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Exhibit 99.1 Material incorporated by reference from Pegasus' Annual Report on
             Form 10-K filed with the SEC on March 10, 2000 for the fiscal year
             ended December 31, 1999

         The following material has been incorporated by reference from Pegasus'
Annual Report on Form 10-K filed with the SEC on March 10, 2000 for the fiscal
year ended December 31, 1999 and is being filed as Exhibit 99.1 to the Form 10-Q
for Golden Sky DBS, Inc. for the quarter ended June 30, 2000 pursuant to Rule
12b-23(a)(3) of the Exchange Act of 1934, as amended.

ITEM 3: LEGAL PROCEEDINGS

         DIRECTV/NRTC Litigation. On June 3, 1999, the National Rural
Telecommunications Cooperative filed a lawsuit in federal court against DIRECTV
seeking a court order to enforce the National Rural Telecommunications
Cooperative's contractual rights to obtain from DIRECTV certain premium
programming formerly distributed by United States Satellite Broadcasting
Company, Inc. for exclusive distribution by the National Rural
Telecommunications Cooperative's members and affiliates in their rural markets.
The National Rural Telecommunications Cooperative also sought a temporary
restraining order preventing DIRECTV from marketing the premium programming in
such markets and requiring DIRECTV to provide the National Rural
Telecommunications Cooperative with the premium programming for exclusive
distribution in those areas. The court, in an order dated June 17, 1999, denied
the National Rural Telecommunications Cooperative a preliminary injunction on
such matters, without deciding the underlying claims. On July 22, 1999, DIRECTV
responded to the National Rural Telecommunications Cooperative's continuing
lawsuit by rejecting the National Rural Telecommunications Cooperative's claims
to exclusive distribution rights and by filing a counterclaim seeking judicial
clarification of certain provisions of DIRECTV's contract with the National
Rural Telecommunications Cooperative. In particular, DIRECTV contends in its
counterclaim that the term of DIRECTV's contract with the National Rural
Telecommunications Cooperative is measured solely by the orbital life of DBS-1,
the first DIRECTV satellite launched into orbit at the 101 (degree) W orbital
location, without regard to the orbital lives of the other DIRECTV satellites at
the 101 (degree) W orbital location. DIRECTV also alleges in its counterclaim
that the National Rural Telecommunications Cooperative's right of first refusal,
which is effective at the end of the term of DIRECTV's contract with the
National Rural Telecommunications Cooperative, does not provide for certain
programming and other rights comparable to those now provided under the
contract. On September 8, 1999, the court denied a motion by DIRECTV to dismiss
certain of the National Rural Telecommunications Cooperative's claims, leaving
all of the causes of action asserted by the National Rural Telecommunications
Cooperative at issue.

         On September 9, 1999, the National Rural Telecommunications Cooperative
filed a response to DIRECTV's counterclaim contesting DIRECTV's interpretations
of the end of term and right of first refusal provisions. On August 26, 1999,
the National Rural Telecommunications Cooperative filed a separate lawsuit in
federal court against DIRECTV claiming that DIRECTV had failed to provide to the
National Rural Telecommunications Cooperative its share of launch fees and other
benefits that DIRECTV and its affiliates have received relating to programming
and other services. On November 15, 1999, the court granted a motion by DIRECTV
and dismissed a portion of the National Rural Telecommunications Cooperative's
lawsuit regarding launch fees and other benefits. In particular, the court
dismissed the tort claim asserted by the National Rural Telecommunications
Cooperative, but left in place the remaining claims asserted by the National
Rural Telecommunications Cooperative. The court also consolidated that lawsuit
with the other pending National Rural Telecommunications Cooperative/DIRECTV
lawsuit. The court set various discovery and motion deadlines for the spring and
summer of 2000 but did not set a trial date.

         On December 29, 1999, DIRECTV filed a motion for partial summary
judgment. The motion seeks a court order that the National Rural
Telecommunications Cooperative's right of first refusal, effective at the
termination of DIRECTV's contract with the National Rural Telecommunications
Cooperative, does not include programming services and is limited to 20 program
channels of transponder capacity. The hearing date on DIRECTV's motion was
vacated by the court pending resolution of certain procedural issues raised by
anew lawsuit we and Golden Sky filed against DIRECTV, discussed below. The court
has not yet set a trial date on the merits of the motion for partial summary
judgment.

         On January 10, 2000, we and Golden Sky filed a class action lawsuit in
federal court in Los Angeles against DIRECTV as representatives of a proposed
class that would include all members and affiliates of the National Rural
Telecommunications Cooperative that are distributors of DIRECTV. The complaint
contains causes of action for various torts, common counts and declaratory
relief based on DIRECTV's failure to provide the National Rural
Telecommunications Cooperative with premium programming, thereby preventing the
National Rural Telecommunications Cooperative from providing this programming to
the class members and affiliates. The claims are also based on DIRECTV's
position with respect to launch fees and other benefits, term and rights of
first refusal. The complaint seeks monetary damages and a court order regarding
the rights of the National Rural Telecommunications Cooperative and its members
and affiliates.
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         On February 10, 2000, we and Golden Sky filed an amended complaint
which added new tort claims against DIRECTV for interference with plaintiffs'
relationships with manufacturers, distributors and dealers of direct broadcast
satellite equipment. We and Golden Sky also withdrew the class action
allegations to allow a new class action to be filed on behalf of the members and
affiliates of the National Rural Telecommunications Cooperative. The outcome of
this litigation and the litigation filed by the National Rural
Telecommunications Cooperative could have a material adverse effect on our
direct broadcast satellite business.