<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
[x] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11 or Rule 14a-12
PEGASUS COMMUNICATIONS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No Fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined).
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
-----------------------------------------------------------------------
2) Form, Schedule or Registration Statement no.:
-----------------------------------------------------------------------
3) Filing Party:
-----------------------------------------------------------------------
4) Date Filed:
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<PAGE>
[LOGO]
PEGASUS COMMUNICATIONS CORPORATION
C/O PEGASUS COMMUNICATIONS MANAGEMENT COMPANY
SUITE 454
5 RADNOR CORPORATE CENTER
100 MATSONFORD ROAD
RADNOR, PENNSYLVANIA 19087
--------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
--------------
TIME 4:00 p.m. on Wednesday, June 25, 1997
PLACE Eagle Lodge Conference Center
Ridge Pike and Manor Road
Lafayette Hill, Pennsylvania 19444
ITEMS OF BUSINESS 1. To elect four directors to hold office as specified in
the proxy statement.
2. To ratify the appointment of Coopers & Lybrand L.L.P. as
independent accountants for the Company for the current
fiscal year.
3. To act upon any other matters properly coming before the
meeting or any adjournment thereof.
RECORD DATE The close of business on May 23, 1997 has been fixed as the
record date for the meeting. All stockholders of record at
that time are entitled to notice of, and all such holders
of Class A Common Stock and Class B Common Stock are
entitled to vote at, the meeting and any adjournment or
postponement thereof.
ANNUAL REPORT The 1996 Annual Report of Pegasus Communications
Corporation is being mailed simultaneously herewith. The
Annual Report is not to be considered part of the proxy
solicitation materials.
IMPORTANT In order to avoid additional soliciting expense to the
Company, please MARK, SIGN, DATE and MAIL your proxy
PROMPTLY in the return envelope provided, even if you plan
to attend the meeting. If you attend the meeting and wish
to vote your shares in person, arrangements will be made
for you to do so.
By order of the Board of Directors,
HOWARD E. VERLIN
Secretary
May 29, 1997
<PAGE>
[LOGO]
PEGASUS COMMUNICATIONS CORPORATION
C/O PEGASUS COMMUNICATIONS MANAGEMENT COMPANY
SUITE 454
5 RADNOR CORPORATE CENTER
100 MATSONFORD ROAD
RADNOR, PENNSYLVANIA 19087
----------------------------
PROXY STATEMENT
----------------------------
May 29, 1997
This Proxy Statement, which is being sent to stockholders on or about
May 29, 1997, is furnished in connection with the solicitation of proxies by the
Board of Directors of Pegasus Communications Corporation ("Pegasus" or the
"Company") for use at the forthcoming Annual Meeting of Stockholders to be held
on Wednesday, June 25, 1997, and at any adjournment or postponement thereof.
The close of business on May 23, 1997 has been fixed as the record date
for the meeting (the "Record Date"). All stockholders of record at that time are
entitled to notice of, and all holders of record of the Company's Class A Common
Stock ("Class A Common Stock") and Class B Common Stock ("Class B Common Stock"
and together with the Class A Common Stock, the "Common Stock") are entitled to
vote at the meeting and any adjournment or postponement thereof. On the Record
Date, there were outstanding 5,224,766 shares of Class A Common Stock and
4,581,900 shares of Class B Common Stock, which constituted the only outstanding
securities of the Company entitled to vote.
VOTING AND REVOCABILITY OF PROXIES
On each matter voted upon at the meeting and any adjournment or
postponement thereof, holders of Class A Common Stock and Class B Common Stock
will vote together as a single class. Each record holder of Class A Common Stock
will be entitled to one vote per share, and each record holder of Class B Common
Stock will be entitled to ten votes per share.
<PAGE>
Directors are to be elected by a plurality of the votes of the shares
present, in person or by proxy, at the meeting and entitled to vote. Cumulative
voting in the election of directors is not permitted. Approval of Proposal 2
requires the affirmative vote of the holders of a majority of the shares
present, in person or by proxy, at the meeting and entitled to vote. If a proxy
is marked as "Withhold Authority" or "Abstain" on any matter, or if specific
instructions are given that no vote be cast on any specific matter (a "Specified
Non-Vote"), the shares represented by such proxy will not be voted on such
matter. Abstentions will be included within the number of shares present at the
meeting and entitled to vote for purposes of determining whether such matter has
been authorized, but nominee and other Specified Non-Votes will not be so
included.
Shares may be voted at the meeting in person or by proxy. All valid
proxies received prior to the meeting will be voted. Unless marked to the
contrary, such proxies will be voted "FOR" the election of all directors and
"FOR" the ratification of the appointment of Coopers & Lybrand L.L.P. as the
Company's independent accountants for 1997. If any other business is brought
before the meeting, the proxies will be voted, to the extent permitted by the
rules and regulations of the Securities and Exchange Commission (the
"Commission"), in accordance with the judgment of the persons voting the
proxies. A stockholder who has given a proxy may revoke it at any time prior to
such proxy being voted at the meeting by filing with the Secretary of the
Company an instrument revoking it or a duly executed proxy bearing a later date,
or by attending the meeting and giving notice of such revocation. Attendance at
the meeting does not by itself constitute revocation of a proxy.
In addition to the use of the mails, proxies may be solicited by the
directors, officers and employees of the Company, without additional
compensation, by personal interview, telephone, telegram, or otherwise.
Arrangements also may be made with brokerage houses and other custodians,
nominees and for the forwarding of solicitation material to the beneficial
owners of stock held of record by such persons, and the Company may reimburse
them for their reasonable out-of-pocket and clerical expenses.
PROPOSAL 1. ELECTION OF DIRECTORS
The Board of Directors has nominated four persons for election as
directors whose terms will expire at the 1998 Annual Meeting of Stockholders, or
when their successors are duly elected and qualified. The nominees are Marshall
W. Pagon, James J. McEntee, III, Mary C. Metzger and Donald W. Weber, all of
whom are currently directors of the Company.
If any nominee should be unable to serve as a director, an event not
now anticipated, it is intended that the shares represented by proxies will be
voted for the election of such substitute as the Board of Directors may
nominate. Set forth below is certain information with respect to the persons
nominated as directors of the Company.
Marshall W. Pagon has served as President, Chief Executive Officer,
Treasurer and Chairman of the Board of the Company since its incorporation. Mr.
Pagon also serves as Chief Executive Officer and Director of each of the
Company's subsidiaries. From 1991 to October 1994, when the assets of various
affiliates of the Company, principally limited partnerships that owned and
operated the Company's
-2-
<PAGE>
television and cable operations, were transferred to subsidiaries of the
Company, Mr. Pagon or entities controlled or affiliated with Mr. Pagon served as
the general partner of these partnerships and conducted the business now
conducted by the Company. Mr. Pagon's background includes over 15 years of
experience in the media and communications industry. Mr. Pagon is 41 years old.
James J. McEntee, III has been a Director of the Company since October
8, 1996 and a Director of Pegasus Media & Communications, Inc. ("PM&C"), a
wholly-owned subsidiary of the Company, since November 1996. Mr. McEntee has
been a member of the law firm of Lamb, Windle & McErlane, P.C. for the past five
years and a principal of that law firm for the past three years. Mr. McEntee is
39 years old.
Mary C. Metzger has been a Director of the Company since November 14,
1996 and a Director of PM&C since November 1996. Ms. Metzger has been Chairman
of Personalized Media Communications L.L.C. and its predecessor company,
Personalized Media Communications Corp., since February 1989. Ms. Metzger has
also been Managing Director of Video Technologies International, Inc. since June
1986. Ms. Metzger is 51 years old.
Donald W. Weber has been a Director of the Company since its
incorporation and a director of PM&C since November 1995. Mr. Weber has been the
President and Chief Executive Officer of Viewstar Entertainment Services, Inc.,
an affiliate member of the National Rural Telecommunications Cooperative, which
distributes DIRECTV(R) services in North Georgia, since August 1993. From
November 1991 through August 1993, Mr. Weber was a private investor and
consultant to various communication companies. Prior to that time, Mr. Weber was
President and Chief Operating Officer of Contel Corporation until its merger
with GTE Corporation in 1991. Mr. Weber is currently a member of the boards of
directors of InterCel, Inc. and Healthdyne Information Enterprises, Inc., which
are publicly-traded companies. Mr. Weber is 60 years old.
Information Concerning Meetings and Certain Committees
The Board of Directors held five meetings during 1996. The Company has
a standing Audit Committee and a standing Compensation Committee of its Board of
Directors. The Company does not have a standing nominating committee. The
Company was incorporated in May 1996. Prior to the Company's initial public
offering on October 3, 1996 (the "Initial Public Offering"), the Company did not
have an Audit Committee or a Compensation Committee or other Board committee
performing similar functions. See "Compensation Committee Interlocks and Insider
Participation" below.
The Audit Committee reviews (i) the scope of the Company's audit, (ii)
the corporate accounting practices and policies with the Company's independent
accountants and recommends to whom reports should be submitted within the
Company, (iii) the final report of the Company's independent accountants, and
(iv) overall accounting and financial controls with internal and independent
accountants. The Audit Committee is also available to the independent
accountants during the year for consultation purposes. Mr. Weber and Ms. Metzger
are members of the Audit Committee. During 1996, the Audit Committee met once.
-3-
<PAGE>
The Compensation Committee establishes the salaries of executive
officers and makes recommendations to the Board of Directors regarding the
adoption, extension, amendment and termination of compensation plans in which
officers or directors may participate. The Committee also exercises certain
administrative powers pursuant to the Pegasus Restricted Stock Plan (the
"Restricted Stock Plan") and the Pegasus Communications 1996 Stock Option Plan
(the "Stock Option Plan"). Messrs. Weber and McEntee are members of the
Compensation Committee. The Compensation Committee did not meet during 1996.
During 1996, all incumbent directors attended in person or by
conference telephone at least 75% of the total number of meetings of the Board
of Directors and committees of the Board on which they served during their
incumbency.
Compensation of Directors
Under the Company's Bylaws, each director is entitled to receive such
compensation, if any, as may from time to time be fixed by the Board of
Directors. The Company currently pays its directors who are not employees or
officers of the Company an annual retainer of $5,000 plus $500 for each Board
meeting attended in person and $250 for each Board meeting held by telephone.
The Company also reimburses each director for all reasonable expenses incurred
in traveling to and from the place of each meeting of the Board or committee of
the Board.
As additional remuneration for joining the Board, Mr. Weber was granted
in April 1996 an option to purchase 3,385 shares of Class A Common Stock at an
exercise price of $14.00 per share. Mr. Weber's option vested upon issuance, is
exercisable until November 2000 and, at the time of grant, was issued at an
exercise price equal to fair market value at the time Mr. Weber was elected a
director.
In addition, each non-employee director of the Company, which currently
includes all directors except for Mr. Pagon, are eligible to receive grants of
nonqualified stock options ("NQSOs") under the Company's Stock Option Plan. In
March 1997, each non-employee director was granted an option to purchase 5,000
shares of Class A Common Stock under the Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE ELECTION OF EACH OF
THE DIRECTORS.
-4-
<PAGE>
PROPOSAL 2. RATIFICATION OF APPOINTMENT OF AUDITORS
The firm of Coopers & Lybrand L.L.P. served as the Company's
independent accountants for 1996 and has been selected by the Board of Directors
to serve in the same capacity for 1997. The stockholders will be asked to ratify
this appointment at the meeting. The ratification of independent accountants by
the stockholders is not required by law or the Company's Bylaws. The Company has
submitted this matter to the stockholders because it believes it to be good
practice to do so. The affirmative vote of holders of a majority of the
outstanding shares of Common Stock present, in person or by proxy, at the
meeting and entitled to vote is required to ratify the appointment of Coopers &
Lybrand L.L.P. If a majority of the votes cast on this matter are not cast in
favor of the ratification of Coopers & Lybrand L.L.P., the Company will appoint
other independent accountants as soon as practicable and before the close of the
1997 year.
A representative of Coopers & Lybrand L.L.P. is expected to be present
at the meeting and will be available to respond to appropriate questions. The
representative will also have the opportunity to make a statement if he or she
desires to do so.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" RATIFICATION OF
THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR 1997.
PROPOSAL 3. OTHER MATTERS
The Board of Directors knows of no matters to be presented for action
at the meeting other than those set forth in the attached notice and customary
procedural matters. However, if any other matters should properly come before
the meeting or any adjournments thereof, the proxies solicited hereby will be
voted on such matters, to the extent permitted by the rules and regulations of
the Commission, in accordance with the judgment of the persons voting such
proxies.
ADDITIONAL INFORMATION
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's directors and executive officers, as well as
persons beneficially owning more than 10% of the Company's outstanding shares of
Common Stock and certain other holders of such shares (collectively, "Covered
Persons"), to file with the Commission and the Nasdaq Stock Market, within
specified time periods, initial reports of ownership, and subsequent reports of
changes in ownership, of Common Stock and other equity securities of the
Company.
Based solely upon the Company's review of copies of such reports
furnished to it and upon representations of Covered Persons that no other
reports were required, to the Company's knowledge, all
-5-
<PAGE>
of the Section 16(a) filings required to be made by the Covered Persons with
respect to 1996 were made on a timely basis.
Executive Compensation
The following table sets forth certain information, for the Company's
last three fiscal years, concerning the annual and long-term compensation paid
to the Company's Chief Executive Officer and each of the Company's other
executive officers whose total annual salary and bonus during 1996 exceeded
$100,000 (collectively, the "Named Officers"):
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation(1) Awards
----------------- --------------
Restricted All
Other Annual Stock Other
Name Principal Position Year Salary Compensation Award(3) Compensation(4)
- -------------------- ------------------------------------- ------ -------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Marshall W. Pagon President and Chief Executive Officer 1996 $150,000 -- -- $62,253(5)
1995 $150,000 -- -- --
1994 $150,000 -- -- --
Robert N. Verdecchio Senior Vice President, Chief Financial 1996 $125,000 -- $1,746,794 $ 6,875
Officer and Assistant Secretary 1995 $122,083 -- $ 133,450 --
1994 $ 90,000 -- -- --
Howard E. Verlin Vice President, Cable and Satellite 1996 $100,000 -- $ 89,166 $ 1,100
Television, and Secretary 1995 $100,000 -- $ 95,321 --
1994 $ 65,000 -- -- --
Guyon W. Turner Vice President, Broadcast Television 1996 $130,717 $18,200(2) $1,738,674 --
1995 $130,486 $18,200(2) $ 95,321 --
1994 $140,364 $20,480(2) -- --
</TABLE>
- ----------------------
(1) Prior to the consummation of the Initial Public Offering, the Company's
executive officers never received any salary or bonus compensation from the
Company. The salary amounts presented above for 1994 and 1995 and for
January 1, 1996 through October 8, 1996 were paid by BDI Associates L.P.
(the "Management Company"), an affiliate of the Company. After October 8,
1996, the Company's executive officers' salaries were paid by the Company.
See "Certain Relationships and Related Transactions" below. There are no
employment agreements between the Company and its executive officers.
(2) Includes $18,000 housing allowance paid by the Company.
(3) Represents grants of the non-voting common stock of Pegasus Communications
Holdings, Inc., the parent of the Company (the "Parent"), in 1995 (875
shares to Mr. Verdecchio and 625 shares each to Messrs. Verlin and Turner).
Amounts shown in the table for 1995 are based on a valuation prepared for
the Parent at the time of the grants. Amounts shown in the table for 1996
are based on the Initial Public Offering price of $14.00 per share.
One-fourth of the shares vest on December 31 of each of 1995, 1996, 1997
and 1998. Upon the completion of the Initial Public Offering, all of the
Parent's non-voting common stock were exchanged for shares of Class A
Common Stock pursuant to a Management Share Exchange Agreement resulting in
46,142, 39,952 and 32,952 shares of Class A Common Stock, respectively, to
Messrs. Verdecchio, Verlin and Turner. In 1996, 123,868, 6,369 and 124,191
shares were granted to Messrs. Verdecchio, Verlin and Turner, which vested
in accordance with the same vesting schedule. An additional 903 shares were
granted to Mr. Verdecchio pursuant to the Company's Restricted Stock Plan.
As of December 31, 1996, Messrs. Verdecchio, Verlin and Turner had an
aggregate of 170,903, 39,321 and
-6-
<PAGE>
157,143 shares of Class A Common Stock with an aggregate value as of
December 31, 1996 of $2,349,916, $540,664 and $2,160,716, respectively.
(4) Unless otherwise indicated, the amounts listed represent the Company's
contributions under its 401(k) Plans.
(5) Of the amount listed for Mr. Pagon, $8,525 represents the Company's
contributions under its 401(k) Plans and $53,728 represents the actuarial
benefit to Mr. Pagon of premiums paid by the Company in connection with the
split dollar agreement entered into by the Company with the trustees of an
insurance trust established by Mr. Pagon. See "Certain Relationships and
Related Transactions" below for more information relating to this
agreement.
Compensation Committee Interlocks and Insider Participation
Prior to the Initial Public Offering, the Company did not have a
compensation committee or any other committee of the Board of Directors
performing similar functions. Decisions concerning compensation of executive
officers were made by the Board of Directors, which included Mr. Pagon, the
President and Chief Executive Officer of the Company. Pegasus' Compensation
Committee currently consists of Messrs. McEntee and Weber.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
Introduction
Pursuant to rules established by the Securities and Exchange
Commission, the Company is required to provide certain information with respect
to compensation provided to the Company's Chief Executive Officer and certain
other of its executive officers. In fulfillment of this requirement, the
Compensation Committee of the Board of Directors has prepared the following
report addressing the Company's executive compensation policies for the fiscal
year ended December 31, 1996 for inclusion in the Proxy Statement.
The Compensation Committee reviews and approves salaries and other
matters relating to compensation of the Company's executive officers, including
incentive compensation and other forms of compensation and benefits, and
administers the Pegasus Restricted Stock Plan (the "Restricted Stock Plan")
(with respect to executive officers) and Pegasus Communications 1996 Stock
Option Plan (the "Stock Option Plan"). The Compensation Committee of the
Company's Board of Directors consists entirely of non-employee directors.
The Compensation Committee was established in December 1996. Prior to
that time, the Company did not have a Compensation Committee or any other
committee of the Board of Directors performing similar functions. As a
consequence, between October 8, 1996, the date of consummation of the Company's
initial public offering, and the date of appointment of the Compensation
Committee, decisions regarding executive compensation were made by the Board of
Directors as a whole. Prior to the consummation of the Company's initial public
offering, the Company's executive officers never received any salary or bonus
compensation from the Company. The salaries of the Company's executive officers
were paid by the Management Company, an affiliate of the Company. After October
8, 1996, the Company's executive officers' salaries were paid by the Company.
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<PAGE>
Compensation Policies
The Compensation Committee seeks to achieve the following goals with
the Company's executive compensation programs: attract and retain key employees
and non-employee directors and motivate them to exercise their best efforts on
behalf of the Company; and promote growth in stockholder value by providing
employees with restricted stock awards under the Restricted Stock Plan and
grants of options to purchase Class A Common Stock of the Company.
Base Compensation
The Company's executive compensation philosophy places a high degree of
emphasis on incentive compensation in the form of equity-based plans.
Accordingly, in the opinion of the Compensation Committee, based upon
information available to the Committee on competitive salaries, the base
compensation paid to the Company's executive officers falls at the lower end of
the range of salaries for similar positions in comparable media and
communications companies.
Equity Incentive Plans
The Company provides equity incentive compensation to its executive
officers and key employees primarily through the Restricted Stock Plan and the
Stock Option Plan.
Restricted Stock Plan. The Restricted Stock Plan was adopted by the
Company and approved by its shareholders in September 1996. Awards under this
Plan, other than discretionary awards and excess awards, are in proportion to
the annual increases in location cash flow. The Company believes that location
cash flow is accepted within the media and communications industry as a
generally recognized measure of performance and is used by analysts who report
publicly on the performance of companies operating in this industry. The Company
believes that the Restricted Stock Plan, together with its other equity
incentive plans, will result in greater increases in stockholder value than
conventional stock option programs, because these plans create a clear cause and
effect relationship between initiatives taken to increase location cash flow and
the amount of incentive compensation that results therefrom.
The Restricted Stock Plan provides for four types of restricted stock
awards that are made in the form of the Company's Class A Common Stock: profit
sharing awards to general managers, department managers and corporate managers
(other than executive officers); special recognition awards for consistency
(team award), initiative (a team or individual award), problem solving (a team
or individual award) and individual excellence; discretionary awards; and awards
that are made to the extent that an employee does not receive a matching
contribution under the Company's 401(k) Plans because of restrictions imposed by
the U.S. or Puerto Rico Internal Revenue Code. Executive officers are eligible
to receive awards under the Restricted Stock Plan consisting only of special
recognition awards, discretionary awards and awards made to the extent that an
employee does not receive a matching contribution because of restrictions of the
U.S. or Puerto Rico Internal Revenue Code. In 1996, the Company issued a total
of 3,614 shares of its Class A Common Stock under the Restricted Stock Plan. The
Company has made and intends to make additional grants to key employees under
the Restricted Stock Plan.
-8-
<PAGE>
Stock Option Plan. The Stock Option Plan was adopted by the Company and
approved by shareholders in September 1996. Executive officers who are not
eligible to receive profit sharing awards under the Restricted Stock Plan are
eligible to receive incentive stock options and nonqualified stock options under
the Plan subject to certain limits. Non-employee directors are eligible to
receive nonqualified stock options under the Plan. Currently five executive
officers and three non-employee directors are eligible to receive options under
the Stock Option Plan. In 1996, no options were granted under the Stock Option
Plan. The Company intends to make future grants under the Stock Option Plan to a
broad-based group of employees, including executive officers, senior managers,
directors and other key employees.
Chief Executive Officer Compensation
The Compensation Committee uses the same factors in determining the
compensation of the Chief Executive Officer as it does for the other executive
officers. The salary received by the Chief Executive Officer in 1996 was based
on the compensation policies discussed above.
THE COMPENSATION COMMITTEE
James J. McEntee, III
Donald W. Weber
-9-
<PAGE>
Performance Graph
The graph set forth below compares the cumulative total returns to
holders of Class A Common Stock of the Company with the cumulative total return
of the Nasdaq Stock Market-U.S. Index and the Nasdaq Telecommunications Index
for the period beginning October 4, 1996, the date trading first began in the
Company's Class A Common Stock on the Nasdaq National Market. The graph assumes
that the value of the investment in the relevant stock or index was $100 at
October 4, 1996 and that all dividends were reinvested. Total returns are
calculated based on a fiscal year ending December 31. The closing market price
of the Company's Class A Common Stock on December 31, 1996 was $13.75.
Comparison of Cumulative Total Return for the Period
From October 4, 1996 to December 31, 1996
150|------------------------------------------------------------------|
| |
| |
125|------------------------------------------------------------------|
| |
D | * * |
O 100|------*-----------------*-----------------------------------&-----|
L | & & # |
L | # # |
A 75|------------------------------------------------------------------|
R | |
S | |
50|------------------------------------------------------------------|
| |
| |
25|------------------------------------------------------------------|
| |
| |
0|-----|------------------|-----------------|-----------------|-----|
October 4 October 31 November 30 December 31
*=Pegasus Communications &=Nasdaq #=Nasdaq Stock Market - US
Corporation Telecommunications
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
October 4 October 31 November 30 December 31
- ----------------------------------------------------------------------------------------------
Pegasus Communications
Corporation 100.00 94.00 91.00 98.00
- ----------------------------------------------------------------------------------------------
Nasdaq Telecommunications 100.00 95.00 97.00 100.00
- ----------------------------------------------------------------------------------------------
Nasdaq Stock Market - US 100.00 97.00 103.00 103.00
- ----------------------------------------------------------------------------------------------
</TABLE>
-10-
<PAGE>
Principal Stockholders
The following table sets forth as of May 23, 1997 certain information
regarding the beneficial ownership of the Class A Common Stock and Class B
Common Stock by (a) each stockholder known to the Company to be the beneficial
owner, as defined in Rule 13d-3 under the Exchange Act, of more than 5% of the
Class A Common Stock and Class B Common Stock, based upon Company records or the
records of the Commission, (b) each director of the Company, (c) each of the
Named Officers, and (d) all executive officers and directors of the Company as a
group. Each share of Class B Common Stock is currently convertible at the
discretion of the holder into an equal amount of shares of Class A Common Stock.
Each of the stockholders named below has sole voting power and sole investment
power with respect to the shares indicated as beneficially owned, unless
otherwise indicated.
<TABLE>
<CAPTION>
Pegasus Class A Pegasus Class B
Common Stock Common Stock
Beneficially Owned Beneficially Owned
------------------------ ---------------------
Shares % Shares %
-------- ------ --------- ------
<S> <C> <C> <C> <C>
Marshall W. Pagon(1)(2)......................... 4,590,990(3) 46.8% 4,581,900 100.0%
Guyon W. Turner................................. 157,143(4) 3.0% -- --
Robert N. Verdecchio............................ 175,448(4) 3.4% -- --
Howard E. Verlin................................ 48,411(4) (5) -- --
James J. McEntee, III........................... 500 (5) -- --
Mary C. Metzger................................. 500 (5) -- --
Donald W. Weber(6).............................. 5,385 (5) -- --
Richard D. Summe(7)............................. 284,719 5.5% -- --
T. Rowe Price Associates, Inc.
and related entities(8)....................... 433,000 8.3% -- --
Wellington Management
Company, LLP(9)............................... 461,600 8.8% -- --
Harron Communications Corp.(10)(11)............. 852,110 16.3% -- --
Directors and Executive Officers as
a Group (8 persons)(12)..................... 4,983,513 50.8% 4,581,900 100.0%
</TABLE>
- ----------------------
(1) The address of this person is c/o Pegasus Communications Management
Company, 5 Radnor Corporate Center, Suite 454, 100 Matsonford Road, Radnor,
Pennsylvania 19087.
(2) Pegasus Capital, L.P. holds 1,217,348 shares of Class B Common Stock and
9,090 shares of Class A Common Stock. Mr. Pagon is the sole shareholder of
the general partner of Pegasus Capital, L.P. and is deemed to be the
beneficial owner of these shares. All of the 3,364,552 remaining shares of
Class B Common Stock are owned by the Parent. All shares of Class A Voting
Common Stock of the Parent are held by Pegasus Communications Limited
Partnership. Mr. Pagon controls Pegasus Communications Limited Partnership
by reason of his ownership of all the outstanding voting stock of the sole
general partner of a limited partnership that is, in turn, the sole general
partner in Pegasus Communications Limited Partnership. As such, Mr. Pagon
is the beneficial owner of 100% of Class B Common Stock with sole voting
and investment power over all such shares.
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(3) Includes 4,581,900 shares of Class B Common Stock, which are convertible
into shares of Class A Common Stock on a one-for-one basis.
(4) On March 26, 1997, the Commission declared effective a registration
statement filed by Pegasus which would permit Messrs. Turner, Verdecchio
and Verlin to sell 157,143, 170,000 and 39,321 shares of Class A Common
Stock, respectively, subject to certain vesting and other restrictions. To
date, no shares have been sold pursuant to the registration statement.
Messrs. Turner, Verdecchio and Verlin have sole voting and investment power
over their shares, subject to certain vesting restrictions.
(5) Represents less than 1% of the outstanding shares of the class of Common
Stock.
(6) Includes 3,385 shares of Class A Common Stock issuable upon the exercise of
the vested portion of outstanding stock options.
(7) The address of Richard D. Summe is 11790 E. State Rd. 334, Zionsville,
Indiana 46077-9399.
(8) T. Rowe Price Associates, Inc. ("T. Rowe Price") is deemed to be the
beneficial owner of 433,000 shares, over which it has sole investment
power. Of these shares, 283,000 shares are held by T. Rowe Price New
Horizons Fund, Inc. ("New Horizons"), which is deemed to be the beneficial
owner of 5.4% of the shares of Class A Common Stock (over which New
Horizons Fund has sole voting power), and 150,000 shares are held by New
Age Media Funds, Inc. ("New Age Media") (over which New Age Media has sole
voting power).
(9) Consists of 193,500 shares of Class A Common Stock over which Wellington
Management Company, LLP ("WMC") has shared voting power and 461,600 shares
over which WMC has shared investment power.
(10) Under the terms of a stockholder's agreement entered into by the Company in
connection with the acquisition of direct broadcast satellite television
rights in Michigan and Texas, the Company has a right of first offer to
purchase any shares sold by Harron Communications Corp. in a private
transaction exempt from registration under the Securities Act.
(11) The address of Harron Communications Corp. is 70 East Lancaster Avenue,
Frazer, Pennsylvania 19355.
(12) See footnotes (2), (3) and (6). Also includes 1,500 shares of Class A
Common Stock owned by Ted S. Lodge's wife, for which Mr. Lodge disclaims
beneficial ownership, and 3,636 shares of Class A Common Stock issued to
Mr. Lodge for which Mr. Lodge has sole voting and investment power, subject
to certain vesting restrictions.
Certain Relationships and Related Transactions
Management Agreement
Prior to the Initial Public Offering, the Management Company performed
various management and accounting services for the Company pursuant to a
management agreement (the "Management Agreement") between the Management Company
and the Company. Mr. Pagon controls and is the majority owner of the Management
Company. Upon the consummation of the Initial Public Offering, the Management
Agreement was transferred to the Company, and the employees of the Management
Company became employees of the Company. In consideration for the transfer of
this agreement together with certain net assets, including approximately $1.5
million of accrued management fees, the Management Company received $19.6
million of Class B Common Stock (1,400,000 shares of Class B Common Stock) and
approximately $1.5 million in cash. Of the 1,400,000 shares, 182,652 were
exchanged for an equal number of shares of Class A Common Stock and transferred
to certain members of management who were participants in a management share
exchange. The fair market value of the Management Agreement was determined by
Kane Reece Associates, Inc. ("Kane Reece"), an independent appraiser, based upon
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a discounted cash flow approach using historical financial results and
management's financial projections. In return for Kane Reece's services, the
Company incurred a fee of approximately $15,000 plus expenses.
Under the Management Agreement, the Management Company provided
specified executive, administrative and management services to PM&C and its
operating subsidiaries. These services included: (i) selection of personnel;
(ii) review, supervision and control of accounting, bookkeeping, recordkeeping,
reporting and revenue collection; (iii) supervision of compliance with legal and
regulatory requirements; and (iv) conduct and control of daily operational
aspects of the Company. In consideration for the services performed by the
Management Company under the Management Agreement, the Company was charged
management fees, which represented 5% of the Company's net revenues, and
reimbursements for the Management Company's accounting department costs. The
Management Company's offices are located at 5 Radnor Corporate Center, Suite
454, 100 Matsonford Road, Radnor, Pennsylvania 19087.
Management Share Exchange
Certain members of the Company's management, including all of the
Company's executive officers with the exception of Marshall W. Pagon and Ted S.
Lodge, held prior to the consummation of the Initial Public Offering 5,000
shares in the aggregate of non-voting stock of the Parent. Upon consummation of
the Initial Public Offering, all shares of the Parent non-voting stock were
exchanged for an aggregate of 263,606 shares of Class A Common Stock of the
Company and the non-voting stock of the Parent was distributed to the Parent.
Towers
Simultaneously with the completion of the Initial Public Offering, the
Company purchased the assets of Pegasus Towers, Inc. ("Towers"), currently a
subsidiary of the Company, for total consideration of approximately $1.4
million. Towers was beneficially owned by Marshall W. Pagon. The Towers purchase
consisted of ownership and leasehold interests in three tower properties. Towers
leased space on each of its towers to the Company and to unaffiliated companies.
The purchase price was determined by an independent appraisal.
Split Dollar Agreement
In December 1996, the Company entered into a Split Dollar Agreement
with the trustees of an insurance trust established by Marshall W. Pagon. Under
the Split Dollar Agreement, the Company agreed to pay a portion of the premiums
for certain life insurance policies covering Mr. Pagon owned by the insurance
trust. The Agreement provides that the Company will be repaid for all amounts it
expends for such premiums, either from the cash surrender value or the proceeds
of the insurance policies.
Loan Program
In February 1997, the Company adopted a program to assist its employees
in obtaining loans for various purposes, including to enable employees to pay
income taxes as a result of grants of Class A Common Stock by the Company.
Assistance may take the form of direct loans by the Company,
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guarantees by the Company of loans made by third parties, or other forms of
credit support or credit enhancement, including without limitation, agreements
by the Company to purchase such loans, purchase any collateral securing such
loans (including Class A Common Stock), lend money or otherwise provide funds
for the repayment of such loans. Any direct loan by the Company may not exceed
75 percent of the market value of the Class A Common Stock at the time that the
loan is made.
In April 1997, Messrs. Verdecchio, Verlin and Turner obtained loans of
$432,000, $68,000, and $414,000, respectively, from a bank and pledged their
shares of Class A Common Stock as security. Proceeds from the loans were used to
pay tax liabilities arising from grants of the Company's Class A Common Stock.
Pursuant to the loan program, the Company agreed, upon any default by these
officers under the loans, to purchase from the bank the Class A Common Stock
securing the loans for prices (ranging from $3.71 to $5.66 per share) sufficient
to repay the loans.
Harron Designee
In connection with the acquisition of direct broadcast satellite
television rights from Harron Communications Corp. ("Harron") in October 1996,
the Parent agreed to nominate a designee of Harron as a member of the Company's
Board of Directors. James J. McEntee, III was appointed to the Company's Board
of Directors as Harron's designee. Harron's right to name a designee terminates
on October 8, 1998.
Stockholder Proposals
In order to be eligible for inclusion in the Company's proxy materials
for the 1998 Annual Meeting of Stockholders, stockholders' proposals to take
action at such meeting must comply with applicable Commission rules and
regulations, must be directed to the Secretary of the Company at its offices set
forth on page one of this Proxy Statement and must be received by the Company
not later than January 28, 1998.
Miscellaneous
A copy of the Company's 1996 Annual Report to Stockholders is being
mailed simultaneously herewith to stockholders but is not to be regarded as
proxy solicitation material.
The Company, upon request, will furnish to record and beneficial
holders of its Common Stock, free of charge, a copy of its Annual Report on Form
10-K (including financial statements but without exhibits and schedules) for
fiscal 1996. Copies of exhibits to the Form 10-K also will be furnished upon
request and the payment of a reasonable fee. All requests should be directed to
the Secretary, at the offices of the Company set forth on page one of this Proxy
Statement.
By order of the Board of Directors,
HOWARD E. VERLIN
Secretary
May 29, 1997
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APPENDIX A
FORM OF PROXY
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PEGASUS COMMUNICATIONS CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE
The undersigned, revoking all prior proxies, hereby appoints Marshall W. Pagon,
Robert N. Verdecchio and Ted S. Lodge, or any of them, with full power of
substitution, as the undersigned's proxies to vote all the shares of Class A
Common Stock of Pegasus Communications Corporation (the "Company") held of
record by the undersigned on May 23, 1997, at the Annual Meeting of Stockholders
of the Company to be held on June 25, 1997 and at any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2.
1. ELECTION OF DIRECTORS
Nominees: Marshall W. Pagon, James J. McEntee, III, Mary C. Metzger and
Donald W. Weber
[ ] FOR [ ] WITHHOLD AUTHORITY [ ] ABSTAIN
All nominees listed To vote for all nominees listed
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided below)
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(Continued on reverse side)
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2. Ratification of the appointment of Coopers & Lybrand L.L.P. as independent
public accountants for the Company for the year ending December 31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
You are urged to sign and return this proxy so that you may be sure that your
shares will be voted.
Dated:_____________________, 1997
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Signature of Stockholder
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Signature of Stockholder
Please sign exactly as your name appears hereon, date and return promptly. When
shares are held by joint tenants, both should sign. Executors, administrators,
trustees and other fiduciaries should indicate their capacity when signing.
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