EXECUTION COPY
AGREEMENT
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This AGREEMENT (this "Agreement") is made and entered into as of July
30, 2004 by and among (a) Pegasus Communications Corporation, a Delaware
corporation ("PCC") (on its own behalf and on behalf of its direct and indirect
subsidiaries (other than Pegasus Satellite Communications, Inc. ("PSCI") and its
direct and indirect subsidiaries) (collectively with PCC, the "Company")), (b)
the statutory committee of unsecured creditors duly appointed in the Chapter 11
Cases (as defined below) (the "Committee") and (c) each member of the Official
Committee of Unsecured Creditors (the "Committee") appointed in the Chapter 11
Cases (as defined below) listed on the signature pages of this Agreement
(individually, a "Consenting Holder," and collectively, the "Consenting
Holders).
RECITALS
WHEREAS, on June 2, 2004 (the "Petition Date"), PSCI and substantially
all of its direct and indirect subsidiaries (the "Debtors") filed voluntary
petitions for relief with the United States Bankruptcy Court for the District of
Maine (the "Bankruptcy Court") commencing cases (the "Chapter 11 Cases") under
chapter 11, title 11 of the United States Code (the "Bankruptcy Code");
WHEREAS, the Debtors are in the business of providing direct broadcast
satellite television ("DBS") services in certain rural areas through agreements
with the National Rural Telecommunications Cooperative ("NRTC") called the
"NRTC/Member Agreements for Marketing and Distribution of DBS Services" (as
amended, the "Member Agreements"), and NRTC, in turn, obtains the services for
distribution to the Debtors and to certain other members and affiliates of NRTC
through a contract with DIRECTV, Inc. ("DIRECTV") called the "DBS Distribution
Agreement" (as amended, the "DBS Agreement");
WHEREAS, prior and subsequent to the Petition Date, the Debtors were,
and continue to be, engaged in litigation (the "Litigation") with NRTC and
DIRECTV concerning the Member Agreements and DBS Agreement and certain related
matters;
WHEREAS, the Debtors, the Company, NRTC, DIRECTV, the Committee and the
Consenting Holders have agreed to settle these disputes pursuant to a Global
Settlement Agreement, dated as of July 30, 2004 (the "Global Settlement
Agreement"), providing for the exchange of various releases, and the Debtors
have agreed to sell to DIRECTV, and DIRECTV has agreed to acquire from the
Debtors, the assets associated with the DBS business pursuant to an Asset
Purchase Agreement, dated as of July 30, 2004 (the "Asset Purchase Agreement"),
for a purchase price of $937,719,121.00 (subject to adjustment as provided
therein) and the assumption of certain liabilities;
WHEREAS, PCC is the ultimate parent of the Debtors and holds a
Promissory Note, dated June 28, 2002, issued by PSCI (the "PSCI Note");
WHEREAS, each Consenting Holder is a beneficial owner, or an investment
adviser or manager for a beneficial owner (with the power to vote and dispose of
investments on behalf of such beneficial owner), of claims against one or more
Debtors (the "Claims") in the amounts listed below its name on the signature
pages hereto;
WHEREAS, the Company, the Committee and the Consenting Holders have
engaged in good faith negotiations with the objective of reaching an agreement
(the "Settlement") with regard to (a) a settlement of the Debtors dispute with
NRTC and DIRECTV pursuant to the Global Settlement Agreement and the Asset
Purchase Agreement, (b) the disposition of the broadcast assets of Pegasus
Broadcast Television, Inc. ("PBTI") and certain of its affiliates that own or
operate broadcast television stations and (c) certain related matters, in each
case substantially on the terms set forth in the Term Sheet attached as Exhibit
A hereto (the "Term Sheet");
WHEREAS, in order to facilitate the implementation of the Settlement,
each Consenting Holder is prepared to commit, as set forth in more detail
herein, during the period commencing on the date hereof and ending on the date a
Termination Event (as defined herein) first occurs, and no longer, not to sell,
transfer or assign any of the Claims except as permitted herein; and
WHEREAS, the Company, the Committee and each Consenting Holder is
prepared to commit, on the terms and subject to the conditions of this Agreement
and applicable bankruptcy law, to support the Settlement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company, the Committee and the Consenting Holders hereby agree as follows:
1. Restriction on Transfer. Each Consenting Holder represents that, as
of the date hereof, it is the beneficial owner, or an investment adviser or
manager for a beneficial owner (with the power to vote and dispose of
investments on behalf of such beneficial owner), of the Claims listed below its
name on the signature pages hereto. Each Consenting Holder hereby agrees that,
during the period commencing on the date hereof and ending on the date that a
Termination Event first occurs, and no longer, it may sell, transfer or assign
any Claims or any option thereon or any right or interest therein, provided,
however, that each Consenting Holder shall maintain beneficial ownership of
sufficient Claims to maintain membership on the Committee as stated in the
Committee By-Laws as in existence on the date hereof.
2. Support of the Settlement. The Company will take all necessary and
appropriate action to support the Settlement and the consummation of the
transactions envisioned thereby. The Committee and the Consenting Holders will
take all reasonably necessary and appropriate actions to support the Settlement
and the consummation of the transactions envisioned thereby. The Committee and
each Consenting Holder agree that they shall support any motions or applications
filed by the Debtors seeking approval of the Bankruptcy Court for the auction of
the Broadcast Assets (as defined in the Term Sheet) pursuant to the procedures
and on the timetable described in the Term Sheet and shall not take any action
inconsistent with such transaction.
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3. Acknowledgment. This Agreement is not and shall not be deemed to be
a solicitation by any Debtor for consents to any plan of reorganization.
4. Termination of Agreement and Consenting Holders' Obligations. The
Company, the Committee and each Consenting Holder may terminate its obligations
hereunder and this Agreement shall terminate if any of the following events (any
such event, a "Termination Event") occurs: (i) the Global Settlement Agreement
is terminated pursuant to its terms or (ii) the Asset Purchase Agreement is
terminated pursuant to its terms (other than a termination of the Asset Purchase
Agreement that results in a draw under the Letter of Credit (as defined in the
Asset Purchase Agreement) pursuant to Section 3.4 thereof) and the Debtors do
not substantially contemporaneously enter into an agreement to sell the DBS
business to another buyer for consideration equal to or greater than the
consideration provided in the Asset Purchase Agreement or (iii) the effective
date of a plan of reorganization.
5. Representations and Warranties. The Company and each Consenting
Holders represents and warrants to each other the following statements are true,
correct and complete as of the date hereof:
(a) Corporate Power and Authority. It has all requisite power
and authority to enter into this Agreement and to carry out the
transactions contemplated by, and perform its respective obligations
under, this Agreement.
(b) Authorization. The execution and delivery of this
Agreement and the performance of its obligations hereunder have been
duly authorized by all necessary corporate, partnership or LLC action
on its part.
(c) No Conflicts. The execution, delivery and performance by
it of this Agreement do not and shall not (i) violate any provision of
law, rule or regulation applicable to it or any of its subsidiaries or
its certificate of incorporation or bylaws or other organizational
documents or those of any of its subsidiaries or (ii) conflict with,
result in a breach of or constitute (with due notice or lapse of time
or both) a default under any material contractual obligation to which
it or any of its subsidiaries is a party.
(d) Governmental Consents. The execution, delivery and
performance by it of this Agreement do not and shall not require any
registration or filing with, consent or approval of, or notice to, or
other action to, with or by, any federal, state or other governmental
authority or regulatory body, except such filings as may be necessary
in connection with the commencement of the Chapter 11 Cases, the
approval of a disclosure statement and the confirmation of a plan of
reorganization.
(e) Binding Obligation. This Agreement is the legally valid
and binding obligation of it, enforceable against it in accordance with
its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating
to or limiting creditors' rights generally or by equitable principles
relating to enforceability or a ruling of the Bankruptcy Court.
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6. Further Acquisition of Securities. This Agreement shall in no way be
construed to preclude the Consenting Holders from acquiring additional Claims
against the Debtors. However, any such additional Claims so acquired shall
automatically be subject to the terms of this Agreement.
7. Amendments. This Agreement may not be modified, amended or
supplemented except in writing signed by the Company, the Committee and each
Consenting Holder.
8. Disclosure. Unless required by applicable law or regulation or a
ruling by a court of competent jurisdiction, the Company shall not disclose any
Consenting Holder's holdings of Claims without the prior written consent of such
Consenting Holder, and if such announcement or disclosure is so required by law
or regulation or court ruling, the Company shall afford such Consenting Holder a
reasonable opportunity to review and comment upon any such announcement or
disclosure prior to such announcement or disclosure. The foregoing shall not
prohibit the Company or the Debtors from disclosing the approximate aggregate
holdings of Claims by the Consenting Holders as a group or the existence and
terms of this Agreement and that the Consenting Holders have expressed support
for the Settlement.
9. Creditors Committee. Notwithstanding anything herein to the
contrary, the terms of this Agreement shall not be construed so as to limit any
Consenting Holder's exercise of its fiduciary duties to any person arising from
its service on the Committee, and any such exercise of such fiduciary duties
shall not be deemed to constitute a breach of the terms of this Agreement (but
the fact of such service on the Committee shall not otherwise affect the
continuing validity or enforceability of this Agreement).
10. Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of New York,
without regard to any conflicts of law provision which would require the
application of the law of any other jurisdiction. By its execution and delivery
of this Agreement, the parties hereto hereby irrevocably and unconditionally
agrees for itself that any legal action, suit or proceeding against it with
respect to any matter under or arising out of or in connection with this
Agreement or for recognition or enforcement of any judgment rendered in any such
action, suit or proceeding, may be brought in the United States District Court
for the Southern District of New York. By execution and delivery of this
Agreement, each of the parties hereto hereby irrevocably accepts and submits
itself to the nonexclusive jurisdiction of each such court, generally and
unconditionally, with respect to any such action, suit or proceeding.
Notwithstanding the foregoing consent to New York jurisdiction, during the
pendency of the Chapter 11 Cases, each of the parties hereto hereby agrees that
the Bankruptcy Court shall have exclusive jurisdiction of all matters arising
out of or in connection with this Agreement.
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11. Reservation of Rights. This Agreement and the Settlement
(including, without limitation, the Global Settlement Agreement and the Asset
Purchase Agreement) are part of a proposed settlement of disputes among the
parties hereto. Except as expressly provided in this Agreement, nothing herein
is intended to, or does, in any manner wave, limit, impair or restrict the
ability any party to protect and preserve its rights, remedies and interests,
including, without limitation, its Claims against the Debtors. If the
transactions contemplated herein (including consummation of the transactions
contemplated in the Global Settlement Agreement or the Asset Purchase Agreement)
are not consummated, or if this Agreement is terminated for any reason, the
parties hereto fully reserve any and all of their rights.
12. Headings. The headings of the sections, paragraphs and subsections
of this Agreement are inserted for convenience only and shall not affect the
interpretation hereof
13. Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of the parties and their respective successors, assigns,
heirs, executors, administrators and representatives. The agreements,
representations and obligations of the Consenting Holders under this Agreement
are, in all respects, several and not joint.
14. Prior Negotiations. This Agreement and the Term Sheet supersede all
prior negotiations with respect to the subject matter hereof.
15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same Agreement.
16. No Third-Party Beneficiaries. Unless expressly stated herein, this
Agreement shall be solely for the benefit of the parties hereto and no other
person or entity shall be a third-party beneficiary hereof.
17. Consideration. It is hereby acknowledged by the parties hereto that
no consideration shall be due or paid to the Consenting Holders for their
agreement to support the Settlement or the Company's acquisition of the
Broadcast Assets in accordance with the terms and conditions of this Agreement
other than the Company's agreement to support the Settlement.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered by its duly authorized officer as of the
date first above written.
PEGASUS COMMUNICATIONS CORPORATION
(on its own behalf and on behalf of its direct and indirect
non-debtor subsidiaries)
By: /s/ Xxx X. Lodge
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Name: Xxx X. Lodge
Title: President and Chief Operating Officer
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LC CAPITAL MASTER FUND
By: /s/ Xxxxxx Xxxxx
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Name: Xxxxxx Xxxxx
Title: Managing Member
Claims:
$
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SILVER POINT CAPITAL
By XXXXXXXX CONSULTING LLC, Authorized Signatory
By: /s/ Xxxxx Xxxxxxxx
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Name: Xxxxx Xxxxxxxx
Title: President
Claims:
$
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SINGER CHILDREN MANAGEMENT TRUST and
Affiliates
By: /s/ Xxxx Xxxxxx
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Name: Xxxx Xxxxxx
Title: Investment Advisor
Claims:
$
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STATUTORY COMMITTEE OF UNSECURED CREDITORS
By WACHOVIA BANK N.A. (solely in its capacity as
Committee Chairperson and not in its individual capacity)
By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
Title: Vice President
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Exhibit A
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Term Sheet
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The following sets forth the material terms of the Settlement.
1. DIRECTV/NRTC Settlement. The Settlement shall be conditioned upon
(i) a sale of the DBS business to DIRECTV pursuant to the Asset Purchase
Agreement (whether in connection with a closing thereunder or a draw under the
Letter of Credit (as defined in the Asset Purchase Agreement) pursuant to
Section 3.4 thereof) and a settlement of the Litigation pursuant to the Global
Settlement Agreement or (ii) a sale of the DBS business to another buyer for
consideration equal to or greater than the consideration provided under the
Asset Purchase Agreement and an exchange of releases among the Company, the
Debtors and the Consenting Holders identical to those contained in the Global
Settlement Agreement.
2. PCC's Acquisition of the Broadcast Assets. Subject to the placement
of financing,(1) PCC and the Debtors will enter into an agreement pursuant to
which PCC (or its designee) will acquire on the terms set forth in such
agreement, at PCC's option, either (a) assets (the "Broadcast Assets") of PBTI
and its subsidiaries and the assets of the other Debtors used or necessary to
the operation of the Debtors' broadcast business, including, without limitation,
FCC authorizations, real property, agreements to operate and options to purchase
other broadcast stations and other contract rights and normal working capital
levels, in a transaction pursuant to Sections 363 and 365 of the Bankruptcy Code
or (b) the stock of reorganized PSC pursuant to a plan of reorganization, in
each case in exchange for $75 million in cash (the "Retention Amount). The
agreement between PCC and the Debtors with respect to the Broadcast Assets will
be subject to higher and better offers pursuant to auction procedures described
in Exhibit 1 attached hereto and on substantially the timetable described in
Exhibit 2 attached hereto. In the event that the Broadcast Assets or the stock
of reorganized PSC is sold to someone other than PCC (or its designee) or the
Debtors retain the Broadcast Assets and the stock of the reorganized Debtors is
distributed to their creditors, PCC shall be entitled to reimbursement of
out-of-pocket expenses in an amount not to exceed $1.0 million in the aggregate.
3. Tax Planning. To the extent legally feasible, the plan of
reorganization filed by the Debtors, and supported by the Committee and the
Consenting Holders, will be structured and implemented in a manner that will be
tax-efficient and preserve favorable tax attributes for PCC.
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(1) PCC will seek to obtain third party financing to be secured by
substantially all the acquired assets of the reorganized PBT and its
subsidiaries.
4. Releases. The plan of reorganization filed by the Debtors, and
supported by the Committee and Consenting Holders, shall contain provisions
providing for the release, on the Plan's effective date and to the fullest
extent permitted by law, of any and all claims owned by, possessed by or
derivative of the Debtors against their respective officers and directors. In
addition, such plan of reorganization shall provide that all creditors and
preferred shareholders will release, to the fullest extent permitted by law, any
claims such creditors or preferred shareholders may hold in their individual
capacities against the officers and directors of the Debtors, or against PCC and
its non-debtor affiliates and their respective officers, directors, employees
and advisors.
5. Employee Compensation. The Debtors will implement, and the Committee
and Consenting Holders will support, a KERP on substantially the terms set forth
in Exhibit 3 attached hereto.
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EXHIBIT 1
Terms of
Bidding Procedures
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1. A Qualified Bidder (other than PCC) shall accompany its bid with (i) a
deposit in a form acceptable to the Debtors in an amount of 5% of the
purchase price, (ii) written evidence of a commitment for financing or
other evidence of ability to consummate the transaction and (iii) a
fully completed form of a Federal Communications Commission (the "FCC")
transfer application for the Broadcast Assets and a certification by
the Qualified Bidder that it has no reason to believe it cannot be a
transferee of the FCC license.
2. A Qualified Bid must provide overall value for the Broadcast Assets to
the Debtors of at least $77.5 million.
Exhibit 2
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Timetable for Sale of Broadcast Assets
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August 23 Circulation of offering memorandum (including
form of asset purchase agreement)
Debtors file motion seeking approval of sale,
auction procedures and bid protections
September 13 Hearing to approve auction procedures and bid
protections
October 18 Competing bids due
October 20 Auction (to the extent competing bids received)
October 22 Hearing to approve sale