EXHIBIT 10.2
EXECUTION COPY
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________________________________________________________
COOPERATION AGREEMENT
BY AND AMONG
PEGASUS SATELLITE TELEVISION, INC.
on its own behalf and on behalf of its direct and indirect
subsidiaries that are Sellers under the Asset Purchase Agreement
AND
DIRECTV, INC.
Dated as of July 30, 2004
________________________________________________________
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS.......................................................................1
1.1 Certain Definitions...............................................................1
1.2 Other Definitional and Interpretive Matters.......................................4
ARTICLE II OPERATIONAL MATTERS...............................................................5
2.1 Working Teams.....................................................................5
2.2 Customer Account Migration........................................................6
2.3 Customer Service Operations.......................................................7
2.4 Customer Billing and Collection Activities........................................8
2.5 Sales and Distribution Activities; Retention and Upgrade;
Residence Servicing Activities....................................................8
2.6 Member Agreements.................................................................9
2.7 Existing Migration Process........................................................9
ARTICLE III COST REIMBURSEMENT...............................................................10
3.1 Customer Offers Reimbursement....................................................10
3.2 Migration Plan Reimbursement.....................................................11
3.3 Customer Conversion Reimbursement................................................11
3.4 Reimbursement Procedures.........................................................11
ARTICLE IV POST-CLOSING TRANSITION..........................................................11
4.1 Transition Services..............................................................11
4.2 Incentive Fee....................................................................12
ARTICLE V TERMINATION......................................................................12
5.1 Bankruptcy Court Approval........................................................12
5.2 Termination of Agreement.........................................................12
5.3 Procedure Upon Termination.......................................................12
5.4 Effect of Termination............................................................13
ARTICLE VI MISCELLANEOUS....................................................................14
6.1 Post-Petition Amounts Due from Pegasus to DIRECTV................................14
6.2 Audit............................................................................14
6.3 Expenses.........................................................................14
6.4 Submission to Jurisdiction; Consent to Service of Process........................14
6.5 Financial Dispute................................................................15
6.6 Waiver of Right to Trial by Jury.................................................15
6.7 Entire Agreement; Amendments and Waivers.........................................15
6.8 Governing Law....................................................................15
6.9 Notices..........................................................................16
6.10 Severability.....................................................................17
6.11 Binding Effect; Assignment.......................................................17
6.12 Non-Recourse.....................................................................18
6.13 Counterparts.....................................................................18
6.14 Reservation of Rights............................................................18
6.15 No Survival......................................................................18
Schedule
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1.1 Customer Conversion Reimbursement
2.1(a) Working Teams
COOPERATION AGREEMENT
COOPERATION AGREEMENT, dated as of July 30, 2004, by and among Pegasus
Satellite Television, Inc. ("PST") (on its own behalf and on behalf of its
direct and indirect subsidiaries that are Sellers under the Asset Purchase
Agreement (as defined below) (collectively with PST, "Pegasus")), and DIRECTV,
Inc., a California corporation ("DIRECTV").
Witnesseth:
WHEREAS, Pegasus and certain of its Affiliates, each commenced a case
(collectively, the "Chapter 11 Case") under chapter 11 of title 11 of the United
States Code (the "Bankruptcy Code"), on June 2, 2004 by filing respective
voluntary petitions with the United States Bankruptcy Court for the District of
Maine (the "Bankruptcy Court");
WHEREAS, PST, Golden Sky Systems, Inc., other Affiliates of Pegasus and
DIRECTV have entered into an Asset Purchase Agreement, dated as of the date
hereof, as the same may be amended, modified or supplemented from time to time
in accordance with the terms and provisions thereof (the "Asset Purchase
Agreement") and Pegasus Satellite Communications, Inc., DIRECTV and certain
other parties have entered into the Settlement Agreement;
WHEREAS, the Asset Purchase Agreement, this Agreement and the
Settlement Agreement are integral, interdependent parts of an overall settlement
of the matters referred to in the Settlement Agreement; and
WHEREAS, certain terms used in this Agreement are defined in Section
1.1.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter contained, the parties hereto hereby agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Definitions. For purposes of this Agreement, the following
terms shall have the meanings specified in this Section 1.1:
"Actions" shall have the meaning set forth in the Settlement Agreement.
"Active Subscriber" shall have the meaning set forth in the Asset
Purchase Agreement.
"ADS Facility" shall have the meaning set forth in Section 2.3(a).
"Affiliate" means, with respect to any Person, any other Person that,
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person, and the term
"control" (including the terms "controlled by" and "under common control with")
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" means this Cooperation Agreement, by and between PST and
DIRECTV (as the same may be amended, modified or supplemented from time to time
in accordance with the terms and provisions hereof).
"Approval Motion" shall have the meaning set forth in the Asset
Purchase Agreement.
"Asset Purchase Agreement" shall have the meaning set forth in the
Recitals hereto.
"Bankruptcy Code" shall have the meaning set forth in the Recitals
hereto.
"Bankruptcy Court" shall have the meaning set forth in the Recitals
hereto.
"Business Day" means any day of the year on which national banking
institutions in New York are open to the public for conducting business and are
not required or authorized to close.
"Chapter 11 Case" shall have the meaning set forth in the Recitals
hereto.
"Closing" shall have the meaning set forth in the Asset Purchase
Agreement.
"Closing Date" shall have the meaning set forth in the Asset Purchase
Agreement.
"Contact Persons" shall have the meaning set forth in Section 2.1(b).
"Covered Transaction" shall have the meaning set forth in the Asset
Purchase Agreement.
"Creditors' Committee" means the statutory committee of unsecured
creditors duly appointed in the Chapter 11 Case.
"Customer" means the customers of Pegasus for DIRECTV(R) services and
related services and products.
"Customer Conversion Reimbursement Amount" means an aggregate amount
equal to the product of (i) the Excess Migration Amount, (ii) $0.77, and (iii)
the number of days between the date of conversion and the Reference Date
calculated for each date from the date hereof (not including the date hereof)
until the Reference Date; provided, however, that in no event shall Sellers' owe
DIRECTV any money under this calculation. An illustrative calculation is set
forth on Schedule 1.1.
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"Customer Transfer" shall have the meaning set forth in Section 2.2(b).
"DIRECTV" shall have the meaning set forth in the Preamble hereto.
"Dispute Statement" shall have the meaning set forth in Section 6.5.
"Excess Migration Amount" means the amount obtained by subtracting (i)
twelve hundred fifty (1,250) from (ii) the number of Active Subscribers, who are
Qualified Subscribers as of the date hereof, that terminate existing accounts
with Pegasus and activate new accounts with DIRECTV on a given date between the
date hereof (not including the date hereof) and the Reference Date, such amount
to be determined on a daily basis. For any given day, such amount may be
positive, negative or zero.
"Existing Migration Process" shall have the meaning set forth in
Section 2.7(a).
"Governmental Body" means any government or governmental or regulatory
body thereof, or political subdivision thereof, whether foreign, federal, state
or local, or any agency, instrumentality or authority thereof, or any court or
arbitrator (public or private).
"HSR Act" shall have the meaning set forth in the Asset Purchase
Agreement.
"Implementation Date" means the first day following the later of (i)
the granting of the Approval Order (as defined in the Asset Purchase Agreement)
and (ii) the expiration or termination of the HSR Act waiting period without any
governmental order enjoining the Closing.
"Incentive Fee" shall have the meaning set forth in Section 4.2.
"Member Agreements" means the NRTC/Member Agreements for Marketing and
Distribution of DBS Services (as amended, including in 1994) between Pegasus and
NRTC.
"Migration Plan" shall have the meaning set forth in Section 2.2(a).
"Migration Planning" shall have the meaning set forth in Section
2.2(a).
"Net Service Obligations" shall have the meaning set forth in the Asset
Purchase Agreement.
"NRTC" means National Rural Telecommunications Cooperative, a District
of Columbia non-profit cooperative corporation.
"Pegasus" shall have the meaning set forth in the Preamble hereto.
"Person" means any individual, corporation, cooperative, partnership,
limited liability company, firm, joint venture, association, joint-stock
company, trust, unincorporated organization, Governmental Body or other entity.
"PST" shall have the meaning set forth in the Preamble hereto.
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"Purchase Price" shall have the meaning set forth in the Asset Purchase
Agreement.
"Qualified Subscriber" shall have the meaning set forth in the Asset
Purchase Agreement.
"Referee" shall have the meaning set forth in the Asset Purchase
Agreement.
"Reference Date" means the date which is the earlier of September 15,
2004 and the Closing Date.
"Seamless Agreement" means the Revised Seamless Consumer Program, dated
as of October 3, 2001, as amended, among PST, Golden Sky Systems, Inc. and
DIRECTV.
"Sellers" shall have the meaning set forth in the Asset Purchase
Agreement.
"Settlement Agreement" shall have the meaning set forth in the Asset
Purchase Agreement.
"Subscriber List" shall have the meaning set forth in the Asset
Purchase Agreement.
"Transition Period" shall have the meaning set forth in Section 4.1.
"WARN Act" means the Worker Adjustment and Retraining Notification Act
of 1988.
"Working Teams" shall have the meaning set forth in Section 2.1(a).
1.2 Other Definitional and Interpretive Matters.
(a) Unless otherwise specified, for purposes of this Agreement, the following
rules of interpretation shall apply:
Calculation of Time Period. When calculating the period of time before
which, within which or following which any act is to be done or step taken
pursuant to this Agreement, the date that is the reference date in calculating
such period shall be excluded unless otherwise expressly provided. If the last
day of such period is a non-Business Day, the period in question shall end on
the next succeeding Business Day.
Dollars. Any reference in this Agreement to "$" shall mean U.S.
dollars.
Schedules. The Schedules annexed hereto or referred to herein are
hereby incorporated in and made an integral part of this Agreement as if set
forth in full herein. Any capitalized terms used in any Schedule but not
otherwise defined therein shall be defined as set forth in this Agreement.
Gender and Number. Any reference in this Agreement to gender shall
include all genders, and words imparting the singular number only shall include
the plural and vice versa.
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Headings. The provision of the Table of Contents, the division of this
Agreement into Articles, Sections and other subdivisions and the insertion of
headings are for convenience of reference only and shall not affect or be
utilized in construing or interpreting this Agreement. All references in this
Agreement to any "Article" or "Section" of or "Schedule" to are to the
corresponding Article or Section of or Schedule to this Agreement.
Herein. The words such as "herein", "hereinafter", "hereof" and
"hereunder" refer to this Agreement as a whole and not merely to a subdivision
in which such words appear.
Including. The word "including" or any variation thereof means
"including, without limitation" and shall not be construed to limit any general
statement that it follows to the specific or similar items or matters
immediately following it.
(b) The parties hereto have participated jointly in the
negotiation and drafting of this Agreement and, in the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as jointly drafted by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any
provision of this Agreement.
ARTICLE II
OPERATIONAL MATTERS
2.1 Working Teams.
(a) The Persons set forth on Schedule 2.1(a) will constitute the
"Working Teams". Each party hereto may make additions to the Working Teams by
providing notice to the other party. The Working Teams will be responsible for
managing the implementation of this Agreement, including formulating a plan with
respect to the following functional areas:
(i) Billing and IT infrastructure;
(ii) Customer service and Customer communications;
(iii) Customer residence servicing activities (such as
equipment servicing calls and equipment upgrade activities);
(iv) Accounting and financial operations;
(v) Sales and marketing; and
(vi) Customer retention and churn minimization tactics.
(b) Each party shall designate, within three (3) Business Days
of the date hereof, one person to coordinate all contacts and communications
between the parties regarding the implementation of this Agreement (the "Contact
Persons").
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(c) The Working Teams shall, in good faith, attempt to resolve
any disputes regarding the specific operations under, and timing or method of
implementation or interpretation of this Agreement. If the Working Teams cannot
reach a resolution within five (5) Business Days from the day a dispute first
arises, the dispute shall be referred to the Contact Persons for resolution. If
the Contact Persons cannot reach an agreement within five (5) Business Days of a
dispute being referred to them, such dispute shall be submitted to the
Bankruptcy Court in accordance with Section 6.4, provided, however, that in the
event that such dispute is a financial dispute, such dispute shall be submitted
to the Referee in accordance with Section 6.5. Pegasus and DIRECTV acknowledge
the necessity for such disputes to be adjudicated on an expedited basis and
agree that they will jointly request that the Bankruptcy Court schedule a
hearing on such matters on a shortened emergency basis and seek similar
expedited treatment from the Referee.
2.2 Customer Account Migration.
(a) Promptly after the date hereof, the Working Teams will begin
to develop a plan to migrate the Customers to align with DIRECTV's business
rules ("Migration Plan") that includes the process to implement such plan (the
"Migration Planning"). Business rules for the Migration Plan will cover all
aspects of the standard DIRECTV customer experience, including standard DIRECTV
programming packages, pricing and offers, equipment lease rates, extended
warranty provisions, Customer upgrades, Customer acquisition costs and Customer
retention and churn minimization tactics that may, at DIRECTV's discretion and
direction, vary from the standard DIRECTV offers and rules.
(b) Pegasus Working Team members shall provide DIRECTV Working
Team members with such access, information and input as necessary for DIRECTV to
determine the most efficient approach for the transfer of Customers to DIRECTV
at the Closing or over such period of time after the Closing as directed by
DIRECTV (the "Customer Transfer"). The information to be provided pursuant to
this Section 2.2(b) shall be presented by subscriber categories established by
the Working Teams (e.g., by pricing and package type); provided, however, that,
prior to Closing (except as otherwise provided in the next sentence), such
information from PST shall not include Subscriber List information. If upon
application by DIRECTV, the Bankruptcy Court determines that Pegasus is in
breach of its obligations under this Section 2.2(b), DIRECTV shall have the
unilateral right, to the extent authorized by the Bankruptcy Court, to access
the information required by DIRECTV (including by accessing electronic
information of Pegasus maintained by or viewable by DIRECTV) to prepare the
information contemplated by this Section 2.2(b). In such event, DIRECTV agrees
not to use any information retrieved from such files for purposes of directly
marketing to any Customers prior to the Closing or otherwise in a manner
inconsistent with any orders entered by the Bankruptcy Court in the Chapter 11
Case to date. Notwithstanding anything in this Agreement to the contrary, except
as set forth in this Section 2.2(b), DIRECTV shall not be provided with
Subscriber List information prior to the Closing.
(c) The sharing of relevant information and planning phase of
the Migration Planning shall occur as soon as practicable after the date hereof,
with (i) the implementation of the Migration Plan commencing on such date after
the Implementation Date as determined by the Working Teams and (ii) the Customer
Transfer occurring on the Closing Date or such time or times after the Closing,
as designated by DIRECTV and implemented jointly by both parties.
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(d) In connection with the Migration Planning, Pegasus shall
deliver to its Customers a communication approved by DIRECTV and Pegasus,
announcing this Agreement and notifying Customers that it is anticipated that
they will have the opportunity to become DIRECTV customers in the future through
the parties' joint efforts. The communication shall be delivered as soon as
practical after the date hereof and the Working Teams shall promptly after the
date hereof coordinate the preparation of such announcement. At DIRECTV's
expense, Pegasus shall deliver additional communications to Customers, approved
by DIRECTV and Pegasus, as the Working Teams deem appropriate from time to time
to further the Migration Planning and Customer Transfer.
(e) The parties agree that Pegasus Customer service scripting,
bill stuffers, website and IVR messaging, bill statement messages and all other
Customer communications, to the extent used or made after the Implementation
Date, will be subject to the Working Teams' approval.
2.3 Customer Service Operations.
(a) Pegasus shall use commercially reasonable efforts to obtain
such consents as necessary to allow DIRECTV immediate access, after the date
hereof for planning purposes, to (i) the ADS-owned customer service facility in
Dallas, Texas (the "ADS Facility"), and (ii) documentation and information
related thereto as requested by DIRECTV and available to Pegasus (including a
copy of the ADS Facility contract, policies and procedures in place at the ADS
Facility, performance statistics, training processes and materials and IT tools
in place at the ADS Facility). Subject to (i) DIRECTV's determination to the
contrary following its review and assessment of such information and (ii) the
assumption by the Sellers in the Chapter 11 Case and assignment of the ADS
Facility contract to DIRECTV as of the Closing, the ADS Facility will remain
operating through the current contract period (expiring in December, 2004) to
assist in facilitation of the Customer Transfer and subsequent transition
activities. Within ten (10) days after the date hereof, DIRECTV shall advise
Pegasus of its determination to assume or not assume the ADS Facility contract.
(b) The Working Teams shall develop a retention plan for call
center employees, which will be funded by DIRECTV, in order to maintain
commercially reasonable call center service levels as established by the Working
Teams. If service levels prior to the Implementation Date fall below Pegasus'
current service levels or if service levels after the Implementation Date fall
below the service levels established by the Working Teams, Pegasus agrees to
cause calls received at such call centers to be directed to the Convergys call
center contracted by DIRECTV, where such calls will be handled for Pegasus'
account prior to the Closing Date. The cost to utilize the excess capacity at
the Convergys call center will be shared equally by Pegasus and DIRECTV. The
parties shall have joint management oversight of the Convergys call center with
respect to such calls, with scripts approved by Pegasus.
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(c) Pegasus will not send out WARN Act notices to its call
center employees until two (2) calendar days after the date hereof, in order to
allow the Working Teams to establish information about the call center retention
plans.
2.4 Customer Billing and Collection Activities
(a) Pegasus shall continue in the ordinary course to bill and
collect from Customers from the date hereof until the Closing. The Working Teams
shall determine the appropriate billing and remittance procedures for bills
either mailed to Customers after the Closing or mailed before Closing with
remittances due after Closing.
(b) Collection activities shall be included in the business
rules addressed in the Migration Plan provided for in Section 2.2(a) hereof.
2.5 Sales and Distribution Activities; Retention and Upgrade; Residence
Servicing Activities.
(a) As soon as practicable after the date hereof, the Working
Teams shall begin to discuss a process to handle those potential customers who
contact Pegasus to activate accounts after the Closing, including processes for
the parties to manage the activation of such potential customers as DIRECTV
customers and the installation of equipment in their residences. If Pegasus, in
its sole discretion, decides to cease activities relating to subscriber
acquisition prior to the Closing, Pegasus agrees to refer such potential
customers exclusively to DIRECTV in accordance with procedures established by
the Working Teams.
(b) As soon as practical after the date hereof, Pegasus shall
provide the Working Teams with such data as may be reasonably requested by
DIRECTV relating to the Pegasus retailers, including information regarding
territories covered, number of Customers activated by each retailer in the prior
twelve months, charge backs and such other information as reasonably requested
by DIRECTV but excluding such information that specifically identifies or allows
specific identification of, or contact with, the Pegasus retailers or any of
their Affiliates. The Working Teams shall determine the content of any letters
that shall be delivered to Pegasus retailers with respect to the transactions
contemplated by the Asset Purchase Agreement and the future relationship between
DIRECTV and the retailers. In the event that a retailer of Pegasus or any of its
Affiliates contacts DIRECTV, DIRECTV may discuss its future role, if any, and
any other matters deemed appropriate by DIRECTV with such retailer; provided,
however, that DIRECTV shall keep the Working Teams apprised generally of
contacts with Pegasus retailers relating to the establishment of future
relationships with those retailers. In addition, DIRECTV and Pegasus shall keep
the Working Teams apprised generally of material activities with respect to such
parties' retailers or their Affiliates in Pegasus's territories, but DIRECTV
shall not otherwise be limited by this Section 2.5(b).
(c) In addition, Pegasus shall promptly provide information
similar to that described in Section 2.5(b) above regarding Pegasus'
relationships with installation and equipment servicing providers, but excluding
such information that specifically identifies or allows specific identification
of, or contact with, the Pegasus installation and equipment servicing providers
or any of their Affiliates, to allow DIRECTV to assess the role, if any, that it
would like such providers to undertake.
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(d) As soon as practical after the date hereof, the Working
Teams will discuss appropriate business rules for retaining and upgrading
existing customers during the period prior to Closing. Subject to DIRECTV's
right to terminate its obligations to reimburse certain costs of Pegasus as
described in Section 3.1(b), the parties shall use commercially reasonable
efforts to implement such business rules after the Implementation Date.
2.6 Member Agreements. DIRECTV agrees that notwithstanding the actions
to terminate the Member Agreements by NRTC, and the Seamless Agreement by
DIRECTV, effective on August 31, 2004 (which termination is disputed by
Pegasus), from and after September 1, 2004 through the Closing Date or for the
period provided by Section 5.4(e), as applicable, DIRECTV will provide Pegasus
the services otherwise required to be provided by NRTC to Pegasus as if the
Member Agreements and the Seamless Agreement were still in effect (without
DIRECTV agreeing to assume any exclusivity obligations) and Pegasus shall
continue to comply with the Member Agreements and the Seamless Agreement as if
they were still in effect; provided, however, that DIRECTV does not assume any
liabilities or obligations of NRTC arising under or related to the Member
Agreements. It is expressly acknowledged and agreed that in the event the Asset
Purchase Agreement or this Agreement is terminated, nothing in this Section 2.6
shall be construed as amending or modifying the Member Agreements, or as an
assumption of the Member Agreements by DIRECTV under Section 15 thereof, and no
party will offer evidence or argument about the existence or purpose of this
Agreement in any proceeding, action, motion or contested matter before the
Bankruptcy Court or any other court relating to the Member Agreements. It is the
intent of the parties that their legal relationship return to the status quo as
of the time of the signing of this Agreement and no party's legal rights or
arguments existing prior to this Agreement will be prejudiced or altered by this
Agreement or any action taken pursuant to this Agreement.
2.7 Existing Migration Process.
(a) The parties hereto acknowledge that DIRECTV will continue to
implement a separate migration process during the term of this Agreement, to
terminate the existing Customer accounts and activate new DIRECTV accounts for
those Customers who request to become DIRECTV customers, all in accordance with
DIRECTV's interpretation of any orders entered by the Bankruptcy Court's orders
in the Chapter 11 Case to date, but without prejudice to Pegasus' right to
contest this migration process if the Asset Purchase Agreement is terminated or
the Settlement Agreement does not become effective (the "Existing Migration
Process").
(b) Unless the Working Teams determine otherwise, Pegasus agrees
to cooperate with the Existing Migration Process as follows:
(i) Without prejudice to Pegasus' rights to contest the
Existing Migration Process in the event the Asset Purchase
Agreement is terminated or the Settlement Agreement does not
become effective, Pegasus shall not prevent the deactivation, or
refuse to deactivate, any Customer who requests to transfer to
DIRECTV.
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(ii) During the term of this Agreement, Pegasus shall defer
the billing of any fees or charges related to the non-return of
DIRECTV services receiving equipment (including access cards) or
the early termination or disconnection of services, in the case
of Customers who Pegasus knows have transferred to DIRECTV.
(iii) Pegasus agrees that its communications with Customers
regarding the Existing Migration Process shall be handled in
accordance with Section 2.2(e) .
(iv) Pegasus shall comply with its obligations under Section
8.2(d) of the Asset Purchase Agreement.
(c) As soon as practical after the date hereof, the Working
Teams shall discuss a process to enable Pegasus and DIRECTV, at DIRECTV's
election, to screen Active Subscribers from any solicitations to be sent by
DIRECTV to potential new subscribers for DIRECTV services during the period
prior to Closing.
ARTICLE III
COST REIMBURSEMENT
3.1 Customer Offers Reimbursement.
(a) Subject to Section 3.1(b), DIRECTV agrees to reimburse
Pegasus for amounts actually expended or incurred by Pegasus, from and after the
date hereof and prior to the Closing Date, for: (i) new Customer acquisition
costs, including retailer sales commissions and other dealer compensation,
distributor compensation and equipment and installation subsidies and costs, but
not including advertising or similar marketing expenditures unless specifically
approved by the Working Teams, (ii) retention activities related to churn
mitigation and Customer loyalty, and (iii) equipment upgrade activities, in each
case incurred in the ordinary course of business and in accordance with Pegasus'
policies existing on the date hereof until the Working Teams have developed the
Migration Plan and thereafter as implemented in accordance with the Migration
Plan. Nothing in this Agreement shall prevent Pegasus from incurring advertising
or marketing expenditures, in its sole discretion and at its own costs.
(b) If the Working Teams have not developed and agreed upon,
within ten (10) calendar days of the date hereof, the section of the Migration
Plan that covers the funding aspects of the activities listed in (i) through
(iii) in Section 3.1(a), DIRECTV may terminate its obligations to make
reimbursements for any or all of the costs listed in Section 3.1(a) incurred
after five (5) Business Days written notice to Pegasus, and Pegasus in its
discretion may cease or reduce any activities giving rise to such costs. In
addition, if (i) DIRECTV receives notice from Sellers' that Sellers are in
breach of any representation or warranty or any covenant or agreement contained
in the Asset Purchase Agreement, (ii) Sellers are in material breach of any
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representation or warranty or any covenant or agreement contained in the Asset
Purchase Agreement, or (iii) if any Seller enters into a Covered Transaction,
DIRECTV may terminate its obligations to make reimbursements for any or all of
the costs listed in Section 3.1(a) incurred after DIRECTV provides a written
notice of such termination to Pegasus. For the avoidance of doubt DIRECTV will
not reimburse Pegasus for any or all of the costs listed in Section 3.1(a)
incurred after the date such written notice is provided by DIRECTV to Pegasus,
unless in the case of (i) and (ii) such breach is cured.
(c) In addition, DIRECTV expressly reserves the right to
terminate its obligation to reimburse Pegasus for any Customer acquisition costs
incurred by Pegasus on or after September 1, 2004, at any time upon five (5)
Business Days written notice to Pegasus, and Pegasus, in its discretion, may
cease or reduce any activities giving rise to such costs.
3.2 Migration Plan Reimbursement. Commencing on the date hereof through
Closing, DIRECTV agrees to reimburse Pegasus for (i) actual incremental out of
pocket costs incurred, as determined by the Working Teams, to implement the
Migration Plan, (ii) any reduction in pricing of Customer packages in accordance
with and consistent with the Migration Plan and (iii) any recurring monthly
Customer fees eliminated at DIRECTV's request, in each case as provided for in
the Migration Plan, without duplication of any amounts paid under Section 3.1.
3.3 Customer Conversion Reimbursement. DIRECTV agrees to reimburse
Pegasus in an amount equal to the Customer Conversion Reimbursement Amount.
3.4 Reimbursement Procedures. The Convergys call center reimbursements
provided for in Section 2.3(b) and this Article III shall (except as set forth
in Section 5.4(f)), be made at Closing, and only if the Closing occurs, in each
case in accordance with the Asset Purchase Agreement. Other than the
reimbursement paid by DIRECTV pursuant to this Article III and except as
otherwise provided in the Asset Purchase Agreement and this Agreement, DIRECTV
shall have no liability for any customer service center leases, contracts,
employee salaries, termination payments, retention bonuses or other amounts
related to the Customer offers, and Customer care and service activities
required during the term of this Agreement.
ARTICLE IV
POST-CLOSING TRANSITION
4.1 Transition Services. Pegasus hereby agrees that it shall provide
such transition services post-Closing as shall be determined by the Working
Teams to fully effectuate the Customer Transfer and post-Closing customer care,
billing and collection. Prior to the Closing, the Working Teams shall determine
(i) the nature of the services required, (ii) the post-Closing time period for
which the services shall be required (which shall in no event exceed 60 days
following the date of the Closing) (the "Transition Period"), and (iii) a good
faith estimate of all costs to be incurred with respect to such services
required. DIRECTV agrees to pay Pegasus an amount equal to the Working Teams'
estimate of such costs at the beginning of each thirty (30) day post-Closing
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period. A monthly statement shall be delivered by Pegasus to DIRECTV within
fifteen (15) days after the end of each thirty (30) day post-Closing period. If
the Working Teams estimate of such costs differs from the actual costs incurred
as provided in Pegasus' monthly statement, Pegasus or DIRECTV, as the case may
be, shall make an appropriate reconciliation payment to the other, within five
(5) Business Days after Pegasus delivers the statement to DIRECTV, of such
amount by wire transfer of immediately available funds. Any disputes pursuant to
this Section 4.1 shall be resolved pursuant to Sections 6.4 or 6.5, hereof, as
the case may be.
4.2 Incentive Fee. Pegasus employees shall be eligible to earn an
incentive fee for the prompt and successful conclusion of all aspects of the
post-Closing transition activities (including customer care, billing and
collection) (the "Incentive Fee"). The Incentive Fee shall be paid by DIRECTV to
Pegasus for payment to the Pegasus employees specified by the Working Teams,
upon completion of certain actions and criteria established by DIRECTV prior to
the Closing. The amount and time of the Incentive Fee payment shall be
determined by the Working Teams; provided, however, that notwithstanding Section
6.4, in the event of a dispute, the DIRECTV Contact Person's decision regarding
whether Incentive Fees should be paid or the amount thereof shall be final,
conclusive and binding on the parties with respect to such matters. DIRECTV
agrees to indemnify Pegasus for any liabilities and costs incurred by Pegasus in
the event (i) DIRECTV announces to Pegasus employees the actions and criteria to
be met for the Incentive Fee payment to be made, and (ii) DIRECTV does not pay
such Incentive Fee if such criteria and actions have been met.
ARTICLE V
TERMINATION
5.1 Bankruptcy Court Approval. As part of the Approval Motion, Pegasus
agrees to promptly seek approval of this Agreement (to the extent such approval
is required) with the Bankruptcy Court.
5.2 Termination of Agreement. This Agreement may be terminated as
follows:
(a) by either Pegasus or DIRECTV, if for any reason the Asset
Purchase Agreement or the Settlement Agreement is terminated;
(b) by either Pegasus or DIRECTV, if the Bankruptcy Court
determines that there has been a breach by the other party of any material
agreement or understanding contained in this Agreement and which breach,
following the receipt by the breaching party of a notice to cure such breach
from the non-breaching party, has not been cured by the tenth (10th) day
following receipt of such written notice;
(c) by DIRECTV, (i) upon receiving notice from Sellers' that
Sellers are in breach of any representation or warranty or any covenant or
agreement contained in the Asset Purchase Agreement, or (ii) if DIRECTV provides
written notice to the Sellers that Sellers are in material breach of any
representation or warranty or any covenant or agreement contained in the Asset
Purchase Agreement; or
(d) by DIRECTV, if any Seller enters into a Covered Transaction.
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5.3 Procedure Upon Termination. In the event of termination by Pegasus
or DIRECTV, or both, pursuant to Section 5.2, written notice thereof shall
forthwith be given to the other party, and this Agreement shall terminate,
without further action by Pegasus or DIRECTV. If this Agreement is validly
terminated as provided herein, each party shall re-deliver to the party
furnishing the same or destroy all documents, work papers and other material of
any other party relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof.
5.4 Effect of Termination. Notwithstanding anything in this Agreement
to the contrary, the parties hereby agree that in the event of termination of
this Agreement pursuant to Section 5.2,
(a) the parties shall retain their then existing respective
rights and obligations (if any) with respect to their relationship generally,
including with respect to Customer receivables and liabilities on a going
forward basis as of such termination, and no party will offer evidence or argue
that the existence or performance of this Agreement prior to termination created
new rights or obligations or altered the rights or obligations of the parties
existing prior to the date hereof;
(b) if the Closing occurs, then the amounts owed to Pegasus
pursuant to Sections 3.1 and 3.2 shall be calculated through the day this
Agreement was terminated, and such amounts shall be paid in accordance to the
Asset Purchase Agreement;
(c) notwithstanding the earlier termination of this Agreement,
the amounts owed to Pegasus pursuant to Sections 3.3 shall be calculated through
the Reference Date and such amounts shall be paid in accordance with the Asset
Purchase Agreement;
(d) the parties shall retain such rights and obligations
regarding the Customer information as they would have possessed absent the
execution and performance of this Agreement;
(e) unless the Asset Purchase Agreement has been terminated
pursuant to Sections 4.4(g), 4.4(h), 4.4(j) or 4.4(k) thereof, the rights and
obligations of DIRECTV and Pegasus under Section 2.6 shall continue until the
earlier of (i) the denial by the District Court of Sellers' appeal of the
Bankruptcy Court order which denied Sellers' motion for a preliminary
injunction, or (ii) forty five (45) days after the termination of the Asset
Purchase Agreement; and
(f) if the Asset Purchase Agreement has been terminated by
Sellers pursuant to Section 4.4(a), 4.4(b), 4.4(d), 4.4(e), 4.4(f) or 4.4(i)
thereof, Pegasus may offset the reimbursements to be made by DIRECTV under
Sections 3.1, 3.2 and 3.3 against the amount of Net Service Obligations allowed
by the Bankruptcy Court and actually received by DIRECTV; provided, however,
that Pegasus shall not be entitled to any reimbursement under Section 3.3 and
shall not have any right to offset such amount owed under Section 3.3 if the
Asset Purchase Agreement is terminated by Sellers pursuant to Section 4.4(a),
4.4(f) or 4.4(i), and at such time Pegasus had entered into a Covered
Transaction.
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ARTICLE VI
MISCELLANEOUS
6.1 Post-Petition Amounts Due from Pegasus to DIRECTV. Any claim that
DIRECTV may have relating to or arising out of this Agreement (including if
Pegasus breaches this Agreement) for post-Closing activities shall, to the
extent of the amount allowed, constitute allowed expenses of administration
under sections 503(b) and 507(a)(1) of the Bankruptcy Code and shall be paid to
DIRECTV as and when due.
6.2 Audit.
(a) With respect to any payments required to be made by DIRECTV
to Pegasus pursuant to this Agreement (other than Section 3.3), Pegasus shall
deliver a statement setting forth in reasonable detail the services rendered in
connection with such statement and the amount Pegasus believes it is owed.
DIRECTV will have the right to raise objections to the statement within ten (10)
days after their receipt thereof (but in no event will the Closing be delayed to
resolve any disputes), in which event Pegasus shall provide DIRECTV and its
independent auditors and agents with reasonable access, during regular business
hours, to the employees, books, records or properties of Pegasus required in
connection with DIRECTV's review of such statements.
(b) With respect to the reimbursement made by DIRECTV to Pegasus
pursuant to Section 3.3, DIRECTV shall deliver to Pegasus within three (3)
Business Days after the end of each week during the term hereof a statement
setting forth the daily Excess Migration Amount during the prior week. If the
Closing does not occur and Pegasus is entitled to receive payment pursuant to
Section 3.3, Pegasus has the right to raise objections to the calculations set
forth in the statement in a manner consistent with Section 3.2(c)(iii) of the
Asset Purchase Agreement.
(c) DIRECTV will pay the amounts stated upon presentation of
invoices upon Closing or prior to the Closing (in the case of amounts owed
pursuant to Section 2.3(b)). Any disputes pursuant to this Section 6.2 will be
resolved pursuant to Section 6.5.
6.3 Expenses. Except as otherwise provided in this Agreement, each of
Pegasus on the one hand, and DIRECTV, on the other hand, shall bear their own
expenses incurred in connection with the negotiation and execution of this
Agreement and each other agreement, document and instrument contemplated by this
Agreement and the consummation of the transactions contemplated hereby and
thereby.
6.4 Submission to Jurisdiction; Consent to Service of Process.
(a) Without limiting any party's right to appeal any order of
the Bankruptcy Court, (i) the Bankruptcy Court shall retain exclusive
jurisdiction to enforce the terms of this Agreement and to decide any claims or
disputes which may arise or result from, or be connected with, this Agreement,
any breach or default hereunder, or the transactions contemplated hereby, and
(ii) any and all proceedings related to the foregoing shall be filed and
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maintained only in the Bankruptcy Court, and the parties hereby consent to and
submit to the jurisdiction and venue of the Bankruptcy Court and shall receive
notices at such locations as indicated in Section 6.8; provided, however, that
if the Chapter 11 Case has closed or if the Bankruptcy Court elects to not
exercise its jurisdiction, the parties agree to unconditionally and irrevocably
submit to the exclusive jurisdiction of the United States District Court for the
Southern District of New York sitting in New York County or the Commercial
Division, Civil Branch of the Supreme Court of the State of New York sitting in
New York County and any appellate court from any thereof, for the resolution of
any such claim or dispute. The parties hereby irrevocably waive, to the fullest
extent permitted by applicable law, any objection which they may now or
hereafter have to the laying of venue of any such dispute brought in such court
or any defense of inconvenient forum for the maintenance of such dispute. Each
of the parties hereto agrees that a judgment in any such dispute may be enforced
in other jurisdictions by suit on the judgment or in any other manner provided
by law.
(b) Each of the parties hereto hereby consents to process being
served by any party to this Agreement in any suit, action or proceeding by
delivery of a copy thereof in accordance with the provisions of Section 6.8.
6.5 Financial Dispute. Notwithstanding anything to the contrary
contained in Section 6.4, the parties agree that in the event of a financial
dispute, such dispute will be resolved in a manner consistent with Section
3.2(e)(vi) of the Asset Purchase Agreement, in the same manner as disputes with
respect to any Net Service Obligations are resolved.
6.6 Waiver of Right to Trial by Jury. Each party to this Agreement
waives any right to trial by jury in any action, matter or proceeding regarding
this Agreement or any provision hereof.
6.7 Entire Agreement; Amendments and Waivers. This Agreement (including
the Schedules), the Asset Purchase Agreement, the Confidentiality Agreement and
the Settlement Agreement represent the entire understanding and agreement
between the parties hereto with respect to the subject matter hereof. This
Agreement can be amended, supplemented or changed, and any provision hereof can
be waived, only by any resolution of dispute involving the payment of money or
written instrument making specific reference to this Agreement signed by the
party against whom enforcement of any such amendment, supplement, modification
or waiver is sought; provided, further, that if such party against whom
enforcement is sought is Pegasus or if Pegasus is giving any written notice
under this Agreement, the written instrument must also be signed by a
representative of the Creditors' Committee. No action taken pursuant to this
Agreement shall be deemed to constitute a waiver by the party taking such action
of compliance with any representation, warranty, covenant or agreement contained
herein. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a further or continuing waiver of
such breach or as a waiver of any other or subsequent breach. No failure on the
part of any party to exercise, and no delay in exercising, any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of such right, power or remedy by such party preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
15
6.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and performed in such State, irrespective of and without regard for its
conflicts of law principles, as to all matters, including matters of validity,
construction, effect, enforceability, performance and remedies.
6.9 Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed given (a) when delivered personally by
hand (with written confirmation of receipt by the addressee thereof or any other
person at such address ), (b) when sent by facsimile (with confirmation of
transmission) or (c) one Business Day following the day sent by overnight
courier (with written confirmation of receipt by the addressee thereof or any
other person at such address), in each case at the following addresses and
facsimile numbers (or to such other address or facsimile number as a party may
have specified by notice given to the other party pursuant to this provision):
If to DIRECTV:
DIRECTV, Inc.
2230 East Imperial Highway
El Segundo, CA 90245
Facsimile: 310-964-4991
Attention: Dan Fawcett
Executive Vice President, General Counsel and Secretary
With a copy to:
The DIRECTV Group, Inc.
2250 East Imperial Highway
El Segundo, California 90245
Facsimile: 310-964-0838
Attention: Larry D. Hunter
Executive Vice President, General Counsel and Secretary
With a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Facsimile: (212) 310-8007
Attention: Frederick Green, Esq.
Michael Lubowitz, Esq.
If to Pegasus, to:
225 City Line Avenue
Bala Cynwyd, PA 19004
Facsimile: 610-934-7072
Attention: Scott Blank, Senior Vice President and General Counsel
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With a copy to:
Sidley Austin Brown & Wood LLP
1501 K.Street, NW
Washington, DC 20005
Facsimile: 202 736 8711
Attention: Thomas H. Yancey
With a copy to:
Akin Gump Strauss Hauer & Feld, LLP
590 Madison Avenue
New York, NY 10022
Facsimile: (212)872-1002
Attention: Daniel Golden, Esq.
David Botter, Esq.
6.10 Severability. If any term or other provision of this Agreement is
invalid, illegal, or incapable of being enforced by any law or public policy,
all other terms or provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic and legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal, or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
6.11 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns and, additionally with respect to Pegasus, shall be binding
upon any chapter 11 or 7 trustee appointed or elected for Pegasus and shall not
be discharged by any plan of reorganization or liquidation that may be confirmed
in the Chapter 11 Case, the conversion of such case to Chapter 7, or the
dismissal of any such case. The terms of any plan submitted by Pegasus to the
Bankruptcy Court for confirmation shall not be in conflict with, supersede,
abrogate, nullify, modify or restrict the terms of this Agreement and the rights
of DIRECTV hereunder, or in any way prevent or interfere with the consummation
or performance of the transactions contemplated by this Agreement, including,
without limitation, any transaction that is contemplated by or approved pursuant
to the order of the Bankruptcy Court approving this Agreement. Nothing in this
Agreement shall create or be deemed to create any third party beneficiary rights
in any Person not a party to this Agreement. No assignment of this Agreement or
of any rights or obligations hereunder may be made by Pegasus or DIRECTV (by
operation of law or otherwise) without the prior written consent of the other
parties hereto and any attempted assignment without the required consents shall
be void; provided, however, that Pegasus may assign its rights to receive
payments pursuant to this Agreement to a liquidating trust. No assignment of any
obligations hereunder shall relieve the parties hereto of any such obligations.
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6.12 Non-Recourse. No past, present or future director, officer,
employee, incorporator or stockholder of Pegasus or DIRECTV shall have any
liability for any obligations or liabilities of Pegasus or DIRECTV under this
Agreement of or for any claim based on, in respect of, or by reason of, the
transactions contemplated hereby and thereby.
6.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
6.14 Reservation of Rights. Notwithstanding anything in this Agreement,
it is acknowledged and understood that there exist disputes between the parties
regarding the Purchased Assets (as defined in the Asset Purchase Agreement),
including disputes about ownership, rights to use, access and what is in fact an
asset or right of Pegasus or DIRECTV, including with respect to Subscriber
Information. If this Agreement is terminated, nothing in this Agreement shall be
deemed to be a waiver of any claim or defense relating to such assets or rights
or an admission with respect to any claim or defense relating to such
pre-existing disputes or other matters. If the Closing does occur, the
Settlement Agreement shall be effective in accordance with its terms.
6.15 No Survival. In the event that this Agreement is validly
terminated in accordance with Section 5.2, then each of the parties shall be
relieved of its duties and obligations arising under this Agreement after the
date of such termination and such termination shall be without liability to any
of the parties; provided, however, that the obligations of the parties set forth
in Sections 2.3(b), 2.6, 5.3, 5.4, Articles IV and VI shall survive such
termination and shall be enforceable hereunder.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first written above.
PEGASUS SATELLITE TELEVISION, INC.
By: /s/ Ted S. Lodge
------------------------------------------
Name: Ted S. Lodge
Title: President and Chief Operating
Officer
DIRECTV, INC.
By: /s/ Michael W. Palkovic
------------------------------------------
Name: Michael W. Palkovic
Title: Executive VP and Chief Financial
Officer