Exhibit 10.2

 

EXECUTION VERSION

 

PEGASUS OFFER AGREEMENT

 

June 2, 2004

 

DEAR DBS PARTICIPANT:

 

DIRECTV, Inc. (“DIRECTV”), with the consent of the National Rural
Telecommunications Cooperative (“NRTC”), is pleased to offer Pegasus Satellite
Television, Inc. and its subsidiaries or affiliates that have rights under
existing Member Agreements (as defined below) (including, without limitation,
Golden Sky Systems, Inc. and all other affiliated entities) (collectively, “you”
or “Pegasus”) the options described below (the “Offer”) in this Pegasus Offer
Agreement (including the applicable Annexes and Exhibits hereto and incorporated
herein, this “Agreement”) with respect to your provision of DIRECTV services and
your current DIRECTV subscribers.

 

As you know, (i) DIRECTV (as successor to Hughes Communication Galaxy, Inc.) and
NRTC are parties to that certain DBS Distribution Agreement, dated as of April
10, 1992, as amended to the date hereof including without limitation on February
14, 1994 and pursuant to the Complete Restatement of Amended Term Sheet,
effective August 5, 2003 (the “Settlement”), entered into by NRTC, DIRECTV and
the representatives of the Class (as defined therein), and approved by the
United States District Court for the Central District of California (such
agreement, as so amended, is referred to herein as the “DBS Distribution
Agreement”; (ii) you or a predecessor in interest entered into one or more
NRTC/Member Agreement for Marketing and Distribution of DBS Services (as
amended, including in 1994) with NRTC, which permitted you to distribute DIRECTV
services and (iii) you have acquired certain other NRTC Agreements originally
entered into between NRTC and other of its members or affiliates pursuant to one
or more agreements with such members and/or affiliates of NRTC (all such NRTC
Agreements entered into or acquired by you, under which you have rights to
distribute DIRECTV services, the “Member Agreements”).

 

As described in the notices previously sent to you by NRTC and DIRECTV, the DBS
Distribution Agreement has been terminated effective as of June 1, 2004 and all
of the Member Agreements have been terminated effective as of the earlier of
August 31, 2004 or the Closing Date (defined below), regardless of whether or
not you accept the Offer set forth in this Agreement. Although not legally
required to make this Offer, DIRECTV is providing you with the following options
to provide Pegasus with compensation in exchange for certain commitments by
Pegasus as set forth herein.

 

THIS OFFER SHALL EXPIRE AT 5:00 P.M. (PACIFIC) ON AUGUST 31, 2004 (THE
“EXPIRATION DATE”). IF DIRECTV HAS NOT RECEIVED YOUR OPTION SELECTION BY THE
EXPIRATION DATE, THIS OFFER SHALL BE VOID AND DIRECTV SHALL HAVE NO FURTHER
OBLIGATIONS IN CONNECTION HEREWITH.

 

WE ENCOURAGE YOU TO RESPOND TO THIS OFFER PROMPTLY, AS YOU WILL RECEIVE THE
MAXIMUM PAYMENT IF THIS OFFER IS CLOSED ON JUNE 30, 2004.

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Please note that the following definitions apply to each of the options
described below:

 

(a) “Transferred Subscriber” means any Subscriber account of Pegasus as of the
Closing Date (i) with a level of service at least equivalent to Core
Programming, which account is not more than forty-five (45) days past due, and
which, with respect to a Subscriber acquired within three months prior to the
Closing Date, continues as a DIRECTV Subscriber account in good standing with
Core Programming or a higher level of service for no less than ninety (90) days
after the Closing Date or (ii) which, as of June 2, 2004, is in a “suspend”
status for not more than 180 days and with an account balance which is not $0.
Notwithstanding the foregoing, the number of “suspend” status Subscribers that
are counted as Transferred Subscribers shall be capped at the actual number
thereof as of June 2, 2004.

 

(b) “Core Programming” means any of the Total Choice Packages or Select Choice,
Economy Choice, DIRECTV Limited, NFL Sunday Ticket or premium services
distributed under the Pegasus/DIRECTV Revised Seamless Consumer Program or their
equivalents; and

 

(c) “Subscriber” means a paying subscriber of any DIRECTV service in an active
status with active services.

 

1. Options.

 

You may only select one (1) of the following Options. Please indicate your
selection by checking the appropriate box below.

 

PLEASE READ THIS ENTIRE AGREEMENT (INCLUDING THE ANNEXES ATTACHED HERETO)
CAREFULLY BEFORE COMPLETING ANY BOX BELOW.

 

Option A: Buyout Lump-Sum Payment.

 

By selecting this Option A, Pegasus hereby acknowledges that it shall receive
from DIRECTV an amount equal to $675.00 per Transferred Subscriber payable in a
single lump sum on the third business day after the Closing Date; provided,
however, that such payment amount is based on the assumption that the Closing
Date occurs by June 30, 2004. In the event that the Closing Date occurs after
June 30, 2004, the applicable lump-sum payment shall be adjusted downward pro
rata based on the number of weeks elapsed past June 30, 2004 (with a reduction
of $2.88 per week per Transferred Subscriber for each week elapsed).

 

Appropriate adjustments to the lump sum payment shall be made for (i) accounts
receivable from Transferred Subscribers to Pegasus in existence as of the
Closing Date, (ii) any accounts receivable pursuant to the Pegasus/DIRECTV
Revised Seamless Consumer Program, (iii) payments owing from Pegasus to NRTC as
of the Closing Date pursuant to the Member Agreements, (iv) any amounts payable
to DIRECTV pursuant to

 

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the judgment in the Seamless Marketing case and (v) the total amount of any
other claims (principal plus interest, costs and expenses, as applicable)
against Pegasus or any of its affiliates that are held by DIRECTV as of the
Closing Date. For purposes of clarity, no subscriber transfer payment or other
amount shall be owed to Pegasus after payment of the final Buyout Lump-Sum
Payment.

 

In addition to the other acknowledgments and agreements herein, by accepting
this Option A, Pegasus hereby (i) acknowledges that each of the Member
Agreements have been terminated as of the Closing Date and (ii) acknowledges
that it shall no longer possess an exclusive territory.

 

If you select this Option A, please complete the payment instructions attached
as Annex A hereto.

 

Option B: Buyout Monthly Payment through June 30, 2008.

 

By selecting this Option B-1, Pegasus hereby acknowledges that it shall receive
from DIRECTV payments equal to $800 in the aggregate (i.e., $675 plus interest)
per Transferred Subscriber (as defined below) payable in monthly payments of
$16.67 (including interest) per Transferred Subscriber per month (as adjusted on
a straight-line basis for any payment period of less than a month), commencing
thirty (30) days following the Closing Date and ending June 30, 2008; provided,
however, that such payment amount is based on the assumption that the Closing
Date occurs on June 30, 2004. In the event that the Closing Date occurs after
June 30, 2004, the aggregate amount that DIRECTV shall pay and Pegasus shall
receive will be reduced based on the number of weeks elapsed past June 30, 2004
(with a reduction of $2.88 per Transferred Subscriber per week for each week
elapsed).

 

Appropriate adjustments to monthly payments shall be made for (i) accounts
receivable from Transferred Subscribers to Pegasus in existence as of the
Closing Date, (ii) any accounts receivable pursuant to the Pegasus/DIRECTV
Revised Seamless Consumer Program, (iii) payments owing from Pegasus to NRTC as
of the Closing Date pursuant to the Member Agreements, (iv) any amounts payable
to DIRECTV pursuant to the judgment in the Seamless Marketing case and (v) the
total amount of any other claims (principal plus interest, costs and expenses,
as applicable) against Pegasus or any of its affiliates that are held by DIRECTV
as of the Closing Date, with all such amounts being deducted from the first
payments until all such amounts are paid. For purposes of clarity, no subscriber
transfer payment or other amount shall be owed to Pegasus after payment of the
final Buyout Monthly Payment.

 

In addition to the other acknowledgments and agreements herein, by accepting
this Option B, Pegasus hereby (i) acknowledges that each of the Member
Agreements have been terminated as of the Closing Date and (ii) acknowledges
that it shall no longer possess an exclusive territory.

 

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If you select this Option B, please complete the payment instructions attached
as Annex B hereto.

 

2. Closing Date. DIRECTV will notify Pegasus in writing of the date on which
DIRECTV is prepared to close; it being understood and agreed that DIRECTV will
make a good faith effort to be prepared to close ten (10) business days after
the date this Agreement is executed by you and timely received by DIRECTV on or
prior to the Expiration Date. The closing date (the “Closing Date”) upon which
the transactions described in this Agreement (the “Transactions”) shall become
effective shall be the date that is the later to occur of (i) the date which
DIRECTV notifies Pegasus in writing that DIRECTV is prepared to close as
described in the foregoing sentence and (ii) if necessary, promptly (and in any
event within 10 business days) after all regulatory approvals required with
respect to the Transactions have been received by Pegasus and DIRECTV; provided,
that this Agreements has been executed by you and timely received by DIRECTV on
or prior to the Expiration Date.

 

IF THE CLOSING DATE IS AFTER JUNE 30, 2004, THE APPLICABLE PAYMENT AMOUNT WILL
BE ADJUSTED DOWNWARD, AS APPROPRIATE, AS DESCRIBED IN SECTION 1 ABOVE.

 

3. Representations, Warranties and Covenants.

 

  (a) Authority. DIRECTV and Pegasus each represent and warrant to the other
that it has all requisite power and authority (i) to execute, deliver and
perform this Agreement (including the relevant Annexes and Exhibits attached to
this Agreement and incorporated herein) and all agreements, documents and
instruments executed and delivered by each in connection with this Agreement;
(ii) to own, lease or operate its property and assets; and (iii) to carry on its
business as presently conducted. Pegasus represents and warrants to DIRECTV that
the parties signatory to this Agreement (other than DIRECTV and NRTC) constitute
all of the Pegasus entities, subsidiaries and affiliates that are party to or
entitled to any rights and benefits under any existing Member Agreement.

 

  (b) Litigation. DIRECTV and Pegasus each represent and warrant to the other
that, to the best of its knowledge, there is no outstanding or threatened
judgment, threatened or pending litigation or proceeding, involving or affecting
the transactions provided for in, or contemplated by, this Agreement, except as
has been previously disclosed in writing by either party to the other.

 

  (c) Laws. DIRECTV and Pegasus each shall comply with all FCC and other
governmental (whether international, federal, state, municipal or otherwise)
statutes, laws, rules, regulations, ordinances, codes, directives and orders of
any such governmental agency, body or court applicable to it regarding the
provision of DBS Services.

 

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  (d) HSR. Pegasus hereby acknowledges that if the value of Option A or Option
B, as applicable, selected by Pegasus exceeds certain dollar thresholds, then
Pegasus and DIRECTV could have notification obligations under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”). For
Pegasus’ convenience, Exhibit I attached hereto provides a summary of the
Federal Trade Commission’s guide for determining whether reporting is required
under the HSR Act, including the minimum transaction value threshold of $50
million. Pegasus represents that, unless it has informed DIRECTV in writing to
the contrary, Pegasus is not in a direct or indirect control relationship with
any other member or affiliate of NRTC, the effect of which could be to require
Pegasus and DIRECTV to file HSR Act notifications as described in Exhibit I.

 

  (e) All Necessary Parties. Pegasus hereby represents and warrants to DIRECTV
that the Pegasus entities who are signatories hereto are the only parties
necessary to execute this Agreement for and on behalf of Pegasus and thereby
create a valid and binding agreement enforceable against Pegasus in accordance
with its terms.

 

4. Payment Instructions. Please complete the applicable payment instructions
attached as Annex A and Annex B in connection with, respectively, Option A and
Option B.

 

5. Delivery. This Agreement shall not be considered to have been delivered by
you until DIRECTV, has actually received an original executed copy thereof at
the following delivery address:

 

DIRECTV, Inc.

Building R8, Mail Station N340

El Segundo, California 90245

Telephone: (310) 964-5000

Facsimile: (310) 964-4884

Attention: Legal Department

 

Delivery by facsimile will be considered to have been made upon transmission if
the recipient has acknowledged receipt thereof and actually receives an original
executed copy within three (3) business days thereafter. We recommend that you
use a nationally-recognized overnight courier service (e.g., FedEx, UPS) to
deliver each of the agreements.

 

6. Notices. All notices and other communications from either party to the other
hereunder shall be in writing and shall be deemed received upon actual receipt
when personally delivered, upon acknowledgment of receipt if sent by facsimile,
or (other than for the delivery of executed agreements hereunder) upon the
expiration of the third business day after being deposited in the United States
mails, postage prepaid, certified or registered mail, addressed to the other
party as follows:

 

DIRECTV:

  

DIRECTV, Inc.

Building R8, Mail Station N340

El Segundo, California 90245

Telephone: (310) 964-5000

Facsimile: (310) 964-4884

Attention: Legal Department

 

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NRTC:

  

National Rural Telecommunications Cooperative

2121 Cooperative Way, Suite 500

Herndon, VA 20171

Telephone: (703) 787-0874

Facsimile: (703) 787-9301

Attention: General Counsel

PEGASUS:

  

At the address(es) set forth on the signature page hereto.

 

Each party hereto may change its addresses or payment instructions by giving the
other party notice thereof in conformity with this Section 6.

 

7. General Release.

 

  (a) Pegasus, on behalf of itself and its predecessors, successors, assigns,
subsidiaries, divisions, affiliates, directors, officers and any person or
entity claiming by, through, under it or on its behalf, or which is acting in
concert with it (collectively, the “Pegasus Releasees”), hereby releases and
forever discharges (the “General Release”), as of the Closing Date, each of (i)
DIRECTV and its subsidiaries and affiliates and all present and former
directors, officers, agents, representatives, employees, successors and assigns
of DIRECTV and its affiliates and DIRECTV’s direct or indirect owners and (ii)
NRTC and its subsidiaries and affiliates and all present and former directors,
officers, agents, representatives, employees, successors and assigns of NRTC and
its affiliates and NRTC’s members (collectively, the “Released Parties”), from
any and all claims, suits, controversies, actions, causes of action,
cross-claims, counter-claims, demands, debts, compensatory damages, liquidated
damages, punitive or exemplary damages, other damages, claims for costs and
attorneys’ fees, or liabilities of any nature whatsoever in law and in equity,
both past and present (through the date this General Release becomes effective
and enforceable) and whether known or unknown, suspected, or claimed against
DIRECTV, NRTC and/or any of the Released Parties which Pegasus or any of its
successors or assigns may have, including without limitation, which arise from
either the Member Agreements, from the termination thereof in connection with
the Offer or relating to dealings between NRTC and Pegasus (in each case,
including, but not limited to, any allegation, claim or violation, arising under
any local, state, or federal law, regulation or ordinance; or under any public
policy, contract or tort, or under common law; or arising under any policies,
practices or procedures of the Released Parties; or any claim for breach of
contract (both express and implied), breach of a covenant of good faith and fair
dealing (both express and implied),

 

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negligent or intentional misrepresentation, negligent or intentional
interference with contract or prospective economic advantage; or any claim for
costs, fees, or other expenses, including attorneys’ fees incurred in these
matters) (all of the foregoing collectively referred to herein as the “Claims”).

 

  (b) Pegasus hereby acknowledges that (i) any payments or benefits paid or
granted to it pursuant to the Offer represent, in part, consideration for making
this General Release and (ii) it will not receive any payments or benefits
pursuant to the terms of the Offer unless its makes this General Release.

 

  (c) Pegasus hereby represents that it has not made any assignment or transfer
of any right, claim, demand, cause of action, or other matter covered by Section
7(a) above.

 

  (d) In making this General Release, Pegasus acknowledges and intends that it
shall be effective as a bar to each and every one of the Claims hereinabove
mentioned or implied. Pegasus expressly consents that this General Release shall
be given full force and effect according to each and all of its express terms
and provisions, including those relating to unknown and unsuspected Claims
(notwithstanding any state statute that expressly limits the effectiveness of a
general release of unknown, unsuspected and unanticipated Claims), if any, as
well as those relating to any other Claims hereinabove mentioned or implied.
Pegasus acknowledges and agrees that this waiver is an essential and material
term of this General Release. Pegasus further agrees that in the event it should
bring a Claim seeking damages against any of the Released Parties, this General
Release shall serve as a complete defense to such Claims. Pegasus further agrees
that it is not aware of any pending charge or complaint of the type described in
Section 7(a) as of the execution of this General Release.

 

  (e) Pegasus represents that it is not aware of any claim by it other than the
Claims that are released by this General Release. Pegasus acknowledges that it
may hereafter discover Claims or facts in addition to or different than those
which it now knows or believes to exist with respect to the subject matter of
this General Release and which, if known or suspected at the time of entering
into this General Release, may have materially affected this General Release and
its decision to enter into it. Nevertheless, Pegasus hereby waives any right,
Claim or cause of action that might arise as a result of such different or
additional Claims or facts and hereby expressly waives any and all rights and
benefits confirmed upon it by the provisions of California Civil Code Section
1542, which provides as follows:

 

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE GENERAL RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.”

 

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Being aware of such provisions of law, Pegasus agrees to expressly waive and
relinquish any and all rights and benefits it may have thereunder, as well as
under any similar law or common law principle of similar effect of any state or
territory of the United States with respect to the Claims released hereby.

 

  (f) Pegasus agrees that neither this General Release, nor the furnishing of
the consideration for this General Release, shall be deemed or construed at any
time to be an admission by DIRECTV, NRTC, any Released Party or Pegasus of any
improper or unlawful conduct.

 

  (g) Whenever possible, each provision of this General Release shall be
interpreted in, such manner as to be effective and valid under applicable law,
but if any provision of this General Release is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this General Release shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.

 

8. Assignment. Pegasus hereby assigns to DIRECTV all its present and future
right, title and interest in, under and with respect to all of its tangible and
intangible rights and assets under the Member Agreements (including, without
limitation, ownership and propriety interests in all subscribers to DIRECTV
services and all lists of such subscribers).

 

9. Non-Competition. Pegasus hereby agrees that, until June 30, 2010, it shall
not (a) share or sell its list of former and/or current DBS subscribers (or any
portion thereof) to a multi-channel video provider other than DIRECTV, (b)
market or solicit sales for direct-to-home satellite multi-channel video
services or the related receiving equipment (other than (i) DIRECTV services,
(ii) WildBlue Services and associated equipment and (iii) C-Band services and
related equipment), or (c) share or sell its subscriber list related to non-DBS
businesses to any multi-channel video distributor, unless all former and current
DBS subscribers are excised from such list (i.e., no then-current or former
(within the prior two-year period) DBS subscriber shall be included in a list
sold to a multi-channel video distributor, even if such customer is or was a
customer to a non-DBS business as well). It is expressly agreed and understood
that the marketing or sale solely of WildBlue broadband internet services shall
not be considered a violation of the non-competition provisions in this Section
9.

 

10. Post-Closing Adjustments. Pegasus hereby agrees that it is obligated to
refund to DIRECTV all amounts received by Pegasus in respect of subscribers that
no longer meet the Transferred Subscriber requirements ninety (90) days after
the Closing Date.

 

11. Binding Agreement. The provisions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns. Nothing contained in this Agreement shall be deemed to confer upon
anyone other than the parties hereto (and their permitted successors and
assigns) any legal right or equitable right, remedy or claim under or by reason
of this Agreement.

 

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12. Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed an original, and all counterparts together shall
constitute but one and the same documents.

 

13. Governing Law. The existence, validity, construction, operation and effect
of this Agreement shall be determined in accordance with and be governed by the
laws of the State of California.

 

14. Entire Agreement; Amendment. This Agreement (including the applicable
Annexes and Schedules attached hereto and incorporated by reference herein)
constitutes the entire agreement among the parties and supersedes all previous
understandings, commitments and representations concerning the subject matter.
This Agreement may not be amended or modified in any way, except (i) as provided
in the Agreement or (ii) by a writing signed by an authorized officer of the
party against whom the amendment, modification or waiver is sought to be
enforced.

 

15. Severability. Nothing contained in this Agreement shall be construed to
require the commission of any act contrary to law. Wherever there is any
conflict between any provision of this Agreement and any law, the law shall
prevail and this Agreement shall be limited only to the extent necessary to
permit compliance with the minimum legal requirements. No other provisions of
this Agreement shall be affected and all other provisions shall continue in full
force and effect.

 

16. Third-Party Beneficiary. The provisions of this Agreement are solely for the
benefit of the parties hereto and are not intended to confer upon any person
except the parties hereto any rights to enforce, benefit from or have any other
rights or remedies hereunder, and there are no third-party beneficiaries of this
Agreement and this Agreement shall not provide any third party with any remedy,
claim, liability, reimbursement, cause of action, claim of action or other right
in excess of those existing without reference to this Agreement. Notwithstanding
anything in the foregoing to the contrary, it is expressly agreed and understood
that NRTC (solely for the purposes of receiving and enforcing the General
Release) and any other person or entity described generally in Section 7(a)(ii)
above is an intended third party beneficiary of Section 7. Except as provided in
the preceding sentence, no other persons or parties are intended as
beneficiaries of this Agreement and none shall have rights to enforce or benefit
from the provisions of this Agreement. DIRECTV and Pegasus acknowledge and agree
that NRTC is not a party to this Agreement and is not bound by or liable to
DIRECTV or Pegasus under the provisions of this Agreement.

 

17. NRTC Consent to Offer. NRTC consents to this Offer to Pegasus by DIRECTV,
and to the right of Pegasus to enter into this Agreement with DIRECTV,
notwithstanding NRTC’s rights under and with respect to the Member Agreements
prior to their termination. NRTC executes this Offer and the Agreement for the
purpose, inter alia, of obtaining the General Release set forth above and the
promise of Pegasus to pay amounts that may be due to NRTC under the Member
Agreements or otherwise.

 

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IN WITNESS HEREOF, each of the undersigned hereby acknowledges that it has
selected the Option indicated above and that it agrees to be bound by the terms
of this Agreement, including the provisions of the applicable Annex incorporated
by reference.

 

        

PEGASUS SATELLITE TELEVISION, INC.

    

Address (for notices):

 

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Fax:

 

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Phone:

 

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e-mail:

 

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Date:                                          

            

Signed By:

 

 

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Name:

            

Title:

 

        

GOLDEN SKY SYSTEMS, INC.

    

Address (for notices):

 

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Fax:

 

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Phone:

 

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e-mail:

 

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Date:                                          

            

Signed By:

 

 

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Name:

            

Title:

 

        

PEGASUS COMMUNICATIONS CORPORATION

    

Address (for notices):

 

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Fax:

 

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Phone:

 

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e-mail:

 

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Date:                                          

            

Signed By:

 

 

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Name:

            

Title:

 

S-1

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Instructions: Any other Pegasus entity, subsidiary or affiliate not listed on
the prior signature page that is a party to or entitled to any rights and
benefits under any existing Member Agreement must sign. Please attach additional
signature pages, as needed.

 

IN WITNESS HEREOF, each of the undersigned hereby acknowledges that it has
selected the Option indicated above and that it agrees to be bound by the terms
of this Agreement, including the provisions of the applicable Annex incorporated
by reference.

 

        

Insert name of Pegasus entity signatory hereto:

    

Address (for notices):

 

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Fax:

 

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Phone:

 

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e-mail:

 

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Date:                                          

            

Signed By:

 

 

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Name:

            

Title:

 

        

Insert name of Pegasus entity signatory hereto:

    

Address (for notices):

 

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Fax:

 

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Phone:

 

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e-mail:

 

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Date:                                          

            

Signed By:

 

 

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Name:

            

Title:

 

S-2

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ACCEPTED AND AGREED:

 

DIRECTV, INC.

By:

 

/s/ Michael W. Palkovic

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    Michael W. Palkovic     Executive Vice President and Chief Financial Officer

 

S-3

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CONSENTED TO:

 

NATIONAL RURAL

TELECOMMUNICATIONS COOPERATIVE

By:

 

/s/ B.R. Phillips III

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B.R. Phillips III

   

President and Chief Executive Officer

 

S-4

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Annex A

 

PEGASUS PAYMENT INSTRUCTIONS

 

1. Option A. Pegasus has selected Option A as described in the Agreement.

 

2. Payment Instructions. The lump-sum payment described in the Agreement shall
be paid on the third business day after the Closing Date by wire transfer to the
following bank account of Pegasus.

 

Member:

 

                                                          

Bank:

 

                                                          

ABA #:

 

                                                          

Acct #:

 

                                                          

Account Name:

 

                                                          

Account Representative Contact Name:

 

                                                          

Account Representative Contact Phone:

 

                                                          

 

Name of Member (as it appears on Existing Member Agreement):       

                                                                               
                     

    

By:

 

 

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Name:

Title:

 

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(For Use by DIRECTV Only)

 

  1. Number of Transferred Subscribers (as of the Closing Date):
                                    

 

  2. Calculation of Lump-Sum Payment (subject to downward adjustment).

 

$675.001

 

x

  

                                                       

   =   

$                                         

         (total Transferred Subscribers)         (Base Lump-Sum Amount)

 

  3. Less adjustment for Accounts Receivable

 

$                                         

   -    $                           =   

$                                         

(Base Lump-Sum Payment)

        (A/R)       

(Lump-Sum Payment)

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1 This assumes a Closing Date of June 30, 2004.

 

A-1

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Annex B

 

PEGASUS PAYMENT INSTRUCTIONS

 

  1. Option B. Pegasus has selected Option B as described in the Agreement.

 

  2. Payment Instructions. The monthly payments specified in the Agreement shall
be paid, commencing thirty (30) days after the Closing Date, by wire transfer to
the following bank account of Pegasus.

 

Member:

 

                                                          

Bank:

 

                                                          

ABA #:

 

                                                          

Acct #:

 

                                                          

Account Name:

 

                                                          

Account Representative Contact Name:

 

                                                          

Account Representative Contact Phone:

 

                                                          

 

Name of Member (as it appears on Existing Member Agreement):       

                                                                              
                       

    

By:

 

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Name:

Title:

 

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(For Use by DIRECTV Only)

 

  1. Number of Transferred Subscribers (as of the Closing Date):
                                    

 

  2. Calculation of Monthly Payment (subject to downward adjustment).

 

$16.67

   x   

                                               

   =   

$                                         

          (total Transferred Subscribers)        

(Monthly Payment)

 

  3. Less adjustment to initial Option B-1 Monthly Payment for Accounts
Receivable

 

$                                         

   -    $                           =   

$                                         

(Monthly Payment)

        (A/R)       

(initial Monthly Payment)

 

B-1

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EXHIBIT I TO PEGASUS OFFER AGREEMENT

 

DETERMINING HART-SCOTT-RODINO REPORTABILITY1

 

As a general matter, the Act and the Rules require both acquiring and acquired
persons to file notifications under the Program if all of the following
conditions are met:

 

  a. One person has sales or assets of at least $100 million;

 

  b. The other person has sales or assets of at least $10 million; and

 

  c. As a result of the transaction, the acquiring person will hold an aggregate
amount of stock and assets of the acquired person valued at more than $50
million; or

 

  d. As a result of the transaction, the acquiring person will hold an aggregate
amount of stock and assets of the acquired person valued at more than $200
million, regardless of the sales or assets of the acquiring and acquired
persons.2

 

  A. Acquiring and Acquired Persons/Acquired Entity

 

The first step in determining reportability is to identify who the “acquiring
person” and “acquired person” are. “Person” is defined in Rules 801.1 (a)(l) and
is the “ultimate parent entity” or “UPE” of the buyer or seller. That is, it is
the entity that ultimately controls the buyer or seller.3 The “acquired entity”
is the specific entity whose assets or voting securities are being acquired. The
acquired entity may also be its own UPE or it may be an entity within the
acquired person.

 

Thus, in an asset acquisition, the acquiring person is the UPE of the buyer, and
the acquired person is the UPE of the seller. The acquired entity is the entity
whose assets are being acquired.

 

  B. Size-of-Person Test

 

Once you have determined who the acquiring and acquired persons are, you must
determine whether the size of each person meets the Act’s minimum size criteria.
This “size of person” test generally measures a company based on the person’s
last regularly prepared annual statement of income and expenses and its last
regularly prepared balance sheet.4 The size of a person includes not only the
entity that is making the acquisition or whose assets or securities are being
acquired, but also the UPE and any other entities the UPE controls.5

 

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1 Excerpts from the Federal Trade Commission’s “Introductory Guide II to the
Premerger Notification Program - To File Or Not To File - When You Must File a
Premerger Notification Report Form.” The full document and additional
information is available at
http://www.ftc.gov/bc/hsr/introguides/introguides.htm.

2 See § 7A (a)(3) of the Act.

3 See "control" under 801.1 (b).

4 See Rule 801.11.

 

Exh. I-1

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  C. Size-of-Transaction Test

 

The next step is to determine what voting securities, assets, or combination of
voting securities and assets are being transferred in the proposed transaction.
Then you must determine the value of the voting securities and/or assets as well
as the percentage of voting securities that will be “held as a result of the
transaction.” Calculating what will be held as a result of the transaction
(referred to as the “size of the transaction”) is complicated and requires the
application of several rules, including Rules 801.10, 801.12, 801.13, 801.14 and
801.15. Assets held as a result of the transaction include those that will be
transferred in the proposed transaction as well as certain assets of the
acquired person that the acquiring person has purchased within the time limits
outlined in Rule 801.13.

 

Once it has been determined that a particular transaction is reportable, each
party must submit its notification to the FTC and the DOJ. In addition, each
acquiring person must pay a filing fee to the FTC for each transaction that it
reports.

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5 See Rule 801.1(a)(1).

 

Exh.- I-2