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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 27, 1998
PEGASUS COMMUNICATIONS CORPORATION
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(Exact name of registrant as specified in charter)
Delaware 0-21389 51-0374669
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
c/o Pegasus Communications Management Company, 100 Matsonford Road,
5 Radnor Corporate Center, Suite 454, Radnor, Pennsylvania 19087
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 610-341-1801
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Not Applicable
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(Former name or former address, if changed since last report.)
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The Registration Statement on Form S-4 (File No. 333-44929) (the
"Registration Statement") of Pegasus Communications Corporation (the
"Registrant") containing substantially the same information required in this
form to report the merger (the "Merger") of Digital Television Services, Inc.
("DTS") into Pegasus DTS Merger Sub, Inc., a wholly-owned subsidiary of the
Registrant, became effective on April 14, 1998 and accordingly the Merger was
"previously reported" within the meaning of the General Instructions to Form
8-K. The Merger was consummated on April 27, 1998. In connection with the
Merger, the Registrant issued 5,471,296 shares of its Class A Common Stock to
the former stockholders of DTS. Since the number of shares actually issued to
the former DTS stockholders does not materially affect the pro forma financial
information set forth in the Registration Statement, the Merger is reported
under Item 5 below.
Unless otherwise defined, all defined terms have the meaning set
forth in the Registration Statement.
Item 5. Other Events.
DTS Merger
On April 27, 1998, following a meeting of the Registrant's
stockholders in which the proposal to approve and adopt the Agreement and Plan
of Merger dated January 8, 1998 (the "Merger Agreement") among the Registrant,
DTS, Pegasus DTS Merger Sub, Inc., certain stockholders of Pegasus and certain
stockholders of DTS was approved, the Merger was consummated pursuant to the
terms of the Merger Agreement and DTS became a wholly-owned subsidiary of
Pegasus.
Upon consummation of the Merger, 5,471,296 shares in the aggregate of
the Registrant's Class A Common Stock were issued to the former DTS
stockholders. The number of shares issued was based upon a "market price"
(within the meaning of the Registration Statement) of $22.83, a "trading
value" (within the meaning of the Registration Statement) of approximately
$24.22, a conversion ratio for the DTS Common Stock of approximately 1.54 and
a conversion ratio for the DTS Preferred Stock of approximately 1.58. In
connection with the Merger, holders of DTS options and warrants received
options to purchase an aggregate of 67,042 shares of the Registrant's Class A
Common Stock and warrants to purchase an aggregate of 156,996 shares of the
Registrant's Class A Common Stock, respectively.
Pursuant to the Merger Agreement, the Voting Agreement and
the Registration Rights Agreement were entered into and Michael
C. Brooks, Harry F. Hopper III, and Riordon B. Smith were elected
to the Registrant's Board of Directors as the designees of
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Whitney, Columbia and Chisholm, respectively, under the Voting
Agreement.
Special Meeting
On April 27, 1998, a special meeting of the Registrant's stockholders
was held. At the special meeting, the Registrant's stockholders voted to
approve (i) the Merger Agreement and the transactions contemplated thereby,
(ii) the proposal to amend the Pegasus Communications Restricted Stock Plan to
increase the number of shares of Class A Common Stock that may be issued
thereunder from 270,000 to 350,000, (iii) the proposal to amend the Pegasus
Communications 1996 Stock Option Plan to increase the number of shares of
Class A Common Stock that may be issued thereunder from 450,000 to 970,000 and
to increase the maximum number of shares of Class A Common Stock that may be
issued under options granted to any executive officer from 270,000 to 550,000,
(iv) to amend the provisions of the Certificate of Designation, Preferences
and Relative, Participating, Optional and Other Special Rights of Preferred
Stock and Qualifications, Limitations and Restrictions Thereof relating to the
Registrant's 12-3/4% Series a Cumulative, Exchangeable Preferred Stock due
2007 (the "Certificate of Designation") relating to the incurrence of
indebtedness, and (v) to amend provisions of the Certificate of Designation
relating to the definition of a change of control.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Financial Statements of Business Acquired.
Not Applicable
(b) Pro Forma Financial Information.
Not Applicable
(c) Exhibits.
2.1 Agreement and Plan of Merger dated January
8, 1998 among the Registrant and certain
of its stockholders, Pegasus DTS Merger
Sub, Inc., DTS and certain of DTS'
stockholders (which is incorporated by
reference herein to Exhibit 2.1 to the
Registrant's Form 8-K dated December 10,
1997).
10.1 Registration Rights Agreement dated April
27, 1998 among the Registrant and the
parties thereto.
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10.2 Voting Agreement dated April 27, 1998
among the Registrant, Columbia Capital
Corporation, Columbia DBS, Inc. Whitney
Equity Partners, L.P., Fleet Venture
Resources, Inc., Fleet Equity Partners VI,
L.P., Chisholm Partners III, L.P., Kennedy
Plaza Partners, Pegasus Communications
Holdings, Inc., Pegasus Capital, L.P.,
Pegasus Scranton Offer Corp., Pegasus
Northwest Offer Corp., and Marshall W.
Pagon.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
PEGASUS COMMUNICATIONS CORPORATION
By: /s/ Ted S. Lodge
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Ted S. Lodge,
Senior Vice President
May 11, 1998
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EXHIBIT INDEX
2.1 Agreement and Plan of Merger dated January 8, 1998
among the Registrant and certain of its stockholders,
Pegasus DTS Merger Sub, Inc., DTS and certain of DTS'
stockholders (which is incorporated by reference herein
to Exhibit 2.1 to the Registrant's Form 8-K dated
December 10, 1997).
10.1 Registration Rights Agreement dated April 27, 1998
among the Registrant and the parties thereto.
10.2 Voting Agreement dated April 27, 1998 among the
Registrant, Columbia Capital Corporation, Columbia DBS,
Inc. Whitney Equity Partners, L.P., Fleet Venture
Resources, Inc., Fleet Equity Partners VI, L.P.,
Chisholm Partners III, L.P., Kennedy Plaza Partners,
Pegasus Communications Holdings, Inc., Pegasus Capital,
L.P., Pegasus Scranton Offer Corp., Pegasus Northwest
Offer Corp., and Marshall W. Pagon.
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REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated April 27, 1998 (the
"Agreement"), among PEGASUS COMMUNICATIONS CORPORATION, a Delaware corporation
(the "Company"), and the Persons executing this Agreement as Holders.
The Company, Pegasus DTS Merger Sub, Inc., a Delaware
corporation ("Merger Sub"), Digital Television Services, Inc., a Delaware
corporation ("DTS"), and certain shareholders of the Company and of DTS are
parties to an Agreement and Plan of Merger dated January 8, 1998 (the "Merger
Agreement"). The Holders (this and certain other terms are defined in Section
1) are shareholders of DTS.
At the Closing held today under the Merger Agreement, Merger
Sub is being merged with and into DTS, DTS is thereby becoming a wholly-owned
subsidiary of the Company, and the Holders are receiving shares of Class A
Common Stock as the Merger Consideration. It is a condition precedent to the
Closing that the parties execute and deliver this Agreement.
NOW, THEREFORE, in consideration of the completion of the
transactions contemplated by the Merger Agreement and of the mutual covenants
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as
follows, intending to be legally bound.
Section 1. Definitions. As used in this Agreement, the
following terms have the following meanings:
"Business Day": any day on which the New York Stock Exchange
is open for trading.
"Class A Common Stock": the Company's Class A Common Stock,
par value $0.01 per share.
"Closing Date": the date of this Agreement.
"Exchange Act": the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder, all as the same
shall be in effect at the relevant time.
"Holder": each Person (other than the Company) executing
this Agreement and each Permitted Transferee of a Holder, for so long as (and
to the extent that) such Person or Permitted Transferee owns any Registrable
Securities.
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"Merger Agreement": as defined in the recitals.
"Merger Consideration": as defined in the Merger Agreement;
any reference in this Agreement to a number or percentage of Registrable
Securities initially included in the Merger Consideration shall be
appropriately adjusted to reflect stock dividends, stock splits, reverse stock
splits, recapitalizations and similar transactions that occur after the
Closing Date.
"Permitted Transferee": (a) in the case of an individual (1)
a family member of such individual, (2) a charitable organization (including a
private foundation) described in Section 501(c)(3) of the Internal Revenue
Code of 1986, as amended, to which a Holder may transfer any Registrable
Securities, (3) a trust for the benefit of any of such individual, such
charitable organizations or any family member of such individual, or (4) a
Person substantially all of the equity interests in which are owned by such
individual or by Persons described in clauses (a)(1), (2) and (3); and (b) in
the case of a Person that is not an individual, (1) any shareholder, partner,
member or other owner of equity interests in such Person, or (2) a Person all
of the equity interests in which are owned by such first Person.
"Person": an individual, a partnership (general or limited),
corporation, limited liability company, joint venture, business trust,
cooperative, association or other form of business organization, whether or
not regarded as a legal entity under applicable law, a trust (inter vivos or
testamentary), an estate of a deceased, insane or incompetent person, a
quasi-governmental entity, a government or any agency, authority, political
subdivision or other instrumentality thereof, or any other entity.
"Registrable Securities": (1) the Class A Common Stock
included in the Merger Consideration and (2) any additional shares of Class A
Common Stock or other equity securities of the Company issued or issuable
after the Closing Date in respect of the Class A Common Stock included in the
Merger Consideration (or other equity securities issued in respect thereof) by
way of a stock dividend or stock split, in connection with a combination,
exchange, reorganization, recapitalization or reclassification of Company
securities, or pursuant to a merger, division, consolidation or other similar
business transaction or combination involving the Company; provided that as to
any particular Registrable Securities, such securities shall cease to
constitute Registrable Securities (a) when a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of thereunder, (b)
when such securities shall have been disposed of pursuant to Rule 144 (or any
successor provision to such Rule) under the Securities Act, (c) when such
securities shall have been disposed of to a Person other than a Permitted
Transferee, or (d) when such securities shall have ceased to be outstanding.
"Registration Expenses": all expenses incident to the
Company's performance of or compliance with the registration requirements set
forth in this Agreement including, without limitation, the following: (a) the
fees, disbursements and expenses of the Company's counsel, accountants, and
experts in connection with the registration under the Securities Act of
Registrable Securities; (b) all expenses in connection with the preparation,
printing and filing of the
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registration statement, any preliminary prospectus or final prospectus, any
other offering document and amendments and supplements thereto, and the
mailing and delivering of copies thereof to underwriters and dealers, if any;
(c) the cost of printing or producing any agreement(s) among underwriters,
underwriting agreement(s) and blue sky or legal investment memoranda, any
selling agreements, and any other documents in connection with the offering,
sale or delivery of Registrable Securities to be disposed of; (d) the fees and
expenses incurred in connection with the listing of Registrable Securities on
each securities exchange on which Company securities of the same class are
then listed or with the Nasdaq National Market System (including, if
applicable, the reasonable fees and expenses of any "qualified independent
underwriter" and its counsel); (e) the reasonable fees and expenses of a
single counsel retained by the Holders participating in a particular
registration pursuant to this Agreement, (f) any SEC or blue sky registration
or filing fees attributable to Registrable Securities or transfer taxes
applicable to Registrable Securities, (g) any other expenses in connection
with the qualification of Registrable Securities for offer and sale under
state securities laws, including the fees and disbursements of counsel for the
underwriters in connection with such qualification and in connection with any
blue sky and legal investment surveys; and (h) the filing fees incident to
securing any required review by the National Association of Securities
Dealers, Inc. of the terms of the sale of Registrable Securities to be
disposed of; but the term "Registration Expenses" does not include (i)
underwriters' discounts or compensation, brokers' commissions or similar
selling expenses attributable to the sale of Registrable Securities.
"Registration Statement": a registration statement under the
Securities Act filed by the Company pursuant to this Agreement, including all
amendments thereto, all preliminary and final prospectuses included therein
and all exhibits thereto.
"SEC": the United States Securities and Exchange Commission,
or such other federal agency at the time having the principal responsibility
for administering the Securities Act.
"Securities Act": the Securities Act of 1933, as amended,
and the rules and regulations of the SEC thereunder, all as the same shall be
in effect at the relevant time.
Section 2. Underwritten Demand Registration.
(a) At any time on or after November 5, 1998, and before the
fifth anniversary of the Closing Date the Holder or Holders of ten percent or
more of the Registrable Securities initially included in the Merger
Consideration may (by written notice delivered to the Company) require
registration of all or any portion of such Registrable Securities for sale in
an underwritten public offering. In each such case, such notice shall specify
the number of Registrable Securities for which such underwritten offering is
to be made. Within ten Business Days after its receipt of any such notice, the
Company shall give written notice of such request to all other Holders, and
all such Holders shall have the right to have any or all Registrable
Securities owned by them included in the requested underwritten offering as
they shall specify in a written notice received by the Company within twenty
Business Days after the Company's notice is given. Within ten Business Days
after the expiration of such twenty Business Day period, the Company shall
notify
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all Holders requesting inclusion of Registrable Securities in the proposed
underwriting of (1) the aggregate number of Registrable Securities proposed to
be included by all Holders in the offering, and (2) the proposed commencement
date of the offering, which shall be a date not more than thirty days after
the Company gives such notice. The managing underwriter for such offering
shall be chosen by the Holders of a majority of the Registrable Securities
being included therein and shall be satisfactory to the Company.
(b) If any request for an underwriting shall have been made
pursuant to subsection (a), the Company shall, at the request of the managing
underwriter for such offering, prepare and file a Registration Statement with
the SEC as promptly as reasonably practicable, but in any event within thirty
days after the managing underwriter's request therefor.
(c) Subject to Section 2(g) below, the Company shall not
have any obligation to permit or participate in more than two underwritten
public offerings pursuant to this Section, or to file a Registration Statement
pursuant to this Section with respect to less than ten percent of the
Registrable Securities initially included in the Merger Consideration.
(d) The Company shall have the right to defer the filing or
effectiveness of a Registration Statement relating to any registration
requested under this Section for a reasonable period of time not to exceed 90
days if (1) the Company is, at such time, working on an underwritten public
offering of its securities for the account of the Company and is advised by
its managing underwriter that such offering would in its opinion be materially
adversely affected by such filing; or (2) the Company in good faith determines
that any such filing or the offering of any Registrable Securities would (A)
materially impede, delay or interfere with any proposed financing, offer or
sale of securities, acquisition, corporate reorganization or other significant
transaction involving the Company or (B) require the disclosure of material
non-public information, the disclosure of which would materially and adversely
affect the Company. If the Company shall exercise its deferral right under
this subsection, it may not do so again until 90 days shall have elapsed since
the expiration of such deferral.
(e) The Company shall have no obligation to file a
Registration Statement pursuant to this Section earlier than 360 days after
the effective date of a prior registration statement of the Company, if any,
covering an underwritten public offering for the account of the Company the
closing date of which is after the Closing Date if (1) the Company shall have
offered pursuant to Section 4 to include the Holders' Registrable Securities
in such Registration Statement; (2) the Holders shall not have elected to
include in such Registration Statement at least ten percent of the Registrable
Securities initially included in the Merger Consideration; (3) no Registrable
Securities requested to be included in such registration statement shall have
been excluded therefrom pursuant to Section 4(c); and (4) if such registration
statement is filed before November 5, 1998, the offering price per share of
Class A Common Stock is not less than $30.
(f) The Holders of any Registrable Securities requested to
be included in any offering pursuant to this Section may elect by written
notice to the Company not to include their Registrable Securities in the
offering. If they do so, the Company shall be obligated to proceed
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with the registration relating to the offering only if the offering continues
to include at least the number of shares of Registrable Securities specified
in Section 2(a). In any such case in which the Company is not obligated to and
does not proceed with the registration, the Holders that shall have requested
Registrable Securities to be included in the offering but that shall have
elected not to include their shares shall pay all Registration Expenses
incurred by the Company in connection with such offering.
(g) Subject to the rights, if any, of holders of
registration rights under the existing agreements identified on Exhibit A
hereto (the "Existing Registration Rights Holders"), neither the Company nor
any other Person not party to this Agreement shall be entitled to include any
securities held by it or any of them in any underwritten offering pursuant to
this Section, unless all Registrable Securities for which inclusion has been
requested are also included and unless the managing underwriter concludes that
the inclusion of other securities will not interfere with an orderly sale and
distribution of Registrable Securities being sold in such offering or
adversely affect the price of such Registrable Securities. If the managing
underwriter does not so conclude, the number of shares to be included in the
registration shall be reduced among the Holders and the Existing Registration
Rights Holders pro rata in accordance with the number of shares requested to
be included by each, in which case (1) the Company will bear all Registration
Expenses relating to the registration, whether or not the offering proceeds,
and (2) the Holders shall be entitled to one additional demand registration
under this Section 2.
(h) No registration of Registrable Securities under this
Section shall relieve the Company of its obligation to effect registrations of
Registrable Securities pursuant to Sections 3 and 4.
Section 3. Shelf Registrations.
(a) At any time on or after November 5, 1998, and before the
fifth anniversary of the Closing Date, the Holder or Holders of 100,000 or
more shares of Registrable Securities may (by written notice to the Company)
require registration of all or any portion of such Registrable Securities for
sale through broker-dealers, through agents or directly to one or more
purchasers in one or more transactions in the over-the-counter market, through
writing of options or otherwise effected at market prices prevailing at the
time of sale, at prices related to such prevailing prices, at negotiated
prices or at fixed prices. Within ten Business Days after its receipt of such
notice, the Company shall give written notice of such request to all other
Holders, and all such Holders shall have the right to have any or all
Registrable Securities owned by them included in the requested registration as
they shall specify in a written notice received by the Company within ten
Business Days after the Company's notice is given. Within ten Business Days
after the expiration of such ten Business Day period, the Company shall notify
all Holders requesting inclusion of Registrable Securities in the requested
registration of the aggregate number of Registrable Securities proposed to be
included by all Holders in this registration.
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(b) If any request for registration shall have been made
pursuant to subsection (a), the Company shall prepare and file a Registration
Statement with the SEC as promptly as reasonably practicable, but in any event
within thirty days after the expiration of the ten Business Day period within
which Holders may request inclusion in the registration.
(c) The Company shall not have any obligation under this
Section to file a Registration Statement with respect to fewer than 100,000
shares of Registrable Securities.
(d) The Company shall have no obligation to file a
Registration Statement pursuant to this Section earlier than 180 days after
the effective date of any earlier Registration Statement filed pursuant to
this Section.
(e) The Holders of any of Registrable Securities requested
to be included in any registration pursuant to this Section may elect by
written notice to the Company not to include their Registrable Securities in
such registration. If they do so, the Company shall be obligated to proceed
with the registration only if it continues to include at least the number of
shares of Registrable Securities specified in Section 3(a). In any such case
in which the Company is not obligated to and does not proceed with the
registration, the Holders that shall have requested Registrable Securities to
be included in the registration but shall have elected not to include their
shares shall pay all Registration Expenses incurred by the Company in
connection with such registration.
(f) No registration of Registrable Securities under this
Section shall relieve the Company of its obligation to effect registrations of
Registrable Securities under Sections 2 and 4.
Section 4. Incidental Registration.
(a) From and after the Closing Date, if the Company
proposes, other than pursuant to Section 2 or 3, to file a Registration
Statement under the Securities Act to register any of its common equity
securities for public sale under the Securities Act (whether proposed to be
offered for sale by the Company or by any other Person), it will give prompt
written notice (which notice shall specify the intended method or methods of
disposition) to the Holders of its intention to do so, and upon the written
request of any Holder delivered to the Company within ten Business Days after
any such notice (which request shall specify the number of Registrable
Securities intended to be disposed of by such Holder), the Company shall,
subject to the other provisions of this Section 4, include in such
Registration Statement all Registrable Securities which the Company has been
so requested to register by Holders.
(b) If at any time prior to the effective date of any
Registration Statement described in subsection (a), the Company shall in good
faith determine for any reason not to proceed with such registration, the
Company may, at its election, give written notice of such determination to the
Holders requesting registration and thereupon the Company shall be relieved of
its obligation to register such Registrable Securities in connection with such
registration.
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(c) The Company will not be required to effect any
registration of Registrable Securities pursuant to this Section in connection
with an offering of securities for the account of the Company if the Company
shall have been advised in writing (with a copy to the Holders requesting
registration) by a nationally recognized investment banking firm (which may be
the managing underwriter for the offering) selected by the Company that, in
such firm's opinion, registration of Registrable Securities and of any other
securities requested to be included in such registration by Persons having
rights to include securities therein at that time may interfere with an
orderly sale and distribution of the securities being sold by the Company in
such offering or adversely affect the price of such securities; but if the
inclusion of less than all of the Registrable Securities requested to be
registered by the Holders and other securities requested to be included in
such registration by such other Persons would not, in the opinion of such
firm, adversely affect the distribution or price of the securities to be sold
by the Company in the offering, the aggregate number of Registrable Securities
requested to be included in such offering by the Holders shall be reduced pro
rata in accordance with the proportion that the number of shares proposed to
be included in such registration by Holders bears to the number of shares
proposed to be included in such registration by Holders and all other such
Persons.
(d) The Company shall not be required to give notice of, or
effect any registration of Registrable Securities under this Section
incidental to the registration of any of its securities on Form S-4 or S-8 or
in connection with dividend reinvestment plans.
(e) No registration of Registrable Securities effected under
this Section shall relieve the Company of its obligations to effect
registrations of Registrable Securities pursuant to Sections 2 and 3.
Section 5. Holdbacks and Other Transfer Restrictions.
(a) No Holder shall sell, transfer or otherwise dispose of
any Registrable Securities or any interest therein before November 5, 1998,
except to a Permitted Transferee or pursuant to an effective Registration
Statement described in Section 4 that includes the Registrable Securities to
be disposed of.
(b) No Holder shall, if requested by the managing
underwriter in an underwritten offering that includes such Holder's
Registrable Securities, effect any public sale or distribution of securities
of the Company of the same class as the securities included in such
Registration Statement (or convertible into such class), including a sale
pursuant to Rule 144(k) under the Securities Act (except as part of such
underwritten registration), during the ten day period prior to, and during the
90-day period (or such longer period, not to exceed 180 days, as the managing
underwriter shall request) beginning on the closing date of each underwritten
offering made pursuant to such registration statement, to the extent timely
notified in writing by the Company or the managing underwriter. If the Company
or such managing underwriter so requests, each Holder shall enter into a
holdback agreement reflecting such restrictions.
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(c) No Holder shall, during any period in which any of its
Registrable Securities are included in any effective Registration Statement,
(1) effect any stabilization transactions or engage in any stabilization
activity in connection with the Class A Common Stock or other equity
securities of the Company in contravention of Regulation M under the Exchange
Act; or (2) permit any Affiliated Purchaser (as that term is defined in
Regulation M under the Exchange Act) to bid for or purchase for any account in
which such Holder has a beneficial interest, or attempt to induce any other
person to purchase, any shares of Common Stock or Registrable Securities in
contravention of Regulation M under the Exchange Act.
(d) The Company, upon request by each Holder, shall, at the
Company's expense, in the case of a registration including Registrable
Securities to be offered by such Holder for sale through brokers transactions,
furnish each broker through whom such Holder offers Registrable Securities
such number of copies of the prospectus as the broker may require, and such
Holder shall otherwise comply with the prospectus delivery requirements under
the Securities Act, and the Company shall comply with Rule 153 under the
Securities Act.
Section 6. Registration Procedures. If and whenever the
Company is required by the provisions of this Agreement to effect a
registration of Registrable Securities:
(a) The Company shall prepare and file with the SEC, within
the time periods specified herein, a Registration Statement on Form S-3 or its
equivalent (or on such other registration form available to the Company that
permits the greatest extent of incorporation by reference of materials filed
by the Company, under the Exchange Act), and will use its best efforts to
cause such registration statement to become effective as promptly as
practicable (and, in any event, within sixty days) thereafter and to remain
effective under the Securities Act until (1) the earlier of such time as all
securities covered thereby have been disposed of pursuant to such Registration
Statement or 180 days after such Registration Statement becomes effective, in
the case of registrations pursuant to Section 2, or (2) 90 days after such
Registration Statement becomes effective, in the case of registrations
pursuant to Section 3, in every case as any such period may be extended
pursuant to subsection (h) or Section 8.
(b) The Company shall prepare and file with the SEC such
amendments, post-effective amendments and supplements to such Registration
Statement and the prospectus used in connection therewith as may be necessary
to keep such Registration Statement effective for such period of time required
by subsection (a), as such period may be extended pursuant to subsection (h)
or Section 8.
(c) The Company shall comply in all material respects with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during the period during
which any such Registration Statement is required to be effective.
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(d) The Company shall furnish to any Holder and any
underwriter of Registrable Securities (1) such number of copies (including
manually executed and conformed copies) of such Registration Statement and of
each amendment thereof and supplement thereto (including all annexes,
appendices, schedules and exhibits), (2) such number of copies of the
prospectus used in connection with such Registration Statement (including each
preliminary prospectus, any summary prospectus and the final prospectus and
including prospectus supplements), and (3) such number of copies of other
documents, in each case as such Holder or such underwriter may reasonably
request.
(e) The Company shall use its best efforts to register or
qualify all Registrable Securities covered by such Registration Statement
under the securities or "blue sky" laws of such states of the United States as
any Holder or any underwriter shall reasonably request, and do any and all
other acts and things which may be reasonably requested by such Holder or such
underwriter to consummate the offering and disposition of Registrable
Securities in such jurisdictions; but the Company shall not be required to
qualify generally to do business as a foreign corporation or as a dealer in
securities, subject itself to taxation, or consent to general service of
process in any jurisdiction wherein it is not then so qualified or subject.
(f) The Company shall use its best efforts to cause the
Registrable Securities covered by such Registration Statement to be registered
with, or approved by, such other United States public, governmental or
regulatory authorities, if any, as may be required in connection with the
disposition of such Registrable Securities.
(g) The Company shall list the Registrable Securities
covered by such Registration Statement on any securities exchange (or if
applicable, the Nasdaq National Market System) on which any securities of the
Company are then listed.
(h) The Company shall notify each Holder as promptly as
practicable and, if requested by any Holder, confirm such notification in
writing, (1) when a prospectus or any prospectus supplement has been filed
with the SEC, and when a Registration Statement or any post-effective
amendment thereto has been filed with and declared effective by the SEC, (2)
of the issuance by the SEC of any stop order or the coming to its knowledge of
the initiation of any proceedings for that purpose, (3) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, (4) of the occurrence of any event which requires the making of any
changes to a Registration Statement or related prospectus so that such
documents will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading (and the Company shall promptly prepare and furnish to each
Holder a reasonable number of copies of a supplemented or amended prospectus
such that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they are made, not misleading), and (5) of the
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Company's determination that the filing of a post-effective amendment to a
Registration Statement shall be necessary or appropriate. Upon the receipt of
any notice from the Company of the occurrence of any event of the kind
described in clause (4), the Holders shall forthwith discontinue any offer and
disposition of Registrable Securities pursuant to the Registration Statement
covering such Registrable Securities until all Holders shall have received
copies of a supplemented or amended prospectus which is no longer defective
and, if so directed by the Company, shall deliver to the Company all copies
(other than permanent file copies) of the defective prospectus covering such
Registrable Securities which are then in the Holders' possession. If the
Company shall provide any notice of the type referred to in the preceding
sentence, the period during which the Registration Statement is required by
subsection (a) to be effective shall be extended by the number of days from
and including the date such notice is provided, to and including the date when
Holders shall have received copies of the corrected prospectus.
(i) The Company shall enter into such agreements and take
such other appropriate actions as are customary and reasonably necessary to
expedite or facilitate the disposition of such Registrable Securities, and in
that regard, deliver to the Holders such documents and certificates as may be
reasonably requested by the Holders of a majority of the Registrable
Securities being sold or, as applicable, the managing underwriters, to
evidence the Company's compliance with this Agreement, including, in the case
of any underwritten offering, using commercially reasonable efforts to cause
its independent accountants to deliver to the managing underwriters an
accountants' comfort letter substantially similar to that in scope delivered
in an underwritten public offering and covering audited and interim financial
statements included in the registration statement, or if such letter can not
be obtained through the exercise of commercially reasonable efforts, cause its
independent accountants to deliver to the managing underwriters a comfort
letter based on negotiated procedures providing comfort with respect to the
Company's financial statements included or incorporated by reference in the
registration statement at the highest level permitted to be given by such
accountants under the then applicable standards of the American Institute of
Certified Public Accountants with respect to such Registration Statement.
Section 7. Underwriting.
(a) If requested by the underwriters for any underwritten
offering of Registrable Securities pursuant to a registration under Section 2,
the Company will enter into and perform its obligations under an underwriting
agreement with the underwriters for such offering, such agreement to contain
such representations and warranties by the Company and such other terms and
provisions as are customarily contained in underwriting agreements with
respect to secondary distributions, including, without limitation, customary
provisions relating to indemnities and contribution and the provision of
opinions of counsel and accountants' comfort letters. If Registrable
Securities are to be distributed by such underwriters on behalf of any Holder,
such Holder shall also be a party to any such underwriting agreement.
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<PAGE>
(b) If any registration pursuant to Section 4 shall involve
an underwritten offering, the Company may require Registrable Securities
requested to be registered pursuant to Section 4 to be included in such
underwriting on the same terms and conditions as shall be applicable to the
securities being sold through underwriters under such registration. In such
case, each Holder requesting registration shall be a party to any such
underwriting agreement. Such agreement shall contain such representations and
warranties by the Holders requesting registration and such other terms and
provisions as are customarily contained in underwriting agreements with
respect to secondary distributions, including, without limitation, provisions
relating to indemnities and contribution; provided, however, that no Holder
shall be required to make representations or warranties concerning the Company
or any other Holder.
(c) In any offering of Registrable Securities pursuant to a
registration hereunder, each Holder requesting registration shall also enter
into such additional or other agreements as may be customary in such
transactions, which agreements may contain, among other provisions, such
representations and warranties as the Company or the underwriters of such
offering may reasonably request (including, without limitation, those
concerning such Holder, its Registrable Securities, such Holder's intended
plan of distribution and any other information supplied by it to the Company
for use in such registration statement), and customary provisions relating to
indemnities and contribution.
Section 8. Information Blackout.
(a) At any time when a Registration Statement is effective,
upon written notice from the Company to the Holders that the Company has
determined in good faith that sale of Registrable Securities pursuant to the
Registration Statement would require disclosure of non-public material
information, the disclosure of which would have a material adverse effect on
the Company, all Holders shall suspend sales of Registrable Securities
pursuant to such Registration Statement until the earlier of (1) 90 days after
the Company notifies the Holders of such good faith determination, and (2)
such time as the Company notifies the Holders that such material information
has been disclosed to the public or has ceased to be material or that sales
pursuant to such Registration Statement may otherwise be resumed (the number
of days from such suspension of sales by the Holders until the day when such
sales may be resumed hereunder is hereinafter called a "Sales Blackout
Period").
(b) The time period set forth in Section 6(a)(1) or (2)
shall be extended for a number of days equal to the number of days in the
Sales Blackout Period.
(c) No Sales Blackout Period shall be commenced by the
Company within 60 days after the end of a Sales Blackout Period.
Section 9. Rule 144. The Company shall take all actions
reasonably necessary to comply with the filing requirements described in Rule
144(c)(1) under the Securities Act so as
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<PAGE>
to enable the Holders to sell Registrable Securities without registration
under the Securities Act. Upon the written request of any Holder, the Company
will deliver to such Holder a written statement as to whether it has complied
with the filing requirements under such Rule 144(c)(1).
Section 10. Preparation; Reasonable Investigation;
Information. In connection with the preparation and filing of each
Registration Statement registering Registrable Securities under the Securities
Act, (a) the Company will give the Holders and the underwriters, if any, and
their respective counsel and accountants, drafts of such registration
statement for their review and comment prior to filing and (during normal
business hours and subject to such reasonable limitations as the Company may
impose to prevent disruption of its business) such reasonable and customary
access to its books and records and such opportunities to discuss the business
of the Company with its officers and the independent public accountants who
have certified its financial statements as shall be necessary, in the
reasonable opinion of the Holders of a majority of the Registrable Securities
being registered and such underwriters or their respective counsel, to conduct
a reasonable investigation within the meaning of the Securities Act and (b) as
a condition precedent to including any Registrable Securities of any Holder in
any such registration, the Company may require such Holder to furnish the
Company such information regarding such Holder and the distribution of such
securities as the Company may from time to time reasonably request in writing
or as shall be required by law or the SEC in connection with any registration.
Section 11. Indemnification and Contribution.
(a) In the case of each offering of Registrable Securities
made pursuant to this Agreement, the Company shall indemnify and hold harmless
each Holder, its officers and directors, each underwriter of Registrable
Securities so offered and each Person, if any, who controls any of the
foregoing persons within the meaning of the Securities Act ("Holder
Indemnitees"), from and against any and all claims, liabilities, losses,
damages, expenses and judgments, joint or several, to which they or any of
them may become subject, including any amount paid in settlement of any
litigation commenced or threatened, and shall promptly reimburse them, as and
when incurred, for any legal or other expenses incurred by them in connection
with investigating any claims and defending any actions, insofar as such
losses, claims, damages, liabilities or actions shall arise out of, or shall
be based upon, any violation or alleged violation by the Company of the
Securities Act, any blue sky laws, securities laws or other applicable laws of
any state or county in which the Registrable Securities are offered, and
relating to action taken or action or inaction required of the Company in
connection with such offering, or shall arise out of, or shall be based upon,
any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement (or in any preliminary or final prospectus
included therein) relating to the offering and sale of such Registrable
Securities, or any amendment thereof or supplement thereto, or in any document
incorporated by reference therein, or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; but the Company shall not be
liable to any Holder Indemnitee in any such case to the extent that any such
loss, claim, damage,
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<PAGE>
liability or action arises out of, or is based upon, any untrue statement or
alleged untrue statement, or any omission or alleged omission, if such
statement or omission shall have been made in reliance upon and in conformity
with information furnished to the Company in writing by or on behalf of such
Holder specifically for inclusion in the Registration Statement (or in any
preliminary or final prospectus included therein), or any amendment thereof or
supplement thereto. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any Holder and shall
survive the transfer of such securities. The foregoing indemnity agreement is
in addition to any liability which the Company may otherwise have to any
Holder Indemnitee.
(b) In the case of each offering of Registrable Securities
made pursuant to this Agreement, each Holder shall indemnify and hold harmless
the Company, its officers and directors and each person, if any, who controls
any of the foregoing within the meaning of the Securities Act (the "Company
Indemnitees"), from and against any and all claims, liabilities, losses,
damages, expenses and judgments, joint or several, to which they or any of
them may become subject, including any amount paid in settlement of any
litigation commenced or threatened, and shall promptly reimburse them, as and
when incurred, for any legal or other expenses incurred by them in connection
with investigating any claims and defending any actions, insofar as any such
losses, claims, damages, liabilities or actions shall arise out of, or shall
be based upon, any violation or alleged violation by such Holder of the
Securities Act, any blue sky laws, securities laws or other applicable laws of
any state or country in which the Registrable Securities are offered and
relating to action taken or action or inaction required of such Holder in
connection with such offering, or shall arise out of, or shall be based upon,
any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement (or in any preliminary or final prospectus
included therein) relating to the offering and sale of such Registrable
Securities or any amendment thereof or supplement thereto, or any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, but in
each case only to the extent that such untrue statement is contained in, or
such fact is omitted from, information furnished in writing to the Company by
or on behalf of such Holder specifically for inclusion in such Registration
Statement (or in any preliminary or final prospectus included therein). Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of any Company Indemnitee. The foregoing
indemnity is in addition to any liability which Holder may otherwise have to
any Company Indemnitee.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 11, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in subsection (a) or (b) shall be available to
any person who shall fail to give notice as provided in this subsection (c) if
the indemnifying party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was materially
prejudiced by the failure to give such notice, but the failure to give such
notice shall not relieve the indemnifying party or parties from any liability
which it or they may have to the indemnified
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<PAGE>
party for contribution or otherwise than on account of the provisions of
subsection (a) or (b). In case any such proceeding shall be brought against
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party and shall pay as
incurred the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel at its own expense. Notwithstanding the foregoing,
the indemnifying party shall pay as incurred the fees and expenses of the
counsel retained by the indemnified party in the event (1) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel or (2) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel, in the written
opinion of such counsel, would be inappropriate due to actual or potential
differing interests between them. The indemnifying party shall not, in
connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm for all such indemnified parties (in addition to local counsel).
Such firm shall be designated in writing by the Holders of a majority of the
Registrable Securities disposed under the applicable Registration Statements
in the case of Holder Indemnitees and by the Company in the case of Company
Indemnitees. The indemnifying party shall not be liable for any settlement of
any proceeding effected without its written consent but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 11
is unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) in respect of any losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) referred to therein, or if the
indemnified party failed to give the notice required under subsection (c),
then each indemnifying party shall contribute to the amount paid or payable by
the indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion
as is appropriate to reflect not only both the relative benefits received by
such party (as compared to the benefits received by all other parties) from
the offering in respect of which indemnity is sought, but also the relative
fault of all parties in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by a party shall be deemed to
be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by it bear to the total amounts received by each
other party. Relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The parties agree that it would not be just and equitable if
contributions pursuant to this subsection (d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this
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<PAGE>
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) referred to above shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) The indemnity provided for hereunder shall not inure to
the benefit of any indemnified party to the extent that the claim is based on
such indemnified party's failure to comply with the applicable prospectus
delivery requirements of the Securities Act as then applicable to the person
asserting the loss, claim, damage or liability for which indemnity is sought.
Section 12. Expenses. In connection with any registration
under this Agreement the Company shall pay all Registration Expenses (to the
extent not borne by underwriters or others), except as provided in Section
2(f) or 3(e), and each Holder shall pay its pro rata share of the items
described in clause (i) of the definition of "Registration Expenses" in
Section 1.
Section 13. Notices. Except as otherwise provided below,
whenever it is provided in this Agreement that any notice, demand, request,
consent, approval, declaration or other communication shall or may be given to
or served upon any of the parties hereto, or whenever any of the parties
hereto, wishes to provide to or serve upon the other party any other
communication with respect to this Agreement, each such notice, demand,
request, consent, approval, declaration or other communication shall be in
writing and shall be delivered in person, delivered by the U.S. mail,
delivered by overnight courier service, or sent by telecopy, as follows: (a)
if to a Holder, at the most current address given by such Holder to the
Company by means of a notice given in accordance with the provisions of this
Section 13, which address initially is, with respect to the Holders who have
executed this agreement, the addresses set forth in Schedule A and with
respect to all other holders is as set forth in the register for the
Registrable Securities; and (b) if to the Company, initially at the Company's
address set forth in the Merger Agreement and thereafter at such other
address, notice of which is given in accordance with the provisions of this
Section 13. The furnishing of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Every notice, demand,
request, consent, approval, declaration or other communication hereunder shall
be deemed to have been duly furnished or served on the party to which it is
addressed, in the case of delivery in person or by telecopy, on the date when
sent (with receipt personally acknowledged in the case of telecopied notice),
in the case of delivery by overnight courier service, on the dated delivered
as evidenced by delivery receipt, and in all other cases, five business days
after it is sent.
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<PAGE>
Section 14. Entire Agreement. This Agreement represents the
entire agreement and understanding among the parties hereto with respect to
the subject matter hereof and supersedes any and all prior oral and written
agreements, arrangements and understandings among the parties hereto with
respect to such subject matter; and this Agreement can be amended,
supplemented or changed, and any provision hereof can be waived or a departure
from any provision hereof can be consented to, only by a written instrument
making specific reference to this Agreement signed by the Company and the
Holders of a majority of the Registrable Securities then outstanding.
Section 15. Headings. The section headings contained in this
Agreement are for general reference purposes only and shall not affect in any
manner the meaning, interpretation or construction of the terms or other
provisions of this Agreement.
Section 16. Applicable Law. This Agreement shall be governed
by, construed and enforced in accordance with the laws of Pennsylvania
applicable to contracts to be made, executed, delivered and performed wholly
within such state and, in any case, without regard to the conflicts of law
principles of such state.
Section 17. Severability. If any provision of this Agreement
shall be held by any court of competent jurisdiction to be illegal, void or
unenforceable, such provision shall be of no force and effect, but the
illegality or unenforceability of such provision shall have no effect upon and
shall not impair the enforceability of any other provision of this Agreement.
Section 18. No Waiver. The failure of any party at any time
or times to require performance of any provision hereof shall not affect the
right at a later time to enforce the same. No waiver by any party of any
condition, and no breach of any provision, term, covenant, representation or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be construed as a further or
continuing waiver of any such condition or of the breach of any other
provision, term, covenant, representation or warranty of this Agreement.
Section 19. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute but one and the same original instrument.
Not all parties need sign the same counterpart. Delivery by facsimile of a
signature page to this Agreement shall have the same effect or delivery of an
original executed counterpart.
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<PAGE>
Section 20. Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors, assigns and
transferees of each of the parties, including, without limitation and without
the need for an express assignment, subsequent Holders; but nothing herein
shall be deemed to permit any assignment, transfer or other disposition of
Registrable Securities in violation of applicable law. If any Holder shall
acquire Registrable Securities, in any manner, whether by operation of law or
otherwise, such Registerable Securities shall be held subject to all of the
terms of this Agreement, and by taking and holding such Registrable Securities
such Holder shall be conclusively deemed to have agreed to be bound by and to
perform all of the terms and provisions of this Agreement, including the
restrictions on resale set forth in this Agreement, and such Holder shall be
entitled to receive the benefits hereof.
IN WITNESS WHEREOF, this Agreement has been executed and
delivered as of the date first above written.
PEGASUS COMMUNICATIONS CORPORATION
By /s/ Howard E. Verlin
------------------------------------
Howard E. Verlin,
Vice President
COLUMBIA CAPITAL CORPORATION
By /s/ Neil P. Byrne
------------------------------------
Name: Neil P. Byrne
Title: Vice President
WHITNEY EQUITY PARTNERS, L.P.
By: J.H. Whitney Equity Partners LLC
------------------------------------
Its General Partner
By /s/ Daniel J. O'Brien
------------------------------------
Name: Daniel J. O'Brien
Title: Managing Member
<PAGE>
FLEET VENTURE RESOURCES, INC.
By /s/ Riordan Smith
------------------------------------
Name: Riordan Smith
Title: Senior Vice President
FLEET EQUITY PARTNERS VI, L.P.
By: Fleet Growth Resources II, Inc.
------------------------------------
Its General Partner
By /s/ Riordan Smith
------------------------------------
Name: Riordan Smith
Title: Senior Vice President
CHISHOLM PARTNERS III, L.P.
By: Silverado III L.P., its general partner
By: Silverado III Corp., its general partner
By /s/ Riordan Smith
------------------------------------
Name: Riordan Smith
Title: Senior Vice President
KENNEDY PLAZA PARTNERS
By /s/ Riordan Smith
------------------------------------
Name: Riordan Smith
Title: Senior Vice President
/s/ James B. Murray, Jr.
---------------------------------------
James B. Murray, Jr.
/s/ David P. Mixer
---------------------------------------
David P. Mixer
<PAGE>
/s/ Mark P. Warner
---------------------------------------
Mark P. Warner
/s/ Robert B. Blow
---------------------------------------
Robert B. Blow
/s/ Mark J. Kington
---------------------------------------
Mark J. Kington
/s/ Harry F. Hopper III
---------------------------------------
Harry F. Hopper III
/s/ R. Philip Herget, III
---------------------------------------
R. Philip Herget, III
/s/ Neil P. Byrne
---------------------------------------
Neil P. Byrne
/s/ Barton Schneider
---------------------------------------
Barton Schneider
/s/ James Fleming
---------------------------------------
James Fleming
<PAGE>
DALTON VENTURE FAMILY, L.P.
By: /s/ David P. Mixer
------------------------------------
Name: David P. Mixer
Title: General Partner
DALTON TRUST/1995
By: /s/ David P. Mixer
------------------------------------
Name: David P. Mixer
Title: Trustee
<PAGE>
EXHIBIT A
to Registration Rights Agreement
Stockholders' Agreement dated as of October 8, 1996, among Pegasus, Pegasus
Communications Holdings, Inc. and Harron Communications Corp.
Stockholders Agreement dated as of October 8, 1996, among Pegasus, John W.
Bride, John H. Bride and Christopher McHenry Bride.
Stockholders' Agreement dated as of January 31, 1997, among Pegasus, and the
former shareholders of DBS of Indiana, Inc.
Stockholders' Agreement dated as of November 7, 1997, among Pegasus, Donald W.
Weber and Woodrow W. Griffin.
<PAGE>
VOTING AGREEMENT, dated April 27, 1998, among PEGASUS COMMUNICATIONS
CORPORATION, a Delaware corporation (the "Company"); COLUMBIA CAPITAL
CORPORATION, a Virginia corporation, and COLUMBIA DBS, INC., a Virginia
corporation; WHITNEY EQUITY PARTNERS, L.P., a Delaware limited partnership;
FLEET VENTURE RESOURCES, INC., a Rhode Island corporation, FLEET EQUITY
PARTNERS VI, L.P., a Delaware limited partnership, CHISHOLM PARTNERS III,
L.P., a Delaware limited partnership, and KENNEDY PLAZA PARTNERS, a Rhode
Island general partnership; and PEGASUS COMMUNICATIONS HOLDINGS, INC., a
Delaware corporation, PEGASUS CAPITAL, L.P., a Pennsylvania limited
partnership, PEGASUS SCRANTON OFFER CORP, a Delaware corporation, PEGASUS
NORTHWEST OFFER CORP, a Delaware corporation, and MARSHALL W. PAGON, an
individual.
The Company, Pegasus DTS Merger Sub, Inc., a Delaware corporation
("Merger Sub"), Digital Television Services, Inc., a Delaware corporation
("DTS"), and certain shareholders of the Company and of DTS are parties to an
Agreement and Plan of Merger dated January 8, 1998 (the "Merger Agreement").
Certain of the DTS Parties (this and certain other terms are defined in
Section 1) or certain of their equity holders are shareholders of DTS.
PCH, PCLP, PSOC and PNOC hold all the issued and outstanding shares
of Class B Common Stock. Pagon controls PCH, PCLP, PSOC and PNOC.
At the Closing held today under the Merger Agreement, Merger Sub is
being merged with and into DTS, DTS is thereby becoming a wholly-owned
subsidiary of the Company, and certain of the DTS Parties or certain of their
equity holders are receiving shares of Class A Common Stock as the Merger
Consideration. It is a condition precedent to the Closing that the parties
execute and deliver this Agreement.
NOW, THEREFORE, in consideration of the completion of the
transactions contemplated by the Merger Agreement and of the mutual covenants
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as
follows, intending to be legally bound.
SECTION 1
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms have
the following terms have the following meanings:
<PAGE>
"Audit Committee": the audit committee of the Board of
Directors referred to in Section 3.4.
"Board of Directors": the Board of Directors of the Company.
"Chisholm": Chisholm Partners III, L.P., a Delaware limited
partnership.
"Chisholm Designee": a person designated by Chisholm to
serve as a director in accordance with this Agreement.
"Class A Common Stock": the Company's Class A Common Stock,
par value $0.01 per share.
"Class B Common Stock": the Company's Class B Common Stock,
par value $0.01 per share.
"Columbia Capital": Columbia Capital Corporation, a Virginia
corporation.
"Columbia Designee": a person designated by Columbia Capital
to serve as a director in accordance with this Agreement.
"Columbia Parties": Columbia Capital and Columbia DBS, Inc.,
a Virginia corporation.
"Columbia Principals": each of James B. Murray, Jr., David
P. Mixer, Mark R. Warner, Robert B. Blow, Mark J. Kington, Harry F. Hopper,
III, R. Philip Herget, III, Neil P. Byrne, Barton Schneider and James Fleming.
"Committee": the Audit Committee, the Compensation Committee
or the Nominating Committee.
"Compensation Committee": the compensation committee of the
Board of Directors referred to in Section 3.4.
"Covered Shares": (a) the shares of Class A Common Stock
received as the Merger Consideration by the shareholders of DTS that are
parties to this Agreement; and (b) all shares of voting securities of the
Company now or hereafter beneficially owned (within the meaning of the
Securities Exchange Act of 1934) by PCH, PCLP, PSOC, PNOC or Pagon.
"Designation Right Loss Event": With respect to any person,
any of the following, as determined by a majority of the Independent Directors
(whose determination shall be conclusive):
2
<PAGE>
(a) such person's designee as a director commits a breach of
fiduciary duty to the Company or a material violation of any federal
or state securities law in connection with the purchase or sale of
any of the Company's securities;
(b) such person (or, in the case of Columbia Capital, any
Columbia Principal who owns at the time 100,000 or more shares of
Class A Common Stock) commits a material violation of any federal or
state securities law in connection with the purchase or sale of any
of the Company's securities;
(c) such person materially breaches its or his
noncompetition or confidentiality agreement with the Company;
(d) such person shall own, control, manage or be financially
interested, directly or indirectly, in any business (other than a
less than 5% interest in a publicly held company) that competes with
the Company or any of its Subsidiaries in any geographic area in
which the Company does business; but this paragraph (d) shall not
apply (1) to any investment held on November 5, 1997, (2) to any
investment in a business that comes into competition with the Company
or any of its Subsidiaries as a result of the Company's acquisition
or establishment of a new business or its expansion into a geographic
area in which it did not previously operate if such person shall have
held such investment before the Company's management proposes to the
Board of Directors such acquisition, establishment or expansion, (3)
to any investment in an investment fund or pool that itself makes or
holds an investment in a competitive business if such person (A) is
regularly engaged in making investment of that kind and (B) does not
have the power to, and does not in fact, exercise an influence on the
decision of the fund or pool in making the investment in the
competitive business, and (4) unless prior to the exercise by a
majority of the Independent Directors of the right to terminate the
relevant person's right to designate a director, such person is given
notice of the potential applicability of this paragraph (d) and a
reasonable opportunity to cure or modify the relationship to the
satisfaction of a majority of the Independent Directors;
(e) such person shall violate Section 2; or
(f) any director designated by such person shall take or
omit to take any action in his capacity as a director or Committee
member in a manner materially inconsistent with this Agreement, and
the Person who has the right to designate such director has not
obtained such director's resignation as a director within 30 days
after being requested to do so by the Board of Directors.
"Director" or "director": a member of the Board of Directors.
"DTS": as defined in the recitals.
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"DTS Designee": a Columbia Designee, a Chisholm Designee or
a Whitney Designee.
"DTS Parties": the Columbia Parties, Whitney and the Fleet
Parties.
"Fleet Parties": Chisholm, Fleet Venture Resources, Inc., a
Rhode Island corporation, Fleet Equity Partners VI, L.P., a Delaware limited
partnership, and Kennedy Plaza Partners, a Rhode Island general partnership.
"Independent Director": a natural person who (a) is not
Marshall W. Pagon or a Columbia Principal or an officer, employee or principal
of the Company, PCH, PCLP, PSOC, PNOC, any of the Columbia Parties, Whitney,
any of the Fleet Parties, DTS, or any of their subsidiaries or affiliates, or
any spouse or sibling, or any ancestor or lineal descendant of any such
person, spouse or sibling ("immediate family") (b) is not a former officer or
employee of any such person, (c) does not in addition to such person's role as
a director, act on a regular basis, either individually or as a member or
representative of an organization, serving as a professional adviser, legal
counsel or consultant to any such person, if, in the reasonable discretion of
the Nominating Committee, such relationship is material to any such person,
and (d) does not represent, and is not a member of the immediate family of, a
person who would not satisfy the requirements of the preceding clauses (a),
(b) and (c) of this sentence. A person who has been or is a partner, officer
or director of an organization that has customary commercial, industrial,
banking or underwriting relationships with any of the persons named in clause
(a) of the preceding sentence that are carried on in the ordinary course of
business and on an arms-length basis and who otherwise satisfies the
requirements set forth in clauses (a), (b), (c) and (d) of the first sentence
of this definition, may qualify as a Independent Director unless, in the
reasonable discretion of the Nominating Committee, such person is not
independent or may not be independent with respect to the management of the
business and affairs of the Company. A person shall not be disqualified as an
Independent Director under clause (b), (c) or (d) above solely because of such
person's (or a member of such person's immediate family's) having served in
any capacity with a business (other than DTS) acquired by the Company, or
solely because such person is a representative or designee of any such
business (whether or not the Company shall enter into a consulting agreement
with such person in connection with such acquisition).
"Merger Agreement": as defined in the recitals.
"Merger Consideration": as defined in the Merger Agreement.
"Pagon": Marshall W. Pagon, an individual.
"Pagon Designee": a person designated by Pagon (or, in the
event of his death or incapacity, by PCLP or another person appointed by Pagon
for this purpose) to serve as a director in accordance with this Agreement.
"PCH": Pegasus Communications Holdings, Inc., a Delaware
corporation.
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"PCLP": Pegasus Capital, L.P., a Pennsylvania limited
partnership.
"PNOC": Pegasus Northwest Offer Corp, a Delaware
corporation.
"PSOC": Pegasus Scranton Offer Corp, a Delaware corporation.
"Permitted Transferee": as defined in the Company's
certificate of incorporation on the date hereof.
"Person or "person": an individual, a partnership (general
or limited), corporation, limited liability company, joint venture, business
trust, cooperative, association or other form of business organization,
whether or not regarded as a legal entity under applicable law, a trust (inter
vivos or testamentary), an estate of a deceased, insane or incompetent person,
a quasi-governmental entity, a government or any agency, authority, political
subdivision or other instrumentality thereof, or any other entity.
"Subsidiary": as defined in the Merger Agreement.
"Whitney": Whitney Equity Partners, L.P., a Delaware limited
partnership.
"Whitney Designee": a person designated by Whitney to serve
as a director in accordance with this Agreement.
SECTION 2
VOTING
Section 2.1 Each party warrants to the others that it has voting
control over the number of Covered Shares set forth opposite its name on
Exhibit A. Each party shall vote all Covered Shares held by it, or over which
it has the power to direct the voting, as specified in this Agreement and
shall take any and all other action necessary or appropriate to implement the
provisions of this Agreement, including without limitation proposing and
voting on amendments to the Company's certificate of incorporation and by-laws
as may be necessary to fully implement the provisions hereof. No party shall
permit any Covered Shares held by it, or over which it has the power to direct
the voting, to be voted in any manner inconsistent with this Agreement.
"Voting" includes the execution of written consents.
5
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SECTION 3
COMPOSITION OF BOARD OF DIRECTORS
AND COMMITTEES
Section 3.1 Board of Directors. Except as otherwise provided in
Section 3.3, the Board of Directors shall consist of nine members, of whom:
(a) three will be Pagon Designees;
(b) one will be a Columbia Designee until Columbia Capital
ceases to have the right to designate a director under Section 4.1;
(c) one will be a Whitney Designee until Whitney ceases to
have the right to designate a director under Section 4.1;
(d) one will be a Chisholm Designee until Chisholm ceases to
have the right to designate a director under Section 4.1; and
(e) three will be Independent Directors, who shall be the
persons identified in Section 3.5(e) (so long as they continue to
satisfy the definition of "Independent Director") or their successors
(who satisfy the definition of "Independent Director") nominated by
the Nominating Committee.
Section 2.1 shall apply to the election of directors specified in this Section
3.1.
Section 3.2 Vacancies Caused by Resignation, etc.. Any vacancy in the
Board of Directors or a Committee caused by the resignation, removal,
incapacity or death of a Pagon Designee or a DTS Designee shall be filled by a
person designated by the party that had the right to designate the resigned,
removed, incapacitated or dead director or Committee member, except as
provided in Section 3.3. Section 2.1 shall apply to the election of directors
and Committee members specified in this Section 3.2.
Section 3.3 Other Vacancies.
(a) If Columbia Capital, Whitney or Chisholm ceases to have
the right to designate a director pursuant to Section 4.1, such party shall
promptly cause the director designated by it to resign if so requested by
Pagon (or, in the event of his death or incapacity, by PCLP or another person
appointed for Pagon for this purpose), except that in case of the loss
pursuant to Section 4.1(a)(1), (b)(1) or (c)(1) of the right of Columbia
Capital, Whitney or Chisholm to designate a director, as the case may be,
which also results in the termination of this Agreement pursuant to Section
4.3, such party shall cause the director designated by it to resign not later
than the date on which this Agreement terminates. Failing such resignation,
such director may be removed in the manner provided by law. If a vacancy
occurs in the Board of Directors by reason
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of any such required resignation or permitted removal, the Board of Directors
(as constituted after giving effect to such vacancy) shall either (1) reduce
the number of directors to eliminate the vacancy or (2) instruct the
Nominating Committee to nominate an Independent Director to fill the vacancy.
(b) The size of the Board of Directors may be increased as
provided by law. Each director elected to fill any position created by an
increase in the size of the Board of Directors shall be an Independent
Director.
(c) No party to this Agreement will take any action to fill
a vacancy created under this Section 3.3 by a person who is not an Independent
Director. Otherwise, Section 2.1 shall not apply to the election of directors
to fill vacancies created under this Section 3.3
Section 3.4 Committees. The Board of Directors shall establish an
Audit Committee, a Nominating Committee and a Compensation Committee, each of
which shall consist of three directors who shall be (1) a director designated
by Pagon, (2) a director designated by a majority of the DTS Designees then
serving as directors; and (3) one of the Independent Directors specified in
Section 3.1(e) designated by the Board of Directors in the manner provided by
law. The Audit Committee and the Compensation Committee shall have the powers
and functions of the present audit committee and compensation committee of the
Board of Directors. The Nominating Committee shall nominate all persons (other
than the Pagon Designees and the DTS Designees) to serve as directors, which
nominee shall be subject to election by the shareholders of the Company or
subject to appointment by the Board of Directors to fill vacancies. The
Company shall not establish a committee with the authority to act on all or
substantially all matters on which the Board of Directors may act (commonly
known as an "executive committee") without the consent of a majority of the
DTS Designees.
Section 3.5 Initial Designations. The parties make the following
designations pursuant to this Section 3:
(a) Two of the Pagon Designees are Pagon and Robert N.
Verdecchio.
(b) The Columbia Designee is Harry F. Hopper, III.
(c) The Whitney Designee is Michael C. Brooks.
(d) The Chisholm Designee is Riordon B. Smith.
(e) The Independent Directors specified in Section 3.1(e)
are James J. McEntee, III, Mary C. Metzger and Donald W. Weber, each
of whom is currently a director of the Company.
Immediately following the execution of this Agreement, the Board of Directors
shall take such action as shall be required to create vacancies on the Board
of Directors and to elect persons to
7
<PAGE>
the Board of Directors as specified in this Section 3.5. The parties will make
their designations to the Committees at a later date.
Section 3.6 Subsequent Designations. Except as provided in Section
3.5, each party to this Agreement that is entitled to designate one or more
directors or Committee members shall do so by written notice to each of the
other parties to this Agreement and to the Secretary of the Company, signed by
the Person making such designation.
Section 3.7 Removal. Any director may be removed by the shareholders
of the Company in the manner provided by law, except that no DTS Designee may
be removed without the written consent of the party that designated him unless
such party shall have ceased to have the right to designate a director
pursuant to Section 4.1. Section 2.1 shall apply to this Section 3.7.
Section 3.8 Chairman, President and Chief Executive Officer. For so
long as this Agreement is in effect, Pagon will be elected by the Board of
Directors as Chairman, President and Chief Executive Officer of the Company,
except in case of incapacity.
Section 3.9 Preferred Stock. If the holders of the Company's 12-3/4%
Series A Cumulative Exchangeable Preferred Stock shall become entitled to
elect directors in accordance with the terms thereof, this Agreement shall not
apply to any additional directorships to which their rights apply.
Section 3.10 Failure or Delay in Making Designations. No failure or
delay by any party in making any designation of a director or Committee member
(including the fact that Pagon has made only two of his three designations in
Section 3.5(a)) shall constitute a waiver of such party's right to make
designations in the future.
SECTION 4
TERMINATION
Section 4.1 Termination of Designation Rights.
(a) Columbia Capital shall cease to have the right to
designate a director if at any time (1) the Columbia Parties and the Columbia
Principals collectively own less than half the Covered Shares received by the
Columbia Parties and the Columbia Principals pursuant to the Merger Agreement,
or (2) a Designation Right Loss Event occurs with respect to any Columbia
Party or any Columbia Principal.
(b) Whitney shall cease to have the right to designate a
director if at any time (1) Whitney owns less than half the Covered Shares
received by it pursuant to the Merger Agreement, or (2) a Designation Right
Loss Event occurs with respect to Whitney.
8
<PAGE>
(c) Chisholm shall cease to have the right to designate a
director if at any time (1) the Fleet Parties collectively own less than half
the Covered Shares received by them pursuant to the Merger Agreement, or (2) a
Designation Right Loss Event occurs with respect to any Fleet Party.
(d) For purposes of this Section 4.1, a party no longer owns
Covered Shares distributed to its equity holders unless the distributee is
also a party to this Agreement or, in the case of the Columbia Parties, is a
Columbia Principal. Continuing ownership of Covered Shares shall be determined
by the specific identification method.
(e) For purposes of this Section 4.1, if the Columbia
Parties, the Columbia Principals, the Fleet Parties and Whitney, or any of
them, shall transfer any Covered Shares to a partnership or limited liability
company wholly owned by such transferors immediately following the Closing,
then for purposes of this Section 4.1 the transferor shall be deemed to own a
portion of the Covered Shares transferred to such partnership or limited
liability company, which portion shall be designated in writing by such
partnership or limited liability company to the Company at the time of the
transfer of such Covered Shares, as long as (i) such partnership or limited
liability company continues to own such Covered Shares, and (ii) such
transferors continue to own all of the equity interests in such partnership or
limited liability company.
Section 4.2 Termination of Voting Obligations.
(a) The obligations of any party under Section 2.1 shall
terminate with respect to any Covered Share upon the sale or other transfer of
such Covered Share to any person who is not a party to this Agreement and is
not required by subsection (b) to become a party to this Agreement.
(b) PCH, PCLP, PSOC or PNOC shall not sell or otherwise
transfer any Covered Shares to a Permitted Transferee unless the Permitted
Transferee agrees in writing to be bound by, and to become a party to, this
Agreement (including the requirements of this subsection) to the same extent
as its transferor, as it relates to the Covered Shares so transferred.
Section 4.3 Termination of Agreement. This Agreement shall terminate
in its entirety on the date of the meeting of the Company's shareholders at
which directors are scheduled to be elected next following the date on which
all of Columbia Capital, Whitney and Chisholm shall cease to have the right to
designate a director pursuant to Section 4.1. Neither Section 2 nor the
requirements of this Agreement relating to actions by the Nominating Committee
shall apply to the election of directors to occur at such meeting.
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<PAGE>
SECTION 5
MISCELLANEOUS
Section 5.1 Notices. Except as otherwise provided below, whenever it
is provided in this Agreement that any notice, demand, request, consent,
approval, declaration or other communication shall or may be given to or
served upon any of the parties hereto, or whenever any of the parties hereto,
wishes to provide to or serve upon the other party any other communication
with respect to this Agreement, each such notice, demand, request, consent,
approval, declaration or other communication shall be in writing and shall be
delivered in person or sent by telecopy, as specified in the Merger Agreement.
Section 5.2 Entire Agreement. This Agreement represents the entire
agreement and understanding among the parties hereto with respect to the
subject matter hereof and supersedes any and all prior oral and written
agreements, arrangements and understandings among the parties hereto with
respect to such subject matter; and this Agreement can be amended,
supplemented or changed, and any provision hereof can be waived or a departure
from any provision hereof can be consented to, only by a written instrument
making specific reference to this Agreement signed by all parties to this
Agreement other than (a) the Columbia Parties if Columbia Capital shall no
longer have the right to designate a director pursuant to Section 4.1, (b)
Whitney if Whitney shall no longer have the right to designate a director
pursuant to Section 4.1, or (c) the Fleet Parties if Chisholm shall no longer
have the right to designate a director under Section 4.1.
Section 5.3 Paragraph Headings. The paragraph headings contained in
this Agreement are for general reference purposes only and shall not affect in
any manner the meaning, interpretation or construction of the terms or other
provisions of this Agreement.
Section 5.4 Applicable Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of Delaware applicable to
contracts to be made, executed, delivered and performed wholly within such
state and, in any case, without regard to the conflicts of law principles of
such state.
Section 5.5 Severability. If any provision of this Agreement shall be
held by any court of competent jurisdiction to be illegal, void or
unenforceable, such provision shall be of no force and effect, but the
illegality or unenforceability of such provision shall have no effect upon and
shall not impair the enforceability of any other provision of this Agreement.
Section 5.6 No Waiver. The failure of any party at any time or times
to require performance of any provision hereof shall not affect the right at a
later time to enforce the same. No waiver by any party of any condition, and
no breach of any provision, term, covenant, representation or warranty
contained in this Agreement, whether by conduct or otherwise, in any one or
more instances, shall be deemed to be construed as a further or continuing
waiver of any such condition or of the breach of any other provision, term,
covenant, representation or warranty of this Agreement.
10
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Section 5.7 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same original instrument. Not all
parties need sign the same counterpart. Delivery by facsimile of a signature
page to this Agreement shall have the same effect as delivery of an original
executed counterpart.
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Section 5.8 Successors and Assigns. Subject to Section 4.1(d), this
Agreement shall inure to the benefit of and be binding upon the successors,
assigns and transferees of each of the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed the date first written above.
PEGASUS COMMUNICATIONS CORPORATION
By: /s/ Howard E. Verlin
----------------------------------------
Howard E. Verlin,
Vice President
PEGASUS CAPITAL, L.P.
By: Pegasus Capital, Ltd., General Partner
By: /s/ Howard E. Verlin
----------------------------------------
Howard E. Verlin,
Vice President
PEGASUS COMMUNICATIONS HOLDINGS, INC.
By: /s/ Howard E. Verlin
----------------------------------------
Howard E. Verlin,
Vice President
PEGASUS SCRANTON OFFER CORP.
By: /s/ Howard E. Verlin
----------------------------------------
Howard E. Verlin,
Vice President
PEGASUS NORTHWEST OFFER CORP.
By: /s/ Howard E. Verlin
----------------------------------------
Howard E. Verlin,
Vice President
12
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/s/ Marshall W. Pagon
----------------------------------------
Marshall W. Pagon
FLEET VENTURE RESOURCES, INC.
By: /s/ Riordon B. Smith
----------------------------------------
Name: Riordon B. Smith
Title: Senior Vice President
FLEET EQUITY PARTNERS VI, L.P.
By: Fleet Growth Resources II, Inc.
Its General Partner
By: /s/ Riordon B. Smith
---------------------------------------
Name: Riordon B. Smith
Title: Senior Vice President
CHISHOLM PARTNERS III, L.P.
By: Silverado III L.P., its general partner
By: Silverado III Corp., its general partner
By: /s/ Riordon B. Smith
----------------------------------------
Name: Riordon B. Smith
Title: Senior Vice President
KENNEDY PLAZA PARTNERS
By: /s/ Riordon B. Smith
----------------------------------------
Name: Riordon B. Smith
Title: General Partner
13
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WHITNEY EQUITY PARTNERS, L.P.
By: J.H. Whitney Equity Partners LLC
Its General Partner
By: /s/ Daniel J. O'Brien
----------------------------------------
Name: Daniel J. O'Brien
Title: Managing Member
COLUMBIA CAPITAL CORPORATION
By: /s/ Neil P. Byrne
----------------------------------------
Name: Neil P. Byrne
Title: Vice President
COLUMBIA DBS, INC.
By: /s/ Neil P. Byrne
----------------------------------------
Name: Neil P. Byrne
Title: Vice President
14
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EXHIBIT A
Covered Shares
------------------------------------------
Shareholder Class A Common Stock Class B Common Stock
- ------------------------------------- -------------------- --------------------
Whitney Equity Partners, L.P. 959,473
Fleet Venture Resources, Inc. 406,186
Fleet Equity Partners VI, L.P. 174,079
Chisholm Partners III, L.P. 147,611
Kennedy Plaza Partners 10,179
Columbia Capital Corporation 429,812
Columbia DBS, Inc. 18,316
Pegasus Capital, L.P. 1,217,348
Pegasus Communications Holdings, Inc. 3,123,856
Pegasus Northwest Offer Corp. 122,338
Pegasus Scranton Offer Corp. 118,358
Marshall W. Pagon 12,699
15
