Document:

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                                                                    Exhibit 10.8
                                                                    ------------

                             PEGASUS COMMUNICATIONS

                             1996 STOCK OPTION PLAN

           (As Amended and Restated Effective As of February 13, 2002,
                     And As Amended Through Amendment No. 5)

[This document is a compilation of the Pegasus Communications 1996 Stock Option
Plan, as amended and restated effective as of February 13, 2002, and as it has
been amended in part by five subsequent Amendments.]

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                                                Table of Contents
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<S> <C>                                                                                                      <C>
1.  Purpose...................................................................................................2

2.  Administration............................................................................................2

3.  Eligibility...............................................................................................3

4.  Stock.....................................................................................................3

5.  Annual Limit..............................................................................................4

6.  Granting of Discretionary Options.........................................................................4

7.  Terms and Conditions of Discretionary Options.............................................................5

8.  Formula Grants to Employees Who Are Not Executive Officers................................................9

9.  Election to Receive Option in Lieu of Directors' Fees....................................................12

10. Capital Adjustments......................................................................................13

11. Certain Corporate Transactions...........................................................................13

12. Change in Control........................................................................................14

13. Amendment or Termination of the Plan.....................................................................15

14. Absence of Rights........................................................................................15

15. Indemnification of Board and Committee...................................................................16

16. Application of Funds.....................................................................................16

17. Stockholder Approval.....................................................................................16

18. No Obligation to Exercise Option.........................................................................16

19. Termination of Plan......................................................................................16

20. Governing Law............................................................................................17

21. Option Agreements -- Other Provisions....................................................................17

22. Listing and Registration of Shares.......................................................................17

23. Special Provisions Regarding Digital Television Services, Inc............................................17

24. Special Provisions Regarding Golden Sky Holdings, Inc....................................................18
</TABLE>

                                                       -1-
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                             PEGASUS COMMUNICATIONS

                             1996 STOCK OPTION PLAN

           (As Amended and Restated Effective As of February 13, 2002
                    and Incorporating Amendments 1 through 5)

                        ________________________________

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

            Further, as used in the Plan, (i) the term "ISO" shall mean an
option which, at the time such option is granted, qualifies as an incentive
stock option within the meaning of Section 422 of the Code unless the "Option
Agreement" (as defined in Section 21) states that the option will not be treated
as an ISO; and (ii) the term "NQSO" shall mean an option which, at the time such
option is granted, does not meet the definition of ISO, whether or not it is
designated as a nonqualified stock option in the Option Agreement.

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

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

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

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

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

                                       -2-
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            (b) Employees Who Are Not Executive Officers. With respect to
options granted to Employees (as defined in Section 3) who are not executive
officers, the Plan shall be administered by (i) a management committee, the
members of which shall be appointed by, and shall serve at the pleasure of, the
Board, or (ii) a committee or the Board as described in Section 2(a) above.

            (c) In General. The administrator of the Plan, whether it be the
committee or the Board under Section 2(a) or the committee under Section 2(b),
shall hereinafter be referred to as the "Committee," with respect to the
eligible individuals for which the particular committee serves as administrator.
Each member of the Committee, while serving as such, shall be deemed to be
acting in his capacity as a director or employee of the Company. Except as
provided in Section 8 (regarding formula grants to employees other than
executive officers) and Section 9 (regarding options in lieu of directors'
fees), the Committee shall have full authority, subject to the terms of the
Plan, to select the Employees and Non-employee Directors to be granted Options
under the Plan, to grant Options on behalf of the Company, and to set the date
of grant and the other terms of such Options; provided, however, that a
Non-employee Director shall not be eligible to receive an ISO under the Plan.
The Committee may correct any defect, supply any omission and reconcile any
inconsistency in this Plan and in any Option granted hereunder in the manner and
to the extent it deems desirable. The Committee also shall have the authority to
establish such rules and regulations, not inconsistent with the provisions of
the Plan, for the proper administration of the Plan, to amend, modify, or
rescind any such rules and regulations, and to make such determinations, and
interpretations under, or in connection with, the Plan, as it deems necessary or
advisable. All such rules, regulations, determinations, and interpretations
shall be binding and conclusive upon the Company, its stockholders and all
Employees and Non-employee Directors, upon their respective legal
representatives, beneficiaries, successors, and assigns, and upon all other
persons claiming under or through any of them.

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

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

         4. Stock. Options may be granted under the Plan to purchase up to a
maximum of 1,000,000 shares (which number gives effect to the December 31, 2002
reverse stock split) of Common Stock; provided, however, that no Employee shall
receive Options for more than 200,000 shares (which number gives effect to the
December 31, 2002 reverse stock split) of the Company's Common Stock in any
calendar year. "Common Stock" shall mean, (i) effective for Options granted on
or after June 6, 2003, the Class A common stock of the Company or the non-voting
common stock of the Company, as determined by the Committee, and (ii) effective
for Options granted prior to June 6, 2003, the Class A common stock of the
Company; provided, however, that with respect to Options granted under Section 8

                                       -3-
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or Section 9, "Common Stock" shall mean, effective for Options granted on or
after June 6, 2003, the Class A common stock of the Company unless the Committee
otherwise determines. The limits in this Section 4 shall be subject to
adjustment as provided in Section 10. Shares issuable under the Plan may be
authorized but unissued shares or reacquired shares, and the Company may
purchase shares required for this purpose, from time to time, if it deems such
purchase to be advisable.

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

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

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

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

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

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

            The fair market value of a share of Common Stock shall be (i) the
closing price of the Common Stock on a registered securities exchange or on an
over-the-counter market on the last business day prior to the date of grant or,
in the case of an Option that is amended to reduce the Option price, on the last
business day prior to the date of amendment of the Option) on which the Common
Stock traded, or (ii) if (i) is not applicable, then such other method of
determining fair market value as shall be authorized by the Code or the rules
and regulations thereunder and adopted by the Committee.

            (c) Term.

                (1) ISOs. Subject to earlier termination as provided in Section
7(e), (f), and (g) and in Section 11, the term of each ISO granted under Section
6 shall be not more than ten years (five years in the case of a
more-than-10-percent stockholder, as discussed in Section 7(i)) from the date of
grant.

                (2) NQSOs. Subject to earlier termination as provided in Section
7(e), (f), and (g) and in Section 11, the term of each NQSO granted under
Section 6 shall be not more than ten years from the date of grant.

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

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

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            The Option price shall be payable --

                (1) in cash or its equivalent;

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

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

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

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

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

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

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

                                       -6-
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            (e) Termination of Employment or Board Membership. If an Employee's
employment by the Company (and Related Companies) or a Non-employee Director's
membership on the Board is terminated by either party prior to the expiration
date fixed for his Option for any reason other than death or disability, such
Option may be exercised, to the extent of the number of shares with respect to
which the Optionee could have exercised it on the date of such termination, or
to any greater extent permitted by the Committee, by the Optionee at any time
prior to the earlier of (i) the expiration date specified in such Option, or
(ii) an accelerated expiration date determined by the Committee, in its
discretion, and set forth in the Option Agreement; except that, subject to
Section 11 hereof, such accelerated expiration date shall not be earlier than
the date of the termination of the Employee's employment or the Non-employee
Director's Board membership, and in the case of ISOs, such accelerated
expiration date shall not be later than three months after such termination of
employment.

            (f) Exercise upon Disability of Optionee. If an Optionee becomes
disabled (within the meaning of Section 22(e)(3) of the Code) during his
employment or membership on the Board and, prior to the expiration date fixed
for his Option, his employment or membership on the Board is terminated as a
consequence of such disability, such Option may be exercised, to the extent of
the number of shares with respect to which the Optionee could have exercised it
on the date of such termination, or to any greater extent permitted by the
Committee, by the Optionee at any time prior to the earlier of (i) the
expiration date specified in such Option, or (ii) an accelerated termination
date determined by the Committee, in its discretion, and set forth in the Option
Agreement; except that, subject to Section 11 hereof, such accelerated
termination date shall not be earlier than the date of the Optionee's
termination of employment or Board membership by reason of disability, and in
the case of ISOs, such accelerated termination date shall not be later than one
year after such termination of employment. In the event of the Optionee's legal
disability, such Option may be exercised by the Optionee's legal representative.

            (g) Exercise upon Death of Optionee. If an Optionee dies during his
employment or Board membership, and prior to the expiration date fixed for his
Option, or if an Optionee whose employment or Board membership is terminated for
any reason, dies following his termination of employment or Board membership but
prior to the earliest of (i) the expiration date fixed for his Option, (ii) the
expiration of the period determined under paragraphs (e) and (f) above, or (iii)
in the case of an ISO, three months following termination of employment, such
Option may be exercised, to the extent of the number of shares with respect to
which the Optionee could have exercised it on the date of his death, or to any
greater extent permitted by the Committee, by the Optionee's estate, personal
representative or beneficiary who acquired the right to exercise such Option by
bequest or inheritance or by reason of the death of the Optionee. Such
post-death exercise may occur at any time prior to the earlier of (i) the
expiration date specified in such Option or (ii) an accelerated termination date
determined by the Committee, in its discretion, and set forth in the Option
Agreement; except that, subject to Section 11 hereof, such accelerated
termination date shall not be later than three years after the date of death.

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

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

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

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

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

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

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

            (a) Grant. Each Employee who is not an executive officer of the
Company or a Related Company shall be granted an Option to purchase Common Stock
as provided in this Section 8.

                (1) Effective Prior to September 1, 2002. In the case of such an
Employee who is hired on a full-time or a part-time basis prior to September 1,
2002, such Option shall be granted on the date the Employee first becomes a
full-time or a part-time Employee as a result of hire. In addition, a part-time
Employee who is hired prior to September 1, 2002, who receives a formula grant
pursuant to this Section 8 and who changes status to full-time shall be granted
an additional formula Option under this Section 8 as of the date he becomes a
full-time Employee.

                (2) Effective September 1, 2002. In the case of such an Employee
who is first hired on or after September 1, 2002, such Option shall be granted
on the first anniversary of his date of hire, provided the Employee is then in
the employ of the Company or a Related Company. In addition, such an Employee
who is a part-time Employee on the first anniversary of his date of hire shall
be granted an additional formula Option under this Section 8 as of the date he
becomes a full-time Employee.

            Except in the case of an Employee who changes status from part-time
to full-time, no Employee shall receive more than one Option grant under this
Section 8. The total number of shares covered by Options granted to any Employee
under this Section 8 shall not exceed 100 (50 in the case of an Employee hired
after December 31, 2002).

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

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

                (1) Number and Type of Shares. The Option shall state the number
and type of shares of Common Stock to which the Option pertains, which shall be:

                    (A) Effective Prior to September 1, 2002. For Employees
         hired prior to September 1, 2002, 100 shares with respect to an Option
         granted to an Employee on his date of hire as a full-time Employee, 50
         shares with respect to an Option granted to an Employee on his date of
         hire as a part-time Employee, and 50 shares with respect to an Option
         granted to a part-time Employee as a result of a change in status from
         part-time status to full-time status.

                    (B) Effective September 1, 2002 and Prior to December 31,
         2002. For Employees first hired on or after September 1, 2002 and prior
         to December 31, 2002, 100 shares with respect to an Option granted to
         such an Employee who is a full-time Employee on the first anniversary
         of his date of hire, 50 shares with respect to an Option granted to
         such an Employee who is a part-time Employee on the first anniversary
         of his date of hire, and 50 shares with respect to an Option granted to
         such an Employee as a result of a change in status from part-time
         status to full-time status which occurs after the first anniversary of
         the Employee's date of hire.

                                       -9-
<PAGE>

                    (C) Effective December 31, 2002. For Employees hired on or
         after December 31, 2002, 50 shares with respect to an Option granted to
         such an Employee who is a full-time Employee on the first anniversary
         of his date of hire, 25 shares with respect to an Option granted to
         such Employee who is a part-time Employee on the first anniversary of
         his date of hire, and 25 shares with respect to an Option granted to
         such Employee as a result of a change in status from part-time status
         to full-time status which occurs after the first anniversary of the
         Employee's date of hire.

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

                (3) Term. Subject to earlier termination as provided in Section
8(c)(5), (6) and (7) and in Section 11 hereof, the term of each Option granted
under this Section 8 shall be ten years (five years in the case of an ISO
granted to a more-than-ten-percent stockholder, as discussed in Section 7(i)
above) from the date of grant.

                (4) Exercise. Effective prior to September 1, 2002, each Option
granted under this Section 8 shall become fully exercisable on the earliest of
(i) the first anniversary of the date the Option is granted if the Optionee is
then in the employ of the Company or a Related Company, or (ii) the Optionee's
death or disability (as defined in Section 22(e)(3) of the Code) while in the
employ of the Company or a Related Company. Effective September 1, 2002, each
Option granted under this Section 8 to an Employee first hired on or after
September 1, 2002, shall be fully exercisable on the date the Option is granted.
In addition, the Committee may accelerate the exercise date of any outstanding
Option, in its discretion, if it deems such acceleration to be desirable.

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

            The Option price shall be payable --

                    (A) in cash or its equivalent;

                    (B) in shares of Common Stock previously acquired by the
Optionee; provided that (i) if such shares of Common Stock were acquired through
the exercise of an ISO and are used to pay the Option price for ISOs, such

                                      -10-
<PAGE>

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

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

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

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

                (5) Termination of Employment. If an Employee's employment by
the Company (and Related Companies) is terminated by either party prior to the
expiration date fixed for his Option for any reason other than death or
disability, such Option may be exercised, to the extent of the number of shares
with respect to which the Optionee could have exercised it on the date of such
termination, by the Optionee at any time prior to the earliest of (i) the
expiration date specified in such Option, (ii) three months after such
termination of employment, or (iii) termination of such Option under Section 11.

                (6) Exercise upon Disability of Optionee. If an Optionee becomes
disabled (within the meaning of Section 22(e)(3) of the Code) during his
employment and prior to the expiration date fixed for his Option, such Option
may be exercised, to the extent of the number of shares with respect to which
the Optionee could have exercised it on the date of such termination by the
Optionee at any time prior to the earliest of (i) the expiration date specified
in such Option, (ii) one year after such termination of employment, or (iii)
termination of such Option under Section 11. In the event of the Optionee's
legal disability, such Option may be exercised by the Optionee's legal
representative.

                (7) Exercise upon Death of Optionee. If an Optionee dies during
his employment, and prior to the expiration date fixed for his Option, or if an
Optionee whose employment is terminated for any reason, dies following his
termination of employment but prior to the earliest of (A) the expiration date
fixed for his Option, (B) the expiration of the period determined under
paragraphs (5) and (6) above, or (C) in the case of an ISO, three months
following termination of employment, such Option may be exercised, to the extent
of the number of shares with respect to which the Optionee could have exercised
it on the date of his death, by the Optionee's estate, personal representative
or beneficiary who acquired the right to exercise such Option by bequest or
inheritance or by reason of the death of the Optionee. Such post-death exercise
may occur at any time prior to the earliest of (i) the expiration date specified
in such Option, (ii) one year after the date of death, or (iii) termination of
such Option under Section 11.

                                      -11-
<PAGE>

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

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

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

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

         9. Election to Receive Option in Lieu of Directors' Fees

            (a) Election. A Non-employee Director may to elect to receive his or
her annual retainer fees for a 12-month period in the form of an Option as
described in this Section 9 in lieu of receipt of his or her retainer fees in
cash, such 12-month period to be determined by the Committee. An election under
this Section 9 shall be made prior to the first day of the 12-month period to
which the election relates, in accordance with procedures established by the
Committee.

            (b) Date of Grant. The date of grant for an Option granted pursuant
to an election under this Section 9 shall be the last business day of the
12-month period immediately preceding the 12-month period to which the election
relates.

            (c) Number of Shares Subject to Option. The number of shares of
Common Stock subject to an Option granted pursuant to an election under this
Section 9 shall be determined by dividing (i) the aggregate amount of retainer
fees that would have been paid to the Director for the 12-month period to which
the election described in this Section 9 applies, by (ii) the per share closing
price of the Common Stock on the date of grant of the Option, and (iii)
multiplying the resulting number of shares by a conversion factor. The
conversion factor shall be determined pursuant to a valuation formula
established by the Committee.

                                      -12-
<PAGE>

            (d) Type of Option. Each Option granted under this Section 9 shall
be an NQSO.

            (e) Terms and Conditions of Options. Options granted under this
Section 9 shall be subject to the terms and conditions set forth in Section 7
with respect to Discretionary Options.

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

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

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

                                      -13-
<PAGE>

         12. Change in Control

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

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

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

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

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

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

                                      -14-
<PAGE>

         13. Amendment or Termination of the Plan

             (a) In General. At any time, the Board may suspend or terminate the
Plan. The Committee may amend any outstanding Options in any respect whatsoever,
including amendments that reprice (or decrease the Option price of) outstanding
Options or result in the cancellation of outstanding Options in exchange for
cash or the grant of new Options, shares of Common Stock subject to vesting
requirements, or another type of equity award. At any time and from time to
time, the Plan may be amended by resolution of (i) the Board, or (ii) the
Compensation Committee of the Board; except that, without the approval of the
stockholders (given in the manner set forth in paragraph (b) below) --

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

                 (2) the maximum number of shares of Common Stock with respect
to which Options may be granted under the Plan shall not be increased, except as
permitted under Section 10 hereof;

                 (3) the duration of the Plan under Section 19 hereof with
respect to any ISOs granted hereunder shall not be extended; and

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

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

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

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

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

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

                                      -15-
<PAGE>

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

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

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

         17. Stockholder Approval. This Plan originally became effective on
September 30, 1996 (the date the Plan was adopted by the Board). As amended and
restated, this Plan shall became effective as of February 13, 2002.

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

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

                                      -16-
<PAGE>

         20. Governing Law. The Plan shall be governed by the applicable Code
provisions to the maximum extent possible. Otherwise, the laws of the State of
Delaware, without reference to principles of conflicts of law, shall govern the
operation of, and the rights of Employees and Non-employee Directors under, the
Plan and Options granted thereunder.

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

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

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

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

                                      -17-
<PAGE>

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

         (i) Section 12 ("Change in Control");

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

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

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

         24. Special Provisions Regarding Golden Sky Holdings, Inc. Golden Sky
Holdings, Inc. ("GSH") became a wholly-owned subsidiary of the Company by means
of the merger of a wholly-owned subsidiary of the Company into GSH pursuant to
the Agreement and Plan of Merger dated January 10, 2000 (the "GSH Merger
Agreement") among the Company, GSH, Pegasus GSH Merger Sub, Inc. and certain
stockholders of the Company and GSH. Section 2.12 of the GSH Merger Agreement
provides that the Company will assume certain outstanding GSH options specified
therein. Section 2.12 of the GSH Merger Agreement also provides that such GSH
options will be replaced with options (the "GSH Replacement Options") to
purchase the number of shares of Common Stock equal to the "conversion ratio"
(as defined in the GSH Merger Agreement) times the number of shares of GSH
common stock issuable upon the exercise of such options, for an exercise price
equal to the exercise price applicable to such options divided by the
"conversion ratio."

             Each GSH Replacement Option shall be exercisable under the Plan in
accordance with the terms of the agreement entered into between the Company and
the holder of the GSH Replacement Option (the "Replacement Agreement"), the
terms of which shall govern in the event of any conflict with the provisions of
the Plan. In addition, any provision of the Plan that would provide an
additional benefit (within the meaning of Section 424(a)(2) of the Code and
Treasury Regulations thereunder) shall not apply to the GSH Replacement Options.

                                      -18-<PAGE>

                                                                    Exhibit 10.9
                                                                    ------------

                             PEGASUS COMMUNICATIONS

                              RESTRICTED STOCK PLAN

           (As Amended and Restated Effective As of February 13, 2002,
                     And As Amended Through Amendment No. 4)

[This document is a compilation of the Pegasus Communications Restricted Stock
Plan, as amended and restated effective as of February 13, 2002, and as it has
been amended in part by four subsequent Amendments.]

<PAGE>

                                                 TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                          Page
<S>                                                                                                       <C>
SECTION 1 - Purpose .......................................................................................1

SECTION 2 - Definitions....................................................................................1
     (a)    "Awards".......................................................................................1
     (b)    "Award Agreement"..............................................................................1
     (c)    "Board"........................................................................................1
     (d)    "Code".........................................................................................1
     (e)    "Committee"....................................................................................1
     (f)    "Common Stock".................................................................................2
     (g)    "Company-Wide Location Cash Flow"..............................................................2
     (h)    "Disability"...................................................................................2
     (i)    "Discretionary Awards".........................................................................2
     (j)    "Excess Awards"................................................................................2
     (k)    "Fair Market Value"............................................................................2
     (l)    "Grantee"......................................................................................2
     (m)    "ISO"..........................................................................................2
     (n)    "Management Committee".........................................................................2
     (o)    "NQSO".........................................................................................2
     (p)    "Officers".....................................................................................3
     (q)    "Option".......................................................................................3
     (r)    "PCC"..........................................................................................3
     (s)    "Pegasus"......................................................................................3
     (t)    "Plan".........................................................................................3
     (u)    "Plan Administrator"...........................................................................3
     (v)    "Profit-Sharing Awards"........................................................................3
     (w)    "Savings Plan".................................................................................3
     (x)    "Special Recognition Awards"...................................................................3
     (y)    "Year Over Year Increase in Company-Wide Location Cash Flow"...................................3
     (z)    "Years of Vesting Service".....................................................................3

SECTION 3 - Administration.................................................................................4
     (a)    Special Recognition Awards and Discretionary Awards to Officers................................4
     (b)    Special Recognition Awards and Discretionary Awards to Non-Officer Employees...................4
     (c)    In General.....................................................................................4

SECTION 4 - Eligibility....................................................................................5

SECTION 5 - Stock..........................................................................................5

SECTION 6 - Amount of Award................................................................................5
     (a)    Special Recognition Awards.....................................................................5
     (b)    Discretionary Awards...........................................................................6
</TABLE>

                                                       - i -

<PAGE>

<TABLE>
<CAPTION>
                                                 TABLE OF CONTENTS
                                                    (continued)
                                                                                                          Page
<S>         <C>                                                                                           <C>
SECTION 7 - Vesting........................................................................................6
     (a)    Special Recognition Awards.....................................................................6
     (b)    Discretionary Awards...........................................................................6
     (c)    Forfeiture.....................................................................................7

SECTION 8 - Election To Receive Option in Lieu of Common Stock Subject to Vesting
             Requirements..................................................................................7
     (a)    Election.......................................................................................7
     (b)    Date of Grant..................................................................................7
     (c)    Number of Shares Subject to Option.............................................................7
     (d)    Type of Option.................................................................................8
     (e)    Terms and Conditions of Options................................................................8
     (f)    Application of Funds..........................................................................11

SECTION 9 - Capital Adjustments...........................................................................11

SECTION 10 - Amendment or Discontinuance of the Plan......................................................12

SECTION 11 - Termination of Plan..........................................................................13

SECTION 12 - Effective Date...............................................................................13

SECTION 13 - Miscellaneous................................................................................13
     (a)     Book-Entry Record of Shares..................................................................13
     (b)     Rights as a Stockholder......................................................................14
     (c)     Award Agreement..............................................................................14
     (d)     Governing Law................................................................................14
     (e)     Rights.......................................................................................14
     (f)     Non-Transferability..........................................................................14
     (g)     Listing and Registration of Shares...........................................................15
     (h)     Withholding and Use of Shares to Satisfy Tax Obligations.....................................15
     (i)     Indemnification of Board and Plan Administrator..............................................15
</TABLE>

                                                      - ii -

<PAGE>

                             PEGASUS COMMUNICATIONS
                              RESTRICTED STOCK PLAN
                              ---------------------

           (As Amended and Restated Effective As of February 13, 2002
                    and Incorporating Amendments 1 through 4)

                    _________________________________________

                                    SECTION 1
                                     Purpose
                                     -------

                  The Pegasus Communications Restricted Stock Plan, as amended
and restated, is intended to provide a means whereby PCC may, through the grant
of Common Stock subject to vesting requirements to employees of Pegasus, attract
and retain such individuals and motivate them to exercise their best efforts on
behalf of Pegasus. With respect to Discretionary Awards, a Grantee may elect to
receive an Option to purchase Common Stock in lieu of all or any part of a grant
of Common Stock subject to vesting requirements. A Grantee who is an Officer may
elect to receive a Discretionary Award in the form of cash (subject to certain
limits) or an Option in lieu of all or any part of a grant of Common Stock
subject to vesting requirements.

                                    SECTION 2
                                   Definitions
                                   -----------

                  Whenever the following terms are used in this Plan, they shall
have the meanings specified below, unless the context clearly indicates to the
contrary:

                  (a) "Awards" shall mean Special Recognition Awards and
Discretionary Awards.

                  (b) "Award Agreement" shall mean the document described in
Section 13(c) evidencing Awards made pursuant to the Plan.

                  (c) "Board" shall mean the Board of Directors of PCC.

                  (d) "Code" shall mean the Internal Revenue Code of 1986, as
amended.

                  (e) "Committee" shall mean the administrator of the Plan with
respect to Special Recognition Awards and Discretionary Awards to Officers,
which shall be a committee of the Board or the Board, in accordance with Section
3(a).

                                       -1-
<PAGE>

                  (f) "Common Stock" shall mean (i) effective for Awards made on
or after June 6, 2003, the Class A common stock of PCC or the non-voting common
stock of PCC, as determined by the Plan Administrator, and (ii) effective for
Awards made prior to June 6, 2003, the Class A common stock of PCC.

                  (g) "Company-Wide Location Cash Flow" shall mean income from
Pegasus operations before management fees, depreciation, amortization (other
than amortization of film contracts), and incentive compensation (including
contributions under the Plan and the Savings Plan).

                  (h) "Disability" shall have the meaning set forth in Article I
of the Savings Plan.

                  (i) "Discretionary Awards" shall mean the discretionary awards
described in Section 6(b).

                  (j) "Excess Awards" shall mean the formula awards described in
Section 6(c) of the Plan as amended and restated generally effective as of
December 18, 1998. The final Excess Awards were made with respect to matching
contributions that could not be made under the Savings Plan for 1999. No Excess
Awards shall be made with respect to calendar years beginning on or after
January 1, 2000. Information concerning Excess Awards granted for calendar years
beginning prior to January 1, 2000 may be found in the Plan as amended and
restated effective as of December 18, 1998, and as amended thereafter.

                  (k) "Fair Market Value" shall mean (i) the closing price of
the Common Stock on a registered securities exchange or on an over-the-counter
market on the last business day prior to the date of grant (or, in the case of
an Option that is amended to reduce the Option price, on the last business day
prior to the date of amendment of the Option) on which Common Stock traded, or
(ii) if (i) is not applicable, then such other method of determining fair market
value as shall be authorized by the Code or the rules and regulations thereunder
and adopted by the Committee.

                  (l) "Grantee" shall mean an individual who has received an
Award under the Plan.

                  (m) "ISO" shall mean an option which, at the time such option
is granted under the Plan, qualifies as an incentive stock option within the
meaning of Section 422 of the Code, unless the Award Agreement states that the
option will not be treated as an ISO.

                  (n) "Management Committee" shall mean the committee authorized
to administer the Plan with respect to Special Recognition Awards and
Discretionary Awards to employees who are not Officers.

                  (o) "NQSO" shall mean an option which, at the time such option
is granted, does not meet the definition of an ISO, whether or not it is
designated as a nonqualified stock option in the Award Agreement.

                                       -2-
<PAGE>

                  (p) "Officers" shall mean employees who are officers, within
the meaning of Rule 16a-1(f) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or any successor thereto.

                  (q) "Option" shall mean an ISO or an NQSO granted to an
employee in lieu of Common Stock subject to a vesting schedule, pursuant to the
employee's election under Section 8(a).

                  (r) "PCC" shall mean Pegasus Communications Corporation.

                  (s) "Pegasus" shall mean Pegasus Communications Corporation or
any successor thereto and its direct and indirect subsidiaries, whether in
corporate, partnership or any other form.

                  (t) "Plan" shall mean the Pegasus Communications Restricted
Stock Plan, as set forth in this document and as it may be amended from time to
time.

                  (u) "Plan Administrator" shall mean -

                      (1) With respect to Special Recognition Awards and
             Discretionary Awards to Officers, the Committee; and

                      (2) With respect to Special Recognition Awards and
             Discretionary Awards to employees who are not Officers, the
             Management Committee.

                  (v) "Profit-Sharing Awards" shall mean the formula awards
described in Section 6(b) of the Plan as amended and restated generally
effective as of December 18, 1998. The final Profit-Sharing Awards were made
with respect to the 2000 calendar year. No Profit-Sharing Awards shall be made
with respect to calendar years beginning on or after January 1, 2001.
Information concerning Profit-Sharing Awards granted for calendar years
beginning prior to January 1, 2001 may be found in the Plan as amended and
restated effective as of December 18, 1998, and as amended thereafter.

                  (w) "Savings Plan" shall mean the Pegasus Communications
Savings Plan, effective June 1, 2001, and as it may be amended from time to
time.

                  (x) "Special Recognition Awards" shall mean the awards
described in Section 6(a).

                  (y) "Year Over Year Increase in Company-Wide Location Cash
Flow" shall have the meaning set forth in Article I of the Savings Plan.

                  (z) "Years of Vesting Service" shall have the meaning set
forth in Article I of the Savings Plan; provided, however, that a Grantee shall
not complete a Year of Vesting Service for purposes of this Plan until the last
day of the 12-month computation period in which such Year is being measured.

                                       -3-
<PAGE>

                                    SECTION 3
                                 Administration
                                 --------------

                  The Plan shall be administered as follows:

                  (a) Special Recognition Awards and Discretionary Awards to
Officers. With respect to Special Recognition Awards and Discretionary Awards to
Officers, the Plan shall be administered:

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

                      (2) In the event a committee has not been established in
             accordance with paragraph 1, by the entire Board;

provided, however, that a member of the Board shall not participate in a vote
approving an Award to himself or herself to the extent provided under the laws
of the State of Delaware governing corporate self-dealing. The Plan
Administrator with respect to Special Recognition Awards and Discretionary
Awards to Officers shall hereinafter be referred to as the "Committee." Each
member of the Committee, while serving as such, shall be deemed to be acting in
his capacity as a director of PCC.

                  The Committee shall have full authority, upon consideration of
recommendations by the Management Committee and subject to the terms of the
Plan, to select the Officers to be granted Special Recognition Awards and
Discretionary Awards under the Plan, to grant such Awards on behalf of PCC, and
to set the date of grant and the other terms of such Awards. The Committee shall
also have full authority to make certain determinations with respect to an
Option granted pursuant to an Officer's election, as described in Section 8.

                  (b) Special Recognition Awards and Discretionary Awards to
Non-Officer Employees. With respect to Special Recognition Awards and
Discretionary Awards to employees who are not Officers, the Plan shall be
administered by the Management Committee. The Management Committee shall have
full authority, subject to the terms of the Plan, to select the employees to be
granted Special Recognition Awards and Discretionary Awards under the Plan, to
grant such Awards on behalf of PCC, and to set the date of grant and the other
terms of such Awards. The Management Committee shall also have full authority to
make certain determinations with respect to an Option granted pursuant to the
election of an employee who is not an Officer, as described in Section 8.
Members of the Management Committee may be appointed, removed or replaced by (i)
the Board, or (ii) the Compensation Committee of PCC.

                  (c) In General. The Plan Administrator may correct any defect,
supply any omission and reconcile any inconsistency in the Plan and in any Award
granted hereunder to the extent it shall deem desirable. The Plan Administrator
also shall have the authority to establish such rules and regulations, not
inconsistent with the provisions of the Plan, for the proper administration of

                                       -4-
<PAGE>

the Plan, and to amend, modify, or rescind any such rules and regulations, and
to make such determinations, and interpretations under, or in connection with,
the Plan, as it deems necessary or advisable. All such rules, regulations,
determinations, and interpretations shall be binding and conclusive upon PCC,
its stockholders and all employees, and upon their respective legal
representatives, beneficiaries, successors, and assigns and upon all other
persons claiming under or through any of them.

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

                                    SECTION 4
                                   Eligibility
                                   -----------

                  All employees of Pegasus shall be eligible to receive Special
Recognition Awards and Discretionary Awards. More than one Award may be granted
to an employee who is eligible to receive an Award under the Plan.

                  Special Recognition Awards shall be made as soon as
practicable after the financial information necessary for determining the amount
of the Award is available (absent extraordinary circumstances, on or before the
March 31 following the year for which the Award is made).

                                    SECTION 5
                                      Stock
                                      -----

                  The maximum number of shares of Common Stock that may be
subject to Awards under the Plan shall be 400,000 shares (subject to adjustment
as hereinafter provided). Common Stock issuable under the Plan may be authorized
but unissued shares or reacquired shares, and PCC may purchase shares required
for this purpose, from time to time, if it deems such purchase to be advisable.

                  Any Common Stock subject to an Award which is forfeited shall
continue to be available for the granting of Awards under the Plan.

                                    SECTION 6
                                 Amount of Award
                                 ---------------

                  (a) Special Recognition Awards. The Plan Administrator, in its
sole discretion, shall determine the amount of the annual Special Recognition
Award, if any, to be made on behalf of an eligible employee; provided, however,
that the Fair Market Value of the Common Stock covered by the annual Special
Recognition Awards for any year to all employees in the aggregate, determined as
of the date the Awards are granted, shall not exceed the sum of (1) five percent
of the Year Over Year Increase in Company-Wide Location Cash Flow, plus (2) the
Year Over Year Increase in Company-Wide Location Cash Flow which could have been
awarded as a Special Recognition Award in the preceding year, and was not.
Special Recognition Awards may be granted for consistency (awarded to a team of
employees), initiative (a team or individual award), problem solving (a team or
individual award), and individual excellence.

                                       -5-
<PAGE>

                  (b) Discretionary Awards. The Plan Administrator, in its sole
discretion, shall determine the amount of the Discretionary Award, if any, to be
made on behalf of an eligible employee.

                      (1) Effective On and After June 6, 2003. Effective June 6,
             2003, with respect to Discretionary Awards granted to a non-Officer
             employee, the Plan Administrator shall designate the amount of the
             Discretionary Award that the non-Officer employee may elect to
             receive in the form of (i) Common Stock subject to vesting
             requirements, and (ii) an Option described in Section 8. With
             respect to Discretionary Awards granted to an Officer, the Plan
             Administrator shall designate the amount of the Discretionary Award
             that the Officer may elect to receive in the form of (i) Common
             Stock subject to vesting requirements, (ii) an Option described in
             Section 8, or (iii) cash.

                      (2) Effective prior to June 6, 2003. Effective prior to
             June 6, 2003, Discretionary Awards are payable in Common Stock
             subject to vesting requirements or, to the extent elected by the
             Grantee under Section 8(a), in the form of an Option. With respect
             to Discretionary Awards granted to an Officer, the Officer may
             elect, before the date of grant and in accordance with procedures
             established by the Plan Administrator or its delegate, to receive
             such an Award in the form of (i) Common Stock subject to vesting
             requirements, (ii) an Option described in Section 8, (iii) cash, or
             (iv) in any combination of the foregoing; provided, however, that
             the amount of cash payable under a Discretionary Award shall not
             exceed 33-1/3% of the Officer's base salary for the year in which
             the Discretionary Award is made.

                  The Officer's vesting percentage under Section 7 shall be
applied to the portions of the Discretionary Award payable in the form of an
Option and Common Stock, but not to the portion of the Discretionary Award
payable in cash. Any cash payable pursuant to such an election shall be payable
as soon as practicable after the Discretionary Award is made.

                                    SECTION 7
                                     Vesting
                                     -------

                  (a) Special Recognition Awards. A Grantee shall be 100% vested
in a Special Recognition Award on the date such Award is made.

                  (b) Discretionary Awards.

                      (1) Death, Disability. A Grantee shall be 100% vested in
             his Discretionary Awards under the Plan when he --

                          (A) Incurs a Disability; or

                          (B) Dies.

                                       -6-
<PAGE>

                      (2) Vesting Schedule. Except as otherwise provided in
             paragraph (1), a Grantee shall be 100% vested in his Discretionary
             Awards under the Plan in accordance with the following schedule --

                                                 Percentage of Shares Subject to
              Years of Vesting Service             Awards That Are 100% Vested
              ------------------------             ---------------------------
                 Fewer than 2                                   0
                 2 but fewer than 3                            34
                 3 but fewer than 4                            67
                 4 or more                                     100

Notwithstanding the foregoing, (A) an Officer shall be 100% vested in any
portion of his Discretionary Award that is payable in cash, and (B) the Plan
Administrator may accelerate the vesting of an Award when granted or at any time
thereafter, in its discretion, if it deems such acceleration to be desirable.

                  (c) Forfeiture. Any shares of Common Stock covered by a
Grantee's Awards that are not vested pursuant to subsection (a) or subsection
(b) shall be immediately forfeited upon the Grantee's voluntary or involuntary
termination of employment by Pegasus.

                                    SECTION 8
                      Election To Receive Option in Lieu of
                  Common Stock Subject to Vesting Requirements
                  --------------------------------------------

                  (a) Election. Effective June 6, 2003, to the extent permitted
by the Plan Administrator, an employee may elect to receive all or any portion
of a Discretionary Award in the form of an Option described in this Section 8 in
lieu of Common Stock subject to vesting requirements. Effective prior to June 6,
2003, an employee may elect to receive all or any portion of a Discretionary
Award in the form of an Option described in this Section 8 in lieu of Common
Stock subject to vesting requirements. The employee's election shall be made
before the date of grant in accordance with procedures established by the Plan
Administrator or its delegate. In no event, however, may an employee elect to
receive Options for more than 5,000 shares (which number gives effect to the
December 31, 2002 reverse stock split) of Common Stock of PCC under this Section
8 (as adjusted pursuant to Section 9) in any calendar year. If an Option is
cancelled, the shares of Common Stock covered by the cancelled Option shall be
counted against the maximum number of shares for which Options may be granted to
a single employee.

                  (b) Date of Grant. The date of grant for an Option granted
pursuant to a Grantee's election under Section 8(a) shall be the date such Award
would have been made under Section 6(b) absent such an election.

                  (c) Number of Shares Subject to Option. The number of shares
of Common Stock subject to an Option granted pursuant to a Grantee's election
under Section 8(a) shall be equal to the total number of shares of Common Stock

                                       -7-
<PAGE>

which would have been covered by the Grantee's Award (determined pursuant to
Section 6(b)) without giving effect to any election to receive the Award in a
form other than Common Stock subject to vesting requirements, multiplied by (i)
the percentage of the Award the Grantee has elected to have paid in the form of
an Option, and (ii) a conversion factor. The conversion factor shall be
determined pursuant to a valuation formula established by the Plan Administrator
or its delegate.

                  (d) Type of Option. Each Option granted under this Section 8
shall, unless the Code otherwise requires or the Plan Administrator otherwise
determines, be an ISO. The aggregate Fair Market Value of the Common Stock with
respect to which ISOs are exercisable for the first time by an employee during
any calendar year (counting ISOs under this Plan and incentive stock options
under any stock option plan of Pegasus) shall not exceed $100,000. If an Option
intended as an ISO is granted to an employee and the Option may not be treated
in whole or in part as an ISO pursuant to the $100,000 limitation, the Option
shall be treated as an ISO to the extent it may be so treated under the
limitation and as an NQSO as to the remainder. For purposes of determining
whether an ISO would cause the limitation to be exceeded, ISOs shall be taken
into account in the order granted. The annual limits set forth above for ISOs
shall not apply to NQSOs.

                  (e) Terms and Conditions of Options. Options granted under
this Section 8 in lieu of Common Stock subject to vesting requirements shall
include expressly or by reference the following terms and conditions --

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

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

                      (3) Term. Subject to earlier termination as provided in
             Section 8(e)(5), (6) and (7) and in Section 9 hereof, the term of
             each Option granted under this Section 8 shall be ten years (five
             years in the case of an ISO granted to a more-than-ten-percent
             stockholder, as discussed in Section 8(e)(10)) from the date of
             grant, or such lesser term as the Plan Administrator, in its sole
             discretion, shall permit the Grantee to elect on or before the date
             of grant.

                      (4) Exercise. Each Option granted under this Section 8
             shall become exercisable in accordance with the following schedule:

                                                 Percentage of Shares Subject
                  Years of Vesting Service       to Option That Are Exercisable
                  ------------------------       ------------------------------
                      fewer than 2                             0
                      2 but fewer than 3                      34%
                      3 but fewer than 4                an additional 33%
                      4 or more                         an additional 33%

                                       -8-
<PAGE>

         If the Grantee has completed four or more Years of Vesting Service on
         the date of grant, the Option shall be fully exercisable on the date of
         grant.

                           Notwithstanding the foregoing, an Option granted
         under this Section 8 shall become fully exercisable upon the Grantee's
         death or Disability while in the employ of Pegasus. In addition, the
         Plan Administrator may accelerate the exercise date of any Option when
         granted or at any time thereafter, in its discretion, if it deems such
         acceleration to be desirable.

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

                  The Option price shall be payable --

                          (A) in cash or its equivalent;

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

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

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

                          In the event the Option price is paid, in whole or in
                  part, with shares of Common Stock, the portion of the Option
                  price so paid shall be equal to the aggregate fair market
                  value (determined under Section 2(k), with reference to the
                  date of exercise of the Option, rather than the date of grant)
                  of the Common Stock so surrendered in payment of the Option
                  price.

                                       -9-
<PAGE>

                      (5) Termination of Employment. If a Grantee's employment
             by Pegasus is terminated by either party prior to the expiration
             date fixed for his Option for any reason other than death or
             Disability, such Option may be exercised, to the extent of the
             number of shares with respect to which the Grantee could have
             exercised it on the date of such termination, by the Grantee any
             time prior to the earliest of (i) the expiration date specified in
             such Option, (ii) three months after such termination of
             employment, or (iii) termination of such Option under Section 9.

                      (6) Exercise upon Disability of Grantee. If a Grantee
             becomes Disabled during his employment and prior to the expiration
             date fixed for his Option, such Option may be exercised, to the
             extent of the number of shares with respect to which the Grantee
             could have exercised it on the date of such termination by the
             Grantee at any time prior to the earliest of (i) the expiration
             date specified in such Option, (ii) one year after such termination
             of employment, or (iii) termination of such Option under Section 9.
             In the event of the Grantee's legal disability, such Option may be
             exercised by the Grantee's legal representative.

                      (7) Exercise upon Death of Grantee. If a Grantee dies
             during his employment, and prior to the expiration date fixed for
             his Option, or if a Grantee whose employment is terminated for any
             reason, dies following his termination of employment but prior to
             the earliest of (A) the expiration date fixed for his Option, (B)
             the expiration of the period determined under paragraphs (5) and
             (6) above, or (C) in the case of an ISO, three months following
             termination of employment, such Option may be exercised, to the
             extent of the number of shares with respect to which the Grantee
             could have exercised it on the date of his death, by the Grantee's
             estate, personal representative or beneficiary who acquired the
             right to exercise such Option by bequest or inheritance or by
             reason of the death of the Grantee. Such post-death exercise may
             occur at any time prior to the earliest of (i) the expiration date
             specified in such Option, (ii) one year after the date of death, or
             (iii) termination of such Option under Section 9.

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

                      (9) Withholding and Use of Shares to Satisfy Tax
             Obligations. The obligation of PCC to deliver shares of Common
             Stock upon the exercise of any Option shall be subject to
             applicable federal, state and local tax withholding requirements.

                                      -10-
<PAGE>

             If the exercise of any Option granted under this Section 8 is
             subject to the withholding requirements of applicable tax law, the
             Grantee may satisfy the federal, state and local withholding tax,
             in whole or in part, by electing to have PCC withhold shares of
             Common Stock subject to the exercise (or by returning previously
             acquired shares of Common Stock to PCC). PCC may not withhold
             shares in excess of the number necessary to satisfy the minimum
             federal, state and local tax withholding requirements. Shares of
             Common Stock shall be valued, for purposes of this paragraph, at
             their fair market value determined under Section 2(k), with
             reference to the date the amount attributable to the exercise of
             the Option is includable in income by the Grantee under the Code
             (the "Determination Date"), rather than the date of grant.

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

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

                      (10) Ten Percent Stockholder. If an employee owns more
             than ten percent of the total combined voting power of all classes
             of stock of PCC or of its parent or subsidiary corporation at the
             time an ISO is granted to him (taking into account the attribution
             rules of Section 424(d) of the Code, the Option price for the ISO
             shall be 110 percent of the Fair Market Value of the optioned
             shares of Common Stock on the date the ISO is granted, and such
             ISO, by its terms, shall not be exercisable after the expiration of
             five years from the date the ISO is granted. The conditions set
             forth in this paragraph shall not apply to NQSOs.

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

                                    SECTION 9
                               Capital Adjustments
                               -------------------

                  The number and the type or class of shares which may be issued
under the Plan and the number of shares of Common Stock issuable upon the
vesting of outstanding Awards shall be adjusted to reflect any stock dividend,
stock split, share combination, or similar change in the capitalization of PCC.
The maximum number of shares with respect to which Options may be granted to any
employee in any calendar year (as stated in Section 8(a)) and the number and the
type or class of shares issuable upon exercise of outstanding Options under the
Plan (as well as the Option Price per share under such outstanding Options)
shall be adjusted, as may be deemed appropriate by the Plan Administrator, to
reflect any stock dividend, stock split, spin-off, share combination, or similar
change in the capitalization of PCC; provided, however, that no such adjustment

                                      -11-
<PAGE>

shall be made to an outstanding ISO if such adjustment would constitute a
modification under Section 424(h) of the Code, unless the Grantee consents to
such adjustment. In the event any such change in capitalization cannot be
reflected in a straight mathematical adjustment of the number of shares issuable
upon the vesting of outstanding Awards or the exercise of outstanding Options
(as well as the Option price), the Plan Administrator shall make such
adjustments as are appropriate to reflect most nearly such straight mathematical
adjustment. Such adjustments shall be made only as necessary to maintain the
proportionate interests of Grantees and preserve, without exceeding, the value
of Awards.

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

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

                                   SECTION 10
                     Amendment or Discontinuance of the Plan
                     ---------------------------------------

                  At any time, the Board may suspend or terminate the Plan. The
Plan Administrator may amend any outstanding Awards in any respect whatsoever,
including amendments that reprice (or decrease the Option price of) outstanding
Options under the Plan or result in the cancellation of outstanding Options in
exchange for cash or the grant of new Options, shares of Common Stock subject to
vesting requirements, or another type of equity award. At any time and from time
to time, the Plan may be amended by resolution of (i) the Board, or (ii) the
Compensation Committee of the Board, except that the following amendments shall
require the approval of stockholders:

                  (a) Any amendment which would increase the number of shares of
Common Stock authorized under the Plan;

                  (b) Any amendment for which stockholder approval is required
under the rules of an exchange or market on which Common Stock is listed;

                                      -12-
<PAGE>

                  (c) Any amendment which would change the class of employees
eligible to receive ISOs; and

                  (d) Any amendment requiring stockholder approval pursuant to
Treas. Reg. ss.1.162-27(e)(4)(iv) or any successor thereto (to the extent
compliance with Section 162(m) of the Code is desired).

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

                  The approval of stockholders must be (i) by a method and in a
degree that would be treated as adequate under applicable state law in the case
of an action requiring stockholder approval (i.e., an action on which
stockholders would be entitled to vote if the action were taken at a duly held
stockholders' meeting), or (ii) by a majority of the votes cast at a duly held
stockholders' meeting at which a quorum representing a majority of all
outstanding voting stock is, either in person or by proxy, present and voting on
the Plan.

                                   SECTION 11
                               Termination of Plan
                               -------------------

                  Unless earlier terminated as provided in the Plan, the Plan
and all authority granted hereunder shall terminate absolutely at 12:00 midnight
on September 29, 2006, and no Awards hereunder shall be granted thereafter.
Nothing contained in this Section 11, however, shall terminate or affect the
continued existence of rights created under Awards issued hereunder and
outstanding on September 29, 2006 which by their terms extend beyond such date.

                                   SECTION 12
                                 Effective Date
                                 --------------

                  This Plan became effective on September 30, 1996 (the date the
Plan was adopted by the Board). As amended and restated, this Plan became
effective as of February 13, 2002.

                                   SECTION 13
                                  Miscellaneous
                                  -------------

                  (a) Book-Entry Record of Shares. This Section 13(a) shall not
apply to the portion of any Award with respect to which the Grantee has made an
election to receive an Option pursuant to Section 8(a). Upon the granting of an
Award, book-entry record of the shares of Common Stock covered by the Award
shall be made with PCC's share transfer agent in the name of the Grantee (or in
the name of the Grantee and the Grantee's spouse, if the Grantee so requests --
see subsection (f)), unless the Grantee requests that share certificates be
issued directly to him or her. Share certificates issued directly to the Grantee
shall be issued in the name of the Grantee (or in the name of the Grantee and
the Grantee's spouse -- see subsection (f)). With respect to any shares subject
to the Award in which the Grantee is not vested on the date the Award is made,
however, no certificates shall be issued until the Grantee is vested in such
shares. Only full shares shall be issued, and any fractional shares which might
otherwise be issuable pursuant to an Award shall be forfeited.

                                      -13-
<PAGE>

                  (b) Rights as a Stockholder. With respect to any shares of
Common Stock in which the Grantee is not vested on the date an Award is granted
(other than shares for which the Grantee has made an election pursuant to
Section 8(a) to receive an Option), the Grantee shall have the right to vote
such shares to the extent the shares possess voting rights and shall be entitled
to receive dividends paid on such shares; provided, however, that any dividends
paid in a form other than cash shall be subject to the vesting schedule that
applies to the Award with respect to which such dividend is made. However, the
shares subject to the Award will revert to PCC in accordance with Section 7(c)
to the extent not vested on the Grantee's voluntary or involuntary termination
of employment by Pegasus.

                  With respect to the portion of any Award for which the Grantee
has made an election under Section 8(a), the Option issued pursuant thereto
shall not entitle the holder thereof to any rights as a stockholder of PCC prior
to the exercise of such Option and the issuance of the shares pursuant thereto.

                  (c) Award Agreement. Awards under the Plan shall be evidenced
by documents in such form as the Plan Administrator shall, from time to time,
approve, which Award Agreements shall contain such provisions, not inconsistent
with the provisions of the Plan, as the Plan Administrator shall deem advisable.
Each Grantee shall enter into, and be bound by the terms of, the Award
Agreement.

                  (d) Governing Law. The Plan, and the Award Agreements entered
into and Awards granted thereunder, shall be governed by the Code provisions to
the extent applicable. Otherwise, the operation of, and the rights of eligible
individuals under, the Plan, the Award Agreements, and the Awards shall be
governed by applicable federal law and otherwise by the laws of the State of
Delaware, without reference to principles of conflicts of law.

                  (e) Rights. Neither the adoption of the Plan nor any action of
the Board or the Plan Administrator shall be deemed to give any individual any
right to be granted an Award, or any other right hereunder, unless and until the
Plan Administrator shall have granted such individual an Award, and then his
rights shall be only such as are provided by the Plan and the Award Agreement.

                  Further, notwithstanding any provisions of the Plan or any
Award Agreement with a Grantee, but subject to any employment agreement, Pegasus
shall have the right, in its discretion, to retire an employee at any time
pursuant to its retirement rules or otherwise to terminate his employment at any
time for any reason whatsoever.

                  (f) Non-Transferability. This Section 13(f) shall not apply to
the portion of an Award with respect to which the Grantee has made an election
to receive an Option pursuant to Section 8(a). Except as otherwise provided in
any Award Agreement, Awards which have not vested shall not be assignable or
transferable by the Grantee otherwise than by will or by the laws of descent and
distribution. If a Grantee is married on the date an Award is granted, and if
the Grantee so requests, book entry-record shall be made (or the share
certificates issued shall be registered) in the name of the Grantee and the
Grantee's spouse, jointly, with right of survivorship.

                                      -14-
<PAGE>

                  (g) Listing and Registration of Shares. Each Award shall be
subject to the requirement that, if at any time the Plan Administrator shall
determine, in its discretion, that the listing, registration, or qualification
of the Common Stock covered thereby upon any securities exchange or under any
state or federal law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of, or in connection with, the
granting of such Award or the vesting of Common Stock thereunder, or that action
by PCC or by the Grantee should be taken in order to obtain an exemption from
any such requirement, no shares of Common Stock shall be received pursuant to an
Award, unless and until such listing, registration, qualification, consent,
approval, or action shall have been effected, obtained, or taken under
conditions acceptable to the Plan Administrator. Without limiting the generality
of the foregoing, each Grantee or his legal representative or beneficiary may
also be required to give satisfactory assurance that shares received pursuant to
an Award will be held as an investment and not with a view to distribution, and
certificates representing such shares may be legended accordingly.

                  (h) Withholding and Use of Shares to Satisfy Tax Obligations.
This Section 13(h) shall not apply to the portion of an Award with respect to
which the Grantee made an election to receive an Option pursuant to Section
8(a). The obligation of PCC to deliver Common Stock pursuant to any Award shall
be subject to applicable federal, state and local tax withholding requirements.
If the vesting of any Award is subject to the withholding requirements of
applicable tax law, the Plan Administrator, in its discretion, may permit or
require the Grantee to satisfy the federal, state and local withholding tax, in
whole or in part, by electing to have PCC withhold shares of Common Stock
subject to the Award (or by returning previously acquired shares of Common Stock
to PCC). PCC may not withhold shares in excess of the number necessary to
satisfy the minimum federal, state and local income tax withholding
requirements. Shares of Common Stock shall be valued, for purposes of this
paragraph, at their fair market value, determined under Section 2(k), with
reference to the date the amount attributable to the vesting of the Award is
includable in income by the Grantee under the Code (the "Vesting Date"). If
shares of Common Stock acquired by the exercise of an ISO are used to satisfy
the withholding requirement described above, such shares of Common Stock must
have been held by the Grantee for a period of not less than the holding period
described in Section 422(a)(1) of the Code as of the Vesting Date. The Plan
Administrator shall adopt such withholding rules as it deems necessary to carry
out the provisions of this paragraph.

                  (i) Indemnification of Board and Plan Administrator. Without
limiting any other rights of indemnification which they may have from Pegasus,
the members of the Board, the Committee and the Management Committee shall be
indemnified by PCC against all costs and expenses reasonably incurred by them in
connection with any claim, action, suit, or proceeding to which they or any of
them may be a party by reason of any action taken or failure to act under, or in
connection with, the Plan, or any Award granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by legal counsel selected by PCC) or paid by them in satisfaction of a judgment
in any such action, suit, or proceeding, except a judgment based upon a finding
of willful misconduct or recklessness on their part. Upon the making or
institution of any such claim, action, suit, or proceeding, the Board, Committee
or Management Committee member shall notify PCC in writing, giving PCC an
opportunity, at its own expense, to handle and defend the same before such
Board, Committee or Management Committee member undertakes to handle it on his
own behalf.

                                      -15-

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