-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EZSqzzjziGXoFweMwpn9ZNUdGV2VpHsvAIZxGY5NR1NxLvYj9cy3gnMfFWgSXFuK YvUQnRNmWbaq80N+wEZoBQ== 0000950116-98-001146.txt : 19980518 0000950116-98-001146.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950116-98-001146 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19980515 EFFECTIVENESS DATE: 19980515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEGASUS COMMUNICATIONS CORP CENTRAL INDEX KEY: 0001015629 STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833] IRS NUMBER: 510374669 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: SEC FILE NUMBER: 333-52755 FILM NUMBER: 98622892 BUSINESS ADDRESS: STREET 1: 5 RADNOR CORPORATE CTR STE 454 STREET 2: 100 MATSONFORD RD CITY: RADNOR STATE: PA ZIP: 19087 BUSINESS PHONE: 6103411801 MAIL ADDRESS: STREET 1: 1345 CHESTNUT ST STREET 2: 1345 CHESTNUT ST CITY: PHILADELPHIA STATE: PA ZIP: 19107-3496 FORMER COMPANY: FORMER CONFORMED NAME: PEGASUS COMMUNICATIONS & MEDIA CORP DATE OF NAME CHANGE: 19960530 S-8 1 FORM S-8 As filed with the Securities and Exchange Commission on May 15, 1998 Registration No. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 POST-EFFECTIVE AMENDMENT NO. 1 TO FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 PEGASUS COMMUNICATIONS CORPORATION --------------------------------------------------- (Exact name of issuer as specified in its charter) Delaware 51-0374669 - ----------------------------- ----------------------------- (state or other jurisdiction of (IRS Employer Indentifi- incorporation or organization) cation Number) c/o Pegasus Communications Management Company Suite 454, 5 Radnor Corporate Center 100 Matsonford Road Radnor, Pennsylvania 19087 --------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) PEGASUS COMMUNICATIONS RESTRICTED STOCK PLAN PEGASUS COMMUNICATIONS 1996 STOCK OPTION PLAN ---------------------------------------------- (Full title of the plans) Marshall W. Pagon, President and Chief Executive Officer c/o Pegasus Communications Management Company Suite 454, 5 Radnor Corporate Center 100 Matsonford Road Radnor, Pennsylvania 19087 -------------------------------------------------- (Name and address of agent for service) (610) 341-1801 -------------------------------------- (Telephone number, including area code, of agent for service) Copies to:
Ted S. Lodge, Esq. Michael B. Jordan, Esq. Pegasus Communications Corporation Scott A. Blank, Esq. c/o Pegasus Communications Management Company Drinker Biddle & Reath LLP 5 Radnor Corporate Center, Suite 454 1100 Philadelphia National Bank Building 100 Matsonford Road 1345 Chestnut Street Radnor, Pennsylvania 19087 Philadelphia, Pennsylvania 19107
CALCULATION OF REGISTRATION FEE
Proposed Proposed Titles of Amount Maximum Maximum Securities To Be Offering Aggregate Amount of To Be Regis- Price Offering Registration Registered tered Per Share Price Fee - ---------- ------- ------------ ------------- ------------ Class A 1,316,386 $ (2) $ (2) $4,267.45 (2) (3) Common shares (1) Stock, par value $.01 per share
(1) Represents 346,386 shares registered under the Pegasus Communications Restricted Stock Plan (the "Restricted Stock Plan") and 970,000 shares registered under the Pegasus Communications 1996 Stock Option Plan (the "Stock Option Plan" and together with the Restricted Stock Plan, the "Plans"). On the original filing of this Registration Statement on Form S-8 (File No. 333-22845) on March 5, 1997, 266,386 and 450,000 shares of Class A Common Stock were registered under the Restricted Stock Plan and Stock Option Plan, respectively. Pursuant to this Post-Effective Amendment No. 1, 600,000 additional shares in the aggregate are being registered under the Plans. Pursuant to Rule 416(a), this Registration Statement also registers such indeterminate number of additional shares as may become issuable under the Plans in connection with share splits, share dividends or similar transactions. (2) Calculated pursuant to Rule 457(h). The proposed maximum offering price per share, the proposed maximum aggregate offering price and the amount of the registration fee for the 600,000 shares of Class A Common Stock being newly registered under the Plans hereby were based, for the 10,000 shares of Class A Common Stock subject to currently outstanding stock options, on the maximum exercise price of $21.375 per share, and, for the remaining 590,000 shares, on the average of the high and low sales prices of the Class A Common Stock as reported on the Nasdaq National Market on May 13, 1998. (3) Paid by wire transfer. EXPLANATORY NOTE A Registration Statement on Form S-8 (File No. 333-22845) (the "Registration Statement") was filed on March 5, 1997 to register 266,386 shares of Class A Common Stock that are issuable under the Pegasus Communications Restricted Stock Plan (the "Restricted Stock Plan") and 450,000 shares issuable upon the exercise of options that may be granted under the Pegasus Communications 1996 Stock Option Plan (the "Stock Option Plan" and together with the Restricted Stock Plan, the "Plans"). On December 31, 1997, subject to stockholder approval, the Board of Directors approved amendments to the Restricted Stock Plan and the Stock Option Plan to increase the number of shares that may be granted under the Restricted Stock Plan from 270,000 to 350,000 and to increase the maximum number of shares of Class A Common Stock that may be granted under the Stock Option Plan from 450,000 to 970,000. Stockholder approval was thereafter obtained at a special meeting of stockholders held on April 27, 1998. This Post-Effective Amendment No. 1 to the Registration Statement is being filed to (i) register the additional 80,000 and 520,000 shares of Class A Common Stock that are issuable under the Restricted Stock Plan and the Stock Option Plan, respectively, and (ii) to include as exhibits the amended Restricted Stock Plan and the amended Stock Option Plan. Pursuant to general instruction E to Form S-8, the Registrant incorporates by reference herein the contents of the Registration Statement. Item 8. Exhibits. Exhibit 4(c) The Company's Restricted Stock Plan (as Amended and Restated Effective as of April 27, 1998). Exhibit 4(d) The Company's 1996 Stock Option Plan (as Amended and Restated Effective as of April 27, 1998). Exhibit 5(a) Opinion of Drinker Biddle & Reath LLP. Exhibit 23(a) Consent of Coopers & Lybrand L.L.P. Exhibit 23(b) Consent of Drinker Biddle & Reath LLP (included in their opinion filed as Exhibit 5(a)). Exhibit 24(a) Powers of Attorney (included in Signatures and Powers of Attorney). -1- SIGNATURES AND POWERS OF ATTORNEY Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this registration statement to be signed on its behalf by the undersigned thereunto duly authorized, at Radnor, Pennsylvania, on this 15th day of May, 1998. PEGASUS COMMUNICATIONS CORPORATION By: /s/ Marshall W. Pagon ------------------------------- Marshall W. Pagon, Chief Executive Officer and President Each person whose signature appears below hereby constitutes and appoints Marshall W. Pagon, Robert N. Verdecchio and Ted S. Lodge as his or her attorneys-in-fact and agents, with full power of substitution and resubstitution for him or her, in any and all capacities, to sign any or all amendments or post-effective amendments to this Registration Statement, and to file the same, with exhibits thereto and other documents in connection therewith, granting unto each of such attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary in connection with such matters and hereby ratifying and confirming all that each of such attorneys-in-fact and agents or his substitutes may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
Signature Title Date - ---------------------------- ------------------ ------------- /s/ Marshall W. Pagon President, Chief Executive Officer May 15, 1998 - ------------------------------------ and Chairman of the Board Marshall W. Pagon (Principal Executive Officer) /s/ Robert N. Verdecchio Senior Vice President, Chief May 15, 1998 - ------------------------------------ Financial Officer, Assistant Robert N. Verdecchio Secretary and Director (Principal Financial and Accounting Officer)
-2- /s/ Michael C. Brooks Director May 15, 1998 - ------------------------------------ Michael C. Brooks /s/ Harry F. Hopper III Director May 15, 1998 - ------------------------------------ Harry F. Hopper III /s/ James J. McEntee, III Director May 15, 1998 - ------------------------------------ James J. McEntee, III /s/ Mary C. Metzger Director May 15, 1998 - ------------------------------------ Mary C. Metzger /s/ Riordan B. Smith Director May 15, 1998 - ------------------------------------ Riordon B. Smith /s/ Donald W. Weber Director May 15, 1998 - ------------------------------------ Donald W. Weber -3- EXHIBIT INDEX Exhibit 4(c) The Company's Restricted Stock Plan (as Amended and Restated Effective as of April 27, 1998). Exhibit 4(d) The Company's 1996 Stock Option Plan (as Amended and Restated Effective as of April 27, 1998). Exhibit 5(a) Opinion of Drinker Biddle & Reath LLP. Exhibit 23(a) Consent of Coopers & Lybrand L.L.P. -4- EX-4 2 EXHIBIT 4(C) EXHIBIT 4(c) PEGASUS COMMUNICATIONS RESTRICTED STOCK PLAN (As Amended and Restated Effective As of April 27, 1998)
TABLE OF CONTENTS Page ---- SECTION 1 - Purpose............................................................................................. 1 SECTION 2 - Definitions......................................................................................... 1 (a) "Awards"...................................................................................... 1 (b) "Award Agreement"............................................................................. 1 (c) "Board"....................................................................................... 1 (d) "Business Unit Location Cash Flow"............................................................ 1 (e) "Code"........................................................................................ 1 (f) "Committee"................................................................................... 1 (g) "Common Stock"................................................................................ 1 (h) "Company Matching Contributions".............................................................. 2 (i) "Company-Wide Location Cash Flow"............................................................. 2 (j) "Disability".................................................................................. 2 (k) "Discretionary Awards"........................................................................ 2 (l) "Excess Awards"............................................................................... 2 (m) "Fair Market Value"........................................................................... 2 (n) "Grantee"..................................................................................... 2 (o) "Management Committee"........................................................................ 2 (p) "Officers".................................................................................... 2 (q) "PCC"......................................................................................... 2 (r) "Pegasus"..................................................................................... 2 (s) "Plan"........................................................................................ 2 (t) "Plan Administrator".......................................................................... 2 (u) "Profit-Sharing Awards"....................................................................... 3 (v) "Rollover Matching Contributions"............................................................. 3 (w) "Salary"...................................................................................... 3 (x) "Savings Plan"................................................................................ 3 (y) "Special Recognition Awards".................................................................. 3 (z) "Year Over Year Increase in Business Unit Location Cash Flow"................................. 3 (aa) "Year Over Year Increase in Company-Wide Location Cash Flow".................................. 3 (ab) "Years of Vesting Service".................................................................... 4 SECTION 3 - Administration...................................................................................... 4 (a) Special Recognition Awards to Officers and Discretionary Awards............................... 4 (b) All Other Awards.............................................................................. 4 (c) In General.................................................................................... 5 SECTION 4 - Eligibility......................................................................................... 5 (a) Special Recognition Awards.................................................................... 5 (b) Profit-Sharing Awards......................................................................... 5 (c) Excess Awards................................................................................. 6 (d) Discretionary Awards.......................................................................... 6 SECTION 5 - Stock............................................................................................... 6
i
SECTION 6 - Amount of Award..................................................................................... 7 (a) Special Recognition Awards.................................................................... 7 (b) Profit-Sharing Awards......................................................................... 7 (c) Excess Awards................................................................................. 8 (d) Discretionary Awards.......................................................................... 8 SECTION 7 - Vesting............................................................................................. 9 (a) Special Recognition Awards.................................................................... 9 (b) Awards Others than Special Recognition Awards................................................. 9 (c) Forfeiture.................................................................................... 9 SECTION 8 - Capital Adjustments................................................................................. 10 SECTION 9 - Amendment or Discontinuance of the Plan............................................................. 10 SECTION 10 - Termination of Plan................................................................................ 11 SECTION 11 - Effective Date..................................................................................... 11 SECTION 12 - Miscellaneous...................................................................................... 11 (a) Issuance and Delivery of Certificates......................................................... 11 (b) Rights as a Shareholder....................................................................... 12 (c) Award Agreement............................................................................... 12 (d) Governing Law................................................................................. 12 (e) Rights........................................................................................ 12 (f) Non-Transferability........................................................................... 13 (g) Listing and Registration of Shares............................................................ 13 (h) Withholding and Use of Shares to Satisfy Tax Obligations...................................... 13 (i) Indemnification of Board and Plan Administrator............................................... 14
ii PEGASUS COMMUNICATIONS RESTRICTED STOCK PLAN (As Amended and Restated Effective As of April 27, 1998) SECTION 1 Purpose This Pegasus Communications Restricted Stock Plan is intended to provide a means whereby PCC may, through the grant of stock subject to vesting requirements to employees of Pegasus, attract and retain such individuals and motivate them to exercise their best efforts on behalf of Pegasus. SECTION 2 Definitions Whenever the following terms are used in this Plan, they shall have the meanings specified below, unless the context clearly indicates to the contrary: (a) "Awards" shall mean Special Recognition Awards, Profit-Sharing Awards, Excess Awards and Discretionary Awards. (b) "Award Agreement" shall mean the written document escribed in Section 12(c) evidencing Awards made pursuant to the Plan. (c) "Board" shall mean the Board of Directors of PCC. (d) "Business Unit Location Cash Flow" shall mean income from the business unit's operations before management fees, depreciation, amortization (other than amortization of film contracts), and incentive compensation (including contributions under the Plan and the Savings Plan). (e) "Code" shall mean, as applicable, the Internal Revenue Code of 1986, as amended, or the Puerto Rico Internal Revenue Code of 1994, as amended. (f) "Committee" shall mean the administrator of the Plan with respect to Special Recognition Awards to Officers and Discretionary Awards, which shall be a committee of the Board or the Board, in accordance with Section 3(a). (g) "Common Stock" shall mean Class A common stock of PCC. (h) "Company Matching Contributions" shall have the meaning set forth in Article I of the Savings Plan. (i) "Company-Wide Location Cash Flow" shall mean income from egasus operations before management fees, depreciation, amortization (other than amortization of film contracts), and incentive compensation (including contributions under the Plan and the Savings Plan). (j) "Disability" shall have the meaning set forth in Article I of the Savings Plan. (k) "Discretionary Awards" shall mean the discretionary awards described in Section 6(d). (l) "Excess Awards" shall mean the formula awards described in Section 6(c). (m) "Fair Market Value" shall mean the closing price of the Common Stock on a registered securities exchange or on an over-the-counter market on the last business day prior to the date of grant on which Common Stock traded. (n) "Grantee" shall mean an individual who has received an Award under the Plan. (o) "Management Committee" shall mean the committee authorized by the Board to administer the Plan with respect to all Awards other than Special Recognition Awards to Officers and Discretionary Awards. (p) "Officers" shall mean employees who are officers, within the meaning of Rule 16a- 1(f) under the Securities Exchange Act of 1934, or any successor thereto. (q) "PCC" shall mean Pegasus Communications Corporation. (r) "Pegasus" shall mean Pegasus Communications Holdings, Inc. and its direct and indirect subsidiaries, whether in corporate, partnership or any other form. (s) "Plan" shall mean the Pegasus Communications Restricted Stock Plan, as set forth in this document and as it may be amended from time to time. (t) "Plan Administrator" shall mean -- (1) With respect to Special Recognition Awards to Officers and Discretionary Awards, the Committee; and -2- (2) With respect to all other Awards, the Management Committee. (u) "Profit-Sharing Awards" shall mean the formula awards described in Section 6(b). (v) "Rollover Matching Contributions" shall have the meaning set forth in Article I of the Savings Plan. (w) "Salary" shall have the meaning set forth in Article I of the Savings Plan. (x) "Savings Plan" shall mean, as applicable, the Pegasus Communications Savings Plan, effective January 1, 1996, and as it may be amended from time to time, or the Pegasus Communications Puerto Rico Savings Plan, effective October 1, 1996, and as it may be amended from time to time. (y) "Special Recognition Awards" shall mean the discretionary awards described in Section 6(a). (z) "Year Over Year Increase in Business Unit Location Cash Flow" shall mean, with respect to any year, the excess of the Business Unit Location Cash Flow for such year over the Business Unit Location Cash Flow for the preceding year, determined on a pro forma basis by the Board of Directors or a committee thereof. For purposes of determining the excess of the Business Unit Location Cash Flow in the first calendar year in which a business unit becomes a business unit of Pegasus ("Year 1") over the Business Unit Location Cash Flow for the preceding year ("Year 0"), the Business Unit Location Cash Flow attributable to the period in Year 1 during which the business unit was a business unit of Pegasus shall be compared to the business unit's income -- before management fees, depreciation, amortization (other than amortization of film contracts), and incentive compensation (including contributions under any qualified or nonqualified plan) -- from non-Pegasus operations during the same period in Year 0. For purposes of determining the excess of the Business Unit Location Cash Flow for the succeeding year ("Year 2") over the Business Unit Location Cash Flow for Year 1, the Business Unit Location Cash Flow attributable to the period in Year 1 during which the business unit was a business unit of Pegasus shall be compared to the Business Unit Location Cash Flow during the same period in Year 2. (aa) "Year Over Year Increase in Company-Wide Location Cash Flow" shall have the meaning set forth in Article I of the Savings Plan. -3- (ab) "Years of Vesting Service" shall have the meaning set forth in Article I of the Savings Plan. SECTION 3 Administration The Plan shall be administered as follows: (a) Special Recognition Awards to Officers and Discretionary Awards. With respect to Special Recognition Awards to Officers and Discretionary Awards, the Plan shall be administered: (1) By a committee, which shall consist of not fewer than two non-employee directors (within the meaning of Rule 16b-3(b)(3) (or any successor thereto) under the Securities Exchange Act of 1934) of PCC who shall be appointed by, and shall serve at the pleasure of, the Board, or (2) In the event a committee has not been established in accordance with paragraph 1, by the entire Board; provided, however, that a member of the Board shall not participate in a vote approving an Award to himself or herself to the extent provided under the laws of the State of Delaware governing corporate self-dealing. The Plan Administrator with respect to Special Recognition Awards to Officers and Discretionary Awards shall hereinafter be referred to as the "Committee." Each member of the Committee, while serving as such, shall be deemed to be acting in his capacity as a director of PCC. The Committee shall have full authority, upon consideration of recommendations by the Management Committee and subject to the terms of the Plan, to select the Officers to be granted Special Recognition Awards under the Plan, to select the employees to be granted Discretionary Awards under the Plan, to grant Special Recognition Awards to Officers and Discretionary Awards to employees on behalf of PCC, and to set the date of grant and the other terms of such Awards. (b) All Other Awards. With respect to all Awards other than Special Recognition Awards to Officers and Discretionary Awards, the Plan shall be administered by the Management Committee. With respect to Special Recognition Awards to employees who are not Officers, the Management Committee shall have full authority, subject to the terms of the Plan, to select the employees to be granted Special -4- Recognition Awards under the Plan, to grant Special Recognition Awards on behalf of PCC, and to set the date of grant and the other terms of such Awards. The terms and conditions of Profit-Sharing Awards and Excess Awards are intended to be fixed in advance. Consequently, Profit-Sharing Awards and Excess Awards shall be as set forth in Sections 6(b) and 6(c), respectively, of the Plan, and the Management Committee shall not have any discretionary authority with respect thereto. (c) In General. The Plan Administrator may correct any defect, supply any omission and reconcile any inconsistency in the Plan and in any Award granted hereunder to the extent it shall deem desirable. The Plan Administrator also shall have the authority to establish such rules and regulations, not inconsistent with the provisions of the Plan, for the proper administration of the Plan, and to amend, modify, or rescind any such rules and regulations, and to make such determinations, and interpretations under, or in connection with, the Plan, as it deems necessary or advisable. All such rules, regulations, determinations, and interpretations shall be binding and conclusive upon PCC, its stockholders and all employees, and upon their respective legal representatives, beneficiaries, successors, and assigns and upon all other persons claiming under or through any of them. No member of the Board, the Committee or the Management Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Award granted under it. SECTION 4 Eligibility More than one Award may be granted to an employee who is eligible to receive an Award under the Plan. Employees shall be eligible to receive Awards as follows: (a) Special Recognition Awards. All employees of Pegasus shall be eligible to receive Special Recognition Awards. (b) Profit-Sharing Awards. A General Manager, Department Manager or Corporate Manager shall be eligible to receive a Profit-Sharing Award with respect to a year if: (1) He is not an Officer on the date the Award is made; and -5- (2) He is employed by Pegasus as a Manager on: (A) June 30 of the year for which the Profit-Sharing Award is made; and (B) The date the Profit-Sharing Award is made. (c) Excess Awards. A Participant in the Savings Plan shall be eligible to receive an Excess Award if contributions on his behalf under the Savings Plan are limited by certain limitations imposed by the Code, as described in Section 6(c), and he is employed by Pegasus on the date the Excess Award is made. (d) Discretionary Awards. All employees of Pegasus shall be eligible to receive Discretionary Awards. Special Recognition Awards and Profit-Sharing Awards shall be made as soon as practicable after the financial information necessary for determining the amount of the Award is available (absent extraordinary circumstances, on or before the March 31 following the year for which the Award is made). Excess Awards shall be made as soon as practicable after the availability of the information required to determine whether contributions under the Savings Plan on behalf of a Participant with respect to a year are limited (absent extraordinary circumstances, on or before the March 15 following the Savings Plan year for which such contribution is limited). SECTION 5 Stock The number of shares of Common Stock that may be subject to Awards under the Plan shall be 350,000 shares, subject to adjustment as hereinafter provided. Common Stock issuable under the Plan may be authorized but unissued shares or reacquired shares, and PCC may purchase shares required for this purpose, from time to time, if it deems such purchase to be advisable. Any Common Stock subject to an Award which is forfeited shall continue to be available for the granting of Awards under the Plan. -6- SECTION 6 Amount of Award (a) Special Recognition Awards. The Plan Administrator, in its sole discretion, shall determine the amount of the annual Special Recognition Award, if any, to be made on behalf of an eligible employee described in Section 4(a); provided, however, that the Fair Market Value of the Common Stock covered by the annual Special Recognition Awards for any year to all employees in the aggregate, determined as of the date the Awards are granted, shall not exceed the sum of (1) five percent of the Year Over Year Increase in Company-Wide Location Cash Flow, plus (2) the Year Over Year Increase in Company-Wide Location Cash Flow which could have been awarded as a Special Recognition Award in the preceding year, and was not. Special Recognition Awards may be granted for consistency (awarded to a team of employees), initiative (a team or individual award), problem solving (a team or individual award), and individual excellence. (b) Profit-Sharing Awards. An annual Profit-Sharing Award of Common Stock shall be made to each eligible employee described in Section 4(b). The number of shares of Common Stock covered by an annual Profit-Sharing Award shall be determined as follows -- (1) General Managers. The number of shares of Common Stock covered by the annual Profit-Sharing Award to each eligible employee who is a General Manager shall equal the quotient of (A) six percent of the Year Over Year Increase in Business Unit Location Cash Flow of the General Manager's business unit, divided by (B) the Fair Market Value of a share of Common Stock. (2) Department Managers. The number of shares of Common Stock covered by an annual Profit-Sharing Award to Department Managers in a business unit in the aggregate shall equal the quotient of (A) six percent of the Year Over Year Increase in Business Unit Location Cash Flow of the Department Manager's business unit, divided by (B) the Fair Market Value of a share of Common Stock. Such shares shall be allocated, per capita, to each eligible employee who is a Department Manager in the business unit; provided, however, that the shares allocated to any Department Manager pursuant to an annual Profit-Sharing Award shall not exceed the shares that would have been allocated to the Department Manager if all Department Manager positions in the business -7- unit were filled on June 30 of the year for which the Profit-Sharing Award is being made and the date the Profit-Sharing Award is made. Any shares that may not be allocated on account of the limitation set forth in the previous sentence shall not be subject to the annual Profit-Sharing Award for the year in which such limitation applies. (3) Corporate Managers. The number of shares of Common Stock covered by an annual Profit-Sharing Award to eligible employees who are Corporate Managers in the aggregate shall equal the quotient of (A) three percent of the Year Over Year Increase in Company-Wide Location Cash Flow, divided by (B) the Fair Market Value of a share of Common Stock. Such shares shall be allocated to each eligible employee who is a Corporate Manager in the same proportion that such Corporate Manager's Salary for such year bears to the total Salary of all Corporate Managers entitled to a Profit-Sharing Award for such year. (c) Excess Awards. The number of shares of Common Stock covered by an Excess Award made on behalf of an eligible employee described in Section 4(c) with respect to any year shall equal the quotient of -- (1) The sum of -- (A) Company Matching Contributions which were not contributed to the Savings Plan on the eligible employee's behalf for such year because of any Code provision that limits such contributions, plus (B) Rollover Matching Contributions which were not contributed to the Savings Plan on the eligible employee's behalf for such year because of any Code provision that limits such contributions; divided by (2) The Fair Market Value of a share of Common Stock. (d) Discretionary Awards. The Committee, in its sole discretion, shall determine the amount of the Discretionary Award, if any, to be made on behalf of an eligible employee described in Section 4(d). -8- SECTION 7 Vesting (a) Special Recognition Awards. A Grantee shall be 100% vested in a Special Recognition Award made on or after April 30, 1998 on the date such Award is made. A Grantee shall be 100% vested in a Special Recognition Award made before April 30, 1998 on April 30, 1998 to the extent such Award has not been forfeited or become fully vested prior to April 30, 1998. (b) Awards Other than Special Recognition Awards. (1) Death, Disability. A Grantee shall be 100% vested in his Profit-Sharing Awards, Excess Awards and Discretionary Awards under the Plan when he -- (A) Incurs a Disability; or (B) Dies. (2) Vesting Schedule. Except as otherwise provided in paragraph (1), a Grantee shall be 100% vested in his Profit-Sharing Awards, Excess Awards and Discretionary Awards under the Plan in accordance with the following schedule -- Percentage of Shares Subject to Awards Years of Vesting Service That Are 100% Vested ------------------------ -------------------- Fewer than 2 0 2 but fewer than 3 34 3 but fewer than 4 67 4 or more 100 (c) Forfeiture. Any shares of Common Stock covered by a Grantee's Awards that are not vested pursuant to subsection (a) or subsection (b) shall be immediately forfeited upon the Grantee's voluntary or involuntary termination of employment by Pegasus. -9- SECTION 8 Capital Adjustments The number of shares which may be issued under the Plan, and the number of shares of Common Stock issuable upon the vesting of outstanding Awards shall, subject to the provisions of section 424(a) of the Internal Revenue Code of 1986, as amended, be adjusted, to reflect any stock dividend, stock split, share combination, or similar change in the capitalization of PCC. In the event any such change in capitalization cannot be reflected in a straight mathematical adjustment of the number of shares issuable upon the vesting of outstanding Awards, the Plan Administrator shall make such adjustments as are appropriate to reflect most nearly such straight mathematical adjustment. Such adjustments shall be made only as necessary to maintain the proportionate interests of Grantees and preserve, without exceeding, the value of Awards. In the event of a corporate transaction (as that term is described in section 424(a) of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations issued thereunder as, for example, a merger, consolidation, acquisition of property or stock, separation, reorganization, or liquidation), each outstanding Award shall be assumed by the surviving or successor corporation. SECTION 9 Amendment or Discontinuance of the Plan At any time and from time to time, the Board may suspend or terminate the Plan or amend it, and the Plan Administrator may amend any outstanding Awards, in any respect whatsoever, except that the following amendments shall require the approval of shareholders: (a) Any amendment which would increase the number of shares of Common Stock authorized under the Plan; and (b) Any amendment for which shareholder approval is required under the rules of an exchange or market on which Common Stock is listed. Notwithstanding the foregoing, no such suspension, discontinuance or amendment shall materially impair the rights of any holder of an outstanding Award without the consent of such holder. -10- The approval of shareholders must be (i) by the written consent of the holders of at least a majority of the shares of PCC entitled to vote, or (ii) by the affirmative vote of the holders of at least a majority of the shares present, or represented, and entitled to vote at a duly held meeting of the shareholders of PCC. SECTION 10 Termination of Plan Unless earlier terminated as provided in the Plan, the Plan and all authority granted hereunder shall terminate absolutely at 12:00 midnight on September 29, 2006, and no Awards hereunder shall be granted thereafter. Nothing contained in this Section 10, however, shall terminate or affect the continued existence of rights created under Awards issued hereunder and outstanding on September 29, 2006 which by their terms extend beyond such date. SECTION 11 Effective Date This Plan became effective on September 30, 1996 (the date the Plan was adopted by the Board). As amended and restated, this Plan shall become effective as of February 1, 1996. SECTION 12 Miscellaneous (a) Issuance and Delivery of Certificates. Upon the granting of an Award, (i) PCC shall issue certificates in the name of the Grantee (or the Grantee and the Grantee's spouse -- see subsection (f)) representing the Common Stock subject to the Award. Any shares of Common Stock in which the Grantee is not vested on the date the Award is granted shall bear a legend indicating that they are subject to the terms of the Plan and the Award Agreement and that they may not be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of except in accordance with the terms of the Plan and the Award Agreement. Upon issuance of such certificates, the Grantee shall immediately execute a stock power or other instrument of transfer, appropriately endorsed in blank, to be held with the certificates by PCC pursuant to the terms of the Plan and the Award Agreement with respect to shares of Common Stock in which the Grantee is -11- not vested on the date the Award is granted. Only full shares shall be issued, and any fractional shares which might otherwise be issuable pursuant to an Award shall be forfeited. (b) Rights as a Shareholder. With respect to any shares of Common Stock in which the Grantee is not vested on the date the Award is granted, the Grantee shall be entitled to receive dividends paid on such shares, shall have the right to vote such shares, and shall have all other shareholder's rights with respect to such shares, except that (i) the Grantee will not be entitled to delivery of the stock certificate, (ii) PCC will retain custody of the Common Stock, and (iii) the shares subject to Awards will revert to PCC in accordance with Section 7(c) to the extent not vested on the Grantee's voluntary or involuntary termination of employment by Pegasus. (c) Award Agreement. Awards under the Plan shall be evidenced by written documents in such form as the Plan Administrator shall, from time to time, approve, which Award Agreements shall contain such provisions, not inconsistent with the provisions of the Plan, as the Plan Administrator shall deem advisable. Each Grantee shall enter into, and be bound by the terms of, the Award Agreement. (d) Governing Law. The Plan, and the Award Agreements entered into and Awards granted thereunder, shall be governed by the Code provisions to the extent applicable. Otherwise, the operation of, and the rights of eligible individuals under, the Plan, the Award Agreements, and the Awards shall be governed by applicable federal law and otherwise by the laws of the State of Delaware. (e) Rights. Neither the adoption of the Plan nor any action of the Board or the Plan Administrator shall be deemed to give any individual any right to be granted an Award, or any other right hereunder, unless and until the Plan Administrator shall have granted such individual an Award, and then his rights shall be only such as are provided by the Plan and the Award Agreement. Further, notwithstanding any provisions of the Plan or any Award Agreement with a Grantee, but subject to any employment agreement, Pegasus shall have the right, in its discretion, to retire an employee at any time pursuant to its retirement rules or otherwise to terminate his employment at any time for any reason whatsoever. -12- (f) Non-Transferability. Except as otherwise provided in any Award Agreement, Awards which have not vested shall not be assignable or transferable by the Grantee otherwise than by will or by the laws of descent and distribution. If a Grantee is married on the date an Award is granted, and if the Grantee so requests, the certificate or certificates issued shall be registered in the name of the Grantee and the Grantee's spouse, jointly, with right of survivorship. (g) Listing and Registration of Shares. Each Award shall be subject to the requirement that, if at any time the Plan Administrator shall determine, in its discretion, that the listing, registration, or qualification of the Common Stock covered thereby upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such Award or the vesting of Common Stock thereunder, or that action by PCC or by the Grantee should be taken in order to obtain an exemption from any such requirement, no shares of Common Stock shall be received pursuant to an Award, unless and until such listing, registration, qualification, consent, approval, or action shall have been effected, obtained, or taken under conditions acceptable to the Plan Administrator. Without limiting the generality of the foregoing, each Grantee or his legal representative or beneficiary may also be required to give satisfactory assurance that shares received pursuant to an Award will be held as an investment and not with a view to distribution, and certificates representing such shares may be legended accordingly. (h) Withholding and Use of Shares to Satisfy Tax Obligations. The obligation of PCC to deliver Common Stock pursuant to any Award shall be subject to applicable federal, state and local tax withholding requirements. If the vesting of any Award is subject to the withholding requirements of applicable federal tax law, the Plan Administrator, in its discretion, may permit or require the Grantee to satisfy the federal, state and local withholding tax, in whole or in part, by electing to have PCC withhold shares of Common Stock subject to the Award (or by returning previously acquired shares of Common Stock to PCC). PCC may not withhold shares in excess of the number necessary to satisfy the minimum federal, state and local income tax withholding requirements. Shares of Common Stock shall be valued, for purposes of this paragraph, at their Fair Market -13- Value, but as of the date the amount attributable to the vesting of the Award is includable in income by the Grantee under the Code (the "Determination Date"). If shares of Common Stock acquired by the exercise of an incentive stock option (within the meaning of section 422 of the Internal Revenue Code as of 1986, as amended, or any successor thereto) are used to satisfy the withholding requirement described above, such shares of Common Stock must have been held by the Grantee for a period of not less than the holding period described in section 422(a)(1) of the Internal Revenue Code of 1986, as amended, as of the Determination Date. The Plan Administrator shall adopt such withholding rules as it deems necessary to carry out the provisions of this paragraph. (i) Indemnification of Board and Plan Administrator. Without limiting any other rights of indemnification which they may have from Pegasus, the members of the Board, the Committee and the Management Committee shall be indemnified by PCC against all costs and expenses reasonably incurred by them in connection with any claim, action, suit, or proceeding to which they or any of them may be a party by reason of any action taken or failure to act under, or in connection with, the Plan, or any Award granted thereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by legal counsel selected by PCC) or paid by them in satisfaction of a judgment in any such action, suit, or proceeding, except a judgment based upon a finding of willful misconduct or recklessness on their part. Upon the making or institution of any such claim, action, suit, or proceeding, the Board, Committee or Management Committee member shall notify PCC in writing, giving PCC an opportunity, at its own expense, to handle and defend the same before such Board, Committee or Management Committee member undertakes to handle it on his own behalf. -14- EX-4 3 EXHIBIT 4(D) EXHIBIT 4(d) PEGASUS COMMUNICATIONS 1996 STOCK OPTION PLAN (As Amended and Restated Effective As of April 27, 1998) Table of Contents 1. Purpose............................................................... 1 2. Administration........................................................ 2 3. Eligibility........................................................... 3 4. Stock................................................................. 3 5. Granting of Options................................................... 4 6. Annual Limit.......................................................... 5 7. Terms and Conditions of Options....................................... 5 8. Option Agreements -- Other Provisions................................. 11 9. Capital Adjustments................................................... 12 10. Certain Corporate Transactions........................................ 12 11. Change in Control..................................................... 13 12. Amendment or Termination of the Plan.................................. 14 13. Absence of Rights..................................................... 15 14. Indemnification of Board and Committee................................ 16 15. Application of Funds.................................................. 16 16. Shareholder Approval.................................................. 16 17. No Obligation to Exercise Option...................................... 17 18. Termination of Plan................................................... 17 19. Governing Law......................................................... 17 20. Special Provisions Regarding Digital Television Services, Inc..........17 -i- PEGASUS COMMUNICATIONS 1996 STOCK OPTION PLAN (As Amended and Restated Effective As of April 27, 1998) -------------------------------- WHEREAS, Pegasus Communications Corporation, a Delaware corporation, desires to award incentive and nonqualified stock options to certain of its officers and directors who are not officers; NOW THEREFORE, effective September 30, 1996, the Pegasus Communications 1996 Stock Option Plan is hereby adopted under the following terms and conditions: 1. Purpose. This Pegasus Communications 1996 Stock Option Plan (the "Plan") is intended to provide a means whereby Pegasus Communications Corporation (the "Company") may, through the grant of incentive stock options and nonqualified stock options (collectively, the "Options") to Key Employees and Non-employee Directors (as defined in Section 3), attract and retain such Key Employees and Non-employee Directors and motivate them to exercise their best efforts on behalf of the Company and of any Related Company. For purposes of granting incentive stock options under the Plan, a "Related Company" shall mean either a "subsidiary corporation" of the Company, as defined in section 424(f) of the Internal Revenue Code of 1986, as amended (the "Code"), or the "parent corporation" of the Company, as defined in section 424(e) of the Code. For purposes of granting non-qualified stock options under the Plan, a "Related Company" shall mean Pegasus Communications Holdings, Inc. or any of its direct or indirect subsidiaries, whether in corporate, partnership or any other form. Further, as used in the Plan, (i) the term "ISO" shall mean an option which, at the time such option is granted, qualifies as an incentive stock option within the meaning of section 422 of the Code and is designated as an ISO in the "Option Agreement" (as defined in Section 8 hereof); and (ii) the term "NQSO" shall mean an option which, at the time such option is granted, does not qualify as an ISO, and is designated as a nonqualified stock option in the Option Agreement (as defined in Section 8 hereof). 2. Administration. The Plan shall be administered: (a) By a committee, which shall consist of not fewer than two non-employee directors (within the meaning of Rule 16b-3(b)(3) under the Securities Exchange Act of 1934 (the "Exchange Act"), or any successor thereto) of the Company who are also outside directors (within the meaning of Treas. Reg. ss.1.162-27(e)(3), or any successor thereto) of the Company, who shall be appointed by, and shall serve at the pleasure of, the Board of Directors of the Company (the "Board"); or (b) In the event a committee has not been established in accordance with subsection (a), or cannot be constituted to vote on the grant of an Option (for example, because of state laws governing corporate self-dealing), by the entire Board; provided, however, that a member of the Board shall not participate in a vote approving the grant of an Option to himself or herself to the extent provided under the laws of the State of Delaware governing corporate self-dealing. The administrator of the Plan shall hereinafter be referred to as the "Committee." Each member of the Committee, while serving as such, shall be deemed to be acting in his capacity as a director of the Company. The Committee shall have full authority, subject to the terms of the Plan, to select the Key Employees and Non-employee Directors to be granted Options under the Plan, to grant Options on behalf of the Company, and to set the date of grant and the other terms of such Options; provided, however, that Non-employee Directors shall not be eligible to receive ISOs under the Plan. The Committee may correct any defect, supply any omission and reconcile any -2- inconsistency in this Plan and in any Option granted hereunder in the manner and to the extent it deems desirable. The Committee also shall have the authority to establish such rules and regulations, not inconsistent with the provisions of the Plan, for the proper administration of the Plan, to amend, modify, or rescind any such rules and regulations, and to make such determinations, and interpretations under, or in connection with, the Plan, as it deems necessary or advisable. All such rules, regulations, determinations, and interpretations shall be binding and conclusive upon the Company, its shareholders and all Key Employees and Non-employee Directors, upon their respective legal representatives, beneficiaries, successors, and assigns, and upon all other persons claiming under or through any of them. No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Option granted under it. 3. Eligibility. The class of employees who shall be eligible to receive Options under the Plan shall be the executive officers of the Company or a Related Company (including any directors who also are officers) ("Key Employees"). Directors of the Company or a Related Company who are not employees ("Non-employee Directors") shall be eligible to receive NQSOs (and not ISOs) under the Plan. More than one Option may be granted to a Key Employee or a Non-employee Director under the Plan. A Key Employee or Non- employee Director who has been granted an Option under the Plan shall hereinafter be referred to as an "Optionee." 4. Stock. Options may be granted under the Plan to purchase up to a maximum of 970,000 shares of Class A common stock of the Company ("Common Stock"); provided, however, that no Key Employee shall receive Options for more than 550,000 shares of the Company's Common Stock over the life of the Plan. However, both limits in the preceding sentence shall be subject to adjustment as hereinafter provided. Shares issuable under the Plan may be authorized but unissued shares or reacquired shares, and the Company may -3- purchase shares required for this purpose, from time to time, if it deems such purchase to be advisable. If any Option granted under the Plan expires or otherwise terminates for any reason whatsoever (including, without limitation, the Optionee's surrender thereof) without having been exercised, the shares subject to the unexercised portion of the Option shall continue to be available for the granting of Options under the Plan as fully as if the shares had never been subject to an Option; provided, however, that (i) if an Option is cancelled, the shares of Common Stock covered by the cancelled Option shall be counted against the maximum number of shares specified above for which Options may be granted to single Key Employee, and (ii) if the exercise price of an Option is reduced after the date of grant, the transaction shall be treated as a cancellation of the original Option and the grant of a new Option for purposes of such maximum. 5. Granting of Options. From time to time until the expiration or earlier suspension or discontinuance of the Plan, the Committee may, on behalf of the Company, grant to Key Employees and Non-employee Directors under the Plan such Options as it determines are warranted; provided, however, that grants of ISOs and NQSOs shall be separate and not in tandem, and further provided that Non-employee Directors shall not be eligible to receive ISOs under the Plan. In making any determination as to whether a Key Employee or a Non-employee Director shall be granted an Option, the type of Option to be granted to a Key Employee, the number of shares to be covered by the Option, and other terms of the Option, the Committee shall take into account the duties of the Key Employee or the Non-employee Director, his present and potential contributions to the success of the Company or a Related Company, the tax implications to the Company and the Key Employee of any Option granted, and such other factors as the Committee shall deem relevant in accomplishing the purposes of the Plan. Moreover, the Committee may provide in the Option that said Option may be exercised only if certain conditions, as determined by the Committee, are fulfilled. -4- 6. Annual Limit (a) ISOs. The aggregate fair market value (determined under Section 7(b) hereof as of the date the ISO is granted) of the Common Stock with respect to which ISOs are exercisable for the first time by a Key Employee during any calendar year (counting ISOs under this Plan and incentive stock options under any other stock option plan of the Company or a Related Company) shall not exceed $100,000. If an Option intended as an ISO is granted to a Key Employee and the Option may not be treated in whole or in part as an ISO pursuant to the $100,000 limitation, the Option shall be treated as an ISO to the extent it may be so treated under the limitation and as an NQSO as to the remainder. For purposes of determining whether an ISO would cause the limitation to be exceeded, ISOs shall be taken into account in the order granted. (b) NQSOs. The annual limits set forth above for ISOs shall not apply to NQSOs. 7. Terms and Conditions of Options. Options granted pursuant to the Plan shall include expressly or by reference the following terms and conditions, as well as such other provisions not inconsistent with the provisions of this Plan and, for ISOs granted under this Plan, the provisions of section 422(b) of the Code, as the Committee shall deem desirable -- (a) Number of Shares. The Option shall state the number of shares of Common Stock to which the Option pertains. (b) Price. The Option shall state the Option price which shall be determined and fixed by the Committee in its discretion but shall not be less than the higher of 100 percent (110 percent in the case of an ISO granted to a more-than-10-percent shareholder, as provided in paragraph (j) below) of the fair market value of the optioned shares of Common Stock on the date the Option is granted, or the par value thereof. The fair market value of a share of Common Stock shall be the closing price of the Common Stock on a registered securities exchange or on an -5- over-the-counter market on the last business day prior to the date of grant on which Common Stock traded. (c) Term (1) ISOs. Subject to earlier termination as provided in paragraphs (e), (f), and (g) below and in Section 10 hereof, the term of each ISO shall be not more than 10 years (five years in the case of a more-than-10- percent shareholder, as discussed in paragraph (j) below) from the date of grant. (2) NQSOs. Subject to earlier termination as provided in paragraphs (e), (f), and (g) below and in Section 10 hereof, the term of each NQSO shall be not more than ten years from the date of grant. (d) Exercise. Options shall be exercisable in such installments and on such dates, as the Committee may specify. The Committee may accelerate the exercise date of any outstanding Options, in its discretion, if it deems such acceleration to be desirable. Any exercisable Options may be exercised at any time up to the expiration or termination of the Option. Exercisable Options may be exercised, in whole or in part and from time to time, by giving written notice of exercise to the Company at its principal office, specifying the number of shares to be purchased and accompanied by payment in full of the aggregate Option exercise price for such shares. Only full shares shall be issued under the Plan, and any fractional share which might otherwise be issuable upon exercise of an Option granted hereunder shall be forfeited. The Option price shall be payable -- (1) in cash or its equivalent; (2) in the case of an ISO, if the Committee in its discretion causes the Option Agreement so to provide, and in the case of an NQSO, if the Committee in its discretion so determines at or prior to the time of exercise, then -- (A) in shares of Common Stock previously acquired by the Optionee; provided that if such shares of Common Stock were acquired -6- through the exercise of an ISO and are used to pay the Option price for ISOs, such shares have been held by the Key Employee for a period of not less than the holding period described in section 422(a)(1) of the Code on the date of exercise; (B) in Company Common Stock newly acquired by the Optionee upon exercise of such Option (which shall constitute a disqualifying disposition in the case of an Option which is an ISO); (C) by delivering a properly executed notice of exercise of the Option to the Company and a broker, with irrevocable instructions to the broker promptly to deliver to the Company the amount of sale or loan proceeds necessary to pay the exercise price of the Option; (D) if the Optionee is designated as an "eligible participant," and if the Optionee thereafter so requests, (i) the Company will loan the Optionee the money required to pay the exercise price of the Option; (ii) any such loan to an Optionee shall be made only at the time the Option is exercised; and (iii) the loan will be made on the Optionee's personal negotiable demand promissory note, bearing interest at the lowest rate which will avoid imputation of interest under section 7872 of the Code, and including such other terms as the Committee prescribes; or (E) in any combination of subparagraphs (1), (2)(A), (2)(B), (2)(C) and (2)(D) above. In the event the Option price is paid, in whole or in part, with shares of Common Stock, the portion of the Option price so paid shall be equal to the aggregate fair market value (determined under paragraph (b) above, but as of the date of exercise of the Option, rather than the date of grant) of the Common Stock so surrendered in payment of the Option price. (e) Termination of Employment or Board Membership. If a Key Employee's employment by the Company (and Related Companies) or a Non-employee Director's membership on the Board is terminated by either party prior to the expiration date fixed for his Option for any reason other than death or disability, such Option may be exercised, to the extent of the number of -7- shares with respect to which the Optionee could have exercised it on the date of such termination, or to any greater extent permitted by the Committee, by the Optionee at any time prior to the earlier of (i) the expiration date specified in such Option, or (ii) an accelerated expiration date determined by the Committee, in its discretion, and set forth in the Option Agreement; except that, subject to Section 10 hereof, such accelerated expiration date shall not be earlier than the date of the termination of the Key Employee's employment or the Non-employee Director's Board membership, and in the case of ISOs, such accelerated expiration date shall not be later than three months after such termination of employment. (f) Exercise upon Disability of Optionee. If an Optionee becomes disabled (within the meaning of section 22(e)(3) of the Code) during his employment or membership on the Board and, prior to the expiration date fixed for his Option, his employment or membership on the Board is terminated as a consequence of such disability, such Option may be exercised, to the extent of the number of shares with respect to which the Optionee could have exercised it on the date of such termination, or to any greater extent permitted by the Committee, by the Optionee at any time prior to the earlier of (i) the expiration date specified in such Option, or (ii) an accelerated termination date determined by the Committee, in its discretion, and set forth in the Option Agreement; except that, subject to Section 10 hereof, such accelerated termination date shall not be earlier than the date of the Optionee's termination of employment or Board Membership by reason of disability, and in the case of ISOs, such accelerated termination date shall not be later than one year after such termination of employment. In the event of the Optionee's legal disability, such Option may be exercised by the Optionee's legal representative. (g) Exercise upon Death of Optionee. If an Optionee dies during his employment or Board Membership, and prior to the expiration date fixed for his Option, or if an Optionee whose employment or Board membership is terminated for any reason, dies following his termination of employment or -8- Board membership but prior to the earliest of (i) the expiration date fixed for his Option, (ii) the expiration of the period determined under paragraphs (e) and (f) above, or (iii) in the case of an ISO, three months following termination of employment, such Option may be exercised, to the extent of the number of shares with respect to which the Optionee could have exercised it on the date of his death, or to any greater extent permitted by the Committee, by the Optionee's estate, personal representative or beneficiary who acquired the right to exercise such Option by bequest or inheritance or by reason of the death of the Optionee. Such post-death exercise may occur at any time prior to the earlier of (i) the expiration date specified in such Option or (ii) an accelerated termination date determined by the Committee, in its discretion, and set forth in the Option Agreement; except that, subject to Section 10 hereof, such accelerated termination date shall not be later than three years after the date of death. (h) Non-Transferability. No ISO and (except as otherwise provided in any Option Agreement) no NQSO shall be assignable or transferable by the Optionee other than by will or by the laws of descent and distribution, and during the lifetime of the Optionee, shall be exercisable only by him or by his guardian or legal representative. If the Optionee is married at the time of exercise and if the Optionee so requests at the time of exercise, the certificate or certificates shall be registered in the name of the Optionee and the Optionee's spouse, jointly, with right of survivorship. (i) Rights as a Shareholder. An Optionee shall have no rights as a shareholder with respect to any shares covered by his Option until the issuance of a stock certificate to him for such shares. (j) Ten Percent Shareholder. If the Key Employee owns more than 10 percent of the total combined voting power of all shares of stock of the Company or of a Related Company at the time an ISO is granted to him, the Option price for the ISO shall be not less than 110 percent of the fair market value (as determined under paragraph (b) above) of the optioned shares of Common Stock on the date the ISO is granted, and such ISO, by its terms, shall -9- not be exercisable after the expiration of five years from the date the ISO is granted. The conditions set forth in this paragraph shall not apply to NQSOs. (k) Listing and Registration of Shares. Each Option shall be subject to the requirement that, if at any time the Committee shall determine, in its discretion, that the listing, registration, or qualification of the shares of Common Stock covered thereby upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such Option or the purchase of shares of Common Stock thereunder, or that action by the Company or by the Optionee should be taken in order to obtain an exemption from any such requirement, no such Option may be exercised, in whole or in part, unless and until such listing, registration, qualification, consent, approval, or action shall have been effected, obtained, or taken under conditions acceptable to the Committee. Without limiting the generality of the foregoing, each Optionee or his legal representative or beneficiary may also be required to give satisfactory assurance that shares purchased upon exercise of an Option are being purchased for investment and not with a view to distribution, and certificates representing such shares may be legended accordingly. (l) Withholding and Use of Shares to Satisfy Tax Obligations. The obligation of the Company to deliver shares of Common Stock upon the exercise of any Option shall be subject to applicable federal, state and local tax withholding requirements. If the exercise of any Option is subject to the withholding requirements of applicable federal tax law, the Committee, in its discretion, may permit or require the Key Employee to satisfy the federal, state and local withholding tax, in whole or in part, by electing to have the Company withhold shares of Common Stock subject to the exercise (or by returning previously acquired shares of Common Stock to the Company). The Company may not withhold shares in excess of the number necessary to satisfy the minimum federal, state and local income tax withholding requirements. Shares of Common Stock shall -10- be valued, for purposes of this paragraph, at their fair market value under paragraph (b) above, but as of the date the amount attributable to the exercise of the Option is includable in income by the Key Employee under section 83 of the Code (the "Determination Date"). If shares of Common Stock acquired by the exercise of an ISO are used to satisfy the withholding requirement described above, such shares of Common Stock must have been held by the Key Employee for a period of not less than the holding period described in section 422(a)(1) of the Code as of the Determination Date. The Committee shall adopt such withholding rules as it deems necessary to carry out the provisions of this paragraph. (m) Loans. If an Optionee is designated as an "eligible participant" by the Committee at the date of grant in the case of an ISO, or at or after the date of grant in the case of an NQSO, and if the Optionee thereafter so requests, the Company will loan the Optionee the money required to satisfy any regular income tax obligations (as opposed to alternative minimum tax obligations) resulting from the exercise of any Options. Any loan or loans to an Optionee shall be made only at the time any such tax resulting from such exercise is due. The Committee, in its discretion, may require an affidavit from the Optionee specifying the amount of the tax required to be paid and the date when such tax must be paid. The loan will be made on the Optionee's personal, negotiable, demand promissory note, bearing interest at the lowest rate which will avoid imputation of interest under section 7872 of the Code, and including such other terms as the Committee prescribes. 8. Option Agreements -- Other Provisions. Options granted under the Plan shall be evidenced by written documents ("Option Agreements") in such form as the Committee shall from time to time approve, and containing such provisions not inconsistent with the provisions of the Plan (and, for ISOs granted pursuant to the Plan, not inconsistent with section 422(b) of the Code), as the Committee shall deem advisable. The Option Agreements shall specify whether the Option is an ISO or NQSO. Each Optionee shall enter into, -11- and be bound by, an Option Agreement as soon as practicable after the grant of an Option. 9. Capital Adjustments. The number of shares which may be issued under the Plan, the maximum number of shares with respect to which Options may be granted to any Optionee under the Plan, as stated in Section 4 hereof, and the number of shares issuable upon exercise of outstanding Options under the Plan (as well as the Option price per share under such outstanding Options) shall, subject to the provisions of section 424(a) of the Code, be adjusted, as may be deemed appropriate by the Committee, to reflect any stock dividend, stock split, share combination, or similar change in the capitalization of the Company. In the event any such change in capitalization cannot be reflected in a straight mathematical adjustment of the number of shares issuable upon the exercise of outstanding Options (and a straight mathematical adjustment of the exercise price thereof), the Committee shall make such adjustments as are appropriate to reflect most nearly such straight mathematical adjustment. Such adjustments shall be made only as necessary to maintain the proportionate interest of Optionees, and preserve, without exceeding, the value of Options. 10. Certain Corporate Transactions. In the event of a corporate transaction (as that term is described in section 424(a) of the Code and the Treasury Regulations issued thereunder as, for example, a merger, consolidation, acquisition of property or stock, separation, reorganization, or liquidation), each outstanding Option shall be assumed by the surviving or successor corporation; provided, however, that, in the event of a proposed corporate transaction, the Committee may terminate all or a portion of the outstanding Options if it determines that such termination is in the best interests of the Company. If the Committee decides to terminate outstanding Options, the Committee shall give each Optionee holding an Option to be terminated not less than seven days' notice prior to any such termination, and any Option which is to be so terminated may be exercised (if and only to the extent that it is then exercisable) up to, and including the date immediately preceding such termination. Further, as provided in Section 7(d) hereof, the -12- Committee, in its discretion, may accelerate, in whole or in part, the date on which any or all Options become exercisable. The Committee also may, in its discretion, change the terms of any outstanding Option to reflect any such corporate transaction, provided that, in the case of ISOs, such change would not constitute a "modification" under section 424(h) of the Code, unless the Option holder consents to the change. 11. Change in Control. (a) Full Vesting. Notwithstanding any other provision of this Plan, all outstanding Options shall become fully vested and exercisable upon a Change in Control. (b) Definitions. The following definitions shall apply for purposes of this Section -- (1) "Change in Control" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company to any "person" (as such term is used in section 13(d)(3) of the Exchange Act) other than the Principal or his Related Parties, (ii) the adoption of a plan relating to the liquidation or dissolution of the Company, (iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above) becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a Person shall be deemed to have "beneficial ownership" of all securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time, upon the happening of an event or otherwise), of more of the voting stock of the Company than is "beneficially owned" (as defined above) at such time by the Principal and his Related Parties, or (iv) the first day on which a majority of the members of the Board are not Continuing Directors. -13- (2) "Continuing Directors" means, as of any date of determination, any member of the Board who (i) was a member of the Board on September 30, 1996, or (ii) was nominated for election or elected to the Board with approval of a majority of the Continuing Directors who were members of the Board at the time of such nomination or election. (3) "Person" shall have the meaning set forth in the indenture dated July 7, 1995, by and among Pegasus Media & Communications, Inc., certain of its subsidiaries, and First Union National Bank and Trustee. (4) "Principal" means Marshall W. Pagon. (5) "Related Party" means (A) any immediate family member of the Principal or (B) any trust, corporation, partnership or other entity, more than 50% of the voting equity interests of which are owned directly or indirectly by, and which is controlled by, the Principal and/or such other Persons referred to in the immediately preceding clause (A). For purposes of this definition, (i) "immediate family member" means spouse, parent, step- parent, child, sibling or step-sibling, and (ii) "control," as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. In addition, the Principal's estate shall be deemed to be a Related Party until such time as such estate is distributed in accordance with the Principal's will or applicable state law. 12. Amendment or Termination of the Plan (a) In General. The Board, pursuant to a written resolution, from time to time may suspend or terminate the Plan or amend it, and the Committee may amend any outstanding Options in any respect whatsoever; except that, without the approval of the shareholders (given in the manner set forth in paragraph (b) below) -- -14- (1) the class of employees eligible to receive ISOs shall not be changed; (2) the maximum number of shares of Common Stock with respect to which Options may be granted under the Plan shall not be increased, except as permitted under Section 9 hereof; (3) the duration of the Plan under Section 18 hereof with respect to any ISOs granted hereunder shall not be extended; and (4) no amendment requiring shareholder approval pursuant to Treas. Reg. ss. 1.162-27(e)(4)(vi) or any successor thereto may be made. Notwithstanding the foregoing, no such suspension, discontinuance or amendment shall materially impair the rights of any holder of an outstanding Option without the consent of such holder. (b) Manner of Shareholder Approval. The approval of shareholders must be effected -- (1) By a method and in a degree that would be treated as adequate under applicable state law in the case of an action requiring shareholder approval (i.e., an action on which shareholders would be entitled to vote if the action were taken at a duly held shareholders' meeting); or (2) By a majority of the votes cast at a duly held shareholders' meeting at which a quorum representing a majority of all outstanding voting stock is, either in person or by proxy, present and voting on the Plan. 13. Absence of Rights. Neither the adoption of the Plan nor any action of the Board or the Committee shall be deemed to give any individual any right to be granted an Option, or any other right hereunder, unless and until the Committee shall have granted such individual an Option, and then his rights shall be only such as are provided by the Option Agreement. Any Option under the Plan shall not entitle the holder thereof to any rights as a stockholder of the Company prior to the exercise of such Option and the issuance of the shares pursuant thereto. Further, notwithstanding any provisions of the Plan or the Option Agreement with a Key -15- Employee, the Company and any Related Company shall have the right, in its discretion but subject to any employment contract entered into with the Key Employee, to retire the Key Employee at any time pursuant to its retirement rules or otherwise to terminate his employment at any time for any reason whatsoever. 14. Indemnification of Board and Committee. Without limiting any other rights of indemnification which they may have from the Company and any Related Company, the members of the Board and the members of the Committee shall be indemnified by the Company against all costs and expenses reasonably incurred by them in connection with any claim, action, suit, or proceeding to which they or any of them may be a party by reason of any action taken or failure to act under, or in connection with, the Plan, or any Option granted thereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit, or proceeding, except a judgment based upon a finding of willful misconduct or recklessness on their part. Upon the making or institution of any such claim, action, suit, or proceeding, the Board or Committee member shall notify the Company in writing, giving the Company an opportunity, at its own expense, to handle and defend the same before such Board or Committee member undertakes to handle it on his own behalf. The provisions of this Section shall not give members of the Board or the Committee greater rights than they would have under the Company's by-laws or Delaware law. 15. Application of Funds. The proceeds received by the Company from the sale of Common Stock pursuant to Options granted under the Plan shall be used for general corporate purposes. Any cash received in payment for shares upon exercise of an Option shall be added to the general funds of the Company and shall be used for its corporate purposes. Any Common Stock received in payment for shares upon exercise of an Option shall become treasury stock. 16. Shareholder Approval. This Plan shall become effective on September 30, 1996 (the date the Plan was adopted by the Board); provided, -16- however, that if the Plan is not approved by the shareholders, in the manner described in Section 12(b) hereof, within 12 months before or after the date the Plan was adopted by the Board, ISOs granted hereunder shall be null and void and no additional Options shall be granted hereunder. 17. No Obligation to Exercise Option. The granting of an Option shall impose no obligation upon an Optionee to exercise such Option. 18. Termination of Plan. Unless earlier terminated as provided in the Plan, the Plan and all authority granted hereunder shall terminate absolutely at 12:00 midnight on September 29, 2006, which date is within 10 years after the date the Plan was adopted by the Board, or the date the Plan was approved by the shareholders of the Company, whichever is earlier, and no Options hereunder shall be granted thereafter. Nothing contained in this Section, however, shall terminate or affect the continued existence of rights created under Options issued hereunder, and outstanding on the date set forth in the preceding sentence, which by their terms extend beyond such date. 19. Governing Law. The Plan shall be governed by the applicable Code provisions to the maximum extent possible. Otherwise, the laws of the State of Delaware shall govern the operation of, and the rights of Key Employees and Non-employee Directors under, the Plan and Options granted thereunder. 20. Special Provisions Regarding Digital Television Services, Inc.. Digital Television Services, Inc. ("DTS") became a wholly-owned subsidiary of the Company by means of the merger (the "Merger") of a wholly-owned subsidiary of the Company into DTS pursuant to the Agreement and Plan of Merger dated January 8, 1998 (the "Merger Agreement") among the Company, DTS, Pegasus DTS Merger Sub, Inc. and certain stockholders of the Company and DTS. Section 2.12 of the Merger Agreement provides that the Company will assume certain outstanding DTS options specified therein. Section 2.12 of the Merger Agreement also provides that such DTS options will be replaced with options (the "Replacement Options") to purchase the number of shares of Common Stock equal to the "conversion ratio" (as defined in the Merger Agreement) times the number of shares of DTS common stock issuable upon the exercise of such op- -17- tions, for an exercise price equal to the exercise price applicable to such options divided by the "conversion ratio." Each Replacement Option shall be exercisable under the Plan in accordance with the terms of the agreement entered into between the Company and the holder of the Replacement Option (the "Replacement Agreement"), the terms of which shall govern in the event of any conflict with the provisions of the Plan. The following provisions of the Plan shall not apply to the Replacement Options: (i) Section 11 ("Change in Control"); (ii) Section 7(d)(2)(D) (regarding payment of exercise price with the proceeds of a loan from the Company); and (iii) Section 7(m) (regarding payment of income tax obligations with the proceeds of a loan from the Company). In addition, any provision of the Plan that would provide an additional benefit (within the meaning of section 424(a)(2) of the Code and Treasury Regulations thereunder) shall not apply to the Replacement Options. -18- EX-5 4 EXHIBIT 5(A) EXHIBIT 5(a) [Drinker Biddle & Reath LLP letterhead] May 15, 1998 Pegasus Communications Corporation c/o Pegasus Communications Management Company Suite 454, 5 Radnor Corporate Center 100 Matsonford Road Radnor, Pennsylvania 19087 Re: Pegasus Communications Corporation Securities and Exchange Commission Registration Statement on Form S-8 Ladies and Gentlemen: We have acted as counsel to Pegasus Communications Corporation (the "Company") in connection with the preparation and filing with the Securities and Exchange Commission of the Company's Post-Effective Amendment No. 1 to Registration Statement on Form S-8 under the Securities Act of 1933 (the "Registration Statement") relating to 1,316,386 shares of Class A Common Stock of the Company, par value $0.01 per share (the "Shares"), issuable pursuant to its Restricted Stock Plan (the Restricted Stock Plan"), or upon the exercise of options granted under the Company's 1996 Stock Option Plan (the "Stock Option Plan," and, together with the Restricted Stock Plan, the "Plans"). 1 In this capacity, we have reviewed originals or copies, certified or otherwise identified to our satisfaction, of the Company's Certificate of Incorporation, its By-laws, resolutions of its Board of Directors, the Plans, and such other documents and corporate records as we have deemed appropriate for the purpose of giving this opinion. Based upon the foregoing and consideration of such questions of law as we have deemed relevant, we are of the opinion that the issuance of the Shares by the Company either (i) pursuant to the Restricted Stock Plan or (ii) upon the exercise of stock options properly granted under the Stock Option Plan has been duly authorized by the necessary corporate action of the Board of Directors of the Company and such Shares, upon payment therefore, if applicable, in accordance with the terms of the Restricted Stock Plan, or upon exercise of such options and payment therefor in accordance with the terms of the Stock Option Plan, will be validly issued, fully paid and nonassessable by the Company. The opinions expressed herein are limited to the federal laws of the United States and the Delaware General Corporation Law. We consent to the use of this opinion as an exhibit to the Registration Statement. This does not constitute a consent under Section 7 of the Securi- 2 ties Act of 1933 since we have not certified any part of the Registration Statement and do not otherwise come within the categories of persons whose consent is required under Section 7 or the rules and regulations of the Securities and Exchange Commission. Very truly yours, /s/ DRINKER BIDDLE & REATH LLP DRINKER BIDDLE & REATH LLP 3 EX-23 5 EXHIBIT 23(A) EXHIBIT 23(a) CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in this Post-Effective Amendment No. 1 to Registration Statement of Pegasus Communications Corporation and subsidiaries on Form S-8 (File No. 333-22845) of our report dated February 26, 1998, on our audits of the consolidated financial statements and financial statement schedule of Pegasus Communications Corporation and subsidiaries as of December 31, 1997 and 1996, and for the years ended December 31, 1997, 1996 and 1995. /s/ COOPERS & LYBRAND L.L.P. - ---------------------------- 2400 Eleven Penn Center Philadelphia, Pennsylvania May 13, 1998 5 -----END PRIVACY-ENHANCED MESSAGE-----