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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a)
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)
H. Bryan Ives, III
Nelson Mullins Riley & Scarborough, L.L.P.
NationsBank Corporate Center; 26th Floor, Suite 2600
100 North Tryon Street
Charlotte, North Carolina 28202
(704) 417-3100
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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 Rule 13d-1(b)(3) or (4), check the following box [ ].
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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)
Columbia Capital Corporation
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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
Virginia
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Number of Shares 7) Sole Voting Power: 0
Beneficially Owned
By Each Reporting
Person With 8) Shared Voting Power: 6,842,506
9) Sole Dispositive Power: 429,812
10) Shared Dispositive Power: 0
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11) Aggregate Amount Beneficially Owned by Each Reporting Person
6,842,506
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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)
43.1%
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14) Type of Reporting Person
CO
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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)
Columbia DBS, Inc.
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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
Virginia
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Number of Shares 7) Sole Voting Power: 0
Beneficially Owned
By Each Reporting
Person With 8) Shared Voting Power: 6,842,506
9) Sole Dispositive Power: 18,316
10) Shared Dispositive Power: 0
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11) Aggregate Amount Beneficially Owned by Each Reporting Person
6,842,506
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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)
43.1%
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14) Type of Reporting Person
CO
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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 "Agreement") among the Issuer, certain of its shareholders, Pegasus
DTS Merger Sub, Inc. ("Merger Sub"), Digital Television 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,
the Issuer and the Reporting Persons entered into the Voting Agreement (as
defined herein) with certain of the persons to whom those shares were issued.
Because of the Voting Agreement, the Reporting Persons share voting power over
the shares held by the other parties to the Voting Agreement and, under the
Commission's rules, are deemed to beneficially own them. The purpose of this
Schedule 13D is to reflect the Reporting Persons' deemed beneficial ownership of
these shares.
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.
ITEM 2. IDENTITY AND BACKGROUND.
This statement is filed with respect to Columbia Capital Corporation, a
Virginia corporation ("CCC"), and Columbia DBS, Inc., a Virginia corporation
("DBS"). Each of CCC and DBS are referred to herein as a "Reporting Person" and
collectively as the "Reporting Persons". The Reporting Persons may be deemed to
be part of a "group" as a result of the Voting Agreement (as defined in Item 6)
and, pursuant to an agreement between the Reporting Persons (which is filed with
this Schedule 13D as Exhibit 1) and as permitted by Rule 13d-1(f) under the
Securities Exchange Act of 1934, the Reporting Persons are filing this joint
statement.
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 in to Class A Common
Stock upon transfer to persons who are not Permitted Transferees (as that 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
Persons share voting power over the shares of Class A Common Stock beneficially
owned by the persons identified in Item 6 and are deemed to be beneficial owners
thereof. The Reporting Persons are advised that certain of the persons described
in Item 6 are separately filing one or more statements on Schedule 13D, pursuant
to Rule 13d-1(f)(2), with respect to their beneficial ownership of the Issuer's
securities.
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The principal business of CCC is providing capital, financial services
and strategic guidance to companies in the communications and media industries.
The principal business of DBS is investing in companies engaged in the satellite
television business. The principal business address of each Reporting Person is
201 North Union Street, Alexandria, Virginia 22314. None of the Reporting
Persons has, during the last five years, been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) (a "Criminal Conviction")
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 (a
"Civil Violation").
Messrs. Robert B. Blow, Mark J. Kington, David P. Mixer, James B.
Murray, Jr. and Mark R. Warner constitute all of the directors of each of the
Reporting Persons (the "Directors"). Each of the Directors, together with Mr.
Neil P. Byrne, constitute all of the executive officers of CCC (the "CCC
Executive Officers"). The executive officers of DBS are Messrs. Murray and
Byrne, Mr. Harry F. Hopper, III, Mr. Douglas S. Holladay, Jr. and Mr. Donald A.
Doering (the "DBS Executive Officers", and together with the CCC Executive
Officers, the "Executive Officers"). The principal business address for each of
the Directors and Executive Officers other than Messrs. Holladay and Doering is
201 North Union Street, Alexandria, Virginia 22314. The principal business
address of Messrs. Doering and Holladay is 880 Holcomb Bridge Road, Building
C-200, Roswell, Georgia 30076. Each of the Directors and Executive Officers is a
citizen of the United States. None of the Directors or Executive Officers has
been subject to a Criminal Conviction or Civil Violation.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
As provided in the Merger Agreement, the consideration given by each
Reporting Person (and each Director and Executive Officer) for the shares of
Class A Common Stock held by it or him (and described in Item 5) 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, neither of the Reporting Persons, any Director or Executive
Officer has any present plans, or contemplates any 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 of the date hereof, the Reporting Persons, the Directors and
Executive Officers are deemed to be the beneficial owners of the number and
percentage of the Issuer's Class A Common Stock set forth below:
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Shares of Class A
Name Common Stock (1) %(1)
---- ---------------- ----
Columbia Capital Corporation(2)(3) 6,842,506 43.1
Columbia DBS, Inc.(2)(4) 6,842,506 43.1
Robert B. Blow (5) 510,605 4.5
Mark J. Kington 511,891 4.5
David P. Mixer (6) 511,891 4.5
James B. Murray, Jr 511,891 4.5
Mark R. Warner 511,892 4.5
Harry F. Hopper, III 180,036 1.6
Neil P. Byrne 51,460 *
Donald A. Doering 48,917 *
Douglas S. Holladay(7) 114,736 1.0
* Less than one percent.
(1) The number and percentage of shares reported as beneficially owned for
each person are calculated assuming conversion of all Class B Common
Shares beneficially owned by such person into Class A Common Shares.
(2) Includes 4,581,900 shares of Class A Common Stock issuable upon
conversion of shares of Class B Common Stock held by persons identified
in Item 6 and deemed to be beneficially owned by this person solely by
reason of the Voting Agreement described in Item 6.
(3) Includes 1,830,794 shares of Class A Common Stock held by the persons
identified in Item 6 and deemed to be beneficially owned by this person
solely by reason of the Voting Agreement described in Item 6.
(4) Includes 2,242,290 shares of Class A Common Stock held by the persons
identified in Item 6 and deemed to be beneficially owned by this person
solely by reason of the Voting Agreement described in Item 6.
(5) Excludes 1,284 shares of Class A Common Stock held by Blow Children's
Trust that the trustee, Mr. David Dunehew, has the right to vote and
direct the disposition of. Mr. Blow disclaims beneficial ownership of
the shares of Class A Common Stock held by the Trust.
(6) Includes 100,400 shares of Class A Common Stock held by Dalton Venture
Family, L.P. and 411,491 shares of Class A Common Stock held by Dalton
Trust, all of which are deemed to be beneficially owned by Mr. Mixer.
(7) The 114,736 shares of Class A Common Stock beneficially owned by Mr.
Holladay are held by the Holladay Family Limited Partnership, of which
Mr. Holladay is the general partner.
(b) CCC and DBS share voting power over all 6,842,506 shares of Class A
Common Stock beneficially owned by each of them with the other parties to the
Voting Agreement described in Item 6. CCC has sole dispositive power over all
429,812 shares of Class A Common Stock
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owned directly by it. DBS has sole dispositive power over all 18,316 shares of
Class A Common Stock owned directly by it.
All of the Directors and Executive Officers have sole dispositive and
voting power over all shares beneficially owned by each of them.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
On April 27, 1998, a wholly-owned subsidiary of the Issuer merged (the
"Merger") into Digital Television Services, Inc., a Delaware corporation
("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 and the
Reporting Persons entered into a voting agreement dated April 27, 1998 (the
"Voting Agreement") with Pegasus Capital, L.P., Pegasus Communications Holdings,
Inc., Whitney Equity Partners, L.P., 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 CCC, 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 CCC, Whitney Equity
Partners, L.P. and Chisholm Partners III, L.P., and one member designated by a
majority of the Independent Directors. The parties to the Voting Agreement
(other than the Reporting Persons) beneficially own, collectively, 6,394,378
shares of the Class A Common Stock. The Voting Agreement is filed as Exhibit 2
to this Schedule 13D.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS.
1. Joint Filing Agreement dated May 4, 1998.
2. Voting Agreement dated April 27, 1998.
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SIGNATURES
After reasonable inquiry and to the best of our knowledge and belief,
we certify that the information set forth in this statement is true, complete
and correct.
Dated: May 4, 1998
COLUMBIA CAPITAL CORPORATION
By: /s/ Neil P. Byrne
----------------------------
Neil P. Byrne
Vice President
COLUMBIA DBS, INC.
By: /s/ Neil P. Byrne
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Neil P. Byrne
Vice President
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JOINT FILING AGREEMENT
In accordance with Rule 13d-1(f)(1)(iii) under the Securities Exchange
Act of 1934, as amended, the persons named below agree to the joint filing on
behalf of each of them of a Schedule 13D with respect to the Class A Common
Stock, par value $.01 per share, of Pegasus Communications Corporation, a
Delaware corporation, and any further amendments thereto. This Joint Filing
Agreement shall be filed as an Exhibit to the Schedule 13D.
Date: May 4, 1998
COLUMBIA CAPITAL CORPORATION
By: /s/ Neil P. Byrne
-------------------------
Neil P. Byrne
Vice President
COLUMBIA DBS, INC.
By: /s/ Neil P. Byrne
-------------------------
Neil P. Byrne
Vice President
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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:
"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.
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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.
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"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.
"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.
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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.
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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.
(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.
7
<PAGE> 17
(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.
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.
8
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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 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.
9
<PAGE> 19
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.
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.
10
<PAGE> 20
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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<PAGE> 21
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
<PAGE> 22
/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
<PAGE> 23
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
<PAGE> 24
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
