SECOND AMENDMENT AGREEMENT

 

                                                         Exhibit 10.2

                          SECOND AMENDMENT AGREEMENT

     This SECOND AMENDMENT AGREEMENT (the "Agreement") is entered into as of May
15, 1995 between C-TEC Corporation, a Pennsylvania corporation ("C-TEC"), C-TEC 
Cable Systems, Inc., a Delaware corporation ("C-TEC Cable"), C-TEC Cable Systems
of Pennsylvania, Inc., a Pennsylvania corporation ("C-TEC-PA"), Twin County 
Trans Video, Inc., a Pennsylvania corporation ("Twin County") and Bark Lee Yee, 
Stella C. Yee, Susan C. Yee, Raymond C. Yee, Kenneth C. Yee and Robert G. 
Tallman as trustee for those two (2) certain trusts created pursuant to trust 
agreements dated December 17, 1992 (such individuals and trustee referred to 
individually as a "Shareholder" and in the aggregate as the "Shareholders").

                                   RECITALS

     A.  The parties to this Agreement (other than C-TEC) entered into a merger 
agreement dated as of September 23, 1994 (the "Merger Agreement"), providing 
for, inter alia, the merger of Twin County with and into C-TEC-PA, in exchange 
     ----------
for certain cash, notes, preferred stock of C-TEC Cable, and the other 
consideration set forth therein.

     B.  The parties to this Agreement entered into an Amendment Agreement (the 
"Amendment Agreement") dated March 30, 1995

containing certain agreements and covenants among the parties and amendments to 
the Merger Agreement including amending the Merger Agreement to provide for, 
inter alia, the merger of Twin County with and into C-TEC Cable, in exchange for
- ----- ----
certain cash, notes, preferred stock of C-TEC, and the other consideration set 
forth therein.

     C.  The parties now wish to further amend the Merger Agreement, and provide
for certain other agreements and provisions.

     NOW, THEREFORE, in consideration of the foregoing, and for other good and 
valuable consideration, the receipt and sufficiency of which are hereby 
acknowledged, the parties hereby agree as follows:

     1.  Definitions.
         -----------

          "Articles of Merger" means the Articles of Merger referred to in
           ------------------ 
Section 3.2.3.2 of this Agreement.

          "Closing" has the meaning set forth in Section 3 of this Agreement.
           -------

          "Closing Date" means May 15, 1995.
           ------------

                                      -2-

          "C-TEC Shares" means the 3,671 shares of Twin County Class B Common
           ------------
Stock to be sold to C-TEC Cable pursuant to Section 2.1 of this Agreement.

          "Escrow Agent" means the law firms of Tallman, Hudders & Sorrentino, 
           ------------
P.C. and Swidler & Berlin, Chartered, acting jointly, as the escrow agent 
appointed pursuant to the Escrow Agreement.

          "Escrow Agreement" means the Escrow Agreement by and among Twin 
           ----------------
County, the Shareholders, C-TEC Cable and the Escrow Agent, entered into
pursuant to Section 5.1 of this Agreement.

          "Management Agreement" means the Management Agreement by and between 
           --------------------
C-TEC-PA and Twin County, entered into pursuant to Section 4.1 of this 
Agreement.

          "Management Period" means the term of the Management Agreement.
           -----------------

          "Other Shares" means all issued and outstanding Shares of the capital 
           ------------
stock of Twin County, other than the TEC Shares, which Other Shares are being 
delivered to the Escrow Agent pursuant to Section 2.2 hereof.

                                      -3-

          "Plan of Merger" means the Plan of Merger referred to in Section 
           --------------
3.2.3.2 of this Agreement.

          "Share Exchange Agreement" means the Share Exchange Agreement referred
           ------------------------
to in Section 6.2 of this Agreement.

     Any capitalized terms not defined in this Agreement shall have the meanings
ascribed to them in the Merger Agreement, as amended by the Amendment Agreement.

     2.   Purchase of Shares.
          ------------------

          2.1 Sale of C-TEC Shares. At the Closing Date, the Shareholders shall 
              --------------------
sell, transfer and deliver to C-TEC Cable 3,671 shares of Class B Common Stock 
of Twin County (the "C-TEC Shares"), and good title thereto, free and clear of 
all Liens (other than the lien and security interest in favor of First Union 
National Bank of North Carolina) and shall deliver to the Escrow Agent the 
certificates representing the C-TEC Shares duly endorsed to the Escrow Agent for
the benefit of C-TEC Cable under the Escrow Agreement or accompanied by stock 
powers duly executed, with all necessary stock transfer stamps attached thereto 
and canceled. The Escrow Agent shall hold such shares for the benefit of C-TEC 
Cable pursuant to the Escrow Agreement.

                                      -4-

          2.2  Delivery of Other Shares. On the Closing Date, the Shareholders 
               ------------------------
shall deliver all of the Other Shares to the Escrow Agent who shall hold such 
shares for the benefit of the Shareholders pursuant to the Escrow Agreement. 
Such shares shall be delivered to the Escrow Agent free and clear of all Liens 
(other than the lien and security interest in favor of First Union National Bank
of North Carolina), with the certificates duly endorsed to the Escrow Agent for 
the benefit of the Shareholders under the Escrow Agreement or accompanied by 
stock powers duly executed, with all necessary stock transfer stamps attached 
and canceled.

     3.  Closing.
         -------

          3.1  Closing. On the Closing Date, a closing (the "Closing") will be
               ------- 
held at the offices of C-TEC Corporation, 105 Carnegie Center, Princeton, New 
Jersey at which time the transactions set forth in Section 2. of this Agreement 
shall be consummated. Notwithstanding the foregoing, the filing of the Merger 
Certificate, the filing of the Articles of Merger, the Merger of Twin County 
with and into C-TEC Cable (pursuant to which Twin County will transfer all 
assets and liabilities to C-TEC Cable) and the issuance by C-TEC of Preferred 
Stock, Series A and Series B shall not take place at the Closing, but shall be 
effected, if at all, pursuant to Section 6 of this Agreement. Except as 
otherwise set forth in Section 8(j) of the Amendment

                                      -5-

Agreement, for all purposes of the Merger Agreement and Amendment Agreement, 
the terms "Closing Date" and "Closing" shall have the meaning set forth in 
this Agreement.

           3.2 Deliveries at Closing.
               ---------------------

               3.2.1  Deliveries by Twin County and the Shareholders to C-TEC. 
                      -------------------------------------------------------
At the Closing, Twin County and the Shareholders shall deliver to C-TEC:

                      (a) The Non-Competition Agreement executed by each 
                          Shareholder except Trustee;

                      (b) Tax-Free Reorganization Certificates dated the Closing
                          Date in the form of Exhibit A executed by each
                          Shareholder and Twin County;

                      (c) An opinion of Tallman, Hudders & Sorrentino, P.C., 
                          dated the Closing Date in the form of Exhibit B;

                                      -6-

                      (d) An opinion of Cole, Raywid & Braverman, dated the 
                          Closing Date, in the form of Exhibit C;

                      (e) The Management Agreement executed by Twin County 
                          pursuant to Section 4.1 of this Agreement;

                      (f) Written resignations in a form satisfactory to C-TEC 
                          of all directors and officers of Twin County effective
                          as of the Closing Date;

                      (g) A unanimous consent of the Shareholders effective as
                          of the Closing Date reducing the number of directors
                          of Twin County to one (1) and designating that person
                          set forth in Section 4.3 of this Agreement as the
                          director of Twin County;

                      (h) An agreement executed by Computer Aid, Inc. releasing 
                          Twin County as

                                      -7-

                          required pursuant to Section 8(h) of the Amendment
                          Agreement;

                      (i) An executed Assignment in the form of Exhibit D,
                          transferring Twin County's FCC Licenses to C-TEC-PA in
                          exchange for $100 of the Cash Consideration;

                      (j) A check in the amount of $2.75 million drawn on the
                          account of Twin County, Inc. or its counsel at
                          Meridian Bank and made payable to Twin County Trans
                          Video, Inc.;

                      (k) Any other documentation, certificate and instruments
                          required to be delivered pursuant to Section 5.1 of
                          the Merger Agreement, as amended by the Amendment
                          Agreement.

               3.2.2  Deliveries by C-TEC to Twin County and the Shareholders.
                      -------------------------------------------------------
At the Closing, C-TEC shall deliver to the Shareholders:

                                      -8-

                      (a) By wire transfer of immediately available funds an
                          amount of cash equal to (1) $32,426,137 million (which
                          constitutes: (i) the Cash Consideration of $36 million
                          set forth in Section 2.4(1)(a) of the Merger Agreement
                          plus (ii) $11 million allocable to the Non-competition
                          Agreement less (iii) the Deposit of $5 million less
                          (iv) the reduction in Cash Consideration of $7.4
                          million pursuant to Section 6 of the Amendment
                          Agreement less (v) $315,750 pursuant to Section 8(g)
                          of the Amendment Agreement regarding QVC II launch
                          incentives and less (vii) $1,000,000, the amount
                          transferred to Escrow pursuant to Section 3.2.3.1(a),
                          plus (2) $1.733 million (representing dividends that
                          would have accrued on C-TEC Preferred Stock from May
                          1, 1995 through December 31, 1995), plus (3) $68,500
                          pursuant to Section 8(j) of the Amendment Agreement.
                          Such cash

                                      -9-

                          amount, after taking into consideration the Cash
                          Escrow, shall be further adjusted pursuant to Section
                          2.7 of the Merger Agreement (entitled "Consideration
                          Adjustments") as amended by the Amendment Agreement,
                          in accordance with the procedures set forth in Section
                          2.7(6) of the Merger Agreement and pursuant to Section
                          3.3 hereof.

                      (b) the Note referred to in Section 2.4(1)(C) of the
                          Merger Agreement (as amended pursuant to the Amendment
                          Agreement and this Agreement and attached hereto as
                          Exhibit E) in the amount of $4 million executed by C-
                          TEC Cable;

                      (c) a Tax-Free Reorganization Certificate dated the
                          Closing Date in the form of Exhibit F executed by C-
                          TEC;

                                     -10-

                      (d) an opinion of Swidler & Berlin dated the Closing Date 
                          in the Form of Exhibit G;

                      (e) an assignment in a form satisfactory to Twin County
                          transferring to Twin County, Inc., rights to the cash
                          value of those certain split dollar life insurance
                          policies set forth in Section 8(a) of the Amendment
                          Agreement, which assignment shall only become
                          effective once the check referred to in Section
                          3.2.1(j) has cleared; and

                      (f) any other documents, certificates and instruments
                          required to be delivered by Section 5.2 of the Merger
                          Agreement, as amended by the Amendment Agreement.

                                     -11-

               3.2.3  Deliveries to Escrow Agent.
                      --------------------------

                    3.2.3.1  Deliveries by C-TEC. At the Closing, C-TEC shall
                             ------------------- 
deliver to the Escrow Agent:

                             (a) by wire transfer of immediately available funds
                                 $1,000,000 (the "Cash Escrow"), to be held and
                                 distributed by the Escrow Agent pursuant to the
                                 terms of the Escrow Agreement and Section 5
                                 hereof, and

                             (b) the Plan of Merger executed by C-TEC and C-TEC 
                                 Cable.

                    3.2.3.2  Deliveries by the Shareholders. At the Closing, the
                             ------------------------------
Shareholders and Twin County shall deliver to the Escrow Agent:

                             (a) the C-TEC Shares duly endorsed pursuant to 
                                 Section 2.1,

                             (b) the Other Shares duly endorsed pursuant to 
                                 Section 2.2,

                                     -12-

                             (c) the Plan of Merger executed by Twin County and 
                                 Shareholders, in the form of Exhibit H, and

                             (d) the Articles of Merger in the form of Exhibit I
                                 executed by Twin County.

                  3.3 Cash Adjustment. After the computation of the 
                      ---------------
consideration adjustments pursuant to Section 2.7 of the Merger Agreement, as 
amended by the Amendment Agreement, the parties shall instruct the Escrow Agent 
to distribute the Cash Escrow to C-TEC and the Shareholders in accordance with 
such computation (income earned on such cash while in Escrow shall be 
distributed pro rata to C-TEC and Shareholders on the same basis as the 
principal amount of the Escrow).

              4.  Management of Twin County.
                  -------------------------

                  4.1 Management Agreement. At the Closing, Twin County and 
                      --------------------
C-TEC-PA shall enter into a Management Agreement in the form attached hereto as 
Exhibit J, pursuant to which management of Twin County shall be vested solely in
C-TEC-PA (or its affiliates) during the Management Period.

                                     -13-

          4.2  Resignations.  At the Closing, each director and officer of Twin 
               ------------
County shall execute a written resignation effective as of the Closing Date. 
During the Management Period, except as otherwise set forth in certain 
consulting agreements dated as of the Closing Date between C-TEC (or its 
affiliate) and Raymond C. Yee, Susan C. Yee, and Kenneth C. Yee, no Shareholder 
or affiliate or family member thereof (including but not limited to Leon 
Poitras, his affiliates and family members) shall be entitled to any 
compensation from Twin County for any services performed by such persons for 
Twin County.

          4.3  Voting Rights.  During the Management Period, Twin County and 
               -------------
each of the Shareholders agree that C-TEC shall have the right to direct the 
Escrow Agent as to all matters requiring a vote of the shareholders of Twin 
County, including, but not limited to, the election of all directors of Twin 
County, as well as the right to remove any such directors and elect new 
directors. Attached hereto as Exhibit K is a unanimous consent electing David 
C. McCourt as the sole director of Twin County which shall be executed on the 
Closing Date.

          4.4  Termination of Management Agreement.  The Management Agreement 
               -----------------------------------
shall terminate upon the earlier of: (i) the closing of the transactions 
contemplated by Section 6 hereof, or (ii) the disposition of C-TEC's interest in
Twin County.

                                     -14-

          4.5  Restrictions on Transfer of Other Shares During Management 
               ----------------------------------------------------------
Period. During the Management Period, no Shareholder shall transfer, sell,
- ------
pledge, convey, assign, exchange or otherwise dispose of any interest such
Shareholder may have in the escrow or any assets thereof, or shall enter into an
agreement to do any of the foregoing.

     5.   The Escrow.
          ----------

          5.1  Creation of the Escrow. At the Closing, the parties shall execute
               ----------------------
and deliver an Escrow Agreement in the form attached hereto as Exhibit L.

          5.2  Appointment of Escrow Agent; Delivery to Escrow; Instructions to 
               ----------------------------------------------------------------
Escrow Agent. The Escrow Agent is hereby appointed to act as Escrow Agent 
- ------------
pursuant to the terms of this Agreement and the Escrow Agreement. The parties to
this Agreement agree to execute joint written instructions to the Escrow Agent 
in accordance with the provisions of this Section 5 and this Agreement.

          5.3  Dividends or Distributions; Income. For such time as the C-TEC 
               ----------------------------------
Shares and Other Shares are held in Escrow, the following provisions shall 
apply:

                                     -15-

               (a)  Any dividends or other distributions by Twin County 
attributable to the C-TEC Shares shall be distributed by the Escrow Agent to 
C-TEC immediately upon the Escrow Agent's receipt of such amounts.

               (b)  Any dividends or other distributions by Twin County 
attributable to the Other Shares shall be retained by the Escrow Agent until the
Other Shares have been transferred by the Escrow Agent in accordance with 
Section 6 and the provisions of the Escrow Agreement, at which time such 
dividends or distributions (and any income earned thereon while in Escrow) 
shall be transferred to the party or parties to whom the Other Shares are 
transferred.

     6.   The Merger.
          ----------

          6.1  Twin County Merger Into C-TEC Cable. If C-TEC's common 
               -----------------------------------
shareholders have voted to approve the authorization of sufficient shares of 
preferred stock such that C-TEC may issue the Preferred Stock, Series A and 
Preferred Stock, Series B (the "C-TEC Preferred") pursuant to the Amendment 
Agreement (such approval referred to as the "Shareholder Approval"), then, 
within three (3) business days thereof, C-TEC shall give notice to Twin County 
and the Shareholders (the "Merger Notice"). The C-TEC Preferred shall be in the 
form set forth in Exhibits M-1 and M-2. Within three (3) business days of 
receipt of the Merger Notice,

                                     -16-

consummation of the Merger shall occur at which time the following shall take 
place:

               (a)  the Escrow Agent shall: (i) transfer to C-TEC the Plan of
Merger and Articles of Merger; (ii) upon the effectiveness of the Merger,
transfer the share certificates for the C-TEC Shares and Other Shares to C-TEC; 
and (iii) upon the effectiveness of the Merger, transfer any cash pursuant to 
Section 5.3 of the Agreement to C-TEC Cable.

               (b)  C-TEC Cable shall file the Articles of Merger with the 
Corporation Bureau of the Commonwealth of Pennsylvania, and shall file the 
Merger Certificate with the Secretary of State's office in the State of 
Delaware. All parties shall take such other actions as are necessary for the 
Merger to become effective.

               (c)  Upon the effectiveness of the Merger, C-TEC shall deliver to
the Escrow Agent certificates evidencing the C-TEC Preferred, to be issued in 
the Merger pursuant to the Amendment Agreement, and the Escrow Agent shall 
deliver the C-TEC Preferred to the Shareholders.

          6.2  C-TEC Cable Preferred.  If C-TEC determines that it will be 
               ---------------------
unable to issue the C-TEC Preferred on or before December 31, 1995, for any 
reason, including, but not limited to,

                                     -17-

failure to obtain the Shareholder Approval, or the prohibition by any 
governmental entity of such issuance (including but not limited to a court 
injunction or administrative action), C-TEC shall give notice of such 
determination to Twin County and the Shareholders. Within three (3) days of such
notice, the parties shall execute and deliver all documents necessary to merge 
Twin County with and into C-TEC Cable pursuant to Section 6.1 except that, in 
lieu of issuing C-TEC Preferred, C-TEC shall cause C-TEC Cable to issue C-TEC 
Cable, Preferred Stock, Series A and Preferred Stock, Series B pursuant to the 
terms of Exhibits N-1 and N-2 (the "C-TEC Cable Preferred"). In addition, the 
parties shall enter into a Share Exchange Agreement substantially in the form 
attached hereto as Exhibit 0, and amended Articles of Merger and Plan of Merger.

          6.3  Share Purchase. If C-TEC determines that neither the C-TEC 
Preferred nor the C-TEC Cable Preferred may be issued on or before December 31, 
1995, for any reason, including, but not limited to, failure to obtain the 
Shareholder Approval, the absence of authorization for, or the prohibition by 
any governmental entity of such issuance (including but not limited to a court 
injunction or administrative action), C-TEC shall give notice to Twin County and
the Shareholders of such determination. Within five (5) days of such notice, 
C-TEC, Twin County and the Shareholders shall instruct the Escrow Agent to 
deliver the C-TEC Shares and the Other Shares to C-TEC at a closing to be held 
on

                                    - 18 -

December 29, 1995, or, such earlier time as is mutually acceptable to the 
parties. At the closing, C-TEC shall pay to the Shareholders an amount of cash 
equal to $52 million, plus an additional $5,209,350, by wire transfer of 
immediately available funds, in full and complete payment for the Other Shares 
and, simultaneously therewith, the Escrow Agent shall deliver the C-TEC Shares 
and the Other Shares to C-TEC.

     6.4  Default.  C-TEC shall not be deemed to be in default of its 
          -------
obligations under the Merger Agreement, Amendment Agreement or hereunder if it 
is unable to consummate either the transactions set forth in Sections 6.1 or 
6.2, provided it consummates the transaction set forth in Section 6.3.

     7.   Tax Representation and Indemnification.  C-TEC hereby represents that
          -------------------------------------- 
there is no Federal or state income tax risk concerning the tax-free nature of 
the Merger which may be effected after May 15, 1995, but on or prior to December
31, 1995, pursuant to this Agreement (regardless of whether C-TEC Preferred is 
used under Section 6.1 or C-TEC Cable Preferred is used under Section 6.2) that 
exceeds whatever Federal or state income tax risk there would be concerning the 
tax-free nature of a Merger had the Merger occurred in accordance with the 
Merger Agreement as amended March 30, 1995 (and either C-TEC Preferred or C-TEC 
Cable Preferred been used): In accordance with the procedures set forth in 
Section 10.2 of the Merger Agreement, C-

                                     -19-

TEC agrees to indemnify each Shareholder for any Federal and state income tax 
liability (including, without limitation, any attorneys' fees, court costs, or 
other expenses related to defending any claims, charges, or assessments before 
the Internal Revenue Service or any state income tax authority) that such 
Shareholder incurs solely as a consequence of the failure of the foregoing 
representation to be true.

     8.   Other Documents, Confirmation of Agreements. The parties agree to 
          -------------------------------------------
execute such other agreements, documents and instruments, and to make such 
supplements to any regulatory filings as may be appropriate to effectuate the 
terms of this Agreement. Except as otherwise set forth herein, the parties 
hereby ratify and confirm all other terms and conditions of the Merger Agreement
and the Amendment Agreement, which shall remain in full force and effect, 
including representations, warranties, terms, and conditions made or applicable 
as of the Closing Date.

     9.   Termination of Buy-Sell Agreement. By executing this Agreement, Twin
          ---------------------------------
County and the Shareholders hereby terminate the Buy-Sell Agreement between such
parties dated January 11, 1990 and amended May 17, 1990.

                                     -20-

      IN WITNESS WHEREOF, the parties enter into the Amendment Agreement 
effective as of the date set forth above.

ATTEST/WITNESS                            C-TEC CORPORATION

/s/ Steven G. Miller                      By: /s/ Michael J. Mahoney
- ------------------------                     -----------------------------
Steven G. Miller                             President

                                          C-TEC-CABLE SYSTEMS OF
                                          PENNSYLVANIA, INC.

/s/ Steven G. Miller                      By: /s/ Michael J. Mahoney
- ------------------------                     -----------------------------
                                             President

                                          C-TEC CABLE SYSTEMS, INC.

/s/ Steven G. Miller                      By: /s/ Michael J. Mahoney
- -------------------------                     -----------------------------
                                              President

                                          TWIN COUNTY TRANS VIDEO, INC.

/s/ Dolores A. Laputka                    By: /s/ Bark Lee Yee
- ------------------------                     ------------------------------

/s/ Dolores A. Laputka                       /s/ Bark Lee Yee
- ------------------------                     ------------------------------
                                             Bark Lee Yee

/s/ Dolores A. Laputka                       /s/ Stella C. Yee
- ------------------------                     ------------------------------
                                             Stella C. Yee

/s/ Dolores A. Laputka                       /s/ Raymond C. Yee
- ------------------------                     ------------------------------
                                             Raymond C. Yee

/s/ Dolores A. Laputka                       /s/ Susan C. Yee
- ------------------------                     ------------------------------
                                             Susan C. Yee

/s/ Dolores A. Laputka                       /s/ Kenneth C. Yee
- ------------------------                     ------------------------------
                                             Kenneth C. Yee

/s/ Dolores A. Laputka                       /s/ Robert G. Tallman
- ------------------------                     ------------------------------
                                             Robert G. Tallman, Trustee

                                     -21-

                               LIST OF EXHIBITS
                               ----------------

     Exhibit A      Seller Tax-Free Reorganization Certificate

     Exhibit B      Tallman, Hudders & Sorrentino, P.C. Opinion Letter

     Exhibit C      Cole, Raywid & Braverman Opinion Letter

     Exhibit D      Assignment of FCC Licenses

     Exhibit E      Note

     Exhibit F      C-TEC Tax-Free Reorganization Certificate

     Exhibit G      Swidler & Berlin Opinion Letter

     Exhibit H      Plan of Merger

     Exhibit I      Articles of Merger

     Exhibit J      Management Agreement

     Exhibit K      Twin County Shareholder Consent for New Director

     Exhibit L      Escrow Agreement

     Exhibit M-1    Terms of C-TEC Preferred Stock, Series A

     Exhibit M-2    Terms of C-TEC Preferred Stock, Series B

     Exhibit N-1    Terms of C-TEC Cable Preferred Stock, Series A

     Exhibit N-2    Terms of C-TEC Cable Preferred Stock, Series B

     Exhibit O      Share Exchange Agreement 

4044392.2
     
                                -22-

                                 EXHIBIT M-1 

                   TERMS OF C-TEC PREFERRED STOCK, SERIES A

                      C-TEC Corporation (the CORPORATION)
                           Preferred Stock, Series A

     The designation, preferences, privileges and voting powers of the shares of
the Preferred Stock, Series A, and the restrictions or qualifications thereof
(insofar as they differ from or supplement the provisions which are applicable
to all shares of the Corporation's stock), are as follows:

          (A)  The preferred stock described herein shall be designated as
     Preferred Stock, Series A (hereinafter referred to as PREFERRED STOCK,
     SERIES A).

          (B)  The dividend rate thereof shall be five percent (5%) per annum.
     The dividends on the shares of the Preferred Stock, Series A shall be
     cumulative from the first day of the calendar month in which the shares of
     the Preferred Stock, Series A, if any, shall be issued, with accruals of
     dividends uniform with the unpaid accruals of dividends, if any, on the
     Preferred Stock, Series A outstanding at the time of the issue thereof;
     provided, however, that if any shares of Preferred Stock, Series A are
     issued prior to January 1, 1996, dividends shall begin to accrue thereon on
     January 1, 1996.

          (C)  Except as provided in Paragraphs (O) and (P), the Preferred
     Stock, Series A shall have no voting rights whatsoever.

          (D)  The sum per share payable upon the voluntary or involuntary
     dissolution, liquidation or winding up of the Corporation shall be $10 per
     share (hereinafter referred to as the STATED VALUE) plus an amount equal to
     the dividends accrued and unpaid on such share, whether or not earned or
     declared.

          (E)  Each Holder of the shares of the Preferred Stock, Series A
     (hereinafter referred to individually as a HOLDER, collectively, the
     HOLDERS), may elect at any time during the EXCHANGE ELECTION PERIOD (as
     defined below), to convert the shares of Preferred Stock, Series A into
     common stock of the Corporation (hereinafter, the CONVERTED COMMON STOCK).
     The number of shares of Converted Common Stock issuable upon conversion of
     shares of Preferred Stock, Series A is determined by dividing the aggregate
     Stated Value of the Preferred Stock, Series A which is being converted, by
     the CONVERSION PRICE (as defined below) and rounding the result to the
     nearest 1/100th of a share.  No payment or adjustment in respect of
     dividends on Converted Common Stock or Preferred Stock, Series A will be
     made upon conversion of shares of Preferred Stock, Series A; provided,
     however, that

     any accrued and unpaid dividends on such Preferred Stock, Series A as of
     the Conversion Date (as hereinafter defined) shall be paid to the Holders
     of the Converted Common Stock into which such Preferred Stock, Series A is
     converted, when and if any dividend is subsequently declared and paid to
     the holder or holders of the Corporation's capital stock.  The conversion
     price is $35.00 per share (the CONVERSION PRICE).  The EXCHANGE ELECTION
     PERIOD shall mean the period commencing on the date that is three (3) years
     after the date of Closing (as such term is defined in that certain Merger
     Agreement dated September 23, 1994 as amended by that certain Amendment
     Agreement dated March 30, 1995, and as further amended by that certain
     Second Amendment Agreement dated May 15, 1995) and ending on the date that
     is eight (8) years after Closing.  An election by a Holder shall only be
     effective if the total shares of Preferred Stock, Series A proposed to be
     converted by the Holder (or by the Holder and other Holders electing at the
     same time) equals at least five percent (5%) of the total shares of
     Preferred Stock, Series A and Preferred Stock, Series B outstanding at the
     time such election is made.

          (F)  To convert Preferred Stock, Series A into Converted Common Stock,
     a Holder must:  (1) complete and sign the conversion notice on the back of
     the Preferred Stock, Series A certificate; (2) surrender that certificate
     to a conversion agent designated by the Corporation; (3) furnish
     appropriate endorsement and transfer documents if required by the
     conversion agent; and (4) pay any transfer tax or similar tax, if required.
     The first day of the first calendar year quarter following the date on
     which the holder of Preferred Stock, Series A satisfies all those
     requirements is the conversion date (hereinafter the CONVERSION DATE).  As
     soon as practicable, the Corporation shall deliver through the conversion
     agent a certificate for the number of full shares and fractional shares of
     Converted Common Stock issuable upon the conversion, except that the
     Corporation, at its option, may deliver in lieu of a certificate including
     fractional shares a certificate for the number of full shares issuable upon
     the conversion and a check for the value of any fractional share.  The
     person in whose name the certificate is registered shall be treated as a
     shareholder of record on and after the conversion date.
 
          (G)  At any time during the Exchange Election Period by provision of
     written notice to the Holders, the Corporation may elect to acquire from
     the Holders all, but not less than all, of the Preferred Stock, Series A.
     (The date such notice is provided is referred to as the CORPORATE NOTICE
     DATE.)  In the event the Corporation exercises its election to acquire the
     Preferred Stock, Series A, in consideration of the transfer of the
     applicable shares of Preferred Stock,

                                     - 2 -

     Series A from the Holders to the Corporation, the Corporation shall:

               (1)  If the Market Value (as hereinafter defined) of the
                    Converted Common Stock is greater than or equal to the
                    Conversion Price, the Corporation shall transfer and deliver
                    to the Holders of Preferred Stock, Series A the Converted
                    Common Stock based upon the Conversion Price;

               (2)  If the Market Value of the Converted Common Stock is less
                    than the Conversion Price, the Corporation shall, at
                    Holders' option, either pay to the Holders in immediately
                    available funds an amount equal to the Conversion Price, or
                    the Corporation shall transfer and deliver to the Holders
                    the Converted Common Stock based upon the Conversion Price.
                    The Holders, acting as a whole but not in part, shall make
                    their election to receive either cash or Converted Common
                    Stock pursuant to this Section (G)(2) within ten (10) days
                    of the Corporate Notice Date.  In the event that the Holders
                    fail to unanimously make an election within such ten (10)
                    day period, the Holders shall be deemed to have conclusively
                    elected to accept cash in consideration of the transfer and
                    delivery of the shares of Preferred Stock, Series A.

          (H)  For purposes of Paragraph (G), the Market Value of the Converted
     Common Stock shall be the trading price of such stock as of the close of
     business on the date immediately preceding the Corporate Notice Date.
     Closing on the transfers shall be the later of thirty (30) days after the
     Corporate Notice Date or the first day of the first calendar year quarter
     immediately following the Corporate Notice Data except that, if the Holders
     will be receiving cash, at the Corporation's option, closing may be
     extended until ninety (90) days after the Corporate Notice Date.  At the
     Closing, the Holders shall satisfy the same conditions as set forth in
     Subsections (1) through (4) of Paragraph (F).

          (I)  All remaining Preferred Stock, Series A shall be redeemed by the
     Corporation for an amount equal to the Stated Value, plus any accrued and
     unpaid dividends, on the date that is eight (8) years from the date of
     Closing (hereinafter the REDEMPTION DATE) whether or not the Holders so
     elect.  Closing on such redemption shall occur on a date specified by the
     Corporation but no later than ninety (90)

                                     - 3 -

     days following the Redemption Date, provided, however, that dividends shall
     accrue through the date of such Closing.  At Closing, the Holders shall
     satisfy the same conditions set forth in Subsections (1) through (4) of
     Paragraph (F).

          (J)  For so long as shares of Preferred Stock, Series A, are
     outstanding, the Corporation shall not enter into any Transaction (as
     hereafter defined) if, upon entering into any such Transaction, the ratio
     of Total Obligations (as hereafter defined) to EBITDA (as hereafter
     defined) of the Corporation for the last fiscal quarter, thereafter
     annualized by multiplying such amount(s) by four (4), exceeds 8:1.  For
     purposes hereof, the following terms shall have the following meanings:

               (1)  EBITDA shall mean, for any period, the consolidated net
                    income (or net loss) of the Corporation, as determined in
                    accordance with generally accepted accounting principles,
                                                                             
                    plus (1) the sum of, without duplication, the following for
                    ----                                                       
                    the Corporation: (a) depreciation expense, (b) amortization
                    expense, (c) the excess, if any, of gross interest expense
                    for such period over gross interest income for such period,
                    in each case determined in accordance with generally
                    accepted accounting principles, (d) total income tax expense
                    and (e) extraordinary or unusual non-cash losses, less (2)
                                                                      ----    
                    extraordinary non-cash gains.

               (2)  OBLIGATIONS shall mean, with respect to the Corporation, the
                    consolidated outstanding  (1) principal amount of
                    indebtedness for borrowed money, (2) principal amount of
                    indebtedness for the deferred purchase price of property or
                    services (other than property or services purchased in the
                    ordinary course of business) and (3) the total stated value
                    outstanding preferred stock having a liquidation payment
                    priority senior to or pari passu with the shares of
                                          ---- -----                   
                    Preferred Stock, Series A, excluding, however, the Preferred
                    Stock, Series A and Preferred Stock, Series B of the
                    Corporation.

               (3)  TOTAL OBLIGATIONS shall mean, with respect to the
                    Corporation, as of the time of determination, the aggregate
                    consolidated amount of Obligations.

                                     - 4 -

               (4)  TRANSACTION as used in this Paragraph (J) shall mean, with
                    respect to the Corporation, (1) the incurrence of any
                    Obligation; (2) any merger or consolidation to which the
                    Corporation is a party; or (3) the sale of all or
                    substantially all of the assets of the Corporation.

          (K)  There shall be no sinking fund with respect to the shares of the
     Preferred Stock, Series A.

          (L)  The holders of the Preferred Stock, Series A, shall be entitled
     to receive, but only when, as and if declared by the Board of Directors,
     but in no event more frequently than quarterly, dividends at the rate fixed
     for such series and no more. Such dividends shall be payable on a date or
     dates which shall be fixed by the Board of Directors and shall be
     cumulative from such date as may be fixed for the series. All dividends
     payable on Preferred Stock, Series A shall be fully paid, or declared and
     set apart for payment before any dividends on the Common Stock of the
     Corporation shall be paid or set apart for payment so that if, for all
     dividend periods terminating on the same or an earlier date, dividends on
     all outstanding shares of the Preferred Stock, Series A at the rates fixed
     for the respective series shall not have been paid or set apart for
     payment, the deficiency shall be fully paid or set apart before payment on
     the Common Stock of the Corporation. The Preferred Stock, Series A shall
     rank pari passu with all other series of preferred stock with respect to
     dividends. Dividends in full shall not be paid or set apart for payment on
     the preferred stock of any other series for any dividend period unless
     dividends in full have been or are contemporaneously paid or set apart for
     payment on the preferred stock of all other series for all dividend periods
     in respect of such series terminating on the same or an earlier date. When
     the stated dividends are not paid in full on all series of the preferred
     stock in respect of any dividend period, the shares of all series having
     the same dividend period shall share ratably in the payment of dividends,
     including accumulations, if any, based on the dividends which would be
     payable on said shares if all dividends in respect of such series were paid
     in full. A DIVIDEND PERIOD is the period between any two consecutive
     dividend payment dates, excluding the first of such dates, as fixed for the
     series to which a share or shares shall belong. Accruals of dividends shall
     not bear interest.

          (M)  Upon any dissolution, liquidation or winding up of the
     Corporation, whether voluntary or involuntary, the holders of the preferred
     stock of each and every series then outstanding shall be entitled to
     receive out of the net

                                     - 5 -

     assets of the Corporation, whether capital or surplus, the sums per share
     fixed for the shares of the respective series and payable upon such
     dissolution, liquidation or winding up, plus, in the case of each share, an
     amount equal to the dividends accrued and unpaid thereon, whether or not
     earned or declared, before any distribution of the assets of the
     Corporation shall be made to the holders of the common stock of the
     Corporation as such.

          If the assets distributable on such dissolution, liquidation or
     winding up shall be insufficient to permit the payment to the holders of
     each series of the preferred stock of the full amounts to which they
     respectively are entitled as aforesaid, then said assets shall be
     distributed among the holders of the respective series of the preferred
     stock in the order of priority as specified for each class of stock and in
     proportion to the sums which would be payable on such dissolution,
     liquidation or winding up if all such sums were paid in full in preference
     and priority over the shares of any of the common stock of the Corporation.

          After payment to the holders of the preferred stock of the full
     amounts to which they respectively are entitled as aforesaid, the holders
     of the preferred stock, as such, shall have no right or claim to any of the
     remaining assets of the Corporation.

          The sale, conveyance, exchange or transfer of all or substantially all
     of the property of the Corporation, or the merger or consolidation into or
     with any other corporation, shall not be deemed a dissolution, liquidation
     or winding up for the purposes of this Paragraph (M).

          (N)  Nothing herein contained shall limit any legal right of the
     Corporation to purchase or otherwise acquire any shares of the Preferred
     Stock, Series A.

          (O)  So long as any shares of the Preferred Stock, Series A, are
     outstanding, the Corporation shall not, without the consent (given in
     writing or by vote at a meeting called for that purpose in the manner
     prescribed by the By-Laws of the Corporation) of the holders of record of
     at least 50% of the total number of such votes which may be cast by the
     Holders, each Holder being entitled to one vote for each such share of
     Preferred Stock, Series A:

               (1)  Create or authorize any kind of stock ranking prior to the
          Preferred Stock, Series A with respect to the payment of dividends or
          upon the dissolution, liquidation or winding up of the Corporation,
          whether voluntary or involuntary, or create or authorize any

                                     - 6 -

          obligation or security convertible into shares of any such kind of
          stock;

               (2)  Amend, alter, change or repeal any of the express terms of
          the Preferred Stock, Series A so as to affect the Holders thereof
          adversely.

          (P)  So long as any shares of the Preferred Stock, Series A are
     outstanding, in the event that the Corporation shall fail to pay dividends
     on the Preferred Stock, Series A for at least twelve (12) consecutive
     calendar months sufficient to provide a cumulative dividend rate of five
     percent (5%) per annum, the Holders shall be entitled to elect and
     designate one (1) director of the Board of Directors of the Corporation and
     the size of the Board of Directors of the Corporation shall thereupon be
     increased by one (1) director, and such newly elected director shall hold
     its position on the Board of Directors of the Corporation only until such
     time as the Holders shall have received dividends sufficient to provide a
     cumulative dividend rate of five percent (5%) per annum, in which event
     such newly elected director shall be deemed to have resigned and the size
     of the Board of Directors shall thereupon decrease by one (1) member.  The
     right of the Holders to elect and designate a member of the Board of
     Directors of the Corporation shall be exercised jointly with, and not
     separately from, the corresponding right granted to the Holders of the
     Preferred Stock, Series B, such that only one (1) member of the Board of
     Directors of the Corporation may be elected and designated, in the
     aggregate, by the Holders of the Preferred Stock, Series A and Preferred
     Stock, Series B.

          (Q)  REGISTRATION RIGHTS FOR COMMON SHARES.
               ------------------------------------- 

               (1)  Demand Registration Rights.  The Corporation covenants and
                    --------------------------                                
          agrees with the Holders, but not any subsequent holders, of the
          Preferred Stock, Series A that upon the unanimous written request of
          the Holders made at any time during the Exchange Election Period, but
          only once, the Corporation will file as promptly as practicable and,
          in any event, within one hundred eighty (180) days after receipt of
          such written request, a new registration statement (a REGISTRATION
          STATEMENT) or a post-effective amendment to an existing registration
          statement (an AMENDMENT) under the Securities Act of 1933 (the ACT),
          registering or qualifying the Converted Common Stock for sale.  No
          other securities of the Corporation shall be entitled to be included
          in such Amendment or Registration Statement.  The Corporation will use
          its good faith efforts to file and cause to become effective any such

                                     - 7 -

          Amendment or Registration Statement as promptly as practicable and
          remain effective for a period of not less than sixty (60) days or such
          shorter period as is necessary to complete the distributions.

               (2)  Piggyback Registration Rights. The Corporation covenants and
                    -----------------------------
          agrees with the Holders, but not any subsequent holders of the
          Preferred Stock, Series A, that if, at any time within the Exchange
          Election Period the Corporation proposes to file a Registration
          Statement with respect to any class of security (other than in
          connection with an offering to the Corporation's (or its affiliates')
          employees under the Act in a primary registration on behalf of the
          Corporation and/or in a secondary registration on behalf of holders of
          such securities and the registration form to be used may be used for
          registration of the Converted Common Stock, the Corporation will give
          written notice, which shall be given at least forty five (45) days
          prior to such filing, to the Holders of its intention to file a
          Registration Statement and will offer to include in such Registration
          Statement to the maximum extent possible, and limited, in the case of
          a Regulation A offering, to the amount of the available exemption,
          subject to paragraphs (a) and (b) of this Paragraph (2), such number
          of Converted Common Stock with respect to which the Corporation has
          received written requests for inclusion therein by the Holders within
          ten (10) days after the giving of notice by the Corporation. This
          right shall only apply to Holders who have converted to Converted
          Common Stock prior to the date written notice is given by the
          Corporation unless all, but not less than all, of the Holders who have
          not converted to Converted Common Stock elect under Paragraph (E) to
          convert to Converted Common Stock. All registrations requested
          pursuant to this Paragraph Q(2) are referred to herein as PIGGYBACK
          REGISTRATIONS. This paragraph is not applicable to a Registration
          Statement filed by the Corporation with the Securities and Exchange
          Commission (the SEC) on Forms S-4 or S-8 or any successor form or any
          Registration Statement filed with the SEC prior to the Closing.

                    (a)  Priority on Primary Registrations.  If a Piggyback
                         ---------------------------------                 
                         Registration includes an underwritten primary
                         registration on behalf of the Corporation and the
                         underwriter(s) for the offering being registered by the
                         Corporation shall determine in good faith and advise
                         the Corporation in writing that in its

                                     - 8 -

                         opinion the number of shares of Converted Common Stock
                         requested to be included in such registration exceeds
                         the number that can be sold in such offering without
                         materially adversely affecting the distribution of such
                         securities by the Corporation, the Corporation will
                         include in such registration (i) first, the securities
                         that the Corporation proposes to sell and (ii) second,
                         to the extent feasible, the Converted Common Stock
                         requested to be included in such registration,
                         apportioned ratably among the Holders of Converted
                         Common Stock requiring to be included in such
                         registration.

                    (b)  Priority on Secondary Registrations.  If a Piggyback
                         -----------------------------------                 
                         Registration consists only of an underwritten secondary
                         registration on behalf of holders of securities of the
                         Corporation (other than pursuant to Paragraph Q(1), and
                         the underwriter(s) for the offering being registered by
                         the Corporation advise the Corporation in writing that
                         in its opinion the number of shares of Converted Common
                         Stock requested to be included in such registration
                         exceeds the number which can be sold in such offering
                         without materially adversely affecting the distribution
                         of such securities by the Corporation, the Corporation
                         will include in such registration (i) first, the
                         securities requested to be included therein by the
                         holders requesting such registration and (ii) second,
                         to the extent feasible, the Converted Common Stock
                         requested to be included in such registration above,
                         apportioned ratably, among all such Holders on the
                         basis of the number of shares requested to be included
                         by each such Holder.

               (3)  Restrictions on Registration Rights.
                    ----------------------------------- 

                    (a)  Notwithstanding the provisions set forth in Sections
                         (2)(a) and (2)(b) above or any other provisions, if any
                         such underwriter shall determine in good faith and
                         advise the Corporation in

                                     - 9 -

                         writing that the distribution of the Converted Common
                         Stock requested to be included in the registration
                         concurrently with the securities being registered by
                         the Corporation would materially adversely affect the
                         distribution of such securities by the Corporation,
                         then the Holders of such Converted Common Stock shall
                         delay their offering and sale for such period ending on
                         the earliest of (1) ninety (90) days following the
                         effective date of the Corporation's registration
                         statement, (2) the day upon which the underwriting
                         syndicate, if any, for such offering shall have been
                         disbanded or, (3) such date as the Corporation, the
                         underwriter(s) and the Holders shall otherwise agree.
                         In the event of such delay, the Corporation shall file
                         such supplements, post-effective amendments and take
                         any such other steps as may be reasonably necessary to
                         permit such Holders to make their proposed offering and
                         sale for a period not to exceed ninety (90) days
                         immediately following the end of such period of delay.
                         If any party disapproves of the terms of any such
                         underwriting, it may elect to withdraw therefrom by
                         written notice to the Corporation and the underwriter.
                         Notwithstanding the foregoing, the Corporation shall
                         not be required to file a registration statement to
                         include shares of Converted Common Stock pursuant to
                         this Paragraph (Q) if an opinion of independent
                         counsel, reasonably satisfactory to counsel for the
                         Corporation, that the shares of Converted Common Shares
                         proposed to be disposed of may be transferred pursuant
                         to the provisions of Rule 144 under the Act shall have
                         been delivered to counsel for the Corporation and the
                         Holders shall have agreed to indemnify the Corporation
                         with respect to the accuracy of the matter described in
                         any such opinion and the actions of the Corporation
                         taken in reliance thereon.

                    (b)  The Corporation shall not be required to file a
                         Registration Statement or

                                     - 10 -

                         Amendment at a time when the audited financial
                         statements required to be included therein are not
                         available, which time shall be limited to the period
                         commencing forty five (45) days after the end of the
                         Corporation's last fiscal year and ending ninety (90)
                         days after the end of such fiscal year existing at the
                         time of the proposed offering.

                    (c)  The Corporation shall not be required to file a
                         Registration Statement or Amendment if the Corporation
                         furnishes to the Holders a certificate signed by the
                         Corporation's Chairman or President stating that in his
                         or her good faith judgment it would be detrimental or
                         otherwise disadvantageous to the Corporation or its
                         shareholders for such a Registration Statement or
                         Amendment to be filed as expeditiously as possible, in
                         which case the Corporation shall have a period of not
                         more than 180 days within which to file such
                         Registration Statement or Amendment measured from the
                         date of the Corporation's receipt of Holders' request
                         for registration.

               (4)  Costs of Registration.
                    --------------------- 

                    (a)  All costs, expenses, fees and other charges, including
                         but not limited to reasonable attorneys' and accounting
                         fees and expenses (collectively, the EXPENSES), arising
                         as a result of any registration pursuant to Paragraph
                         (Q) shall be borne by the Corporation and the Holders,
                         or both, as follows:

                         (i)  With respect to an election made by the Holders
                              during the first two (2) years of the Exchange
                              Election Period, the Holders shall be solely
                              responsible for all such Expenses.

                         (ii) With respect to any election made by the Holders
                              during the period commencing on the day after the
                              first two (2) years of the Exchange Election
                              Period, through and until the day prior to the
                              date that is

                                    - 11 -

                              three (3) years after the beginning of the
                              Exchange Election Period, the Expenses shall be
                              shared equally by the Holders and the Corporation.

                       (iii)  With respect to any election made by the Holders
                              during the period commencing on the earlier of (1)
                              the date that is three (3) years after the
                              beginning of the Exchange Election Period, or (2)
                              the date of the Closing with respect to any option
                              exercised by the Corporation pursuant to Paragraph
                              (G) of this Agreement (other than where the
                              Holders have elected to receive immediately
                              available funds at Closing) through and until the
                              expiration of the Exchange Election Period, the
                              Expenses shall be borne solely by the Corporation.

                    (b)  With respect to any election made by the Holders
                         pursuant to Paragraph (Q)(2), the Expenses shall be
                         borne solely by the Corporation.

                    (c)  Notwithstanding any other provision of these terms of
                         Preferred Stock, Series A to the contrary, the Holders
                         shall be solely responsible for any fees and
                         disbursements of any counsel, accountant or other
                         professional for the Holders; any underwriters discount
                         or commission in respect of such Converted Common
                         Stock; and the cost of and liability or similar
                         insurance required by an underwriter to the extent that
                         such costs are attributable to the offering of such
                         Converted Common Stock.

               (5)  Subsequent Holder.  The reference to any "subsequent holder"
                    -----------------                                           
          as stated above shall not include any trustee designated by the
          Holders under a trust agreement for their benefit.

                                    - 12 -

                                  EXHIBIT M-2

                   TERMS OF C-TEC PREFERRED STOCK, SERIES B

                      C-TEC Corporation (the CORPORATION)
                           Preferred Stock, Series B

     The designation, preferences, privileges and voting powers of the shares of
the Preferred Stock, Series B, and the restrictions or qualifications thereof
(insofar as they differ from or supplement the provisions which are applicable
to all shares of the Corporation's stock), are as follows:

          (A)  The preferred stock described herein shall be designated as
     Preferred Stock, Series B (hereinafter referred to as PREFERRED STOCK,
     SERIES B).

          (B)  The dividend rate thereof shall be five percent (5%) per annum.
     The dividends on the shares of the Preferred Stock, Series B shall be
     cumulative from the first day of the calendar month in which the shares of
     the Preferred Stock, Series B, if any, shall be issued, with accruals of
     dividends uniform with the unpaid accruals of dividends, if any, on the
     Preferred Stock, Series B outstanding at the time of the issue thereof;
     provided, however, that if any shares of Preferred Stock, Series B are
     issued prior to January 1, 1996, dividends shall begin to accrue thereon on
     January 1, 1996.

          (C)  Except as provided in Paragraphs (O) and (P), the Preferred
     Stock, Series B shall have no voting rights whatsoever.

          (D)  The sum per share payable upon the voluntary or involuntary
     dissolution, liquidation or winding up of the Corporation shall be $10 per
     share (hereinafter referred to as the STATED VALUE) plus an amount equal to
     the dividends accrued and unpaid on such share, whether or not earned or
     declared.

          (E)  Each Holder of the shares of the Preferred Stock, Series B
     (hereinafter referred to individually as a HOLDER, collectively, the
     HOLDERS), may elect at any time during the EXCHANGE ELECTION PERIOD (as
     defined below), to convert the shares of Preferred Stock, Series B into
     common stock of the Corporation (hereinafter, the CONVERTED COMMON STOCK).
     The number of shares of Converted Common Stock issuable upon conversion of
     shares of Preferred Stock, Series B is determined by dividing the aggregate
     Stated Value of the Preferred Stock, Series B which is being converted, by
     the CONVERSION PRICE (as defined below) and rounding the result to the
     nearest 1/100th of a share.  No payment or adjustment in respect of
     dividends on Converted Common Stock or Preferred Stock, Series B will be
     made upon conversion of shares of Preferred Stock, Series B; provided,
     however, that

     any accrued and unpaid dividends on such Preferred Stock, Series B as of
     the Conversion Date (as hereinafter defined) shall be paid to the Holders
     of the Converted Common Stock into which such Preferred Stock, Series B is
     converted, when and if any dividend is subsequently declared and paid to
     the holder or holders of the Corporation's capital stock.  The conversion
     price is $38.50 per share (the CONVERSION PRICE).  The EXCHANGE ELECTION
     PERIOD shall mean the period commencing on the date that is three (3) years
     after the date of Closing (as such term is defined in that certain Merger
     Agreement dated September 23, 1994 as amended by that certain Amendment
     Agreement dated March 30, 1995, and as further amended by that certain
     Second Amendment Agreement dated May 15, 1995) and ending on the date that
     is eight (8) years after Closing.  An election by a Holder shall only be
     effective if the total shares of Preferred Stock, Series B proposed to be
     converted by the Holder (or by the Holder and other Holders electing at the
     same time) equals at least five percent (5%) of the total shares of
     Preferred Stock, Series A and Preferred Stock, Series B outstanding at the
     time such election is made.

          (F)  To convert Preferred Stock, Series B into Converted Common Stock,
     a Holder must:  (1) complete and sign the conversion notice on the back of
     the Preferred Stock, Series B certificate; (2) surrender that certificate
     to a conversion agent designated by the Corporation; (3) furnish
     appropriate endorsement and transfer documents if required by the
     conversion agent; and (4) pay any transfer tax or similar tax, if required.
     The first day of the first calendar year quarter following the date on
     which the holder of Preferred Stock, Series B satisfies all those
     requirements is the conversion date (hereinafter the CONVERSION DATE).  As
     soon as practicable, the Corporation shall deliver through the conversion
     agent a certificate for the number of full shares and fractional shares of
     Converted Common Stock issuable upon the conversion, except that the
     Corporation, at its option, may deliver in lieu of a certificate including
     fractional shares a certificate for the number of full shares issuable upon
     the conversion and a check for the value of any fractional share.  The
     person in whose name the certificate is registered shall be treated as a
     shareholder of record on and after the conversion date.
 
          (G)  At any time during the Exchange Election Period by provision of
     written notice to the Holders, the Corporation may elect to acquire from
     the Holders all, but not less than all, of the Preferred Stock, Series B.
     (The date such notice is provided is referred to as the CORPORATE NOTICE
     DATE.)  In the event the Corporation exercises its election to acquire the
     Preferred Stock, Series B, in consideration of the transfer of the
     applicable shares of Preferred Stock,

                                     - 2 -

     Series B from the Holders to the Corporation, the Corporation shall:

               (1)  If the Market Value (as hereinafter defined) of the
                    Converted Common Stock is greater than or equal to the
                    Conversion Price, the Corporation shall transfer and deliver
                    to the Holders of Preferred Stock, Series B the Converted
                    Common Stock based upon the Conversion Price;

               (2)  If the Market Value of the Converted Common Stock is less
                    than the Conversion Price, the Corporation shall, at
                    Holders' option, either pay to the Holders in immediately
                    available funds an amount equal to the Conversion Price, or
                    the Corporation shall transfer and deliver to the Holders
                    the Converted Common Stock based upon the Conversion Price.
                    The Holders, acting as a whole but not in part, shall make
                    their election to receive either cash or Converted Common
                    Stock pursuant to this Section (G)(2) within ten (10) days
                    of the Corporate Notice Date.  In the event that the Holders
                    fail to unanimously make an election within such ten (10)
                    day period, the Holders shall be deemed to have conclusively
                    elected to accept cash in consideration of the transfer and
                    delivery of the shares of Preferred Stock, Series B.

          (H)  For purposes of Paragraph (G), the Market Value of the Converted
     Common Stock shall be the trading price of such stock as of the close of
     business on the date immediately preceding the Corporate Notice Date.
     Closing on the transfers shall be the later of thirty (30) days after the
     Corporate Notice Date or the first day of the first calendar year quarter
     immediately following the Corporate Notice Data except that, if the Holders
     will be receiving cash, at the Corporation's option, closing may be
     extended until ninety (90) days after the Corporate Notice Date.  At the
     Closing, the Holders shall satisfy the same conditions as set forth in
     Subsections (1) through (4) of Paragraph (F).

          (I)  All remaining Preferred Stock, Series B shall be redeemed by the
     Corporation for an amount equal to the Stated Value, plus any accrued and
     unpaid dividends, on the date that is eight (8) years from the date of
     Closing (hereinafter the REDEMPTION DATE) whether or not the Holders so
     elect.  Closing on such redemption shall occur on a date specified by the
     Corporation but no later than ninety (90)

                                     - 3 -

     days following the Redemption Date, provided, however, that dividends shall
     accrue through the date of such Closing.  At Closing, the Holders shall
     satisfy the same conditions set forth in Subsections (1) through (4) of
     Paragraph (F).

          (J)  For so long as shares of Preferred Stock, Series B, are
     outstanding, the Corporation shall not enter into any Transaction (as
     hereafter defined) if, upon entering into any such Transaction, the ratio
     of Total Obligations (as hereafter defined) to EBITDA (as hereafter
     defined) of the Corporation for the last fiscal quarter, thereafter
     annualized by multiplying such amount(s) by four (4), exceeds 8:1.  For
     purposes hereof, the following terms shall have the following meanings:

               (1)  EBITDA shall mean, for any period, the consolidated net
                    income (or net loss) of the Corporation, as determined in
                    accordance with generally accepted accounting principles,
                                                                             
                    plus (1) the sum of, without duplication, the following for
                    ----                                                       
                    the Corporation: (a) depreciation expense, (b) amortization
                    expense, (c) the excess, if any, of gross interest expense
                    for such period over gross interest income for such period,
                    in each case determined in accordance with generally
                    accepted accounting principles, (d) total income tax expense
                    and (e) extraordinary or unusual non-cash losses, less (2)
                                                                      ----    
                    extraordinary non-cash gains.

               (2)  OBLIGATIONS shall mean, with respect to the Corporation, the
                    consolidated outstanding  (1) principal amount of
                    indebtedness for borrowed money, (2) principal amount of
                    indebtedness for the deferred purchase price of property or
                    services (other than property or services purchased in the
                    ordinary course of business) and (3) the total stated value
                    outstanding preferred stock having a liquidation payment
                    priority senior to or pari passu with the shares of
                                          ---- -----                   
                    Preferred Stock, Series B, excluding, however, the Preferred
                    Stock, Series A and Preferred Stock, Series B of the
                    Corporation.

              (3)   TOTAL OBLIGATIONS shall mean, with respect to the
                    Corporation, as of the time of determination, the aggregate
                    consolidated amount of Obligations.

                                     - 4 -

               (4)  TRANSACTION as used in this Paragraph (J) shall mean, with
                    respect to the Corporation, (1) the incurrence of any
                    Obligation; (2) any merger or consolidation to which the
                    Corporation is a party; or (3) the sale of all or
                    substantially all of the assets of the Corporation.

          (K)  There shall be no sinking fund with respect to the shares of the
     Preferred Stock, Series B.

          (L)  The holders of the Preferred Stock, Series B, shall be entitled
     to receive, but only when, as and if declared by the Board of Directors,
     but in no event more frequently than quarterly, dividends at the rate fixed
     for such series and no more. Such dividends shall be payable on a date or
     dates which shall be fixed by the Board of Directors and shall be
     cumulative from such date as may be fixed for the series. All dividends
     payable on Preferred Stock, Series B shall be fully paid, or declared and
     set apart for payment before any dividends on the Common Stock of the
     Corporation shall be paid or set apart for payment so that if, for all
     dividend periods terminating on the same or an earlier date, dividends on
     all outstanding shares of the Preferred Stock, Series B at the rates fixed
     for the respective series shall not have been paid or set apart for
     payment, the deficiency shall be fully paid or set apart before payment on
     the Common Stock of the Corporation. The Preferred Stock, Series B shall
     rank pari passu with all other series of preferred stock with respect to
     dividends. Dividends in full shall not be paid or set apart for payment on
     the preferred stock of any other series for any dividend period unless
     dividends in full have been or are contemporaneously paid or set apart for
     payment on the preferred stock of all other series for all dividend periods
     in respect of such series terminating on the same or an earlier date. When
     the stated dividends are not paid in full on all series of the preferred
     stock in respect of any dividend period, the shares of all series having
     the same dividend period shall share ratably in the payment of dividends,
     including accumulations, if any, based on the dividends which would be
     payable on said shares if all dividends in respect of such series were paid
     in full. A DIVIDEND PERIOD is the period between any two consecutive
     dividend payment dates, excluding the first of such dates, as fixed for the
     series to which a share or shares shall belong. Accruals of dividends shall
     not bear interest.

          (M)  Upon any dissolution, liquidation or winding up of the
     Corporation, whether voluntary or involuntary, the holders of the preferred
     stock of each and every series then outstanding shall be entitled to
     receive out of the net

                                     - 5 -

     assets of the Corporation, whether capital or surplus, the sums per share
     fixed for the shares of the respective series and payable upon such
     dissolution, liquidation or winding up, plus, in the case of each share, an
     amount equal to the dividends accrued and unpaid thereon, whether or not
     earned or declared, before any distribution of the assets of the
     Corporation shall be made to the holders of the common stock of the
     Corporation as such.

          If the assets distributable on such dissolution, liquidation or
     winding up shall be insufficient to permit the payment to the holders of
     each series of the preferred stock of the full amounts to which they
     respectively are entitled as aforesaid, then said assets shall be
     distributed among the holders of the respective series of the preferred
     stock in the order of priority as specified for each class of stock and in
     proportion to the sums which would be payable on such dissolution,
     liquidation or winding up if all such sums were paid in full in preference
     and priority over the shares of any of the common stock of the Corporation.

          After payment to the holders of the preferred stock of the full
     amounts to which they respectively are entitled as aforesaid, the holders
     of the preferred stock, as such, shall have no right or claim to any of the
     remaining assets of the Corporation.

          The sale, conveyance, exchange or transfer of all or substantially all
     of the property of the Corporation, or the merger or consolidation into or
     with any other corporation, shall not be deemed a dissolution, liquidation
     or winding up for the purposes of this Paragraph (M).

          (N)  Nothing herein contained shall limit any legal right of the
     Corporation to purchase or otherwise acquire any shares of the Preferred
     Stock, Series B.

          (O)  So long as any shares of the Preferred Stock, Series B, are
     outstanding, the Corporation shall not, without the consent (given in
     writing or by vote at a meeting called for that purpose in the manner
     prescribed by the By-Laws of the Corporation) of the holders of record of
     at least 50% of the total number of such votes which may be cast by the
     Holders, each Holder being entitled to one vote for each such share of
     Preferred Stock, Series B:

               (1)  Create or authorize any kind of stock ranking prior to the
          Preferred Stock, Series B with respect to the payment of dividends or
          upon the dissolution, liquidation or winding up of the Corporation,
          whether voluntary or involuntary, or create or authorize any

                                     - 6 -

          obligation or security convertible into shares of any such kind of
          stock;

               (2)  Amend, alter, change or repeal any of the express terms of
          the Preferred Stock, Series B so as to affect the Holders thereof
          adversely.

          (P)  So long as any shares of the Preferred Stock, Series B are
     outstanding, in the event that the Corporation shall fail to pay dividends
     on the Preferred Stock, Series B for at least twelve (12) consecutive
     calendar months sufficient to provide a cumulative dividend rate of five
     percent (5%) per annum, the Holders shall be entitled to elect and
     designate one (1) director of the Board of Directors of the Corporation and
     the size of the Board of Directors of the Corporation shall thereupon be
     increased by one (1) director, and such newly elected director shall hold
     its position on the Board of Directors of the Corporation only until such
     time as the Holders shall have received dividends sufficient to provide a
     cumulative dividend rate of five percent (5%) per annum, in which event
     such newly elected director shall be deemed to have resigned and the size
     of the Board of Directors shall thereupon decrease by one (1) member.  The
     right of the Holders to elect and designate a member of the Board of
     Directors of the Corporation shall be exercised jointly with, and not
     separately from, the corresponding right granted to the Holders of the
     Preferred Stock, Series B, such that only one (1) member of the Board of
     Directors of the Corporation may be elected and designated, in the
     aggregate, by the Holders of the Preferred Stock, Series A and Preferred
     Stock, Series B.

          (Q)  REGISTRATION RIGHTS FOR COMMON SHARES.
               ------------------------------------- 

               (1)  Demand Registration Rights.  The Corporation covenants and
                    --------------------------                                
          agrees with the Holders, but not any subsequent holders, of the
          Preferred Stock, Series B that upon the unanimous written request of
          the Holders made at any time during the Exchange Election Period, but
          only once, the Corporation will file as promptly as practicable and,
          in any event, within one hundred eighty (180) days after receipt of
          such written request, a new registration statement (a REGISTRATION
          STATEMENT) or a post-effective amendment to an existing registration
          statement (an AMENDMENT) under the Securities Act of 1933 (the ACT),
          registering or qualifying the Converted Common Stock for sale.  No
          other securities of the Corporation shall be entitled to be included
          in such Amendment or Registration Statement.  The Corporation will use
          its good faith efforts to file and cause to become effective any such

                                    - 7 - 

          Amendment or Registration Statement as promptly as practicable and
          remain effective for a period of not less than sixty (60) days or such
          shorter period as is necessary to complete the distributions.

               (2)  Piggyback Registration Rights. The Corporation covenants and
                    -----------------------------                
          agrees with the Holders, but not any subsequent holders, of the
          Preferred Stock, Series B, that if, at any time within the Exchange
          Election Period the Corporation proposes to file a Registration
          Statement with respect to any class of security (other than in
          connection with an offering to the Corporation's (or its affiliates')
          employees under the Act in a primary registration on behalf of the
          Corporation and/or in a secondary registration on behalf of holders of
          such securities and the registration form to be used may be used for
          registration of the Converted Common Stock, the Corporation will give
          written notice, which shall be given at least forty five (45) days
          prior to such filing, to the Holders of its intention to file a
          Registration Statement and will offer to include in such Registration
          Statement to the maximum extent possible, and limited, in the case of
          a Regulation A offering, to the amount of the available exemption,
          subject to paragraphs (a) and (b) of this Paragraph (2), such number
          of Converted Common Stock with respect to which the Corporation has
          received written requests for inclusion therein by the Holders within
          ten (10) days after the giving of notice by the Corporation. This
          right shall only apply to Holders who have converted to Converted
          Common Stock prior to the date written notice is given by the
          Corporation unless all, but not less than all, of the Holders who have
          not converted to Converted Common Stock elect under Paragraph (E) to
          convert to Converted Common Stock. All registrations requested
          pursuant to this Paragraph Q(2) are referred to herein as PIGGYBACK
          REGISTRATIONS. This paragraph is not applicable to a Registration
          Statement filed by the Corporation with the Securities and Exchange
          Commission (the SEC) on Forms S-4 or S-8 or any successor form or any
          Registration Statement filed with the SEC prior to the Closing.

                    (a)  Priority on Primary Registrations.  If a Piggyback
                         ---------------------------------                 
                         Registration includes an underwritten primary
                         registration on behalf of the Corporation and the
                         underwriter(s) for the offering being registered by the
                         Corporation shall determine in good faith and advise
                         the Corporation in writing that in its

                                     - 8 -

                         opinion the number of shares of Converted Common Stock
                         requested to be included in such registration exceeds
                         the number that can be sold in such offering without
                         materially adversely affecting the distribution of such
                         securities by the Corporation, the Corporation will
                         include in such registration (i) first, the securities
                         that the Corporation proposes to sell and (ii) second,
                         to the extent feasible, the Converted Common Stock
                         requested to be included in such registration,
                         apportioned ratably among the Holders of Converted
                         Common Stock requiring to be included in such
                         registration.

                    (b)  Priority on Secondary Registrations.  If a Piggyback
                         -----------------------------------                 
                         Registration consists only of an underwritten secondary
                         registration on behalf of holders of securities of the
                         Corporation (other than pursuant to Paragraph Q(1), and
                         the underwriter(s) for the offering being registered by
                         the Corporation advise the Corporation in writing that
                         in its opinion the number of shares of Converted Common
                         Stock requested to be included in such registration
                         exceeds the number which can be sold in such offering
                         without materially adversely affecting the distribution
                         of such securities by the Corporation, the Corporation
                         will include in such registration (i) first, the
                         securities requested to be included therein by the
                         holders requesting such registration and (ii) second,
                         to the extent feasible, the Converted Common Stock
                         requested to be included in such registration above,
                         apportioned ratably, among all such Holders on the
                         basis of the number of shares requested to be included
                         by each such Holder.

               (3)  Restrictions on Registration Rights.
                    ----------------------------------- 

                    (a)  Notwithstanding the provisions set forth in Sections
                         (2)(a) and (2)(b) above or any other provisions, if any
                         such underwriter shall determine in good faith and
                         advise the Corporation in

                                     - 9 -

                         writing that the distribution of the Converted Common
                         Stock requested to be included in the registration
                         concurrently with the securities being registered by
                         the Corporation would materially adversely affect the
                         distribution of such securities by the Corporation,
                         then the Holders of such Converted Common Stock shall
                         delay their offering and sale for such period ending on
                         the earliest of (1) ninety (90) days following the
                         effective date of the Corporation's registration
                         statement, (2) the day upon which the underwriting
                         syndicate, if any, for such offering shall have been
                         disbanded or, (3) such date as the Corporation, the
                         underwriter(s) and the Holders shall otherwise agree.
                         In the event of such delay, the Corporation shall file
                         such supplements, post-effective amendments and take
                         any such other steps as may be reasonably necessary to
                         permit such Holders to make their proposed offering and
                         sale for a period not to exceed ninety (90) days
                         immediately following the end of such period of delay.
                         If any party disapproves of the terms of any such
                         underwriting, it may elect to withdraw therefrom by
                         written notice to the Corporation and the underwriter.
                         Notwithstanding the foregoing, the Corporation shall
                         not be required to file a registration statement to
                         include shares of Converted Common Stock pursuant to
                         this Paragraph (Q) if an opinion of independent
                         counsel, reasonably satisfactory to counsel for the
                         Corporation, that the shares of Converted Common Shares
                         proposed to be disposed of may be transferred pursuant
                         to the provisions of Rule 144 under the Act shall have
                         been delivered to counsel for the Corporation and the
                         Holders shall have agreed to indemnify the Corporation
                         with respect to the accuracy of the matter described in
                         any such opinion and the actions of the Corporation
                         taken in reliance thereon.

                    (b)  The Corporation shall not be required to file a
                         Registration Statement or

                                    - 10 -

                         Amendment at a time when the audited financial
                         statements required to be included therein are not
                         available, which time shall be limited to the period
                         commencing forty five (45) days after the end of the
                         Corporation's last fiscal year and ending ninety (90)
                         days after the end of such fiscal year existing at the
                         time of the proposed offering.

                    (c)  The Corporation shall not be required to file a
                         Registration Statement or Amendment if the Corporation
                         furnishes to the Holders a certificate signed by the
                         Corporation's Chairman or President stating that in his
                         or her good faith judgment it would be detrimental or
                         otherwise disadvantageous to the Corporation or its
                         shareholders for such a Registration Statement or
                         Amendment to be filed as expeditiously as possible, in
                         which case the Corporation shall have a period of not
                         more than 180 days within which to file such
                         Registration Statement or Amendment measured from the
                         date of the Corporation's receipt of Holders' request
                         for registration.

               (4)  Costs of Registration.
                    --------------------- 

                    (a)  All costs, expenses, fees and other charges, including
                         but not limited to reasonable attorneys' and accounting
                         fees and expenses (collectively, the EXPENSES), arising
                         as a result of any registration pursuant to Paragraph
                         (Q) shall be borne by the Corporation and the Holders,
                         or both, as follows:

                         (i)  With respect to an election made by the Holders
                              during the first two (2) years of the Exchange
                              Election Period, the Holders shall be solely
                              responsible for all such Expenses.

                         (ii) With respect to any election made by the Holders
                              during the period commencing on the day after the
                              first two (2) years of the Exchange Election
                              Period, through and until the day prior to the
                              date that is

                                    - 11 -

                              three (3) years after the beginning of the
                              Exchange Election Period, the Expenses shall be
                              shared equally by the Holders and the Corporation.

                       (iii)  With respect to any election made by the Holders
                              during the period commencing on the earlier of (1)
                              the date that is three (3) years after the
                              beginning of the Exchange Election Period, or (2)
                              the date of the Closing with respect to any option
                              exercised by the Corporation pursuant to Paragraph
                              (G) of this Agreement (other than where the
                              Holders have elected to receive immediately
                              available funds at Closing) through and until the
                              expiration of the Exchange Election Period, the
                              Expenses shall be borne solely by the Corporation.

                    (b)  With respect to any election made by the Holders
                         pursuant to Paragraph (Q)(2), the Expenses shall be
                         borne solely by the Corporation.

                    (c)  Notwithstanding any other provision of these terms of
                         Preferred Stock, Series B to the contrary, the Holders
                         shall be solely responsible for any fees and
                         disbursements of any counsel, accountant or other
                         professional for the Holders; any underwriters discount
                         or commission in respect of such Converted Common
                         Stock; and the cost of and liability or similar
                         insurance required by an underwriter to the extent that
                         such costs are attributable to the offering of such
                         Converted Common Stock.

               (5)  Subsequent Holder.  The reference to any "subsequent holder"
                    -----------------                                           
          as stated above shall not include any trustee designated by the
          Holders under a trust agreement for their benefit.

          (R)  SET-OFF RIGHTS.  In the event that all or any of the Holders of
               --------------                                                 
     Preferred Stock, Series B shall be required to make any payment to or
     indemnify or hold harmless the Corporation, or any affiliate, pursuant to
     the terms and provisions of the Merger Agreement, including but not

                                    - 12 -

     limited to any and all payments and indemnity obligations arising under
     Article X of the Merger Agreement, the Corporation shall be entitled to
     set-off all such payments and indemnification and hold harmless obligations
     in accordance with the Merger Agreement against any and all amounts,
     payments and other consideration to be paid and delivered by the
     Corporation hereunder whether in the form of cash, instruments, stock or
     otherwise.

                                    - 13 -

                                  EXHIBIT N-1

                TERMS OF C-TEC CABLE PREFERRED STOCK, SERIES A

                  C-TEC Cable Systems, Inc. (the CORPORATION)
                           Preferred Stock, Series A

     The designation preferences, privileges and voting powers of the shares of
the Preferred Stock, Series A, and the restrictions or qualifications thereof
(insofar as they differ from or supplement the provisions which are applicable
to all shares of the preferred stock irrespective of series), are as follows:

          (A)  The series shall be designated as Preferred Stock, Series A
     (hereinafter referred to as Preferred Stock, Series A).

          (B)  The dividend rate thereof shall be five percent (5%) per annum.
     The dividends on the shares of the Preferred Stock shall be cumulative from
     the first day of the calendar month in which the shares of the Preferred
     Stock, Series A, if any, shall be issued, with accruals of dividends
     uniform with the unpaid accruals of dividends, if any, on the Preferred
     Stock, Series A outstanding at the time of the issue thereof.

          (C)  Except as provided in Subsection (K) and (L), the Preferred
     Stock, Series A shall have no voting rights whatsoever.

          (D)  The sum per share payable upon the voluntary or involuntary
     dissolution, liquidation or winding up of the Corporation shall be $10 per
     share plus an amount equal to the dividends accrued and unpaid on such
     share, whether or not earned or declared.

          (E)  The holders of the shares of the Preferred Stock, Series A
     (collectively, the HOLDERS), acting as a whole, may elect, or may be
     required, as the case may be, at any time during the period (the ELECTION
     PERIOD) commencing on the date that is three (3) years and expiring on the
     date that is eight (8) years from the date of Closing (as such term is
     defined in that certain Merger Agreement dated September 23, 1994, as
     amended by that certain Amendment Agreement dated March 30, 1995, and
     further amended by that certain Second Amendment Agreement dated May 15,
     1995 (the AGREEMENT), to exchange their shares of Preferred Stock, Series A
     with C-TEC Corporation, a Pennsylvania corporation (C-TEC), either for
     shares of common stock of C-TEC (C-TEC COMMON) or cash.  The terms and
     conditions of such exchange rights are set forth in that certain Share
     Exchange Option Agreement between the Holders and C-TEC dated ___________
     (the

     EXCHANGE AGREEMENT).  In the event that either C-TEC or the Holders
     exercise their option, in accordance with the Exchange Agreement to
     exchange shares of Preferred Stock, Series A for C-TEC Common or cash, as
     the case may be, and provided the Corporation has received notice of any
     such election in writing not less than 30 nor more than 90 days prior to
     the date fixed for such exchange, the Corporation shall cooperate and take
     such actions as are reasonably required to effectuate such exchange on the
     books and records of the Corporation.

          (F)  For so long as shares of Preferred Stock, Series A are
     outstanding, the Corporation shall not enter into any Transaction (as
     hereafter defined) if, upon entering into any such Transaction, the ratio
     of Total Obligations (as hereafter defined) to EBITDA (as hereafter
     defined) of the Corporation for the last fiscal quarter, thereafter
     annualized by multiplying such amount(s) by four (4), exceeds 8:1.  For
     purposes hereof, the following terms shall have the following meanings:

               .    EBITDA shall mean, for any period, the consolidated net
                    income (or net loss) of the Corporation, as determined in
                    accordance with generally accepted accounting principles,
                                                                             
                    plus (1) the sum of, without duplication, the following for
                    ----                                                       
                    the Corporation:  (a) depreciation expense, (b) amortization
                    expense, (c) the excess, if any, of gross interest expense
                    for such period over gross interest income for such period,
                    in each case determined in accordance with generally
                    accepted accounting principles, (d) total income tax expense
                    and (e) extraordinary or unusual non-cash losses, less (2)
                                                                      ----    
                    extraordinary non-cash gains.

               .    OBLIGATIONS shall mean, with respect to the Corporation, the
                    consolidated outstanding (1) principal amount of
                    indebtedness for borrowed money, (2) principal amount of
                    indebtedness for the deferred purchase price of property or
                    services (other than property or services purchased in the
                    ordinary course of business) and (3) total stated value of
                    issued and outstanding preferred stock having a liquidation
                    payment priority senior to or pari passu with the shares of
                                                  ---- -----                   
                    Preferred Stock, Series A, excluding, however, the Preferred
                    Stock, Series A and Preferred Stock, Series B of the
                    Corporation.

                                     - 2 -

               .    TOTAL OBLIGATIONS shall mean, with respect to the
                    Corporation, as of the time of determination, the aggregate
                    consolidated amount of Obligations.

               .    TRANSACTION shall mean, with respect to the Corporation, (1)
                    the incurrence of any Obligation; (2) any merger or
                    consolidation to which the Corporation is a party; or (3)
                    the sale of all or substantially all of the assets of the
                    Corporation.

          (G)  There shall be no sinking fund with respect to the shares of the
     Preferred Stock, Series A.

          (H)  The holders of the Preferred Stock, Series A, shall be entitled
     to receive, but only when, as and if declared by the Board of Directors,
     but in no event more frequently than quarterly, dividends at the rate fixed
     for such series and no more. Such dividends shall be payable on a date or
     dates which shall be fixed by the Board of Directors and shall be
     cumulative from such date as may be fixed for the series. All dividends
     payable on Preferred Stock, Series A shall be fully paid, or declared and
     set apart for payment before any dividends on the common stock of the
     Corporation shall be paid or set apart for payment so that if, for all
     dividend periods terminating on the same or an earlier date, dividends on
     all outstanding shares of the Preferred Stock, Series A at the rates fixed
     for the respective series shall not have been paid or set apart for
     payment, the deficiency shall be fully paid or set apart before payment on
     the common stock of the Corporation. The Preferred Stock, Series A, shall
     rank pari passu with all other series of preferred stock with respect to
     dividends. Dividends in full shall not be paid or set apart for payment on
     the preferred stock of any other series for any dividend period unless
     dividends in full have been or are contemporaneously paid or set apart for
     payment on the preferred stock of all other series for all dividend periods
     in respect of such series terminating on the same or an earlier date. When
     the stated dividends are not paid in full on all series of the preferred
     stock in respect of any dividend period, the shares of all series having
     the same dividend period shall share ratably in the payment of dividends,
     including accumulations, if any, based on the dividends which would be
     payable on said shares if all dividends in respect of such series were paid
     in full. A DIVIDEND PERIOD is the period between any two consecutive
     dividend payment dates, excluding the first of such dates, as fixed for the
     series to which a share or shares shall belong. Accruals of dividends shall
     not bear interest.

                                     - 3 -

          (I)  Upon any dissolution, liquidation or winding up of the
     Corporation, whether voluntary or involuntary, the holders of the preferred
     stock of each and every series then outstanding shall be entitled to
     receive out of the net assets of the Corporation, whether capital or
     surplus, the sums per share fixed for the shares of the respective series
     and payable upon such dissolution, liquidation or winding up, plus, in the
     case of each share, an amount equal to the dividends accrued and unpaid
     thereon, whether or not earned or declared, before any distribution of the
     assets of the Corporation shall be made to the holders of the common stock
     of the Corporation as such.

          If the assets distributable on such dissolution, liquidation or
     winding up shall be insufficient to permit the payment to the holders of
     each series of the preferred stock of the full amounts to which they
     respectively are entitled as aforesaid, then said assets shall be
     distributed among the holders of the respective series of the preferred
     stock in the order of priority as specified for each class of stock and in
     proportion to the sums which would be payable on such dissolution,
     liquidation or winding up if all such sums were paid in full in preference
     and priority over the shares of any of the Common Stock of the Corporation.

          After payment to the holders of the preferred stock of the full
     amounts to which they respectively are entitled as aforesaid, the holders
     of the preferred stock, as such, shall have no right or claim to any of the
     remaining assets of the Corporation.

          The sale, conveyance, exchange or transfer of all or substantially all
     of the property of the Corporation, or the merger or consolidation into or
     with any other corporation, shall not be deemed a dissolution, liquidation
     or winding up for the purposes of this Subsection (I).

          (J)  Nothing herein contained shall limit any legal right of the
     Corporation to purchase or otherwise acquire any shares of the Preferred
     Stock, Series A.

          (K)  So long as any shares of the Preferred Stock, Series A are
     outstanding, the Corporation shall not, without the consent (given in
     writing or by vote at a meeting called for that purpose in the manner
     prescribed by the By-Laws of the Corporation) of the holders of record of
     at least 50% of the total number of such votes which may be cast by the
     Holders, each Holder being entitled to one vote for each such share of
     Preferred Stock, Series A:

                                     - 4 -

               (1)  Create or authorize any kind of stock ranking prior to the
          Preferred Stock, Series A with respect to the payment of dividends or
          upon the dissolution, liquidation or winding up of the Corporation,
          whether voluntary or involuntary, or create or authorize any
          obligation or security convertible into shares of any such kind of
          stock;

               (2)  Amend, alter, change or repeal any of the express terms of
          the Preferred Stock, Series A so as to affect the Holders thereof
          adversely.

          (L)  So long as any shares of the Preferred Stock, Series A are
     outstanding, in the event that the Corporation shall fail to pay dividends
     on the Preferred Stock, Series A or Preferred Stock, Series B for at least
     twelve (12) consecutive calendar months sufficient to provide a cumulative
     dividend rate of five percent (5%) per annum, the Holders shall be entitled
     to elect and designate one (1) director of the Board of Directors of the
     Corporation and the size of the Board of Directors of the Corporation shall
     thereupon be increased by one (1) director, and such newly elected director
     shall hold its position on the Board of Directors of the Corporation only
     until such time as the Holders shall have received dividends sufficient to
     provide a cumulative dividend rate of five percent (5%) per annum, in which
     event such newly elected director shall be deemed to have resigned and the
     size of the Board of Directors shall thereupon decrease by one (1) member.
     The right of the Holders to elect and designate a member of the Board of
     Directors of the Corporation shall be exercised jointly with, and not
     separately from, the corresponding right granted to the Holders of the
     Preferred Stock, Series B, such that only one (1) member of the Board of
     Directors of the Corporation may be elected and designated, in the
     aggregate, by the Holders of the Preferred Stock, Series A and the
     Preferred Stock, Series B.

                                     - 5 -

                                  EXHIBIT N-2

                TERMS OF C-TEC CABLE PREFERRED STOCK, SERIES B

                  C-TEC Cable Systems, Inc. (the CORPORATION)
                           Preferred Stock, Series B

     The designation preferences, privileges and voting powers of the shares of
the Preferred Stock, Series B, and the restrictions or qualifications thereof
(insofar as they differ from or supplement the provisions which are applicable
to all shares of the preferred stock irrespective of series), are as follows:

          (A)  The series shall be designated as Preferred Stock, Series B
     (hereinafter referred to as "Preferred Stock, Series B").

          (B)  The dividend rate thereof shall be five percent (5%) per annum.
     The dividends on the shares of the Preferred Stock shall be cumulative from
     the first day of the calendar month in which the shares of the Preferred
     Stock, Series B, if any, shall be issued, with accruals of dividends
     uniform with the unpaid accruals of dividends, if any, on the Preferred
     Stock, Series B outstanding at the time of the issue thereof.

          (C)  Except as provided in Subsection (K) and (L), the Preferred
     Stock, Series B shall have no voting rights whatsoever.

          (D)  The sum per share payable upon the voluntary or involuntary
     dissolution, liquidation or winding up of the Corporation shall be $10 per
     share plus an amount equal to the dividends accrued and unpaid on such
     share, whether or not earned or declared.

          (E)  The holders of the shares of the Preferred Stock, Series B
     (collectively, the HOLDERS), acting as a whole, may elect, or may be
     required, as the case may be, at any time during the period (the ELECTION
     PERIOD) commencing on the date that is three (3) years and expiring on the
     date that is eight (8) years from the date of Closing (as such term is
     defined in that certain Merger Agreement dated September 23, 1994, as
     amended by that certain Amendment Agreement dated March 30, 1995, and
     further amended by that certain Second Amendment Agreement dated May 15,
     1995 (the AGREEMENT), to exchange their shares of Preferred Stock, Series B
     with C-TEC Corporation, a Pennsylvania corporation (C-TEC), either for
     shares of common stock of C-TEC (C-TEC COMMON) or cash.  The terms and
     conditions of such exchange rights are set forth in that certain Share
     Exchange Option Agreement between the Holders and C-TEC dated ___________
     (the

     EXCHANGE AGREEMENT).  In the event that either C-TEC or the Holders
     exercise their option, in accordance with the Exchange Agreement to
     exchange shares of Preferred Stock, Series B for C-TEC Common or cash, as
     the case may be, and provided the Corporation has received notice of any
     such election in writing not less than 30 nor more than 90 days prior to
     the date fixed for such exchange, the Corporation shall cooperate and take
     such actions as are reasonably required to effectuate such exchange on the
     books and records of the Corporation.

          (F)  For so long as shares of Preferred Stock, Series B are
     outstanding, the Corporation shall not enter into any Transaction (as
     hereafter defined) if, upon entering into any such Transaction, the ratio
     of Total Obligations (as hereafter defined) to EBITDA (as hereafter
     defined) of the Corporation for the last fiscal quarter, thereafter
     annualized by multiplying such amount(s) by four (4), exceeds 8:1.  For
     purposes hereof, the following terms shall have the following meanings:

               .    EBITDA shall mean, for any period, the consolidated net
                    income (or net loss) of the Corporation, as determined in
                    accordance with generally accepted accounting principles,
                                                                             
                    plus (1) the sum of, without duplication, the following for
                    ----                                                       
                    the Corporation:  (a) depreciation expense, (b) amortization
                    expense, (c) the excess, if any, of gross interest expense
                    for such period over gross interest income for such period,
                    in each case determined in accordance with generally
                    accepted accounting principles, (d) total income tax expense
                    and (e) extraordinary or unusual non-cash losses, less (2)
                                                                      ----    
                    extraordinary non-cash gains.

               .    OBLIGATIONS shall mean, with respect to the Corporation, the
                    consolidated outstanding  (1) principal amount of
                    indebtedness for borrowed money, (2) principal amount of
                    indebtedness for the deferred purchase price of property or
                    services (other than property or services purchased in the
                    ordinary course of business) and (3) total stated value of
                    issued and outstanding preferred stock having a liquidation
                    payment priority senior to or pari passu with the shares of
                                                  ---- -----                   
                    Preferred Stock, Series B, excluding, however, the Preferred
                    Stock, Series A and Preferred Stock, Series B of the
                    Corporation.

                                     - 2 -

               .    TOTAL OBLIGATIONS shall mean, with respect to the
                    Corporation, as of the time of determination, the aggregate
                    consolidated amount of Obligations.

               .    TRANSACTION shall mean, with respect to the Corporation, (1)
                    the incurrence of any Obligation; (2) any merger or
                    consolidation to which the Corporation is a party; or (3)
                    the sale of all or substantially all of the assets of the
                    Corporation.

          (G)  There shall be no sinking fund with respect to the shares of the
     Preferred Stock, Series B.

          (H)  The holders of the Preferred Stock Series B shall be entitled to
     receive, but only when, as and if declared by the Board of Directors, but
     in no event more frequently than quarterly, dividends at the rate fixed for
     such series and no more.  Such dividends shall be payable on a date or
     dates which shall be fixed by the Board of Directors and shall be
     cumulative from such date as may be fixed for the series.  All dividends
     payable on Preferred Stock Series B shall be fully paid, or declared and
     set apart for payment before any dividends on the common stock of the
     Corporation shall be paid or set apart for payment so that if, for all
     dividend periods terminating on the same or an earlier date, dividends on
     all outstanding shares of the Preferred Stock Series B at the rates fixed
     for the respective series shall not have been paid or set apart for
     payment, the deficiency shall be fully paid or set apart before payment on
     the common stock of the Corporation.  The Preferred Stock, Series B shall
     rank pari passu with all other series of preferred stock with respect to
     dividends.  Dividends in full shall not be paid or set apart for payment on
     the preferred stock of any other series for any dividend period unless
     dividends in full have been or are contemporaneously paid or set apart for
     payment on the preferred stock of all other series for all dividend periods
     in respect of such series terminating on the same or an earlier date.  When
     the stated dividends are not paid in full on all series of the preferred
     stock in respect of any dividend period, the shares of all series having
     the same dividend period shall share ratably in the payment of dividends,
     including accumulations, if any, based on the dividends which would be
     payable on said shares if all dividends in respect of such series were paid
     in full.  A DIVIDEND PERIOD is the period between any two consecutive
     dividend payment dates, excluding the first of such dates, as fixed for the
     series to which a share or shares shall belong.  Accruals of dividends
     shall not bear interest.

                                     - 3 -

          (I)  Upon any dissolution, liquidation or winding up of the
     Corporation, whether voluntary or involuntary, the holders of the preferred
     stock of each and every series then outstanding shall be entitled to
     receive out of the net assets of the Corporation, whether capital or
     surplus, the sums per share fixed for the shares of the respective series
     and payable upon such dissolution, liquidation or winding up, plus, in the
     case of each share, an amount equal to the dividends accrued and unpaid
     thereon, whether or not earned or declared, before any distribution of the
     assets of the Corporation shall be made to the holders of the common stock
     of the Corporation as such.

          If the assets distributable on such dissolution, liquidation or
     winding up shall be insufficient to permit the payment to the holders of
     each series of the preferred stock of the full amounts to which they
     respectively are entitled as aforesaid, then said assets shall be
     distributed among the holders of the respective series of the preferred
     stock in the order of priority as specified for each class of stock and in
     proportion to the sums which would be payable on such dissolution,
     liquidation or winding up if all such sums were paid in full in preference
     and priority over the shares of any of the Common Stock of the Corporation.

          After payment to the holders of the preferred stock of the full
     amounts to which they respectively are entitled as aforesaid, the holders
     of the preferred stock, as such, shall have no right or claim to any of the
     remaining assets of the Corporation.

          The sale, conveyance, exchange or transfer of all or substantially all
     of the property of the Corporation, or the merger or consolidation into or
     with any other corporation, shall not be deemed a dissolution, liquidation
     or winding up for the purposes of this Subsection (I).

          (J)  Nothing herein contained shall limit any legal right of the
     Corporation to purchase or otherwise acquire any shares of the Preferred
     Stock, Series B.

          (K)  So long as any shares of the Preferred Stock, Series B are
     outstanding, the Corporation shall not, without the consent (given in
     writing or by vote at a meeting called for that purpose in the manner
     prescribed by the By-Laws of the Corporation) of the holders of record of
     at least 50% of the total number of such votes which may be cast by the
     Holders, each Holder being entitled to one vote for each such share of
     Preferred Stock, Series B:

                                     - 4 -

               (1)  Create or authorize any kind of stock ranking prior to the
          Preferred Stock, Series B with respect to the payment of dividends or
          upon the dissolution, liquidation or winding up of the Corporation,
          whether voluntary or involuntary, or create or authorize any
          obligation or security convertible into shares of any such kind of
          stock;

               (2)  Amend, alter, change or repeal any of the express terms of
          the Preferred Stock, Series B so as to affect the Holders thereof
          adversely.

          (L)  So long as any shares of the Preferred Stock, Series B are
     outstanding, in the event that the Corporation shall fail to pay dividends
     on the Preferred Stock, Series A or Preferred Stock, Series B for at least
     twelve (12) consecutive calendar months sufficient to provide a cumulative
     dividend rate of five percent (5%) per annum, the Holders shall be entitled
     to elect and designate one (1) director of the Board of Directors of the
     Corporation and the size of the Board of Directors of the Corporation shall
     thereupon be increased by one (1) director, and such newly elected director
     shall hold its position on the Board of Directors of the Corporation only
     until such time as the Holders shall have received dividends sufficient to
     provide a cumulative dividend rate of five percent (5%) per annum, in which
     event such newly elected director shall be deemed to have resigned and the
     size of the Board of Directors shall thereupon decrease by one (1) member.
     The right of the Holders to elect and designate a member of the Board of
     Directors of the Corporation shall be exercised jointly with, and not
     separately from, the corresponding right granted to the Holders of the
     Preferred Stock, Series A, such that only one (1) member of the Board of
     Directors of the Corporation may be elected and designated, in the
     aggregate by the Holders of the Preferred Stock, Series A and the Preferred
     Stock, Series B.

          (M)  In the event that all or any of the Holders shall be required to
     make any payment to or indemnify or hold harmless the Corporation or C-TEC
     or any affiliate of the Corporation or C-TEC pursuant to the terms and
     provisions of the Agreement, including but not limited to any and all
     payments and indemnity obligations arising under Article 10 of the
     Agreement, the Corporation shall be entitled to set-off all such payments
     and indemnification and hold harmless obligations against any and all
     amounts, dividends and other payments to be made by the Corporation
     hereunder, including but not limited to any consideration, whether in the
     form of cash, instruments, stock or otherwise.

                                     - 5 -

                                   EXHIBIT O

                           SHARE EXCHANGE AGREEMENT

                        Share Exchange Option Agreement

     This Share Exchange Option Agreement (this AGREEMENT) is made as of this
____ day of __________________, 1995, by and among (i) Bark Lee Yee, Stella C.
Yee, Susan C. Yee, Raymond C. Yee, Kenneth C. Yee and Robert G. Tallman, as
Trustee for those two (2) certain trusts created pursuant to trust agreements
dated December 17, 1992 (collectively, the HOLDERS and each, a HOLDER), and (ii)
C-TEC Corporation, a Pennsylvania corporation (C-TEC).

                                    Recitals

     A.  The Holders are, collectively, the owners of all of the Preferred Stock
Series A and Preferred Stock Series B of Cable;

     B.  Cable is a wholly-owned subsidiary of C-TEC and, partly in
consideration for the Holders entering into the Merger Agreement, C-TEC desires
to enter into this Agreement;

     C.  The Holders and C-TEC have agreed to certain terms and conditions
pursuant to which the Holders shall have an option to acquire certain shares of
the Common Stock from C-TEC and C-TEC shall have the option to acquire the
Preferred Stock from the Holders; and

     D.  The Holders and C-TEC desire to enter into this Agreement to set forth
more fully the terms and conditions of their respective options.

                                   Agreement

     Now, therefore, in consideration of the foregoing, for the mutual promises
and covenants contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:

     1.  DEFINITIONS.  In addition to other words and terms defined elsewhere in
         -----------                                                            
this Agreement, as used herein, the following words and terms shall have the
following meanings, unless the context clearly requires otherwise:

         CABLE  shall mean C-TEC Cable Systems, Inc., a Delaware corporation.

         CLOSING  shall have the meaning given such term in Section 5.

         CLOSING DATE  shall have the meaning given such term in Section 5.

         COMMON STOCK shall mean the shares of Common Stock of C-TEC then
issued, whether or not outstanding.

         EFFECTIVE DATE shall mean the date upon which an Election Notice is
deemed validly given in accordance with the provisions of Section 8(a).

         ELECTION NOTICE  shall have the meaning given such term in Section 4.

         ELECTION PERIOD shall mean the period commencing on the date that is
three (3) years from May 15, 1995 and ending on the date that is eight (8) years
from May 15, 1995.

         MARKET VALUE shall mean the then current fair market value of the
Series A Transfer Shares and Series B Transfer Shares, as applicable, determined
as of the applicable Effective Date, which fair market value shall be deemed to
be the closing price per share of the Common Stock as reported on the NASDAQ
System as of the close of business of the business day immediately preceding the
applicable Effective Date, multiplied by the applicable number of shares.

         MERGER AGREEMENT shall mean that certain Merger Agreement dated
September 23, 1994 between the Holders and Cable, as amended by that certain
Amendment Agreement dated March 30, 1995, and further amended by that certain
Second Amendment Agreement dated May 15, 1995.

         PREFERRED STOCK shall mean, collectively, the Preferred Stock Series A
and the Preferred Stock Series B.

         PREFERRED STOCK SERIES A shall mean those certain 4,100,000 shares of
Preferred Stock, 5% Series A issued by Cable held in the aggregate by the
Holders.

         PREFERRED STOCK SERIES B shall mean those certain 1,100,000 shares of
Preferred Stock, 5% Series B issued by Cable held in the aggregate by the
Holders.

         SERIES A STRIKE PRICE shall mean an amount equal to Forty-one Million
Dollars ($41,000,000), which amount is derived from and approximately equal to
the sum of 1,171,428 shares of Common Stock multiplied by $35.00 per share.

         SERIES B STRIKE PRICE shall mean an amount equal to Eleven Million
Dollars ($11,000,000) which amount is derived and approximately equal to the sum
of 285,714 shares of Common Stock multiplied by $38.50 per share.

         SERIES A TRANSFER SHARES shall mean the 1,171,428 shares of Common
Stock to be transferred by C-TEC to the Holders of Preferred Stock Series A upon
the occurrence of certain events as set forth in this Agreement.

         SERIES B TRANSFER SHARES shall mean the 285,714 shares of Common Stock
to be transferred by C-TEC to the Holders of the Preferred Stock Series B upon
the occurrence of certain events as set forth in this Agreement.

         TRANSFER SHARES shall mean, collectively, the Series A Transfer Shares
and the Series B Transfer Shares.

     2.  OPTIONS IN FAVOR OF HOLDERS.
         --------------------------- 

         (a)  The Holders of Preferred Stock Series A, acting as a whole but not
in part, may elect at any time during the Election Period, to acquire all, but
not less than all, of the Series A Transfer Shares from C-TEC. In the event the
Holders properly exercise their election to acquire the Series A Transfer Shares
in accordance with the procedures set forth in Section 4, in consideration of
the transfer and delivery of the Series A Transfer Shares to Holders, the
Holders shall, contemporaneously with such transfer, transfer and deliver the
shares of Preferred Stock Series A to C-TEC. If the Holders are unable to
unanimously make an election pursuant to this subsection with respect to the
Preferred Stock Series A, the Holders shall each be deemed to have elected to
take no action with respect to this subsection.

         (b)  The Holders of Preferred Stock Series B, acting as a whole but not
in part, may elect at any time during the Election Period, to acquire all, but
not less than all, of the Series B Transfer Shares from C-TEC. In the event the
Holders properly exercise their election to acquire the Series B Transfer Shares
in accordance with the procedures set forth in Section 4, in consideration of
the transfer and delivery of the Series B Transfer Shares to Holders, the
Holders shall, contemporaneously with such transfer, transfer and deliver the
shares of Preferred Stock Series B to C-TEC. If the Holders are unable to
unanimously make an election pursuant to this subsection with respect to the
Preferred Stock Series B, the Holders shall each be deemed to have elected to
take no action with respect to this subsection.

         (c)  The options in favor of the Holders to acquire the Transfer Shares
granted pursuant to the foregoing Sections 2(a) and (b) may be exercised by the
Holders, acting as a whole, either separately or jointly at any time during the
Election Period and the exercise by the Holders of one option shall not preclude
the Holders from exercising the remaining options.

                                     - 3 -

     3.  OPTION IN FAVOR OF C-TEC.
         ------------------------ 

         (a)  C-TEC may elect at any time during the Election Period to acquire
from the Holders all, but not less than all, of the Preferred Stock Series A. In
the event C-TEC properly exercises its election to acquire the Preferred Stock
Series A in accordance with the procedures set forth in Section 4 of this
Agreement, in consideration of the transfer of the applicable shares of
Preferred Stock Series A from the Holders to C-TEC, C-TEC shall:

               (i)  If the Market Value of the Series A Transfer Shares is
                    greater than or equal to the Series A Strike Price, C-TEC
                    shall transfer and deliver to the Holders of Preferred Stock
                    Series A the Series A Transfer Shares, ratably in proportion
                    to the shares of Preferred Stock Series A held by them;

               (ii) If the Market Value of the Series A Transfer Shares is less
                    than the Series A Strike Price, C-TEC shall, at Holder's
                    option, either pay to the Holders in immediately available
                    funds at Closing an amount equal to the Series A Strike
                    Price, or C-TEC shall transfer and deliver to the Holders
                    the Series A Transfer Shares.  The Holders, acting as a
                    whole but not in part, shall make their election to receive
                    either cash or Series A Transfer Shares pursuant to this
                    Section 3(a)(ii) within ten (10) days of the applicable
                    Effective Date of the Election Notice.  In the event that
                    the Holders fail to unanimously make an election within such
                    ten (10) day period, the Holders shall be deemed to have
                    conclusively elected to accept cash in consideration of the
                    transfer and delivery of the shares of Preferred Stock
                    Series A.

         (b)  C-TEC may elect at any time during the Election Period to acquire
from the Holders all, but not less than all, of the Preferred Stock Series B. In
the event C-TEC properly exercises its election to acquire the Preferred Stock
Series B in accordance with the procedures set forth in Section 4 of this
Agreement, in consideration of the transfer of the applicable shares of
Preferred Stock Series B from the Holders to C-TEC, C-TEC shall:

               (i)  If the Market Value of the Series B Transfer Shares is
                    greater than or equal to the Series B Strike Price, C-TEC
                    shall transfer and 

                                     - 4 -

                    deliver to the Holders of Preferred Stock Series B the
                    Series B Transfer Shares, ratably in proportion to the
                    shares of Preferred Stock Series B held by them;

              (ii)  If the Market Value of the Series B Transfer Shares is less
                    than the Series B Strike Price, C-TEC shall, at Holder's
                    option, either pay to the Holders in immediately available
                    funds at Closing an amount equal to the Series B Strike
                    Price, or C-TEC shall transfer and deliver to the Holders
                    the Series B Transfer Shares.  The Holders, acting as a
                    whole but not in part, shall make their election to receive
                    either cash or Series B Transfer Shares pursuant to this
                    Section 3(b)(ii) within ten (10) days of the Effective Date
                    of the applicable Election Notice.  In the event that the
                    Holders fail to unanimously make an election within such ten
                    (10) day period, the Holders shall be deemed to have
                    conclusively elected to accept cash in consideration of the
                    transfer and delivery of the shares of Preferred Stock
                    Series B.

         (c)  The options in favor of C-TEC to acquire the Preferred Stock
Series A and the Preferred Stock Series B granted pursuant to the foregoing
Sections 3(a) and (b) may be exercised by C-TEC either separately or jointly, at
any time during the Election Period and the exercise by C-TEC of one such option
shall not preclude C-TEC from exercising the remaining option.

     4.  ELECTION PROCEDURE.  In order to exercise the election rights pursuant
         ------------------                                                    
to Sections 2 and 3 of this Agreement, the Holders or C-TEC, as applicable,
shall deliver to the other party an irrevocable written notice of the election
(each, an ELECTION NOTICE).  The Election Notice shall specify the Closing Date
upon which the relevant transfers shall occur, which Closing Date shall not be
less than thirty (30) days from the Effective Date of the Election Notice (if
the Holders will be receiving C-TEC Common Stock) and ninety (90) days from the
Effective Date of the Election Notice (if the Holders will be receiving cash).
Upon the exercise of an election by either the Holders or C-TEC pursuant to
Section 2 or 3 of this Agreement, the remaining election rights of the non-
electing party with respect to any remaining shares of Preferred Stock then held
by the Holders shall continue, and all other election rights shall thereupon be
extinguished.

                                     - 5 -

     5.  CLOSING.
         ------- 

         (a)  In the event of the exercise of any election provided in Sections
2 or 3 of this Agreement, on the Closing Date specified in the applicable
Election Notice on the applicable Closing Date, each Holder shall transfer and
deliver their respective shares of the applicable series of Preferred Stock 
to C-TEC pursuant to an appropriate endorsement and by physical delivery of such
shares, and C-TEC shall either (x) contemporaneously transfer and deliver to the
Holders, ratably in proportion to their respective shares of Preferred Stock
transferred, the applicable Transfer Shares pursuant to an appropriate
endorsement and by physical delivery of such shares, or (y) pay to the Holders
the applicable strike price for the shares of Preferred Stock transferred in
immediately available funds.

         (b)  The closing of any such sale and transfer (each, a CLOSING) shall
take place at the offices of C-TEC Corporation, 105 Carnegie Center, Princeton,
New Jersey 08540 on the applicable Closing Date, or at such other place and time
as the parties may mutually agree.

     6.  MANDATORY PURCHASE.   All remaining Preferred Stock Series A and
         ------------------                                              
Preferred Stock Series B shall be purchased by C-TEC for an amount equal to $10
per share, plus the value of any accrued and unpaid dividends (hereinafter the
PURCHASE AMOUNT), on May 15, 2003 (hereinafter the PURCHASE DATE) whether or not
the Holders so elect.  Closing on such purchase shall occur on a date specified
by C-TEC but no later than ninety (90) days following the Purchase Date,
provided, however, that for purposes of determining the Purchase Amount,
dividends shall be deemed to have accrued through the Closing.  At the Closing,
each Holder shall transfer and deliver their respective shares of the applicable
series of Preferred Stock to C-TEC pursuant to an appropriate endorsement and by
physical delivery of such shares, and C-TEC shall pay to the Holders the
Purchase Amount for the shares of Preferred Stock transferred in immediately
available funds.

     7.  SET-OFF RIGHTS.  In the event that all or any of the Holders of
         --------------                                                 
Preferred Stock, Series B shall be required to make any payment to or indemnify
or hold harmless C-TEC or Cable, or any affiliate of C-TEC or Cable, pursuant to
the terms and provisions of the Merger Agreement, including but not limited to
any and all payments and indemnity obligations arising under Article X of the
Merger Agreement, C-TEC shall be entitled to set-off all such payments and
indemnification and hold harmless obligations in accordance with the Merger
Agreement against any and all amounts, payments and other consideration to be
paid and delivered by C-TEC hereunder whether in the form of cash, instruments,
stock or otherwise.

                                     - 6 -

     8.  REGISTRATION RIGHTS FOR COMMON SHARES.
         ------------------------------------- 

         (a)  Demand Registration Rights.  C-TEC covenants and agrees with the
              --------------------------                                      
Holders, but not any subsequent holder of, the Transfer Shares that, upon the
unanimous written request of the Holders made at any time after Closing, but in
any event, during the Election Period, but only once, C-TEC will file as
promptly as practicable and, in any event, within one hundred eighty (180) days
after receipt of such written request, a new registration statement (a
REGISTRATION STATEMENT) or a post-effective amendment to an existing
registration statement (an AMENDMENT) under the Securities Act of 1933 (the
ACT), registering or qualifying the Transfer Shares for sale.  No other
securities of C-TEC shall be entitled to be included in such Amendment or
Registration Statement.  C-TEC will use its good faith efforts to file and cause
to become effective any such Amendment or Registration Statement as promptly as
practicable and remain effective for a period of not less than sixty (60) days
or such shorter period as is necessary to complete the distributions.

         (b)  Piggyback Registration Rights. C-TEC covenants and agrees with 
              -----------------------------
the Holders, but not any subsequent holder of, the Transfer Shares that if, at
any time within the Election Period C-TEC proposes to file a Registration
Statement with respect to any class of security (other than in connection with
an offering to C-TEC's employees) under the Act in a primary registration on
behalf of C-TEC and/or in a secondary registration on behalf of holders of such
securities and the registration form to be used may be used for registration of
the Transfer Shares, C-TEC will give written notice, which shall be given at
least forty-five (45) days prior to such filing, to the Holders in the manner
set forth in Section 8(a) of its intention to file a Registration Statement and
will offer to include in such Registration Statement to the maximum extent
possible, and limited, in the case of a Regulation A offering, to the amount of
the available exemption, subject to paragraphs (i) and (ii) of this paragraph
(b), such number of Transfer Shares with respect to which C-TEC has received
written requests for inclusion therein by the Holders within ten (10) days after
the giving of notice by C-TEC. All registrations requested pursuant to this
Section 8(b) are referred to herein as PIGGYBACK REGISTRATIONS. This paragraph
is not applicable to a Registration Statement filed by C-TEC with the Securities
and Exchange Commission (the SEC) on Forms S-4 or S-8 or any successor form or
any Registration Statement filed with the SEC prior to the Closing.

               (i)  Priority or Primary Registrations.  If a Piggyback
                    ---------------------------------                 
                    Registration includes an underwritten primary registration
                    on behalf of C-TEC and the underwriter(s) for the offering
                    being registered by C-TEC shall determine in good faith and
                    advise C-TEC in 

                                     - 7 -

                    writing that in its opinion the number of Transfer Shares
                    requested to be included in such registration exceeds the
                    number that can be sold in such offering without materially
                    adversely affecting the distribution of such securities by C
                    TEC, C-TEC will include in such registration (A) first, the
                    securities that C-TEC proposes to sell and (B) second, to
                    the extent feasible, the Transfer Shares requested to be
                    included in such registration, apportioned ratably among the
                    Holders of Transfer Shares requiring to be included in such
                    registration.

              (ii)  Priority on Secondary Registrations.  If a Piggyback
                    -----------------------------------                 
                    Registration consists only of an underwritten secondary
                    registration on behalf of holders of securities of C-TEC
                    (other than pursuant to Section 8(a)), and the
                    underwriter(s) for the offering being registered by C-TEC
                    advise C-TEC in writing that in its opinion the number of
                    Transfer Shares requested to be included in such
                    registration exceeds the number which can be sold in such
                    offering without materially adversely affecting the
                    distribution of such securities by C-TEC, C-TEC will include
                    in such registration (A) first, the securities requested to
                    be included therein by the holders requesting such
                    registration and (B) second, to the extent feasible, the
                    Transfer Shares requested to be included in such
                    registration above, apportioned ratably, among all such
                    Holders on the basis of the number of shares requested to be
                    included by each such Holder.

         (c)  Restrictions on Registration Rights.
              ----------------------------------- 

               (i)  Notwithstanding the provisions set forth in Sections (b)(i)
                    and (b)(ii) above or any other provisions, if any such
                    underwriter shall determine in good faith and advise C-TEC
                    in writing that the distribution of the Transfer Shares
                    requested to be included in the registration concurrently
                    with the securities being registered by C-TEC would
                    materially adversely affect the distribution of such
                    securities by C-TEC, then the Holders of such Transfer
                    Shares shall delay their offering and sale for such period
                    ending on the earliest of (1) ninety (90) days 

                                     - 8 -

                    following the effective date of C-TEC's registration
                    statement, (2) the day upon which the underwriting
                    syndicate, if any, for such offering shall have been
                    disbanded or, (3) such date as C-TEC, the underwriter(s) and
                    the Holders shall otherwise agree. In the event of such
                    delay, C-TEC shall file such supplements, post-effective
                    amendments and take any such other steps as may be
                    reasonably necessary to permit such Holders to make their
                    proposed offering and sale for a period not to exceed ninety
                    (90) days immediately following the end of such period of
                    delay. If any party disapproves of the terms of any such
                    underwriting, it may elect to withdraw therefrom by written
                    notice to C-TEC and the underwriter. Notwithstanding the
                    foregoing, C-TEC shall not be required to file a
                    registration statement to include Transfer Shares pursuant
                    to this Section 8 if an opinion of independent counsel,
                    reasonably satisfactory to counsel for C-TEC, that the
                    Transfer Shares proposed to be disposed of may be
                    transferred pursuant to the provisions of Rule 144 under the
                    Act shall have been delivered to counsel for C-TEC and the
                    Holders shall have agreed to indemnify C-TEC with respect to
                    the accuracy of the matter described in any such opinion and
                    the actions of C-TEC taken in reliance thereon.

              (ii)  C-TEC shall not be required to file a Registration Statement
                    or Amendment at a time when the audited financial statements
                    required to be included therein are not available, which
                    time shall be limited to the period commencing 45 days after
                    the end of C-TEC's last fiscal year and ending 90 days after
                    the end of such fiscal year existing at the time of the
                    proposed offering.

              (iii)      C-TEC shall not be required to file a Registration
                         Statement or Amendment if C-TEC furnishes to the
                         Holders a certificate signed by C-TEC's Chairman or
                         President stating that in his or her good faith
                         judgment it would be detrimental or otherwise
                         disadvantageous to C-TEC or its shareholders for such a
                         Registration Statement or Amendment to be filed as
                         expeditiously as possible, in which case C-TEC shall
                         have a period 

                                     - 9 -

                         of not more than 180 days within which to file such
                         Registration Statement or Amendment measured from the
                         date of the C-TEC's receipt of Holders' request for
                         registration.

         (d)  Costs of Registration.
              --------------------- 

              (i)  All costs, expenses, fees and other charges, including but
                   not limited to reasonable attorneys' and accounting fees and
                   expenses (collectively, the EXPENSES), arising as a result of
                   any registration pursuant to Section 8(a) shall be borne by 
                   C- TEC and the Holders, or both, as follows:

                   (x)   With respect to an election made by the Holders during
                         the first two (2) years of the Election Period, the
                         Holders shall be solely responsible for all such
                         Expenses.

                   (y)   With respect to any election made by the Holders during
                         the period commencing on the day after the first two
                         (2) years of the Election Period, through and until the
                         day prior to the date that is three (3) years after the
                         beginning of the Election Period, the Expenses shall be
                         shared equally by the Holder and C-TEC.

                   (z)   With respect to any election made by the Holders during
                         the period commencing on the earlier of (1) the date
                         that is three (3) years after the beginning of the
                         Election Period, or (2) the date of the Closing with
                         respect to any option exercised by the C-TEC pursuant
                         to Section 3 of this Agreement (other than where the
                         Holders have elected to receive immediately available
                         funds at Closing) through and until the expiration of
                         the Election Period, the Expenses shall be borne solely
                         by C-TEC.

              (ii) With respect to any election made by the Holders pursuant to
                   Section 8(b), the Expenses shall be borne solely by C-TEC.

              (iii)      Notwithstanding any other provision of this Agreement
                         to the contrary, the Holders shall be solely
                         responsible for 

                                    - 10 -

                         any fees and disbursements of any counsel, accountant
                         or other professional for the Holders; any underwriters
                         discount or commission in respect of such Transfer
                         Shares; and the cost of and liability or similar
                         insurance required by an underwriter to the extent that
                         such costs are attributable to the offering of such
                         Transfer Shares.

         (e)  Subsequent Holder.  The reference to any "subsequent holder" as 
              -----------------                                            
stated above shall not include any trustee designated by the Holders under a
trust agreement for their benefit.

     9.  MISCELLANEOUS.
         ------------- 

         (a)  Notices.  All notices, requests, and other communications 
              -------                                                      
provided for in this Agreement shall be in writing and shall be deemed validly
given upon personal delivery, one day after being sent by overnight courier
service, and upon confirmation of receipt if sent by telecopier, to the
following address or telecopy number:

              (i)  if to each of the Shareholders listed in the agreement:

                   (1)    Bark Lee Yee;
                   (2)    Stella C. Yee;
                   (3)    Susan C. Yee;
                   (5)    Raymond C. Yee; and
                   (6)    Kenneth C. Yee

                   at:  3925 Airport Road
                        Allentown, PA  18103

                   with a copy to:

                   Robert G. Tallman
                   Tallman Hudder & Sorrentino. P.C.
                   The Paragon Centre
                   Suite 300
                   1611 Pond Road
                   Allentown, Pennsylvania  18104

              (ii) If to C-TEC, at:

                   C-TEC Corporation
                   105 Carnegie Center
                   Princeton, NJ  08540

                                    - 11 -

                  Attn:    Stephen J. Rabbitt
                           Executive Vice President
                           C-TEC Cable Systems, Inc.

                  With a copy to:

                  C-TEC Corporation
                  105 Carnegie Center
                  Princeton, NJ  08540

                  Attn:     Raymond B. Ostroski
                            General Counsel
              or at such other address or telecopy number as any party hereto
              may designate by written notice to the other parties hereto.

         (b)  Fees and Expenses.  Except as otherwise specifically provided in
              -----------------      
this Agreement, each party hereto shall pay all its own costs and expenses
incident to this Agreement, and the transactions contemplated hereby, including
legal and accounting fees and disbursements.

         (c)  Severability.  If any provision of this Agreement is held to be
              ------------                                                   
unenforceable for any reason, it shall be adjusted rather than voided, if
possible, in order to achieve the intent of the parties to this Agreement to the
extent possible.  In any event, the invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of this Agreement, including that provision, in any
other competent jurisdiction.

         (d)  Further Assurances.  From time to time, the parties shall execute
              ------------------                 
such documents and shall take such actions as shall be reasonably necessary in
order to carry out and effectuate the intent and purpose of this Agreement and
the transactions contemplated by this Agreement.

         (e)  Governing Law.  This Agreement shall be governed by and construed
              -------------                                          
in accordance with the laws of the Commonwealth of Pennsylvania without regard
to the choice of law rules thereof.

         (f)  Counterparts.  This Agreement may be executed in any number of
              ------------                                                  
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.

         (g)  Time of the Essence.  Time is of the essence with respect to the
              -------------------                                             
obligations of the parties hereunder.

                                    - 12 -

         (h)  Securities Laws.  All sales of securities by Holders in
              ---------------                                                 
connection with the Registration Rights referred to herein shall be conducted
in accordance with all applicable laws and regulations.

         (i)  Assignment.  In no event shall the Holders be entitled to assign 
              ----------                                         
or transfer any of their rights under this Agreement, whether voluntarily,
involuntarily or by operation of law, except that the Holders may assign such
rights to a trustee for their sole benefit or the benefit of their heirs or
estates.  Any attempted assignment shall be void.

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

Witness                                 C-TEC CORPORATION,
                                        A PENNSYLVANIA CORPORATION

______________________________          By:_____________________________________
_________________________
                                        Name:___________________________________
______________________
                                        Title:__________________________________
___________________________

                                        HOLDERS:

______________________________          __________________________________    
                                        Bark Lee Yee

______________________________          __________________________________
                                        Stella C. Yee

______________________________          __________________________________   
                                        Susan C. Yee

______________________________          __________________________________
                                        Raymond C. Yee

______________________________          __________________________________
                                        Kenneth C. Yee

______________________________          __________________________________
                                        Robert G. Tallman, Trustee

                                    - 13 - 

Basic Info X:

Name: SECOND AMENDMENT AGREEMENT
Type: Second Amendment Agreement
Date: June 1, 1995
Company: COMMONWEALTH TELEPHONE ENTERPRISES INC /NEW/
State: Pennsylvania

Other info:

Date:

  • May 1 , 1995
  • December 29 , 1995
  • December 31 , 1995
  • January 11 , 1990
  • May 17 , 1990
  • January 1 , 1996
  • forty five 45 days after the end of the
  • last fiscal quarter
  • December 17 , 1992
  • September 23 , 1994
  • March 30 , 1995
  • May 15 , 1995
  • thirty 30
  • May 15 , 2003
  • day after the first two 2 years of the

Organization:

  • C-TEC Cable Systems of Pennsylvania , Inc.
  • Share Exchange Agreement
  • First Union National Bank of North Carolina
  • C-TEC of Preferred Stock
  • Tallman , Hudders & Sorrentino
  • Computer Aid , Inc.
  • Twin County Trans Video , Inc.
  • Twin County , Inc.
  • Twin County and Shareholders
  • Termination of Management Agreement
  • Transfer of Other Shares During Management
  • Secretary of State
  • State of Delaware
  • Internal Revenue Service
  • Confirmation of Agreements
  • Raywid & Braverman Opinion Letter Exhibit D Assignment of FCC
  • C-TEC Tax-Free Reorganization Certificate Exhibit G Swidler & Berlin Opinion Letter
  • C-TEC Preferred Stock
  • C-TEC Cable Preferred Stock
  • Holders of Preferred Stock
  • Holders the Converted Common Stock
  • Corporate Notice Date
  • Corporate Notice Data
  • Exchange Election Period the Corporation
  • Holders of Converted Common Stock
  • Restrictions on Registration Rights
  • the Exchange Election Period
  • Common Stock of the Corporation
  • Board of Directors of the Corporation
  • the Holders and Cable
  • Eleven Million Dollars
  • b Piggyback Registration Rights
  • Election Period C-TEC
  • Securities and Exchange Commission
  • Holders of Transfer Shares
  • Robert G. Tallman Tallman Hudder & Sorrentino
  • Paragon Centre Suite
  • C-TEC Cable Systems , Inc.
  • C-TEC Corporation 105 Carnegie Center Princeton
  • Commonwealth of Pennsylvania
  • Time of the Essence

Location:

  • P.C.
  • Twin County
  • Delaware
  • Princeton
  • New Jersey
  • 3925 Airport Road Allentown
  • PENNSYLVANIA

Money:

  • $ 100
  • $ 2.75 million
  • $ 32,426,137 million
  • $ 36 million
  • $ 11 million
  • $ 5 million
  • $ 7.4 million
  • $ 315,750
  • $ 1.733 million
  • $ 68,500
  • $ 4 million
  • $ 1,000,000
  • $ 52 million
  • $ 5,209,350
  • Forty-one Million Dollars
  • $ 41,000,000
  • $ 35.00
  • $ 11,000,000
  • $ 38.50

Person:

  • Leon Poitras
  • David C. McCourt
  • Steven G. Miller
  • Michael J. Mahoney
  • Dolores A. Laputka s Bark Lee Yee
  • Bark Lee Yee s Dolores A. Laputka s Stella C. Yee
  • Stella C. Yee s Dolores A. Laputka s Raymond C. Yee
  • Raymond C. Yee s Dolores A. Laputka
  • Susan C. Yee s Dolores A. Laputka
  • Kenneth C. Yee s Dolores A. Laputka
  • Cole
  • Stephen J. Rabbitt
  • Raymond B. Ostroski
  • Robert G. Tallman

Percent:

  • five percent 5 %
  • 50 %