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
________________________________________________________
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TABLE OF CONTENTS
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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
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Schedule
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1.1
Customer Conversion Reimbursement
2.1(a) Working Teams
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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).
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"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
