-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JpL3i1XB5n2nE0XjkU3dTrrFuIVmp9u1DO9o9Xj58/bKuB9DF7hR/9jVpo9EJV3f tHpqbKSkFXdp4FaTWBUKFw== 0000950130-98-001559.txt : 19980331 0000950130-98-001559.hdr.sgml : 19980331 ACCESSION NUMBER: 0000950130-98-001559 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980330 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PANAMSAT CORP /NEW/ CENTRAL INDEX KEY: 0001037388 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATION SERVICES, NEC [4899] IRS NUMBER: 954607698 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-22531 FILM NUMBER: 98578011 BUSINESS ADDRESS: STREET 1: P O BOX PICKWICK PLAZA CITY: GREENWICH STATE: CT ZIP: 06830 BUSINESS PHONE: 2036226664 MAIL ADDRESS: STREET 1: ONE PICKWICK PLAZA STREET 2: C/O PAN AM SAT CITY: GREENWICH STATE: CT ZIP: 06830 FORMER COMPANY: FORMER CONFORMED NAME: MAGELLAN INTERNATIONAL INC DATE OF NAME CHANGE: 19970408 10-K 1 FORM 10-K - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 10-K ANNUAL REPORT ON FORM 10-K PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 COMMISSION FILE NO. 0-22531 ---------------- PANAMSAT CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ---------------- DELAWARE 95-4607698 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) ONE PICKWICK PLAZA, GREENWICH, CONNECTICUT 06830 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) ---------------- REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 622-6664 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, par value $.01 per share ---------------- Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.[_] As of March 24, 1998, the registrant had outstanding 149,149,008 shares of Common Stock. As of such date, the aggregate market value of voting stock held by non-affiliates of the registrant was approximately $2,352,000,000. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- DOCUMENTS INCORPORATED BY REFERENCE Certain information contained in the Proxy Statement for the Annual Meeting of Stockholders of Registrant to be held on May 4, 1998 (to be filed not later than 120 days after the end of the Company's fiscal year) is incorporated by reference into Part III hereof. CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This Annual Report on Form 10-K contains certain forward-looking information under the captions "Item 1. Business" and "Item 7. Management's Discussion and Analysis of Financial Conditions and Results of Operations." The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain forward-looking statements so long as such information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the information. When used in this Annual Report on Form 10-K, the words "estimate," "project," "anticipate," "expect," "intend," "believe," and other similar expressions are intended to identify forward-looking statements and information. PanAmSat identifies the following important factors which could cause PanAmSat's actual results to differ materially from any results which might be projected, forecasted, estimated or budgeted by PanAmSat in forward-looking information: (i) risks associated with technology, (ii) regulatory risks, (iii) effect of loss of key personnel, and (iv) litigation. Such factors are more fully described under the caption "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations--Risk Factors," and such descriptions are incorporated herein by reference. PanAmSat cautions that the foregoing list of important factors is not exclusive. Further, PanAmSat operates in an industry sector where securities values may be volatile and may be influenced by economic and other factors beyond the Company's control. PART I ITEM 1. BUSINESS OVERVIEW PanAmSat Corporation, a Delaware corporation ("PanAmSat" or the "Company"), is the world's largest commercial provider of global satellite-based communications services. The Company commenced operations on May 16, 1997 upon the merger (the "Merger") of PanAmSat International Systems, Inc. (then operating under its previous name, PanAmSat Corporation) ("PanAmSat International") and the Galaxy Satellite Services division ("Galaxy") of Hughes Communications, Inc. ("HCI"). As a result of the Merger and the consummation of a separate but related stock contribution, HCI became the owner of approximately 71.5% of the outstanding shares of Common Stock, par value $.01 per share, of PanAmSat (the "PanAmSat Common Stock"). For further information on the Merger, see "--The Merger" below and Note 1 to the Consolidated Financial Statements included in Item 8 hereof. Unless the context otherwise requires, the term "Company" is used to refer collectively to the parent company and the subsidiaries through which its various businesses are actually conducted, including PanAmSat International. The Company is a leading provider of satellite capacity for television program distribution to network, cable and other redistribution sources in the United States, Latin America, Africa, south Asia and the Asia-Pacific region. PanAmSat's global network of 17 satellites (excluding Brasilsat A1, which is in inclined orbit and does not provide the Company with a significant source of revenues) provide state-of-the-art video distribution and telecommunications services for customers worldwide. Currently, an aggregate of more than 120 million households worldwide are capable of receiving television programming carried by PanAmSat satellites. PanAmSat satellites also serve as the transmission platforms for seven planned or operational direct-to-home ("DTH") services worldwide. The Company also provides satellite services and related technical support for live transmissions for news and special events coverage. In addition, PanAmSat provides satellite services to telecommunications carriers, corporations and Internet service providers ("ISPs") for the provision of satellite-based communications networks, including private corporate networks employing very small aperture terminals ("VSATs") and international access to the U.S. Internet backbone. Currently, more than 100,000 VSATs worldwide relay communications over PanAmSat satellites, and ISPs in 29 countries access the U.S. Internet backbone via PanAmSat satellites. The Company, together with its subsidiaries, provides global satellite services in three areas: Video Services, Telecommunications Services and Other Services. THE MERGER The Merger was the result of an Agreement and Plan of Reorganization dated September 20, 1996 (as amended April 4, 1997) (the "Reorganization Agreement") entered into among HCI, Hughes Communications Galaxy, Inc., Hughes Communications Satellite Services, Inc., Hughes Communications Services, Inc., Hughes Communications Carrier Services, Inc., Hughes Communications Japan, Inc., PanAmSat International and the Company. In addition, an Agreement and Plan of Merger dated April 4, 1997 (the "Merger Agreement") was entered into among PanAmSat International, PanAmSat and PAS Merger Corp., a subsidiary of PanAmSat ("PAS Merger Corp."). As a result of the transactions contemplated by the Reorganization Agreement and the Merger Agreement, on May 16, 1997, among other things, PAS Merger Corp. merged with and into PanAmSat International and Galaxy was contributed to PanAmSat, with the result that (a) PanAmSat International became a wholly- owned subsidiary of PanAmSat; (b) each issued and outstanding share of PanAmSat International's Class A Common Stock, par value $.01 per share, and Common Stock, par value $.01 per share, was converted into, at the election of each holder, either (i) an amount in cash equal to $15, plus one-half ( 1/2) share of PanAmSat Common Stock, 1 (ii) one share of PanAmSat Common Stock or (iii) an amount equal to approximately $16.38 in cash plus 0.45 shares of PanAmSat Common Stock, in each case subject to proration; (c) PanAmSat became Galaxy's owner and operator; and (d) HCI and certain of its subsidiaries received an aggregate of 106,622,807 shares of PanAmSat Common Stock. Following the Merger, the shares of PanAmSat Common Stock owned by HCI constitute approximately 71.5% of the outstanding shares of PanAmSat Common Stock. Prior to the Merger, PanAmSat International operated the world's first privately owned global (excluding domestic U.S.) satellite communications system, consisting of four satellites serving Latin America, the Caribbean, Europe, Asia, the Middle East and Africa. Galaxy was the leading provider of commercial satellite services in the United States, with a fleet consisting of 10 satellites. SERVICES In the year ended December 31, 1997, PanAmSat's pro forma revenues of $756.0 million were derived from the following service areas:
SERVICES 1997 REVENUES -------- ------------- Video Services............................................. 80% Telecommunications Services................................ 16% Other Services............................................. 4% ---- Total...................................................... 100%
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Operations." VIDEO SERVICES PanAmSat's Video Services provide for the long-term, part-time and occasional use of PanAmSat satellite services for the transmission of news, sports, entertainment and education programming worldwide. PanAmSat's Video Services are comprised of four categories: (i) video distribution services, (ii) DTH services, (iii) special events services and (iv) contribution services. Video Distribution Services. PanAmSat's primary video distribution service is the full-time transmission of television programming to cable systems, network affiliates and other redistribution systems. Certain PanAmSat satellites contain broad C-band beams that deliver dozens of television channels to these redistribution systems. PanAmSat generally provides video distribution services under long-term contracts for full or partial transponder usage and digital channels. The Company also offers bundled, valued-added services that include satellite capacity, digital encoding of video channels and, if required, uplinking and downlinking services to PanAmSat satellites from the Company's teleport facilities. PanAmSat currently operates satellites for the distribution of television programming to cable and other redistribution systems in the United States, Latin America, Africa, south Asia and the Asia-Pacific region. The Company creates "video neighborhoods" on these satellites with dozens of popular television channels. Cable and other redistribution systems then install antennas to access the popular channels for their subscribers. Several of the Company's Galaxy satellites deliver television programming to virtually all of the United States' 11,000 cable systems, approximately 70 million cable television households, as well as nearly two million households using C-band backyard dishes. The Ku-band beams on several of the Company's domestic U.S. and international satellites are also used for video distribution to cable systems and network affiliates. DTH Services. PanAmSat creates high-power Ku-band transmission beams on several satellites that serve as platforms for the delivery of multiple television channels for household reception using 60-90 centimeter antennas. PanAmSat believes there is significant demand for digital DTH services because of limited available 2 terrestrial television channels or cable television service in many international markets, and in the United States, limited ethnic or niche programming. PanAmSat has arrangements with customers to operate platforms on five satellites for seven current or planned DTH services in Latin America, South Africa, the Middle East, India and the United States. PanAmSat also designs many of these platforms to facilitate DTH service expansion through the launch of multiple satellites in the same orbital location. Special Events Services. PanAmSat provides broadcasters with satellite transmission services for the timely broadcast of news, sports and events coverage on a short-term basis. This service is designed to enable broadcasters to conduct on-the-scene transmissions using small, portable antennas and to receive the transmissions at their broadcast centers or affiliate stations. PanAmSat conducted approximately 58,000 hours of total special events transmissions in 1997. In addition to short-term services for special events coverage, PanAmSat has long-term transponder service agreements with certain satellite brokers in the United States. These customers package domestic U.S. transponder capacity for their broadcast, business, educational and government users. Contribution Services. PanAmSat provides broadcasters with satellite transmission services for the full-time transmission of news, sports and entertainment segments to their network affiliates or broadcast centers within the United States or around the world. TELECOMMUNICATIONS SERVICES PanAmSat's Telecommunications Services support the creation of satellite- based networks that relay voice, video and data communications within individual countries, throughout regions and around the world. PanAmSat has designed virtually all of its satellites for high-power, bandwidth-intensive applications that relay large amounts of digital information among multiple sites using small, cost-effective antennas. PanAmSat's Telecommunications Services are comprised of four categories: (i) carrier services, (ii) private business networks, (iii) Internet access and (iv) telephony. Carrier Services. PanAmSat provides satellite services to telecommunications carriers licensed by one or more countries to provide voice, video and data communications networks for businesses, governments and other users. The Company's high-power satellites, which facilitate high information throughput and the ability to use VSATs on the ground, have enabled emerging carriers to introduce competitive new telecommunications services in Latin America, Africa and Asia. In addition, PanAmSat offers value-added satellite services for telecommunications customers that include satellite capacity and teleport services that can connect customers to U.S. terrestrial networks. Private Business Networks. PanAmSat provides satellite services directly to network suppliers and businesses for the development and operation of private business networks in the United States, Latin America, Europe, Africa and Asia. These rooftop-to-rooftop VSAT networks provide dedicated, proprietary one-way and two-way communications links among multiple business sites. VSAT network customers include retail chains for rapid credit card authorization and inventory control, banks for the connection of automated teller machines with processing computers and news agencies for the timely dissemination of news and financial information. More than 100,000 VSAT antennas worldwide currently relay communications over PanAmSat satellites. The Company's largest single telecommunications customer is Hughes Network Systems, Inc., an affiliate of the Company ("HNS"), which uses the equivalent of more than 20 U.S. domestic satellite transponders to create and operate VSAT networks for its business customers. In addition, PanAmSat provides satellite services directly to businesses. These include value-added satellite communications services, such as the purchase and installation of on-site antennas and the design, integration, management, operation and maintenance of business networks. These services are provided via PanAmSat's teleports in the United States or through subcontractors. 3 Internet Access. PanAmSat provides satellite services for the full-time delivery of Internet information from the United States and other countries to various locations around the world. PanAmSat's customers consist of educational organizations, ISPs and companies providing direct-to-consumer Internet applications. PanAmSat believes that its high-power domestic U.S. and international satellites are well-suited for Internet service because of the tremendous demand for reliable, high-speed access to the U.S. Internet backbone, where approximately 80 percent of all Internet data currently resides. In many cases, PanAmSat's satellites are capable of delivering Internet data internationally at nearly 20 times the speed of traditional telephone links. PanAmSat currently provides Internet services in approximately 30 countries. PanAmSat also provides SPOTbytesSM, a value-added, bundled Internet service, that offers an integrated package of services including international satellite capacity, uplinking services from a PanAmSat teleport and dedicated links from the teleport to the U.S. Internet backbone. Telephony. The Company provides domestic and international satellite services for public switched telephone network ("PSTN") transmissions. PSTN services represented less than one percent of total combined pro forma revenues in 1997. PanAmSat's ability to provide domestic and international PSTN services are restricted by various telecommunications regulations in most countries. See "Item 1. Business--Government Regulation." The Company believes competition for long-distance services and significant deregulation in several countries could create new service opportunities for the Company. In addition, the Company believes that its international satellites are particularly well- suited for thin-route PSTN applications in developing countries or remote areas where fiber-optic telephone systems are not feasible or cost-effective. OTHER SERVICES Telemetry, Tracking and Control. PanAmSat provides telemetry, tracking and control ("TT&C") services for 21 satellites owned by PanAmSat and other satellite operators. PanAmSat personnel maintain proper orbital location and attitude, monitor on-board housekeeping systems, adjust transponder levels and remotely "rewire" satellites, if necessary, to bring backup systems on-line in the event of a subsystem failure. The necessary TT&C satellite commands are initiated from PanAmSat's Operations Control Center in Long Beach, California and are transmitted to the satellites from PanAmSat Teleport facilities located in New York, Florida, Georgia, Colorado and California. Galaxy Backup Capacity. As part of its video distribution service on certain Galaxy satellites, PanAmSat offers customers a premium service that includes backup C-band capacity on the Galaxy VI satellite. Generally, subject to the specific terms of individual contracts, these customers are entitled to replacement capacity on Galaxy VI if a transponder failure occurs and no spare amplifier or reserved transponder is available on their current satellite. Galaxy VI can meet a customer's immediate needs by providing transponder capacity at Galaxy VI's current orbital location or, subject to Federal Communications Commission ("FCC") approval, from a relocated orbital position. Galaxy VI serves as the in-orbit spare satellite because current Galaxy VI customers are subject to preemption if their capacity is required to serve as a backup transponder. As of December 31, 1997, PanAmSat had not been required to preempt an existing full-time customer on Galaxy VI. 4 BUSINESS STRATEGY PanAmSat's business strategy is based on more than 15 years of experience providing satellite-based communications services and the Company's ongoing analysis of expected worldwide market demand for its services. PanAmSat's strategy is based on five key elements: . Global satellite network; . One-stop-shopping; . Value-added services; . Satellite broadcasting and telecommunications franchises; and . Long-term customer relationships. GLOBAL SATELLITE NETWORK PanAmSat has created a global satellite communications network that is designed to provide broadcast and telecommunications services worldwide. The network currently consists of 17 satellites, seven teleport or TT&C facilities in the United States and more than 450 PanAmSat professionals on five continents. In addition, teleports operated by third parties in Europe, Latin America, the United States and Asia also provide access to PanAmSat satellites. PanAmSat's global satellite network is focused on the point-to- multipoint communications market, which includes the distribution of television channels to cable and other redistribution systems, DTH and private business networks. PanAmSat's core resource is its growing fleet of satellites. The Company has designed many of its satellites to provide high-power transmissions that reflect specific market demographics and customer service requirements. The Company intends to launch six additional satellites by late 1999 that employ the most advanced satellite technology commercially available. These new satellites are designed to provide additional transmission capacity, higher power, expanded coverage and/or extended operational life. Satellites are subject to significant risks related to delayed and failed launches and in- orbit failures. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations--Risk Factors--Risks Associated With Technology." PanAmSat's geostationary C-band and/or Ku-band satellites each provide coverage over specific geographic areas, such as in the United States or across ocean regions. To facilitate continued network expansion, PanAmSat has received authorization from the FCC to use additional orbital slots for C-band and/or Ku-band satellites and nine slots for Ka-band satellites. The Company also has requested authorization for 11 V-band slots and six additional Ka- band slots. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations--Risk Factors--Regulatory Risks." ONE-STOP-SHOPPING While PanAmSat has designed each satellite to reflect specific market requirements, its global satellite network also serves as a single resource for a customer's worldwide transmission requirements. PanAmSat is the only commercial company that offers global satellite services on a one-stop- shopping basis. VALUE-ADDED SERVICES The Company employs its satellites, teleports and professional staff to offer value-added services that are market driven and responsive to customer needs. In addition to satellite transmission capacity, PanAmSat's service offerings include: . Network design and systems engineering; . Transmission of video channels and management of private business network traffic from PanAmSat teleports; 5 . The provision of broadcast studios for video preparation and transmission to PanAmSat satellites during major sporting and special events sites; and . Development of new service applications. PanAmSat's value-added services also include bundled packages of PanAmSat resources. In an effort to provide cost-effective digital video services particularly for smaller programmers, for instance, PanAmSat offers a multi- channel per carrier service in which several television channels are digitally encoded and transmitted from a PanAmSat teleport to a specific cable television market. The Company's SPOTbytesSM bundled Internet service consists of international satellite transmission capacity, and if required, uplinking services from a PanAmSat teleport and dedicated links from the teleport to the U.S. Internet backbone. SATELLITE BROADCASTING AND TELECOMMUNICATIONS FRANCHISES A key element of PanAmSat's strategy is the creation of "service franchises" that help the Company to maintain and build its customer base. These franchises are based on large numbers of users who aim their ground antennas at PanAmSat satellites for the delivery of their television programming or communications traffic. The resulting infrastructure of ground antennas creates neighborhoods that bring added value to the Company's satellite transmission capacity. PanAmSat franchises include the distribution of premier television channels to cable systems and network affiliates; DTH television services to subscriber households; and private business networks to multiple corporate sites. PanAmSat initially enters into service agreements with several key programmers that serve as anchor tenants offering popular television channels on the satellite's cable television "neighborhood." These anchor broadcasters seed the ground infrastructure accessing the programming and also attract additional programmers that want to join the programming neighborhood. LONG-TERM CUSTOMER RELATIONSHIPS PanAmSat's strategy is to build long-term relationships with its customers by understanding their business objectives and offering long-term solutions to their satellite transmission needs. Most of PanAmSat's revenues result from long-term contracts with its customers. In many cases, programmers, corporations and ISPs have incrementally increased usage of PanAmSat satellites based on their service experience. 6 THE SATELLITES The following tables describe the Company's operational and anticipated fleet of satellites: SUMMARY SATELLITE DATA OPERATIONAL SATELLITES
PAS-1 PAS-2 PAS-3 PAS-4 PAS-5 -------------------- --------------------- ------------------- --------------------- ------------------- Region Covered.. Atlantic Ocean Pacific Ocean Atlantic Ocean Indian Ocean Atlantic Ocean Satellite....... GE 3000 HS 601 HS 601 HS 601 HS 601 Expected End of Useful Life(2). 2001 2009 2008 2011 2012(3) Orbital Loca- tion........... 45(degrees) W.L. 191(degrees) W.L. 43(degrees) W.L. 68.5(degrees) E.L.(4) 58(degrees) W.L. Transponders(5) Ku-band(6)..... 6 @ 72 MHz 12 @ 54 MHz 12 @ 54 MHz 16 @ 27 MHz 24 @ 36 MHz 4 @ 64 MHz 4 @ 64 MHz 6 @ 54 MHz C-band(7)...... 6 @ 72 MHz 12 @ 54 MHz 12 @ 54 MHz 12 @ 54 MHz 24 @ 36 MHz 12 @ 36 MHz 4 @ 64 MHz 4 @ 64 MHz 4 @ 64 MHz Usable Band- width(8)....... 1,296 MHz 1,808 MHz 1,808 MHz 1,768 MHz 1,728 MHz Output Power(9) Ku-band......... 6 @ 16 Watts 16 @ 63 Watts 16 @ 63 Watts 24 @ 60 Watts 18 @110 Watts 6 @ 60 Watts C-band.......... 6 @ 16 Watts 16 @ 30 Watts 16 @ 34 Watts 16 @ 30 Watts 24 @ 50 Watts 12 @ 8.5 Watts Total Output Power.......... 294 Watts 1,488 Watts 1,552 Watts 1,920 Watts 3,540 Watts GALAXY I-R GALAXY III-R GALAXY IV GALAXY V GALAXY VI -------------------- --------------------- ------------------- --------------------- ------------------- Latin America/ Region Covered.. United States United States United States United States United States Satellite....... HS 376 HS 601 HS 601 HS 376 HS 376 Expected End of Useful Life(10).. 2006 2004 2005 2004 2003 Orbital Loca- tion........... 133(degrees) W.L.(4) 95(degrees) W.L. 99(degrees) W.L. 125(degrees) W.L. 74(degrees) W.L.(4) Transponders(5) Ku-band(6)..... -- 16 @ 27 MHz 16 @ 27 MHz -- -- 8 @ 54 MHz 8 @ 54 MHz C-band(7)...... 24 @ 36 MHz 24 @ 36 MHz 24 @ 36 MHz 24 @ 36 MHz 24 @ 36 MHz Usable Band- width(8)....... 864 MHz 1,728 MHz 1,728 MHz 864 MHz 864 MHz Output Power(9) Ku-band........ -- 24 @ 63 Watts 24 @ 50 Watts -- -- C-band......... 24 @ 16 Watts 24 @ 16 Watts 24 @ 16 Watts 24 @ 16 Watts 24 @ 10 Watts Total Output Power.......... 384 Watts 1,896 Watts 1,584 Watts 384 Watts 240 Watts GALAXY VIII-I GALAXY IX SBS-4 SBS-5 SBS-6 -------------------- --------------------- ------------------- --------------------- ------------------- Region Covered.. Latin America United States United States United States United States Satellite....... HS 601HP HS 376 HS 376 HS 376 HS 393 Expected End of Useful Life(10) 2012(12) 2010 (inclined)(13) 1999 2007 Orbital Loca- tion........... 95(degrees) W.L. 123(degrees) W.L.(14) 77(degrees) W.L.(4) 123(degrees) W.L.(14) 74(degrees) W.L.(4) Transponders(5) Ku-band(6)...... 32 @ 24 MHz -- 10 @ 43 MHz 10 @ 43 MHz 19 @ 43 MHz 4 @ 110 MHz C-band(7)....... -- 24 @ 36 MHz -- -- -- Usable Band- width(8)....... 768 MHz 864 MHz 430 MHz 870 MHz 817 MHz Output Power(9). Ku-band......... 32 @ 115 Watts -- 10 @ 20 Watts 14 @ 20 Watts 19 @ 41 Watts C-band.......... -- 24 @ 16 Watts -- -- -- Total Output Power.......... 3,680 Watts 384 Watts 200 Watts 280 Watts 779 Watts PAS-6(1) ---------------- Region Covered.. Atlantic Ocean Satellite....... SS/L FS-1300 Expected End of Useful Life(2). 2012(3) Orbital Loca- tion........... 43(degrees) W.L. Transponders(5) Ku-band(6)..... 36 @ 36 MHz 2 @ 64 MHz C-band(7)...... -- Usable Band- width(8)....... 1,296 MHz Output Power(9) Ku-band......... 24 @ 100 Watts 12 @ 110 Watts C-band.......... Total Output Power.......... 3,720 Watts GALAXY VII ---------------- Region Covered.. United States Satellite....... HS 601 Expected End of Useful Life(10).. 2006 Orbital Loca- tion........... 91(degrees) W.L. Transponders(5) Ku-band(6)..... 16 @ 27 MHz 8 @ 54 MHz C-band(7)...... 24 @ 36 MHz Usable Band- width(8)....... 1,728 MHz Output Power(9) Ku-band........ 24 @ 50 Watts C-band......... 24 @ 16 Watts Total Output Power.......... 1,584 Watts BRASILSAT A1(11) ---------------- Region Covered.. United States Satellite....... HS 376 Expected End of Useful Life(10) (inclined)(13) Orbital Loca- tion........... 79(degrees) W.L. Transponders(5) Ku-band(6)...... -- C-band(7)....... 24 @ 36 MHz Usable Band- width(8)....... 864 MHz Output Power(9). Ku-band......... -- C-band.......... 24 @ 10 Watts Total Output Power.......... 240 Watts
7 SATELLITES UNDER DEVELOPMENT
PAS-6B(1) PAS-7(1) PAS-8(1) GALAXY X GALAXY XI ---------------- --------------------- -------------------- --------------------- ------------------- Region Covered.. Atlantic Ocean Indian Ocean Pacific Ocean United States United States Expected Launch(15)..... 1998 1998 1998 1998 1998 Satellite....... HS 601HP SS/L FS-1300(1) SS/L FS-1300(1) HS 601HP HS 702 Expected End of Useful Life(13).. 2013(3) 2011(1) 2013(3) 2010 2013 Orbital Loca- tion........... 43(degrees) W.L. 68.5(degrees) E.L.(4) 166(degrees) E.L.(4) 123(degrees) W.L.(14) 74(degrees) W.L.(4) Transponders(5) Ku-band(6)..... 32 @ 36 MHz 30 @ 36 MHz 24 @ 36 MHz 24 @ 36 MHz 16 @ 27 MHz 24 @ 36 MHz C-band(7)...... -- 14 @ 36 MHz (4) 24 @ 36 MHz 24 @ 36 MHz 24 @ 36 MHz Usable Band- width(8)....... 1,152 MHz 1,584 MHz 1,728 MHz 1,728 MHz 2,160 MHz Output Power(9) Ku-band........ To be determined 30 @ 100 Watts 24 @ 100 Watts 24 @ 63 Watts 16 @ 140 Watts 24 @ 75 Watts C-band......... -- 14 @ 50 Watts 24 @ 50 Watts 24 @ 20 Watts 24 @ 20 Watts Total Output Power.......... To be determined 3,700 Watts 3,600 Watts 1,992 Watts 4,520 Watts PAS-9 PAS-1R ---------------- ------------------- Region Covered.. Indian Ocean United States Expected Launch(15)..... 1999 1999 Satellite....... HS 702 HS 702 Expected End of Useful Life(13).. 2014(3) 2014(2) Orbital Loca- tion........... To be determined 45(degrees) W.L.(4) Transponders(5) Ku-band(6)..... 48 @ 36 MHz 36 @ 36 MHz C-band(7)...... 12 @ 36 MHz 36 @ 36 MHz Usable Band- width(8)....... 2,160 MHz 2,592 MHz Output Power(9) Ku-band........ To be determined To be determined C-band......... To be determined To be determined Total Output Power.......... To be determined To be determined
- -------- (1) See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations--Risk Factors." (2) The information for PAS-1, PAS-2, PAS-3 and PAS-4 is based on fuel level estimates at October 31, 1997. The information for PAS-5 and PAS-6 is based on the terms of their satellite contracts and their launch contracts. Anomalies have begun to occur on PAS-1, which is beyond its construction design life. As a cautionary measure, PAS-1R, a replacement satellite for PAS-1, is planned for launch in 1999. (3) The use of certain launch vehicles may yield significantly longer fuel life for these satellites. The chart shows the conservative design life for such satellites. Actual life may be longer in such cases. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations--Risk Factors" for a discussion of recent events affecting PAS- 6. (4) PanAmSat has received conditional regulatory approval for the orbital slot of 72(degrees) E.L. from the FCC, which approval is subject to a full financial showing and demonstration of consultation with Intelsat, an international treaty organization of 142 member nations ("Intelsat"). In addition, PanAmSat has requested approval to co-locate a satellite with PAS-4 at 68.5(degrees) E.L. PanAmSat intends to locate PAS-7 at the 68.5(degrees) E.L. orbital location if its application for such orbital location is granted, in which case the 72(degrees) E.L. orbital slot could be used for another satellite. If PAS-7 is to be co-located with PAS-4, it is unlikely that PAS-7 will be permitted to operate its C-band transponders for transmitting to or from Russia until certain coordination issues are resolved with the Russian Federation. PanAmSat tentatively plans to locate PAS-8 at 166(degrees) E.L. and has an application for that orbital slot pending with the FCC. The Company has not yet filed an application with the FCC for PAS-1R. The FCC gives a "replacement expectancy" with respect to the use of the same orbital location at the same frequencies for replacement satellites. This replacement expectancy may increase the likelihood that PanAmSat will be able to expand the frequencies or coverages employed by PAS-1 at 45(degrees) W.L.; however, no assurance can be given that the Company will be successful at expanding such frequencies and coverages. SBS-4's FCC license expired in 1994, and the satellite is operated pursuant to grants of special temporary authority that are renewed periodically. PanAmSat has filed an application with the FCC for Galaxy II (H) (to be known as Galaxy XI), a hybrid satellite that will replace Galaxy VI (a C-band satellite) and SBS-6 (a Ku-band satellite) at 74(degrees) W.L. Currently, the Company has not identified any future orbital locations for Galaxy VI and SBS-6. Once slots have been identified, the Company plans to apply for temporary authority to operate at such slots until other satellites are authorized for, and commence operations at, such slots. (5) Satellite transponders receive transmissions from Earth and relay them back to Earth. Transponders are composed of receivers, preamplifiers, power amplifiers, frequency shifters and a host of other electronics. (6) Ku-band is a range of relatively high frequencies (between approximately 12 GHz and 14 GHz) used for commercial satellite communications. Ku-band is widely used for distribution of broadcast television and DTH services, as well as business communications, and allows the use of relatively small receive antennas. 8 (7) C-band is a range of relatively low frequencies (between approximately 4 GHz and 6 GHz) used for commercial satellite communications. C-band is used primarily for cable and broadcast distribution and requires the use of relatively large receive antennas on the ground. (8) Bandwidth is one measure of the information carrying capacity of a transponder. A transponder's bandwidth and power together primarily determine the amount of information that can be carried. (9) Output power is the transmitter power of each transponder and is not a measure of the signal power received on Earth. Total output power is the aggregate power of all the transponders on the satellite. High output power allows for the use of smaller and less expensive receiving antennas to obtain a satellite signal. See footnote 1. (10) The expected end of useful life for each of the Galaxy operational satellites (other than SBS-4) is based on fuel level estimates at October 30, 1997. (11) On September 28, 1995, PanAmSat's predecessor-in-interest, Hughes Communications Galaxy, Inc. ("HCG"), filed an application for interim authority to use C-band capacity on Brasilsat A1 for a two-year period to help alleviate a shortage of C-band capacity in the United States. At that time, Brasilsat A1 was located at 63(degrees) W.L., operating in inclined orbit, and carrying no traffic. HCG also asked that the FCC allow all U.S. earth station licensees to communicate with the Brasilsat A1 satellite during the period of its interim authority pursuant to the ALSAT designation in their licenses. On June 14, 1996, HCG filed an amendment to its application for interim authority to use C-band capacity on Brasilsat A1. As HCG explained at that time, many of its customers were unable to communicate with Brasilsat A1 because the 63(degrees) W.L. orbital location did not provide good elevation angles for earth stations located on the west coast of the U.S. and because some earth stations could not be steered to communicate with satellites as far east as 63(degrees) W.L. Consequently, HCG asked that the FCC grant it interim authority to use C-band capacity on Brasilsat A1 from the 79(degrees) W.L. orbital location rather than the 63(degrees) W.L. location originally requested. To accommodate the future launch of GE Americom's GE-5 satellite, which the FCC has authorized to use the 79(degrees) W.L. orbital location, HCG agreed to cease operations on Brasilsat A1 at that location upon the launch of GE-5. On December 24, 1996, the FCC granted HCG interim authority to use C-band capacity on Brasilsat A1 at 79(degrees) W.L. as requested in HCG's amended application, until December 31, 1997, or the launch of the GE-5 satellite, whichever comes first. On December 11, 1997, PanAmSat requested an extension of the interim authority for Brasilsat A1. (12) The expected end of useful life for each of the indicated satellites is based on the terms of the relevant satellite construction contract and the terms (with respect to Galaxy VIII-i, Galaxy X and Galaxy XI) or anticipated terms (with respect to PAS-1R or PAS-9) of the relevant satellite launch arrangement. (13) Satellite operators may opt to extend the life of a satellite beyond its useful life by allowing it to move into a fuel-conserving mode called "inclined orbit." When a satellite is put into inclined orbit, only east- west station-keeping is continued. While in this mode, the satellite moves in a figure-8 crossing the equator twice daily. The uncorrected north-south inclination increases over time and customers must retrofit their existing ground equipment or purchase new equipment to enable them to track the movement of the satellite. After reaching a certain degree of north-south inclination, tracking antennas can no longer reliably follow the movement of the satellite and its useful life ends. (14) Galaxy X (a C-band/Ku-band hybrid) will replace SBS-5 (a Ku-band satellite) at 123(degrees) W.L. Galaxy IX (a C-band satellite) is an expansion satellite that is authorized to operate at 127(degrees) W.L. The FCC has authorized Galaxy IX to operate temporarily at 123(degrees) W.L. until Galaxy X is launched and occupies that orbital location. The decision granting the Galaxy IX application was conditioned on relinquishing any right to the continued operation of SBS-5 once Galaxy X begins commercial operations. The Company plans to request that the FCC grant PanAmSat interim authority to move SBS-5 to 127(degrees) W.L. when Galaxy IX relocates there, subject to coordination with satellites in adjacent locations. The interim authority would permit SBS-5 to occupy 127(degrees) W.L. until the FCC licenses another satellite for 127(degrees) W.L. and the satellite commences operations at that orbital location. There can be no assurance that the FCC will grant PanAmSat's request to relocate SBS-5 to 127(degrees) W.L. on such basis. (15) Future launch dates are based on PanAmSat estimates. 9 SATELLITE PROCUREMENT The Company currently has seven satellites under construction and development. The Company has agreements with Hughes Space and Communications Company ("HSC"), an affiliate of the Company, for construction of Galaxy X, Galaxy XI, PAS-1R, PAS-6B and PAS-9, and with Space Systems/Loral, Inc. ("SS/Loral") for the construction of PAS-7 and PAS-8. These agreements generally require the Company to pay the majority of the total contract price for each satellite during the period of the satellite's construction, with the remainder of such contract price to be paid in the form of incentive payments based on orbital performance over the design life of the satellite following launch. The contracts also provide for price reductions or liquidated damage payments in the event of late delivery due to the fault of the manufacturer. Each contract provides for a limited pre-launch warranty that a satellite will be free from any defects and conform to technical specifications. The satellite construction contracts contain provisions that would enable the Company to terminate such contracts both with and without cause. If terminated without cause, the Company would forfeit its progress payments and be subject to termination payments that escalate with the passage of time. If terminated for cause, the Company would be entitled to recover any payments it made under the contracts and certain liquidated damages as specified in such contracts. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations--Risk Factors--Risks Associated with Technology." LAUNCH ARRANGEMENTS The Company has entered into launch contracts for the launch of both specified and unspecified future satellites. Each of the Company's launch contracts provide that the Company may terminate such contract at its option, subject to payment by the Company of a specified termination liability that increases in magnitude as the applicable launch date approaches. In addition, in the event of the failure of any launch, the Company may exercise the right to obtain a replacement launch within a specified period following the Company's request for relaunch. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations--Risk Factors--Risks Associated with Technology." CONTROL OF SATELLITES AFTER LAUNCH Once a satellite is placed at its orbital location, ground stations control it until the end of its in-orbit lifetime. PanAmSat generally provides TT&C services for its own satellites, as well as for certain satellites owned or operated by others. INSURANCE Launch Insurance. Under PanAmSat's satellite construction contracts, the contractor generally bears the risk of loss of a satellite during the construction phase up to delivery, at which time risk of loss passes to PanAmSat and launch insurance coverage begins. PanAmSat generally maintains launch insurance with respect to its satellites in an amount approximately equal to the construction, launch and insurance costs for each of such satellites. Coverage under PanAmSat's launch insurance includes claims arising from occurrences up to three years after launch, except for PAS-6. Such coverage includes not only catastrophic loss of a satellite during launch, but also the failure of a satellite to obtain proper orbit, or to perform in accordance with design specifications once in orbit. The terms of the policies generally provide for payment of the full insured amount if 50% or more of a satellite's communications capacity is lost within such three-year period, and, subject to certain deductibles, partial payment for losses of less than 50% of the satellite's communications capacity within such period. Such insurance policies include standard commercial launch insurance provisions and customary exclusions including (i) military or similar actions, (ii) laser, directed- energy or nuclear anti-satellite devices, (iii) insurrection and similar acts or governmental action to prevent such acts, (iv) governmental confiscation, (v) nuclear reaction or radiation contamination, (vi) willful or intentional acts of PanAmSat or its contractors, (vii) loss of market, loss of revenue, extra expenses, incidental and consequential damages, and (viii) third-party claims against 10 PanAmSat. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations--Risk Factors--Risks Associated with Technology" for a description of certain insurance arrangements with respect to PAS-6. In-orbit Insurance. PanAmSat typically obtains in-orbit insurance in advance of the expiration of the relevant launch insurance policy, and coverage thereunder commences upon expiration of such launch insurance policy. PanAmSat generally obtains in-orbit insurance with respect to its satellites in an initial amount approximately equal to the construction, launch and insurance costs for each of such satellites. The amount of in-orbit insurance in force with respect to each of PanAmSat's satellites generally decreases over time, usually on straight line basis over the estimated useful life of such satellite. PanAmSat generally does not insure against lost revenues in the event of a total or partial loss of the communications capacity of a satellite. The Company does, however, purchase insurance to cover revenues from a satellite when revenues have been recognized in connection with an outright sale, sales- type lease or other arrangement with performance warranty provisions with respect to such satellite. Coverage under PanAmSat's in-orbit insurance policies includes claims arising from occurrences after the expiration of the relevant launch insurance policy. The insurance coverage includes the failure of a satellite to continue to perform in accordance with design specifications. Payments in respect of losses of communications capacity are calculated in the same manner as under the launch insurance policies. PanAmSat's in-orbit policies typically include customary commercial satellite insurance exclusions, including, among other things, damage or loss caused by military actions or acts of war, anti-satellite devices, government action, frequency interference or nuclear reaction. SALE LEASEBACK ARRANGEMENTS The Company entered into sale-leaseback arrangements with respect to certain transponders on SBS-6, Galaxy VII and Galaxy IIIR in December 1991, September 1993 and February 1996, respectively. Pursuant to such arrangements, Galaxy sold 19 Ku-band transponders on SBS-6, 16 Ku-band and 14 C-band transponders on Galaxy VII and 24 Ku-band transponders on Galaxy IIIR. Concurrently with such sales, Galaxy agreed to lease back such transponders on terms that required it to make scheduled semi-annual lease payments and operate and maintain such transponders and the applicable satellites for terms of 11.2 years, 11 years and 6.9 years, respectively. As a result of the Merger, PanAmSat succeeded to these arrangements. At the end of each lease's initial term, the Company has the option to renew such lease through the end of the applicable satellite's useful life. The Company's obligations under each sale- leaseback arrangement are guaranteed by General Motors Acceptance Corporation (as successor in interest to Hughes Electronics Corporation) ("GMAC"). In connection with the Merger, the Company agreed to pay and indemnify GMAC for performing any of its obligations under such guarantees. The Company has an option under such leases to repurchase such transponders prior to the end of the respective lease terms as follows: $152 million in 1998 (for which an early buy-out option for $96.6 million relating to transponders on SBS-6 was exercised by the Company in January 1998) and $366 million in 1999. Each of the sale-leaseback leases imposes limits on the Company's ability to move the applicable satellite to a different orbital location other than in certain specified situations and imposes limitations on the Company's ability to consolidate or merge with another entity unless certain circumstances are satisfied. The Company is also required under the terms of each such lease to maintain in-orbit insurance on the applicable satellite. In addition, upon the loss of one or more transponders, the Company is required either to pay a specified loss amount or provide replacement transponder capacity to the relevant lessor. 11 SALES AND MARKETING PanAmSat's sales and marketing activities are separated into three general service areas: full-time program distribution; part-time and ad hoc broadcast; and business communications and long-distance telephony. PanAmSat's Greenwich headquarters has a sales and marketing department for each service area. PanAmSat also has sales and marketing offices in Long Beach, California, Coral Gables, Florida, Sydney, Australia, London, England, Tokyo, Japan and Johannesburg, South Africa, which provide integrated sales and marketing for all three service areas in their respective regions. The senior executive officers of PanAmSat have been directly involved in marketing to key broadcasting and business communications customers. COMPETITION PanAmSat primarily competes with companies and organizations that own or utilize satellite or terrestrial transmission facilities. OTHER SATELLITE OPERATORS PanAmSat's satellite competitors are divided among three categories: (i) global competitors; (ii) companies that intend to create global satellite systems; and (iii) regional or domestic satellite operators. PanAmSat's only global competitor is Intelsat, an international treaty organization of 142 member nations based in Washington, D.C. that provides global satellite capacity primarily through its members called signatories. Comsat Corporation ("Comsat") is the U.S. signatory and is the only company permitted to provide Intelsat satellite capacity in the United States. Intelsat's mandate is to provide international satellite capacity on a non- discriminatory basis to countries around the world. Since its formation in 1964, Intelsat's primary business has been the provision of satellite capacity for long-distance telephony circuits. According to Intelsat's 1996 annual report, video services comprised 26 percent of Intelsat's operating revenue. Intelsat generally provides capacity directly to its signatories which then market such capacity to their customers. In recent years, Intelsat has launched higher-powered satellites that are capable of providing video distribution, DTH and private business network services. In addition, many countries now permit companies other than the Intelsat signatory to market Intelsat satellite capacity in that country. Intelsat and its signatories have announced an intention to create an affiliate company that will own and operate high-power satellites designed for DTH and other high-growth services and that will directly market those services to end users. In February 1998, Intelsat announced a plan that would spin off six satellites and related resources to a new commercial company that would effectively be controlled by current Intelsat signatories. Comsat has also requested approval from the FCC to be regulated as a non-dominant carrier. In addition to Intelsat, PanAmSat experiences competition from companies that have announced plans to create global satellite systems, primarily through acquisitions, partnerships or equity interests in domestic or regional satellite systems. These companies include Loral Space and Communications Ltd. ("Loral"), GE American Communications, Inc. ("GE Americom") and Lockheed Martin Corp. For instance, in 1997 Loral acquired AT&T Skynet (a domestic U.S. satellite operator), announced plans to acquire Orion Network Systems (a transatlantic satellite operator with plans to launch additional international satellites in other regions) and entered into a strategic partnership to own and operate Satelites Mexicanos, S.A. de C.V. (a Mexican satellite system that provides satellite capacity in Latin America). PanAmSat also experiences competition from numerous companies and/or governments that operate domestic or regional satellite systems in the United States, Latin America, Europe, the Middle East, Africa and Asia. Competition from these satellite operators is limited to service within one country or region, depending on 12 the operator's satellite coverage and market activities. In the United States, GE Americom, Loral and Comsat all currently provide fixed satellite services on a regional or domestic basis, and are the Company's primary competitors in such market. PROPOSED SATELLITE SYSTEMS Other companies have announced plans to operate regional or transoceanic satellite systems. Entry into the international satellite communication industry can be expensive and difficult. The construction and launch of a satellite comparable to PanAmSat's new satellites usually takes approximately three or more years and costs approximately $200 million to $250 million. In addition, there are a limited number of orbital slots. The operation of an international satellite communications system also requires approvals from national telecommunications authorities and Intelsat and, in certain cases, from regional satellite authorities. See "--Government Regulation." While the trend around the world is to liberalize these regulatory requirements, at present obtaining the necessary licenses involves significant time, expense and expertise. The Company believes that low-earth-orbit satellite systems under development, such as Celestri, Globalstar, Iridium, Skybridge and Teledesic, are not competitors of PanAmSat. These low-earth-orbit systems are designed primarily for mobile telephony and data services and are not expected to serve the fixed point-to-multipoint video and telecommunications markets. SERVICE PROVIDERS In some cases, PanAmSat experiences competition for its value-added satellite services from companies that also provide value-added services. These companies typically lease large amounts of satellite capacity from satellite operators and then use that capacity to provide value-added communications networks for their customers. For instance, several carriers operate VSAT networks for businesses that PanAmSat also could provide as a value-added service. In addition, brokers in the United States provide value- added special events services to broadcasters, businesses and educational institutions that also could be provided by PanAmSat. Many of these value- added service providers and brokers are PanAmSat customers for their satellite capacity. OPTICAL FIBER CABLES Optical fiber cables generally do not compete with PanAmSat's services. The primary use of optical fiber cables is to carry high-volume telephony communications on a point-to-point basis. Transcontinental optical fiber cables currently carry video traffic, but this service is largely for point- to-point traffic (e.g., New York to London). Optical fiber cables are not readily usable for point-to-multipoint broadcast applications or for the transmission of ad hoc events which require transportable uplink earth stations. GOVERNMENT REGULATION As an operator of a privately-owned global satellite system, PanAmSat is subject to: (i) the regulatory authority of the U.S. government; (ii) the regulatory authority of other countries in which PanAmSat operates; (iii) the Intelsat consultation process; and (iv) the frequency coordination process of the International Telecommunications Union (the "ITU"). U.S. REGULATION The ownership and operation of PanAmSat's satellite system is regulated by the FCC. PanAmSat is subject to the FCC's jurisdiction primarily for: (i) the licensing of satellites and earth stations; (ii) avoidance of interference with other radio stations; and (iii) compliance with FCC rules governing U.S.- licensed satellite systems. Violations of the FCC's rules can result in various sanctions including fines, loss of authorizations, or the denial of applications for new authorizations or to renew existing authorizations. PanAmSat is not regulated as a common carrier and, therefore, is not subject to rate regulation or the obligation not to discriminate among 13 customers, and operates with minimal governmental scrutiny of its business decisions. PanAmSat must pay FCC filing fees in connection with its space station and earth station applications; must pay annual regulatory fees that are intended to defray the FCC's regulatory expenses; and, to the extent PanAmSat is deemed to be providing interstate telecommunications, must contribute to funds used to support universal service. Authorization to Construct, Launch, and Operate Satellites. The FCC grants authorizations to satellite operators who meet its legal, technical and financial qualification requirements. Under the FCC's financial qualification rules, an applicant must demonstrate that it has sufficient funds to construct, launch, and operate for one year each requested satellite. Licenses are issued for an initial ten-year term, and may be extended by the FCC, although it may not be possible for satellites operating beyond their initial ten-year term to remain in the same orbital location or even, in all cases, to be provided a new orbital location. The FCC's rules and policies limit the number of expansion satellite authorizations that may be granted for the same frequency band at one time. PanAmSat has final FCC authorization for seventeen satellites operating in the C-band, the Ku-band, or both bands. In addition, PanAmSat has a final authorization to operate nine satellites in the Ka-band (one Atlantic Ocean Region ("AOR"), to be located at 58(degrees) W.L.; two Pacific Ocean Region ("POR"), to be located at 149(degrees) E.L. and 173(degrees) E.L.; four Indian Ocean Region ("IOR"), to be located at 36(degrees) E.L., 40(degrees) E.L., 48(degrees) E.L., and 124.5(degrees) E.L.; and two U.S., to be located at 103(degrees) W.L. and 125(degrees) W.L.). PanAmSat has requested authority also to operate five of these satellites in the BSS band, and to operate three other satellites exclusively in the BSS band, but FCC processing of PanAmSat's requests must await the resolution of issues concerning the ITU's BSS band plan. In addition to the above final authorizations, PanAmSat has a conditional authorization for an IOR satellite, to be located at 72(degrees) E.L. In order to finalize this authorization, PanAmSat must make a full financial showing and complete its consultation with Intelsat for the satellite. None of PanAmSat's final or conditional authorizations is subject to further administrative or judicial reconsideration or review. The FCC reserves the right to require a satellite to be relocated to a different orbital location if it determines that such a change is in the public interest, but the FCC has rarely used this authority. PanAmSat operates two additional satellites under interim or special temporary authority. The first of these satellites, Brasilsat A1, is providing U.S. domestic service from 79(degrees) W.L. under an interim authorization that expired on December 31, 1997. PanAmSat has requested, but has not yet received, an extension of this authority. The second satellite, SBS-4, exceeded its regular license term in 1994 and, since that time, has operated at 77(degrees) W.L. under successive grants of special temporary authority. Both Brasilsat A1 and SBS-4 must be relocated once the U.S. satellites assigned to 79(degrees) W.L. and 77(degrees) W.L., respectively, are launched. Although PanAmSat has requested authority to relocate SBS-4 to 79(degrees) W.L., there can be no assurance that either of the satellites will be authorized to operate at another orbital location. PanAmSat has filed the following applications for additional or replacement satellites in the C-band and/or the Ku-band: (1) applications for two hybrid C/Ku-band satellites (one POR and one U.S.), and one Ku-band satellite (U.S.), that are now ripe for FCC action; (2) applications for two hybrid C/Ku-band satellites (one IOR and one U.S.); and (3) an application for a hybrid C/Ku- band satellite to replace its separate C-band and Ku-band satellites at 74(degrees) W.L. In order to grant two of the U.S. additional satellite applications, the FCC would have to assign different orbital locations than those requested by PanAmSat (79(degrees) W.L. and 93(degrees) W.L.) because, after PanAmSat's applications were filed, the FCC assigned these orbital locations to other entities. PanAmSat has requested that the 79(degrees) W.L. application be associated with the 81(degrees) W.L. orbital location. In 1996, the FCC modified its rules for processing international satellite system applications. Under the new rules, FCC action on one IOR application and one U.S. application would be substantially delayed. PanAmSat has requested a waiver of these rules. 14 PanAmSat has filed applications for six additional Ka-band satellites (two AOR; two POR; and two IOR), which will be processed in the second Ka-band satellite processing round. Finally, PanAmSat has applied for twelve V-band satellites (two AOR, six IOR, and four U.S.), but the FCC has not yet accepted these applications for filing. Under the FCC's rules, unless an applicant has received an authorization to launch and operate, it must notify the FCC in writing prior to commencing satellite construction, and any construction engaged in is at the applicant's own risk. While PanAmSat therefore may proceed with the construction of planned satellites without prior FCC approval, it must accept the risk that the FCC may not grant the application, may not assign the satellite to its proposed orbital location, or otherwise may act in a manner that limits or eliminates some or all of the value of the construction previously done on the satellite. Other FCC Authorizations. Under the FCC's rules, an entity that provides international telecommunications services on a common carrier basis must first receive authorization, pursuant to Section 214 of the Communications Act of 1934, as amended, to provide such services. The FCC has granted PanAmSat Carrier Services, Inc. ("PCSI") and PanAmSat Communications Carrier Services, Inc. ("PCCS"), wholly owned subsidiaries of the Company, Section 214 authority to provide international private line and public switched services. As common carriers, PCSI and PCCS are subject to rate regulation, tariffing and non- discrimination requirements. Other Authorizations. PanAmSat Asia Carrier Services, Inc. ("PACS"), a wholly owned subsidiary of the Company, intends to apply for a common carrier license in Australia. If such license is granted, PACS will be subject to rate regulation, tariffing and other possible requirements. Scope of Services Authorized. In 1996, the FCC eliminated the regulatory distinction between U.S. domestic satellites and U.S.-licensed international satellites. As a result, each of PanAmSat's satellites may be used, to the extent technically feasible, to provide both U.S. domestic and international services. Due to a restriction in the FCC's rules, however, the transponders on PAS-5 that operate in the 10.7-11.7 GHz and 12.75-13.25 GHz frequency bands may be used solely for international service. PanAmSat has requested a waiver of this restriction. Coordination Requirements. Orion Satellite Corporation ("Orion") has an FCC authorization for the orbital location adjacent to PAS-1. Orion has taken the position that PanAmSat must accept interference from Orion's satellite because PAS-1 does not have "full frequency reuse," while PanAmSat has disputed this position. The FCC has suggested that Orion's position is incorrect, but stated that it will not rule definitively on the issue unless the parties are unable to resolve their differences by frequency coordination. Orion announced in 1993 that it had cancelled its contract for construction of the satellite which was intended for this orbital slot but reaffirmed its intention to build such satellite at an unspecified later date. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations--Risk Factors--Regulatory Risks" generally and for a description of certain frequency coordination issues affecting PAS-6 and PAS- 7. REGULATION BY NON-U.S. NATIONAL TELECOMMUNICATIONS AUTHORITIES Foreign laws and regulatory practices governing the provision of satellite services to licensed entities and directly to end users vary substantially. Most countries in which PanAmSat operates are signatories of Intelsat and, as a result, may require PanAmSat to confirm that it has successfully completed technical consultation with Intelsat before providing services on a given satellite. See "--Intelsat Consultation." In addition, PanAmSat may be subject to national communications and/or broadcasting laws with respect to its provision of international satellite service. While these vary from country to country, national telecommunications authorities, with limited exceptions, typically have not required satellite operators to obtain licenses or regulatory authorizations in order to provide space segment capacity to licensed entities. 15 Many countries--particularly in Latin America and, increasingly, in Europe, Africa and Asia--have liberalized their regulations to permit multiple entities to seek licenses to provide voice, data or video services for their own use or for third-party use; to own and operate private earth station equipment; and to choose a provider of satellite capacity. This trend should accelerate with the commitments by many World Trade Organization ("WTO") members, in the context of the WTO Agreement on Basic Telecommunications Services, to open their satellite markets to competition. Many countries allow licensed radio and television broadcasters and cable television providers to own their own transmission broadcast facilities and purchase satellite capacity without restriction. In such environments, customer access to PanAmSat's services can be a relatively simple procedure. Other countries, however, have maintained strict monopoly regimes. In such markets, a single entity (often the government-owned Posts, Telephone and Telegraph authority) may hold a monopoly on the ownership and operation of facilities or on the provision of communications and/or broadcasting services to, from, and within the country, including via satellite, rendering the provision of service from PanAmSat and other U.S.-licensed satellites more complicated. Many countries also permit satellite carriers to provide services directly to end users. In others, however, a license is required. PanAmSat has obtained licenses in Argentina, Columbia, Ecuador, France, Germany, Japan, Pakistan and the United Kingdom to provide certain services directly to end users. Through its wholly-owned subsidiary, PACS, the Company intends to apply for a carrier license in Australia. Notwithstanding the wide variety of regulatory regimes extant in the countries in which PanAmSat provides service, PanAmSat believes that it and its customers are in compliance in all material respects with all applicable laws and regulations. Intelsat Consultation. In connection with its international satellite services, PanAmSat must complete a consultation process with Intelsat under Article XIV of the Intelsat Agreement to assure that use of any new satellite will not cause Intelsat technical harm. To provide domestic satellite services in any country, PanAmSat must complete a technical consultation. The FCC is responsible for ensuring that PanAmSat has undergone the necessary consultations and that it operates in accordance with the technical parameters forming the basis for each Article XIV consultation. If PanAmSat changes the terms (either technical or service) of its operation in a significant way, it may need to reconsult with Intelsat. The ITU Frequency Coordination Process. Each ITU member nation is required to register its proposed use of orbital slots with the ITU's Radio Regulations Board. Other nations then may give notice of any use or intended use of the radio spectrum that would conflict with the proposal. The nations then are obligated to seek to coordinate the proposed uses and resolve interference concerns. If all disputes are resolved, the ITU "notifies" the proposed use which, at least theoretically, protects it from subsequent or nonconforming interfering uses. The ITU Radio Regulations Board has no dispute resolution or enforcement mechanisms, however, and international law provides no clear remedies if this voluntary process fails. While the right to use most frequencies is determined on a "first-come, first-served" basis, the ITU has "planned" the use of certain frequency bands in a manner that effectively reserves for various countries the right to use those frequencies in accordance with certain technical parameters at a given orbital location. PanAmSat's proposed use of BSS frequencies on eleven satellites is subject to unresolved issues concerning the ITU's BSS band plan. All of the registrations for PanAmSat's satellites are or will be subject to the ITU coordination process. Certain entities have filed notices of intended use with respect to certain orbital slots which conflict with PanAmSat's registered orbital slots for PAS-2, PAS-4 and PAS-8. Such filings may delay the receipt of final registration of such orbital slots with the ITU Radio Regulations Board. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations--Risk Factors--Regulatory Risks." 16 EMPLOYEES At December 31, 1997, PanAmSat had approximately 450 full-time employees. PanAmSat believes that its relations with its employees are good. ITEM 2. PROPERTIES PanAmSat's executive offices are located in Greenwich, Connecticut. PanAmSat leases its executive offices pursuant to a lease that will expire on March 31, 2003. PanAmSat currently operates seven teleports and operations centers in conjunction with its global satellite network. PanAmSat operates its primary teleport in Ellenwood, Georgia and operates regional teleports in Castle Rock, Colorado; Fillmore, California; Homestead, Florida; Long Beach, California; Napa, California; and Spring Creek, New York. PanAmSat's operations centers located in Ellenwood and Long Beach provide other services, such as customer service support, in addition to teleport operations. PanAmSat owns its Homestead, Florida; Spring Creek, New York; Napa, California; and Fillmore, California teleports. PanAmSat leases its Castle Rock, Colorado and Ellenwood, Georgia teleports, and its Long Beach, California teleport and operations center. PanAmSat also leases office space for its sales and marketing offices in Washington, D.C.; Coral Gables, Florida; Sydney, Australia; Johannesburg, South Africa; London, England; and Tokyo, Japan. PanAmSat's leases for its foreign offices have been entered into upon terms that PanAmSat deems to be reasonable and customary. ITEM 3. LEGAL PROCEEDINGS On or about October 25, 1996, an action was commenced by Comsat against the Company, News Corporation, Ltd. ("News") and Grupo Televisa, S.A., ("Televisa") in the United States District Court for the Central District of California. The complaint alleges that News wrongfully terminated an agreement with Comsat for the lease of transponders on an Intelsat satellite over the term of a five year lease, breached certain alleged promises related to such agreement, and breached its alleged obligations under a tariff filed by Comsat with the FCC. As to the Company, the complaint alleges that the Company, alone and in conspiracy with Televisa, intentionally interfered with the alleged agreement and with Comsat's economic relationship with News. The complaint in the present action seeks actual and consequential damages, and punitive or exemplary damages, in an amount to be determined at trial. On December 11, 1996 the Company, News and Televisa filed motions to dismiss the action on various grounds, including that the FCC has primary jurisdiction over the dispute, that Federal law preempts the claims asserted against the Company and Televisa, that the claims asserted against Televisa and the Company are not recognized by Federal law, that the claims against the Company and Televisa fail to state a cause of action and that because the claims against the Company and Televisa depend upon the existence of enforceable rights under the tariff Comsat filed with the FCC, the claims fail if the FCC determines that Comsat has no such rights. In this regard, in April 1996, News filed a complaint with the FCC challenging Comsat's tariff. By order adopted September 15, 1997, the FCC dismissed that complaint without prejudice. On January 27, 1997, the court denied defendants' motions to dismiss the action. The trial is scheduled to begin on November 17, 1998. The Company believes this action is without merit and intends to vigorously contest this matter, although there can be no assurance that PanAmSat will prevail. If PanAmSat were not to prevail, the amounts involved could be material to the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the fourth quarter of fiscal 1997, no matters were submitted to a vote of stockholders through the solicitation of proxies or otherwise. 17 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS PanAmSat Common Stock was listed on the Nasdaq National Market in connection with the Merger and commenced trading on May 19, 1997 under the symbol "SPOT". The following table sets forth, for the calendar periods indicated, the high and low closing sales price per share for PanAmSat Common Stock, as reported by the Nasdaq National Market and the Dow Jones News Retrieval Service.
1997 HIGH LOW ---- -------- -------- Second Quarter (from May 19, 1997)........................... $30- 3/8 $27- 1/2 Third Quarter................................................ $44- 1/2 $29- 1/4 Fourth Quarter............................................... $46- 1/4 $36- 7/8
At March 24, 1998, there were approximately 85 holders of record of PanAmSat Common Stock. To date, the Company has not declared or paid cash dividends on PanAmSat Common Stock. The Company presently intends to retain future earnings to support the growth of its business and, therefore, does not anticipate paying cash dividends in the near future. The payment of any future dividends on PanAmSat Common Stock will be determined by the Company's Board of Directors in light of conditions then existing, including the Company's earnings, financial condition and capital requirements, restrictions in financing agreements, business conditions and other factors. 18 ITEM 6. SELECTED FINANCIAL DATA The following selected financial data of Galaxy (as predecessor) as of December 31, 1996, 1995 and 1994 and for each year of the three year period ended December 31, 1996 have been derived from the audited financial statements of Galaxy. The selected financial data set forth below as of December 31, 1993 and for the year ended December 31, 1993 have been derived from the unaudited financial statements of Galaxy which, in the opinion of management, include all adjustments necessary (consisting only of normal recurring adjustments) for a fair and consistent presentation of such information. The selected financial data as of and for the year ended December 31, 1997 have been derived from the audited consolidated financial statements of PanAmSat appearing elsewhere in this Annual Report, and should be read in conjunction with such financial statements and notes related thereto and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations."
PANAMSAT HISTORICAL GALAXY HISTORICAL DATA DATA(1) (AS PREDECESSOR) ------------ ------------------------------------------- YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, 1997 1996 1995 1994 1993 ------------ ---------- ---------- --------- -------- (DOLLARS IN THOUSANDS) STATEMENT OF INCOME DA- TA: Total revenues.......... $ 629,939 $ 482,770 $ 386,126 $ 328,243 $220,247 ----------- ---------- ---------- --------- -------- Costs and expenses Cost of outright sales and sales-type leases.. 20,476 52,969 49,616 45,747 34,530 Leaseback expense, net of deferred gain....... 61,907 59,927 36,597 36,617 36,576 Depreciation and amorti- zation................. 149,592 58,523 76,522 54,126 52,025 Direct operating costs.. 61,199 34,794 29,931 33,627 35,034 Selling, general & ad- ministrative........... 42,561 34,119 30,146 51,595 19,278 ----------- ---------- ---------- --------- -------- Operating income........ 294,204 242,438 163,314 106,531 42,804 Interest expense, net(2)................. (30,973) (4,903) (5,828) (6,826) (5,848) Other income............ 385 2,184 7,892 3,885 44,876 ----------- ---------- ---------- --------- -------- Income before taxes, mi- nority interest and extraordinary item. 263,616 239,719 165,378 103,590 81,832 Income tax expense...... 117,325 89,895 62,017 38,846 30,687 Minority interest....... 12,819 -- -- -- -- Extraordinary item(3)... 20,643 -- -- -- -- ----------- ---------- ---------- --------- -------- Net income.............. $ 112,829 $ 149,824 $ 103,361 $ 64,744 $ 51,145 =========== ========== ========== ========= ======== OTHER FINANCIAL DATA: EBITDA(4)............... $ 444,181 $ 303,145 $ 247,728 $ 164,542 $139,705 EBITDA margin........... 71% 63% 64% 50% 63% Net cash provided by op- erating activities..... 286,726 151,238 83,690 110,490 -- Net cash used in invest- ing activities......... (1,414,972) (42,122) (270,396) (109,560) -- Net cash provided by (used in) financing activities............. 1,219,956 (109,122) 186,720 (1,126) -- Capital expenditures.... 541,879 308,735 280,543 114,660 111,104 Total assets............ 5,682,434 1,275,516 1,137,978 868,408 850,640 Total long-term obliga- tions.................. 3,016,680 394,187 290,963 319,620 342,070 Total stockholders' eq- uity................... 2,560,836 -- -- -- --
- -------- (1) Includes financial data for PanAmSat International from May 16, 1997 (the effective date of the Merger). See "Item 1. Business--Overview--The Merger" for a description of the Merger. (2) Net of capitalized interest of $80.5 million, $14.6 million, $10.1 million, $5.1 million and $1.6 million for the years ended December 31, 1997, 1996, 1995, 1994 and 1993, respectively, and net of interest income of $28.0 million in 1997. (3) Represents loss on early extinguishment of debt, net of tax. (4) Represents earnings before net interest expense, income tax expense, depreciation and amortization. EBITDA is commonly used in the communications industry to analyze companies on the basis of operating performance, leverage and liquidity. EBITDA should not be considered as a measure of profitability or liquidity as determined in accordance with generally accepted accounting principles in the statements of income and cash flows. 19 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the financial condition and results of operations of PanAmSat should be read in conjunction with the financial data and the Consolidated Financial Statements appearing elsewhere in this Annual Report. The Company commenced operations on May 16, 1997 upon the Merger. Prior to the Merger, the Company was an inactive corporation formed solely for the purpose of consummating the Merger, and each of PanAmSat International and Galaxy was primarily engaged in the business of providing satellite-based communication services. RESULTS OF OPERATIONS The Company's results of operations as reported incorporate PanAmSat International's activity commencing May 16, 1997, the effective date of the Merger. Since this represents only seven and one-half months of activity for PanAmSat International in 1997, management has determined that for comparative purposes, it would be more meaningful to present the information shown below on a "pro forma" basis reflecting the Merger as though it had occurred at the beginning of the respective periods presented (excluding the impact of PanAmSat International's $225 million gain on the sale of its direct-to-home television rights in certain foreign markets (the "DTH Options") to an affiliate concurrent with the Merger, as well as certain professional and advisory fees and other expenses incurred in connection with the Merger totaling $31.6 million, both of which are non-recurring items that are not indicative of the Company's ordinary course of business). The pro forma results are not necessarily indicative of the combined results that would have occurred had the Merger actually occurred at the beginning of 1996.
PRO FORMA (UNAUDITED) AS REPORTED ------------------ ---------------------------- 1997 1996 1997 1996 1995 -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) REVENUES Operating leases, satellite services and other......... $684,663 $566,027 $558,622 $319,084 $236,382 Outright sales and sales- type leases................ 71,317 163,686 71,317 163,686 149,744 -------- -------- -------- -------- -------- Total revenue.............. 755,980 729,713 629,939 482,770 386,126 -------- -------- -------- -------- -------- COSTS AND EXPENSES Cost of outright sales and sales-type leases.......... 20,476 52,969 20,476 52,969 49,616 Leaseback expense, net of deferred gain.............. 61,907 59,927 61,907 59,927 36,597 Direct operating and SG&A costs...................... 130,076 136,116 103,760 68,913 60,077 Depreciation and amortiza- tion....................... 197,116 181,100 149,592 58,523 76,522 -------- -------- -------- -------- -------- Total...................... 409,575 430,112 335,735 240,332 222,812 -------- -------- -------- -------- -------- Income from operations...... 346,405 299,601 294,204 242,438 163,314 Interest expense, net....... 68,981 125,308 30,973 4,903 5,828 Other income................ (385) (2,184) (385) (2,184) (7,892) -------- -------- -------- -------- -------- Income before income taxes, minority interest and extraordinary item......... 277,809 176,477 263,616 239,719 165,378 Income tax expense.......... 134,343 92,549 117,325 89,895 62,017 -------- -------- -------- -------- -------- Income before minority interest and extraordinary item....................... 143,466 83,928 146,291 149,824 103,361 Minority interest, subsidiary preferred stock dividend................... 24,838 28,474 12,819 -- -- -------- -------- -------- -------- -------- Income before extraordinary item....................... 118,628 55,454 133,472 149,824 103,361 Extraordinary item: loss on extinguishment of debt, net of tax..................... 20,643 -- 20,643 -- -- -------- -------- -------- -------- -------- Net income.................. $ 97,985 $ 55,454 $112,829 $149,824 $103,361 -------- -------- -------- -------- -------- Earnings per share--basic and diluted................ $ 0.66 $ 0.37
20 CONSOLIDATED RESULTS 1997 COMPARED TO 1996 (PRO FORMA AND AS REPORTED) The following discussion of 1997 versus 1996 performance is primarily based on pro forma results. Pro forma results for 1997 and 1996 and as reported results since the Merger date reflect the impact of the acquisition of PanAmSat International, including the use of purchase accounting. Comparisons of as reported results reflect significant increases in amortization of intangible assets, interest expense, the effective income tax rate and shares outstanding arising from the Merger. Revenues. Pro forma revenues increased $26.3 million, or 4%, to $756.0 million in 1997 from $729.7 million in 1996. Pro forma video services revenues increased $88.4 million, or 17%, to $607.6 million in 1997 from $519.2 million in 1996, principally as a result of increased service agreements associated with available transponder capacity, increased ad hoc revenue associated with significant international news events and increased revenues associated with DTH services. Pro forma telecommunications services revenues decreased $43.1 million, or 26%, to $123.2 million in 1997 from $166.3 million in 1996. The decrease was primarily due to less outright sales and sales-type lease activity during 1997. Pro forma satellite services and other revenues decreased $19.0 million, or 43%, to $25.2 million in 1997 from $44.2 million in 1996 principally due to a decrease in ground services sales. The pro forma revenue increase can also be analyzed based on the type of agreement. Pro forma revenues from sales and sales-type leases decreased to $71.3 million in 1997 from $163.7 million in 1996. The decrease was attributable to a lower volume in 1997 relative to 1996 of outright sales and sales-type leases. Pro forma revenues from operating leases of transponders, satellite services and other increased $118.7 million, or 21%, to $684.7 million in 1997 from $566.0 million in 1996, due primarily to additional transponder capacity placed in service. As reported revenues increased $147.1 million, or 30%, to $629.9 million in 1997 from $482.8 million in 1996, primarily due to the impact of the Merger, and also due to increased service agreements associated with available transponder capacity. Cost of Outright Sales and Sales-Type Leases of Transponders. Pro forma cost of outright sales and sales-type leases of transponders decreased $32.5 million, or 61%, to $20.5 million in 1997 from $53.0 million in 1996, due to the decrease in outright sales and sales-type leases. Leaseback Expense, Net of Deferred Gain. Pro forma leaseback expense, net of deferred gain, increased $2.0 million, or 3%, to $61.9 million in 1997 from $59.9 million in 1996. Direct Operating and Selling, General and Administrative Costs. Pro forma direct operating and selling, general and administrative costs decreased $6.0 million, or 4%, to $130.1 million in 1997 from $136.1 million in 1996. Depreciation and Amortization. Pro forma depreciation and amortization increased $16.0 million, or 9%, to $197.1 million in 1997, from $181.1 million in 1996, due primarily to depreciation expense associated with additional transponder capacity placed in service. As reported depreciation and amortization increased $91.1 million, or 156%, to $149.6 million in 1997, from $58.5 million in 1996. In addition to the impact of the Merger, the increase was a result of depreciation expense associated with additional transponder capacity placed in service. Income from Operations. Pro forma income from operations increased $46.8 million, or 16%, to $346.4 million in 1997, from $299.6 million in 1996. The increase was primarily due to the increase in revenues and the decrease in cost of outright sales and sales-type leases. Interest Expense, Net. Pro forma interest expense, net decreased $56.3 million, or 45%, to $69.0 million in 1997, from $125.3 million in 1996. The decrease in pro forma interest expense, net was due to increased 21 interest income earned on marketable securities coupled with reduced interest expense reflecting larger amounts of interest capitalized on satellites under construction which are expected to be launched in 1998 and 1999. Income Tax Expense. Pro forma income tax expense increased $41.8 million, or 45%, to $134.3 million in 1997, from $92.5 million in 1996. The increase in pro forma income tax expense was principally due to the increase in taxable income. The pro forma tax rates for 1997 and 1996 of 48% and 52%, respectively, are higher than the statutory rate due to the fact that goodwill amortization attributable to the Merger is not deductible for tax purposes. Minority Interest. Pro forma minority interest, representing preferred stock dividends of PanAmSat International, decreased $3.7 million to $24.8 million in 1997 from $28.5 million in 1996. The decrease was due to the conversion of PanAmSat International's 12 3/4% Mandatorily Exchangeable Senior Redeemable Preferred Stock due 2005 into 12 3/4% Senior Subordinated Notes due 2005 in the third quarter of 1997 and the related termination of dividend payment obligations. Extraordinary Item. The Company recorded an extraordinary charge of $20.6 million ($34.3 million before taxes) during 1997 related to the early extinguishment of certain indebtedness of PanAmSat's subsidiaries. The charge principally represented the excess of the price paid for the debt over its carrying value, net of any deferred financing costs and fair value adjustments recognized in connection with the Merger. 1996 COMPARED TO 1995 (AS REPORTED) Revenues. Revenues increased $96.7 million, or 25%, to $482.8 million in 1996 from $386.1 million in 1995. Video services revenues increased $78.5 million, or 33%, to $314.4 million in 1996 from $235.9 million in 1995, principally as a result of additional transponder capacity with the successful launch of Galaxy III-R and Galaxy IX. Telecommunications services revenues increased $28.0 million, or 28%, to $126.4 million in 1996 from $98.4 million in 1995. The increase was primarily due to an increase in the full and occasional use of SBS 6, Galaxy IV and Galaxy VII Ku-band transponders. Satellite services and other revenues decreased $9.8 million, or 19%, to $42.0 million in 1996 from $51.8 million in 1995 principally due to a decrease in ground service sales. The revenue increase can also be analyzed based on the type of agreement. Revenues from sales and sales-type leases increased to $163.7 million in 1996 from $149.7 million in 1995. The increase was attributable to higher interest income on sales-type leases offset by a lower volume in 1996 relative to 1995 of outright sales and sales-type leases of transponders previously placed in service. The lower volume of outright sales and sales-type leases in 1996 primarily reflected a decrease in available in-orbit C-band transponder capacity, which is typically purchased outright or via sales-type leases by cable video providers. Revenues from operating leases of transponders, satellite services and other increased $82.7 million, or 35%, to $319.1 million in 1996 from $236.4 million in 1995, due primarily to additional transponder capacity placed in service with the launch of Galaxy III-R and Galaxy IX in 1996, including revenues received from a related party for certain Galaxy III-R transponder leases. Cost of Outright Sales and Sales-Type Leases of Transponders. Cost of outright sales and sales-type leases of transponders increased $3.4 million, or 7%, to $53.0 million in 1996 from $49.6 million in 1995, reflecting relatively constant margins on transponder sales and sales-type leases. Leaseback Expense, Net of Deferred Gain. Leaseback expense, net of deferred gain, increased $23.3 million, or 64%, to $59.9 million in 1996 from $36.6 million in 1995. This increase in leaseback expense, net of deferred gain, was due to the sale-leaseback of Galaxy III-R in 1996. Direct Operating and Selling, General and Administrative Costs. Direct operating and selling, general and administrative costs increased $8.8 million, or 15%, to $68.9 million in 1996 from $60.1 million in 1995 principally due to an increase in TT&C costs related to Galaxy III-R and Galaxy IX which were launched in 1996 and an increase in the provision for doubtful accounts. 22 Depreciation and Amortization. Depreciation decreased $18.0 million, or 24%, to $58.5 million in 1996, from $76.5 million in 1995, due primarily to accelerated depreciation in 1995 attributable to a reduction in the expected useful lifetime of one noncommercial satellite resulting from a customer's decision not to exercise a lease renewal option, partially offset by additional depreciation associated with the launch and placement in service of Galaxy III-R. Income from Operations. Income from operations increased $79.1 million, or 48%, to $242.4 million in 1996, from $163.3 million in 1995. The increase is primarily due to the increase in revenues offset by an increase in leaseback expense, net of deferred gain. Other Income. Other income decreased $5.7 million to $2.2 million in 1996 from $7.9 million in 1995, primarily due to non-recurring revenue earned in 1995 for providing services to General Motors Corporation. Income Tax Expense. The effective tax rate for each of 1996 and 1995 was 38%, reflecting the U.S. federal, state and local income taxes reduced for foreign sales corporation benefits. LIQUIDITY AND CAPITAL RESOURCES Pursuant to the Merger, aggregate consideration paid to PanAmSat International shareholders consisted of approximately $1.5 billion in cash and approximately 42.5 million shares of PanAmSat Common Stock. In connection with the Merger, the Company obtained a term loan in the amount of $1.725 billion from Hughes Electronics Corporation, an affiliate of the Company ("HE"). In addition to the $1.725 billion loan, at December 31, 1997 the Company also had long-term indebtedness of $717 million (comprised primarily of $600 million of loans under the Original Credit Agreement (as defined below) and $77.2 million due to affiliates). The significant cash outlays for the Company will continue to be primarily capital expenditures related to the construction and launch of satellites and debt service costs. With the commencement of construction of PAS-6B, the Company now has seven satellites under various stages of development for which the Company has budgeted capital expenditures. See "--Risk Factors" below. The Company will require approximately $900 million to complete the construction, insurance and launch of PAS-6B, PAS-7, PAS-8, Galaxy X, Galaxy XI, PAS-9, and PAS-1R, together with related equipment. This amount is expected to be funded from cash flow from operations, vendor financing and borrowings under the Credit Agreement (as defined below). In addition to funding the construction and launch of new satellites, the Company also expects to exercise its remaining early buy-out options under certain satellite sale-leaseback transactions entered into in prior years which will require the Company to fund outlays of approximately $152 million in 1998 (for which an early buy-out option for $96.6 million relating to transponders on SBS-6 was exercised by the Company in January 1998) and approximately $366 million in 1999. Such additional outlays are expected to be funded from cash flow from operations and borrowings under the Credit Agreement. On January 16, 1998, PanAmSat completed a private placement pursuant to Rule 144A under the Securities Act of 1933 of $750 million aggregate principal amount of new debt securities (the "Offering"). The net proceeds from the Offering were used to repay bank loans incurred partially to finance the recent tender offer for certain debt securities of PanAmSat's subsidiaries, as well as for general corporate purposes. In connection with the Offering, the Company executed a Credit Agreement (the "Credit Agreement") with certain lenders and Citicorp USA, Inc. as administrative agent. The Credit Agreement amends and restates the credit agreement among the parties dated December 24, 1997 (the "Original Credit Agreement"). The Original Credit Agreement provided the Company with up to $500 million of revolving credit loans (the "Revolving Credit Loans") for five years, and up to $300 million in short-term loans maturing on April 30, 1998 (the "Term Loans"). The Credit Agreement amends the Original Credit Agreement to terminate the Term Loan facility. The Company currently has $500 million of Revolving Credit Loans available to it under the Credit Agreement. PanAmSat believes that the Credit Agreement, vendor financing, future cash flow from operations (assuming satellites in development are successfully launched and commence service on the schedule currently 23 contemplated) and cash on hand will be sufficient to fund PanAmSat's operations, anticipated exercise of early buy-out options on certain satellite sale-leaseback transactions and its remaining costs for the construction and launch of the satellites currently in development for the next twelve months. There can be no assurance, however, that PanAmSat's assumptions with respect to future construction and launch costs will be correct, or that additional vendor financing, PanAmSat's future cash flow from operations and borrowings under the Credit Agreement will be sufficient to cover any shortfall in funding for future launches caused by launch failures, cost overruns, delays or other unanticipated expenses. If circumstances required PanAmSat to incur additional indebtedness, the ability of PanAmSat to incur any such additional indebtedness would be subject to the terms of PanAmSat's outstanding indebtedness. The failure to obtain such financing could have a material adverse effect on PanAmSat's operations and its ability to accomplish its business plan. Net cash provided by operating activities decreased to $61.7 million in 1997, from $151.2 million in 1996, an increase from $83.7 million in 1995. The decrease in 1997 was primarily attributable to payments of various liabilities acquired in the Merger, offset by larger adjustments related to amounts of depreciation and amortization as a result of the Merger. The increase in 1996 was primarily attributable to increased cash receipts from customers on additional transponders committed under sales-type and operating leases. Net cash used in investing activities increased to $1,640.0 million in 1997, from $42.1 million in 1996, a decrease from $270.4 million in 1995. The increase in 1997 was primarily attributable to the net cash paid in connection with the Merger and additional capital expenditures for satellite systems under development, offset by proceeds from the sale of marketable securities. The decrease in 1996 was primarily due to proceeds from the sale and leaseback of Galaxy III-R. Net cash provided by (used in) financing activities increased to $1,670.0 million in 1997, from $(109.1) million in 1996, a decrease from $186.7 million in 1995. The increase in 1997 was primarily due to new borrowings (including $1.725 billion of Merger-related borrowings), offset by repayments of long- term debt in connection with the tender offer for certain debt securities of the Company's subsidiaries. The decrease in 1996 (representing distributions by Galaxy to its parent company) was primarily a result of proceeds from the sale and leaseback of Galaxy III-R and increased cash collections from customers. MARKET RISKS From time to time the Company is exposed to market risks relating to interest rate changes. The Company does not enter into derivatives or other financial instruments for trading or speculative purposes. At December 31, 1997, in connection with its debt refinancing activities, the Company entered into certain U.S. Treasury rate lock contracts to reduce its exposure to fluctuations in interest rates. The aggregate nominal value of these contracts was $375 million and these contracts were accounted for as hedges because they were applied to a specific refinancing plan that was consummated shortly after December 31, 1997. The counterparties are major financial institutions. The fair value of these financial instruments at December 31, 1997 approximated their contract value. The cost to unwind these instruments in 1998 will be amortized to expense over the term of the newly placed debt securities to which such hedges were applied. YEAR 2000 MATTERS Many of the world's computer systems currently record years in a two-digit format. Such computer systems will be unable to properly interpret dates beyond the year 1999, which could lead to disruption in the U.S. and internationally. PanAmSat has begun an evaluation of its major business and operations software systems for Year 2000 compliance and expects to complete that evaluation in 1998. As a part of that process, the Company is identifying any applications software which may require further analysis and updating. The Company's most significant assets, the satellites themselves, do not utilize year-specific code in their processing systems and hence are not subject to spontaneous events at the change in year. Nearly all of the PanAmSat satellites are less than 10 years old, and the ground-based satellite control software systems were also largely developed in the last 10 years with many new software systems and 24 enhancements added in the last 5 years. Instances where date corrections may be necessary are anticipated to be far fewer than in the older Cobol-based systems which have been highlighted in other industries as requiring significant re-coding. Further, in all cases the satellite control activities are subject to real-time confirmation by human operators, and any unforeseen software problems can be potentially identified and bypassed before any actions are taken which would adversely affect a satellite. Based upon the facts and circumstances described above, PanAmSat does not believe that the Year 2000 software issue presents any material risk to the business or assets of PanAmSat or to the Company's ability to perform its obligations under its agreements to provide satellite services. As indicated above, PanAmSat will continue to conduct analysis and take appropriate remedial action when required with respect to its critical systems. The total cost to the Company of Year 2000 compliance activities has not been and is not anticipated to have a material adverse effect on its financial position or results of operations. RISK FACTORS Risks Associated with Technology. Satellites are subject to significant risks related to delayed and failed launches and in-orbit failures. Of the 25 satellite launches by PanAmSat or its predecessors since 1983, the Company has experienced three launch failures: on December 1, 1994, the original PAS-3 was destroyed upon launch as a result of a malfunction of an Ariane IV launch vehicle; on August 22, 1992, the Company's original Galaxy I-R satellite was destroyed upon launch as a result of an Atlas launch vehicle malfunction; and the Company's Leasat 4, which was launched on August 27, 1985, was not placed in service after launch due to the failure of its communications payload. Each of the foregoing satellites was insured in an amount sufficient to substantially recover the Company's investment therein, and each was subsequently replaced with a satellite that was successfully launched. Certain launch vehicles present special risks to the Company. Certain launch vehicles scheduled to be used by PanAmSat have unproven track records and are susceptible to certain risks associated with new launch vehicles. For example, Sea Launch and Delta III are two launchers that are scheduled to be used by PanAmSat to launch satellites within the next two years. These launchers have no commercial launch history, which poses special risks including potential launch delays and failures. The Company expects to launch Galaxy X on a Delta III launch vehicle, Galaxy XI on a Sea Launch launch vehicle, PAS-7, PAS-6B and PAS-1R on Ariane launch vehicles, and PAS-8 and PAS-9 on Proton launch vehicles. The Company has contracts directly with Arianespace S.A. ("Arianespace") and with International Launch Services (formerly known as Lockheed-Khrunichev-Energia International, Inc.) ("ILS") for the Ariane and Proton launches, respectively. The Company has a contract with Hughes Space and Communications International, Inc. ("HSCI") for one Delta III launch and one Sea Launch launch, such launch services to be provided by Boeing and Sea Launch LP, respectively, under contracts between HSCI and such providers. The Company's contract with ILS provides for launch services on the Proton launch vehicle. The Proton is built in Russia and launched in Kazakhstan. ILS suffered a launch failure of a Proton launch vehicle in December 1997; an investigation into the failure has commenced, but a final report has not been issued. In addition, there were two Proton launch failures in 1996. Under the Company's contract with ILS, if the Proton is unavailable due to technical, regulatory or other factors, ILS would provide launch services for at least one launch using an alternative launch vehicle. The contract provides for the launch of three PanAmSat satellites using Proton launch vehicles. PAS 5 was launched on a Proton in August 1997 and it is anticipated that PAS-8 will be launched on a Proton in the third quarter of 1998. The Company plans to launch Galaxy X in June 1998 from Cape Canaveral, Florida, aboard a Delta III launch vehicle manufactured by Boeing (formerly McDonnell Douglas). This launch will be the first commercial launch of the Delta III, the latest generation based in part on the Delta II launch vehicle. A Delta II launch vehicle carrying an Air Force satellite suffered a launch failure in January 1997. The Company plans to launch Galaxy XI in the fourth quarter of 1998 using a Sea Launch launch vehicle. Sea Launch is a joint venture among Boeing Commercial Space Co., Kvaerner A.S., RSC-Energia and the NPO- 25 Yuzhnoye space concern. This launch will be the first commercial launch of the Sea Launch service, which will utilize a three-stage launch vehicle launched from a novel semi-submersible launch platform in the Pacific Ocean near the equator. There can be no assurance that PanAmSat's planned launches on Delta III or using the Sea Launch platform will be successful. Galaxy XI is scheduled to be a Hughes-manufactured HS-702 model spacecraft. The HS-702 model has an unproven track record and may be susceptible to certain risks related to its new technology. There can be no assurance that PanAmSat's planned use of an HS-702 model spacecraft will be successful. A significant delay in the delivery or launch of any future satellite would adversely affect the Company's marketing plan for such satellite. Delays can result from the construction of satellites and launch vehicles, launch failures, the periodic unavailability of reliable launch opportunities and possible delays in obtaining regulatory approvals. If satellite construction schedules are not met, there can be no assurance that a launch opportunity will be available at the time a satellite is ready to be launched. The occurrence of a launch failure results in a significant delay in the deployment of a particular satellite because of the need both to construct a replacement satellite and obtain another launch opportunity. A significant delay in the launch of any of PanAmSat's satellites could enable customers who pre-purchased or agreed to lease capacity of such satellite to terminate their contracts. Satellites are also subject to risks after they have been properly deployed and operational. The likelihood of in-orbit failure may be heightened by PanAmSat's use on certain of their satellites of new technology, including a new xenon ion propulsion system on PAS-5, Galaxy VIII-i and Galaxy XI. In addition, the Company's planned deployment of new HS-702 model satellites may increase the risk of in-orbit failure. Following the launch of PAS-6, an anomaly was detected in its solar arrays. The satellite has experienced several circuit failures in its solar arrays and may experience additional failures in the future. The circuit failures will require the Company to forego the use of some transponders initially and to turn off additional transponders in later years. However, the ability of transponders to provide transmission power for DTH signal reception using 60- centimeter dishes is not affected. In November 1997, the Company negotiated an extension of the launch insurance policy for PAS-6 to extend the period of coverage from 181 days from the launch date to one year plus 181 days from the launch date. In February 1998, the Company filed a proof of loss totaling approximately $29 million with its launch insurance underwriters based on certain anomalies discovered in the solar panels on PAS-6 prior to February 5, 1998. The Company expects to receive payment from the insurers pursuant to the proof of loss in the second quarter of 1998. In connection with the extension of the launch insurance policy for PAS-6, the Company has agreed to forego any further claims for partial loss due to subsequent anomalies involving the spacecraft's solar panels but the endorsement to PAS-6's launch insurance policy does not otherwise affect the Company's ability to claim a total constructive launch failure of the spacecraft for any reason (other than normal policy exclusions). On March 9, 1998, the Company entered into arrangements with its customers to build a new satellite to be designated as PAS-6B. In connection with these arrangements, the Company entered into an amendment to its agreements with its customers on PAS-6. Under these amendments, PanAmSat will acquire a new Hughes HS-601HP satellite that is scheduled to be launched on an Ariane IV launch vehicle in the fourth quarter of 1998. The Company is exploring its options for the deployment and use of the original PAS-6 satellite and anticipates either using that satellite as either a backup for PAS-6B, or moving it to another orbital location for other purposes. Management believes that it will be able to generate sufficient future revenues on PAS-6 to enable it to recover the carrying value of its investment in the satellite. Due to contract performance issues relating to the PAS-7 and PAS-8 construction programs, the Company has informed SS/Loral that SS/Loral is in default under the construction contracts for such satellites. Such notice gives the Company the right to terminate in whole or in part its contract for the construction and delivery of 26 PAS-7, PAS-8 and a replacement satellite for either of such satellites or for PAS-6. The Company believes it has adequate sources to procure satellites in the event such performance issues are not satisfactorily resolved. SS/Loral has responded to the Company's notice by asserting that the Company is not entitled to claim a default termination under such circumstances. Regulatory Risks. The satellite industry is highly regulated both in the United States and internationally. PanAmSat is subject to the regulatory authority of the U.S. government (primarily the FCC) and the national communications authorities of the countries in which it operates. The business prospects of PanAmSat could be adversely affected by the adoption of new laws, policies, regulations, or changes in the interpretation or application of existing laws, policies or regulations, that modify the present regulatory environment. While PanAmSat has generally been successful in obtaining necessary licenses, there can be no assurance that PanAmSat will obtain all requisite regulatory approvals for the construction, launch and operation of any of PanAmSat's future satellites and for the orbital slots planned for these satellites or, if obtained, that such licenses will not impose operational restrictions on PanAmSat. Nor can there be any assurance that PanAmSat will succeed in coordinating any or all of its future satellites internationally. Regulatory schemes in countries in which PanAmSat operates may impose impediments to the Company's operations. PanAmSat, its customers or companies with which PanAmSat does business must have authority from each country in which PanAmSat provides services. Although PanAmSat believes that it, its customers and/or companies with which it does business presently hold the requisite licenses and approvals for the countries in which it currently provides services, the regulatory schemes in each country are different and thus there may be instances of noncompliance of which PanAmSat is not aware. In addition, portions of PanAmSat's future satellites are being designed to provide service to countries in which regulatory impediments continue to exist. Although PanAmSat believes these regulatory schemes will not prevent it from pursuing its business plan, there can be no assurance that any current regulatory approvals held by PanAmSat are, or will remain, sufficient in the view of foreign regulatory authorities, or that any additional necessary approvals will be granted on a timely basis, or at all, in all jurisdictions in which the Company wishes to operate its new satellites or that restrictions applicable thereto will not be unduly burdensome. Certain of the frequencies that are intended to be used to uplink to PAS-7 and PAS-6 must be coordinated with the U.S. government on an earth-station-by- earth-station basis to ensure that harmful interference to government operations is minimized. PanAmSat has undertaken such coordination and believes that it will be able to coordinate successfully with federal government users or will institute operational solutions that will mitigate the problem, but there can be no assurance that PanAmSat's efforts will be successful. Effect of Loss of Key Personnel. The success of PanAmSat's business depends in part upon the continued employment of Frederick A. Landman, President and Chief Executive Officer and Lourdes Saralegui, Executive Vice President. The loss of either of these executives could have an adverse effect on PanAmSat's business. PanAmSat is not the beneficiary of key man life insurance policies for either Mr. Landman or Ms. Saralegui. To minimize the potential adverse effect that the loss of either of these executives would have on PanAmSat's business, Mr. Landman has established a senior advisory committee known as the Office of the President. The Office of the President consists of several executive officers of PanAmSat, selected by Mr. Landman, including Ms. Saralegui. The committee meets regularly with Mr. Landman to discuss key issues affecting the Company's business and operations. The Company believes that in the event of a loss of either Mr. Landman or Ms. Saralegui, the Office of the President or certain of its members would be capable of overseeing the Company's operations and business, mitigating the adverse impact caused by any loss. Litigation. See "Item 3. Legal Proceedings." ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations--Market Risks." 27 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS
PAGE ---- Independent Auditors' Report.............................................. 29 Consolidated Statements of Income for Each of the Three Years Ended Decem- ber 31, 1997............................................................. 30 Consolidated Balance Sheets--December 31, 1997 and 1996................... 31 Consolidated Statements of Changes in Stockholders' Equity for Each of the Three Years Ended December 31, 1997...................................... 33 Consolidated Statements of Cash Flows for Each of the Three Years Ended December 31, 1997........................................................ 34 Notes to Consolidated Financial Statements................................ 35
28 INDEPENDENT AUDITORS' REPORT To the Board of Directors of PanAmSat Corporation We have audited the accompanying consolidated balance sheets of PanAmSat Corporation and subsidiaries and predecessor entity as of December 31, 1997 and 1996, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of PanAmSat Corporation and subsidiaries and predecessor entity as of December 31, 1997 and 1996 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. Deloitte & Touche LLP Stamford, Connecticut January 23, 1998 (except for Note 4, which is March 9, 1998) 29 PANAMSAT CORPORATION CONSOLIDATED STATEMENTS OF INCOME DECEMBER 31, 1997, 1996 AND 1995 (IN THOUSANDS)
1997 1996 1995 -------- -------- -------- REVENUES: Operating leases, satellite services and other.. $558,622 $319,084 $236,382 Outright sales and sales-type leases............ 71,317 163,686 149,744 -------- -------- -------- Total revenues................................ 629,939 482,770 386,126 -------- -------- -------- OPERATING COSTS AND EXPENSES: Cost of outright sales and sales-type leases.... 20,476 52,969 49,616 Leaseback expense, net of deferred gains........ 61,907 59,927 36,597 Depreciation and amortization................... 149,592 58,523 76,522 Direct operating costs.......................... 61,199 34,794 29,931 Selling, general and administrative expenses.... 42,561 34,119 30,146 -------- -------- -------- Total operating costs and expenses............ 335,735 240,332 222,812 -------- -------- -------- INCOME FROM OPERATIONS........................... 294,204 242,438 163,314 INTEREST EXPENSE--Net............................ (30,973) (4,903) (5,828) OTHER INCOME..................................... 385 2,184 7,892 -------- -------- -------- INCOME BEFORE INCOME TAXES, MINORITY INTEREST AND EXTRAORDINARY ITEM.............................. 263,616 239,719 165,378 INCOME TAXES..................................... 117,325 89,895 62,017 -------- -------- -------- INCOME BEFORE MINORITY INTEREST AND EXTRAORDINARY ITEM............................................ 146,291 149,824 103,361 MINORITY INTEREST--Subsidiary preferred stock dividend........................................ 12,819 -- -- -------- -------- -------- INCOME BEFORE EXTRAORDINARY ITEM................. 133,472 149,824 103,361 EXTRAORDINARY ITEM, LOSS ON EXTINGUISHMENT OF DEBT, NET OF TAX................................ 20,643 -- -- -------- -------- -------- NET INCOME....................................... $112,829 $149,824 $103,361 ======== ======== ========
See notes to consolidated financial statements. 30 PANAMSAT CORPORATION CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1997 AND 1996 (IN THOUSANDS)
1997 1996 ---------- ---------- ASSETS CURRENT ASSETS: Cash and cash equivalents............................... $ 91,739 $ 29 Accounts receivable--net................................ 41,030 21,742 Net investment in sales-type leases..................... 27,757 20,634 Prepaid expenses and other.............................. 77,891 23,313 Deferred income taxes................................... 46,940 46,989 ---------- ---------- Total current assets.................................. 285,357 112,707 ---------- ---------- SATELLITES AND OTHER PROPERTY AND EQUIPMENT--Net......... 2,506,082 720,225 NET INVESTMENT IN SALES-TYPE LEASES...................... 324,689 320,610 GOODWILL--Net of amortization............................ 2,498,498 72,896 DEFERRED CHARGES--Including deferred income taxes of $28,073 in 1996......................................... 67,808 49,078 ---------- ---------- TOTAL ASSETS............................................. $5,682,434 $1,275,516 ========== ==========
See notes to consolidated financial statements. 31 PANAMSAT CORPORATION CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1997 AND 1996 (IN THOUSANDS, EXCEPT SHARE DATA)
1997 1996 ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt.......................... $ 16,398 $ -- Accounts payable and accrued liabilities................... 26,828 30,941 Deferred gains on sale-leasebacks.......................... 42,870 42,871 Deferred revenues.......................................... 18,822 5,424 ---------- ---------- Total current liabilities................................ 104,918 79,236 DUE TO AFFILIATES (PRINCIPALLY MERGER-RELATED INDEBTEDNESS).. 1,802,195 -- LONG-TERM DEBT............................................... 640,123 -- DEFERRED GAINS ON SALE-LEASEBACKS............................ 191,882 234,751 DEFERRED INCOME TAXES........................................ 179,267 -- OTHER LIABILITIES AND DEFERRED CREDITS....................... 103,029 51,595 ACCRUED OPERATING LEASEBACK EXPENSE.......................... 100,184 107,841 ---------- ---------- TOTAL LIABILITIES............................................ 3,121,598 473,423 ---------- ---------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Parent company's net investment............................ -- 802,093 Common stock, $0.01 par value--400,000,000 shares autho- rized; 149,135,654 shares issued and outstanding................. 1,491 -- Additional paid-in capital................................. 2,501,344 -- Retained earnings.......................................... 58,001 -- ---------- ---------- Total stockholders' equity............................... 2,560,836 802,093 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................... $5,682,434 $1,275,516 ========== ==========
See notes to consolidated financial statements. 32 PANAMSAT CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK PAR VALUE ------------------ PARENT ADDITIONAL COMPANY'S PAID-IN RETAINED NET INVESTMENT SHARES AMOUNT CAPITAL EARNINGS -------------- ----------- ------ ---------- -------- BALANCE, JANUARY 1, 1995................... $ 471,310 -- $ -- $ -- $ -- Net contributions from Parent............... 186,720 -- -- -- -- Net income............ 103,361 -- -- -- -- ---------- ----------- ------ ---------- -------- BALANCE, DECEMBER 31, 1995................... 761,391 -- -- -- -- Net distributions to Parent............... (109,122) -- -- -- -- Net income............ 149,824 -- -- -- -- ---------- ----------- ------ ---------- -------- BALANCE, DECEMBER 31, 1996................... 802,093 -- -- -- -- Net income prior to Merger............... 54,828 -- -- -- (54,828) Net contributions from Parent............... 370,424 -- -- -- -- Capitalization in con- nection with Merger.. (1,227,345) 149,122,807 1,491 2,500,854 Additional issuance of stock................ -- 12,847 -- 490 -- Net income............ -- -- -- -- 112,829 ---------- ----------- ------ ---------- -------- BALANCE, DECEMBER 31, 1997................... $ -- 149,135,654 $1,491 $2,501,344 $ 58,001 ========== =========== ====== ========== ========
See notes to consolidated financial statements. 33 PANAMSAT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (IN THOUSANDS)
1997 1996 1995 ---------- -------- -------- CASH FLOWS PROVIDED BY OPERATING ACTIVITIES: Net income.................................... $ 112,829 $149,824 $103,361 Adjustments to reconcile net income to net cash provided by operating activities: Cost of outright sales....................... -- 14,523 5,990 Gross profit on sales--type leases........... (33,180) (51,802) (62,855) Depreciation and amortization................ 149,592 58,523 76,522 Deferred income taxes........................ 129,065 (21,399) (18,235) Amortization of gains on sale-leasebacks..... (42,870) (41,559) (27,133) Provision for uncollectible receivables...... -- 1,315 (6,666) Interest expense capitalized................. (80,468) (14,613) (10,147) Minority interest............................ 12,819 -- -- Extraordinary item........................... 20,643 -- -- Changes in assets and liabilities, net of ac- quired assets and liabilities: Collections on investments in sales-type leases...................................... 21,978 31,204 19,554 Operating lease and other receivables........ (8,086) (6,053) (6,543) Prepaid expenses and other current assets.... (37,333) 1,725 (1,604) Accounts payable and accrued liabilities..... (130,921) (935) 8,486 Accrued operating leaseback expense.......... (7,657) 38,738 3,441 Deferred revenues and other.................. (44,685) (8,253) (481) ---------- -------- -------- Net cash provided by operating activities... 61,726 151,238 83,690 ---------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of PanAmSat International, net of cash acquired............................... (1,486,266) -- -- Capital expenditures......................... (541,879) (294,122) (270,396) Proceeds from sale-leaseback of satellite transponders................................ -- 252,000 -- Proceeds from sale of marketable securities.. 388,173 -- -- ---------- -------- -------- Net cash used in investing activities....... (1,639,972) (42,122) (270,396) ---------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: New borrowings (including acquisition borrowings of $1.725 billion)............... 2,391,836 -- -- Net contributions from (distributions to) parent company.............................. -- (109,122) 186,720 Parent company contributions prior to the Merger...................................... 370,424 -- -- Repayments of long-term debt................. (1,092,794) -- -- Stock issued to 401(k) plan.................. 490 -- -- ---------- -------- -------- Net cash provided by (used in) financing ac- tivities................................... 1,669,956 (109,122) 186,720 ---------- -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................................. 91,710 (6) 14 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR.. 29 35 21 ---------- -------- -------- CASH AND CASH EQUIVALENTS, END OF YEAR........ $ 91,739 $ 29 $ 35 ========== ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMA- TION: Cash received for interest................... $ 22,229 $ -- $ -- ========== ======== ======== Cash paid for interest....................... $ 109,858 $ -- $ -- ========== ======== ======== Cash paid for taxes.......................... $ 105,218 $ -- $ -- ========== ======== ========
See notes to consolidated financial statements. 34 PANAMSAT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1.BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS BASIS OF PRESENTATION--Effective May 16, 1997, PanAmSat Corporation (the "Company") acquired the business of PanAmSat International Systems, Inc. (then operating under its previous name, PanAmSat Corporation) ("PanAmSat International"). In connection with the acquisition, the net assets of the Galaxy Business of Hughes Communications, Inc. (the "Galaxy Business") were contributed to the Company. (As used herein, the Company refers to the business and operations of PanAmSat Corporation and the Galaxy Business, its predecessor entity.) The consideration paid to PanAmSat International's common stockholders consisted of $1.5 billion in cash and 42.5 million shares of common stock of the Company having an estimated value of $1.3 billion. The acquisition of PanAmSat International was accounted for as a purchase and its operating results have been consolidated from the date of acquisition. The purchase price exceeded the estimated fair value of PanAmSat International's net assets (principally satellites) by approximately $2.5 billion, which has been allocated to goodwill and is being amortized on a straight-line basis over forty years. In a separate but related transaction, as a condition precedent to the merger, the Company redeemed 7.5 million shares of its common stock that was received by a PanAmSat International stockholder for $225 million in cash, and these proceeds were used by the former PanAmSat International stockholder to acquire the Company's rights to equity interests in certain direct-to-home businesses in Latin America and the Iberian Peninsula (the "DTH Rights"). In connection with the transactions described above, the Company borrowed $1.725 billion from Hughes Electronics Corporation ("Hughes"), a wholly owned subsidiary of General Motors Corporation ("GM") and owner of 71 1/2% of the Company's common stock. The Hughes borrowings initially had a term of three years, a floating interest rate of London Interbank Offered Rate ("LIBOR") plus 2% and quarterly principal payments of $50 million commencing in August 1998. (See Note 7 for a description of certain modifications made to the terms of these borrowings.) As a result of the merger transactions described above (the "Merger"), the Company acquired the indebtedness of PanAmSat International consisting primarily of 9 3/4% Senior Secured Notes due 2000 and 11 3/8% Senior Subordinated Discount Notes due 2003, as well as its 12 3/4% Mandatorily Exchangeable Senior Redeemable Preferred Stock due 2005 (the "Preferred Stock"). During the third quarter of 1997, PanAmSat International exchanged the Preferred Stock into 12 3/4% Senior Subordinated Notes due 2005. These debt instruments are collectively referred to as the "Old Notes." The principal components of the Merger were as follows: Fair value of assets acquired (excluding goodwill)............... $1,954,902 Goodwill......................................................... 2,470,000 Fair value of liabilities assumed (including Old Notes).......... (1,424,902) Fair value of common stock issued................................ (1,275,000) ---------- Debt issued in connection with the Merger........................ 1,725,000 Less: Cash acquired.............................................. (238,734) ---------- Net cash paid in connection with the Merger...................... $1,486,266 ==========
35 PANAMSAT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Unaudited pro forma summary results of operations as if PanAmSat International had been acquired at the beginning of 1997 and 1996 are presented below (in thousands, except per share data):
1997 1996 -------- -------- Revenues.................................................. $755,980 $729,713 Income before extraordinary items......................... $118,628 $ 55,454 Net income................................................ $ 97,985 $ 55,454 Income before extraordinary item per share--basic and di- luted.................................................... $ 0.80 $ 0.37 Net income per share--basic and diluted................... $ 0.66 $ 0.37
The unaudited pro forma results of operations include adjustments to reflect the issuance of certain indebtedness related to the Merger, fair value adjustments and the recognition of goodwill associated with the transaction. The unaudited pro forma results exclude the impact of PanAmSat International's $225 million pre-tax gain on the sale of the DTH Rights, as well as certain professional and advisory fees and other expenses incurred by PanAmSat International in connection with the Merger totaling $31.6 million, both of which are nonrecurring items which are not indicative of the Company's ordinary course of business. The pro forma earnings per share for the years ended December 31, 1997 and 1996 is calculated on a basic and diluted basis using the pro forma average number of common shares assumed to be outstanding during the period. DESCRIPTION OF THE BUSINESS--PanAmSat is the world's largest commercial provider of satellite-based communications services through its global network of 17 satellites (excluding Brasilsat A1, which is in inclined orbit and does not provide the Company with a significant source of revenues) that provide state-of-the-art telecommunications services for customers worldwide. The Company is a leading provider of satellite capacity for television program distribution to network, cable and other redistribution sources in the United States, Latin America, Africa, south Asia and the Asia-Pacific region. The Company also provides satellite services and related technical support for live transmissions for news and special events coverage. In addition, PanAmSat provides satellite services to telecommunications carriers, corporations and Internet service providers for the provision of satellite-based communications networks, including private corporate networks employing very small aperture antennas and international access to the U.S. Internet backbone. Prior to the Merger, the Galaxy Business was an operating division of a wholly owned subsidiary of Hughes and its financial information for these periods was derived from the historical financial statements of the subsidiary based upon assumptions that the Company's management believes represent a reasonable basis for presenting results of operations and financial position. Financial data for these periods also included the allocation of certain corporate expenses of Hughes and its wholly owned subsidiary based upon a systematic allocation process that was uniformly applied to similar operating business units of Hughes. 2.SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include the accounts of the Company and its domestic and foreign subsidiaries. All significant intercompany balances and transactions have been eliminated. USE OF ESTIMATES--The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts that differ from those estimates. REVENUE RECOGNITION--The Company enters into contracts to provide satellite capacity and related services. Revenues are generated from outright sale, sales-type lease and operating lease contracts with customers to provide satellite transponders and transponder capacity and, in certain cases, earth station and teleport facilities, 36 PANAMSAT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) for periods ranging from one year to the life of the satellite. Virtually all contracts stipulate payment terms in U.S. dollars. Pursuant to an outright sale contract, all rights and title to a transponder may be purchased. In connection with an outright sale, the Company recognizes the sale amount as revenue and the cost basis of the transponder is removed and charged to cost of sales. Contracts for the sale of transponders include a telemetry, tracking and control ("TT&C") service agreement with the customer. Lease contracts qualifying for capital lease treatment (typically based on the term of the lease) are accounted for as sales-type leases. For sales-type lease transactions, the Company recognizes as revenue the net present value of the future minimum lease payments. The cost basis of the transponder is removed and charged to cost of sales. During the life of the lease, the Company recognizes as revenue in each respective period, that portion of each periodic lease payment deemed to be attributable to interest income. The balance of each periodic lease payment, representing principal repayment, is recognized as a reduction of the net investment in sales-type leases. Interest income from sales-type leases of approximately $38 million, $41 million and $27 million is included in sales-type lease revenues for the years ended December 31, 1997, 1996 and 1995, respectively. Lease contracts that do not qualify as sales-type leases are accounted for as operating leases. Operating lease revenues are recognized on a straight- line basis over the lease term. Differences between operating lease payments received and revenues recognized are deferred and included in operating lease receivables. Revenues for occasional services are recognized as services are performed and billed. The Company has certain obligations, including providing spare or substitute capacity if available, in the event of satellite service failure under certain long-term agreements. If no spare or substitute capacity is available, the agreements may be terminated. Except for certain deposits, the Company is not obligated to refund payments previously made. The Company has entered into sale-leaseback agreements for the sale of certain of its satellite transponders that are subject to operating leases. Gains resulting from such transactions are deferred and amortized over the leaseback period. Leaseback expense is recorded using the straight-line method over the term of the lease, net of the amortization of the deferred gains. Differences between operating leaseback payments made and expense recognized are deferred and included in accrued operating leaseback expense. Future cash payments expected from customers under all long-term arrangements described above aggregate approximately $7.0 billion as of December 31, 1997. FAIR VALUE OF FINANCIAL INSTRUMENTS--The carrying amounts of cash, accounts receivables, accounts payable and accrued liabilities approximate their fair values generally due to the short maturity of these items. The carrying amount of the net investment in sales-type leases approximates fair value based on the interest rates implicit in the leases. At December 31, 1997, in connection with its debt refinancing activities, the Company entered into certain U. S. Treasury rate lock contracts to reduce its exposure to fluctuations in interest rates. The aggregate nominal value of these contracts was $375 million and these contracts were accounted for as hedges because they were applied to a specific refinancing plan that was consummated shortly after December 31, 1997. The fair value of these financial instruments at December 31, 1997 approximated their contract value. The cost to unwind these instruments in 1998 will be amortized to expense over the term of the newly placed debt securities to which such hedges were applied. CONCENTRATION OF CREDIT RISK--The Company provides satellite transponders and related services and extends credit to a large number of customers in the commercial satellite communications market. Management monitors its exposure to credit losses and maintains allowances for anticipated losses which are charged to selling, general and administrative expenses. The currency in which the majority of the contracts are denominated is the U.S. dollar. 37 PANAMSAT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) CASH AND CASH EQUIVALENTS--Cash and cash equivalents consists of cash on hand and highly liquid investments with maturities at date of acquisition of three months or less. ACCOUNTS RECEIVABLE--Accounts receivable include amounts earned under service agreements and occasional services which are billable as performed. An allowance for doubtful accounts was provided for in the amount of approximately $1.0 million and $0.8 million at December 31, 1997 and 1996, respectively. SATELLITES AND OTHER PROPERTY AND EQUIPMENT--Satellites and other property and equipment are stated at historical cost, or in the case of satellites acquired from PanAmSat International, the fair value at the date of acquisition. The capitalized cost of satellites includes all construction costs, incentive obligations, launch costs, launch insurance, direct development costs, and capitalized interest. Substantially all other property and equipment consists of the Company's teleport facilities. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the respective assets as follows:
ESTIMATED LIVES (YEARS) --------------- Satellite systems under development.......................... -- Satellites in service........................................ 13-15 Communications equipment..................................... 7 General support equipment.................................... 5-10 Buildings.................................................... 25
The estimated useful lives of the satellites are determined by an engineering analysis performed at the initial in-service dates. Estimated useful lives are periodically reviewed using current TT&C data provided by various service providers. To date, no significant change in the original estimated useful lives has resulted. The telecommunications industry is subject to rapid technological change which may require the Company to revise the estimated useful lives of its satellites and communications equipment or to adjust their carrying amounts. EVALUATION OF LONG-LIVED ASSETS--The Company periodically evaluates potential impairment loss relating to long-lived assets, including goodwill, by assessing whether the unamortized carrying amount can be recovered over the remaining life through undiscounted future expected cash flows generated by the underlying assets. DEBT ISSUANCE COSTS--Included in Deferred Charges in the accompanying balance sheet are debt issuance costs incurred in connection with the $1.725 billion loan from Hughes of $17.3 million at December 31, 1997, which are being amortized on a straight line basis over the life of the loan. The accumulated amortization at December 31, 1997 is approximately $3.6 million. GOODWILL--Goodwill is primarily related to the acquisition of PanAmSat International and is being amortized over 40 years. Accumulated amortization was $77.8 million at December 31, 1997. DEFERRED REVENUES--The Company enters into agreements with its customers under which they make prepayments for services to be rendered over a specific period. Payments received are deferred and amortized over the periods of performance. TRANSPONDER INSURANCE--The Company accrues an obligation for the present value of estimated in-orbit performance insurance costs on transponder sale, sales-type lease and other agreements with performance warranty provisions, concurrently with the recognition of the related revenue. The Company also purchases insurance for the replacement value of its owned satellite transponders. Premiums paid relative to such insurance are amortized to expense over the insurance policy terms, which are typically one to three years. 38 PANAMSAT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) INCOME TAXES--The provision for income taxes is based upon reported income before income taxes. Deferred income tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes, as measured by applying currently enacted tax laws. The Company and its domestic subsidiaries file a consolidated U. S. Federal income tax return. Prior to the Merger, Hughes Communications, Inc. (which owned the Galaxy Business), along with other Hughes subsidiaries, joined with GM in filing a consolidated U.S. Federal tax return. Current and deferred income taxes were computed by Hughes and allocated to the Company in accordance with principles established by Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." Hughes paid the Company's share of the consolidated income tax liability. The income taxes that would have been paid by Galaxy if it were a separate taxpayer but were not paid under the Hughes policy resulted in an increase in the parent company's net investment. EARNINGS PER SHARE--The Company has adopted Statement of Financial Accounting Standards No. 128, Earnings Per Share, which supercedes Accounting Principles Board No. 15, Earnings Per Share, and modifies the presentation of primary earnings per share ("EPS") on the face of the income statement. As the Company was an operating division of Hughes for all periods prior to the merger, presentation of EPS data for the years ended December 31, 1997, 1996 and 1995 have not been presented on the face of the income statement. STOCK-BASED COMPENSATION--As permitted by Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, the Company accounts for stock-based awards to employees using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. RECLASSIFICATION--Certain prior period amounts have been reclassified to conform with the current year's presentation. NEW ACCOUNTING PRONOUNCEMENTS--The financial accounting Standards Board issued Statement of Financial Accounting Standards No. 129, "Disclosure of Information about Capital Structure," Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income," and Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" in 1997. The Company will adopt the disclosure requirements of these statements in 1998. 3.NET INVESTMENT IN SALES-TYPE LEASES The components of net investment in sales-type leases are as follows:
DECEMBER 31, -------------------- 1997 1996 --------- --------- Total minimum lease payments........................... $ 662,453 $ 696,723 Allowance for doubtful accounts........................ (12,897) (17,968) Less unearned interest income.......................... (297,110) (337,511) --------- --------- Total net investment in sales-type leases.............. 352,446 341,244 Less current portion................................... (27,757) (20,634) --------- --------- $ 324,689 $ 320,610 ========= =========
39 PANAMSAT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Future minimum payments due from customers under sales-type leases and related service agreements (primarily TT&C and in-orbit performance protection) as of December 31, 1997 are as follows:
MINIMUM SERVICE LEASE AGREEMENT PAYMENTS PAYMENTS -------- --------- 1998...................................................... $ 70,256 $ 7,860 1999...................................................... 77,440 9,800 2000...................................................... 76,093 9,720 2001...................................................... 77,391 9,720 2002...................................................... 77,926 9,720 2003 and thereafter....................................... 283,347 22,020 -------- ------- $662,453 $68,840 ======== =======
4.SATELLITES AND OTHER PROPERTY AND EQUIPMENT--NET The Company's principal operating assets consists of satellites in service, summarized as follows:
DECEMBER 31, --------------------- 1997 1996 ---------- --------- Satellite transponders under lease.................... $1,713,409 $ 602,059 Satellite systems under development................... 1,038,886 316,332 Buildings and leasehold improvements.................. 42,078 41,632 Machinery and equipment............................... 136,989 92,573 Other................................................. 11,406 8,346 ---------- --------- 2,942,768 1,060,942 Less accumulated depreciation......................... (436,686) (340,717) ---------- --------- $2,506,082 $ 720,225 ========== =========
At December 31, 1997, the Company had contracts for the construction and development of six satellites with two satellite vendors. Satellite contracts typically require the Company to make progress payments during the period of the satellite's construction and orbital incentive payments (plus interest) over the orbital life of the satellite. The incentive obligations are subject to reduction or refund if the satellite fails to meet specific technical operating standards. The satellite construction contracts contain provisions that would enable the Company to terminate the contracts both with and without cause. If terminated without cause, the Company would forfeit its progress payments and be subject to termination payments that escalate with the passage of time. If terminated for cause, the Company would be entitled to recover any payments it made under the contracts and certain liquidated damages as specified in the contracts. The Company has entered into launch contracts for the launch of both specified and unspecified future satellites. Each of the Company's launch contracts provide that the Company may terminate such contract at its option, subject to payment by the Company of a specified termination liability that increases in magnitude as the applicable launch date approaches. In addition, in the event of a failure of any launch, the Company may exercise the right to obtain a replacement launch within a specified period following the Company's request for relaunch. On August 8, 1997, the Company launched its PAS-6 satellite which commenced service on September 19, 1997 after successfully completing its in-orbit testing. After launch, an anomaly was detected in PAS-6's solar arrays affecting several of the onboard electrical circuits that provide power to the satellite's transponders. The 40 PANAMSAT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) circuit failures will require the Company to forego the use of some transponders initially, and turn off additional transponders in later years. However, the ability of transponders to provide transmission power for DTH signal reception to meet the customer's requirements is not affected. The Company is working with its customers on PAS-6 to ensure that the Company's services continue to meet their needs. Management has evaluated the effects of this anomaly and has determined that no impairment loss has occurred. On March 9, 1998, the Company announced that it had entered into arrangements with its customers to build a new satellite to be designated as PAS-6B. In connection with these arrangements, the Company entered into an amendment to its agreements with its customers on PAS-6 (the "PAS-6B DTH Amendments"). Under these amendments, the Company will acquire a new Hughes HS 601 HP satellite that is scheduled to be launched on an Ariane IV launch vehicle in the fourth quarter of 1998. The Company is exploring its options for the deployment and use of the original PAS-6 satellite and anticipates using this satellite as either a back-up for PAS-6B or moving it to another orbital location for other purposes. Management believes that it will be able to generate sufficient future cash flows on PAS-6 to enable it to recover the carrying value of its investment in the satellite. In addition, the Company has filed an insurance claim relating to PAS-6 and expects to receive a payment of approximately $29 million from the insurance carrier. Future minimum lease payments due from customers under non-cancelable operating leases on completed satellites, exclusive of sublease payments reported below are as follows:
DECEMBER 31, 1997 MINIMUM LEASE PAYMENTS ----------------- 1998....................................................... $ 695,864 1999....................................................... 666,102 2000....................................................... 612,164 2001....................................................... 571,626 2002....................................................... 505,210 2003 and thereafter........................................ 2,721,459 ---------- $5,772,425 ==========
In February 1996, the Company entered into a sale-leaseback agreement for certain transponders on Galaxy III-R with General Motors Acceptance Corporation ("GMAC"), a subsidiary of GM. Proceeds from the sale were $252 million and the sale resulted in a gain of $109 million, which was deferred and is being amortized over the seven-year leaseback period. The transponders on Galaxy III-R are currently under month-to-month subleases pending the planned conversion of the satellite from international to domestic service in early 1998. Accordingly, there are no sublease payments on these transponders in the table below. In prior years, the Company entered into sale-leaseback agreements for the sale of certain transponders on SBS-6 and Galaxy VII, resulting in deferred gains which are being amortized over the leaseback periods. The transponder leaseback terms include early buy-out options as follows: $152 million in 1998 (for which an early buy-out option for $96.6 million relating to transponders on SBS-6 was exercised by the Company in January 1998) and $366 million in 1999. 41 PANAMSAT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) As of December 31, 1997, the future minimum lease amounts payable to lessors under the sale-leaseback agreements and the future minimum payments due from subleases under noncancelable subleases are as follows:
DECEMBER 31, 1997 ------------------ LEASEBACK SUBLEASE AMOUNTS PAYMENTS --------- -------- 1998...................................................... $102,469 $ 76,555 1999...................................................... 133,269 74,946 2000...................................................... 164,657 69,693 2001...................................................... 90,930 67,031 2002...................................................... 138,278 56,477 2003 and thereafter....................................... 228,471 159,512 -------- -------- $858,074 $504,214 ======== ========
5.LONG-TERM DEBT As of December 31, 1997 and 1996, long-term debt consisted of the following:
DECEMBER 31, ------------------ 1997 1996 -------- -------- Borrowings under bank agreements......................... $600,000 $ -- Incentive obligations.................................... 42,500 -- Other.................................................... 10,193 -- -------- -------- 652,693 -- Less current maturities.................................. (12,570) -- -------- -------- $640,123 $ -- ======== ========
In December 1997, the Company commenced a debt tender offer and restructuring program (the "Program") for the Old Notes. In connection with the Program, the Company purchased approximately 99% of the principal amount of each class of the Old Notes then outstanding. The Company also entered into a bank borrowing agreement (the "Bank Agreement") that provided for bridge loans of up to $300 million (terminating in April 1998) and loans of up to $500 million under a five-year revolving credit facility. Using $600 million in borrowings under the Bank Agreement (including $100 million under the bridge loans) and available cash (including cash from the liquidation of certain marketable securities), the Company retired Old Notes having a principal value of approximately $1.1 billion. The debt refinancing Program resulted in the recognition of an extraordinary charge of $20.6 million ($34.3 million before taxes) related principally to the excess of the price paid for the debt over its carrying value, net of any deferred financing costs and fair value adjustments recognized in connection with the Merger. In January 1998, the Company borrowed an additional amount of $125 million under the Bank Agreement principally for the purpose of exercising an early buy-out option on a sale-leaseback agreement. Also in January 1998, the Company completed a private placement debt offering for five, seven, ten and thirty year notes aggregating $750 million (the "Notes Offering"), the proceeds of which were used to retire all of the outstanding borrowings under the Bank Agreement. As a result of the Notes Offering, the bridge loan under the Bank Agreement terminated, and the five year revolving credit facility remains in effect. Because all of the bank borrowings were refinanced on a long term basis shortly after year end, these amounts have been classified as long term as of December 31, 1997. 42 PANAMSAT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Annual maturities of long-term debt are as follows:
YEAR ENDING DECEMBER 31, 1998.............................................................. $ 12,570 1999.............................................................. 12,180 2000.............................................................. 7,819 2001.............................................................. 148 2002.............................................................. -- 2003 and thereafter............................................... 619,976 -------- $652,693 ========
Interest expense for 1997 is presented net of $19.6 million of interest income. 6.INCOME TAXES The income tax provision consisted of the following:
1997 1996 1995 -------- -------- ------- Taxes currently payable (receivable) U.S. Fed- eral and state................................ $(11,740) $111,294 $80,252 Deferred tax (assets) liabilities--net U.S. Federal and state............................. 129,065 (21,399) (18,235) -------- -------- ------- Total income tax provision..................... $117,325 $ 89,895 $62,017 ======== ======== =======
The income tax provision was different than the amount computed using the U.S. statutory income tax rate for the reasons set forth in the following table:
1997 1996 1995 -------- ------- ------- Expected tax at U.S. statutory income tax rate.. $ 92,266 $83,902 $57,882 U.S. state and local income taxes--net of fed- eral income tax effect......................... 12,900 14,479 9,989 Foreign sales corporation tax benefit........... (9,485) (9,589) (6,615) Non-deductible goodwill amortization............ 14,527 -- -- Other........................................... 7,117 1,103 761 -------- ------- ------- Total income tax provision...................... $117,325 $89,895 $62,017 ======== ======= =======
Temporary differences which gave rise to deferred tax assets and liabilities are as follows:
1997 1996 ------------------------ ------------------------ DEFERRED DEFERRED TAX DEFERRED TAX DEFERRED ASSETS TAX LIABILITIES ASSETS TAX LIABILITIES -------- --------------- -------- --------------- Sales and leasebacks....... $ 85,780 $ -- $111,049 $ -- Depreciation............... -- 238,476 -- 71,616 Launch insurance costs..... -- 41,175 -- -- Customer deposits.......... 23,854 -- -- -- Accruals and advances...... 29,969 -- 29,841 -- Other...................... 14,275 6,554 5,788 -- -------- -------- -------- ------- Total deferred taxes....... $153,878 $286,205 $146,678 $71,616 ======== ======== ======== =======
At December 31, 1997, the Company had non-current deferred tax liabilities of $286,205 and deferred tax assets of $153,878, of which $46,940 are current in nature. At December 31, 1996, the Company had deferred tax assets of $75,062, of which $46,989 was current in nature. 43 PANAMSAT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 7.RELATED PARTY TRANSACTIONS AND BORROWINGS The Company purchases certain of its satellites and launch services from a subsidiary of Hughes and has provided services to several subsidiaries of Hughes. The Company also reimburses Hughes for the allocated costs of certain expense items it jointly incurs with Hughes, principally relating to administrative and other expenses. The aggregate amounts of related party transactions in 1997 are summarized below:
1997 1996 1995 -------- -------- -------- Satellite Purchases............................... $345,546 $196,400 $115,337 Satellite Services Revenues: Operating lease revenues........................ 87,235 72,043 26,261 Other satellite services........................ 5,363 11,397 18,513 Allocations of Expenses: Administrative and other expenses............... 9,005 11,016 12,242 Interest expense................................ 91,020 19,475 15,924
Interest expense for 1997 is presented net of $8.4 million of interest income. The following table provides summary information relative to the Company's related party borrowings from Hughes and its affiliates:
DECEMBER 31, --------------------- 1997 1996 ---------- --------- Merger related borrowings (see Note 1)................ $1,725,000 $ -- Incentive obligations................................. 80,819 -- Other................................................. 204 -- ---------- --------- 1,806,023 -- Less current maturities............................... (3,828) -- ---------- --------- Total due to Affiliates............................... $1,802,195 $ -- ========== =========
In connection with the Notes Offering described in Note 5, the Company also modified the terms of its indebtedness with Hughes so that the maturity of the borrowings was extended to June 24, 2003, the mandatory principal payments were eliminated (however, prepayments of principal are permitted under certain circumstances depending upon the level of cash flow from operations), the interest rate on the debt was adjusted to be a floating rate equal to that of the Bank Agreement, and the debt became subordinated to the Bank Agreement and the Notes Offering. In addition, subsequent to May 16, 2000 (the original maturity of the indebtedness), Hughes has the right to request that the Company use its best efforts to replace the credit facility with another Hughes credit facility on terms that may then be available to the Company. Annual maturities of long-term debt are as follows:
YEAR ENDING DECEMBER 31, 1998............................................................ $ 3,828 1999............................................................ 4,015 2000............................................................ 4,435 2001............................................................ 4,900 2002............................................................ 5,413 2003 and thereafter............................................. 1,783,432 ---------- $1,806,023 ==========
44 PANAMSAT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 8.RETIREMENT AND INCENTIVE PLANS EMPLOYEE BENEFIT PLANS: DEFINED CONTRIBUTION PLANS 401(K) PLAN--The Company has a 401(k) plan for qualifying employees. A portion of employee contributions is matched by the Company with shares of its common stock. The number of shares contributed to the plan and the respective market values for 1997 were 12,847 shares and $0.5 million, respectively. DEFERRED COMPENSATION PLAN--The Company has a Restoration and Deferred Compensation Plan (the "Deferred Compensation Plan") for eligible employees. Under the Deferred Compensation Plan, executives and other highly compensated employees of the Company are entitled to defer a portion of their compensation to future years. The annual amount that can be deferred is subject to certain limitations, and a portion of the employee's contribution may be matched by the Company if the employee elected to defer in the 401(k) Plan the maximum amount permissible under the Deferred Compensation Plan and the Internal Revenue Code of 1986, as amended. The maximum annual Company match under both the 401(k) Plan and the Deferred Compensation Plan is limited to an aggregate level of 4% of annual compensation. The Company matched portion of the Deferred Compensation Plan consists of "credits" which vest when awarded. Contributions that receive employer matching are required to be deferred until termination of employment, and any nonmatched contributions may be deferred over a period selected by the employee. In addition, the Company, at its discretion, may make contributions to the Plan for the benefit of any participant as supplemental compensation. The Deferred Compensation Plan is an unfunded plan, and the deferrals and matching credits will receive earnings based upon rates set by the Compensation Committee of the Board of Directors (the "Compensation Committee"), but in no event will these amounts earn less than 100% of the Moody's Corporate Bond Index Rate. 1997 STOCK INCENTIVE PLAN--On May 5, 1997, the Company's Board of Directors adopted the PanAmSat Corporation Long-Term Stock Incentive Plan established in 1997 (the "Stock Plan"), which provides for the granting of nonqualified stock options, incentive stock options, alternate appreciation rights, restricted stock, performance units and performance shares to executive officers, other employees, directors and independent contractors of the Company. Restricted stock, performance units and performance shares may be granted at the discretion of the Compensation Committee on such terms as such committee may decide. The maximum number of shares of common stock which may be issued under the Stock Plan is 7,456,140 and the maximum number of shares of common stock which may be issued to any grantee pursuant to the Stock Plan is 2,000,000. The Stock Plan is administered by the Compensation Committee. As of December 31, 1997, nonqualified options for 584,890 shares of common stock have been granted under the Stock Plan. Such options are exercisable at a price equal to 100% of the fair market value at the date of grant and vest ratably over three years. As permitted by Statement of Financial Accounting Standards No. 123 "Accounting for Stock Based Compensation" ("SFAS 123"), the Company has applied the recognition and measurement principles of Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued To Employees" to its stock options and other stock-based compensation awards and, accordingly, no compensation expense has been recognized on options granted to date. Options outstanding at December 31, 1997 have exercise prices ranging from $29.00-- $38.25 per share (weighted average of $29.09 per share), a remaining life of approximately nine and one-half years, and none of the options are exercisable. Had compensation expense for stock options granted been determined based on the fair value of the options at the grant dates (consistent with the provisions of SFAS 123), the Company's net income for 1997 would have been reduced by approximately $2.0 million. The Company uses the Black-Scholes model for estimating the fair value of its compensation instruments. The estimated fair value of options granted in 1997 was $16.80 and the weighted average assumptions used for 45 PANAMSAT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) calculation of the value were as follows; risk-free interest rate of 6.7%; dividend yield 0%; expected life of ten years; and stock volatility of 30%. COMPENSATION PLANS--On May 16, 1997, the Company assumed the certain obligations of PanAmSat International with respect to its General Severance Policy, Employee Separation Plan and an Executive Severance Pay Program. These plans allow for benefits to be paid to the former employees of PanAmSat International who became employees of the Company as a result of the Merger under certain circumstances relating to a termination of employment. The benefits provided under these programs expire at various dates through May 1999. During 1997, there were no material payments made under these programs. 9.COMMITMENTS AND CONTINGENCIES The Company has commitments for operating leases primarily relating to equipment and its executive office facilities in Greenwich, Connecticut and various other locations. These leases contain escalation provisions for increases as a result of increases in real estate taxes and operating expenses. Minimum annual rentals of all leases, exclusive of potential increases in real estate taxes and operating assessments, are as follows: 1998................................................................. $ 2,335 1999................................................................. 2,315 2000................................................................. 2,088 2001................................................................. 1,894 2002................................................................. 1,653 2003 and thereafter.................................................. 4,117 ------- $14,402 =======
In October 1996, Comsat Corporation ("Comsat") initiated an action seeking unspecified actual, consequential and punitive or exemplary damages against PanAmSat International, Televisa and News Corporation ("News"). The complaint alleges that the Company interfered with the alleged termination by News of an alleged contract between Comsat and News. Although the Company believes this action is without merit and intends to vigorously contest this matter, it is unable to predict the final outcome of this action at this time. The Company is involved in other litigation in the normal course of its operations. Management does not believe the outcome of such matters will have a material effect on the consolidated financial statements. 10.QUARTERLY FINANCIAL INFORMATION--UNAUDITED THREE MONTHS ENDED --------------------------------------------- MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, 1997 1997 1997 1997 --------- -------- ------------- ------------ Revenues...................... $127,553 $134,192 $170,315 $197,879 Operating income.............. 67,511 62,098 70,766 93,829 Income before extraordinary item......................... 41,853 19,902 27,416 44,301 Net income.................... 41,853 19,902 27,416 23,658 Income before extraordinary item per common share--basic and diluted.................. 0.18 0.30 Net income per common share-- basic and diluted............ 0.18 0.16 46 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT See the information set forth under the captions "Election of Directors" and "Executive Officers of the Company" contained in the Company's Proxy Statement (to be filed not later than 120 days after the end of the Company's fiscal year) for the 1998 Annual Meeting of Stockholders, which information is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION See the information set forth under the caption "Executive Compensation" (up to but not including the subcaption "Report of the Compensation Committee on Executive Compensation") contained in the Company's Proxy Statement (to be filed not later than 120 days after the end of the Company's fiscal year) for the 1998 Annual Meeting of Stockholders, which information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT See the information set forth under the caption "Security Ownership of Certain Beneficial Owners and Management" contained in the Company's Proxy Statement (to be filed not later than 120 days after the end of the Company's fiscal year) for the 1998 Annual Meeting of Stockholders, which information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS See the information set forth under the subcaptions "Compensation Committee Interlocks and Insider Participation" and "Certain Transactions" under the caption "Executive Compensation" contained in the Company's Proxy Statement (to be filed not later than 120 days after the end of the Company's fiscal year) for the 1998 Annual Meeting of Stockholders, which information is incorporated herein by reference. 47 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (A)1.FINANCIAL STATEMENTS See Index to Financial Statements on page 28. 2.FINANCIAL STATEMENT SCHEDULES Financial statement schedules are omitted because of the absence of the conditions under which they are required, or because the information is set forth in the financial statements or notes thereto. (B)REPORTS ON FORM 8-K During the last quarter of 1997, the Company did not file any Current Reports on Form 8-K with the Securities and Exchange Commission. (C)EXHIBITS 2.1 Agreement and Plan of Reorganization, dated September 20, 1996, among Hughes Communications, Inc., Hughes Communications Galaxy, Inc., Hughes Communications Satellite Services, Inc., Hughes Communications Services, Inc., Hughes Communications Carrier Services, Inc., Hughes Communications Japan, Inc., PanAmSat Corporation (formerly known as Magellan International, Inc. ("PanAmSat")) and PanAmSat International Systems, Inc. (formerly known as PanAmSat Corporation and successor corporation to PanAmSat, L.P. ("PanAmSat International")) is incorporated herein by reference to Exhibit 2.3 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended June 30, 1996. 2.2 Amendment to Agreement and Plan of Reorganization dated as of April 4, 1997 constituting Exhibit 2.1 hereto is incorporated herein by reference to Appendix AA to the Proxy Statement/Prospectus (the "Proxy Statement/Prospectus") contained in PanAmSat's Registration Statement on Form S-4 (Reg. No. 333-25293) filed on April 16, 1997 (the "Registration Statement"). 2.3 Agreement and Plan of Merger, dated as of April 4, 1997, among PanAmSat International, PAS Merger Corp. and PanAmSat is incorporated herein by reference to Appendix B to the Proxy Statement/Prospectus. 2.4 Assurance Agreement, dated September 20, 1996, between Hughes Electronics Corporation, PanAmSat International, Satellite Company, L.L.C. and PanAmSat is incorporated herein by reference to Appendix K to the Proxy Statement/Prospectus. 2.5 Principal Stockholders Agreement, dated September 20, 1996, among Hughes Communications, Inc., Hughes Communications Galaxy, Inc., Satellite Company, L.L.C., Univisa Satellite Holdings, Inc., the holders of Class A Common Stock of PanAmSat International and the Trustees of that certain Voting Trust of certain holders of Class A Common Stock of PanAmSat International is incorporated herein by reference to Appendix L to the Proxy Statement/Prospectus. 2.6 Stock Contribution and Exchange Agreement, dated September 20, 1996, among Grupo Televisa, S.A., Satellite Company, L.L.C., PanAmSat and Hughes Communications, Inc. is incorporated herein by reference to Exhibit 2.4 to the Registration Statement. 3.1 Restated Certificate of Incorporation of PanAmSat. 3.2 Restated Bylaws of PanAmSat.
48 4.1 Amended and Restated Stockholder Agreement, dated as of May 16, 1997, by and among PanAmSat, Hughes Communications, Inc., Satellite Company, LLC and the former holders of Class A Common Stock of PanAmSat International is incorporated herein by reference to Appendix M to the Proxy Statement/Prospectus. 4.2 Amended and Restated Registration Rights Agreement, dated as of May 16, 1997, by and among PanAmSat, Hughes Communications, Inc., Hughes Communications Galaxy, Inc., Hughes Communications Satellite Services, Inc., Satellite Company, LLC and the former holders of Class A Common Stock of PanAmSat International is incorporated herein by reference to Appendix N to the Proxy Statement/Prospectus. 4.3.1 Loan Agreement, dated May 15, 1997, between Hughes Network Systems, Inc. and PanAmSat is incorporated by reference to Exhibit 4.3 to PanAmSat's Current Report on Form 8-K dated June 5, 1997. 4.3.2 First Amendment to Loan Agreement, constituting Exhibit 4.3.1 hereto, dated as of December 23, 1997, between Hughes Electronics Corporation and PanAmSat. 4.3.3 Subordination and Amendment Agreement, dated as of February 20, 1998, among Hughes Electronics Corporation, PanAmSat and Citicorp USA, Inc., as administrative agent. 4.4 Indenture, dated as of January 16, 1998, between PanAmSat and The Chase Manhattan Bank, as Trustee. 10.1 Participation Agreement, dated as of December 27, 1991, among Satellite Transponder Leasing Corporation, GM Hughes Electronics Corporation, Security Pacific Equipment Leasing, Inc., Wilmington Trust Company, State Street Bank and Trust Company of Connecticut, National Association ("State Street") and Goldman, Sachs & Co. is incorporated herein by reference to Exhibit 10.1 to the Registration Statement. 10.2 Lease Agreement, dated as of December 27, 1991, among GM Hughes Electronics Corporation, Satellite Transponder Leasing Corporation and Wilmington Trust Company is incorporated herein by reference to Exhibit 10.2 to the Registration Statement. 10.3 Participation Agreement, dated as of December 27, 1991, among Satellite Transponder Leasing Corporation, GM Hughes Electronics Corporation, Student Loan Marketing Association, Wilmington Trust Company, State Street and Goldman Sachs & Co. is incorporated herein by reference to Exhibit 10.3 to the Registration Statement. 10.4 Lease Agreement, dated as of December 27, 1991, among GM Hughes Electronics Corporation, Satellite Transponder Leasing Corporation and Wilmington Trust Company is incorporated herein by reference to Exhibit 10.4 to the Registration Statement. 10.5.1 Participation Agreement and Purchase Agreement, dated as of August 21, 1992, among Hughes Communications Galaxy, Inc., Orion One, Inc., State Street, Wilmington Trust Company, Hughes Communications, Inc. and BT Securities Corporation, as agent is incorporated herein by reference to Exhibit 10.5.1 to the Registration Statement. 10.5.2 First Amendment to Participation Agreement and Purchase Agreement, constituting Exhibit 10.5.1 hereto, dated as of December 24, 1992, among Hughes Communications Galaxy, Inc., Orion One, Inc., State Street, Hughes Communications, Inc., Wilmington Trust Company, BT Securities Corporation, as agent, and the other participants to the Transponder Purchase Agreement is incorporated herein by reference to Exhibit 10.5.2 to the Registration Statement. 10.5.3 Second Amendment to Participation Agreement and Purchase Agreement, constituting Exhibit 10.5.1 hereto, dated as of June 18, 1993, among Hughes Communications Galaxy, Inc., Orion One, Inc., State Street, CIBC Inc., Internationale Nederlanden Lease Structured Finance B.V., Wilmington Trust Company and BT Securities Corporation, as agent is incorporated herein by reference to Exhibit 10.5.3 to the Registration Statement.
49 10.6.1 Lease Agreement, dated as of December 31, 1992, by and between Hughes Communications Galaxy, Inc. and State Street is incorporated herein by reference to Exhibit 10.6.1 to the Registration Statement. 10.6.2 First Amendment to Lease Agreement constituting Exhibit 10.6.1, dated as of June 18, 1993, by and between Hughes Communications Galaxy, Inc. and State Street is incorporated herein by reference to Exhibit 10.6.2 to the Registration Statement. 10.7 Schedule identifying certain agreements that have been omitted on the basis that such agreements are substantially identical to the agreements filed as Exhibits 10.5.1, 10.5.2, 10.5.3, 10.6.1 and 10.6.2 hereto is incorporated herein by reference to Exhibit 10.7 to the Registration Statement. 10.8.1 Launch Services Agreement No. 9411-002, dated November 14, 1994, between Lockheed-Khrunichev-Energia International, Inc. and PanAmSat International is incorporated herein by reference to Exhibit 10.10 to Amendment No. 3 to PanAmSat International's Registration Statement on Form S-1 (Reg. No. 33-84836), dated March 9, 1995. (1) 10.8.2 First Amendment to Launch Services Agreement No. 9411-002 constituting Exhibit 10.8.1 hereto, dated March 30, 1995, between Lockheed-Khrunichev-Energia International, Inc. and PanAmSat International is incorporated herein by reference to Exhibit 10.10.2 to Amendment No. 1 to PanAmSat International's Registration Statement on Form S-1 (Reg. No. 33-95396), dated August 17, 1995. (1) 10.8.3 Second Amendment to Launch Services Agreement No. 9411-002 constituting Exhibit 10.8.1 hereto, dated June 9, 1995, between Lockheed-Khrunichev-Energia International, Inc. and PanAmSat International is incorporated herein by reference to Exhibit 10.10.3 to Amendment No. 1 to PanAmSat International's Registration Statement on Form S-1 (Reg. No. 33-95396), dated August 17, 1995. (1) 10.8.4 Amendment Number 3 to Launch Services Agreement No. 9411-002 constituting Exhibit 10.8.1 hereto, dated August 23, 1996, between Lockheed-Khrunichev-Energia International, Inc. and PanAmSat International is incorporated herein by reference to Exhibit 10.10.4 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended September 30, 1996. (1) 10.9.1 Agreement for the Launching into Geostationary Transfer Orbit of the PanAmSat 6 Satellite by an Ariane Launch Vehicle, No. 94.5.918, dated November 21, 1994, between PanAmSat International and Arianespace S.A. is incorporated herein by reference to Exhibit 10.12 to Amendment No. 4 to PanAmSat International's Registration Statement on Form S-1 (Reg. No. 33-84836), dated March 29, 1995. (1) 10.9.2 Amendment No. 1 to Agreement for the Launching into Geostationary Transfer Orbit of the PanAmSat 6 Satellite by an Ariane Launch Vehicle, No. 94.5.918 constituting Exhibit 10.9.1 hereto, dated May 1995, between PanAmSat International and Arianespace S.A. is incorporated herein by reference to Exhibit 10.12.2 to Amendment No. 1 to PanAmSat International's Registration Statement on Form S- 1 (Reg. No. 33-95396), dated August 17, 1995. (1) 10.9.3 Amendment No. 2 to Agreement for the Launching into Geostationary Transfer Orbit of the PanAmSat 6 Satellite by an Ariane Launch Vehicle, No. 94.5.918 constituting Exhibit 10.9.1 hereto, dated as of April 29, 1996, between PanAmSat International and Arianespace S.A. is incorporated herein by reference to Exhibit S-1 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended March 31, 1996.
50 10.9.4 Amendment No. 3 to Agreement for the Launching into Geostationary Transfer Orbit of the PanAmSat 6 Satellite by an Ariane Launch Vehicle, No. 94.5.918 constituting Exhibit 10.9.1 hereto, dated December 31, 1996, between PanAmSat International and Arianespace S.A. is incorporated herein by reference to Exhibit 10.12.8 to PanAmSat International's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. (1) 10.10.1 Memorandum of Understanding, dated as of March 27, 1995, between Grupo Televisa, S.A. and PanAmSat International is incorporated herein by reference to Exhibit 10.13 to Amendment No. 4 to PanAmSat International's Registration Statement on Form S-1 (Reg. No. 33-84836), dated March 29, 1995. (1) 10.10.2 Revised DTH System in Latin America Memorandum of Understanding, dated as of September 20, 1996, between PanAmSat International and Grupo Televisa, S.A. is incorporated herein by reference to Exhibit 10.13.2 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended September 30, 1996. 10.11.1 Satellite Purchase Contract, dated as of March 31, 1995, between Hughes Aircraft Company and PanAmSat International is incorporated by reference to Exhibit 10.14 to Amendment No. 5 to PanAmSat International's Registration Statement on Form S-1 (Reg. No. 33- 84836), dated April 13, 1995. (1) 10.11.2 Amendment No. 1 to Satellite Purchase Contract constituting Exhibit 10.11.1 dated as of September 3, 1996, between Hughes Aircraft Company and PanAmSat International is incorporated herein by reference to Exhibit 10.14.1 to PanAmSat's Quarterly Report on Form 10-Q for the period ended September 30, 1996. (1) 10.12 Galaxy IX Satellite and Services Contract, No. 95-HCG-001, dated August 7, 1995, between Hughes Communications Galaxy, Inc. and Hughes Space and Communications Company is incorporated herein by reference to Exhibit 10.12 to the Registration Statement. (1) 10.13 Letter Agreement, dated November 29, 1995, between Hughes Communications Galaxy, Inc. and Hughes Space and Communications Company regarding the construction of Galaxy X and Galaxy XI is incorporated herein by reference to Exhibit 10.13 to the Registration Statement. (1) 10.14 Galaxy VIII-I Satellite and Services Contract (95-HCG-002), dated October 31, 1995, between Hughes Communications Galaxy, Inc. and Hughes Space and Communications Company is incorporated herein by reference to Exhibit 10.14 to the Registration Statement. (1) 10.15.1 Agreement for the Launching into Geostationary Transfer Orbit of PanAmSat Satellites by an Ariane Launch Vehicle, No. 95.5.933, dated as of December 20, 1995, between PanAmSat International and Arianespace S.A. is incorporated herein by reference to Exhibit 10.12.3 to PanAmSat International's Quarterly Report on Form 10-Q of the Registrant for the period ended March 31, 1996. (1) 10.15.2 Side Letter to Agreement for Launching into Geostationary Transfer Orbit of PanAmSat Satellites by an Ariane Launch Vehicle, No. 95.5.933, dated as of December 20, 1995, between PanAmSat International and Arianespace S.A., constituting Exhibit 10.15.1 hereto, is incorporated herein by reference to Exhibit 10.12.4 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended March 31, 1996. (1) 10.15.3 Amendment No. 1 to Agreement for Launching into Geostationary Transfer Orbit of PanAmSat Satellites by an Ariane Launch Vehicle, No. 95.5.933, dated as of April 29, 1996, between PanAmSat International and Arianespace S.A., constituting Exhibit 10.15.1 hereto, is incorporated herein by reference to Exhibit 10.12.5 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended March 31, 1996.
51 10.15.4 Amendment No. 2 to Agreement for Launching into Geostationary Transfer Orbit of PanAmSat Satellites by an Ariane Launch Vehicle, No. 95.5.933, dated December 31, 1996, between PanAmSat International and Arianespace S.A., constituting Exhibit 10.15.1 hereto, is incorporated herein by reference to Exhibit 10.12.6 to PanAmSat International's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. (1) 10.16 Participation Agreement, dated as of February 7, 1996, among Hughes Communications Galaxy, Inc., General Motors Acceptance Corporation, Wilmington Trust Company, Chemical Bank and the lending institutions listed as loan participants in Schedule I to the Agreement is incorporated herein by reference to Exhibit 10.16 to the Registration Statement. 10.17 Lease Agreement, dated as of February 7, 1996, by and between Wilmington Trust Company and Hughes Communications Galaxy, Inc. is incorporated herein by reference to Exhibit 10.17 to the Registration Statement. 10.18.1 Letter Agreement, dated February 29, 1996, among The News Corporation Limited, Globo Participacoes, Ltd., Grupo Televisa, S.A., and PanAmSat International is incorporated herein by reference to Exhibit 10.17.1 to PanAmSat International's Quarterly Report on Form 10-Q/A for the period ended March 31, 1996. (1) 10.18.2 Amendment to Letter Agreement, dated November 4, 1996, constituting Exhibit 10.18.1 hereto, among The News Corporation Limited, Globo Participacoes, Ltd., Grupo Televisa, S.A., and PanAmSat International is incorporated herein by reference to Exhibit 10.17.2 to PanAmSat International's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. 10.19 Amended and Restated Contract for PanAmSat Program, dated May 2, 1996, between PanAmSat International and Space Systems/Loral, Inc. is incorporated herein by reference to Exhibit 10.7.3 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended March 31, 1996. (1) 10.20 Letter Agreement, dated June 10, 1996, between Hughes Communications Galaxy, Inc. and Hughes Space and Communications Company regarding the construction of Galaxy XI is incorporated herein by reference to Exhibit 10.20 to the Registration Statement. (1) 10.21 Letter Agreement, dated August 12, 1996, between Hughes Communications Galaxy, Inc. and Hughes Space and Communications Company regarding the construction of Galaxy XII is incorporated herein by reference to Exhibit 10.21 to the Registration Statement. (1) 10.22 Letter Agreement, dated August 12, 1996, between Hughes Communications Galaxy, Inc. and Hughes Space and Communications Company regarding the construction of Galaxy XIII, XIV, XV and XVI is incorporated herein by reference to Exhibit 10.22 to the Registration Statement. (1) 10.23 Letter Agreement, dated August 21, 1996, between Hughes Communications Galaxy, Inc. and Hughes Space and Communications Company regarding the construction of Galaxy XI is incorporated herein by reference to Exhibit 10.23 to the Registration Statement. (1) 10.24 DTH Option Purchase Agreement, dated September 20, 1996, between PanAmSat International, Grupo Televisa, S.A. and Satellite Company, L.L.C. is incorporated herein by reference to Exhibit 10.13.1 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended September 30, 1996. 10.25 Full-Time Transponder Service Agreement From PAS-3 (European Beam), dated as of September 20, 1996, between PanAmSat International and Televisa, S.A. is incorporated herein by reference to Exhibit 10.16 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended September 30, 1996. (1)
52 10.26 Transponder Purchase and Sale Agreement, dated as of June 26, 1996, between PanAmSat International and Net Sat Servicos Ltda. is incorporated herein by reference to Exhibit 10.2 to Net Sat Servicios Ltda.'s Registration Statement on Form F-4 (Reg. No. 333- 6318), dated January 21, 1997. (1) 10.27 Amended and Restated Transponder Purchase and Sale Agreement, dated as of June 26, 1996, between PanAmSat International and Net Sat Servicos Ltda. is incorporated herein by reference to Exhibit 10.2.1 to Net Sat Servicios Ltda.'s Registration Statement on Form F-4 (Reg. No. 333-6318), dated January 21, 1997. (1) 10.28 Amended and Restated Launch Services Agreement, dated as of January 17, 1997, between Hughes Communications Galaxy, Inc. and Hughes Space and Communications International, Inc. is incorporated herein by reference to Exhibit 10.28 to the Registration Statement. (1) 10.29 Galaxy X Spacecraft, Related Services and Documentation Contract (96-HCG-001), dated March 20, 1997, between Hughes Communications Galaxy, Inc. and Hughes Space and Communications Company is incorporated herein by reference to Exhibit 10.29 to the Registration Statement. (1) 10.30 Employment Agreement between PanAmSat and Frederick A. Landman, dated as of May 15, 1997, is incorporated herein by reference to Exhibit 10.30 to PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30, 1997.* 10.31 Amended and Restated Collateral Trust Agreement, dated as of May 16, 1997 by and among PanAmSat, Hughes Communications, Inc., Satellite Company, LLC, Grupo Televisa, S.A. and IBJ Schroder Bank & Trust Company is incorporated herein by reference to Exhibit 10.31 to PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30, 1997. 10.32 Pledge and Security Agreement, dated as of May 16, 1997, by and among Satellite Company, LLC, Grupo Televisa, S.A., in favor of IBJ Schroder Bank & Trust Company is incorporated herein by reference to Exhibit 10.30 to PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30, 1997. 10.33 PanAmSat Corporation Long Term Incentive Plan established in 1997 is incorporated herein by reference to Exhibit 10.33 to PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30, 1997.* 10.34 PanAmSat Corporation Annual Incentive Plan, effective January l, 1997, is incorporated herein by reference to Exhibit 10.34 to PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30, 1997.* 10.35 Intellectual Property Cross License Agreement, dated as of May 16, 1997, by and between PanAmSat and Hughes Electronics Corporation is incorporated herein by reference to Exhibit 10.35 to PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30, 1997. 10.36 Leveraged Lease Guaranty Indemnification Agreement, dated as of May 16, 1997 by and between PanAmSat and Hughes Electronics Corporation incorporated herein by reference to Exhibit 10.36 to PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30, 1997. 10.37 Fixed Price Contract between Hughes Communications Galaxy, Inc. and Hughes Space & Communications Company for Galaxy XI HS702, Spacecraft, Related Services and Documentation, Contract No. 96-HCG- 002, executed May 1997 is incorporated herein by reference to Exhibit 10.37 to PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30, 1997. (1) 10.38 Fixed Price Contract for PAS 1R and PAS 9 HS-702 Spacecraft, Related Services and Documentation--Contract No. 97-HCG-001, dated as of August 15, 1997, between Hughes Space and Communications Company, Inc. and PanAmSat. (2)
53 10.39 Transponder Sublease Agreement for Galaxy III-R between Hughes Communications Galaxy, Inc. and California Broadcast Center, LLC, dated April 21, 1997 is incorporated herein by reference to Exhibit 10.39 to PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30, 1997. (1) 10.40 Transponder Lease Agreement for Galaxy VIII(i) between Hughes Communications Galaxy, Inc. and California Broadcast Center, LLC, dated April 21, 1997 is incorporated herein by reference to Exhibit 10.40 to PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30, 1997. (1) 10.41.1 Form of Indemnity Agreement between PanAmSat and each of its directors and executive officers is incorporated herein by reference to Exhibit 10.41 to PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30, 1997.* 10.41.2 Schedule identifying substantially identical agreements to the Indemnity Agreement constituting Exhibit 10.41.1 hereto in favor of Charles H. Noski, Frederick A. Landman, Patrick J. Costello, Steven D. Dorfman, John J. Higgins, Ted G. Westerman, Dennis F. Hightower, James M. Hoak, Joseph R. Wright, Jr., Michael T. Smith, Lourdes Saralegui, Carl A. Brown, Kenneth N. Heintz, Robert A. Bednarek, James W. Cuminale and David P. Berman.* 10.42 Credit Agreement, dated February 20, 1998, among PanAmSat, certain lenders and Citicorp USA, Inc., as administrative agent. 10.43 Agreement, dated as of May 15, 1996, between PanAmSat International and Patrick J. Costello is incorporated herein by reference to Exhibit 10.11.19 to PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30, 1996.* 10.44 Agreement, dated as of March 21, 1997, between PanAmSat and Patrick J. Costello.* 10.45 Agreement, dated as of May 15, 1996, between PanAmSat International and Frederick A. Landman is incorporated herein by reference to Exhibit 10.11.16 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended June 30, 1996.* 10.46 Agreement, dated as of May 15, 1996, between PanAmSat International and Lourdes Saralegui is incorporated herein by reference to Exhibit 10.11.17 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended June 30, 1996.* 10.47 Agreement, dated as of May 15, 1996, between PanAmSat International and Robert A. Bednarek is incorporated herein by reference to Exhibit 10.11.18 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended June 30, 1996.* 10.48 Agreement, dated as of May 15, 1996, between PanAmSat International and James W. Cuminale is incorporated herein by reference to Exhibit 10.11.20 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended June 30, 1996.* 10.49 Agreement, dated as of May 15, 1996, between PanAmSat International and David P. Berman incorporated herein by reference to Exhibit 10.11.21 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended June 30, 1996.* 10.50 Agreement, dated April 7, 1997, between PanAmSat and Hughes Electronics Corporation, regarding the terms of assignment of Kenneth N. Heintz to PanAmSat.* 21.1 Subsidiaries of PanAmSat. 24. l Powers of Attorney. 27.1 Financial Data Schedule.
- -------- (1) Portions of this Exhibit have been omitted pursuant to an order of the Securities and Exchange Commission granting confidential treatment with respect thereto. (2) Portions of this Exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. 54 Exhibits indicated with a * symbol are an executive contract or compensatory plan or arrangement filed pursuant to Item 14 of Form 10-K. In lieu of filing certain instruments with respect to long-term debt of the kind described in Item 601(b)(4) of Regulation S-K, Registrant agrees to furnish a copy of such instruments to the Securities and Exchange Commission upon request. A copy of any of the exhibits included in this Annual Report on Form 10-K, other than those as to which confidential treatment is pending or has been granted by the Securities and Exchange Commission, upon payment of a fee to cover the reasonable expenses of furnishing such exhibits, may be obtained by written request to the Company, at the address set forth on the front cover, attention General Counsel. 55 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, in the Town of Greenwich, State of Connecticut. PanAmSat Corporation By: /s/ Kenneth N. Heintz __________________________________ Kenneth N. Heintz Executive Vice President and Chief Financial Officer March 27, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. NAME TITLE DATE * Chairman of the Board of March 27, 1998 _____________________________________ Directors MICHAEL T. SMITH * President and Chief Executive Officer (principal executive officer) and Director March 27, 1998 _____________________________________ FREDERICK A. LANDMAN * Director March 27, 1998 _____________________________________ PATRICK J. COSTELLO * Director March 27, 1998 _____________________________________ STEVEN D. DORFMAN * Director March 27, 1998 _____________________________________ JOHN J. HIGGINS * Director March 27, 1998 _____________________________________ DENNIS F. HIGHTOWER * Director March 27, 1998 _____________________________________ JAMES M. HOAK * Director March 27, 1998 _____________________________________ CHARLES H. NOSKI * Director March 27, 1998 _____________________________________ TED G. WESTERMAN * Director March 27, 1998 _____________________________________ JOSEPH R. WRIGHT 56 NAME TITLE DATE /s/ Kenneth N. Heintz Executive Vice President and Chief Financial Officer (principal financial officer and principal accounting officer) March 27, 1998 _____________________________________ KENNETH N. HEINTZ *By: /s/ James W. Cuminale _____________________________________ (JAMES W. CUMINALE, ATTORNEY-IN- FACT) 57 EXHIBIT INDEX -------------
Sequentially Exhibit Numbered Page - ------- ------------- 2.1 Agreement and Plan of Reorganization, dated September 20, 1996, amon gHughes Communications, Inc., Hughes Communications Galaxy, Inc., Hughes Communications Satellite Services, Inc., Hughes Communications Services, Inc., Hughes Communications Carrier Services, Inc., Hughes Communications Japan, Inc., PanAmSat Corporation (formerly known as Magellan International, Inc. ("PanAmSat")) and PanAmSat International Systems, Inc. (formerly known as PanAmSat Corporation and successor corporation to PanAmSat, L.P. ("PanAmSat International")) is incorporated herein by reference to Exhibit 2.3 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended June 30, 1996. 2.2 Amendment to Agreement and Plan of Reorganization dated as of April 4, 1997 constituting Exhibit 2.1 hereto is incorporated herein by reference to Appendix AA to the Proxy Statement/Prospectus (the "Proxy Statement/Prospectus") contained in PanAmSat's Registration Statement on Form S-4 (Reg. No. 333-25293) filed on April 16, 1997 (the "Registration Statement"). 2.3 Agreement and Plan of Merger, dated as of April 4, 1997, among PanAmSat International, PAS Merger Corp. and PanAmSat is incorporated herein by reference to Appendix B to the Proxy Statement/Prospectus. 2.4 Assurance Agreement, dated September 20, 1996, between Hughes Electronics Corporation, PanAmSat International, Satellite Company, L.L.C. and PanAmSat is incorporated herein by reference to Appendix K to the Proxy Statement/Prospectus. 2.5 Principal Stockholders Agreement, dated September 20, 1996, among Hughes Communications, Inc., Hughes Communications Galaxy, Inc., Satellite Company, L.L.C., Univisa Satellite Holdings, Inc., the holders of Class A Common Stock of PanAmSat International and the Trustees of that certain Voting Trust of certain holders of Class A Common Stock of PanAmSat International is incorporated herein by reference to Appendix L to the Proxy Statement/Prospectus. 2.6 Stock Contribution and Exchange Agreement, dated September 20, 1996, among Grupo Televisa, S.A., Satellite Company, L.L.C., PanAmSat and Hughes Communications, Inc. is incorporated herein by reference to Exhibit 2.4 to the Registration Statement. 3.1 Restated Certificate of Incorporation of PanAmSat. 3.2 Restated Bylaws of PanAmSat.
EXHIBIT INDEX ------------- Sequentially Exhibit Numbered Page - ------- ------------- 4.1 Amended and Restated Stockholder Agreement, dated as of May 16, 1997, by and among PanAmSat, Hughes Communications, Inc., Satellite Company, LLC and the former holders of Class A Common Stock of PanAmSat International is incorporated herein by reference to Appendix M to the Proxy Statement/ Prospectus. 4.2 Amended and Restated Registration Rights Agreement, dated as of May 16, 1997, by and among PanAmSat, Hughes Communications, Inc., Hughes Communications Galaxy, Inc., Hughes Communications Satellite Services, Inc., Satellite Company, LLC and the former holders of Class A Common Stock of PanAmSat International is incorporated herein by reference to Appendix N to the Proxy Statement/Prospectus. 4.3.1 Loan Agreement, dated May 15, 1997, between Hughes Network Systems, Inc. and PanAmSat is incorporated by reference to Exhibit 4.3 to PanAmSat's Current Report on Form 8-K dated June 5, 1997. 4.3.2 First Amendment to Loan Agreement, constituting Exhibit 4.3.1 hereto, dated as of December 23, 1997, between Hughes Electronics Corporation and PanAmSat. 4.3.3 Subordination and Amendment Agreement, dated as of February 20, 1998, among Hughes Electronics Corporation, PanAmSat and Citicorp USA, Inc., as administrative agent. 4.4 Indenture, dated as of January 16, 1998, between PanAmSat and The Chase Manhattan Bank, as Trustee. 10.1 Participation Agreement, dated as of December 27, 1991, among Satellite Transponder Leasing Corporation, GM Hughes Electronics Corporation, Security Pacific Equipment Leasing, Inc., Wilmington Trust Company, State Street Bank and Trust Company of Connecticut, National Association ("State Street") and Goldman, Sachs & Co. is incorporated herein by reference to Exhibit 10.1 to the Registration Statement. 10.2 Lease Agreement, dated as of December 27, 1991, among GM Hughes Electronics Corporation, Satellite Transponder Leasing Corporation and Wilmington Trust Company is incorporated herein by reference to Exhibit 10.2 to the Registration Statement. 10.3 Participation Agreement, dated as of December 27, 1991, among Corporation, Student Loan Marketing Association, Wilmington Trust Company, State Street and Goldman Sachs & Co. is incorporated herein by reference to Exhibit 10.3 to the Registration Statement. 10.4 Lease Agreement, dated as of December 27, 1991, among GM Hughes Electronics Corporation, Satellite Transponder Leasing Corporation and Wilmington Trust Company is incorporated herein by reference to Exhibit 10.4 to the Registration Statement. 10.5.1 Participation Agreement and Purchase Agreement, dated as of August 21, 1992, among Hughes Communications Galaxy, Inc., Orion One, Inc., State Street, Wilmington Trust Company, Hughes Communications, Inc. and BT Securities Corporation, as agent is incorporated herein by reference to Exhibit 10.5.1 to the Registration Statement. 10.5.2 First Amendment to Participation Agreement and Purchase Agreement, among Hughes Communications Galaxy, Inc., Orion One, Inc., State Street, Hughes Communications, Inc., Wilmington Trust Company, BT Securities Corporation, as agent, and the other participants to the Transponder Purchase Agreement is incorporated herein by reference to Exhibit 10.5.2 to the Registration Statement. 10.5.3 Second Amendment to Participation Agreement and Purchase Agreement, constituting Exhibit 10.5.1 hereto, dated as of June 18, 1993, among Hughes Communications Galaxy, Inc., Orion One, Inc., State Street, CIBC Inc., Internationale Nederlanden Lease Structured Finance B.V., Wilmington Trust Company and BT Securities Corporation, as agent is incorporated herein by reference to Exhibit 10.5.3 to the Registration Statement. EXHIBIT INDEX ------------- Sequentially Exhibit Numbered Page - ------- ------------- 10.6.1 Lease Agreement, dated as of December 31, 1992, by and between Hughes Communications Galaxy, Inc. and State Street is incorporated herein by reference to Exhibit 10.6.1 to the Registration Statement. 10.6.2 First Amendment to Lease Agreement constituting Exhibit 10.6.1, dated as of June 18, 1993, by and between Hughes Communications Galaxy, Inc. and State Street is incorporated herein by reference to Exhibit 10.6.2 to the Registration Statement. 10.7 Schedule identifying certain agreements that have been omitted on the basis that such agreements are substantially identical to the agreements filed as Exhibits 10.5.1, 10.5.2, 10.5.3, 10.6.1 and 10.6.2 hereto is incorporated herein by reference to Exhibit 10.7 to the Registration Statement. 10.8.1 Launch Services Agreement No. 9411-002, dated November 14, 1994, between Lockheed-Khrunichev-Energia International, Inc. and PanAmSat International is incorporated herein by reference to Exhibit 10.10 to Amendment No. 3 to PanAmSat International's Registration Statement on Form S-1 (Reg. No. 33-84836), dated March 9, 1995. (1) 10.8.2 First Amendment to Launch Services Agreement No. 9411-002 constituting Exhibit 10.8.1 hereto, dated March 30, 1995, between Lockheed-Khrunichev-Energia International, Inc. and PanAmSat International is incorporated herein by reference to Exhibit 10.10.2 to Amendment No. 1 to PanAmSat International's Registration Statement on Form S-1 (Reg. No. 33-95396), dated August 17, 1995.(1) 10.8.3 Second Amendment to Launch Services Agreement No. 9411-002 constituting Exhibit 10.8.1 hereto, dated June 9, 1995, between Lockheed-Khrunichev-Energia International, Inc. and PanAmSat International is incorporated herein by reference to Exhibit 10.10.3 to Amendment No. 1 to PanAmSat International's Registration Statement on Form S-1 (Reg. No. 33-95396), dated August 17, 1995.(1) 10.8.4 Amendment Number 3 to Launch Services Agreement No. 9411-002 constituting Exhibit 10.8.1 hereto, dated August 23, 1996, between Lockheed-Khrunichev-Energia International, Inc. and PanAmSat International is incorporated herein by reference to Exhibit 10.10.4 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended September 30, 1996. (1) 10.9.1 Agreement for the Launching into Geostationary Transfer Orbit of the PanAmSat 6 Satellite by an Ariane Launch Vehicle, No. 94.5.918, dated November 21, 1994, between PanAmSat International and Arianespace S.A. is incorporated herein by reference to Exhibit 10.12 to Amendment No. 4 to PanAmSat International's Registration Statement on Form S-1 (Reg. No. 33-84836), dated March 29, 1995.(1) 10.9.2 Amendment No. 1 to Agreement for the Launching into Geostationary Transfer Orbit of the PanAmSat 6 Satellite by an Ariane Launch Vehicle, No. 94.5.918 constituting Exhibit 10.9.1 hereto, dated May 1995, between PanAmSat International and Arianespace S.A. is incorporated herein by reference to Exhibit 10.12.2 to Amendment No. 1 to PanAmSat International's Registration Statement on Form S-1 (Reg. No. 33-95396), dated August 17, 1995. (1) 10.9.3 Amendment No. 2 to Agreement for the Launching into Geostationary Transfer Orbit of the PanAmSat 6 Satellite by an Ariane Launch Vehicle, No. 94.5.918 constituting Exhibit 10.9.1 hereto, dated as of April 29, 1996, between PanAmSat International and Arianespace S.A. is incorporated herein by reference to Exhibit S-1 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended March 31, 1996. EXHIBIT INDEX ------------- Sequentially Exhibit Numbered Page - ------- ------------- 10.6.1 Lease Agreement, dated as of December 31, 1992, by and between Hughes Communications Galaxy, Inc. and State Street is incorporated herein by reference to Exhibit 10.6.1 to the Registration Statement. 10.6.2 First Amendment to Lease Agreement constituting Exhibit 10.6.1, dated as of June 18, 1993, by and between Hughes Communications Galaxy, Inc. and State Street is incorporated herein by reference to Exhibit 10.6.2 to the Registration Statement. 10.7 Schedule identifying certain agreements that have been omitted on the basis that such agreements are substantially identical to the agreements filed as Exhibits 10.5.1, 10.5.2, 10.5.3, 10.6.1 and 10.6.2 hereto is incorporated herein by reference to Exhibit 10.7 to the Registration Statement. 10.8.1 Launch Services Agreement No. 9411-002, dated November 14, 1994, between Lockheed-Khrunichev- Energia International, Inc. and PanAmSat International is incorporated herein by reference to Exhibit 10.10 to Amendment No. 3 to PanAmSat International's Registration Statement on Form S-1 (Reg. No. 33-84836), dated March 9, 1995. (1) 10.8.2 First Amendment to Launch Services Agreement No. 9411-002 constituting Exhibit 10.8.1 hereto, dated March 30, 1995, between Lockheed-Khrunichev-Energia International, Inc. and PanAmSat International is incorporated herein by reference to Exhibit 10.10.2 to Amendment No. 1 to PanAmSat International's Registration Statement on Form S-1 (Reg. No. 33-95396), dated August 17, 1995. (1) 10.8.3 Second Amendment to Launch Services Agreement No. 9411-002 constituting Exhibit 10.8.1 hereto, dated June 9, 1995, between Lockheed-Khrunichev- Energia International, Inc. and PanAmSat International is incorporated herein by reference to Exhibit 10.10.3 to Amendment No. 1 to PanAmSat International's Registration Statement on Form S-1 (Reg. No. 33-95396), dated August 17, 1995. (1) 10.8.4 Amendment Number 3 to Launch Services Agreement No. 9411-002 constituting Exhibit 10.8.1 hereto, dated August 23, 1996, between Lockheed-Khrunichev- Energia International, Inc. and PanAmSat International is incorporated herein by reference to Exhibit 10.10.4 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended September 30, 1996. (1) 10.9.1 Agreement for the Launching into Geostationary Transfer Orbit of the PanAmSat 6 Satellite by an Ariane Launch Vehicle, No. 94.5.918, dated November 21, 1994, between PanAmSat International and Arianespace S.A. is incorporated herein by reference to Exhibit 10.12 to Amendment No. 4 to PanAmSat International's Registration Statement on Form S-1 (Reg. No. 33-84836), dated March 29, 1995. (1) 10.9.2 Amendment No. 1 to Agreement for the Launching into Geostationary Transfer Orbit of the PanAmSat 6 Satellite by an Ariane Launch Vehicle, No. 94.5.918 constituting Exhibit 10.9.1 hereto, dated May 1995, between PanAmSat International and Arianespace S.A. is incorporated herein by reference to Exhibit 10.12.2 to Amendment No. 1 to PanAmSat International's Registration Statement on Form S-1 (Reg. No. 33-95396), dated August 17, 1995. (1) 10.9.3 Amendment No. 2 to Agreement for the Launching into Geostationary Transfer Orbit of the PanAmSat 6 Satellite by an Ariane Launch Vehicle, No. 94.5.918 constituting Exhibit 10.9.1 hereto, dated as of April 29, 1996, between PanAmSat International and Arianespace S.A. is incorporated herein by reference to Exhibit S-1 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended March 31, 1996. EXHIBIT INDEX ------------- Sequentially Exhibit Numbered Page - ------- ------------- 10.15.4 Amendment No. 2 to Agreement for Launching into Geostationary Transfer Orbit of PanAmSat Satellites by an Ariane Launch Vehicle, No. 95.5.933, dated December 31, 1996, between PanAmSat International and Arianespace S.A., constituting Exhibit 10.15.1 hereto, is incorporated herein by reference to Exhibit 10.12.6 to PanAmSat International's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. (1) 10.16 Participation Agreement, dated as of February 7, 1996, among Hughes Communications Galaxy, Inc., General Motors Acceptance Corporation, Wilmington Trust Company, Chemical Bank and the lending institutions listed as loan participants in Schedule I to the Agreement is incorporated herein by reference to Exhibit 10.16 to the Registration Statement. 10.17 Lease Agreement, dated as of February 7, 1996, by and between Wilmington Trust Company and Hughes Communications Galaxy, Inc. is incorporated herein by reference to Exhibit 10.17 to the Registration Statement. 10.18.1 Letter Agreement, dated February 29, 1996, among The News Corporation Limited, Globo Participacoes, Ltd., Grupo Televisa, S.A., and PanAmSat International is incorporated herein by reference to Exhibit 10.17.1 to PanAmSat International's Quarterly Report on Form 10-Q/A for the period ended March 31, 1996. (1) 10.18.2 Amendment to Letter Agreement, dated November 4, 1996, constituting Exhibit 10.18.1 hereto, among The News Corporation Limited, Globo Participacoes, Ltd., Grupo Televisa, S.A., and PanAmSat International is incorporated herein by reference to Exhibit 10.17.2 to PanAmSat International's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. 10.19 Amended and Restated Contract for PanAmSat Program, dated May 2, 1996, between PanAmSat International and Space Systems/Loral, Inc. is incorporated herein by reference to Exhibit 10.7.3 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended March 31, 1996. (1) 10.20 Letter Agreement, dated June 10, 1996, between Hughes Communications Galaxy, Inc. and Hughes Space and Communications Company regarding the construction of Galaxy XI is incorporated herein by reference to Exhibit 10.20 to the Registration Statement. (1) 10.21 Letter Agreement, dated August 12, 1996, between Hughes Communications Galaxy, Inc. and Hughes Space and Communications Company regarding the construction of Galaxy XII is incorporated herein by reference to Exhibit 10.21 to the Registration Statement. (1) 10.22 Letter Agreement, dated August 12, 1996, between Hughes Communications Galaxy, Inc. and Hughes Space and Communications Company regarding the construction of Galaxy XIII, XIV, XV and XVI is incorporated herein by reference to Exhibit 10.22 to the Registration Statement. (1) 10.23 Letter Agreement, dated August 21, 1996, between Hughes Communications Galaxy, Inc. and Hughes Space and Communications Company regarding the construction of Galaxy XI is incorporated herein by reference to Exhibit 10.23 to the Registration Statement. (1) 10.24 DTH Option Purchase Agreement, dated September 20, 1996, between PanAmSat International, Grupo Televisa, S.A. and Satellite Company, L.L.C. is incorporated herein by reference to Exhibit 10.13.1 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended September 30, 1996. 10.25 Full-Time Transponder Service Agreement From PAS-3 (European Beam), dated as of September 20, 1996, between PanAmSat International and Televisa, S.A. is incorporated herein by reference to Exhibit 10.16 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended September 30, 1996. (1) EXHIBIT INDEX ------------- Sequentially Exhibit Numbered Page - ------- ------------- 10.26 Transponder Purchase and Sale Agreement, dated as of June 26, 1996, between PanAmSat International and Net Sat Servicos Ltda. is incorporated herein by reference to Exhibit 10.2 to Net Sat Servicios Ltda.'s Registration Statement on Form F-4 (Reg. No. 333-6318), dated January 21, 1997. (1) 10.27 Amended and Restated Transponder Purchase and Sale Agreement, dated as of June 26, 1996, between PanAmSat International and Net Sat Servicos Ltda. is incorporated herein by reference to Exhibit 10.2.1 to Net Sat Servicios Ltda.'s Registration Statement on Form F-4 (Reg. No. 333-6318), dated January 21, 1997. (1) 10.28 Amended and Restated Launch Services Agreement, dated as of January 17, 1997, between Hughes Communications Galaxy, Inc. and Hughes Space and Communications International, Inc. is incorporated herein by reference to Exhibit 10.28 to the Registration Statement. (1) 10.29 Galaxy X Spacecraft, Related Services and Documentation Contract (96-HCG-001), dated March 20, 1997, between Hughes Communications Galaxy, Inc. and Hughes Space and Communications Company is incorporated herein by reference to Exhibit 10.29 to the Registration Statement. (1) 10.30 Employment Agreement between PanAmSat and Frederick A. Landman, dated as of May 15, 1997, is incorporated herein by reference to Exhibit 10.30 to PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30, 1997.* 10.31 Amended and Restated Collateral Trust Agreement, dated as of May 16, 1997 by and among PanAmSat, Hughes Communications, Inc., Satellite Company, LLC, Grupo Televisa, S.A. and IBJ Schroder Bank & Trust Company is incorporated herein by reference to Exhibit 10.31 to PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30, 1997. 10.32 Pledge and Security Agreement, dated as of May 16, 1997, by and among Satellite Company, LLC, Grupo Televisa, S.A., in favor of IBJ Schroder Bank & Trust Company is incorporated herein by reference to Exhibit 10.30 to PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30, 1997. 10.33 PanAmSat Corporation Long Term Incentive Plan established in 1997 is incorporated herein by reference to Exhibit 10.33 to PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30, 1997.* 10.34 PanAmSat Corporation Annual Incentive Plan, effective January l, 1997, is incorporated herein by reference to Exhibit 10.34 to PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30, 1997.* 10.35 Intellectual Property Cross License Agreement, dated as of May 16, 1997, by and between PanAmSat and Hughes Electronics Corporation is incorporated herein by reference to Exhibit 10.35 to PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30, 1997. 10.36 Leveraged Lease Guaranty Indemnification Agreement, dated as of May 16, 1997 by and between PanAmSat and Hughes Electronics Corporation incorporated herein by reference to Exhibit 10.36 to PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30, 1997. 10.37 Fixed Price Contract between Hughes Communications Galaxy, Inc. and Hughes Space & Communications Company for Galaxy XI HS702, Spacecraft, Related Services and Documentation, Contract No. 96-HCG- 002, executed May 1997 is incorporated herein by reference to Exhibit 10.37 to PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30, 1997. (1) 10.38 Fixed Price Contract for PAS 1R and PAS 9 HS-702 Spacecraft, Related Services and Documentation--Contract No. 97-HCG-001, dated as of August 15, 1997, between Hughes Space and Communications Company, Inc. and PanAmSat. (2) EXHIBIT INDEX ------------- Sequentially Exhibit Numbered Page - ------- ------------- 10.39 Transponder Sublease Agreement for Galaxy III-R between Hughes Communications Galaxy, Inc. and California Broadcast Center, LLC, dated April 21, 1997 is incorporated herein by reference to Exhibit 10.39 to PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30, 1997. (1) 10.40 Transponder Lease Agreement for Galaxy VIII(i) between Hughes Communications Galaxy, Inc. and California Broadcast Center, LLC, dated April 21, 1997 is incorporated herein by reference to Exhibit 10.40 to PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30, 1997. (1) 10.41.1 Form of Indemnity Agreement between PanAmSat and each of its directors and executive officers is incorporated herein by reference to Exhibit 10.41 to PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30, 1997.* 10.41.2 Schedule identifying substantially identical agreements to the Indemnity Agreement constituting Exhibit 10.41.1 hereto in favor of Charles H. Noski, Frederick A. Landman, Patrick J. Costello, Steven D. Dorfman, John J. Higgins, Ted G. Westerman, Dennis F. Hightower, James M. Hoak, Joseph R. Wright, Jr., Michael T. Smith, Lourdes Saralegui, Carl A. Brown, Kenneth N. Heintz, Robert A. Bednarek, James W. Cuminale and David P. Berman.* 10.42 Credit Agreement, dated February 20, 1998, among PanAmSat, certain lenders and Citicorp USA, Inc., as administrative agent. 10.43 Agreement, dated as of May 15, 1996, between PanAmSat International and Patrick J. Costello is incorporated herein by reference to Exhibit 10.11.19 to PanAmSat's Quarterly Report on Form 10-Q for the period ended June 30, 1996.* 10.44 Agreement, dated as of March 21, 1997, between PanAmSat and Patrick J. Costello.* 10.45 Agreement, dated as of May 15, 1996, between PanAmSat International and Frederick A. Landman is incorporated herein by reference to Exhibit 10.11.16 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended June 30, 1996.* 10.46 Agreement, dated as of May 15, 1996, between PanAmSat International and Lourdes Saralegui is incorporated herein by reference to Exhibit 10.11.17 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended June 30, 1996.* 10.47 Agreement, dated as of May 15, 1996, between PanAmSat International and Robert A. Bednarek is incorporated herein by reference to Exhibit 10.11.18 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended June 30, 1996.* 10.48 Agreement, dated as of May 15, 1996, between PanAmSat International and James W. Cuminale is incorporated herein by reference to Exhibit 10.11.20 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended June 30, 1996.* 10.49 Agreement, dated as of May 15, 1996, between PanAmSat International and David P. Berman incorporated herein by reference to Exhibit 10.11.21 to PanAmSat International's Quarterly Report on Form 10-Q for the period ended June 30, 1996.* 10.50 Agreement, dated April 7, 1997, between PanAmSat and Hughes Electronics Corporation, regarding the terms of assignment of Kenneth N. Heintz to PanAmSat.* 21.1 Subsidiaries of PanAmSat. 24. l Powers of Attorney. 27.1 Financial Data Schedule. - -------- (1) Portions of this Exhibit have been omitted pursuant to an order of the Securities and Exchange Commission granting confidential treatment with respect thereto. (2) Portions of this Exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. EX-3.1 2 RESTATED CERTIFICATE OF INCORPORATION OF PANAMSAT EXHIBIT 3.1 RESTATED CERTIFICATE OF INCORPORATION OF PANAMSAT CORPORATION ARTICLE ONE NAME The name of the corporation is PANAMSAT CORPORATION (the ''Corporation''). ARTICLE TWO REGISTERED OFFICE The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle 19801, and the name of the registered agent at such address is The Corporation Trust Company. ARTICLE THREE PURPOSES The nature of the business or purposes of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law, and by such statement all lawful acts and activities shall be within the purposes of the Corporation, except for express limitations, if any. ARTICLE FOUR CAPITAL STRUCTURE 4.1. The total number of shares of stock which the Corporation shall have authority to issue is 450,000,000 shares of all classes of stock, consisting of 400,000,000 shares of Common Stock, par value $.01 per share, and 50,000,000 shares of Preferred Stock, par value $.01 per share. 4.2. Shares of Preferred Stock may be issued from time to time in one or more series as may from time to time be determined by the Board of Directors, each of said series to be distinctly designated. The voting powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations or restrictions thereof, if any, of each such series may differ from those of any and all other series of Preferred Stock at any time outstanding, and the Board of Directors is hereby expressly granted authority to fix or alter, by resolution or resolutions, the designation, number, voting powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions thereof, of each such series, including but without limiting the generality of the foregoing, the following: (a) The distinctive designation of, and the number of shares of Preferred Stock that shall constitute, such series, which number (except where otherwise provided by the Board of Directors in the resolution establishing such series) may be increased or decreased (but not below the number of shares of such series then outstanding) from time to time by like action of the Board of Directors; (b) The rights in respect of dividends, if any, of such series of Preferred Stock, the extent of the preference or relation, if any, of such dividends to the dividends payable on any other class or classes or on any other series of the same or other class or classes of capital stock of the Corporation and whether such dividends shall be cumulative or noncumulative; (c) The right, if any, of the holders of such series of Preferred Stock to convert the same into, or exchange the same for, shares of any other class or classes or of any other series of the same or any other class or classes of capital stock of the Corporation, and the terms and conditions of such conversion or exchange; (d) Whether or not shares of such series of Preferred Stock shall be subject to redemption, and the redemption price or prices and the time or times at which, and the terms and conditions on which, shares of such series of Preferred Stock may be redeemed; (e) The rights, if any, of the holders of such series of Preferred Stock upon the voluntary or involuntary liquidation, dissolution or winding-up of the Corporation or in the event of any merger or consolidation of or sale of assets by the Corporation; (f) The terms of any sinking fund or redemption or repurchase or purchase account, if any, to be provided for shares of such series of Preferred Stock; (g) The voting powers, if any, of the holders of any series of Preferred Stock generally or with respect to any particular matter, which may be less than, equal to or greater than one vote per share, and which may, without limiting the generality of the foregoing, include the right, voting as a series by itself or together with the holders of any other series of Preferred Stock or all series of Preferred Stock as a class, to elect one or more directors of the Corporation generally or under such specific circumstances and on such conditions, as shall be provided in the resolution or resolutions of the Board of Directors adopted pursuant hereto, including, without limitation, in the event there shall have been a default in the payment of dividends on or redemption of any one or more series of Preferred Stock; and (h) Such other powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions thereof, as the Board of Directors shall determine. ARTICLE FIVE DIRECTORS 5.1. The initial Board of Directors shall consist of 10 directors. Such number may be changed in such manner as provided in the bylaws of the Corporation. 2 5.2. Unless and except to the extent that the bylaws of the Corporation shall so require, the election of directors of the Corporation need not be by written ballot. ARTICLE SIX LIMITATION ON LIABILITY A director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the General Corporation Law as the same exists or may hereafter be amended. Any amendment, modification or repeal of the foregoing sentence shall not adversely affect any right or protection of a director of the Corporation hereunder in respect of any act or omission occurring prior to the time of such amendment, modification or repeal. ARTICLE SEVEN INDEMNIFICATION SECTION 7.1. Right to Indemnification. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a ''proceeding'') by reason of the fact that he, or a person for whom he is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys' fees) incurred by such person. Except as provided in Section 7.3, the Corporation shall not be required to indemnify a person in connection with a proceeding (or part thereof) initiated by such person unless the proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. SECTION 7.2. Advancement of Expenses. The Corporation shall pay the expenses (including attorneys' fees) of any person referred to in Section 7.1 of this ARTICLE SEVEN incurred in defending any proceeding in advance of its final disposition; provided, however, that the advancement of expenses incurred by a director or officer in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the director or officer to repay all amounts advanced if it should be ultimately determined that the director or officer is not entitled to be indemnified under this ARTICLE SEVEN or otherwise. SECTION 7.3. Claims. If a claim for indemnification or advancement of expenses under this ARTICLE SEVEN is not paid in full within sixty (60) days after a written claim therefor has been received by the Corporation (except in the case of a claim for advancement of expenses, in which case the applicable period shall be twenty (20) days), the claimant may file suit to recover the unpaid amount of such claim. If successful in whole in such an action, the claimant shall be entitled to be paid the expense of prosecuting such claim; if successful in part in such an action, the claimant shall be entitled to be paid the expense of prosecuting each successfully resolved claim, issue or matter. In any such action the 3 Corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification or advancement of expenses under applicable law. SECTION 7.4. Non-Exclusivity of Rights. The rights conferred on any person by this ARTICLE SEVEN shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of this Restated Certificate of Incorporation, provision of the bylaws, agreement, vote of stockholders or disinterested directors or otherwise. SECTION 7.5. Other Indemnification. The Corporation's obligation, if any, to indemnify any person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or nonprofit entity shall be reduced by any amount such person would be entitled to retain as indemnification from such other corporation, partnership, joint venture, trust, enterprise or nonprofit enterprise. SECTION 7.6. Amendment or Repeal. Any repeal or modification of the foregoing provisions of this ARTICLE SEVEN shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification. ARTICLE EIGHT AMENDMENT OF CERTIFICATE From time to time and at any time, any provision contained in this Restated Certificate of Incorporation may be amended, altered, changed or repealed by the Corporation, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed by law; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Restated Certificate of Incorporation in its present form or as hereafter amended are granted subject to the rights reserved in this ARTICLE EIGHT. ARTICLE NINE AMENDMENT OF BYLAWS In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors of the Corporation is expressly authorized to make, alter and repeal the bylaws of the Corporation. ARTICLE TEN STOCKHOLDER ACTION Any action required or permitted to be taken by any stockholders of the Corporation must be effected at a duly called annual or special meeting of such stockholders and may not be effected by any consent in writing by such stockholders. Except as otherwise required by law, special meetings of 4 stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors. ARTICLE ELEVEN BUSINESS COMBINATIONS The Corporation expressly elects not to be governed by Section 203 of the General Corporation Law. 5 EX-3.2 3 RESTATED BYLAWS OF PANAMSAT EXHIBIT 3.2 RESTATED BYLAWS OF PANAMSAT CORPORATION ARTICLE I STOCKHOLDERS SECTION 1.1. Annual Meetings. An annual meeting of stockholders shall be held for the election of directors at such date, time and place, either within or without the State of Delaware, as may be designated by resolution of the Board of Directors from time to time. Any other proper business may be transacted at the annual meeting. SECTION 1.2. Special Meetings. Special meetings of stockholders for any purpose or purposes may be called at any time by the Board of Directors, or by a committee of the Board of Directors that has been duly designated by the Board of Directors and whose powers and authority, as provided in a resolution of the Board of Directors, include the power to call such meetings, but such special meetings may not be called by any other person or persons. SECTION 1.3. Notice of Meetings. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given that shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the certificate of incorporation or these Bylaws, the written notice of any meeting shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. SECTION 1.4. Adjournments. Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. SECTION 1.5. Quorum. Except as otherwise provided by law, the certificate of incorporation or these Bylaws, at each meeting of stockholders the presence in person or by proxy of the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote at the meeting shall be necessary and sufficient to constitute a quorum. Where a separate vote by a series, class or classes is required, a majority of the outstanding shares of stock of such class or classes on any particular issue, present in person or represented by proxy, shall be necessary and sufficient to constitute a quorum for purposes of such issue. In the absence of a quorum, the stockholders so present may, by majority vote, adjourn the meeting from time to time in the manner provided in Section 1.4 of these Bylaws until a quorum shall attend. Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. SECTION 1.6. Organization. Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in his absence by the President, or in his absence by an Executive Vice President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting. The chairman of the meeting shall announce at the meeting of stockholders the date and time of the opening and the closing of the polls for each maker upon which the stockholders will vote. SECTION 1.7. Voting; Proxies. Each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power upon the matter in question. At all meetings of stockholders for the election of directors, a plurality of the votes cast shall be sufficient to elect a director. All other elections and questions shall, unless otherwise provided by law, the certificate of incorporation, these Bylaws or the rules or regulations of any stock exchange applicable to the Corporation, be decided by the affirmative vote of the holders of shares of stock having a majority of the votes present in person or represented by proxy and entitled to vote thereon. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for him by proxy, but no such proxy shall be voted or acted upon after three years from is date, unless the proxy provides for a longer period. A proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or by delivering a proxy in accordance with applicable law bearing a later date to the Secretary of the Corporation. Voting at meetings of stockholders need not be by written ballot. SECTION 1.8. Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date: (i) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, not be more than sixty nor less than ten (10) days before the date of such meeting; and (ii) in the case of any other action, shall not be more than sixty (60) days prior to such other action. If no record date is fixed: (i) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and (ii) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall 2 apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjured meeting. SECTION 1.9. List of Stockholders Entitled to Vote. The Secretary shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. SECTION 1.10. Stock Ledger. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 1.9 of this ARTICLE I, or to vote in person or by proxy at any meeting of stockholders. SECTION 1.11. Conduct of Meetings. The Board of Directors of the Corporation may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the chairman of any meeting of stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine: (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. Unless and to the extent otherwise determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure. SECTION 1.12. Advance Notice of Stockholder Nominations and Business. (A) Annual Meetings of Stockholders. (1) Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (a) pursuant to the Corporation's notice of meeting, (b) by or at the direction of the Board of Directors or (c) by any stockholder of the Corporation who was a stockholder of record at the time of giving of notice provided for in this Bylaw, who is entitled to vote at the meeting and complies with the notice procedures set forth in this Bylaw. (2) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(l) of this Bylaw, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and such other business must otherwise be a proper matter for stockholder action. To be timely, a stockholder's 3 notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 60th day nor earlier than the close of business on the 90th day prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder's notice as described above. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule 14a-11 thereunder (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner, (ii) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner, and (iii) whether the proponent intends or is part of a group which intends to solicit proxies from other stockholders in support of such proposal or nomination. (3) Notwithstanding anything in the second sentence of paragraph (A)(2) of this Bylaw to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least seventy (70) days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this Bylaw shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation. (B) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation's notice of meeting (a) by or at the direction of the Board of Directors or (b) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this Bylaw, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Bylaw. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation's notice of meeting, if the 4 stockholder's notice required by paragraph (A)(2) of this Bylaw shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 90th day prior to such special meeting and not later than the close of business on the later of the 60th day prior to such special meeting, or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement or an adjournment of a special meeting commence a new time period for the giving of a stockholder's notice as described above. (C) General. (1) Only such persons who are nominated in accordance with the procedures set forth in this Bylaw shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Bylaw. Except as otherwise provided by law, the certificate of incorporation or these Bylaws, the chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Bylaw and, if any proposed nomination or business is not in compliance with this Bylaw, to declare that such defective proposal or nomination shall be disregarded. (2) For purposes of this Bylaw, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. (3) Notwithstanding the foregoing provisions of this Bylaw, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Bylaw. Nothing in this Bylaw shall be deemed to affect any rights (i) of stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders of any series of Preferred Stock to elect directors under specified circumstances. SECTION 1.13. Stockholder Action. Any action required or permitted to be taken by any stockholders of the Corporation must be effected at a duly called annual or special meeting of such stockholders and may not be effected by any consent in writing by such stockholders. Except as otherwise required by law, special meetings of stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors. SECTION 1.14. Inspectors of Election. The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors of election, who may be employees of the Corporation, to act at the meeting or any adjournment thereof and to make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. In the event that no inspector so appointed or designated is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath to execute faithfully the duties of inspector with strict impartiality and according to the best of his or her ability. The inspector or inspectors so appointed or designated shall (i) ascertain the number of shares of capital stock of the Corporation outstanding and the voting power of each such share, (ii) determine the shares of capital stock of the Corporation represented at the meeting and the validity of proxies and ballots, (iii) count all votes 5 and ballots, (iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, and (v) certify their determination of the number of shares of capital stock of the Corporation represented at the meeting and such inspectors' count of all votes and ballots. Such certification and report shall specify such other information as may be required by law. In determining the validity and counting of proxies and ballots cast at any meeting of stockholders of the Corporation, the inspectors may consider such information as is permitted by applicable law. No person who is a candidate for an office at an election may serve as an inspector at such election. ARTICLE II BOARD OF DIRECTORS SECTION 2.1. Number; Qualifications. The Board of Directors shall consist of one or more members, the number thereof to be determined from time to time by resolution of the Board of Directors. Directors need not be stockholders. SECTION 2.2. Election; Resignation; Removal; Vacancies. At the first annual meeting of stockholders and at each annual meeting thereafter, the stockholders shall elect directors each of whom shall hold office for a term of one year or until his successor is elected and qualified. The number of directors constituting the initial Board of Directors shall be ten. Subject to the rights of holders of any series of Preferred Stock to elect directors under specified circumstances, the number of directors may be modified from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors which the Corporation would have if there were no vacancies. Any director may resign at any time upon written notice to the Corporation. Any newly created directorship or any vacancy occurring in the Board of Directors for any cause may be filled by a majority of the remaining members of the Board of Directors, although such majority is less than a quorum, or by a plurality of the votes cast at a meeting of stockholders, and each director so elected shall hold office until the expiration of the term of office of the director whom he has replaced or until his successor is elected and qualified. SECTION 2.3. Regular Meetings. Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware and at such times as the Board of Directors may from time to time determine, and if so determined notices thereof need not be given. SECTION 2.4. Special Meetings. Special meetings of the Board of Directors may be held at any time or place within or without the State of Delaware whenever called by the President, any Vice President, the Secretary, or by any member of the Board of Directors. Notice of a special meeting of the Board of Directors shall be given by the person or persons calling the meeting at least twenty-four hours before the special meeting. SECTION 2.5. Telephonic Meetings Permitted. Members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting thereof by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Bylaw shall constitute presence in person at such meeting. 6 SECTION 2.6. Quorum; Vote Required for Action. At all meetings of the Board of Directors a majority of the whole Board of Directors shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 2.7. Organization. Meetings of the Board of Directors shall be presided over by the Chairman of the Board, if any, or in his absence by the President, or in their absence by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting. SECTION 2.8. Informal Action by Directors. Unless otherwise restricted by the certificate of incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or such committee. ARTICLE ILL COMMITTEES SECTION 3.1. Committees. The Board of Directors shall appoint the committees provided for in these Bylaws in Sections 3.2 and 3.3 and may, by resolution passed by the Board of Directors, designate one or more additional committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent permitted by law and to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. SECTION 3.2. Compensation Committee. (a) At each annual meeting of the Board of Directors, the Board of Directors shall, by a resolution adopted by the Board of Directors, designate and appoint from its members a Compensation Committee consisting of three or more directors, each of whom shall be a "disinterested" person. (b) The Compensation Committee shall have the following powers and responsibilities: (1) to review and recommend to the Board of Directors compensation levels, bonus amounts and stock option grants of officers and compensation and benefit plans recommended by management for other employees; (2) to request and review reports from the corporation's management on the scope, competence, performance and motivation of management employees; 7 (3) to develop, review and recommend to the Board of Directors incentive, bonus, stock option and similar incentive plans or programs and retirement and welfare plans or programs for officers and key managers; (4) to interpret incentive, bonus, stock option and similar incentive plans; and (5) to develop, review and recommend to the Board of Directors changes of major benefit programs. (c) Action taken by the Compensation Committee or at meetings duly called shall require the affirmative vote of at least a majority of its members. SECTION 3.3. Audit Committee. (a) At each annual meeting of the Board of Directors, the Board of Directors shall, by a resolution adopted by the Board of Directors, designate and appoint from its members an Audit Committee consisting of three or more directors, none of whom is an officer or employee of the Corporation. (b) The Audit Committee shall have the powers and responsibilities as designated by the Board of Directors from time to time. SECTION 3.4. Committee Rules. Unless the Board of Directors otherwise provides, each committee designated by the Board of Directors may make, alter and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to ARTICLE II of these Bylaws. ARTICLE IV OFFICERS SECTION 4.1. Executive Officers; Election; Qualifications; Term of Office; Resignation; Removal; Vacancies. The Board of Directors shall elect a President and Secretary, and it may, if it so determines, choose a Chairman of the Board from among its members. The Board of Directors may also choose one or more Executive Vice Presidents, one or more Senior Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers. Each such officer shall hold office until the first meeting of the Board of Directors after the annual meeting of stockholders next succeeding his election, and until his successor is elected and qualified or until his earlier resignation or removal. Any officer may resign at any time upon written notice to the Corporation. The Board of Directors may remove any officer with or without cause at any time, but such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation. Any number of offices may be held by the same person. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board of Directors at any regular or special meeting. SECTION 4.2. Powers and Duties of Executive Officers. The officers of the Corporation shall have such powers and duties in the management of the Corporation as may be prescribed 8 in a resolution by the Board of Directors and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board of Directors. SECTION 4.3. Chairman of the Board. The Chairman of the Board shall be a member of the Board of Directors. He shall preside at each meeting of the Board of Directors or the stockholders. Unless the Chairman also holds another office described in these Bylaws, he shall be a non-executive officer of the Corporation. SECTION 4.4. The President. The President shall be the chief executive officer of the Corporation. He shall, in the absence of the Chairman of the Board, preside at each meeting of the Board of Directors or the stockholders. The President shall be responsible for the general supervision and control of the business and affairs of the Corporation, subject to the direction of the Board of Directors. The President may sign or countersign certificates, contracts, agreements and other documents and instruments in the name and on behalf of the Corporation, unless and except to the extent that any document or instrument is required by law or by the Board of Directors to be signed or countersigned by another officer of the Corporation. The President may appoint additional officers that are not executive officers described in these Bylaws (unless such appointments are approved by the Board of Directors), and such additional officers shall serve the Corporation at the discretion of the President. The President shall perform all duties incident to the office of the President, and such other duties as may from time to time be assigned to him by the Board of Directors. SECTION 4.5. Executive Vice President. Each Executive Vice President shall perform all such duties as from time to time may be assigned to him by the Board of Directors or the President. At the request of the President or in his absence or in the event of his inability or refusal to act, the Executive Vice President, or if there shall be more than one, the Executive Vice Presidents in the order determined by the Board of Directors (or if there be no such determination, then the Executive Vice Presidents in the order of their appointment), shall perform the duties of the President, and when so acting, shall have the powers of and be subject to the restrictions placed upon the President in respect of the performance of such duties. SECTION 4.6. Senior Vice President. Each Senior Vice President shall perform all such duties as from time to time may be assigned to him by the Board of Directors or the President. Each Senior Vice President shall perform all duties incident to the office of such Senior Vice President, and such other duties as may from time to time be assigned to him by the Board of Directors. SECTION 4.7. Chief Financial Officer. The Chief Financial Officer shall be responsible for the financial affairs of the Corporation and shall be the chief accounting officer for public securities purposes. If the Chief Financial Officer is not also the Treasurer of the Corporation, he shall be responsible for the supervision of the Treasurer. He shall perform all duties incident to the office of Chief Financial Officer, and such other duties as may from time to time be assigned to him by the Board of Directors. SECTION 4.8. Treasurer. The Treasurer shall: (a) have charge and custody of, and be responsible for, all the funds and securities of the Corporation; (b) keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation; 9 (c) deposit all moneys and other valuables to the credit of the Corporation in such depositaries as may be designated by the Board of Directors or pursuant to its direction; (d) receive, and give receipts for, moneys due and payable to the Corporation from any source whatsoever; (e) disburse the funds of the Corporation and supervise the investments of its funds; (f) render to the Board of Directors, whenever the Board of Directors may require, an account of the financial condition of the Corporation; and (g) in general, perform all duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board of Directors. In the event that any officer of the Corporation other than the Treasurer shall be designated as the Corporation's chief financial officer, the Treasurer shall share the foregoing powers and duties with such chief financial officer, and all references in these Bylaws to the Treasurer shall be deemed to include such chief financial officer of the Corporation. SECTION 4.9. Secretary. The Secretary shall: (a) keep or cause to be kept in one or more books provided for the purpose, the minutes of all meetings of the Board of Directors, the committees of the Board of Directors and the stockholders; (b) see that all notices are duly given in accordance with the provisions of these Bylaws and as required by law; (c) be custodian of the records and the seal of the Corporation and affix and attest the seal to all certificates for shares of the Corporation and affix and attest the seal to all other documents to be executed on behalf of the Corporation under its seal; (d) see that the books, reports, statements, certificates and other documents and records required by law to be kept and filed are properly kept and filed; and (e) in general, perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board of Directors. SECTION 4.10. Assistant Secretaries. During the absence or disability of the Secretary, the Assistant Secretary shall have and may exercise all of the powers and shall discharge all of the duties of the Secretary. Each Assistant Secretary shall also perform all such other duties as are incident to his office or are properly requested by the President, the Secretary or the Board of Directors. SECTION 4.11. Assistant Treasurers. During the absence or disability of the Treasurer, the Assistant Treasurer shall have and may exercise all of the powers and shall discharge all of the duties of the Treasurer. Each Assistant Treasurer shall also perform all such other duties as are incident to his office or are properly requested by the President, the Treasurer or the Board of Directors. 10 SECTION 4.12. Additional Officers. The Board of Directors may appoint such other officers and agents as it may deem appropriate, and such other officers and agents shall hold their offices for such terms and shall exercise such powers and perform such duties as may be determined from time to time by the Board of Directors. The Board of Directors may from time to time delegate to any officer or agent the power to appoint subordinate officers or agents and to prescribe their respective rights, terms of office, authorities and duties. Any such officer or agent may remove any such subordinate officer or agent appointed by him, for or without cause. ARTICLE V STOCK SECTION 5.1. Certificates. Every holder of stock shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman or the President or an Executive Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by him in the Corporation. Any of or all the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. SECTION 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. ARTICLE VI MISCELLANEOUS SECTION 6.1. Fiscal Year. The fiscal year of the Corporation shall be determined by resolution of the Board of Directors. SECTION 6.2. Seal. The corporate seal shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors. SECTION 6.3. Waiver of Notice of Meetings of Stockholders, Directors and Committees. Any written waiver of notice, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at nor the purpose of any regular or special 11 meeting of the stockholders, directors or members of a committee of directors need be specified in any written waiver of notice. SECTION 6.4. Manner of Notice. Except as otherwise provided herein, notices to directors and stockholders shall be in writing and delivered personally or mailed to the directors or stockholders at their addresses appearing on the books of the Corporation. Notice to directors may be given by telegram, telecopier, telephone or other means of electronic transmission. SECTION 6.5. Interested Directors; Quorum. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if: (i) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. SECTION 6.6. Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs, or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. SECTION 6.7. Amendment of Bylaws. These Bylaws may be altered or repealed, and new bylaws made, by the Board of Directors, but the stockholders may make additional bylaws and may alter and repeal any Bylaws whether adopted by them or otherwise. 12 EX-4.3.2 4 1ST AMENDMENT TO LOAN AGREEMENT EXHIBIT 4.3.2 FIRST AMENDMENT TO LOAN AGREEMENT --------------------------------- The First Amendment to Loan Agreement ("Amendment") is entered into as of December 22, 1997, by and between HUGHES ELECTRONICS CORPORATION, formerly known as Hughes Network Systems, Inc. ("Lender") and PANAMSAT CORPORATION, formerly known as Magellan International, Inc. ("Borrower"). Whereas, Lender and Borrower are parties to this certain Loan Agreement ("Agreement") dated as of May 15, 1997, and wish to amend said Agreement as provided hereto: Now, therefore, for good consideration, the receipt and sufficiency of which is hereby acknowledged, Lender and Borrower agree as follows: 1. Capitalized terms not otherwise defined in this Amendment shall have the meanings given in the Agreement. 2. The Loan Agreement is hereby amended by adding the following new section 3.3: 3.3 Required Refinancing. At any time on or after May 16, 2000, -------------------- Lender may, in its sole discretion, request Borrower to use its best efforts to replace the credit facility provided by Lender pursuant to this Agreement, with such credit facility and on such terms as may be available to Borrower. Upon receipt of a written request from Lender to replace such credit facility, Borrower agrees to diligently pursue a replacement credit facility and it use its best efforts to locate and conclude such replacement at the earliest possible date. 3. Except as specifically provided herein, all terms of the Agreement remain unchanged and in full force and effect. 4. This Amendment may be executed in one or more counterparts, each of which shall be an original document but all of which shall constitute but one agreement. Any document containing the signature of a party transmitted via facsimile transmission by such party, shall be deemed an original executed document. HUGHES ELECTRONICS CORPORATION PANAMSAT CORPORATION By: Edward B. Clarkson By: Kenneth N. Heintz ------------------------------- ---------------------------------- Edward B. Clarkson Kenneth Heintz Assistant Treasurer Executive Vice President and Chief Financial Officer 2 EX-4.3.3 5 SUBORDINATION AND AMENDMENT AGREEMENT DTD 2/20/98 EXHIBIT 4.3.3 SUBORDINATION AND AMENDMENT AGREEMENT SUBORDINATION AND AMENDMENT AGREEMENT dated as of February 20, 1998 among HUGHES ELECTRONICS CORPORATION (together with its successors and assigns, "Hughes Electronics"), PANAMSAT CORPORATION (the "Borrower") and CITICORP USA, INC., as Administrative Agent for the Lenders under the Credit Agreement referred to below (in such capacity, the "Administrative Agent"). RECITALS (1) The Borrower has entered into the Credit Agreement dated as of February 20, 1998, with certain financial institutions (collectively, including without limitation any entity acquiring the rights of a "Lender" under the Credit Agreement after the date hereof, the "Lenders"), each of the Co- Documentation Agents party thereto and the Administrative Agent (as from time to time amended, the "Credit Agreement"), providing among other things for the making of advances by the Lenders to the Borrower (the "Advances") in an aggregate principal amount at any one time outstanding up to $500,000,000. (2) Hughes Electronics has entered into the Loan Agreement dated as of May 15, 1997 with the Borrower (as from time to time amended, the "Hughes Loan Agreement") pursuant to which Hughes Electronics has extended a credit facility in the amount of $1,725,000,000 to the Borrower evidenced by the promissory note dated May 15, 1997 (as from time to time amended, the "Hughes Note"). (3) It is a condition precedent to the effectiveness of the Credit Agreement that Hughes Electronics and the Borrower shall have executed and delivered an agreement in substantially the form hereof. Accordingly, the parties agree as follows: (S)1. Definitions. Except as otherwise expressly provided herein, terms defined in the Credit Agreement have their respective defined meanings when used herein. In addition, as used herein the following terms shall have the following respective meanings: "Excess Cash Flow" shall mean, for any period, with respect to the Borrower and its consolidated Subsidiaries on a consolidated basis, the sum of (a) net income plus (b) cash taxes plus (c) depreciation and amortization plus (d) non- cash charges plus (or minus, as the case may be) (e) change in the level of working capital and minus (f) the aggregate amount of capital expenditures made during such period, all determined in accordance with GAAP. For purposes of this definition, "working capital" means the excess, if any, of current assets (excluding cash) over current liabilities, determined in accordance with GAAP. "Final Payment Date" shall mean, with respect to the Senior Obligations, the date of the final payment in full in cash of the principal thereof and interest thereon and all other amounts now or hereafter payable or becoming payable in connection therewith. "Pay" and "Payment" shall mean, with respect to the Subordinated Obligations or any of them, any payment or prepayment or other distribution on or in respect of the Subordinated Obligations or any portion thereof, whether in cash, securities or other property, by set-off, by purchase or redemption thereof, by defeasance thereof, by the provision of a sinking fund or otherwise. "Senior Obligations" shall mean, collectively, all present and future obligations of the Borrower to the Administrative Agent and the Lenders under the Credit Agreement and the other Loan Documents, including without limitation the obligations of the Borrower thereunder to pay the principal of and interest (including, without limitation, interest accruing after the date of any filing by the Borrower of any petition in bankruptcy or the commencement of any bankruptcy, insolvency, reorganization or similar proceedings with respect to the Borrower whether or not allowed as a claim in such proceedings) on the Advances and all other amounts whatsoever payable or becoming payable under or in respect of the Credit Agreement and the other Loan Documents, whenever incurred, accruing or arising. "Subordinated Obligations" shall mean, collectively, all present and future obligations of the Borrower to Hughes Electronics under the Hughes Loan Agreement and the Hughes Note, including without limitation the obligations of the Borrower to pay the principal of and interest (including, without limitation, interest accruing after the date of any filing by the Borrower of any petition in bankruptcy or the commencement of any bankruptcy, insolvency, reorganization or similar proceedings with respect to the Borrower whether or not allowed as a claim in such proceedings) on the Hughes Note and any and all other amounts whatsoever from time to time owing or becoming owing to Hughes Electronics by the Borrower under the Hughes Loan Agreement and the Hughes Note, whenever incurred, accrued or arising. (S)2. Amendment of Hughes Loan. The Maturity Date (as defined in the Hughes Loan Agreement and for all purposes of the Hughes Note) of the Hughes Loan is hereby amended to be June 24, 2003. (S)3. Subordination. Hughes Electronics hereby agrees with the Administrative Agent for the benefit of the Administrative Agent and the Lenders that except as expressly permitted by (S)4 hereof, (a) the Subordinated Obligations are and shall be subordinated and subject in right of payment to the prior payment in full of the Senior Obligations to the extent provided in (S)4 hereof, (b) Hughes Electronics will not ask, demand, accelerate, sue for, take or receive from the Borrower, by set-off or in any other manner, any Payment of the whole or any part of the Subordinated Obligations or any security therefor, and (c) Hughes Electronics will not, without the prior written consent of the Required Lenders, agree or consent to any amendment, waiver or other modification of any provision of the Hughes Loan Agreement or the Hughes Note if such amendment, waiver or modification would (i) increase the amount or change the time of payment of any sum payable by the Borrower thereunder or otherwise increase any of the obligations of the Borrower thereunder or (ii) adversely affect in any way the rights or remedies of the Administrative Agent and the Lenders. Hughes Electronics hereby directs the Borrower to make such prior payment of the Senior Obligations. (S)4. Payments. (a) Until the Final Payment Date, Hughes Electronics and the Borrower agree with the Administrative Agent for the benefit of the Administrative Agent and the Lenders that the Borrower shall not make and Hughes Electronics shall not be entitled to receive or retain any Payment in respect of any principal of the Subordinated Obligations except to the extent expressly permitted by (S)4(b) and (c) hereof. (b) The Borrower may, subject to the terms of (S)(S)5 and 6 hereof, make payments of principal of the Hughes Note on or after January 1, 2001, in an aggregate amount not exceeding in any fiscal year of the Borrower an amount equal to 50% of Excess Cash Flow for the preceding fiscal year of the Borrower, as set forth in the annual financial statements of the Borrower provided pursuant to Section 5.03(c) of the Credit Agreement; provided, that no payment of principal under this Section 4(b) shall be permitted at any time when the Borrower Debt Rating is lower than BBB in the case of S&P or Baa2 in the case of Moody's. (c) The Borrower may at any time, subject to the terms of (S)(S)5 and 6 hereof, make payments of principal of the Hughes Note out of the proceeds of (i) any issuance by the Borrower of shares of capital stock and (ii) any issuance by the Borrower of Subordinated Debt. (d) The Borrower may, subject to (S)(S)5 and 6 hereof, make payments of interest on the Hughes Note at a rate per annum not exceeding the interest rate per annum applicable to the Advances, plus additional interest at a rate not exceeding the rate at which facility fee is payable under Section 2.07 of the Credit Agreement as in effect from time to time. (e) Hughes Electronics agrees that it will not take any guaranty of or security for the Subordinated Obligations or any or them, unless in the case of a guaranty such guaranty is subject to the provisions of this Agreement. (f) Hughes Electronics will give to the Administrative Agent at least 15 days' prior written notice of any request by Hughes Electronics pursuant to the Hughes Loan Agreement that the Borrower seek refinancing for or in respect of the Hughes Note (it being understood that the Senior Debt must be paid in full prior to any such refinancing). (S)5. Distribution, Etc. In furtherance of, and to make effective, the subordination provided for herein, Hughes Electronics agrees with the Administrative Agent for the benefit of the Administrative Agent and the Lenders as follows: (a) In the event of any distribution, division or application, partial or complete, voluntary or involuntary, by operation of law or otherwise, of all or any part of the assets of the Borrower, or upon any indebtedness of the Borrower, by reason of any Event of Default specified in Section 6.01(f) of the Credit Agreement relating to the Borrower, then and in any such event and during the continuance thereof: (i) any Payment which but for this Agreement would be payable or deliverable upon or with respect to the Subordinated Obligations or any of them (including without limitation any Payment payable to Hughes Electronics under any agreement relating to the subordination of any other indebtedness to the payment of the Subordinated Obligations) shall instead be paid or delivered directly to the Administrative Agent for application to the Senior Obligations; and (ii) Hughes Electronics hereby irrevocably authorizes and empowers the Administrative Agent to demand, sue for, collect and receive every such Payment and give acquittances therefor, and to file and/or vote claims and take such other proceedings, in the Administrative Agent's own name or in the name of Hughes Electronics or otherwise, as the Administrative Agent may deem necessary or advisable for the enforcement of this Agreement; and Hughes Electronics agrees duly and promptly to take such action as may be reasonably requested by the Administrative Agent to assist in the collection of the Subordinated Obligations for the account of the Administrative Agent and the Lenders, and/or to file appropriate proofs of claim in respect of the Subordinated Obligations, and to execute and deliver to the Administrative Agent on demand such powers of attorney, proofs of claim, assignments of claim or other instruments as may be requested by the Administrative Agent to enable the Administrative Agent to (x) enforce any and all claims upon or with respect to the Subordinated Obligations, and (y) to collect and receive any and all Payments which may be payable or deliverable at any time upon or with respect to the Subordinated Obligations. (b) If any Payment shall be received by Hughes Electronics upon or in respect of the Subordinated Obligations in contravention of the provisions of this (S)5 or of (S)4 or (S)6 hereof, Hughes Electronics will forthwith deliver the same to the Administrative Agent in precisely the form received (except for the endorsement or assignment of Hughes Electronics where necessary), for application to the Senior Obligations, whether then due or not due, and, until so delivered, the same shall be held in trust by Hughes Electronics for the sole benefit of the Administrative Agent and the Lenders. In the event of the failure by Hughes Electronics to make any such endorsement or assignment, the Administrative Agent, or any of its officers or employees, is hereby irrevocably authorized to make the same. (c) Any Payment received by Hughes Electronics that was not made or received in contravention of the provisions of this (S)5 or of (S)4 or (S)6 hereof may be retained by Hughes Electronics. (S)6. Event of Default. Hughes Electronics and the Borrower agree with the Administrative Agent for the benefit of the Administrative Agent and the Lenders that if there shall occur an Event of Default, no Payment shall be made on or in respect of the Subordinated Obligations or any portion thereof, whether of principal, interest or otherwise, until such time as the Administrative Agent notifies Hughes Electronics in writing that such Event of Default has been remedied, after which the Borrower may resume making required Payments (to the extent permitted by (S)(S)4 and 5 hereof) in respect of the Subordinated Obligations in accordance with the terms of the Hughes Note (including without limitation any missed Payments). Without prejudice to the foregoing provisions of this (S)6, the Administrative Agent will give Hughes Electronics and the Borrower prompt notice of the occurrence of any Event of Default. (S)7. Continuing Subordination, Etc. The subordination effected by this Agreement is a continuing subordination, and Hughes Electronics hereby agrees that at any time and from time to time without notice to it the Administrative Agent or the Lenders may: (a) change the manner, place or terms of payment or change or extend the time of payment of, or renew, exchange, amend or alter, the terms of any Senior Obligation, any security therefor or guarantee thereof or any liability of the Borrower or any other Person to the Administrative Agent or the Lenders, or any liability incurred directly or indirectly in respect thereof, or otherwise amend, renew, exchange, modify or supplement in any manner the Senior Obligations (without prejudice to the limitation on subordination set forth in the proviso in the definition of "Senior Obligations"), any Loan Document or any instrument evidencing or guaranteeing or securing the same or any agreement under which the Senior Obligations are outstanding; provided, that the Administrative Agent and the Lenders will not amend or modify the terms of the Senior Debt in a way that (i) increases the principal amount of the Senior Debt beyond an aggregate amount of $500,000,000, or (ii) increases the rate of interest on the Senior Debt (except as set forth in the Credit Agreement), or (iii) extends the Commitment Termination Date; (b) sell, exchange, release, surrender, realize upon, enforce or otherwise deal with in any manner and any order any property securing the Senior Obligations or any liability of the Borrower or any other Person to the Administrative Agent or the Lenders, or any liability incurred directly or indirectly in respect thereof; (c) settle or compromise any Senior Obligation or any other liability of the Borrower or any other Person in respect of the Senior Obligations to the Administrative Agent or the Lenders or any security therefor or any liability incurred directly or indirectly in respect thereof and apply any sums by whomsoever paid and however realized to any liability (including without limitation, the Senior Obligations) in any manner or order; and (d) fail to take or to record or otherwise perfect, for any reason or for no reason, any Lien securing the Senior Obligations by whomsoever granted, exercise or delay in or refrain from exercising any right or remedy against the Borrower or any other Person or any security, elect any remedy and otherwise deal freely with the Borrower and any guarantor of or security for the Senior Obligations or any liability of the Borrower or any guarantor to such holder or any liability incurred directly or indirectly in respect thereof. The Borrower agrees to notify Hughes Electronics of each of the events described in paragraphs (a) through (d) above; provided, that failure by the Borrower so to notify Hughes Electronics shall not in any way affect the rights of the Administrative Agent or the Lenders under this Agreement. (S)8. Covenants. (a) Hughes Electronics agrees that it will not transfer, assign, pledge or encumber the Subordinated Obligations or any part thereof except to General Motors Corporation or any Affiliate thereof, provided that in connection with any such transaction, the respective instrument of assignment specifically provides that the assignee takes the Subordinated Obligations or such part thereof subject to the provisions of this Agreement and such assignee executes and delivers to the Administrative Agent an instrument in form and substance satisfactory to the Administrative Agent pursuant to which such assignee agrees to be bound by the provisions of this Agreement. (b) Hughes Electronics agrees that it will give not less than ten (10) days' prior written notice to the Administrative Agent in accordance with Section 19 hereof of any acceleration by Hughes Electronics of the maturity of the Subordinated Obligations or any thereof (without prejudice to the provisions of (S)(S)3, 4, 5 and 6 hereof). (c) Nothing in this Agreement shall limit the right of the Administrative Agent and the Lenders to pursue any of their rights and remedies under the Credit Agreement or the Loan Documents or applicable law at such times and in such manner as they may determine. (S)9. Waiver of Notice. Hughes Electronics hereby unconditionally waives notice of the incurrence of the Senior Obligations or any part thereof and waives notice of reliance by the Administrative Agent or the Lenders upon the subordination of the Subordinated Obligations to the Senior Obligations. (S)10. Representations and Warranties. Hughes Electronics hereby represents and warrants that (i) it is a corporation duly incorporated and validly existing under the laws of Delaware; (ii) its making and performance of this Agreement have been duly authorized by all necessary action on its part; (iii) the making and performance by it of this Agreement do not violate any provision of applicable law or regulation or any contract or agreement to which it is a party; and (iv) this Agreement constitutes its legal, valid and binding obligation, enforceable in accordance with its terms. (S)11. Subrogation. On the Final Payment Date, Hughes Electronics shall, to the extent of any amounts paid to the Administrative Agent hereunder, be subrogated to the rights of the Administrative Agent and the Lenders to receive, accept and retain distributions of assets of the Borrower, or Payments by or on behalf of the Borrower, made on the Senior Obligations, until the Subordinated Obligations shall be paid in full. For purposes solely of such subrogation, no Payments to the Administrative Agent or the Lenders to which Hughes Electronics would be entitled but for the provisions hereof, pursuant to the provisions hereof, to the Administrative Agent or the Lenders by Hughes Electronics shall, as between the Borrower, their creditors other than the Administrative Agent or the Lenders, and Hughes Electronics, be deemed to be a payment or distribution by the Borrower on account of the Senior Obligations. (S)12. Benefit of Subordination Provisions. The subordination provisions of this Agreement are intended solely to define the relative rights of Hughes Electronics and its successors and assigns on the one hand and the Administrative Agent and the Lenders and their successors and assigns on the other hand, and nothing contained herein shall impair, as between the Borrower and Hughes Electronics, the obligations of the Borrower (which are absolute and unconditional) to pay the Subordinated Obligations as and when the same shall become due and payable in accordance with the terms thereof, or affect the relative rights against the Borrower of Hughes Electronics and creditors of the Borrower other than the Administrative Agent and the Lenders. (S)13. Reinstatement. If at any time any payment in respect of the Senior Obligations (or in respect of any Subordinated Obligation that was paid over to the Administrative Agent) is rescinded or must otherwise be restored or returned by the Administrative Agent or any of the Lenders in connection with any bankruptcy, insolvency, reorganization or similar proceeding, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or Hughes Electronics or any substantial part of the Borrower's or Hughes Electronics' property, the obligations of Hughes Electronics under this Agreement shall continue to be effective, or be reinstated as of the time such payment in respect of the Senior Obligations is so rescinded or must otherwise be restored, as the case may be, all as though such payment had not then been made. (S)14. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be identical and all of which, when taken together, shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart. (S)15. No Waiver. No failure on the part of the Administrative Agent or any Lender to exercise, no delay in exercising, and no course of dealing with respect to, any right or remedy hereunder will operate as a waiver thereof; nor will any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy. This Agreement may not be amended or modified except by written agreement of the Borrower, Hughes Electronics and the Administrative Agent, and no consent or waiver hereunder shall be valid unless in writing and signed by the Administrative Agent. (S)16. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and assigns, and each holder from time to time of any of the Senior Obligations or Subordinated Obligations. (S)17. Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of New York. (S)18. Submission to Jurisdiction; Waiver of Jury Trial. Hughes Electronics hereby submits, to the fullest extent permitted by law, to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or any of the other documents or the transactions contemplated hereby or thereby, and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court, any claim that any such proceeding brought in such a court has been brought in any inconvenient forum and any claims or defenses arising from or related to any theory of sovereign immunity. EACH OF HUGHES ELECTRONICS, THE BORROWER AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. (S)19. Miscellaneous. All notices, requests and demands to or upon a party hereto to be effective shall be in writing, shall be sent by certified or registered mail, return receipt requested, or by telecopier or delivered by hand or by a recognized overnight courier service and shall be deemed to have been validly served, given or delivered when delivered against receipt or, in the case of telecopy notice, when sent, or, in the case of telex, when the appropriate answerback received, addressed as follows: If to Hughes Electronics: Hughes Electronics Corporation 7200 Hughes Terrace Mail Station A-135, Building C-1 P.O. Box 45066 Los Angeles, CA 90045-0066 Attention: Edward B. Clarkson, Assistant Treasurer Telephone: 310-568-6190 Facsimile: 310-568-6386 If to the Administrative Agent: Citicorp USA, Inc. 725 South Figueroa Street Fifth Floor Los Angeles, CA 90017 Attention: Walter L. Larsen Telephone: 213-239-1501 Facsimile: 213-623-3592 If to PanAmSat: PanAmSat Corporation One Pickwick Plaza Greenwich, CT 06830 Attention: Kenneth N. Heintz Telephone: 203-622-6664 Facsimile: 203-622-9163 or to such other address as each party may designate for itself by like notice given in accordance with this (S)19. IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year first above written. HUGHES ELECTRONICS CORPORATION By Edward B. Clarkson ------------------------------------------ Title: Assistant Treasurer PANAMSAT CORPORATION By Kenneth N. Heintz ------------------------------------------ Title: CITICORP USA, INC., as Administrative Agent By [Signature Illegible] ------------------------------------------ Title: Attorney-in-Fact EX-4.4 6 INDENTURE, DATED AS OF 01/16/98 EXHIBIT 4.4 PANAMSAT CORPORATION TO THE CHASE MANHATTAN BANK Trustee _________ Indenture Dated as of January 16, 1998 _________ Debt Securities TABLE OF CONTENTS ----------------- Page ---- ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION............................................... 1 SECTION 101. Definitions............................................... 1 SECTION 102. Compliance Certificates and Opinions...................... 9 SECTION 103. Form of Documents Delivered to Trustee.................... 10 SECTION 104. Acts of Holders........................................... 11 SECTION 105. Notices, Etc., to Trustee and Company..................... 12 SECTION 106. Notice to Holders; Waiver................................. 12 SECTION 107. Conflict with Trust Indenture Act......................... 13 SECTION 108. Effect of Headings and Table of Contents.................. 13 SECTION 109. Successors and Assigns.................................... 13 SECTION 110. Separability Clause....................................... 13 SECTION 111. Benefits of Indenture..................................... 13 SECTION 112. Governing Law............................................. 14 SECTION 113. Legal Holidays............................................ 14 SECTION 114. References to Currency.................................... 14 ARTICLE TWO SECURITY FORMS............................................... 14 SECTION 201. Forms Generally........................................... 14 SECTION 202. Form of Trustee's Certificate of Authentication........... 15 SECTION 203. Securities Issuable in the Form of a Global Security...... 15 ARTICLE THREE THE SECURITIES............................................. 18 i Page ---- SECTION 301. Amount Unlimited; Issuable in Series................... 18 SECTION 302. Denominations.......................................... 21 SECTION 303. Execution, Authentication, Delivery and Dating......... 21 SECTION 304. Temporary Securities................................... 22 SECTION 305. Registration, Registration of Transfer and Exchange.... 23 SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities....... 25 SECTION 307. Payment of Interest; Interest Rights Preserved......... 25 SECTION 308. Persons Deemed Owners.................................. 27 SECTION 309. Cancellation........................................... 27 SECTION 310. Computation of Interest................................ 28 ARTICLE FOUR SATISFACTION AND DISCHARGE............................... 28 SECTION 401. Satisfaction and Discharge of Indenture................ 28 SECTION 402. Application of Trust Funds; Indemnification............ 29 SECTION 403. Defeasance and Discharge of Indenture.................. 30 ARTICLE FIVE REMEDIES................................................. 32 SECTION 501. Events of Default...................................... 32 SECTION 502. Acceleration of Maturity; Rescission and Annulment..... 35 SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee............................... 36 SECTION 504. Trustee May File Proofs of Claim....................... 37 SECTION 505. Trustee May Enforce Claims Without Possession of Securities........................................ 38 ii Page ---- SECTION 506. Application of Money Collected......................... 38 SECTION 507. Limitation on Suits.................................... 39 SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest...................... 40 SECTION 509. Restoration of Rights and Remedies..................... 40 SECTION 510. Rights and Remedies Cumulative......................... 40 SECTION 511. Delay or Omission Not Waiver........................... 40 SECTION 512. Control by Holders..................................... 41 SECTION 513. Waiver of Past Defaults................................ 41 SECTION 514. Undertaking for Costs.................................. 42 SECTION 515. Waiver of Stay, Extension or Usury Laws................ 42 ARTICLE SIX THE TRUSTEE.............................................. 42 SECTION 601. Certain Duties and Responsibilities.................... 42 SECTION 602. Notice of Defaults..................................... 44 SECTION 603. Certain Rights of Trustee.............................. 45 SECTION 604. Not Responsible for Recitals or Issuance of Securities........................................... 46 SECTION 605. May Hold Securities.................................... 46 SECTION 606. Money Held in Trust.................................... 46 SECTION 607. Compensation and Reimbursement......................... 47 SECTION 608. Disqualification; Conflicting Interests................ 48 SECTION 609. Corporate Trustee Required; Eligibility................ 48 SECTION 610. Resignation and Removal; Appointment of Successor...... 48 SECTION 611. Acceptance of Appointment by Successor................. 51 iii Page ---- SECTION 612. Merger, Conversion, Consolidation or Succession to Business............................... 52 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY................................................ 53 SECTION 701. Company to Furnish Trustee Names and Addresses of Holders................................. 53 SECTION 702. Preservation of Information; Communications to Holders........................................... 53 SECTION 703. Reports by Trustee..................................... 55 SECTION 704. Reports by Company..................................... 55 ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE............................................... 56 SECTION 801. Company May Consolidate, etc., Only on Certain Terms........................................ 56 SECTION 802. Successor Corporation Substituted...................... 57 ARTICLE NINE SUPPLEMENTAL INDENTURES................................ 58 SECTION 901. Supplemental Indentures without Consent of Holders.............................................. 58 SECTION 902. Supplemental Indentures with Consent of Holders........ 60 SECTION 903. Execution of Supplemental Indentures................... 61 SECTION 904. Effect of Supplemental Indentures...................... 62 SECTION 905. Conformity with Trust Indenture Act.................... 62 SECTION 906. Reference in Securities to Supplemental Indentures........................................... 62 ARTICLE TEN COVENANTS................................................ 62 SECTION 1001. Payment of Principal, Premium and Interest............. 62 SECTION 1002. Maintenance of Office or Agency........................ 63 iv Page ---- SECTION 1003. Money for Securities; Payments to Be Held in Trust................................................ 63 SECTION 1004. Corporate Existence.................................... 65 SECTION 1005. Payment of Taxes....................................... 65 SECTION 1006. Limitation on Liens.................................... 66 SECTION 1007. Limitation on Sale and Lease-Back Transactions......... 69 SECTION 1008. Exemption from Limitation on Liens and Sale and Lease-Back Transactions.......................... 69 SECTION 1009. Defeasance of Certain Obligations...................... 70 SECTION 1010. Statement by Officers as to Default.................... 71 SECTION 1011. Waiver of Certain Covenants............................ 71 ARTICLE ELEVEN REDEMPTION OF SECURITIES............................... 72 SECTION 1101. Applicability of Article............................... 72 SECTION 1102. Election to Redeem; Notice to Trustee.................. 72 SECTION 1103. Selection by Trustee of Securities To Be Redeemed............................................. 72 SECTION 1104. Notice of Redemption................................... 73 SECTION 1105. Deposit of Redemption Price............................ 74 SECTION 1106. Securities Payable on Redemption Date.................. 74 SECTION 1107. Securities Redeemed in Part............................ 75 ARTICLE TWELVE SINKING FUNDS.......................................... 75 SECTION 1201. Applicability of Article............................... 75 SECTION 1202. Satisfaction of Sinking Fund Payments with Securities........................................... 76 SECTION 1203. Redemption of Securities for Sinking Fund.............. 76 v Page ---- TESTIMONIUM.......................................................... SIGNATURES AND SEALS................................................. ACKNOWLEDGMENTS...................................................... vi Reconciliation and tie between Trust Indenture Act of 1939 and Indenture, dated as of January 16, 1998 Trust Indenture Act Section ..................... Indenture Section (S)310(a)(1) ..................... 609 (a)(2) ..................... 609 (a)(3) ..................... Not Applicable (a)(4) ..................... Not Applicable (b) ..................... 608,610 (c) ..................... Not Applicable (S)311(b)(2) ..................... 703(a) (c) ..................... Not Applicable (S)312(a) ..................... 701, 702(a) (b) ..................... 702(b) (c) ..................... 702(c) (S)313(a) ..................... 703(a) (d) ..................... 703(b) (S)314(a) ..................... 704 (b) ..................... Not Applicable (c)(1) ..................... 102 (c)(2) ..................... 102 (c)(3) ..................... Not Applicable (d) ..................... Not Applicable (e) ..................... 102 (f) ..................... Not Applicable (S)315(a) ..................... 601(a) (b) ..................... 602, 703(a) (c) ..................... 601(b) (d) ..................... 601(c) (d)(1) ..................... 601(a)(1) (d)(2) ..................... 601(c)(2) (d)(3) ..................... 601(c)(3) (e) ..................... 514 (S)316(a) ..................... 101 (a)(1)(A) ..................... 502, 512, 513 (a)(1)(B) ..................... 513 (a)(2) ..................... Not Applicable (b) ..................... 508 (S)317(a)(1) ..................... 503 (a)(2) ..................... 504 (b) ..................... 1003 (S)318(a) ..................... 107 NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. INDENTURE, dated as of January 16, 1998, between PANAMSAT CORPORATION, a corporation duly organized and existing under the laws of the State of Delaware (herein called the "Company" or the "Issuer"), having its principal office at One Pickwick Plaza, Greenwich, Connecticut 06830, and THE CHASE MANHATTAN BANK, a New York banking corporation, as Trustee hereunder (herein called the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness (herein called the "Securities"), to be issued in one or more series as in this Indenture provided. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities or of series thereof, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions. For all purposes of this Indenture, ----------- except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted at the date of such computation; and (4) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. Certain items, used principally in Article Six, are defined in that Article. "Act," when used with respect to any Holder, has the meaning specified in Section 104. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Attributable Debt" means, as to any particular lease under which any Person is at the time liable at any date as of which the amount thereof is to be determined, the total net amount of rent required to be paid by such Person under such lease during the remaining term thereof, excluding renewals, discounted at a rate per annum equal to the prevailing market interest rate, at the time such lease was entered into, on United States Treasury obligations having a maturity substantially the same as the average term of such lease, plus 3%. The net amount of rent required to be paid under any such lease for any such period shall be the amount of the rent payable by the lessee with respect to such period, after excluding amounts required to be paid on account of maintenance and repairs, insurance, taxes, assessments, water rates and similar charges and contingent rents such as those based on sales. In the case of any lease which is terminable by the lessee upon the payment of 2 a penalty, such net amount shall also include the amount of such penalty, but no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated. "Board of Directors" means either the board of directors of the Company or any duly authorized committee of that board duly authorized to act hereunder. "Board Resolution" means a copy of a resolution, certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions or trust companies are authorized or obligated by law to close in The City of New York, the Borough of Manhattan. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor corporation. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, a Vice Chairman, its Chief Executive Officer or President or by a Vice President and its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Consolidated Net Tangible Assets" means the total assets shown on the most recent audited annual consolidated balance sheet of the Company and its consolidated subsidiaries, after deducting the amount of all current liabilities and intangible assets. 3 "Corporate Trust Office" means the principal office of the Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of execution of this Indenture is located at 450 West 33rd Street, 15th Floor, New York, New York 10001, Attention: Global Trust Services, or at any other time at such address as the Trustee may from time to time designate by notice to the Holders. "corporation" includes corporations, associations, companies, business trusts and partnerships. "Defaulted Interest" has the meaning specified in Section 307. "Depositary" means, unless otherwise specified by the Company pursuant to either Section 203 or 301, with respect to Securities of any series issuable or issued as a Global Security, The Depository Trust Company, New York, New York, or any successor thereto registered under the Securities Exchange Act of 1934, as amended, or other applicable statute or regulation. "Event of Default" has the meaning specified in Section 501. "Global Security" means a Security issued to evidence all or a part of any series of Securities which is executed by the Company and authenticated and delivered by the Trustee to the Depositary or pursuant to the Depositary's instruction, all in accordance with this Indenture and pursuant to a Company Order, which shall be registered in the name of the Depositary or its nominee. "Holder" means a Person in whose name a Security is registered in the Security Register. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of particular series of Securities established as contemplated by Section 301. "Interest," when used with respect to an Original Issue Discount Security which by its terms bears interest only after Maturity, means interest payable after Maturity. 4 "Interest Payment Date," when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security. "Issuer" means the Person named as the "Issuer" in the first paragraph of this instrument until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Issuer" shall mean such successor corporation. "lien" has the meaning specified in Section 1006. "Maturity," when used with respect to any Security, means the date on which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Officers' Certificate" means a certificate signed by the Chairman of the Board, Chief Executive Officer or the President or by a Vice President and the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company, and delivered to the Trustee. "Opinion of Counsel" means written opinion of counsel, who may be counsel for the Company and whose opinion shall be acceptable to the Trustee. "Original Issue Discount Security" means any Security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502. "Outstanding," when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose payment or redemption money or evidences of indebtedness in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if 5 the Company shall act as its own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of -------- such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and (iii) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite - -------- ------- principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. In case of a dispute as to such right, any decision by the Trustee shall be full protection to the Trustee. Upon request of the Trustee, the Company shall furnish to the Trustee promptly an Officers' Certificate listing and identifying all Securities, if any, known by the Company to be owned or held by or for the account of any of the above-described persons; and, subject to Section 601, the Trustee shall be entitled to accept such Officers' Certificate as conclusive evidence of the facts therein set forth and of the fact that all Securities not listed therein are Outstanding for the purposes of any such determination. 6 "Paying Agent" means any Person authorized by the Company to pay the principal of (and premium, if any) or interest on any Securities on behalf of the Company. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment," when used with respect to the Securities of any series, means the place or places where the principal of (and premium, if any) and interest on the Securities of that series are payable as specified as contemplated by Section 301. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Principal Property" means any satellite or satellite systems equipment, whether under development or in operation, manufacturing, development, testing or research facility or warehouse (including, without limitation, land, fixtures and equipment) owned or leased by the Company or any Restricted Subsidiary (including any of the foregoing owned or leased after the date of this Indenture), but not including (a) any property which in the good faith determination of the Board of Directors is not of material importance to the total business conducted by the Company as an entirety or (b) any portion of a particular property which is similarly found not to be of material importance to the use or operation of such property. "Redemption Date," when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price," when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Regular Record Date" for the interest payable on any Interest Payment Date on the Securities of any series 7 means the date specified for that purpose as contemplated by Section 301. "Responsible Officer," when used with respect to the Trustee, means any officer within the Corporate Trust Office including any Vice President, Managing Director, Assistant Vice President, Secretary, Assistant Secretary, Treasurer or Assistant Treasurer or any officer of the Trustee customarily performing functions similar to those performed by any of the above-designated officers and also with respect to a particular matter, any other officer to whom such matter is referred because of such officer's knowledge and familiarity with the particular subject. "Restricted Subsidiary" means a subsidiary of the Company which owns a Principal Property. "Securities" has the meaning stated in the first recital of this Indenture and more particularly means any Securities authenticated and delivered under this Indenture. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307. "Stated Maturity," when used with respect to any Security or any installment of principal thereof or interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable. "Subsidiary" means a corporation more than 50% of the outstanding Voting Stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any 8 series shall mean the Trustee with respect to Securities of that series. "Trust Indenture Act" means the Trust Indenture Act of 1939 as amended and in force at the date as of which this instrument was executed, except as provided in Section 905. "U.S. Government Obligations" means securities which are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as to the timely payment of principal and interest as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company which is a member of the Federal Reserve System and having a combined capital and surplus of at least $50,000,000 as custodian with respect to any such obligation evidenced by such depository receipt or a specific payment of interest on or principal of any such obligation held by such custodian for the account of the holder of a depository receipt; provided that (except as required by law) such custodian is not authorized to - -------- make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the obligation set forth in (i) or (ii) above or the specific payment of interest on or principal of such obligation evidenced by such depository receipt. "Vice President," when used with respect to the Company, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president". "Voting Stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. SECTION 102. Compliance Certificates and Opinions. Upon any ------------------------------------ application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, 9 if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that the Person signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such Person, such Person has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such Person, such condition or covenant has been complied with. SECTION 103. Form of Documents Delivered to Trustee. In any case -------------------------------------- where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or 10 representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which such officer's certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 104. Acts of Holders. --------------- (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may be proved in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in any reasonable manner which the Trustee deems sufficient. 11 (c) The ownership of Securities shall be proved by the Security Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. SECTION 105. Notices, Etc., to Trustee and Company. Any request, ------------------------------------- demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Global Trust Services, or (2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Company, to the attention of the General Counsel of the Company. SECTION 106. Notice to Holders; Waiver. Where this Indenture ------------------------- provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in 12 any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other case it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 107. Conflict with Trust Indenture Act. If any provision --------------------------------- hereof limits, qualifies or conflicts with another provision which is required or deemed to be included in this Indenture by any of the provisions of the Trust Indenture Act, such required or deemed provision shall control. SECTION 108. Effect of Headings and Table of Contents. The Article ---------------------------------------- and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 109. Successors and Assigns. All covenants and agreements ---------------------- in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. SECTION 110. Separability Clause. In case any provision in this ------------------- Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 111. Benefits of Indenture. Nothing in this Indenture or --------------------- in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. 13 SECTION 112. Governing Law. This Indenture and the Securities ------------- shall be governed by and construed in accordance with the laws of the State of New York without regard to its conflicts of laws principles. SECTION 113. Legal Holidays. In any case where any Interest -------------- Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal (and premium, if any) need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, provided that no interest shall accrue for the --------- period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, to the date of payment. SECTION 114. References to Currency. All references in this ---------------------- Indenture to "dollars" or "$" are to the currency of the United States of America. ARTICLE TWO SECURITY FORMS SECTION 201. Forms Generally. The Securities of each series shall --------------- be in substantially the forms established in one or more indentures supplemental hereto or approved from time to time by or pursuant to a Board Resolution in accordance with Section 301, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and any indenture supplemental hereto, and may have such letters, numbers of other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. If the form of Securities of any series is established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 303 for the authentication and delivery of such Securities. 14 The Trustee's certificate of authentication shall be in substantially the form set forth in this Article. The definitive Securities shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. SECTION 202. Form of Trustee's Certificate of Authentication. ----------------------------------------------- This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. THE CHASE MANHATTAN BANK, as Trustee By Authorized Officer SECTION 203. Securities Issuable in the Form of a Global Security. ---------------------------------------------------- (a) If the Issuer shall establish pursuant to Sections 201 and 301 that the Securities of a particular series are to be issued in whole or in part in the form of one or more Global Securities, then the Issuer shall execute and the Trustee shall, in accordance with Section 303 and the Company Order delivered to the Trustee thereunder, authenticate and deliver, such Global Security or Securities, which (i) shall represent, and shall be denominated in an amount equal to the aggregate principal amount of, the Outstanding Securities of such series to be represented by such Global Security or Securities, (ii) shall be registered in the name of the Depositary for such Global Security or Securities or its nominee, (iii) shall be delivered by the Trustee to the Depositary or pursuant to the Depositary's instruction and (iv) shall bear a legend substantially to the following effect: "UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR THE INDIVIDUAL SECURITIES REPRESENTED HEREBY, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE (I) BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR (II) BY A NOMINEE OF THE 15 DEPOSITARY OR THE DEPOSITARY TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN." (b) Notwithstanding any other provision of this Section 203 or of Section 305, unless the terms of a Global Security expressly permit such Global Security to be exchanged in whole or in part for individual Securities, a Global Security may be transferred, in whole but not in part and in the manner provided in Section 305, only to another nominee of the Depositary for such Global Security, or to a successor Depositary for such Global Security selected or approved by the Issuer or to a nominee of such successor Depositary. (c) (i) If at any time the Depositary for a Global Security notifies the Issuer that it is unwilling or unable to continue as Depositary for such Global Security or if at any time the Depositary for the Securities for such Series shall no longer be eligible or in good standing under the Securities Exchange Act of 1934, as amended, or other applicable statute or regulation, the Issuer shall appoint a successor Depositary with respect to such Global Security. If a successor Depositary for such Global Security is not appointed by the Issuer within 90 days after the Issuer receives such notice or becomes aware of such ineligibility, the Issuer will execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of individual Securities of such series in exchange for such Global Security, will authenticate and deliver individual Securities of such series of like tenor and terms in definitive form in an aggregate principal amount equal to the principal amount of the Global Security in exchange for such Global Security. 16 (ii) If an Event of Default shall have occurred and be continuing or an event shall have occurred which with the giving of notice or lapse of time or both, would constitute an Event of Default with respect to the Securities represented by such Global Security, the Trustee, upon receipt of a Company Order for the authentication and delivery of individual Securities of such series in exchange for such Global Security, will authenticate and deliver individual Securities of such series of like tenor and terms in definitive form in an aggregate principal amount equal to the principal amount of the Global Security in exchange for such Global Security. (iii) The Issuer may at any time and in its sole discretion determine that the Securities of any series issued or issuable in the form of one or more Global Securities shall no longer be represented by such Global Security or Securities. In such event the Issuer will execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of individual Securities of such series in exchange in whole or in part for such Global Security, will authenticate and deliver individual Securities of such series of like tenor and terms in definitive form in an aggregate principal amount equal to the principal amount of such Global Security or Securities representing such series to be so exchanged for such Global Security or Securities. (iv) If specified by the Issuer pursuant to Section 301 with respect to Securities issued or issuable in the form of a Global Security, the Depositary for such Global Security may surrender such Global Security in exchange in whole or in part for individual Securities of such series of like tenor and terms in definitive form on such terms as are acceptable to the Issuer and such Depositary. Thereupon the Issuer shall execute, and the Trustee shall authenticate and deliver, without service charge, (1) to each Person specified by such Depositary a new Security or Securities of the same series of like tenor and terms and of any authorized denomination of $l,000 and any integral multiple thereof as requested by such Person in aggregate principal amount equal to and in exchange for such Person's beneficial interest in the Global Security; and (2) to such Depositary a new Global Security of like tenor and terms and in a denomination equal to the difference, if any, between the principal amount of the surrendered Global Security and the aggregate principal amount of Securities delivered to Holders thereof. 17 (v) In any exchange provided for in any of the preceding four paragraphs, the Issuer will execute and the Trustee will authenticate and deliver individual Securities in definitive registered form in authorized denominations of $1,000 and any integral multiple thereof. Upon the exchange of a Global Security for individual Securities, such Global Security shall be cancelled by the Trustee. Securities issued in exchange for a Global Security pursuant to this Section shall be registered in such names and in such authorized denominations as the Depositary for such Global Security, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee in writing. The Trustee shall deliver such Securities to the persons in whose names such Securities are so registered. ARTICLE THREE THE SECURITIES SECTION 301. Amount Unlimited; Issuable in Series. The aggregate ------------------------------------ principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued in one or more series. There shall be established in or pursuant to a Board Resolution and set forth in an Officers' Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of Securities of any series, (1) the title of the Securities of the series (which shall distinguish the Securities of the series from all other Securities); (2) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Sections 203, 304, 305, 306, 906 or 1107); (3) the date or dates on which the principal of the Securities of the series is payable; 18 (4) the rate or rates at which the Securities of the series shall bear interest, if any, the date or dates from which such interest shall accrue, the Interest Payment Dates on which such interest shall be payable and the Regular Record Date for the interest payable on the Interest Payment Date; (5) the place or places where the principal of (and premium, if any) and interest on Securities of the series shall be payable; (6) the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company; (7) the obligation, if any, of the Company to redeem or purchase Securities of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation; (8) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which Securities of the series shall be issuable; (9) if other than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 502; (10) any paying agents, transfer agents, registrars or any other agents with respect to the Securities of the series, if other than the Trustee; (11) the currency or currencies, including composite currencies, in which payment of the principal of (and premium, if any) and interest, if any, on such Securities shall be payable (if other than the currency of the United States of America), which unless otherwise specified shall be the currency of the United States of America as at the time of payment is legal tender for payment of public or private debts; 19 (12) if the principal of (and premium, if any), or interest, if any, on such Securities are to be payable, at the election of the Company or any Holder thereof, in a coin or currency other than that in which such Securities are stated to be payable, the period or periods within which, and the terms and conditions upon which, such election may be made; (13) if such Securities are to be denominated in a currency or currencies, including composite currencies, other than the currency of the United States of America, the equivalent price in the currency of the United States of America for purposes of determining the voting rights of Holders of such Securities as Outstanding Securities under this Indenture; (14) if the amount of payments of principal of (and premium, if any), or portions thereof, or interest, if any, on such Securities may be determined with reference to an index, formula or other method based on a coin or currency other than that in which such Securities are stated to be payable, the manner in which such amounts shall be determined; (15) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture); and (16) whether the Securities of the series shall be issued in whole or in part in the form of a Global Security or Securities; the terms and conditions, if any, upon which such Global Security or Securities may be exchanged in whole or in part for other individual Securities; and the Depositary for such Global Security or Securities. All Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to such Board Resolution and set forth in such Officers' Certificate or in any such indenture supplemental hereto. If any of the terms of the Securities of any series are established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or 20 prior to the delivery of the Officers' Certificate setting forth the terms of the Securities of any series. SECTION 302. Denominations. The Securities of each series shall be ------------- issuable in registered form without coupons in such denominations as shall be specified as contemplated by Section 301. In the absence of any such provisions with respect to the Securities of any series, the Securities of such series shall be issuable in denominations of $1,000 and any integral multiple thereof. SECTION 303. Execution, Authentication, Delivery and Dating. The ---------------------------------------------- Securities shall be executed on behalf of the Company by its Chairman of the Board, a Vice Chairman, its Chief Executive Officer or President or by one of its Vice Presidents, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Company Order shall authenticate and deliver such Securities. If the form or terms of the Securities of the series have been established in or pursuant to one or more Board Resolutions as permitted by Sections 201 and 301, or by a Supplemental Indenture as provided by Section 901, in authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating, (a) that such form has been established in conformity with the provisions of this Indenture; 21 (b) that such terms have been established in conformity with the provisions of this Indenture; (c) that such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization and other laws of general applicability relating to or affecting the enforcement of creditors' rights and to general equity principles; (d) that all laws and requirements in respect of the execution and delivery by the Company of the Securities have been complied with; and (e) such other matters as the Trustee may reasonably request. If such form or terms have been so established, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee's own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee. Each Security shall be dated the date of its authentication unless otherwise provided by the terms established and contemplated by Section 301. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. SECTION 304. Temporary Securities. Pending the preparation of -------------------- definitive Securities of any series, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, 22 substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. If temporary Securities of any series are issued, the Company will cause definitive Securities of that series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of the temporary Securities of such series at the office or agency of the Company in a Place of Payment for that series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of the same series of authorized denominations. Until so exchanged the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive securities of such series. SECTION 305. Registration, Registration of Transfer and Exchange. --------------------------------------------------- The Company shall cause to be kept at one of its offices or agencies maintained pursuant to Section 1002 or at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency of the Company in a Place of Payment being herein sometimes collectively referred to as the "Security Register") in which, subject to Section 203 and to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee initially is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Subject to (i) Section 203 and (ii) any restrictions on transfer set forth in such Security, upon surrender for registration of transfer of any Security of any series at the office or agency in a Place of Payment for that series, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new 23 Securities of the same series, of any authorized denominations and of a like aggregate principal amount. Subject to Section 203, at the option of the Holder, Securities of any series may be exchanged for other Securities of the same series, of any authorized denominations and of a like aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. Subject to Section 203, all Securities issued upon any registration or transfer or exchange of Securities shall be valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 203, 304, 906 or 1107 not involving any transfer. The Company shall not be required (i) to issue, register the transfer of or exchange Securities of any series during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities of that series selected for redemption (under Section 1103) and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. 24 SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. ------------------------------------------------ If there shall be delivered to the Company and the Trustee (i)(A) any mutilated Security or (B) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon its written request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security or in exchange for such mutilated Security, a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security of any series issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 307. Payment of Interest; Interest Rights Preserved. ---------------------------------------------- Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that 25 Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Securities of such series at his address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in 26 whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2). (2) The Company may make payment of any Defaulted Interest on the Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after written notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security lawfully delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. SECTION 308. Persons Deemed Owners. Subject to Section 203, the --------------------- Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any) and (subject to Section 307) interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. SECTION 309. Cancellation. All Securities surrendered for payment, ------------ redemption, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. The 27 Trustee shall destroy cancelled Securities and deliver a certificate of such destruction to the Company. SECTION 310. Computation of Interest. Except as otherwise ----------------------- specified as contemplated by Section 301 for the Securities of any series, interest on the Securities of each series shall be computed on the basis of a year of twelve 30-day months. ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture. This --------------------------------------- Indenture shall upon Company Request cease to be of further effect with respect to any series of Securities (except as to (i) any surviving rights of registration of transfer or exchange of Securities herein expressly provided for, (ii) rights hereunder of Holders to receive payments of principal of, and premium, if any, and interest on, Securities, and other rights, duties and obligations of the Holders as beneficiaries hereof with respect to the amounts, if any, so deposited with the Trustee, (iii) remaining obligations of the Company to make mandatory sinking fund payments and (iv) the rights, obligations and immunities of the Trustee hereunder), and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to any series of Securities, when (1) either (A) all Securities of such series theretofore authenticated and delivered (other than (i) Securities of such series which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306 and (ii) Securities of such series for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation 28 (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount in cash sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) if all series of Securities are being discharged, the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 607, and, if money shall have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003, shall survive. SECTION 402. Application of Trust Funds; Indemnification. ------------------------------------------- (a) Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401, all money and U.S. Government Obligations deposited with the Trustee pursuant to Section 403 or 1010 and all money received by the Trustee 29 in respect of U.S. Government Obligations deposited with the Trustee pursuant to Section 403 or 1010 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with or received by the Trustee or to make mandatory sinking fund payments or analogous payments as contemplated by Section 403 or 1010, but such money need not be segregated from other funds except to the extent required by law. (b) The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against U.S. Government Obligations deposited pursuant to Section 403 or 1010, or the interest and principal received in respect of such obligations other than any payable by or on behalf of Holders. (c) The Trustee shall deliver or pay to the Company from time to time upon Company Request any U.S. Government Obligations or money held by it as provided in Section 403 or 1010 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are then in excess of the amount thereof which then would have been required to be deposited for the purpose for which such obligations or money were deposited or received. SECTION 403. Defeasance and Discharge of Indenture. The Company ------------------------------------- shall be deemed to have paid and discharged the entire indebtedness on all the Outstanding Securities upon the date of the deposit referred to in subparagraph (d) hereof, and the provisions of this Indenture, as it relates to such Outstanding Securities, shall no longer be in effect (and the Trustee, at the expense of the Company, shall at Company Request, execute proper instruments acknowledging the same), except as to: (a) the rights of Holders of Securities to receive, from the trust funds described in subparagraph (d) hereof, (i) payment of the principal of (and premium, if any) and each installment of principal of (and premium, if any) or interest on the Outstanding Securities on the Stated Maturity of such principal or installment of principal or interest and (ii) the 30 benefit of any mandatory sinking fund payments applicable to the Securities on the day on which such payments are due and payable in accordance with the terms of this Indenture and the Securities; (b) the Company's obligations with respect to such Securities under Sections 305, 306, 1002 and 1003; and (c) the obligations of the Company to the Trustee under Section 607; provided that, the following conditions shall have been satisfied: - -------- (d) the Company has or caused to be irrevocably deposited (except as provided in Section 402) with the Trustee as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities, (i) money in an amount, or (ii) U.S. Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide not later than one day before the due date of any payment referred to in clause (A) or (B) of this subparagraph (d) money in an amount, or (iii) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent certified public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge (A) the principal of (and premium, if any) and each installment of principal of (and premium, if any) and interest on the Outstanding Securities on the Stated Maturity of such principal or installment of principal or interest or on the applicable Redemption Date and (B) any mandatory sinking fund payments applicable to the Securities on the day on which such payments are due and payable in accordance with the terms of this Indenture and of the Securities; (e) such deposit shall not cause the Trustee with respect to the Securities to have a conflicting interest for purposes of the Trust Indenture Act with respect to the Securities; (f) such deposit will not result in a breach or violation of, or constitute a default under, any applicable laws, this Indenture or any other agreement 31 or instrument to which the Company is a party or by which it is bound; (g) no Event of Default or event which with notice or lapse of time would become an Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit; (h) the Company has delivered to the Trustee an Opinion of Counsel to the effect that Holders of the Securities will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to Federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit, defeasance and discharge had not occurred; and (i) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the defeasance contemplated by this Section have been complied with. ARTICLE FIVE REMEDIES SECTION 501. Events of Default. "Event of Default," wherever used ----------------- herein with respect to Securities of any series, means any one of the following events: (1) default in the payment of any interest upon any Security of that series when it becomes due and payable, and continuance of such default for a period of 30 days; or (2) default in the payment of the principal of (or premium, if any, on) any Security of that series at its Maturity; or (3) default in the deposit of any sinking fund payment, when and as due by the terms of a Security of that series; or (4) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture 32 (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with or which has expressly been included in this Indenture solely for the benefit of series of Securities other than that series), and continuance of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (5) a default under any bond, debenture, note or other evidence of indebtedness of the Company for money borrowed (including a default with respect to Securities of any series other than that series) or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness of the Company for money borrowed (including this Indenture), whether such indebtedness now exists or shall hereafter be created, which default shall constitute a failure to pay an aggregate principal amount exceeding $25,000,000 of such indebtedness when due and payable after the expiration of any applicable grace period with respect thereto and shall have resulted in such indebtedness in an aggregate principal amount exceeding $25,000,000 becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without such indebtedness having been discharged, or such acceleration having been rescinded or annulled, within a period of 15 days after there shall have been given, by registered or certified mail, to the Company by the Trustee if such event be known to a Responsible Officer of the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities a written notice specifying such default and requiring the Company to cause such indebtedness to be discharged or cause such acceleration to be rescinded or annulled and stating that such notice is a "Notice of Default" hereunder; provided, however, that if such default -------- ------- under such bond, debenture, note, mortgage, indenture or other instrument or evidence of indebtedness shall be remedied or cured by the Company or waived pursuant to such agreement or instrument, then the Event of 33 Default hereunder by reason thereof shall be deemed likewise to have been thereupon remedied, cured or waived without further action upon the part of either the Trustee or the Holders and any acceleration of such Securities as a result thereof shall likewise be automatically rescinded. Subject to the provisions of Sections 601 and 602, the Trustee shall not be deemed to have knowledge of such default unless either (A) a Responsible Officer of the Trustee assigned to its Corporate Trust Department shall have actual knowledge of such default or (B) such Responsible Officer shall have received written notice thereof from the Company, from any Holder, from the holder of any such indebtedness or from the trustee under any such mortgage, indenture or other instrument; or (6) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (7) the commencement by the Company of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by it to the filing of 34 such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due and its willingness to have a case commenced against it or to seek an order for relief under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law or the taking of corporate action by the Company in furtherance of any such action; or (8) any other Event of Default provided with respect to Securities of that series. SECTION 502. Acceleration of Maturity; Rescission and Annulment. -------------------------------------------------- If an Event of Default with respect to Securities of any series at the time Outstanding occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of that series may declare the principal amount (or, if the Securities of that series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of that series) of all of the Securities of that series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified amount) shall become immediately due and payable. At any time after such a declaration of acceleration with respect to Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Securities of that series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if (1) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Securities of that series, 35 (B) the principal of (and premium, if any, on) any Securities of that series which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in such Securities, (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in such Securities, and (D) all sums paid or advanced by the Trustee and any predecessor Trustee hereunder and all sums due the Trustee and any predecessor Trustee under Section 607; and (2) all Events of Default with respect to Securities of that series, other than the non-payment of the principal of Securities of that series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 503. Collection of Indebtedness and Suits for Enforcement by ------------------------------------------------------- Trustee. The Company covenants that if - ------- (1) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal (and premium, if any) and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal (and premium, if any) and on any overdue interest, at the rate or rates prescribed 36 therefor in such Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including all amounts due the Trustee and any predecessor Trustee under Section 607. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon such Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon such Securities, wherever situated. If any Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 504. Trustee May File Proofs of Claim. In case of the -------------------------------- pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (i) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, 37 its agents and counsel) and of the Holders allowed in such judicial proceeding, and (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 505. Trustee May Enforce Claims Without Possession of ------------------------------------------------ Securities. All rights of action and claims under this Indenture or the - ---------- Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. SECTION 506. Application of Money Collected. Any money collected ------------------------------ by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: 38 FIRST: To the payment of all amounts due the Trustee and each predecessor Trustee under Section 607; SECOND: To the payment of the amounts then due and unpaid for principal of (and premium, if any) and interest on the Securities in respect of which or for the benefit of which such money has been collected ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal (and premium, if any) and interest, respectively; and THIRD: To the Company. SECTION 507. Limitation on Suits. No Holder of any Security of any ------------------- series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee indemnity reasonably satisfactory to it against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of that series; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any 39 other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders. SECTION 508. Unconditional Right of Holders to Receive Principal, ---------------------------------------------------- Premium and Interest. Notwithstanding any other provision in this Indenture, - -------------------- the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any) and (subject to Section 307) interest on such Security on the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. SECTION 509. Restoration of Rights and Remedies. If the Trustee or ---------------------------------- any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 510. Rights and Remedies Cumulative. Except as otherwise ------------------------------ provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 511. Delay or Omission Not Waiver. No delay or omission of ---------------------------- the Trustee or of any Holder of any Securities to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or 40 constitute a waiver of any such Event of Default or any acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 512. Control by Holders. The Holders of a majority in ------------------ principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Securities of such series, provided that -------- (1) such direction shall not be in conflict with any rule of law or with this Indenture, expose the Trustee to personal liability or be unduly prejudicial to holders not joining therein, and (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Nothing in this Indenture shall impair the right of the Trustee to take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 513. Waiver of Past Defaults. The Holders of not less than ----------------------- a majority in principal amount of the Outstanding Securities of any series may on behalf of the Holders of all the Securities of such series waive any past default hereunder with respect to such series and its consequences, except a default (1) in the payment of the principal of (or premium, if any) or interest on any Security of such series, or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this 41 Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 514. Undertaking for Costs. All parties to this Indenture --------------------- agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities of any series, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Securities on or after the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date). SECTION 515. Waiver of Stay, Extension or Usury Laws. The Company --------------------------------------- covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE SIX THE TRUSTEE SECTION 601. Certain Duties and Responsibilities. ----------------------------------- 42 (a) Except during the continuance of an Event of Default with respect to the Securities of any series, (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture with respect to such series, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (b) In case an Event of Default has occurred with respect to Securities of any series and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture with respect to such series of Securities, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that ------ (1) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section; (2) the Trustee shall not be liable for any error or judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (3) the Trustee shall not be liable for any action it takes or omits to take in good faith that it reasonably believes to be authorized or within its rights or powers nor shall it be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders 43 of a majority in principal amount of the Outstanding Securities of any series, determined as provided in Section 512, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Securities of such series; and (4) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. SECTION 602. Notice of Defaults. Within 90 days after the ------------------ occurrence of any default hereunder with respect to the Securities of any series, the Trustee shall transmit by mail to all Holders of Securities of such series, as their names and addresses appear in the Security Register, notice of such default hereunder actually known to a Responsible Officer of the Trustee, unless such default shall have been cured or waived; provided, however, that, -------- ------- except in the case of a default in the payment of the principal of (or premium, if any) or interest on any Security of such series or in the payment of any sinking fund installment with respect to Securities of such series, the Trustee shall be fully protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interest of the Holders of Securities of such series; and provided, further, that in the case of any default of the -------- ------- character specified in Section 501(4) with respect to Securities of such series, no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series. 44 SECTION 603. Certain Rights of Trustee. Subject to the provisions ------------------------- of Section 601: (a) the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any Board Resolution, resolution, Officers' Certificate, certificate, statement, instrument, Opinion of Counsel, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officers' Certificate; (d) the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of 45 indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled (at the expense of the Company) to examine the books, records and premises of the Company, personally or by agent or attorney; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, custodians or nominees and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent, attorney, custodian or nominee appointed with due care by it hereunder; and (h) if the Trustee is acting as Paying Agent or Transfer Agent and Registrar hereunder, the rights and protections afforded to the Trustee pursuant to this Article VI shall also be afforded to such Paying Agent or Transfer Agent and Registrar. SECTION 604. Not Responsible for Recitals or Issuance of Securities. ------------------------------------------------------ The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. The Trustee shall not be accountable for the use or application by the Company of Securities or the proceeds thereof. SECTION 605. May Hold Securities. The Trustee, any Paying Agent, ------------------- any Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Section 608, may otherwise deal with, and collect obligations owed to it by, the Company with the same rights it would have if it were not Trustee, Paying Agent, Security Registrar or such other agent. SECTION 606. Money Held in Trust. Money held by the Trustee in ------------------- trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any 46 money received by it hereunder except as otherwise agreed with the Company. SECTION 607. Compensation and Reimbursement. The Company agrees ------------------------------ (1) to pay to the Trustee from time to time reasonable compensation as shall be agreed upon in writing for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse each of the Trustee and any predecessor Trustee upon its request for all reasonable out-of-pocket expenses, disbursements and advances incurred or made by it in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its own negligence, bad faith or willful misconduct; and (3) to indemnify each of the Trustee, its officers, directors, employees and agents and any predecessor Trustee for, and to hold it and them harmless against, any and all loss, damage, claim liability or expense, including taxes (other than taxes based on the income of the Trustee) arising out of or in connection with the acceptance or administration of the trust or trusts hereunder and the performance of its duties hereunder, including the costs and expenses of defending itself against or investigating any claim or liability and of complying with any process served upon it or any of its officers in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense is due to its own negligence, bad faith or willful misconduct. To ensure the performance of the obligations of the Company under this Section, the Trustee shall have a senior claim to which the Securities are hereby made subordinate upon all property and funds held or collected by the Trustee as such, except property and funds held in trust for the payment of principal of, premium, if any, or 47 interest on particular Securities. Such lien shall survive the satisfaction and discharge of this Indenture. The obligations of the Company under this Section 607 to compensate and indemnify the Trustee and each predecessor Trustee and to pay or reimburse the Trustee and each predecessor Trustee for expenses, disbursements and advances shall survive the satisfaction and discharge of this Indenture or the rejection or termination of this Indenture under bankruptcy law. Such additional obligations shall be a senior claim to that of the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the Holders of particular Securities or coupons, and the Securities are hereby subordinated to such senior claim. If the Trustee renders services and incurs expenses following an Event of Default under Section 501(6) or Section 501(7) hereof, the parties hereto and the Holders by their acceptance of the Securities hereby agree that such expenses are intended to constitute expenses of administration under any bankruptcy law. SECTION 608. Disqualification; Conflicting Interests. The Trustee --------------------------------------- shall comply with the terms of Section 310(b) of the Trust Indenture Act. SECTION 609. Corporate Trustee Required; Eligibility. There shall --------------------------------------- at all times be a Trustee hereunder which shall be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to exercise corporate trust powers having a combined capital and surplus of at least $50,000,000 subject to supervision or examination by Federal or State authority. If such corporation publishes reports of condition at least annually, pursuant to law or the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 610. Resignation and Removal; Appointment of Successor. ------------------------------------------------- 48 (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 611. (b) The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the first sentence of this subsection may be combined with the instrument called for by Section 611. (c) The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Trustee and to the Company. (d) If at any time: (1) the Trustee shall fail to comply with Section 608 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by a Board Resolution may remove the Trustee with respect to all 49 Securities, or (ii) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Securities of one or more series, the Company, by a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series) and shall comply with the applicable requirements of Section 611. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 611, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 611, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (f) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series by mailing written notice of such event by first-class mail, postage prepaid, to all Holders of Securities of such series as their names and addresses appear in the Security Register. Each notice shall include the name of 50 the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office. SECTION 611. Acceptance of Appointment by Successor. -------------------------------------- (a) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee after payment of all monies due and owing to it and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co- 51 trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee upon payment of all monies due and owing to it with respect to Securities of that or those series shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates. (c) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) or (b) of this Section, as the case may be. (d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 612. Merger, Conversion, Consolidation or Succession to -------------------------------------------------- Business. Any corporation into which the Trustee may be merged or converted - -------- or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect 52 as if such successor Trustee had itself authenticated such Securities. ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 701. Company to Furnish Trustee Names and Addresses of ------------------------------------------------- Holders. The Company will furnish or cause to be furnished to the Trustee - ------- with respect to the Securities of each series (a) semi-annually, not more than fifteen days after each Regular Record Date, or, in the case of any series of Securities on which semi- annual interest is not payable, not more than fifteen days after such semi- annual dates as may be specified by the Trustee, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date or such semi-annual date, as the case may be, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; provided, however, that so long as the Trustee is the Security Registrar, no - -------- ------- such list need be furnished. SECTION 702. Preservation of Information; Communications to Holders. ------------------------------------------------------ (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished. (b) If three or more Holders (herein referred to as "applicants") apply in writing to the Trustee, and furnish to the Trustee reasonable proof that each such applicant has owned a Security for a period of at least six 53 months preceding the date of such application, and such application states that the applicants' desire to communicate with other Holders with respect to their rights under this Indenture or under the Securities and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall, within five Business Days after the receipt of such application, at its election, either (i) afford such applicants access to the information preserved at the time by the Trustee in accordance with Section 702(a), or (ii) inform such applicants as to the approximate number of Holders whose names and addresses appear in the information preserved at the time by the Trustee in accordance with Section 702(a), and as to the approximate cost of mailing to such Holders the form of proxy or other communication, if any, specified in such application. If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Holder whose name and address appear in the information preserved at the time by the Trustee in accordance with Section 702(a) a copy of the form of proxy or other communication which is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender the Trustee shall mail to such applicants and file with the Commission, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interest of the Holders or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If the Commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, the Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Holders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the 54 Trustee shall be relieved of any obligation or duty to such applicants respecting their application. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with Section 702(b), regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 702(b). (d) The Depositary may grant proxies and otherwise authorize its participants which own the Global Securities to give or take any Act which a Holder is entitled to take under the Indenture; provided, however, that the -------- ------- Depositary has delivered a list of such participants to the Trustee. SECTION 703. Reports by Trustee. ------------------ (a) The Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security Register, such reports concerning the Trustee and its actions under this Indenture as may be required by Section 313 of the Trust Indenture Act at the times and in the manner provided pursuant thereto, if so required. (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with the Commission and with the Company. The Company will notify the Trustee in writing when any Securities are listed on any stock exchange. SECTION 704. Reports by Company. The Company shall: ------------------ (1) file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934; or, if 55 the Company is not required to file information, documents or reports pursuant to either of said Sections, then it shall file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934 in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (2) file with the Trustee and the Commission, in accordance with the rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and (3) transmit by mail to all Holders, as their names and addresses appear in the Security Register, within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraphs (1) and (2) of this Section as may be required by rules and regulations prescribed from time to time by the Commission. ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 801. Company May Consolidate, etc., Only on Certain Terms. ---------------------------------------------------- The Company shall not consolidate with or merge into any other corporation or convey, transfer or lease its properties and assets substantially as an entirety to any Person, and the Company shall not permit any Person to consolidate with or merge into the Company, unless: (1) in case the Company shall consolidate with or merge into another corporation or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or 56 which leases, the properties and assets of the Company substantially as an entirety shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any) and interest on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed; (2) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Company or a Subsidiary as a result of such transaction as having been incurred by the Company or such Subsidiary at the time of such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; (3) if, as a result of any such consolidation or merger or such conveyance, transfer or lease, properties or assets of the Company would become subject to a mortgage, pledge, lien, security interest or other encumbrance which would not be permitted by this Indenture, the Company or such successor corporation or Person, as the case may be, shall take such steps as shall be necessary effectively to secure the Securities equally and ratably with (or prior to) all indebtedness secured thereby; and (4) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. SECTION 802. Successor Corporation Substituted. Upon any --------------------------------- consolidation by the Company with or merger by the Company into any other corporation or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with Section 801, the successor corporation formed by such 57 consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor corporation has been named as the Company herein, and thereafter, except in the case of a lease, the predecessor corporation shall be relieved of all obligations and covenants under this Indenture and the Securities. Such successor corporation may cause to be signed, and may issue either in its own name or in the name of the Company prior to such succession, any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such successor corporation instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities which previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication pursuant to such provisions and any Securities which such successor corporation thereafter shall cause to be signed and delivered to the Trustee on its behalf for that purpose pursuant to such provisions. All Securities so issued in all respects have the same legal rank and benefit under this Indenture as Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all such Securities had been issued prior to the date of such succession. In case of any such consolidation, merger, sale or conveyance, such changes in phraseology and form may be made in the Securities thereafter to be issued as may be appropriate. ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures without Consent of Holders. -------------------------------------------------- Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: 58 (1) to evidence the succession of another corporation to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; or (2) to add to the covenants of the Company for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company; or (3) to add any additional Events of Default for the benefit of the Holders of all or any series of Securities (and if such Events of Default are to be for the benefit of less than all series of Securities, stating that such Events of Default are expressly being included solely for the benefit of such series); or (4) to add to or change any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the issuance of Securities in bearer form, registrable or not registrable as to principal, and with or without interest coupons; or (5) to change or eliminate any of the provisions of this Indenture, provided that any such change or elimination shall become effective only -------- when there is no Security Outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision; or (6) to secure the Securities; or (7) to establish the form or terms of Securities of any series as permitted by Sections 201 and 301; or (8) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 611(b); or 59 (9) to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture, provided such other provisions -------- shall not adversely affect the interests of the Holders of Securities of any series in any material respect; or (10) to provide for uncertificated Securities in addition to and in place of certificated Securities provided that the Company has, by adopting a Board Resolution, elected to provide for uncertificated Securities. SECTION 902. Supplemental Indentures with Consent of Holders. With ----------------------------------------------- the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities of each series affected by such supplemental indenture, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities of such series under this Indenture; provided, however, that no -------- ------- such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (1) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or reduce the amount of the principal of an Original Issue Discount Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502, or the method in which amounts of payments of principal or interest thereon are determined, or change any Place of Payment where, or the coin or currency in which, any Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or 60 (2) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (or compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or (3) modify any of the provisions of this Section, Section 513 or Section 1011, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby, provided, however, that this clause shall not be deemed to require -------- ------- the consent of any Holder with respect to changes in the references to "the Trustee" and concomitant changes in this Section and Section 1011, or the deletion of this proviso, in accordance with the requirements of Sections 611(b) and 901(8). A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 903. Execution of Supplemental Indentures. In executing, or ------------------------------------ accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this 61 Indenture or is unduly prejudicial to the holders not joining therein or otherwise. SECTION 904. Effect of Supplemental Indentures. Upon the execution --------------------------------- of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 905. Conformity with Trust Indenture Act. Every ----------------------------------- supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. SECTION 906. Reference in Securities to Supplemental Indentures. -------------------------------------------------- Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium and Interest. The ------------------------------------------ Company covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay the principal of (and premium, if any) and interest on the Securities of that series in accordance with the terms of the Securities and this Indenture. At the option of the Company payment of principal (and premium, if any) and interest may be made by wire transfer or (subject to collection) by check mailed to the address of the Person entitled thereto at such address as shall appear in the Security Register. 62 SECTION 1002. Maintenance of Office or Agency. The Company will ------------------------------- maintain in each Place of Payment for any series of Securities an office or agency where Securities of that series may be presented or surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. The Company hereby initially appoints the Trustee its office or agency for each of said purposes. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission -------- ------- shall in any manner relieve the Company of its obligation to maintain an office or agency in each Place of Payment for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. SECTION 1003. Money for Securities; Payments to Be Held in Trust. -------------------------------------------------- If the Company shall at any time act as its own Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents for any series of Securities, it will, on or prior to each due date of the principal of (and premium, if any) or interest on any Securities of that series, deposit with a 63 Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee in writing of its action or failure so to act. The Company will cause each Paying Agent for any series of Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (1) hold all sums held by it for the payment on the principal of (and premium, if any) or interest on Securities of that series in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee written notice of any default by the Company (or any other obligor upon the Securities of that series) in the making of any payment of principal (and premium, if any) or interest on the Securities of that series; and (3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. The Company shall have no obligation to make payment of principal of (or premium, if any) or interest on any Security in immediately available funds, except that if the Company shall have received original payment for Securities in immediately available funds it shall make 64 available immediately available funds for payment of the principal of such Securities. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any) or interest on any Security of any series and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look, only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such -------- ------- Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be mailed or published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the City, County and State of New York, or both, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such mailing or publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 1004. Corporate Existence. Subject to Article Eight, the ------------------- Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to -------- ------- preserve any such right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. SECTION 1005. Payment of Taxes. The Company will pay or discharge ---------------- or cause to be paid or discharged, before the same shall become delinquent, all material taxes, assessments and governmental charges lawfully levied or imposed upon the Company or any Restricted Subsidiary or upon the income, profits or property of the Company or any Restricted Subsidiary; provided, however, that -------- ------- the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment or charge whose 65 legality, amount, applicability or validity is being contested in good faith by appropriate proceedings. SECTION 1006. Limitation on Liens. Except to the extent provided ------------------- in Section 1008, the Company will not create, incur, assume or guarantee, and will not permit any Restricted Subsidiary to create, incur, assume or guarantee, any indebtedness that is secured by a mortgage, security interest, pledge or lien (collectively in this Article Ten referred to as a "lien") of or upon any Principal Property or shares of capital stock or indebtedness of any Restricted Subsidiary, whether owned at the date of this Indenture or thereafter acquired, without making effective provision, and the Company in such case will make or cause to be made effective provision whereby the Outstanding Securities shall be secured by such lien equally and ratably with any and all other indebtedness thereby secured so long as such other indebtedness shall be secured; provided that the foregoing shall not apply to indebtedness that is secured by any of the following: (i) liens on any Principal Property acquired, constructed or improved by the Company or any Restricted Subsidiary after the date of this Indenture which are created or assumed contemporaneously with, or within 180 days after the completion of such acquisition, construction or improvement to secure or provide for the payment of any part of the purchase price of such property or the cost of such construction or improvement, or liens on any Principal Property at the time of acquisition thereof; provided, however, that for purposes of this -------- ------- clause (i), (x) a satellite will be treated as a newly-acquired Principal Property as of the date such satellite is placed in service and (y) any satellite transponder acquired through the exercise of an early buy-out option shall be treated as a newly-acquired Principal Property as of the date such option is exercised; (ii) liens on property or shares of capital stock or indebtedness of a corporation existing at the time such corporation is merged into or consolidated with the Company or a Restricted Subsidiary or at the time of a sale, lease or other disposition of the properties of a corporation as an entirety or substantially as an 66 entirety to the Company or a Restricted Subsidiary; (iii) liens on property or shares of capital stock or indebtedness of a corporation existing at the time such corporation becomes a Restricted Subsidiary; (iv) liens to secure indebtedness of a Restricted Subsidiary to the Company or to another Restricted Subsidiary, but only so long as such indebtedness is held by the Company or a Restricted Subsidiary; (v) liens in favor of the United States of America or any state thereof, or any department, agency or political subdivision of the United States of America or any state thereof, to secure partial, progress, advance or other payments pursuant to any contract or statute, or to secure any indebtedness incurred for the purpose of financing all or any part of the purchase price or the cost of constructing or improving the property subject to such liens; (vi) liens in favor of any customer arising in respect of partial, progress, advance or other payments made by or on behalf of such customer for goods produced for or services rendered to such customer in the ordinary course of business not exceeding the amount of such payments; (vii) liens existing at the date of this Indenture or liens existing at the date of the original issuance of the Securities of a Series; (viii) mechanics', workers', repairmen's, materialmen's, warehousemen's, carriers' or other similar liens arising in the ordinary course of business; (ix) pledges or deposits under the workers' compensation laws or similar legislation and liens of judgments thereunder which are not currently dischargeable, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of money) or leases to which 67 the Company or any Restricted Subsidiary is a party, or deposits in connection with obtaining or maintaining self-insurance or to obtain the benefits of any law, regulation or arrangement pertaining to unemployment insurance, old age pensions, social security or similar matters, or deposits of cash or obligations of the United States of America to secure surety, appeal or custom bonds to which the Company or any Restricted Subsidiary is a party, or deposits in litigation or other proceedings such as, but not limited to, interpleader proceedings; (x) liens created by or resulting form any litigation or proceedings which are being contested in good faith; liens arising out of judgments or awards against the Company or any Restricted Subsidiary with respect to which the Company or such Restricted Subsidiary is in good faith prosecuting an appeal or proceedings for review; or liens incurred by the Company or any Restricted Subsidiary for the purpose of obtaining a stay or discharge in the course of any legal proceeding to which the Company or such Restricted Subsidiary is a party; (xi) liens for taxes or assessments or governmental charges or levies not yet due or delinquent, or which can thereafter be paid without penalty, or which are being contested in good faith by appropriate proceedings; landlord's liens on property held under lease, and tenants' rights under lease; or easements; (xii) liens incidental to the conduct of the business or the ownership of the property and assets of the Company or a Restricted Subsidiary which do not, in the opinion of the Company, materially detract from the value of the property or assets or materially impair the use thereof in the operation of the business of the Company and its Restricted Subsidiaries taken as a whole; (xiii) liens for the sole purpose of extending, renewing or replacing in whole or in part any lien referred to in the foregoing clauses (i) to (xii), inclusive, or in this clause (xiii), provided that the principal amount of indebtedness 68 secured thereby shall not exceed the principal amount of any indebtedness so secured at the time of such extension, renewal or replacement, and that such extension, renewal or replacement shall be limited to all or a part of the property subject to the lien so extended, renewed or replaced (plus improvements on such property). SECTION 1007. Limitation on Sale and Lease-Back Transactions. ---------------------------------------------- Except to the extent provided in Section 1008, the Company will not, nor will it permit any Restricted Subsidiary to, after the date of this Indenture enter into any arrangement with any Person providing for the leasing by the Company or any Restricted Subsidiary of any Principal Property (except for (x) leases existing at the date of this Indenture, (y) leases of not more than three years and (z) leases between the Company and a Restricted Subsidiary or between Restricted Subsidiaries), which property has been owned and operated by the Company or any Restricted Subsidiary for more than 180 days and has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person in anticipation of such leasing (in this Section 1007 and in Section 1008 referred to as a "Sale and Lease-Back Transaction") unless either (i) the Company or such Restricted Subsidiary would be entitled to incur indebtedness secured by a lien on such property without equally and ratably securing the Securities pursuant to the provisions of Section 1006 or (ii) the Company shall apply an amount equal to the Attributable Debt of such Sale and Lease-Back Transaction to (1) the acquisition of another Principal Property of equal or greater fair market value, or (2) the retirement of indebtedness for borrowed money, including the Securities, incurred or assumed by the Company or any Restricted Subsidiary (other than indebtedness for borrowed money owed to the Company or any Restricted Subsidiary) or (3) any combination of the foregoing. Notwithstanding the foregoing, no retirement referred to in clause (2) of the preceding sentence may be effected by payment at maturity or pursuant to any mandatory sinking fund payment or any mandatory prepayment provision. SECTION 1008. Exemption from Limitation on Liens and Sale and Lease- ----------------------------------------------------- Back Transactions. Notwithstanding the provisions of Section 1006 and Section - ----------------- 1007, the Company or any Restricted Subsidiaries may, without equally and ratably securing the Outstanding Securities, create, incur, assume or guarantee indebtedness secured by liens and enter into Sale and Lease-Back Transactions which would otherwise be 69 restricted by such provisions, provided that at the time such indebtedness secured by liens is created, incurred, assumed or guaranteed or such Sale and Lease-Back Transaction is entered into (and after giving effect to the transactions, to the receipt and application of the net proceeds thereof and to the retirement of any indebtedness which is concurrently being retired out of such proceeds) the sum of the aggregate indebtedness secured by such liens plus the Attributable Debt of all Sale and Lease-Back transactions then outstanding (except for leases existing at the date of this Indenture) shall not exceed 10% of Consolidated Net Tangible Assets, as determined in accordance with the most recent published consolidated balance sheet of the Company. SECTION 1009. Defeasance of Certain Obligations. If this Section --------------------------------- 1009 is specified, as in accordance with Section 301, to be applicable to Securities of any Series, the Company may omit to comply with any term, provision or condition set forth in Sections 1006 to 1008, inclusive, with respect to the Securities of that series if (1) With reference to this Section 1009, the Company has deposited or caused to be irrevocably deposited with the Trustee as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities of that series, (i) money in an amount, or (ii) U.S. Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide not later than one day before the due date of any payment referred to in clause (A) or (B) of this subparagraph (1) money in an amount, or (iii) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge (A) the principal of (and premium, if any) and each installment of principal (and premium, if any) and interest on the Outstanding Securities of that series on the Stated Maturity of such principal or installment of principal or interest and (B) any mandatory sinking fund payments or analogous payments applicable to Securities of such series on the day on which such payments are due and payable in accordance with the terms of the Indenture and of such Securities; 70 (2) Such deposit shall not cause the Trustee with respect to the Securities of that series to have a conflicting interest for purposes of the Trust Indenture Act with respect to the Securities of any series; (3) Such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company is a party or by which it is bound; (4) The Company has delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the Securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and defeasance of certain obligations and will be subject to Federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit and defeasance had not occurred; and (5) The Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the defeasance contemplated by this Section have been complied with. SECTION 1010. Statement by Officers as to Default. The Company ----------------------------------- will deliver to the Trustee, within 90 days after the end of each fiscal year of the Company ending after the date hereof, a certificate of the principal executive officer, principal financial officer or principal accounting officer of the Company stating whether or not to the best knowledge of the signers thereof the Company is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture, and if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. SECTION 1011. Waiver of Certain Covenants. The Company may omit in --------------------------- any particular instance to comply with any term, provision or condition set forth in Sections 1006 to 1010, inclusive, if before or after the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Securities (taken together as one class) shall, by Act of such Holders, either waive such 71 compliance in such instance or generally waive compliance with such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. ARTICLE ELEVEN REDEMPTION OF SECURITIES SECTION 1101. Applicability of Article. Securities of any series ------------------------ which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for Securities of any series) in accordance with this Article. SECTION 1102. Election to Redeem; Notice to Trustee. The election ------------------------------------- of the Company to redeem any Securities shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company of less than all the Securities of any series, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities of such series to be redeemed, such notice to be accompanied by a written statement signed by an authorized officer of the Company stating that no defaults in the payment of interest or Events of Default with respect to the Securities of that series have occurred (which have not been waived or cured). In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers' Certificate evidencing compliance with such restriction. SECTION 1103. Selection by Trustee of Securities to Be Redeemed. ------------------------------------------------- If less than all the Securities of any series are to be redeemed, the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series not previously called for redemption, by such method as the Trustee in its sole discretion shall deem fair and appropriate and which may provide for the selection or redemption of portions (equal 72 to the minimum authorized denomination for Securities of that series or any integral multiple thereof) of the principal amount of Securities of such series of a denomination larger than the minimum authorized denomination for Securities of that series. The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. SECTION 1104. Notice of Redemption. Notice of redemption shall be -------------------- given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at his address appearing in the Security Register. Any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not such Holder receives the notice. Failure to give notice by mail, or any defect in the notice to any such Holder in respect of any Security, shall not affect the validity of the proceedings for the redemption of any other Security. All notices of redemption shall state: (1) the Redemption Date, (2) the Redemption Price and any accrued interest, (3) if less than all the Outstanding Securities of any series are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Securities to be redeemed, (4) that on the Redemption Date the Redemption Price and any accrued interest will become due and payable upon each such Security to be redeemed together with accrued interest thereon and, if applicable, that 73 interest thereon will cease to accrue on and after said date, (5) the place or places where such Securities are to be surrendered for payment of the Redemption Price and any accrued interest, and (6) that the redemption is for a sinking fund, if such is the case. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. SECTION 1105. Deposit of Redemption Price. On or prior to any --------------------------- Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money, in funds immediately available on the due date, sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date. SECTION 1106. Securities Payable on Redemption Date. Notice of ------------------------------------- redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified together with accrued interest thereon, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that -------- ------- installments ofinterest whose Stated Maturity is on the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security. 74 The Trustee shall not redeem any Securities of any series pursuant to this Article (unless all Outstanding Securities of such series are to be redeemed) or mail or give any notice of redemption of Securities during the continuance of an Event of Default hereunder actually known to a Responsible Officer of the Trustee with respect to such series, except that, where the mailing of notice of redemption of any Securities shall theretofore have been made, the Trustee shall redeem or cause to be redeemed such Securities, provided that it shall have received from the Company a sum sufficient for such redemption. Except as aforesaid, any moneys theretofore or thereafter received by the Trustee shall, during the continuance of such Event of Default, be deemed to have been collected under Article Five and held for the payment of all such Securities of such series. In case such Event of Default shall have been waived as provided in Section 513 or the default cured on or before the sixtieth day preceding the Redemption Date, such moneys shall thereafter be applied in accordance with the provisions of this Article. SECTION 1107. Securities Redeemed in Part. Any Security which is --------------------------- to be redeemed only in part shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities of the same series, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. ARTICLE TWELVE SINKING FUNDS SECTION 1201. Applicability of Article. The provisions of this ------------------------ Article shall be applicable to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 301 for Securities of such series. The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is 75 herein referred to as a "mandatory sinking fund payment," and any payment in excess of such minimum amount provided for by the terms of Securities of any series is herein referred to as an optional sinking fund payment. If provided for by the terms of Securities of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 1202. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series. SECTION 1202. Satisfaction of Sinking Fund Payments with Securities. ----------------------------------------------------- The Company (1) may deliver Outstanding Securities of a series (other than any previously called for redemption) and (2) may apply as credit Securities of a series which have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, in each case in satisfaction of all or any part of any sinking fund payment with respect to the Securities of such series required to be made pursuant to the terms of such Securities as provided for by the terms of such series; provided that such -------- Securities have not been previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. SECTION 1203. Redemption of Securities for Sinking Fund. Not less ----------------------------------------- than 60 days prior to each sinking fund payment date for any series of Securities, the Company (1) will deliver to the Trustee an Officers' Certificate (A) stating that no defaults in the payment of interest or Events of Default with respect to Securities of that series have occurred (which have not been waived or cured), (B) specifying the amount of the next ensuing sinking fund payment for that series pursuant to the terms of Securities of that series, (C) stating whether or not the Company intends to exercise its right, if any, to make an optional sinking fund payment with respect to such series on the next ensuing sinking fund payment date and, if so, specifying the amount of such optional sinking fund payment and (D) specifying the portion of such sinking fund payment, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities of that series pursuant to Section 1202 76 and (2) will also deliver to the Trustee any Securities to be so delivered. Not less than 30 days before each such sinking fund payment date the Trustee shall select the Securities of such series to be redeemed upon such sinking fund payment date in the manner specified in Section 1103 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 1104. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 1105, 1106 and 1107. Failure of the Company, on or before any such sixtieth day, to deliver such Officers' Certificate and Securities specified in this Section, if any, shall not constitute a default but shall constitute, on and as of such date, the irrevocable election of the Company (a) that the mandatory sinking fund payment for such series due on the next succeeding sinking fund payment date shall be paid entirely in cash without the option to deliver or credit Securities of such series in respect thereof and (b) that the Company will make no optional sinking fund payment with respect to Securities of such series as provided in this Article. The Trustee shall not redeem or cause to be redeemed any Security of a series with sinking fund moneys or mail any notice of redemption of Securities of such series by operation of the sinking fund during the continuance of a default in payment of interest on such Securities or of any Event of Default with respect to such series except that, where the mailing of notice of redemption of any Securities shall theretofore have been made, the Trustee shall redeem or cause to be redeemed such Securities, provided that it shall have received from the Company a sum sufficient for such redemption. Except as aforesaid, any moneys in the sinking fund for such series at the time when any such default or Event of Default shall occur, and any moneys thereafter paid into the sinking fund, shall, during the continuance of such default or Event of Default, be deemed to have been collected under Article Five and held for the payment of all such Securities of such series. In case such Event of Default shall have been waived as provided in Section 513 or the default cured on or before the sixtieth day preceding the sinking fund payment date, such moneys shall thereafter be applied on the next succeeding sinking fund payment date in accordance with this Section to the redemption of such Securities. 77 This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 78 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. PANAMSAT CORPORATION [SEAL] By Kenneth N. Heintz ----------------------------- Name: Kenneth N. Heintz Title: Executive Vice President and Chief Financial Officer Attest: James W. Cuminale - ----------------- Name: James W. Cuminale Title: Secretary THE CHASE MANHATTAN BANK [SEAL] By Sheik Wiltshire ----------------------------- Name: Sheik Wiltshire Title: Second Vice President Attest: Gemmel Richards - ------------------ Name: Gemmel Richards Title: Assistant Secretary 79 STATE OF CONNECTICUT) ) ss.: Greenwich COUNTY OF FAIRFIELD ) On the 16th day of January, 1998, before me personally came Kenneth N. Heintz, to me known, who, being by me duly sworn, did depose and say that he is Executive Vice President and Chief Financial Officer of PanAmSat Corporation, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. [Signature Illegible] --------------------- Notary Public STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the 16th day of January, 1998, before me personally came S. Wiltshire, to me known, who, being by me duly sworn, did depose and say that he is Second Vice President of The Chase Manhattan Bank, one of the corporations described in and which executed the foregoing instrument; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. Annabelle De Luca ------------------ Notary Public 80 EX-10.38 7 FIXED PRICE CONTRACT FOR PAS 1R & PAS 9 HS-702 EXHIBIT 10.38 AMENDED AND RESTATED FIXED PRICE CONTRACT BETWEEN PANAMSAT CORPORATION AND HUGHES SPACE & COMMUNICATIONS COMPANY FOR PAS 1R & PAS 9 HS702 SPACECRAFT, RELATED SERVICES AND DOCUMENTATION CONTRACT No. 97-HCG-001 TABLE OF CONTENTS PAGE ARTICLE 1. EXHIBITS AND INCORPORATIONS..................................2 ARTICLE 2. ORDER OF PRECEDENCE..........................................3 ARTICLE 3. SPACECRAFT, DOCUMENTATION AND RELATED SERVICES...............4 ARTICLE 4. DELIVERABLES AND SCHEDULE....................................7 ARTICLE 5. PRICE.......................................................12 ARTICLE 6. PAYMENTS....................................................14 ARTICLE 7. SPACECRAFT LAUNCH DATE......................................35 ARTICLE 8. BUYER-FURNISHED ITEMS.......................................37 ARTICLE 9. INSPECTION AND ACCEPTANCE...................................44 ARTICLE 10. ACCESS TO WORK IN PROCESS...................................46 ARTICLE 11. TERMINATION FOR DEFAULT; LIMITATION OF LIABILITY............47 ARTICLE 12. EXCUSABLE DELAYS............................................49 ARTICLE 13. AMENDMENTS..................................................51 ARTICLE 14. TERMINATION FOR CONVENIENCE.................................52 ARTICLE 15. TITLE AND RISK OF LOSS......................................56 ARTICLE 16. SPACECRAFT WARRANTY.........................................60 ARTICLE 17. INDEMNIFICATION.............................................62 ARTICLE 18. SPACECRAFT NOT LAUNCHED WITHIN SIX MONTHS AFTER ACCEPTANCE..64 ARTICLE 19. PATENT/COPYRIGHT INDEMNITY..................................66 ARTICLE 20. RIGHTS IN INVENTIONS........................................68 ARTICLE 21. INTELLECTUAL PROPERTY RIGHTS................................71 ARTICLE 22. FURNISHED DATA AND INFORMATION, DISCLOSURE AND USE..........72 ARTICLE 23. PUBLIC RELEASE OF INFORMATION...............................75 ARTICLE 24. TAXES.......................................................76 ARTICLE 25. GOVERNING LAW...............................................77 ARTICLE 26. TITLES......................................................78 ARTICLE 27. NOTICES AND AUTHORIZED REPRESENTATIVES......................79 ARTICLE 28. INTEGRATION.................................................81 ARTICLE 29. CHANGES.....................................................82 ARTICLE 30. EFFECTS OF STORAGE ON BATTERIES.............................88 ARTICLE 31. INTER-PARTY WAIVER OF LIABILITY.............................89 ARTICLE 32. SPACECRAFT STORAGE..........................................90 ARTICLE 33. DISPUTES....................................................91 ARTICLE 34. ASSIGNMENT..................................................94 ARTICLE 35. LIMITATION OF LIABILITY.....................................96 ARTICLE 36. OPTIONS.....................................................97 ARTICLE 37 REPLACEMENT SPACECRAFT .....................................99 ARTICLE 38 LIQUIDATED DAMAGES FOR LATE SHIPMENT ......................101 ARTICLE 39 EFFECTIVE DATE OF CONTRACT.................................104 This AMENDED AND RESTATED FIXED PRICE CONTRACT (the "Contract") is entered into as of the 15th day of August, 1997, by and between PANAMSAT CORPORATION (herein called "Buyer"), a Delaware corporation having a place of business at One Pickwick Plaza, Greenwich, Connecticut 06830, and HUGHES SPACE AND COMMUNICATIONS COMPANY (herein called "Contractor"), a Delaware corporation having a place of business at 909 North Sepulveda Boulevard, El Segundo, California 90245. WITNESSETH: WHEREAS, Buyer (as assignee of Hughes Communications Galaxy, Inc.) and Contractor are party to that certain Fixed Price Contract for Galaxy XIII/XIV HS 702 Spacecraft, Related Services and Documentation (No. 97-HCG-001), dated May 15, 1997 (the "Galaxy XIII/XIV Contract"), providing for Buyer to purchase and Contractor to provide communications Spacecraft, Documentation, and Related Services as therein specified, WHEREAS, the Galaxy XIII/XIV Contract required the Parties to define further the specifications and configurations of the Spacecraft to be delivered, which definition has been established as set forth herein below; WHEREAS, the Parties now desire to amend and restate the Galaxy XIII/XIV Contract; NOW, THEREFORE, the Parties hereby agree to amend and restate the Galaxy XIII/XIV Contract in its entirety as follows: 1 ARTICLE 1. EXHIBITS AND INCORPORATIONS The following documents are hereby incorporated and made a part of this Contract with the same force and effect as though set forth herein: 1.1 Exhibit A - PAS 1R & PAS 9 Statement of Work - dated August 1997 1.2 Exhibit B - PAS 1R & PAS 9 Spacecraft Specification - September 1997 for PAS 1R and October 1997 for PAS 9 1.3 Exhibit C - PAS 1R & PAS 9 Spacecraft Integration Test Plan - August 1997 1.4 Exhibit D - PAS 1R & PAS 9 Product Assurance Plan - dated August 1997 1.5 Exhibit E - Certain Documentation - dated August 1997 1.6 Exhibit F - Maximum Termination Liability - dated October 1997. 1.7 Exhibit G - Optional Spacecraft Satellite Payment Plan - dated October 1997. 1.8 Exhibit H - Replacement Spacecraft Payment Plan - dated October 1997. 1.9 Exhibit I - List of Agreed Exhibit Changes - dated October 1997 2 ARTICLE 2. ORDER OF PRECEDENCE` In the event of any conflict or inconsistency among the provisions of this document and the exhibits attached and incorporated into this Contract, such conflict or inconsistency shall be resolved by giving precedence to this document, and then to the attached and incorporated exhibits in the order listed in Article 1 herein, entitled "Exhibits and Incorporations." 3 ARTICLE 3. SPACECRAFT, DOCUMENTATION AND RELATED SERVICES ("DELIVERABLES") 3.1 Contractor shall sell and provide, and Buyer shall purchase, the items and services referred to in Section 4.1. Contractor shall provide the necessary personnel, material, services and facilities to design, fabricate, test and deliver two (2) HS702 type Spacecraft for PAS 1R and PAS 9 (hereinafter referred to as "Spacecraft"), Documentation and Related Services (as defined in Article 4) in accordance with the provisions of this Contract and in the manner specified under Exhibits A, B, C and D hereto (in the case of Exhibit B, as completed pursuant to Paragraph 3.7 and 8.7). 3.2 The Parties agree that [********************************** ********************************************************** ***********************]. 3.3 All materials and services specified in Exhibit A, "PAS 1R & PAS 9 Statement of Work," shall meet the requirements of Exhibit B, entitled "PAS 1R & PAS 9 Spacecraft Specification" as such Exhibit is completed in accordance with Paragraphs 3.7 and 8.7. 3.4 If Contractor has not made delivery [********************** ******* ***************] or if, prior to the Launch Date, [*********************************] Buyer at its election may: [********************************************************* ********************************************************** ***************************************************] [***] Filed separately with the Commission pursuant to a request for confidential treatment. 4 Any such election shall be made by Buyer in writing. In either case (a) or (b) above, [************************************************* *************************************] 3.5 [********************************************************** ****************************************] in accordance with: (i) current directives and instructions in the Hughes Spacecraft Operators Handbook, utilized at either Buyer's Operations Control Center (OCC) or Contractor's Mission Control Center (MCC); and (ii) any other Documentation utilized, including that Documentation which takes into consideration the unique or special characteristics of the contracted Spacecraft. [****************************************** *******************************************] Contractor has responsibility and liability for the Mission Control Center. Buyer has responsibility and liability for the Operations Control Center and its associated ground station(s). 3.6 Spacecraft, Documentation and Related Services described above shall be delivered to Buyer at the indicated locations on the dates set forth in Article 4 entitled, "Deliverables and Schedule" herein. 3.7 Contractor and Buyer shall complete Exhibit A and Exhibit B to specify the complete Statement of Work and Spacecraft Specifications for PAS 1R and PAS 9 (except for those specifications to be provided pursuant to Paragraph 8.7) by October 31, 1997 consistent with the parameters set forth in the forms of Exhibit A and Exhibit B initially attached hereto and consistent with the agreement of the parties to make certain changes, attached hereto as Exhibit I, "List of Agreed Exhibit Changes." In addition, Contractor and Buyer agrees [***] Filed separately with the Commission pursuant to a request for confidential treatment. 5 that the completed Spacecraft Specification for PAS 9 shall be substantially similar to the Spacecraft Specification for PAS IR, except for differences attributable to the difference in their respective configurations. 6 ARTICLE 4. DELIVERABLES AND SCHEDULE 4.1 The following deliverables to be furnished under this Contract shall be furnished at the designated location(s) on or before the dates specified below:
- ------------------------------------------ ---------------------------------------- ----------------------------------------- Location of Shipment, Date of Shipment, Delivery Delivery or Deliverable(s) or Performance Performance - ------------------------------------------ ---------------------------------------- ----------------------------------------- o Shipped from Contractor's facility. 1A. One PAS 1R Spacecraft May 15, 1999/1/ o Delivery Site at Ariane facility, ("PAS 1R") ("Shipment Date") Kourou, French Guyana (subject to change pursuant to Paragraph 4.2.) - ------------------------------------------ ---------------------------------------- ----------------------------------------- o Shipped from Contractor's facility. 1B. One PAS 9 Spacecraft ("PAS 9") August 15, 1999/1/ o Delivery Site at Baikonur ("Shipment Date") Cosmodrome, Kazakhstan (subject to change pursuant to Paragraph 4.2.) - ------------------------------------------ ---------------------------------------- ----------------------------------------- o Performance Site to be determined 2A. Launch Support, Mission In Accordance with Exhibit A pursuant to Paragraph 4.2. Operations and In-Orbit Testing o Fillmore, California for PAS 1R ("Related Services") o Castle Rock, Colorado o El Segundo, California - ------------------------------------------ ---------------------------------------- -----------------------------------------
7
- ----------------------------------------------------------------------------------------------------------------------------- o Performance Site to be determined 2B. Launch Support, Mission In Accordance with Exhibit A pursuant to Paragraph 4.2. Operations and In-Orbit Testing o Fillmore, California for PAS 9 ("Related Services") o Castle Rock, Colorado o El Segundo, California - ------------------------------------------ ---------------------------------------- ----------------------------------------- - ------------------------------------------ ---------------------------------------- ----------------------------------------- 3A. Documentation for PAS 1R In Accordance with Exhibit A 1500 Hughes Way ("Documentation") Long Beach, California - ------------------------------------------ ---------------------------------------- ----------------------------------------- - ------------------------------------------ ---------------------------------------- ----------------------------------------- 3B. Documentation for PAS 9 In Accordance with Exhibit A 1500 Hughes Way ("Documentation") Long Beach, California - ------------------------------------------ ---------------------------------------- -----------------------------------------
/1/ Contractor warrants that the Shipment Date will support a launch of the Spacecraft thirty (30) days after the Shipment Date. [************* *************]. [***] Filed separately with the Commission pursuant to a request for confidential treatment. 8 4.2 Designation of Launch Vehicle. 4.2.1 The initial launch vehicle designation for PAS 1R is an Ariane launch vehicle. The initial launch vehicle designation for PAS 9 is a Proton launch vehicle. Buyer may change the designation of each Spacecraft's launch vehicle at any time on or before [********] prior to the scheduled Shipment Date for such Spacecraft. If, subsequent to such time, Buyer requests a change in the Launch Site or Approved Storage Facility for such Spacecraft, such request shall be dealt with as a Change Order Request of Buyer under Article 29. 4.2.2 Buyer shall pay the costs of delivering the Spacecraft to the Delivery Site, which costs are included in the Contract Price. 4.3 The Contractor will arrange transportation required for Items 1A and 1B, 2A and 2B, and 3A and 3B above. With respect to Deliverable Items 1A and 1B and 2A and 2B, in the event that a Sea Launch Vehicle is used with respect to either Spacecraft, Contractor shall support a launch of the Spacecraft fifty (50) days after the Shipment Date and the following allocation of transportation duties for such Spacecraft shall apply: Such Spacecraft will be mated with a Sea Launch Zenit Vehicle (the "Vehicle") at the Sea Launch, L.P.facilities, Port of Long Beach (the "Integration Facility"). The Parties contemplate that such mated Spacecraft, associated equipment and Contractor personnel necessary to assist in the monitoring and control of such Spacecraft will be transported by Sea Launch, L.P. Command Ship (the "Ship") at the expense of Sea Launch, L.P. from the Integration Facility to the Launch Site in the vicinity of the Christmas Islands (the "Launch Site"). Contractor may [***] Filed separately with the Commission pursuant to a request for confidential treatment. 9 also utilize the Ship at Sea Launch L.P.'s expense for the transportation of other related Contractor personnel when accommodations are available and such accommodations do not interfere with other Sea Launch, L.P. commitments for the launch of such Spacecraft. 4.3.1 If such Spacecraft fails to conform to the warranty provisions set forth in Article 15 and: (i) such mated Spacecraft requires testing, maintenance, replacement and/or corrective actions at the Launch Site or (ii) return to the Integration Facility and/or the El Segundo Plant Site is necessary to accomplish such actions, Contractor shall have responsibility and liability as follows: 4.3.1.1 If Spacecraft warranty actions can be performed at the Launch Site, Contractor shall be responsible and liable for [**************** **************************************] (as each such term is defined in Article 24 of this Contract) [************************** ****************] to the warranty provisions of this Contract. 4.3.1.2 If return of the Spacecraft to the Integration Facility and/or Plant Site is necessary for such warranty actions, Contractor shall be liable to Buyer in [***************************** **********************************] (as each such term is defined in Article 24 of this Contract) [****************************]. [***] Filed separately with the Commission pursuant to a request for confidential treatment. 10 4.4 [****] shall be responsible for obtaining and maintaining: (i) all U.S. Government export licenses to enable export of each Spacecraft, related test and support equipment to the Launch Site and (ii) all authorizations required for the performance of this Contract. [***] Filed separately with the Commission pursuant to a request for confidential treatment. 11 ARTICLE 5. PRICE 5.1 The total price (the "Contract Price") for Contractor to provide Spacecraft, Documentation and Related Services shall be as follows: (a) For PAS 1R, [**************************************** **** ********************]; (b) For PAS 9, ******************************************* ********************]. 5.2 Buyer shall pay Contractor the Contract Price stated in Paragraph 5.1 above in accordance with Article 6, Paragraph 6.2 of this Contract. 5.3 The Contract Price for each Spacecraft identified in Paragraph 5.1 are contingent upon the utilization of the launch vehicles initially designated for such Spacecraft in Paragraph 4.2.1. If Buyer changes the designated launch vehicle for a Spacecraft in accordance with Paragraph 4.2.1 (as opposed to Article 29), the Contract Price for the applicable Spacecraft shall be adjusted in accordance with the following table: Table 5.3.1 Adjustment to Contract Price - ------------------------------------------------------------------------------- Launch Vehicle PAS 1R PAS 9 - -------------------------------------------------------------------------------- Sea Launch [******] [*******] - -------------------------------------------------------------------------------- Ariane N/A [*******] - -------------------------------------------------------------------------------- Proton [*******] N/A - -------------------------------------------------------------------------------- [***] Filed separately with the Commission pursuant to a request for confidential treatment. 12 5.4 Any adjustment to the Contract Price of a Spacecraft under Paragraph 5.3 shall be allocated pro rata over the entire Payment Plan for such Spacecraft (including In-Orbit Performance Incentive Obligations). Adjustments allocated to payments already made shall be promptly paid by Buyer or refunded by Contractor, as the case may be. 13 ARTICLE 6. PAYMENTS 6.1 Pursuant to the terms set forth in this Article 6, and subject to Buyer's rights, defenses and remedies as expressly stated in this Contract, Buyer shall pay to Contractor the Contract Price as stated in Article 5 herein for the applicable Spacecraft, Documentation, and Related Services under this Contract. 6.2 Invoices shall be prepared and submitted by Contractor for each Spacecraft in a form reasonably acceptable to Buyer. Payments to Contractor for each Spacecraft shall be made according to the following payment plans: [****] [********************] - ------------------------------------------------------------------------------- [***** [***** [****] *****] *****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------ [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [***] Filed separately with the Commission pursuant to a request for confidential treatment. 14 - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - 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------------------------------------------------------------------------------- [**** [***** [********] *****] *******] - ------------------------------------------------------------------------------- [*] [***] [***] - ------------------------------------------------------------------------------- [*] [***] [***] - ------------------------------------------------------------------------------- [*] [***] [***] - ------------------------------------------------------------------------------- [***] Filed separately with the Commission pursuant to a request for confidential treatment. 15 - ------------------------------------------------------------------------------- [*] [***] [***] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [*] [****] [****] - ------------------------------------------------------------------------------- [******************************************************************************* ******************************************************************************* ***************************] 6.3 Incentives Obligations. 6.3.1 The following definitions are applicable to this Section 6.3: 6.3.1.1 "Specified Operation Lifetime" means fifteen (15) years 6.3.1.2 "Successfully Operating Payload". The Spacecraft shall be equipped with one or more Payloads, as specified in Exhibit B upon definition of all Final Specifications. Each Payload shall be deemed to be Successfully Operating if at [***] Filed separately with the Commission pursuant to a request for confidential treatment. 16 least that number of Transponders that is one more than one-half of the total number of Transponders within such Payload are Successfully Operating Transponders (as defined below). 6.3.1.3 "Successfully Operating Transponder". A Successfully Operating Transponder is a Transponder which meets either or both of the following two criteria: (a) The Transponder meets or exceeds the performance specifications set forth in Exhibit B. For the avoidance of doubt, if the Spacecraft is placed into inclined orbit, then the Transponders shall be deemed not to meet the criteria stated in this Paragraph 6.3.1.3(a) at such time as the Spacecraft would have ceased to have a Useful Commercial Life, (as mutually determined by the Parties) had it not been placed in such an orbit. (b) The Transponder, while not meeting or exceeding the performance specifications, provides Buyer with no material loss in its commercial value. A Transponder shall also be deemed to be a Successfully Operating Transponder if it meets the performance specifications through use of any redundant or spare equipment. 6.3.1.4 "Useful Commercial Life". The Useful Commercial Life of a Spacecraft means the period beginning on the Commencement Date and ending on the earlier to occur of (i) the date on which there is just sufficient fuel remaining on 17 board the Spacecraft only to eject the Spacecraft from its geostationary orbital location or (ii) the date on which at least one-half of the Transponders on each Payload are not Successfully Operating Transponders. 6.3.1.5 "Successfully Injected Spacecraft". The Launched Spacecraft shall be deemed to be a Successfully Injected Spacecraft if: (a) The transfer orbit/spacecraft attitude meets the following required criteria: (1) Perigee altitude error is less than or equal to +/-3 sigma; (2) Apogee Altitude error is less than or equal to +/-3 sigma; (3) Inclination error is less than or equal to +/-3 sigma; (4) Argument of perigee error is less than or equal to +/-3 sigma; and (5) The Spacecraft has been separated with attitude rate errors of less than or equal to +/-3 sigma and (b) The Spacecraft has not suffered physical damage which resulted from Launch Vehicle malfunction. The calculated amount of Useful Commercial Life (the "Calculated Operational Lifetime") shall be mutually determined by Buyer and Contractor, based on standard engineering practices, using measured 18 actuals of the Spacecraft, existing at the time of the operational hand-off of the Spacecraft to Contractor from the Launch Vehicle provider. If the attained transfer orbit/Spacecraft attitude does not meet the criteria stated in this Section, but the Calculated Operational Lifetime is greater than or equal to the Specified Operational Lifetime for the Spacecraft, then the Spacecraft shall be deemed to have been a Successfully Injected Spacecraft, If, on the other hand, the attained transfer orbit/Spacecraft attitude does not meet the criteria stated above, and the Calculated Operational Lifetime is less than the Specified Operational Lifetime, then the Spacecraft shall be deemed not be a Successfully Injected Spacecraft. If Buyer and Contractor cannot agree on the Calculated Operational Lifetime, then the Parties shall resolve such disagreement in acceptance with the dispute resolution procedures set forth in Article 33. During such dispute resolution procedure, Buyer shall commence all payments under Section 6.3.2 to Contractor based on Contractor's calculation of such Calculated Operational Lifetime, except only the disputed amount(s) which shall be paid by Buyer in escrow as set forth in Section 29.4, and the prevailing party shall be entitled to interest as provided therein. 6.3.1.6 "Incentives Interest Rate". The Incentives Interest Rate shall be the lesser of (i) the prime rate of Chase Manhattan, New York, as calculated on the first business day of each month for which interest is calculated plus [*************************] or (ii) [*******************] [***] Filed separately with the Commission pursuant to a request for confidential treatment. 19 6.3.1.7 "Commencement Date". The Commencement Date shall be the date on which Buyer receives written certification from Contractor that, based upon the results of completed in-orbit performance tests, at least one Payload is a Successfully Operating Payload. 6.3.2 Buyer shall pay to Contractor the Incentives Obligations and the Change Order Profit Component (if applicable), as follows: 6.3.2.1 Incentives Obligations and Change Order Profit Component. Subject to Section 6.3.2.3 through 6.3.2.6, Buyer shall be obligated to pay to Contractor the Incentives Obligation and any Change Order Profit Component (if applicable), as follows: Buyer shall pay Contractor an equal monthly payment that, when calculated on a net present value basis to the Commencement Date using the Incentives Interest Rate, equals the total amount of Incentives Obligations plus Change Order Profit Component due hereunder. For example, if the PAS 1R Spacecraft is a Successfully Injected Spacecraft and on the Commencement Date all Transponders on the Spacecraft are and continue to be Successfully Operating Transponders for fifteen (15) years, assuming the maximum [****************] for the entire period, the monthly Incentives Obligations payment would be [TBD] (the "Nominal Payment"). If the Incentives Interest Rate is less than [********************] for any given month, the [***] Filed separately with the Commission pursuant to a request for confidential treatment. 20 Incentives Obligations payment will be less than the Nominal Payment. In such circumstances, the amount of each month's payment will be calculated on a net present value basis to the date of the last month's payment using the remaining unpaid principal as the new principal, the Incentives Interest Rate, and a term equal to the number of months remaining in the Incentives period. The Parties shall agree in writing upon an appropriate allocation of the portion of the Incentive Obligations which shall be payable for each Payload on the Spacecraft. The Incentives Obligations, identified above, shall be payable in 180 equal and consecutive monthly installments over a fifteen (15) year life of the Spacecraft, except as may be adjusted as set forth herein. Except as provided in Paragraph 6.3.4, the first installment of each Incentives Obligations shall be paid on the Spacecraft's Commencement Date. A sample schedule matrix showing Incentives Obligations payments for fifteen years, assuming fully successful operation, and with varying hypothetical interests rates will be attached to this Contract as Schedule 6.3.2.1. The foregoing notwithstanding: (a) If the Spacecraft is not a Successfully Injected Spacecraft pursuant to Section 6.3.1.4 but is successfully placed into its on-station orbit by Hughes during the "Transfer Period" (defined as the period from separation of the Launch Vehicle through on-station acquisition), then, subject to Section 21 6.3.2.3, Buyer shall pay the Incentives Obligations for the Spacecraft in equal and consecutive monthly installments over a period of the Spacecraft's On Station Operational Lifetime (defined at Section 6.3.2.1(b)). (b) If the Spacecraft is Successfully Injected, but is not successfully placed into its on-station orbit by Contractor during the Transfer Period, then the total amount of the Incentives Obligations for the Spacecraft shall be multiplied by a percentile equal to (i) the On-Station Operational Lifetime divided by (ii) the Calculated Operational Lifetime, which percentile shall, in no event, be greater than one. Subject to Section 6.3.2.3, Buyer shall pay such Incentives Obligations for the Spacecraft in equal and consecutive monthly installments over a period of the Spacecraft's On-Station Operational Lifetime. The "On Station Operational Lifetime" shall be mutually determined by Buyer and Contractor, based on standard engineering practices, using measured actuals of the Spacecraft, existing at the end of the Transfer Period. However, should the Spacecraft continue to operate successfully beyond the On-Station Operational Lifetime, Contractor will continue to earn Incentives Obligations at the same monthly rate up to the Specified Operational Lifetime. (c) Finally, if the Spacecraft is not a Successfully Injected Spacecraft and, in addition, is not successfully placed into its on-station orbit during the Transfer Period, then the total amount of the Incentives Obligations shall be multiplied by the sum of (A)(i) the Specified Operational Lifetime, plus (ii) the On-Station Operational Lifetime, minus (iii) the 22 Calculated Operational Lifetime, divided by (B) the Specified Operational Lifetime, which percentile shall, in no event, be greater than one. Subject to Section 6.3.2.3, Buyer shall pay such Incentives Obligations for the Spacecraft in equal and consecutive monthly installments over a period of the Spacecraft's On-Station Operational Lifetime. For purposes of any provision of this Contract, if the Incentives Obligations or related payment periods are to be recalculated, the monthly installments due shall be recalculated to reflect the imputed interest element that is reflected in the payment plans specified above. 6.3.2.2 Notwithstanding the foregoing, if at any time Buyer continues to utilize for revenue-producing purposes any Transponder that is not a Successfully Operating Transponder, then Buyer shall pay a pro rated amount of the Incentives Obligation attributable to such Transponder that is proportionate to the partial benefit that Buyer derives from such Transponder (the "Partial Incentive Payment"), all as mutually agreed upon by the Parties in good faith. 6.3.2.3 Except for any Change Order Profit Component (which is non-contingent), payment of any Incentives Obligation shall be contingent upon the Transponders being Successfully Operating Transponders, as set forth herein, on the applicable Payload and shall be pro-rated, therefore, on a Transponder equivalent-by-Transponder equivalent basis over the duration of the applicable term of such Obligation; provided, however, that beginning on the date, if any, that any one or more of the Payloads are no longer a Successfully Operating Payload, as 23 and when ascertained pursuant to in Section 6.3.2.4 (the "Degraded Payload"), then Buyer's then-remaining Incentives Obligations for such Payload(s) (exclusive of any Change Order Profit Component, as applicable) shall be deemed extinguished. 6.3.2.4 Whether any Transponder is not Successfully Operating shall be mutually determined by Buyer and Contractor, based on relevant technical data, reports and analyses, and each Party will make available the other review upon reasonable request all data used in making such determination. If Contractor disagrees with such determination, then the Parties shall resolve such disagreement in accordance with the dispute resolution procedure set forth in Article 33. 6.3.2.5 If the Spacecraft has not been, or is not being, Properly Operated by the Buyer, and any Transponders thereof are not Successfully Operating Transponders, then the Transponders of the Spacecraft which were Successfully Operating prior to such improper operation of the Spacecraft shall be deemed to be Successfully Operating Transponders for purposes of Contractor's entitlement to payment of any applicable Incentives Obligations for such period as such Transponders would have reasonably been predicted to continue to be Successfully Operating had the Spacecraft and transponder thereon been Properly Operated by Buyer; provided, however, that if the failure is the result of a defect in the deliverable software or if Buyer demonstrates that the failure of any Transponder to be Successfully Operating was not caused primarily, directly or indirectly, by any act or omission of Buyer, its agents, Subcontractors, Consultants or 24 representatives of any kind, then the foregoing provision shall not apply with respect to such Transponder. 6.3.2.6 Buyer may prepay any portion of the Incentives Obligations or the Change Order Profit Component pursuant to the schedule matrix attached as Exhibit 6.3.2.1. Any remaining Incentives Obligations so prepaid shall be subject to refund by Contractor to Buyer, in any instance and to the extent that Buyer's obligation to make such payments is relieved pursuant to this Article 6, as outlined in the last sentence of Section 6.3.4.1 hereof. 6.3.3 "Spacecraft Retirement Payment". At any time following the Spacecraft's Delivery, Buyer may, at its option, cease to utilize the Spacecraft for any purpose; provided, however, that if Buyer does cease using the Spacecraft (or if the Spacecraft is rendered a total loss by virtue of Buyer's failure to Properly Operate the Spacecraft), then, upon the exercise date of such option or the declaration of the Spacecraft as a total loss as applicable, all remaining Incentives Obligations payments for any Transponder (and any Change Order Profit Component, if applicable) (subject to the provisions of Section 6.3.2.3 through 6.3.2.5) shall become immediately due and payable, all relative to the Spacecraft; and Buyer shall pay to Contractor such amounts, in immediately available funds, along with the outstanding balance of principal and accrued interest on any other outstanding payment obligations with respect to the Spacecraft, if any, as of such date. In determining the amount of principal and interest due, present value analysis discounted at the Incentives Interest Rate per annum shall be done for any scheduled payment stream previously created by the Parties hereunder. Notwithstanding the foregoing, Buyer shall have the right to cease 25 using the Spacecraft and remove it from its orbital location at any time following the expiration of the Spacecraft's Useful Commercial Life, without payment of such Spacecraft Retirement Payment. 6.3.4 Incentive Obligations and Launch Delay 6.3.4.1 If the Spacecraft has not been launched by the 121st day after Delivery of the Spacecraft, then, except as set forth in Paragraph 6.3.4.2, the first of the equal and consecutive monthly installment payments for Incentive Obligations on the Spacecraft shall be due and payable and the fifteen year period shall be deemed to have begun for purposes of this Paragraph 6.3 and such payments shall commence (the "Pre-Launch Incentive Payments"). If upon the Commencement Date or at any time thereafter, any Transponder ceases to be a successfully Operating Transponder or a Payload becomes a Degraded Payload, then Contractor shall deliver to Buyer a refund (without interest) of that portion of the Pre-Launch Incentive Payment attributable to such Transponder or Payload, taking into account the amount of such time such Transponder or Payload met the performance specifications, and Buyer's subsequent Incentives Obligations shall be reduced thereafter on a pro rata basis; provided, if applicable, Buyer shall receive a credit to the extent of any Pre-Launch Incentive Payments, to be applied as an offset against Buyer's consecutive monthly installment payments for the Incentives Obligations otherwise due and payable for the months immediately following the Commencement Date. 26 6.3.4.2 Subject to the second sentence below, if on or before the 121st day following the Satellite's Delivery Date, the Satellite has not been Launched, then the first of the equal and consecutive monthly installments payments for the Incentives Obligations on the Spacecraft shall be due and payable on the earlier to occur of the Spacecraft's Commencement Date or the 241st following such Spacecraft's Date of Delivery (except that interest on such Incentives Obligations shall begin to accrue on the 121st day following the Delivery Date, as such date may be modified herein). If, however, the Spacecraft has not been Launched due primarily to (1) Contractor's Fault after Delivery or (2) Contractor's failure to timely meet the Spacecraft's scheduled Delivery Date (where such failure in Delivery is not caused by a Buyer's Delay) (or a combination of clauses (1) and (2) immediately above) then the first of the equal and consecutive monthly installments of the Incentives Obligations on the Spacecraft shall be due and payable on, and interest shall not accrue until, the Causation Date. If upon Spacecraft Commencement, or at any time thereafter, any Transponder on the Spacecraft (which has been subject to a Launch delay under this Paragraph 6.3.4.2) ceases to be a Successfully Operating Transponder or a Payload becomes a Degraded Payload, then Contractor shall deliver to Buyer a refund (without interest) of that portion of the Pre-Launch Incentives Payments attributable to such Transponder or Payload, taking into account the amount of time such Transponder or Payload met the performance specifications, and Buyer's subsequent Incentives Obligation for the affected Payload on the 27 Spacecraft shall be reduced thereafter on a pro rata basis; provided, however, that Buyer shall receive a credit to the extent of any Pre-Launch Incentive Payments, such credit to be applied as an offset against Buyer's consecutive monthly installment payments for the Incentives Obligations otherwise due and payable for the months immediately following the Commencement Date. 6.3.4.3 If, for any reason other than primarily Contractor's Fault, the Spacecraft has not been Launched within 24 months following the Spacecraft's Delivery Date, then the full amount of the Incentives Obligations (and any Change Order Profit Component, if applicable) (including principal and accrued interest, if any) shall become immediately due and payable upon the last day of such 24th month. If, however, the Spacecraft is subsequently Launched within 54 months of the Delivery Date and any Transponder of the Spacecraft ceases to be a Successfully Operating Transponder or a Payload becomes a Degraded Payload, then Buyer shall be entitled to a proportionate refund (without interest) for any Incentives Obligations (and any Change Order Profit, if applicable) paid for such Transponder or Payload, taking into account the amount of time such Transponder or Payload met the performance specifications. If, for any reason, the Satellite has not been Launched prior to the third anniversary of the Delivery Date (the "Third Anniversary"), then Buyer shall have an option (the "LOPS/MOPS Option"), exercisable in writing received by Contractor on or before the Third Anniversary, to extend its right to utilize the Related Services for the Satellite to the fifth anniversary 28 of the Delivery Date (the "Extension Period"). If Buyer does not timely exercise the LOPS/MOPS Option, then Contractor shall credit any unused portion of the Baseline Launch Costs for the Spacecraft against any due and unpaid payment obligations of Customer under this Contract (the "LOPS/MOPS Refund"). If Buyer timely exercises the LOPS/MOPS Option, then the price associated with the Related Services (pursuant to Paragraph 6.3) for the Spacecraft during the Extension Period, shall be increased by a [**********************] beginning on the Third Anniversary. Buyer shall be obligated to pay such Escalation Amount within 30 days of receipt of invoice from Contractor. In any case, Contractor's obligation to provide such services shall terminate on the date which is fifty-four (54) months (or as early as thirty-six (36) months) from the Delivery Date for the Spacecraft. If Contractor's obligation to provide Launch and Mission Operations Services is terminated under the immediately preceding sentence, then Buyer shall receive a LOPS/MOPS Credit or LOPS/MOPS Refund, as applicable. 6.3.4.4 If, for any reason, other than Contractor's Fault, a Launch delay occurs between the time of Launch and the Commencement Date (or if no Commencement occurs), then the full amount of the Incentives Obligations (and any Change Order Profit Component, if applicable) (the [***] Filed separately with the Commission pursuant to a request for confidential treatment. 29 "Recoverable Amount(s)") shall become immediately due and payable upon the date of such Launch delay. Contractor shall be entitled to obtain payment of such Recoverable Amounts from the proceeds of the launch insurance obtained by Buyer and shall be entitled to a priority in obtaining such proceeds over Buyer and all other parties or claims; provided, however, that nothing herein shall relieve Buyer of its obligations to pay to Contractor all such Recoverable Amounts, as set forth herein. During the six (6) months immediately following such Launch delay, Buyer shall use best reasonable efforts to obtain the proceeds of its launch insurance to pay Contractor the Recoverable Amounts, hereunder. Provided further, however, that if Contractor does not receive all such Recoverable Amounts from the proceeds of Buyer's launch insurance within such six (6) month period, then Buyer shall be obligated immediately to compensate Contractor for, and Contractor may also look to Buyer directly for satisfaction of, all such Recoverable Amounts. 6.4 Contractor shall not be obligated to deliver a Spacecraft to the Launch Site if there are any outstanding Delinquent Payments owed by Buyer to Contractor with respect to such Spacecraft under this contract one month prior to shipment of such Spacecraft from the Contractor facility. "Delinquent Payments" are defined as those payments not received by Contractor within thirty (30) days of the dates due as defined in Paragraphs 6.2.1 and 6.2.2 above. Once Buyer has paid Contractor for any "Delinquent Payments" and any interest accrued in accordance with Paragraph 6.10 below, Contractor shall use its reasonable best efforts to ship such Spacecraft to the Launch Site so as to enable launch on the scheduled Launch Date and in any event to 30 make shipment as soon as practicable and no later than sixteen (16) weeks after payment by Buyer of such Delinquent Payments. Buyer will be responsible for and will pay to Contractor any reasonable costs and [***] profit on such costs that Contractor may incur as a result of a delay in delivery due to Buyer's Delinquent Payments. Notwithstanding the foregoing, this Section 6.4 shall not relieve Contractor of its obligation to deliver a Spacecraft, and no "Delinquent Payment" shall be deemed to have occurred, due to any non-payment by Buyer on account of an alleged breach by Contractor or other dispute as to such payment. In such event, Buyer shall, within thirty (30) days of the date such payment is due, pay the full amount of such payment into an interest-bearing escrow account to be established at Bank of America, Concord, California. Upon settlement of the dispute as to such payment and alleged breach in accordance with Article 33, the Party entitled to the amount in escrow shall receive such amount together with all accrued interest thereon and the other Party shall pay all costs and fees associated with the escrow of such amount. 6.5 Invoice 6.5.1 Invoices submitted to Buyer for payment shall contain a cross-reference to the Contract number and the date specified in Payment Plans of Paragraphs 6.3.1 and 6.3.2. Contractor shall submit one (1) original invoice for each Spacecraft in each instance to: PanAmSat Corporation One Pickwick Plaza Greenwich, CT 06830 Fax: (203)861-8692 Attention: Accounts Payable - Tony Walden 6.5.2 Invoice amounts, as specified in Paragraph 6.3, provide for billings to [***] Filed separately with the Commission pursuant to a request for confidential treatment. 31 be submitted by the 15th day of each month and shall be paid by Buyer within thirty (30) days upon receipt of the invoice by Buyer. 6.6 Late Payments In the event of a failure by the Buyer or the Contractor to make a payment required pursuant to this Contract, the delinquent Party shall pay interest at the rate of [***********] on the overdue amount for the number of days that the payment is overdue, commencing on the date payment is due and terminating on the date the overdue amount is paid in full. Notwithstanding the foregoing, this Section 6.6 shall not apply to any payment made into escrow in accordance with Section 29.4. [***] Filed separately with the Commission pursuant to a request for confidential treatment. 32 ARTICLE 7. SPACECRAFT LAUNCH DATE 7.1.1 Launch Semester. A six (6) month period of time --------------- in which a launch will occur, the first day of which shall be thirty (30) days after the Delivery Date under Section 4.1 herein (fifty (50) days after Delivery Date if a Sea Launch is utilized). 7.1.2 Launch Period. A ninety (90) day period of time ------------- within a launch Semester during which a launch will be scheduled to occur as shall be notified by Buyer to Contractor. 7.1.3 Launch Slot Definition. A thirty (30) day period ---------------------- of time within a Launch Period during which a Launch will occur. The Launch Slot within the Launch Period shall be notified by Buyer to Contractor not later than one (1) year prior to the first day of the applicable Launch Period and, once established, shall become an express term of this Contract. 7.1.4 Launch Date Defined. The calendar date within the ------------------- Launch Slot during which a Launch will occur. The Launch Date within the Launch Slot shall be notified by Buyer to Contractor no later than six (6) months prior to the first day of the applicable Launch Slot and once established, shall become an express term of this Contract. 7.1.5 Launch Window Definition. A period of time within ------------------------ the Launch Date during which a Launch can occur and meet mission requirements. The Launch Window shall be established by notified by Buyer to Contractor no later than forty-five (45) days prior to the Launch Date and once established, shall become an express term of this Contract. 7.1.6 Adjustment of dates. The time periods as ------------------- delineated in Sections 7.1.2 through 7.1.5 shall be adjusted to reflect applicable launch provider 33 contracts, consistent with ordinary practices of such providers as familiar to the Parties. 7.2 The Contract Price set forth in Paragraph 5.1 includes Contractor furnished launch support services, post launch support services, in-orbit test support services, and post title transfer monitoring and command of each Spacecraft if Buyer invokes the remedial provisions of Article 3, Paragraph 3.3. 7.3 No less than sixteen (16) weeks prior to the launch date, Buyer shall order Contractor by notice in writing to commence launch campaign preparations. 7.4 If a Spacecraft Launch Date is postponed for any reason other than the sole fault of Contractor, excluding any postponement due to an Excusable Delay as defined in Article 12, the Parties shall negotiate in good faith to determine an equitable adjustment to the price and affected terms of this Contract, if any. If the cost of supplies or materials made obsolete or excess as a result of a such postponement is included in the equitable adjustment, Buyer shall have the right to prescribe the manner of disposition of such supplies or materials. Costs included in the equitable adjustment shall include but not be limited to: support personnel standby; extra travel expenses; transport termination or rescheduling fees and a profit rate of [********]. 7.5 Notwithstanding the foregoing, if a Spacecraft Launch Date is postponed by either Party due to an Excusable Delay, as defined in Paragraph 12.1 herein, the terms of Article 12 herein shall govern such postponement. [***] Filed separately with the Commission pursuant to a request for confidential treatment. 34 ARTICLE 8. BUYER-FURNISHED ITEMS 8.1 The following facilities, equipment, and services ("Buyer-Furnished Items") shall be furnished by Buyer at no cost to Contractor, in a timely manner, so as to enable Contractor to perform the work described herein. 1) Facilities (buildings, power, phones and data lines) and enumerated services: (i) transportation of a Spacecraft, Contractor related test equipment and personnel within the Launch Site and if a Sea Launch is provided, between the Integration Facility (Port of Long Beach) and the Launch Site (vicinity of Christmas Islands) unless Article 4, Paragraph 4.2.1 conditions apply (ii) storage of a Spacecraft and related test equipment for all force majeure events (which prevent Buyer from supplying Buyer-Furnished Items) and/or launch vehicle delays (iii) fueling (iv) photographs, (v) interface hardware at the Launch Site and (vi) earth station facilities for IOT including appropriate RF facilities, but not specialized test equipment. 2) Reservation and procurement of launch services and associated services. Contractor will provide preliminary requirements of Item 1 above to Buyer no later than 6 months after the Effective Date of this Contract to assist Buyer's compliance with this Article, which shall be consistent with what Contractor has generally required Buyer to secure for previous launches with the same launch provider. Subject to the confidentiality requirements of the applicable agreements, Contractor will be allowed to review the list of basic and optional service which Buyer has procured in Buyer's contract(s) for launch services. In the event that the Buyer-Furnished Items set forth above are not suitable for the intended purpose or are not provided in a timely manner, excluding any 35 excusable delay as defined in Article 12 herein, then Buyer shall be liable to Contractor for all applicable costs which shall include but not be limited to; procurement or rental of suitable substitutes for such Buyer Furnished Items at no higher than market prices; with title and possession of all such procured items reverting to Buyer after Contractor's use under this Contract; support personnel standby; extra travel expenses; transport termination or rescheduling fees; and installation/de-installation of communication links to the Launch Site and a profit rate of [************]. 8.2 Contractor shall maintain a system to ensure the adequate control and protection of Buyer's Property. For the purposes of this Article, Buyer Property shall be defined as any item which Buyer provides to the Contractor or directs Contractor to maintain in storage or an inventory account under this Contract. Upon receipt of notification from Buyer, the Contractor shall complete and return within fifteen (15) working days a Property System Certification describing the system that will be used to control Buyer's Property. Additionally, Buyer's representative may, at its option and at no additional cost to Buyer, conduct surveillance at a reasonable time of the Contractor's Property Control System as Buyer deems necessary to assure compliance with the terms and conditions of this Article. 8.3 Contractor shall, commencing with its receipt and during its custody or the use of any Buyer's Property, accomplish the following: A. Establish and maintain inventory records and make such records available for review upon Buyer's request; B. Provide the necessary precautions to guard against damage from handling and deterioration during storage; C. Perform periodic inspection to assure adequacy of storage conditions; [***] Filed separately with the Commission pursuant to a request for confidential treatment. 36 and D. Ensure that Buyer's Property is used only for performing this Contract, unless otherwise provided in this Article or approved by the cognizant contracting officer. 8.4 Contractor shall not modify, add-on, or replace any Buyer Property without Buyer's prior written authorization. Contractor shall immediately report to Buyer's contract representative the loss of any Buyer Property or any such property found damaged, malfunctioning, or otherwise unsuitable for use. The Contractor shall determine and report the probable cause and necessity for withholding such property from use. 8.5 Upon termination or completion of this Contract, and upon request by Buyer, the Contractor shall perform a physical inventory, adequate for accountability and disposition purposes, of all Buyer's Property applicable to such terminated or completed agreement and shall cause its subcontractors and suppliers at every tier to do likewise. 8.6 Notwithstanding the provisions of Article 29, at any time on or before [************] Buyer may make changes to the PAS 9 configuration/specifications as follows: [********************************************************* ***************************************] [******] [************] [***] Filed separately with the Commission pursuant to a request for confidential treatment. 37 - ------------------------------------------------------------------------------- [*************] [********] - ------------------------------------------------------------------------------- [***] Filed separately with the Commission pursuant to a request for confidential treatment. 38 - -------------------------------------------------------------------------------- [*************] [***********] - -------------------------------------------------------------------------------- [*************] [***********] - -------------------------------------------------------------------------------- [*************] [***********] - -------------------------------------------------------------------------------- [*************] [***********] - -------------------------------------------------------------------------------- [*************] [***********] - -------------------------------------------------------------------------------- [*************] [***********] - -------------------------------------------------------------------------------- 8.6.2 Changes other than those specified in [*******] shall result in an adjustment to the PAS 9 Contract Price [********************* ****************************]. 8.6.3 Any adjustment to the Contract Price of a Spacecraft under Paragraphs 8.6.1 or 8.6.2 shall be allocated pro rata over the entire Payment Plan for such Spacecraft (including In-Orbit Performance Incentive Obligations). Adjustments allocated to payments already made shall be promptly paid by Buyer or refunded by Contractor, as the case may be. 8.7 Buyer shall provide Contractor with the following payload definitions to Contractor in accordance with the following schedule, and once all such information has been provided for a Spacecraft, Exhibit B, "PAS 1R & PAS 9 Interim Spacecraft Specification", shall be completed and thereafter shall be deemed the final specifications of such Spacecraft (subject to change in accordance with the provisions of this Contract): [********] [*****************] [***] Filed separately with the Commission pursuant to a request for confidential treatment. 39 - ------------------------------------------------------------------------------- [********] [***] [*****] - ------------------------------------------------------------------------------- [********] [***] [*****] - ------------------------------------------------------------------------------- [********] [***] [*****] - ------------------------------------------------------------------------------- [********] [***] [*****] - ------------------------------------------------------------------------------- [********] [***] [*****] - ------------------------------------------------------------------------------- [*********************************************] Any changes to the payload requested by Buyer after the applicable decision dates identified in Table 8.7.1 shall be deemed to be a "Change Order Request" under Paragraph 29.3. 8.8 Contractor shall reasonably and promptly respond to Buyer's requests for information and assistance in making the configuration decisions required by Paragraph 8.7. 8.9 In the event that (i) Buyer does not provide Contractor with the required information as to a Spacecraft in accordance with Table 8.7.1 and (ii) Contractor has complied with its obligations under Paragraph 8.8, then with respect to such Spacecraft: 8.9.1 In the event of cumulative delays by Buyer of [********] or less, the Shipment Date and any remaining configuration decision dates for such Spacecraft in Table 8.7.1 shall each be delayed [*******] 8.9.2 In the event of cumulative delays by Buyer in excess of [******* ******] and not longer than [****************] (i) the Shipment Date and any remaining configuration decision dates for such Spacecraft in Table 8.7.1 shall each be delayed [************** ******] of such delay in excess of [*****] and (ii) Buyer [***** *************] for cumulative delay beyond [***********] or, in [***] Filed separately with the Commission pursuant to a request for confidential treatment. 40 the case of delays of [**************************** ********************************************] for the delay in such decisions, to be calculated [*****************************] provided that the maximum period of time for which Buyer shall [***************] under this Paragraph 8.9.2 shall be [*****************************] under Paragraph 8.9.1 per Spacecraft; 8.9.3 In the event of cumulative delays by Buyer in excess of [******* ***********] such delays shall be deemed to be a Change Order Request by Buyer for a stop work order under Paragraph 29.3; or 8.9.4 In the event of cumulative delays by Buyer in excess of [******** **********] Buyer shall be deemed to have terminated this Contract pursuant to Paragraph 14.1 with respect to the applicable Spacecraft, and Buyer's termination liability under Paragraph 14.1 shall be calculated as of the date that Buyer's delay aggregated [**********************]. [***] Filed separately with the Commission pursuant to a request for confidential treatment. 41 ARTICLE 9. INSPECTION AND ACCEPTANCE 9.1 Inspection of all Hardware, documentation and Contractor's services provided hereunder shall take place in accordance with the terms of Article 10, entitled "Access to Work in Process," herein. 9.2 Preliminary Acceptance of a Spacecraft shall occur when all in-plant tests required to be performed by Contractor for the Hardware have been completed and the Contractor has demonstrated at the pre-ship review that the Hardware and contract deliverables meet the requirements of this Contract, at which time Buyer shall accept the Hardware on a Preliminary basis in writing within five (5) business days subject to completion of Launch Integration Facility and/or Launch Site tests specified in Exhibit C, PAS 1R & PAS 9 Spacecraft Integration Test Plan. If the Hardware is unacceptable, Contractor shall promptly and at its expense, rectify the unsatisfactory Hardware and resubmit the Hardware for acceptance by Buyer as provided above. In either case, the Hardware shall be deemed accepted upon failure of Buyer to notify Contractor in writing within the above five (5) business days that it is accepted, rejected or that in Buyer's opinion further corrective action must be taken by the Contractor. 9.3 Final Acceptance of a Spacecraft shall occur upon the earliest of i) the completion of In-orbit Testing in accordance with Exhibit A, ii) fifty (50) days after Intentional Ignition (as defined in Article 16, Paragraph 16.2 of this Contract) or iii) immediately before a Partial Failure, Total Failure or Total Constructive Failure (as each such term is defined in the applicable Hughes Communications Galaxy Launch Insurance Contract or successor contract), which occurs at or after Intentional Ignition. Buyer shall have access to Launch Integration Facility and/or Launch Site test results during the launch campaign in accordance with the provisions of Article 10, 42 Paragraph 10.1 "Access to Work in Process." 9.4 With respect to deliverable Hardware which Buyer orders Contractor to store, the Hardware shall be stored at a location to be negotiated and Final Acceptance shall occur at the end of the [*********] warranty period as set forth in Article 16 herein, entitled "Spacecraft Warranty," or such other event mutually agreed upon between the Parties. 9.5 Non-Conforming Products. ----------------------- 9.5.1 If (i) the Spacecraft does not meet its weight requirements and (ii) Buyer will be required to pay for additional weight from the launch provider in order to achieve the Specified Operational Lifetime without delaying the placing of the Spacecraft in its orbital location by more than fifteen (15) additional days, then Contractor shall reimburse Buyer for such additional payments up to [**************]. 9.5.2 Any Preliminary Acceptance or Final Acceptance by Buyer of Spacecraft that does not conform to the requirements of this Contract (whether or not related to weight) shall not affect the Parties rights and obligations under Paragraph 6.3 ("Incentive Obligations") with respect to a Spacecraft or other deliverable that does not perform to the specifications of this Contract. [***] Filed separately with the Commission pursuant to a request for confidential treatment. 43 ARTICLE 10. ACCESS TO WORK IN PROCESS 10.1 Contractor shall afford Buyer access to work in progress being performed at Contractor's plants and at the Launch Integration Facility and/or Launch Site pursuant to this Contract, including technical data, documentation, and hardware, at reasonable times during the period of Contract performance, provided such access does not unreasonably interfere with such work or require the disclosure of Contractor's proprietary information to third Parties and subject to (i) Contractor's Security Procedures and (ii) U.S. or Foreign Government Regulations. 10.2 To the extent that the Contractor's major subcontracts permit, Contractor shall afford Buyer access to work being performed pursuant to this Contract in subcontractor's plants in the company of Contractor's representatives. Contractor shall exert reasonable effort in subcontracting to obtain permission for Buyer access to those major subcontractors' plants. Major subcontracts are defined as those subcontracts in excess of [**********************]. 10.3 Buyer shall have the right to witness on a non-interference basis all system and subsystem tests scheduled by Contractor in connection with the performance of work under this Contract. If the system or subsystem tests are performed by a subcontractor of Contractor, Contractor shall take all reasonable steps to secure Buyer's access to the subcontractor's facility or facilities. Buyer's right to witness testing shall be on a non-interference basis with the subcontractor's activities and subject to (i) any subcontractor security procedures and (ii) U.S. or Foreign Government Regulations. [***] Filed separately with the Commission pursuant to a request for confidential treatment. 44 ARTICLE 11. TERMINATION FOR DEFAULT; LIMITATION OF LIABILITY 11.1 Subject to provisions of Article 3 entitled "Spacecraft, Documentation and Related Services," Article 5 entitled "Price" and Article 12 entitled "Excusable Delays," Buyer may issue a written notice of default with respect to a particular Spacecraft to Contractor if: (i) Contractor fails [*********************************************] as confirmed in writing by the Contractor's and Buyer's Senior Executives and such failure may result in a delay in delivery of more than [*****] or (ii) the delivery of such Spacecraft or Contractor's performance of any material obligation under the Contract has been delayed due to the primary fault of the Contractor for more than [********] Subsequent to the issuance of said notice, the Buyer may terminate this Contract with respect to such Spacecraft and thereafter elect remedies as identified in Paragraph 11.2 below. 11.2 If Buyer terminates this Contract, in whole or in part, as provided in Paragraph 11.1 herein, Buyer, at its sole option, shall either: (i) take title to all deliverable hardware, all hardware in process which ultimately would have been deliverable by Contractor and all drawings and data produced by Contractor, the cost of which has been charged or becomes chargeable to any work terminated plus all reasonable reprocurement costs up to a maximum amount per Spacecraft of: (a) [**************] in the event of a termination of this Contract solely with respect to Documentation and/or Related Services for such Spacecraft or (b) [*** **********] with respect to a complete termination of the Contract with respect to such Spacecraft; or (ii) receive a refund of all payments submitted to Contractor by the Buyer for performance of this Contract for the portion terminated by Buyer, plus [*********************] and Contractor shall retain title and [***] Filed separately with the Commission pursuant to a request for confidential treatment. 45 possession to all terminated Hardware which ultimately would have been deliverable by Contractor. Contractor shall continue the performance of this Contract to the extent not terminated under the provisions of this Article. 11.3 Notwithstanding the other provisions of this Article, there will be no termination for default after Intentional Ignition of the Launch Vehicle for the applicable Spacecraft. 11.4 If, after termination of this Contract (or portion thereof) under the provisions of this Article, it is determined for any reason that Contractor was not in default under the provisions of this Article, or that the default was excusable under the provision of Article 12 entitled "Excusable Delays," the rights and obligations of the Parties shall be the same as if Notice of Termination had been issued pursuant to Article 14, entitled "Termination for Convenience" or pursuant to Article 12, Paragraph 12.4, as the case may be. 11.5 Except as otherwise provided in the Contract, the rights and remedies of the Parties provided in this Article shall be in lieu of any other rights and remedies provided by law or in equity in the event Contractor or Buyer fails to meet its obligations under this Contract. Buyer shall have no other rights or remedies for late delivery of a Spacecraft, Documentation and Related Services under this Contract except for those rights and remedies expressly provided for in this Contract. 46 ARTICLE 12. EXCUSABLE DELAYS 12.1 If either Party or a subcontractor of either Party is delayed by act of God, or of the public enemy, fire, flood, earthquake, epidemic, quarantine restriction, strike, walkout, freight embargo, or any other event which is beyond their control or does not arise from the acts or omissions of either Party or its respective subcontractors, said delay shall constitute an excusable delay ("Force Majeure Events"). In the event of an excusable delay, there shall be an equitable adjustment to the time of delivery and/or performance stated in this Contract. The affected Party shall give notice in writing to the other Party within 10 working days that an excusable delay condition exists after learning of such delay. Such notification shall include the cause of the excusable delay, the expected length of the excusable delay, and alternate plans to mitigate the effect of the excusable delay. 12.2 If the affected Party, as defined in Paragraph 12.1 above, requests or experiences, on a cumulative basis, excusable delay(s) greater than [********] the Parties shall enter into good faith negotiations to develop a mutual course of action and/or an equitable adjustment to the affected terms of this Contract. 12.3 Notwithstanding the foregoing, if the Launch Date for a particular Spacecraft defined in Paragraph 7.1 herein is delayed due to a Force Majeure event affecting Buyer's ability to furnish any item to be supplied by it under Article 8 hereof, Buyer shall reimburse Contractor for all reasonable expenses incurred as a result, including without limitation expenses for: support personnel standby; extra travel expenses; and transport termination or rescheduling fees. 12.4 Notwithstanding anything herein to the contrary, in the event that a Force [***] Filed separately with the Commission pursuant to a request for confidential treatment. 47 Majeure Event occurs and continues to delay or prevent performance by Contractor of its obligations as to either or both Spacecraft for a period of twelve (12) months or longer from the initial occurrence of such Force Majeure Event, then Buyer shall have the right to terminate this Contract with respect to the affected Spacecraft upon thirty (30) days written notice. In the event of a termination under this Paragraph 12.4, Buyer shall be entitled to a refund of all payments made to Contractor with respect to the affected Spacecraft, and Contractor shall retain title to all Deliverables produced by Contractor under this Contract with respect to the affected Spacecraft. 48 ARTICLE 13. AMENDMENTS The terms and provisions of this Contract shall not be amended or modified without specific written provision to that effect, signed by the Authorized Representative(s) of both Parties. These Authorized Representative(s) are identified in Article 27, "Notices and Authorized Representative(s)." No oral statement of any person shall in any manner or degree modify or otherwise affect the terms and provisions of this Contract. 49 ARTICLE 14. TERMINATION FOR CONVENIENCE 14.1 Buyer may terminate all or any portion of the work to be performed pursuant to this Contract with respect to one or both of the Spacecraft upon five (5) days written notice to Contractor. Buyer shall pay Contractor, in the event of such termination, termination liability equaling all Costs (as defined in Paragraph 14.6 below) expended by Contractor for all work done up to the date of termination, settlements with subcontractors for work performed prior to termination, and Contractor's reasonable costs related to termination which would not otherwise have been incurred plus a [***] profit for the applicable termination costs and charges, but in no event more than the maximum termination liability that is set forth in Exhibit F hereto, as of date of termination, less amounts previously paid by Buyer to Contractor pursuant to the Payment Article. Buyer shall pay the unpaid balance of such termination liability within thirty (30) days of Buyer's receipt of certification of Contractor's costs. In the event that Buyer has paid to Contractor any amount in excess of such termination liability, then Contractor shall refund such excess amount to Buyer within thirty (30) days of certification of costs. In no event shall the termination liability exceed either the Contract price defined in Article 5 herein or the amount specified in Exhibit F. 14.2 In the event of termination by Buyer hereunder, and upon payment in full of all amount due (if any) under 14.1 above, all tangible work in process inventories generated under this Contract, with respect to the terminated work, shall become the property of Buyer. Buyer shall direct disposition of such property within sixty (60) days from date of termination (which disposition may include requesting Contractor to undertake mitigation efforts in accordance with Paragraph 14.5 below) or such other date as agreed to by the Parties. Final acceptance and transfer of title for all tangible work in process inventories to be delivered to the Buyer in the event of termination [***] Filed separately with the Commission pursuant to a request for confidential treatment. 50 shall be the subject of separate negotiations between Buyer and Contractor and shall be subject to applicable U.S. Government Export Regulations. The expense of disposition shall be borne by Buyer. 14.3 In the event of partial termination with respect to a Spacecraft, the Contract Price for such Spacecraft shall be adjusted accordingly. 14.4 Notwithstanding any other provision in this Contract, in the event that Buyer terminates PAS 1R for convenience, the Contract Price of PAS 9 shall be adjusted in accordance with the following schedule of maximum increases, with any such increase to be paid in proportion to the remaining payments in the PAS 9 Payment Plan in Table 6.2.2: [**********] [************************] [********] [********] [********] [********] [********] [********] [********] [********] [********] [********] [********] [********] [********] [********] [********] [********] The parties agree that: (i) the amounts in Table 14.4.1 are the maximum price increase in the event of a termination at the beginning of each such three month period; (ii) the actual increase in the PAS 9 Contract Price will be the sum of (a) those non-recurring costs mutually beneficial to both PAS 1R and PAS 9, allocated to the PAS 1R Contract Price for convenience purposes [***] Filed separately with the Commission pursuant to a request for confidential treatment. 51 only, and not already completed by Contractor or otherwise paid by Buyer (whether through the payment plan or termination liability payments), plus (b) recurring costs related to managerial labor common to both the PAS 1R and PAS 9 programs; and (iii) the actual amount of such costs will decrease over the course of each three-month period. Buyer may request to have an independent audit performed of such costs. Such audit shall be at the expense of Buyer unless such audit shows Contractor to have overstated its costs, in which event Contractor shall bear the audit expense and the increase to the PAS 9 Contract Price will be adjusted accordingly. 14.5 At Buyer's request, Contractor shall use reasonable best efforts to identify an alternate use (i.e. sale to third Parties and/or internal utilization) for any Hardware affected by a termination under this Article 14, the Contractor shall submit a proposal to Buyer, which, at a minimum, defines (i) the applicable Hardware, (ii) the intended use of the Hardware, (iii) the original acquisition cost/value of the applicable Hardware, as available, and (iv) the sale/transfer payment(s) to be received by Buyer. Contractor shall use its reasonable best efforts to obtain fair market value for the applicable Hardware. Buyer, at its sole option, may accept or reject the proposal submitted by Contractor. In the event that Buyer accepts the proposal submitted by Contractor, payment by Contractor to Buyer of the agreed upon payment value shall occur within thirty (30) days of the sale/transfer of the applicable Hardware, or such other payment period as mutually accepted between the Parties. If the Contractor's proposal is rejected by Buyer or if Contractor is unable to find any alternative use within two (2) years of being requested to do so, then Title to the applicable Hardware shall be vested as stated in Paragraph 14.2 above. 14.6 As used in this Article 14, Contractor's "Costs" shall mean costs actually incurred by Contractor in performing its obligations hereunder (including 52 G&A costs not to exceed [*******] of such costs) all such costs to be determined in accordance with Contractor's normal accounting practices. Contractor shall provide to Buyer an invoice certified by a financial officer of the company stating Contractor claim for costs properly includes only the costs specified in this paragraph. In the event Buyer desires independent verification of claim, Buyer may request to have independent certified public accountants (CPA) audit costs incurred by Contractor and report to the Parties. Such audit shall be at Buyer's expense unless such audit shows Contractor's costs to have been overstated (in which event Contractor shall bear the audit expense). Such audit shall constitute a final determination of actual costs notwithstanding the provision of Article 33; provided that, if the costs determined by such report exceed the amount of Contractor's termination claim, Buyer shall only be obliged to pay the amount of Contractor's termination claim. 14.7 Contractor shall use its reasonable best efforts to include in its subcontracts for work hereunder on terms that will enable Contractor to terminate such subcontracts in a manner consistent with this Article 14. [***] Filed separately with the Commission pursuant to a request for confidential treatment. 53 ARTICLE 15. TITLE AND RISK OF LOSS 15.1 Title and risk of loss or damage in respect of all items to be delivered under this Contract shall pass from Contractor to Buyer as follows: 15.1.1 Risk of loss of the Spacecraft and title shall pass from Contractor to Buyer upon the earliest of: (i) the completion of In-orbit Testing in accordance with Exhibit A, (ii) fifty (50) days after Intentional Ignition (as defined in Article 15, Paragraph 15.2 of this contract) or (iii) immediately before a Partial Failure, Total Failure or Total Constructive Failure (as each such term is defined in the applicable Hughes Communications Galaxy Launch Insurance Contract or successor contract) which occurs at or after Intentional Ignition. 15.1.2 In respect to a Spacecraft which Buyer directs Contractor to store, title and risk of loss shall remain with the Contractor until Final Acceptance as specified in Article 9.4 herein. 15.1.3 Notwithstanding Paragraph 15.1.2 above, upon removal of the Spacecraft from storage, the Contractor shall not assume risk of loss relative to a Battery which Buyer directs Contractor to replace after the five-year storage period which disqualifies the battery for a 15-year mission. In that event, Article 30 herein entitled "Effects of Storage on Batteries," shall apply. 15.1.4 "Risk of Loss" for purposes of this Article 15 is limited to the responsibility and liability for a Partial Failure, Total Failure or Total Constructive Failure (as each such term is as defined in the applicable Hughes Communications Galaxy 54 Launch Insurance Contract or successor contract). Responsibility and liability for the Spacecraft prior to intentional ignition is with the Contractor. 15.2 In the event of damage to or destruction of Hardware when Contractor shall have risk of loss, Contractor shall repair or replace (at Contractor's option) said Hardware. The Buyer shall participate in the decision to repair or replace said Hardware and the provisions of Article 16 shall apply. 15.3 Insurance Provided By Contractor. The Contractor shall, --------------------------------- at its own expense, provide and maintain the following insurance: 15.3.1 "All Risk" Insurance -------------------- (i) The Policy for "All Risks" insurance shall insure the Contractor and name Buyer as additional insured and Loss Payee as their interest may appear. (ii) The insurance shall cover the Spacecraft while in or about the Contractor's and subcontractors' plants, while at other premises which may be used or operated by the Contractor for construction or storage purposes, while in transit, or while at the Designated Launch Site until Intentional Ignition, or while Spacecraft is stored by the Contractor at Buyer's direction until Final Acceptance as specified in Article 9.4. (iii) Such insurance shall be sufficient to cover the full replacement value or selling price of the Spacecraft and may be issued with deductibles, for which losses shall be borne by the Contractor. (iv) This "All Risk" insurance shall be in force from the time of the Effective Date of this Contract and shall continue in effect until 55 Contractor's liabilities have expired at intentional ignition. 15.3.2 Third Party Liability Insurance ------------------------------- (i) The Policy(s) for Third Party Liability insurance shall be written on forms the Buyer may review and shall include Buyer as additional insured. (ii) This Third Party Liability insurance shall be in force from the time of the Effective Date of this Contract and shall continue in effect until Contractor's liabilities have expired at intentional ignition. (iii) The Policy(s) may be issued with deductibles, for which losses shall be borne by the Contractor. 15.4 General Insurance Requirements ------------------------------ (i) The Contractor shall, upon request, provide to the Buyer certificates of the Insurance Policy(s) issued by an agent of the Contractor's Insurer(s) for coverage which the Contractor is required to provide pursuant to the provisions of these Articles. (ii) All Policies of insurance to be provided and maintained pursuant to these Articles shall require the insurer(s) or its authorized agent(s) to give each insured not less than thirty (30) days prior written notice in the event of cancellation or any proposed material change in such policies, except for ten (10) days prior written notice in the event of cancellation due to non-payment of premium. (iii) The Contractor may also acquire and maintain, at its own 56 expense, other insurance for amounts and perils, and upon such terms, conditions and deductibles as it may deem advisable or necessary to cover any loss or damage to persons or property that may occur as a result of the performance of this Contract. 57 ARTICLE 16. SPACECRAFT WARRANTY 16.1 Contractor warrants that a Spacecraft, upon successful completion of Spacecraft in plant Tests pursuant to Article 9 herein, shall be free from any defects in material or workmanship and shall conform to the applicable specifications and drawings, as evidenced by the acceptance criteria in Exhibits A-D herein. 16.2 This warranty shall start from the date of Preliminary Acceptance of a Spacecraft as stated in Article 9 herein, entitled "Inspection and Acceptance," and continue for a period of [*****], or until the Intentional Ignition (defined herein as the "Intentional Ignition of any rocket motor on the first stage of the launch vehicle") of the applicable launch vehicle, whichever is earlier. [********************************************************* ********************************] ("Warranty Time Period"). Contractor shall not be liable in Contract or in Tort for any incidental, special, contingent, or consequential damages. 16.3 Buyer shall have the right at any time during the Warranty Time Period to reject any goods not conforming to this warranty and require that Contractor, at its expense, correct or replace (at Contractor's option) such goods with conforming goods. If any time during the Warranty Time Period Contractor fails to correct or replace such defective goods and fails to initiate reasonable efforts to correct or replace such defective goods within a reasonable period after written notification and authorization from Buyer, Buyer may then, by contract or otherwise, correct or replace such defective goods and equitably adjust the price. 16.4 Except as otherwise expressly agreed upon in this Contract, Contractor shall have no liability, or responsibility in Contract or in Tort with respect to a Spacecraft after Intentional Ignition (as defined in Paragraph 16.2) of the launch vehicle. [***] Filed separately with the Commission pursuant to a request for confidential treatment. 58 16.5 THE ABOVE WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING FITNESS FOR PARTICULAR PURPOSE OR MERCHANTABILITY AND THE REMEDY PROVIDED HEREIN IS THE SOLE REMEDY FOR FAILURE BY CONTRACTOR TO FURNISH A SPACECRAFT THAT IS FREE FROM MATERIAL DEFECTS IN MATERIAL OR WORKMANSHIP AS SET FORTH IN PARAGRAPH 16.1 ABOVE. ALL OTHER WARRANTIES OR CONDITIONS IMPLIED BY ANY OTHER STATUTORY ENACTMENT OR RULE OF LAW WHATSOEVER ARE EXPRESSLY EXCLUDED AND DISCLAIMED. CONTRACTOR AND ITS SUBCONTRACTORS SHALL HAVE NO LIABILITY IN CONTRACT OR IN TORT (INCLUDING NEGLIGENCE) OR IN ANY OTHER MANNER WHATSOEVER FOR A SPACECRAFT AFTER INTENTIONAL IGNITION OTHER THAN AS EXPRESSLY PROVIDED IN THIS CONTRACT. 16.6 Any limitations on warranties, liability or requests for indemnification from liability for the malfunction of delivered items which are imposed upon the Contractor by its various equipment suppliers shall be passed on directly to Buyer provided, however, nothing therein shall decrease or invalidate the rights of the Buyer during, or the length of, the Warranty Time Period as stated in this Article. 59 ARTICLE 17. INDEMNIFICATION 17.1 Each Party shall indemnify and hold the other and/or all its officers, agents, servants, subsidiaries, affiliates, parent companies and employees, or any of them, harmless from any liability or expense in connection herewith on account of damage to property (excepting other Spacecraft in flight) and injuries, including death, to all persons including but not limited to employees of the Parties, and their subcontractors, and of all other persons performing any part of the work hereunder, arising from any occurrence caused by an negligent act or omission of the indemnifying Party or its subcontractors, or any of them in connection with the work to be performed by such Party under this Contract. The indemnifying Party shall have the right, but not the obligation, to participate in any legal or other proceedings concerning claims for which it is indemnifying under this Article 17 and to direct the defense of such claims. However, with respect to such legal or other proceedings, the indemnifying Party shall pay all expenses (including attorneys fees incurred by the indemnified Party in connection with such legal or other proceedings) and satisfy all judgments, costs or other awards which may be incurred by or rendered against the indemnified Party. The indemnifying Party shall not settle any such claim, legal or other proceeding without first giving thirty (30) days prior written notice of the Terms and Conditions of such settlement and obtaining the consent of the indemnified Party, which consent shall not be unreasonably withheld or delayed. 17.2 Notwithstanding the foregoing, neither the Contractor nor its subcontractors shall have any liability in Contract or in Tort, for damages to or caused by a Spacecraft after Intentional Ignition (as defined in Paragraph 16.2), and Buyer shall obtain waivers of subrogation rights from Buyer's insurers against Contractor, and affiliates and subcontractors of Contractor. 60 ARTICLE 18. SPACECRAFT NOT LAUNCHED WITHIN SIX MONTHS AFTER ACCEPTANCE 18.1 If a Spacecraft is not launched within six (6) months after its Preliminary Acceptance per Article 9, entitled "Inspection and Acceptance," and is subsequently ordered to be launched within [********] following its Preliminary Acceptance, it is agreed that such Spacecraft shall be returned at Contractor's option at Contractor's expense, to Contractor's facility for inspection and refurbishment. Any inspection and refurbishment undertaken by Contractor to meet the requirements of Article 16 entitled, "Spacecraft Warranty," shall be at Contractor's expense, including Spacecraft transit insurance. 18.2 If a Spacecraft is not launched within six (6) months after its Preliminary Acceptance and is subsequently ordered to be launched later than [********] following its Preliminary Acceptance, it is agreed that such Spacecraft shall be returned, at Buyer's expense, to Contractor's facility for inspection and refurbishment. An equitable adjustment to Contract price for such inspection and refurbishment, to include a [***] profit component shall be negotiated by the Parties unless the fact that the launch is scheduled for later than [********] is due to Contractor's negligent acts or omissions. 18.3 If a Spacecraft is returned to Contractor's facility for inspection and refurbishment per the terms of Paragraph 18.2 above, all charges to return such Spacecraft to the Launch Site shall be borne by Buyer. 18.4 If a Spacecraft has not been launched within [********] after its preliminary Acceptance, neither Party shall be further obligated to the other with respect to such Spacecraft. Disposition of such Spacecraft shall be at the option of Buyer with costs of such disposition to be borne by Buyer. [***] Filed separately with the Commission pursuant to a request for confidential treatment. 61 ARTICLE 19. PATENT/COPYRIGHT INDEMNITY 19.1 Contractor shall indemnify and hold Buyer harmless against any liability or expense as a result of claims, actions, or proceedings against Buyer alleging the infringement of any trademarks, United States Copyright or mask work, United States Letters Patent, any other intellectual property rights, by any article fabricated by Contractor and delivered to Buyer pursuant to this Contract as set forth below. 19.2 Contractor agrees to defend at its own expense any claim, action, proceeding or request for royalty payments or any claim for equitable relief or damages against Buyer, its officers, employees, agents, or subsidiaries based on an allegation that the manufacture of any item under this Contract or the use, lease, or sale thereof infringes any United States Letters Patent trademark, United States Copyright or mask work or any other intellectual property right, and to pay any royalties and other costs related to the settlement of such claim, action, proceeding or request and to pay the costs and damages, including reasonable attorney's fees finally awarded as the result of any claim, action or proceeding based on such request, provided that Contractor is given prompt written notice of such request or claim by Buyer and given authority and such assistance and information as is available to Buyer for resisting such request or for the defense of such claim, action or proceeding. Any such assistance or information which is furnished by Buyer at the written request of Contractor is to be at Contractor's expense. 19.3 In the event that, as a result of any such claim, action, proceeding or request: a) prior to delivery, the manufacture of any item is enjoined; or b) after delivery, the use, lease or sale thereof is enjoined, Contractor agrees to utilize its best effort to either: (1) negotiate a license or other agreement with plaintiff so that such item is no longer infringing; or (2) modify such 62 item suitably or substitute a suitable item therefore, which modified or substituted item is not subject to such injunction, and to extend the provisions of this Article thereto. In the event that neither of the foregoing alternatives is suitably accomplished by Contractor, Contractor shall be liable to Buyer for Buyer's additional costs and damages arising as a result of such injunction; provided however, that in no event shall Contractor's entire liability under this Article exceed [***************] for each Spacecraft. The existence of one or more claims, actions, proceedings or lawsuits shall not extend such amount. 19.4 The foregoing indemnity shall not apply to any infringement resulting from a modification or addition, by other than Contractor, to an item after delivery. 19.5 If the infringement results from the compliance by Contractor with the Buyer's directed designs, specifications or instructions, the Buyer will defend or settle, at its expense, any such suit against the Contractor. 19.6 The foregoing constitutes the Parties' entire obligation with respect to claims for infringement. [***] Filed separately with the Commission pursuant to a request for confidential treatment. 63 ARTICLE 20. RIGHTS IN INVENTIONS 20.1 As used in this Contract, "Program Invention" shall mean any invention, discovery or improvement conceived of and first reduced to practice in the performance of Work under this Contract. Information relating to Inventions shall be treated as proprietary information in accordance with the provisions of this Contract. Rights to inventions conceived solely by Contractor or its employees shall vest completely with Contractor. 20.2 Contractor shall be the owner of all Program Inventions invented solely by Contractor. Contractor grants Buyer a royalty-free, nonexclusive license in Program Inventions to use Program Inventions solely for the purposes of maintenance and operation of a Spacecraft and delivered Equipment. Contractor agrees that it will not revoke such license if Buyer is in compliance with the terms of the license. 20.3.1 In the case of joint Inventions, that is, inventions conceived jointly by one or more employees of both Parties hereto, each Party shall have an equal, undivided one-half interest in and to such joint Inventions, as well as in and to patent applications and patents thereon in all countries. 20.3.2 In the case of such joint Inventions, Contractor shall have the first right of election to file patent applications in any country, and Buyer shall have a second right of election. Each Party in turn shall make its election at the earliest practicable time, and shall notify the other Party of its decision. 20.3.3 The expenses for preparing, filing and securing each joint Invention patent application, and for issuance of the respective patent shall be borne by the Party which prepares and files the 64 application. The other Party shall furnish the filing Party with all documents or other assistance that may be necessary for the filing and prosecution of each application. Where such joint Invention application for patent is filed by either Party in a country which requires the payment of taxes, annuities, maintenance fees or other charges on a pending application or on an issued patent, the Party which files the application shall, prior to filing, request the other Party to indicate whether it will agree to pay one-half of such taxes, annuities, maintenance fees or other charges. If within sixty (60) days of receiving such request, the non-filing Party fails to assume in writing the obligation to pay its proportionate share of such taxes, annuities, maintenance fees or other charges, or if either Party subsequently fails to continue such payments within sixty (60) days of demand, it shall forthwith relinquish to the other Party, providing that said other Party continues such payments, its interest in such application and patent and the Invention disclosed therein, subject, however, to retention of a paid-up, non-exclusive, non-assignable license in favor of the relinquishing Party, its parent, and any subsidiary thereof to make, use, lease and sell apparatus and/or methods under said application and patent. 20.4 Each owner of a jointly-owned patent application or patent resulting therefrom shall, provided that it shall have fulfilled its obligation, if any, to pay its share of taxes, annuities, maintenance fees and other charges on such pending application or patent, have the right to grant non-exclusive licenses thereunder and to retain any consideration that it may receive therefor without obligation to account therefor to the other Party. In connection therewith, each of the Parties hereby consents to the granting of such non-exclusive licenses by the other Party and also agrees not to assert 65 any claim with respect to the licensed application or patent against any licensee of the other Party thereunder during the term of any such license. 20.5 No sale or lease hereunder shall convey any license by implication, estoppel or otherwise, under any proprietary or patent rights of Contractor, to practice any process with such product or part, or, for the combination of such product or part with any other product or part. 66 ARTICLE 21. INTELLECTUAL PROPERTY RIGHTS Except as provided in Article 20, neither Party shall acquire any rights with respect to any patent, trademark, trade secret, or any other intellectual property developed or used by the other Party in the performance of this Contract. 67 ARTICLE 22. FURNISHED DATA AND INFORMATION, DISCLOSURE AND USE Proprietary Information shall mean any data and information received by one Party from the other Party, which is identified as proprietary in accordance with either of the following methods: (i) if in writing, it shall be marked by the disclosing Party with an appropriate proprietary legend, or (ii) if disclosed orally, it shall be presented by the disclosing Party as Proprietary at the time of disclosure and shall be confirmed by the disclosing Party as Proprietary Information in writing within fifteen (15) days of its initial oral disclosure. 22.1 The receiving Party agrees to protect such data and information with the same degree of care which the receiving Party uses to protect its own confidential data and information; 22.2 The receiving Party shall not disclose or have disclosed to third Parties, in any manner or form, or otherwise publish such data and information so long as it remains proprietary without the explicit authorization of the other Party or except as otherwise permitted in this Article 22; 22.3 The receiving Party agrees that it shall use such data and information solely in connection with the performance of Work under this Contract, unless otherwise explicitly authorized by or on behalf of the other Party with the designation of specific data and information and use; 22.4 The foregoing obligations with regard to such data and information shall exist unless and until such time as: 22.4.1 Such data and information are to the receiving Party or otherwise publicly available prior to its receipt by the receiving Party without the default of the receiving Party; or 68 22.4.2 Such data and information have been lawfully disclosed to the receiving Party by a Third Party which has the right to disclose such data; or 22.4.3 Such data and information are shown by written record to have been independently developed by the receiving Party; or 22.4.4 Such data and information are otherwise available in the public domain without breach of this Contract by the receiving Party; or 22.4.5 Such data and information are disclosed by or with the permission of the disclosing Party to a Third Party without restriction; or 22.4.6 Such data and information that a Party may be required by law or government regulation or order to disclose. 22.4.7 Such data and information are released for disclosure in writing by or with the permission of the disclosing Party. 22.5 Providing Buyer shall obtain from the recipient a nondisclosure agreement at least as restrictive as this Article 22, Buyer may disclose any proprietary information on a need to know basis to its customer(s), contractors, insurers, agents, counsel and actual or prospective lenders, investors, or successors in interest. 22.6 Any copyrighted material belonging to a Party to this Contract may be copied by the other Party as necessary to enable the receiving Party to perform its obligations under this Contract, provided always that the copyright legend is retained on the material. 69 ARTICLE 23. PUBLIC RELEASE OF INFORMATION Neither Party shall issue news releases, articles, brochures, advertisements, prepared speeches, and other information releases concerning the work performed or to be performed under this Contract by Contractor or its subcontractors, or any employee or consultant of either, which contains new information not previously disclosed as permitted under the Contract, without first obtaining the prior written approval of the other Party concerning the content and timing of such release which approval shall not be unreasonably withheld. The initiating Party shall provide such releases to the other Party for review within a reasonable time prior to the desired release date and the other Party shall be required to respond within said time period. 70 ARTICLE 24. TAXES 24.1 The price which shall be paid by Buyer for Spacecraft, Documentation and Related Services [***************] any U.S. (federal, state or local) sales or use taxes, or fees or other U.S. taxes against real or personal property, however designated, which may be levied or assessed against Contractor. Buyer shall be responsible for the payment of all personal property taxes, if any, with regard to goods which are levied upon subsequent to the date of delivery to Buyer. Buyer shall be responsible for any inventory taxes, state taxes or any other taxes that are assessed to Contractor as a result of storage of a Spacecraft in accordance with Article 32. If Sea Launch, L. P. is the Launch Vehicle Provider for any such launch, Contractor shall be relieved of responsibility for any taxes and/or port fees associated with the Sea Launch Zenit Vehicle except as provided by Article 4, Paragraph 4.3.1.2 of the Contract. 24.2 In the event Contractor in the performance of this Contract is required to pay non-U.S. customs, import duties, value-added or sales taxes, commercial card fees, port fees, harbor maintenance tax, other charges, or taxes, or fees, (collectively, "Assessments") however designated (except for (i) any Assessment based on Contractor's income and (ii) any Assessment incurred as a result of or associated with Contractor's manufacture of a Spacecraft), then Buyer will reimburse Contractor for such Assessments within thirty (30) days of written notification by Contractor of payment; provided, however that, Contractor shall used its reasonable best efforts to obtain waivers, exemptions and/or relief from such Assessments when practicable, and Buyer shall not be required to pay any Assessment to the extent any such waiver, exemption or relief is pending or has been obtained. Notification shall then be supported by an invoice and attachment(s) evidencing such payment having been made by Contractor. [***] Filed separately with the Commission pursuant to a request for confidential treatment. 71 ARTICLE 25. GOVERNING LAW This Contract shall be deemed made in the State of California and shall be construed in accordance with the laws of the State of California. 72 ARTICLE 26. TITLES Titles given to the Articles herein are inserted only for convenience and are in no way to be construed as part of this Contract or as a limitation of the scope of the particular article to which the title refers. 73 ARTICLE 27. NOTICES AND AUTHORIZED REPRESENTATIVES Any notice or request required or desired to be given or made hereunder shall be in writing and shall be effective if delivered in person or sent by mail or by facsimile as indicated below: 1. PanAmSat Corporation One Pickwick Plaza Greenwich, Connecticut 06830 Attention: Robert Bednarek, Vice President and Chief Technology Officer cc: Stephen G. Salem, Senior Counsel and cc: Paul McLellan Brian Sing PanAmSat Corporation 1500 Hughes Way Long Beach, CA 90810 Authorized Representative(s): Frederick Landman President and Chief Executive Officer 2. Hughes Space and Communications Company Post Office Box 92919, Airport Station Bldg. S41, M/S A374 Los Angeles, California 90009 Attention: Samuel C. Tricoli, Contracts Manager cc: Arthur W. Ackerman, Jr., Program Manager Dr. William L. Ballhaus, Assistant Program Manager 74 Authorized Representative(s): Michael Houterman Vice President or in each case as a Party may direct by notice to the other Party in accordance with this Article 27. 75 ARTICLE 28. INTEGRATION This document, with Exhibits, constitutes the entire understanding between the Parties with respect to the subject matter of this Contract and supersedes all previous oral and/or written negotiations, commitments, and understandings of the Parties, including without limitation the versions of the Galaxy XIII/XIV Contract dated May 9, 1997 and May 15, 1997. 76 ARTICLE 29. CHANGES Subject to Paragraphs 4.2.1, 5.3, 8.6 and 8.7: 29.1 Any changes requested by Contractor during the performance of this Contract, within the general scope of this Contract, which will add or delete work, stop work, affect the design of a Spacecraft, change the method of shipment or packing, or the place or time of delivery, or will affect any other requirement of this Contract, shall be submitted in writing ("Change Proposal") to Buyer sixty (60) days prior to the proposed effective date of the change. If such Contractor requested change causes an increase or decrease in the total price or other terms of this Contract, Contractor shall submit a proposal to Buyer detailing the impact of such change. 29.2 Buyer shall notify Contractor in writing within thirty (30) days after receipt of the requested change and price adjustment (downward or upward), if any, whether or not it agrees with and accepts such Change Proposal. If Buyer agrees with and accepts the Contractor requested Change Proposal, Contractor shall proceed with the performance of the Contract as changed or in the case of a stop work order, suspend the performance of this Contract, and an amendment to the Contract reflecting the Change Proposal shall be incorporated into the Contract. If Buyer does not agree with the Contractor requested Change Proposal, the Parties shall attempt to reach agreement on such Change Proposal. If the Parties are unable to agree on the requested change and price adjustment, then the Parties shall proceed with the performance of this Contract, as unchanged. In the event the Parties are able to reach agreement on the change, but not on the price adjustment component, then the Parties shall elevate such dispute to the Senior Executives of the respective companies for resolution. If resolution can not be achieved within a reasonable period of time under the circumstances, Buyer may make a qualified acceptance of the Change Proposal, accepting 77 all matters other than price adjustment, and the issue of price adjustment shall be submitted for resolution by arbitration in accordance with the provisions of Paragraph 33.2 hereof. Pending such resolution of the price issue, the Parties shall perform their obligations under the Contract, or in the case of a Stop work order, suspend their obligations, as if the Change Proposal had been accepted; provided, however, that Buyer shall pay any disputed amount of the price adjustment into an escrow account in accordance with Paragraph 29.4 hereof on the date such amount would have been due and payable had the Change Proposal been accepted, or if the Change Proposal could result in a downward adjustment in the Contract Price in excess of the amount remaining to be paid by the Buyer, Contractor shall deposit the disputed amount of such excess into an escrow account in accordance with Paragraph 29.4 hereof. 29.3 Buyer may submit to Contractor in writing (a "Change Order Request") detailing any changes requested by Buyer during the performance of this Contract, within the general scope of the Contract, which will add or delete work, stop work , affect the design of a Spacecraft, change the method of shipment or packing, or the place or time of delivery, or will affect any other requirement of this Contract. Contractor shall respond to such Change Order Request in writing to Buyer within thirty (30) days after such request. If Contractor determines that the change requested by Buyer is feasible and can be made at no additional cost and with no associated delays, then Contractor shall so notify, Buyer and Contractor shall commence implementing such change. If the Contractor determines otherwise, then, Contractor shall submit to Buyer, a proposal detailing the impact of such change and the price adjustment (downward or upward), if any, (the "Change Order Offer"). Buyer shall notify Contractor in writing, within thirty (30) days after receipt of Contractor's Change Order Offer, whether or not it agrees with and accepts Contractor's Change Order Offer. If Buyer agrees with and accepts Contractor's Change Order Offer, Contractor shall immediately proceed with 78 the performance of the Contract as changed, or in the case of a stop work order, suspend the performance of this Contract, and an amendment to the Contract reflecting such change shall be incorporated into the Contract. If Buyer does not agree with the Contractor's Change Order Offer, the Parties shall attempt to reach agreement on such Change Order Offer. In the event the Parties are able to reach agreement on the change, but not on the price adjustment component, then the Parties shall elevate such dispute to the Senior Executives of the respective companies for resolution. If resolution can not be achieved within a reasonable period of time under the circumstances, Buyer may make a qualified acceptance of the Change Order Offer, accepting all matters other than price, and the issue of price shall be submitted for resolution by arbitration in accordance with the provisions of Paragraph 33.2 hereof. Pending such resolution of the price issue, the Parties shall perform their obligations under the Contract, or in the case of a Stop work order, suspend their obligations, as if the Change Order Offer had been accepted; provided however, that the Buyer shall pay any disputed amount of the price adjustment into an escrow account in accordance with Paragraph 29.4 hereof on the date such amount would have been due and payable had the Change Order Offer been accepted, or if the Change Order Request could result in a downward adjustment in the Contract Price in excess of the amount remaining to be paid by Buyer, Contractor shall deposit the disputed amount of such excess into an escrow account in accordance with Paragraph 29.4 hereof. The dispute shall then be resolved by arbitration under the provisions of Article 33, entitled "Disputes." 29.4 Escrow Provisions - Disputed Amounts Disputed amounts with respect to any change under this Article 29 shall be paid into an interest bearing escrow account to be established at Bank of America, Concord, California. Upon settlement of the dispute as to such payment and alleged breach in accordance with Article 33, the Party entitled 79 to the amount or part thereof in escrow, shall receive such amount together with all accrued interest thereon and the other Party shall pay all costs and fees associated with the escrow of said amount. The placement of disputed amounts into an escrow account shall not relieve either Party of its remaining obligations under this contract. 29.5 Determination of Price Adjustment of Change The Parties agree that the change order price adjustment (downward or upward) for any change shall be equal to the sum of (i) the "Change Order Cost" plus (ii) the "Change Order Profit Component". The "Change Order Cost" shall mean those additional or reduced recurring and non-recurring costs to Contractor to implement such change ( or which are not required to be implemented), as determined in accordance with Contractor's normal accounting practices, including those general and administrative costs ("G&A Costs") of such change, as determined in accordance with Contractor's normal accounting practices, [*********************] of Contractor's costs for such change. The "Change Order Profit Component" shall be equal to [***********] of the Change Order Cost. The Total Change Order Cost shall be payable in accordance with the payment plan agreed by the Parties or, if applicable, by the Arbitrator. Unless otherwise agreed by the Parties, the Change Order Profit Component shall be payable in equal monthly installments at the same time as the monthly installments of Incentives Obligations; provided, however, that payment of the Change Order Profit Component shall not be conditioned upon performance of the Spacecraft or any component thereof. 29.6 If Contractor makes any improvements to the generic HS-702 Spacecraft design, then Contractor shall provide reports to Buyer concerning such improvements. Buyer may request that any improvement to the HS-702 Spacecraft design reported to Buyer be incorporated into the Spacecraft, and such improvements shall be considered a Change and shall be dealt with in [***] Filed separately with the Commission pursuant to a request for confidential treatment. 80 accordance with the Change Order process in this Article 29. The foregoing shall not apply to any changes to the generic HS-702 Spacecraft design, to correct or mitigate the impact of anomalies with respect to such design, made by Contractor on its own accord or as necessary in Contractor's reasonable engineering judgment, which changes shall not relieve Contractor of its obligations to meet the technical specifications for the Spacecraft, as set forth in Exhibit B, hereto. Contractor shall notify Buyer on a periodic basis or as requested by Buyer from time to time of any anomalies with respect to such HS-702 Spacecraft design. 29.7 The Change Order Price shall be allocated and payable as follows: The Change Order Profit Component shall be an independent payment obligation not contingent upon performance of the Spacecraft and shall be payable at the same time as the monthly installments of the Incentives Obligations for the Spacecraft as set forth in Paragraph 6.3.4 and, in any case, the then-remaining Change Order Profit Component for the Spacecraft shall be paid in full with the last Incentives Obligations Payment. The Total Change Order Cost shall be payable as agreed by the Parties. 29.8 To the extent that (i) any change agreed under this Article 29 deletes any Hardware already produced by Contractor, then the provisions of Paragraphs 14.2 and 14.5 shall apply to the disposition of such Hardware. 29.9 The Spacecraft shall be designed to support the Launch Vehicle interface requirements issued by the Launch Vehicle provider (as to Ariane, Proton and Sea Launch launch vehicles) existing at the time of the "Delivery Site Designation Date" as defined in Paragraph 4.2.1. If there are any changes to such interface requirements thereafter, then any such change shall be deemed to be a Change Order Request by Buyer, and the Change Order process set forth in Section 29.3 shall apply. 81 ARTICLE 30. EFFECTS OF STORAGE ON BATTERIES For Spacecraft batteries to provide the required minimum fifteen (15) years of in-orbit services per Exhibit B, it is understood that launch must occur within three (3) years from the date of activation of the first battery cell. In the event Buyer directs Contractor to store any deliverable Spacecraft and the period of such storage causes a launch later than three (3) years from the date of activation of that Spacecraft's first battery cell, and Buyer upon its election to either: (i) install replacement batteries or (ii) recondition batteries, so directs Contractor, Buyer shall pay Contractor its costs plus a [***] profit rate. In either case (i) or (ii), the batteries shall meet a fifteen (15) year in-orbit service requirement. [***] Filed separately with the Commission pursuant to a request for confidential treatment. 82 ARTICLE 31. INTER-PARTY WAIVER OF LIABILITY 31.1 Prior to the time Buyer and the Contractor enter the Launch Integration Facility and/or Launch Site, they each agree that they will not make a claim against each other for an event that occurs at the Launch Integration Facility and/or Launch Site premises involving damage to, loss of, or loss of use of their property or the property of others in their possession, caused by the fault or negligence of the other Party to this Contract, or otherwise caused by any defect in any product manufactured or sold by the other Party to this Contract. Such claims are waived and each Party will bear its own losses. Buyer will include a comparable clause in each of its contracts with vendors, subcontractors or customers for services or benefits expected as a result of the launch or orbiting of a Galaxy Spacecraft. Such comparable clause shall include a requirement to flow the clause down to lower-tier contractors. 31.2 Notwithstanding any other provisions of this Contract, prior to the time any Party, associated with the PAS 1R and/or PAS 9 launch activities at the Launch Integration Facility and/or Launch Site, shall enter the Launch Integration Facility and/or Launch Site, such Parties shall be required to sign an Inter-Party Waiver of Liability consistent with that between Buyer and the Contractor as incorporated herein under Paragraph 31.1 of this provision or other similar agreement as may be required by the launch agency. Each Party shall have the responsibility to assure that all the Parties associated with the launch of PAS 1R and/or PAS 9 Spacecraft (for which they have control or privity of Contract with hereunder) have executed said Inter-Party Waiver of Liability. 83 ARTICLE 32. SPACECRAFT STORAGE 32.1 Buyer may, at its option, order Contractor to store, in accordance with the provisions of Exhibit B PAS 1R & PAS 9 Spacecraft Specification, each deliverable Spacecraft (including separate storage of Batteries, if needed) for a period of up to two (2) years from the date of their delivery to Buyer. Buyer shall provide written notice to the Contractor not later than six (6) months prior to the scheduled delivery of said Spacecraft. Contractor's price for providing storage shall be provided to Buyer in accordance with Article 29, "Changes," (and such price shall be deemed a "Change Proposal" for purposes of Article 29) within 30 days after receipt of Buyer's notice to store such Spacecraft and Contractor shall provide storage facilities. If such storage facilities are unavailable, Contractor and Buyer shall hold discussions to determine a mutually agreed storage arrangement. 32.2 Six (6) months prior to a stored Spacecraft's scheduled launch date, Buyer shall, by notice in writing, order the Contractor to remove said Spacecraft from storage and ship it to a Launch Site designated by Buyer. In the case of a Sea Launch, the cost for storage and additional transportation costs exceeding that required to transport a Spacecraft to the Port of Long Beach (Integration Facility) point specified herein, shall be borne by Buyer. These will be in addition to any charges which become the obligation of the Buyer per Article 18 herein entitled "Spacecraft Not Launched Within Six Months After Acceptance." 84 ARTICLE 33. DISPUTES 33.1 Disputes 33.1.1 In the event any dispute arises between the Contractor and the Buyer relating to this Contract, either Party may give written notice to the other of its objections and reasons therefore. The Contractor and Buyer shall consult in an effort to reach a mutual agreement to resolve such dispute. In the event a mutual agreement cannot be reached within fifteen (15) days after receipt of this notice, the respective positions of the Parties shall be forwarded to Contractor and Buyer's respective Executive Offices for discussions and they shall attempt to reach a mutual agreement to resolve such dispute within another fifteen (15) day period. 33.2 Arbitration of Disputes 33.2.1 Grounds for Arbitration and Notice Requirement. Any ---------------------------------------------- dispute, disagreement, controversy or claim arising out of or relating to this Contract or the interpretation thereof or any arrangements relating thereto, or the validity or enforceability thereof, or contemplated therein or the breach, termination or invalidity thereof which is not settled to the mutual satisfaction of the Parties in accordance with Paragraph 33.1 above, then it shall be settled exclusively and finally by binding arbitration, after written notice by either Party. Arbitration of such disputes in accordance with this Article 33 shall be the Parties' exclusive remedy. 33.2.2 Administration and Rules. Arbitration proceedings in ------------------------ connection with the Contract shall be administered by the American Arbitration Association in accordance with its then in effect 85 Commercial Arbitration Rules, together with any relevant supplemental rules including but not limited to its Supplementary Procedures for Large, Complex Disputes, as modified by the terms and conditions of the Contract. With respect to the selection of arbitrators, arbitration proceedings in connection with this Contract shall be conducted before a panel of three (3) arbitrators. Within fifteen (15) days after the commencement of arbitration, each Party shall select from a list of qualified persons one person to serve as an arbitrator on the panel, and within ten (10) days of their selection, the two arbitrators shall select a third arbitrator who is listed as an active member of the American Arbitration Association at the time that arbitration proceedings commence. If the two arbitrators selected by the respective Parties are unable or fail to agree upon the third arbitrator in the allotted time, then the third arbitrator shall be selected by the American Arbitration Association. 33.2.3 Place of Arbitration. The place of arbitration shall -------------------- be in Los Angeles, California, U.S.A. 33.2.4 Discovery. The arbitrators shall have the discretion --------- to order a pre-hearing exchange of information by the Parties, including without limitation, production of requested documents, exchange of summaries of testimony of proposed witnesses, and examination by deposition of the Parties. 33.2.5 Award and Judgment. The arbitrators shall have no ------------------- authority to award punitive damages, and may not, in any event, make any ruling, finding or award that does not conform to the terms and conditions of this Contract. Subject to the foregoing, the Parties agree that the judgment of the arbitrators shall be final and binding upon the Parties and that the judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction 86 thereof. 33.2.6 Confidentiality. No Party or arbitrator may disclose the existence, content, or results of any arbitration proceedings in connections with this Contract without prior written consent of all Parties to the arbitration proceeding. 33.2.7 Fee and Expenses. All fees and expenses of any arbitration proceedings in connection with this Contract shall be borne by the losing Party. However, each Party shall bear the expense of its own counsel, experts, witnesses, and preparation and presentation of evidence. 33.2.8 Performance. Contractor and Buyer shall continue with performance under this Contract during any disagreement, negotiation, or arbitration. 87 ARTICLE 34. ASSIGNMENT 34.1 Neither Party shall assign, or transfer this Contract or any of its rights, duties or obligations thereunder to any person or entity, in whole or part without the prior written consent of the other Party except that either Party may assign or transfer any of its rights, duties or obligations under this Contract, either in whole or in part, to its parent company, subsidiary or affiliate./1/ In addition, notwithstanding anything in this Article 34 to the contrary, the consent of Contractor shall not be required for, and Paragraph 34.2 shall not apply to any assignment by Buyer of its rights, duties and/or obligations hereunder as security for any indebtedness of Buyer or its subsidiaries or affiliates. Neither Party shall unreasonably withhold consent to any assignment or transfer providing that the requesting Party can demonstrate to the other Party's satisfaction that: (1) its successor or assignee possesses the financial resources to fulfill the obligations of this Contract; and (2) any such assignment or transfer shall not jeopardize any data rights or competitive position, or violate laws related to export or technology transfer, or otherwise increase the other Party's risks or obligations. If the requesting Party cannot so demonstrate, both Parties agree to negotiate in good faith suitable modifications and new provisions to this Contract which would mitigate the above risks and/or bring this Contract into conformance with applicable laws. /1/ Affiliate: An "affiliate" of, or a person "affiliated" with, a specified person, is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. 88 34.2 The Parties agree that in the event that the ownership or control of Buyer or Contractor is changed, the Parties reserve the right to negotiate in good faith suitable modifications and new provisions to this Contract which would mitigate any additional risks, financial or otherwise, which may be brought about by such change in ownership or control. 34.3 This Contract shall be binding upon the Parties hereto and their successors and permitted assigns. 89 ARTICLE 35. LIMITATION OF LIABILITY 35.1 The Parties to this Contract expressly recognize that commercial space ventures involve substantial risks and recognize the commercial need to define, apportion and limit contractually such risks associated with this commercial space venture. The payments and other remedies expressly set forth in this Contract fully reflect the Parties' negotiations, intentions and bargained-for allocation of such risks associated with commercial space ventures. 35.2 In no event shall the Parties be liable for any direct, indirect, incidental, special, contingent or consequential damages (including, but not limited to, lost revenues or profits), except as expressly provided for in this Contract. This Article shall survive the expiration or termination of this Contract for whatever cause. 90 ARTICLE 36. OPTIONS 36.1 Buyer may, in its sole discretion, exercise on or before 30 June 1998, the Option provisions of this Contract to request Contractor to deliver to Buyer up to two (2) additional Spacecraft, hereinafter referred to as PAS 10 and 11. Upon exercise of this Option, Buyer shall make the first payment of [***] for each Spacecraft ordered. The configuration and performance of PAS 10 and 11 shall be "Substantially Similar" to PAS 1R and PAS 9, respectively. For purposes of this Paragraph 36.1, a satellite shall be deemed "Substantially Similar" to another satellite if the total payload power and the size and number of antennae are the same; provided that the RF amplifier power, antenna coverage patterns and frequencies in the same band(s) orbital range and associated technical parameters may be different; provided, further, that any other change may be made pursuant to Article 29, entitled "Changes." 36.2 The Contract Price for PAS 10 is [*********************] The Contract Price for PAS 11 is [***********************] Payment schedules for PAS 10 and PAS 11 are attached hereto as Exhibit G. 36.3 Delivery to the Launch Site Integration Facility and/or Launch Site will be as required to meet the established Launch Schedule (consistent with the PAS 1R and PAS 9 delivery schedule span). 36.4 The PAS 10 and 11 Option prices provide for the following: ---------------------------------------------------------- (a) Up to two spacecraft substantially similar to PAS 1R and 9 in configuration and performance (b) Documentation (c) Program Management (d) Insurance up to the Intentional Ignition of Launch Vehicle (e) Launch and Mission Operations Services (Baselined with a Sea Launch Vehicle) [***] Filed separately with the Commission pursuant to a request for onfidential treatment. 91 ("Related Services"). The price of each Optional Spacecraft includes [********] for launch and mission support services for launch on a Sea Launch launch vehicle; if Buyer designates an Ariane or Proton launch vehicle for a spacecraft, the price of such spacecraft shall be increased by no more than (i) [********] in the event of an Ariane launch vehicle or (ii) [********] in the event of a Proton launch vehicle, to account for launch and mission support services. (f) Storage for a Spacecraft on similar terms as PAS 1R and PAS 9 (g) The terms of PAS 10 and/or 11 are pursuant to the terms of this Contract 36.5 In the event that exercise of this Option does not occur on or prior to the date stated in Paragraph 36.1, this Option shall expire unless (i) the Parties otherwise agree or (ii) this Option is superseded by a definitive Spacecraft Acquisition Contract. [***] Filed separately with the Commission pursuant to a request for confidential treatment. 92 ARTICLE 37. REPLACEMENT SPACECRAFT Buyer shall have the right to purchase Replacement Spacecraft for one or both of PAS 1R or PAS 9 in the event that one or both of these Spacecraft suffers a launch failure (including any total or constructive total loss that occurs prior to the placement of a Spacecraft into commercial operations). Each Replacement Spacecraft shall have the same configuration and performance of the Spacecraft being replaced. The price for each such Replacement Spacecraft, if ordered, shall be: (i) [***********************] for the PAS 1R Replacement Spacecraft and (ii) [***********************] for the PAS 9 Replacement Spacecraft. Such prices include all associated deliverables and services as specified in this Contract. Notwithstanding the preceding sentence, each such prices includes [*******] for launch and mission support services for launch on a Sea Launch launch vehicle; if Buyer designates an Ariane or Proton launch vehicle for a spacecraft, the price of such spacecraft shall be increased by no more than (i) [*********] in the event of an Ariane launch vehicle or (ii) [**********] in the event of a Proton launch vehicle, to account for launch and mission support services. Except as expressly specified in this Article, the terms and conditions of this Contract shall apply in context to any Replacement Spacecraft that is ordered under this Article. A Replacement Spacecraft may be ordered at any time through ninety (90) days after the launch of the applicable Spacecraft. Unless long lead items are purchased, as provided below, the Spacecraft shall be constructed and all associated deliverable provided to support a launch within eighteen (18) months of the day ordered. Buyer shall also have the option to require Contractor to purchase long lead items sufficient to enable Contractor to have Replacement Spacecraft, which could be configured as either PAS 1R or PAS 9 (to be specified by Buyer if and when Buyer [***] Filed separately with the Commission pursuant to a request for confidential treatment. 93 orders the Spacecraft to be completed) and shall be ready to be launched with the later of eighteen (18) months after a long lead option is exercised or twelve (12) months after the go ahead is given by Buyer to complete construction of the Spacecraft. The price for the long lead items shall be [***********************], of which [********] is attributable to the Replacement Spacecraft for PAS 1R and an additional [**********] attributable to the Replacement Spacecraft for PAS 9. The remaining portion of such Replacement Spacecraft's Contract Price shall be payable if (and only if) such Replacement Spacecraft is ordered by Buyer to be completed. Payment schedules for the eighteen (18) months without long lead items and long lead item and completion payment options are attached hereto as Exhibit H. If Buyer has purchased long lead items, within ninety (90) days of the successful launch of both PAS 1R and PAS 9, Buyer shall direct disposition of such long lead items either: (a) to build an identical Spacecraft (at the same price and schedule as a twelve-month Replacement Spacecraft); or (b) direct the disposition of such long lead items pursuant to Paragraphs 14.2 and 14.5. [***] Filed separately with the Commission pursuant to a request for confidential treatment. 94 ARTICLE 38. LIQUIDATED DAMAGES FOR LATE SHIPMENT 38.1 In the event that the shipment of PAS IR is delayed due to the fault of Contractor (and/or Contractor's subcontractors or suppliers) and not shipped on or before the PAS IR Shipment Date identified under Article 4 (as such date may be adjusted by mutual agreement of the Parties), Contractor shall pay to Buyer liquidated damages as follows: 38.1.1 For [**********] of delay, Contractor shall [****************] 38.1.2 For [************] of delay, Contractor shall [************ *************************] 38.1.3 For [***********] of delay, Contractor shall [************* ***************************] 38.1.4 For [*************] of delay, Contractor shall [************* **************************************] and 38.1.5 For [************] of delay, Contractor shall [***************************************************] 38.1.6 In the event of any delay of a partial month, the amounts specified in Paragraphs [*****************************] shall be pro rated on a day-for-day manner based upon the number of days in such month. [***] Filed separately with the Commission pursuant to a request for confidential treatment. 95 38.2 In the event that the shipment of PAS 9 is delayed due to the fault of Contractor (and/or Contractor's subcontractors or suppliers) and not shipped on or before the PAS 9 Shipment Date identified under Article 4 (as such date may be adjusted by mutual agreement of the Parties), Contractor shall pay to Buyer liquidated damages as follows: 38.2.1 For [****************************] of delay, Contractor shall [****************************] 38.2.2 For [****************************] of delay, commencing on the day after the period specified in Paragraph 38.2.1, Contractor shall [************************************************* ********************************] 38.2.3 In the event of any delay of a partial one-month period, the amounts specified in Paragraph [******] shall be pro rated on a day-for-day manner based upon the number of days in such one-month period. 38.3 In addition, in the event that Contractor does not begin [**************************************] on or before the date (the "Test Date") that is [***************] prior to the then-existing Shipment Date, Contractor shall pay to Buyer liquidated damages in the amount of [*********************************] for each day that such testing is delayed past the Test Date, up to a maximum of [************************] In the event that (i) Contractor pays to Buyer liquidated damages under this Paragraph 38.3 with respect to a Spacecraft and (ii) Contractor then completes construction and testing of such Spacecraft in accordance with this Contract and the Exhibits thereto and ships the Spacecraft on or before the applicable Shipment Date, then Buyer shall refund to Contractor the liquidated damages paid for such Spacecraft. [***] Filed separately with the Commission pursuant to a request for confidential treatment. 96 38.4 Contractor shall pay to Buyer the liquidated damages owed pursuant to Paragraphs 38.1, 38.2 and 38.3 within thirty (30) days of invoice from Buyer. 38.5 The Parties understand and agree that the liquidated damages provided under this Article 38 shall be in lieu of all other remedies of any kind except for Buyer's rights and remedies under Articles 11 and 14. The reduction in Contract Price shall constitute liquidated damages for such late shipment and shall not constitute a penalty. The Parties acknowledge and agree that such liquidated damages are believed to represent a genuine estimate of the losses that would be suffered by reason of any such delay (which losses would be difficult or impossible to calculate with certainty). 38.6 The Parties agree that the provisions of this Article 38 shall apply separately to each Spacecraft. The maximum reduction in Contract Price under this Article 38 may equal but shall not exceed [**************************************] per Spacecraft. [***] Filed separately with the Commission pursuant to a request for confidential treatment. 97 ARTICLE 39. EFFECTIVE DATE OF CONTRACT The "Effective Date" of this Amended and Restated Contract No. 97-HCG-001 shall be 15, August 1997. 98 IN WITNESS WHEREOF, the Parties hereto have executed this Amended and Restated Contract No. 97-HCG-001 to become effective upon the date specified in Article 39, herein entitled, "Effective Date of Contract." HUGHES SPACE & COMMUNICATIONS COMPANY SIGNATURE: G.W. Durling NAME: G.W. (Bill) Durling TITLE: CBD Ops. Mgr. For President DATE: 9 October 1997 PANAMSAT CORPORATION SIGNATURE: Frederick A. Landman NAME: Frederick A. Landman TITLE: President and Chief Executive Officer DATE: 9 October 1997 99 EX-10.41.2 8 SCHEDULE IDENTIFYING SUBSTANTIALLY IDENTICAL AGREE EXHIBIT 10.41.2 Schedule identifying substantially identical agreements by PanAmSat Corporation ("PanAmSat") in favor of each of the following persons, to the form of Indemnity Agreement constituting Exhibit 10.41.1 to the Annual Report on Form 10-K of PanAmSat for the Fiscal Year ended December 31, 1997 - -------------------------------------------------------------------------------- Name ---- Charles H. Noski Frederick A. Landman Patrick J. Costello Steven D. Dorfman John J. Higgins Ted G. Westerman Dennis F. Hightower James M. Hoak Joseph R. Wright, Jr. Michael T. Smith Lourdes Saralegui Carl A. Brown Kenneth N. Heintz Robert A. Bednarek James W. Cuminale David P. Berman EX-10.42 9 CREDIT AGREEMENT DATED 02/20/98 EXHIBIT 10.42 EXECUTION COUNTERPART - -------------------------------------------------------------------------------- CREDIT AGREEMENT $500,000,000 dated as of February 20, 1998 among PANAMSAT CORPORATION as Borrower CERTAIN LENDERS BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION MORGAN GUARANTY TRUST COMPANY OF NEW YORK as Co-Documentation Agents THE CHASE MANHATTAN BANK CREDIT SUISSE FIRST BOSTON THE FIRST NATIONAL BANK OF CHICAGO NATIONSBANK OF TEXAS, N.A. as Co-Agents and CITICORP USA, INC. as Administrative Agent - ------------------------------------------------------------------------------- TABLE OF CONTENTS This Table of Contents is not part of the Agreement to which it is attached but is inserted for convenience of reference only. Page ---- ARTICLE I Section 1.01. Certain Defined Terms................................1 Section 1.02. Computation of Time Periods.........................19 Section 1.03. Accounting Terms....................................19 ARTICLE II Section 2.01. The Advances........................................20 Section 2.02. Making the Advances.................................20 Section 2.03. Repayment...........................................22 Section 2.04. Termination or Reduction of the Commitments...................................................22 Section 2.05. Prepayments, Etc....................................23 Section 2.06. Interest............................................23 Section 2.07. Fees................................................24 Section 2.08. Conversion and Continuation of Advances.............24 Section 2.09. Increased Costs, Illegality, Etc....................26 Section 2.10. Payments and Computations...........................28 Section 2.11. Taxes...............................................30 Section 2.12. Sharing of Payments, Etc............................33 Section 2.13. Use of Proceeds.....................................33 ARTICLE III Section 3.01. Effective Date......................................33 Section 3.02. Conditions Precedent to Each Borrowing..............35 Section 3.03. Existing Credit Agreement...........................35 ARTICLE IV Section 4.01. Representations and Warranties of the Borrower......36 ARTICLE V Section 5.01. Affirmative Covenants...............................39 Section 5.02. Negative Covenants..................................41 Section 5.03. Reporting Requirements..............................43 Section 5.04. Financial Covenants.................................44 ARTICLE VI Section 6.01. Events of Default...................................45 (i) ARTICLE VII Section 7.01. Authorization and Action............................48 Section 7.02. Administrative Agent's Reliance, Etc................48 Section 7.03. CUSA and Affiliates.................................49 Section 7.04. Lender Credit Decision..............................49 Section 7.05. Indemnification.....................................49 Section 7.06. Successor Administrative Agent......................50 ARTICLE VIII Section 8.01. Amendments, Consents, Etc...........................51 Section 8.02. Notices, Etc........................................51 Section 8.03. No Waiver; Remedies.................................52 Section 8.04. Costs, Expenses and Indemnification.................53 Section 8.05. Right of Setoff.....................................54 Section 8.06. Governing Law; Submission to Jurisdiction...........55 Section 8.07. Assignments and Participations......................55 Section 8.08. Execution in Counterparts...........................59 Section 8.09. WAIVER OF JURY TRIAL................................59 Section 8.10. Survival............................................59 Section 8.11. Captions............................................59 Section 8.12. Successors and Assigns..............................59 (ii) SCHEDULES --------- SCHEDULE 4.01(b) Subsidiaries SCHEDULE 4.01(g) Litigation SCHEDULE 4.01(m) Existing Debt EXHIBITS -------- EXHIBIT A Form of Note EXHIBIT B Form of Notice of Borrowing EXHIBIT C Form of Assignment and Acceptance EXHIBIT D Form of Compliance Certificate EXHIBIT E Form of Subordination and Amendment Agreement EXHIBIT F Form of Opinion of General Counsel of the Borrower EXHIBIT G Form of Opinion of Special New York Counsel to the Borrower EXHIBIT H Form of Opinion of Assistant General Counsel of Hughes Electronics EXHIBIT I Form of Opinion of Special New York Counsel to the Administrative Agent (iii) CREDIT AGREEMENT CREDIT AGREEMENT dated as of February 20, 1998 among PANAMSAT CORPORATION, a Delaware corporation (the "Borrower"); each of the lenders (the -------- "Initial Lenders") listed on the signature pages hereof and each other Person - ---------------- that shall become a party hereto as a Lender pursuant to Section 8.07 (collectively with the Initial Lenders, the "Lenders"); BANK OF AMERICA NATIONAL ------- TRUST AND SAVINGS ASSOCIATION and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Co-Documentation Agents (each, the "Co-Documentation Agents"); and CITICORP USA, ----------------------- INC., as administrative agent (together with its successors in such capacity, the "Administrative Agent"). -------------------- The Borrower has requested the Lenders to provide financing for the general corporate purposes of the Borrower, and the Lenders are willing to provide such financing on and subject to the terms and conditions hereof. Accordingly, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS Section 1.01. Certain Defined Terms. As used in this Agreement, the --------------------- following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Administrative Agent" has the meaning specified in the recital of -------------------- parties to this Agreement. "Administrative Agent's Account" means the account of the ------------------------------ Administrative Agent maintained by the Administrative Agent at Citibank, Account No. 36852248, Attention: Brian Maxwell or such other account maintained by the Administrative Agent as may be designated by the Administrative Agent in a written notice to the Lenders and the Borrower. "Advances" means, collectively, the Advances provided for in Section -------- 2.01. "Affiliate" means, as to any Person, any other Person that, directly --------- or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term "control" (including the terms "controlling", ------- ----------- Credit Agreement ---------------- -2- "controlled by" and "under common control with") of a Person means the -------------- ------------------------- possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise. "Applicable Debt Ratings" means, on any Rating Availability Date, the ----------------------- Borrower Debt Ratings then in effect; provided that if the Borrower Debt -------- Ratings shall fall within different Rating Levels, the Applicable Debt Rating shall be the Borrower Debt Rating that falls in the higher Rating Level; provided, that if the Borrower Debt Ratings shall be two or more -------- Rating Levels apart, the Applicable Debt Rating shall be the Rating Level that is one Rating Level higher than the Rating Level in which the lower Borrower Debt Rating falls; and provided, further, that if Moody's shall -------- ------- cease to provide a Borrower Debt Rating, the Implied Rating shall be applied to determine the Borrower Debt Rating; and provided, further, that -------- ------- if and for so long as neither Moody's nor S&P provides a Borrower Debt Rating, Rating Level 5 shall be deemed to apply. For purposes of this definition, "Implied Rating" means the long-term senior unsecured non- -------------- credit-enhanced debt rating which is one sub-grade below the rating assigned by Moody's to the senior secured debt securities of the Borrower. "Applicable Facility Fee Percentage" means, on any Rating Availability ---------------------------------- Date, the percentage set forth below opposite the Rating Level with respect to which the Applicable Margin is determined on such date: RATING LEVEL APPLICABLE FACILITY FEE PERCENTAGE (PER ANNUM) - -------------------------------------------------------------------- Rating Level 1 0.085% - -------------------------------------------------------------------- Rating Level 2 0.100% - -------------------------------------------------------------------- Rating Level 3 0.125% - -------------------------------------------------------------------- Rating Level 4 0.150% - -------------------------------------------------------------------- Rating Level 5 0.175% - -------------------------------------------------------------------- "Applicable Lending Office" means, with respect to each Lender, such ------------------------- Lender's Domestic Lending Office in the case of a Base Rate Advance and such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Advance. "Applicable Margin" means, on any Rating Availability Date, the ----------------- applicable percentage set forth below under the heading "Base Rate Margin" or "Eurodollar Rate Margin", as applicable, based upon the Applicable Debt Rating in effect Credit Agreement ---------------- -3- on such date: APPLICABLE DEBT Base Rate Margin Eurodollar Rate RATING ----------------- ----------------- S&P/MOODY'S Margin -------- - ------------------------------------------------------------------ Rating Level 1 - --------------- 0% 0.265% A-/A3 or higher - ------------------------------------------------------------------ Rating Level 2 - --------------- 0% 0.300% BBB+/Baa1 or higher but below Rating Level 1 - ------------------------------------------------------------------ Rating Level 3 - -------------- 0% 0.325% BBB/Baa2 or higher but below Rating Level 2 - ------------------------------------------------------------------ Rating Level 4 - -------------- 0% 0.400% BBB-/Baa3 or higher but below Rating Level 3 - ------------------------------------------------------------------ Rating Level 5 - -------------- 0% 0.575% Below Rating Level 4 or unrated ================================================================== "Approved Lender Affiliate" means, as to any Lender, a Person that is ------------------------- an Affiliate of such Lender or of a Person of which such Lender is an Affiliate, and which is engaged primarily in the business of lending or, if not so engaged, which has been approved by the Administrative Agent and the Borrower (the Borrower's consent not to be unreasonably withheld). "Assignment and Acceptance" means an assignment and acceptance entered ------------------------- into by a Lender and an Eligible Assignee, accepted by the Administrative Agent, in accordance with Section 8.07, in substantially the form of Exhibit C. "Base Rate" means a fluctuating interest rate per annum in effect from --------- time to time, which rate per annum shall at all times be equal to the highest of: (a) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Credit Agreement ---------------- -4- Citibank's "base rate"; (b) 1/2 of 1% per annum above the Federal Funds Rate; and (c) the sum (adjusted to the nearest 1/16 of 1% or, if there is no nearest 1/16 of 1%, to the next higher 1/16 of 1%) of (i) 1/2 of 1% per annum plus (ii) the rate obtained by dividing (x) the latest ---- three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money center banks, such three-week moving average (adjusted to the basis of a year of 360 days) being determined weekly on each Monday (or, if such date is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank from three New York certificate of deposit dealers of recognized standing selected by Citibank by (y) a percentage equal to 100% minus the average of the daily percentages specified during such ----- three-week period by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for Citibank with respect to liabilities consisting of or including (among other liabilities) three-month U.S. Dollar non-personal time deposits in the United States plus (iii) the average during such three-week period of ---- the annual assessment rates estimated by Citibank for determining the then current annual assessment rate payable by Citibank to the Federal Deposit Insurance Corporation (or any successor) for insuring U.S. Dollar deposits of Citibank in the United States. Each change in any interest rate provided for herein based upon the Base Rate resulting from a change in the Base Rate shall take effect at the time of such change in the Base Rate. "Base Rate Advance" means an Advance that bears interest as provided ----------------- in Section 2.06(a)(i). "Borrower" has the meaning specified in the recital of parties to this -------- Agreement. Credit Agreement ---------------- -5- "Borrower Debt Rating" for a Rating Agency at any time means the -------------------- rating, if any, issued by such Rating Agency and then in effect with respect to public long-term senior unsecured debt securities, or if unavailable, to other indebtedness of the Borrower ("Rated Debt"). Each ---------- change by a Rating Agency of its rating of Rated Debt shall be effective for purposes hereof as of the date on which such change is first announced publicly by such Rating Agency. "Borrower's Account" means the account of the Borrower maintained with ------------------ Citibank at its office at 399 Park Avenue, New York, New York 10043, Account No. 40730083, or such other account maintained by the Borrower with Citibank as may be designated by the Borrower in a written notice to the Administrative Agent. "Borrowing" means a borrowing consisting of simultaneous Advances of --------- the same Type made by each of the Lenders pursuant to Section 2.01. "Business Day" means a day on which banks are not required or ------------ authorized to close in New York City and, if such Business Day relates to a Eurodollar Rate Advance, on which dealings are carried on in the London interbank market. "Capital Lease Obligations" means, for any Person, all obligations of ------------------------- such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) property to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP, and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP. "CERCLA" means the Comprehensive Environmental Response, Compensation ------ and Liability Act of 1980, as amended. "Change in Control" means that Hughes Electronics shall cease to own, ----------------- beneficially and of record, directly or indirectly, at least 51% of the shares of outstanding Voting Stock of the Borrower. "Citibank" means Citibank, N.A., a national banking association. -------- "Commercial Paper" means short term commercial paper (with a maturity ---------------- date not in excess of 270 days from the date of its issuance) issued by the Borrower (a) pursuant to the exemption from registration contained in Section 4(2) of Credit Agreement ---------------- -6- the Securities Act of 1933, as amended or modified from time to time, or (b) pursuant to the exemption from registration contained in Section 3(a)(3) of the Securities Act of 1933, as amended or modified from time to time. "Commitment" means, as to any Initial Lender, the amount set forth ---------- opposite its name on the signature pages hereof or, as to any Lender that has entered into an Assignment and Acceptance, the amount set forth for such Lender in the Register, in each case as the same may be reduced pursuant to Section 2.04 or increased or reduced pursuant to assignments effected in accordance with Section 8.07. The original aggregate amount of the Commitments is $500,000,000. "Commitment Termination Date" means the earlier of (i) December 24, --------------------------- 2002 (or, if such date is not a Business Day, the immediately preceding Business Day) and (ii) the date of termination or cancellation of the Commitments pursuant to the terms of this Agreement. "Consolidated" refers to the consolidation of accounts in accordance ------------ with GAAP. "Continuation", "Continue" and "Continued" each refers to a ------------ -------- --------- continuation of Eurodollar Rate Advances from one Interest Period to the next Interest Period pursuant to Section 2.08. "Conversion", "Convert" and "Converted" each refers to a conversion of ---------- ------- --------- Advances of one Type into Advances of the other Type pursuant to Section 2.08 or 2.09. "CUSA" means Citicorp USA, Inc. ---- "Debt" of any Person, means (i) all indebtedness of such Person for ---- borrowed money, (ii) that portion of obligations with respect to Capital Lease Obligations that is properly classified as a liability on a balance sheet in conformity with GAAP, (iii) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money, (iv) any obligation owed for all or any part of the deferred purchase price of property or services (excluding any such obligations incurred under ERISA), which purchase price is (a) due more than six months from the date of incurrence of the obligations in respect thereof or (b) evidenced by a note or similar written instrument, (v) any direct or indirect liability, contingent or otherwise, of such Person (the "obligor") with respect to the obligor's reimbursement obligations to any other Person who has provided assurance to the obligee of the obligor's primary obligation that such Credit Agreement ---------------- -7- primary obligation will be paid or discharged, and any direct or indirect guarantee by such Person of Debt of any other Person, and (vi) all Debt described in clauses (i) through (v) above secured by any Lien on any property or asset owned or held by such Person regardless of whether the Debt secured thereby shall have been assumed by such Person or is nonrecourse to the credit of such Person. "Default" means any Event of Default and any event that would ------- constitute an Event of Default but for the requirement that notice be given or time elapse or both. "Domestic Lending Office" means, with respect to any Lender, the ----------------------- office of such Lender specified as its "Domestic Lending Office" below its name on the signature pages hereof or in the Assignment and Acceptance pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Administrative Agent. "EBITDA" means, for purposes of this Agreement, the sum of (a) net ------ income (or net loss) plus (b) Interest Expense, (c) income tax expense and ---- (d) depreciation expense, amortization expense and other non-cash charges deducted in arriving at such net income (or loss), including extraordinary non-cash items which are not reasonably expected to result in a cash outflow within one year, determined in accordance with GAAP for the Borrower and its Subsidiaries on a Consolidated basis, for any period. Anything contained herein to the contrary notwithstanding, for purposes of determining the Leverage Ratio under Section 5.04(a) and the Interest Coverage Ratio under Section 5.04(b), EBITDA for the Borrower and its Subsidiaries for each of the fiscal quarters referred to below shall be deemed to be the amount set forth opposite the reference to such fiscal quarter (regardless of the actual amount of such EBITDA for any such fiscal quarter): Fiscal Quarter Ending EBITDA ------------------------------ ------------ March 31, 1997 $138,400,000 June 30, 1997 $136,100,000 September 30, 1997 $121,400,000 "Effective Date" has the meaning specified in Section 3.01. -------------- "Eligible Assignee" means (a) a Lender and any Approved Lender ----------------- Affiliate; (b) a commercial bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $1,000,000,000; (c) a savings bank Credit Agreement ---------------- -8- organized under the laws of the United States, or any state thereof, and having a net worth in excess of $100,000,000; (d) a commercial bank organized under the laws of any other country that is a member of the OECD or that has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to Borrow, or a political subdivision of any such country, and having total assets in excess of $1,000,000,000; (e) the central bank of any country that is a member of the OECD; (f) a finance company, insurance company or other financial institution or fund (whether a corporation, partnership, trust or other entity) that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business, and having total assets in excess of $100,000,000; and (g) any other Person (other than the Borrower or an Affiliate of the Borrower) approved by the Administrative Agent and the Borrower, such approval of the Borrower not to be unreasonably withheld or delayed. "Environmental Law" means any Federal, state, local or foreign ----------------- governmental law, rule, regulation, order, writ, judgment, injunction or decree relating to pollution or protection of the environment or the treatment, storage, disposal, release, threatened release or handling of Hazardous Materials, including, without limitation, CERCLA, the Resource Conservation and Recovery Act, the Hazardous Materials Transportation Act, the Clean Water Act, the Toxic Substances Control Act, the Clean Air Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal Insecticide, Fungicide and Rodenticide Act and the Occupational Safety and Health Act, in each case as amended from time to time. "ERISA" means the Employee Retirement Income Security Act of 1974, as ----- amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA Affiliate" of any Person means any other Person that for --------------- purposes of Title IV of ERISA is a member of such Person's controlled group, or under common control with such Person, within the meaning of Sections 414(b), (c), (m) and (o) of the Internal Revenue Code. "Eurocurrency Liabilities" has the meaning specified in Regulation D. ------------------------ "Eurodollar Lending Office" means, with respect to any Lender, the ------------------------- office of such Lender specified as its "Eurodollar Lending Office" below its name on the signature pages hereof or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time Credit Agreement ---------------- -9- specify to the Administrative Agent. "Eurodollar Rate" means, for any Interest Period for each Eurodollar --------------- Rate Advance comprising part of the same Borrowing, an interest rate per annum equal to the average (rounded upward to the nearest whole multiple of 1/100 of 1% per annum, if such average is not such a multiple) of the rates per annum at which deposits in U.S. Dollars are offered by the principal office of each of the Reference Banks in London, England to prime banks in the London interbank market at approximately 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount substantially equal to such Reference Bank's Eurodollar Rate Advance (or, in the case of Citibank, an amount substantially equal to CUSA's Eurodollar Rate Advance) comprising part of such Borrowing (determined without giving effect to any assignments by such Reference Bank or CUSA, as the case may be) and for a period equal to such Interest Period. The Eurodollar Rate for each Interest Period for each Eurodollar Rate Advance comprising part of the same Borrowing shall be determined by the Administrative Agent on the basis of applicable rates furnished to and received by the Administrative Agent from the Reference Banks two Business Days before the first day of such Interest Period, subject, however, to the provisions of ------- ------- Sections 2.10 (c), 2.09 (c) and 2.09(d). "Eurodollar Rate Advance" means an Advance that bears interest as ----------------------- provided in Section 2.06(a)(ii). "Eurodollar Rate Reserve Percentage" for any Interest Period for each ---------------------------------- Eurodollar Rate Advance comprising part of the same Borrowing means the reserve percentage (if any) applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with deposits exceeding $1,000,000,000 with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurodollar Rate Advances is determined) having a term equal to such Interest Period. "Events of Default" has the meaning specified in Section 6.01. ----------------- "Existing Credit Agreement" means the $800,000,000 Credit Agreement ------------------------- dated as of December 23, 1997 among the Credit Agreement ---------------- -10- Borrower, certain Lenders and CUSA, as Administrative Agent. "Federal Funds Rate" means, for any period, a fluctuating interest ------------------ rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "GAAP" means generally accepted accounting principles in the United ---- States of America as in effect from time to time. "Hazardous Materials" means (a) petroleum or petroleum products, ------------------- natural or synthetic gas, asbestos in any form that is or could become friable, and radon gas, (b) any substances defined as or included in the definition of "hazardous substances", "hazardous wastes", "hazardous materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic substances", "toxic pollutants", "contaminants" or "pollutants", or words of similar meaning and regulatory effect, under any Environmental Law and (c) any other substance exposure to which is regulated under any Environmental Law. "Hughes Electronics" means Hughes Electronics Corporation, a Delaware ------------------ corporation. "Hughes Electronics Loan" means the loan made by Hughes Electronics to ----------------------- the Borrower pursuant to the Loan Agreement dated as of May 15, 1997 between Hughes Electronics and the Borrower, evidenced by the Hughes Electronics Note, as heretofore amended and as the same may hereafter be amended, modified or supplemented in accordance with the terms of the Subordination and Amendment Agreement. "Hughes Electronics Note" means the promissory note of the Borrower ----------------------- dated May 15, 1997 in the amount of $1,725,000,000 in favor of Hughes Electronics, as the same may be amended, modified or supplemented in accordance with the terms of the Subordination and Amendment Agreement. "Indemnified Party" has the meaning specified in Section 8.04(b). ----------------- "Initial Lenders" has the meaning specified in the --------------- Credit Agreement ---------------- -11- recital of parties to this Agreement. "Insufficiency" means, with respect to any Plan at any date, the ------------- amount, if any, by which the "accumulated benefit obligation" (as defined in Statement of Financial Accounting Standards 87) exceeds the fair market value of the assets of such Plan as of the date of the most recent actuarial valuation for such Plan, calculated using the actuarial methods, factors and assumptions used in such valuation. "Interest Coverage Ratio" means, for any period, the ratio of (a) ----------------------- EBITDA for such period to (b) Interest Expense for such period. "Interest Expense" means, with respect to the Borrower and its ---------------- Subsidiaries on a Consolidated basis, for any period (without duplication), interest expense, whether paid or accrued (including the interest component of Capital Lease Obligations), on all Debt of the Borrower and its Subsidiaries on a Consolidated basis for such period, net of interest income, all determined in accordance with GAAP. Anything contained herein to the contrary notwithstanding, for purposes of determining the Leverage Ratio under Section 5.04(a) and the Interest Coverage Ratio under Section 5.04(b), Interest Expense for the Borrower and its Subsidiaries for each of the fiscal quarters referred to below shall be deemed to be the amount set forth opposite the reference to such fiscal quarter (regardless of the actual amount of such Interest Expense for any such fiscal quarter): Credit Agreement ---------------- -12- Fiscal Quarter Ending Interest Expense --------------------- ---------------- March 31, 1997 $29,000,000 June 30, 1997 $29,000,000 September 30, 1997 $29,000,000 "Interest Period" means, for each Eurodollar Rate Advance comprising --------------- part of the same Borrowing, the period commencing on the date of such Eurodollar Rate Advance or the date of the Conversion of any Base Rate Advance into such Eurodollar Rate Advance, and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three or six months, as the Borrower may, upon notice received by the Administrative Agent not later than 11:00 A.M. (New York City time) on the third Business Day prior to the first day of such Interest Period, select; provided that: -------- (a) any Interest Period for any Eurodollar Rate Advance that would otherwise extend beyond the Commitment Termination Date shall end on the Commitment Termination Date; (b) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided that, if such extension would cause the last -------- day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; (c) whenever the first day of any Interest Period occurs on the last day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month), such Interest Period shall end on the last Business Day of the appropriate subsequent calendar month; and (d) there shall not be more than eight Interest Periods in effect at any one time. "Internal Revenue Code" means the Internal Revenue Code of 1986, as --------------------- amended from time to time, and the regulations promulgated and rulings issued thereunder. "Lenders" has the meaning specified in the recital of -------- Credit Agreement ---------------- -13- parties hereto. "Leverage Ratio" means, at any time, the ratio of (1) the aggregate -------------- amount outstanding of Debt (excluding Debt evidenced by the Hughes Electronics Note) of the Borrower and its Subsidiaries on a Consolidated basis to (2) EBITDA for the most recently concluded Rolling Period. "Lien" means any lien, security interest or other charge or ---- encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property. "Loan Documents" means, collectively, this Agreement, the Notes and -------------- the Subordination and Amendment Agreement. "Margin Stock" has the meaning specified in Regulations G, U and X. ------------ "Material Adverse Change" means any material adverse change in the ----------------------- financial condition, business, assets, liabilities, properties, prospects or results of operations of the Borrower or of the Borrower and its Subsidiaries, taken as a whole. "Material Adverse Effect" means a material adverse effect on (a) the ----------------------- financial condition, prospects or results of operations of the Borrower (or of the Borrower and its Subsidiaries, taken as a whole), (b) the rights and remedies of the Administrative Agent or any Lender under the Loan Documents or (c) the ability of the Borrower to perform its obligations under the Loan Documents. "Material Debt" has the meaning set forth in Section 6.01(e). ------------- "Material Subsidiary" means, at any time, a Subsidiary of the Borrower ------------------- that has (i) revenues for the then preceding period of four consecutive fiscal quarters exceeding 10% of the revenues of the Borrower and its Subsidiaries on a Consolidated basis or (ii) assets in excess of 10% of the assets of the Borrower and its Subsidiaries on a Consolidated basis. "Moody's" means Moody's Investors Service, Inc., or any rating agency ------- successor thereto. "Multiple Employer Plan" of any Person means a single employer plan, ---------------------- as defined in Section 4001(a)(15) of ERISA, that is subject to Title IV of ERISA and (a) is maintained Credit Agreement ---------------- -14- for employees of such Person or any of its ERISA Affiliates and at least one Person other than such Person and its ERISA Affiliates or (b) was so maintained and in respect of which such Person or any of its ERISA Affiliates has or would have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. "Note" means a promissory note of the Borrower payable to the order of ---- a Lender, in substantially the form of Exhibit A hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Advances made by such Lender. "Notice of Borrowing" has the meaning specified in Section 2.02(a). ------------------- "OECD" means the Organization for Economic Cooperation and ---- Development. "Old Notes" means the three series of notes issued under three --------- separate Indentures as follows: (1) the 9 3/4% Senior Secured Notes due 2000 issued pursuant to the Indenture, dated as of August 5, 1993, among PanAmSat International Systems, Inc. (the successor corporation to PanAmSat, L.P.) and PanAmSat Capital Corporation (collectively, the "Offerors") as issuers, and First Trust National Association, as trustee; (2) the 11 3/8% Senior Subordinated Discount Notes due 2003 issued pursuant to the Indenture, dated as of August 5, 1993, among the Offerors, as issuers, and United States Trust Company of New York, as trustee; and (3) the 12 3/4% Senior Subordinated Notes due 2005 issued pursuant to the Indenture, dated as of September 30, 1997, between PanAmSat International Systems, Inc. as issuer, and First Trust National Association, as trustee. "Other Taxes" has the meaning specified in Section 2.11(b). ----------- "PBGC" means the Pension Benefit Guaranty Corporation or any ---- successor. "Permitted Liens" means such of the following as to which no --------------- enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced (or, if such a proceeding has been commenced, such proceeding is being contested in good faith by appropriate proceedings and enforcement of any Lien has been and is stayed): (a) Liens for taxes, assessments and governmental charges or levies to the extent not required to be paid under Section 5.01(b), Credit Agreement ---------------- -15- (b) Liens imposed by law, such as materialmen's, mechanics', carriers', workmen's and repairmen's Liens, statutory landlord's Liens and other similar Liens arising in the ordinary course of business securing obligations that are not overdue for a period of more than 30 days or which are being contested in good faith and by appropriate proceedings, (c) pledges or deposits to secure obligations under workers' compensation laws or similar legislation or to secure public or statutory obligations, (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases (other than capital leases), surety and appeal bonds, and performance bonds and other obligations of a like nature incurred, in each case arising in the ordinary course of business, (e) as to any particular property at any time, such easements, encroachments, covenants, rights of way, minor defects, irregularities or encumbrances on title which do not materially impair the use of such property for the purpose for which it is held by the owner thereof, (f) municipal and zoning ordinances that are not violated in any material respect by the existing improvements and the present use made by the owner thereof, (g) real estate taxes and assessments not yet delinquent, (h) Liens arising from Uniform Commercial Code financing statements regarding operating leases permitted by this Agreement, (i) Liens consisting of bank set-off rights arising by operation of law in the ordinary course of business, (j) judgment Liens in existence less than 30 days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full (subject to a customary deductible) by insurance, (k) Liens securing obligations of any Material Subsidiary of the Borrower to any other Material Subsidiary of the Borrower, Credit Agreement ---------------- -16- (l) Liens existing on property at the time of its acquisition (directly or indirectly), other than any such Lien created in contemplation of such acquisition that is not otherwise permitted by Section 5.02(a), (m) any extension, renewal or replacement (or successive extensions, renewals or replacements), in whole or in part, of any Lien referred to in this definition, provided that (x) the Lien shall be limited to all or a part of the property covered by the Lien extended, renewed or replaced (plus improvements thereon) and (y) that any Debt secured by such Lien is not increased, and (n) Liens not otherwise permitted by the above securing Debt in an aggregate amount not in excess of $50,000,000. "Permitted Swap Obligations" means all obligations (contingent or -------------------------- otherwise) of the Borrower or any of its Subsidiaries existing or arising under Swap Contracts, provided that such obligations are (or were) entered into by such Person in the ordinary course of business for the purpose of mitigating risks associated with liabilities, commitments or assets held or reasonably anticipated by such Person, or changes in the value of securities issued by such Person in conjunction with a securities repurchase program, and not for purposes of speculation or taking a "market view". "Person" means an individual, partnership, corporation (including a ------ business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof. "Plan" means a Single Employer Plan or a Multiple Employer Plan. ---- "Post-Default Rate" means, in respect of any principal of any Advance ----------------- or any other amount whatsoever payable under this Agreement or any Note that is not paid when due (whether at stated maturity, by acceleration, by optional or mandatory prepayment or otherwise), a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2% per annum plus the Base Rate as in ---- effect from time to time plus the Applicable Margin for Base Rate Advances ---- (provided that, if the amount so in default is principal of a Eurodollar -------- Rate Advance and the due date thereof is a day other than the last day of an Interest Period therefor, the "Post-Default Rate" for such principal shall be, for the Credit Agreement ---------------- -17- period for and including such due date to but excluding the last day of such Interest Period, 2% per annum plus the interest rate ---- for such Advance as provided in Section 2.06(a)(ii) and, thereafter, the rate provided for above in this definition). "Quarterly Dates" means March 31, June 30, September 30 and December --------------- 31 in each year, provided that, if any such day is not a Business Day, the -------- relevant Quarterly Date shall be the immediately succeeding Business Day. "Rating Agency" means each of Moody's and S&P. ------------- "Rating Availability Date" means each date on which either or both of ------------------------ the Rating Agencies shall have in effect a Borrower Debt Rating. "Rating Level" means each of Rating Level 1, Rating Level 2, Rating ------------ Level 3, Rating Level 4 and Rating Level 5 (with Rating Level 1 being the highest Rating Level and Rating Level 5 being the lowest). "Rating Level 1", "Rating Level 2", "Rating Level 3", "Rating Level 4" -------------- -------------- -------------- -------------- and "Rating Level 5" have the meanings specified in the definition of -------------- "Applicable Margin" in this Section 1.01. "Reference Banks" means Citibank, Morgan Guaranty Trust Company of New --------------- York and Bank of America National Trust and Savings Association (or their respective Applicable Lending Offices, as the case may be). "Register" has the meaning specified in Section 8.07(c). -------- "Regulation A", "Regulation D", "Regulation G", "Regulation U" and ------------ ------------ ------------ ------------ "Regulation X" mean Regulations A, D, G, U and X of the Board of Governors ------------- of the Federal Reserve System, respectively, as in effect from time to time. "Required Lenders" means at any time Lenders holding in the aggregate ---------------- at least 51% of the outstanding Advances (or, if no Advances are outstanding, at least 51% of the then aggregate amount of the Commitments). "Rolling Period" means each period of four consecutive fiscal quarters -------------- of the Borrower, commencing with such period ending in December, 1997. "Single Employer Plan" of any Person means a single employer plan, as -------------------- defined in Section 4001(a)(15) of ERISA, that is subject to Title IV of ERISA and that (a) is Credit Agreement ---------------- -18- maintained for employees or former employees of such Person or any of its ERISA Affiliates and no Person other than such Person and its ERISA Affiliates or (b) was so maintained and in respect of which such Person or any of its ERISA Affiliates has or would have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "S&P" means Standard & Poor's Ratings Services, a division of The --- McGraw-Hill Companies, Inc., or any rating agency successor thereto. "Subordinated Debt" means Debt of the Borrower subordinated to the ----------------- Debt of the Borrower under this Agreement in substantially the same manner as the Hughes Electronics Loan is subordinated under the Subordination and Amendment Agreement and having a tenor that extends at least six months beyond the Commitment Termination Date. "Subordination and Amendment Agreement" means an agreement among the ------------------------------------- Borrower, Hughes Electronics and the Administrative Agent in substantially the form of Exhibit E, as from time to time amended. "Subsidiary" of any Person means any corporation, partnership, joint ---------- venture, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such partnership or joint venture or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries. "Swap Contracts" means any agreement, whether or not in writing, -------------- relating to any transaction that is a rate swap, basis swap, forward rate transactions, commodity swap, commodity option, equity or equity index swap or option bond, note or bill option, interest rate option, forward foreign exchange transaction, cap, collar or floor transaction, currency swap, cross-currency rate swap, currency option or any other similar transaction (including any option to enter into any of the foregoing) or any combination of the foregoing, and, unless the context otherwise clearly requires, any master agreement relating to or governing any or all of the foregoing. Credit Agreement ---------------- -19- "Taxes" means any and all present or future taxes, levies, ----- assessments, imposts, duties, deductions, fees, withholdings or similar charges, including interest and penalties thereon. "Type" refers to the distinction between Advances bearing interest at ---- the Base Rate and Advances bearing interest at the Eurodollar Rate. "U.S. Dollars" and "$" means lawful money of the United States of ------------ - America. "Voting Stock" means capital stock issued by a corporation or ------------ equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even though the right to so vote has been suspended by the happening of such contingency. "Withdrawal Liability" means, as of any determination date, the -------------------- aggregate amount of the liabilities, if any, pursuant to Section 4201 of ERISA if the Borrower or any ERISA Affiliate made a complete withdrawal from all Plans and any increase in contributions pursuant to Section 4243 of ERISA. Section 1.02. Computation of Time Periods. In this Agreement in the --------------------------- computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" mean "to but excluding". Section 1.03. Accounting Terms. All accounting terms not ---------------- specifically defined herein shall be construed in accordance with GAAP; provided, that if any change in GAAP proposed after the Effective Date - -------- materially affects the calculation of any financial covenant in Section 5.04, the Borrower may by notice to the Administrative Agent, or the Administrative Agent (at the request of the Required Lenders) may, by notice to the Borrower, require that such covenant thereafter be calculated in accordance with GAAP as in effect, and applied by the Borrower, immediately before such change in GAAP occurs. If such notice is given, the compliance certificates delivered pursuant to Section 5.03 after such change occurs shall be accompanied by reconciliations of the difference between the calculation set forth therein and a calculation made in accordance with GAAP as in effect from time to time after such change occurs. To enable the ready determination of compliance with the covenants set forth in Section 5.04 hereof, the Borrower will not change from December 31 in each year the date on which its fiscal year ends, nor from March 31, June 30 and September 30 the dates on which Credit Agreement ---------------- -20- the first three fiscal quarters in each fiscal year end. ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES Section 2.01. The Advances. (a) Each Lender severally agrees, on ------------ the terms and conditions hereinafter set forth, to make advances (each an "Advance") to the Borrower from time to time on any Business Day during the -------- period from the Effective Date until the Commitment Termination Date in an aggregate amount at any one time outstanding not to exceed at any time the amount set forth opposite the name of such Lender on the signature pages hereof under the heading "Commitment" and, as to all Lenders, in an aggregate principal amount up to but not exceeding $500,000,000. (b) Each Borrowing shall be in an aggregate amount not less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof and shall consist of Advances of the same Type made on the same day. (c) The Advances shall be made by the Lenders ratably according to their respective Commitments. (d) Within the limits of each Lender's Commitment in effect from time to time, the Borrower may borrow under this Section 2.01, prepay pursuant to Section 2.05(a) and reborrow on and subject to the terms and conditions hereof. Section 2.02. Making the Advances. ------------------- (a) (i) Each Borrowing shall be made on notice, given not later than 11:00 A.M. (New York City time) on the Business Day of such Borrowing, in the case of Base Rate Advances, or not later than 11:00 A.M. (New York City time) on the third Business Day prior to the date of such Borrowing, in the case of Eurodollar Rate Advances, by the Borrower to the Administrative Agent, which shall give to each Lender prompt notice thereof by telecopier. Each such notice of a Borrowing (a "Notice of Borrowing") shall be by ------------------- telecopier, confirmed immediately in writing, in substantially the form of Exhibit B, specifying therein (1) the requested date of such Borrowing, (2) the requested Type of Advances comprising such Borrowing, (3) the requested aggregate amount of such Borrowing and (4) in the case of a Borrowing consisting of Eurodollar Rate Advances, the requested initial Interest Period for each such Advances. (ii) In the case of a proposed Borrowing comprised of Credit Agreement ---------------- -21- Eurodollar Rate Advances, the Administrative Agent shall promptly notify the Borrower and each Lender of the applicable interest rate under Section 2.06(a)(ii). (iii) Each Lender shall, before 2:00 P.M. (New York City time) on the date of each Borrowing, make available for the account of its Applicable Lending Office to the Administrative Agent at the Administrative Agent's Account, in same day funds, such Lender's ratable portion of such Borrowing. Promptly after the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will transfer same day funds to the Borrower's Account. (b) Anything in subsection (a) above to the contrary notwithstanding, the Borrower may not select Eurodollar Rate Advances for any Borrowing if the aggregate amount of such Borrowing is less than $5,000,000 or if the obligation of the Lenders to make Eurodollar Rate Advances shall then be suspended pursuant to this Agreement. (c) Each Notice of Borrowing shall be irrevocable and binding on the Borrower. In the case of any Borrowing that the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III (other than losses, costs or expenses relating to Taxes or Other Taxes which shall be governed exclusively by Section 2.11), including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such failure, is not made on such date. (d) Unless the Administrative Agent shall have received notice from a Lender prior to 12:00 Noon (New York City time) on the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's ratable portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with Section 2.02(a) and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Credit Agreement ---------------- -22- Administrative Agent and the Administrative Agent shall have made available such corresponding amount to the Borrower, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, the interest rate applicable at such time under Section 2.06 to Advances comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's Advance as part of such Borrowing for purposes of this Agreement. (e) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing. Section 2.03. Repayment. The Borrower hereby promises to pay to the --------- Administrative Agent for the account of each Lender, on the Commitment Termination Date, the full outstanding principal amount of the Advances of such Lender. All repayments of principal under this Section 2.03 shall be made together with interest accrued to the date of such repayment on the principal amount repaid. Section 2.04. Termination or Reduction of the Commitments. ------------------------------------------- (a) Mandatory. The Commitments shall be automatically reduced to --------- zero on the Commitment Termination Date. (b) Reductions. The Borrower may, upon three Business Days' notice ---------- to the Administrative Agent, reduce the Commitments in whole or in part in a minimum amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof. Each reduction of the Commitments shall be applied to the Commitments of the Lenders pro rata according to their respective --- ---- Commitments. (c) Reductions Permanent. Commitments once terminated or reduced may -------------------- not be reinstated. Credit Agreement ---------------- -23- Section 2.05. Prepayments, Etc. ----------------- (a) Optional Prepayments. The Borrower may, upon at least three -------------------- Business Days' notice (in the case of prepayment of Eurodollar Rate Advances) or upon notice given on the date of prepayment (in the case of prepayments of Base Rate Advances) to the Administrative Agent (which notice shall state the proposed date and aggregate principal amount of the prepayment), and if such notice is given the Borrower shall, prepay the outstanding principal amount of the Advances in the aggregate amount and on the date specified in such notice, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided that (x) -------- each partial prepayment shall be in an aggregate principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof, (y) any such prepayment of a Eurodollar Rate Advance other than on the last day of an Interest Period therefor shall be accompanied by, and subject to, the payment of any amount payable under Section 8.04(c) in respect of such prepayment and (z) each such notice shall be made on the relevant day not later than 11:00 a.m. (New York City time). Each prepayment of Advances under this Section 2.05(a) shall be made for account of the Lenders pro --- rata according to the aggregate outstanding principal amount of Advances ---- held by them. (b) Payments with Interest. All prepayments under this Section 2.05 ---------------------- shall be made together with accrued interest to the date of such prepayment on the principal amount prepaid. Section 2.06. Interest. -------- (a) Ordinary Interest. The Borrower shall pay interest on the unpaid ----------------- principal amount of each Advance owing to each Lender from the date of such Advance until such principal amount shall be paid in full at the following rates per annum: (i) Base Rate Advances. If such Advance is a Base Rate Advance, ------------------ a rate per annum equal at all times to the sum of (1) the Base Rate in effect from time to time plus (2) the Applicable Margin for Base Rate ---- Advances in effect from time to time, payable quarterly in arrears on each Quarterly Date and on the date such Base Rate Advance shall be Converted (but only on the amount Converted) or paid in full. (ii) Eurodollar Rate Advances. If such Advance is a Eurodollar ------------------------ Rate Advance, a rate per annum equal at all times during each Interest Period for such Advance Credit Agreement ---------------- -24- to the sum of (1) the Eurodollar Rate for such Interest Period for such Advance plus (2) the Applicable Margin for Eurodollar Rate Advances in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each three-month anniversary of the first day of such Interest Period occurring during such Interest Period. (b) Post-Default Interest. Notwithstanding Section 2.06(a), the --------------------- Borrower shall pay interest on any amount that is not paid when due hereunder (whether at scheduled maturity, by acceleration or otherwise) at the Post-Default Rate, such interest to be payable in arrears on the date such amount shall be paid in full and on demand. Section 2.07. Fees. The Borrower agrees to pay to the Administrative ---- Agent for the account of each Lender a facility fee on the average daily amount (whether used or unused) of each of such Lender's Commitment from the Effective Date (in the case of each Initial Lender), and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender (in the case of each other Lender), until the Commitment Termination Date, payable in arrears on each Quarterly Date and on the Commitment Termination Date, at a rate per annum equal to the Applicable Facility Fee Percentage in effect from time to time. Section 2.08. Conversion and Continuation of Advances. --------------------------------------- (a) Optional Conversion. The Borrower may on any Business Day, upon ------------------- notice given to the Administrative Agent not later than 11:00 A.M. (New York City time) on the third Business Day prior to the date of the proposed Conversion and subject to the provisions hereof, Convert all or any portion of the Advances of one Type outstanding (and, in the case of Eurodollar Rate Advances, having the same Interest Period); provided that any such Conversion of -------- a Eurodollar Rate Advance other than on the last day of the Interest Period therefor shall be accompanied by, and subject to, the payment of any amount payable under Section 8.04(c) in respect of such Conversion, and any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in an amount not less than the minimum amount specified in Section 2.02(b). Each such notice of Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the aggregate amount and Type of the Advances (and, in the case of Eurodollar Rate Advances, the Interest Period therefor) to be Converted and (iii) if such Conversion is into Eurodollar Rate Advances, the duration of the initial Interest Period for such Advances. Each notice of Conversion shall be irrevocable and binding on the Borrower. Credit Agreement ---------------- -25- (b) Failure to Select; Certain Mandatory Conversions. ------------------------------------------------ (i) On the date on which the aggregate unpaid principal amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment, prepayment, Conversion or otherwise, to less than $5,000,000, such Advances shall automatically Convert into Base Rate Advances. (ii) If the Borrower shall fail to select the duration of any Interest Period for any outstanding Eurodollar Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01 and in clause (a) or (c) of this Section 2.08, the Administrative Agent will forthwith so notify the Borrower and the Lenders, and the Borrower shall automatically be deemed irrevocably to have selected an Interest Period of one month. (iii) Upon the occurrence and during the continuance of any Event of Default, unless the Required Lenders otherwise agree, (x) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (y) the obligation of the Lenders to make, or to Convert Advances into, or to Continue, Eurodollar Rate Advances shall be suspended. (c) Continuations. The Borrower may, on any Business Day, upon ------------- notice given to the Administrative Agent not later than 11:00 A.M. (New York City time) on the third Business Day prior to the date of the proposed Continuation, Continue all or any portion of the outstanding Eurodollar Rate Advances having the same Interest Period as such Eurodollar Rate Advances; provided, that any such Continuation shall be in an amount not less than the - -------- minimum Borrowing amount specified in Section 2.02(b). Each such notice of Continuation shall, within the restrictions specified above, specify (i) the date of such Continuation, (ii) the aggregate amount of the Advances being Continued and (iii) the duration of the initial Interest Period for the Eurodollar Rate Advances subject to such Continuation. Each notice of Continuation shall be irrevocable and binding on the Borrower. Credit Agreement ---------------- -26- Section 2.09. Increased Costs, Illegality, Etc. --------------------------------- (a) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation (to the extent any such introduction or change occurs after the Effective Date) or (ii) the compliance with any guideline or request from any central bank or other governmental authority adopted or made after the Effective Date (whether or not having the force of law, other than any thereof applicable to a particular Lender solely because of such Lender's financial condition or capitalization), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining Eurodollar Rate Advances (except with respect to costs relating to Taxes which shall be governed exclusively by Section 2.11), then the Borrower shall from time to time, within ten Business Days after demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost; provided, that, -------- before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Applicable Lending Office if the making of such a designation would avoid the need for, or reduce the amount of, such increased cost and would not, in the sole judgment of such Lender, be otherwise disadvantageous to such Lender. A certificate as to the amount of such increased cost, submitted to the Borrower by such Lender in good faith and setting forth in reasonable detail the basis for such increased cost, shall be conclusive and binding for all purposes, absent manifest error. (b) If any Lender determines that compliance with any law or regulation enacted or introduced after the Effective Date or any guideline or request from any central bank or other governmental authority adopted or made after the Effective Date (whether or not having the force of law) affects the amount of capital required or expected to be maintained by such Lender or any corporation or other entity controlling such Lender and that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of this type (or similar contingent obligations), or the Advances, then, within ten Business Days after demand by such Lender (with a copy of such demand to the Administrative Agent), the Borrower shall pay to the Administrative Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender (or such corporation or other entity) in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder or the Advances. A certificate as to such amounts submitted to the Credit Agreement ---------------- -27- Borrower by such Lender in good faith and setting forth in reasonable detail the basis for such increased cost shall be conclusive and binding for all purposes, absent manifest error. (c) If, with respect to any Eurodollar Rate Advances, (i) the Required Lenders reasonably determine and notify the Administrative Agent that the Eurodollar Rate for any Interest Period for such Advances will not adequately reflect the cost to such Required Lenders of making, funding or maintaining their respective Eurodollar Rate Advances for such Interest Period, or (ii) if none of the Reference Banks furnish timely information to the Administrative Agent for determining the Eurodollar Rate for any Eurodollar Rate Advances, the Administrative Agent shall forthwith so notify the Borrower and the Lenders, whereupon (x) each Eurodollar Rate Advance will automatically, on the last day of any then existing Interest Period therefor, Convert to a Base Rate Advance, and (y) the obligation of the Lenders to make, or to Convert Advances into, or to Continue, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower and such Lenders that the circumstances causing such suspension no longer exist. (d) Notwithstanding any other provision of this Agreement, if the introduction of or any change in or in the interpretation of any law or regulation (to the extent any such introduction or change occurs after the Effective Date) shall make it unlawful, or any central bank or other governmental authority having appropriate jurisdiction shall assert in writing that it is unlawful, for any Lender or its Eurodollar Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate Advances hereunder, then, on notice thereof and demand therefor by such Lender to the Borrower through the Administrative Agent, (i) each Eurodollar Rate Advance of such Lender will automatically, on the last day of the then current Interest Period or on such earlier date as may be required by law, Convert to a Base Rate Advance and (ii) the obligation of such Lender to make, or to Convert Advances into, or to Continue, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower that such Lender has determined that the circumstances causing such suspension no longer exist; provided that, before making any such demand, such -------- Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Eurodollar Lending Office if the making of such a designation would allow such Lender or its Eurodollar Lending Office to continue to perform its obligations to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate Advances and would not, in the sole judgment of such Lender, be otherwise disadvantageous to such Lender. Credit Agreement ---------------- -28- Section 2.10. Payments and Computations. ------------------------- (a) The Borrower shall make each payment hereunder and under the Notes not later than 12:00 Noon (New York City time) on the day when due in U.S. Dollars to the Administrative Agent at the Administrative Agent's Account in same day funds and, except as expressly set forth herein, without deduction, set-off or counterclaim. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal, interest or facility fees ratably (other than amounts payable pursuant to Section 2.09(a), 2.09(b), 2.11 or 8.04(c)) to the Lenders for the account of their Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 8.07(d), from and after the effective date of such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) If the Administrative Agent receives funds for application to the obligations under the Loan Documents under circumstances for which the Loan Documents do not specify the Advances to which, or the manner in which, such funds are to be applied, and the Borrower has not otherwise directed how such funds are to be applied (which direction is consistent with the terms of the Loan Documents), the Administrative Agent may, but shall not be obligated to, elect to distribute such funds to each Lender ratably in accordance with such Lender's proportionate share of the principal amount of all outstanding Advances, in repayment or prepayment of such of the outstanding Advances or other obligations owed to such Lender as the Administrative Agent shall direct. (c) Each Reference Bank agrees to furnish to the Administrative Agent timely information for the purpose of determining each Eurodollar Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Administrative Agent for the purpose of determining any such interest rate, the Administrative Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks. (d) All computations of interest (other than interest determined under paragraphs (a) and (b) of the definition of Credit Agreement ---------------- -29- "Base Rate" in Section 1.01) and facility fees shall be made by the Administrative Agent on the basis of a year of 360 days, and all computations of interest under paragraphs (a) or (b) of the definition of "Base Rate" shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable. Each determination by the Administrative Agent of an interest rate or fee hereunder made in accordance with the provisions of this Agreement shall be conclusive and binding for all purposes, absent manifest error. (e) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or facility fee, as the case may be; provided, that if such extension would cause payment of interest on or -------- principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the immediately preceding Business Day. (f) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to any Lender hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each such Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Administrative Agent, each such Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at the Federal Funds Rate. Credit Agreement ---------------- -30- Section 2.11. Taxes. ----- (a) Unless otherwise provided in this Section 2.11, any and all payments by the Borrower hereunder or under the Notes shall be made, in accordance with Section 2.10, free and clear of and without deduction for any and all present or future Taxes imposed by the laws and regulations of the United States or any state or local jurisdiction thereof or therein, excluding, --------- in the case of each Lender and the Administrative Agent (each, a "Tax --- Indemnitee"), (i) net income taxes that are imposed by the United States and franchise taxes and net income taxes that are imposed on such Tax Indemnitee by any state or local jurisdiction under the laws of which such Tax Indemnitee is organized or any political subdivision thereof and (ii) in the case of such Tax Indemnitee, net income taxes that are imposed by the United States and franchise taxes and net income taxes that are imposed on it by the state or local jurisdiction of such Person's Applicable Lending Office or any political subdivision thereof (all such non-excluded Taxes being hereinafter referred to as "Indemnified Taxes"). If the Borrower shall be required by law to deduct any ----------------- Indemnified Taxes from or in respect of any sum payable hereunder or under any Note to any Tax Indemnitee, (i) subject to Section 2.11(f), the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.11) such Tax Indemnitee receives an amount equal to the sum it would have received had no such deductions been made ("Additional Amounts"), ------------------ (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority in accordance with applicable law. (b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies imposed under the laws of the United States or any state or local jurisdiction thereof or therein, that arise from any payment made by it hereunder or under the Notes or from the execution and delivery of this Agreement or the Notes (hereinafter referred to as "Other Taxes"). ----------- (c) The Borrower will indemnify each Tax Indemnitee for the full amount of Indemnified Taxes or Other Taxes reasonably and in good faith paid by such Tax Indemnitee and any penalties and interest arising from the failure of the Borrower to pay such Indemnified Taxes or Other Taxes. This indemnification shall be made within 30 days from such date such Tax Indemnitee makes written demand therefor, which demand shall contain an itemized summary of the amounts so payable. (d) Within 30 days after the date of any payment of Credit Agreement ---------------- -31- Indemnified Taxes, the Borrower will furnish to the Administrative Agent, at its address referred to in Section 8.02, appropriate evidence of payment thereof. If the Borrower shall make a payment hereunder or under the Notes through an account or branch outside the United States, or a payment is made on behalf of the Borrower by a payor that is not a United States Person, the Borrower will, if no Taxes are payable in respect of such payment, furnish, or will cause such payor to furnish, to the Administrative Agent, at such address, a certificate from the appropriate taxing authority or authorities, or an opinion of counsel acceptable to the Administrative Agent, in either case stating that such payment is exempt from or not subject to Taxes. For purposes of this subsection (d) and subsection (e), the terms "United States" and "United States Person" shall have ------------- -------------------- the meanings specified in Section 7701 of the Internal Revenue Code. (e) Each Tax Indemnitee that is not a United States Person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) for U.S. federal income tax purposes shall, on or prior to the date of its execution and delivery of this Agreement (in the case of each Initial Lender) and on the date of the Assignment and Acceptance pursuant to which it became a Lender (in the case of each other Lender), and from time to time thereafter if requested in writing by the Borrower or the Administrative Agent (but only so long as such Tax Indemnitee remains lawfully able to do so after the date such Person becomes a party hereto), provide the Administrative Agent and the Borrower with either (i) Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Tax Indemnitee is entitled to benefits under an income tax treaty to which the United States is a party that reduces the rate of withholding tax on payments under this Agreement and the Notes or certifying that the income receivable pursuant to this Agreement and the Notes is effectively connected with the conduct of a trade or business in the United States or (ii) Internal Revenue Service form W-8, upon which the Borrower is entitled to rely, from a Tax Indemnitee that has not at the time it becomes a party hereto been named in any notice issued by the Secretary of the Treasury (or such Secretary's authorized delegate) pursuant to Sections 881(c)(2)(B) or 871(h)(5) of the Internal Revenue Code, or any successor form or statement prescribed by the Internal Revenue Service in order to establish that such Tax Indemnitee is entitled to treat the interest payments under this Agreement and the Notes as portfolio interest that is exempt from withholding tax under the Internal Revenue Code, together with a certificate stating that such Tax Indemnitee is not described in Section 881(c)(3) of the Internal Revenue Code. If the form provided by a Tax Indemnitee at the time it first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero (or if such Tax Indemnitee cannot provide at such time such form because it is not entitled to Credit Agreement ---------------- -32- reduced withholding under a treaty, the payments are not effectively connected income and the payments do not qualify as portfolio interest), withholding tax at the rate indicated in such form (or at the then existing U.S. statutory rate if the Tax Indemnitee cannot provide such a form) shall be excluded from Indemnified Taxes unless and until such Lender provides the appropriate form certifying that a zero rate applies; provided, that, if at the date of the -------- Assignment and Acceptance pursuant to which a Lender assignee becomes a party to this Agreement, the Lender assignor was entitled to payments under subsection (a) in respect of United States withholding tax with respect to interest paid at such date, then, to the extent such tax results in liability for such payments, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States interest withholding tax, if any, applicable with respect to the Lender assignee on such date. (f) For any period with respect to which a Tax Indemnitee has failed to provide the Borrower and the Administrative Agent with the appropriate form described in Section 2.11(e) (other than if such failure is due to a change in ----- ---- law occurring after the date on which a form originally was required to be provided or if such form otherwise is not required under subsection (e)), such Lender shall not be entitled to indemnification under subsection (a) or (c) with respect to Indemnified Taxes imposed by the United States or any state or other political subdivision thereof. (g) Any Lender claiming any Additional Amounts payable pursuant to this Section 2.11 shall use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office(s) if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the sole judgment of such Lender, be otherwise disadvantageous to such Lender. (h) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 2.11 shall survive the payment in full of principal and interest hereunder and under the Notes. Credit Agreement ---------------- -33- Section 2.12. Sharing of Payments, Etc. If any Lender shall obtain ------------------------- any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Advances owing to it (other than pursuant to Section 2.09(a), 2.09(b), 2.11 or 8.04(c)) in excess of its ratable share of payments on account of the Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Advances owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, that if all or -------- any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.12 may exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. Section 2.13. Use of Proceeds. The proceeds of the Advances shall be --------------- available (and the Borrower agrees that it shall use such proceeds) solely for general corporate purposes of the Borrower and its Subsidiaries in compliance with all applicable legal and regulatory requirements. Neither the Administrative Agent nor any Lender shall have any responsibility as to the application or use of any of the proceeds of any Advance. ARTICLE III CONDITIONS OF LENDING Section 3.01. Effective Date. This Agreement shall become effective -------------- on the date (the "Effective Date") on which the Administrative Agent notifies -------------- the Borrower that the following conditions precedent have been satisfied: (a) Documents. The Administrative Agent shall have received the --------- following documents (with, except in the case of the Notes, sufficient copies for each Lender), each of which shall be satisfactory to the Administrative Agent in form and substance: (1) Notes. The Notes payable to the order of the Lenders. ----- Credit Agreement ---------------- -34- (2) Subordination and Amendment Agreement. The Subordination ------------------------------------- and Amendment Agreement duly executed by the parties thereto. (3) Corporate Documents. Certified copies of the charter and ------------------- by-laws (or equivalent documents) of the Borrower and Hughes Electronics and of all corporate authority for the Borrower and Hughes Electronics (including, without limitation, board of director resolutions and evidence of the incumbency, including specimen signatures, of officers) with respect to the execution, delivery and performance of the Loan Documents and each other document to be delivered by the Borrower from time to time in connection herewith and the extensions of credit hereunder (and the Administrative Agent and each Lender may conclusively rely on such certificate until it receives notice in writing from the Borrower to the contrary). (4) Opinion of Counsel. (i) A favorable written opinion of ------------------ James W. Cuminale, General Counsel of the Borrower, in substantially the form of Exhibit F hereto, and a favorable written opinion of Chadbourne & Parke LLP, special New York counsel to the Borrower, in substantially the form of Exhibit G hereto, with respect to such matters relating to the Loan Documents as the Administrative Agent or any Lender may request and (ii) a favorable opinion of Robert Hall, Assistant General Counsel of Hughes Electronics, in substantially the form of Exhibit H hereto, with respect to such matters relating to the Subordination and Amendment Agreement as the Administrative Agent or any Lender may request. (5) Opinion of Administrative Agent's Counsel. An opinion of ----------------------------------------- Milbank, Tweed, Hadley & McCloy, special New York counsel for the Administrative Agent, in substantially the form of Exhibit I hereto, covering such matters relating to this Agreement and the Notes as the Administrative Agent may require. (6) Borrower Debt Rating. Evidence that the senior unsecured -------------------- long-term debt rating of the Borrower by S&P is BBB- or higher and that the senior secured long-term debt rating of the Borrower by Moody's is Baa2 or higher. (7) Old Notes. Evidence that an aggregate principal amount of --------- no more than $20,000,000 of the Old Notes is outstanding and that the supplemental indentures modifying the terms of the Old Notes have Credit Agreement ---------------- -35- been executed by the Borrower in substantially the form sent to the holders thereof on November 14, 1997. (b) Governmental Approvals. The Administrative Agent shall have ---------------------- received evidence satisfactory to it of receipt of all governmental and third party consents and approvals necessary in connection with this Agreement and the Notes (without the imposition of any conditions except those that are acceptable to the Lenders) and that the same remain in effect. (c) Fees. The Administrative Agent shall have received confirmation ---- that the Borrower has paid in full all amounts whatsoever outstanding under the Existing Credit Agreement (including without limitation any and all fees thereunder accrued to the Effective Date). (d) Material Adverse Change. The Lenders shall be satisfied that ----------------------- since September 30, 1997, there shall have occurred no Material Adverse Change. (e) Other Items. The Administrative Agent shall have received such ----------- other approvals, opinions and documents relating to this Agreement and the transactions contemplated hereby as any Lender may, through the Administrative Agent, reasonably request. Section 3.02. Conditions Precedent to Each Borrowing. The obligation -------------------------------------- of each Lender to make an Advance on the occasion of each Borrowing shall be subject to the further conditions precedent that on the date of such Borrowing the following statements shall be true (and each of the giving of the applicable Notice of Borrowing and the acceptance by the Borrower of the proceeds of such Borrowing shall constitute a representation and warranty by the Borrower that on the date of such Borrowing such statements are true): (i) the representations and warranties contained in each Loan Document are correct on and as of the date of such Borrowing before and after giving effect to such Borrowing and to the application of the proceeds therefrom, as though made on and as of such date (except to the extent such representations and warranties expressly relate to an earlier date, in which case they shall be true and correct as of such earlier date); and (ii) no Default has occurred and is continuing, or would result from such Borrowing or from the application of the proceeds therefrom. Section 3.03. Existing Credit Agreement. Effective on the Effective ------------------------- Date the Commitments under and as defined in the Credit Agreement ---------------- -36- Existing Credit Agreement and the Borrower's obligations thereunder shall automatically and permanently terminate. ARTICLE IV REPRESENTATIONS AND WARRANTIES Section 4.01. Representations and Warranties of the Borrower. The ---------------------------------------------- Borrower represents and warrants as follows as of the Effective Date: (a) The Borrower (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) is duly qualified and in good standing as a foreign corporation in each other jurisdiction in which the conduct of its business requires it to so qualify or be licensed and where, in each case, failure so to qualify and be in good standing could reasonably be expected to have a Material Adverse Effect and (iii) has all requisite power (corporate or other) and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. (b) Set forth on Schedule 4.01(b) is a complete and accurate list of all Subsidiaries of the Borrower as of the Effective Date, showing as of such date (as to each such Subsidiary) the jurisdiction of its organization and the percentage of the outstanding shares or interests of each class of capital stock or partnership interests owned (directly or indirectly) by the Borrower. All of the outstanding capital stock or partnership interests of all of such Subsidiaries has been validly issued, is fully paid and non-assessable and, except as otherwise specified on Schedule 4.01(b), is owned by the Borrower or one or more of its Subsidiaries free and clear of all Liens except Permitted Liens. (c) The execution, delivery and performance by the Borrower of each Loan Document and the transactions contemplated hereby are within the Borrower's powers (corporate or other), have been duly authorized by all necessary corporate action, and do not (i) contravene the Borrower's charter or by-laws, (ii) violate any applicable law, rule, regulation, order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting the Borrower, any of its Material Subsidiaries or any of their properties or (iv) result in or require the creation or Credit Agreement ---------------- -37- imposition of any Lien upon or with respect to any of the properties of the Borrower or any of its Material Subsidiaries. (d) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for (i) the due execution, delivery, recordation, filing or performance by the Borrower of any Loan Document, or the consummation of the transactions contemplated thereby or (ii) the exercise by the Administrative Agent or any Lender of its rights under the Loan Documents, except for the authorizations, approvals, actions, notices and filings which have been duly obtained, taken, given or made and are in full force and effect. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for the transactions contemplated thereby, except for the authorizations, approvals, actions, notices and filings (x) the failure to obtain could not reasonably be expected to have a Material Adverse Effect or (y) which have been duly obtained, taken, given or made and are in full force and effect. (e) Each of this Agreement and the Subordination and Amendment Agreement is, and each of the Notes when delivered will have been, duly executed and delivered by the Borrower. Each of this Agreement and the Subordination and Amendment Agreement is, and each of the Notes when delivered hereunder for value will be, the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency and other similar laws affecting creditors generally and by general principles of equity (regardless of whether enforcement is sought in equity or at law). (f) The unaudited consolidated balance sheet of the Borrower and its Subsidiaries as of September 30, 1997, and the related pro forma and actual --- ----- consolidated statements of income or operations and cash flows for the respective periods of three months and nine months ended on that date, and the related actual consolidated statements of actual cash flow for the period of three months ended on that date: (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, subject to ordinary, good faith year end audit adjustments; and (ii) fairly present in all respects the financial Credit Agreement ---------------- -38- condition of the Borrower and its Subsidiaries as of the date thereof and results of operations for the period covered thereby. Since September 30, 1997, there has been no Material Adverse Change. (g) Except as set forth on Schedule 4.01(g), as of the Effective Date there is no action, suit, litigation or proceeding against the Borrower or any of its Subsidiaries or any of their respective property, including any thereof under any Environmental Laws, pending before any court, governmental agency or arbitrator, or (to the knowledge of the Borrower) threatened, nor (to the knowledge of the Borrower) is there any investigation pending in respect of the Borrower, that could reasonably be expected to have a Material Adverse Effect. (h) The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock and no proceeds of any Advance will be used to buy or carry any Margin Stock or to extend credit to others for the purpose of buying or carrying any Margin Stock. Less than 25% of the aggregate value of the assets of the Borrower and its Material Subsidiaries that are subject to Section 5.02(a) consists of Margin Stock. (i) Except to the extent any of the following could not reasonably be expected to have a Material Adverse Effect, (i) the operations and properties of the Borrower and each of its Subsidiaries comply in all material respects with all Environmental Laws, all necessary environmental permits have been obtained and are in effect for the operations and properties of the Borrower and its Subsidiaries, the Borrower and its Subsidiaries are in compliance in all material respects with all such environmental permits, and (ii) to the best of the Borrower's knowledge, no circumstances exist that could (x) form the basis of an environmental action against the Borrower or any of its Subsidiaries or (y) cause any such property to be subject to any material restrictions on ownership, occupancy, use or transferability under any Environmental Law. (j) Except to the extent any of the following could not reasonably be expected to have a Material Adverse Effect, as of the Effective Date none of the properties of the Borrower or any of its Subsidiaries is listed or proposed for listing on the National Priorities List under CERCLA or on the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the Environmental Protection Agency or any analogous state list of sites requiring investigation or cleanup. Credit Agreement ---------------- -39- (k) Except to the extent any of the following could not reasonably be expected to have a Material Adverse Effect, as of the Effective Date neither the Borrower nor any of its Subsidiaries has been notified in writing by any federal, state or local governmental agency or any other Person that the Borrower or any of its Subsidiaries is potentially liable for the remedial or other costs with respect to treatment, storage, disposal, release, arrangement for disposal or transportation of any Hazardous Material generated by the Borrower or any of its Subsidiaries, except for costs incurred in the ordinary course of business with respect to treatment, storage, disposal or transportation of such Hazardous Materials. (l) Neither the Borrower nor any of its Material Subsidiaries is an "investment company," or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended. Neither the Borrower nor any of its Material Subsidiaries is a "holding company", or an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. (m) Schedule 4.01(m) is a complete list of all Debt of the Borrower and its Subsidiaries for or in respect of borrowed money, and any Material Debt other than for or in respect of borrowed money, as of the Effective Date. (n) The aggregate outstanding principal amount of Advances (as such term is defined in the Existing Credit Agreement) under the Existing Credit Agreement immediately prior to the Effective Date is zero. ARTICLE V COVENANTS Section 5.01. Affirmative Covenants. So long as any principal of or --------------------- interest on any Advance or any other amount payable under this Agreement or any Note shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will, and will cause each of its Material Subsidiaries to: (a) Compliance with Laws, Etc. Comply with all applicable laws, -------------------------- rules, regulations and orders, including, without limitation, compliance with ERISA and all Environmental Laws and environmental permits, except to the extent that non-compliance with any thereof could not reasonably be expected to have a Material Adverse Effect. Credit Agreement ---------------- -40- (b) Payment of Taxes, Etc. Pay and discharge, before the same shall ---------------------- become delinquent, (i) all Taxes imposed upon it or upon its property or assets and (ii) all lawful claims that, if unpaid, might by law become a Lien upon its property or assets; provided, that neither the Borrower nor -------- any of its Subsidiaries shall be required to pay or discharge any such Tax that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained to the extent required by GAAP. (c) Maintenance of Insurance. Maintain with responsible and reputable ------------------------ insurance companies or associations, insurance, in such amounts and covering such risks as is usually carried by companies engaged in similar businesses. (d) Preservation of Corporate Existence, Etc. Subject to Section ----------------------------------------- 5.02(c), preserve and maintain its corporate existence, rights (charter and statutory) and franchises; provided, that neither the Borrower nor any of -------- its Material Subsidiaries shall be required to preserve any right or franchise if the Borrower or such Material Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Borrower or such Material Subsidiary, as the case may be, and that the loss thereof could not reasonably be expected to have a Material Adverse Effect. (e) Visitation Rights. At any reasonable time during normal business ----------------- hours and as may be reasonably requested from time to time (and, so long as no Event of Default shall have occurred and is continuing, upon reasonable advance notice), permit the Administrative Agent, and its designated officers, employees, agents and representatives, to have access thereto and to make examination thereof at all reasonable times, to make audits and to inspect and otherwise check its properties, real, personal and mixed. (f) Keeping of Books. Keep proper books of record and account, in ---------------- which full and materially correct entries shall be made of all financial transactions and the assets and business of the Borrower and each Material Subsidiary in accordance with GAAP. (g) Maintenance of Properties, Etc. Maintain and preserve, except to ------------------------------- the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect, all of its properties and assets that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted. Credit Agreement ---------------- -41- (h) Transactions with Affiliates. Conduct all transactions with each ---------------------------- of its Affiliates on terms that are no less favorable to the Borrower than those that would obtain in a comparable arm's-length transaction with a Person that is not an Affiliate. (i) Redemption of Old Notes. Redeem the outstanding Old Notes at the ----------------------- earliest redemption date permitted by their respective terms. Section 5.02. Negative Covenants. So long as any principal of or ------------------ interest on any Advance or any other amount payable under this Agreement or any Note shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will not, and will not permit any of its Material Subsidiaries to: (a) Liens, Etc. ----------- (i) Create, assume or suffer to exist any Lien on or in respect of any of its property, assets or revenues, except: (1) Permitted Liens; (2) Liens existing on the Effective Date and theretofore disclosed in writing to the Administrative Agent; (3) Liens securing the Old Notes; and (4) Liens on property existing at the time of acquisition of such property by the Borrower or a Material Subsidiary, or Liens to secure the payment of all or any part of the purchase price of property upon the acquisition of such property by the Borrower or a Material Subsidiary or to secure any Debt incurred or guaranteed prior to, at the time of, or within 180 days after, the later of the date of acquisition of such property and the date such property is placed in service, for the purpose of financing all or any part of the purchase price thereof, or Liens to secure any Debt incurred or guaranteed for the purpose of financing the cost to the Borrower or a Material Subsidiary of improvements to such acquired property; provided, -------- however, that for purposes of this clause (4), (i) a satellite will be ------- treated as a newly-acquired asset as of the date it is placed in service and (ii) any satellite transponder acquired through the exercise of an early buy-out option shall be treated as a newly- acquired asset as of the date such option is exercised. Credit Agreement ---------------- -42- (b) Debt. Create, incur, assume or suffer to exist any Debt other ---- than: (i) Debt hereunder; (ii) Debt under the Old Notes, to the extent permitted hereunder; (iii) Debt evidenced by the Hughes Electronics Note; (iv) endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (v) Debt outstanding on the Effective Date and heretofore disclosed to the Lenders in writing; (vi) Commercial Paper; (vii) Subordinated Debt; (viii) unsecured indebtedness for borrowed money, including the offering of debt securities, in an aggregate amount not to exceed $250,000,000; (ix) indebtedness evidenced by deferred purchase payments and other incentive payments payable by the Borrower or any of its Subsidiaries to vendors for the purchase of satellites or satellite related assets; (x) Permitted Swap Obligations; (xi) loans by Hughes Electronics or Subsidiaries thereof in the ordinary course of business to the Borrower up to an aggregate amount not exceeding $5,000,000 at any one time outstanding; and (xii) renewals, refinancing and replacements of the Debt permitted under the foregoing clauses (other than clause (ii)), without increase in the principal amount or change in any direct or contingent obligor. Credit Agreement ---------------- -43- (c) Mergers, Restricted Investments, Etc. Merge with or into or ------------------------------------- consolidate with or into any Person except that if no Default shall have occurred and be continuing or would result therefrom, (i) any Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving --------- corporation) or any other Subsidiary of the Borrower and (ii) without limiting clause (i), any Material Subsidiary of the Borrower may be merged or consolidated with or into another Person so long as such Material Subsidiary is the continuing or surviving corporation, and immediately after giving effect thereto, no Default has occurred and is continuing. (d) Change in Nature of Business. Make any material change in the ---------------------------- nature of the business of the Borrower and its Material Subsidiaries as carried on at the Effective Date. Section 5.03. Reporting Requirements. So long as any principal of or ---------------------- interest on any Advance or any other amount payable under this Agreement or any Note shall remain unpaid or any Lender shall have any Commitment hereunder: (a) Default Notice. The Borrower will furnish to the Administrative -------------- Agent, as soon as possible and in any event within five Business Days after the Borrower knows of the occurrence of a Default, a statement of a senior financial officer of the Borrower setting forth details of such Default and the action that the Borrower has taken and proposes to take with respect thereto. (b) Quarterly Financial. As soon as available and in any event ------------------- within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, the Borrower will furnish to the Administrative Agent, with sufficient copies for each Lender, a Consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such quarter and Consolidated statements of operations and cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding fiscal year in reasonable detail and duly certified (subject to year-end audit adjustments) by a senior financial officer of the Borrower as having been prepared in accordance with GAAP, together with (i) a certificate of said officer in substantially the form of Exhibit D (A) stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, setting forth a statement as to the nature thereof and the action that the Borrower has Credit Agreement ---------------- -44- taken and proposes to take with respect thereto and (B) stating that since the last fiscal quarter, there has been no Material Adverse Change and (ii) a schedule in form satisfactory to the Administrative Agent of the computations used by the Borrower in determining compliance with the covenants contained in Section 5.04 and, commencing in the first quarter of the year 2001, showing the calculations of Excess Cash Flow (as defined in the Subordination and Amendment Agreement) for such quarter. (c) Annual Financial. As soon as available and in any event within ---------------- 120 days after the end of each fiscal year of the Borrower, the Borrower will furnish to the Administrative Agent, with sufficient copies for each Lender, the Consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal year and Consolidated statements of income and cash flows of the Borrower and its Subsidiaries for such fiscal year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year and accompanied by an unqualified opinion thereon of Deloitte & Touche or other independent public accountants of nationally recognized standing. (d) Litigation. Promptly after the commencement thereof, the ---------- Borrower will furnish to the Administrative Agent notice of any action, suit, litigation or proceeding of the kind described in Section 4.01(g). (e) Public Filings. The Borrower shall, promptly upon their becoming -------------- available, deliver to the Administrative Agent and each Lender copies of any and all registration statements and regular periodic reports that the Borrower shall have filed with the Securities and Exchange Commission (or any governmental agency substituted therefor) or any national securities exchange. (f) Other Information. The Borrower shall promptly furnish to the ----------------- Lenders through the Administrative Agent such other information respecting the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower or any of its Subsidiaries as the Administrative Agent or any Lender may from time to time reasonably request. Section 5.04. Financial Covenants. So long as any principal of or ------------------- interest on any Advance or any other amount payable under this Agreement or any Note shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will: (a) Leverage Ratio. Cause the Leverage Ratio as of -------------- Credit Agreement ---------------- -45- the last day of each fiscal quarter of the Borrower to be not greater than 3.0 to 1.0. (b) Interest Coverage Ratio. Cause the Interest Coverage Ratio for ----------------------- each Rolling Period to be at least equal to (i) for each Rolling Period to and including the Rolling Period ending in December, 1998, 5.0 to 1.0; (ii) for each Rolling Period ending in 1999, 5.5 to 1.0; and (iii) for each Rolling Period thereafter, 6.0 to 1.0. ARTICLE VI EVENTS OF DEFAULT Section 6.01. Events of Default. If any of the following events ----------------- ("Events of Default") shall occur and be continuing: - ------------------- (a) the Borrower (i) shall fail to pay when due any principal of any Advance or (ii) shall fail for three Business Days to pay when due any interest on any Advance or any other amount payable by it under any Loan Document; or (b) any representation or warranty made by the Borrower under or in connection with any Loan Document, or any representation or warranty by Hughes Electronics in the Subordination and Amendment Agreement, shall prove to have been incorrect in any material respect; or (c) the Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 2.13, Section 5.02, or clause (a) of Section 5.03, or Section 5.04, or Hughes Electronics shall fail to perform any term, covenant or agreement in the Subordination and Amendment Agreement if such failure by Hughes Electronics shall remain unremedied for a period of 10 days after notice thereof from the Administrative Agent or any Lender (through the Administrative Agent); or (d) the Borrower shall fail to perform any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for a period of 30 days after notice thereof from the Administrative Agent or any Lender (through the Administrative Agent); or (e) the Borrower or any of its Material Subsidiaries shall fail to pay any principal of, premium or interest on or any other amount payable in respect of any other Debt of the Borrower or such Material Subsidiary (as the case may be) having an aggregate principal amount of at least Credit Agreement ---------------- -46- $25,000,000 ("Material Debt"), when the same becomes due and payable ------------- (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise); or any other event shall occur or condition shall exist under any agreement or instrument relating to any Material Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of Material Debt or otherwise to cause, or to permit the holder or holders (or an agent or trustee on its or their behalf) thereof to cause, such Material Debt to become due in advance of its scheduled maturity; or (f) the Borrower or any of its Material Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or any of its Material Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it) that is being diligently contested by it in good faith, either such proceeding shall remain undismissed or unstayed for a period of 60 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or any substantial part of its property) shall occur; or the Borrower or any of its Material Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (f); or (g) any judgment or order for the payment of money in excess of $25,000,000 shall be rendered against the Borrower or any of its Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect, unless such judgment or order shall have been vacated, satisfied or dismissed or bonded pending appeal; or (h) a Change in Control shall occur; or Credit Agreement ---------------- -47- (i) there shall occur a "reportable event" within the meaning of Section 4043 of ERISA with respect to any Plan of the Borrower or any of its ERISA Affiliates; any fact or circumstance (including without limitation an ERISA Event), which results in, or which the Required Lenders determine in good faith could reasonably be expected to result in, the termination of any Plan of the Borrower, any of its Subsidiaries or an ERISA Affiliate by the PBGC or the appointment by an appropriate United States District Court of a trustee to administer any such Plan, shall occur and shall continue for 30 days after written notice of such determination shall have been given to Borrower or any of its Subsidiaries by the Administrative Agent, or a trustee shall be appointed by the appropriate United States District Court to administer any Plan of the Borrower or any of its Subsidiaries, or the PBGC shall institute proceedings to terminate any Plan of the Borrower or any of its Subsidiaries or to appoint a trustee to administer any such Plan and, upon the occurrence of any of the foregoing, the aggregate amount of the unfunded vested liability for the benefits guaranteed by the PBGC under all such Plans and the present value of any Withdrawal Liability which remains unpaid is reasonably estimated to be in excess of $75,000,000 and such liability is not covered by insurance; then, and in any such event, the Administrative Agent (i) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the obligation of each Lender to make Advances to be terminated, whereupon the same shall forthwith terminate and (ii) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the Advances and the Notes, all interest thereon and all other amounts payable under this Agreement and the other Loan Documents to be forthwith due and payable, whereupon the Advances and the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, that in the event of an actual or deemed entry -------- of an order for relief with respect to the Borrower under the Federal Bankruptcy Code, (x) the obligation of each Lender to make Advances shall automatically be terminated and (y) the Advances and the Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. Credit Agreement ---------------- -48- ARTICLE VII THE ADMINISTRATIVE AGENT Section 7.01. Authorization and Action. Each Lender hereby appoints ------------------------ and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and the other Loan Documents as are delegated to the Administrative Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by the Loan Documents, including, without limitation, enforcement or collection of the Notes, the Administrative Agent shall not be required to exercise any discretion or take any action, and shall not be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) except upon the instructions of the Required Lenders, and such instructions shall be binding upon all Lenders and all holders of the Notes; provided, that the Administrative -------- Agent shall not be required to take any action that exposes it to personal liability or that is contrary to this Agreement or applicable law. The Administrative Agent agrees to give to each Lender prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement. The Administrative Agent is irrevocably authorized to enter into the Subordination and Amendment Agreement. Section 7.02. Administrative Agent's Reliance, Etc. Neither the ------------------------------------- Administrative Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with the Loan Documents, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Administrative Agent (i) may treat the payee of any Note as the holder thereof until the Administrative Agent receives and accepts an Assignment and Acceptance entered into by the Lender that is the payee of such Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section 8.07; (ii) may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by them in accordance with the advice of such counsel, accountants or experts; (iii) makes no warranty or representation to any Lender and shall not be responsible to any of them for any statements, warranties or representations made in or in connection with the Loan Documents; (iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of any Loan Document on the part of the Borrower or to inspect the property (including Credit Agreement ---------------- -49- the books and records) of the Borrower; (v) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of any Loan Document or any other instrument or document furnished pursuant hereto; and (vi) shall incur no liability under or in respect of any Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. Section 7.03. CUSA and Affiliates. With respect to its Commitment, ------------------- the Advances made by it and the Notes issued to it, CUSA shall have the same rights and powers under the Loan Documents as any other Lender and may exercise the same as though it were not the Administrative Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include CUSA in its individual capacity. CUSA and its Affiliates may accept deposits from, lend money to, act as trustee under indentures for, accept investment banking engagements from and generally engage in any kind of business with, the Borrower, any of its Subsidiaries, any of its Affiliates and any Person who may do business with or own securities of the Borrower or any such Subsidiary or Affiliate, all as if CUSA were not the Administrative Agent and without any duty to account therefor to the Lenders. Section 7.04. Lender Credit Decision. Each Lender acknowledges that ---------------------- it has, independently and without reliance upon the Administrative Agent or any other Lender and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. Section 7.05. Indemnification. The Lenders agree to indemnify the --------------- Administrative Agent (to the extent not promptly reimbursed by the Borrower), ratably according to the principal amounts of the Notes then held by each of them (or if no Advances are at the time outstanding, ratably according to the amounts of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against any of them in any way relating to or arising out of the Loan Documents or any action taken or omitted by any of them under the Loan Documents; provided, that no Lender shall be liable for any -------- portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or Credit Agreement ---------------- -50- disbursements resulting from the gross negligence or willful misconduct of the Administrative Agent. Without limitation of the foregoing, each Lender agrees to reimburse the Administrative Agent promptly upon demand for its ratable share of any costs and expenses payable by the Borrower under Section 8.04 of this Agreement to the extent that the Administrative Agent is not promptly reimbursed for such costs and expenses by the Borrower. Section 7.06. Successor Administrative Agent. The Administrative ------------------------------ Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower and may be removed at any time with or without cause by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint (subject, so long as no Default has occurred and is continuing, to the consent of the Borrower, which consent shall not be unreasonably withheld) a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Required Lenders' removal of the Administrative Agent, as the case may be, then the retiring Administrative Agent may, on behalf of the Lenders, appoint (subject, so long as no Default has occurred and is continuing, to the consent of the Borrower, which consent shall not be unreasonably withheld) a successor Administrative Agent, which shall be an Initial Lender or a commercial bank organized under the laws of the United States or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent such successor Administrative Agent shall succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Administrative Agent, as the case may be, and such retiring Administrative Agent shall be discharged from its duties and obligations under the Loan Documents. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article VII shall inure to the benefit of the Administrative Agent as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. Credit Agreement ---------------- -51- ARTICLE VIII MISCELLANEOUS Section 8.01. Amendments, Consents, Etc. No amendment or waiver of -------------------------- any provision of this Agreement or the other Loan Documents, nor any consent to any departure by the Borrower from any provision of this Agreement or the other Loan Documents, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, that (i) no amendment, waiver or consent shall, -------- unless in writing and signed by all the Lenders, do any of the following: (1) waive any of the conditions specified in Section 3.01, (2) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Advances, or the number or percentage of Lenders, that shall be required for the Lenders or any of them to take any action hereunder, (3) amend this Section 8.01, (4) reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, (5) postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder or (6) modify the Subordination and Amendment Agreement, and (ii) no amendment, waiver or consent shall, unless in writing and signed by the Required Lenders and each Lender that would be adversely affected by such amendment, waiver or consent, increase the Commitment of such Lender or subject such Lender to any additional obligations; and provided, further, that no amendment, waiver or consent shall, -------- ------- unless in writing and signed by the Administrative Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Administrative Agent under this Agreement, any Note or any other Loan Document. This Agreement, the other Loan Documents and each confidentiality agreement entered into in connection herewith constitute the entire agreement of the parties with respect to the subject matter hereof and thereof. Section 8.02. Notices, Etc. All notices and other communications ------------- provided for hereunder shall be in writing (including telecopy communication) and mailed, telecopied or delivered: (a) if to the Borrower, at One Pickwick Plaza, Greenwich, CT 06830, Attention Kenneth N. Heintz, telephone number (203) 622-6664, telecopier number (203) 622-9163, with a copy to James W. Cuminale, Senior Vice President & General Counsel at the same address and a copy to David Wilf, Chadbourne & Parke LLP, 30 Rockefeller Plaza, New York, NY, telephone number (212) 408-5440, telecopier number (212) 541-5369; Credit Agreement ---------------- -52- (b) if to any Initial Lender, at its Domestic Lending Office specified opposite its name on the signature pages hereof; (c) if to any other Lender, at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender; (d) if to the Administrative Agent, at its address at 2 Penns Way, Suite 200, New Castle, Delaware 19720, Attention: Brian Maxwell, telephone number 302-894-6023, telecopier number 302-894-6120; with copies to Mr. Walter Larsen, 725 South Figueroa Street, 5th Floor, Los Angeles, CA 90018, telephone number 213-239-1501, telecopier number 213-623-3592; or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall, when mailed or telecopied, be effective when deposited in the mails or transmitted by telecopier, respectively, except that notices and communications to the Administrative Agent pursuant to Article II or III shall not be effective until received by the Administrative Agent. Section 8.03. No Waiver; Remedies. No failure on the part of any ------------------- Lender or the Administrative Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Credit Agreement ---------------- -53- Section 8.04. Costs, Expenses and Indemnification. ----------------------------------- (a) The Borrower agrees to pay on demand (i) all reasonable out-of- pocket costs and expenses of the Administrative Agent in connection with the preparation, execution, delivery, administration, modification and amendment of the Loan Documents including, without limitation, the reasonable and documented fees and expenses of Milbank, Tweed, Hadley & McCloy, special New York counsel to the Administrative Agent, whether or not any of the transactions contemplated by this Agreement are consummated, and the reasonable and documented fees and expenses of counsel for the Administrative Agent, with respect to advising the Administrative Agent as to its rights and responsibilities, or the protection or preservation of rights or interests, under the Loan Documents, and (ii) all documented costs and expenses of the Administrative Agent and the Lenders in connection with the enforcement of the Loan Documents, whether in any action, suit or litigation, any bankruptcy, insolvency or other similar proceeding affecting creditors' rights generally or otherwise (including, without limitation, the reasonable fees and expenses of counsel for the Administrative Agent and each Lender with respect thereto). (b) The Borrower agrees to indemnify and hold harmless the Administrative Agent and each Lender and each of their Affiliates and their officers, directors, employees, agents, advisors and representatives (each, an "Indemnified Party") from and against any and all claims, damages, losses, - ------------------ liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party (other than a claim by a Lender against another Lender or the Administrative Agent or by the Administrative Agent against a Lender), in each case arising out of the entering into and performance of the Loan Documents, the preparation for a defense of, any investigation, litigation or proceeding arising therefrom or any of the other transactions contemplated hereby or thereby, in each case whether or not such investigation, litigation or proceeding is brought by the Borrower, its directors, shareholders or creditors or an Indemnified Party or any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby or thereby are consummated, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's negligence or willful misconduct. The Borrower also agrees that the Administrative Agent, the Lenders, their Affiliates and their respective directors, officers, employees, attorneys, agents or representatives shall have no liability on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the transactions Credit Agreement ---------------- -54- contemplated herein or in any other Loan Document or the actual or proposed use of the proceeds of the Advances. (c) If for any reason any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made by the Borrower to or for the account of a Lender other than on the last day of an Interest Period for such Advance, the Borrower shall, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses that it may incur as a result of such payment, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund or maintain such Advance. A certificate of such Lender setting forth in reasonable detail the amount to which such Lender is then entitled under this clause (c) shall be conclusive and binding on the Borrower in the absence of manifest error. (d) The Borrower agrees to pay to each Lender, so long as such Lender shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or the equivalent), additional interest on the unpaid principal amount of each Eurodollar Rate Advance, from the date of such Eurodollar Rate Advance until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (i) the Eurodollar Rate for the then current Interest Period for such Eurodollar Rate Advance from (ii) the rate obtained by dividing such Eurodollar Rate by a percentage equal to 100% minus the Eurodollar ----- Rate Reserve Percentage for such Interest Period, payable on each date on which interest is payable on such Eurodollar Rate Advance. A certificate of such Lender setting forth in reasonable detail the amount to which such Lender is then entitled under this clause (d) shall be conclusive and binding on the Borrower in the absence of manifest error. (e) If the Borrower fails to pay when due any costs, expenses or other amounts payable by it under any Loan Document, including, without limitation, reasonable fees and expenses of counsel and indemnities, such amount may be paid on behalf of the Borrower by the Administrative Agent or any Lender, in its sole discretion. Section 8.05. Right of Setoff. Upon (a) the occurrence and during --------------- the continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Administrative Agent to declare the Notes due and payable pursuant to the provisions of Section 6.01, each Lender is hereby authorized at any time and Credit Agreement ---------------- -55- from time to time, to the fullest extent permitted by law, to set off and otherwise apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement and the Note held by such Lender, irrespective of whether such Lender shall have made any demand under this Agreement or such Note and although such obligations may be unmatured. Each Lender agrees promptly to notify the Borrower after any such setoff and application; provided, that the failure to -------- give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of setoff) that such Lender may have. Section 8.06. Governing Law; Submission to Jurisdiction. This ----------------------------------------- Agreement and the Notes shall be governed by, and construed in accordance with, the law of the State of New York. The Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York state court sitting in New York County for the purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby, and hereby irrevocably appoints CT Corporation System having offices on the date hereof at 1633 Broadway, New York, New York 10019 as its true and lawful attorney-in-fact in its name, place and stead to accept such service of process. The Borrower irrevocably waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Section 8.07. Assignments and Participations. ------------------------------ (a) Each Lender may assign to one or more banks or other entities all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Advances owing to it and the Note or Notes held by it); provided, that: -------- (i) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender or an Approved Lender Affiliate or an assignment of all of a Lender's rights and obligations under this Agreement, the amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than the lesser Credit Agreement ---------------- -56- of (x) such Lender's Commitment hereunder and (y) $5,000,000 or an integral multiple of $1,000,000 in excess thereof (except as otherwise agreed by the Borrower and the Administrative Agent), (ii) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender or an Approved Lender Affiliate, each such assignment shall be made only upon the prior written approval of the Borrower and the Administrative Agent, such approvals not to be unreasonably withheld or delayed, (iii) each such assignment shall be to an Eligible Assignee, (iv) each such assignment by a Lender of its Advances, Commitment or Note shall be made in such manner so that the same portion of its Advances, Commitment and Note is assigned to the respective assignee, and (v) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note or Notes subject to such assignment and a processing and recordation fee of $3,000. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in such Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (y) the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto). (b) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with Credit Agreement ---------------- -57- respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Administrative Agent, such assigning Lender, or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto; (vii) such assignee agrees to comply with its obligations under Section 2.11(e); and (viii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender. (c) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at its address referred to in Section 8.02 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Advances owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding -------- for all purposes, absent manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. No assignment shall be effective until it is recorded in the Register pursuant to this Section 8.07(c). The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee, together with any Note or Notes subject to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form prescribed herein, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. Within five Business Days after its receipt of such notice, the Borrower, at its own expense, shall execute and deliver to the Administrative Agent in exchange for Credit Agreement ---------------- -58- the surrendered Note or Notes a new Note or Notes to the order of such assignee in an amount equal to the Commitment assumed by it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained a Commitment, a new Note or Notes to the order of the assigning Lender in an amount equal to the portion so retained by it hereunder. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A. (e) Each Lender may sell participations in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Advances owing to it and the Note or Notes held by it); provided, that (i) such Lender's obligations under this -------- Agreement (including, without limitation, its Commitment) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by the Borrower therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation. (f) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 8.07, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided, that, prior to any such disclosure, the -------- assignee or participant or proposed assignee or participant shall agree in writing to preserve the confidentiality of any confidential information received by it from such Lender in form and substance reasonably satisfactory to the Borrower. (g) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it and the Note or Notes held by it) in favor of any Federal Reserve Bank in Credit Agreement ---------------- -59- accordance with Regulation A. (h) Anything in this Section 8.07 to the contrary notwithstanding, neither the Borrower nor any of its Subsidiaries or Affiliates may acquire (whether by assignment, participation or otherwise), and no Lender shall assign or participate to the Borrower or any of its Subsidiaries or Affiliates, any interest in any Commitment, Advance or other amount owing hereunder without the prior consent of each Lender. Section 8.08. Execution in Counterparts. This Agreement may be ------------------------- executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. Section 8.09. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE -------------------- ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS, THE ADVANCES OR THE ACTIONS OF THE ADMINISTRATIVE AGENT OR ANY LENDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF. Section 8.10. Survival. The obligations of the Borrower under -------- Sections 2.09, 2.11 and 8.04, and the obligations of the Lenders under Section 7.05, shall survive the repayment of the Advances and the termination of the Commitments. In addition, each representation and warranty made, or deemed to be made by a notice of any extension of credit, herein or pursuant hereto shall survive the making of such representation and warranty, and no Lender shall be deemed to have waived, by reason of making any extension of credit hereunder, any Default that may arise by reason of such representation or warranty proving to have been false or misleading, notwithstanding that such Lender or the Administrative Agent may have had notice or knowledge or reason to believe that such representation or warranty was false or misleading at the time such extension of credit was made. Section 8.11. Captions. The table of contents and captions and -------- section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. Section 8.12. Successors and Assigns. This Agreement shall be ---------------------- binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, provided, that the Borrower may not assign any -------- of its rights or Credit Agreement ---------------- -60- obligations hereunder or under the other Loan Documents without the prior consent of all of the Lenders and the Administrative Agent. Credit Agreement ---------------- -61- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. BORROWER -------- PANAMSAT CORPORATION By /s/ Lourdes Saralegui ------------------------- Title: Credit Agreement ---------------- -62- ADMINISTRATIVE AGENT -------------------- CITICORP USA, INC. By [Signature Illegible] ---------------------------- Title: Attorney-in-Fact CO-DOCUMENTATION AGENTS ----------------------- BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By [Signature Illegible] ---------------------------- Title: Vice President MORGAN GUARANTY TRUST COMPANY OF NEW YORK By /s/ Douglas Maher --------------------------- Title: Vice President Credit Agreement ---------------- -63- LENDERS ------- Commitment - ---------- $50,000,000 CITICORP USA, INC. By [Signature Illegible] ---------------------------- Title: Attorney-in-Fact Eurodollar Lending Office: 399 Park Avenue New York, New York 10043 Domestic Lending Office: 399 Park Avenue New York, New York 10043 Attention: Brian Maxwell Facsimile: 302-894-6120 Credit Agreement ---------------- -64- Commitment - ---------- $45,000,000 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By [Signature Illegible] ----------------------------- Title: Vice President Eurodollar Lending Office: GPO-Domestic Account Administration #5693 1850 Gateway Blvd., 3rd Floor Concord, California 94520 Domestic Lending Office: GPO-Domestic Account Administration #5693 1850 Gateway Blvd., 3rd Floor Concord, California 94520 Attention: Donna Cowan Facsimile: 510-603-8209 Credit Agreement ---------------- -65- Commitment - ---------- $45,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By /s/ Douglas Maher --------------------------- Title: Vice President Eurodollar Lending Office: Nassau Bahamas Office c/o J.P. Morgan Services Inc. 500 Stanton Christiana Road Newark, Delaware 19715 Domestic Lending Office: 60 Wall Street New York, New York 10260-0060 Attention: Bob Osieski Facsimile: 212-648-5018 Credit Agreement ---------------- -66- Commitment - ---------- $30,000,000 THE CHASE MANHATTAN BANK By /s/ Richard C. Smith -------------------------- Title: Vice President Eurodollar Lending Office: 1 Chase Manhattan Plaza New York, New York 10017 Domestic Lending Office: 1 Chase Manhattan Plaza New York, New York 10017 Attention: May Fong Facsimile: 212-552-5650 Credit Agreement ---------------- -67- Commitment - ---------- $30,000,000 CREDIT SUISSE FIRST BOSTON By /s/ Mark A. Sampson ---------------------------- Title: Vice President By /s/ Thomas G. Muoio ---------------------------- Title: Vice President Eurodollar Lending Office: 11 Madison Avenue, 20th Floor New York, New York 10010 Domestic Lending Office: 11 Madison Avenue, 20th Floor New York, New York 10010 Attention: Jenaro Sarasola Facsimile: 212-325-6508/6509 Credit Agreement ---------------- -68- Commitment - ---------- $30,000,000 THE FIRST NATIONAL BANK OF CHICAGO By /s/ Mark A. Isley ----------------------------- Title: First Vice President Eurodollar Lending Office: One First National Plaza Chicago, Illinois 60670 Domestic Lending Office: One First National Plaza Chicago, Illinois 60670 Attention: Sharon Bosch Facsimile: 312-732-4840 Credit Agreement ---------------- -69- Commitment - ---------- $30,000,000 NATIONSBANK OF TEXAS, N.A. By /s/ Pamela S. Kurtzman ----------------------------- Title: Vice President Eurodollar Lending Office: 901 Main Street 14th Floor Dallas, Texas 75202 Domestic Lending Office: 901 Main Street 14th Floor Dallas, Texas 75202 Attention: Geri Evans Facsimile: 214-508-2020 Credit Agreement ---------------- -70- Commitment - ---------- $20,000,000 BANCA COMMERCIALE ITALIANA LOS ANGELES FOREIGN BRANCH By /s/ E. Bombieri ------------------------------ Title: V.P. & Manager By /s/ J. Wityak ------------------------------ Title: V.P. Eurodollar Lending Office: 555 South Flower Street, Suite 4300 Los Angeles, California 90071 Domestic Lending Office: 555 South Flower Street, Suite 4300 Los Angeles, California 90071 Attention: Mr. Elias Afram Facsimile: 213-624-0457 Credit Agreement ---------------- -71- Commitment - ---------- $20,000,000 THE BANK OF NEW YORK By [Signature Illegible] -------------------------------- Title: Assistant Vice President Eurodollar Lending Office: 1 Wall Street New York, New York 10286 Domestic Lending Office: 1 Wall Street New York, New York 10286 Attention: Pilar Kinzie Facsimile: 212-635-8679 Credit Agreement ---------------- -72- Commitment - ---------- $20,000,000 BANQUE NATIONALE DE PARIS By [Signature Illegible] ------------------------------- Title: Vice President By [Signature Illegible] ------------------------------- Title: Vice President Eurodollar Lending Office: 725 South Figueroa Street Suite 2090 Los Angeles, California 90017 Domestic Lending Office: 725 South Figueroa Street Suite 2090 Los Angeles, California 90017 Attention: Treasury Department Facsimile: 415-989-9041 Credit Agreement ---------------- -73- Commitment - ---------- $20,000,000 BARCLAYS BANK PLC By /s/ R.P. Smithies ---------------------------- Title: Director Eurodollar Lending Office: 75 Wall Street, 12th Floor New York, New York 10265 Domestic Lending Office: 75 Wall Street, 12th Floor New York, New York 10265 Attention: Judy Kwang Facsimile: 212-412-5307/5308 Credit Agreement ---------------- -74- Commitment - ---------- $20,000,000 BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH By /s/ Thomas von Kistowsky ------------------------------- Title: Senior Vice President By /s/ Sean O'Sullivan ------------------------------- Title: Vice President Eurodollar Lending Office: 560 Lexington Avenue New York, New York 10022 Domestic Lending Office: 50 Lexington Avenue New York, New York 10022 Attention: Patricia Sanchez Facsimile: 212-310-9930 Credit Agreement ---------------- -75- Commitment - ---------- $20,000,000 ING LEASE (IRELAND) B.V. By [Signature Illegible] ------------------------------- Title: By /s/ Leo Hellings ------------------------------- Title: Senior Vice President Eurodollar Lending Office: 49 St. Stephens Green Dublin 2, Ireland Attention: Ruth Keernan Facsimile: 011-353-1-662-2240 Domestic Lending Office: N/A Credit Agreement ---------------- -76- Commitment - ---------- $20,000,000 ISTITUTO BANCARIO SAN PAOLO DI TORINO SpA By [Signature Illegible] ------------------------------- Title: First Vice President By [Signature Illegible] ------------------------------- Title: Vice President Eurodollar Lending Office: 245 Park Avenue New York, New York 10167 Domestic Lending Office: 245 Park Avenue New York, New York 10167 Attention: Carmela Romanello- Schaden Facsimile: 212-599-5303 Credit Agreement ---------------- -77- Commitment - ---------- $20,000,000 THE LONG TERM CREDIT BANK OF JAPAN, LTD. By /s/ T. Morgan Edwards II -------------------------------- Title: Deputy General Manager Eurodollar Lending Office: 350 South Grand Avenue Suite 3000 Los Angeles, California 90071 Domestic Lending Office: 350 South Grand Avenue Suite 3000 Los Angeles, California 90071 Attention: Winnie Dutt Facsimile: 213-626-1067 Credit Agreement ---------------- -78- Commitment - ---------- $20,000,000 MELLON BANK, N.A. By /s/ Susan A. Dalton ---------------------------- Title: Vice President Eurodollar Lending Office: Three Mellon Bank Center Room 2304 Pittsburgh, Pennsylvania 15254 Domestic Lending Office: Three Mellon Bank Center Room 2304 Pittsburgh, Pennsylvania 15254 Attention: Darie Gardell Facsimile: 412-236-2027 Credit Agreement ---------------- -79- Commitment - ---------- $20,000,000 UNION BANK OF CALIFORNIA, N.A. By [Signature Illegible] ---------------------------- Title: Vice President Eurodollar Lending Office: 445 South Figueroa Street 16th Floor Los Angeles, California 90071 Domestic Lending Office: 445 South Figueroa Street 16th Floor Los Angeles, California 90071 Attention: S. Jason Kim Facsimile: 213-236-7636 Credit Agreement ---------------- -80- Commitment - ---------- $20,000,000 UNION BANK OF SWITZERLAND, NEW YORK BRANCH By /s/ Robert H. Riley III ------------------------------ Title: Managing Director By /s/ David G. Dickinson, Jr. ------------------------------ Title: Assistant Vice President Eurodollar Lending Office: 299 Park Avenue New York, New York 10171 Domestic Lending Office: 299 Park Avenue New York, New York 10171 Attention: Mike Petersen Facsimile: 212-821-3259 Credit Agreement ---------------- -81- Commitment - ---------- $20,000,000 WESTDEUTSCHE LANDESBANK By /s/ Salvatore Battinelli ------------------------------ Title: Vice President By /s/ Elisabeth R. Wilds ------------------------------ Title: Associate Eurodollar Lending Office: 1211 Avenue of the Americas New York, New York 10036 Domestic Lending Office: 1211 Avenue of the Americas New York, New York 10036 Attention: Cheryl Y. Wilson Facsimile: 212-302-7946 Credit Agreement ---------------- -82- The following Schedules and Exhibits have been omitted: SCHEDULES --------- SCHEDULE 4.01(b) Subsidiaries SCHEDULE 4.01(g) Litigation SCHEDULE 4.01(m) Existing Debt EXHIBITS -------- EXHIBIT A Form of Note EXHIBIT B Form of Notice of Borrowing EXHIBIT C Form of Assignment and Acceptance EXHIBIT D Form of Compliance Certificate EXHIBIT E Form of Subordination and Amendment Agreement EXHIBIT F Form of Opinion of General Counsel of the Borrower EXHIBIT G Form of Opinion of Special New York Counsel to the Borrower EXHIBIT H Form of Opinion of Assistant General Counsel of Hughes Electronics EXHIBIT I Form of Opinion of Special New York Counsel to the Administrative Agent EX-10.44 10 AGREEMENT DATED AS OF 03/21/97 EXHIBIT 10.44 AGREEMENT THIS AGREEMENT made and entered into effective as of March 21, 1997, (this Agreement, as the same may hereafter be amended from time to time, hereinafter referred to as this "Agreement"), by and between PanAmSat Corporation, a Delaware corporation (hereinafter referred to as the "Company"), and Patrick J. Costello (hereinafter referred to as "Executive"). W I T N E S S E T H WHEREAS, Executive is currently serving Company as its Chief Financial Officer; and WHEREAS, following the Merger described below, Executive's job duties will change as described herein; and WHEREAS, Executive and Company have previously entered into an Agreement dated May 15, 1996 (the "May 15 Agreement") (capitalized terms used herein and not otherwise defined shall have the respective meanings assigned to them in the May 15 Agreement); and WHEREAS, Company intends to enter into a business combination (the "Merger") as set forth in the Agreement and Plan or Reorganization among Hughes Communications, Inc., Hughes Communications Galaxy, Inc., Hughes Communications Satellite Services, Inc., Hughes Communications Services, Inc., Hughes Communications Carrier Services, Inc., and Company dated September 20, 1996; and WHEREAS, Company and Executive believe that it is in their best interests to enter into this Agreement in connection with Executive's change in executive capacity; NOW, THEREFORE, in consideration of the foregoing and the promises, covenants and agreements hereinafter set forth, Company and Executive hereby agree as follows: Section 1. Material Change. Upon the closing of the Merger, a ---------------- Material Change shall be deemed to have occurred for the purposes of the May 15 Agreement. Section 2. Continued Employment. Without in any way impairing -------------------- Executive's right to elect to terminate his services following the occurrence of a Material Change and to receive the benefits described in the May 15 Agreement, Executive agrees to continue as an employee to assist the Chief Financial Officer in the transition following the Merger and to perform such other non- finance related services for up to six months from the date of the Merger as requested by the Chief Executive Officer; provided, that Executive shall be -------- given at least thirty (30) days prior written notice of termination. For such time as Executive remains an employee of the Company, Executive shall retain the perquisites and benefits otherwise attendant to his status in the Company on the date hereof. Section 3. Employment Duties. After the closing of the Merger, ----------------- Executive shall be entitled to a Termination Payment as calculated in the May 15 Agreement and subject to Section 4 and 5 of this Agreement. Section 4. No Notice Necessary. Notwithstanding Section B.2 of the ------------------- May 15 Agreement, there shall be no obligation on the part of Executive to give the Company notice of constructive termination and the Company shall have no right to cure such constructive termination. Section 5. Right to Termination Payment. The Termination Payment ---------------------------- shall be due and payable within five days following the Merger. Section 6. No Competing Employment. Section L of the May 15 ----------------------- Agreement is hereby amended by commencing the 18th month period described therein at the time of the closing of the Merger. Commencing on the date of this Agreement and during the period that Executive continues to be employed by the Company in any capacity, Executive may conduct outside business activities that are not in violation of Section L of the May 15 Agreement, as so amended. Section 7. Void Absent Merger. Should the Merger not occur, this ------------------ Agreement shall be void and of no further force or effect. IN WITNESS WHEREOF, Company and Executive have executed this Agreement as of the day and year first above written. PANAMSAT CORPORATION By: Frederick A. Landman ------------------------------------- Frederick A. Landman President and Chief Executive Officer Patrick J. Costello ------------------------------------- Patrick J. Costello 2 EX-10.50 11 AGREEMENT DATED 04/07/97 EXHIBIT 10.50 MAGELLAN INTERNATIONAL, INC. April 7, 1997 Hughes Electronics Corporation 7200 Hughes Terrace Bldg. C01 Los Angeles, CA 90080-0028 Attention: Charles H. Noski, Vice Chairman and Chief Financial Officer Mr. Kenneth N. Heintz c/o Hughes Electronics Corporation 7200 Hughes Terrace Bldg. C01 Los Angeles, CA 90080-0028 RE: TERMS OF ASSIGNMENT OF KENNETH N. HEINTZ ("EXECUTIVE") TO PANAMSAT CORPORATION Gentlemen: This letter will confirm the agreements among Magellan International, Inc. (to be known as PanAmSat Corporation) ("PanAmSat"), Hughes Electronics Corporation ("Hughes") and the Executive concerning the Executive's employment by Hughes and his assignment to PanAmSat. Pursuant to an agreement (the "Reorganization Agreement") dated September 20, 1996 among Hughes Communications, Inc. and certain of its affiliates ("HCI"), PanAmSat and a corporation named PanAmSat Corporation which is to be renamed PanAmSat International Systems, Inc. ("OldPAS"), the parties will engage in a business combination (the "Transaction") which will result in the acquisition by PanAmSat of all the issued and outstanding stock of OldPAS and certain assets of HCI comprising the Galaxy Business, as defined in the Reorganization Agreement. It is the desire of the parties that the Executive serve PanAmSat as its Executive Vice President and Chief Financial Officer, and it is the intention of the parties that the Executive shall ultimately be employed by PanAmSat in such capacity. For an interim period of time, it is in the interests of the parties that the Executive continue to be employed by Hughes and assigned on a full-time basis to PanAmSat as provided below. Accordingly, it is agreed as follows: 1. EMPLOYMENT OF EXECUTIVE BY HUGHES AND ASSIGNMENT TO PANAMSAT. Hughes agrees to assign to PanAmSat, and PanAmSat agrees to accept from Hughes, the full-time services of the Executive who will hold the office and title of Executive Vice President and Chief Financial Officer of PanAmSat. During the term of this Agreement, Executive shall April 7, 1997 Page 2 continue to be an employee of Hughes, shall be maintained on the payroll of Hughes and, except as provided herein, shall be maintained on the benefits programs of Hughes, shall be under the sole direction and control of PanAmSat and shall report directly to the President and Chief Executive Officer. Executive accepts the assignment to PanAmSat, will devote all of his business time and energy to the duties of the office of Executive Vice President and Chief Financial Officer other than transition matters for HE as agreed to from time to time by the Chief Executive Officer of PanAmSat, and will be located in the offices of PanAmSat at Greenwich, Connecticut. 2. TERM. This Agreement shall commence on the closing of the Transaction and shall continue for a period not to exceed one year (the "Term"). At any time during the Term, the Executive may elect by written notice to Hughes and PanAmSat to terminate this assignment and to be employed by PanAmSat directly, which notice shall be effective on the first day of the next succeeding pay period. If the assignment of Executive is in effect upon the expiration of the Term, subject to Section 5, the Executive shall be transferred to the employ of PanAmSat as provided below and this Agreement shall terminate and expire. The assignment of Executive to PanAmSat hereunder and any subsequent employment of Executive by PanAmSat shall be terminable by either party for any reason or no reason. 3. BASE COMPENSATION AND BENEFITS. PanAmSat shall pay to Hughes monthly during the Term an amount equal to the following: a. The sum of $23,222, representing one-twelfth of an annual base salary of $280,000 (as same may be adjusted upwards by the Compensation Committee of PanAmSat's Board of Directors at such time as the salaries of other executive officers of PanAmSat are adjusted); b. An amount equal to the lesser of (i) Hughes' monthly cost of providing medical and health insurance, life/disability insurance and other welfare benefits ("Welfare Benefits") to Executive or (ii) the amount which PanAmSat would have paid if Executive had elected to receive all Welfare Benefits for which he would have been eligible had he been a direct employee of PanAmSat; c. The amount which Hughes pays into any retirement plan for the benefit of the Executive as a match against Executive's contribution, not to exceed 4% of Executive's compensation. Following Executive's direct employment by PanAmSat, Executive will participate in PanAmSat's 401(k) plan; and d. All direct expenses paid by Hughes in respect of Executive's employment, such as the employer's contribution for FICA. Additionally, PanAmSat will reimburse Hughes for all costs paid by Hughes in connection with the relocation of Executive to Connecticut consistent with PanAmSat's relocation policy, a copy of which is attached to this letter as Exhibit A (the "Relocation - --------- April 7, 1997 Page 3 Policy"), subject to a limit of $100,000. All expenses of Executive in excess of $100,000 under the Relocation Policy as administered by PanAmSat shall be paid by Hughes. Executive's business travel and entertainment expenses incurred in the service of PanAmSat will be paid or reimbursed directly to Executive upon presentation of expense reports in accordance with PanAmSat's business expense policies. 4. BONUS COMPENSATION; STOCK OPTIONS; RESIDUAL HUGHES' PLANS. 4.1 PanAmSat Plans. In addition to the sums payable to Hughes under Section 3 above, PanAmSat shall make a payment to Hughes for the account of the Executive equal to the amount which would have been paid to Executive if he had been employed by PanAmSat under PanAmSat's annual incentive plan ("AIP") applicable to executive officers of PanAmSat for the calendar year 1997, which payment will be made at the same time as PanAmSat pays bonuses to its executive officers for 1997. It is anticipated that the target bonus for Executive under the AIP for 1997 would be $160,000. Hughes will pay any bonus paid to it by PanAmSat to the Executive. If Executive becomes an employee of PanAmSat during 1998, he will be eligible to participate in the AIP for the entire calendar year as if he had been an employee from January 1, 1998. Additionally, PanAmSat shall make an initial award as of the closing of the Transaction of stock options to Executive directly, as an independent contractor, for 25,000 shares of PanAmSat common stock which shall be exercisable at the price and upon the same terms and conditions as shall be applicable to options granted to other senior executives of PanAmSat as of the closing of the Transaction. Notwithstanding the foregoing, all stock options so granted to Executive shall terminate in the event Executive ceases to serve as Executive Vice President and Chief Financial Officer of PanAmSat. 4.2 Hughes Plans. The parties acknowledge that Executive has residual benefits under the following Hughes plans which relate to his employment by Hughes prior to the closing of the Transaction: a. Stock options for the purchase of GMH stock; b. Payments under the long term achievement plan ("LTAP") of Hughes which will be made in 1998, 1999 and 2000 in respect of awards made in 1995, 1996 and 1997 (prior to the closing of the Transaction). The benefits described in clauses a. and b. of this Section 4.2 shall survive the execution of this Agreement and Executive's employment with PanAmSat, but shall terminate in accordance with the plans in the event Executive ceases to be employed by Hughes or any of its affiliates or PanAmSat. Other than the awards and incentives referred to in this Section and other than the compensation referred to in Section 3 of this Agreement, Hughes will not grant further compensation, bonuses, incentives or awards to Executive following the closing of the Transaction or with respect to any period during the Term of this Agreement or Executive's subsequent employment by PanAmSat. April 7, 1997 Page 4 5. EMPLOYMENT OF EXECUTIVE BY PANAMSAT. Unless Executive or PanAmSat has given 30 days' written notice to the other that employment with PanAmSat will not commence upon the expiration of the Term, then upon the expiration of the Term, executive shall become an employee of PanAmSat and shall be paid a salary at an annual rate equal to the annual rate in effect under Section 3a. Additionally, Executive shall be eligible for participation in all plans and benefits maintained by PanAmSat for its executive officers including, but not necessarily limited to the AIP, stock option plan, deferred compensation plan, 401(k) retirement plan and Welfare Benefits. 6. MISCELLANEOUS. 6.1 This Agreement shall be governed by and construed in accordance with the laws of the State of Connecticut. 6.2 This Agreement constitutes the entire agreement of the parties concerning its subject matter and all prior agreements and understandings, whether oral or in writing, are merged herein and superseded hereby. This Agreement shall be binding upon and enure to the benefit of the parties and their permitted successors and assigns and may be amended only by a written instrument signed by the parties. 6.3 This Agreement is personal to the parties and may not be assigned or delegated without the express written consent of the parties. 6.4 This Agreement may be signed in counterparts all of which when taken together shall constitute one Agreement. 6.5 If any provision of this Agreement is determined to be illegal or unenforceable, such provision shall not affect the legality or enforceability of the remaining provisions, it being the intention of the parties that each provision is severable from each other provision. If the foregoing terms and conditions re acceptable, please sign a copy of this letter where indicated and return it to the undersigned whereupon this letter shall be a binding agreement between us. Very truly yours, MAGELLAN INTERNATIONAL, INC. By /s/ Charles H. Noski -------------------- Accepted and agreed to this April 18, 1997 April 7, 1997 Page 5 HUGHES ELECTRONICS CORPORATION By /s/ Robert G. Parke ---------------------------------------- Agreed to and accepted this April 9, 1997 Kenneth N. Heintz - ----------------------------------------- Kenneth N. Heintz EX-21.1 12 SUBSIDIARIES OF PANAMSAT EXHIBIT 21.1 PANAMSAT CORPORATION List of Subsidiaries PanAmSat Communications Japan, Inc. California PanAmSat Communications Carrier Services, Inc. California PanAmSat Communications Services, Inc. California PanAmSat International Holdings, Inc. Delaware USHI, Inc. Delaware PanAmSat International Systems, Inc. Delaware PAS International Employment, Inc. Delaware PanAmSat Europe Limited United Kingdom PanAmSat Asia Pty., Ltd. Australia PanAmSat FSC, Incorporated Barbados PanAmSat Africa (Proprietary), Ltd. South Africa Southern Satellite Licensee Corp. Delaware PanAmSat Carrier Services, Inc. Delaware Southern Satellite Corp. Connecticut PanAmSat Capital Corporation Delaware PanAmSat Licensee Corp. Delaware PanAmSat India, Inc. Delaware PanAmSat Mexico. Inc. Delaware PanAmSat Asia Carrier Services, Inc. Delaware EX-24.1 13 POWERS OF ATTORNEY EXHIBIT 24.1 POWER OF ATTORNEY The undersigned, acting in the capacity or capacities with respect to PanAmSat Corporation stated with their respective names below, hereby constitute and appoint JAMES W. CUMINALE, KENNETH N. HEINTZ, and each of them severally, the attorneys-in-fact of the undersigned with full power to them and each of them to sign for and in the name of the undersigned in the capacities indicated below the Annual Report on Form 10-K of PanAmSat Corporation for the fiscal year ended December 31, 1997 and any and all amendments thereto:
Signature Title Date Michael T. Smith Chairman of the Board of March 20, 1998 - --------------------------------- Directors Michael T. Smith Frederick A. Landman President and Chief March 20, 1998 - --------------------------------- Executive Officer (principal Frederick A. Landman executive officer) and Director Patrick J. Costello Director March 20, 1998 - --------------------------------- Patrick J. Costello Steven D. Dorfman Director March 20, 1998 - --------------------------------- Steven D. Dorfman John J. Higgins Director March 20, 1998 - --------------------------------- John J. Higgins Dennis F. Hightower Director March 20, 1998 - --------------------------------- Dennis F. Hightower James M. Hoak Director March 20, 1998 - --------------------------------- James M. Hoak
Charles H. Noski Director March 20, 1998 - --------------------------------- Charles H. Noski Ted G. Westerman Director March 20, 1998 - --------------------------------- Ted G. Westerman Joseph R. Wright, Jr. Director March 20, 1998 - --------------------------------- Joseph R. Wright, Jr. Kenneth N. Heintz Executive Vice President and March 20, 1998 - --------------------------------- Chief Financial Officer Kenneth N. Heintz (principal financial officer and principal accounting officer)
EX-27.1 14 FINANCIAL DATA SCHEDULE
5 THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND RELATED STATEMENT OF INCOME AS OF DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1997 JAN-01-1997 DEC-31-1997 91,739 0 68,787 200 0 285,357 2,942,768 436,686 5,682,434 104,918 9,116 0 0 1,491 2,559,345 5,682,434 0 629,939 20,476 335,735 0 0 30,973 263,616 117,325 133,472 0 20,643 0 112,829 0 0
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