Document:

AMENDED

                                 PROMISSORY NOTE

 $ 500,000.00                                           Date May 31, 2000
 ------------                                           -----------------

This  Promissory  Note amends and replaces  that certain note dated May 31, 2000
made by the undersigned to the Lender in the principal amount of $500,000.

   On September 1, 2001               we     promise to pay to
-----------------------             ------
the order of        NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
                   --------------------------------------------

                 FIVE HUNDRED THOUSAND AND NO CENTS ($500,000.00)     Dollars
         -------------------------------------------------------------

Payable at         26 Harbor Park Drive, Port Washington, NY 11050
                -----------------------------------------------------

for value received with interest at nine and one-half percent (9-1/2%) per annum
payable  quarterly.  The Lender  represents that this loan may be prepaid at any
time without penalty.

                                                      SANDATA, INC.
                                                      By:

                                                      /s/Bert E. Brodsky
                                                      Bert E. Brodsky, Chairman

Witness:

/s/Linda Scarpantonio

/s/Laurie G. HofHSBC

October 13, 2000

Bert E. Brodsky, Chairman
Sandsport Data Services, Inc.
26 Harbor Park Drive
Port Washington, NY  11050

Re:      Your waiver request dated 10/6/00

Dear Mr. Brodsky:

We have  reviewed  your  request  for a waiver  and  amendment  of the  covenant
pertaining to the Net Worth  requirement  contained  within the Second Amendment
dated as of February 14, 2000 to the Loan  Agreement  dated as of April 18, 1997
(the  "Agreement")  between  Sandsport  Data  Services,  Inc. and HSBC Bank USA,
formerly known as Marine Midland Bank (the "Bank"), for the period ended May 31,
2000.

Please be advised  that the Bank agrees to waive  non-compliance  with the above
covenant to the extent of such non-compliance for the period ended May 31, 2000.
Additionally,  the Bank  has  agreed  to amend  the Net  Worth  covenant,  which
requires an increase of $75,000.00 as of each fiscal year end, to an increase of
$25,000.00 as of each fiscal year end.

This  waiver and  amendment  are  effective  only in this  instance  and for the
purpose for which they are given.  All other terms and  conditions  contained in
the Agreement remain in full force and effect. No waiver of any single breach or
default  under the  Agreement  shall be  deemed a waiver of any other  breach or
default.

Kindly  execute and return to the Bank, as soon as possible,  an  acknowledgment
copy of this letter which will become  effective upon the Bank's receipt of such
acknowledgement copy.

Sincerely,

HSBC Bank USA

/s/Gary Sarro
Gary Sarro
Vice President

Sandsport Data Services, Inc.

/s/Bert E. Brodsky            10/16/00
Bert E. Brodsky, Chairman       DateEXECUTION COPY

                            ASSET PURCHASE AGREEMENT

                            dated as of May 15, 2000

                                      among

                      CENTENNIAL PUERTO RICO CABLE TV CORP.

                       PEGASUS COMMUNICATIONS CORPORATION

                  PEGASUS CABLE TELEVISION OF SAN GERMAN, INC.

                                       And

                      MCT CABLEVISION, LIMITED PARTNERSHIP

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S>             <C>                                                                                             <C>

Article 1         CERTAIN DEFINITIONS............................................................................1
Article 2         PURCHASE AND SALE..............................................................................6
         Section 2.1       Covenant of Purchase and Sale; Assets.................................................6
         Section 2.2       Excluded Assets.......................................................................8
         Section 2.3       Assumed and Retained Obligations and Liabilities......................................9
         Section 2.4       Purchase Price.......................................................................10
         Section 2.5       Escrow Amount........................................................................10
         Section 2.6       Current Items Amount.................................................................10
         Section 2.7       Current Items Amount Calculated......................................................11
Article 3         RELATED MATTERS...............................................................................12
         Section 3.1       Bulk Sales...........................................................................12
         Section 3.2       Use of Names and Logos...............................................................12
         Section 3.3       Allocation of Purchase Price.........................................................12
Article 4         BUYER'S REPRESENTATIONS AND WARRANTIES........................................................13
         Section 4.1       Organization and Qualification of Buyer..............................................13
         Section 4.2       Authority............................................................................13
         Section 4.3       No Conflict; Required Consents.......................................................13
         Section 4.4       Litigation...........................................................................13
         Section 4.5       Taxpayer Number......................................................................14
         Section 4.6       Qualification........................................................................14
         Section 4.7       Finders and Brokers..................................................................14
         Section 4.8       Availability of Funds................................................................14
Article 5         SELLERS' REPRESENTATIONS AND WARRANTIES.......................................................14
         Section 5.1       Organization and Qualification of Sellers............................................14
         Section 5.2       Authority............................................................................14
         Section 5.3       No Conflict; Required Consents.......................................................15
         Section 5.4       Title to Assets; Sufficiency.........................................................15
         Section 5.5       Franchises, Licenses, and Contracts..................................................15
         Section 5.6       Employee Benefits....................................................................16
         Section 5.7       Employees............................................................................17
         Section 5.8       Litigation...........................................................................18
         Section 5.9       Tax Returns; Other Reports...........................................................18
         Section 5.10      Compliance with Legal Requirements...................................................19
         Section 5.11      System Information...................................................................21
         Section 5.12      Environmental Matters................................................................21
         Section 5.13      Financial and Operational Information................................................22
         Section 5.14      No Adverse Change....................................................................23
         Section 5.15      Taxpayer Identification Number.......................................................23
         Section 5.16      Intangibles..........................................................................23
         Section 5.17      Accounts Receivable..................................................................23
         Section 5.18      Bonds................................................................................23
         Section 5.19      Transactions with Affiliates and Employees...........................................23
         Section 5.20      Sole Franchisee......................................................................23

                                       i
<PAGE>

         Section 5.21      Real Property........................................................................24
         Section 5.22      Insurance............................................................................24
         Section 5.23      Finders and Brokers..................................................................24
         Section 5.24      Full Disclosure......................................................................24
         Section 5.25      Year 2000............................................................................24
Article 6         COVENANTS.....................................................................................24
         Section 6.1       Certain Affirmative Covenants of Sellers Regarding the System........................24
         Section 6.2       Approvals from Governmental Authorities..............................................26
         Section 6.3       Employee Matters.....................................................................26
         Section 6.4       WARN Act.............................................................................26
         Section 6.5       Exclusivity..........................................................................26
         Section 6.6       Certain Negative Covenants of Sellers................................................27
         Section 6.7       Supplements to Schedules.............................................................27
         Section 6.8       Notification of Certain Matters......................................................28
         Section 6.9       Commercially Reasonable Efforts......................................................28
         Section 6.10      Release of Certain Liens, Litigation and Other Obligations...........................28
         Section 6.11      Duty of Good Faith and Fair Dealing..................................................28
         Section 6.12      Access to Books and Records..........................................................28
         Section 6.13      Transfer Taxes.......................................................................29
         Section 6.14      Covenant Not to Compete..............................................................29
         Section 6.15      Lien Searches........................................................................31
Article 7         CONDITIONS PRECEDENT..........................................................................32
         Section 7.1       Conditions to Buyer's Obligations....................................................32
         Section 7.2       Conditions to Sellers' Obligations...................................................34
Article 8         CLOSING.......................................................................................35
         Section 8.1       Closing; Time and Place..............................................................35
         Section 8.2       Sellers' Obligations.................................................................35
         Section 8.3       Buyer's Obligations..................................................................36
Article 9         TERMINATION...................................................................................37
         Section 9.1       Termination Events...................................................................37
         Section 9.2       Effect of Termination................................................................37
Article 10        REMEDIES......................................................................................38
         Section 10.1      Specific Performance; Remedies Cumulative............................................38
         Section 10.2      Attorney's Fees......................................................................38
         Section 10.3      Escrow Deposit.......................................................................38
Article 11        INDEMNIFICATION...............................................................................39
         Section 11.1      Indemnification by Sellers...........................................................39
         Section 11.2      Indemnification by Buyer.............................................................39
         Section 11.3      Indemnified Third Party Claim........................................................40
         Section 11.4      Determination of Indemnification Amounts and Related Matters.........................40
         Section 11.5      Time and Manner of Certain Claims....................................................41
         Section 11.6      Exclusive Remedy.....................................................................41
         Section 11.7      No Indemnification for Certain Disclosed Matters.....................................41
Article 12        MISCELLANEOUS.................................................................................42
         Section 12.1      Expenses.............................................................................42
                                       ii
<PAGE>

         Section 12.2      Brokerage............................................................................42
         Section 12.3      Waivers..............................................................................42
         Section 12.4      Notices..............................................................................42
         Section 12.5      Entire Agreement; Amendments.........................................................43
         Section 12.6      Binding Effect; Benefits.............................................................44
         Section 12.7      Headings, Schedules, and Exhibits....................................................44
         Section 12.8      Counterparts; Facsimile Signatures...................................................44
         Section 12.9      Publicity............................................................................44
         Section 12.10     Governing Law........................................................................45
         Section 12.11     Third Parties; Joint Ventures........................................................45
         Section 12.12     Construction.........................................................................45
         Section 12.13     Risk of Loss.........................................................................45
         Section 12.14     Sellers..............................................................................45

</TABLE>
                                      iii
<PAGE>

                         LIST OF SCHEDULES AND EXHIBITS

SCHEDULES

Schedule 2.1(i)            Tangible Personal Property
Schedule 2.1(iii)          Franchises
Schedule 2.1(iv)           Licenses
Schedule 2.1(v)            Contracts
Schedule 2.2               Excluded Assets
Schedule 5.3               Sellers' Required Consents
Schedule 5.4               Liens; Condition of Assets
Schedule 5.5               Defaults
Schedule 5.6               Employee Benefits
Schedule 5.7               Employment Matters
Schedule 5.8               Litigation
Schedule 5.10              Rate Regulation Information
Schedule 5.11              System Information
Schedule 5.12              Environmental Matters
Schedule 5.13              Financial Statements
Schedule 5.14              Pricing Policies
Schedule 5.16              Intangibles
Schedule 5.18              Bonds
Schedule 5.19              Transactions with Affiliates and Employees
Schedule 5.21              Real Property
Schedule 5.22              Insurance

EXHIBITS

Exhibit 2.5                Form of Escrow Agreement
Exhibit 7.1(e)             Sellers' Counsel Opinion
Exhibit 7.1(f)             Sellers' FCC Counsel Opinion
Exhibit 7.2(e)             Buyer's Counsel Opinion
Exhibit 8.2(b)             Bill of Sale and Assignment and Assumption Agreement

                                       iv
<PAGE>

                            ASSET PURCHASE AGREEMENT

          THIS ASSET  PURCHASE  AGREEMENT is made and entered into as of May 15,
     2000,  by and between  CENTENNIAL  PUERTO  RICO CABLE TV CORP.,  a Delaware
     corporation  ("Buyer"),   whose  U.S.  Taxpayer  Identification  Number  is
     22-3711308;  and PEGASUS CABLE  TELEVISION OF SAN GERMAN,  INC., a Delaware
     corporation  ("PCT"),   whose  U.S.  Taxpayer   Identification   Number  is
     66-0530527,  MCT  CABLEVISION,  LIMITED  PARTNERSHIP,  a  Delaware  limited
     partnership   ("MCT")  whose  U.S.   Taxpayer   Identification   Number  is
     54-1342471, and PEGASUS COMMUNICATIONS  CORPORATION, a Delaware corporation
     ("Pegasus"),  whose U.S. Taxpayer Identification Number is 51-0374669.  PCT
     and MCT are referred to herein  individually as a "Seller" and collectively
     as "Sellers."

                                                      RECITALS

          A.  Sellers  own and  operate  cable  television  systems  serving the
     Commonwealth  of Puerto Rico  municipalities  of Mayaguez,  Cabo Rojo,  San
     German,  Lajas,  Hormigueros,  Guanica,  Sabana  Grande,  Maricao,  Anasco,
     Rincon,  Las Marias,  Aguadilla,  Aguada,  Quebradillas,  Moca and Isabela,
     (collectively,  the "System") and hold valid franchises  therefor issued by
     the Telecommunications Regulatory Board.

          B.  Sellers  are  willing to convey to Buyer,  and Buyer is willing to
     purchase from Sellers,  all of the assets  comprising the System other than
     the Excluded Assets (as hereinafter defined), upon the terms and conditions
     set forth in this Agreement.

          C.       Pegasus is the indirect parent of PCT and MCT.

                                   AGREEMENTS

          In  consideration  of the  mutual  covenants  and  promises  set forth
     herein, Buyer, Sellers and Pegasus agree as follows:

                                   Article 1
                               CERTAIN DEFINITIONS

          As used in this Agreement, the following terms, whether in singular or
     plural forms, shall have the following meanings:

          "Accounts Receivable" has the meaning given in Section 2.6(a).

          "Agreement" means this Asset Purchase Agreement.

          "Assets" has the meaning given in Section 2.1.

<PAGE>

          "Assumed Obligations and Liabilities" has the meaning given in Section
     2.3.

          "Basic Antenna" means the cable television services described as Basic
     Antenna on Schedule 5.11.

          "Basic Cable" means the cable television  services  described as Basic
     Cable on Schedule 5.11.

          "Bill of Sale" has the meaning given in Section 8.2(b).

          "Business"  means the cable television  business  conducted by Sellers
     through the System.

          "Closing" has the meaning given in Section 8.1.

          "Closing Date" means the date of Closing.

          "Closing  Time" means the close of  business  on the date  immediately
     prior to the Closing Date.

          "Code" means the Internal  Revenue Code of 1986,  as amended,  and the
     regulations thereunder, or any subsequent legislative enactment thereof, as
     in effect from time to time.

          "Communications  Act" means the  Communications Act of 1934, 47 U.S.C.
     SS 151 et. seq., as amended by the Cable Communications Policy Act of 1984,
     Pub. L. No. 98-549,  the Cable Consumer  Protection and  Competition Act of
     1992, Pub. L. No. 102-385, and the  Telecommunications Act of 1996, Pub. L.
     No.  104-104,  as such  statutes may be amended from time to time,  and the
     rules and regulations promulgated thereunder.

          "Contracts" has the meaning given in Section 2.1(v).

          "Copyright Act" means the Copyright Act of 1976, as amended.

          "Current Items Amount" has the meaning given in Section 2.6.

          "Employee Benefit Plan" means any pension, retirement, profit-sharing,
     deferred compensation,  vacation,  severance,  bonus,  incentive,  medical,
     vision,  dental,  disability,  life insurance or any other employee benefit
     plan as defined in Section 3(3) of ERISA to which a Person  contributes  or
     which a Person  sponsors or  maintains,  or by which a Person is  otherwise
     bound.

          "Equivalent  Basic  Subscribers"  means the number obtained by adding:
     (i) the number of first outlet  residential  subscribers for Basic Cable or
     Basic  Antenna of the System who have paid the  applicable  connection  and
     installation  fee and have made at least one monthly payment for service at
     the normal  monthly rate for Basic Cable or Basic  Antenna,  as applicable,
     and whose accounts are not more than 60 days past due from the first day of

                                       2
<PAGE>

     the month for which  service  was  rendered  (or, if more than 60 days past
     due,  who owe less than $5.00) to (ii) the result  obtained by dividing the
     aggregate of the gross monthly billing (excluding installation, connection,
     relocation  and  disconnection  fees and  miscellaneous  rental charges for
     equipment  such as remote  control  devices and  converters)  from the bulk
     subscribers  who have paid the applicable  connection fee and who have made
     at least one monthly  payment for service and whose  accounts  are not more
     than 60 days  past due from the  first  day of the  month  for  which  such
     service was rendered,  by the highest  monthly  service charge in effect in
     the System for a first outlet  residential  connection for Basic Cable. Any
     subscriber  who has  requested  prior to the  Closing  Date  that his cable
     television service be disconnected shall be excluded from the definition of
     Equivalent Basic Subscribers.

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

          "Escrow Agent" has the meaning given in Section 2.5.

          "Escrow Agreement" has the meaning given in Section 2.5.

          "Excluded Assets" has the meaning given in Section 2.2.

          "Expenses" has the meaning given in Section 2.6(c).

          "FAA" means the Federal Aviation Administration.

          "FCC" means the Federal Communications Commission.

          "Final Adjustment Certificate" has the meaning given in Section 2.7.

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

          "Financial Statements" has the meaning given in Section 5.13.

          "Franchises" has the meaning given in Section 2.1(iii).

          "Governmental  Authority"  means the  United  States of  America,  any
     state,  commonwealth,  territory,  or possession  thereof and any political
     subdivision or  quasi-governmental  authority of any of the same (including

                                       3
<PAGE>

     the Commonwealth of Puerto Rico and including counties,  municipalities and
     the like).

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

          "Hazardous Substances" has the meaning given in Section 5.12(d).

          "HSR Act" means the  Hart-Scott-Rodino  Antitrust  Improvements Act of
     1976, as amended.

          "Initial Adjustment Certificate" has the meaning given in Section 2.7.

          "Indemnitee" has the meaning given in Section 11.3(a).

          "Indemnitor" has the meaning given in Section 11.3(a).

          "Judgment"  means any judgment,  writ,  order,  injunction,  award, or
     decree of any court,  judge,  justice or  magistrate,  the FCC or any other
     Governmental Authority.

          "Law 80" means Law 80 of May 30, 1976,  the  Indemnity  for  Discharge
     Without  Just Cause Act, 29 P.R.L.A.  S 185, as may be amended from time to
     time, and any other substantially similar laws.

          "Leased Real Property" has the meaning given in Section 2.1(ii).

          "Legal  Requirements"  means  applicable  common law and any  statute,
     ordinance,  code or other law, rule, regulation,  or order enacted, adopted
     or  promulgated  by  any   Governmental   Authority,   including,   without
     limitation, Judgments and the Franchises.

          "Licenses" has the meaning given in Section 2.1(iv).

          "Lien" means any security  agreement,  financing  statement filed with
     any  Governmental  Authority,  conditional  sale or other  title  retention
     agreement,  any  lease,  consignment  or  bailment  given for  purposes  of
     security,  any lien,  mortgage,  indenture,  pledge,  option,  encumbrance,
     adverse interest,  constructive  trust or other trust,  claim,  attachment,
     exception to or defect in title or other ownership interest (including, but
     not limited to,  reservations,  rights of entry,  rights of first  refusal,
     possibilities   of  reverter,   encroachments,   easement,   rights-of-way,
     restrictive  covenants,  leases, and licenses) of any kind, which otherwise
     constitutes  an  interest in or claim  against  property,  whether  arising
     pursuant to any Legal Requirement, under any Contract or otherwise.

                                       4

<PAGE>

          "Litigation" means any claim, action, suit,  proceeding,  arbitration,
     investigation,  hearing,  or other similar activity or procedure that could
     result in a Judgment.

          "Losses" means any claims, losses,  liabilities,  damages,  penalties,
     costs, and expenses, including, without limitation, reasonable counsel fees
     and reasonable costs and expenses incurred in the investigation, defense or
     settlement  of any claims  covered by the  indemnification  provided for in
     Article  11  hereof,   but  shall  in  no  event   include   incidental  or
     consequential damages.

          "Notice" has the meaning given in Section 11.3(a).

          "Owned Real Property" has the meaning given in Section 2.1(ii).

          "Outside Closing Date" has the meaning given in Section 8.1.

          "Pay Units"  means the  aggregate  number of  subscriptions  to pay or
     premium  television  services (i.e.,  Home Box Office,  Cinemax,  Showtime,
     etc.) by cable  television  subscribers  to the  System,  who have paid the
     applicable  connection fee for such pay or premium television  services and
     have made at least one  monthly  payment  for such  services  at the normal
     monthly  rate for such  services,  and whose  accounts are not more than 60
     days past due (or, if more than 60 days past due, who owe less than $5.00).

          "PCS" means services licensed  pursuant to the Personal  Communication
     Service rules of the FCC.

          "Permitted  Lien" means (i) liens for Taxes not yet due and payable or
     being  contested  in good faith by  appropriate  proceedings;  (ii)  rights
     reserved to any Governmental  Authority to regulate the affected  property;
     (iii) as to leased  Assets,  interests  of the  lessors  thereof  and Liens
     affecting   the   interests   of  the  lessors   thereof;   (iv)   inchoate
     materialmen's,  mechanics',  workmen's,  repairmen's  or other  like  liens
     arising in the  ordinary  course of  business;  and (v)as to any parcel of
     Owned Real  Property  or Leased Real  Property,  any  encumbrance,  adverse
     interest,  constructive or other trust, claim, attachment,  exception to or
     defect in title or other ownership interest (including, but not limited to,
     reservations,  rights of entry,  rights of first refusal,  possibilities of
     reverter, encroachments,  easement,  rights-of-way,  restrictive covenants,
     leases, and licenses) of any kind, which otherwise  constitutes an interest
     in or  claim  against  property,  whether  arising  pursuant  to any  Legal
     Requirement,  under any Contract or otherwise, that do not, individually or
     in the  aggregate,  affect or  impair  the  value or use  thereof  as it is
     currently  being  used by  either  Seller  in the  ordinary  course  of the
     business or render title thereto unmarketable or uninsurable.

          "Person"   means   any   natural   person,   Governmental   Authority,
     corporation,   general  or  limited  partnership,   joint  venture,  trust,
     association,  limited liability  company,  or unincorporated  entity of any
     kind.

                                       5
<PAGE>

          "Pole Attachment Agreements" means pole attachment  authorizations and
     agreements held by either Seller that relate to the System and were granted
     by  a  public  utility  (or  other  Person  providing   similar   service),
     municipality or other Governmental Authority.

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

          "Purchase Price" has the meaning given in Section 2.4.

          "Qualified  Intermediary" has the meaning given to it in the rules and
     regulations promulgated pursuant to Section 1031 of the Code.

          "Retained  Obligations  and  Liabilities"  has the  meaning  given  in
     Section 2.3(b).

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

          "Supplemental  Documents"  means the Bill of Sale,  the vehicle titles
     and deeds to be  delivered at Closing  pursuant to Sections  8.2(g) and (h)
     and the Escrow Agreement.

          "System" has the meaning given in Recital A.

          "Taxes" means all taxes, charges, fees, duties, levies and assessments
     imposed  by  any  federal,   state,  local  or  foreign  taxing  authority,
     including,  but not limited to,  income,  gross  receipts,  sales,  use, ad
     valorem, value added, customs duties,  franchise,  severance,  net or gross
     proceeds,  withholding,  payroll, employment, excise or property taxes, and
     interest,  penalties  and other  governmental  charges  or  additions  with
     respect thereto.

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

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

          "Transferred  Contracts" means the Contracts that are validly assigned
     to Buyer as of the Closing.

                                   Article 2
                                PURCHASE AND SALE

     Section 2.1 Covenant of Purchase and Sale; Assets. Subject to the terms and
conditions  set forth in this  Agreement,  at Closing  each  Seller  shall sell,
convey, assign, and transfer to Buyer, and Buyer shall acquire from such Seller,
for the  Purchase  Price,  free and clear of all  Liens  (except  for  Permitted
Liens), all right, title and interest of such Seller in and to all of the assets
and properties,  real and personal,  tangible and  intangible,  owned or leased,

                                       6
<PAGE>

used or held for use  wherever  located by such Seller in the  operation  of the
System (the "Assets"), including, without limitation, the following:

          (i) Tangible Personal Property. All tangible personal property located
     in Puerto Rico and used in  connection  with the System,  including but not
     limited to towers, tower equipment,  antennae,  aboveground and underground
     cable,  distribution systems, headend amplifiers,  line amplifiers,  feeder
     line  cable,  distribution  plant,  programming  signal  decoders  for each
     satellite  service  which  scrambles  its signal (if owned by such Seller),
     housedrops,   including  disconnected   housedrops,   installed  subscriber
     devices,  utility  poles  (if  owned  by such  Seller),  local  origination
     equipment, vehicles and trailers, microwave equipment,  converters, testing
     equipment, office equipment,  furniture, fixtures, supplies, inventory, all
     assets relating to competitive access or alternate access business or other
     telecommunications  business, and other physical assets,  including but not
     limited to the items described on Schedule 2.1(i).

          (ii) Real Property.  All interests in real property  located in Puerto
     Rico and used in  connection  with the System that is either  owned by such
     Seller  ("Owned Real  Property") or leased or used by such Seller  ("Leased
     Real Property"),  including all improvements  thereon owned by such Seller,
     and  including,  but not limited to, the Owned Real Property and the Leased
     Real Property described on Schedule 5.21.

          (iii)  Franchises.   The  existing  governmental   authorizations  for
     construction,  maintenance  and  operation  of  the  System  issued  by the
     Telecommunications  Regulatory Board or appropriate predecessor franchising
     authority  (individually a "Franchise" and collectively  the  "Franchises")
     presently held by such Seller, as listed on Schedule 2.1(iii).

          (iv)  Licenses.   The  intangible  cable  television   (CATV)  channel
     distribution rights, cable television relay service (CARS),  business radio
     and other  licenses,  authorizations,  or permits  issued by the FCC or any
     other  Governmental  Authority used in the operation of the System and that
     are in effect as of the date hereof or entered or obtained in the  ordinary
     course of  business  between  the date  hereof  and the  Closing  Date (the
     "Licenses"),  including,  without  limitation,  the  Licenses  described on
     Schedule 2.1(iv).  The Licenses do not include any of the PCS licenses held
     by any of the Sellers.

          (v) Contracts.  To the extent assignable or transferable,  the leases,
     private easements or rights of access, contractual rights to easements, MDU
     agreements, bulk and commercial service agreements, cable guide agreements,
     retransmission   consent  agreements,   programming  agreements  and  other
     contracts,   Pole  Attachment  Agreements,   agreements  or  understandings
     relating  to the  System  in effect as of the date  hereof  or  entered  or
     obtained in the ordinary course of business between the date hereof and the

                                       7
<PAGE>

     Closing  Date (other than  Excluded  Assets),  whether oral or written (the
     "Contracts"),  including,  without  limitation,  the Contracts described on
     Schedule 2.1(v).

          (vi) Accounts  Receivable.  All  subscriber,  trade and other accounts
     receivable arising from such Seller's operation of the System.

          (vii)  Books  and  Records.  All  engineering  records,  files,  data,
     drawings, blueprints,  schematics, reports, lists, plans and processes, and
     all  files  of  correspondence,  lists,  records,  and  reports  concerning
     subscribers and prospective subscribers of the System including account and
     credit records, personnel records relating to employees of the System to be
     hired by Buyer upon  Closing  (if any),  signal and program  carriage,  and
     dealings with  Governmental  Authorities,  including but not limited to all
     reports  filed by or on behalf of such Seller with the FCC with  respect to
     the System and  statements  of account filed by or on behalf of such Seller
     with the U.S. Copyright Office with respect to the System.

     Section 2.2 Excluded Assets. Notwithstanding the provisions of Section 2.1,
the Assets shall not include the  following,  which shall be retained by Sellers
(the "Excluded Assets"):

          (i) insurance policies and rights and claims thereunder;

          (ii) bonds, letters of credit,  surety instruments,  and other similar
     items listed on Schedule 2.2;

          (iii) cash and cash equivalents;

          (iv) any agreement, right, asset or property owned or leased by either
     Seller that is not used or held for use in connection with its operation of
     the System;

          (v) all subscriber deposits and advance payments held by either Seller
     as of the Closing Time in connection with the operation of the System;

          (vi) all claims,  rights,  and interest in and to any refunds of taxes
     or fees of any nature,  or other claims against third parties,  relating to
     the operation of the System prior to the Closing Time;

          (vii) those  account  books of  original  entry,  general  ledgers and
     financial records used in connection with the System that are not regularly
     maintained by Sellers in Puerto Rico, provided,  however,  that Sellers and
     Pegasus  shall provide to Buyer and its  representatives  access to, and at
     Buyer's  expense  copies of, any of such books and records as may be in the
     possession  of Sellers or Pegasus for a  reasonable  period,  not to exceed
     five years from the  Closing  Date (seven  years if Buyer needs  reasonable
     access because of an Internal Revenue Service  inquiry),  from time to time
     upon reasonable notice from Buyer to Sellers;

                                       8
<PAGE>

          (viii) Sellers' trademarks, trade names, service marks, service names,
     logos, and similar proprietary rights;

          (ix) all PCS licenses; and

          (x) any other items described on Schedule 2.2.

     Section 2.3 Assumed and Retained Obligations and Liabilities.

     (a) Assumed  Obligations and Liabilities.  At Closing,  Buyer shall assume,
pay,  discharge,  and  perform  the  following  (the  "Assumed  Obligations  and
Liabilities"):

          (i) those  obligations and  liabilities  attributable to periods after
     the  Closing  Time under or with  respect to the  Franchises,  Licenses  or
     Transferred Contracts;

          (ii) other  obligations  and liabilities of Sellers to the extent that
     there  shall  have been a credit  in favor of Buyer  with  respect  thereto
     pursuant to Section 2.6; and

          (iii) all obligations  and  liabilities  arising out of or relating to
     Buyer's  ownership  of the  Assets or  operation  of the  System  after the
     Closing Time.

     (b) Retained  Obligations and Liabilities.  All obligations and liabilities
of Sellers, other than the Assumed Obligations and Liabilities, shall remain and
be  the   obligations   and   liabilities   solely  of  the  applicable   Seller
(collectively,  the "Retained  Obligations  and  Liabilities"),  and each Seller
agrees to satisfy all of such  obligations as they become due.  Without limiting
the generality of the foregoing,  Retained  Obligations  and  Liabilities  shall
include, but not be limited to, the following:

          (i) all obligations and liabilities  arising out of or relating to the
     Litigation and Judgments disclosed on Schedule 5.8 and any other Litigation
     arising out of actions or inaction  of Sellers or events  occurring  before
     the  Closing  Time  regardless  of whether  known or  unknown,  asserted or
     unasserted,  as of the Closing Time; provided that the Retained Obligations
     and Liabilities with respect to any Litigation or Judgments  involving Beam
     Laser Systems,  Inc. shall include only those  obligations  and liabilities
     arising out of actions or inaction  of Sellers or events  occurring  before
     the Closing Time;

          (ii) all obligations and liabilities,  unless specifically  assumed in
     writing by the Buyer, to the extent arising before or as a result of events
     (including,   without  limitation,  the  action  or  inaction  of  Sellers)
     occurring   before  the  Closing  Time  with  respect  to  the  Franchises,
     Contracts, Licenses and Leased Real Property;

          (iii) any liability  under any claim  relating to the period ending as
     of  the  Closing  Time  that  is  or,  but  for  the  consummation  of  the

                                       9
<PAGE>

     transactions  contemplated  hereby,  would  have  been  covered  under  any
     insurance policy of Sellers or Pegasus,  and all liability  associated with
     workmen's  compensation  claims to the extent such liability relates to the
     period prior to the Closing Time, whether or not reported or due or payable
     as of the Closing Time;

          (iv) any liability for salary, bonus (including Christmas bonus), sick
     or vacation pay, or other employee benefits due to all employees of Sellers
     (including  severance and Law 80 obligations) or under any employee benefit
     plan maintained by Sellers or Pegasus,  in all cases other than liabilities
     of Buyer to Sellers'  employees  hired by Buyer pursuant to Section 6.3 and
     arising after the Closing (excluding Law 80 obligations);

          (v) all  obligations  and  liabilities  with  respect to the  Excluded
     Assets; and

          (vi)  except as  expressly  set  forth in  Section  6.13,  any Tax (A)
     payable with respect to the business,  assets,  properties or operations of
     the Sellers or any member of any  affiliated  group of which any of Sellers
     is or was a member,  or (B) incident to or arising as a consequence  of the
     negotiation  or  consummation  by Sellers (or any member of any  affiliated
     group of which any of the Sellers is or was a member) of this Agreement and
     the transactions contemplated thereby.

     Section 2.4 Purchase Price. Subject to Sections 2.5 and 2.6, Buyer will pay
to Sellers at Closing cash in the amount of $170,000,000  ("Purchase Price"), in
accordance  with Sellers' wire transfer  delivery  instructions,  which shall be
delivered to Buyer not less than two business days prior to Closing.

     Section 2.5 Escrow Amount.  Simultaneously  with the execution and delivery
of this  Agreement,  Buyer  will  deposit  into  escrow  pursuant  to an  Escrow
Agreement  substantially in the form attached hereto as Exhibit 2.5 (the "Escrow
Agreement")  among  Buyer,  Sellers,  and First  Union  National  Bank  ("Escrow
Agent"), the sum of Three Million Dollars  ($3,000,000),  to be held and applied
pursuant to the terms of the Escrow Agreement.  Upon the Closing, (a) the amount
of the deposit  (exclusive of any interest and income thereon) shall be credited
against the Purchase Price,  but retained by Escrow Agent in accordance with the
terms of the  Escrow  Agreement,  to secure  Sellers'  performance  pursuant  to
Article 11; and (b) all interest and income earned on the escrow deposit will be
paid to Buyer.  On the nine month  anniversary  of the Closing  Date,  Buyer and
Sellers  shall  instruct  the Escrow  Agent to transfer to the Sellers an amount
equal to $1,500,000  less the amount of any claims by Buyer for  indemnification
under Article 11 of which Sellers have received  notice from Buyer.  Section 2.6
Current Items Amount.  The Purchase Price shall be adjusted by the net amount of
the credits and prorations made pursuant to paragraphs 2.6(a), (b), and (c) (the
"Current Items Amount").

     (a) Accounts  Receivable Sellers shall be entitled to a credit in an amount
equal to the sum of (i) 90% of the face amount of all Accounts  Receivable shown

                                       10
<PAGE>

on the  records of Sellers on the  Closing  Date to be 30 days or less past due;
and (ii) 75% of the face amount of all Accounts  Receivable shown on the records
of Sellers on the Closing Date to be between 31 and 60 days past due.  "Accounts
Receivable" shall mean accounts  receivable  resulting from a Seller's provision
of  cable  television  service  prior  to  the  Closing  Time  to  the  System's
subscribers.

     (b) Advance  Payments and Deposits.  Buyer shall be entitled to a credit in
an amount  equal to the  aggregate  of (i) all  deposits of  subscribers  of the
System, and all interest,  if any, required to be paid thereon as of the Closing
Time which are  retained  by  Sellers;  (ii) all  advance  payments  received by
Sellers for services to be rendered by Buyer to  subscribers of the System after
the Closing Time,  or for other  services to be rendered by Buyer to other third
parties  after  the  Closing  Time for  cable  television  commercials,  channel
leasing,  or other services or rentals,  but only to the extent such obligations
are assumed by Buyer at Closing;  and (iii) any liabilities or other obligations
of Sellers relating to the Business that have matured or are accrued on or prior
to the Closing,  but only to the extent such obligations are assumed by Buyer at
Closing.

     (c) Expenses.  As of the Closing Time,  expenses of a recurring nature that
are incurred to benefit the System and are  incurred in the  ordinary  course of
business (the "Expenses"),  including those set forth below,  shall be prorated,
in accordance with generally accepted  accounting  principles,  so that all such
Expenses  for  periods  prior to the  Closing  Time shall be for the  account of
Sellers and all such  Expenses  for periods  after the Closing Time shall be for
the account of Buyer:

          (i)  all  Expenses  under  the  Franchises,   the  Licenses,  and  the
     Transferred Contracts;

          (ii) Taxes  levied or  assessed  against  any of the Assets or payable
     with respect to cable television  service and related sales to the System's
     subscribers;  expenses  for  utilities,  municipal  assessments,  rents and
     service charges, and other goods or services furnished to the System;

          (iii) all FCC  regulatory  fees and all copyright fees based on signal
     carriage by the System; and

          (iv) all other items of Expense  relating  to the System,  except that
     (A) Sellers and Buyer shall not prorate any items of Expense  payable under
     or with  respect to any  Excluded  Asset,  all of which shall remain and be
     solely for the account of Sellers,  and (B) there shall be no adjustment or
     proration for capital expenditures made by Sellers.

     Section 2.7 Current Items Amount Calculated. The Current Items Amount shall
be  estimated  in good faith by Sellers and shall be set forth in a  certificate
signed  by  an   authorized   officer  of  Sellers  (the   "Initial   Adjustment
Certificate"),  together with a detailed  statement of the calculation  thereof,
with supporting data, delivered to Buyer not later than five business days prior
to the Closing  Date. If Buyer  objects to the Initial  Adjustment  Certificate,

                                       11
<PAGE>

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

                                   Article 3
                                 RELATED MATTERS

     Section 3.1 Bulk Sales.  Buyer and Sellers  waive  compliance  by the other
with bulk sales Legal Requirements  applicable to the transactions  contemplated
hereby.

     Section 3.2 Use of Names and Logos.  Buyer and Sellers  shall  cooperate in
the removal  promptly  after  Closing of the  trademarks,  trade names,  service
marks,  service names,  logos, and similar  proprietary rights of Sellers to the
extent  incorporated  in or on the  Assets,  provided  that  Buyer  may use such
intellectual  property without charge for transitional  purposes for a period of
not more than 60 days following  Closing,  or longer if reasonably  requested by
Buyer in writing with a description of the specific use to be permitted.

     Section 3.3 Allocation of Purchase Price.  Prior to the Closing Date, Buyer
and Sellers shall each use its reasonable efforts and act in good faith to agree
upon the  allocation  (the  "Allocation")  of the Purchase Price and the Assumed
Obligations  and  Liabilities  to the  individual  assets or  classes  of assets
(within  the meaning of Section  1060 of the Code).  Buyer,  Sellers,  and their

                                       12
<PAGE>

respective  affiliates  shall file all tax returns and  schedules  thereto  with
respect to the transactions contemplated by this Agreement,  including,  without
limitation,  all  federal,  state,  Commonwealth  of  Puerto  Rico and local Tax
Returns  and those  returns  and forms  required  by  Section  1060 of the Code,
consistent with the Allocation  unless  otherwise  required by applicable  Legal
Requirements.

                                   Article 4
                     BUYER'S REPRESENTATIONS AND WARRANTIES

         Buyer represents and warrants to Sellers as follows:

     Section 4.1 Organization and Qualification of Buyer. Buyer is a corporation
duly  organized,  validly  existing,  and in good standing under the laws of the
State of Delaware,  and has all requisite  power to own and lease the properties
and assets it currently  owns and leases and to conduct its  activities  as such
activities are currently  conducted.  As of the Closing Date, Buyer will be duly
qualified or licensed to do business and will be in good standing under the laws
of the Commonwealth of Puerto Rico.

     Section 4.2 Authority.  Buyer has all requisite power to execute,  deliver,
and perform this  Agreement and the  Supplemental  Documents to which Buyer is a
party (the "Buyer's Supplemental  Documents") and to consummate the transactions
contemplated  hereby and  thereby.  Execution  and  closing of the  transactions
contemplated   by  this   Agreement   will  not  violate   Section  652  of  the
Communications Act. The execution,  delivery,  and performance of this Agreement
and the Buyer's Supplemental  Documents and the consummation of the transactions
contemplated  hereby and thereby by Buyer have been duly and validly  authorized
by all necessary action on the part of Buyer.  This Agreement  constitutes,  and
the Buyer's Supplemental  Documents,  when executed and delivered by Buyer, will
constitute, valid and binding obligations of Buyer, enforceable against Buyer in
accordance with their terms,  except as may be limited by general  principles of
equity and by  applicable  bankruptcy,  insolvency  and similar  laws  affecting
creditors' rights generally and the availability of equitable remedies.

     Section 4.3 No Conflict;  Required Consents. Subject to compliance with the
HSR Act, the execution, delivery, and performance by Buyer of this Agreement and
the Buyer's  Supplemental  Documents do not and will not:  (i) conflict  with or
violate any provision of the organizational documents of Buyer; (ii) violate any
provision of any Legal  Requirement  applicable to Buyer;  (iii)  conflict with,
violate,  result in a breach of, or  constitute a default under any agreement to
which  Buyer is a party or by which Buyer or the assets or  properties  owned or
leased by it are bound or affected; or (iv) except as expressly  contemplated by
this Agreement,  require any consent,  waiver, approval, or authorization of, or
filing of any certificate,  notice, application, report, or other document with,
any Governmental  Authority or other Person; except, with respect to (ii), (iii)
and (iv) of this Section  4.3, for any  conflict,  violation,  breach,  default,
consent or filing  that  would not  materially  impair  the  ability of Buyer to
perform its obligations hereunder.

     Section  4.4  Litigation.  There is no  Litigation  pending  or, to Buyer's
knowledge, threatened, by or against or affecting or relating to Buyer or any of
its  affiliates  in any  court  or  before  any  Governmental  Authority  or any

                                       13
<PAGE>

arbitrator,  which, if adversely determined, would restrain or materially hinder
or delay the consummation of the transactions  contemplated by this Agreement or
cause any of such transactions to be rescinded.

     Section 4.5 Taxpayer Number. Buyer's U.S. Taxpayer Identification Number is
as set forth in the introductory paragraph of this Agreement.

     Section  4.6  Qualification.  Buyer knows of no facts  which  would,  under
present law and  present  rules,  regulations  and  policies  of the  applicable
Governmental  Authorities,  disqualify  Buyer with respect to the  assignment or
transfer of the  Governmental  Permits and other  agreements  contemplated to be
assigned  to  it  by  Sellers   pursuant   hereto  or  that  would  prevent  the
Telecommunications  Regulatory  Board's  consenting  to  the  assignment  of the
Franchises  to Buyer.  Should  Buyer  become  aware of any such  facts,  it will
promptly  notify Sellers in writing  thereof and use its best efforts to prevent
any such disqualification.

     Section  4.7 Finders  and  Brokers.  Buyer has not dealt with any finder or
broker in connection with the transactions contemplated by this Agreement in any
manner  that  would  impose  on either  Seller  any  obligation  to pay a fee or
commission.

     Section 4.8  Availability of Funds.  Buyer has or will have at Closing cash
or unused credit  commitments in an amount  sufficient to pay the Purchase Price
and closing costs.

                                   Article 5
                     SELLERS' REPRESENTATIONS AND WARRANTIES

     Sellers jointly and severally represent and warrant to Buyer as follows:

     Section 5.1 Organization and Qualification of Sellers. PCT is a corporation
duly  organized,  validly  existing,  and in good standing under the laws of the
State of Delaware,  and MCT is a limited  partnership  duly organized,  validity
existing  and in good  standing  under  the laws of the  State of  Delaware  and
Pegasus is a corporation  duly organized,  validly existing and in good standing
under the laws of the State of Delaware. Each Seller has all requisite corporate
or  partnership  power,  as the case may be, to own and lease the properties and
assets it  currently  owns and  leases  and to conduct  its  activities  as such
activities are currently conducted. Each Seller is duly qualified or licensed to
do  business  under the laws of the  Commonwealth  of Puerto  Rico to the extent
required.  The  general  partner  of MCT is MCT  Cablevision,  Ltd.,  which is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania.

     Section 5.2 Authority.  Each Seller and Pegasus has all requisite corporate
or partnership power, as the case may be, to execute,  deliver, and perform this
Agreement  and the  Supplemental  Documents to which such Seller or Pegasus is a
party (the "Sellers' Supplemental Documents") and to consummate the transactions
contemplated  hereby and thereby.  The execution,  delivery,  and performance of
this Agreement and the Sellers'  Supplemental  Documents and the consummation of
the  transactions  contemplated  hereby and  thereby on the part of Sellers  and
Pegasus  have  been  duly and  validly  authorized  by all  necessary  corporate

                                       14
<PAGE>

(including  shareholder) or partnership  action, as the case may be, on the part
of  Sellers  and  Pegasus.   This  Agreement   constitutes,   and  the  Sellers'
Supplemental Documents, when executed and delivered by Sellers and Pegasus, will
constitute,  valid and binding  obligations of Sellers and Pegasus,  enforceable
against  Sellers and Pegasus in  accordance  with their terms,  except as may be
limited by general principles of equity and by applicable bankruptcy, insolvency
and similar laws affecting  creditors'  rights generally and the availability of
equitable remedies.

     Section 5.3 No Conflict;  Required Consents. Subject to compliance with the
HSR Act and except as described on Schedule 5.3, the  execution,  delivery,  and
performance by Sellers and Pegasus of their obligations under this Agreement and
the Sellers'  Supplemental  Documents do not and will not: (i) conflict  with or
violate any  provision  of the  articles of  incorporation  or bylaws or limited
partnership  agreement of either Seller or Pegasus, as applicable;  (ii)violate
any provision of any Legal  Requirement  applicable to either Seller or Pegasus;
(iii)  conflict  with,  violate,  result in a breach of, or constitute a default
under any contract, agreement or understanding to which either Seller or Pegasus
is a party or by which  either  Seller or  Pegasus  or the  Assets  are bound or
affected;  (iv) require any consent,  waiver,  approval or authorization  of, or
filing of any certificate,  notice, application, report, or other document with,
any  Governmental  Authority or other  Person;  or (v) result in the creation or
imposition of any Lien or other encumbrance of any nature whatsoever  against or
upon any of the Assets;  except,  with respect to (ii),  (iii),  (iv) and (v) of
this Section 5.3, for any conflict,  violation, breach, default, consent, filing
or  imposition  of any Lien that would not,  individually  or in the  aggregate,
materially  impair the  ability of Sellers or Pegasus to perform  hereunder  and
that would not, individually or in the aggregate, have a material adverse effect
on the Assets or the financial condition or the business of the System.

     Section 5.4 Title to Assets; Sufficiency.

     (a)  Sellers  have,  and at  Closing  will  transfer  to  Buyer,  good  and
marketable  title to (or in the case of Assets that are leased,  valid leasehold
interests in) and  possession of all of the Assets,  free and clear of all Liens
except for Permitted  Liens and the Liens  described on Schedule 5.4. All of the
Liens  described  on Schedule  5.4 shall be released or  discharged  at Closing.
Except as set forth on  Schedule  5.4,  no Person  (including  any  Governmental
Authority)  has any right to acquire an interest  in the System or any  material
Asset (including any right of first refusal or similar right), other than rights
of  condemnation  or  eminent  domain  afforded  by law (none of which have been
exercised  and no  proceedings  for  which  have  been  commenced  or, to either
Sellers' knowledge, threatened).

     (b) Except for the Excluded Assets,  the Assets constitute all property and
rights,  real and personal,  tangible and  intangible,  necessary or required to
conduct the Business.

     Section 5.5  Franchises,  Licenses,  and Contracts.  Except as described on
Schedule 5.5,  Sellers have delivered to Buyer true and complete  copies of each
of the  Franchises,  the Licenses and the Contracts,  all of which are listed on
Schedules  2.1(iii),(iv)  and (v),  including all  amendments,  assignments  and
consents  thereto.  Except for the Franchises,  Licenses and Contracts listed on
Schedules  2.1(iii),  (iv) and (v) or included in the Excluded Assets, no Seller
is bound or affected by any other material contract,  agreement or understanding

                                       15
<PAGE>

which  relates to the System or  requires  any  franchise,  material  license or
material  permit  from any  Governmental  Authority  to enable it to operate the
System  as it is  currently  operated.  Each  of the  Franchises,  Licenses  and
Contracts is in full force and effect and is valid,  binding and  enforceable in
accordance with its terms.  Except as described on Schedule 5.5,  Sellers are in
material  compliance with the terms of the  Franchises,  Licenses and Contracts,
and there has not occurred any material default by either Seller or, to Sellers'
knowledge,  by  any  other  Person  under  any of the  Franchises,  Licenses  or
Contracts. Sellers are in possession of all Pole Attachment Agreements necessary
to operate the System,  and all Pole Attachment  Agreements  which relate to the
System are listed on Schedule  2.1(v),  together  with the current  rate of pole
attachment  fees in effect  thereunder  (which Sellers shall update prior to the
Closing in the event such fees are  modified).  Except as  described on Schedule
5.5,  Sellers are in  possession  of all  programming  agreements  necessary  to
operate the System,  and all programming  agreements  which relate to the System
are listed on Schedule  2.1(v),  together  with the current rate  schedules  and
volume discounts in effect  thereunder  (which Sellers shall update prior to the
Closing in the event such rates or discounts are  modified).  Except as provided
on  Schedule  5.10,  Sellers are in  possession  of all  retransmission  consent
agreements  necessary  to operate the  System,  and all  retransmission  consent
agreements  which relate to the System are listed on Schedule  2.1(v),  together
with the summary of the  principal  terms  thereof  (which  Sellers shall update
prior to the Closing in the event such terms are modified).

     Section 5.6 Employee  Benefits.  Schedule  5.6 lists all  Employee  Benefit
Plans  maintained,  sponsored or  contributed  to by Sellers with respect to its
employees  serving the System.  Neither  Seller (and any other entities which by
reason of Section 414 of the Code are treated  together  with either Seller as a
single  employer under Code Section 414)  maintains or  contributes  to, nor has
either  Seller  maintained  or  contributed  to within the past six  years,  any
Multiemployer  Plan,  as  defined  in Section  3(37) of ERISA.  With  respect to
Sellers'  employees  serving  the  System,  neither  Seller is, and no  Employee
Benefit Plan  maintained by either Seller is, in violation of applicable law and
regulation in any material respect;  no reportable event,  within the meaning of
Sections  4043(c)(1),  (2),  (3),  (5),  (6),  (7),  (10) or (13) of ERISA,  has
occurred and is continuing  with respect to any such Employee  Benefit Plan; and
no prohibited  transaction  for which an exemption is not available,  within the
meaning of Title I of ERISA,  has  occurred  with  respect to any such  Employee
Benefit  Plan.  Buyer is not required  under ERISA,  the Code or any  collective
bargaining  agreement to  establish,  maintain or continue any Employee  Benefit
Plan  maintained by either Seller or any affiliate of either  Seller.  Except as
set forth on Schedule  5.6,  neither  Seller is, with  respect to its  employees
serving the System,  a party to any severance pay agreement or arrangement  with
any person. With respect to any severance pay agreement, the consummation of the
transactions  contemplated by this Agreement will not result in any liability to
Buyer by reason of an  acceleration  in the time of  payment  or  vesting  or an
increase  in the  amount of  compensation  due to any  individual  covered  by a
severance pay  agreement.  All severance pay policies of Sellers with respect to
employees  serving  the  System  may be  terminated  at will.  All group  health
insurance  plans, as defined under Code Section  4980B(g),  maintained by or for
the employees of Sellers serving the System comply in all material respects with
all COBRA health continuation  coverage  requirements under Section 4980B of the
Code.  Sellers and Buyer agree that, except as may be required by any federal or
state law, Sellers shall be responsible for providing COBRA health  continuation

                                       16
<PAGE>

coverage  under Code Section 4980B and Part 6 of Title I of ERISA to any past or
present  employees of Sellers serving the System who terminated their employment
or whose  employment  is  terminated on or prior to the Closing and that Sellers
shall be solely  responsible for all  liabilities  arising  thereunder.  Sellers
shall provide all required COBRA health continuation  coverage notices and HIPAA
Certificates of Creditable  Coverage for its past or present  employees  serving
the System  through the Closing  Date,  including  any that may be required as a
result of the consummation of the transactions contemplated by this Agreement.

     Section  5.7  Employees.  With  respect to Sellers'  employees  serving the
System:

     (a) There are no collective bargaining agreements applicable to any persons
employed by either Seller that renders  services in connection  with the System,
and  neither  Seller has any duty to bargain  with any labor  organization  with
respect to any such Person.  Except as set forth on Schedule 5.7,  there are not
pending any unfair labor practice  charges  against either Seller,  nor is there
any  demand  for  recognition,  or any  other  request  or  demand  from a labor
organization  for  representative  status with respect to any person employed by
either Seller that renders services in connection with the System.

     (b) Except as set forth on Schedule  5.7,  Sellers are in compliance in all
material respects with all applicable Legal Requirements  respecting  employment
conditions and practices,  have withheld all amounts  required by any applicable
Legal  Requirements  or Contracts  to be withheld  from the wages or salaries of
System  employees,  and are not liable for any  arrears of wages or any Taxes or
penalties for failure to comply with any of the foregoing.

     (c) Except as set forth on Schedule  5.7,  Sellers  have not engaged in any
unfair labor practice within the meaning of the National Labor Relations Act and
have not violated any Legal Requirement prohibiting  discrimination on the basis
of race, color, national origin, sex, religion, age, marital status, or handicap
in its employment conditions or practices, in any respect material to the Assets
or the financial  condition of the System.  Except as set forth on Schedule 5.7,
there are no pending or, to Sellers' knowledge, threatened unfair labor practice
charges or discrimination  complaints relating to race, color,  national origin,
sex, religion, age, marital status, or handicap against either Seller before any
Governmental Authority.

     (d)  Except as set forth on  Schedule  5.7,  there are no  existing  or, to
Sellers' knowledge,  threatened,  labor strikes,  disputes,  grievances or other
labor controversies  affecting the System.  There are no pending or, to Sellers'
knowledge,  threatened  representation  questions  respecting  employees  of the
System.  Except as set  forth on  Schedule  5.7,  there  are no  pending  or, to
Sellers' knowledge,  threatened,  arbitration proceedings under any Contract. To
Sellers' knowledge, there exists no basis for any of the above.

     (e) Except as set forth on Schedule 5.7,  neither  Seller is a party to any
employment agreement, written or oral, relating to employees of the System which
cannot be terminated at will by such Seller without liability.

     (f) Schedule 5.7 sets forth a true and complete  list of the names,  titles
and rates of  compensation  of all of the employees of the System.  Schedule 5.7

                                       17
<PAGE>

also  sets  forth  accrued  vacation  and sick  time as of a recent  date,  1999
Christmas bonuses paid and hire dates for the employees of the System.

     Section 5.8 Litigation. Except for any Litigation that may affect the cable
television industry (nationally or regionally) generally and except as set forth
on Schedule  5.8,  there is no  Litigation  or Judgment  pending or, to Sellers'
knowledge,  threatened  against either Seller relating to the System, the Assets
or the ability of Sellers to perform their obligations under this Agreement,  or
which  seeks or  could  result  in the  modification,  revocation,  termination,
suspension, or other limitation of any of the Franchises, Licenses or Contracts.
Sellers are retaining all  obligations  and  liabilities for Litigation to which
either of them is a party,  other  than  Litigation  that may  affect  the cable
television industry (nationally or regionally) generally;  provided that Sellers
are retaining all obligations and liabilities for any Litigation  involving Beam
Laser  Systems,  Inc.  arising out of action or  inactions  of Sellers or events
occurring before the Closing Time.

     Section 5.9 Tax Returns; Other Reports.

     (a) Each Seller (or each  affiliated,  combined  or unitary  group of which
such Seller is or was a member) has (i) duly and timely filed all Tax Returns in
respect of Taxes  relating  to the Assets,  the  Business or the System and (ii)
timely paid all Taxes shown as due or owing with respect to such Tax Returns and
has timely  paid all other Taxes due or owing with  respect to the  Assets,  the
System or the  Business  (including  Taxes  required  to be  withheld or paid in
connection with amounts paid or owing to any employee, independent contractor or
other third party).

     (b) None of the Assets (i) is  property  that is  required to be treated as
owned by another person pursuant to the "safe harbor lease" provisions of former
Section  168(f)(8) of the Code,  (ii) is  "tax-exempt  use property"  within the
meaning of Section 168(h) of the Code, or (iii)  directly or indirectly  secures
any debt the interest of which is tax-exempt under Section 103(a) of the Code.

     (c) There are no Liens for Taxes on any of the Assets  except for Permitted
Liens.

     (d) Neither Seller nor any  affiliated,  combined or unitary group of which
either  Seller is or was a member is a party to any Tax  allocation  or  sharing
agreement, except as provided in this Agreement, under which Buyer or the Assets
could be subject to Tax or other liability after the Closing.

     (e) No transaction contemplated by this Agreement is subject to withholding
under Section 1445 of the Code.

     (f) Neither  Seller (or affiliate of either Seller) has received any notice
of deficiency or assessment  of proposed  deficiency  from any taxing  authority
pertaining to the Assets, the Business or the System.

                                       18
<PAGE>

     Section 5.10 Compliance with Legal Requirements.

     (a) Each Seller,  except as set forth on Schedule 5.10, is in compliance in
all  material  respects  with  all  Legal   Requirements,   including,   without
limitation,  the Communications  Act, the Copyright Act, the Occupational Safety
and Health Act, and rules and regulations promulgated thereunder. Neither Seller
has  received  notice  from  any  Governmental  Authority,   including,  without
limitation,  the FCC, of any violation of its rules and  regulations  insofar as
they apply to the System.

     (b) Sellers  have  submitted to the FCC all  material  filings,  including,
without limitation,  cable television  registration  statements,  current annual
reports,  annual regulatory fee filings,  aeronautical  frequency usage notices,
and current  cumulative  leakage index reports ("CLI"),  that are required under
the rules and  regulations  of the FCC. A request  for  renewal  has been timely
filed under  Section  626(a) of the 1984 Cable Act with the proper  Governmental
Authority with respect to each Franchise of the System expiring within 36 months
of the date of this  Agreement and true and correct copies of such requests have
been delivered to Buyer.

     (c) Except as set forth on Schedule 5.10, Sellers have, with respect to the
System,  been certified as in compliance with the FCC's equal  opportunity rules
for the last seven  reporting  years.  Except as set forth on Schedule 5.10, the
System has received a passing score on the most recent CLI tests, based upon the
signal leakage criteria prescribed by the FCC.

     (d)  Except as set  forth on  Schedule  5.10,  the  System  is in  material
compliance  with the must-carry  and  retransmission  consent  provisions of the
Communications  Act and the FCC rules and  regulations  promulgated  thereunder.
Except as set forth on Schedule  5.10, all of the broadcast  signals  carried by
the System are carried  pursuant to the must-carry  provisions of Section 534 of
the Communications Act and the regulations promulgated thereunder or pursuant to
a re-transmission  consent granted by the station in accordance with Section 325
of the Communications Act of 1934, as amended,  and the regulations  promulgated
thereunder.  Except  as set  forth  on  Schedule  5.10,  all  of the  broadcasts
television signals entitled to be carried pursuant to said must-carry provisions
are in fact carried by the System.

     (e)  Each  Seller  is  permitted   under  the  Franchises  and  FCC  rules,
regulations  and orders and any other  applicable  law,  rule or  regulation  to
distribute the transmissions (whether television, satellite, radio or otherwise)
of video  programming  or other  information  that  Sellers  make  available  to
subscribers  of the System and to utilize all carrier  frequencies  generated by
the  operations  of the System,  and is  licensed to operate all the  facilities
required by law to be  licensed,  including,  without  limitation,  any Business
Radio and any Cable Television  Relay Service  facilities being operated as part
of the  System.  No written  requests or notices  have been  received by Sellers
during the prior three years from the FCC, the United States Copyright Office or
any other Person  challenging or questioning the right of Sellers to operate the
System in the  manner  currently  operated  or any  FCC-licensed  or  registered
facility used in conjunction with the operation of the System.

     (f)  Sellers  have  the  legal  right  and  authority,  including,  without
limitation, all necessary authorizations and licenses from the FCC, to carry and

                                       19
<PAGE>

to  continue  to carry and use in the  conduct of the  Business  all signals now
being  carried by the System.  All such  signals are  positioned  as required by
applicable law and regulation.  Except as disclosed on Schedule 5.10, no written
notices or demands have been  received by Sellers  from the FCC, any  television
station or any other Person of any claim or objection  challenging  the right of
Sellers to carry or deliver any signal now carried or  delivered  by the System.
No  administrative  or  judicial  proceeding  involving  the  right to carry and
deliver such signals has been  commenced  and, to the  knowledge of Sellers,  no
such proceeding has been threatened,  except for proceedings affecting the cable
television industry generally. Except as set forth on Schedule 5.10, Sellers are
providing  syndicated  exclusivity  and network  non-duplication  protection  to
stations entitled thereto which have requested such protection.

     (g) For the last three and one-half years,  Sellers have deposited with the
U.S.  Copyright  Office  all  statements  of  account  and other  documents  and
instruments, and paid all royalties, supplemental royalties, fees and other sums
to the U.S.  Copyright  Office  under  the  Copyright  Act with  respect  to the
Business  and  operations  of the System as are  required  to  obtain,  hold and
maintain the compulsory  license for cable television  systems prescribed in the
Copyright  Act. To the  knowledge  of  Sellers,  except as set forth on Schedule
5.10,  there is no  inquiry,  claim,  action or demand  pending  before the U.S.
Copyright Office or from any other party that questions the copyright filings or
payments made by Sellers with respect to the System.

     (h) All  necessary  FAA  approvals  have been  obtained with respect to the
height and  location  of towers used in  connection  with the  operation  of the
System and the System is being  operated in material  compliance  with the rules
and  regulations of the FAA.  Without  limiting the generality of the foregoing,
the  existing  towers of the  System  are  obstruction  marked  and  lighted  in
accordance  with the rules and regulations of the FAA and FCC or are exempt from
such requirements, and all required tower registrations have been filed with the
FCC. All required  authorizations,  including, but not limited to, Hazard to Air
Navigation  determinations,  for such towers have been issued by and pursuant to
the rules and regulations of the FAA.

     (i)  Sellers  have  heretofore  provided  copies  to  Buyer  of each of the
Franchises.  Sellers  are not  aware of any  reason  why the  Telecommunications
Regulatory  Board  would  not  consent  to the  transfer  and  extension  of the
Franchises as contemplated hereby.

                                       20
<PAGE>

     Section  5.11  System  Information.  The  System  is a small  cable  system
pursuant  to the FCC's rate  rules.  The FCC has  determined  that the System is
subject  to  Effective  Competition  and  therefore,  is  not  subject  to  rate
regulation. At Closing, the System will meet or exceed the performance standards
as shown on the proof of performance tests on Schedule 5.11.  Schedule 5.11 sets
forth a true and accurate  description  of the following  information  as of the
dates set forth in such Schedule:

          (i) the  approximate  number of linear miles of energized  cable plant
     that are included in the Assets;

          (ii) a general  description  of Basic Cable  services,  Basic  Antenna
     services  and  Premium or Pay  services  available  from the System and the
     rates charged by Sellers for such services;

          (iii) the number of Equivalent  Basic  Subscribers  (which will not be
     less than 55,000 on the date hereof and on the Closing Date), the number of
     Basic Antenna subscribers and the number of Pay Units;

          (iv) the  stations  and signals  carried by the System and the channel
     position of each such signal and station;

          (v)  the  Megahertz   capacity  of  the  System   including,   without
     limitation, whether the System has been digitized;

          (vi) the analog channel capacity of the System;

          (vii) the principal  marketing,  promotional and advertising  programs
     currently in effect for the System and any other such program that had been
     in effect at any time since January 1, 1998;

          (viii) the rates and charges for  installation,  converter,  equipment
     and monitor services;

          (ix)  an  estimate  of the  percentage  of  single-family  houses  and
     residential  dwelling  units  serviced by the System  (each of which can be
     legally serviced by the System by using no more than 150 feet of drop cable
     possessed by the System); and

          (x) the latest proof of performance tests for the System.

     Section 5.12 Environmental Matters.

     (a) Neither  Seller has received any notice of, and to Sellers'  knowledge,
none of the Owned Real Property or Leased Real Property is listed on the federal
National   Priorities  Lists  or  the  Comprehensive   Environmental   Response,
Compensation,  Liability  Information  System,  Leaking Underground Storage Tank
List  (federal  or  local),  or is the  subject of any  federal  or Puerto  Rico
"Superfund"   evaluation  or  investigation,   or  any  other  investigation  or

                                       21
<PAGE>

proceeding  of any  Governmental  Authority  evaluating  whether  any removal or
remedial  action is necessary to respond to any release of Hazardous  Substances
on or in connection with the Owned Real Property or Leased Real Property.

     (b) To Sellers' knowledge,  no above ground or underground storage tanks or
surface  impoundments  have been or are located in or on the Owned Real Property
or Leased Real Property.

     (c) Except as set forth on Schedule  5.12,  each Seller is in compliance in
all  material  respects  with,  and holds all  material  permits,  licenses  and
authorizations  required under all Legal  Requirements with respect to pollution
or protection  of the  environment,  including  Legal  Requirements  relating to
actual or threatened emissions,  discharges, or releases of Hazardous Substances
into the ambient air, surface water,  ground water,  land, or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport  or handling of  Hazardous  Substances,  insofar as they relate to the
Owned Real  Property or Leased Real  Property.  Neither  Seller has received any
notice of, and to Sellers' knowledge there are no circumstances relating to, any
past  or  present  condition,  circumstance,   activity,  practice  or  incident
(including  without  limitation,  the presence,  use,  generation,  manufacture,
disposal,  release or threat to release of any Hazardous  Substances  from or on
the Owned Real Property or Leased Real  Property),  that could  interfere  with,
prevent  continued  compliance  with,  or result in any Losses  pursuant to, any
Legal Requirement with respect to pollution or protection of the environment, or
that is reasonably  likely to give rise to any Losses,  based upon or related to
the processing,  distribution,  use, treatment, storage, disposal, transport, or
handling,  or the emission,  discharge,  release, or threatened release into the
environment,  of  any  Hazardous  Substance  on,  from  or  attributable  to the
operation of the System or the Owned Real Property or Leased Real Property.

     (d)  "Hazardous  Substances"  has the  meaning  given in the  Comprehensive
Environmental  Response,  Compensation and Liability Act of 1980 (42 U.S.C.A. SS
9601 et seq.),  as amended,  and rules and  regulations  promulgated  thereunder
("CERCLA"),  and, for purposes of this Agreement,  shall also include substances
such as petroleum, crude oil, petroleum products, or any fraction thereof, which
are not otherwise  specifically  listed or  designated  as Hazardous  Substances
under CERCLA.

     Section 5.13 Financial and  Operational  Information.  Attached as Schedule
5.13  are  the  following   financial   statements   (collectively,   "Financial
Statements"):  (i) audited combined balance sheets of Sellers as of December 31,
1998 and 1999,  and audited  combined  statements of  operation,  cash flows and
changes in partners' or  shareholders'  equity for each of the years then ended;
(ii) audited  balance  sheets of Cable Systems USA,  Partners as of December 31,
1997 and 1998,  and audited  statements of operation,  cash flows and changes in
partners'  equity for each of the years then  ended;  (iii)  unaudited  combined
balance  sheet of  Sellers as of  February  29,  2000,  and  unaudited  combined
statements of  operation;  and (iv)  unaudited  statements of operation of Cable
Systems USA,  Partners for the three months ended March 31, 1999.  The Financial
Statements have been prepared in accordance with generally  accepted  accounting
principles  and present  fairly the net assets and results of  operations of the
persons  reported on as of the dates and for the periods  indicated,  subject to
normal year-end adjustments.

                                       22
<PAGE>

     Section 5.14 No Adverse Change. Since December 31, 1999, (i) there has been
no material adverse change in the condition  (financial or otherwise) or results
of operations of the System taken as a whole;  (ii) the Assets and the financial
condition and operations of the System taken as a whole have not been materially
and adversely affected as a result of any fire, explosion,  accident,  casualty,
labor trouble,  flood,  drought,  riot,  storm,  condemnation,  or act of God or
public force or  otherwise;  (iii)  Sellers have not made any sale,  assignment,
lease or other  transfer of assets or properties of the System other than in the
normal and usual  course of  business;  and (iv) except as set forth on Schedule
5.14,  Sellers  have  continued  the pricing  policies  and have  conducted  the
promotional,  advertising  and other business and  operational  activities  with
respect to the Systems  (including,  without  limitation,  billing,  collection,
subscriber  relations and joint trenching  activities)  materially in the normal
and ordinary course of business consistent with past practices.

     Section 5.15  Taxpayer  Identification  Number.  Sellers'  respective  U.S.
Taxpayer  Identification  Numbers are as set forth in the introductory paragraph
of this Agreement.

     Section  5.16  Intangibles.  Sellers  neither use nor hold any  copyrights,
trademarks,  trade names, service marks, service names, logos, licenses, permits
or other similar  intangible  property rights and interests in the operations of
the System that do not  incorporate  the name  "Pegasus" or variations  thereof,
other  than as set forth on  Schedule  5.16.  In the  operation  of the  System,
Sellers are not to their knowledge infringing upon or otherwise acting adversely
to any such  intangible  property rights and interests owned by any other Person
or Persons,  and there is no claim or action pending,  or to Sellers'  knowledge
threatened, with respect thereto.

     Section 5.17 Accounts  Receivable.  Sellers'  accounts  receivable from the
System are actual and bona fide  receivables  representing  obligations  for the
total dollar amount  thereof  shown on the books of Sellers which  resulted from
the regular course of Sellers' business.

     Section  5.18  Bonds.  Except as set forth on Schedule  5.18,  there are no
franchise,  construction,  fidelity,  performance,  or other bonds or letters of
credit posted by either Seller in connection with the System or the Assets.

     Section 5.19  Transactions  with  Affiliates and  Employees.  Except as set
forth on Schedule 5.19,  there is no lease,  sublease,  indebtedness,  contract,
agreement,  understanding,  or other  arrangement  of any kind  (whether oral or
written)  entered into by either Seller with respect to the System or applicable
to any Asset with any employee, affiliate or shareholder of such Seller.

     Section 5.20 Sole  Franchisee.  Each Seller is the sole franchisee for each
of its franchise areas.  There is no overbuild of the System,  nor any overbuild
pending,  and to  Sellers'  knowledge,  there  is no  overbuild  threatened.  In
addition, there is no Multipoint Distribution System ("MDS") or Multichannel MDS
("MMDS") providing signals to the areas served by the System nor any such MDS or
MMDS service pending, and to Sellers' knowledge, there is no MDS or MMDS service
threatened.

                                       23
<PAGE>

     Section 5.21 Real Property. Schedule 5.21 describes the Owned Real Property
and  the  Leased  Real  Property,  including,  in the  case of the  Leased  Real
Property,  the lessor and the  principal  terms and  conditions  of each  lease.
Except as described in Schedule 5.21 or in the appropriate title report relating
to the real property (copies of which have been delivered to the Buyer), Sellers
have good and valid title in pleno dominio to all of the Owned Real Property, in
each case free and clear of any Lien  except  for (a) Liens for  current  taxes,
assessments  and  governmental  charges  and  levies  which may be paid  without
penalty,  interest or other  additional  charge or which are being  contested in
good faith by appropriate proceedings and are not material in amount or value in
relation to the value of the associated property; (b) such utility and municipal
easements and  restrictions,  if any, as do not detract in any material  respect
from the value or  marketability  of the  property  subject  thereto  and do not
interfere  with the use of such  property;  (c) Permitted  Liens;  and (d) Liens
which will be removed at or prior to  Closing.  No  condemnation  proceeding  is
pending or to the  knowledge  of Sellers,  threatened  with  respect to any real
property identified in Schedule 5.21. The current use of all real property owned
by  Sellers  is in  compliance  in all  material  respects  with the  applicable
certificate of occupancy and all applicable  Legal  Requirements.  Since Sellers
have owned the System they have  neither  received  notice nor  acquired  actual
knowledge of any unresolved claims by a property owner asserting that Sellers do
not have any necessary  right of way to keep or gain access to cable included in
the System in its current location.

     Section 5.22  Insurance.  Schedule  5.22 is a true and complete list of all
policies  of  insurance,  performance  bonds and letters of credit in force with
respect to the System.  Such policies are each outstanding and in full force and
effect on the date  hereof.  Schedule  5.22 sets forth an accurate  and complete
list of all unresolved claims made against Sellers,  or claims that Sellers have
reason to believe may be made  against it, with  respect to matters  believed by
Sellers to be insured  against or covered by any insurance or benefit  policy or
plan.

     Section 5.23 Finders and  Brokers.  Neither  Sellers nor Pegasus have dealt
with any finder or broker in connection  with the  transactions  contemplated by
this  Agreement in any manner that would impose on Buyer any obligation to pay a
fee or commission.  Sellers will be  responsible  for the fees of Waller Capital
Corporation.

     Section  5.24 Full  Disclosure.  No  representation  or warranty of Sellers
contained in this Agreement contains an untrue statement of a material fact.

     Section 5.25 Year 2000.  There has not occurred,  and Sellers do not expect
that there will occur,  any material  disruption  in the  operations or business
systems of Sellers  resulting from the inability of computer  systems of Sellers
or equipment  containing  embedded  microchips to recognize or properly  process
dates in or following the year 2000.

                                    Article 6
                                    COVENANTS

     Section 6.1 Certain Affirmative  Covenants of Sellers Regarding the System.
Except as Buyer may  otherwise  consent  in  writing,  between  the date of this
Agreement and Closing each Seller shall:

                                       24
<PAGE>

     (a) (i) continue to operate its System in the  ordinary  course of business
in accordance with such Seller's past  practices,  (ii) continue to maintain the
tangible  Assets in their  present  condition  and repair  consistent  with such
Seller's past practices,  ordinary wear excepted,  (iii) continue to perform all
of its obligations  under all of the Franchises,  Licenses and Contracts without
material breach or default  consistent  with such Seller's past practices,  (iv)
continue  to operate the System in all  material  respects  in  compliance  with
applicable Legal Requirements consistent with such Seller's past practices;  (v)
continue the pricing, marketing, advertising, promotion (including rebates, free
or discounted  services or payments made on behalf of or to any  subscriber) and
other  activities  with  respect to the  System  (including  without  limitation
billing,  collection,  subscriber,  and joint trenching matters) in all material
respects  in the normal and  ordinary  course of business  consistent  with such
Seller's  past  practices;  (vi)use  commercially  reasonable  efforts  to  (A)
preserve  the current  business  organization  of the System  intact,  including
preserving existing  relationships with Persons having business with the System,
(B)  keep  available  the  services  of  its  employees  providing  services  in
connection  with the System,  and (C)  maintain  inventories  of  equipment  and
supplies  for the  System  at  historic  levels;  (vii)  renew  all  Transferred
Contracts in the ordinary course of business on terms  substantially  similar to
other Transferred Contracts of the same type and (viii) maintain in force all of
the policies of  insurance,  performance  bonds and letters of credit  listed on
Schedule 5.22;

     (b) upon  reasonable  prior  notice to such  Seller,  give to Buyer and its
counsel,  accountants,  and other representatives  access during normal business
hours to the System, the employees of the System,  personnel records,  the Owned
Real  Property,  the Leased Real  Property,  the other Assets and such  Seller's
books and records  relating to the System,  provided  that such  persons who are
provided access shall be accompanied by a representative of such Seller and that
such access shall not disrupt the normal business operations of the System;

     (c) as soon as possible after the date of this  Agreement,  and at Sellers'
expense,  exercise  commercially  reasonable  efforts  to obtain in  writing  as
promptly as practicable  all  approvals,  waivers,  authorizations  and consents
described  on  Schedule   5.3  from  all  Persons  that  are  not   Governmental
Authorities,  and deliver to Buyer copies thereof  promptly upon receiving them;
provided  that  "commercially  reasonable  efforts" for this  purpose  shall not
require Sellers to undertake  extraordinary  or unreasonable  measures to obtain
such  approvals,  waivers,   authorizations  and  consents,  including,  without
limitation,  the  initiation  or  prosecution  of legal  proceedings;  provided,
further,  that the costs and expenses  associated with the performance after the
Closing Date of  obligations  which are required by a third party as a condition
of granting  its consent or approval  shall be borne  solely by Buyer,  if Buyer
consented  thereto in writing in advance of obtaining such signed  consents;  in
the event  that  Buyer's  cooperation  is  required  to obtain  such  approvals,
waivers,  authorizations  or consents,  Buyer shall be  responsible  for its own
out-of-pocket costs in connection therewith;

     (d)  promptly,  and in any event within 31 days after the end of each month
between the date hereof and the Closing,  deliver to Buyer copies of any monthly
and  year-to-date  financial  statements  for the System and other  reports with
respect to the operation of the System regularly  prepared by such Seller at any
time from the date hereof until Closing;

                                       25
<PAGE>

     (e) promptly inform Buyer in writing of any material  adverse change in the
condition  (financial or otherwise),  operations or business of the System taken
as a whole;

     (f)  continue to carry and  maintain in full force and effect its  existing
casualty and liability insurance through and including the Closing Date; and

     (g) maintain its books, records and accounts with respect to the Assets and
the operation of the System in the usual, regular and ordinary manner on a basis
consistent with past practices.

     Section 6.2  Approvals  from  Governmental  Authorities.  Sellers and Buyer
shall  (a)  file  the  appropriate  notifications  under  the HSR Act as soon as
possible,  but in no event  later than 10 days after the date of this  Agreement
and (b)  file  with any  Governmental  Authorities  from  which  the  approvals,
authorizations  and  consents  described  in  Schedule  5.3,  and  the  renewals
described in Section 7.1(n),  must be obtained,  joint  applications  requesting
such  approvals,  authorizations,  consents and renewals as soon as practicable,
but in no event later than 30 days after the date of this Agreement. Sellers and
Buyer shall each exercise commercially  reasonable efforts in furtherance of the
foregoing (including Buyer's cooperation in attending meetings with Governmental
Authorities  and  providing  the  financial  data,  information  as to operating
experience,  appropriate  insurance  and surety bonds and any other  information
required to timely prepare and submit the applications  referenced  above),  and
the  parties  shall  exercise  commercially   reasonable  efforts  necessary  or
appropriate  to expedite the processing of the  applications  and to secure such
authorizations, approvals, consents and renewals and to obtain early termination
of the waiting  period under the HSR Act.  Sellers and Buyer shall  furnish each
other with any  correspondence  from or to,  and notify  each other of any other
communications   with,   Governmental    Authorities   that   relate   to   such
authorizations,  approvals, consents and renewals, and each party shall have the
right  to  participate  in  any  hearings  or  proceedings  before  Governmental
Authorities  with  respect  to  such  authorizations,  approvals,  consents  and
renewals.  Each  party  shall  bear  its own  expenses  in  connection  with its
compliance with the foregoing.

     Section 6.3 Employee  Matters.  Sellers shall be responsible  for and shall
cause to be discharged and satisfied in full on or prior to the Closing Date all
amounts owed to any employee of the System  through the Closing Time,  including
wages,  salaries,  accrued vacation,  sick pay, Christmas bonus, any employment,
incentive,  compensation or bonus  agreements,  or other benefits or payments on
account of  termination,  and shall  indemnify and hold Buyer  harmless from any
Losses thereunder. Nothing in this Section is intended to confer on any employee
of the  System  any right to  employment  by Buyer,  which  shall be in  Buyer's
complete discretion (subject to any applicable Legal Requirement). Sellers shall
terminate all employees of the System  effective as of the Closing and shall pay
all liabilities associated with such terminations,  including without limitation
all liabilities associated with Law 80.

     Section 6.4 WARN Act.  Sellers shall comply with the employee  notification
requirements,  if applicable,  of the Federal  Worker  Adjustment and Retraining
Notification Act.

     Section  6.5  Exclusivity.  During the period  from the date  hereof to the
earlier of (i) the consummation of the transactions  contemplated hereby or (ii)

                                       26
<PAGE>

the  termination of this  Agreement,  Sellers and Pegasus will not,  directly or
indirectly,  through any partners, members,  shareholders,  directors, officers,
employees, agents,  representatives or otherwise,  solicit, initiate, facilitate
or  encourage   (including  by  way  of  furnishing  or  disclosing   non-public
information)  any  inquiries or the making of any  proposal  with respect to any
merger,  consolidation or other business combination involving PCT or MCT or the
acquisition  of all or any of the Assets or the  capital  stock of PCT or MCT or
any portion  thereof (an  "Acquisition  Transaction")  or negotiate,  explore or
otherwise  engage in discussions with any Person with respect to any Acquisition
Transaction or enter into any agreement,  arrangement or understanding requiring
it to abandon,  terminate or fail to consummate the transactions contemplated by
this Agreement. Sellers shall immediately advise Buyer in writing of the receipt
of any inquiries or proposals related to an Acquisition Transaction.

     Section  6.6 Certain  Negative  Covenants  of Sellers.  Except as Buyer may
otherwise consent in writing,  which consent shall not be unreasonably withheld,
or except as  otherwise  permitted by this  Agreement,  between the date of this
Agreement and Closing,  Sellers shall not operate the Business in other than the
ordinary course, including,  without limitation,  (a) modify, terminate,  renew,
suspend,  abrogate or enter into (1) any  Franchise  or License or (2)  provided
such modification,  termination,  renewal, suspension, abrogation or entry would
not be materially adverse to any material Contract,  (b) sell, assign,  lease or
otherwise  dispose of any of the  Assets,  unless  such  Assets are  consumed or
disposed of in the  ordinary  course of  business or disposed of in  conjunction
with the acquisition of replacement  property of equivalent kind and value,  (c)
create,  assume, or permit to exist any Lien upon any Asset except for Permitted
Liens and Liens granted by Sellers to their lenders  (which  Sellers agree shall
be listed on Schedule  5.4 and  discharged  by Sellers at or prior to closing as
provided in Section 6.10),  (d) change customer rates for any service or charges
for remote or installations or add, delete,  tier, retier or repackage any cable
television programming offered by the System except to the extent required under
the Communications Act or any other Legal Requirement, (e) increase any bonuses,
salaries  or other  compensation  to any  employee,  enter into any  employment,
severance or similar Contract,  or adopt or increase the payments to or benefits
under, any profit sharing,  bonus, deferred  compensation,  savings,  insurance,
pension, retirement or other employee benefit plan, for or with any employees of
the System, or (f) agree to do any of the foregoing.  Further, Sellers shall not
seek, accept or agree to amendments or modifications to, or any condition to the
transfer of, existing Franchises or Licenses,  or seek to accept or agree to any
modification  or amendment  to, or any  condition to the transfer of, any of the
Contracts, Owned Real Property or Leased Real Property other than any reasonable
modification,  amendment or condition  that does not  materially  and  adversely
affect Buyer.

     Section 6.7  Supplements  to Schedules.  Sellers  shall,  from time to time
prior to Closing,  supplement the Schedules to this  Agreement  with  additional
information that, if existing or known to Sellers on the date of this Agreement,
would  have  been  required  to be  included  in one or more  Schedules  to this
Agreement. Subject to Section 11.7, for purposes of determining the satisfaction
of any of the  conditions  to the  obligations  of Buyer in Section  7.1 and the
liability of Sellers for  breaches of Sellers'  representations  and  warranties
under this Agreement, the Schedules to this Agreement shall be deemed to include
only  (a) the  information  contained  in  such  Schedules  on the  date of this
Agreement and (b)  information  added to such  Schedules by written  supplements

                                       27
<PAGE>

delivered to Buyer by Sellers  prior to Closing that reflect  actions  expressly
permitted by this Agreement to be taken after the date hereof.

     Section  6.8  Notification  of Certain  Matters.  Each party will  promptly
notify the other party in writing of any fact,  event,  circumstance,  action or
omission  (i)  which,  if known at the date of this  Agreement,  would have been
required to be  disclosed  by it in or pursuant to this  Agreement,  or (ii) the
existence or occurrence of which would cause any of such party's representations
or warranties  under this  Agreement not to be true and accurate in any material
respect.  However,  except as  provided  in  Section  6.7 or  Section  11.7,  no
disclosure by Sellers pursuant to this Section 6.8 shall be deemed to amend this
Agreement  or to cure any  misrepresentation,  breach of  warranty  or breach of
covenant by any party.

     Section  6.9  Commercially   Reasonable  Efforts.   Each  party  shall  use
commercially  reasonable  efforts to take all steps  within its power,  and will
cooperate with the other party, to cause to be fulfilled those of the conditions
to the other party's obligations to consummate the transactions  contemplated by
this Agreement that are dependent upon its actions, and will execute and deliver
such instruments and take such other  commercially  reasonable actions as may be
necessary  to  carry  out  the  intent  of this  Agreement  and  consummate  the
transactions contemplated hereby.

     Section 6.10 Release of Certain Liens,  Litigation  and Other  Obligations.
Sellers shall take all  necessary  actions,  including  without  limitation  the
discharging or other  satisfaction of related claims and  obligations,  to cause
the  termination,  release,  and removal on or prior to the Closing  Date of all
Liens,  other than Permitted Liens,  including those listed on Schedule5.4.  In
addition,  Sellers shall discharge and otherwise  satisfy all other  outstanding
liabilities  and  obligations  relating  to the  System  other  than  subscriber
deposits and prepaid  subscriber  fees and other than Permitted  Liens,  in each
case  without  incurring  any  obligations  on the part of  Buyer  or  otherwise
adversely affecting Buyer.

     Section 6.11 Duty of Good Faith and Fair Dealing. Each party agrees that it
will act in good faith with regard to all  matters  that are the subject of this
Agreement,  and will neither intentionally nor knowingly take any action or omit
to take any action at any time for the primary  purpose of  depriving  the other
party  unfairly  of any right or benefit  that the other  party has at such time
under this Agreement.

     Section 6.12 Access to Books and  Records.  For a period of five years from
and after the  Closing  Date,  Buyer  will  permit  Sellers,  during  reasonable
business hours and upon  reasonable  notice,  to review any books,  records,  or
other documents  transferred to Buyer hereunder and relating to the period prior
to the Closing for any reasonable and necessary  purpose  reasonably  related to
the interest of Sellers and permit Sellers, at Sellers' own cost and expense, to
make copies of specific portions of any such books,  records, or other materials
relevant to the purpose  for which such review is  conducted.  In the event that
Buyer chooses to dispose of any such books,  records,  or other materials during
such five year period other than in the ordinary course consistent with the past
practices of Sellers, Buyer shall notify Sellers sufficiently in advance so that
Sellers may review and copy any such records to be disposed of.

                                       28
<PAGE>

     Section 6.13 Transfer Taxes.  Sellers will pay the Puerto Rico  documentary
tax on the  original of the deed  conveying  the Real  Property and the notarial
tariff relating to such  conveyance.  Buyer will pay the Puerto Rico documentary
tax on the  certified  copy of such deed and the  recording tax relating to such
conveyance.  Sellers  and Buyer will share  equally in the  payment of any other
sales, use,  transfer,  excise,  documentary or license taxes or fees imposed by
any  Governmental  Authority  with  respect to the transfer of any of the Assets
pursuant to this Agreement, including HSR filing fees.

     Section 6.14 Covenant Not to Compete.

     (a) General rule.  Except as provided in subsection (c), from and after the
Closing and continuing  throughout the period ending 40 months after the Closing
Date,  each Seller and  Pegasus  covenants  and agrees  that  neither it nor any
person or entity in which a Seller or Pegasus has any interest whatsoever, or in
which it  participates  in any way,  will  directly  or  indirectly  engage in a
Competitive  Business  in the  Service  Area  (as  such  terms  are  hereinafter
defined), whether as a shareholder,  partner, proprietor, associate, consultant,
representative or otherwise, nor shall it or they become or be interested in, or
associated with any other person, corporation, firm, partnership or other entity
whatsoever which is engaged in such a Competitive  Business in the Service Area.
In addition,  Sellers and Pegasus will not use the name "Pegasus" or derivatives
thereof in a Competitive Business in the Service Area.

     (b) Definitions. For the purposes of this Section 6.14:

     (1) The term "Competitive  Business" shall mean the business of operating a
     cable  television  system,  a master  antenna  television  system  (whether
     satellite or otherwise),  an over-the-air or subscription television system
     or service,  a direct satellite  television (DTS) service, a pay television
     system or service of any kind or nature,  whether now or hereafter created,
     and/or an MDS or MMDS,  and any other system for the  transmission  of both
     video and audio signals, whether now or hereafter created.

     (2) The term "IVDS" shall mean interactive video data service.

     (3) The term  "Pegasus  Affiliate"  shall mean any  affiliate  of  Pegasus,
     including  without  limitation any Satellite Carrier that at the time is an
     affiliate of Pegasus.

     (4) The term  "Satellite  Carrier" shall mean DIRECTV,  Inc.,  Galaxy Latin
     America,  Sky Latin America,  EchoStar  Communications  Corporation  and/or
     their respective affiliates and/or successors.

     (5)  The  term  "Service  Area"  shall  mean  the  territorial  area of the
     Commonwealth of Puerto Rico.

     (c) Exceptions.  Notwithstanding  the foregoing  provisions of this Section
6.14:

                                       29
<PAGE>

     (1) Except as provided in  subparagraph (3)  below, a Seller or Pegasus may
     directly or indirectly  make solely passive  investments in any Competitive
     Business  which is publicly  held and in which such Seller or Pegasus  will
     not own or control,  directly or indirectly,  in the aggregate,  securities
     which  constitute more than 5% of the voting rights or equity  ownership of
     such publicly held business.

     (2) A Seller and Pegasus shall not be restricted from engaging  directly or
     indirectly  in any of the  following  activities at any time in the Service
     Area:

          (i) Owning one or more broadcast  television  stations and contracting
     with one or more cable systems to carry the programming of that station.

          (ii) Providing services pursuant to PCS licenses.

          (iii) Providing IVDS.

          (iv) Being an internet service provider.

     (3) If a Seller, Pegasus or a Pegasus Affiliate,  by itself or as part of a
     group,  acquires  control  of all or  substantially  all of the assets of a
     Satellite Carrier, or merges with a Satellite Carrier or its affiliate,  or
     acquires all or a portion of the capital stock of a Satellite Carrier, then
     the Seller, Pegasus or the Pegasus Affiliate may provide satellite services
     in the  Service  Area,  so  long  as the  Seller,  Pegasus  or the  Pegasus
     Affiliate  does not  directly  or  (subject  to the last  sentence  of this
     paragraph (3)) indirectly (i) solicit,  through the use of direct mailings,
     door-to-door  marketing,  telemarketing  or  any  other  direct  or  target
     marketing activities, the residents, customers, owners or managers of homes
     or multiple  dwelling units located within the areas currently  serviced by
     the System, (ii) advertise in the areas currently serviced by the System in
     any newspaper or publication or on any radio or television  station,  other
     than  nationally  run  advertisements  that appear in  newspapers  or other
     publications that are distributed on a substantially  national basis in the
     United States or Latin  America,  or that run on a  substantially  national
     basis in the United States or Latin America on radio or network  television
     stations,  or (iii)  use the  name  "Pegasus"  or  derivatives  thereof  in
     marketing  its  satellite  services  in the  Service  Area.  So long as the
     restrictions  set forth in clauses (i), (ii) or (iii) of the first sentence
     of  this  paragraph  (3)  are  and  have  been  complied  with,  then  such
     restrictions  will  not  restrict  (A)  payment  of  sales  commissions  to
     retailers,  distributors and/or installers who are independent  contractors
     for or serve as agents of a Seller,  Pegasus or a Pegasus  Affiliate in its
     marketing and distribution of programming of a Satellite  Carrier,  as long
     as such commissions are not paid to facilitate direct or targeted marketing
     activities;  (B) cooperative  marketing,  promotion,  advertising and sales
     commission  programs  of a Seller,  Pegasus or a Pegasus  Affiliate  to the
     extent  that a Seller,  Pegasus  or a  Pegasus  Affiliate  pays  marketing,
     promotion  and  advertising  costs  and  sales  commissions  pursuant  to a
     standard dealer program  substantially similar to programs in effect in the
     United States or Latin America;  (C) solicitation of prospective  customers
     of a Satellite Carrier who contact a Seller, Pegasus or a Pegasus Affiliate

                                       30
<PAGE>

     other than as a result of solicitation or advertising prohibited by clauses
     (i), (ii) and (iii) of this paragraph  (3); and (D) a Seller,  Pegasus or a
     Pegasus Affiliate that has signed a definitive acquisition agreement with a
     Satellite Carrier from engaging in marketing activities consistent with the
     Satellite Carrier's  marketing  activities in effect in the Service Area at
     the time that the definitive  acquisition agreement is signed. Any activity
     permitted by the second  sentence of this  paragraph (3) will not be deemed
     to  constitute  an indirect  violation of clause (i),  (ii) or (iii) of the
     first sentence of this paragraph (3).

     (4) If a Satellite Carrier directly or indirectly  acquires an interest in,
     or the satellite assets of, Pegasus (and/or its affiliates),  the Satellite
     Carrier shall not be prohibited  from providing  satellite  services in the
     Service  Area so long as the  Satellite  Carrier  does not (i) use the name
     "Pegasus" or  derivatives  thereof in marketing its  satellite  services or
     (ii)  use  any  customer  lists,   subscriber   information  or  any  other
     confidential  or  proprietary  information  relating  to the  System or the
     Assets.

     (5) Subject to the restrictions, if applicable, set forth in paragraphs (3)
     and (4), a Seller, Pegasus or Pegasus Affiliate,  by itself or as part of a
     group, may acquire control of substantially all of the assets or stock of a
     Satellite  Carrier or may have a Satellite  Carrier  acquire an interest in
     assets or stock of the Seller, Pegasus or Pegasus Affiliate.

     (d) Right to Seek Injunctive  Relief.  Each Seller hereby  acknowledges and
agrees that a violation of this Section  6.14 will cause  irreparable  injury to
Buyer and that Buyer shall be  entitled,  in  addition  to any other  rights and
remedies  Buyer may have, at law or in equity,  to seek an injunction  enjoining
and  restraining  such  Seller from doing or  continuing  to do any such and any
other violations or threatened violations of this Section 6.14.

     (e) Severability  and Reformation.  If any provisions of this Section 6.14,
as applied to any party or to any other  circumstances,  shall be  adjudged by a
court to be invalid or unenforceable,  the same shall in no way affect any other
provisions hereof, the application of such provision in any other circumstances,
or the validity or  enforceability of this Section 6.14. The parties intend this
Section 6.14 to be enforced as written.  However,  if any  provision or any part
hereof is held to be unenforceable  because of the duration of such provision or
the area covered thereby,  Sellers and Buyer, as the case may be, agree that the
court  making the  determination  shall  have the power to reduce  the  duration
and/or area of such provision,  and/or to delete  specific words or phrases,  to
the extent necessary to make this Section 6.14  enforceable,  and in its reduced
or altered form, such provision shall be enforced.

     Section 6.15 Lien Searches. Sellers shall obtain, and deliver to Buyer, not
less than 45 days from the date  hereof,  comprehensive  searches  of the public
records of jurisdiction in which any of the Assets are located regarding any and
all Liens and  Judgments  affecting,  encumbering  or otherwise  relating to the
System or the Assets.

                                       31
<PAGE>

                                   Article 7
                              CONDITIONS PRECEDENT

     Section 7.1 Conditions to Buyer's Obligations.  The obligations of Buyer to
consummate the  transactions  contemplated by this Agreement shall be subject to
the following  conditions,  any one or more of which may be waived by Buyer,  in
its sole discretion.

     (a) Accuracy of  Representations  and Warranties.  Each  representation and
     warranty  of  Sellers  set forth in this  Agreement  that is  qualified  by
     materiality  shall be true and correct as of the date of this Agreement and
     as of the Closing Date as though made on and as of the Closing Date, except
     for   changes   contemplated   under   this   Agreement   and   except  for
     representations and warranties made only at and as of a certain date, which
     shall be true and correct as of that date. Each representation and warranty
     of Sellers set forth in this  Agreement  that is not so qualified  shall be
     true and correct in all material  respects as of the date of this Agreement
     and as of the Closing  Date as though  made on and as of the Closing  Date,
     except  for  changes  contemplated  under  this  Agreement  and  except for
     representations and warranties made only at and as of a certain date, which
     shall be true and correct as of that date.

     (b) Performance of Agreements. Sellers shall have performed in all material
     respects  all  obligations  and  agreements  and  complied in all  material
     respects with all covenants in this  Agreement to be performed and complied
     with by them at or before  Closing,  and no event which would  constitute a
     material breach of the terms of this Agreement on the part of Sellers shall
     have occurred and be continuing.

     (c) Officer's Certificate. Buyer shall receive a certificate executed by an
     executive  officer  of  each  Seller,  dated  as  of  Closing,   reasonably
     satisfactory in form and substance to Buyer, certifying that the conditions
     specified  in  Sections  7.1(a),  (b),  (d),  (g),  (i) and (k)  have  been
     satisfied.

     (d) Legal Proceedings. There shall be no Legal Requirement, and no Judgment
     shall have been  entered and not vacated by any  Governmental  Authority of
     competent  jurisdiction  in any  Litigation  or  arising  therefrom,  which
     enjoins,  restrains,  makes  illegal,  or  prohibits  consummation  of  the
     transactions  contemplated  by  this  Agreement,  and  there  shall  be  no
     Litigation  pending or threatened that seeks or that, if successful,  would
     have the effect of any of the foregoing.

     (e)  Sellers'  Counsel  Opinion.  Buyer  shall have  received an opinion of
     Drinker  Biddle & Reath LLP,  counsel to  Sellers,  dated as of the Closing
     Date, in the form of Exhibit 7.1(e).

     (f) Sellers' FCC Counsel  Opinion.  Buyer shall have received an opinion of
     Vorys, Sater, Seymour & Pease, special FCC counsel to Sellers,  dated as of
     the Closing Date, in the form of Exhibit 7.1(f).

     (g) Consents.  All consents to the  assignment  or transfer of  Transferred
     Contracts  and Licenses  described on Schedule 5.3 shall have been obtained
     and remain in full force and effect,  and Buyer shall have either  received

                                       32
<PAGE>

     an  assignment or transfer of all such  Transferred  Contracts or Licenses;
     provided,  however,  that if any such Contracts prove to be not assignable,
     Buyer shall have entered into  contracts  or other  arrangements  replacing
     such contracts,  and such replacement  contracts or arrangements give Buyer
     the  benefits  of such  non-assigned  Contracts  and do not impose on Buyer
     terms or  conditions  that,  in the  aggregate,  would be  materially  more
     detrimental to Buyer than the terms of the Contracts that they replace.

     (h) Evidence of Authorizing Actions.  Sellers shall have delivered to Buyer
     evidence  reasonably  satisfactory to Buyer to the effect that Sellers have
     taken all action necessary to authorize its execution of this Agreement and
     the consummation of the transactions contemplated hereby.

     (i)  Subscribers.  The number of Equivalent Basic  Subscribers  shall be at
     least 55,000 as of the Closing, and Sellers shall have delivered to Buyer a
     subscriber  list,  dated the Closing Date and  certified by Sellers to that
     effect.

     (j) Lien Releases.  Sellers shall have delivered  evidence  satisfactory to
     Buyer that all Liens (other than Permitted  Liens) affecting or encumbering
     the Assets have been  terminated,  released  and  (subject to  recordation)
     removed of record prior to or as of the Closing Date.

     (k) No Material  Adverse  Change.  There  shall not have been any  material
     adverse  change in the  condition  (financial  or  otherwise) or results of
     operations of the System taken as a whole.

     (l) Other  Documents.  All other  documents and other items  required to be
     delivered  under this  Agreement to Buyer at or prior to Closing shall have
     been delivered or shall be tendered at the Closing.

     (m) HSR Act.  The waiting  period  under the HSR Act shall have  expired or
     shall have been terminated.

     (n)   Telecommunications    Regulatory   Board.   The   consents   of   the
     Telecommunications Regulatory Board to (1) the assignment of the Franchises
     to Buyer and (2) the  renewal of the  Franchises  expiring in 2003 and 2004
     for a period of at least ten years from the Closing to Buyer,  in each case
     on  terms  no less  favorable  to Buyer  than  the  terms of the  Aguadilla
     Franchise, shall each have become a Final Order.

     (o)  Environmental  Matters.  Any Phase I  environmental  report ordered by
     Buyer with respect to any Owned or Leased Real Property hereunder and which
     is received by Buyer within 90 days after the date hereof shall not reflect
     any condition  that would  materially  and adversely  affect such property.
     This condition  shall be deemed  satisfied on or before the 100th day after
     the date hereof.

     (p) Title Reports and Insurance.  The Owned Real Property to be conveyed to
     Buyer  hereunder  shall be insurable at regular  standard rates, at Buyer's
     expense,  by any title insurance  company licensed to do business in Puerto

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     Rico and the Owned Real Property shall be free of exceptions to title which
     would,  individually or in the aggregate,  materially impair the ability of
     Buyer  following the Closing from  operating the System and using the Owned
     Real Property as presently operated or used.

     Section 7.2 Conditions to Sellers' Obligations.  The obligations of Sellers
to consummate the  transactions  contemplated by this Agreement shall be subject
to the following conditions,  any one or more of which may be waived by Sellers,
in their sole discretion:

     (a) Accuracy of Buyer's Representations and Warranties. Each representation
     and  warranty of Buyer set forth in this  Agreement  that is  qualified  by
     materiality  shall be true and correct as of the date of this Agreement and
     as of the Closing Date as though made on and as of the Closing Date, except
     for   changes   contemplated   under   this   Agreement   and   except  for
     representations  and warranties made only at and as of a certain date which
     shall be true and correct as of that date. Each representation and warranty
     of Buyer set forth in this Agreement that is not so qualified shall be true
     and correct in all material  respects as of the date of this  Agreement and
     shall  be  true as of the  Closing  Date  as  though  made on and as of the
     Closing  Date,  except for changes  contemplated  under this  Agreement and
     except for  representations and warranties made only at and as of a certain
     date which  shall be true and correct in all  material  respects as of that
     date.

     (b) Performance of Obligations.  Buyer shall have performed in all material
     respects  all  obligations  and  agreements  and  complied in all  material
     respects with all covenants in this  Agreement to be performed and complied
     with by it at or before  Closing  and no event  which  would  constitute  a
     material  breach of the terms of this  Agreement on the part of Buyer shall
     have occurred and be continuing.

     (c)  Officer's  Certificate.  Sellers  shall have  received  a  certificate
     executed by an executive officer of Buyer, dated as of Closing,  reasonably
     satisfactory  in  form  and  substance  to  Sellers,  certifying  that  the
     conditions specified in Sections 7.2(a) and (b) have been satisfied.

     (d) Legal Proceedings. There shall be no Legal Requirement, and no Judgment
     shall have been  entered and not vacated by any  Governmental  Authority of
     competent  jurisdiction  in any  Litigation  or  arising  therefrom,  which
     enjoins,  restrains,  makes  illegal,  or  prohibits  consummation  of  the
     transactions  contemplated hereby, and there shall be no Litigation pending
     or threatened  that seeks or that, if successful,  would have the effect of
     any of the foregoing.

     (e) Buyer's  Counsel  Opinion.  Sellers  shall have  received an opinion of
     Duane,  Morris & Heckscher LLP,  counsel to Buyer,  dated as of the Closing
     Date, in the form of Exhibit 7.2(e).

     (f) Evidence of Authorizing Actions.  Buyer shall have delivered to Sellers
     evidence  reasonably  satisfactory  to Sellers to the effect that Buyer has
     taken all action necessary to authorize the execution of this Agreement and
     the consummation of the transactions contemplated hereby.

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<PAGE>

     (g) Other  Documents.  All other  documents and other items  required to be
     delivered under this Agreement to Sellers at or prior to Closing shall have
     been delivered or shall be tendered at the Closing.

     (h) HSR Act.  The  waiting  period,  if any,  under the HSR Act shall  have
     expired or shall have been terminated.

                                    Article 8
                                     CLOSING

     Section 8.1 Closing; Time and Place. Subject to the terms and conditions of
this Agreement,  the closing of the transactions  contemplated by this Agreement
("Closing") shall occur and be effective as of the close of business on the last
calendar  day of the month in which all of the  conditions  to Closing have been
satisfied;  provided that in no event shall Closing occur later than October 31,
2000,  or,  if the only  matter  delaying  Closing  is the  satisfaction  of the
condition set forth in Section  7.1(n),  December 31, 2000 (as  applicable,  the
"Outside  Closing  Date").  The Closing  shall be held at the offices of Drinker
Biddle & Reath LLP, One Logan  Square,  18th and Cherry  Streets,  Philadelphia,
Pennsylvania,  19103,  at 10:00 a.m.  commencing on the business day immediately
preceding the Closing Date, except that the delivery of any documents  conveying
Owned Real Property and motor  vehicles,  and any other  documents that are more
conveniently  delivered in Puerto Rico,  shall be delivered and exchanged at the
offices of Noel S. Gonzalez  Miranda,  Citibank Tower,  Suite 1101, 252 Ponce de
Leon Avenue, San Juan, Puerto Rico 00918-2013.

     Section 8.2 Sellers'  Obligations.  At or prior to Closing,  Sellers  shall
deliver or cause to be delivered to Buyer the following:

     (a) Initial  Adjustment  Certificate.  The Initial  Adjustment  Certificate
     described in Section 2.7.

     (b) Bill of Sale.  Executed  counterparts  of a Bill of Sale and Assignment
     and Assumption Agreement relating to the Assets in the form attached hereto
     as   Exhibit 8.2(b)   (the  "Bill  of  Sale")  and  such  other  assignment
     documentation as Buyer may reasonably request.

     (c) Officer's Certificate. The certificate described in Section 7.1(c).

     (d) Evidence of Authorizing  Actions.  Evidence reasonably  satisfactory to
     Buyer that  Sellers  have  taken all  action  necessary  to  authorize  the
     execution  of this  Agreement  and  the  consummation  of the  transactions
     contemplated hereby.

     (e) Opinion of Sellers' Counsel. The opinion described in Section 7.1(e).

     (f) Opinion of Sellers'  FCC  Counsel.  The  opinion  described  in Section
     7.1(f).

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<PAGE>

     (g) Vehicle Titles.  Title  certificates to all vehicles included among the
     Assets, endorsed for transfer of title to Buyer, and separate bills of sale
     and other title transfer documentation therefor, as required by the laws of
     the state in which such vehicles are titled.

     (h) Deed to Owned Real Property.  A deed of purchase and sale conveying the
     Owned Real Property in accordance with the terms hereof, in form reasonably
     acceptable  to Buyer and Sellers and  warranting  against  restrictions  or
     Encumbrances placed on the property by Sellers.

     (i) Possession. Actual possession and operating control of the System.

     (j) Conditions Precedent.  To the extent not described above, all items set
     forth in Section 7.1.

     (k) Documents and Records. All (i) existing blueprints, schematics, working
     drawings,  plans,  specifications,   projections,  statistics,  engineering
     records,  original plant records,  System construction and "as-built" maps,
     (ii) customer  lists,  files and records used by Sellers in connection with
     the operation of the System,  including all lists of all pending subscriber
     hook-ups,  disconnects and repair orders, supply orders and any other lists
     pertinent to the  operation of the System,  and (iii)  personnel  files and
     records  relating to the employees of the System Buyer may have arranged to
     hire upon Closing.  Delivery of the  foregoing  shall be deemed made to the
     extent such lists,  files and records are located as of the Closing Time at
     any of the  offices  included  in the Owned Real  Property  of Leased  Real
     Property.

     (l)  Other.  Such  other  documents  and  instruments  bills  of  sale  and
     certificates  of title as shall be  necessary  to effect the intent of this
     Agreement and consummate the transactions contemplated hereby.

     Section 8.3 Buyer's Obligations.  At Closing,  Buyer shall deliver or cause
to be delivered to Sellers the following:

     (a) Purchase Price.  $167,000,000 plus or minus the estimated Current Items
     Amount required by Section 2.6 of this Agreement.

     (b) Bill of Sale. Executed  counterparts of the Bill of Sale and such other
     assumption documentation as Sellers may reasonably request.

     (c) Officer's Certificate. The certificate described in Section 7.2(c).

     (d) Evidence of Authorizations. Evidence reasonably satisfactory to Sellers
     that Buyer has taken all action  necessary  to authorize  the  execution of
     this  Agreement  and  the  consummation  of the  transactions  contemplated
     hereby.

     (e) Opinion of Buyer's Counsel. The opinion described in Section 7.2(e).

     (f) Conditions Precedent.  To the extent not described above, all items set
     forth in Section 7.2.

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<PAGE>

     (g) Other.  Such other  documents and  instruments as shall be necessary to
     effect  the  intent  of this  Agreement  and  consummate  the  transactions
     contemplated hereby.

                                    Article 9
                                   TERMINATION

     Section 9.1  Termination  Events.  This Agreement may be terminated and the
transactions contemplated hereby may be abandoned as follows:

     (a) at any time, by the mutual agreement of Buyer and Sellers;

     (b) by either Buyer or Sellers,  upon written  notice to the other,  if the
     other  is in  material  breach  or  default  of its  respective  covenants,
     agreements,  or other obligations  herein, or if any of its representations
     herein are not true and accurate in all material respects when made or when
     otherwise required by this Agreement to be true and accurate,  and Buyer or
     Sellers, as the case may be, notifies the other of such breach,  default or
     failure and such breach,  default or failure is not cured within 30 days of
     receipt  of notice  that such  breach,  default  or  failure  exists or has
     occurred;

     (c) by either Buyer or Sellers,  upon written  notice to the other,  if any
     conditions  to  its   obligations  set  forth  in  Sections  7.1  and  7.2,
     respectively,  shall  not have been  satisfied  on or  before  the  Outside
     Closing Date for any reason other than a breach or default by such party of
     its respective covenants,  agreements,  or other obligations hereunder,  or
     any of its representations  herein not being true and accurate when made or
     when otherwise required by this Agreement to be true and accurate; or

     (d) by Buyer in accordance with Section 12.13.

     Section 9.2 Effect of  Termination.  If this Agreement  shall be terminated
pursuant  to  Section  9.1,  all  obligations  of the  parties  hereunder  shall
terminate,  except for the  obligations  set forth in Sections 9.2,  Article 10,
12.1,  12.2,  and 12.9, but  termination  of this Agreement  pursuant to Section
9.1(b)  shall not limit or impair any  remedies  that Buyer or Sellers  may have
under  this  Agreement  with  respect to a breach or default by the other of its
covenants, agreements or obligations hereunder.

                                       37
<PAGE>

                                   Article 10
                                    REMEDIES

     Section 10.1 Specific Performance;  Remedies Cumulative.  Sellers and Buyer
acknowledge  that if either  breaches its  obligation  hereunder to complete the
Closing,  the other would be  irreparably  damaged by such  breach and that,  in
addition to the other remedies that may be available  under this Agreement or at
law, the other party shall be entitled to specific performance of this Agreement
and injunctive relief. Subject to Sections 11.4, 11.5, 11.6 and 11.7, all rights
and remedies  under this  Agreement are cumulative of, and not exclusive of, any
other rights or remedies available under this Agreement, and the exercise of any
such  rights or  remedies  shall  not bar the  exercise  of any other  rights or
remedies under this Agreement.

     Section  10.2  Attorney's  Fees.  In the  event of any  Litigation  between
Sellers  and  Buyer  with  respect  to  this   Agreement  or  the   transactions
contemplated  hereby,  the  party  prevailing  under  such  Litigation  shall be
entitled,  as part of the Judgment rendered in such Litigation,  to recover from
the other party its  reasonable  attorneys'  fees and costs and expenses in such
Litigation.

     Section 10.3 Escrow Deposit.

     (a) Delivery Prior to Closing. In the event this Agreement is terminated by
     the parties in accordance with Section 9.1(a),  by Buyer in accordance with
     Section  9.1(b),  9.1(d)  or  9.1(e),  or by  either  Buyer or  Sellers  in
     accordance with Section 9.1(c),  then Buyer and Sellers promptly shall send
     a Joint Disbursement  Notice (as defined in the Escrow Agreement) to Escrow
     Agent instructing  Escrow Agent to transfer the Escrow Funds (as defined in
     the Escrow Agreement), together with all interest accrued thereon, to Buyer
     in  accordance  with such  Joint  Disbursement  Notice.  In the event  this
     Agreement is terminated by Sellers in accordance with Section 9.1(b),  then
     Buyer and Sellers promptly shall send a Joint Disbursement Notice to Escrow
     Agent instructing Escrow Agent to transfer (1) the Escrow Funds to Sellers,
     and (2) all interest  accrued on the Escrow Funds to Buyer,  in  accordance
     with such Joint  Disbursement  Notice. The disbursement of the Escrow Funds
     to Buyer or Sellers shall not preclude such party from exercising any other
     rights or remedies  provided  for in this  Agreement or at law or equity in
     the event of a breach by the other party of its obligations to complete the
     Closing under this Agreement.

     (b) Delivery After Closing.  In the event that,  following  Closing,  Buyer
     incurs  Losses for which Buyer  believes it is entitled to  indemnification
     from  Sellers in  accordance  with  Article 11,  then Buyer shall  promptly
     submit to  Sellers a claim for  indemnification  describing  in  reasonable
     detail the nature  and,  to the extent  then  reasonably  practicable,  the
     extent of the Losses that Buyer believes are  indemnifiable  by Sellers (an
     "Indemnification Notice"), and provided that there is no good faith dispute
     as to the  applicability  of  indemnification  for such  Losses,  Buyer and
     Sellers  promptly  shall send a Joint  Disbursement  Notice to Escrow Agent
     instructing  Escrow  Agent to transfer to Buyer,  in  accordance  with such
     Joint Disbursement Notice, Escrow Funds as necessary to indemnify Buyer for
     such  indemnifiable  Losses.  If,  by the  close  of  business  on the last
     calendar day of the eighteenth month after the Closing Date (or on the next
     business  day  if  such  last  calendar  day is not a  business  day)  (the

                                       38
<PAGE>

     "Expiration  Date"),  Sellers  shall not have  received an  Indemnification
     Notice from Buyer,  then on the business day next  following the Expiration
     Date,  Buyer and Sellers shall send a Joint  Disbursement  Notice to Escrow
     Agent instructing  Escrow Agent to transfer the balance of the Escrow Funds
     to Sellers in accordance with such Joint Disbursement  Notice. If, however,
     Sellers  have  received  an  Indemnification  Notice  on or  prior  to  the
     Expiration  Date,  then Escrow Agent shall  retain  control over the Escrow
     Funds until the parties have resolved  Buyer's claims for  indemnification,
     whereupon Buyer and Sellers promptly shall send a Joint Disbursement Notice
     to Escrow Agent instructing  Escrow Agent to transfer Escrow Funds to Buyer
     and/or Sellers in accordance with the parties'  resolution of such dispute.
     The disbursement of the Escrow Funds to Buyer shall not preclude Buyer from
     exercising any other rights or remedies provided for in this Agreement.

                                   Article 11
                                 INDEMNIFICATION

     Section 11.1  Indemnification by Sellers.  From and after Closing,  Sellers
and Pegasus shall jointly and severally  indemnify and hold harmless  Buyer from
and against any and all Losses arising out of or resulting from:

     (a) (1) any untruth or inaccuracy in any representation or warranty made by
     Sellers in this  Agreement,  or (2) any breach or default by Sellers in the
     performance  of their  covenants,  agreements,  or  obligations  under this
     Agreement;

     (b) any liabilities relating to employees of Sellers working for the System
     asserted  under any federal,  state or local law or regulation or otherwise
     pertaining  to any labor or  employment  matter to the extent such labor or
     employment  matter  arises out of and  relates to  conditions  existing  or
     actions or events occurring prior to the Closing Time; and

     (c) any of the Retained Obligations and Liabilities.

     Section 11.2 Indemnification by Buyer. From and after Closing,  Buyer shall
indemnify  and hold  harmless  Sellers and Pegasus  from and against any and all
Losses arising out of or resulting from:

     (a) (1) any untruth or inaccuracy in any representation or warranty made by
     Buyer in this  Agreement,  or (2) any  breach  or  default  by Buyer in the
     performance  of  its  covenants,  agreements,  or  obligations  under  this
     Agreement;

     (b) the Assumed Obligations and Liabilities;

     (c) any  liabilities  relating to  employees of Sellers  actually  hired by
     Buyer pursuant to Section 6.3 arising after the Closing Time asserted under
     any federal,  state or local law or regulation  or otherwise  pertaining to
     any labor or employment  matter arising out of actions or events  occurring
     or conditions arising subsequent to the Closing Time; and

                                       39
<PAGE>

     (d) the use by Buyer of Sellers'  intellectual  property in accordance with
     Section 3.2 of this Agreement.

     Section 11.3 Indemnified Third Party Claim.

     (a) If any  Person not a party to this  Agreement  shall make any demand or
     claim or file or threaten to file or continue any  Litigation  with respect
     to which  Buyer or Sellers  or  Pegasus  are  entitled  to  indemnification
     pursuant to Sections  11.1 or 11.2,  respectively,  then within thirty (30)
     days  after  notice  (the   "Notice")   by  the  party   entitled  to  such
     indemnification  (the "Indemnitee") to the other (the "Indemnitor") of such
     demand,  claim or Litigation,  the Indemnitor shall have the option, at its
     sole cost and expense,  to retain counsel for the Indemnitee (which counsel
     shall be reasonably  satisfactory  to the  Indemnitee),  to defend any such
     Litigation. Thereafter, the Indemnitee shall be permitted to participate in
     such defense at its own expense, provided that, if the named parties to any
     such  Litigation   (including  any  impleaded  parties)  include  both  the
     Indemnitor and the Indemnitee and if the Indemnitor  proposes that the same
     counsel represent both the Indemnitee and the Indemnitor,  and such counsel
     is of the opinion that  representation  of both parties by the same counsel
     would be  inappropriate  due to actual  or  potential  differing  interests
     between them,  then the  Indemnitee  shall have the right to retain its own
     counsel at the cost and expense of the  Indemnitor (to the extent such cost
     and expense is reasonable).  If the Indemnitor shall fail to respond within
     thirty (30) days after  receipt of the Notice,  the  Indemnitee  may retain
     counsel and conduct  the defense of such  Litigation  as it may in its sole
     discretion deem proper,  at the sole cost and expense of the Indemnitor (to
     the extent such cost and expense is reasonable).

     (b) The Indemnitee  shall provide  reasonable  assistance to the Indemnitor
     and provide  access to its books,  records and personnel as the  Indemnitor
     reasonably  requests in connection with the investigation or defense of the
     indemnified Losses.

     (c) With regard to  Litigation  of third parties for which Buyer or Sellers
     or Pegasus are entitled to  indemnification  under  Sections  11.1 or 11.2,
     such indemnification shall be paid by the Indemnitor upon: (i) the entry of
     a Judgment  against the  Indemnitee  and the  expiration of any  applicable
     appeal  period;  (ii)  the  entry  of an  unappealable  Judgment  or  final
     appellate  Judgment against the Indemnitee;  or (iii) a settlement with the
     consent  of  the  Indemnitor,  which  consent  shall  not  be  unreasonably
     withheld,  provided that no such consent need be obtained if the Indemnitor
     fails  to  respond  to  the  Notice  as   provided   in  Section   11.3(a).
     Notwithstanding the foregoing,  provided that there is no dispute as to the
     applicability  of  indemnification,  reasonable  expenses of counsel to the
     Indemnitee  shall be reimbursed on a current basis by the  Indemnitor as if
     such expenses are a liability of the Indemnitor,  but only if Indemnitor is
     obligated to pay such expenses pursuant to Section 11.3(a).

     Section 11.4 Determination of Indemnification Amounts and Related Matters.

     (a) In calculating amounts payable to an Indemnitee  hereunder,  the amount
     of the  indemnified  Losses shall be reduced by the amount of any insurance
     proceeds (net of any related  increase in premiums)  paid to the Indemnitee
     for such  Losses  and by the amount of any tax  benefit  to the  Indemnitee
     arising out of such Losses.

                                       40
<PAGE>

     (b) Subject to the provisions of Section 11.3,  all amounts  payable by the
     Indemnitor to the  Indemnitee in respect of any Losses under  Sections 11.1
     or 11.2 shall be payable by the Indemnitor as incurred by the Indemnitee.

     (c) Neither Sellers nor Pegasus will be liable for indemnification  arising
     under  Section  11.1 for (i) any  Losses of or to Buyer or any other Person
     entitled to  indemnification  from  Sellers or Pegasus or  (ii)any  Losses
     incidental to or relating to or resulting  from any of the  foregoing  (the
     items described in clauses (i) and (ii) collectively  being referred to for
     purposes of this Section 11.4(c) as "Buyer's Damages") unless the amount of
     Buyer's Damages for which Sellers or Pegasus would,  but for the provisions
     of this Section,  be liable exceeds,  on an aggregate basis,  $300,000,  in
     which  event  Sellers  and  Pegasus  will be liable for all of the  Buyer's
     Damages  up  to  the  amount  stated  in  the  next  succeeding   sentence.
     Notwithstanding  anything  herein to the  contrary,  the maximum  aggregate
     liability of Sellers and Pegasus under this Agreement shall be $29,750,000.

     Section 11.5 Time and Manner of Certain  Claims.  The  representations  and
warranties of Buyer and Sellers in this  Agreement  shall survive  Closing for a
period of eighteen months,  except for  representations and warranties set forth
in Sections  4.2,  5.2,  5.4(a),  5.9 and 5.12,  which shall  survive  until the
expiration of the applicable  statute of limitations  (the applicable  period of
such survival being the "Survival  Period"),  and Buyer's and Sellers' rights to
make claims thereon shall likewise expire and be extinguished on such respective
dates.  Neither  Sellers  nor Buyer  shall  have any  liability  under  Sections
11.1(a)(1)  or  11.2(a)(1),  respectively,  unless a claim for  Losses for which
indemnification   is  sought   thereunder  is  asserted  by  the  party  seeking
indemnification  by  written  notice to the party from whom  indemnification  is
sought within the Survival Period. Each of Seller and Buyer shall continue to be
liable under Sections 11.1(a) (2), (b) and (c) or Sections  11.2(a)(2),  (b) and
(c), respectively, after the Closing Date without any limitation as to time.

     Section  11.6  Exclusive  Remedy.  Notwithstanding  anything  herein to the
contrary,  the remedies  provided in this Article 11 are the sole and  exclusive
remedies  that either  Buyer or Sellers  shall have after the  Closing  Date for
breach by the other of any representations and warranties of the other or breach
or default by the other in the performance of the other's covenants,  agreements
or obligations under this Agreement.

     Section 11.7 No Indemnification  for Certain Disclosed Matters.  If Sellers
shall disclose in writing to Buyer on or before the Closing Date any fact that -

          (1) arises after the date of this Agreement,

          (2) is not caused by a breach by Sellers or Pegasus of any covenant or
     other agreement contained in this Agreement, and

          (3) is acknowledged in writing by Sellers to have caused the condition
     precedent stated in Section 7.1(a) not to be satisfied,

                                       41
<PAGE>

and if Buyer elects not to terminate this Agreement and to complete the Closing,
then all persons entitled to indemnification  under Section 11.1 shall be deemed
to have waived any claim to indemnification based on such fact.

                                   Article 12
                                 MISCELLANEOUS

     Section  12.1  Expenses.  Except as  otherwise  expressly  provided in this
Agreement,  each party shall pay its own  expenses  and the fees and expenses of
its counsel, accountants, and other experts in connection with this Agreement.

     Section 12.2 Brokerage.  Sellers shall jointly and severally  indemnify and
hold  Buyer  harmless  from and  against  any and all  Losses  arising  from any
employment by them of, or services  rendered to Sellers by, any finder,  broker,
agency or other  intermediary  including,  without  limitation,  Waller  Capital
Corporation,  in connection with the transactions  contemplated  hereby,  or any
allegation  of any such  employment or services,  and Buyer shall  indemnify and
hold  Sellers  harmless  from and  against any and all Losses  arising  from any
employment  by it of, or  services  rendered  to Buyer by, any  finder,  broker,
agency, or other intermediary,  in connection with the transactions contemplated
hereby, or any allegation of any such employment or services.

     Section 12.3 Waivers. No action taken pursuant to this Agreement, including
any  investigation  by or on  behalf  of any  party  hereto,  shall be deemed to
constitute  a waiver by the party  taking  the  action  of  compliance  with any
representation,  warranty,  covenant  or  agreement  contained  herein or in any
document  delivered  pursuant  hereto.  The  waiver by any  party  hereto of any
condition  or of a breach  of  another  provision  of this  Agreement  shall not
operate or be construed as a waiver of any other condition or subsequent breach.
The waiver by any party of any of the  conditions  precedent to its  obligations
under this  Agreement  shall not preclude it from seeking  redress for breach of
this Agreement other than with respect to the condition so waived.

     Section  12.4  Notices.  All  notices,  requests,  demands,   applications,
services of process, and other communications which are required to be or may be
given under this Agreement  shall be in writing and shall be deemed to have been
duly given if sent by  facsimile  transmission,  delivered by overnight or other
courier service, or mailed,  certified first class mail, postage prepaid, return
receipt requested, to the parties hereto at the following addresses:

                To Sellers or Pegasus:

                Pegasus Cable Television of San German, Inc.
                MCT Cablevision Limited Partnership
                Pegasus Communications Corporation
                c/o Pegasus Communications Management Company
                225 City Line Avenue, Suite 200
                Bala Cynwyd,  Pennsylvania 19004
                Attn: Howard E.Verlin
                Telephone: 610- 934-7050
                Telecopy:  610-934-7072

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<PAGE>

                (with a required copy to
                Ted S. Lodge at the same address or telecopier number)

                Copies (which shall not constitute notice):

                Drinker Biddle & Reath LLP
                One Logan Square
                18th and Cherry Streets
                Philadelphia, Pennsylvania 19103
                Attn:  Michael B. Jordan
                Telephone:  215-988-2802
                Telecopy: 215-988-2757

                To Buyer:    Centennial Puerto Rico Cable TV Corp.
                             c/o  Centennial Communications Corp.
                             1305 Campus Parkway
                             Neptune, NJ  07753
                             Attn: Chief Executive Officer
                             Telephone:  732-919-1000
                             Telecopy: 732-919-1022

                    (with a  required  copy to Tony Wolk at the same  address or
                    telecopier number)

                Copies (which shall not constitute notice):

                Duane, Morris & Heckscher LLP
                380 Lexington Avenue
                New York, NY  10168
                Attn:  Richard H. Sauer
                Telephone:  212-692-1057
                Telecopy:  212-692-1020

or to such other  address  as any party  shall  have  furnished  to the other by
notice given in accordance  with this  Section.  Such notice shall be effective,
(i) if delivered by courier  service or by facsimile  transmission,  upon actual
receipt by the intended recipient (with appropriate  confirmation  thereof),  or
(ii) if mailed, upon the earlier of five days after deposit with the U.S. Postal
Service or the date of delivery as shown on the return receipt therefor.

     Section 12.5 Entire  Agreement;  Amendments.  This  Agreement  embodies the
entire  agreement  between the parties hereto with respect to the subject matter
hereof and thereof and supersede all prior agreements and  understandings,  oral
or written, with respect thereto. This Agreement may not be modified orally, but

                                       43
<PAGE>

only by an agreement in writing signed by the party or parties  against whom any
waiver,  change,  amendment,  modification,  or  discharge  may be  sought to be
enforced.

     Section 12.6 Binding  Effect;  Benefits.  This Agreement shall inure to the
benefit  of and will be binding  upon the  parties  hereto and their  respective
heirs,  legal  representatives,  successors,  and permitted  assigns.  Except as
provided  below,  neither  Buyer nor Sellers shall  directly or  indirectly  (by
transfer of control of a party or otherwise),  in whole or in part,  assign this
Agreement  or delegate  any of its duties  hereunder,  or seek  consent from any
Governmental  Authority  to assign this  Agreement or delegate any of its duties
hereunder to any other Person  without the prior  written  consent of the other.
Buyer agrees that Sellers may assign  Sellers'  right to payment of the Purchase
Price under this Agreement to a Qualified Intermediary, and Buyer agrees in such
case to make payment of the Purchase Price to the Qualified Intermediary.  Buyer
further agrees to take other appropriate  actions or execute  documents,  as may
reasonably be requested by Sellers and as may be required in order to effectuate
Sellers'  intent.  Sellers shall jointly and severally  indemnify and hold Buyer
harmless  from any  liability  or expense that may arise from any such action by
Buyer.

     Section  12.7  Headings,  Schedules,  and  Exhibits.  The section and other
headings  contained in this  Agreement are for reference  purposes only and will
not affect  the  meaning  or  interpretation  of this  Agreement.  Reference  to
Schedules or Exhibits shall, unless otherwise indicated,  refer to the Schedules
and Exhibits  attached to this  Agreement as  supplemented  in  accordance  with
Section  6.7,  which  shall be  incorporated  in and  constitute  a part of this
Agreement by such reference.

     Section 12.8  Counterparts;  Facsimile  Signatures.  This  Agreement may be
executed in any number of counterparts,  each of which, when executed,  shall be
deemed to be an original and all of which  together will be deemed to be one and
the same  instrument.  Signatures  to any document or  agreement  required to be
executed or delivered hereunder may be delivered by facsimile or in person.

     Section 12.9 Publicity.  Sellers and Buyer shall consult with and cooperate
with the other with respect to the content and timing of all press  releases and
other  public  announcements,  and any oral or written  statements  to  Sellers'
employees  concerning this Agreement and the transactions  contemplated  hereby.
Neither  Sellers  nor  Buyer  shall  make any  such  release,  announcement,  or
statements  without the prior written  consent of the other,  which shall not be
unreasonably withheld or delayed;  provided,  however, that Sellers or Buyer may
at any time make any announcement required by Legal Requirements so long as such
party,  promptly upon learning of such  requirement,  notifies the other of such
requirement  and  consults  with the other in good  faith  with  respect  to the
wording of such announcement.  Notwithstanding the foregoing,  Sellers and Buyer
may disclose this  Agreement  and the  transactions  contemplated  hereby in any
registration  statement  and any other filing or report made by Sellers or their
affiliates pursuant to the Securities Act or the Securities Exchange Act of 1934
and agree that any  disclosure  therein of the  Agreement  and the  transactions
contemplated  hereby shall be consistent with the terms of this Agreement.  Such
party will  provide  the other with a copy of any such filing or report not less
than one day prior to filing.

                                       44
<PAGE>

     Section 12.10 Governing Law. The validity,  performance, and enforcement of
this Agreement and all transaction  documents,  unless expressly provided to the
contrary, shall be governed by the laws of Delaware without giving effect to the
principles of conflicts of law of that state.

     Section 12.11 Third Parties; Joint Ventures.  This Agreement constitutes an
agreement  solely among the parties hereto,  and,  except as otherwise  provided
herein,  is  not  intended  to  and  will  not  confer  any  rights,   remedies,
obligations,  or  liabilities,  legal  or  equitable,  including  any  right  of
employment,  on any Person  (including but not limited to any employee or former
employee  of  Sellers)  other  than the  parties  hereto  and  their  respective
successors  or  assigns,  or  otherwise  constitute  any  Person  a third  party
beneficiary  under or by reason of this  Agreement.  Nothing in this  Agreement,
expressed  or implied,  is intended to or shall  constitute  the parties  hereto
partners or participants in a joint venture.

     Section 12.12 Construction. This Agreement has been negotiated by Buyer and
Sellers and their  respective legal counsel,  and legal or equitable  principles
that might require the  construction  of this Agreement or any provision of this
Agreement  against  the party  drafting  this  Agreement  shall not apply in any
construction or interpretation of this Agreement.

     Section  12.13  Risk of Loss.  The risk of any loss or damage to the Assets
resulting from fire,  theft or any other casualty  (except  reasonable  wear and
tear) shall be borne by Sellers at all times prior to the Closing  Time.  In the
event that any such loss or damage shall be  sufficiently  substantial  so as to
cause any  representation  or  warranty of Sellers not to be true and correct in
all material  respects at the Closing  Date,  Sellers shall  immediately  notify
Buyer in writing of the circumstances pursuant to Section 6.7 or 6.8, and Buyer,
at any time within ten days after  receipt of such notice,  may elect by written
notice  to  Sellers   either  to  (a)  waive  such  defect  and  proceed  toward
consummation  of the  transactions  contemplated by this Agreement in accordance
with the terms hereof and with no reduction in the Purchase Price (in which case
(1) Section 11.7 shall apply, and (2) Sellers will assign to Buyer all rights to
receive insurance  proceeds on account of the loss or damage),  or (b) terminate
this  Agreement.  If Buyer  elects to so  terminate  this  Agreement,  Buyer and
Sellers shall stand fully  released and  discharged  of any and all  obligations
hereunder.

     Section 12.14 Sellers. Pegasus Media & Communications, Inc. is deemed to be
a party to this  Agreement  solely for purposes of conveying its interest in the
Franchises,  and each reference in this Agreement to "Seller" or "Sellers" shall
be deemed to include Pegasus Media &  Communications,  Inc. solely to the extent
that such term is used in connection with the Franchises.

               [Remainder of this page intentionally left blank.]

                                       45
<PAGE>

     IN WITNESS  WHEREOF,  Buyer and Sellers have executed this  Agreement as of
the date first written above.

                                   CENTENNIAL PUERTO RICO CABLE TV CORP.

                                   By: /s/ Tony Wolk
                                   Name: Tony Wolk
                                   Title: Secretary

                                   PEGASUS CABLE TELEVISION OF SAN GERMAN, INC.

                                   By:  /s/ Howard E. Verlin
                                   Name: Howard E. Verlin
                                   Title: President

                                   MCT CABLEVISION LIMITED PARTNERSHIP
                                   By MCT CABLEVISION, LTD., its general partner

                                   By: /s/ Howard E. Verlin
                                   Name: Howard E. Verlin
                                   Title: President

                                   PEGASUS COMMUNICATIONS CORPORATION

                                   By: /s/ Howard E. Verlin
                                   Name: Howard E. Verlin
                                   Title: Vice President

                                   PEGASUS MEDIA & COMMUNICATIONS, INC.

                                   By: /s/ Howard E. Verlin
                                   Name: Howard E. Verlin
                                   Title: Vice President

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