Pegasus Wireless Corp. Shareholder Derivative Action

WELCOME TO THE PEGASUS WIRELESS CORP. SHAREHOLDER DERIVATIVE ACTION SETTLEMENT WEBSITE

The purpose of this website is to advise current shareholders of Pegasus Wireless Corporation (“Pegasus”) of the proposed settlement of a shareholder derivative action brought on behalf of Pegasus against several former members of Pegasus’s Board of Directors (“Defendants”).

Because the lawsuit is a derivative action brought on behalf of Pegasus, and is not a class action brought on behalf of shareholders, no shareholder will be compensated directly by this settlement and, therefore, there is no claims procedure for shareholders.

On June 6, 2012, the parties appeared before the Court for the Settlement Hearing, at which time the Court approved the Settlement, including the payment of attorney fees and the appointment of a Receiver to oversee the distribution of Net Settlement Funds (copies of those orders can be found here).
On December 20, 2012, the Receiver submitted his Motion Regarding Distribution of Net Settlement Funds/Discharge of Receiver/Exoneration of Bond/Accounting (“Receiver’s Motion”) (a copy of that report can be found here).
On January 3, 2013, the Court held a hearing to determine distribution and adopted the Receiver's Motion. A copy of that order will be posted when it becomes available.

Please NOTE the Following Important Dates:

Plaintiff to file final approval motion and fee petition: May 2, 2012
LAST DAY to file and serve comments on/objections to Settlement: May 17, 2012
Settlement Hearing: June 6, 2012 at 10:00 a.m., Alameda County Superior Court, Dept. 17, 1221 Oak Street, Oakland, CA.

ALL DATES ARE SUBJECT TO CHANGE. Please check back periodically for updates.

A brief summary of the proposed settlement appears below.

The complete Stipulation of Settlement (the “Settlement Agreement”) contains more information about the proposed settlement terms and release) and can be found here.

The Detailed Notice of Proposed Settlement (or long notice) can be found here.

The Settlement Agreement and Detailed Notice of Proposed Settlement contain important additional legal information. PLEASE READ THEM.

BRIEF CASE OVERVIEW

The case is Chen v. Jasper Knabb, et. al. (Alameda County Superior Court Case No. RG 07310978)

Plaintiff alleges that in June 2006 Pegasus’s former President and CEO, Jasper Knabb, agreed to purchase 1,250,000 shares of Pegasus stock for $8 per share. In September 2006, the price of Pegasus stock had plummeted to less than $1 a share, yet the Pegasus Board of Directors voted to approve the repurchase of 870,375 shares of the stock Knabb had purchased for the original price of $8 a share—roughly eight times the then-current purchase price—causing Pegasus to effectively give away several millions of dollars to Knabb.

The Defendants who appeared in the action (the “Individual Defendants”) dispute these allegations and deny any liability.¹

SUMMARY OF PROPOSED SETTLEMENT BENEFITS AND RELEASE

Following extensive discovery, litigation, and mediation, Individual Defendants and their insurer have agreed to pay (1) a total of $1,450,000 (“Settlement Fund”), which shall be used to compensate Pegasus, and pay Plaintiff’s attorneys’ fees and expenses and an incentive award to Plaintiff in amounts to be approved by the Court, and (2) up to an additional $50,000 in notice/administration costs, including the costs associated with the appointment of a neutral receiver to receive and oversee the settlement funds on behalf of Pegasus, as set forth more fully in the Settlement Agreement (with any excess costs paid from the Settlement Fund).

Plaintiff’s counsel intend to request a fee of $500,000 plus their litigation costs of $17,900, which are less than the amounts actually incurred.

In exchange, if the settlement is approved, shareholders will be bound by the decision and will be deemed to have released any derivative claims that have or could have been brought in the Action. Individual claims will not be released.

A full copy of the Release appears in the Settlement Agreement.

CURRENT PEGASUS SHAREHOLDERS HAVE THE RIGHT TO COMMENT ON/OBJECT TO THE PROPOSED SETTLEMENT

If you are a current Pegasus shareholder who wishes to comment on or object to the proposed settlement, you have the right to file a comment/objection and appear at the Settlement Hearing, provided you comply with the procedures set forth in Section 8 of the Detailed Notice, and file and serve your written objections or comments no later than May 15, 2012.

Your written comments or objections must (1) include a reference at the beginning of the document to Chen v. Knabb, et. al., Case No. RG 07310978; (2) list your name, address and telephone number; (3) be signed by you; (4) explain your objection or comment and include copies of any documents, exhibits, affidavits, or other evidence, if any, that support your objection/comment; (5) contain sufficient evidence to establish that you are a current Pegasus shareholder; and (6) indicate whether you or your lawyer intend to appear at the hearing, and, if so, identify any witnesses the shareholder seeks to call at the Settlement Hearing and provide a statement regarding the subject of their proposed testimony.

Written objections/comments must be filed with the Clerk of the Court, Alameda County Superior Court, 1225 Fallon St., Oakland CA 94612 and copies must be sent to the lawyers listed below no later than May 15, 2012.

NOTE: If you do not present your objections/comments in writing in compliance with these procedures, your views will not be considered, you will not be permitted to be heard and you shall be deemed to have waived the right to object (including any right of appeal), unless the Court orders otherwise.

HEARING DATE, TIME AND LOCATION

A hearing will be held on 06-06-12 at 3:00 p.m., before the Honorable Steven Brick, Department 17, 1221 Oak Street, Oakland, CA. to determine (1) whether the Settlement should be approved as adequate, fair, and reasonable; (2) whether the action should be dismissed with prejudice as set forth in the Settlement Agreement; (3) the award of Plaintiff counsels’ attorneys’ fees and costs and incentive award to Plaintiff of $2,500, and (4) any other necessary matters, including the appointment of and duties of the Receiver. Plaintiff’s counsel intend to request a fee of $500,000 plus their litigation costs of $17,900, which are less than the amounts actually incurred.

All dates herein are subject to change. Please check back periodically for updates.

COUNSEL

For Plaintiff:

Jeffrey L. Fazio
Dina E. Micheletti
Fazio | Micheletti LLP
2410 Camino Ramon, Ste 315
San Ramon, CA, 94583
www.fazmiclaw.com
925-543-2555

For Individual Defendants:

Susan S. Muck
Felix S. Lee
Jennifer Bretan
Fenwick & West LLP
555 California Street, 12th Floor
San Francisco, CA 94104
www.fenwick.com
(415) 875-2300

This site provides the following information:

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¹ Please see the Settlement Agreement at pages 5-9 for a list of defined terms and their meaning. The definitions set forth therein shall apply to those words as they appear on this page, unless otherwise noted herein.