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Prepared and filed by St Ives Financial
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<p align="center"><font size="2" face="serif"><b>UNITED STATES<br>
SECURITIES AND EXCHANGE COMMISSION<br>
WASHINGTON, D.C.  20549</b></font></p>
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<p align="center"><font size="2" face="serif"><b>FORM 8-K</b></font></p>
<p align="center"><font size="2" face="serif">CURRENT REPORT<br></font></p>
<p align="center"><font size="2" face="serif"><b>Pursuant to Section 13 or 15(d) of the<br>
</b></font><font size="2" face="serif"><b>Securities Exchange Act of 1934</b></font></p>
<p align="center"><font size="2" face="serif">Date of Report (Date of Earliest Event Reported):  October 10, 2006</font></p>
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<td align="center"><font size="2" face="serif"><b>PEGASUS COMMMUNICATIONS CORPORATION<br>
</b></font><font face="serif" size="1">(Exact Name of Registrant as Specified
in Charter)</font><font size="2" face="serif"><b></b></font></td>
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<td><font size="2" face="serif"><b>Delaware</b></font></td>
<td width="3%">&nbsp;</td>
<td><font size="2" face="serif"><b>0-32383</b></font></td>
<td width="3%">&nbsp;</td>
<td><font size="2" face="serif"><b>23-3070336</b></font></td>
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<td align="center"><font size="1" face="serif">(State or Other Jurisdiction<br>of Incorporation)</font></td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="serif">(Commission File Number)</font></td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="serif">(IRS Employer<br>Identification No.)</font></td>
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<br><br>
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<td align="center"><font size="2" face="serif"><b>c/o Pegasus Communications Management Company</b></font><font size="2"><br>
  <font face="serif"><b>225 City Line Avenue</b></font><br><font face="serif"><b>Bala Cynwyd, Pennsylvania</b></font></font></td>
<td width="3%" align="right"><font size="2">&nbsp;</font></td>
<td width="30%"  align="center"><font size="2" face="serif"><b>19004</b></font></td>
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<td align="center"><font size="1" face="serif">(Address of Principal Executive Offices)</font></td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="serif">(Zip Code)</font></td>
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<td align="right"><font size="2" face="serif">Registrant&#8217;s Telephone Number, Including Area Code:</font></td>
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<td width="40%" align="left"><font size="2" face="serif"><b>(610</b><b>) 934-7000</b></font></td>
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<td align="center"><font size="2" face="serif"><b>Not Applicable<br>
</b></font><font face="serif" size="1">(Former Name or Former Address, if Changed
Since Last Report)</font><font size="2" face="serif"><b></b></font></td>
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<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (<i>see </i>General Instruction A.2. below):</font></p>
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<img src="emptybox.gif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)</font></p>
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<img src="emptybox.gif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)</font></p>
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<img src="emptybox.gif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))</font></p>
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<img src="emptybox.gif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))</font></p>
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<p  align="left"><font size="2" face="serif"><b>Item 1.01.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Entry into a Material Definitive Agreement</b></font></p>
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October 10, 2006, the Registrant, Pegasus Satellite Communications, Inc. (&#8220;PSC&#8221; and together with its subsidiaries, the &#8220;Debtors&#8221;), Ocean Ridge Capital Advisors, LLC (the &#8220;Trustee&#8221;) and certain of the former directors and officers of the Debtors (the &#8220;Claimants&#8221;) entered into a settlement agreement (the &#8220;Settlement Agreement&#8221;) to resolve all open matters between the Debtors and Trustee, on the one hand, and the Registrant, its non-debtor subsidiaries (together with the Registrant, the &#8220;Non-Debtors&#8221;) and the Claimants, on the other hand. The Settlement Agreement included resolution of all potential claims of the Debtors assertable by the
Trustee pursuant to the Debtors&#8217; Chapter 11 Plan of Reorganization against the Non-Debtors or the directors and officers of the Non-Debtors and Debtors, including the Claimants. </font></p>
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    Settlement Agreement provides for the payment of certain medical costs by
    the Debtors or The PSC Liquidating Trust (the &#8220;Trust&#8221;) of approximately
    $177,000 to a subsidiary of the Registrant, the release to the Trust of cash
    reserves held by the Trust relating to medical expenses and director and
    officer indemnification claims, cooperation by PCC with respect to transferability
    of shares of Class A Common Stock owned by the Trust, and certain litigation
    assistance (including the contribution by the Registrant to the Trust of $87,500 toward the settlement of a third party claim). The Settlement Agreement also provides for releases among the
    parties, including the release of any claims that the Trust may have against
    the Non-Debtors and the Claimants and a waiver of any claims that the Trust
    and the Non-Debtors may have against each other relating to payments arising
    from a Support Services Agreement pursuant to which a Non-Debtor subsidiary
    of the Registrant provided support services to the Debtors.</font></p>
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Settlement Agreement is effective on October 10, 2006, subject to entry of an order by the Bankruptcy Court approving the Settlement Agreement. The Bankruptcy court is scheduled to hear the motion relating to approval of the Settlement Agreement on November 8, 2006. </font></p>
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The principal terms of  the Settlement Agreement are incorporated herein by reference to Exhibit 10.1 of this Current Report on Form 8-K. </font></p>
<p align="left"><font size="2"><b>Item 9.01&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial Statements and Exhibits</b></font></p>
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    <td width="10%"><font size="2" face="serif">(a) &#150; (b)</font></td>
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    <td><font size="2" face="serif">Not applicable.</font></td>
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    <td><font size="2" face="serif" align="left">(c)</font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="serif" align="left">Exhibits.</font></td>
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    <td><b><font size="2" face="serif">Exhibit No.</font></b></td>
    <td>&nbsp;</td>
    <td><b><font size="2" face="serif">Description
    of Exhibit</font></b></td>
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    <td valign="top"><font size="2" face="serif">10.1&nbsp;&nbsp;</font></td>
    <td>&nbsp;</td>
    <td><font size="2" face="serif">Settlement Agreement dated
        as of October 10, 2006 by and among Pegasus Satellite Communications,
        Inc. (&#8220;PSC&#8221;), Ocean Ridge Capital Advisors, LLC, Pegasus
        Communications Corporation and certain former directors and officers
    of PSC and its subsidiaries. </font></td>
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<p align="center"><font size="2" face="serif"><b>SIGNATURES</b></font></p>
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.</font></p>
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    <td colspan="3" valign="bottom"><font size="2" face="serif"><b>PEGASUS
    COMMUNICATIONS CORPORATION</b></font></td>
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    <td align="center" valign="bottom">&nbsp;</td>
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    <td valign="bottom"><font size="2" face="serif">By</font></td>
    <td align="center" valign="bottom"><font size="2" face="serif">/s/ Scott A. Blank</font></td>
    <td align="left">&nbsp;</td>
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<td align="center" valign="bottom"><font size="2" face="serif">Scott A. Blank,<br>Senior Vice President</font></td>
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<p align="left"><font size="2" face="serif">Date:  October 16, 2006</font></p>
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Prepared and filed by St Ives Financial
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):  October 10, 2006
PEGASUS COMMMUNICATIONS CORPORATION
(Exact Name of Registrant as Specified
in Charter)
Delaware
0-32383
23-3070336
(State or Other Jurisdiction
of Incorporation)
(Commission File Number)
(IRS Employer
Identification No.)
c/o Pegasus Communications Management Company
225 City Line Avenue
Bala Cynwyd, Pennsylvania
19004
(Address of Principal Executive Offices)
(Zip Code)
Registrant's Telephone Number, Including Area Code:
(610
) 934-7000
Not Applicable
(Former Name or Former Address, if Changed
Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (
see
General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01.     Entry into a Material Definitive Agreement
On October 10, 2006, the Registrant, Pegasus Satellite Communications, Inc. ("PSC" and together with its subsidiaries, the "Debtors"), Ocean Ridge Capital Advisors, LLC (the "Trustee") and certain of the former directors and officers of the Debtors (the "Claimants") entered into a settlement agreement (the "Settlement Agreement") to resolve all open matters between the Debtors and Trustee, on the one hand, and the Registrant, its non-debtor subsidiaries (together with the Registrant, the "Non-Debtors") and the Claimants, on the other hand. The Settlement Agreement included resolution of all potential claims of the Debtors assertable by the
Trustee pursuant to the Debtors' Chapter 11 Plan of Reorganization against the Non-Debtors or the directors and officers of the Non-Debtors and Debtors, including the Claimants.
The
    Settlement Agreement provides for the payment of certain medical costs by
    the Debtors or The PSC Liquidating Trust (the "Trust") of approximately
    $177,000 to a subsidiary of the Registrant, the release to the Trust of cash
    reserves held by the Trust relating to medical expenses and director and
    officer indemnification claims, cooperation by PCC with respect to transferability
    of shares of Class A Common Stock owned by the Trust, and certain litigation
    assistance (including the contribution by the Registrant to the Trust of $87,500 toward the settlement of a third party claim). The Settlement Agreement also provides for releases among the
    parties, including the release of any claims that the Trust may have against
    the Non-Debtors and the Claimants and a waiver of any claims that the Trust
    and the Non-Debtors may have against each other relating to payments arising
    from a Support Services Agreement pursuant to which a Non-Debtor subsidiary
    of the Registrant provided support services to the Debtors.
The Settlement Agreement is effective on October 10, 2006, subject to entry of an order by the Bankruptcy Court approving the Settlement Agreement. The Bankruptcy court is scheduled to hear the motion relating to approval of the Settlement Agreement on November 8, 2006.
The principal terms of  the Settlement Agreement are incorporated herein by reference to Exhibit 10.1 of this Current Report on Form 8-K.
Item 9.01     Financial Statements and Exhibits
(a) – (b)
Not applicable.
(c)
Exhibits.
Exhibit No.
Description
    of Exhibit
10.1
Settlement Agreement dated
        as of October 10, 2006 by and among Pegasus Satellite Communications,
        Inc. ("PSC"), Ocean Ridge Capital Advisors, LLC, Pegasus
        Communications Corporation and certain former directors and officers
    of PSC and its subsidiaries.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
PEGASUS
    COMMUNICATIONS CORPORATION
By
/s/ Scott A. Blank
Scott A. Blank,
Senior Vice President
Date:  October 16, 2006