10-K

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the fiscal year ended December 31, 2004.
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from                             to

Commission file number 333-56365

FairPoint Communications, Inc.
(Exact Name of Registrant as Specified in Its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)	13-3725229 (I.R.S. Employer Identification No.)
521 East Morehead Street, Suite 250 Charlotte, North Carolina (Address of Principal Executive Offices)	28202 (Zip code)
Registrant's Telephone Number, Including Area Code: (704) 344-8150
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Common Stock, par value $0.01 per share	Name of Exchange on Which Registered New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None

        Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o    No ý

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes o    No ý

        As of June 30, 2004, the Registrant had no equity securities registered pursuant to the Securities Exchange Act of 1934 and, accordingly, had no public float.

        As of March 15, 2005, there were 34,925,432 shares of the Registrant's common stock, par value $0.01 per share, outstanding.

        Documents incorporated by reference: None

FAIRPOINT COMMUNICATIONS, INC. ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

Item Number		Page Number
	Index	i
PART I
1.	Business	1
2.	Properties	19
3.	Legal Proceedings	20
4.	Submission of Matters to a Vote of Security Holders	20
PART II
5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	21
6.	Selected Financial Data	31
7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	34
7A.	Quantitative and Qualitative Disclosures about Market Risk	69
8.	Financial Statements and Supplementary Data	70
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	118
9A.	Controls and Procedures	118
9B.	Other Information	118
PART III
10.	Directors and Executive Officers of the Registrant	119
11.	Executive Compensation	124
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	132
13.	Certain Relationships and Related Transactions	135
14.	Principal Accounting Fees and Services	136
PART IV
15.	Exhibits, Financial Statement Schedules	138
	Signatures	139
	Exhibit Index	140

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PART I

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

        Some statements in this Annual Report are known as "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, which we refer to as the Securities Act, and Section 21E of the Securities Exchange Act of 1934, which we refer to as the Exchange Act. Forward-looking statements may relate to, among other things:

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our dividend policy and expectations regarding dividend payments,



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minimum Adjusted EBITDA estimates,



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future performance generally,



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business development activities,



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future capital expenditures,



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future interest expense,



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distributions from minority investments and passive partnership interests,



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net operating loss carry forwards,



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technological developments and changes in the communications industry,



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financing sources and availability,



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regulatory support payments, and



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the effects of regulation and competition.

        These forward-looking statements include, but are not limited to, statements about our plans, objectives, expectations and intentions and other statements contained in this Annual Report that are not historical facts. When used in this Annual Report, the words "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," and similar expressions are generally intended to identify forward-looking statements. Because these forward-looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual results, events or developments to differ materially from those expressed or implied by these forward-looking statements, including our plans, objectives, expectations and intentions and other factors discussed under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Factors" and other parts of this Annual Report. You should not place undue reliance on such forward-looking statements, which are based on the information currently available to us and speak only as of the date on which this Annual Report was filed with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is directed to any further disclosures made on related subjects in our subsequent periodic reports filed with the Securities and Exchange Commission on Forms 10-K, 10-Q and 8-K and Schedule 14A.

ITEM 1.    BUSINESS

Except as otherwise required by the context, references in this Annual Report to "FairPoint," "our company," "we," "us," or "our" refer to the combined business of FairPoint Communications, Inc. and all of its subsidiaries. All references to the "Company" refer to FairPoint Communications, Inc. excluding its subsidiaries.

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Our Business

        We are a leading provider of communications services in rural communities, offering an array of services, including local and long distance voice, data, Internet and broadband product offerings. We are one of the largest telephone companies in the United States focused on serving rural communities, and we are the 17th largest local telephone company, in each case based on number of access lines. We operate in 17 states with approximately 271,150 access line equivalents (including voice access lines and digital subscriber lines) in service as of December 31, 2004.

        We were incorporated in February 1991 for the purpose of operating and acquiring incumbent telephone companies in rural markets. We have acquired 30 such businesses, 26 of which we continue to own and operate. Many of our telephone companies have served their respective communities for over 75 years. The majority of the rural communities we serve have fewer than 2,500 access lines. All of our telephone company subsidiaries qualify as rural local exchange carriers under the Telecommunications Act of 1996, or the Telecommunications Act.

        Rural local exchange carriers generally are characterized by stable operating results and strong cash flow margins and operate in supportive regulatory environments. In particular, existing state and federal regulations permit us to charge rates that enable us to recover our operating costs, plus a reasonable rate of return on our invested capital (as determined by relevant regulatory authorities). Competition is typically limited because rural local exchange carriers primarily serve sparsely populated rural communities with predominantly residential customers, and the cost of operations and capital investment requirements for new entrants is high. As a result, in our markets, we have experienced virtually no wireline competition and limited competition from cable providers. While most of our markets are served by wireless service providers, their impact on our business has been limited.

Our Competitive Strengths

        We believe we are distinguished by the following competitive strengths:

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Consistent and predictable cash flows and strong margins. We have the leading market position in the rural communities we serve, with limited competition. Demand for telephone services from our residential and local business customers has historically been very stable despite changing economic conditions. As a result, we have experienced a relatively stable access line count during the last two years compared to regional bell operating companies. Additionally, our telephone companies operate in generally supportive regulatory environments. These factors have permitted us to generate consistent cash flows and strong margins.



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Geographically diversified markets. We currently operate 26 rural local exchange carriers in 17 states, clustered in four regions, enabling us to capitalize on economies of scale and operating efficiencies. Our geographic diversity significantly enhances our cash flow stability by limiting our exposure to competition, local economic downturns and state regulatory changes. In addition, we believe that we have achieved significant scale efficiencies by centralizing many functions, such as sales and marketing, network planning, accounting and customer service.



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Technologically advanced infrastructure. Our advanced network infrastructure enables us to provide a wide array of communications services. Our network consists of central office hosts and remote sites all with digital switches (primarily manufactured by Nortel and Siemens) and operating with current software. As of December 31, 2004, we maintained over 25,000 miles of copper plant and approximately 3,300 miles of fiber optic plant in order to service our 271,150 access line equivalents in service. As a result of our historic capital investments, our network infrastructure requires predictable capital expenditures and allows us to implement certain broadband enabled services with minimal incremental cost. As of December 31, 2004, approximately 93% of our exchanges were capable of providing broadband services.

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Broadest service offerings in our markets. As a result of our advanced network and switching infrastructure, we believe that we offer the only comprehensive suite of communications services in our markets, including local and long distance voice, data and Internet services. In addition, we offer enhanced features such as caller identification, call waiting, call forwarding, teleconferencing, video conferencing and voicemail. We also offer broadband communications solutions to most of our customers primarily through digital subscriber line technology.



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Management team with proven track record. We have an experienced management team that has demonstrated its ability to grow our rural telephone business over the past decade. Our senior management team has an average of 19 years of experience working with a variety of telephone companies. Our regional presidents have an average of 28 years of experience in the communications industry. Our management team has successfully integrated 30 business acquisitions since 1993, improving revenues and cash flow significantly while enhancing service quality and broadening service offerings.

Our Strategy

        The key elements of our strategy are to:

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Increase revenue per customer. We are focused on increasing our revenues by introducing innovative product offerings and marketing strategies for enhanced and ancillary services to meet the growing needs of our customers. Our long standing relationships with our customers have helped us to successfully cross-sell broadband and value-added services, such as digital subscriber line, long distance, Internet dial-up, voicemail and other services. We will continue to evaluate and implement technologies that will allow us to offer new products and services.



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Continue to improve operating efficiencies and profitability. We have achieved significant operating efficiencies by applying our operational, regulatory, marketing and management expertise to our acquired businesses. We intend to continue to increase our operating efficiencies by consolidating various administrative functions and implementing best practices across all of our regions. For example, we have begun to integrate our six billing systems into a single, outsourced billing platform, which will allow us to improve our customer service and enhance sales and marketing efforts. When completed, we plan to use this platform to develop a number of centralized customer service and call centers and to create a significantly improved customer data base. We believe that such call centers and customer data base will allow us to enhance our operating efficiency and optimize our marketing initiatives.



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Enhance customer loyalty. We believe that our service driven customer relationships and long-standing local presence lead to high levels of customer satisfaction and increased demand for enhanced and ancillary services. We continue to build long-term relationships with our customers by actively participating in the communities we serve and by offering an array of communications services and quality customer care.



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Grow through selective acquisitions. We believe that our acquisition strategy has been successful because of our ability to integrate acquisitions and improve operating efficiencies in the businesses we acquire. Our management team has consistently produced strong operating cash flow improvements in our acquired businesses. We will continue to evaluate and pursue acquisitions which provide the opportunity to enhance our revenues and cash flows.

Recent Developments

        On January 28, 2005, we effected a 5.2773714 for 1 reverse stock split of our class A common stock, par value $0.01 per share, which we refer to as our class A common stock, and our class C common stock, par value, $0.01 per share, which we refer to as our class C common stock.

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        On February 8, 2005, we consummated an initial public offering, which we refer to as the offering, of 25,000,000 shares of our common stock, par value $.01 per share, which we refer to as our common stock, at a price to the public of $18.50 per share. On February 8, 2005, we also reclassified all of our outstanding shares of class A common stock into common stock and converted all of our outstanding shares of class C common stock, on a one-for-one basis, into shares of our common stock. All share information in this Annual Report gives effect to the 5.2773714 for 1 reverse stock split and such reclassification and conversion.

        In connection with the offering, we entered into a new senior secured credit facility with a syndicate of financial institutions, including Deutsche Bank Trust Company Americas, as administrative agent, which we refer to as our credit facility. Our credit facility is comprised of a revolving facility in an aggregate principal amount of up to $100.0 million (less amounts reserved for letters of credit) and a term loan facility in an aggregate principal amount of $588.5 million (including a $22.5 million delayed draw facility). The revolving facility has a six year maturity and the term loan facility has a seven year maturity.

        We used the gross proceeds of $462.5 million from the offering together with borrowings of $566.0 million under the term facility of our credit facility as follows:

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$176.7 million to repay in full all outstanding loans under our old credit facility (including accrued interest);



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$122.1 million to repurchase $115.0 million aggregate principal amount of our 9¹/2% senior subordinated notes due 2008, which we refer to as the 9¹/2% notes, pursuant to the tender offer and consent solicitation for such notes (including accrued interest, tender premiums and consent payments);



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$51.8 million to repurchase $50.8 million aggregate principal amount of our floating rate callable securities due 2008, which we refer to as the floating rate notes, pursuant to the tender offer and consent solicitation for such notes (including accrued interest, tender premiums and consent payments);



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$193.4 million to repurchase $173.1 million aggregate principal amount of our 12¹/2% senior subordinated notes due 2010, which we refer to as the 12¹/2% notes, pursuant to the tender offer and consent solicitation for such notes (including accrued interest, tender premiums and consent payments);



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$274.9 million to repurchase $223.0 million aggregate principal amount of our 11⁷/8% senior notes due 2010, which we refer to as the 11⁷/8% notes, pursuant to the tender offer and consent solicitation for such notes (including accrued interest, tender premiums and consent payments);



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$129.2 million to repurchase all our series A preferred stock (together with accrued and unpaid dividends thereon) from the holders thereof;



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$10.6 million to repay a substantial portion of our subsidiaries' outstanding long-term debt (including accrued interest);



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$7.0 million to repay in full a promissory note issued by us in connection with a past acquisition;



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$18.4 million to invest in temporary investments pending the redemption of the 9¹/2% notes and the floating rate notes not tendered in the tender offers for such notes; and



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$44.4 million to pay fees and expenses, including underwriting discounts of $27.8 million, $8.2 million of debt issuance costs associated with our credit facility and a transaction fee of approximately $8.4 million paid to Kelso & Company, one of our investors.

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        In addition, on March 10, 2005, we used the $18.4 million which we had invested in temporary investments, together with $6.6 million of cash on hand, to redeem the $0.2 million aggregate principal amount of the 9¹/2% notes (including accrued interest and redemption premiums) that were not tendered in the tender offer for such notes and the $24.2 million aggregate principal amount of the floating rate notes (including accrued interest) that were not tendered in the tender offer for such notes.

        In this Annual Report, we refer to the offering, our credit facility and the transactions described above collectively as the transactions.

        We intend to redeem the remaining $19.9 million aggregate principal amount of the 12¹/2% notes on May 1, 2005 with borrowings under the delayed draw facility of our credit facility.

Our Services

        We offer a broad portfolio of high-quality communications services for residential and business customers in each of the markets in which we operate. We have a long history of operating in our markets and have a recognized identity within each of our service areas. Our companies are locally staffed, which enables us to efficiently and reliably provide an array of communications services to meet our customer needs. These include services traditionally associated with local telephone companies, as well as other services such as long distance, Internet and broadband enabled services. Based on our understanding of our local customers' needs, we have attempted to be proactive by offering bundled services designed to simplify the customer's purchasing and management process.

Generation of Revenue

        We primarily generate revenue through: (i) the provision of our basic local telephone service to customers within our service areas; (ii) the provision of network access to interexchange carriers for origination and termination of interstate and intrastate long distance phone calls; (iii) Universal Service Fund high cost loop payments; and (iv) the provision of other services such as long distance resale, data and Internet and broadband enabled services, enhanced services, such as caller name and number identification, and billing and collection for interexchange carriers.

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        The following chart summarizes our revenue sources for the year ended December 31, 2004:

Revenue Source	% Revenue		Description
Local Calling Services	25	%	Enables the local customer to originate and receive an unlimited number of calls within a defined "exchange" area. The customer is charged a flat monthly fee for basic service and service charges for special calling features.
Network Access Charges	45	%	Enables long distance companies to utilize our local network to originate or terminate intrastate and interstate calls. The network access charges are paid by the interexchange carrier to us and are regulated by state regulatory agencies and the Federal Communications Commission, respectively. This also includes Universal Service Fund payments for local switching support, long term support and interstate common line support.
Universal Service Fund High Cost Loop	9	%	We receive payments from the Universal Service Fund to support the high cost of our operations in rural markets. This support fluctuates based upon our average cost per loop compared to the national average cost per loop.
Long Distance Services	7	%	We receive revenues for intrastate and interstate long distance services provided to our retail customers and our wholesale long distance customers.
Data and Internet Services	7	%	We receive revenues from monthly recurring charges for services, including broadband, digital subscriber line, special access, private lines, Internet and other services.
Other Services	7	%	We generate revenues from other services, including enhanced services and billing and collection.

        See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for more information regarding our revenue sources.

Local Calling Services

        Local calling services include basic local lines, private lines and switched data services. We provide local calling services to residential and business customers, generally for a fixed monthly charge. In a rural local exchange carriers' territory, the amount that we can charge a customer for local service is determined by rate proceedings involving the appropriate state regulatory authorities.

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Network Access Charges

        Network access charges relate to long distance, or toll calls, that typically involve more than one company in the provision of telephone service. Since toll calls are generally billed to the customer originating the call, a mechanism is required to compensate each company providing services relating to the call. This mechanism is the access charge and we bill access charges to long distance companies and other customers for the use of our facilities to access the customer, as described below.

        Intrastate Access Charges.    We generate intrastate access revenue when an intrastate long distance call involving an interexchange carrier is originated by a customer in one of our rural local exchanges to a customer in another exchange in the same state, or when such a call is terminated to a customer in one of our rural local exchanges. The interexchange carrier pays us an intrastate access payment for either terminating or originating the call. We bill the call through our carrier access billing system and receive the access payment from the interexchange carrier. The access charge for intrastate services is regulated and approved by the state regulatory authority.

        Interstate Access Charges.    We generate interstate access revenue when an interstate long distance call is originated by a customer in one of our rural local exchanges to a customer in another state, or when such a call is terminated to a customer in one of our rural local exchanges. We bill interstate access charges in the same manner as we bill intrastate access charges; however, the interstate access charge is regulated and approved by the Federal Communications Commission instead of the state regulatory authority.

Universal Service Fund High Cost Loop

        The Universal Service Fund supplements the amount of local service revenue received by us to ensure that basic local service rates for customers in high cost rural areas are consistent with rates charged in lower cost urban and suburban areas. The Universal Service Fund, which is funded by monthly fees charged to interexchange carriers and local exchange carriers, makes payments to us on a monthly basis based upon our cost support for local exchange carriers whose cost of providing the local loop connections to customers is significantly greater than the national average.

Long Distance Services

        We offer switched and dedicated long distance services throughout our service areas through resale agreements with national interexchange carriers. In addition, through our wholly-owned subsidiary FairPoint Carrier Services, Inc., or Carrier Services, we offer wholesale long distance services to communications providers that are not affiliated with us.

Data and Internet Services

        We offer Internet access via digital subscriber line technology, dedicated T-1 connections, Internet dial-up, high speed cable modem and wireless broadband. Customers can utilize this access in combination with customer owned equipment and software to establish a presence on the web. In addition, we offer enhanced Internet services, which include obtaining Internet protocol addresses, basic web site design and hosting, domain name services, content feeds and web-based e-mail services. Our services include access to 24-hour, 7-day a week customer support.

Other Services

        We seek to capitalize on our rural local exchange carriers' local presence and network infrastructure by offering enhanced services to customers, as well as billing and collection services for interexchange carriers.

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        Enhanced Services.    Our advanced digital switch and voicemail platforms allow us to offer enhanced services such as call waiting, call forwarding and transferring, call hunting, three-way calling, automatic callback, call hold, caller name and number identification, voice mail, teleconferencing, video conferencing, store-and-forward fax, follow-me numbers, Centrex services and direct inward dial.

        Billing and Collection.    Many interexchange carriers provide long distance services to our rural local exchange carrier customers and may elect to use our billing and collection services. Our rural local exchange carriers charge interexchange carriers a billing and collection fee for each call record generated by the interexchange carrier's customer.

        Directory Services.    Through our local telephone companies, we publish telephone directories in the majority of our locations. These directories provide white page listings, yellow page listings and community information listings. These directories generate revenues and operating cash flow from the sale of yellow page and related advertising to businesses. We contract with leading industry providers to assist in the sale of advertising, compilation of information, as well as the production, publication and distribution of these directories.

Our Markets

        Our 26 rural local exchange carriers operate as the incumbent local exchange carrier in each of their respective markets. Our rural local exchange carriers serve an average of approximately 13 access lines per square mile versus the non-rural carrier average of approximately 128 access lines per square mile. Approximately 79.3% of our access lines serve residential customers. Our business customers account for approximately 20.7% of our access lines. Our business customers are predominantly in the agriculture, light manufacturing and service industries.

        The following chart identifies the number of access line equivalents in each of our 17 states as of December 31, 2004:

State	Access Line Equivalents
Maine	68,299
Florida	54,142
Washington	45,626
New York	44,335
Ohio	9,341
Virginia	8,216
Illinois	8,094
Vermont	7,055
Idaho	5,969
Kansas	6,089
Oklahoma	3,832
Colorado	3,132
Pennsylvania	3,060
Other States(1)	3,960
Total:	271,150

(1)

Includes Massachusetts, New Hampshire, Georgia and Alabama.

Sales and Marketing

        Our marketing approach emphasizes customer-oriented sales, marketing and service. We believe most communications companies devote their resources and attention primarily toward customers in

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more densely populated markets. To the extent we experience competition for any of our services, we seek to differentiate ourselves from the competitors providing such services by providing a superior level of service to each of our customers.

        Each of our rural local exchange carriers has a long history in the communities it serves. It is our policy to maintain and enhance the strong identity and reputation that each rural local exchange carrier enjoys in its markets, as we believe this is a significant competitive advantage. As we market new services, we will seek to continue to utilize our identity in order to attain higher recognition with potential customers.

        To demonstrate our commitment to the markets we serve, we maintain local offices in most of the population centers within our service territories. These offices are typically staffed by local residents and provide sales and customer support services in the community. We believe that local offices facilitate a direct connection to the community, which improves customer satisfaction and loyalty.

        In addition, our strategy is to enhance our communications services by offering comprehensive bundling of services and deploying new technologies to build upon the strong reputation we enjoy in our markets and to further promote rural economic development in the rural communities we serve.

        Many of the rural local exchange carriers acquired by us traditionally have not devoted a substantial amount of their operating budget to sales and marketing activities. After acquiring such rural local exchange carriers, we typically change this practice to provide additional support for existing products and services as well as to support the introduction of new services. As of December 31, 2004, we had 207 employees engaged in sales, marketing and customer service.

        We have two basic tiers of customers: (i) local customers located in our local access and transport areas who pay for local phone service and (ii) the interexchange carriers which pay us for access to customers located within our local access and transport areas. In general, the vast majority of our local customers are residential, as opposed to business, which is typical for rural telephone companies.

Information Technology and Support Systems

        Our approach to billing and operational support systems focuses on implementing best-of-class applications that allow consistent communication and coordination throughout our entire organization. Our objective is to improve profitability by reducing individual company costs through the sharing of best practices, centralization or standardization of functions and processes, and deployment of technologies and systems that provide for greater efficiencies and profitability.

        We have begun to integrate our six billing systems into a single, outsourced billing platform. When completed, we plan to use this platform to develop a number of centralized customer service and call centers and to create a significantly improved customer data base. We believe that such call centers and customer data base will allow us to enhance our operating efficiency and optimize our marketing initiatives. The billing platform will also enable our customers to directly access, via the Internet, their accounts and will allow us to provide virtual call centers.

Network Architecture and Technology

        Our rural local exchange carrier networks consist of central office hosts and remote sites, all with advanced digital switches (primarily manufactured by Nortel and Siemens) and operating with current software. The outside plant consists of transport and distribution delivery networks connecting our host central office with remote central offices and ultimately with our customers. As of December 31, 2004, we maintained over 25,000 miles of copper plant and approximately 3,300 miles of fiber optic plant. We own fiber optic cable, which has been deployed throughout our current network and is the primary transport technology between our host and remote central offices and interconnection points with other incumbent carriers.

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        Our fiber optic transport system is primarily a synchronous optical network capable of supporting increasing customer demand for high bandwidth transport services. This system supports advanced services including Asynchronous Transfer Mode, Frame Relay and/or Internet Protocol Transport, facilitating delivery of advanced services as demand warrants.

        In our rural local exchange carrier markets, digital subscriber line-enabled integrated access technology is being deployed to provide significant broadband capacity to our customers. As of December 31, 2004, we had invested approximately $25.7 million in digital subscriber line technology and had deployed this technology in 123 of our 143 exchanges. Approximately 93% of our exchanges are capable of providing broadband services through cable modem, wireless broadband and/or digital subscriber line technology.

        Rapid and significant changes in technology are expected in the communications industry. Our future success will depend, in part, on our ability to anticipate and adapt to technological changes. We believe that our network architecture will enable us to efficiently respond to these technological changes.

Competition

        We believe that the Telecommunications Act and other recent actions taken by the Federal Communications Commission and state regulatory authorities promote competition in the provision of communications services; however, many of the competitive threats now confronting larger regulated telephone companies do not currently exist in the rural local exchange carrier marketplace. Our rural local exchange carriers historically have experienced little wireline competition as the incumbent carrier in their markets because the demographic characteristics of rural communications markets generally will not support the high cost of operations and significant capital investment required for new wireline entrants to offer competitive services. For instance, the per minute cost of operating both telephone switches and interoffice facilities is higher in rural areas, as rural local exchange carriers typically have fewer, more geographically dispersed customers and lower calling volumes. Also, the distance from the telephone switch to the customer is typically longer in rural areas, which results in increased distribution facilities costs. These relatively high costs tend to discourage other wireline competitors from entering territories serviced by our rural local exchange carriers.

Wireless Competition

        In most of our rural markets, we face competition from wireless technology. We do not expect this technology to represent a significant competitive threat to us in the near term, but as technology and economies of scale improve, we may experience increased competition from wireless carriers. In addition, the Federal Communications Commission's requirement that telephone companies offer wireline-to-wireless number portability may increase the competition we face from wireless carriers.

Wireline and Satellite Competition

        We also face competition from new market entrants that provide close substitutes for the traditional telephone services we provide, such as cable television, satellite communications and electric utility companies. Cable television companies are entering the communications market by upgrading their networks with fiber optics and installing facilities to provide fully interactive transmission of broadband, voice, video and data communications. Electric utilities have existing assets and access to low cost capital that could allow them to enter a market rapidly and accelerate network development. While we have limited competition for voice services from cable providers and electric utilities for basic voice services, we cannot guarantee that we will not face increased competition from such providers in the future.

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        In addition, we could face increased competition from competitive local exchange carriers, particularly in offering services to Internet service providers.

Voice Over Internet Protocol Competition

        Voice over internet protocol service is increasingly being embraced by all industry participants. Voice over internet protocol service essentially involves the routing of voice calls, at least in part, over the Internet through packets of data instead of transmitting the calls over the existing public switched telephone network. While current voice over internet protocol applications typically complete calls using incumbent local exchange carrier infrastructure and networks, as voice over internet protocol services obtain acceptance and market penetration and technology advances further, a greater quantity of communication may be placed without utilizing the public switched telephone network. On March 10, 2004, the Federal Communications Commission issued a Notice of Proposed Rulemaking with respect to internet protocol-enabled services. Among other things, the Federal Communications Commission is considering whether voice over internet protocol services are regulated communications services or unregulated information services. We cannot predict the outcome of the Federal Communications Commission's rulemaking on this subject or the impact on the revenues of our rural local exchange carriers. The proliferation of voice over internet protocol, particularly to the extent such communications do not utilize our rural local exchange carriers' networks, may result in an erosion of our customer base and loss of access fees and other funding.

Internet Competition

        The Internet services market is also highly competitive, and we expect that competition will continue to intensify. Internet services, meaning both Internet access (wired and wireless) and on-line content services, are provided by Internet service providers, satellite-based companies, long distance carriers and cable television companies. Many of these companies provide direct access to the Internet and a variety of supporting services to businesses and individuals. In addition, many of these companies, such as America Online, Inc., Microsoft Network and Yahoo, offer on-line content services consisting of access to closed, proprietary information networks. Long distance companies and cable television operators, among others, are aggressively entering the Internet access markets. Long distance carriers have substantial transmission capabilities, traditionally carry data to large numbers of customers and have an established billing system infrastructure that permits them to add new services. Satellite companies are offering broadband access to the Internet from desktop personal computers. Many of these competitors have substantially greater financial, technological, marketing, personnel, name-brand recognition and other resources than those available to us.

Long Distance Competition

        The long distance communications market is highly competitive. Competition in the long distance business is based primarily on price, although service bundling, branding, customer service, billing service and quality play a role in customers' choices.

Other Competition

        Although we believe we offer the only comprehensive suite of communications services in our markets, existing service providers such as wireless, cable and utility companies could form strategic alliances to offer bundled services in our markets. We cannot guarantee that we will not face increased competition from such bundled service providers.

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Employees

        As of December 31, 2004, we employed a total of 847 employees. 125 employees of our rural local exchange carriers are represented by four unions. We believe the state of our relationship with our union and non-union employees is good. Within our company, 34 employees are employed at our corporate office, 804 employees are employed at our rural local exchange carriers and 9 employees are employed by Carrier Services.

Intellectual Property

        We believe we have the trademarks, trade names and licenses that are necessary for the operation of our business as we currently conduct it. We do not consider our trademarks, trade names or licenses to be material to the operation of our business.

Discontinued Operations

        On September 30, 2003, MJD Services Corp., or MJD Services, a wholly-owned subsidiary of the Company, completed the sale of all of the capital stock owned by MJD Services of Union Telephone Company of Hartford, Armour Independent Telephone Co., WMW Cable TV Co. and Kadoka Telephone Co. to Golden West Telephone Properties, Inc., or Golden West, which we refer to as the South Dakota disposition. The sale was completed in accordance with the terms of a purchase agreement between MJD Services and Golden West, dated as of May 9, 2003, which we refer to as the South Dakota purchase agreement. MJD Services received approximately $24.2 million in proceeds from the South Dakota disposition. The companies sold to Golden West provided communications services to approximately 4,150 voice access lines located in South Dakota as of the date of such disposition. The operations of these companies were presented as discontinued operations beginning in the second quarter of 2003. Therefore, the balances associated with these activities were reclassified as "held for sale." All prior period financial statements have been restated accordingly. We recorded a gain on disposal of the South Dakota companies of $7.7 million during the third quarter of 2003.

        In early 1998, we launched our competitive local exchange carrier enterprise through Carrier Services. In November 2001, we decided to discontinue such competitive local exchange carrier operations. This decision was a proactive response to the deterioration in the capital markets, the general slow-down of the economy and the slower-than-expected growth in Carrier Services' competitive local exchange carrier operations. Carrier Services completed the termination or sale of its competitive local exchange carrier operations in the second quarter of 2002. Carrier Services now provides wholesale long distance service and support to our rural local exchange carriers and to communications providers not affiliated with us. These services allow such companies to operate their own long distance communication services and sell such services to their respective customers.

Regulatory Environment

        The following summary does not describe all present and proposed federal, state and local legislation and regulations affecting the communications industry. Some legislation and regulations are currently the subject of judicial proceedings, legislative hearings and administrative proposals which could change the manner in which this industry operates. Neither the outcome of any of these developments, nor their potential impact on us, can be predicted at this time. Regulation can change rapidly in the communications industry, and such changes may have an adverse effect on us in the future. See "Item 7. Management's Discussion and analysis of Financial Condition and Results of Operations—Risk Factors—Risks Related to our Regulatory Environment."

        Our regulated communications services are subject to extensive federal, state and local regulation. We hold various regulatory authorizations for our service offerings. At the federal level, the Federal Communications Commission generally exercises jurisdiction over all facilities and services of

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communications common carriers, such as us, to the extent those facilities are used to provide, originate, or terminate interstate or international communications. State regulatory commissions generally exercise jurisdiction over such facilities and services to the extent those facilities are used to provide, originate or terminate intrastate communications. In addition, pursuant to the Telecommunications Act, state and federal regulators share responsibility for implementing and enforcing the domestic pro-competitive policies introduced by that legislation. In particular, state regulatory agencies have substantial oversight over the provision by incumbent telephone companies of interconnection and non-discriminatory network access to competitive communications providers. Local governments often regulate the public rights-of-way necessary to install and operate networks, and may require communications services providers to obtain licenses or franchises regulating their use of public rights-of-way. Additionally, municipalities and other local government agencies may regulate limited aspects of our business, including our use of public rights of way, and by requiring us to obtain construction permits and abide by building codes.

        We believe that competition in our telephone service areas will increase in the future as a result of the Telecommunications Act, although the ultimate form and degree of competition cannot be ascertained at this time. Competition may lead to loss of revenues and profitability as a result of: loss of customers; reduced usage of our network by our existing customers who may use alternative providers for long distance and data services; and reductions in prices for our services which may be necessary to meet competition.

Federal Regulation

        We must comply with the Communications Act which requires, among other things, that communications carriers offer services at just and reasonable rates and on non-discriminatory terms and conditions. The amendments to the Communications Act contained in the Telecommunications Act dramatically changed and are expected to continue to change the landscape of the communications industry. The central aim of the Telecommunications Act was to open local communications marketplaces to competition while enhancing universal service. Most significantly, the Telecommunications Act governs the removal of barriers to market entry into local telephone services, requires incumbent local exchange carriers to interconnect with competitors, establishes procedures pursuant to which incumbent local exchange carriers may provide other services, such as the provision of long distance services by regional bell operating companies, and imposes on incumbent local exchange carriers duties to negotiate interconnection arrangements in good faith.

        Removal of Entry Barriers.    Prior to the enactment of the Telecommunications Act, many states limited the services that could be offered by a company competing with an incumbent local exchange carrier. The Telecommunications Act generally preempts state and local laws that prevent competitive entry into the provision of any communications service. However, states can modify conditions of entry into areas served by rural local exchange carriers where the state regulatory commission determines that such modification is warranted by the public interest. Since the passage of the Telecommunications Act, we have experienced only limited competition from cable and wireless service providers.

        Access Charges.    The Federal Communications Commission regulates the prices that incumbent local telephone companies charge for the use of their local telephone facilities in originating or terminating interstate transmissions. The Federal Communications Commission has structured these prices, also referred to as "access charges," as a combination of flat monthly charges paid by the end-users and usage sensitive charges paid by long distance carriers. State regulatory commissions regulate intrastate access charges. Many states generally mirror the Federal Communications Commission price structure. A significant amount of our revenues come from network access charges, which are paid to us by intrastate carriers and interstate long distance carriers for originating and terminating calls in the regions served by our rural local exchange carriers. The amount of access

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charge revenues that we receive is based on rates set by federal and state regulatory bodies, and such rates are subject to change at any time.

        The Federal Communications Commission regulates the levels of interstate access charges by imposing price caps on larger incumbent local telephone companies. These price caps can be adjusted based on various formulae, such as inflation and productivity, and otherwise through regulatory proceedings. Smaller incumbents may elect to base access charges on price caps, but are not required to do so unless they elected to use price caps in the past or their affiliated incumbent local telephone companies base their access charges on price caps. Each of our 26 incumbent local telephone subsidiaries elected not to apply the Federal Communications Commission's price caps. Instead, our subsidiaries employ rate-of-return regulation for their interstate access charges.

        The Federal Communications Commission has made, and is continuing to consider, various reforms to the existing rate structure for charges assessed on long distance carriers for connection to local networks. States often mirror federal rules in establishing intrastate access charges. In 2001, the Federal Communications Commission adopted an order implementing the beginning phases of the Multi Association Group plan to reform the access charge system for rural carriers. The Multi Association Group plan is revenue neutral to our operating companies. Among other things, the Multi Association Group plan reduces access charges and shifts a portion of cost recovery, which historically has been based on minutes-of-use, to flat-rate, monthly per line charges on end-user customers rather than long distance carriers. As a result, the aggregate amount of access charges paid by long distance carriers to access providers, such as our rural local exchange carriers, has decreased and may continue to decrease. In adopting the Multi Association Group plan, the Federal Communications Commission also determined that rate-of-return carriers will continue to be permitted to set rates based on the authorized rate of return of 11.25%. Additionally, the Federal Communications Commission initiated a rulemaking proceeding to investigate the Multi Association Group's proposed incentive regulation plan and other means of allowing rate-of-return carriers to increase their efficiency and competitiveness. The Multi Association Group plan expires in 2006 and will need to be renewed or replaced at such time. In addition, to the extent our rural local exchange carriers become subject to competition in their own local exchange areas, such access charges could be paid to competing local exchange carriers rather than to us. Additionally, the access charges we receive may be reduced as a result of competition by other service providers such as wireless and voice over internet services. Such a circumstance could have a material adverse effect on our financial condition and results of operations. In addition, the Federal Communications Commission has sought comment on broad policy changes that could harmonize the rate structure and levels of all forms of intercarrier compensation, and could, as a result, substantially modify the current forms of carrier-to-carrier payments for interconnected traffic. Furthermore, in the notice of proposed rulemaking on voice over internet protocol services the Federal Communications Commission adopted in February 2004, the Federal Communications Commission has sought comment on whether access charges should apply to voice over internet protocol or other internet protocol based services. It is unknown at this time what additional changes, if any, the Federal Communications Commission may eventually adopt and the effect of any such changes on our business.

        Rural Local Exchange Carrier Services Regulation.    Our rural local exchange carrier services segment revenue is subject to regulation including regulation by the Federal Communications Commission and incentive regulation by various state regulatory commissions. State lawmakers will likely continue to review the statutes governing the level and type of regulation for communications services. It is expected that over the next few years, legislative and regulatory actions will provide opportunities to restructure rates, introduce more flexible incentive regulation programs and possibly reduce the overall level of regulation. We expect the election of incentive regulation plans and the expected reduction in the overall level of regulation to allow us to introduce new services and pricing changes more expeditiously than in the past. At the same time, however, the implementation of such new programs may also lead to reductions in intrastate access charges.

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        The Federal Communications Commission generally must approve in advance most transfers of control and assignments of operating authorizations by Federal Communications Commission-regulated entities. Therefore, if we seek to acquire companies that hold Federal Communications Commission authorizations, in most instances we will be required to seek approval from the Federal Communications Commission prior to completing those acquisitions. The Federal Communications Commission has the authority to condition, modify, cancel, terminate or revoke operating authority for failure to comply with applicable federal laws or rules, regulations and policies of the Federal Communications Commission. Fines or other penalties also may be imposed for such violations. Our interstate common carrier services are also subject to nondiscrimination requirements and requirements that rates be just and reasonable.

        The Federal Communications Commission has required that incumbent independent local exchange carriers that provide interstate long distance services originating from their local exchange service territories must do so in accordance with "structural separation" rules. These rules require that our long distance affiliates (i) maintain separate books of account, (ii) not own transmission or switching facilities jointly with the local exchange affiliate, and (iii) acquire any services from its affiliated local exchange telephone company at tariffed rates, terms and conditions. The Federal Communications Commission has initiated a rulemaking proceeding to examine whether there is a continuing need for such requirements; however, we cannot predict the outcome of that proceeding.

        The Telecommunications Act required all carriers to offer local number portability. This requirement allows telephone customers to change service providers but keep their existing telephone numbers. Initially, the Federal Communications Commission set November 24, 2003 as the local number portability deadline for carriers within the Top 100 Metropolitan Statistical Areas and May 24, 2004 for carriers outside the Top 100 Metropolitan Statistical Areas. On January 16, 2004, the Federal Communications Commission granted an extension of time, to May 24, 2004, to local exchange carriers with fewer than two percent of the nation's subscriber lines, regardless of whether the companies operate in a Top 100 Metropolitan Statistical Areas. Except for carriers that qualify as small entities under the Regulatory Flexibility Act whose intermodal porting obligations were recently and temporarily stayed by the United States Court of Appeals for the District of Columbia, all local exchange carriers with bona fide local number portability requests were required to be prepared to port numbers from wireline to wireless carriers on or before May 24, 2004. We are in compliance with this requirement in all of the states in which we operate or have received waivers to extend the time for implementation beyond the May 24th date in certain states where technical limitations hinder compliance by this date.

        Our operations and those of all communications carriers also may be impacted by legislation and regulation imposing new or greater obligations related to assisting law enforcement, bolstering homeland security, minimizing environmental impacts, or addressing other issues that impact our business. For example, existing provisions of the Communications Assistance for Law Enforcement Act and Federal Communications Commission regulations implementing the Communications Assistance for Law Enforcement Act require communications carriers to ensure that their equipment, facilities, and services are able to facilitate authorized electronic surveillance. We believe we are in compliance with those laws and regulations. These laws and regulations, however, are subject to both interpretation and change which may result in requirements for us to incur additional costs.

State Regulation

        Most states have some form of certification requirement that requires providers of communications services to obtain authority from the state regulatory commission prior to offering common carrier services. Each of our 26 rural local exchange carriers operates as the incumbent local telephone company in the states in which it operates and is certified in those states to provide local telephone services. State regulatory commissions generally regulate the rates incumbent local exchange carriers

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charge for intrastate services, including rates for intrastate access services paid by providers of intrastate long distance services. Although the Federal Communications Commission has preempted certain state regulations pursuant to the Telecommunications Act, states have retained authority to impose requirements on carriers necessary to preserve universal service, protect public safety and welfare, ensure quality of service and protect consumers. For instance, incumbent local exchange carriers must file tariffs setting forth the terms, conditions and prices for their intrastate services, and such tariffs may be challenged by third parties. From time to time, states conduct rate cases or "earnings" reviews. These reviews may result in the disallowance of certain investments or expenses for ratemaking purposes. We currently have "earnings" reviews of our rates being conducted in Idaho, New York (including with respect to deferred pension assets) and Vermont.

        Under the Telecommunications Act, state regulatory commissions have jurisdiction to arbitrate and review interconnection disputes and agreements between incumbent local exchange carriers and competitive local exchange carriers, in accordance with rules set by the Federal Communications Commission. State regulatory commissions may also formulate rules regarding fees imposed on providers of communications services within their respective states to support state universal service programs. States often require prior approvals or notifications for certain acquisitions and transfers of assets, customers, or ownership of regulated entities. Therefore, in most instances we will be required to seek state approval prior to completing new acquisitions of rural local exchange carriers. States generally retain the right to sanction a carrier or to revoke certifications if a carrier materially violates relevant laws and/or regulations.

Local Government Authorizations

        We may be required to obtain from municipal authorities permits for street opening and construction or operating franchises to install and expand facilities in certain rural communities. Some of these franchises may require the payment of franchise fees. We have obtained such municipal franchises as were required. In some rural areas, we do not need to obtain such permits or franchises because the subcontractors or electric utilities with which we have contracts already possess the requisite authorizations to construct or expand our networks.

Promotion of Local Service Competition and Traditional Telephone Companies

        As discussed above, the Telecommunications Act provides, in general, for the removal of barriers to entry into the communications industry in order to promote competition for the provision of local service. Congress, however, has recognized that states should not be prohibited from taking actions necessary to preserve and advance universal service, and has further recognized that special consideration should be given to the appropriate conditions for competitive entry in areas served by rural telephone companies, such as our 26 rural local exchange carrier subsidiaries.

        Pursuant to the Telecommunications Act, all local exchange carriers, including both incumbents and new competitive carriers, are required to: (i) allow others to resell their services at retail rates; (ii) ensure that customers can keep their telephone numbers when changing carriers; (iii) ensure that competitors' customers can use the same number of digits when dialing and receive nondiscriminatory access to telephone numbers, operator service, directory assistance and directory listing; (iv) ensure access to telephone poles, ducts, conduits and rights of way; and (v) compensate competitors for the competitors' costs of completing calls to competitors' customers. Competitors are required to compensate the incumbent telephone company for the cost of providing these interconnection services. Under the Telecommunications Act, our rural local exchange carriers may request from state regulatory commissions, suspension or modification of any or all of the requirements described above. A state regulatory commission may grant such a request if it determines that such exemption, suspension or modification is consistent with the public interest and necessary to avoid a significant adverse economic impact on communications users and generally avoid imposing a requirement that is technically

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unfeasible or unduly economically burdensome. If a state regulatory commission denies some or all of any such request made by one of our rural local exchange carriers, or does not allow us adequate compensation for the costs of providing interconnection, our costs could increase and our revenues could decline. In addition, with such a denial, competitors could enjoy benefits that would make their services more attractive than if they did not receive such interconnection rights. With the exception of the previously referenced requests to modify the May 24, 2004 implementation date for local number portability in certain states, we have not encountered a need to file any such requests for suspension or modification of the interconnection requirements.

        The Telecommunications Act, with certain exceptions, imposes the following additional duties on incumbent telephone companies by requiring them to: (i) interconnect their facilities and equipment with any requesting communications carrier at any technically feasible point; (ii) unbundle and provide nondiscriminatory access to network elements such as local loops, switches and transport facilities, at nondiscriminatory rates and on nondiscriminatory terms and conditions; (iii) offer their retail services for resale at wholesale rates; (iv) provide reasonable notice of changes in the information necessary for transmission and routing of services over the incumbent telephone company's facilities or in the information necessary for interoperability; and (v) provide, at rates, terms and conditions that are just, reasonable and nondiscriminatory, for the physical co-location of equipment necessary for interconnection or access to unbundled network elements at the premises of the incumbent telephone company. Competitors are required to compensate the incumbent local exchange carrier for the cost of providing these interconnection services. However, pursuant to the Telecommunications Act, rural telephone companies, including our rural local exchange carriers, are automatically exempt from these additional incumbent telephone company requirements. The exemption remains effective until an incumbent rural local telephone company receives a bona fide request for these additional interconnection services and the applicable state authority determines whether the request is not unduly economically burdensome, technically feasible, and consistent with the universal service objectives set forth in the Telecommunications Act. This exemption remains effective for all of our incumbent local telephone operations, except in Florida where the legislature has determined that all incumbent local exchange carriers are required to provide the additional interconnection services as prescribed in the Telecommunications Act. If a request for any of these additional interconnection services is filed by a potential competitor with respect to one of our other operating territories, we are likely to ask the relevant state regulatory commission to retain the exemption. If a state regulatory commission rescinds such exemption in whole or in part and if the state regulatory commission does not allow us adequate compensation for the costs of providing the interconnection, our costs would significantly increase, we would face new competitors in that state and we could suffer a significant loss of customers and resulting declines in our revenues. In addition, we could incur additional administrative and regulatory expenses as a result of the interconnection requirements.

Promotion of Universal Service

        The Universal Service Fund payments received by our rural local exchange carriers from the Universal Service Fund are intended to support the high cost of our operations in rural markets. Such Universal Service Fund payments related to the high cost loop represented 9% of our revenues for the year ended December 31, 2004. Under current Federal Communications Commission regulations, the total Universal Service Fund available to all rural local telephone companies, including our 26 rural local exchange carrier subsidiaries, is subject to a cap. In any given year, the cap may or may not be reached. In any year where the cap is reached, the per access line rate at which we can recover Universal Service Fund payments may decrease. In addition, the consideration of changes in the federal rules governing the distribution of Universal Service Fund is pending before the Federal Communications Commission. If our rural local exchange carriers were unable to receive Universal Service Fund payments, or if such payments were reduced, many of our rural local exchange carriers would be unable to operate as profitably as they have historically in the absence of our implementation

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of increases in charges for other services. Moreover, if we raise prices for services to offset loss of Universal Service Fund payments, the increased pricing of our services may disadvantage us competitively in the marketplace, resulting in additional potential revenue loss. Payments from the Universal Service Fund fluctuate based upon our average cost per loop compared with the national average cost per loop. For example, if the national average cost per loop increases and our operating costs (and average cost per loop) remain constant or decrease, the payments we receive from the Universal Service Fund would decline. Conversely, if the national average cost per loop decreases and our operating costs (and average cost per loop) remain constant or increase, the payments we receive from the Universal Service Fund would increase. Over the past year, the national average cost per loop in relation to our average cost per loop has increased and we believe the national average cost per loop will likely continue to increase in relation to our average cost per loop. As a result, the payments we receive from the Universal Service Fund will likely decline.

        Universal service rules have been adopted by both the Federal Communications Commission and some state regulatory commissions. Universal Service Fund funds may be distributed only to carriers that are designated as eligible communications carriers by a state regulatory commission. All of our rural local exchange carriers have been designated as eligible communications carriers pursuant to the Telecommunications Act. However, under the Telecommunications Act, competitors could obtain the same support payments as we do if a state regulatory commission determined that granting such support payments to competitors would be in the public interest.

        Two notable regulatory changes enacted by the Federal Communications Commission in the last four years are the adoption, with certain modifications, of the Rural Task Force proposed framework for rural high-cost universal service support and the implementation of the beginning phases of the Multi Association Group plan. The Federal Communications Commission's Rural Task Force order modifies the existing universal service support mechanism for rural local exchange carriers and adopts an interim embedded, or historical, cost mechanism for a five-year period that provides predictable levels of support to rural carriers. The Federal Communication Commission has stated its intention to develop a long-term plan based on forward looking costs when the five-year period expires in 2006. The Multi Association Group plan created a new universal service support mechanism, Interstate Common Line Support, to replace carrier common line access charges and the recovery of certain costs formerly recovered through traffic sensitive access charges. A recent Federal Communications Commission order merged long term support into its interstate common line support mechanism without reducing (at least initially) the aggregate universal service support from the two mechanisms (both of which had been previously transformed from access charge revenue streams into universal service support mechanisms). As a result of these changes, when a competitor is designated an eligible communications carrier, it also receives an increased level of Universal Service Fund support equal to the level received by the incumbent on a per line basis.

        The Federal State Joint Board is currently considering recommendations on the question of which carriers can obtain Universal Service Fund support in a market. The Federal State Joint Board recommended that:

•

a set of permissive federal guidelines be developed to ensure that the public interest is served before eligible communications carriers are designated;



•

support be limited to a single connection that provides access to the public telephone network; and



•

the basis for providing support be considered and further clarified during the comprehensive review of the Universal Service Fund to be completed in 2006.

        On February 28, 2005, the Federal Communications Commission issued a press release announcing additional requirements for the designation of competitive Eligible Telecommunications Carriers for

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receipt of high-cost support. Although the written text of the Federal Communications Commission order has not been released, the Federal Communications Commission has adopted additional mandatory requirements for Eligible Telecommunications Carriers designation in cases where it has jurisdiction, and encourages states that have jurisdiction to designate Eligible Telecommunications Carriers to adopt similar requirements. The Federal Communications Commission is still considering revisions to the methodology by which contributions to the Universal Service Fund are determined. These revisions will be part of an overall rulemaking regarding Universal Service Support which will be dealt with sometime in the next year.

        In addition, there are a number of judicial appeals challenging several aspects of the Federal Communications Commission's universal service rules. It is not possible to predict at this time whether the Federal Communications Commission or Congress will require modification to those rules, or the ultimate impact any such modification might have on us.

Potential Internet Regulatory Obligations

        In connection with our Internet access offerings, we could become subject to laws and regulations as they are adopted or applied to the Internet. There is currently only limited regulations applicable to the Internet. As the significance of the Internet expands, federal, state and local governments may adopt rules and regulations, or apply existing laws and regulations to the Internet, and related matters are under consideration in both federal and state legislative and regulatory bodies. The Federal Communications Commission is currently reviewing the appropriate regulatory framework governing broadband access to the Internet through telephone and cable operators' communications networks. We cannot predict whether the outcome will prove beneficial or detrimental to our competitive position. In February 2004, the Federal Communications Commission initiated a proceeding to examine the regulatory implications of voice over Internet protocol technology. We cannot predict the results of these proceedings, the nature of these regulations or their impact on our business.

Environmental Regulations

        Like all other local telephone companies, our 26 rural local exchange carrier subsidiaries are subject to federal, state and local laws and regulations governing the use, storage, disposal of, and exposure to hazardous materials, the release of pollutants into the environment and the remediation of contamination. As an owner of property, we could be subject to environmental laws that impose liability for the entire cost of cleanup at contaminated sites, regardless of fault or the lawfulness of the activity that resulted in contamination. We believe, however, that our operations are in substantial compliance with applicable environmental laws and regulations.

ITEM 2.    PROPERTIES

        We own all of the properties material to our business. Our headquarters is located in Charlotte, North Carolina in a leased facility. We also have administrative offices, maintenance facilities, rolling stock, central office and remote switching platforms and transport and distribution network facilities in each of the 17 states in which we operate our rural local exchange carrier business. Our administrative and maintenance facilities are generally located in or near the rural communities served by our rural local exchange carriers and our central offices are often within the administrative building and/or outlying customer service centers. Auxiliary battery or other non-utility power sources are at each central office to provide uninterrupted service in the event of an electrical power failure. Transport and distribution network facilities include fiber optic backbone and copper wire distribution facilities, which connect customers to remote switch locations or to the central office and to points of presence or interconnection with the long distance carriers. These facilities are located on land pursuant to permits, easements or other agreements. Our rolling stock includes service vehicles, construction equipment and other required maintenance equipment.

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        We believe each of our respective properties is suitable and adequate for the business conducted therein, is being appropriately used consistent with past practice and has sufficient capacity for the present intended purposes.

ITEM 3.    LEGAL PROCEEDINGS

        We currently and from time to time are involved in litigation and regulatory proceedings incidental to the conduct of our business, but currently we are not a party to any lawsuit or proceeding which, in our opinion, is likely to have a material adverse effect on us.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        No matters were submitted to a vote of our security holders during the fourth quarter of fiscal 2004.

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

General

        Our common stock began trading on the New York Stock Exchange under the symbol "FRP" on February 4, 2005. Prior to that time, there was no trading market for our common stock. The high trading price for our common stock during the period from February 4, 2005 to March 22, 2005 was $18.55 per share. The low trading price for our common stock during the period from February 4, 2005 to March 22, 2005 was $15.55 per share.

        On March 3, 2005, we declared a dividend of $0.22543 per share of our common stock, payable on April 15, 2005 to holders of record as of March 31, 2005. This dividend represents a partial-quarter proration (for the period from February 8, 2005 to March 31, 2005) of the indicated annual dividend of $1.59125 per share. For an explanation of our dividend policy, see "—Dividend Policy and Restrictions" below.

        As of March 15, 2005, there were approximately 88 holders of record of our common stock.

Dividend Policy and Restrictions

General

        Our board of directors has adopted a dividend policy under which a substantial portion of the cash generated by our business in excess of operating needs, interest and principal payments on our indebtedness, dividends on our future senior classes of capital stock, if any, capital expenditures, taxes and future reserves, if any, would in general be distributed as regular quarterly dividend payments to the holders of our common stock, rather than retained by us and used for other purposes, including to finance growth opportunities. This policy reflects our judgment that our stockholders would be better served if we distributed to them such substantial portion of the excess cash generated by our business instead of retaining it in our business. However, as described more fully below, our stockholders may not receive any dividends as a result of the following factors:

•

nothing requires us to pay dividends;



•

while our current dividend policy contemplates the distribution of a substantial portion of our cash in excess of operating needs, interest and principal payments on our indebtedness, dividends on our future senior classes of capital stock, if any, capital expenditures, taxes and future reserves, if any, this policy could be modified or revoked by our board of directors at any time;



•

even if our dividend policy was not modified or revoked, the actual amount of dividends distributed under this policy and the decision to make any distributions are entirely at the discretion of our board of directors;



•

the amount of dividends distributed is subject to covenant restrictions under our credit facility;



•

the amount of dividends distributed is subject to restrictions under Delaware law;



•

our stockholders have no contractual or other legal right to receive dividends; and



•

we may not have enough cash to pay dividends due to changes in our cash from operations, distributions we receive from minority investments and passive partnership interests, working capital requirements and/or anticipated cash needs.

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        We believe that our dividend policy limits, but does not preclude, our ability to pursue growth. If we continue paying dividends at the level currently anticipated under our dividend policy, we expect that we would need additional financing to fund significant acquisitions or to pursue growth opportunities requiring capital expenditures that are significantly beyond our current expectations. However, we intend to retain sufficient cash after the distribution of dividends to permit the pursuit of growth opportunities that do not require material capital investment. For further discussion of the relationship of our dividend policy to our ability to pursue potential growth opportunities, see "—Assumptions and Considerations" below.

        On March 3, 2005, we declared a dividend of $0.22543 per share of our common stock, payable on April 15, 2005 to holders of record as of March 31, 2005. In accordance with our dividend policy, we currently intend to continue to pay quarterly dividends at an annual rate of $1.59125 per share for the four fiscal quarters ending March 31, 2006. In respect of the four fiscal quarters ending March 31, 2006, this would be $54.8 million in the aggregate. This aggregate amount of dividends does not include any dividends with respect to 115,733 shares of our common stock issuable upon the exercise of fully vested, exercisable and in-the-money stock options or 473,716 shares of restricted stock awarded under our 2005 stock incentive plan on February 15, 2005, which shares will begin to vest on April 1, 2006 and will not be entitled to receive dividends for any period prior to April 1, 2006. Dividends on our common stock will not be cumulative. Consequently, if dividends on our common stock are not declared and/or paid at the targeted level, our stockholders will not be entitled to receive such payments in the future. In determining our initial dividend level, we reviewed and analyzed, among other things, our operating and financial performance in recent years, the anticipated cash requirements associated with our capital structure, our anticipated capital expenditure requirements, our other anticipated cash needs, the terms of our credit facility, applicable provisions of Delaware law, other potential sources of liquidity and various other aspects of our business.

        Prior to the dividend which will be paid on April 15, 2005, we had not paid dividends on our common stock in the past.

Minimum Adjusted EBITDA

        We do not as a matter of course make public projections as to future sales, earnings or other results. However, our management has prepared the estimated financial information set forth below to present the estimated minimum Adjusted EBITDA required to generate sufficient cash to pay dividends on our common stock in accordance with our dividend policy. See "Item 6. Selected Financial Data" for a definition of, and other information with respect to, Adjusted EBITDA. The accompanying estimated financial information was not prepared with a view toward complying with the rules and regulations of the Securities and Exchange Commission with respect to prospective financial information, but, in the view of our management, was prepared on a reasonable basis, reflects the best currently available estimates and judgments, and presents, to the best of our management's knowledge and belief, our expected course of action and our expected future financial performance. However, this information is not fact and should not be relied upon as being necessarily indicative of future results, and readers of this Annual Report are cautioned not to place undue reliance on the estimated financial information.

        The assumptions and estimates underlying the estimated financial information below are inherently uncertain and, though considered reasonable by our management as of the date of its preparation, are subject to a wide variety of significant business, economic, and competitive risks and uncertainties, including those described under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Factors." Accordingly, there can be no assurance that the estimated financial information is indicative of our future performance or that the actual results will not differ materially from the estimated financial information presented below.

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        We believe that in order to fund dividend payments to holders of our common stock at the level described above solely from cash generated by our business, our Adjusted EBITDA for the four fiscal quarters ending March 31, 2006 would need to be at least $120.7 million and our average Adjusted EBITDA with respect to each such quarter would need to be at least $30.2 million. Based on a review and analysis conducted by our management and our board of directors as described under "—Assumptions and Considerations" below, we believe that our Adjusted EBITDA for the four fiscal quarters ending March 31, 2006 will be at least $120.7 million and our average Adjusted EBITDA with respect to each such quarter will be at least $30.2 million. If our Adjusted EBITDA with respect to such periods were at or above these levels, we would be able to make the full targeted dividend payments on our common stock and we would be permitted to make such payments under the leverage ratio and restricted payment covenants in our credit facility.

        The table below sets forth our calculation that a minimum of $120.7 million of Adjusted EBITDA would be sufficient to fund dividend payments at the targeted levels on our common stock for the four fiscal quarters ending March 31, 2006 (excluding any dividends payable with respect to 115,733 shares of our common stock issuable upon the exercise of fully vested, exercisable and in-the-money stock options and 473,716 shares of restricted stock awarded under our 2005 stock incentive plan, which shares will begin to vest on April 1, 2006 and will not be entitled to receive dividends for any period prior to April 1, 2006) and would satisfy the leverage ratio and restricted payment covenants in our credit facility.

Estimated Cash Available to Pay Dividends on Common Stock Based on Minimum Adjusted EBITDA

	(Dollars in thousands)
Minimum Adjusted EBITDA(1)(2)	$	120,662
Less:
Estimated cash interest expense on credit facility(3)		33,738
Estimated cash interest expense on other debt		453
Estimated capital expenditures(4)		31,000
Estimated cash income taxes(5)		650
Estimated cash available to pay dividends on outstanding common stock(6)	$	54,821
Estimated leverage ratio derived from above(7)		4.9x

        The table below sets forth for the year ended December 31, 2004 the amount of cash that would have been available for distributions to our stockholders subject to the assumptions described in such table. The information in the table below should be read in conjunction with our consolidated historical financial statements and notes thereto contained elsewhere in this Annual Report.

23

Cash Available to Pay Dividends for the Year Ended December 31, 2004

		Year Ended December 31, 2004
		(dollars in thousands)
Net cash provided by operating activities of continuing operations		$	45,975
Adjustments:
	Depreciation and amortization		(50,287	)
	Other non-cash items		(20,618	)
	Impairment of investments		(349	)
	Changes in assets and liabilities arising from continuing operations net of acquisitions		926
Loss from continuing operations			(24,353	)
Adjustments:
	Interest expense		104,315
	Provision for income tax expense		516
	Depreciation and amortization		50,287
	Net gain on sale of investments and other assets		(104	)
	Impairment of investments		349
	Equity in earnings of investee		(10,899	)
	Distributions from investments(8)		15,017
	Realized and unrealized losses on interest rate swaps		112
	Non-cash stock based compensation		49
	Write-off of cost associated with an abandoned offering of Income Deposit Securities and related transactions		5,951
	Deferred patronage dividends		(84	)
Adjusted EBITDA			141,156
Cash interest expense on credit facility(3)			(33,738	)
Cash interest expense on other debt			(453	)
Capital expenditures(4)(9)			(36,492	)
Income tax expense(5)			(650	)
Additional public company costs(2)			(1,000	)
Cash that would have been available to pay dividends			68,823
Cash required to pay dividends on common stock in accordance with our dividend policy			54,821

(1)

To pay the targeted dividends on our common stock, our average Adjusted EBITDA with respect to each quarter must be at least $30.2 million.

(2)

Takes into account estimated incremental ongoing expenses of $1.0 million associated with being a public common stock issuer, including estimated audit fees, director and officer liability insurance premiums, expenses relating to stockholders' meetings, printing expenses, investor relations expenses, registrar and transfer agent fees, directors' fees, additional legal fees and listing fees.

(3)

Represents interest of approximately 5.75% per annum on $589.0 million of outstanding borrowings under our credit facility and a commitment fee of 0.5% per annum on the average unused balance of $98.6 million under our credit facility's revolving facility. This assumed rate is based on indicative LIBOR rates as of February 28, 2005, assumes the redemption of the

24

remaining $19.9 aggregate principal amount of the 12¹/2% notes (which we intend to effect on May 1, 2005) and gives effect to three interest rate swap agreements we entered into upon the closing of the offering that effectively fixed the interest rate we will pay on approximately $130.0 million of the term loans under our credit facility at 6.11% until December 31, 2009, fixed the interest rate on approximately $130.0 million of the term loans under our credit facility at 5.98% until December 31, 2008 and fixed the interest rate on approximately $130.0 million of the term loans under our credit facility at 5.76% until December 31, 2007. Pursuant to these interest rate swap agreements, the interest rate on 66% of our floating rate term loan borrowings will be a blended interest rate of not more than 5.95% per annum until December 31, 2007.

(4)

Capital expenditures in fiscal 2004 were approximately $36.5 million, which includes $4.4 million of non-recurring capital expenditures relating to the conversion of our six billing systems into an integrated billing platform and the centralization of our customer service records and $9.0 million of non-recurring capital expenditures relating to the final stages of our digital subscriber line initiative. We expect that our annual capital expenditures for our existing operations will be approximately $31.0 million for fiscal 2005 through fiscal 2009. We estimate that approximately $28.0 million of this amount will be used to maintain and enhance our network infrastructure and operate our business. This includes expenditures to meet our network, product offering and customer requirements, such as investments in equipment, central office technology (which includes both hardware and software), inside and outside plant upgrades to meet network capacity requirements and normal repair and maintenance to our infrastructure. In addition, approximately $3.0 million of this amount will be available for one-time or discretionary capital expenditures, such as the billing systems conversion. We expect to fund all of these capital expenditures through our cash flow from operations. If cash is available beyond what is required to support our dividend policy, we may consider additional capital expenditures if we believe they are beneficial. Although the amount of our capital expenditures can fluctuate from quarter to quarter, on an annual basis we do not expect capital expenditures for our existing operations through fiscal 2009 to vary significantly from our estimated amounts. We do not believe that our dividend policy will materially affect our ability to maintain and enhance our network infrastructure and operate our business.

(5)

We expect cash taxes during the four fiscal quarters ending March 31, 2006 to be approximately $0.7 million. Based on certain assumptions, our net operating loss carry forwards as of December 31, 2004 were approximately $251.9 million. We have estimated cash taxes after giving effect to the transactions based on an estimate of our net operating loss carry forwards (including an "ownership change" under Section 382 of the Internal Revenue Code limiting the usage of our net operating loss carry forwards) and interest and amortization of deferred financing fees based on our new capital structure. At such time as our net operating loss carry forwards have been fully used, our cash tax liability will increase and may impact our ability to pay dividends. Our tax liability may also be affected by limitations on the use of our net operating loss carry forwards under Section 382 of the Internal Revenue Code by reason of the offering and earlier ownership changes. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Factors—Limitations on usage of our net operating loss carry forwards, and other factors requiring us to pay cash taxes in future periods, may affect our ability to pay dividends to you" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Accounting for Income Taxes."

(6)

The table below sets forth the number of shares of our common stock which were outstanding as of February 28, 2005 (excluding 115,733 shares of our common stock issuable upon the exercise of fully vested, exercisable and in-the-money stock options and 473,716 shares of restricted stock awarded under our 2005 stock incentive plan, which shares will begin to vest on April 1, 2006 and will not be entitled to receive dividends for any period prior to April 1, 2006) and the estimated

25

per share and aggregate dividend amounts payable on such shares during the four fiscal quarters ending March 31, 2006. In order to generate cash flow to pay dividends of $1.59125 per share of our common stock for the four fiscal quarters ending March 31, 2006, we would require an estimated minimum Adjusted EBITDA of $120.7 million during such period.

		Dividends
	Number of Outstanding Shares
		Per Share		Aggregate
				(in thousands)
Estimated dividends on our common stock	34,451,716	$	1.59125	$	54,821

(7)

The leverage ratio is calculated as total indebtedness divided by pro forma Adjusted EBITDA. Under our credit facility, we may not pay dividends on our common stock if our leverage ratio is above 5.00 to 1.00. See "—Restrictions on Payment of Dividends and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Description of Certain Indebtedness—Credit Facility."

(8)

We have a number of minority investments and passive partnership interests from which we receive distributions. We do not control the amount or timing of such distributions. Includes a non-recurring $2.5 million distribution.

(9)

Includes non-recurring capital expenditures of $13.4 million for the year ended December 31, 2004 related to the conversion of our six billing systems into an integrated billing platform and the centralization of our customer service records. Also includes non-recurring capital expenditures of $4.8 million for the year ended December 31, 2004 related to capital investments in digital subscriber line access multiplexers and other plant upgrades associated with our accelerated digital subscriber line initiative that began during the third quarter of 2003. As a result, approximately 93% of our exchanges are broadband capable as of December 31, 2004 and management expects that digital subscriber line investments will decrease significantly in 2005. Our management views non-recurring capital expenditures as either one-time capital expenditures or discretionary capital expenditures which are not necessary to maintain and enhance our network infrastructure or operate our business, such as the billing systems conversion and the digital subscriber line initiative described above. Our dividend policy may cause us to reduce or eliminate such one-time or discretionary capital expenditures in the future or to incur indebtedness to fund such capital expenditures. To the extent we finance capital expenditures with indebtedness, we will begin to incur incremental interest and principal obligations which would reduce our cash available for future dividend payments and other purposes. In addition, if we reduce or eliminate capital expenditures, the regulatory settlement payments we receive may decline.

Assumptions and Considerations

        Based on a review and analysis conducted by our management and our board of directors, we believe that our Adjusted EBITDA for the four fiscal quarters ending March 31, 2006 will be at least $120.7 million and our average Adjusted EBITDA with respect to each such quarter will be at least $30.2 million, and we have determined that our assumptions as to capital expenditures, cash interest expense and income taxes in the above tables are reasonable. We considered numerous factors in making such determination, including the following factors which we considered material in making such determination:

•

For fiscal years 2004, 2003 and 2002, our Adjusted EBITDA was $141.2 million, $132.6 million and $131.7 million, respectively.



•

For fiscal years 2004, 2003 and 2002, we received distributions from minority investments and passive partnership interests of $15.0 million (of which $2.5 million was non-recurring), $10.8 million and $9.0 million, respectively. Although we do not control the amount or timing of

26

such distributions, we believe that distributions from such investments and interests for fiscal 2005 will be consistent with historical recurring levels.

•

For fiscal years 2004, 2003 and 2002, we incurred $36.5 million, $33.6 million and $38.8 million, respectively, in capital expenditures. For fiscal years 2004, 2003 and 2002, we had capital expenditures of $9.0 million, $4.7 million and $3.0 million, respectively, related to our digital subscriber line initiative. This investment has resulted in approximately 93% of our exchanges being broadband enabled as of December 31, 2004. We expect that the amount of our capital expenditures related to digital subscriber line technology in 2005 will significantly decrease. Capital expenditures for fiscal 2004 also includes the costs of converting our six billing systems into an integrated platform and the centralization of our customer service records. Capital expenditures for fiscal 2002 also includes the costs associated with switch and plant upgrades for certain of our exchanges and the purchase of high level digital loop carrier equipment. Such upgrades enable us to provide higher quality service and enhanced features to our customers. The cost to deploy similar technologies has decreased since the implementation of such upgrades. For example, equivalent capacity can be provided on soft switch technology which is less capital intensive than the time division multiplex switches purchased in 2002. We expect capital expenditures in fiscal 2005 to be approximately $31.0 million.



•

Our analysis of the impact of our new capital structure (including the payment of dividends at the level described above) on our operations and performance in prior years and our determination that our credit facility's revolving facility would have had sufficient capacity to finance any fluctuations in working capital and other cash needs, including the payment of dividends at the levels described above. We currently do not intend to borrow under our credit facility's revolving facility to pay dividends.

        We have also assumed:

•

that our general business climate, including such factors as consumer demand for our services, the level of competition and our favorable regulatory environment, will remain consistent with previous periods; and



•

the absence of extraordinary business events, such as new industry altering technological advances or regulatory developments, that may adversely affect our business, results of operations or anticipated capital expenditures.

        If our Adjusted EBITDA with respect to the four fiscal quarters ending March 31, 2006 were to fall below $120.7 million or our average Adjusted EBITDA with respect to each such quarter were to fall below $30.2 million (or if our assumptions as to capital expenditures, principal repayments, interest expense or tax expense were too low), we would need to either reduce or eliminate dividend payments on our common stock or, to the extent we were permitted to do so under our credit facility, fund a portion of the dividends on our common stock with borrowings or from other sources. If we were to use working capital or permanent borrowings under our credit facility's revolving facility to fund dividend payments, we would have less cash available for future dividend payments and other purposes, which could negatively impact our financial condition, our results of operations and our ability to maintain or expand our business. In addition, to the extent we finance capital expenditures or acquisitions with indebtedness, we will begin to incur incremental interest and principal obligations.

        There can be no assurance that our Adjusted EBITDA will equal or exceed the minimum levels set forth above, and our belief that it will equal or exceed such levels are subject to all of the risks, considerations and factors identified in other sections of this Annual Report, including those identified in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Factors."

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        As noted above, we have presented our initial dividend payment level and our minimum Adjusted EBITDA only for the four fiscal quarters ending March 31, 2006. Moreover, there can be no assurance that during or following such period that we will pay dividends at the level set forth above, or at all. In the future, our capital and cash needs will invariably change, which could impact the level of any dividends we pay.

        We are not required to pay dividends, and our board of directors may modify or revoke our dividend policy at any time. Dividend payments are within the sole discretion of our board of directors and will depend upon, among other things, our results of operations, our financial condition and future developments that could differ materially from our current expectations. We expect that our general policy will be to distribute rather than retain a substantial portion of our cash in excess of operating needs, interest and principal payments on our indebtedness, dividends on our future senior classes of capital stock, if any, capital expenditures, taxes and future reserves, if any. These policies are based upon our current assessment of our business and the environment in which it operates, and that assessment could change based on competitive or technological developments (which could, for example, increase our need for capital expenditures), acquisition opportunities or other factors. We believe that our dividend policy limits, but does not preclude, our ability to pursue growth. If we continue paying dividends at the level currently anticipated under our dividend policy, we expect that we would need additional financing to fund significant acquisitions or to pursue growth opportunities requiring capital expenditures significantly beyond our current expectations. Such additional financing could include, among other transactions, the issuance of additional shares of common stock. However, we intend to retain sufficient cash after the distribution of dividends to permit the pursuit of growth opportunities that do not require material capital investments. In the recent past, such growth opportunities have included investments in the roll-out of new services such as digital subscriber line internet access to our existing customer base and the selective expansion of our business into new and/or adjacent markets. Management currently has no specific plans to make a significant acquisition or to increase capital spending to expand our business materially. However, management will evaluate potential growth opportunities as they arise and, if our board of directors determines that it is in our best interest to use cash that would otherwise be available for distribution as dividends to pursue an acquisition opportunity, to materially increase capital spending or for some other purpose, the board would be free to depart from or change our dividend policy at any time. Management currently does not anticipate pursuing growth opportunities, including acquisitions, unless they are expected to be at least neutral or accretive to our ability to pay dividends to the holders of our common stock.

        Borrowings under our credit facility will bear interest at variable interest rates. In connection with the offering, we entered into three interest rate swap agreements which fixed the interest rate on approximately $130.0 million of the term loans under our credit facility at 6.11% until December 31, 2009, fixed the interest rate on approximately $130.0 million of the term loans under our credit facility at 5.98% until December 31, 2008 and fixed the interest rate on approximately $130.0 million of the term loans under our credit facility at 5.76% until December 31, 2007. After these interest rate swap agreements expire, our annual debt service obligations on such portion of the term loans will vary from year to year unless we enter into a new interest rate swap or purchase an interest rate cap or other interest rate hedge. An increase of ten percent in the annual interest rate applicable to borrowings under the term loan facility of our credit facility would result in an increase of approximately $0.9 million in our annual cash interest expense, and a corresponding decrease in cash available to pay dividends on our common stock. If we choose to enter into a new interest rate swap or purchase an interest rate cap or other interest rate hedge in the future, the amount of cash available to pay dividends on our common stock may decrease. However, to the extent interest rates increase in the future, we may not be able to enter into a new interest rate swap or purchase an interest rate cap or other interest rate hedge on acceptable terms. In addition, our credit facility's revolving facility will need to be refinanced prior to February 2011 and our credit facility's term loan facility will need to be refinanced prior to February 2012. We may not be able to refinance our credit facility, or if refinanced,

28

the refinancing may occur on less favorable terms, which may materially adversely affect our ability to pay dividends. If we were unable to refinance our credit facility, our failure to repay all amounts due on the maturity date would cause a default under our credit facility. We expect our required principal repayments under the term loan facility of our credit facility to be approximately $588.5 million at its maturity in February 2012. Our interest expense may increase significantly if we refinance our credit facility on terms that are less favorable to us than the terms of our credit facility.

        We generally have the ability to issue additional common stock, other equity securities or preferred stock for such consideration and on such terms and conditions as are established by our board of directors in its sole discretion and without the approval of the holders of our common stock. It is possible that we will fund acquisitions, if any, through the issuance of additional common stock, other equity securities or preferred stock. Holders of any additional common stock or other equity securities issued by us may be entitled to share equally with the existing holders of our common stock in dividend distributions. The certificate of designation of any preferred stock issued by us may provide that the holders of preferred stock are senior to the holders of our common stock with respect to the payment of dividends. If we were to issue additional common stock, other equity securities or preferred stock, it would be necessary for us to generate additional cash in order for us to distribute dividends at the same rate per share as distributed prior to any such additional issuance.

Restrictions on Payment of Dividends

        Under Delaware law, our board of directors may declare dividends only to the extent of our "surplus" (which is defined as total assets at fair market value minus total liabilities, minus statutory capital) or, if there is no surplus, out of our net profits for the then current and/or immediately preceding fiscal year. We do not anticipate that we will have (and in prior years we would not have had) sufficient earnings, for purposes of Delaware law, to pay dividends at the levels described above and therefore expect that we will pay dividends out of surplus. Although we believe we will have sufficient surplus to pay dividends at the anticipated levels during the four fiscal quarters ending March 31, 2006, our board of directors will seek periodically to assure itself of this before actually declaring any dividends.

        Our credit facility restricts our ability to declare and pay dividends on our common stock as follows:

•

For the period ending March 31, 2005, we will be permitted to pay dividends as long as no default or event of default under our credit facility has occurred and is continuing and we have at least $10 million of cash on hand (including unutilized commitments under our credit facility's revolving facility);

•

After March 31, 2005, we may use all of our available cash accumulated after April 1, 2005 plus certain incremental funds to pay dividends, but we may not in general pay dividends in excess of such amount. "Available cash" is defined in our credit facility as Adjusted EBITDA minus interest expense, capital expenditures (unless funded by long-term debt, equity or the proceeds from asset sales or insurance recovery events), cash taxes, repayments of our indebtedness, cash consideration paid for acquisitions (unless funded by debt or equity) and cash paid to make certain investments. We may not pay dividends if a default or event of default under our credit facility has occurred and is continuing or would occur as a consequence of such payment, if our leverage ratio is above 5.00 to 1.00 or if we do not have at least $10 million of cash on hand (including unutilized commitments under our credit facility's revolving facility).

See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Description of Certain Indebtedness—Credit Facility."

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        Available cash (as defined in our credit facility) does not represent the amount we intend to distribute as dividends for any period but rather is a restriction on the maximum level of dividend payments, if any, that we will be permitted to declare and pay under the terms of our credit facility.

Equity Compensation Plan Information

        The table below provides information, as of the end of the most recently completed fiscal year, concerning securities authorized for issuance under our equity compensation plans.

Plan Category	Number of shares to be issued upon exercise of outstanding options, warrants and rights		Weighted average exercise price of outstanding options, warrants, and rights			Number of shares remaining available for future issuance under equity compensation plans (excluding shares reflected in the first column)
Equity compensation plan approved by our stockholders	1,215,701	(1)(2)	$	14.88	(1)	2,166,323	(3)
Equity compensation plans not approved by our stockholders	0		$	0		0

(1)

Includes 832,888 options to purchase our common stock issued under the FairPoint Communications, Inc. (formerly MJD Communications, Inc.) Stock Incentive Plan which are vested but not currently exercisable, with a weighted average exercise price of $10.80. Also includes 240,638 options to purchase our common stock under the FairPoint Communications, Inc. 2000 Employee Stock Incentive Plan which are vested and exercisable, with a weighted average exercise price of $36.94.

(2)

Does not include 473,716 shares of restricted stock issued on February 15, 2005 under the FairPoint Communications, Inc. 2005 Stock Incentive Plan.

(3)

Does not include 473,725 shares of our common stock which may be issued in the future pursuant to awards which may be granted under the FairPoint Communications, Inc. 2005 Stock Incentive Plan.

        For a description of our equity compensation plans, see "Item 11. Executive Compensation."

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ITEM 6.    SELECTED FINANCIAL DATA

        The following financial information should be read in conjunction with "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and notes thereto contained elsewhere in this Annual Report. Amounts in thousands, except access lines and ratios.

		Year Ended December 31,
		2004			2003			2002			2001			2000
Statement of Operations:
Revenues		$	252,645		$	231,432		$	230,819		$	230,176		$	190,786
Operating expenses:
	Operating expenses		128,755			111,188			110,265			115,763			95,540
	Depreciation and amortization(1)		50,287			48,089			46,310			55,081			46,146
	Stock based compensation expense		49			15			924			1,337			12,323
Total operating expenses			179,091			159,292			157,499			172,181			154,009
Income from operations			73,554			72,140			73,320			57,995			36,777
Interest expense(2)			(104,315	)		(90,224	)		(69,520	)		(76,314	)		(59,556	)
Other income (expense), net(3)			6,926			9,600			(11,974	)		(6,670	)		13,198
Loss from continuing operations before income taxes			(23,835	)		(8,484	)		(8,174	)		(24,989	)		(9,581	)
Income tax (expense) benefit(3)			(516	)		236			(518	)		(431	)		(5,607	)
Minority interest in income of subsidiaries			(2	)		(2	)		(2	)		(2	)		(3	)
Loss from continuing operations			(24,353	)		(8,250	)		(8,694	)		(25,422	)		(15,191	)
Income (loss) from discontinued operations			671			9,921			21,933			(186,178	)		(73,926	)
Net income (loss)			(23,682	)		1,671			13,239			(211,600	)		(89,117	)
Redeemable preferred stock dividends and accretion(2)			—			(8,892	)		(11,918	)		—			—
Gain on repurchase of redeemable preferred stock			—			2,905			—			—			—
Net income (loss) attributable to common shareholders			(23,682	)	$	(4,316	)	$	1,321		$	(211,600	)	$	(89,117	)
Basic and diluted shares outstanding(4)			9,468			9,483			9,498			9,499			9,357
Basic and diluted loss from continuing operations per share(4)		$	(2.57	)	$	(1.50	)	$	(2.17	)	$	(2.68	)	$	(1.62	)
Operating Data:
EBITDA(5)		$	130,765		$	129,827		$	107,654		$	106,404		$	96,118
Adjusted EBITDA(5)			141,156			132,574			131,656			120,951			100,034
Capital expenditures			36,492			33,595			38,803			43,175			49,601
Access line equivalents(6)			271,150			264,308			248,581			247,862			237,294
	Residential access lines		189,668			196,145			189,803			191,570			184,798
	Business access lines		49,606			50,226			51,810			53,056			51,025
	Digital subscriber lines		31,876			17,937			6,968			3,236			1,471
Summary Cash Flow Data:
Net cash provided by operating activities of continuing operations		$	45,975		$	32,834		$	55,632		$	35,717		$	44,706
Net cash used in investing activities of continuing operations			(20,986	)		(54,010	)		(30,258	)		(57,161	)		(284,953	)
Net cash provided by (used in) financing activities of continuing operations			(23,966	)		(1,976	)		(12,546	)		101,234			300,088
Net cash contributed (from) to continuing operations (to) from discontinued operations			(3,031	)		23,361			(10,353	)		(80,862	)		(64,466	)

31

Balance Sheet Data (at period end):
Cash	$	3,595		$	5,603		$	5,394		$	2,919		$	3,991
Property, plant and equipment, net		252,262			266,706			271,690			278,277			272,228
Total assets		819,136			843,068			829,253			875,015			863,547
Total long term debt		810,432			825,560			804,190			907,602			756,812
Preferred shares subject to mandatory redemption		116,880			96,699			90,307			—			—
Total stockholders' equity (deficit)		(172,952	)		(147,953	)		(146,150	)		(149,510	)		64,378

(1)

On January 1, 2002, we adopted SFAS No. 142, "Goodwill and Other Intangible Assets." Pursuant to the requirements of SFAS No. 142, we ceased amortizing goodwill beginning January 1, 2002, and instead test for goodwill impairment annually. Amortization expense for goodwill and equity method goodwill was $9,762 and $11,962 in fiscal 2000 and 2001, respectively. Depreciation and amortization excludes amortization of debt issue costs.

(2)

Interest expense includes amortization of debt issue costs aggregating $2,362, $4,018, $3,664, $4,171 and $4,603 for the fiscal years ended December 31, 2000, 2001, 2002, 2003 and 2004. We prospectively adopted the provisions of SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Liabilities and Equity," effective July 1, 2003. SFAS No. 150 requires us to classify as a long-term liability our series A preferred stock and to reclassify dividends and accretion from the series A preferred stock as interest expense. Such stock is now described as "Preferred Shares Subject to Mandatory Redemption" in the balance sheet and dividends and accretion on these shares are now included in pre-tax income whereas previously they were presented as a reduction to equity (a dividend), and, therefore, a reduction of net income available to common stockholders. For the years ended December 31, 2004 and 2003, interest expense includes $20,181 and $9,049, respectively, related to dividends and accretion on preferred shares subject to mandatory redemption.

(3)

On January 1, 2001, we adopted the provisions of SFAS No. 133, "Accounting for Derivative Instruments and Certain Hedging Activities," as amended by SFAS No. 138. On the date of adoption, we recorded a cumulative adjustment of $4,664 in accumulated other comprehensive income for the fair value of interest rate swaps. Because the interest rate swaps did not qualify as accounting hedges under SFAS No. 133, the change in fair value of the interest rate swaps were recorded as non operating gains or losses, which we classify in other income (expense). We also recorded other income (expense) in 2001, 2002 and 2003 for the amortization of the transition adjustment of the swaps initially recognized in accumulated other comprehensive income. In the second quarter of 2002, we adopted SFAS No. 145 "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical Corrections." This statement eliminates the requirement that gains and losses from the extinguishment of debt be required to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. In 2003, other income (expense) includes a $3,465 gain on the extinguishment of debt and a $4,967 loss for the write-off of debt issue costs related to this extinguishment of debt. In 2004, other income (expense) includes a $5,951 loss for the write-off of debt issuance and offering costs associated with an abandoned offering of Income Deposit Securities.

(4)

In connection with the offering, we effected a 5.2773714 for 1 reverse stock split of our common stock. All share and per share amounts related to our common stock have been restated to reflect the reverse stock split.

(5)

EBITDA means net income (loss) before income (loss) from discontinued operations, interest expense, income taxes, and depreciation and amortization. We believe EBITDA is useful to investors because EBITDA is commonly used in the communications industry to analyze companies on the basis of operating performance, liquidity and leverage. We believe EBITDA allows a standardized comparison between companies in the industry, while minimizing the differences from depreciation policies, financial leverage and tax strategies. We also believe that EBITDA is useful as a means to evaluate our ability to pay dividends. While providing useful information, EBITDA should not be considered in isolation or as a substitute for consolidated statement of operations and cash flows data prepared in accordance with accounting principles generally accepted in the United States of America. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."

32

A reconciliation of net cash provided by operating activities of continuing operations to EBITDA follows (in thousands):

		Year Ended December 31,
		2004			2003			2002			2001			2000
Net cash provided by operating activities of continuing operations		$	45,975		$	32,834		$	55,632		$	35,717		$	44,706
Adjustments:
	Depreciation and amortization		(50,287	)		(48,089	)		(46,310	)		(55,081	)		(46,146	)
	Impairment of investments		(349	)		—			(12,568	)		—			—
	Other non-cash items		(20,618	)		1,866			1,281			(9,712	)		7,439
	Changes in assets and liabilities arising from continuing operations, net of acquisitions		926			5,139			(6,729	)		3,654			(21,190	)
Loss from continuing operations			(24,353	)		(8,250	)		(8,694	)		(25,422	)		(15,191	)
Adjustments:
Interest expense(2)(3)			104,315			90,224			69,520			76,314			59,556
Provision (benefit) for income tax expense			516			(236	)		518			431			5,607
Depreciation and amortization			50,287			48,089			46,310			55,081			46,146
EBITDA		$	130,765		$	129,827		$	107,654		$	106,404		$	96,118

Certain covenants in our credit facility contain ratios based on Adjusted EBITDA and the restricted payment covenant in our credit facility regulating the payment of dividends on our common stock is based on Adjusted EBITDA. Adjusted EBITDA for any period is defined in our credit facility as (1) the sum of Consolidated Net Income (which is defined in our credit facility and includes distributions from investments), plus the following to the extent deducted from consolidated net income: provision for taxes, consolidated interest expense, depreciation, amortization, losses on sales of assets and other extraordinary losses, and certain other non-cash items, each as defined, minus (2) gains on sales of assets and other extraordinary gains and all non-cash items increasing consolidated net income for the period. For a more detailed definition of Adjusted EBITDA and Consolidated Net Income, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Description of Certain Indebtedness—Credit Facility" If our Adjusted EBITDA were to decline below certain levels, covenants in our credit facility that are based on Adjusted EBITDA may be violated and could cause, among other things, a default under our credit facility, or result in our inability to pay dividends. These covenants are summarized under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Description of Certain Indebtedness—Credit Facility"." A reconciliation of EBITDA to Adjusted EBITDA is as follows (in thousands):

	Year Ended December 31,
	2004			2003			2002			2001			2000
EBITDA	$	130,765		$	129,827		$	107,654		$	106,404		$	96,118
Net (gain) loss on sale of investments and other assets		(104	)		(608	)		(34	)		648			(6,642	)
Impairment on investments		349			—			12,568			—			—
Equity in net earnings of investees		(10,899	)		(10,092	)		(7,798	)		(4,930	)		(4,807	)
Distributions from investments(7)		15,017			10,775			9,018			5,013			3,155
Realized and unrealized losses on interest rate swaps		112			1,387			9,577			12,873			—
Loss on early retirement of debt		—			1,503			—			—			—
Non-cash stock based compensation		49			15			924			1,337			12,323
Write-off of cost associated with an abandoned offering of Income Deposit Securities		5,951			—			—			—			—
Deferred patronage dividends		(84	)		(233	)		(253	)		(394	)		(113	)
Adjusted EBITDA	$	141,156		$	132,574		$	131,656		$	120,951		$	100,034

(6)

Total access line equivalents includes voice access lines and digital subscriber lines.

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(7)

Includes distributions relating to minority investments and passive partnership interests. We do not control the timing or the amount of such distributions. The $15.0 million in distributions received in the year ended December 31, 2004 includes a non-recurring distribution of approximately $2.5 million. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion should be read in conjunction with our financial statements and the notes thereto included elsewhere in this Annual Report. The following discussion includes certain forward-looking statements. For a discussion of important factors, including the continuing development of our business, actions of regulatory authorities and competitors and other factors which could cause actual results to differ materially from the results referred to in the forward-looking statements, see "—Risk Factors."

Overview

        We are a leading provider of communications services in rural communities, offering an array of services, including local and long distance voice, data, Internet and broadband product offerings. We are one of the largest telephone companies in the United States focused on serving rural communities and we are the 17th largest local telephone company, in each case based on number of access lines. We operate in 17 states with approximately 271,150 access line equivalents (including voice access lines and digital subscriber lines) in service as of December 31, 2004.

        We were incorporated in February 1991 for the purpose of operating and acquiring incumbent telephone companies in rural markets. Since 1993, we have acquired 30 such businesses, 26 of which we continue to own and operate. Many of our telephone companies have served their respective communities for over 75 years. The majority of the rural communities we serve have fewer than 2,500 access lines. All of our telephone company subsidiaries qualify as rural local exchange carriers under the Telecommunications Act.

        Rural local exchange carriers generally are characterized by stable operating results and strong cash flow margins and operate in supportive regulatory environments. In particular, existing state and federal regulations permit us to charge rates that enable us to recover our operating costs, plus a reasonable rate of return on our invested capital (as determined by relevant regulatory authorities). Competition is typically limited because rural local exchange carriers primarily serve sparsely populated rural communities with predominantly residential customers, and the cost of operations and capital investment requirements for new entrants is high. As a result, in our markets, we have experienced virtually no wireline competition and limited competition from cable providers. While most of our markets are served by wireless service providers, their impact on our business has been limited.

        Access lines are an important element of our business. Historically, rural telephone companies have experienced consistent growth in access lines because of positive demographic trends, insulated rural local economies and little competition. Recently, however, many rural telephone companies have experienced a loss of access lines due to challenging economic conditions, increased competition and the introduction of digital subscriber line services. We have not been immune to these conditions. We have been able to mitigate our access line loss through bundling services, win-back programs, increased community involvement and a variety of other programs.

        Despite our net loss of voice access lines, we have generated growth in our revenues each year since 1999. We have accomplished this by providing our customers with services not previously available in most of our markets, such as enhanced voice services and data services, including digital subscriber line services, and through acquisitions.

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Revenues

        We derive our revenues from:

•

Local calling services. We receive revenues from providing local exchange telephone services, including monthly recurring charges for basic service, usage charges for local calls and service charges for special calling features.



•

Universal Service Fund high cost loop support. We receive payments from the Universal Service Fund to support the high cost of our operations in rural markets. This revenue stream fluctuates based upon our average cost per loop compared to the national average cost per loop. For example, if the national average cost per loop increases and our operating costs (and average cost per loop) remain constant or decrease, the payments we receive from the Universal Service Fund would decline. Conversely, if the national average cost per loop decreases and our operating costs (and average cost per loop) remain constant or increase, the payments we receive from the Universal Service Fund would increase. Over the past year, the national average cost per loop in relation to our average cost per loop has increased, and we believe that the national average cost per loop will likely continue to increase in relation to our average cost per loop. As a result, the payments we receive from the Universal Service Fund will likely decline.



•

Interstate access. These revenues are primarily based on a regulated return on rate base and recovery of allowable expenses associated with the origination and termination of toll calls both to and from our customers. Interstate access charges to long distance carriers and other customers are based on access rates filed with the Federal Communications Commission. These revenues also include Universal Service Fund payments for local switching support, long term support and interstate common line support.



•

Intrastate access. These revenues consist primarily of charges paid by long distance companies and other customers for access to our networks in connection with the origination and termination of long distance telephone calls both to and from our customers. Intrastate access charges to long distance carriers and other customers are based on access rates filed with the state regulatory agencies.



•

Long distance services. We receive revenues from long distance services we provide to our residential and business customers. In addition, our subsidiary Carrier Services provides communications providers not affiliated with us with wholesale long distance services.



•

Data and Internet services. We receive revenues from monthly recurring charges for services, including digital subscriber line, special access, private lines, Internet and other services.



•

Other services. We receive revenues from other services, including billing and collection, directory services and sale and maintenance of customer premise equipment.

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        The following summarizes our revenues and percentage of revenues from continuing operations from these sources:

	Year ended December 31,						Year ended December 31,
	2004		2003		2002		2004		2003		2002
	Revenue (in thousands)						% of Revenue
Local calling services	$	63,150	$	56,078	$	54,000	25	%	24	%	23	%
Universal Service Fund high cost loop		22,151		18,903		22,429	9		8		10
Interstate access		70,297		66,564		65,769	28		29		29
Intrastate access		42,389		43,969		43,848	17		19		19
Long distance services		17,766		15,440		16,763	7		7		7
Data and Internet services		19,054		13,431		10,257	7		6		4
Other services		17,838		17,047		17,753	7		7		8
Total	$	252,645	$	231,432	$	230,819	100	%	100	%	100	%

Operating Expenses

        Our operating expenses are categorized as operating expenses; depreciation and amortization; and stock based compensation.

•

Operating expenses includes cash costs incurred in connection with the operation of our central offices and outside plant facilities and related operations. In addition to the operational costs of owning and operating our own facilities, we also purchase long distance services from regional bell operating companies, large independent telephone companies and third party long distance providers. In addition, our operating expenses include expenses relating to sales and marketing, customer service and administration and corporate and personnel administration.



•

Depreciation and amortization includes depreciation of our communications network and equipment. Prior to January 1, 2002, and the implementation of SFAS No. 142, this category also included amortization of goodwill relating to our acquisitions.



•

Stock based compensation consists of non-cash compensation charges incurred in connection with the employee stock options granted to our officers, and stockholder appreciation rights agreements granted to two of our officers.

Acquisitions

        We intend to continue to pursue selective acquisitions:

•

During 2004, we made no acquisitions.



•

On December 1, 2003, we purchased all of the capital stock of Community Service Telephone and Commtel Communications, which we refer to as the Maine acquisition. Community Service Telephone and Commtel Communications provided communication services to approximately 13,280 access line equivalents in central Maine as of the date of such acquisition.



•

On June 18, 2003, we executed an agreement and plan of merger with Berkshire Telephone Company, or Berkshire, to merge FairPoint Berkshire Corporation with Berkshire. Shareholders of Berkshire would receive approximately $19.2 million in the merger, subject to adjustment. Berkshire is an independent local exchange carrier that, as of December 31, 2004, provided communication services to 7,260 access line equivalents serving five communities in New York State. Berkshire's communities of service are adjacent to Taconic Telephone Corp., one of the Company's subsidiaries. This acquisition is expected to close during the second quarter of 2005, pending receipt of required regulatory approvals.

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•

During 2002, we made no acquisitions.

        In the normal course of business, we evaluate selective acquisitions and may enter into non-binding letters of intent with respect to such acquisitions, subject to customary conditions. Management currently intends to fund future acquisitions through additional financing. However, our substantial amount of indebtedness and our dividend policy could restrict our ability to obtain such financing on acceptable terms or at all.

Stock Based Compensation

        In February 2005, we issued 473,716 shares of restricted stock under our 2005 Stock Incentive Plan. This issuance will result in recognition of an additional compensation expense of approximately $2.2 million in 2005. In addition, 473,725 shares of our common stock may be issued in the future pursuant to awards authorized under our 2005 Stock Incentive Plan which could result in an additional compensation expense.

        Non-cash compensation charges associated with restricted stock units were $0.2 million for 2004. In October 2004, we recorded a non-cash compensation charge of $0.3 million in connection with the modification of employee stock options of one of our officers. In December 2004, we recognized a non-cash compensation benefit of $0.4 million associated with the reduction in estimated fair market value of the stockholder appreciation rights agreements.

        In 2003, we did not recognize any material non-cash compensation charges, primarily due to the fact that the fair market value per share of our common stock remained relatively stable.

        In March 2002, we recognized a non-cash compensation benefit of $0.2 million associated with the reduction in estimated fair market value of the stockholder appreciation rights agreements. In December 2002, an additional benefit of $0.1 million was recognized in connection with these agreements. This benefit was offset by a non-cash compensation charge of $1.2 million in connection with the modification of employee stock options by one of our officers.

Discontinued Operations

        On September 30, 2003, MJD Services completed the sale of all of the capital stock owned by MJD Services of Union Telephone Company of Hartford, Armour Independent Telephone Co., WMW Cable TV Co. and Kadoka Telephone Co. to Golden West. The sale was completed in accordance with the terms of the South Dakota purchase agreement. MJD Services received approximately $24.2 million in proceeds from the South Dakota disposition. The companies sold to Golden West provided communication services to approximately 4,150 voice access lines located in South Dakota as of the date of such disposition. The operations of these companies were presented as discontinued operations beginning in the second quarter of 2003. Therefore, the balances associated with these activities were reclassified as "held for sale." All prior period financial statements have been restated accordingly. We recorded a gain on disposal of the South Dakota companies of $7.7 million during the third quarter of 2003.

        In November 2001, we decided to discontinue the competitive local exchange carrier operations of Carrier Services. This decision was a proactive response to the deterioration in the capital markets, the general slow-down of the economy and the slower-than-expected growth in Carrier Services' competitive local exchange carrier operations. Carrier Services now provides wholesale long distance services and support to our rural local exchange carriers and communications providers not affiliated with us. These services allow such companies to operate their own long distance communication services and sell such services to their respective customers. Our long distance business is included as part of continuing operations in the accompanying financial statements.

        The information in our year to year comparisons below represents only our results from continuing operations.

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Results of Operations

        The following table sets forth the percentages of revenues represented by selected items reflected in our consolidated statements of operations. The year to year comparison of financial results are not necessarily indicative of future results:

		Year Ended December 31,
		2004		2003		2002
Revenues		100.0	%	100.0	%	100.0	%
	Operating expenses	50.9		48.0		47.8
	Depreciation and amortization	19.9		20.8		20.1
	Stock based compensation	0.1		—		0.4
Total operating expenses		70.9		68.8		68.3
Income from operations		29.1		31.2		31.7
	Net gain on sale of investments and other assets	—		0.3		—
	Interest and dividend income	0.9		0.8		0.8
	Interest expense	(41.3	)	(39.0	)	(30.1	)
	Impairment of investments	0.1		—		(5.4	)
	Equity in net earnings of investees	4.3		4.4		3.4
	Realized and unrealized losses on interest rate swaps	—		(0.6	)	(4.1	)
	Other non-operating, net	(2.5	)	(0.7	)	0.2
Total other expense		(38.5	)	(34.8	)	(35.2	)
Loss from continuing operations before income taxes		(9.4	)	(3.6	)	(3.5	)
Income tax benefit (expense)		(0.2	)	0.1		(0.3	)
Loss from continuing operations		(9.6	)%	(3.5	)%	(3.8	)%

Year Ended December 31, 2004 Compared with Year Ended December 31, 2003

Revenues

        Revenues.    Revenues increased $21.2 million to $252.6 million in 2004 compared to $231.4 million in 2003. Of this increase, $8.2 million was attributable to the Maine acquisition and $13.0 million was attributable to our existing operations. We derived our revenues from the following sources:

        Local calling services.    Local calling service revenues increased $7.1 million from $56.1 million in 2003 to $63.2 million in 2004. Revenue from our existing operations increased $4.2 million. Of this increase, $3.6 million is attributable to the implementation of Basic Service Calling Areas in the state of Maine, which changes and expands basic service calling areas and has the effect of shifting revenues from intrastate access to local services. The remaining increase of $0.6 million in local revenues from existing operations is due to increases in local calling features and local interconnection revenues, despite a 2.9% decline in net voice access lines. The remaining increase in local calling service revenues was attributable to the Maine acquisition.

38

        Universal Service Fund high cost loop support.    Universal Service Fund high cost loop payments increased $3.3 million to $22.2 million in 2004 from $18.9 million in 2003. Our existing operations accounted for all of this increase. A reclassification of plant has increased our Universal Service Fund payments in our Maine and Idaho companies that has more than offset a drop in payments from the Universal Service Fund related to increases in the national average cost per loop.

        Interstate access.    Interstate access revenues increased $3.7 million from $66.6 million in 2003 to $70.3 million in 2004. Of the increase, $3.1 million was attributable to the Maine acquisition. Our existing operations accounted for the remaining $0.6 million increase. This increase was due to expense increases from our regulated operations that resulted in higher interstate revenue requirements.

        Intrastate access.    Intrastate access revenues decreased from $44.0 million in 2003 to $42.4 million in 2004. The decrease from our existing operations was $2.6 million before being offset by $1.0 million in revenues contributed by the Maine acquisition. The decrease was mainly attributable to the Basic Service Calling Areas plan implemented in Maine as discussed above in local calling services.

        Long distance services.    Long distance services revenues increased $2.3 million from $15.4 million in 2003 to $17.7 million in 2004. This increase was all attributable to our existing operations as a result of promotional efforts and bundles with unlimited long distance designed to generate more revenue.

        Data and Internet services.    Data and internet services revenues increased $5.7 million from $13.4 million in 2003 to $19.1 million in 2004. The increase is due primarily to increases in digital subscriber line customers as we continue to aggressively market our broadband services. Our digital subscriber line customer base increased from 17,937 customers as of December 31, 2003 to 31,876 customers as of December 31, 2004, a 78% increase during this period. The Maine acquisition contributed the remaining revenue increase of $0.6 million.

        Other services.    Other revenues increased from $17.0 million in 2003 to $17.8 million in 2004. Of the increase, $0.6 million was attributed to the Maine acquisition. An increase of $0.2 million from existing operations was due to a $1.2 million one-time sale and installation of E911 system equipment. This was offset by approximately $1.0 million of reductions in billing and collections revenues, as inter-exchange carriers continue to take back the billing function for their more significant long distance customers. We expect the billing and collection trend to continue.

Operating Expenses

Operating expenses and cost of goods sold, excluding depreciation and amortization. Operating expenses increased $17.6 million to $128.8 million in 2004 from $111.2 million in 2003. Of the increase, $13.5 million is related to our existing operations and $4.1 million is related to expenses of the companies we acquired in 2003 in the Maine acquisition. Wages and benefits increased $4.4 million due to merit salary increases, an increase in our bonus compensation and an increase in the number of our employees compared to a year ago. Network operations expense, wholesale digital subscriber line charges and transport and network costs associated with our broadband initiatives increased $4.0 million. Cost of goods sold associated with the one-time sale and installation of E911 system equipment was $1.0 million in 2004. Bad debt expense was $1.6 million higher in 2004 than 2003 due primarily to a $0.9 million recovery received in 2003. Marketing and promotion expenses increased $0.6 million due to higher levels of activity related to the promotion of custom calling features, data services and other products. Billing costs have increased $1.0 million as we incurred costs associated with the conversion of our billing systems into an integrated platform. The balance of the increase is attributable to smaller miscellaneous items.

        Depreciation and amortization.    Depreciation and amortization from continuing operations increased $2.2 million to $50.3 million in 2004 from $48.1 million in 2003. The Maine acquisition

39

accounted for $1.2 million of the increase and $0.3 million was attributable to the increased investment in our communications network for existing operations we acquired prior to 2003. The other $0.7 million was related to accelerated depreciation on wireless equipment due to a decision to exit certain wireless markets.

        Stock based compensation.    For the year ended December 31, 2004, stock based compensation of $49,000 was incurred as a result of modification of an employee stock option agreement with an executive officer and compensation expense from restricted stock units, offset by the decrease in the estimated value of fully vested stockholder appreciation rights agreements. The restricted stock units issued in December of 2003 resulted in a compensation charge of $0.2 million. Stock based compensation for the year ended December 31, 2003 was $15,000.

        Income from operations.    Income from operations increased $1.5 million to $73.6 million in 2004 from $72.1 million in 2003. A $1.5 million decrease attributable to our existing operations was offset by a $3.0 million increase attributable to the Maine acquisition.

        Other income (expense).    Total other expense increased $16.8 million to $97.4 million in 2004 from $80.6 million in 2003. The increase consisted primarily of interest expense on long-term debt, which increased $14.1 million to $104.3 million in 2004 from $90.2 million in 2003, which was mainly attributable to the issuance of the 11⁷/8% notes during the first quarter of 2003 at a higher interest rate than prior debt financings and the adoption of Statement of Financial Accounting Standards 150 as of July 1, 2003, the latter of which resulted in our recording $20.2 million in interest expense related to dividends and accretion on our series A preferred stock for the year ended December 31, 2004 compared to $9.0 million for the year ended December 31, 2003. Earnings from equity investments increased $0.8 million to $10.9 million in 2004 from $10.1 million in 2003. For the twelve months ended December 31, 2004, other non-operating income (expense) includes the write-off of debt issuance and offering costs of $6.0 million associated with an abandoned offering of Income Deposit Securities. For the year ended December 31, 2003, other non-operating income (expense) of $1.5 million represents the net loss on the extinguishment of debt and expenses related to the loss on the write-off of loan origination costs. In conjunction with the issuance of $225.0 million of the 11⁷/8% notes during the first quarter of 2003, we recorded $3.5 million in non-operating gains on the extinguishment of a portion of the 9¹/2% notes, the 12¹/2% notes and loans under Carrier Services' credit facility. These gains were offset by a non-operating loss of $5.0 million for the write-off of debt issue costs related to this extinguishment of debt in 2003.

        The following is a summary of amounts included in realized and unrealized gains (losses) on interest rate swaps (dollars in thousands):

		2004			2003
Change in fair value of interest rate swaps		$	874		$	7,693
Reclassification of transition adjustment included in other comprehensive income (loss)			(103	)		(1,029	)
Realized losses			(883	)		(8,051	)
	Total	$	(112	)	$	(1,387	)

        Income tax expense.    Income tax expense from continuing operations increased $0.7 million to $0.5 million in 2004 from a benefit of $0.2 million in 2003. The income tax expense relates primarily to income taxes owed in certain states offset by investment tax credits in certain states.

        Discontinued operations.    Net income from discontinued operations of our existing operations sold in the South Dakota disposition was $1.9 million in 2003. The companies were sold on September 30, 2003 and resulted in the recognition of a gain on disposal of the discontinued operations of

40

$7.7 million during 2003. During the twelve months ended December 31, 2004 and 2003, we recorded a reduction to our liability associated with the discontinuation of our competitive local exchange carrier operations of $0.7 million and $0.3 million, respectively. This was mainly attributable to excise tax refunds received from the Internal Revenue Service as well as a reduction in liabilities associated with potential property tax payments.

        Net income (loss).    Net loss attributable to common stockholders for the year ended December 31, 2004 was $23.7 million. Our 2003 net loss attributable to common shareholders was $4.3 million after giving effect to $8.9 million in dividends and accretion related to our series A preferred stock and the repurchase of our series A preferred stock at a discount of $2.9 million. The difference between 2004 and 2003 is a result of the factors discussed above.

Year Ended December 31, 2003 Compared with Year Ended December 31, 2002

Revenues

        Revenues.    Revenues increased $0.6 million to $231.4 million in 2003 compared to $230.8 million in 2002. Of this increase, $0.7 million was attributable to the Maine acquisition and $1.5 million in revenues from our existing operations. This was offset by a decrease to revenues of $1.6 million from our wholesale long distance company. We derived our revenues from the following sources:

        Local calling services.    Local calling service revenues increased $2.1 million from $54.0 million in 2002 to $56.1 million in 2003. Despite a 0.5% decline in net voice access lines, revenues from our existing operations increased $1.8 million due to increases in local calling features and local interconnection revenues. The remaining increase in local calling service revenues of $0.3 million was attributable to the Maine acquisition.

        Universal Service Fund high cost loop support.    Universal Service Fund high cost loop payments decreased $3.5 million to $18.9 million in 2003 from $22.4 million in 2002. Our existing operations accounted for all of this decrease. The support from the high cost loop fund is associated with historical expense levels of our companies that exceed the national average cost per loop. The historical expenses occur two years prior to the receipt of the Universal Service Fund revenues. Historical expenses related to a performance share plan paid in 2000 by an acquired company resulted in Universal Service Fund payments in 2002 which did not recur in 2003. In addition to this decrease, the Universal Service Fund payments declined due to increases in the national average cost per loop.

        Interstate access.    Interstate access revenues increased $0.8 million from $65.8 million in 2002 to $66.6 million in 2003. Our existing operations accounted for $0.5 million of this increase due to operating expense increases that resulted in higher interstate revenue requirements and $0.3 million was attributable to the Maine acquisition.

        Intrastate access.    Intrastate access revenues increased slightly from $43.8 million in 2002 to $44.0 million in 2003. This slight increase was attributable to the Maine acquisition. While consolidated access revenues were relatively flat, lower access rates in a few of the states in which we operate were generally offset by higher minutes of use in other states in which we operate.

        Long distance services.    Long distance services revenues decreased $1.4 million from $16.8 million in 2002 to $15.4 million in 2003. An approximately $0.2 million increase was attributable to our existing rural local exchange carrier operations. Carrier Services revenues decreased by $1.6 million as a result of rate increases from its underlying toll carriers, which resulted in the loss of wholesale customers by Carrier Services.

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        Data and Internet services.    Data and Internet services revenues increased $3.1 million from $10.3 million in 2002 to $13.4 million in 2003. This increase is primarily from an increase of digital subscriber line customers from 6,659 to 17,937, an increase of 169%.

        Other services.    Other revenues decreased by $0.8 million from $17.8 million in 2002 to $17.0 million in 2003 at our existing operations. This decrease is mainly associated with reductions in billing and collections revenues, as interexchange carriers continue to take back the billing function for their more significant long distance customers. We expect this trend to continue.

Operating Expenses

        Operating expenses, excluding depreciation and amortization.    Operating expenses increased $0.9 million to $111.2 million in 2003 from $110.3 million in 2002. Expenses of our wholesale long distance company decreased $0.7 million as a result of lower minutes of use from our wholesale customers. This decrease was offset by an increase of $1.3 million related to our existing operations and $0.3 million related to expenses of the companies we acquired in 2003 in the Maine acquisition. Several items contributed to the expense increase, including network operations expense, transport and network costs associated with our broadband initiatives. Expenses also increased because of an increase in the Universal Service Fund life line fund contribution expense which is directly assigned to the interstate revenue requirement and is fully recovered via our interstate revenues. Marketing and promotion expenses increased due to higher levels of activity related to the promotion of custom calling features, data services and other performance products. The increased expenses in 2003 would have been larger except for lower compensation costs in 2003 as a result of employee termination costs incurred in 2002, as well as a $1.9 million bad debt expense incurred in 2002 when a carrier declared bankruptcy and a $0.6 million recovery of this write-off received in 2003 resulting in a year over year decrease in bad debt expense of $2.5 million.

        Depreciation and Amortization.    Depreciation and amortization from continuing operations increased $1.8 million to $48.1 million in 2003 from $46.3 million in 2002. An increase of $1.7 million was attributable to the increased investment in our communications network by existing operations we acquired prior to 2003 and $0.1 million was attributable to the Maine acquisition.

        Stock Based Compensation.    For the year ended December 31, 2002, stock based compensation of $0.9 million was incurred, including $1.2 million resulting from a modification of an employee stock option agreement with an executive officer, offset by the decrease in the estimated value of fully vested stockholder appreciation rights agreements of $0.3 million. Stock based compensation for the year ended December 31, 2003 was $15,000.

        Income from Operations.    Income from continuing operations decreased $1.2 million to $72.1 million in 2003 from $73.3 million in 2002. A $0.5 million decrease attributable to our existing operations and a decrease of $1.0 million from our wholesale long distance company was offset by a $0.3 million increase attributable to the Maine acquisition.

        Other Income (Expense).    Total other expense from continuing operations decreased $0.9 million to $80.6 million in 2003 from $81.5 million in 2002. The expense consisted primarily of interest expense on long-term debt. Interest expense increased $20.7 million to $90.2 million in 2003 from $69.5 million in 2002, mainly attributable to our March 2003 debt refinancing and our early adoption of SFAS 150, as of July 1, 2003, the latter of which resulted in our recording $9.0 million in interest expense related to dividends and accretion on preferred shares subject to mandatory redemption. During 2002, we recorded non-cash impairment of investments of $12.6 million which is associated with other than temporary declines in fair value of approximately $8.2 million of Choice One stock and a write-down of $4.4 million for certain investments accounted for under the equity method. There were no similar impairment losses recorded in 2003. Earnings in equity investments increased $2.3 million to

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$10.1 million in 2003 from $7.8 million in 2002. Other non-operating income (expense) includes net gain (loss) on the extinguishment of debt and expenses related to the loss on the write-off of loan origination costs. As a result of the issuance of $225.0 million of the 11⁷/8% notes during the first quarter of 2003, we recorded $2.8 million and $0.7 million of non-operating gains on the extinguishment of a portion of the 9¹/2% notes and the 12¹/2% notes and loans under Carrier Services' credit facility, respectively. Additionally, we recorded a non-operating loss of $5.0 million for the write-off of debt issue costs related to this extinguishment of debt in 2003.

        The following is a summary of amounts included in realized and unrealized gains (losses) on interest rate swaps (dollars in thousands):

		2003			2002
Change in fair value of interest rate swaps		$	7,693		$	2,135
Reclassification of transition adjustment included in other comprehensive income (loss)			(1,029	)		(1,437	)
Realized gains (losses)			(8,051	)		(10,275	)
	Total	$	(1,387	)	$	(9,577	)

        Income Tax Benefit.    Income tax benefit from continuing operations increased $0.7 million to $0.2 million in 2003 from an expense of $0.5 million in 2002. The income tax benefit related primarily to income taxes owed in certain states offset by investment tax credits in certain states.

        Discontinued Operations.    In November 2001, we decided to discontinue the competitive local exchange carrier operations of Carrier Services. Net income from discontinued operations of our competitive local exchange carrier operations was $0.3 million and $19.5 million for 2003 and 2002, respectively. The income in 2002 was a result of a gain on extinguishment of debt attributable to Carrier Services. Net income from discontinued operations of our existing operations sold in the South Dakota disposition was $1.9 million and $2.4 million for 2003 and 2002, respectively. We recorded a gain on disposal in connection with the South Dakota disposition of $7.7 million in 2003.

        Net Income (Loss).    Our 2003 net loss attributable to common shareholders was $4.3 million after giving effect to $8.9 million in dividends and accretion related to our series A preferred stock and the repurchase of series A preferred stock at a discount of $2.9 million. Additionally, as a result of the adoption of SFAS 150 on July 1, 2003, the dividends and accretion of $9.0 million related to these instruments is included as a reduction of net income for the third and fourth quarters of 2003. Our 2002 net income attributable to common shareholders was $1.3 million after giving effect to $11.9 million in dividends and accretion related to our series A preferred stock. The differences between the 2003 and 2002 net income (loss) are a result of the factors discussed above.

Liquidity and Capital Resources

        Our short-term and long-term liquidity needs arise primarily from: (i) interest payments, which are expected to be approximately $39.0 million to $40.0 million in 2005, primarily related to our credit facility; (ii) capital expenditures, which are expected to be approximately $31.0 million in 2005; (iii) working capital requirements as may be needed to support the growth of our business; (iv) dividend payments on our common stock; and (v) potential acquisitions. Our board of directors has adopted a dividend policy which reflects our judgment that our stockholders would be better served if we distributed a substantial portion of our cash available for distribution to them instead of retaining it in our business.

        We intend to fund our operations, interest expense, capital expenditures, working capital requirements and dividend payments on our common stock from cash from operations. To fund future acquisitions, we intend to use borrowings under our credit facility, or, subject to the restrictions in our

43

credit facility, to arrange additional funding through the sale of public or private debt and/or equity securities, or obtain additional senior bank debt.

        For the years ended December 31, 2004, 2003 and 2002, cash provided by operating activities of continuing operations was $46.0 million, $32.8 million and $55.6 million, respectively.

        Our ability to service our indebtedness depends on our ability to generate cash in the future. We are not required to make any scheduled amortization payments under our credit facility's term loan facility which matures in February 2012. We will need to refinance all or a portion of our indebtedness on or before maturity. We may not be able to refinance our indebtedness on commercially reasonable terms or at all. If we were unable to renew or refinance our credit facility, our failure to repay all amounts due on the maturity date would cause a default under our credit facility. In addition, borrowings under our credit facility bear interest at variable interest rates. In connection with the offering, we entered into three interest rate swap agreements which fixed the interest rate on approximately $130.0 million of the term loans under our credit facility at 6.11% until December 31, 2009, fixed the interest rate on approximately $130.0 million of the term loans under our credit facility at 5.98% until December 31, 2008 and fixed the interest rate on approximately $130.0 million of the term loans under our credit facility at 5.76% until December 31, 2007. After these interest rate swap agreements expire, our annual debt service obligations on such portion of the term loans will vary from year to year unless we enter into a new interest rate swap or purchase an interest rate cap or other interest rate hedge. An increase of ten percent in the annual interest rate applicable to borrowings under the term loan facility of our credit facility would result in an increase of approximately $0.9 million in our annual cash interest expense, and a corresponding decrease in cash available to pay dividends on our common stock. If we choose to enter into a new interest rate swap or purchase an interest rate cap or other interest rate hedge in the future, the amount of cash available to pay dividends on our common stock may decrease. However, to the extent interest rates increase in the future, we may not be able to enter into a new interest rate swap or to purchase an interest rate cap or other interest rate hedge on acceptable terms.

        Based on the dividend policy with respect to our common stock, we may not have any significant cash available to meet any unanticipated liquidity requirements, other than available borrowings, if any, under our new revolving facility. As a result, we may not retain a sufficient amount of cash to finance growth opportunities, including acquisitions, or unanticipated capital expenditures or to fund our operations. If we do not have sufficient cash for these purposes, our financial condition and our business will suffer. However, our board of directors may, in its discretion, amend or repeal the dividend policy to decrease the level of dividends provided for or discontinue entirely the payment of dividends.

        We used net proceeds received from the offering, together with approximately $566.0 million of borrowings under the term loan facility of our credit facility, to, among other things, repay all outstanding loans under our old credit facility, repurchase all of our series A preferred stock and consummate tender offers and consent solicitations in respect of our outstanding 9¹/2% notes, floating rate notes, 12¹/2% notes and 11⁷/8% notes. On March 10, 2005, we redeemed the remaining outstanding 9¹/2% notes and floating rate notes. We intend to redeem the remaining outstanding 12¹/2% notes on May 1, 2005 with borrowings under the delayed draw facility of our credit facility.

        Net cash used in investing activities from continuing operations was $21.0 million, $54.0 million and $30.3 million for the years ended December 31, 2004, 2003 and 2002, respectively. These cash flows primarily reflect capital expenditures of $36.5 million, $33.6 million and $38.8 million for the years ended December 31, 2004, 2003 and 2002, respectively, and acquisitions of telephone properties, net of cash acquired of $33.1 million for the year ended December 31, 2003. There were no acquisitions during 2004 or 2002.

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        Offsetting capital expenditures were distributions from investments of $15.0 million, $10.8 million and $9.0 million for the years ended December 31, 2004, 2003 and 2002, respectively. The $15.0 million received in the year ended December 31, 2004 includes a non-recurring $2.5 million distribution to one of our subsidiaries, Chouteau Telephone Company, indirectly from Independent Cellular Telephone LLC resulting from the sale of Independent Cellular Telephone LLC's membership interest in an operating cellular limited liability company. These investments represent minority investments and passive partnership interests. We do not control the timing or amount of distributions from such investments or interests. In addition, we have been advised that one of these partnerships has adjusted its pricing structure. Based on such adjustments, the amount of future distributions from this partnership will decrease. Future price adjustments, if any, may result in a significant decrease in distributions from this partnership. Historically, the amount of distributions from this partnership represented a material portion of our cash flow.

        Net cash used in financing activities from continuing operations was $24.0 million, $2.0 million and $12.5 million for the years ended December 31, 2004, 2003 and 2002, respectively. These cash flows primarily represent net repayment of long-term debt of $15.2 million and $7.8 million in debt issuance and offering related costs for the year ended December 31, 2004. For the year ended December 31, 2003, net proceeds from the issuance of long term debt of $23.3 million were offset by debt issuance costs of $15.6 million and the repurchase of our series A preferred stock and class A common stock of $8.6 million. For the year ended December 31, 2002, net repayments of long-term debt were $11.5 million.

        Our annual capital expenditures for our rural telephone operations have historically been significant. Because existing regulations allow us to recover our operating and capital costs, plus a reasonable return on our invested capital in regulated telephone assets, capital expenditures have historically constituted an attractive use of our cash flow. Capital expenditures were approximately $36.5 million, $33.6 million and $38.8 million for the years ended December 31, 2004, 2003 and 2002, respectively. These amounts include $4.4 million and $2.0 million for the years ended December 31, 2004 and 2003, respectively, of non-recurring capital expenditures related to the conversion of our six billing systems into an integrated billing platform and the centralization of our customer service records. These amounts also include $9.0 million and $4.8 million for the years ended December 31, 2004 and 2003, respectively, of non-recurring capital expenditures related to capital investments in digital subscriber line access multiplexers and other plant upgrades associated with our accelerated digital subscriber line initiative that began during the third quarter of 2003. As a result, approximately 93% of our exchanges are broadband capable as of December 31, 2004 and management expects that digital subscriber line investments will decrease significantly in 2005. Our management views non-recurring capital expenditures as either one-time capital expenditures or discretionary capital expenditures which are not necessary to maintain and enhance our network infrastructure or operate our business.

        We expect that our annual capital expenditures for our existing operations will be approximately $31.0 million for fiscal 2005 through fiscal 2009. We estimate that approximately $28.0 million of this amount will be used to maintain and enhance our network infrastructure and operate our business. This includes expenditures to meet our network, product offering and customer requirements, such as investments in equipment, central office technology (which includes both hardware and software), inside and outside plant upgrades to meet network capacity requirements and normal repair and maintenance to our infrastructure. In addition, approximately $3.0 million of this amount will be available for one-time or discretionary capital expenditures, such as the billing systems conversion. We expect to fund all of these capital expenditures through our cash flow from operations. If cash is available beyond what is required to support our dividend policy, we may consider additional capital expenditures if we believe they are beneficial. Although the amount of our capital expenditures can fluctuate from quarter to quarter, on an annual basis we do not expect capital expenditures for our existing operations through fiscal 2009 to vary significantly from our estimated amounts.

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        We intend to use borrowings under our credit facility's revolving facility to fund the acquisition of Berkshire, which we expect to close in the second quarter of 2005.

        Our old credit facility consisted of an $85.0 million revolving loan facility, of which $45.0 million was available at December 31, 2004, and two term facilities, a tranche A term loan facility of $40.0 million with $40.0 million outstanding at December 31, 2004 that matured on March 31, 2007 and a tranche C term loan facility with $102.4 million principal amount outstanding as of December 31, 2004 that matured on March 31, 2007. We repaid all of the borrowings under our old credit facility with a portion of net proceeds from the offering, together with borrowings under our credit facility.

        Our credit facility consists of a $100.0 million revolving loan facility, of which $99.0 million was available at March 15, 2005 (a $1.0 million letter of credit was issued as of such date), that matures in February 2011 and a term loan facility of $588.5 million (including a $22.5 million delayed draw facility) with $566.0 million outstanding at March 15, 2005 that matures in February 2012.

        In 1998, the Company issued $125.0 million aggregate principal amount of the 9¹/2% notes and $75.0 million aggregate principal amount of the floating rate notes. Both series of these notes mature on May 1, 2008. These notes are general unsecured obligations of the Company, subordinated in right of payment to all of the Company's senior debt. On February 9, 2005, we repurchased $115.0 million principal amount of the 9¹/2% notes and $50.8 million principal amount of the floating rate notes tendered pursuant to the tender offers for such notes. We redeemed the remaining $0.2 million principal amount of the outstanding 9¹/2% notes and $24.2 million principal amount of the floating rate notes on March 10, 2005.

        In 2000, the Company issued $200.0 million aggregate principal amount of the 12¹/2% notes. These notes mature on May 10, 2010. These notes are general unsecured obligations of the Company, subordinated in right of payment to all of the Company's senior debt. On February 9, 2005, we repurchased $173.1 million principal amount of the 12¹/2% notes tendered pursuant to the tender offer for such notes. We intend to redeem the remaining outstanding 12¹/2% notes on May 1, 2005.

        In 2003, the Company issued $225.0 million aggregate principal amount of the 11⁷/8% notes. These notes mature on March 1, 2010. These notes are general unsecured obligations of the Company, ranking pari passu in right of payment with all existing and future senior debt of the Company, including all obligations under our credit facility, and senior in right of payment to all existing and future subordinated indebtedness of the Company. On February 9, 2005, we repurchased $223.0 million principal amount of the 11⁷/8% notes tendered pursuant to the tender offer for such notes.

        For a summary description of our debt, see "—Description of Certain Indebtedness."

        In May 2002, Carrier Services entered into an amended and restated credit facility with its lenders to restructure its obligations under its credit facility. In the restructuring, (i) Carrier Services paid certain of its lenders $5.0 million to satisfy $7.0 million of obligations under the credit facility, (ii) the lenders converted approximately $93.9 million of the loans under the credit facility into shares of our series A preferred stock and (iii) the remaining loans under the credit facility and certain swap obligations were converted into $27.9 million of new term loans. In March 2003, we used a portion of the proceeds from the offering of the 11⁷/8% notes and borrowings under our old credit facility's tranche A term loan facility to repay $2.2 million principal amount of loans under Carrier Services' credit facility, at approximately a 30% discount to par. On January 30, 2004, we used additional borrowings under our old credit facility's tranche A loan facility and a portion of the borrowings under our old credit facility's revolving loan facility to repay in full all indebtedness under Carrier Services' credit facility.

        In December 2004, we wrote off debt issuance and offering costs of $6.0 million associated with our abandoned offering of Income Deposit Securities. The offering of Income Deposit Securities was abandoned in favor of the offering. Debt issue and offering costs of $1.4 million that are a direct and incremental benefit to the transactions remain capitalized at December 31, 2004.

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Summary of Contractual Obligations

        The tables set forth below contain information with regard to disclosures about contractual obligations and commercial commitments.

        The following table discloses aggregate information about our contractual obligations as of December 31, 2004 and the periods in which payments are due:

	Payments due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(Dollars in thousands)
Contractual obligations:
Debt maturing within one year	$	27,256	$	27,256	$	—	$	—	$	—
Long term debt		783,176		—		168,768		193,737		420,671
Preferred shares subject to mandatory redemption		126,750		—		—		—		126,750
Operating leases(1)		10,037		3,291		4,935		1,222		589
Deferred transaction fee(2)		8,445		—		—		—		8,445
Common stock subject to put options		1,136		1,000		136		—		—
Minimum purchase contract		7,766		5,828		1,938		—		—
Total contractual cash obligations	$	964,566	$	37,375	$	175,777	$	194,959	$	556,455

(1)

Real property lease obligations of $5.8 million associated with the discontinued operations discussed in note 13 to our consolidated financial statements which are stated in this table at total contractual amounts. However, we have negotiated lease terminations or subleases on these properties to reduce the total obligation. Operating leases from continuing operations of $4.2 million are also included.

(2)

Payable to Kelso & Company upon the occurrence of certain events, which include the offering. See "Item 13. Certain Relationships and Related Transactions—Financial Advisory Agreements."

        The following table discloses aggregate information about our contractual obligations as of December 31, 2004 after giving effect to the transactions and the periods in which payments are due:

	Payments due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(Dollars in thousands)
Contractual obligations:
Debt maturing within one year	$	524	$	524	$	—	$	—	$	—
Long term debt		592,810		—		1,132		622		591,056
Operating leases(1)		10,037		3,291		4,935		1,222		589
Minimum purchase contract		7,766		5,828		1,938		—		—
Total contractual cash obligations	$	611,137	$	9,643	$	8,005	$	1,844	$	591,645

(1)

Real property lease obligations of $5.8 million associated with the discontinued operations discussed in note 13 to our consolidated financial statements which are stated in this table at total contractual amounts. However, we have negotiated lease terminations or subleases on these properties to reduce the total obligation. Operating leases from continuing operations of $4.2 million are also included.

        As of December 31, 2004, we did not have any derivative financial instruments.

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Description of Certain Indebtedness

Credit Facility

        Our credit facility consists of a credit agreement among the Company and certain financial institutions, with Deutsche Bank Trust Company Americas, as administrative agent. The Company is the borrower under the credit facility and each of the Company's direct subsidiaries is a guarantor of the Company's obligations.

        The credit facility consists of:

•

a revolving facility, or the revolver, in a total principal amount of up to $100.0 million; and



•

a term loan facility, or the term loan, in a total principal amount of $588.5 million (including a $22.5 million delayed draw facility).

        The revolver has a swingline subfacility in an amount of $5.0 million and a letter of credit subfacility in an amount of $10.0 million, which will allow issuances of standby letters of credit for our account. The credit facility also permits interest rate and currency exchange swaps and similar arrangements that we may enter into with the lenders under the credit facility and/or their affiliates.

        We expect to borrow under the revolver from time to time to provide for working capital and general corporate needs, including to finance permitted acquisitions. The delayed draw facility was not drawn at the closing of the offering but may be drawn for a period of one year following the closing of the offering to redeem or repurchase any 12¹/2% notes or 11⁷/8% notes not purchased in the tender offers for such notes, subject to the terms and conditions of the credit facility.

        The term loan matures in February 2012 and the revolver matures in February 2011.

        Features of the credit facility include:

        Interest Rate and Fees.    Borrowings bear interest, at our option, for the revolver and for the term loan at either (a) the Eurodollar rate plus an applicable margin or (b) a base rate, as such term is defined in the credit agreement, plus an applicable margin.

        The Eurodollar rate applicable margin and the base rate applicable margin for loans under our credit facility are 2.0% and 1.0%, respectively. Interest on swing line loans bear interest at the base rate plus the base rate applicable margin. Interest with respect to base rate loans is payable quarterly in arrears and interest with respect to Eurodollar loans is payable at the end of the applicable interest period and every three months in the case of interest periods in excess of three months.

        The credit facility provides for payment to the lenders of a commitment fee on any unused commitments equal to 0.5% per annum, payable quarterly in arrears, as well as other fees.

        We entered into three interest rate swap agreements which fixed the interest rate on approximately $130.0 million of the floating rate borrowings under the term loan at 6.11% until December 31, 2009, fixed the interest rate on approximately $130.0 million of floating rate borrowings under the term loan at 5.98% until December 31, 2008 and fixed the interest rate on approximately $130.0 million of the floating rate borrowings under the term loan at 5.76% until December 31, 2007. The floating rate borrowings under our credit facility bear interest at the Eurodollar rate plus 2.0%. These interest rate swap agreements effectively fixed the interest rate on 66% of our floating rate debt to a blended interest rate of not more than 5.95% per annum until December 31, 2007.

        Mandatory Prepayments.    The credit facility requires us first to prepay outstanding term loans under the credit facility and, thereafter, to repay loans under the new revolver and/or to reduce revolver commitments (or commitments under the delayed draw facility) under the credit facility with, subject to certain conditions and exceptions, 100% of the net cash proceeds we receive from any sale, transfer or other disposition of any assets, 100% of net casualty insurance proceeds and 100% of the

48

net cash proceeds we receive from the issuance of permitted securities and, at certain times if we are not permitted to pay dividends, with 50% of the increase in our cumulative distributable cash (as defined below) during the prior fiscal quarter. Reductions to the revolving commitments under the credit facility from the foregoing recapture events will not reduce the revolving commitments under the credit facility below $50.0 million.

        Voluntary Prepayments.    The credit facility provides for voluntary prepayments of the revolver and the term loan and voluntary commitment reductions of the revolver (and the delayed draw facility), subject to giving proper notice and compensating the lenders for standard Eurodollar breakage costs, if applicable.

        Covenants.    The credit facility contains financial covenants, including, without limitation, the following tests: a minimum interest coverage ratio equal to or greater than 3.0:1 and a maximum leverage ratio equal to or less than 5.25:1.

        The credit facility contains customary affirmative covenants. The credit facility also contains negative covenants and restrictions, including, among others, with respect to redeeming and repurchasing our other indebtedness, loans and investments, additional indebtedness, liens, capital expenditures, changes in the nature of our business, mergers, acquisitions, asset sales and transactions with affiliates.

        Payment of Dividends.    Subject to the second sentence of the first paragraph under "Suspension of Dividend Payments" below, under the credit facility we are permitted to pay dividends for the period from the closing date of the offering through March 31, 2005. In addition, we may use all of our Cumulative Distributable Cash accumulated after April 1, 2005 to pay dividends, but we may not in general pay dividends in excess of such amount.

        Set forth below is a summary of certain of the defined terms that are used in the provisions governing the payment of dividends and mandatory payments during suspension of dividends under our credit facility.

        "Available Cash" means, for any reference period, an amount of cash equal to the sum (which may be negative) of (without duplication) (I) our Adjusted EBITDA for such reference period minus (II) the sum of (i) our consolidated interest expense during such reference period, to the extent included in determining such Adjusted EBITDA, (ii) all scheduled, mandatory and voluntary principal repayments in respect of our indebtedness made during such reference period (other than (x) repayments made during such reference period with the proceeds of indebtedness, equity issuances, asset sales or insurance recovery events, (y) repayments of revolving and swingline loans during such reference period, except to the extent resulting in a corresponding reduction of the total revolving commitment in an amount equal to such repayment) and (z) certain mandatory prepayments of term loans during such reference period, (iii) capital expenditures made by us in cash during such reference period (other than capital expenditures financed with the proceeds of indebtedness (other than revolving loans or swingline loans), equity issuances, assets sales and insurance recovery events), (iv) tax payments paid in cash during such reference period, (v) cash consideration paid by us during such reference period for acquisitions of equity interests and/or assets comprising a business or product line (whether pursuant to a permitted acquisition or otherwise), except to the extent financed with the proceeds of indebtedness or issuances of equity, (vi) investments (other than certain excluded investments) made by us during such reference period, (vii) the cash cost of any extraordinary losses and of any losses on sales of assets (other than in the ordinary course of business) during such reference period, in any such case to the extent included in determining Adjusted EBITDA for such reference period and (viii) cash payments made by us during such reference period on account of non-cash losses or non-cash charges accrued or expensed during or prior to such reference period, plus (III) the sum of (i) the cash amount of any extraordinary gains, and the cash amount realized on gains

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on asset sales other than in the ordinary course of business, during such reference period, in any such case to the extent deducted in determining Adjusted EBITDA for such reference period, and (ii) cash received by us during such reference period on account of non-cash gains or non-cash income excluded from Adjusted EBITDA during or prior to such reference period.

        "Adjusted EBITDA" means, for any period, Consolidated Net Income for such period adjusted by (A) adding thereto (in each case (other than for purposes of clauses (v) and (vi) below), to the extent deducted in determining Consolidated Net Income for such period), without duplication, the sum of the amounts for such period of (i) provisions for taxes based on income, (ii) consolidated interest expense, (iii) amortization and depreciation expense (including any amortization or write-off related to the write-up of any assets as a result of purchase accounting and the write-off of deferred financing costs), (iv) losses on sales of assets (excluding sales in the ordinary course of business) and other extraordinary losses, (v) non-core income relating to non-core assets, to the extent not included in any determination of Consolidated Net Income for such period, (vi) dividends paid by CoBank to us on common stock of CoBank held by us, to the extent not included in any determination of Consolidated Net Income, (vii) the non-cash portion of any retirement or pension plan expense incurred by us, (viii) all one-time costs and expenses paid during such period in respect of the transactions and our abandoned offering of income deposit securities and (ix) any other non-cash charges (including non-cash costs arising from implementation of SFAS 106 and SFAS 109) accrued by us during such period (except to the extent any such charge will require a cash payment in a future period) and (B) subtracting therefrom (to the extent included in arriving at Consolidated Net Income for such period), without duplication, the sum of the amounts for such period of (i) gains on sales of assets (excluding sales in the ordinary course of business) and other extraordinary gains and (ii) all non-cash gains and non-cash income, all as determined for us on a consolidated basis in accordance with GAAP. Notwithstanding the foregoing, for purposes of determining the leverage ratio, Adjusted Consolidated EBITDA shall be determined on a pro forma basis.

        "Consolidated Net Income" means, for any period, our net income (or loss) on a consolidated basis for such period (taken as a single accounting period) determined in conformity with GAAP (after any deduction for minority interests), provided that there shall be excluded from the calculation thereof (without duplication) (i) the income (or loss) of any person (other than our subsidiaries) in which any other person (other than us) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to us by such person during such period, (ii) except for determinations expressly required to be made on a pro forma basis, the income (or loss) of any person accrued prior to the date it becomes a subsidiary of us or is merged into or consolidated with us or that person's assets are acquired by us and (iii) the income of any of our subsidiaries to the extent that the declaration or payment of dividends or similar distributions by that subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that subsidiary.

        "Cumulative Distributable Cash" means, as at any date of determination, an amount equal to the remainder of (i) Available Cash for the reference period most recently ended prior to such date less (ii) the sum of the aggregate amount of dividends paid by us during such reference period (other than dividends paid by us during the period from the closing of the offering through March 31, 2005) and the amount used to make certain investments.

        Suspension of Dividend Payments.    If we fail to meet the leverage ratio test of equal to or less than 5.00 to 1.00 (or fail to timely deliver financial statements with respect to such test), we will be required to suspend the payment of dividends on our common stock after the payment covering the period from the closing date of the offering through March 31, 2005. In addition, the payment of dividends will be suspended at any time a default or event of default exists under our credit facility or when we do not have at least $10.0 million of cash on hand (including unutilized commitments under the new revolver).

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        The leverage ratio will be tested quarterly. A determination as to whether dividend payments may be made will be based on the leverage ratio as of the end of the quarter ending immediately prior to the date of the proposed dividend payment.

        As of December 31, 2004, on a pro forma basis after giving effect to the transactions, our leverage ratio would have been 4.2:1.

        If we fail to achieve any of these financial levels for any quarter but resume compliance thereafter, we may resume dividend payments unless some other event described in the credit facility requiring suspension of dividend payments occurs.

        Guarantees/Collateral.    The credit facility is guaranteed, jointly and severally, subject to certain exceptions, by all first tier subsidiaries of the Company. We have provided to Deutsche Bank Trust Company Americas, as collateral agent for the benefit of the lenders under the credit facility and certain hedging creditors under permitted hedging agreements, collateral consisting of (subject to certain exceptions) 100% of our equity interests in the subsidiary guarantors and certain other intermediate holding company subsidiaries. Newly acquired or formed direct or indirect subsidiaries of the Company which own equity interests of any subsidiary that is an operating company will be required to provide the collateral described above.

        Events of Default.    The credit facility contains customary events of default, including but not limited to, failure to pay principal, interest or other amounts when due, breach of covenants or representations, cross-defaults to certain other indebtedness in excess of specified amounts, judgment defaults in excess of specified amounts, certain ERISA defaults, the failure of any guaranty or security document supporting the credit facility and certain events of bankruptcy and insolvency.

9¹/2% Notes and Floating Rate Notes Issued in 1998

        The Company issued $125.0 million aggregate principal amount of the 9¹/2%% notes and $75.0 million of the floating rate notes in 1998. In March 2003, we repurchased $9.8 million aggregate principal amount of the 9¹/2% notes. The 9¹/2% notes bear interest at the rate of 9¹/2%% per annum and the floating rate notes bear interest at a rate per annum equal to LIBOR plus 418.75 basis points, in each case payable semi-annually in arrears. The LIBOR rate on the floating rate notes is determined semi-annually.

        The 9¹/2% notes and floating rate notes mature on May 1, 2008.

        The 9¹/2% notes and floating rate notes are general unsecured obligations of the Company, subordinated in right of payment to all existing and future senior indebtedness of the Company, including all obligations under our credit facility.

        The indenture governing the 9¹/2% notes and floating rate notes contains certain customary covenants and events of default.

        In connection with the offering, on January 5, 2005, we commenced a tender offer and consent solicitation for all of the outstanding principal amount of the 9¹/2% notes and the floating rate notes. On January 20, 2005, we executed a supplemental indenture, which became effective as of the closing of the offering, with respect to the indenture governing the 9¹/2% notes and the floating rate notes which eliminated substantially all of the covenants and the events of default in such indenture. On February 9, 2005, we repurchased $115.0 million principal amount of the 9¹/2%% notes and $50.8 million principal amount of the floating rate notes tendered pursuant to the tender offers for such notes. We redeemed the remaining $0.2 million aggregate principal amount of the 9¹/2%% notes and $24.2 million aggregate principal amount of the floating rate notes on March 10, 2005.

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12¹/2% Notes Issued in 2000

        The Company issued $200.0 million aggregate principal amount of the 12¹/2% notes in 2000. In March 2003, we repurchased $7.0 million aggregate principal amount of the 12¹/2% notes. The 12¹/2% notes bear interest at the rate of 12¹/2% per annum payable semi-annually in arrears.

        The 12¹/2% notes mature on May 1, 2010. We may redeem the 12¹/2% notes at any time on or after May 1, 2005 at the redemption prices stated in the indenture under which the 12¹/2% notes were issued, together with accrued and unpaid interest, if any, to the redemption date. In the event of a change of control, we must offer to repurchase the outstanding 12¹/2% notes for cash at a purchase price of 101% of the principal amount of such notes, together with all accrued and unpaid interest, if any, to the date of repurchase.

        The 12¹/2% notes are general unsecured obligations of the Company, subordinated in right of payment to all existing and future senior indebtedness of the Company, including all obligations under our credit facility.

        The indenture governing the 12¹/2% notes contains certain customary covenants and events of default.

        In connection with the offering, on January 5, 2005, we commenced a tender offer and consent solicitation for all of the outstanding principal amount of the 12¹/2% notes. On January 20, 2005, we executed a supplemental indenture, which became effective as of the closing of the offering, with respect to the indenture governing the 12¹/2% notes which eliminated substantially all of the covenants and the events of default in such indenture. On February 9, 2005, we repurchased $173.1 million principal amount of the 12¹/2% notes tendered pursuant to the tender offer for such notes. We intend to redeem the remaining outstanding 12¹/2% notes on May 1, 2005.

11⁷/8% Notes Issued in 2003

        The Company issued $225.0 million aggregate principal amount of the 11⁷/8% notes in 2003. The 11⁷/8% notes bear interest at the rate of 11⁷/8% per annum payable semi-annually in arrears.

        The 11⁷/8% notes mature on March 1, 2010. We may redeem the 11⁷/8% notes at any time on or after March 1, 2007 at the redemption prices stated in the indenture under which the 11⁷/8% notes were issued, together with accrued and unpaid interest, if any, to the redemption date. In the event of a change of control, we must offer to repurchase the outstanding 11⁷/8% notes for cash at a purchase price of 101% of the principal amount of such notes, together with all accrued and unpaid interest, if any, to the date of repurchase.

        The 11⁷/8% notes are general unsecured obligations of the Company, ranking pari passu in right of payment with all existing and future senior debt of the Company, including all obligations under our credit facility, and senior in right of payment to all existing and future subordinated indebtedness of the Company.

        The indenture governing the 11⁷/8% notes contains certain customary covenants and events of default.

        In connection with the offering, on January 5, 2005, we commenced a tender offer and consent solicitation for all of the outstanding principal amount of the 11⁷/8% notes. On January 20, 2005, we executed a supplemental indenture, which became effective as of the closing of the offering, with respect to the indenture governing the 11⁷/8% notes which eliminated substantially all of the covenants and the events of default in such indenture. On February 9, 2005, we repurchased $223.0 million principal amount of the 11⁷/8% notes tendered pursuant to the tender offer for such notes.

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Critical Accounting Policies

        Our critical accounting policies are as follows:

•

Revenue recognition;



•

Allowance for doubtful accounts;



•

Accounting for income taxes; and



•

Valuation of long-lived assets, including goodwill.

        Revenue recognition.    Certain of our interstate network access and data revenues are based on tariffed access charges filed directly with the Federal Communications Commission; the remainder of such revenues are derived from revenue sharing arrangements with other local exchange carriers administered by the National Exchange Carrier Association.

        The Telecommunications Act allows local exchange carriers to file access tariffs on a streamlined basis and, if certain criteria are met, deems those tariffs lawful. Tariffs that have been "deemed lawful" in effect nullify an interexchange carrier's ability to seek refunds should the earnings from the tariffs ultimately result in earnings above the authorized rate of return prescribed by the Federal Communications Commission. Certain of the Company's telephone subsidiaries file interstate tariffs directly with the Federal Communication Commission using this streamlined filing approach. The settlement period related to (i) the 2001 to 2002 monitoring period lapses on September 30, 2005 and (ii) the 2003 to 2004 monitoring period lapses on September 30, 2007. We will continue to monitor the legal status of any pending or future proceedings that could impact its entitlement to these funds, and may recognize as revenue some or all of the over-earnings at the end of the settlement period or as the legal status becomes more certain.

Allowance for doubtful accounts.    In evaluating the collectibility of our accounts receivable, we assess a number of factors, including a specific customer's or carrier's ability to meet its financial obligations to us, the length of time the receivable has been past due and historical collection experience. Based on these assessments, we record both specific and general reserves for uncollectible accounts receivable to reduce the related accounts receivable to the amount we ultimately expect to collect from customers and carriers. If circumstances change or economic conditions worsen such that our past collection experience is no longer relevant, our estimate of the recoverability of our accounts receivable could be further reduced from the levels reflected in our accompanying consolidated balance sheet.

Accounting for income taxes.    As part of the process of preparing our consolidated financial statements we were required to estimate our income taxes. This process involves estimating our actual current tax exposure and assessing temporary differences resulting from different treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheets. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe the recovery is not likely, we must establish a valuation allowance. Further, to the extent that we establish a valuation allowance or increase this allowance in a financial accounting period, we must include a tax provision, or reduce our tax benefit in our consolidated statement of operations. In performing the assessment, management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. We use our judgment to determine our provision or benefit for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets.

        There are various factors that may cause those tax assumptions to change in the near term. We cannot predict whether future U.S. federal income tax laws and regulations might be passed that could have a material effect on our results of operations. We assess the impact of significant changes to the

53

U.S. federal and state income tax laws and regulations on a regular basis and update the assumptions and estimates used to prepare our financial statements when new regulation and legislation is enacted.

        Based on certain assumptions, we had $251.9 million in federal and state net operating loss carry forwards as of December 31, 2004. On February 8, 2005, we completed the offering which resulted in an "ownership change" within the meaning of the U.S. federal income tax laws addressing net operating loss carry forwards, alternative minimum tax credits and other similar tax attributes. As a result of such ownership change, there will be specific limitations on our ability to use our net operating loss carry forwards and other tax attributes. In order to fully utilize the deferred tax assets, mainly generated by the net operating losses, we will need to generate future taxable income of approximately $180.9 million prior to the expiration of the net operating loss carry forwards beginning in 2019 through 2024. Based upon the level of projections for future taxable income over the periods in which the deferred tax assets are deductible, we believe we will realize the benefits of these deductible differences, net of the valuation allowance of $66.0 million at December 31, 2004. The transactions and related anticipated reduction in interest expense and corresponding increase in taxable income was not considered when evaluating the valuation allowance at December 31, 2004. We will continue to reevaluate future taxable income and determine when and how much of the valuation allowance can be reversed in future periods.

Valuation of long-lived assets, including goodwill.    We review our long-lived assets, including goodwill for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Several factors could trigger an impairment review such as:

•

significant underperformance relative to expected historical or projected future operating results;



•

significant regulatory changes that would impact future operating revenues;



•

significant negative industry or economic trends; and



•

significant changes in the overall strategy in which we operate our overall business.

        Goodwill was $468.5 million at December 31, 2004.

        We are required to perform an annual impairment review of goodwill as required by Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. No impairment of goodwill or other long-lived assets resulted from the annual valuation of goodwill.

New Accounting Standards

        In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51. In December 2003, the FASB revised Interpretation No. 46, which clarifies the application of Accounting Research Bulletin (ARB) No. 51, Consolidated Financial Statements. As per ARB No. 51, a general rule for preparation of consolidated financial statements of a parent and its subsidiary is ownership by the parent, either directly or indirectly, of over fifty percent of the outstanding voting shares of a subsidiary. However, application of the majority voting interest requirement of ARB No. 51 to certain types of entities may not identify the party with a controlling financial interest because the controlling financial interest may be achieved through arrangements that do not involve voting interest. Interpretation No. 46 clarifies applicability of ARB No. 51 to entities in which the equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. Interpretation No. 46 requires an entity to consolidate a variable interest entity even though the entity does not, either directly or indirectly, own over fifty percent of the outstanding voting shares. Interpretation No. 46 is applicable for financial statements issued for reporting periods that end after March 15, 2004. The implementation of Interpretation No. 46 did not have a significant impact on our financial statements.

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        In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 applies specifically to a number of financial instruments that companies have historically presented within their financial statements either as equity or between the liabilities section and the equity section, rather than as liabilities. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of a non-public entity, in which case this statement shall be effective for fiscal periods beginning after December 15, 2003. For purposes of adoption of SFAS No. 150, we met the definition of a nonpublic entity. As described in note 8 to our consolidated financial statements contained elsewhere in this Annual Report, we adopted SFAS No. 150 early, as of July 1, 2003.

        In March 2004, the EITF reached a consensus on the remaining portions of EITF 03-01, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments with an effective date of June 15, 2004. EITF 03-01 provides new disclosure requirements for other-than-temporary impairments on debt and equity investments, including cost method investments. Investors are required to disclose quantitative information about: (i) the aggregate amount of unrealized losses, and (ii) the aggregate related fair values of investments with unrealized losses, segregated into time periods during which the investment has been in an unrealized loss position of less than 12 months and greater than 12 months. In addition, investors are required to disclose the qualitative information that supports their conclusion that the impairments noted in the qualitative disclosure are not other-than temporary. We determined that EITF 03-01 did not have a material impact on the financial statements and has enhanced its disclosures as required by this consensus.

        In December 2004, the FASB issued SFAS No. 123(R). This new standard requires companies to adopt the fair value methodology of valuing stock-based compensation and recognizing that valuation in the financial statements from the date of grant. Accordingly, the adoption of SFAS No. 123(R)'s fair value method will have a significant impact on the Company's result of operations, although it will have no impact on the Company's overall financial position. The impact of adoption of SFAS No. 123(R) cannot be predicted at this time because it will partially depend on levels of share-based payments granted in the future. However, had the Company adopted SFAS No. 123(R) in prior periods, the impact of that standard would have approximated the impact of SFAS No. 123 as shown in the Stock-based Compensation table (see Note 1(o)). SFAS No. 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. We expect to adopt the provisions of SFAS No. 123(R) on a modified prospective application method effective July 1, 2005, with no restatement of any prior periods. SFAS No. 123(R) is effective for us as of the beginning of the first interim reporting period that begins after June 15, 2005.

Inflation

        We do not believe inflation has a significant effect on our operations.

Risk Factors

        Any of the following risks could materially and adversely affect our business, consolidated financial condition, results of operations or liquidity. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business operations.

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Risks Related to our Common Stock and our Substantial Indebtedness

Our stockholders may not receive the level of dividends provided for in the dividend policy our board of directors has adopted or any dividends at all.

        Our board of directors has adopted a dividend policy which reflects an intention to distribute a substantial portion of the cash generated by our business in excess of operating needs, interest and principal payments on our indebtedness, dividends on our future senior classes of capital stock, if any, capital expenditures, taxes and future reserves, if any, as regular quarterly dividends to our stockholders. Our board of directors may, in its discretion, amend or repeal this dividend policy. Our dividend policy is based upon our directors' current assessment of our business and the environment in which we operate, and that assessment could change based on competitive or technological developments (which could, for example, increase our need for capital expenditures) or new growth opportunities. In addition, future dividends with respect to shares of our common stock, if any, will depend on, among other things, our cash flows, cash requirements, financial condition, contractual restrictions, provisions of applicable law and other factors that our board of directors may deem relevant. Our board of directors may decrease the level of dividends provided for in the dividend policy or entirely discontinue the payment of dividends. Our credit facility contains significant restrictions on our ability to make dividend payments. There can be no assurance that we will generate sufficient cash from continuing operations in the future, or have sufficient surplus or net profits, as the case may be, under Delaware law, to pay dividends on our common stock in accordance with the dividend policy established by our board of directors. If we were to use borrowings under our credit facility's revolving facility to fund dividends, we would have less cash available for future dividends. The reduction or elimination of dividends may negatively affect the market price of our common stock.

To expand our business through acquisitions and service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control. We may not generate sufficient funds from operations to consummate acquisitions, pay dividends with respect to shares of our common stock or repay or refinance our indebtedness at maturity or otherwise.

        We may not retain a sufficient amount of cash to finance a material expansion of our business, or to fund our operations consistent with past levels of funding in the event of a significant business downturn. In addition, because a substantial portion of cash available to pay dividends will be distributed to holders of our common stock under our dividend policy, our ability to pursue any material expansion of our business, including through acquisitions or increased capital spending, will depend more than it otherwise would on our ability to obtain third party financing. There can be no assurance that such financing will be available to us at all, or at an acceptable cost.

        Our ability to consummate acquisitions and to make payments on our indebtedness will depend on our ability to generate cash flow from operations in the future. This ability, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. There can be no assurance, however, that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs.

        A significant portion of our cash flow from operations will be dedicated to capital expenditures and debt service. In addition, we currently expect to distribute a significant portion of our cash earnings to our stockholders in the form of quarterly dividends. As a result, we may not retain a sufficient amount of cash to finance growth opportunities, including acquisitions, or unanticipated capital expenditures or to fund our operations. In addition, if we reduce capital expenditures, the regulatory settlement payments we receive may decline.

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        Borrowings under our credit facility will bear interest at variable interest rates. Accordingly, if any of the base reference interest rates for the borrowings under our credit facility increase, our interest expense will increase, which could negatively impact our ability to pay dividends on our common stock. In connection with the offering, we entered into three interest rate swap agreements which fixed the interest rates on a substantial portion of the term loans under our credit facility for a period of approximately three to five years after the closing of the offering. After the interest rate swap agreements expire, our annual debt service obligations on such portion of the term loans will vary from year to year unless we enter into a new interest rate swap or purchase an interest rate cap or other interest rate hedge. If we choose to enter into a new interest rate swap or purchase an interest rate cap or other interest rate hedge in the future, the amount of cash available to pay dividends on our common stock may decrease. However, to the extent interest rates increase in the future, we may not be able to enter into a new interest rate swap or purchase an interest rate cap or other interest rate hedge on acceptable terms.

        In addition, prior to the maturity of our credit facility, we will not be required to make any payments of principal on our credit facility, and it is not likely that we will generate sufficient funds from operations to repay the principal amount of our indebtedness at maturity. We therefore will need to refinance our debt. We may not be able to refinance our credit facility, or if refinanced, the refinancing may occur on less favorable terms, which may materially adversely affect our ability to pay dividends. If we were unable to refinance our credit facility, our failure to repay all amounts due on the maturity date would cause a default under our credit facility. We expect our required principal repayments under the term loan facility of our credit facility to be approximately $588.5 million at its maturity in February 2012. Our interest expense may increase significantly if we refinance our credit facility on terms that are less favorable to us than the terms of our credit facility.

        We may also be forced to raise additional capital or sell assets and, if we are forced to pursue any of these options under distressed conditions, our business and the value of your investment in our common stock could be adversely affected. In addition, these alternatives may not be available to us when needed or on satisfactory terms due to prevailing market conditions, a decline in our business, legislative and regulatory factors or restrictions contained in the agreements governing our indebtedness.

If we have insufficient cash flow to cover the expected dividend payments under our dividend policy we would need to reduce or eliminate dividends or, to the extent permitted under the agreements governing our indebtedness, fund a portion of our dividends with additional borrowings.

        If we do not have sufficient cash to fund dividend payments, we would either reduce or eliminate dividends or, to the extent we were permitted to do so under our credit facility and the agreements governing future indebtedness we may incur, fund a portion of our dividends with borrowings or from other sources. If we were to use working capital or permanent borrowings under our credit facility's revolving facility to fund dividends, we would have less cash available for future dividends and other purposes, which could negatively impact our financial condition, our results of operations and our ability to maintain or expand our business.

Our substantial indebtedness could restrict our ability to pay dividends on our common stock and have an adverse impact on our financing options and liquidity position.

        As of December 31, 2004, after giving effect to the transactions, we would have had approximately $592.8 million of total consolidated indebtedness. Our substantial indebtedness could have important adverse consequences to the holders of our common stock, including:

•

limiting our ability to pay dividends on our common stock or make payments in connection with our other obligations, including, under our credit facility;

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•

limiting our ability in the future to obtain additional financing for working capital, capital expenditures or acquisitions;



•

we may not be able to refinance our indebtedness on terms acceptable to us or at all;



•

limiting our flexibility in planning for, or reacting to, changes in our business and the communications industry;



•

a significant portion of our cash flow from operations is likely to be dedicated to the payment of the principal of and interest on our indebtedness, thereby reducing funds available for future operations, acquisitions, dividends on our common stock and/or capital expenditures;



•

we may be vulnerable to economic and industry downturns and conditions, including increases in interest rates; and



•

placing us at a competitive disadvantage compared to those of our competitors that have less indebtedness.

Despite our substantial indebtedness, we may still be able to incur substantially more indebtedness, which could further exacerbate the risks described above.

        Subject to certain covenants, our credit facility will permit us to incur additional indebtedness. Any additional indebtedness that we may incur would exacerbate the risks described in the preceding risk factor.

Our credit facility contains significant limitations on distributions and other payments.

        Our credit facility contains significant restrictions on our ability to pay dividends on our common stock based on meeting a total leverage ratio, satisfying a restricted payment covenant and compliance with other conditions. See "—Description of Certain Indebtedness—Credit Facility."

We may amend the terms of our credit facility, or we may enter into new agreements that govern our indebtedness, and the amended terms or new agreements may further significantly affect our ability to pay dividends to our stockholders.

        As a result of general economic conditions, conditions in the lending markets, the results of our business or for any other reason, we may elect or be required to amend or refinance our credit facility, at or prior to maturity, or enter into additional agreements for indebtedness. Any such amendment, refinancing or additional agreement may contain covenants which could limit in a significant manner our ability to pay dividends to you.

The Company is a holding company and relies on dividends, interest and other payments, advances and transfers of funds from its operating subsidiaries and investments to meet its debt service and other obligations.

        The Company is a holding company and conducts all of its operations through its operating subsidiaries. The Company currently has no significant assets other than equity interests in its first tier subsidiaries. These first tier subsidiaries have no significant assets other than a direct or indirect equity interest in the Company's operating subsidiaries. As a result, the Company will rely on dividends and other payments or distributions from its operating subsidiaries to pay dividends with respect to its common stock and to meet its debt service obligations generally. The ability of the Company's subsidiaries to pay dividends or make other payments or distributions to the Company will depend on their respective operating results and may be restricted by, among other things:

•

the laws of their jurisdiction of organization;



•

the rules and regulations of state regulatory authorities;



•

agreements of those subsidiaries;

58

•

the terms of our credit facility; and



•

the covenants of any future outstanding indebtedness the Company or its subsidiaries incur.

        The Company's operating subsidiaries have no obligation, contingent or otherwise, to make funds available to the Company, whether in the form of loans, dividends or other distributions. In addition, we have a number of minority investments and passive partnership interests from which we receive distributions. For example, in 2004 and 2003, we received $15.0 million and $10.8 million, respectively, of distributions from such investments and interests, which represented a material portion of our cash flow. The $15.0 million received in the year ended December 31, 2004 includes a non-recurring $2.5 million distribution. We do not control the timing or amount of distributions from such investments or interests and we may not have access to the cash flows of these entities.

        Accordingly, our ability to pay dividends with respect to shares of our common stock and to repay our credit facility at maturity or otherwise may be dependent upon factors beyond our control. Subject to limitations in our credit facility, the Company's subsidiaries may also enter into agreements that contain covenants prohibiting them from distributing or advancing funds or transferring assets to the Company under certain circumstances, including to pay dividends.

Our credit facility contains covenants that limit our business flexibility by imposing operating and financial restrictions on our operations.

        Covenants in our credit facility impose significant operating and financial restrictions on us. These restrictions prohibit or limit, among other things:

•

the incurrence of additional indebtedness and the issuance by our subsidiaries of preferred stock;



•

the payment of dividends on, and purchases or redemptions of, capital stock;



•

a number of other restricted payments, including investments;



•

the creation of liens;



•

the ability of our subsidiaries to guarantee our and their indebtedness;



•

specified sales of assets;



•

the creation of encumbrances or restrictions on the ability of our subsidiaries to distribute and advance funds or transfer assets to us or any other subsidiary;



•

specified transactions with affiliates;



•

sale and leaseback transactions;



•

our ability to enter lines of business outside the communications business; and



•

certain consolidations and mergers and sales and/or transfers of assets by or involving us.

        Our credit facility also contains covenants which require us to maintain specified financial ratios and satisfy financial condition tests, including, without limitation, a maximum total leverage ratio and a minimum interest coverage ratio.

If we are unable to comply with the covenants in the agreements governing our indebtedness, we could be in default under our indebtedness which could result in our inability to make dividend payments on our common stock.

        Our ability to comply with the covenants, ratios or tests contained in our credit facility or in the agreements governing our future indebtedness may be affected by events beyond our control, including prevailing economic, financial and industry conditions. A breach of any of these covenants, ratios or tests could result in a default under our credit facility. Certain events of default under our credit

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facility would prohibit us from making dividend payments on our common stock. In addition, upon the occurrence of an event of default under our credit facility, the lenders could elect to declare all amounts outstanding under our credit facility, together with accrued interest, to be immediately due and payable. If we were unable to repay those amounts, the lenders could proceed against the security granted to them to secure that indebtedness. If the lenders accelerate the payment of the indebtedness under our credit facility, our assets may not be sufficient to repay in full the indebtedness under our credit facility and our other indebtedness, if any.

Limitations on usage of net operating loss carry forwards, and other factors requiring us to pay cash taxes in future periods, may affect our ability to pay dividends to you.

        The offering resulted in an "ownership change" within the meaning of the U.S. federal income tax laws addressing net operating loss carry forwards, alternative minimum tax credits and other similar tax attributes. As a result of such ownership change, there are specific limitations on our ability to use our net operating loss carry forwards and other tax attributes from periods prior to the transactions. Although it is not expected that such limitations will materially affect our U.S. federal and state income tax liability in the near-term, it is possible in the future that such limitations could limit our ability to utilize such tax attributes and, therefore, result in an increase in our U.S. federal and state income tax liability. In addition, in the future we may be required to pay cash income taxes because all of our net operating loss carry forwards have been used or have expired. Limitations on our usage of net operating loss carry forwards, and other factors requiring us to pay cash taxes in the future, would reduce the funds available for the payment of dividends and might require us to reduce or eliminate the dividends on our common stock.

The price of our common stock may fluctuate substantially, which could negatively affect holders of our common stock.

        It is possible that an active trading market for our common stock will not develop or be sustained. Even if an active trading market develops, the market price of our common stock may fluctuate widely as a result of various factors, such as period-to-period fluctuations in our operating results, sales of our common stock by principal stockholders, developments in the communications industry, the failure of securities analysts to cover our common stock or changes in financial estimates by analysts, competitive factors, regulatory developments, economic and other external factors, general market conditions and market conditions affecting the stock of communications companies in particular. Communications companies have in the past experienced extreme volatility in the trading prices and volumes of their securities, which has often been unrelated to operating performance. Any such market volatility may have a significant adverse effect on the market price of our common stock.

Future sales or the possibility of future sales of a substantial amount of our common stock may depress the price of our common stock.

        Future sales, or the availability for sale in the public market, of substantial amounts of our common stock could adversely affect the prevailing market price of our common stock, and could impair our ability to raise capital through future sales of equity securities.

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        As of February 28, 2005, there were 34,925,432 shares of our common stock outstanding (including 473,716 shares of restricted stock which will begin to vest on April 1, 2006). The 25,000,000 shares of our common stock sold in the offering are freely transferable without restriction or further registration under the Securities Act unless such shares are held by our "affiliates," as that term is defined in Rule 144 under the Securities Act. The shares of our common stock owned by our equity investors, our directors, certain members of our management and our current and former employees are restricted securities within the meaning of Rule 144 under the Securities Act, but are eligible for resale subject to the applicable provisions of Rule 144. We, our executive officers and directors and substantially all of our significant equity holders have agreed to a "lock-up," meaning that, subject to specified exceptions, neither we nor they will sell any shares without the prior consent of the representatives of the underwriters for 180 days after the closing of the offering. Following the expiration of this 180-day lock-up period, all of these shares of our common stock will be eligible for future sale, subject to the applicable provisions of Rule 144. In addition, as of February 28, 2005, members of our management and other employees held fully vested, exercisable and in-the-money stock options to purchase a total of 115,733 shares of our common stock. See "Item 11. Executive Compensation." Finally, our existing equity investors and certain members of management have certain registration rights with respect to our common stock. See "Item 13. Certain Relationships and Related Transactions."

        We may issue shares of our common stock, or other securities, from time to time as consideration for future acquisitions and investments. In the event any such acquisition or investment is significant, the number of shares of our common stock, or the number or aggregate principal amount, as the case may be, of other securities that we may issue may in turn be significant. We may also grant registration rights covering those shares or other securities in connection with any such acquisitions and investments.

Our restated certificate of incorporation and amended and restated by-laws and several other factors could limit another party's ability to acquire us and deprive our investors of the opportunity to obtain a takeover premium for their securities.

        A number of provisions in our restated certificate of incorporation and amended and restated by-laws make it difficult for another company to acquire us and for you to receive any related takeover premium for your securities. For example, our restated certificate of incorporation provides that certain provisions of our restated certificate of incorporation can only be amended by a vote of two-thirds or more in voting power of all the outstanding shares of capital stock and that stockholders generally may not act by written consent and only stockholders representing at least 50% in voting power may request that our board of directors call a special meeting. Our restated certificate of incorporation provides for a classified board of directors and authorizes the issuance of preferred stock without stockholder approval and upon such terms as the board of directors may determine. The rights of the holders of shares of our common stock will be subject to, and may be adversely affected by, the rights of holders of any class or series of preferred stock that may be issued in the future.

We may, under certain circumstances, suspend the rights of stock ownership the exercise of which would result in any inconsistency with, or violation of, any applicable communications law.

        Our restated certificate of incorporation provides that so long as we hold any authorization, license, permit, order, filing or consent from the Federal Communications Commission or any state regulatory commission having jurisdiction over us, we will have the right to request certain information from our stockholders. If any stockholder from whom such information is requested should fail to respond to such a request or we conclude that the ownership of, or the existence or exercise of any rights of stock ownership with respect to, shares of our capital stock by such stockholder, could result in any inconsistency with, or violation of, any applicable communications law, we may suspend those rights of stock ownership the existence or exercise of which would result in any inconsistency with, or violation of, any applicable communications law, and we may exercise any and all appropriate remedies,

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at law or in equity, in any court of competent jurisdiction, against any stockholder, with a view towards obtaining such information or preventing or curing any situation which would cause an inconsistency with, or violation of, any provision of any applicable communications law.

Risks Related to our Business

We provide services to our customers over access lines, and if we lose access lines, our business and results of operations may be adversely affected.

        Our business generates revenue by delivering voice and data services over access lines. We have experienced net voice access line loss, adjusted for acquisitions and divestitures, of 4.7% for the period from December 31, 2001 through December 31, 2004 and 2.9% for the period from December 31, 2003 through December 31, 2004 due to challenging economic conditions, increased competition and the introduction of digital subscriber line services. We may continue to experience net access line loss in our markets. Our inability to retain access lines could adversely affect our business and results of operations.

We are subject to competition that may adversely impact us.

        As an incumbent carrier, we historically have experienced little competition in our rural telephone company markets. Nevertheless, the market for communications services is highly competitive. Regulation and technological innovation change quickly in the communications industry, and changes in these factors historically have had, and may in the future have, a significant impact on competitive dynamics. In certain of our rural markets, we face competition from wireless telephone system operators, which may increase as wireless technology improves. We also face competition from cable television operators. We may face additional competition from new market entrants, such as providers of wireless broadband, voice over internet protocol, satellite communications and electric utilities. The Internet services market is also highly competitive, and we expect that competition will intensify. Some of our competitors have brand recognition and financial, personnel, marketing and other resources that are significantly greater than ours. In addition, consolidation and strategic alliances within the communications industry or the development of new technologies could affect our competitive position. We cannot predict the number of competitors that will emerge, especially as a result of existing or new federal and state regulatory or legislative actions, but increased competition from existing and new entities could have a material adverse effect on our business.

        Competition may lead to loss of revenues and profitability as a result of numerous factors, including:

•

loss of customers (in general, when we lose a customer for local service we also lose that customer for all related services);



•

reduced usage of our network by our existing customers who may use alternative providers for long distance and data services;



•

reductions in the prices for our services which may be necessary to meet competition; and/or



•

increases in marketing expenditures and discount and promotional campaigns.

        In addition, our provision of long distance service is subject to a highly competitive market served by large nation-wide carriers that enjoy brand name recognition.

We may not be able to successfully integrate new technologies, respond effectively to customer requirements or provide new services.

        The communications industry is subject to rapid and significant changes in technology, frequent new service introductions and evolving industry standards. We cannot predict the effect of these

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changes on our competitive position, profitability or industry. Technological developments may reduce the competitiveness of our networks and require unbudgeted upgrades or the procurement of additional products that could be expensive and time consuming. In addition, new products and services arising out of technological developments may reduce the attractiveness of our services. If we fail to adapt successfully to technological changes or obsolescence or fail to obtain access to important new technologies, we could lose customers and be limited in our ability to attract new customers and/or sell new services to our existing customers. An element of our business strategy is to deliver enhanced and ancillary services to customers. The successful delivery of new services is uncertain and dependent on many factors, and we may not generate anticipated revenues from such services.

We rely on a limited number of key suppliers and vendors to operate our business. If these suppliers or vendors experience problems or favor our competitors, we could fail to obtain sufficient quantities of products and services we require to operate our business successfully.

        We depend on a limited number of suppliers and vendors for equipment and services relating to our network infrastructure. If these suppliers experience interruptions or other problems delivering these network components on a timely basis, subscriber growth and our operating results could suffer significantly. If proprietary technology of a supplier is an integral component of our network, we could be effectively locked into one of a few suppliers for key network components. As a result we have become reliant upon a limited number of network equipment manufacturers, including Nortel Networks Corporation and Siemens Information and Communication Networks, Inc. In addition, when our new billing platform is completed, we will rely on a single outsourced supplier to support our billing and related customer care services. In the event it becomes necessary to seek alternative suppliers and vendors, we may be unable to obtain satisfactory replacement suppliers or vendors on economically attractive terms, on a timely basis, or at all, which could increase costs and may cause disruptions in services.

Our relationships with other communications companies are material to our operations and their financial difficulties may adversely affect our business and results of operations.

        We originate and terminate calls for long distance carriers and other interexchange carriers over our network and for that service we receive payments for access charges. These payments represent a significant portion of our revenues. Should these carriers go bankrupt or experience substantial financial difficulties, our inability to then collect access charges from them could have a negative effect on our business and results of operations.

We face risks associated with acquired businesses and potential acquisitions.

        We have grown rapidly by acquiring other businesses. Since 1993, we have acquired 30 rural telephone businesses and we continue to own and operate 26 such businesses. We expect that a portion of our future growth will result from additional acquisitions, some of which may be material. Growth through acquisitions entails numerous risks, including:

•

strain on our financial, management and operational resources, including the distraction of our management team in identifying potential acquisition targets, conducting due diligence and negotiating acquisition agreements;



•

difficulties in integrating the network, operations, personnel, products, technologies and financial, computer, payroll and other systems of acquired businesses;



•

difficulties in enhancing our customer support resources to adequately service our existing customers and the customers of acquired businesses;



•

the potential loss of key employees or customers of the acquired businesses;



•

unanticipated liabilities or contingencies of acquired businesses;

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•

not achieving projected cost savings or cash flow from acquired businesses;



•

fluctuations in our operating results caused by incurring considerable expenses to acquire businesses before receiving the anticipated revenues expected to result from the acquisitions;



•

difficulties in finding suitable acquisition candidates;



•

difficulties in making acquisitions based on attractive terms due to increased competitiveness; and



•

difficulties in obtaining and maintaining any required regulatory authorizations in connection with acquisitions.

        In addition, future acquisitions by us could result in the incurrence of indebtedness or contingent liabilities, which could have a material adverse effect on our business and our ability to pay dividends on our common stock, provide adequate working capital and service our indebtedness.

        There can be no assurance that we will be able to successfully complete the integration of the businesses that we have already acquired or successfully integrate any businesses that we might acquire in the future. If we fail to do so, or if we do so but at greater cost than we anticipated, or if our acquired businesses do not experience significant growth, there will be a risk that our business may be adversely affected.

We may need additional capital to continue growing through acquisitions.

        We may need additional financing to continue growing through acquisitions. Such additional financing may be in the form of additional debt, which would increase our leverage. We may not be able to raise sufficient additional capital at all or on terms that we consider acceptable.

A system failure could cause delays or interruptions of service, which could cause us to lose customers.

        To be successful, we will need to continue to provide our customers reliable service over our network. Some of the risks to our network and infrastructure include:

•

physical damage to access lines;



•

power surges or outages;



•

software defects; and



•

disruptions beyond our control.

        Disruptions may cause interruptions in service or reduced capacity for customers, either of which could cause us to lose customers and incur expenses.

Our new integrated billing platform may not be completed on time or may not function properly.

        We are in the process of converting our six billing systems into a single integrated billing platform for our end-user customers. As of December 31, 2004, we had made capital expenditures of approximately $5.1 million with respect to such conversion. We expect to make an additional $3.4 million of capital expenditures to complete such conversion. One of the primary reasons for undertaking this conversion is to consolidate and streamline our internal controls so that we will be able to comply with the management certification and auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002. The portion of the conversion that will enable us to comply with these requirements is expected to be completed by the end of 2005 and the full conversion is expected to be completed in the second quarter of 2006. The failure to successfully complete this conversion could disrupt our billing process, which could have a material adverse effect on our business, financial condition and results of operations, and could cause us not to be in compliance with the requirements

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of Section 404 of the Sarbanes-Oxley Act. See "—We will be exposed to risks relating to evaluations of controls required by Section 404 of the Sarbanes-Oxley Act of 2002."

We depend on third parties for our provision of long distance services.

        Our provision of long distance services is dependent on underlying agreements with other carriers that provide us with transport and termination services. These agreements are based, in part, on our estimate of future supply and demand and may contain minimum volume commitments. If we overestimate demand, we may be forced to pay for services we do not need. If we underestimate demand, we may need to acquire additional capacity on a short-term basis at unfavorable prices, assuming additional capacity is available. If additional capacity is not available, we will not be able to meet this demand. In addition, if we cannot meet any minimum volume commitments, we may be subject to underutilization charges, termination charges, or rate increases which may adversely affect our results of operations.

We may not be able to maintain the necessary rights-of-way for our networks.

        We are dependent on rights-of-way and other permits from railroads, utilities, state highway authorities, local governments and transit authorities to install conduit and related communications equipment for any expansion of our networks. We may need to renew current rights-of-way for our networks and cannot assure you that we would be successful in renewing these agreements on acceptable terms. Some of our agreements may be short-term, revocable at will, or subject to termination upon customary default provisions, and we may not have access to existing rights-of-way after they have expired or terminated. If any of these agreements were terminated or could not be renewed, we may be required to remove our existing facilities from under the streets or abandon our networks. Similarly, we may not be able to obtain right-of-way agreements on favorable terms, or at all, in new service areas, and, if we are unable to do so, our ability to expand our networks, if we decide to do so, could be impaired.

Our success depends on our ability to attract and retain qualified management and other personnel.

        Our success depends upon the talents and efforts of our senior management team. With the exception of Eugene Johnson, our Chairman and Chief Executive Officer, none of these senior executives are employed by us pursuant to an employment agreement. The loss of any such management personnel, due to retirement or otherwise, and the inability to attract and retain highly qualified technical and management personnel in the future, could have a material adverse effect on our business, financial condition and results of operations.

We may face significant future liabilities or compliance costs in connection with environmental and worker health and safety matters.

        Our operations and properties are subject to federal, state and local laws and regulations relating to protection of the environment, natural resources, and worker health and safety, including laws and regulations governing the management, storage and disposal of hazardous substances, materials and wastes. Under certain environmental laws, we could be held liable, jointly and severally and without regard to fault, for the costs of investigating and remediating any contamination at owned or operated properties; or for contamination arising from the disposal by us or our predecessors of hazardous wastes at formerly-owned properties or at third-party waste disposal sites. In addition, we could be held responsible for third-party property or personal injury claims relating to any such contamination or relating to violations of environmental laws. Changes in existing laws or regulations or future acquisitions of businesses could require us to incur substantial costs in the future relating to such matters.

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We will be exposed to risks relating to evaluations of controls required by Section 404 of the Sarbanes-Oxley Act.

        Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act and related regulations implemented by the Securities and Exchange Commission, the New York Stock Exchange and the Public Company Accounting Oversight Board, are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. We will be evaluating our internal controls systems to allow management to report on, and our independent auditors to attest to, our internal controls. We will be performing the system and process evaluation and testing (and any necessary remediation, including the conversion of our various billing systems into a single integrated billing platform) required to comply with the management certification and auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. While we anticipate being able to fully implement the requirements relating to internal controls and all other aspects of Section 404 by our December 31, 2005 deadline, we cannot be certain as to the timing of completion of our evaluation, testing and remediation actions or the impact of the same on our operations. If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance (including due to our failure to successfully complete the conversion of our various billing systems into a single integrated billing platform), we might be subject to sanctions or investigation by regulatory authorities, such as the Securities and Exchange Commission, the New York Stock Exchange or the Public Company Accounting Oversight Board. Any such action could adversely affect our financial results or investors' confidence in us, and could cause our stock price to fall. In addition, the controls and procedures that we will implement may not comply with all of the relevant rules and regulations of the Securities and Exchange Commission, the New York Stock Exchange and the Public Company Accounting Oversight Board. If we fail to develop and maintain effective controls and procedures, we may be unable to provide financial information in a timely and reliable manner.

Risks Related to our Regulatory Environment

We are subject to significant regulations that could change in a manner adverse to us.

        We operate in a heavily regulated industry, and the majority of our revenues generally have been supported by regulations, including access revenue and Universal Service Fund support for the provision of telephone services in rural areas. Laws and regulations applicable to us and our competitors may be, and have been, challenged in the courts, and could be changed by Congress or regulators. In addition, any of the following have the potential to have a significant impact on us:

        Risk of loss or reduction of network access charge revenues.    Almost 45% of our revenues come from network access charges, which are paid to us by intrastate and interstate long distance carriers for originating and terminating calls in the regions served. This 45% also includes Universal Service Fund payments for local switching support, long term support and interstate common line support. In recent years, several of these long distance carriers have declared bankruptcy. Future declarations of bankruptcy by a carrier that utilizes our access services could negatively impact our financial results. The amount of access charge revenues that we receive is based on rates set by federal and state regulatory bodies, and such rates could change. Further, from time to time federal and state regulatory bodies conduct rate cases and/or "earnings" reviews, which may result in rate changes. The Federal Communications Commission has reformed and continues to reform the federal access charge system. States often mirror these federal rules in establishing intrastate access charges. In October 2001, the Federal Communications Commission reformed the system to reduce interstate access charges and shift a portion of cost recovery, which historically have been based on minutes-of-use, to flat-rate, monthly per line charges on end-user customers rather than long distance carriers. As a result, the aggregate amount of access charges paid by long distance carriers to access providers, such as our rural local exchange carriers, has decreased and may continue to decrease. Although these changes were

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implemented on a revenue neutral basis (with commensurate increases in other charges and Universal Service Fund support), there is no assurance that future changes in access charge rates will be implemented on a revenue neutral basis. It is unknown at this time what additional changes, if any, the Federal Communications Commission may eventually adopt. Furthermore, to the extent our rural local exchange carriers become subject to competition, such access charges could be paid to competing communications providers rather than to us. Additionally, the intrastate access charges we receive may be reduced as a result of wireless competition. Regulatory developments of this type could adversely affect our business, revenue and/or profitability.

        Risk of loss or reduction of Universal Service Fund support.    We receive Universal Service Fund revenues to support the high cost of our operations in rural markets. For the year ended December 31, 2004, approximately 9% of our revenues resulted from the high cost loop support we received from the Universal Service Fund and was based upon our average cost per loop compared to the national average cost per loop. For example, if the national average cost per loop increases and our operating costs (and average cost per loop) remain constant or decrease, the payments we receive from the Universal Service Fund would decline. Conversely, if the national average cost per loop decreases and our operating costs (and average cost per loop) remain constant or increase, the payments we receive from the Universal Service Fund would increase. Over the past year, the national average cost per loop in relation to our average cost per loop has increased and management believes the national average cost per loop may continue to increase in relation to our average cost per loop and, as a result, the payments we receive from the Universal Service Fund could decline. This support fluctuates based upon the historical costs of our operating companies. In addition to the Universal Service Fund high cost loop support, we also receive Universal Service Fund support payments, which include local switching support, long term support, and interstate common line support that used to be included in our interstate access charge revenues (the Federal Communications Commission has recently merged long term support into interstate common line support). If our rural local exchange carriers were unable to receive support from the Universal Service Fund, or if such support was reduced, many of our rural local exchange carriers would be unable to operate as profitably as they have historically, in the absence of our implementation of increases in charges for other services. Moreover, if we raise prices for services to offset loss of Universal Service Fund payments, the increased pricing of our services may disadvantage us competitively in the marketplace, resulting in additional potential revenue loss.

        The Telecommunications Act provides that eligible communications carriers, including competitors to rural local exchange carriers, may obtain the same per line support as the rural local exchange carriers receive if a state commission determines that granting such support to competitors would be in the public interest. In fact, wireless communications providers in certain of our markets have obtained matching support payments from the Universal Service Fund, but that has not led to a loss of revenues for our rural local exchange carriers under existing regulations. Any shift in universal service regulation, however, could have an adverse effect on our business, revenue and/or profitability.

        During the last four years, pursuant to recommendations made by the Multi-Association Group and the Rural Task Force, the Federal Communications Commission has made certain modifications to the universal service support system that changed the sources of support and the method for determining the level of support. These changes have been revenue neutral to our operations. It is unclear whether the changes in methodology will continue to accurately reflect the costs incurred by our rural local exchange carriers, and whether it will provide for the same amount of Universal Service Fund support that our rural local exchange carriers have received in the past. In addition, several parties have raised objections to the size of the Universal Service Fund and the types of services eligible for support. A number of issues regarding the source and amount of contributions to, and eligibility for payments from, the Universal Service Fund are pending and will likely be addressed by the Federal Communications Commission or Congress in the near future. The outcome of any

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regulatory proceedings or legislative changes could affect the amount of Universal Service Fund support that we receive, and could have an adverse effect on our business, revenue or profitability.

        On February 28, 2005, the Federal Communications Commission issued a press release announcing additional requirements for the designation of competitive Eligible Telecommunications Carriers for receipt of high-cost support. Although the written text of the Federal Communications Commission order has not been released, the Federal Communications Commission has adopted additional mandatory requirements for Eligible Telecommunications Carriers designation in cases where it has jurisdiction, and encourages states that have jurisdiction to designate Eligible Telecommunications Carriers to adopt similar requirements. The Federal Communications Commission is still considering revisions to the methodology by which contributions to the Universal Service Fund are determined. These revisions will be part of an overall rulemaking regarding Universal Service Support which will be dealt with sometime in the next year.

Risk of loss of statutory exemption from burdensome interconnection rules imposed on incumbent local exchange carriers. Our rural local exchange carriers are exempt from the Telecommunications Act's more burdensome requirements governing the rights of competitors to interconnect to incumbent local exchange carrier networks and to utilize discrete network elements of the incumbent's network at favorable rates. If state regulators decide that it is in the public's interest to impose these more burdensome interconnection requirements on us, we would be required to provide unbundled network elements to competitors. As a result, more competitors could enter our traditional telephone markets than are currently expected and we could incur additional administrative and regulatory expenses, and experience additional revenue losses.

        Risks posed by costs of regulatory compliance.    Regulations create significant compliance costs for us. Our subsidiaries that provide intrastate services are generally subject to certification, tariff filing and other ongoing regulatory requirements by state regulators. Our interstate access services are provided in accordance with tariffs filed with the Federal Communications Commission. Challenges to our tariffs by regulators or third parties or delays in obtaining certifications and regulatory approvals could cause us to incur substantial legal and administrative expenses, and, if successful, such challenges could adversely affect the rates that we are able to charge our customers.

        Our business also may be impacted by legislation and regulation imposing new or greater obligations related to assisting law enforcement, bolstering homeland security, minimizing environmental impacts, or addressing other issues that impact our business. For example, existing provisions of the Communications Assistance for Law Enforcement Act and Federal Communications Commission regulations implementing the Communications Assistance for Law Enforcement Act require communications carriers to ensure that their equipment, facilities, and services are able to facilitate authorized electronic surveillance. We cannot predict whether and when the Federal Communications Commission might modify its Communications Assistance for Law Enforcement Act rules or any other rules or what compliance with new rules might cost. Similarly, we cannot predict whether or when federal or state legislators or regulators might impose new security, environmental or other obligations on our business.

        For a more thorough discussion of the regulatory issues that may affect our business, see "Item 1. Business—Regulatory Environment."

Regulatory changes in the communications industry could adversely affect our business by facilitating greater competition against us, reducing potential revenues or raising our costs.

        The Telecommunications Act provides for significant changes and increased competition in the communications industry, including the local communications and long distance industries. This statute and the Federal Communications Commission's implementing regulations remain subject to judicial review and additional rulemakings of the Federal Communications Commission, thus making it difficult

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to predict what effect the legislation will have on us, including our operations and our revenues and expenses, and our competitors. Several regulatory and judicial proceedings have recently concluded, are underway or may soon be commenced, that address issues affecting our operations and those of our competitors. We cannot predict the outcome of these developments, nor can we assure that these changes will not have a material adverse effect on us or our industry.

        For a more thorough discussion of the regulatory issues that may affect our business, see "Item 1. Business—Regulatory Environment."

The failure to obtain necessary regulatory approvals could impede the consummation of a potential acquisition.

        Our acquisitions likely will be subject to federal, state and local regulatory approvals. We cannot assure you that we will be able to obtain any necessary approvals, in which case a potential acquisition could be delayed or not consummated.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        During the third quarter of 2004, we impaired the value of our marketable available-for-sale equity investments due to an other-than-temporary decline in market value. At December 31, 2004, the carrying value of such investments was zero.

        At December 31, 2004, approximately 68% of our debt bore interest at fixed rates or effectively at fixed rates. Our earnings are affected by changes in interest rates as our long-term debt under our credit facility has variable interest rates based on either the prime rate or LIBOR. If interest rates on our variable rate debt increased by 10%, our interest expense would have increased, and our loss from continuing operations before taxes would have increased, by approximately $1.7 million for the year ended December 31, 2004.

        From time to time, we have entered into interest rate swaps to manage our exposure to fluctuations in interest rates on our variable rate debt. In connection with our old credit facility, we used two interest rate swap agreements, with notional amounts of $25.0 million each, to effectively convert a portion of our variable interest rate exposure to fixed rates ranging from 8.07% to 10.34%. These swap agreements expired in May 2004.

        In connection with the offering, we entered into three interest rate swap agreements which fixed the interest rate on approximately $130.0 million of the term loans under our credit facility at 6.11% until December 31, 2009, fixed the interest rate on approximately $130.0 million of the term loans under our credit facility at 5.98% until December 31, 2008 and fixed the interest rate on approximately $130.0 million of the term loans under our credit facility at 5.76% until December 31, 2007. After these interest rate swap agreements expire, our annual debt service obligations on such portion of the term loans will vary from year to year unless we enter into a new interest rate swap or purchase an interest rate cap or other interest rate hedge. An increase of ten percent in the annual interest rate applicable to borrowings under the term loan facility of our credit facility would result in an increase of approximately $0.9 million in our annual cash interest expense, and a corresponding decrease in cash available to pay dividends on our common stock. If we choose to enter into a new interest rate swap or purchase an interest rate cap or other interest rate hedge in the future, the amount of cash available to pay dividends on our common stock may decrease. However, to the extent interest rates increase in the future, we may not be able to enter into a new interest rate swap or to purchase an interest rate cap or other interest rate hedge on acceptable terms.

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

		Page
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES:
	Report of Independent Registered Public Accounting Firm	71
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002:
	Consolidated Balance Sheets as of December 31, 2004 and 2003	72
	Consolidated Statements of Operations for the Years Ended December 31, 2004, 2003, and 2002	74
	Consolidated Statements of Stockholders' Equity (Deficit) for the Years Ended December 31, 2004, 2003, and 2002	75
	Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2004, 2003, and 2002	76
	Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2003, and 2002	77
	Notes to Consolidated Financial Statements for the Years Ended December 31, 2004, 2003, and 2002	79

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Report of Independent Registered Public Accounting Firm

The Board of Directors
FairPoint Communications, Inc.:

        We have audited the accompanying consolidated balance sheets of FairPoint Communications, Inc. and subsidiaries (the Company) as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders' equity (deficit), comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2004. These consolidated financial statements are the responsibility of FairPoint Communications, Inc.'s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America.

        As described in notes 1 and 8 to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, effective July 1, 2003.

                                                                         /s/ KPMG LLP

Omaha, Nebraska
March 10, 2005

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Assets			Pro forma 2004 (See note 2)		2004	2003
			(Unaudited)
Current assets:
	Cash		$	—	3,595	5,603
	Accounts receivable, net			30,203	30,203	28,845
	Material and supplies			3,866	3,866	4,139
	Prepaid and other			1,878	1,878	1,517
	Notes receivable—related party			—	1,000	—
	Income tax recoverable			61	61	—
	Investments available-for-sale			—	—	1,889
	Assets of discontinued operations			102	102	105
		Total current assets		36,110	40,705	42,098
Property, plant, and equipment, net				252,262	252,262	266,706
Other assets:
	Goodwill			468,508	468,508	468,845
	Investments			37,749	37,749	41,792
	Debt issue and offering costs, net of accumulated amortization			9,561	18,812	21,614
	Notes receivable — related party			—	—	1,000
	Covenants not to compete, net of accumulated amortization			29	29	151
	Other			1,071	1,071	862
		Total other assets		516,918	526,169	534,264
		Total assets	$	805,290	819,136	843,068

See accompanying notes to consolidated financial statements.

72

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets
December 31, 2004 and 2003
(Amounts in thousands, except per share data)

Liabilities and Stockholders' Equity (Deficit)				Pro forma 2004 (See note 2)			2004		2003
				(Unaudited)
Current liabilities:
	Accounts payable			$	14,184		14,184		14,671
	Other accrued liabilities				13,827		13,827		13,116
	Accrued interest payable				531		16,582		16,739
	Current portion of long-term debt				524		524		21,982
	Accrued property taxes				2,045		2,045		1,968
	Current portion of obligation for covenants not to compete				100		100		145
	Demand notes payable				382		382		407
	Income taxes payable				—		—		70
	Liabilities of discontinued operations				2,262		2,262		4,461
			Total current liabilities		33,855		49,906		73,559
Long-term liabilities:
	Long-term debt, net of current portion				592,810		809,908		803,578
	Preferred shares subject to mandatory redemption				—		116,880		96,699
	Other liabilities				4,176		12,621		12,278
	Liabilities of discontinued operations				1,580		1,580		2,571
	Obligation for covenants not to compete, net of current portion				—		—		100
	Unamortized investment tax credits				46		46		85
			Total long-term liabilities		598,612		941,035		915,311
Minority interest					11		11		15
Common stock subject to put options, 16 shares at December 31, 2004 and 31 shares at December 31, 2003					—		1,136		2,136
Commitments and contingencies
Stockholders' equity (deficit):
	Common stock:
		Class A voting, par value $0.01 per share. Authorized 44,757 shares; issued and outstanding 8,643 shares at December 31, 2004 and 2003			—		86		86
		Class B nonvoting, convertible, par value $0.01 per share. Authorized 28,423 shares; issued and outstanding 0 shares			—		—		—
		Class C nonvoting, convertible, par value $0.01 per share. Authorized 2,615 shares; issued and outstanding 809 shares at December 31, 2004 and 2003			—		8		8
		Common stock (pro forma, unaudited)			349		—		—
	Additional paid-in capital				641,778		198,519		198,470
	Unearned compensation				(8,764	)	—		—
	Accumulated other comprehensive income				—		—		1,366
	Accumulated deficit				(460,551	)	(371,565	)	(347,883	)
			Total stockholders' equity (deficit)		172,812		(172,952	)	(147,953	)
			Total liabilities and stockholders' equity (deficit)	$	805,290		819,136		843,068

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FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations
Years ended December 31, 2004, 2003 and 2002
(Dollars in thousands)

			2004			2003		2002
Revenues			$	252,645		231,432		230,819
Operating expenses:
	Operating expenses, excluding depreciation and amortization and stock-based compensation			128,755		111,188		110,265
	Depreciation and amortization			50,287		48,089		46,310
	Stock-based compensation			49		15		924
		Total operating expenses		179,091		159,292		157,499
		Income from operations		73,554		72,140		73,320
Other income (expense):
	Net gain on sale of investments and other assets			104		608		34
	Interest and dividend income			2,335		1,792		1,898
	Interest expense			(104,315	)	(90,224	)	(69,520	)
	Impairment on investments			(349	)	—		(12,568	)
	Equity in net earnings of investees			10,899		10,092		7,798
	Realized and unrealized losses on interest rate swaps			(112	)	(1,387	)	(9,577	)
	Other nonoperating, net			(5,951	)	(1,505	)	441
		Total other expense		(97,389	)	(80,624	)	(81,494	)
		Loss from continuing operations before income taxes		(23,835	)	(8,484	)	(8,174	)
Income tax benefit (expense)				(516	)	236		(518	)
Minority interest in income of subsidiaries				(2	)	(2	)	(2	)
		Loss from continuing operations		(24,353	)	(8,250	)	(8,694	)
Discontinued operations:
	Income from discontinued operations			—		1,929		2,433
	Income on disposal of assets of discontinued operations			671		7,992		19,500
		Income from discontinued operations		671		9,921		21,933
		Net income (loss)		(23,682	)	1,671		13,239
Redeemable preferred stock dividends and accretion				—		(8,892	)	(11,918	)
Gain on repurchase of redeemable preferred stock				—		2,905		—
		Net income (loss) attributed to common shareholders	$	(23,682	)	(4,316	)	1,321
Weighted average shares outstanding:
	Basic			9,468		9,483		9,498
	Diluted			9,468		9,483		9,498
Basic and diluted loss from continuing operations per share			$	(2.57	)	(1.50	)	(2.17	)
Basic and diluted earnings from discontinued operations per share			$	0.07		1.04		2.31
Basic and diluted earnings (loss) per share			$	(2.50	)	(0.46	)	0.14

See accompanying notes to consolidated financial statements.

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FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity (Deficit)
Years ended December 31, 2004, 2003 and 2002
(Amounts in thousands)

	Class A Common			Class C Common
									Accumulated other comprehensive income (loss)				Total stockholders' equity (deficit)
							Additional paid-in capital				Accumulated deficit
	Shares	Amount		Shares	Amount
Balance at December 31, 2001	8,643	$	86	809	$	8	218,341		(2,247	)	(365,698	)	(149,510	)
Net income	—		—	—		—	—		—		13,239		13,239
Compensation expense for stock-based awards	—		—	—		—	924		—		—		924
Other comprehensive loss from available-for-sale securities	—		—	—		—	—		(322	)	—		(322	)
Other comprehensive income from cash flow hedges	—		—	—		—	—		1,437		—		1,437
Preferred stock accretion	—		—	—		—	(1,000	)	—		—		(1,000	)
Preferred stock dividends	—		—	—		—	(10,918	)	—		—		(10,918	)
Balance at December 31, 2002	8,643		86	809		8	207,347		(1,132	)	(352,459	)	(146,150	)
Net income	—		—	—		—	—		—		1,671		1,671
Compensation expense for stock-based awards	—		—	—		—	15		—		—		15
Other comprehensive income from available-for-sale securities	—		—	—		—	—		1,469		—		1,469
Other comprehensive income from cash flow hedges	—		—	—		—	—		1,029		—		1,029
Repurchase redeemable preferred stock	—		—	—		—	—		—		2,905		2,905
Preferred stock accretion	—		—	—		—	(729	)	—		—		(729	)
Preferred stock dividends	—		—	—		—	(8,163	)	—		—		(8,163	)
Balance at December 31, 2003	8,643		86	809		8	198,470		1,366		(347,883	)	(147,953	)
Net income	—		—	—		—	—		—		(23,682	)	(23,682	)
Compensation expense for stock-based awards	—		—	—		—	49		—		—		49
Other comprehensive loss from available-for-sale securities	—		—	—		—	—		(1,469	)	—		(1,469	)
Other comprehensive income from cash flow hedges	—		—	—		—	—		103		—		103
Balance at December 31, 2004	8,643	$	86	809	$	8	198,519		—		(371,565	)	(172,952	)

See accompanying notes to consolidated financial statements.

75

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)
Years ended December 31, 2004, 2003 and 2002
(Dollars in thousands)

			2004						2003			2002
Net income (loss)						$	(23,682	)			1,671			13,239
Other comprehensive income (loss):
	Available-for-sale securities:
		Unrealized holding gains (losses)	$	(1,243	)				1,618			(8,491	)
		Less reclassification adjustment for gain realized in net income (loss)		(226	)				(149	)		(7	)
		Reclassification for other-than-temporary loss included in net income		—			(1,469	)	—		1,469	8,176		(322	)
	Cash flow hedges:
		Reclassification adjustment		103			103		1,029		1,029	1,437		1,437
Other comprehensive income (loss)							(1,366	)			2,498			1,115
Comprehensive income (loss)						$	(25,048	)			4,169			14,354

See accompanying notes to consolidated financial statements.

76

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows
Years ended December 31, 2004, 2003 and 2002
(Dollars in thousands)

					2004			2003		2002
Cash flows from operating activities:
	Net income (loss)				$	(23,682	)	1,671		13,239
	Adjustments to reconcile net income (loss) to net cash provided by operating activities of continuing operations:
		Income from discontinued operations				(671	)	(9,921	)	(21,933	)
		Dividends and accretion on shares subject to mandatory redemption				20,181		9,049		—
		Depreciation and amortization				50,287		48,089		46,310
		Amortization of debt issue costs				4,603		4,171		3,664
		Provision for uncollectible revenue				1,718		1,028		2,997
		Income from equity method investments				(10,899	)	(10,092	)	(7,798	)
		Deferred patronage dividends				(84	)	(233	)	(253	)
		Minority interest in income of subsidiaries				2		2		2
		Loss on early retirement of debt				—		1,503		—
		Write-off of offering costs				5,951		—		—
		Net gain on sale of investments and other assets				(104	)	(608	)	(34	)
		Impairment on investments				349		—		12,568
		Amortization of investment tax credits				(27	)	(37	)	(85	)
		Stock-based compensation				49		15		924
		Change in fair value of interest rate swaps and reclassification of transition adjustment recorded in comprehensive income (loss)				(772	)	(6,664	)	(698	)
		Changes in assets and liabilities arising from continuing operations, net of acquisitions:
			Accounts receivable			(3,068	)	(3,801	)	2,534
			Prepaid and other assets			(89	)	(771	)	1,266
			Accounts payable			(390	)	(7,185	)	900
			Accrued interest payable			(44	)	7,786		506
			Other accrued liabilities			2,302		418		1,640
			Income taxes			(138	)	(149	)	379
			Other assets/liabilities			501		(1,437	)	(496	)
				Total adjustments		69,657		31,163		42,393
				Net cash provided by operating activities of continuing operations		45,975		32,834		55,632
Cash flows from investing activities of continuing operations:
	Acquisition of telephone properties, net of cash acquired					(225	)	(33,114	)	—
	Acquisition of property, plant, and equipment					(36,492	)	(33,595	)	(38,803	)
	Proceeds from sale of property, plant, and equipment					531		377		377
	Distributions from investments					15,017		10,775		9,018
	Payment on covenants not to compete					(145	)	(536	)	(805	)
	Acquisition of investments					—		(17	)	(493	)
	Proceeds from sale of investments and other assets					328		2,100		448
				Net cash used in investing activities of continuing operations		(20,986	)	(54,010	)	(30,258	)

77

Cash flows from financing activities of continuing operations:
	Proceeds from issuance of long-term debt			178,550		317,680		129,080
	Repayment of long-term debt			(193,761	)	(294,414	)	(140,560	)
	Repurchase of shares of common stock subject to put options			(1,000	)	(1,000	)	(1,000	)
	Repurchase of redeemable preferred stock			—		(8,645	)	—
	Loan origination and offering costs			(7,750	)	(15,593	)	(63	)
	Dividends paid to minority stockholders			(5	)	(4	)	(3	)
Net cash used in financing activities of continuing operations				(23,966	)	(1,976	)	(12,546	)
Net cash contributed to (from) continuing operations from (to) discontinued operations				(3,031	)	23,361		(10,353	)
		Net increase (decrease) in cash		(2,008	)	209		2,475
Cash, beginning of year				5,603		5,394		2,919
Cash, end of year			$	3,595		5,603		5,394
Supplemental disclosures of cash flow information:
	Interest paid		$	80,736		77,351		76,611
	Income taxes paid, net of refunds		$	1,055		701		252
Supplemental disclosures of noncash financing activities:
	Redeemable preferred stock issued in connection with long-term debt settlement		$	—		—		93,861
	Long-term debt forgiveness in connection with Carrier Services' debt settlement		$	—		—		2,000
	Redeemable preferred stock dividends paid in-kind		$	—		8,163		10,918
	Gain on repurchase of redeemable preferred stock		$	—		2,905		—
	Accretion of redeemable preferred stock		$	—		729		1,000
	Long-term debt issued in connection with Carrier Services' interest rate swap settlement		$	—		—		3,003
	Long-term debt issued in connection with Carrier Services' Tranche B interest payment		$	115		1,548		887

See accompanying notes to consolidated financial statements.

78

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2004, 2003 and 2002

(1)    Organization and Summary of Significant Accounting Policies

(a)    Organization

        FairPoint Communications, Inc. (FairPoint) provides management services to its wholly owned subsidiaries: ST Enterprises, Ltd. (STE); MJD Ventures, Inc. (Ventures); MJD Services Corp. (Services); FairPoint Carrier Services, Inc. (Carrier Services) (formerly known as FairPoint Communications Solutions Corp.); FairPoint Broadband, Inc. (Broadband); and MJD Capital Corp. STE, Ventures, and Services also provide management services to their wholly owned subsidiaries.

        Collectively, the wholly owned subsidiaries of STE, Ventures, and Services primarily provide telephone local exchange services in various states. Operations also include resale of long distance services, internet services, cable services, equipment sales, and installation and repair services. MJD Capital Corp. leases equipment to other subsidiaries of FairPoint. Carrier Services provides wholesale long distance services. Broadband provides wireless broadband services and wholesale data products.

        STE's wholly owned subsidiaries include Sunflower Telephone Company, Inc. (Sunflower); Northland Telephone Company of Maine, Inc. and STE/NE Acquisition Corp. (d.b.a. Northland Telephone Company of Vermont), (collectively, the Northland Companies); and ST Long Distance, Inc. (ST Long Distance). Ventures' wholly owned subsidiaries include Sidney Telephone Company (Sidney); C-R Communications, Inc. (C-R); Taconic Telephone Corp. (Taconic); Ellensburg Telephone Company (Ellensburg); Chouteau Telephone Company (Chouteau); Utilities, Inc. (Utilities); Chautauqua and Erie Telephone Corporation (C&E); The Columbus Grove Telephone Company (Columbus Grove); The Orwell Telephone Company (Orwell); GTC Communications, Inc. (GT Com); Peoples Mutual Telephone Company (Peoples); Fremont Telcom Co. (Fremont); Fretel Communications, LLC (Fretel); Comerco, Inc. (Comerco); Marianna and Scenery Hill Telephone Company (Marianna); Community Service Telephone Co. (CST); and Commtel Communications Inc. (Commtel). Services' wholly owned subsidiaries include Bluestem Telephone Company (Bluestem); Big Sandy Telecom, Inc. (Big Sandy); Columbine Telecom Company (Columbine); Odin Telephone Exchange, Inc. (Odin); Ravenswood Communications, Inc. (Ravenswood); and Yates City Telephone Company (Yates).

(b)    Principles of Consolidation and Basis of Presentation

        The consolidated financial statements include the accounts of FairPoint and its subsidiaries (the Company). All intercompany transactions and accounts have been eliminated in consolidation.

        On November 7, 2001, the Company announced Carrier Services' plan to sell certain of its assets and to discontinue competitive communications operations. As a result of the adoption of this plan, the financial results have been reclassified in the accompanying consolidated financial statements to present these operations as discontinued (see note 13).

        On September 30, 2003, the Company completed the sale of all of the capital stock owned by Services of Kadoka Telephone Co., Union Telephone Company of Hartford, Armour

79

Independent Telephone Co. and WMW Cable TV Co. As a result of this sale, the financial results have been reclassified in the accompanying consolidated financial statements to present these operations as discontinued. This divestiture is referred to herein as the South Dakota Divestiture.

        The Company's telephone subsidiaries follow the accounting for regulated enterprises prescribed by Statement of Financial Accounting Standards (SFAS) No. 71, Accounting for the Effects of Certain Types of Regulation. This accounting recognizes the economic effects of rate regulation by recording costs and a return on investment; as such, amounts are recovered through rates authorized by regulatory authorities. Accordingly, SFAS No. 71 requires the Company's telephone subsidiaries to depreciate telephone plant over useful lives that would otherwise be determined by management. SFAS No. 71 also requires deferral of certain costs and obligations based upon approvals received from regulators to permit recovery of such amounts in future years. Criteria that would give rise to the discontinuance of SFAS No. 71 include (1) increasing competition restricting the wireline subsidiaries' ability to establish prices to recover specific costs and (2) significant changes in the manner in which rates are set by regulators from cost-based regulation to another form of regulation. The Company's telephone subsidiaries periodically review the applicability of SFAS No. 71 based on the developments in their current regulatory and competitive environments.

(c)    Use of Estimates

        The Company's management has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the reported amounts of revenues and expenses, and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

(d)    Revenue Recognition

        Revenues are recognized as services are rendered and are primarily derived from the usage of the Company's networks and facilities or under revenue-sharing arrangements with other communications carriers. Revenues are primarily derived from: access, pooling, local calling services, Universal Service Fund receipts, long distance services, Internet and data services, and other miscellaneous services. Local access charges are billed to local end users under tariffs approved by each state's public utilities commission. Access revenues are derived for the intrastate jurisdiction by billing access charges to interexchange carriers and to regional Bell operating companies. These charges are billed based on toll or access tariffs approved by the local state's public utilities commission. Access charges for the interstate jurisdiction are billed in accordance with tariffs filed by the National Exchange Carrier Association (NECA) or by the individual company and approved by the Federal Communications Commission.

        Revenues are determined on a bill-and-keep basis or a pooling basis. If on a bill-and-keep basis, the Company bills the charges to either the access provider or the end user and keeps the revenue. If the Company participates in a pooling environment (interstate or intrastate), the toll or access billed is contributed to a revenue pool. The revenue is then distributed to individual companies based on their company-specific revenue requirement. This distribution is based on individual state public utilities commissions (intrastate) or the Federal

80

Communication Commission's (interstate) approved separation rules and rates of return. Distribution from these pools can change relative to changes made to expenses, plant investment, or rate of return. Some companies participate in federal and certain state universal service programs that are pooling in nature but are regulated by rules separate from those described above. These rules vary by state. Revenues earned through the various pooling arrangements are initially recorded based on the Company's estimates.

        Long distance retail and wholesale services are usage sensitive and are billed in arrears and recognized when earned. Internet and data services revenues are substantially all recurring revenues and are billed one month in advance and deferred until earned. The majority of the Company's miscellaneous revenue is provided from billing and collection and directory services. The Company earns revenue from billing and collecting charges for toll calls on behalf of interexchange carriers. The interexchange carrier pays a certain rate per each message billed by the Company. The Company recognizes revenue from billing and collection services when the services are provided. The Company recognizes directory services revenue over the subscription period of the corresponding directory. Billing and collection is normally billed under contract or tariff supervision. Directory services are normally billed under contract.

(e)    Accounts Receivable

        Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company's best estimate of the amount of probable credit losses in the Company's existing accounts receivable. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends, and other information. Receivable balances are reviewed on an aged basis and account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

        The following is activity in the Company's allowance for doubtful accounts receivable for the years ended December 31 (dollars in thousands):

	2004			2003		2002
Balance, beginning of period	$	1,028		1,235		1,355
Acquisition adjustments		(143	)	202		—
Provision charged to expense		1,718		1,028		2,997
Amounts written off, net of recoveries		(1,348	)	(1,437	)	(3,117	)
Balance, end of period	$	1,255		1,028		1,235

(f)    Credit Risk

        Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and trade receivables. The Company places its cash with high-quality financial institutions. Concentrations of credit risk with respect to trade receivables are principally related to receivables from other interexchange carriers and are otherwise limited to the Company's large number of customers in several states.

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(g)    Investments

        Investments consist of stock in CoBank, ACB (CoBank), Rural Telephone Bank (RTB), the Rural Telephone Finance Cooperative (RTFC), various cellular companies and partnerships and other minority equity investments, and Non-Qualified Deferred Compensation Plan assets. The stock in CoBank, RTB, and the RTFC is nonmarketable and stated at cost. For investments in partnerships, the equity method of accounting is used.

        Non-Qualified Deferred Compensation Plan assets are classified as trading. The Company uses fair value reporting for marketable investments in debt and equity securities classified as either available-for-sale or trading. For available-for-sale securities, the unrealized holding gains and losses, net of the related tax effect, are excluded from earnings and are reported as a separate component of comprehensive income until realized or at such time as the Company determines a decline in value has occurred that is deemed to be other-than-temporary. Unrealized holding gains and losses on trading securities are included in other income.

        To determine if an impairment of an investment exists, the Company monitors and evaluates the financial performance of the business in which it invests and compares the carrying value of the investee to quoted market prices (if available), or the fair values of similar investments, which in certain instances, is based on traditional valuation models utilizing multiples of cash flows. When circumstances indicate that a decline in the fair value of the investment has occurred and the decline is other than temporary, the Company records the decline in value as a realized impairment loss and a reduction in the cost of the investment.

        The Company currently receives patronage dividends from its investments in businesses organized as cooperatives for Federal income tax purposes (CoBank and RTFC stock). Patronage dividends represent cash distributions of the cooperative's earnings and notices of allocations of earnings to the Company. Deferred and uncollected patronage dividends are included as part of the basis of the investment until collected. The RTB investment pays dividends annually at the discretion of its board of directors.

(h)    Property, Plant, and Equipment

        Property, plant, and equipment is carried at cost. Repairs and maintenance are charged to expense as incurred and major renewals and improvements are capitalized. For traditional telephone companies, the original cost of depreciable property retired, together with removal cost, less any salvage realized, is charged to accumulated depreciation. For all other companies, the original cost and accumulated depreciation are removed from the accounts and any gain or loss is included in the results of operations. Depreciation is determined using the straight-line method for financial reporting purposes.

        The Company is in the process of developing an integrated end-user billing platform. The costs to develop such system have been accounted for in accordance with Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. Aggregate capitalized costs (before accumulated amortization) totaled $5.1 million as of December 31, 2004, of which approximately 84% represents payments for license fees and third-party consultants. The Company's capitalized billing system costs will be amortized over

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a five-year period. The Company began amortizing its billing system costs in 2004 based on the total operating subsidiaries that the Company had migrated to the new system.

(i)    Debt Issue and Offering Costs

        Debt issue costs are being amortized over the life of the related debt, ranging from 3 to 10 years. During 2003, $5.0 million in net book value of debt issue costs were written off in association with refinancing activity classified as other nonoperating expense in the statements of operations. During 2004, the Company wrote-off debt issuance and offering costs of $6.0 million associated with an abandoned offering of Income Deposit Securities (IDSs), classified as other nonoperating expense in the statements of operations. The offering of IDSs was abandoned in December of 2004 in favor of the transactions described in note 2. Debt issue and offering costs of $1.0 million remained capitalized after the write-off that are a direct and incremental benefit to the transactions described in note 2. Accumulated amortization of loan origination costs from continuing operations was $14.9 million and $10.3 million at December 31, 2004 and 2003, respectively.

(j)    Goodwill and Other Intangible Assets

        Goodwill consists of the difference between the purchase price incurred in acquisitions using the purchase method of accounting and the fair value of net assets acquired. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, which the Company adopted effective January 1, 2002, goodwill is no longer amortized, but instead is assessed for impairment at least annually. During this assessment, management relies on a number of factors, including operating results, business plans, and anticipated future cash flows.

(k)    Impairment of Long-lived Assets

        Long-lived assets, such as property, plant, and equipment and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell and depreciation ceases.

(l)    Income Taxes

        Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

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        FairPoint files a consolidated income tax return with its subsidiaries. FairPoint has a tax-sharing agreement in which all subsidiaries are participants. All intercompany tax transactions and accounts have been eliminated in consolidation.

        As part of the income tax provision process of preparing the Company's consolidated financial statements, the Company is required to estimate its income taxes. This process involves estimating current tax expenses together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities. The Company then assesses the likelihood that deferred tax assets will be recovered from future taxable income and to the extent management believes the recovery is not likely, management will establish a valuation allowance. Management uses judgment to determine the provision or benefit for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against net deferred tax assets.

(m)    Interest Rate Swap Agreements

        The Company assesses interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. The Company maintains risk management control systems to monitor interest rate cash flow risk attributable to both the Company's outstanding and forecasted debt obligations. The risk management control systems involve the use of analytical techniques, including cash flow sensitivity analysis, to estimate the expected impact of changes in interest rates on the Company's future cash flows.

        The Company uses variable and fixed-rate debt to finance its operations, capital expenditures, and acquisitions. The variable-rate debt obligations expose the Company to variability in interest payments due to changes in interest rates. The Company believes it is prudent to limit the variability of a portion of its interest payments. To meet this objective, the Company enters into interest rate swap agreements to manage fluctuations in cash flows resulting from interest rate risk. These swaps change the variable-rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of the interest rate swaps, the Company receives variable interest rate payments and makes fixed interest rate payments, thereby creating the equivalent of fixed-rate debt. As of December 31, 2003, the Company had two interest rate swap agreements with a combined notional amount of $50.0 million that expired in May 2004. These interest rate swap agreements did not qualify as accounting hedges under SFAS No. 133.

        In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, Accounting for Derivative Instruments and Certain Hedging Activities. In June 2000, the FASB issued SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, an Amendment to SFAS No. 133. SFAS No. 133 and SFAS No. 138 require that all derivative instruments be recorded on the balance sheet at their respective fair values. The Company adopted SFAS No. 133 and SFAS No. 138 on January 1, 2001. In accordance with the transition provisions of SFAS No. 133, the Company recorded a cumulative-effect-type loss adjustment (the transition adjustment) of $(4.7) million in other comprehensive income (loss) to recognize at fair value all interest rate swap agreements. As of December 31, 2004, the Company has reclassified to nonoperating income (expense) the entire transition adjustment

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that was recorded in other comprehensive income (loss). The fair value of the Company's interest rate swap agreements is determined from valuations received from financial institutions. The fair value indicates an estimated amount the Company would pay if the contracts were canceled or transferred to other parties.

        Amounts receivable or payable under interest rate swap agreements are accrued at each balance sheet date and included as adjustments to realized and unrealized gains (losses) on interest rate swaps.

        The following is a summary of amounts included in realized and unrealized gains (losses) on interest rate swaps (dollars in thousands):

	2004			2003		2002
Change in fair value of interest rate swaps	$	874		7,693		2,135
Reclassification of transition adjustment included in other comprehensive income (loss)		(103	)	(1,029	)	(1,437	)
Realized losses		(883	)	(8,051	)	(10,275	)
Total	$	(112	)	(1,387	)	(9,577	)

(n)    Stock Appreciation Rights

        Stock appreciation rights have been granted to certain members of management by the founding shareholders of the Company. The Company accounts for stock appreciation rights in accordance with FASB Interpretation No. 28, Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans. The Company measures compensation as the amount by which the market value of the shares of the Company's stock covered by the grant exceeds the option price or value specified, by reference to a market price or otherwise, subject to any appreciation limitations and a corresponding credit to additional paid-in capital. Changes, either increases or decreases, in the market value of those shares between the date of the grant and the measurement date result in a change in the measure of compensation for the right. Valuation of stock appreciation rights is typically based on traditional valuation models utilizing multiples of cash flows, unless there is a current market value for the Company's stock.

(o)    Stock Option Plans

        At December 31, 2004, the Company had three stock-based employee compensation plans. The Company accounts for its stock option plans using the intrinsic-value-based method prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeds the exercise price. SFAS No. 123, Accounting for Stock-Based Compensation, permits entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant. SFAS No. 123 allows entities to continue to apply the provisions of APB No. 25 and provide pro forma net income disclosures as if the fair-value method defined in SFAS No. 123 had been applied. The Company has elected to continue to apply the intrinsic-value-based method

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of accounting under APB No. 25 and has adopted the disclosure requirements of SFAS No. 123.

        The Company calculates stock-based compensation pursuant to the disclosure provisions of SFAS No. 123 using the straight-line method over the vesting period of the option. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company's net pro forma income (loss) would have been (dollars in thousands):

	2004			2003		2002
Net income (loss), as reported	$	(23,682	)	1,671		13,239
Stock-based compensation expense included in reported net income (loss)		49		15		1,260
Stock-based compensation determined under fair value based method		(656	)	(658	)	(1,387	)
Pro forma net income (loss)	$	(24,289	)	1,028		13,112
Basic and diluted earnings per share, as reported	$	(2.50	)	(0.46	)	0.14
Basic and diluted earnings per share, pro forma	$	(2.57	)	(0.52	)	0.13

        The pro forma effects are not representative of the effects on reported net income for future years.

(p)    Certain Financial Instruments with Characteristics of Liabilities and Equity

        The Company prospectively adopted SFAS No. 150 effective July 1, 2003. The SFAS No. 150 adoption had no impact on net income (loss) attributed to common shareholders for any of the periods presented. SFAS No. 150 requires the Company to classify as a long-term liability its series A preferred stock and to reclassify dividends and accretion from the series A preferred stock as interest expense. Such stock is now described as "preferred shares subject to mandatory redemption" in the consolidated balance sheets as of December 31, 2003 and 2004 and dividends and accretion on these shares are now included in pretax income whereas previously they were presented as a reduction to equity (a dividend) and, therefore, a reduction of net income available to common shareholders.

(q)    Business Segments

        Under the provisions of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, the Company's only separately reportable business segment is its traditional telephone operations. The Company's traditional telephone operations are conducted in rural, suburban, and small urban communities in various states. The operating income of this segment is reviewed by the chief operating decision maker to assess performance and make business decisions. Due to the sale of the Company's competitive communications operations, such operations (which were previously reported as a separate segment) are classified as discontinued operations.

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(r)    Earnings Per Share

        Earnings per share has been computed in accordance with SFAS No. 128, Earnings Per Share. Basic earnings per share is computed by dividing net income (loss) less dividends accrued on series A preferred shares subject to mandatory redemption and plus discounts on the redemption of such shares by the weighted average number of common shares outstanding for the period. Except when the effect would be anti-dilutive, the diluted earnings per share calculation includes the impact of restricted stock units and shares that could be issued under outstanding stock options.

        The number of potential common shares excluded from the calculation of diluted net loss per share, prior to the application of the treasury stock method, is as follows (amounts in thousands):

	Year ended December 31
	2004	2003	2002
Contingent stock options	833	833	836
Shares excluded as effect would be anti-dilutive:
Stock options	356	416	348
Restricted stock units	26	27	—
	1,215	1,276	1,184

(s)    New Accounting Pronouncements

        In March 2004, the EITF reached a consensus on the remaining portions of EITF 03-01, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments with an effective date of June 15, 2004. EITF 03-01 provides new disclosure requirements for other-than-temporary impairments on debt and equity investments, including cost method investments. Investors are required to disclose quantitative information about: (i) the aggregate amount of unrealized losses, and (ii) the aggregate related fair values of investments with unrealized losses, segregated into time periods during which the investment has been in an unrealized loss position of less than 12 months and greater than 12 months. In addition, investors are required to disclose the qualitative information that supports their conclusion that the impairments noted in the qualitative disclosure are not other-than-temporary. The Company has determined that EITF 03-01 did have a material impact on the financial statements and has enhanced its disclosures as required by this consensus.

        In December 2004, the FASB issued SFAS No. 123(R). This new standard requires companies to adopt the fair value methodology of valuing stock-based compensation and recognizing that valuation in the financial statements from the date of grant. Accordingly, the adoption of SFAS No. 123(R)'s fair value method will have a significant impact on the Company's result of operations, although it will have no impact on the Company's overall financial position. The impact of adoption of SFAS No. 123(R) cannot be predicted at this time because it will partially depend on levels of share-based payments granted in the future. However, had the Company adopted SFAS No. 123(R) in prior periods, the impact of that standard would have approximated the impact of SFAS No. 123 as shown in the note 1(o).

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SFAS No. 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. The Company expects to adopt the provisions of SFAS No. 123(R) on a modified prospective application method effective July 1, 2005, with no restatement of any prior periods. SFAS No. 123(R) is effective for the Company as of the beginning of the first interim reporting period that begins after June 15, 2005.

(2)    Subsequent Events

        On February 8, 2005, FairPoint completed its initial public offering (the Offering) of 25 million shares of common stock at a price to the public of $18.50 per share for net proceeds of approximately $434.8 million. Concurrently with the Offering, FairPoint entered into a new senior secured credit facility of approximately $688.5 million.

        These proceeds were used to:

•

Repay in full all outstanding loans under FairPoint's old credit facility,



•

Consummate tender offers and consent solicitations for the outstanding $115.2 million aggregate principal amount of 9¹/2% senior subordinated notes due 2008, (the 9¹/2% notes), the outstanding $75.0 million aggregate principal amount of floating rate callable securities due 2008 (the floating rate notes), the outstanding $193.0 million aggregate principal amount of 12¹/2% senior subordinated notes due 2010 (the 12¹/2% notes), and the outstanding $225.0 million aggregate principal amount of 11⁷/8% senior notes due 2010 (the 11⁷/8% notes),



•

Repurchase all of the series A preferred stock subject to mandatory redemption,



•

Repay a substantial portion of the subsidiaries' outstanding long-term debt,



•

Repay in full a $7.0 million unsecured promissory note issued in connection with a past acquisition,



•

Repurchase common stock subject to put option, net of the settlement of $1,000 payment of notes receivable—related party,



•

Pay a long-term deferred transaction fee, and



•

Pay related fees and expenses.

(a)    Issuance of Common Stock

        On January 28, 2005, the board of directors approved a 5.2773714 for 1 reverse stock split of the Company's common stock, which has been given retroactive effect in the accompanying financial statements. In conjunction with the Offering, the Company reclassified all of its outstanding shares of class A and class C common stock into common stock and converted all of its outstanding shares of class C common stock into shares of common stock, of which 200 million shares are authorized. After the stock split, but prior to the issuance of any new shares, 9,451,719 shares of common stock were outstanding. All common stock issued and outstanding has a $0.01 par value.

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        Through February 8, 2005, the Company effected the following changes in its capital stock accounts (amounts in thousands):

	Class A and Class C Common
						Common
									Additional paid-in capital	Unearned compensation
	Shares		Amount			Shares	Amount
Balance at
December 31, 2004	9,452		$	94		—	$	—	198,519	—
Conversion of Class A and Class C to a single class of common stock	(9,452	)		(94	)	9,452		94	—	—
Issuance of common stock, net of issuance costs	—			—		25,000		250	434,500	—
Issuance of restricted stock	—			—		474		5	8,759	(8,764	)
Balance at February 8, 2005	—		$	—		34,926	$	349	641,778	(8,764	)

        The Company granted 473,716 shares of restricted common stock to certain employees concurrently with the Offering, which will begin to vest on April 1, 2006.

(b)    New Senior Secured Credit Facility

        The Company entered into a new senior secured credit facility (the new credit facility) consisting of a revolving facility in an aggregate principal amount of up to $100.0 million and a term facility in an aggregate principal amount of $588.5 million. At the closing of the Offering (February 8, 2005), the Company drew $566.0 million against the term facility, including $24.4 million of proceeds which were used on March 10, 2005, to redeem the $0.2 million aggregate principal amount of the 9¹/2% notes (including accrued interest and redemption premiums) that were not tendered in the tender offer for such notes and the $24.2 million aggregate principal amount of the floating rate notes (including accrued interest) that were not tendered in the tender offer for such notes. Debt issuance cost of $8.2 million were paid at closing for fees associated with the new credit facility.

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        Proceeds were used to prepay existing debt as follows (dollars in thousands):

			December 31, 2004			Repayments		Remaining balance
Senior secured notes			$	182,357		(182,357	)	—
Senior subordinated notes due 2008:
	Fixed rate notes, 9.50%			115,207		(115,207	)	—
	Variable rate notes			75,000		(75,000	)	—
Senior subordinated notes, 12.50%, due 2010				193,000		(173,076	)	19,924
Senior notes, 11.875% due 2010				225,000		(222,950	)	2,050
Senior notes to RTFC:
	Fixed rate, 9.20%, due 2009			2,278		—		2,278
	Variable rate, due 2009			3,415		(3,415	)	—
Subordinated promissory notes, due 2005				7,000		(7,000	)	—
First mortgage notes to Rural Utilities Service, due 2005 to 2016				6,034		(6,034	)	—
Senior notes to RTB, due 2008 to 2014				1,141		(1,141	)	—
		Total outstanding long-term debt		810,432		(786,180	)	24,252
Less current portion				(524	)	—		(524	)
		Total long-term debt, net of current portion	$	809,908		(786,180	)	23,728

        The remaining balance of $19.9 million of the 12.5% notes will be called for redemption in May 2005. The Company paid $59.3 million in debt tender costs and premiums as a result of the repayments described above.

        In conjunction with the refinancing, the Company recorded a write-off of existing debt issuance costs of $17.0 million. Debt issue and offering costs of $1.4 million remain capitalized that are a direct and incremental benefit to the transactions described above. The final costs associated with the transactions will be allocated between debt issuance costs and equity proceeds.

        Borrowings under the Company's new credit facility bear interest at variable interest rates. In connection with the closing of the Company's new credit facility, the Company entered into three interest rate swap agreements which fixed the interest rate on approximately $130.0 million on the term loans under our new credit facility at 6.11% until December 31, 2009, fixed the interest rate on approximately $130.0 million of the term loans under our new credit facility at 5.98% until December 31, 2008 and fixed the interest rate on approximately $130.0 million of the term loans under our new credit facility at 5.76% until December 31, 2007. The interest rate swaps qualify as cash flow hedges for accounting purposes.

(c)    Redemption of Series A Preferred Stock Subject to Mandatory Redemption

        The Company used proceeds of $129.2 million for the redemption of series A preferred stock subject to mandatory redemption. In addition, the Company paid a premium for the redemption of series A preferred stock totaling $0.2 million, resulting in a total loss on redemption of $10.4 million.

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(d)    Other Uses of Offering Proceeds

        A total of $1.0 million common stock subject to put was repurchased in January 2005 and the proceeds were used to repay the note receivable—related party. The Company used proceeds of $8.6 million to repurchase the remaining $136,000 common stock subject to put option and to pay a long-term deferred transaction fee of $8.4 million.

(e)    Dividends

        The Company has adopted a dividend policy under which a substantial portion of the cash generated in excess of operating needs, interest and principal payments on indebtedness, dividends on future senior classes of capital stock, if any, capital expenditures, taxes and future reserves, if any, would in general be distributed as regular quarterly dividend payments to the holders of our common stock, rather than retained and used for other purposes.

        On March 3, 2005, the Company declared a dividend of $0.22543 per share of common stock, payable on April 15, 2005 to holders of record as of March 31, 2005.

(f)    Pro Forma Balance Sheet (Unaudited)

        The accompanying unaudited pro forma balance sheet gives effect to the significant subsequent events described above that occurred in February and March 2005 as if they occurred in December 31, 2004. The following, in conjunction with disclosures made above, is a summary of the adjustments made in arriving at the pro forma December 31, 2004 presentation (amounts in thousands):

	Cash			Debt issue and offering cost, net		Accrued interest payable		Long-term debt		Other long-term liabilities		Accumulated deficit
Balance as of December 31, 2004	$	3,595		18,812		16,582		809,908		12,621		(371,565	)
Proceeds from new credit facility		566,000		—		—		566,000		—		—
Credit facility issuance costs		(8,159	)	8,159		—		—		—		—
Proceeds of Offering, net of issuance costs		434,750		—		—		—		—		—
Payment of existing debt		(786,180	)	—		—		(786,180	)	—		—
Payment of preferred stock subject to mandatory redemption		(129,141	)	—		—		—		—		(12,261	)
Payment of accrued interest		(16,051	)	—		(16,051	)	—		—		—
Payment of deferred transaction fee		(8,445	)	—		—		—		(8,445	)	—
Payment of tender premiums and fees		(59,315	)	—		—		—		—		(59,315	)
Settlement of common stock subject to put		(136	)	—		—		—		—		—
Draw on new revolving credit facility		3,082		—		—		3,082		—		—
Write-off of debt issue costs		—		(17,410	)	—		—		—		(17,410	)
Pro forma balance as of December 31, 2004	$	—		9,561		531		592,810		4,176		(460,551	)

(3)    Acquisition

        On December 1, 2003, the Company acquired 100% of the capital stock of CST and Commtel. The purchase price for this acquisition was $32.6 million. The Company believes the

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entire amount of goodwill will be deductible for income tax purposes. Acquisition costs were $0.3 million in 2003. This acquisition has been accounted for using the purchase method and, accordingly, the results of operations have been included in the Company's consolidated financial statements from the date of acquisition. The excess of the purchase price and acquisition costs over the fair value of the net identifiable assets acquired was $25.1 million and has been recognized as goodwill.

        The allocation of the total net purchase price is shown in the table below (dollars in thousands):

Current assets		$	1,027
Property, plant, and equipment			8,301
Excess cost over fair value of net assets acquired			25,064
Other assets			—
Current liabilities			(1,182	)
Other liabilities			(268	)
	Total net purchase price	$	32,942

        The following unaudited pro forma information presents the combined results of operations of the Company as though the acquisition was made as of January 1, 2002. These results include certain adjustments, including increased interest expense on debt related to the acquisition, certain preacquisition transaction costs, and related income tax effects. The pro forma financial information does not necessarily reflect the results of operations as if the acquisition had been in effect at the beginning of the period or that may be attained in the future (dollars in thousands).

	Pro forma year ended December 31
	2003			2002
Revenues	$	238,663		238,466
Loss from continuing operations		(8,190	)	(8,321	)
Net income		1,731		13,612
Basic and diluted loss from continuing operations per share		(1.49	)	(2.13	)
Basic and diluted earnings (loss) per share		(0.45	)	0.18

(4)    Goodwill and Other Intangible Assets

        Changes in the carrying amount of goodwill were as follows (dollars in thousands):

Balance, December 31, 2002		$	454,306
Disposal of South Dakota Divestiture			(10,525	)
	Balance, December 31, 2002, adjusted for discontinued operations		443,781
Acquisition of CST and Commtel			25,064
	Balance, December 31, 2003		468,845
Acquisition adjustments of CST and Commtel			(337	)
	Balance, December 31, 2004	$	468,508

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        In connection with the transitional goodwill impairment evaluation performed as of January 1, 2002, SFAS No. 142 required the Company to perform an assessment of whether there was an indication that goodwill was impaired as of the date of adoption. To accomplish this, the Company was required to identify its reporting units and determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of January 1, 2002. The Company was required to determine the fair value of each reporting unit and compare it to the carrying amount of the reporting unit within six months of January 1, 2002. In performing the initial transitional impairment test, the Company determined that the carrying amount of its reporting unit did not exceed its estimated fair value and, therefore, the Company did not record an impairment loss upon adoption of SFAS No. 142. The Company updated its annual impairment testing of goodwill as of December 31, 2004, 2003, and 2002, and determined that no impairment loss was required to be recognized.

        Covenants not to compete are being amortized over their useful lives of three to five years. Accumulated amortization of covenants not to compete was $4.7 million and $4.6 million at December 31, 2004 and 2003, respectively. The Company recorded amortization of $0.1 million, $0.7 million, and $0.9 million for the years ended December 31, 2004, 2003, and 2002, respectively. The Company will continue to amortize the covenants over their remaining estimated useful lives and will record amortization of less than $0.1 million during 2005.

(5)    Property, Plant, and Equipment

        A summary of property, plant, and equipment from continuing operations is shown below (dollars in thousands):

		Estimated life (in years)	2004			2003
Land		—	$	3,851		3,861
Buildings and leasehold improvements		2-40		36,339		36,331
Telephone equipment		3-50		615,976		591,621
Cable equipment		3-20		3,143		1,568
Furniture and equipment		3-34		17,098		18,184
Vehicles and equipment		3-20		22,011		20,712
Computer software		3-5		4,577		2,277
	Total property, plant, and equipment			702,995		674,554
Accumulated depreciation				(450,733	)	(407,848	)
	Net property, plant, and equipment		$	252,262		266,706

        The telephone company composite depreciation rate for property and equipment was 7.32%, 7.46%, and 7.62% in 2004, 2003, and 2002, respectively. Depreciation expense from continuing operations for the years ended December 31, 2004, 2003, and 2002 was $50.3 million, $47.1 million, and $45.3 million, respectively.

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(6)    Investments

(a)    Marketable Equity Securities

        The cost, unrealized holding gains and losses, and fair value of the Company's marketable equity investments classified as available-for-sale at December 31, 2004 and 2003 are summarized below (dollars in thousands):

	Cost		Gross unrealized holding gains	Gross unrealized holding loss	Fair value
December 31, 2004	$	—	—	—	—
December 31, 2003		420	1,469	—	1,889

        The Company continually evaluates its investment holdings for evidence of impairment. During 2002, the Company determined that the decline in market value of its Choice One common stock was "other-than-temporary." As such, the Company recorded a noncash charge of $8.2 million. This charge is classified with the impairment on investments in the consolidated statements of operations.

        Following an August 2, 2004 announcement by Choice One of a financial restructuring under Chapter 11 of the United States Bankruptcy Code, the quoted market value of the Company's investment in Choice One Communications Inc.'s common stock declined to $33,000. The Company determined that the decline in fair value was other-than-temporary and recorded an impairment loss of $0.5 million in the third quarter of 2004, of which $0.4 million was recorded as an expense in the consolidated statement of operations and $0.1 million was recorded as a reduction in accumulated other comprehensive income. On November 8, 2004, Choice One exited Chapter 11 and, in accordance with its plan of reorganization, Choice One's preferred stockholders and common stockholders did not receive any recovery and all of the preferred stock and common stock has now been cancelled.

        Proceeds from sales of available-for-sale securities were $0.3 million, $0.3 million, and $0.4 million in 2004, 2003, and 2002, respectively. Gross gains of $0.1 million, $0.1 million, and approximately $7,000 in 2004, 2003, and 2002, respectively, were realized on those sales.

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        The Company's noncurrent investments at December 31, 2004 and 2003 consist of the following:

				2004		2003
				(Dollars in thousands)
Equity method investments in cellular companies and partnerships:
		Orange County—Poughkeepsie Limited Partnership		$	3,590	5,116
		Chouteau Cellular Telephone Company			72	2,973
		Illinois Valley Cellular RSA 2, Inc.			2,037	1,822
		Other equity method investments			1,132	1,037
Investments in securities carried at cost:
	RTB stock				20,125	20,125
	CoBank stock and unpaid deferred CoBank patronage				5,221	5,136
	RTFC secured certificates and unpaid deferred RTFC patronage				419	478
	Cellular companies				4,552	4,552
	Other nonmarketable minority equity investments				33	42
Nonqualified deferred compensation plan assets					568	511
			Total investments	$	37,749	41,792

(b)    Equity Method Investments

        The Company records its share of the earnings or losses of the investments accounted for under the equity method on a three-month lag. The investments accounted for under the equity method and the Company's ownership percentage as of December 31, 2004 and 2003 are summarized below:

	2004		2003
Chouteau Cellular Telephone Company	33.7	%	33.7	%
ILLINET Communications, LLC	9.1	%	9.1	%
Orange County—Poughkeepsie Limited Partnership	7.5	%	7.5	%
ILLINET Communications of Central IL LLC	5.2	%	5.2	%
Syringa Networks, LLC	13.9	%	13.9	%
Illinois Valley Cellular RSA 2, Inc.	25.0	%	25.0	%

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        Earnings in equity investments for the years ended December 31, 2004, 2003, and 2002 consisted of the following:

		2004		2003	2002
Orange County—Poughkeepsie Limited Partnership		$	10,249	8,939	6,787
Illinois Valley Cellular RSA 2, Inc.			372	543	321
Illinois Valley Cellular RSA 2-I, RSA 2- II, and RSA 2-III Partnerships			—	35	252
Chouteau Cellular Telephone Company			2	471	332
Other, net			276	104	106
	Total	$	10,899	10,092	7,798

        Distributions from equity investments during the years ended December 31, 2004, 2003, and 2002 consisted of the following:

	2004		2003	2002
Orange County—Poughkeepsie Limited Partnership	$	11,775	10,125	8,250
Illinois Valley Cellular RSA 2, Inc.		375	325	300
Illinois Valley Cellular RSA 2-I, RSA 2-II, and RSA 2-III Partnerships		—	147	160
Chouteau Cellular Telephone Company		2,524	—	16
Distributions from other equity investments		343	178	292
Total	$	15,017	10,775	9,018

        Chouteau Cellular Telephone Company (a limited partnership in which the Company holds a 1.0% general partner interest and a 32.67% limited partner interest) (Chouteau) is an investment vehicle that holds a 25% member interest in Independent Cellular Telephone, LLC (ICT). ICT, in turn, is an investment vehicle that holds a 44.45% member interest in United States Cellular Telephone of Greater Tulsa, LLC (Tulsa, LLC). Because Tulsa, LLC is the actual operating entity within the overall investment structure, its summary financial information is presented below, rather than summary information for the Chouteau Cellular Telephone Company, which is the actual entity accounted for under the equity method on the books of the Company:

		September 30, 2002
Current assets		$	12,346
Property, plant, and equipment, net			65,394
Other			20,648
	Total assets	$	98,388
Current liabilities		$	55,070
Noncurrent liabilities			2,878
Members' equity			40,440
	Total liabilities and members' equity	$	98,388

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	Twelve months ended September 30, 2002
Revenues	$	96,361
Operating income		12,407
Net income		10,402

        In addition to holding the 44.45% member interest in Tulsa, LLC, ICT has long-term debt consisting of variable rate borrowings (5.50% at December 31, 2003) under a loan agreement with RTFC, due in quarterly installments of $0.7 million, including interest, through 2006. The note is collateralized by the assets of ICT, including its investment in Tulsa, LLC. The RTFC debt balance at December 31, 2003 was $6.0 million. The Company has issued an unsecured guarantee of the RTFC debt. As of December 31, 2003, the amount of the unsecured guarantee was $1.5 million.

        In January 2004, ICT sold its membership interest in Tulsa, LLC and, as a result, Chouteau Cellular Telephone Company made a $2.5 million distribution to the Company. In conjunction with this sale, ICT paid the long-term debt owed to RTFC, thereby eliminating the Company guarantee of the RTFC debt. Subsequent to the sale, the Company continues to have an investment in Chouteau Cellular Telephone Company, but the partnership assets are minimal and do not include any interests in the cellular telephone business of Chouteau.

        During 2003, the Company sold its ownership percentages of Illinois Valley Cellular RSA 2-I Partnership, Illinois Valley Cellular RSA 2-II Partnership, and Illinois Valley Cellular RSA 2-III Partnership. Proceeds from the sales of these investments were $1.8 million and gross gains of approximately $0.4 million were realized on these sales.

        During 2002, the Company determined that the carrying amount exceeded the estimated fair value of some investments accounted for under the equity method, and such declines were "other-than-temporary." As such, the Company recorded a noncash charge of $1.7 million and $2.7 million, respectively, for the Chouteau Cellular Telephone Company and the Illinois Valley Cellular RSA 2—I, II, and III partnership investments. These charges are classified with the impairment on investments in the consolidated statements of operations.

(c)    Investments in Equity Securities Carried at Cost

        The aggregate cost of the Company's cost method investments totaled $30.4 million at December 31, 2004. These investments were not evaluated for impairment because (a) the Company did not estimate the fair value of those investments in accordance with paragraphs 14 and 15 of SFAS No. 107 Disclosures About Fair Value of Financial Instruments, and (b) the Company did not identify any events or circumstances that may have had a significant adverse effect on the fair value of those investments.

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(7)    Long-term Debt

        Long-term debt at December 31, 2004 and 2003 is shown below (dollars in thousands):

		2004			2003
Senior secured notes, variable rates ranging from 6.44% to 8.75% at December 31, 2004, due 2005 to 2007		$	182,357		171,091
Senior subordinated notes due 2008:
Fixed rate notes, 9.50%			115,207		115,207
Variable rate notes, 6.4875% at December 31, 2004			75,000		75,000
Senior subordinated notes, 12.50%, due 2010			193,000		193,000
Senior notes, 11.875%, due 2010			225,000		225,000
Carrier Services' senior secured notes, 8.00%, due 2007			—		24,570
Senior notes to RTFC:
Fixed rate, 9.20%, due 2009			2,278		2,776
Variable rate, 6.15% at December 31, 2004, due 2009			3,415		4,162
Subordinated promissory notes, 7.00%, due 2005			7,000		7,000
First mortgage notes to Rural Utilities Service, fixed rates ranging from 4.96% to 10.78%, due 2005 to 2016			6,034		6,492
Senior notes to RTB, fixed rates ranging from 7.50% to 8.00%, due 2008 to 2014			1,141		1,262
	Total outstanding long-term debt		810,432		825,560
Less current portion			(524	)	(21,982	)
	Total long-term debt, net of current portion	$	809,908		803,578

        The approximate aggregate maturities of long-term debt for each of the five years subsequent to December 31, 2004 are as follows (dollars in thousands):

Fiscal year:
2005(a)	$	27,256
2006		30,384
2007		138,384
2008		192,700
2009		1,037
Thereafter		420,671
	$	810,432

(a)

A total of $26,732 of current maturities on long-term debt has been reclassified to long-term debt as a result of post-balance-sheet refinancing as discussed in note 2.

(a)    Senior Secured Notes

        On March 30, 1998, the Company closed a $315 million senior secured credit facility (the credit facility) which committed $75 million of term debt (tranche C) amortized over 9 years, $155 million of term debt (tranche B) amortized over 8 years, and $85 million of reducing

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revolving credit facility debt with a term of 6.5 years. On March 14, 2000, an additional $165 million reducing revolving credit facility with a term of 4.5 years was committed and made available to the Company under the credit facility. The credit facility requires that the Company maintain certain financial covenants.

        The credit facility was amended and restated as part of a refinancing completed on March 6, 2003. The amended and restated credit facility provides for, among other things, rescheduled amortization and an excess cash flow sweep with respect to the tranche C term facility. The amended and restated credit facility consists of term loan facilities (consisting of tranche A loans and tranche C loans) in an aggregate principal amount of $156.4 million and a revolving credit facility in an aggregate principal amount of $70.0 million. All of the Company's obligations under the amended and restated credit facility are unconditionally and irrevocably guaranteed jointly and severally by four of its mid-tier subsidiaries. Outstanding debt under the amended and restated credit facility is secured by a first priority perfected security interest in all of the capital stock of certain of the Company's subsidiaries.

        The amended and restated credit facility is comprised of the following facilities:

Revolving loan facility—A revolving loan facility of $85 million. As of December 31, 2004, $40 million was outstanding under the revolving loan facility. These loans mature on March 31, 2007 and bear interest per annum at either a base rate plus 3.00% or LIBOR plus 4.00%.

Tranche A term loan facility—A tranche A term loan facility of $40 million. As of December 31, 2004, $40 million of tranche A term loans were outstanding. These loans mature on March 31, 2007 and bear interest per annum at either a base rate plus 3.00% or LIBOR plus 4.00%.

Tranche C term loan facility—As of December 31, 2004, approximately $102.4 million of tranche C term loans remained outstanding. These loans mature on March 31, 2007. Mandatory repayments under the tranche C term loan facility are scheduled to be $18.2 million, $28.2 million and $56.0 million in years 2005, 2006, and on March 31, 2007, respectively. Tranche C term loans bear interest per annum at either a base rate plus 3.50% or LIBOR plus 4.50%.

        The amended and restated credit facility contains certain customary covenants and other credit requirements of the Company and its subsidiaries and certain customary events of default. The amended and restated credit facility limits the Company's ability to make investments in Carrier Services and its subsidiaries.

        Net cash proceeds from asset sales are required to be applied as mandatory prepayments of principal on outstanding loans unless such proceeds are used by us to finance acquisitions permitted under our amended and restated credit facility within 180 days (270 days with respect to a special asset sale, as defined in the credit facility) of our receipt of such proceeds. Change of control transactions trigger a mandatory prepayment obligation. Voluntary prepayments of loans, including interim prepayments of revolving loans with proceeds of asset sales that are not used to prepay term loans in anticipation of being subsequently applied to fund a permitted acquisition or acquisitions within 180 days (270 days in the event described above) of the asset sale, may be made at any time without premium or penalty, provided that voluntary prepayments of Eurodollar loans made on a date other than the last day of an interest period applicable thereto shall be subject to customary breakage costs.

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        In addition, the amended and restated credit facility provides that, on the date occurring 90 days after the last day of each of our fiscal years commencing December 31, 2003, 50% of excess cash flow (as defined in the amended and restated credit facility) for the immediately preceding fiscal year shall be applied as a mandatory repayment of the then-outstanding tranche C term loan facility provided, however, that such requirement shall terminate at such time as (i) we first meet a senior secured leverage ratio (as defined in the credit facility) of less than or equal to 1.00 to 1.00 and (ii) no default or event of default exists under the amended and restated credit facility. In March 2004, the Company made an excess cash flow payment of $3.4 million.

        On January 30, 2004, the Company amended its amended and restated credit facility to increase its revolving loan facility from $70.0 million to $85.0 million and its tranche A term loan facility from $30.0 million to $40.0 million. The Company used all of the additional borrowing under the tranche A term loan facility and a portion of the borrowings under the revolving loan facility to repay in full all of the indebtedness under the Carrier Services' senior secured notes. There was no gain or loss on the extinguishment of this indebtedness.

        The Company's amended and restated credit facility allows the Company to request letters of credit to support obligations of the Company incurred in the ordinary course of business in an aggregate principal amount not to exceed $5.0 million and subject to limitations on the aggregate amount outstanding under the amended and restated credit facility. As of December 31, 2004, $1.0 million had been issued under this letter of credit.

(b)    Fixed Rate and Floating Rate Senior Subordinated Notes Issued in 1998

        At December 31, 2004 the Company's restricted covenants on its fixed-rate and floating-rate senior subordinated notes issued in 1998, its senior subordinated notes issued in 2000, and its senior notes issued in 2003 do not allow the Company to make any dividend payments.

        FairPoint issued $125.0 million aggregate principal amount of senior subordinated notes (the 1998 Fixed-Rate Notes) and $75.0 million of floating-rate notes (the 1998 Floating-Rate Notes) in 1998. The 1998 Fixed-Rate Notes bear interest at the rate of 9.5% per annum and the 1998 Floating Rate Notes bear interest at a rate per annum equal to LIBOR plus 418.75 basis points, in each case payable semiannually in arrears. The LIBOR rate on the 1998 Floating-Rate Notes is determined semiannually.

        The 1998 Fixed-Rate Notes and the 1998 Floating-Rate Notes mature on May 1, 2008. FairPoint may redeem the 1998 Fixed-Rate Notes and the 1998 Floating-Rate Notes at any time, in each case, at the redemption prices stated in the indenture under which those notes were issued, together with accrued and unpaid interest, if any, to the redemption date. In the event of a change of control, FairPoint must offer to repurchase the outstanding 1998 Fixed-Rate Notes and the 1998 Floating-Rate Notes for cash at a purchase price of 101% of the principal amount of such notes, together with all accrued and unpaid interest, if any, to the date of repurchase.

        The 1998 Fixed-Rate Notes and the 1998 Floating-Rate Notes are general unsecured obligations of FairPoint, subordinated in right of payment to all existing and future senior indebtedness of FairPoint, including all obligations under the Company's amended and restated credit facility.

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        The indenture governing the 1998 Fixed-Rate Notes and the 1998 Floating-Rate Notes contains certain customary covenants and events of default.

(c)    Senior Subordinated Notes Issued in 2000

        FairPoint issued $200.0 million aggregate principal amount of senior subordinated notes (the 2000 Notes) in 2000. The 2000 Notes bear interest at the rate of 12.5% per annum, payable semiannually in arrears.

        The 2000 Notes mature on May 1, 2010. FairPoint may redeem the 2000 Notes at any time on or after May 1, 2005 at the redemption prices stated in the indenture under which the 2000 Notes were issued, together with accrued and unpaid interest, if any, to the redemption date. In the event of a change of control, FairPoint must offer to repurchase the outstanding 2000 Notes for cash at a purchase price of 101% of the principal amount of such notes, together with all accrued and unpaid interest, if any, to the date of repurchase.

        The 2000 Notes are general unsecured obligations of FairPoint, subordinated in right of payment to all existing and future senior indebtedness of FairPoint, including all obligations under the Company's amended and restated credit facility.

        The indenture governing the 2000 Notes contains certain customary covenants and events of default.

(d)    Senior Notes Issued in 2003

        FairPoint issued $225.0 million aggregate principal amount of senior notes in 2003 (the 2003 Notes). The 2003 Notes bear interest at the rate of 11⁷/8% per annum, payable semiannually in arrears.

        The 2003 Notes mature on March 1, 2010. FairPoint may redeem the 2003 Notes at any time on or after March 1, 2007 at the redemption prices stated in the indenture under which the 2003 Notes were issued, together with accrued and unpaid interest, if any, to the redemption date. In the event of a change of control, FairPoint must offer to repurchase the outstanding 2003 Notes for cash at a purchase price of 101% of the principal amount of such notes, together with all accrued and unpaid interest, if any, to the date of repurchase.

        The 2003 Notes are general unsecured obligations of FairPoint, ranking pari passu in right of payment with all existing and future senior debt of FairPoint, including all obligations under the Company's amended and restated credit facility, and senior in right of payment to all existing and future subordinated indebtedness of FairPoint.

        The indenture governing the 2003 Notes contains certain customary covenants and events of default.

        The proceeds from the offering of the 2003 Notes and borrowings under the Company's amended and restated credit facility's tranche A term loan facility were used to: (i) repay the entire amount of all loans outstanding under FairPoint's then-outstanding credit facility's revolving facility, acquisition facility, and tranche B term loan facility; (ii) repurchase $13.3 million aggregate liquidation preference of the Company's series A preferred stock (together with accrued and unpaid dividends thereon) at 65% of its liquidation preference; (iii) repurchase $9.8 million aggregate principal amount of the 1998 Fixed Rate Notes (together with accrued and unpaid interest thereon) for approximately $7.9 million;

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(iv) repurchase $7.0 million aggregate principal amount of the 2000 Notes (together with accrued and unpaid interest thereon) for approximately $6.1 million; (v) make a capital contribution of approximately $1.5 million to Carrier Services, which used these proceeds to retire $2.2 million of its debt; and (vi) pay transaction fees.

        As a result of the issuance of the 2003 Notes, the Company recorded $2.8 million and $0.7 million of nonoperating gains on the extinguishment of the 1998 Fixed Rate Notes and 2000 Notes and the Carrier Services debt, respectively. The Company also repurchased some series A preferred stock at a discount of $2.9 million. Additionally, the Company recorded a nonoperating loss of $5.0 million for the write-off of debt issue costs related to this extinguishment of debt in 2003.

(e)    Carrier Services' Senior Secured Notes

        On May 10, 2002, Carrier Services entered into an amended and restated credit agreement with its lenders to restructure the obligations of Carrier Services and its subsidiaries under Carrier Services' Credit Facility. In connection with such restructuring, (i) Carrier Services paid certain of its lenders $5.0 million to satisfy $7.0 million of the obligations under Carrier Services' credit facility, (ii) the lenders converted $93.9 million of the loans and obligations under Carrier Services' credit facility into shares of the Company's series A preferred stock having a liquidation preference equal to the amount of the loans and obligations under Carrier Services' credit facility, and (iii) the remaining loans under Carrier Services' credit facility and Carrier Services' obligations under its swap arrangements were converted into $27.9 million aggregate principal amount of new term loans.

        As a result of this restructuring, in 2002, the Company recorded a gain classified within discontinued operations of $17.5 million for the extinguishment of debt and settlement of its interest rate swap agreements. The gain represents the difference between the May 10, 2002 carrying value of $128.8 million of retired debt ($125.8 million) and related swap obligations ($3.0 million) and the sum of the aggregate value of the cash paid ($5.0 million) plus principal amount of new term loans ($27.9 million) plus the estimated fair value of the Company's series A preferred stock issued ($78.4 million).

        The converted loans under the new Carrier Services' amended and restated credit agreement consisted of two term loan facilities: (i) tranche A loans in the aggregate principal amount of $8.7 million and (ii) tranche B loans in the aggregate principal amount of $19.2 million, each of which was to mature in May 2007. Interest on the new loans was payable monthly and accrued at a rate of 8% per annum; provided, however, that upon an event of default the interest rate would increase to 10% per annum. Interest on the tranche A loans must be paid in cash and interest on tranche B loans may be paid, at the option of Carrier Services, either in cash or in kind. For the years ended December 31, 2004 and 2003, $0.1 million and $1.5 million, respectively, in additional debt was issued to satisfy the accrued in kind interest on the tranche B loans. The principal of the tranche A loans was due at maturity and the principal of the tranche B loans was payable as follows: (a) $3.0 million was due on September 30, 2005; (b) $5.4 million was due on September 30, 2006; and (c) the remaining principal balance was due at maturity. On May 6, 2003, Carrier Services extinguished $2.2 million of the tranche A and tranche B loans. Carrier Services has made mandatory prepayments on the tranche B loans utilizing payments received under its tax-sharing agreement with FairPoint and proceeds from asset sales. On January 30, 2004,

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these loans were paid in full utilizing borrowings under the Company's amended and restated credit facility.

(f)    Other

        In conjunction with the senior notes payable to the RTFC and the RTB and the first mortgage notes payable to the Rural Utilities Service, certain of the Company's subsidiaries are subject to restrictive covenants limiting the amounts of dividends that may be paid.

        The Company also has $0.4 million unsecured demand notes payable to various individuals and entities with interest payable at 5.25% at December 31, 2004 and 2003.

(8)    Redeemable preferred stock

        The series A preferred stock was issued to the lenders in connection with the Carrier Services debt restructuring. The series A preferred stock is nonvoting and is not convertible into common stock of the Company. The series A preferred stock provides for the payment of dividends at a rate equal to 17.428% per annum. Dividends on the series A preferred stock are payable, at the option of the Company, either in cash or in additional shares of series A preferred stock. The Company has the option to redeem any outstanding series A preferred stock at any time. The redemption price for such shares is payable in cash in an amount equal to $1,000 per share plus any accrued but unpaid dividends thereon (the Preference Amount). Under certain circumstances, the Company would be required to pay a premium of up to 6% of the Preference Amount in connection with the redemption of the series A preferred stock. In addition, upon the occurrence of certain events such as (i) a merger, consolidation, sale, transfer, or disposition of at least 50% of the assets or business of the Company and its subsidiaries; (ii) a public offering of the Company's common stock which yields in the aggregate at least $175.0 million; or (iii) the first anniversary of the maturity of the Company's senior subordinated notes (which first anniversary will occur in May 2011), the Company would be required to redeem all outstanding shares of the series A preferred stock at a price per share equal to the Preference Amount, unless prohibited by the Company's credit facility or by the indentures governing its senior subordinated notes. In connection with the March refinancing, certain holders of the series A preferred stock agreed to reduce the dividend rate payable on the shares they hold from 17.428% to 15% for the period from March 6, 2003 to March 6, 2005.

        In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 applies specifically to financial instruments that companies have historically presented within their financial statements either as equity or between the liabilities section and the equity section, rather than as liabilities. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of a nonpublic entity, in which this statement shall be effective for fiscal periods beginning after December 15, 2003. For purposes of adoption of SFAS No. 150, the Company met the definition of a nonpublic entity. The Company prospectively adopted SFAS No. 150 effective July 1, 2003. The SFAS No. 150 adoption had no impact on net income (loss) attributed to common shareholders for any of the periods presented.

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        SFAS No. 150 requires the Company to classify as a long-term liability its series A preferred stock and to classify dividends and accretion from the series A preferred stock as interest expense. Such stock is now described as "Preferred Shares Subject to Mandatory Redemption" in the Balance Sheets as of December 31, 2004 and 2003 and dividends and accretion on these shares are included in pretax income beginning July 1, 2003, whereas previously they were presented as a reduction to equity (a dividend) and, therefore, a reduction of net income available to common shareholders.

        The initial carrying amount of the series A preferred stock has been recorded at its fair value at the date of issuance ($78.4 million). The carrying amount is being increased by periodic accretions, using the interest method, so that the carrying amount will equal the mandatory redemption amount ($82.3 million) at the mandatory redemption date (May 2011). On March 6, 2003, in connection with the Company's issuance of the 2003 Notes, the Company used a portion of these proceeds to repurchase $13.3 million aggregate liquidation preference of its series A preferred stock at a 35% discount (together with accrued and unpaid dividends thereon). For the years ended December 31, 2004 and 2003, the series A preferred stock has been increased by $1.4 million to reflect the periodic accretions. The carrying amount of the series A preferred stock has been further increased by $18.8 million and $16.5 million in connection with dividends paid in kind on the outstanding shares of the series A preferred stock for the years ended December 31, 2004 and 2003, respectively. Prior to the adoption of SFAS No. 150, additional paid-in capital has been decreased $11.9 million and $8.9 million for the increases in the carrying balance of the series A preferred stock for the year ended December 31, 2002 and the period ended June 30, 2003, respectively. Upon the adoption of SFAS No. 150, pretax income has been decreased $20.2 million and $9.0 million for the increases in the carrying balance of the series A preferred stock for the year ended December 31, 2004 and the period July 1, 2003 through December 31, 2003, respectively.

(9)    Employee Benefit Plans

        The Company sponsors a voluntary 401(k) savings plan (the 401(k) Plan) that covers substantially all eligible employees. Each 401(k) Plan year, the Company contributes to the 401(k) Plan an amount of matching contributions determined by the Company at its discretion. For the 401(k) Plan years ended December 31, 2004, 2003, and 2002, the Company matched 100% of each employee's contribution up to 3% of compensation and 50% of additional contributions up to 6%. The 401(k) Plan also allows for a profit sharing contribution that is made based upon management discretion. Total Company contributions to the 401(k) Plan were $2.4 million, $2.7 million, and $1.4 million for the years ended December 31, 2004, 2003, and 2002, respectively.

        In 1999, the Company began a Non-Qualified Deferred Compensation Plan (the NQDC Plan) that covers certain employees. The NQDC Plan allows highly compensated individuals to defer additional compensation beyond the limitations of the 401(k) Plan. Company matching contributions are subject to the same percentage as the 401(k) Plan. Total Company contributions to the NQDC Plan were approximately $7,000, $7,000, and $1,000 for the years ended December 31, 2004, 2003, and 2002, respectively. At December 31, 2004 and 2003, the NQDC Plan assets were $0.6 million and $0.5 million, respectively. The related deferred compensation obligation is included in other liabilities in the accompanying consolidated balance sheets.

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        C&E, Taconic, and GT Com also sponsor defined contribution 401(k) retirement savings plans for union employees. C&E, Taconic, and GT Com match contributions to these plans based upon a percentage of pay of all qualified personnel and make certain profit sharing contributions. Contributions to these plans were $0.2 million, $0.2 million, and $0.3 million for the years ended December 31, 2004, 2003, and 2002, respectively.

(10)    Income Taxes

        Income tax benefit (expense) from continuing operations for the years ended December 31, 2004, 2003, and 2002 consists of the following components (dollars in thousands):

			2004			2003	2002
Current:
	Federal		$	—		—	—
	State			(543	)	199	(603	)
		Total current income tax benefit (expense) from continuing operations		(543	)	199	(603	)
Investment tax credits				27		37	85
Deferred:
	Federal			—		—	—
	State			—		—	—
		Total deferred income tax benefit (expense) from continuing operations		—		—	—
		Total income tax benefit (expense) from continuing operations	$	(516	)	236	(518	)

        Total income tax benefit (expense) from continuing operations was different than that computed by applying U.S. Federal income tax rates to losses from continuing operations before income taxes for the years ended December 31, 2004, 2003, and 2002. The reasons for the differences are presented below (dollars in thousands):

		2004			2003		2002
Computed "expected" Federal tax benefit from continuing operations		$	8,104		2,880		1,952
State income tax benefit (expense), net of Federal income tax expense			(358	)	131		(398	)
Amortization of investment tax credits			27		37		85
Dividends on preferred stock			(6,862	)	(3,077	)	—
Dividends received deduction			103		94		—
Change in valuation allowance			(1,858	)	—		(2,279	)
Disallowed expenses and other			328		171		122
	Total income tax benefit (expense) from continuing operations	$	(516	)	236		(518	)

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        The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2004 and 2003 are presented below (dollars in thousands):

			2004			2003
Deferred tax assets:
	Federal and state tax loss carryforwards		$	91,929		91,527
	Employee benefits			1,620		784
	Restructure charges and exit liabilities			968		1,917
	Allowance for doubtful accounts			458		375
	Alternative minimum tax and other state credits			2,218		2,209
		Total gross deferred tax assets		97,193		96,812
Valuation allowance				(66,011	)	(64,392	)
		Net deferred tax assets		31,182		32,420
Deferred tax liabilities:
	Property, plant, and equipment, principally due to depreciation differences			11,527		17,244
	Goodwill, due to amortization differences			13,496		10,654
	Basis in investments			6,159		4,522
		Total gross deferred tax liabilities		31,182		32,420
		Net deferred tax assets	$	—		—

        The valuation allowance for deferred tax assets as of December 31, 2004 and 2003 was $66.0 million and $64.4 million, respectively. The change in the valuation allowance was $1.6 million and $(0.2) million, of which $1.8 million and $0.0 million was allocated to continuing operations and $0.0 million and $(7.3) million to discontinued operations for the years ended December 31, 2004 and 2003, respectively. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. In order to fully realize the deferred tax asset, the Company will need to generate future taxable income of $180.9 million prior to the expiration of the net operating loss carryforwards in 2024. Taxable income (loss) for the years ended December 31, 2004 and 2003 was $(10.9) million and $7.6 million, respectively. Based upon the level of projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences, net of the existing valuation allowance at December 31, 2004, based on facts and circumstances known as of December 31, 2004. The Company's initial public offering on February 8, 2005 (see note 2) and its anticipated reduction in interest expense and corresponding increase in taxable income was not considered when evaluating the valuation allowance at December 31, 2004. Subsequent to the initial public offering, the Company will continue to reevaluate future taxable income and determine when and how much of the valuation allowance can be reversed in future periods.

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        At December 31, 2004, the Company had federal and state net operating loss carryforwards of $251.9 million that will expire between 2019 and 2024. At December 31, 2004, the Company had alternative minimum tax credits of $1.5 million that may be carried forward indefinitely. The Company completed an initial public offering on February 8, 2005, which resulted in an "ownership change" within the meaning of the U.S. Federal income tax laws addressing net operating loss carryforwards, alternative minimum tax credits, and other similar tax attributes. As a result of such ownership change, these will be specific limitations on the Company's ability to use its net operating loss carryfowards and other tax attributes.

(11)    Stockholders' Equity

        On January 28, 2005, the board of directors approved a 5.2773714 for 1 reverse stock split of the Company's common stock. All share and per share amounts related to common stock and stock options included in the accompanying consolidated financial statements and notes have been restated to reflect the reverse stock split.

        The following summarizes the authorized share capital of the Company:

Class A common stock—authorized 44,757,130 voting common shares at a par value of $0.01 per share. Class A common shares carry one vote per share.

Class B common stock—authorized 28,423,241 nonvoting, convertible common shares at a par value of $0.01 per share.

Class C common stock—authorized 2,614,938 nonvoting, convertible common shares at a par value of $0.01 per share. The Class C common shares are automatically convertible into Class A common shares upon either the completion of an initial public offering of at least $150 million of the Company's Class A common stock or the occurrence of certain conversion events, as defined in the articles of incorporation. The conversion rate for the Class C common shares to Class A common shares is one-for-one.

Series A preferred stock—authorized 1,000,000 nonvoting, nonconvertible, redeemable preferred shares at a par value of $0.01 per share (see note 7).

        Issuance of Common Stock Subject to Put Obligations

        In connection with the acquisition of Fremont, the Company issued 86,656 shares of Class A common stock to certain of the former owners of Fremont. Under the terms of the agreements, these shares can be put back to the Company at any time. The purchase price for such stock is the higher of the current fair market value or the fair market value of the Company's common stock on the date of the acquisition of Fremont. Such former owners of Fremont exercised their put options on 14,291 shares in December 2000 and on 12,634 shares in March 2001. The Company has recorded the common stock subject to put options as temporary equity in the accompanying consolidated balance sheets. In May 2001, the Company loaned $1.0 million to such former owners of Fremont. In January 2002, these loans were paid with 14,442 shares subject to the put options. In January 2003, put options on 14,442 shares were exercised for $1.0 million. In July 2003, the Company loaned $1.0 million to such former owners of Fremont; these loans matured on January 2, 2005. In January 2004, put options on 14,442 shares were exercised for $1.0 million. In January 2005, the loans made

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in July 2003 were paid with 14,442 shares subject to the put option. In February 2005, the remaining 1,963 shares were redeemed by the Company.

(12)    Stock Option Plans

(a)    Compensation Expense

        On December 31, 2002, the Company extended the exercise period on 40,399 options under the FairPoint Communications, Inc. (formerly MJD Communications, Inc.) 1995 Stock Option Plan (the 1995 Plan). The Company recognized a compensation charge of $1.2 million related to the modification of these options during 2002. On October 1, 2004, the Company extended the exercise period on 18,013 options under the 1995 Plan. The Company recognized a compensation charge of $0.3 million related to the modification of these options during 2004.

        Certain principal shareholders of the Company granted stock appreciation rights to certain members of management. The stock appreciation rights are fully vested. The stock appreciation rights may be settled in cash or stock, at the option of the granting shareholders. In connection with the stock appreciation rights, the Company recognized a benefit of $0.4 million and $0.3 million in 2004 and 2002, respectively, as the value associated with the stock appreciation rights declined. There were no adjustments to the stock appreciation rights in the year ended December 31, 2003, as the fair market value per share of the Company's common stock remained flat during the year.

(b)    1995 Stock Option Plan

        In February 1995, the Company adopted the 1995 Plan. The 1995 Plan covers officers, directors, and employees of the Company. The Company may issue qualified or nonqualified stock options to purchase up to 215,410 shares of the Company's Class A common stock to employees that will vest equally over 5 years from the date of employment of the recipient and are exercisable during years 5 through 10. In 1995, the Company granted options to purchase 161,596 shares at $1.32 per share. No options have been granted since 1995.

        The per share weighted average fair value of stock options granted during 1995 was $0.69 on the date of grant using the Black-Scholes option-pricing model. Input variables used in the model included no expected dividend yields, a risk-free interest rate of 6.41%, and an estimated option life of five years. Because the Company was nonpublic on the date of the grant, no assumption as to the volatility of the stock price was made.

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        Stock option activity under the 1995 Plan is summarized as follows:

		2004	2003	2002
Outstanding at January 1:		112,265	112,265	112,265
	Granted	—	—	—
	Exercised	—	—	—
	Forfeited	—	—	—
Outstanding at December 31		112,265	112,265	112,265
Exercisable at December 31, 2004		112,265
Stock options available to grant at December 31, 2004		53,813

(c)    MJD Communications, Inc. Stock Incentive Plan

        In August 1998, the Company adopted FairPoint Communications, Inc. (formerly MJD Communications, Inc.) Stock Incentive Plan (the "1998 Plan"). The 1998 Plan provides for grants of up to 1,317,425 nonqualified stock options to executives and members of management, at the discretion of the compensation committee of the board of directors. Options vest in 25% increments on the second, third, fourth, and fifth anniversaries of an individual grant. In the event of a change in control, outstanding options will vest immediately.

        Pursuant to the terms of the grant, options granted in 1998 and 1999 become exercisable only in the event that the Company is sold, an initial public offering of the Company's common stock results in the principal shareholders holding less than 10% of their original ownership, or other changes in control, as defined, occur. The number of options that may become ultimately exercisable also depends upon the extent to which the price per share obtained in the sale of the Company would exceed a minimum selling price of $22.59 per share. All options have a term of 10 years from date of grant. For those options granted in 1998 and 1999, the Company will record compensation expense for the excess of the estimated market value of its common stock over the exercise price of the options when and if a sale of the Company, at the prices necessary to result in exercisable options under the grant, becomes imminent or likely. The initial public offering of the Company's common stock that occurred on February 8, 2005, as described note 2, did not trigger exercisability of these options.

        Pursuant to the terms of the grant, options granted in 2000 become exercisable immediately upon vesting. The per share weighted average fair value of stock options granted under the 1998 Plan during 2000 was $58.95 on the date of grant using the Black-Scholes option-pricing model. Input variables used in the model included no expected dividend yields, a risk-free interest rate of 6.52%, and an estimated option life of 10 years. Because the Company was nonpublic on the date of the grant, no assumption as to the volatility of the stock price was made.

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        Stock option activity under the 1998 Plan is summarized as follows:

		Options outstanding		Weighted average exercise price
Outstanding at December 31, 2001		834,952		$	9.71
	Granted	47,372			36.94
	Exercised	—			—
	Forfeited	(42,652	)		17.31
Outstanding at December 31, 2002		839,672			10.87
	Granted	—			—
	Exercised	—			—
	Forfeited	(3,316	)		9.02
Outstanding at December 31, 2003 and 2004		836,356			10.87
Stock options available to grant at December 31, 2004		481,069

Options outstanding				Options exercisable
Exercise price		Number outstanding at December 31, 2004	Remaining contractual life (years)	Number exercisable at December 31, 2004	Weighted average exercise price
$	9.02	756,332	3.60	—	$	—
	14.46	29,183	4.50	—		—
	17.31	3,468	5.30	3,468		17.31
	36.94	47,373	7.00	—		—
		836,356		3,468	$	17.31

        The weighted average remaining contractual life for the options outstanding at December 31, 2004 is 3.8 years.

(d)    FairPoint Communications, Inc. 2000 Employee Stock Incentive Plan

        In May 2000, the Company adopted the FairPoint Communications, Inc. 2000 Employee Stock Incentive Plan (the 2000 Plan). The 2000 Plan provided for grants to members of management of up to 1,898,521 options to purchase class A common stock, at the discretion of the compensation committee. During 2002, the Company amended the 2000 Plan to limit the number of shares available for grant to 448,236. In December 2003, the Company amended the 2000 Plan to allow for the grant to members of management of up to 1,898,521 shares of restricted stock in addition to shares available for stock options. Options granted under the 2000 Plan may be of two types: (i) incentive stock options and (ii) nonstatutory stock options. Unless the compensation committee shall otherwise specify at the time of grant, any option granted under the 2000 Plan shall be a nonstatutory stock option.

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        Under the 2000 Plan, unless otherwise determined by the compensation committee at the time of grant, participating employees are granted options to purchase Class A common stock at exercise prices not less than the market value of the Company's Class A common stock at the date of grant. Options have a term of 10 years from date of grant. Options vest in increments of 10% on the first anniversary, 15% on the second anniversary, and 25% on the third, fourth, and fifth anniversaries of an individual grant. Subject to certain provisions, in the event of a change of control, the Company will cancel each option in exchange for a payment in cash of an amount equal to the excess, if any, of the highest price per share of Class A common stock offered in conjunction with any transaction resulting in a change of control over the exercise price for such option.

        On August 3, 2001, the Company made an offer to its employees to cancel their existing options issued under the 2000 Plan in exchange for new options to be granted on the date that is on or after six months and one day following the expiration date of the offer. As a result of this offer, 620,562 options were canceled. The remaining shares outstanding under this plan were forfeited during 2001. On March 13, 2002, 166,905 stock options were issued under this exchange offer.

        Restricted stock units vest in increments of 33% on each of the third, fourth, and fifth anniversaries of the award. In December 2003, 27,382 units were awarded with an aggregate value of $890,000. At December 31, 2004, 26,442 units remain outstanding as 940 units were forfeited in 2004. The Company recognized compensation expense of $177,000 and $15,000 during 2004 and 2003, respectively, related to these awards and will recognize the balance of compensation expense over the remaining vesting period.

        Stock option activity under the 2000 Plan is summarized as follows:

		Options outstanding		Weighted average exercise price
Outstanding at December 31, 2001		—		$	—
	Granted	253,381			36.94
	Exercised	—			—
	Canceled or forfeited	(22,050	)		36.94
Outstanding at December 31, 2002		231,331			36.94
	Granted	90,580			36.94
	Exercised	—			—
	Canceled or forfeited	(21,177	)		36.94
Outstanding at December 31, 2003		300,734			36.94
	Granted	—			—
	Exercised	—			—
	Canceled or forfeited	(60,096	)		36.94
Outstanding at December 31, 2004		240,638			36.94
Stock options available to grant at December 31, 2004		1,631,441

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        The remaining contractual life for the options outstanding at December 31, 2004 was 7.85 years, and 103,111 options were exercisable.

        The per share weighted average fair value of stock options granted under the 2000 Plan during 2003, and 2002 were $8.39 and $14.99, respectively, on the date of grant using the Black Scholes option-pricing model. Input variables used in the model included no expected dividend yields, a weighted average risk free interest rate of 4.26%, and 5.28% in 2003 and 2002, respectively, and an estimated option life of 10 years. Because the Company was nonpublic on the date of grant, no assumption as to the volatility of the stock price was made. No stock options were granted under the 2000 Plan during 2004.

(13)    Discontinued Operations and Restructure Charges

(a)    Competitive Communications Business Operations

        In October and November of 2001, Carrier Services sold certain assets of its competitive communications operations to Advanced TelCom, Inc., a wholly owned subsidiary of Advance Telcom Group, Inc. and to Choice One. Total proceeds from these sales of assets were $9.0 million in cash and 2,500,000 restricted shares of Choice One common stock (valued at $7.9 million). The Company recorded a net loss of $31.1 million from the sale of these assets. In April 2002, Carrier Services earned an additional 1,000,000 restricted shares of Choice One common stock based on the number of access lines converted to the Choice One operating platform within 120 days after closing. The value of these additional shares, $0.8 million, was recognized as a gain within discontinued operations in 2002.

        In November 2001, in connection with the sale of certain of its assets as previously discussed, the Company announced its plan to discontinue the competitive communications business operations of its wholly owned subsidiary, Carrier Services. As a result of the adoption of the plan to discontinue the competitive communications operations, these results are presented as discontinued operations. The Company recognized a total charge of $95.3 million on the disposal of its competitive communications operations, including the $31.1 million loss on the sale of assets; $36.1 million for the write-off of the remaining operating assets, including property, plant, and equipment; and $28.1 million for expenses the Company estimated it would incur during the phase-out period, net of estimated revenue to be received from customers until they were transitioned to other carriers. Estimated expense for the phase-out period included interest expense. Interest expense was allocated to discontinued operations based on the interest incurred by the Company under the Carrier Services credit facility and the two interest rate swaps related to this facility.

        On May 2002, Carrier Services entered into an amended and restated credit facility with its lenders to restructure the obligations under its credit facility. In the restructuring, (i) Carrier Services paid certain of its lenders $5.0 million to satisfy $7.0 million of obligations under the credit facility, (ii) the lenders converted approximately $93.9 million of the loans under the credit facility into shares of FairPoint's series A preferred stock having a liquidation preference equal to the amount of such loans, and (iii) the remaining loans under the credit facility and certain swap obligations were converted into $27.9 million of new term loans.

        As a result of this restructuring in 2002, the Company recorded a gain in discontinued operations of $17.5 million for the extinguishment of debt and settlement of its interest rate

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swap agreements. The gain represents the difference between the May 10, 2002 carrying value of $128.8 million of retired debt ($125.8 million) and related swap obligations ($3.0 million) and the sum of the aggregate value of the cash paid ($5.0 million) plus principal amount of new term loans ($27.9 million) plus the estimated fair value of the Company's series A preferred stock issued ($78.4 million).

        During 2004 and 2003, the Company revised its assumptions on certain lease obligations related to the restructuring accrual and as a result, increased the obligation by $0.1 million in 2004 and reduced the obligation by $0.2 million in 2003. Also during 2004, accrued liabilities associated with the discontinued operations were reevaluated, or settled for less than original estimates and as a result, these obligations were adjusted by $0.6 million.

        Assets and liabilities of discontinued operations of Carrier Services as of December 31, 2004 and 2003 follows (dollars in thousands):

		2004			2003
Accounts receivable		$	102		105
	Current assets of discontinued operations	$	102		105
Accrued liabilities		$	(1,141	)	(1,516	)
Restructuring accrual			(1,071	)	(2,682	)
Accrued property taxes			(50	)	(263	)
	Current liabilities of discontinued operations	$	(2,262	)	(4,461	)
Restructuring accrual		$	(1,580	)	(2,571	)
	Long-term liabilities of discontinued operations	$	(1,580	)	(2,571	)

        Selected information relating to the restructuring charge follows:

	Equipment, occupancy, and other lease terminations
Restructuring accrual as of December 31, 2001	$	12,310
Adjustments from initial estimated charges		(1,192	)
Cash payments		(3,936	)
Restructuring accrual as of December 31, 2002		7,182
Adjustments from initial estimated charges		(246	)
Cash payments		(1,683	)
Restructuring accrual as of December 31, 2003		5,253
Adjustments from initial estimated charges		80
Cash payments		(2,682	)
Restructuring accrual as of December 31, 2004	$	2,651

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(b)    Rural Local Exchange Carrier Operations

        On September 30, 2003, the Company completed the sale of all of the capital stock owned by Services of Union Telephone Company of Hartford, Armour Independent Telephone Co., WMW Cable TV Co., and Kadoka Telephone Co. to Golden West Telephone Properties, Inc. (Golden West). The sale was completed in accordance with the terms of the purchase agreement, dated as of May 9, 2003, with Golden West. The Company received $24.2 million in sales proceeds. The South Dakota properties were geographically isolated from other Company properties making it increasingly difficult to realize additional operating efficiencies. These properties were adjacent to Golden West's operations and offered Golden West numerous operational synergies. The proceeds from this divestiture were used to fund acquisitions completed in 2003. The operations of these companies are presented as discontinued operations.

        Income from the South Dakota divestiture operations consists of the following (dollars in thousands):

	Nine months ended September 30, 2003		Year ended December 31, 2002
Revenue	$	4,028	5,299
Income from discontinued operations		1,929	2,433

        The Company recorded a gain on disposal of the South Dakota companies of $7.7 million.

(14)    Related Party Transactions

        The Company has entered into financial advisory agreements with certain equity investors, pursuant to which the equity investors provide certain consulting and advisory services related, but not limited to, equity financings and strategic planning. The Company paid $1.0 million for each of the years ended December 31, 2004, 2003, and 2002 in such fees to the equity investors and this expense is classified within operating expenses. The agreements also provide that the Company will reimburse the equity investors for travel relating to the Company's board of directors meetings. The Company reimbursed the equity investors $123,000, $21,000, and $43,000 for the years ended December 31, 2004, 2003, and 2002, respectively, for travel and related expenses. Per the financial advisory agreements, the advisory and consulting fees to be paid to each of the principal shareholders through December 31, 2006 is $0.5 million per annum. In January 2000, the Company entered into an agreement whereby the Company must obtain consent from its two principal shareholders in order to incur debt in excess of $5.0 million.

        In 2004, a law firm in which a partner of such law firm was a director of the Company through February 8, 2005 was paid $3.5 million, of which $0.1 million was for general counsel services and $3.4 million was for services related to financing and equity offering costs. In 2003, this same law firm was paid $1.3 million, of which $0.4 million was for general counsel services and $0.9 million was for services related to financings. In 2002, this same law firm was paid $0.8 million, of which $0.3 million was for general counsel services, $0.3 million was for services related to the discontinuance of the competitive communications operations, and $0.2 million was for services related to acquisitions.

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        A law firm, in which a partner of such law firm is the husband of an executive officer, was paid $4,000, $127,000, and $21,000 for the years ended December 31, 2004, 2003, and 2002, respectively, for legal services and expenses.

        All payments made by the Company for general counsel services and unsuccessful acquisition bids are classified within operating expenses on the consolidated statements of operations. All payments made for services related to financings have been recorded as debt or equity issue costs. All payments made for services related to successful acquisition bids have been capitalized as direct costs of the acquisitions. All services related to the restructure and discontinuance of the competitive communications operations have been classified in discontinued operations.

        On July 31, 2003, the Company loaned $1.0 million to two employees that are the former owners of Fremont. These loans were settled on January 2, 2005.

(15)    Quarterly Financial Information (Unaudited)

		First quarter			Second quarter		Third quarter		Fourth quarter
		(Dollars in thousands)
2004:
	Revenue	$	60,985		62,416		65,437		63,807
	Loss from continuing operations		(4,608	)	(4,765	)	(4,225	)	(10,755	)
	Net loss		(4,608	)	(4,094	)	(4,225	)	(10,755	)
	Basic and diluted loss from continuing operations per share		(0.49	)	(0.50	)	(0.45	)	(1.13	)
	Basic and diluted loss per share		(0.49	)	(0.43	)	(0.45	)	(1.13	)
2003:
	Revenue	$	55,812		57,285		58,566		59,769
	Income (loss) from continuing operations		668		(1,112	)	(4,209	)	(3,597	)
	Net income (loss)		1,294		(504	)	4,283		(3,402	)
	Basic and diluted loss from continuing operations per share		(0.12	)	(0.56	)	(0.44	)	(0.38	)
	Basic and diluted earnings (loss) per share		(0.05	)	(0.50	)	0.45		(0.36	)

        In the fourth quarter of 2004, the Company recognized a $6.0 million nonoperating loss related to the write-off of debt issuance and offering costs associated with an abandoned offering of income deposit securities.

        In the first quarter of 2003, the Company recognized a $3.5 million nonoperating gain on the extinguishment of the senior subordinated notes and the Carrier Services loans, offset by a loss of $5.0 million for the write-off of debt issue costs related to this extinguishment of debt. In the third quarter of 2003, the Company recognized a gain of $7.7 million on the South Dakota divestiture.

(16)    Disclosures About the Fair Value of Financial Instruments

(a)    Cash, Accounts Receivable, Accounts Payable, and Demand Notes Payable

        The carrying amount approximates fair value because of the short maturity of these instruments.

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(b)    Investments

        Investments classified as available-for-sale and trading are carried at their fair value, which were approximately $0.0 million and $0.6 million, respectively, at December 31, 2004 and $1.9 million and $0.5 million, respectively, at December 31, 2003 (see note 6 and note 9).

        At December 31, 2004, the Company had cost method investments with a carrying value of $30.4 million. The Company did not estimate the fair value of these investments as to do so would involve significant judgment and a value could not be determined with any degree of accuracy.

(c)    Long-term Debt

        The fair value of the Company's publicly registered long-term debt is stated at quoted market prices. The fair value of the Company's remaining long-term debt is estimated by discounting the future cash flows of each instrument at rates currently offered to the Company for similar debt instruments of comparable maturities. At December 31, 2004 and 2003, the Company had long-term debt with a carrying value of $810.4 million and $825.6 million, respectively, and estimated fair values of $865.2 million and $870.7 million, respectively.

(d)    Redeemable preferred stock

        The fair value of the Company's redeemable preferred stock is estimated utilizing a cash flow analysis at a discount rate equal to rates available for debt with terms similar to the preferred stock. At December 31, 2004 and 2003, the Company's carrying value of its redeemable preferred stock was $116.9 million and $96.7 million, respectively, and estimated fair value was $126.8 million and $97.3 million, respectively.

(e)    Limitations

        Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

(17)    Revenue Concentrations

        Revenues for interstate access services are based on reimbursement of costs and an allowed rate of return. A substantial portion of revenues of this nature are received from NECA in the form of monthly settlements. Such revenues amounted to 25.7%, 26.3%, and 26.3% of the Company's total revenues from continuing operations for the years ended December 31, 2004, 2003, and 2002, respectively.

(18)    Revenue Settlements

        Certain of the Company's telephone subsidiaries participate in revenue-sharing arrangements with other telephone companies for interstate revenue-sharing arrangements and for certain intrastate revenue. Such sharing arrangements are funded by toll revenue and/or access charges within state jurisdiction and by access charges in the interstate market. Revenues earned through

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the various sharing arrangements are initially recorded based on the Company's estimates. The Company recognized $3.1 million, $3.0 million, and $3.1 million of revenue for settlements and adjustments related to prior years during 2004, 2003, and 2002, respectively.

(19)    Commitments and Contingencies

(a)    Operating Leases

        Future minimum lease payments under noncancelable operating leases as of December 31, 2004 are as follows (dollars in thousands):

			Continuing operations		Discontinued operations
Year ending December 31:
	2005		$	845		2,446
	2006			825		1,835
	2007			746		1,529
	2008			688		—
	2009			534		—
	Thereafter			589		—
		Total minimum lease payments	$	4,227		5,810
Less estimated rentals to be received under subleases						(3,240	)
		Estimated minimum lease payments included in liabilities of discontinued operations			$	2,570

        Total rent expense from continuing operations was $3.2 million, $3.1 million, and $3.1 million in 2004, 2003, and 2002, respectively.

        The Company does not have any leases with contingent rental payments or any leases with contingency renewal, purchase options, or escalation clauses.

(b)    Legal Proceedings

        From time to time, the Company is involved in litigation and regulatory proceedings arising out of its operations. The Company is not currently a party to any legal proceedings, the adverse outcome of which, individually or in the aggregate, that management believes would have a material adverse effect on the Company's financial position or results of operations.

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ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        Not applicable.

ITEM 9A.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

        Within 90 days prior to the filing date of this Annual Report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures (as defined in rule 15d-14(c) of the Exchange Act).

        Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures (a) are effective to ensure that information required to be disclosed by the Company in this Annual Report has been timely recorded, processed, summarized and reported and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in this Annual Report has been accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

        There have been no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of the Company's evaluation.

ITEM 9B.    OTHER INFORMATION

        Not applicable.

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PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        Our restated certificate of incorporation requires our board of directors to have between five and eleven members. In connection with the offering, we restructured our board of directors and appointed the following three independent directors: Patricia Garrison-Corbin, David L. Hauser, and Claude C. Lilly. One additional independent director will be appointed by our board of directors in accordance with our restated bylaws within one year after the closing of the offering.

        The following table sets forth the names and positions of our current directors and executive officers and their ages.

Name	Age	Position
Eugene B. Johnson	57	Co-Founder, Chairman of the Board of Directors and Chief Executive Officer
Peter G. Nixon	52	Chief Operating Officer
Valeri A. Marks	47	President
Walter E. Leach, Jr.	53	Executive Vice President and Chief Financial Officer
Shirley J. Linn	54	Senior Vice President, General Counsel and Secretary
Lisa R. Hood	39	Senior Vice President and Controller
Timothy W. Henry	49	Vice President of Finance and Treasurer
Frank K. Bynum, Jr.	42	Director
Patricia Garrison-Corbin	57	Director
David L. Hauser	53	Director
Claude C. Lilly	58	Director
Kent R. Weldon	37	Director

        Eugene B. Johnson.    Mr. Johnson has served as our Chairman since January 1, 2003 and as our Chief Executive Officer since January 1, 2002. Prior to his current responsibilities, Mr. Johnson was our Chief Development Officer from May 1993 to December 2002 and Vice Chairman from August 1998 to December 2002. Mr. Johnson is a co-founder and has been a director of our company since 1991. From 1997 to 2002, Mr. Johnson served as a director of the Organization for the Promotion and Advancement of Small Telecommunications Companies the primary industry organization for small independent telephone companies. From 1987 to 1993, Mr. Johnson served as President and principal shareholder of JC&A, Inc., an investment banking and brokerage firm providing services to the cable television, telephone and related industries. From 1985 to 1987, Mr. Johnson served as the director of the mergers and acquisitions department of Cable Investments, Inc., an investment banking firm. Mr. Johnson currently is chairman of Organization for the Promotion and Advancement of Small Telecommunication Companies' Universal Service Fund committee.

        Peter G. Nixon.    Mr. Nixon has served as our Chief Operating Officer since November 2002. Previously, Mr. Nixon was our Senior Vice President of Corporate Development from February 2002 to November 2002 and President of our Telecom Group from April 2001 to February 2002. Prior to this, Mr. Nixon served as President of our Eastern Region Telecom Group from June 1999 to April 2001

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and President of Chautauqua & Erie Telephone Corporation, or C&E, from July 1997, when we acquired C&E, to June 1999. From April 1, 1989 to June 1997, Mr. Nixon served as Executive Vice President of C&E. From April 1, 1978 to March 31, 1989, Mr. Nixon served as Vice President of Operations for C&E. Mr. Nixon has served as the past Chairman of the New York State Telephone Association, in addition to his involvement in several community and regional organizations.

        Valeri A. Marks.    In October 2004, Ms. Marks was appointed our President. From 2001 to 2003, Ms. Marks served as Chairman and Chief Executive Officer of Sockeye Networks (which was acquired by Internap Network Services Corporation). From 2000 to 2001, Ms. Marks served as President and Chief Executive Officer of Digital Broadband Communications, Inc. and from 1999 to 2000, she served as President and Chief Executive Officer of the Internet division of SBC Communications, Inc. Ms. Marks is a director of Amerivault, an online data back-up and recovery company.

        Walter E. Leach, Jr.    In July 2004, Mr. Leach was appointed our Executive Vice President and Chief Financial Officer. Mr. Leach has served as our Chief Financial Officer since October 1994 and has served as our Senior Vice President from February 1998 to July 2004. From October 1994 to December 2000, Mr. Leach was our Secretary. From 1984 through September 1994, Mr. Leach served as Executive Vice President of Independent Hydro Developers, where he had responsibility for all project acquisition, financing and development activities.

        Shirley J. Linn.    In September 2004, Ms. Linn was appointed our Senior Vice President, General Counsel and Secretary. Ms. Linn has served as our General Counsel since October 2000, our Vice President since October 2000 and our Secretary since December 2000. Prior to joining us, Ms. Linn was a partner, from 1984 to 2000, in the Charlotte, North Carolina law firm of Underwood Kinsey Warren & Tucker, P.A., where she specialized in general business matters, particularly mergers and acquisitions.

        Lisa R. Hood.    In July 2004, Ms. Hood was appointed our Senior Vice President and Controller. Ms. Hood has served as our Controller since December 1993 and served as our Vice President from December 1993 to July 2004. Prior to joining our company, Ms. Hood served as manager of a local public accounting firm in Kansas. Ms. Hood is certified as a public accountant in Kansas.

        Timothy W. Henry.    Mr. Henry has served as our Vice President of Finance and Treasurer since December 1997. From 1992 to December 1997, Mr. Henry served as Vice President/Portfolio Manager at CoBank, ACB, and managed a $225 million communications loan portfolio, which included responsibility for CoBank's relationship with us.

        Frank K. Bynum, Jr.    Mr. Bynum has served as a director of our company since July 1997. He is also a Managing Director of Kelso & Company. Mr. Bynum joined Kelso & Company in 1987 and has held positions of increasing responsibility at Kelso & Company prior to becoming a Managing Director. Mr. Bynum is a director of Cambridge Display Technology, Inc., Citation Corporation, Endurance Business Media, Inc. and eMarkets, Inc. He is also a Trustee of Prep for Prep and a member of the Board of Trustees of the College Foundation of the University of Virginia. Mr. Bynum has been designated to the board of directors by Kelso Investment Associates V, L.P., or Kelso Investment Associates, and Kelso Equity Partners V, L.P., or Kelso Equity Partners, pursuant to their designation rights under our nominating agreement.

        Patricia Garrison-Corbin.    Ms. Corbin has served as a director of our company since February 2005. She has served as President of P.G. Corbin & Company, Inc., Financial Advisory Services, Municipal Finance, since 1986. Ms. Corbin has also served as President and Chief Information Officer of P.G. Corbin Asset Management, Inc., Fixed Income Investment Management, since 1987. Ms. Corbin has served as Chairman of the Board of Directors of Delancey Capital Group, LP, Equity Investment Management since 1996, and Chairman of the Board of Directors of P.G. Corbin

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Group, Inc., Investment and Financial Advisory Services since 1996. Ms. Corbin has also served as a director for the Erie Insurance Company since 1999.

        David L. Hauser.    Mr. Hauser has served as a director of our company since February 2005. He is currently the CFO and Group Vice President of Duke Energy Corp., where he has been employed for 30 years. Mr. Hauser is a certified public accountant and a certified purchasing manager. He is a board member of the Blumenthal Performing Arts Center and is a member of the planning board of the Business Advisory Council for the University of North Carolina at Charlotte, the planning committee for the Motorsports Testing and Research Complex Project, the North Carolina Association of Certified Public Accountants and the American Institute of Certified Public Accountants.

        Claude C. Lilly.    Dr. Lilly has served as a director of our company since February 2005. Dr. Lilly is currently dean and James J. Harris Chair of Risk Management and Insurance in The Belk College of Business Administration at The University of North Carolina at Charlotte. Dr. Lilly has served as Assistant Deputy Insurance Commissioner for the State of Georgia and as a director of several corporations. Mr. Lilly currently serves as a director of Erie Insurance Company. He holds the Chartered Property Casualty Underwriters and Chartered Life Underwriter designations and is a member of numerous professional associations.

        Kent R. Weldon.    Mr. Weldon has served as a director of our company since January 2000. He is currently a Managing Director of Thomas H. Lee Partners, L.P. Mr. Weldon worked at the firm from 1991 to 1993 and rejoined it in 1995. Prior to 1991, Mr. Weldon worked at Morgan Stanley & Co. Incorporated in the Corporate Finance Department. Mr. Weldon is a director of Michael Foods, Inc., Nortek, Inc. and Syratech Corporation. Mr. Weldon has been designated to the board of directors by Thomas H. Lee Equity Fund IV, L.P., which we refer to as THL Equity Fund, pursuant to its designation rights under our nominating agreement.

        Pursuant to our restated certificate of incorporation, our board of directors is divided into three classes. The members of each class, other than the members initially serving as Class I directors or Class II directors, will serve for a staggered three-year term. Upon the expiration of the term of a class of directors, directors in that class will be elected for a three-year term at the annual meeting of stockholders in the year in which their term expires. The classes are comprised as follows:

•

Class I directors. Eugene B. Johnson and Patricia Garrison-Corbin are Class I directors whose terms will expire at the first annual meeting of stockholders held after the closing of the offering;



•

Class II directors. Frank K. Bynum, Jr. and David L. Hauser are Class II directors whose terms will expire at the second annual meeting of stockholders held after the closing of the offering; and



•

Class III directors. Kent R. Weldon and Claude C. Lilly are Class III directors whose terms will expire at the third annual meeting of stockholders held after the closing of the offering.

        Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of our directors. This classification of our board of directors may have the effect of delaying or preventing changes in control of the company.

        In connection with the offering, we entered into a nominating agreement with THL Equity Fund, Kelso Investment Associates and Kelso Equity Partners pursuant to which we, acting through our corporate governance committee, agreed, subject to the requirements of our directors' fiduciary duties, that (i) THL Equity Fund will be entitled to designate one Class III director to be nominated for election to our board of directors and Kelso Investment Associates and Kelso Equity Partners will be entitled to designate one Class II director to be nominated for election to our board of directors as

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long as THL Equity Fund and its affiliates, Kelso Investment Associates and Kelso Equity Partners own in the aggregate at least 40% of the shares of our common stock which they owned immediately prior to the closing of the offering or (ii) THL Equity Fund will be entitled to designate one Class III director to be nominated for election to our board of directors as long as THL Equity Fund and its affiliates, Kelso Investment Associates and Kelso Equity Partners own in the aggregate less than 40% and at least 20% of the shares of our common stock which they owned immediately prior to the closing of the offering. In addition, at any time after Kelso Investment Associates and Kelso Equity Partners no longer own any of our common stock, as long as THL Equity Fund and its affiliates own at least 40% of the shares of our common stock which THL Equity Fund and its affiliates, Kelso Investment Associates and Kelso Equity Partners owned immediately prior to the closing of the offering, THL Equity Fund will be entitled to designate one Class II director to be nominated for election to our board of directors in addition to its right to designate one Class III director to be nominated for election to our board of directors.

Committees of the Board of Directors

        Our board of directors has standing audit, compensation and corporate governance committees.

Audit Committee

        Our audit committee consists of Claude C. Lilly and David L. Hauser. Claude C. Lilly is the chair of the audit committee and David L. Hauser is the audit committee financial expert serving on the audit committee for purposes of the Exchange Act. One additional independent director will be appointed to the audit committee within one year of the closing of the offering. Among other functions, the principal duties and responsibilities of our audit committee are to:

•

have direct responsibility for the selection, compensation, retention and oversight of the work of our independent auditors;



•

set clear hiring policies for employees or former employees of the independent auditors;



•

review, at least annually, the results and scope of the audit and other services provided by our independent auditors and discuss any audit problems or difficulties and management's response;



•

review our annual audited financial statement and quarterly financial statements and discuss the statements with management and the independent auditors (including our disclosure in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations");



•

review and evaluate our internal control functions;



•

review our compliance with legal and regulatory independence;



•

review and discuss our earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies;



•

review and discuss our risk assessment and risk management policies;



•

prepare an audit committee report required by the Securities and Exchange Commission to be included in our annual proxy statement; and



•

establish procedures regarding complaints received by us or our employees regarding accounting, accounting controls or accounting matters.

        The audit committee is required to report regularly to our board of directors to discuss any issues that arise with respect to the quality or integrity of our financial statements, our compliance with legal or regulatory requirements, the performance and independence of our independent auditors, or the performance of the internal audit function.

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Compensation Committee

        Our compensation committee consists of David L. Hauser, Patricia Garrison-Corbin and Kent R. Weldon. David L. Hauser is the chair of the compensation committee. Among other functions, the principal duties and responsibilities of our compensation committee are to:

•

review and approve corporate goals and objectives relevant to our Chief Executive Officer's and other named executive officers' compensation;



•

evaluate our Chief Executive Officer's and our other named executive officers' performance in light of their goals and objectives;



•

either as a committee, or together with the other independent directors, determine and approve the Chief Executive Officer's and our other named executive officers' compensation;



•

make recommendations to our board of directors regarding the salaries, incentive compensation plans and equity-based plans for our employees; and



•

produce a compensation committee report on executive compensation as required by the Securities and Exchange Commission to be included in our annual proxy statement or annual report on Form 10-K filed with the Securities and Exchange Commission.

Compensation Committee Interlocks and Insider Participation

        For the fiscal year ended December 31, 2004, our compensation committee consisted of Anthony J. DiNovi and George E. Matelich. Mr. DiNovi and Mr. Matelich resigned from our board of directors in connection with the offering. None of our executive officers has served as a member of the compensation committee (or other committee serving an equivalent function) of any other entity, whose executive officers served as a director of our company or member of our compensation committee.

Corporate Governance Committee

        Our corporate governance committee consists of Patricia Garrison-Corbin, Claude C. Lilly and Frank K. Bynum, Jr. Patricia Garrison-Corbin is the chair of the corporate governance committee. Among other functions, the principal duties and responsibilities of our corporate governance committee are to:

•

identify candidates qualified to become board members, consistent with criteria approved by the board;



•

recommend the candidates identified be selected as nominees for the next annual meeting of shareholders;



•

develop and recommend to the board a set of corporate governance principles applicable to the corporation; and



•

oversee the evaluation of the board and management.

Codes of Ethics

        The Company has adopted a Code of Business Conduct and Ethics, which we refer to as the Code of Conduct, to help the Company achieve the highest business and personal ethical standards as well as compliance with the laws and regulations that apply to the business. The Code of Conduct sets forth basic guiding principles and standards of conduct for all employees, directors and officers of the Company and its subsidiaries and controlled affiliates.

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        The Company has adopted a Code of Ethics for Financial Professionals, which we refer to as the Code for Financial Professionals, as required by the Securities and Exchange Commission under Section 406 of the Sarbanes-Oxley Act. The Code for Financial Professionals sets forth written standards that are designed to deter wrongdoing and to promote honest and ethical conduct by the Company's senior financial officers, including its Chief Executive Officer, and is a supplement to the Company's Code of Conduct. In addition to applying to the Company's Chief Executive Officer, Chief Financial Officer, Vice President of Finance and Treasurer, Controller and regional controllers, this Code for Financial Professionals applies to all of the other persons employed by the Company who have significant responsibility for preparing or overseeing the preparation of the Company's financial statements and the other financial data included in the Company's periodic reports to the Securities and Exchange Commission and in other public communications made by the Company that are designated from time to time by the Chief Financial Officer as senior financial professionals.

        Copies of the Code of Conduct and the Code for Financial Professionals are available on our web site, www.fairpoint.com, and are also filed as exhibits to this Annual Report.

ITEM 11.    EXECUTIVE COMPENSATION

        The following table sets forth information concerning compensation paid to our Chief Executive Officer and our other four most highly compensated executive officers serving as executive officers at the end of fiscal year 2004 (and an additional executive officer who was no longer serving as an executive officer at the end of fiscal year 2004) in the years indicated.

Summary Compensation Table

								Long-term Compensation Awards
		Annual Compensation						Awards of Restricted Stock Units	Number of Securities Underlying Options/SARs
Name and Principal Position						Other Annual Compensation(2)				All Other Compensation(3)
	Year	Salary		Bonus(1)
Eugene B. Johnson     Chairman and Chief Executive Officer	2004 2003 2002	$	350,000 341,923 256,500	$	178,500 166,450 69,543	$	43,372 45,353 46,093	— — —	— — 67,863	$	17,249 13,252 11,038
Peter G. Nixon.     Chief Operating Officer	2004 2003 2002	$	209,692 198,789 155,000	$	78,750 95,200 47,024	$	4,360 — —	— 5,947 —	— 23,786 8,419	$	10,115 9,690 9,690
Walter E. Leach, Jr.     Executive Vice President     and Chief Financial Officer	2004 2003 2002	$	204,846 199,219 171,074	$	153,750 95,200 45,752	$	33,895 36,130 20,077	— 4,738 —	— — 77,364	$	10,727 11,661 9,822
John P. Duda     President(4)	2004 2003 2002	$	202,085 189,000 189,081	$	50,000 61,625 50,568	$	22,921 31,127 37,431	— — —	— — 54,125	$	7,719 10,435 10,435
Shirley J. Linn     Senior Vice President,     General Counsel and     Secretary	2004 2003 2002	$	193,846 188,758 180,000	$	116,400 76,700 40,157		— — —	— 3,553 —	— 14,212 9,209	$	9,622 11,379 9,898
Lisa R. Hood     Senior Vice President     and Controller	2004 2003 2002	$	137,069 120,595 114,942	$	60,000 30,388 19,208	$	4,267 3,772 3,648	— 1,659 —	— 6,633 8,791	$	6,724 7,132 6,372

(1)

For the year ended December 31, 2004, represents bonuses which were earned during 2004 and paid in February 2005.

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(2)

Reflects the value of certain benefits provided pursuant to employment arrangements.

(3)

Reflects matching contributions made under our 401(k) plan and the value of group term life insurance coverage.

(4)

Mr. Duda served as our President from April 2001 until September 2004. Mr. Duda's employment with us ended effective as of September 30, 2004.

1995 Stock Option Plan

        The FairPoint Communications Inc. (formerly MJD Communications, Inc.) 1995 Stock Option Plan, which we refer to as the 1995 plan, was adopted in February 1995. The 1995 plan provides for the grant of options to purchase up to an aggregate of 215,410 shares of our common stock. The 1995 plan is administered by our compensation committee, which has made discretionary grants of options to our officers, directors and employees. As of December 31, 2004, a total of 112,265 options to purchase shares of our common stock were outstanding under the 1995 plan. Such options all have an exercise price equal to $1.32 per share, and are vested and exercisable.

        The options outstanding under the 1995 plan are vested and exercisable and may be exercised in accordance with the terms of the 1995 plan.

1998 Stock Incentive Plan

        The FairPoint Communications, Inc. (formerly MJD Communications, Inc.) Stock Incentive Plan, which we refer to as the 1998 plan, was adopted in August 1998. The 1998 plan provides for grants to members of management of up to 1,317,425 nonqualified options to purchase our common stock, at the discretion of the compensation committee. As of December 31, 2004, a total of 836,356 options to purchase shares of our common stock were outstanding under the 1998 plan. 756,332 of these options have an exercise price equal to $9.02 per share and are vested, 29,183 have an exercise price equal to $14.46 per share and are vested, 3,468 have an exercise price equal to $17.31 per share and are vested and exercisable and 47,373 of these options have an exercise price equal to $36.94 per share and are vested.

        While all of the options granted under the 1998 plan are vested, these options generally will only become exercisable if there is an exit event (as defined in the 1998 plan) and certain specified thresholds are met. An exit event will occur if (i) Kelso Investment Associates V, L.P. and Kelso Equity Partners V, L.P. sell all of the shares of common stock they own to one or more third parties or (ii) all or substantially all of our assets are sold. Upon an exit event, options granted under the 1998 plan will become exercisable only if Kelso Investment Associates V, L.P. and Kelso Equity Partners V, L.P. receive a certain internal rate of return, compounded annually, and determined after giving effect to any exercisable options granted under any of our equity incentive plans. The number of options, if any, that become exercisable upon such an exit event will be based on the price per share of common stock received in the transaction, with the percentage of each option grant becoming exercisable increasing as the price per share increases. Any options that do not become exercisable in connection with an exit event will be cancelled in connection with the exit event.

2000 Employee Stock Incentive Plan

        The FairPoint Communications, Inc. 2000 Employee Stock Incentive Plan, which we refer to as the 2000 plan, was adopted in May 2000. The 2000 plan provides for grants to members of our management and other key employees of up to 1,898,521 options to purchase shares of our common stock, at the discretion of the compensation committee. During 2002, the Company amended the 2000 plan to limit the number of shares available for grant to 448,236. As of December 31, 2004, 240,638 options to purchase shares of our common stock were outstanding under the 2000 plan. Such options have an exercise price of $36.94 per share.

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        Options granted under the 2000 plan generally become vested based upon the participant's completion of a minimum period of continued employment with us, with 10% of each option grant becoming vested on the first anniversary of grant, 15% of each option grant becoming vested on the second anniversary of grant and 25% of each option grant becoming vested on each of the third, fourth and fifth anniversaries of grant. Unless otherwise determined by our compensation committee, any options that are not vested upon a participant's termination of employment will be cancelled.

        Any options outstanding under the 2000 plan that are vested and exercisable may continue to be exercised in accordance with the terms of the 2000 plan. Any unvested options under the 2000 plan will continue to become vested and exercisable in accordance with the terms of the 2000 plan.

        In December 2003, we amended the 2000 plan to allow for the grant to members of our management of restricted stock units in addition to stock options. As a result, the 2000 plan provides for the grant to members of management of up to 1,898,521 shares of our common stock represented by restricted stock units and/or options to purchase our common stock, at the discretion of the compensation committee. As of December 31, 2004, 26,442 restricted stock units were outstanding.

        Restricted stock units granted under the 2000 plan generally become vested based upon the participant's completion of a minimum period of continued employment with us, with 33¹/3% of each grant becoming vested on each of the third, fourth and fifth anniversaries of grant. Unless otherwise determined by our compensation committee, if the participant's employment terminates because of the participant's death, disability (as defined in the 2000 plan) or retirement (as defined in the 2000 plan), all of the participant's restricted stock units will become immediately vested. If the participant's employment terminates for any other reason, all unvested restricted stock units will be forfeited and cancelled.

        All of the restricted stock units granted under the 2000 plan are currently unvested. These restricted stock units will continue to become vested in accordance with the terms of the 2000 plan.

        The 2000 plan contains a change in control provision that, if triggered, will potentially accelerate the vesting of options and restricted stock units granted under the 2000 plan. In the event of a change in control (as defined in the 2000 plan), each outstanding option will be canceled in exchange for a payment in cash equal to the product of (i) the excess of the change in control price over the option exercise price and (ii) the number of shares of common stock covered by such stock option. All restricted stock units granted under the 2000 plan will become vested and shall be immediately deliverable. Notwithstanding the foregoing, if the compensation committee determines before the change in control either that all outstanding awards will be honored or assumed by the acquirer, or alternative awards with equal or better terms will be made available, such outstanding awards will not be canceled, their vesting and exercisability will not be accelerated, and there will be no payment in exchange for such awards. Any alternative awards offered must generally:

•

have rights and entitlements (such as vesting, exercisability and payment) that are substantially equivalent to or better than the rights and entitlements of the awards related to our stock;



•

have substantially equivalent economic value, at the time of the change in control, to the awards in respect of our stock; and



•

provide that, upon the involuntary termination or constructive termination, of the participant's employment, the awards will be deemed vested or exercisable and any restrictions on transfer shall lapse, as the case may be.

2005 Stock Incentive Plan

        The FairPoint Communications, Inc. 2005 Stock Incentive Plan, which we refer to as the 2005 stock incentive plan, was adopted in February 2005. The 2005 stock incentive plan provides for the

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award to eligible participants of (i) restricted stock and restricted units; (ii) stock options, including incentive stock options (within the meaning of Section 422 of the Internal Revenue Code); (iii) stock appreciation rights; (iv) incentive stock and incentive units; and/or (v) deferred shares and supplemental units.

        A total of 947,441 shares of our common stock are available for award under the 2005 stock incentive plan. The maximum number of shares with respect to which options or stock appreciation rights may be granted to any one participant in any calendar year is 500,000. The maximum number of shares that may be issued under the plan through tax-qualified incentive stock options is 947,441. Shares subject to awards that are forfeited, canceled or otherwise terminated without the issuance of our common stock under the 2005 stock incentive plan will again be available for future awards under the 2005 stock incentive plan. If we undergo a stock dividend, stock split, share combination, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares or other similar event affecting our common stock, our compensation committee will equitably adjust the number and kind of shares that are available under the 2005 stock incentive plan and that are subject to outstanding options or other awards. Unless our compensation committee determines otherwise, participants will not be entitled to dividends or dividend equivalents with respect to unvested restricted stock awards. Awards may be made to any of our current or prospective directors, officers, employees or consultants. The number of individuals participating in the 2005 stock incentive plan will vary from year to year.

        On February 15, 2005, we awarded 473,716 shares of restricted stock in the aggregate to nine of our employees.

        Our compensation committee will determine the terms for vesting of awards, which may include vesting based on a period of continuous employment, or vesting based on the attainment of one or more of the performance criteria specified in the 2005 stock incentive plan. The shares of restricted stock awarded on the closing date of the offering will generally become vested in four equal annual installments commencing on April 1, 2006 (three equal annual installments for our chief executive officer) and will not be entitled to receive dividends for any period prior to April 1, 2006.

        A participant's termination of employment will have the important consequences described below on outstanding awards under the 2005 stock incentive plan, unless our compensation committee determines otherwise at or after the date of grant. Participants will become vested in a pro-rata portion (based on the number of days employed during the vesting period) of any outstanding restricted stock and restricted units if their employment terminates because of their disability (as defined in the 2005 stock incentive plan), normal retirement (as defined in the 2005 stock incentive plan) or early retirement with the consent of our compensation committee, and will vest in full in the event of death (these terminations are referred to as qualifying terminations). If a participant's employment is terminated for any reason other than a qualifying termination, outstanding unvested restricted stock and restricted units will be forfeited and cancelled unless our compensation committee determines otherwise (or, in the case of our chief executive officer, if he fails to comply with applicable post-employment non-competition restrictions).

        Participants will become vested in any outstanding stock options and stock appreciation rights if their employment terminates as a result of a qualifying termination, and will forfeit any unvested stock options and stock appreciation rights if their employment terminates for any reason other than a qualifying termination. Participants will become vested in a pro-rata portion (based on the number of days employed during the performance period) of any outstanding incentive stock and incentive units that are actually earned based on our performance if their employment terminates as a result of a qualifying termination (with full vesting in the event of death), and will forfeit any outstanding unvested incentive stock and incentive units if their employment terminates for any reason other than a qualifying termination.

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        In the event of a change in control (as defined in the 2005 stock incentive plan), all awards other than stock options and stock appreciation rights granted under the 2005 stock incentive plan will become vested and shall be immediately transferable or payable. All outstanding stock options and stock appreciation rights shall, at the discretion of the compensation committee, become fully exercisable or be canceled in exchange for a payment in cash equal to the product of (i) the excess of the change in control price over the option exercise price or stock appreciation right base price, as applicable, and (ii) the number of shares of common stock covered by such stock option or stock appreciation right. Notwithstanding the foregoing, if the compensation committee determines before the change in control either that all outstanding awards will be honored or assumed by the acquirer, or alternative awards with equal or better terms will be made available, such outstanding awards will not be canceled, their vesting and exercisability will not be accelerated, and there will be no payment in exchange for such awards. Any alternative awards offered must generally:

•

be based on stock that is traded on an established securities market, or that will be so traded within 60 days of the change in control;



•

have rights and entitlements (such as vesting, exercisability and payment) that are substantially equivalent to or better than the rights and entitlements of the awards related to our stock;



•

have substantially equivalent economic value, at the time of the change in control, to the awards in respect of our stock; and



•

provide that, upon the involuntary termination or constructive termination of the participant's employment (including a relocation of the participant's principal place of work to a location more than 50 miles from the pre-change in control location), the awards will be deemed vested or exercisable and any restrictions on transfer shall lapse, as the case may be.

        Awards under the 2005 stock incentive plan will generally not be assignable or transferable other than by will or by the laws of descent and distribution, except that the compensation committee may permit certain transfers to the participant's family members or to certain entities controlled by the participant or his or her family members.

        The 2005 stock incentive plan will expire on the day prior to the first meeting of our stockholders in 2009 at which directors will be elected. However, the board of directors or our compensation committee may at any time, and from time to time, amend, modify or terminate the 2005 stock incentive plan. The expiration of the term of the 2005 stock incentive plan, or any amendment, suspension or termination, will not adversely affect any outstanding award held by a participant without the consent of the participant. However, our compensation committee may, in its absolute discretion, alter or amend any of the provisions of the 2005 stock incentive plan if such alteration or amendment would be required to comply with Section 409A of the Internal Revenue Code or any regulations promulgated thereunder.

        The following table sets forth the awards of restricted stock under our 2005 stock incentive plan which were granted to the executive officers named in our management table on February 15, 2005:

Name	Number of Shares of Common Stock Underlying Awards Under our 2005 Stock Incentive Plan
Eugene B. Johnson	189,488
Peter G. Nixon	56,846
Valeri A. Marks	44,213
Walter E. Leach, Jr.	94,744
Shirley J. Linn	44,213
Lisa R. Hood	18,948
Timothy W. Henry	9,474

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Annual Incentive Plan

        In February 2005, the Company adopted the FairPoint Communications, Inc. Annual Incentive Plan, or the annual incentive plan, that provides for the award of incentive bonuses to our named executive officers and certain of our other officers and employees. Each year our compensation committee will establish target incentive bonuses for participants in the annual incentive plan and will select the eligible participants and performance criteria for that year for a participant or group of participants.

        The actual bonus payable to a participant, which may equal, exceed or be less than the target bonus, will be determined based on whether the applicable performance targets are met, exceeded or not met. Performance targets may be based on one or more of the following criteria: (i) revenue growth; (ii) earnings before interest, taxes, depreciation and amortization; (iii) operating income; (iv) pre- or after-tax income; (v) cash flow; (vi) cash flow per share; (vii) net earnings; (viii) earnings per share; (ix) return on equity; (x) return on invested capital; (xi) return on assets; (xii) economic value added (or an equivalent metric); (xiii) share price performance; (xiv) total shareholder return; (xv) improvement in or attainment of expense levels; (xvi) improvement in or attainment of working capital levels; (xvii) debt reduction; or (xviii) any other criteria our compensation committee in its sole discretion deems appropriate. The maximum bonus payable to a participant in any plan year is $1,000,000.

        Bonuses will generally be payable as soon as practicable after our compensation committee certifies that the applicable performance criteria have been obtained, and will generally be payable only if the participant remains employed with us through the end of the plan year, subject to the discretion of our compensation committee to allow payment after a participant's termination of employment.

        If a participant in the plan dies, becomes disabled or retires prior to the end of any plan year, our compensation committee may award to the participant (or his or her estate or legal representative) a partial bonus as it determines appropriate based on the portion of the year the participant worked. In addition, our compensation committee may require that a portion of a participant's annual incentive bonus be payable in shares of common stock, options or other stock-based awards granted under our 2005 stock incentive plan described above, which awards may also be subject to additional vesting or other restrictions determined by our compensation committee.

        The annual incentive plan will be administered by our compensation committee, which may delegate its authority except to the extent that it relates to the compensation of our named executive officers or any other individual whose compensation the board of directors or the compensation committee reasonably believes may become subject to Section 162(m) of the Internal Revenue Code. The annual incentive plan will expire one day prior to the date of the first meeting of our stockholders in 2009 at which directors will be elected. However, our compensation committee may at any time amend, suspend, discontinue or terminate the annual incentive plan, provided that any such amendment, suspension, discontinuance or termination does not adversely affect participants' rights without their consent. The determination of our compensation committee on all matters relating to the annual incentive plan will be final and binding on us, participants and all other interested parties.

        Section 162(m) of the Internal Revenue Code generally limits the ability of a public corporation to deduct compensation greater than $1,000,000 paid with respect to a particular year to an individual who is, on the last day of that year, the corporation's chief executive officer or one of its four other most highly compensated executive officers, other than compensation that is "performance based" within the meaning of Section 162(m). Under a special rule that applies to corporations that become public through an initial public offering, this limitation generally will not apply to compensation that is paid pursuant to the plans described above before the first meeting of our stockholders in 2009 at which directors will be elected.

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Option/SAR Grants in Last Fiscal Year

        There were no options or SARs granted during fiscal year 2004.

Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year End Option/SAR Values

        The following table sets forth the information with respect to the named executive officers set forth in the Summary Compensation Table concerning the exercise of options during fiscal year 2004, the number of securities underlying options as of December 31, 2004 and the year-end value of all unexercised in-the-money options held by such individuals.

Name	Shares Acquired on Exercise (#)	Value Realized ($)	Numbers of Securities Underlying Unexercised Options/SARs At Fiscal Year End (#) Exercisable/Unexercisable	Value of Unexercised In The Money Options/SARs at Fiscal Year End ($) Exercisable/Unexercisable(1)
Eugene B. Johnson	0	0	55,767/278,934	$694,055/$2,146,642
Peter G. Nixon	0	0	6,423/50,678	— /$279,347
Walter E. Leach, Jr.	0	0	58,023/139,553	— /$1,379,410
John P. Duda(2)	0	0	18,013/77,691	$309,463/$933,574
Shirley J. Linn	0	0	7,116/19,858	— /$65,731
Lisa R. Hood	0	0	3,831/35,991	— /$254,456

(1)

Represents the difference between the exercise price and $18.50 per share of our common stock (the price to the public in the offering).

(2)

Mr. Duda's employment with the Company ended effective as of September 30, 2004.

Director Compensation

        During fiscal 2004, we provided Daniel G. Bergstein, a director of the Company during fiscal 2004, and his immediate family with certain medical benefits and provided Mr. Bergstein with a leased automobile as compensation for his services as a director. For fiscal 2005, our non-employee directors will receive an annual fee of $45,000 for serving as directors and an annual fee of $5,000 for serving as the chair of our compensation committee or corporate governance committee and an annual fee of $10,000 for serving as the chair of our audit committee.

Compensation Committee Policies

        Our compensation committee, as chartered by our board of directors, annually evaluates the performance of Eugene B. Johnson as our Chairman of the Board and Chief Executive Officer and reports the results of its evaluation to our board of directors. The evaluation is based principally upon objective criteria, including business performance, accomplishment of strategic and financial objectives, development of management and other matters relevant to our short-term and long-term success and the maximization of shareholder return. The results of the compensation committee's evaluation are communicated to Mr. Johnson and are considered by the committee in its deliberations with respect to Mr. Johnson's compensation. All determinations regarding Mr. Johnson's compensation are made by the compensation committee and thereupon reported to our board of directors. The compensation committee similarly determines the compensation of the Company's other executive officers, after discussions with Mr. Johnson, taking into account such executives' annual goals and performance.

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Employment Agreements

Eugene B. Johnson

        In December 2002, we entered into an employment agreement with Mr. Johnson, pursuant to which we named Mr. Johnson Chief Executive Officer of the Company and/or Chairman of the Company's Board of Directors from December 31, 2002 to December 31, 2006. The employment agreement provides that Mr. Johnson will receive an annual base salary of $350,000 and an annual discretionary bonus, and Mr. Johnson shall be entitled to participate in all incentive, savings, stock option and retirement plans, practices, policies and programs applicable generally to other senior management. The employment agreement also provides that upon (i) the expiration of Mr. Johnson's employment period, or (ii) the termination of Mr. Johnson's employment as Chief Executive Officer without cause, Mr. Johnson is entitled to receive certain benefits. These benefits include continued medical coverage for Mr. Johnson and his wife until each has reached age 65, the accelerated vesting of all options granted to Mr. Johnson under the Company's 1998 plan and 2000 plan and extension of Mr. Johnson's right to exercise all of his vested options under the 1995 plan and the 2000 plan within certain time periods. If we terminate Mr. Johnson for cause or he voluntarily resigns he is not entitled to any benefits under the employment agreement. If Mr. Johnson's employment is terminated without cause during the term of his employment agreement he is entitled to receive payment of his salary as of the termination event for two years, subject to suspension for a breach of Mr. Johnson's covenant not to compete with us. Upon the expiration of the term of Mr. Johnson's employment agreement at December 31, 2006, unless extended, he is entitled to receive payment of his salary as of such expiration date for one year thereafter, subject to suspension for a breach of Mr. Johnson's covenant not to compete with us. The employment agreement supersedes and terminates all prior employment agreements and severance arrangements between Mr. Johnson and us.

        In October 2004, we entered into a letter agreement with Mr. Johnson pursuant to which we extended his right to exercise the options granted to him under the 1995 plan until May 21, 2008, subject to the terms of the 1995 plan. In addition, Mr. Johnson agreed that in connection with any public offering of equity securities by us prior to May 21, 2008, Mr. Johnson will be offered the same rights and will be subject to the same obligations in connection with any such offering as our executive officers then in office.

Walter E. Leach

        In January 2000, we entered into an employment agreement with Walter E. Leach, Jr., which agreement expired on December 31, 2003. In December 2003, we entered into a letter agreement with Mr. Leach, supplementing and modifying his employment agreement. The letter agreement provides that following the expiration of his employment agreement, Mr. Leach shall continue as an employee at will. During this period, Mr. Leach is entitled to receive certain benefits. The letter agreement also provides that upon termination of Mr. Leach's employment by us without cause (including upon a change of control), Mr. Leach is entitled to receive from us in a lump sum payment an amount equal to his base salary as of the date of termination for a period of twelve months, plus all accrued and unpaid base salary and benefits as of the date of termination. In addition, Mr. Leach is also entitled to receive continued long term disability, term life insurance and medical benefits following his termination for twelve months following such date of termination.

Peter G. Nixon, Valeri A. Marks and Shirley J. Linn

        In November 2002, we entered into a letter agreement with each of Mr. Nixon and Ms. Linn, and in October 2004, we entered into a letter agreement with Ms. Marks. The letter agreements provide that upon the termination of each person's respective employment with us without cause, each person is entitled to receive from us in a lump sum payment an amount equal to twelve months of such executive's base salary as of the date of termination, plus the continuation of certain benefits, including medical benefits, for twelve months.

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John P. Duda

        In October 2004, we entered into an agreement with Mr. Duda. The agreement provides that Mr. Duda's last day of employment with us was September 30, 2004 and that we will provide Mr. Duda with certain benefits, including a separation payment equivalent to fifty-two weeks of base salary, medical and disability benefits through September 30, 2005 and eligibility for a discretionary bonus and any discretionary 401(k) corporate performance awards for the year ended December 31, 2004 on a pro rata basis. In addition, the letter agreement provides that (i) Mr. Duda's right to exercise the options granted to him under the 1995 plan will be extended until May 21, 2008, subject to the terms of the 1995 plan, (ii) the options granted to him under the 1998 plan will remain in effect pursuant to the agreements governing such options, (iii) the vested options granted to him under the 2000 plan will terminate unless exercised within 60 days of his last day of employment and any unvested options thereunder will terminate on his last day of employment and (iv) in connection with any public offering of equity securities by us prior to May 21, 2008, Mr. Duda will be offered the same rights and will be subject to the same obligations in connection with any such offering as our executive officers then in office.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

        The following table sets forth information regarding beneficial ownership of our common stock as of February 28, 2005 for (i) each executive officer named in the "Summary Compensation Table", (ii) each director, (iii) all executive officers and directors as a group and (iv) each person who beneficially owns 5% or more of the outstanding shares of our common stock.

        The amounts and percentages of common stock beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission governing the determination of beneficial ownership of securities. Under the rules of the Securities and Exchange Commission, a person is deemed to be a "beneficial owner" of a security if that person has or shares "voting power," which includes the power to vote or to direct the voting of such security, or "investment power," which includes the power to dispose of or direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. All persons listed have sole voting and investment power with respect to their shares unless otherwise indicated.

	Shares Beneficially Owned(1)
	Number	%
Executive Officers and Directors:
Eugene B. Johnson(2)	137,712	0.4	%
Peter G. Nixon(3)	10,270	*
Walter E. Leach, Jr.(4)	77,364	0.2	%
John P. Duda(5)	18,013	*
Shirley J. Linn(6)	7,722	*
Lisa R. Hood(7)	7,449	*
Frank K. Bynum, Jr.(8)	3,448,590	10.0	%
Patricia Garrison-Corbin	0	—
David L. Hauser	0	—
Claude C. Lilly	0	—
Kent R. Weldon(9)	4,066,731	11.8	%
All Executive Officers and Directors as a group (13 persons)(10)	7,777,223	22.5	%

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5% Stockholders:
Kelso Investment Associates V, L.P. and Kelso Equity Partners V, L.P.(8) 320 Park Avenue, 24th Floor New York, New York 10022	3,448,590	10.0	%
Thomas H. Lee Equity Fund IV, L.P. and affiliates(11) 100 Federal Street, 35th Floor Boston, Massachusetts 02110	4,066,731	11.8	%

*

Less than .1%.

(1)

Unless otherwise indicated below, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned by them, subject to community property laws where applicable. The percentage of beneficial ownership is based on 34,452,716 shares of our common stock outstanding as of February 28, 2005 (which does not include 473,716 shares of restricted stock awarded under our 2005 stock incentive plan on February 15, 2005, which shares are subject to certain vesting requirements).

(2)

With respect to shares beneficially owned: (i) includes 55,767 shares of our common stock issuable upon exercise of stock options that are either currently exercisable or become exercisable during the next 60 days, (ii) does not include 278,934 shares of our common stock issuable upon exercise of stock options that are not currently exercisable or do not become exercisable during the next 60 days and (iii) does not include 189,488 shares of restricted stock awarded under our 2005 stock incentive plan on February 15, 2005, which shares are subject to certain vesting requirements.

(3)

With respect to shares beneficially owned: (i) includes 8,527 shares of our common stock issuable upon exercise of stock options that are either currently exercisable or become exercisable during the next 60 days, (ii) does not include 42,627 shares of our common stock issuable upon exercise of stock options that are not currently exercisable or do not become exercisable during the next 60 days, (iii) does not include 5,947 shares of our common stock underlying unvested restricted stock units and (iv) does not include 56,846 shares of restricted stock awarded under our 2005 stock incentive plan on February 15, 2005, which shares are subject to certain vesting requirements.

(4)

With respect to shares beneficially owned: (i) includes 77,364 shares of our common stock issuable upon exercise of stock options that are either currently exercisable or become exercisable during the next 60 days, (ii) does not include 115,474 shares of our common stock issuable upon exercise of stock options that are not currently exercisable or do not become exercisable during the next 60 days, (iii) does not include 4,738 shares of our common stock underlying unvested restricted stock units and (iv) does not include 94,744 shares of restricted stock awarded under our 2005 stock incentive plan on February 15, 2005, which shares are subject to certain vesting requirements.

(5)

With respect to shares beneficially owned: (i) includes 18,013 shares of our common stock issuable upon exercise of stock options that are either currently exercisable or become exercisable during the next 60 days and (ii) does not include 77,691 shares of our common stock issuable upon exercise of stock options that are not currently exercisable or do not become exercisable during the next 60 days.

(6)

With respect to shares beneficially owned: (i) includes 7,722 shares of our common stock issuable upon exercise of stock options that are either currently exercisable or become exercisable during the next 60 days, (ii) does not include 15,699 shares of our common stock issuable upon exercise of stock options that are not currently exercisable or do not become exercisable during the next 60 days, (iii) does not include 3,553 shares of our common stock underlying unvested restricted

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stock units and (iv) does not include 44,213 shares of restricted stock awarded under our 2005 stock incentive plan on February 15, 2005, which shares are subject to certain vesting requirements.

(7)

With respect to shares beneficially owned: (i) includes 6,028 shares of common stock issuable upon exercise of stock options that are either currently exercisable or become exercisable during the next 60 days, (ii) does not include 32,135 shares of our common stock issuable upon exercise of stock options that are not currently exercisable or do not become exercisable during the next 60 days, (iii) does not include 1,659 shares of our common stock underlying unvested restricted stock units and (iv) does not include 18,948 shares of restricted stock awarded under our 2005 stock incentive plan on February 15, 2005, which shares are subject to certain vesting requirements.

(8)

Share amounts include 3,112,861 shares of our common stock owned by Kelso Investment Associates and 335,729 shares of our common stock owned by Kelso Equity Partners V, L.P. Kelso Investment Associates V, L.P. and Kelso Equity Partners V, L.P., due to their common control, could be deemed to beneficially own each other's shares, but each disclaims such beneficial ownership. Joseph S. Schuchert, Frank T. Nickell, Thomas R. Wall, IV, George E. Matelich, Michael B. Goldberg, David I. Wahrhaftig, Frank K. Bynum, Jr., Philip E. Berney, Frank J. Loverro and Michael B. Lazar may be deemed to share beneficial ownership of shares of our common stock owned of record by Kelso Investment Associates V, L.P. and Kelso Equity Partners V, L.P., by virtue of their status as general partners of the general partner of Kelso Investment Associates V, L.P. and as general partners of Kelso Equity Partners V, L.P. Messrs. Schuchert, Nickell, Wall, Matelich, Goldberg, Wahrhaftig, Bynum, Berney, Loverro and Lazar share investment and voting power with respect to securities owned by Kelso Investment Associates V, L.P. and Kelso Equity Partners V, L.P., but disclaim beneficial ownership of such securities.

(9)

Shares beneficially owned include 3,397,096 shares owned by Thomas H. Lee Equity Fund IV, L.P., 116,258 shares owned by Thomas H. Lee Foreign Fund IV, L.P., 329,936 shares owned by Thomas H. Lee Foreign Fund IV-B, L.P. and 1,193 shares owned by Thomas H. Lee Investors Limited Partnership. Due to his position as a Managing Director of Thomas H. Lee Partners, L.P., Mr. Weldon may be deemed to share voting and investment power with other investors with respect to the shares beneficially owned by such entities. Mr. Weldon disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein. In addition, Mr. Weldon owns 2,777 shares of common stock.

(10)

With respect to shares beneficially owned: (i) includes 173,421 shares of our common stock issuable upon exercise of stock options that are either currently exercisable or become exercisable during the next 60 days, (ii) does not include 595,721 shares of our common stock issuable upon exercise of stock options that are not currently exercisable or do not become exercisable during the next 60 days, (iii) does not include 15,897 shares of our common stock underlying unvested restricted stock units and (iv) does not include 457,926 shares of restricted stock awarded under our 2005 stock incentive plan on February 15, 2005, which shares are subject to certain vesting requirements.

(11)

Shares beneficially owned include 3,397,096 shares owned by Thomas H. Lee Equity Fund IV, L.P., 116,258 shares owned by Thomas H. Lee Foreign Fund IV, L.P., 329,936 shares owned by Thomas H. Lee Foreign Fund IV-B, L.P., 22,086 shares owned by Thomas H. Lee Charitable Investment, L.P., 1,196 shares owned by Thomas H. Lee Investors Limited Partnership and 200,162 shares owned by certain individuals affiliated with Thomas H. Lee Partners, L.P. Thomas H. Lee Advisors, LLC, the general partner of Thomas H. Lee Partners, L.P., which is the sole member of THL Equity Advisors IV, LLC, which in turn is the general partner of each of Thomas H. Lee Equity Fund IV, L.P., Thomas H. Lee Foreign Fund IV, L.P. and Thomas H. Lee Foreign Fund IV-B, L.P., is controlled by a managing group comprised of C. Hunter Boll, Anthony J. DiNovi, Thomas M. Hagerty, David V. Harkins, Thomas H. Lee, Scott A. Schoen and Scott M. Sperling.

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Thomas H. Lee Charitable Investment, L.P. is controlled by Thomas H. Lee as its general partner. Thomas H. Lee also controls Thomas H. Lee Investors Limited Partnership as the sole stockholder of its general partner, THL Investment Management Corp.

        See "Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Equity Compensation Plan Information" for a table detailing securities authorized for issuance under our equity compensation plans.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Financial Advisory Agreements

        We entered into a Management Services Agreement with THL Equity Advisors IV, LLC, dated as of January 20, 2000, and an Amended and Restated Financial Advisory Agreement, dated as of January 20, 2000, with Kelso & Company, pursuant to which THL Equity Advisors IV, LLC and Kelso & Company provided us certain consulting and advisory services related, but not limited to, equity financings and strategic planning. In the year ended December 31, 2004, we paid advisory fees and out of pocket expenses of approximately $1,122,755 in the aggregate to THL Equity Advisors IV, LLC and Kelso & Company. In connection with the offering, we terminated these agreements and paid a transaction fee of $8.4 million to Kelso & Company. However, our obligations with respect to the indemnification of Kelso & Company against certain liabilities incurred in connection with the provision of advisory services survive.

Legal Services

        Daniel G. Bergstein, a director of the Company during fiscal 2004, is a senior partner of Paul, Hastings, Janofsky & Walker LLP, a law firm which provides legal services to us. In the year ended December 31, 2004, we paid Paul Hastings approximately $3,511,782 for legal services and expenses.

Stockholders Agreements, Nominating Agreement and Registration Rights Agreements

        In connection with our January 2000 equity financing and recapitalization, we entered into a stockholders agreement with our stockholders, dated as of January 20, 2000, pursuant to which, among other things, THL Equity Fund, Kelso Investment Associates and Kelso Equity Partners had the right to designate members to our board of directors. We also entered into a registration rights agreement with certain of our stockholders, dated as of January 20, 2000, pursuant to which such stockholders had the right in certain circumstances, and subject to certain conditions, to require us to register shares of our common stock held by them under the Securities Act.

        In connection with the offering, we terminated our existing stockholders agreement and entered into a nominating agreement with THL Equity Fund, Kelso Investment Associates and Kelso Equity Partners pursuant to which we, acting through our corporate governance committee, agreed, subject to the requirements of our directors' fiduciary duties, that (i) THL Equity Fund will be entitled to designate one Class III director to be nominated for election to our board of directors and Kelso Investment Associates and Kelso Equity Partners will be entitled to designate one Class II director to be nominated for election to our board of directors as long as THL Equity Fund and its affiliates, Kelso Investment Associates and Kelso Equity Partners own in the aggregate at least 40% of the shares of our common stock which they owned immediately prior to the closing of the offering or (ii) THL Equity Fund will be entitled to designate one Class III director to be nominated for election to our board of directors as long as THL Equity Fund and its affiliates, Kelso Investment Associates and Kelso Equity Partners own in the aggregate less than 40% and at least 20% of the shares of our common stock which they owned immediately prior to the closing of the offering. In addition, at any time after Kelso Investment Associates and Kelso Equity Partners no longer owns any of our common stock, as long as THL Equity Fund and its affiliates own at least 40% of the shares of our common

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stock which THL Equity Fund and its affiliates, Kelso Investment Associates and Kelso Equity Partners owned immediately prior to the closing of the offering, THL Equity Fund will be entitled to designate one Class II director to be nominated for election to our board of directors in addition to its right to designate one Class III director to be nominated for election to our board of directors.

        In connection with the offering, we terminated our existing registration rights agreement and entered into a new registration rights agreement with THL Equity Fund, certain affiliates of THL Equity Fund, Kelso Investment Associates and Kelso Equity Partners, certain other significant stockholders and certain members of our management, which we refer to as the affiliate registration rights agreement. The affiliate registration rights agreement requires us to use our commercially reasonable efforts to file with the Securities and Exchange Commission on the 181st day following the closing of the offering a shelf registration statement covering the shares of our common stock held by such parties and to use our commercially reasonable efforts to have such shelf registration statement declared effective by the Securities and Exchange Commission as soon as reasonably practicable thereafter.

Founder Compensation Arrangements

        Daniel G. Bergstein, Jack H. Thomas, Meyer Haberman and Eugene B. Johnson, our founding stockholders, have entered into an arrangement with Walter E. Leach, Jr. and John P. Duda pursuant to which such stockholders have agreed to provide compensation to Mr. Leach and Mr. Duda upon the occurrence of certain specified liquidation events with respect to us, based on our value at the time of any such liquidation event. In connection with the offering, our founding stockholders will satisfy their obligations to Mr. Leach and Mr. Duda pursuant to this arrangement.

ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES

        The following table sets forth the aggregate fees paid or payable to KPMG LLP, which we refer to as KPMG, relating to the audit of the Company's 2004 consolidated financial statements and the fees billed to the Company in 2004 by KPMG for other professional services:

Audit Fees	$	528,995
Audit-Related Fees		1,712,549
Tax Fees		304,910
All Other Fees		0

Audit-Related Fees consist of fees for assurance and related services that are reasonable related to the performance of the audit or review of the Company's financial statements. This category includes services associated with the offering, including the related registration statements, research and consultation related to our implementation of the Sarbanes-Oxley Act, due diligence related to acquisitions and divestitures and consulting related to financial accounting and reporting standards.

Tax Fees consist of fees for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal and state tax compliance, return preparation and tax audits.

        Our audit committee has considered whether the provision of non-audit services is compatible with maintaining the independence of KPMG and has concluded that it is.

        Our audit committee's pre-approval policy provides that our independent auditor shall not provide services that have the potential to impair or appear to impair the independence of the audit role. The pre-approval policy requires our independent auditor to provide an annual engagement letter to our audit committee outlining the scope of the audit services proposed to be performed during the fiscal year. Upon the audit committee's acceptance of and agreement with such engagement letter, the

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services within the scope of the proposed audit services shall be deemed pre-approved pursuant to the policy.

        The pre-approval policy provides for categorical pre-approval of specified audit and permissible non-audit services and requires the specific pre-approval by the audit committee, prior to engagement, of such services, other than audit services covered by the annual engagement letter. In addition, services to be provided by our independent auditor that are not within the category of pre-approved services must be approved by the audit committee prior to engagement, regardless of the service being requested or the dollar amount involved.

        Requests or applications for services that require specific separate approval by the audit committee are required to be submitted to the audit committee by both management and the independent auditors, and must include a detailed description of the services to be provided and a joint statement confirming that the provision of the proposed services does not impair the independence of the independent auditors.

        The audit committee may delegate pre-approval authority to one or more of its members. The member or members to whom such authority is delegated shall report any pre-approval decisions to the audit committee at its next scheduled meeting. The audit committee is prohibited from delegating to management its responsibilities to pre-approve services to be performed by our independent auditor.

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PART IV

ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Financial Statements

        The financial statements filed as part of this Annual Report are listed in the index to the financial statements under "Item 8. Financial Statements and Supplementary Information", which index to the financial statements is incorporated herein by reference. In addition, certain financial statements of equity method investments owned by us are included as exhibits 99.1, 99.2 and 99.3 to this Annual Report.

Exhibits

        The exhibits filed as part of this Annual Report are listed in the index to exhibits immediately preceding such exhibits, which index to exhibits is incorporated herein by reference.

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SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	FAIRPOINT COMMUNICATIONS, INC.
Date: March 24, 2005	By:	/s/  EUGENE B. JOHNSON Name: Eugene B. Johnson Title: Chairman of the Board of Directors and Chief Executive Officer

        Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signatures	Title	Date
/s/  EUGENE B. JOHNSON Eugene B. Johnson	Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer)	March 24, 2005
/s/  WALTER E. LEACH, JR. Walter E. Leach, Jr.	Executive Vice President and Chief Financial Officer (Principal Financial Officer)	March 24, 2005
/s/  LISA R. HOOD Lisa R. Hood	Senior Vice President and Controller (Principal Accounting Officer)	March 24, 2005
/s/  FRANK K. BYNUM, JR. Frank K. Bynum, Jr.	Director	March 24, 2005
/s/  PATRICIA GARRISON-CORBIN Patricia Garrison-Corbin	Director	March 24, 2005
/s/  DAVID L. HAUSER David L. Hauser	Director	March 24, 2005
/s/  CLAUDE C. LILLY Claude C. Lilly	Director	March 24, 2005
/s/  KENT R. WELDON Kent R. Weldon	Director	March 24, 2005

139

Exhibit Index

Exhibit No.	Description
2.1	Stock Purchase Agreement, dated as of April 18, 2003 and as amended June 20, 2003, by and among FairPoint, Community Service Communications, Inc., Community Service Telephone Co. and Commtel Communications, Inc.(1)
2.2	Stock Purchase Agreement, dated as of May 9, 2003, by and among Golden West Telephone Properties, Inc., MJD Services Corp., Union Telephone Company of Hartford, Armour Independent Telephone Co., WMW Cable TV Co. and Kadoka Telephone Co.(2)
2.3	Agreement and Plan of Merger, dated as of June 18, 2003, by and among FairPoint, MJD Ventures, Inc., FairPoint Berkshire Corporation and Berkshire Telephone Corporation.(1)
3.1	Eighth Amended and Restated Certificate of Incorporation of FairPoint.*
3.2	Amended and Restated By-Laws of FairPoint.*
4.1	Indenture, dated as of May 24, 2000, by and between FairPoint and United States Trust Company of New York, relating to FairPoint's $200,000,000 121/2% Senior Subordinated Notes due 2010.(3)
4.2	Indenture, dated as of March 6, 2003, by and between FairPoint and The Bank of New York, relating to FairPoint's $225,000,000 117/8% Senior Notes due 2010.(4)
4.3	Supplemental Indenture, dated as of January 20, 2005, by and between FairPoint and The Bank of New York, amending the Indenture dated as of May 24, 2000 between FairPoint and the United States Trust Company of New York.*
4.4	Supplemental Indenture, dated as of January 20, 2005, by and between FairPoint and The Bank of New York, amending the Indenture dated as of March 6, 2003 between FairPoint and The Bank of New York.*
4.5	Form of 144A Senior Subordinated Note due 2010.(3)
4.6	Form of Regulation S Senior Subordinated Note due 2010.(3)
4.7	Form of Initial Senior Note due 2010.(4)
4.8	Form of Exchange Senior Note due 2010.(4)
10.1	Credit Agreement, dated as of February 8, 2005, by and among FairPoint, various lending institutions, Bank of America, N.A., CoBank ACB, General Electric Capital Corporation and Deutsche Bank Trust Company Americas.*
10.2	Pledge Agreement, dated as of February 8, 2005, by FairPoint, ST Enterprises, Ltd., FairPoint Broadband, Inc., MJD Services Corp., MJD Ventures, Inc., C-R Communications, Inc., Comerco, Inc., GTC Communications, Inc., Ravenswood Communications, Inc., Utilities, Inc., FairPoint Carrier Services, Inc. and St. Joe Communications, Inc.*
10.3	Subsidiary Guaranty, dated as of February 8, 2005, by FairPoint Broadband, Inc., MJD Ventures, Inc., MJD Services Corp., ST Enterprises, Ltd. and FairPoint Carrier Services, Inc.*
10.4	Amended and Restated Credit Agreement, dated as of March 11, 2005, among FairPoint, various lending institutions, Bank of America, N.A., CoBank ACB, General Electric Capital Corporation and Deutsche Bank Trust Company Americas.*

140

10.5	Form of Swingline Note.*
10.6	Form of RF Note.*
10.7	Form of B Term Note.*
10.8	Amended and Restated Tax Sharing Agreement, dated November 9, 2000, by and among FairPoint and its Subsidiaries.(5)
10.9	Nominating Agreement, dated as of February 8, 2005.*
10.10	Affiliate Registration Rights Agreement, dated as of February 8, 2005.*
10.11	Employment Agreement, dated as of December 31, 2002, by and between FairPoint and Eugene B. Johnson.(4)
10.12	Letter Agreement, dated as of October 1, 2004, by and between FairPoint and Eugene B. Johnson.(6)
10.13	Letter Agreement, dated as of October 1, 2004, by and between FairPoint and John P. Duda.(6)
10.14	Employment Agreement, dated as of January 20, 2000, by and between FairPoint and Walter E. Leach, Jr.(7)
10.15	Letter Agreement, dated as of November 11, 2002, by and between FairPoint and Peter G. Nixon.(4)
10.16	Letter Agreement, dated as of October 25, 2004, by and between FairPoint and Valeri A. Marks.(6)
10.17	Letter Agreement, dated as of November 13, 2002, by and between FairPoint and Shirley J. Linn.(4)
10.18	FairPoint 1995 Stock Option Plan.(3)
10.19	FairPoint Amended and Restated 1998 Stock Incentive Plan.(3)
10.20	FairPoint Amended and Restated 2000 Employee Stock Incentive Plan.(8)
10.21	FairPoint 2005 Stock Incentive Plan.*
10.22	FairPoint Annual Incentive Plan.(6)
10.23	Form of Restricted Stock Agreement.*
14.1	FairPoint Code of Business Conduct and Ethics.*
14.2	FairPoint Code of Ethics for Financial Professionals.*
23.1	Consent of KPMG LLP.*
23.2	Consent of Deloitte & Touche LLP.*
23.3	Consent of Kiesling Associates LLP.*
31.1	Certification required by 18 United States Code Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certification required by 18 United States Code Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

141

32.1	Certification required by 18 United States Code Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *†
32.2	Certification required by 18 United States Code Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *†
99.1	Audited financial statements for the Orange County-Poughkeepsie Limited Partnership for the years ended December 31, 2004, 2003 and 2002.*
99.2	Audited financial statements for the Illinois Valley Cellular RSA 2-I Partnership for the years ended December 31, 2002 and 2001 and unaudited financial statements for the six months ended June 30, 2003.*
99.3	Audited financial statements for the Illinois Valley Cellular RSA 2-III Partnership for the years ended December 31, 2002 and 2001 and unaudited financial statements for the six months ended June 30, 2003.*

*

Filed herewith.

†

Pursuant to Securities and Exchange Commission Release No. 33-8238, this certification will be treated as "accompanying" this Annual Report on Form 10-K and not "filed" as part of such report for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of Section 18 of the Securities Exchange Act of 1934 and this certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act 1934, except to the extent that the registrant specifically incorporates it by reference.

(1)

Incorporated by reference to the registration statement on Form S-4 of FairPoint, declared effective as of July 22, 2003.

(2)

Incorporated by reference to the quarterly report of FairPoint for the period ended March 31, 2003, filed on Form 10-Q.

(3)

Incorporated by reference to the registration statement on Form S-4 of FairPoint, declared effective as of August 9, 2000.

(4)

Incorporated by reference to the annual report of FairPoint for the year ended 2002, filed on Form 10-K.

(5)

Incorporated by reference to the quarterly report of FairPoint for the period ended September 30, 2000, filed on Form 10-Q.

(6)

Incorporated by reference to the registration statement on Form S-1 of FairPoint, declared effective as of February 3, 2005.

(7)

Incorporated by reference to the annual report of FairPoint for the year ended 1999, filed on Form 10-K.

(8)

Incorporated by reference to the annual report of FairPoint for the year ended 2003, filed on Form 10-K.

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QuickLinks

FAIRPOINT COMMUNICATIONS, INC. ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004
PART I CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
PART II
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2004 and 2003 (Amounts in thousands, except per share data)
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES Consolidated Statements of Operations Years ended December 31, 2004, 2003 and 2002 (Dollars in thousands)
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity (Deficit) Years ended December 31, 2004, 2003 and 2002 (Amounts in thousands)
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (Loss) Years ended December 31, 2004, 2003 and 2002 (Dollars in thousands)
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended December 31, 2004, 2003 and 2002 (Dollars in thousands)
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2004, 2003 and 2002
PART III
Summary Compensation Table
PART IV
SIGNATURES
Exhibit Index

EX-3.1

Exhibit 3.1

EIGHTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
FAIRPOINT COMMUNICATIONS, INC.

FairPoint Communications, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), hereby certifies as follows:

A.The name of the Corporation is FairPoint Communications, Inc.  The Corporation was originally incorporated under the name “MJD Communications, Inc.” and filed its original Certificate of Incorporation with the Secretary of State of the State of Delaware on June 30, 1993.  The Corporation filed Certificates of Amendment with the Secretary of State of the State of Delaware on June 6, 1996, November 24, 1998 and January 28, 2005.  The Corporation filed restatements of its Certificate of Incorporation with the Secretary of State of the State of Delaware on July 1, 1994, July 31, 1997, March 26, 1998, October 20, 1999, January 19, 2000, April 28, 2000 and May 10, 2002.

B.This Eighth Amended and Restated Certificate of Incorporation, which restates and integrates and further amends the Certificate of Incorporation of the Corporation as heretofore amended and restated, has been duly adopted by the Board of Directors of the Corporation in accordance with Sections 242 and 245 of the DGCL and by the written consent of its stockholders in accordance with Section 228 of the DGCL.

C.The Certificate of Incorporation of the Corporation, as heretofore amended and restated, is hereby further amended and restated to read in its entirety as follows:

1.Corporate Name.  The name of the Corporation is FairPoint Communications, Inc.

2.Registered Office and Agent.

(a).The address of the Corporation’s registered office in the State of Delaware is 1209 Orange Street, City of Wilmington, New Castle County, Delaware 19801.

(b).The name of the registered agent of the Corporation at such address is The Corporation Trust Company.

3.Purpose of the Corporation.  The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL.

4.Definitions.  The following terms have the indicated meanings when used herein.

(a).“Board of Directors” means the board of directors of the Corporation.

(b).“Common Stock” means the shares of common stock of the Corporation referred to in Section 5(a)(i) hereof.

(c).“Communications Laws” means any law or regulation of the United States or any state of the United States, now or hereafter in effect, including without limitation, the Communications Act of 1934, as amended, the

Telecommunications Act of 1996, as amended, and the regulations promulgated under such acts, pertaining to any authorization, license, permit, order, filing or consent held or required to be obtained by the Corporation from the Federal Communications Commission (or any successor thereto) or any state regulatory commission having jurisdiction over the Corporation or any of its subsidiaries, including laws or regulations pertaining to approval of the acquisition or ownership of shares of capital stock of the Corporation.

(d).“Corporation” means FairPoint Communications, Inc., a Delaware corporation.

(e).“Covered Person” means any holder of capital stock of the Corporation or any partner, member, director, stockholder, employee or agent of any such holder, other than someone who is an employee of the Corporation or any of its subsidiaries.

(f).“DGCL” means the General Corporation Law of the State of Delaware.

(g).“Effective Time” means the date and time at which this Eighth Amended and Restated Certificate of Incorporation of the Corporation shall become effective in accordance with Section 103(d) of the DGCL.

(h).“Excluded Opportunity” means any opportunity, matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of:

(i).any director of the Corporation who is not an employee of the Corporation or any of its subsidiaries, or

(ii).any Covered Person,

unless such opportunity, matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the knowledge or possession of, such director or Covered Person expressly in such director’s or Covered Person’s capacity as a director of the Corporation or as a Covered Person.

(i).“Old Class A Common Stock” means the class A common stock, par value $.01 per share, authorized by the Seventh Amended and Restated Certificate of Incorporation of the Corporation, as amended.

(j).“Old Class C Common Stock” means the class C common stock, par value $.01 per share, authorized by the Seventh Amended and Restated Certificate of Incorporation of the Corporation, as amended.

(k).“Preferred Stock” means the shares of preferred stock of the Corporation referred to in Section 5(a)(ii) hereof.

(l).“Transferee” has the meaning given such term in Section 6(a) hereof.

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5.Capitalization.

(a).Authorized Shares.  The total number of shares of all classes of capital stock which the Corporation shall have the authority to issue is 300,000,000 shares, consisting of:

(i).200,000,000 shares of common stock, par value $0.01 per share, and

(ii).100,000,000 shares of preferred stock, par value $0.01 per share.

(b).Reclassification.  At the Effective Time:

(i).Each outstanding share of Old Class C Common Stock shall be reclassified, automatically, immediately and irrevocably, without any further action on the part of any holder of Old Class C Common Stock, the Corporation or any other person or entity, into one share of Common Stock.

(ii).Each outstanding share of Old Class A Common Stock shall be reclassified, automatically, immediately and irrevocably, without any further action on the part of any holder of Old Class A Common Stock, the Corporation or any other person or entity, into one share of Common Stock.

(iii).Each stock certificate which immediately prior to the Effective Time represented shares of Old Class A Common Stock or Old Class C Common Stock shall, without any action on the part of the holder, thereupon and thereafter until surrendered as hereinafter provided, represent the appropriate number of shares of Common Stock.  The registered holder of each such certificate may after the Effective Time surrender such certificate to the Corporation for cancellation and, upon such surrender, shall receive in exchange therefor, without charge, a new certificate registered in the name of such holder representing the appropriate number of shares of Common Stock.

(c).Preferred Stock.  Shares of Preferred Stock may be issued at any time and from time to time in one or more classes or series, with each such class or series to consist of such number of shares and to have such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, as shall be stated in the resolution or resolutions providing for the issuance of such class or series adopted by the Board of Directors, and the Board of Directors is hereby expressly vested with authority, to the full extent now or hereafter provided by law, to adopt any such resolution or resolutions and to file with the Secretary of State of the State of Delaware a certificate setting forth a copy of such resolution or resolutions and the number of shares of Preferred Stock of the class or series as to which such resolution or resolutions

3

apply.  The authority of the Board of Directors with respect to each class or series of Preferred Stock shall include, but not be limited to, determination of the following:

(i).the number of authorized shares constituting that class or series and the distinctive designation of that class or series;

(ii).the dividend rate on the outstanding shares of that class or series, whether dividends shall be paid in cash or in kind and whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on the outstanding shares of that class or series;

(iii).whether that class or series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights;

(iv).whether that class or series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine;

(v).whether the shares of that class or series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates;

(vi).whether that class or series shall have a sinking fund for the redemption or purchase of shares of that class or series, and, if so, the terms and amount of such sinking fund;

(vii).the rights of the shares of that class or series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that class or series; and

(viii).any other relative rights, preferences and limitations of that class or series.

(d).Common Stock.

(i).Generally.  All outstanding shares of Common Stock shall have the same terms except as otherwise set forth herein.

(ii).Dividends.  Subject to the preferential dividend rights of any class or series of Preferred Stock outstanding from time to time, and subject to the other provisions of this Section 5(d)(ii), the holders of outstanding shares of Common Stock shall be entitled to receive dividends and other distributions in cash, stock or property of the Corporation when, as and to

4

the extent declared by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefor.

(iii).Liquidation.  In the event of the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of outstanding shares of Common Stock shall be entitled to share in the assets of the Corporation remaining after payment of or provision for all debts and other liabilities of the Corporation and the liquidation preference of all classes or series of outstanding Preferred Stock.

(iv).Voting Rights.  Except as otherwise expressly set forth in this Eighth Amended and Restated Certificate of Incorporation and except as otherwise required by law:

(A).Each holder of shares of Common Stock shall be entitled, with respect to each share of Common Stock held by such holder, to one vote in person or by proxy on all matters submitted to a vote of the holders of Common Stock, whether voting separately as a class or otherwise.

(B).The holders of outstanding shares of Common Stock shall vote together as a single class on all matters to be voted on by the holders of Common Stock.

(e).No Preemptive Rights.  Except as expressly set forth in this Eighth Amended and Restated Certificate of Incorporation, any certificate of designation, any resolution or resolutions providing for the issuance of a class or series of capital stock adopted by the Board of Directors, or any agreement between the Corporation and the holders of its capital stock, no holder of shares of capital stock of the Corporation shall have any preemptive right to subscribe for any shares of any class or series of capital stock of the Corporation whether now or hereafter authorized.

6.Provisions Relating to Stock Ownership and Federal and State Communications Laws.

(a).Requests for Information.  So long as the Corporation or any of its subsidiaries holds any authorization, license, permit, order, filing or consent from the Federal Communications Commission (or any successor thereto) or any state regulatory commission having jurisdiction over the Corporation or any of its subsidiaries, if the Corporation has reason to believe that the ownership, or proposed ownership, of shares of capital stock of the Corporation by any stockholder or any person presenting any shares of capital stock of the Corporation for transfer into its name (a “Transferee”) may be inconsistent with, or in violation of, any provision of the Communications Laws, or if the Corporation needs information in order to make a determination as to whether the ownership, or proposed ownership, of shares of capital stock of the Corporation by any stockholder or any Transferee may be

5

inconsistent with, or in violation of, any provision of the Communications Laws, such stockholder or Transferee, upon request of the Corporation, shall furnish promptly to the Corporation such information (including, without limitation, information with respect to citizenship, other ownership interests and affiliations) as the Corporation shall reasonably request to determine whether the ownership of, or the existence or exercise of any rights with respect to, shares of capital stock of the Corporation by such stockholder or Transferee is inconsistent with, or in violation of, any provision of the Communications Laws.

(b).Denial of Rights.  If any stockholder or Transferee from whom information is requested should fail to respond to any request for information made by the Corporation pursuant to Section 6(a) hereof, or if the Corporation shall conclude that the ownership of, or existence or exercise of any rights of stock ownership with respect to, shares of capital stock of the Corporation by such stockholder or Transferee could result in any inconsistency with, or violation of, any provision of the Communications Laws, the Corporation may suspend those rights of stock ownership the existence or exercise of which would result in any inconsistency with, or violation of, any provision of the Communications Laws, such suspension to remain in effect until the requested information has been received and the Corporation has determined that the existence or exercise of such suspended rights is not inconsistent with, or in violation of, any provision of the Communications Laws.

(c).Remedies.  The Corporation may exercise any and all appropriate remedies, at law or in equity, in any court of competent jurisdiction, against any stockholder or Transferee, with a view towards obtaining any information requested pursuant to Section 6(a) hereof or preventing or curing any situation which would cause an inconsistency with, or violation of, any provision of the Communications Laws.

7.Renunciation of Interest or Expectancy.  The Corporation renounces any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, any Excluded Opportunity.

8.Management of the Business and Conduct of the Affairs of the Corporation.  The following provisions are inserted for the management of the business and for the conduct of the affairs of the Corporation and for the purpose of creating, defining, limiting and regulating the powers of the Corporation and its directors and stockholders.

(a).The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things, except as may otherwise be provided in the DGCL or elsewhere herein.

(b).The number of directors constituting the Board of Directors shall be as set forth in, or determined by the Board of Directors by resolution adopted by the Board of Directors in accordance with, the by-laws of the Corporation, but shall not be less than five nor more than eleven.

6

(c).Classification of the Board of Directors.

(i).The Board of Directors shall be divided into three classes, designated Classes I, II and III, which shall be as nearly equal in number of directors per Class as possible.

(ii).Directors of Class I shall be elected to hold office for an initial term expiring at the first annual meeting of stockholders held after the Effective Time.

(iii).Directors of Class II shall be elected to hold office for an initial term expiring at the second annual meeting of stockholders held after the Effective Time.

(iv).Directors of Class III shall be elected to hold office for an initial term of office expiring at the third annual meeting of stockholders held after the Effective Time.

(v).At each annual meeting of stockholders, the respective successors of the directors whose terms are expiring shall be elected for terms expiring at the annual meeting of stockholders held in the third succeeding year.

(vi).Subject to Section 12 hereof, vacancies in the Board of Directors and newly-created directorships resulting from any increase in the authorized number of directors may be filled as provided in the by-laws.

(d).Advance notice of nominations by stockholders for the election of directors, and of stockholder proposals regarding action to be taken at any meeting of stockholders, shall be given in the manner and to the extent provided in the by-laws of the Corporation.

9.By-laws.

(a).The Board of Directors shall be authorized to adopt, amend and repeal the by-laws of the Corporation without a stockholder vote in any manner not inconsistent with the laws of the State of Delaware, this Eighth Amended and Restated Certificate of Incorporation and the by-laws of the Corporation as from time to time in effect, subject to the power of the stockholders entitled to vote to adopt, amend, alter, change, add to or repeal by-laws made by the Board of Directors.

(b).Notwithstanding anything contained in this Eighth Amended and Restated Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least two-thirds in voting power of all the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required in order for the stockholders to adopt, amend, alter, change, add to or repeal the by-laws of the Corporation.

7

10.Exoneration.

(a).A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of his/her fiduciary duty as a director to the fullest extent permitted by the DGCL, as the DGCL exists on the Effective Date or may thereafter be amended.

(b).Any repeal or modification of Section 10(a) hereof shall be prospective only, and shall not adversely affect any elimination or limitation of the personal liability of a director of the Corporation in respect of any act or omission occurring prior to the time of such repeal or modification.

11.Stockholder Action.

(a).Any action required or permitted to be taken by the holders of the Common Stock of the Corporation must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders.

(b).Except as otherwise required by law and subject to the rights of the holders of any series of Preferred Stock, special meetings of stockholders of the Corporation may be called only by:

(i).the Chairman of the Board of Directors of the Corporation,

(ii).the Board of Directors, or

(iii).the Board of Directors upon a request by the holders of at least 50% in voting power of all outstanding shares of the Corporation entitled to vote at such meeting.

(c).Meetings of stockholders may be held within or without the State of Delaware, as the by-laws of the Corporation may provide.

(d).The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated by the Board of Directors or in the by-laws of the Corporation.

(e).Elections of directors need not be by written ballot.

12.Quorum at stockholder meetings.  The holders of one-third in voting power of the capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business, except that the holders of a majority in voting power of the capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall be required to constitute a quorum for:

(a).a vote for any director in a contested election,

8

(b).the removal of a director, or

(c).the filling of a vacancy on the Board of Directors by the stockholders of the Corporation.

13.Amendments to this Eighth Amended and Restated Certificate of Incorporation.

(a).The Corporation reserves the right to amend any provision contained in this Eighth Amended and Restated Certificate of Incorporation, as the same may be in effect from time to time, in the manner now or hereafter prescribed by law, and all rights conferred on stockholders or others hereunder are subject to such reservation.

(b).Anything contained in Section 13(a) hereof to the contrary notwithstanding, the affirmative vote of the holders of at least two-thirds in voting power of all the shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend or repeal Sections 8, 9, 10, 11(a), 11(b) and 12 hereof and this Section 13 or to adopt any provision inconsistent therewith.

14.Compromise.  Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed by the Corporation under the provisions of Section 291 of the DGCL or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of Section 279 of the DGCL, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said Court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the Court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all stockholders or class of stockholders of the Corporation, as the case may be, and also on the Corporation.

9

IN WITNESS WHEREOF, FAIRPOINT COMMUNICATIONS, INC. has caused this Eighth Amended and Restated Certificate of Incorporation to be executed by Shirley J. Linn, its Senior Vice President and Secretary, on this 7th day of February, 2005.

		FAIRPOINT COMMUNICATIONS, INC.
		By:	/s/ Shirley J. Linn
			Name: Shirley J. Linn
			Title: Senior Vice President and Secretary
Attest:
By:	/s/ Timothy W. Henry
	Name: Timothy W. Henry
	Title: Vice President

10

EX-3.2

Exhibit 3.2

FAIRPOINT COMMUNICATIONS, INC.

AMENDED AND RESTATED BY-LAWS

As adopted on February 8, 2005

ARTICLE I

STOCKHOLDERS

SECTION 1.1Annual Meetings.  The annual meeting of the stockholders of the Corporation for the purpose of electing directors and for the transaction of such other business as may properly be brought before such meeting shall be held on such date, and at such time and place within or without the State of Delaware, as may be designated from time to time by resolution of the Board of Directors and set forth in the notice or waiver of notice of the meeting.

SECTION 1.2Special Meetings.  Except as otherwise required by law and subject to the rights of the holders of any series of Preferred Stock (as defined herein), special meetings of stockholders of the Corporation may be called only by (a) the Chairman of the Corporation; (b) the Board of Directors; or (c) the Board of Directors upon a request by the holders of at least fifty percent (50%) in voting power of all outstanding shares of capital stock of the Corporation entitled to vote at such meeting.  Such special meetings of the stockholders shall be held at such places, within or without the State of Delaware, as shall be specified in the respective notices or waivers of notice thereof.  The purpose or purposes of the proposed meeting shall be included in the notice setting forth such call.

SECTION 1.3Notice of Meetings.  The Secretary or any Assistant Secretary shall cause written notice of the place, if any, date and hour of each meeting of the stockholders and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting and, in the case of a special meeting, the purpose or purposes for which such meeting is called, to be given in the manner set forth in the next paragraph, not less than ten (10) nor more than sixty (60) calendar days prior to the meeting, to each stockholder of record entitled to vote at such meeting. If a stockholder meeting is to be held via electronic communications and stockholders will take action at such meeting, the notice of such meeting must: (a) specify the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present and vote at such meeting; and (b) provide the information required to access the stockholder list.

Notices are deemed given (i) if by mail, when deposited in the United States mail, postage prepaid, directed to the stockholder at his or her address as it appears on the record of stockholders of the Corporation, or, if he or she shall have filed with the Secretary of the Corporation a written request that notices to him or her be mailed to some other address, then directed to him or her at such other address; (ii) if by facsimile, when faxed to a number where the stockholder has consented to receive notice; (iii) if by electronic mail, when mailed

electronically to an electronic mail address at which the stockholder consented to receive such notice; (iv) if by posting on an electronic network (such as a website or chatroom) together with a separate notice to the stockholder of such specific posting, upon the later to occur of (A) such posting or (B) the giving of the separate notice of such posting; or (v) if by any other form of electronic communication, when directed to the stockholder in the manner consented to by the stockholder.

For notice given by electronic transmission to a stockholder to be effective, such stockholder must consent to the Corporation’s giving notice by that particular form of electronic transmission. A stockholder may revoke consent to receive notice by electronic transmission by written notice to the Corporation. A stockholder’s consent to notice by electronic transmission is automatically revoked if the Corporation is unable to deliver two consecutive electronic transmission notices and such inability becomes known to the Secretary, Assistant Secretary, the transfer agent or other person responsible for giving notice.

A written waiver of any notice of any annual or special meeting signed by the person entitled thereto, or a waiver by electronic transmission by the person entitled to notice, shall be deemed equivalent to notice, whether provided before or after the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in a waiver of notice. The attendance of any stockholder at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting is not lawfully called or convened.

SECTION 1.4Organization; Procedure.  The Chairman, or in the Chairman’s absence or at the Chairman’s direction, any officer of the Corporation shall call all meetings of the stockholders to order and shall act as chairman of such meeting. The Secretary of the Corporation or, in such officer’s absence, an Assistant Secretary shall act as secretary of the meeting. If neither the Secretary nor an Assistant Secretary is present, the chairman of the meeting shall appoint a secretary of the meeting. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the person presiding over the meeting. The Board of Directors may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the person presiding over any meeting of stockholders shall have the right and authority to convene and to adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such presiding person, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the presiding person of the meeting, may include, without limitation, the following: (a) the establishment of an agenda or order of business for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present; (c) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the presiding person of the meeting shall determine; (d) restrictions on entry to

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the meeting after the time fixed for the commencement thereof; and (e) limitations on the time allotted to questions or comments by participants. The presiding person at any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if such presiding person should so determine, such presiding person shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board of Directors or the person presiding over the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

SECTION 1.5Quorum.  Except as otherwise provided by law, by the certificate of incorporation of the Corporation, as amended, restated or supplemented from time to time (hereinafter the “Certificate of Incorporation”) or these By-Laws, the holders of one-third (1/3) in voting power of the capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business, except that the holders of a majority in voting power of the capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall be required to constitute a quorum for (a) a vote for any director in a contested election; (b) the removal of a director; or (c) the filling of a vacancy on the Board of Directors if the filling of such vacancy is submitted to a vote of the stockholders. If a quorum is not present at any meeting of the stockholders, the presiding officer shall have the power to adjourn any such meeting from time to time until a quorum is present. Notice of any adjourned meeting of the stockholders of the Corporation need not be given if the place, if any, date and hour thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, are announced at the meeting at which the adjournment is taken; provided, however, that if the adjournment is for more than thirty (30) calendar days, or if after the adjournment a new record date for the adjourned meeting is fixed pursuant to Section 1.6 of these By-Laws, a notice of the adjourned meeting, conforming to the requirements of Section 1.3 of these By-Laws, shall be given to each stockholder of record entitled to vote at such meeting. At any adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted on the original date of the meeting.

SECTION 1.6Record Date.  In order that the Corporation may determine the stockholders (a) entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof; (b) entitled to receive payment of any dividend or other distribution or allotment of any rights; or (c) entitled to exercise any rights in respect of any change, conversion or exchange of capital stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date (i) in the case of clause (a) above, shall, unless otherwise required by law, not be more than sixty (60) nor less than ten (10) calendar days before the date of such meeting; and (ii) in the case of clause (b) above, shall not be more than sixty (60) calendar days prior to such action. If for any reason the Board of Directors shall not have fixed a record date for any such purpose, the record date for such purpose shall be determined as provided by law. A determination of the stockholders of

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record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

SECTION 1.7Stockholder Lists.  The officer who has charge of the stock ledger of the Corporation shall prepare and make at least ten (10) calendar days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) calendar days prior to the meeting, as required by applicable law. The list shall also be produced at the time and kept at the place of the meeting during the whole time of the meeting, and may be inspected by any stockholder who is present.

SECTION 1.8Proxies.  At all meetings of stockholders, any stockholder entitled to vote thereat shall be entitled to vote in person or by proxy, but no proxy shall be voted or acted upon after three years from its date, unless such proxy provides for a longer period. Without limiting the manner in which a stockholder may authorize another person or persons to act for such stockholder as proxy pursuant to the General Corporation Law of the State of Delaware (hereinafter the “DGCL”), the following shall constitute a valid means by which a stockholder may grant such authority: (a) a stockholder may execute a written instrument authorizing another person or persons to act for such stockholder as proxy, and execution of the written instrument may be accomplished by the stockholder or the stockholder’s authorized officer, director, employee, trustee or agent signing such writing or causing his or her signature to be affixed to such writing by any reasonable means including, but not limited to, by facsimile signature; or (b) a stockholder may authorize another person or persons to act for such stockholder as proxy by transmitting or authorizing the transmission of a telegram, cablegram or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such telegram, cablegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram, cablegram or electronic transmission was authorized by the stockholder. If it is determined that such telegrams, cablegrams or other electronic transmissions are valid, the inspectors, or if there are no inspectors, such other persons making that determination shall specify the information upon which they relied.

Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to the preceding paragraph of this Section 1.8 may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.

Proxies shall be filed with the Secretary of the meeting prior to or at the commencement of the meeting to which they relate. A proxy shall be irrevocable if it states that

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it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or by filing another duly executed proxy bearing a later date with the Secretary.

SECTION 1.9Voting.  Except as otherwise provided by law or the Certificate of Incorporation and subject to the rights of the holders of any class or series of preferred stock of the Corporation (hereinafter the “Preferred Stock”), every holder of record of capital stock entitled to vote at a meeting of stockholders shall be entitled to one vote for each share of capital stock outstanding in his or her name on the books of the Corporation at the close of business on the date fixed pursuant to Section 1.6 of these By-Laws as the record date for the determination of the stockholders entitled to notice of and to vote at such meeting.  When a quorum is present at any meeting, the vote of the holders of a majority in voting power of the capital stock present in person or represented by proxy and entitled to vote on the matter shall decide any question brought before such meeting, unless the question is one upon which by express provision of statute or of the Certificate of Incorporation, these By-Laws or the rules or regulations of any stock exchange applicable to the Corporation, a different vote is required, in which case such express provision shall govern and control the decision of such question.

SECTION 1.10Voting by Ballot.  No vote of the stockholders need be taken by written ballot, or by a ballot submitted by electronic transmission, or conducted by inspectors of elections unless otherwise required by law. Any vote not required to be taken by ballot or by ballot submitted by electronic transmission may be conducted in any manner approved by the presiding officer at the meeting at which such vote is taken.

SECTION 1.11Inspector of Elections.  The Corporation may, and shall if required by law, in advance of any meeting of stockholders, appoint one or more inspectors of election, who may be employees of the Corporation, to act at the meeting or any adjournment thereof and to make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. In the event that no inspector so appointed or designated is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath to execute faithfully the duties of inspector with strict impartiality and according to the best of his or her ability. The inspector or inspectors so appointed or designated shall (a) ascertain the number of shares of capital stock of the Corporation outstanding and the voting power of each such share; (b) determine the shares of capital stock of the Corporation represented at the meeting and the validity of proxies and ballots; (c) specify the information relied upon to determine the validity of electronic transmissions in accordance with Section 1.8 hereof; (d) count all votes and ballots; (e) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; and (f) certify their determination of the number of shares of capital stock of the Corporation represented at the meeting and such inspectors’ count of all votes and ballots. Such certification and report shall specify such other information as may be required by law. No person who is a candidate for an office at an election may serve as an inspector at such election.

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When determining the shares of capital stock represented and the validity of proxies and ballots, the inspector shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in accordance with Section 1.8 of these By-Laws, ballots and the regular books and records of the Corporation. The inspector may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers or their nominees or a similar person which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspector considers other reliable information as outlined in this section, the inspector, at the time of his or her certification pursuant to provision (f) of this section shall specify the precise information considered, the person or persons from whom the information was obtained, when this information was obtained, the means by which the information was obtained, and the basis for the inspector’s belief that such information is accurate and reliable.

SECTION 1.12Notice of Stockholder Business and Nominations.

(a)Annual Meetings of Stockholders.

(i)Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the stockholders at an annual meeting of stockholders may be made only (A) by or at the direction of the Board of Directors or the Chief Executive Officer; (B) by any stockholder of the Corporation who is entitled to vote at the meeting, who complies with the applicable requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder, and the notice procedures set forth in clause (ii) of this Section 1.12(a) and who was a stockholder of record at the time such notice is delivered to the Secretary of the Corporation; or (C) pursuant to the Corporation’s notice of meeting (or any supplement thereto).

(ii)For nominations or other business to be properly brought before an annual meeting by a stockholder, pursuant to clause (B) of paragraph (a)(i) of this Section 1.12, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and any such other business other than nominations of persons for election to the Board of Directors must otherwise be a proper matter for stockholder action. To be timely, a stockholder’s notice shall be delivered or mailed to the Secretary at the principal executive offices of the Corporation and received not less than ninety (90) calendar days, nor more than one hundred twenty (120) calendar days prior to the first anniversary of the previous year’s annual meeting; provided, however, that in the event that no annual meeting was held in the previous year or the date of the annual meeting was changed by more than thirty (30) calendar days from the anniversary date of the previous year’s annual meeting, notice by the stockholder must be so received not less than ninety (90) calendar days nor more than one hundred twenty (120) calendar days prior to such annual meeting or ten (10) calendar days following the date on which public announcement of the date of the meeting is first made by the Corporation or notice of such meeting is given. In no event shall an adjournment or postponement of an annual meeting (or the public announcement thereof) commence a new time period (or extend any time period)

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for the giving of stockholder’s notice as described above. Such stockholder’s notice shall set forth (A) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act, and Rule 14a-11 thereunder, including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected; (B) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting (including the text of any resolutions proposed for consideration), the reasons for conducting such business at the meeting and, in the event that such business includes a proposal to amend either the Certificate of Incorporation or the By-Laws of the Corporation, the language of the proposed amendment; (C) any material interest in such business of such stockholder and of any beneficial owner on whose behalf the proposal is made and, in the case of nominations, a description of all arrangements or understandings between the stockholder and each nominee and any other persons (naming them) pursuant to which the nominations are to be made by the stockholder; (D) a representation that the stockholder is a holder of record of capital stock of the Corporation entitled to vote at such meeting and intends to appear in person or by a qualified representative at the meeting to propose such business; (E) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (1) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal or elect the nominee and/or (2) otherwise to solicit proxies from stockholders in support of such proposal or nomination; and (F) as to the stockholder giving the notice and any beneficial owner on whose behalf the nomination or proposal is made, (1) the name and address of such stockholder, as it appears on the Corporation’s books, and of such beneficial owner and (2) the class and number of shares of capital stock of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner. If such stockholder does not appear or send a qualified representative to present such proposal at such annual meeting, the Corporation need not present such proposal for a vote at such meeting, notwithstanding that proxies in respect of such vote may have been received by the Corporation. The presiding officer of any annual meeting of stockholders shall refuse to permit any business proposed by a stockholder to be brought before such annual meeting without compliance with the foregoing procedures or if the stockholder solicits proxies in support of such stockholder’s proposal without such stockholder having made the representation required by clause (E) above. The foregoing notice requirements shall be deemed satisfied by a stockholder if the stockholder has notified the Corporation of his or her intention to present a proposal at an annual meeting in compliance with Rule 14a-8 (or any successor thereof) promulgated under the Exchange Act and such stockholder’s proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting. The Corporation may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Corporation.

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(iii)Notwithstanding anything in the second sentence of paragraph (a)(ii) of this Section 1.12 to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation at an annual meeting is increased and there is no public announcement by the Corporation naming the nominees for the additional directorships at least one hundred (100) calendar days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Section 1.12 shall also be considered timely, but only with respect to nominees for the additional directorships, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the Corporation.

(b)Special Meetings of Stockholders.

(i)Only such business as shall have been brought before the special meeting of the stockholders pursuant to the Corporation’s notice of meeting pursuant to Section 1.2 of these By-Laws shall be conducted at such meeting.

(ii)In the event that directors are to be elected at a special meeting of stockholders pursuant to the Corporation’s notice of meeting, nominations of persons for election to the Board of Directors may be made at such special meeting of stockholders (A) by or at the direction of the Board of Directors; or (B) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is entitled to vote at the meeting, who complies with the notice procedures set forth in this Section 1.12 and who is a stockholder of record at the time such notice is delivered to the Secretary of the Corporation. Nominations by stockholders of persons for election to the Board of Directors may be made at such special meeting of stockholders if the stockholder’s notice as required by paragraph (a)(ii) of this Section 1.12 shall be delivered to the Secretary at the principal executive offices of the Corporation not more than one hundred twenty (120) calendar days prior to such special meeting and not less than ninety (90) calendar days prior to such special meeting or ten (10) calendar days following the date on which a public announcement of the date of the special meeting and of the nominees to be elected at such meeting is first made or notice of such meeting is given. In no event shall the adjournment or postponement of a special meeting (or the public announcement thereof) commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

(c)General.

(i)Only persons who are nominated in accordance with the procedures set forth in this Section 1.12 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 1.12. Except as otherwise provided by law, the Certificate of Incorporation or these By-Laws, the presiding officer of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed in accordance with the procedures set forth in this Section 1.12 (including

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whether the stockholder or beneficial owner, if any, on whose behalf the nomination or proposal is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies in support of such stockholder’s representation as required by clause (a)(ii)(E) of this Section 1.12) and, if any proposed nomination or business is not in compliance with this Section 1.12, to declare that such defective proposal or nomination shall be disregarded. Notwithstanding the foregoing provisions of this Section 1.12, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation.

(ii)For purposes of this Section 1.12, “public announcement” shall include disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14, or 15(d) of the Exchange Act.

(iii)For purposes of this Section 1.12, no adjournment nor notice of adjournment of any meeting shall be deemed to constitute a new notice of such meeting for purposes of this Section 1.12 and in order for any notification required to be delivered by a stockholder pursuant to this Section 1.12 to be timely, such notification must be delivered within the periods set forth above with respect to the originally scheduled meeting.

(iv)Notwithstanding the foregoing provisions of this Section 1.12, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 1.12. Nothing in this Section 1.12 shall be deemed to affect any rights (A) of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act; or (B) of the holders of any class or series of Preferred Stock, if any, to elect directors if so provided under the Certificate of Incorporation or any applicable Certificate of Designation.

SECTION 1.13Opening and Closing of Polls.  The date and time for the opening and the closing of the polls for the matters to be voted upon at a stockholder meeting shall be announced at the meeting. The inspector of the election shall be prohibited from accepting any ballots, proxies or votes or any revocations thereof or changes thereto after the closing of the polls, unless the Court of Chancery upon application by a stockholder shall determine otherwise.

SECTION 1.14Confidential Voting.

(a)Proxies and ballots that identify the votes of specific stockholders shall be kept in confidence by the inspectors of election unless:  (i) there is an opposing solicitation with respect to the election or removal of directors; (ii) disclosure is required by applicable law; (iii) a stockholder expressly requests or otherwise authorizes disclosure in relation to such

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stockholder’s vote; or (iv) the Corporation concludes in good faith that a bona fide dispute exists as to the authenticity of one or more proxies, ballots or votes, or as to the accuracy of any tabulation of such proxies, ballots or votes.

(b)The inspectors of election and any authorized agents or other persons engaged in the receipt, count and tabulation of proxies and ballots shall be advised of this Section 1.14 and instructed to comply herewith.

(c)The inspectors of election shall certify, to the best of their knowledge based on due inquiry, that proxies and ballots have been kept in confidence as required by this Section 1.14.

SECTION 1.15No Stockholder Action by Written Consent.  Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of the stockholders of the Corporation, and the ability of the stockholders to consent in writing to the taking of any action is specifically denied.

ARTICLE II

BOARD OF DIRECTORS

SECTION 2.1General Powers; Membership Policies.  Except as may otherwise be provided by law, by the Certificate of Incorporation or by these By-Laws, the property, affairs and business of the Corporation shall be managed by or under the direction of the Board of Directors. The Board of Directors may exercise all the powers of the Corporation and do all such lawful acts and things as are not by law or by the Certificate of Incorporation directed or required to be exercised or done by the stockholders.

SECTION 2.2Number of Directors.  The Board of Directors of the Corporation shall consist of such number of directors as shall from time to time be fixed exclusively by resolution of the Board of Directors adopted by a majority of the entire Board of Directors. The Board of Directors shall at no time consist of fewer than five (5) directors nor more than eleven (11) directors. Directors shall be elected by stockholders by a plurality of the votes cast by holders of shares of the Corporation’s capital stock present in person or represented by proxy and entitled to vote thereon.

SECTION 2.3Classified Board; Election of Directors.  The Board of Directors of the Corporation shall be divided into three classes, designated Classes I, II and III, which shall be as nearly equal in number as possible. Directors of Class I shall hold office for an initial term expiring at the first annual meeting of stockholders to be held after the date hereof. Directors of Class II shall hold office for an initial term expiring at the second annual meeting of stockholders to be held after the date hereof. Directors of Class III shall hold office for an initial term of office expiring at the third annual meeting of stockholders to be held after the date hereof. Except as otherwise provided in Section 2.4 of these By-Laws and subject to the rights of the holders of

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shares of any class or series of Preferred Stock, at each annual meeting of stockholders of the Corporation, the respective successors of the directors whose terms are expiring shall be elected for terms expiring at the annual meeting of stockholders held in the third succeeding year.

SECTION 2.4Additional Directorships.  Newly created directorships or vacancies on the Board of Directors shall be filled by a majority of the directors then in office, regardless of whether such directors fulfill quorum requirements, or by a sole remaining director; and the newly created directorships shall be distributed among the three classes of directors so that, as nearly as possible, each class will consist of one-third (1/3) of the Corporation’s directors. Any director elected to fill any vacancy on the Board of Directors not resulting from an increase in the number of directors shall be of the same class as that of the director whose death, resignation, removal or other event caused the vacancy and shall have the same remaining term as that of his predecessor. A director elected to fill a vacancy or a newly created directorship shall hold office until such director’s successor has been elected and qualified or until such director’s earlier death, resignation or removal. Subject to the rights of the holders of any class or series of Preferred Stock, any vacancy or newly created directorship may also be filled by the vote of the holders of a majority in voting power of the capital stock issued and outstanding and entitled to vote. Directors may be removed only for cause, and only by the affirmative vote of at least a majority in voting power of all outstanding capital stock of the Corporation entitled to vote generally in the election of directors, voting as a single class.

SECTION 2.5Annual and Regular Meetings.  The annual meeting of the Board of Directors for the purpose of electing officers and for the transaction of such other business as may come before the meeting shall be held as soon as practicable following adjournment of the annual meeting of the stockholders. Notice of such annual meeting of the Board of Directors need not be given. The Board of Directors from time to time may by resolution provide for the holding of regular meetings and fix the place (which may be within or without the State of Delaware) and the date and hour of such meetings. Notice of regular meetings need not be given; provided, however, that if the Board of Directors shall fix or change the time or place of any regular meeting, notice of such action shall be mailed promptly, or sent by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, telegraph, facsimile, electronic mail or other electronic means, to each director who shall not have been present at the meeting at which such action was taken, addressed or transmitted to him or her at his or her usual place of business, or shall be delivered or transmitted to him or her personally. Notice of such action need not be given to any director who attends the first regular meeting after such action is taken without protesting the lack of notice to him or her, prior to or at the commencement of such meeting, or to any director who submits a signed waiver of notice, whether before or after such meeting.

SECTION 2.6Special Meetings; Notice.  Special meetings of the Board of Directors shall be held whenever called by the Chairman, any director or the Chief Executive Officer (or, in the event of the Chief Executive Officer’s absence or disability, by any other officer) at such place (within or without the State of Delaware), date and hour as may be specified in the respective notices or waivers of notice of such meetings. Special meetings of the Board of Directors may be called on twenty-four (24) hours’ notice, if notice is given to each director

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personally or by telephone, including a voice messaging system, or other system or technology designed to record and communicate messages, telegraph, facsimile, electronic mail or other electronic means, or on five (5) calendar days’ notice, if notice is mailed to each director, addressed or transmitted to him or her at such director’s usual place of business or other designated location. Notice of any special meeting shall be deemed to have been waived by any director who attends such meeting without protesting the lack of notice to him or her, prior to or at the commencement of such meeting, or to any director who submits a signed waiver of notice, whether before or after such meeting, and any business may be transacted thereat.

SECTION 2.7Quorum; Voting.  At all meetings of the Board of Directors, the presence of a majority of the directors shall constitute a quorum for the transaction of business. Except as otherwise required by law, the vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors.

SECTION 2.8Adjournment.  A majority of the directors present, whether or not a quorum is present, may adjourn any meeting of the Board of Directors to another time or place. No notice need be given of any adjourned meeting unless the time and place of the adjourned meeting are not announced at the time of adjournment, in which case notice conforming to the requirements of Section 2.6 of these By-Laws shall be given to each director.

SECTION 2.9Action Without a Meeting.  Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all members of the Board of Directors consent thereto in writing or by electronic transmission, and such writing or writings or electronic transmissions are filed with the minutes of proceedings of the Board of Directors.

SECTION 2.10Regulations; Manner of Acting.  To the extent consistent with applicable law, the Certificate of Incorporation and these By-Laws, the Board of Directors may adopt such rules and regulations for the conduct of meetings of the Board of Directors and for the management of the property, affairs and business of the Corporation as the Board of Directors may deem appropriate. The directors shall act only as a Board, and the individual directors shall have no power as such.

SECTION 2.11Action by Telephonic Communications.  Members of the Board of Directors may participate in a meeting of the Board of Directors by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this provision shall constitute presence in person at such meeting.

SECTION 2.12Resignations.  Any director may resign at any time by submitting an electronic transmission or by delivering a written notice of resignation, signed by such director, to the Chairman or the Secretary. Unless otherwise specified therein, such resignation shall take effect upon delivery.

SECTION 2.13Removal of Directors.  Any director may be removed at any time, but only for cause, upon the affirmative vote of the holders of a majority of the combined voting

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power of the then outstanding capital stock of the Corporation entitled to vote generally in the election of directors.

SECTION 2.14Compensation.  The amount, if any, which each director shall be entitled to receive as compensation for his or her services as such shall be fixed from time to time by resolution of the Board of Directors.

SECTION 2.15Reliance on Accounts and Reports, etc.  A director, or a member of any committee designated by the Board of Directors shall, in the performance of his or her duties, be fully protected in relying in good faith upon the records of the Corporation and upon information, opinions, reports or statements presented to the Corporation by any of the Corporation’s officers or employees, or committees designated by the Board of Directors, or by any other person as to the matters the member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.

ARTICLE III

BOARD COMMITTEES

SECTION 3.1How Constituted.  The Board of Directors may designate one or more Committees, including but not limited to an Executive Committee, an Audit Committee, a Compensation Committee, and a Corporate Governance Committee, each such Committee to consist of such number of directors as from time to time may be fixed by the Board of Directors. The Board of Directors may designate one or more directors as alternate members of any such Committee, who may replace any absent or disqualified member or members at any meeting of such Committee. Thereafter, members of each such Committee may be designated from time to time by the Board of Directors. Any such Committee may be abolished or re-designated from time to time by the Board of Directors. Each member (and each alternate member) of any such Committee (whether designated at an annual meeting of the Board of Directors or to fill a vacancy or otherwise) shall hold office until his or her successor shall have been designated or until he or she shall cease to be a director, or until his or her earlier death, resignation or removal.

SECTION 3.2Powers.

(a)Executive Committee.  During the intervals between the meetings of the Board of Directors, the Executive Committee, except as otherwise provided in this section, and subject to the provisions of the Certificate of Incorporation, shall have and may exercise the powers and authority of the Board of Directors in the management of the property, affairs and business of the Corporation, including the power to declare dividends. At all times, a majority of the members of the Executive Committee necessary in order to constitute a quorum shall be U.S. citizens.

(b)Audit Committee.  The Audit Committee, except as otherwise may be provided in any resolution of the Board of Directors or as may be required by applicable law or by the rules of any stock exchange upon which the securities of the Corporation may be listed or traded, shall have and may exercise the authority of the Board of Directors to:

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(i)have direct responsibility for the selection, compensation, retention and oversight of the work of the Corporation’s independent auditors;

(ii)set clear hiring policies for employees or former employees of the independent auditors;

(iii)review the results and scope of the audit and other services provided by the Corporation’s independent auditors and discuss any audit problems or difficulties and management’s response;

(iv)review reports by the Corporation’s independent auditors pertaining to the independent auditors’ internal quality-control procedures;

(v)review the Corporation’s annual audited financial statement and quarterly financial statements and discuss the statements with management and the independent auditors;

(vi)review and evaluate the Corporation’s internal control functions;

(vii)review the Corporation’s compliance with legal and regulatory independence;

(viii)review and discuss the Corporation’s earnings press releases, as well as financial information and earnings guidance provided to analysts and ratings agencies;

(ix)review and discuss the Corporation’s risk assessment and risk management policies;

(x)prepare an audit committee report required by the Securities and Exchange Commission to be included in the Corporation’s annual proxy statement; and

(xi)establish procedures regarding complaints received by the Corporation or its employees regarding accounting, accounting controls or accounting matters.

(c)Compensation Committee.  The Compensation Committee, except as otherwise may be provided in any resolution of the Board of Directors or as may be required by applicable law or by the rules of any stock exchange upon which the securities of the Corporation may be listed or traded, shall have and may exercise all the authority of the Board of Directors with respect to compensation, benefits and personnel administration of the employees of the Corporation to:

(i)review and approve corporate goals and objectives relevant to the compensation of the Chief Executive Officer and the other executive officers of the Corporation and its subsidiaries;

(ii)evaluate the performance of the Chief Executive Officer and the other executive officers in light of the corporate goals and objectives;

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(iii)determine and approve the compensation of the Chief Executive Officer and the other executive officers of the Corporation and its subsidiaries;

(iv)make recommendations to the Corporation’s Board of Directors regarding the salaries, incentive compensation plans and equity-based plans for the employees of the Corporation and its subsidiaries;

(v)produce a compensation committee report on executive compensation as required by the Securities and Exchange Commission to be included in the Corporation’s annual proxy statement or annual report on Form 10-K filed with the Securities and Exchange Commission;

(vi)oversee regulatory compliance with respect to compensation matters;

(vii)review and approve any severance or similar termination payments proposed to be made to any current or former executive officer of the Corporation; and

(viii)perform any other duties or responsibilities expressly delegated to the Compensation Committee by the Board of Directors relating to the Corporation’s compensation programs.

(d)Corporate Governance Committee.  The Corporate Governance Committee, except as otherwise may be provided in any resolution of the Board of Directors or as required by applicable law or by the rules of any stock exchange upon which the securities of the Corporation may be listed or traded, shall:

(i)review the structure of the Board of Directors, its committee structure, overall size, and the number of independent directors;

(ii)identify candidates qualified to become board members, consistent with criteria approved by the Board of Directors;

(iii)recommend the candidates identified to be selected as nominees for the next annual meeting of the shareholders;

(iv)review and recommend directors to serve as members of each Committee;

(v)develop, recommend, and oversee an annual self-evaluation process for the Board of Directors and its Committees;

(vi)develop and recommend to the Board of Directors a set of corporate governance principles applicable to the Corporation;

(vii)consider possible conflicts of interests of directors and any transactions involving related parties and make recommendations to the Board of Directors with respect to the determination of director independence;

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(viii)review and make recommendations to the Board of Directors with respect to compensation arrangements for non-employee members of the Board of Directors; and

(ix)oversee the evaluation of the Board of Directors and management.

(e)Other Committees.  Each other Committee, except as otherwise provided in this section, shall have and may exercise such powers of the Board of Directors as may be provided by resolution or resolutions of the Board of Directors.

SECTION 3.3Proceedings.  Each Committee may, subject to approval of the Board of Directors, adopt a charter specifying its scope of responsibility and may fix its own rules of procedure and may meet at such place (within or without the State of Delaware), at such time and upon such notice, if any, as it shall determine from time to time. Each Committee shall keep minutes of its proceedings and shall report such proceedings to the Board of Directors at the meeting of the Board of Directors next following any such proceedings.

SECTION 3.4Quorum and Manner of Acting.  Except as may be otherwise provided in the resolution creating such Committee, at all meetings of any Committee the presence of members (or alternate members) constituting a majority of the total membership of such Committee shall constitute a quorum for the transaction of business. The act of the majority of the members present at any meeting at which a quorum is present shall be the act of such Committee. Any action required or permitted to be taken at any meeting of any such Committee may be taken without a meeting, if all members of such Committee shall consent to such action in writing or by electronic transmission, and such writing or writings or electronic transmission or transmissions are filed with the minutes of the proceedings of the Committee. The members of any such Committee shall act only as a Committee, and the individual members of such Committee shall have no power as such.

SECTION 3.5Action by Telephonic Communications.  Members of any Committee designated by the Board of Directors may participate in a meeting of such Committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this provision shall constitute presence in person at such meeting.

SECTION 3.6Resignations.  Any member of any Committee may resign at any time by delivering a written notice of resignation, signed by such member, to the Chairman or the Chief Executive Officer. Unless otherwise specified therein, such resignation shall take effect upon delivery.

SECTION 3.7Removal.  Any member (and any alternate member) of any Committee may be removed from his or her position as a member of such Committee at any time, either for or without cause, by resolution adopted by a majority of the whole Board of Directors.

SECTION 3.8Vacancies.  If any vacancy shall occur in any Committee, by reason of death, resignation, removal or otherwise, the remaining members (and alternate members) shall continue to act, and any such vacancy may be filled by the Board of Directors.

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ARTICLE IV

OFFICERS

SECTION 4.1Number.  The officers of the Corporation shall be elected by the Board of Directors and shall be a Chairman, a Chief Executive Officer, a Chief Operating Officer, a President, one or more Vice Presidents, a Chief Financial Officer, a Secretary, a Treasurer and a General Counsel. The Board of Directors may appoint such other officers as it may deem appropriate; provided that officers of the rank of Vice President and below may be appointed by the Compensation Committee. Such other officers shall exercise such powers and perform such duties as may be determined from time to time by the Board of Directors, the Chief Executive Officer, the Chief Operating Officer or the President. Any number of offices may be held by the same person. No officer, other than the Chairman, need be a director of the Corporation.

SECTION 4.2Election.  Unless otherwise determined by the Board of Directors, the officers of the Corporation shall be elected by the Board of Directors at the annual meeting of the Board of Directors, and shall be elected to hold office until the next succeeding annual meeting of the Board of Directors. In the event of the failure to elect officers at such meeting, officers may be elected at any regular or special meeting of the Board of Directors. Officers of the rank of Vice President and below may be elected by the Compensation Committee. Each officer shall hold office until such officer’s successor has been elected and qualified, or until such officer’s earlier death, resignation or removal.

SECTION 4.3Powers.  Each of the officers of the Corporation elected by the Board of Directors or appointed by an officer in accordance with these By-Laws shall have the powers and duties prescribed by law, by these By-Laws or by the Board of Directors and, in the case of appointed officers, the powers and duties prescribed by the appointing officer, and, unless otherwise prescribed by these By-Laws or by the Board of Directors or such appointing officer, shall have such further powers and duties as ordinarily pertain to that office.

SECTION 4.4Salaries.  Except as otherwise provided by Section 3.2 hereof, the salaries of all executive officers (as determined by the Board of Directors) of the Corporation shall be fixed by the Board of Directors.  The Chief Executive Officer shall fix the salaries of all non-executive officers.

SECTION 4.5Removal and Resignation; Vacancies.  Any officer may be removed for or without cause at any time by the Board of Directors. Any officer may resign at any time by delivering notice of resignation, either in writing signed by such officer or by electronic transmission, to the Board of Directors or the Chief Executive Officer. Unless otherwise specified therein, such resignation shall take effect upon delivery. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise, shall be filled by the Board of Directors.

SECTION 4.6Authority and Duties of Officers.  The officers of the Corporation shall have such authority and shall exercise such powers and perform such duties as may be specified

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in these By-Laws, except that in any event each officer shall exercise such powers and perform such duties as may be required by law.

SECTION 4.7The Chairman.  The directors shall elect from among the members of the Board of Directors a Chairman, who shall be a U.S. citizen. The Chairman shall have such duties and powers as set forth in these By-Laws or as shall otherwise be conferred upon the Chairman from time to time by the Board of Directors. The Chairman shall preside over all meetings of the stockholders and the Board of Directors.

SECTION 4.8The Chief Executive Officer.  The Chief Executive Officer shall have general control and supervision of the policies and operations of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. The Chief Executive Officer shall be a U.S. citizen. He or she shall manage and administer the Corporation’s business and affairs and shall also perform all duties and exercise all powers usually pertaining to the office of a chief executive officer of a corporation. He or she shall have the authority to sign, in the name and on behalf of the Corporation, checks, orders, contracts, leases, notes, drafts and other documents and instruments in connection with the business of the Corporation and together with the Secretary, or any Assistant Secretary, conveyances of real estate and other documents and instruments to which the seal of the Corporation is affixed. He or she shall have the authority to cause the employment or appointment of such employees and agents of the Corporation as the conduct of the business of the Corporation may require, to fix their compensation, and to remove or suspend any employee or agent elected or appointed by the Chief Executive Officer or the Board of Directors. The Chief Executive Officer shall perform such other duties and have such other powers as the Board of Directors or the Chairman may from time to time prescribe.

SECTION 4.9The Chief Operating Officer.  The Chief Operating Officer, subject to the authority of the Chief Executive Officer, shall have primary responsibility for, and authority with respect to, the management of the day-to-day business and affairs of the Corporation, to the extent prescribed by the Chief Executive Officer. The Chief Operating Officer shall have the authority to sign, in the name and on behalf of the Corporation, checks, orders, contracts, leases, notes, drafts and other documents and instruments and perform such other duties and have such other powers as the Board of Directors or the Chief Executive Officer may from time to time prescribe.

SECTION 4.10The President.  The President shall perform such duties and have such powers as the Board of Directors or the Chief Executive Officer may from time to time prescribe.

SECTION 4.11Absence or Disability of the Chief Executive Officer.  In the event of the absence of the Chief Executive Officer or in the event of the Chief Executive Officer’s inability to act, the officer, if any, designated by resolution of the Board of Directors (or in the event there is more than one such designated officer, then in the order of designation) shall perform the duties of the Chief Executive Officer, and when so acting, shall have all the powers and be subject to all the restrictions of the Chief Executive Officer. Any such officer or officers acting in the absence or inability to act of the Chief Executive Officer shall be U.S. citizens.

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SECTION 4.12Vice Presidents.  The Vice Presidents shall have such designations and shall perform such duties and have such powers as the Board of Directors or the Chief Executive Officer may from time to time prescribe.

SECTION 4.13The Secretary.  The Secretary shall keep or cause to be kept a record of all the proceedings of the meetings of the stockholders and of the Board of Directors, and shall cause all notices to be duly given in accordance with the provisions of these By-Laws and as required by law. The Secretary shall be the custodian of the records and of the seal of the Corporation and cause such seal (or a facsimile thereof) to be affixed to instruments when appropriate. The Secretary shall perform, in general, all duties incident to the office of secretary and such other duties as may be specified in these By-Laws or as may be assigned to him or her from time to time by the Board of Directors or the Chief Executive Officer.

SECTION 4.14The Chief Financial Officer.  The Chief Financial Officer shall be the principal financial officer of the Corporation and shall have responsibility for the financial affairs of the Corporation and shall keep or cause to be kept correct records of the business and transactions of the Corporation. The Chief Financial Officer shall perform such other duties and exercise such other powers as are normally incident to the office of chief financial officer and as may be prescribed by the Board of Directors or the Chief Executive Officer from time to time.

SECTION 4.15The Treasurer.  The Treasurer shall have charge and supervision over and be responsible for the moneys, securities, receipts and disbursements of the Corporation, and shall keep or cause to be kept full and accurate records of all receipts of the Corporation, and shall cause the moneys and other valuable effects of the Corporation to be deposited in the name and to the credit of the Corporation. The Treasurer shall cause the moneys of the Corporation to be disbursed by checks or drafts upon the authorized depositaries of the Corporation and cause to be taken and preserved proper vouchers for all moneys disbursed. The Treasurer shall perform, in general, all duties incident to the office of treasurer and such other duties as may be specified in these By-Laws or as may be assigned to him or her from time to time by the Board of Directors, the Chief Executive Officer, or the Chief Financial Officer.

SECTION 4.16The General Counsel.  The General Counsel shall have responsibility for the legal affairs of the Corporation. The General Counsel shall perform such other duties and exercise such other powers as are normally incident to the office of general counsel and as may be prescribed by the Board of Directors or the Chief Executive Officer from time to time.

SECTION 4.17Additional Officers.  The Board of Directors from time to time may delegate to any officer the power to appoint subordinate officers and to prescribe their respective rights, terms of office, authorities and duties. Any such officer may remove any such subordinate officer appointed by him or her, for or without cause, but such removal shall be without prejudice to the contractual rights of such subordinate officer or agent, if any, with the Corporation.

SECTION 4.18Security.  The Board of Directors may require any officer, agent or employee of the Corporation to provide security for the faithful performance of such officer’s,

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agent’s or employee’s duties, in such amount and of such character as may be determined from time to time by the Board of Directors.

ARTICLE V

CAPITAL STOCK

SECTION 5.1Certificates of Stock, Uncertificated Shares.  The shares of capital stock of the Corporation may be either represented by certificates or uncertificated shares; provided that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of the capital stock of the Corporation shall be uncertificated shares. Any resolution of the Board of Directors providing for uncertificated shares shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Subject to Section 5.3 below, notwithstanding the adoption of such resolution by the Board of Directors, every holder of capital stock represented by certificates and, upon request, every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of, the Corporation, (a) by the Chairman, the Chief Executive Officer, the Chief Operating Officer, the President or a Vice President; and (b) by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, representing the number of shares registered in certificate form. Such certificate shall be in such form as the Board of Directors may determine, to the extent consistent with applicable law, the Certificate of Incorporation and these By-Laws.

SECTION 5.2Signatures; Facsimile.  All signatures on the certificate referred to in Section 5.1 of these By-Laws may be in facsimile, engraved or printed form, to the extent permitted by law. In case any officer, transfer agent or registrar who has signed, or whose facsimile, engraved or printed signature has been placed upon a certificate representing shares of capital stock of the Corporation shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.

SECTION 5.3Lost, Stolen or Destroyed Certificates.  The Board of Directors may direct that a new certificate be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon delivery to the Board of Directors of an affidavit of the owner or owners of such certificate, setting forth such allegation. The Board of Directors may require the owner of such lost, stolen or destroyed certificate, or his or her legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate.

SECTION 5.4Transfer of Stock.  Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares of stock, duly endorsed or accompanied by appropriate evidence of succession, assignment or authority to transfer, the Corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Within a reasonable time after the transfer of uncertificated stock, the Corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on the certificates pursuant to Sections 151, 156, 202(a) or

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218(a) of the DGCL. Subject to the provisions of the Certificate of Incorporation and these By-Laws, the Board of Directors may prescribe such additional rules and regulations as it may deem appropriate relating to the issue, transfer and registration of shares of the Corporation. For so long as required by the rules of any exchange upon which the securities of the Corporation may be listed or traded, the Corporation shall not close, and shall not permit to be closed, the transfer books on which transfers of such securities are recorded.

SECTION 5.5Registered Stockholders.  To the fullest extent permitted by law, prior to due surrender of a certificate for registration of transfer, the Corporation may treat the registered owner as the person exclusively entitled to receive dividends and other distributions, to vote, to receive notice and otherwise to exercise all the rights and powers of the owner of the shares represented by such certificate, and the Corporation shall not be bound to recognize any equitable or legal claim to or interest in such shares on the part of any other person, whether or not the Corporation shall have notice of such claim or interests. Whenever any transfer of shares of capital stock shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer if, when the certificates are presented to the Corporation for transfer or uncertificated shares are requested to be transferred, both the transferor and transferee request the Corporation to do so.

SECTION 5.6Transfer Agent and Registrar.  The Board of Directors may appoint one or more transfer agents and one or more registrars, and may require all certificates representing shares to bear the signature of any such transfer agents or registrars.

ARTICLE VI

INDEMNIFICATION

To the fullest extent permitted by the laws of the State of Delaware:

SECTION 6.1Nature of Indemnity.  Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any actual or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she or a person of whom he or she is the legal representative is or was a director or an officer of the Corporation or is or was serving at the request of the Corporation as a director, officer or trustee of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an “indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer or trustee or in any other capacity while serving as a director, officer or trustee, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended, against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith; provided, however, that, except as provided in these By-Laws with respect to proceedings to enforce rights to indemnification and “advancement of expenses” (as defined below), the Corporation shall indemnify any such indemnitee in

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connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. Furthermore, the Corporation may only indemnify such person if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding had no reasonable cause to believe that his or her conduct was unlawful; except that in the case of an action or suit by or in the name of the Corporation to procure a judgment in its favor (a) such indemnification shall be limited to expenses (including attorneys’ fees) actually and reasonably incurred by such person in the defense or settlement of such action or suit; and (b) no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper.

The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.

SECTION 6.2Advance Payment of Expenses.  In addition to the right to indemnification conferred in this Article VI, an indemnitee shall also have the right to be paid by the Corporation the expenses (including attorneys’ fees) incurred in defending any such proceeding in advance of its final disposition (hereinafter an “advancement of expenses”); provided, however, that, if the DGCL requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (hereinafter an “undertaking”), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a “final adjudication”) that such indemnitee is not entitled to be indemnified for such expenses under this Article VI or otherwise. Such expenses (including attorneys’ fees) incurred by former directors and officers shall be so paid upon such terms and conditions, if any, as the Corporation deems appropriate. The Board of Directors may authorize the Corporation’s counsel to represent such director or officer in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding.

SECTION 6.3Procedure for Indemnification.  If, following final disposition of a proceeding, a claim for indemnification under this Article VI is not paid in full by the Corporation within sixty (60) calendar days after a written claim has been received by the Corporation, or if, whether before or after final disposition of a proceeding, a claim for an advancement of expenses under this Article VI is not paid in full by the Corporation within

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twenty (20) calendar days after a written claim has been received by the Corporation, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit, including without limitation reasonable attorneys’ fees. In any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that the indemnitee has not met any applicable standard for indemnification set forth in the DGCL.  In any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met any applicable standard for indemnification set forth in the DGCL. Neither the failure of the Corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) to have made a determination that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article VI or otherwise shall be on the Corporation.

SECTION 6.4Preservation of Other Rights.  The rights to indemnification and to the advancement of expenses conferred in this Article VI shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the Certificate of Incorporation, these By-Laws, agreement, vote of stockholders or directors or otherwise.

SECTION 6.5Insurance.  The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.

SECTION 6.6Employees and Agents.  The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation to the fullest extent of the provisions of this Article VI with respect to the indemnification and advancement of expenses of directors and officers of the Corporation.

SECTION 6.7Survival.  The rights conferred upon indemnitees in this Article VI shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director, officer or trustee and shall inure to the benefit of the indemnitee’s heirs, executors and

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administrators. Any amendment, alteration or repeal of this Article VI that adversely affects any right of an indemnitee or its successors shall be prospective only and shall not limit or eliminate any such right with respect to any proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place prior to such amendment, alteration or repeal.

ARTICLE VII

OFFICES

SECTION 7.1Registered Office.  The registered office of the Corporation in the State of Delaware shall be located at The Corporation Trust Company, 1209 Orange Street, in the City of Wilmington, New Castle County, Delaware 19801. The name and address of the Corporation’s registered agent at such address is The Corporation Trust Company.

SECTION 7.2Other Offices.  The Corporation may maintain offices or places of business at such other locations within or without the State of Delaware as the Board of Directors may from time to time determine or as the business of the Corporation may require.

ARTICLE VIII

GENERAL PROVISIONS

SECTION 8.1Dividends.  Subject to any applicable provisions of law and the Certificate of Incorporation or any resolution or resolutions adopted by the Board of Directors pursuant to authority expressly vested in it by the Certificate of Incorporation and Section 151 of the DGCL, the Board of Directors may, at any regular or special meeting of the Board of Directors, out of funds legally available therefore, declare dividends upon the capital stock of the Corporation, and any such dividend may be paid in cash, property, or shares of the Corporation’s stock.

A member of the Board of Directors, or a member of any committee designated by the Board of Directors shall be fully protected in relying in good faith upon the records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or committees of the Board of Directors, or by any other person as to matters the director reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation, as to the value and amount of the assets, liabilities and/or net profits of the Corporation, or any other facts pertinent to the existence and amount of surplus or other funds from which dividends might properly be declared and paid.

SECTION 8.2Reserves.  There may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, thinks proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors shall think conducive to the interests of the Corporation, and the Board of Directors may similarly modify or abolish any such reserve.

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SECTION 8.3Execution of Instruments.  The Chief Executive Officer, the Chief Operating Officer, the President, the Chief Financial Officer, any Vice President, the Secretary or the Treasurer may enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation. The Board of Directors or the Chief Executive Officer may authorize any other officer or agent to enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation. Any such authorization may be general or limited to specific contracts or instruments.

SECTION 8.4Facsimile Signatures.  In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these By-Laws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof.

SECTION 8.5Corporate Books.  The books of the Corporation may be kept outside of the State of Delaware at such place or places as the Board of Directors may from time to time determine.

SECTION 8.6Corporate Indebtedness.  No loan shall be contracted on behalf of the Corporation, and no evidence of indebtedness shall be issued in its name, unless authorized by the Board of Directors, the Chief Executive Officer or the Chief Financial Officer. Such authorization may be general or confined to specific instances. Loans so authorized may be effected at any time for the Corporation from any bank, trust company or other institution, or from any firm, corporation or individual. All bonds, debentures, notes and other obligations or evidences of indebtedness of the Corporation issued for such loans shall be made, executed and delivered as the Board of Directors, the Chief Executive Officer or the Chief Financial Officer shall authorize. When so authorized by the Board of Directors, the Chief Executive Officer or the Chief Financial Officer, any part of or all the properties, including contract rights, assets, business or good will of the Corporation, whether then owned or thereafter acquired, may be mortgaged, pledged, hypothecated or conveyed or assigned in trust as security for the payment of such bonds, debentures, notes and other obligations or evidences of indebtedness of the Corporation, and of the interest thereon, by instruments executed and delivered in the name of the Corporation.

SECTION 8.7Deposits.  Any funds of the Corporation may be deposited from time to time in such banks, trust companies or other depositaries as may be determined by the Board of Directors, the Chief Executive Officer, the Chief Financial Officer or the Treasurer or by such officers or agents as may be authorized by the Board of Directors or the Chief Executive Officer, the Treasurer or the Chief Financial Officer or the Treasurer to make such determination.

SECTION 8.8Checks.  All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such agent or agents of the Corporation, and in such manner, as the Board of Directors or the Chief Executive Officer from time to time may determine.

SECTION 8.9Sale, Transfer, etc. of Securities.  To the extent authorized by the Board of Directors or by the Chief Executive Officer, the Chief Operating Officer, the President,

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the Chief Financial Officer, any Vice President, the Secretary or the Treasurer or any other officers designated by the Board of Directors or the Chief Executive Officer may sell, transfer, endorse, and assign any shares of stock, bonds or other securities owned by or held in the name of the Corporation, and may make, execute and deliver in the name of the Corporation, under its corporate seal (if required), any instruments that may be appropriate to effect any such sale, transfer, endorsement or assignment.

SECTION 8.10Voting as Stockholder.  Unless otherwise determined by resolution of the Board of Directors, the Chief Executive Officer, the Chief Operating Officer, the President or any Vice President shall have full power and authority on behalf of the Corporation to attend any meeting of stockholders of any corporation in which the Corporation may hold stock, and to act, vote (or execute proxies to vote) and exercise in person or by proxy all other rights, powers and privileges incident to the ownership of such stock. Such officers acting on behalf of the Corporation shall have full power and authority to execute any instrument expressing consent to or dissent from any action of any such corporation without a meeting. The Board of Directors may by resolution from time to time confer such power and authority upon any other person or persons.

SECTION 8.11Fiscal Year.  The fiscal year of the Corporation shall be fixed by the Board of Directors.

SECTION 8.12Seal.  The seal of the Corporation shall contain the name of the Corporation, the year of its incorporation and the words “Corporate Seal” and “Delaware.” The form of such seal shall be subject to alteration by the Board of Directors. The seal may be used by causing it or a facsimile thereof to be impressed, affixed or reproduced, or may be used in any other lawful manner.

ARTICLE IX

AMENDMENT OF BY-LAWS

SECTION 9.1Amendment.  Subject to the provisions of this Section 9.1 and the Certificate of Incorporation and any Preferred Stock Certificate of Designations, these By-Laws (including this Article IX) may be amended, altered or repealed:

(a)by resolution adopted by a majority of the Board of Directors without a stockholder vote at any special or regular meeting of the Board of Directors if, in the case of such special meeting only, notice of such amendment, alteration or repeal is contained in the notice or waiver of notice of such meeting; provided, however, that the amendment, alteration or repeal of the provisions of Sections 1.2, 1.15, 2.2, 2.3, or 2.13 hereof or this Section 9.1 shall require the affirmative vote of the holders of two-thirds (2/3) or more of the combined voting power of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors; or

(b)at any regular or special meeting of the stockholders upon the affirmative vote of the holders of two-thirds (2/3) or more of the combined voting power of the outstanding shares

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of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, if, in the case of such special meeting only, notice of such amendment, alteration or repeal is contained in the notice or waiver of notice of such meeting.

ARTICLE X

CONSTRUCTION

SECTION 10.1Construction.  In the event of any conflict between the provisions of these By-Laws as in effect from time to time and the provisions of the Certificate of Incorporation of the Corporation as in effect from time to time, the provisions of such Certificate of Incorporation shall be controlling.

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EX-4.3

Exhibit 4.3

SUPPLEMENTAL INDENTURE

SUPPLEMENTAL INDENTURE dated as of January 20, 2005, between FAIRPOINT COMMUNICATIONS, INC., a Delaware corporation (the “Company”), and THE BANK OF NEW YORK (as successor to United States Trust Company of New York (the “Old Trustee”)), a New York banking corporation, as Trustee (the “Trustee”), to the Indenture, dated as of May 24, 2000 (the “Indenture”), between the Company and the Old Trustee, as amended as of the date hereof.  Capitalized terms used in this Supplemental Indenture and not otherwise defined herein shall have the meanings assigned to such terms in the Indenture.

WITNESSETH:

WHEREAS, the Company and the Old Trustee have heretofore executed and delivered the Indenture providing for the issuance of 12-1/2% Senior Subordinated Notes due 2010 (the “Securities”) of the Company;

WHEREAS, the Company intends to offer its common stock to the public pursuant to a Registration Statement on Form S-1 (the “IPO”) and enter into a series of transactions (the “Restructuring”) which require the amendment and/or waiver of various provisions of the Indenture;

WHEREAS, Section 9.02 of the Indenture provides that the Company and the Trustee may, with the written consent of the Holders of at least a majority in aggregate principal amount of the Securities outstanding, amend the Indenture and/or the Securities;

WHEREAS, the Company has offered to purchase for cash all of the outstanding Securities upon the terms and subject to the conditions set forth in the Offer to Purchase and Consent Solicitation Statement, dated January 5, 2005, as the same may be amended, supplemented or modified (the “Offer”);

WHEREAS, the Offer is conditioned upon, among other things, the proposed amendments (the “Proposed Amendments”) to the Indenture set forth herein having been approved by at least a majority in aggregate principal amount of the Securities outstanding, with the effectiveness of such Proposed Amendments with respect to the Indenture and the Securities being subject to the acceptance for payment by the Company of Securities representing a majority in aggregate principal amount of the outstanding Securities pursuant to the Offer (the “Acceptance”);

WHEREAS, the Company has received and delivered to the Trustee the requisite consents to effect the Proposed Amendments under the Indenture and the Securities;

WHEREAS, the Company has been authorized by a resolution of its Board of Directors to enter into this Supplemental Indenture; and

WHEREAS, all other acts and proceedings required by law, by the Indenture and the certificate of incorporation and by-laws of the Company to make this Supplemental Indenture a valid and binding agreement of the Company for the purposes expressed herein, in accordance with its terms, have been duly done and performed;

NOW THEREFORE, in consideration of the premises and the covenants and agreements contained herein, and for other good and valuable consideration the receipt of which is hereby acknowledged, and for the equal and proportionate benefit of the Holders of the Securities, the Company and the Trustee hereby agree as follows:

Article I.

Waiver of Compliance with Indenture

1.1The Trustee, with the consent of a majority in aggregate principal amount of the outstanding Securities, waives compliance with the provisions of Sections 4.02 through 4.16 of the Indenture, inclusive, Article V of the Indenture and with any events of default set forth in Section 6.01 of the Indenture with respect thereto arising in connection with the consummation of the IPO and the transactions contemplated by the Restructuring, including, without limitation:

(a)the entry into a new senior secured credit facility in an amount up to $690.0 million;

(b)the repayment of all of the Company’s outstanding indebtedness; and

(c)any and all actions that are taken by the Company or any of its subsidiaries in connection with the consummation of the IPO and the transactions contemplated by the Restructuring.

Article II.

Amendments to the Indenture

2.1Amendment of Sections 4.02 through 4.06.  Sections 4.02 through 4.06 of the Indenture, inclusive, are hereby deleted in their entirety and each Section is replaced with the following: “[intentionally omitted]”.

2.2Amendment of Section 4.07.  The words “270 days” which appear in two places in the first sentence of clause (c) in Section 4.07 of the Indenture are hereby deleted in their entirety in both such places and replaced in both such places with the following: “360 days”.

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2.3Amendment of Sections 4.08 through 4.13.  Sections 4.08 through 4.13 of the Indenture, inclusive, are hereby deleted in their entirety and each Section is replaced with the following: “[intentionally omitted]”.

2.4Amendment of Sections 4.15 through 4.16.  Sections 4.15 through 4.16 of the Indenture, inclusive, are hereby deleted in their entirety and each Section is replaced with the following: “[intentionally omitted]”.

2.5Amendment of Article V.  Article V of the Indenture is hereby deleted in its entirety and is replaced with the following: “[intentionally omitted]”.

2.6Amendment of Section 6.01.

(a)  Clauses (3), (4), (5) and (8) of the first paragraph of Section 6.01 of the Indenture are hereby deleted in their entirety and replaced with the following: “[intentionally omitted]”.

(b)The fourth paragraph reading “A Default under clause (4) is not an Event of Default until the Trustee or the Holders of at least 25.0% in aggregate principal amount of the Securities then outstanding notify the Company (and in the case of such notice by Holders, the Trustee) of the Default and the Company does not cure such Default within the time specified after receipt of such notice.  Such notice must specify the Default, demand that it be remedied and state that such notice is a “Notice of Default”“ in Section 6.01 of the Indenture is hereby deleted in its entirety.

2.7Amendment of Section 8.02.  Clause (7) of the first paragraph of Section 8.02 of the Indenture is hereby deleted in its entirety and replaced with the following: “[intentionally omitted]”.

2.8Amendment of the Indenture and the Global Securities.  Section 4 of the Global Securities is hereby amended to add the words, “, as amended or supplemented from time to time” at the end of the first sentence after the words “, between the Company and the Trustee”.

2.9Amendment of Defined Terms.

(a)The defined term “Asset Sale” in Section 1.01 of the Indenture is hereby deleted in its entirety and replaced with the following:

““Asset Sale” means any sale, lease, transfer, conveyance, issuance or other disposition (or series of related sales, leases, transfers, conveyances, issuances or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a

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“disposition”), of (a) any shares of Capital Stock of a Restricted Subsidiary (other than directors’ qualifying shares) or (b) any other Property of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary, other than, in the case of clauses (a) and (b) above:

(i)any disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary;

(ii)any merger, consolidation or amalgamation of the Company with or into any other Person (other than a merger with a Wholly Owned Subsidiary into the Company) or a sale, transfer, assignment, lease, conveyance or other disposition of all or substantially all of the Company’s Property in any one transaction or series of transactions unless:

(A) the Company shall be the surviving Person (the “Surviving Person”) or the Surviving Person (if other than the Company) formed by such merger, consolidation or amalgamation or to which such sale, transfer, assignment, lease, conveyance or disposition is made shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia;

(B) the Surviving Person (if other than the Company) expressly assumes, by supplemental indenture in form satisfactory to the Trustee, executed and delivered to the Trustee by such Surviving Person, the due and punctual payment of the principal of, and premium, if any, and interest on, all the Notes, according to their tenor, and the due and punctual performance and observance of all the covenants and conditions of the Indenture to be performed by the Company; and

(C)in the case of a sale, transfer, assignment, lease, conveyance or other disposition of all or substantially all the Property of the Company, such Property shall have been transferred as an entirety or virtually as an entirety to one Person;

(iii)any disposition or series of related dispositions for an aggregate consideration not in excess of $1.0 million;

(iv)contemporaneous exchanges by the Company or any Restricted Subsidiary of Telecommunications Assets for other Telecommunications Assets in the ordinary course of business as long as the applicable Telecommunications Assets received by the Company or such Restricted

4

Subsidiary have at least substantially equal Fair Market Value to the Company or such Restricted Subsidiary (as evidenced by a resolution of the Board of Directors of the Company);

(v)the grant of Liens not prohibited by the Indenture;

(vi)any disposition of obsolete, worn-out, uneconomical or surplus property or equipment in the ordinary course of business;

(vii)the sale or other disposition of cash or cash equivalents (including the payment of dividends);

(viii)the sale or discount, in each case without recourse, of accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof; and

(ix)any release of intangible claims or rights in connection with the loss or settlement of a bona fide lawsuit, dispute or controversy.”

(b)The defined term “Change of Control” in Section 1.01 of the Indenture is hereby deleted in its entirety and replaced with the following:

““Change of Control” means the occurrence of any of the following events:

(a)any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more of the Equity Investors, becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Company;

(b)the Company merges or consolidates with or into, or sells or transfers (in one or a series of related transactions) all or substantially all of the assets of the Company and its Restricted Subsidiaries to, another Person, other than one or more of the Equity Investors, and any “person” (as defined in clause (a) above), other than one or more of the Equity Investors, is or becomes the “beneficial owner” (as so defined), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the surviving Person in such merger or consolidation, or the transferee Person in such sale or transfer of assets, as the case may be;

(c)during any period of two consecutive years, individuals who at the beginning of such period were members of the Board of Directors of the Company (together with any new members thereof whose election by the

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Board of Directors or whose nomination for election by holders of Capital Stock of the Company was approved by a vote of a majority of the members of the Board of Directors then still in office who were either members thereof at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the members of the Board of Directors then in office; or

(d)the shareholders of the Company shall have approved any plan of liquidation or dissolution of the Company.”

(c)All terms defined in Sections 1.01 and 1.02 of the Indenture and contained in the Article, Sections and Clauses of the Indenture and the Securities deleted pursuant to Sections 2.1 through 2.8, inclusive, of this Supplemental Indenture, but not otherwise used elsewhere in the Indenture or the Securities, are hereby deleted in their entirety.

2.10Amendment of Section References.  All references in the Indenture and the Securities to the Article, Sections and Clauses of the Indenture and the Securities deleted pursuant to this Article II of this Supplemental Indenture are hereby deleted, other than any references to such Sections contained in clause (5)(i) of the first paragraph of Section 9.02 of the Indenture.

Article III.

Effectiveness

3.1Effectiveness of this Supplemental Indenture.  This Supplemental Indenture is entered into pursuant to and consistent with Section 9.02 of the Indenture, and nothing herein shall constitute a waiver, amendment, modification or deletion of the Indenture requiring the approval of each Securityholder affected thereby pursuant to clauses (1) through (9) of the first paragraph of Section 9.02 of the Indenture.  Upon the execution of this Supplemental Indenture by the Company and the Trustee, the Indenture shall be amended and supplemented in accordance herewith, and this Supplemental Indenture shall form a part of the Indenture for all purposes and each Holder shall be bound thereby; provided, however, that the provisions of the Indenture and the Securities referred to in Articles I and II above (such provisions being referred to as the “Amended Provisions”) will remain in effect in the form they existed prior to the execution of this Supplemental Indenture, and the waivers, amendments, modifications and deletions to the Amended Provisions will not become operative, and the terms of the Indenture will not be waived, amended, modified or deleted, in each case, until the Acceptance.

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Article IV.

Miscellaneous

4.1Continuing Effect of the Indenture.  Except as expressly provided herein, all of the terms, provisions and conditions of the Indenture and the Securities outstanding thereunder shall remain in full force and effect.

4.2Reference and Effect on the Indenture.  On and after the Acceptance, each reference in the Indenture to “the Indenture,” “this Indenture,” “hereunder,” “hereof” or “herein” shall mean and be a reference to the Indenture as supplemented by this Supplemental Indenture, unless the context otherwise requires.

4.3Trust Indenture Act Controls.  If any provision of this Supplemental Indenture limits, qualifies or conflicts with another provision of this Supplemental Indenture or the Indenture that is required to be included by the Trust Indenture Act of 1939, as amended, as in force at the date this Supplemental Indenture is executed, the provision required by said Act shall control.

4.4Governing Law.  This Supplemental Indenture shall be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby.

4.5Separability.  In case any provision of this Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

4.6Counterparts.  This Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

4.7Trustee.  The Trustee makes no representations as to the validity or sufficiency of this Supplemental Indenture.  The recitals and statements herein are deemed to be those of the Company and not of the Trustee.

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IN WITNESS WHEREOF, the parties have caused this Supplemental Indenture to be duly executed as of the date first written above.

FAIRPOINT COMMUNICATIONS, INC.
By:	/s/ Walter E. Leach, Jr.
Name: Walter E. Leach, Jr.
Title: Executive Vice President and Chief Financial Officer
THE BANK OF NEW YORK,
as Trustee
By:	/s/ Derek Kettel
Name: Derek Kettel
Title: Agent

EX-4.4

Exhibit 4.4

SUPPLEMENTAL INDENTURE

SUPPLEMENTAL INDENTURE dated as of January 20, 2005, between FAIRPOINT COMMUNICATIONS, INC., a Delaware corporation (the “Company”), and THE BANK OF NEW YORK, a New York banking corporation, as Trustee (the “Trustee”), to the Indenture, dated as of March 6, 2003 (the “Indenture”), between the Company and the Trustee, as amended as of the date hereof.  Capitalized terms used in this Supplemental Indenture and not otherwise defined herein shall have the meanings assigned to such terms in the Indenture.

WITNESSETH:

WHEREAS, the Company and the Trustee have heretofore executed and delivered the Indenture providing for the issuance of 11-7/8% Senior Notes due 2010 (the “Securities”) of the Company;

WHEREAS, the Company intends to offer its common stock to the public pursuant to a Registration Statement on Form S-1 (the “IPO”) and enter into a series of transactions (the “Restructuring”) which require the amendment and/or waiver of various provisions of the Indenture;

WHEREAS, Section 9.02 of the Indenture provides that the Company and the Trustee may, with the written consent of the Holders of at least a majority in aggregate principal amount of the Securities outstanding, amend the Indenture and/or the Securities;

WHEREAS, the Company has offered to purchase for cash all of the outstanding Securities upon the terms and subject to the conditions set forth in the Offer to Purchase and Consent Solicitation Statement, dated January 5, 2005, as the same may be amended, supplemented or modified (the “Offer”);

WHEREAS, the Offer is conditioned upon, among other things, the proposed amendments (the “Proposed Amendments”) to the Indenture set forth herein having been approved by at least a majority in aggregate principal amount of the Securities outstanding, with the effectiveness of such Proposed Amendments with respect to the Indenture and the Securities being subject to the acceptance for payment by the Company of Securities representing a majority in aggregate principal amount of the outstanding Securities pursuant to the Offer (the “Acceptance”);

WHEREAS, the Company has received and delivered to the Trustee the requisite consents to effect the Proposed Amendments under the Indenture and the Securities;

WHEREAS, the Company has been authorized by a resolution of its Board of Directors to enter into this Supplemental Indenture; and

WHEREAS, all other acts and proceedings required by law, by the Indenture and the certificate of incorporation and by-laws of the Company to make this Supplemental Indenture a valid and binding agreement of the Company for the purposes expressed herein, in accordance with its terms, have been duly done and performed;

NOW THEREFORE, in consideration of the premises and the covenants and agreements contained herein, and for other good and valuable consideration the receipt of which is hereby acknowledged, and for the equal and proportionate benefit of the Holders of the Securities, the Company and the Trustee hereby agree as follows:

Article I.

Waiver of Compliance with Indenture

1.1The Trustee, with the consent of a majority in aggregate principal amount of the outstanding Securities, waives compliance with the provisions of Sections 4.02 through 4.16 of the Indenture, inclusive, Article V of the Indenture and with any events of default set forth in Section 6.01 of the Indenture with respect thereto arising in connection with the consummation of the IPO and the transactions contemplated by the Restructuring, including, without limitation:

(a)the entry into a new senior secured credit facility in an amount up to $690.0 million;

(b)the repayment of all of the Company’s outstanding indebtedness; and

(c)any and all actions that are taken by the Company or any of its subsidiaries in connection with the consummation of the IPO and the transactions contemplated by the Restructuring.

Article II.

Amendments to the Indenture

2.1Amendment of Sections 4.02 through 4.06.  Sections 4.02 through 4.06 of the Indenture, inclusive, are hereby deleted in their entirety and each Section is replaced with the following: “[intentionally omitted]”.

2.2Amendment of Section 4.07.  The words “270 days” which appear in two places in the first sentence of clause (c) in Section 4.07 of the Indenture are hereby deleted in their entirety in both such places and replaced in both such places with the following: “360 days”.

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2.3Amendment of Sections 4.08 through 4.13.  Sections 4.08 through 4.13 of the Indenture, inclusive, are hereby deleted in their entirety and each Section is replaced with the following: “[intentionally omitted]”.

2.4Amendment of Sections 4.15 through 4.16.  Sections 4.15 through 4.16 of the Indenture, inclusive, are hereby deleted in their entirety and each Section is replaced with the following: “[intentionally omitted]”.

2.5Amendment of Article V.  Article V of the Indenture is hereby deleted in its entirety and is replaced with the following: “[intentionally omitted]”.

2.6Amendment of Section 6.01.

(a)Clauses (3), (4), (5) and (8) of the first paragraph of Section 6.01 of the Indenture are hereby deleted in their entirety and replaced with the following: “[intentionally omitted]”.

(b)The fourth paragraph reading “A Default under clause (4) is not an Event of Default until the Trustee or the Holders of at least 25.0% in aggregate principal amount of the Securities then outstanding notify the Company (and in the case of such notice by Holders, the Trustee) of the Default and the Company does not cure such Default within the time specified after receipt of such notice.  Such notice must specify the Default, demand that it be remedied and state that such notice is a “Notice of Default”“ in Section 6.01 of the Indenture is hereby deleted in its entirety.

2.7Amendment of Section 8.02.  Clause (7) of the first paragraph of Section 8.02 of the Indenture is hereby deleted in its entirety and replaced with the following: “[intentionally omitted]”.

2.8Amendment of the Indenture and the Global Securities.  Section 4 of the Global Securities is hereby amended to add the words, “, as amended or supplemented from time to time” at the end of the first sentence after the words “, between the Company and the Trustee”.

2.9Amendment of Defined Terms.

(a)The defined term “Asset Sale” in Section 1.01 of the Indenture is hereby deleted in its entirety and replaced with the following:

““Asset Sale” means any sale, lease, transfer, conveyance, issuance or other disposition (or series of related sales, leases, transfers, conveyances, issuances or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a

3

“disposition”), of (a) any shares of Capital Stock of a Restricted Subsidiary (other than directors’ qualifying shares) or (b) any other Property of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary, other than, in the case of clauses (a) and (b) above:

(i)any disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary;

(ii)any merger, consolidation or amalgamation of the Company with or into any other Person (other than a merger with a Wholly Owned Subsidiary into the Company) or a sale, transfer, assignment, lease, conveyance or other disposition of all or substantially all of the Company’s Property in any one transaction or series of transactions unless:

(A)  the Company shall be the surviving Person (the “Surviving Person”) or the Surviving Person (if other than the Company) formed by such merger, consolidation or amalgamation or to which such sale, transfer, assignment, lease, conveyance or disposition is made shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia;

(B)  the Surviving Person (if other than the Company) expressly assumes, by supplemental indenture in form satisfactory to the Trustee, executed and delivered to the Trustee by such Surviving Person, the due and punctual payment of the principal of, and premium, if any, and interest on, all the Notes, according to their tenor, and the due and punctual performance and observance of all the covenants and conditions of the Indenture to be performed by the Company; and

(C)  in the case of a sale, transfer, assignment, lease, conveyance or other disposition of all or substantially all the Property of the Company, such Property shall have been transferred as an entirety or virtually as an entirety to one Person;

(iii)any disposition or series of related dispositions for an aggregate consideration not in excess of $1.0 million;

(iv)contemporaneous exchanges by the Company or any Restricted Subsidiary of Telecommunications Assets for other Telecommunications Assets in the ordinary course of business as long as the applicable Telecommunications Assets received by the Company or such Restricted

4

Subsidiary have at least substantially equal Fair Market Value to the Company or such Restricted Subsidiary (as evidenced by a resolution of the Board of Directors of the Company);

(v)the grant of Liens not prohibited by the Indenture;

(vi)any disposition of obsolete, worn-out, uneconomical or surplus property or equipment in the ordinary course of business;

(vii)the sale or other disposition of cash or cash equivalents (including the payment of dividends);

(viii)the sale or discount, in each case without recourse, of accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof; and

(ix)any release of intangible claims or rights in connection with the loss or settlement of a bona fide lawsuit, dispute or controversy.”

(b)The defined term “Change of Control” in Section 1.01 of the Indenture is hereby deleted in its entirety and replaced with the following:

““Change of Control” means the occurrence of any of the following events:

(a)any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more of the Equity Investors, becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Company;

(b)the Company merges or consolidates with or into, or sells or transfers (in one or a series of related transactions) all or substantially all of the assets of the Company and its Restricted Subsidiaries to, another Person, other than one or more of the Equity Investors, and any “person” (as defined in clause (a) above), other than one or more of the Equity Investors, is or becomes the “beneficial owner” (as so defined), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the surviving Person in such merger or consolidation, or the transferee Person in such sale or transfer of assets, as the case may be;

(c)during any period of two consecutive years, individuals who at the beginning of such period were members of the Board of Directors of the Company (together with any new members thereof whose election by the

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Board of Directors or whose nomination for election by holders of Capital Stock of the Company was approved by a vote of a majority of the members of the Board of Directors then still in office who were either members thereof at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the members of the Board of Directors then in office; or

(d)the shareholders of the Company shall have approved any plan of liquidation or dissolution of the Company.”

(c)All terms defined in Sections 1.01 and 1.02 of the Indenture and contained in the Article, Sections and Clauses of the Indenture and the Securities deleted pursuant to Sections 2.1 through 2.8, inclusive, of this Supplemental Indenture, but not otherwise used elsewhere in the Indenture or the Securities, are hereby deleted in their entirety.

2.10Amendment of Section References.  All references in the Indenture and the Securities to the Article, Sections and Clauses of the Indenture and the Securities deleted pursuant to this Article II of this Supplemental Indenture are hereby deleted, other than any references to such Sections contained in clause (5)(i) of the first paragraph of Section 9.02 of the Indenture.

Article III.

Effectiveness

3.1Effectiveness of this Supplemental Indenture.  This Supplemental Indenture is entered into pursuant to and consistent with Section 9.02 of the Indenture, and nothing herein shall constitute a waiver, amendment, modification or deletion of the Indenture requiring the approval of each Securityholder affected thereby pursuant to clauses (1) through (9) of the first paragraph of Section 9.02 of the Indenture.  Upon the execution of this Supplemental Indenture by the Company and the Trustee, the Indenture shall be amended and supplemented in accordance herewith, and this Supplemental Indenture shall form a part of the Indenture for all purposes and each Holder shall be bound thereby; provided, however, that the provisions of the Indenture and the Securities referred to in Articles I and II above (such provisions being referred to as the “Amended Provisions”) will remain in effect in the form they existed prior to the execution of this Supplemental Indenture, and the waivers, amendments, modifications and deletions to the Amended Provisions will not become operative, and the terms of the Indenture will not be waived, amended, modified or deleted, in each case, until the Acceptance.

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Article IV.

Miscellaneous

4.1Continuing Effect of the Indenture.  Except as expressly provided herein, all of the terms, provisions and conditions of the Indenture and the Securities outstanding thereunder shall remain in full force and effect.

4.2Reference and Effect on the Indenture.  On and after the Acceptance, each reference in the Indenture to “the Indenture,” “this Indenture,” “hereunder,” “hereof” or “herein” shall mean and be a reference to the Indenture as supplemented by this Supplemental Indenture, unless the context otherwise requires.

4.3Trust Indenture Act Controls.  If any provision of this Supplemental Indenture limits, qualifies or conflicts with another provision of this Supplemental Indenture or the Indenture that is required to be included by the Trust Indenture Act of 1939, as amended, as in force at the date this Supplemental Indenture is executed, the provision required by said Act shall control.

4.4Governing Law.  This Supplemental Indenture shall be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby.

4.5Separability.In case any provision of this Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

4.6Counterparts.  This Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

4.7Trustee.  The Trustee makes no representations as to the validity or sufficiency of this Supplemental Indenture.  The recitals and statements herein are deemed to be those of the Company and not of the Trustee.

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IN WITNESS WHEREOF, the parties have caused this Supplemental Indenture to be duly executed as of the date first written above.

FAIRPOINT COMMUNICATIONS, INC.
By:	/s/ Walter E. Leach, Jr.
Name: Walter E. Leach, Jr.
Title: Executive Vice President and Chief Financial Officer
THE BANK OF NEW YORK,
as Trustee
By:	/s/ Derek Kettel
Name: Derek Kettel
Title: Agent

EX-10.1

Exhibit 10.1

CREDIT AGREEMENT

among

FAIRPOINT COMMUNICATIONS, INC.,

VARIOUS LENDING INSTITUTIONS,

BANK OF AMERICA, N.A.,
as SYNDICATION AGENT,

COBANK, ACB
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as CO-DOCUMENTATION AGENTS,

and

DEUTSCHE BANK TRUST COMPANY AMERICAS,
as ADMINISTRATIVE AGENT

Dated as of February 8, 2005

DEUTSCHE BANK SECURITIES, INC.
and
BANC OF AMERICA SECURITIES LLC,
as JOINT LEAD ARRANGERS,

and

DEUTSCHE BANK SECURITIES, INC.,

BANC OF AMERICA SECURITIES LLC,

GOLDMAN SACHS CREDIT PARTNERS, L.P.,

and

MORGAN STANLEY SENIOR FUNDING, INC.,
as JOINT BOOK RUNNING MANAGERS

TABLE OF CONTENTS

SECTION 1. Amount and Terms of Credit
	1.01 Commitment
	1.02 Minimum Borrowing Amounts, etc.
	1.03 Notice of Borrowing
	1.04 Disbursement of Funds
	1.05 Notes
	1.06 Conversions
	1.07 Pro Rata Borrowings
	1.08 Interest
	1.09 Interest Periods
	1.10 Increased Costs, Illegality, etc.
	1.11 Compensation
	1.12 Change of Lending Office
	1.13 Replacement of Lenders
	1.14 Incremental B Term Loan Commitments
SECTION 1A.  Letters of Credit.
1A.01  Letters of Credit
	1A.02  Minimum Stated Amount
	1A.03  Letter of Credit Requests; Notices of Issuance
	1A.04  Agreement to Repay Letter of Credit Drawings
	1A.05  Letter of Credit Participations
	1A.06  Increased Costs
SECTION 2. Fees
	2.01 Fees
	2.02 Voluntary Reduction of Commitments
	2.03 Mandatory Adjustments of Commitments, etc.
SECTION 3. Payments
	3.01 Voluntary Prepayments
	3.02 Mandatory Prepayments
	3.03 Method and Place of Payment
	3.04 Net Payments
SECTION 4. Conditions Precedent
	4.01 Conditions Precedent to Initial Borrowing Date and the Initial Incurrence of Loans
	4.02 Conditions Precedent to All Loans (other than RF Loans and Delayed-Draw B Term Loans Incurred to Finance an Optional Non-2008 Tender Offer Notes

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	Redemption and RF Loans Incurred on the Redemption Date to Finance the Existing 2008 Senior Subordinated Notes Redemption)
	4.03 Special Condition Precedent to Incurrence of RF Loans and Delayed-Draw B Term Loans Incurred to Finance an Optional Non-2008 Tender Offer Notes Redemption and of RF Loans Incurred on the Redemption Date to Finance the Existing 2008 Senior Subordinated Notes Redemption
SECTION 5. Representations, Warranties and Agreements
	5.01 Company Status
	5.02 Company Power and Authority
	5.03 No Violation
	5.04 Litigation
	5.05 Use of Proceeds; Margin Regulations
	5.06 Governmental Approvals
	5.07 Investment Company Act
	5.08 Public Utility Holding Company Act
	5.09 True and Complete Disclosure
	5.10 Financial Condition; Financial Statements
	5.11 Security Interests
	5.12 Compliance With Statutes
	5.13 Tax Returns and Payments
	5.14 Compliance with ERISA
	5.15 Subsidiaries
	5.16 Intellectual Property
	5.17 Environmental Matters
	5.18 Labor Relations
	5.19 Subordination
	5.20 Capitalization
SECTION 6. Affirmative Covenants
	6.01 Information Covenants
	6.02 Books, Records and Inspections
	6.03 Insurance
	6.04 Payment of Taxes
	6.05 Company Franchises
	6.06 Compliance with Statutes, etc.
	6.07 ERISA
	6.08 Good Repair
	6.09 End of Fiscal Years; Fiscal Quarters; Etc.
	6.10 Permitted Acquisitions
	6.11 CoBank Capital
	6.12 Margin Stock
	6.13 Post-Closing Refinancing
	6.14 Special Covenant Regarding Cash Management Policy
	6.15 PIK Requirements
	6.16 Interest Rate Protection

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	6.17 Maintenance of Company Separateness
SECTION 7. Negative Covenants
	7.01 Changes in Business
	7.02 Consolidation, Merger, Sale or Purchase of Assets, etc.
	7.03 Liens
	7.04 Indebtedness
	7.05 Capital Expenditures.
	7.06 Advances, Investments and Loans
	7.07 Limitation on Creation of Subsidiaries
	7.08 Modifications
	7.09 Restricted Payments, Etc.
	7.10 Transactions with Affiliates
	7.11 Interest Coverage Ratio
	7.12 Leverage Ratio
	7.13 Limitation On Issuance of Equity Interests
	7.14 Designated Senior Debt
SECTION 8. Events of Default
	8.01 Payments
	8.02 Representations, etc.
	8.03 Covenants
	8.04 Default Under Other Agreements
	8.05 Bankruptcy, etc.
	8.06 ERISA
	8.07 Pledge Agreement
	8.08 Subsidiary Guaranty
	8.09 Judgments
SECTION 9. Definitions
SECTION 10. The Agents
	10.01 Appointment
	10.02 Nature of Duties
	10.03 Certain Rights of the Agents
	10.04 Reliance by Agents
	10.05 Notice of Default, etc.
	10.06 Nonreliance on Agents and Other Lenders
	10.07 Indemnification
	10.08 Agents in their Individual Capacities
	10.09 Holders
	10.10 Resignation of the Agents
	10.11 Collateral Matters
	10.12 Delivery of Information

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SECTION 11. Miscellaneous
	11.01 Payment of Expenses, etc.
	11.02 Right of Setoff
	11.03 Notices
	11.04 Benefit of Agreement
	11.05 No Waiver; Remedies Cumulative
	11.06 Payments Pro Rata
	11.07 Calculations; Computations
	11.08 Governing Law; Submission to Jurisdiction; Venue; Waiver of Jury Trial
	11.09 Counterparts
	11.10 Effectiveness
	11.11 Headings Descriptive
	11.12 Amendment or Waiver
	11.13 Survival
	11.14 Domicile of Loans
	11.15 Confidentiality
	11.16 Lender Register
	11.17 Patriot Act Notice
	11.18 Post-Closing Actions

ANNEX I	—	Lender Commitments
ANNEX II	—	Lender Addresses
ANNEX III	—	Subsidiaries
ANNEX IV	—	ERISA §3(2) Pension Plans Subject to Title IV
ANNEX V	—	Existing Liens
ANNEX VI	—	Scheduled Existing Indebtedness
ANNEX VII	—	Existing Investments
ANNEX VIII	—	Affiliate Transactions
ANNEX IX	—	Existing Letters of Credit
ANNEX X	—	Post-Closing Matters

EXHIBIT A-1	—	Form of Notice of Borrowing
EXHIBIT A-2	—	Form of Letter of Credit Request
EXHIBIT A-3	—	Form of Notice of Conversion/Continuation
EXHIBIT B-1	—	Form of B Term Note
EXHIBIT B-2	—	Form of RF Note
EXHIBIT B-3	—	Form of Swingline Note
EXHIBIT C	—	Form of Section 3.04 Certificate
EXHIBIT D	—	Form of Opinion of Paul, Hastings, Janofsky & Walker LLP
EXHIBIT E	—	Form of Officer’s Certificate
EXHIBIT F	—	Form of Subsidiary Guaranty
EXHIBIT G	—	Form of Pledge Agreement
EXHIBIT H	—	Form of Solvency Certificate
EXHIBIT I	—	Form of Assignment Agreement
EXHIBIT J	—	Form of Intercompany Subordination Agreement

iv

EXHIBIT K	—	Form of Intercompany Note
EXHIBIT L	—	Form of Incremental B Term Commitment Agreement

v

CREDIT AGREEMENT, dated as of February 8, 2005, among FAIRPOINT COMMUNICATIONS, INC., a Delaware corporation (the “Borrower”), the Lenders from time to time party hereto, BANK OF AMERICA, N.A., as Syndication Agent (in such capacity, the “Syndication Agent”), COBANK, ACB and GENERAL ELECTRIC CAPITAL CORPORATION, as Co-Documentation Agents (in such capacity, each, a “Co-Documentation Agent” and, collectively, the “Co-Documentation Agents”), and DEUTSCHE BANK TRUST COMPANY AMERICAS, as Administrative Agent (in such capacity, the “Administrative Agent” and, together with the Syndication Agent and the Co-Documentation Agents, collectively, the “Agents”).  Unless otherwise defined herein, all capitalized terms used herein and defined in Section 9 are used herein as so defined.

W I T N E S S E T H :

WHEREAS, subject to and upon the terms and conditions set forth herein, the Lenders are willing to make available to the Borrower the respective credit facilities provided for herein;

NOW, THEREFORE, IT IS AGREED:

SECTION 1.  Amount and Terms of Credit.

1.01  Commitment.  Subject to and upon the terms and conditions herein set forth (including, in the case of Incremental B Term Loans, the terms and conditions of Section 1.14), each Lender severally agrees to make and/or continue a loan or loans (each, a “Loan” and, collectively, the “Loans”) to the Borrower, as set forth below:

(a)           Loans under the Initial B Term Facility (each, an “Initial B Term Loan” and, collectively, the “Initial B Term Loans”) (i) shall be made to the Borrower by each Lender with an Initial B Term Commitment pursuant to a single drawing on the Initial Borrowing Date, (ii) except as hereinafter provided, may, at the option of the Borrower, be incurred and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans, provided that (x) all Initial B Term Loans made as part of the same Borrowing shall, unless specifically provided herein, consist of Initial B Term Loans of the same Type and (y) unless the Administrative Agent has determined that the Syndication Date has occurred (at which time this clause (y) shall no longer be applicable), no more than three Borrowings of Initial B Term Loans to be maintained as Eurodollar Loans may be incurred prior to the 90th day after the Initial Borrowing Date (or, if later, the last day of the Interest Period applicable to the third Borrowing of Eurodollar Loans referred to below), each of which Borrowings of Eurodollar Loans may only have an Interest Period of one month, and the first of which Borrowings may be made no earlier than the fourth Business Day, and no later than the fifth Business Day, after the Initial Borrowing Date, the second of which Borrowings may only be made on the last day of the Interest Period of the first such Borrowing and the third of which Borrowings may only be made on the last day of the Interest Period of the second such Borrowing, and (iii) shall not exceed in aggregate principal amount for any Lender in respect of any incurrence of Initial B Term Loans the Initial B Term Commitment, if any, of such Lender as in effect immediately

prior to such incurrence.  Once prepaid or repaid, Initial B Term Loans may not be reborrowed.

(b)           Loans under the Delayed-Draw B Term Facility (each, a “Delayed-Draw B Term Loan” and, collectively, the “Delayed-Draw B Term Loans”) (i) shall be made to the Borrower by each Lender with a Delayed-Draw B Term Commitment pursuant to one or more drawings after the Initial Borrowing Date for the purposes described in Section 5.05(b), (ii) except as hereinafter provided, shall, at the option of the Borrower, be initially incurred as Eurodollar Loans or Base Rate Loans and, immediately after such incurrence, be converted into Initial B Term Loans in accordance with the requirements of Section 1.06(b) and (iii) shall not exceed in aggregate principal amount for any Lender in respect of any incurrence of Delayed-Draw B Term Loans the Delayed-Draw B Term Commitment, if any, of such Lender as in effect immediately prior to such incurrence.  Once prepaid or repaid, Delayed-Draw B Term Loans may not be reborrowed.

(c)           Loans under the Revolving Facility (each, an “RF Loan” and, collectively, the “RF Loans”) (i) shall be made to the Borrower at any time and from time to time on and after the Initial Borrowing Date and prior to the RF Maturity Date, (ii) except as hereinafter provided, may, at the option of the Borrower, be incurred and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans, provided that (x) all RF Loans made as part of the same Borrowing shall, unless otherwise specifically provided herein, consist of RF Loans of the same Type and (y) unless the Administrative Agent has determined that the Syndication Date has occurred (at which time this clause (y) shall no longer be applicable), no more than three Borrowings of RF Loans to be maintained as Eurodollar Loans may be incurred prior to the 90th day after the Initial Borrowing Date (or, if later, the last day of the Interest Period applicable to the third Borrowing of Eurodollar Loans referred to below), each of which Borrowings of Eurodollar Loans may only have an Interest Period of one month, and the first of which Borrowings may only be made on the same date as the initial Borrowing of Initial B Term Loans that are maintained as Eurodollar Loans, the second of which Borrowings may only be made on the last day of the Interest Period of the first such Borrowing and the third of which Borrowings may only be made on the last day of the Interest Period of the second such Borrowing, (iii) may be repaid and reborrowed in accordance with the provisions hereof, and (iv) shall not exceed (giving effect to any incurrence thereof and the use of the proceeds of such incurrence) for any Lender in aggregate principal amount at any time outstanding that amount which, when added to such Lender’s Percentage of the sum of (x) the Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of RF Loans) at such time and (y) the outstanding principal amount of Swingline Loans (exclusive of Swingline Loans which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of RF Loans) at such time, equals the Available Revolving Commitment, if any, of such Lender at such time.

(d)           Subject to and upon the terms and conditions herein set forth, the Swingline Lender agrees to make at any time and from time to time after the Initial Borrowing Date and prior to the Swingline Expiry Date, a loan or loans to the Borrower

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(each, a “Swingline Loan,” and, collectively the “Swingline Loans”), which Swingline Loans (i) shall be made and maintained as Base Rate Loans, (ii) may be repaid and reborrowed in accordance with the provisions hereof, (iii) shall not exceed in aggregate principal amount at any time outstanding, when combined with the aggregate principal amount of all RF Loans then outstanding (exclusive of RF Loans which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Swingline Loans) and the Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Swingline Loans) at such time, an amount equal to the Total Available Revolving Commitment then in effect and (iv) shall not exceed in aggregate principal amount at any time outstanding the Maximum Swingline Amount.  Notwithstanding anything to the contrary contained in this Section 1.01(d), (i) the Swingline Lender shall not be obligated to make any Swingline Loans at a time when a Lender Default exists with respect to an RF Lender unless the Swingline Lender has entered into arrangements satisfactory to it and the Borrower to eliminate the Swingline Lender’s risk with respect to the Defaulting Lender’s or Defaulting Lenders’ participation in such Swingline Loans, including by cash collateralizing such Defaulting Lender’s or Defaulting Lenders’ Percentage of the outstanding Swingline Loans, and (ii) the Swingline Lender shall not make any Swingline Loan after it has received written notice from the Borrower, any other Credit Party or the Required Lenders stating that a Default or an Event of Default exists and is continuing until such time as the Swingline Lender shall have received written notice (A) of rescission of all such notices from the party or parties originally delivering such notice or notices or (B) of the waiver of such Default or Event of Default by the Required Lenders.

(e)           On any Business Day, the Swingline Lender may, in its sole discretion, give notice to the RF Lenders that its outstanding Swingline Loans shall be funded with a Borrowing of RF Loans (provided that each such notice shall be deemed to have been automatically given upon the occurrence of an Event of Default under Section 8.05 or upon the exercise of any of the remedies provided in the last paragraph of Section 8), in which case a Borrowing of RF Loans constituting Base Rate Loans (each such Borrowing, a “Mandatory Borrowing”) shall be made on the immediately succeeding Business Day by all RF Lenders pro rata based on each RF Lender’s Percentage, and the proceeds thereof shall be applied directly to repay the Swingline Lender for such outstanding Swingline Loans.  Each RF Lender hereby irrevocably agrees to make Base Rate Loans upon one Business Day’s notice pursuant to each Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and on the date specified in writing by the Swingline Lender notwithstanding:  (i) that the amount of the Mandatory Borrowing may not comply with the Minimum Borrowing Amount otherwise required hereunder, (ii) whether any conditions specified in Section 4.02 or 4.03 are then satisfied, (iii) whether a Default or an Event of Default has occurred and is continuing, (iv) the date of such Mandatory Borrowing and (v) the amount of the Total Available Revolving Commitment and the Total Revolving Commitment at such time.  In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code in respect of the Borrower), each RF Lender (other than the Swingline Lender) hereby agrees that it shall forthwith purchase from the

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Swingline Lender (without recourse or warranty) such assignment of the outstanding Swingline Loans as shall be necessary to cause the RF Lenders to share in such Swingline Loans ratably based upon their respective Percentages, provided that (x) all interest payable on the Swingline Loans shall be for the account of the Swingline Lender until the date as of which the respective participation is required to be purchased and, to the extent attributable to the purchased participation, shall be payable to the RF Lender purchasing same from and after such date and (y) at the time any purchase of participations pursuant to this sentence is actually made, the purchasing RF Lender shall be required to pay the Swingline Lender interest on the principal amount of participation purchased for each day from and including the day upon which the Mandatory Borrowing would otherwise have occurred to but excluding the date of payment for such participation, at the overnight Federal Funds Effective Rate for the first three days and at the interest rate otherwise applicable to RF Loans maintained as Base Rate Loans hereunder for each day thereafter.

(f)            Loans under the Incremental B Term Facility (each, an “Incremental B Term Loan” and, collectively, the “Incremental B Term Loans”) (i) shall be made to the Borrower by each Lender with an Incremental B Term Commitment pursuant to a single drawing on the respective Incremental B Term Loan Borrowing Date, (ii) except as hereinafter provided, may, at the option of the Borrower, be incurred and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans, provided that all Incremental B Term Loans incurred on such Incremental B Term Loan Borrowing Date shall be added to the then outstanding Borrowings of Initial B Term Loans as provided in Section 1.14(c) and (iii) shall not exceed in an aggregate principal amount for any Lender in respect of any incurrence of Incremental B Term Loans the Incremental B Term Commitment, if any, of such Lender as in effect immediately prior to such incurrence.  Once prepaid or repaid, Incremental B Term Loans may not be reborrowed.

1.02  Minimum Borrowing Amounts, etc.  The aggregate principal amount of each Borrowing shall not be less than the Minimum Borrowing Amount.  More than one Borrowing may be incurred on any day, provided that at no time shall there be outstanding more than twelve Borrowings of Eurodollar Loans.

1.03  Notice of Borrowing.  (a)  Whenever the Borrower desires to incur Loans under any Facility (excluding Swingline Loans and RF Loans made pursuant to a Mandatory Borrowing), it shall give the Administrative Agent at its Notice Office, (x) prior to 12:00 Noon (New York time), at least three Business Days’ prior written notice (or telephonic notice promptly confirmed in writing) of each proposed incurrence of Eurodollar Loans and (y) prior to 12:00 Noon (New York time) on the proposed date thereof, written notice (or telephonic notice promptly confirmed in writing) of each proposed incurrence of Base Rate Loans.  Each such notice (each, a “Notice of Borrowing”) shall be in the form of Exhibit A-1 and shall be irrevocable and shall specify (i) the Facility pursuant to which such incurrence is being made, (ii) the aggregate principal amount of the Loans to be made pursuant to such incurrence, (iii) the date of incurrence (which shall be a Business Day) and (iv) whether the respective Borrowing shall consist of Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the Interest Period to be initially applicable thereto.  The Administrative Agent shall promptly give each Lender written notice (or telephonic notice promptly confirmed in writing) of each proposed incurrence

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of Loans of such Lender’s proportionate share thereof and of the other matters covered by the Notice of Borrowing.

(b)           (i)  Whenever the Borrower desires to make a Borrowing of Swingline Loans hereunder, it shall give the Swingline Lender, prior to 12:00 Noon  (New York time) on the day such Swingline Loan is to be made, written notice (or telephonic notice promptly confirmed in writing) of each Swingline Loan to be made hereunder.  Each such notice shall be irrevocable and shall specify in each case (x) the date of such Borrowing (which shall be a Business Day) and (y) the aggregate principal amount of the Swingline Loan to be made pursuant to such Borrowing.

(ii)           Mandatory Borrowings shall be made upon the notice specified in Section 1.01(e), with the Borrower irrevocably agreeing, by its incurrence of any Swingline Loan, to the making of Mandatory Borrowings as set forth in such Section 1.01(e).

(c)           Without in any way limiting the obligation of the Borrower to confirm in writing any telephonic notice permitted to be given hereunder, the Administrative Agent, the Swingline Lender and any Letter of Credit Issuer, prior to receipt of written confirmation may act without liability upon the basis of and consistent with such telephonic notice, believed by the Administrative Agent, the Swingline Lender or such Letter of Credit Issuer, as the case may be, in good faith to be from an Authorized Officer.  In each such case, the Borrower hereby waives the right to dispute the Administrative Agent’s, the Swingline Lender’s or such Letter of Credit Issuer’s record of the terms of such telephonic notice, unless such record reflects gross negligence or willful misconduct on the part of the Administrative Agent, the Swingline Lender or such Letter of Credit Issuer, as the case may be (as determined by a court of competent jurisdiction in a final and nonappealable decision).

1.04  Disbursement of Funds.  (a)  No later than 1:00 P.M. (New York time) (3:00 P.M. (New York time) in the case of Base Rate Loans made pursuant to same day notice) on the date specified in each Notice of Borrowing (or, where applicable, each notice described in Section 1.03(b)(i) or (ii)), each Lender with a Commitment under the respective Facility will make available its pro rata share of each Borrowing requested to be made on such date (or (x) in the case of Swingline Loans, the Swingline Lender will make available the full amount thereof or (y) in the case of a funding of Incremental B Term Loans on an Incremental B Term Loan Borrowing Date, in an amount equal to such Lender’s Incremental B Term Commitment on such date).  All such amounts shall be made available to the Administrative Agent in Dollars and immediately available funds at the Payment Office and, except in the case of RF Loans made pursuant to a Mandatory Borrowing, the Administrative Agent promptly will make available to the Borrower by depositing to its account at the Payment Office or as otherwise directed in the applicable Notice of Borrowing the aggregate of the amounts so made available in the type of funds received.  Unless the Administrative Agent shall have been notified by any Lender prior to the date of the proposed incurrence that such Lender does not intend to make available to the Administrative Agent its portion of the Borrowing or Borrowings to be made on such date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such date, and the Administrative Agent, in reliance upon such assumption, may (in its sole discretion and without any obligation to do so) make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to

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the Administrative Agent by such Lender and the Administrative Agent has made available same to the Borrower, the Administrative Agent shall be entitled to recover such corresponding amount from such Lender.  If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent’s demand therefor, the Administrative Agent may notify the Borrower, and, upon receipt of such notice, the Borrower shall promptly pay such corresponding amount to the Administrative Agent.  The Administrative Agent shall also be entitled to recover on demand from such Lender or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower to the date such corresponding amount is recovered by the Administrative Agent, at a rate per annum equal to (x) if paid by such Lender, the overnight Federal Funds Effective Rate or (y) if paid by the Borrower, the then applicable rate of interest, calculated in accordance with Section 1.08, for the respective Loans.

(b)           Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its commitments hereunder or to prejudice any rights which the Borrower may have against any Lender as a result of any default by such Lender hereunder.

1.05  Notes.  (a)  The Borrower’s obligation to pay the principal of, and interest on, the Loans made by each Lender shall be set forth in the Lender Register maintained by the Administrative Agent pursuant to Section 11.16 and, subject to the provisions of Section 1.05(f), shall be evidenced (i) if B Term Loans, by a promissory note substantially in the form of Exhibit B-1 with blanks appropriately completed in conformity herewith (each, a “B Term Note” and, collectively, the “B Term Notes”), (ii) if RF Loans, by a promissory note substantially in the form of Exhibit B-2 with blanks appropriately completed in conformity herewith (each, an “RF Note” and, collectively, the “RF Notes”) and (iii) if Swingline Loans, by a promissory note substantially in the form of Exhibit B-3 with blanks appropriately completed in conformity herewith (the “Swingline Note”).

(b)           The B Term Note issued to each Lender that makes any B Term Loan shall (i) be executed by the Borrower, (ii) be payable to the order of such Lender and be dated the Initial Borrowing Date (or, if issued after the Initial Borrowing Date, be dated the date of the issuance thereof), (iii) be in a stated principal amount equal to the Initial B Term Commitment of such Lender on the Initial Borrowing Date (or, if issued after the Initial Borrowing Date, be in a stated principal amount equal to the outstanding principal amount of B Term Loans of such Lender at such time) and be payable in the principal amount of B Term Loans evidenced thereby, (iv) mature on the Term Loan Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to mandatory repayment as provided in Section 3.02 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents.

(c)           The RF Note issued to each RF Lender shall (i) be executed by the Borrower, (ii) be payable to the order of such RF Lender and be dated the Initial Borrowing Date (or, in the case of any RF Note issued after the Initial Borrowing Date, the date of issuance thereof), (iii) be in a stated principal amount equal to the Revolving Commitment of such RF Lender and be payable in the principal amount of the RF Loans evidenced thereby, (iv) mature on the RF Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi)

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be subject to mandatory repayment as provided in Section 3.02 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents.

(d)           The Swingline Note issued to the Swingline Lender shall (i) be executed by the Borrower, (ii) be payable to the order of the Swingline Lender and be dated the Initial Borrowing Date (or, in the case of any Swingline Note issued after the Initial Borrowing Date, the date of issuance thereof), (iii) be in a stated principal amount equal to the Maximum Swingline Amount and be payable in the principal amount of Swingline Loans evidenced thereby, (iv) mature on the Swingline Expiry Date, (v) bear interest as provided in Section 1.08 in respect of the Base Rate Loans evidenced thereby, (vi) be subject to mandatory prepayment as provided in Section 3.02 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents.

(e)           Each Lender will note on its internal records the amount of each Loan made by it and each payment in respect thereof and will, prior to any transfer of any of its Notes, endorse on the reverse side thereof the outstanding principal amount of Loans evidenced thereby.  Failure to make (or any error in making) any such notation shall not affect the Borrower’s obligations in respect of such Loans.

(f)            Notwithstanding anything to the contrary contained above or elsewhere in this Agreement, Notes shall only be delivered to Lenders that at any time specifically request the delivery of such Notes.  No failure of any Lender to request or obtain a Note evidencing its Loans to the Borrower shall affect or in any manner impair the obligations of the Borrower to pay the Loans (and all related Obligations) which would otherwise be evidenced thereby in accordance with the requirements of this Agreement, and shall not in any way affect the security or guaranties therefor provided pursuant to the various Credit Documents.  Any Lender that does not have a Note evidencing its outstanding Loans shall in no event be required to make the notations otherwise described in preceding clause (e).  At any time when any Lender requests the delivery of a Note to evidence any of its Loans, the Borrower shall promptly execute and deliver to the respective Lender the requested Note or Notes in the appropriate amount or amounts to evidence such Loans.

1.06  Conversions.  (a)         The Borrower shall have the option to convert on any Business Day all or a portion at least equal to the applicable Minimum Borrowing Amount of the outstanding principal amount of the Loans (other than Swingline Loans, which at all times shall be maintained as Base Rate Loans) owing pursuant to a single Facility into a Borrowing or Borrowings pursuant to such Facility of another Type of Loan, provided that (i) no partial conversion of a Borrowing of Eurodollar Loans shall reduce the outstanding principal amount of the Eurodollar Loans made pursuant to such Borrowing to less than the Minimum Borrowing Amount applicable thereto, (ii) Base Rate Loans may not be converted into Eurodollar Loans when a Default under Section 8.01 or an Event of Default is in existence on the date of the proposed conversion if the Administrative Agent or the Required Lenders shall have determined in its or their sole discretion not to permit such conversion, (iii) unless the Administrative Agent has determined that the Syndication Date has occurred (at which time this clause (iii) shall no longer be applicable), prior to the 90th day after the Initial Borrowing Date, conversions of Base Rate Loans into Eurodollar Loans may only be made if any such conversion is effective on the first day of the first, second or third Interest Period referred to in clause (y) of the proviso

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appearing in each of Sections 1.01(a)(ii) and 1.01(c)(ii) and so long as such conversion does not result in a greater number of Borrowings of Eurodollar Loans prior to the 90th day after the Initial Borrowing Date as are permitted under Sections 1.01(a)(ii) and 1.01(c)(ii) and (iv) Borrowings of Eurodollar Loans resulting from this Section 1.06 shall be limited in number as provided in Section 1.02.  Each such conversion shall be effected by the Borrower giving the Administrative Agent at its Notice Office, prior to 12:00 Noon (New York time), at least three Business Days’ (or one Business Day’s, in the case of a conversion into Base Rate Loans) prior written notice (or telephonic notice promptly confirmed in writing) (each, a “Notice of Conversion/Continuation”) in the form of Exhibit A-3, appropriately completed to specify the Loans to be so converted (including the relevant Facility), the Type of Loans to be converted into and, if to be converted into a Borrowing of Eurodollar Loans, the Interest Period to be initially applicable thereto.  The Administrative Agent shall give each Lender prompt notice of any such proposed conversion affecting any of its Loans.

(b) On the date (each, a “DDTL Conversion Date”) of each incurrence of Delayed-Draw Term Loans (immediately after giving effect thereto), all Delayed-Draw Term Loans outstanding on such date shall be automatically (and without further action) converted into, and thereafter constitute, Initial B Term Loans for all purposes of this Agreement and the other Credit Documents (other than for purposes of Sections 1.01(a)(i) and (iii) and Sections 4.01(l) and 5.05(a)), with such conversion to be effected in accordance with the following rules (each, a “DDTL Conversion”):

(i)            the Delayed-Draw Term Loans incurred on a given DDTL Conversion Date (immediately prior to giving effect to the DDTL Conversion on such date) shall, upon the occurrence of the DDTL Conversion, be proportionately added to (and thereafter be deemed to constitute a part of) each then existing Borrowing of Initial B Term Loans, even though as a result thereof such newly-converted Initial B Term Loans may (x) if initially incurred as Eurodollar Loans, effectively have a shorter Interest Period than the then existing Borrowings of outstanding Initial B Term Loans to which they are added and (y) if initially incurred as Base Rate Loans, bear interest at a different rate than the existing Borrowing or Borrowings of Initial B Term Loans to which they are added;

(ii)           if requested by any Lender, the Borrower shall pay to such Lender (x) if the Delayed-Draw Term Loans incurred pursuant to a given DDTL Conversion were initially incurred as Eurodollar Loans, such amounts necessary, as reasonably determined by such Lender, to compensate such Lender for “making” (by way of conversion) such Initial B Term Loans during an existing Interest Period (rather than at the beginning of the respective Interest Period applicable to the existing Borrowings of Initial B Term Loans, based upon the rates then applicable thereto) and (y) if the Delayed-Draw Term Loans incurred pursuant to a given DDTL Conversion were incurred as Base Rate Loans, such amounts necessary, as reasonably determined by such Lender, to equalize the interest rate applicable to the existing Borrowings of Initial B Term Loans of such Lender and the interest rate applicable to the newly-converted Initial B Term Loans converted pursuant to such DDTL Conversion; and

(iii)          the Administrative Agent shall (and is hereby authorized to) take all appropriate actions in connection with the DDTL Conversion to ensure that all Lenders

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with outstanding Initial B Term Loans (after giving effect to the DDTL Conversion) participate in each Borrowing of Initial B Term Loans on a pro rata basis.

1.07  Pro Rata Borrowings.  All Initial B Term Loans, Delayed-Draw B Term Loans, Incremental B Term Loans and RF Loans under this Agreement shall be made by the Lenders pro rata on the basis of their Initial B Term Commitments, Delayed-Draw B Term Commitments, Incremental B Term Commitments or Revolving Commitments, as the case may be, if any.  It is understood that no Lender shall be responsible for any default by any other Lender in its obligation to make Loans hereunder and that each Lender shall be obligated to make the Loans provided to be made by it hereunder, regardless of the failure of any other Lender to fulfill its commitments hereunder.

1.08  Interest.  (a)  The unpaid principal amount of each Base Rate Loan shall bear interest from the date of the Borrowing thereof until the earlier of repayment or conversion thereof and maturity (whether by acceleration or otherwise) at a rate per annum which shall at all times be the Applicable Base Rate Margin plus the Base Rate in effect from time to time.

(b)           The unpaid principal amount of each Eurodollar Loan shall bear interest from the date of the Borrowing thereof until the earlier of repayment or conversion thereof and maturity (whether by acceleration or otherwise) at a rate per annum which shall at all times be the Applicable Eurodollar Margin plus the relevant Eurodollar Rate.

(c)           Interest in respect of any overdue amount payable hereunder shall accrue at a rate per annum equal to the Base Rate in effect from time to time plus the sum of (i) 2% and (ii) the Applicable Base Rate Margin, provided that principal in respect of Eurodollar Loans shall bear interest from the date the same becomes due (whether by acceleration or otherwise) until the end of the Interest Period then applicable to such Eurodollar Loan at a rate per annum no less than one which is equal to 2% in excess of the rate of interest applicable thereto on such date.

(d)           Interest shall accrue from and including the date of any Borrowing to but excluding the date of any repayment thereof and shall be payable (i) in respect of each Base Rate Loan, quarterly in arrears on the last Business Day of each March, June, September and December, (ii) in respect of each Eurodollar Loan, on the last day of each Interest Period applicable thereto and, in the case of an Interest Period in excess of three months, on each date occurring at three month intervals after the first day of such Interest Period, and (iii) in respect of each such Loan, on any prepayment or conversion (on the amount prepaid or converted), at maturity (whether by acceleration or otherwise) and, after such maturity, on demand.

(e)           All computations of interest hereunder shall be made in accordance with Section 11.07(b).

(f)            The Administrative Agent, upon determining the interest rate for any Borrowing of Eurodollar Loans for any Interest Period, shall promptly notify the Borrower and the Lenders thereof.

1.09  Interest Periods.  (a)  At the time the Borrower gives a Notice of Borrowing or Notice of Conversion/Continuation in respect of the making of, or conversion into, a

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Borrowing of Eurodollar Loans (in the case of the initial Interest Period applicable thereto) or prior to 12:00 Noon (New York time) on the third Business Day prior to the expiration of an Interest Period applicable to a Borrowing of Eurodollar Loans, it shall have the right to elect by giving the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of the Interest Period applicable to such Borrowing, which Interest Period shall, at the option of the Borrower (but otherwise subject to clause (y) of the provisos appearing in Sections 1.01(a)(ii) and 1.01(c)(ii) and clause (iii) of the proviso appearing in Section 1.06), be a one, two, three, six or, to the extent available to all Lenders with a Commitment and/or outstanding Loans under the respective Facility, nine or twelve month period (or, in the case of the initial Interest Period for Delayed-Draw Term Loans or Incremental B Term Loans, such other period (not to exceed one-month) acceptable to the Administrative Agent).  Notwithstanding anything to the contrary contained above:

(i)            the initial Interest Period for any Borrowing of Eurodollar Loans shall commence on the date of such Borrowing (including the date of any conversion from a Borrowing of Base Rate Loans) and each Interest Period occurring thereafter in respect of such Borrowing shall commence on the day on which the next preceding Interest Period expires;

(ii)           if any Interest Period begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month;

(iii)          if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day, provided that if any Interest Period would otherwise expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day;

(iv)          no Interest Period with respect to a Borrowing of RF Loans, B Term Loans or Delayed-Draw B Term Loans shall extend beyond the Maturity Date for the respective Facility of Loans; and

(v)           no Interest Period may be elected at any time when a Default under Section 8.01 or an Event of Default is then in existence if the Administrative Agent or the Required Lenders shall have determined in its or their sole discretion not to permit such election.

(b)           If upon the expiration of any Interest Period, the Borrower has failed to (or may not) elect a new Interest Period to be applicable to the respective Borrowing of Eurodollar Loans as provided above, the Borrower shall be deemed to have elected to convert such Borrowing into a Borrowing of Base Rate Loans effective as of such expiration.

1.10  Increased Costs, Illegality, etc.  (a)  In the event that (x) in the case of clause (i) below, the Administrative Agent or (y) in the case of clauses (ii) and (iii) below, any Lender shall have determined (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto):

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(i)            on any date for determining the Eurodollar Rate for any Interest Period that, by reason of any changes arising after the Effective Date affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Eurodollar Rate or the making or continuance of any Eurodollar Loan has become impracticable as a result of a contingency occurring after the Effective Date which materially and adversely affects the interbank Eurodollar market;

(ii)           at any time, that such Lender shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to any Eurodollar Loans because of (x) any change since the Effective Date in any applicable law, governmental rule, regulation, guideline or order (or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, guideline or order) (including, but not limited to, a change in the basis of taxation of payments to a Lender of the principal of or interest on the Loans or any other amounts payable hereunder (except for changes in the rate of tax on, or determined by reference to, the net income or net profits of such Lender imposed by the jurisdiction in which its principal office or applicable lending office is located) or a change in official reserve requirements, but, in all events, excluding reserves required under Regulation D to the extent included in the computation of the Eurodollar Rate) and/or (y) other circumstances affecting the interbank Eurodollar market or the position of such Lender in such market; or

(iii)          at any time, that the making or continuance of any Eurodollar Loan has become unlawful by compliance by such Lender in good faith with any law, governmental rule, regulation, guideline or order (or would conflict with any such governmental rule, regulation, guideline or order not having the force of law but with which such Lender customarily complies even though the failure to comply therewith would not be unlawful);

then, and in any such event, such Lender (or the Administrative Agent in the case of clause (i) above) shall (x) on such date and (y) within ten Business Days of the date on which such event no longer exists give notice (by telephone confirmed in writing) to the Borrower and to the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each of the other Lenders).  Thereafter (x) in the case of clause (i) above, Eurodollar Loans shall no longer be available until such time as the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice by the Administrative Agent no longer exist, and any Notice of Borrowing or Notice of Conversion/Continuation given by the Borrower with respect to Eurodollar Loans which have not yet been incurred shall be deemed rescinded by the Borrower, (y) in the case of clause (ii) above, the Borrower shall pay to such Lender, within 10 Business Days after the Borrower’s receipt of written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its reasonable discretion shall determine after consultation with the Borrower) as shall be required to compensate such Lender for such increased costs or reductions in amounts receivable hereunder (a written notice as to the additional amounts owed to such Lender, describing the basis for such increased costs and showing the calculation thereof, submitted to the Borrower by such Lender shall, absent manifest error, be final and conclusive and binding upon all parties hereto) and (z) in the

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case of clause (iii) above, the Borrower shall take one of the actions specified in Section 1.10(b) as promptly as possible and, in any event, within the time period required by law.

(b)           At any time that any Eurodollar Loan is affected by the circumstances described in Section 1.10(a)(ii), the Borrower may (and in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii), the Borrower shall within the time period required by law) either (x) if the affected Eurodollar Loan is then being made pursuant to a Borrowing, cancel said Borrowing by giving the Administrative Agent telephonic notice (confirmed promptly in writing) thereof on the same date that the Borrower was notified by a Lender pursuant to Section 1.10(a)(ii) or (iii), or (y) if the affected Eurodollar Loan is then outstanding, upon at least three Business Days’ notice to the Administrative Agent, require the affected Lender to convert each such Eurodollar Loan into a Base Rate Loan (which conversion, in the case of the circumstances described in Section 1.10(a)(iii), shall occur no later than the last day of the Interest Period then applicable to such Eurodollar Loan (or such earlier date as shall be required by applicable law)); provided, that if more than one Lender is affected at any time, then all affected Lenders must be treated the same pursuant to this Section 1.10(b).

(c)           If any Lender shall have determined that the adoption or effectiveness of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, in each case after the Effective Date, or compliance by such Lender or its parent corporation with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency first made after the Effective Date, has or would have the effect of reducing the rate of return on such Lender’s or its parent corporation’s capital or assets as a consequence of its commitments or obligations hereunder to a level below that which such Lender or its parent corporation could have achieved but for such adoption, effectiveness, change or compliance (taking into consideration such Lender’s or its parent corporation’s policies with respect to capital adequacy), then from time to time, within 10 Business Days after demand by such Lender (with a copy to the Administrative Agent), the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or its parent corporation for such reduction.  Each Lender, upon determining in good faith that any additional amounts will be payable pursuant to this Section 1.10(c), will give prompt written notice thereof to the Borrower, which notice shall describe the basis for such claim and set forth in reasonable detail the calculation of such additional amounts, although the failure to give any such notice shall not release or diminish any of the Borrower’s obligations to pay additional amounts pursuant to this Section 1.10(c) upon the subsequent receipt of such notice.

1.11  Compensation.  (a)  The Borrower shall, without duplication, compensate each Lender, upon its written request (which request shall set forth the basis for requesting such compensation and reasonably detailed calculations thereof), for all reasonable losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Lender to fund its Eurodollar Loans but excluding in any event the loss of anticipated profits) which such Lender may sustain:  (i) if for any reason (other than a default by any Lender or the Administrative Agent) a Borrowing of Eurodollar Loans by the Borrower does not occur on a date specified therefor in a Notice of Borrowing or Notice of Conversion/Continuation (whether or not

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withdrawn by the Borrower or deemed withdrawn pursuant to Section 1.10(a)); (ii) if any prepayment, repayment or conversion of any of its Eurodollar Loans occurs on a date which is not the last day of an Interest Period applicable thereto; (iii) if any prepayment of any of its Eurodollar Loans is not made on any date specified in a notice of prepayment given by the Borrower; or (iv) as a consequence of (w) a DDTL Conversion, (x) any other default by the Borrower to repay its Eurodollar Loans when required by the terms of this Agreement, (y) an election made pursuant to Section 1.10(b) or (z) actions required to be taken by the Borrower pursuant to Section 1.14(c).

(b)           Notwithstanding anything in this Agreement to the contrary, to the extent any notice or request required by Section 1.10, 1.11, 1A.06 or 3.04 of this Agreement is given by any Lender more than 120 days after such Lender obtained, or reasonably should have obtained, knowledge of the occurrence of the event giving rise to the additional costs, reductions in amounts, losses, taxes or other additional amounts of the type described in such Section, such Lender shall not be entitled to compensation under Section 1.10, 1.11, 1A.06 or 3.04 of this Agreement for any amounts incurred or accruing prior to the giving of such notice to the Borrower.

1.12  Change of Lending Office.  Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or (iii), 1.10(c), 1A.06 or 3.04 with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event, provided that such designation is made on such terms that such Lender and its lending office suffer no material economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of any such Section.  Nothing in this Section 1.12 shall affect or postpone any of the obligations of the Borrower or the right of any Lender provided in Section 1.10, 1A.06 or 3.04.

1.13  Replacement of Lenders.  (x) Upon the occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 1A.06 or Section 3.04 with respect to any Lender which results in such Lender charging to the Borrower increased costs in a material amount in excess of those being generally charged by the other Lenders, (y) if any Lender becomes a Defaulting Lender, or (z) in the case of a refusal by a Lender to consent to a proposed change, waiver, discharge or termination with respect to this Agreement which has been approved by the Required Lenders as provided in Section 11.12(b), the Borrower shall have the right, in accordance with Section 11.04(b), if no Default under Section 8.01 or Event of Default then exists or would exist after giving effect to such replacement, to replace such Lender (the “Replaced Lender”) with one or more other Eligible Transferee or Eligible Transferees, none of whom shall constitute a Defaulting Lender at the time of such replacement (collectively, the “Replacement Lender”) and each of which shall be reasonably acceptable to the Administrative Agent or, at the option of the Borrower, to replace only (a) the Revolving Commitment (and outstandings pursuant thereto) of the Replaced Lender with an identical Revolving Commitment provided by the Replacement Lender or (b) in the case of a replacement as provided in Section 11.12(b) where the consent of the respective Lender is required with respect to less than all Facilities, the Commitments and/or outstanding Loans of such Lender in respect of each Facility where the consent of such Lender would otherwise be individually

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required, with identical Commitments and/or Loans of the respective Facility provided by the Replacement Lender; provided that:

(i)            at the time of any replacement pursuant to this Section 1.13, the Replacement Lender shall enter into one or more Assignment Agreements pursuant to Section 11.04(b) (and with all fees payable pursuant to said Section 11.04(b) to be paid by the Replacement Lender and/or the Replaced Lender (as agreed between them)) pursuant to which the Replacement Lender shall acquire all of the Commitments and outstanding Loans (or, in the case of the replacement of only (a) the Revolving Commitment, the Revolving Commitment and outstanding Revolving Loans and participations in Letter of Credit Outstandings and/or (b) the Commitments and/or outstanding Term Loans under a given Facility of Term Loans, the Commitment and outstanding Term Loans under the Facility with respect to which such Lender is being replaced) of, and in each case (except for the replacement of only the outstanding Commitments and/or Term Loans of any or all of the Facilities of Term Loans of the respective Lender) participations in Letters of Credit by, the Replaced Lender and, in connection therewith, shall pay to (x) the Replaced Lender in respect thereof an amount equal to the sum of (A) an amount equal to the principal of, and all accrued interest on, all outstanding Loans (or of the Loans of the respective Facility being replaced) of the Replaced Lender, (B) an amount equal to all Unpaid Drawings (unless there are no Unpaid Drawings with respect to the Facility being replaced) that have been funded by (and not reimbursed to) such Replaced Lender, together with all then unpaid interest with respect thereto at such time and (C) an amount equal to all accrued, but theretofore unpaid, Fees owing to the Replaced Lender (but only with respect to the relevant Facility, in the case of the replacement of less than all Facilities of Loans then held by the respective Replaced Lender) pursuant to Section 2.01, (y) except in the case of the replacement of only the Commitments and/or outstanding Term Loans of one or more Facilities of Term Loans of a Replaced Lender, each Letter of Credit Issuer an amount equal to such Replaced Lender’s Percentage of any Unpaid Drawing relating to Letters of Credit issued by such Letter of Credit Issuer (which at such time remains an Unpaid Drawing) to the extent such amount was not theretofore funded by such Replaced Lender and (z) in the case of any replacement of Revolving Commitments, the Swingline Lender an amount equal to such Replaced Lender’s Percentage of any Mandatory Borrowing to the extent such amount was not theretofore funded by such Replaced Lender; and

(ii)           all obligations of the Borrower then owing to the Replaced Lender (other than those (a) specifically described in clause (i) above in respect of which the assignment purchase price has been, or is concurrently being, paid, but including all amounts, if any, owing under Section 1.11 or (b) relating to any Facility of Loans and/or Commitments of the respective Replaced Lender which will remain outstanding after giving effect to the respective replacement) shall be paid in full to such Replaced Lender concurrently with such replacement.

Upon the execution of the respective Assignment Agreements, the payment of amounts referred to in clauses (i) and (ii) above, recordation of the assignment on the Lender Register by the Administrative Agent pursuant to Section 11.16 and, if so requested by the Replacement Lender, delivery to the Replacement Lender of the appropriate Note or Notes

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executed by the Borrower, (x) the Replacement Lender shall become a Lender hereunder and, unless the respective Replaced Lender continues to have outstanding Term Loans and/or a Commitment hereunder, the Replaced Lender shall cease to constitute a Lender hereunder, except with respect to indemnification provisions under this Agreement (including, without limitation, Sections 1.10, 1.11, 1A.06, 3.04, 11.01 and 11.06), which shall survive as to such Replaced Lender and (y) except in the case of the replacement of only Commitments and/or outstanding Term Loans under one or more Facilities of Term Loans, the Percentages of the RF Lenders shall be automatically adjusted at such time to give effect to such replacement.

1.14  Incremental B Term Loan Commitments.  (a)  The Borrower, with the prior consent of the Administrative Agent, shall have the right to request from time to time (by written notice to the Lenders) that one or more Lenders (and/or one or more other Persons which will become Lenders as provided below) provide Incremental B Term Commitments and, subject to the terms and conditions contained in this Agreement, make Incremental B Term Loans pursuant thereto, so long as (w) no Default or Event of Default then exists or would result therefrom, (x) any Incremental B Term Loans are incurred on the date of the effectiveness of the respective Incremental B Term Commitment Agreement pursuant to which the related Incremental B Term Commitments are provided, (y) the Borrower shall have demonstrated to the Administrative Agent’s reasonable satisfaction that the full amount of the respective Incremental B Term Facility (assuming the full utilization of the Incremental B Term Commitments thereunder) may be incurred without violating the terms of any Permitted Junior Capital, any Permitted Senior Unsecured Notes, any other material debt of the Borrower or the documentation governing any such Indebtedness and (z) the Borrower and its subsidiaries are in compliance on a Pro Forma Basis with each of the covenants contained in Sections 7.11 and 7.12 (determined after giving effect to the full utilization of the commitments provided under such Incremental B Term Facility); it being understood and agreed, however, that (i) no Lender shall be obligated to provide an Incremental B Term Commitment as a result of any such request by the Borrower, and until such time, if any, as such Lender has agreed in its sole discretion to provide an Incremental B Term Commitment and executed and delivered to the Administrative Agent an Incremental B Term Commitment Agreement as provided in clause (b) of this Section 1.14, such Lender shall not be obligated to fund any Incremental B Term Loans, (ii) any Lender (or, in the circumstances contemplated by clause (v) below, any other Person which will qualify as an Eligible Transferee) may so provide an Incremental B Term Commitment without the consent of any other Lender, (iii) each provision of Incremental B Term Commitments pursuant to this Section 1.14 on a given date shall be in a minimum aggregate amount (for all Lenders (including in the circumstances contemplated by clause (v) below, Eligible Transferees who will become Lenders)) of at least $20,000,000 and in integral multiples of $5,000,000 in excess thereof, (iv) the aggregate amount of all Incremental B Term Commitments permitted to be provided pursuant to this Section 1.14 shall not exceed $200,000,000, (v) if the Borrower has first requested the then existing Lenders (other than Defaulting Lenders) to provide at least 75% of the aggregate Incremental B Term Commitments then being requested pursuant to this Section 1.14, then the Borrower may request Incremental B Term Commitments from Persons reasonably acceptable to the Administrative Agent which would qualify as Eligible Transferees hereunder in an aggregate amount equal to the sum of (x) 25% of the aggregate Incremental B Term Commitments then being requested pursuant to this Section 1.14 plus (y) if the Borrower has not received Incremental B Term Commitments in an aggregate amount equal to 75% of that aggregate amount of the Incremental B Term Commitments which the Borrower desires to

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obtain pursuant to such request (as set forth in the notice provided by the Borrower in connection with its initial request), the amount of such deficiency, provided that any such Incremental B Term Commitment provided by any such Eligible Transferee which is not already a Lender shall be in a minimum amount (for such Eligible Transferee) of at least $1,000,000 (and with the fees to be paid to such Eligible Transferee to be no greater than those fees to be paid to the then existing Lenders (if any) providing Incremental B Term Commitments) and (vi) all actions taken by the Borrower pursuant to this Section 1.14 shall be done in coordination with the Administrative Agent.

(b)           In connection with any provision of Incremental B Term Commitments pursuant to this Section 1.14, (i) the Borrower, the Administrative Agent and each such Lender or other Eligible Transferee (each, an “Incremental B Term Lender”) which agrees to provide an Incremental B Term Commitment shall execute and deliver to the Administrative Agent an Incremental B Term Commitment Agreement substantially in the form of Exhibit L hereto (appropriately completed) (each, an “Incremental B Term Commitment Agreement”), with the effectiveness of such Incremental B Term Lender’s Incremental B Term Commitment to occur upon delivery of such Incremental B Term Commitment Agreement to the Administrative Agent, the payment of any fees required in connection therewith (including, without limitation, any agreed upon up-front or arrangement fees owing to the Administrative Agent) and the satisfaction of the other terms and conditions described in this Section 1.14 (it being understood that no fees shall be required to be paid to any existing Lender (in its capacity as such) in connection with the provision of any Incremental B Term Commitment by an Incremental B Term Lender), and (ii) the Borrower shall deliver to the Administrative Agent (x) an opinion or opinions, in form and substance reasonably satisfactory to the Administrative Agent, from counsel to the Borrower reasonably satisfactory to the Administrative Agent and dated the applicable Incremental B Term Loan Borrowing Date, covering such matters relating to the provision of the Incremental B Term Commitments as may be reasonably requested by the Administrative Agent and (y) a solvency certificate from the Chief Financial Officer of the Borrower, dated the applicable Incremental B Term Loan Borrowing Date, in form and substance satisfactory to the Administrative Agent. The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Incremental B Term Commitment Agreement, and at such time (A) Annex I to the Credit Agreement shall be deemed modified to reflect the Incremental B Term Commitments of such Incremental B Term Lenders and (B) to the extent requested by any Incremental B Term Lender, a B Term Note will be issued at the Borrower’s expense to such Incremental B Term Lender, to be in conformity with the requirements of Section 1.05 (with appropriate modification) to the extent needed to reflect the new Incremental B Term Loans made by such Incremental B Term Lender.  Each Incremental B Term Lender with an outstanding B Term Note which requests a new B Term Note as contemplated by preceding clause (B) agrees to use good faith efforts to return the outstanding B Term Note held by it to the Borrower for cancellation.

(c)           In connection with each incurrence of Incremental B Term Loans pursuant to Section 1.01(f), the Lenders and the Borrower hereby agree that, notwithstanding anything to the contrary contained in this Agreement, the Borrower and the Administrative Agent may take all such actions as may be necessary to ensure that all Lenders with outstanding B Term Loans continue to participate in each Borrowing of outstanding B Term Loans (after giving effect to the incurrence of Incremental B Term Loans pursuant to Section 1.01(f)) on a pro rata basis,

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including by adding the Incremental B Term Loans to be so incurred to the then outstanding Borrowings of Initial B Term Loans on a pro rata basis even though as a result thereof such new Incremental B Term Loans (to the extent required to be maintained as Eurodollar Loans) may effectively have a shorter Interest Period than the then outstanding Borrowings of Initial B Term Loans.  It is hereby agreed that, to the extent the Incremental B Term Loans are to be so incurred or added to the then outstanding Borrowings of Initial B Term Loans which are maintained as Eurodollar Loans, the Lenders that have made such Incremental B Term Loans shall be entitled to receive from the Borrower such amounts, as reasonably determined by the respective Lenders, to compensate them for funding the various Incremental B Term Loans during an existing Interest Period (rather than at the beginning of the respective Interest Period, based upon rates then applicable thereto).  All determinations by any Lender pursuant to the immediately preceding sentence shall, absent manifest error, be final and conclusive and binding on all parties hereto.

SECTION 1A.  Letters of Credit.

1A.01  Letters of Credit.  (a)  Subject to and upon the terms and conditions herein set forth, the Borrower may request that a Letter of Credit Issuer, at any time and from time to time on or after the Effective Date and prior to the date which is thirty Business Days prior to the RF Maturity Date, issue, for the account of the Borrower and in support of such obligations of the Borrower and/or its Subsidiaries that are incurred in the ordinary course of business or are acceptable to the Administrative Agent and, subject to and upon the terms and conditions herein set forth, such Letter of Credit Issuer agrees to issue from time to time, irrevocable standby letters of credit (each such letter of credit, a “Letter of Credit” and, collectively, the “Letters of Credit”) denominated in Dollars and issued on a sight basis, in such form as may be approved by such Letter of Credit Issuer and the Administrative Agent.

(b)           Notwithstanding the foregoing, (i) no Letter of Credit shall be issued if after giving effect thereto (x) the Letter of Credit Outstandings would exceed $10.0 million or (y) the sum of all Letter of Credit Outstandings (less any portion thereof subject to Section 1A.01(c) Arrangements) and the aggregate principal amount of all RF Loans and all Swingline Loans then outstanding would exceed the Total Available Revolving Commitment at such time, (ii) each Letter of Credit shall by its terms terminate on or before the earlier of (A) the date which occurs 12 months after the date of the issuance thereof (although any such standby Letter of Credit may be automatically extendable for successive periods of up to 12 months, but, in each case, not beyond the tenth Business Day prior to the RF Maturity Date, so long as such Letter of Credit provides that the respective Letter of Credit Issuer retains an option, reasonably satisfactory to such Letter of Credit Issuer, to terminate such Letter of Credit within a specified period of time prior to each scheduled extension date) and (B) ten Business Days prior to the RF Maturity Date, (iii) no Letter of Credit shall be a trade or commercial letter of credit and (iv) no Letter of Credit Issuer shall be under any obligation to issue any Letter of Credit of the types described above if at the time of such issuance:

(x)            any order, judgment or decree of any governmental authority or arbitrator shall purport by its terms to enjoin or restrain such Letter of Credit Issuer from issuing such Letter of Credit or any requirement of law applicable to such Letter of Credit Issuer or any request or directive (whether or not having the force of law) from any

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governmental authority with jurisdiction over such Letter of Credit Issuer shall prohibit, or request that such Letter of Credit Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuing Lender with respect to such Letter of Credit any restriction or reserve or capital requirement (for which such Letter of Credit Issuer is not otherwise compensated hereunder) not in effect with respect to such Letter of Credit Issuer on the Effective Date, or any unreimbursed loss, cost or expense which was not applicable or in effect with respect to such Letter of Credit Issuer as of the date hereof and which such Letter of Credit Issuer in good faith deems material to it; or

(y)           such Letter of Credit Issuer shall have received from the Borrower, any other Credit Party or the Required Lenders prior to the issuance of such Letter of Credit notice of the type described in the second sentence of Section 1A.03(c).

(c)           Notwithstanding the foregoing, in the event a Lender Default exists, the respective Letter of Credit Issuer shall not be required to issue any Letter of Credit unless such Letter of Credit Issuer has entered into arrangements satisfactory to it and the Borrower (“Section 1A.01(c) Arrangements”) to eliminate such Letter of Credit Issuer’s risk with respect to the participation in Letters of Credit of the Defaulting Lender or Lenders, which may include requiring that the Borrower cash collateralize such Defaulting Lender’s or Lenders’ Percentage of the Letter of Credit Outstandings.

(d)           Annex IX hereto contains a description of certain letters of credit issued pursuant to the Existing Credit Agreement and outstanding on the Initial Borrowing Date.  Each such letter of credit, including any extension thereof (each, as amended from time to time in accordance with the terms hereof and thereof, an “Existing Letter of Credit”) shall constitute a “Letter of Credit” for all purposes of this Agreement, issued, for purposes of Sections 1A.04(a) and 1A.05, on the Initial Borrowing Date.

1A.02  Minimum Stated Amount.  The initial Stated Amount of each Letter of Credit shall be not less than $100,000 or such lesser amount as is acceptable to the respective Letter of Credit Issuer.

1A.03  Letter of Credit Requests; Notices of Issuance.  (a)  Whenever it desires that a Letter of Credit be issued, the Borrower shall give the Administrative Agent and the respective Letter of Credit Issuer written notice (which may include by way of facsimile transmission) in the form of Exhibit A-2 hereto prior to 1:00 P.M. (New York time) at least three Business Days (or such shorter period as may be acceptable to such Letter of Credit Issuer in any given case) prior to the proposed date of issuance (which shall be a Business Day) (each, a “Letter of Credit Request”), which Letter of Credit Request shall include any documents that such Letter of Credit Issuer customarily requires in connection therewith.

(b)           Each Letter of Credit Issuer shall, promptly after the issuance of, or amendment to, a Letter of Credit, give the Administrative Agent and the Borrower written notice of such issuance or amendment, as the case may be, and such notice shall be accompanied by a copy of such Letter of Credit or such amendment, as the case may be.  Promptly upon receipt of such notice, the Administrative Agent shall notify each Participant, in writing, of such issuance

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or amendment and if any Participant shall so request, the Administrative Agent shall furnish said Participant with a copy of such Letter of Credit or such amendment, as the case may be.

(c)           The making of each Letter of Credit Request shall be deemed to be a representation and warranty by the Borrower to the respective Letter of Credit Issuer and the Lenders that such Letter of Credit may be issued in accordance with, and will not violate the requirements of, Section 1A.01(a) or (b).  Unless the respective Letter of Credit Issuer has received notice from the Borrower, any other Credit Party or the Required Lenders before it issues a Letter of Credit that one or more of the conditions specified in Section 4 are not then satisfied, or that the issuance of such Letter of Credit would violate Section 1A.01(a) or (b), then such Letter of Credit Issuer shall, subject to the terms and conditions of this Agreement, issue the requested Letter of Credit for the account of the Borrower in accordance with such Letter of Credit Issuer’s usual and customary practices.

1A.04  Agreement to Repay Letter of Credit Drawings.  (a)  The Borrower hereby agrees to reimburse the respective Letter of Credit Issuer, by making payment to the Administrative Agent at the Payment Office, for any payment or disbursement made by such Letter of Credit Issuer under any Letter of Credit (each such amount so paid or disbursed until reimbursed, an “Unpaid Drawing”) immediately after, and in any event on the date on which the Borrower is notified by such Letter of Credit Issuer of, such payment or disbursement with interest on the amount so paid or disbursed by such Letter of Credit Issuer, to the extent not reimbursed prior to 3:00 P.M. (New York time) on the date of such payment or disbursement, from and including the date paid or disbursed to but not including the date such Letter of Credit Issuer is reimbursed therefor at a rate per annum which shall be the Applicable Base Rate Margin plus the Base Rate as in effect from time to time (plus an additional 2% per annum if not reimbursed by the third Business Day after the date of such notice of payment or disbursement), such interest also to be payable on demand.

(b)           The Borrower’s obligation under this Section 1A.04 to reimburse the respective Letter of Credit Issuer with respect to Unpaid Drawings (including, in each case, interest thereon) shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against any Letter of Credit Issuer, the Administrative Agent or any Lender, including, without limitation, any defense based upon the failure of any drawing under a Letter of Credit to conform to the terms of the Letter of Credit or any non-application or misapplication by the beneficiary of the proceeds of such drawing; provided, however, that the Borrower shall not be obligated to reimburse such Letter of Credit Issuer for any wrongful payment made by such Letter of Credit Issuer under a Letter of Credit as a result of acts or omissions constituting willful misconduct or gross negligence on the part of such Letter of Credit Issuer as determined by a final judgment issued by a court of competent jurisdiction.

1A.05  Letter of Credit Participations.  (a)  Immediately upon the issuance by any Letter of Credit Issuer of any Letter of Credit, such Letter of Credit Issuer shall be deemed to have sold and transferred to each other RF Lender, and each such RF Lender (each, a “Participant”) shall be deemed irrevocably and unconditionally to have purchased and received from such Letter of Credit Issuer, without recourse or warranty, an undivided interest and participation, to the extent of such Participant’s Percentage, in such Letter of Credit, each

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substitute letter of credit, each drawing made thereunder and the obligations of the Borrower under this Agreement with respect thereto (although the Letter of Credit Fee shall be payable directly to the Administrative Agent for the account of the RF Lenders as provided in Section 2.01(c) and the Participants shall have no right to receive any portion of any Facing Fees) and any security therefor or guaranty pertaining thereto.  Upon any change in the Revolving Commitments pursuant to Section 1.13 or 11.04(b), it is hereby agreed that, with respect to all outstanding Letters of Credit and Unpaid Drawings, there shall be an automatic adjustment to the participations pursuant to this Section 1A.05 to reflect the new Percentages of the RF Lenders.

(b)In determining whether to pay under any Letter of Credit, the applicable Letter of Credit Issuer shall not have any obligation relative to the Participants other than to determine that any documents required to be delivered under such Letter of Credit have been delivered and that they substantially comply on their face with the requirements of such Letter of Credit.  Any action taken or omitted to be taken by any Letter of Credit Issuer under or in connection with any Letter of Credit if taken or omitted in the absence of gross negligence or willful misconduct as determined by a final judgment issued by a court of competent jurisdiction shall not create for such Letter of Credit Issuer any resulting liability.

(c)           In the event that any Letter of Credit Issuer makes any payment under any Letter of Credit and the Borrower shall not have reimbursed such amount in full to such Letter of Credit Issuer pursuant to Section 1A.04(a), such Letter of Credit Issuer shall promptly notify the Administrative Agent, and the Administrative Agent shall promptly notify each Participant of such failure, and each Participant shall promptly and unconditionally pay to the Administrative Agent for the account of such Letter of Credit Issuer, the amount of such Participant’s Percentage of such payment in Dollars and in same day funds; provided, however, that no Participant shall be obligated to pay to the Administrative Agent its Percentage of such unreimbursed amount for any wrongful payment made by such Letter of Credit Issuer under a Letter of Credit as a result of acts or omissions constituting willful misconduct or gross negligence on the part of such Letter of Credit Issuer as determined by a final judgment issued by a court of competent jurisdiction.  If the Administrative Agent so notifies any Participant required to fund an Unpaid Drawing under a Letter of Credit prior to 1:00 P.M. (New York time) on any Business Day, such Participant shall make available to the Administrative Agent for the account of the respective Letter of Credit Issuer such Participant’s Percentage of the amount of such payment on such Business Day in same day funds.  If and to the extent such Participant shall not have so made its Percentage of the amount of such Unpaid Drawing available to the Administrative Agent for the account of the respective Letter of Credit Issuer, such Participant agrees to pay to the Administrative Agent for the account of such Letter of Credit Issuer, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Administrative Agent for the account of such Letter of Credit Issuer at the overnight Federal Funds Effective Rate.  The failure of any Participant to make available to the Administrative Agent for the account of the respective Letter of Credit Issuer its Percentage of any Unpaid Drawing under any Letter of Credit shall not relieve any other Participant of its obligation hereunder to make available to the Administrative Agent for the account of such Letter of Credit Issuer its Percentage of any payment under any Letter of Credit on the date required, as specified above, but no Participant shall be responsible for the failure of any other Participant to make available to the Administrative Agent for the account of such Letter of Credit Issuer such other Participant’s Percentage of any such payment.

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(d)           Whenever any Letter of Credit Issuer receives a payment of a reimbursement obligation (including interest on Unpaid Drawings) as to which the Administrative Agent has received for the account of such Letter of Credit Issuer any payments from any Participant pursuant to clause (c) above, such Letter of Credit Issuer shall pay to the Administrative Agent and the Administrative Agent shall promptly pay to each Participant which has paid its Percentage thereof, in Dollars and in same day funds, an amount equal to such Participant’s Percentage of the amount of the payment of such reimbursement obligation, including interest paid thereon to the extent accruing after the purchase of the respective participations.

(e)           The obligations of the Participants to make payments to the Administrative Agent for the account of the respective Letter of Credit Issuer with respect to Letters of Credit shall be irrevocable and not subject to counterclaim, set-off or other defense or any other qualification or exception whatsoever (provided that no Participant shall be required to make payments resulting from the Administrative Agent’s gross negligence or willful misconduct as determined by a final judgment issued by a court of competent jurisdiction) and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation, any of the following circumstances:

(i)            any lack of validity or enforceability of this Agreement or any of the other Credit Documents;

(ii)           the existence of any claim, set-off, defense or other right which the Borrower or any of its Subsidiaries may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), the Administrative Agent, any Letter of Credit Issuer, any Lender or other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Borrower and the beneficiary named in any such Letter of Credit);

(iii)          any draft, certificate or other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;

(iv)          the surrender or impairment of any security for the performance or observance of any of the terms of any of the Credit Documents; or

(v)           the occurrence of any Default or Event of Default.

(f)            To the extent the respective Letter of Credit Issuer is not indemnified by the Borrower, the Participants will reimburse and indemnify such Letter of Credit Issuer, in proportion to their respective Percentages, for and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, judgments, costs, expenses or disbursements of whatsoever kind or nature which may be imposed on, asserted against or incurred by such Letter of Credit Issuer in performing its respective duties in any way relating to or arising out of its issuance of Letters of Credit; provided that no Participants shall be liable for any portion of such

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liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Letter of Credit Issuer’s gross negligence or willful misconduct as determined by a final judgment issued by a court of competent jurisdiction.

1A.06  Increased Costs.  If at any time after the Effective Date, the adoption or effectiveness of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central lender or comparable agency charged with the interpretation or administration thereof, or compliance by any Letter of Credit Issuer or any Participant with any request or directive (whether or not having the force of law) by any such authority, central lender or comparable agency shall either (i) impose, modify or make applicable any reserve, deposit, capital adequacy or similar requirement against Letters of Credit issued by any Letter of Credit Issuer or such Participant’s participation therein, or (ii) shall impose on any Letter of Credit Issuer or any Participant any other conditions affecting this Agreement, any Letter of Credit or such Participant’s participation therein; and the result of any of the foregoing is to increase the cost to any Letter of Credit Issuer or such Participant of issuing, maintaining or participating in any Letter of Credit, or to reduce the amount of any sum received or receivable by any Letter of Credit Issuer or such Participant hereunder (other than, in the case of a change in the basis of taxation of payments to a Letter of Credit Issuer or Participant of the principal of or interest on the Loans or any other amounts payable hereunder, changes in the rate of tax on, or determined by reference to, the net income or net profits of such Letter of Credit Issuer or Participant imposed by the jurisdiction in which its principal office or applicable lending office is located), then, upon demand to the Borrower by any Letter of Credit Issuer or such Participant (a copy of which notice shall be sent by such Letter of Credit Issuer or such Participant to the Administrative Agent), the Borrower shall pay to such Letter of Credit Issuer or such Participant such additional amount or amounts as will compensate such Letter of Credit Issuer or such Participant for such increased cost or reduction.  A certificate submitted to the Borrower by such Letter of Credit Issuer or such Participant, as the case may be (a copy of which certificate shall be sent by such Letter of Credit Issuer or such Participant to the Administrative Agent), setting forth the basis for the determination of such additional amount or amounts necessary to compensate such Letter of Credit Issuer or such Participant as aforesaid shall be conclusive and binding on the Borrower absent manifest error, although the failure to deliver any such certificate shall not release or diminish any of the Borrower’s obligations to pay additional amounts pursuant to this Section 1A.06 upon the subsequent receipt thereof.

SECTION 2.  Fees.

2.01  Fees.  (a)  The Borrower agrees to pay to the Administrative Agent a commitment commission (the “RF Commitment Commission”) for the account of each RF Lender that is a Non-Defaulting Lender for the period from and including the Effective Date to but not including the date upon which the Total Revolving Commitment has been terminated, computed for each day at the rate per annum equal to 0.50% for such day on the Unutilized Revolving Commitment of such Lender on such day.  Such Commitment Commission shall be due and payable in arrears on the last Business Day of each calendar quarter and on the date upon which the Total Revolving Commitment is terminated.

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(b)           The Borrower agrees to pay to the Administrative Agent a commitment commission (the “DDTF Commitment Commission” and, together with the RF Commitment Commission, the “Commitment Commission”) for the account of each Lender with a Delayed-Draw B Term Commitment that is a Non-Defaulting Lender for the period from and including the Effective Date to but not including the date upon which the Total Delayed-Draw B Term Commitment has been terminated, computed for each day at the rate per annum equal to 0.50% for such day on the Delayed-Draw B Term Commitment of such Lender on such day.  Such DDTF Commitment Commission shall be due and payable in arrears on the last Business Day of each calendar quarter and on the date upon which the Total Delayed-Draw B Term Commitment is terminated.

(c)           So long as any Letter of Credit is outstanding and has not been fully collateralized pursuant to Section 3.02(A)(a) and/or Section 8, the Borrower agrees to pay to the Administrative Agent, for the account of each Non-Defaulting Lender, pro rata on the basis of their respective Percentages, a fee in respect of each Letter of Credit (the “Letter of Credit Fee”) computed for each day at a per annum rate equal to the Applicable Eurodollar Margin for RF Loans on such day multiplied by the Stated Amount of all Letters of Credit outstanding on such day (less any amount thereof as to which Section 1A.01(c) Arrangements are in place).  Accrued Letter of Credit Fees shall be due and payable quarterly in arrears on the last Business Day of each calendar quarter.

(d)           So long as any Letter of Credit is outstanding and has not been fully collateralized pursuant to Section 3.02(A)(a) and/or Section 8, the Borrower agrees to pay to the respective Letter of Credit Issuer a fee in respect of each Letter of Credit issued by it (the “Facing Fee”) computed for each day at the rate of 0.125% per annum on the Stated Amount of all such Letters of Credit outstanding on such day, provided that there will be a minimum Facing Fee per year for each Letter of Credit of $500 (which is not an additional fee).  Accrued Facing Fees shall be due and payable quarterly in arrears on the last Business Day of each calendar quarter.

(e)           The Borrower agrees to pay directly to the respective Letter of Credit Issuer upon each issuance of, payment under, and/or amendment of, a Letter of Credit such amount, if any, as shall at the time of such issuance, payment or amendment be the administrative charge which such Letter of Credit Issuer is customarily charging for issuances of, payments under or amendments of, letters of credit issued by it.

(f)            The Borrower shall pay to (x) each Agent on the Initial Borrowing Date, for its own account and/or for distribution to the Lenders, such fees as heretofore agreed by the Borrower and the Agents and (y) the Administrative Agent, for its own account, such other fees as agreed to between the Borrower and the Administrative Agent, when and as due.

(g)           The Borrower shall pay to the Administrative Agent for distribution to each Incremental B Term Lender such fees and other amounts, if any, as are specified in the relevant Incremental B Term Commitment Agreement, with such fees and other amounts, if any, to be payable on the respective Incremental B Term Loan Borrowing Date.

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(h)           All computations of Fees shall be made in accordance with Section 11.07(b).

2.02  Voluntary Reduction of Commitments.  (a)  Upon at least three Business Day’s prior written notice (or telephonic notice confirmed in writing) to the Administrative Agent at its Notice Office (which notice shall be deemed to be given on a certain day only if given before 2:00 P.M. (New York time) on such day and shall be promptly transmitted by the Administrative Agent to each of the Lenders), the Borrower shall have the right, without premium or penalty, to reduce, in whole or in part, the Total Unutilized Revolving Commitment or the Total Delayed-Draw B Term Commitment, provided that (w) any such partial reduction shall apply to proportionately and permanently reduce the Revolving Commitments or Delayed-Draw B Term Commitments, as the case may be, of each Lender with such a Commitment, (x) in the case of any reduction to the Total Unutilized Revolving Commitment, no such reduction shall reduce any Lender’s Revolving Commitment by an amount greater than the then Unutilized Revolving Commitment of such Lender, (y) in the case of any reduction to the Total Unutilized Revolving Commitment, no such reduction shall cause the Blocked Revolving Commitment to exceed the Total Unutilized Revolving Commitment (as determined immediately after giving effect to such reduction) and (z) any partial reduction pursuant to this Section 2.02(a) shall be in integral multiples of $1,000,000.

(b)           In the event of certain refusals by a Lender to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Lenders as provided in Section 11.12(b), the Borrower shall have the right, subject to obtaining the consents required by Section 11.12(b), upon two Business Days’ prior written notice to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders), to terminate the entire Delayed-Draw B Term Commitment and/or Revolving Commitment of such Lender, so long as all Loans, together with accrued and unpaid interest, Fees and all other amounts, owing to such Lender (including all amounts, if any, owing pursuant to Section 1.11 but excluding amounts owing in respect of Loans of any Facility maintained by such Lender, if such Loans are not being repaid pursuant to Section 11.12(b)) are repaid concurrently with the effectiveness of such termination (at which time Annex I shall be deemed modified to reflect such changed amounts) and at such time, unless the respective Lender continues to have outstanding Commitments and/or Loans hereunder, such Lender shall no longer constitute a “Lender” for purposes of this Agreement, except with respect to indemnifications under this Agreement (including, without limitation, Sections 1.10, 1.11, 1A.06, 3.04, 11.01 and 11.06), which shall survive as to such repaid Lender.

2.03  Mandatory Adjustments of Commitments, etc.  (a)  Each of the Total Initial B Term Commitment, the Total Delayed-Draw B Term Commitment and the Total Revolving Commitment (and the Initial B Term Commitment, Delayed-Draw B Term Commitment and Revolving Commitment of each Lender with such a Commitment) shall terminate in its entirety on the Expiration Date unless the Initial Borrowing Date has occurred on or before such date.

(b)           The Total Initial B Term Commitment (and the Initial B Term Commitment of each Initial B Term Lender) shall terminate in its entirety on the Initial Borrowing Date (after giving effect to the making of Initial B Term Loans on such date).

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(c)           The Total Delayed-Draw B Term Commitment (and the Delayed-Draw B Term Commitment of each Lender with such a Commitment) shall terminate in its entirety (to the extent not theretofore terminated) on the Delayed-Draw B Term Commitment Termination Date (after giving effect to any incurrence of Delayed-Draw B Term Loans on such date).

(d)           The Total Delayed-Draw B Term Commitment shall (i) be reduced on each date on which Delayed-Draw B Term Loans are incurred (after giving effect to the making of Delayed-Draw B Term Loans on such date) in an amount equal to the aggregate principal amount of the Delayed-Draw B Term Loans incurred on such date and (ii) prior to the termination of the Total Delayed-Draw B Term Commitment as provided in Section 2.03(c) and preceding clause (i), be reduced on each date on which both (x) no B Term Loans are outstanding (after giving effect to the application on or prior to such date of the provisions of Sections 3.02(A)) and (y) B Term Loans, had there been any still outstanding, would have been required to be repaid pursuant to Sections 3.02(A)(b), (c), (d) or (e), by the amount, if any, by which the amount required to be applied pursuant to said Sections as a result of the events described therein (determined as if an unlimited amount of B Term Loans were actually outstanding) exceeds the aggregate principal amount of B Term Loans being repaid as a result of such events.

(e)           The Total Incremental B Term Commitment (and the Incremental B Term Commitment of each Incremental B Term Lender with such a Commitment) pursuant to an Incremental B Term Commitment Agreement shall terminate in its entirety on the related Incremental B Term Loan Borrowing Date therefor (after giving effect to the making of Incremental B Term Loans on such date).

(f)            The Total Revolving Commitment (to the extent outstanding) shall be reduced on each date on which both (x) no B Term Loans are outstanding (after giving effect to the application on or prior to such date of the provisions of Sections 3.02(A)) and the Total Delayed-Draw B Term Commitment has terminated (after giving effect to the application on or prior to such date of the provisions of Sections 2.03(c) and (d)) and (y) B Term Loans, had there been any still outstanding, would have been required to be repaid pursuant to Sections 3.02(A)(b), (c), (d) or (e), by the amount, if any, by which the amount required to be applied pursuant to said Sections as a result of the events described therein (determined as if an unlimited amount of B Term Loans were actually outstanding) exceeds the sum of the Delayed-Draw B Term Commitments being terminated and the aggregate principal amount of B Term Loans being repaid, in either case as a result of such events; provided, however, that in no event shall the Total Revolving Commitment be reduced below $50,000,000 as a result of the application of this Section 2.03(f).

(g)           The Total Revolving Commitment shall terminate in its entirety on the earlier of (x) the RF Maturity Date and (y) the date on which a Change of Control occurs.

(h)           Each partial reduction of the Commitments under a Facility pursuant to this Section 2.03 shall apply proportionately to reduce the Commitment of each Lender under such Facility.

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SECTION 3.  Payments.

3.01  Voluntary Prepayments.  The Borrower shall have the right to prepay Loans, in whole or in part, without premium or penalty, from time to time on the following terms and conditions:  (i) the Borrower shall give the Administrative Agent at the Payment Office written notice (or telephonic notice promptly confirmed in writing) of its intent to prepay the Loans, whether such Loans are B Term Loans, RF Loans or Swingline Loans, the amount of such prepayment and (in the case of Eurodollar Loans) the specific Borrowing(s) pursuant to which made, which notice shall be given by the Borrower prior to 12:00 Noon (New York time) at least one Business Day prior to the date of such prepayment with respect to Base Rate Loans (other than Swingline Loans, with respect to which notice shall be given by the Borrower on the date of prepayment) and at least three Business Days prior to the date of such prepayment with respect to Eurodollar Loans, and which notice (except in the case of a prepayment of Swingline Loans) shall promptly be transmitted by the Administrative Agent to each of the Lenders; (ii) each partial prepayment of any Borrowing shall be in an aggregate principal amount of at least $1,000,000 (or $100,000, in the case of a partial prepayment of any Borrowing of Swingline Loans), provided that no partial prepayment of Eurodollar Loans made pursuant to a Borrowing shall reduce the aggregate principal amount of the Loans outstanding pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount applicable thereto; (iii) except as provided in clause (v) below, each prepayment in respect of any Loans of a given Facility made pursuant to a Borrowing shall be applied pro rata among such Loans, provided that at the Borrower’s election in connection with any prepayment of RF Loans pursuant to this Section 3.01, such prepayment shall not be applied to any RF Loans of a Defaulting Lender; (iv) at the time of any prepayment of Eurodollar Loans pursuant to this Section 3.01 on any date other than the last day of the Interest Period applicable thereto, the Borrower shall pay the amounts required pursuant to Section 1.11; and (v) in the event of certain refusals by a Lender to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Lenders as provided in Section 11.12(b), the Borrower may, upon two Business Days’ prior written notice to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders), repay all Loans of such Lender (including all amounts, if any, owing pursuant to Section 1.11), together with accrued and unpaid interest, Fees and all other amounts then owing to such Lender (or owing to such Lender with respect to each Facility which gave rise to the need to obtain such Lender’s individual consent) in accordance with said Section 11.12(b), so long as (A) in the case of the repayment of RF Loans of any Lender pursuant to this clause (v), the Revolving Commitment of such Lender is terminated concurrently with such repayment (at which time Annex I shall be deemed modified to reflect the changed Revolving Commitments) and (B) the consents required by Section 11.12(b) in connection with the repayment pursuant to this clause (v) shall have been obtained.

3.02  Mandatory Prepayments.

(A)          Requirements:

(a)           (i) If on any date (and after giving effect to all other repayments on such date) the sum of (I) the aggregate outstanding principal amount of RF Loans made by Non-Defaulting Lenders, (II) the aggregate outstanding principal amount of all Swingline Loans and (III) the Letter of Credit Outstandings (less any amount thereof as to which Section 1A.01(c) Arrangements are in place) exceeds the Adjusted Total Available Revolving Commitment as

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then in effect, the Borrower shall repay on such date the principal of outstanding Swingline Loans and, after all Swingline Loans have been repaid in full or if no Swingline Loans are outstanding, the principal of outstanding RF Loans of Non-Defaulting Lenders in an aggregate amount equal to such excess.  If, after giving effect to such repayment or repayments, the Letter of Credit Outstandings (less any amount thereof as to which Section 1A.01(c) Arrangements are in place) exceeds the Adjusted Total Available Revolving Commitment then in effect, the Borrower shall pay to the Collateral Agent an amount in cash and/or Cash Equivalents equal to such excess and the Collateral Agent shall hold such payment as security for the obligations of the Borrower in respect of Letters of Credit owing to Non-Defaulting Lenders pursuant to a cash collateral agreement to be entered into in form and substance reasonably satisfactory to the Collateral Agent (which shall permit certain investments in Cash Equivalents reasonably satisfactory to the Collateral Agent, until all proceeds are applied to such secured obligations or until all Letters of Credit so secured expire undrawn, at which time such amount shall be returned to the Borrower).

(ii)           On any date on which the aggregate outstanding principal amount of the RF Loans made by any Defaulting Lender exceeds the Available Revolving Commitment of such Defaulting Lender, the Borrower shall prepay on such date principal of outstanding RF Loans of such Defaulting Lender in an amount equal to such excess.

(b)           On the fifth Business Day following the date of receipt thereof on or after the Effective Date by the Borrower and/or any of its Subsidiaries of the Net Cash Proceeds from any Asset Sale, an amount equal to 100% of the Net Cash Proceeds from such Asset Sale shall be applied as a mandatory repayment of principal of the then outstanding B Term Loans, provided that up to 100% of the Net Cash Proceeds from Asset Sales shall not be required to be used to so repay B Term Loans to the extent (i) the Borrower elects, as hereinafter provided, to cause such Net Cash Proceeds to be used within 270 days of such Asset Sale to finance Permitted Acquisitions (a “Reinvestment Election”) or (ii) in the case of Net Cash Proceeds from an Asset Sale constituting a Non-Core Asset Sale and so long as RF Loans in an aggregate principal amount equal to at least such amount of Net Cash Proceeds were incurred to finance Permitted Acquisitions within 120 days prior to the date of receipt of such Net Cash Proceeds, the Borrower applies all (and not less than all) of such Net Cash Proceeds to repay outstanding principal of RF Loans in accordance with Section 3.01 (a “Repayment Election”).  The Borrower may exercise (x) its Repayment Election with respect to a Non-Core Asset Sale as provided above if (A) no Default or Event of Default exists and (B) the Borrower delivers a written notice signed by an Authorized Officer to the Administrative Agent no later than five Business Days following the respective Non-Core Asset Sale stating that it has incurred RF Loans in an aggregate principal amount equal to or greater than the Net Cash Proceeds received from such Non-Core Asset Sale to finance a Permitted Acquisition within the time period specified in clause (ii) above and specifying the relevant Permitted Acquisition(s) consummated during such period and (y) its Reinvestment Election with respect to an Asset Sale if (A) no Default or Event of Default exists and (B) the Borrower delivers a Reinvestment Notice to the Administrative Agent no later than five Business Days following the date of the consummation of the respective Asset Sale, with such Reinvestment Election being effective with respect to the Net Cash Proceeds of such Asset Sale equal to the Anticipated Reinvestment Amount specified in such Reinvestment Notice.  Notwithstanding the foregoing provisions of this Section 3.02(A)(b), in no event shall the Borrower or any of its Subsidiaries use any proceeds from any Asset Sale to make

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any voluntary or mandatory repayment or prepayment of Permitted Senior Unsecured Notes or Permitted Junior Capital and, in each case, before any such obligation to use such proceeds to make such repayment shall arise, the Borrower or the respective Subsidiary shall reinvest the respective amounts pursuant to a Reinvestment Election as, and to the extent, permitted above in this Section 3.02(A)(b) or apply such proceeds as a mandatory prepayment and/or commitment reduction in accordance with the requirements of Section 3.02(B), 2.03(d) or 2.03(f), as applicable.

(c)           On the Business Day following the receipt thereof by the Borrower, an amount equal to 100% of the Net Cash Proceeds from the issuance of Permitted Senior Unsecured Notes and Permitted Junior Capital shall be applied as a mandatory repayment of principal of the then outstanding B Term Loans; provided that, notwithstanding the foregoing, the Net Cash Proceeds from any issuance of Permitted Senior Unsecured Notes or Permitted Junior Capital by the Borrower after the Initial Borrowing Date shall not be required to be applied to repay principal of outstanding B Term Loans as otherwise required above, so long as (i) no Default or Event of Default then exists or would result from the respective issuance of such Permitted Senior Unsecured Notes or Permitted Junior Capital, as the case may be, (ii) calculations are made by the Borrower demonstrating compliance with the covenants contained in Sections 7.11 and 7.12 for the Calculation Period most recently ended prior to the date of such issuance of Permitted Senior Unsecured Notes or Permitted Junior Capital, as the case may be, on a Pro Forma Basis (as if the respective Permitted Senior Unsecured Notes or Permitted Junior Capital, as the case may be, had been issued on the first day of such Calculation Period), (iii) in the case of any issuance of Permitted Junior Capital consisting of Permitted Senior Subordinated Notes or Disqualified Preferred Stock, calculations are made by the Borrower demonstrating compliance with a Senior Secured Leverage Ratio of less than 3.75:1.00 for the Calculation Period most recently ended prior to the date of such issuance of Permitted Junior Capital on a Pro Forma Basis (as if the respective Permitted Junior Capital had been issued on the first day of such Calculation Period), (iv) in the case of any issuance of Permitted Senior Unsecured Notes, calculations are made by the Borrower demonstrating compliance with a Senior Secured Leverage Ratio of less than 3.00:1.00 for the Calculation Period most recently ended prior to the date of such issuance of Permitted Senior Unsecured Notes on a Pro Forma Basis (determined as if the respective Permitted Senior Unsecured Notes had been issued on the first day of such Calculation Period and after giving effect to any concurrent prepayment of B Term Loans with a portion of the Net Cash Proceeds from the issuance thereof), (v) all of the Net Cash Proceeds from such issuance of Permitted Senior Unsecured Notes or Permitted Junior Capital, as the case may be, shall have been used (except to the extent of any portion thereof applied to make a concurrent prepayment of B Term Loans pursuant to, and in accordance with the requirements of, Section 3.01) to effect a Permitted Acquisition in accordance with the requirements of Section 6.10 and/or concurrently utilized by the Borrower (x) to make a voluntary prepayment of RF Loans pursuant to, and in accordance with the requirements of, Section 3.01 in an aggregate principal amount equal to the aggregate principal amount of RF Loans actually incurred by the Borrower to finance a Permitted Acquisition and/or (y) to redeem and/or refinance Permitted Senior Unsecured Notes and/or Permitted Junior Capital in an amount equal to the principal amount or aggregate liquidation preference of or the Net Cash Proceeds from, as the case may be, the Permitted Senior Unsecured Notes or Permitted Junior Capital, as the case may be, actually issued to finance Permitted Acquisition(s) or Permitted Acquisitions (and pay related accrued interest and dividends thereon, if any), in any such case within the 364-day period prior

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to such issuance of Permitted Senior Unsecured Notes or Permitted Junior Capital, as the case may be, and (vi) the Borrower shall have furnished to the Administrative Agent a certificate from an Authorized Officer certifying as to compliance with the requirements of preceding clauses (i), (ii), (iii), (iv) and (v) and containing the calculations required by preceding clauses (ii), (iii) and (iv), as applicable.

(d)           On the Reinvestment Prepayment Date with respect to a Reinvestment Election, an amount equal to the Reinvestment Prepayment Amount, if any, for such Reinvestment Election shall be applied as a repayment of the principal amount of the then outstanding B Term Loans.

(e)           On the date of delivery of each Quarterly Compliance Certificate pursuant to Section 6.01(e) demonstrating that the Leverage Ratio as at the last day of the fiscal quarter of the Borrower covered by such Quarterly Compliance Certificate is greater than 5.00:1.00 (or, if the Borrower shall have failed to deliver a Quarterly Compliance Certificate as required by Section 6.01(e) with respect to any fiscal quarter of the Borrower, on the date of the required delivery of a Quarterly Compliance Certificate for such fiscal quarter pursuant to said Section), an amount equal to 50% of the increase, if any, in Cumulative Distributable Cash during such fiscal quarter shall be applied as a mandatory repayment of principal of the then outstanding B Term Loans; provided that, so long as (x) no Default or Event of Default exists at the time of the required mandatory repayment pursuant to this clause (e) and (y) no Dividend Suspension Period existed during the fiscal quarter of the Borrower ended immediately prior to such fiscal quarter, the Borrower shall not be so required to repay B Term Loans as otherwise required by this clause (e); provided however, that if the Borrower is subsequently prohibited from paying Dividends on the Borrower Common Stock during the fiscal quarter of the Borrower immediately succeeding such fiscal quarter as a result of the existence of a Dividend Suspension Period, a Default or an Event of Default, a mandatory repayment of B Term Loans shall be required within 60 days after the last day of such immediately succeeding fiscal quarter in the amount originally required by this clause (e) for the respective prior fiscal quarter (determined without regard to this and the immediately preceding proviso).

(f)            To the extent not theretofore repaid pursuant to the provisions of this Agreement, (i) all outstanding RF Loans and Swingline Loans shall be repaid in full upon the termination of the Total Revolving Commitment, (ii) all outstanding B Term Loans and RF Loans shall be repaid in full on the relevant Maturity Date therefor, (iii) all outstanding Swingline Loans shall be repaid in full on the Swingline Expiry Date and (iv) all outstanding B Term Loans shall be repaid in full on the date a Change of Control occurs.

(B)           Application:

With respect to each prepayment of Loans required by Section 3.02(A), the Borrower may designate the Types of Loans which are to be prepaid and the specific Borrowing(s) under the affected Facility pursuant to which made, provided that (i) if any prepayment of Eurodollar Loans made pursuant to a single Borrowing shall reduce the outstanding Loans made pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount for such Borrowing, such Borrowing shall be immediately converted into Base Rate Loans; (ii) except for the differing treatments of Defaulting Lenders and Non-Defaulting Lenders

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as expressly provided in Section 3.02(A)(a), each prepayment of any Loans under a Facility made pursuant to a given Borrowing shall be applied pro rata among such Loans; (iii) repayments of Eurodollar Loans pursuant to this Section 3.02 may only be made on the last day of an Interest Period applicable thereto unless (x) all Eurodollar Loans of the respective Facility with Interest Periods ending on such date of required repayment and all Base Rate Loans of the respective Facility have been paid in full and/or (y) concurrently with such repayment, the Borrower pays all breakage costs and other amounts owing to each Lender pursuant to Section 1.11.  In the absence of a designation by the Borrower as described in the preceding sentence, the Administrative Agent shall, subject to the above, make such designation in its sole discretion with a view, but no obligation, to minimize breakage costs owing under Section 1.11.  Notwithstanding the foregoing provisions of this Section 3.02, if at any time the mandatory repayment of Loans pursuant to this Section 3.02 would result, after giving effect to the procedures set forth in clause (iii) of the second preceding sentence, in the Borrower incurring breakage costs under Section 1.11 as a result of Eurodollar Loans being repaid other than on the last day of an Interest Period applicable thereto (any such Eurodollar Loans, “Affected Loans”), the Borrower may (in lieu of making such payment) elect, by written notice to the Administrative Agent, to have the provisions of the following sentence be applicable.  At the time any Affected Loans are otherwise required to be prepaid, the Borrower may elect to deposit 100% (or such lesser percentage elected by the Borrower as not being repaid) of the principal amounts that otherwise would have been paid in respect of the Affected Loans with the Administrative Agent to be held as security for the obligations of the Borrower hereunder pursuant to a cash collateral agreement to be entered into in form and substance satisfactory to the Administrative Agent, with such cash collateral to be released from such cash collateral account (and applied to repay the principal amount of such Eurodollar Loans) upon each occurrence thereafter of the last day of an Interest Period applicable to Eurodollar Loans (or such earlier date or dates as shall be requested by the Borrower), with the amount to be so released and applied on the last day of each Interest Period to be the amount of such Eurodollar Loans to which such Interest Period applies (or, if less, the amount remaining in such cash collateral account).

3.03  Method and Place of Payment.  Except as otherwise specifically provided herein, all payments under this Agreement shall be made to the Administrative Agent for the ratable account of the Lenders entitled thereto, not later than 1:00 P.M. (New York time) on the date when due and shall be made in immediately available funds and in Dollars at the Payment Office, it being understood that written notice by the Borrower to the Administrative Agent to make a payment from the funds in the Borrower’s account at the Payment Office shall constitute the making of such payment to the extent of such funds held in such account.  Any payments under this Agreement which are made later than 1:00 P.M. (New York time) shall be deemed to have been made on the next succeeding Business Day. Whenever any payment to be made hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable during such extension at the applicable rate in effect immediately prior to such extension.

3.04  Net Payments.  (a)  All payments made by the Borrower hereunder and/or under any Note will be made without setoff, counterclaim or other defense.  Except as provided in Section 3.04(b), all such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other

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charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding, except as provided in the second succeeding sentence, any tax imposed on or measured by the net income or net profits of a Lender pursuant to the laws of the jurisdiction in which it is organized or the jurisdiction in which the principal office or applicable lending office of such Lender is located or any subdivision thereof or therein) and all interest, penalties or similar liabilities with respect to such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as “Taxes”).  If any Taxes are so levied or imposed, the Borrower agrees to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every payment of all amounts due under this Agreement and/or under any Note, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein or therein.  If any amounts are payable in respect of Taxes pursuant to the preceding sentence, the Borrower agrees to reimburse each Lender, upon the written request of such Lender, for taxes imposed on or measured by the net income or net profits of such Lender pursuant to the laws of the jurisdiction in which such Lender is organized or in which the principal office or applicable lending office of such Lender is located or under the laws of any political subdivision or taxing authority of any such jurisdiction in which such Lender is organized or in which the principal office or applicable lending office of such Lender is located and for any withholding of taxes as such Lender shall determine are payable by, or withheld from, such Lender, in respect of such amounts so paid to or on behalf of such Lender pursuant to the preceding sentence and in respect of any amounts paid to or on behalf of such Lender pursuant to this sentence.  The Borrower will furnish to the Administrative Agent within 45 days after the date the payment of any Taxes is due pursuant to applicable law certified copies of tax receipts evidencing such payment by the Borrower.  The Borrower agrees to indemnify and hold harmless each Lender, and reimburse such Lender upon its written request, for the amount of any Taxes so levied or imposed and paid by such Lender.

(b)           Each Lender that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes agrees to deliver to the Borrower and the Administrative Agent on or prior to the Effective Date, or in the case of a Lender that is an assignee or transferee of an interest under this Agreement pursuant to Section 1.13 or 11.04 (unless the respective Lender was already a Lender hereunder immediately prior to such assignment or transfer), on the date of such assignment or transfer to such Lender, (i) two accurate and complete original signed copies of Internal Revenue Service Form W-8ECI or W-8BEN (with respect to a complete exemption under an income tax treaty) (or successor form)) certifying to such Lender’s entitlement as of such date to a complete exemption from United States withholding tax with respect to payments to be made under this Agreement and under any Note, or (ii) if the Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service Form W-8ECI or W-8BEN (with respect to a complete exemption under an income tax treaty) pursuant to clause (i) above, (x) a certificate substantially in the form of Exhibit C (any such certificate, a “Section 3.04 Certificate”) and (y) two accurate and complete original signed copies of Internal Revenue Service Form W-8BEN (with respect to the portfolio interest exemption) (or successor form) certifying to such Lender’s entitlement as of such date to a complete exemption from United States withholding tax with respect to payments of interest to be made under this Agreement and under any Note.  In addition, each Lender agrees that from time to time after the Effective Date,

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when a lapse of time or change in circumstances renders the previous certification obsolete or inaccurate in any material respect, it will deliver to the Borrower and the Administrative Agent two new accurate and complete original signed copies of Internal Revenue Service Form W-8ECI or W-8BEN (with respect to the benefits of any income tax treaty), or Form W-8BEN (with respect to the portfolio interest exemption) and a Section 3.04 Certificate, as the case may be, and such other forms as may be required in order to confirm or establish the entitlement of such Lender to a continued exemption from or reduction in United States withholding tax with respect to payments under this Agreement and any Note, or it shall immediately notify the Borrower and the Administrative Agent of its inability to deliver any such Form or Certificate, in which case such Lender shall not be required to deliver any such Form or Certificate pursuant to this Section 3.04(b).  Notwithstanding anything to the contrary contained in Section 3.04(a), but subject to Section 11.04(b) and the immediately succeeding sentence, (x) the Borrower shall be entitled, to the extent it is required to do so by law, to deduct or withhold income or similar taxes imposed by the United States (or any political subdivision or taxing authority thereof or therein) from interest, Fees or other amounts payable by it hereunder for the account of any Lender which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes to the extent that such Lender has not provided to the Borrower U.S. Internal Revenue Service Forms that establish a complete exemption from such deduction or withholding and (y) the Borrower shall not be obligated pursuant to Section 3.04(a) hereof to gross-up payments to be made by it to a Lender in respect of income or similar taxes imposed by the United States (I) if such Lender has not provided to the Borrower the Internal Revenue Service Forms required to be provided to the Borrower pursuant to this Section 3.04(b) or (II) in the case of a payment, other than interest, to a Lender described in clause (ii) above, to the extent that such Forms do not establish a complete exemption from withholding of such taxes.  Notwithstanding anything to the contrary contained in the preceding sentence or elsewhere in this Section 3.04 and except as set forth in Section 11.04(b), the Borrower agrees to pay any additional amounts and to indemnify each Lender in the manner set forth in Section 3.04(a) (without regard to the identity of the jurisdiction requiring the deduction or withholding) in respect of any amounts deducted or withheld by it as described in the immediately preceding sentence as a result of any changes after the Effective Date in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of such income or similar taxes.

(c)           If the Borrower pays any additional amount under this Section 3.04 to a Lender and such Lender determines in its sole discretion that it has actually received or realized in connection therewith any refund or any reduction of, or credit against, its Tax liabilities in or with respect to the taxable year in which the additional amount is paid, such Lender shall pay to the Borrower an amount that the Lender shall, in its sole discretion (but acting in good faith), determine is equal to the net benefit, after tax, which was obtained by the Lender in such year as a consequence of such refund, reduction or credit.

SECTION 4.  Conditions Precedent.

4.01  Conditions Precedent to Initial Borrowing Date and the Initial Incurrence of Loans.  The obligation of the Lenders to make Loans hereunder and the obligation of each Letter of Credit Issuer to issue Letters of Credit hereunder, in each case on the Initial Borrowing Date, are subject to the satisfaction of each of the following conditions at such time:

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(a)           Effectiveness; Notes.  (i)  The Effective Date shall have occurred as provided in Section 11.10 and (ii) there shall have been delivered to the Administrative Agent for the account of each Lender requesting same the appropriate Note or Notes executed by the Borrower, in each case, in the amount, maturity and as otherwise provided herein.

(b)           Opinions of Counsel.  The Administrative Agent shall have received (i) from Paul, Hastings, Janofsky & Walker LLP, special counsel to the Credit Parties, an opinion addressed to each Agent, the Collateral Agent and each of the Lenders and dated the Initial Borrowing Date substantially in the form of Exhibit D and (ii) from local and special FCC counsel to the Pledge Parties reasonably satisfactory to the Agents, such opinions as the Agents may reasonably request, which opinions shall (x) be addressed to each Agent, the Collateral Agent and each of the Lenders and be dated the Initial Borrowing Date, (y) cover such other matters incident to the transactions contemplated herein as the Agents may reasonably request and (z) be in form, scope and substance reasonably satisfactory to the Agents.

(c)           Company Proceedings.  (i)  The Administrative Agent shall have received a certificate, dated the Initial Borrowing Date, signed by an Authorized Officer in the form of Exhibit E with appropriate insertions and deletions, together with (x) copies of the certificate of incorporation, by-laws or other organizational documents of each Pledge Party and (y) the resolutions of each Pledge Party referred to in such certificate and all of the foregoing (including each such organizational document) shall be reasonably satisfactory to the Administrative Agent and (z) a statement that all of the applicable conditions set forth in Sections 4.01(e), (f), (g), (k), (l) and (n) and 4.02(b) have been satisfied as of such date.

(ii)           On the Initial Borrowing Date, all Company proceedings, all legal proceedings and all instruments and agreements in connection with the transactions contemplated by this Agreement and the other Credit Documents shall be reasonably satisfactory in form and substance to the Administrative Agent, and the Administrative Agent shall have received all information and copies of all certificates, documents and papers, including good standing certificates and any other records of Company proceedings and governmental approvals, if any, which the Agents may have reasonably requested in connection therewith, such documents and papers, where appropriate, to be certified by proper Company or governmental authorities.

(d)           Plans; etc.  On or prior to the Initial Borrowing Date, there shall have been made available to the Administrative Agent true and correct copies of the following documents, in each case as same will be in effect on the Initial Borrowing Date after the consummation of the Transaction:

(i)            all Plans (and for each Plan that is required to file an annual report on Internal Revenue Service Form 5500-series, a copy of the most recent such report (including, to the extent required, the related financial and actuarial statements and other supporting statements, certifications, schedules and information), and for each Plan that is a “single-employer plan,” as defined in Section 4001(a)(15) of ERISA, the most recently prepared actuarial valuation therefor) and any other “employee benefit plans,” as defined in Section 3(3) of ERISA, and any other material agreements, plans or arrangements, with or for the benefit of current or former employees of the Borrower or any of its

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Subsidiaries or any ERISA Affiliate (provided that the foregoing shall apply in the case of any multiemployer plan, as defined in 4001(a)(3) of ERISA, only to the extent that any document described herein is in the possession of the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate or reasonably available thereto from the sponsor or trustee of any such plan);

(ii)           any collective bargaining agreements or any other similar agreement or arrangements covering the employment arrangements of the employees of the Borrower or any of its Subsidiaries;

(iii)          all agreements entered into by the Borrower or any Subsidiary governing the terms and relative rights of its capital stock or other equity interests;

(iv)          any material agreement with respect to the management of the Borrower or any of its Subsidiaries;

(v)           any material employment agreements entered into by the Borrower or any of its Subsidiaries; and

(vi)          any tax sharing, tax allocation and other similar agreements entered into by the Borrower and/or any of its Subsidiaries with any entity not a Pledge Party;

with all of the foregoing to be reasonably satisfactory to the Administrative Agent.

(e)           Adverse Change, etc.  Since December 31, 2003, nothing shall have occurred, and neither any Agent nor the Required Lenders shall have first become aware of any facts or conditions not previously known, in each case which any Agent or the Required Lenders shall reasonably determine has had, or is reasonably likely to have, a Material Adverse Effect.

(f)            Litigation.  There shall be no actions, suits or proceedings pending or, to the knowledge of the Borrower, threatened (a) with respect to this Agreement or any other Document or (b) which any Agent or the Required Lenders shall reasonably determine has had, or is reasonably likely to have, a Material Adverse Effect.

(g)           Approvals.  All necessary material governmental and third party approvals in connection with the Documents (including, without limitation, all necessary material approvals required by the FCC and the applicable PUCs) shall have been obtained and remain in effect.

(h)           Subsidiary Guaranty.  Each 1^st-Tier Subsidiary of the Borrower on the Initial Borrowing Date shall have duly authorized, executed and delivered a Subsidiary Guaranty in the form of Exhibit F hereto (as modified, amended, restated and/or supplemented from time to time in accordance with the terms hereof and thereof, the “Subsidiary Guaranty”), and the Subsidiary Guaranty shall be in full force and effect.

(i)            Pledge Agreement.  The Borrower, each 1^st-Tier Subsidiary of the Borrower on the Initial Borrowing Date and each Parent Company that is a Subsidiary on the Initial Borrowing Date shall have each duly authorized, executed and delivered a Pledge

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Agreement in the form of Exhibit G (as modified, amended, restated and/or supplemented from time to time in accordance with the terms thereof and hereof, the “Pledge Agreement”) and shall have delivered to the Collateral Agent, as pledgee thereunder:

(i)             all of the Collateral, if any, referred to therein and then owned by such Persons, (x) endorsed in blank in the case of promissory notes constituting Collateral and (y) together with executed and undated transfer powers in the case of certificated equity interests constituting Collateral;

(ii)           proper Financing Statements (Form UCC-1 or the equivalent) fully executed (where required) for filing under the UCC or other appropriate filing offices of each jurisdiction as may be necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect the security interests purported to be created by the Pledge Agreement;

(iii)          certified copies of Requests for Information or Copies (Form UCC-11), or equivalent reports, each of a recent date, listing all effective financing statements that name any Pledge Party or any of its Subsidiaries as debtor and that are filed in the jurisdictions referred to in clause (ii) above, together with copies of such other financing statements that name any Pledge Party or any of its Subsidiaries as debtor (none of which shall cover any of the Collateral, except to the extent evidencing Permitted Liens or in respect of which the Collateral Agent shall have received termination statements (Form UCC-3) or such other termination statements as shall be required by local law fully executed (where required) for filing); and

(iv)          evidence that all other actions necessary or, in the reasonable opinion of the Collateral Agent, desirable to create, maintain, effect, perfect, preserve, maintain and protect the security interests purported to be created by the Pledge Agreement have been taken;

and the Pledge Agreement shall be in full force and effect.

(j)            Solvency.  The Borrower shall have delivered to the Administrative Agent a solvency certificate, dated the Initial Borrowing Date and in the form of Exhibit H hereto.

(k)           Initial Public Offering.  On the Initial Borrowing Date, the Borrower shall have (x) issued shares of Borrower Common Stock pursuant to an underwritten initial public generating gross cash proceeds (calculated before underwriting costs) of approximately $462.5 million (the “IPO”) and (y) utilized the full amount of the cash proceeds described in preceding clause (x) to make payments owing in connection with the Transaction prior to the utilization by the Borrower of any proceeds of Loans for such purpose.  On the Initial Borrowing Date, (i) the IPO shall have been consummated in accordance with the terms and conditions of the IPO Documents and all applicable law, (ii) the Administrative Agent shall have received true and correct copies of all IPO Documents and (iii) all conditions precedent to the consummation of the IPO as set forth in the IPO Documents shall have been satisfied, and not waived unless consented to by each Agent and the Required Lenders, to the reasonable satisfaction of each Agent and the Required Lenders.

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(l)            Refinancing.  (i)  Prior to the Initial Borrowing Date and the Credit Events then occurring, the Borrower shall have commenced tender offers and consent solicitations with respect to each issue of outstanding Existing Tender Offer Notes (the “Tender Offers and Consent Solicitations”) pursuant to which (I) the Borrower shall offer, subject to the Minimum Tender Offer Condition for each such Tender Offer and Consent Solicitation and the other terms and conditions contained therein, to purchase all of the outstanding Existing Tender Offer Notes at a cash price equal to $1000 per $1000 principal amount, plus accrued and unpaid interest thereon, (II) consents shall be solicited to proposed amendments (the “Existing Tender Offer Notes Indenture Amendments”) to each of the Existing Tender Offer Notes Indentures, which amendments shall, inter alia, provide for the substantial elimination of the covenants contained in each of the Existing Tender Offer Notes Indentures (including, without limitation, limitations on restricted payments, dividends, transactions with affiliates, indebtedness and guarantees by subsidiaries) and (III) the Borrower shall offer to pay to each holder of Existing Tender Offer Notes which validly consents to the relevant Existing Tender Offer Notes Indenture Amendment a consent fee in an amount not to exceed $20 for each $1,000 principal amount of such holder’s Existing Tender Offer Notes.  All terms and conditions of the Tender Offers and Consent Solicitations and the Existing Tender Offer Notes Indenture Amendments shall be reasonably satisfactory to the Agents, and in any event, the Tender Offers and Consent Solicitations shall provide that the period for tendering Existing Tender Offer Notes pursuant thereto shall terminate on or prior to the Initial Borrowing Date.

(ii)           On or prior to the Initial Borrowing Date, (x) holders of at least 75% (or, in the case of the Existing 2008 Senior Subordinated Notes, 51%) of the aggregate outstanding principal amount of each series of outstanding Existing Tender Offer Notes shall have validly tendered, and not withdrawn, their Existing Tender Offer Notes and provided their “Consent” pursuant to, and in accordance with the requirements of, the Tender Offer and Consent Solicitation therefor, and (y) the Borrower and the trustees under each of the Existing Tender Offer Notes Indentures shall have duly executed and delivered the Existing Tender Offer Notes Indenture Supplements and same shall have become effective in accordance with their terms and the terms of the relevant Existing Tender Offer Notes Indenture.

(iii)          On the Initial Borrowing Date (and concurrently with the Credit Events occurring on such Date), the Borrower shall have deposited into a segregated account (the “Segregated Account”) proceeds of Initial B Term Loans in an aggregate principal amount equal to the sum of (x) the aggregate principal amount of the Existing 2008 Senior Subordinated Notes not validly tendered (or validly tendered and subsequently withdrawn) pursuant to the Tender Offer and Consent Solicitation therefor plus (y) all unpaid interest accruing and applicable call premiums thereon through the 30^th day following the Initial Borrowing Date (the “Redemption Date”).

(iv) On the Initial Borrowing Date, the Borrower shall have delivered an irrevocable “notice of redemption” to the trustee under the Existing 2008 Senior Subordinated Notes Indenture pursuant to, and in accordance with the requirements of, the Existing 2008 Senior Subordinated Notes Indenture.

(v)           On or prior to the Initial Borrowing Date, the Borrower shall have redeemed or repurchased all of its outstanding shares of Series A Preferred Stock for an

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aggregate redemption price (including any and all accrued but unpaid dividends with respect to the Series A Preferred Stock) equal to approximately $131.0 million.

(vi)          On the Initial Borrowing Date and concurrently with the incurrence of Loans on such date, approximately $194.8 million of Indebtedness of the Borrower and its Subsidiaries, consisting of all Indebtedness under the Existing Credit Agreement (other than Existing Letters of Credit) and all but approximately $2.2 million in aggregate principal amount of the Existing Seller/Opco Notes, shall have been repaid in full, together with all fees, accrued interest and other amounts owing thereon (collectively, the “Additional Refinanced Indebtedness”), all commitments under the documents evidencing Additional Refinanced Indebtedness shall have been terminated, all letters of credit issued pursuant to the documents evidencing the Additional Refinanced Indebtedness shall have been terminated or incorporated hereunder as Letters of Credit as contemplated by Section 1A.01(d) and all guaranties issued in support of such Additional Refinanced Indebtedness shall have been terminated.

(vii)         On the Initial Borrowing Date and concurrently with the incurrence of Loans on such date, all security interests in respect of, and Liens securing, the Additional Refinanced Indebtedness shall have been terminated and released, and the Administrative Agent shall have received all such releases as may have been reasonably requested by the Administrative Agent, which releases shall be in form and substance reasonably satisfactory to the Administrative Agent.  Without limiting the foregoing, there shall have been delivered to the Administrative Agent proper termination statements (Form UCC-3 or the appropriate equivalent) for filing under the UCC of each jurisdiction where a financing statement (Form UCC-1 or the appropriate equivalent) was filed with respect to the Borrower or any of its Subsidiaries in connection with the security interests created with respect to the Additional Refinanced Indebtedness and the documentation related thereto, all of which shall be in form and substance reasonably satisfactory to the Administrative Agent.

(viii)        On the Initial Borrowing Date and after giving effect to the consummation of the Transaction (including the Tender Offer and Consent Solicitation Consummation as if the same had occurred on such date but excluding the Existing 2008 Senior Subordinated Notes Redemption and the Optional Non-2008 Tender Offer Notes Refinancing), the Borrower and its Subsidiaries shall have no outstanding preferred equity or Indebtedness, except for (i) Indebtedness pursuant to or in respect of the Credit Documents, (ii) Existing Tender Offer Notes not repurchased pursuant to the Tender Offer and Consent Solicitation Consummation in an aggregate outstanding principal amount not to exceed $48.0 million and (iii) such other existing Indebtedness of the Borrower and its Subsidiaries, if any, as shall be permitted by the Agents and Required Lenders to remain outstanding (all of which Indebtedness described in this subclause (iii) shall be required to be specifically listed as Scheduled Existing Indebtedness).  On and as of the Initial Borrowing Date, all Indebtedness described in the immediately preceding sentence shall remain outstanding after giving effect to the Transaction (other than the Existing 2008 Senior Subordinated Notes Redemption and the Optional Non-2008 Tender Offer Notes Refinancing) and the other transactions contemplated hereby without any breach, required repayment, required offer to purchase, default, event of default or termination rights existing thereunder or arising as a result of the Transaction and the other transactions contemplated hereby.

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(m)          Intercompany Subordination Agreement.  The Borrower and each of its Subsidiaries shall have duly authorized, executed and delivered a Subordination Agreement substantially in the form of Exhibit J hereto (as amended, restated, modified and/or supplemented from time to time in accordance with the terms hereof and thereof, the “Intercompany Subordination Agreement”), and the Intercompany Subordination Agreement shall be in full force and effect.

(n)           Fees.  The Borrower shall have paid to the Agents and the Lenders all Fees and expenses agreed upon by such parties to be paid on or prior to the Initial Borrowing Date (for which, in the case of legal fees and expenses, the Borrower shall have received in advance a written invoice in reasonable detail).

(o)           Projections.  On or prior to the Initial Borrowing Date, each of the Agents and the Lenders shall have received detailed projected consolidated financial statements of the Borrower and its Subsidiaries for the period from the Initial Borrowing Date through the Term Loan Maturity Date (“Projections”), which Projections shall (x) reflect the forecasted consolidated financial condition of the Borrower and its Subsidiaries after giving effect to the Transaction and (y) be reasonably satisfactory in form and substance to the Agents.

4.02  Conditions Precedent to All Loans (other than RF Loans and Delayed-Draw B Term Loans Incurred to Finance an Optional Non-2008 Tender Offer Notes Redemption and RF Loans Incurred on the Redemption Date to Finance the Existing 2008 Senior Subordinated Notes Redemption).  The obligation of each Lender to make Loans (including Loans made on the Initial Borrowing Date and on each Incremental B Term Loan Borrowing Date but excluding (x) RF Loans and Delayed-Draw B Term Loans made to finance an Optional Non-2008 Tender Offer Notes Redemption, (y) RF Loans incurred on the Redemption Date to finance the Existing 2008 Senior Subordinated Notes Redemption and (z) Mandatory Borrowings made after the Initial Borrowing Date, which shall be made as provided in Section 1.01(e)), and of each Letter of Credit Issuer to issue Letters of Credit, is subject, at the time of the making of each such Loan and the issuance of each such Letter of Credit, to the satisfaction of the following conditions:

(a)           Notice of Borrowing.  The Administrative Agent shall have received a Notice of Borrowing meeting the requirements of Section 1.03 (or, in the case of a Swingline Loan, the notice referred to in Section 1.03(b)(i)) or a Letter of Credit Request meeting the requirements of Section 1A.03.

(b)           No Default; Representations and Warranties.  At the time of each making of Loans and each issuance of a Letter of Credit and also after giving effect thereto, (i) there shall exist no Default or Event of Default and (ii) all representations and warranties made by any Credit Party contained herein or in the other Credit Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such Loans or issuance of such Letter of Credit, except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date.

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(c)           Regulation U.        If at any time any Margin Stock is pledged or required to be pledged pursuant to the Pledge Agreement, all actions required to be taken pursuant to Section 6.12 shall have been taken to the reasonable satisfaction of the Administrative Agent.

4.03  Special Condition Precedent to Incurrence of RF Loans and Delayed-Draw B Term Loans Incurred to Finance an Optional Non-2008 Tender Offer Notes Redemption and of RF Loans Incurred on the Redemption Date to Finance the Existing 2008 Senior Subordinated Notes Redemption.  The obligation of each Lender to (x) make RF Loans and Delayed-Draw B Term Loans to finance any Optional Non-2008 Tender Offer Notes Redemption and (y) make RF Loans on the Redemption Date to finance the Existing 2008 Senior Subordinated Notes Redemption, is subject to the absence, at the time of making such Loans and also after giving effect thereto, of any Default or Event of Default under Section 8.01 or 8.05.

The occurrence of the Initial Borrowing Date and the acceptance of the benefits or proceeds of each Credit Event shall constitute a representation and warranty by the Borrower to each Agent, each Letter of Credit Issuer and each of the Lenders that all the conditions specified in Section 4 and applicable to such Credit Event have been satisfied as of that time.  All of the certificates, legal opinions and other documents and papers referred to in Sections 4.01 and 4.02, unless otherwise specified, shall be delivered to the Administrative Agent for the benefit of each of the Lenders and, except for the Notes, in sufficient counterparts for each of the Lenders and shall be reasonably satisfactory in form and substance to the Agents.

SECTION 5.  Representations, Warranties and Agreements.  In order to induce the Lenders to enter into this Agreement, to make the Loans and to issue and/or participate in Letters of Credit, the Borrower makes the following representations and warranties to, and agreements with, the Lenders, all of which shall survive the execution and delivery of this Agreement, the making of the Loans and the issuance of the Letters of Credit:

5.01  Company Status.  Each of the Borrower and its Subsidiaries (i) is a duly organized and validly existing Company and is in good standing, in each case under the laws of the jurisdiction of its organization and has the Company power and authority to own its property and assets and to transact the business in which it is engaged and (ii) is duly qualified and is authorized to do business and, to the extent relevant, is in good standing in all jurisdictions where it is required to be so qualified except where the failure to be so qualified, authorized or in good standing would not be reasonably likely to have a Material Adverse Effect.

5.02  Company Power and Authority.  Each Credit Party has the Company power and authority to execute, deliver and carry out the terms and provisions of the Documents to which it is a party and has taken all necessary action to authorize the execution, delivery and performance of the Documents to which it is a party. Each Credit Party has duly executed and delivered each Document to which it is a party and each such Document constitutes the legal, valid and binding obligation of such Person enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally and general equitable principles (regardless of whether enforcement is sought in equity or at law).

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5.03  No Violation.  Neither the execution, delivery or performance by any Credit Party of the Documents to which it is a party nor compliance with the terms and provisions thereof, (i) will contravene any applicable provision of any law, statute, rule, regulation, order, writ, injunction or decree of any court or governmental instrumentality, (ii) will violate, conflict or be inconsistent with or result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or (other than pursuant to the Pledge Agreement) result in the creation or imposition of (or the obligation to create or impose) any Lien upon any of the property or assets of the Borrower or any of its Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust or other material agreement or instrument to which the Borrower or any of its Subsidiaries is a party or by which it or any of its property or assets are bound or to which it may be subject or (iii) will violate any provision of the organizational documents (including by-laws) of the Borrower or any of its Subsidiaries.

5.04  Litigation.  There are no actions, suits or proceedings pending or, to the knowledge of the Borrower, threatened (i) with respect to any Credit Document, (ii) with respect to the Transaction or any other Document or (iii) with respect to the Borrower or any of its Subsidiaries that have had, or that are reasonably likely to have, a Material Adverse Effect.  Additionally, there does not exist any judgment, order or injunction prohibiting or imposing material adverse conditions upon the incurrence of any Credit Event.

5.05  Use of Proceeds; Margin Regulations.  (a)  The proceeds of all Initial B Term Loans shall be utilized solely to finance, in part, the Refinancing (including to fund the Segregated Account and to finance the Existing 2008 Senior Subordinated Notes Redemption but excluding the Optional Non-2008 Tender Offer Notes Refinancing) and to pay certain fees and expenses relating to the Transaction.

(b)           The proceeds of all Delayed-Draw B Term Loans shall be utilized solely to finance the Optional Non-2008 Tender Offer Notes Refinancing.

(c)           The proceeds of all Incremental B Term Loans shall be utilized for general corporate and working capital purposes of the Borrower and its Subsidiaries (including, without limitation, to finance Permitted Acquisitions).

(d)           The proceeds of RF Loans may be used (x) on the Initial Borrowing Date to finance, in part, the Refinancing (other than the Existing 2008 Senior Subordinated Notes Redemption and the Optional Non-2008 Tender Offer Notes Refinancing) and to pay certain fees and expenses relating to the Transaction and (y) for working capital, general corporate and capital expenditure requirements of the Borrower and its Subsidiaries (including to finance Permitted Acquisitions, the Existing 2008 Senior Subordinated Notes Redemption and the Optional Non-2008 Tender Offer Notes Refinancing, to repay any Existing Seller/Opco Notes not refinanced pursuant to the Refinancing and, subject to the satisfaction of the Minimum Liquidity Condition, to pay dividends on Borrower Common Stock permitted to be paid pursuant to the terms of this Agreement); provided that no more than $13.0 million of proceeds of RF Loans may be incurred on the Initial Borrowing Date for the purposes described in preceding clause (x).

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(e)           The proceeds of Swingline Loans may be used for the general corporate and working capital purposes of the Borrower and its Subsidiaries; provided that no proceeds from Swingline Loans may be used to finance the Refinancing or to pay fees and expenses incurred in connection with the Transaction.

(f)            Neither the making of any Loan hereunder, nor the use of the proceeds thereof, nor the occurrence of any other Credit Event, will violate the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System and no part of any Credit Event (or the proceeds thereof) will be used to purchase or carry any Margin Stock or to extend credit for the purpose of purchasing or carrying any Margin Stock, provided that proceeds of RF Loans may be utilized to purchase Margin Stock (A) if such purchase (x) is pursuant to a Permitted Acquisition of the Person issuing such Margin Stock and (y) is effected pursuant to a friendly transaction (as determined by the Agents) not in violation of such Regulations T, U or X and (B) to the extent otherwise permitted by Sections 7.09(a)(ii), (iii) or (xvi).

(g)           The fair market value of all Margin Stock owned by the Borrower and its Subsidiaries (other than the capital stock of the Borrower held in treasury) does not exceed $500,000.  At the time of each Credit Event, not more than 25% of the value of the assets of the Borrower and its Subsidiaries taken as a whole (including all capital stock of the Borrower held in treasury) will constitute Margin Stock.

5.06  Governmental Approvals.  Except for such consents, approvals and filings as have been obtained or made on or prior to the Initial Borrowing Date and remain in full force and effect, no order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any foreign or domestic governmental or public body or authority (including, without limitation, the FCC and applicable PUCs), or any subdivision thereof, is required to authorize or is required in connection with (i) the execution, delivery and performance of any Document or (ii) the legality, validity, binding effect or enforceability of any Document.

5.07  Investment Company Act.  Neither the Borrower nor any of its Subsidiaries is an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.

5.08  Public Utility Holding Company Act.  Neither the Borrower nor any of its Subsidiaries is a “holding company,” or a “subsidiary company” of a “holding company,” or an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company” within the meaning of the Public Utility Holding Company Act of 1935, as amended.

5.09  True and Complete Disclosure.  All factual information (taken as a whole) heretofore or contemporaneously furnished by or on behalf of the Borrower in writing to the Lenders for purposes of or in connection with this Agreement or any transaction contemplated herein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of any Credit Party in writing to the Lenders hereunder will be, true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any material fact necessary to make such information (taken as a whole) not misleading at such time in light of the circumstances under which such information

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was provided.  The projections and pro forma financial information contained in such materials are based on good faith estimates and assumptions believed by the Borrower to be reasonable at the time made (it being recognized by the Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results and that such assumptions and estimates may prove to be inaccurate).

5.10  Financial Condition; Financial Statements.  (a)  On and as of the Initial Borrowing Date, on a pro forma basis after giving effect to the Transaction and all Indebtedness incurred, and to be incurred (including, without limitation, the Loans and the application of the proceeds thereof), and Liens created, and to be created, by each Credit Party in connection therewith, with respect to the Borrower (on a stand-alone basis) and the Borrower and its Subsidiaries (on a consolidated basis), (x) the fair valuation of all of the tangible and intangible assets of the Borrower (on a stand-alone basis) and the Borrower and its Subsidiaries (on a consolidated basis) will exceed its or their debts, (y) it has or they have not incurred nor intended to, nor believes or believe that it or they will, incur debts beyond its or their ability to pay such debts as such debts mature and (z) it or they will not have unreasonably small capital with which to conduct its or their business.  For purposes of this Section 5.10, “debt” means any liability on a claim, and “claim” means (i) the right to payment whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured; or (ii) the right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured.

(b)           (i)  The audited consolidated statements of financial condition of the Borrower and its Subsidiaries at December 31, 2001, December 31, 2002 and December 31, 2003 and the related consolidated statements of income and cash flows and changes in shareholders’ equity of the Borrower and its Subsidiaries for the fiscal years of the Borrower ended on such dates, in each case furnished to the Lenders prior to the Initial Borrowing Date, present fairly in all material respects the consolidated financial position of the Borrower and its Subsidiaries at the date of said financial statements and the results for the respective periods covered thereby and (ii) the unaudited statement of financial condition of the Borrower and its Subsidiaries at September 30, 2004 and the related consolidated statement of income and cash flows and change in shareholder’s equity of the Borrower and its Subsidiaries for nine-month period of the Borrower ended on such date, in each case furnished to the Lenders prior to the Initial Borrowing Date, present fairly in all material respects the consolidated financial position of the Borrower and its Subsidiaries at the date of said financial statements and the results for the period covered thereby, subject to normal year-end adjustments.  All such financial statements have been prepared in accordance with GAAP and practices consistently applied except to the extent provided in the notes to said financial statements and subject, in the case of unaudited financial statements, to normal year-end adjustments (all of which are of a recurring nature and none of which, individually or in the aggregate, would be material) and the absence of footnotes.  The pro forma consolidated balance sheet of the Borrower as at September 30, 2004, a copy of which has been included in the Rule 424(b) Prospectus filed with the SEC in connection with the IPO, presents a good faith estimate of the consolidated pro forma financial condition of the Borrower (after giving effect to the Transaction and all Indebtedness incurred or

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to be incurred in connection therewith) as at the date thereof.  Nothing has occurred since December 31, 2003 that has had, or is reasonably likely to have, a Material Adverse Effect.

(c)           Except as reflected in the financial statements described in Section 5.10(b) or in the footnotes thereto, there are as of the Initial Borrowing Date no liabilities or obligations with respect to the Borrower or any of its Subsidiaries of a nature (whether absolute, accrued, contingent or otherwise and whether or not due) which, either individually or in aggregate, are reasonably likely to be material to the Borrower and its Subsidiaries taken as a whole, except as incurred in the ordinary course of business consistent with past practices.

(d)           On and as of the Initial Borrowing Date, the Projections have been prepared on a basis consistent with the financial statements referred to in Section 5.10(b) for the fiscal year of the Borrower ended December 31, 2003, and are based on good faith estimates and assumptions made by the management of the Borrower.  On the Initial Borrowing Date, such management believed that the Projections were reasonable and attainable (it being recognized by the Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results).

5.11  Security Interests.  At any time on or after the Initial Borrowing Date, the Pledge Agreement creates, as security for the obligations purported to be secured thereby, a valid and enforceable Lien on all of the Collateral subject thereto at such time, superior to and prior to the rights of all third Persons and subject to no other Liens (except for Liens permitted under Section 7.03(a)), in favor of the Collateral Agent for the benefit of the Secured Creditors, which Lien has been perfected under applicable law.  No filings or recordings are required in order to perfect the Lien on the Collateral created under the Pledge Agreement, except for filings or recordings required in connection with the Pledge Agreement which shall have been made on or prior to the Initial Borrowing Date or as otherwise required in accordance with the terms of the Pledge Agreement.

5.12  Compliance With Statutes.  Each of the Borrower and its Subsidiaries is in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property, except such non-compliance as has not had, and is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect.

5.13  Tax Returns and Payments.  Each of the Borrower and its Subsidiaries has filed all U.S. federal income tax returns and all other material tax returns, domestic and foreign, required to be filed by it and has paid all material taxes and assessments payable by it which have become due, except for those contested in good faith and adequately disclosed and fully provided for on the financial statements of the Borrower and its Subsidiaries if and to the extent required by GAAP.  Each of the Borrower and its Subsidiaries has at all times paid, or has provided adequate reserves (in the good faith judgment of the management of the Borrower) for the payment of, all U.S. federal, state and foreign income taxes applicable for all prior fiscal years which are still open for audit and for the current fiscal year to date.  There is no action, suit, proceeding, investigation, audit, or claim now pending or, to the knowledge of the

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Borrower, threatened by any authority regarding any taxes relating to the Borrower or any of its Subsidiaries which is reasonably likely to have a Material Adverse Effect.

5.14  Compliance with ERISA.  (i)  Annex IV sets forth each Plan and Multiemployer Plan; (ii) except as set forth on Annex IV, each Plan (and each related trust, insurance contract or fund) is in substantial compliance with its terms and with all applicable laws, including without limitation ERISA and the Code; each Plan which is intended to be qualified under Section 401(a) of the Code has received a determination letter from the Internal Revenue Service to the effect that it meets the requirements of Section 401(a) of the Code;  except as set forth on Annex IV, no Reportable Event has occurred with respect to a Plan; to the knowledge of the Borrower, no Multiemployer Plan is insolvent or in reorganization; except as set forth on Annex IV, no Plan has an Unfunded Current Liability which, when added to the aggregate amount of Unfunded Current Liabilities with respect to all other Plans, exceeds $3,000,000; no Plan which is subject to Section 412 of the Code or Section 302 of ERISA has an accumulated funding deficiency, within the meaning of such sections of the Code or ERISA, or has applied for or received a waiver of an accumulated funding deficiency or an extension of any amortization period, within the meaning of Section 412 of the Code or Section 303 or 304 of ERISA; all contributions required to be made with respect to a Plan or a Multiemployer Plan have been timely made; neither the Borrower nor any Subsidiary nor any ERISA Affiliate has incurred any material liability (including any indirect, contingent or secondary liability) to or on account of a Plan or a Multiemployer Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or reasonably expects to incur any such liability under any of the foregoing sections with respect to any Plan or any Multiemployer Plan; no condition exists which presents a material risk to the Borrower or any Subsidiary or any ERISA Affiliate of incurring a material liability to or on account of a Plan or, to the knowledge of the Borrower, of any Multiemployer Plan pursuant to the foregoing provisions of ERISA and the Code; no proceedings have been instituted to terminate or appoint a trustee to administer any Plan which is subject to Title IV of ERISA; except as would not result in any material liability, no action, suit, proceeding, hearing, audit or investigation with respect to the administration, operation or the investment of assets of any Plan (other than routine claims for benefits) is pending, or to the best knowledge of the Borrower expected or threatened; using actuarial assumptions and computation methods consistent with Part 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of the Borrower and its Subsidiaries and its ERISA Affiliates to all Multiemployer Plans in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each such Plan ended prior to the date of the most recent Loan incurrence, would not exceed $50,000; except as would not result in a material liability, each group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) which covers or has covered employees or former employees of the Borrower, any Subsidiary or any ERISA Affiliate has at all times been operated in compliance with the provisions of Part 6 of subtitle B of Title I of ERISA and Section 4980B of the Code; no Lien imposed under the Code or ERISA on the assets of the Borrower or any Subsidiary or any ERISA Affiliate exists or is reasonably likely to arise on account of any Plan; and the Borrower and its Subsidiaries do not maintain or contribute to any employee welfare benefit plan (as defined in Section 3(1) of ERISA) which provides benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or any Plan the obligations with respect to which could reasonably be expected to have a material adverse effect on the ability of the Borrower to perform its obligations under this Agreement.

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5.15  Subsidiaries.  On and as of the Initial Borrowing Date and after giving effect to the consummation of the Transaction, the Borrower has no Subsidiaries other than those Subsidiaries listed on Annex III, which correctly sets forth, as of the Initial Borrowing Date, the percentage ownership (direct and indirect) of the Borrower in each class of capital stock or other equity interests of each of its Subsidiaries and also identifies the direct owner thereof.  All outstanding shares of capital stock or other equity interests of each Subsidiary of the Borrower have been duly and validly issued, are fully paid and non-assessable and are free of preemptive rights.  No Subsidiary of the Borrower has outstanding any securities convertible into or exchangeable for its capital stock or other equity interests or outstanding any right to subscribe for or to purchase, or any options or warrants for the purchase of, or any agreement providing for the issuance (contingent or otherwise) of or any calls, commitments or claims of any character relating to, its capital stock or other equity interests or any stock appreciation or similar rights.

5.16  Intellectual Property.  Each of the Borrower and its Subsidiaries owns or holds a valid transferable license to use all the patents, trademarks, service marks, trade names, domain names, technology, know-how, copyrights, licenses, franchises and formulas or rights with respect to the foregoing, that are used in the operation of the business of the Borrower or such Subsidiary as presently conducted and are material to such business where the failure to own or hold a valid license is reasonably likely to have a Material Adverse Effect.

5.17  Environmental Matters.  Each of the Borrower and its Subsidiaries is in material compliance with all applicable Environmental Laws governing its business for which failure to comply is reasonably likely to have a Material Adverse Effect, and neither the Borrower nor any of its Subsidiaries is liable for any material penalties, fines or forfeitures for failure to comply with any of the foregoing in the manner set forth above.  All licenses, permits, registrations or approvals required for the business of the Borrower and each of its Subsidiaries under any Environmental Law have been secured and each of the Borrower and its Subsidiaries is in substantial compliance therewith, except where the failure to secure or comply with such licenses, permits, registrations or approvals the failure to secure or to comply therewith is not reasonably likely to have a Material Adverse Effect.  There are no Environmental Claims pending or, to the knowledge of the Borrower threatened, against the Borrower or any of its Subsidiaries with respect to which any decision, ruling or finding is reasonably likely to have a Material Adverse Effect.

5.18  Labor Relations.  No Credit Party is engaged in any unfair labor practice that is reasonably likely to have a Material Adverse Effect.  There is (i) no unfair labor practice complaint pending against the Borrower or any of its Subsidiaries or, to the Borrower’s knowledge, threatened against any of them, before the National Labor Relations Board, and no grievance or arbitration proceeding arising out of or under any collective bargaining agreement is so pending against the Borrower or any of its Subsidiaries or, to the Borrower’s knowledge, threatened against any of them, (ii) no strike, labor dispute, slowdown or stoppage pending against the Borrower or any of its Subsidiaries or, to the Borrower’s knowledge, threatened against the Borrower or any of its Subsidiaries and (iii) no union representation question, to the Borrower’s knowledge, existing with respect to the employees of the Borrower or any of its Subsidiaries and no union organizing activities, to the Borrower’s knowledge, are taking place, except with respect to any matter specified in clause (i), (ii) or (iii) above, either individually or in the aggregate, such as is not reasonably likely to have a Material Adverse Effect.

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5.19  Subordination.  The subordination provisions contained in the Existing 2008 Subordinated Notes Documents and the Existing 2010 Subordinated Notes Documents and, on and after the execution, delivery and/or incurrence thereof, any Permitted Senior Subordinated Notes Documents and any agreements or instruments relating to any Additional Permitted Subordinated Debt, and any Refinancing Indebtedness in respect of the foregoing, are enforceable against the Borrower, the Subsidiary Guarantors party thereto and the holders of such Indebtedness, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws generally affecting creditors’ rights and by equitable principles (regardless of whether enforcement is sought in equity or at law), and all Obligations hereunder and the obligations of the Borrower and each Subsidiary Guarantor under the other Credit Documents are within the definitions of “Senior Debt” (or relevant similar term) and “Designated Senior Debt” or “Designated Guarantor Senior Debt”, as applicable, included in such subordination provisions.

5.20  Capitalization.  On the Initial Borrowing Date, after giving effect to the Transaction, the authorized capital stock of the Borrower shall consist of (i) 200,000,000 shares of common stock, $.01 par value per share (such authorized shares of common stock, together with any subsequently authorized shares of such common stock, the “Borrower Common Stock”), of which 34,925,432 shares are issued and outstanding on the Initial Borrowing Date (including 473,716 shares of restricted stock awarded under the Borrower’s 2005 Stock Incentive Plan on the Initial Borrowing Date, which are deemed outstanding for purposes of GAAP) and (ii) 100,000,000 shares of preferred stock, $.01 per share, none of which is issued and outstanding on the Initial Borrowing Date.  All such outstanding shares have been duly and validly issued, are fully paid and nonassessable and are free of preemptive rights.  On the Initial Borrowing Date, the Borrower does not have outstanding any securities convertible into or exchangeable for its capital stock or outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreement providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, its capital stock or any stock appreciation or similar rights.

SECTION 6.  Affirmative Covenants.  The Borrower hereby covenants and agrees that until the Commitments have terminated, no Notes or Letters of Credit are outstanding and the Loans, together with interest, Fees and all other Obligations (other than any indemnities described in Section 11.13 which are not then owing) incurred hereunder, are paid in full:

6.01  Information Covenants.  The Borrower will furnish to each Lender:

(a)           Annual Financial Statements.  As soon as available and in any event within 75 days after the close of each fiscal year of the Borrower, the consolidated and consolidating balance sheet of the Borrower and the Intermediary Holding Companies, as at the end of such fiscal year and the related consolidated and consolidating statements of operations and of cash flows for such fiscal year, and in each case setting forth comparative consolidated and consolidating figures for the preceding fiscal year, and (x) in the case of consolidated statements, examined by independent certified public accountants of recognized national standing whose opinion shall not be qualified as to the scope of audit and as to the status of the Borrower as a going concern or (y) in the case of consolidating statements, certified by the chief financial officer of the Borrower, together with a certificate of such accounting firm stating that

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in the course of its regular audit of the business of the Borrower and the Intermediary Holding Companies, which audit was conducted in accordance with generally accepted auditing standards, no Default or Event of Default which has occurred and is continuing has come to their attention or, if such a Default or Event of Default has come to their attention a statement as to the nature thereof.  If the Borrower has designated any Unrestricted Subsidiaries hereunder, then the annual financial information required by this Section 6.01(a) shall include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, of the financial condition and results of operations of the Borrower and its Subsidiaries excluding the financial condition and results of operations of the Unrestricted Subsidiaries of the Borrower (although such separate presentation of financial information excluding the effects of Unrestricted Subsidiaries need not be audited).

(b)           Quarterly Financial Statements.  As soon as available and in any event within 45 days after the close of each of the first three quarterly accounting periods in each fiscal year of the Borrower, the consolidated and consolidating balance sheet of the Borrower and the Intermediary Holding Companies, as at the end of such quarterly period and the related consolidated and consolidating statements of operations and of cash flows for such quarterly period and for the elapsed portion of the fiscal year ended with the last day of such quarterly period, and in each case setting forth comparative consolidated and consolidating figures for the related periods in the prior fiscal year, all of which shall be in reasonable detail and certified by the chief financial officer or controller of the Borrower, subject to changes resulting from audit and normal year-end audit adjustments.  If the Borrower has designated any Unrestricted Subsidiaries hereunder, then the quarterly financial information required by this Section 6.01(b) shall include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, of the financial condition and results of operations of the Borrower and its Subsidiaries excluding the financial condition and results of operations of the Unrestricted Subsidiaries of the Borrower.

(c)           Budgets; etc.  Not more than 30 days after the commencement of each fiscal year of the Borrower ending after the Initial Borrowing Date, consolidated and consolidating budgets of the Borrower and its Subsidiaries in reasonable detail for each of the twelve months of such fiscal year as customarily prepared by management for its internal use setting forth, with appropriate discussion, the principal assumptions upon which such budgets are based.

(d)           Officer’s Certificates.  At the time of the delivery of the financial statements provided for in Sections 6.01(a) and (b), a certificate of the chief financial officer or other Authorized Officer of the Borrower to the effect that no Default or Event of Default exists or, if any Default or Event of Default does exist, specifying the nature and extent thereof, which certificate (i) if delivered with the financial statements required by Sections 6.01(a) and (b), shall set forth the calculations required to establish (I) the Interest Coverage Ratio, the Leverage Ratio and Senior Secured Leverage Ratio as at the last day of the fiscal year or fiscal quarter, as the case may be, covered by such financial statements and (II) whether the Borrower and its Subsidiaries were in compliance with the provisions of Sections 7.11 and 7.12 as at the end of such fiscal period, and (ii) if delivered with the financial statements required by Section 6.01(b), shall set forth Available Cash and Cumulative Distributable Cash, in each case determined as at the last day of the fiscal quarter of the Borrower covered by such financial statements.

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(e)           Quarterly Compliance Certificate. Within 60 days following the end of each fiscal quarter of the Borrower (commencing with the first full fiscal quarter of the Borrower ending after the Initial Borrowing Date), a certificate (each, a “Quarterly Compliance Certificate”) from an Authorized Officer, which certificate shall set forth (i) the calculations required to establish (I) the Interest Coverage Ratio and the Leverage Ratio as of the last day of the Test Period then last ended and (II) the Available Cash and Cumulative Distributable Cash, in each case determined as at the last day of the Test Period then last ended, and (ii) the amount of Dividends, if any, that the Borrower intends to pay on the immediately succeeding date on which the Borrower’s dividend policy provides for Dividends to be paid by the Borrower on the Borrower Common Stock.

(f)            Notice of Default or Litigation.  Promptly, and in any event within five Business Days after any officer of the Borrower obtains knowledge thereof, notice of (x) the occurrence of any event which constitutes a Default or Event of Default, which notice shall specify the nature thereof, the period of existence thereof and what action the Borrower proposes to take with respect thereto, and (y) the commencement of, or any significant adverse development in, any litigation or governmental proceeding pending against the Borrower or any of its Subsidiaries or their assets or business (i) with respect to any Document or (ii) which has had, or is reasonably likely to have, a Material Adverse Effect and (iii) any other event which has had, or is reasonably likely to have, a Material Adverse Effect.

(g)           Other Information.  Promptly upon transmission thereof, copies of any filings and registrations with, and reports to, the Securities and Exchange Commission or any successor thereto (the “SEC”) or holders (or any trustee, agent or other representative therefor) of any Permitted Senior Unsecured Notes or Permitted Junior Capital by the Borrower or any of its Subsidiaries, and with reasonable promptness, such other information or documents (financial or otherwise) as the Administrative Agent on its own behalf or on behalf of any Lender may reasonably request from time to time.

6.02  Books, Records and Inspections.  The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries in conformity with, and as required by, GAAP and all material requirements of law shall be made of all dealings and transactions in relation to such Person’s business and activities.  The Borrower will, and will cause its Subsidiaries to, permit, upon reasonable notice to the chief financial officer, controller or any other Authorized Officer of the Borrower, officers and designated representatives of the Administrative Agent or the Required Lenders to visit and inspect any of the properties or assets of the Borrower and any of its Subsidiaries in their possession and to examine the books of account of the Borrower and any of its Subsidiaries and discuss the affairs, finances and accounts of the Borrower and of any of its Subsidiaries with, and be advised as to the same by, its and their officers and independent accountants, all at such reasonable times and intervals during normal business hours (with reasonable notice) and to such reasonable extent as the Administrative Agent or the Required Lenders may desire.

6.03  Insurance.  The Borrower will, and will cause each of its Subsidiaries to, at all times maintain in full force and effect insurance with reputable and solvent insurers in such amounts, covering such risks and liabilities and with such deductibles or self-insured retentions as are in accordance with normal industry practice.  The Borrower will, and will cause each of its

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Subsidiaries to, furnish to the Administrative Agent on the Initial Borrowing Date and thereafter annually, upon request of the Administrative Agent, a summary of the insurance carried.

6.04  Payment of Taxes.  The Borrower will pay and discharge, and will cause each of its Subsidiaries to pay and discharge, all material taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any properties belonging to it, prior to the date on which penalties attach thereto, and all lawful claims which, if unpaid, would become a Lien or charge upon any material properties of the Borrower or any of its Subsidiaries, provided that neither the Borrower nor any Subsidiary shall be required to pay any such tax, assessment, charge, levy or claim which is being contested in good faith and by proper proceedings if it has maintained adequate reserves (in the good faith judgment of the management of the Borrower) with respect thereto in accordance with GAAP.

6.05  Company Franchises.  The Borrower will do, and will cause each Subsidiary to do, or cause to be done, all things reasonably necessary to preserve and keep in full force and effect its existence and to preserve its material rights and franchises, other than those the failure to preserve which could not reasonably be expected to have a Material Adverse Effect, provided that any transaction permitted by Section 7.02 will not constitute a breach of this Section 6.05.

6.06  Compliance with Statutes, etc.The Borrower will, and will cause each Subsidiary to, comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign (including all Environmental Laws), in respect of the conduct of its business and the ownership of its property other than those the non-compliance with which is not reasonably likely to have a Material Adverse Effect.

6.07  ERISA.  As soon as possible and, in any event, within 10 days after the Borrower knows or has reason to know of the occurrence of any of the following, the Borrower will deliver to each of the Lenders a certificate of the chief financial officer of the Borrower setting forth the full details as to such occurrence and the action, if any, that the Borrower, any Subsidiary or any ERISA Affiliate is required or proposes to take, together with any notices required or proposed to be given to or filed with or by the Borrower, any Subsidiary, any ERISA Affiliate, the PBGC, a Plan or Multiemployer Plan participant or the Plan administrator with respect thereto:  that a Reportable Event has occurred (except to the extent that the Borrower has previously delivered to the Lender a certificate and notices (if any) concerning such event pursuant to the next clause hereof); that a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA is subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof), and an event described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 is reasonably expected to occur with respect to such Plan within the following 30 days; that an accumulated funding deficiency, within the meaning of Section 412 of the Code or Section 302 of ERISA, has been incurred or an application may reasonably be expected to be or has been made for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 of the Code or Section 303 or 304 of ERISA with respect to a Plan; that any contribution required to be made with respect to a Plan or Multiemployer Plan has not been timely made; that a Plan or Multiemployer Plan has been or may reasonably be expected to be terminated, reorganized,

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partitioned or declared insolvent under Title IV of ERISA; that a Plan has an Unfunded Current Liability which, when added to the aggregate amount of Unfunded Current Liabilities with respect to all other Plans, exceeds the aggregate amount of such Unfunded Current Liabilities that existed on the Initial Borrowing Date by $500,000; that proceedings may reasonably be expected to be or have been instituted to terminate or appoint a trustee to administer a Plan which is subject to Title IV of ERISA; that a proceeding has been instituted pursuant to Section 515 of ERISA to collect a delinquent contribution to a Multiemployer Plan; that the Borrower, any Subsidiary or any ERISA Affiliate will or may reasonably be expected to incur any material liability (including any indirect, contingent, or secondary liability) to or on account of the termination of or withdrawal from a Plan or Multiemployer Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or 502(i) or 502(l) of ERISA or with respect to a group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code; or that the Borrower or any Subsidiary may incur any material liability pursuant to any employee welfare benefit plan (as defined in Section 3(1) of ERISA) that provides benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or any Plan in addition to the liability that existed on the Initial Borrowing Date pursuant to any such plan or plans.  Upon request by any Lender, the Borrower will deliver to such Lender a complete copy of the annual report (on Internal Revenue Service Form 5500-series) of each Plan (including, to the extent required, the related financial and actuarial statements and opinions and other supporting statements, certifications, schedules and information) required to be filed with the Internal Revenue Service.  In addition to any certificates or notices delivered to the Lenders pursuant to the first sentence hereof, copies of any records, documents or other information required to be furnished to the PBGC (other than any PBGC Form 1), and any material notices received by the Borrower, any Subsidiary or any ERISA Affiliate with respect to any Plan or Multiemployer Plan shall be delivered to the Lender no later than 10 days after the date such records, documents and/or information has been furnished to the PBGC or such notice has been received by the Borrower, the Subsidiary or the ERISA Affiliate, as applicable.

6.08  Good Repair.  The Borrower will, and will cause each of its Subsidiaries to, ensure that its material properties and equipment used or useful in its business are kept in good repair, working order and condition, normal wear and tear excepted, and, subject to Section 7.05, that from time to time there are made in such properties and equipment all needful and proper repairs, renewals, replacements, extensions, additions, betterments and improvements thereto, to the extent and in the manner useful or customary for companies in similar businesses.

6.09  End of Fiscal Years; Fiscal Quarters; Etc.The Borrower will, for financial reporting purposes, cause (i) each of its, and each of its Subsidiaries’, fiscal years and fourth fiscal quarters to end on December 31 of each year and (ii) each of its, and each of its Subsidiaries’, first three fiscal quarters to end on the last day of March, June and September of each year.

6.10  Permitted Acquisitions.  (a)  Subject to the provisions of this Section 6.10 and the requirements contained in the definition of Permitted Acquisition, the Borrower and any Qualified Subsidiary may from time to time effect Permitted Acquisitions, so long as (except to the extent the Required Lenders otherwise specifically agree in writing in the case of a specific

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Permitted Acquisition): (i) no Default or Event of Default shall be in existence at the time of the consummation of the proposed Permitted Acquisition or immediately after giving effect thereto; (ii) the Borrower shall have given the Administrative Agent and the Lenders at least 5 Business Days’ prior written notice of any Permitted Acquisition; (iii) the Borrower provides to the Administrative Agent and the Lenders as soon as available but not later than 5 Business Days after the execution thereof, a copy of any executed purchase agreement or similar agreement with respect to such Permitted Acquisition; (iv) calculations are made by the Borrower of compliance with the covenants contained in Sections 7.11 and 7.12 for the Calculation Period most recently ended prior to the date of such Permitted Acquisition, on a Pro Forma Basis as if the respective Permitted Acquisition (as well as all other Permitted Acquisitions and Significant Asset Sales theretofore consummated after the first day of such Calculation Period) had occurred on the first day of such Calculation Period, and such calculations shall show that such financial covenants would have been complied with if the Permitted Acquisition had occurred on the first day of such Calculation Period (for this purpose, if the first day of the respective Calculation Period occurs prior to the Initial Borrowing Date, calculated as if the covenants contained in said Sections 7.11 and 7.12 had been applicable from the first day of the Calculation Period); (v) based on good faith projections prepared by the Borrower for the period from the date of the consummation of the Permitted Acquisition to the date which is one year thereafter, the level of financial performance measured by the covenants set forth in Sections 7.11 and 7.12 shall be better than or equal to such level as would be required to provide that no Default or Event of Default would exist under the financial covenants contained in Sections 7.11 and 7.12 through the date which is one year from the date of the consummation of the respective Permitted Acquisition (it being understood that projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results); (vi) all representations and warranties contained herein and in the other Credit Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such Permitted Acquisition (both before and after giving effect thereto), unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date; (vii) after giving effect to such proposed Permitted Acquisition and the payment of all amounts (including fees and expenses) owing in connection therewith, the sum of the Total Unutilized Revolving Commitment then in effect plus the aggregate amount of all Unrestricted cash and Cash Equivalents of the Borrower and the Subsidiary Guarantors at such time shall equal or exceed the sum of (I) $10,000,000 plus (II) an amount equal to the aggregate amount reasonably likely to be payable in respect of all post-closing purchase price adjustments, earn-out payments, non-compete payments and/or deferred purchase payments (or similar payments), in each case required or which will be required in connection with such Permitted Acquisition (and all other Permitted Acquisitions for which such purchase price adjustments and other payments may be required to be made) as determined by the Borrower in good faith plus (III) all capital expenditures (and the financing thereof) reasonably anticipated by the Borrower to be made in the business acquired pursuant to such Permitted Acquisition within the 90-day period (such period for any Permitted Acquisition, a “Post-Closing Period”) following such Permitted Acquisition (and in the businesses acquired pursuant to all other Permitted Acquisitions with Post-Closing Periods ended during the Post-Closing Period of such Permitted Acquisition); (viii) in the case of (x) a proposed Permitted Acquisition of an Acquired Person (other than a Telco or Carrier Services Company) or non-

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equity assets to be effected by a Qualified Subsidiary (directly or through a Subsidiary of such Qualified Subsidiary) in circumstances where the capital stock or other equity interests of the Acquired Person acquired pursuant to such Permitted Acquisition are not to be pledged under the Pledge Agreement or the assets so acquired pursuant to such Permitted Acquisition are not held by a Person which is (or will concurrently become) a Pledged Subsidiary or (y) the creation or acquisition of a new Telco or Carrier Services Company pursuant to a Permitted Acquisition in circumstances where the capital stock or other equity interests of such Telco or Carrier Services Company is (or are) not to be pledged under the Pledge Agreement, the Pro Forma EBITDA Test is satisfied and (ix) the Borrower shall have delivered to the Administrative Agent an officer’s certificate executed by an Authorized Officer, certifying to the best of his knowledge, compliance with the requirements of preceding clauses (i) through (vii), inclusive, and containing the calculations required by the preceding clauses (iv), (v), (vii) and (viii).

(b)           The Borrower will use reasonable best efforts to obtain as promptly as practicable after the consummation of any Permitted Acquisition, any approvals not obtained on or prior to the date of the consummation of such Permitted Acquisition, provided that (x) it shall not be a default under this Section 6.10 if the Borrower fails to obtain any such approval, after having used commercially reasonable efforts to obtain same and (y) the Borrower may cease to seek to obtain any such approvals if it has been advised by counsel or the applicable governmental agency that it will not, or is not reasonably likely to, obtain such approval, provided, further, that, in the event the Borrower is able to obtain any approval required to be obtained in accordance with the terms of this Section 6.10, the Borrower shall use commercially reasonable efforts to obtain as promptly as practicable after receipt of such approval, an opinion of local counsel reasonably satisfactory to the Administrative Agent covering the regulatory aspects, if any, of the respective Permitted Acquisition, which opinion shall be in form and substance reasonably satisfactory to the Administrative Agent.

(c)           At the time of each Permitted Acquisition involving the creation or acquisition of a Subsidiary, or the acquisition of capital stock or other equity interests of any Person, the capital stock or other equity interests thereof created or acquired in connection with such Permitted Acquisition shall be pledged for the benefit of the Secured Creditors pursuant to the Pledge Agreement as, and to the extent required by, Section 7.07.

(d)           The Borrower shall cause each Subsidiary which is formed to effect, or is acquired pursuant to, a Permitted Acquisition to comply with, and to execute and deliver, all of the documentation (if any) required by, Section 7.07, to the reasonable satisfaction of the Administrative Agent.

(e)           The consummation of each Permitted Acquisition shall be deemed to be a representation and warranty by the Borrower that the certifications by the Borrower (or by one or more of its Authorized Officers) pursuant to Section 6.10(a) are true and correct and that all conditions thereto have been satisfied and that same is permitted in accordance with the terms of this Agreement, which representation and warranty shall be deemed to be a representation and warranty for all purposes hereunder, including, without limitation, Sections 4 and 8.

6.11  CoBank Capital.  The Borrower will purchase such participation certificates in CoBank as CoBank may require from time to time in accordance with its bylaws.  The

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Borrower hereby consents and agrees that the amount of any distributions with respect to its patronage with CoBank that are made in qualified written notices of allocation (as defined in 26 U.S.C. 1388) and that are received by the Borrower from CoBank, will be taken into account by the Borrower at their stated Dollar amounts whether the distribution be evidenced by a participation certificate or other form of written notice that such distribution has been made and recorded in the name of the Borrower on the records of CoBank.

6.12  Margin Stock.  The Borrower will take all actions so that at all times the fair market value of all Margin Stock owned by the Borrower and its Subsidiaries (other than capital stock of the Borrower held in treasury) shall not exceed $500,000.  So long as the covenant contained in the immediately preceding sentence is complied with, all Margin Stock at any time owned by the Borrower and its Subsidiaries will not constitute Collateral and no security interest shall be granted therein pursuant to any Credit Document.  Without excusing any violation of the first sentence of this Section 6.12, if at any time the fair market value of all Margin Stock owned by the Borrower and its Subsidiaries (other than capital stock of the Borrower held in treasury) exceeds $500,000, then (x) all Margin Stock owned by the Pledge Parties (other than capital stock of the Borrower held in treasury) shall be pledged, and delivered for pledge, pursuant to the Pledge Agreement and (y) the Borrower will execute and deliver to the Lenders appropriate completed forms (including, without limitation, Forms G-3 and U-1, as appropriate) establishing compliance with Regulations T, U and X of the Board of Governors of the Federal Reserve System.  If at any time any Margin Stock is required to be pledged as a result of the provisions of the immediately preceding sentence, repayments of outstanding Obligations shall be required, and subsequent Credit Events shall be permitted, only in compliance with the applicable provisions of Regulations T, U and X of the Board of Governors of the Federal Reserve System.

6.13  Post-Closing Refinancing.  (a) No later than the third Business Day following the Initial Borrowing Date, the Borrower shall have (i) purchased for cash all Existing Tender Offer Notes validly tendered on the Initial Borrowing Date pursuant to the Tender Offers and Consent Solicitations and (ii) paid to each holder of Existing Tender Offer Notes tendering the same pursuant to the Tender Offers and Consent Solicitations the consent fee referred to in Section 4.01(l)(i)(III).

(b)           On the Redemption Date, the Borrower shall (x) redeem all of the then outstanding Existing 2008 Senior Subordinated Notes and (y) pay all related call premiums (not to exceed $4.5 million) and all accrued and unpaid interest thereon, in each case pursuant to, and in accordance with the terms of, the Existing 2008 Senior Subordinated Notes Indenture (collectively, the “Existing 2008 Senior Subordinated Notes Redemption”).

6.14  Special Covenant Regarding Cash Management Policy.  The Borrower shall, and shall cause its Subsidiaries to, at all times comply with the cash management policy of the Borrower and its Subsidiaries delivered to the Administrative Agent on the Initial Borrowing Date, without giving effect to any changes thereto, except to the extent such changes are not adverse to the interests of the Lenders or are otherwise required to ensure compliance with applicable law or regulation.

6.15  PIK Requirements.  On and after the date of the initial issuance of any Additional Permitted Subordinated Debt, the Borrower shall pay interest owing on any

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outstanding Additional Permitted Subordinated Debt solely through (x) the accretion of the principal amount thereof or (y) the issuance of additional notes evidencing Additional Permitted Subordinated Debt, rather than in cash.

6.16  Interest Rate Protection.  No later than the 90th day after the Initial Borrowing Date, the Borrower shall enter into, and for a minimum period of two years thereafter maintain, Interest Rate Agreements establishing a fixed or maximum interest rate acceptable to the Administrative Agent for an aggregate notional amount equal to at least 50% of the initial aggregate principal amount of the Initial B Term Loans incurred on the Initial Borrowing Date.

6.17  Maintenance of Company Separateness.  (a)  The Borrower will, and will cause each of its Subsidiaries and Unrestricted Subsidiaries to, satisfy customary Company formalities, including, as applicable, the holding of regular board of directors’ and shareholders’ meetings or action by directors or shareholders without a meeting and the maintenance of Company offices and records. Neither the Borrower nor any of its Subsidiaries shall make any payment to a creditor of any Unrestricted Subsidiary in respect of any liability of any Unrestricted Subsidiary, and no bank account of any Unrestricted Subsidiary shall be commingled with any bank account of the Borrower or any of its Subsidiaries. Any financial statements distributed to any creditors of any Unrestricted Subsidiary shall clearly establish or indicate the Company separateness of such Unrestricted Subsidiary from the Borrower and its Subsidiaries.

(b)           The Borrower shall not permit any cash of any Non-Pledge Party Subsidiary, on the one hand, and any Pledge Party, on the other hand, to be commingled in any bank account.

SECTION 7.  Negative Covenants.  The Borrower hereby covenants and agrees that until the Commitments have terminated, no Notes or Letters of Credit are outstanding and the Loans, together with interest, Fees and all other Obligations (other than any indemnities described in Section 11.13 which are not then owing) incurred hereunder, are paid in full:

7.01  Changes in Business.  (a)  The Borrower will not permit at any time the business activities taken as a whole conducted by the Borrower, its Subsidiaries and its Unrestricted Subsidiaries to be materially different from the business activities taken as a whole (including incidental activities) conducted by the Borrower and its Subsidiaries on the Initial Borrowing Date and businesses reasonably related thereto (the “Business”).

(b)           Notwithstanding the foregoing, no 2d-Tier Holdco will engage in any business or own any significant assets (other than its ownership of (x) equity interests of Subsidiaries existing on the date hereof or permitted to be created, established or acquired pursuant to the terms of this Agreement and (y) intercompany obligations owed to it and permitted to be extended by it pursuant to Section 7.06(c)) or have any liabilities (other than (x) those liabilities for which it is responsible under this Agreement and the other Credit Documents to which it is a party and (y) intercompany debt permitted to be incurred by it pursuant to Section 7.06(c)); provided that any 2d-Tier Holdco may engage in those activities and incur related liabilities that are incidental to (x) the maintenance of its corporate existence in compliance with applicable law, (y) legal, tax and accounting matters in connection with any of the foregoing activities and

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(z) the entering into, and performing its obligations under, this Agreement and the other Credit Documents to which it is a party.

7.02  Consolidation, Merger, Sale or Purchase of Assets, etc.  The Borrower will not, and will not permit any Subsidiary to, wind up, liquidate or dissolve its affairs, or enter into any transaction of merger or consolidation, or convey, sell, lease or otherwise dispose of all or any part of its property or assets (other than inventory or obsolete equipment or excess equipment no longer needed in the conduct of its business in the ordinary course of business) or purchase, lease or otherwise acquire all or any part of the property or assets of any Person (other than purchases or other acquisitions of inventory, leases, materials and equipment in the ordinary course of business) or agree to do any of the foregoing at any future time without a contingency relating to obtaining any required approval hereunder, except that the following shall be permitted:

(a)           (i)  any Subsidiary may be merged or consolidated with or into, or be liquidated into, the Borrower or a Subsidiary Guarantor (so long as the Borrower or such Subsidiary Guarantor is the surviving corporation), or all or any part of its business, properties and assets may be conveyed, sold or transferred to the Borrower or any Subsidiary Guarantor, and (ii) any Subsidiary that is not a Subsidiary Guarantor may be merged or consolidated with or into, or convey, sell or transfer its assets to, another Subsidiary that is not a Subsidiary Guarantor, provided that if the stock or other equity interests of either such Person were pledged pursuant to the Pledge Agreement the stock or other equity interests of the surviving entity or the transferee entity, as the case may be, shall also be pledged pursuant to the Pledge Agreement; provided, further, that no such merger or consolidation otherwise permitted by this clause (a) between a Pledged Subsidiary and Non-Pledged Subsidiary, and no such conveyance, sale or transfer by a Pledged Subsidiary to a Non-Pledged Subsidiary, shall be permitted unless, after giving effect thereto, the Pro Forma EBITDA Test is satisfied;

(b)           capital expenditures to the extent within the limitations set forth in Section 7.05;

(c)           the investments, acquisitions and transfers or dispositions of properties, shares and assets permitted pursuant to Section 7.06;

(d)           each of the Borrower and any Subsidiary may lease (as lessee) real or personal property in the ordinary course of business (so long as such lease does not create a Capitalized Lease Obligation not otherwise permitted by Section 7.04(c));

(e)           licenses or sublicenses by the Borrower and its Subsidiaries of intellectual property in the ordinary course of business, provided, that such licenses or sublicenses shall not interfere with the business of the Borrower or any Subsidiary;

(f)            (i)            Excluded Asset Sales and (ii) additional sales or dispositions of assets to the extent that the aggregate Net Cash Proceeds received from all such sales and dispositions permitted by this clause (f)(ii) after the Initial Borrowing Date shall not exceed $4,000,000 in any fiscal year of the Borrower, provided that (x) each such sale or

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disposition pursuant to this clause (f) shall be in an amount at least equal to the fair market value thereof and for proceeds consisting of at least 85% cash and (y) the Net Cash Proceeds of any such sale are reinvested and/or applied as a mandatory repayment or commitment reduction to the extent required by Section 3.02(A)(b) or Section 2.03(d) or (f), as the case may be, provided, further, that the sale or disposition of the capital stock or other equity interests of any Subsidiary of the Borrower pursuant to this clause (f) shall be prohibited unless it is for all of the outstanding capital stock or other equity interests of such Subsidiary owned by the Borrower and its Subsidiaries;

(g)           Permitted Acquisitions may be consummated in accordance with the requirements of Section 6.10;

(h)           leases and subleases permitted under Section 7.03(d) and (g); and

(i)            Permitted Swap Transactions.

7.03  Liens.  The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with respect to any property or assets of any kind (real or personal, tangible or intangible) of the Borrower or any such Subsidiary whether now owned or hereafter acquired, or sell any such property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable or notes with recourse to the Borrower or any of its Subsidiaries) or assign any right to receive income, except:

(a)           Liens for taxes not yet delinquent or Liens for taxes being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Borrower) have been established in accordance with GAAP;

(b)           Liens in respect of property or assets of the Borrower or any of its Subsidiaries imposed by law which were incurred in the ordinary course of business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlord’s Liens, and other similar Liens arising in the ordinary course of business, and (x) which do not in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Borrower or any of its Subsidiaries or (y) which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or asset subject to such Lien;

(c)           Liens created by or pursuant to this Agreement or the other Credit Documents;

(d)           Liens created pursuant to (x) Capital Leases in respect of Capitalized Lease Obligations permitted by Section 7.04(c) and (y) Capital Leases securing Permitted MJD Capital Debt;

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(e)           Liens arising from judgments, decrees or attachments and Liens securing appeal bonds arising from judgments, in each case in circumstances not constituting an Event of Default under Section 8.09;

(f)            Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations incurred in the ordinary course of business (exclusive of obligations in respect of the payment for borrowed money);

(g)           leases or subleases granted to others not interfering in any material respect with the business of the Borrower or any of its Subsidiaries;

(h)           easements, rights-of-way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the ordinary conduct of the business of the Borrower or any of its Subsidiaries;

(i)            Liens arising from precautionary UCC financing statement filings regarding operating leases entered into by the Borrower or any of its Subsidiaries in the ordinary course of business and statutory and common law landlords’ liens under leases to which the Borrower or any of its Subsidiaries is a party;

(j)            purchase money Liens securing payables arising from the purchase by the Borrower or any Subsidiary Guarantor of any equipment or goods in the normal course of business, provided that such payables shall not constitute Indebtedness;

(k)           any interest or title of a lessor under any lease permitted by this Agreement;

(l)            Liens in existence on, and which are to continue in effect after, the Effective Date which are listed, and the property subject thereto described in, Annex V, plus extensions and renewals of such Liens, provided that (x) the aggregate principal amount of the Indebtedness, if any, secured by such Liens does not increase from that amount outstanding at the time of any such extension or renewal and (y) any such extension or renewal does not encumber any additional assets or properties of the Borrower or any of its Subsidiaries;

(m)          Liens arising pursuant to purchase money mortgages or security interests securing Indebtedness representing the purchase price (or financing of the purchase price within 90 days after the respective purchase) of assets acquired by the Borrower or any Subsidiary after the Initial Borrowing Date, provided that (i) any such Liens attach only to the assets so acquired, (ii) the Indebtedness secured by any such Lien does not exceed 100%, nor is less than 70%, of the lesser of the fair market value or purchase price of the property being purchased at the time of the incurrence of such Indebtedness and (iii) the Indebtedness secured by such Liens is permitted by Section 7.04(e);

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(n)           Liens on property or assets acquired pursuant to a Permitted Acquisition, or on property or assets of a Person in existence at the time such Person is acquired pursuant to a Permitted Acquisition, in each case securing Permitted Acquired Debt, provided that (i) such Liens do not attach to the capital stock or other equity interests of any Subsidiary of the Borrower and (ii) such Liens existed prior to, and were not incurred in contemplation of, such Permitted Acquisition and do not attach to any other asset of the Borrower or any of its Subsidiaries; and

(o)           Liens on property or assets of a Person in existence at the time such Person is acquired pursuant to an Investment permitted under Section 7.06(l), in each case securing Indebtedness permitted under Section 7.04, provided that (i) such Liens do not attach to the capital stock or other equity interests of any Subsidiary of the Borrower (other than any capital stock or other equity interests not held by the Borrower or any of its Subsidiaries) and (ii) such Liens existed prior to, and were not incurred in contemplation of, such Investment and do not attach to any other asset of the Borrower or any of its Subsidiaries.

7.04  Indebtedness.  The Borrower will not, and will not permit any of its Subsidiaries to, contract, create, incur, assume or suffer to exist any Indebtedness, except:

(a)           Indebtedness incurred pursuant to this Agreement and the other Credit Documents;

(b)           intercompany Indebtedness permitted by Section 7.06(c);

(c)           Capitalized Lease Obligations initially incurred after the Initial Borrowing Date, provided that the aggregate Capitalized Lease Obligations (exclusive of Permitted MJD Capital Debt) outstanding at any time under all Capital Leases incurred in reliance on this clause (c) after Initial Borrowing Date, when added to the aggregate outstanding amount of Indebtedness incurred in reliance on Section 7.04(e), shall not exceed $30,000,000 at any time;

(d)           Indebtedness of the Borrower under Interest Rate Agreements entered into to protect it against fluctuations in interest rates in respect of Indebtedness otherwise permitted under this Agreement, so long as the entering into of such Interest Rate Agreements are bona fide hedging activities and are not for speculative purposes;

(e)           Indebtedness incurred pursuant to purchase money mortgages permitted by Section 7.03(m); provided that the aggregate outstanding amount of Indebtedness incurred in reliance on this clause (e), when added to the aggregate outstanding amount of all Capitalized Lease Obligations incurred in reliance on Section 7.04(c), shall not exceed $30,000,000 at any time;

(f)            (i) unsecured Indebtedness of the Borrower incurred under the Existing 2010 Senior Subordinated Notes and the Existing 2010 Senior Subordinated Notes Indenture, and of the Subsidiary Guarantors under subordinated guarantees of the obligations of the Borrower under the Existing 2010 Senior Subordinated Notes Documents, in an aggregate principal amount not to exceed $20,000,000 (less the amount of any

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repayments of principal thereof after the Initial Borrowing Date), (ii) unsecured Indebtedness of the Borrower incurred under the Existing 2010 Senior Notes and the Existing 2010 Senior Notes Indenture, and of the Subsidiary Guarantors under guarantees of the obligations of the Borrower under the Existing 2010 Senior Notes Documents, in an aggregate principal amount not to exceed $2,100,000 (less the amount of any repayments of principal thereof after the Initial Borrowing Date) and (iii) at any time prior to the Redemption Date, unsecured Indebtedness of the Borrower incurred under the Existing 2008 Senior Subordinated Notes and the Existing 2008 Senior Subordinated Notes Indenture, in an aggregate principal amount not to exceed $22,500,000 (less the amount of any repayments of principal thereof after the Initial Borrowing Date);

(g)           Indebtedness (the “Scheduled Existing Indebtedness”) in existence on, and which is to continue in effect after, the Effective Date (excluding Intercompany Debt) and which is listed on Annex VI hereto, without giving effect to any subsequent extension, renewal or refinancing thereof, except as permitted pursuant to Section 7.04(l);

(h)           Indebtedness of the Borrower or any of its Subsidiaries which may be deemed to exist in connection with agreements providing for indemnification, purchase price adjustments and similar obligations in connection with Permitted Acquisitions or sales of assets permitted by this Agreement (so long as any such obligations are those of the Person making the respective acquisition or sale, and are not guaranteed by any other Person);

(i)            Permitted Acquired Debt;

(j)            unsecured subordinated Indebtedness of the Borrower, and subordinated guarantees thereof by the Subsidiary Guarantors (so long as same remain Subsidiary Guarantors), under the Permitted Senior Subordinated Notes and the other Permitted Senior Subordinated Notes Documents, so long as (i) all such Indebtedness is incurred in accordance with the requirements of the definition of Permitted Senior Subordinated Notes, (ii) no Default or Event of Default then exists or would result therefrom, (iii) 100% of the Net Cash Proceeds therefrom are (x) applied as a mandatory repayment and/or commitment reduction in accordance with the requirements of Section 3.02(A)(c), 2.03(d) or 2.03(f), as the case may be, (y) used to effect a Permitted Acquisition in accordance with the requirements of Section 6.10 and/or (z) concurrently used by the Borrower (I) to make a voluntary prepayment of RF Loans pursuant to, and in accordance with the requirements of, Section 3.01 and/or (II) to redeem and/or refinance Permitted Senior Unsecured Notes and/or Permitted Junior Capital, in each case in an aggregate principal amount or with an aggregate liquidation preference, as applicable, equal to the aggregate principal amount or liquidation preference, as applicable, of RF Loans, Permitted Senior Unsecured Notes and/or Permitted Junior Capital, as the case may be, actually incurred or issued by the Borrower to finance a Permitted Acquisition or Permitted Acquisitions (and pay related accrued interest and dividends thereon, if any) in the 364-day period prior to such issuance of Permitted Senior Subordinated Notes, (iv) calculations are made by the Borrower demonstrating compliance, on a Pro Forma Basis, with the covenants contained in Sections 7.11 and 7.12 for the Calculation Period most recently ended prior to the date of the respective issuance of Permitted Senior

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Subordinated Notes, and (v) the Borrower shall have furnished to the Administrative Agent a certificate from an Authorized Officer certifying as to compliance with the requirements of preceding clauses (i), (ii), (iii) and (iv) and containing the calculations required by preceding clause (iv);

(k)           Permitted MJD Capital Debt;

(l)            Permitted Refinancing Indebtedness, so long as no Default or Event of Default is in existence at the time of the incurrence thereof and immediately after giving effect thereto;

(m)          Indebtedness of the Borrower consisting of Permitted Letters of Credit and reimbursement obligations with respect thereto, so long as the aggregate outstanding stated amounts of all such letters of credit and reimbursement obligations do not exceed $7,500,000 at any time;

(n)           unsecured Indebtedness of the Borrower incurred under the Permitted Senior Unsecured Notes and the other Permitted Senior Unsecured Notes Documents, and of the Subsidiary Guarantors under guarantees of the obligations of the Borrower under the Permitted Senior Unsecured Notes Documents, so long as (i) all such Indebtedness is incurred in accordance with the requirements of the definition of Permitted Senior Unsecured Notes, (ii) no Default or Event of Default then exists or would result therefrom, (iii) 100% of the Net Cash Proceeds therefrom (except to the extent of any portion thereof applied to make a concurrent prepayment of B Term Loans pursuant to, and in accordance with the requirements of, Section 3.01) are (x) applied as a mandatory repayment and/or commitment reduction in accordance with the requirements of Section 3.02(A)(c), 2.03(d) or 2.03(f), as the case may be, (y) used to effect a Permitted Acquisition in accordance with the requirements of Section 6.10 and/or (z) concurrently used by the Borrower (I) to make a voluntary prepayment of RF Loans pursuant to, and in accordance with the requirements of, Section 3.01 and/or (II) to redeem and/or refinance Permitted Senior Unsecured Notes and/or Permitted Junior Capital, in each case in an aggregate principal amount or with an aggregate liquidation preference, as applicable, equal to the aggregate principal amount or liquidation preference, as applicable, of RF Loans, Permitted Senior Unsecured Notes and/or Permitted Junior Capital, as the case may be, actually incurred or issued by the Borrower to finance a Permitted Acquisition or Permitted Acquisitions (and pay related accrued interest and dividends thereon, if any) in the 364-day period prior to such issuance of Permitted Senior Unsecured Notes, (iv) calculations are made by the Borrower demonstrating compliance, on a Pro Forma Basis, with the covenants contained in Sections 7.11 and 7.12 for the Calculation Period most recently ended prior to the date of the respective issuance of Permitted Senior Unsecured Notes, and (v) the Borrower shall have furnished to the Administrative Agent a certificate from an Authorized Officer certifying as to compliance with the requirements of preceding clauses (i), (ii), (iii) and (iv) and containing the calculations required by preceding clause (iv);

(o)           Additional Permitted Subordinated Debt, so long as (i) no Default or Event of Default then exists or would result from the incurrence or issuance thereof, (ii)

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100% of the Net Cash Proceeds therefrom are (x) applied as a mandatory repayment and/or commitment reduction in accordance with the requirements of Section 3.02(A)(c), 2.03(d) or 2.03(f), as the case may be, (y) used to effect a Permitted Acquisition in accordance with the requirements of Section 6.10 and/or (z) concurrently used by the Borrower (I) to make a voluntary prepayment of RF Loans pursuant to, and in accordance with the requirements of, Section 3.01 and/or (II) to redeem and/or refinance Permitted Senior Unsecured Notes and/or Permitted Junior Capital, in each case in an aggregate principal amount or with an aggregate liquidation preference, as applicable, equal to the aggregate principal amount or liquidation preference, as applicable, of RF Loans, Permitted Senior Unsecured Notes and/or Permitted Junior Capital, as the case may be, actually incurred or issued by the Borrower to finance a Permitted Acquisition or Permitted Acquisitions (and pay related accrued interest and dividends thereon, if any) in the 364-day period prior to such issuance of Additional Permitted Subordinated Debt, (iii) calculations are made by the Borrower demonstrating compliance, on a Pro Forma Basis, with the covenants contained in Sections 7.11 and 7.12 for the Calculation Period most recently ended prior to the date of such incurrence or issuance of Additional Permitted Subordinated Debt, and (iv) the Borrower shall have furnished to the Administrative Agent a certificate from an Authorized Officer certifying as to compliance with the requirements of preceding clauses (i), (ii) and (iii) and containing the calculations required by preceding clause (iii); provided however, that Additional Permitted Subordinated Debt issued as in kind regularly scheduled interest payments on theretofore outstanding Additional Permitted Subordinated Debt shall not be subject to the requirements specified in preceding clauses (i) through (iv); and

(p)           additional unsecured Indebtedness of the Borrower and the Subsidiary Guarantors not to exceed an aggregate outstanding principal amount of $10.0 million at any time.

7.05  Capital Expenditures.  (a)  The Borrower will not, and will not permit any of its Subsidiaries to, incur Consolidated Capital Expenditures, provided that the Borrower and its Subsidiaries may make Consolidated Capital Expenditures not to exceed in the aggregate in any fiscal year of the Borrower an amount equal to 37.5% of Adjusted Consolidated EBITDA for such fiscal year.

(b)           In the event that the maximum amount which is permitted to be expended in respect of Consolidated Capital Expenditures during any fiscal year of the Borrower pursuant to Section 7.05(a) is not fully expended during such fiscal year, the maximum amount which may be expended during the immediately succeeding fiscal year of the Borrower pursuant to Section 7.05(a) shall be increased by such unutilized amount.

7.06  Advances, Investments and Loans.  The Borrower will not, and will not permit any of its Subsidiaries to, lend money or credit or make advances to any Person (other than Excluded Intercompany Payables), or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to any Person, or purchase or own a futures contract or otherwise become liable for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract (each of the foregoing an “Investment” and, collectively, “Investments”), except:

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(a)           the Borrower or any Subsidiary may invest in cash and Cash Equivalents;

(b)           the Borrower and any Subsidiary may acquire and hold receivables owing to them, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms and/or reasonable extensions thereof;

(c)           the Borrower and its Qualified Subsidiaries may make intercompany loans and advances between and among one another (collectively, “Intercompany Loans”), provided that (i) each such Intercompany Loan shall be evidenced by an Intercompany Note which, if held by a Pledge Party, shall be pledged to the Collateral Agent as, and to the extent required by, the Pledge Agreement, (ii) each Intercompany Loan made pursuant to this clause (c) shall be subject to subordination as, and to the extent required by, the Intercompany Subordination Agreement (giving effect to exceptions required by applicable law or regulation as contemplated thereby) and (iii) any Intercompany Loan made pursuant to this clause (c) shall cease to be permitted hereunder if the obligor or obligee thereunder ceases to be the Borrower or a Qualified Subsidiary as contemplated above;

(d)           loans and advances to officers, directors and employees in the ordinary course of business (x) for relocation purposes and/or the purchase from the Borrower of the capital stock (or options or warrants relating thereto) of the Borrower and (y) otherwise in an aggregate principal amount not to exceed $1.0 million at any time outstanding shall be permitted;

(e)           the Borrower and each Subsidiary may acquire and own investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business;

(f)            Interest Rate Agreements entered in compliance with Section 7.04(d) shall be permitted;

(g)           Investments in existence on the Effective Date and listed on Annex VII (excluding Intercompany Debt), without giving effect to any additions thereto or replacements thereof, shall be permitted;

(h)           the Borrower and each Qualified Subsidiary may make capital contributions (including by way of the capitalization of an Intercompany Loan) (i) to any of their respective Subsidiaries, to the extent a Subsidiary Guarantor and (ii) to any Qualified Subsidiary that is not a Subsidiary Guarantor, so long as, in the case of this subclause (ii), (x) no Default or Event of Default has occurred and is continuing at the time of the respective contribution and (y) in the case of any contribution to a Qualified Subsidiary of the type referred to in clause (iii) of the definition thereof, the Pro Forma EBITDA Test is satisfied;

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(i)            the Borrower and its Subsidiaries may (x) establish and/or create Subsidiaries in accordance with the provisions of Section 7.07 and (y) make Investments therein as otherwise provided in this Section 7.06;

(j)            Permitted Acquisitions may be consummated in accordance with the requirements of Section 6.10;

(k)           the Borrower and its Subsidiaries may acquire and hold investments consisting of non-cash consideration received from sales of assets effected in accordance with the requirements of Section 7.02(f);

(l)            so long as no Default or Event of Default exists or would exist immediately after giving effect to the respective Investment, the Borrower and its Qualified Subsidiaries shall be permitted to make Investments in (x) any Restricted Investment Entity on any date in an amount (in the case of a non-cash Investment, taking the fair market value of the asset so invested (as determined in good faith by senior management of the Borrower)) not to exceed the Available Basket Amount on such date (after giving effect to all prior and contemporaneous adjustments thereto, except as a result of such Investment) and (y) any Unrestricted Subsidiary on any date in an amount (in the case of a non-cash Investment, taking the fair market value of the asset so invested (as determined in good faith by senior management of the Borrower)) not to exceed the Available Basket Sub-Limit on such date (after giving effect to all prior and contemporaneous adjustments thereto, except as a result of such Investment), provided that in no event shall the aggregate amount of Investments made in Restricted Investment Entities and Unrestricted Subsidiaries in reliance on this Section 7.06(l) the equity interests of which are not pledged pursuant to the Pledge Agreement (for such purpose, determined without giving effect to any write-downs or write-offs thereof and, in the case of a non-cash Investment, taking the fair market value of the asset so invested (as determined in good faith by senior management of the Borrower)) exceed $45,000,000.

(m)          the Borrower and its Subsidiaries may from time to time make additional Investments in an amount (in the case of a non-cash Investment, taking the fair market value of the asset so invested (as determined in good faith by the Board of Directors of the Borrower)) not to exceed the amount of Cumulative Distributable Cash at such time (determined as of the date of the making of such Investment, after giving effect to all prior and contemporaneous adjustments thereto, except as a result of such Investment), so long as (i) no Default or Event of Default is then in existence or would exist immediately after giving effect thereto, (ii) no Dividend Suspension Period is then in effect, (iii) the Minimum Liquidity Condition is satisfied at such time (before and after giving effect to the respective Investment) and (iv) the Borrower shall have delivered an officer’s certificate on the date of the proposed Investment certifying that the Cumulative Distributable Cash on such date (after giving effect to all prior and contemporaneous adjustments thereto, except as a result of such Investment) exceeds the aggregate amount of the proposed Investment; and

(n)           so long as no Default or Event of Default then exists or would exist immediately after giving effect to the respective Investment, the Borrower and its

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Subsidiaries may make Investments not otherwise permitted by clauses (a) through (m) of this Section 7.06 in an aggregate amount not to exceed $15,000,000 (determined without regard to any write-downs or write-offs thereof), net of cash payments of principal in the case of loans and cash equity returns (whether as a distribution, dividend or redemption) or a return in the form of an asset distribution (based on the fair market value of the distributed asset as determined in good faith by senior management of the Borrower) in the case of equity investments.

7.07  Limitation on Creation of Subsidiaries.  (a)  Except as otherwise specifically provided in immediately succeeding clause (b), the Borrower will not, and will not permit any Subsidiary to, establish, create or acquire any Subsidiary; provided that the Borrower and its Subsidiaries shall be permitted to establish, create or acquire Wholly-Owned Subsidiaries (or 90%-Owned Subsidiaries in the case of Telcos or Carrier Services Companies), so long as (i) 100% of the capital stock or other equity interests of such new Subsidiary (if a Parent Company) or at least 90% of the capital stock or other equity interests of such new Subsidiary (if a Telco or a Carrier Services Company) is pledged pursuant to the Pledge Agreement (provided that the stock or other equity interests of any new Telco or Carrier Services Company acquired or created pursuant to a Permitted Acquisition shall not have to be pledged if, after giving effect to the acquisition or creation thereof, the Pro Forma EBITDA Test is satisfied) and the certificates representing such stock or other equity interests, together with transfer powers duly executed in blank, are delivered to the Collateral Agent, (ii) such new Subsidiary executes a counterpart of the Intercompany Subordination Agreement, the Subsidiary Guaranty (in the case of a new 1^st-Tier Subsidiary) and the Pledge Agreement (in the case of a new Parent Company), in each case on the same basis (and to the same extent) as such Subsidiary would have executed such Credit Documents if it were a Credit Party on the Initial Borrowing Date, and (iii) such new Subsidiary takes all action in connection therewith as would otherwise have been required to be taken pursuant to Section 4 if such new Subsidiary had been a Credit Party on the Initial Borrowing Date.

(b)           In addition to Subsidiaries of the Borrower created pursuant to preceding clause (a), the Borrower and its Subsidiaries may establish, acquire or create, and make Investments in, Non-Wholly Owned Subsidiaries after the Initial Borrowing Date as a result of Permitted Acquisitions (subject to the limitations contained in the definition thereof) and Investments expressly permitted to be made pursuant to Section 7.06, provided that (i) all of the capital stock or other equity interests of each such Non-Wholly Owned Subsidiary shall be pledged by any Pledge Party which owns same as, and to the extent, required by the Pledge Agreement, (ii) such new Subsidiary executes a counterpart of the Intercompany Subordination Agreement and (iii) in the case of (x) a proposed Permitted Acquisition of an Acquired Person (other than a Telco or Carrier Services Company) or non-equity assets to be effected by a Qualified Subsidiary (directly or through a Subsidiary of such Qualified Subsidiary) in circumstances where the capital stock or other equity interests of the Acquired Person acquired pursuant to such Permitted Acquisition are not to be pledged under the Pledge Agreement or the assets so acquired pursuant to such Permitted Acquisition are not held by a Person which is (or will concurrently become) a Pledged Subsidiary or (y) the creation or acquisition of a new Telco or Carrier Services Company pursuant to a Permitted Acquisition in circumstances where the capital stock or other equity interests of such Telco or Carrier Services Company is (or are) not to be pledged under the Pledge Agreement, the Pro Forma EBITDA Test is satisfied.

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7.08  Modifications.  The Borrower will not, and will not permit any of its Subsidiaries to:

(a)           amend or modify (or permit the amendment or modification of) any provisions of any Permitted Acquired Debt, any Scheduled Existing Indebtedness, any Existing 2008 Senior Subordinated Notes Document, any Existing 2010 Senior Subordinated Notes Document, any Existing 2010 Senior Notes Document and, on and after the execution, delivery and/or incurrence thereof, any Permitted Senior Unsecured Notes Document, any Permitted Senior Subordinated Notes Document and any agreements or instruments relating to any other Permitted Junior Capital or any other Permitted Refinancing Indebtedness, in any such case other than amendments or modifications that are not in any way adverse to the interests of the Lenders; provided that in no event shall any amendment to the foregoing (i) increase the applicable interest rate, (ii) shorten the maturity date from that theretofore in effect, (iii) modify or change any subordination provisions contained therein or (iv) make any covenant more restrictive than previously existed thereunder; and/or

(b)           amend, modify or change in any manner adverse to the interests of the Lenders the organizational documents (including by-laws) of any Pledge Party (including, without limitation, by the filing or modification of any certificate or articles of designation, other than any certificate of designation relating to Disqualified Preferred Stock or Qualified Preferred Stock issued as permitted herein), any agreement entered into by the Borrower with respect to its capital stock, or enter into any new agreement in any manner adverse to the interests of the Lenders with respect to the capital stock of the Borrower (in each case other than an agreement governing Disqualified Preferred Stock or Qualified Preferred Stock issued as permitted herein).

7.09  Restricted Payments, Etc.  (a)  The Borrower will not, and will not permit any of its Subsidiaries to, make any Restricted Payment, except that:

(i)            (x) any Subsidiary of the Borrower may pay Dividends to the Borrower or any Wholly-Owned Subsidiary of the Borrower (including by way of conversion of intercompany payables) and (y) any Non-Wholly-Owned Subsidiary of the Borrower may pay cash Dividends to its shareholders generally, so long as the Borrower or its respective Subsidiary which owns the equity interest in the Subsidiary paying such Dividends receives at least its proportionate share thereof (based upon its relative holding of the equity interests in the Subsidiary paying such Dividends and taking into account the relative preferences, if any, of the various classes of equity interests of such Subsidiary);

(ii)           the Borrower may redeem or repurchase shares of Borrower Common Stock (or options, warrants and/or appreciation rights in respect thereof) from shareholders, officers, employees, consultants and directors (or their estates) upon the death, permanent disability, retirement or termination of employment of any such Person or otherwise in accordance with any shareholder agreement, stock option plan or any employee stock ownership plan, provided that (x) no Default or Event of Default is then in existence or would arise therefrom and (y) the aggregate amount of all cash paid in

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respect of all such shares, options, warrants and rights so redeemed or repurchased in any calendar year, does not exceed $2,000,000;

(iii)          the Borrower may declare and pay Dividends to the holders of Borrower Common Stock (including by way of the repurchase of outstanding shares of Borrower Common Stock) in an amount not to exceed the amount of Cumulative Distributable Cash at such time (determined as of the date of the payment of such Dividends); provided that no such Dividend shall be made (w) if a Default or Event of Default is then in existence or would exist immediately after giving effect thereto, (x) if a Dividend Suspension Period is then in effect, (y) if the Minimum Liquidity Condition is not satisfied at such time (before and after giving effect to the respective Dividend) and (z) the Borrower shall have delivered an officer’s certificate on the date of the proposed Dividend certifying that the Cumulative Distributable Cash on such date (after giving effect to all prior and contemporaneous adjustments thereto, except as a result of such Dividend) exceeds the aggregate amount of the proposed Dividend;

(iv)          subject to the subordination provisions of the respective indenture governing the respective issuance of Permitted Senior Subordinated Notes and so long as no Default or Event of Default then exists or would result therefrom, the Borrower may pay regularly scheduled interest on each issuance of Permitted Senior Subordinated Notes as and when due in accordance with the terms of the Permitted Senior Subordinated Notes Documents;

(v)           subject to the subordination provisions of the respective agreements governing the respective issuance of Additional Permitted Subordinated Debt and so long as no Default or Event of Default then exists or would result therefrom, the Borrower may pay regularly scheduled interest on each issuance of Additional Permitted Subordinated Debt through the issuance of Additional Permitted Subordinated Debt (but not in cash) as and when due in accordance with the terms of the instruments and agreements governing the respective Additional Permitted Subordinated Debt;

(vi)          the Existing 2008 Senior Subordinated Notes Redemption may be consummated as contemplated by Section 6.13(b);

(vii)         Existing 2010 Senior Notes and Existing 2010 Senior Subordinated Notes not repurchased in connection with the Tender Offer and Consent Solicitation therefor may from time to time be redeemed in accordance with the terms of the respective indenture therefor and/or repurchased on the open-market, so long as (I) the aggregate amount of cash expended by the Borrower to effect such repurchases or redemptions shall not exceed the sum of (A) the principal amount of the Indebtedness so repurchased or redeemed plus (B) the amount of accrued but unpaid interest on the Indebtedness so repurchased or redeemed through the respective date of repurchase or redemption plus (C) any required premium payable in connection with such repurchase or redemption, (II) no Default or Event of Default then exists or would result therefrom (or, in the case of any redemption of Existing 2010 Senior Notes and/or Existing 2010 Senior Subordinated Notes pursuant to the respective indenture therefor, no Default or Event of Default under Section 8.01 or 8.05 then exists or would result therefrom), (III) all such Existing 2010

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Senior Notes and/or any Existing 2010 Senior Subordinated Notes, as the case may be, so repurchased or redeemed are promptly cancelled by the purchaser thereof and (IV) at the time of any delivery of an irrevocable notice of redemption pursuant to the indenture governing the Existing 2010 Senior Notes or the Existing 2010 Senior Subordinated Notes, no Default or Event of Default then exists;

(viii)        Indebtedness may be refinanced with the proceeds of Permitted Refinancing Indebtedness in accordance with the requirements of the definition thereof, so long as no Default or Event of Default is in existence at the time of the incurrence of such Permitted Refinancing Indebtedness and immediately after giving effect thereto;

(ix)           the Permitted Senior Subordinated Notes may be exchanged for Permitted Exchange Senior Subordinated Notes in accordance with the requirements of the respective definitions thereof and the relevant provisions of this Agreement;

(x)            the Permitted Senior Unsecured Notes may be exchanged for Permitted Exchange Senior Unsecured Notes in accordance with the requirements of the respective definitions thereof and the relevant provisions of this Agreement;

(xi)           the Transaction shall be permitted to be consummated in accordance with the relevant requirements of this Agreement;

(xii)          the Borrower and its Subsidiaries may make payments with respect to Intercompany Debt, so long as the respective payment is permitted to be made in accordance with the terms of the Intercompany Subordination Agreement (giving effect to the exceptions required by applicable regulatory law as contemplated thereby);

(xiii)         so long as no Default or Event of Default exists or would result therefrom, the Borrower may pay regularly accruing Dividends on its Disqualified Preferred Stock issued pursuant to Section 7.13(d) in cash and/or through the issuance of additional shares of Disqualified Preferred Stock in accordance with the terms of the documentation governing the same;

(xiv)        the Borrower may pay regularly accruing Dividends with respect to Qualified Preferred Stock through the issuance of additional shares of Qualified Preferred Stock (but not in cash) in accordance with the terms of the documentation governing the same;

(xv)         the Borrower may redeem shares of Qualified Preferred Stock or Disqualified Preferred Stock or repurchase or refinance any Permitted Senior Unsecured Notes, Permitted Senior Subordinated Notes or Additional Permitted Subordinated Debt with the proceeds of any issuance of Permitted Senior Unsecured Noted or Permitted Junior Capital not required to be applied to repay B Term Loans as a result of the application of clause (v) of the proviso in Section 3.02(A)(c);

(xvi)        so long as (x) no Default or Event of Default then exists or would exist immediately after giving effect thereto and (y) the Minimum Liquidity Condition is satisfied at such time, the Borrower may, within 70 days following the last day of the first

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fiscal quarter of the Borrower ended after the Initial Borrowing Date, make a one-time payment of cash Dividends on then outstanding shares of Borrower Common Stock of $0.22543 per share of Borrower Common Stock (which based on the number of outstanding shares of Borrower Common Stock as of the Initial Borrowing Date equates to approximately $777,000);

(xvii)       the Borrower may redeem or repurchase shares of Sunflower Telephone Company, Inc. held by third-party investors, so long as (x) no Default or Event of Default then exists or would exist immediately after giving effect thereto and (y) the aggregate amount of all cash paid in respect of all redemptions and/or repurchases pursuant to this clause (xvii) does not exceed $250,000; and

(xviii)      the Borrower may redeem or repurchase warrants to purchase shares of STE held by third-party investors, so long as (x) no Default or Event of Default then exists or would exist immediately after giving effect thereto and (y) the aggregate amount of all cash paid in respect of all such redemptions and/or repurchases pursuant to this clause (xviii) does not exceed $250,000.

(b)           The Borrower will not, and will not permit any of its Subsidiaries to, create or otherwise cause or suffer to exist (other than as a result of a requirement of law) any encumbrance or restriction which prohibits or otherwise restricts (A) the ability of any Subsidiary to (a) pay dividends or make other distributions or pay any Indebtedness owed to the Borrower or any Subsidiary, (b) make loans or advances to the Borrower or any Subsidiary, (c) transfer any of its properties or assets to the Borrower or any Subsidiary or (B) the ability of any Subsidiary to create, incur, assume or suffer to exist any Lien upon its property or assets to secure the Obligations, other than (for purposes of clauses (A) and (B)) prohibitions or restrictions existing under or by reason of:  (i) this Agreement and the other Credit Documents; (ii) applicable law; (iii) customary non-assignment provisions entered into in the ordinary course of business and consistent with past practices; (iv) any restriction or encumbrance with respect to a Subsidiary imposed pursuant to an agreement which has been entered into for the sale or disposition of all or substantially all of the capital stock or assets of such Subsidiary, so long as such sale or disposition is permitted under this Agreement; (v) Liens permitted under Sections 7.03(d), (m) and/or (n) and any documents or instruments governing the terms of any Indebtedness or other obligations secured by any such Liens, provided that such prohibitions or restrictions apply only to the assets subject to such Liens; (vi) any agreement or instrument governing Permitted Acquired Debt, to the extent such restriction or encumbrance (x) is not applicable to any Person or the properties or assets of any Person (other than the Person or the properties or assets of the Person acquired pursuant to the respective Permitted Acquisition) and (y) was not created (or made more restrictive) in connection with or in anticipation of the respective Permitted Acquisition; (vii) restrictions applicable to any Non-Wholly Owned Subsidiary existing at the time of the acquisition thereof as a result of an Investment pursuant to Section 7.06 or a Permitted Acquisition effected in accordance with Section 6.10; provided that the restrictions applicable to such joint venture are not made more burdensome, from the perspective of the Borrower and its Subsidiaries, than those as in effect immediately before giving effect to the consummation of the respective Investment or Permitted Acquisition; (viii) on and after the execution and delivery thereof, the Permitted Senior Unsecured Notes Documents; (ix) on and after the execution and delivery thereof, the Permitted Senior

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Subordinated Notes Documents; and (x) on and after the execution and delivery thereof, any agreements or instruments relating to any Additional Permitted Subordinated Debt.

7.10  Transactions with Affiliates.  The Borrower will not, and will not permit any Subsidiary to, enter into any transaction or series of transactions after the Effective Date whether or not in the ordinary course of business, with any of its Affiliates or Unrestricted Subsidiaries other than on terms and conditions substantially as favorable to the Borrower or such Subsidiary as would be obtainable by the Borrower or such Subsidiary at the time in a comparable arm’s-length transaction with a Person other than an Affiliate, provided that the foregoing restrictions shall not apply to (i) transactions solely among Pledge Parties and their 90%-Owned Subsidiaries, (ii) employment arrangements entered into in the ordinary course of business with officers of the Borrower and its Subsidiaries, (iii) customary fees paid to members of the Board of Directors of the Borrower and of its Subsidiaries, (iv) arrangements with directors, officers and employees not otherwise prohibited by this Agreement, (v) payment of customary legal fees and expenses to Paul, Hastings, Janofsky & Walker LLP, (vi) Restricted Payments made by the Borrower to the extent permitted by Section 7.09(a), (vii) the Transaction and (viii) the transactions set forth on Annex VIII hereto.

7.11  Interest Coverage Ratio.  The Borrower will not permit the Interest Coverage Ratio for any Test Period ending on the last day of any fiscal quarter of the Borrower to be less than 3.00:1.00 (or, at any time on and after the issuance of any Permitted Senior Subordinated Notes pursuant to Section 7.04(j), 2.50:1.00).

7.12  Leverage Ratio.  The Borrower will not permit the Leverage Ratio determined as at the end of any fiscal quarter of the Borrower to exceed 5.25:1.00.

7.13  Limitation On Issuance of Equity Interests.  (a)  The Borrower will not, and will not permit any of its Subsidiaries to, issue (i) any Preferred Stock or any options, warrants or rights to purchase Preferred Stock (other than Preferred Stock issued in accordance with Section 7.13(c) or (d) below) or (ii) any redeemable common equity interests unless, in either case, the issuance thereof is, and all terms thereof are, satisfactory to the Required Lenders in their sole discretion.

(b)           The Borrower will not permit any of its Subsidiaries, directly or indirectly, to issue any shares of such Subsidiary’s capital stock, securities or other equity interests (or warrants, rights or options to acquire shares or other equity interests), except (i) for replacements of then outstanding shares of capital stock or other equity interests, (ii) for stock splits, stock dividends and similar issuances which do not decrease the percentage ownership of the Borrower and its Subsidiaries taken as a whole in any class of the capital stock or other equity interests of such Subsidiary, (iii) Subsidiaries formed after the Effective Date pursuant to Section 7.07 may issue capital stock or other equity interests in accordance with the requirements of Section 7.07 and (iv) to qualify directors to the extent required by applicable law.

(c)           The Borrower may issue Qualified Preferred Stock (x) in payment of regularly accruing dividends on theretofore outstanding shares of Qualified Preferred Stock as contemplated by Section 7.09(a)(xiv) and (y) with respect to each other issue of Qualified

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Preferred Stock, so long as the Borrower receives reasonably equivalent consideration therefor (as determined in good faith by the Borrower).

(d)           The Borrower may issue Disqualified Preferred Stock, so long as (i) no Default or Event of Default then exists or would result from the issuance thereof, (ii) 100% of the Net Cash Proceeds therefrom are (x) applied as a mandatory repayment and/or commitment reduction in accordance with the requirements of Section 3.02(A)(c), 2.03(d) or 2.03(f), as the case may be, (y) used to effect a Permitted Acquisition in accordance with the requirements of Section 6.10 and/or (z) concurrently used by the Borrower (I) to make a voluntary prepayment of RF Loans pursuant to, and in accordance with the requirements of, Section 3.01 and/or (II) to redeem and/or refinance Permitted Senior Unsecured Notes and/or Permitted Junior Capital, in each case in an aggregate principal amount or liquidation preference, as applicable, equal to the aggregate principal amount or liquidation preference, as applicable, of RF Loans, Permitted Senior Unsecured Notes and/or Permitted Junior Capital, as the case may be, actually incurred or issued by the Borrower to finance a Permitted Acquisition or Permitted Acquisitions (and pay related accrued interest and dividends thereon, if any) in the 364-day period prior to such issuance of Disqualified Preferred Stock, (iii) calculations are made by the Borrower demonstrating compliance, on a Pro Forma Basis, with the covenants contained in Sections 7.11 and 7.12 for the Calculation Period most recently ended prior to the date of such issuance of Disqualified Preferred Stock and (iv) the Borrower shall have furnished to the Administrative Agent a certificate from an Authorized Officer certifying as to compliance with the requirements of preceding clauses (i), (ii) and (iii) and containing the calculations required by preceding clause (iii).

7.14  Designated Senior Debt.  The Borrower shall not designate any Indebtedness (other than the Obligations) as “Designated Senior Debt” or “Designated Guarantor Senior Debt” for purposes of any Existing 2008 Subordinated Notes Document, any Existing 2010 Subordinated Notes Document and, on and after the execution, delivery and/or incurrence thereof, any Permitted Senior Subordinated Notes Document and any agreements or instruments relating to any Additional Permitted Subordinated Debt or any Permitted Refinancing Indebtedness in respect thereof.

SECTION 8.  Events of Default.  Upon the occurrence of any of the following specified events (each, an “Event of Default”):

8.01  Payments.  The Borrower shall (i) default in the payment when due of any principal of the Loans or (ii) default, and such default shall continue for five or more Business Days, in the payment when due of any interest on the Loans or any Fees or any other amounts owing hereunder or under any other Credit Document; or

8.02  Representations, etc.  Any representation, warranty or statement made by any Credit Party herein or in any other Credit Document or in any statement or certificate delivered or required to be delivered pursuant hereto or thereto shall prove to be untrue in any material respect on the date as of which made or deemed made; or

8.03  Covenants.  Any Credit Party shall (a) default in the due performance or observance by it of any term, covenant or agreement contained in Section 6.05, 6.09, 6.10, 6.13,

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6.14 or 7, or (b) default in the due performance or observance by it of any term, covenant or agreement (other than those referred to in Section 8.01, 8.02 or clause (a) of this Section 8.03) contained in this Agreement and such default shall continue unremedied for a period of at least 30 days after written notice to the Borrower by the Administrative Agent or the Required Lenders; or

8.04  Default Under Other Agreements.  (a)  The Borrower or any of its Subsidiaries shall (i) default in any payment with respect to any Indebtedness (other than the Obligations) beyond the period of grace, if any, applicable thereto or (ii) default in the observance or performance of any agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause, any such Indebtedness to become due prior to its stated maturity; or (b) any such Indebtedness of the Borrower or any of its Subsidiaries shall be declared to be due and payable (or shall be required to be prepaid as a result of a default thereunder or of an event of the type that constitutes an Event of Default) prior to the stated maturity thereof, provided that it shall not constitute an Event of Default pursuant to this Section 8.04 unless the aggregate principal amount of all Indebtedness referred to in clauses (a) and (b) above (without duplication) exceeds $7,500,000 in the aggregate at any one time; or

8.05  Bankruptcy, etc.  The Borrower or any Material Subsidiary shall commence a voluntary case concerning itself under Title 11 of the United States Code entitled “Bankruptcy,” as now or hereafter in effect, or any successor thereto (the “Bankruptcy Code”); or an involuntary case is commenced against the Borrower or any of its Material Subsidiaries and the petition is not controverted within 20 days, or is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of the Borrower or any of its Material Subsidiaries; or the Borrower or any of its Material Subsidiaries commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Borrower or any of its Material Subsidiaries; or there is commenced against the Borrower or any of its Material Subsidiaries any such proceeding which remains undismissed for a period of 60 days; or the Borrower or any of its Material Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Borrower or any of its Material Subsidiaries suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 60 days; or the Borrower or any of its Material Subsidiaries makes a general assignment for the benefit of creditors; or any Company action is taken by the Borrower or any of its Material Subsidiaries for the purpose of effecting any of the foregoing; or

8.06  ERISA.  (a)  Any Plan or Multiemployer Plan shall fail to satisfy the minimum funding standard required for any plan year or part thereof under Section 412 of the Code or Section 302 of ERISA or a waiver of such standard or extension of any amortization period is sought or granted under Section 412 of the Code or Section 303 or 304 of ERISA, a Reportable Event shall have occurred, a contributing sponsor (as defined in Section 4001(a)(13)

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of ERISA) of a Plan subject to Title IV of ERISA shall be subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof) and an event described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 shall be reasonably expected to occur with respect to such Plan within the following 30 days, any Plan which is subject to Title IV of ERISA shall have had or is likely to have a trustee appointed to administer such Plan, any Plan or Multiemployer Plan which is subject to Title IV of ERISA is, shall have been or is likely to be terminated or to be the subject of termination proceedings under ERISA, any Plan shall have an Unfunded Current Liability, a contribution required to be made with respect to a Plan or Multiemployer Plan has not been timely made, the Borrower or any Subsidiary or any ERISA Affiliate has incurred or is likely to incur any liability to or on account of a Plan or Multiemployer Plan under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or on account of a group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code, or the Borrower or any Subsidiary has incurred or is likely to incur liabilities pursuant to one or more employee welfare benefit plans (as defined in Section 3(1) of ERISA) that provide benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or Plans; (b) there shall result from any such event or events the imposition of a lien, the granting of a security interest, or a liability or a material risk of incurring a liability; and (c) such lien, security interest or liability, individually, or in the aggregate, in the opinion of the Required Lenders, has had, or is reasonably likely to have, a Material Adverse Effect; or

8.07  Pledge Agreement.  (a)  Except in each case to the extent resulting from the negligent or willful failure of the Collateral Agent to continue to hold certificated Collateral under the Pledge Agreement, the Pledge Agreement shall cease to be, in any material respect, in full force and effect, or shall cease, in any material respect, to give the Collateral Agent the Liens, powers and privileges purported to be created thereby in favor of the Collateral Agent, or (b) any Pledge Party shall default in the due performance or observance of any material term, covenant or agreement on its part to be performed or observed pursuant to the Pledge Agreement and such default shall continue for 15 or more days after written notice to the respective Pledge Party by the Administrative Agent; or

8.08  Subsidiary Guaranty.  The Subsidiary Guaranty of any Subsidiary Guarantor or any material provision thereof shall cease to be in full force and effect, or any Subsidiary Guarantor or any Person acting by or on behalf of such Subsidiary Guarantor shall deny or disaffirm such Subsidiary Guarantor’s obligations under the Subsidiary Guaranty; or

8.09  Judgments.  One or more judgments or decrees shall be entered against the Borrower or any of its Subsidiaries involving a liability (to the extent not paid or covered by insurance) in excess of $7,500,000 in the aggregate for all such judgments and decrees for the Borrower and its Subsidiaries and all such judgments and decrees in excess of such amount shall not have been vacated, discharged or stayed or bonded pending appeal within 60 days from the entry thereof;

then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the Administrative Agent shall, upon the written request of the Required Lenders, by written notice to the Borrower, take any or all of the following actions, without prejudice to the

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rights of the Administrative Agent, any Letter of Credit Issuer, the Swingline Lender or any Lender to enforce its claims against any Credit Party, except as otherwise specifically provided for in this Agreement (provided that, if an Event of Default specified in Section 8.05 shall occur with respect to the Borrower, the result which would occur upon the giving of written notice by the Administrative Agent as specified in clauses (i) and (ii) below shall occur automatically without the giving of any such notice):  (i) declare the Total Commitment terminated, whereupon the Commitment of each Lender shall forthwith terminate immediately and any Fees shall forthwith become due and payable without any other notice of any kind; (ii) declare the principal of and any accrued interest in respect of all Loans and all Obligations owing hereunder (including Unpaid Drawings) to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; (iii) enforce, as Collateral Agent (or direct the Collateral Agent to enforce), any and all of the Liens and rights created pursuant the Pledge Agreement; (iv) terminate any Letter of Credit which may be terminated in accordance with its terms; (v) direct the Borrower to pay (and the Borrower hereby agrees upon receipt of such notice, or upon the occurrence of any Event of Default specified in Section 8.05 in respect of the Borrower, it will pay) to the Collateral Agent at the Payment Office such additional amounts of cash and/or Cash Equivalents, to be held in a cash collateral account as security for the Borrower’s reimbursement obligations in respect of Letters of Credit then outstanding equal to the aggregate Stated Amount of all Letters of Credit then outstanding (less any amount thereof as to which Section 1A.01(c) Arrangements are in place); and (vi) apply any cash collateral held by the Administrative Agent as provided in Section 3.02(A)(a) to the repayment of the Obligations.

SECTION 9.  Definitions.  As used herein, the following terms shall have the meanings herein specified unless the context otherwise requires.  Defined terms in this Agreement shall include in the singular number the plural and in the plural the singular:

“Acquired Person” shall have the meaning provided in the definition of “Permitted Acquisition.”

“Additional Permitted Subordinated Debt” shall mean any pay-in-kind subordinated Indebtedness of the Borrower, so long as (i) such Indebtedness has a final maturity no earlier than the date that falls one year and one day after the date on which all Obligations are repaid in full and all Commitments hereunder have terminated or expired, and no required amortizations prior to such date, (ii) such Indebtedness does not provide for guarantors or security, (iii) such Indebtedness provides for a complete suspension of remedies prior to the earliest to occur of (x) the repayment in full in cash of all Obligations then owing and related senior obligations, (y) the acceleration of any Indebtedness incurred pursuant to this Agreement and the other Credit Documents or of Indebtedness under any Permitted Senior Subordinated Notes Document or any Permitted Senior Unsecured Notes Document and (z) the occurrence of any event with respect to the Borrower described in Section 8.05) and (iv) the terms and conditions of, and documentation governing, such Indebtedness is otherwise reasonably satisfactory to the Agents.

“Additional Refinanced Indebtedness” shall have the meaning provided in Section 4.01(l).

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“Adjusted Consolidated EBITDA” shall mean, for any period, Consolidated Net Income for such period adjusted by (A) adding thereto (in each case (other than for purposes of clauses (v) and (vi) below), to the extent deducted in determining Consolidated Net Income for such period), without duplication, the sum of the amounts for such period of (i) provisions for taxes based on income, (ii) Consolidated Interest Expense, (iii) amortization and depreciation expense (including any amortization or write-off related to the write-up of any assets as a result of purchase accounting and the write-off of deferred financing costs), (iv) losses on sales of assets (excluding sales in the ordinary course of business) and other extraordinary losses, (v) non-core income relating to Non-Core Assets, to the extent not included in any determination of Consolidated Net Income for such period, (vi) dividends paid by CoBank to the Borrower on common stock of CoBank held by the Borrower, to the extent not included in any determination of Consolidated Net Income, (vii) the non-cash portion of any retirement or pension plan expense incurred by the Borrower or any of its Subsidiaries, (viii) all one-time costs and expenses paid during such period in respect of the Transaction, (ix) one-time costs and expenses actually paid during such period in respect of the Borrower’s proposed “IDS” transaction, so long as the aggregate amount of costs and expenses added back pursuant to this clause (ix) does not exceed $6.0 million and (x) any other non-cash charges (including non-cash costs arising from implementation of SFAS 106 and SFAS 109) accrued by the Borrower and its Subsidiaries during such period (except to the extent any such charge will require a cash payment in a future period) and (B) subtracting therefrom (to the extent included in arriving at Consolidated Net Income for such period), without duplication, the sum of the amounts for such period of (i) gains on sales of assets (excluding sales in the ordinary course of business) and other extraordinary gains and (ii) all non-cash gains and non-cash income, all as determined for the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP.  Notwithstanding the foregoing, for purposes of determining the Leverage Ratio, Adjusted Consolidated EBITDA shall be determined on a Pro Forma Basis. For the avoidance of doubt, it is understood and agreed that, to the extent any net income (or loss) of any Subsidiary is excluded from the calculation of Consolidated Net Income in accordance with the definition thereof contained herein, any add-backs to, or deductions from, Consolidated Net Income in determining Adjusted Consolidated EBITDA as provided above shall be calculated in a fashion consistent with the limitations and/or exclusions provided in the definition of Consolidated Net Income contained herein.

“Adjusted Total Available Revolving Commitment” shall mean, at any time, the Total Revolving Commitment at such time less the aggregate Available Revolving Commitments of all Defaulting Lenders at such time.

“Administrative Agent” shall have the meaning provided in the first paragraph of this Agreement and shall include any successor to the Administrative Agent appointed pursuant to Section 10.10.

“Affected Loans” shall have the meaning provided in Section 3.02(B).

“Affiliate” shall mean, with respect to any Person, any other Person directly or indirectly controlling (including but not limited to all directors and officers of such Person), controlled by, or under direct or indirect common control with such Person.  A Person shall be deemed to control another Person if such Person possesses, directly or indirectly, the power (i) to vote 10% or more of the securities having ordinary voting power for the election of directors (or

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equivalent governing body) of such Person or (ii) to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise.

“Agents” shall have the meaning provided in the first paragraph of this Agreement.

“Agreement” shall mean this Credit Agreement, as modified, amended, restated and/or supplemented.

“Anticipated Reinvestment Amount” shall mean, with respect to any Reinvestment Election, the amount specified in the Reinvestment Notice delivered by the Borrower in connection therewith as the amount of the Net Cash Proceeds from the related Asset Sale that the Borrower intends to use to finance one or more Permitted Acquisitions within 270 days.

“Applicable Base Rate Margin” shall mean (i) in the case of B Term Loans, 1.00%, (ii) in the case of RF Loans, 1.00% and (iii) in the case of Swingline Loans, 1.00%.

“Applicable Eurodollar Margin” shall mean (i) in the case of B Term Loans, 2.00%, and (ii) in the case of RF Loans, 2.00%.

“Asset Sale” shall mean and include (x) the sale, transfer or other disposition by the Borrower or any Subsidiary to any Person (other than the Borrower or any Wholly-Owned Domestic Subsidiary of the Borrower) of any asset of the Borrower or such Subsidiary (other than sales, transfers or other dispositions in the ordinary course of business of inventory and/or obsolete or excess equipment) and/or (y) the receipt by the Borrower or any Subsidiary of any insurance, condemnation or similar proceeds in connection with a casualty or taking of any of its assets in excess of the costs incurred by the Borrower and its Subsidiaries in respect of such event and of repairing or replacing the assets so damaged, destroyed or taken but in all cases only to the extent that the aggregate Net Cash Proceeds of all such sales, transfers, dispositions and receipts in any fiscal year of the Borrower are in excess of $2,000,000; provided that so long as no Default or Event of Default exists at the time of a proposed Excluded Asset Sale, such Excluded Asset Sale shall not constitute an “Asset Sale”.

“Assignment Agreement” shall mean the Assignment Agreement in the form of Exhibit I (appropriately completed).

“Authorized Officer” shall mean, with respect to (i) delivering Notices of Borrowing, Notices of Conversion/Continuation, Letter of Credit Requests and similar notices, any officer or officers of the Borrower that has or have been authorized by the board of directors of the Borrower to deliver such notices pursuant to this Agreement and that has or have appropriate signature cards on file with the Administrative Agent; (ii) delivering financial information and officer’s certificates pursuant to this Agreement, the chief executive officer, the president, any vice president, the chief financial officer, any treasurer or any controller of the Borrower; and (iii) any other matter in connection with this Agreement or any other Credit Document, any officer (or a person or persons so designated by any two officers) of the Borrower.

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“Available Basket Amount” shall mean, on any date of determination, an amount equal to the sum of (i) $50,000,000 minus (ii) the aggregate amount of Investments made (including for such purpose the fair market value of any assets contributed (at the time contributed) to any Restricted Investment Entity or Unrestricted Subsidiary (as determined in good faith by senior management of the Borrower), net of Indebtedness outstanding at the time of determination assigned to, and assumed by, the respective Restricted Investment Entity or Unrestricted Subsidiary in connection therewith) pursuant to Section 7.06(1) after the Effective Date (determined without giving effect to any write-downs or write-offs thereof) minus (iii) the aggregate amount of then outstanding Indebtedness or other obligations (whether absolute, accrued, contingent or otherwise and whether or not due) of any Restricted Investment Entity or Unrestricted Subsidiary for which the Borrower or any of its Subsidiaries (other than the respective Restricted Investment Entity or Unrestricted Subsidiary) is liable, minus (iv) all payments made by the Borrower or any of its Subsidiaries (other than the respective Restricted Investment Entity or Unrestricted Subsidiary) in respect of Indebtedness or other obligations of the respective Restricted Investment Entity or Unrestricted Subsidiary (including, without limitation, payments in respect of obligations described in preceding clause (iii)) after the Effective Date, plus (v) the aggregate amount of all cash returns received by the Borrower or any Qualified Subsidiary from the respective Restricted Investment Entity or Unrestricted Subsidiary in respect of Investments previously made pursuant to Section 7.06(l) (which cash return may be made by way of repayment of principal in the case of loans and cash equity returns (whether as a distribution, dividend or redemption) in the case of equity investments) and all non-cash returns in the form of an asset distribution from the respective Restricted Investment Entity or Unrestricted Subsidiary of any asset previously contributed pursuant to Section 7.06(l) (taking the fair market value of such distributed asset (as determined in good faith by senior management of the Borrower)), in any such case as such aggregate amount has been then last certified by an Authorized Officer by delivery of an officers’ certificate to the Administrative Agent, provided that the aggregate amount of increases to the “Available Basket Amount” resulting from the application of this clause (v) shall not exceed the value of the returned investments (in the case of a non-cash return on investment, taking the fair market value of the distributed asset (as determined in good faith by senior management of the Borrower)) and, in no event, shall the amount of the increases made to “Available Basket Amount” in respect of any Investment exceed the amount of the respective Investment previously made pursuant to Section 7.06(l) (in the case of a non-cash Investment, taking the fair market value of the Investment at the time of the initial investment (as determined in good faith by senior management of the Borrower)).

“Available Basket Sub-Limit” shall mean, on any date of determination, an amount equal to the sum of (i) $35,000,000 minus (ii) the aggregate amount of Investments made (including for such purpose the fair market value of any asset contributed (at the time contributed) to any Unrestricted Subsidiary (as determined in good faith by senior management of the Borrower), net of Indebtedness outstanding at the time of determination assigned to, and assumed by, the respective Unrestricted Subsidiary in connection therewith) in Unrestricted Subsidiaries pursuant to Section 7.06(l) after the Effective Date (determined without giving effect to any write-downs or write-offs thereof), minus (iii) the aggregate amount of all then outstanding Indebtedness or other obligations (whether absolute, accrued, contingent or otherwise and whether or not due) of any Unrestricted Subsidiary for which the Borrower or any of its Subsidiaries is liable, minus (iv) all payments made by the Borrower or any of its

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Subsidiaries in respect of Indebtedness or other obligations of the respective Unrestricted Subsidiary (including, without limitation, payments in respect of obligations described in preceding clause (iii)) after the Effective Date, plus (v) the aggregate amount of all cash returns received by the Borrower or any Qualified Subsidiary from the respective Unrestricted Subsidiary in respect of Investments previously made pursuant to Section 7.06(l) (which cash return may be made by way of repayment of principal in the case of loans and cash equity returns (whether as a distribution, dividend or redemption) in the case of equity investments) and all returns in the form of an asset distribution from the respective Unrestricted Subsidiary of any asset previously contributed pursuant to Section 7.06(l) (taking the fair market value of such distributed asset (as determined in good faith by senior management of the Borrower), in any such case as such aggregate amount has been then last certified by an Authorized Officer by delivery of an officers’ certificate to the Administrative Agent, provided that the aggregate amount of increases to the “Available Basket Sub-Limit” resulting from the application of this clause (v) shall not exceed the value of the returned investments (in the case of a non-cash return on investment, taking the fair market value of the distributed asset (as determined in good faith by senior management of the Borrower)) and, in no event, shall the amount of the increases made to “Available Basket Sub-Limit” in respect of any Investment in an Unrestricted Subsidiary exceed the amount of the respective Investment previously made in such Unrestricted Subsidiary pursuant to Section 7.06(l) (in the case of a non-cash Investment, taking the fair market value of the Investment at the time of the initial investment (as determined in good faith by senior management of the Borrower)); provided further that the Available Basket Sub-Limit shall not exceed at any time the Available Basket Amount as then in effect.

“Available Cash” shall mean, for any Reference Period, for the Borrower and its Subsidiaries determined on a consolidated basis for such Reference Period, an amount of cash equal to the sum (which may be negative) of (without duplication) (I) Adjusted Consolidated EBITDA for such Reference Period minus (II) the sum of (i) Consolidated Interest Expense during such Reference Period, to the extent included in determining such Adjusted Consolidated EBITDA, (ii) all scheduled, mandatory and voluntary principal repayments in respect of Indebtedness of the Borrower and its Subsidiaries made during such Reference Period (other than (x) repayments made during such Reference Period with the proceeds of Indebtedness, equity issuances, asset sales or insurance recovery events, (y) repayments of RF Loans or Swingline Loans during such Reference Period, except to the extent resulting in a corresponding reduction of the Total Revolving Commitment in an amount equal to such repayment) and (z) prepayments of B Term Loans during such Reference Period pursuant to Section 3.02(A)(e)), (iii) Consolidated Capital Expenditures made in cash during such Reference Period (other than Consolidated Capital Expenditures financed with the proceeds of Indebtedness (other than RF Loans or Swingline Loans), equity issuances, assets sales and insurance recovery events), (iv) Consolidated Tax Payments paid in cash during such Reference Period, (v) cash consideration paid during such Reference Period for acquisitions of equity interests and/or assets comprising a business or product line (whether pursuant to a Permitted Acquisition or otherwise), except to the extent financed with the proceeds of Indebtedness or issuances of equity, (vi) Investments (other than Excluded Investments) made during such Reference Period, (vii) the cash cost of any extraordinary losses and of any losses on sales of assets (other than in the ordinary course of business) during such Reference Period, in any such case to the extent included in determining Adjusted Consolidated EBITDA for such Reference Period and (viii) cash payments made during such Reference Period on account of non-cash losses or non-cash charges accrued or

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expensed during or prior to such Reference Period, plus (III) the sum of (i) the cash amount of any extraordinary gains, and the cash amount realized on gains on asset sales other than in the ordinary course of business, during such Reference Period, in any such case to the extent deducted in determining Adjusted Consolidated EBITDA for such Reference Period, and (ii) cash received during such Reference Period on account of non-cash gains or non-cash income excluded from Adjusted Consolidated EBITDA during or prior to such Reference Period.

“Available Revolving Commitment” of any RF Lender at any time shall mean its Percentage of the Total Available Revolving Commitment at such time.

“B Term Loan” shall mean, collectively, each Initial B Term Loan (including, after any DDTL Conversion, each Delayed-Draw Term Loan converted into an Initial B Term Loan pursuant to such DDTL Conversion as contemplated by Section 1.06(b)) and each Incremental B Term Loan.

“B Term Note” shall have the meaning provided in Section 1.05(a).

“Bankruptcy Code” shall have the meaning provided in Section 8.05.

“BAS” shall mean Banc of America Securities LLC in its individual capacity and any successor thereto by merger, consolidation or otherwise.

“Base Rate” at any time shall mean the higher of (i) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate and (ii) the Prime Lending Rate.

“Base Rate Loan” shall mean each Loan bearing interest at the rates provided in Section 1.08(a).

“Blocked Revolving Commitment” shall mean, at any time, $7.0 million (i.e., the amount representing the remainder of (x) the aggregate amount of cash required to finance the Existing 2008 Senior Subordinated Notes Redemption less the aggregate amount of cash deposited in the Segregated Account on the Initial Borrowing Date for purposes of financing the Existing 2008 Senior Subordinated Notes Redemption); provided that the Blocked Revolving Commitment shall be reduced to zero on the date of (and concurrently with) the consummation of the Existing 2008 Senior Subordinated Notes Redemption.

“Borrower” shall have the meaning provided in the first paragraph of this Agreement.

“Borrower Common Stock” shall have the meaning provided in Section 5.20.

“Borrowing” shall mean the incurrence of (i) Swingline Loans by the Borrower from the Swingline Lender on a given date or (ii) Base Rate Loans or Eurodollar Loans pursuant to a single Facility by the Borrower from the Lenders having Commitments (and/or outstanding Loans) with respect to such Facility on a pro rata basis on a given date (or resulting from conversions on a given date), having in the case of Eurodollar Loans the same Interest Period; provided that (x) Base Rate Loans incurred pursuant to Section 1.10(b) shall be considered part of any related Borrowing of Eurodollar Loans, (y) any Delayed-Draw Term Loans converted into Initial

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B Term Loans pursuant to a DDTL Conversion shall be considered part of the related Borrowing of the then outstanding Initial B Term Loans to which such newly-deemed Initial B Term Loans are added as contemplated by Section 1.06(b) and (z) any Incremental B Term Loans incurred pursuant to Section 1.01(f) shall be considered part of the related Borrowing of the then outstanding Initial B Term Loans to which such Incremental B Term Loans are added pursuant to Section 1.14; it being understood and agreed, however, that for purposes of Section 1.08, (i) the incurrence of Incremental B Term Loans on a given Incremental B Term Loan Borrowing Date shall be deemed to be a “Borrowing” of such Loans and (ii) the incurrence of Delayed-Draw Term Loans on a given date shall be deemed to be a “Borrowing” of such Loans.

“Business” shall have the meaning provided in Section 7.01.

“Business Day” shall mean (i) for all purposes other than as covered by clause (ii) below, any day excluding Saturday, Sunday and any day which shall be in the City of New York a legal holiday or a day on which banking institutions are authorized by law or other governmental actions to close and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks in Dollar deposits in the interbank Eurodollar market.

“Calculation Period” shall mean, with respect to any Permitted Acquisition, any Significant Asset Sale or any other event expressly required to be calculated on a Pro Forma Basis pursuant to the terms of this Agreement, the Test Period most recently ended prior to the date of such Permitted Acquisition, Significant Asset Sale or other event.

“Capital Lease” as applied to any Person shall mean any lease of any property (whether real, personal or mixed) by that Person as lessee which, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person.

“Capitalized Lease Obligations” shall mean all obligations under Capital Leases of the Borrower or any of its Subsidiaries in each case taken at the amount thereof accounted for as liabilities in accordance with GAAP.

“Carrier Services” shall mean the resale of long distance services.

“Carrier Services Company” shall mean any Subsidiary of the Borrower that is an operating company engaged in the Carrier Services business.

“Cash Equivalents” shall mean (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition; (b) Dollar denominated certificates of deposit, time deposits, bankers acceptances, eurodollar time deposits or overnight bank deposits having maturities of six months or less from the date of acquisition issued by any Lender or by any commercial bank organized under the laws of the United States of America or any state thereof having combined capital and surplus of not less than $350,000,000; (c) commercial paper of an issuer rated at least A-2 by Standard & Poor’s Ratings Services, a division of McGraw-Hill, Inc. (“S&P”) or P-2 by Moody’s Investors Service, Inc. (“Moody’s”), or carrying an equivalent rating by a nationally

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recognized rating agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally, and maturing within 270 days from the date of acquisition; (d) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 30 days with respect to securities issued or fully guaranteed or insured by the United States government; (e) securities (including tax-exempt debt obligations) with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A2 by Moody’s (or publicly traded or open-ended bond funds that invest exclusively in such securities); (f) securities with maturities of six months or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition; (g) Dollar denominated debt obligations of corporations maturing within 12 months from the date of the acquisition rated at least A by S&P or A2 by Moody’s; (h) shares of bond funds rated at least A by S&P or A2 by Moody’s having weighted average maturities of 12 months or less; and (i) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (h) of this definition.

“Cash Proceeds” shall mean, with respect to any Asset Sale, the aggregate cash payments (including any cash received by way of deferred payment pursuant to a note receivable issued in connection with such Asset Sale, other than the portion of such deferred payment constituting interest, but only as and when so received) received by the Borrower and/or any Subsidiary from such Asset Sale.

“CERCLA” shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. § 9601 et seq.

“Change of Control” shall mean at any time and for any reason (a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the “beneficial owner” (as defined in Sections 13(d) and 14(d) of the Exchange Act) on a fully diluted basis of more than 25% of the total voting interest in the capital stock of the Borrower or (ii) during any period of two consecutive years individuals who at the beginning of such period constituted the Board of Directors of the Borrower (together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of the Borrower was approved by a vote of a majority of the directors of the Borrower then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Borrower then in office or (b) a “change of control” or similar event shall occur as provided in the Existing 2008 Subordinated Notes Indenture, the Existing 2010 Subordinated Notes Indenture, the Existing 2010 Senior Notes Indenture and, on and after the execution, delivery and/or incurrence thereof, any Permitted Senior Subordinated Notes Document, any Permitted Senior Unsecured Notes Document, any agreements or instruments relating to any other Permitted Junior Capital or any Permitted Refinancing Indebtedness in respect of the foregoing or any other agreement governing or evidencing any other material Indebtedness of the Borrower.

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“CoBank” shall mean CoBank, ACB and any successor thereto by merger, consolidation or otherwise.

“Co-Documentation Agent” shall have the meaning provided in the first paragraph of this Agreement.

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder.  Section references to the Code are to the Code, as in effect at the date of this Agreement and any subsequent provisions of the Code, amendatory thereof, supplemental thereto or substituted therefor.

“Collateral” shall mean all of the “Collateral” as defined in the Pledge Agreement.

“Collateral Agent” shall mean the Administrative Agent acting as collateral agent for the Lenders.

“Commitment” shall mean, with respect to each Lender, such Lender’s Initial B Term Commitment, Delayed-Draw B Term Commitment, Incremental B Term Commitment and/or Revolving Commitment.

“Commitment Commission” shall have the meaning provided in Section 2.01(b).

“Company” shall mean any corporation, limited liability company, partnership or other business entity (or the adjectival form thereof, where appropriate).

“Consolidated Capital Expenditures” shall mean, for any period, the aggregate of all cash expenditures (including in all events all amounts expended under Capital Leases (other than Capital Leases evidencing Permitted MJD Capital Debt) but excluding any amount representing capitalized interest) by the Borrower and its Subsidiaries during that period that, in conformity with GAAP, are or are required to be included in the property, plant or equipment reflected in the consolidated balance sheet of the Borrower and its Subsidiaries, provided that Consolidated Capital Expenditures shall in any event (x) exclude the purchase price paid in cash in connection with the acquisition of any Person (including through the purchase of all of the capital stock or other ownership interests of such Person or through merger or consolidation) pursuant to a Permitted Acquisition, whether or not allocable to property, plant and equipment and (y) exclude amounts expended with insurance proceeds.

“Consolidated Debt” shall mean, as of any date of determination, without duplication, the sum of (i) the aggregate stated balance sheet amount of all Indebtedness of the Borrower and its Subsidiaries on a consolidated basis as determined in accordance with GAAP plus (ii) any Indebtedness for borrowed money of any other Person as to which the Borrower and/or any of its Subsidiaries has created a guarantee or other Contingent Obligation (but only to the extent of such guarantee or other Contingent Obligation) less (iii) the remainder (if positive) of (A) the aggregate amount of Unrestricted cash and Cash Equivalents held by the Borrower and its Subsidiaries on such date minus (B) all overdue accounts payable of the Borrower and its Subsidiaries on such date not paid in accordance with past practices as in effect on the Effective Date; provided that, for purposes of this definition (and notwithstanding any contrary treatment

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by GAAP), any Disqualified Preferred Stock that is issued and outstanding shall be treated as “Indebtedness”, with an amount equal to the greater of the liquidation preference or the maximum mandatory fixed repurchase price of any such Disqualified Preferred Stock deemed to be a component of “Consolidated Debt”.

“Consolidated Interest Expense” shall mean, for any period, the sum of (i) total interest expense (including the portion that is attributable to Capital Leases in accordance with GAAP) of the Borrower and its Subsidiaries on a consolidated basis with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries (including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing and without duplication net costs and/or net benefits under Interest Rate Agreements, but excluding, however, all non-cash interest expense to the extent included in total interest expense and the amortization of deferred financing costs) plus (ii) the product of (x) the amount of all cash Dividend requirements (whether or not declared or paid) on Disqualified Preferred Stock paid, accrued or scheduled to be paid or accrued during such period multiplied by (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated Federal, state, local and foreign tax rate of the Borrower as reflected in the audited consolidated financial statements of the Borrower for its most recently completed fiscal year, which amounts described in this clause (ii) shall be treated as interest expense of the Borrower and its Subsidiaries for purposes of this definition regardless of the treatment of such amounts under GAAP; provided that, for purposes of any determination of Consolidated Interest Expense for any Test Period ending on or prior to December 31, 2005 (other than for purposes of the definition of “Available Cash”), Consolidated Interest Expense for such Test Period shall be Consolidated Interest Expense for that portion of such Test Period occurring on and after the Initial Borrowing Date multiplied by a fraction the numerator of which is 365 and the denominator of which is the number of days elapsed from the Initial Borrowing Date to the last day of such Test Period (in each case taken as one accounting period).

“Consolidated Net Income” shall mean, for any period, the net income (or loss) of the Borrower and its Subsidiaries on a consolidated basis for such period (taken as a single accounting period) determined in conformity with GAAP (after any deduction for minority interests), provided that there shall be excluded from the calculation thereof (without duplication) (i) the income (or loss) of any Person (other than Subsidiaries of the Borrower) in which any other Person (other than the Borrower or any of its Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to the Borrower or any of its Subsidiaries by such Person during such period, (ii) except for determinations expressly required to be made on a Pro Forma Basis, the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of the Borrower or is merged into or consolidated with the Borrower or any of its Subsidiaries or that Person’s assets are acquired by the Borrower or any of its Subsidiaries and (iii) the income of any Subsidiary of the Borrower to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary.

“Consolidated Tangible Assets” shall mean, at any time, the total consolidated assets of the Borrower and its Subsidiaries as same would be shown on a consolidated balance

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sheet of the Borrower prepared in accordance with GAAP, provided that all intangible assets (including goodwill) shall be excluded in making such determination.

“Consolidated Tax Payments” shall mean, for any period, the sum of (a) the provision for taxes based on income or profits which was deducted from gross income in the computation of “Consolidated Net Income”, plus (b) without duplication, the cash amount of any taxes actually paid in excess of the corresponding provisions, minus (c) cash tax refunds actually received by the Borrower and its Subsidiaries during such period.

“Contingent Obligations” shall mean as to any Person any obligation of such Person guaranteeing or intending to guarantee any Indebtedness, leases, dividends or other obligations (“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (d) otherwise to assure or hold harmless the owner of such primary obligation against loss in respect thereof, provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business.  The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated maximum of the Contingent Obligation or, if none, the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if there is no stated or determinable amount of the primary obligation, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith.

“Credit Documents” shall mean this Agreement, the Notes, the Intercompany Subordination Agreement, the Pledge Agreement, the Subsidiary Guaranty and each Incremental B Term Commitment Agreement.

“Credit Event” shall mean the making of a Loan or the issuance of a Letter of Credit.

“Credit Party” shall mean the Borrower and each Subsidiary of the Borrower party to a Credit Document.

“Cumulative Distributable Cash” shall mean, as at any date of determination, an amount equal to the remainder of (i) Available Cash for the Reference Period most recently ended prior to such date less (ii) the aggregate amount of Dividends paid by the Borrower on the Borrower Common Stock during such Reference Period (other than Dividends paid pursuant to Section 7.09(a)(xvi)) less (iii) the aggregate amount of Investments made by the Borrower and its Subsidiaries during such Reference Period in reliance on Section 7.06(m) (determined at the time of the making of the Investment and without regard to any write-downs or write-offs thereof and, in the case of any Investment in the form of a contribution of a non-cash asset, taking the

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fair market value of the asset so contributed (as determined in good faith by the Board of Directors of the Borrower) plus (iv) the aggregate amount of all cash returns on Investments previously made pursuant to Section 7.06(m) (which cash return may be made by way of repayment of principal in the case of loans and cash equity returns (whether as a distribution, dividend or redemption) in the case of equity investments) and all non-cash returns in the form of an asset distribution on Investments previously made pursuant to Section 7.06(m) (taking the fair market value of such distributed asset (as determined in good faith by the Board of Directors of the Borrower)), in any such case as such aggregate amount has been then last certified by an Authorized Officer by delivery of an officers’ certificate to the Administrative Agent, provided that the aggregate amount of increases to “Cumulative Distributable Cash” resulting from the application of this clause (iv) shall not exceed the value of the returned investments (in the case of a non-cash return on investment, taking the fair market value of the distributed asset (as determined in good faith by the Board of Directors of the Borrower)) and, in no event, shall the amount of the increases made to “Cumulative Distributable Cash” in respect of any Investment exceed the amount of the respective Investment previously made pursuant to Section 7.06(m) at the time of the making thereof (in the case of a non-cash Investment, taking the fair market value of the Investment (as determined in good faith by the Board of Directors of the Borrower)).

“DBSI” shall mean Deutsche Bank Securities, Inc. in its individual capacity and any successor thereto by merger, consolidation or otherwise.

“DBTCA” shall mean Deutsche Bank Trust Company Americas in its individual capacity, and any successor thereto by merger, consolidation or otherwise.

“DDTF Commitment Commission” shall have the meaning provided in Section 2.01(b).

“DDTL Conversion” shall have the meaning provided in Section 1.06(b).

“DDTL Conversion Date” shall have the meaning provided in Section 1.06(b).

“Default” shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default.

“Defaulting Lender” shall mean any Lender with respect to which a Lender Default is in effect.

“Delayed-Draw B Term Commitment” shall mean, with respect to each Delayed-Draw B Term Lender, the amount set forth opposite such Lender’s name on Annex I hereto directly below the column entitled “Delayed-Draw B Term Commitment”, as the same may be (x) reduced or terminated pursuant to Sections 2.02, 2.03 and/or 8 or (y) adjusted from time to time as a result of assignments to or from such Lender pursuant to Sections 1.13 and/or 11.04(b).

“Delayed-Draw B Term Commitment Termination Date” shall mean the earlier to occur of (x) the date occurring one year after the Initial Borrowing Date and (y) the date on which a Change of Control occurs.

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“Delayed-Draw B Term Facility” shall mean the Facility evidenced by the Total Delayed-Draw B Term Commitment and/or Delayed-Draw B Term Loans.

“Delayed-Draw B Term Lender” shall mean at any time each Lender with a Delayed-Draw B Term Commitment and/or with outstanding Delayed-Draw B Term Loans.

“Delayed-Draw B Term Loan” shall have the meaning provided in Section 1.01(b).

“Disqualified Preferred Stock” shall mean any Preferred Stock of the Borrower (other than Qualified Preferred Stock), all terms and conditions of which (including covenants, defaults, remedies, redemption provisions, maturity, voting provisions, dividend rate and cash-pay limitations), and the documentation therefor, are on market terms for a placement of preferred equity securities and are otherwise reasonably satisfactory to the Agents; provided, that in any event, unless the Required Lenders otherwise expressly consent in writing prior to the issuance thereof, the terms of any such Preferred Stock shall not contain any mandatory redemption, repayment, sinking fund or similar provision prior to the date occurring one year following the Term Loan Maturity Date (except upon the occurrence of a “change of control” or similar event (including Asset Sales), in each case so long as the provisions relating to a “change of control” or similar event included in the documentation and agreements governing the Disqualified Preferred Stock provide that either (I) the consent of the Required Lenders shall have been obtained or (II) the Obligations shall have been paid in full in cash, in either case prior to the satisfaction of such provisions).

“Dividend” shall mean, as to any Person, the declaration or payment of any dividends (other than dividends payable solely in capital stock or other equity interests of such Person) or return of any capital to, its stockholders, members and/or other owners or the authorization or the making of any other distribution, payment or delivery of property or cash to its stockholders, members and/or other owners as such, or the redemption, retirement, purchase or other acquisition, directly or indirectly, for a consideration, of any shares of any class of its capital stock or other ownership interests now or hereafter outstanding (or any warrants for or options or stock appreciation rights in respect of any of such shares), or the setting aside of any funds for any of the foregoing purposes, or the purchase or other acquisition by any Subsidiary of such Person for consideration of any shares of any class of the capital stock or other ownership interests of the Borrower or any other Subsidiary, as the case may be, now or hereafter outstanding (or any options or warrants or stock appreciation rights issued by such Person with respect to its capital stock or other ownership interests).

“Dividend Suspension Period” means any period (i) commencing on the date of delivery of a Quarterly Compliance Certificate showing that the Leverage Ratio determined as of the last day of the then most recently ended Test Period is greater than 5.00 to 1.00 (or, on the date upon which the Borrower shall have failed to deliver a Quarterly Compliance Certificate within the time period required by Section 6.01(e)) and (ii) ending on the date of delivery of a Quarterly Compliance Certificate showing that the Leverage Ratio determined as of the last day of the then most recently Test Period is equal to or less than 5.00 to 1.00.

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“Documents” shall mean and include (i) the Credit Documents, (ii) the IPO Documents, (iii) the Refinancing Documents, (iv) on and after the execution and delivery thereof, the Permitted Senior Unsecured Notes Documents, (v) on and after the execution and delivery thereof, the Permitted Senior Subordinated Notes Documents and (vi) on and after the execution and delivery thereof, all documentation, agreements and instruments governing or relating to any other Permitted Junior Capital; provided that the term “Documents” shall not include the IPO Documents for purposes of Sections 5.02 and 5.03.

“Dollars” and the sign “$” shall each mean freely transferable lawful money of the United States.

“Domestic Subsidiary” of any Person shall mean any Subsidiary of such Person incorporated or organized in the U.S.

“Effective Date” shall have the meaning provided in Section 11.10.

“Eligible Transferee” shall mean and include a commercial bank, a financial institution, a fund that regularly invests in bank loans or any other institutional “accredited investor” as defined in SEC Regulation D.

“Environmental Claims” means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations (other than internal reports prepared by the Borrower or any of its Subsidiaries solely in the ordinary course of such Person’s business and not in response to any third party action or request of any kind) or proceedings relating to any Environmental Law or any permit issued, or any approval given, under any such Environmental Law (hereafter, “Claims”), including, without limitation, (a) any and all Claims by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and (b) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials arising from alleged injury or threat of injury to health, safety or the environment.

“Environmental Law” means any applicable federal, state, foreign or local statute, law, rule, regulation, ordinance, code and rule of common law now or hereafter in effect and in each case as amended, and any binding judicial or administrative interpretation thereof, including any binding judicial or administrative order, consent decree or judgment, relating to the environment or Hazardous Materials, including, without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, as amended, 33 U.S.C. § 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. § 7401 et seq.; the Clean Air Act, 42 U.S.C. § 2601 et seq.; the Safe Drinking Water Act, 42 U.S.C. § 300F et seq.; the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq.; and any applicable state and local or foreign counterparts or equivalents.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.  Section references to ERISA are to ERISA, as in effect at the date of this Agreement

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and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.

“ERISA Affiliate” shall mean each person (as defined in Section 3(9) of ERISA) which together with the Borrower or a Subsidiary would be deemed to be a “single employer” within the meaning of Section 414(b) or (c) of the Code and with respect to Sections 412 and 4971 of the Code and Section 302 of ERISA, Section 414(b), (c), (m) or (o) of the Code.

“Eurodollar Loans” shall mean each Loan bearing interest at the rates provided in Section 1.08(b).

“Eurodollar Rate” shall mean with respect to each Interest Period for a Eurodollar Loan, (i) the offered quotation to first-class banks in the interbank Eurodollar market by the Administrative Agent for dollar deposits of amounts in same day funds comparable to the outstanding principal amount of the Eurodollar Loans for which an interest rate is then being determined with maturities comparable to the Interest Period to be applicable to such Eurodollar Loans, determined as of 10:00 A.M. (New York time) on the date which is two Business Days prior to the commencement of such Interest Period divided (and rounded upward to the next whole multiple of 1/16 of 1%) by (ii) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D).

“Event of Default” shall have the meaning provided in Section 8.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

“Excluded Asset Sale” shall mean any sale or other disposition of Non-Core Assets made after the Initial Borrowing Date and identified as an “Excluded Asset Sale” by written notice to the Administrative Agent, so long as the Net Cash Proceeds of such sale or disposition, when combined with the aggregate Net Cash Proceeds of all other sales and dispositions identified as “Excluded Asset Sales” after the Initial Borrowing Date, does not exceed $40,000,000.

“Excluded Intercompany Payables” shall mean (i) any intercompany payable incurred in the ordinary course of business by the Borrower or any of its Wholly-Owned Subsidiaries and owing to the Borrower or a Wholly-Owned Subsidiary of the Borrower, as applicable, so long as such payable has not remained outstanding for more than 90 days and (ii) any payable owing by a Subsidiary of the Borrower to its parent company (if the Borrower or another Subsidiary of the Borrower) arising in connection with the tax sharing arrangements entered into among the Borrower and its Subsidiaries, so long as the amount of such payable relates to the taxes attributable to the operations of such Subsidiary.

“Excluded Investments” shall mean any Investment made pursuant to clause (a), (b), (c), (e), (f), (g), (h), (i)(x), (j), (k) or (m) of Section 7.06.

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“Existing Credit Agreement” shall mean the Credit Agreement, dated as of March 30, 1998, and amended and restated as of March 6, 2003, among the Borrower, the lenders from time to time party thereto, Bank of America, N.A., as syndication agent, Wachovia Bank, N.A., as documentation agent, and Deutsche Bank Trust Company Americas, as administrative agent, as in effect on the Initial Borrowing Date (immediately prior to giving effect thereto).

“Existing Letter of Credit” shall have the meaning provided in Section 1A.01(d).

“Existing Seller/Opco Notes” shall mean notes payable by Taconic Telephone Corp., Comerco, Inc., Maine Telephone Company and the Borrower previously identified to the Administrative Agent in an aggregate principal amount equal to approximately $21.0 million.

“Existing Tender Offer Notes” shall mean and include the Existing 2008 Senior Subordinated Notes, the Existing 2010 Senior Notes and the Existing 2010 Senior Subordinated Notes.

“Existing Tender Offer Notes Indenture Amendments” shall have the meaning provided in Section 4.01(l).

“Existing Tender Offer Notes Indenture Supplements” shall mean the Supplemental Indentures to the Existing Tender Offer Notes Indentures in form and substance satisfactory to the Agents and entered into by the Borrower and the respective trustees under the Existing Tender Offer Notes Indentures in connection with the Tender Offers and Consent Solicitations to effect the Existing Tender Offer Notes Indenture Amendments.

“Existing Tender Offer Notes Indentures” shall mean and include the Existing 2008 Senior Subordinated Notes Indenture, the Existing 2010 Senior Notes Indenture and the Existing 2010 Senior Subordinated Notes Indenture.

“Existing 2008 Senior Subordinated Notes” shall mean, collectively, the Borrower’s 9-½% Senior Subordinated Notes due 2008 and the Borrower’s Senior Subordinated Floating Rate Notes due 2008, in each case issued pursuant to the Existing 2008 Senior Subordinated Notes Indenture, as in effect on the Effective Date and as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.

“Existing 2008 Senior Subordinated Notes Documents” shall mean the Existing 2008 Senior Subordinated Notes, the Existing 2008 Senior Subordinated Notes Indenture and all other documents executed and delivered with respect to the Existing 2008 Senior Subordinated Notes or Existing 2008 Senior Subordinated Notes Indenture, as in effect on the Effective Date and as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.

“Existing 2008 Senior Subordinated Notes Indenture” shall mean the Indenture, dated as of May 5, 1998, among the Borrower, as issuer, certain of its Subsidiaries, as guarantors, and the trustee therefor, as in effect on the Effective Date and as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.

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“Existing 2008 Senior Subordinated Notes Redemption” shall have the meaning provided in Section 6.13(b).

“Existing 2010 Senior Notes” shall mean the Borrower’s 11-7/8% Senior Notes due 2010, issued pursuant to the Existing 2010 Senior Notes Indenture, as in effect on the Effective Date and as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.

“Existing 2010 Senior Notes Documents” shall mean the Existing 2010 Senior Notes, the Existing 2010 Senior Notes Indenture and all other documents executed and delivered with respect to the Existing 2010 Senior Notes or Existing 2010 Senior Notes Indenture, as in effect on the Effective Date and as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.

“Existing 2010 Senior Notes Indenture” shall mean the Indenture, dated as of March 6, 2003, among the Borrower, as issuer, certain of its Subsidiaries, as guarantors, and the trustee therefor, as in effect on the Effective Date and as thereafter amended, modified or supplemented from time to time in accordance with the requirements hereof and thereof.

“Existing 2010 Senior Subordinated Notes” shall mean the Borrower’s 12-1/2% Senior Subordinated Notes due 2010, issued pursuant to the Existing 2010 Senior Subordinated Notes Indenture, as in effect on the Effective Date and as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.

“Existing 2010 Senior Subordinated Notes Documents” shall mean the Existing 2010 Senior Subordinated Notes, the Existing 2010 Senior Subordinated Notes Indenture and all other documents executed and delivered with respect to the Existing 2010 Senior Subordinated Notes or Existing 2010 Senior Subordinated Notes Indenture, as in effect on the Effective Date and as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.

“Existing 2010 Senior Subordinated Notes Indenture” shall mean the Indenture, dated as of May 24, 2000, among the Borrower, as issuer, certain of its Subsidiaries, as guarantors, and the trustee therefor, as in effect on the Effective Date and as thereafter amended, modified or supplemented from time to time in accordance with the requirements hereof and thereof.

“Expiration Date” shall mean April 8, 2005.

“Facility” shall mean any of the credit facilities established under this Agreement, i.e., the Initial B Term Facility, the Delayed-Draw B Term Facility, the Incremental B Term Facility or the Revolving Facility; provided that (x) for purposes of Sections 1.06(a), 1.09 (other than for purposes of the initial Interest Period for Incremental B Term Loans), 1.13, 3.01, 3.02(B), 11.04(b) and 11.12(a) and (b) and the definitions of “Borrowing” and “Majority Lenders”, the Initial B Term Facility and the Incremental B Term Facility shall be deemed to be a single “Facility” and (ii) after the conversion of Delayed-Draw B Term Loans into Initial B Term Loans pursuant to a DDTL Conversion, such newly converted Loans shall be deemed to be a part of the Initial B Term Facility.

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“Facing Fee” shall have the meaning provided in Section 2.01(d).

“FairPoint Carrier Services” shall mean FairPoint Carrier Services, Inc. (formerly known as FairPoint Communications Solutions, Inc.), a Wholly-Owned Subsidiary of the Borrower.

“FCC” shall mean the Federal Communications Commission and any successor regulatory body.

“Federal Funds Effective Rate” shall mean for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal Funds brokers of recognized standing selected by the Administrative Agent.

“Fees” shall mean all amounts payable pursuant to, or referred to in, Section 2.01.

“1st-Tier Subsidiary” shall mean FairPoint Broadband, Inc., MJD Ventures, Inc., MJD Services Corp., STE, FairPoint Carrier Services and any other Subsidiary first acquired or created after the Initial Borrowing Date that is a direct Subsidiary of the Borrower.

“Form S-1” shall mean the Form S-1 registration statement of the Borrower filed with the SEC on February 3, 2005 (together with the Exhibits thereto), as in effect on the Effective Date.

“GAAP” shall mean generally accepted accounting principles in the United States of America as in effect on the date of this Agreement; it being understood and agreed that determinations in accordance with GAAP for purposes of Section 7, including defined terms as used therein, are subject (to the extent provided therein) to Section 11.07(a).

“GECC” shall mean General Electric Capital Corporation and any successor thereto by merger, consolidation or otherwise.

“Hazardous Materials” shall mean (a) petroleum or petroleum products, radioactive materials, asbestos in any form that is friable, urea formaldehyde foam insulation, and radon gas; (b) any chemicals, materials or substance defined as or included in the definition of “hazardous substances,” “hazardous waste,” “hazardous materials,” “extremely hazardous substances,” restricted hazardous waste,” “toxic substances,” “toxic pollutants,” “contaminants,” or “pollutants,” or words of similar import, under any applicable Environmental Law; and (c) any other chemical, material or substance, the release of which is prohibited, limited or regulated by any governmental authority.

“Incremental B Term Commitment” shall mean, with respect to each Incremental B Term Lender, the commitment of such Lender to make Incremental B Term Loans pursuant to Section 1.01(f) on a given Incremental B Term Loan Borrowing Date, as such commitment is set

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forth in the respective Incremental B Term Commitment Agreement delivered pursuant to Section 1.14(b) and as same may be terminated pursuant to Sections 2.02, 2.03 and/or 8.

“Incremental B Term Commitment Agreement” shall have the meaning provided in Section 1.14(b).

“Incremental B Term Facility” shall mean the Facility evidenced by the Total Incremental B Term Commitment.

“Incremental B Term Lender” shall have the meaning provided in Section 1.14(b).

“Incremental B Term Loan” shall have the meaning provided in Section 1.01(f).

“Incremental B Term Loan Borrowing Date” shall mean each date on which the Borrower incurs Incremental B Term Loans pursuant to Section 1.01(f), which date shall be the date of the effectiveness of the Incremental B Term Commitment Agreement pursuant to which such Incremental B Term Loans are to be made.

“Indebtedness” of any Person shall mean, without duplication, (i) all indebtedness of such Person for borrowed money, (ii) the deferred purchase price of assets or services which in accordance with GAAP would be shown on the liability side of the balance sheet of such Person, (iii) the face amount of all letters of credit issued for the account of such Person and, without duplication, all drafts drawn thereunder, (iv) all indebtedness of a second Person secured by any Lien on any property owned by such first Person, whether or not such indebtedness has been assumed (to the extent of the fair market value of such property), (v) all Capitalized Lease Obligations of such Person, (vi) all obligations of such Person to pay a specified purchase price for goods or services whether or not delivered or accepted, i.e., take-or-pay and similar obligations, (vii) all net obligations of such Person under Interest Rate Agreements and (viii) all Contingent Obligations of such Person (other than Contingent Obligations arising from the guaranty by such Person of the obligations of the Borrower and/or its Subsidiaries to the extent such guaranteed obligations do not constitute Indebtedness and are otherwise permitted hereunder), provided that Indebtedness shall not include trade payables, accrued expenses and receipt of progress and advance payments, in each case arising in the ordinary course of business.

“Indemnified Person” shall have the meaning provided in Section 11.01(a).

“Initial B Term Commitment” shall mean, with respect to each Initial B Term Lender, the amount set forth opposite such Lender’s name on Annex I hereto directly below the column entitled “Initial B Term Commitment”, as the same may be (x) reduced or terminated pursuant to Sections 2.02, 2.03, 3.02(A) and/or 8 or (y) adjusted from time to time as a result of assignments to or from such Lender pursuant to Sections 1.13 and/or 11.04(b).

“Initial B Term Facility” shall mean the Facility evidenced by the Total Initial B Term Commitment and/or Initial B Term Loans.

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“Initial B Term Lender” shall mean at any time each Lender with an Initial B Term Commitment and/or with outstanding Initial B Term Loans.

“Initial B Term Loan” shall have the meaning provided in Section 1.01(a); provided that after the conversion of Delayed-Draw B Term Loans into Initial B Term Loans pursuant to a DDTL Conversion as contemplated by Section 1.06(b), such converted Loans shall be deemed to be Initial B Term Loans for all purposes of this Agreement and the other Credit Documents (other than for purposes of Sections 1.01(a)(i) and (iii) and Section 4.01(l) and 5.05(a) hereof).

“Initial Borrowing Date” shall mean the date of the Refinancing and the incurrence of the Initial B Term Loans hereunder.

“Intercompany Debt” shall mean any Indebtedness, payables or other obligations (other than Excluded Intercompany Payables), whether now existing or hereafter incurred, owed by the Borrower or any Subsidiary of the Borrower to the Borrower or any other Subsidiary of the Borrower.

“Intercompany Loans” shall have the meaning provided in Section 7.06(c).

“Intercompany Note” shall mean a promissory note evidencing Intercompany Loans (other than Excluded Intercompany Payables), in each case duly executed and delivered substantially in the form of Exhibit K, with blanks completed in conformity therewith (or such other form as may be approved by the Administrative Agent or the Required Lenders).

“Intercompany Subordination Agreement” shall have the meaning provided in Section 4.01(m).

“Interest Coverage Ratio” for any period shall mean the ratio of (x) Adjusted Consolidated EBITDA for such period to (y) Consolidated Interest Expense for such period.

“Interest Period” with respect to any Loan shall mean the interest period applicable thereto, as determined pursuant to Section 1.09.

“Interest Rate Agreement” shall mean any interest rate swap agreement, any interest rate cap agreement, any interest rate collar agreement or other similar agreement or arrangement designed to protect the Borrower or any Subsidiary against fluctuations in interest rates.

“Intermediary Holding Company” shall mean each 1^st-Tier Subsidiary and any other Subsidiary first acquired or created after the Initial Borrowing Date that is (i) not an operating company (but that owns directly or indirectly one or more operating companies) and (ii) not subject to regulatory restrictions on borrowings or issuances of guaranties of indebtedness for borrowed money.

“Investment” shall have the meaning provided in the preamble to Section 7.06.

“IPO” shall have the meaning provided in Section 4.01(k).

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“IPO Documents” shall mean the Form S-1, the Rule 424(b) Prospectus, the Underwriting Agreement, dated as of February 8, 2005, between the Borrower, the underwriters named therein and the selling shareholders named therein, and the “Declaration of Effectiveness” from the SEC, in each case as in effect on the Initial Borrowing Date and as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof.

 “Joint Book Running Managers” shall mean DBSI, BAS, Morgan Stanley Senior Funding, Inc. and Goldman Sachs Credit Partners L.P., each in its capacity as a “Joint Book Running Manager.”

“Joint Lead Arrangers” shall mean DBSI and BAS, each in its capacity as “Joint Lead Arranger.”

“Kelso” shall mean Kelso Investment Associates V, L.P., a Delaware limited partnership, Kelso Equity Partners V, L.P., a Delaware limited partnership, and their respective Affiliates.

“Lender” shall mean each financial institution listed on Annex I, as well as any Person that becomes a “Lender” hereunder pursuant to Section 1.13, 1.14 or 11.04(b).

“Lender Default” shall mean (i) the wrongful refusal (which has not been retracted) or failure of a Lender to make available its portion of any incurrence of Loans or a reimbursement of an Unpaid Drawing or (ii) a Lender having notified the Administrative Agent and/or the Borrower that it does not intend to comply with the obligations under Section 1.01 or 1A.05, in circumstances where such non-compliance will constitute a breach of such Lender’s obligations under the respective Section.

“Lender Register” shall have the meaning provided in Section 11.16.

“Letter of Credit” shall have the meaning provided in Section 1A.01(a).

“Letter of Credit Fee” shall have the meaning provided in Section 2.01(c).

“Letter of Credit Issuer” shall mean (i) DBTCA, any affiliate of DBTCA and any RF Lender (or affiliate of any RF Lender) which at the request of the Borrower and with the consent of the Administrative Agent agrees, in such RF Lender’s (or RF Lender affiliate’s) sole discretion, to become a Letter of Credit Issuer for the purpose of issuing Letters of Credit pursuant to Section 1A, and (ii) with respect to the Existing Letters of Credit, the Lender designated as the issuer thereof on Annex IX shall be the Letter of Credit Issuer thereof.

“Letter of Credit Outstandings” shall mean, at any time, the sum of, without duplication, (i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii) the aggregate amount of all Unpaid Drawings in respect of all Letters of Credit.

“Letter of Credit Request” shall have the meaning provided in Section 1A.03(a).

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“Leverage Ratio” shall mean, at any date of determination, the ratio of (x) Consolidated Debt on such date to (y) Adjusted Consolidated EBITDA for the Test Period then or last ended.  All calculations of the Leverage Ratio shall be made on a Pro Forma Basis.

“Lien” shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement or any lease in the nature thereof).

“Loan” shall have the meaning provided in Section 1.01.

“Majority Lenders” of any Facility shall mean those Non-Defaulting Lenders which would constitute the Required Lenders under, and as defined in, this Agreement if all outstanding Obligations of the other Facilities under this Agreement were repaid in full and all Commitments with respect thereto were terminated.

“Management Affiliate” shall mean Messrs. Duda, Leach, Johnson and Bergstein.

“Mandatory Borrowing” shall have the meaning provided in Section 1.01(e).

“Margin Stock” shall have the meaning provided in Regulation U.

“Material Adverse Effect” shall mean a material adverse effect on (x) the business, property, assets, liabilities or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole after giving effect to the Transaction, (y) the rights or remedies of the Agents or the Lenders under any Credit Document or (z) the ability of the Pledge Parties taken as a whole to perform their obligations under the Credit Documents.

“Material Subsidiary” shall mean, at any time, any Subsidiary having gross assets at such time with a value of at least 5% of consolidated gross assets of the Borrower and its Subsidiaries at such time and/or gross revenues for the Test Period then last ended of at least 5% of the consolidated gross revenues of the Borrower and its Subsidiaries for such Test Period.

“Maturity Date” shall mean (i) with respect to Term Loans, the Term Loan Maturity Date, (ii) with respect to RF Loans, the RF Maturity Date and (iii) with respect to Swingline Loans, the Swingline Expiry Date.

“Maximum Swingline Amount” shall mean $5,000,000.

“Minimum Borrowing Amount” shall mean (i) in the case of Term Loans, $1,000,000, (ii) in the case of RF Loans (x) maintained as Base Rate Loans, $500,000 and (y) maintained as Eurodollar Loans, $1,000,000 and (iii) in the case of Swingline Loans, $100,000.

“Minimum Liquidity Condition” shall mean, as of any date on which a Dividend is to be paid on the Borrower Common Stock, the condition existing on such date if (but only if) the sum of (i) Total Unutilized Revolving Commitment on such date (determined on a pro forma basis after giving effect to any incurrence of RF Loans and Swingline Loans on such date to

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make such Dividend) plus (ii) the amount of Unrestricted cash and Cash Equivalents of the Borrower and its Subsidiaries, is equal to or greater than $10,000,000.

“Minimum Tender Offer Condition” shall mean, with respect to any issue of Existing Tender Offer Notes, that at least 75% (or, in the case of the 2008 Senior Subordinated Notes only, that at least 51%) of the aggregate principal amount of such issue of Existing Tender Offer Notes shall have been validly tendered, and not withdrawn, pursuant to the Tender Offer and Consent Solicitation therefor.

“MJD Capital” shall mean MJD Capital Corp., a South Dakota corporation.

“Moody’s” shall have the meaning provided in the definition of “Cash Equivalents”.

“Multiemployer Plan” shall mean any multiemployer plan as defined in section 4001(a)(3) of ERISA which is contributed to by (or to which there is an obligation to contribute of) the Borrower or any of its Subsidiaries or an ERISA Affiliate and each such plan for the five year period immediately following the latest date on which the Borrower, any such Subsidiary or ERISA Affiliate contributed to or had an obligation to contribute to such plan.

“Net Cash Proceeds” shall mean (i) with respect to any Asset Sale, the Cash Proceeds resulting therefrom net (without duplication) of expenses of sale (including payment of principal, premium and interest of Indebtedness secured by the assets the subject of the Asset Sale and required to be, and which is, repaid under the terms thereof as a result of such Asset Sale), and incremental taxes paid or payable as a result thereof and (ii) with respect to any issuance of Preferred Stock or Indebtedness, the cash proceeds received by the Borrower from such issuance net (without duplication) of underwriting discounts and commissions, private placement and/or initial purchaser fees and other reasonable fees and expenses associated therewith.

“90%-Owned Subsidiary” shall mean (i) any Subsidiary to the extent at least 90% of the capital stock or other ownership interests in such Subsidiary is owned directly or indirectly by the Borrower and (ii) STE, to the extent at least 87.5% of the capital stock of STE is owned directly or indirectly by the Borrower.

“Non-Core Asset Sale” shall mean an Asset Sale constituting a sale of Non-Core Assets.

“Non-Core Assets” shall mean (i) assets of the Borrower and its Subsidiaries not used in their core business of providing local exchange carrier voice telephony services (e.g., assets used in the operation of the cable television business, cellular telephone business and radio stations) and (ii) the stock and/or other equity interests in any Subsidiary not primarily engaged in the core business of providing local exchange carrier services, in the case of either clause (i) or (ii) to the extent such assets are certified as non-core assets by an Authorized Officer in an officer’s certificate delivered to the Administrative Agent.

“Non-Defaulting Lender” shall mean a Lender that is not a Defaulting Lender.

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“Non-Pledge Party Subsidiary” shall mean each Subsidiary of the Borrower which is not a Pledge Party.

“Non-Pledged Subsidiary” shall mean any Subsidiary that is not a Pledged Subsidiary.

“Non-Wholly Owned Entity” shall have the meaning provided in the definition of “Permitted Acquisition”.

“Non-Wholly Owned Subsidiary” shall mean, as to any Person, each Subsidiary of such Person which is not a Wholly-Owned Subsidiary of such Person.

“Note” shall mean and include each B Term Note, each RF Note and the Swingline Note.

“Notice of Borrowing” shall have the meaning provided in Section 1.03.

“Notice of Conversion/Continuation” shall have the meaning provided in Section 1.06.

“Notice Office” shall mean the office of the Administrative Agent at 60 Wall Street, New York, New York 10005 or such other office as the Administrative Agent may designate to the Borrower in writing from time to time.

“Obligations” shall mean all amounts, direct or indirect, contingent or absolute, of every type or description, and at any time existing, owing to any Agent, any Letter of Credit Issuer, the Collateral Agent, the Swingline Lender or any Lender pursuant to the terms of this Agreement or any other Credit Document.

“Optional Non-2008 Tender Offer Notes Redemption” shall mean, collectively, any redemption of Existing 2010 Senior Notes and/or Existing 2010 Senior Subordinated Notes pursuant to, and in accordance with the terms of, the respective indenture therefor, all as contemplated by Section 7.09(a)(vii).

“Optional Non-2008 Tender Offer Notes Refinancing” shall mean, collectively, any repurchase and/or redemption of Existing 2010 Senior Notes and/or Existing 2010 Senior Subordinated Notes as contemplated by Section 7.09(a)(vii).

“Parent Company” shall mean at any time each Intermediary Holding Company and each other Subsidiary of the Borrower that, in either such case, owns, directly or indirectly, the capital stock or other equity interests of any Subsidiary that is a Telco or a Carrier Services Company.

“Participant” shall have the meaning provided in Section 1A.05(a).

“Patriot Act” shall mean the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).

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“Payment Office” shall mean the office of the Administrative Agent at 60 Wall Street, New York, New York 10005 or such other office as the Administrative Agent may designate to the Borrower and the Lenders in writing from time to time.

“PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto.

“Percentage” shall mean at any time for each RF Lender, the percentage obtained by dividing such Lender’s Revolving Commitment by the Total Revolving Commitment, provided that if the Total Revolving Commitment has been terminated, the Percentage of each RF Lender shall be determined by dividing such RF Lender’s Revolving Commitment immediately prior to such termination by the Total Revolving Commitment immediately prior to such termination.

“Permitted Acquired Debt” shall mean Indebtedness of a Subsidiary acquired after the Effective Date pursuant to a Permitted Acquisition, to the extent such Indebtedness was outstanding prior to the consummation of the Permitted Acquisition and remains outstanding as Indebtedness of the respective Subsidiary after giving effect thereto, provided that (i) such Indebtedness was not incurred in connection with or in anticipation of such Permitted Acquisition or the respective Person becoming Subsidiary of the Borrower, (ii) such Indebtedness does not constitute Indebtedness of the Borrower or any of its Subsidiaries other than the respective Subsidiary acquired pursuant to the respective Permitted Acquisition and shall not be secured by any assets of any Person other than assets of the Subsidiary so acquired serving as security therefor at the time of the respective Permitted Acquisition, (iii) no Person (other than the respective Subsidiary or a direct parent or a Subsidiary of the respective Subsidiary to the extent such parent or Subsidiary is acquired in connection with such Permitted Acquisition) shall have any liability (contingent or otherwise) with respect to any Permitted Acquired Debt and (iv) the aggregate principal amount of all such Indebtedness shall not exceed at any time outstanding more than 10% of the Senior Consolidated Debt at such time.

“Permitted Acquisition” shall mean the acquisition by the Borrower or any of its Qualified Subsidiaries of assets constituting a business, division or product line of any Person not already a Subsidiary of the Borrower or any of its Qualified Subsidiaries or of 100% of the capital stock or other equity interests of any such Person, provided that (A) the consideration paid by the Borrower or such Qualified Subsidiary consists solely of cash (including proceeds of RF Loans), the issuance of Borrower Common Stock, the issuance of Indebtedness otherwise permitted in Section 7.04 and the assumption/acquisition of any Permitted Acquired Debt relating to such business, division, product line or Person which is permitted to remain outstanding in accordance with the requirements of Section 7.04, (B) those acquisitions that are structured as equity acquisitions shall be effected through a purchase of 100% of the capital stock or other equity interests of such Person by the Borrower or such Qualified Subsidiary or through a merger between such Person and Qualified Subsidiary of the Borrower, so that after giving effect to such merger, the surviving entity of such merger constitutes or continues to constitute a Qualified Subsidiary of the Borrower, (C) in the case of the acquisition of 100% of the capital stock or other equity interests of any Person, such Person (the “Acquired Person”) shall own no capital stock or other equity interests of any other Person unless either (x) the Acquired Person owns 100% of the capital stock or other equity interests of such other Person or

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(y) if the Acquired Person owns capital stock or equity interests in any other Person which is not a Wholly-Owned Subsidiary of the Acquired Person (a “Non-Wholly Owned Entity” ), (1) the Acquired Person shall not have been created or established in contemplation of, or for purposes of, the respective Permitted Acquisition, (2) any Non-Wholly Owned Entity of the Acquired Person shall have been non-wholly-owned prior to the date of the respective Permitted Acquisition and not created or established in contemplation thereof and (3) such Acquired Person and/or its Wholly-Owned Subsidiaries own at least 80% of the consolidated assets of such Acquired Person and its Subsidiaries taken as a whole, (D) substantially all of the business, division or product line acquired pursuant to the respective Permitted Acquisition, or the business of the Acquired Person and its Subsidiaries taken as a whole, is in the U.S., (E) the assets acquired, or the business of the Acquired Person and its Subsidiaries, shall be in the Business, and (F) all requirements of Section 7.02 applicable to Permitted Acquisitions are satisfied.  Notwithstanding anything to the contrary contained in the immediately preceding sentence, an acquisition which does not otherwise meet the requirements set forth above in the definition of “Permitted Acquisition” shall constitute a Permitted Acquisition if, and to the extent, the Required Lenders agree in writing that such acquisition shall constitute a Permitted Acquisition for purposes of this Agreement.

“Permitted Exchange Senior Subordinated Notes” shall mean senior subordinated notes issued in exchange for Permitted Senior Subordinated Notes pursuant to the relevant Permitted Senior Subordinated Notes Indenture therefor, which Permitted Exchange Senior Subordinated Notes are substantially identical securities to the originally issued Permitted Senior Subordinated Notes and shall be issued pursuant to a registered exchange offer or private exchange offer for such Permitted Senior Subordinated Notes on market terms reasonably satisfactory to the Administrative Agent; provided that in no event will the issuance of any Permitted Exchange Senior Subordinated Notes increase the aggregate principal amount of the Permitted Senior Subordinated Notes theretofore outstanding and subject to such exchange or otherwise result in an increase in the interest rate applicable to the Permitted Senior Subordinated Notes theretofore outstanding and subject to such exchange.

“Permitted Exchange Senior Unsecured Notes” shall mean senior unsecured notes issued in exchange for Permitted Senior Unsecured Notes pursuant to the relevant Permitted Senior Unsecured Notes Indenture therefor, which Permitted Exchange Senior Unsecured Notes are substantially identical securities to the originally issued Permitted Senior Unsecured Notes and shall be issued pursuant to a registered exchange offer or private exchange offer for such Permitted Senior Unsecured Notes on market terms satisfactory to the Administrative Agent; provided that in no event will the issuance of any Permitted Exchange Senior Unsecured Notes increase the aggregate principal amount of Permitted Senior Unsecured Notes theretofore outstanding and subject to such exchange or otherwise result in an increase in the interest rate applicable to the Permitted Senior Unsecured Notes theretofore outstanding and subject to such exchange.

“Permitted Holders” shall mean Kelso, THL and each Management Affiliate.

“Permitted Junior Capital” shall mean and include (i) any Additional Permitted Subordinated Debt, (ii) any Permitted Senior Subordinated Notes, (iii) any Qualified Preferred Stock and (iv) any Disqualified Preferred Stock.

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“Permitted Letters of Credit” shall mean (i) each standby letter of credit issued by a financial institution acceptable to the Administrative Agent for the account of the Borrower or any of its Subsidiaries in support of obligations arising in the ordinary course of business of the Borrower or such Subsidiary and (ii) each trade letter of credit issued by a financial institution acceptable to the Administrative Agent for the account of the Borrower or any of its Subsidiaries and for the benefit of sellers of goods to the Borrower or such Subsidiary in support of commercial transactions of the Borrower or such Subsidiary in the ordinary course of business.

“Permitted Liens” shall mean Liens described in clauses (a) through (o), inclusive, of Section 7.03.

“Permitted MJD Capital Debt” shall mean Indebtedness of MJD Capital under Capital Leases and purchase money mortgages in respect of equipment acquired by MJD Capital to lease or sublease to subsidiaries of the Borrower, provided that the maximum amount of such Indebtedness incurred in any fiscal year shall not exceed $2.5 million.

“Permitted Refinancing Indebtedness” shall mean any Indebtedness of the Borrower and/or any Subsidiary of the Borrower issued or given in exchange for, or the proceeds of which are used to, extend, refinance, renew, replace, substitute or refund any Indebtedness of such Person permitted pursuant to Sections 7.04(g), (i), (j) or (n) (other than the Existing Seller/Opco Notes not refinanced on the Initial Borrowing Date) or any Indebtedness of such Person issued to so extend, refinance, renew, replace, substitute or refund any such Indebtedness, so long as (a) such Indebtedness has a weighted average life to maturity greater than or equal to the weighted average life to maturity of the Indebtedness being refinanced, (b) such refinancing or renewal does not (i) increase the amount of such Indebtedness outstanding immediately prior to such refinancing or renewal or (ii) add guarantors, obligors or security from that which applied to such Indebtedness being refinanced or renewed, (c) such refinancing or renewal Indebtedness has substantially the same (or, from the perspective of the Lenders, more favorable) subordination provisions, if any, as applied to the Indebtedness being renewed or refinanced, and (d) all other terms of such refinancing or renewal (including, without limitation, with respect to the amortization schedules, redemption provisions, maturities, covenants, defaults and remedies), taken as a whole, are not less favorable to the respective borrower than those previously existing with respect to the Indebtedness being refinancing or renewed.

“Permitted Senior Subordinated Notes” shall mean any Indebtedness of the Borrower evidenced by subordinated notes and incurred pursuant to one or more issuances of such subordinated notes, all of terms and conditions (including, without limitation, with respect to interest rate, amortization, redemption provisions, maturities, covenants, defaults, remedies, guaranties and subordination provisions) which are on market terms for a public offering of subordinated notes or for a private placement of subordinated notes under Rule 144A of the Securities Act and are otherwise reasonably satisfactory to the Agents, as such Indebtedness may be amended, modified and/or supplemented from time to time in accordance with the terms hereof and thereof; provided, that in any event, unless the Required Lenders otherwise expressly consent in writing prior to the issuance thereof, (i) no such Indebtedness shall be secured by any asset of the Borrower or any of its Subsidiaries, (ii) no such Indebtedness shall be guaranteed by any Person other than a Subsidiary Guarantor, (iii) no such Indebtedness shall be subject to scheduled amortization or have a final maturity, in either case prior to the date occurring one

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year following the Term Loan Maturity Date, (iv) any “change of control” covenant included in the indenture governing such Indebtedness shall provide that, before the mailing of any required “notice of redemption” in connection therewith, the Borrower shall covenant to (I) obtain the consent of the Required Lenders or (II) pay the Obligations in full in cash, (v) any “asset sale” offer to purchase covenant included in the indenture governing such Indebtedness shall provide that the Borrower or the respective Subsidiary shall be permitted to repay obligations, and terminate commitments, under “senior debt” (including this Agreement) before offering to purchase such Indebtedness, (vi) the indenture governing such Indebtedness shall not include any financial maintenance covenants, (vii) the “default to other indebtedness” event of default contained in the indenture governing such Indebtedness shall provide for a “cross-acceleration” rather than a “cross-default” and (viii) the subordination provisions contained therein shall provide for a permanent block on payments with respect to such Indebtedness upon a payment default with respect to “senior debt” and cover all obligations under Interest Rate Agreements.  As used in this Agreement (other than this definition), the term “Permitted Senior Subordinated Notes” shall include any Permitted Exchange Senior Subordinated Notes issued pursuant to the respective Permitted Senior Subordinated Notes Indenture in exchange for outstanding Permitted Senior Subordinated Notes, as contemplated by the definition of “Permitted Exchange Senior Subordinated Notes”.  The issuance of Permitted Senior Subordinated Notes shall be deemed to be a representation and warranty by the Borrower that all conditions thereto have been satisfied in all material respects and that same is permitted in accordance with the terms of this Agreement, which representation and warranty shall be deemed to be a representation and warranty for all purposes hereunder, including, without limitation, Sections 4.02 and 8.

“Permitted Senior Subordinated Notes Documents” shall mean, on and after the execution and delivery thereof, each Permitted Senior Subordinated Notes Indenture, the Permitted Senior Subordinated Notes and all other documents relating to each issuance of the Permitted Senior Subordinated Notes, as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.

“Permitted Senior Subordinated Notes Indenture” shall mean any indenture or similar agreement entered into in connection with an issuance of Permitted Senior Subordinated Notes, as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.

“Permitted Senior Unsecured Notes” shall mean any Indebtedness of the Borrower evidenced by senior notes and incurred pursuant to one or more issuances of such senior notes, all of terms and conditions of which (including, without limitation, with respect to interest rate, amortization, redemption provisions, maturities, covenants, defaults, remedies and guaranties) are on market terms for a public offering of senior notes or for a private placement of senior notes under Rule 144A of the Securities Act and are otherwise reasonably satisfactory to the Agents, as such Indebtedness may be amended, modified and/or supplemented from time to time in accordance with the terms hereof and thereof; provided, that in any event, unless the Required Lenders otherwise expressly consent in writing prior to the issuance thereof, (i) no such Indebtedness shall be secured by any asset of the Borrower or any of its Subsidiaries, (ii) no such Indebtedness shall be guaranteed by any Person other than a Subsidiary Guarantor, (iii) no such Indebtedness shall be subject to scheduled amortization or have a final maturity, in either case prior to the date occurring one year following the Term Loan Maturity Date, (iv) any “change of

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control” covenant included in the indenture governing such Indebtedness shall provide that, before the mailing of any required “notice of redemption” in connection therewith, the Borrower shall covenant to (I) obtain the consent of the Required Lenders or (II) pay the Obligations in full in cash, (v) any “asset sale” offer to purchase covenant included in the indenture governing such Indebtedness shall provide that the Borrower or the respective Subsidiary shall be permitted to repay obligations, and terminate commitments, under this Agreement before offering to purchase such Indebtedness, (vi) the indenture governing such Indebtedness shall not include any financial maintenance covenants, and (vii) the “default to other indebtedness” event of default contained in the indenture governing such Indebtedness shall provide for a “cross-acceleration” rather than a “cross-default”.  As used in this Agreement (other than this definition), the term “Permitted Senior Unsecured Notes” shall include any Permitted Exchange Senior Unsecured Notes issued pursuant to the relevant Permitted Senior Unsecured Notes Indenture in exchange for outstanding Permitted Senior Unsecured Notes, as contemplated by the definition of “Permitted Exchange Senior Unsecured Notes”.   The issuance of Permitted Senior Unsecured Notes shall be deemed to be a representation and warranty by the Borrower that all conditions thereto have been satisfied in all material respects and that same is permitted in accordance with the terms of this Agreement, which representation and warranty shall be deemed to be a representation and warranty for all purposes hereunder, including, without limitation, Sections 4.02 and 8.

“Permitted Senior Unsecured Notes Documents” shall mean, on or after the execution and delivery thereof, each Permitted Senior Unsecured Notes Indenture, the Permitted Senior Unsecured Notes and each other agreement, document or instrument relating to the issuance of the Permitted Senior Unsecured Notes, in each case as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.

“Permitted Senior Unsecured Notes Indenture” shall mean any indenture or similar agreement entered into in connection with the issuance of Permitted Senior Unsecured Notes, as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.

“Permitted Swap Transaction” shall mean a transfer of assets by the Borrower or any of its Subsidiaries in which at least 85% of the consideration received therefrom consists of assets (other than cash) that will be used in the Business; provided that (x) the fair market value (as determined in good faith by the board of directors of the Borrower) of the assets so transferred shall not exceed the fair market value (determined as provided in the preceding parenthetical) of the assets so received and (y) the fair market value (as determined in good faith by the board of directors of the Borrower) of the assets transferred pursuant to any such transaction shall not exceed 12.5% of Consolidated Tangible Assets (as shown on the consolidated balance sheet of the Borrower most recently delivered (or required to be delivered) to the Administrative Agent pursuant to Section 6.01(a) or (b), as the case may be); provided further that the fair market value of such assets shall be determined by an independent appraiser satisfactory to the Administrative Agent if in excess of $20,000,000.

“Person” shall mean any individual, partnership, joint venture, firm, corporation, limited liability company, association, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof.

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“Plan” shall mean any pension plan as defined in Section 3(2) of ERISA (other than a multiemployer plan as defined in Section 3(37) of ERISA), which is maintained or contributed to by (or to which there is an obligation to contribute of) the Borrower or any of its Subsidiaries or an ERISA Affiliate and that is subject to Title IV of ERISA, and each such plan for the five year period immediately following the latest date on which the Borrower, any such Subsidiary of the Borrower or an ERISA Affiliate maintained, contributed to or had an obligation to contribute to such plan.

“Pledge Agreement” shall have the meaning provided in Section 4.01(i).

“Pledge Party” shall mean the Borrower, each Subsidiary Guarantor and each other Subsidiary of the Borrower party to the Pledge Agreement.

“Pledged Subsidiary” shall mean each Subsidiary the capital stock or other equity interests of which is or are pledged pursuant to the Pledge Agreement.

“Post-Closing Period” shall have the meaning provided in Section 6.10(a).

“Preferred Stock,” as applied to the capital stock of any Person, means capital stock of such Person (other than common stock of such Person) of any class or classes (however designed) that ranks prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to shares of capital stock of any other class of such Person, and shall include any Disqualified Preferred Stock and any Qualified Preferred Stock.

“Prime Lending Rate” shall mean the rate which DBTCA announces from time to time as its prime lending rate, the Prime Lending Rate to change when and as such prime lending rate changes.  The Prime Lending Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer.  DBTCA may make commercial loans or other loans at rates of interest at, above or below the Prime Lending Rate.

“Pro Forma Basis” shall mean, in connection with any calculation of compliance with any financial covenant or financial term, the calculation thereof after giving effect on a pro forma basis to (x) the incurrence of any Indebtedness (other than revolving Indebtedness, except to the extent same is incurred to refinance other outstanding Indebtedness or to finance a Permitted Acquisition) after the first day of the relevant Test Period or Calculation Period as if such Indebtedness had been incurred (and the proceeds thereof applied) on the first day of the relevant Calculation Period, (y) the permanent repayment of any Indebtedness (other than revolving Indebtedness) after the first day of the relevant Test Period or Calculation Period as if such Indebtedness had been retired or repaid on the first day of the relevant Test Period or Calculation Period and (z) any Permitted Acquisition or Significant Asset Sale then being consummated as well as any other Permitted Acquisition or Significant Asset Sale consummated after the first day of the relevant Test Period or Calculation Period, as the case may be, and on or prior to the date of the respective Permitted Acquisition or Significant Asset Sale, as the case may be, then being effected, with the following rules to apply in connection therewith:

(i)all Indebtedness (x) (other than revolving Indebtedness, except to the extent same is incurred to refinance other outstanding Indebtedness or to finance

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Permitted Acquisitions) incurred or issued after the first day of the relevant Test Period or Calculation Period (whether incurred to finance a Permitted Acquisition, to refinance Indebtedness or otherwise) shall be deemed to have been incurred or issued (and the proceeds thereof applied) on the first day of the respective Test Period or Calculation Period and remain outstanding through the date of determination (and thereafter in the case of projections pursuant to Section 6.10(a)) and (y) (other than revolving Indebtedness) permanently retired or redeemed after the first day of the relevant Test Period or Calculation Period shall be deemed to have been retired or redeemed on the first day of the respective Calculation Period and remain retired through the date of determination (and thereafter in the case of projections pursuant to Section 6.10(a));

(ii)all Indebtedness assumed to be outstanding pursuant to preceding clause (i) shall be deemed to have borne interest at (x) the rate applicable thereto, in the case of fixed rate indebtedness or (y) the rates which would have been applicable thereto during the respective period when same was deemed outstanding, in the case of floating rate Indebtedness (although interest expense with respect to any Indebtedness for periods while same was actually outstanding during the respective period shall be calculated using the actual rates applicable thereto while same was actually outstanding); and

(iii)in making any determination of Adjusted Consolidated EBITDA on a Pro Forma Basis, pro forma effect shall be given to any Permitted Acquisition or Significant Asset Sale effected during the respective Calculation Period or Test Period (or thereafter, as provided in Section 6.10, for determinations pursuant to Section 6.10 only) as if same had occurred on the first day of the respective Calculation Period or Test Period, as the case may be, taking into account, in the case of any Permitted Acquisition, factually supportable and identifiable cost savings and expenses which would otherwise be accounted for as an adjustment pursuant to Article 11 of Regulation S-X under the Securities Act, as if such cost savings or expenses were realized on the first day of the respective Test Period or Calculation Period.

“Pro Forma EBITDA Test” shall be satisfied (i) if, after giving effect to (x) any merger, consolidation, conveyance, sale or transfer referred to in Section 7.02(a), (y) the creation or acquisition of a new Telco or Carrier Services Company pursuant to a Permitted Acquisition the capital stock or other equity interests of which is or are not to be pledged under the Pledge Agreement or (z) an Investment in a Qualified Subsidiary of the type referred to in clause (iii) of the definition thereof pursuant to Section 7.06(h), the percentage of Adjusted Consolidated EBITDA for the 12 months last ended at such time (determined, in the case of the acquisition or creation of a new Telco or Carrier Services Company pursuant to a Permitted Acquisition, on a Pro Forma Basis, as if such Permitted Acquisition was consummated on the first day of such 12 month period and taking account of the adjustments described in clause (iii) of the definition of “Pro Forma Basis” for such period) attributable to all Non-Pledged Subsidiaries does not exceed 10% and (ii) for purposes of Section 6.10(a)(viii) and 7.07(b) only, if, after giving effect to the creation or acquisition of any Acquired Person (other than a Telco or a Carrier Services Company) or business pursuant to a Permitted Acquisition by a Qualified Subsidiary in circumstances where the capital stock or other equity interests of such Acquired Person are not to be pledged under the Pledge Agreement or the business or assets so acquired pursuant to such Permitted Acquisition are not held by a Person which is (or will concurrently become) a Pledged

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Subsidiary, the percentage of Adjusted Consolidated EBITDA for the 12 months last ended at such time (determined on a Pro Forma Basis, as if such Permitted Acquisition was consummated on the first day of such 12 month period and taking account of the adjustments described in clause (iii) of the definition of “Pro Forma Basis” for such period) attributable to all Non-Pledged Subsidiaries acquired after the Initial Borrowing Date pursuant to Permitted Acquisitions effected by Qualified Subsidiaries in the circumstances described above in this clause (ii), does not exceed 40%.

“Projections” shall have the meaning provided in Section 4.01(o).

“PUC” shall mean a public utility commission, public service commission or any similar agency or commission.

“Qualified Subsidiary” shall mean and include (i) each Wholly-Owned Domestic Subsidiary of the Borrower that is a Pledged Subsidiary, (ii) each other Pledged Subsidiary (x) that is a Domestic Subsidiary and (y) in which the Investments of cash, property, services and/or other assets are made in each class of equity interests of such Subsidiary by the Pledged Parties, on the one hand, and the other holders of such class of equity interests, on the other hand, in amounts which are proportional to the respective equity percentages of the Pledged Parties, on the one hand, and such other holders, on the other hand, for each class of equity interests of such Subsidiary (as reasonably determined by senior management of the Borrower) and (iii) each Wholly-Owned Domestic Subsidiary of the Borrower that is a Telco or Carrier Services Company, the capital stock or other equity interests of which are not permitted to be pledged pursuant to the Pledge Agreement as a result of applicable regulatory law.

“Qualified Preferred Stock” shall mean any Preferred Stock of the Borrower, the express terms of which shall provide for no voting rights (except for (x) voting rights required by applicable law and (y) limited customary voting rights on fundamental matters such as mergers, consolidations, sales of all or substantially all of the assets of the Borrower, or liquidations involving the Borrower) or covenants (other than customary information covenants and inspection rights) and shall provide that dividends thereon shall not be required to be paid at any time (and to the extent) that such payment would be prohibited by the terms of this Agreement or any other agreement of the Borrower relating to outstanding indebtedness and which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event (including any Change of Control), cannot mature and is not mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, and is not redeemable, or required to be repurchased, at the sole option of the holder thereof (including, without limitation, upon the occurrence of a Change of Control), in whole or in part, on or prior to the date that falls one year and one day after the date on which all Obligations are repaid in full and all Commitments have terminated or expired.

“Quarterly Compliance Certificate” shall have the meaning provided in Section 6.01(e).

“RCRA” shall mean the Resource Conservation and Recovery Act, as amended, 42 U.S.C. § 6901 et seq.

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“Redemption Date” shall have the meaning provided in Section 4.01(l).

“Reference Period” shall mean, at any date, the period commencing on the first day of the first full fiscal quarter of the Borrower ending after the Initial Borrowing Date and ending on the last day of the last fiscal quarter for which a Quarterly Compliance Certificate has been delivered by the Borrower prior to such date.

“Refinancing” shall mean the Tender Offers and Consent Solicitations, the Optional Non-2008 Tender Offer Notes Refinancing and the other refinancing transactions contemplated by Sections 4.01(l) and 6.13 (including the execution and delivery of the Existing Tender Offer Notes Indenture Supplement as contemplated by Section 4.01(l)).

“Refinancing Documents” shall mean the documents, instruments and agreements entered into connection with the Refinancing.

“Regulation D” shall mean Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing reserve requirements.

“Regulation T” shall mean Regulation T of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing margin requirements.

“Regulation U” shall mean Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing margin requirements.

“Regulation X” shall mean Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing margin requirements.

“Reinvestment Election” shall have the meaning provided in Section 3.02(A)(b).

“Reinvestment Notice” shall mean a written notice signed by an Authorized Officer stating that the Borrower, in good faith, intends and expects that the Borrower and its Subsidiaries will use all or a specified portion of the Net Cash Proceeds of an Asset Sale to finance a Permitted Acquisition within 270 days following the consummation of such Asset Sale.

“Reinvestment Prepayment Amount” shall mean, with respect to any Reinvestment Election, the amount, if any, on the Reinvestment Prepayment Date relating thereto by which (a) the Anticipated Reinvestment Amount in respect of such Reinvestment Election exceeds (b) the aggregate amount thereof expended by the Borrower and its Subsidiaries to finance Permitted Acquisitions.

“Reinvestment Prepayment Date” shall mean, with respect to any Reinvestment Election, the earliest of (i) the date, if any, upon which the Administrative Agent, on behalf of the Required Lenders, shall have delivered a written termination notice to the Borrower,

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provided that such notice may only be given while an Event of Default under Section 8.01 exists and (ii) the date occurring 270 days after the date of the related Reinvestment Notice.

“Repayment Election” shall have the meaning provided in Section 3.02(A)(b).

“Replaced Lender” shall have the meaning provided in Section 1.13.

“Replacement Lender” shall have the meaning provided in Section 1.13.

“Reportable Event” shall mean an event described in Section 4043(c) of ERISA with respect to a Plan that is subject to Title IV of ERISA other than those events as to which the 30-day notice period is waived under subsection .22, .23, .25, .27 or .28 of PBGC Regulation Section 4043.

“Required Lenders” shall mean Non-Defaulting Lenders the sum of whose outstanding B Term Loans (and, if prior to the termination thereof, Delayed-Draw B Term Commitments) and Revolving Commitments (or, after the termination thereof, outstanding RF Loans and Percentages of (x) outstanding Swingline Loans and (y) Letter of Credit Outstandings) constitute greater than 50% of the sum of (i) all outstanding B Term Loans (and, if prior to the termination thereof, Delayed-Draw B Term Commitments) of Non-Defaulting Lenders and (ii) the Total Revolving Commitment less the Revolving Commitments of all Defaulting Lenders (or after the termination thereof, the sum of then total outstanding RF Loans of Non-Defaulting Lenders and the aggregate Percentages of all Non-Defaulting Lenders of the total outstanding Swingline Loans and Letter of Credit Outstandings at such time).

“Required RF Lenders” shall mean those RF Lenders which are Non-Defaulting Lenders and which would constitute the Required Lenders under, and as defined in, this Agreement if all outstanding B Term Loans were repaid in full and the Total Delayed-Draw B Term Commitment had terminated in its entirety.

“Restricted” shall mean, when referring to cash or Cash Equivalents of the Borrower or any of its Subsidiaries, that such cash or Cash Equivalents (i) appear (or would be required to appear) as “restricted” on a consolidated balance sheet of the Borrower or of any such Subsidiary, (ii) are subject to any Lien in favor of any Person other than the Collateral Agent for the benefit of the Secured Creditors or (iii) are not otherwise generally available for use by the Borrower or any of its Subsidiaries.

“Restricted Investment Entity” shall mean, as to any Person, (i) any other Person, other than an individual or a Wholly-Owned Subsidiary of such Person, (x) in which such Person or a Subsidiary of such Person holds or acquires an ownership interest (whether by way of capital stock, partnership or limited liability company interest, or other evidence of ownership) and (y) which is engaged in the Business and/or (ii) any Wholly-Owned Domestic Subsidiary of such Person the capital stock or other equity interests of which then owned by such Person are not pledged pursuant to the Pledge Agreement (other than as a result of applicable regulatory laws restricting such pledge).

“Restricted Payment” shall mean, with respect to the Borrower or any of its Subsidiaries, (i) any Dividend by such Person, (ii) any payment of cash interest by such Person

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on account of any Indebtedness that is subordinated in right of payment to the Obligations (including, without limitation, any Permitted Senior Subordinated Notes, any Additional Permitted Subordinated Debt and guaranties thereof), (iii) any payment by the Borrower or any of its Subsidiaries with respect to any Intercompany Debt and (iv) the making of (or giving any notice in respect of) any voluntary or optional payment or prepayment on or redemption, repurchase or acquisition for value of (including, without limitation, by way of depositing with the trustee with respect thereto or any other Person money or securities before due for the purpose of paying when due), or any prepayment, repurchase, redemption or acquisition for value as a result of any asset sale, change of control or similar event of any Permitted Acquired Debt, any Scheduled Existing Indebtedness (other than the Existing Seller/Opco Notes not refinanced pursuant to the Refinancing, so long as no Default or Event of Default then exists or would result from the prepayment, repurchase or redemption thereof), any Existing 2008 Subordinated Notes Document, any Existing 2010 Subordinated Notes Document, any Existing 2010 Senior Notes Document and, on and after the execution, delivery and/or incurrence thereof, any Permitted Senior Unsecured Notes Document, any Permitted Senior Subordinated Notes Document, any other Permitted Junior Capital and any Permitted Refinancing Indebtedness.

“Revolving Commitment” shall mean, with respect to each Lender, the amount set forth opposite such Lender’s name in Annex I hereto directly below the column entitled “Revolving Commitment,” as the same may be (x) reduced or terminated from time to time pursuant to Section 2.02, 2.03 and/or 8 or (y) adjusted from time to time as a result of assignments to or from such Lender pursuant to Section 1.13 and/or 11.04.

“Revolving Facility” shall mean the Facility evidenced by the Total Revolving Commitment.

“RF Commitment Commission” shall have the meaning provided in Section 2.01(a).

“RF Lender” shall mean at any time each Lender with a Revolving Commitment or with outstanding RF Loans.

“RF Loan” shall have the meaning provided in Section 1.01(c).

“RF Maturity Date” shall mean February 8, 2011.

“RF Note” shall have the meaning provided in Section 1.05(a).

“Scheduled Existing Indebtedness” shall have the meaning provided in Section 7.04(g).

“SEC” shall have the meaning provided in Section 6.01(g).

“SEC Regulation D” shall mean Regulation D as promulgated under the Securities Act.

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“2d-Tier Holdco” shall mean any indirect Subsidiary of the Borrower that is a holding company formed to hold the capital stock or other equity interests of one or more Subsidiaries (i.e., is not an operating company).

“Section 1A.01(c) Arrangements” shall have the meaning provided in Section 1A.01(c).

“Section 3.04 Certificate” shall have the meaning provided in Section 3.04(b)(ii).

“Secured Creditor” shall mean and include any “Secured Creditor” as defined in the Pledge Agreement.

“Securities Act” shall mean the Securities Act of 1933, as amended, as the same may be in effect from time to time.

“Segregated Account” shall have the meaning specified in Section 4.01(l)(iii).

“Senior Consolidated Debt” shall mean, at any time, (i) Consolidated Debt at such time less (ii) any such Consolidated Debt that constitutes Indebtedness under any Existing 2010 Senior Subordinated Notes Documents, any Permitted Senior Subordinated Notes Documents, any Additional Permitted Subordinated Debt and/or Permitted Refinancing Indebtedness incurred to refinance Permitted Senior Subordinated Notes less (iii) the amount of any Disqualified Preferred Stock deemed to be Consolidated Debt at such time pursuant to the definition thereof.

“Senior Secured Consolidated Debt” shall mean, at any time, (i) Senior Consolidated Debt at such time less (ii) any such Senior Consolidated Debt that constitutes Indebtedness under the Existing 2010 Senior Notes Documents, any Permitted Senior Unsecured Notes Documents and/or Permitted Refinancing Indebtedness incurred to refinance the foregoing.

“Senior Secured Leverage Ratio” shall mean, at any date of determination, the ratio of (x) Senior Secured Consolidated Debt on such date to (y) Adjusted Consolidated EBITDA for the Test Period then or last ended.  All calculations of the Senior Secured Leverage Ratio shall be made on a Pro Forma Basis.

“Series A Preferred Stock” shall mean Series A preferred stock of the Borrower, par value $.01 per share, authorized by Article IV.B.1. of the Borrower’s certificate of incorporation consisting of 1,000,000 authorized shares.

“Significant Asset Sale” shall mean each Asset Sale which generates Net Sale Proceeds of at least $5,000,000.

“Stated Amount” shall mean, with respect to any Letter of Credit at any time, the maximum available to be drawn thereunder at such time (regardless of whether any conditions for drawing could then be met).

“STE” shall mean ST Enterprises, Ltd., a Kansas corporation.

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“Subsidiary” of any Person shall mean and include (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries and (ii) any partnership, association, joint venture or other entity in which such Person directly or indirectly through Subsidiaries, has more than a 50% equity interest at the time.  Unless otherwise expressly provided, all references herein to “Subsidiary” shall mean a Subsidiary of the Borrower.  Notwithstanding the foregoing (and except for purposes of (x) Sections 5.01, 5.04, 5.12, 5.13, 5.14, 5.17, 6.01(f), 6.04, 6.06, 6.07, 8.05, 8.06 and 8.09 and the defined terms used therein and (y) the definition of Unrestricted Subsidiary contained herein), an Unrestricted Subsidiary shall be deemed not to be a Subsidiary of the Borrower or any of its other Subsidiaries for purposes of this Agreement.

“Subsidiary Guarantors” shall mean each Subsidiary party to the Subsidiary Guaranty.

“Subsidiary Guaranty” shall have the meaning provided in Section 4.01(h).

“Swingline Expiry Date” shall mean that date which is five Business Days prior to the RF Maturity Date.

“Swingline Lender” shall mean DBTCA in its individual capacity for so long as DBTCA is the Administrative Agent hereunder, and thereafter shall mean the successor Administrative Agent in its individual capacity.

“Swingline Loan” shall have the meaning provided in Section 1.01(d).

“Swingline Note” shall have the meaning provided in Section 1.05(a).

“Syndication Agent” shall have the meaning provided in the first paragraph of this Agreement.

“Syndication Date” shall mean the earlier of (i) the 90th day following the Initial Borrowing Date and (ii) the date upon which the Administrative Agent determines (and notifies the Borrower and the Lenders) that the primary syndication (and resultant addition of Persons as Lenders pursuant to Section 11.04(b)) has been completed.

“S&P” shall have the meaning provided in the definition of “Cash Equivalents”.

“Taxes” shall have the meaning provided in Section 3.04(a).

“TelCo” shall mean any Subsidiary of the Borrower that is an operating company (except to the extent same is a Non-Core Asset).

“Tender Offer and Consent Solicitation Consummation” shall mean the taking of the actions specified in clause (y) of Section 4.01(l)(ii) and 6.13(a).

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“Tender Offers and Consent Solicitations” shall have the meaning provided in Section 4.01(l).

“Term Loan Maturity Date” shall mean February 8, 2012.

“Term Loans” shall mean, collectively, each B Term Loan and each Delayed-Draw B Term Loan.

“Test Period” shall mean each period of four consecutive fiscal quarters then last ended, in each case taken as one accounting period.

“THL” shall mean THL Equity Advisors IV, LLC and its Affiliates.

“Total Available Revolving Commitment” shall mean, at any time, an amount equal to the remainder of (x) the Total Revolving Commitment at such time less (y) the Blocked Revolving Commitment as in effect at such time.

“Total Commitment” shall mean, at any time, the sum of the Total Initial B Term Commitment, the Total Delayed-Draw B Term Commitment, the Total Incremental B Term Commitment and the Total Revolving Commitment at such time.

“Total Delayed-Draw B Term Commitment” shall mean the sum of the Delayed-Draw B Term Commitments of each of the Lenders.

“Total Incremental B Term Commitment” shall mean the sum of the Incremental B Term Commitments of each of the Lenders.

“Total Initial B Term Commitment” shall mean the sum of the Initial B Term Commitments of each of the Lenders.

“Total Revolving Commitment” shall mean, at any time, the sum of the Revolving Commitments of each of the Lenders at such time.

“Total Unutilized Revolving Commitment” shall mean, at any time, (i) the Total Revolving Commitment at such time less (ii) the sum of (x) the aggregate principal amount of all RF Loans and Swingline Loans at such time plus (y) the Letter of Credit Outstandings at such time.

“Transaction” shall mean (i) the Refinancing, (ii) the issuance of Borrower Common Stock pursuant to the IPO, (iii) the entering into of the Credit Documents and the incurrence of all Loans and the issuance of all Letters of Credit on the Initial Borrowing Date, and (iv) the payment of fees and expenses in connection with the foregoing.

“Type” shall mean any type of Loan determined with respect to the interest option applicable thereto, i.e., a Base Rate Loan or Eurodollar Loan.

“UCC” shall mean the Uniform Commercial Code as in effect from time to time in New York.

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“Unfunded Current Liability” of any Plan shall mean the amount, if any, by which the actuarial present value of the accumulated plan benefits under the Plan as of the close of its most recent plan year, determined in accordance with actuarial assumptions at such time consistent with Statement of Financial Accounting Standards No. 87, exceeds the market value of the assets allocable thereto.

“Unpaid Drawing” shall have the meaning provided in Section 1A.04.

“Unrestricted” shall mean, when referring to cash or Cash Equivalents of the Borrower or any of its Subsidiaries, that such cash or Cash Equivalents are not Restricted.

“Unrestricted Subsidiary” shall mean any Subsidiary of the Borrower that is acquired or created after the Effective Date and designated by the Borrower as an “Unrestricted Subsidiary” hereunder by written notice to the Administrative Agent, provided that the Borrower shall only be permitted to so designate a new Unrestricted Subsidiary after the Initial Borrowing Date and so long as (i) no Default or Event of Default exists or would result therefrom, (ii) such Subsidiary is not a Telco or a Carrier Services Company, and (iii) such Unrestricted Subsidiary shall be capitalized (to the extent capitalized by the Borrower or any of its Subsidiaries) through Investments as permitted by, and in compliance with, Section 7.06(l), with the Pledge Party’s or respective Qualified Subsidiary’s ownership percentage in the value of the assets owned by such Unrestricted Subsidiary at the time of the initial designation thereof to be treated as an Investment pursuant to Section 7.06(l); provided that at the time of the initial Investment in any Subsidiary designated as an “Unrestricted Subsidiary”, such Subsidiary and the Borrower shall have entered into tax sharing agreement on a basis which is satisfactory to the Administrative Agent.

“Unutilized Revolving Commitment” for any Lender with a Revolving Commitment at any time shall mean the excess of (i) the Revolving Commitment of such Lender at such time over (ii) the sum of (x) the aggregate outstanding principal amount of RF Loans made by such Lender at such time plus (y) an amount equal to such Lender’s Percentage of the Letter of Credit Outstandings at such time.

“U.S.” shall mean the United States of America and any state or territory thereof or the District of Columbia.

“Wholly-Owned Domestic Subsidiary” shall mean, as to any Person, any Wholly-Owned Subsidiary of such Person which is a Domestic Subsidiary.

“Wholly-Owned Subsidiary” of any Person shall mean any Subsidiary of such Person to the extent all of the capital stock or other ownership interests in such Subsidiary, other than directors’ qualifying shares, is owned directly or indirectly by such Person; provided, however, that (x) for purposes of the definitions of “Asset Sale”, “Available Basket Amount”, “Available Basket Sub-Limit”, “Consolidated Net Income” and “Wholly-Owned Domestic Subsidiary” and Sections 6.10, 7.06(c), (h) and (l), 90%-Owned Subsidiaries that are Telcos or Carrier Services Companies shall be deemed to be “Wholly-Owned Subsidiaries” and (y) no Unrestricted Subsidiary shall be considered a Wholly-Owned Subsidiary.

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“Written” or “in writing” shall mean any form of written communication or a communication by means of telex, facsimile transmission, telegraph or cable.

SECTION 10.  The Agents

10.01  Appointment.  (a)  Each Lender hereby irrevocably designates and appoints (x) DBTCA as Administrative Agent for such Lender (for purposes of this Section 10, the term “Administrative Agent” shall mean DBTCA in its capacities as Administrative Agent and as Collateral Agent hereunder and pursuant to the Pledge Agreement), (y) BAS as Syndication Agent for such Lender, and (z) CoBank and GECC as Co-Documentation Agents for such Lender, each to act as specified herein and in the other Credit Documents, and each such Lender hereby irrevocably authorizes the Administrative Agent, the Syndication Agent and each Co-Documentation Agent to take such action on its behalf under the provisions of this Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated to or required of the Administrative Agent, the Syndication Agent or such Co-Documentation Agent, as the case may be, by the terms of this Agreement and the other Credit Documents, together with such other powers as are reasonably incidental thereto.  Each of the Agents may perform any of their respective duties under this Agreement, the other Credit Documents and any other instruments and agreements referred to herein or therein by or through its respective officers, directors, agents, employees or affiliates (it being understood and agreed, for avoidance of doubt and without limiting the generality of the foregoing, that the Administrative Agent and/or Collateral Agent may perform any of its duties under the Pledge Agreement by or through one or more of its affiliates).

(b)The provisions of this Section 10 are solely for the benefit of the Administrative Agent, the Syndication Agent, the Co-Documentation Agents and the Lenders, and neither the Borrower nor any of its Subsidiaries shall have any rights as a third party beneficiary of any of the provisions hereof.  In performing its functions and duties under this Agreement, each of the Administrative Agent, the Syndication Agent and each Co-Documentation Agent shall act solely as agent for the Lenders, and none of the Administrative Agent, the Syndication Agent or the Co-Documentation Agents assumes (and shall not be deemed to have assumed) any obligation or relationship of agency or trust with or for Borrower or any of its Subsidiaries.

10.02  Nature of Duties.  (a)  No Agent shall have any duties or responsibilities except those expressly set forth in this Agreement and in the other Credit Documents.  Neither any Agent nor any of its officers, directors, agents, employees or affiliates shall be liable for any action taken or omitted by it hereunder or under any other Credit Document or in connection herewith or therewith, unless caused by its or their gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and non-appealable decision).  The duties of the Agents shall be mechanical and administrative in nature; no Agent shall have by reason of this Agreement or any other Credit Document a fiduciary relationship in respect of any Lender or the holder of any Note and nothing in this Agreement or in any other Credit Document, expressed or implied, is intended to or shall be so construed as to impose upon any Agent any obligations in respect of this Agreement or any other Credit Document except as expressly set forth herein or therein.

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(b)Notwithstanding any other provision of this Agreement or any provision of any other Credit Document, each of the Joint Lead Arrangers and the Joint Book Running Managers is named as such for recognition purposes only, and in their respective capacities as such shall have no powers, duties, responsibilities or liabilities with respect to this Agreement or the other Credit Documents or the transactions contemplated hereby and thereby; it being understood and agreed that each Joint Lead Arranger and each Joint Book Running Manager shall be entitled to all indemnification and reimbursement rights in favor of “Agents” as, and to the extent, provided for under Sections 10.07 and 11.01.  Without limitation of the foregoing, none of the Joint Lead Arrangers or the Joint Book Running Managers shall, solely by reason of this Agreement or any other Credit Documents, have any fiduciary relationship in respect of any Lender or any other Person.

10.03  Certain Rights of the Agents.  The Agents shall have the right to request instructions from the Required Lenders at any time.  If any Agent shall request instructions from the Required Lenders with respect to any act or action (including failure to act) in connection with this Agreement or any other Credit Document, such Agent shall be entitled to refrain from such act or taking such action unless and until such Agent shall have received instructions from the Required Lenders; and such Agent shall not incur liability to any Lender by reason of so refraining.  Without limiting the foregoing, neither any Lender nor the holder of any Note shall have any right of action whatsoever against any Agent or any of its employees, directors, officers, agents or affiliates as a result of such Agent or such other person acting or refraining from acting hereunder or under any other Credit Document in accordance with the instructions of the Required Lenders.

10.04  Reliance by Agents.  Each Agent shall be entitled to rely, and shall be fully protected (and shall have no liability to any Person) in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, radiogram, order, telephone message or other document or conversation that such Agent believed, in the absence of gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and non-appealable decision), to be the proper Person, and, with respect to all legal matters pertaining to this Agreement and any other Credit Document and its duties hereunder and thereunder, upon advice of counsel selected by such Agent (which may be counsel for the Credit Parties) and, with respect to other matters, upon advice of independent public accountants or other experts selected by it.

10.05  Notice of Default, etc.  The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless the Administrative Agent has actually received written notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default.”  In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to the Lenders.  The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or all Lenders, to the extent required by Section 11.12(a)); provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem

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advisable in the best interests of the Lenders (as determined by the Administrative Agent in its sole discretion).

10.06  Nonreliance on Agents and Other Lenders.  Independently and without reliance upon any Agent, each Lender and the holder of each Note, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Borrower and its Subsidiaries in connection with the making and the continuance of the Loans and the taking or not taking of any action in connection herewith and (ii) its own appraisal of the creditworthiness of the Borrower and its Subsidiaries and, except as expressly provided in this Agreement, no Agent shall have any duty or responsibility, either initially or on a continuing basis, to provide any Lender or the holder of any Note with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter.  No Agent or their respective affiliates nor any of their respective officers, directors, agents or employees shall be responsible to any Lender or the holder of any Note for, or be required or have any duty to ascertain, inquire or verify the accuracy of, (i) any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith, (ii) the execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of this Agreement or any other Credit Document, (iii) the financial condition of the Borrower and any of its Subsidiaries, (iv) the performance or observance of any of the terms, provisions or conditions of this Agreement or any other Credit Document, (v) the satisfaction of any of the conditions precedent set forth in Section 4, or (vi) the existence or possible existence of any Default or Event of Default.

10.07  Indemnification.  (a)  To the extent any Agent (or any affiliate thereof) is not reimbursed and indemnified by the Borrower, the Lenders will reimburse and indemnify such Agent (and any affiliate thereof) in proportion to their respective “percentages” as used in determining the Required Lenders (determined as if there were no Defaulting Lenders), for and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, judgments, costs, expenses or disbursements of whatsoever kind or nature which may be imposed on, asserted against or incurred by such Agent (or any affiliate thereof) in performing its respective duties hereunder or under any other Credit Document or in any way relating to or arising out of this Agreement or any other Credit Document, provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent’s gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and non-appealable decision).

(b)Any Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Credit Document (except actions expressly required to be taken by it hereunder or under the Credit Documents) unless it shall first be indemnified to its satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action.

(c)The agreements in this Section 10.07 shall survive the payment of all Obligations.

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10.08  Agents in their Individual Capacities.  With respect to its obligation to make Loans, or issue or participate in Letters of Credit, under this Agreement, each Agent shall have the rights and powers specified herein for a “Lender” and may exercise the same rights and powers as though it were not performing the duties specified herein; and the term “Lender”, “Majority Lenders”, “Required Lenders”, “Required RF Lender”, “holders of Notes” or any similar terms shall, unless the context clearly otherwise indicates, include each Agent in its individual capacity.  Each Agent and its affiliates may accept deposits from, lend money to, and generally engage in any kind of banking, investment banking, trust or other business with, or provide debt financing, equity capital or other services (including financial advisory services) to, any Credit Party or any Affiliate of any Credit Party (or any Person engaged in a similar business with any Credit Party or any Affiliate thereof) as if they were not performing the duties specified herein, and may accept fees and other consideration from any Credit Party or any Affiliate of any Credit Party for services in connection with this Agreement and otherwise without having to account for the same to the Lenders.

10.09  Holders.  The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Administrative Agent.  Any request, authority or consent of any Person or entity who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee, assignee or endorsee, as the case may be, of such Note or of any Note or Notes issued in exchange therefor.

10.10  Resignation of the Agents.  (a)  The Administrative Agent may resign from the performance of all its functions and duties hereunder and/or under the other Credit Documents (including, without limitation, its functions and duties as Collateral Agent) at any time by giving 15 Business Days’ prior written notice to the Lenders and, unless a Default or an Event of Default under Section 8.05 then exists, the Borrower.  Any such resignation by an Agent hereunder shall also constitute its resignation (if applicable) as a Letter of Credit Issuer and Swingline Lender, in which case the resigning Agent (x) shall not be required to issue any further Letters of Credit or make any additional Swingline Loans hereunder and (y) shall maintain all of its rights as Letter of Credit Issuer or Swingline Lender, as the case may be, with respect to any Letter of Credit issued by it, or Swingline Loans made by it, prior to the date of such resignation. Such resignation shall take effect upon the appointment of a successor Administrative Agent pursuant to clauses (b) and (c) below or as otherwise provided below.

(b)Upon any such notice of resignation by the Administrative Agent, the Required Lenders shall appoint a successor Administrative Agent hereunder and/or under the other Credit Documents who shall be a commercial bank or trust company acceptable to the Borrower, which acceptance shall not be unreasonably withheld or delayed (provided that the Borrower’s approval shall not be required if an Event of Default then exists).

(c)If a successor Administrative Agent shall not have been so appointed within such 15 Business Day period, the Administrative Agent, with the consent of the Borrower (which consent shall not be unreasonably withheld or delayed, provided that the Borrower’s consent shall not be required if an Event of Default then exists), shall then appoint a successor Administrative Agent who shall serve as Administrative Agent hereunder and/or under the other

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Credit Documents until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided above.

(d)If no successor Administrative Agent has been appointed pursuant to clause (b) or (c) above by the 15th Business Day after the date such notice of resignation was given by the Administrative Agent, the Administrative Agent’s resignation shall become effective and the Required Lenders shall thereafter perform all the duties of the Administrative Agent hereunder and/or under any other Credit Document until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided above.

(e)The Syndication Agent may resign from the performance of all its functions and duties hereunder and/or under the other Credit Documents at any time by giving five Business Days’ prior written notice to the Borrower and the Administrative Agent.  Such resignation shall take effect at the end of such five Business Day period.

(f)Either Co-Documentation Agent may resign from the performance of all its functions and duties hereunder and/or under the other Credit Documents at any time by giving five Business Days’ prior written notice to the Borrower and the Administrative Agent.  Such resignation shall take effect at the end of such five Business Day period.

(g)Upon a resignation of any Agent pursuant to this Section 10.10, such Agent shall remain indemnified to the extent provided in this Agreement and the other Credit Documents and the provisions of this Section 10 shall continue in effect for the benefit of such Agent for all of its actions and inactions while serving as such Agent.

10.11  Collateral Matters.  (a)  Each Lender authorizes and directs the Collateral Agent to enter into the Pledge Agreement for the benefit of the Lenders and the other Secured Creditors.  Each Lender hereby agrees, and each holder of any Note or participant in Letters of Credit by the acceptance thereof will be deemed to agree, that, except as otherwise set forth herein, any action taken by the Required Lenders in accordance with the provisions of this Agreement or the Pledge Agreement, and the exercise by the Required Lenders of the powers set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all of the Lenders.  The Collateral Agent is hereby authorized on behalf of all of the Lenders, without the necessity of any notice to or further consent from any Lender, from time to time prior to an Event of Default, to take any action with respect to any Collateral or the Pledge Agreement which may be necessary to perfect and maintain perfected the security interest in and liens upon the Collateral granted pursuant to the Pledge Agreement.

(b)The Lenders hereby authorize the Collateral Agent, at its option and in its discretion, to release any Lien granted to or held by the Collateral Agent upon any Collateral (i) upon termination of the Commitments and payment and satisfaction of all of the Obligations at any time arising under or in respect of this Agreement or the Credit Documents or the transactions contemplated hereby or thereby, (ii) constituting property being sold or otherwise disposed of (to Persons other than the Borrower and its Subsidiaries) upon the sale or other disposition thereof in compliance with Sections 7.02 and 11.12(a), (iii) if approved, authorized or ratified in writing by the Required Lenders (or all of the Lenders hereunder, to the extent required by Section 11.12) or (iv) as otherwise may be expressly provided in the Pledge

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Agreement.  Upon request by the Administrative Agent at any time, the Lenders will confirm in writing the Collateral Agent’s authority to release particular types or items of Collateral pursuant to this Section 10.11.

(c)The Collateral Agent shall have no obligation whatsoever to the Lenders or to any other Person to assure that the Collateral exists or is owned by the Borrower or any of its Subsidiaries or is cared for, protected or insured or that the Liens granted to the Collateral Agent herein or pursuant hereto have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise or to continue exercising at all or in any manner or under any duty of care, disclosure or fidelity any of the rights, authorities and powers granted or available to the Collateral Agent in this Section 10.11 or in the Pledge Agreement, it being understood and agreed that in respect of the Collateral, or any act, omission or event related thereto, the Collateral Agent may act in any manner it may deem appropriate, in its sole discretion, given the Collateral Agent’s own interest in the Collateral as one of the Lenders and that the Collateral Agent shall have no duty or liability whatsoever to the Lenders, except for its gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and non-appealable decision).

10.12  Delivery of Information.  The Administrative Agent shall not be required to deliver to any Lender originals or copies of any documents, instruments, notices, communications or other information received by the Administrative Agent from the Borrower, any Subsidiary, the Required Lenders, any Lender or any other Person under or in connection with this Agreement or any other Credit Document except (i) as specifically provided in this Agreement or any other Credit Document and (ii) as specifically requested from time to time in writing by any Lender with respect to a specific document, instrument, notice or other written communication received by and in the possession of the Administrative Agent at the time of receipt of such request and then only in accordance with such specific request.

SECTION 11.  Miscellaneous.

11.01  Payment of Expenses, etc. (a)  The Borrower agrees to:  (i) whether or not the transactions herein contemplated are consummated, pay all reasonable out-of-pocket costs and expenses of the Administrative Agent in connection with the negotiation, preparation, execution and delivery of the Credit Documents and the documents and instruments referred to therein and any amendment, waiver or consent relating thereto (including, without limitation, the reasonable fees and disbursements of White & Case LLP) and of each Agent, the Collateral Agent, each Letter of Credit Issuer, the Swingline Lender and each of the Lenders in connection with the enforcement of the Credit Documents and the documents and instruments referred to therein (including, without limitation, the reasonable fees and disbursements of counsel for the Agents, the Collateral Agent, each Letter of Credit Issuer, the Swingline Lender and each of the Lenders); (ii) pay and hold each of the Lenders (including in its capacity as Agent, Collateral Agent, Swingline Lender and/or Letter of Credit Issuer) harmless from and against any and all present and future stamp and other similar taxes with respect to the foregoing matters and save each of the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Lender) to pay such taxes; and (iii) indemnify each Lender (including in its capacity as Agent, Collateral Agent, Swingline Lender and/or Letter of Credit Issuer) and its affiliates, and each officer, director,

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trustee, employee, representative, advisor and agent thereof (each, an “Indemnified Person”) from and hold each of them harmless against any and all losses, liabilities, claims, damages or expenses incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of, (a) any investigation, litigation or other proceeding (whether or not any Agent or any Lender is a party thereto and whether or not any such investigation, litigation or other proceeding is between or among any Agent, any Lender, any Credit Party or any third Person or otherwise (except to the extent between or among any Lenders in their capacity as such)) related to the entering into and/or performance of any Credit Document or the use of the proceeds of any Loans hereunder or the Transaction or the consummation of any transactions contemplated in any Credit Document, or (b) the actual or alleged presence of Hazardous Materials in the air, surface water or ground water or on the surface or subsurface of any property owned or operated at any time by Borrower or any of its Subsidiaries or the generation, storage, transportation, handling or disposal of Hazardous Materials by the Borrower or any of its Subsidiaries at any location, or the noncompliance by the Borrower or any of its Subsidiaries with any Environmental Law or any Environmental Claim in connection with the Borrower or any of its Subsidiaries or business or operations or any property owned or operated at any time by the Borrower or any of its Subsidiaries, including, in each case, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding (but excluding any such losses, liabilities, claims, damages or expenses (x) of an Indemnified Person, to the extent incurred by reason of the gross negligence or willful misconduct of such Indemnified Person as determined by a court of competent jurisdiction in a final and non-appealable decision and (y) for purposes of clause (b) only and without limiting the indemnity in favor of such Indemnified Persons for purposes of clause (a), to the extent incurred by any affiliate of an Agent, Collateral Agent, Swingline Lender and/or Letter of Credit Issuer and any officer, director, trustee, employee, representative, advisor and agent of any such affiliate, if such Indemnified Person is not involved, directly or indirectly, in any of the transactions contemplated by the Credit Documents).

(b)To the full extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnified Person, on any theory of liability, for special, indirect, consequential or incidental damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof.  No Indemnified Person shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Credit Documents or the transactions contemplated hereby or thereby, except to the extent the liability of such Indemnified Person results from such Indemnified Person’s gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and non-appealable decision) .

11.02  Right of Setoff.  In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, if an Event of Default then exists, each Lender is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to any Credit Party or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special but not trust accounts) and any other Indebtedness at any

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time held or owing by such Lender (including, without limitation, by branches and agencies of such Lender wherever located) to or for the credit or the account of any Pledge Party against and on account of the Obligations and liabilities of such Pledge Party to such Lender under this Agreement or under any of the other Credit Documents, including, without limitation, all interests in Obligations of such Pledge Party purchased by such Lender pursuant to Section 11.06(b), and all other claims of any nature or description arising out of or connected with this Agreement or any other Credit Document, irrespective of whether or not such Lender shall have made any demand hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent or unmatured.

11.03  Notices.  Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, telecopier, facsimile or cable communication) and mailed, telegraphed, telexed, telecopied, faxed, cabled or delivered, if to the Borrower at the address specified opposite its signature below, if to any Lender, at its address specified for such Lender on Annex II hereto; or, at such other address as shall be designated by any party in a written notice to the other parties hereto.  All such notices and communications shall be mailed, telegraphed, telexed, telecopied, or cabled or sent by overnight courier, and shall be effective when received.

11.04  Benefit of Agreement.  (a)  This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto, provided that the Borrower may not assign or transfer any of its rights or obligations hereunder without the prior written consent of each of the Lenders.  Each Lender may at any time grant participations in any of its rights hereunder or under any of the Notes to another financial institution, provided that in the case of any such participation, the participant shall not have any rights under this Agreement or any of the other Credit Documents (the participant’s rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the participant relating thereto) and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation, except that the participant shall be entitled to the benefits of Sections 1.10, 1A.06 and 3.04 of this Agreement to the extent that such Lender would be entitled to such benefits if the participation had not been entered into or sold, and, provided, further, that no Lender shall transfer, grant or assign any participation under which the participant shall have rights to approve any amendment to or waiver of this Agreement or any other Credit Document except to the extent such amendment or waiver would (i) extend the final scheduled maturity of any Loan or Note in which such participant is participating (it being understood that any waiver of any prepayment of, or the method of any application of any prepayment to, the Loans shall not constitute an extension of the Maturity Date therefor), or reduce the rate or extend the time of payment of interest or Fees (except in connection with a waiver of the applicability of any post-default increase in interest rates), or reduce the principal amount thereof, or increase such participant’s participating interest in any Commitment over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Total Commitment or a mandatory prepayment shall not constitute a change in the terms of any Commitment), (ii) release all or substantially all of the Collateral, (iii) release all or substantially all of the Subsidiaries from the Subsidiary Guaranty (except as provided therein) or (iv) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement or any other Credit Document.

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(b)Notwithstanding the foregoing, (x) any Lender may assign all or a portion of its outstanding B Term Loans, Delayed-Draw Term Commitments and/or Revolving Commitment and its rights and obligations hereunder (which assignment does not have to be pro rata among the Facilities) to (i)(A) its parent company and/or any affiliate of such Lender which is at least 50% owned by such Lender or its parent company or (B) to one or more other Lenders or any affiliate of any such other Lender which is at least 50% owned by such other Lender or its parent company (provided that any fund that invests in loans and is managed or advised by the same investment advisor of another fund which is a Lender (or by an affiliate of such investment advisor) shall be treated as an affiliate of such other Lender for the purposes of this sub-clause (x)(i)(B)), or (ii) in the case of any Lender that is a fund that invests in loans, any other fund that invests in loans and is managed and/or advised by the same investment advisor of such Lender or by an Affiliate of such investment advisor and (y) with the consent of the Administrative Agent and, if no Default under Section 8.01 or 8.05 or Event of Default exists, the Borrower (which consents shall not be unreasonably withheld or delayed), any Lender (or any Lender together with one or more other related Lenders) may assign all, or if less than all, a portion equal to at least (I) in the case of Revolving Commitments, $2,500,000 in the aggregate for the assigning Lender or Lenders of such outstanding Loans and Commitments and its or their related rights and obligations hereunder and (II) in the case of B Term Loans and Delayed-Draw B Term Commitments, $1,000,000 in the aggregate for the assigning Lender or Lenders of such outstanding Loans and/or Commitments and its or their related rights and obligations hereunder, to one or more Eligible Transferees (treating any fund that invests in loans and any other fund that invests in loans and is managed and/or advised by the same investment advisor of such fund or by an Affiliate of such investment advisor of such fund or by an Affiliate of such investment advisor as a single Eligible Transferee).  If any Lender so sells or assigns all or a part of its rights hereunder or under the Notes, any reference in this Agreement or the Notes to such assigning Lender shall thereafter refer to such Lender and to the respective assignee to the extent of their respective interests and the respective assignee shall have, to the extent of such assignment (unless otherwise provided therein), the same rights and benefits as it would if it were such assigning Lender.  Each assignment pursuant to this Section 11.04(b) shall be effected by the assigning Lender and the assignee Lender executing an Assignment Agreement and giving the Administrative Agent written notice thereof.  At the time of any such assignment, (i) either the assigning or the assignee Lender shall pay to the Administrative Agent a nonrefundable assignment fee of $3,500 (provided that only one assignment fee shall be payable in respect of any reasonably contemporaneous assignment by a Lender to any one or more funds that invest in loans and are managed and/or advised by the same investment advisor of such Lender or by an Affiliate of such investment advisor), (ii) Annex I shall be deemed to be amended to reflect the Commitments and Loans of the respective assignee (which shall result in a direct reduction to the Commitment of the assigning Lender) and of the other Lenders, and (iii) upon surrender of the old Notes the Borrower will, at its own expense, issue new Notes to the respective assignee and to the assigning Lender in conformity with the requirements of Section 1.05, provided, further, that such transfer or assignment will not become effective until recorded by the Administrative Agent on the Lender Register pursuant to Section 11.16.  To the extent of any assignment pursuant to this Section 11.04(b) to a Person which is not already a Lender hereunder and which is not a United States Person (as such term is defined in Section 7701(a)(30) of the Code) for Federal income tax purposes, the respective assignee Lender shall provide to the Borrower and the Administrative Agent the appropriate Internal Revenue Service Forms (and, if applicable, a

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Section 3.04 Certificate) described in Section 3.04(b).  To the extent that an assignment pursuant to this Section 11.04(b) would, at the time of such assignment, result in increased costs under Section 1.10 or 3.04 from those being charged by the respective assigning Lender prior to such assignment, then the Borrower shall not be obligated to pay such increased costs (although the Borrower shall be obligated to pay any other increased costs of the type described above resulting from changes after the date of the respective assignment).  Nothing in this clause (b) shall prevent or prohibit any Lender from pledging its Notes or Loans to a Federal Reserve Bank in support of borrowings made by such Lender from such Federal Reserve Bank and, with prior written notice to the Administrative Agent, any Lender which is a fund may pledge all or any portion of its Notes or Loans to its trustee or to a collateral agent or to another creditor providing credit or credit support to such Lender in support of its obligations to such trustee, such collateral agent or a holder of, or any other representative of a holder of, such obligations, or such other creditor, as the case may be; provided that no such pledge shall release the transferor Lender from any of its obligations hereunder or substitute any such trustee, collateral agent or other assignee for such Lender as a party hereto.

(c)Notwithstanding any other provisions of this Section 11.04, no transfer or assignment of the interests or obligations of any Lender hereunder or any grant of participation therein shall be permitted if such transfer, assignment or grant would require the Borrower or any of its Subsidiaries to (i) file a registration statement with the SEC, (ii) qualify the Loans under the “Blue Sky” laws of any State or (iii) integrate such transfer or assignment with a separate securities offering of securities of the Borrower or any of its Subsidiaries.

(d)Each Lender initially party to this Agreement hereby represents, and each Person that became a Lender pursuant to an assignment permitted by this Section 11 will, upon its becoming party to this Agreement, represent that it is an Eligible Transferee which makes or invests in loans in the ordinary course and that it will make or acquire Loans for its own account in the ordinary course, provided that subject to the preceding clauses (a) and (b), the disposition of any promissory notes or other evidences of or interests in Indebtedness held by such Lender shall at all times be within its exclusive control.

(e)Any Lender which assigns all of its Commitments and/or Obligations hereunder in accordance with Section 11.04(b) shall cease to constitute a “Lender” hereunder, except with respect to indemnification provisions under this Agreement (including, without limitation, Sections 1.10, 1.11, 1A.06, 3.04, 11.01 and 11.06), which shall survive as to such assigning Lender.

11.05  No Waiver; Remedies Cumulative.  No failure or delay on the part of the Administrative Agent or any Lender in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between any Credit Party and the Administrative Agent or any Lender shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder.  The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which the Administrative Agent or any Lender would otherwise have.  No notice to or demand on any Credit Party in any case shall entitle any Credit Party to any other or further notice or demand in similar or other circumstances

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or constitute a waiver of the rights of the Administrative Agent or the Lenders to any other or further action in any circumstances without notice or demand.

11.06  Payments Pro Rata.  (a)  The Administrative Agent agrees that promptly after its receipt of each payment from or on behalf of any Pledge Party in respect of any Obligations of such Pledge Party hereunder, it shall distribute such payment to the Lenders (other than any Lender that has expressly waived its right to receive its pro rata share thereof) pro rata based upon their respective shares, if any, of the Obligations with respect to which such payment was received.

(b)Each of the Lenders agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker’s lien, by counterclaim or cross action, by the enforcement of any right under the Credit Documents, or otherwise) which is applicable to the payment of the principal of, or interest on, the Loans or Fees, of a sum which with respect to the related sum or sums received by other Lenders is in a greater proportion than the total of such Obligation then owed and due to such Lender bears to the total of such Obligation then owed and due to all of the Lenders immediately prior to such receipt, then such Lender receiving such excess payment shall purchase for cash without recourse or warranty from the other Lenders an interest in the Obligations of the respective Pledge Party to such Lenders in such amount as shall result in a proportional participation by all of the Lenders in such amount, provided that if all or any portion of such excess amount is thereafter recovered from such Lender, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest.

(c)Notwithstanding anything to the contrary contained herein, the provisions of the preceding Sections 11.06(a) and (b) shall be subject to the express provisions of this Agreement which require, or permit, differing payments to be made to Non-Defaulting Lenders as opposed to Defaulting Lenders.

11.07  Calculations; Computations.  (a)  The financial statements to be furnished to the Lenders pursuant hereto shall be made and prepared in accordance with GAAP consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the Borrower to the Lenders), provided that (x) except as otherwise specifically provided herein, all computations determining compliance with Sections 7.11 and 7.12, including definitions used therein, shall utilize accounting principles and policies in effect at the time of the preparation of, and in conformity with those used to prepare, the December 31, 2003 historical financial statements of the Borrower delivered to the Lenders pursuant to Section 5.10(b), (y) that if at any time such computations utilize accounting principles different from those utilized in the financial statements furnished to the Lenders, such financial statements shall be accompanied by reconciliation work-sheets and (z) for purposes of calculating financial terms, all covenants and related definitions, all such calculations based on the operations of the Borrower and its Subsidiaries on a consolidated basis shall be made without giving effect to the operations of any Unrestricted Subsidiaries.

(b)All computations of interest and Fees hereunder shall be made on the actual number of days elapsed over a year of 360 days (365-366 days in the case of interest on Base Rate Loans).

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11.08  Governing Law; Submission to Jurisdiction; Venue; Waiver of Jury Trial.  (a)  This Agreement and the other Credit Documents and the rights and obligations of the parties hereunder and thereunder shall be construed in accordance with and be governed by the law of the State of New York.  Any legal action or proceeding with respect to this Agreement or any other Credit Document may be brought in the courts of the State of New York sitting in the Borough of Manhattan or of the United States for the Southern District of New York, and, by execution and delivery of this Agreement, each Credit Party hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts.  Each Credit Party further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to each Credit Party located outside New York City and by hand delivery to each Credit Party located within New York City, at its address for notices pursuant to Section 11.03, such service to become effective 30 days after such mailing.  Nothing herein shall affect the right of the Administrative Agent, any Lender to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against any Credit Party in any other jurisdiction.

(b)Each Credit Party hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement or any other Credit Document brought in the courts referred to in clause (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum.

(c)Each of the parties to this Agreement hereby irrevocably waives all right to a trial by jury in any action, proceeding or counterclaim arising out of or relating to this Agreement, the other Credit Documents or the transactions contemplated hereby or thereby.

11.09  Counterparts.  This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.  A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Administrative Agent.

11.10  Effectiveness.  This Agreement shall become effective on the date (the “Effective Date”) on which each of the Borrower, the Administrative Agent, the Syndication Agent, each Co-Documentation Agent and each Lender shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered the same (including by way of facsimile transmission) to the Administrative Agent.  The Administrative Agent will give the Borrower and each Lender prompt written notice of the occurrence of the Effective Date.

11.11  Headings Descriptive.  The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.

11.12  Amendment or Waiver.  (a)  Neither this Agreement nor any other Credit Document nor any terms hereof or thereof may be changed, waived, discharged or terminated

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unless such change, waiver, discharge or termination is in writing signed by the Borrower and the Required Lenders, provided that no such change, waiver, discharge or termination shall, without the consent of each Lender (other than a Defaulting Lender) (with Obligations being directly affected thereby in the case of the following clauses (i) and (vii)), (i) extend the final scheduled maturity of any Loan or Note (it being understood that any waiver of any prepayment of, or the method of application of any prepayment to, the Loans shall not constitute any such extension), or reduce the rate or extend the time of payment of interest (other than as a result of waiving the applicability of any post-default increase in interest rates) or Fees, or reduce (or forgive) the principal amount thereof, or increase the Commitment of any Lender over the amount thereof then in effect (it being understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default or of a mandatory reduction in the Total Commitment shall not constitute an increase of the Commitment of any Lender, and that an increase in the available portion of any Commitment of any Lender shall not constitute an increase in the Commitment of such Lender), (ii) amend, modify or waive any provision of this Section 11.12 (except for technical amendments with respect to additional extensions of credit pursuant to this Agreement which afford the protections to such additional extensions of credit of the type provided to the Initial B Term Loans and the Revolving Commitments on the Initial Borrowing Date), (iii) reduce the percentage specified in, or (except to give effect to any additional facilities hereunder) otherwise modify, the definition of Required Lenders, (iv) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement, (v) release all or substantially all of the Collateral, (vi) release all or substantially all of the Subsidiaries from the Subsidiary Guaranty (except as provided therein), or (vii) alter the requirements set forth in Sections 3.02(B) and 11.06 that certain payments with respect to Loans under a given Facility be applied or distributed on a pro rata basis to the holders of such Loans; provided, further, that no such change, waiver, discharge or termination shall, (t) except in cases where additional extensions of term loans and/or revolving loans are being afforded substantially the same treatment afforded to the Term Loans and RF Loans pursuant to this Agreement as originally in effect, without the consent of the Majority Lenders of each Facility which is being allocated a lesser prepayment, repayment or commitment reduction as a result of the actions described below, alter the required application of any prepayments or repayments (or commitment reduction), as between the various Facilities, pursuant to Sections 3.02(A)(b) through (g) and Section 2.03(c) or (e), as applicable (it being understood, however, that the Required Lenders may waive, in whole or in part, any such prepayment, repayment or commitment reduction, so long as the application, as amongst the various Facilities, of any such prepayment, repayment or commitment reduction which is still required to be made is not altered), (u) without the consent of the Majority Lenders of the respective Facility affected thereby, amend the definition of Majority Lenders (it being understood that, with the consent of the Required Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Majority Lenders on substantially the same basis as the extensions of Loans and Commitments are included on the Effective Date), (v) without the written consent of the Required RF Lenders, amend, modify or waive any condition precedent set forth in Section 4.02 or 4.03 with respect to the making of RF Loans, Swingline Loans or the issuance of Letters of Credit, (w) without the consent of each Letter of Credit Issuer, amend, modify or waive any provision of Section 1A or alter its rights or obligations with respect to Letters of Credit, (x) without the consent of the Swingline Lender, alter its rights or obligations with respect to Swingline Loans, (y) without the consent of the respective Agent, amend, modify

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or waive any provision of Section 11 as same applies to such Agent or any other provision as same relates to the rights or obligations of such Agent and (z) without the consent of the Collateral Agent, amend, modify or waive any provision relating to the rights or obligations of the Collateral Agent.

(b)If, in connection with any proposed change, waiver, discharge or termination of or to any of the provisions of this Agreement as contemplated by clauses (i) through (vi), inclusive, of the first proviso to Section 11.12(a), the consent of the Required Lenders is obtained but the consent of one or more of such other Lenders whose consent is required is not obtained, then the Borrower shall have the right, so long as all non-consenting Lenders whose individual consent is required are treated as described in either clause (A) or (B) below, to either (A) replace each such non-consenting Lender or Lenders (or, at the option of the Borrower if the respective Lender’s consent is required with respect to less than all Facilities of Loans (or related Commitments), to replace only the Revolving Commitments and/or Loans of the respective non-consenting Lender which gave rise to the need to obtain such Lender’s individual consent) with one or more Replacement Lenders pursuant to Section 1.13 so long as at the time of such replacement, each such Replacement Lender consents to the proposed change, waiver, discharge or termination or (B) terminate such non-consenting Lender’s Revolving Commitment (if such Lender’s consent is required as a result of its Revolving Commitment) and/or repay each Facility of outstanding Loans of such Lender which gave rise to the need to obtain such Lender’s consent and/or cash collateralize its applicable Percentage of the Letter of Credit of Outstandings, in accordance with Sections 2.02(b) and/or 3.02(A)(a), provided that, unless the Commitments which are terminated and Loans which are repaid pursuant to preceding clause (B) are immediately replaced in full at such time through the addition of new Lenders or the increase of the Commitments and/or outstanding Loans of existing Lenders (who in each case must specifically consent thereto), then in the case of any action pursuant to preceding clause (B), the Required Lenders (determined after giving effect to the proposed action) shall specifically consent thereto, provided, further, that the Borrower shall not have the right to replace a Lender, terminate its Commitment or repay its Loans solely as a result of the exercise of such Lender’s rights (and the withholding of any required consent by such Lender) pursuant to the second proviso to Section 11.12(a).

(c)Notwithstanding anything to the contrary contained in clause (a) above of this Section 11.12, the Borrower, the Administrative Agent and each Incremental B Term Lender may, in accordance with the provisions of Section 1.14, enter into an Incremental B Term Commitment Agreement, provided that after the execution and delivery by the Borrower, the Administrative Agent and each such Incremental B Term Lender of such Incremental B Term Commitment Agreement, such Incremental B Term Commitment Agreement may thereafter only be modified in accordance with the requirements of clause (a) above of this Section 11.12.

11.13  Survival.  All indemnities set forth herein including, without limitation, in Section 1.10, 1.11, 3.04, 10.06 or 11.01 shall survive the execution and delivery of this Agreement and the making and repayment of the Loans.

11.14  Domicile of Loans.  Each Lender may transfer and carry its Loans at, to or for the account of any branch office, subsidiary or affiliate of such Lender, provided that the Borrower shall not be responsible for costs arising under Section 1.10 or 3.04 resulting from any

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such transfer (other than a transfer pursuant to Section 1.12) to the extent not otherwise applicable to such Lender prior to such transfer.

11.15  Confidentiality.  (a)  Each of the Lenders agrees that it will use its best efforts not to disclose without the prior consent of the Borrower (other than to its employees, trustees, auditors, counsel or other professional advisors, to affiliates or to another Lender if the Lender or such Lender’s holding or parent company in its sole discretion determines that any such party should have access to such information) any information with respect to the Borrower or any of its Subsidiaries which is furnished pursuant to any Credit Document and which is designated by the Borrower or the Borrower to the Lenders in writing as confidential; provided, that any Lender may disclose any such information (a) as has become generally available to the public, (b) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such Lender or to the Federal Reserve Board or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors or to the National Association of Insurance Commissioners, (c) as may be required or appropriate in response to any summons or subpoena or in connection with any litigation (notice of which will be promptly sent to the Borrower to the extent permitted by law), (d) in order to comply with any law, order, regulation or ruling applicable to such Lender, and (e) to any pledgee referred to in Section 11.04(b) or any prospective transferee that is an Eligible Transferee that is acceptable to the Borrower in connection with any contemplated transfer of any of the Notes or any interest therein by such Lender to the extent that such prospective transferee is notified of the confidentiality requirements relating thereto.  No Lender shall be obligated or required to return any materials furnished by the Borrower or any Subsidiary.  The Borrower hereby agrees that the failure of a Lender to comply with the provisions of this Section 11.15 shall not relieve the Credit Parties of any of their obligations to such Lender under this Agreement and the other Credit Documents.

(b)The Borrower hereby represents and acknowledges that, to the best of its knowledge, neither any Lender, nor any employees or agents of, or other persons affiliated with, any Lender, have directly or indirectly made or provided any statement (oral or written) to the Borrower or to any of its employees or agents, or other persons affiliated with or related to the Borrower (or, so far as the Borrower is aware, to any other person), as to the potential tax consequences of the Transaction.

11.16  Lender Register.  The Borrower hereby designates the Administrative Agent to serve as the Borrower’s agent, solely for purposes of this Section 11.16, to maintain a register (the “Lender Register”) on which it will record the Commitments from time to time of each of the Lenders, the Loans made by each of the Lenders and each repayment in respect of the principal amount of the Loans of each of the Lenders.  Failure to make any such recordation, or any error in such recordation shall not affect the Borrower’s obligations in respect of such Loans.  With respect to any Lender, the transfer of the Commitments or Loans of such Lender and the rights to the principal of, and interest on, such Loans or any Loan made pursuant to such Commitments shall not be effective until such transfer is recorded on the Lender Register maintained by the Administrative Agent with respect to ownership of such Commitments and Loans and prior to such recordation all amounts owing to the transferor with respect to such Commitments and Loans shall remain owing to the transferor.  The registration of assignment or

126

transfer of all or part of any Commitments and Loans shall be recorded by the Administrative Agent on the Lender Register only upon the acceptance by the Administrative Agent of a properly executed and delivered Assignment Agreement pursuant to Section 11.04(b).  Any provision of Incremental B Term Commitments pursuant to Section 1.14 shall be recorded by the Administrative Agent on the Lender Register only upon the acceptance of the Administrative Agent of a properly executed and delivered Incremental B Term Commitment Agreement.  The Borrower agrees to indemnify the Administrative Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its duties under this Section 11.16 (but excluding such losses, claims, liabilities or liabilities incurred by reason of the Administrative Agent’s gross negligence or willful misconduct).

11.17  Patriot Act Notice.  Each Lender that is subject to the Patriot Act, the Letter of Credit Issuer and the Administrative Agent (for itself and not on behalf of any Lender) hereby notify the Borrower that, pursuant to the requirements of the Patriot Act, each of them is required to obtain, verify and record information that identifies each Credit Party, which information includes the name and address of such Credit Party and other information that will allow such Lender, the Letter of Credit Issuer or the Administrative Agent, as applicable, to identify such Credit Party in accordance with the Patriot Act.

11.18  Post-Closing Actions.  Notwithstanding anything to the contrary contained in this Agreement or the other Credit Documents, the parties hereto acknowledge and agree that:

(a)(i)  The security interests in respect of, and Liens securing, the Existing Seller/Opco Notes (other than the Existing Seller/Opco Note owed by the Borrower) are not required to have been terminated and released, and the Borrower and the other Credit Parties are not required to have delivered to the Administrative Agent all such releases as may have been reasonably requested by the Administrative Agent, in form and substance reasonably satisfactory to the Administrative Agent (including without limitation proper termination statements (Form UCC-3 or the appropriate equivalent)), in each case on the Initial Borrowing Date pursuant to Section 4.01(l)(vii), and (ii) within 90 days after the Initial Borrowing Date, all security interests in respect of, and Liens securing, such Existing Seller/Opco Notes shall have been terminated and released, and the Administrative Agent shall have received all such releases as may have been reasonably requested by the Administrative Agent, in form and substance reasonably satisfactory to the Administrative Agent (including without limitation proper termination statements (Form UCC-3 or the appropriate equivalent)).

(b)(i) A physical copy of the “Declaration of Effectiveness” constituting an IPO Document hereunder was not required to be delivered on the Initial Borrowing Date pursuant to Section 4.01(k) and (ii) promptly following the Borrower’s receipt thereof from the SEC, a physical copy of such “Declaration of Effectiveness” shall be delivered to the Administrative Agent.

(c)(i) Certified copies of Requests for Information or Copies (Form UCC-11), or equivalent reports, each of a recent date, listing all effective financing statements that name any of the Credit Parties listed in Annex X as debtor and that are filed in the

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jurisdictions set forth opposite such Credit Party’s name in said Annex, together with copies of such other financing statements that name such Person as debtor were not required to be delivered on the Initial Borrowing Date, (ii) within 15 days following the Initial Borrowing Date, such certified copies of Requests for Information or Copies (Form UCC-11), or equivalent reports, and related copies of financing statements shall have been delivered to the Collateral Agent and (iii) within 180 days following the Initial Borrowing Date, unless otherwise agreed by the Collateral Agent in its sole discretion, the Collateral Agent shall have received termination statements (Form UCC-3) or such other termination statements as shall be required by local law, fully executed (where required) for filing, for all financing statements that name any of the Credit Parties listed in Annex X as debtor and which cover any of the Collateral (except to the extent evidencing Permitted Liens).

All conditions precedent and representations contained in this Agreement and the other Credit Documents shall be deemed modified to the extent necessary to effect the foregoing (and to permit the taking of the actions described above within the time periods required above, rather than as elsewhere provided in the Credit Documents), provided that (x) to the extent any representation and warranty would not be true because the foregoing actions were not taken on the Initial Borrowing Date, the respective representation and warranty shall be required to be true and correct in all material respects at the time the respective action is taken (or was required to be taken) in accordance with the foregoing provisions of this Section 11.18 and (y) all representations and warranties relating to the Pledge Agreement shall be required to be true in all material respects immediately after the actions required to be taken by Section 11.18 have been taken (or were required to be taken).  The incurrence of Loans on the Initial Borrowing Date shall constitute a representation, warranty and covenant by the Borrower to each of the Lenders that the actions required pursuant to this Section 11.18 will be, or have been, taken within the relevant time periods referred to in this Section 11.18 and that, at such time, all representations and warranties contained in this Agreement and the other Credit Documents shall then be true and correct in all material respects without any modification pursuant to this Section 11.18, and the parties hereto acknowledge and agree that the failure to take any of the actions required above, within the relevant time periods required above, shall give rise to an immediate Event of Default pursuant to this Agreement.

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IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written.

Address:	FAIRPOINT COMMUNICATIONS, INC.
521 East Morehead Street, Suite 250
Charlotte, NC 28202	By:	/s/ Timothy W. Henry
		Title: Vice President of Finance & Treasurer
	DEUTSCHE BANK TRUST COMPANY AMERICAS, Individually and as Administrative Agent
	By:	/s/ Anca Trifan
		Title:   Director
	BANK OF AMERICA, N.A., Individually and as Syndication Agent
	By	/s/ Robert Klawinski
		Title: Senior Vice President
	COBANK, ACB, Individually and as Co- Documentation Agent
	By	/s/ Rick Freeman
		Title: Vice President
	GENERAL ELECTRIC CAPITAL CORPORATION, Individually and as Co- Documentation Agent
	By	/s/ Matthew A. Toth III
		Title: Authorized Signatory
	GOLDMAN SACHS CREDIT PARTNERS L.P.
	By	/s/ William Archer
		Title: Authorized Signatory
	MORGAN STANLEY SENIOR FUNDING, INC.
	By	/s/ Eugene F. Martin
		Title: Vice President

FairPoint Credit Agreement

CIT LENDING SERVICES CORPORATION
By	/s/ Michael V. Monahan
	Title: Vice President
WACHOVIA BANK, NATIONAL ASSOCIATION
By	/s/ Franklin M. Wessigner
	Title: Managing Director

ANNEX 1

LENDER COMMITMENTS

	Revolving Commitments		Initial B Term Commitments		Delayed-Draw B Term Commitments
Deutsche Bank Trust Company Americas	$	25,925,000	$	518,500,000	$	9,250,000
Bank of America, N.A.	$	20,925,000			$	9,250,000
Goldman Sachs Credit Partners L.P.	$	12,825,000
Morgan Stanley Senior Funding, Inc.	$	12,825,000
CoBank, ACB	$	10,000,000	$	47,500,000	$	2,000,000
General Electric Capital Corporation	$	10,000,000			$	2,000,000
CIT Lending Services Corporation	$	5,000,000
Wachovia Bank, National Association	$	2,500,000
	$	100,000,000	$	566,000,000	$	22,500,000

ANNEX II

LENDER ADDRESSES

DEUTSCHE BANK TRUST COMPANY AMERICAS	60 Wall Street New York, NY 10006 Attention: Anca Trifan Telephone: 646-324-2184 Facsimile: 646-324-7456
BANK OF AMERICA, N.A.	901 Main Street, 14th Floor Dallas, TX 75202 Attention: Shelley Bloom Telephone: 214-209-4103 Facsimile: 214-290-9462
GOLDMAN SACHS CREDIT PARTNERS L.P.	30 Hudson Street, 17th Floor Jersey City, NJ 07302 Attention: Philip Green/Rosalee Gordon Telephone: 212-357-7570/4256 Facsimile: 212-357-4597
MORGAN STANLEY SENIOR FUNDING, INC.	1633 Broadway, 25th Floor New York, NY 10019 Attention: Larry Benison Telephone: 212-537-1439 Facsimile: 212-537-1866
COBANK, ACB	5500 South Quebec St. Greenwood Village, CO 80111 Attention: Deann Sullivan Telephone: 303-740-4315 Facsimile: 303-740-4021
GENERAL ELECTRIC CAPITAL CORPORATION	Corporate Financial Services 201 Merritt 7, P.O. Box 5201 Norwalk, CT 06856-5201 Attention: Mary Lou Parks Telephone: 203-229-5740 Facsimile: 203-229-5791
CIT LENDING SERVICES CORPORATION	1211 Avenue of the Americas, 21st Floor New York, NY 10036 Attention: Delilah DeMetro Telephone: 212-536-1299 Facsimile: 212-536-1329
WACHOVIA BANK, NATIONAL ASSOCIATION	301 South College Street Charlotte, NC 28288 Attention: Sharon Gibson Telephone: 704-715-0094 Facsimile: 704-715-7608

ANNEX III

SUBSIDIARIES

A.FairPoint Broadband, Inc. (f/k/a MJD Holdings Corp.) - 3,000 shares of Common Stock, par value $.01 per share, authorized; 100 shares issued and outstanding.

FairPoint Communications, Inc. - 100 shares
Morehead Place, 521 E. Morehead Street,
Suite 250, Charlotte, North Carolina 28202

B.ST Enterprises, Ltd. - 200,000 shares of Common Stock, par value $.01 per share, authorized; 90,000 shares issued and outstanding.

FairPoint Communications, Inc. - 90,000 shares
Morehead Place, 521 E. Morehead Street,
Suite 250, Charlotte, North Carolina 28202
Common Stock Purchase Warrants - 222.98 warrants issued and outstanding

Steve McGeeney - Warrants to purchase 111.49 shares
c/o Paul, Hastings, Janofsky & Walker LLP
Ninth Floor
1055 Washington Boulevard
Stamford, Connecticut  06901-2217

Sylvana Zoberg - Warrants to purchase 111.49 shares
418 East 59th Street
New York, New York  10022

C.All the issued and outstanding stock of the following entities is held by ST Enterprises, Ltd., P.O. Box 199, Dodge City, Kansas 67801:

Northland Telephone Company of Maine, Inc. - 200 shares of Common stock, par value $.01 per share, authorized; 100 shares issued and outstanding

STE/NE Acquisition Corp. (d/b/a Northland Telephone Company of Vermont) - - 1,000 shares of Common Stock, par value $.01 per share, authorized; 1,000 shares issued and outstanding

ST Computer Resources, Inc. - 10,000 shares of Common Stock, no par value, authorized; 500 shares issued and outstanding

ST Long Distance, Inc. - 1,000 shares of Common Stock, par value $.01 per share, authorized; 100 shares issued and outstanding

D.Sunflower Telephone Company, Inc. - 1,500 shares of Common Stock, par value $100 per share, authorized; 968 shares issued and outstanding.  1,500 shares of Preferred Stock, par value $100 per share, authorized; 234 preferred shares issued and outstanding (234 preferred shares and 282 common shares held in treasury).

ST Enterprises, Ltd. - 684 common shares
P.O. Box 199
Dodge City, Kansas 67081

Frank and Mathilda Schreck - 2 common shares
Marienthal, Kansas  67863

E.MJD Ventures, Inc. - 100 shares of Common Stock, par value $.01 per share, authorized; 100 shares issued and outstanding.

FairPoint Communications, Inc. - 100 common shares
Morehead Place, 521 E. Morehead Street,
Suite 250, Charlotte, North Carolina 28202

F.All of the issued and outstanding stock of the following entities is held by MJD Ventures, Inc., Morehead Place, 521 E. Morehead Street, Suite 250, Charlotte, North Carolina 28202:

Sidney Telephone Company - 100,000 shares of Common Stock, par value $.01 per share, authorized; 100 common shares issued and outstanding.

Ellensburg Telephone Company - 50,000 shares of Common Stock, par value $10.00 per share, authorized; 100 shares issued and outstanding.

Taconic Telephone Corp. - 100 shares of Common Stock, par value $100 per share, authorized; 100 shares issued and outstanding.

Chouteau Telephone Company - 100 shares of Common Stock, par value $.01 per share, authorized; 100 shares issued and outstanding.

C-R Communications, Inc. - 750 shares of Common Stock, without par value, authorized; 750 shares issued and outstanding.

Telephone Service Company - 8,000 shares of Common Stock, no par value, authorized; 100 shares issued and outstanding.

Chautauqua and Erie Telephone Corporation - 100,000 shares of Common Stock, par value $.01 per share, authorized; 100 shares

2

issued and outstanding.  35,000 shares of Preferred Stock, par value $50 per share, authorized; 0 shares issued and outstanding.

The Columbus Grove Telephone Company - 500 shares of Common Stock, $100 par value, authorized; 318 shares issued and outstanding.

Utilities, Inc. - 50,000 shares of Common Stock, par value $.01 per share, authorized; 100 shares issued and outstanding; 20,000 shares of Preferred Stock authorized; 0 shares outstanding.

The Orwell Telephone Company - 10,000  shares of Common Stock, no par value, authorized; 4,795.7461 shares issued and outstanding.

GTC Communications, Inc. – 1,500,000 shares of Common Stock, par value $0.01 per share, authorized; 1,000,000 shares issued and outstanding.

Peoples Mutual Telephone Company – 12,000 shares of Common Stock, par value $25.00 per share, authorized; 9,832 shares issued and outstanding.

Fremont Telcom Co. - 100,000 shares of Common Stock, no par value, authorized; 5,155.5 issued and outstanding.

Fretel Communications, LLC - 100% membership interest

Comerco, Inc. - 50,000 shares of Common Stock, $10 par value, authorized; 31,250 shares issued and outstanding.

Marianna and Scenery Hill Telephone Company - 2400 shares of Common Stock, par value $25 per share, authorized; 306 shares issued and outstanding and 400 shares of Preferred Stock, par value $100 per share; 0 shares issued and outstanding (194 shares of Common Stock are held in treasury).

Commtel Communications Inc. – 100,000 shares of Common Stock, par value $1.00 per share, authorized, 1 share issued and outstanding.

Community Service Telephone Co. (d/b/a FairPoint New England – Community Service Telephone Co.) – 250,000 shares of Common Stock, par value $10.00 per share, authorized; 100 shares issued and outstanding.

FairPoint Berkshire Corporation – 200 shares of Common Stock, no par value, authorized; 100 shares issued and outstanding.

3

G.YCOM Networks, Inc. - 450 shares of Common Stock, $100 par value, authorized; 294 shares issued and outstanding.

Comerco, Inc. - 294 shares

H.Peoples Mutual Services Company – 500 shares of Common Stock, no par value, authorized; 1 share issued and outstanding.

Peoples Mutual Telephone Company – 1 share

I.Peoples Mutual Long Distance Company – 10,000 shares of Common Stock, no par value authorized; 10,000 shares issued and outstanding.

Peoples Mutual Telephone Company – 10,000 shares

J.St. Joe Communications, Inc. – 1,000 shares of Common Stock, par value $1.00 per share, authorized; 1,000 shares issued and outstanding.

GTC Communications, Inc. – 1,000 shares

K.GTC, Inc. – 25,000 shares of Common Stock, par value $100 per share, authorized; 14,890 shares issued and outstanding.

St. Joe Communications, Inc. – 14,890 shares

L.GTC Finance Corporation (f/k/a TPGC Finance Corporation)  – 300 shares of Common Stock, par value $0.01 per share, authorized; 300 shares issued and outstanding.

GTC, Inc. – 300 shares

M.MJD Services Corp. - 100 shares of Common Stock, par value $.01 per share, authorized; 100 shares issued and outstanding.

FairPoint Communications, Inc. - 100 shares
Morehead Place, 521 E. Morehead Street,
Suite 250, Charlotte, North Carolina 28202

N.Marianna Tel, Inc. - 100 shares of Common Stock, par value $10 per share authorized; 100 shares issued and outstanding.

Marianna and Scenery Hill Telephone Company - 100 shares

O.All of the issued and outstanding stock of the following entities is held by MJD Services Corp., Morehead Place, 521 E. Morehead Street, Suite 250, Charlotte, North Carolina 28202:

Bluestem Telephone Company - 100 shares of Common Stock, par value $.01 per share, authorized; 100 shares issued and outstanding.

4

Big Sandy Telecom, Inc. - 100 shares of Common Stock, par value $.01 per share, authorized; 100 shares issued and outstanding.

Columbine Telecom Company (f/k/a Columbine Acquisition Corp.) - 100 shares of Common Stock, par value $.01 per share, authorized; 100 shares issued and outstanding.

Ravenswood Communications, Inc. - 1,000 shares of Common Stock, no par value, authorized; 405 shares issued and outstanding.

Yates City Telephone Company - 500 shares of Common Stock, $20.00 par value, authorized; 252 issued and outstanding.

P.Odin Telephone Exchange, Inc. - 150 shares of Common Stock, no par value per share, authorized; 101 shares issued and outstanding (5.7143 shares held in treasury).

MJD Services Corp. - 95.2857 common shares
521 E. Morehead Street, Suite 250
Charlotte, North Carolina  28202

Q.Orwell Communications, Inc. - 500 shares of Common Stock, no par value, authorized; 500 issued and outstanding.

The Orwell Telephone Company – 500 shares
70 South Maple Street
P.O. Box 337
Orwell, Ohio 44076-0337

R.MJD Capital Corp. - 100 shares of Common Stock, par value $.01 per share, authorized; 100 shares issued and outstanding.

FairPoint Communications, Inc. - 100 shares
Morehead Place, 521 E. Morehead Street,
Suite 250, Charlotte, North Carolina 28202

S.All of the issued and outstanding stock of the following entities is held by C-R Communications, Inc., 106 N. 6th Street, Cornell, Illinois 61319:

C-R Telephone Company - 750 shares of Common Stock, par value $10.00 per share, authorized; 100 shares issued and outstanding.

C-R Long Distance, Inc. -  10,000 shares of Common Stock, no par value, authorized; 100 shares issued and outstanding.

T.Elltel Long Distance Corp. – 100 shares of Common Stock, $0.01 par value,  authorized; 100 shares issued and outstanding.

5

Ellensburg Telephone Company – 100 shares
305 N. Ruby St.
P.O. Box 308
Ellensburg, WA 98926

U.All of the issued and outstanding stock of the following entities is held by Taconic Telephone Corp., One Taconic Place, Chatham, NY 12037:

Taconic Cellular Corp. - 1 share of Common Stock, no par value, authorized; 1 share issued and outstanding.

Taconic Technology Corp. - 200 shares of Common Stock, no par value, authorized; 200 shares issued and outstanding.

Taconic TelCom Corp. - 1 share of Common Stock, no par value, authorized; 1 share issued and outstanding.

Taconet Wireless Corp. - 1 share of Common Stock, no par value, authorized; 1 share issued and outstanding.

Taconet Corp. - 1 share of Common Stock, no par value, authorized; 1 share issued and outstanding.

V.Chouteau Telecommunications & Electronics, Inc. - 200,000 shares of Common Stock, par value $.01 per share, authorized; 100,000 shares issued and outstanding.

Chouteau Telephone Company – 100,000 shares.
102 S. McCracken
P.O. Box 909
Chouteau, OK 74337

W.All of the issued and outstanding stock of the following entities is held by Utilities, Inc., One Ossippee Trail East, P.O. Box 1480, Standish, ME 04084:

Standish Telephone Company - 26,000 shares of Common Stock, par value $25.00 per share, authorized, 23,560 shares issued and outstanding.  12,000 shares of Preferred Stock authorized, 0 shares issued and outstanding.

China Telephone Company - 20,000 shares of Common Stock, par value $10.00 per share, authorized; 20,000 shares issued and outstanding.

Maine Telephone Company - 100,000 shares of Common Stock, par value $.01 per share, authorized; 100 shares issued and outstanding.

6

UI Long Distance, Inc. - 100,000 shares of Common Stock, par value $.01 per share, authorized; 100 shares issued and outstanding.

UI Communications, Inc. - 100,000 shares of Common Stock, par value $.01 per share, authorized; 100 shares issued and outstanding.

UI Telecom, Inc. - 100,000 shares of Common Stock, par value $.01 per share, authorized; 100 shares issued and outstanding.

X.All of the issued and outstanding stock of the following entities is held by Ravenswood Communications, Inc., 48 West 1st Street, P.O. Box 257, El Paso, Illinois 61738:

The El Paso Telephone Company - 800 shares of Common Stock, par value $25 per share, authorized; 405 shares issued and outstanding.

El Paso Long Distance Company - 1,000 shares of Common Stock, no par value per share, authorized; 1,000 shares issued and outstanding.

Y.Quality One Technologies, Inc. - 850 shares of Common Stock, no par value, authorized; 850 shares issued and outstanding.

The Columbus Grove Telephone Company – 850 shares.

Z.All of the issued and outstanding stock of the following entities is held by Chautauqua and Erie Telephone Corporation, 30 Main Street, Westfield, New York 14787:

Chautauqua & Erie Communications, Inc. (f/k/a Chautauqua & Erie Technologies, Inc.) – 200 shares of Common Stock, no par value, authorized; 110 shares issued and outstanding.

Chautauqua & Erie Network, Inc. – 200 shares of Common Stock, no par value, authorized; 101 shares issued and outstanding.

C&E Communications, Ltd. – 200 shares of Common Stock, no par value, authorized; 101 shares issued and outstanding.

Western New York Cellular, Inc. – 200 shares of Common Stock, no par value, authorized; 101 shares issued and outstanding.

AA.Chautauqua Cable, Inc. – 200 shares of Common Stock, no par value, authorized; 100 shares issued and outstanding.

Western New York Cellular, Inc. – 100 shares.

7

BB.FairPoint Carrier Services, Inc. (f/k/a FairPoint Communications Solutions Corp., f/k/a FairPoint Communications Corp.) . – 3000 shares of Common Stock, $.01 par value, authorized, 100 issued and outstanding.

FairPoint Communications, Inc. - 100 shares
Morehead Place, 521 E. Morehead Street,
Suite 250, Charlotte, North Carolina 28202

CC.All of the issued and outstanding stock of the following entities is held by FairPoint Carrier Services, Inc., Morehead Place, 521 E. Morehead Street, Suite 250, Charlotte, North Carolina 28202:

FairPoint Communications Solutions Corp. – New York – 100 shares of Common Stock, par value $0.01 per share authorized; 100 shares issued and outstanding.

FairPoint Communications Solutions Corp. – Virginia – 25,000 shares of Common Stock, par value $1.00 per share authorized; 100 shares issued and outstanding.

DD.The sole member of Fremont Broadband, LLC is Fremont Telcom Co.

8

ANNEX IV

ERISA §3(2) PENSION PLANS SUBJECT TO TITLE IV

ACTIVE PLANS

1.None

MULTIEMPLOYER PLANS PREVIOUSLY CONTRIBUTED TO

1.Marianna and Scenery Hill Telephone Company previously contributed to the National Telephone Cooperative Association Defined Benefit Plan during the period between September 2001 (when Borrower acquired the stock of this Subsidiary) to December 31, 2002.  During this period, these contributions were for amounts which were a very small percentage of this plan’s total participants and total assets and contributions. Since 2002, Borrower has not received and does not anticipate any request or demand that it contribute additional amounts following its withdrawal in 2002.

TERMINATED OR MERGED PLANS
NO ASSETS REMAIN

1.Retirement Plan of Utilities, Inc and Associated Employers for Standish Telephone Company and China Telephone Company

2.Retirement Plan of Utilities, Inc. and Associated Employers for Telephone Service Co.

3.STE/NE Acquisition Corp. Pension Plan for Vermont Employees of Transferred GTE Operations

4.Retirement Plan for Employees of the Ellensburg Telephone Company

5.Chautauqua and Erie Telephone Corporation Management Pension Plan

6.Chautauqua and Erie Telephone Corporation Union Pension Plan

7.Taconic Telephone Corp Union Employee Defined Benefit Plan

8.Retirement Plan of Utilities, Inc and Associated Employers for Utilities, Inc.

9.Taconic Telephone Corp. Management Employee Defined Benefit Plan

10.St. Joe Communications, Inc. Salaried Employees Pension Plan

11.St. Joe Communications, Inc. Hourly Employees Pension Plan

ANNEX V

EXISTING LIENS

A.Liens on Capital Stock and Other Equity Interests of FairPoint Communications, Inc. and the Subsidiaries

1.Under Kansas law, the minority stockholders of Sunflower Telephone Company, Inc. have the right to participate in any issuance of stock by Sunflower Telephone Company, Inc. on a pro rata basis.

Mortgages

2.Supplemental Mortgage and Security Agreement dated as of May 6, 1975 by Taconic Telephone Corp. in favor of the United States of America (as filed in Columbia, Dutchess and Rensselaer Counties, New York).*

3.Mortgage and Security Agreement dated as of June 7, 1960 by Yelm Telephone Company in favor of the Rural Electrification Administration.*

4.Supplemental Mortgage and Security Agreement dated as of October 8, 1977 by Yelm Telephone Company in favor of the Rural Electrification Administration and Rural Telephone Bank.*

5.Restated Mortgage, Security Agreement, and Financing Statement dated as of December 12, 1994 in favor of the Rural Electrification Administration. *

6.Supplemental Mortgage and Security Agreement dated as of July 20, 1994 by Maine Telephone Company in favor of the Rural Telephone Finance Cooperative.

Liens on Tangible Personal Property of the Company and its Subsidiaries

7.Liens on the capital stock of the Subsidiaries as described in Annex V(A).

8.Liens on all tangible personal property of Taconic Telephone Corp. in favor of the United States of America.*

9.Liens on all tangible personal property of Yelm Telephone Company in favor of Rural Electrification Administration.*

10.Liens on all tangible personal property of Yelm Telephone Company in favor of Rural Electrification Administration and Rural Telephone Bank.*

11.Liens on all tangible personal property of Maine Telephone Company in favor of Rural Telephone Finance Cooperative.

* To be released post-closing in accordance with Section 11.18 of the Credit Agreement.

ANNEX VI

SCHEDULED EXISTING INDEBTEDNESS

1.Indemnification Agreement dated July 31, 1994 among WFT Acquisition Co., STE/NE Acquisition Corp. and Vermont Telephone Company, Inc.

2.Unsecured Demand Notes to Chautauqua and Erie Telephone Corporation from various holders in the approximate aggregate principal amount of $387,000.

3.Secured Note of Maine Telephone Company payable to Rural Telephone Finance Cooperative in an approximate outstanding principal amount of $2,156,200.

ANNEX VII

EXISTING INVESTMENTS

A.Investments

1.Odin Telephone Exchange, Inc. owns 2,006 shares (representing 14.29%) of the common stock, $.01 par value of Southern Illinois Cellular Corp. (“SICC”), which provides cellular telephone services within certain restricted areas of central and southern Illinois.

2.The following entities own shares of Rural Telephone Bank:

•Sunflower Telephone Company, Inc. – 571 Class C shares

•Sidney Telephone Company – 131 Class C shares

•Northland Telephone Company of Maine, Inc. – 2,176 Class C shares

•Big Sandy Telecom, Inc. – 5 Class C shares

•Odin Telephone Exchange, Inc. – 33 Class C

•C-R Telephone Company – 18 Class C shares

3.FairPoint Communications, Inc. has ownership in CoBank in the form of a Class B Participation Certificate in the approximate amount of $5,220,000.

4.MJD Ventures, Inc. holds Patronage Capital Certificates in Rural Telephone Finance Corporation in the approximate amount of $418,989.

5.MJD Ventures, Inc. owns 700 shares (12.5%) of Illinois Valley Cellular RSA 2, Inc., an Illinois corporation, which provides switching services to the Illinois Valley Cellular RSA 2-I, 2-II and 2-III Partnerships.

6.MJD Services Corp. owns 700 shares (12.5%) of Illinois Valley Cellular RSA 2, Inc.

7.Taconic Telephone Corp. owns a 7.5% limited partnership interest in the Orange County - Poughkeepsie Limited Partnership.

8.Fremont Telecom Co. owns a 13.9% membership interest in Syringa Networks, LLC, an Idaho limited liability company, engaged in providing broadband telecommunications services.

9.FairPoint Communications, Inc. owns 60,000 shares of Community Service Communications, Inc.

10.The attached addendum will serve to document other non-material investments held by FairPoint Communications, Inc. or its Subsidiaries.

FairPoint Communications, Inc.
Addendum – Non-Material Investments

	Book Value December 31, 2004
Chouteau Cellular	72,409
ICTC, Inc.	7,605
Illinet	11,073
NYS Independent Ptnship	0
New York Access Billing LLC	32,868
Country Club	500
Krupp Investments	1,527
ANPI	0
Tangible Data Options, LLC	1,529
Benton Ridge Telephone	10,000
Vital LC	0
Fall River	3,239
Linktel	0
Accelernet	95,478
NRTC	5,981
REC	1,864
Hancock	1,357
Peoples Mutual Services	10,000
Choice One	0
Other	27
Total Other	255,456
NQDC Plan*	568,029

* An asset, but also an offsetting liability carried on the balance sheet.

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ANNEX VIII

AFFILIATE TRANSACTIONS

A.FairPoint Communications, Inc. has Management Services Agreements with each of its mid-tier subsidiaries, ST Enterprises, Ltd., MJD Ventures, Inc., MJD Services Corp. and FairPoint Broadband, Inc. (the “Mid-Tier Subsidiaries”).

B.ST Enterprises, Ltd. has Management Services Agreements with MJD Ventures, Inc., MJD Services Corp. and FairPoint Broadband, Inc.

C.Each Mid-Tier Subsidiary has entered into Management Services Agreements with each of its respective operating subsidiaries.

D.Warrants as described on Annex III.

E.Travel advances in the ordinary course of business.

F.Affiliate Registration Rights Agreement, dated as of February 8, 2005 between FairPoint Communications, Inc. and certain of its stockholders.

G.Nominating Agreement, by and among FairPoint Communications, Inc., Kelso Investment Associates V, L.P., Kelso Equity Partners V, L.P. and Thomas H. Lee Equity Fund IV, L.P. dated as of February 8, 2005.

H.Amended and Restated Tax Sharing Agreement, dated November 9, 2000 by and among FairPoint Communications, Inc. and its Subsidiaries.

ANNEX IX

EXISTING LETTERS OF CREDIT

Beneficiary	Maturities	Amount
Travelers Indemnity Company	June 30, 2005	$	1,020,510

ANNEX X

POST-CLOSING MATTERS

ENTITY	JURISDICTION
BLUESTEM TELEPHONE COMPANY	Kansas-U.S. District Court
CHOTEAU TELEPHONE COMPANY	Oklahoma-Mayes County, Mayes District Court
COLUMBINE TELECOM COMPANY	Colorado-Alamosa District Court
FREMONT TELECOM CO.	Idaho-Fremont County, Fremont District Court, U.S. District Court
GT COM	Florida-Gulf County Circuit Court
GTC COMMUNICATIONS, INC.	Florida-Gulf County Circuit Court
ODIN TELEPHONE EXCHANGE, INC.	Illinois-Marion Circuit Court
SUNFLOWER TELEPHONE COMPANY INC.	Kansas-Hodgeman County, Hodgeman District Court, U.S. District Court
YCOM NETWORKS, INC.	Washington-Thurston County, Thurston Superior Court, U.S. Western District Court

EX-10.2

Exhibit 10.2

PLEDGE AGREEMENT

PLEDGE AGREEMENT, dated as of February 8, 2005 (as amended, restated, modified and/or supplemented from time to time, the “Agreement”), made by each of the undersigned pledgors (each, a “Pledgor” and together with any other entity that becomes a party hereto pursuant to Section 24 hereof, collectively, the “Pledgors”), in favor of DEUTSCHE BANK TRUST COMPANY AMERICAS, as Collateral Agent (including any successor collateral agent, the “Pledgee”) for the benefit of the Secured Creditors (as defined below).  Except as otherwise defined herein, terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as therein defined.

W I T N E S S E T H :

WHEREAS, FairPoint Communications, Inc. (the “Borrower”), the lenders from time to time party thereto (the “Lenders”), Bank of America, N.A., as Syndication Agent (the “Syndication Agent”), CoBank, ACB and General Electric Capital Corporation, as Co-Documentation Agents (the “Co-Documentation Agents”), and Deutsche Bank Trust Company Americas, as Administrative Agent (the “Administrative Agent” and together with the Lenders, the Swingline Lender, the Syndication Agent, the Co-Documentation Agents, the Collateral Agent, each Letter of Credit Issuer and the Pledgee, the “Lender Creditors”), have entered into a Credit Agreement, dated as of February 8, 2005 (as amended, restated, modified and/or supplemented from time to time, the “Credit Agreement”), providing for the making of Loans and the issuance of, and participation in, Letters of Credit as contemplated therein;

WHEREAS, the Borrower may from time to time be a party to one or more Interest Rate Agreements (each such Interest Rate Agreement with an Interest Rate Creditor (as defined below), a “Secured Interest Rate Agreement”) with Deutsche Bank Trust Company Americas, in its individual capacity (“DBTCA”), any Lender, a syndicate of financial institutions organized by DBTCA or such Lender or an affiliate of DBTCA or such Lender (even if DBTCA or any such Lender ceases to be a Lender under the Credit Agreement for any reason), and any institution that participates therein, and in each case their subsequent assigns (collectively, the “Interest Rate Creditors” and, together with the Lender Creditors, collectively, the “Secured Creditors”);

WHEREAS, it is a condition precedent to the making of Loans and the issuance of, and participation in, Letters of Credit under the Credit Agreement that each Pledgor shall have executed and delivered to the Pledgee this Agreement; and

WHEREAS, each Pledgor desires to execute this Agreement to satisfy the condition described in the preceding paragraph;

NOW, THEREFORE, in consideration of the benefits accruing to each Pledgor, the receipt and sufficiency of which are hereby acknowledged, each Pledgor hereby makes the following representations and warranties to the Pledgee and hereby covenants and agrees with the Pledgee as follows:

1.SECURITY FOR OBLIGATIONS.  This Agreement is made by each Pledgor for the benefit of the Secured Creditors to secure:

(i)the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of the Borrower (in the case of the Borrower or an NSG Pledgor) or such Pledgor (in the case of a Pledgor that is a Subsidiary Guarantor), now existing or hereafter incurred under, arising out of or in connection with any Credit Document to which the Borrower or such Pledgor, as the case may be, is a party (including, in the case of a Pledgor that is a Subsidiary Guarantor, all such obligations of such Pledgor under the Subsidiary Guaranty) and the due performance of and compliance by the Borrower or such Pledgor, as the case may be, with the terms of each such Credit Document (all such obligations and liabilities under this clause (i), except to the extent consisting of obligations or indebtedness with respect to Secured Interest Rate Agreements, being herein collectively called the “Credit Document Obligations”);

(ii)the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of the Borrower (in the case of the Borrower and each NSG Pledgor) or such Pledgor (in the case of any Pledgor that is a Subsidiary Guarantor), now existing or hereafter incurred under, arising out of or in connection with any Secured Interest Rate Agreement (all such obligations and liabilities under this clause (ii) being herein collectively called the “Interest Rate Obligations”);

(iii)any and all sums advanced by the Pledgee in order to preserve the Collateral (as hereinafter defined) and/or its security interest therein;

(iv)in the event of any proceeding for the collection of the Obligations (as defined below) or the enforcement of this Agreement, after an Event of Default (such term, as used in this Agreement, shall mean any Event of Default under the Credit Agreement or any payment default by the Borrower under any Secured Interest Rate Agreement after the expiration of any applicable grace period) shall have occurred and be continuing, the reasonable out-of-pocket expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Pledgee of its rights hereunder, together with reasonable attorneys’ fees and disbursements of counsel; and

(v)all amounts paid by any Secured Creditor as to which such Secured Creditor has the right to reimbursement under Section 11 of this Agreement;

all such obligations, liabilities, sums and expenses set forth in clauses (i) through (v) of this Section 1 being herein collectively called the “Obligations”.

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2.DEFINITION OF STOCK, NOTES, PARTNERSHIP INTERESTS,  MEMBERSHIP INTERESTS, SECURITIES, ETC.  The following capitalized terms used herein shall have the definitions specified below:

“Certificated Security” shall have the meaning given such term in Section 8-102(a)(4) of the UCC.

“Clearing Corporation” shall have the meaning given such term in Section 8-102(a)(5) of the UCC.

“Collateral” shall have the meaning provided in Section 3.1.

“Collateral Accounts” shall mean any and all accounts established and maintained by the Pledgee in the name of any Pledgor to which Collateral may be credited.

“Excluded Entity” shall mean (x) any corporation, partnership, limited liability company or association which is not (I) a Parent Company, (II) an Intermediary Holding Company, (III) a TelCo, (IV) a Carrier Services Company or (V) an entity that the Borrower has designated as a “Pledged Entity” in a written notice to the Collateral Agent specifying such entity’s legal name, type of organization, jurisdiction of organization, Location, organizational identification number (if any), and whether such entity is or is not a Registered Organization and/or a Transmitting Utility and (y) any TelCo or Carrier Services Company acquired or created pursuant to a Permitted Acquisition after the Effective Date if, after giving effect to the acquisition or creation of such TelCo or Carrier Services Company, the Pro Forma EBITDA Test is satisfied.

“Exempted Foreign Entity” shall mean any Foreign Corporation, Foreign LLC or Foreign Partnership that, in any such case, is treated as a corporation or an association taxable as a corporation for U.S. Federal income tax purposes.

“Financial Asset” shall have the meaning given such term in Section 8-102(a)(9) of the UCC.

“Instrument” shall have the meaning given such term in Section 9-102(a)(47) of the UCC.

“Investment Property” shall have the meaning given such term in Section 9-102(a)(49) of the UCC.

“Location” of any Pledgor has the meaning given such term in Section 9-307 of the UCC.

“Membership Interest” shall mean (x) the entire membership interest at any time owned by any Pledgor in any limited liability company (other than (I) an Excluded Entity and (II) a limited liability company that is not organized under the laws of the United States or any State or territory thereof (a “Foreign LLC”)) and (y) with respect to a Foreign LLC (other than an Excluded Entity), the entire membership interest at any time owned by any Pledgor in such Foreign LLC, provided that such Pledgor shall not be required to pledge hereunder (and the term

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“Membership Interest” shall not include) more than 65% of the total voting power of all classes of the membership interests of any Foreign LLC (that is an Exempted Foreign Entity) entitled to vote (with any limited liability company (other than an Excluded Entity) in which any Pledgor owns a membership interest being herein called a “Pledged LLC”).

“Notes” shall mean all promissory notes at any time issued to, or held by, any Pledgor.

“NSG Pledgor” shall mean each Pledgor which is not a Subsidiary Guarantor.

“Obligations” shall have the meaning provided in Section 1.

“Partnership Interest” shall mean (x) the entire partnership interest (whether general and/or limited partnership interests) at any time owned by any Pledgor in any partnership (other than (I) an Excluded Entity and (II) a partnership that is not organized under the laws of the United States or any State or territory thereof (a “Foreign Partnership”)) and (y) with respect to a Foreign Partnership (other than an Excluded Entity), the entire partnership interest at any time owned by any Pledgor in such Foreign Partnership, provided that such Pledgor shall not be required to pledge hereunder (and the term “Partnership Interest” shall not include) more than 65% of the total voting power of all classes of partnership interests of any Foreign Partnership (that is an Exempted Foreign Entity) entitled to vote (with any partnership (other than an Excluded Entity) in which any Pledgor owns a partnership interest being herein called a “Pledged Partnership”).

“Pledged Membership Interests” shall mean all Membership Interests at any time pledged or required to be pledged hereunder.

“Pledged Notes” shall mean all Notes at any time pledged or required to be pledged hereunder.

“Pledged Partnership Interests” shall mean all Partnership Interests at any time pledged or required to be pledged hereunder.

“Pledged Securities” shall mean all Pledged Stock, Pledged Notes, Pledged Partnership Interests and Pledged Membership Interests.

“Pledged Stock” shall mean all Stock at any time pledged or required to be pledged hereunder.

“Proceeds” shall have the meaning given such term in Section 9-102(a)(64) of the UCC.

“Registered Organization” shall have the meaning given such term in Section 9-102(a)(70) of the UCC.

“Secured Debt Agreements” shall have the meaning provided in Section 5.

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“Securities” shall mean all of the Stock, Notes, Partnership Interests and Membership Interests.

“Securities Intermediary” shall have the meaning given such term in Section 8-102(14) of the UCC.

“Security Entitlement” shall have the meaning given such term in Section 8-102(a)(17) of the UCC.

“Stock” shall mean (x) all of the issued and outstanding shares of stock at any time owned by any Pledgor of any corporation (other than (I) any Excluded Entity and (II) a corporation that is not organized under the laws of the United States or any State or territory thereof (a “Foreign Corporation”)) and (y) with respect to a Foreign Corporation that is a 1^st-Tier Subsidiary (other than any Excluded Entity), all of the issued and outstanding shares of capital stock at any time owned by any Pledgor of such Foreign Corporation, provided that such Pledgor shall not be required to pledge hereunder (and the term “Stock” shall not include) more than 65% of the total combined voting power of all classes of capital stock of any Exempted Foreign Entity entitled to vote.

“Transmitting Utility” has the meaning given such term in Section 9-102(a)(80) of the UCC.

“UCC” shall mean the Uniform Commercial Code as in effect in the State of New York from time to time; provided that all references herein to specific Sections or subsections of the UCC are references to such Sections or subsections, as the case may be, of the Uniform Commercial Code as in effect in the State of New York on the date hereof.

“Uncertificated Security” shall have the meaning given such term in Section 8-102(a)(18) of the UCC.

3.PLEDGE OF SECURITIES, ETC.

3.1Pledge.  To secure the Obligations now or hereafter owed or to be performed by such Pledgor, each Pledgor does hereby grant, pledge, hypothecate, mortgage, charge and assign to the Pledgee for the benefit of the Secured Creditors, and does hereby create a continuing security interest (subject to those Liens permitted to exist with respect to the Collateral pursuant to the terms of all Secured Debt Agreements then in effect) in favor of the Pledgee for the benefit of the Secured Creditors in, all of its right, title and interest in and to the following, whether now existing or hereafter from time to time acquired (collectively, the “Collateral”):

(i)all of the Securities owned or held by such Pledgor from time to time and all options and warrants owned by such Pledgor from time to time to purchase Securities (and all certificates or instruments evidencing such Securities);

(ii)each Collateral Account, including any and all assets of whatever type or kind deposited by such Pledgor in any such Collateral Account, whether now owned or hereafter acquired, existing or arising (including, without limitation, all Financial Assets,

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Investment Property, monies, checks, drafts, Instruments or interests therein of any type or nature deposited or required by the Credit Agreement or any other Secured Debt Agreement to be deposited in such Collateral Account, and all investments and all certificates and other instruments (including depository receipts, if any) from time to time representing or evidencing the same, and all dividends, interest, distributions, cash and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing);

(iii)all of such Pledgor’s (x) Partnership Interest and all of such Pledgor’s right, title and interest in each Pledged Partnership and (y) Membership Interest and all of such Pledgor’s right, title and interest in each Pledged LLC, in each case including, without limitation:

(a)all the capital thereof and its interest in all profits, losses and other distributions to which such Pledgor shall at any time be entitled in respect of such Partnership Interest and/or Membership Interest;

(b)all other payments due or to become due to such Pledgor in respect of such Partnership Interest and/or Membership Interest, whether under any partnership agreement, limited liability company agreement or otherwise, whether as contractual obligations, damages, insurance proceeds or otherwise;

(c)all of its claims, rights, powers, privileges, authority, options, security interest, liens and remedies, if any, under any partnership agreement, limited liability company agreement or at law or otherwise in respect of such Partnership Interest and/or Membership Interest;

(d)all present and future claims, if any, of the Pledgor against any Pledged Partnership and any Pledged LLC for moneys loaned or advanced, for services rendered or otherwise;

(e)all of such Pledgor’s rights under any partnership agreement or limited liability company agreement or at law to exercise and enforce every right, power, remedy, authority, option and privilege of such Pledgor relating to the Partnership Interest and/or Membership Interest, including any power to terminate, cancel or modify any partnership agreement or any limited liability company agreement, to execute any instruments and to take any and all other action on behalf of and in the name of such Pledgor in respect of any Partnership Interest or Membership Interest and any Pledged Partnership and any Pledged LLC to make determinations, to exercise any election (including, but not limited to, election of remedies) or option or to give or receive any notice, consent, amendment, waiver or approval, together with full power and authority to demand, receive, enforce, collect or receipt for any of the foregoing, to enforce or execute any checks, or other instruments or orders, to file any claims and to take any action in connection with any of the foregoing; and

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(f)all other property hereafter delivered in substitution for or in addition to any of the foregoing, all certificates and instruments representing or evidencing such other property and all cash, securities, interest, dividends, rights and other property at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all thereof;

(iv)all Security Entitlements owned by such Pledgor from time to time in any and all of the foregoing; and

(v)all Proceeds of any and all of the foregoing.

Notwithstanding anything to the contrary contained in this Section 3.1, except as otherwise required by Section 6.12 of the Credit Agreement, no Pledgor shall be required to pledge hereunder any Margin Stock owned by such Pledgor.

3.2Procedures.  (a)  To the extent that any Pledgor at any time or from time to time owns, acquires or obtains any right, title or interest in any Collateral, such Collateral shall automatically (and without the taking of any action by such Pledgor) be pledged pursuant to Section 3.1 of this Agreement and, in addition thereto, such Pledgor shall (to the extent provided below) forthwith take the following actions as set forth below:

(i)with respect to a Certificated Security (other than a Certificated Security credited on the books of a Clearing Corporation or Securities Intermediary), such Pledgor shall physically deliver such Certificated Security to the Pledgee, endorsed to the Pledgee or endorsed in blank;

(ii)with respect to an Uncertificated Security (other than an Uncertificated Security credited on the books of a Clearing Corporation or Securities Intermediary), such Pledgor shall cause the issuer of such Uncertificated Security to duly authorize, execute, and deliver to the Pledgee, an agreement for the benefit of the Pledgee and the other Secured Creditors substantially in the form of Annex E hereto (appropriately completed to the satisfaction of the Pledgee and with such modifications, if any, as shall be satisfactory to the Pledgee) pursuant to which such issuer agrees to comply with any and all instructions originated by the Pledgee without further consent by the registered owner and not to comply with instructions regarding such Uncertificated Security (and any Partnership Interests and Membership Interests issued by such issuer) originated by any other Person other than a court of competent jurisdiction;

(iii)with respect to a Certificated Security, Uncertificated Security, Partnership Interest or Membership Interest credited on the books of a Clearing Corporation or Securities Intermediary (including a Federal Reserve Bank, Participants Trust Company or The Depository Trust Company), such Pledgor shall promptly notify the Pledgee thereof and shall promptly take (x) all actions required (i) to comply with the applicable rules of such Clearing Corporation or Securities Intermediary and (ii) to perfect the security interest of the Pledgee under applicable law (including, in any event, under Sections 9-314(a), (b) and (c), 9-106 and 8-106(d) of the UCC) and (y) such other actions as the Pledgee deems necessary or desirable to effect the foregoing;

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(iv)with respect to a Partnership Interest or a Membership Interest (other than a Partnership Interest or Membership Interest credited on the books of a Clearing Corporation or Securities Intermediary), (1) if such Partnership Interest or Membership Interest is represented by a certificate and is a Security for purposes of the UCC, the procedure set forth in Section 3.2(a)(i) hereof, and (2) if such Partnership Interest or Membership Interest is not represented by a certificate or is not a Security for purposes of the UCC, the procedure set forth in Section 3.2(a)(ii) hereof;

(v)with respect to any Note, physical delivery of such Note to the Pledgee, endorsed in blank, or, at the request of the Pledgee, endorsed to the Pledgee; and

(vi)with respect to cash proceeds from any of the Collateral described in Section 3.1 hereof, (i) the establishment by the Pledgee of a cash account in the name of such Pledgor over which the Pledgee shall have “control” within the meaning of the UCC and, at any time any Event of Default is in existence, no withdrawals or transfers may be made therefrom by any Person except with the prior written consent of the Pledgee and (ii) the deposit of such cash in such cash account.

(b)In addition to the actions required to be taken pursuant to Section 3.2(a) hereof, each Pledgor shall take the following additional actions with respect to the Collateral:

(i)with respect to all Collateral of such Pledgor whereby or with respect to which the Pledgee may obtain “control” thereof within the meaning of Section 8-106 of the UCC (or under any provision of the UCC as same may be amended or supplemented from time to time, or under the laws of any relevant State other than the State of New York), such Pledgor shall take all actions as may be requested from time to time by the Pledgee so that “control” of such Collateral is obtained and at all times held by the Pledgee; and

(ii)each Pledgor shall from time to time cause appropriate financing statements (on appropriate forms) under the Uniform Commercial Code as in effect in the various relevant States, covering all Collateral hereunder (with the form of such financing statements to be satisfactory to the Pledgee), to be filed in the relevant filing offices so that at all times the Pledgee’s security interest in all Investment Property and other Collateral which can be perfected by the filing of such financing statements (in each case to the maximum extent perfection by filing may be obtained under the laws of the relevant States, including, without limitation, Section 9-312(a) of the UCC) is so perfected.

3.3Subsequently Acquired Collateral.  If any Pledgor shall acquire (by purchase, stock dividend or otherwise) any additional Collateral at any time or from time to time after the date hereof, such Pledgor will forthwith thereafter take (or cause to be taken) all action with respect to such Collateral in accordance with the procedures set forth in Section 3.2 hereof, and will promptly thereafter deliver to the Pledgee a certificate executed by a principal executive officer of such Pledgor describing such Collateral and certifying that the same have been duly pledged with the Pledgee hereunder. Each Pledgor further agrees to provide an opinion of counsel reasonably satisfactory to the Pledgee with respect to any pledge of Collateral

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constituting Uncertificated Securities promptly upon request of the Pledgee. No Pledgor shall be required at any time to pledge hereunder any Securities which constitute more than 65% of the total combined voting power of all classes of ownership interests of any Exempted Foreign Entity entitled to vote.  Notwithstanding anything to the contrary contained above in this Section 3.3, except as otherwise required by Section 6.12 of the Credit Agreement, no Pledgor shall be required to pledge hereunder any Margin Stock acquired by such Pledgor after the date hereof.

3.4Certain Representations and Warranties Concerning the Collateral.  Each Pledgor represents and warrants that on the date hereof: (a) each Subsidiary of such Pledgor whose equity interest is required to be pledged hereunder, and the direct ownership thereof, is listed on Annex A hereto; (b) the Stock held by such Pledgor consists of the number and type of shares of the stock of the corporations as described in Annex B hereto; (c) such Stock constitutes that percentage of the issued and outstanding capital stock of the issuing corporation as set forth in Annex B hereto; (d) the Notes held by such Pledgor consist of the promissory notes described in Annex C hereto; (e) such Pledgor is the holder of record and sole beneficial owner of the Stock and Notes held by such Pledgor and there exists no options or preemption rights in respect of any of the Stock; (f) the Partnership Interests and Membership Interests, as the case may be, held by such Pledgor constitute that percentage of the entire interest of the respective Pledged Partnership or Pledged LLC, as the case may be, as is set forth under its name in Annex D hereto; (g) on the date hereof, such Pledgor owns or possesses no other Securities except as described on Annexes B, C and D hereto; and (h) the Pledgor has complied with the respective procedure set forth in Section 3.2(a) hereof with respect to each item of Collateral described in Annexes B, C and D hereto.

4.APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC.  The Pledgee shall have the right to appoint one or more sub-agents for the purpose of retaining physical possession of the Pledged Securities, which may be held (in the discretion of the Pledgee) in the name of the relevant Pledgor, endorsed or assigned in blank or in favor of the Pledgee or any nominee or nominees of the Pledgee or a sub-agent appointed by the Pledgee.

5.VOTING, ETC., WHILE NO EVENT OF DEFAULT.  Unless and until there shall have occurred and be continuing an Event of Default, each Pledgor shall be entitled to exercise all voting rights attaching to any and all Pledged Securities owned by it, and to give consents, waivers or ratifications in respect thereof, provided that no vote shall be cast or any consent, waiver or ratification given or any action taken which would violate, result in breach of any covenant contained in, or be inconsistent with, any of the terms of this Agreement, the Credit Agreement, any other Credit Document or any Secured Interest Rate Agreement (collectively, the “Secured Debt Agreements”), or which would have the effect of impairing the value of the Collateral or any part thereof or the position or interests of the Pledgee or any other Secured Creditor therein.  All such rights of a Pledgor to vote and to give consents, waivers and ratifications shall cease in case an Event of Default shall occur and be continuing and Section 7 hereof shall become applicable.

6.DIVIDENDS AND OTHER DISTRIBUTIONS.  Unless and until an Event of Default shall have occurred and be continuing, all cash dividends, distributions or other amounts payable in respect of the Pledged Securities shall be paid to the respective Pledgor, provided that all dividends, distributions or other amounts payable in respect of the Pledged

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Securities which are determined by the Pledgee, in its absolute discretion, to represent in whole or in part an extraordinary, liquidating or other distribution in return of capital not permitted by the Credit Agreement shall be paid, to the extent so determined to represent an extraordinary, liquidating or other distribution in return of capital not permitted by the Credit Agreement, to the Pledgee and retained by it as part of the Collateral (unless such cash dividends or distributions are applied to repay the Obligations pursuant to Section 9 of this Agreement).  The Pledgee shall also be entitled to receive directly, and to retain as part of the Collateral:

(i)all other or additional stock, notes, membership interests, partnership interests or other securities or property (other than cash) paid or distributed by way of dividend or otherwise in respect of the Collateral;

(ii)all other or additional stock, notes, membership interests, partnership interests or other securities or property (including cash) paid or distributed in respect of the Collateral by way of stock-split, spin-off, split-up, reclassification, combination of shares or similar rearrangement; and

(iii)all other or additional stock, notes, membership interests, partnership interests or other securities or property (including cash) which may be paid in respect of the Collateral by reason of any consolidation, merger, exchange of stock, conveyance of assets, liquidation or similar corporate reorganization (other than the Net Cash Proceeds from any Asset Sale applied to repay Loans and/or reinvested in accordance with the relevant provisions of the Credit Agreement).

Nothing contained in this Section 6 shall limit or restrict in any way the Pledgee’s right to receive the proceeds of the Collateral in any form in accordance with Section 3 of this Agreement.  All dividends, distributions or other payments which are received by the respective Pledgor contrary to the provisions of this Section 6 or Section 7 shall be received in trust for the benefit of the Pledgee, shall be segregated from other property or funds of such Pledgor and shall be forthwith paid over to the Pledgee as Collateral in the same form as so received (with any necessary endorsement).

7.REMEDIES IN CASE OF AN EVENT OF DEFAULT.  (a)  In case an Event of Default shall have occurred and be continuing, the Pledgee shall be entitled to exercise all of the rights, powers and remedies (whether vested in it by this Agreement or any other Secured Debt Agreement or by law) for the protection and enforcement of its rights in respect of the Collateral, including, without limitation, all the rights and remedies of a secured party upon default under the Uniform Commercial Code of the State of New York, and the Pledgee shall be entitled, without limitation, to exercise any or all of the following rights, which each Pledgor hereby agrees to be commercially reasonable:

(i)to receive all amounts payable in respect of the Collateral otherwise payable under Section 6 to such Pledgor;

(ii)to transfer all or any part of the Collateral into the Pledgee’ s name or the name of its nominee or nominees;

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(iii)to accelerate any Pledged Note which may be accelerated in accordance with its terms, and take any other lawful action to collect upon any Pledged Note (including, without limitation, to make any demand for payment thereon);

(iv)to vote all or any part of the Collateral (whether or not transferred into the name of the Pledgee) and give all consents, waivers and ratifications in respect of the Collateral and otherwise act with respect thereto as though it were the outright owner thereof (each Pledgor hereby irrevocably constituting and appointing the Pledgee the proxy and attorney-in-fact of such Pledgor, with full power of substitution to do so);

(v)to set off any and all Collateral against any and all Obligations, and to withdraw any and all cash or other Collateral from any and all Collateral Accounts and to apply such cash and other Collateral to the payment of any and all Obligations; and

(vi)at any time or from time to time to sell, assign and deliver, or grant options to purchase, all or any part of the Collateral, or any interest therein, at any public or private sale, without demand of performance, advertisement or notice of intention to sell or of the time or place of sale or adjournment thereof or to redeem or otherwise (all of which are hereby waived by each Pledgor), for cash, on credit or for other property, for immediate or future delivery without any assumption of credit risk, and for such price or prices and on such terms as the Pledgee in its absolute discretion may determine, provided that at least 10 days’ notice of the time and place of any such sale shall be given to such Pledgor.  The Pledgee shall not be obligated to make such sale of Collateral regardless of whether any such notice of sale has theretofore been given.  Each purchaser at any such sale shall hold the property so sold absolutely free from any claim or right on the part of any Pledgor, and each Pledgor hereby waives and releases to the fullest extent permitted by law any right or equity of redemption with respect to the Collateral, whether before or after sale hereunder, all rights, if any, of marshalling the Collateral and any other security for the Obligations or otherwise, and all rights, if any, of stay and/or appraisal which it now has or may at any time in the future have under rule of law or statute now existing or hereafter enacted.  At any such sale, unless prohibited by applicable law, the Pledgee on behalf of all Secured Creditors (or certain of them) may bid for and purchase (by bidding in Obligations or otherwise) all or any part of the Collateral so sold free from any such right or equity of redemption.  Neither the Pledgee nor any Secured Creditor shall be liable for failure to collect or realize upon any or all of the Collateral or for any delay in so doing nor shall it be under any obligation to take any action whatsoever with regard thereto.

8.REMEDIES, ETC., CUMULATIVE.  Each right, power and remedy of the Pledgee provided for in this Agreement or any other Secured Debt Agreement, or now or hereafter existing at law or in equity or by statute shall be cumulative and concurrent and shall be in addition to every other such right, power or remedy.  The exercise or beginning of the exercise by the Pledgee or any other Secured Creditor of any one or more of the rights, powers or remedies provided for in this Agreement or any other Secured Debt Agreement or now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by the Pledgee or any other Secured Creditor of all such other rights, powers or remedies, and no failure or delay on the part of the Pledgee or any other

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Secured Creditor to exercise any such right, power or remedy shall operate as a waiver thereof.  Unless otherwise required by the Credit Documents, no notice to or demand on any Pledgor in any case shall entitle it to any other or further notice or demand in similar other circumstances or constitute a waiver of any of the rights of the Pledgee or any other Secured Creditor to any other further action in any circumstances without demand or notice.  The Secured Creditors agree that this Agreement may be enforced only by the action of the Administrative Agent or the Pledgee, in each case acting upon the instructions of the Required Lenders (or, after the date on which all Credit Document Obligations have been paid in full, the holders of at least the majority of the outstanding Interest Rate Obligations) and that no other Secured Creditor shall have any right individually to seek to enforce or to enforce this Agreement or to realize upon the security to be granted hereby, it being understood and agreed that such rights and remedies may be exercised by the Administrative Agent or the Pledgee or the holders of at least a majority of the outstanding Interest Rate Obligations, as the case may be, for the benefit of the Secured Creditors upon the terms of this Agreement.

9.APPLICATION OF PROCEEDS.  (a)  All moneys collected by the Pledgee or the Collateral Agent upon any sale or other disposition of the Collateral, together with all other moneys received by the Pledgee or the Collateral Agent hereunder, shall be applied as follows:

(i)first, to the payment of all Obligations owing to the Pledgee or the Collateral Agent of the type described in clauses (iii) and (iv) of the definition of “Obligations” contained in Section 1 hereof;

(ii)second, to the extent proceeds remain after the application pursuant to preceding clause (i), an amount equal to the outstanding Obligations to the Secured Creditors shall be paid to the Secured Creditors as provided in Section 9(c), with each Secured Creditor receiving an amount equal to its outstanding Obligations or, if the proceeds are insufficient to pay in full all such Obligations, its Pro Rata Share of the amount remaining to be distributed to be applied, with respect to the Credit Document Obligations, firstly, to the payment of interest in respect of the unpaid principal amount of Loans outstanding, secondly, to the payment of principal of Loans outstanding, then to the other Credit Document Obligations; and

(iii)third, to the extent proceeds remain after the application pursuant to the preceding clauses (i) and (ii) and following the termination of this Agreement pursuant to Section 18 hereof, to the relevant Pledgor or, to the extent directed by such Pledgor or a court of competent jurisdiction, to whomever may be lawfully entitled to receive such surplus.

(b)For purposes of this Agreement, “Pro Rata Share” shall mean, when calculating a Secured Creditor’s portion of any distribution or amount, the amount (expressed as a percentage) equal to a fraction the numerator of which is the then outstanding amount of the relevant Obligations owed such Secured Creditor and the denominator of which is the then outstanding amount of all Obligations.

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(c)All payments required to be made to the (i) Lender Creditors hereunder shall be made to the Administrative Agent for the account of the respective Lender Creditors and (ii) Interest Rate Creditors hereunder shall be made to the paying agent under the applicable Secured Interest Rate Agreement or, in the case of Secured Interest Rate Agreements without a paying agent, directly to the applicable Interest Rate Creditor.

(d)For purposes of applying payments received in accordance with this Section 9, the Pledgee and the Collateral Agent shall be entitled to rely upon (i) the Administrative Agent for a determination (which the Administrative Agent agrees to provide upon request to the Pledgee and the Collateral Agent) of the outstanding Credit Document Obligations and (ii) any Interest Rate Creditor for a determination (which each Interest Rate Creditor agrees to provide upon request to the Pledgee and the Collateral Agent) of the outstanding Interest Rate Obligations owed to such Interest Rate Creditor.  Unless it has actual knowledge (including by way of written notice from a Secured Creditor) to the contrary, the Administrative Agent under the Credit Agreement, in furnishing information pursuant to the preceding sentence, and the Pledgee and the Collateral Agent, in acting hereunder, shall be entitled to assume that (x) no Credit Document Obligations other than principal, interest and regularly accruing fees are owing to any Lender Creditor and (y) no Secured Interest Rate Agreements or Interest Rate Obligations with respect thereto are in existence.

(e)It is understood that each Pledgor shall remain jointly and severally liable to the extent of any deficiency between (x) the amount of the Obligations for which it is liable directly or as a Guarantor that are satisfied with proceeds of the Collateral and (y) the aggregate outstanding amount of the Obligations.

10.PURCHASERS OF COLLATERAL.  Upon any sale of the Collateral by the Pledgee hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of the Pledgee or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Pledgee or such officer or be answerable in any way for the misapplication or nonapplication thereof.

11.INDEMNITY.  Each Pledgor jointly and severally agrees (i) to indemnify and hold harmless the Pledgee and the other Secured Creditors from and against any and all claims, demands, losses, judgments and liabilities (including liabilities for penalties) of whatsoever kind or nature, and (ii) to reimburse the Pledgee for all reasonable out-of-pocket costs and expenses, including reasonable attorneys’ fees, arising in connection with any amendment, waiver or modification to this Agreement and the Pledgee and the other Secured Creditors for all reasonable costs and expenses (including reasonable attorney’s fees) growing out of or resulting from the exercise by the Pledgee of any right or remedy granted to it hereunder or under any other Secured Debt Agreement except, with respect to clauses (i) and (ii) above, for those arising from such Person’s gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and non-appealable decision).  In no event shall the Pledgee be liable, in the absence of gross negligence or willful misconduct on its part (as determined by a court of competent jurisdiction in a final and non-appealable decision), for any matter or thing in connection with this Agreement other than to account for moneys or

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other property actually received by it in accordance with the terms hereof.  If and to the extent that the obligations of any Pledgor under this Section 11 are unenforceable for any reason, such Pledgor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law.

12.FURTHER ASSURANCES; POWER OF ATTORNEY.  (a)  Each Pledgor agrees that it will join with the Pledgee in executing and, at such Pledgor’s own expense, file and refile under the Uniform Commercial Code such financing statements, continuation statements and other documents in such offices as the Pledgee may reasonably deem necessary or appropriate and wherever required or permitted by law in order to perfect and preserve the Pledgee’s security interest in the Collateral hereunder and hereby authorizes the Pledgee to file financing statements and amendments thereto relative to all or any part of the Collateral without the signature of such Pledgor where permitted by law, and agrees to do such further acts and things and to execute and deliver to the Pledgee such additional conveyances, assignments, agreements and instruments as the Pledgee may reasonably require or deem advisable to carry into effect the purposes of this Agreement or to further assure and confirm unto the Pledgee its rights, powers and remedies hereunder or thereunder.

(b)Each Pledgor hereby appoints the Pledgee, such Pledgor’s attorney-in-fact, with full authority in the place and stead of such Pledgor and in the name of such Pledgor or otherwise, from time to time after the occurrence and during the continuance of an Event of Default, in the Pledgee’s reasonable discretion to take any action and to execute any instrument which the Pledgee may reasonably deem necessary or advisable to accomplish the purposes of this Agreement.

13.THE PLEDGEE AS COLLATERAL AGENT.  The Pledgee will hold in accordance with this Agreement all items of the Collateral at any time received under this Agreement.  It is expressly understood and agreed that the obligations of the Pledgee as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement.  The Pledgee shall act hereunder on the terms and conditions set forth herein and in Section 10 of the Credit Agreement.

14.TRANSFER BY THE PLEDGORS.  No Pledgor will sell or otherwise dispose of, grant any option with respect to, or mortgage, pledge or otherwise encumber any of the Collateral or any interest therein (except in accordance with the terms of this Agreement and the other Secured Debt Agreements).

15.REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGORS.  (a)  Each Pledgor represents, warrants and covenants that:

(i)it is, or at the time when pledged hereunder will be, the legal, beneficial and record owner of, and has (or will have) good and marketable title to, all Securities pledged by it hereunder, subject to no pledge, lien, mortgage, hypothecation, security interest, charge, option or other encumbrance whatsoever, except (x) the liens and security interests created by this Agreement and (y) liens permitted by Section 7.03(a) of the Credit Agreement;

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(ii)it has full power, authority and legal right to pledge all the Collateral pledged by it pursuant to this Agreement;

(iii)this Agreement has been duly authorized, executed and delivered by such Pledgor and constitutes a legal, valid and binding obligation of such Pledgor enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors’ rights and by equitable principles (regardless of whether enforcement is sought in equity or at law);

(iv)except to the extent already obtained or made, no consent of any other party (including, without limitation, any stockholder, limited or general partner, member or creditor of such Pledgor or any of its Subsidiaries) and no consent, license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is required to be obtained by such Pledgor in connection with (a) the execution, delivery or performance of this Agreement, (b) the validity or enforceability of this Agreement, (c) the perfection or enforceability of the Pledgee’ s security interest in the Collateral or (d) except for compliance with or as may be required by applicable securities laws, the exercise by the Pledgee of any of its rights or remedies provided herein;

(v)the execution, delivery and performance of this Agreement by such Pledgor will not violate any provision of any applicable law or regulation or of any order, judgment, writ, award or decree of any court, arbitrator or governmental authority, domestic or foreign, applicable to such Pledgor, or of the certificate of incorporation, certificate of formation, by-laws, certificate of limited partnership, partnership agreement or limited liability company agreement, as the case may be, of such Pledgor or of any securities issued by such Pledgor or any of its Subsidiaries, or of any mortgage, indenture, lease, loan agreement, credit agreement or other material contract, agreement or instrument or undertaking to which such Pledgor or any of its Subsidiaries is a party or which purports to be binding upon such Pledgor or any of its Subsidiaries or upon any of their respective assets and will not result in the creation or imposition of (or the obligation to create or impose) any lien or encumbrance on any of the assets of such Pledgor or any of its Subsidiaries except as contemplated by this Agreement;

(vi)all the shares of the Stock have been duly and validly issued, are fully paid and non-assessable and are subject to no options to purchase or similar rights;

(vii)each of the Pledged Notes constitutes, or when executed by the obligor thereof will constitute, the legal, valid and binding obligation of such obligor, enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors’ rights and by equitable principles (regardless of whether enforcement is sought in equity or at law);

(viii)the pledge, assignment and delivery to the Pledgee of the Securities (other than those constituting Uncertificated Securities) pursuant to this Agreement creates a

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valid and, assuming such Securities are held in the continued possession of the Collateral Agent in the State of New York, perfected first priority Lien in the Securities and the proceeds thereof, subject to no other Lien or to any agreement purporting to grant to any third party a Lien on the property or assets of such Pledgor which would include the Securities (other than Liens permitted by Section 7.03(a) of the Credit Agreement);

(ix)it has the unqualified right to pledge and grant a security interest in the Partnership Interests and Membership Interests as herein provided without the consent of any other Person, firm, association or entity which has not been obtained;

(x)the Partnership Interests and the Membership Interests pledged by it pursuant to this Agreement have been validly acquired and are fully paid for and are duly and validly pledged hereunder;

(xi)it is not in default in the payment of any portion of any mandatory capital contribution, if any, required to be made under any partnership agreement or limited liability company agreement to which such Pledgor is a party, and such Pledgor is not in violation of any other material provisions of any partnership agreement or limited liability company agreement to which such Pledgor is a party, or otherwise in default or violation thereunder, no Partnership Interest or Membership Interest is subject to any defense, offset or counterclaim, nor have any of the foregoing been asserted or alleged against such Pledgor by any Person with respect thereto and as of the Initial Borrowing Date, there are no certificates, instruments, documents or other writings (other than the partnership agreements and certificates, if any, delivered to the Collateral Agent) which evidence any Partnership Interest or Membership Interest of such Pledgor;

(xii)the pledge and assignment of the Partnership Interests and the Membership Interests pursuant to this Agreement, together with the relevant filings, consents or recordings (which filings, consents and recordings have been made or obtained), creates a valid, perfected and continuing first security interest in such Partnership Interests and Membership Interest and the proceeds thereof, subject to no prior lien or encumbrance or to any agreement purporting to grant to any third party a lien or encumbrance on the property or assets of such Pledgor which would include the Collateral;

(xiii)there are no currently effective financing statements under the UCC covering any property which is now or hereafter may be included in the Collateral and such Pledgor will not, without the prior written consent of the Pledgee, execute and, until the Termination Date (as hereinafter defined), there will not ever be on file in any public office, any enforceable financing statement or statements covering any or all of the Collateral, except financing statements filed or to be filed in favor of the Pledgee as secured party;

(xiv)it shall give the Pledgee prompt notice of any written claim relating to the Collateral and shall deliver to the Pledgee a copy of each other demand, notice or document received by it which may adversely affect the Pledgee’s interest in the

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Collateral promptly upon, but in any event within 10 days after, such Pledgor’ s receipt thereof;

(xv)it shall not withdraw as a partner of any Pledged Partnership or member of any Pledged LLC, or file or pursue or take any action which may, directly or indirectly, cause a dissolution or liquidation of or with respect to any Pledged Partnership or Pledged LLC or seek a partition of any property of any Pledged Partnership or Pledged LLC, except as permitted by the Credit Agreement;

(xvi)as of the date hereof, all of its Partnership Interests and Membership Interests are uncertificated and each Pledgor covenants and agrees that it will not approve of any action by any Pledged Partnership or Pledged LLC to convert such uncertificated interests into certificated interests;

(xvii)it will take no action which would violate or be inconsistent with any of the terms of any Secured Debt Agreement, or which would have the effect of impairing the position or interests of the Pledgee or any other Secured Creditor under any Secured Debt Agreement except as permitted by the Credit Agreement; and

(xviii)“control” (as defined in Section 8-106 of the UCC) has been obtained by the Pledgee over all of such Pledgor’s Collateral consisting of Securities (including, without limitation, Notes which are Securities) with respect to which such “control” may be obtained pursuant to Section 8-106 of the UCC, except to the extent that the obligation of the applicable Pledgor to provide the Pledgee with “control” of such Collateral has not yet arisen under this Agreement; provided that in the case of the Pledgee obtaining “control” over Collateral consisting of a Security Entitlement, such Pledgor shall have taken all steps in its control so that the Pledgee obtains “control” over such Security Entitlement.

16.PLEDGORS’ OBLIGATIONS ABSOLUTE, ETC.  The obligations of each Pledgor under this Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including, without limitation:

(i)any renewal, extension, amendment or modification of, or addition or supplement to or deletion from any of the Secured Debt Agreements, or any other instrument or agreement referred to therein, or any assignment or transfer of any thereof;

(ii)any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such agreement or instrument or this Agreement;

(iii)any furnishing of any additional security to the Pledgee or its assignee or any acceptance thereof or any release of any security by the Pledgee or its assignee;

(iv)any limitation on any party’s liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof; or

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(v)any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to such Pledgor or any Subsidiary of such Pledgor, or any action taken with respect to this Agreement by any trustee or receiver, or by any court, in any such proceeding, whether or not such Pledgor shall have notice or knowledge of any of the foregoing.

17.REGISTRATION, ETC.  (a)  If an Event of Default shall have occurred and be continuing and any Pledgor shall have received from the Pledgee a written request or requests that such Pledgor cause any registration, qualification or compliance under any Federal or state securities law or laws to be effected with respect to all or any part of the Pledged Stock, such Pledgor as soon as practicable and at its expense will use its best efforts to cause such registration to be effected (and be kept effective) and will use its best efforts to cause such qualification and compliance to be effected (and be kept effective) as may be so requested and as would permit or facilitate the sale and distribution of such Pledged Stock, including, without limitation, registration under the Securities Act of 1933, as then in effect (or any similar statute then in effect), appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with any other governmental requirements, provided that the Pledgee shall furnish to such Pledgor such information regarding the Pledgee as such Pledgor may request in writing and as shall be required in connection with any such registration, qualification or compliance.  Each Pledgor will cause the Pledgee to be kept reasonably advised in writing as to the progress of each such registration, qualification or compliance and as to the completion thereof, will furnish to the Pledgee such number of prospectuses, offering circulars and other documents incident thereto as the Pledgee from time to time may reasonably request, and will indemnify, to the extent permitted by law, the Pledgee, each other Secured Creditor and all others participating in the distribution of such Pledged Stock against all claims, losses, damages or liabilities caused by any untrue statement (or alleged untrue statement) of a material fact contained therein (or in any related registration statement, notification or the like) or by any omission (or alleged omission) to state therein (or in any related registration statement, notification or the like) a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same may have been caused by an untrue statement or omission based upon information furnished in writing to such Pledgor by the Pledgee or such other Secured Creditor expressly for use therein.

(b)If at any time when the Pledgee shall determine to exercise its right to sell all or any part of the Pledged Securities pursuant to Section 7, and such Pledged Securities or the part thereof to be sold shall not, for any reason whatsoever, be effectively registered under the Securities Act of 1933, as then in effect, the Pledgee may, in its sole and absolute discretion, sell such Pledged Securities or part thereof by private sale in such manner and under such circumstances as the Pledgee may deem necessary or advisable in order that such sale may legally be effected without such registration.  Without limiting the generality of the foregoing, in any such event the Pledgee, in its sole and absolute discretion, (i) may proceed to make such private sale notwithstanding that a registration statement for the purpose of registering such Pledged Securities or part thereof shall have been filed under such Securities Act, (ii) may approach and negotiate with a single possible purchaser to effect such sale and (iii) may restrict such sale to a purchaser who will represent and agree that such purchaser is purchasing for its own account, for investment, and not with a view to the distribution or sale of such Pledged Securities or part thereof.  In the event of any such sale, the Pledgee shall incur no responsibility

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or liability for selling all or any part of the Pledged Securities at a price which the Pledgee, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might be realized if the sale were deferred until the registration as aforesaid.

18.TERMINATION; RELEASE.  (a)  After the Termination Date (as defined below), this Agreement shall terminate (provided that all indemnities set forth herein including, without limitation, in Section 11 hereof shall survive any such termination) and the Pledgee, at the request and expense of the respective Pledgor, will execute and deliver to such Pledgor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement as provided above, and will duly assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Pledgee and as has not theretofore been sold or otherwise applied or released pursuant to this Agreement, together with any moneys at the time held by the Pledgee hereunder and, with respect to any Collateral consisting of an Uncertificated Security, a Partnership Interest or a Membership Interest (other than an Uncertificated Security, Partnership Interest or Membership Interest credited on the books of a Clearing Corporation or Securities Intermediary), a termination of the agreement relating thereto executed and delivered by the issuer of such Uncertificated Security pursuant to Section 3.2(a)(ii) or by the respective partnership or limited liability company pursuant to Section 3.2(a)(iv)(2).  As used in this Agreement, “Termination Date” shall mean the date upon which the Total Commitment and all Secured Interest Rate Agreements have been terminated, no Note under the Credit Agreement is outstanding (and all Loans have been paid in full) and all other Obligations have been paid in full (other than arising from indemnities for which no request has been made).

(b)In the event that any part of the Collateral is sold or otherwise disposed of in connection with a sale or other disposition permitted by Section 7.02 of the Credit Agreement or is otherwise released at the direction of the Required Lenders (or all the Lenders if required by Section 11.12 of the Credit Agreement), and the proceeds of such sale or other disposition or from such release are applied in accordance with the terms of the Credit Agreement to the extent required to be so applied, the Pledgee, at the request and expense of the respective Pledgor, will release such Collateral from this Agreement, duly assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) such of the Collateral as is then being (or has been) so sold, disposed of or released and as may be in possession of the Pledgee and has not theretofore been released pursuant to this Agreement.

(c)At any time that any Pledgor desires that Collateral be released as provided in the foregoing Section 18(a) or (b), it shall deliver to the Pledgee a certificate signed by a principal executive officer stating that the release of the respective Collateral is permitted pursuant to Section 18(a) or (b).  The Pledgee shall have no liability whatsoever to any Secured Creditor as the result of any release of Collateral by it in accordance with (or which the Pledgee in the absence of gross negligence and willful misconduct believes to be in accordance with) this Section 18.

19.NOTICES, ETC.  All notices and other communications hereunder shall be in writing (including telegraphic, telex, telecopier, facsimile or cable communication) and

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shall be delivered, telegraphed, telexed, telecopied, faxed, cabled, or mailed (by first class mail, postage prepaid):

(i)if to any Pledgor, at its address set forth opposite its signature below;

(ii)if to the Pledgee, at:

Deutsche Bank Trust Company Americas

60 Wall Street

New York, New York  10005

Attention:  Anca Trifan

Tel:(212) 250-6159

Fax:(212) 797-5692

(iii)if to any Lender Creditor (other than the Pledgee), either (x) to the Administrative Agent, at the address of the Administrative Agent specified in the Credit Agreement or (y) at such address as such Lender Creditor shall have specified in the Credit Agreement;

(iv)if to any Interest Rate Creditor, at such address as such Interest Rate Creditor shall have specified in writing to the Pledgors and the Pledgee;

or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder.

20.WAIVER; AMENDMENT.  None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by the Pledgee (with the consent of the Required Lenders or, to the extent required by Section 11.12 of the Credit Agreement, all of the Lenders) and each Pledgor affected thereby, provided that (i) no such change, waiver, modification or variance shall be made to Section 9 hereof or this Section 20 without the consent of each Secured Creditor adversely affected thereby and (ii) any change, waiver, modification or variance affecting the rights and benefits of a single Class (as defined below) of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors (as defined below) of such Class of Secured Creditors.  For the purpose of this Agreement, the term “Class” shall mean each class of Secured Creditors, i.e., whether (x) the Lender Creditors as holders of the Credit Document Obligations or (y) the Interest Rate Creditors as holders of the Interest Rate Obligations.  For the purpose of this Agreement, the term “Requisite Creditors” of any Class shall mean (x) with respect to the Credit Document Obligations, the Required Lenders (or, to the extent required by Section 11.12 of the Credit Agreement, all of the Lenders) and (y) with respect to the Interest Rate Obligations, the holders of at least a majority of all obligations outstanding from time to time under the Secured Interest Rate Agreements.

21.PLEDGEE NOT BOUND.  (a)  Nothing herein shall be construed to make the Pledgee or any other Secured Creditor liable as a general partner or limited partner of any Pledged Partnership or a member of any Pledged LLC, and neither the Pledgee nor any Secured Creditor by virtue of this Agreement or otherwise (except as referred to in the following sentence) shall have any of the duties, obligations or liabilities of a general partner or limited

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partner of any Pledged Partnership or a member of any Pledged LLC.  The parties hereto expressly agree that, unless the Pledgee shall become the absolute owner of a Partnership Interest or a Membership Interest pursuant hereto, this Agreement shall not be construed as creating a partnership or joint venture or membership agreement among the Pledgee, any other Secured Creditor and/or a Pledgor.

(b)Except as provided in the last sentence of paragraph (a) of this Section 21, the Pledgee, by accepting this Agreement, does not intend to become a general partner or limited partner of any Pledged Partnership or a member of any Pledged LLC or otherwise be deemed to be a co-venturer with respect to any Pledgor or any Pledged Partnership or a member of any Pledged LLC either before or after an Event of Default shall have occurred.  The Pledgee shall have only those powers set forth herein and shall assume none of the duties, obligations or liabilities of a general partner or limited partner of any Pledged Partnership or of a member of any Pledged LLC or of a Pledgor.

(c)The Pledgee shall not be obligated to perform or discharge any obligation of a Pledgor as a result of the collateral assignment hereby effected.

(d)The acceptance by the Pledgee of this Agreement, with all the rights, powers, privileges and authority so created, shall not at any time or in any event obligate the Pledgee to appear in or defend any action or proceeding relating to the Collateral to which it is not a party, or to take any action hereunder or thereunder, or to expend any money or incur any expenses or perform or discharge any obligation, duty or liability under the Collateral.

22.MISCELLANEOUS.  This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect, subject to release and/or termination as set forth in Section 18, (ii) be binding upon each Pledgor, its successors and assigns; provided that no Pledgor shall assign any of its rights or obligations hereunder without the prior written consent of the Pledgee (with the prior written consent of the Required Lenders or to the extent required by Section 11.12 of the Credit Agreement, all of the Lenders), and (iii) inure, together with the rights and remedies of the Pledgee hereunder, to the benefit of the Pledgee, the other Secured Creditors and their respective successors, transferees and assigns.  The headings of the several sections and subsections in this Agreement are for purposes of reference only and shall not limit or define the meaning hereof.  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 instrument.  In the event that any provision of this Agreement shall prove to be invalid or unenforceable, such provision shall be deemed to be severable from the other provisions of this Agreement which shall remain binding on all parties hereto.

23.GOVERNING LAW, ETC.  (a)  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE SECURED CREDITORS AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.  Any legal action or proceeding with respect to this Agreement or any other Credit Document may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Agreement, each NSG Pledgor hereby irrevocably accepts for

21

itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts.  Each NSG Pledgor further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to each NSG Pledgor at its address set forth opposite its signature below, such service to become effective 30 days after such mailing.  Nothing herein shall affect the right of any of the Secured Creditors to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against any Pledgor in any other jurisdiction.

(b)Each NSG Pledgor hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement or any other Credit Document brought in the courts referred to in clause (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that such action or proceeding brought in any such court has been brought in an inconvenient forum.

(c)Each Pledgor and the Pledgee hereby irrevocably waive all right to a trial by jury in any action, proceeding or counterclaim arising out of or relating to this Agreement, the other Credit Documents or the transactions contemplated hereby or thereby.

24.ADDITIONAL PLEDGORS.  It is understood and agreed that any Subsidiary of the Borrower that is required to execute a counterpart of this Agreement pursuant to the Credit Agreement shall become a Pledgor hereunder by executing a counterpart hereof and delivering the same to the Pledgee and Annexes A, B, C and D will be modified at such time in a manner acceptable to the Pledgee to give effect to such additional Pledgor.

25.COUNTERPARTS.  This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.  A set of counterparts executed by all the parties hereto shall be lodged with each Pledgor and the Pledgee.

26.  CONTRIBUTION.  At any time a payment is made by any Pledgor (other than the Borrower) (each, a “Subsidiary Pledgor”) in respect of the Obligations from the proceeds of any sale or other disposition of Collateral owned by such Subsidiary Pledgor (each, a “Relevant Payment”), the right of contribution of each Subsidiary Pledgor hereunder against each other such Subsidiary Pledgor shall be determined as provided in the immediately following sentence, with the right of contribution of each Subsidiary Pledgor to be revised and restated as of each date on which a Relevant Payment is made.  At any time that a Relevant Payment is made by a Subsidiary Pledgor that results in the aggregate payments made by such Subsidiary Pledgor hereunder in respect of the Obligations to and including the date of the Relevant Payment exceeding such Subsidiary Pledgor’s Contribution Percentage (as defined below) of the aggregate payments made by all Subsidiary Pledgors hereunder in respect of the Obligations from the proceeds of any sale or other disposition of Collateral owned by the Subsidiary Pledgors to and including the date of the Relevant Payment (such excess, the “Aggregate Excess Amount”), each such Subsidiary Pledgor shall have a right of contribution against each other Subsidiary Pledgor who either has not made any payments or has made (or whose Collateral has

22

been used to make) payments hereunder in respect of the Obligations to and including the date of the Relevant Payment in an aggregate amount less than such other Subsidiary Pledgor’s Contribution Percentage of the aggregate payments made to and including the date of the Relevant Payment by all Subsidiary Pledgors hereunder in respect of the Obligations from the proceeds of any sale or other disposition of Collateral owned by the Subsidiary Pledgors (the aggregate amount of such deficit, the “Aggregate Deficit Amount”) in an amount equal to (x) a fraction the numerator of which is the Aggregate Excess Amount of such Subsidiary Pledgor and the denominator of which is the Aggregate Excess Amount of all Subsidiary Pledgors multiplied by (y) the Aggregate Deficit Amount of such other Subsidiary Pledgor.  A Subsidiary Pledgor’s right of contribution pursuant to the preceding sentences shall arise at the time of each computation, subject to adjustment to the time of any subsequent computation; provided, that no Subsidiary Pledgor may take any action to enforce such right until the Obligations have been paid in full and the Total Commitment has been terminated, it being expressly recognized and agreed by all parties hereto that any Subsidiary Pledgor’s right of contribution arising pursuant to this Agreement against any other Subsidiary Pledgor shall be expressly junior and subordinate to such other Subsidiary Pledgor’s obligations and liabilities in respect of the Obligations and any other obligations owing under this Agreement.  As used in this Section 26:  (i) each Subsidiary Pledgor’s “Contribution Percentage” shall mean the percentage obtained by dividing (x) the Adjusted Net Worth (as defined below) of such Subsidiary Pledgor by (y) the aggregate Adjusted Net Worth of all Subsidiary Pledgors; (ii) the “Adjusted Net Worth” of each Subsidiary Pledgor shall mean the greater of (x) the Net Worth (as defined below) of such Subsidiary Pledgor and (y) zero; and (iii) the “Net Worth” of each Subsidiary Pledgor shall mean the amount by which the fair salable value of such Subsidiary Pledgor’s assets on the date of any Relevant Payment exceeds its existing debts and other liabilities (including contingent liabilities, but without giving effect to any obligations arising under this Agreement, any Guaranteed Obligations under, and as defined in, the Subsidiary Guaranty or any guaranteed obligations arising under any guaranty of the Permitted Senior Subordinated Notes or the Permitted Senior Unsecured Notes) on such date.  All parties hereto recognize and agree that, except for any right of contribution arising pursuant to this Section 26, each Subsidiary Pledgor who makes (or whose Collateral has been used to make) any payment in respect of the Obligations shall have no right of contribution or subrogation against any other Subsidiary Pledgor in respect of such payment.  Each of the Subsidiary Pledgors recognizes and acknowledges that the rights to contribution arising hereunder shall constitute an asset in favor of the party entitled to such contribution.  In this connection, each Subsidiary Pledgor has the right to waive its contribution right against any Subsidiary Pledgor to the extent that after giving effect to such waiver such Subsidiary Pledgor would remain solvent, in the determination of the Required Lenders.

27.LEGAL NAMES; TYPE OF ORGANIZATION (AND WHETHER A REGISTERED ORGANIZATION AND/OR A TRANSMITTING UTILITY); JURISDICTION OF ORGANIZATION; LOCATION; ORGANIZATIONAL IDENTIFICATION NUMBERS; CHANGES THERETO; ETC.  No Pledgor shall change its legal name, its type of organization, its status as a Registered Organization (in the case of a Registered Organization), its status as a Transmitting Utility or as a Person which is not a Transmitting Utility, as the case may be, its jurisdiction of organization, its Location, or its organizational identification number (if any), except that any such changes shall be permitted (so long as not in violation of the applicable requirements of the Secured Debt Agreements and so long as same do not involve (x) a Registered Organization ceasing to constitute same or (y) any Pledgor changing its jurisdiction

23

of organization or Location from the United States or a State thereof to a jurisdiction of organization or Location, as the case may be, outside the United States or a State thereof) if (i) it shall have given to the Collateral Agent not less than 10 days’ prior written notice of each change to its legal name, its type of organization, whether or not it is a Registered Organization, its jurisdiction of organization, its Location, its organizational identification number (if any), and whether or not it is a Transmitting Utility, and (ii) in connection with the respective such change or changes, it shall have taken all action reasonably requested by the Collateral Agent to maintain the security interests of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect.  In addition, to the extent that any Pledgor does not have an organizational identification number on the date hereof and later obtains one, such Pledgor shall promptly thereafter deliver a notification of the Collateral Agent of such organizational identification number and shall take all actions reasonably satisfactory to the Collateral Agent to the extent necessary to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby fully perfected and in full force and effect.

28.CHANGE OF CONTROL.  The Pledgee acknowledges that, under existing law, a change of control of a Subsidiary whose equity interests are pledged hereunder as a result of a proposed exercise of remedies hereunder may require the prior approval of the FCC and/or a PUC.  The Pledgee further acknowledges that, notwithstanding the provisions of Section 5 and Sections 7(a)(ii), (iv) and (vi), with respect to any Collateral constituting Securities issued by a Person organized under the laws of any State of the United States, to the extent (and only to the extent) that the laws of such State specifically require that regulatory approval be obtained prior to such Pledgee enforcing its rights hereunder with respect to such Collateral, the Pledgee shall not be entitled to enforce its rights hereunder with respect to such Collateral without first obtaining such required regulatory approval.

29.SEVERABILITY.  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

30.HEADINGS DESCRIPTIVE.  The headings of the several Sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.

*   *   *   *

24

IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written.

Address:	FAIRPOINT COMMUNICATIONS, INC.,
521 East Morehead Street, Suite 250		as a Pledgor
Charlotte, NC 28202
	By:	/s/ Timothy W. Henry
		Title: Vice President of Finance & Treasurer
Address:	ST ENTERPRISES, LTD.,
c/o Fairpoint Communications, Inc.		as a Pledgor
521 East Morehead Street, Suite 250
Charlotte, NC 28202
	By:	/s/ Timothy W. Henry
		Title: Vice President of Finance & Treasurer
Address:	FAIRPOINT BROADBAND, INC.,
c/o Fairpoint Communications, Inc.		as a Pledgor
521 East Morehead Street, Suite 250
Charlotte, NC 28202
	By:	/s/ Timothy W. Henry
		Title: Vice President of Finance & Treasurer
Address:	MJD SERVICES CORP.,
c/o Fairpoint Communications, Inc.		as a Pledgor
521 East Morehead Street, Suite 250
Charlotte, NC 28202
	By:	/s/ Timothy W. Henry
		Title: Vice President of Finance & Treasurer
Address:	MJD VENTURES, INC.,
c/o Fairpoint Communications, Inc.		as a Pledgor
521 East Morehead Street, Suite 250
Charlotte, NC 28202
	By:	/s/ Timothy W. Henry
		Title: Vice President of Finance & Treasurer

25

Address:	C-R COMMUNICATIONS, INC.,
c/o Fairpoint Communications, Inc.		as a Pledgor
521 East Morehead Street, Suite 250
Charlotte, NC 28202
	By:			/s/ Timothy W. Henry
				Title: Vice President of Finance & Treasurer
Address:	COMERCO, INC.,
c/o Fairpoint Communications, Inc.				as a Pledgor
521 East Morehead Street, Suite 250
Charlotte, NC 28202
	By:			/s/ Timothy W. Henry
				Title: Vice President of Finance & Treasurer
Address:	GTC COMMUNICATIONS, INC.,
c/o Fairpoint Communications, Inc.		as a Pledgor
521 East Morehead Street, Suite 250
Charlotte, NC 28202
	By:			/s/ Timothy W. Henry
				Title: Vice President of Finance & Treasurer
Address:	RAVENSWOOD COMMUNICATIONS, INC.,
c/o Fairpoint Communications, Inc.			as a Pledgor
521 East Morehead Street, Suite 250
Charlotte, NC 28202
	By:			/s/ Timothy W. Henry
				Title: Vice President of Finance & Treasurer
Address:	UTILITIES, INC.,
c/o Fairpoint Communications, Inc.		as a Pledgor
521 East Morehead Street, Suite 250
Charlotte, NC 28202
	By:			/s/ Timothy W. Henry
				Title: Vice President of Finance & Treasurer
Address:	FAIRPOINT CARRIER SERVICES, INC.,
c/o Fairpoint Communications, Inc.				as a Pledgor
521 East Morehead Street, Suite 250
Charlotte, NC 28202
	By:			/s/ Timothy W. Henry
				Title: Vice President of Finance & Treasurer

26

Address:		ST. JOE COMMUNICATIONS, INC.,
c/o FairPoint Communications, Inc.			as a Pledgor
521 East Morehead Street, Suite 250
Charlotte, NC 28202
		By:	/s/ Timothy W. Henry
			Title: Vice President of Finance & Treasurer
Accepted and Agreed to:
DEUTSCHE BANK TRUST COMPANY AMERICAS,
	as Collateral Agent and Pledgee
By:	/s/ Anca Trifan
	Title:  Director

27

ANNEX A

LIST OF PLEDGED SUBSIDIARIES OF FAIRPOINT COMMUNICATIONS, INC.

A.	ST Enterprises, Ltd.
	1.	Sunflower Telephone Company, Inc.
	2.	STE/NE Acquisition Corp., d/b/a/ Northland Telephone Company of Vermont
	3.	Northland Telephone Company of Maine, Inc.
	4.	ST Computer Resources, Inc.
	5.	ST Long Distance, Inc.
B.	MJD Ventures, Inc.
	1.		The Columbus Grove Telephone Company
	2.		C-R Communications, Inc.
			a.			C-R Telephone Company
	3.		Taconic Telephone Corp.
	4.		Ellensburg Telephone Company
	5.		Sidney Telephone Company
	6.		Utilities, Inc.
			a.		Standish Telephone Company
			b.		China Telephone Company
			c.		Maine Telephone Company
	7.		Telephone Service Company
	8.		Chouteau Telephone Company
	9.		Chautauqua and Erie Telephone Corporation
	10.		The Orwell Telephone Company
	11.		GTC Communications, Inc. (f/k/a TPG Communications, Inc.)
			a.	St. Joe Communications, Inc.
				i.			GTC, Inc.

	12.	Peoples Mutual Telephone Company
	13.	Fremont Telcom Co.
	14.	Comerco, Inc.
		a.	YCOM Networks, Inc.
	15.	Community Service Telephone Co.
	16.	Marianna and Scenery Hill Telephone Company
C.	MJD Services Corp.
	1.	Bluestem Telephone Company
	2.	Big Sandy Telecom, Inc.
	3.	Odin Telephone Exchange, Inc.
	4.	Columbine Telecom Company (f/k/a Columbine Acquisition Corp.)
	5.	Ravenswood Communications, Inc.
		a.	The El Paso Telephone Company
	6.	Yates City Telephone Company
D.	FairPoint Broadband, Inc. (f/k/a MJD Holdings Corp.)
E.	FairPoint Carrier Services, Inc.

2

ANNEX B

LIST OF PLEDGED STOCK

I.              FAIRPOINT COMMUNICATIONS, INC. (F/K/A MJD COMMUNICATIONS, INC.)(1)

	Name of Issuing Corporation	Type of Shares	Number of Shares	Percentage Owned
1.	FairPoint Broadband, Inc.	Common	100	100	%
2.	MJD Services Corp.	Common	100	100	%
3.	MJD Ventures, Inc.	Common	100	100	%
4.	FairPoint Carrier Services, Inc.	Common	100	100	%

A.MJD SERVICES CORP.

	Name of Issuing Corporation	Type of Shares	Number of Shares	Percentage Owned
1.	Bluestem Telephone Company	Common	100	100	%
2.	Big Sandy Telecom, Inc.	Common	100	100	%
3.	Odin Telephone Exchange, Inc.	Common	95.2857	100	%(2)
4.	Columbine Telecom Company	Common	100	100	%
5.	Ravenswood Communications, Inc.	Common	405	100	%
6.	Yates City Telephone Company	Common	252	100	%

B.MJD VENTURES, INC.

	Name of Issuing Corporation	Type of Shares	Number of Shares	Percentage Owned
1.	The Columbus Grove Telephone Company	Common	318	100	%
2.	C-R Communications, Inc.	Common	750	100	%
3.	Taconic Telephone Corp.	Common	100	100	%

(1)           FairPoint Communications, Inc. stock will not be pledged.

(2)           There are Warrants outstanding for the purchase of ST Enterprises, LTD Common Stock.

4.	Ellensburg Telephone Company	Common	100	100	%
5.	Sidney Telephone Company	Common	100	100	%
6.	Utilities, Inc.	Common	100	100	%
7.	Chouteau Telephone Company	Common	100	100	%
8.	Chautauqua and Erie Telephone Corporation	Common	100	100	%
9.	The Orwell Telephone Company	Common	4,795.7461	100	%
10.	Telephone Service Company	Common	100	100	%
11.	GTC Communications, Inc.	Common	1,000,000	100	%
12.	Peoples Mutual Telephone Company	Common	9,832	100	%
13.	Fremont Telcom Co.	Common	5,155.5	100	%
14.	Comerco, Inc.	Common	31,250	100	%
15.	Community Service Telephone Co.	Common	100	100	%
16.	Marianna and Scenery Hill Telephone Company	Common	306	100	%

C.ST ENTERPRISES, LTD.(3)

	Name of Issuing Corporation	Type of Shares	Number of Shares	Percentage Owned
1.	Sunflower Telephone Company, Inc.	Common	684	99.7	%
2.	STE/NE Acquisition Corp. (dba Northland Telephone Company of Vermont)	Common	1000	100	%
3.	Northland Telephone Company of Maine, Inc.	Common	100	100	%

(3)           There are Warrants outstanding for the purchase of ST Enterprises, LTD Common Stock.

2

4.	ST Computer Resources, Inc.	Common	500	100	%
5.	ST Long Distance, Inc.	Common	100	100	%

D.C-R COMMUNICATIONS, INC.

	Name of Issuing Corporation	Type of Shares	Number of Shares	Percentage Owned
1.	C-R Telephone Company	Common	100	100	%

E.UTILITIES, INC.

	Name of Issuing Corporation	Type of Shares	Number of Shares	Percentage Owned
1.	Standish Telephone Company	Common	23,560	100	%
2.	China Telephone Company	Common	20,000	100	%
3.	Maine Telephone Company	Common	100	100	%

F.RAVENSWOOD COMMUNICATIONS, INC.

	Name of Issuing Corporation	Type of Shares	Number of Shares	Percentage Owned
1.	The El Paso Telephone Company	Common	405	100	%

G.GTC COMMUNICATIONS, INC.

	Name of Issuing Corporation	Type of Shares	Number of Shares	Percentage Owned
1.	St. Joe Communications, Inc.	Common	1,000	100	%

H.ST. JOE COMMUNICATIONS, INC.

	Name of Issuing Corporation	Type of Shares	Number of Shares	Percentage Owned
1.	GTC, Inc.	Common	14,890	100	%

I.COMERCO, INC.

	Name of Issuing Corporation	Type of Shares	Number of Shares	Percentage Owned
1.	YCOM Networks, Inc.	Common	294	100	%

3

ANNEX C

LIST OF NOTES

None.

ANNEX D

PART I

LIST OF PARTNERSHIP INTERESTS

A.None.

PART II

LIST OF MEMBERSHIP INTERESTS

A.None.

4

ANNEX E

Form of Agreement Regarding Uncertificated Securities, Membership Interests and Partnership Interests

AGREEMENT (as amended, modified, restated and/or supplemented from time to time, this “Agreement”), dated as of [                  , 20     ], among the undersigned pledgor (the “Pledgor”), [                  ], not in its individual capacity but solely as Collateral Agent (the “Pledgee”), and [                  ], as the issuer of the Uncertificated Securities, Membership Interests and/or Partnership Interests (each as defined below) (the “Issuer”).

W I T N E S S E T H :

WHEREAS, the Pledgor, certain of its affiliates and the Pledgee have entered into a Pledge Agreement, dated as of February 8, 2005 (as amended, modified, restated and/or supplemented from time to time, the “Pledge Agreement”), under which, among other things, in order to secure the payment of the Obligations (as defined in the Pledge Agreement), the Pledgor has pledged or will pledge to the Pledgee for the benefit of the Secured Creditors (as defined in the Pledge Agreement), and grant a security interest in favor of the Pledgee for the benefit of the Secured Creditors in, all of the right, title and interest of the Pledgor in and to any and all [Uncertificated Securities (as defined in the Pledge Agreement)] [Partnership Interests (as defined in the Pledge Agreement)] [Membership Interests (as defined in the Pledge Agreement)], from time to time by the Issuer, whether now existing or hereafter from time to time acquired by the Pledgor (with all of such [Uncertificated Securities] [Partnership Interests] [Membership Interests] being herein collectively called the “Issuer Pledged Interests”); and

WHEREAS, the Pledgor desires the Issuer to enter into this Agreement in order to perfect the security interest of the Pledgee under the Pledge Agreement in the Issuer Pledged Interests, to vest in the Pledgee control of the Issuer Pledge Interests and to provide for the rights of the parties under this Agreement;

NOW THEREFORE, in consideration of the premises and the mutual promises and agreements contained herein, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.The Pledgor hereby irrevocably authorizes and directs the Issuer, and the Issuer hereby agrees, to comply with any and all instructions and orders originated by the Pledgee (and its successors and assigns) regarding any and all of the Issuer Pledged Interests without the further consent by the registered owner (including the Pledgor), and, following its receipt of a notice from the Pledgee stating that the Pledgee is exercising exclusive control of the Issuer Pledged Interests, not to comply with any instructions or orders regarding any or all of the Issuer Pledged Interests originated by any person or entity other than the Pledgee (and its successors and assigns) or a court of competent jurisdiction.

2.The Issuer hereby certifies that (i) no notice of any security interest, lien or other encumbrance or claim affecting the Issuer Pledged Interests (other than the security interest

of the Pledgee) has been received by it, and (ii) the security interest of the Pledgee in the Issuer Pledged Interests has been registered in the books and records of the Issuer.

3.The Issuer hereby represents and warrants that (i) the pledge by the Pledgor of, and the granting by the Pledgor of a security interest in, the Issuer Pledged Interests to the Pledgee, for the benefit of the Secured Creditors, does not violate the charter, by-laws, partnership agreement, membership agreement or any other agreement governing the Issuer or the Issuer Pledged Interests, and (ii) the Issuer Pledged Interests consisting of capital stock of a corporation are fully paid and nonassessable.

4.All notices, statements of accounts, reports, prospectuses, financial statements and other communications to be sent to the Pledgor by the Issuer in respect of the Issuer will also be sent to the Pledgee at the following address:

[                                    ]

[                                    ]

Attention:  [                                    ]

Telephone No.:  [                                    ]

Telecopier No.:  [                                    ]

5.Following its receipt of a notice from the Pledgee stating that the Pledgee is exercising exclusive control of the Issuer Pledged Interests and until the Pledgee shall have delivered written notice to the Issuer that all of the Obligations have been paid in full and this Agreement is terminated, the Issuer will send any and all redemptions, distributions, interest or other payments in respect of the Issuer Pledged Interests from the Issuer for the account of the Pledgee only by wire transfers to such account as the Pledgee shall instruct.

6.Except as expressly provided otherwise in Sections 4 and 5, all notices, instructions, orders and communications hereunder shall be sent or delivered by mail, telegraph, telex, telecopy, cable or overnight courier service and all such notices and communications shall, when mailed, telexed, telecopied, cabled or sent by overnight courier, be effective when deposited in the mails or delivered to overnight courier, prepaid and properly addressed for delivery on such or the next Business Day, or sent by telex or telecopier, except that notices and communications to the Pledgee or the Issuer shall not be effective until received.  All notices and other communications shall be in writing and addressed as follows:

(a)if to the Pledgor, at:

Attention:                    
Telephone No.: 
Fax No.:

2

(b)if to the Pledgee, at the address given in Section 4 hereof;

(c)if to the Issuer, at:

or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder.  As used in this Section 6, “Business Day” means any day other than a Saturday, Sunday, or other day in which banks in New York are authorized to remain closed.

7.This Agreement shall be binding upon the successors and assigns of the Pledgor and the Issuer and shall inure to the benefit of and be enforceable by the Pledgee and its successors and assigns.  This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument.  In the event that any provision of this Agreement shall prove to be invalid or unenforceable, such provision shall be deemed to be severable from the other provisions of this Agreement which shall remain binding on all parties hereto.  None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever except in writing signed by the Pledgee, the Issuer and the Pledgor.

8.This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to its principles of conflict of laws.

3

IN WITNESS WHEREOF, the Pledgor, the Pledgee and the Issuer have caused this Agreement to be executed by their duly elected officers duly authorized as of the date first above written.

[                                               ],
	as Pledgor
By
	Name:
	Title:
[                                               ],
	not in its individual capacity but solely as Collateral Agent and Pledgee
By
	Name:
	Title:
[                                               ],
	as the Issuer
By
	Name:
	Title:

4

EX-10.3

Exhibit 10.3

SUBSIDIARY GUARANTY

SUBSIDIARY GUARANTY (as amended, modified, restated and/or supplemented from time to time, this “Guaranty”), dated as of February 8, 2005, made by and among each of the undersigned guarantors (each, a “Guarantor” and, together with any other entity that becomes a guarantor hereunder pursuant to Section 23 hereof, collectively, the “Guarantors”) in favor of DEUTSCHE BANK TRUST COMPANY AMERICAS, as Administrative Agent (together with any successor administrative agent, the “Administrative Agent”), for the benefit of the Secured Creditors (as defined below).  Except as otherwise defined herein, all capitalized terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as therein defined.

W I T N E S S E T H :

WHEREAS, FairPoint Communications, Inc. (the ”Borrower”), the lenders from time to time party thereto (the “Lenders”), Bank of America, N.A., as Syndication Agent, CoBank, ACB and General Electric Capital Corporation, as Co-Documentation Agents, and the Administrative Agent have entered into a Credit Agreement, dated as of February 8, 2005 (as amended, modified, restated and/or supplemented from time to time, the “Credit Agreement”), providing for the making of Loans to, and the issuance of, and participation in, Letters of Credit for the account of the Borrower, all as contemplated therein (the Lenders, each Letter of Credit Issuer, the Swingline Lender, the Administrative Agent, the Collateral Agent, each other Agent and the Pledgee referred to in the Pledge Agreement are herein called the “Lender Creditors”);

WHEREAS, the Borrower may from time to time be a party to one or more Interest Rate Agreements (each such Interest Rate Agreement with an Interest Rate Creditor (as defined below), a “Secured Interest Rate Agreement”) with Deutsche Bank Trust Company Americas, in its individual capacity (“DBTCA”), any Lender, a syndicate of financial institutions organized by DBTCA or such Lender or an affiliate of DBTCA or such Lender (even if DBTCA or any such Lender ceases to be a Lender under the Credit Agreement for any reason), and any institution that participates therein, and in each case their subsequent assigns (collectively, the “Interest Rate Creditors,” and together with the Lender Creditors, collectively, the “Secured Creditors”);

WHEREAS, each Guarantor is a direct or indirect Subsidiary of the Borrower;

WHEREAS, it is a condition precedent to the making of Loans to the Borrower and the issuance of, and participation in, Letters of Credit for the account of the Borrower under the Credit Agreement that each Guarantor shall have executed and delivered this Guaranty to the Administrative Agent; and

WHEREAS, each Guarantor will obtain benefits from the incurrence of Loans by the Borrower and the issuance of, and participation in, Letters of Credit for the account of the Borrower under the Credit Agreement and the entering into by the Borrower and/or one or more

of its Subsidiaries of Secured Interest Rate Agreements and, accordingly, desires to execute this Guaranty in order to satisfy the condition described in the preceding paragraph and to induce the Lenders to make Loans to the Borrower and issue, and/or participate in, Letters of Credit for the account of the Borrower and the Interest Rate Creditors to enter into Secured Interest Rate Agreements with the Borrower and/or one or more of its Subsidiaries;

NOW, THEREFORE, in consideration of the foregoing and other benefits accruing to each Guarantor, the receipt and sufficiency of which are hereby acknowledged, each Guarantor hereby makes the following representations and warranties to the Administrative Agent for the benefit of the Secured Creditors and hereby covenants and agrees with each other Guarantor and the Administrative Agent for the benefit of the Secured Creditors as follows:

1.  GUARANTY.            (a)        Each Guarantor, jointly and severally, irrevocably, absolutely and unconditionally guarantees as a primary obligor and not merely as surety:

(i)            to the Lender Creditors the full and prompt payment when due (whether at the stated maturity, by required prepayment, declaration, acceleration, demand or otherwise) of (x) the principal of, premium, if any, and interest on the Notes issued by, and the Loans made to, the Borrower under the Credit Agreement, and all reimbursement obligations and Unpaid Drawings with respect to Letters of Credit and (y) all other obligations (including, without limitation, obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due), liabilities and indebtedness owing by the Borrower to the Lender Creditors under the Credit Agreement and each other Credit Document to which the Borrower is a party (including, without limitation, indemnities, Fees and interest thereon (including, without limitation, any interest accruing after the commencement of any bankruptcy, insolvency, receivership or similar proceeding at the rate provided for in the Credit Agreement, whether or not such interest is an allowed claim in any such proceeding)), whether now existing or hereafter incurred under, arising out of or in connection with the Credit Agreement and any such other Credit Document and the due performance and compliance by the Borrower with all of the terms, conditions, covenants and agreements contained in all such Credit Documents (all such principal, premium, interest, liabilities, indebtedness and obligations under this clause (i), except to the extent consisting of obligations or liabilities with respect to Secured Interest Rate Agreements, being herein collectively called the “Credit Document Obligations”); and

(ii)           to each Interest Rate Creditor the full and prompt payment when due (whether at the stated maturity, by required prepayment, declaration, acceleration, demand or otherwise) of all obligations (including, without limitation, obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due), liabilities and indebtedness (including, without limitation, any interest accruing after the commencement of any bankruptcy, insolvency, receivership or similar proceeding at the rate provided for in the respective Secured Interest Rate Agreements, whether or not such interest is an allowed claim in any such proceeding) owing by the Borrower under any Secured Interest Rate Agreement to which it is a party, whether now in existence or hereafter arising, and the due performance and compliance by the

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Borrower with all of the terms, conditions, covenants and agreements contained therein (all such obligations, liabilities and indebtedness being herein collectively called the “Interest Rate Obligations”, and together with the Credit Document Obligations are herein collectively called the “Guaranteed Obligations”).

Each Guarantor understands, agrees and confirms that the Secured Creditors may enforce this Guaranty up to the full amount of the Guaranteed Obligations against such Guarantor without proceeding against any other Guarantor or the Borrower, or against any security for the Guaranteed Obligations, or under any other guaranty covering all or a portion of the Guaranteed Obligations.  This Guaranty is a guaranty of prompt payment and performance and not of collection.

(b)           Additionally, each Guarantor, jointly and severally, unconditionally, absolutely and irrevocably, guarantees the payment of any and all Guaranteed Obligations whether or not due or payable by the Borrower upon the occurrence in respect of the Borrower of any of the events specified in Section 8.05 of the Credit Agreement, and unconditionally, absolutely and irrevocably, jointly and severally, promises to pay such Guaranteed Obligations to the Secured Creditors, or order, on demand.

2.  LIABILITY OF GUARANTORS ABSOLUTE.  The liability of each Guarantor hereunder is primary, absolute, joint and several, and unconditional and is exclusive and independent of any security for or other guaranty of the indebtedness of the Borrower whether executed by such Guarantor, any other Guarantor, any other guarantor or by any other party, and the liability of each Guarantor hereunder shall not be affected or impaired by any circumstance or occurrence whatsoever, including, without limitation:  (a) any direction as to application of payment by the Borrower or any other party, (b) any other continuing or other guaranty, undertaking or maximum liability of a Guarantor or of any other party as to the Guaranteed Obligations, (c) any payment on or in reduction of any such other guaranty or undertaking, (d) any dissolution, termination or increase, decrease or change in personnel by the Borrower, (e) the failure of any Guarantor to receive any benefit from or as a result of its execution, delivery and performance of this Guaranty, (f) any payment made to any Secured Creditor on the indebtedness which any Secured Creditor repays the Borrower pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding, and each Guarantor waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding, (g) any action or inaction by the Secured Creditors as contemplated in Section 5 hereof or (h) any invalidity, rescission, irregularity or unenforceability of all or any part of the Guaranteed Obligations or of any security therefor.

3.  OBLIGATIONS OF GUARANTORS INDEPENDENT.  The obligations of each Guarantor hereunder are independent of the obligations of any other Guarantor, any other guarantor or the Borrower, and a separate action or actions may be brought and prosecuted against each Guarantor whether or not action is brought against any other Guarantor, any other guarantor or the Borrower and whether or not any other Guarantor, any other guarantor or the Borrower be joined in any such action or actions.

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4.  WAIVERS BY GUARANTORS.  (a)            Each Guarantor hereby waives notice of acceptance of this Guaranty and notice of the existence, creation or incurrence of any new or additional liability to which it may apply, and waives promptness, diligence, presentment, demand of payment, demand for performance, protest, notice of dishonor or nonpayment of any such liabilities, suit or taking of other action by the Administrative Agent or any other Secured Creditor against, and any other notice to, any party liable thereon (including such Guarantor, any other Guarantor, any other guarantor or the Borrower) and each Guarantor further hereby waives any and all notice of the creation, renewal, extension or accrual of any of the Guaranteed Obligations and notice or proof of reliance by any Secured Creditor upon this Guaranty, and the Guaranteed Obligations shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended, modified, supplemented or waived, in reliance upon this Guaranty.

(b)           Each Guarantor waives any right to require the Secured Creditors to:  (i) proceed against the Borrower, any other Guarantor, any other guarantor of the Guaranteed Obligations or any other party; (ii) proceed against or exhaust any security held from the Borrower, any other Guarantor, any other guarantor of the Guaranteed Obligations or any other party; or (iii) pursue any other remedy in the Secured Creditors’ power whatsoever.  Each Guarantor waives any defense based on or arising out of any defense of the Borrower, any other Guarantor, any other guarantor of the Guaranteed Obligations or any other party other than payment in full in cash of the Guaranteed Obligations, including, without limitation, any defense based on or arising out of the disability of the Borrower, any other Guarantor, any other guarantor of the Guaranteed Obligations or any other party, or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower other than payment in full in cash of the Guaranteed Obligations.  The Secured Creditors may, at their election and in accordance with the security documents governing same, foreclose on any collateral serving as security held by the Administrative Agent, the Collateral Agent or the other Secured Creditors by one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable (to the extent such sale is permitted by applicable law), or exercise any other right or remedy the Secured Creditors may have against the Borrower or any other party, or any security, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Guaranteed Obligations have been paid in full in cash.  Each Guarantor waives any defense arising out of any such election by the Secured Creditors, even though such election operates to impair or extinguish any right of reimbursement, contribution, indemnification or subrogation or other right or remedy of such Guarantor against the Borrower, any other Guarantor, any other guarantor of the Guaranteed Obligations or any other party or any security.

(c)           Each Guarantor hereby waives the benefits of any statute of limitations affecting its liability hereunder or the enforcement thereof.  Any payment by the Borrower or other circumstance which operates to toll any statute of limitations as to the Borrower shall operate to toll the statute of limitations as to each Guarantor.

(d)           Each Guarantor has knowledge and assumes all responsibility for being and keeping itself informed of the Borrower’s and each other Guarantor’s financial condition, affairs and assets, and of all other circumstances bearing upon the risk of nonpayment of the

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Guaranteed Obligations and the nature, scope and extent of the risks which such Guarantor assumes and incurs hereunder, and has adequate means to obtain from the Borrower and each other Guarantor on an ongoing basis information relating thereto and to the Borrower’s and each other Guarantor’s ability to pay and perform its respective Guaranteed Obligations, and agrees to assume the responsibility for keeping, and to keep, so informed for so long as this Guaranty is in effect.  Each Guarantor acknowledges and agrees that (x) the Secured Creditors shall have no obligation to investigate the financial condition or affairs of the Borrower or any other Guarantor for the benefit of such Guarantor nor to advise such Guarantor of any fact respecting, or any change in, the financial condition, assets or affairs of the Borrower or any other Guarantor that might become known to any Secured Creditor at any time, whether or not such Secured Creditor knows or believes or has reason to know or believe that any such fact or change is unknown to such Guarantor, or might (or does) increase the risk of such Guarantor as guarantor hereunder, or might (or would) affect the willingness of such Guarantor to continue as a guarantor of the Guaranteed Obligations hereunder and (y) the Secured Creditors shall have no duty to advise any Guarantor of information known to them regarding any of the aforementioned circumstances or risks.

(e)           Each Guarantor hereby acknowledges and agrees that no Secured Creditor or any other Person shall be under any obligation (a) to marshal any assets in favor of such Guarantor or in payment of any or all of the liabilities of the Borrower under the Credit Documents or the obligation of such Guarantor hereunder or (b) to pursue any other remedy that such Guarantor may or may not be able to pursue itself any right to which such Guarantor hereby waives.

(f)            Each Guarantor warrants and agrees that each of the waivers set forth in Section 3 and in this Section 4 is made with full knowledge of its significance and consequences and that if any of such waivers are determined to be contrary to any applicable law or public policy, such waivers shall be effective only to the maximum extent permitted by applicable law.

5.  RIGHTS OF SECURED CREDITORS.  Subject to Section 4, any Secured Creditor may (except as shall be required by applicable law and cannot be waived) at any time and from time to time without the consent of, or notice to, any Guarantor, without incurring responsibility to such Guarantor, without impairing or releasing the obligations or liabilities of such Guarantor hereunder, upon or without any terms or conditions and in whole or in part:

(a)           change the manner, place or terms of payment of, and/or change, increase or extend the time of payment of, renew, increase, accelerate or alter, any of the Guaranteed Obligations (including, without limitation, any increase or decrease in the rate of interest thereon or the principal amount thereof), any security therefor, or any liability incurred directly or indirectly in respect thereof, and the guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, increased, accelerated, renewed or altered;

(b)           take and hold security for the payment of the Guaranteed Obligations and sell, exchange, release, surrender, impair, realize upon or otherwise deal with in any manner and in any order any property or other collateral by whomsoever at any time

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pledged or mortgaged to secure, or howsoever securing, the Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or any offset thereagainst;

(c)           exercise or refrain from exercising any rights against the Borrower, any other Credit Party, any Subsidiary thereof, any other guarantor of the Borrower or others or otherwise act or refrain from acting;

(d)           release or substitute any one or more endorsers, Guarantors, other guarantors, the Borrower or other obligors;

(e)           settle or compromise any of the Guaranteed Obligations, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and may subordinate the payment of all or any part thereof to the payment of any liability (whether due or not) of the Borrower to creditors of the Borrower other than the Secured Creditors;

(f)            apply any sums by whomsoever paid or howsoever realized to any liability or liabilities of the Borrower to the Secured Creditors regardless of what liabilities of the Borrower remain unpaid;

(g)           consent to or waive any breach of, or any act, omission or default under, any of the Secured Interest Rate Agreements, the Credit Documents or any of the instruments or agreements referred to therein, or otherwise amend, modify or supplement any of the Secured Interest Rate Agreements, the Credit Documents or any of such other instruments or agreements;

(h)           act or fail to act in any manner which may deprive such Guarantor of its right to subrogation against the Borrower to recover full indemnity for any payments made pursuant to this Guaranty; and/or

(i)            take any other action or omit to take any other action which would, under otherwise applicable principles of common law, give rise to a legal or equitable discharge of such Guarantor from its liabilities under this Guaranty (including, without limitation, any action or omission whatsoever that might otherwise vary the risk of such Guarantor or constitute a legal or equitable defense to or discharge of the liabilities of a guarantor or surety or that might otherwise limit recourse against such Guarantor).

No invalidity, illegality, irregularity or unenforceability of all or any part of the Guaranteed Obligations, the Credit Documents or any other agreement or instrument relating to the Guaranteed Obligations or of any security or guarantee therefor shall affect, impair or be a defense to this Guaranty, and this Guaranty shall be primary, absolute and unconditional notwithstanding the occurrence of any event or the existence of any other circumstances which might constitute a legal or equitable discharge of a surety or guarantor except payment in full in cash of the Guaranteed Obligations.

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6.  CONTINUING GUARANTY.  This Guaranty is a continuing one and all liabilities to which it applies or may apply under the terms hereof shall be conclusively presumed to have been created in reliance hereon.  No failure or delay on the part of any Secured Creditor in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  The rights and remedies herein expressly specified are cumulative and not exclusive of any rights or remedies which any Secured Creditor would otherwise have.  No notice to or demand on any Guarantor in any case shall entitle such Guarantor to any other further notice or demand in similar or other circumstances or constitute a waiver of the rights of any Secured Creditor to any other or further action in any circumstances without notice or demand.  It is not necessary for any Secured Creditor to inquire into the capacity or powers of the Borrower or the officers, directors, partners or agents acting or purporting to act on its or their behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder.

7.  SUBORDINATION OF INDEBTEDNESS HELD BY GUARANTORS.  Any indebtedness of the Borrower now or hereafter held by any Guarantor is hereby subordinated to the indebtedness of the Borrower to the Secured Creditors; and such indebtedness of the Borrower to any Guarantor, if the Administrative Agent or the Collateral Agent, after an Event of Default has occurred and is continuing, so requests, shall be collected, enforced and received by such Guarantor as trustee for the Secured Creditors and be paid over to the Secured Creditors on account of the indebtedness of the Borrower to the Secured Creditors, but without affecting or impairing in any manner the liability of such Guarantor under the other provisions of this Guaranty.  Prior to the transfer by any Guarantor of any note or negotiable instrument evidencing any indebtedness of the Borrower to such Guarantor, such Guarantor shall mark such note or negotiable instrument with a legend that the same is subject to this subordination.  Without limiting the generality of the foregoing, each Guarantor hereby agrees with the Secured Creditors that it will not exercise any right of subrogation which it may at any time otherwise have as a result of this Guaranty (whether contractual, under Section 509 of the Bankruptcy Code or otherwise) until all Guaranteed Obligations have been irrevocably paid in full in cash; provided, that if any amount shall be paid to any Guarantor on account of such subrogation rights at any time prior to the irrevocable payment in full in cash of all the Guaranteed Obligations, such amount shall be held in trust for the benefit of the Secured Creditors and shall forthwith be paid to the Secured Creditors to be credited and applied to the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms of the Credit Documents or, if the Credit Documents do not provide for the application of such amount, to be held by the Secured Creditors as collateral security for any Guaranteed Obligations thereafter existing.  Upon irrevocable payment in full in cash of all of the Guaranteed Obligations, each Guarantor shall be subrogated to the rights of the Secured Creditors to receive payments or distributions applicable to the Guaranteed Obligations until all Indebtedness of the Borrower held by such Guarantor shall be paid in full.

8.  GUARANTY ENFORCEABLE BY ADMINISTRATIVE AGENT OR COLLATERAL AGENT.  Notwithstanding anything to the contrary contained elsewhere in this Guaranty or any other Credit Document or Secured Interest Rate Agreement, the Secured Creditors agree (by their acceptance of the benefits of this Guaranty) that this Guaranty may be

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enforced only by the action of the Administrative Agent or the Collateral Agent, in each case acting upon the instructions of the Required Lenders (or, after the date on which all Credit Document Obligations have been paid in full, the holders of a majority of the outstanding Interest Rate Obligations) and that no other Secured Creditor shall have any right individually to seek to enforce or to enforce this Guaranty or to realize upon the security to be granted by the Credit Documents, it being understood and agreed that such rights and remedies may be exercised by the Administrative Agent or the Collateral Agent or, after all the Credit Document Obligations have been paid in full, by the holders of a majority of the outstanding Interest Rate Obligations, as the case may be, for the benefit of the Secured Creditors upon the terms of this Guaranty and the other Credit Documents.  The Secured Creditors further agree that this Guaranty may not be enforced against any director, officer, employee, partner, member or stockholder of any Guarantor (except to the extent such partner, member or stockholder is also a Guarantor hereunder).  It is understood and agreed that the agreement in this Section 8 is among and solely for the benefit of the Secured Creditors and that, if the Required Lenders (or, after the date on which all Credit Document Obligations have been paid in full, the holders of a majority of the outstanding Interest Rate Obligations) so agree (without requiring the consent of any Guarantor), this Guaranty may be directly enforced by any Secured Creditor.

9.  REPRESENTATIONS, WARRANTIES AND COVENANTS OF GUARANTORS.  In order to induce the Lenders to make Loans to, and issue Letters of Credit for the account of, the Borrower pursuant to the Credit Agreement, and in order to induce the Interest Rate Creditors to execute, deliver and perform the Secured Interest Rate Agreements to which they are a party, each Guarantor represents, warrants and covenants that:

(a)           until the termination of the Total Commitment and all Secured Interest Rate Agreements and until such time as no Note or Letter of Credit remains outstanding and all Guaranteed Obligations have been paid in full (other than indemnities described in Section 11.01 of the Credit Agreement and analogous provisions in the other Credit Documents which are not then due and payable), such Guarantor will take, or will refrain from taking, as the case may be, all actions that are necessary to be taken or not taken so that no violation of any provision, covenant or agreement contained in Sections 6 and 7 of the Credit Agreement, and so that no Event of Default, is caused by the actions of such Guarantor or any of its Subsidiaries; and

(b)           an executed (or conformed) copy of each of the Credit Documents and each of the Secured Interest Rate Agreements has been made available to a senior officer of such Guarantor and such officer is familiar with the contents thereof.

10.  EXPENSES.  The Guarantors hereby jointly and severally agree to pay all reasonable out-of-pocket costs and expenses of the Collateral Agent, the Administrative Agent and each other Secured Creditor in connection with the enforcement of this Guaranty and the protection of the Secured Creditors’ rights hereunder and of the Administrative Agent in connection with any amendment, waiver or consent relating hereto (including, in each case, without limitation, the reasonable fees and disbursements of counsel).

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11.  BENEFIT AND BINDING EFFECT.  This Guaranty shall be binding upon each Guarantor and its successors and assigns and shall inure to the benefit of the Secured Creditors and their successors and assigns to the extent permitted under the Credit Agreement or the respective Secured Interest Rate Agreement.

12.  AMENDMENTS; WAIVERS.  Neither this Guaranty nor any provision hereof may be changed, waived, discharged or terminated except with the written consent of each Guarantor directly affected thereby (it being understood that the addition or release of any Guarantor hereunder shall not constitute a change, waiver, discharge or termination affecting any Guarantor other than the Guarantor so added or released) and with the written consent of either (x) the Required Lenders (or, to the extent required by Section 11.12 of the Credit Agreement, with the written consent of each Lender) at all times prior to the time at which all Credit Document Obligations have been paid in full or (y) the holders of a majority of the outstanding Interest Rate Obligations at all times after the time at which all Credit Document Obligations have been paid in full; provided, that any change, waiver, modification or variance affecting the rights and benefits of a single Class (as defined below) of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall also require the written consent of the Requisite Creditors (as defined below) of such Class of Secured Creditors.  For the purpose of this Guaranty, the term “Class” shall mean each class of Secured Creditors, i.e., whether (x) the Lender Creditors as the holders of the Credit Document Obligations or (y) the Interest Rate Creditors as the holders of the Interest Rate Obligations.  For the purpose of this Guaranty, the term “Requisite Creditors” of any Class shall mean (x) with respect to the Credit Document Obligations, the Required Lenders (or, to the extent required by Section 11.12 of the Credit Agreement, each Lender) and (y) with respect to the Interest Rate Obligations, the holders of a majority of all Interest Rate Obligations outstanding from time to time under the Secured Interest Rate Agreements.

13.  SET OFF.  In addition to any rights now or hereafter granted under applicable law (including, without limitation, Section 151 of the New York Debtor and Creditor Law) and not by way of limitation of any such rights, upon the occurrence and during the continuance of an Event of Default (such term to mean and include any “Event of Default” as defined in the Credit Agreement and any payment default under any Secured Interest Rate Agreement continuing after any applicable grace period), each Secured Creditor is hereby authorized, at any time or from time to time, without notice to any Guarantor or to any other Person, any such notice being expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by such Secured Creditor to or for the credit or the account of such Guarantor, against and on account of the obligations and liabilities of such Guarantor to such Secured Creditor under this Guaranty, irrespective of whether or not such Secured Creditor shall have made any demand hereunder and although said obligations, liabilities, deposits or claims, or any of them, shall be contingent or unmatured.  Each Secured Creditor (by its acceptance of the benefits hereof) acknowledges and agrees (i) to promptly notify the relevant Guarantor after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application, and (ii) that the provisions of this Section 13 are subject to the sharing provisions set forth in Section 11.06 of the Credit Agreement.

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14.  NOTICE.  Except as otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be sent or delivered by mail, telegraph, telex, telecopy, cable or courier service and all such notices and communications shall, when mailed, telegraphed, telexed, telecopied, or cabled or sent by courier, be effective when deposited in the mails, delivered to the telegraph company, cable company or overnight courier, as the case may be, or sent by telex or telecopier, except that notices and communications to the Administrative Agent or any Guarantor shall not be effective until received by the Administrative Agent or such Guarantor, as the case may be.  All notices and other communications shall be in writing and addressed to such party at (i) in the case of any Lender Creditor, as provided in the Credit Agreement, (ii) in the case of any Guarantor, at its address set forth opposite its signature below, and (iii) in the case of any Interest Rate Creditor, at such address as such Interest Rate Creditor shall have specified in writing to the Guarantors; or in any case at such other address as any of the Persons listed above may hereafter notify the others in writing.

15.  REINSTATEMENT.  If any claim is ever made upon any Secured Creditor for repayment or recovery of any amount or amounts received in payment or on account of any of the Guaranteed Obligations and any of the aforesaid payees repays all or part of said amount by reason of (i) any judgment, decree or order of any court or administrative body having jurisdiction over such payee or any of its property or (ii) any settlement or compromise of any such claim effected by such payee with any such claimant (including, without limitation, the Borrower), then and in such event each Guarantor agrees that any such judgment, decree, order, settlement or compromise shall be binding upon such Guarantor, notwithstanding any revocation hereof or the cancellation of any Note, any Secured Interest Rate Agreement or any other instrument evidencing any liability of the Borrower, and such Guarantor shall be and remain liable to the aforesaid payees hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by any such payee.

16.  CONSENT TO JURISDICTION; SERVICE OF PROCESS; AND WAIVER OF TRIAL BY JURY.  (a)             THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE SECURED CREDITORS AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.  Any legal action or proceeding with respect to this Guaranty or any other Credit Document to which any Guarantor is a party may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, in each case located within the City of New York, and, by execution and delivery of this Guaranty, each Guarantor hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts.  Each Guarantor hereby further irrevocably waives any claim that any such courts lack jurisdiction over such Guarantor, and agrees not to plead or claim, in any legal action or proceeding with respect to this Guaranty or any other Credit Document to which such Guarantor is a party brought in any of the aforesaid courts, that any such court lacks jurisdiction over such Guarantor.  Each Guarantor further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to each Guarantor at its address set forth opposite its signature below, such service to become effective 30 days after such mailing.  Each

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Guarantor hereby irrevocably waives any objection to such service of process and further irrevocably waives and agrees not to plead or claim in any action or proceeding commenced hereunder or under any other Credit Document to which such Guarantor is a party that such service of process was in any way invalid or ineffective. Nothing herein shall affect the right of any of the Secured Creditors to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against each Guarantor in any other jurisdiction.

(b)           Each Guarantor hereby irrevocably waives (to the full extent permitted by applicable law) any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Guaranty or any other Credit Document to which such Guarantor is a party brought in the courts referred to in clause (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that such action or proceeding brought in any such court has been brought in an inconvenient forum.

(c)           EACH GUARANTOR AND EACH SECURED CREDITOR (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS GUARANTY) HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY, THE OTHER CREDIT DOCUMENTS TO WHICH SUCH GUARANTOR IS A PARTY OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

17.  TERMINATION.  After the Termination Date (as defined below), but subject to Section 15, this Guaranty shall terminate (provided that all indemnities set forth herein shall survive any such termination) and the Administrative Agent, at the request and expense of the respective Guarantor, will execute and deliver to such Guarantor a proper instrument or instruments acknowledging the satisfaction and termination of this Guaranty as provided above.  As used in this Guaranty, “Termination Date” shall mean the date upon which the Total Commitment and all Secured Interest Rate Agreements have been terminated, no Note or Letter of Credit under the Credit Agreement is outstanding (and all Loans have been paid in full) and all other Obligations (as defined in the Credit Agreement) have been paid in full (other than arising from indemnities for which no request has been made).

18.  RELEASE OF LIABILITY OF GUARANTOR UPON SALE OR DISSOLUTION.  In the event that all of the capital stock or other equity interests of one or more Guarantors is sold or otherwise disposed of (including by way of the merger or consolidation of such Guarantor with or into another Person) or liquidated, in any such case in compliance with the requirements of Section 7.02 of the Credit Agreement (or such sale, other disposition or liquidation has been approved in writing by the Required Lenders (or all the Lenders if required by Section 11.12 of the Credit Agreement)) and the proceeds of such sale, disposition or liquidation are applied in accordance with the provisions of the Credit Agreement, to the extent applicable, such Guarantor shall, upon consummation of such sale or other disposition (except to the extent that such sale or disposition is to the Borrower or a Subsidiary thereof), be released from this Guaranty automatically and without further action and this Guaranty shall, as to each such Guarantor or Guarantors, terminate, and have no further force or effect (it being understood

11

and agreed that the sale of one or more Persons that own, directly or indirectly, all of the capital stock or other equity interests of any Guarantor shall be deemed to be a sale of such Guarantor for the purposes of this Section 18).

19.  CONTRIBUTION.  At any time a payment in respect of the Guaranteed Obligations is made under this Guaranty, the right of contribution of each Guarantor against each other Guarantor shall be determined as provided in the immediately following sentence, with the right of contribution of each Guarantor to be revised and restated as of each date on which a payment (a “Relevant Payment”) is made on the Guaranteed Obligations under this Guaranty.  At any time that a Relevant Payment is made by a Guarantor that results in the aggregate payments made by such Guarantor in respect of the Guaranteed Obligations to and including the date of the Relevant Payment exceeding such Guarantor’s Contribution Percentage (as defined below) of the aggregate payments made by all Guarantors in respect of the Guaranteed Obligations to and including the date of the Relevant Payment (such excess, the “Aggregate Excess Amount”), each such Guarantor shall have a right of contribution against each other Guarantor who either has not made any payments or has made payments in respect of the Guaranteed Obligations to and including the date of the Relevant Payment in an aggregate amount less than such other Guarantor’s Contribution Percentage of the aggregate payments made to and including the date of the Relevant Payment by all Guarantors in respect of the Guaranteed Obligations (the aggregate amount of such deficit, the “Aggregate Deficit Amount”) in an amount equal to (x) a fraction the numerator of which is the Aggregate Excess Amount of such Guarantor and the denominator of which is the Aggregate Excess Amount of all Guarantors multiplied by (y) the Aggregate Deficit Amount of such other Guarantor.  A Guarantor’s right of contribution pursuant to the preceding sentences shall arise at the time of each computation, subject to adjustment at the time of each computation; provided that no Guarantor may take any action to enforce such right until the Guaranteed Obligations have been irrevocably paid in full in cash and the Total Commitment and all Letters of Credit have been terminated, it being expressly recognized and agreed by all parties hereto that any Guarantor’s right of contribution arising pursuant to this Section 19 against any other Guarantor shall be expressly junior and subordinate to such other Guarantor’s obligations and liabilities in respect of the Guaranteed Obligations and any other obligations owing under this Guaranty.  As used in this Section 19:  (i) each Guarantor’s “Contribution Percentage” shall mean the percentage obtained by dividing (x) the Adjusted Net Worth (as defined below) of such Guarantor by (y) the aggregate Adjusted Net Worth of all Guarantors; (ii) the “Adjusted Net Worth” of each Guarantor shall mean the greater of (x) the Net Worth (as defined below) of such Guarantor and (y) zero; and (iii) the “Net Worth” of each Guarantor shall mean the amount by which the fair saleable value of such Guarantor’s assets on the date of any Relevant Payment exceeds its existing debts and other liabilities (including contingent liabilities, but without giving effect to any Guaranteed Obligations arising under this Guaranty or any guaranteed obligations arising under any guaranty of the Permitted Senior Subordinated Notes or the Permitted Senior Unsecured Notes on such date.  Notwithstanding anything to the contrary contained above, any Guarantor that is released from this Guaranty pursuant to Section 18 hereof shall thereafter have no contribution obligations, or rights, pursuant to this Section 19, and at the time of any such release, if the released Guarantor had an Aggregate Excess Amount or an Aggregate Deficit Amount, same shall be deemed reduced to $0, and the contribution rights and obligations of the remaining Guarantors shall be recalculated on the respective date of release (as otherwise provided above)

12

based on the payments made hereunder by the remaining Guarantors.  All parties hereto recognize and agree that, except for any right of contribution arising pursuant to this Section 19, each Guarantor who makes any payment in respect of the Guaranteed Obligations shall have no right of contribution or subrogation against any other Guarantor in respect of such payment until all of the Guaranteed Obligations have been irrevocably paid in full in cash.  Each of the Guarantors recognizes and acknowledges that the rights to contribution arising hereunder shall constitute an asset in favor of the party entitled to such contribution.  In this connection, each Guarantor has the right to waive its contribution right against any Guarantor to the extent that after giving effect to such waiver such Guarantor would remain solvent, in the determination of the Required Lenders.

20.  LIMITATION ON GUARANTEED OBLIGATIONS.  Each Guarantor and each Secured Creditor (by its acceptance of the benefits of this Guaranty) hereby confirms that it is its intention that this Guaranty not constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy Code, the Uniform Fraudulent Conveyance Act of any similar Federal or state law.  To effectuate the foregoing intention, each Guarantor and each Secured Creditor (by its acceptance of the benefits of this Guaranty) hereby irrevocably agrees that the Guaranteed Obligations guaranteed by such Guarantor shall be limited to such amount as will, after giving effect to such maximum amount and all other (contingent or otherwise) liabilities of such Guarantor that are relevant under such laws (it being understood that it is the intention of the parties to this Guaranty and the parties to any guaranty of the Permitted Senior Subordinated Notes that, to the maximum extent permitted under applicable laws, the liabilities in respect of the guarantees of the Permitted Senior Subordinated Notes shall not be included for the foregoing purposes and that, if any reduction is required to the amount guaranteed by any Guarantor hereunder and with respect to the Permitted Senior Subordinated Notes that its guarantee of amounts owing in respect of the Permitted Senior Subordinated Notes shall first be reduced) and after giving effect to any rights to contribution pursuant to any agreement providing for an equitable contribution among such Guarantor and the other Guarantors, result in the Guaranteed Obligations of such Guarantor in respect of such maximum amount not constituting a fraudulent transfer or conveyance.  Notwithstanding the provisions of the two preceding sentences, as between the Secured Creditors and the holders of the Permitted Senior Subordinated Notes, unless the Agents otherwise agree in their sole discretion, it is agreed (and upon execution and delivery of any Permitted Senior Subordinated Notes Indentures, the provisions thereof shall so provide) that any diminution (whether pursuant to court decree or otherwise) of any Guarantor’s obligation to make any distribution or payment pursuant to this Guaranty shall have no force or effect for purposes of the subordination provisions contained in the Permitted Senior Subordinated Notes Indentures, and that any payments received in respect of a Guarantor’s obligations with respect to the Permitted Senior Subordinated Notes shall be turned over to the holders of the “senior debt” of such Guarantor (or obligations which would have constituted “senior debt” of such Guarantor if same had not been reduced or disallowed and which “senior debt” shall be calculated as if there were no diminution thereto pursuant to this Section 20 or for any other reason other than the irrevocable payment in full in cash of the respective obligations which would otherwise have constituted “senior debt” of such Guarantor) until all such “senior debt” (or obligations which would have constituted “senior debt” of such Guarantor if same had not been reduced or disallowed) has been irrevocably paid in full in cash.

13

21.  COUNTERPARTS.  This Guaranty may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.  A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Administrative Agent.

22.  PAYMENTS.  All payments made by any Guarantor hereunder will be made without setoff, counterclaim or other defense and on the same basis as payments are made by the Borrower under Sections 3.03 and 3.04 of the Credit Agreement.

23.  ADDITIONAL GUARANTORS.  It is understood and agreed that any Subsidiary of the Borrower that is required to execute a counterpart of this Guaranty after the date hereof pursuant to the Credit Agreement shall become a Guarantor hereunder by (x) executing and delivering a counterpart hereof (or a satisfactory joinder agreement hereto) to the Administrative Agent and (y) taking all actions as specified in this Guaranty as would have been taken by such Guarantor had it been an original party to this Guaranty, in each case with all documents and actions required to be taken above to the reasonable satisfaction of the Administrative Agent.

24.  HEADINGS DESCRIPTIVE.  The headings of the several Sections of this Guaranty are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Guaranty.

*  *  *

14

IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed and delivered as of the date first above written.

Address:               

c/o FAIRPOINT COMMUNICATIONS, INC.	FAIRPOINT BROADBAND, INC.,
521 East Morehead Street	as a Guarantor
Suite 250
Charlotte, NC 28202
	By:	/s/ Timothy W. Henry
		Title:	Vice President of Finance & Treasurer
c/o FAIRPOINT COMMUNICATIONS, INC.	MJD VENTURES, INC.,
521 East Morehead Street	as a Guarantor
Suite 250
Charlotte, NC 28202	By:	/s/ Timothy W. Henry
		Title:	Vice President of Finance & Treasurer
c/o FAIRPOINT COMMUNICATIONS, INC.	MJD SERVICES CORP.,
521 East Morehead Street	as a Guarantor
Suite 250
Charlotte, NC 28202	By:	/s/ Timothy W. Henry
		Title:	Vice President of Finance & Treasurer
c/o FAIRPOINT COMMUNICATIONS, INC.	ST ENTERPRISES, LTD.,
521 East Morehead Street	as a Guarantor
Suite 250
Charlotte, NC 28202	By:	/s/ Timothy W. Henry
		Title:	Vice President of Finance & Treasurer
c/o FAIRPOINT COMMUNICATIONS, INC.	FAIRPOINT CARRIER SERVICES, INC.,
521 East Morehead Street	as a Guarantor
Suite 250
Charlotte, NC 28202	By:	/s/ Timothy W. Henry
		Title:	Vice President of Finance & Treasurer

Accepted and Agreed to:
DEUTSCHE BANK TRUST COMPANY AMERICAS,
as Administrative Agent
By:	/s/ Anca Trifan
	Title:	Director

15

Table of Contents

1.	GUARANTY
2.	LIABILITY OF GUARANTORS ABSOLUTE
3.	OBLIGATIONS OF GUARANTORS INDEPENDENT
4.	WAIVERS BY GUARANTORS
5.	RIGHTS OF SECURED CREDITORS
6.	CONTINUING GUARANTY
7.	SUBORDINATION OF INDEBTEDNESS HELD BY GUARANTORS
8.	GUARANTY ENFORCEABLE BY ADMINISTRATIVE AGENT OR COLLATERAL AGENT
9.	REPRESENTATIONS, WARRANTIES AND COVENANTS OF GUARANTORS
10.	EXPENSES
11.	BENEFIT AND BINDING EFFECT
12.	AMENDMENTS; WAIVERS
13.	SET OFF
14.	NOTICE
15.	REINSTATEMENT
16.	CONSENT TO JURISDICTION; SERVICE OF PROCESS; AND WAIVER OF TRIAL BY JURY
17.	RELEASE OF LIABILITY OF GUARANTOR UPON SALE OR DISSOLUTION
18.	CONTRIBUTION
19.	LIMITATION ON GUARANTEED OBLIGATIONS
20.	COUNTERPARTS
21.	PAYMENTS
22.	ADDITIONAL GUARANTORS
23.	HEADINGS DESCRIPTIVE

i

EX-10.4

Exhibit 10.4

FIRST AMENDMENT TO CREDIT AGREEMENT

FIRST AMENDMENT TO CREDIT AGREEMENT (this “Amendment”), dated as of March 11, 2005, among FAIRPOINT COMMUNICATIONS, INC., a Delaware corporation (the “Borrower”), various Lenders party to the Credit Agreement referred to below, and DEUTSCHE BANK TRUST COMPANY AMERICAS, as Administrative Agent (in such capacity, the “Administrative Agent”).  All capitalized terms used herein and not otherwise defined shall have the respective meanings provided such terms in the Credit Agreement referred to below.

W I T N E S S E T H:

WHEREAS, the Borrower, various lenders from time to time party thereto (the “Lenders”), Bank of America, N.A., as Syndication Agent, Cobank, ACB and General Electric Capital Corporation, as Co-Documentation Agents, and the Administrative Agent are parties to a Credit Agreement, dated as of February 8, 2005 (the “Credit Agreement”); and

x

WHEREAS, subject to the terms and conditions of this Amendment, the parties hereto wish to amend or otherwise modify certain provisions of the Credit Agreement as herein provided;

NOW, THEREFORE, IT IS AGREED:

I.              Amendment to Credit Agreement.

1.             Section 6.01(a) of the Credit Agreement is hereby amended by inserting the text “(or, in the case of the fiscal year of the Borrower ended December 31, 2004, within 90 days after the close of such fiscal year)” immediately following the text “75 days after the close of each fiscal year of the Borrower” appearing in said Section.

II.            Miscellaneous Provisions.

1.             In order to induce the Lenders to enter into this Amendment, the Borrower hereby represents and warrants that:

(a)           no Default or Event of Default exists as of the First Amendment Effective Date, both immediately before and immediately after giving effect thereto; and

(b)           all of the representations and warranties contained in the Credit Agreement and the other Credit Documents are true and correct in all material respects on the First Amendment Effective Date both immediately before and immediately after giving effect thereto, with the same effect as though such representations and warranties had been made on and as of the First Amendment Effective Date (it being understood that any representation or warranty made as of a specific date shall be true and correct in all material respects as of such specific date).

2.             This Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Credit Agreement or any other Credit Document.

3.             This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.  A complete set of counterparts shall be lodged with the Borrower and the Administrative Agent.

4.             THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK (WITHOUT GIVING REGARD TO ANY CONFLICTS OF LAWS PROVISIONS THEREOF).

5.             This Amendment shall become effective on the date (the “First Amendment Effective Date”) when each of the Borrower and the Lenders constituting the Required Lenders shall have signed a counterpart hereof (whether the same or different counter parts) and shall have delivered (including by way of facsimile transmission) the same to White & Case LLP, 1155 Avenue of the Americas, New York, NY 10036 Attention:  May Yip (facsimile number: 212-354-8113 / e-mail address: myip@whitecase.com).

6.             From and after the First Amendment Effective Date, all references in the Credit Agreement and each of the other Credit Documents to the Credit Agreement shall be deemed to be references to the Credit Agreement as modified hereby.

*          *          *

2

IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Amendment as of the date first above written.

FAIRPOINT COMMUNICATIONS, INC.
By:	/s/ Timothy W. Henry
	Name: Timothy W. Henry
	Title: Vice President of Finance and Treasurer
DEUTSCHE BANK TRUST COMPANY AMERICAS, Individually and as Administrative Agent
By:	/s/ Anca Trifan
	Name: Anca Trifan
	Title: Director
By:	/s/ Marcus M. Tarkington
	Name: Marcus M. Tarkington
	Title: Director

BANK OF AMERICA, N.A., Individually and as Syndication Agent
By:	/s/ James Ford
	Name: James Ford
	Title: Senior Vice President
COBANK, ACB, Individually and as Co- Documentation Agent
By:	/s/ Rick Freeman
	Name: Rick Freeman
	Title: Vice President

GENERAL ELECTRIC CAPITAL CORPORATION, Individually and as Co- Documentation Agent
By:	illegible
	Name:
	Title:

SIGNATURE PAGE TO THE FIRST AMENDMENT TO CREDIT AGREEMENT, DATED AS OF MARCH 11, 2005, AMONG FAIRPOINT COMMUNICATIONS, INC., THE LENDERS FROM TIME TO TIME PARTY TO THE CREDIT AGREEMENT AND DEUTSCHE BANK TRUST COMPANY AMERICAS, AS ADMINISTRATIVE AGENT

NAME OF INSTITUTION:	NAME OF INSTITUTION:
Pacifica CDO II, Ltd.	Avenue CLO Fund, Ltd.

By:	/s/ An Pham, Jr.	By:	/s/ Richard D’Addario
	Name: An Pham Jr.		Name: Richard D’Addario
	Title: Vice President		Title: Senior Portfolio Manager

NAME OF INSTITUTION:		NAME OF INSTITUTION:
Ares CLO VII, Ltd.		Ares CLO VIII, Ltd.
By:	Ares CLO Management VII, L.P.	By:	Ares CLO Management VIII, L.P.
	Investment Manager		Investment Manager
By:	Ares CLO GP VII, LLC	By:	Ares CLO GP VIII, LLC
	Its General Partner		Its General Partner
By:	/s/Jeff Moore	By:	/s/ Jeff Moore
	Name: Jeff Moore		Name: Jeff Moore
	Title: Vice President		Title: Vice President

NAME OF INSTITUTION:		NAME OF INSTITUTION:
Ares CLO IX, Ltd.		Ares Enhanced Loan Investment Strategy, Ltd.
By:	Ares CLO Management IX, L.P.	By:	Ares Enhanced Loan Management, L.P.
	Investment Manager		Investment Manager
By:	Ares CLO GP IX, LLC	By:	Ares Enhanced Loan GP, LLC
	Its General Partner
By:	/s/ Jeff Moore	By:	/s/ Jeff Moore
	Name: Jeff Moore		Name: Jeff Moore
	Title: Vice President		Title: Vice President

NAME OF INSTITUTION:		NAME OF INSTITUTION:
Massachusetts Mutual Life Insurance Co.		Babson CLO Ltd. 2004-I
		Babson CLO Ltd. 2004-II
By:	Babson Capital Management LLC	Babson CLO Ltd. 2005-I
	as Investment Advisor	Suffield CLO, Limited
		Tryon CLO Ltd. 2000-I

By:	/s/ David P. Wells
	Name: David P. Wells, CFA	By:	Babson Capital Management LLC
	Title: Managing Director		as Collateral Manager
		By:	/s/ David P. Wells
			Name: David P. Wells, CFA
			Title: Managing Director

NAME OF INSTITUTION:		NAME OF INSTITUTION:
Braymoor & Co.		Bear Stearns Institutional Loan Master Fund
By:	Bear Stearns Assets Management, Inc.	By:	Bear Stearns Asset Management, Inc.
	as its attorney-in-fact		as its attorney-in-fact
By:	/s/ Niall D. Rosenzweig	By:	/s/ Niall D. Rosenzweig
	Name: Niall D. Rosenzweig		Name: Niall D. Rosenzweig
	Title: Managing Director		Title: Managing Director

NAME OF INSTITUTION:	NAME OF INSTITUTION:
Bear Stearns Loan Trust	FBS CBNA Loan Funding LLC

By:	Bear Stearns Asset Management, Inc.
	as its attorney-in-fact	By:	/s/ Gregg Bresner
			Name:	Gregg Bresner
By:	/s/ Niall D. Rosenzweig		Title:	Member, Briscoe Capital Management,
	Name: Niall D. Rosenzweig			on behalf of FBS CBNA
				Loan Funding LLC
	Title: Managing Director

NAME OF INSTITUTION:		NAME OF INSTITUTION:
Callidus Debt Partners CLO Fund II Ltd.		CIT Lending Services Corporation
By:	Its Collateral Manager, Callidus Capital	By:	/s/ Michael V. Monahan
	Management, LLC		Name: Michael V. Monahan
			Title: Vice President
By:	/s/ Wayne Mueller
	Name: Wayne Mueller
	Title: Senior Managing Director
NAME OF INSTITUTION:		NAME OF INSTITUTION:
Senior Debt Portfolio		Eaton Vance Senior Income Trust
By:	Boston Management and Research	By:	Eaton Vance Management
	its Investment Advisor		as Investment Advisor
By:	/s/ Michael B. Botthof	By:	/s/ Michael B. Botthof
	Name: Michael B. Botthof		Name: Michael B. Botthof
	Title: Vice President		Title: Vice President
NAME OF INSTITUTION:		NAME OF INSTITUTION:
Eaton Vance Institutional Senior Loan Fund		Eaton Vance CDO III, Ltd.
By:	Eaton Vance Management	By:	Eaton Vance Management
	as Investment Advisor		as Investment Advisor
By:	/s/ Michael B. Botthof	By:	/s/ Michael B. Botthof
	Name: Michael B. Botthof		Name: Michael B. Botthof
	Title: Vice President		Title: Vice President
NAME OF INSTITUTION:		NAME OF INSTITUTION:
Costantinus Eaton Vance CDO V, Ltd.		Eaton Vance CDO VI, Ltd.
By:	Eaton Vance Management	By:	Eaton Vance Management
	as Investment Advisor		as Investment Advisor
By:	/s/ Michael B. Botthof	By:	/s/ Michael B. Botthof
	Name: Michael B. Botthof		Name: Michael B. Botthof
	Title: Vice President		Title: Vice President

NAME OF INSTITUTION:		NAME OF INSTITUTION:
Grayson & Co.		Eaton Vance VT Floating-Rate Income Fund
By:	Boston Management and Research	By:	Eaton Vance Management
	as Investment Advisor		as Investment Advisor
By:	/s/ Michael B. Botthof	By:	/s/ Michael B. Botthof
	Name: Michael B. Botthof		Name: Michael B. Botthof
	Title: Vice President		Title: Vice President
NAME OF INSTITUTION:		NAME OF INSTITUTION:
Eaton Vance Limited Duration Income Fund		Eaton Vance Senior Floating-Rate Trust
By:	Eaton Vance Management	By:	Eaton Vance Management
	as Investment Advisor		as Investment Advisor
By:	/s/ Michael B. Botthof	By:	/s/ Michael B. Botthof
	Name: Michael B. Botthof		Name: Michael B. Botthof
	Title: Vice President		Title: Vice President
NAME OF INSTITUTION:		NAME OF INSTITUTION:
Eaton Vance Floating-Rate Income Trust		Eaton Vance Short Duration Diversified Income Fund
By:	Eaton Vance Management
	as Investment Advisor	By:	Eaton Vance Management
			as Investment Advisor
By:	/s/ Michael B. Botthof
	Name: Michael B. Botthof	By:	/s/ Michael B. Botthof
	Title: Vice President		Name: Michael B. Botthof
			Title: Vice President
NAME OF INSTITUTION:		NAME OF INSTITUTION:
MacQuarie/First Trust Global Infrastructure/Utilities		Four Corners CLO2005-I, Ltd.
Dividend & Income Fund
		By: Four Corners Capital Management LLC,
By: Four Corners Capital Management LLC,				As Sub-Adviser
	As Sub-Adviser

		By:	/s/ Steven Columbaro
By:	/s/Steven Columbaro		Name: Steven Columbaro
	Name: Steven Columbaro		Title: Vice President
	Title: Vice President
NAME OF INSTITUTION:		NAME OF INSTITUTION:
Fortress Portfolio Trust		State Street Bank and Trust Company as Trustee
		for GMAM Group Pension Trust I
By:	Four Corners Capital Management LLC,
	As Sub-Adviser	By:	/s/ Russell Riccardi
			Name: Russell Riccardi
By:	/s/ Steven Columbaro		Title: CSO
	Name: Steven Columbaro
	Title: Vice President
NAME OF INSTITUTION:		NAME OF INSTITUTION:
State Street Bank and Trust Company as Trustee		Alzette European CLO S.A.
for General Motors Welfare Benefit Trust
		By:	INVESCO Senior Secured Management,
			Inc. As Collateral Manager
By:	/s/ Russell Riccardi
	Name: Russell Riccardi	By:	/s/ Scott Baskind
	Title: CSO		Name: Scott Baskind
			Title: Authorized Signatory
NAME OF INSTITUTION:		NAME OF INSTITUTION:
Avalon Capital Ltd.-3		Champlain CLO, Ltd.
By:	INVESCO Senior Secured Management, Inc.	By:	INVESCO Senior Secured Management,
	As Asset Manager		Inc. As Collateral Manager
By:	/s/ Scott Baskind	By:	/s/ Scott Baskind
	Name: Scott Baskind		Name: Scott Baskind
	Title: Authorized Signatory		Title: Authorized Signatory
NAME OF INSTITUTION:		NAME OF INSTITUTION:
Charter View Portfolio		Diversified Credit Portfolio, Ltd.

By:	INVESCO Senior Secured Management, Inc.	By:	INVESCO Senior Secured Management,
	As Investment Advisor		Inc. As Investment Advisor
By:	/s/ Scott Baskind	By:	/s/ Scott Baskind
	Name: Scott Baskind		Name: Scott Baskind
	Title: Authorized Signatory		Title: Authorized Signatory
NAME OF INSTITUTION:		NAME OF INSTITUTION:
Aim Floating Rate Fund		INVESCO European CDO I S.A.
By:	INVESCO Senior Secured Management, Inc.	By:	INVESCO Senior Secured Management,
	As Sub-Advisor		Inc.
By:	/s/ Scott Baskind	By:	/s/ Scott Baskind
	Name: Scott Baskind		Name: Scott Baskind
	Title: Authorized Signatory		Title: Authorized Signatory
NAME OF INSTITUTION:		NAME OF INSTITUTION:
Loan Funding IX LLC, for itself or as agent for		Sequils-Liberty, Ltd.
Corporate Loan Funding IX LLC
		By:	INVESCO Senior Secured Management,
By:	INVESCO Senior Secured Management, Inc.		Inc. As Collateral Manager
	As Portfolio Manager
		By:	/s/ Scott Baskind
By:	/s/ Scott Baskind		Name: Scott Baskind
	Name: Scott Baskind		Title: Authorized Signatory
	Title: Authorized Signatory
NAME OF INSTITUTION:		NAME OF INSTITUTION:
Petrusse European CLO S.A.		Sagamore CLO Ltd.
By:	INVESCO Senior Secured Management, Inc.	By:	INVESCO Senior Secured Management,
	As Collateral Manager		Inc. As Collateral Manager
By:	/s/ Scott Baskind	By:	/s/ Scott Baskind
	Name: Scott Baskind		Name: Scott Baskind
	Title: Authorized Signatory		Title: Authorized Signatory

NAME OF INSTITUTION:		NAME OF INSTITUTION:
Saratoga CLO I, Ltd.		Metropolitan Life Insurance Co.
By:	INVESCO Senior Secured Management, Inc.	By:	/s/ Jim Dingler
	As Asset Manager		Name: Jim Dingler
			Title: Director
By:	/s/ Scott Baskind
	Name: Scott Baskind
	Title: Authorized Signatory
NAME OF INSTITUTION:		NAME OF INSTITUTION:
Morgan Stanley Senior Funding, Inc.		The Norinchukin Bank, New York Branch,
		through State Street Bank and Trust Company
By:	/s/ Eugene F. Martin	N.A. as fiduciary custodian
	Name: Eugene F. Martin
	Title: Vice President	By: Eaton Vance Management, Attorney-in-Fact
		By:	/s/ Michael B. Botthof
			Name: Michael B. Botthof
			Title: Vice President
NAME OF INSTITUTION:		NAME OF INSTITUTION:
Oak Hill Credit Partners I, Limited		Oak Hill Credit Partners II, Limited
By:	Oak Hill CLO Management I, LLC	By:	Oak Hill CLO Management II, LLC
	As Investment Manager		As Investment Manager
By:	/s/ Scott D. Krase	By:	/s/ Scott Krase
	Name: Scott D. Krase		Name: Scott Krase
	Title: Authorized Person		Title: Authorized Person
NAME OF INSTITUTION:		NAME OF INSTITUTION:
Oak Hill Credit Partners III, Limited		Oak Hill Credit Partners IV, Limited
By:	Oak Hill CLO Management III, LLC	By:	Oak Hill CLO Management IV, LLC
	As Investment Manager		As Investment Manager
By:	/s/ Scott D. Krase	By:	/s/ Scott Krase
	Name: Scott D. Krase		Name: Scott Krase
	Title: Authorized Person		Title: Authorized Person

NAME OF INSTITUTION:		NAME OF INSTITUTION:
SMBC MVI SPC, on behalf of and for the account of		PPM Monarch Bay Funding
Segregated Portfolio No. 1
		By:	/s/ Meredith J, Koslick
By:	Oak Hill Separate Account Management I, LLC		Name: Meredith J. Koslick
	As Investment Manager		Title: Assistant Vice President
By:	/s/ Scott D. Krase
	Name: Scott D. Krase
	Title: Authorized Person
NAME OF INSTITUTION:		NAME OF INSTITUTION:
PPM Spyglass Funding Trust		Foxe Basin CLO 2003, Ltd.
By:	/s/ Ann E. Morris	By:	Royal Bank of Canada
	Name: Ann E. Morris		as Collateral Manager
	Title: Authorized Agent
		By:	/s/ Lee M. Shaiman
			Name: Lee M. Shaiman
			Title: Authorized Signatory
NAME OF INSTITUTION:		NAME OF INSTITUTION:
Sun Life Assurance Company of Canada (US)		Sankaty Advisors, LLC as Collateral Manager
		for Castle Hill II – INGOTS, Ltd., as Term
By:	Fairlead Capital Management Inc.	Lender
	as Sub-Advisor
		By:	/s/ Jeffrey Hawkins
By:	/s/ Lee M. Shaiman		Name: Jeffrey Hawkins
	Name: Lee M. Shaiman		Title: Senior Vice President
	Title: President and Chief Investment Officer
NAME OF INSTITUTION:		NAME OF INSTITUTION:
Sankaty Advisors, LLC as Collateral Manager for		Sankaty Advisors, LLC as Collateral Manager
Castle Hill III CLO, Limited, as Term Lender		for Race Point II CLO, Limited, as Term Lender
By:	/s/ Jeffrey S. Hawkins	By:	/s/ Jeffrey S. Hawkins
	Name: Jeffrey S. Hawkins		Name: Jeffrey S. Hawkins
	Title: Senior Vice President		Title: Senior Vice President

NAME OF INSTITUTION:		NAME OF INSTITUTION:
Sankaty Advisors, LLC as Collateral Manager for		Sankaty Advisors, LLC as Collateral Manager
Castle Hill I – INGOTS, Ltd., as Term Lender		for Loan Funding XI LLC, as Term Lender
By:	/s/ Jeffrey S. Hawkins	By:	/s/ Jeffrey S. Hawkins
	Name: Jeffrey S. Hawkins		Name: Jeffrey S. Hawkins
	Title: Senior Vice President		Title: Senior Vice President
NAME OF INSTITUTION:		NAME OF INSTITUTION:
Sankaty Advisors, LLC as Collateral Manager for		Sankaty Advisors, LLC as Collateral Manager
Avery Point CLO, Ltd., as Term Lender		for Race Point CLO, Limited, as Term Lender
By:	/s/ Jeffrey S. Hawkins	By:	/s/ Jeffrey S. Hawkins
	Name: Jeffrey S. Hawkins		Name: Jeffrey S. Hawkins
	Title: Senior Vice President		Title: Senior Vice President
NAME OF INSTITUTION:		NAME OF INSTITUTION:
Harbour Town Funding LLC		Windsor Loan Funding, Limited
By:	/s/ Meredith Koslick	By:	Stanfield Capital Partners LLC
	Name: Meredith Koslick		as its Investment Manager
	Title: Assistant Vice President
		By:	/s/ Christopher E. Jansen
			Name: Christopher E. Jansen
			Title: Managing Partner
NAME OF INSTITUTION:		NAME OF INSTITUTION:
XL Re Ltd.		Stanfield Vantage CLO, Ltd.
By:	Stanfield Capital Partners LLC	By:	Stanfield Capital Partners LLC
	as its Collateral Manager		As Its Interim Asset Manager
By:	/s/ Christopher E. Jansen	By:	/s/ Christopher E. Jansen
	Name: Christopher E. Jansen		Name: Christopher E. Jansen
	Title: Managing Partner		Title: Managing Partner

NAME OF INSTITUTION:		NAME OF INSTITUTION:
TRS Callisto LLC		Wachovia Bank National Association
By:	/s/ Alice L. Wagner	By:	/s/ Franklin M. Wessinger
	Name: Alice L. Wagner		Name: Franklin M. Wessinger
	Title: Vice President		Title: Managing Director
NAME OF INSTITUTION:
Waterville Funding LLC
By:	/s/ Meredith J. Koslick
	Name: Meredith J. Koslick
	Title: Assistant Vice President

EX-10.5

Exhibit 10.5

SWINGLINE NOTE

$	New York, New York
	, 2005

FOR VALUE RECEIVED, FAIRPOINT COMMUNICATIONS, INC., a Delaware corporation (the “Borrower”), hereby promises to pay to the order of (the “Lender”), in lawful money of the United States of America in immediately available funds, at the Payment Office (as defined in the Agreement referred to below) initially located at 60 Wall Street, New York, New York 10005, on the Swingline Expiry Date (as defined in the Agreement) the principal sum of                        ($             ) or, if less, the then unpaid principal amount of all Swingline Loans (as defined in the Agreement) made by the Lender pursuant to the Agreement.

The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement.

This Note is the Swingline Note referred to in the Credit Agreement, dated as of February 8, 2005, among the Borrower, the lenders from time to time party thereto (including the Lender), Bank of America, N.A., as Syndication Agent, CoBank, ACB and General Electric Capital Corporation, as Co-Documentation Agents, and Deutsche Bank Trust Company Americas, as Administrative Agent (as amended, restated, modified and/or supplemented from time to time, the “Agreement”), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement).  This Note is secured pursuant to the Pledge Agreement (as defined in the Agreement).  As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Swingline Expiry Date, in whole or in part.

In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement.

The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note.

THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.

FAIRPOINT COMMUNICATIONS, INC.
By
	Name:
	Title:

EX-10.6

Exhibit 10.6

RF NOTE

$	New York, New York
	, 2005

FOR VALUE RECEIVED, FAIRPOINT COMMUNICATIONS, INC., a Delaware corporation (the “Borrower”), hereby promises to pay to the order of (the “Lender”), in lawful money of the United States of America in immediately available funds, at the Payment Office (as defined in the Agreement referred to below) initially located at 60 Wall Street, New York, New York 10005, on the RF Maturity Date (as defined in the Agreement) the principal sum of                 ($                 ) or, if less, the then unpaid principal amount of all RF Loans (as defined in the Agreement) made by the Lender pursuant to the Agreement.

The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement.

This Note is one of the RF Notes referred to in the Credit Agreement, dated as of February 8, 2005, among the Borrower, the lenders from time to time party thereto (including the Lender), Bank of America, N.A., as Syndication Agent, CoBank, ACB and General Electric Capital Corporation, as Co-Documentation Agents, and Deutsche Bank Trust Company Americas, as Administrative Agent (as amended, restated, modified and/or supplemented from time to time, the “Agreement”), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement).  This Note is secured pursuant to the Pledge Agreement (as defined in the Agreement).  As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the RF Maturity Date, in whole or in part.

In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement.

The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note.

THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.

FAIRPOINT COMMUNICATIONS, INC.
By
	Name:
	Title:

EX-10.7

Exhibit 10.7

B TERM NOTE

$	New York, New York
	, 2005

FOR VALUE RECEIVED, FAIRPOINT COMMUNICATIONS, INC., a Delaware corporation (the “Borrower”), hereby promises to pay to the order of (the “Lender”), in lawful money of the United States of America in immediately available funds, at the Payment Office (as defined in the Agreement referred to below) initially located at 60 Wall Street, New York, New York 10005, on the Term Loan Maturity Date (as defined in the Agreement) the principal sum of                   ($                   )or, if less, the then unpaid principal amount of all B Term Loans (as defined in the Agreement) made by the Lender pursuant to the Agreement.

The Borrower also promises to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement.

This Note is one of the B Term Notes referred to in the Credit Agreement, dated as of February 8, 2005, among the Borrower, the lenders from time to time party thereto (including the Lender), Bank of America, N.A., as Syndication Agent, CoBank, ACB and General Electric Capital Corporation, as Co-Documentation Agents, and Deutsche Bank Trust Company Americas, as Administrative Agent (as amended, restated, modified and/or supplemented from time to time, the “Agreement”), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement).  This Note is secured pursuant to the Pledge Agreement (as defined in the Agreement).  As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Term Loan Maturity Date, in whole or in part.

In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement.

The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note.

THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.

FAIRPOINT COMMUNICATIONS, INC.
By
	Name:
	Title:

EX-10.9

Exhibit 10.9

NOMINATING AGREEMENT

THIS NOMINATING AGREEMENT (this “Agreement”), dated as of February 8, 2005, is entered into by and among FairPoint Communications, Inc., a Delaware corporation (the “Company”), Kelso Investment Associates V, L.P., a Delaware limited partnership (“KIA V”), Kelso Equity Partners V, L.P., a Delaware limited partnership (“KEP V” and together with KIA V, “Kelso”) and Thomas H. Lee Equity Fund IV, L.P., a Delaware limited partnership (“THL”).  Kelso and THL, together with the affiliates of THL listed on Schedule A attached hereto, are referred to herein collectively as the “Stockholders.”

WHEREAS, as of the date hereof and immediately prior to the consummation of the Company’s initial public offering of its common stock, par value $.01 per share (the “Common Stock”), the Stockholders own in the aggregate 7,515,321 shares (collectively, the “Shares”) of Common Stock; and

WHEREAS, Kelso, THL and the Company wish to make certain agreements with respect to the nomination of candidates for election to the board of directors of the Company, upon the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants and considerations herein set forth, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.Board of Directors.  The size of the Board of Directors of the Company (the “Board”) shall be established in accordance with the Certificate of Incorporation and By-Laws of the Company.  The members of the Board shall be nominated and elected in accordance with the Certificate of Incorporation and By-Laws of the Company, and the provisions of this Agreement.  “Certificate of Incorporation” shall mean the Eighth Amended and Restated Certificate of Incorporation of the Company, as filed with the Secretary of State of the State of Delaware and effective as of the date hereof, as may be amended from time to time.  “By-Laws” shall mean the Amended and Restated By-Laws of the Company, effective as of the date hereof, as may be amended from time to time.

2.Staggered Board.  The Certificate of Incorporation and By-Laws of the Company shall provide that the Board shall be divided into three classes, as nearly equal in number as possible, as follows: (A) one class initially consisting of two directors (“Class I”), the initial term of which shall expire at the first annual meeting of the stockholders to be held after the date hereof; (B) a second class initially consisting of two directors (“Class II”), the initial term of which shall expire at the second annual meeting of the stockholders to be held after the date hereof and (C) a third class initially consisting of two directors (“Class III”), the initial term of which shall expire at the third annual meeting of the stockholders to be held after the date hereof, with each class to hold office until its successors are elected and qualified.  At each annual meeting of the stockholders of the Company, the successors of the members of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the third succeeding annual meeting of stockholders.  On the date hereof, the Board shall

consist of: (i) Eugene B. Johnson and Patricia Garrison-Corbin in Class I, (ii) Frank K. Bynum and David L. Hauser in Class II and (iii) Kent R. Weldon and Claude C. Lilly in Class III.

3.Designees.  Upon expiration of the respective terms of the initial Board members set forth in Section 2 above, and subject to the provisions of Section 4 hereof, Kelso and THL shall have the right to designate individuals for nomination for election to the Board as set forth below and the Company shall, acting through its Nominating Committee, cause such individuals to be nominated for election to the Board as set forth below; provided that the Nominating Committee’s obligations under this Agreement are subject to the requirements of their fiduciary duties as directors and the Delaware General Corporation Law.

(a)For so long as the Stockholders (together with any of their respective successors and permitted assigns) own, in the aggregate, at least forty percent (40%) of the Shares and Kelso (together with its successors and permitted assigns) owns at least one (1) Share, (i) Kelso shall be entitled to designate one person for nomination for election to the Board in Class II and (ii) THL shall be entitled to designate one person for nomination for election to the Board in Class III; provided, however, that if Kelso no longer owns any Shares, but THL (together with its successors and permitted assigns)owns at least forty percent (40%) of the Shares, THL shall be entitled to designate one person for nomination for election to the Board in Class II and one person for nomination for election to the Board in Class III; or

(b)For so long as the Stockholders (together with any of their respective successors and permitted assigns) own, in the aggregate, less than forty percent (40%), but at least twenty percent (20%), of the Shares, THL shall be entitled to designate one person for nomination for election to the Board in Class III.

4.Mechanics of Designation.

(a)In order to nominate an individual for election to the Board, Kelso or THL, as applicable, must submit to the Company a prior written notice at least ninety (90) days prior to the date of the next scheduled annual meeting of the Company’s stockholders in accordance with the notice provisions set forth in Section 11 hereof, which notice shall include (i) the name of the designee, (ii) a current resume and curriculum vitae of the designee, (iii) a statement describing the designee’s qualifications and (iv) contact information for personal and professional references.  At least one hundred and twenty (120) days prior to the date of such annual meeting of the Company’s stockholders, the Company shall provide Kelso and THL with written notice of the expected date of such meeting in accordance with the notice provisions set forth in Section 11 hereof.

(b)At each meeting of the Company’s stockholders at which the directors of the Company are to be elected, the Company agrees to recommend that the stockholders elect to the Board each designee of Kelso and/or THL nominated for election at such meeting in accordance with the provisions of Section 3 above.

2

5.Vacancies.

(a)At any time at which a vacancy shall be created on the Board in any class as a result of the death, disability, retirement, resignation, removal or otherwise of a designee of Kelso and Kelso maintains the right to designate a person for nomination for election to the Board, as specified in Section 3 above, Kelso shall have the right to designate for appointment by the remaining directors of the Company under the Certificate of Incorporation an individual to fill such vacancy and to serve as a director on the Board in such class.

(b)At any time at which a vacancy shall be created on the Board in any class as a result of the death, disability, retirement, resignation, removal or otherwise of a designee of THL and THL maintains the right to designate a person or persons for nomination for election to the Board, as specified in Section 3 above, THL shall have the right to designate for appointment by the remaining directors of the Company under the Certificate of Incorporation an individual to fill such vacancy and to serve as a director on the Board in such class.   In addition, in the event a vacancy of a Kelso designee occurs at a time when Kelso no longer owns any Shares, but THL owns at least forty percent (40%) of the Shares, THL shall be entitled to designate an individual to fill such vacancy.

(c)In connection with the foregoing, THL or Kelso, as applicable, must submit to the Company written notice of such designee or designees in accordance with the notice provisions set forth in Section 11 hereof, which notice shall include (i) the name of the designee, (ii) a current resume and curriculum vitae of the designee, (iii) a statement describing the designee’s qualifications and (iv) contact information for personal and professional references.  The Company agrees to take such actions as will result in the appointment to the Board as soon as practicable of any individual so designated by THL or Kelso, as applicable.

6.Modification, Amendment, Waiver.  No modification, amendment or waiver of any provision of this Agreement shall be effective unless approved in writing by the Company, THL and Kelso; provided, however, that Kelso’s consent will not be required if Kelso no longer owns any Shares.  The failure of any party at any time to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the rights of the party thereafter to enforce the provisions of this Agreement in accordance with its terms.

7.Invalid or Unenforceable Provisions.  Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any term or provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.  The parties further agree that any court of competent jurisdiction is expressly authorized to modify any such unenforceable provision of this Agreement in lieu of severing such unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting any or all of the offending provision, adding additional language to this Agreement, or by making such other modifications as it deems warranted to carry out the intent and agreement of the parties as

3

embodied herein to the maximum extent permitted by law.  The parties expressly agree that this Agreement as so modified by a court of competent jurisdiction shall be binding upon and enforceable against each of them.

8.Entire Agreement. Except as otherwise expressly set forth herein, this document embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.

9.Binding Effect; Assignment.  All of the terms of this Agreement shall inure to the benefit of and shall be binding upon the Company, THL and Kelso and their respective successors and permitted assigns; provided, however, that this Agreement may not be assigned except in accordance with the following sentence.  No party hereto shall assign its rights, or delegate its duties, under this Agreement without the prior written consent of all of the other parties hereto; provided, however, that (a) THL and Kelso may assign their respective rights hereunder to their respective affiliates without consent and (b) Kelso’s consent will not be required if Kelso no longer owns any Shares.

10.Remedies.  The parties hereto will be entitled to enforce their rights under this Agreement specifically (without posting a bond or other security), to recover damages by reason of any material breach of any provision of this Agreement and to exercise all other rights existing in their favor.  The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief in order to enforce or prevent any violation of the provisions of this Agreement.  In the event of any dispute involving the terms of this Agreement, the prevailing party shall be entitled to collect reasonable fees and expenses incurred by the prevailing party in connection with such dispute from the other parties to such dispute.

11.Notices.  Any notice or other communication in connection with this Agreement or the Shares shall be deemed to be delivered and received if in writing (or in the form of a telex or telecopy) addressed as provided below (a) when actually delivered, in person, (b) if telexed or telecopied to said address, when electronically confirmed, (c) when delivered if delivered by overnight courier or (d) in the case of delivery by mail, five (5) business days shall have elapsed after the same shall have been deposited in the United States mails, postage prepaid and registered or certified:

If to the Company, to:

FairPoint Communications, Inc.

521 East Morehead Street

Suite 250

Charlotte, North Carolina 28202

Attention:  Shirley J. Linn, Esq.

Facsimile:  (704) 344-1594

4

with a copy to:

Paul, Hastings, Janofsky & Walker LLP
75 East 55th Street
New York, New York  10022
Attention: Jeffrey J. Pellegrino, Esq.

If to Kelso, to:

Kelso & Company

320 Park Avenue, 24th Floor

New York, New York 10022

Attention:  James J. Connors, II, Esq.

Facsimile:  (212) 223-2379

If to THL, to:

Thomas H. Lee Partners, L.P.

100 Federal Street

35th Floor

Boston, Massachusetts 02110

Attention:  Anthony J. DiNovi

Kent R. Weldon

Facsimile:  (617) 227-3514

12.Term.  The term of this Agreement shall terminate upon the earlier to occur of: (i) the mutual consent in writing of all of the parties hereto, provided that Kelso’s consent will not be required if Kelso no longer owns any Shares or (ii) the date on which the Stockholders (together with any of their respective successors and permitted assigns) own, in the aggregate, less than twenty percent (20%) of the Shares.

13.Governing Law; Submission to Jurisdiction.  All questions concerning the construction, validity and interpretation of this Agreement will be governed by the internal laws of the State of Delaware, without giving effect to principles of conflicts of law. The parties hereby irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the courts of the State of Delaware or the United States of America located in the State of Delaware for any actions, suits or proceedings arising out of or relating to this Agreement and the transactions contemplated hereby (and the parties agree not to commence any action, suit or proceeding relating hereto except in such courts), and further agree that service of any process, summons, notice or documents by United States registered mail to a party in accordance with Section 11 hereof shall be effective service of process for any action, suit or proceeding brought against such party in any such court and, absent any statute, rule or order to the contrary, that each party shall have thirty (30) days from actual receipt of any complaint to answer or otherwise plead with respect thereto.  The parties hereby irrevocably and unconditionally waive any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in the courts of the State of Delaware or the United States of America located in the State of Delaware, and hereby further irrevocably and unconditionally

5

waive and agree not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

14.Descriptive Headings.  The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

15.Counterparts.  This Agreement may be executed in separate counterparts each of which will be an original and all of which taken together will constitute one and the same agreement.

(Signature Pages Follow)

6

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.

COMPANY:
FAIRPOINT COMMUNICATIONS, INC.
By:	/s/ Shirley J. Linn
	Name: Shirley J. Linn
	Title: Senior Vice President
KELSO:
KELSO INVESTMENT ASSOCIATES V, L.P.
By: Kelso Partners V, L.P.,
its General Partner
By:	/s/ George E. Matelich
	Name: George E. Matelich
	Title: General Partner
KELSO EQUITY PARTNERS V, L.P.
By:	/s/ George E. Matelich
	Name: George E. Matelich
	Title: General Partner
THL:
THOMAS H. LEE EQUITY FUND IV, L.P.
By: THL Equity Advisors IV, LLC,
its general partner
By:	/s/ Thomas H. Lee
	Name: Thomas H. Lee
	Title:

[Nominating Agreement]

Schedule A

THL Related Parties

Thomas H. Lee Foreign Fund IV, L.P.

Thomas H. Lee Foreign Fund IV-B, L.P.

1987 Thomas H. Lee Nominee Trust

David V. Harkins

The Harkins 1995 Gift Trust

Scott A. Schoen

C. Hunter Boll

Scott M. Sperling

Anthony J. DiNovi

Thomas M. Hagerty

Warren C. Smith, Jr.

Seth W. Lawry

Kent R. Weldon

Terrence M. Mullen

Todd M. Abbrecht

Charles A. Brizius

Scott Jaeckel

Soren Oberg

Thomas R. Shepherd

Joseph J. Incandela

Wendy L. Malser

Andrew D. Flaster

Robert Schiff Lee 1988 Irrevocable Trust

Stephen Zachary Lee

Charles W. Robins as Custodian for Jesse Lee

Charles W. Robins as Custodian for Nathan Lee

Charles W. Robins

James Westra

Thomas H. Lee Charitable Investment L.P.

THL-CCI Investors Limited Partnership

Putnam Investment Holdings, LLC

EX-10.10

Exhibit 10.10

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made as of February 8, 2005, by and among FairPoint Communications, Inc., a Delaware corporation (the “Company”), and those persons listed on Schedule A attached hereto, as the same may be amended from time to time (each an “Initial Holder” and collectively, the “Initial Holders”).

WHEREAS, as set forth in this Agreement, the Company has agreed to grant to the Holders certain registration rights with respect to the shares of the Company’s common stock, par value $.01 per share (the “Common Stock”), owned by each Holder as of the date hereof as set forth next to each Holders name on Schedule A hereto.

NOW, THEREFORE, BE IT RESOLVED, that the parties hereto, in consideration of the mutual covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, hereby agree as follows:

Section 1.               Definitions.  As used in this Agreement, the following capitalized defined terms shall have the following meanings:

“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, controls, or is controlled by, or is under common control with, such Person.  For the purposes of this definition, “control,” when used with respect to any Person, means possession, direct or indirect, of the power to direct or cause the direction of the management and policies of the such Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “affiliated,” “controlling” and “controlled” have meanings correlative to the foregoing.

“Business Day” means a day, other than a Saturday, Sunday or other day on which banking institutions in New York, New York are permitted or required by any applicable law to close.

“Commission” means the Securities and Exchange Commission.

“Common Stock” has the meaning set forth in the Recitals.

“Company” has the meaning set forth in the Preamble and also includes the Company’s successors.

“Delay Notice” has the meaning set forth in Section 2(c) hereof.

“Delay Period” has the meaning set forth in Section 2(c) hereof.

“Effectiveness Period” has the meaning set forth in Section 2(b) hereof.

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.

“Holder” or “Holders” means the Initial Holder(s) or each Person to whom a Holder Transfers Registrable Securities in accordance with Section 7(c) hereof.

“Initial Holder” or “Initial Holders” has the meaning set forth in the Preamble.

“Person” means an individual, partnership, corporation, limited liability company, joint venture, trust, association, estate, or unincorporated organization, or other entity or organization, or a government or agency or political subdivision thereof.

“Prospectus” means the prospectus included in the Shelf Registration Statement, including any preliminary prospectus, and any such prospectus amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by the Shelf Registration Statement, and by all other amendments and supplements to a prospectus, including post-effective amendments, and, in each case, including all documents incorporated by reference therein.

“Registrable Securities” means (i) the shares of Common Stock held by the Holders as of the date hereof as set forth next to each Holders name on Schedule A hereto; (ii) any shares of Common Stock or other securities issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange by the Company generally for, or in replacement by the Company generally of, such shares of Common Stock; and (iii) any securities issued in exchange for such shares of Common Stock in any merger, combination or reorganization of the Company; provided, however, that Registrable Securities shall not include any securities which have theretofore been registered and sold by a Holder pursuant to the Securities Act or which have been sold by a Holder to the public pursuant to Rule 144 or any similar rules promulgated by the Commission pursuant to the Securities Act, and, provided further, that the Company shall have no obligation under Section 2 hereof to register any Registrable Securities of a Holder if the Company shall deliver to the Holders requesting such registration an opinion of counsel reasonably satisfactory to such Holders and their counsel to the effect that the proposed sale or disposition of all of the Registrable Securities does not require registration under the Securities Act for a sale or disposition in a single public sale in accordance with the volume limitations contained in Rule 144(e)(1)(i) under the Securities Act, and if the Company shall offer to remove any and all legends restricting transfer from the certificates evidencing such Registrable Securities.  For purposes of this Agreement, a

Person will be deemed to be a Holder of Registrable Securities whenever such Person has the then-existing right to acquire such Registrable Securities (by conversion, purchase or otherwise), whether or not such acquisition has actually been effected.

“Rule 144” and “Rule 145” mean Rule 144 and Rule 145 promulgated under the Securities Act.

“Securities Act” means the Securities Act of 1933, as amended from time to time.

“Shelf Registration” means a registration effected pursuant to Section 2(a) hereof.

“Shelf Registration Statement” means the “shelf” registration statement of the Company pursuant to the provisions of Section 2 hereof which covers all of the Registrable Securities, on an appropriate form under Rule 415 under the Securities Act, or any successor or similar rule that may be adopted by the Commission, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all documents incorporated by reference therein.  For the avoidance of doubt, the “Shelf Registration Statement” will not cover any securities other than Registrable Securities.

“Transfer” means and includes the act of selling, giving, transferring, creating a trust (voting or otherwise), assigning or otherwise disposing of (other than pledging, hypothecating or otherwise transferring as security or any transfer upon any merger or consolidation) (and correlative words shall have correlative meanings); provided however, that any transfer or other disposition upon foreclosure or other exercise of remedies of a secured creditor after an event of default under or with respect to a pledge, hypothecation or other transfer as security shall constitute a Transfer.

Section 2.               Registration under the Securities Act.

(a)           Registration Requirement.  The Company shall use commercially reasonableefforts to prepare and file with the Commission on the 181st day following the date hereof a Shelf Registration Statement meeting the requirements of the Securities Act and cause such Shelf Registration Statement to be declared effective by the Commission as reasonably practicable thereafter.  No Holder of Registrable Securities shall be entitled to include any of its Registrable Securities in any Shelf Registration pursuant to this Agreement unless and until such Holder agrees in writing to be bound by all of the provisions of this Agreement applicable to such Holder and furnishes to the Company in writing, within 10 Business Days after receipt of a request therefor, such information as the Company may, after conferring with counsel with regard to information relating to Holders that would be required by the Commission to be included in such Shelf Registration Statement or the Prospectus, reasonably request for inclusion in any Shelf

Registration Statement or the Prospectus.  Each Holder as to which any Shelf Registration is being effected agrees to furnish to the Company all information with respect to such Holder necessary to make the information previously furnished to the Company by such Holder not materially misleading.

(b)           Effectiveness Requirement.  The Company agrees to use commercially reasonable efforts to keep the Shelf Registration Statement continuously effective and the Prospectus usable for resales for a period commencing on the date that such Shelf Registration Statement is initially declared effective by the Commission and terminating on the date when all of the Registrable Securities covered by such Shelf Registration Statement have been sold pursuant to such Shelf Registration Statement or cease to be Registrable Securities (the “Effectiveness Period”); provided, however, that (i) the Company shall be permitted to defer the filing and/or effectiveness of such Shelf Registration Statement, to suspend the sale of securities pursuant to the Shelf Registration Statement and to withdraw the Shelf Registration Statement during any Delay Period (as defined below) and (ii) nothing contained herein shall require the Company to prepare any financial statements for inclusion or incorporation by reference in the Shelf Registration Statement prior to the time period such financial statements would otherwise be required to be filed with the Commission pursuant to the Exchange Act.

(c)           Delay Period.  The term “Delay Period” shall mean, with respect to any obligation to keep the Shelf Registration Statement or the Prospectus usable for resales pursuant to this Section 2, the shortest period of time determined in good faith by the Company to be necessary for such purpose when there exist circumstances relating to a material pending development, including but not limited to a pending or contemplated material acquisition or merger or other material transaction or similar event, which would require disclosure by the Company in such Shelf Registration Statement or the Prospectus of material information which the Company determines in good faith that it has a bona fide business purpose for keeping confidential and non-public and the non-disclosure of which in the Shelf Registration Statement or the Prospectus might cause such Shelf Registration Statement or Prospectus to fail to comply with applicable disclosure requirements.  A Delay Period shall commence on and include the date that the Company gives written notice (a “Delay Notice”) to the Holders that the Prospectus is no longer usable as a result of a material pending development pursuant to Section 2(b) hereof and shall end on the date when the Holders are advised in writing by the Company that the current Delay Period has terminated (it being understood that the Company shall give such notice to all Holders promptly upon making the determination that the Delay Period has ended); provided, however, that the Company shall not be entitled during any consecutive twelve (12)-month period to (i) more than three (3) Delay Periods or (ii) to Delay Periods having durations that exceed ninety (90) days in the aggregate.

(d)           Notice.  The Company shall, in the event the Shelf Registration Statement is declared effective, provide to each Holder a reasonable number of copies of the Prospectus which is a part of such Shelf Registration Statement, notify each such

Holder when such Shelf Registration Statement has become effective and take such other actions as are required to permit unrestricted resales of the Registrable Securities.  The Company further agrees to supplement or amend the Shelf Registration Statement if and as required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement or by the Securities Act or by any other rules and regulations thereunder for shelf registrations, and the Company agrees to furnish to the Holders of Registrable Securities copies of any such supplement or amendment promptly after its being used or filed with the Commission.

(e)           Effective Shelf Registration Statement.  The Shelf Registration Statement will not be deemed to have become effective unless it has been declared effective by the Commission; provided, however, that if, after it has been declared effective, the offering of Registrable Securities pursuant to such Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the Commission or any other governmental agency or court, such Shelf Registration Statement will be deemed not to have been effective during the period of such interference until the offering of Registrable Securities pursuant to such Shelf Registration Statement may legally resume.

(f)            Selection of Underwriter.  In any underwritten offering to be effected pursuant to a Shelf Registration, Holders of a majority of the shares of Common Stock to be included in such offering will have the right to select the managing underwriter (which shall be of nationally recognized standing) to administer the offering, but only with the approval of the Company, such approval not to be unreasonably withheld.

(g)           Other Registration Rights.  The Company represents and warrants that as of the date hereof it is not a party to, or otherwise subject to, any other agreement granting registration rights to any other Person with respect to any securities of the Company.  Except as provided in this Agreement, prior to the date on which the Shelf Registration Statement is initially declared effective by the Commission, the Company shall not grant to any Person the right to request the Company to register any equity securities of the Company, or any securities convertible or exchangeable into or exercisable for equity securities of the Company, without the prior written consent of the holders of a majority of the Registrable Securities.

Section 3.               Registration Procedures.

(a)           Obligations of the Company.  In connection with its obligations under Section 2 hereof with respect to the Shelf Registration Statement, the Company shall use commercially reasonable efforts, during the Effectiveness Period, to:

(i)            prepare and file with the Commission the Shelf Registration Statement as prescribed by Section 2(a) hereof on the appropriate form under the Securities Act, which form shall (i) be selected

by the Company, (ii) be available for the sale of the Registrable Securities by the selling Holders thereof, and (iii) comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the Commission to be filed therewith; the Company shall use commercially reasonable efforts to cause such Shelf Registration Statement to become effective and remain effective and the Prospectus usable for resales in accordance with Section 2 hereof, subject to the proviso contained in Section 2(b) hereof; provided, however, that, before filing the Shelf Registration Statement or the Prospectus or any amendments or supplements thereto, the Company shall furnish to and afford the Holders of the Registrable Securities covered by such Shelf Registration Statement, their counsel and the managing underwriters of an underwritten offering of Registrable Securities, if any, a reasonable opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed; and the Company shall not file the Shelf Registration Statement or the Prospectus or any amendments or supplements thereto in respect of which the Holders must be afforded an opportunity to review prior to the filing of such document, other than filings required under the Exchange Act, if the Holders, their counsel or the managing underwriters of an underwritten offering of Registrable Securities, if any, shall reasonably object in a timely manner;

(ii)           prepare and file with the Commission such amendments and post-effective amendments to such Shelf Registration Statement as may be necessary to keep such Shelf Registration Statement effective for the Effectiveness Period, subject to the proviso contained in Section 2(b) hereof or as reasonably requested by the Holders of a majority of Registrable Securities, and cause the Prospectus to be supplemented, if so determined by the Company or requested by the Commission, by any required prospectus supplement and as so supplemented to be filed pursuant to Rule 424 (or any similar provision then in force), under the Securities Act, respond within a reasonable time to any comments received from the Commission with respect to such Shelf Registration Statement, or any amendment, post-effective amendment or supplement relating thereto, and comply with the provisions of the Securities Act, the Exchange Act and the rules and regulations promulgated thereunder applicable to it with respect to the disposition of all Registrable Securities covered by such Shelf Registration Statement during the Effectiveness Period in accordance with the intended method or methods of distribution by the selling Holders thereof described in this Agreement;

(iii)          register or qualify the Registrable Securities under all applicable state securities or “blue sky” laws of such jurisdictions by the

time the Shelf Registration Statement is declared effective by the Commission as any Holder of Registrable Securities covered by such Shelf Registration Statement and each underwriter of an underwritten offering of Registrable Securities, if any, shall reasonably request in writing in advance of such date of effectiveness, and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder and any such underwriter to consummate the disposition in each such jurisdiction of such Registrable Securities owned by such Holder; provided, however, that the Company shall not be required to (A) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(a)(iii) hereof, (B) file any general consent to service of process in any jurisdiction where it would not otherwise be subject to such service of process or (C) subject itself to taxation in any such jurisdiction if it is not then so subject;

(iv)          promptly notify each Holder of Registrable Securities, its counsel and the managing underwriters of an underwritten offering of Registrable Securities, if any, and promptly confirm such notice in writing (A) when the Shelf Registration Statement covering such Registrable Securities has become effective and when any post-effective amendments thereto become effective, (B) of any request by the Commission or any state securities authority for amendments and supplements to such Shelf Registration Statement or the Prospectus or for additional information after such Shelf Registration Statement has become effective, (C) of the issuance or threatened issuance by the Commission or any state securities authority of any stop order suspending the effectiveness of such Shelf Registration Statement or the qualification of the Registrable Securities in any jurisdiction described in Section 3(a)(iii) hereof or the initiation of any proceedings for that purpose, (D) if, between the effective date of such Shelf Registration Statement and the closing of any sale of Registrable Securities covered thereby, the representations and warranties of the Company contained in any purchase agreement, securities sales agreement or other similar agreement cease to be true and correct in all material respects, (E) of the happening of any event or the failure of any event to occur or the discovery of any facts, during the Effectiveness Period, which makes any statement made in such Shelf Registration Statement or the  Prospectus untrue in any material respect or which causes such Shelf Registration Statement or the Prospectus to omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (F) of the reasonable determination of the Company that a post-effective amendment to such Shelf Registration Statement would be appropriate;

(v)           in the event of the issuance of any stop order suspending the effectiveness of the Shelf Registration Statement, use commercially reasonable efforts to obtain the prompt withdrawal of such stop order;

(vi)          furnish to each Holder of Registrable Securities included within the coverage of the Shelf Registration Statement, without charge, a reasonable number of conformed copies of such Shelf Registration Statement and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested) as such Holder or managing underwriters of an underwritten offering of Registrable Securities, if any, may reasonably request;

(vii)         deliver to each selling Holder of Registrable Securities and each managing underwriter participating in any such disposition of Registrable Securities, if any, without charge, as many copies of the Prospectus (including any preliminary prospectus) as such Holder or managing underwriters, if any, may reasonably request (it being understood that the Company consents to the use of the Prospectus by each of the selling Holders of Registrable Securities and the underwriter or underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by the Prospectus), such other documents incorporated by reference therein and any exhibits thereto as such selling Holder or managing underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities by such Holder or underwriter;

(viii)        cooperate with the selling Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends and registered in such names as the selling Holders or any underwriters may reasonably request at least two Business Days prior to the closing of any sale of Registrable Securities pursuant to the Shelf Registration Statement;

(ix)           as soon as practicable after the resolution of any matter or event specified in Sections 3(a)(iv)(B), 3(a)(iv)(C), 3(a)(iv)(E) (subject to the proviso contained in Section 2(b) hereof) and 3(a)(iv)(F) hereof), prepare a supplement or post-effective amendment to the Shelf Registration Statement or the Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, such Prospectus will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein,

in the light of the circumstances under which they were made, not misleading;

(x)            within a reasonable time following the filing of any document which is to be incorporated by reference into the Shelf Registration Statement or the Prospectus after the initial filing of such Shelf Registration Statement, provide a copy to the Holders and managing underwriters of an underwritten offering of Registrable Securities, if any;

(xi)           if requested by the Holders of Registrable Securities in connection with a firm commitment underwritten offering of at least $1.0 million of Registrable Securities: (i) enter into such agreements (including underwriting agreements) as are customary in underwritten offerings, (ii) obtain an opinion of counsel to the Company and updates thereof (which may be in the form of a reliance letter) in form and substance reasonably satisfactory to the managing underwriters covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such underwriters (it being agreed that the matters to be covered by such opinion may be subject to customary qualifications and exceptions); (iii) obtain a “cold comfort” letter or letters from the Company’s independent public accountants in customary form and covering matters of the type customarily covered in “cold comfort” letters in connection with underwritten offerings and such other matters as reasonably requested by the underwriters in accordance with Statement on Auditing Standards No. 72; and (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures customary for such agreements;

(xii)          provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by the Shelf Registration Statement from and after a date not later than the effective date of such Shelf Registration Statement;

(xiii)         list or quote all Registrable Securities covered by the Shelf Registration Statement on any securities exchange or quotation system on which the Common Stock is then listed or quoted if such Registrable Securities are not already so listed or quoted and if such listing is then permitted under the rules of such exchange or quotation system;

(xiv)        cooperate with each seller of Registrable Securities covered by the Shelf Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with

any securities exchange or quotation system on which the Common Stock is listed; and

(xv)         take such other actions as are reasonably necessary to effect the registration of the Registrable Securities covered by the Shelf Registration Statement contemplated hereby.

In addition, each Holder of Registrable Securities to be distributed by an underwriter in a firm commitment underwritten offering may, at such Holder’s option, require that any or all of the representations and warranties made by the Company to and for the benefit of such underwriters be made to and for the benefit of such Holder of Registrable Securities.

(b)           Holders’ Obligations.  In connection with any registration pursuant to Section 2 hereof, each Holder agrees that:

(i)            upon receipt of any notice from the Company of the occurrence of any event specified in Sections 3(a)(iv)(B), 3(a)(iv)(C), 3(a)(iv)(E), 3(a)(iv)(F) hereof or any Delay Notice, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to the Shelf Registration Statement at issue until such Holder’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(a)(ix) hereof or until it is advised in writing by the Company that the use of the Prospectus may be resumed, and, if so directed by the Company, such Holder will deliver to the Company (at the Company’s expense) all copies in such Holder’s possession, other than permanent file copies then in such Holder’s possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice; and

(ii)           the Company may require each seller of Registrable Securities as to which any registration is being effected to furnish to it such information regarding such seller as may be required by the staff of the Commission to be included in the Shelf Registration Statement, the Company may exclude from such registration the Registrable Securities of any seller who fails to furnish such information within 10 Business Days after receiving such request, and the Company shall have no obligation to register under the Securities Act the Registrable Securities of a seller who so fails to furnish such information.

No Holder in its capacity as a stockholder and/or controlling person of the Company (but not in its capacity as director or officer of the Company) shall be required by any underwriting agreement to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such Holder, the ownership of such Holder’s Registrable Securities and such Holder’s intended method or methods of disposition and any other representation

required by law or to furnish any indemnity to any Person which is broader than the indemnity furnished by such Holder pursuant to Section 5 hereof.

(c)           Lock-Up Agreement.  If requested in writing by the Company, each Holder agrees to execute a lock-up agreement pursuant to which such Holder shall not effect any public or private sale or distribution (including sales pursuant to Rule 144 of the Securities Act) of Registrable Securities, or any securities convertible into or exchangeable or exercisable for such securities, held by such Holder during the period starting with the date seven (7) days prior to the Company’s good faith estimate, as certified in writing by an executive officer of the Company to the Holders, of the date of the proposed pricing of an underwritten public offering of equity securities of the Company initiated by and for the account of the Company and ending on the date ninety (90) days following the consummation of such underwritten public offering.  If requested by the managing underwriter, if any, each Holder agrees to execute a lock-up agreement consistent with such managing underwriter’s customary form of lock-up agreement.

Section 4.               Expenses of Registration.  The Company shall bear and pay all expenses incurred by it in connection with any registration, filing, or qualification of Registrable Securities with respect to the Shelf Registration Statement for each selling Holder, including all registration, stock exchange listing, accounting and filing fees, all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the reasonable fees and disbursements of counsel for the Company, and of the Company’s independent public accountants, including the expenses of “comfort letters” required by or incident to such performance and compliance and reasonable fees and disbursements of one firm of counsel and one firm of accountants for the Holders.  Holders shall be responsible for any underwriting discounts and commissions and taxes of any kind (including without limitation, transfer taxes) relating to any disposition, sale or transfer of Registrable Securities.

Section 5.               Indemnification; Contribution.

(a)           Indemnification by the Company.  If any Registrable Securities are included in the Shelf Registration Statement under this Agreement, to the extent permitted by applicable law, the Company shall indemnify and hold harmless each selling Holder, each Person, if any, who controls such selling Holder within the meaning of the Securities Act, and each officer, director, trustee, partner, and employee of such selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities, joint or several, and expenses (including reasonable attorneys’ fees and reasonable expenses of investigation), to which any of the foregoing Persons may become subject under the Securities Act, the Exchange Act or other federal or state laws or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained

in such Shelf Registration Statement, including any amendments or supplements thereto, any document incorporated by reference therein and the Prospectus, or any omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading; provided, however, that the indemnification required by this Section 5(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable in any such case for any such loss, claim, damage, liability or expense to the extent that it arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Shelf Registration Statement in reliance upon and in conformity with written information furnished to the Company by a Holder, underwriter or the indemnified party expressly for use in connection with such registration; provided, further, that the indemnity agreement contained in this Section 5(a) shall not apply to any loss, liability, claim or damage based on or arising out of (i) an offer or sale of Registrable Securities during any Delay Period pursuant to Section 2(c) hereof (provided that the Company has given the Holder a Delay Notice pursuant to Section 2(c) hereof) or (ii) an untrue statement or alleged untrue statement of a material fact, or an omission or alleged omission to state a material fact, contained in or omitted from such Shelf Registration Statement, any amendments or supplements thereto, any document incorporated by reference therein or the Prospectus in conformity with information furnished to the Company in writing by such Person specifically for use therein.

(b)           Indemnification by Holder.  If any of a selling Holder’s Registrable Securities are included in the Shelf Registration Statement under this Agreement, to the extent permitted by applicable law, such selling Holder shall indemnify and hold harmless the Company, each of its directors, each of its officers who shall have signed such Shelf Registration Statement, each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, any other selling Holder, any controlling Person of any such other selling Holder and each officer, director, partner, and employee of such other selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint and several), including reasonable attorneys’ fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may otherwise become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses arise out or are based upon any untrue statement or alleged untrue statement of a material fact contained in such Shelf Registration Statement, including the Prospectus, or any amendments or supplements thereto or any document incorporated by reference therein, or any omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein (in light of the circumstances under which they were made in the case of the Prospectus) not misleading, but only to the

extent that such untrue statement or omission had been contained in any information furnished in writing by such Holder to the Company expressly for use in connection with such registration; provided, however, that (i) the indemnification required by this Section 5(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if settlement is effected without the consent of the relevant selling Holder of Registrable Securities, which consent shall not be unreasonably withheld, and (ii) in no event shall the amount of any indemnity under this Section 5(b) exceed the net proceeds from the applicable offering received by such selling Holder.  The Company and the Holders of the Registrable Securities in their capacities as stockholders and/or controlling persons (but not in their capacities as directors or officers of the Company) hereby acknowledge and agree that the only information furnished or to be furnished to the Company for use in any registration statement or prospectus relating to the Registrable Securities or in any amendment, supplement or preliminary materials associated therewith are statements specifically relating to (A) the beneficial ownership of shares of Common Stock by such Holder and its Affiliates and (B) the name and address of such Holder.  If any additional information about such Holder or the plan of distribution (other than for an underwritten offering) is required by law to be disclosed in any such document, then such Holder shall not unreasonably withhold its agreement referred to in the immediately preceding sentence of this Section 5(b).  In no event shall a Holder be jointly liable with any other Holder as a result of its indemnification obligations.

(c)           Conduct of Indemnification Proceedings.  Promptly after receipt by an indemnified party under this Section 5 of notice of the commencement of any action, suit, proceeding, investigation or threat thereof made in writing for which such indemnified party may make a claim under this Section 5, such indemnified party shall deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties.  The failure to deliver written notice to the indemnifying party within a reasonable time following the commencement of any such action, if it prejudices or results in forfeiture of substantial rights or defenses of the indemnifying party, shall relieve such indemnifying party of any liability to the indemnified party under this Section 5, to the extent of any damage directly suffered by the indemnifying party as a result thereof.  Any fees and expenses incurred by the indemnified party (including any fees and expenses incurred in connection with investigating or preparing to defend such action or proceeding) shall be paid to the indemnified party, as incurred, within thirty (30) days of written notice thereof to the indemnifying party.  Any such indemnified party shall have the right to employ separate counsel in any such action, claim or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be the expenses of such indemnified party unless (i) the indemnifying party has agreed to pay such fees and expenses, (ii) the indemnifying party shall have failed to promptly assume the defense of such action, claim or

proceeding or (iii) the named parties to any such action, claim or proceeding (including any impleaded parties) include both such indemnified party and the indemnifying party, and such indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or in addition to those available to the indemnifying party (in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action, claim or proceeding on behalf of such indemnified party, it being understood, however, that the indemnifying party shall not, in connection with any one such action, claim or proceeding or separate but substantially similar or related actions, claims or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one additional firm of attorneys (together with appropriate local counsel) at any time for all such indemnified parties.  No indemnifying party shall be liable to an indemnified party for any settlement of any action, proceeding or claim without the written consent of the indemnifying party, which consent shall not be unreasonably withheld.

(d)           Contribution.  If the indemnification required by this Section 5 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to in this Section 5:

(i)            The indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations.  The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any indemnifiable action has been committed by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such indemnifiable action.  The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 5(a) and Section 5(b), any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding.

(ii)           The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in Section 5(d)(i).

No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

(iii)          No party shall be liable for contribution under this Section 5(d) except to the extent and under such circumstances as such party would have been liable for indemnification under this Section 5 if such indemnification were enforceable under applicable law.

(e)           Full Indemnification.  If indemnification is available under this Section 5, the indemnifying parties shall indemnify each indemnified party to the full extent provided in this Section 5 without regard to the relative fault of such indemnifying party or indemnified party or any other equitable consideration referred to in Section 5(d)(i) hereof.

(f)            Survival.  The obligations of the Company and the selling Holders of Registrable Securities under this Section 5 shall survive the completion of any offering of Registrable Securities pursuant to the Shelf Registration Statement under this agreement, and otherwise.

Section 6.               Covenants of the Company.  The Company hereby agrees and covenants as follows:

(a)           The Company shall use commercially reasonable efforts to file as and when applicable, on a timely basis, all reports required to be filed by it under the Exchange Act.  If the Company is not required to file reports pursuant to the Exchange Act, upon the request of any Holder of Registrable Securities, the Company shall use commercially reasonable efforts to make publicly available the information specified in subparagraph (c)(2) of Rule 144.  The Company shall use commercially reasonable efforts to take such further action as may be reasonably required from time to time and as may be within the reasonable control of the Company to enable the Holders to Transfer Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 or any other exemption from registration.  Upon the request of any Holder of Registrable Securities, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements and, if not, the specifics thereof.

(b)           In connection with any sale, transfer or other disposition by a Holder of any  Registrable Securities pursuant to Rule 144, the Company shall use commercially reasonable efforts to cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any Securities Act legend, and enable certificates for such Registrable Securities to be for such number of shares and registered in such names as the Holder

may reasonably request at least two Business Days prior to any sale of Registrable Securities.

Section 7.               Miscellaneous .

(a)           Amendments and Waivers.

(i)            The provisions of this Agreement, including the provisions of this Section 7(a), may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given without the written consent of the Company and the Holders of a majority of the outstanding Registrable Securities.  Any amendment or waiver effected in accordance with this paragraph shall be binding upon each Holder, each future Holder of Registrable Securities, and the Company.

(ii)           Notice of any amendment, modification or supplement to this Agreement adopted in accordance with this Section 7 shall be provided by the Company to the Holders prior to the effective date of such amendment, modification or supplement.

(b)           Notices.  All notices or other communications under this Agreement shall be sufficient if in writing and delivered by hand or sent, postage prepaid by registered, certified or express mail, or by recognized overnight air courier service and shall be deemed given when so delivered by hand, or if mailed or sent by overnight courier service, on the third Business Day after mailing (one Business Day in the case of express mail or overnight courier service) to the parties at the following addresses:

(i)            if to the Initial Holders, to the addresses set forth under their signatures on the signature page hereof and if to any other Holder to the address contained in the records of the Company;

(ii)           if to the Company, to:

FairPoint Communications, Inc.

521 East Morehead Street, Suite 250

Charlotte, North Carolina 28202
Attention: Shirley J. Linn, Esq.

with a copy to:

Paul, Hastings, Janofsky & Walker LLP
75 East 55th Street
New York, New York  10022
Attention: Jeffrey J. Pellegrino, Esq.

or at such other address as the addressee may have furnished in writing to the sender as provided herein.

(c)           Assignment.

(i)            Except as expressly provided in this Section 7(c), the rights of the parties hereto cannot be assigned and any purported assignment or transfer to the contrary shall be void ab initio.  So long as the terms of this Section 7(c) are followed, any Holder may assign any of its rights under this Agreement, without the consent of the Company, to any Person to whom such holder Transfers any Registrable Securities or any rights to acquire Registrable Securities so long as such Transfer is not made pursuant to an effective Registration Statement or pursuant to Rule 144 or Rule 145 (or any successor provisions) under the Securities Act or in any other manner or to any Person the effect or consequences of which is to cause the Transferred securities to be freely transferable without regard to the volume and manner of sale limitations set forth in Rule 144 (or any successor provision) in the hands of the transferee as of the date of such Transfer.

(ii)           Notwithstanding Section 7(c)(i) hereof, no Holder may assign any of its rights under this Agreement to any Person to whom such Holder Transfers any Registrable Securities if the Transfer of such Registrable Securities requires registration under the Securities Act.

(iii)          The nature and extent of any rights assigned shall be as agreed to between the assigning party and the assignee.  No Person may be assigned any rights under this Agreement unless (x) the Company is given written notice by the assigning party at the time of such assignment stating the name and address of the assignee, identifying the securities of the Company as to which the rights in question are being assigned, and providing a detailed description of the nature and extent of the rights that

are being assigned and (y) the assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement, including, without limitation, the provisions of this Section 7(c).

(d)           Successors and Assigns; No Third Party Beneficiaries.  This Agreement will be binding upon and inure to the benefit of the parties hereto and their successors and permitted assigns.  Except as set forth herein and by operation of law, no party to this Agreement may assign or delegate all or any portion of its rights, obligations, or liabilities under this Agreement without the prior written consent of the Company in the case of a Holder or without the written consent of Holders holding a majority of Registrable Securities in the case of the Company; provided, that (i) such transferee acquires such Registrable Securities pursuant to an express assignment from the transferor, and (ii) such transferee executes a joinder agreement agreeing to be bound by all of the transferor’s obligations hereunder, a copy of which shall have been delivered to the Company.  This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties hereto and their respective successors and permitted assigns to the extent contemplated herein.

(e)           Counterparts.  This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

(f)            Headings.  The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

(g)           GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.

(h)           Specific Performance.  The parties hereto acknowledge that there would be no adequate remedy at law if any party fails to perform any of its obligations hereunder, and accordingly agree that each party, in addition to any other remedy to which it may be entitled at law or in equity, shall be entitled to compel specific performance of the obligations of any other party under this Agreement in accordance with the terms and conditions of this Agreement in any court of the United States or any State thereof having jurisdiction.

(i)            Entire Agreement.  This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein.  This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

IN WITNESS WHEREOF, the Company has executed this Agreement as of the date first written above.

FAIRPOINT COMMUNICATIONS, INC.
By:	/s/ Shirley J. Linn
	Name: Shirley J. Linn
	Title: Senior Vice President and General Counsel

IN WITNESS WHEREOF, the undersigned Holder has executed this Agreement as of the date first written above.

KELSO INVESTMENT ASSOCIATES V,
L.P.
By:	Kelso Partners V, L.P., its General
	Partner
/s/ George E. Matelich
Name: George E. Matelich
Address: Kelso & Company
320 Park Avenue, 24th Floor
New York, NY 10022
KELSO EQUITY PARTNERS V, L.P.
/s/ George E. Matelich
Name: George E. Matelich
Address: Kelso & Company
320 Park Avenue, 24th Floor
New York, NY 10022
/s/ Eugene B. Johnson
Name: Eugene B. Johnson
Address: 920 Berkley Avenue
Charlotte, NC 28203
/s/ Peter G. Nixon
Name: Peter G. Nixon
Address: 21720 Junco Court
Cornelius, NC 28031
/s/ Timothy W. Henry
Name: Timothy W. Henry

Address: 2329 Keara Way
Charlotte, NC 28270
/s/ Lisa R. Hood
Name: Lisa R. Hood
Address: P.O. Box 486
Bucklin, KS 67834
PUTNAM INVESTMENTS, LLC
By:	/s/ Robert T. Burns
	Name: Robert T. Burns
	Title: Managing Director
Address: One Post Office Square
Boston, MA 02109
THOMAS H. LEE FOREIGN FUND IV, L.P.
/s/ Thomas H. Lee
Name: Thomas H. Lee
Address: 100 Federal Street, 35th Floor
Boston, MA 02110
THOMAS H. LEE FOREIGN FUND IV-B, L.P.
/s/ Thomas H. Lee
Name: Thomas H. Lee
Address: 100 Federal Street, 35th Floor
Boston, MA 02110
THOMAS H. LEE CHARITABLE INVESTMENT LIMITED PARTNERSHIP

/s/ Thomas H. Lee
Name: Thomas H. Lee
Address: 100 Federal Street, 35th Floor
Boston, MA 02110
THL-CCI INVESTORS LIMITED PARTNERSHIP
/s/ Thomas H. Lee
Name: Thomas H. Lee
Address: 100 Federal Street, 35th Floor
Boston, MA 02110
1997 THOMAS H. LEE NOMINEE TRUST
By:	/s/ Gerald R. Wheeler
	Name: Gerald R. Wheeler
	Title: Vice President
US Bank, N.A. (as successor to State Street Trust And Company), not personally but solely under a Trust Agreement dated as of August 18, 1997 and known as the Thomas H. Lee Nominee Trust
THOMAS H. LEE EQUITY FUND IV, L.P.
/s/ Thomas H. Lee
Name: Thomas H. Lee
Address: 100 Federal Street, 35th Floor
Boston, MA 02110
/s/ David V. Harkins
Name: David V. Harkins

Address: 100 Federal Street, 35th Floor

Boston, MA 02110

THE 1995 HARKINS GIFT TRUST

/s/ Sheryll J. Harkins

Name: Sheryll J. Harkins

Address: 100 Federal Street, 35th Floor

Boston, MA 02110

/s/ Scott A. Schoen

Name: Scott A. Schoen

Address: 100 Federal Street, 35th Floor

Boston, MA 02110

/s/ C. Hunter Boll

Name: C. Hunter Boll

Address: 100 Federal Street, 35th Floor

Boston, MA 02110

/s/ Scott M. Sperling

Name: Scott M. Sperling

Address: 100 Federal Street, 35th Floor

Boston, MA 02110

/s/ Anthony J. DiNovi

Name: Anthony J. DiNovi

Address: 100 Federal Street, 35th Floor

Boston, MA 02110

/s/ Thomas M. Hagerty

Name: Thomas M. Hagerty

Address: 100 Federal Street, 35th Floor

Boston, MA 02110

/s/ Warren C. Smith, Jr.

Name: Warren C. Smith, Jr.

Address: 100 Federal Street, 35th Floor

Boston, MA 02110

/s/ Seth W. Lawry

Name: Seth W. Lawry

Address: 100 Federal Street, 35th Floor

Boston, MA 02110

/s/ Kent R. Weldon

Name: Kent R. Weldon

Address: 100 Federal Street, 35th Floor

Boston, MA 02110

/s/ Terrence M. Mullen

Name: Terrence M. Mullen

Address: 100 Federal Street, 35th Floor

Boston, MA 02110

/s/ Todd M. Abbrecht

Name: Todd M. Abbrecht

Address: 100 Federal Street, 35th Floor

Boston, MA 02110

/s/ Charles A. Brizius

Name: Charles A. Brizius

Address: 100 Federal Street, 35th Floor

Boston, MA 02110

/s/ Scott L. Jaeckel

Name: Scott L. Jaeckel

Address: 100 Federal Street, 35th Floor

Boston, MA 02110

/s/ C. Hunter Boll

Name: C. Hunter Boll

Address: 100 Federal Street, 35th Floor

Boston, MA 02110

/s/ Soren L. Oberg

Name: Soren L. Oberg

Address: 100 Federal Street, 35th Floor

Boston, MA 02110

/s/ Thomas M. Shepherd

Name: Thomas M. Shepherd

Address: 100 Federal Street, 35th Floor

Boston, MA 02110

/s/ Wendy L. Masler

Name: Wendy L. Masler

Address: 100 Federal Street, 35th Floor

Boston, MA 02110
/s/ Andrew D. Flaster
Name: Andrew D. Flaster
Address: 100 Federal Street, 35th Floor
Boston, MA 02110
RSL TRUST
/s/ Charles W. Robins
Name:	Charles W. Robins, as Trustee, not individually
Address: 100 Federal Street, 35th Floor
Boston, MA 02110
/s/ Stephen Zachary Lee
Name: Stephen Zachary Lee
Address: c/o Thomas H. Lee Partners, L.P.
100 Federal Street, 35th Floor
Boston, MA 02110
Attn: Todd Link
/s/ Charles W. Robins
Name: Charles W. Robins, as Custodian for Nathan Lee
Address: c/o Weil, Gotshal & Manges LLP 100 Federal Street
Boston, MA 02110
/s/ Charles W. Robins
Name: Charles W. Robins, as Custodian for Jesse Lee

Address: c/o Weil, Gotshal & Manges LLP
100 Federal Street

Boston, MA 02110

/s/ Charles W. Robins

Name: Charles W. Robins

Address: c/o Weil, Gotshal & Manges LLP
100 Federal Street

Boston, MA 02110

/s/ James Westra

Name: James Westra

Address: c/o Weil, Gotshal & Manges LLP
100 Federal Street

Boston, MA 02110

SCHEDULE A

Holder	Number of Shares of Common Stock
Kelso Investment Associates V, L.P.	3,112,861
Kelso Equity Partners V, L.P.	335,729
Eugene B. Johnson	90,945
Peter G. Nixon	1,743
Timothy W. Henry	3,372
Lisa R. Hood	1,421
Putnam Investment Holdings, LLC	55,864
Thomas H. Lee Foreign Fund IV, L.P.	116,258
Thomas H. Lee Foreign Fund IV-B, L.P.	329,936
Thomas H. Lee Charitable Investment Limited Partnership	22,086
THL-CCI Investors Limited Partnership	1,193
1997 Thomas H. Lee Nominee Trust	52,401
Thomas H. Lee Equity Fund IV, L.P.	3,397,096
David V. Harkins	11,964
The 1995 Harkins Gift Trust	1,341
Scott A. Schoen	9,978
C. Hunter Boll	9,978
Scott M. Sperling	9,978
Anthony J. DiNovi	9,978
Thomas M. Hagerty	9,978
Warren C. Smith, Jr.	9,978
Seth W. Lawry	4,157
Kent R. Weldon	2,777
Terrence M. Mullen	2,213
Todd M. Abbrecht	2,213
Charles A. Brizius	1,663
Scott L. Jaeckel	629
Soren L. Oberg	629
Thomas R. Shepherd	1,163
Wendy L. Masler	288
Andrew D. Flaster	250
RSL Trust	723
Stephen Zachary Lee	723
Charles W. Robins, as Custodian for Nathan Lee	360
Charles W. Robins, as Custodian for Jesse Lee	360
Charles W. Robins	288
James Westra	288

EX-10.21

Exhibit 10.21

FAIRPOINT COMMUNICATIONS, INC. 2005 STOCK INCENTIVE PLAN

ARTICLE I
PURPOSES

This FairPoint Communications, Inc. 2005 Stock Incentive Plan is intended to foster and promote the long-term financial success of the Company and the Subsidiaries and increase total shareholder returns by (i) motivating superior performance by means of performance-related incentives, (ii) encouraging and providing for the acquisition of an ownership interest in the Company by its employees and directors and (iii) enabling the Company and its Subsidiaries to attract and retain the services of outstanding employees, consultants and directors upon whose judgment, interest and special effort the successful conduct of its operations is largely dependent.  Capitalized terms are defined in Article XIII.

ARTICLE II
POWERS OF THE COMMITTEE

2.1Power to Grant Awards.  The Committee shall determine the Participants to whom Awards shall be granted, the type or types of Awards to be granted and the terms and conditions of any and all such Awards.  The Committee may establish different terms and conditions for different types of Awards, for different Participants receiving the same type of Award and for the same Participant for each Award such Participant may receive, whether or not granted at different times.

2.2Administration.  The Committee shall be responsible for the administration of the Plan, including, without limitation, determining which Participants receive Awards, what kind of Awards are made under the Plan and for what number of shares, and the other terms and conditions of each such Award.  The Committee shall have the responsibility of construing and interpreting the Plan and of establishing, amending and rescinding such rules and regulations as it may deem necessary or desirable for the proper administration of the Plan.  Any decision or action taken or to be taken by the Committee, arising out of or in connection with the construction, administration, interpretation and effect of the Plan and of its rules and regulations, shall, to the greatest extent permitted by applicable law, be within its absolute discretion (except as otherwise specifically provided herein) and shall be conclusive and binding upon the Company and its Subsidiaries, all Participants and any person claiming under or through any Participant.  No term of this Plan relating to ISOs shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be so exercised, so as to disqualify the Plan under section 422 of the Code.

2.3Delegation by the Committee.  The Committee may delegate its authority under this Plan; provided that the Committee shall in no event delegate its authority with respect to the compensation of the Chief Executive Officer of the Company, the other four most highly compensated executive officers (as determined under Section 162(m) of the Code and regulations thereunder) of the Company and any other individual whose

compensation the Board or Committee reasonably believes may become subject to Section 162(m) of the Code.

2.4Participants Based Outside the United States.  The Committee, in order to conform with provisions of local laws and regulations in foreign countries in which the Company or its Subsidiaries operate, shall have sole discretion to (i) modify the terms and conditions of Awards granted to Participants employed outside the United States, (ii) establish subplans with modified exercise procedures and such other modifications as may be necessary or advisable under the circumstances presented by local laws and regulations, and (iii) take any action which it deems advisable to obtain, comply with or otherwise reflect any necessary governmental regulatory procedures, exemptions or approvals with respect to the Plan or any subplan established hereunder.

ARTICLE III
STOCK SUBJECT TO PLAN

3.1Number.  Subject to the provisions of this Article III, the number of Shares subject to Awards under the Plan may not exceed 947,441 Shares.  The Shares to be delivered under the Plan may consist, in whole or in part, of treasury stock or authorized but unissued Common Stock not reserved for any other purpose.  The maximum number of Shares with respect to which Options or Stock Appreciation Rights may be granted to any one Participant in any calendar year shall be 500,000.

3.2Canceled, Terminated, or Forfeited Awards; Awards Settled for Cash.  Any Shares subject to any Award granted hereunder that for any reason is canceled, terminated or otherwise settled without the issuance of any Common Stock after the effective date of this Plan shall be available for further Awards under this Plan.

3.3Adjustment in Capitalization.  In the event of any Adjustment Event such that an adjustment is required to preserve, or to prevent enlargement of, the benefits or potential benefits made available under this Plan, the Committee shall, in such manner as the Committee shall deem equitable, adjust any or all of (a) the number and kind of Shares which thereafter may be awarded or optioned and sold under the Plan (including, without limitation, adjusting the limits on the number and types of certain Awards that may be made under the Plan), (b) the number and kinds of Shares subject to outstanding Options and other Awards and (c) the grant, exercise or conversion price with respect to any of the foregoing, provided that any adjustment to the exercise or conversion price of, or the number and kind of Shares subject to, outstanding Options or Stock Appreciation Rights that the Committee intends to be excluded from the coverage of Section 409A of the Code shall be made in accordance with the requirements of Section 409A of the Code.  In addition, the Committee may make provisions for a cash payment to a Participant or a person who has an outstanding Option or other Award.  The number of Shares subject to any Option or other Award shall always be a whole number.

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ARTICLE IV
STOCK OPTIONS

4.1Grant of Options.  The Committee shall have the power to grant Options that are “incentive stock options” within the meaning of section 422 of the Code (“ISOs”) or that are non-statutory stock options (“NSOs”) to any Participant and to determine (a) the number of ISOs and the number of NSOs to be granted to each Participant and (b) the other terms and conditions of such Awards.  An Option shall be an NSO unless otherwise specified by the Committee at the time of grant.  Each Option shall be evidenced by an Option agreement that shall specify (a) the type of Option granted, (b) the number of Shares to which the Option pertains, (c) the exercise price, (d) the period in which the Option may be exercised and (e) such terms and conditions not inconsistent with the Plan as the Committee shall determine.  The maximum number of Shares that may be issued under the Plan through ISOs is 947,441.

4.2Exercise Price.  Unless otherwise determined by the Committee, Options granted pursuant to the Plan shall have an exercise price that is not less than the Fair Market Value of a Share on the date the Option is granted.

4.3Vesting and Exercisability.  Options awarded under the Plan shall vest and become exercisable in accordance with the vesting schedule determined by the Committee, subject to the Participant’s continuous employment with the Company or a Subsidiary from the date of grant through the applicable vesting date.  No Option shall be exercisable for more than 10 years after the date on which it is granted.

4.4Payment.  The Committee shall establish procedures governing the exercise of Options.  Without limiting the generality of the foregoing, the Committee may provide that payment of the exercise price may be made (a) in cash or its equivalent, (b) by exchanging Shares owned by the optionee (which are not the subject of any pledge or other security interest), (c) through an arrangement with a broker approved by the Company whereby payment of the exercise price is accomplished with the proceeds of the sale of Common Stock or (d) by any combination of the foregoing; provided that the combined value of all cash and cash equivalents paid and the Fair Market Value of any such Common Stock so tendered to the Company, valued as of the date of such tender, is at least equal to such exercise price.  No Shares shall be delivered pursuant to any exercise of an Option unless arrangements satisfactory to the Committee have been made to assure full payment of the exercise price therefor and any required withholding or other similar taxes or governmental charges.

4.5Termination of Employment.  Unless otherwise determined by the Committee at or after the date of grant and except as provided in Article XI, in the event a Participant’s employment terminates by reason of death or a Qualifying Termination of Employment, the Participant (or the Participant’s beneficiary or legal representative) may exercise any Options (regardless of whether then exercisable) until the earlier of (a) the twelve-month anniversary of the date of such termination of employment and (b) the date such Options would otherwise expire but for the operation of this Section 4.5.  Unless otherwise determined by the Committee at or after the date of grant, in the event a

3

Participant’s employment terminates for any reason other than death, a Qualifying Termination of Employment or Cause, the Participant may exercise any Option that is exercisable at the time of such termination of employment until the earlier of (a) the 60-day anniversary of the date of such termination of employment and (b) the date such Options would otherwise expire but for the operation of this Section 4.5, and any Option that is not then exercisable shall be forfeited and cancelled as of the date of such termination of employment.  In the event that a Participant’s employment is terminated for Cause (or, following the date the Participant’s employment terminates, the Committee determines that circumstances exist such that the Participant’s employment could have been terminated for Cause), any Options granted to such Participant, whether or not then vested, shall be forfeited and cancelled as of the date of such termination of employment.

4.6Certain NSO’s. If at the time of grant the Committee intends a grant of NSOs to any Participant to be excluded from the coverage of Section 409A of the Code, then, notwithstanding any other provision of the Plan, such grant of NSOs shall (i) have an exercise price that is not less than the Fair Market Value of a Share on the date the NSOs are granted and (ii) not include any feature for the deferral of compensation other than the deferral of recognition of income until the exercise or other disposition of the NSOs.

ARTICLE V
RESTRICTED STOCK AND RESTRICTED UNITS

5.1Grant of Restricted Stock and Restricted Units.  The Committee shall have the power to grant Restricted Stock or Restricted Units to any Participant and to determine (a) the number of shares of Restricted Stock and the number of Restricted Units to be granted to each Participant, (b) the Period(s) of Restriction and (c) the other terms and conditions of such Awards.  The Committee shall require that the stock certificates evidencing any Restricted Stock or Restricted Units be held in the custody of the Secretary of the Company until the Period of Restriction lapses, and that, as a condition of any Restricted Stock award, the Participant shall have delivered a stock power, endorsed in blank, relating to the Shares covered by such award.  Each grant of Restricted Stock or Restricted Units shall be evidenced by a written agreement setting forth the terms of such Award.

5.2Vesting of Restricted Stock and Restricted Units.  Restricted Stock or Restricted Units granted pursuant to Section 5.1 shall vest and become nonforfeitable, and the Period of Restriction with respect to such Restricted Stock or Restricted Units will lapse, in accordance with the vesting schedule determined by the Committee.

5.3Dividend Equivalents.

(a)Restricted Stock.  Unless otherwise determined by the Committee at the time of grant, Participants holding outstanding Restricted Stock shall not be entitled to receive any dividends or Dividend Equivalents paid with respect to such shares of Restricted Stock.

4

(b)Restricted Units.  The Committee will determine whether and to what extent to credit to the account of, or to pay currently to, each recipient of a Restricted Unit, any Dividend Equivalents.  To the extent provided by the Committee at or after the date of grant, any cash Dividend Equivalents credited to a Participant’s account shall be deemed to have been invested in Shares on the record date established for the related dividend and, accordingly, a number of Restricted Units shall be credited to such Participant’s account equal to the greatest whole number which may be obtained by dividing (i) the value of such Dividend Equivalents on the record date by (ii) the Fair Market Value of a Share on such date.  Any additional Restricted Units credited in respect of Dividend Equivalents shall become vested and nonforfeitable, if at all, on the same terms and conditions as are applicable in respect of the Restricted Units with respect to which such Dividend Equivalents were payable.

5.4Termination of Employment.  Unless otherwise determined by the Committee at or after the date of grant and except as provided in Article XI, in the event a Participant’s employment terminates by reason of a Qualifying Termination of Employment during the Period of Restriction, a pro rata portion of any Shares related to a Restricted Stock or Restricted Unit held by such Participant shall become nonforfeitable, based upon the percentage of which the numerator is the portion of the Period of Restriction that expired prior to the Participant’s termination and the denominator is the number of days in the Period of Restriction.  Unless otherwise determined by the Committee at or after the date of grant, in the event a Participant’s employment terminates because of the Participant’s death during the Period of Restriction, any Shares related to a Restricted Stock or Restricted Unit held by such Participant shall become nonforfeitable.  Unless otherwise determined by the Committee at or after the date of grant, in the event a Participant’s employment terminates for any reason other than death or a Qualifying Termination of Employment during the Period of Restriction, any Restricted Stock or Restricted Units held by such Participant shall be forfeited and cancelled as of the date of such termination of employment.

5.5Settlement of Restricted Units.  Unless otherwise determined by the Committee at or after the date of grant, when a Period of Restriction with respect to an Award of Restricted Units lapses and the Restricted Units become vested and nonforfeitable, the Participant shall receive (i) one Share for each such Restricted Unit (including additional Restricted Units credited in respect of Dividend Equivalents) or (ii) if the Committee so determines, the Committee may direct the Company to pay to the Participant the Fair Market Value of such Shares as of such payment date.

ARTICLE VI
INCENTIVE AWARDS

6.1Grant of Incentive Stock and Incentive Units.  The Committee shall have the authority to grant Incentive Stock or Incentive Units to any Participant and to determine (a) the number of Incentive Stock and the number of Incentive Units to be granted to each Participant, (b) the restrictions pursuant to which such Award is subject to forfeiture by reason of the Performance Criteria established by the Committee pursuant to Section 6.2 not being met in whole or in part and (c) the other terms and conditions of

5

such Awards.  Each grant of Incentive Stock or Incentive Units shall be evidenced by a written agreement setting forth the terms of such Award.

6.2Performance Criteria.

(a)Within 90 days after each Performance Period begins (or such other date as may be required or permitted under Section 162(m) of the Code, if applicable), the Committee shall establish the performance objective or objectives for the applicable Performance Period that must be satisfied in order for an Award to be vested and nonforfeitable (the “Performance Criteria”).  Any such Performance Criteria will be based upon the relative or comparative achievement of one or more of the following criteria, or such other criteria, as may be determined by the Committee: (i) revenue growth; (ii) earnings before interest, taxes, depreciation and amortization; (iii) earnings before interest, taxes and amortization; (iv) operating income; (v) pre- or after-tax income; (vi) cash flow; (vii) cash flow per share; (viii) net earnings; (ix) earnings per share; (x) return on equity; (xi) return on invested capital; (xii) return on assets; (xiii) economic value added (or an equivalent metric); (xiv) share price performance; (xv) total shareholder return; (xvi) improvement in or attainment of expense levels; (xvii) improvement in or attainment of working capital levels; or (xviii) debt reduction.

(b)  The Performance Criteria related to Incentive Stock or Incentive Units shall be achieved upon the determination by the Committee that the objective or objectives for the applicable Performance Period have been attained, in whole or in part.  The Committee may provide at the time of grant that in the event the objective or objectives are attained in part, a specified portion (which may be zero) of the Award will vest and become nonforfeitable and the remaining portion shall be forfeited.

6.3Dividend Equivalents.

(a)Incentive Stock.  Unless otherwise determined by the Committee at or after the date of grant, Participants granted Incentive Stock shall not be entitled to receive cash dividends or Dividend Equivalents.

(b)Incentive Units.  The Committee will determine whether and to what extent to credit to the account of, or to pay currently to, each recipient of an Incentive Unit, any Dividend Equivalents.  To the extent provided by the Committee at or after the date of grant, any cash Dividend Equivalents with respect to the Incentive Units credited to a Participant’s account shall be deemed to have been invested in Shares on the record date established for the related dividend and, accordingly, a number of Incentive Units, as the case may be, shall be credited to such Participant’s account equal to the greatest whole number which may be obtained by dividing (i) the value of such Dividend Equivalents on the record date by (ii) the Fair Market Value of a Share on such date.  Any additional Incentive Unit credited in respect of Dividend Equivalents shall become vested and nonforfeitable, if at all, on the same terms and conditions as are applicable in respect of the Incentive Unit with respect to which such Dividend Equivalents were payable.

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6.4Termination of Employment.  Unless otherwise determined by the Committee at or after the date of grant and except as provided in Article XI, in the event that a Participant’s employment terminates by reason of a Qualifying Termination of Employment during the Performance Period, any award of Incentive Stock or Incentive Units shall become vested and nonforfeitable at the end of the Performance Period as to that number of such Incentive Stock or Incentive Units, as the case may be, that is equal to that percentage, if any, of such Award that would have been earned had the Participant’s employment not so terminated prior to the expiration of the Performance Period times a fraction, the numerator of which is the number of days employed during the Performance Period and the denominator of which is the total number of days during the Performance Period. Unless otherwise determined by the Committee at or after the date of grant, in the event that a Participant’s employment terminates because of death during the Performance Period, any award of Incentive Stock or Incentive Units shall become vested and nonforfeitable at the end of the Performance Period as to that number of such Incentive Stock or Incentive Units, as the case may be, that is equal to that percentage, if any, of such Award that would have been earned had the Participant’s employment not so terminated prior to the expiration of the Performance Period. Unless otherwise determined by the Committee at or after the date of grant, in the event a Participant’s employment terminates for any reason other than death or a Qualifying Termination of Employment during the Performance Period, any Incentive Stock or Incentive Units held by such Participant shall be forfeited and cancelled as of the date of such termination of employment.

6.5Settlement of Incentive Units.  Unless otherwise determined by the Committee at or after the date of grant, when the Performance Criteria with respect to an Award of Incentive Units is achieved and the Incentive Units become vested and nonforfeitable, the Participant shall receive (i) one Share for each such Incentive Unit (including additional Incentive Units credited in respect of Dividend Equivalents, if any) or (ii) if the Committee so determines, the Committee may direct the Company to pay to the Participant the Fair Market Value of such Shares as of such payment date.

ARTICLE VII
STOCK APPRECIATION RIGHTS

7.1Grant of Stock Appreciation Rights.  Stock Appreciation Rights may be granted to any Participants, all Participants or any class of Participants at such time or times as shall be determined by the Committee.  Stock Appreciation Rights may be granted only on a freestanding basis, and not related to any Option.  A grant of a Stock Appreciation Right shall be evidenced by a written agreement containing such provisions not inconsistent with the Plan as the Committee shall approve.

7.2Terms and Conditions of Stock Appreciation Rights.  Unless otherwise determined by the Committee at or after the date of grant, the terms and conditions (including, without limitation, the exercise period of the Stock Appreciation Right, the vesting schedule applicable thereto and the impact of any termination of service on the Participant’s rights with respect to the Stock Appreciation Right) applicable with respect to Stock Appreciation Rights shall be substantially identical (to the extent possible taking

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into account the differences related to the character of the Stock Appreciation Right) to the terms and conditions that would have been applicable under Article IV above were the grant of the Stock Appreciation Rights a grant of an Option.

7.3Payment of Stock Appreciation Right Amount.  Upon exercise of a Stock Appreciation Right, the holder shall be entitled to receive payment, in cash, in Shares or in a combination thereof, as determined by the Committee, of an amount determined by multiplying the excess, if any, of the Fair Market Value of a Share at the date of exercise over the Stock Appreciation Right’s base value or exercise price, by the number of Shares with respect to which the Stock Appreciation Rights are then being exercised.

7.4Certain Stock Appreciation Rights.  If at the time of grant the Committee intends a grant of Stock Appreciation Rights to any Participant to be excluded from the coverage of Section 409A of the Code, then, notwithstanding any other provision of the Plan, such grant of Stock Appreciation Rights shall (i) have a base value or exercise price that is not less than the Fair Market Value of a Share on the date the Stock Appreciation Rights are granted, (ii) be payable upon exercise only with Shares and (iii) not include any feature for the deferral of compensation other than the deferral of recognition of income until the exercise or other disposition of the Stock Appreciation Rights.

ARTICLE VIII
DEFERRED SHARES

8.1Deferred Share Awards.  The Committee shall have the authority to grant Deferred Shares to any Participant and to determine (i) the number of Deferred Shares granted to each Participant, (ii) the date such Deferred Shares shall become vested and (iii) the date such Deferred Shares will be payable to the Participant.  In addition, on such date or dates as shall be established by the Committee and subject to such terms and conditions as the Committee shall determine, a Participant may be permitted to elect to defer receipt of all or a portion of his annual compensation and/or annual incentive bonus (“Deferred Amount”) payable by the Company or a Subsidiary and receive in lieu thereof a number of Deferred Shares equal to the greatest whole number which may be obtained by dividing (i) the Deferred Amount by (ii) the Fair Market Value of a Share on the date such compensation or bonus would otherwise have been payable to the Participant.  No Shares will be issued at the time an award of Deferred Shares is made and the Company shall not be required to set aside a fund for the payment of any such award.  The Company will establish a separate account for the Participant and will record in such account the number of Deferred Shares awarded to the Participant.  To the extent the Committee so determines, a Participant who elects to defer receipt of his or her compensation or bonus and receive Deferred Shares may also receive that number of supplemental Deferred Shares (“Supplemental Units”) equal to the greatest whole number which may be obtained by dividing (i) such percentage of the Deferred Amount as is determined by the Committee by (ii) the Fair Market Value of a Share on the date of grant.  Each grant of Deferred Shares and Supplemental Units shall be evidenced by a written agreement setting forth the terms of such Award.

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8.2Vesting of Deferred Shares and Supplemental Units.  Unless otherwise determined by the Committee at or after the date of grant, the Deferred Shares together with any Dividend Equivalents credited with respect thereto, shall be fully vested at all times.  The Supplemental Units together with any Dividend Equivalents credited with respect thereto,will become vested in accordance with the vesting schedule determined by the Committee, subject to the Participant’s continuous employment with the Company or a Subsidiary through such vesting date.

8.3Dividend Equivalents.  The Committee will determine whether and to what extent Dividend Equivalents will be credited to the account of, or paid currently to, a recipient of Deferred Shares or Supplemental Units.  To the extent provided by the Committee at or after the date of grant, any cash Dividend Equivalents with respect to the Deferred Shares and Supplemental Units deemed credited to a Participant’s account shall be deemed to have been invested in Shares on the record date established for the related dividend and, accordingly, a number of Deferred Shares or Supplemental Units, as the case may be, shall be credited to such Participant’s account equal to the greatest whole number which may be obtained by dividing (i) the amount of such Dividend Equivalent on the record date by (ii) the Fair Market Value of a Share on such date.

8.4Termination of Employment.  Unless otherwise determined by the Committee at or after the date of grant and except as provided in Article XI, in the event that a Participant’s employment terminates by reason of death or a Qualifying Termination of Employment during the vesting period, any Supplemental Units (and related Dividend Equivalents, if any) granted to a Participant shall become vested and nonforfeitable.  Unless otherwise determined by the Committee at or after the date of grant, in the event a Participant’s employment terminates for any reason other than death, a Qualifying Termination of Employment or Cause during the vesting period, any Supplemental Units (and related Dividend Equivalents, if any) held by such Participant, to the extent unvested, shall be forfeited and cancelled as of the date of such termination of employment.  In the event that a Participant’s employment is terminated for Cause (or, following the date the Participant’s employment terminates, the Committee determines that circumstances exist such that the Participant’s employment could have been terminated for Cause), any Supplemental Units (and related Dividend Equivalents, if any) granted to such Participant, whether or not then vested, shall be forfeited and cancelled as of the date of such termination of employment.

8.5Settlement of Deferred Shares. Unless otherwise determined by the Committee at or after the date of grant and except as provided in Article XI, a Participant shall receive as of the date of such Participant’s termination of employment (or such other date as may be elected by the Participant or required by the Committee in accordance with the rules and procedures of the Committee) (i) one Share for each Deferred Share credited to such Participant’s account and (ii) subject to Section 8.4, one Share for each Supplemental Unit that shall have become vested.  The Committee may provide in the Award agreement applicable to any Deferred Shares or Supplemental Units that, in lieu of issuing Shares, the Committee may direct the Company to pay to the Participant the Fair Market Value of such Shares as of such payment date.

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8.6Further Deferral Elections.  A Participant may elect to further defer receipt of Shares issuable in respect of Deferred Shares (or an installment of an Award) for a specified period or until a specified event, subject in each case to the Committee’s approval and to such terms as are determined by the Committee, all in its sole discretion.  Subject to any exceptions adopted by the Committee, such election must generally be made at least 12 months prior to the original settlement date of such Deferred Shares (or any such installment thereof) and such election may not take effect until the expiration of such 12 month period.  A further deferral opportunity does not have to be made available to all Participants, and different terms and conditions may apply with respect to the further deferral opportunities made available to different Participants.

ARTICLE IX
CHANGE IN CONTROL

9.1Accelerated Vesting and Payment.  Subject to the provisions of Section 9.2 below, in the event of a Change in Control, each Option shall be, at the discretion of the Committee, either canceled in exchange for a payment in cash of an amount equal to the excess, if any, of the Change in Control Price over the exercise price for such Option, or fully exercisable regardless of the exercise schedule otherwise applicable to such Option.  All other Awards shall become nonforfeitable and be immediately transferable or payable, as the case may be.

9.2Alternative Awards.  Notwithstanding Section 9.1, no cancellation, acceleration of exercisability, vesting, cash settlement or other payment shall occur with respect to any Award or any class of Awards if the Committee reasonably determines in good faith prior to the occurrence of a Change in Control that such Award or Awards shall be honored or assumed, or new rights substituted therefor (such honored, assumed or substituted award an “Alternative Award”), by a Participant’s employer (or the parent or a Subsidiary of such employer) immediately following the Change in Control, provided that any such Alternative Award must:

(i)be based on stock that is traded on an established U.S. securities market, or that will be so traded within 60 days of the Change in Control;

(ii)provide such Participant (or each Participant in a class of Participants) with rights and entitlements substantially equivalent to or better than the rights, terms and conditions applicable under such Award, including, but not limited to, an identical or better exercise or vesting schedule and identical or better timing and methods of payment;

(iii)have substantially equivalent economic value to such Award (determined at the time of the Change in Control); and

(iv)have terms and conditions which provide that in the event that the Participant’s employment is involuntarily terminated or constructively terminated, any conditions on a Participant’s rights under, or any restrictions on transfer or

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exercisability applicable to, each such Alternative Award shall be waived or shall lapse, as the case may be.

For this purpose, a constructive termination shall mean a termination by a Participant following (i) a material reduction in the Participant’s base salary or a Participant’s incentive compensation opportunity, (ii) a material reduction in the Participant’s responsibilities or (iii) the relocation of the Participant’s principal place of work to a location that is more than 50 miles from the Participant’s principal place of work immediately prior to the Change in Control, in each case without the Participant’s written consent.

9.3Termination of Employment Prior to Change in Control.  In the event that any Change in Control occurs as a result of any transaction described in subclause (iii) or (v) of the definition of such term, any Participant whose employment is terminated due to death or Disability or by the Company for any reason other than Cause on or after the date, if any, on which the shareholders of the Company approve such transaction, but prior to the consummation thereof, shall be treated, solely for purposes of this Plan (including, without limitation, this Article IX), as continuing in the Company’s employment until the occurrence of such Change in Control, and to have been terminated immediately thereafter.

ARTICLE X
STOCKHOLDER RIGHTS

A Participant (or a Permitted Transferee) shall have no rights as a stockholder with respect to any Shares covered by an Award until he or she shall have become the holder of record of such Share(s), and no adjustments shall be made for dividends in cash or other property or distribution or other rights in respect to any such Shares, except as otherwise specifically provided for in this Plan.

ARTICLE XI
 SECTION 409A OF THE CODE

In connection with a Participant’s termination of employment, the payment, settlement or exercisability of an Award held by a Participant who the Committee reasonably believes is a “specified employee” (within the meaning of Section 409A of the Code) shall not be made before the first business day that is six months and one day after the date of such Participant’s termination of employment (or, if earlier, upon death) if the Committee reasonably believes an Award to be subject to Section 409A(a)(2)(B) of the Code.  Notwithstanding anything to the contrary in the Plan, the Committee may in its absolute discretion alter or amend any of the provisions of this Plan if such alteration or amendment would be required to comply with Section 409A of the Code or any regulations promulgated thereunder.

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ARTICLE XII
AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN

The Board or the Committee at any time may terminate or suspend the Plan, and from time to time may amend or modify the Plan, provided that no amendment, modification, or termination of the Plan shall in any manner adversely affect any Award theretofore granted under the Plan, without the consent of the Participant.  Unless earlier terminated, the Plan shall terminate on the day immediately prior to the first meeting of the stockholders of the Company in 2009 at which directors will be elected.

ARTICLE XIII
DEFINITIONS

13.1Certain Definitions.  Capitalized terms used herein without definition shall have the respective meanings set forth below:

“Act” means the Securities Exchange Act of 1934, as amended.

“Adjustment Event” means any stock dividend, stock split, share combination, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares or other similar event affecting the Common Stock.

“Affiliate” means, with respect to any person, any other person controlled by, controlling or under common control with such person.

“Alternative Award” has the meaning given in Section 9.2.

“Award” means any Option, Restricted Stock, Restricted Unit, Stock Appreciation Right, Incentive Stock, Incentive Unit, Deferred Share, or Supplemental Unit granted under the Plan or any combination thereof, including Awards combining two or more types of Awards in a single grant.

“Board” means the Board of Directors of the Company.

“Cause” means, unless otherwise provided in an Award, (i) the refusal or neglect of the Participant to perform substantially his or her employment-related duties, (ii) the Participant’s personal dishonesty, incompetence, willful misconduct or breach of fiduciary duty, (iii) the Participant’s conviction of a crime constituting a felony (or a crime or offense of equivalent magnitude in any jurisdiction) or his or her willful violation of any other law, rule, or regulation (other than a traffic violation or other offense or violation outside of the course of employment which in no way adversely affects the Company or its reputation or the ability of the Participant to perform his or her employment related duties or to represent the Company) or (iv) the material breach by the Participant of any applicable written policy of the Company or any Subsidiary; provided that, with respect to any Participant who is party to an employment agreement with the Company or a Subsidiary, “Cause” shall have the meaning specified in such

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Participant’s employment agreement.  The determination as to whether “Cause” has occurred shall be made by the Committee, which shall have the authority to waive the consequences under the Plan of the existence or occurrence of any of the events, acts or omissions constituting “Cause.”

“Change in Control” means the first occurrence of any of the following events (other than a Public Offering):

(i)the members of the Board (the “Incumbent Directors”) cease for any reason other than due to death to constitute at least a majority of the members of the Board, provided that any director whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the members of the Board other than as a result of a proxy contest, or any agreement arising out of an actual or threatened proxy contest, shall be treated as an Incumbent Director;

(ii)the acquisition by any person, entity or “group” (as defined in Section 13(d) the Act), other than the Company, the Subsidiaries, any employee benefit plan of the Company or the Subsidiaries, any Kelso Entity or any Affiliate of any Kelso Entity, any THL Entity or any Affiliate of any THL Entity, of 50% or more of the combined voting power of the Company’s then outstanding voting securities;

(iii)the merger or consolidation of the Company, as a result of which persons who were stockholders of the Company immediately prior to such merger or consolidation, do not, immediately thereafter, own, directly or indirectly, more than 50% of the combined voting power entitled to vote generally in the election of directors of the merged or consolidated company;

(iv)the liquidation or dissolution of the Company other than a liquidation into the Company or into any Subsidiary; and

(v)the sale, transfer or other disposition of all or substantially all of the assets of the Company to one or more persons or entities that are not, immediately prior to such sale, transfer or other disposition, Affiliates of the Company, any Kelso Entity or any THL Entity.

Notwithstanding the foregoing, a “Change in Control” shall not be deemed to occur in the event the Company files for bankruptcy, liquidation or reorganization under the United States Bankruptcy Code.

“Change in Control Price” means the price per Share offered in conjunction with any transaction resulting in a Change in Control on a fully-diluted basis (as determined in good faith by the Committee as constituted before the Change in Control, if any part of the offered price is payable other than in cash) or, in the case of a Change in Control occurring solely by reason of a change in the composition of the Board, the highest Fair Market Value of a Share

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on any of the 30 trading days immediately preceding the date on which a Change in Control occurs.

“Code” means the Internal Revenue Code of 1986, as amended, and the regulations thereunder.

“Committee” means the Compensation Committee of the Board, or when section 162(m) of the Code or Rule 16b promulgated under the Act would require action to be taken by a committee of “outside directors” or “Non-Employee Directors,” as the case may be, the “Committee” shall, if appropriate, be deemed to refer to a subcommittee of the Compensation Committee that consists of two or more members meeting such requirements, or the full Board in the absence of such a subcommittee.

“Common Stock” means the common stock of the Company, par value $.01 per share.

“Company” means FairPoint Communications, Inc., a Delaware corporation, and any successor thereto.

“Deferred Amount” has the meaning given in Section 8.1.

“Deferred Share” means the deferred share units that confer upon a Participant the right to receive Shares at the end of a specified deferral period as set forth in Article VIII.

“Disability” means, unless otherwise provided in an Award, a long-term disability within the meaning of the long-term disability or other similar program then applicable to a Participant or, in the absence of any such program, as determined by the Committee; provided that with respect to any Participant who is a party to an employment agreement with the Company or a Subsidiary, “Disability” shall have the meaning, if any, specified in such agreement.

“Dividend Equivalents” means dividends paid by the Company with respect to Shares corresponding to Awards awarded under the Plan.

“Employee” means any officer, employee or consultant of the Company or any Subsidiary, or any director of the Company or any Subsidiary.

“Fair Market Value” means, as of any date of determination, the closing price of a Share on the New York Stock Exchange (or on such other recognized market or quotation system on which the trading prices of Common Stock are traded or quoted at the relevant time).  In the event that there are no Common Stock transactions reported on such exchange or system on such date, Fair Market Value shall mean the closing price of a Share on the immediately preceding day on which Common Stock transactions were so reported.

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“Incentive Stock” shall mean an award of Common Stock that is forfeitable until the achievement of specified Performance Criteria as provided for in Section 6.1.

“Incentive Unit” shall mean a contractual right to receive Common Stock, or cash based on the Fair Market Value of Common Stock, made pursuant to Section 6.1 that is forfeitable by the Participant until the achievement of specified Performance Criteria or until otherwise determined by the Committee or in accordance with the terms of the Plan.

“ISOs” has the meaning given in Section 4.1.

“Kelso” means Kelso Investment Associates V, L.P. and any successor investment vehicle managed by Kelso.

“Kelso Entities” means collectively, Kelso and Kelso Equity Partners V, L.P.

“Normal Retirement” means a termination of the Participant’s employment under circumstances that the Committee determines as qualifying as retirement at normal retirement age for purposes of the Plan.

“NSOs” has the meaning given in Section 4.1.

“Option” means the right to purchase Common Stock at a stated price for a specified period of time.

“Participant” means any Employee or prospective Employee of the Company designated by the Committee to receive an Award under the Plan.

“Performance Criteria” has the meaning given in Section 6.2(a).

“Performance Period” means the period, as determined by the Committee, during which the performance of the Company, any Subsidiary, any business unit and any individual is measured to determine whether and the extent to which the applicable performance measures have been achieved.

“Period of Restriction” means the period during which a Restricted Stock or Restricted Unit is subject to forfeiture.

“Permitted Transferees” has the meaning given in Section 14.1.

“Plan” means this FairPoint Communications, Inc. 2005 Stock Incentive Plan, as the same may be amended from time to time.

“Public Offering” means a public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, that covers (together with prior registrations) (a) not less than 20% of the outstanding Shares,

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on a fully diluted basis, or (b) Shares that, after the closing of such public offering, will be traded on the New York Stock Exchange, the American Stock Exchange or the National Association of Securities Dealers Automated Quotation System.

“Qualifying Termination of Employment” means a termination of a Participant’s employment with the Company or any of its Subsidiaries by reason of the Participant’s Disability, early retirement with the consent of the Committee or Normal Retirement.

“Restricted Stock” means an award of Common Stock made pursuant to Section 5.1 that is forfeitable by the Participant until the completion of a specified period of future service or until otherwise determined by the Committee or in accordance with the terms of the Plan.

“Restricted Unit” means a contractual right to receive Common Stock, or cash based on the Fair Market Value of Common Stock, made pursuant to Section 5.1 that is forfeitable by the Participant until the completion of a specified period of future service or until otherwise determined by the Committee or in accordance with the terms of the Plan.

“Share” means a share of Common Stock.

“Stock Appreciation Right” means the right to receive a payment from the Company, in cash or Common Stock, in an amount to be determined under Article VII of the Plan.

“Subsidiary” means any corporation in which the Company owns, directly or indirectly, stock representing 50% or more of the voting power of all classes of stock entitled to vote and any other business organization, regardless of form, in which the Company possesses directly or indirectly 50% or more of the total combined equity interests in such organization.

“Supplemental Unit” has the meaning given in Section 8.1.

“THL Entity” means Thomas H. Lee Equity Fund IV, L.P. and its Affiliates.

13.2Gender and Number.  Except when otherwise indicated by the context, words in the masculine gender used in the Plan shall include the feminine gender, the singular shall include the plural, and the plural shall include the singular.

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ARTICLE XIV
MISCELLANEOUS PROVISIONS

14.1Nontransferability of Awards.  No Award shall be assignable or transferable except by will or the laws of descent and distribution; provided that the Committee may permit (on such terms and conditions as it shall establish) a Participant to transfer an Award for no consideration to the Participant’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the Participant’s household (other than a tenant or employee), a trust in which these persons have more than fifty percent of the beneficial interest, a foundation in which these persons (or the Participant) control the management of assets, and any other entity in which these persons (or the Participant) own more than fifty percent of the voting interests (“Permitted Transferees”).  Except to the extent required by law, no right or interest of any Participant shall be subject to any lien, obligation or liability of the Participant.  All rights with respect to Awards granted to a Participant under the Plan shall be exercisable during the Participant’s lifetime only by such Participant or, if applicable, his or her Permitted Transferee(s).  The rights of a Permitted Transferee shall be limited to the rights conveyed to such Permitted Transferee, who shall be subject to and bound by the terms of the agreement or agreements between the Participant and the Company.  Notwithstanding the foregoing, no ISO shall be assignable or transferable except by will or the laws of descent and distribution, and during a Participant’s lifetime, shall be exercisable only by the Participant.

14.2Beneficiary Designation.  Each Participant under the Plan may from time to time name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid or by whom any right under the Plan is to be exercised in case of his death.  Each designation will revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Committee during his lifetime.  In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to or exercised by the Participant’s surviving spouse, if any, or otherwise to or by his or her estate.

14.3No Guarantee of Employment or Participation.  Nothing in the Plan shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate any Participant’s employment at any time, nor to confer upon any Participant any right to continue in the employ of the Company or any Subsidiary.  No Employee shall have a right to be selected as a Participant, or, having been so selected, to receive any future Awards.

14.4Tax Withholding.  The Company shall have the right to deduct from all amounts paid to a Participant in cash (whether under this Plan or otherwise) any taxes required by law to be withheld in respect of Awards under this Plan.  In the case of any Award satisfied in the form of Shares, no Shares shall be issued unless and until arrangements satisfactory to the Committee shall have been made to satisfy any withholding tax obligations applicable with respect to such Award.  Without limiting the

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generality of the foregoing, the Company shall have the right to retain, or the Committee may, subject to such terms and conditions as it may establish from time to time, permit Participants to elect to tender Shares (including Shares issuable in respect of an Award) to satisfy, in whole or in part, the amount required to be withheld (but no greater amount).

14.5Compliance with Legal and Exchange Requirements.  The Plan, the granting and exercising of Awards thereunder, and any obligations of the Company under the Plan, shall be subject to all applicable federal and state laws, rules, and regulations, and to such approvals by any regulatory or governmental agency as may be required, and to any rules or regulations of any exchange on which the Shares are listed.  The Company, in its discretion, may postpone the granting and exercising of Awards, the issuance or delivery of Shares under any Award or any other action permitted under the Plan to permit the Company, with reasonable diligence, to complete such stock exchange listing or registration or qualification of such Shares or other required action under any federal or state law, rule, or regulation and may require any Participant to make such representations and furnish such information as it may consider appropriate in connection with the issuance or delivery of Shares in compliance with applicable laws, rules, and regulations.  The Company shall not be obligated by virtue of any provision of the Plan to recognize the exercise of any Award or to otherwise sell or issue Shares in violation of any such laws, rules, or regulations, and any postponement of the exercise or settlement of any Award under this provision shall not extend the term of such Awards.  Neither the Company nor its directors or officers shall have any obligation or liability to a Participant with respect to any Award (or Shares issuable thereunder) that shall lapse because of such postponement.

14.6Indemnification.  Each person who is or shall have been a member of the Committee or of the Board shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit, or proceeding to which he may be made a party or in which he may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him in settlement thereof, with the Company’s approval, or paid by him in satisfaction of any judgment in any such action, suit, or proceeding against him, provided he shall give the Company an opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it on his own behalf.  The foregoing right of indemnification shall not be exclusive and shall be independent of any other rights of indemnification to which such persons may be entitled under the Company’s Articles of Incorporation or By-laws, by contract, as a matter of law, or otherwise.

14.7Legend.  To the extent any stock certificate is issued to a Participant in respect of shares of Restricted Stock prior to the expiration of the Period of Restriction, such certificate shall be registered in the name of the Participant and shall bear such restrictive legend as the Committee determines appropriate.  Upon the lapse of the Period of Restriction with respect to such Restricted Stock, the Company shall issue or have

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issued in exchange for those certificates previously issued new share certificates without such legend herein in respect of any Shares that have become vested.

14.8Effective Date.  The Plan shall be effective immediately prior to the consummation date of the initial public offering of Shares.

14.9No Limitation on Compensation.  Nothing in the Plan shall be construed to limit the right of the Company to establish other plans or to pay compensation to its employees, in cash or property, in a manner which is not expressly authorized under the Plan.

14.10Governing Law.  The Plan shall be construed in accordance with and governed by the laws of the State of Delaware, without reference to principles of conflict of laws which would require application of the law of another jurisdiction, except to the extent that the corporate law of the State of Delaware specifically and mandatorily applies.

14.11Severability; Blue Pencil.  In the event that any one or more of the provisions of this Plan shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.  If, in the opinion of any court of competent jurisdiction such covenants are not reasonable in any respect, such court shall have the right, power and authority to excise or modify such provision or provisions of these covenants as to the court shall appear not reasonable and to enforce the remainder of these covenants as so amended.

14.12No Impact On Benefits.  Except as may otherwise be specifically stated under any employee benefit plan, policy or program, no amount payable in respect of any Award shall be treated as compensation for purposes of calculating a Participant’s right under any such plan, policy or program.

14.13No Constraint on Corporate Action.  Nothing in this Plan shall be construed (i) to limit, impair or otherwise affect the Company’s right or power to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets or (ii) to limit the right or power of the Company, or any Subsidiary to take any action which such entity deems to be necessary or appropriate.

14.14Headings and Captions.  The headings and captions herein are provided for reference and convenience only, shall not be considered part of this Plan, and shall not be employed in the construction of this Plan.

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EX-10.23

Exhibit 10.23

RESTRICTED STOCK AGREEMENT

This Restricted Stock Agreement, dated as of the Grant Date set forth on the signature page hereof, between FairPoint Communications, Inc., a Delaware corporation (the “Company”), and the grantee whose name appears on Schedule A hereto (the “Grantee”), is being entered into pursuant to the FairPoint Communications, Inc. 2005 Stock Incentive Plan (the “Plan”).  Capitalized terms used herein without definition have the meaning given in the Plan.

1.  Grant of Restricted Stock.  The Company hereby evidences and confirms its grant to the Grantee, effective as of the date hereof (the “Grant Date”), of the number of Shares specified on Schedule A hereto under the heading “Restricted Stock.”  All Shares received by the Grantee under this Agreement are subject to the restrictions contained herein and are referred to as “Restricted Stock.”  This Agreement is subordinate to, and the terms and conditions of the Restricted Stock granted hereunder are subject to, the terms and conditions of the Plan, which are incorporated by reference herein.  If there is any inconsistency between the terms hereof and the terms of the Plan, the terms of the Plan shall govern.

2.  Vesting of Restricted Stock.

(a)  Restricted Period.  Except for transfers to Permitted Transferees approved by the Committee and transfers by will or by the laws of descent and distribution, the Restricted Stock granted hereby may not be sold, assigned, transferred, pledged, hypothecated or otherwise directly or indirectly encumbered or disposed of until the end of the Period of Restriction.  Subject to the Grantee’s continuous employment with the Company or a Subsidiary, and except as provided in Section 2(b)(i) or Article IX of the Plan, the Period of Restriction shall lapse, and the Restricted Stock shall become vested, according to the schedule set forth below:

Date	% of Restricted Stock Becoming Vested
April 1, 2006	25%
April 1, 2007	25%
April 1, 2008	25%
April 1, 2009	25%

(b)  Termination of Employment.  Notwithstanding anything contained in this Agreement to the contrary, (i) if the Grantee’s employment is terminated by reason of a Qualifying Termination of Employment during the Period of Restriction, a pro rata portion of any Shares underlying the Restricted Stock shall become vested and nonforfeitable, based upon the percentage of which the numerator is the portion of the Period of Restriction that expired prior to the Grantee’s termination and the denominator is the number of days in the Period of Restriction., and the remaining Restricted Stock for

which the Period of Restriction has not then expired shall be forfeited and canceled as of the date of such termination, (ii) if the Grantee’s employment is terminated because of the Grantee’s death during the Period of Restriction, any Shares underlying the Restricted Stock shall become vested and nonforfeitable, and (iii) if the Grantee’s employment is terminated for any reason other than death or a Qualifying Termination of Employment during the Period of Restriction, any Restricted Stock held by the Grantee for which the Period of Restriction has not then expired shall be forfeited and canceled as of the date of such termination.

(c)  Committee Discretion.  Notwithstanding anything contained in this Agreement to the contrary, the Committee, in its sole discretion, may accelerate the expiration date of the Period of Restriction with respect to any Restricted Stock under this Agreement, at such times and upon such terms and conditions as the Committee shall determine.

3.  Grantee’s Representations, Warranties and Covenants.

(a)  Investment Intention.  The Grantee represents and warrants that the Restricted Stock has been, and any Shares will be, acquired by the Grantee solely for the Grantee’s own account for investment and not with a view to or for sale in connection with any distribution thereof.  The Grantee further understands, acknowledges and agrees that the Restricted Stock, and any Shares, may not be transferred, sold, pledged, hypothecated or otherwise disposed of except to the extent expressly permitted hereby and at all times in compliance with the U.S. Securities Act of 1933, as amended, and the rules and regulations of the Securities Exchange Commission thereunder, and in compliance with applicable state securities or “blue sky” laws and non-U.S. securities laws.

4.  Grantee’s Rights with Respect to Restricted Stock.

(a)  Rights as Stockholder.  The Grantee shall have, with respect to all Restricted Stock, the right to vote such Restricted Stock, but shall otherwise enjoy none of the rights of a stockholder (including the right to receive dividends and Dividend Equivalents) unless and until the expiration of the Period of Restriction with respect to such Restricted Stock.  Any securities issued to or received by the Grantee with respect to Restricted Stock as a result of a stock split, a combination of shares or any other change or exchange of the Restricted Stock for other securities, by reclassification, reorganization, distribution, liquidation, merger, consolidation, or otherwise, shall have the same status, be subject to the same restrictions and bear the same legend as the Shares of Restricted Stock such securities are issued for, and shall be held by the Company for as long as the Shares of Restricted Stock such securities are issued for are so held, unless otherwise determined by the Committee.

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(b)  Legend.  Until the expiration of the Period of Restriction, each certificate evidencing Shares subject to the Grantee’s Restricted Stock shall be registered in the Grantee’s name and shall bear the following legend: “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) CONTAINED IN THE FAIRPOINT COMMUNICATIONS, INC. 2005 STOCK INCENTIVE PLAN AND A RESTRICTED STOCK AGREEMENT ENTERED INTO THEREUNDER, AND NEITHER THIS CERTIFICATE NOR THE SHARES REPRESENTED BY IT ARE ASSIGNABLE OR OTHERWISE TRANSFERABLE EXCEPT IN ACCORDANCE WITH SUCH PLAN AND AGREEMENT, COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE COMPANY.”

5.  Change in Control.  In the event of a Change in Control, all of the Grantee’s Shares of Restricted Stock shall be treated in accordance with the provisions of Article IX of the Plan.

6.  Section 409A of the Code.  In connection with the Grantee’s termination of employment, the settlement of the Grantee’s Restricted Stock shall not be made before the first business day that is six months and one day after the date of the Grantee’s termination of employment (or, if earlier, upon death) if the Committee reasonably believes the Grantee is a “specified employee” (within the meaning of Section 409A of the Code) and the Restricted Stock is subject to Section 409A(a)(2)(B) of the Code. Notwithstanding anything to the contrary in the Plan or this Agreement, the Committee may in its absolute discretion alter or amend any of the provisions of this Agreement if such alteration or amendment would be required to comply with Section 409A of the Code or any regulations promulgated thereunder.

7.  Miscellaneous.

(a)  Binding Effect; Benefits.  This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and assigns.  Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.

(b)  Amendment.  This Agreement may not be amended, modified or supplemented orally, but only by a written instrument executed by the Grantee and the Company.

(c)  Assignability.  Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or Grantee without the prior written consent of the other party; provided that the Company

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may assign all or any portion of its rights or obligations under this Agreement to one or more persons or other entities designated by it.

(d)  Applicable Law.  This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware, without reference to principles of conflict of laws which would require application of the law of another jurisdiction, except to the extent that the corporate law of the State of Delaware specifically and mandatorily applies.

(e)  Severability; Blue Pencil.  In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.  If, in the opinion of any court of competent jurisdiction such covenants are not reasonable in any respect, such court shall have the right, power and authority to excise or modify such provision or provisions of these covenants as to the court shall appear not reasonable and to enforce the remainder of these covenants as so amended.

(f)  Consent to Electronic Delivery.  By executing this Agreement, Grantee hereby consents to the delivery of information (including, without limitation, information required to be delivered to the Grantee pursuant to applicable securities laws) regarding the Company and the Subsidiaries, the Plan, and the Restricted Stock via Company web site or other electronic delivery.

(g)  Section and Other Headings, etc.  The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

(h)  Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.

–Signature page follows –

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IN WITNESS WHEREOF, the Company and Grantee have executed this Agreement as of the Grant Date.

FAIRPOINT COMMUNICATIONS, INC.
By:
	Name:
	Title:
GRANTEE
Name:

5

Schedule A

Grantee

Grantee’s Address

Grant Date

Total Number of Shares of Restricted
Stock Which Have Been Granted

6

STOCK POWER

FOR VALUE RECEIVED, the undersigned,                       , hereby assigns and transfers to the Secretary of FairPoint Communications, Inc., a Delaware corporation (the “Company”),       shares of common stock, par value $.01 per share, of the Company, standing in the undersigned’s name on the books of the Company, represented by Certificate No.          herewith and does hereby irrevocably constitute and appoint the Secretary of the Company attorney to transfer said stock on the books of the Company with full power of substitution in the premises.

Dated:              ,            

By:

EX-14.1

Exhibit 14.1

FAIRPOINT COMMUNICATIONS, INC.
CODE OF BUSINESS CONDUCT AND ETHICS

Introduction

Set forth herein is the Code of Business Conduct and Ethics (the “Code”) adopted by FairPoint Communications, Inc. (the “Company”).  This Code summarizes basic guiding principles and standards of conduct to guide all employees, directors and officers of the Company and its subsidiaries and controlled affiliates in meeting our goal to achieve the highest business and personal ethical standards as well as compliance with the laws and regulations that apply to our business.  This Code covers a wide range of business practices and procedures, but it does not address every applicable law or respond to every ethical question or concern that may arise.  All of our employees, directors and officers must conduct themselves accordingly in every aspect of our business and seek to avoid even the appearance of wrongdoing or improper behavior.  Our standard has been, and will continue to be, to advance the highest standards of ethical conduct.  We expect the Company’s agents, consultants, contractors, suppliers and representatives to be guided by the principles and standards set forth in this Code.

Our Chief Executive Officer, Chief Financial Officer and other financial and accounting officers must adhere to our Code of Ethics for Financial Professionals which sets forth additional standards in connection with our public disclosures. If you have questions regarding any of the goals, principles, or standards discussed or policies or procedures referred to in this Code or are in doubt about the best course of action to take in a particular situation, you should contact the General Counsel, or follow the guidelines set forth in Section 16 of this Code.

Every director, officer and employee has a duty to adhere to this Code and those who violate the standards in this Code will be subject to disciplinary action which may include suspension or dismissal and/or the reporting of violative conduct to appropriate regulatory and criminal authorities.  If you are involved in a situation which you believe may violate or lead to a violation of this Code, follow the guidelines described in Section 16 of this Code.

We are committed to continuously reviewing and updating our policies and procedures.  Therefore, this Code is subject to modification.  This Code supercedes all other such codes, policies, procedures, instructions, practices, rules or written or verbal representations concerning the subject matter of this Code to the extent they are inconsistent.

Please sign the acknowledgment form attached hereto as Exhibit A, indicating that you have received, read, understand and agree to comply with this Code, and return the form as instructed.  The signed acknowledgment form will be located in your personnel file.  Each year, as part of the annual review process, officers and other appropriate personnel will be asked to sign an acknowledgment indicating their continued understanding of and compliance with the Code.  In addition, periodically, you may be asked to participate in seminars, training meetings and similar activities related to reinforcing your understanding of this Code and its applicability to the Company’s business.

1.Compliance with Laws, Rules and Regulations

Obeying the law, both in letter and in spirit, is the foundation on which this Company’s ethical standards are built.  All employees, directors and officers must respect and obey the laws of the cities, states and countries in which we operate and the rules and regulations applicable to the Company’s business.  Although not all employees are expected to know the details of these laws, rules and regulations, it is important to know enough to determine when to seek advice from supervisors, managers or other appropriate personnel who should consult with
the Legal Department as necessary or appropriate.  Compliance with the law does not obviate the need to act with the highest honest and ethical standards.

To promote compliance with laws, rules, regulations and the policies of the Company, including insider trading rules, other securities laws, and anti-discrimination and anti-harassment laws and policies, the

Company has established various compliance policies and procedures and, where appropriate, may conduct information and training sessions.

2.Conflicts of Interest

A “conflict of interest” exists when a person’s personal private interest interferes in any way - or even appears to interfere in any way - with the interests of the Company.  A conflict situation can arise when an employee, officer or director takes actions or has interests in connection with or as a result of a material transaction or relationship that may make it difficult for him or her or others to perform work or make decisions objectively and effectively in the Company’s interest.  Conflicts of interest may also arise when an employee, officer or director, or members of his or her family, receives improper personal benefits as a result of his or her position in the Company.  Conflicts of interest, unless approved in accordance with this Code, as applicable, are prohibited as a matter of Company policy.  Examples include the following:

(a)Employment/Outside Employment

In consideration of their employment with the Company, employees are expected to devote their full attention to the business interests of the Company.  Employees are prohibited from engaging in any activity that interferes with their performance or responsibilities to the Company or is otherwise in conflict with or prejudicial to the Company.  Our policies prohibit any employee from accepting simultaneous employment with a client, credit source, supplier, or competitor, or from taking part in any activity that enhances or supports a competitor’s position.  If you have any questions regarding this requirement, you should contact the Legal Department.

(b)Outside Directorships

It is a conflict of interest to serve as a director of any company that competes with the Company.  Employees may not serve as a director of another company without first obtaining the approval of the Company’s Chief Executive Officer (the “CEO”).  Directors of the Company are required to review with the Company’s Board of Directors and the Company’s Secretary other proposed directorships to confirm that accepting such directorship is consistent with the Company’s Corporate Governance Guidelines.

(c)Business Interests

If you are considering investing in a client, credit source, supplier or competitor, great care must be taken to ensure that these investments do not compromise your responsibilities to the Company.  Many factors should be considered in determining whether a conflict exists, including the size and nature of the investment; your ability to influence the Company’s decisions; your access to confidential information of the Company or of the other company; and the nature of the relationship between the Company and the other company.  The Audit Committee of the Company’s Board of Directors must approve in advance any such investment (other than purchases of $50,000 or less of stock of a publicly traded company).

(d)Related Parties

As a general rule, you should avoid conducting business or engaging in a transaction on behalf of the Company with a family member or significant other, or with a company or firm with which you or a family member or significant other is a significant owner or associated or employed in a significant role or position.  “Family members” include any person related by blood, adoption or marriage, including grandparents, aunts, uncles, nieces, nephews, cousins, stepchildren, stepparents, and in-laws.  “Significant others” include co-habitants, domestic partners, and persons with whom an employee has (or reasonably expects to have) a consensual romantic, sexual, intimate or dating relationship.

The Audit Committee must review and approve in advance all material related party transactions or business or professional relationships.  All instances involving such potential related party transactions or business or professional relationships must be reported to the Legal Department who will assess the materiality of the transaction or relationship and elevate the matter to the Audit Committee as appropriate.  You must not enter into, develop or continue any such material transaction or relationship without obtaining such prior Audit Committee approval.  The Company must report all material related party transactions and business or

professional relationships under applicable accounting rules and the Securities and Exchange Commission’s (the “SEC”) rules and regulations.  Any dealings with a related party must be conducted in such a way as to avoid preferential treatment and assure that the terms obtained by the Company are no less favorable than could be obtained from unrelated parties on an arm’s-length basis.

Conflicts of interest or the material nature of a transaction or relationship may not always be clear-cut; if questions arise, you should consult with the Legal Department before entering into, developing or continuing a transaction that could reasonably be expected to give rise to a conflict of interest.

(e)Other Situations

Because other conflicts of interest may arise, it would be impractical to attempt to list all possible situations.  Any employee, officer or director who becomes aware of a conflict of interest or a potential conflict of interest should bring it to the attention of a supervisor, manager or other appropriate personnel or consult the guidelines described in Section 16 of this Code.

3.Insider Trading

Employees, officers and directors who have access to confidential information are not permitted to use or share that information for stock trading purposes or for any other purpose except the conduct of our business.  All non-public information about the Company should be considered confidential information.  To use non-public information about the Company or any other company for personal financial benefit or to “tip” others who might make an investment decision on the basis of this information is not only unethical but also illegal.  Please refer to the Company’s Insider Trading Policy.  The purpose of such policy is to inform you of your legal responsibilities to make clear to you that the misuse of sensitive information is contrary to Company policies and to set forth procedures with respect to trading in the Company’s securities.

4.Public Disclosure

The Company is committed to providing full, fair, accurate, timely and understandable disclosure in the periodic reports and other information it files with or submits to the SEC and in other public communications, such as press releases, earnings conference calls and industry conferences, made by the Company.  In meeting such standards for disclosure, the Company’s executive officers and directors shall at all times strive to comply with the Company’s disclosure obligations and, as necessary, appropriately consider and balance the need or desirability for confidentiality with respect to non-public negotiations or other business developments.  The Company’s CEO and CFO are responsible for establishing effective disclosure controls and procedures and internal controls over financial reporting within the meaning of applicable SEC rules and regulations.  The Company expects the CEO and CFO to take a leadership role in implementing such controls and procedures and to position the Company to comply with its disclosure obligations and otherwise meet the foregoing standards for public disclosure.

No employee, officer or director should interfere with, hinder or obstruct the Company’s efforts to meet the standards for public disclosure set forth above.

5.Corporate Opportunities

Employees, officers and directors are prohibited from exploiting for their own personal gain opportunities that are discovered through the use of corporate property, information or position unless the opportunity is fully disclosed to the Board and the Board declines to pursue such opportunity.  No employee, officer or director may use corporate property, information, or position for improper personal gain, and no employee may compete with the Company directly or indirectly.  Employees, officers and directors owe a duty to the Company to advance the Company’s legitimate interest when the opportunity to do so arises.

6.Competition and Fair Dealing

We seek to outperform our competition fairly and honestly.  We seek competitive advantages through superior performance, never through unethical or illegal business practices.  Stealing proprietary information, possessing trade secret information that was obtained without the owner’s consent, or inducing such disclosures by past or present employees of other companies is prohibited.  Each employee, director and officer should endeavor to respect the rights of and deal fairly with the Company’s customers, suppliers, consultants, competitors and employees.  No employee, director or officer should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other intentional unfair-dealing practice.

The purpose of business entertainment and gifts in a commercial setting is to create good will and sound working relationships, not to gain unfair advantage with customers.  No gift or entertainment should ever be offered, given, provided or accepted by any Company employee, officer, director, family member of any of the foregoing or agent unless it:

•is not a cash gift,

•is consistent with customary business practices,

•is not excessive in value,

•cannot be construed as a bribe or payoff and does not create an appearance of impropriety, and

•is in compliance with the Company’s policy on gifts and gratuities and does not violate any laws or rules or regulations.

Please discuss with your Human Resources representative any gifts or proposed gifts which you are not certain are appropriate.

7.Discrimination and Harassment

The diversity of the Company’s employees is a tremendous asset.  It is the Company’s policy to provide equal employment opportunity for all applicants and employees.  The Company does not unlawfully discriminate on the basis of race, color, religion, sex (including pregnancy, childbirth, or related medical conditions), national origin, age, disability, marital status, veteran status, or any other basis prohibited under federal, state or local law.  In addition, the Company is committed to providing a workplace free of unlawful harassment.  This includes not only sexual harassment, but also harassment on any of the bases set forth above.  The Company strongly disapproves of and will not tolerate harassment of employees by managers, supervisors, co-workers or non-employees.  Similarly, the Company will not tolerate harassment by its employees of non-employees with whom Company employees have a business, service, or professional relationship.  For information about the Company’s policies against discrimination and harassment, please refer to the Company’s Employee Handbook.

All of our employees deserve a positive work environment where they will be respected and we are committed to providing an environment that supports honesty, integrity, respect, trust and responsibility.  All of our employees should contribute to the creation and maintenance of such an environment and our executive officers and management and supervisory personnel should take a leadership role in achieving a work environment that meets our diversity standards and is free from the fear of retribution.

8.Health and Safety

The Company strives to provide each employee with a safe and healthful work environment.  Each employee has a responsibility for maintaining a safe and healthy workplace for all employees by following safety and health rules and practices and reporting accidents, injuries and unsafe equipment, practices or conditions.

Violence and threatening behavior are not permitted and the use of illegal drugs or alcohol in the workplace will not be tolerated.  Employees should report to work in condition to perform their duties, free from the influence of illegal drugs or alcohol.

9.Record-Keeping

The purpose of this policy is to set forth and convey the Company’s requirements in managing records, including all recorded information regardless of medium or characteristics.  Records include paper documents, CDs, DVDs, computer hard disks, email, floppy disks, microfiche, microfilm or all other media.  The Company requires honest and accurate recording and reporting of information in order to make responsible business decisions.

Many employees, officers and directors regularly use business expense accounts, which must be documented and recorded accurately.   If you are not sure whether a certain expense is legitimate, ask your supervisor or contact the Company’s Controller.  Please refer to the Company’s business travel policy for further information regarding business expenses.

The Company’s responsibilities to its shareholders and the investing public require that all of the Company’s books, records, accounts and financial statements must be maintained in reasonable detail, must appropriately reflect the Company’s transactions and must conform both to applicable legal requirements and to the Company’s system of internal controls and generally accepted accounting practices and principles.  No one should rationalize or even consider misrepresenting facts or falsifying records.  Unrecorded or “off the books” funds or assets should not be maintained unless permitted by applicable law or regulation.

Business records and communications often become public, and we should avoid exaggeration, derogatory remarks, guesswork, or inappropriate characterizations of people and companies that can be misunderstood.  This applies equally to e-mail, internal memos, and formal reports.  Records should always be retained or destroyed according to the Company’s record retention policies.  No record or document shall be destroyed which is the subject of a subpoena or other legal process or if there is a reasonable belief that litigation proceedings or government investigative proceedings are likely to occur and it is anticipated that such record or document is relevant to such proceedings.  All employees are expected to comply with all federal, state and industry-specific record retention rules and requirements as well as the Company’s record retention policies.

10.Confidentiality

Employees, directors and officers must maintain the confidentiality of confidential information entrusted to them by the Company or its customers, except when disclosure is authorized by the CEO or CFO or required by laws or regulations.  Confidential information includes all non-public information that might be of use to competitors, or harmful to the Company or its customers, if disclosed.  It also includes information that suppliers and customers have entrusted to us.  The obligation to preserve confidential information continues even after employment ends.

The Company and its employees, agents, consultants and contractors must cooperate with appropriate government inquiries and investigations.  In this context, however, it is important to protect the legal rights of the Company with respect to its confidential information.  All government inquiries and requests for information, documents or investigative interviews (whether in person, by phone, email or written correspondence) must be referred to the General Counsel, who will be responsible for coordinating a response.  No financial information may be disclosed without the prior approval of the CEO or CFO.

11.Protection and Proper Use of Company Assets

All employees, directors and officers should endeavor to protect the Company’s property, electronic communications systems, information resources, facilities and equipment and ensure their efficient use.  Theft, carelessness, and waste have a direct impact on the Company’s profitability.  Any suspected incident of fraud or theft should be immediately reported for investigation pursuant to Section 16 of this Code.  Company assets should not be used for non-Company business, although we recognize that incidental personal use may be permitted without adversely affecting the interests of the Company.  Personal use of Company assets must always be in accordance with Company policy.  You should consult your Human Resources representative for appropriate guidance and permission.

The obligation of employees, directors and officers to protect the Company’s assets includes its

proprietary information.  Proprietary information includes intellectual property such as trade secrets, patents, trademarks and copyrights, as well as business, marketing and service plans, designs, databases, records, salary information and any unpublished financial data and reports.  Unauthorized use or distribution of this information would violate Company policy.  It could also be illegal and result in civil or even criminal penalties.

Unauthorized duplication of copyrighted documents or computer software violates the law.  You must neither engage in nor tolerate the making or using of unauthorized documents or software copies and must comply will all license and purchase terms regulating the use of any document or software.  The Company will provide all documents and software needed to meet legitimate needs.

12.Payments to Government Personnel

The U.S. Foreign Corrupt Practices Act prohibits giving anything of value, directly or indirectly, to officials of foreign governments or foreign political candidates in order to obtain or retain business.  It is strictly prohibited to make illegal payments to government officials of any country.

In addition, there are a number of federal and state laws and regulations regarding business gratuities which may be accepted by U.S. or state government personnel.  The promise, offer or delivery to an official or employee of the U.S. government or a state government of a gift, favor or other gratuity in violation of these rules would not only violate Company policy but could also be a criminal offense.  Local governments, as well as foreign governments, may have similar rules.  You must consult with the Legal Department prior to making any such gifts.

13.Waivers of the Code of Business Conduct and Ethics

Any waiver of any provision of this Code for executive officers or directors must be approved by the Audit Committee and will be promptly disclosed as required by applicable securities law or stock exchange regulation.  With regard to employees who are not executive officers, waivers must be approved by the General Counsel.

14.Reporting any Illegal or Unethical Behavior; No Retaliation

It is your obligation and ethical responsibility to help enforce this Code, and to that end, you should promptly report violations of this Code in accordance with the guidelines set forth in Section 16 of this Code.  Employees, directors and officers are encouraged to report to supervisors, managers or his or her Human Resources representative about observed or suspected illegal, improper or unethical behavior and when in doubt about the best course of action in a particular situation.  You should know that reprisal, threats, retribution or retaliation against any person who has in good faith reported a violation or a suspected violation of law, this Code or other Company policies, or against any person who is assisting in any investigation or process with respect to such a violation, is both a violation of Company policy and is prohibited by a variety of state and federal civil and criminal laws including the Sarbanes-Oxley Act of 2002.  Accordingly, it is the policy of the Company not to allow retaliation for reports of wrongdoing or misconduct by others made in good faith by employees.  Employees, directors and officers are expected to cooperate in internal investigations of wrongdoing or misconduct.

15.Accounting Complaints

The Company’s policy is to comply with all applicable financial reporting and accounting regulations.  If any director, officer or employee of the Company has unresolved concerns or complaints regarding questionable accounting, internal control or auditing matters of the Company, then he or she is encouraged to submit those concerns or complaints in accordance with the Company’s Complaint Procedures for Accounting and Auditing Matters.

16.Compliance Procedures

We must all work to ensure prompt and consistent action against violations of this Code.  However, in some situations it is difficult to know right from wrong.  Since we cannot anticipate every situation that will arise, you should keep in mind the following steps as you consider a particular problem or concern.

(a)Make sure you have all the facts.  In order to reach the right solutions, we must be as fully informed as possible.

(b)Ask yourself:  What specifically am I being asked to do or ignore?  Does it seem illegal, unethical or improper?  This will enable you to focus on the specific question you are faced with, and the alternatives you have.  Use your judgment and common sense; if something seems unethical or improper, it may very well be.

(c)Clarify your responsibility and role.  In most situations, there is shared responsibility.  Are your colleagues informed?  It may help to get others involved and discuss your concerns.

(d)You should report violations of this Code to or otherwise discuss your concerns in this regard with your supervisor or your Human Resources representative.  In many cases, your supervisor will be more knowledgeable about the question or concern, and will appreciate being brought into the decision-making process.  Remember that it is your supervisor’s responsibility to help solve problems.  Supervisors and Human Resources representatives are obligated to report violations of this Code to the General Counsel.

(e)In the case where it may not be appropriate to report a violation to or discuss your concerns with your supervisor or your Human Resources representative, or where you do not feel comfortable approaching your supervisor to report a violation or discuss your concerns, you may report the violation or discuss your concerns with the General Counsel.  If you prefer to report violations or your concerns in writing, on an anonymous basis, please address your concerns to our General Counsel at the following address:  FairPoint Communications, Inc., 521 East Morehead Street, Suite 250, Charlotte, NC 28202, Attention: Shirley J. Linn.

(f)Reports of violations of this Code or other complaints made to the persons referenced above will be reviewed by the General Counsel or her designee, who shall either (i) conduct an investigation of the facts and circumstances as she deems appropriate and report her conclusions and remedial actions taken, if any, to the Audit Committee or (ii) report the alleged violation or other complaint to the Audit Committee for further direction.

(g)Your communications of violations or concerns will be kept confidential to the extent feasible and appropriate, and except as required by law.

(h)All reports of violations of the Code will be promptly investigated and addressed.  If you are not satisfied with the response, you may contact the Audit Committee directly.

(i)Always ask first, act later:  If you are unsure of what to do in any situation, seek guidance before you act.

17.Compliance Required

The matters covered in this Code are of the utmost importance to the Company, its shareholders and its business partners, and are essential to the Company’s ability to conduct its business in accordance with its stated values.  We expect all of our directors, officers, employees, agents, contractors, consultants and representatives to adhere to these rules in carrying out their duties for the Company.

Any individual whose actions are found to violate these policies or any other policies of the Company will be subject to disciplinary action, up to and including immediate termination of employment or business relationship.  Where the Company has suffered a loss, it may pursue its legal remedies against the individuals or entities responsible.

18.Administration

No code, including this one, can cover all situations.  Similarly, exceptional circumstances may occur which do not fit neatly within the guidelines of this Code or where strict application of this Code may not produce a fair result.  Overall administration of this Code including its interpretation and amendment is under the authority of the Audit Committee of the Board.

EXHIBIT A

ACKNOWLEDGMENT OF RECEIPT OF CODE

OF BUSINESS CONDUCT AND ETHICS

I have received and read the Company’s Code of Business Conduct and Ethics (the “Code”).  I understand the standards and policies contained in the Code and understand that there may be additional policies or laws specific to my position as an employee, officer or director of the Company.  I further agree to comply with the Code.

If I have questions concerning the meaning or application of the Code, any Company policies, or the legal and regulatory requirements applicable to my position, I know I can consult my supervisor, my Human Resources representative or the Legal Department, knowing that my questions or reports to these sources will be maintained in confidence to the extent feasible and appropriate.

Employee Name
Signature
Date
	Please sign and return this form to [                                   ].

EX-14.2

Exhibit 14.2

FairPoint Communications, Inc.

Code of Ethics for Financial Professionals

Employees are FairPoint Communications, Inc.’s most important asset.  Accordingly, FairPoint expects all its and its subsidiaries’ employees to act with the highest standards of personal and professional honesty and integrity in all aspects of their activities, to comply with applicable laws, rules and regulations, to deter wrongdoing and to comply with all policies and procedures adopted by FairPoint that govern the conduct of its employees.

In response to rules adopted by the United States Securities and Exchange Commission under Section 406 of the Sarbanes-Oxley Act of 2002, FairPoint has adopted this Code of Ethics for Financial Professionals.  This Code sets forth written standards that are designed to deter wrongdoing and to promote honest and ethical conduct by FairPoint’s senior financial officers, including its chief executive officer, and is a supplement to FairPoint’s Code of Conduct and the other policies and procedures that govern the conduct of employees of FairPoint and its subsidiaries. In addition to applying to FairPoint’s chief executive officer, chief financial officer, vice president of finance and treasurer, controller and regional controllers, this Code of Ethics for Financial Professionals shall apply to all of the other persons employed by FairPoint or its subsidiaries who have significant responsibility for preparing or overseeing the preparation of FairPoint’s financial statements and the other financial data included in FairPoint’s periodic reports to the Securities and Exchange Commission and in other public communications made by FairPoint that are designated from time to time by the chief financial officer as senior financial professionals.

As a senior financial professional employed by FairPoint or one of its subsidiaries, I agree to use my best efforts and abilities at all times to:

1.Act with honesty and integrity and promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest in my personal and professional relationships, and promote honest and ethical conduct among my colleagues by setting an example of such for them through my own conduct.

2.Protect the confidentiality of information I obtain in the course of my work, except when I am authorized or otherwise legally obligated to disclose such information, and not use any confidential information for personal advantage.

3.Produce full, fair, accurate, timely and understandable disclosure in reports and other documents that FairPoint or its subsidiaries file with, or submit to, the Securities and Exchange Commission and in other public communications made by FairPoint or its subsidiaries.

4.Comply with applicable laws, rules and regulations of any federal, state or local government or of any other public or private regulatory organization.

5.Act in good faith, responsibly, with due care, competence and diligence without misrepresenting material facts or allowing my independent judgment to be subordinated to that of another.

6.Use and control all of the assets and resources employed or entrusted to me by FairPoint in a responsible and ethical manner.

7.Report any conduct that I believe could be a possible violation of this Code of Ethics for Financial Professionals promptly to FairPoint’s general counsel or to a member of FairPoint’s board of directors serving on the audit committee of the board.

I understand that I am prohibited from directly or indirectly taking any action to fraudulently influence, coerce, manipulate or mislead FairPoint’s or its subsidiaries’ independent public auditors for any purpose.

I also understand that I will be held accountable for my adherence to this Code of Ethics for Financial Professionals, and that my failure to observe the terms of this Code of Ethics for Financial Professionals may result in disciplinary action up to and including immediate termination.  In addition, I understand that my agreement to comply with all of the terms of this Code of Ethics for Financial Professionals does not constitute a contract of employment.  Finally, I understand that violations of this Code of Ethics for Financial Professionals may constitute violations of law, which could result in civil and criminal penalties for me, my supervisors and/or FairPoint.

I acknowledge that I have received and read FairPoint’s Code of Ethics for Financial Professionals, have had an opportunity to ask questions about it and understand all of my obligations under it.

Please print your name:
Please sign here:	Date:

EX-23.1

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Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
FairPoint Communications, Inc.:

        We consent to the incorporation by reference in the registration statement (No. 333-122809) on Form S-8 of FairPoint Communications, Inc. of our report dated March 10, 2005 relating to the consolidated balance sheets of FairPoint Communications, Inc, and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders' equity (deficit), comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2004, which report appears in the December 31, 2004 Annual Report to Stockholders on Form 10-K of FairPoint Communications, Inc.

/s/  KPMG LLP

Omaha, Nebraska
March 24, 2005

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Consent of Independent Registered Public Accounting Firm

EX-23.2

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Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

        We consent to the incorporation by reference in the Registration Statement No. 333-122809 of FairPoint Communications, Inc. on Form S-8 of our report dated March 1, 2005 (relating to the financial statements of Orange County—Poughkeepsie Limited Partnership as of December 31, 2004 and 2003 and for each of the three years in the period ended December 31, 2004), appearing in this Annual Report on Form 10-K of FairPoint Communications Inc. for the year ended December 31, 2004.

/s/ Deloitte & Touche LLP
New York, New York
March 24, 2005

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Consent of Independent Registered Public Accounting Firm

EX-23.3

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Exhibit 23.3

Consent of Independent Registered Public Accounting Firm

        We consent to the incorporation by reference in the Registration Statement (No. 333-122809) on Form S-8 of FairPoint Communications, Inc. of our reports dated March 1, 2003, with respect to the financial statements of Illinois Valley Cellular RSA 2-I as of December 31, 2002 and 2001, and for each of the years in the three-year period ended December 31, 2002 and the financial statements of Illinois Valley Cellular RSA 2-III as of December 31, 2002 and 2001, and for each of the years in the three-year period ended December 31, 2002, which reports are included in the December 31, 2004, Annual Report to Stockholders on Form 10-K of FairPoint Communications, Inc.

/s/ Kiesling Associates LLP
Madison, Wisconsin
March 23, 2005

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Consent of Independent Registered Public Accounting Firm

EX-31.1

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Exhibit 31.1

CERTIFICATION

I, Eugene B. Johnson, certify that:

1.

I have reviewed this annual report on Form 10-K of FairPoint Communications, Inc. (the "Company");

2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this annual report;

4.

The Company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in the Securities Exchange Act of 1934, as amended (the "Exchange Act") rule 13a–15(e) and 15d–15(e)) for the Company and we have:

(i)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report was being prepared;

(ii)

evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report; and

(iii)

disclosed in this report any change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter (the Company's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; and

5.

The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of Company's board of directors (or persons performing the equivalent function):

(i)

all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonable likely to adversely affect the Company's ability to record, process, summarize and report financial information; and

(ii)

any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls over financial reporting.

Date: March 24, 2005

/s/  EUGENE B. JOHNSON Eugene B. Johnson
Chief Executive Officer

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CERTIFICATION

EX-31.2

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Exhibit 31.2

CERTIFICATION

I, Walter E. Leach, Jr., certify that:

1.

I have reviewed this annual report on Form 10-K of FairPoint Communications, Inc. (the "Company");

2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this annual report;

4.

The Company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in the Securities Exchange Act of 1934, as amended (the "Exchange Act") rule 13a–15(e) and 15d–15(e)) for the Company and we have:

(i)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report was being prepared;

(ii)

evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report; and

(iii)

disclosed in this report any change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter (the Company's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; and

5.

The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of Company's board of directors (or persons performing the equivalent function):

(i)

all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonable likely to adversely affect the Company's ability to record, process, summarize and report financial information; and

(ii)

any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls over financial reporting.

Date: March 24, 2005

/s/  WALTER E. LEACH, JR. Walter E. Leach, Jr.
Chief Financial Officer

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CERTIFICATION

EX-32.1

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Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the Annual Report on Form 10-K of FairPoint Communications, Inc. (the "Company") for the year ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Eugene B. Johnson, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1.

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  EUGENE B. JOHNSON Eugene B. Johnson
Chief Executive Officer

March 24, 2005

        A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EX-32.2

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Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the Annual Report on Form 10-K of FairPoint Communications, Inc. (the "Company") for the year ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Walter E. Leach, Jr., Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1.

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  WALTER E. LEACH, JR. Walter E. Leach, Jr.
Chief Financial Officer

March 24, 2005

        A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EX-99.1

Exhibit 99.1

Orange County - Poughkeepsie
Limited Partnership

Report of Independent Registered Public Accounting Firm

Financial Statements

Years Ended December 31, 2004, 2003 and 2002

ORANGE COUNTY -

POUGHKEEPSIE LIMITED PARTNERSHIP

TABLE OF CONTENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
	Balance Sheets
	December 31, 2004 and 2003
	Statements of Operations
	For the years ended December 31, 2004, 2003 and 2002
	Statements of Changes in Partners’ Capital
	For the years ended December 31, 2004, 2003 and 2002
	Statements of Cash Flows
	For the years ended December 31, 2004, 2003 and 2002
	Notes to Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners of Orange County - Poughkeepsie Limited Partnership:

We have audited the accompanying balance sheets of Orange County - Poughkeepsie Limited Partnership (the “Partnership”) as of December 31, 2004 and 2003, and the related statements of operations, changes in partners’ capital, and cash flows for each of the three years in the period ended December 31, 2004.  These financial statements are the responsibility of the Partnership’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Partnership as of December 31, 2004 and 2003, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

New York, New York

March 1, 2005

1

ORANGE COUNTY - POUGHKEEPSIE LIMITED PARTNERSHIP

BALANCE SHEETS

DECEMBER 31, 2004 AND 2003

(Dollars in Thousands)

	2004		2003
ASSETS
CURRENT ASSETS:
Accounts receivable, net of allowances of $0 and $20 in 2004 and 2003, respectively	$	244	$	73
Unbilled revenue	1,249		866
Due from general partner	—		19,766
Prepaid expenses and other current assets	52		49
Total current assets	1,545		20,754
PROPERTY, PLANT AND EQUIPMENT - Net	34,525		29,622
TOTAL ASSETS	$	36,070	$	50,376
LIABILITIES AND PARTNERS’ CAPITAL
CURRENT LIABILITIES:
Accounts payable and accrued liabilities	$	436	$	348
Advance billings	144		310
Due to general partner	3,102		—
Total current liabilities	3,682		658
COMMITMENTS AND CONTINGENCIES (NOTES 5 and 7)
PARTNERS’ CAPITAL	32,388		49,718
TOTAL LIABILITIES AND PARTNERS’ CAPITAL	$	36,070	$	50,376

See notes to financial statements.

2

ORANGE COUNTY - POUGHKEEPSIE LIMITED PARTNERSHIP

STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

(Dollars in Thousands)

	2004		2003			2002
OPERATING REVENUE:
Service revenue	$	163,367	$	144,643		$	114,591
OPERATING COSTS AND EXPENSES:
Cost of service (excluding depreciation and amortization related to network assets included below)	16,854		17,248			11,652
General and administrative	2,242		2,123			2,900
Depreciation and amortization	5,521		5,179			4,225
Net loss (gain) on sale of property, plant and equipment	60		(3		)	(2		)
Total operating costs and expenses	24,677		24,547			18,775
OPERATING INCOME	138,690		120,096			95,816
INTEREST AND OTHER INCOME - Net	980		1,472			1,553
NET INCOME	$	139,670	$	121,568		$	97,369
Allocation of Net Income:
Limited partners	$	20,950	$	18,236		$	14,606
General partners	118,720		103,332			82,763

See notes to financial statements.

3

ORANGE COUNTY - POUGHKEEPSIE LIMITED PARTNERSHIP

STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL

YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

(Dollars in Thousands)

	General Partner						Limited Partners
	NYNEX Mobile Limited Partnership 2			Verizon Wireless of the East LP			Taconic Telephone Corporation			Warwick Valley Telephone Company			Total Partners’ Capital
BALANCE, JANUARY 1, 2002	$	38,915		$	—		$	3,433		$	3,433		$	45,781
Net income	46,092			36,671			7,303			7,303			97,369
Distribution to partners	(25,500		)	(42,500		)	(6,000		)	(6,000		)	(80,000		)
Transfer of Partnership interest	(59,507		)	59,507			—			—			—
BALANCE, DECEMBER 31, 2002	—			53,678			4,736			4,736			63,150
Net income	—			103,332			9,118			9,118			121,568
Distribution to partners	—			(114,750		)	(10,125		)	(10,125		)	(135,000		)
BALANCE, DECEMBER 31, 2003	—			42,260			3,729			3,729			49,718
Net income	—			118,720			10,475			10,475			139,670
Distribution to partners	—			(133,450		)	(11,775		)	(11,775		)	(157,000		)
BALANCE, DECEMBER 31, 2004	$	—		$	27,530		$	2,429		$	2,429		$	32,388

See notes to financial statements.

4

ORANGE COUNTY - POUGHKEEPSIE LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

(Dollars in Thousands)

	2004			2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	139,670		$	121,568		$	97,369
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for uncollectible accounts receivable	—			30			—
Depreciation and amortization	5,521			5,179			4,225
Net loss (gain) on sale of property, plant and equipment	60			(3		)	(2		)
Changes in certain assets and liabilities:
Accounts receivable	(171		)	14			378
Unbilled revenue	(383		)	259			420
Prepaid expenses and other current assets	(3		)	(13		)	107
Accounts payable and accrued liabilities	88			(887		)	901
Advance billings	(166		)	63			51
Net cash provided by operating activities	144,616			126,210			103,449
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(10,484		)	(5,325		)	(7,704		)
Proceeds from sale of property, plant and equipment	—			—			64
Net cash used in investing activities	(10,484		)	(5,325		)	(7,642		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease (increase) in due to/from general partner, net	22,868			14,115			(15,809		)
Distribution to partners	(157,000		)	(135,000		)	(80,000		)
Net cash used in financing activities	(134,132		)	(120,885		)	(95,809		)
INCREASE IN CASH	—			—			—
CASH, BEGINNING OF YEAR	—			—			—
CASH, END OF YEAR	$	—		$	—		$	—

See notes to financial statements.

5

ORANGE COUNTY - POUGHKEEPSIE LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002

(Dollars in Thousands)

1.ORGANIZATION AND MANAGEMENT

Orange County - Poughkeepsie Limited Partnership- Orange County - Poughkeepsie LimitedPartnership (the “Partnership”) was formed in 1987.  The principal activity of the Partnership is providing wholesale cellular service to resellers who operate principally in the Orange County and Poughkeepsie, New York service areas.

The partners and their respective ownership percentages as of December 31, 2004 are as follows:

Managing and general partner:
Verizon Wireless of the East LP*	85.0	%
Limited partners:
Taconic Telephone Corporation (“Taconic”)	7.5	%
Warwick Valley Telephone Company (“Warwick”)	7.5	%

*   Prior to August 15, 2002 NYNEX Mobile LP 2 was the managing and general partner of the Partnership.  On August 15, 2002 NYNEX Mobile LP 2 transferred its 85% partnership interest to its affiliate, Verizon Wireless of the East LP (the “General Partner”).  Verizon Wireless of the East LP is a partnership between Verizon Wireless of Georgia LLC and Verizon Wireless Acquisition South LLC, which hold a controlling interest, and Price Communications which has a preferred interest.  Verizon Wireless of the East LP is a partnership which is consolidated by Cellco Partnership (d/b/a Verizon Wireless) (“Cellco”).

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition - The Partnership earns revenue by providing access to the network (access revenue) and for usage of the network (airtime/usage revenue), which includes roaming and long distance revenue.  In general, access revenue is billed one month in advance and is recognized when earned; the unearned portion is classified in advance billings.  Airtime/usage revenue, roaming revenue and long distance revenue are recognized when service is rendered and included in unbilled revenue until billed.  The Partnership’s revenue recognition policies are in accordance with the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin (“SAB”) No. 101, Revenue Recognition in Financial Statements and Staff Accounting Bulletin (“SAB”) No. 104, Revenue Recognition.

Approximately 98% of the Partnership’s 2004, 2003 and 2002 revenue is affiliate revenue due to the fact that Cellco is the Partnership’s primary reseller.  The wholesale rates charged to Cellco do not necessarily reflect current market rates.  The Partnership continues to re-evaluate the rates and expects these rates to be reduced in the future consistent with market trends and the terms of the limited partnership agreement (See Note 4).

6

Cellular service revenues resulting from a cellsite agreement with Cellco are recognized based upon an allocation of airtime minutes (See Note 4).

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  Estimates are used for, but not limited to, the accounting for: allocations, allowance for uncollectible accounts receivable, unbilled revenue, fair value of financial instruments, depreciation and amortization, useful lives and impairment of assets, accrued expenses, taxes, and contingencies.  Estimates and assumptions are periodically reviewed and the effects of any material revisions are reflected in the financial statements in the period that they are determined to be necessary.

Operating Expenses - Operating expenses include expenses incurred directly by the Partnership, as well as an allocation of certain administrative and operating costs incurred by the General Partner or its affiliates on behalf of the Partnership.  Services performed on behalf of the Partnership are provided by employees of Cellco.  These employees are not employees of the Partnership and therefore, operating expenses include direct and allocated charges of salary and employee benefit costs for the services provided to the Partnership.  The Partnership believes such allocations, principally based on the Partnership’s percentage of total customers, customer gross additions, or minutes-of-use, are reasonable.

Property, Plant and Equipment - Property, plant and equipment primarily represents costs incurred to construct and expand capacity and network coverage on Mobile Telephone Switching Offices and cell sites within the Partnership’s network.  The cost of property, plant and equipment is depreciated over its estimated useful life using the straight-line method of accounting.  Leasehold improvements are amortized over the shorter of their estimated useful lives or the term of the related lease.  Major improvements to existing plant and equipment are capitalized. Routine maintenance and repairs that do not extend the life of the plant and equipment are charged to expense as incurred.

Upon the sale or retirement of property, plant and equipment, the cost and related accumulated depreciation or amortization is eliminated from the accounts and any related gain or loss is reflected in the Statements of Operations.

Network engineering costs incurred during the construction phase of the Partnership’s network and real estate properties under development are capitalized as part of property, plant and equipment and recorded as construction in progress until the projects are completed and placed into service.

FCC Licenses - The Federal Communications Commission (“FCC”) issues licenses that authorize cellular carriers to provide service in specific cellular geographic service areas.  The FCC grants licenses for terms of up to ten years.  In 1993 the FCC adopted specific standards to apply to cellular renewals, concluding it will reward a license renewal to a cellular licensee that meets certain standards of past performance.  Historically, the FCC has granted license renewals routinely.  The current term of both of the Partnership’s FCC licenses expire in January 2008.  Both of the Partnership’s licenses are recorded on the books of Cellco.  Cellco believes it will be able to meet all requirements necessary to secure renewal of the Partnership’s cellular licenses.

Valuation of Assets - Long-lived assets, including property, plant and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.  The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. 

7

The impairment loss, if determined to be necessary, would be measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset.

The FCC licenses recorded on the books of Cellco are evaluated for impairment, by Cellco, under the guidance set forth in Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.”  The FCC licenses are treated as an indefinite life intangible asset under the provisions of SFAS No. 142 and are not amortized, but rather are tested for impairment annually or between annual dates, if events or circumstances warrant.  All of the licenses in Cellco’s nationwide footprint are tested in the aggregate for impairment under SFAS No. 142.  When testing the carrying value of the wireless licenses for impairment, Cellco determines the fair value of the aggregated wireless licenses by subtracting from enterprise discounted cash flows (net of debt) the fair value of all of the other net tangible and intangible assets of Cellco, including previously unrecognized intangible assets. This approach is generally referred to as the residual method.  In addition, the fair value of the aggregated wireless licenses is then subjected to a reasonableness analysis using public information of comparable wireless carriers. If the fair value of the aggregated wireless licenses as determined above is less than the aggregated carrying amount of the licenses, an impairment will be recognized by Cellco. Any impairment loss recognized by Cellco will be allocated to its consolidated subsidiaries based upon a reasonable methodology. Annual impairment tests were performed by Cellco in 2004, 2003 and 2002 with no impairment recognized.

On September 29, 2004, the SEC issued a Staff Announcement regarding the “Use of the Residual Method to Value Acquired Assets other than Goodwill.”  The Staff Announcement requires SEC registrants to adopt a direct value method of assigning value to intangible assets, including wireless licenses, acquired in a business combination under SFAS No. 141, “Business Combinations,” effective for all business combinations completed after September 29, 2004.  Further, all intangible assets, including wireless licenses, valued under the residual method prior to this adoption are required to be tested for impairment using a direct value method no later than the beginning of 2005.  Any impairment of intangible assets recognized upon application of a direct value method by entities previously applying the residual method should be reported as a cumulative effect of a change in accounting principle.  Under this Staff Announcement, the reclassification of recorded balances from wireless licenses to goodwill prior to the adoption of this Staff Announcement is prohibited.  Cellco has evaluated its wireless licenses for potential impairment using a direct value methodology effective January 1, 2005.  The valuation and analyses prepared in connection with the adoption of a direct value method resulted in no adjustment to the carrying value of it’s wireless licenses, and accordingly, had no effect on its results of operations and financial position.Future tests for impairment will be performed by Cellco at least annually and more often if events or circumstances warrant.

Concentrations - To the extent the Partnership’s customer receivables become delinquent, collection activities commence.  The General Partner accounts for 80.4% and 88.8% of the accounts receivable balance at December 31, 2004, and 2003 respectively.  The Partnership maintains an allowance for losses based on the expected collectibility of accounts receivable.

Approximately 98% of the Partnership’s 2004, 2003 and 2002 revenue is affiliate revenue.

The General Partner relies on local and long-distance telephone companies, some of whom are related parties, and other companies to provide certain communication services.  Although management believes alternative telecommunications facilities could be found in a timely manner, any disruption of these services could potentially have an adverse impact on the Partnership’s operating results.

Although the General Partner attempts to maintain multiple vendors for equipment, which are important components of its operations, they are currently acquired from only a few sources.  Certain of these products are in turn utilized by the Partnership and are important components of the Partnership’s operations.  If the suppliers are unable to meet the General Partner’s needs as it builds out its network

8

infrastructure and sells service, delays and increased costs in the expansion of the Partnership’s network infrastructure or losses of potential customers could result, which would adversely affect the financial statements.

Financial Instruments - The Partnership’s trade receivables and payables are short-term in nature, and accordingly, their carrying value approximates fair value.

Income Taxes - The Partnership is not a taxable entity for Federal and state income tax purposes.  Any taxable income or loss is apportioned to the partners based on their respective partnership interests and is reported by them individually.

Segments – The Partnership has one reportable business segment and operates domestically only.  The Partnership’s products and services are materially comprised of wireless telecommunications services.

Due to/from General Partner - Due to/from General Partner principally represents the Partnership’s cash position.  The General Partner manages all cash, investing and financing activities of the Partnership.  As such, the change in Due to/from General Partner is reflected as a financing activity in the Statements of Cash Flows. Additionally, administrative and operating costs incurred by the General Partner on behalf of the Partnership are charged to the Partnership through this account.  Interest expense/income is based on the average monthly outstanding balance in this account and is calculated by applying Cellco’s average cost of borrowing from Verizon Global Funding, a wholly owned subsidiary of Verizon Communications. The cost of borrowing was approximately 5.9%, 5.0%, and 5.0% for the years ended December 31, 2004, 2003 and 2002, respectively.  Included in Interest and Other Income, Net is net interest income related to the Due from General Partner balance of $980, $1,472 and $1,553 for the years ended December 31, 2004, 2003 and 2002, respectively.

Recently Issued Accounting Pronouncements - In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets – An Amendment of APB Opinion No. 29.”  This standard eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets.  A nonmonetary exchange shall be measured based on the recorded amount of the nonmonetary asset(s) relinquished, and not on the fair values of the exchanged assets, if a) the fair value is not determinable, b) the exchange transaction is to facilitate sales to customers, or c) the exchange transaction lacks commercial substance.  This statement specifies that a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange.  The Partnership will adopt the standard effective January 1, 2006.  The Partnership does not expect the impact of the adoption of SFAS No. 153 to have a material effect on the Partnership’s financial statements.

Reclassifications - Certain reclassifications have been made to the 2003 and 2002 financial statements to conform to the current year presentation.

Distributions – The Partnership is required to make distributions to its partners on a quarterly basis based upon the Partnership’s operating results, cash availability and financing needs as determined by the General Partner at the date of the distribution.

9

3.PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net, consists of the following:

		December 31,
	Useful Lives	2004			2003
Buildings	10-40 years	$	11,223		$	9,951
Wireless plant equipment	3-15 years	51,940			44,525
Furniture, fixtures and equipment	2-5 years	361			318
Leasehold Improvements	5 years	1,725			1,294
		65,249			56,088
Less accumulated depreciation		(30,724		)	(26,466		)
Property, plant and equipment, net		$	34,525		$	29,622

Property, plant, and equipment, net, includes the following:

Allocated capitalized network engineering costs of $245 and $415 were recorded during the years ended December 31, 2004 and 2003, respectively.

Construction-in-progress included in certain of the classifications shown above, principally wireless plant equipment, amounted to $1,767 and $852 at December 31, 2004 and 2003, respectively.

Depreciation expense for the years ended December 31, 2004, 2003 and 2002 was $5,521, $5,179 and $4,225, respectively.

4.TRANSACTIONS WITH AFFILIATES

Significant transactions with affiliates are summarized as follows:

	Years Ended December 31,
	2004		2003		2002
Revenue:
Operating revenues (b)	$	158,571	$	138,796	$	109,232
Cellsite allocated revenues (c)	1,506		2,963		3,037
Cost of Service:
Direct telecommunication charges (a)	1,697		274		302
Allocation of cost of service (a)	3,360		3,315		1,105
Allocation of switch usage cost (a)	4,705		7,256		5,077
Selling, General and Administrative:
Allocation of certain general and administrative expenses (a)	2,198		1,797		1,399

(a) Expenses were allocated based on the Partnership’s percentage of total customers, customer gross additions or minutes-of-use where applicable.  The Partnership believes the allocations are reasonable.

(b) Affiliate operating revenues primarily represent revenues generated from transactions with Cellco, the Partnership’s primary reseller.  The wholesale rates charged to Cellco do not necessarily reflect current market rates.  The Partnership continues to re-evaluate the rates and expects these rates to be reduced in the future consistent with market trends and the terms of the limited partnership agreement.

(c) Cellsite allocated revenues, based on the Partnership’s percentage of minutes of use, result from the Partnership sharing a cell site with the Catskills RSA Limited Partnership, an affiliate entity.

10

5.COMMITMENTS

The General Partner, on behalf of the Partnership, and the Partnership itself have entered into operating leases for facilities and equipment used in its operations.  Lease contracts include renewal options that include rent expense adjustments based on the Consumer Price Index as well as annual and end-of-lease term adjustments.  Rent expense is recorded on a straight-line basis.  The noncancellable lease term used to calculate the amount of the straight-line rent expense is generally determined to be the initial lease term, including any optional renewal terms that are reasonably assured.  Leasehold improvements related to these operating leases are amortized over the shorter of their estimated useful lives or the noncancellable lease term.  For the years ended December 31, 2004, 2003 and 2002, the Partnership recognized a total of $1,446, $1,234 and $1,100, respectively, as rent expense related to payments under these operating leases, which was included in cost of service and general and administrative expenses in the accompanying Statements of Operations.

Aggregate future minimum rental commitments under noncancelable operating leases, excluding renewal options that are not reasonably assured, for the years shown are as follows:

Years	Amount
2005	$	1,450
2006	1,310
2007	1,144
2008	1,043
2009	536
2010 and thereafter	638
Total minimum payments	$	6,121

From time to time the General Partner enters into purchase commitments, primarily for network equipment, on behalf of the Partnership.

6.VALUATION AND QUALIFYING ACCOUNTS

	Balance at Beginning of the Year		Additions Charged to Operations		Write-offs Net of Recoveries			Balance at End of the Year
Accounts Receivable Allowances:
2004	$	20	$	—	$	(20	)	$	—
2003	1		49		(30		)	20
2002	—		1		—			1

7.CONTINGENCIES

Cellco is subject to lawsuits and other claims including class actions, product liability, patent infringement, intellectual property, antitrust, partnership disputes, and claims involving relations with resellers and agents.  Cellco is also defending lawsuits against Cellco and other participants in the wireless industry alleging various adverse effects as a result of wireless phone usage.  Various consumer class action lawsuits allege that the Cellco breached contracts with consumers, violated certain state consumer protection laws and other statutes and defrauded customers through concealed or misleading

11

billing practices.  Certain of these lawsuits and other claims may impact the Partnership.  These litigation matters may involve indemnification obligations by third parties and/or affiliated parties covering all or part of any potential damage awards against Cellco and the Partnership and/or insurance coverage.  All of the above matters are subject to many uncertainties, and outcomes are not predictable with assurance.

The Partnership may be allocated a portion of the damages that may result upon adjudication of these matters if the claimants prevail in their actions.  Consequently, the ultimate liability with respect to these matters at December 31, 2004 cannot be ascertained.  The potential effect, if any, on the financial statements of the Partnership, in the period in which these matters are resolved, may be material.

In addition to the aforementioned matters, Cellco is subject to various other legal actions and claims in the normal course of business.  While Cellco’s legal counsel cannot give assurance as to the outcome of each of these matters, in management’s opinion, based on the advice of such legal counsel, the ultimate liability with respect to any of these actions, or all of them combined, will not materially affect the financial statements of the Partnership.

******

12

EX-99.2

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Exhibit 99.2

RSA 2-I PARTNERSHIP

Financial Statements

INDEPENDENT AUDITORS' REPORT

To the Partners of
Illinois Valley Cellular RSA 2-I Partnership

        We have audited the accompanying balance sheets of Illinois Valley Cellular RSA 2-I Partnership (an Illinois partnership) as of December 31, 2002 and 2001, and the related statements of income, partners' capital, and cash flows for each of three years in the period ended December 31, 2002. These financial statements are the responsibility of the Operating Partner's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as, evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Illinois Valley Cellular RSA 2-I Partnership as of December 31, 2002 and 2001, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

/s/ KIESLING ASSOCIATES LLP
Madison, Wisconsin
March 1, 2003

ILLINOIS VALLEY CELLULAR RSA 2-1 PARTNERSHIP

BALANCE SHEETS
December 31, 2002 and 2001

				2002			2001
ASSETS
CURRENT ASSETS
	Cash and cash equivalents			$	117,870		$	102,338
	Accounts receivable
		Due from customers
			Less allowance of $116,500 and $110,000, respectively		1,079,795			1,176,246
		Affiliates			233,674			115,664
		Other			58,018			65,137
	Prepaids				97,384			3,446
					1,586,741			1,462,831
PROPERTY AND EQUIPMENT
	Plant in service				13,342,101			11,149,052
	Less accumulated depreciation				(6,833,198	)		(6,022,436	)
					6,508,903			5,126,616
	Plant under construction				5,704			5,845
					6,514,607			5,132,461
OTHER NONCURRENT ASSETS
	Investments				159,144			235,647
TOTAL ASSETS				$	8,260,492		$	6,830,939

ILLINOIS VALLEY CELLULAR RSA 2-1 PARTNERSHIP

BALANCE SHEETS
December 31, 2002 and 2001

			2002		2001
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
	Current portion of long-term debt		$	—	$	659,340
	Capital lease obligation			21,287		—
	Notes Payable			1,000,000		—
	Accounts Payable:
		Trade		204,101		24,314
		Affiliates		608,248		316,154
		Other		290,254		244,508
	Accrued liabilities—affiliate			136,559		98,078
	Accrued commissions			71,288		76,912
	Advance billings			279,853		246,652
	Other			168,064		122,044
				2,779,654		1,788,002
LONG-TERM OBLIGATIONS
	Capital lease obligation			96,620
PARTNERS' CAPITAL				5,384,218		5,042,937
TOTAL LIABILITIES AND PARTNERS' CAPITAL			$	8,260,492	$	6,830,939

The accompanying notes are an integral part of these financial statements

ILLINOIS VALLEY CELLULAR RSA 2-I PARTNERSHIP

STATEMENTS OF INCOME
Years Ended December 31, 2002, 2001 and 2000

		2002			2001			2000
OPERATING REVENUES
	Retail service	$	6,513,308		$	6,123,233		$	6,095,261
	Roamer service		3,131,185			4,020,995			3,184,181
	Equipment sales		181,442			180,670			149,909
	Miscellaneous services		1,069,743			906,974			693,533
			10,895,678			11,231,872			10,122,884
OPERATING EXPENSES
	Cost of services		4,572,661			4,358,681			3,439,668
	Cost of equipment sales		1,017,085			937,143			890,065
	Selling, general and administrative		3,986,972			3,723,723			3,229,256
	Depreciation		956,539			748,968			772,698
			10,533,257			9,768,515			8,331,687
OPERATING INCOME			362,421			1,463,357			1,791,197
OTHER INCOME (EXPENSES)
	Interest expense		(43,862	)		(78,081	)		(154,861	)
	Interest during construction		9,534			—			—
	Other, net		13,188			28,039			33,284
			(21,140	)		(50,042	)		(121,577	)
NET INCOME		$	341,281		$	1,413,315		$	1,669,620

The accompanying notes are an integral part of these financial statements.

ILLINOIS VALLEY CELLULAR RSA 2-I PARTNERSHIP

STATEMENTS OF PARTNERS' CAPITAL
December 31, 2002, 2001, and 2000

	Total
Balance at December 31, 1999	$	2,859,792
Net income		1,669,620
Distribution		(549,994	)
Balance at December 31, 2000		3,979,418
Net income		1,413,315
Distribution		(349,796	)
Balance at December 31, 2001		5,042,937
Net income		341,281
Balance at December 31, 2002	$	5,384,218

The accompanying notes are an integral part of these financial statements.

ILLINOIS VALLEY CELLULAR RSA 2-I PARTNERSHIP

STATEMENTS OF CASH FLOWS
Years Ended December 31, 2002, 2001, and 2000

					2002			2001			2000
CASH FLOWS FROM OPERATING ACTIVITIES
	Net income				$	341,281		$	1,413,315		$	1,669,620
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation				956,539			748,968			772,698
		Provision for losses on accounts receivable				(6,500	)		(24,000	)		(8,000	)
	Changes in assets and liabilities:
		(Increase) Decrease in:
			Accounts receivable			(7,940	)		(225,823	)		(9,609	)
			Prepaids			(93,938	)		—			—
		Increase (Decrease) in:
			Accounts payable			517,627			102,857			(135,409	)
			Other			112,078			95,298			(47,291	)
				Net cash provided by operating activities		1,819,147			2,110,615			2,242,009
CASH FLOWS FROM INVESTING ACTIVITIES
	Capital expenditures					(2,214,901	)		(995,505	)		(889,583	)
	Proceeds from the sale of investments, net					76,503			87,431			88,012
				Net cash used in investing activities		(2,138,398	)		(908,074	)		(801,571	)
CASH FLOWS FROM FINANCING ACTIVITIES
	Proceeds from short-term borrowings					1,000,000			—			—
	Repayment of long-term borrowings					(659,340	)		(801,751	)		(933,040	)
	Payments of capital lease obligations					(5,877	)		—			—
	Partnership distribution					—			(349,796	)		(549,994	)
				Net cash provided by/(used in) financing activities		334,783			(1,151,547	)		(1,483,034	)
Net Increase (Decrease) in Cash and Cash Equivalents						15,532			50,994			(42,596	)
Cash and Cash Equivalents at Beginning of Year						102,338			51,344			93,940
Cash and Cash Equivalents at End of Year					$	117,870		$	102,338		$	51,344

The accompanying notes are an integral part of these financial statements.

ILLINOIS VALLEY CELLULAR RSA 2-I PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION

        The Illinois Valley Cellular RSA 2-I Partnership (Partnership) is organized pursuant to the provisions of the Illinois Uniform Partnership Act. The Partnership was formed on November 8, 1989, to fund, establish, and provide cellular service within a portion of the Illinois RSA 2 Cellular Geographic Service Area. At December 31, 2002, 2001, and 2000, the general partners and their respective ownership percentages in the Partnership were as follows:

Partner	Percentage
Verizon Wireless	40.00	%
CENCOMM, Inc.	6-2/3
C-R Cellular, Inc.	6-2/3
DePue Communications, Inc.	6-2/3
Gemcell, Inc.	6-2/3
Gridley Cellular, Inc.	6-2/3
Leonore Cellular, Inc.	6-2/3
Marseilles Cellular, Inc.	6-2/3
McNabb Cellular, Inc.	6-2/3
Tonica Cellular, Inc.	6-2/3
	100.00	%

        Marseilles Cellular, Inc. (MC) was elected by the Partnership to serve as the operating and network partner of the Partnership.

        The partners make capital contributions, share in the operating results, and receive distributions from the Partnership in accordance with their respective ownership percentages.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

        The accounting policies of the Partnership conform to accounting principles generally accepted in the United States of America. Management uses estimates and assumptions in preparing its financial statements. Those estimates and assumptions affect the reported amounts of assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities. Actual results may differ from those estimates.

Property and Equipment

        The Partnership's property and equipment is stated at cost, including labor and overheads associated with construction and capitalized interest.

        Depreciation is computed by applying the straight-line method. The estimated service lives for depreciable plant and equipment are: 10 to 20 years for cell site towers and shelter; 7 to 10 years for radio frequency equipment, electronic mobile exchange and base site controller equipment; 7 to 10 years for furniture and fixtures; and 3 to 5 years for computer equipment.

        When depreciable properties are sold, or otherwise disposed of, any resulting gains or losses are included in the determination of income.

Long-Lived Assets

        The Partnership recognizes impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount.

Revenue Recognition

        The Partnership earns revenue by providing access to the cellular network (access revenue) and for usage of the cellular network (airtime and toll revenue). Access revenue is billed one month in advance and is recognized when earned. Airtime (including roaming) and toll revenues are recognized when the services are rendered. Other revenues are recognized when services are performed and include, primarily, connection revenues. Equipment sales are recognized upon delivery of the equipment to the customer.

        The Partnership generates revenue from charges to its customers when they use their cellular phones in other wireless providers' markets. Until 2002, the Partnership included this revenue on a net basis in cost of services in its statement of operations. Expense associated with this revenue, charged by third-party wireless providers, is also included in cost of services. The Partnership used this method because it has passed through to its customers most of the costs related to these revenues. However, the wireless industry and the Partnership have increasingly been using pricing plans that include flat rate pricing and larger home service areas. Under these types of plans, amounts charged to the Partnership by other wireless providers may not necessarily be passed through to its customers.

        In 2002, the Partnership adopted a policy to include these revenues as retail revenue rather than cost of services on a net basis. Roamer revenue includes only the revenue from other wireless providers' customers who use the Partnership's network. Retail revenue and cost of services of $881,197 and $985,702 for 2001 and 2000, respectively, were reclassified to conform to this presentation. This change in presentation has no impact on operating income, net income or partners' equity.

Expense Recognition

        Pursuant to the Partnership Agreement, expenses included in the Statements of Income represent expenses incurred by the Partnership, including an allocation of administrative and operations costs from the operating partner.

Income Taxes

        The Internal Revenue Code and applicable state statutes provide that income and expenses of a partnership are not separately taxable to the Partnership, but rather accrue directly to the partners. Accordingly, no provision for federal or state income taxes has been made in the financial statements.

Advertising Costs

        Advertising costs are expensed as incurred. Advertising expenses were $346,620, $294,841, and $337,750 in 2002, 2001, and 2000, respectively.

Cash Equivalents

        All highly liquid investments with a maturity of three months or less at the time of purchase are considered cash equivalents. The carrying value of cash and cash equivalents approximates its fair value due to the short maturity of the instruments.

Reclassifications

        Certain reclassifications have been made to the 2001 and 2000 financial statements to conform with the 2002 presentation.

NOTE 3. PROPERTY AND EQUIPMENT

        The components of property and equipment were as follows:

		2002			2001
Land and land improvements		$	545,333		$	541,618
Buildings			1,324,949			1,277,987
Electronic mobile exchange and base site controller equipment			3,955,971			3,462,373
Cell site towers and equipment			3,784,222			3,422,232
Radio frequency equipment			3,054,024			1,966,997
Other			677,602			477,845
	Total property and equipment		13,342,101			11,149,052
Less accumulated depreciation			(6,833,198	)		(6,022,436	)
	Net property and equipment		6,508,903			5,126,616
Plant under construction			5,704			5,845
	Total net property and equipment	$	6,514,607		$	5,132,461

        Property and equipment and accumulated depreciation include $123,784 and $2,947, respectively, at December 31, 2002, for capital leases. Property and equipment acquired with capital leases in 2002 was $123,784.

NOTE 4. INVESTMENTS

        Investments include $65,934 and $146,109 at December 31, 2002 and 2001, respectively, of Rural Telephone Finance Cooperative (RTFC) subordinated capital certificates (SCC). Such SCC's were purchased from RTFC as a condition of obtaining long-term financing for the Partnership and are carried at cost. The SCC's are non-interest bearing and are returned as the related RTFC loan is repaid. The stock purchases were fully financed through the issuance of long-term debt obligations to RTFC. It is not practical to estimate the fair value for these investments due to a lack of quoted market prices.

NOTE 5. NOTES PAYABLE

        In 2002, the Partnership entered into a $1,000,000 revolving line of credit loan agreement with RTFC. While the agreement is scheduled to mature on the one year anniversary of the advance, the Partnership may borrow, repay, and reborrow from time to time until the agreement expires on January 3, 2005. Interest is due quarterly and is based on the prevailing bank prime rate plus one and one-half percent or such lessor amount as determined by RTFC. The rate at December 31, 2002, was 5.8%. The agreement is subject to the provisions of the mortgage and security agreement described below. In addition, the aggregate amount of outstanding principal balance of all Partnership unsecured indebtedness is limited to $1,000,000 at any one time.

        The maximum amount of short-term borrowings at any month-end during 2002 was $1,000,000.

NOTE 6. LONG-TERM DEBT

        Long-term debt consists of:

		2001
RTFC notes—variable rate		$	513,032
RTFC notes—variable rate			146,308
	Total long-term debt		659,340
Less current portion			(659,340	)
		$	—

        The mortgage notes outstanding at December 31, 2001, are to be repaid in equal quarterly installments covering principal and interest beginning two to five years after date of issue and expiring by 2002. The interest rate on the debt is a variable rate established periodically by the RTFC. The rate at December 31, 2001, was 5.3%.

        Substantially all assets of the Partnership are pledged as security under the mortgage and security agreement with the RTFC.

        The mortgage and security and loan agreements underlying the RTFC notes contain certain restrictions on Partnership distributions, return of partner capital contributions, and investment in, or loans to others. In 2000, the Partnership received a waiver from the lender to make partnership distributions. Also included in the loan agreement is a provision which requires the partners to infuse, on an ongoing basis, the greater of sufficient amounts of equity to accommodate any cash shortfalls or certain specified amounts. Further, the Partnership is required, under the loan agreement, to achieve a debt service coverage ratio of not less than 1.25.

        Of the funds available under the RTFC approved loans, including amendments, all amounts were advanced as of December 31, 2002.

        Cash paid for interest net of amounts capitalized for 2002, 2001, and 2000, totaled $25,021, $92,928, and $158,095, respectively.

        The fair value of the partnership debt is estimated based on the discounted value of future cash flows expected to be paid using current rates of borrowing for similar types of debt. The fair value of debt approximates carrying value at December 31, 2002 and 2001.

NOTE 7. RELATED PARTY TRANSACTIONS

        MC, as operating and network partner, performed certain technical, professional, and administrative services on behalf of the Partnership. In accordance with the Partnership Agreement, MC is reimbursed by the Partnership for the Partnership's share of these costs. MC allocates these costs to the various cellular systems to which they provide service based on each entity's customer access lines. Reimbursed expenses in 2002, 2001, and 2000 were $2,224,397, $1,944,325, and $1,725,222, respectively. These reimbursed expenses are classified and presented under the Operating Expenses category to which each relates.

        In addition, $276,062, $252,406, and $223,877 were paid to an affiliate of MC for contract labor, interest, and other services in 2002, 2001, and 2000, respectively.

        Certain cellular equipment sold to subscribers by the Partnership is provided to the Partnership by a related entity at cost. Cost of goods sold is recorded by the Partnership at the time of sale.

        The Partnership has an arrangement with Illinois Valley Cellular RSA 2, Inc. (Switching Company) to provide switching services to the Partnership. The stockholders of the Switching Company own 53% of the Partnership. In 2002, switching and toll roaming services of $546,600 and $1,716,618, respectively, were provided to the Partnership. These services in 2001 were $455,250 and $1,592,348, respectively, and in 2000 were $423,525 and $1,004,834, respectively. The Switching Company received $511,669, $334,881, and $293,108 of access and billing and collecting services from the Partnership in 2002, 2001, and 2000, respectively.

NOTE 8. CONCENTRATIONS OF CREDIT RISK

        Financial instruments that potentially subject the Partnership to concentrations of credit risk consist principally of cash equivalents and accounts receivable. The Partnership grants credit to cellular customers located primarily within its portion of the Illinois RSA 2 cellular geographic service area, to other cellular carriers, and to other telecommunications carriers.

        The Partnership maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Partnership has not experienced any losses in such accounts. The Partnership believes it is not exposed to any significant credit risk on cash and cash equivalents.

        Retail service revenues are derived from customers located primarily within the Partnership's portion of the Illinois RSA 2 cellular geographic service area. The Partnership grants credit to these customers, substantially all of whom are local residents of this geographic area.

        Roamer cellular revenues are derived under arrangements with other wireless carriers (roaming partners) whose customers use the Partnership's network to place or complete calls. Roaming revenues from Verizon Wireless accounted for 21%, 31%, and 22% of total operating revenues in 2002, 2001, and 2000, respectively.

NOTE 9. LEASE COMMITMENTS

        Future minimum rental payments under leases for facilities have initial non-cancelable lease terms at December 31, 2002 as follows:

	Capitalized Leases		Operating Leases
2003	$	32,612	$	154,200
2004		30,103		145,200
2005		30,104		130,400
2006		30,104		113,180
2007		20,069		65,750
Thereafter		—		—
Total minimum lease payments	$	142,992	$	608,730
Less amount representing interest		25,085
Present value of minimum lease payments including current maturities of $21,287	$	117,907

        The cell site leases are renewable for four additional five-year periods under similar terms at the end of the initial term. Lease terms provide for certain adjustments of the payments in the renewal periods.

        The Partnership has an office building lease with an affiliate of MC for an initial term of five years. The Partnership's portion of the annual base rental, included in the future minimum rental payments above, is $68,400. A contingent rental provision allows for increases in base rent for real estate taxes and operating costs in excess of base operating costs. The agreement includes an option to extend the lease for an additional five years.

        Rental expense for all cancelable and non-cancelable operating leases totaled $199,503, $139,150, and $114,856 in 2002, 2001, and 2000, respectively.

NOTE 10. ALLOWANCE FOR UNCOLLECTIBLES

        The Company uses the reserve method to recognize uncollectible customer accounts. The following activity has been recognized under this method.

	2002		2001		2000
Balance, December 31	$	110,000	$	134,000	$	142,000
Provision for uncollectibles		67,489		33,902		107,037
Accounts written off, net of recoveries		60,989		57,902		115,037
Balance, December 31	$	116,500	$	110,000	$	134,000

NOTE 11. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

        The following table presents summarized quarterly results.

	Quarter
	1st		2nd		3rd		4th
2002
Operating revenues	$	2,665,525	$	2,732,486	$	2,784,279	$	2,713,388
Operating income	$	300,775	$	181,779	$	69,549	$	(189,682	)
Net income	$	310,158	$	175,016	$	64,205	$	(208,098	)
2001
Operating revenues	$	2,457,057	$	2,897,386	$	2,994,715	$	2,882,714
Operating income	$	238,467	$	378,592	$	402,836	$	443,462
Net income	$	222,770	$	357,551	$	387,483	$	445,511

        Quarterly operating results are not necessarily representative of operations for a full year for various reasons, including seasonal variations in customer calling patterns and timing of promotional activities.

NOTE 12. RECENT ACCOUNTING DEVELOPMENTS

        In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires entities to record the fair value of the liability for legal obligations associated with an asset retirement in the period in which the obligation is incurred. When the liability is initially recorded, the entity capitalizes the cost of the asset retirement obligation by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset.

        In April 2002, the FASB issued No. 145, "Rescission of FASB Statements No.4, 44, and 64, Amendment of FASB Statement No.13, and Technical Corrections." SFAS No. 145 rescinds FASB Statement No.4, "Reporting Gains and Losses from Extinguishment of Debt," and an amendment of that Statement, FASB Statement No.64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements." SFAS No. 145 also rescinds FASB Statement No. 44, "Accounting for Intangible Assets of Motor Carriers," and amends FASB Statement No. 13, "Accounting for Leases."

        In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan.

        In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." This interpretation elaborates on the disclosures required in financial statements concerning obligations under certain guarantees. It also clarifies the requirements related to the recognition of liabilities by a guarantor at the inception of certain guarantees. The disclosure requirements of this interpretation were effective on December 31, 2002. No disclosures were required at December 31, 2002.

        The Partnership has not yet determined the impact the adoption of these Standards will have on its financial position, results of operations, and cash flows.

RSA 2-I PARTNERSHIP
Unaudited Financial Statements
For the six months ended June 30, 2003

RSA 2-I
Balance Sheet (Unaudited)
June 30, 2003

ASSETS
Current Assets
	Cash & Cash Equivalents			$	80,038
	Accounts Receivable
		Due from Customers
			Less Allowance for Uncollectible of $164,402		1,653,482
		Affiliates			431,163
	Prepayments				107,379
		Total Current Assets			2,272,062
Plant & Equipment
	Plant In Service				13,605,649
	Less Accumulated Depreciation				(7,432,892	)
					6,172,757
	Plant Under Construction				57,033
					6,229,790
Other Noncurrent Assets
	Investments				94,246
		TOTAL ASSETS		$	8,596,098
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
	Note Payable			$	1,000,000
	Accounts Payable
		Trade			227,579
		Affiliates			567,877
	Accrued Liabilities				415,807
	Advanced Billings				279,853
	Accrued Taxes				112,762
	Capital Lease Obligation				21,287
	Other				161,572
		Total Current Liabilities			2,786,737
Long Term Liabilities
	Capital Lease Obligation				86,123
	Asset Retirement Obligation				129,136
		Total Long Term Liabilities			215,259
Partner's Capital					5,594,102
		TOTAL LIABILITIES & PARTNERS' CAPITAL		$	8,596,098

RSA 2-I
Statement of Income (Unaudited)
for the Six Months Ending June 30, 2003

Operating Revenues
	Retail service	$	3,636,082
	Roamer service		2,344,412
	Equipment sales		122,749
	Miscellaneous services		505,930
			6,609,173
Operating Expenses
	Cost of services		3,053,145
	Cost of equipment sales		554,923
	Selling, general and administrative		2,120,550
	Depreciation		582,000
			6,310,618
Operating Income			298,555
Other Expenses
	Interest expense		40,010
Net Income before cumulative effect of change in accounting principle			258,545
Cumulative effect of change in accounting principle			(48,663	)
Net Income		$	209,882

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Exhibit 99.2

RSA 2-I PARTNERSHIP Financial Statements
INDEPENDENT AUDITORS' REPORT
ILLINOIS VALLEY CELLULAR RSA 2-1 PARTNERSHIP BALANCE SHEETS December 31, 2002 and 2001
ILLINOIS VALLEY CELLULAR RSA 2-1 PARTNERSHIP BALANCE SHEETS December 31, 2002 and 2001
ILLINOIS VALLEY CELLULAR RSA 2-I PARTNERSHIP STATEMENTS OF INCOME Years Ended December 31, 2002, 2001 and 2000
ILLINOIS VALLEY CELLULAR RSA 2-I PARTNERSHIP STATEMENTS OF PARTNERS' CAPITAL December 31, 2002, 2001, and 2000
ILLINOIS VALLEY CELLULAR RSA 2-I PARTNERSHIP STATEMENTS OF CASH FLOWS Years Ended December 31, 2002, 2001, and 2000
ILLINOIS VALLEY CELLULAR RSA 2-I PARTNERSHIP NOTES TO FINANCIAL STATEMENTS

EX-99.3

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Exhibit 99.3

RSA 2-III PARTNERSHIP

Financial Statements

INDEPENDENT AUDITORS' REPORT

To the Partners of
Illinois Valley Cellular RSA 2-III Partnership

        We have audited the accompanying balance sheets of Illinois Valley Cellular RSA 2-III Partnership (an Illinois partnership) as of December 31, 2002 and 2001, and the related statements of income, partners' capital, and cash flows for each of three years in the period ended December 31, 2002. These financial statements are the responsibility of the Operating Partner's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as, evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Illinois Valley Cellular RSA 2-III Partnership as of December 31, 2002 and 2001, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

/s/ KIESLING ASSOCIATES LLP
Madison, Wisconsin
March 1, 2003

ILLINOIS VALLEY CELLULAR RSA 2-III PARTNERSHIP

BALANCE SHEETS
December 31, 2002 and 2001

				2002			2001
ASSETS
CURRENT ASSETS
	Cash and cash equivalents			$	81,145		$	48,377
	Accounts receivable:
		Due from customers
			Less allowance of $85,000 and $80,000, respectively		565,754			697,422
		Affiliates			69,741			72,718
		Other			20,554			23,620
	Prepaids				104,236			3,855
					841,430			845,992
PROPERTY AND EQUIPMENT
	Plant in service				7,124,486			5,816,790
	Less accumulated depreciation				(3,356,524	)		(2,834,086	)
					3,767,962			2,982,704
OTHER NONCURRENT ASSETS
	Investments				73,140			100,147
	Other				1,215			1,215
					74,355			101,362
TOTAL ASSETS				$	4,683,747		$	3,930,058

ILLINOIS VALLEY CELLULAR RSA 2-III PARTNERSHIP

BALANCE SHEETS
December 31, 2002 and 2001

			2002		2001
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
	Current portion of long-term debt		$	—	$	236,690
	Capital lease obligation			11,495		—
	Notes payable			1,500,000		400,000
	Accounts payable:
		Trade		107,184		38,031
		Affiliates		401,580		429,224
		Other		130,070		151,128
	Accrued commissions			39,849		51,572
	Advance billings			2,383		3,683
	Other			154,660		123,789
				2,347,221		1,434,117
LONG-TERM OBLIGATIONS
	Capital lease obligation			52,175		—
PARTNERS' CAPITAL				2,284,351		2,495,941
TOTAL LIABILITIES AND PARTNERS' CAPITAL			$	4,683,747	$	3,930,058

The accompanying notes are an integral part of these financial statements.

ILLINOIS VALLEY CELLULAR RSA 2-III PARTNERSHIP

STATEMENTS OF INCOME
Years Ended December 31, 2002, 2001, and 2000

		2002			2001			2000
OPERATING REVENUES
	Retail service	$	3,469,059		$	3,227,973		$	3,047,399
	Roamer service		2,521,150			3,344,344			2,573,368
	Equipment sales		101,694			111,163			85,863
	Miscellaneous services		788,808			637,263			442,516
			6,880,711			7,320,743			6,149,146
OPERATING EXPENSES
	Cost of sales		3,628,394			3,563,141			2,817,688
	Cost of equipment sales		578,473			570,489			555,587
	Selling, general, and administrative		2,280,964			2,080,607			1,758,277
	Depreciation		580,137			493,940			489,717
			7,067,968			6,708,177			5,621,269
OPERATING INCOME			(187,257	)		612,566			527,877
OTHER INCOME (EXPENSES)
	Interest expense		(52,682	)		(56,560	)		(103,842	)
	Interest during construction		20,308			—			—
	Other, net		8,041			14,352			13,129
			(24,333	)		(42,208	)		(90,713	)
NET INCOME		$	(211,590	)	$	570,358		$	437,164

The accompanying notes are an integral part of these financial statements.

ILLINOIS VALLEY CELLULAR RSA 2-III PARTNERSHIP

STATEMENTS OF PARTNERS' CAPITAL
December 31, 2002, 2001, and 2000

	Total
Balance at December 31, 1999	$	1,988,174
Net Income		437,164
Distribution		(99,994	)
Balance at December 31, 2000		2,325,344
Net Income		570,358
Distribution		(399,761	)
Balance at December 31, 2001		2,495,941
Net Income (Loss)		(211,590	)
Balance at December 31, 2002	$	2,284,351

The accompanying notes are an integral part of these financial statements.

ILLINOIS VALLEY CELLULAR RSA 2-III PARTNERSHIP

STATEMENTS OF CASH FLOWS
Years Ended December 31, 2002, 2001, and 2000

					2002			2001			2000
CASH FLOWS FROM OPERATING ACTIVITIES
	Net income				$	(211,590	)	$	570,358		$	437,164
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation				580,137			493,940			489,717
		Provision for losses on accounts receivable				5,000			10,000			(25,000	)
	Changes in assets and liabilities:
		(Increase) Decrease in:
			Accounts receivable			132,711			(239,549	)		88,558
			Prepaids			(100,381	)		—			—
		Increase (Decrease) in:
			Accounts payable			20,451			311,892			(390,032	)
			Other			17,852			(11,548	)		26,737
				Net cash provided by operating activities		444,180			1,135,093			627,144
CASH FLOWS FROM INVESTING ACTIVITIES
	Capital expenditures					(1,298,556	)		(484,229	)		(129,498	)
	Proceeds from the sale of investments, net					27,007			46,302			128,861
				Net cash used in investing activities		(1,271,549	)		(437,927	)		(637	)
CASH FLOWS FROM FINANCING ACTIVITIES
	Proceeds from short-term borrowings					1,100,000			—			—
	Repayment of long-term borrowings					(236,690	)		(293,659	)		(493,234	)
	Payments of capital lease obligations					(3,173	)		—			—
	Partnership distribution					—			(399,761	)		(99,994	)
				Net cash provided by/(used in) financial activities		860,137			(693,420	)		(593,228	)
Net Increase in Cash and Cash Equivalents						32,768			3,746			33,279
Cash and Cash Equivalents at Beginning of Year						48,377			44,631			11,352
Cash and Cash Equivalents at End of Year					$	81,145		$	48,377		$	44,631

The accompanying notes are an integral part of these financial statements.

ILLINOIS VALLEY CELLULAR RSA 2-III PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION

        The Illinois Valley Cellular RSA 2-III Partnership (Partnership) is organized pursuant to the provisions of the Illinois Uniform Partnership Act. The Partnership was formed on November 6, 1989, to fund, establish, and provide cellular service within a portion of the Illinois RSA 2 Cellular Geographic Service Area. At December 31, 2002, 2001, and 2000, the general partners and their respective ownership percentages in the Partnership were as follows:

Partner	Percentage
Illinois SMSA Limited Partnership	20.00	%
Chicago SMSA Limited Partnership	20.00	%
CENCOMM, Inc.	6-2/3
C-R Cellular, Inc.	6-2/3
DePue Communications, Inc.	6-2/3
Gemcell, Inc.	6-2/3
Gridley Cellular, Inc.	6-2/3
Leonore Cellular, Inc.	6-2/3
Marscilles Cellular, Inc.	6-2/3
McNabb Cellular, Inc.	6-2/3
Tonica Cellular, Inc.	6-2/3
	100.00	%

        Marscilles Cellular, Inc. (MC) was elected by the Partnership to serve as the operating and network partner of the Partnership.

        The partners make capital contributions, share in the operating results, and receive distributions from the Partnership in accordance with their respective ownership percentages.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

        The accounting policies of the Partnership conform to accounting principles generally accepted in the United States of America. Management uses estimates and assumptions in preparing its financial statements. Those estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results may differ from those estimates.

Property and Equipment

        The Partnership's property and equipment is stated at cost, including labor and overheads associated with construction and capitalized interest.

        Depreciation is computed by applying the straight-line method. The estimated service lives for depreciable plant and equipment are: 15 years for buildings; 7 to 15 years for cell site towers; 7 to 10 years for electronic mobile exchange and base site controller equipment; 7 years for furniture and fixtures; and 5 years for computer equipment.

        When depreciable properties are sold, or otherwise disposed of, any resulting gains or losses are included in the determination of income.

Long-Lived Assets

        The Partnership recognizes impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount.

Revenue Recognition

        The Partnership earns revenue by providing access to the cellular network (access revenue) and for usage of the cellular network (airtime and toll revenue). Access revenue is billed one month in advance and is recognized when earned. Airtime (including roaming) and toll revenues are recognized when the services are rendered. Other revenues are recognized when services are performed and include, primarily, connection revenues. Equipment sales are recognized upon delivery of the equipment to the customer.

        The Partnership generates revenue from charges to its customers when they use their cellular phones in other wireless providers' markets. Until 2002, the Partnership included this revenue on a net basis in cost of services in its statement of operations. Expense associated with this revenue, charged by third-party wireless providers, is also included in cost of services. The Partnership used this method because it has passed through to its customers most of the costs related to these revenues. However, the wireless industry and the Partnership have increasingly been using pricing plans that include flat rate pricing and larger home service areas. Under these types of plans, amounts charged to the Partnership by other wireless providers may not necessarily be passed through to its customers.

        In 2002, the Partnership adopted a policy to include the revenue as retail revenue rather than cost of services on a net basis. Roamer revenue includes only the revenue from other wireless providers' customers who use the Partnership's network. Retail revenue and cost of services of $523,315 and $589,604 for 2001 and 2000, respectively, were reclassified to conform to this presentation. This change in presentation has no impact on operating income, net income, or partners' equity.

Expense Recognition

        Pursuant to the Partnership Agreement, expenses included in the Statements of Income represent expenses incurred by the Partnership, including an allocation of administrative and operations costs from the operating partner.

Income Taxes

        The Internal Revenue Code and applicable state statutes provide that income and expenses of a partnership are not separately taxable to the Partnership, but rather accrue directly to the partners. Accordingly, no provision for federal or state income taxes has been made in the financial statements

Advertising Costs

        Advertising costs are expensed as incurred. Advertising expenses were $203,997, $162,430, and $170,659 in 2002, 2001 and 2000, respectively.

Cash Equivalents

        All highly liquid investments with a maturity of three months or less at the time of purchase are considered cash equivalents. The carrying value of cash and cash equivalents approximates its fair value due to the short maturity of the investments.

Reclassifications

        Certain reclassifications have been made to the 2001 and 2000 financial statements to conform with the 2002 presentation.

NOTE 3. PROPERTY AND EQUIPMENT

        The components of property and equipment were as follows:

		2002			2001
Land and Land improvements		$	233,179		$	232,978
Buildings			642,311			594,346
Electronic mobile exchange and base site controller equipment			2,479,042			2,097,221
Cell site towers and equipment			1,855,225			1,436,055
Other			1,914,729			1,456,190
	Total property and equipment		7,124,486			5,816,790
Less accumulated depreciation			(3,356,524	)		(2,834,086	)
	Total net property and equipment	$	3,767,962		$	2,982,704

        Property and equipment and accumulated depreciation include $66,843 and $796, respectively, at December 31, 2002, for capital leases. Property and equipment acquired with capital leases in 2002 was $66,843.

NOTE 4. INVESTMENTS

        Investments include $23,669 and $53,035 at December 31, 2002 and 2001, respectively, of Rural Telephone Finance Cooperative (RTFC) subordinated capital certificates (SCC). Such SCCs were purchased from RTFC as a condition of obtaining long-term financing for the Partnership and are carried at cost. The SCCs are non-interest bearing and are returned as the related RTFC loan is repaid. The stock purchases were fully financed through the issuance of long-term debt obligations to RTFC. It is not practical to estimate the fair value for these investments due to a lack of quoted market prices.

NOTE 5. NOTES PAYABLE

        Notes payable consist of:

	2002		2001
RTFC lines of credit	$	500,000	$	400,000
RTFC revolving line of credit		1,000,000		—
	$	1,500,000	$	400,000

        Interest on the lines of credit is at a variable rate (5.8% and 5.3% at December 31, 2002 and 2001, respectively).

        In 2002, the Partnership entered into a $1,000,000 revolving line of credit loan agreement with RTFC. While the agreement is scheduled to mature on the one year anniversary of the advance, the Partnership may borrow, repay, and reborrow from time to time until the agreement expires on January 3, 2005. Interest is due quarterly and is based on the prevailing bank prime rate plus one and

one-half percent or such lessor amount as determined by RTFC. The rate at December 31, 2002 was 5.8%. The agreement is subject to the provisions of the mortgage and security agreement described below. In addition, the aggregate amount of outstanding principal balance of all Partnership unsecured indebtedness is limited to $1,000,000 at any one time.

        The maximum amount of short-term borrowings at any month-end during 2002 and 2001 were $1,500,000 and $500,000, respectively.

NOTE 6. LONG-TERM DEBT

        Long-term debt consists of:

		2001
RTFC notes—variable rate		$	160,160
RTFC notes—variable rate		$	76,530
	Total long-term debt		236,690
Less current portion			(236,690	)
		$	—

        These mortgage notes outstanding at December 31, 2001, are to be repaid in equal quarterly installments covering principal and interest beginning two to three years after date of issue and expiring by 2002. The interest rate on the debt is a variable rate established periodically by the RTFC. The rate at December 3, 2001, was 5.3%.

        Substantially all assets of the Partnership are pledged as security under the mortgage and security agreement with the RTFC.

        The mortgage and security and loan agreements underlying the RTFC notes contain certain restrictions on Partnership distributions, return of partner capital contributions, and investment in, or loans to others. In 2000, the Partnership received a waiver from the lender to make partnership distributions. Also included in the loan agreement is a provision, which requires the partners to infuse, on an ongoing basis, the greater of sufficient amounts of equity to accommodate any cash shortfalls or certain specified amounts. Further, the Partnership is required, under the loan agreement, to achieve a debt service coverage ratio of not less than 1.25.

        Of the funds available under the RTFC approved loans, including amendments, all amounts were advanced as of December 31, 2002.

        Cash paid for interest net amounts capitalized for 2002, 2001, and 2000 totaled $24,922, $62,028, and $97,253, respectively.

        The fair value of the partnership debt is estimated based on the discounted value of future cash flows expected to be paid using current rates of borrowing for similar types of debt. The fair value of debt approximates carrying value at December 31, 2002 and 2001.

NOTE 7. RELATED PARTY TRANSACTIONS

        MC, as operating and network partner, performed certain technical, professional, and administrative services on behalf of the Partnership. In accordance with the Partnership Agreement, MC is reimbursed by the Partnership's share of these costs. MC allocates these costs to the various cellular systems to which they provide service based on each entity's customer access lines. Reimbursed

expenses in 2002, 2001, and 2000 were $1,194,151; $1,040,212; and $885,246; respectively. These reimbursed expenses are classified and presented under the Operating Expenses category to which each relates.

        In addition, $107,974, $105,260, and $96,678 were paid to an affiliate of MC for contract labor, interest, and other services in 2002, 2001, and 2000, respectively.

        Certain cellular equipment sold to subscribers by the Partnership is provided to the Partnership by a related entity at cost. Cost of goods sold is recorded by the Partnership at the time of sale.

        The Partnership has an arrangement with Illinois Valley Cellular RSA 2, Inc. (Switching Company) to provide switching services to the Partnership. The stockholders of the Switching Company own 53% of the Partnership. In 2002, switching and toll roaming services of $794,832 and $1,431,105, respectively, were provided to the Partnership. These services in 2001 were $767,976 and $1,311,962, respectively and in 2000 were $719,858 and $816,461, respectively. The Switching Company received $414,548, $353,983, and $231,694 of access and billing and collecting services from the Partnership in 2002, 2001, and 2000, respectively.

NOTE 8. CONCENTRATIONS OF CREDIT RISK

        Financial instruments that potentially subject the Partnership to concentrations of credit risk consist principally cash equivalents and accounts receivable. The Partnership grants credit to cellular customers located primarily within its portion of the Illinois RSA 2 cellular geographic service area, to other cellular carriers, and to other telecommunications carriers.

        The Partnership maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Partnership has not experienced any losses in such accounts. The Partnership believes it is not exposed to any significant credit risk on cash and cash equivalents.

        Retail cellular revenues are derived from customers located primarily within the Partnership's portion of the Illinois RSA 2 cellular geographic service area. The Partnership grants credit to these customers, substantially all of whom are local residents of this geographic area.

        Roamer cellular revenues are derived under arrangements with other wireless carriers (roaming partners) whose customers use the Partnership's network to place of complete calls. Roaming revenues from Verizon Wireless accounted for 34%, 43%, and 30% of total operating revenues in 2002, 2001, and 2000, respectively.

NOTE 9. LEASE COMMITMENTS

        Future minimum rental payments under leases for facilities have initial non-cancelable lease terms at December 31, 2002 as follows:

	Capitalized Leases		Operating Leases
2003	$	17,611	$	93,586
2004		15,956		71,086
2005		16,256		62,036
2006		16,256		55,436
2007		10,837		34,952
Thereafter		—		—
Total minimum lease payments	$	76,916	$	317,096
Less amount representing interest		13,246		—
Present value of minimum lease payments including current maturities of $11,495	$	63,670	$	317,096

        Cell site leases are renewable for four additional five-year periods under similar terms at the end of the initial term. Lease terms provide for certain adjustment of the payments in the renewal periods.

        The Partnership has an office building lease with an affiliate of MC for an initial term of five years. The Partnership's portion of the annual base rental, included in the future minimum rental payments above, is $36,936. A contingent rental provision allows for increases in base rent for real estate taxes and operating costs in excess of base operating costs. The agreement includes an option to extend the lease for an additional five years.

        Rental expense for all cancelable and non-cancelable operating leases totaled $122,319, $95,515, and $90,900 in 2002, 2001, and 2000, respectively.

NOTE 10. ALLOWANCE FOR UNCOLLECTIBLES

        The Company uses the reserve method to recognize uncollectible customer accounts. The following activity has been recognized under this method.

	2002		2001		2000
Balance, December 31	$	80,000	$	70,000	$	95,000
Provision for uncollectibles		51,226		36,991		47,460
Accounts written off, net of recoveries		46,226		26,991		72,460
Balance, December 31	$	85,000	$	80,000	$	70,000

NOTE 11. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

        The following table presents summarized quarterly results.

	Quarter
	1st		2nd			3rd			4th
2002
Operating revenues	$	1,707,412	$	1,698,737		$	1,745,740		$	1,728,822
Operating income	$	48,352	$	(19,292	)	$	(45,733	)	$	(170,584	)
Net income	$	51,725	$	(26,825	)	$	(52,226	)	$	(184,262	)
2001
Operating revenues	$	1,614,897	$	1,872,348		$	1,911,963		$	1,921,535
Operating income	$	114,963	$	153,201		$	169,279		$	175,123
Net income	$	107,694	$	136,992		$	156,622		$	169,050

        Quarterly operating results are not necessarily representative of operations for a full year for various reasons, including seasonal variations in customer calling patterns and timing of promotional activities.

NOTE 12. RECENT ACCOUNTING DEVELOPMENTS

        In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires entities to record the fair value of the liability for legal obligations associated with an asset retirement in the period in which the obligation is incurred. When the liability is initially recorded, the entity capitalizes the cost of the asset retirement obligation by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset.

        In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS No. 145 rescinds FASB Statement No. 4, "Reporting Gains and Losses from Extinguishment of Debt," and an amendment of that Statement, FASB Statement No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements." SFAS No. 145 also rescinds FASB Statement No. 44, "Accounting for Intangible Assets of Motor Carriers," and amends FASB Statement No. 13, "Accounting for Leases."

        In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan.

        In November 2002, the FASB issued Interpretation No.45, "Guarantor's Accounting and Disclosure Requirements for Gaurantees, Including Indirect Guarantees of Indebtedness of Others." This interpretation elaborates on the disclosures required in financial statements concerning obligations under certain guarantees. It also clarifies the requirements related to the recognition of liabilities by a guarantor at the inception of certain guarantees. The disclosure requirements of this interpretation were effective on December 31, 2002. No disclosures were required at December 31, 2002.

        The Partnership has not yet determined the impact the adoption of these Standards will have on its financial position, results of operations, and cash flows.

RSA 2-III PARTNERSHIP
Unaudited Financial Statements
For the six months ended June 30, 2003

RSA 2-III
Balance Sheet (Unaudited)
June 30, 2003

ASSETS
Current Assets
	Cash & Cash Equivalents			$	33,376
	Accounts Receivable
		Due from Customers
			Less Allowance for Uncollectible of $118,647		936,584
		Affiliates			242,373
	Prepayments				136,797
		Total Current Assets			1,349,130
Plant & Equipment
	Plant In Service				7,325,699
	Less Accumulated Depreciation				(3,741,072	)
					3,584,627
	Plant Under Construction				7,442
					3,592,069
Other Noncurrent Assets
	Investments				50,439
	Deferred Charges				1,215
		Total Other NonCurrent Assets			51,654
		TOTAL ASSETS		$	4,992,853
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
	Capital Lease Obligation			$	11,495
	Note Payable				1,500,000
	Accounts Payable
		Trade			135,549
		Affiliates			542,888
	Accrued Liabilities				241,255
	Advanced Billings				2,383
	Accrued Taxes				128,880
	Other				93,748
		Total Current Liabilities			2,656,198
Long Term Liabilities
	Capital Lease Obligation				46,506
	Asset Retirement Obligation				165,789
		Total Long Term Liabilities			212,295
Partner's Capital					2,124,360
		TOTAL LIABILITIES & PARTNERS' CAPITAL		$	4,992,853

RSA 2-III
Statement of Income (Unaudited)
for the Six Months Ending June 30, 2003

Operating Revenues
	Retail service	$	1,963,145
	Roamer service		1,816,313
	Equipment sales		55,035
	Miscellaneous services		374,008
			4,208,501
Operating Expenses
	Cost of services		2,443,176
	Cost of equipment sales		270,594
	Selling, general and administrative		1,155,437
	Depreciation		354,000
			4,223,207
Operating Income			(14,706	)
Other Expenses
	Interest expense		47,121
Net Loss before cumulative effect of change in accounting principle			(61,827	)
Cumulative effect of change in accounting principle			(98,165	)
Net Loss		$	(159,992	)

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Exhibit 99.3

RSA 2-III PARTNERSHIP Financial Statements
INDEPENDENT AUDITORS' REPORT
ILLINOIS VALLEY CELLULAR RSA 2-III PARTNERSHIP BALANCE SHEETS December 31, 2002 and 2001
ILLINOIS VALLEY CELLULAR RSA 2-III PARTNERSHIP BALANCE SHEETS December 31, 2002 and 2001
ILLINOIS VALLEY CELLULAR RSA 2-III PARTNERSHIP STATEMENTS OF INCOME Years Ended December 31, 2002, 2001, and 2000
ILLINOIS VALLEY CELLULAR RSA 2-III PARTNERSHIP STATEMENTS OF PARTNERS' CAPITAL December 31, 2002, 2001, and 2000
ILLINOIS VALLEY CELLULAR RSA 2-III PARTNERSHIP STATEMENTS OF CASH FLOWS Years Ended December 31, 2002, 2001, and 2000
ILLINOIS VALLEY CELLULAR RSA 2-III PARTNERSHIP NOTES TO FINANCIAL STATEMENTS