UNITED STATES DISTRICT COURTFOR THE EASTERN DISTRICT OF PENNSYLVANI A

MARK MADDEN, and JEFF K. RAMSEY,individually and on behalf of all others similarl ysituated, : CASE NO. 2:05-cv-05868 (ABB)

Plaintiffs, FIRST AMENDED CLASSACTION COMPLAINT FO R

v . : VIOLATION OF THEFEDERAL SECURITIES LAWS

MARSHALL W. PAGON, JOSEPH W.POOLER, JR., KASIN SMITH and PEGASUSCOMMUNICATIONS CORPORATION, CLASS ACTION

Defendants . : JURY TRIAL DEMANDED

Plaintiffs, by their counsel, for this Class Action Complaint hereby allege the following

upon personal knowledge as to themselves and their own acts and upon information and belief a s

to all other matters, based upon an investigation by their counsel, including, among othe r

sources, a review of publicly filed court documents , and news releases of Defendant Pegasus

Communications Corporation ("Pegasus" or the "Company"), interviews of witnesses wit h

personal knowledge of the facts stated herein and a review of relevant public filings made b y

Pegasus and its wholly-owned subsidiary Peg asus Satellite Communications , Inc. ("PSC") with

the Securities and Exchange Commission (the "SEC") .

Introduction and Overview

1 . This is a class action brought on behalf of those persons (the "Class") who acquired th e

stock of Pegasus and/or any subsidiary during the period from November 8, 2000 through Jun e

2, 2004 (the "Class Period") . Plaintiffs allege violations against all defendants of Sections 10b

and 20(a) of the Securities Exchange Act of 1934 and Rule 1Ob-5 promulgated thereunder by the

SEC .

2 . During the Class Period, defendants engaged in a scheme to inflate the price of Pegasu s

securities by issuing materially misleading and false statements about the nature, source an d

amount of their Digital Broadcast Satellite ("DBS") subscriber growth and subscriber account

totals. Defendants failed to disclose that a material portion of Pegasus' "internal" subscribe r

growth and the subscriber account totals included non-paying and suspended accounts that woul d

not have otherwise been counted, but for the Defendants' knowing or reckless practice o f

manually overriding the applicable billing systems . As a result of counting these valueles s

accounts, defendants misled investors as to the prospects for Pegasus' business and caused the

Company's stock to be artificially inflated, thereby damaging the Plaintiffs during the Clas s

Period.

3 . Reported subscriber numbers were a key measure of Pegasus' success in the eyes of

investors . Increasing subscriber numbers would cause increases in the Company's stock price

and decreasing subscriber numbers would cause a decrease in the stock price . Thus, defendants

fraudulently increased Pegasus' reported subscriber account growth and subscriber account

totals .

4. Subsequently on April 3, 2002, Pegasus and PSC announced that they were changing th e

manner in which they calculate subscriber accounts and as a result would exclude certain

accounts whose service has been suspended for a prolonged period of time .

5 . When investors learned that actual number of paying subscribers was lower than

reported, Pegasus' stock price dropped significantly, damaging investors .

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6. On January 11, 2006, the SEC issued a cease and desist order against Pegasus' forme r

wholly owned subsidiari es , PSC and PM&C, finding that PSC and PM&C had violated § l Ob an d

Rule I Ob-5, among other provisions of the securities laws, in fraudulently inflating the subscribe r

account growth and totals during the relevant period (the "SEC Order")

7. During the same Class Period and extending through May 14, 2004, defendants als o

engaged in another scheme to inflate the price of Pegasus' securities through the non-disclosure

of material adverse information concerning the Company . The public filings and business

publications of Pegasus claimed that PSC had exclusive dist ribution rights for DirecTV satellite

television programming services within defined territories across 41 states . Such rights were the

centerpiece of Pegasus' and PSC's business plan .

8 . The desc ription of PSC 's exclusive distribution rights was unqualified and unequivocal ,

but specifically disclosed that such rights could be terminated prematurely only for cause in th e

event that a party breached the exclusive distribution agreement .

9 . Pegasus failed to disclose that such exclusive distribution rights could be terminate d

prematurely without cause and without the authorization and consent of Pegasus or PSC as earl y

as 2004 . Thus, a substantial risk going to the heart of Pegasus' business went undisclosed .

10. In reliance on such statements and omissions from November 8, 2000 until June 2, 2004 ,

Plaintiff and the Class purchased Pegasus securities . Unbeknownst to Plaintiff and the Class, the

statements of Pegasus regarding PSC's exclusive distribution rights were materially misleading .

As news of this adverse information was disseminated into the market, Pegasus stock price

declined . On June 2, 2004, Pegasus and PSC announced that PSC's exclusive rights to distribute

DirecTV services had been terminated without cause . That same day, PSC filed a voluntary

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petition for bankruptcy . Consequently, the securities purchased by Plaintiff and the Class durin g

the Class Period plummeted in value, causing millions of dollars in damages to investors .

JURISDICTION AND VENUE

11 . This action arises under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934

(the "Exchange Act"), 15 U.S .C. § 78j(b) and 78t, and Rule lOb-5, 17 C.F.R. § 240.10b-5

promulgated thereunder.

12. The Court has jurisdiction over the subject matter of this action pursu ant to Section 27 of

the Exchange Act, 15 U .S.C. § 78aa and 28 U.S .C. § 1331 .

13 . Venue is proper in this District pursuant to Section 27 of the Exchange Act and 28 U.S.C.

§ 1391(b) . Many of the wrongs alleged in this complaint occurred in substantial part in this

District , including the preparation and dissemination of mate rially false and misleading

statements to the investing public . Pegasus maintains its principal places of business in this

district in Bala Cynwyd, Pennsylvania.

14. In connection with the acts , transactions and conduct alleged herein, Defendants , directly

and indirectly, used the means and instrumentalities of interstate commerce , including the United

States mails, interstate telephone communications and the facilities of national securitie s

exchanges and markets .

THE PARTIES

15. Lead Plaintiffs Mark Madden and Jeff Ramsey purchased shares of Pegasus stock durin g

the Class Period and were damaged thereby. Their certifications have been previously filed with

the Court and are incorporated by reference herein .

16. Defendant Pegasus Communication Corporation ("Pegasus ," "PCC" or the "Company")

is a Delaware corporation with its principle place of business in Bala Cynwyd, Pennsylvania . At

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all material times, its principal assets consisted of the stock of its wholly owned subsidiaries PS C

and PM&C, and its principal operating business was the dist ribution of DirecTV programming .

Pegasus was a controlling person of PSC and of PM&C . Pegasus in its current form was a

product of a reorganization of the Company completed on February 22, 2001 . On February 22,

2001, Pegasus adopted a holding comp any structure through a corporate reorganization. In the

reorganization, all of the common and preferred stock of Pegasus' subsidiary PSC (then name d

Pegasus Communications Corporation) were exchanged for identical common stock of the ne w

holding company, which assumed the named Pegasus Communications Corporation . In the

reorganization, PSC became a direct subsidiary of Pegasus, which adopted the name previously

held by PSC . Prior and up to the February 2001 reorgan ization, PSC's (then known as PCC)

stock was traded on the NASDAQ . After the reorg anization , PCC's stock became the trade d

stock on the NASDAQ and PSC' stock was not publicly traded . Thus, PSC (formerly PCC )

shareholders became Pegasus Shareholders after the reorganization . '

17. Defendant Marshall W. Pagon ("Pagon") is an individual who, upon information an d

belief, resides in Haverford, Pennsylvania . Pagon serves, and has served at all relevant times, as

Chairman and Chief Executive Officer of Pegasus , PSC and PM&C . Pagon effectively controls

Pegasus by virtue of his ownership of all shares of Pegasus Class B common stock b y

intermediate affiliates controlled by Pagon . Pagon also controlled PSC and PM&C insofar as

Pegasus owned all of PSC's and PM&C's outstanding shares . As CEO and Chairman of the

board of each company, Pagon signed the fiscal year 2000, 2001, 2002 and 2003 Form 10-K' s

1 PSC's form 10-Q filed on November 14, 2000 stated in relevant part : "On September 15, 2000, Pegasus' Board ofDirectors approved a reorganization of the current corporate structure . Under the new structure, a new publicly-heldparent holding company ("New PCC") will be formed and will assume the identity and capital stock structure of theexisting Pegasus Communications Corporation ("Old PCC") . New PCC will issue common and preferred securitiesidentical in terms, conditions and amounts as that present with Old PCC . The ownership interests and rights ofcommon and preferred shareholders of New PCC will be exactly the same in New PCC as in Old PCC . Debtsecurities held by Old PCC will remain with Old PCC . . . . In the reorganization, Old PCC will become a directwholly-owned subsidiary of New PCC and will be renamed Pegasus Satellite Communications, Inc . ("Satellite") . "

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for Pegasus, PSC and PM&C, filed on or about April 2, 2001, April 15, 2002 . March 30, 2003

and March 15, 2004, respectively. Pagon also signed the certifications required under Sections

906 and 302 of the Sarbanes-Oxley Act ("SOA") in his capacity as CEO for each quarterly and

annual period since the enactment of SOA in July 2002 .

18 . Defendant Joseph W. Pooler, Jr . ("Pooler") is an individual who, upon information and

belief, resides in Philadelphia, Pennsylvania . Pooler served as Chief Financial Officer of Pegasus

until June 8, 2005 and served as Senior Vice President of Finance of Pegasus from February

2003 to January 2004. Pooler also served as Pegasus' Vice President of Finance and Controller

from January 2001 until February 2003 . Pooler served as Vice President and Controller of PS C

from December 1999 through January 2001 . Pooler was a controlling person of both Pegasus,

PM&C and PSC. Pooler signed the fiscal year 2001, 2002 and 2003 Form 10-K's for Pegasus,

PM&C and PSC as senior vice president of each company . Pooler also served as the Vice

President of Finance and Controller of PM&C from April 2002 through the end of the Class

Period . Pooler signed the certifications required under Sections 906 and 302 of the Sarbanes-

Oxley Act ("SOA") in his capacity as Principal Accounting Officer for each quarterly and annual

period since the enactment of SOA in July 2002 .

19. Defendant Kasin Smith ("Smith") is an individual who, upon information and belief,

resides in Philadelphia, Pennsylvania . Smith served as Chief Financial Officer, Treasurer and

Executive Vice President of Finance and Information Technology of Pegasus and PSC from at

least 1999 until April 2002 . Smith was a controlling person of Pegasus, PSC and PM&C . Smith

signed the 2001, Form 10-K's and each of the Form 10-Q's during the Period from November 8,

2000 through December 2001 for Pegasus, PSC and PM&C as Vice President, CFO, and as

principal financial and principal accounting officer of each company.

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20. Pagon, Smith and Pooler are referred to herein as the "Individual Defendants ." Because

of the Individual Defendants' positions with Pegasus, PSC and PM&C, they had access to the

adverse undisclosed information about the Company's business, operations, via access to internal

corporate documents (including the DBS Agreement, and the Member Agreement, as well as

information related to the improper methods used in reporting subscribers detailed herein),

conversations and connections with other corporate officers and employees, and attorneys,

attendance at management and Board of Directors meetings and committees thereof and via

reports and other information provided to them in connection therewith.

21 . Each of the above officers of Pegasus, by virtue of their high-level positions with the

Company, directly participated in the management of the Company, was directly involved in the

day-to-day operations of the Company at the highest levels and was privy to confidential

proprietary information concerning the Company and its business, and operations as allege d

herein. Said defendants were involved in drafting, producing, reviewing and/or disseminating

the false and misleading statements and information alleged herein, were aware, or recklessly

disregarded, that the false and misleading statements were being issued regarding the Company,

and approved or ratified these statements, in violation of the federal securities laws .

22. As officers and controlling persons of a publicly-held company whose common stock

was, and is, registered with the SEC pursuant to the Exchange Act, and was traded on the

NASDAQ market, and governed by the provisions of the federal securities laws, the defendants

each had a duty to disseminate promptly, accurate and truthful information with respect to the

Company's business condition and operations, as well as, present and future business prospects,

and to correct any previously-issued statements that had become materially misleading or untrue,

so that the market price of the Company's publicly-traded securities would be based upo n

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truthful and accurate information . The Individual Defendants' misrepresentations and omissions

during the Class Period violated these specific requirements and obligations .

23 . The Individual Defendants participated in the drafting, preparation, and/or approval o f

the various public and shareholder and investor reports and other communications complained o f

herein and were aware of, or recklessly disregarded, the misstatements contained therein an d

omissions there from, and were aware of their materially false and misleading nature . Because

of their Board membership and/or executive and managerial positions with Pegasus, each of the

defendants had access to the adverse, undisclosed information about Pegasus's busines s

prospects and financial condition and performance as particularized herein and knew (or

recklessly disregarded) that these adverse facts rendered the positive representations made by o r

about Pegasus and its business issued or adopted by the Company materially false and

misleading.

24. Non-Party PSC is a wholly owned subsidiary of Pegasus through which Pegasus

conducted its direct broadcast satellite television businesses . PSC in its current form was created

when Pegasus completed a reorganization in February 2001 . PSC held itself out as "the largest

independent distributor of DirecTV programming with in excess of 1 .1 million subscribers at

December 31, 2003 with the exclusive right to distribute DirecTV services to approximately 8 . 4

million rural households in specified territories within 41 states ." On June 2, 2004, after it s

exclusive distribution rights were terminated, PSC filed a petition for protection under Chapte r

11 of the United States Bankruptcy Court for the District of Maine .

25 . Non-party Pegasus Media & Communications, Inc . ("PM&C") was a Delaware

corporation with corporate headquarters in Bala Cynwyd, PA, which together with its

subsidiaries owned and operated broadcast television systems in exclusive territories within 4 1

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states . At all relevant times PM&C was a wholly owned subsidiary of Pegasus or its

predecessor, PSC . During the period from November 8, 2000 through June 2, 2004 PM&C filed

quarterly and annual reports with the SEC on a purely voluntary basis, as its stock was not

publicly registered or traded . During the period from November 8, 2000 through April 2002,

Kasin Smith served as Vice President and Chief Financial Officer (Principal Financial and

Accounting Officer) and Marshall Pagon served as Chairman of the Board and Chief Executive

Officer of PM&C .

26 . Non-party National Rural Telecommunications Cooperative ("NRTC") is a member

owned, member controlled organization . NRTC's members consist of approximately nine

hundred rural electric cooperatives and telephone utilities located in forty-eight states serving 30

million rural Americans . NRTC, pursuant to the DBS Agreement with DirecTV, offered its

members television programming and other services provided by DirecTV . Members sold and

distributed DBS services to subscribers in their territories entering into separate Subscriber

Agreements for this purpose . PSC was far and away the largest member of NRTC .

27. Non-party DirecTV is a company that provides direct broadcast satellite services .

DirecTV, through two broadcast centers in the United States, transmits digitally compressed

programming to satellites which beam programming and information directly to miniature

satellite dishes installed in homes and businesses across the United States .

CLASS ACTION ALLEGATION S

28. Plaintiffs bring this action as a class action pursuant to Federal Rules of Civil Procedure

23(a) and (b)(3) on behalf of the Class defined above . Excluded from the Class are the

Defendants, members of the immediate family of each of the Individual Defendants, Pegasus,

any subsidiary or affiliate of Pegasus or any of their subsidiaries or affiliates, or any entity in

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which any excluded person has a controlling interest, as well as the legal representatives, heirs,

successors and assigns of any excluded person .

29. While the exact number of Class members is unknown and can only be ascertained

through appropriate discovery, Plaintiffs believe there are at least one thousand of them . As of

March 10, 2003 , Pegasus had approximately 497 stockholders of record . This number

underestimates the number of Class Members because most Class Members held their shares in

street name (the name of the broker holding the certificates) . In addition, many Class Members

sold their shares prior to the end of the Class Period and were not reflected as holders of record .

Joinder of all Class members is thus impracticable . Furthermore, because the damages suffere d

by the individual Class members may be relatively small, the expense and burden of individual

litigation make it impossible for the Class members individually to redress the wrongs clone to

them.

30. Common questions of law and fact exist as to all members of the Class and predominat e

over any questions affecting solely individual members . Among the questions of law and fac t

common to the Class are :

a) whether the federal securities laws were violated by Defendants' acts asalleged herein ;

b) whether the Individual Defendants are "control persons" within themeaning of the federal securities laws ;

c) whether Pegasus and the Individual Defendants misrepresented andomitted to state material facts necessary in order to make the statementsmade, in the light of the circumstances under which they were made, notmisleading during the Class Period ;

d) whether the market prices of Pegasus securities during the Class Periodwere artificially inflated as a result of the conduct alleged in thiscomplaint ; and

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e) whether Plaintiffs and the other members of the Class have sustaineddamages and, if so, the proper measure of those damages .

31 . Plaintiffs' claims are typical of the claims of other Class members . Plaintiffs and the

other Class members sustained damages arising out of Defendants' wrongful conduct .

32 . Plaintiffs will fairly and adequately protect the interests of the members of the Class and

have retained counsel competent and experienced in class actions and securities litigation .

Plaintiffs have no interests antagonistic to or in conflict with those of the Class .

33 . Few members of the class have an interest in individually controlling a separate actio n

with similar allegations and claims ; it is desirable to concentrate the litigation of all similar

claims to Plaintiffs' in this jurisdiction ; and no difficulties are likely to be encountered. in the

management of a class action . A class action, therefore, is superior to other available method s

for the fair and efficient adjudication of Plaintiffs' claims .

34. Pursuant to Fed. R. Civ. P. 23(g), counsel for Plaintiffs will fairly and adequately

represent the interests of the class. Counsel has investigated the claims set forth in thi s

complaint, are experienced in class actions, in particular those alleging violations of the federa l

securities laws, will commit the necessary resources to prosecuting the case effectively, and are

knowledgeable about the law under which they assert claims on Plaintiffs' behalf .

35 . The names and addresses of purchasers of Pegasus stock are available from Pegasus '

transfer agent . Notice can be provided to such record owners via first class mail using technique

and form of notice similar to those customarily used in class actions .

FACTUAL BACKGROUND

36. On April 10, 1992, the NRTC and DirecTV entered into an agreement, the Direct

Broadcasting Satellite Distribution Agreement ("the DBS Agreement "), whereby DirecTV

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agreed to provide NRTC with ce rtain exclusive rights to distribute DirecTV's premium

programming and services in NRTC's area of service .

37. Following the execution of the DBS Agreement, NRTC entered into separate

"NRTC/Member Agreements for Marketing and Dist ribution of Direct Broadcast Service"

("Member Agreements") with its members and affiliates , such as PSC, pursuant to which NRT C

passed through DirecTV programming and distribution se rvices to its members .

38. NRTC and PSC entered into a Member Agreement on July 23, 1993. The Member

Agreement provides in part, "NRTC grants [PSC] the exclusive right to market and sell DB S

Serv ices transmitted over the HCO Frequencies to Committed Member Residents "

39. At the time DirecTV began providing satellite programming se rv ices in 1994, PSC , and it s

affiliates, were the largest of the o riginal DirecTV independent distributors , with a DirecTV

exclusive territory of approximately 500,000 homes in four New England states . In October

1996, PSC began acquiring exclusive distribution rights from other NRTC Patrons . Between

October 1996 and February 2001, the companies claimed to have in excess of 1 .1 million

subscribers and the exclusive right to distribute DirecTV services to approximately 8 .4 million

rural households in specific territories within 41 states, representing a market penetration of 13 %

of the rural households in such territories . PSC's DirecTV distribution operations accounted for a

substantial majority of the revenue and assets of Pegasus .

40. During the Class Period, Pegasus' ability to distribute DirecTV programming services

was dependent upon the continued vitality of (1) the DBS Agreement between the NRTC an d

Hughes Electronics Corporation, DirecTV's parent, and (2) the Member Agreement betwee n

Pegasus and NRTC .

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41 . During the Class Period, DirecTV, Pegasus, the NRTC, and a plaintiff class of other

NRTC members were involved in several litigations concerning the DBS Agreement and the

Member Agreements . In relevant part, disputes arose as to the duration of the initial term of the

DBS Agreement and DirecTV's obligations after the expiration of the initial term . The DBS an d

Member Agreements both did not initially have a date certain concerning the expiration of the

initial term, but were instead contingent upon the lives of ce rtain disputed satellites . DirecTV

had maintained that the DBS and Member Agreements ' initial term was measured by the life of

the first DirecTV satellite launched - DBS-1 , and not the orbital lives of the other DirecTV

satellites that were launched in the 101 west longitude location .

42. Despite numerous disclosures Pegasus made in their pe riodic reports with the SEC during

the Class Pe riod conce rning the risks and consequent effects the litigations would have on th e

DBS and Member Agreements and the inherent business risks of the Company, Pegasus never

disclosed the central risk to its business : that the NRTC could terminate the Member Agreement

without cause or consent of Pegasus when, as in here , DirecTV and the NRTC voluntarily chose

to end the DBS Agreement. It was within this universe of facts , in which Defendants issued

false and misleading statements to the market . 2

SUMMARY OF MISLEADING STATEMENTS DURING THE CLASS PERIO D

2 During much of the Class Period, Pegasus' and PSC's SEC filings were in all relevant aspects herein essentiallyidentical . Due to Pegasus' February 2001 reorganization, Pegasus and PSC were the only entities required to fileperiodic reports with the SEC . As such, Plaintiffs will only cite from Pegasus's (after 2001) and PSC's (prior to2001) SEC filings as appropriate .

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43 . All of Pegasus' SEC filings, including Forms 10-K and 10-Q filed during the Class Period

were materially false and misleading because Pegasus' statements concerning potential risk

factors and conditions that might lead to the termination of the Member Agreement, wer e

materially false and misleading as they omitted to state that NRTC could unilaterally terminate

the Member Agreement without cause or the consent of Pegasus, upon the mutual agreement o f

NRTC and DirecTV to terminate the DBS Agreement .

44 . In addition all of Pegasus' SEC filings, including Forms 10-K and 10-Q filed for the

period beginning November 8, 2000 through April 3, 2002 were materially false and misleading

because Pegasus materially misstated the nature, source, and amount of its DBS subscribe r

growth and subscriber count totals .

SPECIFIC MISLEADING STATEMENTS

45. On November 8, 2000 Pegasus issued a press release announcing its third quarter results

and for the nine months ended September 30, 2000 . The release was titled "Subscribers Up

108% as Compared to 1999" and "New Subscriber Additions Up 13% for the Quarter . The

release stated in part :

Subscriber Data :

(in thousands)

Subscribers -beginningof perio d

Newsubscribers (gross)

Primestarconversions

Churn

New subscribers(net)

Nine Month sThree Months Ended Ended

September 30, September 30 ,2000 1999 Change 2000 1999 Change

1,202 540 123% 702 435 610/6

98 87 13% 217 206 5°/ 0

27 35 -23% 77 44 75%

-48 -38 26% -112 -87 29 0%

77 84 -8% 182 163 12%

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Acquiredsubscribers 33 7 371% 428 33 11970/0

Subscribers -end of period 1,312 631 108% 1,312 631 108%)

Per Subscriber Data

SAC per grosssubscriberAddition $440 .00 $319.00 $ 0.38 $379.00 $356 .00 6%,

Monthly revenu eper subscriber $ 43 .41 $ 44.80 -3% $ 43.33 $ 43 .33 0°h

MonthlycontributionMargin pe rsubscriber $ 15.12 $ 15 .54 -3% $ 14.85 $ 15.09 -2%,

46. On November 14, 2000, PSC filed a materially false and misleading Form 10-Q for the

quarterly period ending September 30, 2000. PSC's 10-Q states in relevant part :

DBS Business

**********

Additionally, we added 247,100 subscribers during the last 12 months throughinternal growth . At September 30, 2000, we had exclusive DIRECTV distributionrights to 7.4 million households and 1 .3 mi ll ion subscribers compared to 4 .8 millionhouseholds and 630,900 subscribers at September 30, 1999 . Our subscriber penetrationwithin territories in which we have exclusive DIRECTV distribution rights increased to17.8% at September 30, 2000 from 13 .0% at September 30, 1999 . During the threemonths ended September 30, 2000, we added 77,300 subscribers through internalgrowth . . . . (emphasis added) PSC 11/14/00 10-Q pp. 19-20 .

47 . Pegasus' statements in the November 8, 2000 press release and November 14, 2000 10-Q

concerning its subscriber growth and totals are materially false and misleading. From 1999

through 2001, PSC manually implemented certain adjustments to inflate the number of active

subscribers to its DBS service as more fully set forth in the SEC Order which is incorporated by

reference herein .

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48. The SEC found that PSC and PM&C's actions violated Section 17(a) of the Securities

Act, Section 10(b) of the Securities Exchange Act and Rule 10(b)-5 promulgated there under .

49. Since Pegasus was the publicly traded holding company for its operating businesses, PSC

and PM&C, the misrepresentation of subscriber counts at the operating level directly caused a

misrepresentation of the subscriber count for Pegasus and inflated the value of Pegasus publicly

traded securities .

50. Pagon, Pooler and Smith held the same senior executive positions at PSC and PM :&C as

they held at Pegasus, demonstrating Pagon, Pooler and Smith's actual control over PSC and

PM&C and their culpable participation in the wrongdoing at PSC and PM&C .

51 . On February 15, 2001, Pegasus issued a press release announcing fourth-quarter results

and for the fiscal year-end 2000. The release, headlined : "Subscribers Up 100% as Compared to

1999 . . . Gross Subscriber Additions Up 117% for the Quarter ." stated in pertinent part :

Three Months Ended Year EndedDecembe r

December 31, 31 ,Subscriber Data 2000 1999 Change 2000 1999 Change

Subscribers -beginningof period 1,312 631 108% 702 435 61 %

Gross subscribe radditions 126 58 117% 343 264 30%

Churn -53 -24 121% -165 -111 49%

Net subscriberadditions 73 34 115% 178 153 16%

Primestarconversions -- 31 -100% 77 75 3%

Acquired subscribers 18 6 200% 446 39 1,044%

Subscribers - endof period 1,403 702 100% 1,403 702 100%

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Per SubscriberData :

SAC per grosssubscriberaddition

Monthly revenueper subscriber

$462 $330 40%

$48 .10 $45.37 6%

$404 $349 16%

$44.80 $43.94 2%

Monthly pre-marketingcash flow persubscriber $14.50 $12.81 13% $13.46 $13 .07 3%

52. Pegasus' February 15, 2001 press release is materially false and misleading because i t

misstates the nature , source , and amount of the Company 's subsc riber growth and subscriber

account totals as set forth and evidenced in ¶ 47 , above .

53 . On April 2, 2001 PSC filed a materially false and misleading Form 10-K for the fisca l

year ended December 31, 20003, which states in relevant part :

Revenues increased $295 .7 million to $582.1 million principally due to the virtualdoubling of our number of subscribers to 1.4 mil lion . . . . . In 2000 we acquired theexclusive DIRECTV distribution rights to an additional 2.6 mil lion households, ofwhich 1 .9 million came from the Golden Sky acquisition . At December 31, 2000, we hadexclusive DIRECTV distribution rights to 7 .4 million households.

In 2000 , we added 255,000 net subscribers through internal growth compared to netinternal growth of 228,000 in 1999 . Our growth has increased our subscriberpenetration to 18 .9% from 14 .4% at December 31, 1999 . Because of the increasednumber of households available to us within our territories, we believe that the prospectsfor continued internal growth are favorable . (emphasis added) PSC 4/2/01 10-K p . 29 .

The agreements between the National Rural Telecommunications Cooperative andparticipating National Rural Telecommunications Cooperative members andaffiliates terminate when the DIRECTV satellites are removed from their orbitallocation at the end of their lives . Our agreements with the National RuralTelecommunications Cooperative may also be terminated as follows :

3 This Form 10-K was incorporated into PCC's Prospectus filed with the SEC, dated April 18, 2000, throughPegasus' filing of a Form 424B3 on April 19, 2001 .

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o If the agreement between DIRECTV and the National Rural TelecommunicationsCooperative is terminated because of a breach by DIRECTV , the National RuralTelecommunications Cooperative may terminate its agreements with us , but the NationalRural Telecommunications Cooperative will be responsible for paying to us our pro rataportion of any refunds that the National Rural Telecommunications Cooperative receivesfrom DIRECTV .

o If we fail to make any payment due to the National Rural TelecommunicationsCooperative or otherwise breach a material ob ligation of our agreements with theNational Rural Telecommunications Cooperative, the National RuralTelecommunications Cooperative may terminate our agreement with the National RuralTelecommunications Cooperative in addition to exercising other rights and remediesagainst us .

o If the National Rural Telecommunications Cooperative's agreement withDIRECTV is terminated because of a breach by the National RuralTelecommunications Cooperative, DIRECTV is obligated to continue to provideDIRECTV services to Pegasus by assuming the National Rural TelecommunicationsCooperative's rights and obligations under the National Rural TelecommunicationsCooperative's agreement with DIRECTV or under a new agreement containingsubstantially the same terms and conditions as the National Rural TelecommunicationsCooperative's agreement with DIRECTV . (emphasis added) PSC 4/2/01 10-K pp. 12-13 .

As a result of the outcome of this litigation, we may or may not be able to continue inthe DIRECTV business after the initial term of our agreement with the NationalRural Telecommunications Cooperative. (emphasis added) PSC 4/2/01 10-K p . 18 .

54. Pegasus ' April 2 , 2001 10-K is materially false and misleading because it misstates the

nature, source, and amount of the Company' s subscriber growth and subscriber account totals a s

set forth and evidenced in ¶ 47, above .

55 . The April 2, 2001 10-K was false and misleading because it failed to disclose that the

DBS Agreement at ¶18 .02 permitted NRTC and DirecTV to amend the DBS Agreement and

hence terminate it, upon the written agreement of the NRTC and DirecTV. The DBS Agreement

at ¶18 .09 specifically stated that no other parties had third party beneficiary rights in the DBS

Agreement . Thus, DirecTV and NRTC could terminate the DBS Agreement by its terms and

none of the Members, including Pegasus, had any right as third party beneficiaries to prevent

such termination .

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56 . Moreover the April 2, 2001 10-K is also false and misleading because Pegasus failed t o

disclose accurately the various ways in which its right to distribute DBS service might be

terminated . Pegasus represented that its Member Agreement with the NRTC terminated when

certain DirecTV satellites were removed from orbit or upon breach of the DBS or Member

Agreements . Pegasus, however failed to disclose the most material and most risky provision for

termination : that the Member Agreement could be terminated without cause or consent o f

Pegasus when, as here, DirecTV and the NRTC voluntarily chose to end the DBS Agreement, a s

evidenced by ¶13 of the Member Agreement dated June 24, 1993, which states in relevant part :

TERMINATION OF [DBSJ Agreement : In the event the [DBS] Agreement is terminated . . . .NRTC may terminate their [Member Agreement with Pegasus] and neither Pa rty shall have anyfurther obligations regarding the other . . . . Member Agreement ¶ 13 dated June 24, 1993 .

57. Additionally, Pegasus ' 10-K states that depending on the outcome of the pending

litigation, it may not be able to continue with the DirecTV at the expiration of the initial term

(which was to end at the orbital life of certain satellite(s)), the Company, however, misled the

market by failing to disclose that, outside of a breach, it could also lose DirecTV distributio n

rights during the initial term without cause or consent of Pegasus, if the NRTC and DirecT V

agreed to do so .

58. On May 10, 2001 Pegasus issued a press release announcing its first quarter results an d

for the three months ended March 31, 2001 . The release, headlined : "Subscribers Up 80%

Compared to 2000 . . . Gross Subscriber Additions Up 120% for the Quarter" stated in part :

Subscriber Data :(in thousands ) Three Months Ended

March 31 ,Subscribers - 2001 2000 Changebeginningof period 1,403 702 100%

19

Newsubscribers (gross) 110 50 120%

Primestarconversions 0 29 -100%

Churn 74 29 155%

New subscribers(net) 36 21 71%

Acquiredsubscribers 1 50 -98%

Subscribers -end of period 1,440 802 80%

Per Subscribe rData

SAC per grosssubscriber addition $ 491 .00 $ 321 .00 53%

Monthly revenu eper subscriber $ 48 .48 $ 43.52 11%

Monthlycontributionmargin persubscriber $ 14.04 $ 12.71 10%

59. Pegasus' May 10, 2001 press release is materially false and misleading because it

misstates the nature, source, and amount of the Company's subscriber growth and subscriber

account totals as set forth and evidenced in ¶ 47, above .

60. On May 17, 2001 PCC filed a materially false and misleading Form 10-Q for the quarter

ended March 31, 2001, which states in relevant part :

DBS Busines s

Revenues more than doubled, with an increase of $110 .0 million to $205 .8 million,principally due to an increase of 637,100 subscribers in the last 12 months to1,439,500 at March 31, 2001 . Of this subscriber increase . . . . 241,000 were frominternal growth. . . . At March 31, 2001, we had exclusive DIRECTV distributionrights to 7.5 million households . Our sales and marketing efforts have increased ourpenetration within our territories to 19 .3% at March 31, 2001 from 15 .1% at March 31,2000 .

20

Because of the increased number of households available to us within our territories thatare not yet our subscribers, we believe that the prospects for continued subscriber growthare favorable . (emphasis added) PCC 5/17/01 10-Q p . 15; PSC 5/17/01 10-Q p . 13 .

61 . Pegasus' May 17, 2001 Form 10-Q is materially false and misleading because it misstates

the nature, source, and amount of the Company's subscriber growth and subscriber count totals

as set forth and evidenced in ¶ 47, above .

62 . On August 9, 2001 Pegasus issued a press release announcing its second quarter results

and for the six months ended June 31, 2001 . The release stated in part :

Three Months EndedJune 31 ,

2001 2000Per Subscriber Data

Monthly revenueper subscriber

Six Months EndedJune 31 ,

2001 2000

(ARPU) $47.60 $43.11 $48.04 $43.28

SAC per grosssubscriber

addition $461.00 $347.00 $476.00 $334.00

Net subscribe radditions 21 34 57 55

Acquired subscriber 0 345 1 395

Subscribers - endof period 1,461 1,202 1,461 1,202

63. Pegasus' August 9, 2001 press release is materially false and misleading because it

misstates the nature, source, and amount of the Company's subscriber growth and subscriber

count totals as set forth and evidenced in ¶ 47, above .

64. On August 14, 2001 PCC filed a materially false and misleading Forrn 10-Q for the

quarter ended June 30, 2001, which states in relevant part :

21

DBS Busines s

Revenues increased $71 .6 million to $206 .0 million for the three months ended andincreased $181 .6 million to $411 .9 million for the six months ended .

Subscribers were 1 ,460,700 at June 30, 2001 compared to 1,201,900 at June 30, 2000 .This increase was principally due to internal growth . At June 30 , 2001, we hadexclusive DIRECTV distribution rights to 7.5 million households . Our sales andmarketing efforts have increased our penetration within our territories to 19 .5% at June30, 2001 from 16.8% at June 30, 2000 . Average revenue per subscriber was $47.60 and$48.04 for the three and six months ended June 30, 2001, respectively, compared to$43.11 and $43 .28 for the three and six months ended June 30, 2000, respectively .

*********

Because of the increased number of households available to us within our territories thatare not yet our subscribers, we believe that the prospects for continued subscriber growthare favorable . (emphasis added) PCC 8/14/01 10-Q p . 16; PSC 8/16/01 10-Q p . 16 .

65 . Pegasus' Form 10-Q for the quarter ended June 30, 2001 is materially false an d

misleading because it misstates the nature, source, and amount of the Company's subscriber

growth and subscriber count totals as set forth and evidenced in ¶ 47, above .

66. On November 1, 2001 Pegasus issued a press release announcing its third quarter result s

and for the nine months ended September 3, 2001 . The release stated in part :

Nine MonthsThree Months Ended EndedSept ,30, Sept 30,

2001 2000 2001 2000Per Subscriber Data

Monthly revenueper subscribe r(ARPU) $46.76 $43.41 $47.61 $43 .33

SAC per grosssubscriber

addition $310.00 $440.00 $421 .00 $379 .00

Net subscriberadditions 36 77 93 182

Acquired subscriber 0 32 1 427

Subscribers - end

22

of period 1,496 1,312 1,496 1,312

67. Pegasus' November 1, 2001 press release is materially false and misleading because i t

misstates the nature, source, and amount of the Company's subscriber growth and subscriber

account totals as set forth and evidenced in ¶ 47 above .

68. On November 5, 2001 Pegasus filed a materially false and misleading Form 10-Q for th e

quarter ended September 30, 2001, which states in relevant part :

DBS Busines s

Revenues increased $47 .2 million to $206.8 million for the three months ended andincreased $228 .8 million to $618 .6 million for the nine months ended . . . .

Number of subscribers were 1,496,000 at September 30, 2001 compared to 1,312,000

at September 30, 2000 . This increase was substantially due to internal growth . AtSeptember 30, 2001, we had exclusive DIRECTV distribution rights toapproximately 7.5 mill ion households . Our sales and marketing efforts have increasedour penetration within our territories to approximately 20 .0% at September 30, 2001 from17 .8% at September 30, 2000 .

Because of the number of households available to us within our territories that are not yetour subscribers, we believe that the prospects for continued subscriber growth arefavorable . (emphasis added) PCC 11/5/01 10-Q, p . 18; PSC 11/14/01 10-Q p . 16 .

69 . Pegasus' November 5, 2001 Form 10-Q is materially false and misleading because i t

misstates the nature, source, and amount of the Company's subscriber growth and totals as se t

forth and evidenced in ¶ 47, above .

70. On February 19, 2002 Pegasus issued a press release announcing its fourth quarter results

and for twelve months ended December 31, 2001 . The release stated in part :

ThreeMonthsEnded Year EndedDec 31, Dec 31 ,2001 2000 2001 2000

Per SubscriberData

23

Monthly revenueper subscriber(ARPU)

SAC per grosssubscriber

addition

Net subscriberadditions

Acquiredsubscribe r

Subscribers - endof period

$48.59 $48.1 0

$155.00 $462 .00

23 73

0 1 8

1,519 1,403

$47.86 $44 .80

$360.00 $404.00

116 255

1 446

1,519 1,403

71 . Pegasus' February 19, 2002 press release is materially false and misleading because i t

misstates the nature, source, and amount of the Company's subscriber growth and totals as se t

forth and evidenced in ¶ 47, above .

72 . On April 3, 2002 Pegasus filed a materially false and misleading Form 10-K for the fisca l

year ended December 2001, which states in relevant part :

Pegasus Communications is :

o the largest independent distributor of DIRECTV programming withapproximately 1 .5 million subscribers at December 31, 2001 . PCC 4/3/02 10-K p . 1 ; seealso PSC 10-K 4/9/02 p .

We have recently undertaken a review of the method by which we publicly report thenumber of our subscribers . Our pub licly reported subscriber counts in the past haveincluded a number of accounts whose service has been suspended for prolongedperiods of time. Because we believe it would improve our public reporting and internalanalyses, we are changing our method of reporting subscribers, beginning with the firstquarter of 2002 so as to exclude these accounts . We estimate that if we had institutedthis change at December 31, 2001, we would have reported approximately 1 .4million subscribers . (emphasis added) PCC 4/3/02 10-K p . 34; see also PSC 4/9/02 10-K p. 30 .

24

The agreements between the National Rural Telecommunications Cooperative andparticipating National Rural Telecommunications Cooperative members andaffiliates terminate when the DirecTV satellites are removed from their orbitallocation at the end of their lives. Our agreements with the National RuralTelecommunications Cooperative may also be terminated as follows :

o If the agreement between DirecTV and the National Rural Telecommunications

Cooperative is terminated because of a breach by DirecTV, the National RuralTelecommunications Cooperative may terminate its agreements with us, but the NationalRural Telecommunications Cooperative will be responsible for paying to us our pro rataportion of any refunds that the National Rural Telecommunications Cooperative receivesfrom DirecTV .

o If we fail to make any payment due to the National Rural Telecommunications

Cooperative or otherwise breach a material ob ligation of our agreements with theNational Rural Telecommunications Cooperative, the National RuralTelecommunications Cooperative may terminate our agreement with the National RuralTelecommunications Cooperative in addition to exercising other rights and remediesagainst us .

o If the National Rural Telecommunications Cooperative's agreement with DirecTV isterminated because of a breach by the National Rural TelecommunicationsCooperative, DirecTV is obligated to continue to provide DIRECTV programming toPegasus by assuming the National Rural Telecommunications Cooperative's rights andobligations under the National Rural Telecommunications Cooperative's agreement withDirecTV or under a new agreement containing substantially the same terms andconditions as the National Rural Telecommunications Cooperative's agreement withDirecTV. (emphasis added) PCC 4/3/02 10-K p . 12; see also PSC 10-K 4/9/0 2

Based upon the outcome of this litigation, we may or may not be able to continueoffering DIRECTV products after the initial term of our agreement with theNational Rural Telecommunications Cooperative . As a result, the outcome of thislitigation could have a material adverse effect on our DBS business . Furthermore, if wecan continue to offer DIRECTV products after the initial term of our agreement with theNational Rural Telecommunications Cooperative, we cannot predict what it will cost usto do so. (emphasis added) PCC 4/3/02 10-K p . 20; see also PSC 4/9/02 10- K

25

73 . The statement that Pegasus was simply changing its method for reporting subscriber

account totals was false and misleading because the April 3, 2002 Form 10-K failed to disclos e

that all of the prior subscriber account totals and growth were inflated as a result of the knowin g

or reckless misconduct of the Company's employees-in that the subscriber count totals wer e

manipulated upwards through Pegasus' employees' overriding the subscriber billing system to

include suspended and non-paying or "dead" accounts as current subscribers --- which occurre d

from at least 1999 through fiscal year-end 2001 as set forth and evidenced in ¶ 47, above . Based

on the 10-K, the one-time adjustment would have reduced the subscriber count for the fiscal year

ended 2001 by 100,000 subscribers or about 6 .7% .

74. The April 3, 2002 Form 10-K is also independently mate rially false and misleading

because Pegasus failed to disclose that the Member Agreement was terminable without cause o r

consent of Pegasus as set forth and evidenced in ¶¶ 55-57, above .

75 . As a result of Pegasus ' 10-K disclosure concerning subscriber counts, on April 3, 2002 ,

Pegasus Stock fell 13 .2% to $12 . 80 from a previous day close of $14.75 . Pegasus stock

continued its downward slide on this information as it closed at $9 .75 and $8.85 on April 5 and

6, 2002, respectively.

76. On April 5, 2002, Pegasus announced that Kasin Smith, who had served as Pegasus',

PSC's and PM&C's CFO, and Executive Vice President of Finance and Information Technology

had resigned from the Company. When queried by investors and analysts as to why Mr. Smith

had resigned, Pegasus management stated that Mr. Smith had left to pursue other business

opportunities .

77. On March 31, 2003, Pegasus filed a materially false and misleading Form 10-K for the

fiscal year ended December 2002, which states in part :

26

The agreements between the NRTC and participating NRTC members and affiliatesterminate when the DIRECTV sate ll ites are removed from their orbital location atthe end of their lives. Our agreements with the NRTC may also be terminated asfollows :

o If the agreement between DIRECTV, Inc . and the NRTC is terminatedbecause of a breach by DIRECTV, Inc ., the NRTC may terminate its agreements withus, but the NRTC will be responsible for paying to us our pro rata port ion of any refundsthat the NRTC receives from DIRECTV, Inc .

o If we fail to make any payment due to the NRTC or otherwise breach amaterial obligation of our agreements with the NRTC, the NRTC may terminate ouragreement with the NRTC in addition to exercising other rights and remedies against us .

o If the NRTC 's agreement with DIRECTV, Inc . is terminated because of abreach by the NRTC, DIRECTV, Inc. is obligated to continue to provide DIRECTVprogramming to us by assuming the NRTC's rights and obligations under the NRTC'sagreement with DIRECTV, Inc . or under a new agreement containing substantially thesame terms and conditions as the NRTC's agreement with DIRECTV, Inc . PCC 3/31/0310-K p. 9 .

Based upon the outcome of this litigation, we may or may not be able to continueoffering DIRECTV products after the initial term of our agreement with the NRTC .As a result, the outcome of this litigation could have a material adverse effect on ourDBS business . PCC 3/31/03 10-K p. 17 .

78. Pegasus' March 31, 2003 Form 10-K was materially false and misleading because it failed

to disclose that the Member Agreement could be terminated without cause or consent of Pegasu s

as set forth and evidenced in ¶¶ 55-57, above .

27

79. On August 13, 2003, Pegasus filed a mate rially false and misleading Form 8-K with the

SEC which described a proposed settlement of the class action litigation between NRTC and

DirecTV, in which all NRTC members agreed to settle the ongoing litigations with DirecTV ,

except for Pegasus which refused to participate in the settlement . The 8-K attached two press

releases that were disseminated through the national media wires . Both press releases wer e

dated August 11, 2003 . The first press release was issued by DirecTV an d announced the terms

of a proposed settlement of the pending litigation between DirecTV and the NRTC . The

proposed settlement had set the expiration of the initial term of the DBS Agreement at the late r

of either the end of the useful life of the DBS-1 satellite or June 30, 2008 . (PCC 8/13/03 8-K ex.

99 .3) . The second press release was issued by Pegasus, which states in relevant part :

DIRECTV, Inc . (NYSE: GMH) today announced that it has entered into a preliminarysettlement agreement with the National Rural Telecommunications Cooperative (NRTC)regarding issues that are currently the subject of litigation among DIRECTV, NRTC anda Class of other NRTC DBS participants in Federal Court. While Pegasus is not a party tothe proposed settlement, all NRTC DBS participants, including Pegasus, are beingoffered the opportunity to participate in the proposed settlement .

Pegasus' rights, including its exclusive right to distribute DIRECTV programming inits rural territories, cannot be altered, amended or modified by DIRECTV or NRTCwithout Pegasus' agreement . Pegasus' claims against DIRECTV, also pending in FederalCourt, including claims regarding the length of term, the right to renew on substantiallythe same terms, premium services and launch fees are not resolved by the proposedsettlement . Pegasus' claims will be resolved in Court if Pegasus and DIRECTV do notagree to a bi-lateral settlement . (emphasis added) PCC 8/13/03 8-K ex . 99.4 .

80. Pegasus ' August 13, 2003 Form 8-K and its corresponding press release incorporated

therein are misleading and false because they essentially state that the Member Agreement

(Pegasus ' rights to distribute DBS serv ices) could "not be altered , amended modified, by

DIRECTV or NRTC without Pegasus ' agreement" when in fact the Pegasus Member Agreement

could be terminated without cause or consent of Pegasus pursu ant to ¶13 of the Member

Agreement, as set forth in IT 55-57, above .

28

81 . Pegasus had refused to go along with the settlement that DirecTV reached with the other

NRTC members, demanding better terms. Shortly thereafter, Pegasus and DirecTV began

mediation discussions in an effort to resolve the dispute concerning the DBS Agreement .

82. On February 5, 2004, after the market close, DirecTV issued a press release announcing

that it had terminated all mediation discussions with Pegasus related to the parties' pending

litigation and further stated in part :

If Pegasus does not elect to participate in the [class action] settlement, DIRECTVbelieves that its obligations to provide DBS services to the NRTC for sale byPegasus will end by June 30, 2008 , if not sooner . (emphasis added)

83 . As a result of DirecTV' s announcement, Pegasus stock opened down 37% at $13 .05 on

February 6, 2004 from a previous close of $20 . 825 . Pegasus stock closed for the day down 32%

at $14.15 . This press release ominously stated that Pegasus ' exclusive rights might very wel l

terminate prior to June 2008 for reasons not related to the life of the satellite DBS-1 . This

disclosure implied to investors that Pegasus' rights to distribute DirecTV services might

terminate prior to 2008 for reasons not previously disclosed publicly, including throug h

unilateral termination by DirecTV .

84. On March 15, 2004, Pegasus filed a materially false and misleading Form 10-K for th e

fiscal year ended December 2003, which states in relevant part :

We are the largest independent distributor of DirecTV programming with in excessof 1 .1 million subscribers at December 31, 2003 with the exclusive right to distributeDirecTV services to approximately 8 .4 million rural households in specified territorieswithin 41 states . cite

The agreements between the NRTC and participating NRTC members and affiliatesterminate when the DIRECTV satellites are removed from their orbital location atthe end of their lives. Our agreements with the NRTC may also be terminated asfollows :

29

o If the agreement between DIRECTV, Inc. and the NRTC is

terminated because of a breach by DIRECTV, Inc ., the NRTC may terminate itsagreements with us, but the NRTC will be responsible for paying to us our pro rataportion of any refunds that the NRTC receives from DIRECTV, Inc .

o If we fail to make any payment due to the NRTC or otherwisebreach a material obligation of our agreements with the NRTC, the NRTC mayterminate our agreement with the NRTC in addition to exercising other rights andremedies against us .

o If the NRTC' s agreement with DIRECTV, Inc . is terminated because of abreach by the NRTC, DIRECTV , Inc. is obligated to continue to provide DIRECTVprogramming to us by assuming the NRTC' s rights and obligations under the NRTC'sagreement with DIRECTV , Inc. or under a new agreement containing substantially thesame terms and conditions as the NRTC 's agreement with DIRECTV, Inc . PCC 3/15/04

10-K p. 11 .

. . . . If DIRECTV, Inc . were to prevail in its position on the right of first refusal and/or weare not able to participate in the right of first refusal, we may not have the opportunityto provide DIRECTV services after the initial term of our agreements with theNRTC. 3/15/04 10-K p . 28 .

85 . Pegasus' March 15, 2004 Form 10-K was materially false and misleading because it failed

to disclose that the Member Agreement could be terminated without cause or consent of Pegasu s

as evidenced and set forth in ¶¶55-57, above.

86. Then on May 13, 2004, before market open, Pegasus issued a materially false an d

misleading press release , which states :

BALA CYNWYD, PA -- (MARKET WIRE) -- 05/13/2004 -- The website of the UnitedStates District Court, Central District of California, today reported that Judge LourdesBaird has dismissed DIRECTV's claim against Pegasus Satellite Television, Inc ., asubsidiary of Pegasus Communications Corporation (NASDAQ : PGTV), that Pegasus'right to exclusive distribution of DIRECTV services will expire when DIRECTV's firstsatellite, DBS-1, is removed from service . Pegasus believes that the term of its right toexclusive distribution of DIRECTV services is tied to DIRECTV satell ites expectedto continue in service until 2016 or beyond . The website also reported that Judge Bairdhas dismissed Pegasus' claims against DIRECTV thereby terminating further proceedingsbetween DIRECTV and Pegasus before the District Court . Pegasus will have furthercomment when Judge Baird's final order is released in its entirety .

30

87. The May 13, 2004 press release is false and misleading because it conveys to the marke t

that Pegasus is entitled to distribute DirecTV services going forward until 2016, when in fact th e

distribution rights could be terminated without cause or the consent of Pegasus as set forth i n

¶155-57 above .

88 . The May 13, 2004 press release, issued before the market opened, caused Pegasus Stock

to be artificially inflated . Pegasus stock opened the day at $11 .15 up 29% from the previous

close of $8.645. Pegasus stock eventually closed up 14 .7% at $9 .915 .

89. After the market close on May 13, 2004 DirecTV issued a press release announcing that

that the U.S. District Court had ruled that Pegasus had no rights under the DBS Agreement an d

the "court confirmed that `DIRECTV and NRTC can modify their agreement at anytime in

writing ."' DirecTV added that it had no direct obligation to Pegasus and DIRECTV' s obligation

to NRTC to provide services for sale to Pegasus ends by June 30 , 2008, at the latest . DirecTV

added that : "Pegasus' suggestion that it has rights to distribute DIRECTV programming beyond

the date when DIRECTV has to provide services to NRTC is not only untrue, it makes no sense . "

90. The May 13, 2004 press release issued by DirecTV after the market close, cause d

Pegasus' stock to fall . On May 14, 2004 Pegasus stock closed down 27% at $7 .22, down from

the previous close of $9.915 .

91 . On June 2, 2004 Pegasus announced in a press release that they received a notice from the

NRTC that the Member Agreement had been terminated pursuant to the NRTC's voluntary

agreement with DirecTV . Later that day, Pegasus' operating subsidiaries filed for bankruptcy

protection . Pegasus' stock declined 4% after these announcements .

Pegasus SEC Filings Omitted to State Material Fact s

31

92. All of Pegasus ' Form 10-Ks and 10-Qs from the beginning of the Class Pe riod up to Apri l

3, 2002 contained statements concerning the Company' s subsc riber growth and totals . However,

Pegasus failed to disclose that its subscriber account growth and totals were misleading becaus e

the subscriber account growth and totals included accounts that were suspended, non-paying, and

inactive . Subscriber account growth and totals are the key metrics used by investors an d

investment professionals in assessing the securities value of companies such as Pegasus .

93. All of Pegasus' Form 10-Ks and 10-Qs during the entire Class Period were replete with

references to Pegasus' exclusive rights to distribute DirecTV services and the importance o f

those rights to the continued operational success of Pegasus' business . In Management' s

Discussion and Analysis of Financial Condition and Results of Operation contained in Pegasus '

Form 10-Qs, Pegasus stated that "as a dist ributor of DirecTV, we may be adversely affected by

any material adverse changes in the assets, financial condition, programming, technologica l

capabilities or services of DirecTV, Inc ." The risk factor section of Pegasus ' Form 10-Ks also

identified several adverse business risks related to Pegasus' exclusive distribution of DirecTV

programming which were contingent upon the operation of DirecTV and beyond the control of

Pegasus . Such risks included potential equipment failure by DirecTV, potential delays t o

DirecTV in the launching of the satellites , potential failure by DirecTV to provide key Pegasus

markets with local programming, and potentially unpopular programming .

94. The Pegasus Form 10-Ks and 10-Qs, however, failed to disclose the more fundamental

and material risk that Pegasus could lose all of its rights to distribute DirecTV programmin g

without cause and without its authorization and consent by agreement between NRTC and

DirecTV. In short, defendants failed to disclose that Pegasus' entire business plan was vulnerable

to termination without cause by third parties wholly outside Pegasus' control .

32

95. Pegasus' Form 10-Ks purported to disclose the circumstances concerning the potentia l

termination of distribution rights . According to the disclosure, termination of distribution right s

would occur "when the DirecTV satellites were removed from their orbital location at the end o f

their lives." Further, the Form 10-Ks disclosed that termination could occur earlier for cause i f

DirecTV, NRTC or Pegasus breached the relevant dist ribution agreements . The Pegasus Form

10-Ks, however, failed to disclose other, much more material circumstances regardin g

termination of Pegasus' distribution rights. Specifically, the 10-Ks failed to disclose that

Pegasus' distribution rights could be terminated without cause and without its authorization or

consent before DirecTV satellites were removed from their orbital location or before the end of

the satellites useful lives.

96. The Pegasus Form 10-Ks and 10-Qs during the Class Period disclosed litigation pendin g

between the NRTC and DirecTV and between Pegasus and DirecTV regarding the duration of

the DBS Agreement. According to the disclosure, DirecTV advocated limiting exclusive

distribution rights to as short a duration as possible . DirecTV contended in the litigation that the

DBS distribution agreement would expire when the useful life of the existing satellite carryin g

the DirecTV signal expired . Pegasus and NRTC contended that the duration of the DB S

Agreement was extended beyond the useful life of the existing satellite to include the useful life

of additional satellites operating in the same orbital location . The 2003 Form 10-K disclosed that

a settlement was reached between DirecTV and NRTC extending the termination date of th e

DBS Agreement to at least June 30, 2008 and, at the election of a member, providing a n

extension of distribution rights to June 30, 2011 . (Neither Pegasus, nor PSC was a party to the

settlement) . The 2003 Form 10-K failed to disclose the known circumstances under which the

DBS Agreement might be terminated prior to the initial term for reasons other than cause arisin g

33

from a breach by one of the parties .

97 . In fact, Pegasus actually misrepresented in its August 13, 2003 8-K that its "rights ,

including its exclusive right to distribute DIRECTV programming in its rural territories , cannot

be altered , amended or modified by DIRECTV or NRTC without Pegasus' agreement ." '

98. PSC filed its 2003 Form 10-Ks and 10-Qs on approximately the same dates as the Pegasu s

Form 10-Ks and 10-Qs during the Class Period . The PSC SEC filings contained substantially the

same representations concerning its exclusive rights under the DBS Distribution Agreement an d

the litigation with DirecTV as more fully set forth in the preceding paragraphs above .

THE SEC ORDER

99 . On January 11, 2006 the SEC issued a Cease-and-Desist Order against PSC pursuant t o

Section 8A of the Securities Act and Section 21C of the Exchange Act .4 As part of the Order,

the SEC made the followings findings of fact .

(a) PSC billed their customers through a billing system maintained by a

telecommunications cooperative. The system generated subscriber statistics that wer e

used to prepare reports . The system used ce rtain criteria to determine which accounts

would be considered active and included in the subscriber statistics and which

accounts would be considered dropped, or "churned," and excluded subscriber

statistics. Under this system a customer bill would was generated one day after

activation and was payable 21 days thereafter . The system automatically cut-off and

marked churned accounts that were overdue by 54 days . They system also churne d

accounts with a zero balance that were not receiving services . SEC Order p .3 .

4 The SEC Order was against PSC and PM&C .

34

(b) During at least 1999-2001, PSC and PM&C implemented certain adjustments t o

inflate the number of active subscribers . Personnel associated with PSC overrode

features of the billing system that would have deemed certain accounts to be inactiv e

and churned, and thus not counted . SEC Order p . 3 .

(c) PSC did not disclose during the period that their subscriber growth and totals set fort h

in its periodic filings included these "no-core" accounts that were being counted as a

result of PM&C and PSC's procedures set forth above . Id. at pp. 3-4 .

(d) The SEC noted that "[s]tock analysts and public investors typically focused o n

subscriber numbers as one of the most important performance metrics for a compan y

operating a satellite television business ." Id. at p . 4 .

100. Consequently, the SEC determined that PSC and PM&C violated the antifraud provision s

of Section 10(b) of the Exchange Act and Rule 1Ob-5 promulgated thereunder, as well as 17(a)

of the Securities Act for issuing false and misleading financial statements and press release s

during the Class Period. The SEC also found that PSC and PM&C violated the reportin g

provisions of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rule 112b-

20, 13a-1, 13a-13, 13b2-1 thereunder . Id. at p . 5 .

DEFENDANTS ACTED WITH SCIENTER

101 . Each of the Defendants had full knowledge that the subscriber account growth and totals ,

set forth in the Company's quarterly and annual reports and press releases were inaccurate as th e

applicable billing systems were manually manipulated to count subscribers that were inactive o r

suspended, and who would not, and should not, have otherwise been counted.

35

102 . Each of the Defendants had full knowledge that the exclusivity rights to distribut e

DirecTV could at any time be subject to termination without cause during the initial term of the

DBS agreement . Each was familiar with the material terms of the DBS Distribution Agreemen t

and NRTC Member Agreement and each was involved and knowledgeable conce rn ing the

dispute with DirecTV. Defendant Pagon was intimately involved in overseeing the litigatio n

with DirecTV and had complete access to the relevant agreements from which he could gain

knowledge of this adverse material information . Furthermore, the defendants knowingly faile d

to report that such rights were subject to termination without cause in their quarterly and annua l

SEC filings during the Class Period .

103 . Defendants issued the press release on or about August 13, 2003 stating that "Pegasus'

rights, including its exclusive right to distribute DIRECTV programming in its rural territories, cannot be

altered, amended or modified by DIRECTV or NRTC without Pegasus' agreement ." This statement was

in direct contradiction to ¶13 of the Member Agreement which states that if NRTC can . unilaterally

terminate the Member Agreement with cause, if the DBS Agreement is terminated . This shows

Defendants knowing concealment of the truth concerning the possibility that its right to distribute

DirecTV services could be terminated at any time by agreement of DirecTV and NRTC .

PROOF OF PLAINTIFF'S RELIANCE

104. Plaintiffs and members of the Class reasonably relied on the misleading statements se t

forth above in purchasing Pegasus Stock during the Class Period .

105. Plaintiffs intend to employ two separate and alternative presumptions of reliance i n

demonstrating that Class Members have reasonably relied on the misleading SEC filings an d

press releases in purchasing shares of Pegasus stock during the Class Period .

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Applicability Of Affiliated Ute Presumption Of Reliance

106. Neither Plaintiff nor the Class need prove reliance - either individually or as a class -

because under the circumstances of this case, involving primarily a failure to disclose, positive

proof of reliance is not a prerequisite to recovery, pursuant to ruling of the United States

Supreme Court in Affiliated Ute Citizens of Utah v. United States, 406 U.S . 128 ; 92 S . Ct . 1456;

31 L. Ed. 2d 741 ; 1972 U.S. LEXIS 163 ; Fed. Sec. (1972) . All that is necessary is that the facts

withheld be material in the sense that a reasonable investor might have considered the m

important in the making of this decision . This complaint, as it relates to the termination of

Pegasus' rights to distribute DBS Services, is based primarily on defendants' non-disclosure of

the material fact that Pegasus faced the risk that it could have its distribution rights for DirecTV

terminated at any time and without cause prior to the end of the initial term of the agreement .

Applicability Of Presumption Of Reliance : Fraud-On-The -Market Doctrine

107. In the alternative, Plaintiff will rely, in part, upon the presumption of reliance established

by the fraud-on-the-market doctrine in that :

a. Defendants made misleading public statements or failed to disclose materia l

facts during the Class Period ;

b. the omissions and misleading statements were material ;

c . the securities of the Company traded in an efficient market ;

d. the misleading statements and omissions alleged would tend to induce a

reasonable investor to misjudge the value of the Company's securities ; and

e. Plaintiff and members of the Class purchased their Pegasus securities between

the time defendants failed to disclose or misrepresented material facts and the

time the true facts were disclosed, without knowledge of the omitted facts or

misleading statements .

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108 . At all relevant times , the market for Pegasus ' securities was an efficient market for the

following reasons, among others :

(a) Pegasus ' stock met the requirements for listing , and was listed and actively traded

on the NASDAQ, an efficient and automated market . During the class period on

average approximately four hundred seventy five thousand shares of Pegasus stoc k

were traded on a weekly basis (after discounting volume by 50% for potentia l

double counting of market maker trades) . The discounted average weekly volum e

as a percentage of outstanding shares exceeded 9 .5%, permitting a very strong

presumption that Pegasus shares were traded in an efficient market .

(b) As a regulated issuer, Pegasus filed periodic public reports with the SEC and the

NASDAQ and/or NASD ;

(c) Pegasus regularly communicated with public investors via established marke t

communication mechanisms, including through regular disseminations of pres s

releases on the national circuits of major newswire services and through other wide-

ranging public disclosures, such as communications with the financial press and

other similar reporting services ;

(d) Pegasus' stock price reacted quickly in response to material news about th e

Company;

(e) During the Class Period, Pegasus was eligible to file, and did in fact file ,

registration statements on Form S-3 with the SEC ;

(f) More than ten well-known third party stock analysts issued reports on Pegasu s

during the Class Period, including Salomon Smith Barney, Bear Stearns, :Banc of

America, Lehman Brothers, Credit Suisse First Boston, CE Unterberg Towbin ,

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Morgan Stanley, Deutsche Banc, Merrill Lynch, UBS Warburg, Ladenburg

Thalmann and CIBC World Markets ; and

(g) More than fifteen firms acted as market makers in Pegasus stock during the Clas s

Period .

109. As a result of the foregoing, the market for Pegasus' securities promptly digested current

information regarding Pegasus from all publicly available sources and reflected such informatio n

in Pegasus 's stock price . Under these circumstances, all purchasers of Pegasus's securities during

the Class Period suffered similar injury through their purchase of Pegasus's securities a t

artificially inflated prices and a presumption of reliance applies .

NO STATUTORY SAFE HARBOR

110. The statutory safe harbor providing for forward -looking statements under ce rtain

circumstances does not apply to any of the false statements pleaded in this complaint, becaus e

none of the statements pleaded herein was identified as "forward-looking" when made. Nor did

meaningful cautionary statements identifying important factors that could cause actual results t o

differ materially from those in the statements accompany those statements . To the extent that the

statutory safe harbor does apply to any statements pleaded herein and those statements ar e

deemed to be forward-looking, Defendants are liable for those false forward-looking statements ,

because at the time each of those statements were made the speaker actually knew the forward-

looking statement was false and/or the statement was authorized and/or approved by a n

executive officer of the Company, who actually knew that those statements were false whe n

made .

DEFENDANTS' CONDUCT CAUSED DAMAGE TO INVESTOR S

111 . Plaintiff and the members of the Class paid an inflated price for the Pegasus shares the

39

purchased during the Class Period because the market price of the stock was artificially inflate d

as a result of the above-described misleading statements and omissions, causing Plaintiff and the

Class to suffer damages in an amount to be proved at trial .

112 . On April 3, 2002, when Pegasus disclosed that it was adjusting its subsc riber count to

exclude suspended and inactive accounts, Pegasus stock fell 13 .2% to $12.80 from a previou s

day close of $14 .75 . Pegasus stock continued its downward slide on this information as it close d

at $9 .75 and $8 .85 on April 5 and 6, 2002, dropping another 24% and 9% respectively.

113 . The April 3-5, 2002 stock drop was caused by Defendants fraud and directly damaged

Class members . Investors typically valued Pegasus stock and the shares of comparable cabl e

television companies based on the historic subscriber growth, the number of current subscriber s

and projections for future subscriber growth . When Pegasus changed its subscriber account

methods to eliminate 9% of its subscriber base, investors decreased their estimate of the value o f

Pegasus stock based on the lower current subscriber base, lower historic subscriber growth an d

lower projected subscriber totals .

114. On February 5, 2004, when DirecTV stated in a press release stating : "If Pegasus does not

elect to pa rticipate in the [class action] settlement , DIRECTV believes that its obligations to

provide DBS services to the NRTC for sale by Pegasus will end by June 30, 2008, if no t

sooner .", Pegasus stock immediately and substantially declined in value almost 33% . Thus, the

disclosure by DirecTV for the first time that it might unilaterally effect the termination o f

Pegasus' DBS distribution rights prior to 2008, caused Pegasus' stock to drop substantially .

115 . After the market close on May 13, 2004, DirecTV issued a press release , announcing that

the U.S . District Court had ruled that Pegasus had no rights under the DBS Agreement and th e

"court confirmed that `DIRECTV and NRTC can modify their agreement at anytime in

40

writing."' DirecTV added that it had no direct obligation to Pegasus and DIRECT V's obligation

to NRTC to provide services for sale to Pegasus ends by June 30 , 2008, at the latest . DirecTV

also stated that : "Pegasus' suggestion that it has rights to distribute DIRECTV programming

beyond the date when DIRECTV has to provide services to NRTC is not only untrue, it make s

no sense ." As a result of this fact, which relates directly to the facts that Pegasus had concealed

(namely that NRTC could unilaterally terminate the Member Agreement , if DirecTV and NRT C

mutually agreed to terminate the DBS Agreement), Pegasus' stock dropped 27% and continued

to fall further over the next few days .

116. On June 2, 2004, when Pegasus disclosed that DirecTV had unilaterally terminate d

Pegasus' exclusive distribution rights and that PSC had filed for bankruptcy, Pegasus' stoc k

declined another 4 .7%.

COUNT IAGAINST ALL DEFENDANTS FOR VIOLATION OF

SECTION 10(B) OF THE EXCHANGE ACT AND

RULE 1 OB-5 OF THE SECURITIES AND EXCHANGE COMMISSIO N

117 . Plaintiffs repeat and re-alleges each and every allegation contained in the foregoin g

paragraphs as if fully set forth herein .

118 . This Count is asserted against Defendant Pegasus, and the Individual Defendants and i s

based upon Section 10(b) of the 1934 Act, 15 U .S.C. §78j(b), and Rule lOb-5 promulgate d

thereunder .

119 . During the Class Period, Defendants Pegasus, PM&C, PSC and the Individual

Defendants, singly and in concert, directly engaged in a common plan, scheme, and unlawfu l

course of conduct, pursuant to which they knowingly or recklessly engaged in acts, transactions ,

practices, and courses of business which operated as a fraud and deceit upon Plaintiffs and the

Class, and failed to disclose material information in order to make the statements made, in light

41

of the circumstances under which they were made, not misleading to Plaintiffs and the Class .

The purpose and effect of said scheme, plan, and unlawful course of conduct was, among other

things, to induce Plaintiffs and the Class to purchase Pegasus common stock during the Clas s

Period at artificially inflated prices .

120. Throughout the Class Period, Pegasus acted through the Individual Defendants, the

Company's senior-most officers and directors . Pegasus also acted through its subsidiaries, PS C

and PM&C, which were controlled by the Individual Defendants, Pegasus' senior-most officer s

and directors, including the Individual Defendants . The willfulness, motive, knowledge, an d

recklessness of the Individual Defendants, PSC and PM&C are therefore imputed to Pegasus ,

rendering the Company primarily liable for the securities law violations of these Defendants an d

third parties committed while performing in their official capacity as Company representative s

and subsidiaries . In the alternative and additionally, Pegasus is liable for the acts of th e

Individual Defendants, PSC and PM&C under the doctrine of respondent superior and under

principles of agency .

121 . Each of the Defendants had an affirmative duty to correct all of the above described fals e

information concerning the DBS subscription account growth and totals, and the § 13 termination

provision of the Member Agreement. Defendants' failure to correct the false information whe n

Defendants were aware of the falsity of such information was a conscious violation of the

securities laws .

122. As a result of the failure to disclose material facts, the information that defendant Pegasu s

and the Individual Defendants disseminated to the investing public was materially misleading as

set forth above, and the market price of Pegasus common stock was artificially inflated durin g

the Class Period . Plaintiffs and the Class relied on the above-described misleading statements i n

42

purchasing and/or retaining Pegasus shares during the Class Period . Class Members had no

knowledge of the falsity of the information disseminated by Pegasus during the Class Period . In

ignorance of the misleading nature of the statements described above and the deceptive an d

manipulative devices and contrivances employed by said defendants, Plaintiffs and the Class

relied, to their detriment, on the integrity of the market price of the stock in purchasing Pegasu s

common stock. Had Plaintiffs and the Class known the truth, they would not have purchase d

said shares .

123 . Plaintiffs and the Class have suffered substantial damages as a result of the wrongs herei n

alleged in an amount to be proved at trial .

124. By reason of the foregoing, defendants Pegasus and the Individual Defendants directl y

violated Section 10(b) of the Exchange Act and Rule IOb-5 promulgated thereunder in that they :

(a) employed devices, schemes, and artifices to defraud ; (b) failed to disclose and misstated

material information ; or (c) engaged in acts, practices, and a course of business which operate d

as a fraud and deceit upon Plaintiffs and the Class in connection with their purchases of Pegasu s

common stock during the Class Period .

125 . This action is being brought within two years after the discovery of the untrue statement s

and omissions and within five years after their issuance .

COUNT IIAGAINST THE INDIVIDUAL DEFENDANTS FOR

VIOLATION OF SECTION 20(A) OF THE EXCHANGE AC T

126. Plaintiff repeats and re-alleges each and every allegation contained in each of the

foregoing paragraphs as if set forth fully herein .

127. Each of the Individual Defendants , by virtue of their management positions ,

directorships, stock ownership and/or specific acts described above, were, at the time of th e

43

wrongs alleged herein, controlling persons pf Pegasus, PSC and PM&C within the meaning o f

Section 20(a) of the 1934 Act .

128. The Individual Defendants had the power and influence and exercised the same to caus e

Pegasus, PSC and PM&C to engage in the illegal conduct and practices complained of herein .

129. Pegasus by virtue of its stock ownership and interlocking management structure desc ribed

above , was, at the time of the wrongs alleged herein, a controlling person of PSC and PM&C

within the meaning of Section 20(a) of the 1934 Act .

130. Pegasus had the power and influence and exercised the same to cause PM&C and PSC to

engage in the illegal conduct and practices complained of herein .

131 . By reason of the conduct alleged in Count I of the Complaint, the Individual Defendant s

and Pegasus are liable for the aforesaid wrongful conduct, and are liable to Plaintiffs and th e

Class for the substantial damages which they suffered in connection with their purchases o f

Pegasus common stock during the Class Period .

132 . This action is being brought within two years after the discovery of the untrue statements

and omissions and within five years after their issuance .

PRAYER FOR RELIEF

WHEREFORE, Plaintiffs, on behalf of themselves and the Class, prays for judgment as follows :

a. Declaring this action to be a proper plaintiff class action maintainable pursuant to Rule s

23(a) and 23(b)(3) of the Federal Rules of Civil Procedure and declaring plaintiffs to be prope r

representatives of the Class and their counsel to be appropriate lead counsel for the Class ;

b. Awarding Plaintiffs and the members of the Class damages together with interest thereon ;

c. Awarding Plaintiffs and the members of the Class their costs and expenses in thi s

litigation, including reasonable attorneys' fees and experts' fees and other costs and disbursements ; and

44

d. Awarding Plaintiffs and the members of the Class such other and further relief as may b e

just and proper under the circumstances .

DEMAND FOR TRIAL BY JURY

Pursuant to Rule 38(b) of the Federal Rules of Civil Procedure, Plaintiffs hereby demand trial b y

jury of all issues .

DATED: May 26, 2006 \JPy OBIlk . fl , }AJ1 , ESQ. LLC

JaQb A. Goldberg, Esq (PA Bar No . 66399)Vaidation\jf Signature ode : JAG3869P.O.~ Box 3013 2Elki s Park, PA 19027Tel: 215) 782-8235Fax: (215) 782-8236

il : j acoba olg dbergacomcast .net

Liaison Counselfor Plaintiffs and the Class

THE ROSEN LAW FIRM, P .A .Laurence Rosen, Esq . (pro hac vice)Phillip Kim, Esq .350 Fifth Avenue, Suite 5508New York, NY 1011 8Tel : (212) 686-1060Fax : (212) 202-3827Email : lrosen@rosenlegal .com

Lead Counsel for Plaintiffs and the Class

45

UNITED STATES DISTRICT COURTEASTERN DISTRICT OF PENNSYLVANI A

MARK MADDEN, individually and on behalf)of all others similarly situated, )

Plaintiff, )

V. )

MARSHALL W. PAGON, JOSEPH W. )POOLER, JR. and PEGASUS )COMMUNICATIONS CORPORATION )

Defendants. )

CIVIL ACTION NO . 2 :05-cv-05868 (ABB)

CERTIFICATE OF SERVIC E

On this 26`h day of May, 2006, I, Jacob A. Goldberg, caused a true and correct copy ofPlaintiffs' First Amended Class Action Complaint For Violation of the Federal Securities Laws,to be filed electronically on the ECF system of this Court; the document is available for viewingand downloading from the ECF system . I also caused the document to be served on thefollowing persons by First Class Mail :

Robe rt L . Hickok, Esq .Ch ristopher J . Huber, Esq .

PEPPER HAMILTON. LLP3000 Two Logan Squat

Eighteenth and Arch StrePhiladelphia, PA 19103- ,'