<PAGE>

                     CERTIFICATE OF DESIGNATION, PREFERENCES
                    AND RELATIVE, PARTICIPATING, OPTIONAL AND
                        OTHER SPECIAL RIGHTS OF PREFERRED
                      STOCK AND QUALIFICATIONS, LIMITATIONS
                            AND RESTRICTIONS THEREOF

                                       OF

                     12.75% SERIES A CUMULATIVE EXCHANGEABLE
                                 PREFERRED STOCK

                                       OF

                       PEGASUS COMMUNICATIONS CORPORATION

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

                         Pursuant to Section 151 of the
                General Corporation Law of the State of Delaware

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

                  Pegasus Communications Corporation (the "Company"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware, certifies that pursuant to the authority contained in Article
Fourth of its Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") and in accordance with the provisions of Section
151 of the General Corporation Law of the State of Delaware, a duly constituted
committee of the Board of Directors of the Company, acting within the scope of
the authority delegated to it by the Board of Directors, by unanimous written
consent dated January 22, 1997 duly approved and adopted the following
resolution (this "Certificate of Designation") which resolution remains in full
force and effect on the date hereof:

                  RESOLVED, that pursuant to the authority vested in the Pricing
Committee of the Board of Directors by resolutions duly adopted by the Board of
Directors on November 21, 1996, the Pricing Committee of the Board of Directors
does hereby designate, create, authorize and provide for the issue of 12.75%
Series A Cumulative Exchangeable Preferred Stock due January 1, 2007 (the
"Series A Preferred Stock"), par value $0.01 per share, with a liquidation
preference of $1,000 per share, consisting of 100,000 shares, having the
following voting powers, preferences and relative, participating, optional and
other special rights, and qualifications, limitations and restrictions thereof
as follows:

                  1. Certain Definitions.

                  Unless the context otherwise requires, the terms defined in
this Section 1 shall have, for all purposes of this resolution, the meanings
herein specified (with terms defined in the singular having comparable meanings
when used in the plural).

                  "Acquired Debt" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in


<PAGE>



contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.

                  "Adjusted Operating Cash Flow" means, for the four most recent
fiscal quarters for which internal financial statements are available, Operating
Cash Flow of such Person and its Restricted Subsidiaries less DBS Cash Flow for
the most recent four-quarter period plus DBS Cash Flow for the most recent
quarterly period, multiplied by four.

                  "Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean 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.

                  "Affiliate Transaction" has the meaning set forth in Section
8(d) below.

                  "Applicable Redemption Price" means a price per share equal to
the following redemption prices specified below (expressed as percentages of the
Liquidation Preference thereof), in each case, together with accumulated and
unpaid dividends, if any, to the date of redemption if redeemed during the
12-month period commencing on January 1 of each of the years set forth below:

                  2002.........................................106.375%
                  2003.........................................104.250%
                  2004.........................................102.125%
                  2005 and thereafter..........................100.000%

                  "Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets (including, without limitation, by way of a sale and
leaseback) other than in the ordinary course of business consistent with past
practices and (ii) the issue or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of the Company's Restricted
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million. Notwithstanding the foregoing, the following transactions will not be
deemed to be Asset Sales: (i) a transfer of assets by the Company to a Wholly
Owned Restricted Subsidiary of the Company or by a Wholly Owned Restricted
Subsidiary of the Company to the Company or to another Wholly Owned Restricted
Subsidiary of the Company, (ii) an issuance of Equity Interests by a Wholly
Owned Restricted Subsidiary of the Company to the Company or to another Wholly
Owned Restricted Subsidiary of the Company and (iii) a Restricted Payment that
is permitted by the provisions of Section 8(a) hereof.

                  "Asset Swap" means an exchange of assets by the Company or a
Restricted Subsidiary of the Company for one or more Permitted Businesses or for
a controlling equity interest in any Person whose assets consist primarily of
one or more Permitted Businesses.



                                        2

<PAGE>



                  "Bank Facilities" means, with respect to the Company or any of
its Restricted Subsidiaries, one or more debt facilities or commercial paper
facilities with banks or other institutional lenders providing for revolving
credit loans, term loans, receivables financing (including through the sale of
receivables to such lenders or to special purpose entities formed to borrow from
such lenders against such receivables) or letters of credit, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time.

                  "Basket Period" has the meaning set forth in Section 8(a)
below.

                  "Board of Directors" means the Board of Directors of the
Company or any authorized committee of the Board of Directors.

                  "Business Day" means any day other than a Legal Holiday.

                  "Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease that would at such time be required to be capitalized on a balance
sheet in accordance with GAAP.

                  "Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.

                  "Cash Equivalents" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof having maturities of
not more than six months from the date of acquisition, (iii) certificates of
deposit and eurodollar time deposits with maturities of six months or less from
the date of acquisition, bankers' acceptances with maturities not exceeding six
months and overnight bank deposits, in each case, with any domestic commercial
bank having capital and surplus in excess of $500 million and a Thompson Bank
Watch Rating of "B" or better, (iv) repurchase obligations with a term of not
more than seven days or on demand for underlying securities of the types
described in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii) above and (v)
commercial paper having the highest rating at acquisition obtainable from
Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each
case maturing within six months after the date of acquisition.

                  "Certificated Securities" has the meaning set forth in Section
14(d) below.

                  "Change of 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 and its
Restricted Subsidiaries taken as a whole 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 (A) 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


                                        3

<PAGE>



right to acquire, whether such right is exercisable immediately or only after
the passage of time, upon the happening of an event or otherwise), directly or
indirectly, of more of the Class A Common Stock of the Company than is
beneficially owned (as defined above) at such time by the Principal and his
Related Parties in the aggregate, (B) the Principal and his Related Parties
collectively cease to beneficially own (as defined above) Voting Stock of the
Company having at least 30% of the combined voting power of all classes of
Voting Stock of the Company then outstanding or (C) the Principal and his
Affiliates acquire, in the aggregate, beneficial ownership (as defined above) of
more than 66 2/3 % of the shares of Class A Common Stock at the time outstanding
or (iv) the first day on which a majority of the members of the Board of
Directors are not Continuing Directors.

                  "Change of Control Offer" has the meaning set forth in Section
7(a) below.

                  "Change of Control Payment" has the meaning set forth in
Section 7(a) below.

                  "Change of Control Payment Date" has the meaning set forth in
Section 7(d)(ii) below.

                  "Class A Common Stock" means the Class A Common Stock, par
value $.01 per share, of the Company.

                  "Closing Date" means the date on which shares of Series A
Preferred Stock are first issued.

                  "Commission" means the Securities and Exchange Commission.

                  "Consolidated Net Income" means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that (i) the Net Income (but not loss) of any
Person that is not a Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, (iii) the cumulative effect of a change in accounting principles
shall be excluded and (iv) the Net Income of any Unrestricted Subsidiary shall
be excluded, whether or not distributed to the Company or one of its
Subsidiaries.

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

                  "Cumulative Operating Cash Flow" means, as of any date of
determination, Operating Cash Flow for the Company and its Restricted
Subsidiaries for the period (taken as one accounting period) from the beginning
of the first full month commencing after the Closing Date to the end of the most
recently ended fiscal quarter for which internal financial statements are
available at such date of determination, plus all cash dividends received by the
Company or a Wholly Owned Restricted Subsidiary of the Company from any
Unrestricted Subsidiary of the Company or any Unrestricted Subsidiary of any
Wholly Owned Restricted Subsidiary of the Company to the extent that such
dividends are not included


                                        4

<PAGE>



in the calculation of permitted Restricted Payments under Section 8(a)(i)(3)
hereof by virtue of clause (C) of such section.

                  "Cumulative Total Interest Expense" means, with respect to the
Company and its Restricted Subsidiaries, as of any date of determination, Total
Interest Expense for the period (taken as one accounting period) from the
beginning of the first full month commencing after the Closing Date to the end
of the most recently ended fiscal quarter for which internal financial
statements are available at such date of determination.

                  "Depositary" has the meaning set forth in Section 14(a) below.

                  "DBS Cash Flow" means income from operations (before
depreciation, amortization and Non-Cash Incentive Compensation to the extent
deducted in arriving at income from operations) for the Satellite Segment
determined on a basis consistent with the segment data contained in the
Company's consolidated audited financial statements.

                  "Default" means any event that is or with the passage of time
or the giving of notice or both would be an Event of Default.

                  "DGCL" has the meaning set forth in Section 2(b) below.

                  "Disqualified Stock" means any Capital Stock (other than the
Series A Preferred Stock) that, by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the Holder
thereof, in whole or in part, on or prior to the mandatory redemption date of
the Series A Preferred Stock set forth in this Certificate of Designation
unless, in any such case, the issuer's obligation to pay, purchase or redeem
such Capital Stock is expressly conditioned on its ability to do so in
compliance with the provisions of Section 8(a) hereof.

                  "Dividend Payment Date" has the meaning set forth in Section
2(a) below.

                  "Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).

                  "Event of Default" means any Event of Default under the
Exchange Note Indenture.

                  "Exchange Act" means the Securities and Exchange Act of 1934,
as amended.

                  "Exchange Date" has the meaning set forth in Section 5(b)
below.

                  "Exchange Notes" means the Company's 12.75% Senior
Subordinated Exchange Notes due 2007 issuable in exchange for the Company's
Series A Preferred Stock.

                  "Exchange Note Indenture" means that certain indenture under
which the Exchange Notes would be issued and which shall be substantially in the
form attached as Annex A hereto.


                                        5

<PAGE>




                  "Exchange Note Trustee" means the trustee under the Exchange
Note Indenture.

                  "Executive Officer" means any officer of the Company that
would be deemed to be an "executive officer" within meaning of the rules and
regulations of the Commission.

                  "Existing Indebtedness" means all Indebtedness of the Company
and its Subsidiaries in existence on the Closing Date, until such amounts are
repaid.

                  "fair market value" means, with respect to assets or aggregate
net proceeds having a fair market value (a) of less than $5.0 million, the fair
market value of such assets or proceeds determined in good faith by the Board of
Directors (including a majority of the Independent Directors thereof) and
evidenced by a board resolution and (b) equal to or in excess of $5.0 million,
the fair market value of such assets or proceeds as determined by an independent
appraisal firm with experience in the valuation of the classes and types of
assets in question; provided that the fair market value of the assets purchased
in an arms'-length transaction by an Affiliate of the Company (other than a
Subsidiary) from a third party that is not also an Affiliate of the Company or
of such purchaser and contributed to the Company within five Business Days of
the consummation of the acquisition of such assets by such Affiliate shall be
deemed to be the aggregate consideration paid by such Affiliate (which may
include the fair market value of any non-cash consideration to the extent that
the valuation requirements of this definition are complied with as to any such
non-cash consideration).

                  "GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect on the Closing Date.

                  "Global Shares" has the meaning set forth in Section 14(a)
below.

                  "Global Share Holder" has the meaning set forth in Section
14(a) below.

                  "Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, co-borrowing
arrangements, letters of credit and reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.

                  "Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.

                  "Holder" means the record holder of one or more shares of
Series A Preferred Stock, as shown on the books and records of the Transfer
Agent.

                  "incur" has the meaning set forth in Section 8(b) below.



                                        6

<PAGE>



                  "Indebtedness" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing any Capital Lease Obligations or the balance
deferred and unpaid of the purchase price of any property or representing any
Hedging Obligations, except any such balance that constitutes an accrued expense
or trade payable, if and to the extent any of the foregoing indebtedness (other
than letters of credit and Hedging Obligations) would appear as a liability upon
a balance sheet of such Person prepared in accordance with GAAP, as well as all
indebtedness of others secured by a Lien on any asset of such Person (whether or
not such indebtedness is assumed by such Person) and, to the extent not
otherwise included, the Guarantee by such Person of any indebtedness of any
other Person. The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date; provided
that the amount outstanding at any time of any Indebtedness issued with original
issue discount is the full amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP.

                  "Indebtedness to Adjusted Operating Cash Flow Ratio" means, as
of any date of determination, the ratio of (a) the aggregate principal amount of
all outstanding Indebtedness of a Person and its Restricted Subsidiaries as of
such date on a consolidated basis, plus the aggregate liquidation preference of
all outstanding preferred stock (other than Qualified Subsidiary Stock) of the
Restricted Subsidiaries of such Person as of such date (excluding any such
preferred stock held by such Person or a Wholly Owned Restricted Subsidiary of
such Person), plus the aggregate liquidation preference or redemption amount of
all Disqualified Stock of such Person (excluding any Disqualified Stock held by
such Person or a Wholly Owned Restricted Subsidiary of such Person) as of such
date to (b) Adjusted Operating Cash Flow of such Person and its Restricted
Subsidiaries for the most recent four-quarter period for which internal
financial statements are available determined on a pro forma basis after giving
effect to all acquisitions and dispositions of assets (notwithstanding clause
(ii) of the definition of "Consolidated Net Income") (including, without
limitation, Asset Swaps) made by such Person and its Restricted Subsidiaries
since the beginning of such four-quarter period through such date as if such
acquisitions and dispositions had occurred at the beginning of such four-quarter
period.

                  "Independent Director" means a member of the Board of
Directors who is neither an officer nor an employee of the Company or any of its
Affiliates.

                  "Investments" means, with respect to any Person, all
investments by such Person in other Persons (including Affiliates) in the forms
of direct or indirect loans (including Guarantees of Indebtedness or other
obligations), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided that an acquisition of assets, Equity Interests or other securities by
the Company for consideration consisting of common equity securities, or
preferred stock which is not Disqualified Stock, of the Company shall not be
deemed to be an Investment.

                  "Junior Securities" has the meaning set forth in Section 2(c)
below.



                                        7

<PAGE>



                  "Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed.

                  "Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).

                  "Liquidation Preference" means $1,000 per share of Series A
Preferred Stock.

                  "Mandatory Redemption Date" has the meaning set forth in
Section 4(a) below.

                  "Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however, (i) any
gain (but not loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback transactions) or
(b) the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).

                  "Net Proceeds" means the aggregate cash proceeds received by
the Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting, investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness in connection with such Asset Sale and any reserve
for adjustment in respect of the sale price of such asset or assets established
in accordance with GAAP.

                  "Non-Cash Incentive Compensation" means incentive compensation
paid to any officer, employee or director of the Company or any of its
Subsidiaries in the form of Class A Common Stock of the Company or options to
purchase Class A Common Stock of the Company pursuant to the Pegasus
Communications Restricted Stock Plan and the Pegasus Communications 1996 Stock
Option Plan.

                  "Non-Recourse Debt" means Indebtedness (i) as to which neither
the Company nor any of its Restricted Subsidiaries (a) provides credit support
of any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise) or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the


                                        8

<PAGE>



lenders have been notified in writing that they will not have any recourse to
the stock or assets of the Company or any of its Restricted Subsidiaries.

                  "Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.

                  "Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary, any Assistant Secretary or any Vice-President of
such Person.

                  "Officers' Certificate" means a certificate signed on behalf
of the Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 10 hereof.

                  "Operating Cash Flow" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period, (a) plus
(i) extraordinary net losses and net losses on sales of assets outside the
ordinary course of business during such period, to the extent such losses were
deducted in computing such Consolidated Net Income, plus (ii) provision for
taxes based on income or profits, to the extent such provision for taxes was
included in computing such Consolidated Net Income, and any provision for taxes
utilized in computing the net losses under clause (i) hereof, plus (iii)
consolidated interest expense of such Person and its Subsidiaries for such
period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income, plus (iv) depreciation, amortization
(including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) and
other non-cash charges (excluding any such non-cash charge to the extent that it
represents an accrual of or reserve for cash charges in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of such
Person and its Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash charges were deducted in computing
such Consolidated Net Income, plus (v) Non-Cash Incentive Compensation to the
extent such compensation expense was deducted in computing such Consolidated Net
Income and to the extent not included in clause (iv) of this definition and (b)
less all non-cash income for such period (excluding any such non-cash income to
the extent it represents an accrual of cash income in any future period or
amortization of cash income received in a prior period).

                  "Parity Securities" means any class or series of Capital Stock
of the Company of the Company ranking on a parity with the Series A Preferred
Stock.

                  "Paying Agent" has the meaning set forth in Section 9(c)
below.

                  "Payment Default" has the meaning set forth in Section 6(b)
below.


                                        9

<PAGE>




                  "Permitted Businesses" means (a) any media or communications
business, including but not limited to, any broadcast television station, cable
franchise or other business in the television broadcasting, cable or
direct-to-home satellite television industries and (b) any business reasonably
related or ancillary to any of the foregoing businesses.

                  "Permitted Investments" means (a) any Investments in the
Company or in a Wholly Owned Restricted Subsidiary of the Company; (b) any
Investments in Cash Equivalents; (c) Investments by the Company or any
Restricted Subsidiary of the Company in a Person, if as a result of such
Investment (i) such Person becomes a Wholly Owned Restricted Subsidiary of the
Company or (ii) such Person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is liquidated
into, the Company or a Wholly Owned Restricted Subsidiary of the Company; and
(d) other Investments (measured as of the time made and without giving effect to
subsequent changes in value) that do not exceed an amount equal to $5.0 million
plus, to the extent any such Investments are sold for cash or are otherwise
liquidated or repaid for cash, any gains less any losses realized on the
disposition of such Investments.

                  "Permitted Refinancing Debt" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries;
provided that (i) the principal amount of such Permitted Refinancing Debt does
not exceed the principal amount of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus (a) the amount of reasonable
expenses incurred in connection therewith and (b) the amount of any premium
required to be paid in connection with such refinancing pursuant to the terms of
such refinancing or deemed by the Company or such Restricted Subsidiary
necessary to be paid in order to effectuate such refinancing); (ii) such
Permitted Refinancing Debt has a final maturity date not earlier than the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
would, if the Exchange Notes were outstanding at such time, be subordinated in
right of payment to the Exchange Notes, such Permitted Refinancing Debt has a
final maturity date later than January 1, 2007 and would, if the Exchange Notes
were outstanding at such time, be subordinated in right of payment to the
Exchange Notes on terms at least as favorable to the holders of such Exchange
Notes as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred either by the Company or by the Restricted Subsidiary
who is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.

                  "Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).

                  "Principal" means Marshall W. Pagon.

                  "Qualified Subsidiary Stock" means Capital Stock of a
Subsidiary of the Company which by its terms (a) does not mature, or is not
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise and
is not redeemable at the option of the holder thereof, in whole or in part,
prior to


                                       10

<PAGE>



January 1, 2008 (in each case, whether automatically or upon the happening of
any event) (unless, in any such case, the issuer's obligation to pay, purchase
or redeem such Capital Stock is expressly conditioned on its ability to do so in
compliance with the provisions of Section 8(a) hereof), (b) is automatically
exchangeable into shares of Capital Stock of the Company that is not
Disqualified Stock upon the earlier to occur of (i) the occurrence of a Voting
Rights Triggering Event and (ii) January 1, 2006, (c) has no voting or remedial
rights and (d) does not permit the payment of cash dividends prior to January 1,
2007 (unless, in the case of this clause (d), the issuer's ability to pay cash
dividends is expressly conditioned on its ability to do so in compliance with
the provisions of Section 8(a) hereof).

                  "Record Date" has the meaning set forth in Section 2(a) below.

                  "Redemption Date" has the meaning set forth in Section 4(d)
below.

                  "reduction or decrease in capital stock" has the meaning set
forth in Section 3 below.

                  "Related Party" with respect to the Principal 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"
has the meaning specified in the definition of "Affiliate." 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.

                  "Restricted Investment" means an Investment other than a
Permitted Investment.

                  "Restricted Payment" has the meaning set forth in Section 8(a)
below.

                  "Restricted Subsidiary" of a Person means any Subsidiary of
the referent Person that is not an Unrestricted Subsidiary.

                  "Securities Act" means the Securities Act of 1933, as amended.

                  "Senior Securities" means any class or series of capital stock
of the Company ranking senior to the Series A Preferred Stock.

                  "Separation Date" means the earliest to occur of (i) April 3,
1997, (ii) in the event of a Change of Control, the date the Company mails
notice thereof and (iii) such other date as may be designated by CIBC Wood Gundy
Securities Corp.

                  "Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the Closing Date.

                  "Split Dollar Agreement" means the Split Dollar Agreement
between the Company and Nicholas A. Pagon, Holly T. Pagon and Michael B. Jordan,
as trustees of an insurance trust established by Marshall W. Pagon, as in effect
on the Closing Date.


                                       11

<PAGE>




                  "Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).

                  "Total Interest Expense" means, with respect to any Person for
any period, the sum of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations) and (ii) the consolidated interest expense of such
Person and its Restricted Subsidiaries that was capitalized during such period,
to the extent such amounts are not included in clause (i) of this definition,
and (iii) any interest expense for such period on Indebtedness of another Person
that is Guaranteed by such Person or one of its Restricted Subsidiaries or
secured by a Lien on assets (other than Equity Interests in Unrestricted
Subsidiaries securing Indebtedness of Unrestricted Subsidiaries) of such Person
or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is
called upon) and (iv) all cash and non-cash dividend payments during such period
on any series of preferred stock of a Restricted Subsidiary of such Person.

                  "Transfer Agent" means the entity designated from time to time
by the Company to act as the registrar and transfer agent for the Series A
Preferred Stock.

                  "Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.

                  "Unrestricted Subsidiary" means any Subsidiary that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution; but only to the extent that such Subsidiary (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (c) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (x) to subscribe for additional Equity Interests or (y) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
the Company or any of its Restricted Subsidiaries; and (e) has at least one
executive officer that is not a director or executive officer of the Company or
any of its Restricted Subsidiaries. If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of this
Certificate of Designation and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of the Company as of such date
(and, if such Indebtedness is not permitted to be incurred as of such date under
the provisions of Section 8(b)(i) hereof (treating such Subsidiary as a
Restricted Subsidiary for such purpose for the period relevant


                                       12

<PAGE>



to such covenant set forth in Section 8(b)(i) hereof), the Company shall be in
default of such covenant); provided, however, that in the event an Unrestricted
Subsidiary ceases to meet the requirement set forth in clause (e) of this
definition, such Unrestricted Subsidiary shall have 60 days to meet such
requirement before such Unrestricted Subsidiary shall cease to be an
Unrestricted Subsidiary. The Board of Directors may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall be permitted only if (i) such Indebtedness
is permitted under Section 8(b)(i) hereof (treating such Subsidiary as a
Restricted Subsidiary for such purpose for the period relevant to such covenant
set forth in Section 8(b)(i) hereof) and (ii) no Voting Rights Triggering Event
would be in existence following such designation.

                  "Voting Stock" means with respect to any specified Person,
Capital Stock with voting power, under ordinary circumstances and without regard
to the occurrence of any contingency, to elect the directors or other managers
or trustees of such Person.

                  "Voting Rights Triggering Event" has the meaning set forth in
Section 6(b) below.

                  "Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.

                  "Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock (other
than Qualified Subsidiary Stock) or other ownership interests of which (other
than directors' qualifying shares) shall at the time be owned by such Person
and/or by one or more Wholly Owned Restricted Subsidiaries of such Person.

                  2. Dividends.

                  (a) The Holders of shares of the Series A Preferred Stock
shall be entitled to receive, when, as and if dividends are declared by the
Board of Directors out of funds of the Company legally available therefor,
cumulative preferential dividends from the issue date of the Series A Preferred
Stock accruing at the rate of 12.75% per annum, payable semi-annually in arrears
on each January 1 and July 1 or, if any such date is not a Business Day, on the
next succeeding Business Day (each, a "Dividend Payment Date"), to the Holders
of record as of the next preceding December 15 and June 15 (each, a "Record
Date"). Dividends shall be payable in cash, except that on each Dividend Payment
Date occurring on or prior to January 1, 2002, dividends may be paid, at the
Company's option, by the issuance of additional shares of Series A Preferred
Stock (including fractional shares) having an aggregate Liquidation Preference
equal to the amount of such dividends. The issuance of such additional shares of
Series A Preferred Stock shall constitute "payment" of the related dividend for
all purposes of this Certificate of Designation. The first dividend payment
shall be payable on July 1, 1997. Dividends payable on the Series A Preferred
Stock shall be computed on the basis of a 360-day year consisting of twelve
30-day months and shall be deemed to accumulate on a daily basis.



                                       13

<PAGE>



                  (b) Dividends on the Series A Preferred Stock shall accumulate
whether or not the Company has earnings or profits, whether or not there are
funds legally available for the payment of such dividends and whether or not
dividends are declared. Dividends shall accumulate to the extent they are not
paid on the Dividend Payment Date for the period to which they relate.
Accumulated unpaid dividends shall bear interest at a per annum rate 200 basis
points in excess of the annual dividend rate on the Series A Preferred Stock.
The Company shall take all actions required or permitted under the Delaware
General Corporation Law (the "DGCL") to permit the payment of dividends on the
Series A Preferred Stock, including, without limitation, through the revaluation
of its assets in accordance with the DGCL, to make or keep funds legally
available for the payment of dividends.

                  (c) No dividend whatsoever shall be declared or paid upon, or
any sum set apart for the payment of dividends upon, any outstanding share of
the Series A Preferred Stock with respect to any dividend period unless all
dividends for all preceding dividend periods have been declared and paid, or
declared and a sufficient sum set apart for the payment of such dividend, upon
all outstanding shares of Series A Preferred Stock. Unless full cumulative
dividends on all outstanding shares of Series A Preferred Stock for all past
dividend periods shall have been declared and paid, or declared and a sufficient
sum for the payment thereof set apart, then: (i) no dividend (other than a
dividend payable solely in shares of any class of stock ranking junior to the
Series A Preferred Stock as to the payment of dividends and as to rights in
liquidation, dissolution or winding up of the affairs of the Company ("Junior
Securities") shall be declared or paid upon, or any sum set apart for the
payment of dividends upon, any shares of Junior Securities; (ii) no other
distribution shall be declared or made upon, or any sum set apart for the
payment of any distribution upon, any shares of Junior Securities, other than a
distribution consisting solely of Junior Securities; (iii) no shares of Junior
Securities shall be purchased, redeemed or otherwise acquired or retired for
value (excluding an exchange for shares of other Junior Securities) by the
Company or any of its Subsidiaries; and (iv) no monies shall be paid into or set
apart or made available for a sinking or other like fund for the purchase,
redemption or other acquisition or retirement for value of any shares of Junior
Securities by the Company or any of its Subsidiaries. Holders of the Series A
Preferred Stock shall not be entitled to any dividends, whether payable in cash,
property or stock, in excess of the full cumulative dividends as herein
described.

                  3. Distributions Upon Liquidation, Dissolution or Winding Up.

         Upon any voluntary or involuntary liquidation, dissolution or winding
up of the affairs of the Company or reduction or decrease in its capital stock
resulting in a distribution of assets to the holders of any class or series of
the Company's capital stock (a "reduction or decrease in capital stock"), each
Holder of shares of the Series A Preferred Stock shall be entitled to payment
out of the assets of the Company available for distribution of an amount equal
to the Liquidation Preference per share of Series A Preferred Stock held by such
Holder, plus accumulated and unpaid dividends, if any, to the date fixed for
liquidation, dissolution, winding up or reduction or decrease in capital stock,
before any distribution is made on any Junior Securities, including, without
limitation, common stock of the Company. After payment in full of the
Liquidation Preference and all accumulated dividends, if any, to which Holders
of Series A Preferred Stock are entitled, such Holders shall not be entitled to
any further participation in any distribution of assets of the Company. However,
neither the voluntary sale, conveyance, exchange or transfer (for cash, shares
of stock, securities or other consideration) of all or substantially all of the
property or assets of the Company nor the consolidation or merger of the Company
with or into one or more corporations shall be deemed to be a voluntary or
involuntary liquidation, dissolution or winding up of the Company or reduction
or decrease in capital stock, unless such sale, conveyance, exchange or


                                       14

<PAGE>



transfer shall be in connection with a liquidation, dissolution or winding up of
the business of the Company or reduction or decrease in capital stock.

                  4. Redemption by the Company

                  (a) On January 1, 2007 (the "Mandatory Redemption Date"), the
Company shall be required to redeem (subject to the legal availability of funds
therefor) all outstanding shares of Series A Preferred Stock at a price in cash
equal to the Liquidation Preference thereof, plus accumulated and unpaid
dividends, if any, to the date of redemption. The Company shall not be required
to make sinking fund payments with respect to the Series A Preferred Stock. The
Company shall take all actions required or permitted under the DGCL to permit
such redemption.

                  (b) The Series A Preferred Stock may not be redeemed at the
option of the Company prior to January 1, 2002. The Series A Preferred Stock may
be redeemed, in whole or in part, at the option of the Company on or after
January 1, 2002, at the Applicable Redemption Price. Notwithstanding the
foregoing sentence, during the first 36 months after the Closing Date, the
Company may, on any one or more occasions, use the net proceeds of one or more
offerings of its Class A Common Stock to redeem up to 25% of the shares of
Series A Preferred Stock then outstanding (whether initially issued or issued in
lieu of cash dividends) at a redemption price of 112.750% of the Liquidation
Preference thereof plus, without duplication, accumulated and unpaid dividends
to the date of redemption; provided that, after any such redemption, at least
$75.0 million in aggregate Liquidation Preference of Series A Preferred Stock
remains outstanding; and provided further, that any such redemption shall occur
within 90 days of the date of closing of such offering of Class A Common Stock
of the Company.

                  (c) In case of redemption of less than all of the shares of
Series A Preferred Stock at the time outstanding, the shares to be redeemed
shall be selected pro rata or by lot as determined by the Company in its sole
discretion.

                  (d) Notice of any redemption shall be sent by or on behalf of
the Company not less than 30 nor more than 60 days prior to the date specified
for redemption in such notice (including the Mandatory Redemption Date, the
"Redemption Date"), by first class mail, postage prepaid, to all Holders of
record of the Series A Preferred Stock at their last addresses as they shall
appear on the books of the Company; provided, however, that no failure to give
such notice or any defect therein or in the mailing thereof shall affect the
validity of the proceedings for the redemption of any shares of Series A
Preferred Stock except as to the Holder to whom the Company has failed to give
notice or except as to the Holder to whom notice was defective. In addition to
any information required by law or by the applicable rules of any exchange upon
which Series A Preferred Stock may be listed or admitted to trading, such notice
shall state: (i) whether such redemption is being made pursuant to the optional
or the mandatory redemption provisions hereof; (ii) the Redemption Date; (iii)
the Applicable Redemption Price; (iv) the number of shares of Series A Preferred
Stock to be redeemed and, if less than all shares held by such Holder are to be
redeemed, the number of such shares to be redeemed; (v) the place or places
where certificates for such shares are to be surrendered for payment of the
Applicable Redemption Price, including any procedures applicable to redemptions
to be accomplished through book-entry transfers; and (vi) that dividends on the
shares to be redeemed will cease to accumulate on the Redemption Date. Upon the
mailing of any such notice of redemption, the Company shall become obligated to
redeem at the time of redemption specified thereon all shares called for
redemption.



                                       15

<PAGE>



                  (e) If notice has been mailed in accordance with Section 4(d)
above and provided that on or before the Redemption Date specified in such
notice, all funds necessary for such redemption shall have been set aside by the
Company, separate and apart from its other funds in trust for the pro rata
benefit of the Holders of the shares so called for redemption, so as to be, and
to continue to be available therefor, then, from and after the Redemption Date,
dividends on the shares of the Series A Preferred Stock so called for redemption
shall cease to accumulate, and said shares shall no longer be deemed to be
outstanding and shall not have the status of shares of Series A Preferred Stock,
and all rights of the Holders thereof as stockholders of the Company (except the
right to receive from the Company the Applicable Redemption Price) shall cease.
Upon surrender, in accordance with said notice, of the certificates for any
shares so redeemed (properly endorsed or assigned for transfer, if the Company
shall so require and the notice shall so state), such shares shall be redeemed
by the Company at the Applicable Redemption Price. In case fewer than all the
shares represented by any such certificate are redeemed, a new certificate or
certificates shall be issued representing the unredeemed shares without cost to
the Holder thereof.

                  (f) Any funds deposited with a bank or trust company for the
purpose of redeeming Series A Preferred Stock shall be irrevocable except that:

                           (i) the Company shall be entitled to receive from
         such bank or trust company the interest or other earnings, if any,
         earned on any money so deposited in trust, and the Holders of any
         shares redeemed shall have no claim to such interest or other earnings;
         and

                           (ii) any balance of monies so deposited by the
         Company and unclaimed by the Holders of the Series A Preferred Stock
         entitled thereto at the expiration of two years from the applicable
         Redemption Date shall be repaid, together with any interest or other
         earnings earned thereon, to the Company, and after any such repayment,
         the Holders of the shares entitled to the funds so repaid to the
         Company shall look only to the Company for payment without interest or
         other earnings.

                  (g) No Series A Preferred Stock may be redeemed except with
funds legally available for the purpose. The Company shall take all actions
required or permitted under the DGCL to permit any such redemption.

                  (h) Notwithstanding the foregoing provisions of this Section
4, unless the full cumulative dividends on all outstanding shares of Series A
Preferred Stock shall have been paid or contemporaneously are declared and paid
for all past dividend periods, none of the shares of Series A Preferred Stock
shall be redeemed unless all outstanding shares of Series A Preferred Stock are
simultaneously redeemed.

                  (i) All shares of Series A Preferred Stock redeemed pursuant
to this Section 4 shall be restored to the status of authorized and unissued
shares of preferred stock, without designation as to series and may thereafter
be reissued as shares of any series of preferred stock other than shares of
Series A Preferred Stock.



                                       16

<PAGE>



                  5. Exchange.

                  (a) The Company may, at its option, on any Dividend Payment
Date occurring after the Separation Date, exchange, in whole, but not in part,
the then outstanding shares of Series A Preferred Stock for Exchange Notes;
provided, that (i) on the date of such exchange there are no accumulated and
unpaid dividends on the Series A Preferred Stock (including the dividend payable
on such date) or other contractual impediments to such exchange; (ii) there
shall be legally available funds sufficient therefor; (iii) no Voting Rights
Triggering Event has occurred and is continuing at the time of such exchange;
(iv) immediately after giving effect to such exchange, no Default or Event of
Default (each as defined in the Exchange Note Indenture) would exist under the
Exchange Note Indenture and no default or event of default would exist under any
material instrument governing Indebtedness outstanding at the time, in either
case, would be caused thereby; (v) the Exchange Note Indenture has been
qualified under the Trust Indenture Act, if such qualification is required at
the time of exchange; and (vi) the Company shall have delivered a written
opinion to the Exchange Note Trustee to the effect that all conditions to be
satisfied prior to such exchange have been satisfied.

                  (b) The Exchange Notes shall be issuable in principal amounts
of $1,000 and integral multiples thereof to the extent possible, and shall also
be issuable in principal amounts less than $1,000 so that each Holder of Series
A Preferred Stock will receive certificates representing the entire amount of
Exchange Notes to which such Holder's shares of Series A Preferred Stock entitle
such Holder; provided that the Company may pay cash in lieu of issuing an
Exchange Note having a principal amount less than $1,000. Notice of the
intention to exchange shall be sent by or on behalf of the Company not more than
60 days nor less than 30 days prior to the date fixed for the exchange (the
"Exchange Date"), by first class mail, postage prepaid, to each Holder of record
of Series A Preferred Stock at its registered address. In addition to any
information required by law or by the applicable rules of any exchange upon
which the Series A Preferred Stock may be listed or admitted to trading, such
notice shall state: (i) the Exchange Date; (ii) the place or places where
certificates for such shares are to be surrendered for exchange, including any
procedures applicable to exchanges to be accomplished through book-entry
transfers; and (iii) that dividends on the shares of Series A Preferred Stock to
be exchanged will cease to accumulate on the Exchange Date.

                  (c) A Holder delivering Series A Preferred Stock for exchange
shall not be required to pay any taxes or duties in respect of the issue or
delivery of Exchange Notes on exchange but shall be required to pay any tax or
duty that may be payable in respect of any transfer involved in the issue or
delivery of the Exchange Notes in a name other than that of the Holder of the
Series A Preferred Stock. Certificates representing Exchange Notes shall not be
issued or delivered unless all taxes and duties, if any, payable by the Holder
have been paid.

                  (d) If notice of any exchange has been properly given, and if
on or before the Exchange Date the Exchange Notes have been duly executed and
authenticated and an amount in cash or additional shares of Series A Preferred
Stock (as applicable) equal to all accumulated and unpaid dividends, if any,
thereon to the Exchange Date has been deposited with the Transfer Agent, then on
and after the close of business on the Exchange Date, the shares of Series A
Preferred Stock to be exchanged shall no longer be deemed to be outstanding and
may thereafter be issued in the same manner as the other authorized but unissued
preferred stock, but not as Series A Preferred Stock, and all rights of the
Holders thereof as stockholders of the Company shall cease, except the right of
the Holders to receive upon


                                       17

<PAGE>



surrender of their certificates the Exchange Notes and all accumulated and
unpaid dividends, if any, thereon to the Exchange Date.

                  (e) As a condition to the exercise of the exchange rights
described in this Section 5, the Company shall deliver an opinion to the
Exchange Note Trustee as to the due authorization, execution, delivery and
enforceability of both the Exchange Notes and the Exchange Note Indenture and as
to the compliance by the Company with the provisions hereof.

                  6. Voting Rights.

                  (a) The Holders of record of shares of the Series A Preferred
Stock shall have no voting rights, except as required by law and as hereinafter
provided in this Section 6.

                  (b) Upon:

                           (i) the accumulation of accumulated and unpaid
         dividends on the outstanding Series A Preferred Stock in an amount
         equal to three (3) full semi-annual dividends (whether or not
         consecutive);

                           (ii) the failure of the Company to satisfy any
         mandatory redemption or repurchase obligation (including, without
         limitation, pursuant to any required Change of Control Offer) with
         respect to the Series A Preferred Stock;

                           (iii) the failure of the Company to make a Change of
         Control Offer on the terms and in accordance with the provisions
         described below in Section 7 hereof;

                           (iv) the failure of the Company to comply with any of
         the other covenants or agreements set forth in this Certificate of
         Designation and the continuance of such failure for 60 consecutive days
         or more; or

                           (v) default under any mortgage, indenture or
         instrument under which there may be issued or by which there may be
         secured or evidenced any Indebtedness for money borrowed by the Company
         or any of its Subsidiaries (or the payment of which is guaranteed by
         the Company or any of its Subsidiaries) whether such Indebtedness or
         Guarantee now exists, or is created after the Closing Date, which
         default (1) is caused by a failure to pay principal of or premium, if
         any, or interest on such Indebtedness prior to the expiration of the
         grace period provided in such Indebtedness on the date of such default
         (a "Payment Default") or (2) results in the acceleration of such
         Indebtedness prior to its express maturity and, in each case, the
         principal amount of any such Indebtedness, together with the principal
         amount of any other such Indebtedness under which there has been a
         Payment Default or the maturity of which has been so accelerated,
         aggregates $5.0 million or more (each of the events described in
         clauses (i), (ii), (iii), (iv) and (v) being referred to herein as a
         "Voting Rights Triggering Event");

then the number of members of the Company's Board of Directors shall be
immediately and automatically increased by two, and the Holders of a majority of
the outstanding shares of Series A Preferred Stock, voting as a separate class,
shall be entitled to elect two members to the Board of Directors of the Company.


                                       18

<PAGE>




                  (c) Whenever such voting right shall have vested, such right
may be exercised initially either at a special meeting of the Holders of Series
A Preferred Stock, called as hereinafter provided, or at any annual meeting of
stockholders held for the purpose of electing directors, and thereafter at such
annual meetings or by the written consent of the Holders of Series A Preferred
Stock. Such right of the Holders of Series A Preferred Stock to elect directors
may be exercised until (i) all dividends in arrears shall have been paid in full
and (ii) all other Voting Rights Triggering Events have been cured or waived, at
which time the right of the Holders of Series A Preferred Stock to elect such
number of directors shall cease, the term of such directors previously elected
shall thereupon terminate, and the authorized number of directors of the Company
shall thereupon return to the number of authorized directors otherwise in
effect, but subject always to the same provisions for the renewal and divestment
of such special voting rights in the case of any such future dividend arrearage
or defaults or any such failure to make redemption payments.

                  (d) At any time when such voting right shall have vested in
the Holders of Series A Preferred Stock and if such right shall not already have
been initially exercised, a proper officer of the Company shall, upon the
written request of Holders of record of 10% or more of the Series A Preferred
Stock then outstanding, addressed to the Secretary of the Company, call a
special meeting of Holders of Series A Preferred Stock. Such meeting shall be
held at the earliest practicable date upon the notice required for annual
meetings of stockholders at the place for holding annual meetings of
stockholders of the Company or, if none, at a place designated by the Secretary
of the Company. If such meeting shall not be called by the proper officers of
the Company within 30 days after the personal service of such written request
upon the Secretary of the Company, or within 30 days after mailing the same
within the United States, by registered mail, addressed to the Secretary of the
Company at its principal office (such mailing to be evidenced by the registry
receipt issued by the postal authorities), then the Holders of record of 10% of
the shares of Series A Preferred Stock then outstanding may designate in writing
a Holder of Series A Preferred Stock to call such meeting at the expense of the
Company, and such meeting may be called by such person so designated upon the
notice required for annual meetings of stockholders and shall be held at the
place for holding annual meetings of the Company or, if none, at a place
designated by such Holder. Any Holder of Series A Preferred Stock that would be
entitled to vote at such meeting shall have access to the stock books of the
Company for the purpose of causing a meeting of stockholders to be called
pursuant to the provisions of this Section. Notwithstanding the provisions of
this paragraph, however, no such special meeting shall be called if any such
request is received less than 90 days before the date fixed for the next ensuing
annual or special meeting of stockholders.

                  (e) If any director so elected by the Holders of Series A
Preferred Stock shall cease to serve as a director before his term shall expire,
the Holders of Series A Preferred Stock then outstanding may, at a special
meeting of the Holders called as provided above, elect a successor to hold
office for the unexpired term of the director whose place shall be vacant.

                  (f) The Company shall not, without the affirmative vote or
consent of the Holders of a majority of the shares of Series A Preferred Stock
then outstanding (with shares held by the Company or any of its Affiliates not
being considered to be outstanding for this purpose):

                           (i) authorize, create (by way of reclassification or
         otherwise) or issue any Parity Securities or any Obligation or security
         convertible into or evidencing the right to purchase any Parity
         Securities;



                                       19

<PAGE>



                           (ii) amend or otherwise alter its Certificate of
         Incorporation in any manner that adversely affects the rights of
         Holders of Series A Preferred Stock;

                           (iii) amend or otherwise alter this Certificate of
         Designation (including the provisions of Section 7 hereof) in any
         manner; or

                           (iv) waive any existing Voting Rights Triggering
         Event or compliance with any provision of this Certificate of
         Designation.

                  (g) Without the consent of each Holder affected, an amendment
or waiver of the Company's Certificate of Incorporation or of this Certificate
of Designation may not (with respect to any shares of Series A Preferred Stock
held by a non-consenting Holder):

                           (i) alter the voting rights with respect to the
         Series A Preferred Stock or reduce the number of shares of Series A
         Preferred Stock whose Holders must consent to an amendment, supplement
         or waiver;

                           (ii) reduce the Liquidation Preference of or change
         the Mandatory Redemption Date of any share of Series A Preferred Stock
         or alter the provisions with respect to the redemption of the Series A
         Preferred Stock (except as provided above with respect to Section 7
         hereof);

                           (iii) reduce the rate of or change the time for
         payment of dividends on any share of Series A Preferred Stock;

                           (iv) waive the consequences of any failure to pay
         dividends on the Series A Preferred Stock;

                           (v) make any share of Series A Preferred Stock
         payable in any form other than that stated in this Certificate of
         Designation;

                           (vi) make any change in the provisions of this
         Certificate of Designation relating to waivers of the rights of Holders
         of Series A Preferred Stock to receive the Liquidation Preference and
         dividends on the Series A Preferred Stock;

                           (vii) waive a redemption payment with respect to any
         share of Series A Preferred Stock (except as provided above with
         respect to Section 7 hereof); or

                           (viii) make any change in the foregoing amendment and
         waiver provisions.

                  (h) The Company shall not, without the consent of at least
two-thirds of the then outstanding shares of Series A Preferred Stock (with
shares held by the Company or its Affiliates not being considered to be
outstanding for this purpose), authorize, create (by way of reclassification or
otherwise) or issue any Senior Securities or any Obligation or security
convertible into or evidencing a right to purchase any Senior Securities.



                                       20

<PAGE>



                  (i) The Company in its sole discretion may without the vote or
consent of any Holders of the Series A Preferred Stock amend or supplement this
Certificate of Designation:

                           (i) to cure any ambiguity, defect or inconsistency;

                           (ii) to provide for uncertificated Series A Preferred
         Stock in addition to or in place of certificated Series A Preferred
         Stock; or

                           (iii) to make any change that would provide any
         additional rights or benefits to the Holders of the Series A Preferred
         Stock or that does not adversely affect the legal rights under this
         Certificate of Designation of any such Holder.

                  7. Change of Control.

                  (a) Upon the occurrence of a Change of Control, each Holder of
shares of Series A Preferred Stock shall have the right to require the Company
to repurchase all or any part (but not, in the case of any Holder requiring the
Company to purchase less than all of the shares of Series A Preferred Stock held
by such Holder, any fractional shares) of such Holder's Series A Preferred Stock
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate Liquidation Preference
thereof plus accumulated and unpaid dividends, if any, thereon to the date of
purchase (the "Change of Control Payment").

                  (b) The Change of Control Offer shall include all instructions
and materials necessary to enable Holders to tender their shares of Series A
Preferred Stock.

                  (c) The Company shall comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Series A Preferred Stock as a result of a Change of
Control.

                  (d) Within 30 days following any Change of Control, the
Company shall mail a notice to each Holder stating:

                           (i) that the Change of Control Offer is being made
         pursuant to this Section 7 and that all shares of Series A Preferred
         Stock tendered will be accepted for payment;

                           (ii) the purchase price and the purchase date, which
         shall be no earlier than 30 days nor later than 60 days from the date
         such notice is mailed (the "Change of Control Payment Date");

                           (iii) that any share of Series A Preferred Stock not
         tendered will continue to accumulate dividends;

                           (iv) that, unless the Company fails to pay the Change
         of Control Payment, all shares of Series A Preferred Stock accepted for
         payment pursuant to the Change of Control Offer shall cease to
         accumulate dividends after the Change of Control Payment Date;



                                       21

<PAGE>



                           (v) that Holders electing to have any shares of
         Series A Preferred Stock purchased pursuant to a Change of Control
         Offer will be required to surrender the shares of Series A Preferred
         Stock, with the form entitled "Option of Holder to Elect Purchase"
         which shall be included with the Notice of Change of Control completed,
         to the Paying Agent at the address specified in the notice prior to the
         close of business on the third Business Day preceding the Change of
         Control Payment Date;

                           (vi) that Holders will be entitled to withdraw their
         election if the Paying Agent receives, not later than the close of
         business on the second Business Day preceding the Change of Control
         Payment Date, a telegram, telex, facsimile transmission or letter
         setting forth the name of the Holder, the number of shares of Series A
         Preferred Stock delivered for purchase, and a statement that such
         Holder is withdrawing his election to have such shares purchased; and

                           (vii) the circumstances and relevant facts regarding
         such Change of Control (including, but not limited to, information with
         respect to pro forma historical financial information after giving
         effect to such Change of Control and information regarding the Person
         or Persons acquiring control).

                  (e) On the Change of Control Payment Date, the Company shall,
to the extent lawful, (i) accept for payment all shares of Series A Preferred
Stock or portions thereof properly tendered pursuant to the Change of Control
Offer, (ii) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all shares of Series A Preferred Stock or portions
thereof so tendered and (iii) deliver or cause to be delivered to the Transfer
Agent the shares of Series A Preferred Stock so accepted together with an
Officers' Certificate stating the aggregate Liquidation Preference of the shares
of Series A Preferred Stock or portions thereof being purchased by the Company.
The Paying Agent shall promptly mail to each Holder of Series A Preferred Stock
so tendered the Change of Control Payment for such Series A Preferred Stock, and
the Transfer Agent shall promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new certificate representing the
shares of Series A Preferred Stock equal in Liquidation Preference amount to any
unpurchased portion of the shares of Series A Preferred Stock surrendered, if
any. The Company shall publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Payment Date.

                  (f) Prior to complying with the provisions of this Section 7,
but in any event within 90 days following a Change of Control, the Company shall
either repay all outstanding Indebtedness or obtain the requisite consents, if
any, under all agreements governing outstanding Indebtedness to permit the
repurchase of Series A Preferred Stock required by this Section 7.

                  (g) The Company shall not be required to make a Change of
Control Offer upon a Change of Control if a third party makes the Change of
Control Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Section 7 applicable to a Change of Control Offer
made by the Company and purchases all shares of Series A Preferred Stock validly
tendered and not withdrawn under such Change of Control Offer.




                                       22

<PAGE>



                  8. Certain Covenants.

                  (a) Restricted Payments.

                           (i) The Company shall not, and shall not permit any
         of its Restricted Subsidiaries to, directly or indirectly, (a) declare
         or pay any dividend or make any payment or distribution on account of
         the Company's Parity Securities or Junior Securities (including,
         without limitation, any payment in connection with any merger or
         consolidation involving the Company) or on account of any Qualified
         Subsidiary Stock or make any payment or distribution to or for the
         benefit of the direct or indirect holders of the Company's Parity
         Securities or Junior Securities or the direct or indirect holders of
         any Qualified Subsidiary Stock in their capacities as such (other than
         dividends or distributions payable in Equity Interests (other than
         Disqualified Stock) of the Company); (b) purchase, redeem or otherwise
         acquire or retire for value any Parity Securities or Junior Securities
         of the Company or any direct or indirect parent of the Company or other
         Affiliate of the Company (other than any such Equity Interests owned by
         the Company or any of its Restricted Subsidiaries and other than the
         acquisition of Equity Interests in Subsidiaries of the Company solely
         in exchange for Equity Interests (other than Disqualified Stock) of the
         Company); (c) make any payment on, or purchase, redeem, defease or
         otherwise acquire or retire for value any Junior Securities, except
         payments of the Liquidation Preference thereof at final maturity; (d)
         make any loan, advance, capital contribution to or other investment in,
         or guarantee any obligation of, any Affiliate of the Company other than
         a Permitted Investment; (e) forgive any loan or advance to or other
         obligation of any Affiliate of the Company (other than a loan or
         advance to or other obligation of a Wholly Owned Restricted Subsidiary)
         which at the time it was made was not a Restricted Payment that was
         permitted to be made; or (f) make any Restricted Investment (all such
         payments and other actions set forth in clauses (a) through (f) above
         being collectively referred to as "Restricted Payments"), unless, at
         the time of and immediately after giving effect to such Restricted
         Payment:

                                    (1) no Voting Rights Triggering Event shall
                  have occurred and be continuing or would occur as a
                  consequence thereof; and

                                    (2) the Company would be permitted to incur
                  $1.00 of additional Indebtedness pursuant to the Indebtedness
                  to Adjusted Operating Cash Flow Ratio described in Section
                  8(b)(i) hereof; and

                                    (3) such Restricted Payment, together with
                  the aggregate of all other Restricted Payments made by the
                  Company and its Restricted Subsidiaries after the Closing
                  Date, is less than the sum of (A) an amount equal to the
                  Cumulative Operating Cash Flow for the period (taken as one
                  accounting period) from the beginning of the first full month
                  commencing after the Closing Date to the end of the Company's
                  most recently ended fiscal quarter for which internal
                  financial statements are available at the time of such
                  Restricted Payment (the "Basket Period") less 1.4 times the
                  Company's Cumulative Total Interest Expense for the Basket
                  Period, plus (B) 100% of the aggregate net cash proceeds and,
                  in the case of proceeds consisting of assets constituting or
                  used in a Permitted Business, 100% of the fair market value of
                  the aggregate net proceeds other than cash received since the
                  Closing Date (i) by the Company as capital contributions to
                  the Company (other than from a Subsidiary) or (ii) from the
                  sale by the Company (other


                                       23

<PAGE>



                  than to a Subsidiary) of its Equity Interests (other than
                  Disqualified Stock), plus (C) without duplication, to the
                  extent that any Restricted Investment that was made after the
                  Closing Date is sold for cash or otherwise liquidated or
                  repaid for cash, the Net Proceeds received by the Company or a
                  Wholly Owned Restricted Subsidiary of the Company upon the
                  sale of such Restricted Investment, plus (D) without
                  duplication, to the extent that any Unrestricted Subsidiary is
                  designated by the Company as a Restricted Subsidiary, an
                  amount equal to the fair market value of such Investment at
                  the time of such designation, plus (E) $2.5 million.

                           (ii) The foregoing Section 8(a)(i) shall not prohibit
         (1) the payment of any dividend within 60 days after the date of
         declaration thereof, if at said date of declaration such payment would
         have complied with the provisions of this Certificate of Designation;
         (2) the redemption, repurchase, retirement or other acquisition of any
         Equity Interests of the Company in exchange for, or out of the net
         proceeds of, the substantially concurrent sale (other than to a
         Subsidiary of the Company) of other Equity Interests of the Company
         (other than any Disqualified Stock); provided that the amount of any
         such net proceeds that are utilized for any such redemption,
         repurchase, retirement or other acquisition shall be excluded from
         clause (3)(B) of the preceding paragraph (i); (3) the payment by the
         Company of advances under the Split Dollar Agreement in an amount not
         to exceed $250,000 in any four-quarter period; (4) the repurchase or
         redemption from employees of the Company and its Subsidiaries (other
         than the Principal) of Capital Stock of the Company in an amount not to
         exceed an aggregate of $3.0 million; (5) the payment of dividends on
         the Series A Preferred Stock in accordance with the terms thereof as in
         effect on the Closing Date; (6) the issuance of Exchange Notes in
         exchange for shares of the Series A Preferred Stock; provided that such
         issuance is permitted by Section 8(b) hereof; and (7) in the event that
         the Company elects to issue Exchange Notes in exchange for Series A
         Preferred Stock, cash payments made in lieu of the issuance of Exchange
         Notes having a face amount less than $1,000 and any cash payments
         representing accumulated and unpaid dividends in respect thereof, not
         to exceed $100,000 in the aggregate in any fiscal year.

                           (iii) The amount of all Restricted Payments (other
         than cash) shall be the fair market value on the date of the Restricted
         Payment of the asset(s) proposed to be transferred by the Company or
         the applicable Restricted Subsidiary, as the case may be, net of any
         liabilities proposed to be assumed by the transferee and novated
         pursuant to a written agreement releasing the Company and its
         Subsidiaries. Not later than the date of making any Restricted Payment,
         the Company shall deliver to the Board of Directors an Officers'
         Certificate stating that such Restricted Payment is permitted by the
         terms hereof and setting forth the basis upon which the calculations
         required by this Section 8(a) were computed, which calculations may be
         based upon the Company's latest available financial statements.

                           (iv) The Board of Directors may designate any
         Restricted Subsidiary to be an Unrestricted Subsidiary if such
         designation would not cause a Voting Rights Triggering Event. For
         purposes of making such determination, all outstanding Investments by
         the Company and its Restricted Subsidiaries in the Subsidiary so
         designated shall be deemed to be Restricted Payments at the time of
         such designation (valued as set forth below) and shall reduce the
         amount available for Restricted Payments under Section 8(a)(i) hereof.
         All such outstanding Investments shall be deemed to constitute
         Investments in an amount equal to the fair market value of such
         Investments at the time of such designation. Such designation shall be
         permitted only if such Restricted


                                       24

<PAGE>



         Payment would be permitted at such time and if such Restricted
         Subsidiary would otherwise meet the definition of an Unrestricted
         Subsidiary.

                  (b) Incurrence of Indebtedness and Issuance of Preferred
Stock.

                           (i) The Company shall not, and shall not permit any
         of its Subsidiaries to, directly or indirectly, create, incur, issue,
         assume, guarantee or otherwise become directly or indirectly liable,
         contingently or otherwise, with respect to (collectively, "incur") any
         Indebtedness (including Acquired Debt) and shall not issue any
         Disqualified Stock and shall not permit any of its Subsidiaries to
         issue any shares of preferred stock (other than Qualified Subsidiary
         Stock); provided, however, that (a) the Company may incur Indebtedness
         (including Acquired Debt) or issue shares of Disqualified Stock and (b)
         a Restricted Subsidiary of the Company may incur Indebtedness
         (including Acquired Debt) or issue shares of preferred stock (including
         Disqualified Stock) if, in each case, the Company's Indebtedness to
         Adjusted Operating Cash Flow Ratio as of the date on which such
         Indebtedness is incurred or such Disqualified Stock or preferred stock
         is issued would have been 7.0 to 1 or less, determined on a pro forma
         basis (including a pro forma application of the net proceeds
         therefrom), as if the additional Indebtedness had been incurred, or the
         Disqualified Stock or preferred stock had been issued, as the case may
         be, as of the date of such calculation.

                           The foregoing provisions shall not apply to:

                                    (1) the incurrence by the Company's
                  Unrestricted Subsidiaries of Non-Recourse Debt or the issuance
                  by such Unrestricted Subsidiaries of preferred stock;
                  provided, however, that if any such Indebtedness ceases to be
                  Non-Recourse Debt of an Unrestricted Subsidiary or any such
                  preferred stock becomes preferred stock (other than Qualified
                  Subsidiary Stock) of a Restricted Subsidiary, as the case may
                  be, such event shall be deemed to constitute an incurrence of
                  Indebtedness by or an issuance of preferred stock (other than
                  Qualified Subsidiary Stock) of, as the case may be, a
                  Restricted Subsidiary of the Company;

                                    (2) the incurrence by the Company or any of
                  its Restricted Subsidiaries of Indebtedness pursuant to one or
                  more Bank Facilities, so long as the aggregate principal
                  amount of all Indebtedness outstanding under all Bank
                  Facilities does not, at the time of incurrence, exceed an
                  amount equal to $50.0 million;

                                    (3) the incurrence by the Company and its
                  Restricted Subsidiaries of the Existing Indebtedness;

                                    (4) the incurrence by the Company of
                  Indebtedness under the Exchange Notes;

                                    (5) the incurrence by the Company or any of
                  its Restricted Subsidiaries of intercompany Indebtedness
                  between or among the Company and any of its Wholly Owned
                  Restricted Subsidiaries; provided, however, that (A) any
                  subsequent issuance or transfer of Equity Interests that
                  result in any such Indebtedness being held by a Person other
                  than the Company or a Wholly Owned Restricted Subsidiary of
                  the


                                       25

<PAGE>



                  Company and (B) any sale or other transfer of such
                  Indebtedness to a Person that is not either the Company or a
                  Wholly Owned Restricted Subsidiary of the Company shall be
                  deemed, in each case, to constitute an incurrence of such
                  Indebtedness by the Company or such Restricted Subsidiary, as
                  the case may be;

                                    (6) the incurrence by the Company or any of
                  its Restricted Subsidiaries of Indebtedness represented by
                  Capital Lease Obligations, mortgage financings or purchase
                  money obligations, in each case incurred for the purpose of
                  financing all or any part of the purchase price or cost of
                  construction or improvement of property used in the business
                  of the Company or such Restricted Subsidiary, in an aggregate
                  principal amount not to exceed $5.0 million at any time
                  outstanding;

                                    (7) the incurrence by the Company or any of
                  its Restricted Subsidiaries of Permitted Refinancing Debt in
                  exchange for, or the net proceeds of which are used to extend,
                  refinance, renew, replace, defease or refund, Indebtedness
                  that was permitted by this Certificate of Designation to be
                  incurred; and

                                    (8) the incurrence by the Company or any of
                  its Restricted Subsidiaries of Indebtedness (in addition to
                  Indebtedness permitted by any other clause of this paragraph)
                  in an aggregate principal amount at any time outstanding not
                  to exceed $5.0 million.

                           (ii) If an item of Indebtedness is permitted to be
         incurred on the basis of the first paragraph of Section 8(b)(i) hereof
         and also on the basis of one or more of clauses (1) through (8) of
         Section 8(b)(i) hereof, or is permitted to be incurred on the basis of
         two or more of clauses (1) through (8) of Section 8(b)(i) hereof, then
         the Company shall classify the basis on which such item of Indebtedness
         is incurred. If an item of Indebtedness is repaid with the proceeds of
         an incurrence of other Indebtedness (whether from the same or a
         different creditor), the Company may classify such other Indebtedness
         as having been incurred on the same basis as the Indebtedness being
         repaid or on a different basis permitted under this covenant. For
         purposes of this Section 8(b)(ii), "Indebtedness" includes Disqualified
         Stock and preferred stock of Subsidiaries. Accrued interest and
         accreted discount will not be deemed incurrence of Indebtedness for
         purposes of this Section 8(b).

                  (c) Merger, Consolidation or Sale of Assets. The Company shall
not consolidate or merge with or into (whether or not the Company is the
surviving corporation), or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its properties or assets in one or more
related transactions, to another corporation, Person or entity unless (i) the
Company is the surviving corporation or the entity or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia; (ii) the
Series A Preferred Stock shall be converted into or exchanged for and shall
become shares of such successor, transferee or resulting Person, having in
respect of such successor, transferee or resulting Person the same powers,
preferences and relative participating, optional or other special rights and the
qualifications, limitations or restrictions thereon, that the Series A Preferred
Stock had with respect to the Company immediately prior to such transaction;
(iii) immediately after such transaction no Voting Rights Triggering Event
exists; and (iv) the Company or the entity or


                                       26

<PAGE>



Person formed by or surviving any such consolidation or merger (if other than
the Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Indebtedness to Adjusted
Operating Cash Flow Ratio set forth in Section 8(b)(i) hereof.

                  (d) Transactions with Affiliates. The Company shall not, and
shall not permit any of its Restricted Subsidiaries to, sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms that are no less favorable to the Company or
the relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (ii) the Company delivers to the Holders (1) with respect
to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $1.0 million, a resolution of the
Board of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such Affiliate
Transaction has been approved by a majority of the disinterested members of the
Board of Directors and a majority of the Independent Directors and (2) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $5.0 million, an opinion as to
the fairness to the Company or such Restricted Subsidiary of such Affiliate
Transaction from a financial point of view issued by an investment banking firm
of national standing; provided that the Company shall not, and shall not permit
any of its Restricted Subsidiaries to, engage in any Affiliate Transaction
involving aggregate consideration in excess of $1.0 million at any time that
there is not at least one Independent Director on the Company's Board of
Directors; and provided further that (A) any employment agreement entered into
by the Company or any of its Restricted Subsidiaries in the ordinary course of
business and consistent with the past practice of the Company or such Restricted
Subsidiary, (B) transactions between or among the Company and/or its Restricted
Subsidiaries, (C) the payment of any dividend on, or the issuance of the
Exchange Notes in exchange for, the Series A Preferred Stock, provided that such
dividends are paid on a pro rata basis and the Exchange Notes are issued in
accordance with this Certificate of Designation, and (D) transactions permitted
by the provisions of Section 8(a) hereof, in each case, shall not be deemed
Affiliate Transactions.

                  (e) Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i)(1) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (A) on its Capital Stock or
(B) with respect to any other interest or participation in, or measured by, its
profits, or (2) pay any indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets to
the Company or any of its Restricted Subsidiaries, except for such encumbrances
or restrictions existing under or by reason of (1) the terms of any Indebtedness
permitted by this Certificate of Designation to be incurred by any Subsidiary of
the Company, (2) Existing Indebtedness as in effect on the Closing Date, (3)
applicable law, (4) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such Indebtedness
was incurred in


                                       27

<PAGE>



connection with or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person and its Subsidiaries, or the property or assets of
the Person and its Subsidiaries, so acquired or (5) by reason of customary
non-assignment provisions in leases and other contracts entered into in the
ordinary course of business and consistent with past practices.

                  (f) Limitation on Issuance and Sales of Capital Stock of
Wholly Owned Restricted Subsidiaries. The Company (i) shall not, and shall not
permit any Wholly Owned Restricted Subsidiary of the Company to, transfer,
convey, sell or otherwise dispose of any Capital Stock (other than Qualified
Subsidiary Stock) of any Wholly Owned Restricted Subsidiary of the Company to
any Person (other than the Company or a Wholly Owned Restricted Subsidiary of
the Company), unless such transfer, conveyance, sale, lease or other disposition
is of all the Capital Stock of such Wholly Owned Restricted Subsidiary and (ii)
shall not permit any Wholly Owned Restricted Subsidiary of the Company to issue
any of its Equity Interests (other than Qualified Subsidiary Stock and, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Wholly Owned Restricted
Subsidiary of the Company.

                  (g) Reports.

                           (i) Whether or not required by the rules and
         regulations of the Commission, so long as any shares of Series A
         Preferred Stock are outstanding, the Company shall furnish to the
         Holders of Series A Preferred Stock (1) all quarterly and annual
         financial information that would be required to be contained in a
         filing with the Commission on Forms 10-Q and 10-K if the Company were
         required to file such Forms, including "Management's Discussion and
         Analysis of Financial Condition and Results of Operations" and, with
         respect to the annual information only, a report thereon by the
         Company's certified independent accountants and (2) all current reports
         that would be required to be filed with the Commission on Form 8-K if
         the Company were required to file such reports. In addition, whether or
         not required by the rules and regulations of the Commission, the
         Company shall file a copy of all such information and reports with the
         Commission for public availability (unless the Commission shall not
         accept such a filing) and make such information available to securities
         analysts and prospective investors upon request. In addition to the
         financial information required by the Exchange Act, each such quarterly
         and annual report shall be required to contain "summarized financial
         information" (as defined in Rule 1-02(aa)(1) of Regulation S-X under
         the Exchange Act) showing Adjusted Operating Cash Flow for the Company
         and its Restricted Subsidiaries, on a consolidated basis, where
         Adjusted Operating Cash Flow for the Company is calculated in a manner
         consistent with the manner described under the definition of "Adjusted
         Operating Cash Flow" contained herein. The summarized financial
         information required pursuant to the preceding sentence may, at the
         election of the Company, be included in the footnotes to audited
         consolidated financial statements or unaudited quarterly financial
         statements of the Company and shall be as of the same dates and for the
         same periods as the consolidated financial statements of the Company
         and its Subsidiaries required pursuant to the Exchange Act.

                           (i) The Company shall deliver to the Holders, within
         90 days after the end of each fiscal year, an Officers' Certificate
         stating that a review of the activities of the Company and its
         Subsidiaries during the preceding fiscal year has been made under the
         supervision of the signing officers with a view to determining whether
         the Company has kept, observed, performed


                                       28

<PAGE>



         and fulfilled its obligations under this Certificate of Designation and
         further stating, as to each such officer signing such certificate, that
         to the best of his or her knowledge the Company has kept, observed,
         performed and fulfilled each and every covenant contained in this
         Certificate of Designation and is not in default in the performance or
         observance of any of the terms, provisions and conditions of this
         Certificate of Designation (or, if any such default shall have
         occurred, describing all such defaults of which he or she may have
         knowledge and what action the Company is taking or proposes to take
         with respect thereto) and that to the best of his or her knowledge no
         event has occurred and remains in existence by reason of which payments
         on account of the Liquidation Preference of or dividends, if any, on
         the Series A Preferred Stock is prohibited or if such event has
         occurred, a description of the event and what action the Company is
         taking or proposes to take with respect thereto.

                           (ii) The Company shall, so long as any of the shares
         of Series A Preferred Stock are outstanding, deliver to the Holders,
         forthwith upon any Executive Officer of the Company becoming aware of
         any default under this Certificate of Designation, an Officers'
         Certificate specifying such default and what action the Company is
         taking or proposes to take with respect thereto.

                  (h) Conflicts with By-laws. If any provisions of the Company's
By-laws conflict in any way with this Certificate of Designation, the Company
shall, so long as any of the shares of Series A Preferred Stock are outstanding,
take all necessary actions to amend such By-laws and thereby resolve the
conflict.

                  9. Payment.

                  (a) All amounts payable in cash with respect to the Series A
Preferred Stock shall be payable in United States dollars at the office or
agency of the Company maintained for such purpose within the City and State of
New York or, at the option of the Company, payment of dividends (if any) may be
made by check mailed to the Holders of the Series A Preferred Stock at their
respective addresses set forth in the register of Holders of Series A Preferred
Stock maintained by the Transfer Agent, provided that all cash payments with
respect to the Global Shares (as defined below) and shares of Series A Preferred
Stock the Holders of which have given wire transfer instructions to the Company
shall be required to be made by wire transfer of immediately available funds to
the accounts specified by the Holders thereof.

                  (b) Any payment on the Series A Preferred Stock due on any day
that is not a Business Day need not be made on such day, but may be made on the
next succeeding Business Day with the same force and effect as if made on such
due date.

                  (c) The Company has initially appointed the Transfer Agent to
act as the "Paying Agent." The Company may at any time terminate the appointment
of any Paying Agent and appoint additional or other Paying Agents, provided that
until the Series A Preferred Stock has been delivered to the Company for
cancellation, or moneys sufficient to pay the Liquidation Preference and
accumulated dividends on the Series A Preferred Stock have been made available
for payment and either paid or returned to the Company as provided in this
Certificate of Designation, it shall maintain an office or agency in the Borough
of Manhattan, The City of New York for surrender of Series A Preferred Stock for
conversion.


                                       29

<PAGE>




                  (d) Dividends payable on the Series A Preferred Stock on any
redemption date or repurchase date that is a Dividend Payment Date shall be paid
to the Holders of record as of the immediately preceding Record Date.

                  (e) All moneys and shares of Series A Preferred Stock
deposited with any Paying Agent or then held by the Company in trust for the
payment of the Liquidation Preference and dividends on any shares of Series A
Preferred Stock which remain unclaimed at the end of two years after such
payment has become due and payable shall be repaid to the Company, and the
Holder of such shares of Series A Preferred Stock shall thereafter look only to
Company for payment thereof.

                  10.      Officers' Certificate.

                  Each Officers' Certificate provided for in this Certificate of
Designation shall include:

                  (a) a statement that the officer making such certificate or
         opinion has read such covenant or condition;

                  (b) a brief statement as to the nature and scope of the
         examination or investigation upon which the statements or opinions
         contained in such certificate or opinion are based;

                  (c) a statement that, in the opinion of such officer, he or
         she has made such examination or investigation as is necessary to
         enable him to express an informed opinion as to whether or not such
         covenant or condition has been satisfied; and

                  (d) a statement as to whether or not, in the opinion of such
         officer, such condition or covenant has been satisfied.

                  11. Exclusion of Other Rights.

                  Except as may otherwise be required by law, the shares of
Series A Preferred Stock shall not have any voting powers, preferences and
relative, participating, optional or other special rights, other than those
specifically set forth in this Certificate of Designation (as such Certificate
of Designation may be amended from time to time) and in the Certificate of
Incorporation. The shares of Series A Preferred Stock shall have no preemptive
or subscription rights.

                  12. Headings of Subdivisions.

                  The headings of the various subdivisions hereof are for
convenience of reference only and shall not affect the interpretation of any of
the provisions hereof.

                  13. Severability of Provisions.

                  If any voting powers, preferences and relative, participating,
optional and other special rights of the Series A Preferred Stock and
qualifications, limitations and restrictions thereof set forth in this
Certificate of Designation (as it may be amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule of law or public
policy, all other voting powers, preferences and relative, participating,
optional and other special rights of Series A Preferred Stock and
qualifications,


                                       30

<PAGE>



limitations and restrictions thereof set forth in this Certificate of
Designation (as so amended) which can be given effect without the invalid,
unlawful or unenforceable voting powers, preferences and relative,
participating, optional and other special rights of Series A Preferred Stock and
qualifications, limitations and restrictions thereof shall, nevertheless, remain
in full force and effect, and no voting powers, preferences and relative,
participating, optional or other special rights of Series A Preferred Stock and
qualifications, limitations and restrictions thereof herein set forth shall be
deemed dependent upon any other such voting powers, preferences and relative,
participating, optional or other special rights of Series A Preferred Stock and
qualifications, limitations and restrictions thereof unless so expressed herein.

                  14. Form of Securities.

                  (a) The Series A Preferred Stock shall initially be issued in
the form of one or more Global Preferred Shares (the "Global Shares"). The
Global Shares shall be deposited on the Closing Date with, or on behalf of, The
Depository Trust Company (the "Depositary") and registered in the name of Cede &
Co., as nominee of the Depositary (such nominee being referred to as the "Global
Share Holder").

                  (b) So long as the Global Share Holder is the registered owner
of any Series A Preferred Stock, the Global Share Holder will be considered the
sole Holder under this Certificate of Designation of any shares of Series A
Preferred Stock evidenced by the Global Shares. Beneficial owners of shares of
Series A Preferred Stock evidenced by the Global Shares shall not be considered
the owners or Holders thereof under this Certificate of Designation for any
purpose. The Company shall not have any responsibility or liability for any
aspect of the records of the Depositary relating to the Series A Preferred
Stock.

                  (c) Payments in respect of the Liquidation Preference,
dividends on any Series A Preferred Stock registered in the name of the Global
Share Holder on the applicable record date shall be payable by the Company to or
at the direction of the Global Share Holder in its capacity as the registered
Holder under this Certificate of Designation. The Company may treat the persons
in whose names Series A Preferred Stock, including the Global Shares, are
registered as the owners thereof for the purpose of receiving such payments. The
Company does not and will not have any responsibility or liability for the
payments of such amounts to beneficial holders of Series A Preferred Stock.

                  (d) Any person having a beneficial interest in a Global Share
may, upon request to the Company, exchange such beneficial interest for Series A
Preferred Stock in the form of registered definitive certificates ("Certificated
Securities"). Upon any such issuance, the Company shall register such
Certificated Securities in the name of, and cause the same to be delivered to,
such person or persons (or the nominee of any thereof). If (i) the Company
notifies the Holders in writing that the Depositary is no longer willing or able
to act as a depositary and the Company is unable to locate a qualified successor
within 90 days or (ii) the Company, at its option, notifies the Holders in
writing that it elects to cause the issuance of Series A Preferred Stock in the
form of Certificated Securities, then, upon surrender by the Global Share Holder
of its Global Shares, Series A Preferred Stock in such form will be issued to
each person that the Global Share Holder and the Depositary identify as being
the beneficial owner of the related Series A Preferred Stock.



                                       31

<PAGE>


                  IN WITNESS WHEREOF, the Company has caused this certificate to
be duly executed by Robert N. Verdecchio, Chief Financial Officer, and attested
by Ted S. Lodge, its assistant secretary, this 27th day of January, 1997.



                                         PEGASUS COMMUNICATIONS CORPORATION




                                         By: /s/ Robert N. Verdecchio
                                             ------------------------------
                                                 Robert N. Verdecchio
                                                 Chief Financial Officer


ATTEST:


By: /s/ Ted S. Lodge
    ----------------------
    Ted S. Lodge
    Assistant Secretary



<PAGE>




                                                                         Annex A
--------------------------------------------------------------------------------















                       PEGASUS COMMUNICATIONS CORPORATION

               12.75% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2007

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

                                    INDENTURE

                          Dated as of ________________
                                ____________________










                                _________________


                            FIRST UNION NATIONAL BANK

                                   as Trustee

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





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



<PAGE>



                             CROSS-REFERENCE TABLE*
Trust Indenture
  Act Section                                             Indenture Section

310  (a)(1)...............................................            7.10
     (a)(2)..............................................             7.10
     (a)(3) .............................................             N.A.
     (a)(4)..............................................             N.A.
     (a)(5)..............................................             7.10
     (b) ................................................        7.03;7.10
     (c) ................................................             N.A.
311  (a) .................................................            7.11
     (b) ................................................             7.11
     (c) ................................................             N.A.
312  (a)..................................................            2.05
     (b).................................................            11.03
     (c) ................................................            11.03
313  (a)..................................................            7.06
     (b)(1) .............................................             N.A.
     (b)(2) .............................................        7.06;7.07
     (c) ................................................       7.06;11.02
     (d).................................................             7.06
314  (a) .................................................      4.03;11.05
     (b) ................................................              N.A
     (c)(1) ............................................. .          11.04
     (c)(2) .............................................            11.04
     (c)(3) .............................................             N.A.
     (d).................................................             N.A.
     (e)  ...............................................            11.05
     (f).................................................             N.A.
315  (a)..................................................            7.01
     (b).................................................       7.05,11.02
     (c)  ...............................................             7.01
     (d).................................................             7.01
     (e).................................................             6.11
316  (a)(last sentence) ..................................            2.09
     (a)(1)(A)...........................................             6.05
     (a)(1)(B) ..........................................             6.04
     (a)(2) .............................................             N.A.
     (b) ................................................             6.07
     (c) ................................................              N.A.
317  (a)(1) ..............................................            6.08
     (a)(2)..............................................             6.09
     (b) ................................................             2.04
318  (a)..................................................           11.01
     (b).................................................             N.A.
     (c).................................................            11.01
N.A. means not applicable.

*This Cross-Reference Table is not part of the Indenture.


<PAGE>



                                TABLE OF CONTENTS


                                                                        Page No.
                                                                        --------


                               ARTICLE 1
                     DEFINITIONS AND INCORPORATION
                             BY REFERENCE

 Section 1.01.   Definitions...............................................  1
 Section 1.02.   Other Definitions......................................... 12
 Section 1.03.   Incorporation by Reference of Trust Indenture Act......... 13
 Section 1.04.   Rules of Construction..................................... 13

                                       ARTICLE 2
                                  THE EXCHANGE NOTES

 Section 2.01.   Form and Dating........................................... 14
 Section 2.02.   Execution and Authentication.............................. 14
 Section 2.03.   Registrar and Paying Agent................................ 14
 Section 2.04.   Paying Agent to Hold Money in Trust....................... 15
 Section 2.05.   Holder Lists.............................................. 15
 Section 2.06.   Transfer and Exchange..................................... 15
 Section 2.07.   Replacement Exchange Notes................................ 16
 Section 2.08.   Outstanding Exchange Notes................................ 16
 Section 2.09.   Treasury Exchange Notes................................... 16
 Section 2.10.   Temporary Exchange Notes.................................. 17
 Section 2.11.   Cancellation.............................................. 17
 Section 2.12.   Defaulted Interest........................................ 17

                                      ARTICLE 3
                               REDEMPTION AND PREPAYMENT

 Section 3.01.   Notices to Trustee........................................ 18
 Section 3.02.   Selection of Exchange Notes to Be Redeemed................ 18
 Section 3.03.   Notice of Redemption...................................... 18
 Section 3.04.   Effect of Notice of Redemption............................ 19
 Section 3.05.   Deposit of Redemption or Purchase Price................... 19
 Section 3.06.   Exchange Notes Redeemed or Purchased in Part.............. 20
 Section 3.07.   Optional Redemption....................................... 20
 Section 3.08.   Mandatory Redemption...................................... 20
 Section 3.09.   Offer to Purchase by Application of Excess Proceeds....... 20

                                       ARTICLE 4
                                       COVENANTS

 Section 4.01.   Payment of Exchange Notes................................. 22
 Section 4.02.   Maintenance of Office or Agency........................... 23

                                         i


<PAGE>



Section 4.03. Reports....................................................... 23
Section 4.04. Compliance Certificate........................................ 24
Section 4.05. Taxes......................................................... 24
Section 4.06. Stay, Extension and Usury Laws................................ 24
Section 4.07. Restricted Payments........................................... 25
Section 4.08. Dividend and Other Payment Restrictions Affecting
              Subsidiaries.................................................. 26
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.... 27
Section 4.10. Asset Sales................................................... 29
Section 4.11. Transactions with Affiliates.................................. 30
Section 4.12. Liens......................................................... 30
Section 4.13. Offer to Repurchase Upon Change of Control.................... 31
Section 4.14. Continued Existence........................................... 32
Section 4.15. Limitation on Layering........................................ 32
Section 4.16. Limitation on Issuances and Sales of Capital Stock of Wholly
              Owned Restricted Subsidiaries................................. 32

                                    ARTICLE 5
                                   SUCCESSORS

Section 5.01. Merger, Consolidation, or Sale of Assets...................... 33
Section 5.02. Successor Corporation Substituted............................. 33

                                   ARTICLE 6
                             DEFAULTS AND REMEDIES

Section 6.01. Events of Default............................................. 33
Section 6.02. Acceleration.................................................. 36
Section 6.03. Other Remedies................................................ 36
Section 6.04. Waiver of Past Defaults....................................... 36
Section 6.05. Control by Majority........................................... 36
Section 6.06. Limitation on Suits........................................... 37
Section 6.07. Rights of Holders of Exchange Notes to Receive Payment........ 37
Section 6.08. Collection Suit by Trustee.................................... 37
Section 6.09. Trustee May File Proofs of Claim.............................. 37
Section 6.10. Priorities.................................................... 38
Section 6.11. Undertaking for Costs..........................................38

                                   ARTICLE 7
                                    TRUSTEE

Section 7.01. Duties of Trustee............................................. 39
Section 7.02. Rights of Trustee............................................. 40
Section 7.03. Individual Rights of Trustee.................................. 40
Section 7.04. Trustee's Disclaimer.......................................... 40
Section 7.05. Notice of Defaults............................................ 41
Section 7.06. Reports by Trustee to Holders of the Exchange Notes........... 41
Section 7.07. Compensation and Indemnity.................................... 41
Section 7.08. Replacement of Trustee........................................ 42

                                      ii


<PAGE>



Section 7.09. Successor Trustee by Merger, etc...............................43
Section 7.10. Eligibility; Disqualification................................. 43
Section 7.11. Preferential Collection of Claims Against Company............. 43

                                    ARTICLE 8
                    LEGAL DEFEASANCE AND COVENANT DEFEASANCE

Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance...... 43
Section 8.02. Legal Defeasance and Discharge................................ 43
Section 8.03. Covenant Defeasance........................................... 44
Section 8.04. Conditions to Legal or Covenant Defeasance.................... 44
Section 8.05. Deposited Money and Government Securities to be Held in
              Trust; Other Miscellaneous Provisions......................... 45
Section 8.06. Repayment to Company.......................................... 46
Section 8.07. Reinstatement................................................. 46

                                    ARTICLE 9
                        AMENDMENT, SUPPLEMENT AND WAIVER

Section 9.01. Without Consent of Holders of Exchange Notes.................. 47
Section 9.02. With Consent of Holders of Exchange Notes..................... 47
Section 9.03. Compliance with Trust Indenture Act........................... 49
Section 9.04. Revocation and Effect of Consents............................. 49
Section 9.05. Notation on or Exchange of Exchange Notes..................... 49
Section 9.06. Trustee to Sign Amendments, etc............................... 49


                                   ARTICLE 10
                                  SUBORDINATION

Section 10.01. Agreement to Subordinate......................................49
Section 10.02. Certain Definitions...........................................50
Section 10.03. Liquidation; Dissolution; Bankruptcy..........................50
Section 10.04. Default on Designated Senior Debt.............................50
Section 10.05. Acceleration of Exchange Notes................................51
Section 10.06. When Distribution Must Be Paid Over...........................51
Section 10.07. Notice by Company.............................................52
Section 10.08. Subrogation...................................................52
Section 10.09. Relative Rights...............................................52
Section 10.10. Subordination May Not Be Impaired by Company..................53
Section 10.11. Distribution or Notice to Representative......................53
Section 10.12. Rights of Trustee and Paying Agent............................53
Section 10.13. Authorization to Effect Subordination.........................53
Section 10.14. Amendments....................................................53



                                       iii


<PAGE>


                             ARTICLE 11
                            MISCELLANEOUS

Section 11.01.  Trust Indenture Act Controls............................... 54
Section 11.02.  Notices.................................................... 54
Section 11.03.  Communication by Holders of Exchange Notes with
                Other Holders of Exchange Notes............................ 55
Section 11.04.  Certificate and Opinion as to Conditions Precedent......... 55
Section 11.05.  Statements Required in Certificate or Opinion.............. 55
Section 11.06.  Rules by Trustee and Agents................................ 56
Section 11.07.  No Personal Liability of Directors, Officers, Employees
                and Stockholders........................................... 56
Section 11.08.  Governing Law.............................................. 56
Section 11.09.  No Adverse Interpretation of Other Agreements.............. 56
Section 11.10.  Successors................................................. 56
Section 11.11.  Severability............................................... 56
Section 11.12.  Counterpart Originals...................................... 56
Section 11.13.  Table of Contents, Headings, etc........................... 57

Exhibit A..................................................................A-1


                                       iv
<PAGE>

           INDENTURE dated as of __________________ between Pegasus
Communications Corporation, a Delaware corporation (the "Company"), and First
Union National Bank, a national banking association, as trustee (the "Trustee").

           The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the 12.75% Senior
Subordinated Exchange Notes due 2007 of the Company:


                                    ARTICLE 1
                          DEFINITIONS AND INCORPORATION
                                  BY REFERENCE

SECTION 1.01. DEFINITIONS.

        "Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.

        "Adjusted Operating Cash Flow" means, for the four most recent fiscal
quarters for which internal financial statements are available, Operating Cash
Flow of such Person and its Restricted Subsidiaries less DBS Cash Flow for the
most recent four-quarter period plus DBS Cash Flow for the most recent quarterly
period, multiplied by four.

        "Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
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.

        "Agent" means any Registrar, Paying Agent or co-registrar.

        "Asset Sale" means (i) the sale, lease, conveyance or other disposition
of any assets (including, without limitation, by way of a sale and leaseback)
other than in the ordinary course of business consistent with past practices
(provided that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole will be governed by the provisions described in Section 4.13 hereof and/or
the provisions described in Section 5.01 hereof and not by the provision of
Section 4.10 hereof) and (ii) the issue or sale by the Company or any of its
Restricted Subsidiaries of Equity Interests of any of the Company's Restricted
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million. Notwithstanding the foregoing, the following transactions will not be
deemed to be Asset Sales: (i) a transfer of assets by the Company to a Wholly
Owned Restricted Subsidiary of the Company or by a Wholly Owned Restricted
Subsidiary of the Company to the Company or to another Wholly Owned Restricted
Subsidiary of the Company, (ii) an issuance of Equity Interests by a Wholly
Owned


<PAGE>



Restricted Subsidiary of the Company to the Company or to another Wholly Owned
Restricted Subsidiary of the Company and (iii) a Restricted Payment that is
permitted by the provisions of Section 4.07 hereof.

        "Asset Swap" means an exchange of assets by the Company or a Restricted
Subsidiary of the Company for one or more Permitted Businesses or for a
controlling equity interest in any Person whose assets consist primarily of one
or more Permitted Businesses.

        "Bank Facilities" means, with respect to the Company or any of its
Restricted Subsidiaries, one or more debt facilities or commercial paper
facilities with banks or other institutional lenders providing for revolving
credit loans, term loans, receivables financing (including through the sale of
receivables to such lenders or to special purpose entities formed to borrow from
such lenders against such receivables) or letters of credit, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time.

        "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.

        "Board" or "Board of Directors" means the Board of Directors of the
Company or any authorized committee of the Board of Directors.

        "Business Day" means any day other than a Legal Holiday.

        "Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.

        "Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.

        "Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any domestic commercial bank
having capital and surplus in excess of $500 million and a Thompson Bank Watch
Rating of "B" or better, (iv) repurchase obligations with a term of not more
than seven days or on demand for underlying securities of the types described in
clauses (ii) and (iii) above entered into with any financial institution meeting
the qualifications specified in clause (iii) above and (v) commercial paper
having the highest rating at acquisition obtainable from Moody's Investors
Service, Inc. or Standard & Poor's Corporation and in each case maturing within
six months after the date of acquisition.

        "Certificate of Designation" means the Certificate of Designation,
Preferences and Relative, Participating, Optional and Other Special Rights of
Preferred Stock and Qualifications, Limitations and Restrictions Thereof setting
forth the terms of the Series A Preferred Stock.


                                        2

<PAGE>



        "Change of 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 and its Restricted Subsidiaries
taken as a whole 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 (A) 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), directly or
indirectly, of more of the Class A Common Stock of the Company than is
beneficially owned (as defined above) at such time by the Principal and his
Related Parties in the aggregate, (B) the Principal and his Related Parties
collectively cease to beneficially own (as defined above) Voting Stock of the
Company having at least 30% of the combined voting power of all classes of
Voting Stock of the Company then outstanding or (C) the Principal and his
Affiliates acquire, in the aggregate, beneficial ownership (as defined above) of
more than 66 2/3 % of the shares of Class A Common Stock at the time outstanding
or (iv) the first day on which a majority of the members of the Board of
Directors are not Continuing Directors.

        "Class A Common Stock" means the Company's Class A Common Stock, par
value $.01 per share.

        "Closing Date" means the date on which shares of Series A Preferred
Stock are first issued.

        "Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
not a Subsidiary or that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or distributions
paid in cash to the referent Person or a Wholly Owned Restricted Subsidiary
thereof, (ii) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded, (iii) the cumulative effect of a change in accounting principles shall
be excluded and (iv) the Net Income of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to the Company or one of its Subsidiaries.

        "Company" means Pegasus Communications Corporation, a Delaware
corporation.

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

        "Corporate Trust Office of the Trustee" shall be at the first address of
the Trustee specified in Section 11.02 hereof or such other address as to which
the Trustee may give notice to the Company.

        "Cumulative Operating Cash Flow" means, as of any date of determination,
Operating Cash Flow for the Company and its Restricted Subsidiaries for the
period (taken as one accounting period) from the beginning of the first full
month commencing after the Closing Date to the end of the most recently ended
fiscal quarter for which internal financial statements are available at such
date of determination, plus all cash dividends received by the Company or a
Wholly Owned Restricted

                                        3

<PAGE>



Subsidiary of the Company from any Unrestricted Subsidiary of the Company or any
Unrestricted Subsidiary of any Wholly Owned Restricted Subsidiary of the Company
to the extent that such dividends are not included in the calculation of
permitted Restricted Payments under paragraph (C) of Section 4.07(a) hereof by
virtue of clause (iii) of such paragraph.

        "Cumulative Total Interest Expense" means, with respect to the Company
and its Restricted Subsidiaries, as of any date of determination, Total Interest
Expense for the period (taken as one accounting period) from the beginning of
the first full month commencing after the Closing Date to the end of the most
recently ended fiscal quarter for which internal financial statements are
available at such date of determination.

        "DBS Cash Flow" means income from operations (before depreciation,
amortization and Non-Cash Incentive Compensation to the extent deducted in
arriving at income from operations) for the Satellite Segment determined on a
basis consistent with the segment data contained in the Company's consolidated
audited financial statements.

        "Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.

        "Depositary" means, with respect to the Exchange Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depositary with respect to the Exchange Notes, until a successor
shall have been appointed and become such pursuant to the applicable provision
of this Indenture, and, thereafter, "Depositary" shall mean or include such
successor.

        "Disqualified Stock" means any Capital Stock (other than the Series A
Preferred Stock) that, by its terms (or by the terms of any security into which
it is convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the mandatory redemption date of the Series A
Preferred Stock set forth in the Certificate of Designations unless, in any such
case, the issuer's obligation to pay, purchase or redeem such Capital Stock is
expressly conditioned on its ability to do so in compliance with the provisions
of Section 4.07 hereof.

        "Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).

        "Exchange Act" means the Securities Exchange Act of 1934, as amended.

        "Exchange Notes" means the Company's 12.75% Senior Subordinated Exchange
Notes due 2007 issuable in exchange for the Company's Series A Preferred Stock.

        "Existing Indebtedness" means all Indebtedness of the Company and its
Subsidiaries in existence on the Closing Date, until such amounts are repaid.

        "fair market value" means, with respect to assets or aggregate net
proceeds having a fair market value (a) of less than $5.0 million, the fair
market value of such assets or proceeds determined in good faith by the Board of
Directors (including a majority of the Independent Directors thereof) and
evidenced by a board resolution and (b) equal to or in excess of $5.0 million,
the fair market value of

                                        4

<PAGE>



such assets or proceeds as determined by an independent appraisal firm with
experience in the valuation of the classes and types of assets in question;
provided that the fair market value of the assets purchased in an arms'-length
transaction by an Affiliate of the Company (other than a Subsidiary) from a
third party that is not also an Affiliate of the Company or of such purchaser
and contributed to the Company within five Business Days of the consummation of
the acquisition of such assets by such Affiliate shall be deemed to be the
aggregate consideration paid by such Affiliate (which may include the fair
market value of any non-cash consideration to the extent that the valuation
requirements of this definition are complied with as to any such non-cash
consideration).

        "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Closing Date.

        "Government Securities" means direct obligations of, or obligations
guaranteed by, the United States for the payment of which guarantee or
obligations the full faith and credit of the United States is pledged.

        "Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, co-borrowing
arrangements, letters of credit and reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.

        "Hedging Obligations" means, with respect to any Person, the obligations
of such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.

        "Holder" means a Person in whose name an Exchange Note is registered.

        "Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing any Capital Lease Obligations or the balance deferred and unpaid
of the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any indebtedness of any other Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date; provided that the amount
outstanding at any time of any Indebtedness issued with original issue discount
is the full amount of such Indebtedness less the remaining unamortized portion
of the original issue discount of such Indebtedness at such time as determined
in conformity with GAAP.

        "Indebtedness to Adjusted Operating Cash Flow Ratio" means, as of any
date of determination, the ratio of (a) the aggregate principal amount of all
outstanding Indebtedness of a Person and its

                                        5

<PAGE>



Restricted Subsidiaries as of such date on a consolidated basis, plus the
aggregate liquidation preference of all outstanding preferred stock (other than
Qualified Subsidiary Stock) of the Restricted Subsidiaries of such Person as of
such date (excluding any such preferred stock held by such Person or a Wholly
Owned Restricted Subsidiary of such Person), plus the aggregate liquidation
preference or redemption amount of all Disqualified Stock of such Person
(excluding any Disqualified Stock held by such Person or a Wholly Owned
Restricted Subsidiary of such Person) as of such date to (b) Adjusted Operating
Cash Flow of such Person and its Restricted Subsidiaries for the most recent
four-quarter period for which internal financial statements are available
determined on a pro forma basis after giving effect to all acquisitions and
dispositions of assets (notwithstanding clause (ii) of the definition of
"Consolidated Net Income") (including, without limitation, Asset Swaps) made by
such Person and its Restricted Subsidiaries since the beginning of such
four-quarter period through such date as if such acquisitions and dispositions
had occurred at the beginning of such four-quarter period.

        "Indenture" means this Indenture, as amended or supplemented from time
to time.

        "Independent Director" means a member of the Board of Directors who is
neither an officer nor an employee of the Company or any of its Affiliates.

        "Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided that an acquisition of assets, Equity Interests or other securities by
the Company for consideration consisting of common equity securities, or
preferred stock which is not Disqualified Stock, of the Company shall not be
deemed to be an Investment.

        "Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.

        "Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).

        "Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).


                                        6

<PAGE>



        "Net Proceeds" means the aggregate cash proceeds received by the Company
or any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting,
investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
in connection with such Asset Sale and any reserve for adjustment in respect of
the sale price of such asset or assets established in accordance with GAAP.

        "Non-Cash Incentive Compensation" means incentive compensation paid to
any officer, employee or director of the Company or any of its Subsidiaries in
the form of Class A Common Stock of the Company or options to purchase Class A
Common Stock of the Company pursuant to the Pegasus Communications Restricted
Stock Plan and the Pegasus Communications 1996 Stock Option Plan.

        "Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise) or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.

        "Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.

        "Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary, any Assistant Secretary, any Vice-President or any Assistant
Vice-President of such Person.

        "Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 11.05 hereof.

        "Operating Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period, (a) plus (i)
extraordinary net losses and net losses on sales of assets outside the ordinary
course of business during such period, to the extent such losses were deducted
in computing such Consolidated Net Income, plus (ii) provision for taxes based
on income or profits, to the extent such provision for taxes was included in
computing such Consolidated Net Income, and any provision for taxes utilized in
computing the net losses under clause (i) hereof, plus (iii) consolidated
interest expense of such Person and its Subsidiaries for such period, whether
paid or accrued and whether or not capitalized (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts

7

<PAGE>



and other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
charges (excluding any such non-cash charge to the extent that it represents an
accrual of or reserve for cash charges in any future period or amortization of a
prepaid cash expense that was paid in a prior period) of such Person and its
Subsidiaries for such period to the extent that such depreciation, amortization
and other non-cash charges were deducted in computing such Consolidated Net
Income, plus (v) Non-Cash Incentive Compensation to the extent such compensation
expense was deducted in computing such Consolidated Net Income and to the extent
not included in clause (iv) of this definition and (b) less all non-cash income
for such period (excluding any such non-cash income to the extent it represents
an accrual of cash income in any future period or amortization of cash income
received in a prior period).

        "Opinion of Counsel" means an opinion from legal counsel who is not
unsatisfactory to the Trustee, that meets the requirements of Section 11.05
hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.

        "Pari Passu Debt" means senior subordinated Indebtedness of the Company
permitted by Section 4.09 hereof, other than the Exchange Notes, which is pari
passu in right of payment with the Exchange Notes.

        "Permitted Businesses" means (a) any media or communications business,
including but not limited to, any broadcast television station, cable franchise
or other business in the television broadcasting, cable or direct-to-home
satellite television industries and (b) any business reasonably related or
ancillary to any of the foregoing businesses.

        "Permitted Investments" means (a) any Investments in the Company or in a
Wholly Owned Restricted Subsidiary of the Company; (b) any Investments in Cash
Equivalents; (c) Investments by the Company or any Restricted Subsidiary of the
Company in a Person, if as a result of such Investment (i) such Person becomes a
Wholly Owned Restricted Subsidiary of the Company or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Wholly Owned
Restricted Subsidiary of the Company; (d) Investments made as a result of the
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with the provisions of Section 4.10 hereof; and (e) other
Investments (measured as of the time made and without giving effect to
subsequent changes in value) that do not exceed an amount equal to $5.0 million
plus, to the extent any such Investments are sold for cash or are otherwise
liquidated or repaid for cash, any gains less any losses realized on the
disposition of such Investments.

        "Permitted Liens" means (i) Liens securing Senior Debt; (ii) Liens
securing Indebtedness of a Subsidiary that was permitted to be incurred under
this Indenture, (iii) Liens on property of a Person existing at the time such
Person is merged into or consolidated with the Company or any Subsidiary of the
Company; provided that such Liens were not created in contemplation of such
merger or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with the Company or any Restricted Subsidiary
of the Company; (iv) Liens on property existing at the time of acquisition
thereof by the Company or any Subsidiary of the Company; provided that such
Liens were not created in contemplation of such acquisition; (v) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business; (vi) Liens existing on the Closing Date; (vii) Liens to secure

                                        8

<PAGE>



Indebtedness represented by Capital Lease Obligations, mortgage financings or
purchase money obligations permitted by clause (vi) of Section 4.09(b) hereof,
covering only the assets acquired with such Indebtedness; (viii) Liens for
taxes, assessments or governmental charges or claims that are not yet delinquent
or that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (ix) Liens incurred in the ordinary course of business of
the Company or any Subsidiary of the Company with respect to obligations that do
not exceed $1.0 million at any one time outstanding and (x) Liens on assets of
or Equity Interests in Unrestricted Subsidiaries that secure Non-Recourse Debt
of Unrestricted Subsidiaries.

        "Permitted Refinancing Debt" means any Indebtedness of the Company or
any of its Restricted Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Restricted Subsidiaries; provided that
(i) the principal amount of such Permitted Refinancing Debt does not exceed the
principal amount of the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus (a) the amount of reasonable expenses incurred in
connection therewith and (b) the amount of any premium required to be paid in
connection with such refinancing pursuant to the terms of such refinancing or
deemed by the Company or such Restricted Subsidiary necessary to be paid in
order to effectuate such refinancing); (ii) such Permitted Refinancing Debt has
a final maturity date not earlier than the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; (iii) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated in right of
payment to the Exchange Notes, such Permitted Refinancing Debt has a final
maturity date later than the final maturity date of the Exchange Notes, and is
subordinated in right of payment to the Exchange Notes on terms at least as
favorable to the Holders of Exchange Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Company or by the Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.

        "Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).

        "Preferred Stock," of any Person, means Capital Stock of such Person of
any class or series (however designated) that ranks prior, as to payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class or series of such Person.

        "Principal" means Marshall W. Pagon.

        "Qualified Subsidiary Stock" means Capital Stock of a Subsidiary of the
Company which by its terms (a) does not mature, or is not mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise and is not
redeemable at the option of the Holder thereof, in whole or in part, prior to
January 1, 2008 (in each case, whether automatically or upon the happening of
any event) (unless, in any such case, the issuer's obligation to pay, purchase
or redeem such Capital Stock is expressly conditioned on its ability to do so in
compliance with the provisions of Section 4.07 hereof), (b) is automatically
exchangeable into shares of Capital Stock of the Company that is not
Disqualified Stock upon the earlier to occur of (i) the occurrence of an Event
of Default and (ii) January 1, 2006, (c) has

                                        9

<PAGE>



no voting or remedial rights and (d) does not permit the payment of cash
dividends prior to January 1, 2007 (unless, in the case of this clause (d), the
issuer's ability to pay cash dividends is expressly conditioned on its ability
to do so in compliance with the provisions of Section 4.07 hereof).

        "Related Party" with respect to the Principal 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" has the meaning
specified in the definition of "Affiliate" contained in this Section 1.01. 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.

        "Responsible Officer," when used with respect to the Trustee, means any
authorized officer within the Corporate Trust Administration department of the
Trustee (or any successor group of the Trustee) or any other officer of the
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.

        "Restricted Investment" means an Investment other than a Permitted
Investment.

        "Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.

        "Satellite Segment" means the business involved in the marketing of
video and audio programming and data information services through transmission
media consisting of space-based satellite broadcasting services, the assets
related to the conduct of such business held by the Company and its Restricted
Subsidiaries on the Closing Date, plus all other assets acquired by the Company
or any of its Restricted Subsidiaries that are directly related to such business
(excluding, without limitation, the terrestrial television broadcasting business
and the assets related thereto and the cable television business and the assets
related thereto); provided that any assets acquired by the Company or any of its
Restricted Subsidiaries after the Closing Date that are not directly related to
such business shall not be included for purposes of this definition.

        "SEC" means the Securities and Exchange Commission.

        "Securities Act" means the Securities Act of 1933, as amended.

        "Series A Preferred Stock" means the Company's 12.75% Series A
Cumulative Exchangeable Preferred Stock.

        "Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the Closing Date.

        "Split Dollar Agreement" means the Split Dollar Agreement between the
Company and Nicholas A. Pagon, Holly T. Pagon and Michael B. Jordan, as trustees
of an insurance trust established by Marshall W. Pagon, as in effect on the
Closing Date.


                                       10

<PAGE>



        "Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).

        "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as amended as in effect on the date of this Indenture.

        "Total Interest Expense" means, with respect to any Person for any
period, the sum of (i) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations) and (ii) the consolidated interest expense of such
Person and its Restricted Subsidiaries that was capitalized during such period,
to the extent such amounts are not included in clause (i) of this definition,
and (iii) any interest expense for such period on Indebtedness of another Person
that is Guaranteed by such Person or one of its Restricted Subsidiaries or
secured by a Lien on assets (other than Equity Interests in Unrestricted
Subsidiaries securing Indebtedness of Unrestricted Subsidiaries) of such Person
or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is
called upon) and (iv) all cash and non-cash dividend payments during such period
on any series of preferred stock of a Restricted Subsidiary of such Person.

        "Trustee" means the party named as such above until a successor replaces
it in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.

        "Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board resolution;
but only to the extent that such Subsidiary (a) has no Indebtedness other than
Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Restricted Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates of the
Company; (c) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries; and (e) has at least one executive officer that is
not a director or executive officer of the Company or any of its Restricted
Subsidiaries. Any such designation made by the Board of Directors at a time when
any Exchange Notes are outstanding shall be evidenced to the Trustee by filing
with the Trustee a certified copy of the Board resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by the provisions of
Section 4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to
meet the foregoing requirements as an Unrestricted Subsidiary, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture
and any Indebtedness of such Subsidiary shall be deemed to be incurred by a
Restricted Subsidiary of the Company as of such date (and, if such Indebtedness
is not

                                       11

<PAGE>



permitted to be incurred as of such date under the provisions of Section 4.09
hereof (treating such Subsidiary as a Restricted Subsidiary for such purpose for
the period relevant to such covenant), the Company shall be in default of such
covenant); provided, however, that in the event an Unrestricted Subsidiary
ceases to meet the requirement set forth in clause (e) of this definition, such
Unrestricted Subsidiary shall have 60 days to meet such requirement before such
Unrestricted Subsidiary shall cease to be an Unrestricted Subsidiary. The Board
of Directors may at any time designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that such designation shall be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of the Company of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall be permitted only if (i) such Indebtedness is permitted under Section 4.09
hereof (treating such Subsidiary as a Restricted Subsidiary for such purpose for
the period relevant to such covenant) and (ii) no Default or Event of Default
would be in existence following such designation.

        "Voting Stock" means with respect to any specified Person, Capital Stock
with voting power, under ordinary circumstances and without regard to the
occurrence of any contingency, to elect the directors or other managers or
trustees of such Person.

        "Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.

        "Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock (other than
Qualified Subsidiary Stock) or other ownership interests of which (other than
directors' qualifying shares) shall at the time be owned by such Person and/or
by one or more Wholly Owned Restricted Subsidiaries of such Person.

SECTION 1.02.              OTHER DEFINITIONS.
                                                  Defined in
                  Term                             Section

        "Affiliate Transaction"..................... 4.11
        "Asset Sale Offer" ......................... 4.10
        "Basket Period"............................. 4.07
        "Change of Control Offer"................... 4.13
        "Change of Control Payment"................. 4.13
        "Change of Control Payment Date"............ 4.13
        "Covenant Defeasance"....................... 8.03
        "Custodian"................................. 6.01
        "Designated Senior Debt".................... 10.02
        "distribution".............................. 10.02
        "DTC"....................................... 2.03
        "Event of Default".......................... 6.01
        "Excess Proceeds"........................... 4.10
        "incur"..................................... 4.09
        "Legal Defeasance" ......................... 8.02
        "Notice of Default"......................... 6.01
        "Offer Amount" ............................. 3.09
        "Offer Period .............................. 3.09

                                       12

<PAGE>



        "outstanding"............................... 8.02
        "Paying Agent".............................. 2.03
        "Payment Blockage Notice"................... 10.04
        "Payment Default"........................... 6.01
        "Purchase Date" ............................ 3.09
        "Registrar"................................. 2.03
        "Representative" ........................... 10.02
        "Restricted Payments"....................... 4.07
        "Senior Bank Debt".......................... 10.02
        "Senior Debt"............................... 10.02

SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.

        Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture.

        The following TIA terms used in this Indenture have the following
meanings:

        "indenture securities" means the Exchange Notes;

        "indenture security Holder" means a Holder of an Exchange Note;

        "indenture to be qualified" means this Indenture;

        "indenture trustee" or "institutional trustee" means the Trustee;

        "obligor" on the Exchange Notes means the Company and any successor
obligor upon the Exchange Notes.

        All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.

SECTION 1.04. RULES OF CONSTRUCTION.

        Unless the context otherwise requires:

                  (1) a term has the meaning assigned to it;

                  (2) an accounting term not otherwise defined has the meaning
         assigned to it in accordance with GAAP;

                  (3) "or" is not exclusive;

                  (4) words in the singular include the plural, and in the
         plural include the singular;

                  (5) provisions apply to successive events and transactions;
         and

                  (6) references to sections of or rules under the Securities
         Act shall be deemed to include substitute, replacement of successor
         sections or rules adopted by the SEC from time to time.


                                       13

<PAGE>




                                    ARTICLE 2
                               THE EXCHANGE NOTES

SECTION 2.01. FORM AND DATING.

        The Exchange Notes and the Trustee's certificate of authentication shall
be substantially in the form of Exhibit A hereto. The Exchange Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Exchange Note shall be dated the date of its authentication. The
Exchange Notes shall be in all appropriate denominations.

        The terms and provisions contained in the Exchange Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.

SECTION 2.02. EXECUTION AND AUTHENTICATION.

        Two Officers shall sign the Exchange Notes for the Company by manual or
facsimile signature.

        If an Officer whose signature is on an Exchange Note no longer holds
that office at the time an Exchange Note is authenticated, the Exchange Note
shall nevertheless be valid.

        An Exchange Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Exchange Note has been authenticated under this Indenture.

        The Trustee shall, upon a written order of the Company signed by two
Officers, authenticate Exchange Notes for original issue up to the aggregate
principal amount stated in paragraph 4 of the Exchange Notes. The aggregate
principal amount of Exchange Notes outstanding at any time may not exceed such
amount except as provided in Section 2.07 hereof.

        The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate the Exchange Notes. An authenticating agent may
authenticate Exchange Notes whenever the Trustee may do so. Each reference in
this Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as an Agent to deal with the
Company or an Affiliate of the Company.

SECTION 2.03. REGISTRAR AND PAYING AGENT.

        The Company shall maintain an office or agency where Exchange Notes may
be presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Exchange Notes may be presented for payment ("Paying
Agent"). The Registrar shall keep a register of the Exchange Notes and of their
transfer and exchange. The Company may appoint one or more co-registrars and one
or more additional paying agents. The term "Registrar" includes any co-registrar
and the term "Paying Agent" includes any additional paying agent. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company shall notify the Trustee in writing of the name

                                       14

<PAGE>



and address of any Agent not a party to this Indenture. If the Company fails to
appoint or maintain another entity as Registrar or Paying Agent, the Trustee
shall act as such. The Company may act as Paying Agent or Registrar.

        The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Exchange Notes.

        The Company initially appoints the Trustee to act as the Registrar and
Paying Agent.

SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.

        The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium, if any, or interest on the Exchange Notes, and will notify
the Trustee of any default by the Company in making any such payment. While any
such default continues, the Trustee may require a Paying Agent to pay all money
held by it to the Trustee. The Company at any time may require a Paying Agent to
pay all money held by it to the Trustee. Upon payment over to the Trustee, the
Paying Agent (if other than the Company or a Subsidiary) shall have no further
liability for the money. If the Company or a Subsidiary acts as Paying Agent, it
shall segregate and hold in a separate trust fund for the benefit of the Holders
all money held by it as Paying Agent. Upon any bankruptcy or reorganization
proceedings relating to the Company, the Trustee shall serve as Paying Agent for
the Exchange Notes.

SECTION 2.05. HOLDER LISTS.

        The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Exchange Notes and the Company shall otherwise comply with TIA ss. 312(a).

SECTION 2.06. TRANSFER AND EXCHANGE.

        When Exchange Notes are presented by a Holder to the Registrar with a
request to register, transfer or exchange them for an equal principal amount of
Exchange Notes of other denominations, the Registrar shall register the transfer
or make the exchange if its requirements for such transactions are met;
provided, however, that any Exchange Note presented or surrendered for
registration of transfer or exchange shall be duly endorsed or accompanied by a
written instruction of transfer in form satisfactory to the Registrar and the
Trustee duly executed by the Holder thereof or by his attorney duly authorized
in writing. To permit registrations of transfer and exchanges, the Company shall
issue and the Trustee shall authenticate Exchange Notes at the Registrar's
request, subject to such rules as the Trustee may reasonably require.

        Neither the Company nor the Registrar shall be required (i) to issue or
register the transfer or exchange of Exchange Notes during a period beginning at
the opening of business on a Business Day fifteen (15) Business Days before the
day of any selection of Exchange Notes for redemption under Section 3.02 hereof
and ending at the close of business on the day of selection, (ii) to register
the transfer of or exchange any Exchange Notes so selected for redemption, in
whole or in part, except the

                                       15

<PAGE>



unredeemed portion of any Exchange Note being redeemed in part or (iii) to
register the transfer or exchange of an Exchange Note between a record date and
the next succeeding interest payment date.

        No service charge shall be made to any Holder for any registration of
transfer or exchange (except as otherwise expressly permitted herein), but the
Company may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than such
transfer tax or similar governmental charge payable upon exchanges pursuant to
Sections 2.10, 3.06 or 9.05 hereof, which shall be paid by the Company).

        Prior to due presentment for registration of transfer of any Exchange
Note, the Trustee, any Agent and the Company may deem and treat the Person in
whose name any Exchange Note is registered as the absolute owner of such
Exchange Note for the purpose of receiving payment of principal of, premium, if
any, and interest on such Exchange Note and for all other purposes whatsoever,
whether or not such Exchange Note is overdue, and neither the Trustee, any
Agent, nor the Company shall be affected by notice to the contrary.

SECTION 2.07. REPLACEMENT EXCHANGE NOTES.

        If any mutilated Exchange Note is surrendered to the Trustee, or the
Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Exchange Note, the Company shall issue and the
Trustee, upon the written order of the Company signed by two Officers of the
Company, shall authenticate a replacement Exchange Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if an Exchange
Note is replaced. The Company may charge for its expenses in replacing an
Exchange Note.

        Every replacement Exchange Note is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Exchange Notes duly issued hereunder.

SECTION 2.08. OUTSTANDING EXCHANGE NOTES.

        The Exchange Notes outstanding at any time are all the Exchange Notes
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation and those described in this Section 2.08 as not
outstanding. Except as set forth in Section 2.09 hereof, an Exchange Note does
not cease to be outstanding because the Company or an Affiliate of the Company
holds the Exchange Note.

        If an Exchange Note is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Exchange Note is held by a bona fide purchaser.

        If the principal amount of any Exchange Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.

        If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, by 10:00 a.m. Eastern Time on a redemption date
or maturity date, money sufficient to pay the Exchange Notes payable on that
date, then on and after that date such Exchange Notes shall be deemed to be no
longer outstanding and shall cease to accrue interest, if any.


                                       16

<PAGE>



SECTION 2.09. TREASURY EXCHANGE NOTES.

        In determining whether the Holders of the required principal amount of
Exchange Notes have concurred in any direction, waiver or consent, Exchange
Notes owned by the Company or by any Person directly or indirectly controlling
or controlled by or under direct or indirect common control with the Company,
shall be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Exchange Notes that the Trustee knows are so
owned shall be so disregarded. In connection with any such determination, the
Company agrees to notify the Trustee of the existence of any Exchange Notes
owned by the Company or any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company.

SECTION 2.10. TEMPORARY EXCHANGE NOTES.

        Until definitive Exchange Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Exchange Notes upon a
written order of the Company signed by two Officers of the Company. Temporary
Exchange Notes shall be substantially in the form of Exchange Notes but may have
variations that the Company considers appropriate for temporary Exchange Notes
and as shall be reasonably acceptable to the Trustee. Without unreasonable
delay, the Company shall prepare and the Trustee shall authenticate Exchange
Notes in exchange for temporary Exchange Notes.

        Holders of temporary Exchange Notes shall be entitled to all of the
benefits of this Indenture.

SECTION 2.11. CANCELLATION.

        The Company at any time may deliver Exchange Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Exchange Notes surrendered to them for registration of transfer, exchange or
payment. The Trustee and no one else shall cancel all Exchange Notes surrendered
for registration of transfer, exchange, payment, replacement or cancellation and
shall destroy cancelled Exchange Notes (subject to the record retention
requirement of the Exchange Act). Certification of the destruction of all
cancelled Exchange Notes shall be delivered to the Company unless the Company
directs the Trustee to return the Exchange Notes to the Company upon written
order signed by two Officers of the Company. The Company may not issue new
Exchange Notes to replace Exchange Notes that have been paid or that have been
delivered to the Trustee for cancellation.

SECTION 2.12. DEFAULTED INTEREST.

        If the Company defaults in a payment of interest on the Exchange Notes,
they shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Exchange Notes and in Section 4.01 hereof. The Company shall notify the
Trustee in writing of the amount of defaulted interest proposed to be paid on
each Exchange Note and the date of the proposed payment. The Company shall fix
or cause to be fixed each such special record date and payment date, provided
that no such special record date shall be less than 10 days prior to the related
payment date for such defaulted interest. At least 15 days before the special
record date, the Company (or, upon the written request of the Company, the
Trustee in the name and at the expense of the Company) shall mail or cause to be
mailed to Holders a notice that states the special record date, the related
payment date and the amount of such interest to be paid. Notwithstanding the
foregoing, such interest may be paid at any time in any other lawful manner not
inconsistent with the requirements

                                       17

<PAGE>



of any securities exchange on which the Exchange Notes may be listed, and upon
such notice as may be required by such exchange.


                                    ARTICLE 3
                            REDEMPTION AND PREPAYMENT

SECTION 3.01. NOTICES TO TRUSTEE.

        If the Company elects to redeem Exchange Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 45 days (unless a shorter period may be satisfactory to the Trustee)
but not more than 60 days before a redemption date, an Officers' Certificate
setting forth (i) the clause of this Indenture pursuant to which the redemption
shall occur, (ii) the redemption date, (iii) the principal amount of Exchange
Notes to be redeemed and (iv) the redemption price.

        If the Company is required to make an offer to purchase Exchange Notes
pursuant to the provisions of Section 4.13 hereof, it shall furnish to the
Trustee an Officers' Certificate setting forth (i) the Section of this Indenture
pursuant to which the purchase shall occur, (ii) the purchase date, (iii) the
principal amount of Exchange Notes to be purchased, (iv) the purchase price and
(v) a statement to the effect that a Change of Control has occurred and the
conditions set forth in Section 4.13 hereof have been satisfied, as applicable.

SECTION 3.02. SELECTION OF EXCHANGE NOTES TO BE REDEEMED.

        If less than all of the Exchange Notes are to be redeemed at any time,
the Trustee shall select the Exchange Notes to be redeemed among the Holders of
the Exchange Notes in compliance with the requirements of the principal national
securities exchange, if any, on which the Exchange Notes are listed or, if the
Exchange Notes are not so listed, to be redeemed among the Holders of Exchange
Notes on a pro rata basis, by lot or by such method as the Trustee deems fair
and appropriate. In the event of partial redemption by lot, the particular
Exchange Notes to be redeemed shall be selected, unless otherwise provided
herein, not less than 30 nor more than 60 days prior to the redemption date by
the Trustee from the outstanding Exchange Notes not previously called for
redemption.

        The Trustee shall promptly notify the Company in writing of the Exchange
Notes selected for redemption and, in the case of any Exchange Note selected for
partial redemption, the principal amount thereof to be redeemed. Exchange Notes
and portions of Exchange Notes selected shall be in amounts of $1,000 or whole
multiples of $1,000; except that if all of the Exchange Notes of a Holder are to
be redeemed, the entire outstanding amount of Exchange Notes held by such
Holder, even if not a multiple of $1,000, shall be redeemed. A new Exchange Note
in principal amount equal to the unredeemed portion thereof will be issued in
the name of the Holder thereof upon cancellation of the original Exchange Note.
On and after the redemption date, interest ceases to accrue on Exchange Notes or
portions of them called for redemption. Except as provided in this Section 3.02,
provisions of this Indenture that apply to Exchange Notes called for redemption
also apply to portions of Exchange Notes called for redemption.

SECTION 3.03. NOTICE OF REDEMPTION.

        Subject to the provisions of Section 3.09 hereof, at least 30 days but
not more than 60 days before a redemption date, the Company shall mail or cause
to be mailed, by first class mail, a notice of redemption to each Holder whose
Exchange Notes are to be redeemed at its registered address.

        The notice shall identify the Exchange Notes to be redeemed and shall
state:

                                       18

<PAGE>


            (a) the redemption date;

            (b) the redemption price;

            (c) if any Exchange Note is being redeemed in part, the portion of
      the principal amount of such Exchange Note to be redeemed and that, after
      the redemption date upon surrender of such Exchange Note, a new Exchange
      Note or Exchange Notes in principal amount equal to the unredeemed portion
      shall be issued upon cancellation of the original Exchange Note;

            (d) the name and address of the Paying Agent;

            (e) that Exchange Notes called for redemption must be surrendered to
      the Paying Agent to collect the redemption price;

            (f) that, unless the Company defaults in making such redemption
      payment, interest on Exchange Notes called for redemption ceases to accrue
      on and after the redemption date;

            (g) the paragraph of the Exchange Notes and/or Section of this
      Indenture pursuant to which the Exchange Notes called for redemption are
      being redeemed; and

            (h) that no representation is made as to the correctness or accuracy
      of the CUSIP number, if any, listed in such notice or printed on the
      Exchange Notes.

        At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 30 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.

SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.

        Once notice of redemption is mailed in accordance with Section 3.03
hereof, Exchange Notes called for redemption become irrevocably due and payable
on the redemption date at the redemption price. A notice of redemption may not
be conditional.

SECTION 3.05. DEPOSIT OF REDEMPTION OR PURCHASE PRICE.

        One Business Day prior to 10:00 a.m. Eastern Time on the redemption
date, the Company shall deposit with the Trustee or with the Paying Agent money
in immediately available funds sufficient to pay the redemption or purchase
price of and accrued interest, if any, on all Exchange Notes to be redeemed or
purchased on that date. The Trustee or the Paying Agent shall promptly return to
the Company any money deposited with the Trustee or the Paying Agent by the
Company in excess of the amounts necessary to pay the redemption or purchase
price of, and accrued interest on, all Exchange Notes to be redeemed or
purchased.

        If Exchange Notes called for redemption or tendered in a Change of
Control Offer are paid or if the Company has deposited with the Trustee or
Paying Agent money sufficient to pay the redemption or purchase price of, and
unpaid and accrued interest, if any, on all Exchange Notes to be redeemed or
purchased, on and after the applicable redemption or purchase date, interest, if
any, ceases to accrue on the Exchange Notes or the portions of Exchange Notes
called for redemption or tendered and not withdrawn in a Change of Control Offer
(regardless of whether certificates for such Exchange Notes are



                                       19

<PAGE>



actually surrendered). If an Exchange Note is redeemed or purchased on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest, if any, shall be paid to the Person in
whose name such Exchange Note was registered at the close of business on such
record date. If any Exchange Note called for redemption or subject to a Change
of Control Offer shall not be so paid upon surrender for redemption or purchase
because of the failure of the Company to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption or purchase
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case, at the rate provided in the
Exchange Notes and in Section 4.01 hereof.

SECTION 3.06. EXCHANGE NOTES REDEEMED OR PURCHASED IN PART.

        Upon surrender of an Exchange Note that is redeemed or purchased in
part, the Company shall issue and, upon the Company's written request, the
Trustee shall authenticate for the Holder at the expense of the Company a new
Exchange Note equal in principal amount to the unredeemed or unpurchased portion
of the Exchange Note surrendered.

SECTION 3.07. OPTIONAL REDEMPTION.

        (a) The Exchange Notes are not redeemable, in whole or in part, at the
Company's option prior to January 1, 2002. The Exchange Notes may be redeemed,
in whole or in part, at the option of the Company on or after January 1, 2002,
at the redemption prices specified below (expressed as a percentage of the
principal amount thereof), in each case, together with accrued and unpaid
interest, if any, thereon to the date of redemption, upon not less than 30 nor
more than 60 days' notice, if redeemed during the 12-month period beginning on
January 1 of the years indicated below: Redemption Year Rate ---- ----
                                                                   

      2002...................................................... 106.375%
      2003...................................................... 104.250%
      2004...................................................... 102.125%
      2005 and thereafter....................................... 100.000%

        (b) Notwithstanding the foregoing, during the first 36 months after the
Closing Date, the Company may, on any one or more occasions, use the net
proceeds of one or more offerings of its Class A Common Stock to redeem up to
25% of the aggregate principal amount of the Exchange Notes (whether issued in
exchange for Series A Preferred Stock or in lieu of cash interest payments) at
the redemption price of 112.750% of the principal amount thereof, plus accrued
and unpaid interest to the date of redemption; provided that, after any such
redemption, the aggregate principal amount of the Exchange Notes outstanding
must equal at least $75.0 million; and provided further, that any such
redemption shall occur within 90 days of the date of closing of such offering of
Class A Common Stock of the Company.

SECTION 3.08. MANDATORY REDEMPTION.

        Except as set forth under Sections 4.10 and 4.13 hereof, the Company
shall not be required to make mandatory redemption or sinking fund payments with
respect to the Exchange Notes.

                                       20

<PAGE>


SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.

        (a) In the event that, pursuant to Section 4.10 hereof, the Company
shall be required to commence an Asset Sale Offer, it shall follow the
procedures specified below with respect to the Holders of Exchange Notes.

        (b) The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five Business Days after the termination of the Offer Period (the "Purchase
Date"), the Company shall purchase the principal amount of Exchange Notes
required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount")
or, if less than the Offer Amount has been tendered, all Exchange Notes tendered
in response to the Asset Sale Offer. Payment for any Exchange Notes so purchased
shall be made in the same manner as interest payments are made.

        (c) The Company shall comply with any tender offer rules under the
Exchange Act which may then be applicable, including Rule 14e-1, in connection
with any offer required to be made by the Company to repurchase the Exchange
Notes as a result of an Asset Sale Offer. To the extent that the provisions of
any securities laws or regulations conflict with provisions of this Section
3.09, the Company shall comply with the applicable securities laws or
regulations and shall not be deemed to have breached its obligations hereunder
by virtue thereof.

        (d) If the Purchase Date is on or after an interest record date and on
or before the related interest payment date, any accrued and unpaid interest
shall be paid to the Person in whose name an Exchange Note is registered at the
close of business on such record date, and no additional interest shall be
payable to Holders who tender Exchange Notes pursuant to the Asset Sale Offer.

        (e) Upon the commencement of an Asset Sale Offer, the Company shall
send, by first class mail, a notice to the Trustee and each of the Holders, with
a copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Exchange Notes pursuant to the Asset
Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:

                (i) that the Asset Sale Offer is being made pursuant to this
      Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale
      Offer shall remain open;

                (ii) the Offer Amount, the purchase price and the Purchase Date;

                (iii) that any Exchange Note not tendered or accepted for
      payment shall continue to accrue interest;


                (iv) that, unless the Company defaults in making such payment,
      any Exchange Note accepted for payment pursuant to the Asset Sale Offer
      shall cease to accrue interest after the Purchase Date;

                (v) that Holders electing to have an Exchange Note purchased
      pursuant to an Asset Sale Offer may only elect to have all of such
      Exchange Note purchased and may not elect to have only a portion of such
      Exchange Note purchased;

                (vi) that Holders electing to have an Exchange Note purchased
      pursuant to any Asset Sale Offer shall be required to surrender the
      Exchange Note, with the form entitled "Option of Holder


                                       21

<PAGE>

      to Elect Purchase" on the reverse of the Exchange Note completed, or
      transfer by book-entry transfer, to the Company, a depositary, if
      appointed by the Company, or a Paying Agent at the address specified in
      the notice at least three days before the Purchase Date;

                (vii) that Holders shall be entitled to withdraw their election
      if the Company, the Depositary or the Paying Agent, as the case may be,
      receives, not later than the expiration of the Offer Period, a telegram,
      telex, facsimile transmission or letter setting forth the name of the
      Holder, the principal amount of the Exchange Note the Holder delivered for
      purchase and a statement that such Holder is withdrawing his election to
      have such Exchange Note purchased;

                (viii) that, if the aggregate principal amount of Exchange Notes
      surrendered by Holders exceeds the Offer Amount, the Company shall select
      the Exchange Notes to be purchased on a pro rata basis (with such
      adjustments as may be deemed appropriate by the Company so that only
      Exchange Notes in denominations of $1,000, or integral multiples thereof,
      shall be purchased, other than in the case of Holders whose Exchange Notes
      were purchased in whole); and

                (ix) that Holders whose Exchange Notes were purchased only in
      part shall be issued new Exchange Notes equal in principal amount to the
      unpurchased portion of the Exchange Notes surrendered (or transferred by
      book-entry transfer).

        (f) On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Exchange Notes or portions thereof tendered pursuant to the
Asset Sale Offer, or if less than the Offer Amount has been tendered, all
Exchange Notes tendered, and shall deliver to the Trustee an Officers'
Certificate stating that such Exchange Notes or portions thereof were accepted
for payment by the Company in accordance with the terms of this Section 3.09.
The Company, the Depositary or the Paying Agent, as the case may be, shall
promptly (but in any case not later than five days after the Purchase Date) mail
or deliver to each tendering Holder of Exchange Notes an amount equal to the
purchase price of the Exchange Notes tendered by such Holder of Exchange Notes
and accepted by the Company for purchase, and the Company shall promptly issue a
new Exchange Note and the Trustee, upon written request from the Company shall
authenticate and mail or deliver such new Exchange Note to such Holder of
Exchange Notes in a principal amount equal to any unpurchased portion of the
Exchange Note surrendered. Any Exchange Note not so accepted shall be promptly
mailed or delivered by the Company to the Holder of Exchange Notes thereof. The
Company shall publicly announce the results of the Asset Sale Offer on the
Purchase Date.

        (g) Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof. No repurchase of Exchange Notes under this
Section 3.09 shall be deemed to be a redemption of Exchange Notes.


                                    ARTICLE 4
                                    COVENANTS

SECTION 4.01. PAYMENT OF EXCHANGE NOTES.

        The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Exchange Notes on the dates and in the manner provided
in the Exchange Notes. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the Company,
a Subsidiary or an Affiliate of any thereof, holds as of 10:00 a.m. Eastern Time
on the due 22

<PAGE>

date money deposited by the Company in immediately available funds and
designated for and sufficient to pay all principal, premium, if any, and
interest then due.

        The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Exchange
Notes to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest (without regard to any applicable grace period) at the same rate to the
extent lawful.

SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.

        The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Exchange Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Exchange Notes and this
Indenture may be served. The Company shall give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.

        The Company may also from time to time designate one or more other
offices or agencies where the Exchange Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.

        The Company hereby designates the Corporate Trust Office of the Trustee
as one such office or agency of the Company in accordance with Section 2.03
hereof. The Trustee may resign such agency at any time by giving written notice
to the Company no later than 30 days prior to the effective date of such
resignation.

SECTION 4.03. REPORTS.

        Whether or not required by the rules and regulations of the SEC, so long
as any Exchange Notes are outstanding, the Company shall furnish to the Trustee
and to the Holders of Notes (a) all quarterly and annual financial information
that would be required to be contained in a filing with the SEC on Forms 10-Q
and 10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants and (b) all current reports
that would be required to be filed with the SEC on Form 8-K if the Company were
required to file such reports. In addition, whether or not required by the rules
and regulations of the SEC, the Company shall file a copy of all such
information and reports with the SEC for public availability (unless the SEC
will not accept such a filing) and make such information available to securities
analysts and prospective investors upon request. In addition to the financial
information required by the Exchange Act, each such quarterly and annual report
shall be required to contain "summarized financial information" (as defined in
Rule 1-02(aa)(1) of Regulation S-X under the Exchange Act) showing Adjusted
Operating Cash Flow for the Company and its Restricted Subsidiaries, on a
consolidated basis, where Adjusted Operating Cash Flow for the Company is
calculated in a manner

                                       23

<PAGE>

consistent with the manner described under the definition of "Adjusted
Operating Cash Flow" contained herein. The summarized financial information
required pursuant to the preceding sentence may, at the election of the Company,
be included in the footnotes to audited consolidated financial statements or
unaudited quarterly financial statements of the Company and shall be as of the
same dates and for the same periods as the consolidated financial statements of
the Company and its Subsidiaries required pursuant to the Exchange Act.

SECTION 4.04. COMPLIANCE CERTIFICATE.

        (a) The Company shall deliver to the Trustee, within 90 days after the
end of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest on the Exchange Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.

        (b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03 above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article Four or Article Five hereof or, if any such violation
has occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.

        (c) The Company shall, so long as any of the Exchange Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer of the Company
becoming aware of any Default or Event of Default, an Officers' Certificate
specifying such Default or Event of Default and what action the Company is
taking or proposes to take with respect thereto.

SECTION 4.05. TAXES.

        The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Exchange Notes.

SECTION 4.06. STAY, EXTENSION AND USURY LAWS.

        The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the

                                       24

<PAGE>


covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law, and covenants that it shall not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as though
no such law has been enacted.

SECTION 4.07. RESTRICTED PAYMENTS.

        (a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any payment or distribution on account of the Company's Equity Interests
(including, without limitation, any payment in connection with any merger or
consolidation involving the Company) or on account of any Qualified Subsidiary
Stock or make any payment or distribution (other than compensation paid to, or
reimbursement of expenses of, employees in the ordinary course of business) to
or for the benefit of the direct or indirect holders of the Company's Equity
Interests or the direct or indirect holders of any Qualified Subsidiary Stock in
their capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company); (ii) purchase, redeem
or otherwise acquire or retire for value any Equity Interests of the Company or
any direct or indirect parent of the Company or other Affiliate of the Company
(other than such Equity Interests owned by the Company or any of its Restricted
Subsidiaries and other than the acquisition of Equity Interests in Subsidiaries
of the Company solely in exchange for Equity Interests (other than Disqualified
Stock) of the Company); (iii) make any payment on, or purchase, redeem, defease
or otherwise acquire or retire for value any Indebtedness that is subordinated
to the Exchange Notes, except at final maturity; (iv) make any loan, advance,
capital contribution to or other investment in, or guarantee any obligation of,
any Affiliate of the Company other than a Permitted Investment; (v) forgive any
loan or advance to or other obligation of any Affiliate of the Company (other
than a loan or advance to or other obligation of a Wholly Owned Restricted
Subsidiary) which at the time it was made was not a Restricted Payment that was
permitted to be made; or (vi) make any Restricted Investment (all such payments
and other actions set forth in clauses (i) through (vi) above being collectively
referred to as "Restricted Payments"), unless, at the time of and immediately
after giving effect to such Restricted Payment:

           (A) no Default or Event of Default shall have occurred and be
      continuing or would occur as a consequence thereof; and

           (B) the Company would be permitted to incur $1.00 of additional
      Indebtedness pursuant to the Indebtedness to Adjusted Operating Cash Flow
      Ratio set forth in Section 4.09(a) hereof; and

           (C) such Restricted Payment, together with the aggregate of all other
      Restricted Payments made by the Company and its Restricted Subsidiaries
      after the Closing Date (excluding Restricted Payments permitted by clause
      (iii) of Section 4.07(b)), is less than the sum of (i) an amount equal to
      the Cumulative Operating Cash Flow for the period (taken as one accounting
      period) from the beginning of the first full month commencing after the
      Closing Date to the end of the Company's most recently ended fiscal
      quarter for which internal financial statements are available at the time
      of such Restricted Payment (the "Basket Period") less 1.4 times the
      Company's Cumulative Total Interest Expense for the Basket Period, plus
      (ii) 100% of the aggregate net cash proceeds and, in the case of proceeds
      consisting of assets constituting or used in a Permitted Business, 100% of
      the fair market value of the aggregate net proceeds other than cash
      received since the Closing Date (1) by the Company as capital
      contributions to the Company (other than from a Subsidiary) or (2) from
      the sale by the Company (other than to a Subsidiary) of its Equity
      Interests (other than Disqualified Stock), plus (iii) without duplication,
      to the extent that any Restricted Investment that was made after the
      Closing Date is sold for cash or otherwise liquidated or repaid for cash,
      the Net Proceeds 

                                       25

<PAGE>


      received by the Company or a Wholly Owned Restricted Subsidiary of the
      Company upon the sale of such Restricted Investment, plus (iv) without
      duplication, to the extent that any Unrestricted Subsidiary is designated
      by the Company as a Restricted Subsidiary, an amount equal to the fair
      market value of such Investment at the time of such designation, plus (v)
      $2.5 million.

        (b) The foregoing provisions shall not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company in exchange for, or out of the net proceeds
of, the substantially concurrent sale (other than to a Subsidiary of the
Company) of other Equity Interests of the Company (other than any Disqualified
Stock); provided that the amount of any such net proceeds that are utilized for
any such redemption, repurchase, retirement or other acquisition shall be
excluded from clause (C)(ii) of the preceding paragraph; (iii) the defeasance,
redemption or repurchase of Indebtedness with the proceeds of a substantially
concurrent issuance of Permitted Refinancing Debt in accordance with the
provisions of Section 4.09 hereof; (iv) the payment by the Company of advances
under the Split Dollar Agreement in an amount not to exceed $250,000 in any
four-quarter period; (v) the repurchase or redemption from employees of the
Company and its Subsidiaries (other than the Principal) of Capital Stock of the
Company in an amount not to exceed an aggregate of $3.0 million and (vi) cash
payments made in lieu of the issuance of additional Exchange Notes having a face
amount less than $1,000 and any cash payments representing accrued and unpaid
interest in respect thereof, not to exceed $100,000 in the aggregate in any
fiscal year.

        (c) The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) proposed
to be transferred by the Company or the applicable Restricted Subsidiary, as the
case may be, net of any liabilities proposed to be assumed by the transferee and
novated pursuant to a written agreement releasing the Company and its
Subsidiaries. Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this covenant were computed, which calculations may be
based upon the Company's latest available financial statements.

        (d) The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if such designation would not cause a Default or an
Event of Default. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries in the Subsidiary so
designated will be deemed to be Restricted Payments at the time of such
designation (valued as set forth below) and will reduce the amount available for
Restricted Payments under the first paragraph of this Section 4.07. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the fair market value of such Investments at the time of such
designation. Such designation will only be permitted only if such Restricted
Payment would be permitted at such time and if such Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.

SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.

        The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by, its
profits or (b) pay any Indebtedness owed to the Company or any of its Restricted
Subsidiaries, (ii) make loans or advances to the Company or any of its
Restricted Subsidiaries or (iii) transfer any of its properties or assets to the
Company or any of its Restricted
           


                                       26

<PAGE>

Subsidiaries, except for such encumbrances or restrictions existing under or by
reasons of (a) the terms of any Indebtedness permitted by this Indenture to be
incurred by any Subsidiary of the Company, (b) Existing Indebtedness as in
effect on the Closing Date, (c) this Indenture and the Exchange Notes, (d)
applicable law, (e) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such Indebtedness
was incurred in connection with or in anticipation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person and its Subsidiaries, or the
property or assets of the Person and its Subsidiaries, so acquired or (f) by
reason of customary non-assignment provisions in leases and other contracts
entered into in the ordinary course of business and consistent with past
practices.

SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.

        (a) The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and the
Company shall not issue any Disqualified Stock and shall not permit any of its
Subsidiaries to issue any shares of preferred stock (other than Qualified
Subsidiary Stock); provided, however, that (i) the Company may incur
Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock and
(ii) a Restricted Subsidiary of the Company may incur Indebtedness (including
Acquired Debt) or issue shares of preferred stock (including Disqualified Stock)
if, in each case, the Company's Indebtedness to Adjusted Operating Cash Flow
Ratio as of the date on which such Indebtedness is incurred or such Disqualified
Stock or preferred stock is issued would have been 7.0 to 1 or less, determined
on a pro forma basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock or preferred stock had been issued, as the case may be, as of
the date of such calculation.

        (b) The foregoing provisions shall not apply to:

            (i) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt or the issuance by such Unrestricted Subsidiaries of preferred
stock; provided, however, that if any such Indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary or any such preferred stock
becomes preferred stock (other than Qualified Subsidiary Stock) of a Restricted
Subsidiary, as the case may be, such event shall be deemed to constitute an
incurrence of Indebtedness by or an issuance of preferred stock (other than
Qualified Subsidiary Stock) of, as the case may be, a Restricted Subsidiary of
the Company;

            (ii) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness pursuant to one or more Bank Facilities, so long as
the aggregate principal amount of all Indebtedness outstanding under all Bank
Facilities does not, at the time of incurrence, exceed an amount equal to $50.0
million;

            (iii) the incurrence by the Company or any of its Restricted
Subsidiaries of the Existing Indebtedness;

            (iv) Indebtedness under the Exchange Notes (including any Exchange
Notes issued to pay interest on outstanding Exchange Notes);

            (v) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and any
of its Wholly Owned Restricted Subsidiaries;

                                       27

<PAGE>

provided, however, that (A) if the Company is the obligor on such Indebtedness,
such Indebtedness is expressly subordinated to the prior payment in full in cash
of all obligations with respect to the Exchange Notes and (B)(1) any subsequent
issuance or transfer of Equity Interests that result in any such Indebtedness
being held by a Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company and (2) any sale or other transfer of such
Indebtedness to a Person that is not either the Company or a Wholly Owned
Restricted Subsidiary of the Company shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such Restricted
Subsidiary, as the case may be;

            (vi) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the purpose
of financing all or any part of the purchase price or cost of construction or
improvement of property used in the business of the Company or such Restricted
Subsidiary, in an aggregate principal amount not to exceed $5.0 million at any
time outstanding;

            (vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Debt in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund,
Indebtedness that was permitted by this Indenture to be incurred; and

            (viii) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness (in addition to Indebtedness permitted by any other
clause of this paragraph) in an aggregate principal amount at any time
outstanding not to exceed $5.0 million.

      If an item of Indebtedness is permitted to be incurred on the basis of
Section 4.09(a) and also on the basis of one or more of clauses (i) through
(viii) above, or is permitted to be incurred on the basis of two or more of
clauses (i) through (viii) above, then the Company shall classify the basis on
which such item of Indebtedness is incurred. If an item of Indebtedness is
repaid with the proceeds of an incurrence of other Indebtedness (whether from
the same of a different creditor), the Company may classify such other
Indebtedness as having been incurred on the same basis as the Indebtedness being
repaid or on a different basis permitted under this Section 4.09. For purposes
of this Section 4.09(b), "Indebtedness" includes Disqualified Stock and
preferred stock of Subsidiaries. Accrued interest and accreted discount will not
be deemed incurrence of Indebtedness for purposes of this Section 4.09.


                                       28

<PAGE>



SECTION 4.10. ASSET SALES.

        (a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, engage in an Asset Sale unless (i) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair value (evidenced by a resolution of
the Board of Directors set forth in an Officers' Certificate delivered to the
Trustee) of the assets or Equity Interests issued or sold or otherwise disposed
of and (ii) at least 85% of the consideration therefor received by the Company
or such Restricted Subsidiary is in the form of cash; provided that the amount
of (x) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet or in the notes thereto), of the Company
or any Restricted Subsidiary (other than liabilities that are by their terms
subordinated to the Exchange Notes or any guarantee thereof) that are assumed by
the transferee of any such assets and (y) any notes or other obligations
received by the Company or any such Restricted Subsidiary from such transferee
that are immediately converted by the Company or such Restricted Subsidiary into
cash (to the extent of the cash received), shall be deemed to be cash for
purposes of this provision.

        (b) Notwithstanding the foregoing, the Company and its Restricted
Subsidiaries may engage in Asset Swaps (which shall not be deemed to be Asset
Sales for purposes of this Section 4.10); provided that, immediately after
giving effect to such Asset Swap, the Company would be permitted to incur at
least $1.00 of additional indebtedness pursuant to the Indebtedness to Adjusted
Operating Cash Flow ratio set forth in Section 4.09(a) hereof.

        (c) Within 180 days after the receipt of any Net Proceeds from an Asset
Sale, the Company or the applicable Restricted Subsidiary may, at its option,
apply such Net Proceeds (i) to permanently reduce Indebtedness outstanding
pursuant to any Senior Debt (and to permanently reduce the commitments
thereunder by a corresponding amount), (ii) to permanently reduce Indebtedness
of any of the Company's Restricted Subsidiaries or (iii) to the acquisition of
another business, the making of a capital expenditure or the acquisition of
other long-term assets, in each case, in a Permitted Business; provided,
however, that if the Company or the applicable Restricted Subsidiary enters into
a binding agreement to reinvest such Net Proceeds in accordance with this clause
(iii) within 180 days after the receipt thereof, the provisions of this Section
4.10 will be satisfied so long as such binding agreement is consummated within
one year after the receipt of such Net Proceeds. If any such legally binding
agreement to reinvest such Net Proceeds is terminated, then the Company may,
within 90 days of such termination, or within 180 days of such Asset Sale,
whichever is later, apply such Net Proceeds as provided in clauses (i), (ii) or
(iii) above (without regard to the proviso contained in clause (iii) above).
Pending the final application of any such Net Proceeds, the Company or the
applicable Restricted Subsidiary may temporarily reduce Indebtedness pursuant to
any Bank Facility or otherwise invest such Net Proceeds in any manner that is
not prohibited by this Indenture. A reduction of Indebtedness pursuant to any
Bank Facility is not "permanent" for purposes of clause (i) of this Section
4.10(c) if an amount equal to the amount of such reduction is reborrowed and
used to make an acquisition described in clause (iii) of this Section 4.10(c)
within the time period specified in this Section 4.10(c). Any Net Proceeds from
Asset Sales that are not applied or invested as provided in the first sentence
of this paragraph will be deemed to constitute "Excess Proceeds."

        (d) Within five days of each date on which the aggregate amount of
Excess Proceeds exceeds $10.0 million, the Company shall be required to make an
offer to all Holders of Exchange Notes and the holders of Pari Passu Debt, to
the extent required by the terms thereof (an "Asset Sale Offer") to purchase the
maximum principal amount of Exchange Notes and Pari Passu Debt that may be
purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus, in each case, accrued and
unpaid interest thereon, if any, to the date of purchase, in

                                       29

<PAGE>

accordance with the procedures set forth in Section 3.09 hereof or the
agreements governing Pari Passu Debt, as applicable; provided, however, that the
Company may only purchase Pari Passu Debt in an asset sale offer that was issued
pursuant to an indenture having a provision similar to this Section 4.10.

        (e) To the extent that the aggregate amount of Exchange Notes and Pari
Passu Debt tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes.

        (f) If the aggregate principal amount of Exchange Notes and Pari Passu
Debt surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Exchange Notes and Pari Passu Debt to be purchased on a
pro rata basis, based upon the principal amount thereof surrendered in such
Asset Sale Offer.

        (g) Upon completion of such offer to purchase, the amount of Excess
Proceeds shall be reset at zero.

SECTION 4.11. TRANSACTIONS WITH AFFILIATES.

        The Company shall not, and shall not permit any of its Restricted
Subsidiaries to sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make any contract, agreement, understanding, loan, advance or guarantee with,
or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (a) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person and (b) the Company delivers to
the Trustee, on behalf of the Holders, (i) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $1.0 million, a resolution of the Board of Directors
set forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (a) above and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board of Directors
and a majority of Independent Directors and (ii) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $5.0 million, an opinion as to the fairness to the
Company or such Restricted Subsidiary of such Affiliate Transaction from a
financial point of view issued by an investment banking firm of national
standing; provided that the Company shall not, and shall not permit any of its
Restricted Subsidiaries to, engage in any Affiliate Transaction involving
aggregate consideration in excess of $1.0 million at any time that there is not
at least one Independent Director on the Company's Board of Directors; and
provided further that (w) any employment agreement entered into by the Company
or any of its Restricted Subsidiaries in the ordinary course of business and
consistent with the past practice of the Company or such Restricted Subsidiary,
(x) transactions between or among the Company and/or its Restricted Subsidiaries
and (y) transactions permitted by the provisions of Section 4.07 hereof, in each
case, shall not be deemed Affiliate Transactions.

SECTION 4.12. LIENS.

        The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired, or any income or
profits therefrom, or assign or convey any right to receive income therefrom,
except Permitted Liens.


                                       30

<PAGE>



SECTION 4.13. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.

        (a) Upon the occurrence of a Change of Control, each Holder of Exchange
Notes shall have the right to require the Company to repurchase all or any part
(but not, in the case of any Holder requiring the Company to purchase less than
all of the Exchange Notes held by such Holder, any Exchange Note in principal
amount less than $1,000) of such Holder's Exchange Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the principal amount thereof plus accrued and unpaid interest, if
any, thereon to the date of purchase (the "Change of Control Payment").

        (b) Within 10 days following any Change of Control, the Company shall
mail a notice to each Holder, with a copy to the Trustee, stating: (1) a
description of the transaction or transactions that constitute the Change of
Control; (2) that the Change of Control Offer is being made pursuant to this
Section 4.13 and that all Exchange Notes tendered shall be accepted for payment;
(3) the purchase price and the purchase date, which shall be no later than 30
Business Days from the date such notice is mailed (the "Change of Control
Payment Date"); (4) that any Exchange Note not tendered shall continue to accrue
interest; (5) that, unless the Company defaults in the payment of the Change of
Control Payment, all Exchange Notes accepted for payment pursuant to the Change
of Control Offer shall cease to accrue interest after the Change of Control
Payment Date; (6) that Holders electing to have any Exchange Notes purchased
pursuant to a Change of Control Offer shall be required to surrender the
Exchange Notes, with the form entitled "Option of Holder to Elect Purchase" on
the reverse of the Exchange Notes completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the third Business Day
preceding the Change of Control Payment Date; (7) that Holders shall be entitled
to withdraw their election if the Paying Agent receives, not later than the
close of business on the second Business Day preceding the Change of Control
Payment Date, a telegram, telex, facsimile, transmission or letter setting forth
the name of the Holder, the principal amount of Exchange Notes delivered for
purchase, and a statement that such Holder is withdrawing his election to have
the Exchange Notes purchased; and (8) that Holders whose Exchange Notes are
being purchased only in part shall be issued new Exchange Notes equal in
principal amount to the unpurchased portion of the Exchange Notes surrendered,
which unpurchased portion must be equal to $1,000 in principal amount or an
integral multiple thereof. The Company shall comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of Exchange Notes in connection with a Change of Control.

        (c) On or prior to 10:00 a.m. Eastern Time on the Change of Control
Payment Date, the Company shall, to the extent lawful, (1) accept for payment
all Exchange Notes or portions thereof properly tendered pursuant to the Change
of Control Offer, (2) deposit with the Paying Agent an amount equal to the
Change of Control Payment in respect of all Exchange Notes or portions thereof
so tendered and (3) deliver or cause to be delivered to the Trustee the Exchange
Notes so accepted together with an Officers' Certificate stating the aggregate
principal amount of Exchange Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to each Holder of Exchange Notes
so tendered the Change of Control Payment for such Exchange Notes, and the
Trustee shall promptly authenticate and mail (or cause to be transferred by book
entry) to each Holder a new Exchange Note equal in principal amount to any
unpurchased portion of the Exchange Notes surrendered, if any. Prior to
complying with the provisions of this Section 4.13, but in any event within 90
days following a Change of Control, the Company shall either repay all
outstanding Senior Debt or obtain the requisite consents, if any, under all
agreements governing outstanding Senior Debt to permit the repurchase of
Exchange Notes required by this Section 4.13. The Company shall publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.


                                       31

<PAGE>


        (d) The Company shall not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth in this Indenture applicable to a Change of Control Offer made by the
Company, and purchases all Exchange Notes validly tendered and not withdrawn
under such Change of Control Offer.

SECTION 4.14. CONTINUED EXISTENCE.

        Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Restricted Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Restricted Subsidiary and (ii) the rights (charter and statutory), licenses
and franchises of the Company and any of its Restrictive Subsidiaries; provided,
however, that the Company shall not be required to preserve any such right,
license or franchise, or the corporate, partnership or other existence of any of
its Restricted Subsidiaries, if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Restricted Subsidiaries, taken as a whole, and that the loss
thereof is not adverse in any material respect to the Holders of the Exchange
Notes.

SECTION 4.15. LIMITATION ON LAYERING.

        Notwithstanding the provisions of Section 4.09 hereof, the Company shall
not incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to any Senior
Debt and senior in any respect in right of payment to the Exchange Notes.

SECTION 4.16. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY OWNED
              RESTRICTED SUBSIDIARIES.

        The Company (a) shall not, and shall not permit any Wholly Owned
Restricted Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock (other than Qualified Subsidiary Stock)
of any Wholly Owned Restricted Subsidiary of the Company to any Person (other
than the Company or a Wholly Owned Restricted Subsidiary of the Company), unless
(i) such transfer, conveyance, sale, lease or other disposition is of all the
Capital Stock of such Wholly Owned Restricted Subsidiary and (ii) the cash Net
Proceeds from such transfer, conveyance, sale, lease or other disposition are
applied in accordance with Section 4.10 hereof and (b) shall not permit any
Wholly Owned Restricted Subsidiary of the Company to issue any of its Equity
Interests (other than, Qualified Subsidiary Stock and, if necessary, shares of
its Capital Stock constituting directors' qualifying shares) to any Person other
than to the Company or a Wholly Owned Restricted Subsidiary of the Company.



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<PAGE>



                                    ARTICLE 5
                                   SUCCESSORS

SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.

        The Company shall not consolidate or merge with or into (whether or not
the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another corporation, Person or
entity unless (a) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (b) the entity or Person formed by or surviving any such consolidation
or merger (if other than the Company) or the entity or Person to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made assumes all the Obligations of the Company under the Exchange Notes
and this Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (c) immediately after such transaction no Default
or Event of Default exists; (d) the Company or the entity or Person formed by or
surviving any such consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made shall, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Indebtedness to Adjusted Operating Cash
Flow Ratio set forth in Section 4.09(a) hereof.

SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.

        Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for and may exercise every right and
power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein (so that from and after
the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Company" shall
refer instead to the successor corporation and not to the Company), and may
exercise every right and power of the Company under this Indenture with the same
effect as if such successor Person had been named as the Company herein;
provided, however, that the predecessor Company shall not be relieved from the
obligation to pay the principal of and interest on the Exchange Notes except in
the case of a sale of all of the Company's assets that meets the requirements of
Section 5.01 hereof.



                                       33

<PAGE>



                                    ARTICLE 6
                              DEFAULTS AND REMEDIES

SECTION 6.01. EVENTS OF DEFAULT.

        Each of the following constitutes an "Event of Default":

                (i) a Default by the Company in the payment of interest on the
           Exchange Notes when the same becomes due and payable and the Default
           continues for a period of 30 days (whether or not such payment is
           prohibited by Article 10 of this Indenture);

                (ii) default by the Company in the payment of the principal of
           or premium, if any, on the Exchange Notes when the same becomes due
           and payable at maturity, upon redemption or otherwise (whether or not
           such payment is prohibited by Article 10 of this Indenture);

                (iii) failure by the Company to comply with the provisions
           described under Sections 3.09, 4.07, 4.09, 4.10, 4.13 or Article 5
           hereof;

                (iv) failure by the Company for 60 days after notice to comply
           with any of its other agreements in this Indenture or the Exchange
           Notes;

                (v) default under any mortgage, indenture or instrument under
           which there may be issued or by which there may be secured or
           evidenced any Indebtedness for money borrowed by the Company or any
           of its Restricted Subsidiaries (or the payment of which is guaranteed
           by the Company or any of its Restricted Subsidiaries), whether such
           Indebtedness or Guarantee now exists, or shall be created hereafter,
           which default (a) is caused by a failure to pay principal of or
           premium, if any, or interest on such Indebtedness prior to the
           expiration of the grace period provided in such Indebtedness on the
           date of such default (a "Payment Default") or (b) results in the
           acceleration of such Indebtedness prior to its express maturity and,
           in each case, the principal amount of such Indebtedness, together
           with the principal amount of any other such Indebtedness under which
           there has been a Payment Default or the maturity of which has been so
           accelerated, aggregates $5.0 million or more;

                (vi) a final judgment or final judgments for the payment of
           money are entered by a court or courts of competent jurisdiction
           against the Company or any Restricted Subsidiary that would be a
           Significant Subsidiary and such judgment or judgments remain unpaid,
           undischarged or unstayed for a period of 60 days, provided that the
           aggregate of all such undischarged judgments exceeds $5.0 million;

                (vii) the Company, any Restricted Subsidiary that would
           constitute a Significant Subsidiary or any group of Restricted
           Subsidiaries that, taken together, would constitute a Significant
           Subsidiary pursuant to or within the meaning of Bankruptcy Law:

                      (a) commences a voluntary case,

                      (b) consents to the entry of an order for relief against
                it in an involuntary case,

                      (c) consents to the appointment of a Custodian of it or
                for all or substantially all of its property,


                                       34

<PAGE>



                      (d) makes a general assignment for the benefit of its
                creditors, or

                      (e) generally is not paying its debts as they become due;
                or

                (viii) a court of competent jurisdiction enters an order or
           decree under any Bankruptcy Law that:

                      (a) is for relief against the Company, any Restricted
                Subsidiary that would constitute a Significant Subsidiary or any
                group of Restricted Subsidiaries that, taken together, would
                constitute a Significant Subsidiary in an involuntary case;

                      (b) appoints a Custodian of the Company, any Restricted
                Subsidiary that would constitute a Significant Subsidiary, or
                any group of Restricted Subsidiaries that, taken together, would
                constitute a Significant Subsidiary or for all or substantially
                all of the property of the Company, any Restricted Subsidiary
                that would constitute a Significant Subsidiary or any group of
                Restricted Subsidiaries that, taken together, would constitute a
                Significant Subsidiary; or

                      (c) orders the liquidation of the Company, any of
                Restricted Subsidiary that would constitute a Significant
                Subsidiary or any group of Restricted Subsidiaries that, taken
                together, would constitute a Significant Subsidiary;

           and the order or decree remains unstayed and in effect for 60
           consecutive days.

        The term "Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law.

        An Event of Default shall not be deemed to have occurred under clause
(iii), (v) or (vi) until the Trustee shall have received at the Corporate Trust
Office of the Trustee written notice from the Company or any of the Holders or
unless a Responsible Officer shall have actual knowledge of such Event of
Default. A Default under clause (iv) is not an Event of Default until the
Trustee notifies the Company, or the Holders of at least 25% in principal amount
of the then outstanding Exchange Notes notify the Company and the Trustee, of
the Default and the Company does not cure the Default within 60 days after
receipt of the notice. The notice must specify the Default, demand that it be
remedied and state that the notice is a "Notice of Default."

        In the case of any Event of Default pursuant to the provisions of this
Section 6.01 occurring by reason of any action (or inaction) willfully taken (or
not taken) by or on behalf of the Company with the intention of avoiding payment
of the premium that the Company would have had to pay if the Company then had
elected to redeem the Exchange Notes pursuant to Section 3.07 hereof, an
equivalent premium shall also become and be immediately due and payable to the
extent permitted by law upon the acceleration of the Exchange Notes, anything in
this Indenture or in the Exchange Notes to the contrary notwithstanding;
provided that the Trustee shall not be under any duty to collect such premium on
behalf of the Holders until such time as Holders of at least 10% in principal
amount of the then outstanding Exchange Notes so notify the Trustee. If an Event
of Default occurs prior to January 1, 2002 by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company with the intention
of avoiding the prohibition on redemption of the Exchange Notes prior to January
1, 2002, then the premium payable for purposes of this paragraph for each of the
years beginning on January 1 of the years set forth below shall be as set forth
in the following table expressed as a percentage of the amount that

                                       35

<PAGE>



would otherwise be due but for the provisions of this sentence, plus accrued
interest, if any, to the date of payment:

      Year                                                   Percentage
      ----                                                   ----------

      1997...................................................  117.000%
      1998...................................................  114.875%
      1999...................................................  112.750%
      2000...................................................  110.625%
      2001...................................................  108.500%

SECTION 6.02. ACCELERATION.

        If any Event of Default (other than an Event of Default specified in
clause (vii) or (viii) of Section 6.01 hereof) occurs and is continuing, the
Trustee by notice to the Company, or the Holders of at least 25% in principal
amount of the then outstanding Exchange Notes by written notice to the Company
and the Trustee may declare all the Exchange Notes to be due and payable
immediately. Upon any such declaration, the Exchange Notes shall become due and
payable immediately. Notwithstanding the foregoing, if an Event of Default
specified in clause (vii) or (viii) of Section 6.01 hereof occurs with respect
to the Company, any Restricted Subsidiary that would constitute a Significant
Subsidiary or any group of Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary occurs, such an amount shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holder. The Holders of a majority in principal
amount of the then outstanding Exchange Notes by written notice to the Trustee
may rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal or interest that has become due solely because
of the acceleration) have been cured or waived.

SECTION 6.03. OTHER REMEDIES.

        If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal, premium, if any, and
interest on the Exchange Notes or to enforce the performance of any provision of
the Exchange Notes or this Indenture.

        The Trustee may maintain a proceeding even if it does not possess any of
the Exchange Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of an Exchange Note in exercising any
right or remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.

SECTION 6.04. WAIVER OF PAST DEFAULTS.

        Holders of not less than a majority in aggregate principal amount of the
then outstanding Exchange Notes by notice to the Trustee may on behalf of the
Holders of all of the Exchange Notes waive an existing Default or Event of
Default and its consequences hereunder, except a continuing Default or Event of
Default in the payment of the principal of, premium, if any, or interest on, the
Exchange Notes (including in connection with an offer to purchase) (provided,
however, that the Holders of a majority in aggregate principal amount of the
then outstanding Exchange Notes may rescind an acceleration and its
consequences, including any related payment default that resulted from such
acceleration). Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising

                                       36

<PAGE>

therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.

SECTION 6.05. CONTROL BY MAJORITY.

        Holders of a majority in principal amount of the then outstanding
Exchange Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Exchange Notes or
that may involve the Trustee in personal liability.

SECTION 6.06. LIMITATION ON SUITS.

        A Holder of an Exchange Note may pursue a remedy with respect to this
Indenture or the Exchange Notes only if:

        (a) the Holder of an Exchange Note gives to the Trustee written notice
of a continuing Event of Default;

        (b) the Holders of at least 25% in principal amount of the then
outstanding Exchange Notes make a written request to the Trustee to pursue the
remedy;

        (c) such Holder of an Exchange Note or Holders of Exchange Notes offer
and, if requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;

        (d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and

        (e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Exchange Notes do not give the Trustee a
direction inconsistent with the request.

A Holder of an Exchange Note may not use this Indenture to prejudice the rights
of another Holder of an Exchange Note or to obtain a preference or priority over
another Holder of an Exchange Note.

SECTION 6.07. RIGHTS OF HOLDERS OF EXCHANGE NOTES TO RECEIVE PAYMENT.

        Notwithstanding any other provision of this Indenture, the right of any
Holder of an Exchange Note to receive payment of principal, premium, if any, and
interest on the Exchange Note, on or after the respective due dates expressed in
the Exchange Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.

SECTION 6.08. COLLECTION SUIT BY TRUSTEE.

        If an Event of Default specified in Section 6.01(i) or (ii) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal of, premium, if any, and interest remaining unpaid on the Exchange
Notes and interest on overdue principal and, to the extent lawful, interest and
such further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.


                                       37

<PAGE>

SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.

        The Trustee is authorized to file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Exchange Notes allowed in any judicial proceedings relative to
the Company (or any other obligor upon the Exchange Notes), its creditors or its
property and shall be entitled and empowered to collect, receive and distribute
any money or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder to
make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 hereof. To the extent that the
payment of any such compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof out of the estate in any such proceeding, shall be denied
for any reason, payment of the same shall be secured by a Lien on, and shall be
paid out of, any and all distributions, dividends, money, securities and other
properties that the Holders may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Exchange
Notes or the rights of any Holder, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.

SECTION 6.10. PRIORITIES.

        If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:

        First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;

        Second: to Holders of Exchange Notes for amounts due and unpaid on the
Exchange Notes for principal, premium, if any, and interest, ratably, without
preference or priority of any kind, according to the amounts due and payable on
the Exchange Notes for principal, premium, if any, and interest, respectively;
and

        Third: to the Company or to such party as a court of competent
jurisdiction shall direct.

        The Trustee may fix a record date and payment date for any payment to
Holders of Exchange Notes pursuant to this Section 6.10.

SECTION 6.11. UNDERTAKING FOR COSTS.

        In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of an
Exchange Note

                                       38

<PAGE>

pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Exchange Notes.


                                    ARTICLE 7
                                     TRUSTEE


SECTION 7.01. DUTIES OF TRUSTEE.

        (a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.

        (b) Except during the continuance of an Event of Default:

           (i) the duties of the Trustee shall be determined solely by the
      express provisions of this Indenture and the Trustee need perform only
      those duties that are specifically set forth in this Indenture and no
      others, and no implied covenants or obligations shall be read into this
      Indenture against the Trustee; and

           (ii) in the absence of bad faith on its part, the Trustee may
      conclusively rely, as to the truth of the statements and the correctness
      of the opinions expressed therein, upon certificates or opinions furnished
      to the Trustee and conforming to the requirements of this Indenture.
      However, the Trustee shall examine the certificates and opinions to
      determine whether or not they conform to the requirements of this
      Indenture.

        (c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:

           (i) this paragraph does not limit the effect of paragraph (b) of this
      Section;

           (ii) the Trustee shall not be liable for any error of judgment made
      in good faith by a Responsible Officer, unless it is proven that the
      Trustee was negligent in ascertaining the pertinent facts; and

           (iii) the Trustee shall not be liable with respect to any action it
      takes or omits to take in good faith in accordance with a direction
      received by it pursuant to Section 6.05 hereof.

        (d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.

        (e) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holders shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.

                                       39

<PAGE>

        (f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.

SECTION 7.02. RIGHTS OF TRUSTEE.

        (a) The Trustee may conclusively rely upon any document believed by it
to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.

        (b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.

        (c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent appointed with due
care.

        (d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.

        (e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.

        (f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.

SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.

        The Trustee in its individual or any other capacity may become the owner
or pledgee of Exchange Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.

SECTION 7.04. TRUSTEE'S DISCLAIMER.

        The Trustee shall not be responsible for and makes no representation as
to the validity or adequacy of this Indenture or the Exchange Notes, it shall
not be accountable for the Company's use of the proceeds from the Exchange Notes
or any money paid to the Company or upon the Company's direction under any
provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Exchange Notes or any other document in connection with the
sale of the Exchange Notes or pursuant to this Indenture other than its
certificate of authentication.

                                       40

<PAGE>

SECTION 7.05. NOTICE OF DEFAULTS.

        If a Default or Event of Default occurs and is continuing and if a
Responsible Officer of the Trustee has actual knowledge of such Default or Event
of Default, the Trustee shall mail to Holders of Exchange Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, or interest on, any
Note, the Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interests of the Holders of the Exchange Notes.

SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE EXCHANGE NOTES.

        Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, and for so long as Exchange Notes remain outstanding,
the Trustee shall mail to the Holders of the Exchange Notes a brief report dated
as of such reporting date that complies with TIA Section 313(a) (but if no
event described in TIA Section 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by
mail all reports as required by TIA Section 313(c).

        A copy of each report at the time of its mailing to the Holders of
Exchange Notes shall be mailed to the Company and filed with the SEC and each
stock exchange on which the Exchange Notes are listed in accordance with TIA
Section 313(d). The Company shall promptly notify the Trustee when the Exchange
Notes are listed on any stock exchange.

SECTION 7.07. COMPENSATION AND INDEMNITY.

        The Company shall pay to the Trustee from time to time such compensation
for its acceptance of this Indenture and services hereunder as the Company and
Trustee have separately agreed. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee promptly upon request for all reasonable disbursements,
advances and expenses incurred or made by it in addition to the compensation for
its services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.

        The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.

        The obligations of the Company under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.


                                       41

<PAGE>

        To secure the Company's payment obligations in this Section, the Trustee
shall have a Lien prior to the Exchange Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Exchange Notes. Such Lien shall survive the satisfaction
and discharge of this Indenture.

        When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(vii) or (viii) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.

        The Trustee shall comply with the provisions of TIA Section 313(b)(2)
to the extent applicable.

SECTION 7.08. REPLACEMENT OF TRUSTEE.

        A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.

        The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of a majority in
principal amount of the then outstanding Exchange Notes may remove the Trustee
by so notifying the Trustee and the Company in writing. The Company may remove
the Trustee if:

        (a) the Trustee fails to comply with Section 7.10 hereof;

        (b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;

        (c) a Custodian or public officer takes charge of the Trustee or its
property; or

        (d) the Trustee becomes incapable of acting.

        If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Exchange Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.

        If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in principal amount of the then outstanding Exchange
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.

        If the Trustee, after written request by any Holder of an Exchange Note
who has been a Holder of an Exchange Note for at least six months, fails to
comply with Section 7.10, such Holder of an Exchange Note may petition any court
of competent jurisdiction for the removal of the Trustee and the appointment of
a successor Trustee.

        A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Exchange Notes.

                                       42

<PAGE>

The retiring Trustee shall promptly transfer all property held by it as
Trustee to the successor Trustee, provided all sums owing to the Trustee
hereunder have been paid and subject to the Lien provided for in Section 7.07
hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.

SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.

        If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.

SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.

        There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.

        This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).

SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.

        The Trustee is subject to TIA Section. 311(a), excluding any creditor
relationship listed in TIA Section. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section. 311(a) to the extent indicated therein.


                                    ARTICLE 8
                    LEGAL DEFEASANCE AND COVENANT DEFEASANCE

SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.

        The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Exchange Notes
upon compliance with the conditions set forth below in this Article 8.

SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.

        Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Exchange Notes
on the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Exchange Notes, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.05 hereof and the other Sections of this
Indenture referred to in (a) and (b) below, and to have satisfied all of its
other Obligations under such Exchange Notes and this Indenture (and the Trustee,
on demand of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall

                                       43

<PAGE>



survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of outstanding Exchange Notes to receive solely from the trust fund
described in Section 8.04 hereof, and as more fully set forth in such Section,
payments in respect of the principal of, premium, if any, and interest, if any,
on such Exchange Notes when such payments are due, (b) the Company's obligations
with respect to such Exchange Notes under Article 2 and Section 4.02 hereof, (c)
the rights, powers, trusts, duties and immunities of the Trustee hereunder and
the Company's obligations in connection therewith and (d) this Article 8.
Subject to compliance with this Article 8, the Company may exercise its option
under this Section 8.02 notwithstanding the prior exercise of its option under
Section 8.03 hereof.

SECTION 8.03. COVENANT DEFEASANCE.

        Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 3.09, 4.07, 4.08, 4.09,
4.10, 4.11, 4.12, 4.13, 4.15, 4.16 and 5.01 hereof with respect to the
outstanding Exchange Notes on and after the date the conditions set forth below
are satisfied (hereinafter, "Covenant Defeasance"), and the Exchange Notes shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Exchange Notes shall not be deemed outstanding for accounting purposes). For
this purpose, Covenant Defeasance means that, with respect to the "outstanding"
Exchange Notes, the Company may omit to comply with and shall have no liability
in respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default under Section 6.01 hereof,
but, except as specified above, the remainder of this Indenture and such
Exchange Notes shall be unaffected thereby. In addition, upon the Company's
exercise under Section 8.01 hereof of the option applicable to this Section
8.03, subject to the satisfaction of the conditions set forth in Section 8.04
hereof, Sections 6.01(iv) through 6.01(viii) hereof shall not constitute Events
of Default.

SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.

        The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Exchange Notes:

        In order to exercise either Legal Defeasance or Covenant Defeasance:

              (a) the Company must irrevocably deposit with the Trustee, in
           trust, for the benefit of the Holders of the Exchange Notes, cash in
           United States dollars, non-callable Government Securities, or a
           combination thereof, in such amounts as will be sufficient, in the
           opinion of a nationally recognized firm of independent public
           accountants, to pay the principal of, premium, if any, and interest
           on the outstanding Exchange Notes on the stated maturity or on the
           applicable redemption date, as the case may be, and the Company must
           specify whether the Exchange Notes are being defeased to maturity or
           to a particular redemption date;

              (b) in the case of an election under Section 8.02 hereof, the
           Company shall have delivered to the Trustee an Opinion of Counsel in
           the United States reasonably acceptable to the Trustee confirming
           that (i) the Company has received from, or there has been published
           by, the Internal Revenue Service a ruling or (ii) since the date of
           this Indenture, there has been a


                                       44

<PAGE>

           change in the applicable federal income tax law, in either case to
           the effect that, and based thereon such Opinion of Counsel shall
           confirm that, the Holders of the outstanding Exchange Notes will not
           recognize income, gain or loss for federal income tax purposes as a
           result of such Legal Defeasance and will be subject to federal income
           tax on the same amounts, in the same manner and at the same times as
           would have been the case if such Legal Defeasance had not occurred;

              (c) in the case of an election under Section 8.03 hereof, the
           Company shall have delivered to the Trustee an Opinion of Counsel in
           the United States reasonably acceptable to the Trustee confirming
           that the Holders of the outstanding Exchange Notes will not recognize
           income, gain or loss for federal income tax purposes as a result of
           such Covenant Defeasance and will be subject to federal income tax on
           the same amounts, in the same manner and at the same times as would
           have been the case if such Covenant Defeasance had not occurred;

              (d) no Default or Event of Default shall have occurred and be
           continuing on the date of such deposit (other than a Default or Event
           of Default resulting from the borrowing of funds to be applied to
           such deposit) or insofar as Sections 6.01(vii) or (viii) hereof are
           concerned, at any time in the period ending on the 91st day after the
           date of deposit (or greater period of time in which any such deposit
           of trust funds may remain subject to bankruptcy or insolvency laws
           insofar as those apply to the deposit by the Company);

              (e) such Legal Defeasance or Covenant Defeasance shall not result
           in a breach or violation of, or constitute a default under, any
           material agreement or instrument (other than this Indenture) to which
           the Company or any of its Subsidiaries is a party or by which the
           Company or any of its Subsidiaries is bound;

              (f) the Company shall have delivered to the Trustee an Opinion of
           Counsel to the effect that, as of the date of such opinion, (i) the
           trust funds will not be subject to the rights of holders of
           Indebtedness other than the Exchange Notes and (ii) assuming no
           intervening bankruptcy of the Company between the date of deposit and
           the 91st day (or greater period of time in which any such deposit of
           trust funds may remain subject to bankruptcy or insolvency laws
           insofar as those apply to the deposit by the Company) following the
           deposit and assuming no Holder of Exchange Notes is an insider of the
           Company, after the 91st day (or later date until which any such
           deposit of trust funds may remain subject to bankruptcy or insolvency
           laws insofar as those apply to the deposit by the Company) following
           the deposit, the trust funds will not be subject to the effects of
           any applicable bankruptcy, insolvency, reorganization or similar laws
           affecting creditors' rights generally under any applicable United
           States or state law;

              (g) the Company shall have delivered to the Trustee an Officers'
           Certificate stating that the deposit was not made by the Company with
           the intent of preferring the Holders of Exchange Notes over the other
           creditors of the Company or with the intent of defeating, hindering,
           delaying or defrauding creditors of the Company or others; and

              (h) the Company shall have delivered to the Trustee an Officers'
           Certificate and an Opinion of Counsel, each stating that all
           conditions precedent provided for or relating to the Legal Defeasance
           or the Covenant Defeasance have been complied with.

SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; 
              OTHER MISCELLANEOUS PROVISIONS.


                                       45

<PAGE>

        Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding
Exchange Notes shall be held in trust and applied by the Trustee, in accordance
with the provisions of such Exchange Notes and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as
Paying Agent) as the Trustee may determine, to the Holders of such Exchange
Notes of all sums due and to become due thereon in respect of principal,
premium, if any, and interest, but such money need not be segregated from other
funds except to the extent required by law.

        The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding
Exchange Notes.

        Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non-callable Government Securities held by it as provided
in Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

SECTION 8.06. REPAYMENT TO COMPANY.

        Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Exchange Note and remaining unclaimed for two years after
such principal, and premium, if any, or interest has become due and payable
shall be paid to the Company on its request or (if then held by the Company)
shall be discharged from such trust; and the Holder of such Exchange Note shall
thereafter, as a secured creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.

SECTION 8.07. REINSTATEMENT.

        If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the obligations of the Company under this Indenture and the
Exchange Notes shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying
Agent is permitted to apply all such money in accordance with Section 8.02 or
8.03 hereof, as the case may be; provided, however, that, if the Company makes
any payment of principal of, premium, if any, or interest on any Exchange Note
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Exchange Notes to receive such payment from
the money held by the Trustee or Paying Agent.

                                       46

<PAGE>

                                    ARTICLE 9
                        AMENDMENT, SUPPLEMENT AND WAIVER

SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF EXCHANGE NOTES.

        Notwithstanding Section 9.02 of this Indenture, the Company and the
Trustee may amend or supplement this Indenture or the Exchange Notes without the
consent of any Holder of an Exchange Note:

        (a) to cure any ambiguity, defect or inconsistency;

        (b) to provide for uncertificated Exchange Notes in addition to or in
      place of certificated Exchange Notes;

        (c) to provide for the assumption of the Company's obligations to
      Holders of Exchange Notes in the case of a merger or consolidation
      pursuant to Article 5 hereof, as applicable;

        (d) to make any change that would provide any additional rights or
      benefits to the Holders of Exchange Notes or that does not adversely
      affect the legal rights hereunder of any such Holder; or

        (e) to comply with the requirements of the SEC in order to effect or
      maintain the qualification of this Indenture under the TIA.

        Upon the request of the Company accompanied by a resolution of the Board
of Directors of the Company authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Company in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.

SECTION 9.02. WITH CONSENT OF HOLDERS OF EXCHANGE NOTES.

        Except as provided below in this Section 9.02, the Company and the
Trustee may amend or supplement this Indenture and the Exchange Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the Exchange Notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, Exchange Notes), and, subject to Sections 6.04 and 6.07
hereof, any existing Default or Event of Default (other than a Default or Event
of Default in the payment of the principal of, premium, if any, or interest on
the Exchange Notes) or compliance with any provision of this Indenture or the
Exchange Notes may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Exchange Notes (including consents
obtained in connection with a purchase of, or tender offer or exchange offer for
the Exchange Notes). Any amendment to the provisions of Article 10 hereof
including the related definitions will require the consent of the Holders of at
least 75% in aggregate principal amount of the Exchange Notes then outstanding
if such amendment would adversely affect the rights of Holders of Exchange
Notes.

        Upon the request of the Company accompanied by a resolution of the Board
of Directors of the Company authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Exchange Notes as
aforesaid, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the

                                       47

<PAGE>

Trustee shall join with the Company in the execution of such amended or
supplemental Indenture unless such amended or supplemental Indenture affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise, in
which case the Trustee may in its discretion, but shall not be obligated to,
enter into such amended or supplemental Indenture.

        It shall not be necessary for the consent of the Holders of Exchange
Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.

        After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders of Exchange Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the
Holders of a majority in aggregate principal amount of the Exchange Notes then
outstanding may waive compliance in a particular instance by the Company with
any provision of this Indenture or the Exchange Notes. However, without the
consent of each Holder affected, an amendment or waiver may not (with respect to
any Exchange Notes held by a non-consenting Holder):

                (a) reduce the principal amount of Exchange Notes whose Holders
           must consent to an amendment, supplement or waiver;

                (b) reduce the principal of or change the fixed maturity of any
           Exchange Note or alter the provisions with respect to the redemption
           of the Exchange Notes (other than provisions relating to Sections
           3.09, 4.10 and 4.13 hereof);

                (c) reduce the rate of or change the time for payment of
           interest, including default interest, on any Exchange Note;

                (d) waive a Default or Event of Default in the payment of
           principal of or premium, if any, or interest on the Exchange Notes
           (except a rescission of acceleration of the Exchange Notes by the
           Holders of a majority in aggregate principal amount of the Exchange
           Notes and a waiver of the payment default that resulted from such
           acceleration);

                (e) make any Exchange Note payable in money other than that
           stated in the Exchange Notes;

                (f) make any change in the provisions of this Indenture relating
           to waivers of past Defaults or the rights of Holders of Exchange
           Notes to receive payments of principal of or premium, if any, or
           interest on the Exchange Notes;

                (g) waive a redemption payment with respect to any Exchange Note
           (other than a payment required by the provisions of Section 3.09,
           4.10 or 4.13 hereof); or


                (h) make any change in Section 6.04 or 6.07 hereof or in the
           foregoing amendment and waiver provisions.


                                       48

<PAGE>

SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.

        Every amendment or supplement to this Indenture or the Exchange Notes
shall be set forth in a amended or supplemental Indenture that complies with the
TIA as then in effect.

SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.

        Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder of an Exchange Note is a continuing consent by the Holder of an
Exchange Note and every subsequent Holder of an Exchange Note or portion of an
Exchange Note that evidences the same debt as the consenting Holder's Exchange
Notes, even if notation of the consent is not made on any Exchange Notes.
However, any such Holder of an Exchange Note or subsequent Holder of an Exchange
Note may revoke the consent as to its Exchange Notes if the Trustee receives
written notice of revocation before the date the waiver, supplement or amendment
becomes effective. An amendment, supplement or waiver becomes effective in
accordance with its terms and thereafter binds every Holder.

SECTION 9.05. NOTATION ON OR EXCHANGE OF EXCHANGE NOTES.

        The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Exchange Notes thereafter authenticated. The Company
in exchange for all Exchange Notes may issue and the Trustee shall authenticate
new Exchange Notes that reflect the amendment, supplement or waiver.

        Failure to make the appropriate notation or to issue a new Exchange
Notes shall not affect the validity and effect of such amendment, supplement or
waiver.

SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.

        The Trustee shall sign any amendment or supplemental Indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental Indenture until its Board
of Directors approves it. If it does, the Trustee may, but need not, sign it. In
signing or refusing to sign such amendment or supplemental Indenture, the
Trustee shall be entitled to receive and, subject to Section 7.01 hereof, shall
be fully protected in relying upon, an Officers' Certificate and an Opinion of
Counsel as conclusive evidence that such amendment or supplemental Indenture is
authorized or permitted by this Indenture, that it is not inconsistent herewith,
and that it will be valid and binding upon the Company in accordance with its
terms.

                                   ARTICLE 10
                                  SUBORDINATION

SECTION 10.01. AGREEMENT TO SUBORDINATE.

        The Company agrees, and each Holder by accepting an Exchange Note
agrees, that the Indebtedness evidenced by the Exchange Notes is subordinated in
right of payment, to the extent and in the manner provided in this Article 10,
to the prior payment in full of all Senior Debt, whether outstanding on the date
hereof or hereafter created, incurred, assumed or guaranteed, and that the
subordination is for the benefit of the holders of Senior Debt.

                                       49

<PAGE>

SECTION 10.02. CERTAIN DEFINITIONS.

        "Designated Senior Debt" means any Senior Debt permitted under this
Indenture, the principal amount of which is $10.0 million or more and that has
been designated by the Company as "Designated Senior Debt."

        A "distribution" may consist of cash, securities or other property, by
set-off or otherwise.

        "Representative" means the indenture trustee or other trustee, agent or
representative for any Senior Debt.

        "Senior Bank Debt" means any Indebtedness of the Company (including
letters of credit) outstanding under, and any other Obligations of the Company
with respect to, Bank Facilities, to the extent that any such Indebtedness and
other Obligations are permitted by this Indenture to be incurred.

        "Senior Debt" means (a) the Senior Bank Debt (to the extent it
constitutes Indebtedness of the Company) and (b) any other Indebtedness of the
Company that is permitted to be incurred by the Company under this Indenture,
unless the instrument under which such Indebtedness is incurred expressly
provides that it is on a parity with or subordinated in right of payment to the
Exchange Notes. Notwithstanding anything to the contrary in the foregoing,
Senior Debt will not include (i) any liability for federal, state, local or
other taxes owed or owing by the Company, (ii) any Indebtedness of the Company
to any of its Subsidiaries or other Affiliates, (iii) any trade payables or (iv)
any Indebtedness that is incurred in violation of this Indenture.

SECTION 10.03. LIQUIDATION; DISSOLUTION; BANKRUPTCY.

        Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, or
in an assignment for the benefit of creditors or any marshalling of the
Company's assets and liabilities:

        (1) holders of Senior Debt shall be entitled to receive payment in full
      of all Obligations due in respect of such Senior Debt (including interest
      after the commencement of any such proceeding at the rate specified in the
      applicable Senior Debt, whether or not an allowable claim) before the
      Holders shall be entitled to receive any payment with respect to the
      Exchange Notes (except that Holders may receive (i) securities that are
      subordinated at least to the same extent as the Exchange Notes to (a)
      Senior Debt and (b) any securities issued in exchange for Senior Debt and
      (ii) payments made from any defeasance trust created pursuant to Section
      8.01 hereof); and

        (2) until all Obligations with respect to Senior Debt (as provided in
      subsection (1) above) are paid in full, any distribution to which the
      Holders would be entitled but for this Article 10 shall be made to holders
      of Senior Debt (except that Holders may receive (i) securities that are
      subordinated at least to the same extent as the Exchange Notes to (a)
      Senior Debt and (b) any securities issued in exchange for Senior Debt and
      (ii) payments made from any defeasance trust created pursuant to Section
      8.01 hereof), as their interests may appear.

SECTION 10.04. DEFAULT ON DESIGNATED SENIOR DEBT.

        (a) The Company may not make any payment or distribution upon or in
respect of the Exchange Notes (other than (1) securities that are subordinated
at least to the same extent as the Exchange Notes

                                       50

<PAGE>

to (A) Senior Debt and (B) any securities issued in exchange for Senior Debt and
(2) payments made from any defeasance trust created pursuant to Section 8.01
hereof) until all principal and other Obligations with respect to the Senior
Debt have been paid in full if:

        (i) a default in the payment of the principal of, premium, if any, or
      interest on Designated Senior Debt occurs and is continuing beyond any
      applicable grace period in the agreement, indenture or other document
      governing such Designated Senior Debt; or

        (ii) a default, other than a default specified in Section 10.04(a)(i)
      hereof, on Designated Senior Debt occurs and is continuing with respect to
      Designated Senior Debt that then permits holders of the Designated Senior
      Debt as to which such default relates to accelerate its maturity and the
      Trustee receives a notice of such default (a "Payment Blockage Notice")
      from the Company or the holders of any Designated Senior Debt who may give
      it pursuant to Section 10.12 hereof. If the Trustee receives any such
      Payment Blockage Notice, no subsequent Payment Blockage Notice shall be
      effective for purposes of this Section 10.04 unless and until (I) at least
      360 days shall have elapsed since the effectiveness of the immediately
      prior Payment Blockage Notice and (II) all scheduled payments of
      principal, premium, if any, and interest on the Exchange Notes that have
      come due (other than by reason of acceleration) have been paid in full in
      cash. No default described in this paragraph (ii) that existed or was
      continuing on the date of delivery of any Payment Blockage Notice to the
      Trustee shall be, or be made, the basis for a subsequent Payment Blockage
      Notice.

        (b) The Company may and shall resume payments on the Exchange Notes

        (i) in the case of a default described in Section 10.04(a)(i) hereof,
      upon the date on which the default is cured or waived and

        (ii) in the case of a default referred to in Section 10.04(a)(ii)
      hereof, the earlier of (A) the date on which such default is cured or
      waived or (B) 179 days after the date on which the applicable Payment
      Blockage Notice is received, unless the maturity of any Designated Senior
      Debt has been accelerated

if this Article 10 otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.

SECTION 10.05. ACCELERATION OF EXCHANGE NOTES.

        If payment of the Exchange Notes is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Debt of the
acceleration.

SECTION 10.06. WHEN DISTRIBUTION MUST BE PAID OVER.

        In the event that the Trustee or any Holder receives any payment of any
Obligations with respect to the Exchange Notes at a time when a Responsible
Officer of the Trustee or such Holder, as applicable, has actual knowledge that
such payment is prohibited by Section 10.04 hereof, such payment shall be held
by the Trustee or such Holder, in trust for the benefit of, and shall be paid
forthwith over and delivered, upon written request, to, the holders of Senior
Debt as their interests may appear or their Representative under the indenture
or other agreement (if any) pursuant to which Senior Debt may have been issued,
as their respective interests may appear, for application to the payment of all
Obligations with respect to Senior Debt remaining unpaid to the extent necessary
to pay such Obligations in full in accordance with


                                       51

<PAGE>

their terms, after giving effect to any concurrent payment or distribution to or
for the holders of Senior Debt.

        With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 10, and no implied covenants or obligations with respect
to the holders of Senior Debt shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or the Company
or any other Person money or assets to which any holders of Senior Debt shall be
entitled by virtue of this Article 10, except if such payment is made as a
result of the willful misconduct or gross negligence of the Trustee.

SECTION 10.07. NOTICE BY COMPANY.

        The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Exchange Notes to violate this Article 10, but failure to
give such notice shall not affect the subordination of the Exchange Notes to the
Senior Debt as provided in this Article 10.

SECTION 10.08. SUBROGATION.

        After all Senior Debt is paid in full and until the Exchange Notes are
paid in full, Holders shall be subrogated (equally and ratably with all other
Pari Passu Debt) to the rights of holders of Senior Debt to receive
distributions applicable to Senior Debt to the extent that distributions
otherwise payable to the Holders have been applied to the payment of Senior
Debt. A distribution made under this Article to holders of Senior Debt that
otherwise would have been made to Holders is not, as between the Company and
Holders, a payment by the Company on the Senior Debt.

SECTION 10.09. RELATIVE RIGHTS.

        This Article defines the relative rights of Holders and holders of
Senior Debt. Nothing in this Indenture shall:

        (1) impair, as between the Company and Holders, the obligation of the
      Company, which is absolute and unconditional, to pay principal of and
      interest on the Exchange Notes in accordance with their terms;

        (2) affect the relative rights of Holders and creditors of the Company
      other than their rights in relation to holders of Senior Debt; or

        (3) prevent the Trustee or any Holder from exercising its available
      remedies upon a Default or Event of Default, subject to the rights of
      holders and owners of Senior Debt to receive distributions and payments
      otherwise payable to Holders.

        If the Company fails because of this Article to pay principal of or
interest on an Exchange Note on the due date, the failure is still a Default or
Event of Default.

                                       52

<PAGE>


SECTION 10.10. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.

        No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness evidenced by the Exchange Notes shall be impaired by any act or
failure to act by the Company or any Holder or by the failure of the Company or
any Holder to comply with this Indenture.

SECTION 10.11. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.

        Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.

        Upon any payment or distribution of assets of the Company referred to in
this Article 10, the Trustee and the Holders shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 10.

SECTION 10.12. RIGHTS OF TRUSTEE AND PAYING AGENT.

        Notwithstanding the provisions of this Article 10 or any other provision
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Exchange Notes, unless the Trustee shall have received
at its Corporate Trust Office at least five Business Days prior to the date of
such payment written notice of facts that would cause the payment of any
Obligations with respect to the Exchange Notes to violate this Article. Only the
Company or a Representative may give the notice. Nothing in this Article 10
shall impair the claims of, or payments to, the Trustee under or pursuant to
Section 7.07 hereof.

        The Trustee in its individual or any other capacity may hold Senior Debt
with the same rights it would have if it were not Trustee. Any Agent may do the
same with like rights.

SECTION 10.13. AUTHORIZATION TO EFFECT SUBORDINATION.

        Each Holder of an Exchange Note by the Holder's acceptance thereof
authorizes and directs the Trustee on the Holder's behalf to take such action as
may be necessary or appropriate to effectuate the subordination as provided in
this Article 10, and appoints the Trustee to act as the Holder's
attorney-in-fact for any and all such purposes.

SECTION 10.14. AMENDMENTS.

        The provisions of this Article 10 shall not be amended or modified
without the written consent of the holders of all Senior Debt.




                                       53

<PAGE>

                                   ARTICLE 11
                                  MISCELLANEOUS

SECTION 11.01. TRUST INDENTURE ACT CONTROLS.

        If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA Section 318(c), the imposed duties shall control.

SECTION 11.02. NOTICES.

        Any notice or communication by the Company or the Trustee to the others
is duly given if in writing and delivered in Person or mailed by first class
mail (registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the others' address:

        If to the Company:

                Pegasus Communications Corporation
                c/o Pegasus Communications Management Company
                5 Radnor Corporate Center, Suite 454
                100 Matsonford Road
                Radnor, PA 19087
                Telecopier No.:  (610) 341-1835
                Attention:  Marshall W. Pagon

        With a copy to:

                Drinker Biddle & Reath
                PNB Building, 11th Floor
                1345 Chestnut Street
                Philadelphia, PA 19107
                Telecopier No.:  (215) 988-2757
                Attention:  Michael B. Jordan, Esq.

        If to the Trustee:

                First Union National Bank of North Carolina
                230 S. Tryon Street
                Charlotte, NC  28288-1153
                Telecopier No.:  (704) 374-6114
                Attention:  Client Service Group

        With a copy to:

                First Union National Bank
                123 South Broad Street
                PA 1249
                Philadelphia, PA 19109
                Telecopier No.:  (215) 985-7290
                Attention:  Corporate Trust Administration

                                       54

<PAGE>


        The Company or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.

        All notices and communications (other than those sent to Holders) shall
be deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.

        Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA Section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.

        If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.

        If the Company mails a notice or communication to Holders, it shall mail
a copy to the Trustee and each Agent at the same time.

SECTION 11.03. COMMUNICATION BY HOLDERS OF EXCHANGE NOTES WITH OTHER HOLDERS OF
               EXCHANGE NOTES.

        Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Exchange Notes.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).

SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.

        Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:

        (a) an Officers' Certificate in form and substance reasonably
      satisfactory to the Trustee (which shall include the statements set forth
      in Section 11.05 hereof) stating that, in the opinion of the signers, all
      conditions precedent and covenants, if any, provided for in this Indenture
      relating to the proposed action have been satisfied; and

        (b) an Opinion of Counsel in form and substance reasonably satisfactory
      to the Trustee (which shall include the statements set forth in Section
      11.05 hereof) stating that, in the opinion of such counsel, all such
      conditions precedent and covenants have been satisfied.

SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.

        Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA
Section 314(e) and shall include:


                                       55

<PAGE>

        (a) a statement that the Person making such certificate or opinion has
      read such covenant or condition;

        (b) a brief statement as to the nature and scope of the examination or
      investigation upon which the statements or opinions contained in such
      certificate or opinion are based;

        (c) a statement that, in the opinion of such Person, he or she has made
      such examination or investigation as is necessary to enable him to express
      an informed opinion as to whether or not such covenant or condition has
      been satisfied; and

        (d) a statement as to whether or not, in the opinion of such Person,
      such condition or covenant has been satisfied.

SECTION 11.06. RULES BY TRUSTEE AND AGENTS.

        The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.

SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND\
               STOCKHOLDERS.

        No past, present or future director, officer, employee, incorporator or
stockholder of the Company, as such, shall have any liability for any
obligations of the Company under the Exchange Notes, this Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Exchange Notes by accepting an Exchange Note waives and
releases all such liability. The waiver and release are part of the
consideration for issuance of the Exchange Notes.

SECTION 11.08. GOVERNING LAW.

        THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE AND THE EXCHANGE NOTES.

SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.

        This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.

SECTION 11.10. SUCCESSORS.

        All agreements of the Company in this Indenture and the Exchange Notes
shall bind its respective successors. All agreements of the Trustee in this
Indenture shall bind its successors.

SECTION 11.11. SEVERABILITY.

        In case any provision in this Indenture or in the Exchange Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.


                                       56

<PAGE>

SECTION 11.12. COUNTERPART ORIGINALS.

        The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.

SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.

        The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.


                         [Signatures on following page]

                                       57

<PAGE>


                                   SIGNATURES


         IN WITNESS WHEREOF, the parties have executed this Indenture as of the
date first written above.

                                            Very truly yours,


                                            PEGASUS COMMUNICATIONS CORPORATION



                                            By: ________________________________
                                            Name:
                                            Title:



FIRST UNION NATIONAL BANK


By: _______________________________
Name:
Title:



<PAGE>




                                    EXHIBIT A
                                 (Face of Note)

               12.75% Senior Subordinated Exchange Notes due 2007

                                                            CUSIP:

No.                                                         $______________


                       Pegasus Communications Corporation

promises to pay to ________________ or registered assigns, the principal sum of
__________________ Dollars on January 1, 2007.

                      Interest Payment Dates: January 1 and July 1

                      Record Dates:  December 15 and June 15


                                        Dated:

                                        PEGASUS COMMUNICATIONS CORPORATION

                                        By:______________________________
                                           Name:
                                           Title:





This is one of the Exchange 
Notes referred to in the 
within-mentioned Indenture:

FIRST UNION NATIONAL BANK,
as Trustee

By: __________________________________
    Authorized Officer

                                       A-1

<PAGE>



                                 (Back of Note)

               121.75% Senior Subordinated Exchange Notes due 2007

      Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated. The terms of the
Exchange Notes set forth below are not complete and are qualified in their
entirety by reference to the Indenture.

      1. INTEREST. Pegasus Communications Corporation, a Delaware corporation
(the "Company") promises to pay interest on the principal amount of this
Exchange Note at 12.75% per annum from the date hereof until maturity. The
Company will pay interest semi-annually on January 1 and July 1 of each year, or
if any such day is not a Business Day, on the next succeeding Business Day (each
an "Interest Payment Date"). Interest will be payable in cash, except that on
each Interest Payment Date occurring on or prior to January 1, 2002, interest
may be paid, at the Company's option, by the issuance of additional Exchange
Notes having an aggregate principal amount equal to the amount of such interest.
The issuance of such additional Exchange Notes will constitute "payment" of the
related interest for all purposes of the Indenture. Interest on the Exchange
Notes will accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from the date of issuance; provided that if there
is no existing Default in the payment of interest, and if this Exchange Note is
authenticated between a record date referred to on the face hereof and the next
succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date. The Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
principal and premium, if any, from time to time on demand at a rate that is 1%
per annum in excess of the rate then in effect; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest (without regard to any applicable grace periods) from
time to time on demand at the same rate to the extent lawful. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.

      2. METHOD OF PAYMENT. The Company will pay interest on the Exchange Notes
(except defaulted interest) to the Persons who are registered Holders of
Exchange Notes at the close of business on the December 15 or June 15 next
preceding the Interest Payment Date, even if such Exchange Notes are cancelled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
Any such interest installment not punctually paid or duly provided for shall
forthwith cease to be payable to the registered Holders on such Interest Payment
Date, and may be paid to the registered Holders at the close of business on a
special interest payment date to be fixed by the Company for the payment of such
defaulted interest, notice whereof shall be given to the registered Holders not
less than 15 days prior to such special interest payment date, or may be paid at
any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Exchange Notes may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in the
Indenture. The Exchange Notes will be payable as to principal, premium,
interest, if any, at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option of
the Company, payment of interest, if any, may be made by check mailed to the
Holders at their addresses set forth in the register of Holders, and provided
that payment by wire transfer of immediately available funds will be required
with respect to principal of and interest and premium, if any, on, all global
Exchange Notes and all other Exchange Notes the Holders of which shall have
provided wire transfer instructions to the Company or the Paying Agent. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.


                                       A-2

<PAGE>

      3. PAYING AGENT AND REGISTRAR. Initially, First Union National Bank, the
Trustee under the Indenture, will act as Paying Agent and Registrar. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company may act in any such capacity.

      4. INDENTURE. The Company issued the Exchange Notes under an Indenture
dated as of ______________ (the "Indenture") between the Company and the
Trustee. The terms of the Exchange Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"). The Exchange
Notes are subject to all such terms, and Holders are referred to the Indenture
and the TIA for a statement of such terms. The Exchange Notes are general
obligations of the Company limited to $100,000,000 in aggregate principal
amount, on outstanding Exchange Notes as set forth in Paragraph 2 hereof.

      5. OPTIONAL REDEMPTION.

         The Exchange Notes are not redeemable at the Company's option prior to
January 1, 2002. Thereafter, the Exchange Notes will be subject to redemption at
the option of the Company, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest, if any,
thereon to the applicable redemption date, if redeemed during the twelve-month
period beginning on January 1 of the years indicated below:


         Year                                                 Redemption Rate
         ----                                                 ---------------

         2002......................................................  106.375%
         2003......................................................  104.250%
         2004......................................................  102.125%
         2005 and thereafter........................................  100.00%

           (b) Notwithstanding the foregoing, during the first 36 months after
the Closing Date, the Company may, on any one or more occasions, use the net
proceeds of one or more offerings of its Class A Common Stock to redeem up to
25% of the aggregate principal amount of the Exchange Notes (whether issued in
exchange for Series A Preferred Stock or in lieu of cash interest payments) at
the redemption price of 112.750% of the principal amount thereof, plus accrued
and unpaid interest to the date of redemption; provided that, after any such
redemption, the aggregate principal amount of the Exchange Notes outstanding
must equal at least $75.0 million; and provided further, that any such
redemption shall occur within 90 days of the date of closing of such offering of
Class A Common Stock of the Company.

      6. MANDATORY REDEMPTION. Except as set forth in Paragraph 7 below, the
Company shall not be required to make mandatory redemption or sinking fund
payments with respect to the Exchange Notes.

      7. REPURCHASE AT OPTION OF HOLDER.

           (a) Upon the occurrence of a Change of Control, each Holder of
Exchange Notes shall have the right to require the Company to repurchase all or
any part (but not, in the case of any Holder requiring the Company to purchase
less than all of the Exchange Notes held by such Holder, any Exchange Note in
principal amount less than $1,000) of such Holder's Exchange Notes pursuant to
an offer (the "Change of Control Offer") at an offer price equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest, if any,
thereon to the date of purchase (the "Change of Control

                                       A-3

<PAGE>

Payment"). Within 10 days following any Change of Control, the Company shall
mail a notice to each Holder setting forth the procedures governing the Change
of Control Offer as required by the Indenture.

           (b) If the Company or any Restricted Subsidiary consummates any Asset
Sale, within five days of each date on which the aggregate amount of Excess
Proceeds exceeds $10.0 million, the Company shall make an offer to all Holders
of Exchange Notes and the holders of Pari Passu Debt, to the extent required by
the terms thereof (an "Asset Sale Offer"), to purchase the maximum principal
amount of Exchange Notes and Pari Passu Debt that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus, in each case, accrued and unpaid interest
thereon, if any, to the date of purchase, in accordance with the procedures set
forth in Section 3.09 of the Indenture or the agreements governing Pari Passu
Debt, as applicable; provided, however, that the Company may only purchase Pari
Passu Debt in an Asset Sale Offer that was issued pursuant to an indenture
having a provision substantially similar to the Asset Sale Offer provision
contained in the Indenture. To the extent that the aggregate amount of Exchange
Notes and Pari Passu Debt tendered pursuant to an Asset Sale Offer is less than
the Excess Proceeds, the Company may use any remaining Excess Proceeds for
general corporate purposes. If the aggregate principal amount of Exchange Notes
and Pari Passu Debt surrendered exceeds the amount of Excess Proceeds, the
Trustee shall select the Exchange Notes and Pari Passu Debt to be purchased on a
pro rata basis, based upon the principal amount thereof tendered in such Asset
Sale Offer. Upon completion of such offer to purchase, the amount of Excess
Proceeds shall be reset at zero. Holders of Notes that are the subject of an
Asset Sale Offer will receive notice of the Asset Sale Offer from the Company
prior to any related purchase date setting forth the procedures relating to the
offer as required by the Indenture and may elect to have such Notes purchased by
completing the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Exchange Notes.

      8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Exchange Notes are to be redeemed at its registered address. Exchange Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Exchange Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Exchange
Notes or portions thereof called for redemption.

      9. SUBORDINATION. Each Holder by accepting an Exchange Note agrees that
the payment of principal of, premium, if any, and interest on the Exchange Notes
is subordinated in right of payment, to the extent and in the manner provided in
Article 10 of the Indenture, to the prior payment in full of all Senior Debt
(whether outstanding on the date of the Indenture or thereafter incurred), and
that the subordination is for the benefit of the holders of Senior Debt.

      10. DENOMINATIONS, TRANSFER, EXCHANGE. The Exchange Notes are in
registered form without coupons in all appropriate denominations. The transfer
of Exchange Notes may be registered and Exchange Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not transfer or exchange any
Exchange Note selected for redemption, except for the unredeemed portion of any
Exchange Note being redeemed in part. Also, it need not transfer or exchange any
Exchange Note for a period of 15 Business Days before a selection of Exchange
Notes to be redeemed or during the period between a record date and the
corresponding Interest Payment Date.


                                       A-4

<PAGE>

      11. PERSONS DEEMED OWNERS. The registered Holder of an Exchange Note may
be treated as its owner for all purposes.

      12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture or the Exchange Notes may be amended or supplemented with the consent
of the Holders of at least a majority in principal amount of the then
outstanding Exchange Notes, and, subject to Sections 6.04 and 6.07 of the
Indenture, any existing default or compliance with any provision of the
Indenture or the Exchange Notes may be waived with the consent of the Holders of
a majority in principal amount of the then outstanding Exchange Notes. Without
the consent of any Holder of an Exchange Note, the Indenture or the Exchange
Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Exchange Notes in addition to or in
place of certificated Exchange Notes, to provide for the assumption of the
Company's obligations to Holders of the Exchange Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Exchange Notes or that does not adversely affect
the legal rights under the Indenture of any such Holder, or to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the TIA. Any amendment to the provisions of Article 10 of the
Indenture including, the related definitions will require the consent of the
Holders of at least 75% in aggregate principal amount of the Exchange Notes then
outstanding if such amendment would adversely affect the rights of Holders of
Exchange Notes.

      13. DEFAULTS AND REMEDIES. Events of Default include: (i) a default by the
Company in the payment of interest on the Exchange Notes when the same becomes
due and payable and the Default continues for a period of 30 days (whether or
not such payment is prohibited by Article 10 of the Indenture); (ii) default by
the Company in the payment of the principal of or premium, if any, on the
Exchange Notes when the same becomes due and payable at maturity, upon
redemption or otherwise (whether or not such payment is prohibited by Article 10
of the Indenture); (iii) failure by the Company to comply with the provisions
described under Sections 3.09, 4.07, 4.09, 4.10, 4.13 or Article 5 of the
Indenture; (iv) failure by the Company for 60 days after notice to comply with
any of its other agreements in the Indenture or the Exchange Notes; (v) default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Indebtedness for money borrowed
by the Company or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Restricted Subsidiaries), whether such
Indebtedness or Guarantee now exists, or shall be created hereafter, which
default (a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a "Payment Default")
or (b) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of such Indebtedness, together
with the principal amount of any other such Indebtedness under which there has
been a Payment Default or the maturity of which has been so accelerated,
aggregates $5.0 million or more; (vi) a final judgment or final judgments for
the payment of money are entered by a court or courts of competent jurisdiction
against the Company or any Restricted Subsidiary that would be a Significant
Subsidiary and such judgment or judgments remain unpaid, undischarged or
unstayed for a period of 60 days; provided that the aggregate of all such
undischarged judgments exceeds $5.0 million; (vii) certain events of bankruptcy
or insolvency with respect to the Company, any Restricted Subsidiary that would
constitute a Significant Subsidiary or any group of Restricted Subsidiaries
that, taken together, would constitute a Significant Subsidiary. If any Event of
Default occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Exchange Notes may declare all the
Exchange Notes to be due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Exchange Notes will become due and payable without
further action or notice. Holders may not enforce the Indenture or the Exchange
Notes except as provided in the Indenture. Subject to certain limitations,

                                       A-5

<PAGE>

Holders of a majority in principal amount of the then outstanding Exchange Notes
may direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Exchange Notes notice of any continuing Default or
Event of Default (except a Default or Event of Default relating to the payment
of principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the
Exchange Notes then outstanding by notice to the Trustee may on behalf of the
Holders of all of the Exchange Notes waive any existing Default or Event of
Default and its consequences under the Indenture except a continuing Default or
Event of Default in the payment of interest and premium, if any, on, or the
principal of, the Exchange Notes. The Company is required to deliver to the
Trustee annually a statement regarding compliance with the Indenture, and the
Company is required upon becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of Default.

      15. TRUSTEE DEALINGS WITH THE COMPANY. Subject to Section 7.03 of the
Indenture, the Trustee, in its individual or any other capacity, may become the
owner or pledgee of Exchange Notes and may otherwise deal with the Company or
any Affiliate of the Company with the same rights it would have if it were not
Trustee.

      16. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator or stockholder of the Company, as such, shall
have any liability for any obligations of the Company under the Exchange Notes,
the Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Exchange Notes by accepting an
Exchange Note waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Exchange Notes.

      17. AUTHENTICATION. This Exchange Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.

      18. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).

      19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Exchange Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Exchange
Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.

      The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:

                Pegasus Communications Corporation
                c/o Pegasus Communications Management Company
                5 Radnor Corporate Center
                Suite 454
                100 Matsonford Road
                Radnor, Pennsylvania  19087
                Attention:  Marshall W. Pagon

                                       A-6

<PAGE>

                                 ASSIGNMENT FORM


     To assign this Exchange Note, fill in the form below: (I) or (we) assign
     and transfer this Exchange Note to

________________________________________________________________________________
                  (Insert assignee's soc. sec. or tax I.D. no.)

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________
              (Print or type assignee's name, address and zip code)

and irrevocably appoint _______________________________________________________
to transfer this Exchange Note on the books of the Company. The agent may
substitute another to act for him.

________________________________________________________________________________

Date:_______________________

                                 Your Signature: _______________________________
                                 (Sign exactly as your name appears on the face 
                                 of this Exchange Note)

                                 Signature Guarantee:___________________________

                                       A-7

<PAGE>



                       OPTION OF HOLDER TO ELECT PURCHASE

           If you want to elect to have this Exchange Note purchased by the
Company pursuant to Section 4.10 or 4.13 of the Indenture, check the box below:

        [ ] Section 4.10                        [ ] Section 4.13

           If you want to elect to have only part of the Exchange Note purchased
by the Company pursuant to Section 4.10 or Section 4.13 of the Indenture, state
the amount you elect to have purchased:
$____________


Date:_______________________         Your Signature:____________________________
                                     (Sign exactly as your name appears on the 
                                     Exchange Note)

                                     Tax Identification No.:____________________


                                     Signature Guarantee:_______________________

                                       A-8
<PAGE>

                            CERTIFICATE OF AMENDMENT

                                       OF

                     CERTIFICATE OF DESIGNATION, PREFERENCES
                    AND RELATIVE, PARTICIPATING, OPTIONAL AND
                        OTHER SPECIAL RIGHTS OF PREFERRED
                      STOCK AND QUALIFICATIONS, LIMITATIONS
                            AND RESTRICTIONS THEREOF

                                       OF

                     12.75% SERIES A CUMULATIVE EXCHANGEABLE
                                 PREFERRED STOCK

                                       OF

                       PEGASUS COMMUNICATIONS CORPORATION

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


                  Pegasus Communications Corporation (the "Company"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware (the "DGCL"),

                  DOES HEREBY CERTIFY THAT:

                  FIRST: Pursuant to the authority vested in the Pricing
Committee of the Board of Directors by resolutions duly adopted by the Board of
Directors on November 21, 1996, the Pricing Committee of the Board of Directors
designated, created, authorized and provided for the issuance of 12.75% Series A
Cumulative Exchangeable Preferred Stock due January 1, 2007 (the "Series A
Preferred Stock"), par value $0.01 per share, having the voting powers,
preferences and relative, participating, optional and other special rights, and
qualifications, limitations and restrictions as more fully described in the
Certificate of Designation, Preferences and Relative, Participating, Optional
and Other Special Rights of Preferred Stock and Qualifications, Limitations and
Restrictions Thereof of 12.75% Series A Cumulative Exchangeable Preferred Stock
of Pegasus Communications Corporation (the "Certificate of Designation").

                  SECOND: Pursuant to the authority contained in Article Fourth
of the Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") and in accordance with the provisions of Section
151 of the DGCL, the Pricing Committee of the Board of Directors of the Company,
acting within the scope of the authority delegated to it by the Board of
Directors, by unanimous written consent dated January 22, 1997 duly approved and
adopted the foregoing designation of the Series A Preferred Stock, and in
connection therewith, the Company filed the Certificate of Designation with the
Secretary of State of the State of Delaware on January 24, 1997.

                  THIRD: Pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation, and pursuant to the provisions of
Section 242 of the DGCL, the Board of Directors adopted the following
resolutions providing for the amendment to the Certificate of Designation (the
"Amendment") at a meeting held on February 17, 1998:
<PAGE>

                  RESOLVED, that the definition of "Change of Control" in
         Section 1, Certain Definitions, of the Certificate of Designation,
         Preferences and Relative, Participating, Optional and Other Special
         Rights of Preferred Stock and Qualifications, Limitations and
         Restrictions Thereof of 12.75% Series A Cumulative Exchangeable
         Preferred Stock of Pegasus Communications Corporation ("Certificate of
         Designation"), and the amendment to the definition of "Change of
         Control" in Section 1.01, Definitions, of the form of Indenture
         attached as Annex A to the Certificate or Designation, to read in their
         entirety as follows, are hereby proposed and declared to be advisable
         and in the best interests of the Company:

                           "Change of 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 and its
                  Restricted Subsidiaries taken as a whole 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 (A) 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), directly or indirectly, of more of the Voting
                  Stock of the Company (measured by voting power rather than
                  number of shares) than is beneficially owned (as defined
                  above) at such time by the Principal and his Related Parties
                  in the aggregate, (B) the Principal and his Related Parties
                  collectively cease to beneficially own (as defined above)
                  Voting Stock of the Company having at least 30% of the
                  combined voting power of all classes of Voting Stock of the
                  Company then outstanding or (C) the Principal and his
                  Affiliates acquire, in the aggregate, beneficial ownership (as
                  defined above) of more than 66 2/3 % of the shares of Class A
                  Common Stock at the time outstanding or (iv) the first day on
                  which a majority of the members of the Board of Directors are
                  not Continuing Directors.

                  FURTHER RESOLVED, that the amendment to Section 8(b)(i)(2) of
         the Certificate of Designation, and the amendment to Section
         4.09(b)(ii) of the form of Indenture attached as Annex A to the
         Certificate of Designation, to read in their entirety as follows, are
         hereby proposed and declared to be advisable and in the best interests
         of the Company:

                           (2) the incurrence by the Company or any of its
                  Restricted Subsidiaries of Indebtedness pursuant to one or
                  more Bank Facilities, so long as the aggregate principal
                  amount at any time outstanding of Indebtedness incurred
                  pursuant to this clause (2) ["clause (ii)", in the case of the
                  form of Indenture attached as Annex A to the Certificate of
                  Designation] does not exceed $50.0 million;

                  FOURTH: The holders of the Company's Class A and Class B
Common Stock having a majority of the voting power of all shares of Class A and
Class B Common Stock, at a special meeting of the Common Stockholders held on
April 27, 1998, duly adopted the Amendment in accordance with the provisions of
the DGCL.


<PAGE>

                  FIFTH: The holders of a majority of the Series A Preferred
Stock duly adopted the Amendment by written consent in accordance with the
provisions of the DGCL.

                  SIXTH: The Amendment has been duly adopted in accordance with
the provisions of Section 242 of the DGCL.

                  IN WITNESS WHEREOF, the Company has caused this certificate to
be duly executed by Ted S. Lodge, its Senior Vice President, and attested by
Michael B. Jordan, its Assistant Secretary, this 20th day of May, 1998.


                                 PEGASUS COMMUNICATIONS CORPORATION



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

ATTEST:


By:  /s/ Michael B. Jordan
     -----------------------------
         Michael B. Jordan,
         Assistant Secretary