Exhibit 10.15

                  AGREEMENT  AND  PLAN  OF  MERGER  (this  "Merger   Agreement")
effective as of the 1st day of July 1997, by and among MARKETING SERVICES GROUP,
INC., a Nevada corporation ("MSGI" or the "Purchaser");  PII MERGER CORP., a New
York corporation and a wholly-owned  subsidiary of MSGI ("Merging  Subsidiary");
PEGASUS  INTERNET,  INC., a New York  corporation  ("Pegasus" or "the Company");
ROBERT BOURNE, an individual ("RB"); J. JEREMY BARBERA,  an individual  ("JJB");
ROBERT K. BOURNE, an individual;  ("RKB"); and KATHLEEN R. BOURNE, an individual
("KRB"; together with RB, JJB, and RKB, the "Shareholders").

                              W I T N E S S E T H:

                  WHEREAS,  MSGI, Merging  Subsidiary,  PII and the Shareholders
deem it to be desirable and in the best interests of each  corporation that MSGI
acquire  Pegasus such that all of the issued and  outstanding  shares of capital
stock of Pegasus be acquired by MSGI  pursuant  to a merger  (the  "Merger")  as
described herein;

                  WHEREAS,   MSGI  has  formed  PII  Corp.  as  a   wholly-owned
subsidiary  ("Merging  Subsidiary")  under the Business  Corporation  Law of the
State of New York  (the  "BCL")  for the  purpose  of  merging  it with  Pegasus
pursuant to the  applicable  provisions  of the BCL and the terms of this Merger
Agreement;

                  WHEREAS,  subject to the terms and  conditions  of this Merger
Agreement, MSGI and Pegasus desire to cause Merging Subsidiary to be merged with
and into Pegasus,  Pegasus and Merging Subsidiary shall be referred to herein as
the "Constituent Corporations"; and

                  WHEREAS,   it  is  the  express  intention  of  MSGI,  Merging
Subsidiary  and  Pegasus  that the Merger  constitute  a plan of  reorganization
intended to qualify for federal income tax purposes as a "reorganization" within
the meaning of IRC Sections 368(a)(1)(A) and 368(a)(2)(E):

                  NOW,   THEREFORE,    in   consideration   of   the   premises,
representations,  warranties and covenants contained herein, and intending to be
legally bound hereby, the parties hereto agree as follows:

1.  THE MERGER.
                  1.1    The Merger.
At the Effective Time (as defined in Section 1.2), upon the terms and subject to
the conditions of this Agreement,  Merging  Subsidiary  shall be merged with and
into Pegasus (the  "Merger") in  accordance  with the BCL.  Pegasus shall be the
surviving  corporation (the "Surviving  Corporation") in the Merger. As a result
of the  Merger,  the  outstanding  shares of  capital  stock of the  Constituent
Corporations shall be converted or canceled in the manner provided in Article 2.

                  1.2    Effective Time.
At the  Closing  (as  defined in Section  1.3),  a  certificate  of merger  (the
"Certificate  of Merger")  shall be duly  prepared  and  executed by Pegasus and
Merging  Subsidiary  and  thereafter  delivered to the Secretary of State of the
State of New York (the  "Secretary")  on, or as soon as practicable  after,  the
Closing Date (as defined in Section 1.3).  The Merger shall become  effective at
the time of the filing of the Certificate of Merger with the Secretary (the date
and time of such filing being referred to herein as the "Effective Time").

                  1.3    Closing.
The  closing of the Merger  (the  "Closing")  will take place at the  offices of
Camhy Karlinsky & Stein LLP, 1740 Broadway,  New York, New York  10019-4315,  on
July 11, 1997 or at such other place as the parties hereto  mutually agree, on a
date and at a time to be specified  by the  parties,  which shall in no event be
later than 10:00 a.m.,  local time,  provided  that the closing  conditions  set
forth in Article 5 have been satisfied or, if permissible,  waived in accordance
with this Merger Agreement, or on such other date as the parties hereto mutually
agree (the "Closing Date").

                  1.4 Certificate of  Incorporation  and Bylaws of the Surviving
                      Corporation.
At the Effective  Time, (i) the  Certificate of  Incorporation  of Pegasus as in
effect  immediately  prior to the  Effective  Time shall be the  Certificate  of
Incorporation of the Surviving  Corporation until thereafter amended as provided
by law and such Certificate of Incorporation,  and (ii) the Bylaws of Pegasus as
in effect  immediately  prior to the  Effective  Time shall be the Bylaws of the
Surviving   Corporation  until  thereafter  amended  as  provided  by  law,  the
Certificate of Incorporation of the Surviving Corporation, and such Bylaws.

                  1.5    Directors of the Surviving Corporation.
From and after the Effective  Time,  the directors of the Surviving  Corporation
shall be JJB and RB. The  directors  of the  Surviving  Corporation  shall serve
until their  successors  shall have been duly elected or appointed and qualified
or until their earlier  death,  resignation,  or removal in accordance  with the
Surviving Corporation's Certificate of Incorporation and Bylaws.

                  1.6    Effects of the Merger.
Subject to the foregoing,  the effects of the Merger shall be as provided in the
applicable provisions of the BCL.

2.  STATUS AND CONVERSION OF SECURITIES.
                  2.1    Stock of Pegasus.
     (a)  Pegasus.  Each share of common  stock,  without par value,  of Pegasus
     ("Pegasus  Common  Stock")  issued and  outstanding  at the Effective  Time
     shall,  by virtue of the Merger and  without  any action on the part of the
     holders thereof, be converted into the right to receive (i) 3,000 shares of
     common stock,  par value $0.01 per share, of MSGI ("MSGI Common Stock") for
     a total of 600,000 shares of MSGI Common Stock (the "Stock Consideration"),
     except that any shares of Pegasus Common Stock held in Pegasus' treasury or
     owned by Pegasus  or  Merging  Subsidiary  at the  Effective  Time shall be
     canceled  without payment of any  consideration  thereof and (ii) $1,000 in
     cash for a total of  $200,000  in cash  (the  "Cash  Consideration").  Each
     Shareholder shall receive a portion of the Cash Consideration  equal to the
     product (x multiplied by y) of (x) $200,000  divided by the total number of
     shares of Pegasus Common Stock outstanding, and (y) the number of shares of
     Pegasus Common Stock held by such Shareholder.

     (b) Exchange of Pegasus  Common Stock.  At the Effective  Time,  MSGI shall
     deliver to its transfer  agent  instructions  to  forthwith  issue from its
     authorized but unissued  shares and  distribute to holders of  certificates
     representing shares of Pegasus Common Stock, upon surrender to MSGI of such
     certificates for cancellation,  together with a duly-executed  stock power,
     if applicable,  one or more  certificates  representing the number of whole
     shares of MSGI  Common  Stock  into  which the  shares  represented  by the
     certificate(s)  shall have been converted  pursuant to Sections  2.1(a) and
     the  certificate(s)  so surrendered  shall be canceled.  Such  instructions
     shall be  accompanied by an opinion of MSGI's  counsel,  sufficient in form
     and scope to cause the transfer  agent to comply with MSGI's  instructions.
     Upon surrender of his or her Pegasus  shares,  each  shareholder of Pegasus
     prior to the Effective Time shall be deemed the owner of the number of MSGI
     shares into which such Pegasus shares are to be converted  pursuant hereto.

     (c) After the Effective  Time,  there shall be no further  registration  of
     transfers on the stock transfer  books of the Surviving  Corporation of the
     shares of Pegasus Common Stock that were outstanding  immediately  prior to
     the Effective  Time. As of the Effective  Time, the holders of certificates
     representing  shares of Pegasus Common Stock shall cease to have any rights
     as  shareholders of Pegasus,  except such rights,  if any, as they may have
     pursuant to New York law. Except as provided above, until such certificates
     are  surrendered  for  exchange,  each such  certificate  shall,  after the
     Effective  Time,  represent  for all purposes only the right to receive the
     number of whole  shares  of MSGI  Common  Stock  into  which the  shares of
     Pegasus  Common  Stock have been  converted  by the Merger as  provided  in
     Sections 2.1(a) hereof.

     (d)  Dissenters'   Rights.  All  of  the  Shareholders   hereby  waive  any
     dissenters' rights under New York Law.

                  2.2    Stock of Merging Subsidiary.
Each share of common stock,  par value $.01,  of Merging  Subsidiary  shall,  by
virtue of the Merger and without  any action on the part of the holder  thereof,
be converted into one share of Pegasus Common Stock, which will be registered in
the name of MSGI.

                  2.3    Other Transactions at Closing.
In addition to the  transactions  referred  to in this  Article 1 above,  at the
Closing, Pegasus shall deliver to the Purchaser the following:
                  (a) The minute books,  stock certificate books, stock transfer
ledgers, and corporate seals of the Company;
                  (b) Certificates of Good Standing, with "bring down" telegrams
or  similar  documentation,   as  to  the  Company  issued  by  the  appropriate
governmental  authorities  of the State of New York and each  state in which the
Company is qualified to do business;
                  (c) Certified copy of the Certificate of  Incorporation of the
Company, and all amendments thereto,  certified by the Secretary of State of the
State of New York; and
                  (d) A copy of the  Bylaws  of the  Company,  certified  by the
secretary or assistant secretary thereof as being true, complete, and correct.

3. REPRESENTATIONS AND WARRANTIES OF PEGASUS AND THE SHAREHOLDERS.
                  Pegasus and each of the  Shareholders,  jointly and severally,
represent and warrant to the Purchaser as follows:

                  3.1    Organization and Qualification.
The Company does not own any capital stock of any corporation or any interest in
any  joint  venture,  partnership,  association,  trust,  or other  entity.  The
business and  operations of the Company are conducted  solely by and through the
Company. Schedule 3.1 correctly sets forth the Company's place of incorporation,
principal place of business,  and  jurisdictions  in which it is qualified to do
business. The Company is a corporation duly organized,  validly existing, and in
good standing  under the laws of its  jurisdiction  of  incorporation,  with all
requisite  power and  authority,  and all  necessary  consents,  authorizations,
approvals,  orders,  licenses,  certificates,  and  permits  of  and  from,  and
declarations and filings with, all federal, state, local, and other governmental
authorities, and all courts and other tribunals, to own, lease, license, and use
its  properties  and  assets  and to  carry on the  business  in which it is now
engaged and the business in which it contemplates  engaging.  To the best of the
Shareholders'  and the  Company's  knowledge,  the Company is duly  qualified to
transact  the  business in which it is now engaged and is in good  standing as a
foreign  corporation  in every  jurisdiction  in which its  ownership,  leasing,
licensing,  or use of property or assets or the  conduct of its  business  makes
such qualification necessary.

                  3.2    Capitalization.
The  authorized  capital stock of the Company  consists of 200 shares of Pegasus
Common  Stock,  all of which shares are  outstanding.  Each of such  outstanding
shares of Pegasus  Common Stock is validly  authorized,  validly  issued,  fully
paid,  and  nonassessable,  has not  been  issued  and is not  owned  or held in
violation of any preemptive  right of  stockholders,  and is owned of record and
beneficially by the  Shareholders as set forth on Schedule 3.2 attached  hereto.
The  Pegasus  Common  Stock is owned by the  Shareholders  free and clear of all
liens,  security  interests,  pledges,  charges,   encumbrances,   stockholders'
agreements,  and voting trusts. There is no commitment,  plan, or arrangement to
issue,  and no  outstanding  option,  warrant,  or other  right  calling for the
issuance of, any share of capital  stock of the Company or any security or other
instrument  convertible into, exercisable for, or exchangeable for capital stock
of the Company. There is no outstanding security or other instrument convertible
into or exchangeable for capital stock of the Company.

                  3.3    Financial Condition.
Pegasus has delivered to the Purchaser true and correct copies of the following:
the balance sheets of the Company as of December 31, 1995 and 1996 and March 31,
1997, the statements of income,  statements of retained earnings, and statements
of cash flows of the Company for the years ended December 31, 1995 and 1996, and
for the six months ended March 31, 1997. Each such balance sheet presents fairly
the financial condition,  assets,  liabilities,  and stockholders' equity of the
Company as of its date;  each such statement of income and statement of retained
earnings presents fairly the results of operations of the Company for the period
indicated and their retained  earnings as of the date  indicated;  and each such
statement of cash flows presents  fairly the  information  purported to be shown
therein.  To the best of the  Shareholders'  and the  Company's  knowledge,  the
Company  understands that the financial  statements  referred to in this Section
3.3 have been prepared by  management of the Company and are in accordance  with
generally accepted  accounting  principles  consistently  applied throughout the
periods  involved,  are in accordance  with the books and records of the Company
and are capable of being audited by independent  certified public accountants in
accordance with generally accepted accounting standards. Since March 31, 1997:

(a)  There  has at no time  been a  material  adverse  change  in the  financial
condition, results of operations, business, properties, assets, liabilities, or,
to the Shareholder's knowledge, the future prospects of the Company.

(b) The Company has not authorized,  declared, paid, or effected any dividend or
liquidating or other  distribution in respect of its capital stock or any direct
or  indirect  redemption,  purchase,  or other  acquisition  of any stock of the
Company.

(c) The  operations  and  business of the  Company  have been  conducted  in all
material respects only in the ordinary course.

(d) The Company has not suffered an  extraordinary  loss (whether or not covered
by insurance) or waived any right of substantial value.

There is no fact  known to the  Shareholders,  which  materially  and  adversely
affects or in the future (as far as the Shareholders can reasonably foresee) may
materially and adversely affect the financial condition,  results of operations,
business,  properties,  assets, liabilities, or future prospects of the Company;
provided,  however,  that the Shareholders express no opinion as to political or
economic matters of general applicability.

                  3.4    Tax and Other Liabilities.
(a) The Company has no known  liability  of any nature,  accrued or  contingent,
including without limitation liabilities for Taxes (as defined in Section 3.4(f)
and liabilities to customers or suppliers, other than the following:
                            (i) Liabilities  for which full  provision  has been
                                made,  except  Taxes,  on the balance sheet (the
                                "Last Balance  Sheet") as of March 31, 1997 (the
                                "Last Balance Sheet Date"); and
                            (ii)Other liabilities arising since the Last Balance
                                Sheet Date and prior to the  Closing,  including
                                Taxes,  in the ordinary course of business which
                                are  not   materially   inconsistent   with  the
                                representations    and    warranties    of   any
                                Shareholder  or  any  other  provision  of  this
                                Merger Agreement.
(b) Without limiting the generality of Section 3.4(a):
                            (i) The  Company  and  any  combined,  consolidated,
                                unitary or affiliated group of which the Company
                                is or has  been a member  prior  to the  Closing
                                Date: (i) has paid all Taxes required to be paid
                                on or  prior  to the  Closing  Date  (including,
                                without limitation, payments of estimated Taxes)
                                for  which  the  Company  could be held  liable,
                                except for Taxes  which are being  contested  in
                                good faith and by appropriate  proceedings;  and
                                (ii) has  accurately  and timely filed (or filed
                                an extension  for), all federal,  state,  local,
                                and foreign tax returns, reports, and forms with
                                respect  to such taxes  required  to be filed by
                                them on or before the Closing Date.
                            (ii)The amount set up as provisions for Taxes on the
                                Last  Balance  Sheet  are   sufficient  for  all
                                accrued and unpaid Taxes of the Company, whether
                                or not due and  payable  and  whether  or not in
                                dispute, under tax laws as in effect on the Last
                                Balance  Sheet  Date or now in  effect,  for the
                                period  ended on such  date and for all  periods
                                prior thereto.
(c) There is no material  dispute or claim concerning any liability for Taxes of
the Company either (i) claimed or raised by any authority in writing, or (ii) as
to which the Company has knowledge based upon personal contact with any agent of
such authority.
(d)  Schedule 3.4 sets forth all federal,  state,  local and foreign  income tax
returns  filed  with  respect to the  Company  for  taxable  periods on or after
January 1, 1994 ("Tax Returns"),  indicates those Tax Returns that currently are
subject to audit.  The Company has  delivered  or made  available  to  Purchaser
complete  and  correct  copies  of all Tax  Returns,  examination  reports,  and
statements of deficiencies  assessed against,  or agreed to by the Company since
January 1, 1994.  The  Company  has not waived  any  statute of  limitations  in
respect  of Taxes or agreed to any  extension  of time with  respect  to any Tax
assessment or deficiency.
(e) The Company has not filed a consent  under  Section  341(f) of the  Internal
Revenue  Code of 1986,  as amended  (the  "Code").  The Company has not made any
payments,  nor is it  obligated  to make  any  payments,  nor is a party  to any
agreement that under certain circumstances could obligate it to make any payment
that will not be deductible under Section 280G of the Code. The Company will not
have any  liability on or after the Closing Date  pursuant to any tax sharing or
tax  allocation  agreement.  The Company has no  liability  for the Taxes of any
other person under  Treasury  Regulation  1.1502-6 (or any similar  provision of
state,  local or foreign law), as a transferee  or  successor,  by contract,  or
otherwise.
(f) For  purposes  of this Merger  Agreement,  "Taxes"  shall mean all  federal,
state,  local or  foreign  taxes,  assessments,  duties  which  are  payable  or
remittable  by the  Company or levied  upon the  Company or any  property of the
Company,  or levied with respect to its assets,  franchises,  income,  receipts,
including, without limitation, import duties, excise, franchise, gross receipts,
utility,  real  property,   capital,  personal  property,   withholding,   FICA,
unemployment  compensation,  sales  or use,  withholding,  governmental  charges
(whether or not  requiring  the filing of a return),  and all  additions to tax,
penalties and interest relating thereto.

                  3.5    Litigation and Claims.
There is no litigation,  arbitration,  claim,  governmental or other  proceeding
(formal or informal), or investigation pending,  threatened,  or in prospect (or
any basis therefor known to the  Shareholders)  with respect to the Company,  or
any of its  respective  businesses,  properties,  or assets.  The Company is not
affected by any present or threatened  strike or other labor  disturbance nor to
the  knowledge of the  Shareholders  is any union  attempting  to represent  any
employee  of the  Company as  collective  bargaining  agent.  To the best of the
Shareholders' and the Company's  knowledge,  the Company is not in violation of,
or in default with respect to, any law, rule,  regulation,  order,  judgment, or
decree;  nor is the  Company  required to take any action in order to avoid such
violation or default.

                  3.6    Properties.
     (a) The Company owns no real  property.  Set forth on Schedule  3.6(a) is a
list of all real property leased by the Company.
     (b) Set  forth  in  Schedule  3.6(b)  is a true  and  complete  list of all
personal  properties and assets (other than real property)  owned by the Company
or  leased  or  licensed  by the  Company  from or to a third  party.  All  such
properties  and assets  owned by the Company are  reflected  on the Last Balance
Sheet (except for  acquisitions  subsequent to the Last Balance Sheet Date which
are noted on Schedule 3.6(b)).  All such properties and assets owned, leased, or
licensed by the Company are in good and usable  condition  (reasonable  wear and
tear which is not such as to affect  adversely  the operation of the business of
the Company excepted).
     (c) All accounts and notes receivable  reflected on the Last Balance Sheet,
or arising  since the Last  Balance  Sheet  Date,  have been  collected,  or are
believed  to be  collectible  in  the  ordinary  course  subject  to  adjustment
consistent with industry standards.
     (d) No real property owned,  leased,  or licensed by the Company lies in an
area which is, or to the knowledge of Sellers will be,  subject to zoning,  use,
or building  code  restrictions  that would  prohibit  the  continued  effective
ownership,  leasing,  licensing,  or use of such real  property in the  business
which the Company is now engaged.
     (e) The  Company has not caused or  permitted  its  respective  businesses,
properties,  or assets to be used to generate,  manufacture,  refine, transport,
treat, store,  handle,  dispose of, transfer,  produce, or process any Hazardous
Substance (as such term is defined in this Section  3.6(e)) except in compliance
with all applicable laws, rules,  regulations,  orders,  judgments, and decrees,
and has not caused or  permitted  the  Release  (as such term is defined in this
Section 3.6(e)) of any Hazardous Substance on or off the site of any property of
the Company.  The term "Hazardous  Substance" shall mean any hazardous waste, as
defined  by 42 U.S.C.  ss.6903(5),  any  hazardous  substance,  as defined by 42
U.S.C.  ss.9601(14),  any  pollutant  or  contaminant,  as  defined by 42 U.S.C.
ss.9601(33),  and all toxic substances,  hazardous materials,  or other chemical
substances  regulated by any other law, rule, or regulation.  The term "Release"
shall have the meaning set forth in 42 U.S.C. ss.9601(22).

                  3.7    Contracts and Other Instruments.
Schedule  3.7  accurately  and  completely  sets  forth a list  of all  material
contracts,   agreements,   loan  agreements,   instruments,   leases,  licenses,
arrangements,  or  understandings  with  respect to the  Company  not  otherwise
identified in this Agreement or on any other Schedule hereto. To the best of the
Shareholders' and the Company's knowledge,  each such contract,  agreement, loan
agreement,  instrument,  lease,  or  license  is in full force and is the legal,
valid,  and  binding  obligation  of the  Company  and  (subject  to  applicable
bankruptcy,   insolvency,   and  other  laws  affecting  the  enforceability  of
creditors'  rights  generally) is  enforceable  as to it in accordance  with its
terms. To the best of the Shareholders' and the Company's knowledge, the Company
is not in  violation,  in breach of, or in default  with respect to any material
terms of any such contract,  agreement,  loan agreement,  instrument,  lease, or
license.  Except for employment agreements and as disclosed in Schedule 3.7, the
Company is not a party to any contract,  agreement, loan agreement,  instrument,
lease,  license,  arrangement,  or  understanding  with, any  Shareholder or any
director,  officer,  or employee of the Company, or any relative or affiliate of
any Shareholder or of any such director, officer, or employee. The stock ledgers
and stock transfer books and the minute book records of the Company  relating to
all issuances and  transfers of the  shareholders  of the Board of Directors and
committees  thereof of the Company since its incorporation made available to the
Purchaser  are the original  stock ledgers and stock  transfer  books and minute
book records of the Company or exact copies thereof.

                  3.8    Employees.
     (a) The Company does not have and it does not  contribute  to, any pension,
profit  sharing,  option,  other  incentive  plan, or any other type of Employee
Benefit  Plan (as  defined in Section  3(3) of the  Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA"),  and does not have any obligation to
or non-customary arrangement with employees for bonuses, incentive compensation,
vacations, severance pay, insurance, or other benefits, other than a 401(k) plan
as described on Schedule 3.8(a) hereof.
     (b)  Schedule  3.8(b)  contains a true and correct  statement of the names,
relationship  with the Company,  present rates of  compensation  (whether in the
form of salary, bonuses,  commissions, or other supplemental compensation now or
hereafter  payable),  and  aggregate  compensation  for the twelve  month period
ending June 30, 1997 of each employee of the Company.  Since June 30, 1997,  the
Company  has not  changed  the  rate of  compensation  of any of its  directors,
officers,  employees,  agents,  dealers,  or distributors,  nor has any Employee
Benefit  Plan or  program  been  instituted  or  amended  to  increase  benefits
thereunder.

                  3.9    Patents, Trademarks, Et Cetera.
Except as disclosed on Schedule  3.9, the Company does not own or have  pending,
or is licensed  under,  any patent,  patent  application,  trademark,  trademark
application, trade name, service mark, copyright, franchise, or other intangible
property or asset (all of the  foregoing  being  herein  called  "Intangibles").
Those  Intangibles  listed on Schedule 3.9 are in good standing and uncontested.
Neither any Shareholder,  any director, officer, or employee of the Company, nor
any relative or affiliate of any  Shareholder or of any such director,  officer,
or  employee,  possesses  any  Intangible  which  relates to the business of the
Company. There is no right under any Intangible necessary to the business of the
Company as presently  conducted,  except such as are so  designated  in Schedule
3.9. To the best of the Shareholders' and the Company's  knowledge,  the Company
has  not  infringed,  is  not  infringing,   and  has  not  received  notice  of
infringement with regard to asserted  Intangibles of others. To the knowledge of
the  Shareholders,  there is no  infringement  by others of  Intangibles  of the
Company.

                  3.10   Questionable Payments.
To the  best of the  Shareholders'  and  the  Company's  knowledge,  none of the
Company, any director, officer, agent, employee, or other person associated with
or acting on  behalf of the  Company  has,  directly,  or  indirectly:  used any
corporate  funds for  unlawful  contributions,  gifts,  entertainment,  or other
unlawful expenses relating to political  activity;  made any unlawful payment to
foreign or domestic government  officials or employees or to foreign or domestic
political  parties or campaigns from corporate funds;  established or maintained
any unlawful or unrecorded  fund of corporate  monies or other assets;  made any
false or  fictitious  entry on the books or records of the Company;  or made any
bribe,  kickback,  or other payment of a similar or comparable  nature,  whether
lawful or not, to any person or entity,  private or public,  regardless of form,
whether in money,  property,  or  services,  to obtain  favorable  treatment  in
securing  business or to obtain  special  concessions,  or to pay for  favorable
treatment for business secured or for special concessions already obtained.

                  3.11   Authority to Merge.
     (a) The Company and each of the  Shareholders  has the capacity to execute,
deliver, and perform this Merger Agreement.  This Merger Agreement has been duly
executed  and  delivered  by the  Company and each of the  Shareholders,  is the
legal,  valid,  and  binding  obligation  of  each of the  Shareholders,  and is
enforceable as to each of them in accordance with its terms. None of the Company
nor any of the  Shareholders is under any contractual  restriction or obligation
which  is  inconsistent  with  the  execution  and  performance  of this  Merger
Agreement.  Neither the Company nor any of the Shareholders has any knowledge of
any consent, authorization,  approval, order, license, certificate, or permit of
or from, or  declaration  or filing with, any federal,  state,  local,  or other
governmental  authority or any court or other  tribunal  that is required by the
Company, or any Shareholder for the execution,  delivery, or performance of this
Merger Agreement by the Company and the Shareholders.
     (b) No consent of any party to any material lease,  license,  distribution,
agency,  consulting,   employment,   financing,  lending,  installment  sale  or
conditional sale, security, pledge, guarantee, or other agreement,  arrangement,
or understanding to which the Company or any Shareholder is a party, or to which
any of its or his  properties  or  assets  are  subject,  is  required  for  the
execution,  delivery,  or  performance  of  this  Merger  Agreement,  except  as
disclosed in Schedule 3.11. Neither the Company nor any Shareholder has made any
agreement  or  understanding  not  approved  in  writing by the  Purchaser  as a
condition for obtaining any consent,  authorization,  approval,  order, license,
certificate,  or  permit  required  for  the  consummation  of the  transactions
contemplated by this Merger Agreement. The execution,  delivery, and performance
of this Merger Agreement by the Company and the  Shareholders  will not violate,
result in a breach of,  conflict  with, or (with or without the giving of notice
or the passage of time or both) entitle any party to terminate or call a default
under  such  lease,  license,  distribution,   agency,  consulting,  employment,
financing,  lending,  installment sale or conditional  sale,  security,  pledge,
guarantee,  or other  agreement,  or  understanding,  or  violate or result in a
breach  of any  term of the  certificate  of  incorporation  (or  other  charter
document) or bylaws of the Company or, to the Shareholders  knowledge,  violate,
result in a breach  of,  or  conflict  with any law,  rule,  regulation,  order,
judgment,  or decree binding on the Company,  or to which any of its operations,
business, properties, or assets are subject.

                  3.12   Nondistributive Intent.
Each Shareholder is acquiring the shares of MSGI Stock to be issued hereunder to
him for his own account (and not for the account of others) for  investment  and
not  with a view  to the  distribution  thereof.  No  Shareholder  will  sell or
otherwise dispose of such shares without  registration  under the Securities Act
of 1933, as amended (the "Securities Act"), or an exemption  therefrom,  and the
certificate or certificates representing such shares may contain a legend to the
foregoing effect. Each Shareholder understands that he may not sell or otherwise
dispose of such shares in the absence of either a registration  statement  under
the  Securities  Act or an exemption  from the  registration  provisions  of the
Securities Act.

4.  REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
                  The Purchaser represents and warrants to Pegasus and the
Shareholders as follows:
                  4.1    Organization.
MSGI is a  corporation  duly  organized,  validly  existing and in good standing
under the laws of Nevada.  Merging  Subsidiary is a corporation  duly organized,
validly  existing  and in good  standing  under the laws of New  York.  MSGI and
Merging  Subsidiary  have  all  requisite  power  and  authority,  corporate  or
otherwise, to carry on and conduct its business as it is now being conducted and
to own or lease its  properties  and assets,  and is duly  qualified and in good
standing  in every  state of the  United  States  in which  the  conduct  of the
business of MSGI or Merging Subsidiary,  as the case may be, or the ownership of
such  properties  and assets  requires it to be so  qualified,  except where the
failure  to be so  qualified  would not have a  material  adverse  effect on the
business,  assets or financial condition of MSGI and its subsidiaries taken as a
whole.

                  4.2    Validity of Shares.
The Shares of MSGI Stock to be  delivered to the  Shareholders  pursuant to this
Merger  Agreement,  when issued in accordance  with the terms and  provisions of
this Merger Agreement,  will be validly authorized,  validly issued, fully paid,
and nonassessable.

                  4.3    Authority to Merge.
The Purchaser and Merging  Subsidiary  have all requisite power and authority to
execute,  deliver,  and perform this Merger Agreement.  All necessary  corporate
proceedings  of the  Purchaser  and Merging  Subsidiary  have been duly taken to
authorize the execution,  delivery,  and performance of this Merger Agreement by
the  Purchaser.  This Merger  Agreement has been duly  authorized,  executed and
delivered by the  Purchaser and Merging  Subsidiary,  is the legal,  valid,  and
binding obligation of the Purchaser and Merging  Subsidiary,  and is enforceable
as to them in accordance with its terms.

                  4.4    SEC Reports.
Since  April  25,  1995,  MSGI has filed all  reports,  registrations,  proxy or
information  statements  and all other  material  documents,  together  with any
amendments or supplements required to be made thereto ("SEC Reports"),  required
to be filed with the  Securities and Exchange  Commission  (the "SEC") under the
Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and MSGI has heretofore made available to the Shareholders true copies of
all such reports.  As of their respective dates, such reports referred to herein
complied,  as of their respective dates, in all material respects with all rules
and regulations promulgated by the SEC and did not, or will not, as the case may
be, contain any untrue  statement of a material fact or omit to state a material
fact required to be stated  therein or omit to state any fact necessary in order
to make the statements  therein,  in light of the circumstances under which they
were made, not materially  misleading.  With respect to the SEC Reports filed by
MSGI with the SEC  prior to April  25,  1995,  MSGI has no  knowledge  that such
reports contained any material misstatements or omissions.

5.  CONDITIONS TO OBLIGATIONS OF THE PURCHASER.
                  The obligations of the Purchaser  under this Merger  Agreement
are subject, at the option of the Purchaser, to the following conditions:
                  5.1    Accuracy of Representations and Compliance With
                         Conditions.
All representations and warranties of the Company and the Shareholders contained
in this  Merger  Agreement  shall be  accurate  as of the Closing as though such
representations  and  warranties  were then made in exactly the same language by
the Company and the  Shareholders and regardless of knowledge or lack thereof on
the part of the  Company  and the  Shareholders  or changes  beyond its or their
control;  as of the  Closing,  the  Company  and  the  Shareholders  shall  have
performed  and complied  with all  covenants  and  agreements  and satisfied all
conditions  required  to be  performed  and  complied  with by any of them at or
before such time by this Merger Agreement; and the Purchaser shall have received
a certificate  executed by the Company and each of the  Shareholders,  dated the
date of the Closing, to that effect.

                  5.2    Opinion of Counsel.
The Company and the  Shareholders  shall have  delivered to the Purchaser on the
date of the Closing the opinion of counsel to the Company and the  Shareholders,
dated as of the Closing Date, in form and substance  satisfactory to counsel for
the Purchaser, substantially to the effect that:
     (a) The Company is a  corporation  validly  existing  and in good  standing
under the laws of the State of New York, with all requisite  corporate power and
authority to own, lease, license, and use its properties and assets and to carry
on the business in which it is now engaged.
     (b) The Company is duly  qualified  to transact the business in which it is
now engaged.
     (c) The authorized and  outstanding  capital stock of the Company is as set
forth in Section 3.2 of this Merger Agreement, and all the outstanding shares of
capital stock of the Company are validly authorized, validly issued, fully paid,
and nonassessable.
     (d) This Merger Agreement has been duly authorized, executed, and delivered
by the Company and the Shareholders,  constitutes the legal,  valid, and binding
obligation  of  the  Shareholders,   and  (subject  to  applicable   bankruptcy,
insolvency,  and other laws affecting the  enforceability  of creditors'  rights
generally) is enforceable as to the Company and the  Shareholders  in accordance
with its terms.

                  5.3    Other Closing Documents.
The Company and the  Shareholders  shall have  delivered to the  Purchaser at or
prior to the  Closing  such other  documents  as the  Purchaser  may  reasonably
request in order to enable the Purchaser to determine  whether the conditions to
its obligations under this Merger Agreement have been met and otherwise to carry
out the provisions of this Merger Agreement.

                  5.4    Legal Action.
There shall not have been instituted or threatened any legal proceeding relating
to, or seeking to prohibit  or  otherwise  challenge  the  consummation  of, the
transactions  contemplated by this Merger  Agreement,  or to obtain  substantial
damages with respect thereto.

                  5.5    No Governmental Action.
There shall not have been any action taken, or any law, rule, regulation, order,
judgment, or decree proposed, promulgated, enacted, entered, enforced, or deemed
applicable  to the  transactions  contemplated  by this Merger  Agreement by any
federal,  state, local, or other governmental authority or by any court or other
tribunal,  including the entry of a preliminary or permanent injunction,  which,
in the  sole  judgment  of the  Purchaser,  (a)  makes  any of the  transactions
contemplated  by this Merger  Agreement  illegal,  (b) results in a delay in the
ability of the Purchaser to consummate any of the  transactions  contemplated by
this Merger  Agreement,  (c) requires the divestiture by the Purchaser of any of
the shares of the Company to be acquired pursuant to this Merger Agreement or of
a material  portion of the business of either the Purchaser and its subsidiaries
taken as a whole,  or of the Company,  (d) imposes  material  limitations on the
ability of the  Purchaser  effectively  to exercise  full rights of ownership of
such shares  including  the right to vote such  shares on all  matters  properly
presented  to the  stockholders  of the  Company,  or (e)  otherwise  prohibits,
restricts,  or delays  consummation of any of the  transactions  contemplated by
this Merger Agreement or impairs the  contemplated  benefits to the Purchaser of
any of the transactions contemplated by this Merger Agreement.

                  5.6    Contractual Consents Needed.
The  parties to this  Merger  Agreement  shall have  obtained at or prior to the
Closing  all  consents   required  for  the  consummation  of  the  transactions
contemplated by this Merger Agreement from any party to any contract, agreement,
instrument,  lease, license,  arrangement, or understanding to which any of them
is a party,  or to  which  any of them or any of  their  respective  businesses,
properties, or assets are subject.

                  5.7    Material Adverse Change.
Since March 31, 1997,  there has been no event or development or combinations of
changes  or  developments,  individually  or in the  aggregate,  that  could  be
reasonably  expected  to  have  a  material  adverse  effect  on  the  business,
operations, or future prospects of the Company.

6. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS.
                  The obligations of the Company and the Shareholders  under the
Merger Agreement are subject, at the option of the Company and the Shareholders,
to the following conditions.
                  6.1    Accuracy of Representations and Compliance With
                         Conditions.
All  representations  and  warranties of the Purchaser  contained in this Merger
Agreement shall be accurate when made and, in addition,  shall be accurate as of
the  Closing as though such  representations  and  warranties  were then made in
exactly the same language by the  Purchaser  and  regardless of the knowledge or
lack thereof on the part of the Purchaser or changes  beyond its control;  as of
the Closing, the Purchaser shall have performed and complied with all conditions
required to be performed  and complied with by it at or before such time by this
Merger  Agreement,  and the Company and the  Shareholders  shall have received a
certificate executed by an executive officer of the Purchaser, dated the date of
the Closing, to that effect.

                  6.2    Legal Action.
There shall not have been instituted or threatened any legal proceeding relating
to, or seeking to prohibit  or  otherwise  challenge  the  consummation  of, the
transactions  contemplated by this Merger  Agreement,  or to obtain  substantial
damages with respect thereto.

                  6.3    Other Closing Documents.
The Purchaser and Merging Subsidiary shall have delivered to the Company and the
Shareholders at or prior to the Closing such other documents as the Shareholders
may reasonably  request in order to enable the Shareholders to determine whether
the conditions to their  obligations  under this Merger  Agreement have been met
and otherwise to carry out the provisions of this Merger Agreement.

                  6.4    No Governmental Action.
There shall not have been any action taken, or any law, rule, regulation, order,
judgment, or decree proposed, promulgated, enacted, entered, enforced, or deemed
applicable  to the  transactions  contemplated  by this Merger  Agreement by any
federal,  state, local or other governmental  authority or by any court or other
tribunal,  including the entry of a preliminary or permanent injunction,  which,
in the sole  judgment  of the  Shareholders,  (a) makes any of the  transactions
contemplated  by this Merger  Agreement  illegal,  (b) results in a delay in the
ability of the Shareholders to consummate any of the  transactions  contemplated
by this Merger  Agreement,  or (c)  otherwise  prohibits,  restricts,  or delays
consummation of any of the transactions contemplated by this Merger Agreement or
impairs the contemplated benefits to the Shareholders of any of the transactions
contemplated by this Merger Agreement.

                  6.5    Contractual Consents.
The  parties to this  Merger  Agreement  shall have  obtained at or prior to the
Closing  all  consents   required  for  the  consummation  of  the  transactions
contemplated by this Merger Agreement from any party to any contract, agreement,
instrument,  lease, license,  arrangement, or understanding to which any of them
is a party,  or to  which  any of them or any of  their  respective  businesses,
properties, or assets are subject.

                  6.6    Opinion of Counsel.
The Purchaser  shall have delivered to Pegasus and the  Shareholders on the date
of the Closing the opinion of counsel to the Purchaser  and Merging  Subsidiary,
dated as of the Closing Date, in form and substance  satisfactory to counsel for
Pegasus and the Shareholders, substantially to the effect that:
     (a) MSGI and Merging  Subsidiary are  corporations  validly existing and in
good  standing  under  the  laws of  their  states  of  incorporation,  with all
requisite  corporate power and authority to own, lease,  license,  and use their
properties  and  assets  and to carry on the  businesses  in which  they are now
engaged.
     (b) This Merger Agreement has been duly authorized, executed, and delivered
by the Purchaser  and Merging  Subsidiary,  constitutes  the legal,  valid,  and
binding  obligation  of the Purchaser  and Merging  Subsidiary,  and (subject to
applicable bankruptcy,  insolvency,  and other laws affecting the enforceability
of  creditors'  rights  generally)  is  enforceable  as to Purchaser and Merging
Subsidiary in accordance with its terms.
     (c) The shares of MSGI Common  Stock to be  delivered  to the  Shareholders
pursuant to this Merger  Agreement when issued in accordance  with the terms and
provisions of this Merger Agreement, will be validly authorized, validly issued,
fully paid and nonassessable.

                  6.7    Registration Rights.
On  the  date  of  the  Closing,  MSGI  shall  grant  the  Shareholders  certain
registration  rights  with  respect to the MSGI  Common  Stock  received by them
pursuant to the terms of an agreement in the form attached hereto as Exhibit C.

                  6.8    Employment Agreement.
On the date of the Closing,  the Company  shall have entered into an  employment
agreement with RB (the "Employment Agreement"), in the form of Exhibit B hereto.

                  6.9    Tax Opinion.
On the date of the Closing,  Pegasus and the Shareholders shall have received an
opinion from Hutton Ingram Yuzek Gainen  Carroll & Bertolotti to the effect that
the Merger  constitutes a  reorganization  within the meaning of IRC Section 368
and  will  result  in  the  tax-free  acquisition  of  shares  of  MSGI  by  the
Shareholders.

7.  COVENANTS OF THE PURCHASER.
                  The Purchaser covenants and agrees as follows:
                  7.1    Confidentiality.
The  Purchaser  shall  insure  that  all  confidential   information  which  the
Purchaser,  any of  its  respective  officers,  directors,  employees,  counsel,
agents,  investment  bankers,  or accountants,  may now possess or may hereafter
create or obtain  relating to the financial  condition,  results of  operations,
business,  properties,  assets,  liabilities, or future prospects of the Company
shall not be  published,  disclosed,  or made  accessible  by any of them to any
other  person  or entity  at any time or used by any of them  without  the prior
written consent of the Company; provided, however, that the restrictions of this
sentence  shall not apply (a) to the  extent  required  to enforce  this  Merger
Agreement  or (b) to the extent the  information  shall  have  otherwise  become
publicly available.

                  7.2    SEC Filings.
For a period of five years from the Effective  Time the Purchaser  shall use its
best  efforts to timely  file all  reports  required to be filed by it under the
Exchange Act.

                  7.3    NASDAQ Listing.
For a period of five years from the Effective  Time the Purchaser  shall use its
best  efforts to maintain  the listing of the MSGI Stock on the NASDAQ  SmallCap
Market or on another inter-dealer quotation system or stock exchange.

                  7.4    Voting of Securities.
MSGI  covenants and agrees to vote its  securities of the Company which they are
entitled to vote so as to effectuate  the  provisions  and intent of this Merger
Agreement.

                  7.5    Lock-Up Agreements.
The Shareholders agree to execute and deliver to MSGI agreements with respect to
limiting  their  ability to sell their  shares of MSGI Stock upon the same terms
and  conditions as agreements  being  executed by other  executive  officers and
directors of MSGI in connection  with a potential  public offering of securities
of MSGI.

8.  INDEMNIFICATION; SURVIVAL; LIMITATIONS ON LIABILITY.
                  8.1    Indemnification.
     (a)  Subject  to the terms and  conditions  set forth in Section  8.2,  the
Shareholders  jointly and  severally  agree to indemnify  and hold  harmless the
Purchaser,   its   officers,   directors,   employees,   counsel,   and  agents,
(collectively, the "Indemnitees"), against and in respect of any and all claims,
suits,  actions,  proceedings (formal or informal),  investigations,  judgments,
deficiencies, damages, settlements,  liabilities, and reasonable legal and other
expenses related thereto (collectively, "Claims"), as and when incurred, arising
out of or based upon any breach of any representation,  warranty,  covenant,  or
agreement of any Shareholder  contained in this Merger Agreement or any document
or instrument delivered in connection with this Merger Agreement.
     (b) Each Indemnitee shall give the Shareholders  prompt notice of any claim
asserted  or  threatened  against  such  Indemnitee  on the basis of which  such
Indemnitee  intends  to  seek   indemnification  (but  the  obligations  of  the
Shareholders shall not be conditioned upon receipt of such notice, except to the
extent that the  indemnifying  party is actually  prejudiced  by such failure to
give  notice).  The  Shareholders  shall  promptly  assume  the  defense  of any
Indemnitee,  with counsel  reasonably  satisfactory to such Indemnitee,  and the
fees and expenses of such  counsel  shall be at the sole cost and expense of the
Shareholders.  Notwithstanding the foregoing,  any Indemnitee shall be entitled,
at  his or its  expense,  to  employ  counsel  separate  from  counsel  for  the
Shareholders  and  from  any  other  party  in  such  action,   proceeding,   or
investigation.  No  Indemnitee  may agree to a settlement of a claim without the
prior  written  approval  of  the  Shareholders,  which  approval  shall  not be
unreasonably   withheld.   Notwithstanding   the   above,   if  the   claim  for
indemnification  arises  out of a breach  of the  representations  set  forth in
Section  3.4,  the  Purchaser,  at its  option,  shall  have the  sole  right to
represent  the  Company in any  federal,  state,  local or foreign  tax  matter,
including any audit or administrative or judicial proceeding or the filing of an
amended  return.  The  Shareholders  agree that they will  cooperate  fully with
Purchaser and its counsel in the defense or compromise of any such tax matter.

                  8.2    Survival.
     (a) Subject to the provisions of Section 8.2(b), the covenants, agreements,
representations,  and  warranties  contained in or made  pursuant to this Merger
Agreement  shall  survive the Closing and the delivery of the purchase  price by
the Purchaser,  irrespective  of any  investigation  made by or on behalf of any
party.
     (b) The liabilities and obligations of the  Shareholders  under this Merger
Agreement shall be subject to the following limitations:
                           (i)  The  Shareholders  shall  have no  liability  or
                                obligation  with  respect  to  any  claim  for a
                                breach of a  representation  or  warranty  under
                                this  Merger  Agreement  made after one (1) year
                                from the Closing Date except for claims  arising
                                out of a breach of the representations as to tax
                                liabilities  under  Section 2.4, with respect to
                                which the Shareholders shall remain liable until
                                ninety  (90) days  after the  expiration  of the
                                applicable  statute of  limitations  relating to
                                such tax liabilities; and
                           (ii) The  Shareholders  shall not be responsible  for
                                any claims until the cumulative aggregate amount
                                thereof shall exceed Fifty Thousand ($50,000.00)
                                Dollars (the "Minimum Amount") in which case the
                                Shareholders shall then be jointly and severally
                                liable for all  amounts in excess of the Minimum
                                Amount.

9.  MISCELLANEOUS.
                  9.1    Brokerage Fees.
Each of the parties  hereto  represent  and warrant to each other that no person
has been engaged as a broker or finder in connection with this Merger Agreement.
If any person shall assert a claim to a fee,  commission,  or other compensation
on account of alleged employment as a broker or finder, in connection with or as
a result of any of the transactions  contemplated by this Merger Agreement,  the
person who is purported  to have  engaged such broker or finder shall  indemnify
and hold  harmless  the  other  party  against  any and all  Claims  as and when
incurred,  arising out of, based upon, or in connection  with such Claim by such
person,  except to the extent  that it is  determined  in any suit,  action,  or
proceeding   that  the  other   party  had   engaged   such  broker  or  finder.
Notwithstanding  anything  in  the  preceding  sentence  to the  contrary,  MSGI
acknowledges that Heinemann & Co., Inc., Moskowitz Altman & Hughes LLP and Nancy
Cooper,  MBA have  provided  professional  advisory and  consulting  services to
Pegasus in connection with the transactions  contemplated by this Agreement, and
that the fees due to such  entities and  individual  are the  responsibility  of
Pegasus,  and that such fees will be paid by Pegasus in the  ordinary  course of
business.

                  9.2    Further Actions.
At any time and from time to time, each party agrees, as its or his expense,  to
take such actions and to execute and deliver such documents as may be reasonably
necessary to effectuate the purposes of this Merger Agreement.

                  9.3    Submission to Jurisdiction.
Each of the parties hereto irrevocably submits to the exclusive  jurisdiction of
the courts of the County and State of New York, and of any federal court located
in the County and State of New York, in connection with any action or proceeding
arising out of or relating to, or a breach of, this Merger Agreement,  or of any
document  or  instrument   delivered   pursuant  to,  in  connection   with,  or
simultaneously  with this Merger  Agreement.  Each of the parties  hereto agrees
that such court may award  reasonable  legal fees and expenses to the prevailing
party.

                  9.4    Merger; Modification.
This Merger  Agreement and the Schedules and Exhibits  attached hereto set forth
the entire  understanding  of the parties  with  respect to the  subject  matter
hereof,  supersede all existing  agreements  among them  concerning such subject
matter,  and may be modified only by a written  instrument duly executed by each
party to be charged.

                  9.5    Notices.
Any notice or other  communication  required or permitted to be given  hereunder
shall be in  writing  and shall be  mailed by  certified  mail,  return  receipt
requested by Federal  Express,  or Express  Mail or  delivered  (in person or by
telecopy, or similar telecommunications  equipment) against receipt to the party
to whom it is to be given at the  address  set forth in this  Section 9.5 (or to
such other  address as the party shall have  furnished in writing in  accordance
with the  provisions of this Section 9.5).  Any notice given to the Purchaser or
Merging  Subsidiary  shall be addressed to Marketing  Services Group,  Inc., 333
Seventh Avenue,  20th Floor, New York, New York 10001 attention of the President
and a copy of such notice (which copy shall not constitute notice) shall also be
sent to Camhy  Karlinsky & Stein LLP, 1740 Broadway,  16th Floor,  New York, New
York 10019-4315,  Attention: Alan I. Annex, Esq. Any notice given to the Company
shall be addressed to Pegasus  Internet,  Inc., 112 East 11th Street,  Suite 4C,
New York, New York 10003,  Attn: Mr. Robert Bourne. Any notice given to RB shall
be addressed to him at 11 Waverly Place,  Apt. 5C, New York, New York 10003. Any
notice given to JJB shall be addressed to him at 24 West 70th Street,  New York,
New York  10023.  Any  notice  given to RKB  shall  be  addressed  to him at 227
Campbell  Court,  Geneva,  Illinois  60134.  Any  notification  to KRB  shall be
addressed to her at 227 Campbell  Court,  Geneva,  Illinois 60134. A copy of any
notice given to the Company or the Shareholders (which copy shall not constitute
notice)  shall  also be sent to  Moskowitz,  Altman & Hughes  LLP,  11 East 44th
Street, Suite 504, New York, NY 10017, Attention:  John J. Hughes, Jr. Notice to
the  estate  of any  party  shall be  sufficient  if  addressed  to the party as
provided in this Section 9.5.

                  9.6    Waiver.
Any waiver by any party of a breach of any terms of this Merger  Agreement shall
not operate as or be  construed  to be a waiver of any other breach of that term
or of any breach of any other term of this  Merger  Agreement.  The failure of a
party to insist upon strict  adherence  to any term of this Merger  Agreement on
one or more  occasions  will not be considered a waiver or deprive that party of
the right  thereafter to insist upon strict  adherence to that term or any other
term of this Merger Agreement. Any waiver must be in writing.

                  9.7    Guaranty.
MSGI hereby  unconditionally  and  irrevocably  guarantees  the  obligations  of
Merging Subsidiary under this Agreement.

                  9.8    Binding Effect.
The provisions of this Merger  Agreement  shall be binding upon and inure to the
benefit of the  Purchaser,  and its  successors  and  assigns  Pegasus,  and its
successors and assigns, and each Shareholder and his respective assigns,  heirs,
and personal representatives,  and shall inure to the benefit of each Indemnitee
and its successors and assigns (if not a natural person) and his assigns, heirs,
and personal representatives (if a natural person).

                  9.9    No Third-Party Beneficiaries.
This Merger  Agreement does not create,  and shall not be construed as creating,
any  rights  enforceable  by any  person  not a party to this  Merger  Agreement
(except as provided in 10.8).

                  9.10     Separability.
If any provision of this Merger Agreement is invalid, illegal, or unenforceable,
the  balance  of this  Merger  Agreement  shall  remain  in  effect,  and if any
provision is inapplicable to any person or circumstance,  it shall  nevertheless
remain applicable to all other persons and circumstances.

                  9.11     Headings.
The headings in this Merger  Agreement are solely for  convenience  of reference
and shall be given no  effect  in the  construction  or  interpretation  of this
Merger Agreement.

                  9.12     Counterparts; Governing Law.
This Merger  Agreement  may be executed in any number of  counterparts,  each of
which shall be deemed an original,  but all of which together  shall  constitute
one and the  same  instrument.  It  shall  be  governed  by,  and  construed  in
accordance with, the laws of the State of New York, without giving effect to the
rules governing the conflict of laws.

                  IN WITNESS WHEREOF, the parties have duly executed this Merger
Agreement on July 11, 1997.

                                              MARKETING SERVICES GROUP, INC.

                                              By:  /s/ J. Jeremy Barbera
                                                  Name:  J. Jeremy Barbera
                                                  Title:  Chairman

                                              PII MERGER CORP.

                                              By:  /s/ J. Jeremy Barbera
                                                  Name:  J. Jeremy Barbera
                                                  Title:  President

                                              PEGASUS INTERNET, INC.

                                              By:  /s/ Robert Bourne
                                                  Name:  Robert Bourne
                                                  Title:  President

                                                  /s/ Robert Bourne
                                              ROBERT BOURNE

                                                  /s/ J. Jeremy Barbera
                                              J. JEREMY BARBERA

                                                  /s/ Robert K. Bourne
                                              ROBERT K. BOURNE

                                                  /s/ Kathleen R. Bourne
                                              KATHLEEN R. BOURNE