Document:

THE INTERSIL HOLDING CORPORATION
                          EMPLOYEE STOCK PURCHASE PLAN
                            (EFFECTIVE MARCH 1, 2000)

I. PURPOSE OF THE PLAN

     This Plan is intended to promote the interests of Intersil Holding
Corporation (the "Corporation") by providing eligible employees with the
opportunity to acquire a proprietary interest in the Corporation through
participation in a payroll-deduction based employee stock purchase plan designed
to qualify under Section 423 of the Code.

II. Capitalized terms herein shall have the following meanings:

     A. "Compensation" shall mean the total earnings paid to a Participant by
one or more Participating Corporations during such individual's period of
participation in the Plan, plus any pre-tax contributions made by the
Participant to any Code Section 401(k) salary deferral plan or any Code Section
125 cafeteria benefit program now or hereafter established by the Corporation or
any Corporate Affiliate; provided that Compensation shall not include the
following items of compensation:

     (i)  any extraordinary income compensation of a non-recurring nature;

     (ii) any award made or amount paid pursuant to an employer's equity-based
          compensation arrangement including, but not limited to, performance
          shares, stock options (including any exercise thereof), restricted
          stock, stock appreciation rights (including any exercise thereof), and
          dividend equivalents;

    (iii) severance pay or special retirement pay;

     (iv) imputed compensation, such as employer-paid group insurance premiums;
          and

     (v)  reimbursements or other allowances for automobile, relocation,
          tax-equalization, travel or educational expenses.

     B. "Board" shall mean the Corporation's Board of Directors.

     C. "Code" shall mean the Internal Revenue Code of 1986, as amended.

     D. "Committee" shall mean the committee described in Article III below.

     E. "Common Stock" shall mean the Corporation's common stock.

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     F. "Corporate Affiliate" shall mean any parent or subsidiary corporation of
the Corporation (as determined in accordance with Code Section 424), whether now
existing or subsequently established.

     G. "Corporate Transaction" shall mean either of the following
stockholder-approved transactions to which the Corporation is a party: (i) a
merger or consolidation in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Corporation's outstanding
securities are transferred to a person or persons different from the persons
holding those securities immediately prior to such transaction, or (ii) the
sale, transfer or other disposition of all or substantially all of the assets of
the Corporation in complete liquidation or dissolution of the Corporation.

     H. "Corporation" shall mean Intersil Holding Corporation, a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Intersil Holding Corporation which shall by
appropriate action adopt the Plan.

     I. "Effective Date" shall mean March 1, 2000. Any Corporate Affiliate which
becomes a Participating Corporation after such Effective Date shall designate a
subsequent Effective Date with respect to its employee-Participants.

     J. "Eligible Employee" shall mean any employee on active payroll status who
is employed by a Participating Corporation on such terms that he or she is
regularly expected to render more than twenty (20) hours of service per week for
more than five (5) months per calendar year for earnings considered wages under
Section 3401(a) of the Code, with the exception of Five-Percent Owners, as
defined in Article II.M. below.

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

     L. "Fair Market Value" per share of Common Stock as of a particular date
means (i) if the shares of Common Stock are then listed on a national stock
exchange, the closing sales price per share of Common Stock on the exchange for
the last preceding date on which there was a sale of such shares on such
exchange, as determined by the Committee, (ii) if shares of Common Stock are not
then listed on a national stock exchange but are then traded on an
over-the-counter market, the average of the closing bid and asked prices for
such shares in such over-the-counter market for the last preceding date on which
there was a sale of such shares in such market, as determined by the Committee,
or (iii) if shares of Common Stock are not then listed on a national stock
exchange or traded on an over-the-counter market, such value as the Committee in
its discretion may in good faith determine; provided that, where the shares of
Common Stock are so listed or traded, the Committee may make such discretionary
determinations where the shares have not been traded for 10 trading days.
Notwithstanding the foregoing, upon the date of an initial public offering of
the Common Stock pursuant to an effective registration statement under the
Securities Act of 1933, as amended, the "Fair Market Value" per share of Common
Stock means the price at which such stock is initially offered by the Company in
such public offering.

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     M. "Five-Percent Owner" shall mean any individual who would, immediately
after the grant of purchase rights, as described in Article VIII.A., own (within
the meaning of Code Section 424(d)) or hold outstanding options or other rights
to purchase stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Corporation or any
Corporate Affiliate.

     N. "Participant" shall mean any Eligible Employee of a Participating
Corporation who is actively participating in the Plan.

     O. "Participating Corporation" shall mean the Corporation and such
Corporate Affiliates as may be authorized from time to time by the Board to
extend the benefits of the Plan to their Eligible Employees. The Participating
Corporations in the Plan are listed in the attached Schedules, which may be
amended from time to time.

     P. "Plan" shall mean the Corporation's Employee Stock Purchase Plan, as set
forth in this document.

     Q. "Purchase Date" shall mean the last business day of each purchase
period, i.e., the last business day of September and March of each year in which
the Plan is maintained by the Corporation.

III. ADMINISTRATION OF THE PLAN

     The Plan shall be administered by the Board, or by a Committee appointed by
the Board. All references to the Committee herein shall apply to the Board in
the event that no Committee is appointed pursuant to this Article. Such
Committee shall, at such times as the Common Stock is registered pursuant to
Section 12 of the Exchange Act, consist of at least two individuals each of whom
shall be a "nonemployee director" as defined in Rule 16b-3 as promulgated by the
Securities and Exchange Commission ("Rule 16b-3") under the Exchange Act and
shall, at such times as the Company is subject to Section 162(m) of the Code (to
the extent relief from the limitation of Section 162(m) of the Code is sought
with respect to purchase rights offered hereunder), qualify as "outside
directors" for purposes of Section 162(m) of the Code and related Treasury
regulations. The acts of a majority of the members present at any meeting of the
Committee at which a quorum is present, or acts approved in writing by a
majority of the entire Committee, shall be the acts of the Committee for
purposes of the Plan. If and to the extent applicable, no member of the
Committee may act as to matters under the Plan specifically relating to such
member. The Committee shall have full authority to interpret and construe any
provision of the Plan and to adopt such rules and regulations for administering
the Plan as it may deem necessary in order to comply with the requirements of
Code Section 423. Decisions of the Committee shall be final and binding on all
parties having an interest in the Plan.

IV. STOCK SUBJECT TO PLAN

     A. Number of Shares. The stock purchasable under the Plan shall be shares
of authorized but unissued or reacquired Common Stock, including shares of
Common Stock

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purchased on the open market. The maximum number of shares of Common Stock which
may be issued over the term of the Plan shall not exceed 2,000,000 shares.

     B. Adjustments. Should any change be made to the Common Stock by reason of
any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and class of securities
issuable under the Plan, (ii) the maximum number and class of securities
purchasable per Participant on any one Purchase Date and (iii) the number and
class of securities and the price per share in effect under outstanding purchase
rights in order to prevent the dilution or enlargement of benefits thereunder.

V. PURCHASE PERIODS

     A. Shares of Common Stock shall be offered for purchase under the Plan
through a series of successive purchase periods until the earlier of such time
as (i) the maximum number of shares of Common Stock available for issuance under
the Plan shall have been purchased or (ii) the Plan shall have been terminated.

     B. Except for the initial purchase period, each purchase period shall have
a duration of six (6) months. Purchase periods shall run from April 1st to
September 30th and from October 1st to March 31st; provided that the first
purchase period shall begin on the date of the Corporation's initial public
offering and end on September 30, 2000.

VI. ELIGIBILITY

     A. Each individual who is an Eligible Employee shall be eligible to
participate in the Plan on the start date of any purchase period under the Plan.

     B. To participate in the Plan for a particular purchase period, the
Eligible Employee must complete the telephonic enrollment procedure prescribed
by the Committee (or its designate), at the time specified by such procedures.
Such telephonic enrollment will include authorizing payroll deductions as
described in Article VII below. An Eligible Employee's election to participate
in the Plan for a particular purchase period shall apply to subsequent purchase
periods, unless revoked by the Eligible Employee, as provided in Articles VII
and VIII.

VII. PAYROLL DEDUCTIONS

     A. Election and Revocation. The payroll deduction authorized by the
Participant for purposes of acquiring shares of Common Stock under the Plan may
be any multiple of one percent (1%) of the Compensation paid to the Participant
during each purchase period, up to a maximum of ten percent (10%). The deduction
rate so authorized shall continue in effect for the entire purchase period. The
rate of payroll deduction may not be increased or decreased during the purchase
period. However, the Participant may, at any time during a purchase period,
revoke his or her payroll deduction election by using the telephonic procedures
prescribed by the

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Committee. The revocation shall become effective as soon as possible following
the completion of such telephonic procedure. The revocation of a payroll
deduction election results in the termination of the Participant's outstanding
purchase rights, as provided in Article VIII.F.i below.

     B. Beginning Date. Payroll deductions shall begin on the first pay period
following the start date of the purchase period and shall (unless sooner
terminated by the Participant) continue through the pay period ending with or
immediately prior to the last day of the purchase period. The amounts so
collected shall be credited to the Participant's book account under the Plan,
but no interest shall be paid on the balance outstanding from time to time in
such account. The amounts collected from the Participant shall not be held in
any segregated account or trust fund and may be commingled with the general
assets of the Corporation and used for general corporate purposes.

     C. Ending Date. Payroll deductions shall automatically cease upon the
termination of the Participant's purchase rights in accordance with the
provisions of the Plan.

     D. No Further Obligation. Subject to the limitations set forth in Articles
VIII.D and IX below, the Participant's acquisition of Common Stock under the
Plan on any Purchase Date shall neither limit nor require the Participant's
acquisition of Common Stock on any subsequent Purchase Date.

VIII. PURCHASE RIGHTS

     A. Grant of Purchase Rights. A Participant shall be granted a separate
purchase right on the start date of each purchase period in which he or she
elects to participate. Such purchase right shall provide the Participant with
the right to purchase shares of Common Stock on the Purchase Date upon the terms
set forth below. Under no circumstances shall a purchase right be granted under
the Plan to any Eligible Employee if such individual would immediately after the
grant be a Five-Percent Owner, as defined in Article II.M..

     B. Exercise of the Purchase Rights. Purchase rights shall be automatically
exercised on the Purchase Date, and shares of Common Stock shall accordingly be
purchased on behalf of each Participant (other than any Participant whose
payroll deductions have previously been refunded in accordance with Section
VIII.F. below) on such date. The purchase shall be effected by applying the
Participant's payroll deductions for the purchase period ending on such Purchase
Date to the purchase of shares of Common Stock (subject to the limitation on the
maximum number of shares purchasable per Participant on any one Purchase Date)
at the purchase price in effect for that purchase period.

     C. Purchase Price. Unless otherwise provided by the Committee, the purchase
price per share at which Common Stock will be purchased on the Participant's
behalf on each Purchase Date shall be eighty-five percent (85%) of the lower of
(i) the Fair Market Value per share of Common Stock on the start date of the
purchase period or (ii) the Fair Market Value per share of Common Stock on the
applicable Purchase Date.

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     D. Number of Shares Which May Be Purchased. The number of shares of Common
Stock which will be purchased by a Participant on each Purchase Date shall be
that number of shares (including fractional shares) obtained by dividing the
amount collected from the Participant through payroll deductions during the
purchase period ending with that Purchase Date by the purchase price in effect
for that Purchase Date. However, the maximum number of shares of Common Stock
purchasable per Participant on any one Purchase Date shall not exceed 25,000
shares, subject to periodic adjustments as provided in Article IV.B. and subject
to the limitation in Article IX.

     E. Excess Payroll Deductions. Any payroll deductions not applied to the
purchase of Common Stock by reason of the limitation on the maximum number of
shares purchasable by the Participant on the Purchase Date shall be held for the
purchase of shares of Common Stock for the Participant on the next Purchase
Date.

     F. Termination of Payroll Deductions During a Purchase Period. The
following provisions shall govern the termination of payroll deduction elections
during a purchase period rights:

          (i) A Participant may, at any time before the last two weeks of a
     purchase period, terminate his or her payroll deductions by revoking his or
     her payroll deduction election through the telephonic procedure described
     above, and no further payroll deductions shall be collected from the
     Participant during the purchase period in which such revocation is made (or
     the purchase period immediately following such purchase period). Any
     payroll deductions collected during the purchase period in which a
     revocation of payroll deduction election occurs shall, at the Participant's
     election, be refunded in cash or held for the purchase of shares of Common
     Stock on the Purchase Date applicable to such purchase period. If no such
     election is made at the time such revocation occurs, then the payroll
     deductions collected with respect to the purchase period in which the
     revocation occurs shall be refunded to the Participant.

          (ii) The termination of a payroll deduction election shall be
     irrevocable, and the Participant may not subsequently rejoin the purchase
     period in which the revocation was made. In addition, the Participant may
     not make payroll deduction contributions in the purchase period immediately
     following the purchase period in which such a revocation occurred. In order
     to resume payroll deductions in any subsequent purchase period, such
     individual must re-enroll in the Plan on or before the start date of the
     next purchase period in which he or she may participate.

          (iii) Should the Participant cease to remain an Eligible Employee for
     any reason (including death or disability) while his or her purchase rights
     are outstanding, then such Participant's right to continue payroll
     deduction contributions shall immediately terminate, and all of the
     Participant's payroll deductions accumulated prior to such termination
     shall, at the election of the Participant (or, in the event of the
     Participant's death, the personal representative of the Participant's
     estate), be refunded or held for the purchase of shares of Common Stock on
     the next Purchase Date. If no such election is made prior to the next
     Purchase Date, then such accumulated payroll deductions shall be refunded
     to the Participant or beneficiary, as applicable.

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<PAGE>

          (iv) Should the Participant cease to remain in active service by
     reason of an approved leave of absence, then the Participant shall have the
     right described in Article VIII.F.i above to elect to withdraw all the
     payroll deductions collected during the applicable purchase period. In the
     absence of such an election, such funds shall be held for the purchase of
     shares at the end of such purchase period. In no event, however, shall any
     further payroll deductions be collected on the Participant's behalf during
     such leave. Upon the Participant's return to active service, his or her
     payroll deductions under the Plan shall automatically resume at the rate in
     effect at the time the leave began, unless the participant elects otherwise
     in accordance with Article VIII.F.i above.

     G. Corporate Transaction. Outstanding purchase rights shall automatically
be exercised, immediately prior to the effective date of any Corporate
Transaction, by applying the payroll deductions of each Participant for the
purchase period in which such Corporate Transaction occurs to the purchase of
shares of Common Stock at a purchase price per share equal to eighty-five
percent (85%) (or such greater percentage as the Committee may have established
for the purchase period in which such Corporate Transaction occurs) of the lower
of (i) the Fair Market Value per share of Common Stock on the start date of the
purchase period in which such Corporate Transaction occurs or (ii) the Fair
Market Value per share of Common Stock immediately prior to the effective date
of such Corporate Transaction. However, the applicable limitation on the number
of shares of Common Stock purchasable per Participant shall continue to apply to
any such purchase. The Corporation shall use its best efforts to provide at
least ten (10) days prior written notice of the occurrence of any Corporate
Transaction, and Participants shall, following the receipt of such notice, have
the right to terminate their outstanding purchase rights prior to the effective
date of the Corporate Transaction in accordance with Article VIII.F.i above.

     H. Proration of Purchase Rights. Should the total number of shares of
Common Stock which are to be purchased pursuant to outstanding purchase rights
on any Purchase Date exceed the number of shares then available for issuance
under the Plan, the Committee shall make a pro-rata allocation of the available
shares on a uniform and nondiscriminatory basis, and the payroll deductions of
each Participant, to the extent in excess of the aggregate purchase price
payable for the Common Stock pro-rated to such individual, shall be refunded.

     I. Assignability. Purchase rights shall be exercisable only by the
Participant and shall not be assignable or transferable by the Participant.

     J. Stockholder Rights. A Participant shall have no stockholder rights with
respect to the shares subject to his or her outstanding purchase rights until
the shares are purchased on the Participant's behalf in accordance with the
provisions of the Plan and the Participant has become a holder of record of the
purchased shares.

IX. ACCRUAL LIMITATIONS

     A. Twenty-Five Thousand Dollar Limit. No Participant shall be entitled to
accrue rights to acquire Common Stock pursuant to any purchase right outstanding
under this Plan if

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<PAGE>

and to the extent such accrual, when aggregated with (i) rights to purchase
Common Stock accrued under any other purchase right granted under this Plan and
(ii) similar rights accrued under other employee stock purchase plans (within
the meaning of Code Section 423) of the Corporation or any Corporate Affiliate,
would otherwise permit such Participant to purchase more than Twenty-Five
Thousand Dollars ($25,000) worth of stock of the Corporation or any Corporate
Affiliate (determined on the basis of the Fair Market Value per share on the
date or dates such rights are granted) for each calendar year such rights are at
any time outstanding.

     B. Application of the Limit. For purposes of applying such accrual
limitations, (i) the right to acquire Common Stock under each outstanding
purchase right shall accrue on the Purchase Date in effect for the purchase
period for which such right is granted and, (ii) the right to acquire Common
Stock under any outstanding purchase right shall accrue in accordance with the
rate preserved in the Plan, but in the event may such rate exceed Twenty-Five
Thousand Dollars ($25,000) worth of Common Stock (determined on the basis of the
Fair Market Value per share on the date or dates of grant) for any one calendar
year.

     C. Refund of Excess. If by reason of such accrual limitations, the purchase
rights of a Participant does not accrue for a particular purchase period, then
the payroll deductions which the Participant made during that purchase period
with respect to such purchase rights shall be refunded within thirty (30) days.

     D. Limit Controls. In the event there is any conflict between the
provisions of this Article IX and one or more provisions of the plan or any
instrument issued thereunder, the provisions of this Article IX shall be
controlling.

X. EFFECTIVE DATE AND TERM OF THE PLAN

     A. The Effective Date. The Plan was adopted by the Board on November 3,
2000 and becomes effective on the Effective Date.

     B. Termination of the Plan. Unless sooner terminated by the Board, the Plan
shall terminate upon the earliest of (i) February 28, 2010, (ii) the date on
which all shares available for issuance under the Plan shall have been sold
pursuant to purchase rights exercised under the Plan or (iii) the date on which
all purchase rights are exercised in connection with a Corporate Transaction. No
further purchase rights shall be granted or exercised, and no further payroll
deductions shall be collected, under the Plan following its termination.

XI. AMENDMENT OF THE PLAN

     The Board may alter, amend, suspend or discontinue the Plan at any time,
with such change to become effective immediately following the close of any
purchase period. However, the Board may not, without the approval of the
Corporation's stockholders, (i) materially increase the number of shares of
Common Stock issuable under the Plan or the maximum number of shares purchasable
per Participant on any one Purchase Date, except for permissible adjustments in
the event of certain changes in the Corporation's capitalization, (ii) alter the

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<PAGE>

purchase price formula so as to reduce the purchase price payable for the shares
of Common Stock purchasable under the Plan, or (iii) materially increase the
benefits accruing to Participants under the Plan or materially modify the
requirements for eligibility to participate in the Plan.

XII. GENERAL PROVISIONS

     A. All costs and expenses incurred in the administration of the Plan shall
be paid by the Corporation.

     B. Nothing in the Plan shall confer upon any Participant the right to
continue in the employ of the Corporation or any Corporate Affiliate for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Corporate Affiliate employing such person)
or of the Participant, which rights are hereby expressly reserved by each, to
terminate such person's employment at any time for any reason, with or without
cause.

     C. The provisions of the Plan shall be governed by the laws of the State of
Delaware without resort to that State's conflict-of-laws rules.

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<PAGE>

                                   SCHEDULE A

                          Corporations Participating in
                          Employee Stock Purchase Plan
                                As March 1, 2000

                              Intersil Corporation
                          Intersil Holding Corporation
                       Choice-Intersil Microsystems, Inc.<PAGE>
                           RENEWAL FRANCHISE AGREEMENT
                BETWEEN THE TELECOMMUNICATIONS REGULATORY BOARD,
                         CABLE SYSTEMS USA, PARTNERS AND
                  PEGASUS CABLE TELEVISION OF SAN GERMAN, INC.

                  WHEREAS, Cable Systems USA, Partners (the "Company" or
"Franchisee") has been operating a cable communications system within the
municipalities of Aguadilla, Aguada, Quebradillas, Moca and Isabela, Puerto Rico
(the "Municipalities") pursuant to Franchise FC-53 originally issued by the
Public Service Commission on September 26, 1983, as amended; and

                  WHEREAS, the Telecommunications Regulatory Board of Puerto
Rico ("the Board") has been authorized to renew cable television franchises
pursuant to its authority under Public Law 213 of September 12, 1996, known as
the "Telecommunications Act of Puerto Rico of 1996" and Public Law 170 of August
12, 1988 known as the "Uniform Administrative Procedures Act".

                  WHEREAS, the Company has asked the Board to renew the
nonexclusive franchise ("Prior Franchise") to construct, install, maintain and
operate a cable communications system in the Municipalities; and

                  WHEREAS, Grantor has a legitimate and necessary regulatory
role in ensuring the maximum feasible availability of cable communications
service, the high technical capability and reliability of cable systems in its
jurisdiction, the availability of local programming, including public,
educational, and governmental access programming, optimum customer service, and
fair rates, subject to the limitations of applicable law and

<PAGE>

                  WHEREAS, the basis for the Grantor's lawful regulatory
authority to establish an enforceable franchise agreement and associated
regulatory mechanisms are the Grantee's use of public resources for its
distribution network, limited competition in the cable service market within the
franchise area, and applicable federal law authorizing the provision of cable
services only through a local franchise agreement; and

                  WHEREAS, diversity in cable service, local and non-local
programming is an important policy goal. Grantee's cable system should offer a
wide range of programming services which individually may not be desired by all
subscribers, but collectively present a substantial share of the overall value
of cable to current and prospective subscribers, including local programming;
and

                  WHEREAS, flexibility to respond to changes in technology,
subscriber interests, and competitive factors is an important policy goal; and

                  WHEREAS, the Board has reviewed the Company's performance
under the Prior Franchise, and the quality of service during prior franchise
term; has identified the future cable-related needs and interests of the
community; has considered the financial, technical, and legal qualifications of
the Company; and has determined whether the Company's plans for constructing,
operating and maintaining its cable System are adequate; and

                  WHEREAS, based on the Company's representations and
information, the Board has determined that, subject to the terms and conditions
set forth herein, the grant of a new nonexclusive franchise to the Company, to
supersede the Prior Franchise, is consistent with the public interest; and

                                       -2-

<PAGE>

                  WHEREAS, the Company has signed an Asset Purchase Agreement
("Purchase Agreement") with, among other parties, Pegasus Cable Television,
Inc., which is the parent company of Pegasus Cable Television of San German,
Inc. ("Pegasus"), under which, after certain conditions are met, the Company
will transfer the Franchise to Pegasus;

                  WHEREAS, the Board has reviewed the Pegasus's performance
under its Franchise, has identified the future cable-related needs and interests
of the community; has considered its financial, technical, and legal
qualifications; and has determined whether Pegasus' plans for constructing and
operating its cable System are adequate; and

                  WHEREAS, based on the Company's and on Pegasus's
representations and information, the Board has determined that, subject to the
terms and conditions set forth herein, the grant of a new nonexclusive franchise
to the Company, to supersede the Prior Franchise, is consistent with the public
interest; and

                  WHEREAS, based on the terms of the Purchase Agreement and the
representations made by the parties during the renewal and transfer hearing held
on October 20, 1998, the Board has determined that it will agree to the renewal
of the Franchise to the Company (independent of the closing of the Purchase
Agreement), and to the transfer the Franchise to Pegasus, subject to the closing
of the Purchase Agreement; and

                  WHEREAS, the Board and the Company have reached agreement on
the terms and conditions of such a Franchise Agreement; and

                  NOW, THEREFORE, in consideration of the Board's renewal of the
Company's Franchise; the Company's and Pegasus' promise to provide Cable Service
to residents of the Municipalities under the terms and conditions set forth
herein; the promises

                                       -3-

<PAGE>

and undertakings herein, and other good and valuable consideration, the receipt
and the adequacy of which is hereby acknowledged, the Board, the Company and
Pegasus hereby agree as follows:

1. DEFINITIONS

The following definitions shall apply;

     a) Board - The Telecommunications Regulatory Board of Puerto Rico

     b) Board Regulations - The regulations of the Board applicable to cable
        television companies as adopted by the Board on January 28, 1998.

     c) Cable Service shall mean: (1) the one-way transmission to subscribers of
        video programming or other programming services and (2) subscriber
        interaction, if any, which is required for the selection or use of such
        video programming or programming service. Cable Service includes the
        provision of Internet access over the cable system.

     d) Cable System or System: shall mean a facility consisting of a set of
        closed transmission paths and associated signal generation, reception,
        and control equipment that is designed to provide Cable Service which
        includes video programming and/or producing, receiving, amplifying,
        storing, processing, switching, or distributing audio, video, digital or
        other forms of electronic Signals sold or distributed to subscribers,
        but such term does not include (1) a facility that services only to
        retransmit the television signals of one or more television broadcast
        stations; (2) a facility that serves Subscribers without using any
        Public Rights of Way (3) a facility of a common carrier which is
        subject, in

                                       -4-

<PAGE>

        whole or in part, to the provisions of Title II of the Communications
        Act of 1934, as amended, except that such facility shall be considered a
        cable system to the extent such facility is used in the transmission of
        video programming directly to subscribers, unless the extent of such use
        is solely to provide interactive on-demand services; (4) an open video
        system that complies with 47 U.S.C. ss. 573 of the Cable Act, the rules
        and regulations of the FCC, and local law; or (5) any facilities of any
        electric utility used solely for operating its electric utility systems.
        The foregoing definition of "Cable System" shall not be deemed to
        circumscribe or limit the valid authority of the Board to Regulate or
        Franchise the activities of any other communications system or provider
        of communication services to the full extent permitted by law.

     e) Channel: Shall mean a band of frequencies in the electromagnetic
        spectrum, or any other means of transmission (including, without
        limitation, optical fibers or any other means now available or that may
        become available), which is capable of carrying a video Signal, an audio
        Signal, a voice Signal, or a data Signal.

     f) FCC: shall mean the Federal Communications Commission.

     g) Franchise Agreement or Agreement: shall mean this contract and any
        amendments,

     h) Owner: shall mean a person with a legal or equitable interest in
        ownership of real property

     i) Person: shall mean any corporation, partnership, proprietorship,
        individual or organization, governmental organization, or any natural
        person

                                       -5-

<PAGE>

     j) Public Right-of-way: shall mean the surface, air space above the
        surface, and the area below any public street, road, highway, lane,
        path, parkway, waterway, easement or right-of-way now or hereafter held
        by Municipalities or dedicated for use by the Municipalities, use by the
        general public, or use compatible with cable system operations.

     k) Franchisee: shall mean the Company and its successors, transferees or
        assignees.

     l) Franchise Area: shall mean the geographical area of the Municipalities,
        as delineated in Exhibit A.

     m) Gross Revenues: Any and all cable television subscriber revenues
        obtained by the Franchisee for the delivery of cable television
        programming which shall include residential cable subscriber revenue;
        revenue from commercial accounts for the delivery of cable television
        programming; and bulk billing revenue from the provision of cable
        television programming. Gross Revenues include, by way of illustration
        and not limitation, monthly fees charged to Subscribers for any basic,
        optional, premium, per channel, per-program service, or cable
        programming service; installation, disconnection, reconnection, and
        change-in-service fees; leased channel fees; late fees and
        administrative fees; revenues from rentals or sales of Converters or
        other equipment; any studio rental, production equipment, and personnel
        fees; advertising revenues; barter; revenues from program guides; and
        revenues from the sale of carriage of other cable-related services.
        Gross Revenues shall include revenues received by an entity other than

                                       -6-

<PAGE>

        the Franchisee, an Affiliate, or another entity that operates the System
        where necessary to prevent evasion or avoidance of the obligation under
        this Agreement to pay the franchise fee. Gross Revenues shall not
        include any taxes on services furnished by the Franchisee which are
        imposed directly on any Subscriber or user by the state, or other
        governmental unit and which are collected by the Franchisee on behalf of
        said governmental unit. A Franchise fee is not such a tax. Gross
        Revenues shall not include revenues from home shopping and bank-at-home
        channels; bad debt, up to 2% of gross revenue; and fees, payments, or
        other consideration received from programmers for carriage of
        programming on the System, and accounted for as revenue or an expense
        off-set under GAAP.

     n) Normal Business Hours: Those hours during which most similar businesses
        in the community are open to serve customers. In all cases, "normal
        business hours" must include some evening hours at least one night per
        week and/or some weekend hours.

     o) Normal Operating Conditions: Those service conditions, which are within
        the control of the cable operator. Those conditions which are not within
        the control of the cable operator include, but are not limited to,
        natural disasters, civil disturbances, power outages, telephone network
        outages, and severe or unusual weather conditions. Those conditions
        which are within the control of the cable operator include, but are not
        limited to, special promotions, routine pay-per-view events, rate
        increase, regular peak or seasonal demand periods, and maintenance of
        the cable system.

                                       -7-

<PAGE>

     p) PEG: Public, educational, and governmental.

     q) Service Interruption: The loss of picture or sound on one or more cable
        Channels or Channel Equivalents.

     r) System outage: A Service Interruption affecting more than 15 Subscribers
        at a particular area.

     s) System Rebuild or Rebuild: A major improvement or enhancement in the
        technology or service capabilities made by the Franchisee to the Cable
        System, as more fully described in Section 6(d).

     t) Transfer of the Franchise: Any transaction in which: (1) an ownership or
        other interest in the Franchisee is transferred, directly or indirectly,
        from one Person or group of Persons to another Person or group of
        Persons so that control of the Franchisee is transferred; or (2) the
        rights held by the Franchisee under this Franchise Agreement are
        transferred or assigned to another Person or group of Persons. The mere
        pledge of system assets, including the franchise, shall not be
        considered a transfer of the franchise.

     u) Transfer of an Interest: The sale or transfer, directly or indirectly,
        of an existing or newly created equity interest in the Franchisee that
        does not result in a transfer of control of the Franchisee.

     v) Public Property shall mean any real property owned by Municipalities
        other than a street.

     w) Purchase Agreement shall mean the Asset Purchase Agreement among Cable
        Systems USA, Partners, J & J Cable Partners, Inc., PS&G Cable Partners,
        Inc.,

                                      -8-

<PAGE>

        and Pegasus Cable Television, Inc. dated July 23, 1998, as the same
        may be amended or modified by the parties thereto.

     x) Service means any Cable Service or other transmission of Signals,
        including any Basic Service or any other Service, whether originated by
        the Franchisee or any other Person, which is offered to any Person in
        conjunction with, or distributed over, the System.

     y) Signal means any transmission of radio frequency energy or of optical
        information.

     z) Subscriber shall mean any Person who subscribes to a Service provided by
        Franchisee by means of the System.

2. GRANT OF AUTHORITY

   a) Grant of Authority:

     1) Grantor hereby grants to Grantee a revocable authorization to make
        reasonable and lawful use of the public streets and public easements
        within the franchise area to construct, operate, maintain, reconstruct,
        rebuild and upgrade a cable system for the purpose of providing cable
        services and other services subject to the terms and conditions set
        forth in this Agreement and in any prior utility or use agreements
        entered into with regard to any individual property. This Franchise
        shall constitute both a right and an obligation to provide the services
        required by, and to fulfill the obligations set forth in, the provisions
        of this Agreement.

                                       -9-

<PAGE>

     2) Franchise Non Exclusive - The right to use and occupy the public
        right-of-way is not exclusive and does not explicitly or implicitly
        preclude the issuance of other Franchises to construct or operate within
        the Municipalities; or affect the Board's right to authorize the use of
        the public right-of-way or other property by other personas as it
        determines appropriate.

     3) Franchise Agreement Subject to Other Laws: (a) This Franchise Agreement
        is subject to and shall be governed by all applicable provisions of
        federal, state, and local law.

     4) Approval, Acceptance, and Effective Date; This Franchise Agreement shall
        become effective immediately (the "Effective Date"), following its
        approval by the Board and its acceptance by the Franchisee, provided
        that if the Franchisee fails to accept the Franchise before or within
        thirty (30) days after approval by the Board, whichever is later, it
        shall be deemed void.

     5) Effect of Acceptance; By accepting the Franchise and executing this
        Franchise Agreement, the Franchisee:

        a) accepts and agrees to comply with each provision this Agreement;
           acknowledges and accepts the legal right of the Board to grant the
           Franchise, to enter this Franchise Agreement, and to enact and
           enforce laws and regulations related to the Franchise;

        b) Agrees that the Franchise was granted pursuant to processes and
           procedures consistent with applicable law, and that it will not raise
           any claim to the contrary, or allege in any proceeding by the
           Franchisee against the Board

                                      -10-

<PAGE>

           that any provision, condition or term of this Franchise Agreement at
           the time of the acceptance of the Franchise was unreasonable or
           arbitrary, or that at the time of the acceptance of the Franchise any
           such provision, condition or term was void or that the Board had no
           power or authority to make or enforce any such provision, condition
           or term;

        c) Agrees to reimburse the Board for all costs incurred in its review,
           preparation, evaluation of proposals and qualifications, and
           negotiations involving this Agreement costs up to $25,000. The Board
           shall provide the Franchisee with an accounting of these expenses,
           such as consultant fees, and shall supply the Franchisee with
           invoices for said expenses. Franchisee shall deliver payment to the
           Board within 30 days of receipt of said invoices. Such payments are
           in addition to the Franchise Fee. Failure to make timely payment of
           said expenses, except for any expenses that are the subject of
           legitimate dispute, shall constitute a material violation of this
           Agreement. Other than publication and advertisement posts, no such
           costs shall be assessed in connection with this renewal.

     6) No Waiver:

          a)   The failure of the Board on one or more occasions to exercise a
               right or to require compliance or performance under this
               Franchise Agreement, the Board Regulations or any other
               applicable law shall not be deemed to constitute a waiver of such
               right or a waiver of compliance or performance by the Board, nor
               to excuse the Franchisee from complying or performing,

                                      -11-
<PAGE>

               unless such right or such compliance or performance has been
               specifically waived in writing.

          b)   The failure of the Franchisee on one or more occasions to
               exercise a right under this Franchise Agreement or applicable
               law, or to require performance under this Franchise Agreement,
               shall not be deemed to constitute a waiver of such right or of
               performance of this Agreement, nor shall it excuse the Board from
               performance, unless such right or performance has been
               specifically waived in writing.

     7) No Recourse

          a)   The Franchisee shall have no recourse against the Board for any
               loss, cost, expense, claim, liability or damage arising out of
               any action undertaken or not undertaken by the Franchisee
               pursuant to the Franchise, this Agreement or the Board
               Regulations, whether or not such action or non-action was
               required by the Franchise, the Agreement or the Board
               Regulations, arising out of the enforcement or non-enforcement by
               the Board of any provision or requirement of this Agreement or
               Board Regulations, otherwise arising out of the Franchise, the
               Agreement or Board Regulations. The preceding shall not preclude
               declaratory or injunctive relief; provided, however, that this
               section shall not afford the Board any greater rights than
               provided in 47 U.S.C. Section 555a.

                                      -12-

<PAGE>
     8) Construction of Franchise Agreement.

             a)     The provisions of this Franchise Agreement shall be
                    liberally construed to effectuate its objectives consistent
                    with the applicable Board Regulations and the public
                    interest. In the event of a future conflict between the
                    Board Regulations and this Agreement, the older provision or
                    term shall prevail. If a new regulation is promulgated by
                    the Board after it approves this Agreement, such regulation
                    shall only apply to the Franchisee if it benefits the
                    Franchisee. References to applicable law or applicable
                    requirements refer to applicable law or requirements as the
                    same may be amended from time to time.

     9) Effect of Competition

        a) The Board desires competition in cable services in the Municipalities
           and believes competition will benefit the residents of the
           Municipalities. Further, the Board believes that competition can
           develop without substantial injury to Franchisee or Franchisee's
           ability to perform on its promises in this Agreement. The Franchisee
           has entered this Agreement with a full understanding that the Board
           intends to encourage the development of competition.

        b) Use of Public Streets and Ways - Grantee may erect, install,
           construct, repair, replace, reconstruct, and retain in, upon, across,
           and along the public streets, including rights-of-way and public
           easements within the franchise area such wires, cable, conductors,
           ducts,

                                      -13-

<PAGE>

           conduits, vaults, manholes, amplifiers, appliances, pedestals,
           attachments and other property and equipment as are necessary and
           appurtenant to the operation of a cable system for the provision of
           cable service and other services within the franchise area. Grantee
           shall comply with all applicable construction codes, laws,
           ordinances, regulations and procedures, now in effect or enacted
           hereafter. Grantee, through this Agreement, is granted extensive and
           valuable rights to operate its cable system for profit using the
           public rights-of-way and public utility easements within the
           franchise area in compliance with all applicable construction codes
           and procedures. As trustee for the public, the Grantor is entitled to
           fair compensation to be paid for these valuable rights throughout the
           term of the franchise.

        c) Duration - The term of this franchise and all rights, privileges,
           obligations and restrictions pertaining thereto shall be 10 years
           from the effective date of this Agreement, unless terminated sooner
           as hereinafter provided.

        d) Relation to Prior Franchise - As of the effective date of this
           Franchise, the Franchise previously held by the Franchisee are
           superseded and of no further force and effect. Franchisee promises to
           pay all amounts owed the Board and subscribers under its prior
           franchises for which claims are made within three years of the

                                   -14-

<PAGE>

           effective date of this Franchise. Franchisee hereby indemnifies and
           insures the Board against Franchisee's acts and omissions that
           occurred when the prior Franchises were effective to the extent any
           claims related to such acts and omissions are not barred by the
           statute of limitations.

        e) Franchisee Bears Its Own Costs - Unless otherwise expressly provided
           in this Agreement, all acts that the Franchisee is required to
           perform must be performed at the Franchisee's own expense.

        f) External Costs - The Franchisee may itemize any external costs on
           subscriber bills to the extent permitted by federal law. Franchisee
           agrees that it was planning the upgrade and rebuild of the subscriber
           system before entering this Franchise Agreement and therefore will
           not claim the upgrade and rebuild costs attributable to the
           subscriber system as an external cost for which recovery could be
           sought through 47 CFR Sec. 76.922(d)(3). Notices of price changes
           caused by external costs shall be in accordance with federal rules.

3. FRANCHISE RENEWAL AND TRANSFER

     a) Transfer:

     1. A Transfer of the Franchise, or a Transfer of an INTEREST IN THE
        Franchise that results in a change in ownership interest of the
        Franchise of 5 percent or more, must not occur without prior approval by
        the Board.

                                      -15-

<PAGE>

        However, a Transfer of an Interest to a person who already holds an
        ownership interest of 25 percent or more does not require such prior
        approval if Transfer of the Franchise does not occur.

     2. An application to Transfer the Franchise must provide complete
        information on the proposed transaction, including the legal, moral
        character, financial, technical and other pertinent qualifications of
        the transferee, and on the potential impact of the transfer on
        subscriber services or rates.

     3. An application for Transfer of an Interest in the Franchise must
        describe the proposed transaction in detail and identify the interest to
        be transferred, the transferor, and transferee.

     4. Before approving Transfer of the Franchise, the Board must consider the
        legal, financial, technical and moral character qualifications of the
        transferee to operate the System, and whether operation by the proposed
        franchisee will adversely affect the cable services to Subscribers or
        otherwise be contrary to the public interest. Before approving a
        Transfer of an Interest in the Franchise, the Board must consider
        whether the transferee's interest will have any effect on the
        Franchisee's operation of the System, the Franchisee's qualifications,
        or the public interest.

     5. Approval by the Board of a Transfer of the Franchise does not constitute
        a waiver or release of any of the rights of the Board under this
        Agreement or applicable laws and regulations.

     6. The Board may impose a grant fee to cover the costs in considering an

                                      -16-

<PAGE>

        application for Transfer of the Franchise. Other than publication and
        advertisement costs, no such costs will be assessed in connection with
        this transfer.

     7. In seeking the Grantor's consent to any change in ownership or control,
        the Grantee shall require the proposed transferee to indicate whether it
        either:

        a) Has ever been convicted or held liable for acts involving deceit
           including any violation of federal, state or local law or
           regulations, or is currently under an indictment, investigation or
           complaint charging such acts; and

        b) has ever had a judgment in an action for fraud, deceit, or
           misrepresentation entered against the proposed transferee by any
           court of competent jurisdiction; and

        c) has pending any material legal claim, law suit, or administrative
           proceeding arising out of or involving a cable system, except that
           any such claims, suits or proceedings relating to insurance, claims,
           theft of service, or employment matters need not be disclosed; and

        d) is financially solvent, by submitting the financial data including
           financial statements that are audited by a certified public
           accountant who may also be an officer of the parent corporation along
           with any other data that the Grantor may reasonably require; and

        e) has the financial and technical capability to enable it to maintain
           and operate the cable system for the remaining term of the Franchise.

                                      -17-

<PAGE>

        f) In seeking the Grantor's consent to any change in ownership or
           control, the Grantee shall indicate whether the Grantee has failed to
           materially comply with any provision of this Agreement or of any
           applicable customer or consumer service standards promulgated or in
           effect in Grantor's jurisdiction at any point during the term of this
           Agreement.

        g) A sale, transfer or assignment of the Franchise may not be approved
           without the successor in interest becoming a signatory to this
           Franchise Agreement.

     8. No application for a Transfer of the Franchise shall be granted unless
        the transferee agrees in writing that it will abide by and accept all
        terms of this Agreement and the Board Regulations, and that it will
        assume the obligations, liabilities, and responsibility for all acts and
        omissions, known and unknown, of the previous Franchisee under this
        Agreement for all purposes, including renewal, unless the Board, in its
        sole discretion, expressly waives this requirement in whole or in part.

     9. The Board shall have one hundred and twenty (120) days following the
        submission of the application for transfer (using FCC Form 394) or
        assignment to render a decision. If the Board does not render a decision
        within this time, the transaction shall be deemed approved. The
        Franchisee and the Board may agree to an extension of time.

   b) Renewal

                                           -18-

<PAGE>

     1. This Franchise may be renewed, under the provisions of the Regulations
        of the Board as they existed on the effective date of this agreement,
        for an additional period not to exceed ten (10) years if:

        a. The Franchisee has substantially complied with the material terms of
           the existing Franchise and with applicable law;

        b. the quality of the Franchisee's service, including signal quality,
           response to consumer complaints, and billing practices, but without
           regard to the mix or quality of cable services or other services
           provided over the System has been reasonable in light of community
           needs;

        c. the Franchisee has the financial, legal, and technical ability to
           provide the services, facilities, and equipment set forth in the
           Franchisee's proposal; and

        d. the Franchisee's proposal is reasonable to meet the future
           cable-related community interests, taking into account the cost of
           meeting such needs and interest.

     2. Any denial of a proposal for renewal shall be based on one or more
        adverse findings made with respect to the factors described in Section
        3b(l)(a-d). The Board may not base a denial of renewal on a failure to
        substantially comply with the material terms of the Franchise or the
        factors described in Section 3(b) unless the Board has provided
        Franchisee with notice and the reasonable opportunity to cure the same.

                                      -19-

<PAGE>

     3. The Board may not, upon the expiration of this Franchise, or otherwise,
        acquire an ownership interest in the System, or require a sale of the
        System to any other person, unless the Board or such other person
        acquires the ownership interest at not less than fair market value for
        the System as a going concern.

4. PROVISION OF SERVICE

   a)  Availability of Cable Service. The Franchisee shall make Cable Service
       available to all persons, including residences, businesses, and other
       legal entities, within the territory designated at Exhibit A, including
       owners or occupants of multiple dwelling units that request Cable
       Service, except for multiple dwelling unit buildings to which the
       Franchisee cannot legally obtain access or cannot reach an agreement for
       access after good faith negotiation with the building owner.
       Notwithstanding the foregoing, the requirements contained in the
       following sections of this Franchise shall not apply to service provided
       by the Franchisee to business customers: Section 4(b) (Line Extensions.
       Section 6(a)(8) (Consumer Equipment); Section 6(a)(l1) (Program
       Security); Section 9(b) (Installations), Section 9(d) (Scheduling and
       Completing Service), Section 9(f)(3) and Section 9(h) (Rebate Policy).
       Except as otherwise required under this Franchise, terms and conditions
       of services provided to businesses are subject to negotiation between the
       Franchisee and the business requesting the service.

   b)  Line Extension Requirements.

                                      -20-

<PAGE>

        1. Requirements. The Franchisee shall extend its Cable System within a
           reasonable time (but not to exceed ninety (90) days) to provide
           service to any person or business upon request at no charge other
           than any applicable installation fees for the individual subscriber's
           drop, as long as the following conditions are satisfied:

           A. the new subscriber requesting service is located 200 feet or less
              from the termination of the Cable System; and

           B. the number of dwelling units to be passed by the extension is a
              cost based number and the dwelling unit is within the Franchise
              Area.

           The above requirements may be waived if the Franchisee demonstrates
           to the Board's satisfaction, in its sole discretion, that a waiver is
           justified due to extraordinary circumstances. In addition, the
           Franchisee may obtain a waiver of the 90-day time period if it
           demonstrates to the Board's reasonable satisfaction that additional
           time is required to accommodate utilities providing the Franchisee
           with access to poles, ducts, conduits or right-of-way. The operator
           may at its option extend service to any other locations within the
           Franchise Area.

        2. Cost sharing.

           A. If a person has requested Cable Service but the requirement in
              paragraph (1)(A) above is not met, and the requirement in
              paragraph (1)(B) is met, then the Franchisee shall extend its
              System to serve the

                                      -21-

<PAGE>

              person requesting service, provided that the Franchisee may
              require the person to pay the cost of any line extension in excess
              of 200 feet.

           B. If neither of the requirements in paragraph (1) is met, then the
              Franchisee must extend its System based upon an equitable and
              reasonable cost-sharing arrangement with affected potential
              subscribers, such as the arrangement described below:

           C. The Franchisee shall first determine the total construction costs
              of the extension. The "total construction costs" are defined as
              the actual turn key cost to construct the entire extension
              including electronics, pole make-ready charges, labor and
              reasonable associated overhead, but not profit or the cost of the
              house drop.

           D. The Franchisee shall then determine its share of the total
              construction costs by multiplying the total construction costs by
              a fraction, where the numerator equals the number of actual
              potential subscribers per mile in the area to be served by the
              extension at the time of the request, and the denominator equals
              100.

           E. Persons requesting service can be required to bear the remainder
              of the total construction costs on a pro rata basis, and could be
              required to pay the estimate of such costs before the beginning of
              the construction.

           F. If the Franchisee proposes to require a person requesting
              extension to make a contribution in aid of extension, it must,
              within 30 days of completion of the extension, furnish the Board
              proof of the total cost of the extension.

                                   -22-

<PAGE>

5. CONSTRUCTION AND MAINTENANCE.

   a. Construction Standards.

      1. The construction, operation, maintenance, and repair of the System
         shall be in accordance with all applicable sections of the Occupational
         Safety and Health Act of 1970, as amended; the most current edition of
         the National Electrical Safety Code and National Electric Code;
         Obstruction Marking and Lighting, AC 70/7460 i.e., Federal Aviation
         Administration; Construction, Marking and Lighting of Antenna
         Structures, Federal Communications Commission Rules Part 17;
         Franchisee's Construction Procedures Manual, applicable local building
         codes; and other applicable federal, state or local laws and
         regulations that may apply to the operation, construction, maintenance,
         or repair of a Cable System, including, without limitation, local
         zoning and construction codes and laws and accepted industry practices,
         all as hereafter may be amended or adopted. In the event of a conflict
         among codes, the most stringent code shall apply (except insofar as
         those codes, if followed, would result in a system that could not meet
         requirements of

                                      -23-

<PAGE>

         federal, state, or local law, or is expressly preempted by other such
         provisions).

      2. All wires, cable lines, and other transmission lines, equipment, and
         structures shall be installed and located to minimize interference with
         the rights and convenience of property owners and the use of the Public
         Right-of-Way.

      3. All installation of electronic equipment shall be of a permanent
         nature, using durable components, except where maintenance or emergency
         repairs require the installation of temporary equipment. Temporary
         equipment shall be replaced as soon as possible. If replacement cannot
         occur within 60 days, Franchisee must provide notification to the
         Board.

      4. Without limiting the foregoing, antennae and their supporting
         structures (towers) shall be designed in accordance with the Building
         Officials and Code Administrator's National Building Code, as amended,
         and shall be painted, lighted, erected, and maintained in accordance
         with all applicable rules and regulations of the Federal Aviation
         Administration and all other applicable state or local laws, codes, and
         regulations, all as hereafter may be amended or adopted.

      5. Without limiting the foregoing, all of the Franchisee's new plant and
         equipment, including, but not limited to, the antenna site, headend and
         distribution system, towers, house connections, structures, poles,
         wires, cable, coaxial cable, fiber optic cable, fixtures, and
         apparatuses shall be installed, located, erected, constructed,
         reconstructed, maintained, and operated in

                                      -24-

<PAGE>

         accordance with good engineering practices, performed by experienced
         and properly trained maintenance and construction personnel so as not
         to endanger or interfere with improvements the Participating
         Municipality shall deem appropriate to make or to interfere in any
         manner with the Public Rights-of-Way or legal rights of any property
         owner or to unnecessarily hinder or obstruct pedestrian or vehicular
         traffic. All of the Franchisee's plant and equipment shall be
         maintained and operated in accordance with good engineering practices,
         performed by experienced and properly trained maintenance and
         construction personnel so as not to endanger or interfere with
         improvements the Participating Municipality shall deem appropriate to
         make or to interfere in any manner with the Public Rights-of-Way or
         legal rights of any property owner or to unnecessarily hinder or
         obstruct pedestrian or vehicular traffic.

      6. All safety practices required by law shall be used during construction,
         maintenance, and repair of the Cable System. The Franchisee shall at
         all times employ ordinary care and shall install and maintain in use
         commonly accepted methods and devices preventing failures and accidents
         that are likely to cause damage, injury, or nuisance to the public.

      7. In the event of a failure by the Franchisee to complete any work
         required for the protection or restoration of the Public Rights-of-Way,
         or any other work required by the Municipality or local law or
         ordinance, within the time specified by and to the reasonable
         satisfaction of the Municipality, the

                                      -25-

<PAGE>

          affected Participating Municipality, following reasonable notice and a
          reasonable opportunity to cure, may cause such work to be done, and
          the Franchisee shall reimburse the Municipality the cost thereof
          within thirty (30) days after receipt of an itemized list of such
          costs.

      8.  The Franchisee shall place facilities, equipment, and fixtures where
          they will minimize effects on any gas, electric, telephone, water,
          sewer, or other utility facilities, and shall not obstruct or hinder
          in any manner the various utilities serving the residents of the
          Participating Municipalities or their use of any Public Rights-of-Way.

      9.  Any and all Public Rights-of-Way, public property, or private property
          that is disturbed or damaged during the construction, repair,
          replacement, relocation, operation, maintenance, or construction of a
          System shall be promptly restored to the same condition as it was
          prior to its disturbance by the Franchisee.

      10. The Franchisee shall, if it does not materially interfere with the
          cable system and it is not unduly expensive, by a time specified by
          then affected Participating Municipality, and at no cost to the
          affected Participating Municipality, protect, support, temporarily
          disconnect, relocate, or remove any of its property when required by
          the affected Participating Municipality by reason of traffic
          conditions; public safety; Public Right-of-Way construction; Public
          Right-of-Way maintenance or repair (including resurfacing or
          widening); change of Public Right-of-Way grade; construction,

                                      -26-

<PAGE>

          installation or repair of sewers, drains, water pipes, power lines,
          signal lines, tracks, or any other type of government-owned
          communications system, public work or improvement or any
          government-owned utility; Public Right-of-Way vacation; or for any
          other purpose where the convenience of the affected Participating
          Municipality would be served thereby; provided, however, that the
          Franchisee shall, in all such cases, have the privilege of abandoning
          any property in place

      11. If any removal, relaying, or relocation is required to accommodate the
          construction, operation, or repair of the facilities of another Person
          that is authorized to use the Public Rights-of-Way, the Franchisee
          shall, after thirty (30) days advance written notice, take action to
          effect the necessary changes requested by the responsible entity. The
          requesting party (other than the municipality) shall pay for any such
          change, removal, relaying, or relocation.

      12. Where a Cable System creates or is contributing to an imminent danger
          to health or public safety, the affected Participating Municipality
          and/or Civil Defense may remove, relay, or relocate any or all parts
          of that Cable System without prior notice.

      13. The Franchisee shall, on the request of any Person holding a building
          moving permit issued by the Local government or a Participating
          Municipality, temporarily raise or lower its wires to permit the
          moving of buildings. The expense of such temporary removal or raising
          or lowering of wires shall be paid by the Person requesting same, and
          the Franchisee shall have the

                                      -27-

<PAGE>

          authority to require such payment in advance, except in the case where
          the requesting Person is the Participating Municipality, in which case
          no such payment shall be required.

      14. Trimming or Pruning

          A. The Franchisee may trim trees or other vegetation owned by the
             Participating Municipality to prevent their branches or leaves from
             touching or otherwise interfering with its wires, cables or other
             structures.

             1. All trimming or pruning shall be at the sole cost of the
                Franchisee.

             2. The Franchisee may contract for said trimming or pruning
                services with any person approved by the affected Participating
                Municipality prior to the rendering of said services.

          B.  The Franchisee shall make reasonable efforts to obtain written or
              verbal permission of the owner of any privately owned tree or
              other vegetation before it trims or prunes the same, unless
              otherwise provided by the right-of-way agreement.

      15. The Franchisee shall use, with the owner's permission, existing poles,
          conduits and other facilities whenever technically feasible and
          economically practical. The Franchisee may not erect poles, conduits,
          or other facilities in Public Rights-of-Way without the express
          permission of the Department of Transportation of Puerto Rico.

                                      -28-

<PAGE>

      16. System cable and facilities may be constructed overhead where poles
          now exist and electric or telephone lines or both are now overhead,
          but where no overhead poles exist all cables and facilities, excluding
          system passive or active electronics that may be housed in
          low-profile, above-ground pedestals, shall be constructed underground.
          Whenever and wherever electric lines and telephone lines are moved
          from overhead to underground placement, all Cable System cables shall
          be similarly moved.

      17. The Participating Municipality in which a pole is located shall have
          the right to attach, for a charge to be paid to the Franchisee, upon
          any poles owned by the Franchisee any wire and pole fixtures that do
          not unreasonably interfere with the Cable System operations of the
          Franchisee.

      18. Any contractor or subcontractor used for work or construction,
          installation, operation, maintenance, or repair of System equipment or
          for the pruning or removal must be properly licensed under laws of
          Puerto Rico and all applicable local ordinances, where applicable, and
          each contractor or subcontractor shall have the same obligations with
          respect to its work as the Franchisee would have if the work were
          performed by the Franchisee. The Franchisee must ensure that
          contractors, subcontractors and all employees who will perform work
          for it are trained and experienced. The Franchisee shall be
          responsible for ensuring that the work of contractors and
          subcontractors is performed consistent with the franchise and
          applicable law

                                      -29-

<PAGE>

          and shall implement a quality control program to ensure that the work
          is properly performed.

      19. The Franchisee shall be a member of the "One Call Notification System"
          or the equivalent system established in Puerto Rico by the Public
          Service Commission and shall comply with all of the requirements of
          such system.

   b. System Tests and Inspections

      1. The Franchisee shall perform all tests necessary to demonstrate
         compliance with the requirements of the Franchise and other
         performance standards established by law or regulation, and to ensure
         that the System components are operating as expected. All tests shall
         be conducted in accordance with applicable federal law and rules.

      2. The Franchisee shall conduct tests as follows:

         A. acceptance tests on each new construction which requires the
            addition of trunk or rebuilt segment prior to subscriber connection
            or activation;

         B. proof of performance tests on the System at least once every six
            months or as required by FCC rules, whichever is more often, except
            as federal law otherwise limits the Franchisee's obligation;

         C. special tests at the Board's request, as reasonably necessary,
            taking into consideration their cost, to insure there is no
            substantial lapse in technical performance.

      3. Tests shall be supervised by the Franchisee's chief technical
         authority, who shall sign all records of tests provided to the Board.

                                      -30-

<PAGE>

         4. The Franchisee shall provide the Board with prior notice of, and
            opportunity to observe, any tests performed on the System pursuant
            to subsection 2 above. The Board may also conduct inspections of
            construction areas and subscriber installations, including but not
            limited to inspections to assess compliance with the Franchisee's
            construction and installation requirements. Inspection does not
            relieve the Franchisee of its obligation to build in compliance with
            all provisions of the franchise.

         5. Copies of the written report of test results shall be maintained by
            the operator and made available to the Board upon request. In
            addition, the Franchisee shall retain written reports of the results
            of any tests required by the FCC, and such reports shall be
            submitted to the Board upon the Board's request.

         6. If any test indicates that any part or component of the System does
            not materially satisfy applicable performance requirements, the
            Franchisee, without requirement of additional notice or request from
            the Board, shall take corrective action, retest the locations and
            advise the Board of the action taken and results achieved.

   c. Restoration:

      In case of any disturbance of pavement, sidewalk, driveway or other
      surfacing, due to the Franchisee's work, the Franchisee shall replace and
      restore all paving, sidewalk, driveway, landscaping, or surface of any
      street or alley disturbed, in substantially the same condition and in a
      good workmanlike, timely manner in accordance with standards for such
      work, wear and tear excepted. Such

                                      -31-

<PAGE>

      restoration shall be undertaken as quickly as possible, and within no more
      than thirty (30) days after the damage is incurred, and shall be completed
      as soon as reasonably possible thereafter, provided that the affected
      Participating Municipality may extend the thirty-day period if weather
      conditions make restoration within that time impractical. The Franchisee
      shall guarantee and maintain such restoration for at least one year
      against defective materials or workmanship.

   d. Publicizing Proposed Construction Work

      The Franchisee shall notify the public prior to commencing any proposed
      construction that will significantly disturb or disrupt public property or
      have the potential to present a danger or affect the safety of the public
      generally, except when a delay in commencing such work would present a
      danger or affect the safety of the public. The Franchisee shall publicize
      the proposed major construction work at least one (1) week prior to
      commencement of that work by causing written notice of such construction
      work to be delivered to the affected Participating Municipality and by
      notifying those Persons most likely to be affected by the work in at least
      two (2) of the following ways: by telephone, in person, by mail, by
      distribution of flyers to residences, by publication in local newspapers,
      or in any other manner reasonably calculated to provide adequate notice.
      In addition, before entering onto any Person's property, the Franchisee
      shall provide prior notification and obtain the property owner's or, in
      the case of residential property, the resident's permission. If the
      Franchisee must enter

                                      -32-

<PAGE>

      premises, it must schedule an appointment at the convenience of the owner
      or resident.

   e. System Maintenance

      1. Interruptions to be Minimized. The Franchisee shall schedule
         maintenance on its System at times that will minimize the likelihood of
         interruptions in service to Subscribers.

      2. Maintenance Practices Subject to Regulation. Maintenance of the System
         shall be performed in accordance with the technical performance and
         operating standards established by FCC rules and regulations. The Board
         may monitor the Franchisee's maintenance practices and, to the extent
         permitted by applicable law, may waive requirements or adopt additional
         requirements as reasonable to ensure the system remains capable of
         providing high-quality service.

   f. Failure Grounds for Termination. Failure on the part of the Franchisee to
      commence and diligently pursue and complete each of the material
      requirements set forth in this Section of the Agreement or in plans
      submitted to the Board regarding System design and construction shall be
      grounds for termination of its Franchise under and pursuant to the terms
      of Section 14(h); provided, however, that the Board in its discretion may
      extend the time for the completion of construction and installation for
      additional periods in the event the Franchisee, acting in good faith,
      experiences delays by reason of circumstances beyond its control.

                                      -33-

<PAGE>

6. SYSTEM FACILITIES-EQUIPMENT AND SERVICES.

   a. System Characteristics: The Franchisee's Cable System shall, at all times
      during the Franchise term, meet or exceed the following requirements:

      1. Compliance With FCC Rules. All maintenance performed on the Cable
         System by the Franchisee shall be in accordance with the FCC rules and
         regulations governing the technical performance and operating standards
         for such System.

      2. Continuous 24-Hour Operation. The System shall be capable of continuous
         twenty-four (24) hour daily operation without severe material
         degradation of signal except during extremely inclement weather or
         immediately following extraordinary storms that adversely affect
         utility services or damage major system components.

      3. Temperature Specifications. The System shall be capable of operating
         over an outdoor temperature range of 20 degrees F to + 120 degrees F
         and over variation in supply voltages from 105 to 130 volts AC without
         catastrophic failure or irreversible performance changes. The System
         shall meet all applicable specifications over an outdoor temperature
         range of 0 degrees F to 100 degrees F and over variation in supply
         voltages from 105 to 130 volts AC.

      4. No Interference. The Franchisee shall operate the System in such a
         manner as to minimize interference with the reception of off-the-air
         signals by a Subscriber. The Franchisee shall insure that signals
         carried by the System, or originating outside the System wires, cables,
         fibers, electronics and facilities, do not ingress or egress into or
         out of the System in excess of FCC or other applicable standards. In

                                      -34-

<PAGE>

         particular, Franchisee shall not operate the System in such a manner as
         to pose unwarranted interference with emergency radio services,
         aeronautical navigational frequencies or any airborne navigational
         reception in normal flight patterns, or any other type of wireless
         communications, pursuant to FCC regulations.

      5. No Deterioration to Access Signals. The System shall be so constructed
         and operated that there is no significant deterioration in the quality
         of PEG signals or leased access signals resulting from the
         transportation of the video signal, either upstream or downstream, as
         compared with any other channel on the System. Deterioration refers to
         any signal problem, including but not limited to ghost images and other
         interference and distortions.

      6. Industry-accepted Equipment. The System shall use equipment generally
         used in high-quality, reliable, modem systems of similar design.

      7. Stand-by Power. Franchisee shall provide standby power generating
         capacity at the headend. Franchisee shall maintain motorized standby
         power generators capable of at least twenty four (24) hours duration at
         the headend, and battery back-up power capability of at least four (4)
         hours duration for all system nodes. The headend generator shall be
         tested once per week. The Franchisee shall maintain portable motorized
         generators to be deployed in the event that the duration of a power
         disruption is expected to exceed four (4) hours.

      8. Cable Ready Television Sets. The Franchisee shall comply with all FCC
         regulations regarding scrambling or other encryption of signals.

                                      -35-

<PAGE>

      9.  Consumer Equipment For Lease or Sale. Subject to applicable law or
          regulation. as part of the System, the Franchisee shall, consistent
          with 47 C.F.R. ss.76.984 and 47 U.S.C. ss.543(d), offer every
          Subscriber, at uniform prices and regardless of the level of service
          taken, the opportunity to lease from the Franchisee or to lease or buy
          from others Converters (including digital converters), including any
          associated software, that allow Subscribers to view a program on one
          channel while taping a program on another channel. To the extent
          permitted by federal law, Subscribers shall have the right to attach
          devices to the Franchisee's System to allow them to transmit signals
          or service to video cassette recorders, receivers and other terminal
          equipment, and to use their own remote control devices and Converters,
          and other similar equipment, as long as such devices do not interfere
          with the operation of the Franchisee's System or the reception of any
          cable Subscriber, do not serve to circumvent the Franchisee's security
          procedures, or are not used in any manner to obtain services
          illegally. The Franchisee, at no additional charge, shall provide
          information regarding the cable system to Subscribers which will
          assist them in adjusting such devices so that they may be used with
          the Franchisee's System.

      10. Parental Control. The Franchisee shall provide equipment to enable
          Subscribers to block out audio and video on any undesired channels on
          the System.

      11. Program Security. The System shall include equipment so that any
          pay-per-view programming can only be activated by the positive action
          of a subscriber.

      12. Service for the Disabled. All closed-caption programming retransmitted
          by the System shall include the closed-caption signal. For hearing
          impaired Subscribers,

                                      -36-

<PAGE>

      the Franchisee shall provide information concerning the cost and
      availability of equipment to facilitate the reception of all basic
      services for the hearing impaired. In addition, the Franchisee shall
      comply with the FCC's TDD/TTY requirements. Upon request, the Franchisee
      shall provide, for purchase or lease, a remote control device to those
      Subscribers who are mobility limited, or where a member of the
      Subscriber's household is mobility limited.

   b. Current System: The Franchisee is authorized and required to operate its
      existing System, and to provide service substantially equivalent to its
      existing service, within each Participating Municipality as of the
      Effective Date of this Agreement, until such time as the System is
      rebuilt, as provided herein.

   c. Integration of Advancements in Technology.

      1. In addition to any upgrades required herein, the Franchisee will
         periodically evaluate its Cable System to integrate advancements in
         technology as may be required to meet the needs and interests of the
         community, consistent with sound financial practices, during the term
         of the franchise.

      2. To ensure that the Franchisee is carrying out its responsibilities
         hereunder, the Franchisee shall be required to submit a report on cable
         technology to the Board in the third and sixth year of the Franchise
         term. Each report shall describe developments in cable technology,
         including digital technology, being pursued by other companies, and
         whether, how, and by what date the Franchisee plans to incorporate
         those technological developments into the System. In addition, the
         report shall describe the effect of those developments on public,
         educational, and

                                      -37-

<PAGE>

         governmental use of the Cable System, and the effect and compatibility
         of those technological changes on consumer electronic equipment.

   d. System Rebuild: Within four years after the effective date of this
      Agreement, the Franchisee shall complete a System Rebuild providing at
      least the following capabilities:

      1. The rebuilt System shall have a minimum bandwidth capacity of 550 MHz
         on all active components, at least 550 MHz for all existing passive
         components, and at least 1 GHz for all new or replaced passive
         components; an analog bandwidth of 550 MHz; and shall initially have a
         minimum analog Channel capacity of at least 80 Channels downstream to
         all Subscribers. If the Franchisee subsequently decides to change the
         amount of capacity allocated to analog programming, the Franchisee
         shall notify the Board in writing at least sixty (60) days prior to the
         effective date of the proposed change.

      2. The Franchisee shall design the system so that channel capacity may be
         expanded without compromising signal or service quality.

      3. The rebuilt System shall provide two-way capability. Except as provided
         elsewhere in this Agreement, Franchisee, in its sole discretion, may
         activate such capability based on economic and technical
         considerations.

      4. The Franchisee and the Board shall meet as reasonably requested to
         discuss and coordinate the rebuild process and any of the following
         issues:

         a. System Architectural Design

         b. System Physical Design

                                                -38-

<PAGE>

         c. Construction Manual and Cut-Over Plan

         d. Post-Rebuild Design Modifications

         e. System Rebuild Schedule

         f. System Acceptance Schedule

         g. Periodic Progress Reporting

         h. Delays in the System Rebuild

      5. The System Rebuild shall be completed within the boundaries of the
         service area.

      6. All construction shall be performed in accordance with generally
         accepted construction standards and applicable provisions of this
         Agreement, except where specifically waived in writing by the Board.

   e. Periodic Progress Reporting. Following the commencement of construction
      of the System Rebuild or any similar major construction, the Franchisee
      shall provide the Board with written reports on the Franchisee's progress
      in construction at least every four (4) months until the construction is
      completed and, at the Board's request, will meet with the Board to discuss
      the progress.

   f. Delays in the System Rebuild. The Franchisee shall not be excused from the
      timely performance of its obligation to begin and complete any System
      Rebuild within the times specified herein, except for the following
      occurrences:

      1. Any Force Majeure situation, as described herein. Delays beyond the
         control of the Franchisee that the Franchisee could not reasonably have
         anticipated regarding the availability, shipment and arrival of
         necessary equipment, cables, electronics or hardware, protracted
         underground excavation, easement

                                      -39-

<PAGE>

         availability, third-party refusal to allow necessary access to poles or
         other rights-of-way facilities, changes in contractors or contractor
         personnel, the issuance of necessary governmental permits, or any other
         valid factor agreed to by the Board as fully explained and reasonably
         justified in writing to the Board or its designee.

      2. Consequences of Delays: Absent a showing of excusable delay pursuant to
         the immediately preceding subsection, should the Franchisee be unable
         to demonstrate the commencement or timely completion of the System
         Rebuild by the times specified herein, or be unable to reasonably
         justify any delays, then the Franchisee shall be in violation of a
         material provision of this Franchise Agreement and the Board may, in
         its sole discretion, either grant the Franchisee an extension of time
         to complete, such construction or implement any enforcement measures
         specified in this Agreement. In the event of excusable delay, the time
         for completion shall be extended by the period of such delay.

   g. Technical Standards. The Cable System shall meet or exceed the technical
      standards set forth in 47 C.F.R. ss. 76, subpart k and any other
      applicable technical standards, including any such standards as hereafter
      may be amended or adopted by the Board subject to applicable federal law.

   h. Types of Service: Should the Franchisee desire to change the selection of
      programs or services offered on any of its tiers, it shall maintain the
      quality and level of services provided over the System. Any change in
      programs or services offered shall comply with all lawful conditions and
      procedures contained in this Agreement and in applicable law.

                                      -40-

<PAGE>

      The Franchisee shall provide thirty (30) days' advance written notice to
      Subscribers and the Board of any change in channel assignment or in the
      video programming service provided over any channel, unless this
      requirement is waived by the Board or by operation of federal or state
      law, or due to events beyond the reasonable control of the Franchisee.

   i. Leased Access Channels: The Franchisee shall provide leased access
      channels as required by federal law.

   j. Customer Service Monitoring: The Franchisee shall keep such records and
      maintain such monitoring equipment as are required to enable the Board to
      determine whether the Franchisee is complying with all telephone answering
      standards required by applicable customer service regulations, as amended
      time to time.

   k. Emergency Alert System.

      1. The Franchisee shall install and thereafter maintain for use by the
         Civil Defense an Emergency Alert System ("EAS"), as required by 47
         C.F.R. Part 11.

      2. To the extent permitted by 47 C.F.R. Part 11, the EAS shall be remotely
         activated by telephone and shall allow a representative of the Civil
         Defense to override the audio and video on all channels on the
         Franchisee's System that may lawfully be overridden, without the
         assistance of the Franchisee, for emergency broadcasts from a location
         designated by the Civil Defense in the event of a civil emergency or
         for reasonable tests.

                                      -41-

<PAGE>

      3. The Civil Defense will provide reasonable notice to the Franchisee
         prior to any test use of the EAS. The Franchisee shall cooperate with
         the Civil Defense in any such test.

   l. Home Wiring: Franchisee will comply with FCC Regulations 47
      C.F.R. ss.7.6801 ss.7.6802 governing the disposition of subscriber home
      wiring and home run wiring.

   m. Periodic Performance Evaluation: The Board may schedule periodic public
      hearings to evaluate the performance of the Franchisee, or to discuss the
      integration of future technologies, other plans or operations of the
      Franchisee or any aspect of the Franchisee's Cable System. The Franchisee
      shall cooperate with the Board in any such evaluation.

7. CHANNELS AND FACILITIES FOR PUBLIC, EDUCATIONAL AND GOVERNMENTAL USE

   a. Access Channels:

      1. The Franchisee shall provide at least one (1) analog video Channel for
         non-commercial public, educational and governmental use. Once the
         rebuild is completed and such initial channel is fully occupied with
         non-repeated locally-originated programming, the Franchisee shall
         provide an additional channel. "Fully occupied" shall mean that during
         a six month period the access channel is used 80% of the time during
         9 a.m. to 11 p.m., with non-repeated locally-originated programming.

                                      -42-

<PAGE>

      2. The Franchisee agrees that it will not take the cost of operating and
         maintaining the access facility as an offset against its franchise
         obligation, provided that the franchise fee is not greater than 3%.

      3. The Franchisee's cost to operate and maintain the access facility shall
         not be separately identified on the customer bill.

      4. Access Channel assignments should not be changed unless there is good
         cause. Such consent to a channel assignment change shall not be
         unreasonably withheld. Access channel assignments should be the same
         throughout the System. If the Franchisee decides to change the channel
         designations for Access Channels, it must provide sixty (60) days
         notice to the Board prior to doing so, and shall reimburse the Board
         and/or PEG users for any costs incurred for purchasing or modifying any
         equipment or for making logo changes necessitated by the channel
         designation changes. Alternatively, the Franchisee may choose to supply
         such equipment itself, provided such equipment is satisfactory to the
         Board or PEG users.

      5. Any reference to an upstream or downstream analog channel for PEG use
         refers to a 6 MHz Channel.

   b. Editorial Control: Except as expressly permitted by federal law, the
      Franchisee shall not exercise any editorial control over the content of
      programming on PEG Channels (except for such programming as the Franchisee
      may produce and cablecast on such Channels).

                                      -43-

<PAGE>

   c. Indemnification By PEG Programming Producers and Users: All local
      producers and users of any of the PEG facilities or channels shall agree
      in writing to hold harmless the Franchisee, the Board and the
      Participating Municipalities, from any and all liability or other injury
      (including the reasonable cost of defending claims or litigation) arising
      from or in connection with claims for failure to comply with applicable
      federal laws, rules, regulations or other requirements of local, state or
      federal authorities; for claims of libel, slander, invasion of privacy, or
      the infringement of common law or statutory copyright; for unauthorized
      use of any trademark, trade name or service mark; for breach of
      contractual or other obligations owing to third parties by the producer or
      user; and for any other injury or damage in law or equity, which claims
      result from the use of a PEG facility or channel.

   d. Additional Use: The Franchisee may use the access channel for any
      consistent purpose when it is not being used for PEG access.

   e. Cable Service to Certain Facilities:

      1. Upon the request of the Board, the Franchisee shall without charge
         install one activated first floor outlet at each public and non-profit
         educational institution, which contains at least one hundred (100)
         students, each town hall, each public non-profit major health care
         institution with at least fifty (50) patient beds, and one major
         multi-purpose Community Center per municipality, within the Franchise
         Area, as shall be designated by the Board from time to time. The
         Franchisee at its own cost shall provide the signal power level at the
         outlet at 3 dBmV, so that zero (0) dBmV will be delivered to the back
         of the set.

                                      -44-

<PAGE>

      2. The Franchisee shall provide the basic tier, and any equipment
         necessary (excluding televisions, VCRs, recording devices or computers)
         to receive such service, free of charge to those facilities specified
         in subsection (1) herein. At its sole discretion, the Franchisee may
         also provide higher levels of service to such facilities free of
         charge.

8. FRANCHISE FEE

   a. Payment to Board. Each year during the Franchise term, the Franchisee
      shall pay to the Board, on a semiannual basis, a Franchise fee of three
      (3) percent (%) of Gross Revenues, including any Franchise fee owed to the
      Board. Such payments shall be made no later than forty five (45) days
      following the end of each calendar semiannual period. Such payments may be
      made subject to an annual adjustment for shortfalls or overpayments.

   b. Increase in Franchise Fee. The Board may increase the amount of the
      Franchise fee up to the maximum amount permitted under state and federal
      law, but in no event to more than 5%. However, the Board shall increase
      the fee only if

      1) a sixty (60) days notice of the intention to increase the franchise fee
         is provided to the Franchisee; and

      2) a hearing is provided to the Franchisee to discuss the increase.

   c. Supporting Information. Each Franchise fee payment shall be submitted with
      supporting detail and a statement certified by the Franchisee's chief
      financial or accounting officer or an independent certified public
      accountant, reflecting the total amount of quarterly Gross Revenues for
      the payment period and a breakdown by major revenue categories (such as
      basic service, cable programming service, premium service, etc.). In the
      information

                                      -45-

<PAGE>

      provided with each payment, the Franchisee shall also indicate the
      number of subscribers within the corporate limits of each Participating
      Municipality. The Board shall have the right to require further
      supporting information.

   d. Late Payments. In the event any Franchise fee payment or computation
      amount is not made on or before the required date, the Franchisee shall
      pay a late charge as established in the January 28, 1998, Cable Television
      Regulation promulgated by the Board.

   e. Audit

      1. The Board shall have the right to inspect and copy records and the
         rights to audit and to recompute any amounts determined to be payable
         under this Agreement, whether the records are held by the Franchisee,
         an Affiliate, or any other entity that collects or receives funds
         related to the Franchisee's operation in the Franchise Area, including,
         by way of illustration and not limitation, any entity that sells
         advertising on the Franchisee's behalf.

      2. The Franchisee shall be responsible for providing to the Board all
         records necessary to confirm the accurate payment of Franchise fees.
         Such records shall be made available pursuant to the requirements of
         this Agreement. The Franchisee shall maintain such records for seven
         years.

      3. The Board's audit expenses shall be borne by the Franchisee as a cost
         incidental to the enforcement of the Franchise, only if the audit
         determines the annual payment to the Board for the preceding year is
         increased by more than 5%. Any additional amounts due to the Board as a
         result of the audit shall be paid within

                                      -46-

<PAGE>

         thirty (30) days following written notice to the Franchisee by the
         Board of the underpayment, which notice shall include a copy of the
         audit report. If recomputation results in additional revenue to be paid
         to the Board, such amount shall be subject to the interest charge
         described in subsection (d), above. If the audit determines that there
         has been an overpayment by Franchisee, the Franchisee may credit any
         overpayment against its next payment.

      4. The Franchisee shall maintain its fiscal and financial records and have
         all relevant fiscal and financial records maintained by others on its
         behalf in such a manner as to enable the Board to determine the cost of
         assets of the Franchisee which are used in providing services within
         the Franchise Area and to determine Gross Revenues.

   f. No Limitation on Taxing Authority:

      1. Nothing in this Agreement shall be construed to limit any authority of
         the Board to impose any tax, fee, or assessment of general
         applicability. By way of illustration and not limitation, to the extent
         permitted by applicable law, the Board may impose a tax, fee, or other
         assessment on any Person (other than a cable operator) with respect to
         Cable Service or other communications service provided by such Person
         over a Cable System for which charges are assessed to subscribers but
         not received by the cable operator.

      2. The Franchise fee payments required by this section shall be in
         addition to any and all taxes of a general nature (i.e., those which
         are not applicable solely to cable television operations, within the
         Municipality) or other fees or charges

                                      -47-

<PAGE>

         which the Franchisee shall be required to pay to the Municipality or to
         any local, state or federal agency or authority, as required herein or
         by law, all of which shall be separate and distinct obligations of the
         Franchisee. The Franchisee shall not have or make any claim for any
         deduction or other credit of all or any part of the amount of said
         Franchise fee payments from or against any of said municipal taxes or
         other fees or charges which the Franchisee is required to pay to the
         Participating Municipality, except as expressly permitted by law. The
         Franchisee shall not apply nor seek to apply all or any part of the
         amount of said Franchise fee payments as a deduction or other credit
         from or against any of said municipal taxes or other fees or charges,
         except as expressly permitted by law. Nor shall the Franchisee apply or
         seek to apply all or any part of the amount of any of said taxes or
         other fees or charges as a deduction or other credit from or against
         any of its Franchise fee obligations, except as expressly permitted by
         law.

9. CUSTOMER SERVICE

   a. General Provisions.

      This Section 9 sets forth customer service standards that the Franchisee
      must satisfy. In addition, the Franchisee shall at all times satisfy any
      additional or stricter requirements established by FCC regulations, or
      other applicable federal, state, or local law or regulation, as the same
      may be amended from time to time. Nothing in this section in any way
      relieves the Franchisee of its obligation to comply with other applicable
      consumer protection laws.

                                      -48-

<PAGE>

   b. Installations, Connections, and Other Franchisee Services.

      1. Standard Installations. Except as federal rate regulations may
         otherwise require, the Franchisee shall not assess a Subscriber any
         cost other than a standard installation charge for service drops of two
         hundred (200) feet or less to the primary outlet, unless the Franchisee
         demonstrates to the Board's satisfaction that extraordinary
         circumstances justify a higher charge. Except as applicable law may
         otherwise require, where a drop exceeds two hundred (200) feet in
         length from the nearest cable distribution, the Franchisee may charge a
         subscriber an additional charge, pursuant to the Franchisee's "long
         drop" policy.

      2. Location of Drops. The Subscriber's preference as to the point of entry
         into the residence shall be observed whenever feasible. Runs in
         building interiors shall be as unobtrusive as possible. The Franchisee
         shall use due care in the process of installation and shall restore the
         subscriber's property to its prior condition. Such restoration shall be
         undertaken as soon as possible after the damage is incurred and shall
         be completed within no more than thirty (30) days after the damage is
         incurred.

      3. Non-standard Installations. In locations where the Franchisee's System
         must be underground, drops must be placed underground as well. Except
         as federal law may otherwise require, in any area where the Franchisee
         would be entitled to install a drop above-ground, the Franchisee will
         provide the homeowner the option to have the drop installed underground
         if requested, but may charge the homeowner the difference between the
         Actual Cost of the above-ground installation and the Actual Cost of the
         underground installation.

                                      -49-

<PAGE>

      4. Antennas and Antenna Switches. The Franchisee shall adhere to FCC
         regulations regarding antenna switches. The Franchisee shall not, as a
         condition to providing Cable Service, require any subscriber or
         potential subscriber to remove any properly grounded existing antenna
         structures for the receipt of over-the-air television signals.

      5. Delinquent Accounts. The Franchisee shall use its best efforts to
         collect on delinquent subscriber accounts before terminating service.

   c. Telephone and Office Availability.

      1. Franchisee shall maintain an office(s) at a convenient location in the
         franchise area that shall be open during Normal Business Hours to allow
         Subscribers to request service, pay bills, and conduct other business.

      2. Franchisee will maintain at least one local, toll-free or collect call
         telephone access line which will be available to subscribers 24 hours a
         day, seven days a week. Trained representatives of the Franchisee shall
         be available to respond to Subscriber telephone inquiries during Normal
         Business Hours.

      3. Under Normal Operating Conditions, the following standards shall be met
         by the Franchisee at least ninety (90) percent of the time, measured
         quarterly.

         A. Telephone answering time shall not exceed thirty (30) seconds, and
            the time to transfer the call to a customer service representative
            (including hold time) shall not exceed an additional thirty (30)
            seconds.

                                      -50-

<PAGE>

         B. A customer will receive a busy signal less than three percent (3%)
            of the time.

         C. When the business office is closed, an answering machine or service
            capable of receiving and recording service complaints and inquiries
            shall be employed. Inquiries received after hours must be responded
            to by a trained representative of the Franchisee on the next
            business day. To the extent possible, the after-hours answering
            service shall comply with the same telephone answer time standard
            set forth in this Section.

      4. The Franchisee must hire sufficient staff so that it can adequately
         respond to customer inquiries, complaints, and requests for service in
         its office and by phone.

   d. Interruptions of Service.

The Franchisee may intentionally interrupt service on the Cable System only for
good cause and for the shortest time possible and, except in emergency
situations or to the extent necessary to fix the affected Subscriber's service
problems, only after a minimum of forty-eight (48) hours prior notice to
Subscribers, the Board, and PEG channel operators of the anticipated service
interruption; provided, however, that planned maintenance that does not require
more than two (2) hours' interruption of service or that occurs between the
hours of 12:00 midnight and 6:00 a.m., shall not require such notice.

   e. Notice to Subscribers.

      1. The Franchisee shall provide the following materials to each Subscriber
         at the time Cable Service is installed, at least annually thereafter,
         and at any time upon request. Copies of all such materials provided to
         Subscribers shall also be provided to the Board:

                                      -51-
<PAGE>

         A. a written description of products and services offered, including a
            schedule of rates and charges, a list of channel positions, and a
            description of programming services, options, and conditions;

         B. a written description of the Franchisee's installation and service
            maintenance policies, delinquent subscriber disconnect and reconnect
            procedures, and any other of its policies applicable to its
            subscribers,

         C. written instructions on how to use the cable service;

         D. written instructions for placing a service call;

         E. a written description of the Franchisee's billing and complaint
            procedures, including the address and telephone number of the
            Franchisee's office(s) responsible for receiving Subscriber
            complaints;

         F. a copy of the service contract, any; notice regarding Subscribers'
            privacy rights pursuant to 47 U.S.C. ss.551;

         G. notice of the availability of universal remote controls and other
            compatible equipment (a list of which, specifying brands and models,
            shall be provided to any Subscriber upon request).

      2. Subscribers and the Board will be notified of any changes in rates,
         programming services or channel positions, and any significant changes
         in any other information required to be provided by this section, as
         soon as possible through announcements on the cable system and in
         writing. Notice must be given to subscribers and the Board a minimum of
         thirty (30) days in advance of such changes and other

                                            -52-

<PAGE>

        significant changes if the change is within the control of the cable
        operator.

      3. All Franchisee promotional materials, announcements, and advertising of
         residential Cable Service to Subscribers and the general public, where
         price information is listed in any manner, shall clearly and accurately
         disclose price terms. In the case of pay-per-view or pay-per-event
         programming, all promotional materials must clearly and accurately
         disclose price terms and in the case of telephone orders, the
         Franchisee shall take appropriate steps to ensure that price terms are
         clearly and accurately disclosed to potential customers before the
         order is accepted.

      4. The Franchisee shall maintain a public file containing all notices
         provided to Subscribers under these customer service standards, as well
         as all promotional offers made to Subscribers. Copies of all notices,
         promotional or special offers sent to Subscribers and any agreements
         used with Subscribers shall be filed promptly with the Board.

   f. Billing

      1. Bills shall be clear, concise, and understandable. Bills must be fully
         itemized including, but not limited to, basic and premium service
         charges and equipment charges. Bills shall clearly delineate all
         activity during the billing period, including optional charges,
         rebates, and credits.

   g. Rebate Policy.

      In the event of a Service Interruption of one or more channels to any
      subscriber, the Franchisee shall repair the Service Interruption as soon
      as possible. This obligation is satisfied if the Franchisee offers the
      Subscriber the next available repair appointment

                                      -53-

<PAGE>

      within the twenty-four hour period following the Service Interruption, or
      at the request of the Subscriber, to a mutually convenient later time for
      the repair call, and successfully repairs the Service Interruption during
      the agreed appointment. If the Service Interruption is not repaired at the
      time of the scheduled appointment, the Subscriber will receive a credit
      equal to 1/30th of his normal monthly bill for each 24 hour period. The
      Subscriber will receive a rebate if all, or substantially all, of the
      relevant channels were lost, and only if the Subscriber requests the
      rebate.

10. EMPLOYMENT, TRAINING, AND PROCUREMENT REQUIREMENTS

    a. Employment:

       1. The Franchisee shall, in accordance with Federal, State, and local
          laws and regulations, afford equal opportunity and non-discrimination
          in employment to all individuals, regardless of their race, color,
          religion, age, sex, national origin, sexual orientation or handicap.
          The Franchisee shall comply with all applicable requirements of the
          Americans with Disabilities Act.

       2. The Franchisee agrees that it shall give documentary evidence as to
          the steps it took to ensure that a good faith effort was made by it to
          comply with subsection (a)(1) above.

    b. Training: The Franchisee shall provide training on an ongoing basis for
       its employees to maintain and upgrade skills.

11. REPORTS AND RECORDS.

                                      -54-

<PAGE>

   a. Open Books and Records.

      1. The Board shall have the right, upon reasonable notice, to inspect and
         copy at any time during normal business hours at Franchisee's office or
         at such location as the Board may designate, all books, receipts, maps,
         plans, financial statements, contracts, service complaint logs,
         performance, test results, records of requests for service, computer
         records, codes, programs, and disks or other storage media and other
         like material which the Board deems appropriate in order to monitor
         compliance with the terms of the Cable Law, this Agreement, or
         applicable law. This includes not only the books and records of the
         Franchisee, but any books and records the Board deems relevant held by
         an Affiliate, a cable operator of the Cable System, or any person
         holding any form of management contract for the Cable System. With
         respect to books and records held by contractors and subcontractors
         other than entities described in the preceding sentence, the Franchisee
         shall cooperate with the Board and exercise Franchisee's best efforts
         to obtain access to the books and records. The Franchisee is
         responsible for collecting the information and producing it at the
         location specified above.

      2. The Franchisee shall maintain financial records that allow analysis and
         review of its operations in the Franchise Area.

      3. Access to the Franchisee's records shall not be denied by the
         Franchisee on the basis that said records contain "proprietary"
         information. Refusal to provide information required herein to the
         Board shall be grounds for revocation. All such information

                                      -55-

<PAGE>

         received by the Board shall remain confidential insofar as permitted
         by applicable Puerto Rico and federal law.

      4. The Franchisee shall maintain a file of records open to public
         inspection in accordance with applicable FCC rules and regulations.

   b. Communication with Regulatory Agencies.

      1. The Franchisee shall have available for review by the Board, in a form
         acceptable to the Board, all reports and materials submitted to or
         received from the FCC, the Security and Exchange Commission, or any
         other federal or state regulatory commission or agency having
         jurisdiction over any matter affecting operation of the Franchisee's
         System, including, but not limited to, any proof of performance tests
         and results. Equal Employment Opportunity reports, and all petitions,
         applications, and communications of all types regarding the Cable
         System, or a group of Cable Systems of which the Franchisee's Cable
         System is a part, including any such material submitted by or received
         by the Franchisee, an Affiliate, or any other Person on the behalf of
         the Franchisee.

   c. Annual Report. Unless this requirement is waived in whole or in part by
      the Board, no later than 90 days after the end of Franchisee's fiscal
      year, the Franchisee shall submit a written report to the Board which
      shall include:

      1. a summary of the previous year's activities in development of the Cable
         System, derived from the monthly reports.

      2. An annual list of officers and members of the Board of Directors or
         similar controlling body of the Franchisee and any Affiliates;

                                      -56-

<PAGE>

      3. An annual report and SEC 10(k) filing for the Franchisee;

      4. Upon request by the Board, a detailed copy of updated maps depicting
         the location of all cable plant, showing areas served and locations of
         all trunk lines and feeder lines in the Franchise Area, and including
         changes in all such items for the period covered by the report.

   d. Special Reports. Unless this requirement is waived in whole or in part by
      the Board, the Franchisee shall deliver the following special reports to
      the Board:

      1. The Franchisee must submit a copy and full explanation of any notice of
         deficiency, forfeiture, or other document issued by any state or
         federal agency instituting any investigation or civil or criminal
         proceeding regarding the Cable System, the Franchisee, or any Affiliate
         of the Franchisee, to the extent the same may affect or bear on
         operations in the Franchise Area.

      2. The Franchisee must submit a copy and brief explanation of any request
         for protection under bankruptcy laws, or any judgment related to a
         declaration of bankruptcy by the Franchisee or by any partnership or
         corporation that owns or controls the Franchisee directly or
         indirectly.

   e. Additional Reports. Franchisee shall prepare and furnish to the Board, at
      the times and in the form prescribed by the Board, (e.g. Board's
      Regulations) such additional reports with respect to its operation,
      affairs, transactions or property, as may be reasonably necessary to the
      performance of any of the rights, functions or duties of the Board in
      connection with this Agreement.

   f. Records Required

                                      -57-

<PAGE>

      1. Consistent with FCC time requirements, the Franchisee shall maintain:

         A. Records of all complaints by type received. The term "complaints" as
            used herein and throughout this Agreement refers to complaints about
            any aspect of the Cable System or the Franchisee's operations,
            including, without limitation, complaints about employee courtesy.
            Complaints recorded may not be limited to complaints requiring an
            employee service call.

         B. A full and complete set of plans, records, and "as built" maps
            showing the exact location of all System equipment installed or in
            use in the Franchise Area, exclusive of Subscriber service drops.

         C. Records of outages, indicating date, duration, area, and the number
            of Subscribers affected, type of outage, and cause.

         D. Records of service calls for repair and maintenance indicating the
            date and time service was required, the date of acknowledgment and
            date and time service was scheduled (if it was scheduled), and the
            date and time service was provided, and (if different) the date and
            time the problem was solved.

         E. Records of installation/reconnection and requests for service
            extension, indicating date of request, date of acknowledgment, and
            the date and time service was extended.

         F. A public file showing its plan and timetable for the System Rebuild.

      2. Copies of the foregoing shall be provided to the Board upon request,
         and the Board may require additional information, records, and
         documents from time to time.

   g. Performance Evaluation.

                                      -58-

<PAGE>

      1. The Board may, at its discretion, hold performance evaluation sessions
         on the third and sixth year of the franchise. The Franchisee may be
         required by the Board to notify subscribers of a such evaluation
         sessions by announcement on a designated local channel on the System in
         a manner and with a frequency specified by the Board for five (5)
         consecutive days preceding each session.

      2. Topics that may be discussed at any evaluation session may include, but
         are not limited to, system performance and construction, Franchisee
         compliance with the Board Regulations and this Agreement, customer
         service and complaint response, Subscriber privacy, services provided,
         programming offered, service rate structures, Franchise fees,
         penalties, free or discounted services, applications of new
         technologies, judicial and FCC filings, and line extensions.

      3. During the evaluation process, the Franchisee shall fully cooperate
         with the Board and shall provide such information and documents, as the
         Board may need to reasonably perform its review.

   h. Voluminous Materials.

      If any books, records, maps or plans, or other requested documents are too
      voluminous, or for security reasons cannot be copied and moved, then the
      Franchisee may request that the inspection take place at some other
      location, provided that (1) the Franchisee must make necessary
      arrangements for copying documents selected by the Board after review;
      and (2) the Franchisee must pay all reasonable travel and additional
      copying expenses incurred by the Board in inspecting those documents or
      having those documents

                                      -59-

<PAGE>

      inspected by its designee. The parties agree that any payments made by the
      Franchisee pursuant to this paragraph are not part of a Franchise fee.

   i. Retention of Records; Relation to Privacy Rights.

      The Franchisee shall take all steps that may be reasonably required to
      ensure that it is able to provide the Board all information which must be
      provided or may be requested under this Agreement, including by providing
      appropriate Subscriber privacy notices. Nothing in this Section shall be
      read to require the Franchisee to violate 47 U.S. C. ss. 551. Each
      Franchisse shall be responsible for redacting any data that federal law
      prevents it from providing to the Board. The Board retains the right to
      question any such redaction and to challenge it in any forum having
      jurisdiction over such a challenge. Records shall be kept for at least
      five (5) years.

   j. Waiver of Reporting Requirements. The Board may, at its discretion, waive
      in writing the requirement of any particular report specified in this
      Section 11.

12. RATE REGULATION

    a. All Rights Reserved

       The Board reserves all of its rights to regulate the Franchisee's rates
       to the maximum extent permitted by law.

    b. Geographical Uniformity.

       To the extent consistent with the FCC regulations, the Franchisee's
       residential rates throughout the Franchise Area shall be uniform.

                                      -60-

<PAGE>

13. INSURANCE, SURETY, AND INDEMNIFICATION

    a. Insurance Required

    1. The Franchisee shall obtain, and by its acceptance of the Franchise
       specifically agrees that it will maintain, throughout the entire length
       of the Franchise period, at its own cost and expense and keep in force
       and effect the following insurance covering the Franchisee and, by
       additional insured provision, the Board. Coverage must be placed with an
       insurance company/companies licensed to do business in the Commonwealth
       of Puerto Rico evidenced by a certificate of insurance and/or copies of
       the insurance policies. Franchisee's insurance shall be primary.

       a. Commercial General Liability insurance with respect to the
          construction, operation and maintenance of the Cable System, and the
          conduct of the Franchisee's business in the Franchise Area, in the
          minimum amount of two million dollars ($2,000,000) per occurrence,
          combined single limit for property damage and bodily injury. The
          policy must include coverage for Contractual Liability, Premises and
          Operations, Broad Form Property Damage, Personal Injury, and Products
          and Completed Operations. The policy must also include coverage for
          the explosion, collapse and underground hazard.

       b. Automobile Liability Coverage, with a minimum limit of liability of
          one million dollars ($1,000,000), per occurrence, combined single
          limit for bodily injury and property damage coverage. Policy must
          include coverage

                                      -61-

<PAGE>

          for owned automobiles, leased or hired automobiles and non-owned
          automobiles.

       c. Workers' Compensation Coverage meeting all requirements of Puerto Rico
          Law.

    2. The Board may review these amounts no more than once a year and may
       require reasonable adjustments to them consistent with the public
       interest.

    b. Endorsements:

       All insurance policies and certificates maintained pursuant to this
       Agreement shall contain the following endorsement:

       It is hereby understood and agreed that this insurance coverage may not
       be canceled by the insurance company nor the intention not to renew be
       stated by the insurance company until sixty (60) days after receipt by
       the Board, by registered mail, of a written notice of such intention to
       cancel or not to renew.

    c. Qualifications of Sureties. All insurance policies shall be with sureties
       qualified to do business in the Commonwealth of Puerto Rico, with an A +9
       or better rating for financial condition and financial performance by
       Best's Key Rating Guide, Property/Casualty Edition, and in a form
       approved by the Board

    d. Policies Available for Review.

       All insurance policies shall be available for review by the Board, and
       the Franchisee shall deliver to the Board a copy of the required
       certificates of insurance, evidencing that the required policies are in
       effect, no later than thirty (30) days after such policy is required to
       be effective.

                                      -62-

<PAGE>

    e. Additional Insureds: Prior Notice of Policy Cancellation.

       All liability insurance policies shall name the Board and its employees
       as additional insureds and shall further provide that any cancellation or
       reduction in coverage shall not be effective unless sixty (60) days'
       prior written notice thereof has been given to the Board. The Franchisee
       shall not cancel any required insurance policy without submission of
       proof that the Franchisee has obtained alternative insurance reasonably
       satisfactory to the Board which complies with this Agreement, such
       approval by the Board shall not be unreasonably withheld.

    f. Failure Constitutes Material Violation. Failure to comply with the
       insurance requirements set forth in this Section shall constitute a
       material violation of the Franchise.

    g. Indemnification.

       1. The Franchisee shall, at its sole cost and expense, indemnify, hold
          harmless, and defend the Board and its employees, from and against any
          and all claims, suits, causes of action, proceedings, and judgments
          for damages or equitable relief arising out of the construction,
          maintenance, or operation of its Cable System; copyright infringements
          or a failure by the Franchisee to secure consents from the owners,
          authorized distributors, or Franchisees of programs to be delivered by
          the Cable System, other than programs delivered on PEG channels, the
          conduct of the Franchisee's business in the Municipalities; or in any
          way arising out of the Franchisee's enjoyment or exercise of the
          Franchise, regardless of whether the act or

                                      -63-

<PAGE>

          omission complained of is authorized, allowed, or prohibited by the
          Board's Regulations or this Agreement.

       2. Specifically, the Franchisee shall fully indemnify, defend, and hold
          harmless the Board and its employees, from and against any and all
          claims, suits, actions, liability, and judgments for damages or
          otherwise subject to 47 U.S.C. ss. 558, arising out of or alleged to
          arise out of the installation, construction, operation, or maintenance
          of the System, including but not limited to any claim against the
          Franchisee for invasion of the right of privacy, defamation of any
          Person, firm or corporation, or the violation or infringement of any
          copyright, trade mark, trade name, service mark, or patent, or of any
          other right of any Person, firm, or corporation.

       3. The Board shall give the Franchisee prompt notice of any claim or the
          commencement of any action, suit or other proceeding covered by the
          provisions of this Section. Franchisee will provide the defense of any
          claims brought against the Board under this Section of the franchise
          by selecting counsel of Franchisee's choice to defend the claim,
          subject to the consent of the Board, which will not unreasonably be
          withheld. Nothing herein shall be deemed to prevent the Board from
          cooperating with the Franchisee and participating in the defense of
          any litigation by its own counsel at its own cost and expense,
          provided however, that after consultation with the Board, Franchisee
          shall have the right to defend, settle or compromise any claim or
          action arising hereunder, and Franchisee shall have the authority to
          decide the appropriateness and the amount of any such settlement. In
          the event that the Board does not consent to the terms of any such
          settlement or compromise, the Franchisee

                                      -64-

<PAGE>

           shall not settle the claim or action but any obligation to indemnify
           the Board shall in no event exceed the amount of such settlement.

        4. Nothing in this Agreement shall be construed to waive the tort
           immunity of the Board or any Participating Municipality.

     h. No Limit of Liability.

        Neither the provisions of this Section nor any damages recovered by the
        Board shall be construed to limit the liability of the Franchisee for
        damages under the Franchise.

14. PERFORMANCE GUARANTEES AND REMEDIES

    a. Performance Bond:

       1. Franchisee shall obtain and maintain during the entire term of the
          Franchise, and any renewal or extensions thereof, except as provided
          herein, a performance bond or an irrevocable letter of credit in favor
          of the Board in the amount of $50,000, to ensure the Franchisee's
          faithful performance of its obligations under the Cable Law and this
          Agreement.

       2. The performance bond shall provide the following conditions:

          A. There shall be recoverable by the Board, from the principal and
             surety, any and all fines and penalties due to the Board and any
             and all damages, losses, costs, and expenses suffered or incurred
             by the Board or resulting from the failure of the Franchisee after
             notice and opportunity to cure to faithfully comply with (i) the
             material provisions of this Agreement, the Board's Regulations and
             other applicable law; (ii) all orders, permits and directives of
             the Board; (iii) payment

                                      -65-

<PAGE>

             of fees due to the Board; or (iv) payment of any claims or liens
             due the Board. Such losses, costs and expenses shall include but
             not be limited to reasonable attorneys' fees and other associated
             expenses.

          B. The total amount of the performance bond shall be forfeited in
             favor of the Board in the event:

              i. the Franchisee abandons the System at any time during the term
                 of its Franchise or any extension thereto; or

             ii. the Franchisee carries out a Transfer of the Franchise without
                 the express written consent of the Board as provided herein.

             The Board shall apply any funds received under the performance bond
             to defray any damages, fees, costs and expenses attributable to or
             arising from the abandonment of the System or Transfer of the
             Franchise. Any funds remaining upon final resolution of all claims
             and payment of all damages, costs, fees, and expenses shall be
             returned to the bonding company.

       3. The performance bond shall be issued by a surety qualified to do
          business in the Commonwealth of Puerto Rico and with an A+9 or better
          rating for financial condition and financial performance in Best's Key
          Rating Guide, Property/Casualty Edition; shall be in a form approved
          by the Board; and shall contain the following endorsement:

"This bond may not be canceled, or allowed to lapse, until sixty (60) days after
receipt by the Board, by certified mail, return receipt requested, of a written
notice from the issuer of the bond of intent to cancel or not to renew."

                                      -66-

<PAGE>

       4. Reduction of Bond. Upon written application by the Franchisee, the
          Board may, at its sole option, in writing, permit the amount of the
          bond to be reduced or waive the requirements for a performance bond.
          Reductions granted or denied upon application by the Franchisee shall
          be without prejudice to the Franchisee's subsequent applications or to
          the Board's right to require the full bond at any time thereafter.
          However, no application shall be made by the Franchisee within one (1)
          year of any prior application.

    b. Security Fund.

       1. The Franchisee shall provide a security fund in the amount of $10,000
          to secure its performance of all its obligations under this Agreement.
          Such requirement can be satisfied at Franchisee's option by a
          performance bond or a letter of credit with a value of $10,000.

       2. The Security Fund shall be released only upon expiration of the
          Franchise and if there is no outstanding default or unpaid amounts by
          the Franchisee.

    c. Rights Cumulative. The rights reserved to the Board herein are in
       addition to all other rights of the Board, whether reserved herein or
       authorized by applicable law, and no action, proceeding, or exercise of a
       right with respect to such Security Fund will affect any other right the
       Board may have. The receipt of damages by the Board from the Security
       Fund shall not be construed to excuse faithful performance by the
       Franchisee or limit the liability of the Franchisee under the terms of
       its Franchise for damages.

    d. Security Fund Procedures. The following procedures shall apply to drawing
       on the Security Fund:

                                      -67-

<PAGE>

       A. The Board may immediately withdraw an appropriate amount, including
          interest and penalties, from the security if:

          1. After ten (10) days notice the Franchisee fails to pay to the Board
             any fees or taxes due and unpaid, liquidated damages, damages, or
             costs or expenses that the Board is compelled to pay by reason of
             any act of default of the Franchisee in connection with the
             franchise; or

          2. After 30 days notice to the Franchisee, the Franchisee fails to
             comply with any provision of the Franchise that the Board
             reasonably determines can be remedied by an expenditure of the
             security deposit. The Board must promptly notify the Franchisee of
             the amount and date of any withdrawal.

       B. Within 30 days after the Board gives notice that an amount has been
          withdrawn from the security deposit, the Franchisee must deposit a sum
          of money equal to the amount withdrawn. If the Franchisee does not
          deposit the required amount within 30 days, the entire security
          deposit remaining may be forfeited. In addition, that failure is a
          violation for which the Board may revoke the franchise or take any
          other enforcement action.

       C. The security deposit is the property of the Board if the Franchise is
          revoked. The Board must return the security deposit to the Franchisee
          after the Franchise is terminated if there is no outstanding default
          or unpaid amounts owed to the Board by the Franchisee.

                                      -68-

<PAGE>

       D. The rights reserved to the Board with respect to the security deposit
          are in addition to all other rights of the Board under this Chapter or
          other law. An action, proceeding, or exercise of a right with respect
          to the security deposit does not affect any other right the Board may
          have.

    e. Failure Constitutes Material Violation.

       Failure to maintain or restore the Security Fund shall constitute a
       material violation of this Agreement.

    f. Remedies.

       1. If the Franchisee violates any provision of the law or this Franchise
          Agreement, the Board may have one or more of the following actions:

          A. impose administrative fines in the amount, whether per day,
             incident, or other measure of violation, as provided in the
             franchise agreement. Payment of the fines by the Franchisee will
             not relieve the Franchisee of its obligation to meet the Franchise
             requirements; or

          B. require the Franchisee to pay its subscribers or classes of
             subscribers in an amount and on a basis the Board determines is
             necessary to cure the breach or default, or equitably compensate
             for the violation; or

          C. revoke the Franchise.

       2. In determining which remedy or remedies are appropriate, the Board
          must consider the nature of the violation, the person or persons
          bearing the impact of the violation, the nature of the remedy required
          in order to prevent further violations, and any other

                                      -69-

<PAGE>

          matters the Board determines are appropriate. Provided, however, that
          the remedy of franchise revocation shall be employed only for the most
          outrageous violations.

          3. In addition to or instead of these remedies, the Board may seek
             legal or equitable relief from any court of competent jurisdiction.

          4. Before initiating a remedy under this section other than revocation
             of the Franchise, the Board must give the Franchisee written notice
             of the violations claimed and at least 10 working days to correct
             the violations.

       g. Fines: Because the Franchisee's failure to comply with provisions of
          the Franchise and this Franchise Agreement will result in injury to
          the Board, the Board may impose the following fines (The Board may
          draw on the Security Fund to recover any fine.):

          1. For failure to submit any required plans indicating expected dates
             of installation of various parts of the System: a fine for each day
             the violation continues;

          2. For failure to substantially complete the System Rebuild, including
             the timeline of completion, in accordance with this Agreement: a
             fine for each day the violation continues;

          3. For a Transfer without approval: a fine for each day the violation
             continues;

          4. For failure to make PEG capacity available; failure to construct
             required links to PEG facilities; or failure to make payments to
             support PEG under this Agreement: a fine for each day the violation
             continues, in addition to any monetary payment due under this
             Agreement or the Board Regulations;

                                      -70-

<PAGE>

          5.  For failure to supply information, reports, or filings lawfully
              required Franchise Agreement or applicable law or by the Board: a
              fine for each 0. violation continues;

          6.  For violation of customer service standards: a fine per violation;

          7.  For failure, unless such failure is beyond the Franchisee's
              control, of the Emergency Alert System to perform in the event of
              a public emergency or vital information situation: a fine per
              occurrence;

          8.  For failure to render required payment for reimbursement of any
              Franchise expenses, or liquidated damages: a fine per day, in
              addition to any monetary payment under this Agreement or the Board
              Regulations;

          9.  For failure to file, obtain or maintain any required Security Fund
              in a timely fashion: a fine per day;

          10. For failure to restore damaged property: a fine per day, in
              addition to the cost of the restoration as required elsewhere
              herein; and

          11. For violation of technical standards established by the FCC: a
              fine per day.

    h. Termination of franchise.

       1. Upon completion of the term of this Franchise, if a new, extended, or
          renewed Franchise is not granted to the Franchisee by the Board, the
          Franchisee's right to occupy the Public Rights-of-Way within the
          Franchise Area shall terminate, subject to applicable federal law.

       2. To invoke the provisions of this Section, the Board shall give the
          Franchisee written notice of the default in its performance. If
          within thirty (30) calendar days

                                      -71-

<PAGE>

          following such written notice from the Board to the Franchisee, or
          such other period as the Franchise Agreement shall require or the
          Franchisee and the Board shall agree, the Franchisee has not taken
          corrective action to the satisfaction of the Board, or diligently
          commenced corrective action if the nature of the default does not
          permit completion of such action within 30 days, the Board may give
          written notice to the Franchisee of its intent to revoke the
          Franchise, stating its reasons; provided that no opportunity to cure
          shall be provided where the Franchisee is shown to have defrauded or
          attempted to defraud the Board or its Subscribers.

       3. Prior to revoking the Franchise, the Board shall hold a public
          hearing, on thirty (30) calendar days' notice, at which time the
          Franchisee and the public shall be given an opportunity to be heard.
          Following the public hearing, the Board may determine whether to
          revoke the Franchise based on the information presented at the
          hearing, and other information of record, or, where applicable, grant
          additional time to the Franchisee to effect any cure. If the Board
          determines to revoke the Franchise, it shall issue a written decision
          setting forth the reasons for its decision. A copy of such decision
          shall be transmitted to the Franchisee.

       4. If the Board revokes the Franchise, or if for any other reason the
          Franchisee abandons, terminates, or fails to operate or maintain
          service to its Subscribers, the following procedures and rights are
          effective:

          A. The Board may require the former Franchisee to remove its
             facilities and equipment at the former Franchisee's expense and
             restore affected sites as

                                      -72-

<PAGE>

             required in Section 5(c), or permit the former Franchisee to
             abandon such facilities in place. If the former Franchisee fails to
             do so within a reasonable period of time, the Board may have the
             removal done at the former Franchisee's and/or surety's expense.

          B. The Board may require the former Franchisee to continue operating
             the Cable System as specified in Section 4(a).

          C. In the event of revocation, the Board, may assign or transfer the
             ownership of the Cable System at its then-fair market value.

          D. If a Cable System is abandoned by the Franchisee or the Franchisee
             fails to operate or maintain service to its Subscribers or
             otherwise terminates the Franchise, the ownership of all portions
             of the Cable System in Public Rights-of-Way shall revert to the
             Board which has jurisdiction over the Public Right-of-Way, and the
             Board may sell, assign, or Transfer all or part of the assets of
             the System.

15. TRANSFER TO PEGASUS

    The Board hereby gives its consent to the Transfer of the Franchise to
Pegasus Cable Television of San German, Inc. once all the terms and conditions
included in the Purchase Agreement are complied with. Once this triggering event
occurs, the parties will file an informative motion before the Board, notifying
of the actual and final transfer of the Franchise to Pegasus Cable Television of
San German Inc. Once said motion is received,

                                      -73-

<PAGE>

the Board will issue a resolution acknowledging the transfer from Franchisee to
Pegasus Cable Television of San German, Inc.

    To the Board's best knowledge, at the day of this Agreement the Company is
in substantial compliance with the prior Franchise. This provision does not
liberate the Company from any actual, past, present or unknown obligation to the
Board.

16. MISCELLANEOUS PROVISIONS.

    a. Binding Acceptance: This Agreement shall bind and benefit the parties
       hereto and their respective heirs, beneficiaries, administrators,
       executors, receivers, trustees, successors and assigns, and the promises
       and obligations herein shall survive the expiration date hereof

    b. Preemption: In the event that federal or state laws, rules or regulations
       preempt a provision or limit the enforceability of a provision of this
       Agreement, then, the provision shall be read to be preempted to the
       extent and for the time, but only to the extent and for the time,
       required by law. In the event such federal or state law, rule or
       regulation is subsequently repealed, rescinded, amended or otherwise
       changed so that the provision hereof that had been preempted is no longer
       preempted, such provision shall thereupon return to full force and
       effect, and shall thereafter be binding on the parties hereto, without
       the requirement of further action on the part of the Board.

    c. Compliance With Federal and State Laws: The Franchisee shall comply with
       all applicable federal, state, and local laws and regulations.

                                      -74-

<PAGE>

    d. Force Majeure: The Franchisee shall not be deemed in default of
       provisions of this Agreement or the Board Regulation where performance
       was rendered impossible by war or riots, labor strikes or civil
       disturbances, floods, earthquakes, fire, explosions, or epidemics, or
       other causes beyond the Franchisee's control, and the Franchise shall not
       be revoked or the Franchisee penalized for such noncompliance, provided
       that the Franchisee takes immediate and diligent steps to bring itself
       back into compliance and to comply as soon as possible under the
       circumstances with the Franchise without unduly endangering the health,
       safety, and integrity of the Franchisee's employees or property, or the
       health, safety, and integrity of the public, Public Rights-of-Way, public
       property, or private property.

    e. Governing Law: This Franchise Agreement shall be governed in all
       respects by the laws of the Commonwealth of Puerto Rico.

    f. Notices: Unless otherwise expressly stated herein, notices required under
       this Franchise Agreement shall be mailed first class, postage prepaid, to
       the addressees below. Each party may change its designee by providing
       written notice to the other party, but each party may only designate one
       entity to receive notice

       1. Notices to the Franchisee shall be mailed to:

          (A) General Manager
              Pegasus Cable TV
              P.O. Box 7998
              Mayaguez, Puerto Rico 00681

          AND

                                      -75-

<PAGE>
          (B) Office of the General Counsel
              Pegasus Cable TV
              225 City Line Avenue
              Suite 200
              Bala Cynwyd, Pennsylvania 19004

       2. Notices to the Board shall be mailed to:

          Telecommunications Regulatory Board of Puerto Rico
          235 Arterial Hostos Avenue
          Capital Center Tower, North Tower, Suite 901
          San Juan, Puerto Rico 00918-1453

       3. The Franchisee shall at all times keep the Board advised as to which
          individual(s) are authorized to act on behalf of the Franchisee and
          whose acts will be considered to bind the Franchisee.

    g. Time of Essence: In determining whether the Franchisee has substantially
       complied with this Franchise Agreement, the parties agree that time is of
       the essence. As a result, the Franchisee's repeated and substantial
       failure to complete construction in a timely manner may constitute a
       material breach.

    h. Severability. If any law, ordinance, regulation or court decision shall
       render any provision of this Franchise invalid, the remaining provisions
       of the Franchise shall remain in full force and effect.

    i. No Waiver. The failure of either party on one or more occasions to
       exercise a right or to require compliance or performance under the
       Franchise Agreement, or any other applicable law shall not be deemed to
       constitute a waiver of such right or a waiver of compliance or
       performance by such party, unless such right or such compliance or
       performance has been specifically waived in writing.

                                      -76-

<PAGE>

    j. Entire Agreement. This Franchise represents the entire understanding and
       agreement between the parties hereto with respect to the subject matter
       hereof, supersedes all prior oral negotiations between the parties, and
       can be amended, supplemented, modified or changed only by an agreement in
       writing which makes specific reference to this Franchise or the
       appropriate attachment and which is signed by the party against whom
       enforcement of any such amendment, supplement, modification or change is
       sought.

Agreed to in San Juan, Puerto Rico, on March 19, 1999, by:

TELECOMMUNICATIONS REGULATORY BOARD OF PUERTO RICO:

/s/ Phoebe Forsythe Isales
-------------------------------------------------
Phoebe Forsythe Isales, President

/s/ Vicente Aguirre Iturrino
-------------------------------------------------
Vicente Aguirre Iturrino, Associate Member

/s/ Casandra Lopez
-------------------------------------------------
Cassandra Lopez, Associate Member

PETITIONERS:

/s/ Vivian J. Smith
--------------------------------------------------
Representative of
CABLE SYSTEMS USA, PARTNERS

/s/ Ted S. Lodge
--------------------------------------------------
Representative of:
PEGASUS CABLE TELEVISION OF SAN GERMAN, INC.

                                      -77-

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