<PAGE>









                           PEGASUS COMMUNICATIONS 1996

                                STOCK OPTION PLAN

            (As Amended and Restated Effective As of April 23, 1999)


<PAGE>



-
                                Table of Contents

1.   Purpose................................................................ 1
2.   Administration......................................................... 1
3.   Eligibility............................................................ 2
4.   Stock.................................................................. 3
5.   Annual Limit........................................................... 3
6.   Granting of Discretionary Options...................................... 3
7.   Terms and Conditions of Discretionary Options.......................... 4
8.   Formula Grants to Full-Time Employees Who Are Not Executive Officers... 8
9.   Capital Adjustments....................................................11
10.  Certain Corporate Transactions.........................................11
11.  Change in Control......................................................12
12.  Amendment or Termination of the Plan...................................13
13.  Absence of Rights......................................................13
14.  Indemnification of Board and Committee.................................14
15.  Application of Funds...................................................14
16.  Stockholder Approval...................................................14
17.  No Obligation to Exercise Option.......................................14
18.  Termination of Plan....................................................14
19.  Governing Law..........................................................15
20.  Option Agreements -- Other Provisions..................................15
21.  Listing and Registration of Shares.....................................15
22.  Special Provisions Regarding Digital Television Services, Inc..........15


<PAGE>



                           PEGASUS COMMUNICATIONS 1996

                                STOCK OPTION PLAN

            (As Amended and Restated Effective As of April 23, 1999)

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


         WHEREAS, Pegasus Communications Corporation amended and restated the
Pegasus Communications 1996 Stock Option Plan effective December 18, 1998;

         WHEREAS, Pegasus Communications Corporation, in accordance
with resolutions adopted by the Board of Directors on April 23, 1999, desires to
amend and restate the Plan (i) to increase the number of shares of Class A
Common Stock available thereunder to 1,300,000, (ii) to provide that options may
be granted to employees who are not executive officers by a management
committee, and (iii) to change certain provisions regarding 100-share options
granted (or to be granted) to full-time employees;

         NOW THEREFORE, effective as of April 23, 1999, the Pegasus
Communications 1996 Stock Option Plan is hereby amended and restated to read as
follows:

         1. Purpose. This Pegasus Communications 1996 Stock Option Plan (the
"Plan") is intended to provide a means whereby Pegasus Communications
Corporation (the "Company") may, through the grant of incentive stock options
and nonqualified stock options (collectively, the "Options") to Employees and
Non-employee Directors (as defined in Section 3), attract and retain such
individuals and motivate them to exercise their best efforts on behalf of the
Company and of any Related Company. A "Related Company" shall mean either a
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Internal Revenue Code of 1986, as amended (the "Code"), or the "parent
corporation" of the Company, as defined in Section 424(e) of the Code.

         Further, as used in the Plan, (i) the term "ISO" shall mean an
option which, at the time such option is granted, qualifies as an incentive
stock option within the meaning of Section 422 of the Code and is designated as
an ISO in the "Option Agreement" (as defined in Section 20); and (ii) the term
"NQSO" shall mean an option which, at the time such option is granted, does not
meet the definition of ISO, whether or not it is designated as a nonqualified
stock option in the Option Agreement.

         2. Administration. The Plan shall be administered as follows:



                                        1
<PAGE>

                  (a) Executive Officers and Non-employee Directors. With
respect to options granted to executive officers and Non-employee Directors of
the Company, the Plan shall be administered:

                           (1) By a committee, which shall consist solely of not
                  fewer than two directors of the Company who shall be appointed
                  by, and shall serve at the pleasure of, the Board of Directors
                  of the Company (the "Board"), taking into consideration the
                  rules under Section 16(b) of the Securities Exchange Act of
                  1934, as amended (the "Exchange Act"), and the requirements of
                  Section 162(m) of the Code; or

                           (2) In the event a committee has not been established
                  in accordance with Section 2(a)(1), or cannot be constituted
                  to vote on the grant of an Option, by the entire Board;

provided, however, that a member of the Board shall not participate in a vote
approving the grant of an Option to himself or herself to the extent provided
under the laws of the State of Delaware governing corporate self-dealing.

                  (b) Employees Who Are Not Executive Officers. With respect to
options granted to Employees (as defined in Section 3) who are not executive
officers, the Plan shall be administered by a management committee, the members
of which shall be appointed by, and shall serve at the pleasure of, the Board.

                  (c) In General. The administrator of the Plan, whether it be
the committee under Section 2(a) or the committee under Section 2(b), shall
hereinafter be referred to as the "Committee," with respect to the eligible
individuals for which the particular committee serves as administrator. Each
member of the Committee, while serving as such, shall be deemed to be acting in
his capacity as a director or employee of the Company. Except as provided in
Section 8 (regarding formula grants to employees other than executive officers),
the Committee shall have full authority, subject to the terms of the Plan, to
select the Employees and Non-employee Directors to be granted Options under the
Plan, to grant Options on behalf of the Company, and to set the date of grant
and the other terms of such Options; provided, however, that a Non-employee
Director shall not be eligible to receive an ISO under the Plan. The Committee
may correct any defect, supply any omission and reconcile any inconsistency in
this Plan and in any Option granted hereunder in the manner and to the extent it
deems desirable. The Committee also shall have the authority to establish such
rules and regulations, not inconsistent with the provisions of the Plan, for the
proper administration of the Plan, to amend, modify, or rescind any such rules
and regulations, and to make such determinations, and interpretations under, or
in connection with, the Plan, as it deems necessary or advisable. All such
rules, regulations, determinations, and interpretations shall be binding and
conclusive upon the Company, its stockholders and all Employees and Non-employee
Directors, upon their respective legal representatives, beneficiaries,
successors, and assigns, and upon all other persons claiming under or through
any of them.

                  No member of the Board or the Committee shall be liable for
any action or determination made in good faith with respect to the Plan or any
Option granted under it.



                                       2
<PAGE>

                  3. Eligibility. All employees of the Company or a Related
Company (including any directors who also are officers) ("Employees") shall be
eligible to receive Options under the Plan. Directors of the Company or a
Related Company who are not employees ("Non-employee Directors") shall be
eligible to receive NQSOs (and not ISOs) under the Plan. More than one Option
may be granted to an Employee or a Non-employee Director under the Plan. An
Employee or Non-employee Director who has been granted an Option under the Plan
shall hereinafter be referred to as an "Optionee."

                  4. Stock. Options may be granted under the Plan to purchase up
to a maximum of 1,300,000 shares of Class A common stock of the Company ("Common
Stock"); provided, however, that no Employee shall receive Options for more than
550,000 shares of the Company's Common Stock over the life of the Plan. However,
both limits in the preceding sentence shall be subject to adjustment as provided
in Section 9. Shares issuable under the Plan may be authorized but unissued
shares or reacquired shares, and the Company may purchase shares required for
this purpose, from time to time, if it deems such purchase to be advisable.

                  If any Option granted under the Plan expires or otherwise
terminates for any reason whatsoever (including, without limitation, the
Optionee's surrender thereof) without having been exercised, the shares subject
to the unexercised portion of the Option shall continue to be available for the
granting of Options under the Plan as fully as if the shares had never been
subject to an Option; provided, however, that (i) if an Option is cancelled, the
shares of Common Stock covered by the cancelled Option shall be counted against
the maximum number of shares specified above for which Options may be granted to
a single Employee, and (ii) if the exercise price of an Option is reduced after
the date of grant, the transaction shall be treated as a cancellation of the
original Option and the grant of a new Option for purposes of such maximum.

                  5. Annual Limit. The aggregate fair market value (determined
under Section 7(b)) of the Common Stock with respect to which ISOs are
exercisable for the first time by an Employee during any calendar year (counting
ISOs under this Plan and incentive stock options under any other stock option
plan of the Company or a Related Company) shall not exceed $100,000. If an
Option intended as an ISO is granted to an Employee and the Option may not be
treated in whole or in part as an ISO pursuant to the $100,000 limitation, the
Option shall be treated as an ISO to the extent it may be so treated under the
limitation and as an NQSO as to the remainder. For purposes of determining
whether an ISO would cause the limitation to be exceeded, ISOs shall be taken
into account in the order granted. The annual limits set forth above for ISOs
shall not apply to NQSOs.

                  6. Granting of Discretionary Options. From time to time until
the expiration or earlier suspension or discontinuance of the Plan, the
Committee may, on behalf of the Company, grant to Employees and Non-employee
Directors under the Plan such Options as it determines are warranted; provided,
however, that grants of ISOs and NQSOs shall be separate and not in tandem, and
further provided that Non-employee Directors shall not be eligible to receive
ISOs under the Plan. In making any determination as to whether an Employee or a
Non-employee Director shall be granted an Option, the type of Option to be
granted to an Employee, the number of shares to be covered by the Option, and
other terms of the Option, the Committee shall take into account the duties of
the Employee or the Non-employee Director, his present and potential
contributions to the success of the Company or a Related Company, the tax
implications to the Company and the Employee of any Option granted, and such
other factors as the Committee shall deem relevant in accomplishing the purposes
of the Plan. Moreover, the Committee may provide in the Option that said Option
may be exercised only if certain conditions, as determined by the Committee, are
fulfilled.



                                        3
<PAGE>

                  7. Terms and Conditions of Discretionary Options. Options
granted pursuant to Section 6 shall include expressly or by reference the
following terms and conditions, as well as such other provisions not
inconsistent with the provisions of this Plan and, for ISOs granted under this
Plan, the provisions of Section 422(b) of the Code, as the Committee shall deem
desirable --

                            (a) Number of Shares. The Option shall state the
number of shares of Common Stock to which the Option pertains.

                            (b) Price. Each Option granted under Section 6 shall
state the Option price which shall be determined and fixed by the Committee in
its discretion but shall not be less than the higher of 100 percent (110 percent
in the case of an ISO granted to a more-than-10-percent stockholder, as provided
in Section 7(i)) of the fair market value of the optioned shares of Common
Stock, or the par value thereof.

         The fair market value of a share of Common Stock shall be the closing
price of the Common Stock on a registered securities exchange or on an
over-the-counter market on the last business day prior to the date of grant on
which the Common Stock traded.

                            (c) Term.

                  (1) ISOs. Subject to earlier termination as provided in
         Section 7(e), (f), and (g) and in Section 10, the term of each ISO
         granted under Section 6 shall be not more than ten years (five years in
         the case of a more-than-10-percent stockholder, as discussed in Section
         7(i)) from the date of grant.

                  (2) NQSOs. Subject to earlier termination as provided in
         Section 7(e), (f), and (g) and in Section 10, the term of each NQSO
         granted under Section 6 shall be not more than ten years from the date
         of grant.

                            (d) Exercise. Options granted under Section 6 shall
be exercisable in such installments and on such dates, as the Committee may
specify. The Committee may accelerate the exercise date of any outstanding
Option, in its discretion, if it deems such acceleration to be desirable.

         Any exercisable Options may be exercised at any time up to the
expiration or termination of the Option. Exercisable Options may be exercised,
in whole or in part and from time to time, by giving written notice of exercise
to the Company at its principal office, specifying the number of shares to be
purchased and accompanied by payment in full of the aggregate Option exercise
price for such shares (or payment as soon as practicable after the exercise, in
the case of an exercise arrangement approved by the Committee and described in
paragraph (2)(C) below). Only full shares shall be issued under the Plan, and
any fractional share which might otherwise be issuable upon exercise of an
Option granted hereunder shall be forfeited.


                                        4
<PAGE>

         The Option price shall be payable --

                  (1) in cash or its equivalent;

                  (2) in the case of an ISO, if the Committee in its discretion
causes the Option Agreement so to provide, and in the case of an NQSO, if the
Committee in its discretion so determines at or prior to the time of exercise,
then --

                           (A) in shares of Common Stock previously acquired by
the Optionee; provided that (i) if such shares of Common Stock were acquired
through the exercise of an ISO and are used to pay the Option price for ISOs,
such shares have been held by the Employee for a period of not less than the
holding period described in Section 422(a)(1) of the Code on the date of
exercise, (ii) if such shares of Common Stock were acquired through the exercise
of an NQSO (and are used to pay the Option price of an ISO or NQSO) or acquired
through the exercise of an ISO (and are used to pay the Option price of an
NQSO), such shares have been held by the Optionee for a period of not less than
six months on the date of exercise, and (iii) if such shares of Common Stock
were acquired through the vesting of a restricted stock award, such shares shall
have vested in the Optionee at least six months prior to the date of exercise;

                           (B) in Company Common Stock newly acquired by the
Optionee upon exercise of such Option (which shall constitute a disqualifying
disposition in the case of an Option which is an ISO);

                           (C) by delivering a properly executed notice of
exercise of the Option to the Company and a broker, with irrevocable
instructions to the broker promptly to deliver to the Company the amount of sale
or loan proceeds necessary to pay the exercise price of the Option;

                           (D) if the Optionee is designated as an "eligible
participant," and if the Optionee thereafter so requests, (i) the Company will
loan the Optionee the money required to pay the exercise price of the Option;
(ii) any such loan to an Optionee shall be made only at the time the Option is
exercised; and (iii) the loan will be made on the Optionee's personal negotiable
demand promissory note, bearing interest at the lowest rate which will avoid
imputation of interest under Section 7872 of the Code, and including such other
terms as the Committee prescribes; or

                           (E) in any combination of (1), (2)(A), (2)(B), (2)(C)
and (2)(D) above.

         In the event the Option price is paid, in whole or in part, with shares
of Common Stock, the portion of the Option price so paid shall be equal to the
aggregate fair market value (determined under Section 7(b), with reference to
the date of exercise of the Option, rather than the date of grant) of the Common
Stock so surrendered in payment of the Option price.



                                        5
<PAGE>

                            (e) Termination of Employment or Board Membership.
If an Employee's employment by the Company (and Related Companies) or a
Non-employee Director's membership on the Board is terminated by either party
prior to the expiration date fixed for his Option for any reason other than
death or disability, such Option may be exercised, to the extent of the number
of shares with respect to which the Optionee could have exercised it on the date
of such termination, or to any greater extent permitted by the Committee, by the
Optionee at any time prior to the earlier of (i) the expiration date specified
in such Option, or (ii) an accelerated expiration date determined by the
Committee, in its discretion, and set forth in the Option Agreement; except
that, subject to Section 10 hereof, such accelerated expiration date shall not
be earlier than the date of the termination of the Employee's employment or the
Non-employee Director's Board membership, and in the case of ISOs, such
accelerated expiration date shall not be later than three months after such
termination of employment.

                            (f) Exercise upon Disability of Optionee. If an
Optionee becomes disabled (within the meaning of Section 22(e)(3) of the Code)
during his employment or membership on the Board and, prior to the expiration
date fixed for his Option, his employment or membership on the Board is
terminated as a consequence of such disability, such Option may be exercised, to
the extent of the number of shares with respect to which the Optionee could have
exercised it on the date of such termination, or to any greater extent permitted
by the Committee, by the Optionee at any time prior to the earlier of (i) the
expiration date specified in such Option, or (ii) an accelerated termination
date determined by the Committee, in its discretion, and set forth in the Option
Agreement; except that, subject to Section 10 hereof, such accelerated
termination date shall not be earlier than the date of the Optionee's
termination of employment or Board membership by reason of disability, and in
the case of ISOs, such accelerated termination date shall not be later than one
year after such termination of employment. In the event of the Optionee's legal
disability, such Option may be exercised by the Optionee's legal representative.

                            (g) Exercise upon Death of Optionee. If an Optionee
dies during his employment or Board membership, and prior to the expiration date
fixed for his Option, or if an Optionee whose employment or Board membership is
terminated for any reason, dies following his termination of employment or Board
membership but prior to the earliest of (i) the expiration date fixed for his
Option, (ii) the expiration of the period determined under paragraphs (e) and
(f) above, or (iii) in the case of an ISO, three months following termination of
employment, such Option may be exercised, to the extent of the number of shares
with respect to which the Optionee could have exercised it on the date of his
death, or to any greater extent permitted by the Committee, by the Optionee's
estate, personal representative or beneficiary who acquired the right to
exercise such Option by bequest or inheritance or by reason of the death of the
Optionee. Such post-death exercise may occur at any time prior to the earlier of
(i) the expiration date specified in such Option or (ii) an accelerated
termination date determined by the Committee, in its discretion, and set forth
in the Option Agreement; except that, subject to Section 10 hereof, such
accelerated termination date shall not be later than three years after the date
of death.

                                       6

<PAGE>

                            (h) Non-Transferability. No ISO granted under
Section 6 shall be assignable or transferable by the Optionee other than by will
or by the laws of descent and distribution. During the lifetime of the Optionee,
an ISO shall be exercisable only by the Optionee, or in the event of the
Optionee's legal disability, by the Optionee's guardian or legal representative.
Except as provided in an Optionee's Option Agreement, such limits on assignment,
transfer and exercise shall also apply to NQSOs. If the Optionee is married at
the time of exercise and if the Optionee so requests at the time of exercise,
the certificate or certificates shall be registered in the name of the Optionee
and the Optionee's spouse, jointly, with right of survivorship.

                            (i) Ten Percent Stockholder. If the Employee owns
more than 10 percent of the total combined voting power of all shares of stock
of the Company or of a Related Company at the time an ISO is granted to him
(taking into account the attribution rules of Section 424(d) of the Code), the
Option price for the ISO shall be not less than 110 percent of the fair market
value (as determined under Section 7(b)) of the optioned shares of Common Stock
on the date the ISO is granted, and such ISO, by its terms, shall not be
exercisable after the expiration of five years from the date the ISO is granted.
The conditions set forth in this paragraph shall not apply to NQSOs.

                            (j) Withholding and Use of Shares to Satisfy Tax
Obligations. The obligation of the Company to deliver shares of Common Stock
upon the exercise of any Option shall be subject to applicable federal, state
and local tax withholding requirements. If the exercise of any Option granted
under Section 6 is subject to the withholding requirements of applicable federal
tax law, the Committee, in its discretion, may permit or require the Employee to
satisfy the federal, state and local withholding tax, in whole or in part, by
electing to have the Company withhold shares of Common Stock subject to the
exercise (or by returning previously acquired shares of Common Stock to the
Company). The Company may not withhold shares in excess of the number necessary
to satisfy the minimum federal, state and local tax withholding requirements.
Shares of Common Stock shall be valued, for purposes of this paragraph, at their
fair market value determined under Section 7(b), with reference to the date the
amount attributable to the exercise of the Option is includable in income by the
Employee under Section 83 of the Code (the "Determination Date"), rather than
the date of grant.

         If shares of Common Stock acquired by the exercise of an ISO are used
to satisfy the withholding requirement described above, such shares of Common
Stock must have been held by the Employee for a period of not less than the
holding period described in Section 422(a)(1) of the Code as of the
Determination Date.

         The Committee shall adopt such withholding rules as it deems necessary
to carry out the provisions of this paragraph.



                                       7
<PAGE>

                            (k) Loans. If an Optionee who is granted an Option
under Section 6 is designated as an "eligible participant" by the Committee at
the date of grant in the case of an ISO, or at or after the date of grant in the
case of an NQSO, and if the Optionee thereafter so requests, the Company will
loan the Optionee the money required to satisfy any regular income tax
obligations (as opposed to alternative minimum tax obligations) resulting from
the exercise of any Options. Any loan or loans to an Optionee shall be made only
at the time any such tax resulting from such exercise is due. The Committee, in
its discretion, may require an affidavit from the Optionee specifying the amount
of the tax required to be paid and the date when such tax must be paid. The loan
will be made on the Optionee's personal, negotiable, demand promissory note,
bearing interest at the lowest rate which will avoid imputation of interest
under Section 7872 of the Code, and including such other terms as the Committee
prescribes.

                  8. Formula Grants to Full-Time Employees Who Are Not Executive
Officers.

                  (a) Grant. Each full-time Employee who is not an executive
officer of the Company or a Related Company shall be granted an Option to
purchase 100 shares of Common Stock as provided in this Section 8. Such Option
shall be granted on the later of (i) December 18, 1998, or (ii) the date the
Employee becomes a full-time Employee (as a result of hire or a change in status
from part-time to full-time Employee). No Employee shall receive more than one
Option grant under this Section 8.

                  (b) Type of Option. Each Option granted under this Section 8
on December 18, 1998 shall be an NQSO. Each Option granted under this Section 8
after December 18, 1998 shall, unless the Code otherwise requires or the
Committee otherwise determines, be an ISO.

                  (c) Terms and Conditions of Formula Options. Options granted
under this Section 8 shall include expressly or by reference the following terms
and conditions --

                           (1) Number of Shares. The Option shall state the
number of shares of Common Stock to which the Option pertains.

                           (2) Price. The Option price of each Option granted
under this Section 8 shall be the higher of 100 percent (110 percent in the case
of an ISO granted to a more-than-10-percent stockholder, as provided in Section
7(i)) of the fair market value (as defined in Section 7(b)) of the optioned
shares of Common Stock, or the par value thereof.

                           (3) Term. Subject to earlier termination as provided
in Section 8(c)(5), (6) and (7) and in Section 10 hereof, the term of each
Option granted under this Section 8 shall be ten years (five years in the case
of an ISO granted to a more-than-ten-percent stockholder, as discussed in
Section 7(i) above) from the date of grant.

                           (4) Exercise. Effective April 23, 1999, each Option
granted under this Section 8 shall become fully exercisable on the earliest of
(i) the date the Optionee completes one Year of Vesting Service, (ii) the first
anniversary of the date the Option is granted if the Optionee is then in the
employ of the Company or a Related Company, or (iii) on the Optionee's death or
disability (as defined in Section 22(e)(3) of the Code) while in the employ of
the Company or a Related Company. In addition, the Committee may accelerate the
exercise date of any outstanding Option, in its discretion, if it deems such
acceleration to be desirable. For purposes of this Section 8(c)(4), Year of
Vesting Service shall have the meaning set forth in Article I of (I) the Pegasus
Communications Savings Plan, as it may be amended from time to time, if the
Employee is an eligible employee thereunder or (II) the Pegasus Communications
Puerto Rico Savings Plan, as it may be amended from time to time, if the
Employee is an eligible employee thereunder; provided, however, that an Employee
shall not complete a Year of Vesting Service for purposes of this Plan until the
last day of the 12-month computation period in which such Year is being
measured.




                                       8
<PAGE>

                  Any exercisable Options may be exercised at any time up to the
expiration or termination of the Option. Exercisable Options may be exercised,
in whole or in part and from time to time, by giving written notice of exercise
to the Company at its principal office, specifying the number of shares to be
purchased and accompanied by payment in full of the aggregate Option exercise
price for such shares (or payment as soon as practicable after the exercise, in
the case of an exercise arrangement described in paragraph (C) below). Only full
shares shall be issued under the Plan, and any fractional share which might
otherwise be issuable upon exercise of an Option granted hereunder shall be
forfeited.

                  The Option price shall be payable --

                           (A) in cash or its equivalent;

                           (B) in shares of Common Stock previously acquired by
the Optionee; provided that (i) if such shares of Common Stock were acquired
through the exercise of an ISO and are used to pay the Option price for ISOs,
such shares have been held by the Employee for a period of not less than the
holding period described in Section 422(a)(1) of the Code on the date of
exercise, (ii) if such shares of Common Stock were acquired through the exercise
of an NQSO (and used to pay the Option price for ISOs or NQSOs) or acquired
through the exercise of an ISO (and used to pay the Option price for NQSOs),
such shares have been held by the Optionee for a period of not less than six
months on the date of exercise, and (iii) if such shares of Common Stock were
acquired through the vesting of a restricted stock award, such shares shall have
vested in the Optionee at least six months prior to the date of exercise;

                           (C) by delivering a properly executed notice of
exercise of the Option to the Company and a broker, with irrevocable
instructions to the broker promptly to deliver to the Company the amount of sale
or loan proceeds necessary to pay the exercise price of the Option; or

                           (D) in any combination of (A), (B) and (C) above.

                  In the event the Option price is paid, in whole or in part,
with shares of Common Stock, the portion of the Option price so paid shall be
equal to the aggregate fair market value (determined under Section 7(b), with
reference to the date of exercise of the Option, rather than the date of grant)
of the Common Stock so surrendered in payment of the Option price.

                           (5) Termination of Employment. If an Employee's
employment by the Company (and Related Companies) is terminated by either party
prior to the expiration date fixed for his Option for any reason other than
death or disability, such Option may be exercised, to the extent of the number
of shares with respect to which the Optionee could have exercised it on the date
of such termination, by the Optionee at any time prior to the earliest of (i)
the expiration date specified in such Option, (ii) three months after such
termination of employment, or (iii) termination of such Option under Section 10.



                                       9
<PAGE>

                           (6) Exercise upon Disability of Optionee. If an
Optionee becomes disabled (within the meaning of Section 22(e)(3) of the Code)
during his employment and prior to the expiration date fixed for his Option,
such Option may be exercised, to the extent of the number of shares with respect
to which the Optionee could have exercised it on the date of such termination by
the Optionee at any time prior to the earliest of (i) the expiration date
specified in such Option, (ii) one year after such termination of employment, or
(iii) termination of such Option under Section 10. In the event of the
Optionee's legal disability, such Option may be exercised by the Optionee's
legal representative.

                           (7) Exercise upon Death of Optionee. If an Optionee
dies during his employment, and prior to the expiration date fixed for his
Option, or if an Optionee whose employment is terminated for any reason, dies
following his termination of employment but prior to the earliest of (A) the
expiration date fixed for his Option, (B) the expiration of the period
determined under paragraphs (5) and (6) above, or (C) in the case of an ISO,
three months following termination of employment, such Option may be exercised,
to the extent of the number of shares with respect to which the Optionee could
have exercised it on the date of his death, by the Optionee's estate, personal
representative or beneficiary who acquired the right to exercise such Option by
bequest or inheritance or by reason of the death of the Optionee. Such
post-death exercise may occur at any time prior to the earliest of (i) the
expiration date specified in such Option, (ii) one year after the date of death,
or (iii) termination of such Option under Section 10.

                           (8) Non-Transferability. No Option granted under this
Section 8 shall be assignable or transferable by the Optionee other than by will
or by the laws of descent and distribution. During the lifetime of the Optionee,
all Options granted under this Section 8 shall be exercisable only by the
Optionee, or, in the event of the Optionee's legal disability, by the Optionee's
guardian or legal representative. If the Optionee is married at the time of
exercise and if the Optionee so requests at the time of exercise, the
certificate or certificates shall be registered in the name of the Optionee and
the Optionee's spouse, jointly, with right of survivorship.

                           (9) Withholding and Use of Shares to Satisfy Tax
Obligations. The obligation of the Company to deliver shares of Common Stock
upon the exercise of any Option shall be subject to applicable federal, state
and local tax withholding requirements. If the exercise of any Option granted
under this Section 8 is subject to the withholding requirements of applicable
federal tax law, the Employee may satisfy the federal, state and local
withholding tax, in whole or in part, by electing to have the Company withhold
shares of Common Stock subject to the exercise (or by returning previously
acquired shares of Common Stock to the Company). The Company may not withhold
shares in excess of the number necessary to satisfy the minimum federal, state
and local tax withholding requirements. Shares of Common Stock shall be valued,
for purposes of this paragraph, at their fair market value determined under
Section 7(b), with reference to the Determination Date (as defined in Section
7(j)), rather than the date of grant.

                                       10
<PAGE>

                  If shares of Common Stock acquired by the exercise of an ISO
are used to satisfy the withholding requirement described above, such shares of
Common Stock must have been held by the Employee for a period of not less than
the holding period described in Section 422(a)(1) of the Code as of the
Determination Date.

                  The Committee shall adopt such withholding rules as it deems
necessary to carry out the provisions of this paragraph.

         9. Capital Adjustments. The number of shares which may be issued under
the Plan, the maximum number of shares with respect to which Options may be
granted to any Employee under the Plan (as stated in Section 4 hereof), the
number of shares subject to an Option to be granted under Section 8, and the
number of shares issuable upon exercise of outstanding Options under the Plan
(as well as the Option price per share under such outstanding Options) shall be
adjusted, as may be deemed appropriate by the Committee, to reflect any stock
dividend, stock split, spin-off, share combination, or similar change in the
capitalization of the Company; provided, however, that no such adjustment shall
be made to an outstanding ISO if such adjustment would constitute a modification
under Section 424(h) of the Code, unless the Optionee consents to such
adjustment. In the event any such change in capitalization cannot be reflected
in a straight mathematical adjustment of the number of shares issuable upon the
exercise of outstanding Options (and a straight mathematical adjustment of the
exercise price thereof), the Committee shall make such adjustments as are
appropriate to reflect most nearly such straight mathematical adjustment. Such
adjustments shall be made only as necessary to maintain the proportionate
interest of Optionees, and preserve, without exceeding, the value of Options.

         10. Certain Corporate Transactions. In the event of a corporate
transaction (as that term is described in Section 424(a) of the Code and the
Treasury Regulations issued thereunder as, for example, a merger, consolidation,
acquisition of property or stock, separation, reorganization, or liquidation),
the surviving or successor corporation shall assume each outstanding Option or
substitute a new option for each outstanding Option; provided, however, that, in
the event of a proposed corporate transaction, the Committee may terminate all
or a portion of the outstanding Options if it determines that such termination
is in the best interests of the Company. If the Committee decides to terminate
outstanding Options, the Committee shall give each Optionee holding an Option to
be terminated not less than seven days' notice prior to any such termination,
and any Option which is to be so terminated may be exercised (if and only to the
extent that it is then exercisable) up to, and including the date immediately
preceding such termination. Further, as provided in Section 7(d) and Section
8(c)(4), the Committee, in its discretion, may accelerate, in whole or in part,
the date on which any or all Options become exercisable.

         The Committee also may, in its discretion, change the terms of any
outstanding Option to reflect any such corporate transaction, provided that, in
the case of ISOs, such change does not constitute a "modification" under Section
424(h) of the Code, unless the Option holder consents to the change.


                                       11
<PAGE>

         11. Change in Control.

                  (a) Full Vesting. Notwithstanding any other provision of this
Plan, all outstanding Options shall become fully vested and exercisable upon a
Change in Control.

                  (b) Definitions. The following definitions shall apply for
purposes of this Section --

                           (1) "Change in Control" means the occurrence of any
of the following: (i) the sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company to any
"person" (as such term is used in Section 13(d)(3) of the Exchange Act) other
than the Principal or his Related Parties, (ii) the adoption of a plan relating
to the liquidation or dissolution of the Company, (iii) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" (as defined above) becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act, except that a Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time, upon the happening of
an event or otherwise), of more of the voting stock of the Company than is
"beneficially owned" (as defined above) at such time by the Principal and his
Related Parties, or (iv) the first day on which a majority of the members of the
Board are not Continuing Directors.

                           (2) "Continuing Directors" means, as of any date of
determination, any member of the Board who (i) was a member of the Board on
September 30, 1996, or (ii) was nominated for election or elected to the Board
with approval of a majority of the Continuing Directors who were members of the
Board at the time of such nomination or election.

                           (3) "Person" shall have the meaning set forth in the
indenture dated July 7, 1995, by and among Pegasus Media & Communications, Inc.,
certain of its subsidiaries, and First Union National Bank and Trustee.

                           (4) "Principal" means Marshall W. Pagon.

                           (5) "Related Party" means (A) any immediate family
member of the Principal or (B) any trust, corporation, partnership or other
entity, more than 50% of the voting equity interests of which are owned directly
or indirectly by, and which is controlled by, the Principal and/or such other
Persons referred to in the immediately preceding clause (A). For purposes of
this definition, (i) "immediate family member" means spouse, parent,
step-parent, child, sibling or step-sibling, and (ii) "control," as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise; provided that beneficial ownership of 10% or more of the voting
securities of a Person shall be deemed to be control. In addition, the
Principal's estate shall be deemed to be a Related Party until such time as such
estate is distributed in accordance with the Principal's will or applicable
state law.




                                       12
<PAGE>

         12. Amendment or Termination of the Plan.

                  (a) In General. The Board, pursuant to a written resolution,
from time to time may suspend or terminate the Plan or amend it, and the
Committee may amend any outstanding Options in any respect whatsoever; except
that, without the approval of the stockholders (given in the manner set forth in
paragraph (b) below) --

                  (1) the class of employees eligible to receive ISOs shall not
be changed;

                  (2) the maximum number of shares of Common Stock with respect
to which Options may be granted under the Plan shall not be increased, except as
permitted under Section 9 hereof;

                  (3) the duration of the Plan under Section 18 hereof with
respect to any ISOs granted hereunder shall not be extended; and

                  (4) no amendment requiring stockholder approval pursuant to
Treas. Reg. ss. 1.162-27(e)(4)(vi) or any successor thereto may be made (to the
extent compliance with Section 162(m) of the Code is desired).

         Notwithstanding the foregoing, no such suspension, discontinuance or
amendment shall materially impair the rights of any holder of an outstanding
Option without the consent of such holder.

         (b) Manner of Stockholder Approval. The approval of stockholders must
be effected --

                  (1) By a method and in a degree that would be treated as
adequate under applicable state law in the case of an action requiring
stockholder approval (i.e., an action on which stockholders would be entitled to
vote if the action were taken at a duly held stockholders' meeting); or

                  (2) By a majority of the votes cast at a duly held
stockholders' meeting at which a quorum representing a majority of all
outstanding voting stock is, either in person or by proxy, present and voting on
the Plan.

         13. Absence of Rights. Neither the adoption of the Plan nor any action
of the Board or the Committee shall be deemed to give any individual any right
to be granted an Option, or any other right hereunder, unless and until the
Committee shall have granted such individual an Option (or unless and until such
Option shall have been granted under Section 8), and then his rights shall be
only such as are provided by the Option Agreement.



                                       13
<PAGE>

         Any Option under the Plan shall not entitle the holder thereof to any
rights as a stockholder of the Company prior to the exercise of such Option and
the issuance of the shares pursuant thereto. Further, notwithstanding any
provisions of the Plan or the Option Agreement with an Employee, the Company and
any Related Company shall have the right, in its discretion but subject to any
employment contract entered into with the Employee, to retire the Employee at
any time pursuant to its retirement rules or otherwise to terminate his
employment at any time for any reason whatsoever.

         14. Indemnification of Board and Committee. Without limiting any other
rights of indemnification which they may have from the Company and any Related
Company, the members of the Board and the members of the Committee shall be
indemnified by the Company against all costs and expenses reasonably incurred by
them in connection with any claim, action, suit, or proceeding to which they or
any of them may be a party by reason of any action taken or failure to act
under, or in connection with, the Plan, or any Option granted thereunder, and
against all amounts paid by them in settlement thereof (provided such settlement
is approved by legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit, or proceeding, except a
judgment based upon a finding of willful misconduct or recklessness on their
part. Upon the making or institution of any such claim, action, suit, or
proceeding, the Board or Committee member shall notify the Company in writing,
giving the Company an opportunity, at its own expense, to handle and defend the
same before such Board or Committee member undertakes to handle it on his own
behalf. The provisions of this Section shall not give members of the Board or
the Committee greater rights than they would have under the Company's by-laws or
Delaware law.

         15. Application of Funds. The proceeds received by the Company from the
sale of Common Stock pursuant to Options granted under the Plan shall be used
for general corporate purposes. Any cash received in payment for shares upon
exercise of an Option shall be added to the general funds of the Company and
shall be used for its corporate purposes. Any Common Stock received in payment
for shares upon exercise of an Option shall become treasury stock.

         16. Stockholder Approval. This amended and restated Plan shall become
effective on April 23, 1999; provided, however, that if stockholders do not
approve (in the manner described in Section 12(b) hereof) the expansion of the
class of employees who are eligible to receive ISOs hereunder, on or before
December 17, 1999, any ISOs granted hereunder to Employees who are not executive
officers of the Company or a Related Company shall be null and void and no
additional ISO shall be granted hereunder to an Employee who is not an executive
officer of the Company or Related Company.

         17. No Obligation to Exercise Option. The granting of an Option shall
impose no obligation upon an Optionee to exercise such Option.

         18. Termination of Plan. Unless earlier terminated as provided in the
Plan, the Plan and all authority granted hereunder shall terminate absolutely at
12:00 midnight on September 29, 2006, which date is within 10 years after the
date the Plan was adopted by the Board, or the date the Plan was approved by the
stockholders of the Company, whichever is earlier, and no Options hereunder
shall be granted thereafter. Nothing contained in this Section, however, shall
terminate or affect the continued existence of rights created under Options
issued hereunder, and outstanding on the date set forth in the preceding
sentence, which by their terms extend beyond such date.



                                       14
<PAGE>

         19. Governing Law. The Plan shall be governed by the applicable Code
provisions to the maximum extent possible. Otherwise, the laws of the State of
Delaware shall govern the operation of, and the rights of Employees and
Non-employee Directors under, the Plan and Options granted thereunder.

         20. Option Agreements -- Other Provisions. Options granted under the
Plan shall be evidenced by written documents ("Option Agreements") in such form
as the Committee shall from time to time approve, and containing such provisions
not inconsistent with the provisions of the Plan (and, for ISOs granted pursuant
to the Plan, not inconsistent with Section 422(b) of the Code), as the Committee
shall deem advisable. The Option Agreements shall specify whether the Option is
an ISO or NQSO. Each Optionee shall enter into, and be bound by, an Option
Agreement as soon as practicable after the grant of an Option.

         21. Listing and Registration of Shares. Each Option shall be subject to
the requirement that, if at any time the Committee shall determine, in its
discretion, that the listing, registration, or qualification of the shares of
Common Stock covered thereby upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting of
such Option or the purchase of shares of Common Stock thereunder, or that action
by the Company or by the Optionee should be taken in order to obtain an
exemption from any such requirement, no such Option may be exercised, in whole
or in part, unless and until such listing, registration, qualification, consent,
approval, or action shall have been effected, obtained, or taken under
conditions acceptable to the Committee. Without limiting the generality of the
foregoing, each Optionee or his legal representative or beneficiary may also be
required to give satisfactory assurance that shares purchased upon exercise of
an Option are being purchased for investment and not with a view to
distribution, and certificates representing such shares may be legended
accordingly.

         22. Special Provisions Regarding Digital Television Services, Inc.
Digital Television Services, Inc. ("DTS") became a wholly-owned subsidiary of
the Company by means of the merger (the "Merger") of a wholly-owned subsidiary
of the Company into DTS pursuant to the Agreement and Plan of Merger dated
January 8, 1998 (the "Merger Agreement") among the Company, DTS, Pegasus DTS
Merger Sub, Inc. and certain stockholders of the Company and DTS. Section 2.12
of the Merger Agreement provides that the Company will assume certain
outstanding DTS options specified therein. Section 2.12 of the Merger Agreement
also provides that such DTS options will be replaced with options (the
"Replacement Options") to purchase the number of shares of Common Stock equal to
the "conversion ratio" (as defined in the Merger Agreement) times the number of
shares of DTS common stock issuable upon the exercise of such options, for an
exercise price equal to the exercise price applicable to such options divided by
the "conversion ratio."


                                       15
<PAGE>

         Each Replacement Option shall be exercisable under the Plan in
accordance with the terms of the agreement entered into between the Company and
the holder of the Replacement Option (the "Replacement Agreement"), the terms of
which shall govern in the event of any conflict with the provisions of the Plan.

         The following provisions of the Plan shall not apply to the Replacement
Options:

         (i) Section 11 ("Change in Control");

         (ii) Section 7(d)(2)(D) (regarding payment of exercise price with the
proceeds of a loan from the Company); and

         (iii) Section 7(k) (regarding payment of income tax obligations with
the proceeds of a loan from the Company).

         In addition, any provision of the Plan that would provide an additional
benefit (within the meaning of Section 424(a)(2) of the Code and Treasury
Regulations thereunder) shall not apply to the Replacement Options.






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