AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 26, 2002
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
PANAMSAT CORPORATION
(Exact name of each registrant as specified in its charter)
<Table>
DELAWARE 4899 95-4607698
(State of Incorporation or (Primary standard industrial (I.R.S. employer
organization) classification code number) identification number)
</Table>
20 WESTPORT ROAD
WILTON, CONNECTICUT 06897
(203) 210-8000
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
JAMES W. CUMINALE, ESQ.
EXECUTIVE VICE PRESIDENT -- CORPORATE DEVELOPMENT, GENERAL COUNSEL AND SECRETARY
PANAMSAT CORPORATION
20 WESTPORT ROAD
WILTON, CONNECTICUT 06897
(203) 210-8000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
WITH A COPY TO:
DENNIS J. FRIEDMAN, ESQ.
GIBSON, DUNN & CRUTCHER LLP
200 PARK AVENUE
NEW YORK, NEW YORK 10166
(212) 351-4000
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]----------
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]----------
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]----------
---------------------
CALCULATION OF REGISTRATION FEE
<Table>
<Caption>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED UNIT(1) PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------
8 1/2% Senior Notes due 2012........ $800,000,000 100% $800,000,000 $73,600
Guarantees of the 8 1/2% Senior
Notes due 2012.................... $800,000,000 None(2) None(2) None(2)
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</Table>
(1) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457.
(2) Pursuant to Rule 457(n) under the Securities Act of 1933, no separate fee is
payable for the Guarantee.
---------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE OF ADDITIONAL REGISTRANTS
Each of the following direct or indirect subsidiaries of PanAmSat
Corporation, as a guarantor of the 8 1/2% Senior Notes due 2012, is hereby
deemed to be a registrant.
<Table>
<Caption>
PRIMARY STANDARD
STATE OF INCORPORATION INDUSTRIAL I.R.S. EMPLOYER
NAME OF GUARANTOR OR FORMATION CLASSIFICATION NUMBER IDENTIFICATION NUMBER
- ----------------- ---------------------- --------------------- ---------------------
NET/36, Inc........................... Delaware 4899 06-1586835
PanAmSat Communications Carrier
Services, Inc. ..................... California 4899 95-3684190
PanAmSat Communications Japan,
Inc. ............................... California 4899 95-3976181
PanAmSat Communications Services,
Inc. ............................... California 4899 95-3270893
PanAmSat International Holdings,
Inc. ............................... Delaware 4899 95-4130814
USHI, Inc. ........................... Delaware 4899 95-4130816
PanAmSat Marketing Corporation........ Delaware 4899 01-0667473
PanAmSat International Systems, Inc.
(PISI).............................. Delaware 4899 06-1407851
PanAmSat Asia Carrier Services,
Inc. ............................... Delaware 4899 06-1532021
PanAmSat Capital Corporation.......... Delaware 4899 06-1371155
PanAmSat Carrier Services, Inc. ...... Delaware 4899 06-1377869
PanAmSat India, Inc. ................. Delaware 4899 06-1532023
PanAmSat India Marketing, L.L.C....... Delaware 4899 06-1532023
PAS International Employment, Inc. ... Delaware 4899 06-1475361
PanAmSat Licensee Corp. .............. Delaware 4899 06-1369810
PanAmSat International Sales, Inc. ... Delaware 4899 06-1532018
PanAmSat International Systems,
L.L.C. ............................. Delaware 4899 None
PanAmSat International Systems
Marketing, L.L.C.................... Delaware 4899 06-1407851
Service and Equipment Corporation..... Delaware 4899 06-1614545
Southern Satellite Corp. ............. Connecticut 4899 06-1396534
Southern Satellite Licensee
Corporation......................... Delaware 4899 06-1532182
</Table>
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED APRIL 26, 2002
PROSPECTUS
[LOGO]
PANAMSAT CORPORATION
OFFER TO EXCHANGE
ALL OUTSTANDING 8 1/2% SENIOR NOTES DUE 2012
FOR
NEW 8 1/2% SENIOR NOTES DUE 2012
---------------------
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
2002, UNLESS EXTENDED.
TERMS OF THE EXCHANGE OFFER:
- We will exchange all outstanding notes that are validly tendered and not
withdrawn prior to the expiration of the exchange offer.
- You may withdraw tendered outstanding notes at any time prior to the
expiration of the exchange offer.
- The exchange of outstanding notes for new notes will not be a taxable
exchange for United States federal income tax purposes.
- The terms of the new notes to be issued are substantially identical to
the terms of the outstanding notes, except that transfer restrictions,
registration rights and additional interest provisions relating to the
outstanding notes do not apply.
- Each broker-dealer that receives new notes for its own account pursuant
to the exchange offer must acknowledge that it will deliver a prospectus
in connection with any resale of such new notes. The letter of
transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of new notes received in
exchange for outstanding notes where such outstanding notes were acquired
by such broker-dealer as a result of market-making activities or other
trading activities. See "Plan of Distribution."
- We will not receive any proceeds from the exchange offer.
- There is no existing market for the new notes to be issued, and we do not
intend to apply for their listing on any securities exchange.
See the "Description of Notes" section beginning on page 40 for more
information about the new notes to be issued in this exchange offer.
THIS INVESTMENT INVOLVES RISKS. SEE THE SECTION ENTITLED "RISK FACTORS"
BEGINNING ON PAGE 18 FOR A DISCUSSION OF THE RISKS THAT YOU SHOULD CONSIDER
PRIOR TO TENDERING YOUR OUTSTANDING NOTES FOR EXCHANGE.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES AND
EXCHANGE COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON
THE ADEQUACY OR THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated , 2002.
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
Where You Can Find More Information......................... ii
Incorporation Of Certain Documents By Reference............. ii
Forward-Looking Statements.................................. ii
Prospectus Summary.......................................... 1
Risk Factors................................................ 18
The Exchange Offer.......................................... 26
Use Of Proceeds............................................. 35
Capitalization.............................................. 36
Selected Consolidated Financial And Other Data.............. 37
Description Of Notes........................................ 40
Book-Entry; Delivery And Form............................... 80
Material United States Federal Tax Considerations........... 82
Plan Of Distribution........................................ 85
Legal Matters............................................... 85
Experts..................................................... 85
</Table>
---------------------
THIS EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL WE ACCEPT SURRENDERS FOR
EXCHANGE FROM, HOLDERS OF OUTSTANDING NOTES IN ANY JURISDICTION IN WHICH THIS
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-4 under the Securities Act with respect to the new notes
offered in this prospectus. This prospectus, which forms part of the
registration statement, does not contain all of the information that is included
in the registration statement. You will find additional information about our
company and the notes in the registration statement. Statements made in this
prospectus as to the contents of any contract, agreement or other documents
referred to are not necessarily complete. For a more complete understanding and
description of each contract, agreement or other document filed as an exhibit to
the exchange offer registration statement, we encourage you to read the
documents contained in the exhibits.
You may read and copy the registration statement and any of the other
documents we file with the SEC at the SEC's Public Reference Room located at 450
Fifth Street, N.W., Washington, D.C. Please call the SEC at 1-800-SEC-0330 for
further information on the operation of the Public Reference Room. In addition,
reports and other filings are available to the public on the SEC's web site at
http://www.sec.gov.
If for any reason we are not subject to the reporting requirements of the
Securities Exchange Act of 1934 in the future, we will still be required under
the indenture governing the notes to furnish the holders of the notes with
certain financial and reporting information. See "Description of
Notes -- Reports" for a description of the information we are required to
provide.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to documents containing that information. The information
incorporated by reference is considered to be part of this prospectus, and later
information that we file with the SEC will automatically update and supersede
this information. We incorporate by reference the documents listed below:
- our Annual Report on Form 10-K for the year ended December 31, 2001, as
filed with the SEC on March 11, 2002;
- our definitive Proxy Statement on Schedule 14A relating to the annual
meeting of stockholders to be held on May 31, 2002, as filed with the SEC
on April 24, 2002; and
- any future filings we make with the SEC under Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 until all the securities
offered under this prospectus are sold.
Any statement contained herein, or in any documents incorporated or deemed
to be incorporated by reference herein, shall be deemed to be modified or
superseded for the purpose of this prospectus to the extent that a subsequent
statement contained herein or in any subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supercedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this prospectus.
You may request a copy of these filings, at no cost, by writing or
telephoning us at PanAmSat Corporation, 20 Westport Road, Wilton, Connecticut
06897, telephone: (203) 210-8000, Attention: Secretary. You may also obtain
copies of these filings, at no cost, by accessing the SEC website at
http://www.sec.gov.
FORWARD-LOOKING STATEMENTS
This prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. All statements other than statements of historical facts
included in this prospectus regarding the prospects of our industry and our
prospects, plans, financial position and business strategy, may constitute
forward-looking statements. In
ii
addition, forward-looking statements generally can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "intend,"
"estimate," "anticipate," "believe" or "continue" or the negatives of these
terms or variations of them or similar terminology. Although we believe that the
expectations reflected in these forward-looking statements are reasonable, we
cannot assure you that these expectations will prove to be correct. Important
factors that could cause actual results to differ materially from our
expectations are disclosed in this prospectus, including in conjunction with the
forward-looking statements included in this prospectus and under "Risk Factors."
These forward-looking statements speak only as of the date of this prospectus.
We do not intend to update these statements unless the securities laws require
us to do so.
iii
PROSPECTUS SUMMARY
This summary contains basic information about us and this exchange offer
but may not contain all the information that is important to you. This
prospectus includes or incorporates by reference specific terms of the exchange
offer, as well as information regarding our business and detailed financial
data. We encourage you to read the detailed information and financial statements
appearing elsewhere or incorporated by reference in this prospectus. Unless
otherwise specified, the words "we," "our," "ours," "us," "the company" and "our
company" refer to PanAmSat Corporation and its subsidiaries. The term
"outstanding notes" refers to the 8 1/2% Senior Notes due 2012 that were issued
on February 1, 2002. The term "new notes" refers to the 8 1/2% Senior Notes due
2012 offered in this prospectus.
OUR COMPANY
We are a leading global facilities-based provider of video, broadcasting
and network services through satellites. We lease transponder capacity on our
satellites, which we own and operate, and deliver entertainment and information
to cable television systems, television broadcast affiliates, direct-to-home
television operators, Internet service providers, telecommunications companies
and other corporations. Our customers consist of some of the world's leading
media and communications companies, including AOL Time Warner (which includes
Home Box Office and Turner Broadcasting System), the BBC, News Corp. (Fox Family
of Channels), Sony, Viacom and The Walt Disney Company (which includes ABC and
ESPN).
With 21 satellites in orbit that include approximately 870 36 MHz
equivalent transponders, we have one of the world's largest commercial
geostationary earth orbit ("GEO") satellite networks, capable of reaching over
98% of the world's population. We are one of only a few companies worldwide
capable of servicing a global footprint through an owned fleet of satellites. We
operate our 21 satellites in 16 orbital slots. We have one of the most
sophisticated ground infrastructure networks available to support the needs of
our customers. We own teleports in six U.S. locations, each of which provides
transmission, monitoring and control services for operating our fleet. We lease
such services outside of the United States to support the remainder of our
worldwide satellite fleet.
As a provider of fixed satellite services, we operate in the most mature
segment of the satellite communications business, characterized by steady and
predictable revenue streams, strong cash flows from operations, substantial
contracted revenue backlog and high barriers to entry. We derive our revenue
primarily from our video and network services businesses.
VIDEO SERVICES
Through our video services business, we provide satellite services for the
transmission of entertainment, news, sports and educational programming to over
300 content providers worldwide. Our video services business is comprised of
four categories:
- video distribution services -- the full-time transmission of television
programming to cable systems, network affiliates and other redistribution
systems;
- direct-to-home television services -- the transmission of multiple
television channels for household reception;
- full-time contribution services -- satellite transmission services for
the full-time transmission of news, sports and entertainment segments to
network affiliates or broadcast centers around the world; and
- special events services -- short-term satellite services that we provide
to broadcasters when they need on-the-scene coverage of sporting events
and breaking news.
Our video services business has been the most stable component of our
business, characterized by predictable revenues from our media customers under
long-term contracts. As leading media companies
1
have come to rely on our satellites to distribute their content, our network has
become one of the largest global video distribution platforms available today.
Our satellites serving the United States deliver more than 100 of the leading
cable television channels to over 10,000 cable head-ends, representing
approximately 69 million cable households. In addition, our satellites provide
direct-to-home television services to seven direct-to-home platforms spanning
four continents, making us one of the largest third-party providers of
direct-to-home television services. Our strong market presence in video services
has enabled us to enter into long-term contracts with our customers, many of
which include premium pricing.
For the year ended December 31, 2001, our video services business generated
$593.6 million, or 68.2%, of our total revenues. At December 31, 2001, our video
services contracted backlog was $4.83 billion, or 82.7% of total contracted
backlog.
NETWORK SERVICES
Through our network services business, we provide satellite services for
relaying voice, video and data communications throughout regions and around the
world. We currently provide network services to telecommunications carriers and
multinational corporations in over 40 countries. Our network services business
is comprised of three categories:
- private business networks -- secure, high speed corporate data networks
used in a variety of business functions;
- Internet services -- services we provide to content providers and
Internet service providers for improved high data rate Internet
connections and point-to-multipoint content distribution; and
- carrier services -- services we provide to telecommunications carriers
for voice, video or data communications networks for businesses,
governments and other users.
We view our network services business as a major contributor to our future
growth. The network services business remains one of the fastest growing
segments within satellite telecommunications, with the transport of Internet
protocol content and streaming media applications generally regarded as the
primary drivers of growth. Because our space and ground network is designed to
broadcast streaming media content to multiple locations in an efficient manner,
we believe we are well positioned to capture a meaningful share of the
anticipated growth in these areas.
For the year ended December 31, 2001, our network services business
generated $219.5 million, or 25.2%, of our total revenues. At December 31, 2001,
our network services contracted backlog was approximately $973.0 million, or
16.7%, of total contracted backlog.
TELEMETRY, TRACKING AND CONTROL AND OTHER SERVICES
Telemetry, tracking and control ("TT&C") satellite services include
maintaining the proper orbital location of the satellite, monitoring on-board
housekeeping systems, adjusting transponder levels and remotely bringing backup
systems on-line in the event of a subsystem failure. In addition to the TT&C
services we provide for 17 of our satellites, we also provide TT&C services for
six satellites owned by other satellite operators. For the year ended December
31, 2001, TT&C services accounted for $26.2 million, or 3.0%, of our total
revenues.
Our other services include in-orbit backup service, which is backup
transponder capacity that we reserve for certain customers. For the year ended
December 31, 2001, revenues from in-orbit protection accounted for $28.8
million, or 3.3%, of our revenues.
2
OUR STRENGTHS
Our business is characterized by the following key strengths:
MARKET LEADING NETWORK INFRASTRUCTURE
With 21 satellites in orbit and approximately 870 36 MHz equivalent
transponders, we have one of the world's largest commercial GEO satellite
networks. Our global reach and our ability to offer bundled services allow us to
provide one-stop-shopping to our customers seeking to deliver video, data or
voice around the world. We are one of only a few companies worldwide capable of
servicing a global footprint through an owned fleet of satellites. To complement
our space assets, we have one of the most sophisticated ground infrastructure
networks available to support our satellites and the needs of our customers. Our
ground infrastructure includes a technically advanced customer service center
and teleport located in Ellenwood, Georgia, which provides customers around the
world with a single point of contact for technical support. This recently
constructed, 90,000 square foot facility houses more than 200 professionals with
staffing 24 hours a day, seven days a week. In addition, we own and operate five
other teleports in the United States, which provide transmission, monitoring and
control services, and a satellite operations control center in Long Beach,
California, which is responsible for monitoring and maintaining the health and
safety of our satellites.
SUBSTANTIAL REVENUE BACKLOG RESULTING FROM LONG-TERM CONTRACTS
At December 31, 2001, we had a contracted backlog for future services of
approximately $5.84 billion, of which we expect to realize approximately $720
million as revenue in 2002. Contracts for our video distribution services are
typically long term and can range up to the useful life of the satellite, which
can be up to 15 years. The terms of the contracts generally provide for
significant penalties in the case of cancellation. As a result of the long-term
contracts we have entered into with many of our significant customers,
particularly in video services, we have relatively predictable revenues and cash
flows.
PREMIER CUSTOMER BASE AND LONG-STANDING RELATIONSHIPS
From the time we began offering commercial services in 1984, through
superior and consistent customer service, we have built a premier customer base
for our video and network services. Some of the customers for our video services
business with whom we have long-standing relationships include AOL Time Warner
(which includes HBO and Turner Broadcasting System), Viacom, News Corp. (Fox
Family of Channels) and The Walt Disney Company (which includes ABC and ESPN).
In addition, our direct-to-home television customers include DirecTV-Latin
America, MultiChoice (South Africa), Sky Latin America, NETSAT (Brazil),
Television and Radio Broadcasting Services (Asia and Australia), South African
Broadcasting Corp. and Television Broadcasting Limited (Australia).
Representative customers for our network services business include Hughes
Network Systems, Telstra and WorldCom.
WELL POSITIONED TO CAPTURE REVENUES IN NEW MARKETS AND SERVICES
The growth of the Internet has created a need for bandwidth to service data
traffic for backbone connectivity for Internet service providers or streaming
media applications for content providers. With our satellite network and ground
infrastructure in place today, we can provide high quality services to these
markets. Our end-to-end network ensures reliable, secure transmissions
regardless of location, because connectivity is not dependent on peering
arrangements with other regional networks. In addition, the installed base of
antennas at cable head-ends and other video distribution systems already
accessing our satellite network has the capability, if enabled by a cable
company, to disseminate not only video content but also Internet protocol data
in a streaming point-to-multipoint manner.
HIGH BARRIERS TO ENTRY
There are a number of regulatory, economic and other barriers to entry in
our industry that help to preserve our position as one of the leading satellite
service providers. One of the most significant barriers
3
to entry is the need to obtain operating rights to an orbital slot, a costly and
time consuming process. We operate our 21 satellites in 16 orbital slots.
Obtaining orbital slots is difficult because there is a finite number of orbital
slots, and even fewer commercially viable orbital slots. Most of these are
currently in use or subject to filings for use. Once a particular orbital slot
has been awarded by regulatory agencies, it is difficult for a potential
competitor to gain rights to that slot. In addition to obtaining rights to
orbital slots, any potential competitor would have to invest significant time
and capital to procure, launch and insure its satellites. We have invested
approximately $4.1 billion in our existing satellite fleet and ground
infrastructure through December 31, 2001.
In our video distribution business, we have established our satellites as a
leading transmission platform for the distribution of video programming to cable
systems, network affiliates, direct-to-home distribution platforms, and other
redistribution systems. We have been successful in creating "cable
neighborhoods" on our satellites, which are collections of popular channels that
are transmitted on our satellites. These cable neighborhoods are powerful in
maintaining customers and create high barriers for new entrants because most of
our customers' ground infrastructure are specifically designed to receive
information from our satellites, making their switching costs significant.
OUR BUSINESS STRATEGY
Our mission is to be a global leader in the fixed satellite services
industry, operating the highest quality and most reliable satellite-based
network that delivers entertainment, data and communications for businesses
around the world, while positioning PanAmSat to achieve strong financial results
in terms of EBITDA and free cash flow. Our strategy to achieve this mission is
based on the following initiatives:
STRENGTHENING OUR LEADERSHIP POSITION IN VIDEO DISTRIBUTION
Our satellites were the first commercial satellites dedicated to video
distribution in the U.S. and international markets. As a result of this history
and our track record over time, we have long-standing relationships with premier
video content providers. These relationships, in addition to the direct benefits
they provide, also provide us with a powerful marketing tool to use for
obtaining new business. Because we have premier programmers, such as AOL Time
Warner, The Walt Disney Company and Viacom, under long-term agreements for
capacity on particular satellites, forming cable neighborhoods, we have been
able to attract additional programmers onto these satellites and charge higher
rates for additional capacity on these satellites. These premier customers have
built distribution channels with cable providers, network affiliates and other
redistribution systems using our satellite network. Other content providers have
been willing to pay higher rates to leverage the existing ground infrastructure
already aimed at our satellites. In this way, other content providers access the
same audience receiving an existing lineup of premier programming.
INCREASING UTILIZATION OF OUR NETWORK
Increased utilization of our transponders by existing or new customers will
add to our revenue with minimal incremental costs. We can achieve higher
transponder utilization without additional capital expenditures. At present, we
are utilizing approximately 70% of our useable and available transponders, which
excludes transponders dedicated to backup for our customers and those
unavailable for regulatory or technical reasons. We are pursuing additional
revenue opportunities by cross-selling incremental services to our existing
customers and by pursuing new customers in new markets to absorb unutilized
capacity.
IMPROVING MARGINS BY PURSUING COST EFFICIENCIES
We are committed to reducing our operating cost structure in order to
improve our operating efficiency. In the third and fourth quarters of 2001, we
streamlined operations, rationalized headcount and reduced general operating
expenses, which we expect will result in annual savings of approximately $25
million to $30 million.
4
PROVIDING SUPERIOR NETWORK RELIABILITY
We recognize the value of our customers and place a strong emphasis on
offering high quality services and, accordingly, take necessary steps to ensure
high network reliability. Our strategy is to use modern yet proven satellites
and related technology, mitigating the risks of in-orbit failure before the
satellites are placed in commercial service. As part of our strategy, we replace
existing satellites as they approach the end of their useful lives. We expect to
launch four satellites by early 2003, three of which will be replacement
satellites and one of which will increase our capacity in North America. We have
both in-orbit and ground-based redundancies built into many of our most critical
network elements so that we can provide backup services to our customers in the
event of failure. Through our dedicated and experienced team of engineering
personnel, we have implemented a comprehensive satellite procurement and launch
quality control process. Since 1998, we have actively monitored and supervised
manufacturers and suppliers in launch vehicle design and engineering, space
systems design and engineering, space operations engineering, testing and
operational procedures. Our focus has been to develop a fault tolerant, robust
and flexible spacecraft design that is not dependent on new or different
technologies.
EXPANDING INTO NEW MARKETS
Our fleet has a footprint, or coverage area, capable of reaching over 98%
of the world's population. We believe that certain regions in which we have only
a limited presence represent opportunities for growth. In general, as part of
our growth strategy, we have positioned certain satellites to cover markets to
which we have been granted access and markets which have a poor
telecommunications infrastructure and where regulations may have prevented
penetration by satellite communications companies. In that way, upon gaining
access to these markets through liberalized regulations, joint ventures or a
combination of the two, we will have the infrastructure in place to begin
servicing new customers and grow our business. In our most recent evaluations,
we identified Mexico, Brazil and India as presenting opportunities for business
expansion. We currently have satellites deployed that are capable of reaching
these key markets, so that entering these markets will require little in terms
of additional capital expenditures.
As part of effecting this strategy, in February 2001 we announced the
creation of a new company, PanAmSat de Mexico, a joint venture with Grupo
Pegaso, that, through a concession granted by the Mexican government, can
provide video, data and Internet services to the Mexican telecommunications
market. In December 2001, we opened our first office in Brazil, where we were
recently granted governmental approval to provide satellite services on our
PAS-1R satellite. We are also seeking authorization from the Brazilian
government to provide satellite services on four of our other satellites. Brazil
had previously been closed to foreign competition for satellite services. We are
also taking advantage of liberalized regulations in India, where the government
recently granted us approval to sell certain satellite services. We opened our
first office in India in December 2001.
PURSUING VALUE ADDED SERVICES
We intend to selectively pursue new services by focusing on our core
competencies and leveraging our existing strengths. We believe that our
satellite fleet is well suited to provide Internet service because of its
ability to deliver anywhere in the world reliable, high speed access to the U.S.
Internet backbone. Our strategy is to offer bundled Internet connection packages
to international ISPs and corporate customers. We also offer webcast services
that use our satellites to collect, encode, store and stream audio and video
content to broadband Internet users throughout the U.S. and worldwide.
5
THE REFINANCING
The issuance of the outstanding notes was part of our plan to repay a
$1.725 billion term loan from Hughes Electronics Corporation ("Hughes
Electronics"), which is a wholly-owned subsidiary of General Motors Corporation
("General Motors"). We refer to this financing plan as the "Refinancing." In
addition to issuing the outstanding notes, on February 25, 2002, we entered into
a new $1.25 billion senior secured credit facility, consisting of three
components:
- a revolving credit facility in the aggregate principal amount of $250.0
million;
- a Term loan A facility in the aggregate principal amount of $300.0
million; and
- a Term loan B facility in the aggregate principal amount of $700.0
million.
On February 25, 2002, we repaid in full the $1.725 billion term loan from
Hughes Electronics, along with accrued interest on the loan.
The following table summarizes the sources and uses of funds in the
Refinancing:
<Table>
<Caption>
SOURCES: (IN THOUSANDS)
Revolving credit facility................................... $ --
Term loan A facility........................................ 300,000
Term loan B facility........................................ 700,000
Outstanding notes........................................... 800,000
----------
Total sources............................................. $1,800,000
==========
USES:
Repay Hughes Electronics term loan.......................... $1,725,000
Pay transaction fees and expenses........................... 40,000
General corporate purposes.................................. 35,000
----------
Total uses................................................ $1,800,000
==========
</Table>
OUR HISTORY
We are the product of the May 1997 merger of PanAmSat International
Systems, Inc. (formerly known as PanAmSat Corporation) and the Galaxy Satellite
Services business ("Galaxy") of Hughes Communications, Inc., a subsidiary of
Hughes Electronics Corporation ("Hughes Electronics"), into a new publicly held
company, which retained the PanAmSat name. Hughes Electronics, a wholly-owned
subsidiary of General Motors Corporation ("GM"), indirectly owns approximately
81% of our outstanding common stock.
Our common stock is listed on the Nasdaq National Market under the symbol
"SPOT." Our principal executive offices are located at 20 Westport Road, Wilton,
Connecticut 06897 and our telephone number there is (203) 210-8000. We maintain
a web site at www.panamsat.com. Information contained in our web site does not
constitute a part of this offering circular and is not being incorporated by
reference herein.
On October 28, 2001, GM, Hughes Electronics and EchoStar Communications
Corporation ("EchoStar") entered into definitive agreements providing for the
split-off of Hughes Electronics, or a newly formed holding company holding all
of the capital stock of Hughes Electronics, from GM and the merger of Hughes
Electronics, or such newly formed holding company, with EchoStar. EchoStar is a
leading provider of DTH subscription television services through its DISH
Network, which it delivers to over six million customers in the United States
via a fleet of GEO satellites. The transactions are subject to a number of
conditions, including approval of GM's stockholders and antitrust and Federal
Communications Commission regulatory clearance and approval. GM, Hughes
Electronics and EchoStar
6
have agreed that, in the event the merger of Hughes Electronics and EchoStar
does not occur because certain specified regulatory approvals have not been
obtained or due to the fact that certain other conditions have not been
satisfied, EchoStar will be required to purchase all of the shares of PanAmSat
common stock beneficially owned by Hughes Electronics (approximately 81% of the
outstanding common stock) for $22.47 per share or an aggregate purchase price of
approximately $2.7 billion. EchoStar has the option to structure its purchase of
Hughes Electronics' interest in PanAmSat as a merger or tender offer so that it
can attempt to acquire 100% of PanAmSat in one transaction, in which case Hughes
Electronics and its affiliates must receive at least the same amount of
consideration that they would have received in the PanAmSat stock sale. EchoStar
has agreed that, unless it has previously completed a merger with PanAmSat or a
tender offer for all of the outstanding PanAmSat shares, it will commence a
tender offer for all PanAmSat shares that remain outstanding following the
completion of the PanAmSat stock sale to EchoStar for a purchase price of at
least $22.47 per share, payable, at the option of the holder, either in cash or
shares of EchoStar Class A common stock.
7
OUR SATELLITE NETWORK
Set forth below is a table containing certain basic information about our
21 satellites currently in orbit. Under Spacecraft Model, "B" indicates a Boeing
model and "SS/L" indicates a Space Systems/ Loral model. The estimated end of
useful life shown below reflects our best estimation as to the end of the
satellite's useful life. For those satellites whose useful life we expect will
end on or prior to December 31, 2006, we have provided details in footnotes to
the table as to our replacement plans for those satellites. Under Position, "EL"
indicates east longitude and "WL" indicates west longitude.
<Table>
<Caption>
ESTIMATED 36 MHZ 36 MHZ
END OF EQUIVALENT EQUIVALENT
SPACECRAFT LAUNCH USEFUL C-BAND KU-BAND
SATELLITE MODEL DATE LIFE POSITION TRANSPONDERS TRANSPONDERS GEOGRAPHIC COVERAGE
- --------- ------------ ------ --------- -------- ------------ ------------ -------------------------
Galaxy IR............ B 376 02/94 2006(1) 133WL 24.0 -- North America; Caribbean
Galaxy IIIR.......... B 601 12/95 2005(2) 95WL 24.0 24.0 North America; Caribbean
Galaxy IVR........... B 601 HP 04/00 2015 99WL 24.0 24.0 North America
Galaxy V............. B 376 03/92 2005(1) 125WL 24.0 -- North America; Caribbean
Galaxy VI............ B 376 10/90 2003(3) 74WL 24.0 -- North America; Caribbean
Galaxy VIII-i........ B 601 HP 12/97 2002(2)(4)(5) 95WL -- 21.3 Latin America; Caribbean
Galaxy IX............ B 376 06/96 2008(3)(6) 127WL 24.0 -- North America; Caribbean
Galaxy XR............ B 601 HP 01/00 2015 123WL 24.0 24.0 North America
Galaxy XI............ B 702 12/99 2013 91WL 24.0 36.0 North America; Brazil
PAS-1R............... B 702 11/00 2015 45WL 36.0 36.0 Americas; Caribbean;
Europe; Africa
PAS-2................ B 601 07/94 2008 169EL 25.1 25.1 Asia-Pacific
PAS-3R............... B 601 01/96 2009 43WL 25.1 25.1 Americas; Caribbean;
Europe; Africa
PAS-4................ B 601 08/95 2011 72EL 25.1 24.6 Asia; Africa, Middle
East; Europe
PAS-5................ B 601 HP 08/97 2012(4)(7) 155.5WL 24.0 24.0 Americas; Europe
PAS-6................ SS/L FS 1300 08/97 2012(8) 43WL -- 36.0 South America
PAS-6B............... B 601 HP 12/98 2013(8) 43WL -- 32.0 South America
PAS-7................ SS/L FS 1300 09/98 2013(9) 68.5EL 14.0 30.0 Asia; Africa; Middle
East; Europe
PAS-8................ SS/L FS 1300 11/98 2014(4) 166EL 24.0 24.0 Asia-Pacific
PAS-9................ B 601 HP 07/00 2015 58WL 24.0 24.0 Americas; Caribbean;
Europe
PAS-10............... B 601 HP 05/01 2016 68.5EL 24.0 24.0 Asia; Africa; Middle
East; Europe
SBS 6................ B 393 10/90 2007 74WL -- 22.7 Continental U.S.
----- -----
Total.............. 413.3 456.8
===== =====
</Table>
- ---------------
(1) We have two C-band satellites under construction by Orbital Sciences
Corporation for U.S. coverage that will replace Galaxy IR and Galaxy V prior
to the end of their useful lives.
(2) Galaxy IIIC, a Boeing 702 scheduled for launch in the second quarter of
2002, will replace Galaxy IIIR in North America and supplement Galaxy VIII-i
in the Caribbean and Latin America.
(3) Galaxy VI is an in-orbit spare for the C-band capacity to serve our U.S.
cable customers. Galaxy VI will be replaced by Galaxy IX upon deployment of
Galaxy XIII/Horizons, a Boeing 601 HP, at 127 degrees WL scheduled for early
2003.
8
(4) In September 1999, in connection with anomalies on Galaxy VIII-i, PAS-5 and
PAS-8, we agreed with our insurance carriers to settle all of our claims for
net cash of approximately $304 million.
(5) Galaxy VIII-iR, a Boeing 601 HP, will be ready for launch in the third
quarter of 2002 and will cover Latin America. The satellite is being built
first to serve as an on-ground spare for Galaxy IIIC in the event of a
launch failure or as possible supplemental capacity for Galaxy IIIC if it is
successfully deployed.
(6) A C-band payload on a new Boeing 601 HP that is scheduled for launch in late
2002 will replace Galaxy IX in our domestic U.S. fleet. Galaxy IX will
replace Galaxy VI upon deployment of Galaxy XIII/Horizons at 127 degrees WL
scheduled for early 2003.
(7) PAS-5 was declared a constructive total loss in 1999. It may be used either
for backup capacity or expansion capacity.
(8) PAS-6 provides backup capacity for the Sky Latin America direct-to-home
service on PAS-6B. During 1998, an anomaly on PAS-6 caused it to be declared
a partial loss, and we received an insurance payment of $29.1 million.
(9) In October 2001, we filed a proof of loss under the insurance policy on
PAS-7 related to circuit failures which occurred in September 2001 and
resulted in a reduction of 28.9% of the satellite's total power available
for communications. Service to existing customers was not affected, and we
expect that PAS-7 will continue to serve these customers. The insurance
policy was in the amount of $253.4 million and included a provision for us
to share 25% of future revenues on PAS-7 with the insurers. We have settled
the claim for $215 million, which reflects the insurance policy amount of
$253.4 million less the expected future revenue share that would have been
paid in relation to PAS-7 adjusted by a negotiated discount. Pursuant to
this settlement, no future revenue share payments will be required to be
made in relation to PAS-7. As of April 23, 2002 the Company had received all
of the net proceeds from this insurance settlement.
RECENT DEVELOPMENTS
On April 12, 2002, we reported financial results for the three months ended
March 31, 2002. Total revenues for the first quarter of 2002 were $207.1
million, compared to revenues of $205.2 million for the first quarter of 2001.
Operating lease revenues increased slightly to $201.4 million or 97% of total
revenues for the first quarter of 2002, compared to $199.5 million for the same
period in 2001. Included in operating lease revenues for the three months ended
March 31, 2002 was a termination fee related to one of our video customers,
offset partially by reduced operating lease revenues. The net effect of this
customer termination was an increase to operating lease revenues for the three
months ended March 31, 2002 of approximately $6.4 million. Total sales and
sales-type lease revenues were $5.8 million for the quarter ended March 31,
2002, compared to $5.7 million for the same period in 2001.
Operating lease revenues from video services increased by 1.9% to $133.5
million during the first quarter of 2002, compared to $131.1 million for the
first quarter of 2001. The increase was due to the termination fee revenues
recorded during the first quarter of 2002 related to video customers, offset
partially by a reduction in revenues related to video customer agreements.
Overall video services revenues were $139.3 million in the first quarter of
2002, an increase of 1.8% as compared to the first quarter of 2001. Operating
lease revenues from network services decreased by 3.1% to $52.7 million for the
first quarter of 2002, compared to the same period in 2001. The decrease was due
to reduced revenue recorded during the first quarter of 2002 as a result of
customer credit issues, offset partially by an increase in revenues related to
network services and Internet customer agreements.
For the three months ended March 31, 2002, earnings before interest, taxes,
depreciation and amortization ("EBITDA") was $151.0 million, or 73% of total
revenues, as compared to $140.0 million or 68% of total revenues for the same
period in 2001. These increases in EBITDA and EBITDA margin were driven
primarily by our continued focus on operational efficiencies and several
significant transactions,
9
which were recorded during the three months ended March 31, 2002. These
significant transactions included: termination fee revenue of approximately $6.4
million, which was recorded during the three months ended March 31, 2002; the
recording of a $40.1 million gain in relation to the settlement of the PAS-7
insurance claim; the recording of an $11.2 million facilities restructuring
charge related to several of the our U.S. locations; the recording of an $18.7
million loss on the conversion of several sales-type leases to operating leases
by one of our customers; and the recording of additional customer bad debt
expense and sales-type lease reserves of approximately $10 million. EBITDA is
commonly used in the fixed satellite 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 GAAP in the statements of income and cash flows.
For the three months ended March 31, 2002, net income before extraordinary
loss on early extinguishment of debt was $23.5 million, compared to $5.0 million
for the same period in 2002. Earnings per share before extraordinary loss on
early extinguishment of debt were $0.16 per share for the first quarter of 2002
versus $0.03 for the first quarter of 2001 and, for the three months ended March
31, 2002, we recorded an extraordinary loss on early extinguishment of debt of
$2.5 million ($0.02 per share) net of taxes in relation to our recently
completed refinancing. Including the extraordinary loss on early extinguishment
of debt, net income and earnings per share were $21.0 million and $0.14 per
share, respectively, for the first quarter of 2002, as compared to net income
and earnings per share of $5.0 million and $0.03 per share, respectively, for
the same period in 2001. The increase in net income and earnings per share was
principally due to the increased EBITDA during the three months ended March 31,
2002, as well as the reduction in our effective income tax rate from 43.5% in
2001 to 25% in 2002 primarily resulting from the elimination of goodwill
amortization as a result of the adoption of Statement of Financial Accounting
Standards No. 142.
As of March 31, 2002, we had contracts for satellite services representing
future payments (backlog) of approximately $5.72 billion, compared to
approximately $5.84 billion, as of December 31, 2001.
THE EXCHANGE OFFER
The following is a brief summary of terms of the exchange offer. For a more
complete description of the exchange offer, see "The Exchange Offer" in this
prospectus.
New Notes Offered............. $800,000,000 aggregate principal amount of new
8 1/2% Senior Notes due 2012, which have been
registered under the Securities Act. The terms
of the new notes offered in the exchange offer
are substantially identical to those of the
outstanding notes, except that certain transfer
restrictions, registration rights and
additional interest provisions relating to the
outstanding notes do not apply to the
registered new notes.
Outstanding Notes............. $800,000,000 aggregate principal amount of
8 1/2% Senior Notes due 2012, which were issued
on February 1, 2002.
The Exchange Offer............ We are offering to issue registered new notes
in exchange for a like principal amount and
like denomination of our outstanding notes. We
are offering to issue these registered new
notes to satisfy our obligations under a
registration rights agreement that we entered
into with the initial purchasers of the
outstanding notes when we sold them in a
transaction that was exempt from the
registration requirements of the Securities
Act. You may tender your outstanding notes for
exchange by following the procedures described
under the caption "The Exchange Offer."
10
Tenders; Expiration Date;
Withdrawal.................. The exchange offer will expire at 5:00 p.m.,
New York City time, on , 2002,
unless we extend it. If you decide to exchange
your outstanding notes for new notes, you must
acknowledge that you are not engaging in, and
do not intend to engage in, a distribution of
the new notes. You may withdraw any outstanding
notes that you tender for exchange at any time
prior to , 2002. If we decide for
any reason not to accept any outstanding notes
you have tendered for exchange, those
outstanding notes will be returned to you
without cost promptly after the expiration or
termination of the exchange offer. See "The
Exchange Offer -- Terms of the Exchange Offer"
for a more complete description of the tender
and withdrawal provisions.
Conditions to the Exchange
Offer......................... The exchange offer is subject to customary
conditions, some of which we may waive in our
discretion.
Your exchange of outstanding notes for new
notes to be issued
U.S. Federal Income Tax
Consequences................ in the exchange offer will not result in any
gain or loss to you for U.S. federal income tax
purposes.
Use of Proceeds............... We will not receive any cash proceeds from the
exchange offer.
Exchange Agent................ The Bank of New York
Consequences of Failure to
Exchange Your Outstanding
Notes....................... Outstanding notes that are not tendered or that
are tendered but not accepted will continue to
be subject to the restrictions on transfer that
are described in the legend on those
outstanding notes. In general, you may offer or
sell your outstanding notes only if they are
registered under, or offered or sold under an
exemption from, the Securities Act and
applicable state securities laws. We, however,
will have no further obligation to register the
outstanding notes. If you do not participate in
the exchange offer, the liquidity of your
outstanding notes could be adversely affected.
Consequences of Exchanging
Your Outstanding Notes........ Based on interpretations of the staff of the
SEC, we believe that you may offer for resale,
resell or otherwise transfer the new notes that
we issue in the exchange offer without
complying with the registration and prospectus
delivery requirements of the Securities Act if
you:
- acquire the new notes issued in the
exchange offer in the ordinary course of
your business;
- are not participating, do not intend to
participate, and have no arrangement or
undertaking with anyone to participate,
in the distribution of the new notes
issued to you in the exchange offer; and
- are not an "affiliate" of our company as
defined in Rule 405 under the Securities
Act.
11
If any of these conditions are not satisfied
and you transfer any new notes issued to you in
the exchange offer without delivering a proper
prospectus or without qualifying for a
registration exemption, you may incur liability
under the Securities Act. We will not be
responsible for or indemnify you against any
liability you may incur.
Any broker-dealer that acquires new notes in
the exchange offer for its own account in
exchange for outstanding notes which it
acquired through market-making or other trading
activities, must acknowledge that it will
deliver a prospectus when it resells or
transfers any new notes issued in the exchange
offer. See "Plan of Distribution" for a
description of the prospectus delivery
obligations of broker-dealers in the exchange
offer.
12
THE NEW NOTES
The terms of the new notes we are issuing in this exchange offer and the
outstanding notes are identical in all material respects, except the new notes
offered in the exchange offer:
- will have been registered under the Securities Act;
- will not contain transfer restrictions and registration rights that
relate to the outstanding notes; and
- will not contain provisions relating to the payment of additional
interest to the holders of the outstanding notes under circumstances
related to the timing of the exchange offer.
A brief description of the material terms of the notes follows:
The following is a brief summary of terms of the exchange offer. For a more
complete description of the exchange offer, see "The Exchange Offer" in this
prospectus.
Issuer........................ PanAmSat Corporation
Notes......................... $800,000,000 aggregate principal amount of
8 1/2% Senior Notes due 2012.
Interest...................... The notes bear interest at an annual rate of
8 1/2%. We will pay interest on the notes
semi-annually on each February 1 and August 1,
beginning on August 1, 2002.
Maturity Date................. February 1, 2012.
Optional Redemption........... At any time on or after February 1, 2007, we
may redeem all or part of the notes at the
redemption prices specified in this prospectus
under "Description of the Notes -- Optional
Redemption."
At any time prior to February 1, 2005, we may
redeem up to 35% of the notes with the net
proceeds of certain public equity offerings, at
a price equal to 108.5% of the principal amount
of the notes, plus accrued and unpaid interest
thereon, if any, to the redemption date,
provided that at least 65% of the aggregate
principal amount of the notes remains
outstanding immediately after the redemption.
Change of Control............. Following a change of control, as defined in
the indenture governing the notes, we will be
required to make an offer to purchase all of
the notes at a purchase price of 101% of their
principal amount, plus accrued and unpaid
interest. Neither consummation of the merger of
Hughes Electronics and EchoStar nor the
purchase of Hughes Electronics' interest in
PanAmSat by EchoStar would constitute a change
of control, as defined in the indenture.
Ranking....................... The notes are:
- our senior unsecured obligations;
- equal in right of payment with all our
existing and future senior debt and that
of the subsidiary guarantors;
- senior to all of our existing and future
subordinated obligations and those of
the subsidiary guarantors; and
- effectively subordinated to our secured
obligations.
13
Guarantees.................... The notes are fully guaranteed, on a senior
basis, by all of our present and future
domestic restricted subsidiaries.
Certain Covenants............. We have issued the notes under an indenture
among us, the guarantors and The Bank of New
York, as trustee. The indenture limits our
ability and the ability of our restricted
subsidiaries to:
- incur additional indebtedness;
- pay dividends or make other restricted
payments;
- create or permit to exist certain liens;
- issue stock of subsidiaries;
- sell certain assets;
- incur dividend or other payment
restrictions affecting our subsidiaries;
- enter into transactions with affiliates;
- consolidate, merge or transfer
substantially all our assets; and
- enter into new businesses.
These covenants are subject to a number of
important exceptions and qualifications.
Covenant Suspension........... At any time when the notes are rated investment
grade by both Moody's and S&P and no default or
event of default has occurred and is continuing
under the indenture, we and our subsidiaries
will not be subject to most of the foregoing
covenants.
14
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
The summary consolidated financial data as of December 31, 2001 and for the
years ended December 31, 1999, 2000 and 2001 presented in this table are derived
from our audited consolidated financial statements and notes thereto which are
incorporated by reference in this prospectus. The operating data and other
financial data presented in this table are not derived from our consolidated
financial statements. You should read the financial data below in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations," the financial data appearing elsewhere in this prospectus and our
consolidated financial statements and notes.
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1999 2000 2001
------------- -------------- -------------
(DOLLARS IN THOUSANDS (OTHER THAN CONTRACTED
BACKLOG, WHICH IS IN BILLIONS))
STATEMENT OF INCOME DATA:
Revenue:
Operating leases, satellite services and other.......... $ 787,509 $ 780,256 $ 802,194
Outright sales and sales-type leases(1)................. 23,108 243,314 67,881
--------- ---------- ---------
Total revenue........................................ 810,617 1,023,570 870,075
--------- ---------- ---------
Costs and expenses:
Cost of outright sales and sales-type leases............ -- 85,776 12,766
Leaseback expense, net of deferred gains................ 15,391 -- --
Depreciation and amortization........................... 280,472 337,450 414,744
Direct operating costs.................................. 103,973 149,681 152,883
Selling, general and administrative..................... 72,415 97,462 116,140
Severance costs......................................... -- -- 8,223
Gain on Galaxy VII insurance claim...................... -- (3,362) --
--------- ---------- ---------
Operating income.......................................... 338,366 356,563 165,319
Interest expense, net(2).................................. 112,002 128,205 111,153
--------- ---------- ---------
Income before taxes....................................... 226,364 228,358 54,166
Income tax expense........................................ 104,127 102,761 23,562
--------- ---------- ---------
Net income................................................ $ 122,237 $ 125,597 $ 30,604
========= ========== =========
OTHER FINANCIAL DATA:
EBITDA(3)................................................. $ 618,838 $ 694,013 $ 580,063
EBITDA margin(4).......................................... 76% 68% 67%
Net cash provided by operating activities................. $ 500,582 $ 456,408 $ 540,389
Net cash used in investing activities..................... (560,199) (394,185) (203,836)
Net cash provided by (used in) financing activities....... (666) (50,137) (22,632)
Capital expenditures...................................... 586,910 449,560 338,203
Contracted backlog (at period end; in billions)(5)........ $ 6.1 $ 6.0 $ 5.84
</Table>
15
<Table>
<Caption>
AT DECEMBER 31,
------------------
1999 2000 2001
---- ---- ----
OPERATING DATA:
Number of satellites in orbit............................... 20 20 21
Number of transponders(6):
C-band.................................................... 329 413 413
Ku-band................................................... 397 445 457
Capacity utilization(7):
C-band.................................................... -- 79.8% 75.0%
Ku-band................................................... -- 65.2% 65.0%
</Table>
<Table>
<Caption>
AS OF DECEMBER 31, 2001
---------------------------
PRO FORMA AS
ACTUAL ADJUSTED(8)
---------- --------------
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash........................................................ $ 443,266 $ 431,724
Satellites and other property and equipment, net............ 3,152,082 3,152,082
Net investment in sales-type leases......................... 251,899 251,899
Total assets................................................ 6,296,810 6,285,268
Total debt and due to affiliates(9)......................... 2,521,542 2,550,000
Total long-term liabilities................................. 3,134,897 3,163,355
Stockholders' equity........................................ 2,992,560 2,992,560
</Table>
- ---------------
(1) Under an outright sales contract, we sell all rights and title to a
transponder to a customer, which in turn pays us the full amount of the sale
price in cash at the commencement of the contract. At that time, we
recognize the sale amount as revenue and record the cost of the transponder
to cost of outright sales. Under sales-type leases, we recognize as revenue
at the inception of the lease the net present value of the future minimum
lease payments, but we continue to receive cash payments from the lessee
throughout the term of the lease. In addition, during the life of the lease,
we recognize as revenue the portion of each periodic lease payment deemed to
be attributable to interest income. The principal difference between a
sales-type lease and an operating lease is when we recognize the revenue and
related costs, but not when we receive the cash.
(2) Net of capitalized interest of $60.7 million, $56.1 million and $23.3
million for the years ended December 31, 1999, 2000 and 2001, respectively,
and net of interest income of $3.2 million, $6.8 million and $13.5 million
for the years ended December 31, 1999, 2000 and 2001, respectively.
(3) Represents earnings before net interest expense, income tax expense, and
depreciation and amortization. EBITDA is commonly used in the fixed
satellite services 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 GAAP
in the statements of income and cash flows.
(4) EBITDA margin is equal to EBITDA divided by total revenue, expressed as a
percentage.
(5) Contracted backlog represents expected future cash payments to be received
from customers under executed operating leases or sales-type leases.
Contracted backlog is attributable to both satellites currently in orbit and
those planned for future launch.
(6) The number of transponders is in 36 MHz equivalents.
(7) Capacity utilization represents, on a worldwide basis at period end, the
percentage obtained by dividing the total number of transponders in
commercial use by the total number of transponders then-available for
commercial use, which excludes those transponders dedicated to backup for
our
16
customers and those unavailable for regulatory or technical reasons.
Capacity utilization rates by C-band and Ku-band transponders are not
available for 1999.
(8) The pro forma as adjusted data gives effect to the Refinancing (including
the offering of the notes) and the repayment of $46.5 million aggregate
principal amount of notes relating to the Galaxy IIIR satellite on January
2, 2002, as if they each had occurred on December 31, 2001.
(9) Actual as of December 31, 2001 includes debt of $796.5 million and due to
affiliates of $1.725 billion.
17
RISK FACTORS
In addition to the information contained elsewhere in this prospectus, you
should carefully consider the following risk factors, which apply to the
outstanding notes and the new notes, in evaluating the exchange offer.
RISKS RELATING TO THE EXCHANGE OFFER
YOU MAY HAVE DIFFICULTY SELLING THE OUTSTANDING NOTES THAT YOU DO NOT
EXCHANGE.
If you do not exchange your outstanding notes for the new notes offered in
this exchange offer, you will continue to be subject to the restrictions on the
transfer of your outstanding notes. Those transfer restrictions are described in
the indenture governing the outstanding notes and in the legend contained on the
outstanding notes, and arose because we originally issued the outstanding notes
under exemptions from, and in transactions not subject to, the registration
requirements of the Securities Act.
In general, you may offer or sell your outstanding notes only if they are
registered under the Securities Act and applicable state securities laws, or if
they are offered and sold under an exemption from those requirements. We do not
intend to register the outstanding notes under the Securities Act.
If a large number of outstanding notes are exchanged for new notes issued
in the exchange offer, it may be more difficult for you to sell your outstanding
notes. In addition, if you do not exchange your outstanding notes in the
exchange offer, you will no longer be entitled to have those outstanding notes
registered under the Securities Act.
See "The Exchange Offer -- Consequences of Failure to Exchange Outstanding
Notes" for a discussion of the possible consequences of failing to exchange your
notes.
YOU MAY FIND IT DIFFICULT TO SELL THE NEW NOTES BECAUSE THERE IS NO EXISTING
TRADING MARKET FOR THE NEW NOTES.
There is no existing trading market for the new notes. You may find it
difficult to sell your new notes because an active trading market for the new
notes may not develop. We do not intend to apply for listing or quotation of the
new notes on any exchange. The new notes are being offered to the holders of the
outstanding notes. The outstanding notes were issued on February 1, 2002 to a
small number of institutional investors. Therefore, we do not know the extent to
which investor interest will lead to the development of a trading market or how
liquid that market may be. Although we were informed by the initial purchasers
of the outstanding notes that they intend to make a market in the new notes,
they are not required to do so, and they may cease market-making at any time
without notice. Consequently, the market price of the new notes issued in this
exchange offer could be adversely affected and you may not be able to liquidate
your investment readily.
RISKS RELATING TO OUR INDUSTRY
ONCE LAUNCHED AND PROPERLY DEPLOYED, SATELLITES ARE SUBJECT TO SIGNIFICANT
OPERATIONAL RISKS DUE TO VARIOUS TYPES OF POTENTIAL ANOMALIES.
Satellites are subject to significant operational risks while in orbit.
These risks include malfunctions, commonly referred to as anomalies, that have
occurred in our satellites and the satellites of other operators as a result of:
- the satellite manufacturer's error, whether due to the use of new and
largely unproven technology or simply due to a manufacturing defect;
- problems with the power systems of the satellites, including:
18
- circuit failures causing reductions in the power output of the solar
array panels on the satellites, which could require the operator to
forego the use of some transponders initially and to turn off
additional transponders in later years; and
- failure of the cells within the batteries, whose sole purpose is to
power the payload and spacecraft operations during the daily eclipse
periods which occur for brief periods of time during two 40-day periods
around March 21 and September 21;
- problems with the control systems of the satellites, including:
- failure of the primary and/or backup spacecraft control processor; and
- failure of the xenon ion propulsion system ("XIPS") used on certain
Boeing satellites, which is an electronic propulsion system that
maintains the spacecraft's proper in-orbit position; and
- general failures resulting from operating satellites in the harsh space
environment.
We have experienced anomalies in each of the categories described above.
Although we work closely with the satellite manufacturers to determine and
eliminate the cause of these anomalies in new satellites and provide for
redundancies of critical components in the satellite, we cannot assure you that
we will not experience anomalies in the future, whether of the types described
above or arising from the failure of other systems or components. In particular,
we may experience additional anomalies relating to the failure of the spacecraft
control processor in certain of our Boeing 601 satellites. The primary and
backup spacecraft control processors on two of our Boeing 601 satellites have
failed, and the primary spacecraft control processor on one of our Boeing 601
satellites has also failed. We have three other Boeing 601 satellites in orbit
that have not experienced any anomalies related to their spacecraft control
processors, but we cannot assure you that similar anomalies will not occur on
those models. In addition, failures related to XIPS have occurred on the Boeing
601 HP spacecraft, and we operate several of those spacecraft that utilize XIPS
but have not yet experienced anomalies related to XIPS. We cannot assure you
that similar XIPS failures or failures of other propulsion systems on our
satellites will not occur in the future.
Any single anomaly or series of anomalies could materially and adversely
affect our operations, our revenues, our relationship with our current customers
and our ability to attract new customers for our satellite services. In
particular, future anomalies may result in the loss of individual transponders
on a satellite, a group of transponders on that satellite or the entire
satellite, depending on the nature of the anomaly. Anomalies may also reduce the
expected useful life of a satellite, thereby reducing the revenue that could be
generated by that satellite. Finally, the occurrence of anomalies may adversely
affect our ability to insure our satellites at commercially favorable premiums,
if at all. While some anomalies are covered by insurance policies, others are
not or may not be covered.
NEW SATELLITES ARE SUBJECT TO LAUNCH FAILURES, THE OCCURRENCE OF WHICH CAN
MATERIALLY AND ADVERSELY AFFECT OUR OPERATIONS.
Satellites are subject to certain risks related to failed launches. Of the
34 satellites launched by us or our predecessors since 1983, four have resulted
in launch failures. In addition, certain launch vehicles that we have used or
are scheduled to use have either unproven track records or have experienced
launch failures in the past. Launch failures result in significant delays in the
deployment of satellites because of the need both to construct replacement
satellites, which can take up to 24 months, and obtain other launch
opportunities. Such significant delays could materially and adversely affect our
operations and our revenues. In addition, although we have had launch insurance
on all of our launches to date, if we were not able to obtain launch insurance
on reasonable terms and a significant launch failure were to occur, our
financial condition would be materially and adversely affected.
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NEW OR PROPOSED SATELLITES ARE SUBJECT TO CONSTRUCTION AND LAUNCH DELAYS, THE
OCCURRENCE OF WHICH CAN MATERIALLY AND ADVERSELY AFFECT OUR OPERATIONS.
The construction and launch of satellites are subject to certain delays.
Such delays can result from the delays in the construction of satellites and
launch vehicles, the periodic unavailability of reliable launch opportunities,
possible delays in obtaining regulatory approvals and launch failures. We have
in the past experienced delays in satellite construction and launch which have
adversely affected our operations. Future delays may have the same effect. A
significant delay in the future delivery of any satellite would also adversely
affect our marketing plan for the satellite. 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. Further, any
significant delay in the commencement of service of any of our satellites could
enable customers who pre-purchased or agreed to lease transponder capacity on
the satellite to terminate their contracts and could affect our plans to replace
an in-orbit satellite prior to the end of its useful life. The failure to
implement our satellite deployment plan on schedule could have a material
adverse effect on our financial condition and results of operations.
THE MARKET FOR SATELLITE INSURANCE HAS HISTORICALLY FLUCTUATED SIGNIFICANTLY,
AND WE MAY BE UNABLE TO OBTAIN NEW OR RENEWAL POLICIES ON COMMERCIALLY
REASONABLE TERMS OR AT ALL.
The price, terms and availability of insurance have fluctuated
significantly since we began offering commercial satellite services in 1984. In
the last several years, the cost of obtaining launch and in-orbit policies on
satellites reached historic lows but has recently begun to return to the higher
levels for such policies that were common in the early 1990s. We expect the cost
of obtaining such insurance to continue to rise and availability to be limited
as a result of recent satellite failures and general conditions in the insurance
industry, including the effects of the September 11th terrorist attacks. Launch
and in-orbit policies on satellites may not continue to be available on
commercially reasonable terms or at all. In addition to higher premiums,
insurance policies may provide for higher deductibles, shorter coverage periods,
higher loss percentages required for total constructive loss claims and
additional satellite health-related policy exclusions. For example, while we
have since the late 1990s been able to obtain launch policies covering a period
of three to five years from the date of launch and in-orbit policies covering a
period of one to three years from the date of expiration of the applicable
launch policy, providers of launch and in-orbit insurance recently have informed
us that they are unwilling to insure for periods greater than one year. An
uninsured failure of one or more of our satellites could have a material adverse
effect on our financial condition and results of operations. In addition, higher
premiums on insurance policies will increase our costs, thereby reducing our
operating income by the amount of such increased premiums.
THE FIXED SATELLITE SERVICES INDUSTRY IS HEAVILY REGULATED, BOTH IN THE UNITED
STATES AND ELSEWHERE, AND SUCH REGULATION COULD IMPEDE US FROM EXECUTING OUR
BUSINESS PLAN.
We are subject to the regulatory authority of the U.S. government,
primarily the Federal Communications Commission ("FCC"), and the national
communications authorities of the countries in which we operate. If we do not
obtain all requisite regulatory approvals for the construction, launch and
operation of any of our future satellites and for the orbital slots planned for
these satellites or, the licenses obtained impose operational restrictions on
us, our business, financial condition and results of operations could be
materially adversely affected. In addition, there can be no assurance that we
will continue to coordinate successfully any or all of our satellites under FCC
procedures domestically and under procedures of the International
Telecommunications Union internationally. Such coordination is required in
connection with domestic and international procedures that are intended to avoid
interference to or from other satellites. More specifically, the risks of
government regulation include:
- the FCC reserves the right to require satellites within its jurisdiction
to be re-located to a different orbital location if it determines that
re-location is in the public interest;
- our ability to replace an existing satellite with a new satellite is
typically subject to FCC approval;
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- governments, including the U.S. government, have the ability to regulate
satellite transmissions that have the potential to interfere with
government operations, or other satellite or terrestrial commercial
operations and such regulation could interfere with our contractual
obligations to customers; and
- currently unused orbital slots that have been granted to us may be
revoked if we do not utilize such slots prior to their expiration dates,
as was the case with two slots previously granted to us that the FCC
revoked in 2000, and as may be the case with our Ka-band slots unless we
meet certain satellite development milestones by the deadlines set by the
FCC.
Because the regulatory schemes vary by country, we may be subject to
regulations in foreign countries of which we are not presently aware. If that
were to be the case, we could be subject to sanctions by a foreign government
that could materially and adversely affect our operations in that country. There
can be no assurance that any current regulatory approvals held by us 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 we wish to operate our new satellites, or that
applicable restrictions in those jurisdictions will not be unduly burdensome.
The failure to obtain the authorizations necessary to operate our satellites
internationally could have a material adverse effect on our financial condition
and results of operations.
WE FACE RISKS IN CONDUCTING BUSINESS INTERNATIONALLY.
A significant portion of our business is conducted outside the United
States. For the years ended December 31, 2001, 2000 and 1999, approximately 60%,
51% and 57% of our revenues were generated from customers outside of the United
States. We could be harmed financially and operationally by changes in foreign
regulations and telecommunications standards, tariffs or taxes and other trade
barriers. Although almost all of our contracts with foreign customers require
payment in U.S. dollars, customers in developing countries could have difficulty
in obtaining the U.S. dollars they owe us, including as a result of exchange
controls. Exchange rate fluctuations may adversely affect the ability of our
customers to pay us in U.S. dollars. If we ever need to pursue legal remedies
against our foreign business partners or customers, we may have to sue abroad,
where it could be hard for us to enforce our rights.
RISKS RELATING TO OUR BUSINESS
OUR FINANCIAL CONDITION COULD BE MATERIALLY AND ADVERSELY AFFECTED IF WE WERE
TO SUFFER A LOSS THAT IS NOT ADEQUATELY COVERED BY INSURANCE.
Certain losses of a satellite may not be covered by launch or in-orbit
insurance policies. Some of our satellites are covered by insurance policies
that are subject to significant health-related exclusions and deductibles
related to specific components identified by the insurers as the most likely to
fail ("Significant Exclusion Policies") and some of our satellites are
uninsured. As of December 31, 2001, we had in effect launch and in-orbit
policies covering 17 satellites in the aggregate amount of $2.3 billion, six of
which were covered by policies with Significant Exclusion Policies. Four of our
satellites were uninsured. As of such date, the uninsured satellites and the
satellites covered by Significant Exclusion Policies had a total net book value
of satellites and other insurable costs of $942 million. As our other insurance
policies expire, we may elect to reduce or eliminate insurance coverage of
certain other satellites if, in our view, exclusions make such policies
ineffective or the costs make such insurance impractical and if we believe that
we can more effectively protect our business through the use of in-orbit spare
satellites, backup transponders and self-insurance.
An additional risk to our business is that we do not generally obtain
insurance to cover the risk of revenues lost as a result of satellite anomalies.
As a result, even if insurance were to cover a loss relating to a launch or
in-orbit failure, we would not be adequately compensated for lost revenue
attributable to that loss. As of December 31, 2001, the total net book value of
satellites and other insurable costs, which includes certain sales-type leases
plus the estimated amount of warranty liabilities related to transponders
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sold outright, less incentive obligations, totaled $2.7 billion. As of December
31, 2001, insurance covered approximately $1.75 billion of these net insurable
costs. The partial or complete failure of any revenue-producing satellites that
are not substantially or fully insured could have a material adverse effect on
our financial condition and results of operations.
OUR BUSINESS IS CAPITAL INTENSIVE, AND WE MAY NOT BE ABLE TO ACCESS THE
CAPITAL MARKETS WHEN WE WOULD LIKE TO RAISE CAPITAL.
We may not be able to raise adequate capital to complete some or all of our
business strategies or to react rapidly to changes in technology, products,
services or the competitive landscape. Industry participants often face high
capital requirements in order to take advantage of new market opportunities,
respond to rigorous competitive pressures and react quickly to changes in
technology. We expect the fixed satellite services industry to continue to grow
due to the demand for communications infrastructure and the opportunities
created by industry deregulation. Many of our competitors are committing
substantial capital and, in many instances, are forming alliances to acquire or
maintain market leadership. Our satellite deployment plan will require
substantial investments of capital over the next several years. There can be no
assurance that we will be able to satisfy our capital requirements in the
future.
WE ARE SUBJECT TO SIGNIFICANT AND INTENSIFYING COMPETITION BOTH WITHIN THE
FIXED SATELLITE SERVICES INDUSTRY AND OUTSIDE THE INDUSTRY FROM COMPANIES
OFFERING OTHER MEANS TO TRANSMIT SIGNALS, SUCH AS THROUGH FIBER OPTICS.
We face heavy competition in the fixed satellite services industry from
companies such as newly-privatized Intelsat Ltd. and Eutelsat S.A., SES Global
("SES Global"), the entity formed by the November 2001 acquisition of GE
American Communications, Inc. by Societe Europeenne des Satellites, the
Luxembourg-based operator of ASTRA, one of Europe's leading DTH services, New
Skies Satellites N.V. and Loral Space & Communications Ltd., among others.
Intensifying competition in this market, particularly as a result of the
privatization in 2001 of both Intelsat and Eutelsat, may result in lower prices
for our services, which may adversely affect our results. Many of the owners of
Intelsat are government-owned monopolies or privatized entities that are the
dominant telecommunications companies in their home territories. By virtue of
their substantial investment in the Intelsat system and their ties to government
regulators, Intelsat's owners have the incentive to, and may be able to, block
us from entering certain non-U.S. markets. There has been a trend toward
consolidation of major fixed satellite service providers as customers
increasingly demand more robust distribution platforms with network redundancies
and worldwide reach, and we expect to face increased competition as a result of
this trend. For example, SES Global now has the world's largest satellite fleet,
and the combined entity is now capable of providing service in many of the
markets we serve. These and other direct competitors are likely to continue
developing and launching satellites with greater power and more transponders,
which may create satellite capacity at lower costs. In order to compete
effectively, we may have to invest in similar technology.
In addition, we believe that there are many companies that are seeking ways
to improve the ability of existing land-based infrastructure, such as fiber
optic cable, to transmit signals. Any significant improvement or increase in the
amount of land-based capacity, particularly with respect to the existing fiber
optic cable infrastructure, may cause our video services customers to shift
their transmissions to land-based capacity or make it more difficult for us to
obtain new customers. If fiber optic cable networks or other ground-based
high-capacity transmission systems are available to service a particular point,
that capacity, when available, is generally less expensive than satellite
capacity. As land-based telecommunications services expand, demand for some
satellite-based services may be reduced.
Many of our direct and indirect competitors, both those in and outside of
the fixed satellites services industry, have greater financial resources and
operating flexibility than we do. This may permit them to respond better to
changes in the industry.
22
ANTICIPATED REVENUES FROM OUR INTERNET-RELATED BUSINESS ARE SUBJECT TO
SIGNIFICANT RISKS AND UNCERTAINTIES.
In addition to the video and network services that account for the majority
of our revenues, we offer value-added services that make use of the Internet,
such as connecting to the U.S. Internet backbone, a bundled satellite Internet
service to deliver content to ISPs and, more recently, streaming video and audio
delivered through a satellite-based network connected to the Internet backbone
or directly to broadband ISPs. The growth of this business will depend on the
demand for Internet-based services, the competitive environment, the quality of
our services and the fees which we can charge our customers, particularly as
compared to existing terrestrial service offerings. We cannot assure you,
however, that this facet of our business will meet our expectations due to the
present uncertainty inherent in Internet ventures, nor can we assure you that
this facet of our business will grow into a source of significant revenue for us
in the near future or at any time.
RISKS RELATING TO THE NOTES
OUR SUBSTANTIAL INDEBTEDNESS COULD IMPAIR OUR FINANCIAL CONDITION AND OUR
ABILITY TO FULFILL OUR OBLIGATIONS UNDER OUR OUTSTANDING INDEBTEDNESS,
INCLUDING THE NOTES.
Subject to the restrictions contained in the indenture governing the notes
and in the agreement governing our new senior secured credit facility, we may
incur additional indebtedness. Our substantial indebtedness could:
- make it more difficult for us to satisfy our obligations with respect to
the notes and other indebtedness, including $750 million of senior notes
issued in 1998 and amounts outstanding under our new $1.25 billion senior
secured credit facility;
- require us to dedicate a substantial portion of our cash flow from
operations to payments on our debt, thereby reducing the availability of
our cash flow to fund working capital, capital expenditures and other
general corporate requirements;
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;
- place us at a competitive disadvantage compared to our competitors that
have proportionately less debt;
- make it more difficult for us to borrow money for working capital,
capital expenditures, acquisitions or other purposes; and
- expose us to the risk of increased interest rates with respect to that
portion of our debt which has a variable rate of interest.
If we are unable to meet our debt obligations, we could be forced to
restructure or refinance our indebtedness, seek additional equity capital or
sell assets. We may be unable to obtain financing or sell assets on satisfactory
terms, or at all.
THE NOTES AND THE GUARANTEES ARE EFFECTIVELY JUNIOR TO ALL OF OUR AND THE
GUARANTORS' SENIOR SECURED DEBT TO THE EXTENT OF THE COLLATERAL.
The notes are general unsecured obligations, effectively junior to all
existing and future senior secured debt of us and each subsidiary guarantor to
the extent of the collateral, including obligations under our new $1.25 billion
senior secured credit facility and $750.0 million of senior notes we issued in
1998 that, in accordance with the terms of their indenture, have been ratably
secured with our obligations under the new senior secured credit facility. The
notes are not secured by any of our or the subsidiary guarantors' assets, and as
such are effectively subordinated to any secured debt that we or the guarantors
may have now or may incur in the future to the extent of the value of the assets
securing that debt.
In the event that we or a subsidiary guarantor is declared bankrupt,
becomes insolvent or is liquidated or reorganized, any secured debt will be
entitled to be paid from our assets or the assets of the guarantor,
23
as applicable, that serve as collateral, before any payment may be made with
respect to unsecured debt, such as the notes or the affected guarantees. In any
of the foregoing events, we cannot assure you that we would have sufficient
assets to pay amounts due on the notes. As a result, holders of the notes may
receive less, proportionally, than the holders of secured debt senior to the
notes and the guarantees.
THE TERMS OF OUR INDEBTEDNESS IMPOSE SIGNIFICANT RESTRICTIONS ON OUR BUSINESS.
The indenture governing the notes and the agreement governing our new
senior secured credit facility contain various covenants that limit our ability
to, among other things:
- incur or guarantee additional indebtedness;
- make restricted payments, including dividends;
- create or permit to exist certain liens;
- enter into business combinations and asset sale transactions;
- make investments;
- reduce or eliminate insurance on our satellites;
- enter into transactions with affiliates; and
- enter into new businesses.
These restrictions could limit our ability to obtain future financing, make
acquisitions or needed capital expenditures, withstand a future downturn in our
business or the economy in general, conduct operations or otherwise take
advantage of business opportunities that may arise. Our new senior secured
credit facility also requires us to maintain specified financial ratios. Our
ability to meet future financial ratios can be affected by events beyond our
control, such as general economic conditions. Our failure to maintain any
applicable financial ratios would prevent us from borrowing additional amounts
under our new senior secured credit facility and could result in a default under
that facility, which could cause the indebtedness outstanding under the
facility, and by reason of cross-acceleration or cross-default provisions, the
notes and any other indebtedness we may then have, to become immediately due and
payable. If we were unable to repay those amounts, the lenders under our new
senior secured credit facility could initiate a bankruptcy proceeding or
liquidation proceeding or proceed against the collateral granted to them and the
holders of our senior notes issued in 1998 to secure that indebtedness. If the
lenders under our new senior secured credit facility were to accelerate the
repayment of outstanding borrowings, we might not have sufficient assets to
repay our indebtedness, including the notes.
WE MAY BE UNABLE TO REPURCHASE THE NOTES IF WE EXPERIENCE A CHANGE OF CONTROL.
If we were to experience a change of control, as defined in the indenture
governing the notes, we will be required to make an offer to purchase all of the
notes at a purchase price equal to 101% of their principal amount, plus accrued
and unpaid interest. Our new senior secured credit facility restricts our
ability to repurchase notes, including the repurchase of notes under a change of
control offer. Our failure to repay holders tendering notes upon a change of
control would result in an event of default under the notes. A change of
control, or an event of default under the notes, may also result in an event of
default under our new senior secured credit facility, which may result in the
acceleration of the indebtedness under that facility requiring us to repay that
indebtedness immediately. If a change of control were to occur, we cannot assure
you that we would have sufficient funds to repay debt outstanding under the new
senior secured credit facility or to purchase the notes or any other securities
which we would be required to offer to purchase or that become immediately due
and payable as a result. We expect that we would require additional financing
from third parties to fund any such purchases, and we cannot assure you that we
would be able to obtain financing on satisfactory terms or at all. Neither
consummation of the currently contemplated merger of the Hughes Electronics and
EchoStar businesses nor the separate
24
purchase of PanAmSat by EchoStar would constitute a change of control as defined
in the indenture governing the notes.
A COURT MAY VOID THE GUARANTEES OF THE NOTES OR SUBORDINATE THE GUARANTEES TO
OTHER OBLIGATIONS OF THE SUBSIDIARY GUARANTORS.
Although standards may vary depending on the applicable law, generally
under U.S. federal bankruptcy law and comparable provisions of state fraudulent
transfer laws, if a court were to find that, among other things, at the time any
guarantor of the notes incurred the debt evidenced by its guarantee of the
notes, the guarantor:
- either:
- was insolvent or rendered insolvent by reason of the incurrence of the
guarantee;
- was engaged or about to engage in a business or transaction for which
that guarantor's remaining assets constituted unreasonably small
capital;
- was a defendant in an action for money damages, or had a judgment for
money damages docketed against it, if in either case, after a final
judgment, the judgment were unsatisfied; or
- intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature
- and
- the guarantor received less than reasonable equivalent value or fair
consideration for the incurrence of its guarantee; or
- incurred the guarantee or made related distributions or payments with
the intent of hindering, delaying or defrauding creditors,
there is a risk that the guarantee of that guarantor could be voided by the
court, or claims by holders of the notes under the guarantee could be
subordinated to other debts of that guarantor. In addition, any payment by the
guarantor pursuant to its guarantee could be required to be returned to that
guarantor, or to a fund for the benefit of the creditors of that guarantor.
The measures of insolvency for purposes of the foregoing considerations
will vary depending upon the law applied in any proceeding. Generally, however,
a guarantor of the notes would be considered insolvent if:
- the sum of its debts, including contingent liabilities, was greater than
the fair value of all of its assets at a fair valuation;
- the present fair value of its assets was less than the amount that would
be required to pay its probable liability on its existing debts,
including contingent liabilities, as they become absolute and mature; or
- it could not pay its debts as they become due.
OUR MAJORITY STOCKHOLDER MAY HAVE INTERESTS THAT CONFLICT WITH THOSE OF THE
NOTEHOLDERS.
Hughes Electronics beneficially owns approximately 81% of our common stock.
As the majority stockholder, Hughes Electronics has the ability to control
fundamental corporate transactions requiring the approval of our stockholders,
including but not limited to the election of directors and the approval of
significant corporate transactions, including a change of control. The interests
of Hughes Electronics as a stockholder may differ from the interests of the
noteholders. If the merger of the Hughes Electronics and EchoStar businesses is
completed or, in the alternative, if EchoStar acquires PanAmSat separately as
described above, EchoStar will have the similar ability to influence our
fundamental corporate transactions and corporate policy.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
When we sold the outstanding notes on February 1, 2002, we entered into a
registration rights agreement with the initial purchasers of those notes. Under
the registration rights agreement, we agreed to:
- file not later than 90 days after the date which the initial purchasers
purchased the outstanding notes (the "Closing Date"), the registration
statement of which this prospectus forms a part, regarding the exchange
of the new notes which are registered under the Securities Act for
outstanding notes; and
- use our commercially reasonable efforts to cause this registration
statement to be declared effective by the SEC on or prior to 180 days
after the Closing Date; and
We also agreed to use our commercially reasonable efforts to keep the
exchange offer open for not less than 20 business days (or longer, if required
by applicable law) after the date notice of the exchange offer is mailed to the
holders of the outstanding notes and to consummate the exchange offer no later
than 30 days after the date that the registration statement is declared
effective.
We also agreed to file a shelf registration statement for the resale of the
outstanding notes if we cannot effect an exchange offer within the time periods
listed above and in certain other circumstances and use our commercially
reasonable efforts to cause such shelf registration statement to be declared
effective under the Securities Act.
The registration rights agreement provides that we are required to pay
additional interest to the holders of outstanding notes whose outstanding notes
are subject to transfer restrictions if:
- the registration statement is not filed on or prior to 90 days after the
Closing Date; or
- the registration statement is not declared effective on or prior to 180
days after the Closing Date;
- the exchange offer has not been consummated on or prior to 30 days after
the date that the registration statement is declared effective; or
- the registration statement required by the registration rights agreement
has been declared effective by the SEC but (1) the registration statement
thereafter ceases to be effective or (2) the registration statement or
the related prospectus ceases to be usable in connection with resales of
notes as specified in the registration rights agreement.
Each broker-dealer that receives new notes for its own account in exchange
for outstanding notes where such outstanding notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such new notes. See "Plan of Distribution."
A copy of the registration rights agreement is filed as an exhibit to the
registration statement of which this prospectus forms a part.
TERMS OF THE EXCHANGE OFFER
This prospectus and the accompanying letter of transmittal together
constitute the exchange offer. Upon the terms and subject to the conditions set
forth in this prospectus and in the letter of transmittal, we will accept for
exchange outstanding notes that are properly tendered on or before the
expiration date and are not withdrawn as permitted below. The expiration date
for this exchange offer is 5:00 p.m., New York City time, on , 2002, or
such later date and time to which we, in our sole discretion, extend the
exchange offer.
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The form and terms of the new notes being issued in the exchange offer are
the same as the form and terms of the outstanding notes, except that the new
notes being issued in the exchange offer:
- will have been registered under the Securities Act;
- will not bear the restrictive legends restricting their transfer under
the Securities Act; and
- will not contain the registration rights and additional interest
provisions contained in the outstanding notes.
Outstanding notes tendered in the exchange offer must be in denominations
of the principal amount of $1,000 and any integral multiple of $1,000.
We expressly reserve the right, in our sole discretion:
- to extend the expiration date;
- to delay accepting any outstanding notes;
- if any of the conditions set forth below under "-- Conditions to the
Exchange Offer" have not been satisfied, to terminate the exchange offer
and not accept any outstanding notes for exchange; and
- to amend the exchange offer in any manner.
We will give oral or written notice of any extension, delay,
non-acceptance, termination or amendment as promptly as practicable by a public
announcement, and in the case of an extension, no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date.
During an extension, all outstanding notes previously tendered will remain
subject to the exchange offer and may be accepted for exchange by us. Any
outstanding notes not accepted for exchange for any reason will be returned
without cost to the holder that tendered them as promptly as practicable after
the expiration or termination of the exchange offer.
EXCHANGE OFFER PROCEDURES
When the holder of outstanding notes tenders and we accept outstanding
notes for exchange, a binding agreement between us and the tendering holder is
created, subject to the terms and conditions set forth in this prospectus and
the accompanying letter of transmittal. Except as set forth below, a holder of
outstanding notes who wishes to tender outstanding notes for exchange must, on
or prior to the expiration date:
- transmit a properly completed and duly executed letter of transmittal,
including all other documents required by such letter of transmittal, to
The Bank of New York, the exchange agent, at the address set forth below
under the heading "The Exchange Agent"; or
- if outstanding notes are tendered pursuant to the book-entry procedures
set forth below, the tendering holder must transmit an agent's message to
the exchange agent at the address set forth below under the heading "The
Exchange Agent."
In addition, either:
- the exchange agent must receive the certificates for the outstanding
notes and the letter of transmittal;
- the exchange agent must receive, prior to the expiration date, a timely
confirmation of the book-entry transfer of the outstanding notes being
tendered into the exchange agent's account at The Depository Trust
Company, or DTC, along with the letter of transmittal or an agent's
message; or
- the holder must comply with the guaranteed delivery procedures described
below.
The term "agent's message" means a message, transmitted to DTC and received
by the exchange agent and forming a part of a book-entry transfer, referred to
as a "book-entry confirmation," which states
27
that DTC has received an express acknowledgment that the tendering holder agrees
to be bound by the letter of transmittal and that we may enforce the letter of
transmittal against such holder.
The method of delivery of the outstanding notes, the letters of transmittal
and all other required documents is at the election and risk of the holder. If
such delivery is by mail, we recommend registered mail, properly insured, with
return receipt requested. In all cases, you should allow sufficient time to
assure timely delivery. No letters of transmittal or outstanding notes should be
sent directly to us.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the outstanding notes surrendered for
exchange are tendered:
- by a holder of outstanding notes who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on the
letter of transmittal; or
- for the account of an eligible institution.
An "eligible institution" is a firm which is a member of a registered
national securities exchange or a member of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an office
or correspondent in the United States.
If signatures on a letter of transmittal or notice of withdrawal are
required to be guaranteed, the guarantor must be an eligible institution. If
outstanding notes are registered in the name of a person other than the signer
of the letter of transmittal, the outstanding notes surrendered for exchange
must be endorsed by, or accompanied by a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by us in our sole
discretion, duly executed by the registered holder with the holder's signature
guaranteed by an eligible institution.
We will determine all questions as to the validity, form, eligibility
(including time of receipt) and acceptance of outstanding notes tendered for
exchange in our sole discretion. Our determination will be final and binding. We
reserve the absolute right to:
- reject any and all tenders of any outstanding note improperly tendered;
- refuse to accept any outstanding note if, in our judgment or the judgment
of our counsel, acceptance of the outstanding note may be deemed
unlawful; and
- waive any defects or irregularities or conditions of the exchange offer
as to any particular outstanding note either before or after the
expiration date, including the right to waive the ineligibility of any
holder who seeks to tender outstanding notes in the exchange offer.
Our interpretation of the terms and conditions of the exchange offer as to
any particular outstanding notes either before or after the expiration date,
including the letter of transmittal and the instructions to it, will be final
and binding on all parties. Holders must cure any defects and irregularities in
connection with tenders of outstanding notes for exchange within such reasonable
period of time as we will determine, unless we waive such defects or
irregularities. Neither we, the exchange agent nor any other person will be
under any duty to give notification of any defect or irregularity with respect
to any tender of outstanding notes for exchange, nor will any such persons incur
any liability for failure to give such notification.
If a person or persons other than the registered holder or holders of the
outstanding notes tendered for exchange signs the letter of transmittal, the
tendered outstanding notes must be endorsed or accompanied by appropriate powers
of attorney, in either case signed exactly as the name or names of the
registered holder or holders that appear on the outstanding notes.
If trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity sign the letter of transmittal or any outstanding notes or any power of
attorney, such persons should so indicate when signing, and you must submit
proper evidence satisfactory to us of such person's authority to so act unless
we waive this requirement.
By tendering, each holder will represent to us that, among other things,
the person acquiring new notes in the exchange offer is obtaining them in the
ordinary course of its business, whether or not such
28
person is the holder, and that neither the holder nor such other person has any
arrangement or understanding with any person to participate in the distribution
of the new notes. If any holder or any such other person is an "affiliate," as
defined in Rule 405 under the Securities Act, of our company, or is engaged in
or intends to engage in or has an arrangement or understanding with any person
to participate in a distribution of the new notes, such holder or any such other
person:
- may not rely on the applicable interpretations of the staff of the SEC;
and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction.
Each broker-dealer that receives new notes for its own account in exchange
for outstanding notes, where such outstanding notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such new notes. The letter of transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
See "Plan of Distribution" for a discussion of the exchange and resale
obligations of broker-dealers in connection with the exchange offer.
ACCEPTANCE OF OUTSTANDING NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES ISSUED IN
THE EXCHANGE OFFER
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will accept, promptly after the expiration date, all outstanding notes
properly tendered and will issue new notes registered under the Securities Act.
For purposes of the exchange offer, we will be deemed to have accepted properly
tendered outstanding notes for exchange when, as and if we have given oral or
written notice to the exchange agent, with written confirmation of any oral
notice to be given promptly thereafter. See "Conditions to the Exchange Offer"
for a discussion of the conditions that must be satisfied before we accept any
outstanding notes for exchange.
For each outstanding note accepted for exchange, the holder will receive a
new note registered under the Securities Act having a principal amount equal to,
and in the denomination of, that of the surrendered outstanding note.
Accordingly, registered holders of new notes on the relevant record date for the
first interest payment date following the consummation of the exchange offer
will receive interest accruing from the issue date of the outstanding notes or,
if interest has been paid, the most recent date to which interest has been paid.
Outstanding notes that we accept for exchange will cease to accrue interest from
and after the date of consummation of the exchange offer. Under the registration
rights agreement, we may be required to make additional payments in the form of
additional interest to the holders of the outstanding notes under circumstances
relating to the timing of the exchange offer, as discussed above.
In all cases, we will issue new notes in the exchange offer for outstanding
notes that are accepted for exchange only after the exchange agent timely
receives:
- certificates for such outstanding notes or a timely book-entry
confirmation of such outstanding notes into the exchange agent's account
at DTC;
- a properly completed and duly executed letter of transmittal or an
agent's message; and
- all other required documents.
If for any reason set forth in the terms and conditions of the exchange
offer we do not accept any tendered outstanding notes, or if a holder submits
outstanding notes for a greater principal amount than the holder desires to
exchange, we will return such unaccepted or non-exchanged outstanding notes
without cost to the tendering holder. In the case of outstanding notes tendered
by book-entry transfer into the exchange agent's account at DTC, such
non-exchanged outstanding notes will be credited to an account maintained with
DTC. We will return the outstanding notes or have them credited to DTC as
promptly as practicable after the expiration or termination of the exchange
offer.
29
BOOK-ENTRY TRANSFERS
The exchange agent will make a request to establish an account at DTC for
purposes of the exchange offer within two business days after the date of this
prospectus. Any financial institution that is a participant in DTC's system must
make book-entry delivery of outstanding notes denominated in dollars by causing
DTC to transfer the outstanding notes into the exchange agent's account at DTC
in accordance with DTC's procedures for transfer. Such participant should
transmit its acceptance to DTC on or prior to the expiration date or comply with
the guaranteed delivery procedures described below. DTC will verify such
acceptance, execute a book-entry transfer of the tendered outstanding notes into
the exchange agent's account at DTC and then send to the exchange agent
confirmation of such book-entry transfer. The confirmation of such book-entry
transfer will include an agent's message confirming that DTC has received an
express acknowledgment from such participant that such participant has received
and agrees to be bound by the letter of transmittal and that we may enforce the
letter of transmittal against such participant. Delivery of outstanding notes
tendered in the exchange offer may be effected through book-entry transfer at
DTC as applicable. However, the letter of transmittal or facsimile thereof or an
agent's message, with any required signature guarantees and any other required
documents, must:
- be transmitted to and received by the exchange agent at the address set
forth below under "-- Exchange Agent" on or prior to the expiration date;
or
- comply with the guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
If a holder of outstanding notes desires to tender such notes and the
holder's outstanding notes are not immediately available, or time will not
permit such holder's outstanding notes or other required documents to reach the
exchange agent before the expiration date, or the procedure for book-entry
transfer cannot be completed on a timely basis, a tender may be effected if:
- the holder tenders the outstanding notes through an eligible institution;
- prior to the expiration date, the exchange agent receives from such
eligible institution a properly completed and duly executed notice of
guaranteed delivery, substantially in the form we have provided, by
facsimile transmission, mail or hand delivery, setting forth the name and
address of the holder of the outstanding notes being tendered and the
amount of the outstanding notes being tendered. The notice of guaranteed
delivery will state that the tender is being made and guarantee that
within three New York Stock Exchange trading days after the date of
execution of the notice of guaranteed delivery, the certificates for all
physically tendered outstanding notes, in proper form for transfer, or a
book-entry confirmation, as the case may be, together with a properly
completed and duly executed letter of transmittal or agent's message with
any required signature guarantees and any other documents required by the
letter of transmittal will be deposited by the eligible institution with
the exchange agent; and
- the exchange agent receives the certificates for all physically tendered
outstanding notes, in proper form for transfer, or a book-entry
confirmation, as the case may be, together with a properly completed and
duly executed letter of transmittal or agent's message with any required
signature guarantees and any other documents required by the letter of
transmittal, within three New York Stock Exchange trading days after the
date of execution of the notice of guaranteed delivery.
WITHDRAWAL RIGHTS
You may withdraw tenders of your outstanding notes at any time prior to
5:00 p.m., New York City time, on the expiration date. For a withdrawal to be
effective, you must send a written notice of
30
withdrawal to the exchange agent at one of the addresses set forth below under
"The Exchange Agent." Any such notice of withdrawal must:
- specify the name of the person having tendered the outstanding notes to
be withdrawn;
- identify the outstanding notes to be withdrawn, including the principal
amount of such outstanding notes; and
- where certificates for outstanding notes are transmitted, specify the
name in which outstanding notes are registered, if different from that of
the withdrawing holder.
If certificates for outstanding notes have been delivered or otherwise
identified to the exchange agent, then, prior to the release of such
certificates the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and signed notice of withdrawal with
signatures guaranteed by an eligible institution unless such holder is an
eligible institution. If outstanding notes have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal must
specify the name and number of the account at DTC to be credited with the
withdrawn outstanding notes and otherwise comply with the procedures of such
facility. We will determine all questions as to the validity, form and
eligibility (including time of receipt) of such notices and our determination
will be final and binding on all parties. Any tendered outstanding notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the exchange offer. Any outstanding notes which have been tendered
for exchange but which are not exchanged for any reason will be returned to the
holder of those outstanding notes without cost to the holder. In the case of
outstanding notes tendered by book-entry transfer into the exchange agent's
account at DTC, the outstanding notes withdrawn will be credited to an account
maintained with DTC for the outstanding notes. The outstanding notes will be
returned or credited to this account as soon as practicable after withdrawal,
rejection of tender or termination of the exchange offer. Properly withdrawn
outstanding notes may be re-tendered by following one of the procedures
described under "-- Exchange Offer Procedures" above at anytime on or prior to
5:00 p.m., New York City time, on the expiration date.
CONDITIONS TO THE EXCHANGE OFFER
We are not required to accept for exchange, or to issue new notes in the
exchange offer for, any outstanding notes. We may terminate or amend the
exchange offer at any time before the acceptance of outstanding notes for
exchange if:
- any federal law, statute, rule or regulation is adopted or enacted which,
in our judgment, would reasonably be expected to impair our ability to
proceed with the exchange offer;
- any stop order is threatened or in effect with respect to the
registration statement of which this prospectus constitutes a part or the
qualification of the indenture under the Trust Indenture Act of 1939, as
amended;
- there is a change in the current interpretation by staff of the SEC which
permits the new notes issued in the exchange offer in exchange for the
outstanding notes to be offered for resale, resold and otherwise
transferred by such holders, other than broker-dealers and any such
holder which is an "affiliate" of our company within the meaning of Rule
405 under the Securities Act, without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that
the new notes acquired in the exchange offer are acquired in the ordinary
course of such holder's business and such holder has no arrangement or
understanding with any person to participate in the distribution of the
new notes;
- there is a general suspension of or general limitation on prices for, or
trading in, securities on any national exchange or in the
over-the-counter market;
- any governmental agency creates limits that adversely affect our ability
to complete the exchange offer;
31
- there is any declaration of war, armed hostilities or other similar
international calamity directly or indirectly involving the United
States, or the worsening of any such condition that existed at the time
that we commence the exchange offer;
- there is a change or a development involving a prospective change in our
and our subsidiaries' businesses, properties, assets, liabilities,
financial condition, operations or results of operations, taken as a
whole, that is or may be adverse to us; or
- we become aware of facts that, in our reasonable judgment, have or may
have adverse significance with respect to the value of the outstanding
notes or the new notes to be issued in the exchange offer.
The preceding conditions are for our sole benefit and we may assert them
regardless of the circumstances giving rise to any such condition. We may waive
the preceding conditions in whole or in part at any time and from time to time
in our sole discretion. If we do so, the exchange offer will remain open for at
least three business days following any waiver of the preceding conditions. Our
failure at any time to exercise the foregoing rights will not be deemed a waiver
of any such right and each such right will be deemed an ongoing right which we
may assert at any time and from time to time.
THE EXCHANGE AGENT
The Bank of New York has been appointed as our exchange agent for the
exchange offer. All executed letters of transmittal should be directed to our
exchange agent at the address set forth below. Questions and requests for
assistance, requests for additional copies of this prospectus or of the letter
of transmittal and requests for notices of guaranteed delivery should be
directed to the exchange agent addressed as follows:
Main Delivery To:
THE BANK OF NEW YORK
By mail, hand delivery or overnight courier:
The Bank of New York
5 Penn Plaza -- 13th Floor
New York, NY 10001
Attention: Corporate Trust Administration -- Confidential
By facsimile transmission
(for eligible institutions only)
Fax: (212) 896-7299
Confirm by telephone:
Tel: (212) 896-7198
Delivery of the letter of transmittal to an address other than as set forth
above or transmission of such letter of transmittal via facsimile other than as
set forth above does not constitute a valid delivery of such letter of
transmittal.
FEES AND EXPENSES
We will not make any payment to brokers, dealers or others soliciting
acceptance of the exchange offer except for reimbursement of mailing expenses.
We will pay the cash expenses to be incurred in connection with the exchange
offer, including:
- the SEC registration fee;
- fees and expenses of the exchange agent and the trustee;
- accounting and legal fees;
32
- printing fees; and
- other related fees and expenses.
TRANSFER TAXES
Holders who tender their outstanding notes for exchange will not be
obligated to pay any transfer taxes in connection with the exchange. If,
however, the new notes issued in the exchange offer are to be delivered to, or
are to be issued in the name of, any person other than the holder of the
outstanding notes tendered, or if a transfer tax is imposed for any reason other
than the exchange of outstanding notes in connection with the exchange offer,
then the holder must pay any of these transfer taxes, whether imposed on the
registered holder or on any other person. If satisfactory evidence of payment
of, or exemption from, these taxes is not submitted with the letter of
transmittal, the amount of these transfer taxes will be billed directly to the
tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE OUTSTANDING NOTES
Holders who desire to tender their outstanding notes in exchange for new
notes registered under the Securities Act should allow sufficient time to ensure
timely delivery. Neither the exchange agent nor we are under any duty to give
notification of defects or irregularities with respect to the tenders of
outstanding notes for exchange.
Outstanding notes that are not tendered or are tendered but not accepted
will, following the consummation of the exchange offer, continue to be subject
to the provisions in the indenture regarding the transfer and exchange of the
outstanding notes and the existing restrictions on transfer set forth in the
legend on the outstanding notes and in the prospectus dated January 25, 2002,
relating to the outstanding notes. Except in limited circumstances with respect
to specific types of holders of outstanding notes, we will have no further
obligation to provide for the registration under the Securities Act of such
outstanding notes. In general, outstanding notes, unless registered under the
Securities Act, may not be offered or sold except pursuant to an exemption from,
or in a transaction not subject to, the Securities Act and applicable state
securities laws. We do not currently anticipate that we will take any action to
register the outstanding notes under the Securities Act or under any state
securities laws.
Upon completion of the exchange offer, holders of the outstanding notes
will not be entitled to any further registration rights under the registration
rights agreement, except under limited circumstances.
Holders of the new notes and any outstanding notes that remain outstanding
after consummation of the exchange offer will vote together as a single class
for purposes of determining whether holders of the requisite percentage of the
class have taken certain actions or exercised certain rights under the
indenture.
CONSEQUENCES OF EXCHANGING OUTSTANDING NOTES
Based on interpretations of the staff of the SEC, as set forth in no-action
letters to third parties, we believe that the new notes may be offered for
resale, resold or otherwise transferred by holders of those new notes, other
than by any holder that is an "affiliate" of ours within the meaning of Rule 405
under the Securities Act. The new notes may be offered for resale, resold or
otherwise transferred without compliance with the registration and prospectus
delivery provisions of the Securities Act, if:
- the new notes issued in the exchange offer are acquired in the ordinary
course of the holder's business; and
- the holder, other than a broker-dealer, has no arrangement or
understanding with any person to participate in the distribution of the
new notes issued in the exchange offer.
However, the SEC has not considered this exchange offer in the context of a
no-action letter and we cannot guarantee that the staff of the SEC would make a
similar determination with respect to this exchange offer as in such other
circumstances.
33
Each holder, other than a broker-dealer, must furnish a written
representation, at our request, that:
(1) it is not an affiliate of our company;
(2) it is not engaged in, and does not intend to engage in, a
distribution of the new notes issued in the exchange offer and has no
arrangement or understanding to participate in a distribution of new notes
issued in the exchange offer;
(3) it is acquiring the new notes issued in the exchange offer in the
ordinary course of its business; and
(4) it is not acting on behalf of a person who could not make
representations (1)-(3).
Each broker-dealer that receives new notes for its own account in exchange
for outstanding notes must acknowledge that:
- such outstanding notes were acquired by such broker-dealer as a result of
market-making or other trading activities; and
- it must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any resale transaction,
including the delivery of a prospectus that contains information with
respect to any selling holder required by the Securities Act in
connection with any resale of new notes issued in the exchange offer.
Furthermore, any broker-dealer that acquired any of its outstanding notes
directly from us:
- may not rely on the applicable interpretation of the SEC staff's position
contained in Exxon Capital Holdings Corp., SEC No-Action Letter (April
13, 1989), Morgan, Stanley & Co., Inc., SEC No-Action Letter (June 5,
1991) and Shearman Sterling, SEC No-Action Letter (July 2, 1983); and
- must also be named as a selling holder of the new notes in connection
with the registration and prospectus delivery requirements of the
Securities Act relating to any resale transaction.
See "Plan of Distribution" for a discussion of the exchange and resale
obligations of broker-dealers in connection with the exchange offer.
In addition, to comply with state securities laws of certain jurisdictions,
the new notes issued in the exchange offer may not be offered or sold in any
state unless they have been registered or qualified for sale in such state or an
exemption from registration or qualification is available and complied with by
the holders selling the new notes. We have agreed in the registration rights
agreement that, prior to any public offering of transfer restricted notes, we
will use our reasonable best efforts to register or qualify, and cooperate with
the holders of the notes in connection with the registration or qualification
of, the transfer restricted notes for offer or sale under the securities laws of
those states as any holder of the notes reasonably requests in writing. Unless a
holder requests, we currently do not intend to register or qualify the sale of
the new notes in any state where an exemption from registration or qualification
is required and not available.
34
USE OF PROCEEDS
We will not receive any proceeds from this exchange offer.
We used the proceeds from the sale of the outstanding notes, together with
borrowings under our new senior secured credit facility, to repay in full $1.725
billion of indebtedness owing to Hughes Electronics under a term loan and to pay
the fees and expenses of the Refinancing, and will use the balance of the
proceeds for general corporate purposes.
The following table summarizes the sources and uses of funds in the
Refinancing:
<Table>
<Caption>
(IN THOUSANDS)
SOURCES:
Revolving credit facility................................... $ --
Term loan A facility........................................ 300,000
Term loan B facility........................................ 700,000
Outstanding notes........................................... 800,000
----------
Total sources............................................. $1,800,000
==========
USES:
Repay Hughes Electronics term loan.......................... $1,725,000
Pay transaction fees and expenses........................... 40,000
General corporate purposes.................................. 35,000
----------
Total uses................................................ $1,800,000
==========
</Table>
35
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 2001:
- on a historical basis;
- as adjusted to reflect the repayment in full of the Galaxy IIIR notes on
January 2, 2002 from available cash as if such repayment had been made on
December 31, 2001; and
- pro forma as adjusted, to give effect to the Galaxy IIIR notes repayment
and the Refinancing as if they had each occurred on December 31, 2001.
This table should be read in conjunction with the information contained in
our consolidated financial statements and the notes thereto appearing elsewhere
in this prospectus.
<Table>
<Caption>
AS OF DECEMBER 31, 2001
--------------------------------------
PRO FORMA
ACTUAL AS ADJUSTED AS ADJUSTED
---------- ----------- -----------
(IN THOUSANDS)
Cash and cash equivalents........................ $ 443,266 $ 396,724 $ 431,724
========== ========== ==========
Long-term debt and due to affiliates (including
current portion):
Old senior credit facility(1).................. -- --
New revolving credit facility(2)............... -- -- --
New term loan A facility....................... -- -- 300,000
New term loan B facility....................... -- -- 700,000
6.00% Notes due 2003........................... 200,000 200,000 200,000
6.125% Notes due 2005.......................... 275,000 275,000 275,000
6.375% Notes due 2008.......................... 150,000 150,000 150,000
6.875% Debentures due 2028..................... 125,000 125,000 125,000
Galaxy IIIR Notes due 2002(3).................. 46,542 -- --
Senior Notes................................... -- -- 800,000
Hughes Electronics term loan................... 1,725,000 1,725,000 --
---------- ---------- ----------
Total debt.................................. $2,521,542 $2,475,000 $2,550,000
========== ========== ==========
Common stock..................................... 1,499 1,499 1,499
Additional paid-in capital....................... 2,530,016 2,530,016 2,530,016
Retained earnings................................ 461,045 461,045 461,045
---------- ---------- ----------
Total stockholders' equity.................. $2,992,560 $2,992,560 $2,992,560
========== ========== ==========
Total capitalization........................ $5,514,102 $5,467,560 $5,542,560
========== ========== ==========
</Table>
- ---------------
(1) The old senior credit facility was terminated in connection with the
Refinancing.
(2) The revolving credit facility was not drawn down in connection with the
Refinancing.
(3) The Galaxy IIIR notes were repaid in full on January 2, 2002 from available
cash.
36
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The selected consolidated financial data as of December 31, 2001 and 2000
and for each of the three years in the period ended December 31, 2001 presented
in this table has been derived from our audited consolidated financial
statements and notes thereto which are incorporated herein by reference. The
selected consolidated financial data as of December 31, 1999, 1998 and 1997 and
for each of the years ended December 31, 1998 and 1997 presented in this table
are derived from our audited consolidated financial statements and notes thereto
which are not included or incorporated by reference herein. The operating data
and other financial data presented in this table are not derived from our
consolidated financial statements. You should read the selected financial data
below in conjunction with our consolidated financial statements and notes
thereto and "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations" located in the Annual Report on Form 10-K, which is
incorporated herein by reference.
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
1997(1) 1998 1999 2000 2001
--------------- ------------- ------------- -------------- -------------
(DOLLARS IN THOUSANDS (OTHER THAN CONTRACTED BACKLOG, WHICH IS IN BILLIONS))
STATEMENT OF INCOME DATA:
Revenue:
Operating leases, satellite
services and other.......... $ 558,622 $ 736,624 $ 787,509 $ 780,256 $ 802,194
Outright sales and sales-type
leases(2)................... 71,317 30,639 23,108 243,314 67,881
----------- --------- --------- ---------- ---------
Total revenue............... 629,939 767,263 810,617 1,023,570 870,075
----------- --------- --------- ---------- ---------
Costs and expenses:
Cost of outright sales and
sales-type leases........... 20,476 -- -- 85,776 12,766
Leaseback expense, net of
deferred gains.............. 61,907 47,223 15,391 -- --
Depreciation and
amortization................ 149,592 234,945 280,472 337,450 414,744
Direct operating costs......... 61,199 96,510 103,973 149,681 152,883
Selling, general and
administrative.............. 42,561 70,251 72,415 97,462 116,140
Severance costs................ -- -- -- -- 8,223
Gain on Galaxy VII insurance
claim....................... -- -- -- (3,362) --
----------- --------- --------- ---------- ---------
Operating income................. 294,204 318,334 338,366 356,563 165,319
Interest expense, net(3)......... 30,973 97,788 112,002 128,205 111,153
Other income..................... (385) -- -- -- --
----------- --------- --------- ---------- ---------
Income before taxes, minority
interest and extraordinary
item........................... 263,616 220,546 226,364 228,358 54,166
Income tax expense............... 117,325 95,940 104,127 102,761 23,562
Minority interest................ 12,819 -- -- -- --
Extraordinary item(4)............ 20,643 -- -- -- --
----------- --------- --------- ---------- ---------
Net income....................... $ 112,829 $ 124,606 $ 122,237 $ 125,597 $ 30,604
=========== ========= ========= ========== =========
Net income per share-basic and
diluted........................ N/A $ 0.83 $ 0.82 $ 0.84 $ 0.20
=========== ========= ========= ========== =========
</Table>
37
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
1997(1) 1998 1999 2000 2001
--------------- ------------- ------------- -------------- -------------
(DOLLARS IN THOUSANDS (OTHER THAN CONTRACTED BACKLOG, WHICH IS IN BILLIONS))
OTHER FINANCIAL DATA:
EBITDA(5)........................ $ 444,181 $ 553,279 $ 618,838 $ 694,013 $ 580,063
EBITDA margin(6)................. 71% 72% 76% 68% 67%
Net cash provided by operating
activities..................... $ 201,944 $ 628,119 $ 500,582 $ 456,408 $ 540,389
Net cash used in investing
activities..................... (1,720,440) (636,465) (560,199) (394,185) (203,836)
Net cash provided by (used in)
financing activities........... 1,610,206 94,149 (666) (50,137) (22,632)
Capital expenditures............. 622,347 738,540 586,910 449,560 338,203
Contracted backlog (at period
end; in billions)(7)........... -- $ 6.3 $ 6.1 $ 6.0 $ 5.84
Ratio of earnings to fixed
charges(8)..................... 2.38 2.05 2.05 2.06 1.43
Pro forma ratio of earnings to
fixed charges(9)............... -- -- -- -- 1.34
</Table>
<Table>
<Caption>
AT DECEMBER 31,
--------------------------------
1999 2000 2001
---- ---- ----
OPERATING DATA:
Number of satellites in orbit.......... 20 20 21
Number of transponders(10):
C-band............................... 329 413 413
Ku-band.............................. 397 445 457
Capacity utilization(11):
C-band............................... -- 79.8% 75.0%
Ku-band.............................. -- 65.2% 65.0%
</Table>
<Table>
<Caption>
AT DECEMBER 31,
--------------------------------------------------------------
1997 1998 1999 2000 2001
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Cash............................. $ 91,739 $ 177,542 $ 117,259 $ 129,345 $ 443,266
Satellites and other property and
equipment, net................. 2,506,082 2,895,191 3,140,014 3,156,944 3,152,082
Net investment in sales-type
leases......................... 352,446 195,977 167,961 245,998 251,899
Total assets..................... 5,682,434 5,890,497 5,984,709 6,178,351 6,296,810
Total debt and due to
affiliates(12)................. 2,397,469 2,538,409 2,671,342 2,542,758 2,521,542
Total long-term liabilities...... 3,016,680 3,058,480 3,025,577 3,130,086 3,134,897
Stockholders' equity............. 2,560,836 2,688,415 2,815,989 2,954,695 2,992,560
</Table>
- ---------------
(1) Results for the year ended December 31, 1997 include financial data for
PanAmSat International from May 16, 1997, the effective date of the merger
of PanAmSat International and Galaxy.
(2) Under an outright sales contract, we sell all rights and title to a
transponder to a customer, which in turn pays us the full amount of the
sale price in cash at the commencement of the contract. At that time, we
recognize the sale amount as revenue and record the cost of the transponder
to cost of outright sales. Under sales-type leases, we recognize as revenue
at the inception of the lease the net present value of the future minimum
lease payments, but we continue to receive cash payments from
38
the lessee throughout the term of the lease. In addition, during the life of the
lease, we recognize as revenue the portion of each periodic lease payment deemed
to be attributable to interest income. The principal difference between a
sales-type lease and an operating lease is when we recognize the revenue
and related costs, but not when we receive the cash.
(3) Net of capitalized interest of $80.5 million, $59.9 million, $60.7 million,
$56.1 million and $23.3 million for the years ended December 31, 1997,
1998, 1999, 2000 and 2001, respectively, and net of interest income of
$28.0 million, $10.4 million, $3.2 million, $6.8 million and $13.5 million
for the years ended December 31, 1997, 1998, 1999, 2000 and 2001,
respectively.
(4) Represents loss on early extinguishment of debt, net of tax.
(5) Represents earnings before net interest expense, income tax expense, and
depreciation and amortization. EBITDA in 1997 excludes the extraordinary
item and minority interest that are applicable for 1997 only. EBITDA is
commonly used in the fixed satellite services 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 GAAP in the statements of income and cash
flows.
(6) EBITDA margin is equal to EBITDA divided by total revenue, expressed as a
percentage.
(7) Contracted backlog represents expected future cash payments to be received
from customers under executed operating leases or sales-type leases.
Contracted backlog is attributable to both satellites currently in orbit
and those planned for future launch. Contracted backlog figures are not
available for 1997.
(8) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as income (loss) before extraordinary item, cumulative
effect of accounting change and provision (benefit) for income taxes paid
plus fixed charges and amortization of capitalized interest, less
capitalized interest. Fixed charges consist of interest expense on all
indebtedness (including amortization of deferred debt issued costs) plus
one-third of rent expense (this portion is considered to be representative
of the interest factor).
(9) The pro forma ratio of earnings to fixed charges gives effect to the
Refinancing (including the offering of the notes) and the repayment of
$46.5 million aggregate principal amount of notes relating to the Galaxy
IIIR satellite on January 2, 2002, as if they each had occurred on January
1, 2001.
(10) The number of transponders is in 36 MHz equivalents.
(11) Capacity utilization represents, on a worldwide basis at period end, the
percentage obtained by dividing the total number of transponders in
commercial use by the total number of transponders then-available for
commercial use, which excludes those transponders dedicated to backup for
our customers and those unavailable for regulatory or technical reasons.
Capacity utilization rates by C-band and Ku-band transponders are not
available for 1997, 1998 and 1999.
(12) Actual as of December 31, 2001 includes debt of $796.5 million and due to
affiliates of $1.725 billion.
39
DESCRIPTION OF NOTES
GENERAL
The new notes (the "Notes") will be issued pursuant to the Indenture, dated
as of February 1, 2002 (the "Indenture"), among PanAmSat Corporation
("PanAmSat"), the Guarantors and The Bank of New York, as Trustee (the
"Trustee"). The Notes will be issued in fully registered form only, in
denominations of $1,000 and integral multiples thereof. The Notes will be
represented by one or more registered Notes in global form and in limited
circumstances may be represented by Notes in certificated form. See "Book-
Entry; Delivery and Form."
The following statements are subject to the detailed provisions of the
Indenture and are qualified in their entirety by reference to the Indenture,
including the terms made a part thereof by the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). A copy of the Indenture will be provided
upon request without charge to each person to whom a copy of this prospectus is
delivered. Capitalized terms used herein which are not otherwise defined shall
have the meaning assigned to them in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes will be issued in an aggregate principal amount of up to $800.0
million and will mature on February 1, 2012. Interest on the Notes will accrue
at the rate per annum shown on the front cover of this prospectus from February
1, 2002, or from the most recent date on which interest has been paid or
provided for, payable semi-annually to holders of record at the close of
business on the January 15 or July 15 (whether or not such day is a business
day) immediately preceding the interest payment date on February 1 and August 1
of each year, commencing August 1, 2002. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months. The Indenture provides for
the issuance thereunder of additional Notes having substantially identical terms
and conditions to the Notes offered hereby (the "Additional Notes"), subject to
compliance with the covenants contained in the Indenture (including
"Covenants -- Limitation on Indebtedness" as a new Incurrence of Indebtedness by
PanAmSat). Any Additional Notes will be part of the same issue as the Notes
offered hereby (and accordingly will participate in purchase offers and partial
redemptions) and will vote on all matters with the Notes offered hereby. Unless
the context otherwise requires, for purposes of this "Description of the Notes,"
reference to the Notes includes Additional Notes.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of
PanAmSat maintained for such purpose in the Borough of Manhattan, The City of
New York (which initially shall be the principal corporate trust office of the
Trustee at 5 Penn Plaza, 13th Floor, New York, New York 10001), except that, at
the option of PanAmSat, payment of interest may be made by check mailed to the
registered holders of the Notes at their registered addresses; provided that all
payments with respect to global Notes and certificated Notes the holders of
which have given written wire transfer instructions to the Trustee by no later
than five business days prior to the relevant payment date will be required to
be made by wire transfer of immediately available funds to the accounts
specified by the holders thereof.
RANKING AND GUARANTEES
The Notes are unsecured, senior obligations of PanAmSat, ranking pari passu
in right of payment with all existing and future unsecured Indebtedness of
PanAmSat, other than any Subordinated Obligations. The Notes are effectively
subordinated to any secured Indebtedness of PanAmSat.
The Notes are guaranteed by each of PanAmSat's Restricted Subsidiaries,
except that Foreign Restricted Subsidiaries and Securitization Entities are not
required (but are permitted) to guarantee the Notes, and are unsecured senior
obligations of each of the Guarantors, ranking pari passu in right of payment
with all existing and future unsecured Indebtedness of the Guarantors, other
than any Subordinated Obligations. The Notes are effectively subordinated to any
secured Indebtedness of the
40
Guarantors and are structurally subordinated to Indebtedness of Non-Guarantor
Subsidiaries. As of the Issue Date, each of PanAmSat's Subsidiaries is a
Restricted Subsidiary and each such Subsidiary, other than the following Foreign
Restricted Subsidiaries, are Guarantors:
<Table>
<Caption>
JURISDICTION OF
FOREIGN RESTRICTED SUBSIDIARIES ORGANIZATION
- ------------------------------- ---------------
PanAmSat International Limited.............................. Bermuda
PanAmSat Africa (Proprietary) Ltd........................... South Africa
PanAmSat Asia Pty. Ltd...................................... Australia
PanAmSat Europe Limited..................................... United Kingdom
PanAmSat FSC Incorporated................................... Barbados
PanAmSat India Private Limited.............................. India
PanAmSat Korea Limited...................................... South Korea
PanAmSat Asia (Hong Kong) Limited........................... Hong Kong
PanAmSat do Brasil.......................................... Brazil
PanAmSat International Systems Limited...................... Cayman Islands
</Table>
A Guarantor will be released from all of its obligations under its
guarantee if:
(i) (a) (1) all of its assets or Equity Interests are sold, including
by way of merger, consolidation or otherwise or (2) Equity Interests in
such Guarantor are sold or otherwise disposed of and as a result of such
disposition, such Person ceases to be a Subsidiary of PanAmSat, in each
case in a transaction in compliance with clauses (i) and (ii) of the first
paragraph of "Repurchase at the Option of Holders -- Asset Sales" below and
such portion of the Asset Sale Proceeds as is applied on or before the date
of such release is applied in accordance with clause (iii) of such
paragraph, or (b) such Guarantor is designated an Unrestricted Subsidiary
in compliance with "Covenants -- Designation of Unrestricted Subsidiaries"
below; and
(ii) such Guarantor has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to such transaction have been
complied with.
OPTIONAL REDEMPTION
Except as set forth below, the Notes are not redeemable prior to February
1, 2007. Thereafter, the Notes will be redeemable, in whole or in part, from
time to time at the option of PanAmSat, on not less than 30 and not more than 60
days' notice prior to the redemption date by first class mail to each holder of
Notes to be redeemed at such holder's address appearing in the register of Notes
maintained by the Registrar at the following redemption prices (expressed as
percentages of principal amount) if redeemed during the twelve-month period
beginning with February 1 of the year indicated below, in each case together
with accrued and unpaid interest and Additional Interest, if any, thereon to the
date of redemption:
<Table>
<Caption>
REDEMPTION
YEAR PRICE
- ---- ----------
2007........................................................ 104.250%
2008........................................................ 102.833%
2009........................................................ 101.417%
2010 and thereafter......................................... 100.000%
</Table>
In addition, at any time and from time to time on or prior to February 1,
2005, PanAmSat may redeem up to 35% of the principal amount of the Notes
(calculated to give effect to any issuance of Additional Notes) with the Net
Cash Proceeds of one or more Public Equity Offerings, at a redemption price in
cash equal to 108.5% of the principal to be redeemed plus accrued and unpaid
interest and Additional Interest, if any, thereon to the date of redemption;
provided that at least 65% of the original
41
principal amount of Notes remains outstanding immediately after each such
redemption. Any such redemption will be required to occur within 90 days
following the closing of any such Public Equity Offering.
If fewer than all the Notes are to be redeemed, the Trustee will select the
Notes to be redeemed, if the Notes are listed on a national securities exchange,
in accordance with the rules of such exchange or, if the Notes are not so
listed, on a pro rata basis or by lot or by such other method that the Trustee
deems to be appropriate; provided that, if a partial redemption is made with the
proceeds of any Public Equity Offering, selection of the Notes or portions
thereof for redemption shall be made by the Trustee on a by lot basis. If any
Note is to be redeemed in part only, the notice of redemption that relates to
such Note shall state the portion of the principal amount thereof to be redeemed
and a new Note or Notes in principal amount equal to the unredeemed principal
portion thereof will be issued; provided that no Notes of a principal amount of
$1,000 or less shall be redeemed in part. On and after the redemption date,
interest will cease to accrue on Notes or portions thereof called for redemption
as long as PanAmSat has deposited with the Paying Agent for the Notes funds in
satisfaction of the applicable redemption price pursuant to the Indenture.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control,
each holder of Notes shall have the right to require PanAmSat to repurchase all
or any part of such holder's Notes pursuant to an offer described below (the
"Change of Control Offer") at a purchase price equal to 101% of the principal
amount thereof plus accrued and unpaid interest and Additional Interest, if any,
thereon to the date of repurchase (the "Change of Control Payment").
A "Change of Control" means the occurrence of any of the following events:
(i) any person (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended ("Exchange Act"), including
any group acting for the purpose of acquiring, holding or disposing of
securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act),
other than one or more Permitted Holders, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 and 13d-5 under the Exchange Act, except
that a person (as so defined) shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 40% of the total voting power
of the then outstanding Voting Equity Interests in PanAmSat and the
Permitted Holders beneficially own, in the aggregate, a lesser percentage
of the total voting power of the Voting Equity Interests of PanAmSat than
such other person and do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the
Board of Directors of PanAmSat (for purposes of this clause (i) and clause
(ii) below, the Permitted Holders shall be deemed to beneficially own all
Voting Equity Interests of an entity (including PanAmSat or any surviving
or transferee person referred to in clause (ii) below) held by a direct or
indirect parent entity so long as (1) no other person beneficially owns,
directly or indirectly, (a) more than 40% of the total voting power of the
then outstanding Voting Equity Interests of the parent entity and (b) a
greater percentage of the total voting power of the then outstanding Voting
Equity Interests of the parent entity than the Permitted Holders, or (2)
the Permitted Holders shall have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the
Board of Directors of such parent entity);
(ii) PanAmSat consolidates with, or merges with or into, another
person (as so defined, other than a Restricted Subsidiary or a Permitted
Holder), or PanAmSat or any of its Subsidiaries sells, assigns, conveys,
transfers, leases or otherwise disposes of all or substantially all of the
assets of PanAmSat and its Subsidiaries (determined on a consolidated
basis) to any person (as so defined, other than PanAmSat, any Restricted
Subsidiary or a Permitted Holder) and immediately after such transaction
any person (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act,
42
including any group acting for the purpose of acquiring, holding or
disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act) (other than the Permitted Holders) "beneficially owns" (as
defined in Rule 13d-3 and 13d-5 under the Exchange Act, except that a
person shall be deemed to have "beneficial ownership" of all shares that
any such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time, and subject to the foregoing
clause (i)) more than 40% of the total voting power of the then outstanding
Voting Equity Interests in the surviving or transferee person;
(iii) PanAmSat is liquidated or dissolved or adopts a plan of
liquidation or dissolution (whether or not otherwise in compliance with the
provisions of the Indenture); or
(iv) a majority of the members of the Board of Directors of PanAmSat
shall consist of Persons who are not Continuing Members.
For the avoidance of doubt, and without limitation, the formation, by
merger or otherwise, of a parent entity of PanAmSat shall not constitute a
Change of Control if, under the provisions of the parenthetical of clause (i)
above, all Voting Equity Interests of PanAmSat held by such parent entity are
deemed beneficially owned by the Permitted Holders.
Within 30 days of the occurrence of a Change of Control, PanAmSat shall
send by first class mail, postage prepaid, to the Trustee and to each holder of
the Notes, at the address appearing in the register of Notes maintained by the
Registrar, a notice stating:
(1) that the Change of Control Offer is being made pursuant to this
covenant and that all Notes tendered will be accepted for payment;
(2) the purchase price and the purchase date, which shall be a
business day no earlier than 30 days nor later than 60 days from the date
such notice is mailed (the "Change of Control Payment Date");
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless PanAmSat defaults in the payment of the Change of
Control Payment, any Notes accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control
Payment Date;
(5) that holders accepting the offer to have their Notes purchased
pursuant to a Change of Control Offer will be required to surrender the
Notes to the Paying Agent at the address specified in the notice prior to
the close of business on the business day preceding the Change of Control
Payment Date;
(6) that holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than the close of business on the third
business day preceding the Change of Control Payment Date, a facsimile
transmission or letter setting forth the name of the holder, the principal
amount of the Notes delivered for purchase, and a statement that such
holder is withdrawing its election to have such Notes purchased;
(7) that holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered; provided that each Note purchased and each such new
Note issued shall be in an original principal amount in denominations of
$1,000 and integral multiples thereof;
(8) any other procedures that a holder must follow to accept a Change
of Control Offer or effect withdrawal of such acceptance; and
(9) the name and address of the Paying Agent.
On the Change of Control Payment Date, PanAmSat shall, to the extent
lawful, (i) accept for payment Notes or portions thereof tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent money sufficient
to pay the purchase price of all Notes or portions thereof so tendered and
43
(iii) deliver or cause to be delivered to the Trustee Notes so accepted together
with an Officers' Certificate stating the Notes or portions thereof tendered to
PanAmSat. The Paying Agent shall promptly mail to each holder of Notes so
accepted payment in an amount equal to the purchase price for such Notes, and
PanAmSat shall execute and issue, and the Trustee shall promptly authenticate
and mail to such holder, a new Note equal in principal amount to any unpurchased
portion of the Notes surrendered; provided that each such new Note shall be
issued in an original principal amount in denominations of $1,000 and integral
multiples thereof. PanAmSat will send to the Trustee and the holders of Notes on
or as soon as practicable after the Change of Control Payment Date a notice
setting forth the results of the Change of Control Offer.
PanAmSat will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant.
ASSET SALES
The Indenture provides that PanAmSat shall not, and shall not permit any
Restricted Subsidiary to, consummate an Asset Sale unless:
(i) PanAmSat or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such sale or other disposition at
least equal to the fair market value thereof (as determined in good faith
by the Board of Directors, whose determination shall be evidenced by a
Board Resolution);
(ii) not less than 75% of the consideration received by PanAmSat or
such Restricted Subsidiary, as the case may be, is in the form of cash or
Cash Equivalents; provided, however, that up to $40.0 million of assets at
any one time may be considered to be cash for purposes of this clause (ii)
so long as the provisions of clause (iii) below are complied with as such
non-cash assets are converted to cash; and
(iii) the Asset Sale Proceeds (together with any Event of Loss
Proceeds required to be applied as provided in "Covenants -- Maintenance of
Insurance" below) received by PanAmSat or such Restricted Subsidiary are
applied (a) first, (i) to the extent PanAmSat elects, or is required, to
prepay or repay debt (other than debt owed to PanAmSat or a Subsidiary of
PanAmSat) under the Senior Credit Facility, any other secured Indebtedness,
Indebtedness of any Non-Guarantor Subsidiary (but only to the extent such
Asset Sale Proceeds or Event of Loss Proceeds are from an Asset Sale of or
an Event of Loss affecting such Non-Guarantor Subsidiary) or Pari Passu
Indebtedness; provided that if PanAmSat shall so reduce Pari Passu
Indebtedness, it will equally and ratably make an Excess Proceeds Offer to
all holders) within 360 days following the receipt of the Asset Sale
Proceeds from any Asset Sale (and any Event of Loss Proceeds from an Event
of Loss), and/or (ii) to the extent PanAmSat elects, to purchase assets
(including Equity Interests or other securities purchased in connection
with the acquisition of Equity Interests or property of another Person)
used or useful in a Permitted Business of PanAmSat or any of its Restricted
Subsidiaries; provided that either (y) such purchase occurs and such Asset
Sale Proceeds (and Event of Loss Proceeds) are so applied or (z) PanAmSat
enters into a binding agreement committing to make such purchase (subject
to customary conditions precedent), in each case, within 360 days following
the receipt of such Asset Sale Proceeds (and Event of Loss Proceeds) (the
"Reinvestment Date"), and (b) second, if on the Reinvestment Date with
respect to any Asset Sale Proceeds (and Event of Loss Proceeds) the Excess
Proceeds exceed $30.0 million, PanAmSat shall (i) make an offer to all
holders of Notes and (ii) prepay, purchase or redeem (or make an offer to
do so) any other Pari Passu Indebtedness of PanAmSat in accordance with
provisions governing such Indebtedness requiring PanAmSat to prepay,
purchase or redeem such Indebtedness with the proceeds from any Asset Sales
(or offer to do so) pro rata in proportion to the respective principal
amounts of the Notes and such other Indebtedness required to be prepaid,
purchased or redeemed or tendered for, in the case of the Notes pursuant to
such offer to purchase the maximum principal amount of Notes that may be
purchased out of such pro rata portion of the Excess Proceeds, at an offer
price in cash in an amount
44
equal to 100% of the principal amount thereof plus accrued and unpaid
interest and Additional Interest, if any, thereon to the date of repurchase
(an "Excess Proceeds Offer") subject to the right of holders of record on a
record date to receive interest on the relevant interest payment date in
accordance with the procedures set forth in the Indenture. Pending the
final application of any Asset Sale Proceeds (or Event of Loss Proceeds),
PanAmSat or any Restricted Subsidiary may temporarily reduce borrowings
under a Credit Facility or otherwise invest such Asset Sale Proceeds (or
Event of Loss Proceeds) in any manner that is not prohibited by the
Indenture.
To the extent that the aggregate principal amount of Notes and Pari Passu
Indebtedness tendered pursuant to an Excess Proceeds Offer or other offer is
less than the Excess Proceeds, PanAmSat may use any remaining Excess Proceeds
for any purpose not otherwise prohibited by the Indenture. For purposes of
determining in clause (ii) above the percentage of cash consideration received
by PanAmSat or any Restricted Subsidiary, (1) the amount of any (x) liabilities
(other than liabilities that are by their terms subordinated to the Notes) (as
shown on PanAmSat's or such Restricted Subsidiary's most recent balance sheet)
of PanAmSat or any Restricted Subsidiary that are actually assumed by the
transferee in such Asset Sale and from which PanAmSat and the Restricted
Subsidiaries are fully released shall be deemed to be cash, and (y) securities,
notes or other similar obligations received by PanAmSat or such Restricted
Subsidiary from such transferee that are immediately converted (or are converted
within 30 days of the related Asset Sale) by PanAmSat or such Restricted
Subsidiary into cash shall be deemed to be cash in an amount equal to the net
cash proceeds realized upon such conversion, and (2) a lease entered into in
connection with a Sale and Lease-Back Transaction shall not be considered as
consideration received in connection with such transaction.
If PanAmSat is required to make an Excess Proceeds Offer, within 30 days
following the Reinvestment Date, PanAmSat shall send by first class mail,
postage prepaid, to the Trustee and to each holder of the Notes, at the address
appearing in the register of the Notes maintained by the Registrar, a notice
stating, among other things:
(1) that such holders have the right to require PanAmSat to apply the
pro rata portion of the Excess Proceeds to repurchase such Notes at a
purchase price in cash equal to 100% of the principal amount thereof plus
accrued and unpaid interest and Additional Interest, if any, thereon to the
date of repurchase;
(2) the purchase date, which shall be a business day no earlier than
30 days nor later than 60 days from the date such notice is mailed;
(3) the instructions, determined by PanAmSat, that each holder must
follow in order to have such Notes repurchased; and
(4) the calculations used in determining the amount of Excess Proceeds
to be applied to the repurchase of such Notes.
If the aggregate principal amount of Notes surrendered by holders thereof
exceeds the pro rata portion of such Excess Proceeds to be used to purchase
Notes, the Trustee shall select the Notes to be purchased on a pro rata basis or
by lot or by such other method that the Trustee deems to be fair and equitable
to holders. Upon completion of the Excess Proceeds Offer, the amount of Excess
Proceeds shall be reset to zero.
PanAmSat will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant.
45
EVENTS OF DEFAULT
An Event of Default is defined in the Indenture as being:
(a) default in payment of any principal of or premium, if any, on the
Notes when due;
(b) default for 30 days in payment of any interest or Additional
Interest, if any, on the Notes when due;
(c) default by PanAmSat or any Restricted Subsidiary in the observance
or performance of the covenants described under "Repurchase at the Option
of Holders -- Change of Control," "Repurchase at the Option of
Holders -- Asset Sales" and "Covenants -- Merger or Sales of Assets";
(d) default by PanAmSat for 45 days after written notice by the
Trustee or the holders of not less than 25% in principal amount of the
Notes then outstanding in the observance or performance of any other
covenant in the Notes or the Indenture;
(e) a default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness of PanAmSat or of any Significant Subsidiary or any group of
Restricted Subsidiaries of PanAmSat which, if merged into each other, would
constitute a Significant Subsidiary, (or the payment of which is guaranteed
by PanAmSat or any Significant Subsidiary or any group of Restricted
Subsidiaries of PanAmSat which, if merged into each other, would constitute
a Significant Subsidiary), whether such Indebtedness now exists or is
created after the Issue Date, which default (A) is caused by a failure to
pay principal of such Indebtedness at final maturity after the expiration
of any applicable grace period provided in such Indebtedness on the date of
such default (a "payment default") or (B) results in the acceleration of
such Indebtedness prior to its express maturity (and such acceleration is
not rescinded, or such Indebtedness is not repaid, within 20 days) and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been
a payment default or the maturity of which has been so accelerated (and
such acceleration is not rescinded, or such Indebtedness is not repaid,
within such 20 day period), aggregates $50.0 million;
(f) any final judgment or judgments for the payment of money in excess
of $50.0 million (net of amounts covered by insurance) shall be rendered
against PanAmSat or any Significant Subsidiary or any group of Restricted
Subsidiaries of PanAmSat which, if merged into each other, would constitute
a Significant Subsidiary, and shall not be discharged for any period of 60
consecutive days, during which a stay of enforcement of such judgment shall
not be in effect;
(g) certain events involving bankruptcy, insolvency or reorganization
of PanAmSat or a Significant Subsidiary or any group of Restricted
Subsidiaries of PanAmSat which, if merged into each other, would constitute
a Significant Subsidiary;
(h) the guarantee of any Guarantor that is a Significant Subsidiary
ceases, or the guarantees of any group of Guarantors which, if merged into
each other, would constitute a Significant Subsidiary cease, as the case
may be, to be in full force and effect (except as contemplated by the terms
of the Indenture) or any Guarantor that is a Significant Subsidiary or any
group of Guarantors which, if merged into each other, would constitute a
Significant Subsidiary, shall deny or disaffirm its, or their respective,
obligations under the Indenture or its, or their respective, guarantee; or
(i) any failure to perform or comply with the provisions of the
Indenture or the escrow agreement relating to a special mandatory
redemption provision that would have been triggered had PanAmSat not
entered into and borrowed funds under the Senior Credit Facility by a
certain date (which PanAmSat has successfully done).
If an Event of Default (other than an Event of Default specified in clause
(g) above) shall occur and be continuing, the Trustee or the holders of at least
25% in principal amount of outstanding Notes may declare the principal of,
premium, if any, and accrued interest and Additional Interest, if any, on all
the
46
Notes to be due and payable by notice in writing to PanAmSat and (if given by
the holders) the Trustee specifying the respective Events of Default and that it
is a "notice of acceleration," and the same shall become immediately due and
payable. If an Event of Default specified in clause (g) above occurs and is
continuing, then all unpaid principal of, premium, if any, and accrued and
unpaid interest and Additional Interest, if any, on all of the outstanding Notes
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any holder.
The Indenture provides that, at any time after a declaration of
acceleration with respect to the Notes as described in the preceding paragraph,
the holders of a majority in principal amount of the then outstanding Notes may
rescind and cancel such declaration and its consequences:
(1) if the rescission would not conflict with any judgment or decree;
(2) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of
the acceleration;
(3) to the extent the payment of such interest is lawful, if interest
on overdue installments of interest and overdue principal, which has become
due otherwise than by such declaration of acceleration, has been paid;
(4) if PanAmSat has paid the Trustee its reasonable compensation and
reimbursed the Trustee for its expenses, disbursements and advances; and
(5) in the event of the cure or waiver of an Event of Default of the
type described in clause (g) of the description above of Events of Default,
the Trustee shall have received an Officers' Certificate and an Opinion of
Counsel that such Event of Default has been cured or waived.
No such rescission shall affect any subsequent Default or Event of Default
or impair any right consequent thereto.
The holders of a majority in principal amount of the then outstanding Notes
may waive any existing Default or Event of Default under the Indenture, and its
consequences, except a default in the payment of the principal of or premium, if
any, or interest on any Notes (other than nonpayment of principal or interest
that has become due solely because of a declaration of acceleration which has
been rescinded).
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture and under the Trust Indenture Act. Subject to the
provisions of the Indenture relating to the duties of the Trustee, the Trustee
is under no obligation to exercise any of its rights or powers under the
Indenture at the request, order or direction of any of the holders, unless such
holders have offered to the Trustee reasonable indemnity. Subject to all
provisions of the Indenture and applicable law, the holders of a majority in
aggregate principal amount of the then outstanding Notes 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.
Under the Indenture, PanAmSat is required to deliver to the Trustee, within
120 days after the end of each fiscal year, a certificate indicating whether the
signers thereof actually know of any Default that occurred during the previous
year. PanAmSat also is required to deliver to the Trustee, promptly upon a
Senior Officer obtaining actual knowledge of any such Default, written notice of
any event which would constitute a Default or Event of Default and the status
thereof.
The Indenture provides that the Trustee may withhold notice to the holders
of Notes of any default (except in payment of principal of, premium, if any, or
interest on the Notes) if the Trustee considers it to be in the interest of the
holders of the Notes to do so.
CERTAIN COVENANTS
Set forth below are summaries of certain covenants contained in the
Indenture. During any period of time that: (i) the Notes have Investment Grade
Ratings from both Rating Agencies and (ii) no Default or Event of Default has
occurred and is continuing under the Indenture (the occurrence of the events
47
described in the foregoing clauses (i) and (ii) being collectively referred to
as a "Covenant Suspension Event"), PanAmSat and the Restricted Subsidiaries will
not be subject to the following provisions of the Indenture:
1. "Limitation on Restricted Payments";
2. "Limitation on Indebtedness";
3. "Limitation on Transactions with Affiliates";
4. clause (b) of the first and third paragraphs of "Designation of
Unrestricted Subsidiaries";
5. "Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries";
6. "Limitation on Business Activities of PanAmSat and the Restricted
Subsidiaries";
7. clauses (a)(i) and (b) of the first paragraph of "Limitation on
Sale and Lease-Back Transactions";
8. "Repurchase at the Option of Holders -- Asset Sales";
9. clause (iv) of the first paragraph of "Merger or Sales of Assets";
and
10. "Maintenance of Insurance"
(collectively, the "Suspended Covenants"). Upon the occurrence of a Covenant
Suspension Event, the amount of Excess Proceeds from Asset Sale Proceeds (and
Event of Loss Proceeds) shall be set at zero.
In the event that PanAmSat and the Restricted Subsidiaries are not subject
to the Suspended Covenants for any period of time as a result of the preceding
sentence and, subsequently, either of the Rating Agencies withdraws its rating
or downgrades the ratings assigned to the Notes below the required Investment
Grade Ratings such that both Rating Agencies at such time shall not have
assigned to the Notes an Investment Grade Rating or a Default or Event of
Default occurs and is continuing, then PanAmSat and the Restricted Subsidiaries
will thereafter again be subject to the Suspended Covenants and compliance with
the Suspended Covenants with respect to Restricted Payments made after the time
of such withdrawal, downgrade, Default or Event of Default will be calculated in
accordance with the terms of "-- Limitation on Restricted Payments" below as
though such covenant had been in effect during the entire period of time from
the Issue Date; provided, however, that there will not be deemed to have
occurred a Default or Event of Default with respect to the Suspended Covenants
during the time that PanAmSat and its Restricted Subsidiaries were not subject
to the Suspended Covenants (or upon termination of the suspension period or
after that time based solely on events that occurred during the suspension
period).
LIMITATION ON RESTRICTED PAYMENTS
The Indenture provides that, so long as any of the Notes remain
outstanding, PanAmSat shall not, and shall not permit any Restricted Subsidiary
to, make any Restricted Payment if:
(i) at the time of such proposed Restricted Payment, a Default or
Event of Default shall have occurred and be continuing or shall occur as a
consequence of such Restricted Payment;
(ii) immediately after giving effect to such proposed Restricted
Payment, PanAmSat would not be able to Incur $1.00 of additional
Indebtedness under the Debt to Operating Cash Flow Ratio of the first
paragraph of "-- Limitation on Indebtedness" below; or
(iii) immediately after giving effect to any such Restricted Payment,
the aggregate of all Restricted Payments (excluding Restricted Payments
made pursuant to clause (3)(A)(ii) below, but including Permitted
Investments referred to in clauses (x)(a), (xii) and (xiv) of the
definition of the term "Permitted Investments" as if they were Restricted
Payments, to the extent made after the Issue Date) which shall have been
made on or after the Issue Date would exceed an amount equal to the
difference between (a) the Cumulative Credit and (b) 1.4 times Cumulative
Interest Expense.
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The provisions of the first paragraph of this covenant shall not prevent:
(1) the retirement of any of PanAmSat's Equity Interests in exchange
for, or out of the proceeds of, the substantially concurrent sale (other
than to a Restricted Subsidiary) of Equity Interests (other than
Disqualified Equity Interests) in PanAmSat;
(2) the payment of any dividend or distribution on, or redemption of
Equity Interests within 60 days after the date of declaration of such
dividend or distribution or the giving of formal notice of such redemption,
if at the date of such declaration or giving of such formal notice such
payment or redemption would comply with the provisions of the Indenture;
(3) the redemption, repurchase, retirement, defeasance or other
acquisition of any Subordinated Obligations of PanAmSat or any Guarantor
(A) in exchange for, or out of net cash proceeds of the substantially
concurrent sale (other than to a Restricted Subsidiary) of (i) Equity
Interests (other than Disqualified Equity Interests) in PanAmSat or (ii)
Subordinated Obligations of PanAmSat or any Guarantor which constitute
Refinancing Indebtedness or (B) upon a Change of Control, Asset Sale or
Event of Loss to the extent required by the agreement governing such
Subordinated Obligations but only if PanAmSat shall have complied with the
covenants described under the headings "Repurchase at the Option of
Holders -- Change of Control" and "Repurchase at the Option of
Holders -- Asset Sales" and purchased all Notes validly tendered pursuant
to the relevant offer prior to purchasing or repaying such Subordinated
Obligations;
(4) payments or distributions to dissenting stockholders under
applicable law or in connection with a consolidation, merger or transfer of
assets;
(5) to the extent constituting Restricted Payments, Specified
Affiliate Payments; and
(6) additional Restricted Payments in an aggregate amount (net of
repayments) not to exceed $25.0 million at any one time outstanding;
provided, however, that in the case of clause (6) of this paragraph, no Default
or Event of Default shall have occurred and be continuing at the time of such
Restricted Payment or as a result thereof. In determining the aggregate amount
of Restricted Payments made on or after the Issue Date, Restricted Payments made
pursuant to clauses (1), (2), (3) (other than 3(A)(ii)), (4), (5) and (6) shall
be included in such calculation.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by PanAmSat or such Restricted Subsidiary,
as the case may be, pursuant to the Restricted Payment, without regard to
subsequent changes in value. The fair market value of any non-cash Restricted
Payment shall be determined in good faith by the Board of Directors of PanAmSat.
In making the computations required by this covenant:
(a) PanAmSat or the relevant Restricted Subsidiary may use audited
financial statements for the portions of the relevant period for which
audited financial statements are available on the date of determination and
unaudited financial statements and other current financial data based on
the books and records of PanAmSat for the remaining portion of such period;
and
(b) PanAmSat or the relevant Restricted Subsidiary will be permitted
to rely in good faith on the financial statements and other financial data
derived from the books and records of PanAmSat and the Restricted
Subsidiary that are available on the date of determination.
If PanAmSat or a Restricted Subsidiary makes a Restricted Payment that, at
the time of the making of such Restricted Payment, would in the good faith
determination of PanAmSat or any Restricted Subsidiary be permitted under the
requirements of the Indenture, such Restricted Payment will be deemed to have
been made in compliance with the Indenture notwithstanding any subsequent
adjustments made in good faith to PanAmSat's or any Restricted Subsidiary's
financial statements, affecting Cumulative Credit or Consolidated Interest
Expense of PanAmSat for any period. For the avoidance of doubt, it is expressly
49
agreed that no payment or other transaction permitted by clauses (ii), (iv),
(v), (ix) and (x) of the third paragraph of the covenant described under
"-- Limitation on Transactions with Affiliates" shall be considered a Restricted
Payment for purposes of, or otherwise restricted by, the Indenture.
LIMITATION ON INDEBTEDNESS
The Indenture provides that PanAmSat shall not, directly or indirectly,
Incur any Indebtedness (including Acquired Indebtedness) or issue any
Disqualified Equity Interests, and shall not permit any Restricted Subsidiary
to, directly or indirectly, Incur any Indebtedness (including Acquired
Indebtedness) or issue any Preferred Equity Interests except, in each case, for
Permitted Indebtedness; provided, however, that PanAmSat may Incur Indebtedness
(including Acquired Indebtedness) or issue Disqualified Equity Interests and any
Guarantor may Incur Indebtedness (including Acquired Indebtedness) or issue
Preferred Equity Interests if, at the time of and immediately after giving pro
forma effect to such Incurrence of Indebtedness or issuance of Disqualified
Equity Interests or Preferred Equity Interests, as the case may be, and the
application of the proceeds therefrom, PanAmSat's Debt to Operating Cash Flow
Ratio would be less than or equal to 5.0 to 1.0.
The foregoing limitations will not apply to the Incurrence of any of the
following (collectively, "Permitted Indebtedness"), each of which shall be given
independent effect:
(a) Indebtedness under the Notes issued in this offering in an
aggregate principal amount not to exceed $800.0 million, the Indenture and
the guarantees of the Guarantors;
(b) (i) Indebtedness and Disqualified Equity Interests in PanAmSat and
Indebtedness and Preferred Equity Interests in the Restricted Subsidiaries
outstanding on the Issue Date, other than Indebtedness described in clause
(a) or (c) of this paragraph, reduced by the amount of any scheduled
payments or mandatory repayments when actually paid or permanent reductions
therein and (ii) Indebtedness arising from any Sale and Lease-Back
Transaction in respect of the PAS-10 satellite in an aggregate principal
amount not to exceed $180.0 million;
(c) Indebtedness of PanAmSat and the Restricted Subsidiaries (other
than the Foreign Restricted Subsidiaries except to the extent a Guarantor)
under Credit Facilities in an aggregate principal amount for all such
Indebtedness, together with the aggregate Off-Balance Sheet Financing
Amount attributable to Qualified Securitization Transactions, not to exceed
$1,250.0 million at any one time outstanding, less the amount of Asset Sale
Proceeds applied to permanently repay Indebtedness under Credit Facilities;
(d) Indebtedness of and Disqualified Equity Interests in (x) any
Restricted Subsidiary owed to or issued to and held by PanAmSat or any
other Restricted Subsidiary and (y) PanAmSat owed to and held by any
Restricted Subsidiary which is unsecured and subordinated in right of
payment, pursuant to a written agreement, to the payment and performance of
PanAmSat's obligations under the Indenture and the Notes;
(e) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument drawn against
insufficient funds in the ordinary course of business; provided, however,
that such Indebtedness is extinguished within five business days after
Incurrence;
(f) Hedging Agreements of PanAmSat or any Restricted Subsidiary
relating to any Indebtedness of PanAmSat or such Restricted Subsidiary, as
the case may be, Incurred in accordance with the provisions of the
Indenture; provided that such Hedging Agreements have been entered into for
bona fide business purposes and not for speculation;
(g) Indebtedness of PanAmSat or any of the Restricted Subsidiaries in
respect of letters of credit, performance bonds, bankers' acceptances,
workers' compensation claims, surety or appeal bonds, and payment
obligations in connection with self-insurance or similar obligations, in
each case, in the ordinary course of business;
(h) Refinancing Indebtedness;
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(i) Indebtedness (or guarantees thereof) of PanAmSat or a Restricted
Subsidiary (including Capitalized Lease Obligations, Indebtedness under a
Sale and Lease-Back Transaction and Purchase Money Indebtedness) Incurred
for the purpose of financing or refinancing all or any part of the lease,
purchase price or cost of acquisition, construction, installation or
improvement of property, plant or equipment used or useful in the business
of PanAmSat or such Restricted Subsidiary (whether through the direct
purchase of assets or of the Equity Interests of any Person owning such
assets and whether such Indebtedness is owed to the seller or the Person
carrying out such construction, installation or improvement or to any third
party) not to exceed 100% of the cost of such acquisition, construction,
installation or improvement of such property, plant or equipment (or Equity
Interests) to which such Indebtedness relates; provided that the amount of
Indebtedness Incurred pursuant to this clause (i) shall not exceed 10% of
Consolidated Tangible Assets;
(j) Indebtedness of Foreign Restricted Subsidiaries; provided that the
aggregate principal amount of such Indebtedness does not exceed $5.0
million at any one time outstanding;
(k) a guarantee by PanAmSat or any Restricted Subsidiary of
Indebtedness of PanAmSat or a Restricted Subsidiary that was permitted to
be Incurred by another provision of this covenant; provided that the
obligations of PanAmSat and the Guarantors under guarantees of Indebtedness
of Non-Guarantor Subsidiaries under this clause (k) shall not exceed $5.0
million at any one time outstanding; and
(l) in addition to any Indebtedness described in clauses (a) through
(k) above, Indebtedness or Disqualified Equity Interests of PanAmSat or
Indebtedness or Preferred Equity Interests of any of the Restricted
Subsidiaries so long as the principal amount of all such Indebtedness
incurred, and the amount of Disqualified Equity Interests and Preferred
Equity Interests issued, in the aggregate, pursuant to this clause (l)does
not exceed $100.0 million at any one time outstanding.
For purposes of determining compliance with this covenant, (1) the
outstanding principal amount of any particular Indebtedness shall be counted
only once and any obligation arising under any guarantee, Lien, letter of credit
or similar instrument supporting such Indebtedness incurred in compliance with
the terms of this covenant shall be disregarded and (2) if an item of
Indebtedness meets the criteria of more than one of the categories of Permitted
Indebtedness described in clauses (a) through (l) above or is permitted to be
Incurred pursuant to the first paragraph of this covenant and also meets the
criteria of one or more of the categories of Permitted Indebtedness described in
clauses (a) through (l) above, PanAmSat shall, in its sole discretion, classify
such item of Indebtedness in any manner that complies with this covenant and may
from time to time reclassify such item of Indebtedness in any manner in which
such item could be Incurred at the time of such reclassification.
Notwithstanding any other provision in this covenant, the maximum amount of
Indebtedness that PanAmSat or any Restricted Subsidiary may Incur pursuant to
this covenant shall not be deemed to be exceeded as a result of fluctuations in
the exchange rates of currencies.
Accrual of interest, the accretion of original issue discount and the
payment of interest in the form of additional Indebtedness of the same class
will not be deemed to be an Incurrence of Indebtedness for purposes of this
covenant and the payment of dividends on Disqualified Equity Interests (or
Preferred Equity Interests in the case of any Restricted Subsidiary) in the form
of additional shares of the same class of Disqualified Equity Interests will not
be deemed to be an issuance of Disqualified Equity Interests (or Preferred
Equity Interests in the case of any such Restricted Subsidiary).
LIMITATION ON TRANSACTIONS WITH AFFILIATES
The Indenture provides that PanAmSat shall not, and shall not permit any of
its Restricted Subsidiaries to, directly or indirectly, enter into, amend or
suffer to exist any transaction or series of related transactions (including the
sale, purchase, exchange or lease of assets, property or services) with or for
the benefit of any Affiliate (each an "Affiliate Transaction") or extend, renew,
waive or otherwise amend or modify the terms of any Affiliate Transaction
entered into prior to the Issue Date unless
51
(i) such Affiliate Transaction is between or among PanAmSat and one or
more of its Restricted Subsidiaries; or
(ii) the terms of such Affiliate Transaction are fair and reasonable
to PanAmSat or such Restricted Subsidiary, as the case may be, and the
terms of such Affiliate Transaction are at least as favorable as the terms
which could be obtained by PanAmSat or such Restricted Subsidiary, as the
case may be, in a comparable transaction made on an arm's length basis
between unaffiliated parties.
In any Affiliate Transaction (or any series of related Affiliate
Transactions which are similar or part of a common plan) involving an amount or
having a fair market value in excess of $25.0 million which is not permitted
under clause (i) above, PanAmSat must obtain a Board Resolution (which Board
Resolution shall also have been approved by a majority of the disinterested
members of the Board of Directors, if any) certifying that such Affiliate
Transaction complies with clause (ii) above.
The foregoing provisions will not apply to
(i) any Restricted Payment or Permitted Investment permitted in
accordance with the terms of the Indenture (other than an Investment in a
Person in which an Affiliate of PanAmSat (other than a Restricted
Subsidiary) owns any Equity Interest);
(ii) any employment agreements, consulting agreements, non-competition
agreements, stock purchase or option agreements, collective bargaining
agreements, employee benefit plans or arrangements (including vacation
plans, health and life insurance plans, deferred compensation plans, stock
loan plans, directors' and officers' indemnification agreements and
retirement, savings or similar plans), related trust agreements or any
similar arrangements, in each case in respect of employees, officers or
directors of PanAmSat or any Restricted Subsidiary and entered into in the
ordinary course of business, any payments, indemnification provided under,
or other transactions contemplated by, any of the foregoing and any other
payments of compensation to employees, officers, directors or consultants
of PanAmSat or any Restricted Subsidiary in the ordinary course of business
as determined in good faith by PanAmSat's Board of Directors or senior
management;
(iii) transactions between or among PanAmSat and/or one or more of its
Restricted Subsidiaries and any joint venture; provided no Affiliate of
PanAmSat (other than a Restricted Subsidiary) owns any of the Equity
Interests of any such joint venture;
(iv) any agreement or arrangement as in effect as of the Issue Date
(including any tax sharing agreement or arrangement) or any amendment
thereto or any transaction contemplated thereby (including pursuant to any
amendment thereto) or any replacement agreement or arrangement or any
transaction pursuant thereto so long as any such amendment or replacement
agreement or arrangement is not more disadvantageous to the holders of the
Notes in any material respect than the original agreement or arrangement as
in effect on the Issue Date;
(v) transactions with customers, clients, suppliers, or purchasers or
sellers of goods or services, in each case in the ordinary course of
business and otherwise in compliance with the terms of the Indenture which
are fair to PanAmSat or its Restricted Subsidiaries, or are on terms at
least as favorable as might reasonably have been obtained at such time from
an unaffiliated party, in each case in the reasonable determination of
PanAmSat's Board of Directors or senior management;
(vi) any transaction on arm's length terms with non-affiliates that
become Affiliates as a result of such transaction;
(vii) the issuance of Equity Interests (other than Disqualified Equity
Interests) of PanAmSat;
(viii) transactions effected as part of a Qualified Securitization
Transaction;
(ix) loans or advances to officers, directors, employees and
consultants (or guarantees of third-party loans to officers, directors,
employees and consultants) of PanAmSat or the Holding Company in the
ordinary course of business; and
52
(x) without limiting clause (v) above, the provision of services to
any Permitted Holder and its Affiliates by PanAmSat or any of its
Restricted Subsidiaries, on the one hand, or to PanAmSat and its Restricted
Subsidiaries by any Permitted Holder or any of its Affiliates, on the other
hand, so long as no cash or other assets are transferred by PanAmSat or any
Restricted Subsidiary in connection with such transactions (other than up
to $10.0 million in cash in any fiscal year and other than nonmaterial
assets used in the operations of the business in the ordinary course
pursuant to the agreement governing the provision of the services), and so
long as such transaction or agreement is determined by a majority of the
members of the Board of Directors of PanAmSat to be fair to PanAmSat and
its Restricted Subsidiaries when taken together with all other such
transactions and agreements entered into with such Permitted Holder and its
Affiliates.
LIMITATION ON LIENS
The Indenture provides that PanAmSat shall not, and shall not permit any
Restricted Subsidiary to, Incur any Indebtedness secured by a Lien against or on
any of its property or assets now owned or hereafter acquired by PanAmSat or any
such Restricted Subsidiary, unless:
(1) in the case of Liens securing Indebtedness that is a Subordinated
Obligation, the Notes or such guarantee of such Guarantor are secured by a
Lien on such property or assets that is senior in priority to such Liens;
and
(2) in all other cases, the Notes or such guarantee of such Guarantor
are equally and ratably secured; provided that any Lien which is granted to
secure the Notes under this covenant shall be discharged at the same time
as the discharge of the Lien that gave rise to the obligation to so secure
the Notes.
This restriction does not, however, apply to:
(i) Liens, if any, in effect on the Issue Date to the extent and in
the manner such Liens are in effect on the Issue Date;
(ii) Liens securing the Notes or the guarantee of a Guarantor;
(iii) Liens securing the Existing Notes to the extent and in the
manner provided for in or required under the Existing Notes Indenture as in
effect on the Issue Date;
(iv) Liens securing obligations under the Credit Facilities to the
extent permitted by clauses (c) and (l) of the second paragraph under the
heading "Limitation on Indebtedness";
(v) Liens in favor of PanAmSat or a Restricted Subsidiary;
(vi) Liens, or amendments or renewals of such Liens, securing
Refinancing Indebtedness which is incurred to Refinance any Indebtedness
secured by a Lien permitted under the Indenture; provided, however, that
such Liens do not extend to or cover any property or assets of PanAmSat or
any of the Restricted Subsidiaries not securing the Indebtedness so
Refinanced; and
(vii) Other Permitted Liens.
LIMITATION ON CREATION OF SUBSIDIARIES
The Indenture provides that PanAmSat shall not create or acquire, and shall
not permit any Restricted Subsidiary to create or acquire, any Subsidiary other
than:
(i) a Restricted Subsidiary existing as of the Issue Date;
(ii) a Restricted Subsidiary that is acquired or created after the
Issue Date; provided, however, that each such Restricted Subsidiary (other
than a Foreign Restricted Subsidiary or a Securitization Entity) must
execute a guarantee, satisfactory in form and substance to the Trustee (and
with such documentation relating thereto as the Trustee may reasonably
require, including, a supplement or
53
amendment to the Indenture), pursuant to which such Restricted Subsidiary
will become a Guarantor; or
(iii) an Unrestricted Subsidiary.
DESIGNATION OF UNRESTRICTED SUBSIDIARIES
The Indenture provides that PanAmSat may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary or a Person becoming a
Subsidiary through merger or consolidation or Investment therein) as an
"Unrestricted Subsidiary" under the Indenture (a "Designation") only if:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Designation; and
(b) PanAmSat would be permitted to make a Permitted Investment or
Restricted Payment at the time of Designation (assuming the effectiveness
of such Designation) in an amount equal to PanAmSat's proportionate
interest in the fair market value of such Subsidiary on such date (as
determined in good faith by the Board of Directors, whose determination
shall be evidenced by a Board Resolution).
The Indenture will further provide that at the time of Designation all of the
Indebtedness of such Unrestricted Subsidiary, to the extent guaranteed by
PanAmSat or any Restricted Subsidiary, shall be deemed an "Incurrence" of the
guarantee of such Indebtedness at the time of such Designation and such
Designation shall only be permissible if such Indebtedness is then permitted to
be Incurred under the covenant described under the heading "Limitation on
Indebtedness."
PanAmSat may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") if:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if Incurred at
such time, have been permitted to be Incurred for all purposes of the
Indenture.
All Designations and Revocations must be evidenced by Board Resolutions
delivered to the Trustee certifying compliance with the foregoing provisions.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that PanAmSat shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction of
any kind on the ability of any Restricted Subsidiary to:
(a) pay dividends or make any other distributions to PanAmSat or any
other Restricted Subsidiary on its Equity Interests;
(b) pay any Indebtedness owed to PanAmSat or any other Restricted
Subsidiary;
(c) make loans or advances to PanAmSat or any other Restricted
Subsidiary; and
(d) transfer any of its properties or assets to PanAmSat or any other
Restricted Subsidiary,
except for encumbrances and restrictions:
(i) existing under or by reason of Acquired Indebtedness of any
Restricted Subsidiary existing at the time such Person became a Restricted
Subsidiary; provided that such encumbrances or restrictions were not
created in anticipation of such Person becoming a Restricted Subsidiary and
are not applicable to PanAmSat or any other Restricted Subsidiary,
54
(ii) arising under Refinancing Indebtedness permitted by clause (h) of
the second paragraph under "-- Limitation on Indebtedness" above; provided
that the terms and conditions of any such restrictions are no less
favorable to the holders of Notes than those under the Indebtedness being
Refinanced,
(iii) contained in the Indenture or under the Notes and any other
agreement entered into after the Issue Date; provided that the encumbrances
and restrictions in such agreements are not materially more restrictive
than those contained in the Indenture and the Notes,
(iv) existing under or by reason of the Senior Credit Facility and the
related documentation to the extent and in the manner such encumbrances and
restrictions are in effect on the Issue Date,
(v) existing under or by reason of customary non-assignment provisions
of any contract or any lease governing a leasehold interest of any
Restricted Subsidiary,
(vi) existing under or by reason of agreements existing on the Issue
Date to the extent and in the manner such agreements are in effect on the
Issue Date,
(vii) in customary form on the transfer of any property or assets
arising under a security agreement or mortgage governing a Lien permitted
under the Indenture,
(viii) existing under or by reason of any agreement governing the sale
or disposition of assets or Equity Interests in any Restricted Subsidiary
which restricts dividends and distributions or transfers of assets pending
such sale or disposition,
(ix) existing under or by reason of Indebtedness or other contractual
requirements of a Securitization Entity in connection with a Qualified
Securitization Transaction so long as such restrictions apply only to such
Securitization Entity,
(x) existing under or by reason of Purchase Money Indebtedness
(including Capitalized Lease Obligations) for property acquired in the
ordinary course of business that impose restrictions of the nature
described in clause (d) above on the property so acquired,
(xi) in the case of clause (d) above, (i) that restrict in a customary
manner the subletting, assignment, or transfer of any property or asset
that is subject to a lease, license or similar contract, or (ii) by virtue
of any transfer of, agreement to transfer, option or right with respect to,
or Lien on, any property or assets of PanAmSat or any Restricted Subsidiary
not otherwise prohibited by the Indenture,
(xii) on cash or other deposits or net worth imposed by leases, credit
agreements or other agreements entered into in the ordinary course of
business,
(xiii) created with respect to Indebtedness or Preferred Equity
Interests of Foreign Restricted Subsidiaries permitted to be Incurred or
issued subsequent to the Issue Date pursuant to the provisions of the
covenant described under the caption "Limitation on Indebtedness"; provided
that the Board of Directors of PanAmSat determines in good faith at the
time such encumbrances or restrictions are created that such encumbrances
or restrictions would not reasonably be expected to impair the ability of
PanAmSat to make payments of interest and scheduled payments of principal
on the Notes as and when due,
(xiv) in customary form under joint venture agreements and other
similar agreements that limit the ability of the Person to which such
agreements relate to undertake the actions described in clauses (a) through
(d) above, and
(xv) by reason of or under any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings of the contracts, instruments or obligations referred to in
clauses (i) through (xiv) above; provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings, taken as a whole, are, in the good faith
judgment of PanAmSat, not materially more restrictive with respect to
55
such encumbrances or restrictions than those contained in the contracts,
instruments or obligations prior to such amendment, modification,
restatement, renewal, increase, supplement, refunding, replacement or
refinancing.
LIMITATION ON BUSINESS ACTIVITIES OF PANAMSAT AND THE RESTRICTED SUBSIDIARIES
The Indenture provides that PanAmSat shall not, and shall not permit any
Restricted Subsidiary to, engage in any business other than a Permitted
Business.
LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS
The Indenture provides that PanAmSat shall not, and shall not permit any
Restricted Subsidiary to, enter into any Sale and Lease-Back Transaction (other
than the Sale and Lease-Back Transaction relating to the PAS-10 satellite);
provided that PanAmSat or any Restricted Subsidiary may enter into a Sale and
Lease-Back Transaction if:
(a) PanAmSat or such Restricted Subsidiary could have:
(i) Incurred any Indebtedness relating to such Sale and Lease-Back
Transaction under "-- Limitation on Indebtedness" above; and
(ii) incurred a Lien to secure such Indebtedness pursuant to
"-- Limitation on Liens" above;
(b) the consideration received by PanAmSat or such Restricted
Subsidiary in that Sale and Lease-Back Transaction is at least equal to the
fair market value of the property sold and otherwise complies with
"Repurchase at the Option of Holders -- Asset Sales" above; and
(c) the transfer of assets in that Sale and Lease-Back Transaction is
permitted by, and PanAmSat applies the proceeds of such transaction in
compliance with "-- Repurchase at the Option of Holders -- Asset Sales"
above.
MAINTENANCE OF INSURANCE
The Indenture provides that at all times PanAmSat and each Restricted
Subsidiary will maintain (i) with respect to each satellite to be launched by
PanAmSat or any Restricted Subsidiary, launch insurance with respect to each
such satellite covering the launch of such satellite and a period thereafter,
but only to the extent, if at all, and on such terms (including, without
limitation, period, exclusions, limitations on coverage and coverage amount) as
is determined by the Board of Directors of PanAmSat to be in the best interests
of PanAmSat and evidenced by a Board Resolution delivered to the Trustee, (ii)
with respect to each satellite it currently owns or has risk of loss for, other
than any Excluded Satellite or any In-orbit Spare Satellite (but only to the
extent that such In-orbit Spare Satellite is not expected or intended, in the
good faith determination of the Board of Directors of PanAmSat and evidenced by
a Board Resolution delivered to the Trustee, to earn revenues in excess of $15.0
million for the immediately succeeding twelve calendar months), in-orbit
insurance in an amount at least equal to the book value of such satellite and
(iii) at all times subsequent to the coverage period of the launch insurance
described in clause (i) above, if any, or if launch insurance is not procured,
at all times subsequent to the initial completion of in-orbit testing, in each
case other than in the case of any such satellite that is an Excluded Satellite
or an In-orbit Spare Satellite (but only to the extent that such In-orbit Spare
Satellite is not expected or intended, in the good faith determination of the
Board of Directors of PanAmSat and evidenced by a Board Resolution delivered to
the Trustee, to earn revenues in excess of $15.0 million for the immediately
succeeding twelve calendar months), in-orbit insurance in an amount as provided
for in clause (ii) above; provided, however, that at any time with respect to a
satellite that PanAmSat or any Restricted Subsidiary owns or has risk of loss
for,
(1) PanAmSat and each Restricted Subsidiary may at its option in lieu
of procuring or maintaining the in-orbit insurance described in clauses
(ii) and (iii) above elect to provide an In-orbit
56
Spare Satellite for one or more satellites (or the C-band or Ku-band
payloads separately on a hybrid C/Ku-band satellite, provided both payloads
on such satellite are protected by In-orbit Spare Satellites or by in-orbit
insurance in accordance with this covenant); provided that
(y) no more than two satellites protected by the same In-orbit
Spare Satellite may, at any time, each be subject to a Partial Loss
exceeding 37.5% of each such satellite's commercial communications
capacity; provided, however, that up to three satellites protected by
the same In-orbit Spare Satellite may, at any time, each be subject to a
Partial Loss exceeding 37.5% of each such satellite's commercial
communications capacity if such In-orbit Spare is at such time
functioning as an In-orbit Spare Satellite for six satellites and
PanAmSat or the applicable Restricted Subsidiary shall maintain or
procure within 120 days in-orbit insurance complying with the provisions
of clause (ii) or (iii) above, as applicable, on the three satellites
not subject to a Partial Loss exceeding 37.5% of commercial
communications capacity; and
(z) at no single time shall any satellite act as an In-orbit Spare
Satellite for more than six satellites and in no event shall such
satellites be within a geostationary orbital arc of greater than 60
contiguous degrees of longitude; and
(2) for such time as PanAmSat and its Restricted Subsidiaries shall
own or retain risk of loss for and maintain at least 10 satellites (other
than Excluded Satellites) in commercial operation in orbit, PanAmSat and
its Restricted Subsidiaries shall not be required to maintain in-orbit
insurance in excess of 60% of the aggregate book value of all satellites
insured pursuant to clause (i) above (but included in such calculation only
to the extent such satellite has successfully completed its in-orbit
testing phase) and otherwise required to be insured pursuant to clauses
(ii) and (iii) above (with the allocation of such insurance among such
satellites being in PanAmSat's discretion). In the event that fewer than 10
satellites (other than Excluded Satellites) are in commercial operation
in-orbit, PanAmSat shall have 120 days to have in effect in-orbit insurance
complying with clause (ii) or (iii) of the first paragraph above, as
applicable; provided that PanAmSat and its Restricted Subsidiaries shall be
considered in compliance with this insurance covenant for such 120 day
period.
The insurance policies required by the foregoing paragraph shall
(i) contain no exclusions other than
(A) Acceptable Exclusions and such other exclusions or limitations
of coverage as may be applicable to all satellites of the same model or
relating to systemic anomalies as are then customary in the satellite
insurance market and
(B) such specific exclusions applicable to the performance of the
satellite being insured as are reasonably accepted by the Board of
Directors of PanAmSat in order to obtain insurance for a price that is,
and on other terms and conditions that are, commercially reasonable and
(ii) provide coverage for all risks of loss of and damage to the
satellite including, without limitation, for Partial Loss, constructive
total loss and total loss. The insurance required by this covenant shall
name PanAmSat or the applicable Restricted Subsidiary as the named insured.
In the event of (i) a total loss or constructive total loss of an uninsured
in-orbit satellite (or either of the C-band or Ku-band payloads on a hybrid
C/Ku-band satellite thereon) covered by an In-orbit Spare Satellite or (ii) the
unavailability of an In-orbit Spare Satellite for any reason, PanAmSat shall,
subject to clause (2) of the proviso to the first paragraph above, within 120
days of such loss or unavailability, be required to have in effect in-orbit
insurance complying with clauses (ii) or (iii) of the first paragraph above, as
applicable, with respect to all satellites that the In-orbit Spare Satellite was
intended to protect (and in the case of clause (i) of this paragraph, also the
In-orbit Spare Satellite which replaces the satellite subject to such total loss
or constructive total loss) so long as an In-orbit Spare Satellite is
unavailable, provided that PanAmSat and its Restricted Subsidiaries shall be
considered in compliance with this insurance covenant for the 120 days
immediately following such loss or unavailability, as the case may be.
57
In the event that PanAmSat or its Restricted Subsidiaries receive proceeds
from any satellite insurance covering any satellite owned by PanAmSat or any of
its Restricted Subsidiaries, or in the event that PanAmSat or any of its
Restricted Subsidiaries receives proceeds from any insurance maintained for it
by any satellite manufacturer or any launch provider covering any of such
satellites (the event resulting in the payment of such proceeds, an "Event of
Loss"), all Event of Loss Proceeds in respect of such Event of Loss shall be
applied in the manner provided for in clause (iii) of the first paragraph under
"Repurchase at the Option of Holders -- Asset Sales".
PAYMENTS FOR CONSENT
The Indenture provides that PanAmSat shall not, and shall not permit any
Subsidiary to, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any holder of
Notes for or as an inducement to any consent, waiver or amendment of any of the
terms or provisions of the Indenture or the Notes unless such consideration is
offered to be paid or agreed to be paid to all holders of Notes that so consent,
waive or agree to amend in the time frame set forth in solicitation documents
relating to such consent, waiver or amendment.
REPORTS
The Indenture provides that, whether or not PanAmSat is then subject to
Section 13(a) or 15(d) of the Exchange Act or any successor provision thereto,
PanAmSat shall file with the SEC (if permitted by SEC practice and applicable
law and regulations) so long as the Notes are outstanding the annual reports,
quarterly reports and other periodic reports which PanAmSat would have been
required to file with the SEC pursuant to Section 13(a) or 15(d) or any
successor provision thereto if PanAmSat were so subject on or prior to the
respective dates (the "Required Filing Dates") by which PanAmSat would have been
required to file such documents if PanAmSat were so subject. PanAmSat shall also
in any event within 15 days of each Required Filing Date (whether or not
permitted or required to be filed with the SEC) (i) transmit or cause to be
transmitted by mail to all holders of Notes, at such holders' addresses
appearing in the register maintained by the Registrar, without cost to such
holders, and (ii) file with the Trustee, copies of the annual reports, quarterly
reports and other documents described in the preceding sentence. In addition, if
required, PanAmSat shall furnish to holders and to prospective investors, upon
their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act of 1933, as amended (the "Securities Act").
MERGER OR SALES OF ASSETS
The Indenture provides that PanAmSat shall not consolidate or merge with or
into, or transfer all or substantially all of its assets to, another Person
unless:
(i) either (A) PanAmSat shall be the surviving Person, or (B) the
Person formed by or surviving any such consolidation or merger (if other
than PanAmSat), or to which any such transfer shall have been made, is a
corporation organized and existing under the laws of the United States, any
State thereof or the District of Columbia;
(ii) the surviving Person (if other than PanAmSat) expressly assumes
by supplemental indenture all the obligations of PanAmSat under the Notes
and the Indenture;
(iii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iv) immediately after giving effect to such transaction, the
surviving Person would be able to Incur $1.00 of additional Indebtedness
under the Debt to Operating Cash Flow Ratio of the first paragraph of
"-- Limitation on Indebtedness" above; and
(v) PanAmSat shall have delivered to the Trustee prior to the proposed
transaction an Officers' Certificate and an Opinion of Counsel, each
stating that the proposed consolidation, merger or transfer and such
supplemental indenture will comply with the Indenture.
58
Notwithstanding the foregoing clauses (iii) and (iv): (A) any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to PanAmSat; and (B) PanAmSat may (1) merge with an
Affiliate incorporated solely for the purpose of reincorporating PanAmSat in
another jurisdiction, (2) consolidate or merge with or into, or transfer all or
substantially all of its assets to a Restricted Subsidiary so long as all or
substantially all of the assets of PanAmSat immediately prior to such
transaction are owned by the surviving Person or such Restricted Subsidiary
immediately after the consummation of such transaction, or (3) merge with any
direct or indirect wholly owned Subsidiary of EchoStar pursuant to Section 3.1
of the Stock Purchase Agreement dated as of October 28, 2001 among EchoStar,
Hughes Electronics, Hughes Communications Galaxy, Inc., Hughes Communications
Satellite Services, Inc. and Hughes Communications Inc., provided that each such
transaction otherwise complies with the other provisions of the Indenture. Upon
consummation of any transfer permitted by clause (2), concurrently with the
execution by such Restricted Subsidiary of the supplemental indenture
contemplated by clause (ii) of the first paragraph above, PanAmSat shall be
released from all of its obligations under the Notes and the Indenture.
To the extent a transfer contemplated by this covenant is for less than all
of the assets of PanAmSat, PanAmSat shall be deemed to have sold the assets not
so transferred for cash in an amount equal to the fair market value thereof and
shall apply such amount in accordance with "Repurchase at the Option of
Holders -- Asset Sales."
The Indenture provides that no Guarantor shall consolidate or merge with or
into, or transfer all or substantially all of its assets to, another Person
unless either the guarantee of such Guarantor is being released in accordance
with "Ranking and Guarantees" above or:
(i) either (A) such Guarantor shall be the continuing Person, or (B)
the Person formed by or surviving any such consolidation or merger (if
other than such Guarantor), or to which any such transfer shall have been
made, is a corporation organized and existing under the laws of the United
States, any State thereof or the District of Columbia;
(ii) the surviving Person (if other than such Guarantor) expressly
assumes by supplemental indenture all the obligations of such Guarantor
under its guarantee of the Notes and the Indenture;
(iii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing; and
(iv) PanAmSat shall have delivered to the Trustee prior to the
proposed transaction an Officers' Certificate and an Opinion of Counsel,
each stating that the proposed consolidation, merger or transfer and such
supplemental indenture will comply with the Indenture.
Notwithstanding the foregoing clause (iii), any Guarantor may consolidate
with, merge into or transfer all or part of its properties and assets to
PanAmSat or another Guarantor.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants contained in the Indenture. Reference is made to the Indenture for the
full definition of all such terms as well as any other capitalized terms used
herein for which no definition is provided.
"Acceptable Exclusions" means
(i) war, hostile or warlike action in time of peace or war, including
action in hindering, combating or defending against an actual, impending or
expected attack,
(ii) any anti-satellite device or device employing atomic or nuclear
fission or fusion or device employing laser or directed energy beams,
(iii) insurrection, strikes, riots, civil commotion, rebellion,
revolution, civil war, usurpation or action taken by a government or
governmental authority in hindering, combating or defending against such an
occurrence, whether there by a declaration of war or not,
59
(iv) confiscation by order of any government, governmental authority
or agent,
(v) nuclear reaction, nuclear radiation or radioactive contamination
of any nature, whether such loss or damage be direct or indirect,
(vi) electromagnetic or radio frequency interference, except for
physical damage to a satellite resulting from such interference,
(vii) willful or intentional acts of the insured, its directors and
officers, or its contractors intended to cause loss or failure of a
satellite,
(viii) third party liability,
(ix) loss of market, loss of revenue and extra expenses, and except as
contemplated in the insuring agreement, incidental damages and
consequential damages,
(x) actions (including any unlawful seizure or wrongful exercise of
control of the satellite or launch vehicle) taken by one or more persons,
whether or not agents of a sovereign power, for political or terrorist
purposes and whether the loss, damage or failure resulting therefrom is
accidental or intentional, and
(xi) such other exclusions as may be customary for policies of such
type as of the date of issuance or renewal of such coverage.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary or assumed in connection with an
Asset Acquisition from such Person and not Incurred in connection with, or in
anticipation of, such Person becoming a Restricted Subsidiary or such Asset
Acquisition.
"Additional Interest" has the meaning provided for such term in the
registration rights agreement.
"Affiliate" means, with respect to any specific Person, any other Person
that directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by," and "under common control with"), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement or
otherwise; provided that, for purposes of the covenant described under
"Covenants -- Limitation on Transactions with Affiliates" above, beneficial
ownership of at least 10% of the voting securities of a Person, either directly
or indirectly, will be deemed to be control.
"Asset Acquisition" means (i) an Investment by PanAmSat or any Restricted
Subsidiary in any other Person pursuant to which such Person shall become a
Restricted Subsidiary or shall be consolidated or merged with or into PanAmSat
or any Restricted Subsidiary or (ii) any acquisition by PanAmSat or any
Restricted Subsidiary of the assets of any Person which constitute substantially
all of an operating unit, a division or a line of business of such Person or
which is otherwise outside of the ordinary course of business.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
(that has the effect of a disposition) or other disposition (including any
merger, consolidation or sale-leaseback transaction) to any Person other than
PanAmSat or any Restricted Subsidiary in one transaction or a series of related
transactions, of:
(i) any Equity Interest in any Restricted Subsidiary; or
(ii) any other property or assets of PanAmSat or any Restricted
Subsidiary.
For the purposes of this definition, the term "Asset Sale" shall not include:
(a) any Investment (including, without limitation, in connection with
any asset sold for other than cash) or Restricted Payment consummated in
compliance with "Covenants -- Limitation on
60
Restricted Payments" above and any transaction consummated in compliance
with "Covenants -- Merger or Sales of Assets" above;
(b) the sale of inventory (including, the sale or leasing, including
by way of sales-type lease, of transponder capacity and the leasing or
licensing of teleports) in the ordinary course of business;
(c) a transaction or series of related transactions for which PanAmSat
or the Restricted Subsidiaries receive aggregate consideration of less than
$10.0 million;
(d) (i) the sale or factoring of accounts receivable and related
assets on customary market terms pursuant to Credit Facilities or (ii)
sales of accounts receivable (including in respect of sales-type leases)
and related assets (including contract rights) of the type specified in the
definition of the term "Qualified Securitization Transaction" to a
Securitization Entity for the fair market value thereof; provided that any
cash and Cash Equivalents received in connection therewith shall be treated
as Asset Sale Proceeds of an Asset Sale and shall be applied as provided
for under "Repurchase at the Option of Holders -- Asset Sales";
(e) transfers of accounts receivable (including in respect of
sales-type leases) and related assets (including contract rights) of the
type specified in the definition of the term "Qualified Securitization
Transaction," or a fractional undivided interest therein, by a
Securitization Entity in a Qualified Securitization Transaction;
(f) any disposition of (A) property or assets that in the reasonable
judgment of PanAmSat, have become uneconomic, obsolete or worn out or (B)
rights to construct or launch satellites;
(g) the disposition of cash or Cash Equivalents;
(h) the sale of Equity Interests in Unrestricted Subsidiaries;
(i) any exchange of Productive Assets (including transponders or
transponder capacity) for other Productive Assets owned by a Person other
than PanAmSat and its Restricted Subsidiaries; provided that any cash
proceeds of any such exchange in excess of the amount in clause (c) above
are applied in accordance with "Repurchase at the Option of Holder -- Asset
Sales" as if they were Asset Sale Proceeds;
(j) any Event of Loss;
(k) any Sale and Lease-Back Transaction in respect of the PAS-10
satellite; and
(l) any sale of an Excluded Satellite; provided, that any cash and
Cash Equivalents received in connection with the sale of an Excluded
Satellite shall be treated as Asset Sale Proceeds of an Asset Sale and
shall be applied as provided for under the provisions described under
"Repurchase at the Option of Holders -- Asset Sales."
For purposes of clause (d)(ii) of this definition, sale proceeds received
for the assets described in that clause shall include the fair market value, as
determined in good faith by management of PanAmSat, of any Equity Interest or
Purchase Money Note issued by the Securitization Entity in exchange for such
assets and not in turn sold for cash proceeds by the entity that received such
property in exchange for such assets.
"Asset Sale Proceeds" means, with respect to any Asset Sale:
(i) cash received by PanAmSat or any of the Restricted Subsidiaries
from such Asset Sale (including cash received as consideration for the
assumption of liabilities incurred in connection with or in anticipation of
such Asset Sale), after
(a) provision for all income or other taxes measured by or
resulting from such Asset Sale,
(b) payment of all reasonable brokerage commissions, underwriting,
legal, accounting and other reasonable fees and expenses related to such
Asset Sale,
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(c) provision for minority interest holders in any Restricted
Subsidiary as a result of such Asset Sale by such Restricted Subsidiary,
(d) payment of amounts required to be applied to the repayment of
Indebtedness secured by a Lien on the asset or assets that were the
subject of such Asset Sale, and
(e) deduction of appropriate amounts to be provided by PanAmSat or
such Restricted Subsidiary as a reserve, in accordance with GAAP,
against any liabilities associated with the assets sold or disposed of
in such Asset Sale and retained by PanAmSat or such Restricted
Subsidiary after such Asset Sale, including pension and other post
employment benefit liabilities and liabilities related to environmental
matters or against any indemnification obligations associated with the
assets sold or disposed of in such Asset Sale; and
(ii) promissory notes and other non-cash consideration received by
PanAmSat or any Restricted Subsidiary from such Asset Sale or other
disposition upon the liquidation or conversion of such notes or non-cash
consideration into cash.
"Board of Directors" means the board of directors of PanAmSat or any duly
authorized committee thereof.
"Board Resolution" means with respect to PanAmSat, a duly adopted
resolution of the Board of Directors of PanAmSat or any committee thereof.
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"Cash Equivalents" means:
(i) United States dollars;
(ii) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof
having maturities of not more than one year from the date of acquisition;
(iii) certificates of deposit and eurodollar time deposits with
maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding one year or less from the date of
acquisition and overnight bank deposits, in each case with any commercial
bank or trust company having capital and surplus in excess of $500.0
million;
(iv) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the
qualifications specified in clause (iii) above;
(v) commercial paper maturing no more than one year from the date of
creation thereof and at the time of acquisition, having a rating of at
least P-1 from Moody's or a rating of at least A-1 from S&P;
(vi) readily marketable direct obligations issued by any state of the
United States of America or any political subdivision thereof having a
rating of at least "A" from either Moody's or S&P; and
(vii) money market mutual or similar funds having assets in excess of
$500.0 million, substantially all the assets of which are comprised of
assets specified in clauses (i) through (vi) above.
"Consolidated Income Tax Expense" means, with respect to PanAmSat for any
period, the provision for federal, state, local and foreign taxes based on
income or profits (including franchise taxes) payable by PanAmSat and the
Restricted Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP.
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"Consolidated Interest Expense" means, with respect to PanAmSat and the
Restricted Subsidiaries for any period, without duplication, the sum of:
(i) the interest expense of PanAmSat and the Restricted Subsidiaries
for such period as determined on a consolidated basis in accordance with
GAAP, including amortization of original issued discount on any
Indebtedness and the interest portion of any deferred payment obligation
and after taking into account the effect of elections made under any
Hedging Agreements, however denominated, with respect to such Indebtedness,
but excluding amortization of debt issuance costs;
(ii) the interest component of Capitalized Lease Obligations paid or
accrued by PanAmSat and the Restricted Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP; and
(iii) dividends and distributions in respect of Disqualified Equity
Interests actually paid in cash by PanAmSat and the Restricted Subsidiaries
and dividends and distributions in respect of Preferred Equity Interests
actually paid in cash by any Restricted Subsidiary, in each case, during
such period as determined on a consolidated basis in accordance with GAAP.
For purposes of this definition, interest on a Capitalized Lease Obligation
shall be deemed to accrue at an interest rate reasonably determined by PanAmSat
to be the rate of interest implicit in such Capitalized Lease Obligation in
accordance with GAAP.
"Consolidated Net Income" means, with respect to any period, the net income
(loss) of PanAmSat and the Restricted Subsidiaries for such period determined on
a consolidated basis in accordance with GAAP, adjusted, to the extent included
in calculating such net income (loss), by excluding, without duplication:
(i) all extraordinary, unusual or nonrecurring items of income or
expense and of gains or losses and all gains and losses from the sale or
other disposition of assets out of the ordinary course of business or from
Events of Loss or other casualties or condemnations (net of taxes, fees and
expenses relating to the transaction giving rise thereto) for such period;
(ii) that portion of such net income (loss) derived from or in respect
of Investments in Persons other than any Restricted Subsidiary, except to
the extent actually received in cash by PanAmSat or any Restricted
Subsidiary;
(iii) the portion of such net income (loss) allocable to minority
interests in unconsolidated Persons for such period, except to the extent
actually received in cash by PanAmSat or any Restricted Subsidiary;
(iv) except for purposes of determining the Debt to Operating Cash
Flow Ratio, net income (loss) of any other Person combined with PanAmSat or
any Restricted Subsidiary on a "pooling of interests" basis attributable to
any period prior to the date of combination;
(v) net income (loss) of any Restricted Subsidiary to the extent that
the declaration or payment of dividends or similar distributions by that
Restricted Subsidiary of that net income (loss) is not at the date of
determination permitted without any prior governmental approval (which has
not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Restricted Subsidiary or
the holders of its Equity Interests;
(vi) the cumulative effect of a change in accounting principles after
the Issue Date;
(vii) net income (loss) attributable to discontinued operations;
(viii) any restoration to income of any contingency reserve, except to
the extent that provision for such reserve was made out of Consolidated Net
Income accrued at any time following the Issue Date; and
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(ix) except for purposes of determining the Debt to Operating Cash
Flow Ratio, in the case of a successor to PanAmSat by consolidation or
merger or as a transferee of PanAmSat's assets, any earnings of the
successor corporation prior to such consolidation, merger or transfer of
assets.
"Consolidated Tangible Assets" means, as at any date of determination, the
total assets, less goodwill and other intangibles shown on the balance sheet of
PanAmSat and the Restricted Subsidiaries as of the most recent date for which
such a balance sheet is available, determined on a consolidated basis in
accordance with GAAP.
"Consolidated Total Indebtedness" means, as at any date of determination,
an amount equal to the sum of (i) the aggregate amount of all outstanding
Indebtedness of PanAmSat and the Restricted Subsidiaries and (ii) the aggregate
amount of all outstanding Disqualified Equity Interests in PanAmSat and all
Preferred Equity Interests in the Restricted Subsidiaries, with the amount of
such Disqualified Equity Interests and Preferred Equity Interests equal to the
greater of their respective voluntary or involuntary liquidation preferences and
maximum fixed repurchase prices, in each case determined on a consolidated basis
in accordance with GAAP.
For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Equity Interest or Preferred Equity Interest that does not have a
fixed repurchase price shall be calculated in accordance with the terms of such
Disqualified Equity Interest or Preferred Equity Interest as if such
Disqualified Equity Interest or Preferred Equity Interest were purchased on any
date on which Consolidated Total Indebtedness shall be required to be determined
pursuant to the Indenture, and if such price is based upon, or measured by, the
fair market value of such Disqualified Equity Interest or Preferred Equity
Interest, such fair market value shall be determined reasonably and in good
faith by the Board of Directors.
"Continuing Member" means, as of the date of determination, any Person who:
(i) was a member of the Board of Directors of PanAmSat on the Issue
Date;
(ii) was nominated for election or elected to the Board of Directors
of PanAmSat with the affirmative vote of a majority of the Continuing
Members who were members of the Board of Directors at the time of such
nomination or election; or
(iii) is a representative of, or was approved by, a Permitted Holder.
"Credit Facilities" means, with respect to PanAmSat and its Restricted
Subsidiaries, one or more debt facilities (including the Senior Credit Facility)
or commercial paper facilities with banks, insurance companies or other
institutional lenders providing for revolving credit loans, term loans, notes,
factoring or other receivables financing (including through the sale or
factoring of receivables to such lenders or by way of a Qualified Securitization
Transaction) or letters of credit or other credit facilities, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time.
"Cumulative Credit" means the sum of:
(i) the aggregate Net Cash Proceeds, and the fair market value of any
property other than cash (as determined in good faith by the Board of
Directors), received by PanAmSat from the issue or sale (other than to a
Restricted Subsidiary) of any class of Equity Interests in PanAmSat after
the Issue Date, other than (A) Disqualified Equity Interests or (B) Equity
Interests to the extent the Net Cash Proceeds therefrom are applied as
provided for in clause (i) of the definition of "Specified Affiliate
Payments"; plus
(ii) the principal amount (or accreted amount (determined in
accordance with GAAP), if less) of any Indebtedness, or the liquidation
preference or maximum fixed repurchase price, as the case may be, of any
Disqualified Equity Interests, of PanAmSat issued after the Issue Date
(other than any such Indebtedness or Disqualified Equity Interests to the
extent issued to a Restricted
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Subsidiary), which has been converted into or exchanged for Equity
Interests in PanAmSat (other than Disqualified Equity Interests); plus
(iii) cumulative Operating Cash Flow from and after the first day of
the fiscal quarter during which the Issue Date occurs, to the end of the
fiscal quarter immediately preceding the date of the proposed Restricted
Payment, or, if cumulative Operating Cash Flow for such period is negative,
minus the amount by which cumulative Operating Cash Flow is less than zero;
plus
(iv) to the extent not already included in Operating Cash Flow, 100%
of the aggregate net cash proceeds received by PanAmSat or a Restricted
Subsidiary since the Issue Date from (i) Investments (other than Permitted
Investments), whether through interest payments, principal payments,
dividends or other distributions and payments, or the sale or other
disposition (other than to PanAmSat or a Restricted Subsidiary) thereof
made by PanAmSat and its Restricted Subsidiaries and (ii) a cash dividend
from, or the sale (other than to PanAmSat or a Restricted Subsidiary) of
the stock of, an Unrestricted Subsidiary; plus
(v) if any Unrestricted Subsidiary is redesignated as a Restricted
Subsidiary, the fair market value of all Investments by PanAmSat and its
Restricted Subsidiaries in such Subsidiary, as determined in good faith by
the Board of Directors.
Notwithstanding anything to the contrary above, any repayments of
Restricted Payments made pursuant to clause (6) of the second paragraph of
"-- Limitation on Restricted Payments" shall be excluded from the calculation of
Cumulative Credit.
"Cumulative Interest Expense" means, in respect of any Restricted Payment,
the aggregate amount of Consolidated Interest Expense of PanAmSat and the
Restricted Subsidiaries for the period from and after the first day of the
fiscal quarter during which the Issue Date occurs, to the end of the fiscal
quarter immediately preceding the proposed Restricted Payment.
"Debt to Operating Cash Flow Ratio" means the ratio of (i) the Consolidated
Total Indebtedness as of the date of calculation (the "Determination Date") to
(ii) the Operating Cash Flow for the four full consecutive fiscal quarters
immediately preceding such Determination Date for which financial information is
available (the "Measurement Period"). For purposes of calculating Operating Cash
Flow for the Measurement Period ending immediately prior to the relevant
Determination Date:
(a) any Person that is a Restricted Subsidiary on the Determination
Date (or would become a Restricted Subsidiary on such Determination Date in
connection with the transaction that requires the determination of such
Operating Cash Flow) will be deemed to have been a Restricted Subsidiary at
all times during such Measurement Period;
(b) any Person that is not a Restricted Subsidiary on such
Determination Date (or would cease to be a Restricted Subsidiary on such
Determination Date in connection with the transaction that requires the
determination of such Operating Cash Flow) will be deemed not to have been
a Restricted Subsidiary at any time during such Measurement Period; and
(c) if since the beginning of the Measurement Period, PanAmSat, any
Restricted Subsidiary or any Person that subsequently became a Restricted
Subsidiary or was merged with or into PanAmSat or any Restricted Subsidiary
since the beginning of the Measurement Period, shall have in any manner (x)
acquired (including through an Asset Acquisition or the commencement of
activities constituting such operating business) or (y) disposed of
(including by way of an Asset Sale or the termination or discontinuance of
activities constituting such operating business) any operating business in
each case during such Measurement Period or after the end of such period
and on or prior to such Determination Date, such calculation will be made
on a pro forma basis in accordance with GAAP and giving effect to any
increase or reduction of any associated Operating Cash Flow attributable
thereto (including any pro forma adjustments (including cost-savings
adjustments) calculated on a basis consistent with Regulation S-X under the
Securities Act), as if, in the case of an Asset Acquisition or the
commencement of activities constituting such operating business, all such
65
transactions had been consummated on the first day of such Measurement
Period, and, in the case of an Asset Sale or termination or discontinuance
of activities constituting such operating business, all such transactions
had been consummated prior to the first day of such Measurement Period.
For purposes of this definition, whenever pro forma effect is to be given
to a transaction, the pro forma calculations shall be made in good faith by a
financial or accounting officer of PanAmSat.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice would be, an Event of Default.
"Disqualified Equity Interest" means any Equity Interest which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable at the option of the holder thereof), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof
(except, in each such case, upon the occurrence of a change of control) in whole
or in part, or is exchangeable into Indebtedness, on or prior to the earlier of
the maturity date of the Notes or the date on which no Notes remain outstanding.
"EchoStar" means EchoStar Communications Corporation, a Nevada corporation,
and its successors and assigns.
"Equity Interest" in any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, and
membership interests in such Person, including any Preferred Equity Interests.
"Event of Loss" is defined under "Covenants -- Maintenance of Insurance."
"Event of Loss Proceeds" means, with respect to any Event of Loss, all
satellite insurance proceeds received by PanAmSat or any of the Restricted
Subsidiaries in connection with such Event of Loss, after
(i) provision for all income or other taxes measured by or resulting
from such Event of Loss,
(ii) payment of all reasonable legal, accounting and other reasonable
fees and expenses related to such Event of Loss,
(iii) payment of amounts required to be applied to the repayment of
Indebtedness secured by a Lien on the satellite that is the subject of such
Event of Loss,
(iv) provision for payments to Persons who own an interest in the
satellite (including any transponder thereon) in accordance with terms of
the agreement(s) governing the ownership of such interest by such Person
(other than payments to insurance carriers required to be made based on the
future revenues generated from such satellite), and
(v) deduction of appropriate amounts to be provided by PanAmSat or
such Restricted Subsidiary as a reserve, in accordance with GAAP, against
any liabilities associated with the satellite that was the subject of the
Event of Loss.
"Excess Proceeds" means any Asset Sale Proceeds (or Event of Loss Proceeds)
that are not applied or invested (or committed to be invested) as provided in
clause (iii)(a) of the first paragraph of "Repurchase at the Option of
Holders -- Asset Sales" above.
"Excluded Satellite" means (a) the satellites of PanAmSat and its
Restricted Subsidiaries identified as PAS-4, PAS-5, PAS-6, PAS-7, Galaxy IIIR
and Galaxy VIIIi and (b) any other satellite that (i) is not expected or
intended, in the good faith determination of the Board of Directors and
evidenced by a Board Resolution delivered to the Trustee, to earn future
revenues from the operation of such satellite in excess of $10.0 million in any
fiscal year, and (ii) has suffered loss or damage such that (1) the procurement
of in-orbit insurance therefor in the amount and on the terms required by the
Indenture would not be available for a price that is, and on other terms and
conditions that are, commercially reasonable or (2) such in-orbit insurance
would be subject to exclusions or limitations of coverage that
66
would make the terms of the insurance commercially unreasonable, in either case,
as determined in good faith by the Board of Directors and evidenced by a Board
Resolution delivered to the Trustee.
"Existing Notes" means each of the (i) 6% Notes due 2003, (ii) 6 1/8% Notes
due 2005, (iii) 6 3/8% Notes due 2008 and (iv) 6 7/8% Debentures due 2028 of
PanAmSat issued pursuant to the Existing Notes Indenture and outstanding on the
Issue Date.
"Existing Notes Indenture" means the Indenture dated as of January 16, 1998
by and between PanAmSat and The Chase Manhattan Bank, as trustee, pursuant to
which the Existing Notes were issued.
"Foreign Restricted Subsidiary" means a Restricted Subsidiary that is
incorporated in a jurisdiction other than the United States or a State thereof
or the District of Columbia and with respect to which more than 80% of any of
its sales, earnings or assets (determined on a consolidated basis in accordance
with GAAP) are located in or generated or derived from operations located in
jurisdictions outside of the United States of America.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect from time to time.
"Guarantor" means any Restricted Subsidiary of PanAmSat that guarantees
PanAmSat's obligations under the Indenture and the Notes.
"Hedging Agreement" means any interest rate swap agreement, interest rate
cap agreement, interest rate collar agreement, foreign exchange contract,
currency swap agreement or other similar agreement providing for the transfer or
mitigation of interest rate or currency risks either generally or under specific
contingencies.
"Hedging Obligations" means, with respect to any Person, the obligation of
such Person under any Hedging Agreement.
"Holding Company" means (i) PanAmSat following the consummation of the
transaction contemplated by clause (B)(2) of the second paragraph of the
covenant described under "Covenants -- Merger or Sale of Assets" following which
a Restricted Subsidiary shall succeed to all or substantially all of the assets
of PanAmSat and PanAmSat shall be released from all of its obligations under the
Notes and the Indenture and (ii) any Person formed primarily for the purpose of
acting as a parent holding company for PanAmSat and which has no significant
assets or operations other than through its ownership of PanAmSat.
"Hughes Electronics" means Hughes Electronics Corporation, a Delaware
corporation, and its successors and assigns.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation (and "Incurrence," "Incurred" and "Incurring"
shall have meanings correlative to the foregoing). Indebtedness of any Person or
any of its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary (or is merged into or consolidates with PanAmSat or any Restricted
Subsidiary), whether or not such Indebtedness was incurred in connection with,
or in contemplation of, such Person becoming a Restricted Subsidiary (or being
merged into or consolidated with PanAmSat or any Restricted Subsidiary), shall
be deemed Incurred at the time any such Person becomes a Restricted Subsidiary
or merges into or consolidates with PanAmSat or any Restricted Subsidiary.
"Indebtedness" means, with respect to any Person, without duplication, any
indebtedness, secured or unsecured, contingent or otherwise, in respect of
borrowed money (whether or not the recourse of the lender is to the whole of the
assets of such Person or only to a portion thereof), or evidenced by bonds,
67
notes, debentures or similar instruments or letters of credit or representing
the deferred and unpaid balance of the purchase price of property or services
(but excluding trade payables and other accrued liabilities arising in the
ordinary course of business) if and to the extent any of the foregoing
indebtedness would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, and shall also include, to the extent not
otherwise included (but without duplication):
(i) any Capitalized Lease Obligations;
(ii) obligations secured by a Lien to which any property or assets
owned or held by such Person, other than Equity Interests of any
Unrestricted Subsidiary, is subject, whether or not the obligation or
obligations secured thereby shall have been assumed;
(iii) obligations for the reimbursement of any obligor on any letter
of credit, banker's acceptance or similar credit transaction;
(iv) guarantees of items of other Persons which would be included
within this definition for such other Persons (whether or not such items
would appear upon the balance sheet of the guarantor); and
(v) Hedging Obligations of such Person in respect of any of the
foregoing (if and only to the extent any amount due in respect of such
Hedging Obligations would appear as a liability upon a balance sheet of
such Person prepared in accordance with GAAP).
Notwithstanding the foregoing, Indebtedness shall not include:
(a) obligations and liabilities in respect of synthetic lease
facilities that are accounted for as operating leases in accordance with
GAAP (including guarantees of loans then outstanding by the lenders under
any such facility to the lessor thereunder);
(b) obligations of such Person arising from agreements of such Person
providing for indemnification, adjustment of purchase price or similar
obligations, in each case, incurred or assumed in connection with the
disposition of any business, assets or a Subsidiary, other than guarantees
of Indebtedness Incurred by any Person acquiring all or any portion of such
business, assets or a Subsidiary for the purpose of financing such
acquisition; provided, however, that:
(i) such obligations are not reflected on the balance sheet of such
Person (contingent obligations referred to in a footnote to financial
statements and not otherwise reflected on the balance sheet will not be
deemed to be reflected on such balance sheet for purposes of this
definition); and
(ii) the maximum assumable liability in respect of all such
obligations shall at no time exceed the gross proceeds including noncash
proceeds (the fair market value of such noncash proceeds being measured
at the time received and without giving effect to any subsequent changes
in value) actually received by such Person in connection with such
disposition;
(c) deferred or prepaid revenues;
(d) purchase price holdbacks in connection with purchasing in the
ordinary course of business of such Person;
(e) Standard Securitization Undertakings;
(f) obligations to make payments to one or more insurers under
satellite insurance policies in respect of premiums or the requirement to
remit to such insurer(s) a portion of the future revenues generated by a
satellite which has been declared a constructive total loss, in each case
in accordance with the terms of the insurance policies relating thereto; or
(g) any obligations to make progress or incentive payments under any
satellite manufacturing contract or to make payments under satellite launch
contracts in respect of launch services provided thereunder, in each case,
to the extent not overdue by more than 90 days.
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"In-orbit Spare Satellite" means a satellite that:
(i) shall meet or exceed the performance requirements to which the
customer would be entitled pursuant to its service agreement with respect
to each satellite being protected (or the C-band or Ku-band payloads
separately on a hybrid C/Ku-band satellite, provided both payloads on such
satellite are so protected or insured by insurance in accordance with
"Covenants -- Maintenance of Insurance"); and
(ii) to the extent necessary to serve the present and future intended
customer base for the satellite being protected (or the C-band or Ku-band
payloads separately on a hybrid C/Ku-band satellite, provided both payloads
on such satellite are so protected or insured by insurance in accordance
with "Covenants -- Maintenance of Insurance"), shall have a similar or
better footprint coverage and power levels and similar operating radio
frequencies when compared to each satellite (or the C-band or Ku-band
payloads separately on a hybrid C/Ku-band satellite, provided both payloads
on such satellite are so protected or insured by insurance in accordance
with "Covenants -- Maintenance of Insurance") for which it shall be
maintained as an In-orbit Spare Satellite;
provided that a satellite that has both C-band and Ku-band payloads, shall be
deemed to be an "In-orbit Spare Satellite" with respect to each payload as to
which it meets the foregoing criteria as applied to such payload separately.
"Investment" means, directly or indirectly, any advance, loan or other
extension of credit (but excluding guarantees of Indebtedness permitted to be
Incurred under the Indenture) or capital contribution to (by means of transfers
of property to others, payments for property or services for the account or use
of others or otherwise), or the acquisition, by purchase or otherwise, of any
stock, bonds, notes, debentures, partnership, membership or joint venture
interests or other securities or other evidence of beneficial interest of any
Person. If PanAmSat or any Restricted Subsidiary sells or otherwise disposes of
any Voting Equity Interest in any direct or indirect Restricted Subsidiary such
that, after giving effect to such sale or disposition, PanAmSat no longer owns,
directly or indirectly, greater than 50% of the outstanding Voting Equity
Interests in such Restricted Subsidiary, PanAmSat shall be deemed to have made
an Investment on the date of any such sale or disposition equal to the fair
market value of the Equity Interests in such former Restricted Subsidiary not
sold or disposed of. Notwithstanding the foregoing, payments made under
contracts to construct, launch, operate or insure satellites which contracts are
entered into in the ordinary course of business shall not constitute
Investments.
"Investment Grade Rating" means a rating equal to or higher than Baa3 (or
the equivalent) by Moody's and BBB- (or the equivalent) by S&P.
"Issue Date" means February 1, 2002, the date of original issuance of the
Notes.
"Lien" means any mortgage, pledge, lien, charge, security interest,
hypothecation, assignment for security or encumbrance of any kind (including any
conditional sale or capital lease or other title retention agreement, any lease
in the nature thereof or any agreement to give a security interest).
"Moody's" means Moody's Investors Service, Inc. or its successors.
"Net Cash Proceeds" means, with respect to any issuance or sale of Equity
Interests, the proceeds in the form of cash or Cash Equivalents received by
PanAmSat from such issuance or sale and net of attorneys' fees, accountants
fees, underwriters' or placement agents' fees, discounts or commissions and
brokerage, consultant and other fees actually incurred in connection with such
issuance or sale and net of taxes paid or payable as a result thereof.
"Net Transponder Capacity" means the aggregate transponder transmission
capacity for all in-orbit transponders then owned by PanAmSat and the Restricted
Subsidiaries less the amount of capacity relating to transponders which are not
at such time available for use whether due to legal, regulatory, technical or
contractual restrictions or otherwise.
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"Non-Guarantor Subsidiary" means any Restricted Subsidiary that is not, and
is not required to be, a Guarantor of the Notes.
"Non-Recourse Indebtedness" means Indebtedness of a Person (i) as to which
neither PanAmSat nor any of the Restricted Subsidiaries (a) provides any
guarantee or direct or indirect credit support of any kind (including any
undertaking, guarantee, indemnity, agreement or instrument that would constitute
Indebtedness) or (b) is directly or indirectly liable (as a guarantor or
otherwise); and (ii) the Incurrence of which will not result in any recourse
against any of the assets of either PanAmSat or any Restricted Subsidiary;
provided, however, that (1) PanAmSat or any Restricted Subsidiary may make a
loan to an Unrestricted Subsidiary, or guarantee a loan made to an Unrestricted
Subsidiary, if such loan or guarantee is permitted by "Covenants -- Limitation
on Restricted Payments" above at the time of the making of such loan or
guarantee, and such loan or guarantee shall not constitute Indebtedness which is
not Non-Recourse Indebtedness, and (2) no Indebtedness shall fail to constitute
Non-Recourse Indebtedness as a result of any Standard Securitization
Undertaking.
"Notes" means the 8 1/2% Senior Notes due 2012 issued by PanAmSat on the
Issue Date.
"Off-Balance Sheet Financing Amount" means at any date, with respect to any
Qualified Securitization Transaction, that portion of the Non-Recourse
Indebtedness of the related Securitization Entity (other than Standard
Securitization Undertakings) that is attributable to assets of the type
described in the definition of the term "Qualified Securitization Transaction"
transferred to such Securitization Entity by or on behalf of PanAmSat and its
Subsidiaries.
"Officers" means any of the following: Chairman, President, Chief Executive
Officer, Treasurer, any Assistant Treasurer, Chief Financial Officer, any
Executive Vice President, any Senior Vice President, any Vice President, any
Assistant Vice President, Secretary, any Assistant Secretary or any other
officer reasonably acceptable to the Trustee.
"Officers' Certificate" means a certificate signed by two Officers solely
in their capacity as such.
"Operating Cash Flow" means, with respect to PanAmSat and the Restricted
Subsidiaries on a consolidated basis, for any period, an amount equal to
Consolidated Net Income for such period
(1) increased (without duplication) by the sum of:
(i) Consolidated Income Tax Expense accrued for such period to the
extent deducted in determining Consolidated Net Income for such period;
(ii) Consolidated Interest Expense for such period to the extent
deducted in determining Consolidated Net Income for such period;
(iii) depreciation, amortization and any other non-cash items for
such period to the extent deducted in determining Consolidated Net
Income for such period (other than any non-cash item which requires the
accrual of, or a reserve for, cash charges for any future period) of
PanAmSat and the Restricted Subsidiaries (including amortization of
capitalized debt issuance costs for such period and any non-cash
compensation expense realized for grants of stock options or other
rights to officers, directors and employees), all of the foregoing
determined on a consolidated basis in accordance with GAAP, and
decreased by non-cash items (other than items referred to in clause (2)
below) to the extent they increase Consolidated Net Income (including
the partial or entire reversal of reserves taken in prior periods, but
excluding reversals of accruals or reserves for cash charges taken in
prior periods) for such period;
(iv) collections on investments in sales-type leases during such
period, to the extent not otherwise included in Consolidated Net Income
for such period; and
(v) an amount equal to the reduction or elimination of the tax loss
carry-forward available to PanAmSat as a result of the tax sharing
arrangements between PanAmSat and Hughes Electronics which reduction or
elimination results from the consummation of the pending
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acquisition by EchoStar of Hughes Electronics and/or PanAmSat to the
extent such amount is deducted in determining Consolidated Net Income
for such period; and
(2) decreased by any gross profit on sales-type leases included in
Consolidated Net Income for such period.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to PanAmSat or the Trustee. As to matters of fact, an Opinion of Counsel
may conclusively rely on an Officers' Certificate, without any independent
investigation.
"Other Permitted Liens" means:
(i) Liens imposed by law, such as carriers', warehousemen's and
mechanics' Liens and other similar Liens arising in the ordinary course of
business which secure payment of obligations that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and for which any appropriate reserve
or provision shall have been made in accordance with GAAP;
(ii) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and
for which any appropriate reserve or provision shall have been made in
accordance with GAAP;
(iii) Liens related to Capitalized Lease Obligations, Indebtedness
under a Sale and Lease-Back Transaction or Purchase Money Indebtedness, in
each case Incurred for the purpose of financing or refinancing all or any
part of the lease, purchase price or cost of acquisition, construction,
installation or improvement of property, plant or equipment used or useful
in the business of PanAmSat or any Restricted Subsidiary (whether through
the direct purchase of assets or the Equity Interests of any Person owning
such assets and whether such Indebtedness is owed to the seller or the
Person carrying out such construction, installation or improvement);
provided that any such Lien encumbers only the asset or assets so financed,
refinanced, leased, purchased, acquired, constructed, installed or improved
(including assets owned by the Person whose Equity Interests are being
purchased);
(iv) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation obligations and general
liability exposure, unemployment insurance and other types of social
security;
(v) bankers' Liens, right of setoff and Liens to secure the
performance of statutory obligations, surety or appeal bonds, performance
bonds, deposits to secure the performance of bids, trade contracts,
government contracts, leases or licenses or other obligations of a like
nature incurred in the ordinary course of business (including landlord
Liens on leased properties);
(vi) deposits made in the ordinary course of business to secure
liability to insurance carriers;
(vii) Liens securing reimbursement obligations with respect to letters
of credit which encumber documents, the goods covered by such documents and
other property relating to such letters of credit and the products and
proceeds thereof;
(viii) Liens arising by reason of a judgment, decree or court order,
to the extent not otherwise resulting in an Event of Default, and any Liens
that are required to protect or enforce any rights in any administrative,
arbitration or other court proceedings in the ordinary course of business;
(ix) Liens securing Hedging Obligations entered into in respect of
Indebtedness permitted to be secured in accordance with the terms of the
Indenture;
(x) any provision for the retention of title to an asset by the vendor
or transferor of such asset which asset is acquired by PanAmSat or any
Restricted Subsidiary in a transaction entered into in the ordinary course
of business of PanAmSat or such Restricted Subsidiary;
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(xi) Liens that secure Indebtedness (A) of Foreign Restricted
Subsidiaries or (B) of PanAmSat or any of its Restricted Subsidiaries in
respect of guarantees of Indebtedness of Foreign Restricted Subsidiaries or
foreign joint ventures or other entities in which PanAmSat or any of its
Subsidiaries has an Investment; provided that the aggregate principal
amount of such Indebtedness (including any such Indebtedness guaranteed)
does not exceed $20.0 million at any one time outstanding;
(xii) Liens securing Acquired Indebtedness (and any Indebtedness which
Refinances such Acquired Indebtedness) Incurred in accordance with the
covenant described under "Covenants -- Limitation on Indebtedness";
provided that
(A) such Liens secured the Acquired Indebtedness at the time of and
prior to the Incurrence of such Acquired Indebtedness by PanAmSat or a
Restricted Subsidiary and were not granted in connection with, or in
anticipation of, the Incurrence of such Acquired Indebtedness by
PanAmSat or a Restricted Subsidiary, and
(B) such Liens do not extend to or cover any property or assets of
PanAmSat or of any of the Restricted Subsidiaries other than the
property or assets that secured the Acquired Indebtedness prior to the
time such Indebtedness became Acquired Indebtedness of PanAmSat or a
Restricted Subsidiary (including any property or assets acquired
thereafter by a Restricted Subsidiary the Equity Interests of which are
acquired in the relevant transaction if the provisions of such
Indebtedness in effect prior to such transaction required the grant of
Liens in such property or assets);
(xiii) Liens arising in connection with Qualified Securitization
Transactions;
(xiv) Liens incurred in the ordinary course of business of PanAmSat or
any Restricted Subsidiary of PanAmSat with respect to obligations that do
not exceed $5.0 million at any one time outstanding and that (A) are not
incurred in connection with the borrowing of money or the obtaining of
advances or credit (other than trade credit in the ordinary course of
business) and (B) do not in the aggregate materially detract from the value
of the property or materially impair the use thereof in the operation of
business by PanAmSat or such Restricted Subsidiary; and
(xv) additional Liens on any asset of PanAmSat or any Restricted
Subsidiary securing Indebtedness in an amount not to exceed $25.0 million.
"Pari Passu Indebtedness" means any Indebtedness of PanAmSat or any
Guarantor that ranks pari passu with the Notes or the relevant guarantee of such
Guarantor.
"Partial Loss" means the loss of available communications capacity on the
satellite resulting from the failure of transponders thereon to meet the
requirements of the satellite's performance specifications such that PanAmSat,
using reasonable business judgment and after use of all available redundancy and
spare components of the satellite, determines that such transponders cannot or
would not be able to be used for their intended commercial communications
purposes.
"Permitted Business" means the business of developing, owning, engaging in
and dealing with all or any part of the business of domestic and international
media, entertainment, electronics or communications, and reasonably related
extensions thereof or any business complimentary thereto, including but not
limited to the purchase, ownership, operation, leasing and selling of, and
generally dealing in or with, one or more communications satellites and the
transponders thereon, and communication uplink centers.
"Permitted Holder" means each of (i) General Motors Corporation or Hughes
Electronics Corporation, (ii) EchoStar Communications Corporation, (iii) Charles
W. Ergen, his spouse, children and other lineal descendants and any trust the
sole beneficiaries of which are one or more of such individuals and (iv) any
Subsidiary or any other Person, directly or indirectly, controlled by, and any
successor of, any of the foregoing.
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"Permitted Investments" means:
(i) (a) Cash Equivalents or (b) to the extent determined by PanAmSat
in good faith to be necessary for local currency working capital
requirements of a Foreign Restricted Subsidiary, other cash equivalents;
provided that in the case of clause (b), the Investment is made by the
Foreign Restricted Subsidiary having such operations;
(ii) Investments in prepaid expenses, negotiable instruments held for
collection and lease, utility and workers' compensation, performance and
other similar deposits and stock, obligations or securities received in
satisfaction of judgments, foreclosure of liens or settlement of debts
(whether pursuant to a plan of reorganization or similar arrangement or
otherwise);
(iii) the extension of credit to vendors, suppliers and customers in
the ordinary course of business, including items that are recorded as
accounts receivable, investments in sales-type leases, prepaid expenses,
insurance claim receivables or similar items on the balance sheet of
PanAmSat and its Restricted Subsidiaries and including extensions of credit
to Foreign Restricted Subsidiaries or other foreign Subsidiaries in the
ordinary course of business in connection with the sale of transponder
capacity or services to third party customers;
(iv) Investments existing or legally committed as of the Issue Date
(provided that Investments after the Issue Date pursuant to such legal
commitments do not exceed $75.0 million at any one time outstanding), and
any amendment, modification, extension or renewal thereof after the Issue
Date to the extent such amendment, modification, extension or renewal does
not require PanAmSat or any Restricted Subsidiary to make any additional
Investments in connection therewith;
(v) Investments in Hedging Agreements;
(vi) any Investment in consideration of Equity Interests (other than
Disqualified Equity Interests) of PanAmSat or any parent company of
PanAmSat (including, the Holding Company);
(vii) Investments in PanAmSat, in any Guarantor or any Person that, as
a result of or in connection with such Investment, becomes a Guarantor or
is merged with or into or consolidated with PanAmSat or a Guarantor;
(viii) Investments in respect of loans and advances to officers,
directors and employees of PanAmSat and the Restricted Subsidiaries (or
loans to the Holding Company the proceeds of which are used to make loans
or advances to officers, directors and employees of the Holding Company) in
the ordinary course of business;
(ix) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with "Repurchase at the Option of Holders -- Asset Sales" or in
connection with any other disposition of assets not constituting an Asset
Sale;
(x) (a) Investments in Foreign Restricted Subsidiaries; provided that
all such Investments in Foreign Restricted Subsidiaries do not exceed $20.0
million in an aggregate amount at any one time outstanding and (b)
Investments by Foreign Restricted Subsidiaries in other Foreign Restricted
Subsidiaries;
(xi) Investments in Subsidiaries or joint ventures formed for the
purpose of selling or leasing transponders or transponder capacity to third
party customers in the ordinary course of business of PanAmSat and its
Restricted Subsidiaries which Investments are in the form of transfers to
such Subsidiaries or joint ventures for fair market value of transponders
or transponder capacity sold or to be sold or leased or to be leased by
such Subsidiaries or joint ventures; provided that all such Investments in
Subsidiaries and joint ventures do not exceed 10% of Net Transponder
Capacity;
(xii) any Investment in a Permitted Business having an aggregate fair
market value, taken together with all other Investments made pursuant to
this clause (xii), not to exceed $50.0 million in an aggregate amount at
any one time outstanding (with the fair market value of each Investment
being measured at the time made and without giving effect to subsequent
changes in value);
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(xiii) any Investment by PanAmSat or a Restricted Subsidiary of
PanAmSat in a Securitization Entity or any Investment by a Securitization
Entity in any other Person in connection with a Qualified Securitization
Transaction, so long as any Investment in a Securitization Entity is in the
form of a Purchase Money Note, an Equity Interest or a capital
contribution; and
(xiv) other Investments made pursuant to this clause (xiv) at any
time, and from time to time, after the Issue Date, in addition to any
Permitted Investments described in clauses (i) through (xiii) above, in an
aggregate amount not to exceed $10.0 million at any one time outstanding.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust, unincorporated
organization, government or agency or political subdivision thereof or any other
entity.
"Preferred Equity Interest" means, in any Person, an Equity Interest of any
class or classes, however designated, which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over Equity
Interests of any other class in such Person.
"Productive Assets" means assets of a kind used or useful in a Permitted
Business.
"Public Equity Offering" means an underwritten public offering pursuant to
an effective registration statement by PanAmSat or any direct or indirect parent
holding company for cash of its Equity Interests (other than Disqualified Equity
Interests) or options, warrants or rights with respect to such Equity Interests.
"Purchase Money Indebtedness" means Indebtedness of any Person Incurred for
the purpose of financing or refinancing all or any part of the purchase price or
cost of acquisition (including obligations to pay insurance premiums and orbital
incentive payments), or the cost of construction, installation or improvement,
of any property or asset, whether such Indebtedness is owed to the seller or the
Person carrying out such construction, installation or improvement or to any
third party.
"Purchase Money Note" means a promissory note of a Securitization Entity to
PanAmSat or any Subsidiary of PanAmSat in connection with a Qualified
Securitization Transaction, which note must be repaid from cash available to the
Securitization Entity, other than amounts required to be established as reserves
pursuant to agreements, amounts paid to investors in respect of interest,
principal and other amounts owing to such investors and amounts paid in
connection with the purchase of newly generated receivables (including in
respect of sales-type leases).
"Qualified Securitization Transaction" means any transaction or series of
transactions that may be entered into by PanAmSat or any of its Subsidiaries
pursuant to which PanAmSat or any of its Subsidiaries may sell, convey or
otherwise transfer (or cause to be transferred) to (a) a Securitization Entity,
in the case of a transfer by or on behalf of PanAmSat or any of its
Subsidiaries, or (b) any other Person, in the case of a transfer initially to a
Subsidiary of PanAmSat that constitutes a Securitization Entity and then a
second transfer to such other Person, or may grant a security interest in, any
accounts receivable (including in respect of sales-type leases), whether now
existing or arising or acquired in the future, of PanAmSat or any of its
Subsidiaries, and any assets related thereto, including all collateral securing
such accounts receivable (including in respect of sales-type leases), all
contracts and contract rights and all guarantees or other obligations in respect
of such accounts receivable (including in respect of sales-type leases),
proceeds of such accounts receivable (including in respect of sales-type leases)
and other assets, including contract rights which are customarily transferred or
in respect of which security interests are customarily granted in connection
with asset securitization transactions involving accounts receivable (including
in respect of sales-type leases).
"Rating Agencies" mean Moody's and S&P.
"Refinance" means in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement
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for, such security or Indebtedness in whole or in part. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by PanAmSat or any
Restricted Subsidiary of Indebtedness Incurred in accordance with the covenant
described under "Covenants -- Limitation on Indebtedness" above (other than
Indebtedness Incurred pursuant to clause (c), (d), (e), (f), (g), (j), (k) or
(l) of the definition of the term "Permitted Indebtedness"), in each case that
does not:
(1) result in an increase in the aggregate principal amount of any
Indebtedness of such Person as of the date of such proposed Refinancing
(plus the amount of any premium required to be paid under the terms of the
instrument governing such Indebtedness and plus the amount of fees and
expenses incurred by PanAmSat in connection with such Refinancing); or
(2) create Indebtedness with (A) a Weighted Average Life to Maturity
that is less than the Weighted Average Life to Maturity of the Indebtedness
being Refinanced (or, if less, the Weighted Average Life to Maturity of the
Notes) or (B) a final maturity earlier than the final maturity of the
Indebtedness being Refinanced (or, if earlier, the final maturity of the
Notes); provided that (x) if such Indebtedness being Refinanced is
Indebtedness of PanAmSat, then such Refinancing Indebtedness shall be
Indebtedness solely of PanAmSat and (y) if such Indebtedness being
Refinanced is subordinate or junior to the Notes, then such Refinancing
Indebtedness shall be subordinate to the Notes at least to the same extent
and in the same manner as the Indebtedness being Refinanced.
PanAmSat may incur Refinancing Indebtedness not more than 60 days prior to
the application of the proceeds thereof to repay the Indebtedness to be
refinanced; provided that (i) upon the incurrence of such Refinancing
Indebtedness, PanAmSat shall provide written notice thereof to the Trustee,
specifically identifying the Indebtedness to be refinanced as Refinancing
Indebtedness and (ii) the proceeds of such Refinancing Indebtedness shall be
placed in escrow and governed by an escrow agreement and to the extent such
proceeds are not applied within such 60 day period to Refinance the Indebtedness
to which such Refinancing Indebtedness relates, such Indebtedness shall be
deemed to no longer constitute Refinancing Indebtedness under the Indenture.
"Restricted Payment" means:
(i) any dividend (whether made in cash, property or securities) on or
with respect to any Equity Interests in PanAmSat or of any Restricted
Subsidiary (other than any dividend made to PanAmSat or another Restricted
Subsidiary (and, in the case of any Restricted Subsidiary, pro rata
dividends made to the other holders of Equity Interests in such Restricted
Subsidiary) or any dividend payable in Equity Interests (other than
Disqualified Equity Interests) in PanAmSat);
(ii) any distribution (whether made in cash, property or securities)
on or with respect to any Equity Interests in PanAmSat or of any Restricted
Subsidiary (other than any distribution made to PanAmSat or another
Restricted Subsidiary (and, in the case of any Restricted Subsidiary, pro
rata distributions to the other holders of Equity Interests in such
Restricted Subsidiary) or any distribution payable in Equity Interests
(other than Disqualified Equity Interests) in PanAmSat);
(iii) any redemption, repurchase, retirement or other direct or
indirect acquisition of any Equity Interests in PanAmSat or any securities
exchangeable for or convertible into any such Equity Interests;
(iv) any redemption, repurchase, retirement or other direct or
indirect acquisition for value or other payment of principal, prior to any
scheduled final maturity scheduled repayment or scheduled sinking fund
payment, of any Subordinated Obligations; or
(v) any Investment (other than a Permitted Investment).
For the avoidance of doubt, any distribution described in clause (ii) above
and any redemption, repurchase, retirement or other direct or indirect
acquisition of any Equity Interests in PanAmSat
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described in clause (iii) above that is made in connection with a merger or
consolidation will not constitute a Restricted Payment to the extent that no
cash, property or securities of PanAmSat or any Restricted Subsidiary are used
to make such payment and provided that neither PanAmSat nor any Restricted
Subsidiary shall be or become directly or indirectly obligated to reimburse,
repay, refund or return such cash, property or securities or to make any other
payment in respect thereof to any Person.
"Restricted Subsidiary" means any Subsidiary of PanAmSat that has neither
been designated by the Board of Directors of PanAmSat by a Board Resolution
delivered to the Trustee as an Unrestricted Subsidiary pursuant to
"Covenants -- Designation of Unrestricted Subsidiaries" above nor constitutes a
Subsidiary of an Unrestricted Subsidiary. Any such designation may be revoked by
a Board Resolution delivered to the Trustee, subject to the provisions of such
covenant.
"S&P" means Standard & Poor's, a division of The McGraw-Hill Companies,
Inc.
"Sale and Lease-Back Transaction" means any arrangement with any Person
providing for the leasing by PanAmSat or any Restricted Subsidiary of any real
or tangible personal property, which property has been or is to be sold or
transferred by PanAmSat or such Restricted Subsidiary to such Person in
contemplation of such leasing.
"Securitization Entity" means (i) a Subsidiary of PanAmSat or (ii) a
Subsidiary of another Person in which PanAmSat or any Subsidiary of PanAmSat
makes an Investment and/or to which PanAmSat or any Subsidiary of PanAmSat
transfers accounts receivable (including in respect of sales-type leases) and
related assets, in each case (a) which engages in no activities other than in
connection with the financing of accounts receivable (including in respect of
sales-type leases) and related assets, (b) which is designated by the Board of
Directors of PanAmSat, as provided below, as a Securitization Entity, and (c):
(1) all of the Indebtedness of which is Non-Recourse Indebtedness
(other than Standard Securitization Undertakings),
(2) with which neither PanAmSat nor any Subsidiary of PanAmSat has any
material contract, agreement, arrangement or understanding other than on
terms no less favorable to PanAmSat or such Subsidiary than those that
might be obtained at the time from Persons that are not Affiliates of
PanAmSat, other than fees payable in the ordinary course of business in
connection with servicing receivables of such entity and the Investment
referred to in clause (ii) above, and
(3) to which neither PanAmSat nor any Subsidiary of PanAmSat has any
obligation to maintain or preserve such entity's financial condition or
cause such entity to achieve certain levels of operating results.
Any such designation by the Board of Directors of PanAmSat must be
evidenced to the Trustee by filing with the Trustee a certified copy of the
Board Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions.
"Senior Credit Facility" means the Credit Agreement among PanAmSat, the
Restricted Subsidiaries, the lenders party thereto in their capacities as
lenders thereunder and Credit Suisse First Boston, as administrative agent,
together with the related documents thereto (including any guarantee agreements
and security documents), in each case as such agreements may be amended
(including any amendment and restatement thereof), supplemented or otherwise
modified from time to time, including any agreement extending the maturity of,
Refinancing or otherwise restructuring (including increasing the amount of
available borrowings thereunder (provided that such increase in borrowings is
permitted under "Covenants -- Limitation on Indebtedness" above) or adding
Subsidiaries of PanAmSat as additional borrowers or guarantors thereunder) all
or any portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.
"Senior Officer" means the Chief Executive Officer or the Chief Financial
Officer of PanAmSat.
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"Significant Subsidiary" means any Restricted Subsidiary which at the time
of determination is a "Significant Subsidiary" as defined in Rule 1-02(w) of
Regulation S-X under the Securities Act.
"Specified Affiliate Payments" means:
(i) the direct or indirect repurchase, redemption or other acquisition
or retirement for value of any Equity Interests of PanAmSat or any of its
Restricted Subsidiaries or amounts paid to the Holding Company on account
of any such acquisition or retirement for value of any Equity Interests of
the Holding Company held by any future, present or former employee,
director, officer or consultant of the Holding Company or PanAmSat (or any
of its Restricted Subsidiaries) pursuant to any defined contribution plan,
stock incentive plan, non-full-time employee directors retainer, non-
employee directors fee plan, stock option agreement, management equity
subscription agreement, stock ownership plan, put agreement, stockholder
agreement or similar agreement that may be in effect from time to time;
provided that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed $5.0 million in any
calendar year (with unused amounts in any calendar year being carried over
to succeeding calendar years subject to a maximum amount of repurchases,
redemptions or other acquisitions or retirements pursuant to this clause
(i) (without giving effect to the immediately following proviso) of $10.0
million in any calendar year); provided, further, that such amount in any
calendar year may be increased by an amount not to exceed the net cash
proceeds received by PanAmSat (including by way of capital contribution)
since the Issue Date from the sale of Equity Interests of the Holding
Company or PanAmSat to employees, directors, officers or consultants of the
Holding Company or PanAmSat or its Subsidiaries that occurs in such
calendar year (other than to the extent that such proceeds have been used
to calculate the Cumulative Credit); and provided, further, that
cancellation of Indebtedness owing to PanAmSat from employees, directors,
officers or consultants of PanAmSat or any of its Subsidiaries in
connection with a repurchase of Equity Interests of PanAmSat will not be
deemed to constitute a Restricted Payment for purposes of the Indenture;
(ii) repurchases of Equity Interests deemed to occur upon exercise of
stock options or warrants as a result of the payment of all or a portion of
the exercise price of such options or warrants with Equity Interests;
(iii) the payment of dividends, other distributions or other amounts
by PanAmSat to Hughes Electronics or any other Person with which PanAmSat
is included in a consolidated tax return in amounts equal to the amount of
federal, state and local income taxes payable in respect of the income of
PanAmSat and its Subsidiaries (without regard to any tax credits, loss
carry-forwards or the like held by Hughes Electronics or such other
Person); and
(iv) dividends, other distributions or other amounts paid by PanAmSat
to the Holding Company (a) in amounts equal to amounts required for the
Holding Company to pay franchise taxes and other expenses required to
maintain its corporate existence and provide for other operating costs of
up to $3.0 million per fiscal year or (b) to pay, or reimburse the Holding
Company for, the costs, fees and expenses incident to a private placement
or public offering of any of the Equity Interests of the Holding Company,
so long as the net proceeds of such offering (if it is completed) are
contributed to, or otherwise used for the benefit of, PanAmSat.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by PanAmSat or any Subsidiary of PanAmSat
which are reasonably customary in an accounts receivable securitization
transaction.
"Subordinated Obligations" means with respect to PanAmSat or any Guarantor,
any Indebtedness of PanAmSat or such Guarantor which is expressly subordinated
in right of payment to the Notes or the guarantee of such Guarantor, as the case
may be.
"Subsidiary" means, with respect to any Person, a Person the majority of
whose voting stock, membership interests or other Voting Equity Interests is or
are owned by such Person or another Subsidiary of such Person. Unless otherwise
specified, "Subsidiary" refers to a Subsidiary of PanAmSat.
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"Unrestricted Subsidiary" means any Subsidiary of PanAmSat designated as
such pursuant to the provisions of "Covenants -- Designation of Unrestricted
Subsidiaries" above, and any Subsidiary of an Unrestricted Subsidiary. Any such
designation may be revoked by a Board Resolution delivered to the Trustee,
subject to the provisions of such covenant.
"Voting Equity Interests" means Equity Interests in any Person with voting
power under ordinary circumstances entitling the holders thereof to elect the
Board of Directors or other governing body of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment at final maturity, in respect thereof by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding aggregate
principal amount of such Indebtedness.
NO LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, OR SHAREHOLDERS
No past, present or future director, officer, employee, shareholder,
incorporator, agent or Affiliate of PanAmSat or any Subsidiary, as such, will
have any liability for any obligations of PanAmSat under the Notes, the
guarantees of the Notes or the Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation, or with respect to any
asset held by them that arises by, or represents an application of proceeds of
the Notes. Each holder of Notes and the guarantees by the Guarantors by
accepting a Note and such guarantees waives and releases all such liabilities or
claims. The waiver and release are part of the consideration for issuance of the
Notes and such guarantees. Such waiver may not be effective to waive liabilities
under the Federal securities laws and the SEC is of the view that such a waiver
is against public policy.
DEFEASANCE AND COVENANT DEFEASANCE; DISCHARGE
The Indenture provides that PanAmSat may elect either (a) to defease and be
discharged from any and all obligations with respect to the Notes (except for
the obligations to register the transfer or exchange of such Notes, to replace
temporary or mutilated, destroyed, lost or stolen Notes, to maintain an office
or agency in respect of the Notes and to hold moneys for payment in trust)
("legal defeasance") or (b) to be released from its obligations with respect to
the Notes under certain covenants (and certain Events of Default) contained in
the Indenture, including but not limited to those described above under
"Covenants" ("covenant defeasance"), upon the deposit with the Trustee (or other
qualifying trustee), in trust for such purpose, of money and/or U.S. government
obligations which through the payment of principal and interest in accordance
with their terms will provide money or government securities, in an amount
sufficient to pay the principal of, premium, if any, and interest and Additional
Interest, if any, on the Notes, on the scheduled due dates therefor. Such a
trust may only be established if, among other things, (x) no Default or Event of
Default has occurred and is continuing or would arise therefrom and (y) PanAmSat
has delivered to the Trustee an Opinion of Counsel (as specified in the
Indenture) to the effect that the holders of the Notes will recognize income,
gain or loss for Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such legal defeasance or
covenant defeasance had not occurred. Such opinion, in the case of legal
defeasance under clause (a) above, must refer to and be based upon a private
ruling concerning the Notes of the Internal Revenue Service or a ruling of
general effect published by the Internal Revenue Service.
Upon the request of PanAmSat, the Indenture will cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
the Notes, as expressly provided for in the Indenture) and the Trustee, at the
expense of PanAmSat, will execute proper instruments acknowledging
78
satisfaction and discharge of the Indenture, the guarantees by the Guarantors,
the Registration Rights Agreement and the Notes when:
(1) either:
(a) all the Notes theretofore authenticated and delivered (other
than destroyed, lost or stolen Notes that have been replaced or paid and
Notes that have been subject to defeasance as described above have been
delivered to the Trustee for cancellation); or
(b) all Notes not theretofore delivered to the Trustee for
cancellation:
(i) have become due and payable;
(ii) will become due and payable at 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 the expense, of PanAmSat, and PanAmSat has irrevocably deposited or
caused to be deposited with the Trustee funds in trust for the purpose
in an amount sufficient to pay and discharge the entire Indebtedness on
such Notes not theretofore delivered to the Trustee for cancellation,
for principal (and premium, if any, on) and interest on the Notes to the
date of such deposit (in case of Notes that have become due and payable)
or to the stated maturity or redemption date, as the case may be and any
Additional Interest thereon;
(2) PanAmSat has paid or caused to be paid all sums payable under the
Indenture by PanAmSat; and
(3) PanAmSat has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel (which Opinion of Counsel may be subject to customary
assumptions and exclusions), each stating that all conditions precedent
provided in the Indenture relating to the satisfaction and discharge of the
Indenture, the guarantee by the Guarantors, the Registration Rights
Agreement and the Notes have been complied with.
MODIFICATION OF INDENTURE
From time to time, PanAmSat and the Trustee may, without the consent of
holders of the Notes, enter into one or more supplemental indentures for certain
specified purposes, including:
(a) providing for a successor or successors to PanAmSat or any
Guarantor and the release of PanAmSat of its obligations under the Notes
and the Indenture as contemplated by the last sentence of the second
paragraph of "Covenants -- Merger or Sales of Assets";
(b) adding guarantees;
(c) releasing Guarantors when permitted by the Indenture;
(d) providing for security for the Notes;
(e) adding to the covenants of PanAmSat;
(f) surrendering any right or power conferred upon PanAmSat;
(g) providing for uncertificated Notes in addition to or in place of
certificated Notes;
(h) making any change that does not adversely affect the rights of any
holder of Notes; and
(i) complying with any requirement of the Trust Indenture Act or
curing certain ambiguities, defects or inconsistencies.
The Indenture contains provisions permitting PanAmSat and the Trustee, with
the consent of holders of at least a majority in aggregate principal amount of
the Notes at the time outstanding, to modify the
79
Indenture or any supplemental indenture or the rights of the holders of the
Notes, except that no such modification shall, without the consent of each
holder affected thereby:
(i) change or extend the fixed maturity of any Notes, reduce the rate
of or extend the time of payment of interest or Additional Interest, if
any, thereon, reduce the principal amount thereof or premium, if any,
thereon or change the currency in which the Notes are payable;
(ii) reduce the premium payable upon any redemption of Notes in
accordance with the optional redemption provisions of the Notes or change
the time before which no such redemption may be made;
(iii) waive a default in the payment of principal or interest or
Additional Interest, if any, on the Notes (except that holders of a
majority in aggregate principal amount of the Notes at the time outstanding
may (a) rescind an acceleration of the Notes that resulted from a
non-payment default and (b) waive the payment default that resulted from
such acceleration) or alter the rights of holders of the Notes to waive
defaults;
(iv) adversely affect the ranking of the Notes or the guarantees, if
any;
(v) reduce the percentage of Notes, the consent of the holders of
which is required for any such modification;
(vi) release any Guarantor from any of its obligations under its
guarantee or the Indenture otherwise than in accordance with the terms of
the Indenture;
(vii) impair the rights of holders of Notes to receive payment of
principal of or premium, if any, or interest or Additional Interest on the
Notes; or
(viii) make any change in the foregoing amendment and waiver
provisions.
Any existing Event of Default, other than a default in the payment of principal
or interest or Additional Interest, if any, on the Notes, or compliance with any
provision of the Notes or the Indenture, other than any provision related to the
payment of principal or interest or Additional Interest, if any, on the Notes,
may be waived with the consent of holders of at least a majority in aggregate
principal amount of the Notes at the time outstanding.
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the new notes will be issued in fully
registered form. Except as described below, the new notes will initially be
represented by one or more global notes in fully registered form, without
interest coupons (the "global notes"). The global notes will be deposited with,
or on behalf of, the DTC and registered in the name of Cede & Co., as nominee of
DTC, or will remain in the custody of the Trustee pursuant to the FAST Balance
Certificate Agreement between DTC and the Trustee.
CERTAIN BOOK ENTRY PROCEDURES FOR THE GLOBAL NOTES
The description of the operations and procedures of DTC set forth below are
provided solely as a matter of convenience. These operations and procedures are
solely within the control of DTC and are subject to change by them from time to
time. Neither we nor any of the initial purchasers takes any responsibility for
these operations or procedures, and investors are urged to contact DTC or its
participants directly to discuss these matters.
THE GLOBAL NOTES
We expect that pursuant to procedures established by DTC (1) upon the
issuance of the global notes, DTC or its custodian will credit, on its internal
system, the principal amount of securities of the individual beneficial
interests represented by such global notes to the respective accounts of persons
who have accounts with such depositary and (2) ownership of beneficial interests
in the global notes will be shown
80
on, and the transfer of such ownership will be effected only through, records
maintained by DTC or its nominee (with respect to interests of participants) and
the records of participants (with respect to interests of persons other than
participants). Such accounts initially will be designated by or on behalf of the
initial purchasers and ownership of beneficial interests in the global notes
will be limited to persons who have accounts with DTC ("participants") or
persons who hold interests through participants. Holders may hold their
interests in the global notes directly through DTC if they are participants in
such system, or indirectly through organizations which are participants in such
system.
So long as DTC, or its nominee, is the registered owner or holder of the
notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the notes represented by such global notes for all purposes
under the Indenture. No beneficial owner of an interest in the global notes will
be able to transfer that interest except in accordance with DTC's procedures, in
addition to those provided for under the Indenture with respect to the notes.
Payments on the global notes will be made to DTC or its nominee, as the
case may be, as the registered owner thereof. None of PanAmSat Corporation, the
Trustee or any paying agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the global notes or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest.
We expect that DTC or its nominee, upon receipt of any payment on the
global notes, will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the applicable global
notes as shown on the records of DTC or its nominee. We also expect that
payments by participants to owners of beneficial interests in the global notes
held through such participants will be governed by standing instructions and
customary practice, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payments
will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same day funds. If a holder requires physical delivery of a
certificated security for any reason, including to sell notes to persons in
states which require physical delivery of the securities, or to pledge such
securities, such holder must transfer its interest in a global note, in
accordance with the normal procedures of DTC and with the procedures set forth
in the Indenture.
DTC has advised us that it will take any action permitted to be taken by a
holder of notes (including the presentation of notes for exchange as described
below) only at the direction of one or more participants to whose account the
DTC interests in the global notes are credited and only in respect of such
portion of the aggregate principal amount of or beneficial interests in notes as
to which such participant or participants has or have given such direction.
However, if there is an event of default under the Indenture, DTC will exchange
the global notes for certificated securities, which it will distribute to its
participants.
DTC has advised us as follows: DTC is a limited-purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934. DTC was created to hold securities
for its participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants"). The rules applicable to DTC and its direct and indirect
participants are on file with the SEC.
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Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the global notes among participants of DTC, it is
under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither PanAmSat nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe to be reliable, but we take no
responsibility for the accuracy thereof.
CERTIFICATED SECURITIES
Certificated securities shall be issued in exchange for beneficial
interests in the global notes (1) if requested by a holder of such interests or
(2) if DTC is at any time unwilling or unable to continue as a depositary for
the global notes and a successor depositary is not appointed by us within 90
days.
IMPORTANT FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following is a general discussion of certain United States federal
income tax considerations relating to the purchase, ownership and disposition of
the notes by an initial beneficial owner of the notes, and the exchange by an
initial beneficial owner of the notes for new notes. This discussion is based
upon the Internal Revenue Code of 1986 as amended (the "Code"), existing and
proposed Treasury Regulations, and judicial decisions and administrative
interpretations thereunder, as of the date hereof, all of which are subject to
change, possibly with retroactive effect, or are subject to different
interpretations. We cannot assure you that the Internal Revenue Service (the
"IRS") will not challenge one or more of the tax considerations described
herein, and we have not obtained, nor do we intend to obtain, a ruling from the
IRS with respect to the United States federal tax considerations resulting from
acquiring, holding or disposing of the notes.
In this discussion, we do not purport to address all tax considerations
that may be important to a particular holder in light of the holder's
circumstances, or to certain categories of investors (such as certain financial
institutions, insurance companies, tax-exempt organizations, dealers in
securities, persons who hold the notes through partnerships or other
pass-through entities, U.S. expatriates, or persons who hold the notes as part
of a hedge, conversion transaction, straddle or other risk reduction
transaction) that may be subject to special rules. This discussion is limited to
initial holders who purchase the notes for cash at the original offering price
and who hold the notes as capital assets. This discussion also does not address
the tax considerations arising under the laws of any foreign, state or local
jurisdiction.
You should consult your own tax advisors as to the particular tax
considerations to you of the acquisition, ownership and disposition of the
notes, including the effect and applicability of state, local or foreign tax
laws.
As used herein, the term "U.S. holder" means a holder of notes that is any
of the following:
(1) a citizen or resident of the United States for United States
federal income tax purposes;
(2) a corporation, partnership or other entity created or organized in
or under the laws of the United States or of any political subdivision
thereof;
(3) an estate, the income of which is subject to United States federal
income taxation regardless of its source; or
(4) a trust that either is subject to the supervision of a court
within the United States and which has one or more United States persons
with authority to control all substantial decisions, or has a valid
election in effect under applicable U.S. Treasury regulations to be treated
as a U.S. person.
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As used herein, the term "non-U.S. holder" means any holder other than a
U.S. holder, as defined above.
U.S. HOLDERS
EXCHANGE PURSUANT TO EXERCISE OF REGISTRATION RIGHTS
Neither an exchange of notes nor the filing of a registration statement
with respect to the resale of the notes will be a taxable event to you, and you
will not recognize any taxable gain or loss or any interest income as a result
of such exchange or such filing. If an obligation to pay additional interest on
the notes as Additional Interest is triggered, we intend to take the position
that such payments should be treated for United States federal income tax
purposes as additional interest includible in income when such payments are
made, although there can be no assurance that the IRS will not propose a
different method of taxing the additional interest payments.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under the Code, you may be subject, under certain circumstances, to
information reporting and/or backup withholding with respect to cash payments in
respect of the notes at a rate of 30% for payments in 2002. The rate of backup
withholding is scheduled to be reduced over time to 28% in 2006. This
withholding applies only if you (i) fail to furnish your social security or
other taxpayer identification number ("TIN") within a reasonable time after a
request therefor, (ii) furnish an incorrect TIN, (iii) fail to report interest
or dividends properly, or (iv) fail, under certain circumstances, to provide a
certified statement, signed under penalty of perjury, that the TIN provided is
your correct number and that you are not subject to backup withholding. Any
amount withheld from a payment under the backup withholding rules is allowable
as a credit against your United States federal income tax liability (and may
entitle you to a refund), provided that the required information is furnished to
the IRS. Certain persons are exempt from backup withholding, including
corporations and certain financial institutions. You should consult your tax
advisor as to your qualification for exemption from withholding and the
procedure for obtaining such exemption.
NON-U.S. HOLDERS
UNITED STATES FEDERAL WITHHOLDING TAX
The 30% United States federal withholding tax imposed on individuals and
corporations will not apply (if otherwise potentially applicable to you) to any
payment of principal, interest or premium on the notes provided that:
- you do not actually (or constructively) own 10% or more of the total
combined voting power of all classes of our voting stock within the
meaning of the Code and the United States Treasury regulations;
- you are not a controlled foreign corporation that is related to us
through stock ownership;
- you are not a bank whose receipt of interest on the notes is pursuant to
a loan agreement entered into in the ordinary course of business; and
- you provide your name and address on an IRS Form W-8BEN (or successor
form), and certify, under penalty of perjury, that you are not a U.S.
person or
- a financial institution holding the notes on your behalf certifies, under
penalty of perjury, that it has received an IRS Form W-8BEN (or successor
form) from the beneficial owner and provides us with a copy.
If you cannot satisfy the requirements described above, payments of premium and
interest made to you will be subject to the 30% United States federal
withholding tax, unless you provide us with a properly executed (1) IRS Form
W-8BEN (or successor form) claiming an exemption from (or a reduction of)
83
withholding under the benefit of a tax treaty or (2) IRS Form W-8ECI (or
successor form) stating that interest paid on the note is not subject to
withholding tax because it is effectively connected with your conduct of a trade
or business in the United States. Special certification requirements apply to
partnerships.
The 30% United States federal withholding tax will generally not apply to
any gain that you realize on the sale, exchange, or other disposition of the
notes.
UNITED STATES FEDERAL ESTATE TAX
Your estate will not be subject to United States federal estate tax on
notes beneficially owned by you at the time of your death, provided that (1) you
do not own 10% or more of the total combined voting power of all classes of our
voting stock (within the meaning of the Code and the United States Treasury
Regulations) and (2) interest on that note would not have been, if received at
the time of your death, effectively connected with the conduct by you of a trade
or business in the United States.
UNITED STATES FEDERAL INCOME TAX
Any gain realized on the sale, exchange or redemption of notes generally
will not be subject to United States federal income tax unless:
- you are an individual who is present in the United States for 183 days or
more in the taxable year of that disposition, and certain other
conditions are met; or
- that gain is effectively connected with the conduct of a trade or
business in the United States.
If you (i) are engaged in a trade or business in the United States and
interest on the notes or gain realized on the sale, exchange or redemption of
notes is effectively connected with the conduct of that trade or business and
(ii) are not a partnership or other passthrough entity, then you will be subject
to United States federal income tax on the interest or gain on a net income
basis (although exempt from the 30% withholding tax) in the same manner as if
you were a U.S. person as defined under the Code. In addition, if you are a
corporation, you may be subject to a branch profits tax equal to 30% (or lower
applicable treaty rate) of your earnings and profits for the taxable year that
are effectively connected with the conduct by you of a trade or business in the
United States. For this purpose, interest and gain on notes will be included in
earnings and profits if so effectively connected. Partnerships and other
passthrough entities should consult their own tax advisors regarding the
taxation of their members on their income that is effectively connected with its
United State trade or business.
INFORMATION REPORTING AND BACKUP WITHHOLDING
We must report annually to the IRS and to each Non-U.S. holder on Form
1042-S the amount of interest paid on a note, regardless of whether withholding
was required, and any tax withheld with respect to the interest. Under the
provisions of an income tax treaty and other applicable agreements, copies of
these information returns may be made available to the tax authorities of the
country in which the Non-U.S. holder resides. In general, you will not be
subject to backup withholding with respect to payments that we make to you
provided that we do not have actual knowledge or reason to know that you are a
U.S. person and we have received from you the statement described above under
"-- Non-U.S. Holders -- United States Federal Withholding Tax."
In addition, you will not be subject to backup withholding and information
reporting with respect to the proceeds of the sale of a note within the United
States or conducted through certain U.S.-related financial intermediaries, if
the payor receives the statement described above and does not have actual
knowledge or reason to know that you are a U.S. person, as defined under the
Code, or you otherwise establish an exemption.
84
Any amounts withheld under the backup withholding rules will be allowed as
a refund or credit against your United States federal income tax liability
provided the required information is furnished to the IRS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account pursuant to
the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such new notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of new notes received in exchange for outstanding notes
where such outstanding notes were acquired as a result of market-making
activities or other trading activities. We have agreed that, for a period of 180
days after the expiration date of the exchange offer, we will make this
prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until , 2002, all
dealers effecting transactions in the new notes may be required to deliver a
prospectus.
We will not receive any proceeds from any sale of new notes by
broker-dealers. New notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the new notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such new notes. Any broker-dealer that
resells new notes that were received by it for its own account pursuant to the
exchange offer and any broker or dealer that participates in a distribution of
such new notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of new notes and any commission
or concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The letter of transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 180 days after the expiration date of the exchange offer,
we will promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the letter of transmittal. We have agreed to pay all expenses incident to the
exchange offer (including the expenses of one counsel for the holders of the
outstanding notes), other than commissions or concessions of any brokers or
dealers, and we will indemnify the holders of the outstanding notes (including
any broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the notes offered in this exchange
offer will be passed upon for us by Gibson, Dunn & Crutcher LLP, New York, New
York.
EXPERTS
The financial statements incorporated in this prospectus by reference from
the Company's Annual Report on Form 10-K for the year ended December 31, 2001
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
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ALL TENDERED OLD NOTES, EXECUTED LETTERS OF TRANSMITTAL AND OTHER RELATED
DOCUMENTS SHOULD BE DIRECTED TO THE EXCHANGE AGENT. QUESTIONS AND REQUESTS FOR
ADDITIONAL COPIES OF THE PROSPECTUS, LETTER OF TRANSMITTAL AND OTHER RELATED
DOCUMENTS SHOULD BE ADDRESSED TO THE EXCHANGE AGENT AS FOLLOWS:
By mail, hand delivery or overnight courier:
THE BANK OF NEW YORK
5 PENN PLAZA -- 13TH FLOOR
NEW YORK, NY 10001
Attention: Corporate Trust Administration -- Confidential
By facsimile transmission
(for eligible institutions only)
Fax: (212) 896-7299
Confirm by telephone:
Tel: (212) 896-7198
(ORIGINALS OF ALL DOCUMENTS SUBMITTED BY FACSIMILE SHOULD BE SENT PROMPTLY
BY HAND, OVERNIGHT COURIER, OR REGISTERED OR CERTIFIED MAIL)
NO BROKER DEALER OR OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFER
MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED
IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY NOR DOES IT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN
OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
UNTIL , 2002 (90 DAYS FROM THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT PARTICIPATING IN THIS
EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
------------------------------------------------------
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- ------------------------------------------------------
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-------------------------
PROSPECTUS
-------------------------
$800,000,000
[PANAMSAT LOGO]
OFFER TO EXCHANGE ALL OUTSTANDING
8 1/2% SENIOR NOTES DUE 2012
FOR
NEW 8 1/2% SENIOR NOTES DUE 2012
, 2002
------------------------------------------------------
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The registrant's Certificate of Incorporation (the "Certificate") provides
that, except to the extent prohibited by the Delaware General Corporation Law
(the "DGCL"), the registrant's directors shall not be liable to the registrant
or their respective stockholders for monetary damages for any breach of
fiduciary duty as directors of the registrant. Under the DGCL, the directors
have a fiduciary duty to the registrant, which is not eliminated by these
provisions of the Certificate and, in appropriate circumstances, equitable
remedies such as injunctive or other forms of nonmonetary relief will remain
available. In addition, each director will continue to be subject to liability
under the DGCL (1) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (2) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3) arising
under Section 174 of the DGCL or (4) for any transaction from which the director
derived an improper personal benefit. This provision does not affect the
directors' responsibilities under any other laws, such as the Federal securities
laws or state or Federal environmental laws.
Section 145 of the DGCL empowers a corporation to indemnify its directors
and officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers. The DGCL provides further
that the indemnification permitted thereunder shall not be deemed exclusive of
any other rights to which the directors and officers may be entitled under the
corporation's bylaws, any agreement, a vote of stockholders or otherwise. The
registrant's Certificate provides that the registrant shall indemnify and hold
harmless, to the fullest extent permitted by applicable law, as may 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 registrant or is or was serving at the request of the registrant
as a director, officer, employee or agent of another registrant 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.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the Certificate. The registrant is not aware of any
threatened litigation or proceeding that may result in a claim for such
indemnification.
The registrant has entered into indemnity agreements with each of its
directors.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibits
<Table>
1.1 Purchase Agreement, dated January 25, 2002, between PanAmSat
Corporation, as the Issuer, NET/36, Inc., PanAmSat
Communications Carrier Services, Inc., PanAmSat
Communications Japan, Inc., PanAmSat Communications
Services, Inc., PanAmSat International Holdings, Inc., USHI,
Inc., PanAmSat Marketing Corporation, PanAmSat International
Systems, Inc., PanAmSat Asia Carrier Services, Inc.,
PanAmSat India, Inc., PanAmSat India Marketing, L.L.C., PAS
International Employment, Inc., PanAmSat Licensee Corp.,
PanAmSat International Sales, Inc., PanAmSat International
Systems, L.L.C., PanAmSat International Systems Marketing,
L.L.C., Service and Equipment Corporation, Southern
Satellite Corp. and Southern Satellite Licensee Corporation,
as Guarantors, and Credit Suisse First Boston Corporation,
Deutsche Banc Alex. Brown Inc., ABN AMRO Incorporated and SG
Cowen Securities Corporation, as Purchasers is incorporated
herein by reference to Exhibit 1.1 to PanAmSat's Annual
Report on Form 10-K for the fiscal year ended December 31,
2001.
</Table>
II-1
<Table>
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.
2.6 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 is incorporated herein by reference to Exhibit 3.1 to
PanAmSat's Annual Report on Form 10-K for the fiscal year ended December 31, 1997.
3.2 Restated Bylaws of PanAmSat is incorporated herein by reference to PanAmSat's Quarterly Report on Form
10-Q for the period ended June 30, 2000.
4.1.1 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.
4.1.2 Letter Agreement, dated February 26, 1999, among PanAmSat, Hughes Communications, Inc. and the former
holders of Class A Common Stock of PanAmSat International is incorporated by reference to Exhibit 4.1.2
to PanAmSat's Annual Report on Form 10-K for the year ended December 31, 1998.
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 is incorporated herein by references to Exhibit
4.3.2 to PanAmSat's Annual Report on Form 10-K for the fiscal year ended December 31, 1997.
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 is incorporated herein by
references to Exhibit 4.3.3 to PanAmSat's Annual Report on Form 10-K for the fiscal year ended December
31, 1997.
</Table>
II-2
<Table>
4.3.4 Subordination Agreement, dated as of January 16, 1998, between Hughes Electronics and PanAmSat is
incorporated herein by reference to Exhibit 4.3.4 to PanAmSat's Quarterly Report on Form 10-Q for the
period ended September 30, 1998.
4.4 Indenture, dated as of January 16, 1998, between PanAmSat and The Chase Manhattan Bank, as Trustee, is
incorporated herein by reference to Exhibit 4.1 to PanAmSat's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997.
4.5 Agreement, dated as of May 1, 1998, by and among PanAmSat and the former holders of Class A Common Stock
of PanAmSat International is incorporated herein by reference to Exhibit 4.2.2 to PanAmSat's
Registration Statement on Form S-4 (Registration No. 333-56227).
4.7 Letter Agreement, dated July 22, 1998, between Hughes Electronics Corporation and PanAmSat is
incorporated herein by reference to Exhibit 4.3.4 to PanAmSat's Quarterly Report on Form 10-Q for the
period ended June 30, 1998.
4.8 Indenture, dated as of February 1, 2002, by and among PanAmSat Corporation as the Issuer , NET/36, Inc.,
PanAmSat Communications Carrier Services, Inc., PanAmSat Communications Japan, Inc., PanAmSat
Communications Services, Inc., PanAmSat International Holdings, Inc., Ushi, Inc., PanAmSat Marketing
Corporation, PanAmSat International Systems, Inc., PanAmSat Asia Carrier Services, Inc., PanAmSat India,
Inc., PanAmSat India Marketing, LLC, PAS International Employment, Inc., PanAmSat Licensee Corp.,
PanAmSat International Sales, Inc., PanAmSat International Systems, LLC, PanAmSat International Systems
Marketing, LLC, Service and Equipment Corporation, Southern Satellite Corp. and Southern Satellite
Licensee Corporation, as Guarantors, and the Bank of New York as Trustee governing the Notes is
incorporated herein by reference to Exhibit 4.8 to PanAmSat's Annual Report on Form 10-K for the fiscal
year ended December 31, 2001.
4.9 Registration Rights Agreement, dated as of January 25, 2002, by and among PanAmSat Corporation and
Credit Suisse First Boston Corporation, Deutsche Banc Alex. Brown Inc., ABN AMRO Incorporated and SG
Cowen Securities Corporation relating to the registration rights of the holders of the Securities is
incorporated by reference to Exhibit 4.9 to PanAmSat's Annual Report on Form 10-K for the fiscal year
ended December 31, 2001.
5.1+ Opinion of Gibson, Dunn & Crutcher LLP
10.31.1 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.
10.31.2 First Amendment, dated April 30, 1998, to Amended and Restated Collateral Trust Agreement by and among
PanAmSat, Hughes Communications, Inc., Satellite Company, LLC, Grupo Televisa, S.A. and IBJ Schroder
Bank & Trust Company constituting Exhibit 10.31.1 hereto, is incorporated herein by reference to Exhibit
3 to Amendment No. 1 to the Schedule 13D filed by Hughes Communications, Inc. on May 1, 1998.
10.33 PanAmSat Corporation Long-Term Stock Incentive Plan, Established in 1997, is incorporated herein by
reference to Exhibit 10.33 of PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30,
1997.
10.33.2 Amendment to the PanAmSat Corporation Long-Term Stock Incentive Plan, Established in 1997, is
incorporated herein by reference to Exhibit 10.33.2 to PanAmSat's Quarterly Report on Form 10-Q for the
period ended September 30, 1999.
10.33.3 Amendment to the PanAmSat Corporation Long-Term Stock Incentive Plan, Established in 1997, is
incorporated herein by reference to Exhibit 10.33.3 to PanAmSat's Quarterly Report on Form 10-Q for the
period ended June 30, 2000.
</Table>
II-3
<Table>
10.33.4 Amendment to the PanAmSat Corporation Long-Term Stock Incentive Plan, established in 1997, effective as
of December 7, 2000 is incorporated herein by reference to Exhibit 10.33.4 to PanAmSat's Annual Report
on Form 10-K for the year ended December 31, 2000. 10.33.5 Amendment No. 2 to the Amended and Restated
PanAmSat Corporation Long-Term Stock Incentive Plan, effective as of December 7, 2000 is incorporated
herein by reference to Exhibit 10.33.5 to PanAmSat's Quarterly Report on Form 10-Q for the period ended
March 31, 2001.
10.33.6 Second Amended and Restated PanAmSat Corporation Long-Term Stock Incentive Plan, established in 1997,
effective as of June 1, 2001 is incorporated herein by reference to Exhibit 10.33.6 to PanAmSat's
Quarterly Report on Form 10-Q for the period ended June 30, 2001.
10.34 PanAmSat Corporation Annual Incentive Plan, effective January 1, 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.
10.38 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 is incorporated herein by reference to Exhibit 10.38 to
PanAmSat's Annual Report on Form 10-K for the fiscal year ended December 31, 1997.(1)
10.38.1 Amendment No. 1 to Fixed Price Contract for PAS 1R and PAS 9 HS-702 Spacecraft, Related Services and
Documentation -- Contract No. 97-HCG-00l, dated as of November 6, 2000, between Hughes Space and
Communications Company, Inc. and PanAmSat Corporation is incorporated herein by reference to Exhibit
10.38.1 to PanAmSat's Annual Report on Form 10-K for the year ended December 31, 2000.(1)
10.38.2 Amendment No. 2 to Fixed Price Contract for PAS 1R and GIIIC HS-702 Spacecraft, Related Services and
Documentation -- Contract No. 97-HCG-001, dated as of November 6, 2000, between Hughes Space and
Communications Company, Inc. and PanAmSat Corporation. is incorporated herein by reference to Exhibit
10.38.2 to PanAmSat's Annual Report on Form 10-K for the year ended December 31, 2000.(1)
10.39 Transponder Sublease Agreement for Galaxy IIIR 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)
10.39.2 Amendment No. 2 dated December 15, 2000 to Transponder Sublease Agreement for Galaxy IIIR between
PanAmSat Corporation and California Broadcast Center, LLC is incorporated herein by reference to Exhibit
10.39.2 to PanAmSat's Annual Report on Form 10-K for the year ended December 31, 2000.(1)
10.40.1 Amended and Restated Galaxy VIII(i) Transponder Lease Agreement between PanAmSat Corporation and
California Broadcast Center, LLC, effective as of June 30, 2000 is incorporated herein by reference to
PanAmSat's Quarterly Report on Form 10-Q for the period ended September 30, 2000.(1)
10.40.2 Amendment No. 1, dated as of December 15, 2000, to Amended and Restated Galaxy VIII(i) Transponder Lease
Agreement between PanAmSat Corporation and California Broadcast Center, LLC is incorporated herein by
reference to Exhibit 10.40.2 to PanAmSat's Annual Report on Form 10-K for the year ended December 31,
2000.(1)
</Table>
II-4
<Table>
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. Identical agreements have been executed by PanAmSat in favor of Charles H.
Noski, Frederick A. Landman, Patrick J. Costello, Steven D. Dorfman, Dennis F. Hightower, James M. Hoak,
Joseph R. Wright, Jr., Michael T. Smith, Carl A. Brown, Kenneth N. Heintz, Robert A. Bednarek, James W.
Cuminale, David P. Berman, Roxanne S. Austin, Tig H. Krekel, Stephen R. Kahn, R. Douglas Kahn, Michael
J. Inglese, Thomas E. Eaton, Jr., James B. Frownfelter, Jack A. Shaw, Michael J. Gaines, Eddy W.
Hartenstein and Larry D. Hunter.
10.42 Credit Agreement, dated February 20, 1998, among PanAmSat, certain lenders and Citicorp USA, Inc., as
administrative agent is incorporated herein by reference to Exhibit 10.42 to PanAmSat's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997.
10.42.2 Amendment to the Revolving Credit Agreement between Citibank and PanAmSat Corporation, dated September
29, 1999, is incorporated herein by reference to Exhibit 10.42.2 to PanAmSat's Quarterly Report on Form
10-Q for the period ended September 30, 1999.
10.55 Fixed Price Contract for DOMSAT 1, DOMSAT 2, and Option Spacecraft, Related Services and
Documentation -- Contract No. 98-PAS-002, dated as of October 9, 1998, between PanAmSat and Hughes Space
and Communications Company is incorporated herein by reference to Exhibit 10.55 to PanAmSat's Annual
Report on Form 10-K for the year ended December 31, 1998.(2)
10.55.2 Amendment No. 1 to Fixed Price Contract for DOMSAT 1, DOMSAT 2 and Option Spacecraft, Related Services
and Documentation -- Contract No. 98-PAS-002, dated as of January 8, 1999, between PamAmSat Corporation
and Hughes Space and Communications Company, is incorporated herein by reference to Exhibit 10.55.2 to
PanAmSat's Annual Report on Form 10-K for the fiscal year ended December 31, 1998.(1)
10.55.3 Amendment No. 2 to Fixed Price Contract for Galaxy 10R, Galaxy 4R and Option Spacecraft, Related
Services and Documentation -- Contract No. 98-PAS-002, dated as of December 15, 2000, between PamAmSat
Corporation and Boeing Satellite Systems, Inc. is incorporated herein by reference to Exhibit 10.55.3 to
PanAmSat's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.(1)
10.56 PanAmSat Corporation Amended and Restated Restoration and Deferred Compensation Plan, is incorporated
herein by reference to Exhibit 10.56 to PanAmSat's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1999.
10.57 PanAmSat Corporation 1999 Non-Employee Directors Compensation Deferral Plan, is incorporated herein by
reference to Exhibit 10.57 to PanAmSat's Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1999.
10.57.1 Amendment to the PanAmSat Corporation 1999 Non-Employee Directors Compensation Deferral Plan, as amended
and restated as of April 25, 2000 is incorporated herein by reference to PanAmSat's Quarterly Report on
Form 10-Q for the period ended June 30, 2000.
10.59 Amended and Restated Loan and Security Agreement by and among PanAmSat Corporation, The Chase Manhattan
Bank, and certain lending institutions, dated as of July 2, 1999, is incorporated herein by reference to
Exhibit 10.59 to PanAmSat's Quarterly Report on Form 10-Q for the period ended September 30, 1999.
10.62 PanAmSat Corporation Annual Incentive Plan 2000, is incorporated herein by reference to Exhibit B to the
Company's Definitive Proxy Statement filed on April 28, 2000.
10.63 Galaxy IIIC Transponder Lease Agreement between PanAmSat Corporation and California Broadcast Center,
LLC, effective as of June 30, 2000 is incorporated herein by reference to PanAmSat's Quarterly Report on
Form 10-Q for the period ended September 30, 2000.(1)
10.63.1 Amendment No. 1 to Galaxy IIIC Transponder Lease Agreement between PanAmSat Corporation and California
Broadcast Center, LLC, effective as of December 15, 2000 is incorporated herein by reference to Exhibit
10.63.1 to PanAmSat's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.(1)
</Table>
II-5
<Table>
10.64 Galaxy VIII(i)R Transponder Lease Agreement between PanAmSat Corporation and California Broadcast
Center, LLC, effective as of December 15, 2000 is incorporated herein by reference to Exhibit 10.64 to
PanAmSat's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.(1)
10.65 Fixed Price Contract between PanAmSat Corporation and Boeing Satellite Systems, Inc. for Galaxy VIII(i)R
and Option Spacecraft, Related Services and Documentation -- Contract No. 00-PAS-001, dated as of
December 15, 2000 is incorporated herein by reference to Exhibit 10.65 to PanAmSat's Annual Report on
Form 10-K for the fiscal year ended December 31, 2000.(1)
10.66 Lease between 20 Westport Holdings L.L.C., Landlord and PanAmSat Corporation, dated September 29, 2000
is incorporated herein by reference to Exhibit 10.66 to PanAmSat's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000.(1)
10.68 PanAmSat Corporation Executive Change in Control Severance Agreement between PanAmSat Corporation and
James W. Cuminale, dated January 31, 2001 is incorporated herein by reference to Exhibit 10.68 to
PanAmSat's Quarterly Report on Form 10-Q for the period ended March 31, 2001.
10.69 PanAmSat Corporation Executive Change in Control Severance Agreement between PanAmSat Corporation and
Thomas E. Eaton, dated January 31, 2001 is incorporated herein by reference to Exhibit 10.69 to
PanAmSat's Quarterly Report on Form 10-Q for the period ended March 31, 2001.
10.70 PanAmSat Corporation Executive Change in Control Severance Agreement between PanAmSat Corporation and
Michael J. Inglese, dated January 31, 2001 is incorporated herein by reference to Exhibit 10.70 to
PanAmSat's Quarterly Report on Form 10-Q for the period ended March 31, 2001.
10.71 Employment Agreement between PanAmSat Corporation and Joseph R. Wright, Jr., dated as of August 20, 2001
is incorporated herein by reference to Exhibit 10.71 to PanAmSat's Quarterly Report on Form 10-Q for the
period ended September 30, 2001.
10.72 Employment Agreement between PanAmSat Corporation and James B. Frownfelter, dated as of November 8, 2001
is incorporated herein by reference to Exhibit 10.72 to PanAmSat's Annual Report on Form 10-K for the
period ended December 31, 2001.
10.73 Retention Bonus Agreement between PanAmSat Corporation and James W. Cuminale, dated as of April 2, 2001
is incorporated herein by reference to Exhibit 10.73 to PanAmSat's Annual Report on Form 10-K for the
period ended December 31, 2001.
10.74 Retention Bonus Agreement between PanAmSat Corporation and Thomas E. Eaton, Jr., dated as of April 2,
2001 is incorporated herein by reference to Exhibit 10.74 to PanAmSat's Annual Report on Form 10-K for
the period ended December 31, 2001.
10.75 Retention Bonus Agreement between PanAmSat Corporation and James B. Frownfelter, dated as of April 2,
2001 is incorporated herein by reference to Exhibit 10.75 to PanAmSat's Annual Report on Form 10-K for
the period ended December 31, 2001.
10.76 Retention Bonus Agreement between PanAmSat Corporation and Michael J. Inglese, dated as of April 2,
2001. is incorporated herein by reference to Exhibit 10.76 to PanAmSat's Annual Report on Form 10-K for
the period ended December 31, 2001.
10.77 Letter Agreement between PanAmSat Corporation and R. Douglas Kahn, dated as of August 14, 2001 is
incorporated herein by reference to Exhibit 10.77 to PanAmSat's Annual Report on Form 10-K for the
period ended December 31, 2001.
</Table>
II-6
<Table>
10.78 Credit Agreement, dated as of February 25, 2002, between PanAmSat Corporation, Credit Suisse First
Boston, Bankers Trust Company, Allied Irish Banks plc, the Governor and Company of the Bank of Scotland,
Fuji Bank, Ltd., General Electric Capital Corporation, Industrial Bank of Japan, Societe Generale, The
Bank of New York, Metropolitan Life Insurance Company and Credit Industrial et Commercial, as Lenders,
Credit Suisse First Boston, as Administrative Agent, Credit Suisse First Boston, as Sole Bookrunner and
Sole Lead Arranger, Credit Suisse First Boston and Deutsche Banc Alex Brown, Inc., as Joint Arrangers,
Deutsche Banc Alex Brown, Inc., as Syndication Agent, and Societe Generale, as Documentation Agent is
incorporated herein by reference to Exhibit 10.78 to PanAmSat's Annual Report on Form 10-K for the
period ended December 31, 2001.
10.79 Intercreditor and Collateral Trust Agreement, dated as of February 25, 2002, between PanAmSat
Corporation, NET/36, Inc., PanAmSat Asia Carrier Services, Inc., PanAmSat Capital Corporation, PanAmSat
Carrier Services, Inc., PanAmSat Communications Carrier Services, Inc., PanAmSat Communications Japan,
Inc., PanAmSat Communications Services, Inc., PanAmSat India, Inc., PanAmSat India Marketing, LLC,
PanAmSat International Holdings, Inc., PanAmSat International Sales, Inc., PanAmSat International
Systems, Inc., PanAmSat International Systems, LLC, PanAmSat International Systems Marketing, LLC,
PanAmSat Licensee Corp., PanAmSat Marketing Corporation, PAS International Employment, Inc., Service and
Equipment Corporation, Southern Satellite Corp., Southern Satellite Licensee Corporation, and Ushi,
Inc., as Subsidiary Guarantors, Credit Suisse First Boston, as Administrative Agent, and The Bank of New
York, as collateral trustee is incorporated herein by reference to Exhibit 10.79 to PanAmSat's Annual
Report on Form 10-K for the period ended December 31, 2001.
10.80 Lender Security Agreement, dated as of February 25, 2002, between PanAmSat Corporation, NET/36, Inc.,
PanAmSat Asia Carrier Services, Inc., PanAmSat Capital Corporation, PanAmSat Carrier Services, Inc.,
PanAmSat Communications Carrier Services, Inc., PanAmSat Communications Japan, Inc., PanAmSat
Communications Services, Inc., PanAmSat India, Inc., PanAmSat India Marketing, LLC, PanAmSat
International Holdings, Inc., PanAmSat International Sales, Inc., PanAmSat International Systems, Inc.,
PanAmSat International Systems, LLC, PanAmSat International Systems Marketing, LLC, PanAmSat Licensee
Corp., PanAmSat Marketing Corporation, PAS International Employment, Inc., Service and Equipment
Corporation, Southern Satellite Corp., Southern Satellite Licensee Corporation, and Ushi, Inc., as
Subsidiary Guarantors, and Credit Suisse First Boston, as Administrative Agent is incorporated herein by
reference to Exhibit 10.80 to PanAmSat's Annual Report on Form 10-K for the period ended December 31,
2001.
10.81 Shared Security Agreement, dated as of February 25, 2002, between PanAmSat Corporation, NET/36, Inc.,
PanAmSat Asia Carrier Services, Inc., PanAmSat Capital Corporation, PanAmSat Carrier Services, Inc.,
PanAmSat Communications Carrier Services, Inc., PanAmSat Communications Japan, Inc., PanAmSat
Communications Services, Inc., PanAmSat India, Inc., PanAmSat India Marketing, LLC, PanAmSat
International Holdings, Inc., PanAmSat International Sales, Inc., PanAmSat International Systems, Inc.,
PanAmSat International Systems, LLC, PanAmSat International Systems Marketing, LLC, PanAmSat Licensee
Corp., PanAmSat Marketing Corporation, PAS International Employment, Inc., Service and Equipment
Corporation, Southern Satellite Corp., Southern Satellite Licensee Corporation, and Ushi, Inc., as
Subsidiary Guarantors, and The Bank of New York, as Collateral Trustee is incorporated herein by
reference to Exhibit 10.81 to PanAmSat's Annual Report on Form 10-K for the period ended December 31,
2001.
12.1* Computation of Ratio of Earnings to Fixed Charges.
21.1 List of subsidiaries of PanAmSat Corporation is incorporated by reference to Exhibit 21.1 to PanAmSat's
Annual Report on Form 10-K for the period ended December 31, 2001.
23.1* Consent of Deloitte & Touche LLP.
24.1* Power of Attorney (see signature page of this Registration Statement).
</Table>
II-7
<Table>
25.1+ Form of T-1 Statement of Eligibility of The Bank of New York, to act as Trustee under the Indenture.
99.1* Form of Letter of Transmittal.
99.2* Form of Notice of Guaranteed Delivery.
99.3+ Exchange Agent Agreement.
99.4* Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
99.5* Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
</Table>
- ---------------
* Filed herewith. All other exhibits have been previously filed unless
otherwise indicated.
+ To be filed by amendment.
(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 an application for
confidential treatment filed with the Securities and Exchange Commission
under separate cover on the date hereof.
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 Form S-4, 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.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of the receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
give, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 20 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
Registrants has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Town of Wilton,
State of Connecticut, on the 26th day of April, 2002.
PANAMSAT CORPORATION
By: /s/ JAMES W. CUMINALE
------------------------------------
James W. Cuminale
Executive Vice President, General
Counsel
and Secretary
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints James W.
Cuminale and Michael J. Inglese, and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his name, place and stead, in any and all capacities, to
sign any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ JACK A. SHAW Chairman of the Board of Directors April 26, 2002
- ------------------------------------------------
Jack A. Shaw
/s/ JOSEPH R. WRIGHT President and Chief Executive April 26, 2002
- ------------------------------------------------ Officer (principal executive
Joseph R. Wright officer)
and Director
/s/ MICHAEL J. INGLESE Executive Vice President and Chief April 26, 2002
- ------------------------------------------------ Financial Officer (principal
Michael J. Inglese financial officer and principal
accounting officer)
/s/ ROXANNE S. AUSTIN Director April 26, 2002
- ------------------------------------------------
Roxanne S. Austin
/s/ PATRICK J. COSTELLO Director April 26, 2002
- ------------------------------------------------
Patrick J. Costello
/s/ MICHAEL J. GAINES Director April 26, 2002
- ------------------------------------------------
Michael J. Gaines
</Table>
II-9
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ EDDY W. HARTENSTEIN Director April 26, 2002
- ------------------------------------------------
Eddy W. Hartenstein
/s/ DENNIS F. HIGHTOWER Director April 26, 2002
- ------------------------------------------------
Dennis F. Hightower
/s/ JAMES M. HOAK Director April 26, 2002
- ------------------------------------------------
James M. Hoak
/s/ LARRY D. HUNTER Director April 26, 2002
- ------------------------------------------------
Larry D. Hunter
/s/ STEPHEN R. KAHN Director April 26, 2002
- ------------------------------------------------
Stephen R. Kahn
</Table>
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
Guarantors listed on Schedule A hereto has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Wilton, State of Connecticut, on the 26th day of
April, 2002.
On behalf of each Guarantor listed on
Schedule A hereto.
By: /s/ JAMES W. CUMINALE
------------------------------------
Name: James W. Cuminale
Title: Executive Vice
President -- Corporate
Development, General Counsel and
Corporate Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ JOSEPH R. WRIGHT President and Chief Executive Officer April 26, 2002
- ------------------------------------------------ (principal executive officer)
Joseph R. Wright and Director
/s/ MICHAEL J. INGLESE Executive Vice President, Chief April 26, 2002
- ------------------------------------------------ Financial Officer (principal financial
Michael J. Inglese officer and principal accounting
officer) and Director
/s/ JAMES W. CUMINALE Executive Vice President -- Corporate April 26, 2002
- ------------------------------------------------ Development, General Counsel, Corporate
James W. Cuminale Secretary and Director
</Table>
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
Guarantors listed on Schedule B hereto has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Wilton, State of Connecticut, on the 26th day of
April, 2002.
On behalf of each Guarantor listed on
Schedule B hereto.
By: /s/ JAMES W. CUMINALE
------------------------------------
Name: James W. Cuminale
Title: Sole Manager
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ JAMES W. CUMINALE Sole Manager (principal executive April 26, 2002
- ------------------------------------------------ officer, principal financial
James W. Cuminale officer and principal accounting
officer)
</Table>
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Net/36, Inc.
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Town of Wilton, State of
Connecticut, on the 26th day of April, 2002.
NET/36, INC.
By: /s/ JAMES W. CUMINALE
------------------------------------
Name: James W. Cuminale
Title: Executive Vice
President -- Corporate Development
and Corporate Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ JOSEPH R. WRIGHT President and Chief Executive April 26, 2002
- ------------------------------------------------ Officer (principal executive
Joseph R. Wright officer)
and Director
/s/ MICHAEL J. INGLESE Executive Vice President, Chief April 26, 2002
- ------------------------------------------------ Financial Officer (principal
Michael J. Inglese financial officer and principal
accounting officer) and Director
/s/ JAMES W. CUMINALE Executive Vice April 26, 2002
- ------------------------------------------------ President -- Corporate Development,
James W. Cuminale Corporate Secretary
and Director
</Table>
II-13
SCHEDULE A
PANAMSAT COMMUNICATIONS CARRIER SERVICES, INC.
PANAMSAT COMMUNICATIONS JAPAN, INC.
PANAMSAT COMMUNICATIONS SERVICES, INC.
PANAMSAT INTERNATIONAL HOLDINGS, INC.
USHI, INC.
PANAMSAT MARKETING CORPORATION
PANAMSAT INTERNATIONAL SYSTEMS, INC.
PANAMSAT ASIA CARRIER SERVICES, INC.
PANAMSAT CAPITAL CORPORATION
PANAMSAT CARRIER SERVICES, INC.
PANAMSAT INDIA, INC.
PAS INTERNATIONAL EMPLOYMENT, INC.
PANAMSAT LICENSEE CORP.
PANAMSAT INTERNATIONAL SALES, INC.
SERVICE AND EQUIPMENT CORPORATION
SOUTHERN SATELLITE CORP.
SOUTHERN SATELLITE LICENSEE CORPORATION
II-14
SCHEDULE B
PANAMSAT INDIA MARKETING, L.L.C.
PANAMSAT INTERNATIONAL SYSTEMS, L.L.C.
PANAMSAT INTERNATIONAL SYSTEMS MARKETING, L.L.C.
II-15
EXHIBIT INDEX
Exhibits
<Table>
12.1 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Deloitte & Touche LLP.
24.1 Powers of Attorney (see signature page of this Registration
Statement).
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.4 Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
99.5 Letter to Clients for Use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
</Table>