FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT ("this Amendment"), executed
as of March 10, 1998 and effective as of January 1, 1998, is by and among
PEGASUS MEDIA & COMMUNICATIONS, INC., a Delaware corporation (the "Borrower");
the undersigned financial institutions, in their capacities as "Lenders" under
the Credit Agreement referred to below, and being the "Required Lenders", as
defined in the Credit Agreement, for purposes of this Amendment (the "Required
Lenders"); and BANKERS TRUST COMPANY, as agent for the Lenders (in such
capacity, together with its successors and assigns in such capacity, the
"Agent").
RECITALS
A. The Borrower, the Lenders and the Agent are parties to a Credit
Agreement dated as of December 10, 1997 (the "Credit Agreement"). Capitalized
terms used herein without definition have the meanings assigned to them in the
Credit Agreement.
B. The Borrower has requested the amendment of the Credit Agreement to
(1) extend until April 16, 1998 the date as of which the Borrower is required to
perfect the security interests in property covered by the Uniform Commercial
Code in effect in Puerto Rico, in order to address certain delays in the
production of necessary documentation by the applicable governmental authorities
in Puerto Rico, (2) permit the issuance of Seller Letters of Credit with expiry
dates of up to four (4) years from the date of issuance; and (3) permit PSTH to
form a special purpose wholly owned subsidiary to finance Subscriber Acquisition
Costs incurred by or on behalf of the DBS Subsidiaries, in exchange for certain
commissions, which subsidiary would not be required to provide a guaranty or any
other credit support for the Obligations and would not be included as one of the
"Subsidiaries" for purposes of calculating the Applicable Margin or the
Borrower's compliance with certain financial covenants.
C. Subject to certain terms and conditions, the Agent and the Required
Lenders are willing to agree to such requests, concurrently with the execution
of this Amendment.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
I. Amendments to Credit Agreement.
Subject to the satisfaction of each of the conditions set forth in
Section III, the Agent and the Required Lenders hereby agree with the Borrower
as follows:
A. Security. Paragraph 6 of Schedule 2.01(a) to the Credit Agreement is
hereby amended by deleting the reference to the date "January 31, 1998" and
substituting therefor the date "April 16, 1998", thereby extending by 75 days
the time within which the Borrower is required to perfect the security interests
in property covered by the Uniform Commercial Code, as in effect in Puerto Rico.
B. Expiry of Certain Seller Letters of Credit.
Section 1.02(a)(v) of the Credit Agreement is amended by deleting the
first sentence thereof and substituting therefor the following:
"Each Letter of Credit shall have an expiry date occurring not later
than the earlier of the date which is one year from the date of issuance (or,
solely with respect to Seller Letters of Credit issued after February __, 1998,
four (4) years from the date of issuance) and the date which is ten (10)
Business Days prior to the Expiration Date."
C. Formation of Special Purpose Subsidiary and Related Matters.
1. Formation of Special Purpose Subsidiary.
Section 7.04(a) of the Credit Agreement is amended to read in its
entirety as follows:
"(a) Form any subsidiary (other than the Special Purpose
Subsidiary) or otherwise change the corporate structure or organization of the
Borrower or the Subsidiaries from that set forth in Schedule 4.23, except in
connection with, and in accordance with the conditions to, any Permitted
Acquisition;
2. Limits on Activities of Special Purpose Subsidiary.
Section 7.09 of the Credit Agreement is amended by changing its title
to "Change in Business; Limits on Activities of Special Purpose Subsidiary", and
by adding at the end thereof the following:
"The Special Purpose Subsidiary shall not engage, directly or
indirectly, in any business other than that of paying, or reimbursing the DBS
Subsidiaries for, Subscriber Acquisition Costs incurred by the DBS Subsidiaries
(such payments or reimbursements being referred to collectively herein as the
"SAC Payments") in exchange for commissions payable by the DBS Subsidiaries not
exceeding $4.17 per month for each affected subscriber to DBS Services
(collectively, the "SAC Commissions"), and shall
(a) hold no assets other than such funds,
(b) not incur, create, assume, become or be liable, directly,
indirectly or contingently, in any manner with respect to, any Indebtedness or
liability (other than liabilities to make SAC Payments accrued in the ordinary
course),
(c) not create, incur, assume, suffer or permit to exist any mortgage,
pledge, lien, charge or other encumbrance of any nature whatsoever on any of its
assets, now or hereafter owned,
(d) not make any payments or engage in any other transactions, other
than SAC Payments and distributions to PSTH,
(e) not maintain cash on hand and other liquid investments exceeding
$3,500,000 in the aggregate at any time, and
(f) distribute to PSTH (i) all SAC Commissions on a regular basis (and,
in any event, no less frequently than every second month) and (ii) any cash or
other liquid investments exceeding $3,500,000 ("Excess SAC Cash") no later than
thirty (30) Business Days after such excess shall arise.
3. Borrower's Investments in the Special Purpose Subsidiary.
The definition of "Permitted Investments" set forth in Article XI of
the Credit Credit Agreement is amended by deleting the word "and" where it
appears after clause (k) thereof, adding a semi-colon after clause (l) thereof
and inserting directly thereafter and immediately prior to the period at the end
of such definition the following:
"(m) equity investments by PSTH in the Special Purpose Subsidiary made
solely for the purpose of funding SAC Payments and subject to the Special
Purpose Subsidiary's obligations to distribute SAC Payments and Excess SAC Cash
to PSTH under Section 7.09, and (n) equity investments by the Borrower in PSTH
made solely for the purpose of funding the equity investments referred to in
clause (m) above"
4. Definition of Special Purpose Subsidiary and Related Terms.
Article XI of the Credit Agreement is further amended by adding
thereto, in appropriate alphabetical location, the following new definitions:
Excess SAC Cash. See Section 7.09.
SAC Commissions. See Section 7.09.
SAC Payments. See Section 7.09.
Special Purpose Subsidiary Pegasus Satellite Development Corporation, a
Delaware corporation wholly owned by PSTH and formed for the sole
purpose of reimbursing the DBS Subsidiaries for Subscriber Acquisition
Costs.
5. No Credit Support Provided by Special Purpose Subsidiary.
Section 2.01(a) is amended to add " (other than the Special Purpose
Subsidiary)" after all references to "the Subsidiaries" which appear in
subparagraphs (i), (ii), (iii) and (iv) thereof, thereby providing that the
Borrower shall not be required to provide a security interest in the assets of
the Special Purpose Subsidiary as collateral for the Obligations, but shall
remain obligated to cause PSTH to pledge all of the issued and outstanding
shares of capital stock of the Special Purpose Subsidiary to secure the
Obligations.
6. Special Purpose Subsidiary Excluded for Certain Financial Covenants
and for Pricing Calculations.
In order to assure that the operations of the Special Purpose
Subsidiary are not considered in the calculation of financial covenants under
Sections 5.01 through 5.04 or in the calculation of the Applicable Margin:
(a) Article V of the Credit Agreement is amended by adding " (other
than the Special Purpose Subsidiary, except with respect to Section 5.05)" after
the reference to "its Subsidiaries" which appears in the preamble thereto; and
(b) Article XI of the Credit Agreement is amended by adding "(other
than the Special Purpose Subsidiary)" after (i) all references to "Subsidiaries"
appearing in the definitions of Adjusted EBITDA, Annualized EBITDA, Location
Cash Flow, Total Funded Debt and Transaction Costs set forth therein and (ii)
all references to "Companies" appearing in the definitions of Current Assets,
Current Liabilities, Fixed Charges, Interest Expense, Maintenance Capital
Expenditures, Management Fees and Net Income set forth therein.
7. Combined Financial Reporting for 1997 Audit.
Section 6.05(a) of the Credit Agreement is amended to add the following
at the end thereof and immediately prior to the semi-colon:
", and provided, further, that the annual audited financial statements
of the Borrower and its Subsidiaries for the fiscal year ended December 31, 1997
may be provided on a combined and combining basis for all purposes of the
forgoing, including without limitation the opinion of the Accountants, in order
to include the results of operations of Pegasus Development Corporation, a
wholly owned subsidiary of the Parent responsible for funding Subscriber
Acquisition Costs prior to January 1, 1998"
D. Correction of Leverage Ratio Definition.
Article XI of the Credit Agreement is further amended by deleting the
definition of "PCC Consolidated Leverage Ratio" set forth therein and replacing
it with the following:
PCC Consolidated Leverage Ratio. The meaning given to the term
"Indebtedness to Adjusted Operating Cash Flow Ratio" (as applied to
indebtedness classified as having been incurred on the basis of such
ratio) in the PCC Indenture, as in effect on the date hereof, without
giving effect to any amendment thereto after the date hereof (unless
the Required Lenders agree in writing, in their sole discretion, that
any such amendment shall be given effect for purposes of this
Agreement).
E. No Further Amendments.
Except for such amendments, the text of the Credit Agreement and all
other Loan Documents shall remain unchanged and in full force and effect and is
hereby ratified and confirmed by the Borrower.
II. Representations, Warranties and Covenants of the Borrower.
The Borrower hereby represents and warrants to, and covenants and
agrees with, the Lenders that:
A. The execution and delivery of this Amendment have been duly
authorized by all requisite corporate action on the part of the Borrower.
B. After giving effect to this Amendment, all warranties and
representations set forth in the Credit Agreement and the other Loan Documents
are true and correct in all material respects (except to the extent they
expressly relate to an earlier specified date or are affected by transactions or
events occurring after the Closing Date and permitted or not prohibited under
the Credit Agreement).
C. As of the date hereof and since the Closing Date, no event or
circumstance has occurred which has had or could have a Material Adverse Effect.
D. After giving effect to this Amendment, no Default has occurred and
is continuing.
E. None of the Borrower or any of its Affiliates is required to obtain
any consent, approval or authorization from, or to file any declaration or
statement with, any governmental instrumentality or other agency or any other
person or entity (including without limitation the Parent and the Subsidiaries)
in connection with or as a condition to the execution, delivery or performance
of this Amendment.
F. This Amendment constitutes the legal, valid and binding obligation
of the Borrower, enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the rights and remedies of creditors generally or the application of principles
of equity, whether in any action at law or proceeding in equity, and subject to
the availability of the remedy of specific performance or of any other equitable
remedy or relief to enforce any right thereunder.
III. General Conditions.
The willingness of the Agent and the Required Lenders to agree to the
foregoing is subject to the condition that the Borrower shall have executed and
delivered to the Agent (or shall have caused to be duly executed and delivered
to the Agent by the appropriate persons) the following:
A. This Amendment.
B. True and complete copies of any required stockholders' and/or
directors' consents and/or resolutions, authorizing the execution and delivery
of this Amendment, certified by the Secretary of the appropriate company.
C. Any and all such documents (including additional Security
Documents), certificates and opinions as the Agent shall reasonably request with
respect to this Amendment and the formation of the Special Purpose Subsidiary
and as otherwise required to
ensure or evidence compliance by the Borrower with the requirements of Sections
2.01(a)(v) and 2.01(b)(ii) of the Credit Agreement in connection therewith.
IV. Miscellaneous.
A. As provided in the Loan Agreement, the Borrower agrees to reimburse
the Agent upon demand for all reasonable fees and disbursements of counsel to
the Agent incurred in connection with the preparation of this Amendment.
B. This Amendment shall be governed by and construed in accordance with
the laws of the State of New York.
C. This Amendment may be executed by the parties hereto in several
counterparts hereof and by the different parties hereto on separate counterparts
hereof, all of which counterparts shall together constitute one and the same
agreement. Delivery of an executed signature page of this Amendment by facsimile
transmission shall be effective as an in hand delivery of an original executed
counterpart hereof.
*The Next Page is the Signature Page*
IN WITNESS WHEREOF, the Agent, the Borrower and the undersigned
Required Lenders have caused this Amendment to be duly executed as a sealed
instrument by their duly authorized representatives, all as of the day and year
first above written.
BORROWER:
PEGASUS MEDIA & COMMUNICATIONS, INC.
By: /s/ Xxxxxx X. Xxxxxxxxxx
-------------------------------------------------
Xxxxxx X. Xxxxxxxxxx, Senior Vice President
AGENT:
BANKERS TRUST COMPANY
By: /s/ Xxxxxxx X. Chefrin
-------------------------------------------------
Name: Xxxxxxx X. Chefrin
Title: Vice President
LENDERS:
BANKERS TRUST COMPANY
By: /s/ Xxxxxxx X. Chefrin
-------------------------------------------------
Name: Xxxxxxx X. Chefrin
Title: Vice President
BANKBOSTON, N.A.
By: /s/ Xxxxx X. Xxxx
--------------------------------------
Name: Xxxxx X. Xxxx
Title: Director
BANQUE PARIBAS
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Director
BANK OF MONTREAL, CHICAGO BRANCH
By: /s/ X. Xxxxxxxxxxx
-------------------------------------
Name: X. Xxxxxxxxxxx
Title: Director
FLEET NATIONAL BANK
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Assistant Vice President
IBJ XXXXXXXX BANK & TRUST COMPANY
By: /s/ Xxxx X. Xxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxx
Title: Managing Director
MEESPIERSON CAPITAL CORP.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Managing Director
By: /s/ Xxxx X. Xxxxxxx
---------------------------------------------------
Name: Xxxx X. Xxxxxxx
Title: President and Chief Operating Officer
STATE STREET BANK AND TRUST COMPANY
By: /s/ Xxxxxxxx X. Xxxx, Xx.
------------------------------------
Name: Xxxxxxxx X. Xxxx, Xx.
Title: Vice President
COMPAGNIE FINANCIERE DE CIC
ET DE L'UNION EUROPEENNE
By:/s/ Xxxxxx Xxxxxx
------------------------------------
Name: Xxxxxx Xxxxxx
Title: Vice President
By:/s/ Xxxxx X'Xxxxx
------------------------------------
Name: Xxxxx X'Xxxxx
Title: Vice President
UNION BANK OF CALIFORNIA
By: /s/ Xxxxxxxxx X. Xxxx
------------------------------------
Name: Xxxxxxxxx X. Xxxx
Title: Vice President
