<PAGE>

                            ASSET PURCHASE AGREEMENT



                         PEGASUS CABLE TELEVISION, INC.


                                       and


                           CABLE SYSTEMS USA, PARTNERS

                            J&J CABLE PARTNERS, INC.

                            PS&G CABLE PARTNERS, INC.





                        --------------------------------

                               Dated July 23, 1998

                        --------------------------------



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                                                      TABLE OF CONTENTS

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ARTICLE I  DEFINITIONS.............................................................................................1
     1.1      Defined Terms........................................................................................1

ARTICLE II  BASIC TRANSACTION.....................................................................................11
     2.1      Purchase and Sale of Assets.........................................................................11
     2.2      Purchase Price......................................................................................11
     2.3      Adjustments to the Purchase Price...................................................................11
     2.4      Escrow Arrangements.................................................................................12
     2.5      Allocation of Purchase Price........................................................................12
     2.6      Closing.............................................................................................13

ARTICLE III  ASSUMED LIABILITIES AND EXCLUDED ASSETS..............................................................13
     3.1      Assignment and Assumption...........................................................................13
     3.2      Excluded Assets.....................................................................................13

ARTICLE IV  REPRESENTATIONS AND WARRANTIES........................................................................14
     4.1      Representations and Warranties of Seller and the Partners...........................................14
     4.2      Repesentations and Warranties of Buyer..............................................................30

ARTICLE V  PRE-CLOSING COVENANTS..................................................................................31
     5.1      Due Diligence Investigation.........................................................................31
     5.2      Exclusivity.........................................................................................32
     5.3      Corporate Matters...................................................................................32
     5.4      Continuity and Maintenance of Operations; Financial Statements......................................32
     5.5      Employee Matters....................................................................................34
     5.6      Required Consents...................................................................................34
     5.7      Projects in Progress................................................................................35
     5.8      Notification of Certain Matters.....................................................................35
     5.9      Risk of Loss; Condemnation..........................................................................35
     5.10     Transfer Taxes......................................................................................36
     5.11     Distant Broadcast Signals...........................................................................36
     5.12     Programmers.........................................................................................36
     5.13     Updated Disclosure Schedule.........................................................................37
     5.14     CRIM ...............................................................................................37
     5.15     Fondo del Seguro....................................................................................37

ARTICLE VI  CONDITIONS PRECEDENT..................................................................................37
     6.1      Conditions to the Obligations of Buyer..............................................................37
     6.2      Conditions to Obligations of Seller and Partners....................................................40
     6.3      Waiver of Conditions................................................................................41
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                                                      TABLE OF CONTENTS
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ARTICLE VII  POST-CLOSING COVENANTS...............................................................................42
     7.1      Litigation Support..................................................................................42
     7.2      Transition..........................................................................................42

ARTICLE VIII  TERMINATION.........................................................................................42
     8.1      Events of Termination...............................................................................42
     8.2      Liabilities in Event of Termination.................................................................43
     8.3      Procedure Upon Termination..........................................................................43

ARTICLE IX  REMEDIES FOR BREACH OF THIS AGREEMENT.................................................................43
     9.1      Survival of Representations and Warranties..........................................................43
     9.2      Indemnification Provisions for Benefit of Buyer.....................................................44
     9.3      Indemnification Provisions for Benefit of Seller....................................................44
     9.4      Matters Involving Third Parties.....................................................................45
     9.5      Determination of Adverse Consequences...............................................................46
     9.6      Escrow Deposit  and Indemnification Fund............................................................46
     9.7      Limitations.........................................................................................46

ARTICLE X  MISCELLANEOUS..........................................................................................47
     10.1     Press Releases and Public Announcements.............................................................47
     10.2     Parties Obligated and Benefited.....................................................................47
     10.3     Notices.............................................................................................47
     10.4     Attorneys' Fees.....................................................................................48
     10.5     Waiver..............................................................................................49
     10.6     Headings............................................................................................49
     10.7     Choice of Law.......................................................................................49
     10.8     Rights Cumulative...................................................................................49
     10.9     Further Actions.....................................................................................49
     10.10    Time ...............................................................................................49
     10.11    Late Payments.......................................................................................49
     10.12    Counterparts........................................................................................49
     10.13    Entire Agreement....................................................................................49
     10.14    Amendments and Waivers..............................................................................50
     10.15    Severability........................................................................................50
     10.16    Construction........................................................................................50
     10.17    Expenses............................................................................................50

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                                       ii
<PAGE>

                                   Appendices



1        Form of Escrow Agreement
2        Purchase Price Allocation
3        Excluded Assets
4        Encumbrances To Be Discharged
5        Proof of Performance Tests and Cumulative Leakage Index Reports
6        Form of Bill of Sale
7        Form of Non-Competition Agreement
8        Form of FIRPTA Affidavit
9        Form of Opinion of Baer Marks & Upham LLP
10       Form of Opinion of Cole, Raywid & Braverman, L.L.P.
11       Form of Assumption Agreement
12       Form of Opinion of Drinker Biddle & Reath LLP


                                      -i-

<PAGE>


                            ASSET PURCHASE AGREEMENT


         This ASSET PURCHASE AGREEMENT ("Agreement") is made this 23rd day of
July, 1998, by and among PEGASUS CABLE TELEVISION, INC., a Massachusetts
corporation ("Buyer"); and CABLE SYSTEMS USA, PARTNERS, a Delaware general
partnership doing business as Cable TV Del Noroeste ("Seller"), J&J CABLE
PARTNERS, INC., a Delaware corporation ("J&J"), and PS&G CABLE PARTNERS, INC., a
Delaware corporation ("PS&G"). J&J and PS&G are collectively referred to herein
as the "Partners." Buyer, Seller and the Partners are collectively referred to
herein as the "Parties."

                                    RECITALS:

         WHEREAS, Seller owns and operates the System and holds a franchise
therefor issued by the Telecommunications Regulatory Board; and

         WHEREAS, subject to the terms, conditions and provisions hereof, Buyer
wishes to acquire from Seller, and Seller wishes to sell to Buyer, substantially
all of the Assets of the Business for the Purchase Price stipulated herein.

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


                                   ARTICLE I
                                   DEFINITIONS


         1.1 Defined Terms. The following terms shall have the following
meanings for purposes of this Agreement:

                  "Accountant" means Coopers & Lybrand L.L.P.

                  "Accounts Receivable" means all subscriber, trade and other
accounts receivable arising from Seller's operation of the System.

                  "Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, assessments, dues, penalties,
fines, interest, costs, amounts paid in settlement, Liabilities, obligations,
Taxes, liens, losses, expenses and fees (including court costs, settlement
costs, reasonable legal, reasonable accounting, experts' and other reasonable
fees, costs and reasonable expenses).



<PAGE>

                  "Affiliate" means, with respect to any Person: (a) any Person
directly or indirectly owning, controlling, or holding with power to vote 10% or
more of the outstanding voting securities of such other Person; (b) any Person
10% or more of whose outstanding voting securities are directly or indirectly
owned, controlled, or held with power to vote, by such other Person; (c) any
Person directly or indirectly controlling, controlled by, or under common
control with such other Person; (d) any officer, director or partner of such
other Person; and (e) if such other person is an officer, director or partner,
any Person for which such person acts in any such capacity. "Control" for the
foregoing purposes shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or voting interests,
by contract or otherwise.

                  "Assets" means all properties, assets, privileges, powers,
rights, interests and claims, real and personal, tangible and intangible, of
every type and description that are owned, leased, held, used or useful in the
Business in which Seller or either of the Partners has any right, title or
interest or in which Seller or either of the Partners acquires any right, title
or interest on or before the Closing Date, wherever located, whether known or
unknown, and whether or not now or on the Closing Date on the books and records
of Seller, including Accounts Receivable, Books and Records, Business Radio
Licenses, Equipment, Intangibles, Intellectual Property, Inventory, Real
Property and Seller Contracts listed in Section 4.1(r) of the Disclosure
Schedule, but excluding any Excluded Assets.

                  "Assumed Liabilities" means and is limited to:

          (a) Seller's obligations to subscribers of the Business for: (i)
subscriber deposits held by Seller as of the Closing Date and which are
refundable, in the amount for which Buyer receives credit under Section 2.3;
(ii) subscriber advance payments held by Seller as of the Closing Date for
services to be rendered by the System after the Closing Date, in the amount for
which Buyer receives credit under Section 2.3; (iii) the delivery of cable
television service to subscribers of the Business after the Closing Date; and

         (b) obligations accruing and relating to periods on and after the
Closing Date with respect to the Business, including but not limited to
obligations under Governmental Permits and Seller Contracts (other than Seller
Contracts constituting Excluded Assets);

provided, however, that the Assumed Liabilities shall not include: (i) any
Liability of Seller or any of its Affiliates for income, transfer, sales, use
and other Taxes arising in connection with the consummation of the transactions
contemplated hereby, except as expressly provided herein; (ii) any Liability of
Seller or any of its Affiliates for the unpaid Taxes of any Person under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign law) as a transferee or successor, by contract or otherwise; (iii)
any obligation of Seller or any of its Affiliates to indemnify any Person
(including Seller) by reason of the fact that such Person was an officer,
director, shareholder, employee or agent of Seller or was serving at the request
of Seller as a partner, trustee, director, officer, employee or agent of another
entity (whether such indemnification is for judgments, damages, penalties,
fines, costs, amounts paid in settlement, losses, expenses or otherwise and
whether such indemnification is pursuant to any statute, charter 


                                     - 2 -

<PAGE>

document, by-law, agreement or otherwise); (iv) any Liability of Seller or any
of its Affiliates for costs and expenses incurred in connection with this
Agreement or the transactions contemplated hereby; (v) any Liability or
obligation of Seller or any of its Affiliates for underaccrued property taxes
with respect to any of the Assets owed to the Commonwealth of Puerto Rico; (vi)
any Liability or obligation of Seller or any of its Affiliates under this
Agreement or any agreement executed and delivered in connection herewith; (vii)
any Liability or obligation to Taxing Authorities, Fondo del Seguro, any other
Governmental Authorities or programmers relating to any periods prior to the
Closing Date; (viii) any Liability or obligation of Seller or any of its
Affiliates to Pole Attachment Authorities relating to any periods prior to
Closing; (ix) any obligation to employees, agents or independent contractors of
Seller or any of its Affiliates relating to any periods prior to Closing; or (x)
any liability relating to civil, criminal and/or administrative cases or
proceedings, or awards of arbitration tribunals, relating to periods prior to
Closing.

                  "Basic Services" means the group of cable television program
services sold to subscribers as a package and described in Section 4.1(q) of the
Disclosure Schedule, including broadcast and satellite service programming for
which a subscriber pays a fixed monthly fee to Seller, but not including Pay TV.

                  "Basis" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction that forms or could form the
basis for any specified consequence.

                  "Books and Records" means all books and records relating to
the Business or the System, including purchase and sale order files, subscriber
lists, mailing lists, sales materials and records, personnel files, media
materials and plates, blueprints, strand maps, as-built maps, other technical
data and records, all correspondence with and documents pertaining to
subscribers, suppliers, Governmental Authorities and other third parties, all
records relating to the System and program carriage, all reports filed with
governmental Authorities, all statements of account filed with the United States
Copyright Office, and all records evidencing the Accounts Receivable and a
schedule of accounts receivable aging.

                  "Business" means the cable television business conducted by
Seller on the date of this Agreement through the System in and around the
Service Area.

                  "Business Day" means any day other than Saturday, Sunday or a
day on which banking institutions in San Juan, Puerto Rico, or New York, New
York, are required or authorized to be closed.

                  "Business Radio Licenses" means Business Radio Licenses
described in Section 4.(i) of the Disclosure Schedule.

                  "Cash" means cash and cash equivalents (including marketable
securities and short term investments) calculated in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.


                                     - 3 -

<PAGE>

                  "Code" means the Internal Revenue Code of 1986, as amended.

                  "CRIM" means the Centro de Recaudacion de Ingresos Municipales
of the Commonwealth of Puerto Rico.

                  "EBITDA" means net income adjusted, without duplication, by
(i) adding (to the extent deducted in arriving at net income) expense items in
respect of interest, taxes on or measured by income, depreciation and
amortization, and (ii) eliminating (a) expenses attributable to Seller's office
in Crown, Pennsylvania, and (b) items of revenue, expense, gain and loss that
are both nonrecurring and unrelated to the operation of the System, whether or
not classified as extraordinary items. All determinations under this definition
shall be made in accordance with GAAP without regard to any materiality
threshold otherwise applicable under GAAP.

                  "Effective Competition Order" means the Memorandum Opinion and
Order of the Acting Chief, Cable Services Bureau of the FCC, in In the Matter of
Cable TV Del Noroeste, No. DA 98-1269 adopted June 26, 1998, and released June
30, 1998. 

                  "Employee Benefit Plan" means any: (a) nonqualified deferred
compensation or retirement plan or arrangement that is an Employee Pension
Benefit Plan; (b) qualified defined contribution retirement plan or arrangement
that is an Employee Pension Benefit Plan; (c) qualified defined benefit
retirement plan or arrangement that is an Employee Pension Benefit Plan
(including any Multiemployer Plan); or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.

                  "Employee Pension Benefit Plan" has the meaning set forth in
ERISA Section 3(2).

                  "Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Section 3(l).

                  "Encumbrance" means any mortgage, pledge, lien, encumbrance,
charge, security interest, security agreement, conditional sale or other title
retention agreement, limitation, option, assessment, restrictive agreement,
restriction, adverse interest, restriction on transfer or any exception to or
defect in title or other ownership interest (including reservations, rights of
way, possibilities of reverter, encroachments, easements, rights of entry,
restrictive covenants, leases and licenses).

                  "Environmental Law" means any Legal Requirement (including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Resource Conservation and Recovery Act of 1976 and
the Occupational Safety and Health Act of 1970, as amended), relating to or
concerning pollution or protection of public health, safety or welfare or the
environment, including those relating to emissions, discharges, releases or
threatened releases of Hazardous Substances into the environment (including
ambient air, surface water, ground water or land), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances.



                                     - 4 -
<PAGE>

                  "Equipment" means all electronic devices, trunk, distribution
and drop coaxial and optical fiber cable and distribution plant, amplifiers,
power supplies, transformers, conduit, vaults and pedestals, towers, antennas,
grounding and pole hardware, housedrops (including disconnected housedrops),
subscribers devices (including converters, encoders, decoders, transformers
behind television sets and fittings), headend hardware (including origination,
earth stations, transmission and distribution system), test equipment,
computers, vehicles (including trucks, tractors and trailers), machinery, office
equipment, furnishings, inventories and supplies, spare parts, new and used
testing equipment and tools (including those normally used for installation,
construction and maintenance) and other tangible personal property owned,
leased, used or held for use in the Business, other than any such property
listed as an Excluded Asset.

                  "Equivalent Basic Subscribers" means the number of active
subscribers equal to the quotient of (1) the aggregate revenues, excluding
taxes, earned by the System for Basic Services provided by the System during the
month last ended before the Closing Date from (a) billings to hotels, motels, or
other nonresidential customers (each a "Commercial Account"), (b) billings to
residential multiple dwelling units (each a "MDU"), and (c) billings to other
subscribers that are billed for such service on a bulk basis, divided by (2) the
System's regular monthly subscription rate for Full Basic Services (as described
in Section 4.1(q) of the Disclosure Schedule) for such month. For purposes of
the foregoing, there will be excluded: (i) any subscriber who is 45 days or more
past due in the payment of any amount payable to Seller, excluding late charges,
disconnect fees, and any amount that is the subject of a bona fide dispute; (ii)
any subscriber who has not paid at least two full months' payment for Basic
Services and all installation charges owed and due; (iii) any subscriber whose
service is pending disconnection for any reason; and (iv) any subscriber who was
solicited to purchase such services by any promotions or by offers of discounts
not described in Section 1.1(a) of the Disclosure Schedule. For purposes of this
Agreement, payments on account of monthly billings to a subscriber of the System
will be deemed to be due on the first day of the month during which the service
to which such billings relate is provided.

                  "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.

                  "Escrow Agent" means First Union National Bank.

                  "Escrow Agreement" means the Escrow Agreement to be executed
and delivered concurrently with the execution hereof by the Escrow Agent, Buyer,
Seller and the Partners, substantially in the form of Appendix 1 hereto.

                  "FCC" means the United States Federal Communications
Commission.

                  "Fiduciary" has the meaning set forth in ERISA Section 3(21).

                  "Final Order" means action by the FCC or the
Telecommunications Regulatory Board, as applicable, as to which (i) no request
for stay by the FCC or the Telecommunications Regulatory Board, as applicable,
of the action is pending, no such stay is in effect, and, if any deadline for
filing any such request is designated by statute or regulation, such deadline
has 
                                     - 5 -


<PAGE>

passed; (ii) no petition for rehearing or reconsideration of the action is
pending before the FCC or the Telecommunications Regulatory Board, as
applicable, and the time for filing any such petition has passed; (iii) the FCC
or the Telecommunications Regulatory Board, as applicable, does not have the
action under reconsideration on its own motion and the time for such
reconsideration has passed; and (iv) no appeal to a court, or request for stay
by a court, of the FCC's action or the Telecommunications Regulatory Board, as
applicable, is pending or in effect, and, if any deadline for filing any such
appeal or request is designated by statute or rule, it has passed.

                  "Fondo del Seguro" means the Puerto Rico Fondo del Seguro del
Estado.

                  "Franchise" means the existing or any future authorizations of
the Telecommunications Regulatory Board to construct and/or operate the System.

                  "GAAP" means United States generally accepted accounting
principles as in effect from time to time.

                  "Governmental Authority" means: (i) the United States of
America; (ii) any state, commonwealth, territory or possession of the United
States of America and any political subdivision thereof (including the
Commonwealth of Puerto Rico and including counties, municipalities and the
like); (iii) any foreign (as to the United States of America) sovereign entity
and any political subdivision thereof; or (iv) any agency, authority or
instrumentality of any of the foregoing, including any court, tribunal,
department, bureau, commission or board.

                  "Governmental Permits" means the Franchise and all approvals,
authorizations, permits, consents, licenses, certificates of compliance,
easements, registrations, qualifications, leases, variances and similar rights
held by Seller from any Governmental Authority and necessary or useful for the
operation of the System as now operated.

                  "Hacienda" means the Treasury Department of the Commonwealth
of Puerto Rico.

                  "Hazardous Substances" means any pollutant, contaminant,
chemical, industrial, toxic, hazardous or noxious substance or waste that is
regulated by any Governmental Authority, including: (a) any petroleum or
petroleum compounds (refined or crude), flammable substances, explosives,
radioactive materials or any other materials or pollutants that pose a hazard or
potential hazard to the Real Property or to Persons in or about the Real
Property or cause the Real Property to be in violation of any Environmental
Laws; (b) asbestos or any asbestos-containing material of any kind or character;
(c) polychlorinated biphenyls ("PCBs"), as regulated by the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq.; (d) any materials or substances
designated as "hazardous substances" pursuant to the Clean Water Act, 33 U.S.C.
Section 1251 et seq.; (e) any "economic poison," as defined in the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Section 135 et seq.; (f)
any "chemical substance," "new chemical substance" or "hazardous chemical
substance or mixture" pursuant to the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq.; (g) any "hazardous substances" pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
Section 9601 et seq.; (h) any "hazardous waste" pursuant to the Resource
Conservation and Recovery Act, 42 U.S.C. 



                                     - 6 -
<PAGE>

Section 6901 et seq.; and (i) any "extremely hazardous substance" pursuant to
Section 202 of the Emergency Planning and Community Right-to-Know Act of 1986,
as amended.

                  "HSR Act" means the Hart-Scott-Rodino antitrust Improvements
Act of 1976.

                  "Individual Subscriber" means any active single household
subscriber of the System that pays Seller for Basic Services, excluding (i) any
subscriber who is 45 days or more past due in the payment of any amount payable
to Seller, excluding late charges, disconnect fees, and any amount that is the
subject of a bona fide dispute; (ii) any subscriber who has not paid at least
two full months' payment for Basic Services and all installation charges owed
and due; (iii) any subscriber whose service is pending disconnection for any
reason; and (iv) any subscriber who was solicited to purchase such service by
any promotions or by offers or discounts not described in Section 1.1(a) of the
Disclosure Schedule. For purposes of this Agreement, payments on account of
monthly billings will be deemed to be due on the first day of the month during
which the service to which such billings relate is provided.

                  "Intangibles" mean all accounts, notes and other receivables,
claims, deposits, prepayments, refunds, causes of action, choses in action,
rights of recovery, rights of set-off, rights of recoupment and other intangible
assets owned, used or held for use in the Business (excluding any of the
Excluded Assets).

                  "Intellectual Property" means all: (a) patents, patent
applications and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions and extensions thereof; (b)
trademarks, service marks, trade dress, logos, trade names and corporate names
(including the name "Cable TV Del Noroeste" and any variation thereof), together
with all translations, adaptations, derivations and combinations thereof and
including all goodwill associated therewith, and all applications, registrations
and renewals in connection therewith; (c) all copyrightable works, all
copyrights and all applications, registrations and renewals in connection
therewith; (d) trade secrets and confidential business information (including
ideas, research and development, know-how, formulas, compositions, manufacturing
and production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information and
business and marketing plans and proposals); (e) all computer software
(including data and related documentation); (f) all other proprietary rights;
and (g) all copies and tangible embodiments thereof (in whatever form or
medium).

                  "Inventory" has the meaning given to that term in the Uniform
Commercial Code.

                  "Legal Requirement" means any statute, ordinance, law, rule,
regulation, code, plan, injunction, judgment, order, decree, ruling, charge or
other requirement, standard or procedure enacted, adopted or applied by any
Governmental Authority, including judicial decisions applying common law or
interpreting any other Legal Requirement.

                  "Liability" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.



                                     - 7 -
<PAGE>

                  "Material Consents" means the Required Consents listed under
the caption "Material Consents" on Section 4.1(c) of the Disclosure Schedule.

                  "Multiemployer Plan" has the meaning set forth in ERISA
Section 3(37).

                  "Ordinary Course" means the ordinary course of business of the
Business, consistent with past custom and practice (including with respect to
quantity and frequency).

                  "Normal Qualifications" means bankruptcy, insolvency and other
laws affecting creditors' rights generally, and general principles of equity.

                  "Pay TV" means premium programming services selected by and
sold to subscribers on a package or an a la carte basis for monthly fees in
addition to the fee for Basic Services.

                  "PBGC" means the Pension Benefit Guaranty Corporation.

                  "Permitted Encumbrances" mean the following Encumbrances: (a)
zoning laws and ordinances; (b) rights reserved to any Governmental Authority to
regulate the affected property; and (c) as to Real Property interests, any
easements, covenants, conditions, rights-of-way, servitudes, permits,
restrictions and minor imperfections or irregularities in title that do not
individually or in the aggregate materially and adversely interfere with the
conduct of the Business or the right or ability to own, use or operate the Real
Property or to convey good, marketable and indefeasible title to such Real
Property.

                  "Person" means any natural person, corporation, partnership,
trust, unincorporated organization, association, limited liability company,
Governmental Authority or other entity.

                  "Pole Attachment Authorities" means the Puerto Rico Telephone
Company and the Puerto Rico Electric Power Authority.

                  "Prohibited Transaction" has the meaning set forth in ERISA
Section 406 and Code Section 4975.

                  "Real Property" means all Assets consisting of realty or
interests therein, including appurtenances, improvements and fixtures located on
such realty, and any other interests in real property, including ownership
interests in Seller's offices and headend sites, leasehold interests, easements,
permits, rights-of-way and other similar rights and privileges used or held for
use in connection with the ownership and operation of the Business, other than
any such interests relating to Seller's office located in Crown, Pennsylvania.

                  "Reportable Event" has the meaning set forth in ERISA Section
4043.

                                     - 8 -
<PAGE>

                  "Required Consents" means all franchises, licenses,
authorizations, approvals and consents required under Governmental Permits,
Seller Contracts or otherwise for: (a) Seller to transfer the Assets to Buyer;
(b) Buyer to conduct the Business and to own, lease, use and operate the Assets
at the places and in the manner in which the Business is conducted as of the
date of this Agreement and on the Closing Date; and (c) Buyer to assume and
perform the Governmental Permits and Seller Contracts.

                  "Seller Contracts" means all contracts and agreements of
whatsoever kind or nature, other than Governmental Permits, pertaining to the
ownership, operation and maintenance of the Assets or the Business or used or
held for use in the Business, including all leases and installment sale and
other financing arrangements relating to vehicles used in the Business (whether
or not listed in Appendix 4 and required to be discharged at the Closing).

                  "Seller's or Partner's knowledge," or words of similar import,
means with respect to the fact, issue or subject that is the subject thereof,
(i) the actual knowledge of Peter Graf, Jan Fuellhart, Vivian J. Smith, Yvan
Rosa, Hiram Rodriguez, Carmen Hernandez, Lillian Roman, and Donna Rathfon and
(ii) unless expressly stated otherwise, the knowledge that such persons could
obtain by making inquiries that would be made by a reasonable person in the
cable television business for the purpose of ascertaining the relevant facts.

                  "Service Area" means the area in which Seller operates the
Business, specifically in and around the communities of Aguadilla, Aguada, Moca,
Isabela and Quebradillas, Puerto Rico, and all areas included in the
municipalities in which such communities lie.

                  "System" means the complete cable television reception and
distribution facilities used or useful in the conduct of the Business,
consisting of one headend, subscriber drops and associated electronic and other
equipment, and that is, or is capable of being without modification, operated as
an independent system without interconnections to other systems. Any systems
that are interconnected or that are served in total or in part by a common
headend will be considered a single System.

                  "Tax" means any federal, state, Commonwealth of Puerto Rico,
local or foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental, customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated or other tax of any kind whatsoever, including any interest,
penalties, fees, deficiencies, assessments, additions or other charges of any
nature with respect thereto, whether disputed or not.

                  "Tax Return" means any return, declaration, report, claim for
refund or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.



                                     - 9 -
<PAGE>

                  "Taxing Authority" means any Governmental Authority that
collects Taxes, including, but not limited to, the following Puerto Rico
Governmental Authorities: CRIM and Hacienda.

                  "Telecommunications Regulatory Board" means the Junta
Reglamentadora de Telecomunicaciones de Puerto Rico.

                  "Termination Date" means December 31, 1998 or a mutually
agreeable earlier date.

         1.2 Other Definitions. The following terms are defined in the Sections
or other places indicated:

Term                                                                   Section
----                                                                   -------
"Adjusted Final Adjustment Certificate"....................................2.3
"Adjustment Objection Period"..............................................2.3
"Buyer"...............................................................Preamble
"Closing"..................................................................2.6
"Closing Balance Sheet".................................................2.3(a)
"Closing Date".............................................................2.6
"Communications Act"....................................................4.1(i)
"Confidentiality Agreement".............................................4.1(u)
"Copyright Statements"....................................................5.14
"Current Items Amount".....................................................2.3
"Disclosure Schedule"......................................................4.1
"Eligible Accounts Receivable".............................................2.3
"Escrow Deposit"...........................................................2.4
"Escrow Funds".............................................................9.6
"Excluded Assets"..........................................................3.2
"Expenses".................................................................2.3
"Extended Termination Date"................................................2.6
"FAA"......................................................................4.1
"Final Adjustment Certificate".............................................2.3
"Final Adjustment Objection Period"........................................2.3
"Final Adjustments Report"..............................................2.3(b)
"Financial Statements"..................................................4.1(j)
"Indemnification Fund".....................................................2.4
"Most Recent Financial Statements"......................................4.1(j)
"Most Recent Fiscal Month End"..........................................4.1(j)
"Most Recent Fiscal Year End"...........................................4.1(j)
"Operating Adjustments".................................................2.3(a)
"Partners"............................................................Preamble
"Phase I Audit".........................................................6.1(k)
"Pole Attachment Agreements"............................................4.1(i)
"Purchase Price"...........................................................2.2
"Seller"..............................................................Preamble
"Survival Period"..........................................................9.1
"Taking"................................................................5.9(b)



                                     - 10 -
<PAGE>

                                   ARTICLE II
                                BASIC TRANSACTION


     2.1 Purchase and Sale of Assets. On and subject to the terms and conditions
of this Agreement, Buyer agrees to purchase from Seller and Seller agrees to
sell, transfer, convey and deliver to Buyer, all of Seller's right, title and
interest in, to and under the Assets at Closing, free and clear of all
Encumbrances (other than Permitted Encumbrances), for the consideration
specified below. Except as otherwise specifically provided in this Agreement,
all of the Assets are intended to be transferred to Buyer, whether or not
described in the Disclosure Schedule.

         2.2 Purchase Price. Buyer will pay to Seller at Closing cash in the
amount of $42 million ("Purchase Price"), subject to the adjustments set forth
in Section 2.3 and the escrow arrangements set forth in Section 2.4, in
accordance with Seller's wire transfer delivery instructions.

         2.3 Adjustments to the Purchase Price. (a) The Purchase Price will be
adjusted by the net amount of the credits and prorations made pursuant to this
Section 2.3 (the "Current Items Amount").

                  i. Except for the adjustment described in Section 5.11(b),
adjustments and prorations shall be made to reflect the principle that all
liabilities, expenses and income of a recurring nature attributable to the
Business and the Assets for the period on and prior to the close of business on
the Closing are for the account of Seller, and all liabilities, expenses and
income attributable to the Business and the Assets for the period subsequent to
the close of business on the Closing Date are for the account of Buyer, all as
determined in accordance with GAAP (without regard to any materiality threshold
otherwise applicable under GAAP). Items to be prorated shall include, but shall
not be limited to, prepaid assets for which Buyer will receive a benefit
following Closing, pole rents, franchise fees, taxes (other than income taxes or
those based on income, and other than corporate or partnership franchise taxes),
copyright royalty payments, fees and payments under cable service agreements,
power and utility fees and deposits, rentals and other payments under leases.
The amount of such adjustment to which Buyer or Seller is entitled shall be
deducted from or added to the amount payable to Seller pursuant to Section 2.2.

                  ii. Additionally, the Purchase Price shall be (A) increased by
an amount equal to the face amount of all Accounts Receivable no portion of
which is more than 60 days past due ("past due" being measured, for this
purpose, from the first day of the period for which the respective services
being billed were provided) and (B) reduced by (1) an amount equal to the sum of
all obligations and liabilities in respect to customers (including, without
limitation, prepayments, credit balances and deposits) which constitute Assumed
Liabilities and (2) any liabilities or other obligations of Seller relating to
the Business which constitute Assumed Liabilities which have matured or are
accrued on or prior to the Closing Date.



                                     - 11 -
<PAGE>

          (b) The Current Items Amount will be estimated in good faith by Seller
and will be set forth in a certificate (the "Initial Adjustment Certificate"),
together with a detailed statement of the calculation thereof, both reasonably
satisfactory to Buyer, delivered to Buyer not later than three business days
prior to the Closing Date. The Initial Adjustment Certificate shall constitute
the basis on which the Current Items Amount paid at Closing is calculated. On or
before ninety (90) days after the Closing Date, Buyer shall deliver to Seller a
final calculation of the Current Items Amount calculated as of the Closing Date,
together with such supporting documentation as Seller may reasonably request, in
a certificate (the "Final Adjustment Certificate"), which shall evidence in
reasonable detail the nature and extent of each adjustment. If Seller does not
object to the Final Adjustment Certificate by delivering to Buyer a reasonably
detailed written explanation of its objections thereto within twenty (20) days
after the Final Adjustment Certificate is delivered (the "Final Adjustment
Objection Period"), Seller or Buyer, as appropriate, shall pay to the other an
amount equal to the amount by which the Current Items Amount as set forth in the
Final Adjustment Certificate differs from the Current Items Amount as estimated
in the Initial Adjustment Certificate. If Seller timely objects to the Final
Adjustment Certificate within the Final Adjustment Objection Period, Seller and
Buyer shall attempt in good faith to resolve such objections within twenty (20)
days after Buyer's receipt of Seller's written objections, failing which the
parties shall appoint a mutually agreeable independent accounting firm
knowledgeable in the cable television business to review the Final Adjustment
Certificate and Seller's written objections thereto, and make adjustments to the
Final Adjustment Certificate (the "Adjusted Final Adjustment Certificate")
within thirty (30) days after its appointment. The fees and expenses of such
firm shall be shared equally by the Parties. The Adjusted Final Adjustment
Certificate shall be final and binding. Seller or Buyer, as appropriate, shall
pay to the other within five (5) days after resolving Seller's objections or
after delivery of the Adjusted Final Adjustment Certificate, as the case may be,
an amount equal to the amount by which the Current Items Amount as finally
agreed upon by the parties or as set forth in the Adjusted Final Adjustment
Certificate, as the case may be, differs from the Current Items Amount as
estimated in the Initial Adjustment Certificate.

         2.4 Escrow Arrangements. Not later than the second Business Day after
the date of this Agreement, Buyer will deposit the sum of $1,000,000 (the
"Escrow Deposit") with the Escrow Agent. At the Closing, the amount of the
Escrow Deposit, together with interest and income thereon, will be credited
against the Purchase Price, but $1,000,000 thereof (the "Indemnification Fund")
will be retained by the Escrow Agent. The Escrow Deposit will secure Buyer's
obligation hereunder to complete the Closing, and the Indemnification Fund will
secure the obligations of Seller and the Partners under Section 9.2 in
accordance with Section 9.6. The Escrow Deposit and the Indemnification Fund
will be held in escrow pursuant to the terms and conditions of the Escrow
Agreement.

         2.5 Allocation of Purchase Price. The Purchase Price will be allocated
among the Assets as set forth in Appendix 2. Buyer, Seller and the Partners
agree to be bound by the allocation and will not take any position inconsistent
with such allocation and will file all returns and reports with respect to the
transactions contemplated by this Agreement, including all federal, state,
Commonwealth of Puerto Rico and local Tax Returns, on the basis of such
allocations.



                                     - 12 -
<PAGE>

         2.6 Closing. The closing of the transactions contemplated by this
Agreement ("Closing") shall take place at the offices of Drinker Biddle & Reath
LLP, Philadelphia, Pennsylvania, or such other location as the Parties may
agree, on the fifth Business Day following the satisfaction or waiver of the
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than those conditions with respect to actions the
respective Parties will take at the Closing itself), or such other date as the
Parties may mutually determine. The day on which the Closing actually occurs is
referred to herein as the "Closing Date," but unless the Closing Date is the
last day of a calendar month, the Parties will treat the Closing as having
occurred at the opening of business on the first day of the calendar month in
which the Closing occurs (both for purposes of Section 2.3 and for all other
purposes), and references to the "Closing Date" shall be construed accordingly.
The Closing Date shall be no later than the Termination Date; provided, that if
the Closing shall not have occurred by the Termination Date due solely to the
failure to obtain the consent of the assignment of the Franchise through no
fault of any of the Parties, the Termination Date shall be extended to March 31,
1999 (the "Extended Termination Date").

                                  ARTICLE III
                     ASSUMED LIABILITIES AND EXCLUDED ASSETS


         3.1 Assignment and Assumption. On and subject to the terms and
conditions of this Agreement, Buyer agrees to assume and become responsible for
all of the Assumed Liabilities at Closing. Buyer will not assume, nor will it be
deemed to have assumed, and will not pay, perform, discharge or be liable in any
manner whatsoever for, and will have no responsibility with respect to: (i) any
obligation or Liability of the Business, the System, Seller or any of its
Affiliates not included within the definition of Assumed Liabilities; or (ii)
any Liabilities or obligations associated with the Excluded Assets (including
Seller Contracts that are Excluded Assets), in either case whether arising
before, at or after the Closing Date, whether arising out of any written or oral
agreement or understanding or otherwise.

         3.2 Excluded Assets. The Excluded Assets, which will be retained by
Seller, will consist of the following: (a) Cash; (b)(i) Seller's copies of tax
returns and other documents relating to the Business which Seller is required by
law to keep in its possession, for four full fiscal years immediately preceding
the Closing, copies of which will be furnished by Seller to and at the
reasonable request of the Buyer for a period of four years after the Closing
Date, (ii) all books or records of Seller (including those which pertain to the
accounting and tax aspects of the Seller or Partners prior to the Closing Date),
which do not relate to the operation of the Business, (iii) certificates of
deposit with various banking institutions, (iv) all documents relating to the
legal existence of Seller or Partners, (v) all agreements other than those
constituting an Assumed Liability, (vi) all assets, properties and rights of
Seller or Partners not related to the Business, (vii) cash equivalents, (viii)
insurance policies, bonds, letters of credit, or other similar items, and any
cash surrender value in regard thereto, (ix) any and all claims, rights and
interests in and to any refunds for federal, state or local franchise, income or
other taxes or fees of any nature whatsoever for any period prior to the Closing
Date (unless there shall be an increase in the Purchase Price on 



                                     - 13 -
<PAGE>

account of such item under Section 2.3), (x) any chose in action owned by Seller
not related to any of the Assets, (xi) the names or trade names "Cable Systems
USA", and any related trade names, trademarks, service marks or logo and any
derivation thereof, and (xii) all assets of Seller located at Seller's office in
Crown, Pennsylvania, other than the Books and Records (Seller and the Partners
hereby representing and warranting that no asset located in Crown, Pennsylvania
(other than the Books and Records), is necessary for the conduct of the Business
as now conducted); and (c) the assets described in Appendix 3.


                                   ARTICLE IV
                         REPRESENTATIONS AND WARRANTIES


         4.1 Representations and Warranties of Seller and the Partners. Seller
and the Partners jointly and severally represent and warrant to Buyer that the
statements contained in this Section 4.1 are correct and complete as of the date
of this Agreement (or, to the extent that any such statement expressly refers to
an earlier date, such statement was correct and complete as of such date),
except as set forth in the disclosure schedule accompanying this Agreement and
initialed by the Parties (the "Disclosure Schedule"). The Disclosure Schedule
will be arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in this Section 4.1.

                  (a) Organization and Qualification; Ownership of Seller.
Seller is a general partnership duly organized, validly existing and in good
standing under the laws of the State of Delaware, with all requisite partnership
power and authority to own, lease and use the Assets as they are currently
owned, leased and used and to conduct the Business as it is currently conducted.
Each of the Partners is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, with all requisite
corporate power and authority to own its interest in Seller and to conduct its
business as currently conducted. Seller is, and each of the Partners is, duly
qualified or licensed to do business under the laws of the Commonwealth of
Puerto Rico to the extent required and in each other jurisdiction in which the
character of the properties owned, leased or operated by it or the nature of the
activities conducted by it make such qualification necessary, except any such
jurisdiction where the failure to be so qualified or licensed will not have an
adverse effect on Seller, the Partners, the Assets or the Business or on the
validity, binding effect or enforceability of this Agreement. The Partners are
the only partners in Seller, and no other Person has any right, contingent or
otherwise, to acquire an ownership interest in Seller. J&J has the right to less
than 50 percent of the profits of Seller and less than 50 percent of the assets
of Seller upon liquidation. No stockholder of PS&G (or group of stockholders of
PS&G that would be included in the same "person," within the meaning of the HSR
Act and the rules, regulations and interpretations thereunder) owns 50 percent
or more of the "voting securities" (within the meaning of the HSR Act and the
rules, regulations and interpretations thereunder) of PS&G or has the
contractual power presently to designate 50% or more of the directors of PS&G.

                  (b) Authority and Validity. Seller has, and each of the
Partners has, all requisite corporate or partnership power and authority, as the
case may be, to execute and deliver, 



                                     - 14 -
<PAGE>

to perform its obligations under, and to consummate the transactions
contemplated by, this Agreement. The execution and delivery by Seller and the
Partners of, the performance by them of their obligations under, and the
consummation by them of the transactions contemplated by, this Agreement have
been duly authorized by all requisite partnership and corporate action of Seller
and the Partners respectively. This Agreement has been duly executed and
delivered by Seller and the Partners and is the valid and binding obligation of
Seller and the Partners, enforceable against each of them in accordance with its
terms, except insofar as enforceability may be affected by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect affecting creditors' rights generally or by principles
governing the availability of equitable remedies.

                  (c) No Breach or Violation. Subject to obtaining the Required
Consents (including Required Consents relating to Governmental Permits), all of
which are listed on Section 4.1 (c) of the Disclosure Schedule, and subject to
compliance with the HSR Act, the execution, delivery and performance of this
Agreement by Seller and the Partners will not: (i) violate any provision of the
partnership agreement of Seller or the certificate of incorporation or by-laws
of either of the Partners; (ii) violate any Legal Requirement; (iii) require any
consent, approval or authorization of, or any filing with or notice to, any
Person; or (iv)(A) violate, conflict with or constitute a breach of or default
under, (B) permit or result in the termination, suspension or modification of,
(C) result in the acceleration of (or give any Person the right to accelerate)
the performance of Seller or either of the Partners under, or (D) result in the
creation or imposition of any Encumbrance under, any Seller Contract or any
other instrument evidencing any of the Assets or any instrument or other
agreement to which Seller or either of the Partners is a party or by which
Seller or either of the Partners or any of the assets of Seller or either of the
Partners is bound or affected, except for purposes of this clause (iv) such
violations, conflicts, breaches, defaults, terminations, suspensions,
modifications and accelerations as would not, individually or in the aggregate,
have a material adverse effect on the System, the Business, Seller or the
Partners.

                  (d) Title to Real Property Assets. Seller has, and on the
Closing Date Seller will have, exclusive, good and marketable title to, or a
valid leasehold interest in, the Real Property Assets, free and clear of any and
all Encumbrances of any kind or nature, except those set forth on Appendix 4,
all of which will be discharged prior to Closing and except for Permitted
Encumbrances.

                  (e) Equipment and Other Tangible Assets. All of the Assets
consisting of Equipment and other tangible Assets with a book value of $5,000 or
more are described in Section 4.1(e) of the Disclosure Schedule. Seller has, and
on the Closing Date Seller will have, exclusive, good and marketable title to
such tangible Assets, all of which are free and clear of all Encumbrances of any
kind or nature, except for those Encumbrances set forth on Appendix 4, all of
which shall be discharged prior to Closing, and except for Permitted
Encumbrances. None of the Equipment and other tangible Assets are leased by
Seller from any other Person except under Seller Contracts described in Section
4.1(e) of the Disclosure Schedule. The Equipment and other tangible Assets
constitute all of the tangible assets necessary to permit Buyer to conduct the
Business substantially as it is being conducted on the date of this Agreement in
compliance with all Legal Requirements and Governmental Permits and to perform
all the Assumed Liabilities. 



                                     - 15 -
<PAGE>

Attached as Appendix 5 are copies of the latest proof of performance tests and
cumulative leakage index reports for the System. All Equipment and other
tangible Assets are suitable and adequate for continued use in the manner in
which they are currently used.

                  (f) Real Property.

                           i. Section 4.1(f)(i) of the Disclosure Schedule lists
and describes briefly all Real Property that Seller owns. With respect to each
such parcel of owned Real Property:

                                    (A) Seller has, and on the Closing Date
Seller will have, good, marketable and valid title in pleno dominio to the
parcel of Real Property, free and clear of any and all Encumbrances of any kind
or nature, other than Permitted Encumbrances, and the valid and enforceable
right to use and possess such parcel of Real Property;

                                    (B) there are no pending or, to Seller's or
the Partners' best knowledge, threatened condemnation proceedings, lawsuits, or
administrative actions relating to the Real Property or other matters affecting
materially and adversely the current use, occupancy or value thereof;

                                    (C) the legal description of the parcel
contained in the deed therefor describes such parcel; the buildings and
improvements are located within the boundary lines of the described parcels of
land to the best of Seller's and the Partners' knowledge, are not in violation
of applicable setback requirements, zoning laws and ordinances (and none of the
properties or buildings or improvements thereon are subject to "permitted
non-conforming structure" classifications), and, to the best of Seller's and the
Partners' knowledge, do not encroach on any easement that may burden the land,
and the land does not serve any adjoining property for any purpose inconsistent
with the use of the land; and the property is not located within any flood plain
or subject to any similar type restriction for which any permits or licenses
necessary to the use thereof have not been obtained;

                                    (D) all facilities have received all
approvals of Governmental Authorities (including licenses and permits) required
in connection with the ownership or operation thereof and have been operated and
maintained in all material respects in accordance with applicable Legal
Requirements and all restrictive covenants, if any, or other Encumbrances
affecting all or part thereof;

                                    (E) except as set forth in Section 4.1(f)(i)
of the Disclosure Schedule, there are no leases, subleases, licenses,
concessions or other agreements, written or oral, granting to any party or
parties the right of use or occupancy of any portion of the parcel of Real
Property;

                                    (F) there are no outstanding options or
rights of first refusal to purchase the parcel of Real Property, or any portion
thereof or interest therein;



                                     - 16 -
<PAGE>

                                    (G) there are no parties (other than Seller)
in possession of the parcel of Real Property, other than tenants under any
leases disclosed in Section 4.1(f)(i) of the Disclosure Schedule who are in
possession of space to which they are entitled; and

                                    (H) all facilities located on the parcel of
Real Property are supplied with utilities and other services necessary for the
operation of such facilities such as electricity, water, telephone, sanitary
sewer or septic tank, all of which services comply in all material respects with
all applicable Legal Requirements.

                           ii. Seller does not lease, rent or otherwise use or
have the right to use (pursuant to easements, rights-of-way, licenses or the
like) any Real Property that it does not own.

                  (g) Environmental Matters.

                           i. The Real Property currently complies in all
material respects with and, to the best of Seller's and the Partners' knowledge,
has previously been operated in compliance with, all Environmental Laws; neither
Seller nor either of the Partners has generated, released, stored, used,
treated, handled, discharged or disposed of any Hazardous Substances at, on,
under, in or about, or in any other manner affecting, the Real Property in
violation of any Environmental Law, transported any Hazardous Substances to or
from the Real Property or discharged any Hazardous Substances from the Real
Property into any body of water, directly or indirectly, in violation of any
Environmental Law, and, to the best of Seller's and the Partners' knowledge, no
other present or previous owner, tenant, occupant or user of the Real Property
or any other Person has committed or suffered any of the foregoing. To the best
of Seller's and the Partners' knowledge, no release of Hazardous Substances
outside the Real Property has entered or threatens to enter the Real Property,
nor is there any pending or threatened claim based on Environmental Laws that
arises from any condition of the land surrounding the Real Property. No claim or
investigation based on Environmental Laws that relates to the Real Property or
any operations on it (A) has been asserted or conducted in the past or is
currently pending against or with respect to Seller or either of the Partners;
(B) to Seller's and the Partners' best knowledge, has been asserted or conducted
in the past or is currently pending against or with respect to any other Person;
or (C) to Seller's and the Partners' best knowledge, is threatened or
contemplated.

                           ii. To Seller's and the Partners' best knowledge: (A)
no underground storage tanks are currently or have been located on the Real
Property; and (B) the Real Property has not been used at any time as a gasoline
service station or any other facility for storing, pumping, dispensing or
producing gasoline or any other petroleum products or wastes. There are no
incinerators or cesspools on the Real Property and all waste is discharged into
septic tanks that have been designed, built and operated in accordance with all
applicable Legal Requirements.

                           iii. Seller has provided Buyer with complete and
correct copies of (A) all studies, reports, surveys or other materials in
Seller's or either of the Partners' possession relating to the presence or
alleged presence of Hazardous Substances at, on or affecting the Real Property;
(B) all notices or other materials in Seller's or either of the Partners'
possession that were received from any Governmental Authority having the power
to administer or enforce any 



                                     - 17 -
<PAGE>

Environmental Laws relating to current or past ownership, use or operation of
the Real Property or activities at the Real Property; and (C) all materials in
Seller's or either of the Partners' possession relating to any claim, allegation
or action by any private third party under any Environmental Law.

                  (h) Intellectual Property.

                           i. Seller owns or has the right to use, and on the
Closing Date Seller will own or have the right to use, pursuant to license,
sublicense, agreement or permission, all Intellectual Property necessary for the
operation of the Business as currently conducted. Provided any necessary consent
is obtained, each item of Intellectual Property owned or used by Seller
immediately prior to the Closing hereunder will be owned or available for use by
Buyer on identical terms and conditions immediately subsequent to the Closing
hereunder. Seller has taken all necessary and desirable action to maintain and
protect each item of Intellectual Property that it owns or uses in the Business.

                           ii. To the best of Seller's and the Partners'
knowledge, neither Seller nor either of the Partners has interfered with,
infringed upon, misappropriated or otherwise come into conflict with, and the
operation of the Business as currently conducted does not, to the best knowledge
of Seller and the Partners, violate or infringe upon, any Intellectual Property
rights of third parties, and neither Seller nor either of the Partners has ever
received any charge, complaint, claim, demand or notice alleging any such
interference, infringement, misappropriation or violation (including any claim
that either Seller or either of the Partners must license or refrain from using
any Intellectual Property rights of any third party). To the best knowledge of
Seller and the Partners, no third party has interfered with, infringed upon,
appropriated or otherwise come into conflict with any Intellectual Property
rights of Seller.

                           iii. Seller does not possess any patent, patent
right, registered trademark or copyright and is not a party to any license or
royalty agreement with respect to any patent, trademark or copyright except for
licenses respecting program material and obligations under the Copyright Act of
1976 applicable to cable television systems generally. Seller has made all
required filings with, and all required payments to, the United States Copyright
Office, and is otherwise in material compliance with all applicable rules and
regulations of the United States Copyright Office. Seller has delivered to Buyer
complete and correct copies of all statements of account, correspondence and
other filings for the past three and one-half years, made or filed pursuant to
copyright rules and regulations with respect to the Business.

                           iv. Section 4.1(h)(iv) of the Disclosure Schedule
identifies each license, agreement or other permission that Seller has granted
to any third party with respect to any of its Intellectual Property (together
with any exceptions). Seller has delivered to Buyer correct and complete copies
of all such licenses, agreements and permissions (as amended to date). Section
4.1(h)(iv) of the Disclosure Schedule also identifies each trade name or
unregistered trademark used by Seller in connection with the Business. With
respect to each item of Intellectual Property required to be identified in
Section 4.1(h)(iv) of the Disclosure Schedule:



                                     - 18 -
<PAGE>

                                    (A) Seller possesses all right, title and
interest in and to the item, free and clear any and all Encumbrances of any kind
or nature other than Permitted Encumbrances;

                                    (B) to the best knowledge of Seller and the
Partners, the item is not subject to any outstanding injunction, judgment,
order, decree, ruling or charge;

                                    (C) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or, to the best of
Seller's and the Partners' knowledge, is threatened that challenges the
legality, validity, enforceability, use or ownership of the item; and

                                    (D) neither Seller nor either of the
Partners has ever agreed to indemnify any Person for or against any
interference, infringement, misappropriation or other conflict with respect to
the item, except as set forth in the applicable agreement relating to such item.

                           v. Section 4.1(h)(v) of the Disclosure Schedule
identifies each item of Intellectual Property that any third party owns and that
Seller uses pursuant to license, sublicense, agreement or permission. Seller has
delivered to Buyer correct and complete copies of all such licenses,
sublicenses, agreements and permissions (as amended to date). With respect to
each item of Intellectual Property required to be identified in Section
4.1(h)(v) of the disclosure Schedule:

                                    (A) the license, sublicense, agreement or
permission covering the item is legal, valid, binding, enforceable and in full
force and effect, subject to the Normal Qualifications;

                                    (B) subject to obtaining any Required
Consent, the license, sublicense, agreement or permission will continue to be
legal, valid, binding, enforceable and in full force and effect following the
consummation of the transaction contemplated hereby (subject to the Normal
Qualifications);

                                    (C) to the best of Seller's and the
Partners' knowledge, no party to the license, sublicense, agreement or
permission is in breach or default, and to the best of Seller's and the
Partners' knowledge, no event has occurred which with notice or lapse of time
would constitute a breach or default or permit termination, modification or
acceleration thereunder;

                                    (D) to the best of Seller's and the
Partners' knowledge, no party to the license, sublicense, agreement or
permission has repudiated any material provision thereof;

                                    (E) with respect to each sublicense, the
representations and warranties set forth in subsections (A) through (D) above
are true and correct with respect to the underlying license, to the best of
Seller's and the Partners' knowledge;

                                     - 19 -
<PAGE>

                                    (F) to the best of Seller's and the
Partners' knowledge, the underlying item of Intellectual Property is not subject
to any outstanding injunction, judgment, order, decree, ruling or charge;

                                    (G) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or, to the best of
Seller's and the Partners' knowledge, is threatened that challenges the
legality, validity or enforceability of the underlying item of Intellectual
Property; and

                                    (H) neither Seller nor either of the
Partners has granted any sublicense or similar right with respect to the
license, sublicense, agreement or permission.

                           vi. To the best of Seller's and the Partners'
knowledge, neither Seller nor either of the Partners will interfere with,
infringe upon, misappropriate, or otherwise come into conflict with, any
Intellectual Property rights of third parties as a result of Seller's continued
operation of the Business until the Closing Date as currently conducted and as
currently proposed to be conducted.

                  (i) Compliance.

                           i. Except as set forth in Section 4.1(i) of the
Disclosure Schedule, Seller and the Partners have complied in all material
respects with all Legal Requirements of all Governmental Authorities (including
the Communications Act of 1934, as amended, and the FCC rules and regulations
promulgated thereunder) and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand or notice has been filed, commenced or, to the
best of Seller's and the Partners' knowledge, threatened against Seller or
either of the Partners alleging any failure to so comply, and, to the best of
Seller's and the Partners' knowledge, without independent investigation, there
is no Basis for any claim that such a failure to comply exists, except as set
forth in Section 4.1(i) of the Disclosure Schedule.

                           ii. Complete and correct copies of the Governmental
Permits currently in effect, all of which are listed in Section 4.l(i) of the
Disclosure Schedule, have been delivered by Seller to Buyer. Except as set forth
in Section 4.1(i) of the Disclosure Schedule, the Governmental Permits are the
only franchises, licenses and authorizations necessary for Seller and the
Partners to operate the System lawfully and in the manner in which it is
presently being operated. Seller and the Partners have timely filed with the
appropriate Governmental Authorities all appropriate requests for renewal under
the Communications Act of 1934. Each of Governmental Permits is currently in
full force and effect and constitutes the valid and binding obligation of the
respective Governmental Authority, and is legally enforceable against such
Governmental Authority in accordance with its terms, subject to Normal
Qualifications. Except as set forth in Section 4.1(i) of the Disclosure
Schedule, neither Seller nor either of the Partners has received any notice of
any legal action, governmental proceeding or investigation, pending or
threatened, to terminate, suspend or modify any Governmental Permit, and, to the
best of Seller's and the Partners' knowledge, without independent investigation,
there is no Basis for any of the foregoing.



                                     - 20 -
<PAGE>

                           iii. Section 4.1(i) of the Disclosure Schedule sets
forth a true and complete list of the current channel alignment (including all
broadcast stations and satellite services carried, cable channel assignment,
frequencies utilized and pilot frequencies) for the System.

                           iv. Seller has filed offset notifications for or
obtained appropriate waivers for all aeronautical frequencies in use by the
System. Seller's use of such aeronautical frequencies is in material compliance
with all applicable FCC rules, regulations and requirements. The System is
presently carrying channels and is providing reception on all such channels in
material compliance with the technical standards set forth in all applicable FCC
rules, regulations and requirements. Section 4.1(i) of the Disclosure Schedule
sets forth a true and complete list of such frequencies, the geographic
coordinates of the approximate center of the System's service areas and the
authorized radius of the System.

                           v. Except as set forth in Section 4.1(i) of the
Disclosure Schedule, all material royalties, fees, reports, schedules and
returns relating to the System which are required to be filed by Seller or
either of the Partners with and paid to any Governmental Authority or any
utility have been filed and paid.

                           vi. All necessary Federal Aviation Administration
("FAA") and FCC approvals, registrations and filings with respect to the
System's towers have been obtained, and the towers have been maintained in
material compliance with the rules, policies and regulations of the FAA and the
FCC. Section 4.1(i) of the Disclosure Schedule contains a true and complete list
of each of the System's towers and copies of all relevant FAA determinations
with respect thereto.

                           vii. Except as set forth in Section 4.1(i) of the
Disclosure Schedule, Seller is, and each of the Partners is, in material
compliance with the rules and regulations of the FCC, the rules and regulations
of the United States Copyright Office, the Copyright Act and the Communications
Act of 1934, as amended by the Cable Communications Policy Act of 1984 and by
the Cable Television Consumer Protection and Competition Act of 1992 and the
1996 Telecommunications Act (collectively, the "Communications Act"). Seller and
the Partners have provided appropriate notices to subscribers of their right to
privacy in accordance with the requirements of the Communications Act. Except as
set forth in Section 4.1(i) of the Disclosure Schedule, Seller and the Partners
are currently in material compliance with 47 C.F.R. Sections 76.92 and 76.151
with respect to network non-duplication protection and syndicated exclusivity,
and Seller and the Partners are not aware of any complaint filed with the FCC
alleging Seller's non-compliance with such regulations.

                           viii. All of the communities to which Seller provides
service have been registered with the FCC. Section 4.1(i) of the Disclosure
Schedule contains a true and complete list of each such community and its
corresponding community unit identification number. Each employment unit
operated by Seller, including headquarters offices, is currently and has been in
compliance with the equal employment opportunity requirements of Section 554 of
the Communications Act and the FCC's implementing rules and regulations, and
(except as disclosed 



                                     - 21 -
<PAGE>

in Section 4.1(i) of the Disclosure Schedule) the FCC has not for any employment
period failed to certify an employment unit.

                           ix. Except as set forth in Section 4.1(i) of the
Disclosure Schedule hereto, all broadcast television station signals carried on
the System, excluding superstations carried pursuant to 47 C.F.R. Section 76.64,
are being carried pursuant to a must carry election, and no broadcast television
signals are being carried pursuant to retransmission consent agreements. Except
as set forth in Section 4.1(i) of the Disclosure Schedule, there is no dispute
pending or, to Seller's or the Partners' knowledge, threatened with respect to
the carriage or channel position of any broadcast station.

                           x. Section 4.1(i) of the Disclosure Schedule sets
forth all of the pole attachment authorizations and agreements and the
respective current attachment fees (the "Pole Attachment Agreements") presently
held by Seller and the public utility, municipality or other authority which has
granted such authorizations. True, complete and correct copies of each written
agreement, ordinance, resolution, license and permit granting such Pole
Attachment Agreements have been furnished by Seller to Buyer, and Section 4.1(i)
of the Disclosure Schedule contains an accurate and complete description of any
of the foregoing that are not in writing. Except as set forth in Section 4.1(i)
of the Disclosure Schedule, all of the Pole Attachment Agreements are validly
existing, legally enforceable obligations of the parties thereto, subject to the
Normal Qualifications, and Seller is validly and lawfully operating the System
under the Pole Attachment Agreements. Except as set forth in Section 4.1(i) of
the Disclosure Schedule, Seller has duly complied with all of the terms and
conditions of the Pole Attachment Agreements in all material respects and has
not done or performed any act which would invalidate or materially impair its
rights under the Pole Attachment Agreements. There is no pending assertion or
claim made against Seller or either of the Partners that operations pursuant to
any Pole Attachment Agreement have been improperly conducted or maintained.
Except as set forth in Section 4.1(i) of the Disclosure Schedule, there is no
claim or action, either pending or, to the best knowledge of Seller and the
Partners, threatened against Seller or either of the Partners by any Pole
Attachment Authority, or any third party, which would materially and adversely
affect the rights of Seller, or materially increase the costs of Seller, under
the Pole Attachment Agreements. The Pole Attachment Agreements cover all pole
attachments currently used by the System. Except as described in Section 4.1(i)
of the Disclosure Schedule, all rearrangement work on the poles and all pole
changeout work requested of Seller prior to the date hereof by any Pole
Attachment Authority has been completed or will be completed on or before the
Closing Date.

                  (j) Financial Statements. Section 4.1(j) of the Disclosure
Schedule contains the following financial statements (collectively, "Financial
Statements"): (i) Seller's audited balance sheet and statements of operations,
changes in partners' deficit and cash flows as of and for the fiscal years ended
December 31, 1995 through December 31, 1997 (the latter herein called the "Most
Recent Fiscal Year End"); and (ii) Seller's unaudited balance sheet and
statements of income, operations, changes in partners' deficit and cash flows
(the "Most Recent Financial Statements") as of and for the three months ended
March 31, 1998 (the "Most Recent Fiscal Month End"). The Financial Statements
(including the notes thereto) have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered thereby and 



                                     - 22 -
<PAGE>

fairly present Seller's financial position, results of operations and cash flows
as of the dates and for the periods indicated, subject in the case of the
unaudited Financial Statements only to normal year-end adjustments (none of
which will be material in amount) and the absence of footnotes.

                  (k) Events Subsequent to Most Recent Fiscal Year End. Since
the Most Recent Fiscal Year End and except as disclosed in Section 4.1(k) of the
Disclosure Schedule, there has not been any material, adverse change in the
business, condition (financial or otherwise) operations, results of operations
or prospects of Seller or the Business, other than changes affecting the cable
television industry generally. Without limiting the generality of the foregoing,
since that date: (i) Seller has not sold, leased, transferred or assigned any
assets of Seller or the Business, tangible or intangible except in the Ordinary
Course; (ii) Seller has not entered into any agreement, contract, lease or
license (or series of related agreements, contracts, leases and licenses) either
involving more than $7,500 or outside the Ordinary Course; (iii) no third party
has accelerated, terminated, modified or canceled any agreement, contract, lease
or license (or series of related agreements, contracts, leases and licenses)
involving more than $7,500 to which Seller is a party or by which Seller is
bound; (iv) Seller has not imposed any Encumbrance upon any assets of the
Business, tangible or intangible; (v) Seller has not made any capital
expenditure (or series of related expenditures) either involving more than
$7,500 or outside the Ordinary Course; (vi) Seller has not made any capital
investment in, any loan to, or any acquisition of the securities or assets of,
any other Person (or series of related capital investments, loans or
acquisitions) either involving more than $7,500 or outside the Ordinary Course;
(vii) Seller has not issued any note, bond or other debt security or created,
incurred, assumed or guaranteed any indebtedness for borrowed money or
capitalized lease obligations either involving more than $7,500 singly or
$12,500 in the aggregate; (viii) Seller has not delayed or postponed the payment
of accounts payable and other Liabilities outside the Ordinary Course; (ix)
Seller has not canceled, compromised, waived or released any right or claim (or
series of related rights and claims) either involving more than $7,500 or
outside the Ordinary Course; (x) Seller has not granted any license or
sublicense of any rights under or with respect to any Intellectual Property;
(xi) there has been no change made or authorized in the partnership agreement of
Seller or the certificate of incorporation or by-laws of either Partner; (xii)
Seller has not issued, sold or otherwise disposed of any of its partnership
interest or granted any options, warrants, or other rights to purchase or obtain
any interest therein; (xiii) Seller has not set aside or paid any distribution
to its partners or redeemed, purchased or otherwise acquired any of its
partnership interests from any of its partners; (xiv) Seller has not experienced
any damage, destruction or loss (whether or not covered by insurance) to any
property of the Business; (xv) Seller has not made any loans to, or entered into
any other transaction with, any employees of the Business or any of Seller's
current or former officers or partners; (xvi) Seller has not entered into any
employment contract or collective bargaining agreement, written or oral, nor
modified the terms of any existing contract or agreement with any employees of
the Business; (xvii) Seller has not granted any increase in the base
compensation of any employees of the Business outside the Ordinary Course;
(xviii) Seller has not adopted, amended, modified or terminated any bonus,
profit-sharing, incentive, severance or other plan, contract or commitment for
the benefit of employees of the Business (or taken any such action with respect
to any other Employee Benefit Plan); (xix) Seller has not made any other change
in employment terms for any employees of the Business outside the Ordinary
Course; (xx) Seller has not paid any amount to any third party with respect to
any Liability or obligation (including any costs and expenses Seller or either
of the



                                     - 23 -
<PAGE>

Partners has incurred or may incur in connection with this Agreement and the
transactions contemplated hereby) that would not constitute an Assumed Liability
if in existence as of the Closing; (xxi) Seller has not changed the rates
charged for Basic Services; (xxii) Seller has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course; (xxiii)
there has not been any other material occurrence, event, incident, action,
failure to act or transaction outside the Ordinary Course involving the Business
or Seller; and (xxiv) Seller has not committed to any of the foregoing. Since
the Most Recent Financial Statements, there has been no material adverse change
in, and no event has occurred which is likely, individually or in the aggregate,
to result in any material adverse change in, the business, operations, assets,
prospects or condition (financial or otherwise) of the Business.

                  (l) Undisclosed Liabilities. Except as set forth in Schedule
4.(l) of the Disclosure Schedule, Seller does not have, and on the Closing Date
Seller will not have, any Liability and, to the best of Seller's and the
Partners' knowledge, without independent investigation, there is no Basis for
any present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand against Seller or either of the Partners giving rise
to any Liability, except for: (i) Liabilities set forth on the face of the
balance sheet in the Most Recent Financial Statements (rather than in any notes
thereto); and (ii) Liabilities that have arisen after the Most Recent Financial
Statements in the Ordinary Course (none of which results from, arises out of,
relates to, is in the nature of, or was caused by any breach of contract, breach
of warranty, tort, infringement or violation of any Legal Requirement).

                  (m) Legal Proceedings. Except as set forth in Section 4.1(m)
of the Disclosure Schedule, there are no outstanding judgments against or
otherwise affecting Seller, either of the Partners, the System, the Business or
the Assets other than those affecting the cable television industry generally.
There is no order of any Governmental Authority and no action, suit, complaint,
proceeding or investigation, judicial, administrative or otherwise, that is
pending or, to the best knowledge of Seller and the Partners, threatened and
which, if adversely determined, might materially and adversely affect the
System, the Business or the Assets (other than those affecting the cable
television industry generally) or which challenges the validity or propriety of
any of the transactions contemplated by this Agreement. To the best of Seller's
and the Partners' knowledge, without independent investigation, there is no
Basis upon which any such action, suit, proceeding or investigation could be
brought or initiated.

                  (n) Tax Returns; Other Reports. Seller and the Partners have
duly and timely filed in proper form all Tax Returns for all Taxes required to
be filed with the appropriate Governmental Authority. Except as set forth in
Section 4.1(n) of the Disclosure Schedule, all Taxes due and payable by Seller
(or claimed to be due and payable) have been paid (regardless whether Tax
Returns relating to such Taxes have been duly and timely filed or if filed,
regardless whether such Tax Returns are deficient), except such amounts as are
being contested diligently and in good faith and are not in the aggregate
material and for which Seller has adequately reserved on the Most Recent
Financial Statements. If any Tax Return for any period has been examined, all
additional Taxes, if any, assessed as a result of such examination have been
paid. To the extent any of such Tax Returns have not been examined and settled,
there are no outstanding agreements or waivers extending the statutory period of
limitations applicable thereto 



                                     - 24 -
<PAGE>

for any period. There are no pending audits, claims or proceedings relating to,
or asserted for, Taxes against Seller, except as listed in Section 4.1(n) of the
Disclosure Schedule.

                  (o) Employees.

                           i. Section 4.1(o)(i) of the Disclosure Schedule
contains a complete and correct list of names and positions of all employees of
Seller engaged in the Business and their current hourly wages or monthly
salaries and other compensation. Except as disclosed in Section 4.1(o)(i) of the
Disclosure Schedule, there are no other employees or material forms of
compensation paid by Seller to any of its employees. Except as disclosed in
Section 4.1(o)(i) of the Disclosure Schedule, no employee, officer, partner or
Affiliate of Seller has any material financial interest, direct or indirect, in
any supplier or other outside business which has significant transactions with
the System or the Business.

                           ii. Seller has complied in all material respects with
all Legal Requirements relating to the employment of labor, including ERISA,
continuation coverage requirements with respect to group health plans, and those
relating to wages, hours, collective bargaining, unemployment compensation,
worker's compensation, equal employment opportunity, age and disability
discrimination, immigration control and the payment and withholding of social
security and other Taxes, and neither the System nor the Business is liable for
any material arrearages of wages or any Taxes for failure to comply with any of
the foregoing.

                           iii. Seller is not a party to or bound by any
collective bargaining agreement, nor has Seller experienced any strikes,
grievances, claims of unfair labor practices or other collective bargaining
disputes. Seller has not committed any unfair labor practices. Seller has not
recognized or agreed to recognize and is not required to recognize any union or
other collective bargaining unit. Except as described in Section 4.1(o) of the
Disclosure schedule, no union or other collective bargaining unit has been
certified as representing any of its employees, nor has Seller received any
requests from any party for recognition as a representative of employees for
collective bargaining purposes. To Seller's and the Partners' best knowledge, no
employees of the Business are engaged in any organizing activity with respect to
any labor organization. Neither Seller nor either of the Partners has employment
agreements of any kind, oral or written, express or implied, that would require
Buyer to employ any Person after the Closing Date.

                  (p) Employee Benefits. Seller does not have, maintain or
contribute to, nor is Seller required to contribute to, any Employee Pension
Benefit Plans of any kind or nature (including Multiemployer Plans). Except as
disclosed in Section 4.1(p) of the Disclosure Schedule, Seller does not have,
maintain or contribute to, nor is Seller required to contribute to, any Employee
Welfare Benefit Plans providing medical, health or life insurance or other
welfare-type benefits for current or future retired or terminated employees or
their spouses or their dependents. There has been no material violation of the
"continuation coverage requirements" of "group health plans" as set forth in
Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA with
respect to any Employee Benefit Plan maintained by the Seller.




                                     - 25 -
<PAGE>

                  (q) System Information. No Person other than Seller has been
granted or, to the Seller's and the Partners' knowledge, has applied for a cable
television franchise in any portion of the Service Area. Section 4.1(q) of the
Disclosure Schedule sets forth a true and accurate description of the following
information:

                           i. The approximate number of miles of plant that are
included in the System, the approximate number of homes in the Service Area, and
the approximate number of homes passed by the System's existing plant.

                           ii. A general description of Basic Services available
from the System and the rates charged by Seller for such services.

                           iii. The stations and signals carried by the System
and the channel position of each such station and signal.

                           iv. The megahertz capacity of the System.

                           v. The channel capacity of the System.

                           vi. The principal marketing, promotional and
advertising programs currently in effect for the System and any other such
program that was in effect at any time since January 1, 1997.

                           vii. Seller's procedures and policies for
disconnection and discontinuance of services to subscribers whose accounts are
delinquent.

                  (r) Seller Contracts. Section 4.1(r) of the Disclosure
Schedule lists the following contracts and other agreements to which Seller is a
party, or to which either Partner is a party and that relates to the System
(including contracts and other agreements that constitute Excluded Assets and
are listed on Appendix 3 and contracts and other agreements that relate to liens
that are to be discharged at the closing and are described on Appendix 4):

                           i. each Pole Attachment Agreement, programming
agreement, multiple dwelling unit agreement and retransmission consent
agreement;

                           ii. any agreement (or group of related agreements)
for the lease of personal property to or from any Person providing for lease
payments in excess of $2,500 per annum;

                           iii. any agreement (or group of related agreements)
for the purchase or sale of raw materials, commodities, supplies, products or
other personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year, result in
a loss to Seller or involve consideration in excess of $2,500.

                           iv. any agreement concerning a partnership or joint
venture;



                                     - 26 -
<PAGE>

                           v. any agreement (or group of related agreements)
under which Seller has created, incurred, assumed or guaranteed any indebtedness
for borrowed money, or any capitalized lease obligation, in excess of $6,500 or
under which Seller has imposed an Encumbrance on any of its or his assets,
tangible or intangible;

                           vi. any agreement concerning confidentiality or
non-competition;

                           vii. any agreement involving any employee, officer,
partner or Affiliate of Seller;

                           viii. any agreement for the employment of any
individual on a full-time, part-time, consulting or other basis providing annual
compensation in excess of $10,000 or providing severance benefits;

                           ix. any agreement relating to the services of
independent contractors, including sales representatives;

                           x. any agreement under which Seller or either of the
Partners has advanced or lent any amount to any System or Business employees or
under which Seller has advanced or lent any amount to any of Seller's current or
former partners, officers or Affiliates; and

                           xi. any other agreement (or group of related
agreements) the performance of which involves consideration in excess of $7,500.

                  Seller has delivered to the Buyer a correct and complete copy
of each written agreement listed in Section 4.1(r) of the Disclosure Schedule
(as amended to date) and a written summary setting forth the terms and
conditions of each oral agreement referred to in Section 4.l(r) of the
Disclosure Schedule. With respect to each such agreement: (A) the agreement is
legal, valid, binding and enforceable, subject to the Normal Qualifications, and
in full force and effect; (B) in the case of each agreement that is to be
assigned to and assumed by the Buyer, assuming any applicable Required Consent
is obtained, the agreement will continue to be legal, valid, binding and
enforceable, subject to the Normal Qualifications, and in full force and effect
following the consummation of the transactions contemplated hereby (including
the assignments and assumptions referred to in Article III above); (C) Seller
has not, and to the best of Seller's and the Partners' knowledge, without
independent investigation, no other party is in breach or default in any
material respect, and no event has occurred which with notice or lapse of time
would constitute a breach or default in any material respect, or permit
termination, modification or acceleration, under the agreement; and (D) neither
the Seller nor, to the best of Seller's and the Partners' knowledge, any other
party has repudiated any provision of the agreement.

                  (s) Books and Records; Accounts Receivable. Section 4.1(s) of
the Disclosure Schedule briefly describes all the material Books and Records.
All notes and accounts receivable 



                                     - 27 -
<PAGE>

of the Business are reflected properly in all material respects on such Books
and Records and are valid receivables subject to no setoffs or counterclaims.

                  (t) Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of Seller.

                  (u) Outstanding Rights. Except for this Agreement and the
confidentiality agreement dated April 28, 1998, and the confidentiality
provisions of the confidentiality and exclusivity agreement dated April 28,
1998, each between Buyer and Seller (collectively, the "Confidentiality
Agreement"), there is no agreement to which Seller or either of the Partners is
a party or is otherwise bound relating to the sale of all or substantially all
the Assets, the transfer of the System franchise, a merger or consolidation of
Seller or either Partner with or into any entity or the sale of all or any part
of Seller's partnership interest or other ownership interests.

                  (v) Projects in Progress. There are no projects in progress or
which have been committed to third parties or to the Telecommunications
Regulatory Board, for construction or otherwise, except for ongoing subscriber
installations being made in the Ordinary Course and except those listed in
Section 4.1(v) of the Disclosure Schedule. Except as set forth in Section 4.1(v)
of the Disclosure Schedule, neither Seller nor either of the Partners has
received notice from the Telecommunications Regulatory Board relating to line
extensions or unbuilt areas.

                  (w) Insurance. Section 4.1(w) of the Disclosure Schedule sets
forth the following information with respect to each insurance policy (including
policies providing property, casualty, liability and workers' compensation
coverage and bond and surety arrangements) to which Seller has been a party, a
named insured, or otherwise the beneficiary of coverage at any time since the
beginning of Seller's operation of the Business, or to which either of the
Partners has been a party, a named insured, or otherwise the beneficiary of
coverage at any such time and that relates to the Business:

                           i. the name, address, and telephone number of the
agent;

                           ii. the name of the insurer, the name of the
policyholder and the name of each covered insured;

                           iii. the policy number and the period of coverage;

                           iv. the scope (including an indication of whether the
coverage was on a claims made, occurrence or other basis) and amount (including
a description of how deductibles and ceilings are calculated and operate) of
coverage; and

                           v. a description of any retroactive premium
adjustments or other loss-sharing arrangements.

                  Section 4.1(w) of the Disclosure Schedule also sets forth each
insurance claim made or loss incurred in connection with the Business pursuant
to property, casualty, liability, workers' 



                                     - 28 -
<PAGE>

compensation and bond and surety policies since 1995 in excess of $25,000, and
except as indicated therein, no such claim is outstanding.

                  (x) Holding Period. Neither Seller nor either of the Partners
will violate nor be subject to any requirement to obtain a waiver under the
anti-trafficking provisions of the Cable Television Consumer Protection and
Competition Act of 1992 and the FCC rules promulgated thereunder as a result of
the transfer of the System contemplated under this Agreement.

                  (y) Partners' Interest in Assets. Neither of the Partners and
none of their Affiliates owns or otherwise has any interest in any of the
Assets, except by reason of its ownership of its partnership interest in Seller.

                  (z) Disclosure. No representation or warranty of Seller or
either of the Partners in this Agreement and no statement in any certificate,
report, instrument, list or other document furnished or to be furnished by
Seller or either of the Partners pursuant to this Agreement or in connection
with the transactions contemplated hereby, contained, contains or will contain
on the date of this Agreement or of such certificate, report, instrument, list
or other document, any untrue statement of a material fact, or omitted or will
omit on such date to state any material fact necessary in order to make the
statements made, in the light of the circumstances under which they were made,
not misleading, nor will any such representation or warranty or statement
contain on the Closing Date any untrue statement of a material fact or omit on
the Closing Date to state any material fact necessary in order to make the
statements made, in the light of the circumstances under which they were made,
not misleading. There is no fact known to Seller or either of the Partners that
is not applicable to or known by the cable television industry generally and
which adversely affects, or which in the future may materially or adversely
affect, the System, the Business or the Assets that has not been disclosed in
this Agreement.

                  (aa) Finders and Brokers. Except for Charles S. James and his
Affiliates, all negotiations relating to this Agreement and the transactions
contemplated herein have been carried on by Seller and the Partners directly
with Buyer and without the intervention of any other person as a result of any
act of Seller or either of the Partners (and, to the best of and Seller's and
the Partners' knowledge, without the intervention of any other Person) in such a
manner as to give rise to any valid claim against any of the Parties hereto for
a brokerage commission, finder's fee, financial advisor's fee or other like
payment. Seller will pay and discharge promptly when due all amounts payable to
Charles S. James and his Affiliates, for fees to which the latter will be
entitled as a result of the execution of this Agreement or the completion of the
Closing.

                  (bb) Independent Contractors. Section 4.1(bb) of the
Disclosure Schedule contains a complete and correct list of the names of
independent contractors (including, but not limited to, sales representatives)
performing services for the Business during the last three years and their dates
of service and compensation. Except as disclosed in Section 4.1(bb) of the
Disclosure Schedule: (i) Seller has complied in all material respects with all
Legal Requirements relating to the engagement of independent contractors; (ii)
all Persons listed in Section 4.1(bb) of the Disclosure Schedule have been and
are properly treated as independent contractors under applicable Legal
Requirements and are not employees under applicable Legal Requirements; and




                                     - 29 -
<PAGE>

(iii) neither the System nor the Business is liable for any incorrect treatment
by Seller of employees as independent contractors. Seller has no agreements of
any kind, oral or written, express or implied, that would require Buyer to
engage any Person as an independent contractor.

         4.2 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller and the Partners that the statements contained in this
Section 4.2 are correct and complete as of the date of this Agreement.

                  (a) Organization and Qualification. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has all requisite corporate power to carry on
its business as currently conducted and to own, lease, use and operate its
assets. As of the Closing Date, Buyer or its permitted assignee will be duly
qualified or licensed to do business and will be in good standing under the laws
of the Commonwealth of Puerto Rico and each other jurisdiction in which the
character of the properties owned, leased or operated by it or the nature of the
activities conducted by it makes such qualification necessary, except any such
jurisdiction where the failure to be so qualified or licensed and in good
standing would not have a material adverse effect on Buyer or its permitted
assignee, as the case may be, or on the validity, binding effect or
enforceability of this Agreement.

                  (b) Authority and Validity. Buyer has all requisite power and
authority to execute and deliver, to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement. The execution and
delivery by Buyer of, the performance by Buyer of its obligations under, and the
consummation by Buyer of the transactions contemplated by, this Agreement have
been duly authorized by all requisite action of Buyer, and this Agreement
constitutes the valid and binding obligation of Buyer, enforceable in accordance
with its terms, except insofar as enforceability may be limited or affected by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
now or hereafter in effect affecting creditors' rights generally or by
principles governing the availability of equitable remedies.

                  (c) No Breach or Violation. Subject to obtaining the Required
Consents listed in Section 4.1(c) of the Disclosure Schedule, and subject to
compliance with the HSR Act, and subject to Buyer's obtaining any required
consent under any agreement relating to debt financing provided to Buyer or any
of its Affiliates, the execution, delivery and performance of this Agreement by
Buyer will not: (i) violate any provision of Buyer's certificate of
incorporation or bylaws; (ii) violate any Legal Requirement; (iii) require any
consent, approval or authorization of, or any filing with or notice to, any
Person except notifications to lenders and filings under the Securities Exchange
Act of 1934, as amended; or (iv) (A) violate, conflict with or constitute a
breach of or default under (without regard to requirements of notice, passage of
time or elections of any Person), (B) permit or result in the termination,
suspension, modification of, (C) result in the acceleration of (or give any
Person the right to accelerate) the performance of Buyer under, or (D) result in
the creation or imposition of any Encumbrance under, any instrument or other
agreement to which Buyer is a party or by which Buyer or any of its assets is
bound or affected, except for purposes of this subclause (iv) such violations,
conflicts, breaches, defaults, terminations, suspensions, modifications and
accelerations as would not, individually or in the aggregate, have a material
adverse effect on Buyer or its assignee (provided such assignee is a 



                                     - 30 -
<PAGE>

permitted assignee under the terms of Section 10.2), as the case may be, or on
the validity, binding effect or enforceability of this Agreement.

                  (d) No Judgment or Litigation Pending. There is no action,
suit, proceeding or investigation, judicial, administrative or otherwise, of
which Buyer has knowledge, that is pending or threatened against Buyer, or that
challenges the validity or propriety of any of the transactions contemplated by
this Agreement.

                  (e) Finders and Brokers. Except for Charles S. James and his
Affiliates, whose fees will be paid by Seller and the Partners, all negotiations
relative to this Agreement have been carried on by Buyer directly with Seller
without the intervention of any person as the result of any act by Buyer (and,
to Buyer's best knowledge, without the intervention of any other Person) in such
manner as to give rise to any valid claim against any of the Parties hereto for
a brokerage commission, finder's fee or like payment.


                  (f) Qualification. Buyer knows of no facts which would, under
present law and present rules, regulations and policies of the applicable
Governmental Authorities, disqualify Buyer with respect to the assignment or
transfer of the Governmental Permits and other agreements contemplated to be
assigned to it by Seller pursuant hereto or that would prevent the
Telecommunications Regulatory Board's consenting to the assignment of the
Franchise to Buyer. Should Buyer become aware of any such facts, it will
promptly notify the Seller in writing thereof and use its best efforts to
prevent any such disqualification.


                                   ARTICLE V
                              PRE-CLOSING COVENANTS


         The Parties covenant and agree as follows:

         5.1 Due Diligence Investigation. From and after the execution and
delivery of this Agreement to and including the Closing Date, Seller and the
Partners will give to Buyer and its counsel, accountants and other authorized
representatives, full access to all the Assets and all the premises and books,
contracts, documents and records of the Business and shall furnish Buyer with
all such information concerning the Business and the Assets as Buyer may
reasonably request in order that Buyer may have full opportunity to make
reasonable investigations of the Assets and the affairs of the Business for the
purpose of verifying the performance of and compliance with Seller's and the
Partners' representations, warranties, covenants and conditions contained herein
or for other purposes related thereto. Seller and the Partners will take all
action reasonably necessary to enable Buyer, its counsel, accountants and other
representatives to discuss the Assets, affairs, System operations and records of
the Business at such times and as often as Buyer may reasonably request with
executives, independent accountants, engineers and counsel of the System and the
Business. Without limiting the generality of the foregoing, Buyer will be
entitled to conduct a full physical and engineering inspection of the Assets and
an examination of the Books and Records 



                                     - 31 -
<PAGE>

and to approach and negotiate with Governmental Authorities and Pole Attachment
Authorities and suppliers of goods and services to the Business for or on behalf
of the Business. Buyer will not approach the Telecommunications Regulatory Board
without first obtaining Seller's approval, which will not be unreasonably
withheld, and will permit Seller to participate in any communications with the
Telecommunications Regulatory Board if Seller so requests. Notwithstanding any
investigation that Buyer may conduct of the Business and the Assets, Buyer may
fully rely on Seller's and the Partners' representations, warranties, covenants
and indemnities, which will not be waived or affected by or as a result of such
investigation.

         5.2 Exclusivity. Neither Seller nor either of the Partners will, nor
will any of them permit any of its representatives or Affiliates to: (a)
solicit, initiate or encourage the submission of any proposal or offer from any
Person relating to the acquisition of any of Seller's partnership interests or
other ownership interests, or any substantial portion of Seller's assets
(including any acquisition structured as a merger, consolidation, or equity
exchange); or (b) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in or facilitate
in any other manner any effort or attempt by any Person to do or seek any of the
foregoing. Seller and the Partners will notify Buyer immediately if any Person
makes any proposal, offer, inquiry or contact with respect to any of the
foregoing.

         5.3 Corporate Matters. Pending Closing, Seller and the Partners will
maintain Seller's existence at all times as a general partnership duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and will make no change to Seller's partnership agreement. Subsequent
to the date hereof and until the Closing, neither Seller nor either Partner
will: (a) sell or deliver any partnership interest or other ownership interest
in Seller to any Person or enter into any agreement to do so; (b) issue any
options, warrants or other rights calling for or permitting the issue, transfer,
sale or delivery of any partnership interest or other ownership interest in
Seller or enter into any agreement to do so; or (c) declare, set aside or pay
any in-kind dividend or distribution to the Partners of any Assets or enter into
any agreement to do so.

         5.4 Continuity and Maintenance of Operations; Financial Statements.
Until Closing:

                  (a) Seller and the Partners will duly comply with all Legal
Requirements, will fulfill all of their respective obligations under and
maintain in full force and effect all contracts, commitments, agreements,
insurance policies, licenses, and authorizations, including the Franchise and
all other Governmental Permits and Seller Contracts, and will not, without
Buyer's prior written consent, alter, modify or amend any of the foregoing.
Seller and the Partners will continue to operate the Business in the Ordinary
Course, consistent with past practices, subject to the restrictions contained in
this Agreement. Seller and the Partners will use reasonable efforts to preserve
the Business and its relationships with its present employees and to preserve
for Buyer the goodwill of its suppliers, customers and others having business
relations with it, and will promptly notify Buyer of any material change in
business or prospects, financial or otherwise, of the Business. Without limiting
the generality of the foregoing, Seller and the Partners will maintain the
Assets, will maintain adequate inventories of spare Equipment consistent with
past practice, will maintain insurance as in effect on the date of this
Agreement and will keep all the books, records and files of the Business in the
Ordinary Course. Neither Seller nor either of the 



                                     - 32 -
<PAGE>

Partners will itself pay or credit in any way any subscriber accounts receivable
prior to the Closing Date, and will not permit any of its or his respective
agents or employees, to do so either. Seller and the Partners will continue to
implement Seller's procedures and policies for disconnection and discontinuance
of service to subscribers whose accounts are delinquent in accordance with those
in effect for the period preceding the date of this Agreement, which procedures
and policies are described in Section 4.1(q) of the Disclosure Schedule.

                  (b) Neither Seller nor either of the Partners will, without
the prior written consent of Buyer: (i) change the rate charged for Basic
Services or Pay TV or add or delete any program services or alter the System's
channel line-up; (ii) sell, lease, transfer, convey or assign any of the Assets
(or enter into any contract to do any of the foregoing) other than in the
Ordinary Course or permit the creation of any Encumbrance on any Asset; (iii)
permit the amendment or cancellation of any of the Governmental Permits, Seller
Contracts or any other contract or agreement (other than those constituting
Excluded Assets) which affects or is applicable to the System or the Business
other than in the Ordinary Course; or (iv) enter into any contract or commitment
or incur any indebtedness or other liability or obligation of any kind relating
to the System or the Business involving an expenditure in excess of $20,000;

                  (c) Neither Seller nor either of the Partners will take or
omit to take any action that would cause Seller or either of the Partners to be
in breach of any of its representations or warranties in this Agreement.

                  (d) Seller and the Partners will provide the Accountant with
access to Vega Palau & Co., the independent accounting firm engaged by Seller to
perform audits of Seller's financial statements for the most Recent Fiscal Year
End. Seller and the Partners will cause Vega Palau & Co. to provide to the
Accountant access to all work papers and other documents used by that firm in
performing its audits of Seller. In addition, Seller and the Partners will
provide to the Accountant access to Seller's management and accounting personnel
and other financial information and documents of Seller, but shall not be
required to provide any such information with respect to the Partners.

                  (e) Seller has delivered or will deliver to Buyer correct and
complete copies of monthly and quarterly financial statements and operating
reports for the Business and any reports with respect to the operations of the
System prepared by or for Seller at any time for the period March 31, 1998
through Closing. All financial statements so delivered will be prepared in
accordance with GAAP on a basis consistent with the Financial Statements
referred to in Section 4.1(j). Seller will also deliver to Buyer not later than
July 31, 1998, a 1999 fiscal year operating and capital budget for the Business.

                  (f) Seller will not enter into any agreement with either of
its Partners or with any Affiliate of Seller or of either of the Partners.



                                     - 33 -
<PAGE>

         5.5 Employee Matters.

                  (a) Neither Seller nor either of the Partners will, without
Buyer's prior written consent, enter into any fixed term employment or similar
contract with any employee of the Business or any person providing services to
the Business. Seller will pay to employees employed in the Business all
compensation, including salaries, commissions, bonuses, deferred compensation,
severance, insurance, pensions, profit sharing, vacation, sick pay and other
compensation or benefits to which they are entitled for periods prior to
Closing. Other than as required by applicable law (prompt notice of which shall
be given to Seller), neither Seller nor either of the Partners will pay or
obligate itself to pay any pension, retirement, insurance, death or other fringe
benefit or other form of incentive or special compensation to any employee of
the Business, except pursuant to plans and arrangements in effect on the date of
this Agreement, or change or terminate any pension or other such plans in effect
on the date of this Agreement, or make any material increase in rates of pay or
salaries of any employees or officers of the Business except pursuant to
contracts or agreements in effect on the date of this Agreement. Buyer will have
no obligation to offer employment to any of the current employees of Seller or
either of the Partners.

                  (b) Seller and the Partners will be responsible for
maintenance and distribution of benefits accrued under any Employee Benefit Plan
maintained by Seller or either of the Partners pursuant to the provisions of
such plans. Buyer will assume neither any liability for any such accrued
benefits nor any fiduciary or administrative responsibility to account for or
dispose of any such accrued benefits under any Employee Benefit Plans maintained
by Seller or either of the Partners.

                  (c) All claims and obligations under, pursuant to or in
connection with any welfare, medical, insurance, disability or other Employee
Benefit Plans of Seller or either of the Partners or arising under any Legal
Requirement affecting employees of Seller, either of the Partners, the System or
the Business incurred on or before the Closing Date or resulting or arising from
events or occurrences occurring or commencing on or prior to the Closing Date
will remain the responsibility of Seller and the Partners, whether or not such
employees are hired by Buyer after Closing. Buyer will have and assume no
obligation or liability under or in connection with any such plan and will
assume no obligation with respect to any preexisting condition of any employee
who is hired as an employee of Buyer.

         5.6 Required Consents. Subject to the provisions of this Section 5.6,
Seller, the Partners and Buyer will use their respective best efforts to
consummate the transactions contemplated by this Agreement and will use
reasonable efforts to obtain, as soon as possible and at their expense, all the
Required Consents, in form and substance reasonably satisfactory to Buyer.
Without limiting the generality of the foregoing provision, promptly, and in any
event within 20 days, after the delivery of the Escrow Deposit to the Escrow
Agent, Seller and the Partners will, with Buyer's full cooperation, make all
filings, applications, statements and reports to all Governmental Authorities
that are required to be made prior to the Closing Date by them or on their
behalf pursuant to any statute, rule or regulation in connection with the
transactions contemplated by this Agreement, including, without limitation, and
all applications necessary to 



                                     - 34 -
<PAGE>

transfer the Franchise to Buyer. Buyer will fully cooperate with Seller and the
Partners to obtain all Required Consents, but Buyer will not be required to
agree to any changes in, or the imposition of any condition to the transfer to
Buyer of, any Seller Contract or Governmental Permit as a condition to obtaining
any Material Consent, if the change or imposition would cause the condition
precedent stated in Section 6.1(c) not to be satisfied. If any Required Consent
is not obtained at the time of the Closing, Seller and the Partners will
continue to cooperate with Buyer following the Closing Date in obtaining such
Required Consent.


         5.7 Projects in Progress. With respect to ongoing subscriber
installations and the projects in progress listed on Section 4.1(v) of the
Disclosure Schedule, Seller will proceed with all such projects without material
undue delay or interruption. From the date hereof until Closing, Seller and the
Partners will permit Buyer reasonable opportunity for inspection of System
construction, which will be in accordance with FCC standards in all material
respects. Seller will also keep Buyer informed of all opportunities known to it
to pursue or obtain agreements with developers, builders or businesses, provided
that Buyer will have the final right of approval of all contracts that may be
entered into by Seller (other than contracts entered into in the Ordinary
Course) by or on behalf of the System or the Business with such entities or
persons.

         5.8 Notification of Certain Matters. Seller and the Partners will
promptly notify Buyer of any fact, event, circumstance or action: (a) that, if
known on the date of this Agreement, would have been required to be disclosed to
Buyer pursuant to this Agreement; or (b) the existence or occurrence of which
would cause any of Seller's or the Partners' representations or warranties under
this Agreement not to be correct and complete. In addition, each Party will give
prompt written notice to the other Party of any material adverse development
causing a breach of any of its own representations and warranties in Section 4.1
and Section 4.2 above. No disclosure by any Party pursuant to this Section 5.8,
however, shall be deemed to amend or supplement the Disclosure Schedule or to
prevent or cure any misrepresentation, breach of warranty, or breach of
covenant.

         5.9 Risk of Loss; Condemnation.

                  (a) Seller will bear the risk of any loss or damage to the
Assets resulting from fire, theft or other casualty (except reasonable wear and
tear) at all times prior to Closing. If any such loss or damage is so
substantial as to prevent normal operation of any material portion of the System
or the replacement or restoration of the lost or damaged property within 60 days
after the occurrence of the event resulting in such loss or damage, Seller will
immediately notify Buyer of that fact and Buyer, at any time within 10 days
after receipt of such notice, may elect by written notice to Seller either: (i)
to waive such defect and proceed toward consummation of the acquisition of the
Assets in accordance with terms of this Agreement; or (ii) terminate this
Agreement. If Buyer elects so to terminate this Agreement, the Parties will be
discharged of any and all obligations hereunder. If Buyer elects to consummate
the transactions contemplated by this Agreement notwithstanding such loss or
damage and does so, there will be no adjustment in the consideration payable to
Seller on account of such loss or damage but all insurance proceeds payable as a
result of the occurrence of the event resulting in such loss or damage will be
delivered



                                     - 35 -
<PAGE>

by Seller and/or the Partners to Buyer, or the rights to such proceeds will be
assigned by Seller and/or the Partners to Buyer if not yet paid over to Seller
and/or the Partners. If, however, prior to Closing Seller and/or the Partners
correct all such loss or damage to the Assets to the reasonable satisfaction of
Buyer, there will be no remitting or assignment of insurance proceeds to Buyer
and no adjustment to the Purchase Price.

                  (b) If, prior to Closing, any part of or interest in the
Assets is taken or condemned as a result of the exercise of the power of eminent
domain, or if a Governmental Authority having such power informs Seller, either
of the Partners or Buyer that it intends to condemn all or any part of the
Assets (such event being called in either case, a "Taking"), and if the Taking
is of the Real Property, the headend equipment of the System, or property the
Taking of which could have a material adverse effect on Buyer's ability to
operate the Business, as now conducted, after the Closing, then Buyer may
terminate this Agreement. If Buyer does not elect to terminate this Agreement,
then: (i) there will be no adjustment to the Purchase Price on account of the
Taking: (ii) Buyer will have the sole right, in the names of Seller and the
Partners, if Buyer so elects, to negotiate for, claim, contest and receive all
damages with respect to the Taking; (iii) Seller will be relieved of its
obligation to convey to Buyer the Assets or interests that are the subject of
the Taking; (iv) at Closing, Seller and/or the Partners will assign to Buyer all
of Seller's and the Partners' rights to all damages payable with respect to such
Taking and will pay to Buyer all damages previously paid to Seller and/or the
Partners with respect to the Taking; and (v) following Closing, Seller and the
Partners will give Buyer such further assurances of such rights and assignment
with respect to the Taking as may from time to time be reasonably required to
effectuate the foregoing.

         5.10 Transfer Taxes. Seller will pay the Puerto Rico documentary tax on
the original of the deed conveying the Real Property and the notarial tariff
relating to such conveyance. Buyer will pay the Puerto Rico documentary tax on
the certified copy of such deed and the recording tax relating to such
conveyance. Seller and Buyer will share equally in the payment of any other
sales, use, transfer, excise, documentary or license taxes or fees or any other
charge (including filing fees) imposed by any Governmental Authority with
respect to the transfer of any of the Assets pursuant to this Agreement.

         5.11 Distant Broadcast Signals. If the Closing shall not have occurred
on or before December 31, 1998, either (a) Seller will cease carrying WGN on the
System on or before December 31, 1998, or (b) the adjustment described in
Section 2.3(a)(i) will include a reduction in the Purchase Price equal to the
entire amount of the copyright royalty directly associated with carriage of WGN
on Seller's independent System, without regard to any other cable facility, for
the copyright period beginning January 1, 1999. If Seller elects to cease
carrying WGN under clause (a), and if Seller replaces WGN with WOR beginning on
or after January 1, 1999, the amount of copyright royalty for WOR for the
copyright period beginning January 1, 1999, will be prorated based on the
Closing Date pursuant to Section 2.3(a)(i).

         5.12 Programmers. Seller will pay all obligations owed to programmers
at or before Closing. Any amounts invoiced by programmers after Closing relating
to the operation of the 



                                     - 36 -
<PAGE>

Business prior to Closing will be paid promptly by Seller and/or the Partners
directly to such programmers.

         5.13 Updated Disclosure Schedule. Not less than five days prior to
Closing, Seller and the Partners will deliver to Buyer a revised copy of the
Disclosure Schedule, which shall have been updated to show any changes occurring
between the date of this Agreement and the date of delivery; provided, however,
that for purposes of Seller's and the Partners' representations and warranties
and covenants in this Agreement, all references to the Disclosure Schedule will
mean the version of the Disclosure Schedule attached to this Agreement on the
date of signing, and provided further that if the effect of any such updates to
the Disclosure Schedule is to disclose any one or more additional properties,
privileges, rights, interests or claims as Assets, Buyer, at or before Closing,
will have the right (to be exercised by written notice to Seller) to cause any
one or more of such items to be designated as and deemed to constitute Excluded
Assets for all purposes under this Agreement.

         5.14 CRIM. At least 10 days prior to Closing, Seller will obtain from
CRIM invoices (and furnish copies thereof to Buyer) for any deficiencies
assessed by CRIM, and Seller will pay all such invoices prior to the Closing
Date. In addition, prior to Closing, Seller will obtain from CRIM and deliver to
Buyer a certification, in form reasonably satisfactory to Buyer, that there are
no taxes due to CRIM with respect to the Assets or System other than the
assessed deficiencies.

         5.15 Fondo del Seguro. At least 10 days prior to Closing, Seller will
obtain from Fondo del Seguro invoices (and furnish copies thereof to Buyer) for
any deficiencies assessed by Fondo del Seguro, and Seller will pay all such
invoices prior to the Closing Date. Prior to Closing, Seller will obtain from
Fondo del Seguro and deliver to Buyer a certification, in form reasonably
satisfactory to Buyer, that there are no amounts due to Fondo del Seguro other
than the assessed deficiencies.


                                   ARTICLE VI
                              CONDITIONS PRECEDENT


         6.1 Conditions to the Obligations of Buyer. All obligations of Buyer
under this Agreement shall be subject to the fulfillment at or prior to Closing
of each of the following conditions, it being understood that Buyer may, in its
sole discretion, to the extent permitted by applicable Legal Requirements, waive
any or all of such conditions in whole or in part:

                  (a) All representations and warranties of Seller and the
Partners contained in this Agreement shall be, if specifically qualified by
materiality, true in all respects and, if not so qualified, shall be true in all
material respects, in each case on and as of the Closing Date with the same
effect as if made on and as, of the Closing Date.



                                     - 37 -
<PAGE>

                  (b) Seller and the Partners shall, in all material respects,
have performed and complied with each of the covenants, obligations, conditions
and agreements contained in this Agreement that are to be performed or complied
with by each of them at or prior to Closing.

                  (c) Seller shall have procured all Material Consents without
any change in the terms thereof or the imposition of any condition thereon that
is materially more burdensome to Buyer than those now in effect and shall have
delivered to Buyer copies thereof or other evidence, in form and substance
reasonably satisfactory to Buyer, that all of such Material Consents have been
obtained or given as provided herein and are in full force and effect. In the
case of the consent of the Telecommunications Regulatory Board to the assignment
of the Franchise, such consent shall have become a Final Order. In the event
that the Material Consents are not obtained for assignment of the Pole
Attachment Agreements and Buyer is required to enter into new pole attachment
agreements, Buyer shall have entered into new pole attachment agreements
sufficient to operate the System as now operated. Buyer acknowledges and agrees
that notwithstanding anything to the contrary contained in this Agreement, terms
and conditions materially more burdensome to Buyer shall not be deemed to have
occurred and the foregoing condition shall be deemed satisfied with respect to
Material Consents involving Pole Attachment Agreements, if any changes,
concessions or modifications are required by the pole attachment company or
Buyer is required to enter into new Pole Attachment Agreements, provided such
changes, concessions or modifications or new agreement contain terms and
conditions not materially different from those then prevailing in Puerto Rico.


                  (d) The Telecommunications Regulatory Board shall have
extended the term of the System franchise until not earlier than May 5, 2008,
and such action shall have become a Final Order.

                  (e) There shall have been no material adverse change in the
Assets, or in the condition (financial or otherwise) of the System or the
Business since the date hereof. On the Closing Date the System will not fail in
any material respect to meet or exceed the performance standards met by the
System as shown in the proof of performance tests and cumulative leakage index
reports appearing in Appendix 5.

                  (f) No action, suit or proceeding shall be pending or
threatened by or before any Governmental Authority and no Legal Requirement
shall have been enacted, promulgated or issued or deemed applicable to any of
the transactions contemplated by this Agreement, that would: (i) prohibit or
materially adversely affect Buyer's ownership or operation of all or a material
portion of the System, the Business or the Assets or otherwise materially impair
the ability of Buyer to realize the benefits of the transactions contemplated by
this Agreement; (ii) compel Buyer to dispose of or hold separate all or a
material portion of the System, the Business or the Assets as a result of any of
the transactions contemplated by this Agreement; (iii) prevent or make illegal
the consummation of any transactions contemplated by this Agreement; or (iv)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation.

                                     - 38 -
<PAGE>

                  (g) As of the Closing Date, the System shall have total
Individual Subscribers and Equivalent Basic Subscribers of not less than 20,750,
and Buyer shall have received a certificate signed by Seller, dated the Closing
Date, to that effect.

                  (h) Seller shall have delivered financial statements and other
documentation reasonably satisfactory to Buyer that Seller's revenues and EBITDA
for the 12 months ending on the last day of the second month before the Closing
Date were not less than $9,250,000 and $4,800,000, respectively. Such financial
statements will be prepared in accordance with GAAP on a basis consistent with
the Financial Statements referred to in Section 4.1(j) and will be reviewed by
the Accountant.

                  (i) There shall be an adequate supply of cable inventory and
spare equipment for the System as of the Closing Date to ensure no interruption
of the daily operations of the System for a period of one month.

                  (j) Buyer, at its own expense and upon prior notice to Seller,
may engage an environmental engineering firm of national reputation to perform a
Phase I environmental audit of the Real Property in accordance with ASTM
standards ("Phase I Audit"), and either (i) such environmental audit and
accompanying report shall reflect the satisfactory environmental condition of
the Real Property without any recommendation by such firm of additional
environmental testing, or (ii) the results of any additional environmental
testing recommended in such report (which Buyer will obtain promptly at its
expense) shall reflect that there are no conditions existing on, at or under
such Real Property that are reasonably likely to result in material liability to
the owner or operator of such Real Property under the Environmental Laws..

                  (k) As of the Closing Date, (i) the Effective Competition
Order shall have become a Final Order or (ii) the Telecommunications Regulatory
Board shall have withdrawn its certification to regulate rates.

                  (l) Seller and the Partners shall have delivered to Buyer: (i)
a certificate, dated the Closing Date, stating that the conditions set forth in
Sections 6.1(a) through (l) have been satisfied; and (ii) such other documents
as Buyer may reasonably request in connection with the transactions contemplated
by this Agreement.

                  (m) Seller shall have delivered to Buyer certificates of
compliance, statements of account and/or other documentation reasonably
satisfactory to Buyer evidencing that Seller is not delinquent or deficient with
respect to filings with and payments to (i) the Telecommunications Regulatory
Board, (ii) the FCC, (iii) Fondo del Seguro, (iv) the United States Copyright
Office (v) Hacienda, (vi) CRIM, and (vii) municipalities having jurisdiction to
collect the Municipal License Tax.

                  (n) Seller shall have paid all amounts due to Charles S. James
and his Affiliates for fees to which the latter will be entitled at the time of
Closing.



                                     - 39 -
<PAGE>

                  (o) Seller shall have executed (or caused to be executed) and
delivered to Buyer each of the following items:

                           i. a Bill of Sale and Assignment in the form attached
as Appendix 6;

                           ii. a deed of purchase and sale conveying the owned
Real Estate in accordance with the terms hereof, in form reasonably acceptable
to Buyer and Seller;

                           iii. Non-Competition Agreement signed by Seller, each
of the Partners, and each of their respective Affiliates in the form attached as
Appendix 7;

                           iv. an affidavit of Seller that Seller is not a
"foreign person" (as defined in the Foreign Investment in Real Property Tax Act
and applicable regulations) and that Buyer is not required to withhold any
portion of the consideration payable under this Agreement under the provisions
of such Act in the form attached as Appendix 8.

                           v. motor vehicle title certificates and such other
transfer instruments as Buyer may reasonably deem necessary or advisable to
transfer the Assets to Buyer and to perfect Buyer's rights in the Assets;

                           vi. certified copies of Seller's partnership
agreement and of each of the Partners' certificate of incorporation and by-laws,
together with good standing certificates from such jurisdictions as Buyer may
reasonably specify, and certified resolutions of the boards of directors of the
Partners authorizing this Agreement and the transactions contemplated hereby;
and

                           vii. documents required to be delivered pursuant to
Article V.

                  (p) Buyer shall have received the opinions of Baer, Marks &
Upham LLP, dated the Closing Date, in substantially the form set forth in
Appendix 9 and the opinion of Cole, Raywid & Braverman, L.L.P.. in substantially
the form set forth in Appendix 10. Such opinions shall expressly allow reliance
thereon by any party providing debt financing to Buyer or any of its Affiliates.

                  (q) Seller shall have delivered releases, in form satisfactory
to Buyer, of all Encumbrances affecting any of the Assets (other than Permitted
Encumbrances).


                  (r) Seller shall have terminated all contracts with
independent contractors.

                  (s) Seller shall have fewer than three decertifications with
respect to equal employment opportunity compliance under the Communications Act
during the period 1987-1997.

         6.2 Conditions to Obligations of Seller and Partners. All obligations
of Seller and the Partners under this Agreement shall be subject to the
fulfillment at or prior to Closing of the following conditions, it being
understood that Seller and the Partners may, in their sole discretion,



                                     - 40 -
<PAGE>

to the extent permitted by applicable Legal Requirements, waive any or all of
such conditions in whole or in part.

                  (a) All representations and warranties of Buyer contained in
this Agreement shall be, if specifically qualified by materiality, true and
correct in all respects and, if not so qualified, shall be true and correct in
all material respects, in each case on and as of the Closing Date with the same
effect as if made on and as of the Closing Date.

                  (b) Buyer shall, in all material respects, have performed and
complied with each obligation, agreement, covenant and condition contained in
this Agreement and required by this Agreement to be performed or complied with
by Buyer at or prior to Closing.

                  (c) No action, suit or proceeding shall be pending or
threatened by or before any Governmental Authority and no Legal Requirement
shall have been enacted, promulgated or issued or deemed applicable to any of
the transactions contemplated by this Agreement by any Governmental Authority,
that would: (i) prevent or make illegal consummation of any of the transactions
contemplated by this Agreement; or (ii) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation.

                  (d) Buyer shall have delivered to Seller: (i) a certificate to
the effect that each of the conditions specified above in Section 6.2(a) through
(d) is satisfied in all respects; and (iii) such other documents as Seller may
reasonably request in connection with the transactions contemplated by this
Agreement.

                  (e) Buyer shall have executed and delivered to Seller an
Assumption Agreement in the form attached as Appendix 11. 

                  (f) Buyer shall have paid the Purchase Price (as adjusted in
accordance with this Agreement).

                  (g) Seller shall have received the opinion of Drinker Biddle &
Reath LLP dated the Closing Date, in substantially the form set forth in
Appendix 12. 

                  (h) All Material Consents shall have been obtained.


                  (i) Seller shall have received certified copies of Buyer's
articles of incorporation and by-laws, and certified copies of resolutions of
the board of directors of Buyer and of Pegasus Communications Corporation,
Buyer's parent company, authorizing this Agreement and the transactions
contemplated hereby.


         6.3 Waiver of Conditions. Any Party may waive in writing any or all of
the conditions to its obligations under this Agreement to the extent permitted
by applicable Legal Requirements.

                                     - 41 -
<PAGE>

                                  ARTICLE VII
                             POST-CLOSING COVENANTS


         The Parties agree as follows with respect to the period following
Closing:

     7.1 Litigation Support. If and for so long as any Party actively is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with: (a) any
transaction contemplated under this Agreement; or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing Date
involving Seller, the Partners or the Business, the other Party will cooperate
with the contesting or defending Party and his or its counsel in the contest or
defense, make available his or its personnel and provide such testimony and
access to his or its books and records as shall be reasonably necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Article IX below).

     7.2 Transition. Neither Seller nor either Partner will take any action that
is designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier or other business associate of Seller, either of the
Partners, the System or the Business from maintaining the same business
relationships with Buyer after Closing as it maintained with Seller and/or the
Partners prior to Closing. Seller and the Partners will refer all customer
inquiries relating to the Business or the System to Buyer from and after
Closing.

                                  ARTICLE VIII
                                   TERMINATION


         8.1 Events of Termination. This Agreement may be terminated and the
transactions contemplated by this Agreement may be abandoned at any time prior
to Closing as provided below or elsewhere in this Agreement:

                  (a) Buyer, Seller and the Partners may terminate this
Agreement by mutual written consent at any time prior to Closing.

                  (b) Buyer may terminate this Agreement by giving written
notice to Seller at any time prior to Closing:

                           i. if Seller and/or either of the Partners has
breached any representation, warranty or covenant contained in this Agreement
applicable to them in any material respect, Buyer has notified Seller of the
breach, and the breach has continued without cure for a period of 30 days after
the notice of breach; or

                           ii. if Closing shall not have occurred on or before
the Termination Date by reason of the failure of any condition precedent under
Section 6.1 hereof (unless the failure 



                                     - 42 -
<PAGE>

results primarily from Buyer itself breaching any representation, warranty or
covenant contained in this Agreement).

                  (c) Seller and the Partners may jointly terminate this
Agreement by giving written notice to Buyer at any time prior to Closing:

                           i. if Buyer has breached any representation, warranty
or covenant contained in this Agreement in any material respect, Seller has
notified the Buyer of the breach, and the breach has continued without cure for
a period of 30 days after the notice of breach; or

                           ii. if Closing shall not have occurred on or before
the Termination Date by reason of the failure of any condition precedent under
Section 6.2 hereof (unless the failure results primarily from Seller and/or
either of the Partners itself breaching any representation, warranty or covenant
contained in this Agreement applicable to them).


                  (d) If the Telecommunications Regulatory Board makes a timely
request to the FCC for reconsideration of, or takes a timely appeal from, the
Effective Competition Order, and if Buyer does not waive in writing the
condition precedent stated in Section 6.1(k) within 42 days thereafter, Seller
and the Partners may jointly terminate this Agreement by written notice to
Buyer.

         8.2 Liabilities in Event of Termination. The termination of this
Agreement will in no way limit any obligation or liability of any Party based on
or arising from a breach or default by such Party with respect to any of its
representations, warranties, covenants or agreements contained in this
Agreement. Notwithstanding the foregoing, if Seller and the Partners terminate
this Agreement pursuant to Section 8.1(c)(i), or if the Closing does not occur
as a result of Buyer's breach of any representation, warranty or covenant
contained in this Agreement in any material respect, the liability of Buyer
shall be limited to, and shall be satisfied solely out of, the Escrow Funds.

         8.3 Procedure Upon Termination. If this Agreement is terminated by
Buyer or Seller pursuant to this Article VIII, notice of such termination will
promptly be given by the terminating Party to the other.


                                   ARTICLE IX
                      REMEDIES FOR BREACH OF THIS AGREEMENT


         9.1 Survival of Representations and Warranties. All of the
representations and warranties of Buyer, Seller and the Partners contained in
this Agreement shall survive Closing (even if the damaged Party knew or had
reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect for a period of one year
thereafter, except that the representations and warranties in Section 4.1(a),
(b), (c), (d), (g), (n) and (p) and in Section 4.2(a), (b) and (c) shall survive
until the expiration of the applicable statute of limitation. The period of
survival of the representations and warranties prescribed by this Section 



                                     - 43 -
<PAGE>

9.1 is referred to as the "Survival Period." The liabilities of Buyer, Seller
and the Partners under their respective representations and warranties will
expire as of the expiration of the applicable Survival Period; provided,
however, that such expiration will not include, extend or apply to any
representation or warranty, the breach of which has been asserted by either
Party in a written notice to the other before such expiration or about which
either Party has given the other written notice before such expiration
indicating that facts or conditions exist that, with the passage of time or
otherwise, can reasonably be expected to result in a breach (and describing such
potential breach in reasonable detail). The covenants and agreements of Buyer,
Seller and the Partners in Article II and Sections 5.5, 5.6 (last sentence),
5.9, 5.10, 5.12 and 10.9 of this Agreement and in the Non-Competition Agreement,
the Bill of Sale and the Assumption Agreement, and rights to indemnification
under Sections 9.2 and 9.3 relating to such covenants and agreements, shall
survive Closing and will continue in full force and effect.

         9.2 Indemnification Provisions for Benefit of Buyer. Subject to Section
9.7, Seller and the Partners, jointly and severally, agree to indemnify Buyer
and its Affiliates, and the shareholders, directors, officers, employees,
agents, successors and assigns of any of such Persons, from and against the
entirety of any Adverse Consequences that any such Person may suffer resulting
from, arising out of, relating to, in the nature of, or caused by any of the
following: (i) any breach of any covenant, agreement or obligation of Seller
and/or the Partners contained in this Agreement; (ii) any act or omission of
Seller and/or either of the Partners with respect to, or any event or
circumstance related to, the ownership or operation of the Assets or the conduct
of the Business, which act, omission, event or circumstance occurred or existed
prior to the Closing Date, without regard to whether a claim with respect such
matter is asserted before or after the Closing Date, including any matter
described in the Disclosure Schedule; (iii) any Real Property title defect
(other than Permitted Encumbrances) not waived by Buyer at or before the Closing
that Seller or the Partners fail to eliminate as an exception from a title
insurance commitment; (iv) any claim that the transactions contemplated by this
Agreement violate the Worker Adjustment and Retraining Notification Act, as
amended, or any similar state, Commonwealth of Puerto Rico or local law; (v) any
Liability of Seller, any Affiliate of Seller, the System or the Business that is
not an Assumed Liability; (vi) any Liability of Buyer arising by operation of
law (including under any bulk transfer law of any jurisdiction or under any
common law doctrine of de facto merger or successor liability or under any
fraudulent conveyance law of any jurisdiction) that is not an Assumed Liability,
including Liabilities for Taxes and Liabilities in respect of Employee Benefit
Plans; (vii) the presence, generation, removal or transportation of a Hazardous
Substance on or from any of the Real Property prior to the Closing Date,
including the costs of removal or clean-up of such Hazardous Substance and other
compliance with the provisions of any Environmental Laws (whether such costs are
incurred before or after Closing); (viii) any rate refund ordered by a
Governmental Authority for periods prior to the Closing Date; and (ix) any
breach (or breach alleged by any third party) by Seller or either Partner of any
of its respective representations and warranties contained in this Agreement;
provided, that, with respect to any claim for indemnification pursuant to this
Section 9.2, Buyer shall have made a written claim for indemnification to Seller
and/or either of the Partners (as the case may be) within the applicable
Survival Period specified in Section 9.1. Seller's and the Partners' obligations
under this Section 9.2 shall expire at the end of the applicable Survival
Period.



                                     - 44 -
<PAGE>

         9.3 Indemnification Provisions for Benefit of Seller. Buyer agrees to
indemnify, defend and hold harmless Seller, the Partners and their respective
Affiliates, and the shareholders, directors, officers, employees, agents,
successors and assigns of each such Person, from and against the entirety of any
Adverse Consequences that any such Person may suffer resulting from, arising out
of, relating to or caused by any of the following: (i) any breach (or breach
alleged by any third party) of any covenant, agreement or obligation of Buyer
contained in this Agreement; (ii) any act or omission of Buyer with respect to,
or any event or circumstances related to, the ownership or operation of the
Assets or the conduct of the Business, which act, omission, event or
circumstance occurs or exists on or after the Closing Date; (iii) any obligation
or Liability resulting from, arising out of or related to any of the Assumed
Liabilities, and (iv) any breach by Buyer of any of its representations or
warranties contained herein; provided, that, with respect to any claim for
indemnification pursuant to Section 9.3, Seller shall have made a written claim
for indemnification to Buyer within the applicable Survival Period specified in
Section 9.1.

         9.4 Matters Involving Third Parties.

                  (a) If any third party shall notify either Buyer, Seller or
either of the Partners (the "Indemnified Party") with respect to any matter (a
"Third Party Claim") that may give rise to a claim for indemnification against
the other (the "Indemnifying Party") under this Article IX, then the Indemnified
Party shall promptly notify the Indemnifying Party thereof in writing; provided,
however, that no delay on the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party from any obligation
hereunder unless (and then solely to the extent) the Indemnifying Party thereby
is prejudiced.

                  (b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as: (i) the
Indemnifying Party notifies the Indemnified Party in writing within 15 days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of or caused by the Third Party
Claim; (ii) the Indemnifying Party provides the Indemnified Party with evidence
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder; (iii) the Third Party Claim involves only
money damages and does not seek an injunction or other equitable relief; (iv)
settlement of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice adverse to the continuing business interests of
the Indemnified Party; and (v) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently.

                  (c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 9.4(b) above: (i)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim; (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party 



                                     - 45 -
<PAGE>

(not to be withheld unreasonably); and (iii) the Indemnifying Party will not
consent to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the Indemnified
Party (not to be withheld unreasonably).

                  (d) If any of the conditions in Section 9.4(b) above is or
becomes unsatisfied, however: (i) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with respect
to, the Third Party Claim in any manner it reasonably may deem appropriate (and
the Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith); (ii) the Indemnifying Party will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including attorneys' fees and
expenses); and (iii) the Indemnifying Party will remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of or caused by the Third Party Claim to the
fullest extent provided in this Article IX.

         9.5 Determination of Adverse Consequences. All indemnification payments
under this Article IX shall be net of insurance proceeds related to such
payments and shall be deemed adjustments to the Purchase Price.

         9.6 Escrow Deposit and Indemnification Fund.

                  (a) Escrow Deposit. Upon any termination of this Agreement,
other than under Section 8.1(c)(i), Buyer shall be entitled to receive the
Escrow Deposit and all earnings thereon. Upon any termination of this Agreement
under Section 8.1(c)(i), Seller shall be entitled to receive the Escrow Deposit
and any earnings thereon as liquidated damages.

                  (b) Indemnification Fund. The Indemnification Fund will
provide a fund for, and will secure Seller's and the Partners' obligation to
make, payment of claims for which Buyer shall be entitled to indemnification
under this Article IX. On the day which is one year after the Closing Date,
Sellers shall be entitled to return of the Indemnification Fund and all interest
and other earnings accrued thereon; provided, that if on such date Buyer has any
indemnification claims pending, the Escrow Agent shall retain an amount
sufficient to satisfy such claims and shall remit only the remaining balance to
Seller. After all claims for indemnification are settled and paid, Seller shall
be entitled to the immediate return of the difference between the amounts paid
and the balance then remaining in the Indemnification Fund.

                  (c) Other Remedies. The disbursement of the Indemnification
Fund to Buyer shall not preclude Buyer from exercising any other rights or
remedies provided for in this Agreement or at law or equity in the event of a
breach by Seller or either of the Partners of its obligations under this
Agreement, including the right to seek damages for Adverse Consequences in
excess of the Indemnification Fund.

                  (d) Instructions to Escrow Agent. To the extent there is no
dispute between the Parties concerning the disposition of the Escrow Deposit or
the Indemnification Fund, or to the extent the Parties have resolved any such
dispute, they will promptly give the Escrow Agent joint 



                                     - 46 -
<PAGE>

directions to disburse funds held by the Escrow Agent in accordance with this
Agreement or the resolution of such dispute.

         9.7 Limitations. Notwithstanding anything to the contrary contained
herein, no indemnification shall be required to be made by Seller or Partners
until the aggregate amount of Buyer's claims exceeds $50,000. Any written notice
delivered by Buyer pursuant to this Article IX with respect to a claim for
indemnification shall set forth with reasonable specificity the basis of the
claim for Buyer's Adverse Consequences and an estimate of the amount thereof. In
no event shall Buyer's right to indemnification for Buyer's Adverse Consequences
or otherwise in connection with the transactions contemplated hereby exceed the
amount of the Purchase Price actually paid by Buyer.

                                   ARTICLE X
                                  MISCELLANEOUS


         10.1 Press Releases and Public Announcements. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to Closing without the prior written approval of the other
Party; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law (in which case the
disclosing Party will use its best efforts to advise the other Party prior to
making the disclosure).

         10.2 Parties Obligated and Benefited. Subject to the limitations set
forth below, this Agreement will be binding upon the Parties and their
respective assigns and successors in interest and will inure solely to the
benefit of the Parties and their respective assigns and successors in interest,
and no other Person will be entitled to any of the benefits conferred by this
Agreement. Without the prior written consent of the other Party, no Party may
assign this Agreement or any of its rights or interests or delegate any of its
duties under this Agreement; except that (i) subject to any required consent of
the Telecommunications Regulatory Board, Buyer may assign this Agreement or any
of its rights or interests or delegate any of its duties hereunder to an
Affiliate(s), provided, however, that no such assignment may be made after
application has been made to the Telecommunications Regulatory Board for its
consent to the assignment of the Franchises; and (ii) Buyer or such Affiliate(s)
may collaterally assign its rights under this Agreement to any Persons providing
debt financing to Buyer or any of its Affiliates.

         10.3 Notices. Any notices and other communications required or
permitted hereunder shall be in writing and shall be effective upon delivery by
hand or upon receipt if sent by certified or registered mail (postage prepaid
and return receipt requested) or by a nationally recognized overnight courier
service (appropriately marked for overnight delivery) or upon transmission if
sent by telex or facsimile (with request for immediate confirmation of receipt
in a manner customary for communications of such respective type and with
physical delivery of the communication being made by one or the other means
specified in this Section 10.3 as promptly as practicable thereafter). Notices
shall be addressed as follows:



                                     - 47 -
<PAGE>

          (a) If to Buyer to:

              Pegasus Cable Television, Inc.
              c/o Pegasus Communications Management Company
              5 Radnor Corporate Center
              100 Matsonford Road, Suite 454
              Radnor, Pennsylvania 19087
              Attn:            Ted S. Lodge, Esq.
              Telecopy: 610-341-1835

              with a copy to:

              Michael B. Jordan, Esq.
              Drinker Biddle & Reath LLP
              1345 Chestnut Street
              Philadelphia, PA  19107-3496
              Telecopy: 215-988-2757

          (b) If to Seller or either of the Partners:

              Cable Systems USA, Partners
              Route 66 North
              Crown, Pennsylvania  16220
              Attn: Jan Fuellhart
              Telecopy: 814-744-8324

              with a copy to:

              Leslie J. Levinson, Esq.
              Baer Marks & Upham LLP
              805 Third Avenue
              New York, New York  10022
              Telecopy: 212-702-5835 or 5941


Any Party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this Section 10.3.

         10.4 Attorneys' Fees. In the event of any action or suit based upon or
arising out of any alleged breach by any Party of any representation, warranty,
covenant or agreement contained in this Agreement, the prevailing Party will be
entitled to recover reasonable attorneys' fees and other costs of such action or
suit from the other Party.

                                     - 48 -
<PAGE>

         10.5 Waiver. This Agreement or any of its provisions may not be waived
except in writing. The failure of any Party to enforce any right arising under
this Agreement on one or more occasions will not operate as a waiver of that or
any other right on that or any other occasion.

         10.6 Headings. The Article and Section headings of this Agreement are
for convenience only and shall not constitute a part of this Agreement or in any
way affect the meaning or interpretation thereof. 

         10.7 Choice of Law. This Agreement and the rights of the parties under
it will be governed by and construed in all respects in accordance with the laws
of the State of New York, without giving effect to any choice of law provision
or rule (whether of the State of New York or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
New York.

         10.8 Rights Cumulative. All rights and remedies of each of the Parties
under this Agreement will be cumulative, and the exercise of one or more rights
or remedies will not preclude the exercise of any other right or remedy
available under this Agreement or applicable law.

         10.9 Further Actions. The Parties will execute and deliver to the
other, from time to time at or after Closing, for no additional consideration
and at no additional cost to the requesting Party, such further assignments,
certificates, instruments, records, or other documents, assurances or things as
may be reasonably necessary to give full effect to this Agreement and to allow
each Party fully to enjoy and exercise the rights accorded and acquired by it
under this Agreement.

         10.10 Time. If the last day permitted for the giving of any notice or
the performance of any act required or permitted under this Agreement falls on a
day which is not a Business Day, the time for the giving of such notice or the
performance of such act will be extended to the next succeeding Business Day.

         10.11 Late Payments. If either Party fails to pay the other any amounts
when due under this Agreement, the amounts due will bear interest from the due
date to the date of payment at the Applicable Rate.

         10.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

         10.13 Entire Agreement. This Agreement (including the Disclosure
Schedule and the other agreements and documents executed in connection herewith,
which are incorporated in and constitute a part of this Agreement) and the
Confidentiality Agreement contain the entire agreement of the Parties and
supersede all prior oral or written agreements, understandings and
representations to the extent that they relate in any way to the subject matter
hereof or thereof.

                                     - 49 -
<PAGE>

         10.14 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
Buyer, Seller and the Partners. No waiver by any Party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence.

         10.15 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.

         10.16 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, Commonwealth,
local, or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, covenant and condition precedent contained
herein shall have independent significance. If any Party has breached any
representation, warranty or covenant contained herein in any respect, the fact
that there exists another representation, warranty or covenant relating to the
same subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty or covenant.

         10.17 Expenses. If Buyer elects to purchase insurance to protect itself
from the consequence of the breach of Seller's and the Partner's representations
and warranties contained herein, Seller will pay the lesser of one-half of the
premium for such insurance or $40,000. Otherwise, each Party will bear his or
its own costs and expenses (including legal fees and expenses and accountants'
fees and expenses) incurred in connection with the negotiation of this
Agreement, the performance of its obligations and the consummation of the
transactions contemplated hereby.

         IN WITNESS WHEREOF, the Parties hereto have duly executed this
Agreement as of the day and year first above written.

                       PEGASUS CABLE TELEVISION, INC.



                       By: /s/ Ted S. Lodge
                               -----------------------------------
                               Ted S. Lodge, Senior Vice President


                                     - 50 -
<PAGE>

                       CABLE SYSTEMS USA, PARTNERS

                       By J & J CABLE PARTNERS, INC.,
                            general partner


                       By:/s/ Janice Fuellhart
                              -----------------------------------
                              Name:
                              Title:


                       And by P S & G CABLE PARTNERS, INC.



                       By:/s/ Peter Graf
                              -----------------------------------
                              Name: Peter Graf
                              Title: President


                       J & J CABLE PARTNERS, INC.



                       By:/s/ Janice Fuellhart
                              -----------------------------------
                              Name:
                              Title:
  

                       P S & G CABLE PARTNERS, INC.



                       By:/s/ Peter Graf
                              -----------------------------------
                              Name: Peter Graf
                              Title: President




                                     - 51 -