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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934 (Amendment No. )*
PEGASUS COMMUNICATIONS CORPORATION
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(Name of Issuer)
Class A Common Stock, Par Value $.01
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(Title of Class of Securities)
705904100
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(CUSIP NUMBER)
Daniel J. O'Brien
c/o J.H. Whitney & Co.
177 Broad Street
Stamford, Connecticut 06901
(203) 973-1400
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
April 27, 1998
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g),
check the following box [ ].
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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SCHEDULE 13D
CUSIP NO. 705904100
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1) Name of Reporting Persons I.R.S. Identification Nos. of Above Persons
(entities only)
Whitney Equity Partners, L.P.(IRS Identification No. 06-1445444), the sole
general partner of which is J.H. Whitney Equity Partners, L.L.C. (the
members of J.H. Whitney Equity Partners, L.L.C. are Michael C. Brooks,
Peter M. Castleman, Jeffrey R. Jay, William Laverack, Jr., Ray E. Newton,
III, Daniel J. O'Brien and Michael R. Stone).
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2) Check the Appropriate Box if a Member of a Group*
(a) / /
(b) /X/
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3) SEC Use Only
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4) Source of Funds OO
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5) Check Box if Disclosure of Legal Proceedings is Required Pursuant to Item
2(d) or 2(e) / /
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6) Citizenship or Place of Organization
Whitney Equity Partners, L.P., is a Delaware limited partnership. The sole
general partner, J.H. Whitney Equity Partners, L.L.C., is a Delaware
limited liability company. All of the members of J.H. Whitney Equity
Partners, L.L.C., are United States citizens.
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Number of Shares 7) Sole Voting Power: 0
Beneficially Owned
By Each Reporting 8) Shared Voting Power: 6,757,255
Person With
9) Sole Dispositive Power: 959,473
10) Shared Dispositive Power: 0
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11) Aggregate Amount Beneficially Owned by Each Reporting Person
6,757,255
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12) Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
/ /
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13) Percent of Class Represented by Amount in Row (11)
42.7%
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14) Type of Reporting Person
PN
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This Schedule 13D is filed in connection with the closing of the
transactions under that certain Agreement and Plan of Merger dated January 8,
1998 (the "Merger Agreement") among the Issuer, certain of its shareholders,
Pegasus DTS Merger Sub, Inc. ("Merger Sub"), Digital Televisions Services, Inc.
("DTS") and certain of its stockholders, pursuant to which Merger Sub, a
wholly-owned subsidiary of the Issuer, merged into DTS and DTS became a
wholly-owned subsidiary of the Issuer (the "Merger"). In connection with the
Merger, the Issuer issued 5,471,296 shares of its Class A Common Stock, par
value $.01 per share, to the former stockholders of DTS in exchange for all of
the issued and outstanding shares of the capital stock of DTS. In connection
with the Merger, 959,473 shares of Class A Common Stock were issued to Whitney
Equity Partners, L.P., and the Issuer entered into the Voting Agreement (as
defined in Item 6) with certain stockholders, including Whitney Equity Partners,
L.P. Because of the Voting Agreement, under the Commission's rules, the
Reporting Person may also be deemed to share voting power over the shares held
by the other parties to the Voting Agreement and to beneficially own them. The
Reporting Person disclaims such beneficial ownership. The Reporting Person also
disclaims that it, along with all or any of the other stockholders of the Issuer
parties to the Voting Agreement, constitute a "person" or "group" as such terms
are used in Section 13(d) of the Act. The filing of this Schedule 13D shall not
be construed as an admission that the Reporting Person is the beneficial owner
of such shares or that the Reporting Person and any of such other stockholders
constitute such a person or group.
ITEM 1. SECURITY AND ISSUER.
This Schedule 13D relates to the Class A Common Stock, par value $.01 per
share ("Class A Common Stock"), of Pegasus Communications Corporation (the
"Issuer"). The Issuer is a Delaware corporation and its principal executive
offices are located at 5 Radnor Corporate Center, Suite 454, 100 Matsonford
Road, Radnor, PA 19087.
Shares of the Issuer's Class B Common Stock, par value $.01 per share (the
"Class B Common Stock") are convertible into shares of Class A Common Stock on a
one-for-one basis at any time at the option of the holder. In addition, shares
of Class B Common Stock are automatically converted into Class A Common Stock
upon transfer to persons who are not Permitted Transferees (as this term is
defined in the Issuer's Amended and Restated Certificate of Incorporation).
Holders of Class A Common Stock are entitled to one vote per share, and holders
of Class B Common Stock are entitled to ten votes per share.
By reason of the Voting Agreement described in Item 6, the Reporting
Person may be deemed to share voting power over the shares of Class A Common
Stock (and the 4,581,900 shares of Class A Common Stock issuable upon conversion
of the outstanding shares of Class B Common Stock) held by the persons
identified in Item 6 and to be a beneficial owner thereof. The Reporting Person
is advised that certain of the persons described in Item 6 are separately filing
one or more statements on Schedule 13D with respect to their beneficial
ownership of the Issuer's securities.
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ITEM 2. IDENTITY AND BACKGROUND.
Whitney Equity Partners, L.P., is a Delaware limited partnership, with
offices at 177 Broad Street, Stamford, CT 06901. The name and business address
of the sole general partner of Whitney Equity Partners, L.P., is J.H. Whitney
Equity Partners, L.L.C., 177 Broad Street, Stamford, CT 06901. The names and
business addresses of the members of J.H. Whitney Equity Partners, L.L.C. are as
follows: Michael C. Brooks, Peter M. Castleman, Jeffrey R. Jay, William
Laverack, Jr., Ray E. Newton, III, Daniel J. O'Brien and Michael R. Stone, the
business address of each of whom is 177 Broad Street, Stamford, CT 06901. The
principal business of Whitney Equity Partners, L.P., is that of a private
investment fund. The principal business of J.H. Whitney Equity Partners, L.L.C.
is that of the general partner of Whitney Equity Partners, L.P. The principal
occupation or employment of each of the members of J.H. Whitney Equity Partners,
L.L.C. is that of a general partner or member of the general partner of J.H.
Whitney & Co., Whitney Equity Partners, L.P. and several other partnerships.
Neither Whitney Equity Partners, L.P., J.H. Whitney Equity Partners,
L.L.C., nor any member of J.H. Whitney Equity Partners, L.L.C., has, during the
last five years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction resulting in a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, Federal or state securities laws or finding
any violation with respect to such laws.
Whitney Equity Partners, L.P. is a Delaware limited partnership. Its sole
general partner, J.H. Whitney Equity Partners, L.L.C., is a Delaware limited
liability company. All of the members of J.H. Whitney Equity Partners, L.L.C.,
are citizens of the United States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
As provided in the Merger Agreement, the consideration given by the
Reporting Person for the Class A Common Stock held by it consisted solely of
shares of the outstanding capital stock of DTS.
ITEM 4. PURPOSE OF TRANSACTION.
The composition of the Issuer's board of directors has been changed to
satisfy the requirements of the Voting Agreement, as more fully described in
Item 6. Otherwise, the Reporting Person has no present plans, and contemplates
no present proposals, that relate to or would result in any of the transactions
described in Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) As a result of the Merger, Whitney Equity Partners, L.P. received
959,473 shares of Class A Common Stock (8.5% of the total outstanding) in
exchange for its DTS stock. Solely by virtue of the Voting Agreement, the
Reporting Person may be deemed to share voting power to the
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shares held by the other parties to the Voting Agreement and to beneficially own
them. The total number of shares of Class A Common Stock subject to the Voting
Agreement is 6,757,255 shares, or 42.7% of the total outstanding, including (i)
4,581,900 shares of Class A Common Stock issuable upon conversion of shares of
Class B Common Stock held by other parties to the Voting Agreement and (ii)
1,215,882 shares of Class A Common Stock held by other parties to the Voting
Agreement.
(b) Solely by virtue of the Voting Agreement, the Reporting Person may be
deemed to share voting power over all 6,757,255 shares of Class A Common Stock
beneficially owned by the parties to the Voting Agreement. The Reporting Person
has sole dispositive power over all 959,473 shares of Class A Common Stock owned
directly by it.
(c) Whitney Equity Partners, L.P. acquired 959,473 shares of Class A
Common Stock in connection with the Merger.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
On April 27, 1998, Merger Sub, a wholly-owned subsidiary of the Issuer,
merged into DTS, as a result of which DTS became a wholly-owned subsidiary of
the Issuer, and the Issuer issued 5,471,296 shares of Class A Common Stock to
the former stockholders of DTS. In connection with the Merger, the Issuer
entered into a voting agreement dated April 27, 1998 (the "Voting Agreement")
with Whitney Equity Partners, L.P., Pegasus Capital, L.P., Pegasus
Communications Holdings, Inc., Pegasus Scranton Offer Corp., Pegasus Northwest
Offer Corp., Columbia Capital Corporation, Columbia DBS, Inc., Fleet Venture
Resources, Inc., Fleet Equity Partners VI, L.P., Chisholm Partners III, L.P.,
Kennedy Plaza Partners, and Marshall W. Pagon. The Voting Agreement obligates
the parties thereto to vote their shares of the Issuer's Class A Common Stock
and Class B Common Stock to elect to the Issuer's board of directors three
persons designated by Mr. Pagon, one person designated by Columbia Capital
Corporation, one person designated by Whitney Equity Partners, L.P., one person
designated by Chisholm Partners III, L.P., and three Independent Directors (as
defined in the Voting Agreement). It also requires there to be audit,
compensation and nominating committees of the Issuer's board of directors, each
consisting of one member designated by Mr. Pagon, one member designated by a
majority of the directors designated by Columbia Capital Corporation, Whitney
Equity Partners, L.P. and Chisholm Partners III, L.P., and one member
designated by a majority of the Independent Directors. The Voting Agreement is
filed as Exhibit 1 to this Schedule 13D.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS.
1. Voting Agreement dated April 27, 1998.
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SIGNATURES
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is
true, complete and correct.
Dated: May 6, 1998
WHITNEY EQUITY PARTNERS, L.P.
By: J.H. Whitney Equity Partners, L.L.C.
Its General Partner
By: /s/Daniel J. O'Brien
----------------------
Daniel J. O'Brien
Member
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EXHIBIT 1
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
Section 1.1 Definitions. As used in this Agreement, the following terms
have the following meanings:
"Audit Committee": the audit committee of the Board of Directors
referred to in Section 3.4.
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"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):
(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;
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(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.
"DTS Designee": a Columbia Designee, a Chisholm Designee or a
Whitney Designee.
"DTS Parties": the Columbia Parties, Whitney and the Fleet Parties.
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"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.
"PCLP": Pegasus Capital, L.P., a Pennsylvania limited partnership.
"PNOC": Pegasus Northwest Offer Corp, a Delaware corporation.
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"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.
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:
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(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 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.
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(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 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.
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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.
(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
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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.
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.
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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.
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:______________________________________________
Howard E. Verlin,
Vice President
PEGASUS CAPITAL, L.P.
By: Pegasus Capital, Ltd., General Partner
By:______________________________________________
Howard E. Verlin,
Vice President
PEGASUS COMMUNICATIONS HOLDINGS, INC.
By:______________________________________________
Howard E. Verlin,
Vice President
PEGASUS SCRANTON OFFER CORP
By:______________________________________________
Howard E. Verlin,
Vice President
PEGASUS NORTHWEST OFFER CORP
By:______________________________________________
Howard E. Verlin,
Vice President
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_________________________________________________
Marshall W. Pagon
FLEET VENTURE RESOURCES, INC.
By:______________________________________________
Name:
Title:
FLEET EQUITY PARTNERS VI, L.P.
By: Fleet Growth Resources II, Inc.
Its General Partner
By:______________________________________________
Name:
Title:
CHISHOLM PARTNERS III, L.P.
By: Silverado III L.P., its general partner
By: Silverado III Corp., its general partner
By:______________________________________________
Name:
Title:
KENNEDY PLAZA PARTNERS
By:______________________________________________
Name:
Title:
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<PAGE> 13
WHITNEY EQUITY PARTNERS, L.P.
By: J.H. Whitney Equity Partners LLC
Its General Partner
By:______________________________________________
Name:
Title:
COLUMBIA CAPITAL CORPORATION
By:______________________________________________
Name:
Title:
COLUMBIA DBS, INC.
By:______________________________________________
Name:
Title:
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EXHIBIT A
<TABLE>
<CAPTION>
Covered Shares
---------------------------------------------
Shareholder Class A Common Stock Class B Common Stock
- ----------- -------------------- --------------------
<S> <C> <C>
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
</TABLE>
