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 1-32362

OTELCO INC.
(Exact Name of Registrant as Specified in Its Charter)

Delaware	52-2126395
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
505 Third Avenue East, Oneonta, Alabama	35121
(Address of Principal Executive Offices)	(Zip Code)
Registrant's telephone number, including area code: (205) 625-3574

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name and Exchange on which Registered
Income Deposit Securities, each representing shares of Class A Common Stock, and Senior Subordinated Notes due 2019	American 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 than the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S K (§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. o

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

        The aggregate market value of the Income Deposit Securities (IDSs) held by non-affiliates of the registrant as of December 31, 2004 (the last day of the registrant's most recently completed fiscal year) was approximately $151.9 million. Each IDS represents one share of Class A common stock, par value $0.01 per share, and $7.50 principal amount of senior subordinated notes due 2019. In determining the market value of the registrant's IDSs held by non-affiliates, IDSs beneficially owned by directors, officers and holders of more than 10% of the registrant's IDSs have been excluded. This determination of affiliate status is not necessarily a conclusive determination for other purposes. The registrant did not have publicly traded voting or non-voting common equity as of the last business day of its most recently completed second fiscal quarter.

        As of March 28, 2005, the registrant had 9,676,733 shares of Class A common stock, par value $0.01 per share, outstanding and 544,671 shares of Class B common stock, par value $0.01 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

        Certain information required by Part III of this report is incorporated by reference from the registrant's proxy statement to be filed pursuant to Regulation 14A with respect to the registrant's 2005 annual meeting of stockholders.

PART I
Item 1.	Business.	3
Item 2.	Properties.	9
Item 3.	Legal Proceedings.	10
Item 4.	Submission of Matters to a Vote of Security Holders.	10
	Executive Officers of the Registrant.	10
PART II
Item 5.	Market for Registrant's Common Equity and Related Stockholder Matters.	12
Item 6.	Selected Financial Data.	15
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	16
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.	32
Item 8.	Financial Statements and Supplementary Data.	37
Item 9.	Changes in and Disagreement with Accountants on Accounting and Financial Disclosure.	59
Item 9A.	Controls and Procedures.	59
Item 9B.	Other Information.	59
PART III
Item 10.	Directors and Executive Officers of the Registrant.	60
Item 11.	Executive Compensation.	60
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	60
Item 13.	Certain Relationships and Related Transactions.	60
Item 14.	Principal Accountant Fees and Services.	60
PART IV
Item 15.	Exhibits, Financial Statement Schedules.	61

Unless the context otherwise requires, the words "we", "us", "our", "the company" and "Otelco" refer to Otelco Inc., a Delaware corporation.

FORWARD-LOOKING STATEMENTS

        The report contains forward-looking statements that are subject to risks and uncertainties. Forward-looking statements give our current expectations relating to our financial condition, results of operations, plans, objectives, future performance and business. These statements may include words such as "anticipate," "estimate," "expect," "project," "plan," "intend," "believe" and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. These forward-looking statements are based on assumptions that we have made in light of our experience in the industry in which we operate, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial condition or results of operations and cause actual results to differ materially from those in the forward-looking statements. These factors include, among other things, those discussed under the caption "Risk Factors Affecting Our Operating Performance" in Item 7A.

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PART I

Item 1.    Business

History

        We were formed for the purpose of operating and acquiring rural local exchange carriers or RLECs. Since 1999, we have acquired five RLEC businesses, four of which serve contiguous territories in north central Alabama, and one which serves a portion of central Missouri. The company completed an initial public offering of income deposit securities in December 2004 at which time it converted from a Delaware limited liability company into a Delaware corporation and changed its name to Otelco Inc.

        The following table shows the aggregate number of our access line equivalents, cable television, long distance, and dial-up Internet customers as of December 31, 2004:

Access line equivalents	37,139
Long distance customers	13,641
Cable television customers	3,959
Dial-up Internet customers	15,348

        The five companies we acquired can trace their history as local communications providers as far back as the early 1900s. We are able to leverage our long-standing relationship with our local service customers by offering them a broad suite of telecommunications and information services, such as long distance, Internet access and cable television, thereby increasing customer loyalty and average revenue per access line.

        Our rural local exchange carriers have historically experienced stable operating results and strong cash flows and operate in supportive regulatory environments. Each of our rural local exchange carriers qualifies as a rural telephone company under the federal Communications Act of 1934, so we are currently exempt from certain costly interconnection requirements imposed on incumbent or historical local telephone companies, or incumbent local exchange carriers, by the Communications Act. This exemption helps us maintain our strong competitive position. Direct competition is typically limited because rural local exchange carriers primarily serve low customer density communities with predominantly residential customers, and the cost of operations and capital investment requirements for new entrants is high.

        Otelco Telephone.    On January 5, 1999, we, through Otelco Telephone LLC, or Otelco Telephone, acquired certain telecommunications businesses from Oneonta Telephone Company, Inc., a rural local exchange carrier that serves a portion of Blount County in Alabama. In connection with the transaction, we acquired 8,127 access line equivalents.

        Hopper.    On September 30, 1999, we acquired Hopper Telecommunications Company, Inc., or Hopper, a rural local exchange carrier that serves portions of Blount and Etowah counties in Alabama. In connection with the transaction, we acquired 3,827 access line equivalents.

        Brindlee Mountain.    On July 19, 2000, we acquired Brindlee Mountain Telephone Company, or Brindlee, a rural local exchange carrier that serves portions of Marshall, Morgan, Blount and Cullman counties in Alabama. In connection with the transaction, we acquired 14,013 access line equivalents.

        Blountsville.    On June 30, 2003, we acquired Blountsville Telephone Company, Inc., or Blountsville, a rural local exchange carrier that serves portions of Blount county in Alabama. In connection with the transaction, we acquired 4,080 access line equivalents.

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        Mid-Missouri.    On December 21, 2004, at the time of our initial public offering, we acquired Mid-Missouri Telephone Company, or Mid-Missouri Telephone, a rural local exchange carrier that serves portions of Cooper, Moniteau, Morgan, Pettis and Saline counties in central Missouri, from an affiliate of certain of then existing equity investors. In connection with the transaction, we acquired approximate 4,585 access line equivalents.

Service Offerings

        The following table reflects the percentage of total revenues derived from each of our service offerings for the year ended December 31, 2004:

Revenue Mix

Source of Revenue
Local Service		37.6	%
Network access		44.5
Long distance and other telephone services		7.1
Cable television		4.9
Internet		5.9
	Total	100.0	%

Local Services

        We are the sole provider of wireline telephone services in the territories served by our five rural local exchange carriers. Local services enable customers to originate and receive telephone calls within a defined exchange area, or territory. The maximum amount that we can charge a customer for local services in Alabama and Missouri is regulated by the Alabama Public Service Commission, or APSC, and the Missouri Public Service Commission, or MPSC, respectively.

        Revenue derived from local services includes monthly recurring charges for access lines providing local dial tone and calling features, including caller identification, call waiting, call forwarding and voicemail. We provide local services on a retail basis to residential and business customers, in most cases for a fixed monthly charge that varies by the selected features.

Network Access

        Network access revenue relates primarily to services provided by us to long distance carriers (also referred to as interexchange carriers) in connection with their use of our facilities to originate and terminate interstate and intrastate long distance, or toll, telephone calls. As toll calls are generally billed to the customer originating the call, network access charges are applied in order to compensate each telecommunications company providing services relating to the call. Network access charges apply to both interstate and intrastate calls. Our network access revenues also include revenues we receive from wireless carriers for originating or terminating their calls on our networks pursuant to our interconnection agreements with those wireless carriers. Hopper, Blountsville and Mid-Missouri Telephone also receive Universal Service Fund High Cost, or USF HC, revenue which is included in our reported network access revenue.

        Intrastate Access Charges.    We generate intrastate access revenue when a long distance call involving one of our RLECs and a long distance carrier is originated and terminated within the same state. The interexchange carrier pays us an intrastate access payment for either terminating or originating the call. We record the details of the call through our carrier access billing system. Our

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access charges for our intrastate access services are set by the APSC with respect to our Alabama rural local exchange carriers and by the MPSC with respect to Mid-Missouri Telephone.

        Interstate Access Charges.    We generate interstate access revenue when a long distance call originates from an area served by one of our rural local exchange carriers and terminates in a local calling area outside of that state, or vice versa. We bill interstate access charges in a manner similar to intrastate access charges. Our interstate access charges are regulated by the Federal Communications Commission, or FCC, through our participation in tariffs filed by the National Exchange Carriers Association, or NECA. The FCC regulates the prices local exchange carriers charge for access services in three ways: price caps, rate-of-return and average schedule. None of our rural local exchange carriers is a price cap carrier for purposes of interstate network access regulation. Mid-Missouri Telephone, Hopper and Blountsville are rate-of-return carriers, and Otelco Telephone and Brindlee are average schedule carriers. Interstate access revenue for rate-of-return carriers is based upon an FCC regulated rate-of-return currently authorized at up to 11.25% on investment and recovery of operating expenses and taxes, in each case solely to the extent related to interstate access. Average schedule carriers share in a settlement process pursuant to which such carriers receive a portion of a pool of revenue based upon their individual cost of providing interstate access relative to an average of a statistical sample of other carriers' costs. The tariffs for average schedule carriers are developed to yield a return of up to 11.25% on the participating carriers' investment, and to cover their operating expenses and taxes, in each case solely to the extent related to interstate access.

        Federal Universal Service Fund High Cost Revenue.    Hopper, Blountsville and Mid-Missouri Telephone recover a portion of their costs through the USF HC, which is regulated by the FCC and administered by the Universal Service Administrative Company or USAC, a non-profit organization. Based on historic and other information, a nationwide average cost per loop is determined by USAC. Any incumbent local exchange carrier whose individual cost per loop exceeds the nationwide average by more than 15% qualifies for USF HC support. Although all of our rural local exchange carriers have been designated as eligible telecommunications carriers or ETCs, Otelco Telephone and Brindlee do not receive USF HC support because their cost per loop does not exceed the national average. The USF HC, which is funded by assessments on all United States telecommunications carriers as a percentage of their revenue from end-users of interstate and international service, distributes funds to our participating RLECs based upon their respective costs for providing local services. USF HC payments are received monthly.

        Transition Service Fund Revenue.    Otelco Telephone, Hopper, Brindlee, and Blountsville recover a portion of their costs through the Transition Service Fund, or TSF, which is administered by the APSC. All interexchange carriers originating or completing calls in Alabama contribute to the TSF on a monthly basis, with the amount of each carrier's contribution calculated based upon its relative originating and terminating minutes of use compared to the aggregate originating and terminating minutes of use for all telecommunications carriers participating in the TSF. The TSF reduces the vulnerability of our Alabama rural local exchange carriers to a loss of access and interconnection revenue. TSF payments are received monthly.

Long Distance and Other Telephone Services

        We offer long distance telephone services to our local telephone customers. The majority of our long distance revenue is derived from reselling long distance services purchased from a long distance provider. At December 31, 2004, approximately 40.5% of our access lines subscribed to our long distance services. We intend to continue to expand our long distance business within our rural local exchange carrier territories, principally through marketing to our local telephone customers.

        We derive revenue from other telephone related services, including leasing, selling, installing, maintaining and repairing customer premise telecommunications equipment, pay telephone service and

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the publication of local telephone directories in certain of our rural local exchange carrier territories. We also provide billing and collection services for interexchange carriers through negotiated billing and collection agreements for certain types of toll calls placed by our local customers.

Cable Television Services

        We provide cable television services over networks with 750 MHz of transmission capacity in the towns of Bunceton and Pilot Grove in Missouri, and in portions of Blount and Etowah counties in Alabama. Our cable television packages offer from 59 to 184 channels, depending upon the location in which the services are offered. We intend to expand our cable services selectively by extending our cable networks into areas adjacent to our existing cable network facilities within our telephone service area. With this strategy, we believe we will be able to capture additional customers with minimal capital expenditures. Of the 8,169 homes we pass, we are the cable television provider to approximately 4,000 of these homes.

Internet Services

        We provide two forms of Internet access to our customers: high-speed and dial-up. High-speed Internet access is provided via DSL or cable modems, depending upon the location in which the service is offered. We charge our Internet customers a flat rate for unlimited Internet usage and a premium for high-speed Internet services. We are able to provide high-speed Internet access to a majority of our access lines. We intend to expand the availability of our high-speed Internet services as warranted by customer demand by installing additional DSL equipment at certain switching locations. In Missouri, we also offer internet services outside of but adjacent to our telephone service area.

Network Assets

        Our telephone networks include carrier grade advanced switching capabilities provided by four digital switches, fiber rings and network software, all of which meet industry standards for service integrity, redundancy, reliability and flexibility. Our networks enable us to provide switched wireline telephone services and other calling features, long distance services and Internet access services through dial-up, DSL and cable modems. As of December 31, 2004, our networks included the following elements, all of which are owned by us:

•

Three Lucent 5ESS digital switches and one Siemens EWSD switch;



•

More than 560 route miles of high-quality, high-speed fiber optic cable; and



•

DSL and cable modem equipment.

        Our cable television networks in Alabama and Missouri provide cable television and cable modem services with approximately 80 route miles of fiber optic cable and approximately 285 route miles of coaxial cable in Alabama and approximately 10 route miles of coaxial cable in Missouri, each of which has been upgraded to a transmission capacity of 750 MHz.

Sales, Marketing & Customer Service

        Our marketing approach emphasizes locally managed, customer-oriented sales, marketing and service. We believe we are able to differentiate ourselves from our competition by providing a superior level of service in our territories. We believe that most telecommunications companies devote their resources and attention primarily toward customers in more densely populated markets, thereby providing relatively poor service to rural customers.

        Each of our rural local exchange carriers has a long history in the communities it serves, which has helped to enhance our reputation among local residents by fostering familiarity with our products and

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level of service. To demonstrate our commitment to the markets we serve, we maintain local offices in most of the population centers within our service territories. While customers have the option of paying their bills by mail or automatic withdrawal from their bank account, a substantial portion of the customer base elects to pay their monthly bill in person at the local office. This provides us with an opportunity to directly market our services to our existing customers. These offices typically are staffed by local residents and provide sales and customer support services in the community. Local offices facilitate a direct connection to the community, which we believe improves customer satisfaction and enhances our reputation with local residents. We also build upon our strong reputation by participating in local activities, such as local fund raising and charitable events for schools and community organizations and by airing local interest programs on our local access community cable channels.

        In order to capitalize on the strong branding of each of our rural local exchange carriers, while simultaneously establishing and reinforcing the "Otelco" brand name across our Alabama and Missouri territories, we identify each of our rural local exchange carriers as a division of Otelco. In each territory, both the name of the local rural local exchange carrier and the name of Otelco appear on the customers' bills and our marketing materials. Part of our strategy is to increase customer loyalty and strengthen our brand name by deploying new technologies and by offering comprehensive bundling of services, including dial-up and high-speed Internet access, cable television, long distance and a full array of calling features. In addition, we believe that our ability to provide our customers with a single, unified bill for all of our services is a major competitive advantage and helps to enhance customer loyalty.

        Prior to their acquisition by us, many of our rural local exchange carriers had not engaged in significant sales and marketing activities. Upon their acquisition, we have provided additional sales and marketing support that has enhanced the introduction of new services and the continued marketing of existing services and products.

Competition

Local Services

        We believe that many of the competitive threats now confronting larger telephone companies do not currently exist in our rural local exchange carrier service areas. Our rural local exchange carriers have never experienced wireline telephone competition because the demographic characteristics of rural telecommunications markets generally would require significant capital investment to offer competitive wireline telephone services with low potential revenues. For instance, the per minute cost of operating both telephone switches and interoffice facilities is higher in rural areas than in urban areas, because rural local exchange carriers typically have fewer, more geographically dispersed customers and lower calling volumes. Furthermore, the distance from the telephone switch to the customer is typically longer in rural areas, which results in increased distribution facilities costs that tend to discourage wireline telephone competitors from entering territories serviced by rural local exchange carriers. As a result, rural local exchange carriers generally do not face the threat of significant wireline telephone competition. However, in the future, we may face direct competition from new market entrants, such as providers of wireless broadband or voice over electric lines, and indirect competition such as voice over Internet protocol, or VoIP.

        We currently qualify for the rural exemption from certain interconnection obligations which support industry competition, including obligations to provide services for resale at discounted wholesale prices and to offer unbundled network elements. If the APSC or MPSC terminates this exemption for our rural local exchange carriers, we may face competition from resellers and other wireline carriers.

        In our markets, we face competition from wireless carriers. To date, we do not believe that we have experienced any significant decrease in access lines as a result of customers switching their

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residential wireline telephone service to a wireless service. Although we believe we have experienced a minor decrease in our minutes of use primarily due to flat rate "free minutes and long distance calling offers" from certain wireless carriers, we have also experienced an increase in network access revenue associated with terminating wireless calls on our telephone network. We do not expect wireless technology to represent a meaningful threat to our business in the near term due in part to the topography of our telephone territories and the inconsistent wireless coverage that has resulted therefrom to date. However, as wireless carriers continue to build-out their networks, we may experience increased competition from this technology. The FCC has recently adopted regulations requiring wireline telephone carriers to provide portability of telephone numbers to wireless carriers, which may increase the competition we face from wireless carriers. Our rural local exchange carriers are currently capable of providing portability of telephone numbers to wireless carriers. The MPSC has ruled that the cellular carrier must provide and pay for the necessary transport to implement a customer's request for wireline to wireless portability.

        In addition, under the Communications Act, a competitor can obtain USF HC support if a state public service commission (or the FCC in certain instances) determines that it would be in the public interest and designates such competitor as an ETC. While access to USF HC support by our competitors does not significantly reduce our current USF HC revenue, such economic support could facilitate competition in our rural local exchange carrier territories, particularly from wireless carriers. To date, no other telecommunications carriers receive USF HC funds within our rural local exchange carrier territories, although three wireless carriers have applied for ETC status in our Alabama territories. In Missouri, one wireless carrier applied for ETC status and was denied by the MPSC.

Long Distance and Other Telephone Services

        The long distance market is highly competitive in all of our rural local exchange carrier territories. We compete with major national and regional interexchange carriers, including AT&T Corp., MCI, Inc. and Sprint Corporation as well as wireless carriers, and other service providers. However, we believe that our position as the rural local exchange carrier in our territories, our long-standing local presence in our territories and our ability to provide a single, unified bill for all of our services, are major competitive advantages. At December 31, 2004, customers with approximately 40.5% of our access lines subscribed to our long distance services. Most of these customers added our long distance services since our acquisition of the related rural local exchange carrier.

Cable Television Services

        We offer cable television services in select areas of our territories. In the northern portion of our Alabama territory, Charter Communications, Inc. provides cable service, passing about 10,000 of our subscribers. In addition, in all of our cable television territories, we compete against digital broadcast satellite providers including EchoStar Communications Corporation and DirecTV, Inc.

Internet Services

        Competition in the provision of Internet services currently comes from alternative dial-up and high-speed Internet service providers. Individual competitors vary on a market-to-market basis and include Mindspring Enterprises, Inc., Charter Communications, Inc. and a number of small, local competitors. At December 31, 2004, we provided Internet services to approximately 21% of our access lines. In Missouri, we also provide Internet services outside our telephone services territory.

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Information Technology and Support Systems

        We have an integrated software system that functions as an operational support and customer care/billing system. Our system includes automated provisioning and service activation, mechanized line record and trouble reporting. These services are provided through the use of licensed third-party software. By utilizing an integrated software system, we are able to reduce individual company costs and standardize functions resulting in greater efficiencies and profitability.

        Our system allows us to provide a single, unified bill for all our services which we believe is a significant competitive advantage. Additionally, our system provides us an extensive database that enables us to gather detailed marketing information in our service territory. This capability allows us to market new services as they become available to particular customers.

Environment

        We are subject to various federal, state and local laws relating to the protection of the environment. We believe that we are in compliance in all material respects with all such laws. The environmental compliance costs incurred by us to date have not been material, and we currently have no reason to believe that such costs will become material in the foreseeable future.

Employees

        As of December 31, 2004, we employed a total of approximately 142 full-time employees. None of our employees are members of, or are represented by, any labor union or other collective bargaining unit. We consider our relations with our employees to be good.

Available Information

        Under the Securities Exchange Act of 1934, we are required to file annual, quarterly and current reports, proxy and information statements and other information with the Securities and Exchange Commission, or SEC. You may read and copy any document we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room. The SEC maintains a web site at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. We file electronically with the SEC.

        We make available, free of charge, through the investor relations section of our web site, our reports on Forms 10-K, 10-Q and 8-K, and amendments to those reports, as soon as reasonably practicable after they are filed with the SEC. The address for our web site is http://www.otelco.net.

        Our Code of Ethics applies to all of our employees, officers and directors, including our chief executive officer and our chief financial officer and principal accounting officer. The full text of the Code of Ethics is available at the investor relations section of our web site, http://www.otelco.net. We intend to disclose any amendment to, or waiver from, a provision of the Code of Ethics that applies to our chief executive officer or chief financial officer and principal accounting officer in the investor relations section of our web site.

        The information contained on our web site is not part of, and is not incorporated in, this or any other report we file with or furnish to the SEC.

Item 2.    Properties

        Our property consists primarily of land and buildings, central office equipment, telephone lines and related equipment. Our telephone lines include aerial and underground cable, conduit, poles and wires. Our central office equipment includes digital switches and peripheral equipment. We own

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substantially all our real property, including our head office. We also lease certain of our real property, including land in Oneonta, Alabama, pursuant to a long-term, renewable lease. Substantially all our cable television service equipment is located on this leased property. Our real property is all located in Alabama and Missouri. As of December 31, 2004, our property and equipment consisted of the following (in thousands):

	(in thousands)
Land	$	758
Buildings and improvements		6,827
Telephone equipment		89,233
Cable television equipment		5,232
Furniture and equipment		1,342
Vehicles		3,185
Computer hardware and software		2,887
Internet equipment		1,924
Total property and equipment	$	111,388
Accumulated depreciation		(63,192	)
Net property and equipment	$	48,196

Item 3.    Legal Proceedings

        From time to time, we may be involved in various claims, legal actions and regulatory proceedings incidental to and in the ordinary course of business, including administrative hearings of the APSC and MPSC relating primarily to rate making. Currently, none of the legal proceedings are expected to have a material adverse effect on our business.

Item 4.    Submission of Matters to a Vote of Security Holders

        During the fourth quarter of fiscal 2004, no matter was submitted to a vote of our security holders.

Executive Officers of the Registrant

        The following table sets forth the names and positions of our current executive officers, and their ages as of December 31, 2004.

Name	Age	Position
Michael D. Weaver	52	President, Chief Executive Officer and Director
Curtis L. Garner, Jr.	57	Chief Financial Officer
Keith "Scotty" Hawk	50	Senior Vice President
Dennis Andrews	48	Vice President, Regulatory Affairs
Kenneth W. Gross	53	Vice President, Operations
Jerry C. Boles	52	Vice President and Controller

Michael D. Weaver has served as our President, Chief Executive Officer and a Director since January 1999. Prior to this time, he spent 10 years with Oneonta Telephone Co., Inc., the predecessor to Otelco Telephone, serving as Chief Financial Officer from 1990 to 1998 and General Manager from January 1998 to January 1999.

        Curtis L. Garner, Jr.    has served as our Chief Financial Officer since February 2004. Prior to this position, he provided consulting services to a number of businesses and not-for-profit organizations from October 2002. He served PTEK Holdings, Inc. from November 1997 through September 2002 (including one year as a consultant), first as President of its Premiere Communications division, and

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later as Chief Administrative Officer of its VoiceCom division. Prior thereto, he spent approximately 26 years at AT&T Corp., retiring in 1997 as the Chief Financial Officer of the Southern and Southwestern Regions of AT&T Corp.'s consumer long distance business.

Keith "Scotty" Hawk has served as our Senior Vice President and General Manager of Brindlee since April 1996. Prior to this position, he held various management positions with subsidiaries of Brindlee from January 1988 to April 1995 including General Manager of Valley Telephone Services d/b/a Marshall Cellular and Director, Carrier Relations and Operator Services for Delta Communication, Inc.

Dennis Andrews has served as our Vice President, Regulatory Affairs since July 2000. Prior to this position, he spent 21 years at Brindlee where he held several positions, including Vice President, Finance, General Manager, Operations Manager and Accounting Department Manager.

Kenneth W. Gross has served as our Vice President, Operations since July 2000. From March 1988 to July 2000, he served as Vice President/Manager, Marketing and Commercial Operations of Brindlee. Prior to joining Brindlee, he held several positions with two commercial lending institutions.

Jerry C. Boles has served as our Controller since he joined the company in January 1999. Prior to joining Otelco, he was controller for McPherson Oil Company for 14 years. He also worked in public accounting for 10 years, is certified as a CPA by the State of Alabama, and is a member in good standing of the AICPA.

        Officers are not elected for a fixed term of office but hold their position until a successor is named.

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PART II

Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters

Market Information

        We have outstanding two separate classes of common stock, our Class A common stock, par value $0.01 per share, and our Class B common stock, par value $0.01 per share.

        Our Income Deposit Securities (IDSs), each representing one share of Class A common stock and $7.50 principal amount of senior subordinated notes due 2019, began trading on the American Stock Exchange under the symbol "OTT" on December 16, 2004. The high and low for the stock during the quarter ended December 31, 2004 was US$16.05 and US$15.20 on the American Stock Exchange. Prior to this quarter, the company was privately held and there was no trading in the company's equity.

        There is no established trading market for our Class B common stock.

Holders

        As of March 10, 2005 there were approximately 4,600 record holders of our IDSs. Holders of our IDSs have the right to separate each IDS into the shares of Class A common stock and senior subordinated notes represented thereby. As of the date of this Annual Report on form 10-K, no holder has elected to separate the IDSs.

        As of March 10, 2005, there were approximately 10 record holders of our Class B common stock.

Dividends

        No dividends were declared or paid on our Class A common stock in the prior two fiscal years.

        At the time of our initial public offering, our then board of directors adopted a dividend policy for our Class A common stock pursuant to which, in the event and to the extent we have any available cash for distribution to the holders of shares of our Class A common stock and subject to applicable law and the terms of our credit facility, the indenture governing our senior subordinated notes and any other then outstanding indebtedness of ours, our board of directors will declare cash dividends on our Class A common stock. Our dividend policy reflects a basic judgment that our stockholders would be better served by distributing available cash in the form of dividends rather than retaining it. Under this dividend policy, cash generated by our business in excess of operating needs, interest and principal payments on indebtedness, capital expenditures and income taxes, if any, would in general be distributed as regular quarterly dividends to the holders of our Class A common stock rather than retained by us as cash on our consolidated balance sheet. In determining our expected initial dividend levels, we reviewed and analyzed, among other things, our operating and financial performance in recent years, the anticipated cash requirements associated with our new capital structure, our anticipated capital expenditure requirements, our expected other cash needs, the terms of our debt instruments, including our credit facility, other potential sources of liquidity and various other aspects of our business. If these factors were to change, including based on new growth opportunities, we would need to reassess our dividend policy.

        As described more fully below, holders of our Class A common stock 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 our available cash, this policy could be modified or revoked at any time;



•

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

12

•

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



•

the amount of dividends distributed is subject to state law restrictions;



•

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



•

we may not have enough cash to pay dividends due to changes to our operating earnings, working capital requirements and anticipated cash needs.

        Dividends on our Class A common stock will not be cumulative. Consequently, if dividends on our Class A common stock are not declared and/or paid at the targeted levels, our stockholders will not be entitled to receive such payments in the future.

        If we have any remaining cash after the payment of dividends as contemplated above, our board of directors will, in its sole discretion, decide to use that cash to fund capital expenditures or acquisitions, repay indebtedness, pay additional dividends or for general corporate purposes.

Restrictions on Payment of Dividends

        The indenture governing our senior subordinated notes restricts our ability to declare and pay dividends on our common stock as follows:

•

we may only pay dividends in any given fiscal quarter equal to 100% of our excess cash for the period from and including the first fiscal quarter beginning after the date of the indenture to the end of our most recently ended fiscal quarter for which internal financial statements are available at the time of such payment. "Excess cash" means with respect to any period, Adjusted EBITDA, as defined in the indenture, minus the sum of (i) cash interest expense, (ii) capital expenditures and (iii) cash income tax expense, in each case, for such period;



•

we may not pay dividends if our interest coverage ratio, which is defined as Adjusted EBITDA divided by consolidated interest expense, is below 1.4x;



•

we may not pay any dividends if not permitted under any of our senior indebtedness;



•

we may not pay any dividends while interest on the senior subordinated notes is being deferred or, after the end of any interest deferral, so long as any deferred interest has not been paid in full; and



•

we may not pay any dividends if a default or event of default under the indenture governing the senior subordinated notes has occurred and is continuing.

        Our credit facility does not allow us to pay dividends on our common stock unless we maintain:

•

a "fixed charge coverage ratio" (defined as our Adjusted EBITDA for any period of four consecutive fiscal quarters divided by the sum of certain capital expenditures, cash income taxes, the aggregate amount of cash interest expense and scheduled principal payments for such period) of not less than 1.2x; and



•

a "senior leverage ratio" (defined as senior secured debt as of the last day of any period divided by our Adjusted EBITDA for any period of four consecutive fiscal quarters) of not more than 3.1x.

        In addition, our credit facility does not allow us to pay dividends on our common stock if and for as long as (a) interest payments on our senior subordinated notes are required to be deferred pursuant to the terms of the new credit facility, (b) any default or event of default exists under the new credit facility, (c) deferred interest or interest on deferred interest is outstanding under our senior subordinated notes, (d) a compliance certificate for the prior fiscal quarter has not been timely delivered and (e) there is insufficient excess cash, as defined in our credit facility.

13

Securities Authorized for Issuance under Equity Compensation Plans

        No securities have been issued for any equity compensation plan and no such plan is currently in place.

Recent Sales of Unregistered Securities

        During the fiscal year ended December 31, 2004, we issued the following unregistered securities. None of these sales involved an underwriter, finder or other agent or the payment of any selling commission to any person. The sale of these securities were made pursuant to Section 4(2) of the Securities Act.

•

In connection with our conversion from a limited liability company to a corporation on December 21, 2004, the membership interests in our limited liability company predecessor was converted into, approximately 7,853,995 IDSs and 489,926 shares of our Class B common stock.



•

In connection with our conversion, we also exchanged options to acquire an aggregate of 97,365 membership interests in our limited liability company predecessor for 200,843 IDSs and 12,529 shares of our Class B common stock.



•

In connection with the acquisition of Mid-Missouri Telephone on December 21, 2004, we exchanged (i) all outstanding common stock of Mid-Missouri Holding Corp., or Mid-Missouri Holding, for 847,564 IDSs and 52,871 share of our Class B common stock and (ii) options to acquire an aggregate of 162,316 shares of common stock of Mid-Missouri Holding for 8,670 IDSs and 542 shares of our Class B common stock.

        Beginning on December 21, 2006, and subject to a financial test relating to our Adjusted EBITDA (as such term is defined in the indenture governing our senior subordinated notes) that will no longer apply following December 21, 2009, and certain other conditions, at the option of the holders of our Class B common stock, such holders we will automatically exchange one IDS for each share of Class B common stock, subject to compliance with law and applicable agreements.

Use of Proceeds from Registered Securities

        On December 21, 2004, we consummated our initial public offering of IDSs, which resulted in net proceeds of approximately $20.1 million (including our senior subordinated notes sold separately and after deducting underwriting discounts and commissions and the amount received by the selling stockholders).

        We used the net proceeds from our initial public offering, together with $6.4 million of cash on hand and $80.0 million from the senior secured term loan, as follows:

•

approximately $92.0 million to repay in full our existing long-term notes payable;



•

approximately $4.7 million to purchase an interest rate cap in connection with the floating rate borrowings under our credit facility;



•

approximately $1.1 million to repurchase shares of Class B common stock and IDSs issued upon exchange of the options with respect to Rural LEC Acquisition LLC's membership interests and Mid-Missouri Holding's common stock; and



•

approximately $8.7 million to pay fees and expenses, excluding underwriters' discount of $1.0 million.

        We did not receive any of the $121.5 million of proceeds from the sale of IDSs offered by the selling stockholders.

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Item 6.    Selected Financial Data

        The following table sets forth selected consolidated financial and other information. The consolidated financial information as of December 31, 2002, 2003, and 2004 and for each of the three periods in the period ended December 31, 2004 have been derived from, and should be read together with, our audited consolidated financial statements and the accompanying notes included in Item 8 of this report. The consolidated financial information as of December 31, 2001 has been derived from our audited consolidated financial statements not included in this report. The consolidated financial information as of December 31, 2000 and for the year ended December 31, 2000 have been derived from our unaudited consolidated financial statements not included in this report. Our unaudited consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements and, in the opinion of management, include all adjustments considered necessary for a fair presentation of our financial condition and results of operations for such periods. The consolidated financial information set forth should be read in conjunction with, and is qualified in its entirety by reference to, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 and our audited consolidated financial statements and related notes in Item 8.

			At and For The Year Ended December31,
			2000(1)			2001			2002		2003(1)		2004(1)
			(unaudited)
			(in thousands except per share amounts)
Income Statement Data
Revenues:
	Local service		$	7,491		$	13,251		$	12,882	$	13,090	$	13,998
	Network access			7,212			11,750			12,003		14,701		16,602
	Long distance and other telephone services			3,917			2,113			2,197		2,571		2,659
	Cable television			1,051			1,361			1,586		1,748		1,818
	Internet			548			806			1,202		1,645		2,189
		Total	$	20,219		$	29,281		$	29,870	$	33,755	$	37,266
Income from operations			$	5,630		$	7,924		$	14,847	$	14,719	$	13,529
Income (loss) before income taxes			$	(582	)	$	1,752		$	11,017	$	11,600	$	10,074
Net income (loss)			$	1,655		$	(405	)	$	7,199	$	7,493	$	6,114
Net income per share(2)
	Basic		$	0.21		$	(0.05	)	$	0.89	$	0.93	$	0.75
	Diluted		$	0.19		$	(0.05	)	$	0.84	$	0.88	$	0.71
Balance Sheet Data
	Cash and cash equivalents		$	859		$	5,695		$	2,322	$	1,650	$	5,407
	Property and equipment, net			32,678			32,897			32,672		37,919		48,196
	Total assets			158,570			139,396			135,138		150,721		196,227
	Long-term notes payable (including current portion)			111,971			97,622			81,493		83,073		161,075

(1)

During fiscal 2000, 2003 and 2004, we acquired Brindlee, Blountsville, and Mid-Missouri respectively, all rural local telephone companies. More information about each acquisition can be found in Item 1 included herein.

(2)

On December 21, 2004, the company completed its initial public offering of IDSs. Net income per share is restated to reflect the relevant shares that would have been outstanding in the respective periods.

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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

General

        Since 1999, we have acquired and operate five rural local exchange carriers serving twenty exchanges through four central offices and thirteen remote switches in approximately 1,540 square miles of north central Alabama and central Missouri. We are the sole wireline telephone services provider in the rural communities we serve. Our services include local telephone, network access, long distance and other telephone related services, cable television and Internet access. We view, manage and evaluate the results of operations from the various telephony products and services as one company and therefore have identified one reporting segment as it relates to providing segment information. As of December 31, 2004, we operated approximately 37,100 access line equivalents.

        Our core businesses are local service and the provision of network access to other wireline, long distance and wireless carriers for calls originated or terminated on our network. Our core businesses generated approximately 82.1% of our total revenues in 2004. We also provide long distance and other telephone related services, cable television and dial-up and high-speed Internet access.

        The following discussion and analysis should be read in conjunction with our financial statements and the related notes and other financial information appearing elsewhere in this report, included in Item 8. The following discussion and analysis discusses our financial condition and results of operations on a consolidated basis, including the acquisitions of Blountsville as of June 30, 2003 and Mid-Missouri Holding as of December 21, 2004.

Impact of Changes in Capital Structure on our Results of Operations and Liquidity

        As a result of the significant amount of debt we have outstanding through our credit facility, the senior subordinated note portion of the outstanding IDSs, and the senior subordinated notes sold separately (not in the form of IDSs), our interest expense has increased significantly. We will be required to refinance our credit facility upon its maturity in five years and, if interest rates are higher at that time, interest expense will increase further.

        Our board of directors has adopted a dividend policy for our Class A common stock which, in the event and to the extent we have available cash for distribution to the holders of shares of our Class A common stock and subject to applicable law and terms of our then existing indebtedness, our board of directors will declare cash dividends on our Class A common stock. The cash requirements of this dividend policy are in addition to the increase in our indebtedness and related debt service requirements discussed above. We expect the cash requirements to be funded through cash flow generated from the operations of our business. We also have access to a $15.0 million revolving credit facility to supplement our liquidity position as needed.

        There can be no assurance that we will have sufficient cash in the future to pay dividends on our Class A common stock in the intended amounts or at all. If we do not generate sufficient cash from our operating activities in the future to pay dividends, we may have to rely on cash provided by financing activities in order to fund dividend payments, and such financing may not be available. However, if we use working capital or borrowings under our credit facility to fund dividends, we would have less cash available for future dividends and we may not have sufficient cash to pursue growth opportunities such as the expansion of our high-speed Internet access service area, the introduction of new services and the acquisition of other telephone companies, or to respond to unanticipated events such as the failure of a portion of our switching or network facilities. If we do not have sufficient cash to finance growth opportunities or capital expenditures that would otherwise be necessary or desirable, and cannot find alternative sources of financing, our financial condition and our business will suffer.

        Our current dividend policy, the increase in our indebtedness and related debt service requirements and our capital expenditure requirements will significantly limit any cash available from operations for other uses for the foreseeable future.

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Revenue Sources

        We derive our revenues from five sources:

•

Local services.    We receive revenues from providing local exchange telephone services. These revenues include monthly subscription charges for basic service, calling to adjacent communities on a per minute basis, local private line services and enhanced calling features, such as voicemail, caller identification, call waiting and call forwarding.



•

Network access services.    We receive revenues from charges established to compensate us for the origination, transport and termination of calls of long distance and other interexchange carriers. These include subscriber line charges imposed on end users and switched and special access charges paid by carriers. Switched access charges for long distance services within Alabama and Missouri are based on rates approved by the APSC and MPSC respectively. Switched and special access charges for interstate and international services are based on rates approved by the FCC.



•

Long distance and other telephone services.    We receive revenues for providing long distance services to our customers. We also provide billing and collections services for other carriers under contract and receive revenues from directory advertising.



•

Cable television services.    We offer basic, digital and pay per view cable television services to a portion of our telephone service territory in both Alabama and Missouri.



•

Internet services.    We receive revenues from monthly recurring charges for dial-up and high-speed Internet access.

Access Line and Customer Trends

        The number of access lines served is a fundamental factor in determining revenue stability for a telecommunications provider. Reflecting a general trend in the rural local exchange carrier industry, the number of access lines we serve has been decreasing gradually when normalized for territory acquisitions. We expect that either this trend will continue or the number of access lines that we serve in the future will remain relatively flat. In addition to the impact of the economy on our customers, the growth of our high-speed Internet access services will continue to have an impact on residential and small business customers' requirements for second access lines. Our response to this trend will have an important impact on our future revenues. Our primary strategy consists of leveraging our strong incumbent market position to increase revenue per access line by selling additional services to our customer base.

			Year Ended December 31,
			2002		2003		2004
Access line equivalents(1):
	Residential access lines			19,343		22,100		25,237
	Business access lines			6,654		7,355		8,414
	High-speed lines			1,361		2,185		3,488
		Total access line equivalents		27,358		31,640		37,139
Long distance customers				8,183		11,374		13,641
Cable television customers				3,442		3,628		3,959
Dial-up Internet customers				2,463		2,331		15,348
Average monthly revenue per access line(2)			$	94.40	$	101.45	$	105.88

(1)

We define access line equivalents as access lines, cable modems and digital subscriber lines.

(2)

We calculate average monthly revenue per access line as equal to (A) our average revenues for the period divided by (B) the average of the number of access lines on the first day and the last day of the period.

17

        We will continue our strategy of increasing revenues by cross-selling to our existing customer base, in the form of bundled service packages and individual additional services as they become available. Our high-speed Internet customers have grown rapidly from 502 customers at December 31, 2001 to 3,488 customers at December 31, 2004, including 115 high-speed lines associated with the Mid-Missouri Telephone acquisition. We expect continued revenue growth in this area of our business. This growth in our high-speed Internet customers is expected to have a negative effect on our dial-up Internet customers as some customers migrate to high-speed Internet access. In addition, we expect the growth in our high-speed Internet access customers will have a negative effect on our access lines as some customers will no longer have a need for second lines for purposes of dial-up Internet access. During 2004, we added three high-speed Internet customers for every access line lost.

        Our long distance customers increased at a compound annual growth rate of 34.2% from December 31, 2001 to December 31, 2004, including 996 associated with the Mid-Missouri Telephone acquisition. Our cable television customers have grown at a compound annual growth rate of 5.6% from December 31, 2001 to December 31, 2004, as a result of the expansion of our cable television service area, the introduction of additional channels to our cable television service offering, and the addition of 370 associated with the acquisition of Mid-Missouri. While we have experienced annual increases in our cable television programming costs, and expect this trend to continue in the future, we expect these increases will be offset by a corresponding increase in the price that we charge our cable television customers for cable television service offerings. The acquisition of Mid-Missouri Telephone added 13,079 dial-up internet customers, including 11,676 that are outside of our local telephone service area.

        On a comparable company basis including Mid-Missouri Telephone, access lines declined 1.2% for 2004, the smallest decline in the last three years. Thus, although we have experienced a gradual decline in the number of access lines we serve, when normalized for territory acquisitions, our average revenue per access line increased by 7.5% from 2002 and 2003 and 4.4% from 2003 to 2004. The primary contributor to our ability to maintain our revenue stream during a time of decreasing access lines has been our success with cross-selling additional services to our existing customers.

        The following is a discussion of the major factors affecting our access line count:

        Cyclical Economic and Industry Factors.    We believe that the general downturn in economic conditions and its related impact on residential and small business customers since 2000 had a negative effect on our access line count. We expect that the improved performance of the Alabama and Missouri local economies will stabilize this cyclical factor.

        Competition.    There are currently no wireline telephone competitors operating within our territory. We believe we have experienced an impact on our local toll and long distance minutes of use due to flat rate "free minutes and long distance calling" offers from certain wireless carriers. While originating minutes have declined, terminating minutes have increased. While we cannot precisely quantify the effect of this competition on the number of our access lines, we believe that our access line losses to wireless carriers have been minimal to date. We are currently tracking the reasons for all disconnected service to monitor this impact going forward. In addition, we have responded to the threat of wireless competition by offering bundled minutes packages at industry competitive rates and are developing service bundles to meet the broader communications needs of our customers.

        Acquisitions.    In June 2003, we purchased Blountsville, a rural local exchange carrier serving 4,080 access line equivalents that is contiguous to our other Alabama rural local exchange carriers. This acquisition allows us to cross-sell additional services to these customers, including high-speed and dial-up Internet access and long distance services.

        In December 2004, we purchased Mid-Missouri Telephone, a rural local exchange carrier serving 4,700 access line equivalents in central Missouri.

18

        Ancillary Effects of our Internet Services.    As we increase penetration of our high-speed Internet services, customer demand for second access lines for dial-up Internet access decreases. We believe that the revenue potential of our high-speed Internet businesses outweighs the effect of the potential access line loss.

Our Rate and Pricing Structure

        In 1995, the APSC rebalanced the formula for service rates within Alabama as part of the move from rate-of-return regulation to a price cap regulation. Under this price cap plan, local service rates for residential and business customers increased annually for five years. At the same time, the APSC reduced access rates paid by carriers. The plan was intended to be revenue neutral for telephone companies. The Alabama Service Fund (which later became the Alabama Transition Service Fund, or TSF) was established to insure this goal was met. We raised monthly rates for residential and business customers to their current levels of $16.30 and $32.60, respectively, under this plan. The ability to increase basic residential and business rates, while still available through the APSC, is significantly limited through this rebalancing effort to material changes in the cost of providing services. Four of our operating subsidiaries continue to receive compensation from the TSF. We received total compensation of $2.8 million, representing 7.4% of our total revenue, from the TSF for the year ended December 31, 2004. We do not expect material changes in the amount of revenue we receive from the TSF.

        Under the 1995 Plan, selected local telecommunications services not classified as basic communications services, such as caller identification, call waiting, call forwarding and other enhanced calling services, are regulated by the APSC as non-basic communications services. We were allowed to increase our rates each year for some or all of the non-basic communications services we provide by amounts that are up to 10.0% higher than the rates for such services during the prior year.

        The APSC recently voted to approve a proposal that would provide each of our Alabama rural local exchange carriers with the option of being regulated under one of two new cap plans, neither of which imposes rate of return regulation. Details of the new plans are still being developed. Our understanding of the new Alabama regulatory plans is based on proposals published by the APSC for comment and statements by the APSC Commissioners and staff in public deliberations.

        Under the Price Flexibility Plan option, local exchange carriers would be granted much broader rate flexibility than under the 1995 Plan, subject to a two year prohibition on rate increases for one party residential service, one party business service and certain vertical services. Local exchange carriers participating in the Price Flexibility Plan would be required to offer an optional expanded residential calling plan at an additional charge not to exceed $22.00. Rural local exchange carriers that wish to participate in the Price Flexibility Plan will also be required to agree to a change in the procedure through which they may seek to exercise their exemption, as a rural local exchange carrier, from certain interconnection requirements applicable to larger carriers and to carry the burden of proof in any such proceedings.

        Under the Price Cap Plan option, tariffed services would be capped at current levels for three years, with limited increases allowed thereafter. Local exchange carriers regulated under the Price Cap Plan will not be required to offer an expanded residential calling plan or agree to a change in the procedure through which they may seek to exercise their exemption as a rural telephone company from certain interconnection requirements.

        Under either plan, pricing caps will not apply to bundled services or regulated services offered to customers under special contracts. Both plans will require local exchange carriers to meet certain minimum service quality standards. Local exchange carriers that initially choose to be regulated under the Price Cap Plan may make an annual election to move to the Price Flexibility Plan.

19

        Parties to the regulatory proceedings may seek reconsideration or judicial review of the APSC order. Our Alabama RLECs will not be required to elect one of the two new regulatory plans until a written order is issued and the impact on each company can be more accurately assessed. We cannot predict the ultimate outcome of the review process or the impact that it will have on our business and revenue.

        In Missouri, local exchange and exchange access telecommunications services are regulated under rate of return regulation. Since 1996, Missouri law provides for three degrees of regulation for local exchange telecommunications companies: traditional rate of return regulation for certain incumbent local exchange companies; "price cap" regulation for certain exchanges of incumbent local exchange companies; and "competitive classification" for certain services in certain exchanges of incumbent local exchange companies as well as for competitive local exchange companies.

        Mid-Missouri Telephone is an incumbent local exchange company operating as a traditional rate of return company. Its rates were set in its last rate case or earnings review in 1999. Those rates were reviewed in 2002 and remain in effect for the Company's local and exchange access services, presumptively lawful, and presumptively meeting the Company's revenue requirement, until rates are changed in a subsequent rate proceeding. The Company has no ability to change prices for regulated local exchange and exchange access services without completing a rate case. The Company is ineligible to convert to price cap regulation, and is ineligible for competitive classification at this time.

        Since 1996, Missouri law has authorized a Missouri Universal Service Fund to ensure just, reasonable, and affordable rates for reasonably comparable essential local telecommunications services throughout the state. In 2005, the Fund is expected to become operational, on a revenue neutral basis to the company, for low income and disabled customers. A high cost component of the Fund has not been determined.

        Our rates for other services we provide in Alabama and Missouri, including cable, long-distance, and dial-up and high-speed Internet access, are not price regulated. The combined revenues from these non-price regulated services were $6.7 million in 2004, up from $6.0 million in 2003 and $5.0 million in 2002. In 2004, 17.9% of our total revenues were generated from these services, up from 17.7% in 2003 and 16.7% in 2002.

Categories of Operating Expenses

        Our operating expenses are categorized as cost of services; selling, general and administrative expenses; and depreciation and amortization. In addition, we had a one-time write-off of capitalized transaction costs in 2003.

        Cost of services.    This includes expense for salaries, wages and benefits relating to plant operation, maintenance and customer service; other plant operations, maintenance and administrative costs; network access costs; and costs of sales for long distance, cable television, Internet and directory services.

        Selling, general and administrative expenses.    This includes expenses for salaries, wages and benefits and contract service payments (e.g., legal fees) relating to engineering, financial, human resources and corporate operations; information management expenses, including billing; allowance for uncollectibles; expenses for travel, lodging and meals; internal and external communications costs; stock option compensation expense; insurance premiums; stock exchange and banking fees; and postage. Included in selling, general and administrative expenses historically are annual management fees of approximately $0.7 million in 2002, $0.9 million in 2003 and $1.0 million in 2004 payable to Seaport Capital Partners II, L.P. and its affiliates, or Seaport Capital. These fees were terminated on December 21, 2004 in conjunction with our initial public offering. The incremental selling, general and administrative expenses associated with being a public company will replace these fees.

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        Write-off of capitalized transaction costs.    This consists of expenses in 2003 associated with a proposed financing transaction not consummated and includes associated legal and accounting fees.

        Depreciation and amortization.    This includes depreciation of our telecommunications, cable and Internet networks and equipment, and amortization of intangible assets. Prior to January 1, 2002, when we implemented the Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, or SFAS 142, this expense category also included amortization of goodwill relating to our acquisitions of Otelco, Brindlee and Hopper. Certain of these amortization expenses continue to be deductible for tax purposes.

Our Ability to Control Operating Expenses

        We strive to control expenses in order to maintain our strong operating margins. As our revenue shifts to non-regulated services, operating margins decrease reflecting the lower margins associated with these more competitive services. As an example, the cost of services as a percentage of revenue has increased each year from 2002 to 2004, but the absolute dollars available to cover all other expenses after these service costs increased $4.9 million. We expect to control expenses while we continue to grow our business.

Results of Operations

        The following table sets forth our results of operations as a percentage of total revenues for the periods indicated.

			Years Ended December 31
			2002		2003		2004
Revenues
	Local service		43.1	%	38.8	%	37.6	%
	Network access		40.2		43.5		44.5
	Long distance and other telephone services		7.4		7.6		7.1
	Cable television		5.3		5.2		4.9
	Internet		4.0		4.9		5.9
		Total revenues	100.0	%	100.0	%	100.0	%
Operating expenses
	Cost of services and products		21.2	%	22.2	%	23.7	%
	Selling, general and administrative expenses		12.7		15.0		20.6
	Write-off of capitalized transaction costs		—		3.0		—
	Depreciation and amortization		16.3		16.2		19.4
		Total operating expenses	50.2		56.4		63.7
	Income from operations		49.8		43.6		36.3
Other income (expense)
	Interest expense		(15.3	)	(10.0	)	(9.9	)
	Other income		2.5		0.8		0.6
		Total other expense	(12.8	)	(9.2	)	(9.3	)
	Income before income taxes		37.0		34.4		27.0
Income tax expense			(12.8	)	(12.2	)	(10.6	)
Income before accretion expense			24.2		22.2		16.4
Accretion of Class B common convertible to senior subordinated notes			—		—		—
Net income			24.2	%	22.2	%	16.4	%

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Year ended December 31, 2004 compared to year ended December 31, 2003

        Total Revenues.    Total revenues grew 10.4% in 2004 to $37.3 million from $33.8 million in 2003. The table below provides the components of our revenues for 2004 compared to 2003.

		Year Ended December 31,				Change
		2003		2004		Amount		Percent
		(dollars in thousands)
Local service		$	13,090	$	13,998	$	908	6.9	%
Network access			14,701		16,602		1,901	12.9
Long distance and other telephone services			2,571		2,659		88	3.4
Cable television			1,748		1,818		70	4.0
Internet			1,645		2,189		544	33.1
	Total	$	33,755	$	37,266	$	3,511	10.4

Local service.    Local service revenue in 2004 grew 6.9% to $14.0 million from $13.1 million in 2003. This increase was attributable to an increase of $1.1 million from the full year effect of the acquisition of Blountsville offset by a reduction of $0.2 million from an access line loss by our other rural local exchange carriers. The company lost 1.2% of its access lines, partially caused by increased penetration of our high-speed Internet service which resulted in the loss of some second access lines used by customers for dial-up Internet access.

Network access.    Network access revenue in 2004 grew 12.9% to $16.6 million from $14.7 million in 2003. This increase was attributable to an increase of $1.3 million from the full year effect of the acquisition of Blountsville, $0.2 million from the acquisition of Mid-Missouri, and $0.4 million associated with special access trunks, interexchange carrier traffic, and other miscellaneous items.

Long distance and other telephone services.    Long distance and other telephone services revenue in 2004 increased 3.4% to $2.7 million from $2.6 million in 2003. This increase was due to the addition of over 1,200 long distance customers in Alabama, the addition of almost 1,000 customers associated with the acquisition of Mid-Missouri on December 21, 2004, and an increase in directory advertising and inside wire maintenance revenue, partially offset by a reduction on other carrier billing and collection agreements.

Cable television.    Cable television revenue in 2004 increased 4.0% to $1.8 million from $1.7 million in 2003. The increase was due to growth in premium and pay per view services, the partial year impact of a $2.00 per month increase in basic cable prices, and the addition of 370 customers associated with the acquisition of Mid-Missouri on December 21, 2004.

Internet.    Internet revenue in 2004 increased 33.1% to $2.2 million from $1.6 million in 2003. This increase was attributable to the addition of almost 1,200 new high-speed Internet customers in Alabama and the addition of 115 high-speed and 13,079 dial-up Internet customers associated with the acquisition of Mid-Missouri on December 21, 2004.

        Operating expenses.    Operating expenses in 2004 increased 24.7% to $23.7 million from $19.0 million 2003. The increase was primarily attributable to the purchase of Blountsville, one-time

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initial public offering and debt retirement costs, employee stock option expenses, and increased costs associated with higher Internet and long distance revenues.

		Year Ended December 31,				Change
		2003		2004		Amount			Percent
		(dollars in thousands)
Cost of services		$	7,488	$	8,832	$	1,344		17.9	%
Selling, general and administrative expenses			5,061		7,677		2,616		51.7
Write-off of capitalized transaction costs			1,005		—		(1,005	)	(100.0	)
Depreciation and amortization			5,482		7,228		1,746		31.8
	Total	$	19,036	$	23,737	$	4,701		24.7

Cost of services.    The cost of services increased 17.9% to $8.8 million in 2004 from $7.5 million in 2003. The full year effect of the acquisition of Blountsville and partial year of Mid-Missouri accounted for $0.9 million of this increase. The balance of the increase was attributable to the higher costs associated with the increase in Internet and long distance customers.

Selling, general and administrative expenses.    Selling, general and administrative expenses increased 51.7% to $7.7 million in 2004 from $5.1 million in 2003. One-time selling shareholder expenses associated with our initial public offering, stock options expense, and increased public company insurance costs accounted for $2.1 million of the increase. The full year effect of the acquisition of Blountsville and the associated management fees paid to a related party accounted for $0.6 million of this increase.

Depreciation and amortization.    Depreciation and amortization increased 31.8% to $7.2 million in 2004 from $5.5 million in 2003. The write-off of existing loan costs associated with the replacement of long term notes payable accounted for $1.0 million of the increase. The balance of the increase was due to the acquisition of Blountsville and increased high-speed Internet equipment.

        Interest expense.    Interest expense increased 8.7% to $3.7 million in 2004 from $3.4 million in 2003. The average outstanding balance declined by $6.1 million on our existing long-term notes payable prior to their repayment on December 21, 2004. Coupled with relatively stable interest rates, this reduced interest expense by $0.2 million. The new senior and senior subordinated debt associated with our initial public offering generated approximately $0.5 million in additional interest expense.

        Other income.    Other income decreased 16.0% to $0.2 million in 2004 from $0.3 million in 2003. The decline was primarily attributable to the reduced patronage dividend income from the Rural Telephone Finance Cooperative as a result of our refinancing of our notes payable with another institution.

        Income taxes.    Income taxes in 2004 declined 3.9% to $3.9 million from $4.1 million in the 2003. Our 2004 effective income tax rate increased significantly due to the impact of the non-deductible initial public offering expenses of $1.5 million. Our effective tax rate, exclusive of these expenses, was approximately 35.4% and 39.2% for 2003 and 2004 respectively.

        Accretion of Class B common convertible to senior subordinated notes.    Our Class B common stock were issued to the existing equity holders coincident with our initial public offering on December 21, 2004. These shares represent their retained interest in the company. They do not receive any dividends and will convert into IDSs not later than December 21, 2009. The discount will be accreted over two years which is the length of time up to the earliest date the Class B common stock could be exchanged for IDSs.

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        Net income.    As a result of the foregoing, net income in 2004 decreased 18.4% to $6.1 million from $7.5 million in 2003.

Year ended December 31, 2003 compared to year ended December 31, 2002

        Total Revenues.    Total revenues grew 13.0% in 2003 to $33.8 million from $29.9 million in 2002. The table below provides the components of our revenues for 2003 compared to 2002.

		Year Ended December 31,				Change
		2002		2003		Amount		Percent
		(dollars in thousands)
Local service		$	12,882	$	13,090	$	208	1.6	%
Network access			12,003		14,701		2,698	22.5
Long distance and other telephone services			2,197		2,571		374	17.0
Cable television			1,586		1,748		162	10.2
Internet			1,202		1,645		443	36.9
	Total	$	29,870	$	33,755	$	3,885	13.0

Local service.    Local service revenue in 2003 grew 1.6% to $13.1 million from $12.9 million in 2002. This increase was attributable to an increase of $1.1 million from the acquisition of Blountsville, offset by a decrease of $0.1 million from an access line loss of 2.2%, or 575 lines, by our three other rural local exchange carriers partially caused by the loss of some secondary access lines as customers migrated from dial-up to high-speed Internet access and thereby eliminated the need for certain second access lines, $0.4 million in area calling service due to a decline in minutes of use from our local calling plans, and $0.4 million from a reclassification of revenue from local service to network access.

Network access.    Network access revenue in 2003 increased 22.5% to $14.7 million from $12.0 million in 2002. This increase was attributable to an increase of $1.4 million from the acquisition of Blountsville, $0.7 million from the full year effect of utilizing the Company's toll switch to serve as the point of exchange for long distance calling traffic to and from its operating companies which resulted in additional revenue from long distance carriers starting in June 2002, $0.4 million from a reclassification of revenue from local service to network access and $0.2 million in higher end user access fees.

Long distance and other telephone services.    Long distance and other telephone services revenue in 2003 increased 17.0% to $2.6 million from $2.2 million in 2002. This increase was due to an increase of $0.2 million from the increase of 3,191 long distance customers during the year and $0.2 million from increased directory advertising and inside wire maintenance revenues.

Cable television.    Cable television revenue in 2003 increased 10.2% to $1.7 million from $1.6 million in 2002. This increase was due to a 5.4% growth in our cable television customers as a result of the expansion of our cable service area, the full year impact of a $3.00 per month price increase to cable television customers beginning July 2002 and new digital and premium packages introduced in March 2002.

Internet.    Internet revenue in 2003 increased 36.9% to $1.6 million from $1.2 million in 2002. This increase was attributable to an increase in the availability of high-speed Internet access service to additional areas of our territory and the successful marketing of the service in new and existing service areas, generating 824 new high-speed Internet customers during this period.

        Operating expenses.    Operating expenses for 2003 increased 26.7% to $19.0 million from $15.0 million in 2002. This increase is primarily attributable to the purchase of Blountsville, one time expenses of $1.0 million associated with a proposed financing that was not consummated, increased

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costs associated with higher Internet, cable television and long distance revenues and higher non-cash stock option compensation expense.

		Year Ended December 31,				Change
		2002		2003		Amount		Percent
				(dollars in thousands)
Cost of services		$	6,346	$	7,488	$	1,142	18.0	%
Selling, general and administrative expenses			3,796		5,062		1,266	33.3
Write-off of capitalized transaction costs			—		1,005		1,005
Depreciation and amortization			4,881		5,482		601	12.3
	Total	$	15,023	$	19,037	$	4,013	26.7

Cost of services.    The cost of services increased 18.0% to $7.5 million in 2003 from $6.3 million in 2002. The acquisition of Blountsville added $0.7 million. The balance of the increase is attributable to higher costs associated with the increase in Internet ($0.2 million) and long distance ($0.1 million) customers, higher cable programming costs ($0.1 million) and increased telephone directory costs ($0.1 million).

Selling, general and administrative expenses.    Selling, general and administrative expenses increased 33.3% to $5.1 million in 2003 from $3.8 million in 2002. The acquisition of Blountsville accounted for $0.6 million of this increase. The balance is related to an increase of $0.7 million in non-cash stock option compensation expense.

Write-off of capitalized transaction costs.    These expenses relate to one time charges associated with a proposed financing transaction that was not consummated.

Depreciation and amortization.    Depreciation and amortization increased 12.3% to $5.5 million from $4.9 million in 2002. This increase was due to the acquisition of Blountsville.

        Interest expense.    Interest expense in 2003 decreased 26.2% to $3.4 million from $4.6 million in 2002. The average long-term notes payable outstanding was $84.4 million in 2003 compared to $87.1 million in 2002. In addition, the average interest rate on our debt decreased from 5.2% in 2002 to 4.0% in 2003.

        Other income.    Other income in 2003 decreased 64.8% to $0.3 million from $0.8 million in 2002. This was attributable to the reduction of $0.5 million in patronage dividend income from the Rural Telephone Finance Cooperative as a result of our refinancing of our notes payable with another institution.

        Income taxes.    Income taxes in 2003 increased 7.6% to $4.1 million from $3.8 million in 2002. In addition to an increase in taxable income, the effective income tax rate for the year ended December 31, 2003 was 35.4% compared to 34.7% in the prior year. The increase in the effective tax rate in 2003 was related to higher marginal tax rates as the net operating loss carryforward was fully utilized in 2003.

        Net income.    As a result of the foregoing, net income in 2003 increased 4.1% to $7.5 million from $7.2 million in 2002.

Liquidity and Capital Resources

        Having completed the transactions associated with our initial public offering, our liquidity needs will arise primarily from: (i) interest payments related to our credit facility and our senior subordinated notes; (ii) capital expenditures, which are expected to be approximately $4.3 million in 2005;

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(iii) working capital requirements; (iv) dividend payments on our Class A common stock; and (v) potential acquisitions.

        Cash flows from operating activities for 2004 amounted to $18.3 million compared to $17.1 million for 2003. The increase is primarily due to additional accrued expenses related to completing our initial public offering that had not been paid by the end of the year.

        Cash flows from investing activities for 2004 amounted to $7.7 million compared to $19.0 million for 2003. The acquisition and construction of property and equipment used $3.3 million in 2004, a decrease of $0.5 million from $3.8 million in 2003. In 2003, we purchased Blountsville for $15.2 million, net of cash. In 2004, we purchased an interest rate cap associated with our senior credit facility for $4.7 million.The balance relates to the one-time proceeds from the retirement of an asset and cash acquired in connection with the Mid-Missouri acquisition.

        Cash flows from financing activities for 2004 reflected the change in equity and debt structure of the company associated with our initial public offering. The company repaid $99.8 million in long-term notes payable and issued $88.5 million in 5 and 15 year long-term notes payable. We received $12.7 million in proceeds and incurred fees and costs of $8.0 million for selling IDSs.

        Total capital expenditures in 2004 were $3.3 million, down $0.5 million from $3.8 million in 2003. In 2004, $0.7 million was spent for upgrades to our telephone network and expansion of our cable network and $2.4 million was spent for upgrades to extend the life of existing facilities. Included in our capital expenditures in 2004 were $0.1 million in non-recurring capital expenditures related to our fiber network that connects our telephone companies and $0.1 million in non-recurring capital expenditures related to one-time purchases of equipment for our Internet network. Our management views non-recurring capital expenditures as either one-time capital expenditures or discretionary capital expenditures, which are not necessary to maintain our network infrastructure or operate our business.

        We currently have outstanding $80.0 million under the term loan portion of our credit facility that matures in 2009. Borrowings under term loan the bear interest at three-month LIBOR plus 4.0% (6.53% as of December 31, 2004). The company purchased a five year rate cap as an effective hedge against any increase in interest rates, capping the overall cost at 7% per year for the five years. We also have outstanding an aggregate of $81.1 million senior subordinated notes due 2019 which bear interest at a rate of 13% payable quarterly. Our Class B common stock will be converted to IDSs in not more than five years. At the time of conversion, the IDSs will represent an additional $4.1 million in senior subordinated notes due in 2019. In addition, we currently have a $15.0 million revolving credit facility, which bears interest at a variable rate. No borrowings were outstanding under this facility at December 31, 2004. If unused balances on this credit facility exceed $7.5 million, we are charged with a .0075% fee on the unused balance.

        Both our credit facility and the senior subordinated notes have material covenants based upon Adjusted EBITDA, as defined in the indenture. In our credit facility, senior leverage and fixed charge coverage covenants are calculated based upon Adjusted EBITDA. In the indenture for the senior subordinated notes, our ability to pay dividends on our common stock is dependent in large part on our Adjusted EBITDA. In addition, our ability to incur debt under the indenture for the senior subordinated notes and the credit facility is based on our ability to meet a specified leverage ratio. If we are unable to meet the leverage ratio, our liquidity would be adversely affected to the extent that we intend to rely on additional debt to enhance our liquidity.

        We anticipate that operating cash flow, together with borrowings under our credit facility, will be adequate to meet our currently anticipated operating and capital expenditure requirements for at least the next 12 months. However, our current dividend policy, the increase in our indebtedness and related debt service requirements and our capital expenditure requirements will significantly limit any cash available from operations for other uses for the foreseeable future. We may not retain a sufficient

26

amount of cash to finance growth opportunities or unanticipated capital expenditure needs or to fund our operations in the event of a significant business downturn. We may have to forego growth opportunities or capital expenditures that would otherwise be necessary or desirable if we do not find alternative sources of financing. If we do not have sufficient cash for these purposes, our financial condition and our business will suffer.

Obligations and Commitments

        The following table discloses aggregate information about our contractual obligations as of December 31, 2004, including scheduled interest and principal for the periods in which payments are due (in millions):

		Total		Less than 1 year		1–3 years		3–5 years		More than 5 years
New credit facility
	Term	$	80.0	$	—	$	—	$	80.0	$	—
	Revolver(1)		—		—		—		—		—
Senior subordinated notes(2)			85.2		—		—		—		85.2
Expected interest expense(3)			192.9		16.1		32.8		33.2		110.8
Total contractual cash obligations		$	358.1	$	16.1	$	32.8	$	113.2	$	196.0

(1)

We have a $15.0 million revolving credit facility with a five year maturity available. No amounts were drawn on this facility on December 31, 2004.

(2)

Includes $4.1 million liquidation value of Class B common stock convertible into senior subordinated notes and interest on those notes beginning December 21, 2006, the earliest date they can be converted into IDSs on a one-for-one basis.

(3)

Expected interest payments to be made in future periods reflect anticipated interest payments related to our $80.0 million senior credit facility and our $85.2 million senior subordinated notes, including those associated with our IDSs and those sold separately. We have assumed in the presentation above that we will hold the senior credit facility until maturity in 2009 and the senior subordinated notes until maturity in 2019. No interest payment is included for the revolving credit facility because of the variability and timing of advances and repayments thereunder.

Critical Accounting Policies and Accounting Estimates

        The process of preparing financial statements requires the use of estimates on the part of management. These estimates are based on our historical experience combined with management's understanding of current facts and circumstances. Certain of our accounting policies are considered critical as they are both important to the portrayal of our financial statements and require significant or complex judgment on the part of management. The following is a summary of certain policies considered critical by management.

        Regulatory Accounting.    We follow the accounting for regulated enterprises prescribed by SFAS No. 71, Accounting for The Effects of Certain Types of Regulations, or SFAS 71. 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 71 requires us to depreciate telecommunications property and equipment over the useful lives approved by regulators, which could be different than the useful lives that would otherwise be determined by management. SFAS 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 71 include (i) increasing competition restricting our ability to

27

establish prices that allow us to recover specific costs and (ii) significant changes in the manner in which rates are set by regulators from cost-based regulation to another form of regulation. We periodically review these criteria to determine whether the continuing application of SFAS 71 is appropriate.

        We are subject to reviews and audits by regulatory agencies. The effect of these reviews and audits, if any, will be recorded in the period in which they become known and determinable.

        Intangible Assets and Goodwill.    Intangible assets consist primarily of the value of customer related intangibles. Goodwill represents the excess of total acquisition cost over the assigned value of net identifiable tangible and intangible assets acquired through various business combinations. Due to the regulatory accounting required by SFAS 71, we did not record acquired telecommunications property and equipment at fair value as required by SFAS No. 141, Business Combinations, or SFAS 141. In accordance with 47 CFR 32.2000, the federal regulation governing acquired telecommunications property and equipment, such property and equipment is accounted for at original cost and depreciation and amortization of property and equipment acquired is credited to accumulated depreciation. We have acquired identifiable intangible assets associated with the territories we serve through our acquisitions of various companies. Any excess of the total purchase price over the amounts assigned to net tangible and intangible assets is recorded as goodwill.

        Revenue Recognition.    Revenue for monthly recurring local services is billed in advance to a portion of our customers and in arrears to the balance of our customers. We record our revenue for charges that have not yet been invoiced to our customers as unbilled revenue when services are rendered. We record revenue billed in advance as advance billings and defers recognition until such revenue is earned.

        Network access revenue is derived from several sources. Compensation for interstate access services is received through tariffed access charges filed by the National Exchange Carrier Association, or NECA, with the FCC on behalf of the NECA member companies. These access charges are billed by us to interstate interexchange carriers and pooled with like-revenues from all NECA member companies. A portion of the pooled access charge revenue received by us is based upon our actual cost of providing interstate access service, plus a return on the investment dedicated to providing that service. The balance of the pooled access charge revenue received by us is based upon the nationwide average schedule costs of providing interstate access services. In Alabama and Missouri, compensation for intrastate access services is received through tariffed access charges filed with the APSC and MPSC respectively. These access charges are billed by us to intrastate interexchange carriers and retained by us. In addition, our Alabama companies receive payments for access services provided to BellSouth Telecommunications, Inc., or BellSouth, which serves as the primary intraLATA toll provider to our customers. In addition, Otelco Telephone, Hopper, Brindlee and Blountsville recover a portion of their costs for providing access through the TSF, which is administered by the APSC.

        Long distance service is billed to customers in arrears based on actual usage. We record unbilled long distance revenue as unbilled revenue when services are rendered.

        Cable television and Internet service revenues are recognized when services are rendered.

        We record revenue for charges that have not yet been invoiced to our customers as unbilled revenue when services are rendered. We record revenue billed in advance as advance billing and we defer recognition until we have earned such revenue.

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        Long-Lived Assets.    We review our long-lived assets for impairment at each balance sheet date and whenever events or changes in circumstances indicate that the carrying amount of an asset should be assessed. To determine if an impairment exists, we estimate the future undiscounted cash flows expected to result from the use of the asset being reviewed for impairment. If the sum of these expected future cash flows is less than the carrying amount of the asset, we recognize an impairment loss in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, or SFAS 144. The amount of the impairment recognized is determined by estimating the fair value of the assets and recording a loss for the excess of the carrying value over the fair value.

        Variable Accounting.    We accounted for our option-based compensation plan based on variable accounting in accordance with Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, or APB 25. The option plan included a cashless exercise feature that allowed option holders to provide payment upon exercise of vested options in the form of cash, units or options for units. As a result of applying variable accounting, we recognized compensation expense based on the estimated fair market value of a membership unit at each period and at the offering price of the IDSs upon conversion coincident with our initial public offering on December 21, 2004, at which time all options were exercised. As of December 31, 2004, we do not have an option plan.

        The estimated fair market value of a membership unit at each period for the years ended December 31, 2001, 2002 and 2003 was determined based on using market comparable valuations for public companies in the same industry as us. Based on these comparable companies and their enterprise value to EBITDA multiples at each period, we calculated our enterprise value based on a range of enterprise value to EBITDA multiples supported by the comparable company metrics after taking into account an illiquidity discount. From enterprise value, we calculated the resulting equity value and value per unit to come up with a range of values per unit. We chose an estimated fair market value per unit from within this range.

        Accounting Treatment for Class B Common Stock.    In connection with our conversion, we issued shares of Class B common stock. In general, beginning on December 21, 2006, and subject to a financial test and other conditions, our Class B common stock will be exchangeable at the holder's option for IDSs registered under the Securities Act of 1933. Each share of Class B common stock will be exchangeable for one IDS, subject to certain adjustments. All Class B common stock will convert to IDSs not later than December 21, 2009.

        We recorded the Class B common stock allocable to the potential debt issuance upon exchange outside stockholders' equity in the "mezzanine" section of our consolidated balance sheet based upon the present value of the par amount of the senior subordinated notes discounted for the two year period from their issuance to the date the exchange option is exercisable using the interest rate of the senior subordinated notes. This obligation is labeled "Class B common convertible to senior subordinated notes." During this period, the Class B common convertible to senior subordinated notes will be accreted up to the par amount of the senior subordinated notes which could be issued on or after December 21, 2007. This equals our maximum potential cash obligation at the maturity of the senior subordinated notes assuming the senior subordinated notes are originally issued at par value of $7.50, with a charge for the accretion recorded as a reduction to income available to shareholders.

        We are also accounting separately for the embedded exchange feature of the Class B common stock as a derivative liability. We have recorded the fair market value of the embedded derivative liability with an immediate charge to retained earnings, resulting in a reduction to permanent equity. The derivative liability for the exchange feature of the Class B common stock will be marked to current estimated fair value at each subsequent balance sheet date, with such adjustments recorded as other non-operating income or expense. Upon any actual exchange of Class B common stock for IDSs, the pro rata portion of the Class B common convertible to senior subordinated notes of such exchange and the fair value of the derivative liability associated with the exchange will be reduced and the newly

29

issued senior subordinated notes will be recorded at fair value. Any difference in these amounts would either reduce or increase additional paid-in capital. If the then fair value (i.e., market price) of the senior subordinated notes is above or below the par value of the senior subordinated notes, we will amortize any premium or accrete any discount on a non-cash basis on our consolidated statements of operations from the date that the exchange is made and record it as a permanent debt obligation of our company through the maturity date of the senior subordinated notes whereby the carrying value of the senior subordinated notes at maturity would equal the par value of the senior subordinated notes. Following any exchange of a share of Class B common stock for IDSs, the portion of such exchange (the permanent equity portion of the Class B common stock) representing the exchange into shares of Class A common stock would be reallocated as par and additional paid-in capital to the Class A common stock issued upon the exchange.

        To the extent that holders exercise their exchange rights, the portion of the Class B common stock included in temporary equity will be reclassified to debt and the associated interest payments will be included in interest expense. Diluted earnings per share of Class A common stock assumes all shares of Class B common stock are converted into the equivalent number of IDSs. Accretion of the discount on the Class B common convertible to senior subordinated notes reduces the income available to Class A common stockholders for purposes of computing earnings per share.

        Income taxes.    The Company accounts for income taxes using the asset and liability approach in accordance with SFAS No. 109, Accounting for Income Taxes, or SFAS 109. The asset and liability approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

        The provision for income taxes consists of an amount for the taxes currently payable and a provision for the tax consequences deferred to future periods.

        Accounting for Interest Rate Cap.    Our primary objective for holding derivative financial instruments is to manage future interest rate risk. Our derivative instruments are recorded at fair value and are reported as other assets.

        We use derivative financial instruments to reduce our exposure to interest rate volatility. Coincident with our initial public offering, we entered into a five year interest rate cap agreement in connection with the floating rate term loan under our credit facility. The interest rate cap agreement will effectively limit the interest expense under the term loan, which floats based on LIBOR, to not more than 7.0% per annum for the five year term of our credit facility. This hedge is considered to be effective as all the critical terms noted in the interest rate cap are be identical to the terms of our credit facility and thus qualify for hedge accounting and are accounted for at fair value under SFAS No. 133.

        We reflect a charge to interest expense for the portion of the interest rate cap hedge that has expired in each period. Changes in the fair value of the derivative asset will be reflected in other comprehensive income in each respective period.

New Accounting Standards

        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, or SFAS 145. Among other provisions, this statement rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt or SFAS 4, which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect. As a result, the criteria in Accounting Policy Board Opinion No. 30, Reporting the Results of Operations—Reporting the

30

Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions of APB 30, which requires gains and losses on extinguishments of debt to be classified as income or loss from continuing operations, will now be applied. We adopted this standard effective January 1, 2003, the earliest effective date applicable.

        In December 2002, the FASB issued SFAS No. 148, Accounting for Stock Based Compensation—Transition and Disclosure, an Amendment to FASB Statement 123, or SFAS 148. SFAS 148 amends SFAS No. 123, Accounting for Stock Based Compensation, or SFAS 123, to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of SFAS 123 to require prominent disclosure in both annual and interim financial statements. Although we have adopted the disclosure provision required by SFAS 148, we do not expect to voluntarily adopt the fair value-based method of accounting for our employee option-based compensation plan. The adoption of SFAS 148 did not have a material impact on our financial statements. In conjunction with our initial public offering, all options were extinguished through the issuance of IDSs for their value. We do not currently have any options or option plan.

        FASB Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, or FIN 45, was issued in November 2002 and clarifies disclosure and recognition/measurement requirements related to certain guarantees. The disclosure requirements are effective for financial statements issued after December 15, 2002, and the recognition/measurement requirements are effective on a prospective basis for guarantees issued or modified after December 31, 2002. The application of the requirements of FIN 45 did not have any impact on our financial position or results of operations.

        In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51, or FIN 46. In December 2003, the FASB revised Interpretation 46, which clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, or ARB 51. As per ARB 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 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. FIN 46 clarifies applicability of ARB 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. FIN 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. FIN 46 is applicable for financial statements issued for reporting periods that end after March 15, 2004. We are in the process of reviewing the recent provisions of FIN 46. Any potential changes, as a result of implementation of FIN 46, are not expected to have a significant impact on our financial statements.

        In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity, or SFAS 150. SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS 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 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 SFAS 150, we met the definition of a non-public entity for timing

31

of its implementation. The adoption of SFAS 150 did not have a material impact on our financial statements.

Item 7A.    Quantitative and Qualitative Disclosures about Market Risk

        Our short-term excess cash balance is invested in short-term commercial paper. We do not invest in any derivative or commodity type instruments. Accordingly, we are subject to minimal market risk on our investments.

        We have the ability to borrow up to $15.0 million under a revolving loan facility. The interest rate is variable and, accordingly, we are exposed to interest rate risk, primarily from the change in LIBOR or a base rate. Currently, we have no loans drawn under this facility.

Risk Factors Affecting Our Operating Performance

Our business is concentrated geographically and dependent on regional economic conditions.

        Our business is conducted primarily in north central Alabama and central Missouri and, accordingly, our business is dependent upon the general economic conditions of these regions. There can be no assurance that future economic conditions in these regions will not impact demand for our services or cause residents to relocate to other regions, which may adversely impact our business, revenue and cash flow.

The telecommunications industry has experienced increased competition.

        Although we have historically experienced no wireline telephone competition in our rural local exchange carrier territories, the market for telecommunications services is highly competitive. Certain competitors benefit from brand recognition and financial, personnel, marketing and other resources that are significantly greater than ours. 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. Increased competition from existing and new entities could have an adverse effect on our business, revenue and cash flow.

        In our markets, we face competition from wireless carriers. We believe that we have experienced a minor decrease in our minutes of use, primarily due to flat rate "free minutes and long distance calling" offers from certain wireless carriers. As wireless carriers continue to build-out their networks, we may experience increased competition, which could have an adverse effect on our business, revenue and cash flow.

        Our current and potential competitors could include competitive local exchange carriers and other providers of telecommunications and information services, including Internet and voice over Internet protocol, or VoIP, service providers, wireless carriers, satellite television companies, alternate access providers, neighboring incumbent local exchange carriers, long distance companies, electric utilities and cable television companies that may provide services competitive with those products and services that we provide or intend to provide.

        Although our long distance operations have historically been modest in relation to our competitors, we intend to continue to expand our long distance business within our territories, through marketing to our existing telephone services customers. Our existing long distance competitors can be expected to respond to such initiatives, including those with significantly greater resources than us. There can be no assurance that our revenue from long distance services will not decrease in the future as competition and/or the cost of providing long distance services increase or should market prices potentially decline.

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        The FCC has recently adopted regulations requiring wireline telephone carriers to provide portability of telephone numbers to wireless carriers when a customer substitutes wireless service for wireline service. Wireline to wireless portability may enhance the competitive position of wireless carriers.

We may not be able to integrate new technologies and provide new services in a cost-efficient manner.

        The telecommunications 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 changes on our competitive position, our profitability or the industry generally. Technological developments may reduce the competitiveness of our networks and require additional capital expenditures 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 advances or fail to obtain access to 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. In addition, delivery of new services in a cost-efficient manner depends upon many factors, and we may not generate anticipated revenue from such services.

We may have difficulty acquiring businesses, managing growth and integrating acquired businesses.

        We have grown rapidly by acquiring other businesses. Since 1999, we have acquired five rural local exchange carriers businesses. We face competition acquiring rural local exchange carriers, including from businesses that are larger or have access to more financing than us. There can be no assurance that owners of rural local exchange carriers will want to sell at all or to us. If we fail to expand our business, make acquisitions or successfully integrate the operations of any acquired companies with our own operations, the rate of our future growth, if any, will likely be lower than our historical growth rate. There can be no assurance that we will be able to successfully expand our business through acquisitions or otherwise. In addition, the pursuit of future acquisitions could lead to a diversion of resources and management attention from operational matters.

Disruptions in our networks and infrastructure may cause us to lose customers and incur additional expenses.

        To be successful, we will need to continue to provide our customers with reliable and timely service over our networks. We face the following risks to our networks and infrastructure:

•

our territory can have significant weather events which physically damage access lines;



•

our rural geography creates the risk of security breaches, break-ins and sabotage;



•

power surges and outages, computer viruses or hacking, and software or hardware defects which are beyond our control; and



•

unusual spikes in demand or capacity limitations in our or our suppliers' networks.

        Disruptions may cause interruptions in service or reduced capacity for customers, either of which could cause us to lose customers and incur expenses, and thereby adversely affect our business, revenue and cash flow. In addition, the ASPC and/or MPSC could require us to issue credits on customer bills for such service interruptions, further impacting revenue and cash.

Our success depends on a small number of key personnel.

        Our success depends on the personal efforts of a small group of skilled employees and senior management. The rural nature of our service area provides for a smaller pool of skilled telephone

33

employees and increases the challenge of hiring employees from metropolitan areas. Although we believe we will be able to replace our key employees within a reasonable time should the need arise, the loss of key personnel could have a material short-term adverse effect on our financial performance.

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 access line loss due to challenging economic conditions, loss of second lines when we sell high-speed Internet access service and increased competition. Our access line count declined by 1.2% during 2004. We may continue to experience net access line loss in our markets for an unforeseen period of time. Continued access line losses could adversely affect our business and results of operations.

Our performance is subject to a number of other economic and non-economic factors, which we may not be able to predict accurately.

        There are factors that may be beyond our control that could affect our operations and business. Such factors include adverse changes in the conditions in the specific markets for our products and services, the conditions in the broader market for telecommunications services and the conditions in the domestic and global economies, generally.

        Although our performance is affected by the general condition of the economy, not all of our services are affected equally. Local services revenue is generally linked to relatively consistent variables such as population changes, housing starts and general economic activity levels in the areas served. Internet and cable television revenue is generally related to more variable factors such as changing levels of discretionary spending on entertainment, the adoption of e-commerce and other on-line activities by our current or prospective customers. It is not possible for management to accurately predict all of these factors and the impact of such factors on our performance.

        Changes in the regulatory, competitive and technological environments may also impact our ability to increase revenue and/or earnings from the provision of local wireline services. We may therefore have to place increased emphasis on developing and realizing revenue through the provision of new and enhanced services with higher growth potential. In such a case, there is a risk that these revenue sources as well as our cost savings efforts through further efficiency gains will not grow or develop at a fast enough pace to offset slowing growth in local services. It is also possible that as we invest in new technologies and services, demand for those new services may not develop. There can be no assurance that we will be able to successfully expand our service offerings through the development of new services, and our efforts to do so may have a material adverse effect on our financial performance.

Changes in the regulation of the telecommunications industry could adversely affect our business, revenue or cash flow.

        We operate in a heavily regulated industry. The majority of our revenue has been generally supported by and subject to regulation at the federal, state and local level. Certain federal, Alabama and Missouri regulations and local franchise requirements have been, are currently, and may in the future be, the subject of judicial proceedings, legislative hearings and administrative proposals. Such proceedings may relate to, among other things, the rates we may charge for our local, network access and other services, the manner in which we offer and bundle our services, the terms and conditions of interconnection, federal and state universal service funds (including USF HC), unbundled network elements and resale rates, and could change the manner in which telecommunications companies operate. We cannot predict the outcome of these proceedings or the impact they will have on our business, revenue and cash flow.

34

Governmental authorities could decrease network access charges or rates for local services, which would adversely affect our revenue.

        Approximately 19.2% of our revenue for the year ended December 31, 2004, was derived from network access charges paid by long distance carriers for use of our facilities to originate and terminate interstate and intrastate telephone calls. The interstate network access rates that we can charge are regulated by the FCC, and the intrastate network access rates that we can charge are regulated by the APSC and the MPSC. Those rates may change from time to time. The FCC has reformed and continues to reform the federal network access charge system. It is unknown at this time what additional changes, if any, the FCC, APSC or MPSC may adopt. Such regulatory developments could adversely affect our business, revenue and cash flow.

        The local services rates and intrastate access charges charged by our rural local exchange carriers are regulated by state regulatory commissions which have the power to grant and revoke authorization to companies to provide telecommunications services and to impose other conditions and penalties. If we fail to comply with regulations set forth by the APSC or the MPSC, we may face revocation of our authorizations in Alabama or Missouri, as applicable, or other conditions and penalties. The APSC is considering several proposals that would result in greater pricing flexibility for our Alabama rural local exchange carriers in regard to most services, as well as the expansion of local calling options. It is possible that a new plan would require us to reduce our rates, forego future rate increases, provide greater features as part of our basic service plan or limit our rates for certain offerings. We cannot predict the ultimate outcome of the review process or the impact that it will have on our business, revenue and cash flow.

        Mid-Missouri Telephone charges rates for local services and intrastate access service based in part upon a rate-of-return authorized by the MPSC. These authorized rates are subject to audit by the MPSC at any time and may be reduced if the MPSC finds them excessive. If Mid-Missouri Telephone is ordered to reduce its rates or if its applications to increase rates are denied or delayed, our business, revenue and cash flow may be negatively impacted.

The United States federal income tax consequences of the purchase, ownership and disposition of IDSs are unclear.

        No statutory, judicial or administrative authority directly addresses the treatment of the IDSs or the senior subordinated notes, for United States federal income tax purposes. As a result, the United States federal income tax consequences of the purchase, ownership and disposition of IDSs and senior subordinated notes are unclear. The IRS or the courts may take the position that the IDSs are a single security classified as equity, which could adversely affect the amount, timing and character of income, gain or loss in respect of your investment in IDSs or senior subordinated notes, and materially increase our taxable income and, thus, our United States federal and applicable state income tax liability. This would reduce our after-tax cash flow and materially and adversely impact our ability to make interest and dividend payments on the senior subordinated notes and the common stock.

A reduction in Universal Service Fund High Cost support would adversely affect our business, revenue and cash flow.

        Hopper, Blountsville and Mid-Missouri Telephone receive federal USF HC revenue to support their high cost of operations. Such support payments represented approximately 9.2% of our revenue for the year ended December 31, 2004, and were based upon each participating rural local exchange carrier's average cost per loop as compared to the national average cost per loop. These support payments fluctuate based upon the historical costs of our participating rural local exchange carriers as compared to the national average cost per loop. If our participating rural local exchange carriers are

35

unable to receive support from the USF HC, or if such support is reduced, our business, revenue and cash flow would be negatively affected.

        During the past two years, the FCC made certain modifications to the USF HC support system that changed the sources of support and the method for determining the level of support. There is a cap on the total USF HC payments nationwide. It is unclear whether the changes in methodology will continue to accurately reflect the costs incurred by our participating rural local exchange carriers, and whether they will provide for the same amount of USF HC support that we have received in the past. In addition, a number of issues regarding source and amount of contributions to, and eligibility for, payments from USF HC are currently being reviewed by the FCC. On February 25, 2005, the FCC adopted several Federal-State Joint Board recommendations to augment the requirements for telecommunications carriers seeking designation as eligible telecommunications carriers, or "ETCs," and urged states exercising ETC designation authority to take the same steps. Applicants for ETC designation by the FCC will now be required to provide a five-year plan for utilization of the high-cost universal service support to be received, demonstrate an ability to remain functional during emergency situations, demonstrate an ability to satisfy consumer protection and service quality standards, offer local service plans comparable to that provided by the incumbent local exchange carrier, and acknowledge the possibility of being required to provide equal access to long distance service providers if only one ETC remains designated within the service area. Those carriers already designated as ETCs by the Commission will be required to demonstrate compliance with these standards by October 1, 2006. Additional annual certification and reporting requirements were also adopted. Similarly, the FCC in September 2004 asked the Federal-State Joint Board on Universal Service to review the federal rules relating to universal service support mechanisms for rural carriers, including addressing the relevant costs and the definition of rural telephone company for the purpose of determining the appropriate universal service support. The outcome of these proceedings or other regulatory changes could affect the amount of USF HC support that we receive, and could have an adverse effect on our business, revenue and cash flow. If a wireless or other telecommunications carrier receives ETC status in our service areas or even outside of our service areas, the amount of support we receive from the USF HC could decline under current rules, and under some proposed USF HC rule changes, could be significantly reduced. Recently, some disbursements to another class of universal service fund recipients, schools and libraries, were suspended to comply with the Anti-Deficiency Act (31 U.S.C. § 1341) (2000)). Some analysts have suggested that disbursements under the USF HC could also be suspended to comply with the Anti-Deficiency Act. We cannot predict the impact these actions may have on us, including on our receipts from, and contributions to, the universal service fund.

If we were to lose our protected status under interconnection rules, we would incur additional administrative and regulatory expenses and face more competition.

        As a "rural telephone company" under the Communications Act, each of our RLECs is exempt from the obligation to lease its unbundled facilities to competitive local exchange carriers, to offer retail services at wholesale prices for resale, to permit competitive collocation at its facilities and to comply with certain other requirements applicable to larger incumbent local exchange carriers. However, we eventually may be required to comply with these requirements in some or all of our service areas if: (i) we receive a bona fide request from a telecommunications carrier; and (ii) the APSC or MPSC, as applicable, determines that it is in the public interest to impose such requirements. In addition, we may be required to comply with some or all of these requirements in order to achieve greater pricing flexibility from state regulators. If we are required to comply with these requirements, we could incur additional administrative and regulatory expenses and face more competition which could adversely affect our business, revenue and cash flow.

36

Changes in the regulation of cable television franchises and services may adversely impact our cable television operations.

        Cable television systems are operated under franchises granted by local government authorities. Franchises may contain various conditions, including time limitations on commencement or completion of construction, approval of initial fees charged to customers for basic service, the number of channels offered and the types of programming to be provided. The regulation of cable television at the federal, state and local levels is subject to a political process and has been in constant flux over the past decade. This process continues in the context of new legislative proposals and the adoption or deletion of administrative regulations and policies. We anticipate further material developments in these areas, but cannot anticipate their direction or impact on our cable television operations. In addition, the regulatory approach to the utilization of cable television facilities for the provision of services beyond video programming is also in flux, rendering it impossible to anticipate the extent or scope of future regulatory requirements or limitations.

Our current dividend policy may negatively impact our ability to maintain or expand our network infrastructure and finance capital expenditures or operations.

        Our board of director has adopted a dividend policy pursuant to which substantially all of the cash generated by our business in excess of operating needs, interest and principal payments on indebtedness, and capital expenditures sufficient to maintain our network infrastructure, would in general be distributed a s regular quarterly cash dividends to the holders of our Class A common stock and not be retained by us. As a result we may not have a sufficient amount of cash to fund our operations in the event of a significant business downturn, finance growth of our network or unanticipated capital expenditure needs. We may have to forego growth opportunities or capital expenditures that would otherwise be necessary or desirable if we do not find alternative sources of financing. If we do not have sufficient cash for these purposes, our financial condition and our business will suffer.

We are subject to restrictive debt covenants that limit our business flexibility by imposing operating and financial restrictions on our operations.

        The agreements governing our indebtedness impose significant operating and financial restrictions on us. These restrictions prohibit or limit, among other things:

•

the incurrence of additional indebtedness and the issuance of preferred stock and certain redeemable capital stock;



•

a number of other restricted payments, including investments and acquisitions;



•

specified sales of assets;



•

specified transactions with affiliates;



•

the creation of a number of liens;



•

consolidations, mergers and transfers of all or substantially all of our assets; and



•

our ability to change the nature of our business.

Item 8.    Financial Statements and Supplementary Data

Consolidated Financial Statements:

        Report of Independent Registered Public Accounting Firm

        Consolidated Balance Sheets

        Consolidated Statements of Income

        Consolidated Statements of Changes in Stockholders' Equity

        Consolidated Statements of Cash Flow

        Notes to Consolidated Financial Statements

37

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Otelco Inc.
Oneonta, Alabama

        We have audited the accompanying consolidated balance sheets of Otelco Inc. as of December 31, 2004 and 2003 and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Company'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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included 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 Company'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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Otelco, Inc. at 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/ BDO SEIDMAN, LLP

Atlanta, Georgia
March 18, 2005

38

OTELCO INC.

CONSOLIDATED BALANCE SHEETS

					December 31,
					2003		2004
Assets
	Current assets
		Cash and cash equivalents			$	1,650,307	$	5,406,545
		Accounts receivable:
			Due from subscribers, net of allowance for doubtful accounts of $130,400 and $160,270 respectively.			1,136,339		1,179,074
			Unbilled receivables			1,544,175		1,884,405
			Other			1,281,606		1,522,945
		Materials and supplies				1,202,364		1,039,910
		Prepaid expenses				396,891		537,784
		Deferred income taxes				890,448		652,625
				Total current assets		8,102,130		12,223,288
	Property and equipment, net					37,919,405		48,195,568
	Goodwill					101,903,148		119,714,094
	Intangible assets, net					514,285		2,050,943
	Investments					1,348,178		1,298,852
	Deferred financing costs					934,217		8,020,743
	Interest rate cap					—		4,723,135
				Total assets	$	150,721,363	$	196,226,623
Liabilities and Stockholders' Equity
	Current liabilities
		Accounts payable				1,285,683		2,690,351
		Accrued expenses				3,427,996		1,862,604
		Advance billings and payments				595,561		1,141,013
		Customer deposits				235,114		220,209
		Current portion of long-term notes payable				7,727,432		—
				Total Current Liabilities		13,271,786		5,914,177
	Deferred income taxes					7,980,506		13,053,226
	Other liabilities					204,753		196,644
				Total deferred tax and other liabilities		8,185,259		13,249,870
	Long-term notes payable, net of current portion					75,345,896		161,075,498
	Derivative liability					—		2,788,716
	Class B common convertible to senior subordinated notes					—		3,212,528
	Stockholders' Equity
		Class A Common Stock, $.01 par value-authorized 20,000,000 shares; issued and outstanding at December 31, 2004, 9,676,733 shares				—		96,767
		Class B Common Stock, $.01 par value-authorized 800,000 shares; issued and outstanding at December 31, 2004, 544,671 shares				—		5,447
		Additional paid in capital				—		12,435,800
		Membership units, no par, 3,000,000 units authorized and 2,512,699 issued and outstanding				39,000,010		—
		Retained earnings (deficit)				14,918,412		(2,597,315	)
		Accumulated other comprehensive income				—		45,135
				Total stockholders' equity		53,918,422		9,985,834
				Total liabilities and stockholders' equity	$	150,721,363	$	196,226,623

The accompanying notes are an integral part of these consolidated financial statements.

39

OTELCO INC.

CONSOLIDATED STATEMENTS OF INCOME

			Years Ended December 31,
			2002			2003			2004
Revenues
	Local service		$	12,882,143		$	13,090,059		$	13,997,938
	Network access			12,003,154			14,700,862			16,602,572
	Long distance and other telephone services			2,196,772			2,571,311			2,659,418
	Cable television			1,586,140			1,747,514			1,817,711
	Internet			1,201,964			1,645,118			2,188,703
		Total revenues		29,870,173			33,754,864			37,266,342
Operating expenses
	Cost of services and products			6,346,073			7,488,091			8,831,951
	Selling, general and administrative expenses			3,795,731			5,061,499			7,676,496
	Write-off of capitalized transaction costs			—			1,004,965			—
	Depreciation and amortization			4,881,489			5,481,779			7,228,472
		Total operating expenses		15,023,293			19,036,334			23,736,919
	Income from operations			14,846,880			14,718,530			13,529,423
Other income (expense)
	Interest expense			(4,585,431	)		(3,383,876	)		(3,678,691	)
	Other income			755,403			265,537			223,104
		Total other expense		(3,830,028	)		(3,118,339	)		(3,455,587	)
	Income before income taxes			11,016,852			11,600,191			10,073,836
Income tax expense				(3,817,438	)		(4,107,275	)		(3,946,625	)
Income before accretion expense			$	7,199,414		$	7,492,916		$	6,127,211
Accretion of Class B common convertible to senior subordinated notes				—			—			(13,348	)
Net income available to common stockholders			$	7,199,414		$	7,492,916		$	6,113,863
Weighted average shares outstanding:
	Basic			8,054,841			8,054,841			8,103,720
	Diluted			8,557,304			8,557,304			8,607,455
Basic net income per share			$	0.89		$	0.93		$	0.75
Diluted net income per share			$	0.84		$	0.88		$	0.71

The accompanying notes are an integral part of these consolidated financial statements.

40

OTELCO INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

						Class A Common Stock					Class B Common Stock
																						Accumulated Other Comprehensive Income
			Members' Equity													Additional Paid In Capital			Retained Earnings (Deficit)					Total Stockholders' Equity
						Shares		Amount			Shares		Amount
Balance, December 31, 2001			$	39,000,010															$	226,082				$	39,226,092
Comprehensive income:
	Net income																			7,199,414					7,199,414
		Total comprehensive income																						$	7,199,414
Balance, December 31, 2002			$	39,000,010				$	—				$	—		$	—		$	7,425,496		$	—	$	46,425,506
Comprehensive income:
	Net income																			7,492,916					7,492,916
		Total comprehensive income																							7,492,916
Balance, December 31, 2003			$	39,000,010				$	—				$	—		$	—		$	14,918,412		$	—	$	53,918,422
Comprehensive income:
	Net income																			6,113,863					6,113,863
	Interest rate cap																						45,135		45,135
		Total comprehensive income																							6,158,998
Conversion Of Equity
Conversion of membership units into IDSs and Class B common stock				(39,000,010	)	7,853,994			78,540		489,926			4,899			(22,866,228	)		—			—		(61,782,799	)
Embedded exchange feature of Class B common stock																	—			(2,572,611	)		—		(2,572,611	)
Vesting and conversion into IDSs and Class B common stock of option shareholders						200,847			2,008		12,537			125			(1,581,919	)							(1,579,786	)
Stock options exercised																	3,391,168								3,391,168
Adjust for negative balance APIC																	21,056,979			(21,056,979	)				—
Acquisition of Mid Missouri
Issuance of IDSs and Class B common stock for acquisition and conversion of option holders						856,234			8,562		53,413			534			6,884,642			—			—		6,893,738
Embedded exchange feature of Class B common stock																	(273,475	)		—			—		(273,475	)
Initial Public Offering
Issuance of IDSs						830,776			8,308		—			—			6,388,667			—			—		6,396,975
Repurchase and retirement of IDSs and Class B common stock						(65,118	)		(651	)	(11,205	)		(111	)		(671,725	)		—			—		(672,487	)
Embedded exchange feature of Class B common stock																	57,370			—			—		57,370
Discount on repurchase of shares																	193,553								193,553
Capitalized transactions costs offsett against proceeds of offering																	(143,232	)		—			—		(143,232	)
Balance, December 31, 2004			$	—		9,676,733		$	96,767		544,671		$	5,447		$	12,435,800		$	(2,597,315	)	$	45,135	$	9,985,834

The accompanying notes are an integral part of these consolidated financial statements.

41

OTELCO INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

					2002			2003			2004
Cash flows from operating activities:
	Net income (loss)				$	7,199,414		$	7,492,916		$	6,113,863
	Adjustments to reconcile net income to cash flows from operating activities:
		Depreciation				4,530,054			5,107,110			5,837,033
		Amortization				351,435			374,669			1,391,438
		Stock based compensation expense				304,807			1,025,934			1,493,985
		Accretion expense				—			—			13,348
		Loss on sale of assets				—			50,459			—
		Provision for deferred income taxes				3,817,438			3,152,980			3,042,751
		Provision for uncollectible revenue				121,456			31,243			107,224
		Changes in assets and liabilities; net of assets and liabilities acquired:
			Accounts receivables			(80,348	)		795,801			214,940
			Material and supplies			334,642			42,001			200,232
			Prepaid expenses and other assets			(81,118	)		(213,230	)		(16,716	)
			Accounts payable and accrued liabilities			568,583			(756,822	)		(28,271	)
			Advance billings and payments			58,435			36,702			(2,583	)
			Other liabilities			(64,166	)		(17,927	)		(23,014	)
				Net cash from operating activities		17,060,632			17,121,836			18,344,230
Cash flows from investing activities:
	Purchase interest rate cap					—			—			(4,678,000	)
	Acquisition and construction of property and equipment					(4,304,355	)		(3,838,477	)		(3,261,177	)
	Cash received from acquisition											50,633
	Proceeds from retirement of investment					—			—			116,334
	Payment for the purchase of Page & Kiser Communications, Inc., net of cash acquired					—			(15,207,565	)		47,858
				Net cash from investing activities		(4,304,355	)		(19,046,042	)		(7,724,352	)
Cash flows from financing activities:
	Proceeds from long-term notes payable					—			12,000,000			88,500,000
	Loan origination costs and transacation cost					—			(327,836	)		(8,060,735	)
	Repayment of long-term notes payable					(16,129,286	)		(10,419,840	)		(99,787,468	)
	Repurchase and retirement of IDSs and Class B common stock					—			—			(1,090,503	)
	Proceeds from issuances of Income Deposit Securities					—			—			13,718,298
	Direct cost of initial public offering					—			—			(143,232	)
				Net cash from financing activities		(16,129,286	)		1,252,324			(6,863,640	)
Net (decrease) increase in cash and cash equivalents						(3,373,009	)		(671,882	)		3,756,238
Cash and cash equivalents, beginning of period						5,695,198			2,322,189			1,650,307
Cash and cash equivalents, end of period					$	2,322,189		$	1,650,307		$	5,406,545
Supplemental disclosures of cash flow information:
	Interest paid				$	4,163,064		$	4,426,187		$	3,114,381
	Income taxes paid				$	12,500		$	948,000		$	1,581,026
Supplemental disclosures of noncash financing activities:
	Issuance of IDSs and assumption of notes payable in connection with acquisition				$	—		$	—		$	30,540,774
	Issuance of IDSs in connection with option plan				$	—		$	—		$	3,391,168
	Embedded exchange feature of Class B common stock				$	—		$	—		$	2,788,716

        The accompanying notes are an integral part of these consolidated financial statements.

42

1.     Summary of Significant Accounting Policies

Nature of Business

        Otelco's principal line of business is providing local telephone service, long distance, cable television and high-speed and dial-up Internet access. The principal markets for these services are local residential and business customers residing in and adjacent to the exchanges the Company serves in rural Alabama and Missouri. The Company offers various communications services that are sold to economically similar customers in a comparable manner of distribution. The Company views, manages and evaluates the results of its operations from the various communications services as one company and therefore has identified one reporting segment as it relates to providing segment information.

Basis of Presentation and Principles of Consolidation

        The consolidated financial statements include the accounts of Otelco Inc. (the "Company"), its wholly owned subsidiaries Otelco Telecommunications LLC ("OTC"), Otelco Telephone LLC ("OTP"), Hopper Holding Company, Inc. ("HHC"), and Brindlee Holdings LLC ("BH"). HHC's wholly owned subsidiary is Hopper Telecommunications Company, Inc. ("HTC"). BH's owned subsidiary is Brindlee Mountain Telephone Company, Inc. ("BMTC"). On June 30, 2003, the Company purchased Page & Kiser Communications, Inc. ("PKC"), which is reflected in the 2003 results from the date acquired. PKC's wholly owned subsidiary is Blountsville Telephone Company, Inc. ("BTC"). On December 21, 2004, the Company purchased Mid-Missouri Holding Corporation ("MMH"), which is reflected in the 2004 results from the date acquired. MMH's wholly owned subsidiary is Mid-Missouri Telephone Company ("MMT"). MMT is the sole stockholder of Imagination, Inc., which provides internet services in certain locations in Missouri. The accompanying consolidated financial statements include the accounts of the Company and all of its subsidiaries after elimination of all material intercompany balances and transactions.

Use of Estimates

        The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying consolidated financial statements are based upon management's evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying consolidated financial statements.

        Significant accounting estimates include the recoverability of goodwill and long-term assets.

Regulatory Accounting

        The Company follows the accounting for regulated enterprises prescribed by Statement of Financial Accounting Standards (SFAS) No. 71, Accounting for The Effects of Certain Types of Regulations or SFAS 71. 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 71 requires the Company to depreciate telecommunications property and equipment over the useful lives approved by regulators, which could be different than the useful lives that would otherwise be determined by management. SFAS 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 accounting in accordance with SFAS 71 include (1) increasing competition restricting the ability of the Company to establish prices that allow it to recover specific costs and (2) significant changes in the manner in which rates are

43

set by regulators from cost-based regulation to another form of regulation. The Company periodically reviews the criteria to determine whether the continuing application of SFAS 71 is appropriate.

        The Company is subject to reviews and audits by regulatory agencies. The effect of these review and audits, if any, will be recorded in the period in which they become known and determinable.

Intangible Assets and Goodwill

        Intangible assets consist primarily of the value of customer related intangibles. Goodwill represents the excess of total acquisition cost over the assigned value of net identifiable tangible and intangible assets acquired through various business combinations. Due to the regulatory accounting required by SFAS 71, the Company did not record acquired telecommunications property and equipment at fair value as required by SFAS No. 141, Business Combinations, or SFAS 141. In accordance with 47 CFR 32.2000, the federal regulation governing acquired telecommunications property and equipment, such property and equipment is accounted for at original cost, and depreciation and amortization of property and equipment acquired is credited to accumulated depreciation. The Company has acquired identifiable intangible assets associated with the territories it serves through its acquisitions of various companies. Any excess of the total purchase price over the amounts assigned to tangible and definable assets is recorded as goodwill.

        Effective January 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other Intangibles Assets, or SFAS 142, which establishes accounting and reporting standards for intangible assets and goodwill. SFAS 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but rather tested for impairment at least annually or in the event that triggers an impairment event. SFAS 142 also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives and reviewed for impairment in accordance with SFAS 144, Account for the Impairment or Disposal of Long-Lived Assets. The Company performed the required transition impairment tests of goodwill and other intangibles in the first six months of adoption, and determined that no impairment existed. In addition, the Company performs its annual assessment of impairment each January.

        The Company performs a quarterly review of its identified intangible assets to determine if facts and circumstances exist which indicate that the useful life is shorter than originally estimated or that the carrying amount of assets may not be recoverable. If such facts and circumstances do exist, the Company assesses the recoverability of identified intangible assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets.

Revenue Recognition

        Local service.    Revenue for monthly recurring local services is billed in advance to a portion of the Company's customers and in arrears to the balance of the customers. The Company records revenue for charges that have not yet been invoiced to its customers as unbilled revenue when services are rendered. The Company records revenue billed in advance as advance billings and defers recognition until such revenue is earned.

        Network access services.    Network access revenue is derived from several sources. Revenue for interstate access services is received through tariffed access charges filed by the National Exchange Carrier Association ("NECA") with the Federal Communications Commission ("FCC") on behalf of the NECA member companies. These access charges are billed by the Company to interstate interexchange carriers and pooled with like-revenues from all NECA member companies. A portion of the pooled access charge revenue received by the Company is based upon its actual cost of providing interstate access service, plus a return on the investment dedicated to providing that service. The balance of the pooled access charge revenue received by the Company is based upon the nationwide

44

average schedule costs of providing interstate access services. Revenue for intrastate/intraLATA access service is received under a Primary Carrier Plan. These access charges are billed by the Company to the primary intraLATA interexchange carriers using tariffed access rates filed with the Alabama Public Service Commission ("APSC") and the Missouri Public Service Commission ("MPSC") and are retained by the Company. Revenue for the intrastate/interLATA access service is received through tariffed access charges as filed with the APSC and MPSC. These access charges are billed to the interLATA interchange carriers and are retained by the Company. Revenue for terminating and originating long distance service is received through charges for providing usage of the local exchange network. Toll revenues are recognized when services are rendered.

        Long distance services.    Long distance service is billed to customers in arrears based on actual usage. The Company records unbilled long distance revenue as unbilled revenue when services are rendered.

        Cable television and Internet services.    Cable television and Internet service revenues are recognized when services are rendered.

Cash and Cash Equivalents

        The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Accounts Receivable

        The Company extends credit to its commercial and residential customers based upon a written credit policy. Service interruption is the primary vehicle for controlling losses. Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company's best estimate for 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.

Materials and Supplies

        Materials and supplies are stated at the lower of cost or market value. Cost is determined using a first-in, first-out method of valuation.

Property and Equipment

        Property and equipment is stated at original cost. Expenditures for improvements that significantly add to productive capacity or extend the useful life of an asset are capitalized. Expenditures for maintenance and repairs are expensed when incurred. Depreciation is computed principally using the straight-line method over useful lives determined by the APSC and MPSC, as discussed above.

Long-Lived Assets

        The Company reviews its long-lived assets for impairment at each balance sheet date and whenever events or changes in circumstances indicate that the carrying amount of an asset should be assessed. To determine if an impairment exists, the Company estimates the future undiscounted cash flows expected to result from the use of the asset being reviewed for impairment. If the sum of these expected future cash flows is less than the carrying amount of the asset, the Company recognizes an impairment loss in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The amount of the impairment recognized is determined by estimating the fair value of the assets and recording a loss for the excess of the carrying value over the fair value.

45

Deferred Financing Costs

        Deferred financing costs consist of debt issuance costs incurred in obtaining long-term financing, which are amortized over the life of the related debt.

Derivative Financial Instruments

        Derivative financial instruments are accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities as amended, or SFAS 133. Under SFAS 133, all derivatives are recorded on the balance sheet as assets or liabilities and measured at fair value. The embedded exchange feature of the Class B common stock is accounted for as a derivative liability and adjusted to fair value as of December 21, 2004 at the time of our initial public offering with an offsetting entry to retained earnings. This liability will be adjusted to estimated fair value on each subsequent balance sheet date until the shares are converted with the offset to other non-operating income or expense. In addition, the company has an effective hedge of its interest rates—see Note 9.

        We are exposed to the market risk of adverse changes in interest rates. On December 21, 2004, the Company purchased an interest rate cap with a notional amount of $80 million, cap rate of 3.0%, and a termination date of December 21, 2009. The interest rate cap is used to lock in a maximum interest expense of 7% should variable interest rates rise, but enable us otherwise to take advantage of current lower market interest rates. The interest rate cap is an effective hedge in offsetting the potential variability of interest rates and all critical terms of the interest rate cap are identical to the debt it hedges. Changes in the fair value of the interest rate cap are not included in earnings but are reported as a component of accumulated other comprehensive income. The cost of the interest rate cap is expensed as interest over the effective life of the hedge in accordance with its quarterly future value at the date of inception.

Income Taxes

        The Company accounts for income taxes using the asset and liability approach in accordance with SFAS No. 109, Accounting for Income Taxes or SFAS 109. The asset and liability approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

        The provision for income taxes consists of an amount for the taxes currently payable and a provision for the tax consequences deferred to future periods.

Fair Value of Financial Instruments

        The carrying value of the Company's financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and long-term notes payable approximate their net book value as of December 31, 2003 and 2004.

Comprehensive Income

        Comprehensive income equals net income plus other comprehensive income. Other comprehensive income refers to revenue, expenses, gains and losses, which are reflected in the retained earnings but excluded from net income.

Option-Based Compensation

        Until December 21, 2004, the Company had one member unit-based employee compensation plan, which is described more fully in Note 12. The Company accounted for its plan under the intrinsic value recognition and measurement principles of Account Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued To Employees, or APB 25 and related interpretation. On December 21,

46

2004, under the terms of the plan, a change in ownership caused the options to fully vest. The options under this plan were converted into IDSs and the plan was terminated.

Income per Common Share

        The Company computes net income (loss) per Class A common share in accordance with the provision of SFAS No. 128, "Earnings per Share" or SFAS 128". Under the provision of SFAS 128, basic and diluted income per share are computed by dividing net income available to stockholders by the weighted average number of common shares and common share equivalents outstanding during the period. Basic income per common share excludes the effect of potentially dilutive securities, while diluted income per common share reflects the potential dilution that would occur if securities or other contracts to issue common shares were exercised for, converted into or otherwise resulted in the issuance of common shares.

Recent Accounting Pronouncements

        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 or SFAS 145. Among other provisions, this statement rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt, which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect. As a result, the criteria in APB Opinion No. 30, Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions or APB 30, which requires gains and losses on extinguishments of debt to be classified as income or loss from continuing operations, will now be applied. The Company adopted this standard effective January 1, 2003, the earliest effective date applicable.

        In December 2002, the FASB issued SFAS No. 148, Accounting for Stock Based Compensation—Transition and Disclosure, an Amendment to FASB Statement 123 or SFAS 148. This Statement amends SFAS No. 123, Accounting for Stock Based Compensation or SFAS 123, to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock -based employee compensation. In addition, this Statement amends the disclosure requirements of SFAS 123 to require prominent disclosure in both annual and interim financial statements. Although the Company has adopted the disclosure provision required by SFAS 148, we do not expect to voluntarily adopt the fair value based method of accounting for its employee option-based compensation plan. The adoption of SFAS 148 did not have a material impact on its financial statements.

        FASB Interpretation ("FIN") No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others or FIN 45, was issued in November 2002 and clarifies disclosure and recognition/measurement requirements related to certain guarantees. The disclosure requirements are effective for financial statements issued after December 15, 2002 and the recognition/measurement requirements are effective on a prospective basis for guarantees issued or modified after December 31, 2002. The application of the requirements of FIN 45 did not have any impact on our financial position or results of operations.

        In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51 or FIN 46. In December 2003, the FASB revised FIN 46, which clarifies the application of Accounting Research Bulletin ("ARB") No. 51, Consolidated Financial Statements orARB 51. As per ARB 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 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. FIN 46 clarifies applicability of ARB 51 to entities in which the equity investors do not have the characteristics of a controlling financial interest or do not

47

have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. FIN 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. FIN 46 is applicable for financial statements issued for reporting periods that end after March 15, 2004. The Company does not have any relationship with variable interest entities that would require consolidation under FIN 46.

        In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity or SFAS 150. SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS 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 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 SFAS 150, the Company met the definition of a non-public entity for timing of its implementation. The adoption of SFAS 150 did not have a material impact on the Company's financial statements.

Reclassifications

        Certain items in prior years financial statements have been reclassified to conform with 2004 presentation.

2.    Initial Public Offering and Equity Conversion

        On December 16, 2004 the SEC declared the Company's Income Deposit Securities (IDSs) registration effective and public trading of the Company's IDSs commenced. Prior to the closing of the offering, the Company converted from a Delaware limited liability company to a Delaware corporation and changed its name to Otelco Inc. Certain activities occurred simultaneously with the offering, including a recapitalization of debt, our equity conversion to a Delaware corporation, the acquisition of Mid-Missouri Telephone Company and offering IDSs to the public.

        IDSs are securities consisting of Class A common stock and senior subordinated notes. Each IDS represents:

•

one share of our Class A common stock; and



•

a 13% senior subordinated note with a $7.50 principal amount.

        The initial public offering closed on December 21, 2004. The offering consisted of:

•

9,331,513 IDSs, representing 9,331,513 shares of Class A common stock and $69,986,348 aggregate principal amount of senior subordinated notes, at an initial public offering price of $15.20 per IDS (comprised of $7.70 allocated per share of Class A common stock and $7.50 allocated per senior subordinated note); and



•

$8,500,000 aggregate principal amount of senior subordinated notes sold separately (not in the form of IDSs).

48

        A summary of the Class A common stock associated with the IDSs included in the public offering follows:

Shares sold by exising equity investors	7,828,224
Shares sold in conjunction with overallotment by existing equity investors	672,513
Shares sold by the Company	830,776
Shares sold in initial public offering	9,331,513
Shares retained by existing equity investors and employees	345,220
Total Class A outstanding	9,676,733

        Net proceeds from the 830,776 sold by the Company of $12,627,795 were allocated to the senior subordinated notes portion of the IDSs and the Class A common stock portion in amounts of $6,230,820 and $6,338,667, respectively, based on the fair value of these instruments.

        Included in the 9,331,513 IDSs were 8,054,841 shares of Class A common stock and 502,463 shares of Class B common stock, which represented our conversion from a Delaware limited liability company to a Delaware corporation and the conversion of our 2,512,699 outstanding membership interests and 97,365 outstanding options to acquire membership interests. We recorded $60,411,308 to reflect the senior subordinated notes portion of the IDSs at fair value.

        In conjunction with the public offering, the Company acquired Mid-Missouri in a business combination accounted for based on the purchase method of accounting under SFAS 141. The Company issued 856,234 shares of Class A common stock and 53,413 shares of Class B common stock and assumed $16,714,140 in notes payable for a total purchase price of $30,540,774. As part of the acquisition, the Company also issued 5,527 IDS for the vesting of Mid-Missouri's option plan. See Note 3 for additional disclosure related to the acquisition of Mid-Missouri.

        Class A and Class B common stock carry identical voting rights. In conjunction with our public offering, we amended our articles of incorporation to prohibit participation in dividends and other distributions to our Class B holders. Each outstanding share of our common stock will carry one vote per share and all classes of commons stock will vote as a single class on all matters presented to the stockholders for a vote.

        Class B common stock will be exchangeable on a one-for-one basis for IDSs at the holder's option, upon our liquidation or during specified period beginning December 21, 2006 subject to certain conditions. The conditions to such exchange include a financial test related to Adjusted EBITDA (as such term is defined in the indenture governing the notes). After five years, the Adjusted EBITDA test will no longer apply and the Class B common stock will be exchangeable for IDSs at the option of the holder subject only to the satisfaction of the other conditions to such exchange.

        The Class A and Class B common stock was recorded at the carryover basis of existing investor's equity. We recorded a $21,056,979 reduction to retained earnings to eliminate deficiency in additional paid-in capital resulting from the conversion.

        The Company discounted to present value the potential debt issuance on conversion of Class B common stock to IDSs at a discount rate equal to the interest rate on the senior subordinated notes. The fair value of the senior subordinated notes payable associated with the Class B common stock is recorded in the mezzanine section of the consolidated balance sheets as of December 31, 2004.

        As previously described, the holders of Class B common stock have the right to exchange their shares for IDSs. This exchange right is an embedded derivative feature that is required to be separately accounted for as a liability and measured at fair value. In connection with the issuance of Class B common stock and related partial repurchase, the Company has reflected the initial fair value of the exchange right as a long-term liability and reduction of retained earnings and additional paid in capital of $2,788,716. The derivative is not considered a hedge and thus does not qualify for hedge accounting under SFAS 133. The Company will adjust on a quarterly basis the derivative liability to fair value with a corresponding gain or loss recorded in other income (expenses) in the consolidated statements of income.

49

        A summary of shares issued by activity is provided. The impact of conversion of options is included in our conversion and the purchase of Mid-Missouri. The repurchase and retirement of IDSs and Class B common stock shown below was associated with the tax impact of the cashless exercise of management options as part of the existing option plan.

		Class A		Class B
Conversion to Delaware Corporation		8,054,841		502,463
Acquisition of Mid-Missouri		856,234		53,413
Company offered shares		830,776		—
Repurchase of shares		(65,118	)	(11,205	)
	Shares outstanding	9,676,733		544,671

        During the year, the Company incurred costs related to the offering. These costs were for the public offering, expenses of the selling shareholders and cost of obtaining the new credit facility and senior subordinated notes. In conjunction with the public offering, costs related to the debt were capitalized; costs related to the offering were charged to additional paid in capital; and the costs associated with the selling share holders were expensed in the consolidated statements of income. The following table depicts all costs related to the public offering except the purchase of the interest rate cap which is accounted for separately:

Costs related related to long term notes payable and capitalized		$	8,060,735
Costs related to selling shareholders and expensed			1,526,138
Costs related to the Company and charged to APIC			143,232
	Total costs	$	9,730,105

        After the underwriters' discount of $1.0 million, net proceeds to the Company from the sale of IDSs and the senior subordinated notes sold separately were $20.1 million. On December 21, 2004 the Company also obtained a new credit facility of $80.0 million. The net proceeds of the IPO, together with $6.4 million of cash on hand, and the new credit facility were used to:

Repay existing indebtedness	$	92.0 million
Purchase interest rate cap	$	4.7 million
Fees and expenses	$	8.7 million
Repurchase IDSs and Class B common stock	$	1.1 million

        Also as part of this offering, 8,500,737 IDSs were sold by certain selling shareholders of the Company, from which the Company received no proceeds.

        We recorded $3,212,528 to reflect the initial allocation of Class B common stock to the potential debt issuance upon conversion to IDSs. This entry is net of $885,852 which reduced the potential debt issuance to its present value at the closing of the offering using a discount rate equal to the interest rate on the senior subordinated notes. The embedded exchange feature of the Class B common stock is accounted for separately as a derivative liability.

3.     Acquisitions

        On June 30, 2003, the Company acquired 100% of the outstanding common stock of PKC. PKC owns 100% of the common stock of BTC. BTC is a local exchange telephone company with a service area that borders those of OTP, HTC and BMTC. The excess of the total acquisition cost over the

50

assigned value of the identifiable net assets acquired is reflected as goodwill in the amount of $8,867,736. The goodwill related to this acquisition is not deductible for tax purposes.

        The allocation of the net purchase price for the PKC acquisition is as follows:

		2003
Current assets		$	5,545,389
Property and equipment			6,566,794
Excess cost over fair value of net assets acquired			8,867,736
Current liabilities			(1,185,916	)
Other liabilities			(1,065,750	)
	Net purchase price	$	18,728,253

        The following unaudited pro forma information presents the combined results of operations of the Company as though the acquisition PKC completed in 2003 occurred at the beginning of the preceding year. The results include certain adjustments, including increased interest expense on notes payable related to the acquisition. The pro forma financial information does not necessarily reflect the results of operations had the acquisition been completed at the beginning of 2002 or those which may be obtained in the future.

	Unaudited
	2002		2003
Revenues	$	34,349,952	$	36,461,607
Income from continuing operations		15,771,348		14,896,987
Net income		7,796,872		6,227,415
Basic net income per share	$	0.97	$	0.77
Diluted net income per share	$	0.91	$	0.73

        On December 21, 2004, the Company acquired 100% of the outstanding common stock of MMH. MMH owns 100% of MMT. MMT is a local exchange carrier in central Missouri. The purchase price of the acquisition was $30,540,774 including assumed notes payable. The excess of the total purchase price over the assigned value of the identifiable net assets is reflected as goodwill and intangible assets in the amount of $17,858,806 and $1,800,000, respectively. The goodwill related to the acquisition is not deductible for tax purposes.

        The allocation of the net purchase price for the MMH acquisition is as follows:

		2004
Current assets		$	1,158,957
Property and equipment			12,900,823
Intangible assets			1,800,000
Goodwill			17,858,806
Other assets			422,680
Current liabilities			(1,144,674	)
Notes payable			(16,714,140	)
Other liabilities			(2,455,818	)
	Net purchase price	$	13,826,634

        The Company issued 856,234 shares of Class A common stock ($8,562 par value) underlying the 856,234 IDSs and 53,413 shares of Class B common stock ($534 par value) in connection with the acquisition of MMHC based on an exchange ratio of 0.14126 IDSs and 0.00881 shares of Class B common stock for each share of MMHC. The issuance of Class A common stock represented by IDSs, Class B common stock and Class A common stock associated with the conversion of options resulted in

51

an increase in paid-in capital of $7,222,120. Each IDS represents one share of Class A common stock and a 13.0% senior subordinated note with a $7.50 principal amount. The number of IDSs and shares of Class B common stock to be received upon exchange of each outstanding option to acquire shares of Mid-Missouri Holding were equal to the number of IDSs and shares of Class B common stock that a holder would have received in the exchange had the holder exercised the option on a "cashless basis." The embedded exchange feature of the Class B common stock is accounted for separately as a derivative liability. We recorded $273,475 for the value of the exchange feature to the derivative liability with an offsetting entry to additional paid-in capital.

        The following unaudited pro forma information presents the combined results of operations of the Company as though the acquisition MMH completed in 2004 occurred at the beginning of the preceding year. The results include certain adjustments, including increased interest expense on notes payable related to the acquisition. The pro forma financial information does not necessarily reflect the results of operations had the acquisition been completed at the beginning of 2003 or those which may be obtained in the future.

	Unaudited
	2003		2004
Revenues	$	44,934,126	$	48,162,092
Income from operations		13,648,488		16,284,236
Net income		4,321,361		6,861,029
Basic net income per share	$	0.54	$	0.85
Diluted net income per share	$	0.50	$	0.80

        Each acquisition was accounted for using the purchase method of accounting and accordingly, the accompanying financial statements include the financial position and results of operation from the respective dates of acquisition.

4.     Goodwill and Intangible Assets

        In June 2001, FASB issued SFAS No. 142, Goodwill and Other Intangible Assets, or SFAS 142. SFAS 142 requires that in periods beginning after December 15, 2001, goodwill shall no longer be amortized. Instead, goodwill shall be tested for impairment. The Company adopted SFAS 142 in 2002 and ceased amortizing goodwill, and performs an annual impairment test to determine whether the carrying value of goodwill exceeds its fair market value. Based on the results of its impairment test, the Company does not believe that there is an impairment of the goodwill balance at December 31, 2003 or 2004, respectively.

        Intangible assets are summarized as follows:

	December 31, 2003							December 31, 2004
	Carrying Value		Accumulated Amortization			Net Value		Carrying Value		Accumulated Amortization			Net Value
Customer relationships	$	1,800,000	$	(1,285,715	)	$	514,285	$	3,600,000	$	(1,549,057	)	$	2,050,943

        These intangible assets have either seven or ten year useful lives. The following table presents current and expected amortization expense of the existing intangible assets as of December 31, 2004 for each of the following periods:

Aggregate amortization expense:
	For the year ended December 31, 2002	$	257,143
	For the year ended December 31, 2003		257,143
	For the year ended December 31, 2004		263,342

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        Expected amortization expense for the years ending December 31,

2005	$	462,856
2006		205,714
2007		205,714
2008		205,714
2009		205,714

5.     Property and Equipment

        A summary of property and equipment from continuing operations is shown as follows:

		December 31,
	Estimated Life
		2003			2004
Land		$	653,434		$	757,897
Building and improvements	20–40		5,465,529			6,826,776
Telephone equipment	6–20		62,027,949			89,233,193
Cable television equipment	7		4,908,938			5,232,479
Furniture and equipment	8–14		1,076,144			1,342,387
Vehicles	7–9		2,568,176			3,184,904
Computer software equipment	5–7		2,628,578			2,886,775
Internet equipment	5		403,754			1,923,497
Total property, plant and equipment			79,732,502			111,387,908
Accumulated depreciation			(41,813,097	)		(63,192,340	)
Net property, plant and equipment		$	37,919,405		$	48,195,568

        The Company's composite depreciation rate for property and equipment was 13.9%, 13.5% and 12.1% in 2002, 2003 and 2004, respectively. Depreciation expense from continuing operations for the years ended December 31, 2002, 2003 and 2004 was $4,530,054, $5,107,110 and $5,837,033, respectively.

6.     Other Accounts Receivable

        Other accounts receivable consist of the following:

	December 31,
	2003		2004
Carrier access bills receivable	$	621,544	$	1,021,969
Receivables from Alabama Service Fund		461,673		461,729
Other miscellaneous		198,389		39,247
	$	1,281,606	$	1,522,945

7.     Investments

        Investments consist of the following:

	December 31,
	2003		2004
Investment in CoBank stock	$	409,876	$	271,031
Investment in Rural Telephone Bank (Class C stock)		411,348		435,858
Rental property		526,954		576,210
Other miscellaneous		—		15,753
	$	1,348,178	$	1,298,852

        The investments in CoBank stock and Rural Telephone Bank Class C stock are carried at historical cost due to no readily determinable fair value for those instruments being available. These investments are patronage certificates that represent ownership in the financial institutions (CoBank and Rural Telephone Bank) where the Company has, or in the past, had, debt. These certificates yield dividends

53

on an annual basis, and the investment is redeemed ratably subsequent to the repayment of the debt by the respective financial institution.

8.     Accrued Expenses

        Our initial public offering and related notes payable transactions which closed on December 21, 2005 created a number of accrued expenses at December 31, 2004. We accrued $688,762 for Merrill Corp., our printer for the initial public offering. No other vendor's accrued expenses exceeded 5% of total current liabilities.

9.     Long-Term Notes Payable

        Long-term notes payable consists of the following:

	December 31,
	2003			2004
Term credit facility, General Electric Captial Corporation; variable interest rate of 6.53% at December 31, 2004. There are no principal payments. Interest payments are due on the last day of the LIBOR period or at three month intervals, whichever date comes first. Interest rate is the index rate plus the applicable term loan index margin of 3.0% or the applicable LIBOR rate plus the applicable term loan LIBOR margin of 4.0%. The unpaid balance will be due on December 21, 2009.	$	—		$	80,000,000
13% Senior subordinated notes payable, due 2019; interest payments are due quarterly		—			72,575,498
13% Senior subordinated notes payable, held seperately, due 2019; interest payments are due quarterly		—			8,500,000
Mortgage note payable, CoBank-payable in quarterly installments; variable interest rates, 3.9% to 5.75% at December 31, 2003; principal and interest payments through 2010. On December 21, 2004, the loan was repaid.		71,909,328			—
Mortgage note payable, CoBank-payable in quarterly installments; variable interest rates, 4.9% to 6.75% at December 31, 2003; principal and interest payments through 2010. On December 21, 2004, the loan was repaid.		11,164,000			—
Total long-term notes payable	$	83,073,328		$	161,075,498
Less: current portion		(7,727,432	)		—
Long-term notes payable	$	75,345,896		$	161,075,498

        Associated with these changes in long-term notes payable, the Company wrote off $1.0 million in deferred financing costs associated with the payoff of the CoBank notes payable and capitalized $8.1 million in deferred financing costs associated with the new credit facility and the 13% senior subordinated notes payable. The credit facility is secured by the total assets of the Company.

        The Company has a revolving credit facility of $15,000,000 available as of December 21, 2004. There was no balance outstanding as of December 31, 2004. The interest rate is the index rate plus a 3.00% margin or LIBOR rate whichever is applicable. The Company pays a commitment fee of 0.75% per annum, payable quarterly in arrears, on the unused portion of the revolver loan.

        The Company had an available working line of credit of $5,000,000 through December 21, 2004. No balance was outstanding at December 31, 2003. The Company had a commitment fee of .50% per annum, payable quarterly in arrears, on the unused portion of the revolver loan. Commitment fee expense was minimal for the years ended December 31, 2002, 2003 and 2004, respectively.

54

        Maturities of long-term debt for the next five years are as follows:

2005	$	—
2006		—
2007		—
2008		—
2009		80,000,000
Thereafter		81,075,498
Total	$	161,075,498

        The above schedule of maturities of long-term debt does not include the $4.1 million liquidation value of Class B common shares convertible into senior subordinated notes.

        The Company's various long-term notes payable agreements contain certain financial covenants that require the maintenance of certain levels and ratios of working capital and equity to total assets as well as certain coverage ratios associated with debt service and fixed charges. As of December 31, 2003 and 2004, respectively, the Company was in compliance with all financial covenants.

        The Company has no independent assets or operations separate from its operating subsidiaries. The guarantees of its senior subordinated notes by four of its five operating subsidiaries are full and unconditional, joint and several. The operating subsidiaries have no independent long-term notes payable. There are no significant restrictions on the ability of the Company to obtain funds from its operating subsidiaries by dividend or loan.

10.   Income Taxes

        Deferred income taxes are provided for certain temporary differences principally due to the use of accelerated depreciation for income tax purposes. Such deferred taxes are credited to income as the related temporary differences reverse.

        Income tax expense for the years ended December 31, 2002, 2003 and 2004 is summarized below.

			For the years ended December 31,
			2002		2003		2004
Federal income taxes
	Current		$	—	$	835,013	$	777,594
	Deferred			3,352,752		2,769,740		2,657,080
		Total federal tax expense		3,352,752		3,604,753		3,434,674
State income taxes
	Current			—		119,282		126,280
	Deferred			464,686		383,240		385,671
		Total state tax expense		464,686		502,522		511,951
		Total tax expense	$	3,817,438	$	4,107,275	$	3,946,625

        Total income tax benefit (expense) from continuing operations was different than that computed by applying U.S. federal income tax rates to income from continuing operations before income taxes for

55

the years ended December 31, 2002, 2003 and 2004. The reasons for the differences are presented below.

	For the years ended December 31,
	2002			2003			2004
Federal income tax at statutory rate		34	%		34	%		34	%
Federal income tax expense at statutory rate	$	3,745,730		$	3,944,065		$	3,425,104
Non-deductible IPO cost		—			—			518,887
State income tax (provision), net of federal income tax effects		306,693			331,665			337,888
Other		(234,985	)		(168,455	)		(335,254	)
Provision for income taxes	$	3,817,438		$	4,107,275		$	3,946,625
Effective income tax rate		34.7	%		35.4	%		39.2	%

        The Company purchased PKC as described in Note 2, which resulted in incremental net deferred tax liabilities of approximately $0.8 million that are included in the consolidated balance sheet at December 31, 2003.

        The Company purchased MMHC as described in Note 2, which resulted in incremental net deferred tax liabilities of approximately $2.2 million that are included in the consolidated balance sheet at December 31, 2004.

        The Company had net operating loss carry forwards in 2002 of approximately $2.5 million. In 2003, the net operating loss carry forward was fully utilized.

        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, 2003 and 2004 are presented below:

			2003			2004
Deferred tax liabilities:
	Amortization		$	(4,447,762	)	$	(6,637,399	)
	Depreciation			(3,518,194	)		(6,415,827	)
	Other			(14,550	)		—
		Total deferred tax liabilities	$	(7,980,506	)	$	(13,053,226	)
Deferred tax assets:
	Deferred compensation			229,388			283,948
	Stock options			648,214			—
	Other			12,846			368,677
		Total deferred tax assets		890,448			652,625
Net deferred income tax liability			$	(7,090,058	)	$	(12,400,601	)

11.   Employee Benefit Program

        Employees of OTC, HTC, BMTC and MMHC participate in a defined contribution savings plan under Section 401(k) of the Internal Revenue Code, which is sponsored by the Company. The terms of the plan provide for an elective contribution from employees up to 15% of their annual compensation through September 30, 2002 and 100% beginning October 1, 2002, not to exceed $11,000, $12,000 and $13,000 for 2002, 2003, and 2004, respectively. The Company matches the employee's contribution up to 6% of the employee's annual compensation. In addition, the Company made a discretionary contribution for each employee equal to 4% of their annual compensation for 2002, and 1.7% of their annual compensation in 2003 and 2004. For the years ended December 31, 2002, 2003 and 2004, the total expense associated with this plan was $315,256, $244,625 and $265,366, respectively.

56

        The employees of BTC participate in a Retirement and Security Program ("RSP") and a Savings Plan ("SP") provided through the National Telecommunications Cooperative Association. Participation in the RSP requires a minimum contribution of 1% from the employees. The Company contributes 15.1% for every participating employee. SP is a defined contribution savings plan under Section 401(k) of the Internal Revenue Code to which the Company contributes 1% of pre-tax employee earnings and the employee can make additional voluntary contributions as desired with no additional Company contribution. For the year ended December 31, 2003 and 2004 the total expense associated with these plans was $148,893 and $95,721, respectively.

12.    Income per Common Share and Potential Common Share

        Basic income per common share is computed by dividing net income by the weighted-average number of shares outstanding for the period. Diluted income per common share reflects the potential dilution that could occur if the Class B common stock were exercised into IDSs with Class A common shares. Class B common stock is convertible on a one-for-one basis into IDSs, each of which includes a Class A common share. For periods prior to our conversion, membership units were treated on an as if converted basis into Class A and Class B common shares. For 2004, the shares associated with the purchase on Mid-Missouri Holding Corp., the sale of common shares by the Company, and the buy-back of common shares by the Company, were prorated from December 21, 2004 until the end of the year.

        A reconciliation of the common shares for the Company's basic and diluted income per common share calculation is as follows:

	For the year ended December 31,
	2002		2003		2004
Weighted average common shares at conversion		8,054,841		8,054,841		8,054,841
Purchase of Mid-Missouri Holding Corp., sale of common shares by Company, and buy-back of common shares by Company (12/21/04)		—		—		48,879
Weighted average common shares		8,054,841		8,054,841		8,103,720
Effect of Class B shares at conversion		502,463		502,463		502,463
Effect on Class B shares from purchase of Mid Missouri-Holding Corp., sale of common shares by Company, and buy-back of common shares by Company (12/21/04)		—		—		1,272
Effect of dilutive securities		502,463		502,463		503,735
Weighted-average common shares and potential common shares		8,557,304		8,557,304		8,607,455
Net income	$	7,199,414	$	7,492,916	$	6,113,863
Net income per basic share	$	0.89	$	0.93	$	0.75
Net income per diluted share	$	0.84	$	0.88	$	0.71

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13.    Selected Quarterly Financial Data (unaudited)

		First Quarter		Second Quarter		Third Quarter		Fourth Quarter(1)
Fiscal 2003:
	Revenue	$	7,679,746	$	7,843,849	$	8,935,661	$	9,295,608
	Operating income		3,648,250		3,757,630		4,097,847		3,214,803
	Net income		1,947,782		2,003,320		2,020,111		1,521,702
	Net income per share, basic		0.24		0.25		0.25		0.19
	Net income per share, diluted		0.23		0.23		0.24		0.18
Fiscal 2004:
	Revenue	$	9,127,238	$	9,029,003	$	9,319,806	$	9,790,295
	Operating income		3,973,643		3,955,372		4,085,174		1,515,234
	Net income		2,056,516		2,047,558		2,142,503		(132,714	)
	Net loss per share, basic		0.26		0.25		0.27		(0.02	)
	Net loss per share, diluted		0.24		0.24		0.25		(0.02	)

(1)

Fourth quarter 2004 results were impacted by a charge of $1.5 million in initial public offering costs related to the selling shareholders.

14.    Option-based Compensation

        1999 Option Plan

        In 1999 the Company adopted an option plan that covered senior management and consultants of the Company. At the time our initial public offering on December 21, 2004, under the terms of the option plan, a change in ownership caused the outstanding options to fully vest. All options were converted to IDSs on a cashless exercise basis as allowed in the option plan and the plan was terminated. As of December 31, 2004, there were no outstanding options.

		Number of units		Weighted Average Exercise Price
Outstanding at December 31, 2001		68,365		$	13.00
	Granted	14,500			28.00
	Exercised	—			—
Outstanding at December 31, 2002		82,865			15.63
	Granted	14,500			36.00
	Exercised	—			—
Outstanding at December 31, 2003		97,365			18.66
	Granted	—
	Exercised December 31, 2004	(97,365	)		18.66
Outstanding at December 31, 2004		—		$	—

        The Company accounts for the option-based compensation plan based on variable accounting in accordance with APB 25. The option plan included a cashless exercise feature that allowed option holders to provide payment upon exercise of vested options in the form of cash, units or options for units. As a result of applying variable accounting, the Company recognized compensation expense net of tax in the amount of $196,906, $662,753 and $908,343 for the periods ended 2002, 2003 and 2004 respectively, based on the estimated fair market value of a membership unit at each period.

        The estimated fair market value of a membership unit at each period for the years ended December 31, 2002, 2003 and 2004 was determined based on using market comparable valuations for

58

public companies in the same industry as the Company. Based on these comparable companies and their enterprise value to EBITDA multiples at each period, the Company calculated its enterprise value based on a range of enterprise value to EBITDA multiples supported by the comparable company metrics after taking into account an illiquidity discount. From enterprise value, the Company calculated the resulting equity value and value per unit to come up with a range of values per unit. The Company chose an estimated fair market value per unit from with this range.

15.    Related Party Transactions

        Two of the Company's subsidiaries had advisory agreements with CEA Management Corp. and Seaport Capital, LLC (together "Seaport"). Prior to December 21, 2004, affiliates of Seaport owned approximately 68% of the Company. Under the agreements, Seaport furnished professional advisory services. This agreement was terminated on December 21, 2004 in conjunction with the initial public offering.

        For the years ended December 31, 2002, 2003 and 2004, Otelco Holdings paid Seaport $700,000, $850,000 and $973,118 respectively, in advisory fees. Accounts payable at December 31, 2003 and 2004 included amounts payable to Seaport of $250,000 and $334,672, respectively.

16.    Revenue Concentrations

        Revenues for interstate access services are based on reimbursement of costs and an allowed rate of return. Revenues of this nature are received from NECA in the form of monthly settlements. Such revenues amounted to 13.1%, 15.4%, and 20.2% of the Company's total revenues from continuing operations for the years ended December 31, 2002, 2003 and 2004 respectively.

17.    Commitments and Contingencies

        From time to time, we may be involved in various claims, legal action and regulatory proceedings incidental to and in the ordinary course of business, including administrative hearings of the APSC and MPSC relating primarily to rate making. Currently, none of the legal proceedings are expected to have a material adverse effect on our business.

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

        None.

Item 9A.    Controls and Procedures

        With the participation of the Chief Executive Officer and the Chief Financial Officer, management has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2004.

        With the completion of our initial public offering on December 21, 2004, we are subject to the reporting requirements under Regulation S-K for the first time and anticipate being classified as an accelerated filer for the year ending December 31, 2005.

        There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during the fourth quarter of fiscal 2004 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.    Other Information

        None.

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PART III

Item 10.    Directors and Executive Officers of the Registrant

        We have a code of ethics that applies to each director and employee of the company, including the executive, financial, and accounting officers. Our code of conduct is available on our website at http://www.otelco.net under the Investor Relations section titled Corporate Governance.

        The other information required by this Item is incorporated herein by reference to the applicable information in the proxy statement for our 2005 annual meeting, including the information set forth under the captions "Election of Directors," Section 16(a) Beneficial Ownership Reporting Compliance" and "Governance of the Company—Audit Committee—Audit Committee Financial Expert."

Item 11.    Executive Compensation

        The information required by this Item is incorporated herein by reference to the applicable information in the proxy statement for our 2005 annual meeting, including the information set forth under the captions "Executive Compensation," Compensation of Directors" and Compensation Committee Interlocks and Insider Participation."

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

        The Company currently has no securities authorized for issuance under an equity compensation plan. The other information required by this Item is incorporated herein by reference to the applicable information in the proxy statement for our 2005 annual meeting, including the information set forth under the caption "Beneficial Ownership of Otelco Inc. Common Stock."

Item 13.    Certain Relationships and Related Transactions

        The information required by this Item is incorporated herein by reference to the applicable information in the proxy statement for our 2005 annual meeting, including the information set forth under the caption "Other Relationships and Transactions with Executives."

Item 14.    Principal Accounting Fees and Services

        The information required by this Item is incorporated herein by reference to the applicable information in the proxy statement for our 2005 annual meeting, including the information set forth under the caption "Our Relationship with Our Independent Auditors."

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PART IV

Item 15.    Exhibits, Financial Statement Schedules

        (a)(1)    Financial Statements

•

Report of Independent Certified Public Accountants



•

Consolidated Balance Sheets



•

Consolidated Statements of Operations



•

Consolidated Statements of Changes in Stockholders' Equity



•

Consolidated Statements of Cash Flow



•

Notes to Consolidated Financial Statements

        (a)(2)    Financial Statement Schedules 

        None

(a)(3)    Exhibits 

Exhibit No.	Description
2.1	Agreement and Plan of Merger, dated as of December 16, 2004, among Mid-Missouri Parent, LLC, Mid-Missouri Holding Corp., Rural LEC Acquisition LLC and Otelco Merger Subsidiary, Inc.
3.1	Certificate of Incorporation of Otelco Inc.
3.2	Third Amended and Restated By-laws of Otelco Inc.
4.1	Indenture, dated as of December 21, 2004, among Otelco Inc., each subsidiary listed on the signature pages thereto and Wells Fargo Bank, National Association, as trustee, relating to the 13% Senior Subordinated Notes dues 2019
4.2	Form of 13% Senior Subordinated Note due 2019 (included in Exhibit 4.1)
4.3	Investor Rights Agreement, dated December 21, 2004, among Otelco Inc., Seaport Capital Partners II, L.P., Seaport Investments, LLC, CEA Capital Partners USA, L.P., CEA Capital Partners USA CI, L.P., BancBoston Ventures Inc., Mid-Missouri Parent LLC, Michael D. Weaver, Sean Reilly, Kevin Reilly and Sternberg Consulting Inc.
4.4	Form of stock certificate for Class A common stock (filed as Exhibit 4.4 to Amendment No. 4 to Registration Statement on Form S-1 (file no. 333-115341) and incorporated herein by reference)
4.5	Form of global Income Deposit Security (filed as Exhibit 4.5 to Amendment No. 4 to Registration Statement on Form S-1 (file no. 333-115341) and incorporated herein by reference)
10.1	Credit Agreement, dated December 21, 2004, among Otelco Inc., as Borrower, the other credit parties signatory thereto, as Credit Parties, the Lenders signatory thereto from time to time, as Lenders and General Electric Capital Corporation, as Administrative Agent and Lender and CoBank, ACB, as Syndication Agent and Lender

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10.2	Amended and Restated Employment Agreement, dated as of June 21, 2004, between Otelco Telephone LLC and Michael D. Weaver (filed as Exhibit 10.2 to Amendment No. 1 to Registration Statement on Form S-1 (file no. 333-115341) and incorporated herein by reference)
10.3	Employment Agreement, dated as of June 9, 2004, between Otelco Telephone LLC and Curtis L. Garner, Jr. (filed as Exhibit 10.3 to Amendment No. 1 to Registration Statement on Form S-1 (file no. 333-115341) and incorporated herein by reference)
12.1	Computation of Ratio of Earnings to Fixed Charges
21.1	List of material subsidiaries of Otelco Inc. (filed as Exhibit 21.1 to Registration Statement on Form S-1 (file no. 333-115341) and incorporated herein by reference)
31.1	Certificate pursuant to Rule 13A-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 of the Chief Executive Officer
31.2	Certificate pursuant to Rule 13A-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 of the Chief Financial Officer
32.1	Certificate pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Executive Officer
32.2	Certificate pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Financial Officer

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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 report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Oneonta, State of Alabama, on the 30^th day of March, 2005.

OTELCO INC.
BY:	/S/  MICHAEL D. WEAVER
	Michael D. Weaver President and Chief Executive Officer

        Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated:

Signature	Title	Date
/s/  MICHAEL D. WEAVER Michael D. Weaver	President, Chief Executive Officer and Director (Principal Executive Officer)	March 30, 2005
/s/  CURTIS L. GARNER, JR. Curtis L. Garner, Jr.	Chief Financial Officer (Principal Financial and Accounting Officer)	March 30, 2005
/s/  WILLIAM BAK William Bak	Director	March 30, 2005
/s/  HOWARD HAUG Howard Haug	Director	March 30, 2005
/s/  JOHN P. KUNZ John P. Kunz	Director	March 30, 2005
/s/  STEPHEN P. MCCALL Stephen P. McCall	Director	March 30, 2005
/s/  ANDREW MEYERS Andrew Meyers	Director	March 30, 2005
/s/  WILLIAM F. REDDERSEN William F. Reddersen	Director	March 30, 2005

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QuickLinks

DOCUMENTS INCORPORATED BY REFERENCE
FORWARD-LOOKING STATEMENTS
PART I
Revenue Mix
PART II
OTELCO INC. CONSOLIDATED BALANCE SHEETS
OTELCO INC. CONSOLIDATED STATEMENTS OF INCOME
OTELCO INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
PART III
PART IV
Signatures

EX-2.1

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

DATED AS OF

December 16, 2004,

AMONG

MID-MISSOURI PARENT, LLC,

MID-MISSOURI HOLDING CORP.,

RURAL LEC ACQUISITION LLC

and

OTELCO MERGER SUBSIDIARY, INC.

TABLE OF CONTENTS

ARTICLE I GENERAL
1.1	Definitions
The Merger
1.2	Effective Time of the Merger
1.3	Effect of the Merger
1.4	Charter, Bylaws, Officers and Directors of Surviving Corporation
1.5	Taking of Necessary Action
1.6	Tax Free Reorganization
1.7	Closing
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1	Consideration; Effect on Capital Stock
2.2	Exchange of Certificates
2.3	MMHC Options
ARTICLE III REPRESENTATIONS AND WARRANTIES
3.1	Representations and Warranties of Parent and MMHC
3.2	Representations and Warranties of Otelco and MergerCo
ARTICLE IV CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME; ADDITIONAL AGREEMENTS
4.1	Access to Records
4.2	Conduct
4.3	Legal Conditions to Merger
4.4	Notice of Prospective Breach
4.5	Further Assurances; Consents
ARTICLE V CONDITIONS PRECEDENT
5.1	Conditions to Each Party’s Obligations
5.2	Conditions to Obligations of Otelco and MergerCo
5.3	Conditions to Obligations of MMHC
ARTICLE VI TERMINATION
6.1	Termination
6.2	Effect of Termination

ARTICLE VII MISCELLANEOUS
7.1	Expenses
7.2	Entire Agreement
7.3	Survival
7.4	Descriptive Headings
7.5	Notices
7.6	Counterparts
7.7	Governing Law
7.8	Benefits of Agreement
7.9	Pronouns
7.10	Amendment, Modification and Waiver

AGREEMENT AND PLAN OF MERGER (this “Agreement”) dated as of December 16, 2004, among MID-MISSOURI PARENT, LLC, a Delaware limited liability company (“Parent”), MID-MISSOURI HOLDING CORP., a Delaware corporation and wholly owned subsidiary of Parent (“MMHC”), RURAL LEC ACQUISITION LLC, a Delaware limited liability company (together with is successor in interest upon the Conversion, “Otelco”), and OTELCO MERGER SUBSIDIARY, INC., a Delaware corporation and wholly owned subsidiary of OTELCO (“MergerCo”).

WHEREAS, contemporaneous with the Effective Time, Otelco will convert from a Delaware limited liability company into a Delaware corporation under the name “Otelco Inc.” (the “Conversion”);

WHEREAS, contemporaneous with the Conversion each membership interest of Otelco (each a “Unit”) will be converted into (i) 0.19498 of a Class B Otelco Shares and (ii) 3.12572 IDSs;

WHEREAS, MMHC is currently a wholly owned subsidiary of Parent and MergerCo is a wholly owned subsidiary of Otelco;

WHEREAS, the Board of Directors or Board of Managers (as applicable) of each of Parent, MMHC, Otelco and MergerCo has determined to engage in the transactions contemplated hereby, pursuant to which (i) MergerCo will be merged with and into MMHC (the “Merger”) pursuant to Section 251 of the Delaware General Corporation Law (the “DGCL”), (ii) the outstanding capital stock of MergerCo shall be converted into shares of capital stock of MMHC, (iii) each share of common stock, $0.01 par value per share, of MMHC (the “MMHC Common Stock”) issued and outstanding immediately prior to the Merger will be exchanged and converted into the right to receive Class B Otelco Shares and IDSs in accordance with Section 2.1(a), all upon the terms and conditions set forth in this Agreement; and

WHEREAS, by their signature below, the current sole shareholder of each of MMHC and MergerCo hereby approve the Merger and this Agreement.

NOW, THEREFORE, in consideration of the mutual benefits to be derived from this Agreement and the representations, warranties, covenants, agreements, conditions and promises contained herein and therein, the parties hereby agree as follows:

ARTICLE I

GENERAL

1.1Definitions.

As used herein, the following capitalized terms have the meanings set forth below:

“Agreement” has the meaning set forth in the Caption.

“Applicable Law” means any statute, law, ordinance, rule or regulation applicable to the parties hereto.

“APSC” means the Alabama Public Service Commission, and any successor entity thereto.

“Audited MMHC Balance Sheet” has the meaning set forth in Section 3.1(d)(i).

“Audited MMHC Financial Statements” has the meaning set forth in Section 3.1(d)(i).

“Audited Otelco Balance Sheet” has the meaning set forth in Section 3.1(d)(i).

“Audited Otelco Financial Statements” has the meaning set forth in Section 3.1(d)(i).

“Business Day” means any day other than a Saturday, Sunday or day on which banks are permitted to close in the City and State of New York.

“Certificate of Merger” has the meaning set forth in Section 1.2.

“Class A Otelco Shares” has the meaning set forth in Section3.2(c).

“Class B Otelco Shares” has the meaning set forth in Section 3.2(c).

“Closing” has the meaning set forth in Section 1.7.

“Closing Date” has the meaning set forth in Section 1.7.

“Code” has the meaning set forth in Section 1.6.

“Constituent Corporations” means MMHC and MergerCo.

“Conversion” has the meaning set forth in the Recitals.

“DGCL” has the meaning set forth in the Recitals.

“DTC” means the Depository Trust Company.

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“Effective Time” has the meaning set forth in Section 1.2.

“Environmental Laws” means any Applicable Law enacted and in effect on or prior to the Closing Date relating to pollution or protection of the environment, or to Hazardous Substances.

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

“GAAP” means generally accepted accounting principles consistently applied.

“Governmental Entity” means any federal, state, local or foreign government or any court of competent jurisdiction, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign.

“Hazardous Substance” means any material defined as a toxic or hazardous substance pursuant to 42 U.S.C. § 9601(14).

“IDS” has the meaning set forth in Section 1.2

“Intellectual Property” all industrial and intellectual property rights, including, without limitation, patents, patent applications, patent rights, trademarks, trademark applications, trade names, service marks, service mark applications, copyrights, copyright applications, franchises, licenses, inventories, know-how, trade secrets, proprietary processes and formulae, all source and object code, algorithms, architecture, structure, display screens, layouts, inventions, development tools and all documentation and media constituting, describing or relating to the above, including, without limitation, manuals, memoranda and records.

“Judgment” means any judgment, order or decree.

“Latest MMHC Balance Sheet” has the meaning set forth in Section 3.1(d)(i).

“Latest Otelco Balance Sheet” has the meaning set forth in Section 3.2(d)(i).

“Leased MMHC Property” has the meaning set forth in Section 3.1(f).

“Leased Otelco Property” has the meaning set forth in Section 3.2(f).

“Lien” means and includes security interests, mortgages, liens, pledges, guarantees, charges, easements, reservations, restrictions, clouds, equities, rights of way, options, rights of first refusal and all other encumbrances, whether or not relating to the extension of credit or the borrowing of money.

“Material Adverse Effect” means, with respect to any Person, a change in the business, financial condition or results of operations of such Person and its Subsidiaries, which has a material adverse effect on such Person and its Subsidiaries, taken as a whole, other than changes (a) relating to the public disclosure of the transactions contemplated by this Agreement or the process of consummating such transactions, (b) relating to United States or foreign

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economies in general, (c) affecting the industries which such Person operates and not specifically relating to the business of such Person, (d) arising in connection with war or acts of terrorism, or (e) in Applicable Law.

“Material MMHC Contracts” has the meaning set forth in Section 3.1(h).

“Material Otelco Contracts” has the meaning set forth in Section 3.2(h).

“Merger” has the meaning set forth in the Recitals.

“MergerCo” has the meaning set forth in the Caption.

“Merger Security” has the meaning set forth in Section 2.1(a).

“MMCH Preferred” has the meaning set forth in Section 3.1(c)(ii)

“MMHC” has the meaning set forth in the Caption.

“MMHC Benefit Plans” has the meaning set forth in Section 3.1(l)(i).

“MMHC Financial Statements” has the meaning set forth in Section 3.1(d)(i).

“MMHC Common Stock” has the meaning set forth in the Recitals.

“MMHC Entity” means each of MMHC and its wholly owned Subsidiaries; and “MMHC Entities” means, collectively, MMHC and its wholly owned Subsidiaries.

“MMHC Optionees” has the meaning set forth in Section 2.3.

“MMHC Option Plan” has the meaning set forth in Section 2.3.

“MMHC Options” has the meaning set forth in Section 2.3.

“MMHC Treasury Stock” has the meaning set forth in Section 3.1(c)(i).

“MMT” means Mid-Missouri Telephone Company, a Missouri corporation and wholly owned subsidiary of MMHC.

“MPSC” means the Missouri Public Service Commission, and any successor entity thereto.

“Old Certificate” has the meaning set forth in Section 2.2(b).

“Organizational Documents” means, with respect to any Person, each instrument or other document that (x) defines the existence of such Person, including its certificate of limited partnership or formation or articles or certificate of incorporation, as filed or recorded with an applicable Governmental Authority, or (y) governs the internal affairs of such Person, including its limited liability company agreement, operating agreement, partnership agreement and/or bylaws.

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“Otelco” has the meaning set forth in the Caption.

“Otelco Entity” means each of Otelco and its wholly owned Subsidiaries; and “Otelco Entities” means, collectively, Otelco and its wholly owned Subsidiaries.

“Otelco Financial Statements” has the meaning set forth in Section 3.2(d)(i).

“Owned MMHC Property” has the meaning set forth in Section 3.1(f).

“Owned Otelco Property” has the meaning set forth in Section 3.2(f).

“Parent” has the meaning set forth in the Caption.

“Permitted Liens” means (i) those Liens set forth on Schedule 3.1(e) or Schedule 3.2(e), as applicable, or in the MMHC Financial Statements or Otelco Financial Statements, as applicable, or securing debt reflected as a liability on the Latest MMHC Balance Sheet or Latest Otelco Balance Sheet, as applicable; (ii) mechanics’, carriers’, workmen’s, repairmen’s or other like Liens arising or incurred in the ordinary course of business, Liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business and liens for Taxes that are not due and payable or that may thereafter be paid without penalty or that are being contested in good faith by appropriate proceedings; (iii) other imperfections of title or encumbrances, if any, that do not, individually or in the aggregate, materially impair the continued use and operation of the Company’s assets in the conduct of its business as presently conducted; (iv) easements, covenants, rights-of-way and other similar restrictions of record; (v) any conditions that may be shown by a current, accurate survey or physical inspection of any Owned MMHC Property or Owned Otelco Property (as applicable) made prior to Closing; and (vi) (A) zoning, building and other similar restrictions, (B) Liens that have been placed by any developer, landlord or other third party on property over which the Company has easement rights and (C) unrecorded easements, covenants, rights-of-way and other similar restrictions, none of which items set forth in this clause (vi), individually or in the aggregate, materially impair the continued use and operation of the Owned MMHC Property or Owned Otelco Property (as applicable) in the conduct of the business of the MMHC Entities or Otelco Entities (as applicable) as presently conducted.

“Permits” has the meaning set forth in Section 3.1(i).

“Person” means any association, trust, partnership, limited liability company, joint venture or other entity or business.

“Proceeding” means any action, suit, investigation, litigation or proceeding before any Governmental Entity or arbitrator.

“Public Offering” has the meaning set forth in Section 1.2.

“Surviving Corporation” has the meaning set forth in Section 0.

“Surviving Corporation Bylaws” has the meaning set forth in Section 1.4.

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“Surviving Corporation Charter” has the meaning set forth in Section 1.4.

“Tax” means any of the Taxes and “Taxes” means, with respect to any Person, (A) all income taxes (including any tax on or based upon net income, gross income, income as specially defined, earnings, profits or selected items of income, earnings or profits) and all gross receipts, sales, use, ad valorem, transfer, franchise, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property or windfall profits taxes, alternative or add-on minimum taxes, customs duties and other taxes, fees, assessments or charges of any kind whatsoever, together with all interest and penalties, additions to tax and other additional amounts imposed by any taxing authority (domestic or foreign) on such entity and (B) any liability for the payment of any amount of the type described in the immediately preceding clause (A) as a result of being a “transferee” (within the meaning of Section 6901 of the Code or any other applicable law) of another entity or a member of an affiliated or combined group.

“Tax Returns” means, with respect to any Person, collectively, returns, declarations of estimated Tax, Tax reports, information returns and statements relating to any material Taxes with respect to any income, assets or operations of such Person.

“Units” means, collectively or individually, the units representing an interest in Otelco prior to the Conversion.

The Merger.

Subject to the terms and conditions of this Agreement and contingent upon the substantially contemporaneous consummation of the Public Offering, MergerCo will be merged with and into MMHC in accordance with the DGCL, whereupon the separate existence of MergerCo shall cease and MMHC shall be the surviving corporation (MMHC following the Merger is sometimes referred to herein as the “Surviving Corporation”).

1.2Effective Time of the Merger.

As soon as practicable after the satisfaction or waiver of the conditions set forth in Article V, the Surviving Corporation shall file a Certificate of Merger (the “Certificate of Merger”) with the Secretary of State of the State of Delaware, and make all such other filings or recordings required by the DGCL in connection with the Merger.  The Merger shall become effective (the “Effective Time”) immediately following the Conversion and immediately prior to the consummation of the initial public offering of income deposit securities (each consisting of one Class A Otelco Share and $7.50 principal amount of Otelco’s senior subordinated notes due 2019 and referred to herein as an “IDS”) by Otelco pursuant to a registration statement made effective under the Securities Act of 1933, as amended (the “Public Offering”).

1.3Effect of the Merger.

Except as specifically set forth herein, in the Certificate of Merger or as may be required under the DGCL, at and after the Effective Time, the identity, existence, corporate organization, purposes, powers, objects, franchises, privileges, rights, immunities, restrictions, debts, liabilities and duties of MMHC will continue in effect and be unimpaired by the Merger, and the identity, existence, corporate organization, purposes, powers, objects, franchises, privileges, rights,

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immunities, restrictions, debts, liabilities and duties of MergerCo will be merged with and into MMHC.

1.4Charter, Bylaws, Officers and Directors of Surviving Corporation.

From and after the Effective Time, (a) the Certificate of Incorporation and Bylaws of MMHC, as then in effect, will be the Certificate of Incorporation and Bylaws of the Surviving Corporation (the “Surviving Corporation Charter” and the “Surviving Corporation Bylaws,” respectively), in each case, unless and until altered, amended or repealed as provided in the DGCL, the Surviving Corporation Charter or the Surviving Corporation Bylaws, (b) the following individuals shall serve as the directors of the board of directors of the Surviving Corporation, unless and until removed or until their successors have been duly elected and shall qualify in accordance with the DGCL, the Surviving Corporation Charter and the Surviving Corporation Bylaws, as applicable:

Michael Weaver

Curtis Garner, Jr.

and (c) the following individuals shall serve as officers of the Surviving Corporation, to hold the offices set forth opposite their names until their successors shall have been duly elected and shall qualify in accordance with the DGCL, the Surviving Corporation Charter and the Surviving Corporation Bylaws, as applicable:

Michael Weaver	Chief Executive Officer
Curtis Garner, Jr.	Chief Financial Officer, Secretary
Denise Day	Co-President, Vice President, Assistant Secretary, Controller
Gary B. Romig	Co-President, Vice President, Treasurer

1.5Taking of Necessary Action.

Prior to the Effective Time, the parties hereto shall do or cause to be done all such acts and things as may be necessary or appropriate in order to effectuate the Merger as expeditiously as reasonably practicable in accordance with this Agreement and the DGCL.

1.6Tax Free Reorganization.

For Federal, state and local income Tax purposes, the parties intend that the Merger be treated as the contribution to Otelco of the stock of MMHC by Parent, in connection with the contemporaneous consummation of the Public Offering.  As a consequence, Parent’s members, along with the new public shareholders of Otelco, will own stock satisfying the definition of

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control in Section 368(c) of the Code, and therefore the Merger will be a transfer described in Section 351(a) of the Code.

1.7Closing.

Unless this Agreement will have been terminated and the transactions contemplated by this Agreement abandoned pursuant to the provisions of Article VI, and subject to the provisions of Article V, the closing of the Merger (the “Closing”) will take place on a date (the “Closing Date”) to be mutually agreed upon by the parties.  The Closing will take place at the New York offices of O’Melveny & Myers LLP, unless another place is agreed to by the parties.

ARTICLE II

EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES

2.1Consideration; Effect on Capital Stock.

At the Effective Time, subject and pursuant to the terms and conditions of this Agreement, by virtue of the Merger and without any action on the part of the Constituent Corporations or the holders of the capital stock of the Constituent Corporations:

(a)Conversion of MMHC Common Stock for Merger Securities.  Subject to Section 2.2, each share of MMHC Common Stock issued and outstanding immediately prior to the Effective Time will be exchanged for and converted into the right to receive 0.00881 Class B Otelco Shares and 0.14126 IDSs (such number of Class B Otelco Shares and IDSs that each share of MMHC Common Stock is exchanged for and converted into, collectively, a “Merger Security”).

(b)Capital Stock of MergerCo.  Each issued and outstanding share of common stock, par value $0.01 per share, of MergerCo will be converted into 1 share of MMHC Common Stock.

(c)Shares of Dissenting Stockholders.  Each issued and outstanding share of MMHC Common Stock held by a dissenting stockholder, if any, shall not be exchanged and converted as described in Section 2.1(a) but shall become the right to receive such consideration as may be determined to be due to such dissenting stockholder pursuant to the DGCL; provided, however, that each share of MMHC Common Stock issued and outstanding at the Effective Time and held by a dissenting stockholder who or which shall, after the Effective Time, withdraw his or her demand for appraisal or lose or fail to perfect his or its right of appraisal as provided in the DGCL shall be deemed, as of the Effective Time, to be exchanged for and converted into Merger Securities as provided in Section 2.1(a), without interest.  After the Effective Time, as provided in the DGCL, no dissenting stockholder will be entitled to vote the shares of MMHC Common Stock subject to such dissenting stockholder’s demand for appraisal for any purpose or be entitled to the payment of dividends or other distributions on such shares.

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(d)Cancellation of MMHC Treasury Stock.  Each share of MMHC Treasury Stock shall be automatically cancelled and no consideration shall be delivered in exchange thefefor.

2.2Exchange of Certificates.

(a)Procedure for Exchange of MergerCo Stock.  Upon delivery by Otelco to MMHC of a certificate or certificates which, immediately prior to the Effective Time, represented issued and outstanding shares of MergerCo capital stock, MMHC will issue and deliver to Otelco a new stock certificate representing ownership of an equivalent number of shares of MMHC Common Stock.  After the Effective Time and until the time that any such certificate has been exchanged in accordance with the preceding sentence, each certificate for MergerCo capital stock will be deemed, for all purposes, to represent an equivalent number of shares of MMHC Common Stock.

(b)Procedure for Exchange of MMHC Stock.  Upon delivery by Parent to Otelco of a certificate or certificates which, immediately prior to the Effective Time, represented issued and outstanding shares of MMHC Common Stock, Otelco will issue and deliver to Parent new certificates (to the extent applicable) representing ownership of that number of Merger Securities that Parent has the right to receive pursuant to Section 2.1(a).  After the Effective Time and until the time that any such MMHC Common Stock certificates have been exchanged in accordance with the preceding sentence, such certificates will be deemed, for all purposes, to represent that number of Merger Securities that Parent would have the right to receive pursuant to Section 2.1(a).

(c)No Further Ownership Rights in MMHC Common Stock.  All Merger Securities issued upon the surrender for exchange of shares of MMHC Common Stock in accordance with the terms of this Article II will be deemed to have been issued in full satisfaction of all rights pertaining to such shares of MMHC Common Stock.  If, after the Effective Time, any certificate representing shares of MMHC Common Stock outstanding prior to the Effective Time is presented to the Surviving Corporation for any reason, such certificate will be cancelled and exchanged as provided in this Article II.

2.3MMHC Options.

MMHC and Otelco have or shall enter into the Option Exchange Agreement (attached hereto as Exhibit A) with all of the holders (each an “MMHC Optionee”) of options to purchase shares of MMHC Common Stock (“MMHC Options”) that were granted pursuant to MMHC’s 2001 Second Amended and Restated Stock Option Plan, as may be amended, supplemented and/or restated (the “MMHC Option Plan”), pursuant to which each MMHC Optionee shall agree to exchange all of his, her or its MMHC Options for that number of Class B Otelco Shares and IDSs such MMHC Optionee would have been entitled to receive pursuant to Section 2.1(a) if such MMHC Optionee would have exercised all of his, her or its MMHC Options for MMHC Commons Stock by cashless exercise prior to the Effective Time, such exchange to be effective contemporaneously with the Effective Time.

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ARTICLE III

REPRESENTATIONS AND WARRANTIES

3.1Representations and Warranties of Parent and MMHC.

Each of Parent and MMHC hereby represents and warrants to MergerCo and Otelco as follows:

(a)Organization, Good Standing, Qualification and Power.  Parent and each MMHC Entity is duly organized, validly existing and in good standing under the laws of the state of its incorporation and has the requisite power and authority to own, lease and operate its properties and to carry on its business as presently conducted, to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.  Each MMHC Entity is duly qualified and in good standing to do business in each jurisdiction in which such qualification is necessary because of the nature of the business conducted by it, except where the failure to be so qualified has not had a Material Adverse Effect.  Complete copies of the Organizational Documents of each MMHC Entity have been made available to Otelco.

(b)No Conflicts; Consents. The execution and delivery by Parent and MMHC of this Agreement do not, and the consummation of the transactions contemplated hereby and compliance by Parent and MMHC with the terms hereof will not, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under any obligation, or result in the creation of any Lien upon any of the assets owned or used by Parent or any MMHC Entity under any provision of (i) the Organizational Documents of the Parent or any MMHC Entity, (ii) except as set forth on Schedule 3.1(b), any Material Contract to which Parent or any MMHC Entity is a party or by which any of their respective properties or assets are bound or (iii) any Judgment or Applicable Law applicable to Parent, MMHC or MMT or their respective properties or assets, other than, in the case of clauses (ii) and (iii) above, any such conflicts, violations, defaults, rights or Liens that, individually or in the aggregate, would not have a Material Adverse Effect.  No consent of, or registration, declaration or filing with, any Governmental Entity is required to be obtained or made by or with respect to Parent or any MMHC Entity in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby, other than (i) those consents set forth on Schedule 3.1(b), (ii) those the failure of which to obtain or make, individually or in the aggregate, would not (A) have a Material Adverse Effect or (B) materially impair the ability of Parent or MMHC to perform its obligations under this Agreement and (iii) those that may be required solely by reason of Otelco’s (as opposed to any other third party’s) participation in the transactions contemplated hereby.  This Agreement is a legal, valid and binding obligation of Parent and MMHC, enforceable against it in accordance with the terms herein.

(c)Capitalization.

(i)The authorized capital stock of MMHC consists of 10,000,000 authorized shares, all of which have been designated as common stock, $0.01 par value per share, (x) 6,000,000 of which are issued and outstanding, fully paid and

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nonassessable and (y) 4,000 of which are held in treasury and are issued but not outstanding (“MMHC Treasury Stock”).  All of the issued and outstanding shares of capital stock of MMHC are held of record by Parent (without giving effect to Section 2.3), were validly issued and are fully paid and nonassessable.  Schedule 3.1(c)(i) sets forth a list of each outstanding MMCH Option and the holder thereof.  Except for this Agreement and the MMHC Options, there are no outstanding options, warrants, rights, calls, agreements, convertible securities or other commitments or rights to purchase or acquire any unissued Common Stock or other securities from MMHC.

(ii)MMHC owns 100% of the issued and outstanding capital stock of MMT.  MMT owns (A) 100% of the issued and outstanding capital stock of Imagination, Inc. and (B) 5,800 shares of Series A Redeemable Participating Preferred Stock, 0.01 par value per share, of MMC Holding Corp. (the “MMCH Preferred”).  Except as set forth in this Section 3.1(c)(ii), no MMHC Entity owns any capital stock, other securities, or rights or obligations to acquire the same, of any other Person.

(d)Financial Statements.

(i)MMHC has previously provided Otelco with a true, correct and complete copy of (i) the audited consolidated balance sheet of MMHC as of December 31, 2003 (the “Audited MMHC Balance Sheet”), and the related audited statements of operations, shareholders’ equity and cash flows for the fiscal year then ended (together with the Audited Balance Sheet, the “Audited MMHC Financial Statements”) and (ii) the unaudited consolidated balance sheet of MMHC as of June 30, 2004 (the “Latest MMHC Balance Sheet”) and the related unaudited statement of operations, shareholders’ equity and cash flows for the period then ended (together with the Audited Financial Statements and the Latest MMHC Balance Sheet, the “MMHC Financial Statements”).  The MMHC Financial Statements have been prepared from the books and records of MMHC in accordance with GAAP (except, in the case of unaudited MMHC Financial Statements, for normal year-end adjustments and the absence of footnotes).  Except as set forth on Schedule 3.1(d)(i), the MMHC Financial Statements fairly present in all material respects the financial condition, results of operations, and cash flows of MMHC and its consolidated Subsidiaries as of the dates and for the periods indicated.

(ii)The MMHC Entities do not have any liabilities or obligations of the type required to be reflected in a balance sheet or disclosed in the footnotes to the MMHC Financial Statements, in each case prepared in accordance with GAAP and that would have a Material Adverse Effect, except (i) as disclosed, reflected or reserved against in the MMHC Financial Statements, (ii) for items disclosed on Schedule 3.1(d)(ii), or (iii) for liabilities and obligations incurred in the ordinary course of business consistent with past practice since the date of the Audited MMHC Financial Statements.

(e)Assets Other than Real Property Interests.  The MMHC Entities have good and valid title to all of the assets and properties reflected on the Latest Balance Sheet or acquired subsequent thereto (except for assets and properties sold, consumed or otherwise disposed of in the ordinary course of business since the date of the Latest MMHC Balance Sheet), free and clear of all Liens, except Permitted Liens.  This Section 3.1(e) contains the sole and exclusive

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representations and warranties of MMHC with respect to matters relating to the assets and properties of the MMHC Entities, except for Owned MMHC Property and Leased MMHC Property, which are the subject of Section 3.1(f), and Intellectual Property, which is the subject of Section 3.1(g).

(f)Real Property.  Schedule 3.1(f) contains a true, correct and complete list of all real property and interests in real property owned in fee by the MMHC Entities and used, or held for use, in the operation or conduct of the business of the MMHC Entities as presently conducted (the “Owned MMHC Property”).  The MMHC Entities have good title to all Owned MMHC Property, in each case, free and clear of all Liens, except Permitted Liens.  Schedule 3.1(f) contains a list of all real property and interests in real property leased by the MMHC Entities and used, or held for use, in the operation or conduct of the MMHC Entities’ respective businesses (the “Leased MMHC Property”).  An MMHC Entity is the lessee of each Leased Property and is in possession of the premises purported to be leased thereunder, and each such lease is valid without any material default thereunder by the applicable MMHC Entity or, to the knowledge of MMHC, by the lessor.  Schedule 3.1(f) contains a list of all Owned MMHC Property or Leased MMHC Property on which a telephone switch owned, leased or operated by MMT is located.  This Section 3.1(f) contains the sole and exclusive representations and warranties of MMHC with respect to matters relating to Owned MMHC Property and Leased MMHC Property.

(g)Intellectual Property.  Schedule 3.1(g) sets forth a list of all material Intellectual Property (other than rights of an MMHC Entity as licensee) owned or used by the MMHC Entities.  Except as set forth on Schedule 3.1(g), no MMHC Entity has received any written notice from any other Person challenging in any material respect the right of such MMHC Entity to use any of the material Intellectual Property or any rights thereunder.  Except as set forth on Schedule 3.1(g), no MMHC Entity has granted any licenses or other rights and no MMHC Entity has any obligation to grant licenses or other rights to any of the material Intellectual Property to any other Person.  No MMHC Entity has, in the last two years, made any claim in writing of a violation or infringement by others of its rights to or in connection with any material Intellectual Property.  This Section 3.1(g) contains the sole and exclusive representations and warranties of MMHC with respect to matters relating to Intellectual Property.

(h)Contracts.  Schedule 3.1(h) sets forth a list of the material agreements, understandings, commitments, or instruments, whether written or oral, to which each MMHC Entity is a party or by which any of them or any of their assets are bound as of the date hereof (the “Material Contracts”).  Except as set forth on Schedule 3.1(h), (i) the Material Contracts are, to the knowledge of MMHC, in full force and effect and enforceable by the applicable MMHC Entity in accordance with their respective terms, except to the extent that such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors rights generally and to general principles of equity, (ii) no MMHC Entity is in material breach of or material default under (and no event has occurred which with notice or the passage of time or both would constitute a material breach or material default under) any Material Contract, and (iii) no MMHC Entity has given nor, to the knowledge of MMHC, received from any other Person, any notice or other communication regarding the existence of any breach of, or default under, any Material Contract.

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(i)Permits.  Except as set forth on Schedule 3.1(i), (a) each MMHC Entity holds and is in compliance with all material certificates, licenses, permits, authorizations and approvals (“Permits”) required under Applicable Law for the conduct of its respective business; and (b) during the one-year period prior to the date of this Agreement, no MMHC Entity has received notice of any Proceedings relating to the revocation or modification of any such Permits.  This Section 3.1(i) contains the sole and exclusive representations and warranties of MMHC with respect to Permits, except for Permits required by (i) the MPSC, which are the subject of Section 3.1(o), and (ii) any Environmental Law, which are the subject of Section 3.1(p).

(j)Taxes.  MMHC filed a consolidated Tax Return for United Stated federal income Tax purposes.  Except as set forth on Schedule 3.1(j), (a) each MMHC Entity has filed all Tax Returns required to be filed by them prior to the Closing Date; (b) as of the time of filing, the Tax Returns were true and correct in all material respects; (c) all Taxes shown to be due on such Tax Returns have been paid; (d) no statute of limitations has been waived and no extension of time during which a Tax assessment or deficiency assessment may be made has been agreed to, which waiver or extension is still outstanding with respect to any Tax liability of an MMHC Entity; (e) there are no pending Tax audits of any Tax Returns of any MMHC Entity and no MMHC Entity has received written notice of any unresolved questions or claims concerning its Tax liability; (f) each MMHC Entity has complied in all material respects with Applicable Laws, rules and regulations relating to the payment and withholding of income Taxes; and (g) no MMHC Entity is or has ever been a party to any Tax sharing agreement.  This Section 3.1(j) contains the sole and exclusive representations and warranties of MMHC with respect to matters relating to Taxes.

(k)Proceedings.  Schedule 3.1(k) sets forth a true, correct and complete list as of the date of this Agreement of all pending Proceedings or claims with respect to which a MMHC Entity has been contacted in writing by counsel for the plaintiff or claimant, arising out of the conduct of their respective businesses or against any of their respective assets and that (a) relate to or involve more than $200,000, (b) seek any injunctive relief or (c) would give rise to any legal restraint on or prohibition against the transactions contemplated by this Agreement.  To the knowledge of MMHC, except as set forth on Schedule 3.1(k), no MMHC Entity is a party or subject to or in default under any Judgment applicable to the conduct of its respective business as presently conducted or any of its respective assets.

(l)Benefit Plans.

(i)Schedule 3.1(l)(i) contains a list of all “employee benefit plans” (as defined in Section 3(3) of ERISA) and all other bonus, stock option, deferred and incentive compensation plans and programs maintained or contributed to by the MMHC Entities for the benefit of its employees or former employees (all of the foregoing being referred to herein as the “MMHC Benefit Plans”).

(ii)Except as set forth on Schedule 3.1(l)(ii), (i) each MMHC Benefit Plan has been operated and administered pursuant to its terms and in material compliance with ERISA, the Code, and all Applicable Laws; (ii) all contributions due and payable by an MMHC Entity on or before the Closing Date in respect of any MMHC Benefit Plan have been made in full and proper form, or adequate accruals have been provided for in the

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Financial Statements for all other contributions or amounts in respect of MMHC Benefit Plans for periods ending on or before the Closing Date; (iii) no MMHC Entity has breached the fiduciary rules of ERISA or engaged in a prohibited transaction with respect to any MMHC Benefit Plan which would subject such MMHC Entity to any Tax or penalty imposed under Sections 4975 of the Code or Section 502 (i), (j) or (l) of ERISA; (iv) no MMHC Benefit Plan subject to Part (3) of Subtitle B of Title I of ERISA or Section 412 of the Code has incurred any “accumulated funding deficiency” (as defined in Section 412(a) of the Code), whether or not waived; (v) no “reportable event” (within the meaning of Section 4043 of ERISA) has occurred with respect to any MMHC Benefit Plan; and (vi) no Proceedings (other than routine benefit claims) are pending or, to the knowledge of MMHC, threatened against or relating to any MMHC Benefit Plan, or any fiduciary thereof.

(iii)True and complete copies of the following documents, as they have been amended to the date hereof, relating to the MMHC Benefit Plans, have been made available to Otelco: (A) all MMHC Benefit Plan documents and (B) the Form 5500, 5500-C or 5500-R for each MMHC Benefit Plan for the two most recent plan years.  This Section 3.1(l)(iii) contains the sole and exclusive representations and warranties of MMHC with respect to any MMHC Benefit Plans.

(m)Employee and Labor Matters.  Except as disclosed on Schedule 3.1(m), (a) no MMHC Entity is party to any collective bargaining agreement or similar agreement, (b) there are no unfair labor practice complaints pending against any MMHC Entity, or to the knowledge of MMHC, threatened against any MMHC Entity before the National Labor Relations Board, or (c) no strike, labor dispute, slowdown or stoppage is pending against any MMHC Entity except with respect to any matter specified above, which, in the case of clause (b) or (c), individually or in the aggregate, has not had a Material Adverse Effect.  This Section 3.1(m) contains the sole and exclusive representations and warranties of MMHC with respect to employee and labor matters.

(n)Absence of Changes or Events.  Except as set forth on Schedule 3.1(n), from the date of the Latest MMHC Balance Sheet until the date hereof, there has not been any event which would reasonably be expected to have a Material Adverse Effect on the MMHC Entities.

(o)Compliance with Applicable Laws.

(i)Except as set forth on Schedule 3.1(o)(i), the MMHC Entities are in compliance with all Applicable Laws, except for instances of noncompliance that, individually or in the aggregate, have not had a Material Adverse Effect.  Except as set forth on Schedule 3.1(o)(i), no MMHC Entity has received any written communication during the past two years from a Governmental Entity that alleges that such MMHC Entity is not in compliance in any material respect with any Applicable Laws.

(ii)The regulatory tariffs applicable to MMT stand in full force and effect in accordance with their terms, and there is no outstanding notice of cancellation or termination or, to the knowledge of MMHC, any threatened cancellation or termination in connection therewith.  Except as otherwise disclosed on Schedule 3.1(o)(ii), MMT is not subject to any restrictions or conditions applicable to its regulatory tariffs that limit the

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operations of MMT (other than restrictions or conditions generally applicable to tariffs of that type).  Except as otherwise disclosed on Schedule3.1(o)(ii), MMT is not in material violation under the terms and conditions of any such tariff and, to the knowledge of MMHC, there is no basis for any claim of violation by MMT under any such tariff.  Except as set forth on Schedule 3.1(o)(ii) there are no applications by MMT, nor any complaints or petitions, or other filings by others, or Proceedings pending or, to the knowledge of MMHC, threatened, before the MPSC relating to MMT or its operations or regulatory tariffs.  A true and correct copy of each tariff applicable to MMT has been made available to Otelco.

(iii)This Section 3.1(o) contains the sole and exclusive representations and warranties of MMHC with respect to MMT regulatory tariffs and other regulatory matters before the MPSC.

(p)Environmental Matters.  Except as set forth on Schedule 3.1(p) and except for those matters that, individually or in the aggregate, have not had a Material Adverse Effect, (a) during the past two years, no MMHC Entity has received any written communication from a Governmental Entity that alleges that it is not in compliance with any Environmental Law, (b) the MMHC Entities hold, and are in compliance with, all Permits required under Environmental Laws to conduct their respective businesses, and are in compliance with all Environmental Laws and (c) in connection with the conduct of their respective businesses, the MMHC Entities have not entered into or agreed to any court decree or order and are not subject to any Judgment relating to compliance with any Environmental Law or to investigation or cleanup of a Hazardous Substance under any Environmental Law.  This Section 3.1(p) contains the sole and exclusive representations and warranties of MMHC with respect to any environmental, health or safety matters, including, without limitation, any matters arising under Environmental Law.

(q)No Additional Representations.  NEITHER PARENT NOR MMHC IS MAKING ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER WITH RESPECT TO PARENT OR THE MMHC ENTITIES, INCLUDING ANY OF THE ASSETS OF THE MMHC ENTITIES, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS SECTION 3.1, AND EXCEPT AS SET FORTH EXPRESSLY HEREIN, THE CONDITION OF THE ASSETS OF THE MMHC ENTITIES SHALL BE “AS IS” AND “WHERE IS.”

3.2Representations and Warranties of Otelco and MergerCo.

Each of Otelco and MergerCo represents and warrants to MMHC and Parent as follows:

(a)Organization, Good Standing, Qualification and Power. (i) As of the date hereof, Otelco is a limited liability company duly organized, validly existing and in good standing under the laws of its state of formation, (ii) immediately following the Conversion, Otelco will be a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation, (iii) MergerCo is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation, (iv) each of Otelco and MergerCo has the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as presently conducted, to enter into this Agreement, to perform its

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obligations hereunder and to consummate the transactions contemplated hereby and (v) each of Otelco and MergerCo is duly qualified and in good standing to do business in each jurisdiction in which such qualification is necessary because of the nature of the business conducted by it, except where the failure to be so qualified has not had a Material Adverse Effect.  Otelco has delivered or made available to MMHC true and complete copies of the Organizational Documents of Otelco and MergerCo.

(b)No Conflicts; Consents. The execution and delivery by Otelco and MergerCo of this Agreement do not, and the consummation of the transactions contemplated hereby and compliance by Otelco and MergerCo with the terms hereof will not, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under any obligation, or result in the creation of any Lien upon any of the assets owned or used by any Otelco Entity under any provision of (i) the Organizational Documents of any Otelco Entity, (ii) except as set forth on Schedule 3.2(b), any Material Contract to which any Otelco Entity is a party or by which any of their respective properties or assets are bound or (iii) any Judgment or Applicable Law applicable to any Otelco Entity or their respective properties or assets, other than, in the case of clauses (ii) and (iii) above, any such conflicts, violations, defaults, rights or Liens that, individually or in the aggregate, would not have a Material Adverse Effect.  No consent of, or registration, declaration or filing with, any Governmental Entity is required to be obtained or made by or with respect to any Otelco Entity in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby, other than (i) those consents set forth on Schedule 3.2(b), (ii) those the failure of which to obtain or make, individually or in the aggregate, would not (A) have a Material Adverse Effect or (B) materially impair the ability of Otelco or MergerCo to perform its obligations under this Agreement and (iii) those that may be required solely by reason of Parent’s, the MMHC Optionees’ or MMHC’s (as opposed to any other third party’s) participation in the transactions contemplated hereby.  This Agreement is legal, valid and binding obligation of each of Otelco and MergerCo, enforceable against it in accordance with the terms herein.

(c)Capitalization; Subsidiaries.  Effective as of the Effective Time, the authorized capital stock of Otelco will consist of 20,800,000 authorized shares of common stock, (i) 20,000,000 of which will be designated as Class A Common Stock, $0.01 par value per share (the “Class A Otelco Shares”), 9,676,733 of which will then be issued and outstanding and (ii) 800,000 of which will be designated as Class B Common Stock, $0.01 par value per share (the “Class B Otelco Shares”), 544,671 of which will then be currently issued and outstanding.  All outstanding Class B Otelco Shares will be validly issued, fully paid and non-assessable.  Except as set forth in on Schedule 3.2(c), there are no preemptive rights, options, warrants, other rights, calls, commitments or agreements of any character to which Otelco is a party or by which it is bound calling for the issuance of shares of capital stock of Otelco or any securities convertible into or exercisable or exchangeable for, or representing the right to purchase or otherwise receive, any capital stock of Otelco.  All outstanding shares of the capital stock of MergerCo are validly issued, fully paid and nonassessable and owned by Otelco, free and clear of all Liens.  Immediately prior to the Closing, except for this Agreement, there will be no options, warrants, rights, calls, commitments or agreements of any character to which Otelco is a party or by which it is bound calling for the issuance of shares of capital stock of MergerCo or any securities convertible into or exchangeable for, or representing the right to purchase or otherwise receive, any such capital stock, or other arrangement to acquire, at any time or under any circumstances,

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capital stock of MergerCo.  Effective as of the Effective Time, Otelco will have duly authorized and reserved for issuance the Merger Securities and, when issued in accordance with the terms of Article II, the Merger Securities will be validly issued, fully paid and nonassessable.  Except as set forth on Schedule 3.2(c), no Otelco Entity owns any capital stock, other securities, or rights or obligations to acquire the same, of any other Person.

(d)Financial Statements.

(i)Otelco has previously provided MMHC with a true, correct and complete copy of (i) the audited consolidated balance sheet of Otelco as of December 31, 2003 (the “Audited Otelco Balance Sheet”), and the related audited statements of operations, members’ equity and cash flows for the fiscal year then ended (together with the Audited Balance Sheet, the “Audited Otelco Financial Statements”) and (ii) the unaudited consolidated balance sheet of Otelco as of June 30, 2004 (the “Latest Otelco Balance Sheet”) and the related unaudited statement of operations, members’ equity and cash flows for the period then ended (together with the Audited Otelco Financial Statements and the Latest Otelco Balance Sheet, the “Otelco Financial Statements”).  The Otelco Financial Statements have been prepared from the books and records of Otelco in accordance with GAAP (except, in the case of unaudited Otelco Financial Statements, for normal year-end adjustments and the absence of footnotes).  Except as set forth on Schedule 3.2(d)(i), the Otelco Financial Statements fairly present in all material respects the financial condition, results of operations, and cash flows of Otelco and its consolidated Subsidiaries as of the dates and for the periods indicated.

(ii)The Otelco Entities do not have any liabilities or obligations of the type required to be reflected in a balance sheet or disclosed in the footnotes to the Otelco Financial Statements, in each case prepared in accordance with GAAP and that would have a Material Adverse Effect, except (i) as disclosed, reflected or reserved against in the Otelco Financial Statements, (ii) for items disclosed on Schedule 3.2(d)(ii), or (iii) for liabilities and obligations incurred in the ordinary course of business consistent with past practice since the date of the Audited Otelco Financial Statements.

(e)Assets Other than Real Property Interests.  The Otelco Entities have good and valid title to all of the assets and properties reflected on the Latest Otelco Balance Sheet or acquired subsequent thereto (except for assets and properties sold, consumed or otherwise disposed of in the ordinary course of business since the date of the Latest Otelco Balance Sheet), free and clear of all Liens, except Permitted Liens.  This Section 3.2(e) contains the sole and exclusive representations and warranties of Otelco with respect to matters relating to the assets and properties of the Otelco Entities, except for Owned Otelco Property and Leased Otelco Property, which are the subject of Section 3.2(f), and Otelco Intellectual Property, which is the subject of Section 3.2(g).

(f)Real Property.  Schedule 3.2(f) contains a true, correct and complete list of all real property and interests in real property owned in fee by the Otelco Entities and used, or held for use, in the operation or conduct of the business of the Otelco Entities as presently conducted (the “Owned Otelco Property”).  The Otelco Entities have good title to all Owned Otelco Property, in each case, free and clear of all Liens, except Permitted Liens.  Schedule 3.2(f)

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contains a list of all real property and interests in real property leased by the Otelco Entities and used, or held for use, in the operation or conduct of the Otelco Entities’ respective businesses (the “Leased Otelco Property”).  A Otelco Entity is the lessee of each Leased Otelco Property and is in possession of the premises purported to be leased thereunder, and each such lease is valid without any material default thereunder by the applicable Otelco Entity or, to the knowledge of Otelco, by the lessor.  Schedule 3.2(f) contains a list of all Owned Otelco Property or Leased Otelco Property on which a primary telephone switch owned, leased or operated by an Otelco Entity is located.  This Section 3.2(f) contains the sole and exclusive representations and warranties of Otelco with respect to matters relating to Owned Otelco Property and Leased Otelco Property.

(g)Intellectual Property.  Schedule 3.2(g) sets forth a list of all material Intellectual Property (other than rights of an Otelco Entity as licensee) owned or used by the Otelco Entities.  Except as set forth on Schedule 3.2(g), no Otelco Entity has received any written notice from any other Person challenging in any material respect the right of such Otelco Entity to use any of the material Intellectual Property or any rights thereunder.  Except as set forth on Schedule 3.2(g), no Otelco Entity has granted any licenses or other rights and no Otelco Entity has any obligation to grant licenses or other rights to any of the material Intellectual Property to any other Person.  No Otelco Entity has, in the last two years, made any claim in writing of a violation or infringement by others of its rights to or in connection with any material Intellectual Property.  This Section 3.2(g) contains the sole and exclusive representations and warranties of Otelco with respect to matters relating to Intellectual Property.

(h)Contracts.  Schedule 3.1(h) sets forth a list of the material agreements, understandings, commitments, or instruments, whether written or oral, to which each Otelco Entity is a party or by which any of them or any of their assets are bound as of the date hereof (the “Material Otelco Contracts”).  Except as set forth on Schedule 3.1(h), (i) the Material Otelco Contracts are, to the knowledge of Otelco, in full force and effect and enforceable by the applicable Otelco Entity in accordance with their respective terms, except to the extent that such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors rights generally and to general principles of equity, (ii) no Otelco Entity is in material breach of or material default under (and no event has occurred which with notice or the passage of time or both would constitute a material breach or material default under) any Material Otelco Contract, and (iii) no Otelco Entity has given nor, to the knowledge of Otelco, received from any other Person, any notice or other communication regarding the existence of any breach of, or default under, any Material Otelco Contract.

(i)Permits.  Except as set forth on Schedule 3.2(i), (a) each Otelco Entity holds and is in compliance with all material certificates, licenses, permits, authorizations and approvals (“Permits”) required under Applicable Law for the conduct of its respective business; and (b) during the one-year period prior to the date of this Agreement, no Otelco Entity has received notice of any Proceedings relating to the revocation or modification of any such Permits.  This Section 3.2(i) contains the sole and exclusive representations and warranties of Otelco with respect to Permits, except for Permits required by (i) the APSC, which are the subject of Section 3.2(o), and (ii) any Environmental Law, which are the subject of Section 3.2(p).

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(j)Taxes.  Otelco filed a consolidated Tax Return for United Stated federal income Tax purposes.  Except as set forth on Schedule 3.2(j), (a) each Otelco Entity has filed all Tax Returns required to be filed by them prior to the Closing Date; (b) as of the time of filing, the Tax Returns were true and correct in all material respects; (c) all Taxes shown to be due on such Tax Returns have been paid; (d) no statute of limitations has been waived and no extension of time during which a Tax assessment or deficiency assessment may be made has been agreed to, which waiver or extension is still outstanding with respect to any Tax liability of a Otelco Entity; (e) there are no pending Tax audits of any Tax Returns of any Otelco Entity and no Otelco Entity has received written notice of any unresolved questions or claims concerning its Tax liability; (f) each Otelco Entity has complied in all material respects with Applicable Laws, rules and regulations relating to the payment and withholding of income Taxes; and (g) no Otelco Entity is or has ever been a party to any Tax sharing agreement.  This Section 3.2(j) contains the sole and exclusive representations and warranties of Otelco with respect to matters relating to Taxes.

(k)Proceedings.  Schedule 3.2(k) sets forth a true, correct and complete list as of the date of this Agreement of all pending Proceedings or claims with respect to which a Otelco Entity has been contacted in writing by counsel for the plaintiff or claimant, arising out of the conduct of their respective businesses or against any of their respective assets and that (a) relate to or involve more than $200,000, (b) seek any injunctive relief or (c) would give rise to any legal restraint on or prohibition against the transactions contemplated by this Agreement.  To the knowledge of Otelco, except as set forth on Schedule 3.2(k), no Otelco Entity is a party or subject to or in default under any Judgment applicable to the conduct of its respective business as presently conducted or any of its respective assets.

(l)Benefit Plans.

(i)Schedule 3.2(l)(i) contains a list of all “employee benefit plans” (as defined in Section 3(3) of ERISA) and all other bonus, stock option, deferred and incentive compensation plans and programs maintained or contributed to by the Otelco Entities for the benefit of its employees or former employees (all of the foregoing being referred to herein as the “Otelco Benefit Plans”).

(ii)Except as set forth on Schedule 3.2(l)(ii), (i) each Otelco Benefit Plan has been operated and administered pursuant to its terms and in material compliance with ERISA, the Code, and all Applicable Laws; (ii) all contributions due and payable by an Otelco Entity on or before the Closing Date in respect of any Otelco Benefit Plan have been made in full and proper form, or adequate accruals have been provided for in the Financial Statements for all other contributions or amounts in respect of Otelco Benefit Plans for periods ending on or before the Closing Date; (iii) no Otelco Entity has breached the fiduciary rules of ERISA or engaged in a prohibited transaction with respect to any Otelco Benefit Plan which would subject such Otelco Entity to any Tax or penalty imposed under Sections 4975 of the Code or Section 502 (i), (j) or (l) of ERISA; (iv) no Otelco Benefit Plan subject to Part (3) of Subtitle B of Title I of ERISA or Section 412 of the Code has incurred any “accumulated funding deficiency” (as defined in Section 412(a) of the Code), whether or not waived; (v) no “reportable event” (within the meaning of Section 4043 of ERISA) has occurred with respect to any Otelco Benefit

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Plan; and (vi) no Proceedings (other than routine benefit claims) are pending or, to the knowledge of Otelco, threatened against or relating to any Otelco Benefit Plan, or any fiduciary thereof.

(iii)True and complete copies of the following documents, as they have been amended to the date hereof, relating to the Otelco Benefit Plans, have been made available to MMHC: (i) all Otelco Benefit Plan documents; (ii) the most recently completed actuarial valuation for each Plan; (iii) the Form 5500, 5500-C or 5500-R for each Otelco Benefit Plan for the two most recent plan years; and (iv) all collective bargaining agreements or other similar agreements covering employees of the Otelco Entities.  This Section 3.2(l) contains the sole and exclusive representations and warranties of Otelco with respect to any Otelco Benefit Plans.

(m)Employee and Labor Matters.  Except as disclosed on Schedule 3.2(m), (a) no Otelco Entity is party to any collective bargaining agreement or similar agreement, (b) there are no unfair labor practice complaints pending against any Otelco Entity, or to the knowledge of Otelco, threatened against any Otelco Entity before the National Labor Relations Board, or (c) no strike, labor dispute, slowdown or stoppage is pending against any Otelco Entity except with respect to any matter specified above, which, in the case of clause (b) or (c), individually or in the aggregate, has not had a Material Adverse Effect.  This Section 3.2(m) contains the sole and exclusive representations and warranties of Otelco with respect to employee and labor matters.

(n)Absence of Changes or Events.  Except as set forth on Schedule 3.2(n), from the date of the Latest Otelco Balance Sheet until the date hereof, there has not been any event which would reasonably be expected to have a Material Adverse Effect on the Otelco Entities.

(o)Compliance with Applicable Laws.

(i)Except as set forth on Schedule 3.2(o)(i), the Otelco Entities are in compliance with all Applicable Laws, except for instances of noncompliance that, individually or in the aggregate, have not had a Material Adverse Effect.  Except as set forth on Schedule 3.2(o)(i), no Otelco Entity has received any written communication during the past two years from a Governmental Entity that alleges that such Otelco Entity is not in compliance in any material respect with any Applicable Laws.

(ii)The regulatory tariffs applicable to the Otelco Entities stand in full force and effect in accordance with their terms, and there is no outstanding notice of cancellation or termination or, to the knowledge of Otelco, any threatened cancellation or termination in connection therewith.  Except as otherwise disclosed on Schedule 3.2(o)(ii), no Otelco Entity is subject to any restrictions or conditions applicable to its regulatory tariffs that limit the operations of the Otelco Entities (other than restrictions or conditions generally applicable to tariffs of that type).  Except as otherwise disclosed on Schedule 3.2(o)(ii), no Otelco Entity is in material violation under the terms and conditions of any such tariff and, to the knowledge of Otelco, there is no basis for any claim of violation by any Otelco Entity under any such tariff.  Except as set forth on Schedule 3.2(o)(ii), there are no applications by any Otelco Entity, nor any complaints or petitions, or other filings by others, or Proceedings pending or, to the knowledge of

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Otelco, threatened, before the APSC relating to any Otelco Entity or its operations or regulatory tariffs.  A true and correct copy of each tariff applicable to the Otelco Entities has been made available to Otelco.

(iii)This Section 3.2(o) contains the sole and exclusive representations and warranties of Otelco with respect to regulatory tariffs and other regulatory matters before the APSC.

(p)Environmental Matters.  Except as set forth on Schedule 3.2(p) and except for those matters that, individually or in the aggregate, have not had a Material Adverse Effect, (a) during the past two years, no Otelco Entity has received any written communication from a Governmental Entity that alleges that it is not in compliance with any Environmental Law, (b) the Otelco Entities hold, and are in compliance with, all Permits required under Environmental Laws to conduct their respective businesses, and are in compliance with all Environmental Laws and (c) in connection with the conduct of their respective businesses, the Otelco Entities have not entered into or agreed to any court decree or order and are not subject to any Judgment relating to compliance with any Environmental Law or to investigation or cleanup of a Hazardous Substance under any Environmental Law.  This Section 3.2(p) contains the sole and exclusive representations and warranties of Otelco with respect to any environmental, health or safety matters, including, without limitation, any matters arising under Environmental Law.

(q)No Additional Representations.  Otelco IS NOT MAKING ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER WITH RESPECT TO THE OTELCO ENTITIES, INCLUDING ANY OF THE ASSETS OF THE OTELCO ENTITIES, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS SECTION 3.2, AND EXCEPT AS SET FORTH EXPRESSLY HEREIN, THE CONDITION OF THE ASSETS OF THE OTELCO ENTITIES SHALL BE “AS IS” AND “WHERE IS.”

ARTICLE IV

CONDUCT AND TRANSACTIONS PRIOR
TO EFFECTIVE TIME; ADDITIONAL AGREEMENTS

4.1Access to Records.

From and after the date hereof until the Effective Time or the earlier termination of this Agreement pursuant to Section 6.1 hereof (the “Executory Period”), MMHC shall afford:  (i) to the officers, independent certified public accountants, legal counsel and other representatives of Otelco, free and full access at all reasonable times to all of the properties, books and records (including Tax Returns filed and those in preparation) of the MMHC Entities, in order that Otelco and such other Persons may have full opportunity to make such investigations as they shall reasonably desire to make of the business and affairs of the MMHC Entities; and (ii) to the independent certified public accountants of Otelco, free and full access at all reasonable times to the work papers of the independent certified public accountants for the MMHC Entities.  Additionally, MMHC will permit Otelco, its officers, directors, auditors, legal counsel and other representatives to make such reasonable inspections of the MMHC Entities and their operations

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during normal business hours as Otelco may reasonably require and MMHC will cause its officers to furnish to Otelco and such other Persons, such additional financial and operating data and other information as to its business and properties as Otelco or such other persons shall from time to time reasonably request.  No investigation pursuant to this Section 4.1, or made prior to the date hereof, shall affect or otherwise diminish or obviate in any respect any of the representations and warranties of MMHC.

4.2Conduct.

During the Executory Period and except in connection with the consummation of the transactions contemplated hereby, MMHC will and will cause the other MMHC Entities to, operate their respective businesses as now operated and only in the normal and ordinary course and, consistent with such operation, preserve intact its present business organization, keep available the services of its officers and employees and maintain satisfactory relationships with customers and other Persons having business dealings with the MMHC Entities.  Notwithstanding the foregoing, the parties acknowledge that during the Executory Period, the MMCH Preferred shall be dividended or otherwise distributed to Parent.

4.3Legal Conditions to Merger.

Each party will take all reasonable actions necessary to comply promptly with all legal requirements which may be imposed on such party with respect to the Merger and will take all reasonable action necessary to cooperate with and furnish information to the other party in connection with any such requirements imposed upon such other party in connection with the Merger.  Each party will take all reasonable actions necessary (a) to obtain (and will take all reasonable actions necessary to promptly cooperate with the other party in obtaining) any consent, authorization, order or approval of, or any exemption by, any Governmental Authority, or other third party, required to be obtained or made by such party (or by the other party) in connection with the Merger or the taking of any action contemplated by this Agreement, (b) to defend, lift, rescind or mitigate the effect of any lawsuit, order, injunction or other action adversely affecting the ability of such party to consummate the transactions contemplated hereby and (c) to fulfill all conditions precedent applicable to such party pursuant to this Agreement.

4.4Notice of Prospective Breach.

(a)MMHC shall immediately notify Otelco in writing upon the occurrence of any act, event, circumstance or thing that is reasonably likely to cause or result in a representation or warranty of MMHC hereunder to be untrue at the Closing, the failure of a closing condition to be achieved at the Closing or any other breach or violation hereof or default hereunder by any MMHC Entity.

(b)Otelco shall immediately notify MMHC in writing upon the occurrence of any act, event, circumstance or thing that is reasonably likely to cause or result in a representation or warranty of Otelco hereunder to be untrue at the Closing, the failure of a closing condition to be achieved at the Closing or any other breach or violation hereof or default hereunder by any Otelco Entity.

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4.5Further Assurances; Consents.

Each party will use its commercially reasonable efforts, and the other party will cooperate with such efforts, to obtain any consents and approvals of, or effect the notification of or filing with, each Person or authority, whether private or governmental, whose consent or approval is required in order to permit the consummation of the Merger and the transactions contemplated hereby and to enable the Surviving Corporation to conduct and operate the business of the MMHC Entities substantially as presently conducted.  Subject to the terms and conditions herein provided, the parties will use their commercially reasonable efforts to do or cause to be done all such acts and things as may be necessary, proper or advisable, consistent with all applicable laws and regulations, to consummate and make effective the transactions contemplated hereby and to satisfy or cause to be satisfied all conditions precedent that are set forth in Article V as soon as reasonably practicable.

ARTICLE V

CONDITIONS PRECEDENT

5.1Conditions to Each Party’s Obligations.

The obligations of each party to perform this Agreement and to effect the Merger are subject to the satisfaction of the following conditions unless waived (to the extent such conditions can be waived) by all parties hereto:

(a)Approvals.  All authorizations, consents, orders or approvals of, or declarations or filings with or expiration of waiting periods imposed by, any Governmental Authority necessary for the consummation of the transactions contemplated hereby will have been obtained or made or will have occurred.

(b)Legal Action.  No temporary restraining order, preliminary injunction or permanent injunction or other order preventing the consummation of the Merger will have been issued by any Federal or state court or other Governmental Authority and remain in effect.

(c)Legislation.  No Federal, state, local or foreign statute, rule or regulation will have been enacted which prohibits, restricts or delays the consummation of the transactions contemplated by this Agreement or any of the conditions to the consummation of such transactions.

(d)Public Offering.  The conditions to the consummation of the Public Offering shall have been satisfied or waived and the parties hereto shall reasonably believe that the consummation of the Public Offering will take place promptly after the consummation of the Merger.

5.2Conditions to Obligations of Otelco and MergerCo.

The obligation of Otelco and MergerCo to perform this Agreement is subject to the satisfaction of the following conditions unless waived (to the extent such conditions can be waived) by Otelco:

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(a)Representations and Warranties.  The representations and warranties of MMHC set forth in Section 3.1 hereof will in each case be true and correct in all material respects (except for any representation or warranty that by its terms is qualified by materiality, in which case it will be true and correct in all respects) as of the date of this Agreement and (except those representations and warranties which are made expressly only as of another date) as of the Closing Date as though made at and as of such dates, respectively, and Otelco will have received a certificate signed by an executive officer of MMHC to that effect.

(b)Performance of Obligations of MMHC.  MMHC will have performed in all material respects the obligations required to be performed by it under this Agreement prior to or as of the Closing Date, and Otelco will have received a certificate signed by an executive officer of MMHC to that effect.

(c)Consents and Approvals.  Otelco will have received duly executed copies of all consents and approvals contemplated by this Agreement in form and substance satisfactory to Otelco.

(d)Government Consents, Authorizations, Etc.  All consents, authorizations, orders or approvals of, and filings or registrations with, any Governmental Authority which are required for or in connection with the execution and delivery by MMHC of this Agreement and the consummation by MMHC of the transactions contemplated hereby will have been obtained or made.

5.3Conditions to Obligations of MMHC.

The obligation of MMHC to perform this Agreement are subject to the satisfaction of the following conditions unless waived (to the extent such conditions can be waived) by MMHC:

(a)Representations and Warranties.  The representations and warranties of Otelco and MergerCo set forth in Section 3.2 hereof will be true and correct in all material respects (except for any representation or warranty that by its terms is qualified by materiality, in which case it will be true and correct in all respects) as of the date of this Agreement and (except those representations and warranties which are made expressly only as of another date) as of the Closing Date as though made at and as of such dates, respectively, and MMHC will have received a certificate signed by an executive officer of each of Otelco and MergerCo to that effect.

(b)Performance of Obligations by Otelco and MergerCo.  Otelco and MergerCo will have performed in all material respects the obligations required to be performed by them under this Agreement prior to or as of the Closing Date and MMHC will have received a certificate signed by an executive officer of each of Otelco and MergerCo to that effect.

(c)Government Consents, Authorizations, Etc.  All consents, authorizations, orders or approvals of, and filings or registrations with, any Governmental Authority which are required for or in connection with the execution and delivery by Otelco and MergerCo of this Agreement and the consummation by Otelco and MergerCo of the transactions contemplated hereby will have been obtained or made.

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ARTICLE VI

TERMINATION

6.1Termination.

This Agreement may be terminated, and the Merger abandoned at any time prior to the Effective Time, by:

(a)the mutual consent of Otelco and MMHC;

(b)Otelco or MMHC if the Effective Time has not occurred within 7 days following the date hereof; or

(c)Otelco, if the conditions set forth in Section 5.2 hereof will not have been met, and MMHC, if the conditions set forth in Section 5.3 hereof will not have been met, except if such conditions have not been met solely as a result of the action or inaction of the party seeking to terminate.

Any termination pursuant to this Section 6.1 (other than a termination pursuant to Section 6.1(a)) will be effected by written notice from the party so terminating to the other parties hereto.

6.2Effect of Termination.

In the event of the termination of this Agreement as provided in Section 6.1, this Agreement will be of no further force or effect, except for this Section 6.2 and Article VII, each of which will survive the termination of this Agreement.

ARTICLE VII

MISCELLANEOUS

7.1Expenses.

Each party hereto will bear its own fees and expenses in connection with the transactions contemplated hereby.

7.2Entire Agreement.

This Agreement (including the disclosure schedules and the Exhibits attached hereto) and the other writings referred to herein contain the entire agreement among the parties hereto with respect to the transactions contemplated hereby and supersede all prior agreements or understandings, written or oral, among the parties with respect thereto.

7.3Survival.

The representations, warranties and covenants contained in this Agreement shall not survive the Closing.

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7.4Descriptive Headings.

Descriptive headings are for convenience only and will not control or affect the meaning or construction of any provision of this Agreement.

7.5Notices.

All notices or other communications which are required or permitted hereunder will be in writing and sufficient if delivered Personally or sent by nationally-recognized overnight courier or by registered or certified mail, postage prepaid, return receipt requested or by telecopier, with confirmation as provided above addressed as follows:

if to Otelco:

Otelco Inc.
505 3^rd Avenue East
Oneonta, AL  35121
Attention: Mike Weaver
Telecopier: (205) 625-3528

with a copy to:

O’Melveny & Myers LLP
Times Square Tower
7 Times Square
New York, NY  10036
Attention: Adam K. Weinstein, Esq.
Telecopier: (212) 408-2420

if to MMHC, to:

215 Roe Street
Pilot Grove, MO  65276
Attention Denise M. Day
Telecopier: (660) 834-6632

with a copy to:

O’Melveny & Myers LLP
Times Square Tower
7 Times Square
New York, NY  10036
Attention: Adam K. Weinstein, Esq.
Telecopier: (212) 326-2061

or to such other address as the party to whom notice is to be given may have furnished to the other party in writing in accordance herewith.  All such notices or communications will be deemed to be received (a) in the case of Personal delivery or telecopy, on the date of such

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delivery, (b) in the case of nationally-recognized overnight courier, on the next Business Day after the date when sent and (c) in the case of mailing, on the third Business Day following the date on which the piece of mail containing such communication was posted.

7.6Counterparts.

This Agreement may be executed in any number of counterparts by original or facsimile signature, each such counterpart will be an original instrument and all such counterparts together will constitute one and the same agreement.

7.7Governing Law.

This Agreement will be governed by and construed in accordance with the DGCL and with the laws of the State of Delaware applicable to contracts made and to be performed wholly therein.

7.8Benefits of Agreement.

All the terms and provisions of this Agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.  This Agreement will not be assignable by any party hereto without the consent of the other parties hereto.

7.9Pronouns.

As used herein, all pronouns will include the masculine, feminine, neuter, singular and plural thereof whenever the context and facts require such construction.

7.10Amendment, Modification and Waiver.

This Agreement will not be altered or otherwise amended except pursuant to an instrument in writing signed by Otelco and MMHC.  The waiver by any party hereto of a breach of any provision of this Agreement will not operate or be construed as a waiver of any subsequent breach.

* * * *

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement and Plan of Merger to be executed on its behalf as of the day and year first above written.

MID-MISSOURI PARENT, LLC
By:	/s/ Denise M. Day
	Name:	Denise M. Day
	Title:	Co-Chief Executive Officer
MID-MISSOURI HOLDING CORP.
By:	/s/ Denise M. Day
	Name:	Denise M. Day
	Title:	Co-Chief Executive Officer
RURAL LEC ACQUISITION LLC
By:	/s/ Michael D. Weaver
	Name:	Michael D. Weaver
	Title:	President
OTELCO MERGER SUBSIDIARY, INC.
By:	/s/ Michael D. Weaver
	Name:	Michael D. Weaver
	Title:	President

EX-3.1

Exhibit 3.1

CERTIFICATE OF INCORPORATION

OF

OTELCO INC.

ARTICLE I.
NAME

The name of the corporation (herein called the “Corporation”) is Otelco Inc.

ARTICLE II.
REGISTERED OFFICE AND AGENT

The address of the registered office of the Corporation in the State of Delaware is 9 East Loockerman Street, Suite 1B, City of Dover, County of Kent, 19901. The name of the registered agent of the Corporation at such address is National Registered Agents, Inc.

ARTICLE III.
PURPOSE & DURATION

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law (“DGCL”).  The Corporation is to have a perpetual existence.

ARTICLE IV.
CAPITAL STOCK

Section 1.               Authorized Capital Stock.  The total number of shares of capital stock which the Corporation shall have authority to issue is 20,800,000 shares of common stock, $0.01 par value per share, of which 20,000,000 shares are designated as Class A common stock (the “Class A Stock”) and 800,000 shares are designated as Class B common stock (the “Class B Stock”), and 2,000,000 shares of preferred stock, $0.01 par value per share (the “Preferred Stock”).

Section 2.               LLC Corporate Conversion.  At the time that this Certificate of Incorporation is filed with the Secretary of State (the “Effective Time”), each membership interest (each, a “Unit”) in the Corporation’s predecessor, Rural LEC Acquisition LLC, a Delaware limited liability company, issued and outstanding immediately prior to the Effective Time shall, without any action on the part of the holder thereof, be automatically reclassified, changed and converted into 0.19498 shares of Class B Stock and 3.12572 IDSs (as defined below).  Fractional shares shall not be issued upon such conversion.  As soon as practicable following the Effective Time, each holder of Units may exchange the certificate(s) evidencing the Units held by such holder with the Corporation for a new certificate evidencing the appropriate number of shares of Class B Stock and IDSs.  Until the time that any certificate evidencing Units has been exchanged in accordance with the preceding sentence, such certificate

shall be deemed, for all purposes, to represent the applicable number of shares of Class B Stock and IDSs after the Effective Time.

Section 3.               Terms of Capital Stock.  The following is a statement of the designations, preferences, voting powers, qualifications, special or relative rights and privileges in respect of the authorized capital stock of the Corporation:

(a)           Class A Stock and Class B Stock.  The Class A Stock and Class B Stock shall have all rights and privileges typically associated with common stock as set forth in the DGCL, including without limitation, the right to vote on all matters typically presented to the holders of the common stock for a vote and the additional rights and privileges hereinafter set forth:

(i)            The Class A Stock shall be identical to the Class B Stock in all respects, except that:

(A)          The Corporation shall only be permitted to issue shares of Class A Stock as part of an income deposit security of the Corporation (an “IDS”), except to the extent that such IDSs have separated into shares of Class A Stock and Senior Subordinated Notes (as defined below) represented thereby.  Such IDSs shall consist of one share of Class A Stock and a senior subordinated note of the Corporation due 2019 (a “Senior Subordinated Note”) with a principal amount of $7.50; and

(B)           No dividend, whether in cash or property, shall be paid or declared on Class B Stock.

(ii)           Except as otherwise set forth herein, in any certificate of designations, preferences and rights then in force or in the By-laws (as defined below), the holders of the Class A Stock and Class B Stock shall vote together on all matters as a class; provided, however, that, except as otherwise required by law, holders of Class A Stock and Class B Stock, as such, shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any certificate of designations relating to any class or series of Preferred Stock) that relates solely to the terms of one or more outstanding class or series of Preferred Stock if the holders of such affected class or series of Preferred Stock are entitled, either separately or voting together with the holders of one or more other such class or series of Preferred Stock, to vote thereon pursuant to this Certificate of Incorporation (including any certificate of designations relating to any class or series of Preferred Stock) or pursuant to the DGCL.  Each share of Class A Stock and Class B Stock shall entitle the holder thereof to cast one vote.

(iii)          Subject to the rights of the Preferred Stock, (A) dividends and other distributions may be paid on the Class A Stock, as and when declared by the Board, in cash, capital stock or property, out of the assets or funds of the Corporation legally available therefor and (B) upon a voluntary or involuntary liquidation, dissolution or winding up of the Corporation, holders of shares of Class A Stock and Class B Stock

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shall share ratably, on pari passu basis, in the assets of the Corporation available for distribution.

(b)           Preferred Stock.  Subject to the provisions of this Article IV, the Preferred Stock may be issued from time to time in one or more classes or series.  The Board shall have the authority to the fullest extent permitted under the DGCL to adopt by resolution from time to time one or more certificates of designations providing for the designation of one or more classes or series of Preferred Stock and the voting powers, whether full or limited or no voting powers, and such designations, preferences and relative, participating, optional, or other special rights and qualifications, limitations or restrictions thereof, and to fix or alter the number of shares comprising any such class or series, subject to any requirements of the DGCL and this Certificate of Incorporation.

The authority of the Board with respect to each such class or series shall include, without limitation of the foregoing, the right to determine and fix the following preferences and powers, which may vary as between different classes or series of Preferred Stock:

(i)            the distinctive designation of such class or series and the number of shares to constitute such class or series;

(ii)           the rate at which dividends on the shares of such class or series shall be declared and paid, or set aside for payment, whether dividends at the rate so determined shall be cumulative or accruing, and whether the shares of such class or series shall be entitled to any participating or other dividends in addition to dividends at the rate so determined, and if so, on what terms;

(iii)          the right or obligation, if any, of the Corporation to redeem shares of the particular class or series of Preferred Stock, and, if redeemable, the price, terms and manner of such redemption;

(iv)          the special and relative rights and preferences, if any, and the amount or amounts per share, which the shares of such class or series of Preferred Stock shall be entitled to receive upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation;

(v)           the terms and conditions, if any, upon which shares of such class or series shall be convertible into, or exchangeable for, shares of capital stock of any other class or series, including the price or prices or the rate or rates of conversion or exchange and the terms of adjustment, if any;

(vi)          the obligation, if any, of the Corporation to retire, redeem or purchase shares of such class or series pursuant to a sinking fund or fund of a similar nature or otherwise, and the terms and conditions of such obligation;

(vii)         voting rights, if any, including special voting rights with respect to the election of directors and matters adversely affecting any class or series of Preferred Stock;

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(viii)        limitations, if any, on the issuance of additional shares of such class or series or any shares of any other class or series of Preferred Stock; and

(ix)           such other preferences, powers, qualifications, special or relative rights and privileges thereof as the Board, by the vote of the members of the Board then in office acting in accordance with this Certificate of Incorporation, or any Preferred Stock, may deem advisable and are not inconsistent with law, the provisions of this Certificate of Incorporation or the provisions of any certificate of designations.

(c)           Stockholder Meetings.

(i)            Except as otherwise required by law, a quorum for the transaction of business at meeting of stockholders shall be as set forth in the By-laws and shall require the presence in person or by proxy of the holders of record of a minimum of one-third of the voting power of the outstanding shares of capital stock entitled to vote at such meeting.  Notwithstanding the foregoing, a minimum quorum of a majority of the voting power of the outstanding shares of capital stock entitled to vote is necessary to hold a vote for any director in a contested election, the removal of a director from the Board or the filling of a vacancy on the Board.

(ii)           Notwithstanding anything to the contrary contained herein, (A) special meetings of the stockholders may only be called by the Board pursuant to (I) a resolution adopted by a majority of the members of the Board or (II) a request by holders of at least a majority of the voting power of all outstanding shares of the capital stock of the Corporation entitled to vote at such special meeting and (B) actions to be voted on by the holders of capital stock may not be taken by written consent in lieu of a meeting and the power of stockholders to consent in writing, without a meeting, to take any action is specifically denied.

(iii)          Unless and except to the extent that the By-laws of the Corporation shall so require, the election of directors of the Corporation need not be by written ballot.

(d)           No Preemptive Rights.  The holders of the capital stock of the Corporation shall have no preemptive rights to subscribe for any shares of any class of stock of the Corporation whether now or hereafter authorized.

ARTICLE V.
DIRECTORS

Section 1.               Number of Directors.  The number of directors on the Board is initially set at seven (7) until otherwise fixed from time to time exclusively pursuant to a resolution adopted by a majority of the entire Board.

Section 2.               Classified Board.  The Board shall be divided into three classes, designated Class I, Class II and Class 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 annual meeting of stockholders to be held in 2005.  Directors of Class II shall hold office for an initial term expiring at the annual meeting of stockholders to be held in 2006.  Directors of Class III shall

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hold office for an initial term expiring at the annual meeting of stockholders to be held in 2007.  Except as otherwise provided in the Company’s Third Amended and Restated By-laws (the “By-laws”) in connection with the removal of directors and the filling of vacancies on the Board, at each annual meeting of the stockholders, the respective successors of the directors whose terms are then expiring shall be elected for terms expiring at the annual meeting of stockholders held on the third anniversary thereof.  Upon the filing of this Certificate of Incorporation, the initial directors of the Board shall be as follows:

Class I:	Michael D. Weaver and Patricia L. Higgins.
Class II:	Andrew Meyers and John P. Kunz.
Class III:	Stephen P. McCall, William F. Reddersen and Howard Haug.

Section 3.               Vacancies and Removal.  Any vacancies in the Board for any reason, and any directorships resulting from any increase in the number of directors, may be filled by the Board acting by a majority of the directors then in office, although less than a quorum, and any directors so chosen shall hold office until the next election of the class for which such directors shall have been chosen and until their successors shall be elected and qualified.  Notwithstanding the foregoing, and except as otherwise required by law, whenever the holders of any one or more series of Preferred Stock shall have the right, voting separately as a class, to elect one or more directors of the Corporation, the terms of the director or directors elected by such holders shall expire at the next succeeding annual meeting of stockholders.  Notwithstanding any other provisions of this Certificate of Incorporation or the By-laws of the Corporation (and notwithstanding the fact that some lesser percentage pay be specified by law, this Certificate of Incorporation or By-laws of the Corporation), any director or the entire Board may be removed at any time, but only for cause and only by the affirmative vote of the holders of 50% or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) cast at a meeting of the stockholders called for that purpose.

ARTICLE VI.
LIABILITY AND INDEMNIFICATION

Section 1.               Liability.  A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breaches of fiduciary duties as a director, except for liability (a) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section 174 of the DGCL (or any successor provision thereto), or (d) for any transaction from which the director derived any improper personal benefit.  If the DGCL is amended after the Effective Time to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.  The Corporation is authorized to provide by by-law, agreement or otherwise for indemnification of directors, officers, employees and agents for breach of duty to the Corporation and its stockholders in excess of the indemnification otherwise permitted by applicable law.

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Section 2.               Indemnification.  Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that he or she is or was a director, officer or employee of the Corporation or is or was serving at the request of the Corporation as a director, officer or employee of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (each an “Indemnitee”), whether the basis of such Proceeding is alleged action in an official capacity while serving as a director, officer or employee or in any other capacity while serving as a director, officer or employee, 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 (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes, excise taxes, penalties or amounts paid or to be paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith and such indemnification shall continue as to an Indemnitee who has ceased to be a director, officer or employee and shall inure to the benefit of the Indemnitee’s heirs, testators, intestates, executors and administrators; provided, however, that such person acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and with respect to a Proceeding, had no reasonable cause to believe his conduct was unlawful; provided further, however, that no indemnification shall be made in the case of a Proceeding by or in the right of the Corporation in relation to matters as to which it shall be adjudged in such Proceeding that such director, officer, employee or agent is liable to the Corporation, unless a court having jurisdiction shall determine that, despite such adjudication, such person is fairly and reasonably entitled to indemnification; provided further, however, that, except as provided below with respect to Proceedings to enforce rights to indemnification, the Corporation shall indemnify any such Indemnitee in connection with a Proceeding (or part thereof) initiated by such Indemnitee only if such Proceeding (or part thereof) initiated by such Indemnitee was authorized by the Board.  The right to indemnification conferred in this Section 2 shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such Proceeding in advance of its final disposition (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 (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 (a “Final Adjudication”) that such Indemnitee is not entitled to be indemnified for such expenses under this Section or otherwise.

If a claim under this Section 2 is not paid in full by the Corporation with 60 days after a written claim has been received by the Corporation, except in the case of a claim for an Advancement of Expenses, in which case the applicable period shall be 20 days, 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 any Undertaking, the Indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit.  In

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(i) 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, and (ii) in any suit 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 the applicable standard of conduct set forth in the DGCL.  Neither the failure of the Corporation (including the Board, independent legal counsel, or the stockholders) to have made a determination prior to the commencement of such suit that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable standard of conduct set forth in the Delaware Statute, nor an actual determination by the Corporation (including the Board, independent legal counsel or the 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 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 Section or otherwise shall be on the Corporation.

Section 3.               Modification of this Article.  Any repeal or modification of this Article VI, shall not adversely affect any right or protection of a director, officer, employee or agent of the Corporation (as applicable) existing at the time of such repeal or modification.  Any right or protection of a director, officer, employee or agent of the Corporation (as applicable) under this paragraph shall inure to the benefit of such person’s heirs, executors and administrators.

ARTICLE VII.
INTERESTED TRANSACTIONS

The Corporation elects not to be governed by Section 203 of the DGCL (or any successor provision thereto).

ARTICLE VIII.
AMENDING THE BY-LAWS

In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board is expressly authorized and empowered to make, alter, amend or repeal the By-laws in any manner, without the assent or vote of the stockholders, not inconsistent with the laws of the State of Delaware or this Certificate of Incorporation.  Notwithstanding the foregoing sentence, the stockholders may make, alter, amend or repeal the By-laws in any manner pursuant to a vote of at least two-thirds of the voting power of the outstanding shares of capital stock entitled to vote.

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ARTICLE IX.
AMENDMENT

The Corporation reserves the right to amend any provision contained in this Certificate of Incorporation as the same may from time to time be in effect in the manner now or hereafter prescribed by laws of the State of Delaware, and all rights conferred upon stockholders, directors or others hereunder are subject to such reservation.  Notwithstanding the foregoing, and without limiting any additional requirements set forth in the DGCL, the following provisions of this Certificate of Incorporation may only be amended by a vote of at least two-thirds of the voting power of the outstanding shares of capital stock entitled to vote on such matters:  Section 3(c) of Article IV, Article V, Article VI, Article VIII and this Article IX.

ARTICLE X.
INCORPORATOR

The name and mailing address of the incorporator is as follows:

Michael D. Weaver

505 Third Avenue East

Oneonta, Alabama 35121

*      *      *      *      *

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IN WITNESS WHEREOF, I, the undersigned, being the sole incorporator named above, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, DO HEREBY CERTIFY, under penalties of perjury, that this is my act and deed and that the facts stated above are true and, accordingly, I have hereunto set my hand as of December 21, 2004.

/s/ Michael D. Weaver

Michael D. Weaver

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EX-3.2

Exhibit 3.2

OTELCO INC.

Incorporated under the laws

of the State of Delaware

THIRD AMENDED AND RESTATED

BY-LAWS

As adopted on December 21, 2004

THIRD AMENDED AND RESTATED

BY-LAWS OF

OTELCO INC.

ARTICLE I

OFFICES

1.1          Registered Office.

The registered office of Otelco Inc. (successor by corporate conversion to Rural LEC Acquisition LLC, the “Corporation”) in the State of Delaware shall be at 9 East Loockerman Street, City of Dover, County of Kent 19901, and the registered agent in charge thereof shall be National Registered Agents, Inc.

1.2          Principal Office.

The principal office for the transaction of the business of the Corporation shall be at such place as may be established by the Board of Directors (the “Board”).  The Board is granted full power and authority to change said principal office from one location to another.

1.3          Other Offices.

The Corporation may also have an office or offices at any other place or places within or outside the State of Delaware.

ARTICLE II

MEETING OF STOCKHOLDERS

2.1          Annual Meetings.

The annual meeting of the stockholders for the election of directors, and for the transaction of such other business as may properly come before the meeting, shall be held at such place, date and hour as shall be fixed by the Board and designated in the notice or waiver of notice thereof.

2.2          Special Meetings.

A special meeting of the stockholders for any purpose or purposes may be called by the Board pursuant to (a) a resolution adopted by a majority of the members of the Board or (b) a request by holders of at least a majority of the voting power of all outstanding shares of the capital stock of the Corporation entitled to vote at such special meeting (the “Voting Stock”), in each case to be held at such place, date and hour as shall be designated in the notice or waiver of notice thereof; provided, however, that if and to the extent that any special meeting of stockholders may be called by any other person or persons specified in any provisions of the

Certificate of Incorporation of the Corporation (as amended, restated and/or supplemented, including by way of a designation of one or more series of Preferred Stock pursuant to a certificate of designations, rights, and preferences thereof, the “Certificate of Incorporation”) or any amendment thereto, or any certificate filed under Section 151(g) of the Delaware Statute (as defined below), then such special meeting may also be called by the person or persons in the manner, at the times and for the purposes so specified.

2.3          Notice of Meetings.

Except as otherwise required by applicable law, the Certificate of Incorporation or these By-laws, notice of each annual or special meeting of the stockholders shall be given to each stockholder of record entitled to vote at such meeting not less than 10 nor more than 60 days before the day on which the meeting is to be held, by delivering written notice thereof to such stockholder personally, or by mailing a copy of such notice, postage prepaid, directly to such stockholder at his, her or its address as it appears in the records of the Corporation, or by transmitting such notice thereof to such stockholder at such address by telegraph, cable or other telephonic transmission.  Every such notice shall state the place, the date and hour of the meeting, and, in case of a special meeting, the purpose or purposes for which the meeting is called.  If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage pre-paid, directed to the stockholder at such address as appears on the records of the Corporation.  Notice of any meeting of stockholders shall not be required to be given to any stockholder who shall attend such meeting in person or by proxy, or who shall, in person or by attorney thereunto authorized, waive such notice in writing, either before or after such meeting.  Except as otherwise provided in these By-laws, neither the business to be transacted at, nor the purpose of, any meeting of the stockholders need be specified in any such notice or waiver of notice.  Notice of any adjourned meeting of stockholders shall not be required to be given, except when expressly required by law.

2.4          Quorum.

At each meeting of the stockholders, except where otherwise provided by applicable law, the Certificate of Incorporation or these By-laws, the holders of a majority of the voting power of the issued and outstanding Voting Stock, present in person or represented by proxy, shall constitute a quorum for the transaction of business; provided, however, that the stockholders present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment notwithstanding the withdrawal of enough stockholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.  In the absence of a quorum, a majority in voting interest of the stockholders present in person or represented by proxy and entitled to vote, or, in the absence of all the stockholders entitled to vote, any officer entitled to preside at, or act as secretary of, such meeting, shall have the power to adjourn the meeting from time to time, without notice other than an announcement at the meeting until stockholders holding the requisite amount of stock to constitute a quorum shall be present or represented.  At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally called.  The chairman of the meeting may determine that a quorum is present based upon any reasonable evidence of the presence in person or by proxy of stockholders holding a majority of the voting power of the Voting Stock,

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including without limitation, evidence from any record of stockholders who have signed a register indicating their presence at the meeting.  If the adjournment is for more than 30 days, or if, after the adjournment, a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

2.5          Organization.

(a)           Unless otherwise determined by the Board, at each meeting of the stockholders, one of the following shall act as chairman of the meeting and preside thereat, in the following order of precedence:

(i)            the Chairman, if any;

(ii)           the Chief Executive Officer;

(iii)          the President;

(iv)          any director, officer or stockholder of the Corporation designated by the Board to act as chairman of such meeting and to preside thereat if the Chairman, the Chief Executive Officer or the President shall be absent from such meeting; or

(v)           a stockholder of record who shall be chosen chairman of such meeting by a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat.

(b)           The Secretary or, if he or she shall be presiding over such meeting in accordance with the provisions of this Section 2.5 or if he or she shall be absent from such meeting, the person (who shall be an Assistant Secretary, if an Assistant Secretary has been appointed and is present) whom the chairman of such meeting shall appoint, shall act as secretary of such meeting and keep the minutes thereof.

2.6          Order of Business.

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 chairman of the meeting.  The Board 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, the chairman of such meeting of stockholders shall have the right and authority to convene and to adjourn the meeting, determine the order of business to be transacted at such meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting.  Such rules, regulations or procedures, whether adopted by the Board or prescribed by the chairman of the meeting, may include, without limitation, the following:  (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) 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 chairman of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v)

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limitations on the time allotted to questions or comments by participants.  The chairman 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 chairman should so determine, such chairman 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 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.

2.7          Voting.

(a)           Except as otherwise provided by law, the Certificate of Incorporation or these By-laws, at each meeting of the stockholders, every stockholder of the Corporation shall be entitled, in person or by proxy, to that number of votes provided for in the Certificate of Incorporation in respect of each share of Voting Stock held by him, her or it and registered in his, her or its name, as applicable, on the books of the Corporation on the date fixed pursuant to Section 6.8 as the record date for the determination of stockholders entitled to vote at such meeting.  Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held.  A person whose stock is pledged shall be entitled to vote, unless, in the transfer by the pledgor on the books of the Corporation, he has expressly empowered the pledgee to vote thereon, in which case only the pledgee or his, her or its proxy may represent such stock and vote thereon.  If shares or other securities having voting power stand in the record of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary shall be given written notice to the contrary and furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect:

(i)            if only one votes, his, her or its act binds all;

(ii)           if more than one votes, the act of the majority so voting binds all; and

(iii)          if more than one votes, but the vote is evenly split on any particular matter, such shares shall be voted in the manner provided by law.

(b)           If the instrument so filed shows that any such tenancy is held in unequal interests, a majority or even-split for the purposes of this Section 2.7 shall be a majority or even-split in interest.  The Corporation shall not vote directly or indirectly any share of its own capital stock.  Any vote of stock may be given by the stockholder entitled thereto in person or by his, her or its proxy appointed by an instrument in writing in the manner set forth in clause (c) below, subscribed by such stockholder or by his, her or its attorney thereunto authorized, delivered to, and filed by, the secretary of the meeting; provided, however, that no proxy shall be voted after three years from its date, unless said proxy provides for a longer period.  At all meetings of the stockholders, all matters (except where other provision is made by law, the Certificate of Incorporation or these By-laws, in which case such express provision shall govern and control

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the decision of such matter) shall be decided by the vote of a majority in voting interest of the stockholders present in person or by proxy at such meeting and entitled to vote thereon, a quorum being present.  Unless demanded by a stockholder present in person or by proxy at any meeting and entitled to vote thereon, the vote on any question need not be by ballot.  Upon a demand by any such stockholder for a vote by ballot upon any question, such vote by ballot shall be taken.  On a vote by ballot, each ballot shall be signed by the stockholder voting, or by his, her or its proxy, if there be such proxy, and shall state the number of shares voted.

(c)           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 (the “Delaware Statute”), the following shall constitute a valid means by which a stockholder may grant such authority: (i) a stockholder may execute a writing authorizing another person or persons to act for such stockholder as proxy, and execution of the writing may be accomplished by the stockholder or the stockholder’s authorized officer, director, employee 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 (ii) 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 or electronic transmissions 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 other transmissions are valid.  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 writing or transmission created pursuant to the preceding paragraph of this Section 2.7 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 for the entire original writing or transmission.

2.8          Inspection.

(a)           The chairman of the meeting may at any time appoint one or more inspectors to serve at any meeting of the stockholders.  Any inspector may be removed, and a new inspector or inspectors appointed, by the Board at any time.  Such inspectors shall decide upon the qualifications of voters, accept and count votes, declare the results of such vote, and subscribe and deliver to the secretary of the meeting a certificate stating the number of shares of stock issued and outstanding and entitled to vote thereon and the number of shares voted for and against the question, respectively.  The inspectors need not be stockholders of the Corporation, and any director or officer of the Corporation may be an inspector on any question other than a vote for or against his or her election to any position with the Corporation or on any other matter in which he or she may be directly interested.  Before acting as herein provided, each inspector

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shall subscribe an oath faithfully to execute the duties of an inspector with strict impartiality and according to the best of his or her ability.

(b)           The inspector shall perform his or her duties and shall make all determinations in accordance with the Delaware Statute including, without limitation, Section 231 of the Delaware Statute.

2.9          List of Stockholders.

It shall be the duty of the Secretary or other officer of the Corporation who shall have charge of its stock ledger to prepare and make, at least 10 days before every meeting of the stockholders, a complete list of the stockholders entitled to vote thereat, 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 any such meeting, during ordinary business hours, for a period of at least 10 days prior to such meeting, either at a place within the city where such meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held.  Such list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

2.10        Transaction of Business.

(a)           Annual Meetings of Stockholders.

(i)            Nominations of persons for election to the Board and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders only (A) pursuant to the Corporation’s notice of meeting (or any supplement thereto) delivered pursuant to Section 2.3 of these By-laws, (B) by or at the direction of the Board or (C) by any stockholder of the Corporation who is entitled to vote at the meeting, who has complied with the notice procedures set forth in subparagraphs (ii) and (iii) of this Section 2.10(a) and who was a stockholder of record at the time such notice is delivered to the Secretary of the Corporation.

(ii)           For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (C) of Section 2.10(a)(i), the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation, and, in the case of business other than nominations, such other business must be a proper matter for stockholder action.  To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 20 days, or delayed by more than 70 days, from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made by the Corporation.  Such stockholder’s notice shall set forth (A) as to each person whom the

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stockholder proposes to nominate for election or re-election 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”), 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, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the By-laws of the Corporation, the language of the proposed amendment), the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (C) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner, (ii) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner, and that such shares have been held for the period required by any applicable law, (iii) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination and (iv) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (x) 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 (y) otherwise to solicit proxies from stockholders in support of such proposal or nomination.  The foregoing notice requirements shall be deemed satisfied by a stockholder if the stockholder has notified the Corporation of his, her or its 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.

(iii)          Notwithstanding anything in the second sentence of Section 2.10(a)(ii) to the contrary, in the event that the number of directors to be elected to the Board at an annual meeting is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board made by the Corporation at least 100 days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this by-law shall also be considered timely, but only with respect to nominees for any new positions created by such increase, 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.  Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting as set forth in the Corporation’s notice of meeting pursuant to Section 2.3 of these By-laws.  Nominations of persons for election to the Board may be made at a special meeting of stockholders at which

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directors are to be elected pursuant to the Corporation’s notice of meeting (i) by or at the direction of the Board or (ii) by any stockholder of the Corporation who is entitled to vote at the meeting, who complies with the notice procedures set forth in this by-law 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 may be made at such a special meeting of stockholders if the stockholder’s notice as required by Section 2.10(a)(ii) of this by-law shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the later of the 90^th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting.

(c)           General.

(i)            Only persons who are nominated in accordance with the procedures set forth in this by-law shall be eligible to serve as directors elected by the Corporation’s stockholders 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 by-law.  Except as otherwise provided by law, the Certificate of Incorporation or these By-laws, the chairman 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 in accordance with the procedures set forth in this by-law and, if any proposed nomination or business is not in compliance with this by-law, to declare that such defective nomination shall be disregarded or that such proposed business shall not be transacted.  Notwithstanding the foregoing provisions of this by-law, if the nominating or proposing stockholder (or a qualified representative of the nominating or proposing 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 2.10, “public announcement” shall mean 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 Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

(iii)          For purposes of this by-law, 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 2.10, and in order for any notification required to be delivered by a stockholder pursuant to this Section 2.10 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 by-law, 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 by-law.  Nothing in this by-law shall be deemed to affect any rights of (A) stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act or (B) the holders of any series of preferred stock to elect directors pursuant to any applicable provisions of the Certificate of Incorporation (including any certificate of designations relating to such series).

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ARTICLE III

BOARD OF DIRECTORS

3.1          General Powers.

The business, property and affairs of the Corporation shall be managed by or under the direction of the Board, which may exercise all such 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.

3.2          Number and Term of Office.

The number of directors shall be fixed from time to time by the Board as provided in the Certificate of Incorporation.  Directors need not be stockholders.  Each director shall hold office until his or her successor is elected and qualified, or until his or her earlier death or resignation or removal in the manner hereinafter provided.

3.3          Election of Directors.

At each meeting of the stockholders for the election of directors at which a quorum is present, the persons receiving the greatest number of votes, up to the number of directors to be elected, of the stockholders present in person or by proxy and entitled to vote thereon shall be the directors; provided, however, that for purposes of such vote no stockholder shall be allowed to cumulate his, her or its votes.  Unless an election by ballot shall be demanded as provided in Section 2.7, election of directors may be conducted in any manner approved at such meeting.

3.4          Resignation.

Any director may resign at any time by giving written notice to the Board, the Chairman, the Chief Executive Officer, the President or the Secretary.  Such resignation shall take effect at the time specified therein or, if the time be not specified, upon receipt thereof.  Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

3.5          Meetings.

(a)           Annual Meetings.  As soon as practicable after each annual election of directors, the Board shall meet for the purpose of organization and the transaction of other business, unless it shall have transacted all such business by written consent pursuant to Section 3.6.

(b)           Other Meetings.  Other meetings of the Board shall be held at such times and places as the Board, the Chairman, the Chief Executive Officer, the President or any director shall from time to time determine.

(c)           Notice of Meetings.  Notice shall be given to each director of each meeting, including the time, place and purpose of such meeting.  Notice of each such meeting shall be mailed to each director, addressed to him or her at his or her residence or usual place of

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business, at least forty eight (48) hours before the date on which such meeting is to be held, or shall be sent to him or her at such place by telegraph, cable, wireless or other form of recorded communication, or be delivered personally or by telephone not later than the day before the day on which such meeting is to be held.  A written waiver of notice, signed by the person entitled thereto, whether before or after the time of the meeting stated therein, shall be deemed equivalent to notice.  Notice of any meeting need not be given to any director who shall attend such meeting in person (except when the director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened), or who shall waive notice thereof, before or after such meeting, in writing or by electronic transmission.

(d)           Place of Meetings.  The Board may hold its meetings at such place or places within or outside the State of Delaware as the Board may from time to time determine, or as shall be designated in the respective notices or waivers of notice thereof.

(e)           Quorum and Manner of Acting.  A majority of the total number of directors then in office shall constitute a quorum for the transaction of business, and the vote of a majority of those directors present at any such meeting at which a quorum is present shall be necessary for the passage of any resolution or act of the Board, except as otherwise expressly required by law or these By-laws.  In the absence of a quorum for any such meeting, a majority of the directors present thereat may adjourn such meeting from time to time until a quorum shall be present.  Notice of any adjourned meeting need not be given.

(f)            Organization.  At each meeting of the Board, one of the following shall act as chairman of the meeting and preside thereat, in the following order of precedence:

(i)            the Chairman, if any;

(ii)           the Chief Executive Officer (if a director);

(iii)          the President (if a director); or

(iv)          any director designated by a majority of the directors present.

The Secretary or, in the case of his or her absence, an Assistant Secretary, if an Assistant Secretary has been appointed and is present, or any person whom the chairman of the meeting shall appoint shall act as secretary of such meeting and keep the minutes thereof.

3.6          Directors’ Consent in Lieu of Meeting.

Any action required or permitted to be taken at any meeting of the Board or of any committee thereof, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by all the directors then in office or all members of such committee, as the case may be, and such consent is filed with the minutes of the proceedings of the Board or committee.

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3.7          Action by Means of Conference Telephone or Similar Communications Equipment.

Any one or more members of the Board may participate in a meeting of the Board by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting.

3.8          Committees.

Except as otherwise provided by applicable law, the Board may, by resolution or resolutions passed by a majority of the whole Board, designate one or more committees, each such committee to consist of at least one or more directors of the Corporation, which to the extent provided in said resolution or resolutions shall have and may exercise the powers of the Board in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers which may require it, such committee or committees to have such name or names as may be determined from time to time by resolution adopted by the Board.  The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.  Upon the absence or disqualification of a member of a committee, if the Board has not designated one or more alternates (or if such alternate(s) is then absent or disqualified), the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board to act at the meeting in the place of any such absent or disqualified member or alternate.  A majority of all the members of any such committee may determine its action and fix the time and place of its meetings, unless the Board shall otherwise provide.  The Board shall have power to change the members of any such committee at any time, to fill vacancies and to discharge any such committee, either with or without cause, at any time.

3.9          Fees and Compensation

Each director and each member of a committee of the Board shall receive such fees and reimbursement of expenses incurred on behalf of the Corporation or in attending meetings as the Board may from time to time determine.  No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefore.

ARTICLE IV

OFFICERS

4.1          Executive Officers.

The principal officers of the Corporation shall be a Chairman, if one is appointed (and any references to the Chairman shall not apply if a Chairman has not been appointed), a Chief Executive Officer, a President, a Chief Financial Officer and a Secretary, and may include such other officers as the Board may appoint pursuant to Section 4.3.  Any two or more offices may be held by the same person.

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4.2          Authority and Duties.

All officers, as between themselves and the Corporation, shall have such authority and perform such duties in the management of the Corporation as may be provided in these By-laws or, to the extent so provided, by the Board.

4.3          Other Officers.

The Corporation may have such other officers, agents and employees as the Board may deem necessary, including one or more Assistant Secretaries and one or more Vice Presidents, each of whom shall hold office for such period, have such authority and perform such duties as the Board, the Chairman, the Chief Financial Officer or the President may from time to time determine.  The Board may delegate to any principal officer the power to appoint and define the authority and duties of, or remove, any such officers, agents or employees. The officers of the Corporation need not be stockholders of the Corporation, nor, except in the case of the Chairman of the Board, need such officers be directors of the Corporation.

4.4          Term of Office, Resignation, Removal and Disability.

(a)           All officers shall be elected or appointed by the Board and shall hold office for such term as may be prescribed by the Board.  Each officer shall hold office until his or her successor has been elected or appointed and qualified or until his or her earlier death or resignation or removal in the manner hereinafter provided.

(b)           Any officer may resign at any time by giving written notice to the Board, the Chairman, the Chief Executive Officer, the President or the Secretary.  Such resignation shall take effect at the time specified therein or, if the time be not specified, at the time it is accepted by action of the Board.  Except as aforesaid, the acceptance of such resignation shall not be necessary to make it effective.

(c)           All officers and agents elected or appointed by the Board shall be subject to removal, with or without cause, at any time by the Board.

(d)           Unless otherwise provided in these By-laws, in the absence or disability of any officer of the Corporation, the Board may, during such period, delegate such officer’s powers and duties to any other officer or to any director and the person to whom such powers and duties are delegated shall, for the time being, hold such office.

4.5          Vacancies.

If the office of Chairman, Chief Executive Officer, President, Chief Financial Officer or Secretary becomes vacant for any reason, the Board shall fill such vacancy, and if any other office becomes vacant, the Board may fill such vacancy.  Any officer so appointed or elected by the Board shall serve only until such time as the unexpired term of his or her predecessor shall have expired, unless reelected or reappointed by the Board.

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4.6          The Chairman.

The Chairman shall give counsel and advice to the Board and the officers of the Corporation on all subjects concerning the welfare of the Corporation and the conduct of its business and shall perform such other duties as the Board may from time to time determine.  Unless otherwise determined by the Board, he or she shall preside at meetings of the Board and of the stockholders at which he or she is present and shall see that all orders and resolutions of the Board are carried into effect.

4.7          The Chief Executive Officer.

The Chief Executive Officer shall be responsible for the general direction of the business and affairs of the Corporation, subject to the authority of the Board and the Chairman, and shall perform such other duties as may from time to time be assigned to him or her by the Board, the Chairman, or as prescribed by law or these By-laws.

4.8          The President.

The President shall be the chief operating and administrative officer of the Corporation, subject to the authority of the Board, the Chairman and the Chief Executive Officer.  After the Chairman and the Chief Executive Officer, he or she shall direct the policies and management of the Corporation.  The President shall perform such other duties as from time to time may be assigned to him or her by the Board, the Chairman or the Chief Executive Officer, or as otherwise prescribed by law of these By-laws.

4.9          The Secretary.

The Secretary shall, to the extent practicable, attend all meetings of the Board and all meetings of the stockholders and shall record all votes and the minutes of all proceedings in a book to be kept for that purpose.  He or she may give, or cause to be given, notice of all meetings of the stockholders and of the Board, and shall perform such other duties as may be prescribed by the Board, the Chairman, the Chief Executive Officer or the President, under whose supervision he or she shall act.  He or she shall keep in safe custody the seal of the Corporation and affix the same to any duly authorized instrument requiring it and, when so affixed, it shall be attested by his or her signature or by the signature, if appointed, of an Assistant Secretary.  He or she shall perform all other duties incident to the office of Secretary and such other duties as from time to time may be assigned to him or her by the Board, the Chairman, the Chief Executive Officer or the President.

4.10        The Chief Financial Officer or Treasurer.

The Chief Financial Officer or Treasurer shall have the care and custody of the corporate funds and other valuable effects, including securities, shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board.  The Chief Financial Officer or Treasurer shall perform all other duties incident to the office of Chief Financial Officer or Treasurer and such other duties as

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from time to time may be assigned to him or her by the Board, the Chairman, Chief Executive Officer or Treasurer or the President.

ARTICLE V

CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.

5.1          Execution of Documents.

The Board shall designate, by either specific or general resolution, the officers, employees and agents of the Corporation who shall have the power to execute and deliver deeds, contracts, mortgages, bonds, debentures, checks, drafts and other orders for the payment of money and other documents for and in the name of the Corporation, and may authorize such officers, employees and agents to delegate such power (including authority to redelegate) by written instrument to other officers, employees or agents of the Corporation.  Unless so designated or expressly authorized by these By-laws, no officer, employee or agent shall have any power or authority to bind the Corporation by any contract or engagement, to pledge its credit or to render it liable pecuniarily for any purpose or amount.

5.2          Deposits.

All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation or otherwise as the Board or Chief Financial Officer or Treasurer, or any other officer of the Corporation to whom power in this respect shall have been given by the Board, shall select.

5.3          Proxies with Respect to Stock or Other Securities of Other Corporations.

The Board shall designate the officers of the Corporation who shall have authority from time to time to appoint an agent or agents of the Corporation to exercise in the name and on behalf of the Corporation the powers and rights which the Corporation may have as the holder of stock or other securities in any other corporation, and to vote or consent with respect to such stock or securities.  Such designated officers may instruct the person or persons so appointed as to the manner of exercising such powers and rights, and such designated officers may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal or otherwise, such written proxies, powers of attorney or other instruments as they may deem necessary or proper in order that the Corporation may exercise its powers and rights.

ARTICLE VI

SHARES; SHARE ISSUANCE AND TRANSFER; FIXING RECORD DATE

6.1          Certificates for Shares.

Every owner of stock of the Corporation shall be entitled to have a certificate certifying the number and class of shares owned by him, her or it in the Corporation, which shall be in such form as shall be prescribed by the Board.  Certificates shall be numbered and issued in consecutive order and shall be signed by, or in the name of, the Corporation by the Chairman, the

14

Chief Executive Officer, the President, the Chief Financial Officer or any Vice President, and by the Secretary (or an Assistant Secretary, if appointed).  In case any officer or officers who shall have signed any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate had not ceased to be such officer or officers of the Corporation.

6.2          Record.

A record in one or more counterparts shall be kept of the name of the person, firm or corporation owning the shares represented by each certificate for stock of the Corporation issued, the number of shares represented by each such certificate, the date thereof and, in the case of cancellation, the date of cancellation.  Except as otherwise expressly required by law, the person in whose name shares of stock stand on the stock record of the Corporation shall be deemed the owner thereof for all purposes regarding the Corporation, and the Corporation shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof.

6.3          Issuance of Class A Stock.

The Corporation shall only be permitted to issue shares of its Class A common stock $0.01 par value per share (“Class A Stock”), as part of an income deposit security (an “IDS”) of the Corporation, except to the extent that such IDSs have separated into shares of Class A Stock and Senior Subordinated Notes (as defined below) represented thereby.  Such IDSs shall consist of one share of Class A Stock and a senior subordinated note of the Corporation due 2019 (a “Senior Subordinated Note”) with a principal amount of $7.50.

6.4          Transfer and Registration of Stock.

Registration of transfers of shares of the Corporation shall be made only on the books of the Corporation upon request of the registered holder thereof, or of his, her or its attorney thereunto authorized by power of attorney duly executed and filed with the Secretary, and upon the surrender of the certificate or certificates for such shares properly endorsed or accompanied by a stock power duly executed.  The Corporation shall provide that its books shall remain open at all times during which the a class or series of the Corporation’s equity securities are publicly listed.

6.5          Addresses of Stockholders.

Each stockholder shall designate to the Secretary an address at which notices of meetings and all other corporate notices may be served or mailed to him, her or it, and, if any stockholder shall fail to designate such address, corporate notices may be served upon him, her or it by mail directed to him, her or it at his, her or its post-office address, if any, as the same appears on the share record books of the Corporation or at his, her or its last known post-office address.

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6.6          Lost, Destroyed and Mutilated Certificates.

The holder of any shares of the Corporation shall immediately notify the Corporation of any loss, destruction or mutilation of the certificate therefor, and the Board may, in its discretion, cause to be issued to him, her or it a new certificate or certificates for such shares, upon the surrender of the mutilated certificates or, in the case of loss or destruction of the certificate, upon satisfactory proof of such loss or destruction, and the Board may, in its discretion, require the owner of the lost or destroyed certificate or his, her or its legal representative to give the Corporation a bond in such sum and with such surety or sureties as it may direct to indemnify the Corporation against any claim that may be made against it on account of the alleged loss or destruction of any such certificate.

6.7          Regulations.

The Board may make such rules and regulations as it may deem expedient, not inconsistent with these By-laws, concerning the issue, transfer and registration of certificates for stock of the Corporation.

6.8          Fixing Date for Determination of Stockholders of Record.

(a)           In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board 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, and which record date shall be not more than 60 nor less than 10 days before the date of such meeting.  If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.  A determination of stockholders of 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 may fix a new record date for the adjourned meeting pursuant to Section 2.4 hereof.

(b)           In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action.  If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

ARTICLE VII

SEAL

The Board may provide a corporate seal, which shall be in the form of a circle and shall bear the full name of the Corporation, the year of incorporation of the Corporation and the words and figures “Corporate Seal - Delaware.”  In lieu of a corporate seal, a facsimile thereof may be impressed or affixed or reproduced.

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ARTICLE VIII

FISCAL YEAR

The fiscal year of the Corporation shall be the first day of January through and including the last day of December unless otherwise determined by the Board.

ARTICLE IX

INDEMNIFICATION AND INSURANCE

9.1          Indemnification.

(a)           Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or Proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that he or she is or was a director, officer or employee of the Corporation or is or was serving at the request of the Corporation as a director, officer or employee of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (each an “Indemnitee”), whether the basis of such Proceeding is alleged action in an official capacity while serving as a director, officer or employee or in any other capacity while serving as a director, officer or employee, shall be indemnified and held harmless by the Corporation as provided in the Certificate of Incorporation.

(b)           The rights to indemnification and to the Advancement of Expenses conferred in the Certificate of Incorporation shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, agreement, vote of stockholders or disinterested directors or otherwise.

9.2          Insurance.

The Corporation may purchase and maintain insurance, at its expense, to protect itself and any person who is or was a director, officer, employee or agent of the Corporation or any person who is or was serving at the request of the Corporation as a director, officer, employer or agent of 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 Delaware Statute.

9.3          Indemnity Agreements.

The Corporation may enter into agreements with any director, officer, employee or agent of the Corporation providing for indemnification to the full extent permitted by the Delaware Statute.

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ARTICLE X

AMENDMENT

Notwithstanding anything contained herein to the contrary and except as otherwise provided in the Certificate of Incorporation, these By-laws may be altered, amended or repealed, and new By-laws may be adopted (to the extent not inconsistent with the laws of the State of Delaware) by the affirmative vote of the holders of at least two-thirds of the outstanding Voting Stock at a meeting of the stockholders called for that purpose, or by the affirmative vote of a majority of the members of the Board who are present at any regular or special meeting of the Board.

* * * * *

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EX-4.1

Exhibit 4.1

EXECUTION VERSION

OTELCO INC.
and the Guarantors from time to time party hereto,
as Guarantors

Wells Fargo Bank, National Association

Trustee

INDENTURE

Dated as of December 21, 2004

13% SeniorSubordinated Notes Due 2019

Table of Contents

ARTICLE 1 Definitions And Incorporation By Reference
SECTION 1.01.	Definitions
SECTION 1.02.	Other Definitions
SECTION 1.03.	Incorporation by Reference of Trust Indenture Act
SECTION 1.04.	Rules of Construction
ARTICLE 2 The Notes
SECTION 2.01.	The Notes; Amount Unlimited
SECTION 2.02.	Form and Dating
SECTION 2.03.	Execution and Authentication
SECTION 2.04.	Registrar and Paying Agent
SECTION 2.05.	Paying Agent To Hold Money in Trust
SECTION 2.06.	Holders Lists
SECTION 2.07.	Transfer and Exchange
SECTION 2.08.	Physical Notes
SECTION 2.09.	Replacement Notes
SECTION 2.10.	Outstanding Notes
SECTION 2.11.	Temporary Notes
SECTION 2.12.	Cancellation
SECTION 2.13.	CUSIP Numbers
SECTION 2.14.	Tax Treatment
SECTION 2.15.	Maturity
ARTICLE 3 Redemption
SECTION 3.01.	Notices to Trustee
SECTION 3.02.	Selection of Notes to be Redeemed
SECTION 3.03.	Notice of Redemption
SECTION 3.04.	Effect of Notice of Redemption
SECTION 3.05.	Deposit of Redemption Price
SECTION 3.06.	Notes Redeemed in Part
SECTION 3.07.	Redemption of Notes
SECTION 3.08.	Automatic Separation of IDSs
ARTICLE 4 Covenants
SECTION 4.01.	Payment of Notes; Interest Deferral
SECTION 4.02.	Reports and Other Information
SECTION 4.03.	Limitations on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock
SECTION 4.04.	Limitation on Restricted Payments
SECTION 4.05.	Dividend and Other Payment Restrictions Affecting Subsidiaries

SECTION 4.06.	Asset Sales
SECTION 4.07.	Transactions with Affiliates
SECTION 4.08.	Liens
SECTION 4.09.	Change of Control
SECTION 4.10.	Compliance Certificate
SECTION 4.11.	Further Instruments and Acts
SECTION 4.12.	Future Guarantors
SECTION 4.13.	Limitation on Layering
SECTION 4.14.	Subsequent Issuance
ARTICLE 5 Successor Company
SECTION 5.01.	Merger, Consolidation or Sale of All or Substantially All Assets
ARTICLE 6 Defaults And Remedies
SECTION 6.01.	Events of Default
SECTION 6.02.	Acceleration.
SECTION 6.03.	Other Remedies
SECTION 6.04.	Waiver of Past Defaults
SECTION 6.05.	Control by Majority
SECTION 6.06.	Limitation on Suits
SECTION 6.07.	Rights of Holders to Receive Payment
SECTION 6.08.	Collection Suit by Trustee
SECTION 6.09.	Trustee May File Proofs of Claim
SECTION 6.10.	Trustee May Enforce Claims Without Possession of Notes
SECTION 6.11.	Priorities
SECTION 6.12.	Undertaking for Costs
SECTION 6.13.	Waiver of Stay or Extension Law
ARTICLE 7 Trustee
SECTION 7.01.	Duties of Trustee
SECTION 7.02.	Rights of Trustee
SECTION 7.03.	Individual Right of Trustee
SECTION 7.04.	Trustee’s Disclaimer
SECTION 7.05.	Notice of Defaults
SECTION 7.06.	Reports by Trustee to Holders
SECTION 7.07.	Compensation and Indemnity
SECTION 7.08.	Replacement of Trustee
SECTION 7.09.	Successor Trustee by Merger
SECTION 7.10.	Eligibility; Disqualification
SECTION 7.11.	Conflicting Interests
SECTION 7.12.	Preferential Collection of Claims Against Company
ARTICLE 8 Discharge Of Indenture; Defeasance
SECTION 8.01.	Satisfaction and Discharge of Indenture

ii

SECTION 8.02.	Legal and Covenant Defeasance; Conditions to Defeasance
SECTION 8.03.	Repayment to Company.
SECTION 8.04.	Indemnity for Government Obligations.
SECTION 8.05.	Reinstatement.
ARTICLE 9 Amendments
SECTION 9.01.	Without Consent of Holders
SECTION 9.02.	With Consent of Holders
SECTION 9.03.	Notice to Holders
SECTION 9.04.	Compliance with Trust Indenture Act
SECTION 9.05.	Revocation and Effect of Consent and Waivers
SECTION 9.06.	Notation on or Exchange of Notes
SECTION 9.07.	Trustee To Sign Amendments
SECTION 9.08.	Payment for Consent.
ARTICLE 10
Subordination
SECTION 10.01.	Agreement To Subordinate
SECTION 10.02.	Liquidation, Dissolution or Bankruptcy
SECTION 10.03.	Default on Designated Senior Indebtedness
SECTION 10.04.	When Distribution Must Be Paid Over
SECTION 10.05.	Subrogation
SECTION 10.06.	Relative Rights
SECTION 10.07.	Subordination May Not Be Impaired by the Company
SECTION 10.08.	Right of Trustee and Paying Agent
SECTION 10.09.	Distribution or Notice to Representative
SECTION 10.10.	Article 10 Not To Prevent Events of Default or Limit Right To Accelerate
SECTION 10.11.	Trust Moneys Not Subordinated
SECTION 10.12.	Trustee Entitled To Rely
SECTION 10.13.	Trustee To Effectuate Subordination
SECTION 10.14.	Trustee Not Fiduciary for Holders of Senior Indebtedness
SECTION 10.15.	Reliance by Holders of Senior Indebtedness on Subordination Provisions
SECTION 10.16.	Defeasance
ARTICLE 11 Guarantees
SECTION 11.01.	Guarantee
SECTION 11.02.	Limitation on Liability
SECTION 11.03.	Successors and Assigns
SECTION 11.04.	No Waiver
SECTION 11.05.	Modification
SECTION 11.06.	Execution of Supplemental Indenture for Future Guarantors

iii

SECTION 11.07.	Notation Not Required
ARTICLE 12 Subordination Of The Guarantees
SECTION 12.01.	Agreement To Subordinate
SECTION 12.02.	Liquidation, Dissolution or Bankruptcy
SECTION 12.03.	Default on Designated Senior Indebtedness of a Guarantor
SECTION 12.04.	Demand for Payment
SECTION 12.05.	When Distribution Must Be Paid Over
SECTION 12.06.	Subrogation
SECTION 12.07.	Relative Rights
SECTION 12.08.	Subordination May Not Be Impaired by a Guarantor
SECTION 12.09.	Right of Trustee and Paying Agent
SECTION 12.10.	Distribution or Notice to Representative
SECTION 12.11.	Article 12 Not To Prevent Events of Default or Limit Right To Accelerate
SECTION 12.12.	Trustee Entitled To Rely
SECTION 12.13.	Trustee To Effectuate Subordination
SECTION 12.14.	Trustee Not Fiduciary for Holders of Senior Indebtedness of Guarantor
SECTION 12.15.	Reliance by Holders of Senior Indebtedness of a Guarantor on Subordination Provisions
SECTION 12.16.	Defeasance
ARTICLE 13 Miscellaneous
SECTION 13.01.	Trust Indenture Act Controls
SECTION 13.02.	Notices
SECTION 13.03.	Communication by Holders with Other Holders
SECTION 13.04.	Certificate and Opinion as to Conditions Precedent
SECTION 13.05.	Statements Required in Certificate or Opinion
SECTION 13.06.	When Notes Disregarded
SECTION 13.07.	Rules by Trustee, Paying Agent and Registrar
SECTION 13.08.	Legal Holidays
SECTION 13.09.	Governing Law
SECTION 13.10.	No Recourse Against Others
SECTION 13.11.	Successors
SECTION 13.12.	Multiple Originals
SECTION 13.13.	Table of Contents; Headings

Exhibit A	-	Form of Global Note
Exhibit B	-	Form of Physical Note
Exhibit C	-	Form of Supplemental Indenture for Guarantors
Exhibit D	-	Form of Solvency Certificate

iv

Certain Sections of this Indenture relating to Sections 310 through 318

inclusive of the Trust Indenture Act of 1939:

Trust Indenture Act Section	Indenture Section
§ 310(a)(1)	7.10
(a)(2)	7.10
(a)(3)	Not Applicable
(a)(4)	Not Applicable
(b)	7.11
§ 311(a)	7.12
(b)	7.12
§ 312(a)	2.06
(b)	13.03
(c)	13.03
§ 313(a)	7.06
(b)	7.06
(c)	7.06
(d)	7.06
§ 314(a)	4.02
(a)(4)	13.04
	7.05
(b)	Not Applicable
(c)(1)	13.05
(c)(2)	13.05
(c)(3)	Not Applicable
(d)	Not Applicable
(e)	13.05
§ 315(a)	7.01
(b)	7.05
(c)	7.01
(d)	7.01
(d)(1)	7.01
(d)(2)	7.01
(d)(3)	6.05
(e)	6.12

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Trust Indenture Act Section	Indenture Section
§ 316(a)	6.05
	6.04
(a)(1)(A)	13.06
	6.05
(a)(1)(B)	6.04
(a)(2)	Not Applicable
(b)	6.07
(c)	9.05
§ 317(a)(1)	6.03
(a)(2)	6.09
(b)	2.05
§ 318(a)	13.01

This cross-reference table shall not for any purpose be deemed to be part of this Indenture.

vi

INDENTURE, dated as of December 21, 2004 (as amended, supplemented or otherwise modified from time to time, this “Indenture”), among OTELCO INC., a Delaware corporation (the “Company”), each subsidiary of the Company listed on the signature pages hereto (the “Guarantors”), and Wells Fargo Bank, National Association, as trustee (the “Trustee”).

The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of the Notes.  Each Guarantor party hereto as of the date hereof has duly authorized the execution and delivery of this Indenture to provide for its guarantee of the Notes, as provided in this Indenture.  Each Guarantor party hereto as of the date hereof has received good and valuable consideration for its execution and delivery of this Indenture and its guarantee of the Notes.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

For and in consideration of the premises and the purchase of (i) the Company’s 13% senior subordinated notes issued on the date hereof (the “Original Notes”), and (ii) any Additional Notes (as defined herein) that may be issued on any date after the Issue Date, it is mutually agreed, for the benefit of all Holders of the Notes, as follows:

ARTICLE 1

DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.01.      Definitions.

“Acquired Indebtedness” means, with respect to any specified Person:

(i)            Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person; and

(ii)           Indebtedness secured by a Lien encumbering any asset acquired by such specified Person,

in each case, other than Indebtedness Incurred as consideration in, in contemplation of, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was otherwise acquired by such Person, or such asset was acquired by such Person, as applicable.

“Adjusted EBITDA” means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period, plus, without duplication:

(i)            taxes paid and provision for taxes based on income or profits of such Person for such period to the extent such taxes or provision for taxes were deducted in computing Consolidated Net Income, plus

(ii)           Consolidated Interest Expense of such Person for such period to the extent the same was deducted in computing Consolidated Net Income, plus

(iii)          Consolidated Depreciation and Amortization Expense of such Person for such period to the extent such Consolidated Depreciation and Amortization Expense was deducted in computing Consolidated Net Income, plus

(iv)          any non-recurring fees, expenses or charges related to any Securities Offering, Permitted Investment, acquisition, or Indebtedness permitted to be Incurred by this Indenture (in each case, whether or not successful), deducted in such period in computing Consolidated Net Income, plus

(v)           the amount of annual management and advisory fees and related expenses paid to Seaport Capital, deducted in such period in computing Consolidated Net Income during any period prior to the Issue Date, plus

(vi)          any other non-cash charges reducing Consolidated Net Income for such period (excluding any such charge which requires an accrual of, or cash reserve for, anticipated cash charges for any future period).

Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization of, a Subsidiary of the Company shall be added to Consolidated Net Income to compute Adjusted EBITDA only to the extent (and in the same proportion) that the Net Income of such Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be paid as a dividend to the Company by such Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Subsidiary or its stockholders.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person.  For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.  For purposes of Sections 4.06 and 4.07 only, “Affiliate” shall also mean any beneficial owner of shares representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Voting Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof.

“Asset Sale” means:

(i)            the sale, conveyance, transfer or other disposition (whether in a single transaction or a series of related transactions) of property or assets (including by way of a Sale/Leaseback Transaction) of the Company or any Restricted Subsidiary (each referred to in this definition as a “disposition”); or

2

(ii)           the issuance or sale of Equity Interests of any Restricted Subsidiary (other than to the Company or another Restricted Subsidiary) (whether in a single transaction or a series of related transactions),

in each case other than:

(a)a disposition of Cash Equivalents or Investment Grade Securities in the ordinary course of business;

(b)the disposition of all or substantially all of the assets of the Company in a manner permitted pursuant to Section 5.01 or any disposition that constitutes a Change of Control;

(c)any Restricted Payment or Permitted Investment that is permitted to be made, and is made, under Section 4.04;

(d)any disposition of assets with an aggregate Fair Market Value of less than $5.0 million;

(e)any disposition of property or assets by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary;

(f)any exchange of like-kind property pursuant to Section 1031 of the Internal Revenue Code for use in a Similar Business;

(g)sales of assets received by the Company upon the foreclosure on a Lien;

(h)any sale of Equity Interests in, or Indebtedness or other securities of, an Unrestricted Subsidiary;

(i)contemporaneous exchanges by the Company or any Restricted Subsidiary of Communication Assets for other Communications Assets in the ordinary course of business so long as the applicable Communication Assets received by the Company or such Restricted Subsidiary have at least substantially equal Fair Market Value as determined by a majority of the Board of Directors in good faith;

(j) the grant of Liens not prohibited by this Indenture;

(k)any disposition of obsolete, worn out, uneconomical or surplus property or equipment in the ordinary course of business;

(l)licenses of intellectual property;

(m)any disposition of Designated Noncash Consideration; and

(n)sales of inventory in the ordinary course of business consistent with past practices and sales of equipment upon termination of a contract with a client entered into in the ordinary course of business pursuant to the terms of such contract.

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“Bankruptcy Law” means Title 11, United States Code, or any similar federal or state or foreign law for the relief of debtors.

“Board of Directors” means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board.

“Business Day” means a day other than a Saturday, Sunday or other day on which banking institutions in Minnesota or New York State are authorized or required by law to close.

“Capital Expenditures” means any expenditure required to be classified as a capital expenditure in accordance with GAAP.

“Capital Stock” means:

(i)            in the case of a corporation, corporate stock, including, without limitation, corporate stock represented by IDSs and corporate stock outstanding upon the separation of IDSs into the securities represented thereby;

(ii)           in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

(iii)          in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

(iv)          any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

“Capitalized Lease Obligation” means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) in accordance with GAAP.

“Cash Equivalents” means:

(i)            U.S. dollars and foreign currency exchanged into U.S. dollars within 180 days;

(ii)           securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof;

(iii)          certificates of deposit, time deposits and Eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers’ acceptances with maturities not exceeding one year and overnight bank deposits, in each case with any commercial bank having capital and surplus in excess of $500.0 million and whose long-term debt is rated at least “A” or the equivalent thereof by Moody’s or S&P;

(iv)          repurchase obligations for underlying securities of the types specified in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above;

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(v)           commercial paper issued by a corporation (other than an Affiliate of the Company) rated at least “A-2” or the equivalent thereof by Moody’s or S&P and in each case maturing within one year after the date of acquisition;

(vi)          investment funds investing at least 95% of their assets in securities of the types specified in clauses (i) through (v) above;

(vii)         readily marketable direct obligations issued by any state of the United States of America or any political subdivision thereof having one of the two highest rating categories obtainable from either Moody’s or S&P; and

(viii)        Indebtedness or preferred stock issued by Persons with a rating of “A” or higher from S&P or “A-2” or higher from Moody’s.

“Change of Control” means the occurrence of any of the following events:

(i)            the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of the Company’s assets on a consolidated basis to any person or group (as such term is used in Section 13(d)(3) of the Exchange Act) other than the Permitted Holders;

(ii)           the adoption of a plan relating to the liquidation or dissolution of the Company;

(iii)          the consummation of any transaction the result of which is that any Person or group (as such term is used in Section 13 (d) (3) of the Exchange Act) other than the Permitted Holders is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause such Person or group shall be deemed to have ‘‘beneficial ownership’’ of all shares that any such Person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the voting power of the voting stock of the Company, by way of purchase, merger or consolidation or otherwise (other than a creation of a holding company that does not involve a change in the beneficial ownership of the Company as a result of such transaction);

(iv)          the merger or consolidation of the Company with or into another Person or the merger of another Person into the Company with the effect that immediately after such transaction the stockholders of the Company immediately prior to such transaction hold, directly or indirectly, less than 50% of the total voting power of all securities generally entitled to vote in the election of directors, managers, or trustees of the Person surviving such merger or consolidation, in each case other than creation of a holding company that does not involve a change in the beneficial ownership of the Company as a result of such transaction; or

(v)           the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors.

“Class A Common Stock” means the Company’s Class A common stock represented by the IDSs, par value $0.01 per share.

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“Class B Common Stock” means the Company’s Class B common stock, par value $0.01 per share.

“Communication Assets” means any property or assets, whether real, personal or mixed, tangible, including Capital Stock in, and other securities of, any other Person, including licenses and applications, bids and agreements to acquire licenses, or other authority to provide telecommunication services, previously granted, or to be granted, by the Federal Communications Commission, used or intended for use primarily in connection with a Similar Business.

“Company” means Otelco Inc. until a successor replaces it and, thereafter, means the successor and, for purposes of any provision contained in this Indenture and required by the Trust Indenture Act, each other obligor on the Notes.

“consolidated” with respect to any Person shall mean such Person consolidated with its Restricted Subsidiaries, and shall not include any Unrestricted Subsidiary, but the interest of such Person in an Unrestricted Subsidiary will be accounted for as an Investment.

“Consolidated Depreciation and Amortization Expense” means with respect to any Person for any period, the total amount of depreciation and amortization expense of such Person and its Restricted Subsidiaries for such period on a consolidated basis and otherwise determined in accordance with GAAP.

“Consolidated Interest Expense” means, with respect to any Person for any period, consolidated interest expense of such Person and its Restricted Subsidiaries for such period, to the extent such expense was deducted in computing Consolidated Net Income, determined on a consolidated basis and otherwise determined in accordance with GAAP, plus, to the extent not included in such consolidated interest expense, and to the extent Incurred by the Company or its Restricted Subsidiaries, without duplication:

(i)            interest expense attributable to leases constituting part of a Sale/Leaseback Transaction and/or Capitalized Lease Obligations;

(ii)           amortization of debt discount and debt issuance cost;

(iii)          capitalized interest;

(iv)          non-cash interest expense;

(v)           commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing;

(vi)          net costs associated with Hedging Obligations (including amortization of fees);

(vii)         interest Incurred in connection with Investments in discontinued operations;

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(viii)        interest in respect of Indebtedness of any other Person to the extent such Indebtedness is guaranteed by the Company or any Restricted Subsidiary, but only to the extent that such interest is actually paid by the Company or any Restricted Subsidiary; and

(ix)           the earned discount or yield with respect to the sale of receivables.

“Consolidated Net Income” means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis; provided, however, that:

(i)            any net after-tax extraordinary gains or losses (less all fees and expenses relating thereto) shall be excluded;

(ii)           any increase in amortization or depreciation resulting from purchase accounting in relation to any acquisition that is consummated after the Issue Date, net of taxes, shall be excluded;

(iii)          the Net Income for such period shall not include the cumulative effect of a change in accounting principles during such period;

(iv)          any net after-tax income or loss from discontinued operations and any net after-tax gains or losses on disposal of discontinued operations shall be excluded;

(v)           any net after-tax gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions other than in the ordinary course of business (as determined in good faith by the Board of Directors) shall be excluded;

(vi)          the Net Income for such period of any Person that is not a Subsidiary of such Person, or is an Unrestricted Subsidiary, or that is accounted for by the equity method of accounting, shall be included only to the extent of the amount of dividends or distributions or other payments paid in cash (or to the extent converted into cash) to the referent Person or a Restricted Subsidiary thereof in respect of such period;

(vii)         the Net Income for such period of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of its Net Income is not at the date of determination permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, unless such restrictions with respect to the payment of dividends or in similar distributions have been legally waived; provided that the net loss of any such Restricted Subsidiary shall be included;

(viii)        any non-cash compensation expense realized for grants of performance shares, stock options or other stock awards to officers, directors and employees of the Company or any Restricted Subsidiary shall be excluded; and

(ix)           any non-cash impairment charges resulting from the application of Statement of Financial Accounting Standards No. 142 shall be excluded.

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Notwithstanding the foregoing, for the purpose of Section 4.04 only, there shall be excluded from Consolidated Net Income any dividends, repayments of loans or advances or other transfers of assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the extent such dividends, repayments or transfers increase the amount of Restricted Payments permitted under Section 4.04(c)(iv).

“Continuing Directors” means, as of any date of determination, any member of the Company’s Board of Directors who:

(i)            was a member of the Company’s Board of Directors on the date of this Indenture; or

(ii)           was nominated for election or elected to the Board of Directors with the affirmative vote of at least a majority of the Continuing Directors who were members of the Company’s Board of Directors at the time of the nomination or election.

“Credit Agreement” means the credit agreement dated as of December 21, 2004, among the Company, the Subsidiaries of the Company named therein, the financial institutions from time to time a party thereto and General Electric Capital Corporation, as Administrative Agent, as amended, restated, supplemented, waived, replaced, restructured, repaid, increased, refunded, refinanced or otherwise modified from time to time (whether or not terminated and whether with the original lenders or otherwise), including any successor or replacement facility extending the maturity thereof or otherwise restructuring all or any portion of the Indebtedness under such agreement or increasing the amount of available borrowings thereunder (except to the extent that any such amendment, restatement, supplement, waiver, replacement, refunding, refinancing or other modification thereto, in each case relating to increases in Indebtedness, would be prohibited by the terms of this Indenture, unless otherwise agreed to by the Holders of at least a majority in aggregate principal amount of Notes at the time outstanding).

“Custodian” means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law.

“Default” means any event which is, or after notice or passage of time or both would be, an Event of Default.

“Depository” or “DTC” means The Depository Trust Company, its nominees and their respective successors.

“Designated Capital Expenditures” means the positive result, if any, of (A) Capital Expenditures for the relevant period minus (B) Net Available Cash (except to the extent such Net Available Cash is included in Adjusted EBITDA) of any asset sale (net of repayments of Indebtedness therewith) applied pursuant to the Asset Sales provisions of the Credit Agreement to finance such Capital Expenditures and pursuant to Section 4.06.

“Designated Noncash Consideration” means the Fair Market Value of noncash consideration received by the Company or one of its Restricted Subsidiaries in connection with an Asset Sale that is so designated as Designated Noncash Consideration pursuant to an Officers’

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Certificate, setting forth the basis of such valuation, less the amount of Cash Equivalents received in connection with a subsequent sale of such Designated Noncash Consideration.

“Designated Preferred Stock” means Preferred Stock of the Company (other than Disqualified Stock) that is issued for cash (other than to a Subsidiary of the Company or an employee stock ownership plan or trust established by the Company or any of its Subsidiaries) and is so designated as Designated Preferred Stock, pursuant to an Officers’ Certificate, on the issuance date thereof, the cash proceeds of which are excluded from the calculation set forth in Section 4.04(c).

“Designated Senior Indebtedness” means (i) the Senior Lender Indebtedness and (ii) any other Senior Indebtedness of the Company with a principal amount in excess of $25.0 million and designated by the Company as Designated Senior Indebtedness.

“Disqualified Stock” means, with respect to any Person, any Capital Stock of such Person which, by its terms (or by the terms of any security into which it is convertible or for which it is redeemable or exchangeable), or upon the happening of any event:

(i)            matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise;

(ii)           is convertible or exchangeable for Indebtedness or Disqualified Stock; or

(iii)          is redeemable at the option of the holder thereof, in whole or in part, in each case prior to the first anniversary of the maturity date of the Notes;

provided, however, that only the portion of Capital Stock which so matures or is mandatorily redeemable, is so convertible or exchangeable or is so redeemable at the option of the holder thereof prior to such first anniversary shall be deemed to be Disqualified Stock; provided further, however, that if such Capital Stock is issued to any employee or to any plan for the benefit of employees of the Company or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Company in order to satisfy applicable statutory or regulatory obligations or as a result of such employee’s termination, death or disability. Notwithstanding any provision to the contrary herein, the Company’s Class B common stock that is exchangeable for Additional Notes shall not be Disqualified Stock. In addition, notwithstanding clause (iii) of this definition, any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.04.

“Dividend Suspension Period” means any period for which the Interest Coverage Ratio of the Company for the twelve-month period ended on the last day of the most recently ended fiscal quarter for which internal financial statements are available is less than 1.40 to 1.00.

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“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

“Excess Cash” shall mean, with respect to any period, Adjusted EBITDA of the Company for such period, minus the sum (without duplication) of the following,each determined for such period on a consolidated basis:

(i)            cash interest expense;

(ii)           deferred interest, if any, not otherwise included in clause (i);

(iii)          cash income tax expense;

(iv)          Designated Capital Expenditures (except to the extent financed with an incurrence of indebtedness, until such indebtedness is repaid);

(v)           any item included under the definition of Adjusted EBITDA that reflects a cash payment, and

(vi)          any mandatory prepayment that results in a permanent reduction to the principal amount (or commitments under a revolving facility) of Designated Senior Indebtedness prior to its scheduled maturity (to the extent not included in the clauses contained in clauses (i) and (ii) above); provided that if Senior Indebtedness is Incurred in any such period that replaces Designated Senior Indebtedness previously prepaid or commitments under a revolving facility are increased to previous levels, which prepayment (or reduction in commitments under a revolving credit facility) resulted in a reduction to Excess Cash pursuant to this clause, Excess Cash shall be increased by an amount up to such previous reduction.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exchange Conditions” mean the conditions set forth in Section 4.14(d) and the following conditions, all of which must be satisfied at the time that Class B common stock is exchanged in accordance with its terms into IDSs of the Company (the ‘‘Exchange’’):

(i)            the Exchange must comply with all applicable laws, including, without limitation, securities laws;

(ii)           the Exchange must occur pursuant to an effective registration statement in the United States;

(iii)          the Exchange will not conflict with or cause a default under any material financing agreement;

(iv)          the Exchange will not cause a mandatory suspension of dividends or deferral of interest under any material financing agreement as of the measurement date immediately following the proposed exchange date; and

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(v)           no Default or Event of Default has occurred and is continuing or will occur as a result of the Exchange under this Indenture.

“Fair Market Value” means, with respect to any asset or property, the price which could be negotiated in an arm’s-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction.

“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the Issue Date.

“Global Note Custodian” means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor and if at any time there is more than one such party, “Global Note Custodian” as used with respect to the securities of any series shall mean the Global Note custodian with respect to securities of that series.

“guarantee” means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness or other obligations.

“Guarantee” means any guarantee of the Company’s obligations under this Indenture and on the Notes by any Person in accordance with provisions of this Indenture.

“Guarantor” means any Person that Incurs a Guarantee; provided that upon the release or discharge of such Person from its Guarantee in accordance with this Indenture, such Person ceases to be a Guarantor.

“Hedging Obligations” means, with respect to any Person, the obligations of such Person under

(i)            currency exchange, interest rate or commodity swap agreements, currency exchange, interest rate or commodity cap agreements and currency exchange, interest rate or commodity collar agreements, and

(ii)           other agreements or arrangements designed to protect such Person against fluctuations in currency exchange, interest rates or commodity prices.

“Holder” or “Noteholder” means the Person in whose name a Note is registered on the Trustee’s books.

“IDSs” means the Company’s Income Deposit Securities, whether currently outstanding or as may be issued from time to time.

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“Incur” means issue, assume, guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Subsidiary.

“Indebtedness” means, with respect to any Person:

(i)  the principal and premium (if any) of any indebtedness of such Person, whether or not contingent:

(a)in respect of borrowed money;

(b)evidenced by bonds, notes, debentures or similar instruments or letters of credit or bankers’ acceptances (or, without duplication, reimbursement agreements in respect thereof);

(c)representing the deferred and unpaid purchase price of any property, which purchase price is due more than six months after the date of placing the property in service or taking delivery and title thereto;

(d)in respect of Capitalized Lease Obligations; or

(e)representing any Hedging Obligations,

if and to the extent that any of the foregoing Indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability on a balance sheet  (excluding the footnotes thereto) of such Person prepared in accordance with GAAP;

(ii)  to the extent not otherwise included, any obligation of such Person to be liable for, or to pay, as obligor, guarantor or otherwise, on the Indebtedness of another Person (other than by endorsement of negotiable instruments for collection in the ordinary course of business); and

(iii)  to the extent not otherwise included, Indebtedness of another Person secured by a Lien on any asset owned by such Person (whether or not such Indebtedness is assumed by such Person); provided, however, that the amount of such Indebtedness will be the lesser of (a) the Fair Market Value of such asset at such date of determination and (b) the amount of such Indebtedness of such other Person;

provided, further, that any obligation of the Company or any Restricted Subsidiary in respect of (i) minimum guaranteed commissions, or other similar payments, to clients, minimum returns to clients or stop loss limits in favor of clients or indemnification obligations to clients, in each case pursuant to contracts to provide services to clients entered into in the ordinary course of business, and (ii) account credits to participants under the LTIP or any successor or similar compensation plan, shall be deemed not to constitute Indebtedness.

The amount of any Indebtedness outstanding as of any date shall be:

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(i) the accreted value thereof, in the case of any Indebtedness issued with original issue discount; and

(ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness.

“Independent Financial Advisor” means an accounting, appraisal or investment banking firm or consultant to Persons engaged in a similar business of nationally recognized standing that is, in the good faith determination of the Company, qualified to perform the task for which it has been engaged.

“Interest Coverage Ratio” for any period, means the ratio of Adjusted EBITDA to Consolidated Interest Expense for the twelve-month period ended on the last day of any fiscal quarter.

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended.

“Investment Grade Securities” means:

(i)  securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (other than Cash Equivalents);

(ii)  debt securities or debt instruments with a rating of BBB- or higher by S&P or Baa3 or higher by Moody’s or the equivalent of such rating by such rating organization, or if no rating of S&P or Moody’s then exists, the equivalent of such rating by any other nationally recognized securities rating agency, but excluding any debt securities or instruments constituting loans or advances among the Company and its Subsidiaries; and

(iii)  investments in any fund that invests exclusively in investments of the type specified in clauses (i) and (ii) which fund may also hold immaterial amounts of cash pending investment and/or distribution.

“Investments” means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of loans (including guarantees), advances or capital contributions (excluding accounts receivable, trade credit and advances to customers and commission, travel and similar advances to officers, employees and consultants made in the ordinary course of business), purchases or other acquisitions for consideration (including agreements providing for the adjustment of purchase price) of Indebtedness, Equity Interests or other securities issued by any other Person and investments that are required by GAAP to be classified on the balance sheet of the Company in the same manner as the other investments included in this definition to the extent such transactions involve the transfer of cash or other property.

For purposes of the definition of “Unrestricted Subsidiary” and Section 4.04:

(i)  “Investments” shall include the portion (proportionate to the Company’s equity interest in such Subsidiary) of the Fair Market Value of the net assets of a Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided,

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however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent “Investment” in an Unrestricted Subsidiary equal to an amount (if positive) equal to (x) the Company’s “Investment” in such Subsidiary at the time of such redesignation less (y) the portion (proportionate to the Company’s equity interest in such Subsidiary) of the Fair Market Value of the net assets of such Subsidiary at the time of such redesignation; and

(ii)  any property transferred to or from an Unrestricted Subsidiary shall be valued at its Fair Market Value at the time of such transfer, in each case as determined in good faith by the Board of Directors.

“Issue Date” means the first date on which any Notes are authenticated.

“Leverage Ratio” means, with respect to any Person on any date, the ratio of:

(i)  total Indebtedness of such Person and its Restricted Subsidiaries on a consolidated basis as of such date (which shall include the average daily balance of Indebtedness under any revolving credit facility during the twelve-month period ended on the last day of the most recently ended fiscal quarter) to

(ii) the Adjusted EBITDA of such Person for the most recently ended twelve-month period ended on the last day of any fiscal quarter.

In the event that the Company or any of its Restricted Subsidiaries Incurs or redeems any Indebtedness or issues or redeems Preferred Stock subsequent to the commencement of the period for which the Leverage Ratio is being calculated but prior to the event for which the calculation of the Leverage Ratio is made (the ‘‘Calculation Date’’), then the Leverage Ratio shall be calculated giving pro forma effect to such Incurrence or redemption of Indebtedness, or such issuance or redemption of Preferred Stock, as if the same had occurred at the beginning of the applicable four-quarter period.

For purposes of making the computation referred to above, Investments, acquisitions, dispositions, mergers, consolidations and discontinued operations (as determined in accordance with GAAP), in each case with respect to an operating unit of a business, that have been made by the Company or any of its Restricted Subsidiaries during the four-quarter reference period or subsequent to such reference period and on or prior to or simultaneously with the Calculation Date shall be calculated on a pro forma basis assuming that all such Investments, acquisitions, dispositions, discontinued operations, mergers and consolidations (and the reduction of any associated interest coverage obligations and the change in Adjusted EBITDA resulting therefrom) had occurred on the first day of the four-quarter reference period. If since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Investment, acquisition or disposition, have discontinued any operation, or have engaged in merger or consolidation, in each case with respect to an operating unit of a business, that would have required adjustment pursuant to this definition, then the Leverage Ratio shall be calculated giving pro forma effect thereto for such period as if such

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Investment, acquisition, disposition, discontinued operation, merger or consolidation had occurred at the beginning of the applicable four-quarter period.

For purposes of this definition, whenever pro forma effect is to be given to any transaction, the pro forma calculations shall be made in good faith by a responsible financial or accounting officer of the Company. Any such pro forma calculation may include adjustments appropriate, in the reasonable determination of the Company as set forth in an Officers’ Certificate, to reflect operating expense reductions reasonably expected to result from any acquisition or merger.

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction); provided that in no event shall an operating lease be deemed to constitute a Lien.

“LTIP” means any long-term incentive or similar compensation plan maintained by the Company or its Restricted Subsidiaries.

“Management Group” means the group consisting of the directors, executive officers and other personnel of the Company on the Issue Date.

“Moody’s” means Moody’s Investors Service, Inc.

“Net Available Cash” from any Asset Sale means cash payments received therefrom (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to the property that is the subject of such Asset Sale or received in any other non-cash form), in each case net of:

(i) all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP, as a consequence of such Asset Sale;

(ii) all payments made on any Indebtedness that is secured by any property subject to such Asset Sale, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such property, or which must by its terms, or in order to obtain a necessary consent to such Asset Sale, or by applicable law, be repaid out of the proceeds from such Asset Sale;

(iii) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Sale; and

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(iv) the deduction of appropriate amounts provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the property disposed in such Asset Sale and retained by the Company or any Restricted Subsidiary after such Asset Sale.

“Net Income” means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends.

“Net Proceeds” means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received in respect of or upon the sale or other disposition of any Designated Noncash Consideration received in any Asset Sale and any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, but excluding the assumption by the acquiring person of Indebtedness relating to the disposed assets or other considerations received in any other noncash form), net of the direct costs relating to such Asset Sale and the sale or disposition of such Designated Noncash Consideration (including, without limitation, legal, accounting and investment banking fees, and brokerage and sales commissions), and any relocation expenses Incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements related thereto), amounts required to be applied to the repayment of principal, premium (if any) and interest on Indebtedness required (other than pursuant to Section 4.06(b)(i)) to be paid as a result of such transaction (including in order to obtain any required consent therefor), and any deduction of appropriate amounts to be provided by the Company as a reserve in accordance with GAAP against any liabilities associated with the asset disposed of in such transaction and retained by the Company after such sale or other disposition thereof, including, without limitation, pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction.

“Notes” means the Original Notes and any Additional Notes unless expressly provided otherwise.

“Notes Custodian” means the Trustee, as custodian with respect to the Global Notes, or any successor entity thereto.

“Obligations” means any principal, interest, penalties, fees, indemnifications, reimbursements (including, without limitation, reimbursement obligations with respect to letters of credit and bankers’ acceptances), damages and other liabilities payable under the documentation governing any Indebtedness; provided that Obligations with respect to the Notes shall not include fees or indemnifications in favor of the Trustee and other third parties other than the Holders of the Notes.

“Officer” means the Chairman of the Board, the President, any Executive Vice President, Senior Vice President or Vice President, the Treasurer or the Secretary of the Company.

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“Officers’ Certificate” means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company that meets the requirements set forth in this Indenture.

“Opinion of Counsel” means a written opinion from legal counsel.  The counsel may be an employee of or counsel to the Company.

“Option” means the right given to the underwriters to purchase up to 672,513 additional IDSs, representing 672,513 shares of the Class A Common Stock and $5,043,847.50 aggregate principal amount of Notes for the purpose of covering over-allotments in connection with the sale of IDSs pursuant to the underwriting agreement, dated as of December 16, 2004, among the Company, the guarantors named therein and CIBC World Markets Corp., RBC Capital Markets Corporation and UBS Securities LLC, as representatives of the underwriters named therein (the “Underwriting Agreement”).

“Pari Passu Indebtedness” means

(i) with respect to the Company, the Notes and any other Indebtedness of the Company, other than Senior Indebtedness, Secured Indebtedness or Subordinated Indebtedness of the Company; and

(ii) with respect to any Guarantor, its Guarantee and any other Indebtedness of such Guarantor, other than Senior Indebtedness,  Secured Indebtedness or Subordinated Indebtedness of such Guarantor.

“Permitted Asset Swap” means any one or more transactions in which the Company or any Restricted Subsidiary exchanges assets for consideration consisting of:

(i) assets used or useful in a Similar Business; and

(ii) any cash or Cash Equivalents, provided that such cash or Cash Equivalents shall be considered Net Proceeds from an Asset Sale.

“Permitted Holders” means Seaport Capital and the Management Group.

“Permitted Investments” means:

(i)  any Investment in the Company or any Restricted Subsidiary;

(ii)  any Investment in Cash Equivalents or Investment Grade Securities;

(iii)  any Investment by the Company or any Restricted Subsidiary of the Company in a Person that is primarily engaged in a Similar Business if as a result of such Investment (a) such Person becomes a Restricted Subsidiary or (b) such Person, in one transaction or a series of related transactions, is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary;

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(iv)  any Investment in securities or other assets not constituting Cash Equivalents and received in connection with an Asset Sale made pursuant to the provisions of Section 4.06 or any other disposition of assets not constituting an Asset Sale;

(v)  any Investment existing on the Issue Date;

(vi)  advances to employees not in excess of $1.0 million outstanding at any one time in the aggregate;

(vii)  any Investment acquired by the Company or any of its Restricted Subsidiaries (a) in exchange for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the Company of such other Investment or accounts receivable or (b) as a result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;

(viii)  Hedging Obligations permitted under Section 4.03(j);

(ix)  additional Investments having an aggregate Fair Market Value, taken together with all other Investments made pursuant to this clause (ix) that are at that time outstanding, not to exceed the greater of 7.5% of Tangible Assets or $5.0 million at the time of such Investment (with the Fair Market Value of each Investment being measured at the time made and without giving effect to subsequent changes in value);

(x)  loans and advances to officers, directors and employees for business-related travel expenses, moving expenses and other similar expenses, in each case Incurred in the ordinary course of business, and account credits and payments to participants under the LTIP or any successor or similar compensation plan;

(xi)  Investments the payment for which consists of Equity Interests of the Company (other than Disqualified Stock); provided, however, that such Equity Interests shall not increase the amount available for Restricted Payments under Section 4.04(c);

(xii)  any transaction to the extent it constitutes an Investment that is permitted by and made in accordance with the provisions of Section 4.07(2) (except transactions specified in clauses (ii), (iii), and (iv) of such paragraph);

(xiii)  Investments consisting of the licensing or contribution of intellectual property pursuant to joint marketing arrangements with other Persons;

(xiv)  Guarantees issued in accordance with Section 4.03;

(xv)  any Investment by Restricted Subsidiaries in other Restricted Subsidiaries and Investments by Subsidiaries that are not Restricted Subsidiaries in other Subsidiaries that are not Restricted Subsidiaries;

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(xvi)  Investments consisting of purchases and acquisitions of inventory, supplies, materials and equipment or purchases of contract rights or licenses or leases of intellectual property, in each case in the ordinary course of business; and

(xvii) loans to unaffiliated clients made in connection with entering into, renegotiating, renewing or amending contracts to provide products or services not to exceed $1.0 million in any fiscal year or $3.0 million in aggregate amount at any time outstanding.

“Permitted Junior Securities” shall mean debt or equity securities of the Company or any successor corporation issued pursuant to a plan of reorganization or readjustment of the Company that are subordinated to the payment of all then-outstanding Senior Indebtedness of the Company at least to the same extent that the Notes are subordinated to the payment of all Senior Indebtedness of the Company on the Issue Date, so long as (a) to the extent that any Senior Indebtedness of the Company outstanding on the date of consummation of any such plan of reorganization or readjustment is not paid in full in cash on such date, either (x) the holders of any such Senior Indebtedness not so paid in full in cash have consented to the terms of such plan of reorganization or readjustment or (y) such holders receive securities which constitute Senior Indebtedness and which have been determined by the relevant court to constitute satisfaction in full in cash of any Senior Indebtedness not paid in full in cash, and (b) in the case of debt securities, such debt securities:

(1)are unsecured;

(2)have no maturity, amortization, sinking fund, repayment or similar payment earlier than one year after the final maturity of all Senior Indebtedness of the Company then outstanding (as such Senior Indebtedness may be modified pursuant to any such reorganization or readjustment);

(3)do not require the cash payment of principal, interest or other cash amounts until such time as all Senior Indebtedness of the Company then outstanding (as such Senior Indebtedness may be modified pursuant to any such reorganization or readjustment) has been paid in full in cash or cash equivalents acceptable to holders of such Senior Indebtedness;

(4)shall not be entitled to the benefits of covenants or defaults materially more beneficial to the holders of such debt securities than those in effect with respect to the Notes on the Issue Date (or the Senior Indebtedness, after giving effect to such reorganization or readjustment); and

(5)to the extent that the same are to be guaranteed, shall only be guaranteed by subsidiaries of the Company that have guaranteed the Senior Indebtedness of the Company (as such Senior Indebtedness may be modified pursuant to any such reorganization or readjustment) and such guarantees shall be subordinated at least to the same extent as the Note Guarantees are subordinated to the payment of all Senior Indebtedness of the Subsidiary Guarantors.

“Permitted Liens” means, with respect to any Person:

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(i)  pledges or deposits by such Person under workmen’s compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or United States government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent, in each case Incurred in the ordinary course of business;

(ii)  Liens imposed by law, such as carriers’, warehousemen’s and mechanics’ Liens, in each case for sums not yet due or being contested in good faith by appropriate proceedings or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review;

(iii)  Liens for taxes, assessments or other governmental charges not yet due or payable or subject to penalties for nonpayment or which are being contested in good faith by appropriate proceedings;

(iv)  Liens in favor of issuers of performance and surety bonds or bid bonds or completion guarantees or with respect to other regulatory requirements or letters of credit issued pursuant to the request of and for the account of such Person in the ordinary course of its business;

(v)  minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not Incurred in connection with Indebtedness and which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person;

(vi)  Liens securing Indebtedness permitted to be incurred pursuant to Section 4.03(d);

(vii)  Liens to secure Indebtedness permitted pursuant to Section 4.03(a);

(viii)  Liens existing on the Issue Date;

(ix)  Liens on property or shares of stock of a Person at the time such Person becomes a Subsidiary; provided, however, such Liens are not created or Incurred in connection with, or in contemplation of, such other Person becoming such a Subsidiary; provided further, however, that such Liens may not extend to any other property owned by the Company or any Restricted Subsidiary;

(x)  Liens on property at the time the Company or a Restricted Subsidiary acquired the property, including any acquisition by means of a merger or consolidation with or into the Company or any Restricted Subsidiary; provided, however, that such Liens are not created or Incurred in connection with, or in contemplation of, such acquisition; provided further, however, that the Liens may not extend to any other property owned by the Company or any Restricted Subsidiary;

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(xi)  Liens securing Indebtedness or other obligations of a Restricted Subsidiary owing to the Company or another Restricted Subsidiary permitted to be incurred in accordance with Section 4.03;

(xii)  Liens securing Hedging Obligations so long as the related Indebtedness is, and is permitted to be under this Indenture secured by a Lien on the same property securing such Hedging Obligations;

(xiii)  Liens on specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances, issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;

(xiv)  leases and subleases of real property which do not materially interfere with the ordinary conduct of the business of the Company or any of its Restricted Subsidiaries;

(xv)  Liens arising from Uniform Commercial Code financing statement filings regarding operating leases entered into by the Company and its Restricted Subsidiaries in the ordinary course of business;

(xvi)  Liens in favor of the Company;

(xvii)  Liens on equipment of the Company granted in the ordinary course of business to the Company’s client at which such equipment is located;

(xviii)  Liens encumbering deposits made in the ordinary course of business to secure obligations arising from statutory, regulatory, contractual or warranty requirements, including rights of offset and set-off;

(xix)  Liens on the Equity Interests of Unrestricted Subsidiaries securing obligations of Unrestricted Subsidiaries not otherwise prohibited by this Indenture;

(xx)  Liens to secure Indebtedness permitted by Section 4.03(l); and

(xxi)  Liens to secure any refinancing, refunding, extension, renewal or replacement (or successive refinancings, refundings, extensions, renewals or replacements) as a whole, or in part, of any Indebtedness secured by any Lien referred to in the foregoing clauses (vi), (vii), (viii), (ix), (x), (xi), (xii) and (xx); provided, however, that (y) such new Lien shall be limited to all or part of the same property that secured the original Lien (plus improvements on such property) and (z) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (A) the outstanding principal amount or, if greater, committed amount of the Indebtedness specified under clauses (vi), (vii), (viii), (ix), (x), (xi), (xii) or (xx) at the time the original Lien became a Permitted Lien under this Indenture and (B) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension, renewal or replacement.

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“Person” means any individual, corporation, partnership, business trust, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

“Preferred Stock” means any Equity Interest with preferential right of payment of dividends or upon liquidation, dissolution, or winding up.

“Redemption Date” when used with respect to any Note to be redeemed or purchased means the date fixed for such redemption or purchase by or pursuant to this Indenture and the Notes.

“Representative” means the trustee, agent or representative (if any) for an issue of Senior Indebtedness.

“Restricted Investment” means an Investment other than a Permitted Investment.

“Restricted Subsidiary” means any Subsidiary of the Company other than an Unrestricted Subsidiary.

“Sale/Leaseback Transaction” means an arrangement relating to property now owned or hereafter acquired by the Company or a Restricted Subsidiary whereby the Company or a Restricted Subsidiary transfers such property to a Person and the Company or such Restricted Subsidiary leases it from such Person, other than leases between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries.

“S&P” means Standard and Poor’s Ratings Group.

“SEC” means the Securities and Exchange Commission.

“Seaport Capital” means Seaport Capital Partners II, L.P. and its affiliates.

“Secured Indebtedness” means any Indebtedness of the Company or any Subsidiary secured by a Lien.

“Securities Offering” means any public or private sale of IDSs or common stock or Preferred Stock of the Company (other than Disqualified Stock), other than public offerings with respect to IDSs or the Company’s Common Stock registered on Form S-8.

“Senior Credit Documents” means the collective reference to the Credit Agreement, the notes issued pursuant thereto and the guarantees thereof, and the collateral documents relating thereto.

“Senior Indebtedness” with respect to the Company or any Guarantor means the Senior Lender Indebtedness and all other Indebtedness of the Company or such Guarantor, including principal and interest thereon (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company or any Subsidiary of the Company at a rate specified in the applicable Senior Indebtedness, whether or not a claim for post-filing interest is allowed in such proceeding) and other amounts (including make-whole payments,

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fees, expenses, reimbursement obligations under letters of credit and indemnities) owing in respect thereof, whether outstanding on the Issue Date or thereafter Incurred, unless in the instrument creating or evidencing the same or pursuant to which the same is outstanding it is provided that such obligations are not superior, or are subordinated, in right of payment to the Notes or such Guarantor’s Guarantee, as applicable; provided, however, that Senior Indebtedness shall not include, as applicable:

(i) any obligation of the Company to any Subsidiary of the Company or of such Guarantor to the Company or any other Subsidiary of the Company;

(ii) any liability for federal, state, local or other taxes owed or owing by the Company or such Guarantor;

(iii) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities);

(iv) any Indebtedness or obligation of the Company or such Guarantor which is Pari Passu Indebtedness;

(v) any obligations with respect to any Capital Stock; and

(vi) any Indebtedness Incurred in violation of this Indenture, provided that as to any such Indebtedness, no such violation shall be deemed to exist for purposes of this clause if the holder(s) of such Indebtedness or their representative shall have received an Officers’ Certificate (or representation and warranty) from the Company to the effect that the incurrence of such Indebtedness does not (or in the case of revolving credit Indebtedness, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate this Indenture.

“Senior Lender Indebtedness” means any and all amounts payable under or in respect of the Credit Agreement, the other Senior Credit Documents and any Refinancing Indebtedness with respect thereto, as amended from time to time, including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company or any Guarantor, as applicable, whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof.

“Significant Subsidiary” means any Restricted Subsidiary that would be a “Significant Subsidiary” of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC.

“Similar Business” means a business, the majority of whose revenues are derived from

(i) transmitting, or providing services relating to the transmission of, voice, video or data through owned or leased wireline, wireless, digital subscriber line or cable television facilities,

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(ii) the sale or provision of phone cards, ‘‘800’’ services, voice mail, switching, enhanced communications services, telephone directory or telephone number information services or communications network intelligence, or

(iii) any business ancillary or directly related to the businesses referred to in clause (i) or (ii);

provided that the determination of what constitutes a Similar Business shall be made in good faith by the Board of Directors.

“Stated Maturity” means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred).

“Subordinated Indebtedness” means, any Indebtedness of the Company or any Guarantor, the instrument under which such Indebtedness is incurred expressly provides that it is subordinated in right of payment to the Notes or any Guarantee.

“Subsidiary” means, with respect to any Person:

(i)  any corporation, association or other business entity (other than a partnership, joint venture or limited liability company) of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time of determination owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof; and

(ii)  any partnership, joint venture or limited liability company of which (x) more than 50% of the capital accounts, distribution rights, total equity and voting interests or general and limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof, whether in the form of membership, general, special or limited partnership interests or otherwise and (y) such Person or any Wholly Owned Restricted Subsidiary of such Person is a controlling general partner or otherwise controls such entity.

“TIA” and “Trust Indenture Act” means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the Issue Date, except as provided in Section 9.04.

“Tangible Assets” means the total consolidated assets of the Company and its Restricted Subsidiaries (less applicable reserves and other properly deductible items) after deducting therefrom all goodwill, trade names, trademarks, patents, purchased technology, unamortized debt discount and other like intangible assets, as shown on the most recent balance sheet of the Company.

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“Tax event” means the receipt by the Company of an opinion of counsel, rendered by a nationally recognized law firm experienced in such matters, to the effect that, within 90 days of receipt of the opinion, the Company is not or would not be, permitted to deduct all or a substantial portion of the interest payable on the Notes for U.S. federal income tax purposes as a result of

(i) any amendment to, change in or announced proposed change in the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or

(ii) any official administrative pronouncement (including, without limitation, Notice, Announcement or Revenue Ruling) or judicial decision interpreting or applying such laws or regulations,

in each case, which is announced on or after the date on which the IDSs were initially issued and sold.

“Transactions “ means the transactions occurring in connection with the consummation of  the sale of IDSs pursuant to the Underwriting Agreement (the “Offering”), including without limitation repayment of existing indebtedness, the incurrence of Indebtedness under the Notes, the Credit Agreement, distribution of proceeds and the Company’s concurrent acquisition of Mid-Missouri Holding Corp.

“Trustee” means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor and if at any time there is more than one such party, “Trustee” as used with respect to the securities of any series shall mean the trustee with respect to securities of that series.

“Trust Officer” means

(i) any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person’s knowledge of and familiarity with the particular subject, and

(ii) who shall have direct responsibility for the administration of this Indenture.

“Unrestricted Subsidiary” means:

(i)  any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below; and

(ii)  any Subsidiary of an Unrestricted Subsidiary.

The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary

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unless such Subsidiary or any of its Subsidiaries owns any Equity Interests or Indebtedness of, or owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that the Subsidiary to be so designated and its Subsidiaries do not at the time of designation have and do not thereafter Incur any Indebtedness pursuant to which the lender has recourse to any of the assets of the Company or any of its Restricted Subsidiaries; provided further, however, that either (a) the Subsidiary to be so designated has total consolidated assets of $1,000 or less or (b) if such Subsidiary has consolidated assets greater than $1,000, then such designation would be permitted under Section 4.04.

The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation (x)(1) the Company could Incur $1.00 of additional Indebtedness pursuant to the Leverage Ratio test set forth in Section 4.03 or (2) the Leverage Ratio for the Company and its Restricted Subsidiaries would be less than such ratio for the Company and its Restricted Subsidiaries immediately prior to such designation, in each case on a pro forma basis taking into account such designation, and (y) no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the foregoing provisions.

“U.S. Government Obligations” means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the Company’s option.

“Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness or Disqualified Stock, as the case may be, at any date, the quotient obtained by dividing (i) the sum of the products of the number of years from the date of determination to the date of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Disqualified Stock multiplied by the amount of such payment, by (ii) the sum of all such payments.

“Wholly Owned Restricted Subsidiary” is any Wholly Owned Subsidiary that is a Restricted Subsidiary.

“Wholly Owned Subsidiary” of any Person means a Subsidiary of such Person 100% of the outstanding Capital Stock or other ownership interests of which (other than directors’ qualifying shares) shall at the time be owned by such Person and/or by one or more Wholly Owned Subsidiaries of such Person.

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SECTION 1.02.      Other Definitions.

Term	Defined in Section
“Additional Notes”	2.01
“Affiliate Transaction”	4.07
“Agent Members”	2.02
“Asset Sale Offer”	4.06
“Automatic Exchange”	4.14
“Bankruptcy Law”	6.01
“Blockage Notice”	10.03
“Calculation Date”	1.01 in “Leverage Coverage Ratio”
“Change of Control Offer”	4.09
“covenant defeasance option”	8.02
“Custodian”	6.01
“Deferred Interest”	4.01
“Event of Default”	6.01
“Excess Proceeds”	4.06
“Global Note”	2.02(a)
“Global Note Custodian”	2.02(b)
“Guarantee Blockage Notice”	12.03
“Guarantee Payment Blockage Period”	12.03
“Guaranteed Obligations”	11.01
“Initial Lien”	4.08
“judgment default provision”	6.01
“legal defeasance option”	8.02
“Legal Holiday”	13.08
“Notice of Default”	6.01
“Offer Period”	4.06
“Offering “	1.01 in “Transactions”
“Original Notes”	Preamble
“pay its Guarantee”	12.03
“pay the Notes”	10.03
“Paying Agent”	2.04
“Payment Blockage Period”	10.03
“Physical Notes”	2.02
“Redemption Date”	3.07
“Refinancing Indebtedness”	4.03
“Refunding Capital Stock”	4.04
“Registrar”	2.04
“Restricted Payments”	4.04
“Retired Capital Stock”	4.04
“SEC Reports”	4.02
“Successor Guarantor”	5.01
“Successor Company”	5.01
“Trustee Reports”	4.02

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SECTION 1.03.      Incorporation by Reference of Trust Indenture Act.  This Indenture is subject to the mandatory provisions of the TIA, which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings:

“Commission” means the SEC.

“indenture securities” means the Notes and the Guarantees.

“indenture security holder” means a Holder.

“indenture to be qualified” means this Indenture.

“indenture trustee” or “institutional trustee” means the Trustee.

“obligor” on the indenture securities means the Company, the Guarantors and any other obligor on the indenture securities.

All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions.

If any provision hereof limits, qualifies or conflicts with a provision of the TIA that is required under the TIA to be a part of and govern this Indenture, the latter provision shall control.  If any provision of this Indenture modifies or excludes any provision of the TIA that may be so modified or excluded, the latter provision shall be deemed (i) to apply to this Indenture as so modified or (ii) to be excluded, as the case may be.

SECTION 1.04.      Rules of Construction.  Unless the context otherwise requires:

(1)           all “dollars” are in U.S. dollars, unless otherwise stated;

(2)           a term defined in this Indenture has the meaning assigned to it in this Indenture;

(3)           an accounting term not otherwise defined herein has the meaning assigned to it in accordance with GAAP;

(4)           “or” is not exclusive;

(5)           “including” means including without limitation;

(6)           words in the singular include the plural and words in the plural include the singular;

(7)           the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision;

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(8)           any reference to a Section or Article refers to such Section or Article of this Indenture.

(9)           unsecured Indebtedness shall not be deemed to be subordinate or junior to secured Indebtedness merely by virtue of its nature as unsecured Indebtedness;

(10)         the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the Company thereof dated such date prepared in accordance with GAAP;

(11)         the principal amount of any Preferred Stock shall be (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock, whichever is greater.

ARTICLE 2

THE NOTES

SECTION 2.01.      The Notes; Amount Unlimited.  There is hereby established a series of Notes to be issued under this Indenture, which are designated as the Company’s “13% Senior Surbordinated Note due 2019.”

The aggregate principal amount of Notes which may be authenticated and delivered under this Indenture is unlimited.  The Original Notes shall be issued in an aggregate principal amount of $81,075,497.50.  Any additional 13% senior subordinated notes of the Company issued after the date of this Indenture (“Additional Notes”) shall be part of the same series as the Original Notes, and shall have substantially identical terms and conditions as the Original Notes and will be guaranteed by the Guarantors on the same basis as the Original Notes.

With respect to any Additional Notes issued after the Issue Date, they shall be (i) established in or pursuant to a resolution of the Board of Directors and (ii) (A) set forth or determined in the manner provided in an Officers’ Certificate or (B) established in one or more supplemental indentures hereto, prior to the issuance of such Additional Notes.

Additional Notes shall be issued with substantially identical terms as the Original Notes set forth in this Indenture except for any variation in issuance date and, upon the issuance of Additional Notes with original issue discount (and any issuance of Additional Notes thereafter), CUSIP number. If any of the terms of any Additional Notes are established by action taken pursuant to a resolution of the Board of Directors, a copy of an appropriate record of such action shall be certified by the Secretary or any Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers’ Certificate or the indenture supplemental hereto setting forth the terms of the Additional Notes.

The Company shall only be entitled to issue Additional Notes in compliance with Section 4.14.

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As long as any Notes are outstanding, any Holder of Notes and shares of Class A common stock may, at any time and from time to time, combine these securities to form IDSs unless the IDSs have previously been automatically separated as a result of the continuance of a payment default on the Notes for 90 days, or the redemption or maturity of any Notes.

SECTION 2.02.Form and Dating.  (a)  General.  The Notes and the Trustee’s certificate of authentication shall be substantially in the form of Exhibit A hereto, which is hereby incorporated in and expressly made a part of this Indenture; provided that any Additional Notes may have such applicable revisions to the form set forth in Exhibit A hereto as are necessary to reflect the terms of such Additional Notes established pursuant to Section 2.01.  In addition, the Notes may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company or any Guarantor is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).  Each Note shall be dated the date of its authentication.  The Notes shall be issuable only in registered form without interest coupons.

The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby.  However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling.

(b)  Global Notes.  Notes offered and sold pursuant to this Indenture shall, unless the Company otherwise notifies the Trustee in writing, be issued in the form of one or more permanentglobal Notes in definitive, fully registered form in substantially the form set forth in Exhibit A (each, a “Global Note”).  The aggregate principal amount of a Global Note may from time to time be increased or decreased by adjustments made on the records of the Registrar or the Depository or Wells Fargo Bank, National Association, as Global Note custodian (the “Global Note Custodian”), as applicable, as hereinafter provided.

(c)  Book-Entry Provisions.  This Section 2.02(c) shall apply only to a Global Note deposited with or on behalf of the Depository or the Global Note Custodian, as applicable.

The Company shall execute and the Trustee shall, in accordance with this Section 2.02(c) and pursuant to a written order of the Company signed by one or more Officers, authenticate and deliver initially one or more Global Notes that (a) shall be registered in the name of the Depository or Global Note Custodian, as applicable for such Global Note or Global Notes or the nominee of such Depository or Global Note Custodian and (b) shall be delivered by the Trustee to such Depository or Global Note Custodian or pursuant to such Depository’s or Global Note Custodian’s instructions or held by the Trustee as Notes Custodian.

Members of, or participants in, the Depository or the Global Note Custodian, as applicable (“Agent Members”), shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depository or the Global Note Custodian, as applicable, or by the Trustee as Notes Custodian or under such Global Note, and the Depository or the Global Note Custodian, as applicable, may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Note for all purposes

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whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or the Global Note Custodian, as applicable, or impair, as between the Depository or the Global Note Custodian, as applicable, and its Agent Members, the operation of customary practices of such Depository or Global Note Custodian governing the exercise of the rights of a holder of a beneficial interest in any Global Note.

(d)  Global Note Legends.  Each Global Note shall bear one of the following legends or such other legends as may be required by the Depository or the Global Note Custodian, as applicable, from time to time:

Depository Legend

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

THE COMPANY MAY SUBSEQUENTLY ISSUE NOTES THAT ARE IDENTICAL IN ALL MATERIAL RESPECTS TO THIS NOTE BUT HAVE ORIGINAL ISSUE DISCOUNT.  IN SUCH CASE, THE HOLDER OF THIS NOTE WILL EXCHANGE A PORTION OF HIS NOTES FOR SUCH NEWLY ISSUED NOTES WITH ORIGINAL ISSUE DISCOUNT.  THE AGGREGATE PRINCIPAL AMOUNT OF NOTES OWNED BY SUCH HOLDER, HOWEVER, WILL NOT CHANGE AS A RESULT OF SUCH EXCHANGE.  AFTER ISSUANCE OF ANY SUCH NOTES WITH ORIGINAL DISCOUNT, A HOLDER MAY OBTAIN THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE ISSUE DATE, THE ISSUE PRICE AND THE YIELD TO MATURITY BY SUBMITTING A WRITTEN REQUEST TO THE COMPANY AT 505 THIRD AVENUE EAST, ONEONTA, ALABAMA 35121, ATTN:  CHIEF FINANCIAL OFFICER.

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Global Note Custodian Legend

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF WELLS FARGO BANK, NATIONAL ASSOCIATION (“WELLS FARGO”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF WELLS FARGO OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF WELLS FARGO (AND ANY PAYMENT IS MADE TO WELLS FARGO OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF WELLS FARGO), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, WELLS FARGO, HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF WELLS FARGO OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

THE COMPANY MAY SUBSEQUENTLY ISSUE NOTES THAT ARE IDENTICAL IN ALL MATERIAL RESPECTS TO THIS NOTE BUT HAVE ORIGINAL ISSUE DISCOUNT.  IN SUCH CASE, THE HOLDER OF THIS NOTE WILL EXCHANGE A PORTION OF HIS NOTES FOR SUCH NEWLY ISSUED NOTES WITH ORIGINAL ISSUE DISCOUNT.  THE AGGREGATE PRINCIPAL AMOUNT OF NOTES OWNED BY SUCH HOLDER, HOWEVER, WILL NOT CHANGE AS A RESULT OF SUCH EXCHANGE.  AFTER ISSUANCE OF ANY SUCH NOTES WITH ORIGINAL DISCOUNT, A HOLDER MAY OBTAIN THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE ISSUE DATE, THE ISSUE PRICE AND THE YIELD TO MATURITY BY SUBMITTING A WRITTEN REQUEST TO THE COMPANY AT 505 THIRD AVENUE EAST, ONEONTA, ALABAMA 35121, ATTN:  CHIEF FINANCIAL OFFICER.

In addition, the Notes may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company or any Guarantor is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).

(e)  Physical Notes; Legend.  Notes offered and sold pursuant to this Indenture shall be in the form of physical certificated Notes in definitive, fully registered form  (“Physical Notes”) in substantially the form set forth in Exhibit B if the Company so instructs the Trustee in writing. Notwithstanding the foregoing, however, except as provided in Section 2.07 or 2.08, owners of beneficial interests in Global Notes will not be entitled to receive Physical Notes. Each Physical Note shall bear the following legend:

THE COMPANY MAY SUBSEQUENTLY ISSUE NOTES THAT ARE IDENTICAL IN ALL MATERIAL RESPECTS TO THIS NOTE BUT HAVE ORIGINAL ISSUE DISCOUNT.  IN SUCH CASE, THE HOLDER OF THIS NOTE WILL EXCHANGE A PORTION OF HIS NOTES FOR SUCH NEWLY ISSUED NOTES WITH ORIGINAL ISSUE

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DISCOUNT.  THE AGGREGATE PRINCIPAL AMOUNT OF NOTES OWNED BY SUCH HOLDER, HOWEVER, WILL NOT CHANGE AS A RESULT OF SUCH EXCHANGE AND THE RESTRICTIONS ON TRANSFER SET FORTH IN THE IMMEDIATELY PRECEDING PARAGRAPH WILL CONTINUE TO APPLY TO SUCH HOLDER FOLLOWING SUCH EXCHANGE.  AFTER ISSUANCE OF ANY SUCH NOTES WITH ORIGINAL DISCOUNT, A HOLDER MAY OBTAIN THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE ISSUE DATE, THE ISSUE PRICE AND THE YIELD TO MATURITY BY SUBMITTING A WRITTEN REQUEST TO THE COMPANY AT 505 THIRD AVENUE EAST, ONEONTA, ALABAMA 35121, ATTN:  CHIEF FINANCIAL OFFICER.

In addition, the Notes may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company or any Guarantor is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).

SECTION 2.03.Execution and Authentication.  One or more Officers shall sign the Notes for the Company by manual or facsimile signature.  If an Officer whose signature is on a Note no longer holds that office at the time the Trustee authenticates the Note, the Note shall be valid nevertheless.

A Note shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Note.  The signature shall be conclusive evidence that the Note has been authenticated under this Indenture.  All Notes shall be dated the date of their authentication.

The Trustee shall authenticate and make available for delivery upon a written order of the Company signed by one Officer, (1) Original Notes for original issue on the date hereof in an aggregate principal amount of up to $81,075,497.50, and (2) subject to the terms of this Indenture, Additional Notes in an unlimited aggregate principal amount.  Such order shall specify the amount of Notes to be authenticated, the date on which the original issue of Notes is to be authenticated and whether the Notes are to be Original Notes or Additional Notes.

The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Notes.  Any such appointment shall be evidenced by an instrument signed by a Trust Officer, a copy of which shall be furnished to the Company.  Unless limited by the terms of such appointment, an authenticating agent may authenticate Notes whenever the Trustee may do so.  Each reference in this Indenture to authentication by the Trustee includes authentication by such agent.  An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands.

SECTION 2.04.Registrar and Paying Agent.  The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange (the “Registrar”) and an office or agency where Notes may be presented for payment (the “Paying Agent”).  The Registrar shall keep a register of the Notes and of their transfer and exchange.  The Company may appoint one or more co-registrars and one or more additional paying agents.  The term “Paying Agent” includes any additional paying agent, and the term “Registrar” includes any

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co-registrars.  The Company initially appoints the Trustee as (i) Registrar and Paying Agent in connection with the Notes and (ii) the Notes Custodian with respect to the Global Notes.

The Company shall notify the Trustee of the name and address of any such agent.  If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07.  The Company or any of its Subsidiaries may act as Paying Agent or Registrar.

The Company may remove any Registrar or Paying Agent upon written notice to such Registrar or Paying Agent and to the Trustee; provided, however, that no such removal shall become effective until (1) acceptance of an appointment by a successor agent as evidenced by an appropriate agreement entered into by the Company and such successor Registrar or Paying Agent, as the case may be, and delivered to the Trustee or (2) notification to the Trustee that the Trustee shall serve as Registrar or Paying Agent until the appointment of a successor in accordance with clause (1) above.  The Registrar or Paying Agent may resign at any time upon written notice; provided, however, that the Trustee may resign as Paying Agent or Registrar only if the Trustee also resigns as Trustee in accordance with Section 7.08.

SECTION 2.05.Paying Agent To Hold Money in Trust.  On or prior to each due date of the principal and interest on any Note, the Company shall deposit with the Paying Agent (or if the Company or a Subsidiary is acting as Paying Agent, segregate and hold in trust for the benefit of the Persons entitled thereto) a sum (in U.S. dollars only) sufficient to pay such principal and interest when due.  The Company shall require each Paying Agent (other than the Trustee and except as set forth in the next sentence) to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Notes and shall notify the Trustee of any default by the Company in making any such payment.  If the Company or a Subsidiary of the Company acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund.  The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent.  Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee.  Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes.

SECTION 2.06.Holders Lists.  The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders.  If the Trustee is not the Registrar, the Company shall furnish, or cause the Registrar to furnish, to the Trustee, in writing at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders.

SECTION 2.07.Transfer and Exchange.  The Notes shall be issued in registered form and shall be transferable only upon the surrender of a Note for registration of transfer and in compliance with this Section 2.07.  When a Note is presented to the Registrar with a request to register a transfer, the Registrar shall register the transfer as requested if the requirements of Section 8-401(a)(1) of the Uniform Commercial Code are met.  When Notes are presented to the Registrar with a request to exchange them for an equal principal amount of Notes of other

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denominations, the Registrar shall make the exchange as requested if the same requirements are met.  To permit registration of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Notes upon the Company’s order or at the Registrar’s request.  The Company shall not be required to make and the Registrar need not register transfers or exchanges of Notes (i) selected for redemption (except, in the case of a Note to be redeemed in part, the portion of the Note not to be redeemed), (ii) during a period beginning at the opening of business 15 days prior to a selection of Notes to be redeemed and ending on the relevant Redemption Date,  (iii) tendered in a Change of Control Offer or Asset Sale Offer or (iv) during a period beginning on the opening of business 15 days before a record date for the payment of interest and ending on the applicable succeeding interest payment date.

(a)  Transfer and Exchange of Physical Notes.  When Physical Notes are presented to the Registrar with a request to register the transfer of such Physical Notes or to exchange such Physical Notes for an equal principal amount of Physical Notes of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Physical Notes surrendered for transfer or exchange:

(i)            shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Registrar, duly executed by the Holder thereof or such Holder’s attorney duly authorized in writing; and

(ii)           are accompanied by the following additional information and documents, as applicable:

(A)  if such Physical Notes are being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect (in the form set forth on the reverse side of the Note); or

(B)  if such Physical Notes are being transferred to the Company, a certification to that effect (in the form set forth on the reverse side of the Note).

(b)  Restrictions on Transfer of a Physical Note for a Beneficial Interest in a Global Note. Other than pursuant to an Automatic Exchange in compliance with Section 4.14, a Physical Note may not be exchanged for a beneficial interest in a Global Note except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a Physical Note, duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Registrar, together with written instructions directing the Trustee to make, or to direct the Notes Custodian to make, an adjustment on its books and records with respect to such Global Note to reflect an increase in the aggregate principal amount of the Notes represented by the Global Note, such instructions to contain information regarding the Depository account or Global Note Custodian account, as applicable, to be credited with such increase, then the Trustee shall cancel such Physical Note and cause, or direct the Notes Custodian to cause, in accordance with the standing instructions and procedures existing between the Depository or Global Note Custodian, as applicable, and the Notes Custodian, the aggregate principal amount of Notes represented by the Global Note to be increased by the aggregate principal amount of the Physical Note to be exchanged and shall credit or cause to be credited to

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the account of the Person specified in such instructions a beneficial interest in the Global Note equal to the principal amount of the Physical Note so canceled.  If no Global Notes are then outstanding and the Global Note has not been previously exchanged for Physical Notes pursuant to Section 2.08, the Company shall issue and the Trustee shall authenticate, upon written order of one or more officers of the Company, a new Global Note in the appropriate principal amount.

(c)  Transfer and Exchange of Global Notes.

(i)  Any Holder of a Global Note shall, by acceptance of such Global Note, agree that transfers of beneficial interest in such Global Note may be effected only through a book-entry system maintained by (i) the Holder of such Global Note (or its agent) or (ii) any Holder of a beneficial interest in such Global Note, and that ownership of a beneficial interest in such Global Note shall be required to be reflected in a book entry.

(ii)  The transfer and exchange of Global Notes or beneficial interests therein shall be effected through the Depository or Global Note Custodian, as applicable, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depository or Global Note Custodian, as applicable, therefor. A transferor of a beneficial interest in a Global Note shall deliver a written order given in accordance with the Depository’s procedures or Global Note Custodian’s procedures, as applicable, containing information regarding the participant account of the Depository or Global Note Custodian, as applicable, to be credited with a beneficial interest in such Global Note or another Global Note and such account shall be credited in accordance with such order with a beneficial interest in the applicable Global Note and the account of the Person making the transfer shall be debited by an amount equal to the beneficial interest in the Global Note being transferred.

(iii)          Notwithstanding any other provisions of this Article 2 (other than the provisions set forth in Section 2.08), a Global Note may not be transferred as a whole except by the Depository (or Global Note Custodian, as applicable) to a nominee of the Depository (or Global Note Custodian, as applicable) or by a nominee of the Depository (or Global Note Custodian, as applicable) to the Depository (or Global Note Custodian, as applicable) or another nominee of the Depository (or Global Note Custodian, as applicable) or by the Depository (or Global Note Custodian, as applicable) or any such nominee to a successor Depository (or Global Note Custodian, as applicable) or a nominee of such successor Depository (or Global Note Custodian, as applicable).

(d)  Cancellation or Adjustment of Global Notes.  At such time as all beneficial interests in a Global Note have either been exchanged for Physical Notes (other than pursuant to an Automatic Exchange in compliance with Section 4.14), transferred, redeemed, repurchased or canceled, such Global Note shall be returned by the Depository (or Global Note Custodian, as applicable) to the Trustee for cancellation or retained and canceled by the Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for Physical Notes (other than pursuant to an Automatic Exchange in compliance with Section 4.14), transferred in exchange for an interest in another Global Note, redeemed, repurchased or canceled, the principal amount of Notes represented by such Global Note shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Notes

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Custodian for such Global Note) with respect to such Global Note, by the Trustee or the Notes Custodian, to reflect such reduction.

(e)  Obligations with Respect to Transfers and Exchanges of Notes.  (i)  To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate, Physical Notes and Global Notes at the Registrar’s request.

(ii)           No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charge payable upon exchange or transfer pursuant to Sections 3.06, 4.06, 4.08 and 9.05 of this Indenture).

(iii)          The Company, the Trustee, the Paying Agent or the Registrar may deem and treat the person in whose name a Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest, if any, on such Note and for all other purposes whatsoever, whether or not such Note is overdue, and none of the Company, the Trustee, the Paying Agent or the Registrar shall be affected by notice to the contrary. All such payments so made to any such Person, or upon such Person’s order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any Note.

(iv)          All Notes issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Notes surrendered upon such transfer or exchange.

SECTION 2.08.      Physical Notes.

(a)           A Global Note deposited with the Depository (or Global Note Custodian, as applicable) or with the Trustee as Notes Custodian pursuant to Section 2.02 shall be transferred to the beneficial owners thereof in the form of Physical Notes in an aggregate principal amount equal to the principal amount of such Global Note, in exchange for such Global Note, only if such transfer complies with Section 2.07 and (i) the Depository (or Global Note Custodian, as applicable) notifies the Company that it is unwilling or unable to continue as a Depository (or Global Note Custodian, as applicable) for such Global Note or if at any time the Depository (or Global Note Custodian, as applicable) ceases to be a “clearing agency” registered under the Exchange Act, and the Company is unable to find a successor depositary or (ii) the Company, in its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of Physical Notes under this Indenture.

(b)           Any Global Note that is transferable to the beneficial owners thereof pursuant to this Section 2.08 shall be surrendered by the Depository (or Global Note Custodian, as applicable) to the Trustee, to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Note, an equal aggregate principal amount of Physical Notes of authorized denominations. Any portion of a Global Note transferred pursuant to this Section shall be registered in such names as the Depository (or Global Note Custodian, as applicable) shall direct.

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(c)           Subject to the provisions of Section 2.08(b), the registered Holder of a Global Note may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes.

(d)           In the event of the occurrence of any of the events specified in Section 2.08(a)(i), (ii) or (iii), the Company will promptly make available to the Trustee a reasonable supply of Physical Notes in fully registered form without interest coupons.

SECTION 2.09.Replacement Notes.  If a mutilated Note is surrendered to the Registrar or if the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Note if the requirements of Section 8-405 of the Uniform Commercial Code are met, including that the Holder (i) satisfies the Company or the Trustee within a reasonable time after such Holder has notice of such loss, destruction or wrongful taking and the Registrar does not register a transfer prior to receiving such notification, (ii) makes such request to the Company or the Trustee prior to the Note being acquired by a protected purchaser as defined in Section 8-303 of the Uniform Commercial Code, (iii) if required by the Trustee or the Company, furnish an indemnity bond sufficient in the judgment of the Trustee to protect the Company, the Trustee, the Paying Agent and the Registrar from any loss that any of them may suffer if a Note is replaced and (iv) satisfies any other reasonable requirements of the Trustee.  In the event any such mutilated, lost, destroyed or wrongfully taken Note has become or is about to become due and payable, the Company in its discretion may pay such Note instead of issuing a new Note in replacement thereof.

Upon the issuance of any new Note under this Section 2.09, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.

Every replacement Note is an additional obligation of the Company.

The provisions of this Section 2.09 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, lost, destroyed or wrongfully taken Notes.

SECTION 2.10.Outstanding Notes.  Notes outstanding at any time are all Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those specified in this Section as not outstanding.  Subject to Section 13.06, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note.

If a Note is replaced pursuant to Section 2.09, it ceases to be outstanding.

If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a Redemption Date or maturity date, money sufficient to pay all principal and interest payable on that date with respect to the Notes (or portions thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is not prohibited from paying such money to the Holders on that

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date pursuant to the terms of this Indenture, then on and after that date such Notes (or portions thereof) cease to be outstanding and interest on them ceases to accrue.

SECTION 2.11.Temporary Notes.  In the event that Physical Notes are to be issued under the terms of this Indenture, until such Physical Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes.  Temporary Notes shall be substantially in the form of Physical Notes but may have variations that the Company considers appropriate for temporary Notes.  Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Physical Notes and deliver them in exchange for temporary Notes upon surrender of such temporary Notes at the office or agency of the Company, without charge to the Holder.

SECTION 2.12.Cancellation.  The Company at any time may deliver Notes to the Trustee for cancellation.  The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment.  The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment or cancellation and deliver proof of canceled Notes to the Company pursuant to written direction by an Officer.  The Company may not issue new Notes to replace Notes it has redeemed or paid.  The Trustee shall not authenticate Notes in place of cancelled Notes other than pursuant to the terms of this Indenture.

SECTION 2.13.CUSIP Numbers.  The Company in issuing the Notes may use “CUSIP” numbers (if then generally in use) and, if so, the Trustee shall use “CUSIP” numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers.  Additional Notes may have a different CUSIP number than the Original Notes (which will occur in connection with an issuance of Additional Notes with original issue discount and any issuance of Additional Notes thereafter) and be part of the same series as the Original Notes having identical terms, conditions and entitlements.  The Company, upon becoming aware, through written notice, of any change in such “CUSIP” numbers, shall promptly notify the Trustee of such change.

SECTION 2.14.Tax Treatment.  The Company agrees, and by acceptance of beneficial ownership interest in the Notes each beneficial owner of Notes shall be deemed to have agreed, (1) to treat itself as owner of the Notes for all purposes, including the preparation and filing of any United States federal, state, local or foreign tax return, report, or other information; (2) to treat the Notes as indebtedness for all tax purposes and (3) to treat the acquisition of an IDS as the acquisition of the Notes and Class A Common Stock which are represented by the IDS and to allocate the purchase price of the IDS between the Notes and the Class A Common Stock in the proportions set forth in paragraph 23 of the Notes.

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SECTION 2.15.Maturity.  The Notes shall mature on December 30, 2019 unless redeemed earlier pursuant to Article 3 of this Indenture.

ARTICLE 3

REDEMPTION

SECTION 3.01.Notices to Trustee.  If the Company elects to redeem Notes pursuant to Section 3.07, it shall notify the Trustee in writing of the Redemption Date and the principal amount of Notes to be redeemed.

The Company shall give each notice to the Trustee provided for in this Section at least 30 days before the Redemption Date unless the Trustee consents to a shorter period.  Such notice shall be accompanied by an Officers’ Certificate from the Company to the effect that such redemption shall comply with the conditions herein.  Any such notice may be canceled at any time prior to notice of such redemption being mailed to any Holder and shall thereby be void and of no effect.

SECTION 3.02.Selection of Notes to be Redeemed.  In the case of any partial redemption, selection of Notes for redemption shall be made by the Trustee not more than 60 days prior to the Redemption Date in compliance with the requirements of the principal national securities exchange, if any, on which such Notes of any series are listed, or if such Notes of such series are not so listed, on a pro rata basis, by lot or by such other method as the Trustee shall deem fair and appropriate (and in such manner as complies with applicable legal requirements).  If any Note is to be redeemed in part only, the notice of redemption relating to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof shall be issued in the name of the Holder thereof upon cancellation of the original Note.

SECTION 3.03.Notice of Redemption.  At least 30 days but not more than 60 days before the Redemption Date, the Company, or the Trustee at the Company’s direction, shall mail a notice of redemption by first-class mail to each Holder of Notes to be redeemed at such Holder’s registered address; provided that in the event the Trustee is to mail such notice, the Company shall deliver to the Trustee, at least 30 days prior to the Redemption Date  (unless the Trustee consents to a shorter period), an Officer’s Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided below.

The notice shall identify the Notes to be redeemed and shall state:

(1)  the Redemption Date;

(2)  the redemption price and the amount of accrued and unpaid interest to the Redemption Date

(3)  the name and address of the Paying Agent;

(4)  that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price;

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(5)  that on the Redemption Date, the redemption price will become due and payable upon each such Note, and, unless the Company defaults in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, interest on Notes (or portion thereof) called for redemption ceases to accrue on and after the Redemption Date;

(6)  the CUSIP number, if any, printed on the Notes being redeemed; and

(7)  that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes.

The Company may provide in such notice that payment of the redemption price and the performance of the Company’s obligations with respect to such redemption may be performed by another Person.

The notice if mailed in the manner herein provided shall be conclusively presumed to have been given, whether or not the Holder receives such notice.  In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Note designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Note.

At the Company’s request, the Trustee shall give the notice of redemption in the Company’s name and at the Company’s expense.  In such event, the Company shall provide the Trustee with the information, along with a form of the notice, required by this Section.

SECTION 3.04.Effect of Notice of Redemption.  Once notice of redemption is mailed, Notes called for redemption become due and payable on the Redemption Date and at the redemption price stated in the notice.  Upon surrender to the Paying Agent, such Notes shall be paid at the redemption price stated in the notice, plus accrued and unpaid interest, if any, to the Redemption Date; provided, however, that if the Redemption Date is after a regular record date and on or prior to the interest payment date, the accrued interest shall be payable to the Holder of the redeemed Notes registered on the relevant record date.

SECTION 3.05.Deposit of Redemption Price.  Prior to 10:00 a.m., New York City time, on the Redemption Date, the Company shall deposit with the Paying Agent (or, if the Company or a Subsidiary is acting as the Paying Agent, the Company or such Subsidiary shall segregate and hold in trust) money (in U.S. dollars) sufficient to pay the redemption price of and accrued and unpaid interest, if any, on all Notes to be redeemed on that date other than Notes or portions of Notes called for redemption that have been delivered by the Company to the Trustee for cancellation.

On and after the Redemption Date, unless the Company defaults in payment of the redemption price, interest shall cease to accrue on Notes or portions thereof called for redemption so long as the Company has deposited with the Paying Agent funds (in U.S. dollars) sufficient to pay the principal of, plus accrued and unpaid interest (if any) on, the Notes to be redeemed, whether or not such Notes are presented for payment, and the only right of the Holders of such Notes (or portions thereof) will be to receive payment of the redemption price

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and subject to the next succeeding sentence, any accrued and unpaid interest on such Notes (or portions thereof) to the Redemption Date.  If any Note (or portion thereof) called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate borne by the Note (or portion thereof).

SECTION 3.06.Notes Redeemed in Part.  Upon surrender and cancellation of a Note that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder (at the Company’s expense) a new Note equal in principal amount to the unredeemed portion of the Note surrendered.

SECTION 3.07.      Redemption of Notes.  The Company may, at its option, redeem all, but not less than all, of the Notes at any time upon not less than 30 nor more than 60 days’ prior notice, at a redemption price equal to 100% of the principal amount of the Notes plus accrued and unpaid interest to the redemption date, upon the occurrence of a Tax event.

Except as set forth in the preceding paragraph, the Company may not redeem Notes at its option prior to December 30, 2011.

At any time and from time to time on or after December 30, 2011, the Notes shall be redeemable, at the Company’s option, in whole or in part for cash at the following redemption prices (expressed as a percentage of principal amount), plus accrued and unpaid interest on the Notes redeemed, to the relevant Redemption Date, if redeemed during the 12-month period commencing on December 30 of the years set forth below:

Period	Redemption Price
2011	106.500	%
2012	105.200	%
2013	103.900	%
2014	102.600	%
2015	101.300	%
2016 and thereafter	100.000	%

SECTION 3.08.Automatic Separation of IDSs.  A full or partial redemption of the Notes will result in an automatic separation of the IDSs.

ARTICLE 4

COVENANTS

SECTION 4.01.Payment of Notes; Interest Deferral.  The Company shall pay the principal of and interest on the Notes on the dates and in the manner provided in the Notes and in this Indenture.  Principal and interest shall be considered paid on the date due if on such date the

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Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Holders on that date pursuant to the terms of this Indenture.  Prior to December 30, 2009, the Company may, at its election, defer interest payments on the Notes on one or more occasions for not more than eight quarters in the aggregate (any such period, an “Initial Interest Deferral Period”); provided that (1) at the end of each occasion, the Company will be obligated to resume quarterly payments of interest on the Notes including interest on deferred interest; and (2) no later than December 30, 2009, the Company must pay in full all deferred interest, together with accrued interest thereon.

After December 30, 2009 the Company may, at its election, defer interest payments on the Notes on up to four occasions with respect to up to two quarters per occasion (each such occasion together with the Initial Interest Deferral Period, an “Interest Deferral Period”); provided that (1) the Company may not defer interest on any occasion after December 30, 2009 unless and until all interest deferred on any prior occasion, together with accrued interest thereon, has been paid in full; (2) at the end of each occasion, the Company will be obligated to resume quarterly payments of interest on the Notes including interest on deferred interest; and (3) no later than December 30, 2019, the Company must pay all deferred interest, together with accrued interest thereon.

On each occasion that the Company elects to defer interest, it will be required to deliver to the Trustee a copy of a resolution of the Company’s Board of Directors to the effect that, based upon a good-faith determination of the Company’s Board of Directors, (x) such interest deferral is reasonably necessary for bona-fide cash management purposes, whether indicated by cumulative distributable cash shortfall or otherwise, or to reduce the likelihood of or avoid a payment default under any Designated Senior Indebtedness or (y) as long as the Credit Agreement remains in effect, the Company has failed to maintain a fixed charge coverage ratio of at least 1.15:1:00 or a senior leverage ratio of not more than 3.20 to 1.00, in each case, as calculated in accordance with the provisions contained in the Credit Agreement as of the date hereof, irrespective of any subsequent changes to the Credit Agreement. However, no interest deferral may be commenced, and any on-going deferral shall cease, if (1) a default in payment of interest, principal or premium, if any, on the Notes has occurred and is continuing; or (2) another Event of Default with respect to the Notes has occurred and is continuing and the Notes have been accelerated as a result of the occurrence of such Event of Default.

Deferred interest on the Notes will bear interest at the same rate as the stated rate of interest applicable to the Notes, compounded quarterly, until paid in full.

SECTION 4.02.Reports and Other Information  The Company shall file with the Trustee, within 15 days after it files such annual and quarterly reports, information, documents and other reports with the Commission, copies of its annual report and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may by rules and regulations prescribe) which the Company is required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act (the ‘‘SEC Reports’’). If at any time the Company is not subject to Section 13 or 15(d) of the Exchange Act, the Company shall provide reports containing substantially the same information as that contained in the SEC Reports (the ‘‘Trustee Reports’’), such Trustee Reports to be provided at the same times the

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Company would have been required to provide the SEC Reports to the Trustee pursuant to the immediately preceding sentence had it then been subject to Section 13 or 15(d) of the Exchange Act, provided that the Trustee Reports need not include any certifications from officers of the Company.

SECTION 4.03.Limitations on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock.  The Company (i) shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness (including Acquired Indebtedness) or issue any shares of Disqualified Stock, and (ii) shall not permit any of its Restricted Subsidiaries to issue any shares of Preferred Stock; provided, however, that the Company and any Restricted Subsidiary may Incur Indebtedness (including Acquired Indebtedness) or issue shares of Disqualified Stock and any Restricted Subsidiary may issue shares of Preferred Stock if the Leverage Ratio of the Company for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is Incurred or such Disqualified Stock or Preferred Stock is issued would have been no greater than 6.25 to 1.00 determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been Incurred, or the Disqualified Stock or Preferred Stock had been issued, as the case may be, and the application of proceeds therefrom had occurred at the beginning of such four-quarter period.

The foregoing limitations shall not apply to:

(a)  the Incurrence by the Company or its Restricted Subsidiaries of Indebtedness under the Senior Credit Documents and any related guarantees and the issuance and creation of letters of credit and bankers’ acceptances thereunder (with letters of credit and bankers’ acceptances being deemed to have a principal amount equal to the face amount thereof) up to an aggregate principal amount of $100.0 million outstanding at any one time;

(b)  the Incurrence by the Company and the Guarantors of Indebtedness represented by the Notes (excluding Additional Notes), and the Guarantees, as applicable;

(c)  Indebtedness existing on the date of this Indenture (other than Indebtedness specified in clauses (a) and (b));

(d)  Indebtedness (including Capitalized Lease Obligations) Incurred by the Company or any of its Restricted Subsidiaries to finance the purchase, lease or improvement of property (real or personal) or equipment (whether through the direct purchase of assets or the Capital Stock of any Person owning such assets) in an aggregate principal amount which, when aggregated with the principal amount of all other Indebtedness then outstanding and Incurred pursuant to this clause (d) and all Refinancing Indebtedness (as defined below) Incurred to refund, refinance or replace any Indebtedness Incurred pursuant to this clause (d), does not exceed the greater of 15% of Tangible Assets at the time of Incurrence or $10.0 million;

(e)  Indebtedness Incurred by the Company or any of its Restricted Subsidiaries constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including without limitation letters of credit in respect of workers’

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compensation claims, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance, or with respect to agreements to provide services, or other Indebtedness with respect to reimbursement type obligations regarding workers’ compensation claims; provided, however, that upon the drawing of such letters of credit, such obligations are reimbursed within 30 days following such drawing;

(f)  Indebtedness arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case, Incurred in connection with the disposition of any business, assets or a Subsidiary of the Company in accordance with the terms of this Indenture, other than guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or Subsidiary for the purpose of financing such acquisition;

(g)  Indebtedness of the Company to a Restricted Subsidiary of the Company; provided that any such Indebtedness is subordinated in right of payment to the Notes; provided further that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary of the Company or any other subsequent transfer of any such Indebtedness (except to the Company or another Restricted Subsidiary) shall be deemed, in each case to be an Incurrence of such Indebtedness subject to the first paragraph of this Section 4.03;

(h)  shares of Preferred Stock of a Restricted Subsidiary issued to the Company or another Restricted Subsidiary of the Company; provided that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary holding such shares of Preferred Stock ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such shares of Preferred Stock (except to the Company or another Restricted Subsidiary of the Company) shall be deemed, in each case, to be an issuance of shares of Preferred Stock subject to the first paragraph of this Section 4.03;

(i)  Indebtedness of a Restricted Subsidiary to the Company or another Restricted Subsidiary of the Company; provided that if a Guarantor Incurs such Indebtedness to a Restricted Subsidiary that is not a Guarantor such Indebtedness is subordinated in right of payment to the Guarantee of such Guarantor; provided further that any subsequent issuance or transfer of any Capital Stock or any other event which results in any Restricted Subsidiary lending such Indebtedness ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such Indebtedness (except to the Company or another Restricted Subsidiary of the Company) shall be deemed, in each case, to be an Incurrence of such Indebtedness subject to the first paragraph of this Section 4.03;

(j)  Hedging Obligations that are incurred in the ordinary course of business (1) for the purpose of fixing or hedging interest rate risk with respect to any Indebtedness that is permitted by the terms of this Indenture to be outstanding, (2) for the purpose of fixing or hedging currency exchange rate risk with respect to any currency exchanges or (3) for the purpose of fixing or hedging commodity price risk with respect to any commodity purchases;

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(k)  obligations in respect of performance, bid and surety bonds and completion guarantees provided by the Company or any Restricted Subsidiary in the ordinary course of business;

(l)  Indebtedness or Disqualified Stock of the Company and any Restricted Subsidiary not otherwise permitted hereunder in an aggregate principal amount, which when aggregated with the principal amount or liquidation preference of all other Indebtedness and Disqualified Stock then outstanding and Incurred pursuant to this clause (1), does not exceed $12.5 million at any one time outstanding;

(m)  any guarantee by the Company or a Guarantor of Indebtedness or other obligations of the Company or any of its Restricted Subsidiaries so long as the Incurrence of such Indebtedness Incurred by the Company or such Restricted Subsidiary is permitted under the terms of this Indenture; provided that if such Indebtedness is by its express terms subordinated in right of payment to the Notes or the Guarantee of such Restricted Subsidiary, as applicable, any such guarantee of such Guarantor with respect to such Indebtedness shall be subordinated in right of payment to such Guarantor’s Guarantee with respect to the Notes substantially to the same extent as such Indebtedness is subordinated to the Notes or the Guarantee of such Restricted Subsidiary, as applicable;

(n)  the Incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness which serves to refund or refinance any Indebtedness Incurred as permitted under the first paragraph of this covenant and clauses (b) and (c) of this paragraph, or any Indebtedness issued to so refund or refinance such Indebtedness (subject to the following proviso, “Refinancing Indebtedness”); provided, however, that such Refinancing Indebtedness:

(i)        has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is Incurred which is not less than the remaining Weighted Average Life to Maturity of the Indebtedness being refunded or refinanced;

(ii)       has a Stated Maturity which is no earlier than the Stated Maturity of the Indebtedness being refunded or refinanced;

(iii)      to the extent such Refinancing Indebtedness refinances Indebtedness pari passu with, or subordinate to, the Notes or the Guarantees, is pari passu with, or subordinate to, the Notes or the Guarantees, as applicable;

(iv)     is Incurred in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) then outstanding of the Indebtedness being refinanced plus premium and fees Incurred in connection with such refinancing; and

(v)      shall not include (x) Indebtedness of a Restricted Subsidiary that is not a Guarantor that refinances Indebtedness of the Company or (y)

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Indebtedness of the Company or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary;

and provided further that subclauses (i) and (ii) of this clause (n) shall not apply to any refunding or refinancing of any Senior Indebtedness;

(o)  Indebtedness or Disqualified Stock of Persons that are acquired by the Company or any of its Restricted Subsidiaries or merged into a Restricted Subsidiary in accordance with the terms of this Indenture; provided, however, that such Indebtedness or Disqualified Stock is not Incurred in contemplation of such acquisition or merger or to provide all or a portion of the funds or credit support required to consummate such acquisition or merger; provided, further, however, that after giving effect to such acquisition and the Incurrence of such Indebtedness or Disqualified Stock either (i) the Company would be permitted to Incur at least $1.00 of additional Indebtedness pursuant to the Leverage Ratio test set forth in the first sentence of this covenant or (ii) the Leverage Ratio would be less than immediately prior to such acquisition;

(p)  The Incurrence by the Company or any Restricted Subsidiary of Indebtedness to finance, in whole or in part, an acquisition of a business or assets consummated within 60 days of such Incurrence; provided that after giving effect to such acquisition and the Incurrence of such Indebtedness the Leverage Ratio would be less than immediately prior to such acquisition;

(q)  Indebtedness of the Company and any Restricted Subsidiary arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds, so long as such Indebtedness is covered within five business days;

(r)  the incurrence by the Company or any Restricted Subsidiary of Indebtedness, the net proceeds of which are used to defease the Notes as provided in Article 8 of this Indenture; and

(s)  Indebtedness represented by the issuance of Additional Notes and related Guarantees in connection with the exchange of Class B common stock of the Company outstanding on the Issue Date (or Class B common stock issued or distributed in respect of, or in substitution for, Class B common stock outstanding on the Issue Date, in connection with any stock split or combination) for IDSs provided that all the Exchange Conditions are satisfied at the time of such exchange and issuance.

For purposes of determining compliance with this Section 4.03, in the event that an item of Indebtedness meets the criteria of more than one of the categories of permitted Indebtedness specified in clauses (a) through (s) above or is entitled to be Incurred pursuant to the first paragraph of this covenant, the Company may, in its sole discretion, classify or reclassify such item of Indebtedness or any portion thereof in any manner that complies with this covenant and such item or such portion of such item of Indebtedness will be treated as having been Incurred pursuant to only one of such clauses or pursuant to the first paragraph hereof; provided, however, that a change in GAAP that results in an obligation of such Person that exists at such time, and is not theretofore classified as Indebtedness, becoming Indebtedness shall not be deemed an

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Incurrence of Indebtedness. Accrual of interest, the accretion of accreted value and the payment of interest in the form of additional Indebtedness will not be deemed to be an Incurrence of Indebtedness for purposes of this covenant.

SECTION 4.04.      Limitation on Restricted Payments.  The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly:

(1)  declare or pay any dividend or make any distribution or payment on account of the Company’s or any of its Restricted Subsidiaries’ Equity Interests, including any payment made in connection with any merger or consolidation involving the Company (other than (A) dividends or distributions by the Company payable solely in Equity Interests (other than Disqualified Stock) of the Company, (B) dividends or distributions or payments by a Restricted Subsidiary that is a Wholly Owned Restricted Subsidiary or (C) dividends, distributions or payments by a Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary so long as, in the case of any dividend or distribution payable on or in respect of any class or series of securities issued by a Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary, the Company or a Restricted Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Equity Interests in such class or series of securities);

(2)  purchase or otherwise acquire or retire for value any Equity Interests of the Company or any Restricted Subsidiary;

(3)  make any principal payment on, cause a defeasance of, or purchase, repurchase, redeem or otherwise acquire or retire for value, prior to any scheduled maturity, scheduled repayment or scheduled sinking fund payment, any Subordinated Indebtedness;

(4)  make any Restricted Investment (all such payments and other actions set forth in this clause (4) and in clauses (1), (2) and (3) above being collectively referred to as “Restricted Payments”), unless, at the time of such Restricted Payment,

(a)           no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof;

(b)  (x) no Dividend Suspension Period shall have occurred and be continuing, (y) no Interest Deferral Period shall have occurred and be continuing, and (z) no interest deferred during a prior Interest Deferral Period (including interest thereon) remains unpaid; and

(c)  such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the Issue Date (including, without duplication, Restricted Payments permitted by clauses (1), (4) and (6) of the next succeeding paragraph, but excluding all other Restricted Payments permitted by the next succeeding paragraph), is less than the sum of, without duplication:

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(i)            100% of the Excess Cash of the Company for the period (taken as one accounting period) from the fiscal quarter that first begins after the Issue Date to the end of the Company’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payments, plus

(ii)           100% of the aggregate net cash proceeds or property, other than cash, but only when and to the extent that such property is converted to cash, in each case received by the Companyand its Restricted Subsidiaries since the Issue Date from the issue or sale of Equity Interests of the Company (excluding Refunding Capital Stock (as defined below), Designated Preferred Stock and Disqualified Stock), including Equity Interests issued upon conversion of Indebtedness, Disqualified Stock and Designated Preferred Stock or upon exercise of warrants or options (other than an issuance or sale to a Subsidiary of the Company or an employee stock ownership plan or trust established by the Company or any of its Subsidiaries) plus

(iii)          100% of the aggregate amount of contributions to the capital of the Company since the Issue Date received in cash or in property other than cash, but only when and to the extent that such property is converted to cash (other than Refunding Capital Stock, Designated Preferred Stock and Disqualified Stock), plus

(iv)          100% of the aggregate amount of cash or property other than cash, but only when and to the extent that such property is converted to cash, in each case received from (A) the sale or other disposition (other than to the Company or a Restricted Subsidiary) of Restricted Investments made by the Company and its Restricted Subsidiaries and from repurchases and redemptions of such Restricted Investments from the Company and its Restricted Subsidiaries by any Person (other than the Company or any of its Subsidiaries) and from repayments of loans or advances which constituted Restricted Investments, (B) the sale (other than to the Company or a Restricted Subsidiary) of the Capital Stock of an Unrestricted Subsidiary or (C) a distribution or dividend from an Unrestricted Subsidiary, plus

(v)           in the event any Unrestricted Subsidiary has been redesignated as a Restricted Subsidiary or has been merged, consolidated or amalgamated with or into, or transfers or conveys its assets to, or is liquidated into, the Company or a Restricted Subsidiary, (A) 100% of the amount of Cash Equivalents on the balance sheet of such Unrestricted Subsidiary at the time of such redesignation, combination or transfer (except to the extent such Cash Equivalents were financed with an incurrence of indebtedness) and (B) 100% of the aggregate net cash proceeds received by the Company (i) at the time of such redesignation, combination or transfer, or (ii) with respect to assets other than cash, but only when and to the extent that such property is converted to cash.

The foregoing provisions shall not prohibit:

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(1)  the payment of any dividend or distribution within 60 days after the date of declaration thereof, if at the date of declaration such payment would have complied with the provisions of this Indenture;

(2)  (a) the repurchase, retirement or other acquisition of any Equity Interests (“Retired Capital Stock”) or Subordinated Indebtedness of the Company in exchange for, or out of the proceeds of the substantially concurrent sale of, Equity Interests of the Company or contributions to the equity capital of the Company (other than any Disqualified Stock or any Equity Interests sold to a Subsidiary of the Company or to an employee stock ownership plan or any trust established by the Company or any of its Subsidiaries) (collectively, including any such contributions, “Refunding Capital Stock”) and (b) the declaration and payment of accrued dividends on the Retired Capital Stock out of the proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company or to an employee stock ownership plan or any trust established by the Company or any of its Subsidiaries) of Refunding Capital Stock or the sale of Subordinated Indebtedness;

(3)  the declaration and payment of dividends or distributions to holders of any class or series of Disqualified Stock of the Company or any of its Restricted Subsidiaries issued or incurred in accordance with Section 4.03 hereof;

(4)  the declaration and payment of dividends or distributions to holders of any class or series of Designated Preferred Stock issued after the Issue Date; provided, however, that (A) for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of issuance of such Designated Preferred Stock, after giving effect to such issuance (and the payment of dividends or distributions) on a pro forma basis, the Company would have had a Leverage Ratio of no more than 6.25 to 1.00 and (B) the aggregate amount of dividends declared and paid pursuant to this clause (4) does not exceed the net cash proceeds received by the Company from the sale of Designated Preferred Stock issued after the Issue Date;

(5)  the redemption, repurchase or other acquisition or retirement of Subordinated Indebtedness of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, new Indebtedness of the Company so long as (A) the principal amount of such new Subordinated Indebtedness does not exceed the principal amount of the Subordinated Indebtedness being so redeemed, repurchased, acquired or retired for value (plus the amount of any premium required to be paid under the terms of the instrument governing the Subordinated Indebtedness being so redeemed, repurchased, acquired or retired), (B) such Indebtedness is subordinated to the Senior Indebtedness and the Notes and the Guarantees at least to the same extent as such Subordinated Indebtedness so purchased, exchanged, redeemed, repurchased, acquired or retired for value, (C) such Indebtedness has a final scheduled maturity date equal to or later than the final scheduled maturity date of the Subordinated Indebtedness being so redeemed, repurchased, acquired or retired and (D) such

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Indebtedness has a Weighted Average Life to Maturity equal to or greater than the remaining Weighted Average Life to Maturity of the Subordinated Indebtedness being so redeemed, repurchased, acquired or retired;

(6)  Investments in Unrestricted Subsidiaries having an aggregate Fair Market Value, taken together with all other Investments made pursuant to this clause (6) that are at that time outstanding, not to exceed $5.0 million (with the Fair Market Value of each Investment being measured at the time made and without giving effect to subsequent changes in value);

(7)  other Restricted Payments in an aggregate amount not to exceed $5.0 million;

(8)  repurchases of Equity Interests deemed to occur upon exercise of stock options if such Equity Interests represent a portion of the exercise price of such options;

(9)  the acquisition of Class B common stock outstanding on the Issue Date (or Class B common stock issued or distributed in respect of, or in substitution for, Class B common stock outstanding on the Issue Date, in connection with any stock split or combination) in connection with the issuance of IDSs upon exchange of the Class B common stock; provided that all the Exchange Conditions are satisfied at the time of such exchange and acquisition; provided further that such exchange and acquisition will not increase the amount available for Restricted Payments under clause (c)(ii) of the preceding paragraph; and

(10)         repurchases of 10,275 shares of  Class B Common Stock and 59,723 IDSs on the Issue Date.

provided, however, that at the time of, and after giving effect to, any Restricted Payment permitted under clauses (3), (4), (6), (7) and (9), no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof.

SECTION 4.05.      Dividend and Other Payment Restrictions Affecting Subsidiaries.  The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary to:

(a)  (i) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (ii) pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries;

(b)  make loans or advances to the Company or any of its Restricted Subsidiaries; or

(c)  sell, lease or transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries;

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except in each case for such encumbrances or restrictions existing under or by reason of:

(1)  contractual encumbrances or restrictions in effect on the Issue Date, including pursuant to the Credit Agreement and the other Senior Credit Documents;

(2)  this Indenture, the Notes and the Guarantees;

(3)  applicable law or any applicable rule, regulation or order;

(4)  any agreement or other instrument relating to Indebtedness of a Person acquired by the Company or any Restricted Subsidiary which was in existence at the time of such acquisition (but not created in contemplation thereof or to provide all or any portion of the funds or credit support utilized to consummate such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired;

(5)  any restriction with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition;

(6)  Secured Indebtedness otherwise permitted to be Incurred pursuant to Sections 4.03 and Section 4.08 that limit the right of the debtor to dispose of the assets securing such Indebtedness;

(7)  restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business;

(8)  customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business;

(9)  customary provisions contained in leases, licenses, agreements to provide services and other similar agreements entered into in the ordinary course of business that impose restrictions of the type specified in clause (c) above, including but not limited to, customary non-assignment provisions;

(10)  other Indebtedness of Restricted Subsidiaries permitted to be Incurred subsequent to the Issue Date pursuant to Section 4.03(l); or

(11)  any encumbrances or restrictions of the type referred to in clauses (a), (b) and (c) above imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (1) through (10) above; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith

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judgment of the Board of Directors, no more restrictive with respect to such dividend and other payment restrictions than those contained in the dividend or other payment restrictions prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing.

SECTION 4.06.      Asset Sales.  (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to cause or make an Asset Sale, unless (x) the Company, or its Restricted Subsidiaries, as the case may be, receives consideration at the time of such Asset Sale at least equal to the Fair Market Value (as determined in good faith by the Company) of the assets sold or otherwise disposed of and (y) except in the case of a Permitted Asset Swap, at least 75% of the consideration therefor received by the Company, or such Restricted Subsidiary, as the case may be, is in the form of Cash Equivalents; provided that the amount of the following shall be deemed to be Cash Equivalents for the purposes of this provision:

(i)        any liabilities (as shown on the Company’s or such Restricted Subsidiary’s most recent balance sheet or in the notes thereto) of the Company or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes) that are assumed by the transferee of any such assets;

(ii)       any notes or other obligations or other securities received by the Company or such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into Cash Equivalents within 180 days of the receipt thereof (to the extent of the Cash Equivalents received); and

(iii)      any Designated Noncash Consideration received by the Company or any of its Restricted Subsidiaries in such Asset Sale having an aggregate Fair Market Value, taken together with all other Designated Noncash Consideration received pursuant to this clause that is at that time outstanding, not to exceed the greater of 7.5% of Tangible Assets or $5.0 million (with the Fair Market Value of each item of Designated Noncash Consideration being measured at the time received and without giving effect to subsequent changes in value).

(b)  Within 365 days after the Company’s or any Restricted Subsidiary’s receipt of the Net Proceeds of any Asset Sale, the Company or such Restricted Subsidiary may apply the Net Proceeds from such Asset Sale, at its option to:

(i)        permanently reduce Obligations under the Credit Agreement (and, in the case of revolving Obligations, to temporarily reduce such Obligations) or other Senior Indebtedness or Pari Passu Indebtedness (provided that if the Company shall so reduce Obligations under Pari Passu Indebtedness, it will equally and ratably reduce Obligations under the Notes by making an offer (in accordance with the procedures set forth below for an Asset Sale Offer) to all Holders to purchase at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, the pro rata principal amount of Notes) or Indebtedness of a Restricted Subsidiary, in each case other than Indebtedness owed to the Company or an Affiliate of the Company;

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(ii)make an investment in any one or more businesses, capital expenditures or acquisitions of other assets in each case used or useful in a Similar Business, or set aside in respect of a project in connection therewith that has been commenced or for which a binding contractual commitment has been entered into; and/or

(iii)make an investment in properties or assets that replace the properties and assets that are the subject of such Asset Sale, or set aside in respect of a project in connection therewith that has been commenced or for which a binding contractual commitment has been entered into.

Pending the final application of any such Net Proceeds, the Company or such Restricted Subsidiary may temporarily reduce Indebtedness under a revolving credit facility, if any, or otherwise invest such Net Proceeds in Cash Equivalents or Investment Grade Securities. Any Net Proceeds from any Asset Sale that are not applied as provided and within the time period set forth in the first sentence of this paragraph will be deemed to constitute “Excess Proceeds.”

When the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company shall make an offer to all Holders of Notes (an “Asset Sale Offer”) to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to but not including the date fixed for the closing of such offer, in accordance with the procedures set forth in this Indenture. The Company will commence an Asset Sale Offer with respect to Excess Proceeds within ten Business Days after the date that Excess Proceeds exceed $10.0 million by mailing the notice required pursuant to the terms of this Indenture, with a copy to the Trustee. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased pursuant to Section 4.06(c)(3). Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.

(c) (1)  Promptly, and in any event within ten Business Days after the Company becomes obligated to make an Asset Sale Offer, the Company shall deliver to the Trustee and send, by first-class mail, postage prepaid, to each Holder at such Holder’s registered address, a written notice stating that the Holder may elect to have such Holder’s Notes purchased by the Company either in whole or in part (subject to prorating pursuant to Section 4.06(c)(3)), at the applicable purchase price.  The notice shall be mailed at least 30 but not more than 60 days before the purchase date.  If any Note is to be purchased in part only, any notice of purchase that relates to such Note shall state the portion of the principal amount thereof that has been or is to be purchased.

(2)  Not later than the date upon which written notice of an Asset Sale Offer is delivered to the Trustee as provided above, the Company shall deliver to the Trustee an Officers’ Certificate as to (i) the amount of the Excess Proceeds, (ii) the allocation of the Net Proceeds from the Asset Sales pursuant to which such Asset Sale Offer is being made and (iii) the compliance of such allocation with

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the provisions of Section 4.06(b).  On such date, the Company shall also irrevocably deposit with the Trustee or with a paying agent (or, if the Company is acting as its own paying agent, segregate and hold in trust) an amount equal to the Excess Proceeds to be invested in Cash Equivalents selected by the Company and to be held for payment in accordance with the provisions of this Section 4.06.  Upon the expiration of the period for which the Offer remains open (the “Offer Period”), the Company shall deliver to the Trustee for cancellation the Notes or portions thereof that have been properly tendered to and are to be accepted by the Company.  The Trustee (or the Paying Agent, if not the Trustee) shall, on the date of purchase, mail or deliver payment to each tendering Holder in the amount of the purchase price.  In the event that the Excess Proceeds delivered by the Company to the Trustee is greater than the purchase price of the Notes tendered, the Trustee shall deliver the excess to the Company immediately after the expiration of the Offer Period for application in accordance with Section 4.06(b) above.

(3)  Holders electing to have a Note purchased shall be required to surrender the Note, with an appropriate form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the purchase date.  Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the purchase date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note which was delivered by the Holder for purchase and a statement that such Holder is withdrawing his election to have such Note purchased.  If at the expiration of the Offer Period more Notes are tendered pursuant to an Asset Sale Offer than the Company is required to purchase, selection of such Notes for purchase shall be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which such Notes are listed, or if such Notes are not so listed, on a pro rata basis, by lot or by such other method as the Trustee shall deem fair and appropriate (and in such manner as complies with applicable legal requirements).  A new Note in principal amount equal to the unpurchased portion of any Note purchased in part will be issued in the name of the Holder thereof upon cancellation of the original Note.  On and after the purchase date, unless the Company defaults in payment of the purchase price, interest shall cease to accrue on Notes or portions thereof purchased.

(d)  The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations to the extent such laws or regulations are applicable in connection with the repurchase of the Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in this Indenture by virtue thereof.

SECTION 4.07.Transactions with Affiliates.  The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property

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or assets from, or enter into or make or amend any transaction or series of transactions, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Company (each of the foregoing, an “Affiliate Transaction”) involving aggregate consideration in excess of $1.0 million, unless:

(1)  such Affiliate Transaction is on terms that are not materially less favorable to the Company or the relevant Restricted Subsidiary than those that could have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person; and

(2)  with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, the Company delivers to the Trustee a resolution adopted by the majority of the Board of Directors of the Company, approving such Affiliate Transaction and set forth in an Officers’ Certificate certifying that such Affiliate Transaction complies with clause (1) above.

The foregoing provisions shall not apply to the following:

(i)transactions between or among the Company and/or any of its Restricted Subsidiaries;

(ii)Permitted Investments and Restricted Payments permitted by Section 4.04;

(iii)the payment of compensation (including amounts paid pursuant to employee benefit plans) or the provision of indemnity to officers, directors and/or employees of the Company or any of the Restricted Subsidiaries so long as such payments are pursuant to a policy (i) established by the Board of Directors in good faith and (ii) evidenced by a resolution of the Board of Directors;

(iv)maintenance in the ordinary course of business of customary benefit plans or arrangements for employees, officers and/or directors, including vacation plans, health and life insurance plans, deferred compensation plans, retirement or savings plans and similar plans or arrangements;

(v)issuance of securities or other payments, awards or grants in cash, securities or otherwise, or the grant of options, pursuant to any employment arrangements or employee benefit plans or arrangements which are approved by a majority of the Board of Directors in good faith;

(vi)the payment of all fees and expenses relating to the Transactions;

(vii)transactions in which the Company or any of its Restricted Subsidiaries, as the case may be, delivers to the Trustee a letter from an Independent Financial Advisor stating that such transaction is fair to the Company or such Restricted Subsidiary from a financial point of view or meets the requirements of clause (1) of the preceding paragraph;

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(viii)payments or loans to employees or consultants in the ordinary course of business which are approved by a majority of the Board of Directors in good faith;

(ix)any agreement as in effect as of the Issue Date or any amendment thereto (so long as any such amendment is not disadvantageous to the holders of the Notes in any material respect) or any transaction contemplated thereby;

(x)the existence of, or the performance by the Company or any of its Restricted Subsidiaries of its obligations under the terms of, any stockholders agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the Issue Date and any similar agreements which it may enter into thereafter, provided, however, that the existence of, or the performance by the Company or any of its Restricted Subsidiaries of its obligations under any future amendment to any such existing agreement or under any similar agreement entered into after the Issue Date shall only be permitted by this clause to the extent that the terms of any such amendment or new agreement are not otherwise disadvantageous to the Holders of the Notes in any material respect;

(xi)transactions with customers, clients, suppliers or purchasers or sellers of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of this Indenture, which are fair to the Company and its Restricted Subsidiaries in the reasonable determination of the Board of Directors or the senior management of the Company, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party; and

(xii)the issuance of Capital Stock (other than Disqualified Stock) of the Company or IDSs in respect of the Company’s securities (including such securities represented thereby) or Additional Notes or other Pari Passu Indebtedness evidenced by a different series of notes or shares of the Company’s Capital Stock to any Permitted Holder.

SECTION 4.08.Liens.  The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, Incur or suffer to exist any Lien on any asset or property of the Company or such Restricted Subsidiary, or any income or profits therefrom, or assign or convey any right to receive income therefrom, that secures any Indebtedness of the Company or any of its Subsidiaries (other than Senior Indebtedness) unless the Notes are equally and ratably secured with (or on a senior basis to, in the case of Indebtedness subordinated in right of payment to the Notes) the Indebtedness so secured or until such time as such obligations are no longer secured by a Lien.  The preceding sentence will not require the Company or any Restricted Subsidiary to secure the Notes if the Lien consists of a Permitted Lien.

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No Guarantor shall directly or indirectly create, Incur or suffer to exist any Lien on any asset or property of such Guarantor or any income or profits therefrom, or assign or convey any right to receive income therefrom, that secures any Indebtedness of such Guarantor (other than Senior Indebtedness of such Guarantor) unless the Guarantee of such Guarantor is equally and ratably secured with (or on a senior basis to, in the case of Indebtedness subordinated in right of payment to such Guarantor’s Guarantee) the Indebtedness so secured or until such time as such obligations are no longer secured by a Lien.  The preceding sentence will not require any Guarantor to secure its Guarantee if the Lien consists of a Permitted Lien.

SECTION 4.09.Change of Control.  (a)  Upon the occurrence of a Change of Control, each Holder shall have the right to require that the Company repurchase all or any part of such Holder’s Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to but not including the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase), in accordance with the terms contemplated in Section 4.09(b) ; provided, however, that notwithstanding the occurrence of a Change of Control, the Company shall not be obligated to purchase the Notes pursuant to this Section 4.09 in the event that it has exercised its right to redeem all the Notes pursuant to Section 3.07.  In the event that at the time of such Change of Control the terms of any Senior Lender Indebtedness restrict or prohibit the repurchase of Notes pursuant to this Section 4.09, then prior to the mailing of the notice to Holders provided for in Section 4.09(b) below but in any event within 30 days following any Change of Control, the Company shall (i) repay in full all Senior Lender Indebtedness or offer to repay in full all Senior Lender Indebtedness and repay the Senior Lender Indebtedness of each lender who has accepted such offer or (ii) obtain the requisite consent under the agreements governing the Senior Lender Indebtedness to permit the repurchase of the Notes as provided for in Section 4.09(b).

(b)  Within 30 days following any Change of Control, unless the Company has exercised its right to redeem the Notes pursuant to Section 3.07, the Company shall mail a notice (the “Change of Control Offer”) to each Holder with a copy to the Trustee stating:

(1)  that a Change of Control has occurred and that such Holder has the right to require the Company to purchase such Holder’s Notes of such series at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to but not including the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest on the relevant interest payment date);

(2)  the circumstances and relevant facts and financial information regarding such Change of Control;

(3)  whether the agreements then governing the Senior Lender Indebtedness will permit the repurchase of the Notes;

(4)  the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and

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(5)  the instructions determined by the Company, consistent with this Section 4.09, that a Holder must follow in order to have its Notes purchased.

(c)  In order to exercise the right to require the Company to repurchase the Notes, a Holder must separate its IDSs into the shares of Class A Common Stock and Notes represented thereby.

(d)  Notwithstanding the foregoing provisions of this Section 4.09, the Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.09(b) applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer.

(e)  The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this Section 4.09.  To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section 4.09, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.09 by virtue thereof.

SECTION 4.10.Compliance Certificate.  The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company commencing with the fiscal year ending on December 31, 2004, an Officers’ Certificate stating that in the course of the performance by the signers of their duties as officers of the Company they would normally have knowledge of any Default and whether or not the signers know of any Default that occurred during such period.  If they do, the certificate shall describe the Default, its status and what action the Company is taking or proposes to take with respect thereto.  The Company also shall comply with Section 314(a)(4) of the TIA.

SECTION 4.11.Further Instruments and Acts.  Upon request of the Trustee or as otherwise necessary, the Company shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture.

SECTION 4.12.Future Guarantors.  The Company shall cause each Restricted Subsidiary organized under the laws of the United States of America or any state or territory thereof that Incurs Indebtedness or issues shares of Disqualified Stock or Preferred Stock (other than Mid-Missouri Telephone Company or any other Restricted Subsidiary that cannot guarantee Indebtedness without obtaining the consent or waiver of any U.S. federal or state regulatory or governmental agency or body) to execute and deliver to the Trustee a supplemental indenture in the form of Exhibit C hereto pursuant to which such Subsidiary shall guarantee payment of the Notes.

SECTION 4.13.Limitation on Layering. The Company shall not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is contractually subordinate or junior in right of payment to any Senior Indebtedness of the Company and senior

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in right of payment to the Notes. No Guarantor shall incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is contractually subordinate or junior in right of payment to the Senior Indebtedness of such Guarantor and senior in right of payment to such Guarantor’s Guarantee, provided, however, that this Section 4.13 shall not apply to distinctions between categories of Indebtedness that exist by reason of any Liens or Guarantees securing or in favor of some but not all of such Indebtedness or securing such Indebtedness with greater or lesser priority or with different collateral.

SECTION 4.14.Subsequent Issuance.

(a)  The Company may issue Additional Notes:

(i)in connection with the exchange of shares of Class B Common Stock of the Company outstanding on the Issue Date (or Class B common stock issued or distributed in respect of, or in substitution for, Class B common stock outstanding on the Issue Date, in connection with any stock split or combination); or

(ii)for other purposes so long as the Incurrence of Indebtedness evidenced by such Additional Notes is permitted under Section 4.03 hereof.

(b)  Any Additional Notes will vote on all matters with the Notes issued in the Offering. The Additional Notes will be deemed to have the same accrued current period interest, deferred interest and defaults as the Notes issued in the Offering and will be deemed to have expended Payment Blockage Periods and interest deferral periods to the same extent as the Notes issued in the Offering.

(c)  The Company agrees, and by purchasing the Notes each Holder shall be deemed to have agreed, that in the event there is an issuance of Additional Notes with original issue discount (and any issuance of Additional Notes thereafter), a portion of such Holder’s Notes (whether held directly in book-entry form or certificated form or held as part of IDSs) will be exchanged, without any further action of such Holder, for a portion of the Additional Notes purchased by the Holders of such Additional Notes, such that, following any such additional issuance and exchange, each Holder of the Notes or the IDSs (as the case may be) owns an indivisible unit composed of the Notes and Additional Notes of each issuance in the same proportion as each other Holder, and the records of DTC and the Trustee will be revised to reflect each such exchange without any further action of such Holder (each such exchange, an “Automatic Exchange”). The aggregate principal amount of the Notes owned by each Holder will not change as a result of an Automatic Exchange. Any Additional Notes will be guaranteed by the Guarantors on the same basis as the Original Notes.

(d)  The Company may issue Additional Notes only if it delivers to the Trustee prior to or simultaneously with such issuance (i) an opinion of tax counsel to the effect that the Additional Notes should be treated as debt for U.S. federal income tax purposes and (ii) an Opinion of Counsel to the effect that the Additional Notes and the related Guarantees constitute valid and binding obligations of the Company and the respective Guarantors entitled to the benefits of the Indenture and are enforceable against the Company and the respective Guarantors

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in accordance with their terms. In addition, if an issuance of Additional Notes would trigger the automatic exchange provisions of this Indenture, the Company may not issue such Additional Notes unless it delivers to the Trustee on the date of such issuance a certificate of the Company’s principal financial officer in the form of Exhibit D hereto.

ARTICLE 5

SUCCESSOR COMPANY

SECTION 5.01.Merger, Consolidation or Sale of All or Substantially All Assets.  (a)  The Company may not consolidate or merge with or into or wind up into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to any Person unless:

(i)the Company is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a corporation, partnership or limited liability company organized or existing under the laws of the United States, any state thereof, the District of Columbia, or any territory thereof (the Company or such Person, as the case may be, being herein called the “Successor Company”);

(ii)the Successor Company (if other than the Company) expressly assumes all the obligations of the Company under this Indenture and the Notes pursuant to a supplemental indenture or other documents or instruments in form reasonably satisfactory to the Trustee;

(iii)immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any of its Restricted Subsidiaries as a result of such transaction, as having been Incurred by the Successor Company or such Restricted Subsidiary at the time of such transaction) no Default or Event of Default shall have occurred and be continuing;

(iv)immediately after giving pro forma effect to such transaction, as if such transaction had occurred at the beginning of the applicable four-quarter period, either (A) the Successor Company would be permitted to Incur at least $1.00 of additional Indebtedness pursuant to the Leverage Ratio test set forth in the first sentence of Section 4.03 or (B) the Leverage Ratio for the Successor Company and its Restricted Subsidiaries would be less than or equal to such ratio for the Company and its Restricted Subsidiaries immediately prior to such transaction;

(v)each Guarantor, unless it is the other party to the transactions described above, shall have by supplemental indenture confirmed that its

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Guarantee shall apply to the Successor Company’s obligations under this Indenture and the Notes; and

(vi)the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with this Indenture.

The Successor Company will succeed to, and be substituted for, the Company under this Indenture and the Notes.  Notwithstanding clauses (iii) and (iv) above, (a) any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company or to another Restricted Subsidiary; and (b) the Company may merge with an Affiliate incorporated solely for the purpose of reincorporating the Company in another state of the United States so long as the amount of Indebtedness of the Company and its Restricted Subsidiaries is not increased thereby.

(b)  Subject to Section 11.02(b) hereof, each Guarantor shall not, and the Company shall not permit a Guarantor to, consolidate or merge with or into or wind up into (whether or not such Guarantor is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to, any Person unless:

(i)such Guarantor is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a corporation, partnership or limited liability company organized or existing under the laws of the United States, any state thereof, the District of Columbia, or any territory thereof (such Guarantor or such Person, as the case may be, being herein called the “Successor Guarantor”);

(ii)the Successor Guarantor (if other than such Guarantor) expressly assumes all the obligations of such Guarantor under this Indenture and such Guarantor’s Guarantee pursuant to a supplemental indenture or other documents or instruments in form reasonably satisfactory to the Trustee;

(iii)immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Guarantor or any of its Subsidiaries as a result of such transaction as having been Incurred by the Successor Guarantor or such Subsidiary at the time of such transaction) no Default or Event of Default shall have occurred and be continuing; and

(iv)the Guarantor shall have delivered or caused to be delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with this Indenture.

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Subject to the limitations set forth in this Indenture, the Successor Guarantor shall succeed to, and be substituted for, such Guarantor under this Indenture and such Guarantor’s Guarantee.  Notwithstanding clause (iii) of this Section 5.01(b), a Guarantor may merge with an Affiliate incorporated solely for the purpose of reincorporating such Guarantor in another jurisdiction so long as the amount of Indebtedness of the Guarantor is not increased thereby.

ARTICLE 6

DEFAULTS AND REMEDIES

SECTION 6.01.Events of Default.  An “Event of Default” means:

(a)  a default in any payment of interest on any Note when due, whether or not such payment shall be prohibited by the provisions of Article 10, continued for 30 days, subject to the interest deferral provisions contained in Section 4.01 hereof; provided, however, that a default in any payment of interest on the Note required to be made on December 30, 2009 shall immediately constitute an Event of Default (without regard to the length of time for which such default continues);

(b)  a default in the payment of principal or premium, if any, of any Note when due at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise, whether or not such payment shall be prohibited by Article 10;

(c)  the failure by the Company to comply with Section 5.01 of this Indenture;

(d)  the failure by the Company to comply for 30 days, after notice to it, with Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.12 or 4.13 (in each case, other than a failure to purchase Notes);

(e)  the failure by the Company to comply for 60 days after notice with its other agreements contained in the Notes or this Indenture;

(f)  the failure by the Company or any Significant Subsidiary to pay any Indebtedness (other than Indebtedness owing to the Company or a Restricted Subsidiary) within any applicable grace period after final maturity or the acceleration of any such Indebtedness by the holders thereof because of a default if the total amount of such Indebtedness unpaid or accelerated exceeds $7.5 million or its foreign currency equivalent;

(g)  the Company or any Significant Subsidiary, pursuant to or within the meaning of Bankruptcy Law:

(i)commences a voluntary case under Bankruptcy Law;

(ii)consents to the entry of an order for relief against it in an involuntary case under Bankruptcy Law;

(iii)consents to the appointment of a Custodian of it or for all or substantially all of its property; or

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(iv)makes a general assignment for the benefit of its creditors;

(h)  a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

(i)is for relief against the Company or any of its Significant Subsidiaries in an involuntary case;

(ii)appoints a Custodian of the Company or any of its Significant Subsidiaries or for all or substantially all of the property of the Company or any of its Significant Subsidiaries; or

(iii)orders the winding up or liquidation of the Company or any Significant Subsidiary;

and the order or decree remains unstayed and in effect for 60 days;

(i)  the rendering of any judgment or decree for the payment of money (other than judgments which are covered by enforceable insurance policies issued by solvent carriers) in excess of $7.5 million or its foreign currency equivalent against the Company or a Significant Subsidiary if (A) an enforcement proceeding thereon is commenced and not discharged or stayed within 60 days thereafter or (B) such judgment or decree remains outstanding for a period of 60 days following such judgment and is not discharged, waived or stayed (the “judgment default provision”);

(j)  any Guarantee ceases to be in full force and effect, except as contemplated by the terms thereof, or any Guarantor denies or disaffirms its obligations under this Indenture or any Guarantee and the Default continues for 10 days; or

(k)  except as permitted by clause (1) of Section 4.04, the Company pays any dividend on shares of the Common Stock (A) during the period that any interest is being deferred, so long as any deferred interest and accrued interest thereon has not been paid in full or (B) during a Dividend Suspension Period or the continuance of an Event of Default.

The foregoing shall constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body.

However, a Default under clause (d) or (e) shall not constitute an Event of Default until the Holders of 25% in principal amount of the outstanding Notes notify the Company of the Default and the Company does not cure such Default within the time specified in clause (d) or (e), as the case may be, 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.”  When a Default or Event of Default is cured, it ceases.

The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers’ Certificate of any Event of Default and any event

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which with the giving of notice or the lapse of time would become an Event of Default under, its status and what action the Company is taking or proposes to take with respect thereto.

SECTION 6.02.Acceleration.

(a)  If an Event of Default (other than an Event of Default specified in Section 6.01(g) or (h)) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount of the outstanding Notes, by notice in writing to the Company and the Representative under the Credit Agreement, may declare the principal of, premium, if any, and accrued but unpaid interest on all the Notes to be due and payable, subject to the proviso in the next sentence and to clause (b) of this Section 6.02.  Upon such a declaration, such principal and interest shall be due and payable immediately; provided that so long as there are any amounts outstanding under the Credit Agreement, such declaration of acceleration shall not be effective until the earlier of (1) the acceleration of any Indebtedness under the Credit Agreement or (2) five business days after receipt by the Company and the Representative under the Credit Agreement of written notice of declaration of acceleration of Indebtedness hereunder.  If an Event of Default specified in Section 6.01(g) or (h) occurs, the principal of, premium, if any, and interest on all the Notes shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holders.

(b)  After a declaration of acceleration has been made, but before a judgment or decree for payment of the money due has been obtained by the Trustee, the holders of a majority in aggregate principal amount of Notes outstanding, by written notice to the Trustee, may annul such declaration and its consequences if all Events of Default, other than the non-payment of principal of the Notes which have become due solely by such declaration of acceleration, have been cured or waived.

(c)  In the event of a declaration of acceleration of the Notes because an Event of Default has occurred and is continuing as a result of the acceleration of any Indebtedness described in Section 6.01(f) above, the declaration of acceleration of the Notes shall be automatically annulled if the Holders of all Indebtedness described in Section 6.01(f) have rescinded the declaration of acceleration in respect of such Indebtedness within 30 Business Days of the date of such declaration, and if the annulment of the acceleration of the Notes would not conflict with any judgment or decree of a court of competent jurisdiction, and all existing Events of Default, except non-payment of principal or interest on the Notes that became due solely because of the acceleration of the Notes, have been cured or waived.

SECTION 6.03.Other Remedies.  If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.

The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding.  A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default.  No remedy is exclusive of any other remedy.  All available remedies are cumulative.

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SECTION 6.04.Waiver of Past Defaults.  The Holders of a majority in principal amount of the Notes Outstanding of all series affected by such waiver by notice to the Trustee may on behalf of the Holders of all such Notes waive any existing Default or Event of Default and its consequences except (i) a continuing Default or an Event of Default in the payment of the principal of or premium, if any, or interest on a Note or (ii) any Default or Event of Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Holder affected.  Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon.  In case of any such waiver, the Company, any other obligor upon the Notes, the Trustee and the Holders shall be restored to their former positions and rights hereunder and under the Notes, respectively.  This paragraph of this Section 6.04(a) shall be in lieu of § 316(a)(1)(B) of the TIA and such § 316(a)(1)(B) of the TIA is hereby expressly excluded from this Indenture and the Notes, as permitted by the TIA.

SECTION 6.05.Control by Majority.  The Holders of a majority in principal amount of the Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee.  However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of other Holders or would involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction.  Prior to taking any action hereunder, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action.

SECTION 6.06.Limitation on Suits.  Subject to the provisions of Article 9 relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to this Indenture or the Notes unless:

(1)  the Holder gives to the Trustee written notice stating that an Event of Default is continuing;

(2)  the Holders of at least 25% in principal amount of the Notes Outstanding make a written request to the Trustee to pursue the remedy;

(3)  such Holder or Holders offer to the Trustee security or indemnity reasonably satisfactory to it against any loss, liability or expense;

(4)  the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security or indemnity; and

(5)  the Holders of a majority in principal amount of the Notes Outstanding do not give the Trustee a direction inconsistent with the request during such 60-day period.

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A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder.

SECTION 6.07.Rights of Holders to Receive Payment.  Subject to Sections 10.15 and 12.15 hereof, the right of any Holder to receive payment of principal of and interest on the Notes held by such Holder, on or after the respective due dates expressed in the Notes, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

SECTION 6.08.Collection Suit by Trustee.  If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.07.

SECTION 6.09.Trustee May File Proofs of Claim.  The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Holders allowed in any judicial proceedings relative to the Company, any Subsidiary or Guarantor, their creditors or their property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07.

SECTION 6.10.Trustee May Enforce Claims Without Possession of Notes.  All rights of action and claims under this Indenture or the Notes may be prosecuted and enforced by the Trustee without the possession of any of the Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Notes in respect of which such judgment has been recovered.

SECTION 6.11.Priorities.  If the Trustee collects any money or property pursuant to this Article 6, it shall pay out the money or property in the following order:

FIRST:  to the Trustee for amounts due under Section 7.07;

SECOND:  to holders of Senior Indebtedness of the Company to the extent required by Article 10;

THIRD:  to Holders for amounts due and unpaid on the Notes for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal and interest, respectively; and

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FOURTH: to the Company or any other obligor on the Notes or as a court of competent jurisdiction shall direct in writing.

The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 6.11.  At least 15 days before such record date, the Trustee shall mail to each Holder and the Company a notice that states the record date, the payment date and amount to be paid.

SECTION 6.12.Undertaking for Costs.  In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant.  This Section 6.12 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in principal amount of the Notes.

SECTION 6.13.Waiver of Stay or Extension Law.  Neither the Company nor any Guarantor (to the extent it may lawfully do so) shall at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company and each Guarantor (to the extent that it may lawfully do so) hereby expressly waive all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted.

ARTICLE 7

TRUSTEE

SECTION 7.01.Duties of Trustee.  (a)  If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person’s own affairs.

(b)  Except during the continuance of an Event of Default:

(1)  the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(2)  in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture.  However, in the case of certificates or opinions specifically required by any provision hereof to be furnished to it, the

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Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture.

(c)  The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

(1)  this paragraph does not limit the effect of paragraph (b) of this Section;

(2)  the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and

(3)  the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05.

(d)  Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.

(e)  The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company.

(f)  Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

(g)  No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

(h)  Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 7.01 and to the provisions of the TIA.

SECTION 7.02.Rights of Trustee.

(a)  The Trustee may conclusively rely on any document believed by it to be genuine and to have been signed or presented by the proper person.  The Trustee need not investigate any fact or matter stated in the document.

(b)  Before the Trustee acts or refrains from acting, it may require an Officer’s Certificate or an Opinion of Counsel.  The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers’ Certificate or Opinion of Counsel.

(c)  The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.

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(d)  The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Trustee’s conduct does not constitute willful misconduct or negligence.

(e)  The Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Notes shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.

(f)  The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, note or other paper or document unless requested in writing to do so by the Holders of not less than a majority in principal amount of the Notes at the time outstanding, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the expense of the Company and shall incur no liability of any kind by reason of such inquiry or investigation.

(g)  The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities which might reasonably be incurred by it in compliance with such request or direction.

(h)  The Trustee shall not be deemed to have notice of any Default or Event of Default unless an officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture.

(i)  The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder.

(j)  The Trustee may request that the Company deliver an Officers’ Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers’ Certificate may be signed by any person authorized to sign such an Officers’ Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded.

SECTION 7.03.Individual Right of Trustee.  The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.  Any Paying Agent, Registrar or co-paying agent may do the same with like rights.  However, the Trustee must comply with Sections 7.10 and 7.11.

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SECTION 7.04.Trustee’s Disclaimer.  The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company’s use of the proceeds from the Notes, and it shall not be responsible for any statement of the Company in this Indenture or in any document issued in connection with the sale of the Notes or in the Notes other than the Trustee’s certificate of authentication.

SECTION 7.05.Notice of Defaults.  If a Default occurs and is continuing and is known to the Trustee, the Trustee shall mail to each Holder notice of the Default within the earlier of 90 days after it occurs or 30 days after it is actually known to a Trust Officer or written notice of it is received by the Trustee.  Except in the case of a Default in payment of principal of, premium (if any) or interest (including deferred interest) on any Note, the Trustee may withhold notice if and so long as a committee of its Trust Officers in good faith determines that withholding notice is in the interests of Holders.

SECTION 7.06.Reports by Trustee to Holders.  As promptly as practicable after each May 15 beginning with the May 15 following the date of this Indenture, and in any event prior to July 15 in each year, the Trustee shall mail to each Holder a brief report dated as of July 15 that complies with Section 313(a) of the TIA.  The Trustee shall also comply with Section 313(b) of the TIA.

SECTION 7.07.Compensation and Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation for its services.  The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust.  The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it in accordance with the provisions of this Indenture, including costs of collection, in addition to the compensation for its services, except for any such expenses as may be attributable to its negligence, bad faith or willful misconduct.  Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee’s agents, counsel, accountants and experts.  The Company and each Guarantor, jointly and severally, shall indemnify the Trustee against any and all loss, liability, claim, damage or expense (including reasonable attorneys’ fees and expenses) incurred by or in connection with the administration of this trust and the performance of its duties hereunder without negligence, bad faith or willful misconduct.  The Trustee shall notify the Company of any claim for which it may seek indemnity promptly upon obtaining actual knowledge thereof; provided, however, that any failure so to notify the Company shall not relieve the Company or any Guarantor of its indemnity obligations hereunder.  The Company shall defend the claim and the indemnified party shall provide reasonable cooperation at the Company’s expense in the defense of such claim.  Such indemnified parties may together have one counsel at any time and the Company and the Guarantors, as applicable shall pay the fees and expenses of such counsel; provided, however, that the Company shall not be required to pay such fees and expenses if it assumes such indemnified parties’ defense and, in such indemnified parties’ reasonable judgment, there is no conflict of interest between the Company and the Guarantors, as applicable, and such parties in connection with such defense.  The Company need not reimburse any expense or indemnify against any loss, liability, claim, damage or expense incurred by an indemnified party through such party’s own negligence, bad faith or willful misconduct.

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To secure the Company’s payment obligations in this Section, the Trustee shall have a lien prior to the Notes on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Notes.

The Company’s payment obligations pursuant to this Section shall survive the satisfaction or discharge of this Indenture, any rejection or termination of this Indenture under any Bankruptcy Law or the resignation or removal of the Trustee.  When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(i) or (j) with respect to the Company, the expenses are intended to constitute expenses of administration under the Bankruptcy Law.

SECTION 7.08.Replacement of Trustee.  The Trustee may resign at any time by so notifying the Company in writing.  The Holders of a majority in principal amount of the Notes may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee.  The Company shall remove the Trustee if:

(1)  the Trustee fails to comply with Section 7.10 or 7.11;

(2)  the Trustee is adjudged bankrupt or insolvent;

(3)  a receiver or other public officer takes charge of the Trustee or its property; or

(4)  the Trustee otherwise becomes incapable of acting.

If the Trustee resigns, is removed by the Company or by the Holders of a majority in principal amount of the Notes and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee.

No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of this Section 7.08.

A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company.  Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture.  The successor Trustee shall mail a notice of its succession to Holders.  The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07.

If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in principal amount of the Notes may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Trustee.

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If the Trustee fails to comply with Section 7.10, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

Notwithstanding the replacement of the Trustee pursuant to this Section, the Company’s obligations under Section 7.07 shall continue for the benefit of the retiring Trustee.

SECTION 7.09.Successor Trustee by Merger.  If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee.

In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Notes so authenticated with the same effect as if such successor Trustee had itself authenticated the Notes, and in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force as provided anywhere in the Notes or in this Indenture that the certificate of the Trustee shall have.

SECTION 7.10.Eligibility; Disqualification.  The Trustee shall at all times satisfy the requirements of Section 310(a) of the TIA.  The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition.  The Trustee shall comply with Section 310(b) of the TIA; provided, however, that there shall be excluded from the operation of Section 310(b)(1) of the TIA any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in Section 310(b)(1) of the TIA are met.

SECTION 7.11.Conflicting Interests.  If the Trustee has or shall acquire a conflicting interest within the meaning of the TIA, the Trustee shall eliminate such interest, apply to the SEC for permission to continue as Trustee with such conflict or resign, to the extent and in the manner provided by, and subject to the provisions of, the TIA and this Indenture.  To the extent permitted by the TIA, the Trustee shall not be deemed to have a conflicting interest by virtue of being a trustee under this Indenture with respect to Original Notes and Additional Notes, or a trustee under any other indenture between the Company and the Trustee.

SECTION 7.12.Preferential Collection of Claims Against Company.  The Trustee shall comply with Section 311(a) of the TIA, excluding any creditor relationship listed in Section 311(b) of the TIA.  A Trustee who has resigned or been removed shall be subject to Section 311(a) of the TIA to the extent indicated.  The Trustee herby waives any right to set-off any claim that it may have against the Company in any capacity (other than as Trustee and Paying Agent) against any of the assets of the Company held by the Trustee; provided, however, that if the Trustee is or becomes a lender of any other Indebtedness permitted hereunder to be Pari Passu with the notes, then such waiver shall not apply to the extent of such Indebtedness.

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ARTICLE 8

DISCHARGE OF INDENTURE; DEFEASANCE

SECTION 8.01.Satisfaction and Discharge of Indenture.  (a)  This Indenture shall, subject to Section 8.01(c), cease to be of further effect as to all Notes issued hereunder and the Trustee, on demand of and at the expense of the Company, accompanied by an Officers’ Certificate and an Opinion of Counsel, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when either

(i) all Notes that have been authenticated (except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation; or

(ii) (A) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise or will become due and payable within one year and the Company or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, Cash Equivalents, Investment Grade Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and additional interest, if any, and accrued interest to the date of maturity or redemption;

(B) no Event of Default (other than one resulting solely from the borrowing of funds or the granting of any Liens to provide such deposit) shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any Guarantor is a party or by which the Company or any Guarantor is bound;

(C) the Company or any Guarantor has paid or caused to be paid all sums payable by it under this Indenture; and

(D) the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be.

(b) Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the satisfaction and discharge of this Indenture.

(c) Notwithstanding clauses (a) and (b) above, the Company’s obligations under Sections 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 2.10, 7.07, 7.08 and this Article 8 shall survive until the Notes have been paid in full.  Thereafter, the Company’s obligations in Sections 7.07, 8.04 and 8.05 shall survive such satisfaction and discharge.

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SECTION 8.02.Legal and Covenant Defeasance; Conditions to Defeasance.

(a)  Subject to Section 8.01(c), the Company at any time may terminate (i) all of its obligations under the Notes and this Indenture (“legal defeasance option”) or (ii) its obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.12 and 4.13, the operation of 6.01(f), 6.01(g) and 6.01(h) (with respect to Subsidiaries of the Company only), and the judgment default provision specified in Section 6.01(i) and the limitations specified in Section 5.01(a)(iv)  (“covenant defeasance option”).  The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option.  In the event that the Company exercises either its legal defeasance option or its covenant defeasance option, each Guarantor will be released from all its obligations with respect to its Guarantee.

The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the Notes may not be accelerated because of an Event of Default with respect thereto. If the Company exercises its covenant defeasance option, payment of the Notes may not be accelerated because of an Event of Default specified in Section 6.01(d), (f), (g) with respect only to Significant Subsidiaries or (h) with respect only to Significant Subsidiaries or because of the failure of the Company to comply with Section 5.01(a)(iv).

(b)  The Company may exercise its legal defeasance option or its covenant defeasance option only if:

(1)  the Company irrevocably deposits or causes to be deposited in trust with the Trustee money or U.S. Government Obligations for the payment of principal, premium (if any) and interest on the Notes to redemption or maturity, as the case may be;

(2)  the Company delivers to the Trustee an Opinion of Counsel to the effect that holders of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such deposit and defeasance and will be subject to U.S. federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred (and, in the case of legal defeasance only, such Opinion of Counsel must be based on a ruling of the IRS or other change in applicable U.S. federal income tax law);

(3)  on the date or dates the respective amounts were paid into the trust, such payments were made with respect to the Notes without violating the subordination provisions of this Indenture or any other material agreement binding on the Company, including the Credit Agreement; and

(4)  the deposit does not constitute a default under any other material agreement binding on the Company and is not prohibited by Article 10.

Before or after a deposit, the Company may make arrangements satisfactory to the Trustee for the redemption of Notes at a future date in accordance with Article 3.

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The Trustee shall hold in trust money or U.S. Government Obligations deposited with it pursuant to this Article 8.  It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Notes.  Subject to Sections 10.03 and 10.04, money and securities so held in trust are not subject to Article 10.

SECTION 8.03.Repayment to Company.  The Trustee and the Paying Agent shall promptly turn over to the Company upon request any excess money or securities held by them at any time.

Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon written request any money held by them for the payment of principal or interest that remains unclaimed for two years, and, thereafter, Securityholders entitled to the money must look to the Company for payment as general creditors.

SECTION 8.04.Indemnity for Government Obligations.  The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations.

SECTION 8.05.Reinstatement.  If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with this Article 8 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company’s obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to this Article 8 until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article 8; provided, however, that, if the Company has made any payment of interest on or principal of any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent.

ARTICLE 9

AMENDMENTS

SECTION 9.01.Without Consent of Holders.  The Company and the Trustee may amend this Indenture or the Notes without consent of any Holder to:

(1)  cure any ambiguity, omission, defect or inconsistency;

(2)  provide for the assumption by a successor corporation, partnership, limited liability company or other entity of the obligations of the Company under this Indenture;

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(3)  provide for uncertificated Notes in addition to or in place of Physical Notes; provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Internal Revenue Code or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Internal Revenue Code;

(4)  make any change in Article 10 or Article 12 that would limit or terminate the benefits available to any holder of Senior Indebtedness (or Representatives therefor) under Article 10 or Article 12;

(5)  add Guarantees with respect to the Notes;

(6)  secure the Notes;

(7)  add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company;

(8)  make any change that does not adversely affect the legal rights under this Indenture of any Holder to comply with any requirement of the SEC or in connection with the qualification of this Indenture under the TIA; or

(9)  enter into one or more supplemental indentures to effect any of the amendments set forth herein or to set forth the terms of and issue any Additional Notes in accordance with the provisions of this Indenture.

Notwithstanding the foregoing, an amendment under this Section 9.01 may not make any change that adversely affects the rights under Article 10 or Article 12 of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change.

SECTION 9.02.With Consent of Holders.  The Company, the Guarantors and the Trustee may amend this Indenture or the Notes with the written consent of the Holders of at least a majority in aggregate principal amount of the Notes of all series affected by such amendment then outstanding.

Without the consent of each Holder affected, an amendment or waiver may not:

(1)  reduce the amount of Notes whose Holders must consent to an amendment;

(2)  reduce the rate of or extend the time for payment of interest on any Note, or amend the Company’s right to defer interest on the Notes in a manner adverse to the Holders;

(3)  reduce the principal of or extend the Stated Maturity of any Note;

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(4)  reduce the premium payable upon the redemption of any Note or change the time at which any Note may be redeemed in accordance with Article 3;

(5)  make any Note payable in money other than that stated in the Note;

(6)  make any change in Article 10 or Article 12 that adversely affects the rights of any Holder under Article 10 or Article 12;

(7)  impair the right of any Holder to receive payment of principal of, premium, if any, and interest on such Holder’s Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s Notes;

(8)  except in connection with an offer by the Company to purchase all of the Notes (in which case a majority in principal amount of Notes will be sufficient)

(A)make any change to the provisions of Section 4.05 of this Indenture that eliminate the prohibition on paying dividends while interest is being deferred, while any previously Deferred Interest remains unpaid or during a Dividend Suspension Period or the continuance of any Event of Default;

(B)make a change to lower the Interest Coverage Ratio threshold for a Dividend Suspension Period or make a change to paragraph (c) of Section 4.04 that would have the effect of increasing the amounts permitted to be distributed in respect of the Company’s Capital Stock;

(C)waive an Event of Default under Section 6.01(k); or

(9)  make any change in the amendment provisions which require each Holder’s consent or in the waiver provisions; or

(10)  modify the Guarantees in any manner adverse to the Holders.

It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof.

Notwithstanding the foregoing, an amendment or waiver under this Section 9.02 may not make any change that adversely affects the rights under Article 10 or Article 12 of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent in writing to such change.

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SECTION 9.03.Notice to Holders.  After an amendment or waiver under this Section becomes effective, the Company shall mail to Holders, a notice briefly describing such amendment or waiver.  The failure to give such notice to all Holders, or any defect therein, shall not in any way impair or affect the validity or effectiveness of an amendment or waiver under this Article 9.

SECTION 9.04.Compliance with Trust Indenture Act.  Every amendment to this Indenture or the Notes shall comply with the TIA as then in effect.

SECTION 9.05.Revocation and Effect of Consent and Waivers.  A consent to an amendment or a waiver by a Holder of a Note shall bind the Holder and every subsequent Holder of that Note or portion of the Note that evidences the same debt as the consenting Holder’s Note, even if notation of the consent or waiver is not made on the Note.  However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder’s Note or portion of the Note if the Trustee receives the notice of revocation before the date on which the Trustee receives an Officers’ Certificate from the Company certifying that the requisite number of consents has been received.  After an amendment or waiver becomes effective, it shall bind every Holder.  An amendment or waiver becomes effective upon the (i) receipt by the Company or the Trustee of the requisite number of consents, (ii) satisfaction of conditions to effectiveness as set forth in this Indenture and an indenture supplemental hereto containing such amendment or waiver, (iii) execution of such amendment or waiver (or supplemental indenture) by the Company and the Trustee and (iv) any other conditions thereto specified in the notice thereto.

The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture.  If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date.

SECTION 9.06.Notation on or Exchange of Notes.  If an amendment changes the terms of a Note, the Trustee may (if required by the Company and in accordance with specific directions of the Company) require the Holder of the Note to deliver it to the Trustee.  The Trustee may place an appropriate notation on the Note regarding the changed terms and return it to the Holder.  Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms.  Failure to make the appropriate notation or to issue a new Note shall not affect the validity of such amendment.

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SECTION 9.07.Trustee To Sign Amendments.  The Trustee shall sign any amendment authorized pursuant to this Article 9 if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee.  If it does, the Trustee may but need not sign it.  In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it, shall be provided with, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers’ Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture and that such amendment is the legal, valid and binding obligation of the Company and the Guarantors enforceable against them in accordance with its terms, subject to customary exceptions, and complies with the provisions hereof (including Section 9.03).

SECTION 9.08.Payment for Consent.

Neither the Company nor any Affiliate of the Company shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid to all Holders that so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement.

ARTICLE 10

SUBORDINATION

SECTION 10.01.Agreement To Subordinate.  The Company agrees, and each Holder by accepting a Note agrees, that the Indebtedness evidenced by the Notes and all other amounts payable under the Notes or this Indenture are subordinated in right of payment, to the extent and in the manner provided in this Indenture, to the prior payment in full in cash of all existing and future Senior Indebtedness of the Company, and that the subordination is for the benefit of and enforceable by the holders of Senior Indebtedness.

SECTION 10.02.Liquidation, Dissolution or Bankruptcy.  Upon any payment or distribution of the assets of the Company upon a total or partial liquidation or dissolution, bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, or an assignment for the benefit of its creditors or any marshalling of the Company’s assets or liabilities, the holders of Senior Indebtedness shall be entitled to receive payment in full in cash of all the Senior Indebtedness before Holders are entitled to receive any payment, and until the Senior Indebtedness of the Company is paid in full in cash, any payment or distribution to which Holders would be entitled but for this Article 10 shall be made to holders of the Senior Indebtedness as their interests may appear.

SECTION 10.03.Default on Designated Senior Indebtedness.

(a)  The Company may not pay principal of, premium (if any) or interest on, the Notes or any other payment on or relating to the Notes or under this Indenture, or make any deposit pursuant to Section 8.01 and may not otherwise purchase, redeem or otherwise retire any Notes (except that Holders may receive and retain (a) Permitted Junior Securities and (b)

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payments made from the trust described in Section 8.01 so long as, on the date or dates the respective amounts were paid into the trust, such payments were made with respect to the Notes without violating this Article 10 or any other material agreement binding on the Company, including the Credit Agreement) (collectively, “pay the Notes”) if (i) a default in the payment of the principal of, premium, if any, or interest on any Designated Senior Indebtedness of the Company occurs and is continuing or any other amount owing in respect of any Designated Senior Indebtedness is not paid when due, or (ii) any other default on any Designated Senior Indebtedness of the Company occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (x) the default has been cured or waived and any such acceleration has been rescinded or (y) such Designated Senior Indebtedness has been paid in full in cash.  However, the Company may pay the Notes without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of each series of the Designated Senior Indebtedness with respect to which either of the events in clause (i) or (ii) of the immediately preceding sentence has occurred and is continuing. In addition to the foregoing, during the continuance of any default (other than a default described in clause (i) or (ii) of the second preceding sentence) with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated (x) immediately without further notice (except such notice as may be required to effect such acceleration) or (y) upon the expiration of any applicable grace periods, the Company may not pay the Notes for a period (a “Payment Blockage Period”) commencing upon the receipt by the Trustee (with a copy to the Company) of written notice (a “Blockage Notice”) of such default from the Representative of such defaulted Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending on the earliest to occur of the following events: (1) 179 days shall have elapsed since the receipt of such Blockage Notice; (2) such Payment Blockage Period is terminated by written notice to the Trustee and the Company from the Person or Persons who gave such Blockage Notice; (3) the repayment in full in cash of such defaulted Designated Senior Indebtedness; or (4) the default giving rise to such Blockage Notice is no longer continuing.  Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in the first sentence of this Section 10.03 and in Section 10.02), unless the holders of such defaulted Designated Senior Indebtedness or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the Notes, after the end of such Payment Blockage Period.  In no event may the total number of days during which any Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate during any 360 consecutive day period. For purposes of this provision, no default or event of default that existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness initiating such Payment Blockage Period shall be, or be made, the basis of the commencement of a subsequent Payment Blockage Period by the Representative of such Designated Senior Indebtedness, unless such default or event of default shall have been cured or waived for a period of not less than 90 consecutive days.

(b)  After the occurrence of an Event of Default, the Company or the Trustee shall promptly notify the holders of each series of the Designated Senior Indebtedness (or their respective Representative) of such occurrence.  If any Designated Senior Indebtedness is outstanding, the Company may not make any payments then due on the Notes until five Business Days after the holders or the Representative of such Designated Senior Indebtedness receives

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notice of such occurrence and, thereafter, may pay the Notes only if the provisions of this Article 10 otherwise permit payment at that time.

SECTION 10.04.When Distribution Must Be Paid Over.  If a payment or distribution is made to Holders that due to this Article 10 should not have been made to them, such Holders shall hold it in trust for the holders of Senior Indebtedness and pay it over to them as their interests may appear (except that Holders may receive and retain (i) Permitted Junior Securities and (ii) payments made from the trust pursuant to Section 8.01 so long as, on the date or dates the respective amounts were paid into the trust, such payments were made with respect to the Notes without violating this Article 10 or any other material agreement binding on the Company, including the Credit Agreement).

SECTION 10.05.Subrogation.  After all Senior Indebtedness of the Company is paid in full in cash and until the Notes are paid in full in cash, Holders shall be subrogated to the rights of holders of Senior Indebtedness of the Company to receive distributions applicable to Senior Indebtedness.  A distribution made under this Article 10 to holders of Senior Indebtedness of the Company which otherwise would have been made to Holders is not, as between the Company and Holders, a payment by the Company on its Senior Indebtedness.

SECTION 10.06.Relative Rights.  This Article 10 defines the relative rights of Holders and holders of Senior Indebtedness of the Company. Nothing in this Indenture shall:

(1)  impair, as between the Company and Holders, the obligation of the Company which is absolute and unconditional, to make payments with respect to principal of and interest on the Notes; or

(2)  prevent the Trustee or any Holder from exercising its available remedies upon a Default, subject to the rights of holders of Designated Senior Indebtedness of the Company to receive distributions otherwise payable to Holders.

SECTION 10.07.Subordination May Not Be Impaired by the Company.  No right of any holder of Senior Indebtedness of the Company to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or by its failure to comply with this Indenture.

SECTION 10.08.Right of Trustee and Paying Agent.  Notwithstanding Section 10.03, the Trustee or the Paying Agent may continue to make payments on the Notes and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than two Business Days prior to the date of such payment, a Trust Officer of the Trustee receives notice satisfactory to it that such payments may not be made under this Article 10.  The Company, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness of the Company may give the notice; provided, however, that if an issue of Senior Indebtedness of the Company has a Representative, only the Representative may give the notice.

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Notwithstanding the other provisions of this Indenture, if the Trustee or the Paying Agent holds or receives any payment or distribution in respect of any Obligations with respect to the Notes at a time when the Trustee or the Paying Agent, as applicable, has actual knowledge that such payment or distribution is prohibited by this Article 10, the Trustee or the Paying Agent, as applicable, shall hold it in trust for the holders of Senior Indebtedness and pay it over to them as their interest may appear.

The Trustee, in its individual or any other capacity, may hold Senior Indebtedness of the Company with the same rights it would have if it were not Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights.  The Trustee shall be entitled to all the rights set forth in this Article 10 with respect to any Designated Senior Indebtedness of the Company which may at any time be held by it, to the same extent as any other holder of Designated Senior Indebtedness of the Company; and nothing in Article 7 shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 10 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07.

SECTION 10.09.Distribution or Notice to Representative.  Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of the Company, the distribution may be made and the notice given to their Representative (if any).

SECTION 10.10.Article 10 Not To Prevent Events of Default or Limit Right To Accelerate.  The failure to make a payment pursuant to the Notes by reason of any provision in this Article 10 shall not be construed as preventing the occurrence of a Default.  Except as otherwise provided in Section 10.04, nothing in this Article 10 shall have any effect on the right of the Holders or the Trustee to accelerate the maturity of the Notes.

SECTION 10.11.Trust Moneys Not Subordinated.  Subject to Sections 10.03 and 10.04, payments from money or the proceeds of U.S. Government Obligations held in trust under Article 8 by the Trustee for the payment of principal of and interest on the Notes shall not be subordinated to the prior payment of any Senior Indebtedness of the Company or subject to the restrictions set forth in this Article 10, and none of the Securityholders shall be obligated to pay over any such amount to the Company or any holder of Senior Indebtedness of the Company or any other creditor of the Company.

SECTION 10.12.Trustee Entitled To Rely.  Upon any payment or distribution pursuant to this Article 10, the Trustee and the Holders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 10.02 are pending, (ii) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Holders or (iii) upon the Representatives for the holders of Senior Indebtedness of the Company for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of such Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10.  In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of the Company to participate in any payment or distribution pursuant to this Article 10, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of

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such Person under this Article 10, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment.  The provisions of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 10.

SECTION 10.13.Trustee To Effectuate Subordination.  Each Holder by accepting a Note authorizes and directs the Trustee on such Holder’s behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Holders and the holders of Senior Indebtedness of the Company as provided in this Article 10 and appoints the Trustee as attorney-in-fact for any and all such purposes.

SECTION 10.14.Trustee Not Fiduciary for Holders of Senior Indebtedness.  The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of the Company and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Holders or the Company or any other Person, money or assets to which any holders of Senior Indebtedness of the Company shall be entitled by virtue of this Article 10 or otherwise.

SECTION 10.15.Reliance by Holders of Senior Indebtedness on Subordination Provisions.  Each Holder, by accepting a Note, acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of the Company, whether such Senior Indebtedness was created or acquired before or after the issuance of the Notes, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of such Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness.

SECTION 10.16.Defeasance.  The terms of this Article 10 shall not apply to payments from money or the proceeds of U.S. Government Obligations held in trust by the Trustee pursuant to Article 8 for the payment of principal of and interest on the Notes pursuant to the provisions described in Section 8.02.

ARTICLE 11

GUARANTEES

SECTION 11.01.Guarantee.  (a)  Each Guarantor hereby jointly and severally fully and unconditionally guarantees to each Holder and to the Trustee and its successors and assigns the performance and punctual payment when due, whether at Stated Maturity, by acceleration or otherwise, of all obligations of the Company under this Indenture and the Notes, whether for payment of principal of, premium, if any, or interest on, the Notes, expenses, indemnification or otherwise (all the foregoing being hereinafter collectively called the “Guaranteed Obligations”).  Each Guarantor further agrees that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice or further assent from each such Guarantor, and that each such Guarantor shall remain bound under this Article 11 notwithstanding any extension or renewal of any Guaranteed Obligation.

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Each Guarantor waives presentation to, demand of, payment from and protest to the Company of any of the Guaranteed Obligations and also waives notice of protest for nonpayment.  Each Guarantor waives notice of any default under the Securities or the Guaranteed Obligations.  The obligations of each Guarantor hereunder shall not be affected by (a) the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or remedy against the Company or any other Person under this Indenture, the Securities or any other agreement or otherwise; (b) any extension or renewal of any thereof; (c) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Securities or any other agreement; (d) the release of any security held by any Holder or the Trustee for the Guaranteed Obligations or any of them; (e) the failure of any Holder or Trustee to exercise any right or remedy against any other guarantor of the Guaranteed Obligations; or (f) any change in the ownership of such Guarantor, except as provided in Section 11.02(b).

Each Guarantor hereby waives any right to which it may be entitled to have its obligations hereunder divided among the Guarantors, such that such Guarantor’s obligations would be less than the full amount claimed.  Each Guarantor hereby waives any right to which it may be entitled to have the assets of the Company first be used and depleted as payment of the Company’s or such Guarantor’s obligations hereunder prior to any amounts being claimed from or paid by such Guarantor hereunder.  Each Guarantor hereby waives any right to which it may be entitled to require that the Company be sued prior to an action being initiated against such Guarantor.

Each Guarantor further agrees that its Guarantee herein constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any Holder or the Trustee to any security held for payment of the Guaranteed Obligations.

The Guarantee of each Guarantor is, to the extent and in the manner set forth in Article 12, subordinated and subject in right of payment to the prior payment in full in cash of all Senior Indebtedness of the relevant Guarantor and is made subject to such provisions of this Indenture.

Except as expressly set forth in Sections 8.01(b), 11.02 and 11.06, the obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any Holder or the Trustee to assert any claim or demand or to enforce any remedy under this Indenture, the Securities or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of any Guarantor or would otherwise operate as a discharge of any Guarantor as a matter of law or equity.

Each Guarantee is a continuing guarantee and shall until released in accordance with the next succeeding paragraph:

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(1)  remain in full force and effect until payment in full of all the Guaranteed Obligations;

(2)  be binding upon each such Guarantor and its successors; and

(3)  inure to the benefit of and be enforceable by the Trustee, the Holders and their successors, transferees and assigns.

Each Guarantor further agrees that its Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Guaranteed Obligation is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of the Company or otherwise.

(b)  In furtherance of the foregoing and not in limitation of any other right which any Holder or the Trustee has at law or in equity against any Guarantor by virtue hereof, upon the failure of the Company to pay the principal of or interest on any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Guaranteed Obligation, each Guarantor hereby promises to and shall, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of (i) the unpaid principal amount of such Guarantee then due and owing, (ii) accrued and unpaid interest on such Guarantee (but only to the extent not prohibited by law) and (iii) all other monetary obligations of the Company to the Holders and the Trustee.

(c)  Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any Guaranteed Obligations guaranteed hereby until payment in full of its Guaranteed Obligations and the payment in full in cash of all obligations to which the Guaranteed Obligations are subordinated as provided in Article 12.  Each Guarantor further agrees that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Guaranteed Obligations guaranteed hereby may be accelerated as provided in Article 6 for the purposes of any Guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Guaranteed Obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such Guaranteed Obligations as provided in Article 6, such Guaranteed Obligations (whether or not due and payable) shall forthwith become due and payable by such Guarantor for the purposes of this Section 11.01.

(d)  Each Guarantor also agrees to pay any and all reasonable costs and expenses (including reasonable attorneys’ fees and expenses) incurred by the Trustee or any Holder in enforcing any rights under this Section 11.01.

(e)  Each Guarantor that makes a payment or distribution under its Guarantee shall have the right to seek contribution from the Company or any non-paying Guarantor that has also Guaranteed the relevant Guaranteed Obligations in respect of which such payment or distribution is made, so long as the exercise of such right does not impair the rights of the Holders under the Guarantees.

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(f)  Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that its Guarantee is knowingly made in contemplation of such benefits.

Upon request of the Trustee, each Guarantor shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture.

SECTION 11.02.Limitation on Liability.(a)  Any term or provision of this Indenture to the contrary notwithstanding, the maximum, aggregate amount of the Guaranteed Obligations guaranteed hereunder by any Guarantor shall not exceed the maximum amount that, after giving effect to all other contingent and fixed liabilities of such Guarantor (including, without limitation, all of its obligations with respect to the Credit Agreement) and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to its contribution obligations under this Indenture, can be hereby guaranteed without rendering this Indenture or the Guarantee, as it relates to such Guarantor, voidable or unenforceable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. After the Issue Date, the Company will cause each Restricted Subsidiary that guarantees any Indebtedness under any Senior Credit Document and each Restricted Subsidiary that the Company shall otherwise cause to become a Guarantor pursuant to the terms of this Indenture, to execute and deliver to the Trustee a supplemental indenture pursuant to which such Restricted Subsidiary will guarantee payment of the Notes on an unsecured senior subordinated basis.

(b)  A Guarantee as to any Guarantor that is a Subsidiary of the Company shall terminate and be of no further force or effect and such Guarantor shall be deemed to be released from all obligations under this Article 11; provided that at the time of such release, no Default or Event of Default has occurred and is continuing, upon: (i) the sale or disposition (by merger or otherwise) of such Guarantor, following which such Guarantor is no longer a Restricted Subsidiary of the Company; provided, however, that each such sale or disposition shall comply with this Indenture (including Section 4.06 and Section 5.01(b)); (ii) the merger or consolidation of such Guarantor with and into the Company or another Guarantor that is the surviving Person of such merger or consolidation; or (iii) upon legal defeasance of the Company’s and all Guarantors’ obligations under this Indenture or satisfaction and discharge of this Indenture, in each case, in accordance with the provisions of this Indenture. Upon any such occurrence specified in this Section 11.02, the Trustee shall execute and deliver an appropriate instrument evidencing such release.

SECTION 11.03.Successors and Assigns.  This Article 11 shall be binding upon each Guarantor and its successors and assigns and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Notes shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture.

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SECTION 11.04.No Waiver.  Neither a failure nor a delay on the part of either the Trustee or the Holders in exercising any right, power or privilege under this Article 11 shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege.  The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article 11 at law, in equity, by statute or otherwise.

SECTION 11.05.Modification.  No modification, amendment or waiver of any provision of this Article 11, nor the consent to any departure by any Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Guarantor in any case shall entitle such Guarantor to any other or further notice or demand in the same, similar or other circumstances.

SECTION 11.06.Execution of Supplemental Indenture for Future Guarantors.  Each Subsidiary which is required to become a Guarantor pursuant to Section 4.12 hereof shall execute and deliver to the Trustee a supplemental indenture substantially in the form of Exhibit B hereto pursuant to which such Subsidiary shall become a Guarantor under this Article 11 and shall guarantee the Guaranteed Obligations.  Concurrently with the execution and delivery of such supplemental indenture, the Company shall deliver to the Trustee an Opinion of Counsel and an Officers’ Certificate to the effect that such supplemental indenture has been duly authorized, executed and delivered by such Subsidiary and that, subject to the application of bankruptcy, insolvency, moratorium, fraudulent conveyance or transfer and other similar laws relating to creditors’ rights generally and to the principles of equity, whether considered in a proceeding at law or in equity, the Guarantee of such Guarantor is a legal, valid and binding obligation of such Guarantor, enforceable against such Guarantor in accordance with its terms.

SECTION 11.07.Notation Not Required.  Neither the Company nor any Guarantor shall be required to make a notation on the Notes to reflect any Guarantee or any such release, termination or discharge thereof.

ARTICLE 12
SUBORDINATION OF THE GUARANTEES

SECTION 12.01.Agreement To Subordinate.  Each Guarantor agrees, and each Holder by accepting a Note agrees, that the Indebtedness evidenced by each Guarantee and all other amounts payable under each Guarantee are subordinated in right of payment, to the extent and in the manner provided in this Indenture, to the prior payment in full in cash of all existing and future Senior Indebtedness of such Guarantor (including, without limitation, the Senior Indebtedness of each Guarantor represented by such Guarantor’s guarantee of Obligations under the Credit Agreement), and that the subordination is for the benefit of and enforceable by the holders of Senior Indebtedness.

SECTION 12.02.Liquidation, Dissolution or Bankruptcy.  Upon any payment or distribution of the assets of a Guarantor upon a total or partial liquidation or dissolution,

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bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to such Guarantor or its property, or an assignment for the benefit of its creditors or any marshalling of the Guarantor’s assets or liabilities, the holders of Senior Indebtedness of such Guarantor shall be entitled to receive payment in full in cash of all such Senior Indebtedness of such Guarantor before Holders are entitled to receive any payment under any Guarantee, and until the Senior Indebtedness of such Guarantor is paid in full in cash, any payment or distribution to which Holders would be entitled but for this Article 12 shall be made to holders of such Senior Indebtedness of such Guarantor as their interests may appear.

SECTION 12.03.Default on Designated Senior Indebtedness of a Guarantor.

(a)  A Guarantor may not make any payment pursuant to any of the Guaranteed Obligations and may not otherwise purchase, redeem or otherwise retire any Notes (collectively, “pay its Guarantee”) if (i) a default in the payment of the principal of, premium, if any, or interest on any Designated Senior Indebtedness of such Guarantor occurs and is continuing or any other amount owing in respect of any Designated Senior Indebtedness of such Guarantor is not paid when due, or (ii) any other default on Designated Senior Indebtedness of such Guarantor occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (x) the default has been cured or waived and any such acceleration has been rescinded or (y) such Designated Senior Indebtedness has been paid in full in cash.  However, such Guarantor may pay its Guarantee without regard to the foregoing if such Guarantor and the Trustee receive written notice approving such payment from the Representative of each series of the Designated Senior Indebtedness with respect to which either of the events in clause (i) or (ii) of the immediately preceding sentence has occurred and is continuing. In addition to the foregoing, during the continuance of any default (other than a default described in clause (i) or (ii) of the second preceding sentence) with respect to any Designated Senior Indebtedness of a Guarantor pursuant to which the maturity thereof may be accelerated (x) immediately without further notice (except such notice as may be required to effect such acceleration) or (y) upon the expiration of any applicable grace periods, no Guarantor may pay its Guarantee for a period (a “Guarantee Payment Blockage Period”) commencing upon the receipt by the Trustee (with a copy to the Company) of written notice (a “Guarantee Blockage Notice”) of such default from the Representative of such Designated Senior Indebtedness specifying an election to effect a Guarantee Payment Blockage Period and ending on the earliest to occur of the following events: (1)  179 days shall have elapsed since the receipt of such Guarantee Blockage Notice; (2) such Guarantee Payment Blockage Period is terminated by written notice to the Trustee and the Company from the Person or Persons who gave such Guarantee Blockage Notice; (3) the repayment in full in cash of such defaulted Designated Senior Indebtedness; or (4) the default giving rise to such Guarantee Blockage Notice is no longer continuing. Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in the first sentence of this Section 12.03 and in Section 12.02), unless the holders of such Designated Senior Indebtedness or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, such Guarantor may resume payment on its Guarantee, after the end of such Guarantee Payment Blockage Period.  In no event may the total number of days during which any Guarantee Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate during any 360 consecutive day period. For purposes of this provision, no default or event of default that existed or was continuing on the date of the commencement of any Guarantee Payment Blockage Period

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with respect to the Designated Senior Indebtedness initiating such Guarantee Payment Blockage Period shall be, or be made, the basis of the commencement of a subsequent Guarantee Payment Blockage Period by the Representative of such Designated Senior Indebtedness, unless such default or event of default shall have been cured or waived for a period of not less than 90 consecutive days.

(b)  After the occurrence of an Event of Default, the Company or the Trustee shall promptly notify the holders of the Designated Senior Indebtedness (or their Representative) of such occurrence.  If any Designated Senior Indebtedness is outstanding, a Guarantor may not make any payments pursuant to any of the Guaranteed Obligations until five Business Days after the holders or the Representative of such Designated Senior Indebtedness receives notice of such occurrence and, thereafter, may pay the Notes only if the provisions of this Article 12 otherwise permit payment at that time.

SECTION 12.04.Demand for Payment.  After the occurrence of an Event of Default and a demand for payment is made on a Guarantor pursuant to Article 11, the Trustee shall promptly notify the holders of the Designated Senior Indebtedness (or the Representative of such holders) of such occurrence.

SECTION 12.05.When Distribution Must Be Paid Over.  If a payment or distribution is made to Holders that due to this Article 12 should not have been made to them, such Holders shall hold it in trust for the holders of Senior Indebtedness of such Guarantor and pay it over to them as their interests may appear (except that Holders may receive and retain (i) Permitted Junior Securities and (ii) payments made from the trust pursuant to Section 8.01 so long as, on the date or dates the respective amounts were paid into the trust, such payments were made with respect to the Notes without violating this Article 12 or any other material agreement binding on the Company, including the Credit Agreement).

SECTION 12.06.Subrogation.  After all Designated Senior Indebtedness of a Guarantor is paid in full in cash and until the Notes are paid in full in cash, Holders shall be subrogated to the rights of holders of Senior Indebtedness of such Guarantor to receive distributions applicable to Senior Indebtedness of such Guarantor.  A distribution made under this Article 12 to holders of Senior Indebtedness of such Guarantor which otherwise would have been made to Holders is not, as between such Guarantor and Holders, a payment by such Guarantor its Guarantee.

SECTION 12.07.Relative Rights.  This Article 12 defines the relative rights of Holders and holders of Senior Indebtedness of a Guarantor. Nothing in this Indenture shall:

(1)  impair, as between a Guarantor and Holders, the obligation of a Guarantor which is absolute and unconditional, to make payments with respect to the Guaranteed Obligations to the extent set forth in Article 11; or

(2)  prevent the Trustee or any Holder from exercising its available remedies upon a default by a Guarantor under its obligations with respect to the Guaranteed Obligations, subject to the rights of holders of Senior Indebtedness of such Guarantor to receive distributions otherwise payable to Holders.

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SECTION 12.08.Subordination May Not Be Impaired by a Guarantor.  No right of any holder of Senior Indebtedness of a Guarantor to enforce the subordination of the obligations of such Guarantor hereunder shall be impaired by any act or failure to act by such Guarantor or by its failure to comply with this Indenture.

SECTION 12.09.Right of Trustee and Paying Agent.  Notwithstanding Section 12.03, the Trustee or the Paying Agent may continue to make payments on the Notes and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than two Business Days prior to the date of such payment, a Trust Officer of the Trustee receives notice satisfactory to it that such payments may not be made under this Article 12.  A Guarantor, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness of a Guarantor may give the notice; provided, however, that if an issue of Senior Indebtedness of a Guarantor has a Representative, only the Representative may give the notice.

Notwithstanding the other provisions of this Indenture, if the Trustee or the Paying Agent holds or receives any payment or distribution in respect of any Obligations with respect to the Notes at a time when the Trustee or the Paying Agent, as applicable, has actual knowledge that such payment or distribution is prohibited by this Article 12, the Trustee or the Paying Agent, as applicable, shall hold it in trust for the holders of Senior Indebtedness and pay it over to them as their interest may appear.

The Trustee, in its individual or any other capacity, may hold Senior Indebtedness of a Guarantor with the same rights it would have if it were not Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights.  The Trustee shall be entitled to all the rights set forth in this Article 12 with respect to any Senior Indebtedness of a Guarantor which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness of such Guarantor; and nothing in Article 7 shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 12 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07.

SECTION 12.10.Distribution or Notice to Representative.  Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of a Guarantor, the distribution may be made and the notice given to their Representative (if any).

SECTION 12.11.Article 12 Not To Prevent Events of Default or Limit Right To Accelerate.  The failure of a Guarantor to make a payment on any of its obligations by reason of any provision in this Article 12 shall not be construed as preventing the occurrence of a default by such Guarantor under such obligations.  Nothing in this Article 12 shall have any effect on the right of the Holders or the Trustee to make a demand for payment on a Guarantor pursuant to Article 11.

SECTION 12.12.Trustee Entitled To Rely.  Upon any payment or distribution pursuant to this Article 12, the Trustee and the Holders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 12.02 are pending, (ii) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Holders or (iii) upon the

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Representatives for the holders of Senior Indebtedness of a Guarantor for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness of a Guarantor and other Indebtedness of a Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 12.  In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of a Guarantor to participate in any payment or distribution pursuant to this Article 12, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness of such Guarantor held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article 12, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment.  The provisions of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 12.

SECTION 12.13.Trustee To Effectuate Subordination.  Each Holder by accepting a Note authorizes and directs the Trustee on such Holder’s behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Holders and the holders of Senior Indebtedness of each of the Guarantors as provided in this Article 12 and appoints the Trustee as attorney-in-fact for any and all such purposes.

SECTION 12.14.Trustee Not Fiduciary for Holders of Senior Indebtedness of Guarantor.  The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of any Guarantor and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Holders or the relevant Guarantor or any other Person, money or assets to which any holders of Senior Indebtedness of such Guarantor shall be entitled by virtue of this Article 12 or otherwise.

SECTION 12.15.Reliance by Holders of Senior Indebtedness of a Guarantor on Subordination Provisions.  Each Holder, by accepting a Note, acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of each Guarantor, whether such Senior Indebtedness of such Guarantor was created or acquired before or after the issuance of the Notes, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness of such Guarantor and such holder of Senior Indebtedness of such Guarantor shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness of such Guarantor

SECTION 12.16.Defeasance.  The terms of this Article 12 shall not apply to payments from money or the proceeds of U.S. Government Obligations held in trust by the Trustee pursuant to Article 8 for the payment of principal of and interest on the Notes pursuant to Section 8.02.

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ARTICLE 13

MISCELLANEOUS

SECTION 13.01.Trust Indenture Act Controls.  If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control.

SECTION 13.02.Notices.  Any notice or communication shall be in writing and delivered in person or mailed by first-class mail addressed as follows:

if to the Company or any Guarantor c/o:

Otelco Inc.

505 Third Avenue East

Oneonta, Alabama 35121

Attention: Michael D. Weaver

With a copy to:

Richard A Boehmer, Esq.

O’Melveny & Myers LLP

400 South Hope Street

Los Angeles, California 90071

if to the Trustee:
Wells Fargo Bank, National Association
Corporate Trust Services
Sixth Street & Marquette Avenue
Minneapolis, MN 55479

Attention:  Otelco Administrator

The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications.

Any notice or communication mailed to a Holder shall be mailed to the Holder at the Holder’s address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed.

Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders.  If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it.

SECTION 13.03.Communication by Holders with Other Holders.  Holders may communicate pursuant to Section 312(b) of the TIA with other Holders with respect to their

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rights under this Indenture or the Notes. The Company , the Trustee, the Registrar and anyone else shall have the protection of Section 312(c) of the TIA.

SECTION 13.04.Certificate and Opinion as to Conditions Precedent.  After the date of this Indenture, upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee:

(1)an Officers’ Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and

(2)an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

SECTION 13.05.Statements Required in Certificate or Opinion.  Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture, except for certificates provided for in Section 4.10, shall include:

(1)  a statement that the individual making such certificate or opinion has read such covenant or condition;

(2)  a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(3)  a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(ii)a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with.

SECTION 13.06.When Notes Disregarded.  In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, any Guarantor or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any Guarantor shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which the Trustee knows are so owned shall be so disregarded. Subject to the foregoing, only Notes outstanding at the time shall be considered in any such determination.

SECTION 13.07.Rules by Trustee, Paying Agent and Registrar.  The Trustee may make reasonable rules for action by or a meeting of Holders. The Registrar and the Paying Agent may make reasonable rules for their functions.

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SECTION 13.08.Legal Holidays.  A “Legal Holiday” is a Saturday, a Sunday or a day on which banking institutions are not required to be open in Minnesota or the State of New York. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period.  If a regular record date is a Legal Holiday, the record date shall not be affected.

SECTION 13.09.Governing Law.  THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.  THE TRUSTEE, THE COMPANY, ANY OTHER OBLIGOR IN RESPECT OF THE NOTES AND (BY THEIR ACCEPTANCE OF THE NOTES) THE HOLDERS AGREE TO SUBMIT TO THE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES.

SECTION 13.10.No Recourse Against Others.  A director, officer, employee or stockholder of the Company or any Guarantor shall not have any liability for any obligations of the Company or any Guarantor under the Notes, the Guarantees or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation.  By accepting a Note, each Holder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Notes.

SECTION 13.11.Successors.  All agreements of the Company and each Guarantor in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors.

SECTION 13.12.Multiple Originals.  The parties may sign any number of copies of this Indenture.  Each signed copy shall be an original, but all of them together represent the same agreement.  One signed copy is enough to prove this Indenture.

SECTION 13.13.Table of Contents; Headings.  The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof.

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IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above.

OTELCO INC.
By:	/s/ Michael D. Weaver
Name:  Michael D. Weaver
Title:  President
OTELCO TELECOMMUNICATIONS LLC (as Guarantor)
By:	/s/ Michael D. Weaver
	Name:  Michael D. Weaver
	Title:  President
OTELCO TELEPHONE LLC
(as Guarantor)
By:	/s/ Michael D. Weaver
	Name:  Michael D. Weaver
	Title:  President
HOPPER HOLDING COMPANY, INC.
(as Guarantor)
By:	/s/ Michael D. Weaver
	Name:  Michael D. Weaver
	Title:  President
HOPPER TELECOMMUNICATIONS COMPANY, INC. (as Guarantor)
By:	/s/ Michael D. Weaver
	Name:  Michael D. Weaver
	Title:  President

[Indenture Signature Page]

BRINDLEE HOLDINGS LLC
(as Guarantor)
By:	/s/ Michael D. Weaver
	Name:  Michael D. Weaver
	Title:  President
BRINDLEE MOUNTAIN TELEPHONE COMPANY (as Guarantor)
By:	/s/ Michael D. Weaver
	Name:  Michael D. Weaver
	Title:  President
PAGE & KISER COMMUNICATIONS, INC. (as Guarantor)
By:	/s/ Michael D. Weaver
	Name:  Michael D. Weaver
	Title:  President
BLOUNTSVILLE TELEPHONE COMPANY INC. (as Guarantor)
By:	/s/ Michael D. Weaver
	Name:  Michael D. Weaver
	Title:  President
MID-MISSOURI HOLDING CORP. (as Guarantor)
By:	/s/ Michael D. Weaver
	Name:  Michael D. Weaver
	Title:  Chief Executive Officer

IMAGINATION, INC. (as Guarantor)
By:	/s/ Michael D. Weaver
	Name:  Michael D. Weaver
	Title:  Chief Executive Officer

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee
By:	/s/ Jeffrey Rose
Name:  Jeffrey Rose
Title:  Corporate Trust Officer

EXHIBIT A

Part I

[FORM OF DEPOSITORY NOTE]

[Global Note Legend]

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

THE COMPANY MAY SUBSEQUENTLY ISSUE NOTES THAT ARE IDENTICAL IN ALL MATERIAL RESPECTS TO THIS NOTE BUT HAVE ORIGINAL ISSUE DISCOUNT.  IN SUCH CASE, THE HOLDER OF THIS NOTE WILL EXCHANGE A PORTION OF HIS NOTES FOR SUCH NEWLY ISSUED NOTES WITH ORIGINAL ISSUE DISCOUNT.  THE AGGREGATE PRINCIPAL AMOUNT OF NOTES OWNED BY SUCH HOLDER, HOWEVER, WILL NOT CHANGE AS A RESULT OF SUCH EXCHANGE.  AFTER ISSUANCE OF ANY SUCH NOTES WITH ORIGINAL DISCOUNT, A HOLDER MAY OBTAIN THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE ISSUE DATE, THE ISSUE PRICE AND THE YIELD TO MATURITY BY SUBMITTING A WRITTEN REQUEST TO THE COMPANY AT 505 THIRD AVENUE EAST, ONEONTA, ALABAMA 35121, ATTN:  CHIEF FINANCIAL OFFICER.

No. $

13% Senior Surbordinated Note due 2019

CUSIP No.                    

OTELCO INC., a Delaware corporation, promises to pay to Cede & Co., or registered assigns, the principal sum [of      Dollars] [listed on the Schedule of Increases or Decreases in Global Note attached hereto](1) on December 30, 2019.

Interest Payment Dates:

Record Dates:                     .

(1)Use the Schedule of Increases and Decreases language for a Global Note.

Additional provisions of this Note are set forth on the other side of this Note.

IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed.

	OTELCO INC.
	By:
	Name:
	Title:
Dated:
TRUSTEE’S CERTIFICATE OF
AUTHENTICATION
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee, certifies that this is one of
the Notes referred to in the Indenture.
By:
Authorized Signatory

[FORM OF REVERSE SIDE OF NOTE]

13% Senior Subordinated Note due 2019

Capitalized terms used but not defined herein shall have the meanings given to such terms in the Indenture (as defined).

1.Interest; Extension of Maturity

Otelco Inc., a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the “Company”), promises to pay interest on the principal amount of this 13% senior surbordinated note due 2019 (the “Note”) at the rate per annum shown above.  The Company shall pay interest from December 21, 2004 or from the most recent date to which interest has been paid or provided for, payable quarterly in arrears on March 30, June 30, September 30 and December 30, to Holders of record at the close of business on the 15^th day of such month, commencing March 30, 2005, provided that if any such day is not a Business Day, such day shall be the next Business Day, and no interest on such payment shall accrue for the period from and after such interest payment date.

Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.

Prior to December 30, 2009, the Company may, at its election, defer interest payments on the Notes on one or more occasions for not more than eight quarters in the aggregate (any such period, an “Initial Interest Deferral Period”); provided that (1) at the end of each occasion, the Company will be obligated to resume quarterly payments of interest on the Notes including interest on deferred interest; and (2) no later than December 30, 2009, the Company must pay in full all deferred interest, together with accrued interest thereon.

In addition, after December 30, 2009 the Company may, at its election, defer interest payments on the Notes on up to four occasions with respect to up to two quarters per occasion (each such occasion together with the Initial Interest Deferral Period, an “Interest Deferral Period”); provided that (1) the Company may not defer interest on any occasion after December 30, 2009 unless and until all interest deferred on any prior occasion, together with accrued interest thereon, has been paid in full; (2) at the end of each occasion, the Company will be obligated to resume quarterly payments of interest on the Notes including interest on deferred interest; and (3) no later than December 30, 2019, the Company must pay all deferred interest, together with accrued interest thereon.

On each occasion that the Company elects to defer interest, it will be required to deliver to the Trustee a copy of a resolution of the Company’s Board of Directors to the effect that, based upon a good-faith determination of the Company’s Board of Directors, (x) such interest deferral is reasonably necessary for bona-fide cash management purposes, whether indicated by cumulative distributable cash shortfall or otherwise, or to reduce the likelihood of or avoid a payment default under any Designated Senior Indebtedness or (y) as long the Credit Agreement remains in effect, the Company has failed to maintain a fixed charge coverage ratio of at least 1.15:1:00 or a senior leverage ratio of not more than 3.20 to 1.00, in each case, as calculated in

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accordance with the provisions contained in the Credit Agreement the date hereof, irrespective of any subsequent changes to the Credit Agreement; provided no such deferral may be commenced, and any ongoing deferral shall cease, if a default in payment of interest, principal or premium, if any, on the Notes has occurred and is continuing, or another Event of Default with respect to the Notes has occurred and is continuing and the Notes have been accelerated as a result of the occurrence of such Event of Default.

Deferred interest on the Notes shall bear interest at the same rate as the stated rate on the Notes, compounded quarterly, until paid in full.  Following the end of any Interest Deferral Period, the Company shall be obligated to resume quarterly payments of interest on the Notes, including interest on deferred interest. All interest deferred prior to December 30, 2009, shall be repaid no later than December 30, 2009. All interest deferred after December 30, 2009 shall be repaid on or before maturity. The Company may prepay all or part of the deferred interest, at any time other than during an Interest Deferral Period.

The Notes will mature on December 30, 2019.

2.Method of Payment

The Company shall pay interest on the Notes (except defaulted interest) to the Persons who are registered holders of Notes at the close of business on the 15^th day of the month of the interest payment date even if Notes are canceled after the record date and on or before the interest payment date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company shall pay principal, premium, if any, and interest in money of the United States.  Payments in respect of the Notes represented by a Global Note (including principal, premium, if any, and interest) shall be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company will make all payments in respect of a Physical Note (including principal, premium, if any, and interest), and the Notes may be exchanged or transferred, at office or agency of the Company in the Borough of Manhattan, The City of New York (which initially shall be the office of the Trustee maintained for such purpose at The Depository Trust Company, 55 Water Street, New York, NY 10041), except that, at the option of the Company, payment of interest may be made by check mailed to the Holders at their registered addresses.

3.Paying Agent and Registrar

Initially, the Trustee will act as Paying Agent and as Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar upon written notice to such Paying Agent or Registrar and the Trustee. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar.

4.Indenture

The Company issued the Notes under an Indenture dated as of December 21, 2004 (the “Indenture”), among the Company, the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the date of the Indenture (the “TIA”). Terms defined in the Indenture and not defined herein have the meanings

ascribed thereto in the Indenture. The Notes are subject to all terms and provisions of the Indenture, and Holders are referred to the Indenture and the TIA for a statement of such terms and provisions.

This Note is one of the Notes referred to in the Indenture. The Notes include the Original Notes and any Additional Notes. The Original Notes and any Additional Notes shall be part of the same series issued and will vote together on all matters subject to the conditions set forth in the Indenture.  The Company shall only be entitled to issue Additional Notes in accordance with Section 4.14 of the Indenture.  Additional Notes shall be issued with terms substantially identical to the Original Notes, except for any variation in issuance date and, upon the issuance of Additional Notes with original issue discount (and any issuance of Additional Notes thereafter), CUSIP number.  The Indenture imposes certain limitations on the ability of the Company and its Restricted Subsidiaries to, among other things, incur Indebtedness and issue Disqualified Stock and Preferred Stock; pay dividends on, and redeem, capital stock and redeem Indebtedness that is subordinate in right of payment to the Notes; make certain other Restricted Payments, including Investments; enter into consensual restrictions on the payment of certain dividends and distributions by Restricted Subsidiaries; enter into or permit certain transactions with Affiliates; create or incur Liens; and make Asset Sales. The Indenture also imposes limitations on the ability of the Company to consolidate or merge with or into or wind up into any other Person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of their property or assets in one or more related transactions to any Person.

To guarantee the due and punctual payment of the principal and interest on the Notes and all other amounts payable by the Company under the Indenture and the Notes when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Notes and the Indenture, the Guarantors have jointly and severally, fully and unconditionally guaranteed the Guaranteed Obligations on a subordinated basis pursuant to the terms of the Indenture.

5.Optional Redemption

The Company may, at its option, redeem all, but not less than all, of the Notes at any time upon not less than 30 nor more than 60 days’ prior notice, at a redemption price equal to 100% of the principal amount of the Notes plus accrued and unpaid interest to the redemption date, upon the occurrence of a Tax event.

Except as set forth in the preceding paragraph, the Company may not redeem Notes at its option prior to December 30, 2011.

At any time and from time to time on or after December 30, 2011, the Notes shall be redeemable, at the Company’s option, in whole or in part for cash at the following redemption prices (expressed as a percentage of principal amount), plus accrued and unpaid interest on the Notes redeemed, to the relevant Redemption Date, if redeemed during the 12-month period commencing on December 30 of the years set forth below:

Period	Redemption Price
2011	106.500	%
2012	105.200	%
2013	103.900	%
2014	102.600	%
2015	101.300	%
2016 and thereafter	100.000	%

On and after the redemption date, interest will cease to accrue on Notes or portions thereof called for redemption, so long as the Company has deposited with the paying agent funds (in US Dollars) sufficient to pay the principal of, plus accrued and unpaid interest (including any deferred interest and accrued interest thereon) on, the Notes to be redeemed.

A full or partial redemption of the Notes will result in an automatic separation of the IDSs.

6.Sinking Fund

The Notes are not subject to any sinking fund.

7.Notice of Redemption

Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at his or her registered address. Notes may be redeemed in part.  If money sufficient to pay the redemption price of and accrued and unpaid interest on all Notes (or portions thereof) to be redeemed on the Redemption Date is deposited with the Paying Agent on or before 10:00 am, New York City time on the Redemption Date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Notes (or such portions thereof) called for redemption.

8.Repurchase of Notes at the Option of Holders upon Change of Control

Upon a Change of Control, any Holder of Notes will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Notes of such Holder at a purchase price equal to 101% of the principal amount of the Notes to be repurchased plus accrued and unpaid interest to the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture.

9.Subordination

The Notes and each Guarantee is subordinated to Senior Indebtedness of the Company and the applicable Guarantor, as defined in the Indenture, respectively. To the extent provided in the Indenture, Senior Indebtedness of the Company and the applicable Guarantor must be paid in full in cash before the Notes may be paid by the Company and the Guarantee of such Guarantor

97

may be paid by such Guarantor.  The Company and each Guarantor agrees, and each Holder by accepting a Note agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose.

10.Transfer; Exchange

The Notes are in registered form without coupons. A Holder may transfer or exchange Notes in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Notes (i) selected for redemption (except, in the case of a Note to be redeemed in part, the portion of the Note not to be redeemed), (ii) during a period beginning at the opening of business 15 days prior to a selection of Notes to be redeemed and ending on the relevant Redemption Date, (iii) tendered in a Change of Control Offer or Asset Sale Offer or (iv) during a period beginning on the opening of business 15 days before a record date for the payment of interest and ending on the applicable succeeding interest payment date.

11.Persons Deemed Owners

The registered Holder of this Note may be treated as the owner of it for all purposes.

12.Unclaimed Money

If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment.

13.Discharge and Defeasance

Subject to certain conditions, the Company at any time may terminate some of or all its obligations under the Notes and the Indenture if the Company deposits or causes to be deposited with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Notes to redemption or maturity, as the case may be. In the event that the Company exercises its right to terminate some of or all its obligations under the Notes and the Indenture in accordance with the preceding sentence, each Guarantor will be released from its related obligations with respect to its Guarantee.

14.Amendment, Waiver

Without the consent of each Holder affected, an amendment or waiver may not: (1) reduce the amount of Notes whose Holders must consent to an amendment; (2) reduce the rate of or extend the time for payment of interest on any Note, or amend the Company’s right to defer interest on the Notes in a manner adverse to the Holders; (3) reduce the principal of or extend the Stated Maturity of any Note; (4) reduce the premium payable upon the redemption of any Note or change the time at which any Note may be redeemed in accordance with Article 3 of the

Indenture; (5) make any Note payable in money other than that stated in the Note; (6) make any change in Article 10 or Article 12 of the Indenture that adversely affects the rights of any Holder under Article 10 or Article 12 of the Indenture; (7) impair the right of any Holder to receive payment of principal of, premium, if any, and interest on such Holder’s Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s Notes; (8) except in connection with an offer by the Company to purchase all of the Notes (in which case a majority in principal amount of Notes will be sufficient),  (A) make any change to the provisions of Section 4.05 of the Indenture that eliminate the prohibition on paying dividends while interest is being deferred, while any previously Deferred Interest remains unpaid or during a Dividend Suspension Period, or during the continuance of any Event of Default, (B) make a change to lower the Interest Coverage Ratio threshold for a Dividend Suspension Period or make a change to paragraph (c) of Section 4.04 of the Indenture that would have the effect of increasing the amounts permitted to be distributed in respect of the Company’s Capital Stock, (C) waive an Event of Default under Section 6.01(k) of the Indenture; (9) make any change in the amendment provisions which require each Holder’s consent or in the waiver provisions; or (10) modify the Guarantees in any manner adverse to the Holders.

Without the consent of any Holder of Notes, the Company and the Trustee may amend the Indenture or the Notes to (1) cure any ambiguity, omission, defect or inconsistency; (2) provide for the assumption by a successor corporation, partnership, limited liability company or other entity of the obligations of the Company under this Indenture; (3) provide for uncertificated Notes in addition to or in place of Physical Notes; provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Internal Revenue Code or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Internal Revenue Code; (4) to make any change in Article 10 or Article 12 of the Indenture that would limit or terminate the benefits available to any holder of Senior Indebtedness (or Representatives therefor) under Article 10 or Article 12 of the Indenture; (5) add additional Guarantees with respect to the Notes; (6) secure the Notes; (7) add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; (8)  make any change that does not adversely affect the legal rights or entitlements under this Indenture of any Holder to comply with any requirement of the SEC or in connection with the qualification of this Indenture under the TIA; or (9) enter into one or more supplemental indentures to effect any of the amendments set forth herein or to set forth the terms of and issue any Additional Notes in accordance with the provisions of this Indenture.

Notwithstanding the foregoing, an amendment under this paragraph 14 may not make any change that adversely affects the rights under Article 10 or Article 12 of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change.

15.Defaults and Remedies

If an Event of Default occurs (other than an Event of Default pursuant to Section 6.01(g) or (h)) and is continuing, the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes may declare the principal of, premium if any, and accrued but unpaid interest on all the Notes to be due and payable. Upon such a declaration, such principal and interest shall be due and payable. If an Event of Default relating to certain events of bankruptcy, insolvency or

reorganization of the Company occurs, the principal of, premium, if any, and interest on all the Notes shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holders.

If an Event of Default occurs and is continuing, the Trustee shall be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to the Indenture or the Notes unless (i) such Holder has previously given the Trustee notice that an Event of Default is continuing, (ii) Holders of at least 25% in principal amount of the outstanding Notes have requested the Trustee in writing to pursue the remedy, (iii) such Holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense, (iv) the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity and (v) the Holders of a majority in principal amount of the outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period. Subject to certain restrictions, the Holders of a majority in principal amount of the outstanding Notes are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability. Prior to taking any action under the Indenture, the Trustee will be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action.

If a Default occurs and is continuing and is actually known to the Trustee, the Trustee must mail to each Holder notice of the Default within the earlier of 90 days after it occurs or 30 days after it is actually known to a Trust Officer or written notice of it is received by the Trustee. Except in the case of a Default in the payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold notice if and so long as a committee of its Trust Officers in good faith determines that withholding notice is in the interests of the Noteholders. In addition, the Company is required to deliver, to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any Event of Default that occurred during the previous year. The Company also is required to deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any event which would constitute certain Defaults, their status and what action the Company is taking or proposes to take in respect thereof.

16.Subsequent Issuance

The Company may only issue Additional Notes in accordance with Section 4.14 of the Indenture.

The Company agrees, and by purchasing the Notes each Holder shall be deemed to have agreed, that upon the issuance by the Company of any Additional Notes, if the Company determines that such Additional Notes were issued with original issue discount, immediately following such issuance (and any issuance of Additional Notes thereafter), a portion of each Holder’s Original Notes and/or Additional Notes, as applicable, will automatically, without any

action by such Holder, be exchanged (the “Automatic Exchange”) for a portion of each other Holder’s Notes, such that immediately after the Automatic Exchange, each Holder will hold Notes issued prior to the date of issuance of such Additional Notes and such Additional Notes in the same proportion as the ratio of the then outstanding aggregate principal amount of such Notes to the then outstanding aggregate principal amount of such Additional Notes.  The aggregate stated principal amount of Notes owned by each Holder will not change as a result of the Automatic Exchange.  Immediately following the Automatic Exchange, the Company and the Trustee will instruct DTC to facilitate the combination of the Notes issued prior to the date of issuance of such Additional Notes and such Additional Notes into indivisible units.

At least ten (10) business days prior to the closing of the issuance of Additional Notes that will result in an Automatic Exchange, the Company shall notify the Trustee, in writing of its intention to consummate such subsequent issuance and shall instruct the Trustee and DTC to take any action necessary to effect the Automatic Exchange.  Such notice may be revoked at any time prior to the date fixed for such Automatic Exchange.

The Company agrees, and by acceptance of beneficial ownership in the Notes each beneficial owner of the Notes shall be deemed to have agreed, that (1) the Company will report any “original issue discount” (as determined for U.S. federal income tax purposes) associated with the Original Notes and Additional Notes among all beneficial owners in proportion to their ownership of the aggregate principal amount of Notes and (2) each beneficial owner of the Notes shall report such original issue discount in this manner and shall not take an inconsistent position for any applicable tax purpose.

17.Trustee Dealings with the Company

Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.

18.No Recourse Against Others

A director, officer, employee or stockholder of the Company or any Guarantor shall not have any liability for any obligations of the Company or any Guarantor under the Notes, the Guarantees or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes.

19.Authentication

This Note shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Note.

20.Abbreviations

Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/GIMIA (=Uniform Gift to Minors Act).

21.Governing Law

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.  THE HOLDERS AGREE TO SUBMIT TO THE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE INDENTURE OR THIS NOTE.

22.CUSIP Numbers

Pursuant to a recommendation promulgated by the Committee on Uniform Note Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

23.Tax Treatment. 

By acceptance of beneficial ownership interest in this Note each beneficial Owner of Notes will be deemed to have agreed, (1) to treat itself as owner of the Notes for all purposes, including the preparation and filing of any United States federal, state, local or foreign tax return, report, or other information; (2) to treat the Notes as indebtedness for all tax purposes, (3) to treat the acquisition of an IDS as the acquisition of the Notes and Common Stock which are represented by the IDS and (4) to allocate the initial purchase price of the IDS upon original issuance between the Notes and the Common Stock in the proportions as $                      and $                        respectively.

The Company will furnish to any Holder of Notes upon written request and without charge to the Holder a copy of the Indenture which has in it the text of this Note.

ASSIGNMENT FORM

To assign this Note, fill in the form below:

I or we assign and transfer this Note to

(Print or type assignee’s name, address and zip code)

(Insert assignee’s soc. sec. or tax I.D. No.)

and irrevocably appoint                       agent to transfer this Note on the books of the Company. The agent may substitute another to act for him.

Date:	Your Signature:
Sign exactly as your name appears on the other side of this Note.

[TO BE ATTACHED TO GLOBAL NOTES]

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE

The initial principal amount of this Global Note is $[           ]. The following increases or decreases in this Global Note have been made:

Date of
Exchange Amount of decrease
in Principal Amount
of this Global Note Amount of increase
in Principal
Amount of this
Global Note Principal amount of
this Global Note
following such
decrease or increase Signature of authorized
signatory of Trustee or
Notes Custodian

OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Company pursuant to Section 4.06 (Asset Sale) or 4.09 (Change of Control) of the Indenture, check the box:

Asset Sale o Change of Control o

If you want to elect to have only part of this Note purchased by the Company pursuant to Section 4.06 or 4.09 of the Indenture, state the amount:

Date:		Your Signature:
(Sign exactly as your name appears on the other side of the Note)
Signature Guarantee:
	Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee

Part II

[FORM OF GLOBAL NOTE CUSTODIAN NOTE]

[Global Note Legend]

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF WELLS FARGO BANK, NATIONAL ASSOCIATION (“WELLS FARGO”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF WELLS FARGO OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF WELLS FARGO (AND ANY PAYMENT IS MADE TO WELLS FARGO OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF WELLS FARGO), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, WELLS FARGO, HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF WELLS FARGO OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

THE COMPANY MAY SUBSEQUENTLY ISSUE NOTES THAT ARE IDENTICAL IN ALL MATERIAL RESPECTS TO THIS NOTE BUT HAVE ORIGINAL ISSUE DISCOUNT.  IN SUCH CASE, THE HOLDER OF THIS NOTE WILL EXCHANGE A PORTION OF HIS NOTES FOR SUCH NEWLY ISSUED NOTES WITH ORIGINAL ISSUE DISCOUNT.  THE AGGREGATE PRINCIPAL AMOUNT OF NOTES OWNED BY SUCH HOLDER, HOWEVER, WILL NOT CHANGE AS A RESULT OF SUCH EXCHANGE.  AFTER ISSUANCE OF ANY SUCH NOTES WITH ORIGINAL DISCOUNT, A HOLDER MAY OBTAIN THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE ISSUE DATE, THE ISSUE PRICE AND THE YIELD TO MATURITY BY SUBMITTING A WRITTEN REQUEST TO THE COMPANY AT 505 THIRD AVENUE EAST, ONEONTA, ALABAMA 35121, ATTN:  CHIEF FINANCIAL OFFICER.

No.              $                         

13% Senior Surbordinated Note due 2019

CUSIP No.                   

OTELCO INC., a Delaware corporation, promises to pay to Wells Fargo Bank, National Association, or registered assigns, the principal sum [of         Dollars] [listed on the Schedule of Increases or Decreases in Global Note attached hereto](2) on December 30, 2019.

Interest Payment Dates:

Record Dates:                  .

(2)           Use the Schedule of Increases and Decreases language for a Global Note.

Additional provisions of this Note are set forth on the other side of this Note.

IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed.

OTELCO INC.

By:

Name:

Title:

Dated:

TRUSTEE’S CERTIFICATE OF
	AUTHENTICATION
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee, certifies that this is one of the Notes referred to in the Indenture.
By:
Authorized Signatory

[FORM OF REVERSE SIDE OF NOTE]

13% Senior Subordinated Note due 2019

Capitalized terms used but not defined herein shall have the meanings given to such terms in the Indenture (as defined).

1.  Interest; Extension of Maturity

Otelco Inc., a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the “Company”), promises to pay interest on the principal amount of this 13% senior surbordinated note due 2019 (the “Note”) at the rate per annum shown above.  The Company shall pay interest from December 21, 2004 or from the most recent date to which interest has been paid or provided for, payable quarterly in arrears on March 30, June 30, September 30 and December 30, to Holders of record at the close of business on the 15^th day of such month, commencing March 30, 2005, provided that if any such day is not a Business Day, such day shall be the next Business Day, and no interest on such payment shall accrue for the period from and after such interest payment date.

Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.

Prior to December 30, 2009, the Company may, at its election, defer interest payments on the Notes on one or more occasions for not more than eight quarters in the aggregate (any such period, an “Initial Interest Deferral Period”); provided that (1) at the end of each occasion, the Company will be obligated to resume quarterly payments of interest on the Notes including interest on deferred interest; and (2) no later than December 30, 2009, the Company must pay in full all deferred interest, together with accrued interest thereon.

In addition, after December 30, 2009 the Company may, at its election, defer interest payments on the Notes on up to four occasions with respect to up to two quarters per occasion (each such occasion together with the Initial Interest Deferral Period, an “Interest Deferral Period”); provided that (1) the Company may not defer interest on any occasion after December 30, 2009 unless and until all interest deferred on any prior occasion, together with accrued interest thereon, has been paid in full; (2) at the end of each occasion, the Company will be obligated to resume quarterly payments of interest on the Notes including interest on deferred interest; and (3) no later than December 30, 2019, the Company must pay all deferred interest, together with accrued interest thereon.

On each occasion that the Company elects to defer interest, it will be required to deliver to the Trustee a copy of a resolution of the Company’s Board of Directors to the effect that, based upon a good-faith determination of the Company’s Board of Directors, (x) such interest deferral is reasonably necessary for bona-fide cash management purposes, whether indicated by cumulative distributable cash shortfall or otherwise, or to reduce the likelihood of or avoid a payment default under any Designated Senior Indebtedness or (y) as long the Credit Agreement remains in effect, the Company has failed to maintain a fixed charge coverage ratio of at least 1.15:1:00 or a senior leverage ratio of not more than 3.20 to 1.00, in each case, as calculated in

accordance with the provisions contained in the Credit Agreement the date hereof, irrespective of any subsequent changes to the Credit Agreement; provided no such deferral may be commenced, and any ongoing deferral shall cease, if a default in payment of interest, principal or premium, if any, on the Notes has occurred and is continuing, or another Event of Default with respect to the Notes has occurred and is continuing and the Notes have been accelerated as a result of the occurrence of such Event of Default.

Deferred interest on the Notes shall bear interest at the same rate as the stated rate on the Notes, compounded quarterly, until paid in full.  Following the end of any Interest Deferral Period, the Company shall be obligated to resume quarterly payments of interest on the Notes, including interest on deferred interest. All interest deferred prior to December 30, 2009, shall be repaid no later than December 30, 2009. All interest deferred after December 30, 2009 shall be repaid on or before maturity. The Company may prepay all or part of the deferred interest, at any time other than during an Interest Deferral Period.

The Notes will mature on December 30, 2019.

2.  Method of Payment

The Company shall pay interest on the Notes (except defaulted interest) to the Persons who are registered holders of Notes at the close of business on the 15^th day of the month of the interest payment date even if Notes are canceled after the record date and on or before the interest payment date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company shall pay principal, premium, if any, and interest in money of the United States.  Payments in respect of the Notes represented by a Global Note (including principal, premium, if any, and interest) shall be made by wire transfer of immediately available funds to the accounts specified by Wells Fargo Bank, National Association. The Company will make all payments in respect of a Physical Note (including principal, premium, if any, and interest), and the Notes may be exchanged or transferred, at the office or agency of Wells Fargo Bank, National Association, except that, at the option of the Company, payment of interest may be made by check mailed to the Holders at their registered addresses.

3.  Paying Agent and Registrar

Initially, the Trustee will act as Paying Agent and as Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar upon written notice to such Paying Agent or Registrar and the Trustee. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar.

4.  Indenture

The Company issued the Notes under an Indenture dated as of December 21, 2004 (the “Indenture”), among the Company, the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the date of the Indenture (the “TIA”). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Notes are subject to all terms and provisions of the

Indenture, and Holders are referred to the Indenture and the TIA for a statement of such terms and provisions.

This Note is one of the Notes referred to in the Indenture. The Notes include the Original Notes and any Additional Notes. The Original Notes and any Additional Notes shall be part of the same series issued and will vote together on all matters subject to the conditions set forth in the Indenture.  The Company shall only be entitled to issue Additional Notes in accordance with Section 4.14 of the Indenture.  Additional Notes shall be issued with terms substantially identical to the Original Notes, except for any variation in issuance date and, upon the issuance of Additional Notes with original issue discount (and any issuance of Additional Notes thereafter), CUSIP number.  The Indenture imposes certain limitations on the ability of the Company and its Restricted Subsidiaries to, among other things, incur Indebtedness and issue Disqualified Stock and Preferred Stock; pay dividends on, and redeem, capital stock and redeem Indebtedness that is subordinate in right of payment to the Notes; make certain other Restricted Payments, including Investments; enter into consensual restrictions on the payment of certain dividends and distributions by Restricted Subsidiaries; enter into or permit certain transactions with Affiliates; create or incur Liens; and make Asset Sales. The Indenture also imposes limitations on the ability of the Company to consolidate or merge with or into or wind up into any other Person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of their property or assets in one or more related transactions to any Person.

To guarantee the due and punctual payment of the principal and interest on the Notes and all other amounts payable by the Company under the Indenture and the Notes when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Notes and the Indenture, the Guarantors have jointly and severally, fully and unconditionally guaranteed the Guaranteed Obligations on a subordinated basis pursuant to the terms of the Indenture.

5.  Optional Redemption

The Company may, at its option, redeem all, but not less than all, of the Notes at any time upon not less than 30 nor more than 60 days’ prior notice, at a redemption price equal to 100% of the principal amount of the Notes plus accrued and unpaid interest to the redemption date, upon the occurrence of a Tax event.

Except as set forth in the preceding paragraph, the Company may not redeem Notes at its option prior to December 30, 2011.

At any time and from time to time on or after December 30, 2011, the Notes shall be redeemable, at the Company’s option, in whole or in part for cash at the following redemption prices (expressed as a percentage of principal amount), plus accrued and unpaid interest on the Notes redeemed, to the relevant Redemption Date, if redeemed during the 12-month period commencing on December 30 of the years set forth below:

Period	Redemption Price
2011	106.500	%
2012	105.200	%
2013	103.900	%
2014	102.600	%
2015	101.300	%
2016 and thereafter	100.000	%

On and after the redemption date, interest will cease to accrue on Notes or portions thereof called for redemption, so long as the Company has deposited with the paying agent funds (in US Dollars) sufficient to pay the principal of, plus accrued and unpaid interest (including any deferred interest and accrued interest thereon) on, the Notes to be redeemed.

A full or partial redemption of the Notes will result in an automatic separation of the IDSs.

6.  Sinking Fund

The Notes are not subject to any sinking fund.

7.  Notice of Redemption

Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at his or her registered address. Notes may be redeemed in part.  If money sufficient to pay the redemption price of and accrued and unpaid interest on all Notes (or portions thereof) to be redeemed on the Redemption Date is deposited with the Paying Agent on or before 10:00 am, New York City time on the Redemption Date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Notes (or such portions thereof) called for redemption.

8.  Repurchase of Notes at the Option of Holders upon Change of Control

Upon a Change of Control, any Holder of Notes will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Notes of such Holder at a purchase price equal to 101% of the principal amount of the Notes to be repurchased plus accrued and unpaid interest to the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture.

9.  Subordination

The Notes and each Guarantee is subordinated to Senior Indebtedness of the Company and the applicable Guarantor, as defined in the Indenture, respectively. To the extent provided in the Indenture, Senior Indebtedness of the Company and the applicable Guarantor must be paid in full in cash before the Notes may be paid by the Company and the Guarantee of such Guarantor may be paid by such Guarantor.  The Company and each Guarantor agrees, and each Holder by

accepting a Note agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose.

10.  Transfer; Exchange

The Notes are in registered form without coupons. A Holder may transfer or exchange Notes in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Notes (i) selected for redemption (except, in the case of a Note to be redeemed in part, the portion of the Note not to be redeemed), (ii) during a period beginning at the opening of business 15 days prior to a selection of Notes to be redeemed and ending on the relevant Redemption Date, (iii) tendered in a Change of Control Offer or Asset Sale Offer or (iv) during a period beginning on the opening of business 15 days before a record date for the payment of interest and ending on the applicable succeeding interest payment date.

11.  Persons Deemed Owners

The registered Holder of this Note may be treated as the owner of it for all purposes.

12.  Unclaimed Money

If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment.

13.  Discharge and Defeasance

Subject to certain conditions, the Company at any time may terminate some of or all its obligations under the Notes and the Indenture if the Company deposits or causes to be deposited with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Notes to redemption or maturity, as the case may be. In the event that the Company exercises its right to terminate some of or all its obligations under the Notes and the Indenture in accordance with the preceding sentence, each Guarantor will be released from its related obligations with respect to its Guarantee.

14.  Amendment, Waiver

Without the consent of each Holder affected, an amendment or waiver may not: (1) reduce the amount of Notes whose Holders must consent to an amendment; (2) reduce the rate of or extend the time for payment of interest on any Note, or amend the Company’s right to defer interest on the Notes in a manner adverse to the Holders; (3) reduce the principal of or extend the Stated Maturity of any Note; (4) reduce the premium payable upon the redemption of any Note or change the time at which any Note may be redeemed in accordance with Article 3 of the Indenture; (5) make any Note payable in money other than that stated in the Note; (6) make any

change in Article 10 or Article 12 of the Indenture that adversely affects the rights of any Holder under Article 10 or Article 12 of the Indenture; (7) impair the right of any Holder to receive payment of principal of, premium, if any, and interest on such Holder’s Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s Notes; (8) except in connection with an offer by the Company to purchase all of the Notes (in which case a majority in principal amount of Notes will be sufficient),  (A) make any change to the provisions of Section 4.05 of the Indenture that eliminate the prohibition on paying dividends while interest is being deferred, while any previously Deferred Interest remains unpaid or during a Dividend Suspension Period, or during the continuance of any Event of Default, (B) make a change to lower the Interest Coverage Ratio threshold for a Dividend Suspension Period or make a change to paragraph (c) of Section 4.04 of the Indenture that would have the effect of increasing the amounts permitted to be distributed in respect of the Company’s Capital Stock, (C) waive an Event of Default under Section 6.01(k) of the Indenture; (9) make any change in the amendment provisions which require each Holder’s consent or in the waiver provisions; or (10) modify the Guarantees in any manner adverse to the Holders.

Without the consent of any Holder of Notes, the Company and the Trustee may amend the Indenture or the Notes to (1) cure any ambiguity, omission, defect or inconsistency; (2) provide for the assumption by a successor corporation, partnership, limited liability company or other entity of the obligations of the Company under this Indenture; (3) provide for uncertificated Notes in addition to or in place of Physical Notes; provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Internal Revenue Code or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Internal Revenue Code; (4) to make any change in Article 10 or Article 12 of the Indenture that would limit or terminate the benefits available to any holder of Senior Indebtedness (or Representatives therefor) under Article 10 or Article 12 of the Indenture; (5) add additional Guarantees with respect to the Notes; (6) secure the Notes; (7) add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; (8)  make any change that does not adversely affect the legal rights or entitlements under this Indenture of any Holder to comply with any requirement of the SEC or in connection with the qualification of this Indenture under the TIA; or (9) enter into one or more supplemental indentures to effect any of the amendments set forth herein or to set forth the terms of and issue any Additional Notes in accordance with the provisions of this Indenture.

Notwithstanding the foregoing, an amendment under this paragraph 14 may not make any change that adversely affects the rights under Article 10 or Article 12 of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change.

15.  Defaults and Remedies

If an Event of Default occurs (other than an Event of Default pursuant to Section 6.01(g) or (h)) and is continuing, the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes may declare the principal of, premium if any, and accrued but unpaid interest on all the Notes to be due and payable. Upon such a declaration, such principal and interest shall be due and payable. If an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company occurs, the principal of, premium, if any, and interest on all the

Notes shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holders.

If an Event of Default occurs and is continuing, the Trustee shall be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to the Indenture or the Notes unless (i) such Holder has previously given the Trustee notice that an Event of Default is continuing, (ii) Holders of at least 25% in principal amount of the outstanding Notes have requested the Trustee in writing to pursue the remedy, (iii) such Holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense, (iv) the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity and (v) the Holders of a majority in principal amount of the outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period. Subject to certain restrictions, the Holders of a majority in principal amount of the outstanding Notes are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability. Prior to taking any action under the Indenture, the Trustee will be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action.

If a Default occurs and is continuing and is actually known to the Trustee, the Trustee must mail to each Holder notice of the Default within the earlier of 90 days after it occurs or 30 days after it is actually known to a Trust Officer or written notice of it is received by the Trustee. Except in the case of a Default in the payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold notice if and so long as a committee of its Trust Officers in good faith determines that withholding notice is in the interests of the Noteholders. In addition, the Company is required to deliver, to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any Event of Default that occurred during the previous year. The Company also is required to deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any event which would constitute certain Defaults, their status and what action the Company is taking or proposes to take in respect thereof.

16.  Subsequent Issuance

The Company may only issue Additional Notes in accordance with Section 4.14 of the Indenture.

The Company agrees, and by purchasing the Notes each Holder shall be deemed to have agreed, that upon the issuance by the Company of any Additional Notes, if the Company determines that such Additional Notes were issued with original issue discount, immediately following such issuance (and any issuance of Additional Notes thereafter), a portion of each Holder’s Original Notes and/or Additional Notes, as applicable, will automatically, without any action by such Holder, be exchanged (the “Automatic Exchange”) for a portion of each other

Holder’s Notes, such that immediately after the Automatic Exchange, each Holder will hold Notes issued prior to the date of issuance of such Additional Notes and such Additional Notes in the same proportion as the ratio of the then outstanding aggregate principal amount of such Notes to the then outstanding aggregate principal amount of such Additional Notes.  The aggregate stated principal amount of Notes owned by each Holder will not change as a result of the Automatic Exchange.  Immediately following the Automatic Exchange, the Company and the Trustee will instruct DTC to facilitate the combination of the Notes issued prior to the date of issuance of such Additional Notes and such Additional Notes into indivisible units.

At least ten (10) business days prior to the closing of the issuance of Additional Notes that will result in an Automatic Exchange, the Company shall notify the Trustee, in writing of its intention to consummate such subsequent issuance and shall instruct the Trustee and Wells Fargo Bank, National Association, as custodian for the benefit of the owners hereof, to take any action necessary to effect the Automatic Exchange.  Such notice may be revoked at any time prior to the date fixed for such Automatic Exchange.

The Company agrees, and by acceptance of beneficial ownership in the Notes each beneficial owner of the Notes shall be deemed to have agreed, that (1) the Company will report any “original issue discount” (as determined for U.S. federal income tax purposes) associated with the Original Notes and Additional Notes among all beneficial owners in proportion to their ownership of the aggregate principal amount of Notes and (2) each beneficial owner of the Notes shall report such original issue discount in this manner and shall not take an inconsistent position for any applicable tax purpose.

17.  Trustee Dealings with the Company

Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.

18.  No Recourse Against Others

A director, officer, employee or stockholder of the Company or any Guarantor shall not have any liability for any obligations of the Company or any Guarantor under the Notes, the Guarantees or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes.

19.  Authentication

This Note shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Note.

20.  Abbreviations

Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/GIMIA (=Uniform Gift to Minors Act).

21.  Governing Law

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.  THE HOLDERS AGREE TO SUBMIT TO THE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE INDENTURE OR THIS NOTE.

22.  CUSIP Numbers

Pursuant to a recommendation promulgated by the Committee on Uniform Note Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

23.  Tax Treatment. 

By acceptance of beneficial ownership interest in this Note each beneficial Owner of  Notes will be deemed to have agreed, (1) to treat itself as owner of the Notes for all purposes, including the preparation and filing of any United States federal, state, local or foreign tax return, report, or other information; (2) to treat the Notes as indebtedness for all tax purposes, (3) to treat the acquisition of an IDS as the acquisition of the Notes and Common Stock which are represented by the IDS and (4) to allocate the initial purchase price of the IDS upon original issuance between the Notes and the Common Stock in the proportions as $                            and $                     respectively.

The Company will furnish to any Holder of Notes upon written request and without charge to the Holder a copy of the Indenture which has in it the text of this Note.

ASSIGNMENT FORM

To assign this Note, fill in the form below:

I or we assign and transfer this Note to

(Print or type assignee’s name, address and zip code)

(Insert assignee’s soc. sec. or tax I.D. No.)

and irrevocably appoint                            agent to transfer this Note on the books of the Company. The agent may substitute another to act for him.

Date:	Your Signature:
Sign exactly as your name appears on the other side of this Note.

[TO BE ATTACHED TO GLOBAL NOTES]

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE

The initial principal amount of this Global Note is $[               ]. The following increases or decreases in this Global Note have been made:

Date of Exchange Amount of decrease
in Principal Amount
of this Global Note Amount of increase
in Principal
Amount of this
Global Note Principal amount of
this Global Note
following such
decrease or increase Signature of authorized
signatory of Trustee or
Notes Custodian

OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Company pursuant to Section 4.06 (Asset Sale) or 4.09 (Change of Control) of the Indenture, check the box:

Asset Sale o Change of Control o

If you want to elect to have only part of this Note purchased by the Company pursuant to Section 4.06 or 4.09 of the Indenture, state the amount:

Date:		Your Signature:
(Sign exactly as your name appears on the other side of the Note)
Signature Guarantee:
	Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee

EXHIBIT B

[FORM OF PHYSICAL NOTE]

[Physical Note Legend]

THE COMPANY MAY SUBSEQUENTLY ISSUE NOTES THAT ARE IDENTICAL IN ALL MATERIAL RESPECTS TO THIS NOTE BUT HAVE ORIGINAL ISSUE DISCOUNT.  IN SUCH CASE, THE HOLDER OF THIS NOTE WILL EXCHANGE A PORTION OF HIS NOTES FOR SUCH NEWLY ISSUED NOTES WITH ORIGINAL ISSUE DISCOUNT.  THE AGGREGATE PRINCIPAL AMOUNT OF NOTES OWNED BY SUCH HOLDER, HOWEVER, WILL NOT CHANGE AS A RESULT OF SUCH EXCHANGE.  AFTER ISSUANCE OF ANY SUCH NOTES WITH ORIGINAL DISCOUNT, A HOLDER MAY OBTAIN THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE ISSUE DATE, THE ISSUE PRICE AND THE YIELD TO MATURITY BY SUBMITTING A WRITTEN REQUEST TO THE COMPANY AT 505 THIRD AVENUE EAST, ONEONTA, ALABAMA 35121, ATTN:  CHIEF FINANCIAL OFFICER.

No. $                  

13% Senior Surbordinated Note due 2019

CUSIP No.                   

OTELCO INC., a Delaware corporation, promises to pay to Wells Fargo Bank, National Association, or registered assigns, the principal sum [of       Dollars] [listed on the Schedule of Increases or Decreases in Global Note attached hereto](3) on December 30, 2019.

Interest Payment Dates:

Record Dates:                   .

(3)           Use the Schedule of Increases and Decreases language for a Global Note.

Additional provisions of this Note are set forth on the other side of this Note.

IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed.

		OTELCO INC.
		By:
		Name:
		Title:
Dated:
TRUSTEE’S CERTIFICATE OF
AUTHENTICATION
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee, certifies that this is one of
the Notes referred to in the Indenture.
By:
	Authorized Signatory

[FORM OF REVERSE SIDE OF NOTE]

13% Senior Subordinated Note due 2019

Capitalized terms used but not defined herein shall have the meanings given to such terms in the Indenture (as defined).

1.     Interest; Extension of Maturity

Otelco Inc., a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the “Company”), promises to pay interest on the principal amount of this 13% senior surbordinated note due 2019 (the “Note”) at the rate per annum shown above.  The Company shall pay interest from December 21, 2004 or from the most recent date to which interest has been paid or provided for, payable quarterly in arrears on March 30, June 30, September 30 and December 30, to Holders of record at the close of business on the 15^th day of such month, commencing March 30, 2005, provided that if any such day is not a Business Day, such day shall be the next Business Day, and no interest on such payment shall accrue for the period from and after such interest payment date.

Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.

Prior to December 30, 2009, the Company may, at its election, defer interest payments on the Notes on one or more occasions for not more than eight quarters in the aggregate (any such period, an “Initial Interest Deferral Period”); provided that (1) at the end of each occasion, the Company will be obligated to resume quarterly payments of interest on the Notes including interest on deferred interest; and (2) no later than December 30, 2009, the Company must pay in full all deferred interest, together with accrued interest thereon.

In addition, after December 30, 2009 the Company may, at its election, defer interest payments on the Notes on up to four occasions with respect to up to two quarters per occasion (each such occasion together with the Initial Interest Deferral Period, an “Interest Deferral Period”); provided that (1) the Company may not defer interest on any occasion after December 30, 2009 unless and until all interest deferred on any prior occasion, together with accrued interest thereon, has been paid in full; (2) at the end of each occasion, the Company will be obligated to resume quarterly payments of interest on the Notes including interest on deferred interest; and (3) no later than December 30, 2019, the Company must pay all deferred interest, together with accrued interest thereon.

On each occasion that the Company elects to defer interest, it will be required to deliver to the Trustee a copy of a resolution of the Company’s Board of Directors to the effect that, based upon a good-faith determination of the Company’s Board of Directors, (x) such interest deferral is reasonably necessary for bona-fide cash management purposes, whether indicated by cumulative distributable cash shortfall or otherwise, or to reduce the likelihood of or avoid a payment default under any Designated Senior Indebtedness or (y) as long the Credit Agreement remains in effect, the Company has failed to maintain a fixed charge coverage ratio of at least 1.15:1:00 or a senior leverage ratio of not more than 3.20 to 1.00, in each case, as calculated in

accordance with the provisions contained in the Credit Agreement the date hereof, irrespective of any subsequent changes to the Credit Agreement; provided no such deferral may be commenced, and any ongoing deferral shall cease, if a default in payment of interest, principal or premium, if any, on the Notes has occurred and is continuing, or another Event of Default with respect to the Notes has occurred and is continuing and the Notes have been accelerated as a result of the occurrence of such Event of Default.

Deferred interest on the Notes shall bear interest at the same rate as the stated rate on the Notes, compounded quarterly, until paid in full.  Following the end of any Interest Deferral Period, the Company shall be obligated to resume quarterly payments of interest on the Notes, including interest on deferred interest. All interest deferred prior to December 30, 2009, shall be repaid no later than December 30, 2009. All interest deferred after December 30, 2009 shall be repaid on or before maturity. The Company may prepay all or part of the deferred interest, at any time other than during an Interest Deferral Period.

The Notes will mature on December 30, 2019.

2.     Method of Payment

The Company shall pay interest on the Notes (except defaulted interest) to the Persons who are registered holders of Notes at the close of business on the 15^th day of the month of the interest payment date even if Notes are canceled after the record date and on or before the interest payment date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company shall pay principal, premium, if any, and interest in money of the United States.  Payments in respect of the Notes represented by a Global Note (including principal, premium, if any, and interest) shall be made by wire transfer of immediately available funds to the accounts specified by Wells Fargo Bank, National Association. The Company will make all payments in respect of a Physical Note (including principal, premium, if any, and interest), and the Notes may be exchanged or transferred, at the office or agency of Wells Fargo Bank, National Association, except that, at the option of the Company, payment of interest may be made by check mailed to the Holders at their registered addresses.

3.     Paying Agent and Registrar

Initially, the Trustee will act as Paying Agent and as Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar upon written notice to such Paying Agent or Registrar and the Trustee. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar.

4.     Indenture

The Company issued the Notes under an Indenture dated as of December 21, 2004 (the “Indenture”), among the Company, the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the date of the Indenture (the “TIA”). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Notes are subject to all terms and provisions of the

Indenture, and Holders are referred to the Indenture and the TIA for a statement of such terms and provisions.

This Note is one of the Notes referred to in the Indenture. The Notes include the Original Notes and any Additional Notes. The Original Notes and any Additional Notes shall be part of the same series issued and will vote together on all matters subject to the conditions set forth in the Indenture.  The Company shall only be entitled to issue Additional Notes in accordance with Section 4.14 of the Indenture.  Additional Notes shall be issued with terms substantially identical to the Original Notes, except for any variation in issuance date and, upon the issuance of Additional Notes with original issue discount (and any issuance of Additional Notes thereafter), CUSIP number.  The Indenture imposes certain limitations on the ability of the Company and its Restricted Subsidiaries to, among other things, incur Indebtedness and issue Disqualified Stock and Preferred Stock; pay dividends on, and redeem, capital stock and redeem Indebtedness that is subordinate in right of payment to the Notes; make certain other Restricted Payments, including Investments; enter into consensual restrictions on the payment of certain dividends and distributions by Restricted Subsidiaries; enter into or permit certain transactions with Affiliates; create or incur Liens; and make Asset Sales. The Indenture also imposes limitations on the ability of the Company to consolidate or merge with or into or wind up into any other Person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of their property or assets in one or more related transactions to any Person.

To guarantee the due and punctual payment of the principal and interest on the Notes and all other amounts payable by the Company under the Indenture and the Notes when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Notes and the Indenture, the Guarantors have jointly and severally, fully and unconditionally guaranteed the Guaranteed Obligations on a subordinated basis pursuant to the terms of the Indenture.

5.     Optional Redemption

The Company may, at its option, redeem all, but not less than all, of the Notes at any time upon not less than 30 nor more than 60 days’ prior notice, at a redemption price equal to 100% of the principal amount of the Notes plus accrued and unpaid interest to the redemption date, upon the occurrence of a Tax event.

Except as set forth in the preceding paragraph, the Company may not redeem Notes at its option prior to December 30, 2011.

At any time and from time to time on or after December 30, 2011, the Notes shall be redeemable, at the Company’s option, in whole or in part for cash at the following redemption prices (expressed as a percentage of principal amount), plus accrued and unpaid interest on the Notes redeemed, to the relevant Redemption Date, if redeemed during the 12-month period commencing on December 30 of the years set forth below:

Period	Redemption Price
2011	106.500	%
2012	105.200	%
2013	103.900	%
2014	102.600	%
2015	101.300	%
2016 and thereafter	100.000	%

On and after the redemption date, interest will cease to accrue on Notes or portions thereof called for redemption, so long as the Company has deposited with the paying agent funds (in US Dollars) sufficient to pay the principal of, plus accrued and unpaid interest (including any deferred interest and accrued interest thereon) on, the Notes to be redeemed.

A full or partial redemption of the Notes will result in an automatic separation of the IDSs.

6.     Sinking Fund

The Notes are not subject to any sinking fund.

7.     Notice of Redemption

Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at his or her registered address. Notes may be redeemed in part.  If money sufficient to pay the redemption price of and accrued and unpaid interest on all Notes (or portions thereof) to be redeemed on the Redemption Date is deposited with the Paying Agent on or before 10:00 am, New York City time on the Redemption Date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Notes (or such portions thereof) called for redemption.

8.     Repurchase of Notes at the Option of Holders upon Change of Control

Upon a Change of Control, any Holder of Notes will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Notes of such Holder at a purchase price equal to 101% of the principal amount of the Notes to be repurchased plus accrued and unpaid interest to the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture.

9.     Subordination

The Notes and each Guarantee is subordinated to Senior Indebtedness of the Company and the applicable Guarantor, as defined in the Indenture, respectively. To the extent provided in the Indenture, Senior Indebtedness of the Company and the applicable Guarantor must be paid in full in cash before the Notes may be paid by the Company and the Guarantee of such Guarantor may be paid by such Guarantor.  The Company and each Guarantor agrees, and each Holder by

accepting a Note agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose.

10.   Transfer; Exchange

The Notes are in registered form without coupons. A Holder may transfer or exchange Notes in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Notes (i) selected for redemption (except, in the case of a Note to be redeemed in part, the portion of the Note not to be redeemed), (ii) during a period beginning at the opening of business 15 days prior to a selection of Notes to be redeemed and ending on the relevant Redemption Date, (iii) tendered in a Change of Control Offer or Asset Sale Offer or (iv) during a period beginning on the opening of business 15 days before a record date for the payment of interest and ending on the applicable succeeding interest payment date.

11.   Persons Deemed Owners

The registered Holder of this Note may be treated as the owner of it for all purposes.

12.   Unclaimed Money

If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment.

13.   Discharge and Defeasance

Subject to certain conditions, the Company at any time may terminate some of or all its obligations under the Notes and the Indenture if the Company deposits or causes to be deposited with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Notes to redemption or maturity, as the case may be. In the event that the Company exercises its right to terminate some of or all its obligations under the Notes and the Indenture in accordance with the preceding sentence, each Guarantor will be released from its related obligations with respect to its Guarantee.

14.   Amendment, Waiver

 Without the consent of each Holder affected, an amendment or waiver may not: (1) reduce the amount of Notes whose Holders must consent to an amendment; (2) reduce the rate of or extend the time for payment of interest on any Note, or amend the Company’s right to defer interest on the Notes in a manner adverse to the Holders; (3) reduce the principal of or extend the Stated Maturity of any Note; (4) reduce the premium payable upon the redemption of any Note or change the time at which any Note may be redeemed in accordance with Article 3 of the Indenture; (5) make any Note payable in money other than that stated in the Note; (6) make any

change in Article 10 or Article 12 of the Indenture that adversely affects the rights of any Holder under Article 10 or Article 12 of the Indenture; (7) impair the right of any Holder to receive payment of principal of, premium, if any, and interest on such Holder’s Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s Notes; (8) except in connection with an offer by the Company to purchase all of the Notes (in which case a majority in principal amount of Notes will be sufficient),  (A) make any change to the provisions of Section 4.05 of the Indenture that eliminate the prohibition on paying dividends while interest is being deferred, while any previously Deferred Interest remains unpaid or during a Dividend Suspension Period, or during the continuance of any Event of Default, (B) make a change to lower the Interest Coverage Ratio threshold for a Dividend Suspension Period or make a change to paragraph (c) of Section 4.04 of the Indenture that would have the effect of increasing the amounts permitted to be distributed in respect of the Company’s Capital Stock, (C) waive an Event of Default under Section 6.01(k) of the Indenture; (9) make any change in the amendment provisions which require each Holder’s consent or in the waiver provisions; or (10) modify the Guarantees in any manner adverse to the Holders.

Without the consent of any Holder of Notes, the Company and the Trustee may amend the Indenture or the Notes to (1) cure any ambiguity, omission, defect or inconsistency; (2) provide for the assumption by a successor corporation, partnership, limited liability company or other entity of the obligations of the Company under this Indenture; (3) provide for uncertificated Notes in addition to or in place of Physical Notes; provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Internal Revenue Code or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Internal Revenue Code; (4) to make any change in Article 10 or Article 12 of the Indenture that would limit or terminate the benefits available to any holder of Senior Indebtedness (or Representatives therefor) under Article 10 or Article 12 of the Indenture; (5) add additional Guarantees with respect to the Notes; (6) secure the Notes; (7) add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; (8)  make any change that does not adversely affect the legal rights or entitlements under this Indenture of any Holder to comply with any requirement of the SEC or in connection with the qualification of this Indenture under the TIA; or (9) enter into one or more supplemental indentures to effect any of the amendments set forth herein or to set forth the terms of and issue any Additional Notes in accordance with the provisions of this Indenture.

Notwithstanding the foregoing, an amendment under this paragraph 14 may not make any change that adversely affects the rights under Article 10 or Article 12 of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change.

15.   Defaults and Remedies

If an Event of Default occurs (other than an Event of Default pursuant to Section 6.01(g) or (h)) and is continuing, the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes may declare the principal of, premium if any, and accrued but unpaid interest on all the Notes to be due and payable. Upon such a declaration, such principal and interest shall be due and payable. If an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company occurs, the principal of, premium, if any, and interest on all the

Notes shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holders.

If an Event of Default occurs and is continuing, the Trustee shall be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to the Indenture or the Notes unless (i) such Holder has previously given the Trustee notice that an Event of Default is continuing, (ii) Holders of at least 25% in principal amount of the outstanding Notes have requested the Trustee in writing to pursue the remedy, (iii) such Holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense, (iv) the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity and (v) the Holders of a majority in principal amount of the outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period. Subject to certain restrictions, the Holders of a majority in principal amount of the outstanding Notes are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability. Prior to taking any action under the Indenture, the Trustee will be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action.

If a Default occurs and is continuing and is actually known to the Trustee, the Trustee must mail to each Holder notice of the Default within the earlier of 90 days after it occurs or 30 days after it is actually known to a Trust Officer or written notice of it is received by the Trustee. Except in the case of a Default in the payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold notice if and so long as a committee of its Trust Officers in good faith determines that withholding notice is in the interests of the Noteholders. In addition, the Company is required to deliver, to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any Event of Default that occurred during the previous year. The Company also is required to deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any event which would constitute certain Defaults, their status and what action the Company is taking or proposes to take in respect thereof.

16.   Subsequent Issuance

The Company may only issue Additional Notes in accordance with Section 4.14 of the Indenture.

The Company agrees, and by purchasing the Notes each Holder shall be deemed to have agreed, that upon the issuance by the Company of any Additional Notes, if the Company determines that such Additional Notes were issued with original issue discount, immediately following such issuance (and any issuance of Additional Notes thereafter), a portion of each Holder’s Original Notes and/or Additional Notes, as applicable, will automatically, without any action by such Holder, be exchanged (the “Automatic Exchange”) for a portion of each other

Holder’s Notes, such that immediately after the Automatic Exchange, each Holder will hold Notes issued prior to the date of issuance of such Additional Notes and such Additional Notes in the same proportion as the ratio of the then outstanding aggregate principal amount of such Notes to the then outstanding aggregate principal amount of such Additional Notes.  The aggregate stated principal amount of Notes owned by each Holder will not change as a result of the Automatic Exchange.  Immediately following the Automatic Exchange, the Company and the Trustee will instruct DTC to facilitate the combination of the Notes issued prior to the date of issuance of such Additional Notes and such Additional Notes into indivisible units.

At least ten (10) business days prior to the closing of the issuance of Additional Notes that will result in an Automatic Exchange, the Company shall notify the Trustee, in writing of its intention to consummate such subsequent issuance and shall instruct the Trustee and Wells Fargo Bank, National Association, as custodian for the benefit of the owners hereof, to take any action necessary to effect the Automatic Exchange.  Such notice may be revoked at any time prior to the date fixed for such Automatic Exchange.

The Company agrees, and by acceptance of beneficial ownership in the Notes each beneficial owner of the Notes shall be deemed to have agreed, that (1) the Company will report any “original issue discount” (as determined for U.S. federal income tax purposes) associated with the Original Notes and Additional Notes among all beneficial owners in proportion to their ownership of the aggregate principal amount of Notes and (2) each beneficial owner of the Notes shall report such original issue discount in this manner and shall not take an inconsistent position for any applicable tax purpose.

17.   Trustee Dealings with the Company

Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.

18.   No Recourse Against Others

A director, officer, employee or stockholder of the Company or any Guarantor shall not have any liability for any obligations of the Company or any Guarantor under the Notes, the Guarantees or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes.

19.   Authentication

This Note shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Note.

20.   Abbreviations

Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/GIMIA (=Uniform Gift to Minors Act).

21.   Governing Law

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.  THE HOLDERS AGREE TO SUBMIT TO THE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE INDENTURE OR THIS NOTE.

22.   CUSIP Numbers

Pursuant to a recommendation promulgated by the Committee on Uniform Note Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

23.   Tax Treatment. 

By acceptance of beneficial ownership interest in this Note each beneficial Owner of  Notes will be deemed to have agreed, (1) to treat itself as owner of the Notes for all purposes, including the preparation and filing of any United States federal, state, local or foreign tax return, report, or other information; (2) to treat the Notes as indebtedness for all tax purposes, (3) to treat the acquisition of an IDS as the acquisition of the Notes and Common Stock which are represented by the IDS and (4) to allocate the initial purchase price of the IDS upon original issuance between the Notes and the Common Stock in the proportions as $                   and $                      respectively.

The Company will furnish to any Holder of Notes upon written request and without charge to the Holder a copy of the Indenture which has in it the text of this Note.

ASSIGNMENT FORM

To assign this Note, fill in the form below:

I or we assign and transfer this Note to

(Print or type assignee’s name, address and zip code)

(Insert assignee’s soc. sec. or tax I.D. No.)

and irrevocably appoint                            agent to transfer this Note on the books of the Company. The agent may substitute another to act for him.

Date:	Your Signature:
Sign exactly as your name appears on the other side of this Note.

OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Company pursuant to Section 4.06 (Asset Sale) or 4.09 (Change of Control) of the Indenture, check the box:

Asset Sale  o Change of Control  o

If you want to elect to have only part of this Note purchased by the Company pursuant to Section 4.06 or 4.09 of the Indenture, state the amount:

Date:	Your Signature:
(Sign exactly as your name appears on the other side of the Note)
Signature Guarantee:

Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee

EXHIBIT C

FORM OF SUPPLEMENTAL INDENTURE FOR NEW GUARANTORS

SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”) dated as of         , among [GUARANTOR] (the “New Guarantor”), an indirect subsidiary of OTELCO INC. (or its successor), a Delaware corporation (the “Company “), [EXISTING GUARANTORS] and Wells Fargo Bank, National Association, a national banking association, as trustee under the Indenture referred to below (the “Trustee”).

W I T N E S S E T H :

WHEREAS the Company and [OLD GUARANTORS] (the “Existing Guarantors”) have heretofore executed and delivered to the Trustee an Indenture (the “Indenture”) dated as of            , 2004, providing for the issuance of an unlimited aggregate principal amount of notes (the “Notes”) and [Original Notes have been issued and our outstanding under the Indenture];

WHEREAS Section 4.12 of the Indenture provides that under certain circumstances the Company is required to cause the New Guarantor to execute and deliver to the Trustee a supplemental indenture pursuant to which the New Guarantor shall unconditionally guarantee all the Company’s obligations under the Notes pursuant to a Guarantee on the terms and conditions set forth herein; and

WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the Company and the Existing Guarantors are authorized to execute and deliver this Supplemental Indenture;

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Guarantor, the Company, the Existing Guarantors and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Notes as follows:

1.             Agreement to Guarantee.  The New Guarantor hereby agrees, jointly and severally with all the Existing Guarantors, to unconditionally guarantee the Company’s obligations under the Notes on the terms and subject to the conditions set forth in Article 11 of the Indenture and to be bound by all other applicable provisions of the Indenture and the Notes.

2.             Ratification of Indenture; Supplemental Indentures Part of Indenture.  Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby.

3.             Governing Law.  THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.  THE TRUSTEE, THE COMPANY, ANY OTHER OBLIGOR IN RESPECT OF THE NOTES AND (BY THEIR ACCEPTANCE OF THE NOTES) THE HOLDERS AGREE TO SUBMIT TO THE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF

MANHATTAN, IN THE CITY OF NEW YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES.

4.             Trustee Makes No Representation.  The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture.

5.             Counterparts.  The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

6.             Effect of Headings.  The Section headings herein are for convenience only and shall not effect the construction thereof.

7.             Definitions.  Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written.

[NEW GUARANTOR]
By:
	Name:
	Title:
OTELCO INC.
By:
	Name:
	Title:
[EXISTING GUARANTORS]
By:
	Name:
	Title:
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Trustee
By:
	Name:
	Title:

EXHIBIT D

FORM OF SOLVENCY CERTIFICATE

OTELCO INC.

SOLVENCY CERTIFICATE

Reference is hereby made to the Indenture (the “Indenture”), dated as of December 21, 2004 by and among Otelco Inc., a Delaware corporation (the “Company”), the Guarantors named therein (the “Subsidiary Guarantors”) and Wells Fargo Bank, National Association, as Trustee (the “Trustee”), governing the Company’s 13% Senior Subordinated Notes due 2019. Capitalized terms used herein but not defined herein shall have the meanings ascribed to them in the Indenture.

I,                            , pursuant to Section 4.14 of the Indenture, do hereby certify, in my capacity as Chief Financial Officer of the Company, as follows:

(1)   [The Company is in compliance with its material financial obligations and covenants.](1)

(2)   Neither the Company nor any of the Subsidiary Guarantors intend to hinder, delay, or defraud either present or future creditors or any other person to which the Company or each of the Subsidiary Guarantors, respectively, is or will become, on or after the date hereof, indebted.

(3)   After giving effect to the issuance of an additional $                 million aggregate principal amount of the Company’s 13% Senior Subordinated Notes due 2019 (the “Additional Notes”) and the related guarantees in accordance with Sections 2.01 and 4.14 of the Indenture and the application of the proceeds therefrom:

(a)           Each of the Company and the Subsidiary Guarantors are and will be Solvent.

As used herein, “Solvent” shall mean, for any person or entity on a particular date, that on such date (A) the fair value of the property of such person or entity is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such person or entity, (B) the present fair saleable value of the assets of such person is not less than the amount that will be required to pay the probable liability of such person on its debts as they become absolute and matured, (C) such person or entity does not intend to, and does not believe that it will, incur debts and liabilities beyond such person’s or such entity’s ability to pay as such debts and liabilities mature, (D) such person or entity is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such person’s or such entity’s property would constitute an unreasonably

(1)           Delete this paragraph if Additional Notes are issued in connection with the exchange of shares of Class B Common Stock of the Company outstanding on the Issue Date (as defined in the Indenture).

small capital and (E) such person or entity is able to pay its debts as they become due and payable.

This certificate is of today’s date and is made pursuant to the best of my knowledge. I have made such investigations and inquiries (including, without limitation, of personnel and employees having familiarity with such transactions and factual matters) as I determined to be necessary to enable me to attest to the matters set forth in this certificate and to execute and deliver this certificate.  As to each statement that describes an anticipated future event or method of operation, I have no reason to believe that such event or method of operation will not occur as described.  I understand that the Trustee is relying on this certificate in authenticating the Additional Notes.

IN WITNESS WHEREOF, the undersigned has executed this certificate as of the           day of             .

Name:

Title:

EX-4.3

Exhibit 4.3

INVESTOR RIGHTS AGREEMENT

INVESTOR RIGHTS AGREEMENT, dated as of December 21, 2004 (this “Agreement”), among Otelco Inc., a Delaware corporation (the “Company”), Seaport Capital Partners II, L.P., a Delaware limited partnership (“Seaport Capital”), Seaport Investments, LLC, a Delaware limited liability company (“Seaport Investments”, and together with Seaport Capital, “Seaport”), CEA Capital Partners USA, L.P., a Delaware limited partnership (“CEA Capital”), CEA Capital Partners USA CI, L.P., a Delaware limited partnership (“CEA Capital CI”, and together with CEA Capital, “CEA”), BancBoston Ventures Inc., a Massachusetts corporation (“BancBoston”), Mid-Missouri Parent LLC, a Delaware limited liability company (“Mid-Missouri Parent”), Michael D. Weaver, Sean Reilly, Kevin Reilly and Sternberg Consulting Inc., a Louisiana corporation (“Sternberg Consulting”).

BACKGROUND

WHEREAS, Seaport, CEA, BancBoston, Mid-Missouri Parent, Michael D. Weaver, Sean Reilly, Kevin Reilly and Sternberg Consulting (collectively, the “Holders”) are the beneficial holders of 544,671shares of Class B Common Stock of the Company, par value $0.01 per share (“Class B Common Stock”);

WHEREAS, the Company and certain selling stockholders of the Company have effected an initial public offering of Income Deposit Securities (“IDSs”), each IDS representing one share of the Company’s Class A Common Stock, par value $0.01 per share (“Class A Common Stock”) and $64,942,500 aggregate principal amount of 13% senior subordinated notes due 2019 of the Company (“Subordinated Notes”) pursuant to an effective registration statement under the Securities Act (as defined herein) in the United States and pursuant to a long form prospectus or any amendment or supplement thereto, in the English language, in Canada; and

WHEREAS, the Company has agreed to provide certain exchange rights to the Holders with respect to their shares of Class B Common Stock and certain registration rights with respect to any IDSs they hold upon the terms and subject to the conditions set forth herein.

NOW THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1Definitions.  As used in this Agreement, the following terms shall have the following respective meanings:

“Additional Notes” shall have the meaning specified in the Indenture.

“Adjusted EBITDA” shall have the meaning specified in the Indenture.

“Agreement” shall have the meaning specified in the introductory paragraph hereto.

“BancBoston” shall have the meaning specified in the introductory paragraph hereto.

“Board” shall mean the board of directors of the Company.

“Canadian Prospectus” shall mean a prospectus (including a short form prospectus) prepared in accordance with applicable Canadian Securities Laws for the purposes of qualifying securities for distribution or distribution to the public, as the case may be, in any province or territory of Canada.

“Canadian Securities Law” shall mean the statutes and regulations applicable to the trading of securities in any province or territory of Canada including applicable rules, policy statements and blanket rulings and orders promulgated by Canadian securities regulatory authorities.

“CEA” shall have the meaning specified in the introductory paragraph hereto.

“CEA Capital” shall have the meaning specified in the introductory paragraph hereto.

“CEA Capital CI” shall have the meaning specified in the introductory paragraph hereto.

“Class A Common Stock” shall have the meaning specified in the Recitals hereto.

“Class B Common Stock” shall have the meaning specified in the Recitals hereto.

“CommonStock” means the Class A Common Stock and the Class B Common Stock of the Company and any securities issued or distributed in respect thereof, or in substitution therefor, in connection with any stock split, dividend, spin-off or combination, or any reclassification, recapitalization, merger, consolidation, exchange or other similar reorganization or business combination.

“Common Stock Equivalents” means any stock, warrants, rights, calls, options, debt or other securities exchangeable or exercisable for or convertible into Common Stock.

“Company” shall have the meaning specified in the introductory paragraph hereto.

“Company Offering” shall have the meaning specified in Section 3.6 hereto.

“Consolidated Net Income” shall have the meaning specified in the Indenture.

“Delay Notice” shall have the meaning specified in Section 3.6(b) hereto.

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“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, as then in effect.

“Exchange Shelf Registration”  shall have the meaning specified in Section 2.4 hereto.

“Exchange Transaction”  shall have the meaning specified in Section 2.1 hereto.

“Governmental Entity” shall mean any court, department, body, board, bureau, administrative agency or commission or other governmental authority or instrumentality, whether in the United States or, if applicable, Canada.

“Guarantee” shall have the meaning specified in the Indenture.

“Guarantor” shall have the meaning specified in the Indenture.

“Holder Exchange”  shall have the meaning specified in Section 2.1 hereto.

“Holders” shall have the meaning specified in the Recitals hereto.

“IDSs” shall have the meaning specified in the Recitals hereto.

“Indenture” shall mean the Indenture, dated as of December 21, 2004, among the Company, certain of its subsidiaries, as guarantors, and Wells Fargo Bank, National Association, as trustee, relating to the Subordinated Notes, as it may be amended, supplemented, restated or otherwise modified from time to time.

“Information Delay Notice” shall have the meaning specified in Section 3.6(b) hereto.

“Inspectors” shall have the meaning specified in Section 6.1(l) hereto.

“Majority Holders” shall mean the Holders of a majority of the voting power of all such securities (including IDSs) held by such Holders; provided that all such securities shall be treated as having the voting rights of any underlying securities.

“Majority Sellers” means a majority (based on  the number of Registrable Securities owned) of the Holders eligible to sell pursuant to this Agreement.

“Mid-Missouri Parent” shall have the meaning specified in the introductory paragraph hereto.

“NASD” shall mean the National Association of Securities Dealers, Inc.

“Net Income” shall have the meaning specified in the Indenture.

“Person” means an individual, corporation, limited liability company, association, partnership, group (as defined in Section 13(d)(3) of the Exchange Act), trust, joint venture,

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business trust or unincorporated organization, Governmental Entity or any other entity of any nature whatsoever.

“Pro Forma Adjusted EBITDA” means the Adjusted EBITDA of the Company for the test period plus the Adjusted EBITDA of any Person that becomes a Restricted Subsidiary of the Company to the extent that the Company’s Consolidated Net Income does not include the Net Income of such Person less the Adjusted EBITDA of any Restricted Subsidiary sold, conveyed, transferred or otherwise disposed of by the Company to the extent that the Company’s Consolidated Net Income includes the Net Income of such Restricted Subsidiary.

“register,” “registered” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act and the effectiveness of such registration statement.  In addition, unless inconsistent with the context: (i) the term “registration” and any references to the act of registering include the qualification under Canadian Securities Laws of a Canadian Prospectus in respect of a distribution or distribution to the public, as the case may be, of securities; (ii) the term “registered” as applied to any securities includes a distribution or distribution to the public, as the case may be, of securities so qualified; (iii) the term “registration statement” includes a Canadian Prospectus; (iv) and reference to a registration statement having become effective, or similar references, shall include a Canadian Prospectus for which a final receipt has been obtained from the relevant Canadian securities regulatory authorities; and (v) the provisions of this Agreement shall be applied, mutatis mutandis, to any proposed distribution of securities hereunder in any province or territory of Canada or to which the prospectus requirements under any of the Canadian Securities Laws shall otherwise apply.

“Registrable Securities” shall mean IDSs, Class A Common Stock and Subordinated Notes now or hereafter owned by the Holders or any Transferee thereof.  As to any particular Registrable Securities, once issued, such Registrable Securities shall cease to be Registrable Securities when (i) a registration statement with respect to the sale by the applicable Holder of such securities has become effective under the Securities Act or, if applicable, when a prospectus has been receipted under the applicable Canadian Securities Laws, and such securities have been disposed of in accordance with such registration statement or prospectus, as the case may be, (ii) such securities have been distributed to the public pursuant to Rule 144 (or any successor provision) under the Securities Act or equivalent provisions under Canadian Securities Laws, as applicable, (iii) such securities have been otherwise transferred, new certificates for such securities not bearing a legend restricting further transfer have been delivered by the Company and subsequent disposition of such securities does not require registration or qualification of such securities under the Securities Act, applicable Canadian Securities Laws or any state securities or blue sky law then in force, or (iv) such securities have ceased to be outstanding.

“Registration Expenses” shall mean all expenses incident to the Company’s performance of or compliance with this Agreement, including all SEC, stock exchange or quotation system, NASD, Canadian securities regulatory authorities and Canadian stock exchange registration and filing fees and expenses, fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel for any underwriters in connection with blue sky qualifications of the Registrable Securities), rating

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agency fees, printing expenses, messenger, telephone and delivery expenses, the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange or quotation system, fees and disbursements of counsel for the Company and all independent certified public accountants (including the expenses of any annual audit, special audit and “cold comfort” letters required by or incident to such performance and compliance), the fees and disbursements of underwriters (including all fees and expenses of any “qualified independent underwriter” required by the rules of the NASD) customarily paid by issuers or sellers of securities, the expenses customarily borne by the issuers of securities in a “road show” presentation to potential investors, the reasonable fees and disbursements of one legal counsel for the selling Holders in each registration (as selected by the Majority Sellers), the reasonable fees and expenses of any special experts retained by the Company in connection with such registration, and fees and expenses of other persons retained by the Company (but not including any underwriting discounts or commissions (which shall be paid or borne by the selling Holder) or transfer taxes, if any, attributable to the sale of Registrable Securities) and other reasonable out-of-pocket expenses of the Holders.

“Requesting Party” shall have the meaning specified in Section 3.1 hereto.

“Restricted Subsidiary” shall have the meaning specified in the Indenture.

“Seaport” shall have the meaning specified in the introductory paragraph hereto.

“Seaport Capital” shall have the meaning specified in the introductory paragraph hereto.

“Seaport Investments” shall have the meaning specified in the introductory paragraph hereto.

“SEC” shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act or the Exchange Act.

“Securities Act” shall mean the Securities Act of 1933, as amended, then in effect.

“Separation Exchange” shall have the meaning specified in Section 2.1 hereto.

“Shelf Registration” shall have the meaning specified in Section 3.4 hereto.

“Sternberg Consulting” shall have the meaning specified in the introductory paragraph hereto.

“Subordinated Note Guarantees” shall have the meaning specified in the Indenture.

“Subordinated Notes” shall have the meaning specified in the Recitals hereto.

“Subsidiary Guarantors” shall have the meaning specified in the Indenture.

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“Threshold Level” means $30,150,000 plus the Adjusted EBITDA of any Person that becomes a Restricted Subsidiary of the Company less the Adjusted EBITDA of any Restricted Subsidiary sold, conveyed, transferred or otherwise disposed of by the Company, in each case for the four full fiscal quarters preceding the date of acquisition or disposition.

“Transaction Delay Notice” shall have the meaning specified in Section 3.6(a) hereto.

“Transferee” means any Person to whom any Holder or any Transferee thereof transfers Registrable Securities, including any Person who purchases shares of Class B Common Stock from the Holders and receives IDSs from the Company in exchange for the Class B Common Stock purchased from the Holders.

“Transfer Exchange”  shall have the meaning specified in Section 2.1 hereto.

“Trustee” shall have the meaning specified in the Indenture.

ARTICLE II

EXCHANGE RIGHT

2.1Exchange Right.  The parties to this Agreement hereby agree that, except as set forth below, shares of the Class B Common Stock shall not be (A) exchangeable for IDSs or (B) transferred, sold, assigned, pledged, hypothecated or otherwise disposed of except (1) transfers as a gift or gifts to such Holder’s spouse, lineal descendant, father, mother, brother or sister (“immediate family”) or to a trust the beneficiary of which is exclusively the Holder and/or a member or members of his or her immediate family, provided that the donee thereof agrees in writing to be bound by the terms of this Agreement or (2) distributions to such Holder’s shareholders, partners or members, provided that such shareholders, partners or members agree in writing to be bound by the terms of this Agreement.  Any Holder may:

(i)exchange shares of Class B Common Stock for IDSs on and after                    , 2006, with the initial exchange rate being one IDS for each share of Class B Common Stock (such exchange rate being subject to customary adjustment for adjustments specified in the definition of “Common Stock” set forth above) (a “Holder Exchange”);

(ii)in connection with a sale of shares of Class B Common Stock on and after December 30, 2006, cause the shares of Class B Common Stock proposed to be sold to be exchanged for IDSs, with the initial exchange rate being one IDS for each share of Class B Common Stock (such exchange rate being subject to customary adjustment for adjustments specified in the definition of “Common Stock” set forth above) (a “Transfer Exchange”); and/or

(iii)effective immediately prior to any automatic separation of the IDSs, exchange shares of Class B Common Stock for Class A Common Stock of the Company and Subordinated Notes, with the initial exchange rate being one share of Class A Common Stock and a Subordinated Note in the principal amount of $7.50 for each

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share of Class B Common Stock (such exchange rate subject to customary adjustment for adjustments specified in the definition of “Common Stock” set forth above); provided, however, that if the Subordinated Notes are not outstanding at the time of any such exchange, the Class B Common Stock that would otherwise be exchanged for Class A Common Stock and Subordinated Notes shall instead be exchanged for 1.9740 shares of Class A Common Stock (such exchange rate subject to customary adjustment for adjustments specified in the definition of “Common Stock” set forth above). (a “Separation Exchange” and together with a Holder Exchange and a Transfer Exchange, an “Exchange Transaction”).

2.2Exchange Conditions.  (a)The parties hereto agree that, prior to any Exchange Transaction, the following conditions must be met:

(i)such Exchange Transaction shall comply with applicable laws, including, without limitation, securities laws, laws relating to the redemption of common stock and laws relating to the issuance of debt;

(ii)such Exchange Transaction shall occur pursuant to an effective registration statement in the United States and, if necessary, a receipted prospectus for all the provinces (other than the province of Quebec) or territories of Canada;

(iii)such Exchange Transaction will not conflict with or cause a default under the Company’s Certificate of Incorporation or any material financing agreement of the Company or any of its subsidiaries;

(iv)such Exchange Transaction shall not cause a mandatory suspension of dividends or deferral of interest under any material financing agreement of the Company or any of its subsidiaries as of the measurement date immediately following the proposed Exchange Transaction;

(v)only if the shares of Class B Common Stock are to be exchanged for IDSs, the Company delivers to the Trustee prior to or simultaneously with such Exchange Transaction an opinion of tax counsel to the effect that the Subordinated Notes underlying the IDSs for which the Class B Common Stock is exchanged should be treated as debt for U.S. federal income tax purposes; provided, however, that this condition need only be met to the extent required by the Indenture in connection with an issuance of Additional Notes;

(vi)only if the shares of Class B Common Stock are to be exchanged for IDSs, the Company delivers to the Trustee prior to or simultaneously with such Exchange Transaction an opinion of counsel, subject to exceptions and assumptions customary for such opinions, to the effect that the Subordinated Notes underlying the IDSs for which the Class B Common Stock is exchanged and the related Guarantees constitute valid and binding obligations of the Company and the respective Guarantors and are enforceable against the Company and the respective Guarantors in accordance with their terms; provided, however, that this condition need only be met to the extent required by the Indenture in connection with an issuance of Additional Notes; and

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(vii)only if the shares of Class B Common Stock are to be exchanged for IDSs, if an issuance of Subordinated Notes underlying the IDSs for which the Class B Common Stock is exchanged in an Exchange Transaction would trigger the automatic exchange provisions of the Indenture, the Company delivers to the Trustee prior to or simultaneously with such issuance a certificate from its principal financial officer to the effect that on the date the Subordinated Notes underlying the IDSs for which the Class B Common Stock is exchanged are issued, after giving pro forma effect to the issuance of such Subordinated Notes and the related Subordinated Note Guarantees, the Company and each of the Subsidiary Guarantors are solvent; provided, however, that this condition need only be met to the extent required by the Indenture in connection with an issuance of Additional Notes.

(b) In addition to the foregoing, the parties hereto agree that the following additional conditions must be met prior to any Holder Exchange or Transfer Exchange:

(i)the Company shall have generated Pro Forma Adjusted EBITDA (as certified by the Chief Financial Officer of the Company) equal to or greater than the Threshold Level over the most recent four consecutive fiscal quarters immediately prior to such Holder Exchange or Transfer Exchange, as applicable (the “test period”); provided, however, that the condition contained in this subsection (i) shall only be applicable to Holder Exchanges or Transfer Exchanges occurring on or prior to December 30, 2009;

(ii)no event of default or deferral of interest shall have occurred and be continuing under the Indenture; and

(iii)the Holder shall have given the Company at least 30 but not more than 60 days advance notice of its desire to effect such Holder Exchange or Transfer Exchange (as applicable); provided that such minimum advance notice period may be increased from time to time to the extent necessary, in the determination of the Board, to comply with the rules, regulations and protocols, as then in effect, of the SEC, the principal stock exchange on which the relevant securities of the Company are then listed or admitted to trading, the Depository Trust Company, or the transfer agent with respect to such securities.

2.3Adjustment in the Event of OID Upon Sale or Exchange.  Notwithstanding anything to the contrary in this Agreement, if the Exchange Transaction would result in the issuance of IDSs that include Subordinated Notes that are issued with “original issue discount” for U.S. income tax purposes, holders of Subordinated Notes outstanding prior to such Exchange Transaction and holders of Class B Common Stock exchanging shares of Class B Common Stock will automatically exchange among themselves a portion of the Subordinated Notes they each hold so that immediately following such automatic exchange, each holder will own a pro rata portion of the new Subordinated Notes and the old Subordinated Notes, as more fully set forth in, and subject to the terms and provisions of, the Indenture.

2.4Exchange Shelf Registration.  The Company shall file with the SEC a registration statement for an offering to be made on a continuous basis pursuant to Rule 415

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under the Securities Act covering the securities issuable by the Company in all Exchange Transactions (an “Exchange Shelf Registration”).  The Exchange Shelf Registration shall be on Form S-3 under the Securities Act or another appropriate form permitting registration of such securities.  The Company shall use its commercially reasonable efforts to cause the Exchange Shelf Registration to be declared effective by the SEC no later than December 30, 2006, and to keep the Exchange Shelf Registration continuously effective, supplemented and amended so that the Exchange Shelf Registration will be available for an Exchange Transaction until the earliest of (i) the date all shares of Class B Common Stock have been exchanged in an Exchange Transaction and (ii) December 30, 2008.  The Company shall pay all Registration Expenses in connection with the Exchange Shelf Registration.

ARTICLE III

DEMAND REGISTRATION

3.1Request for Registration.  After compliance with the procedures set forth herein, upon the written request of any Holder (the “Requesting Party”), at any time after December 30, 2006 (and subject to the procedures of this paragraph), requesting that the Company effect the registration under the Securities Act and/or applicable Canadian Securities Laws of all or part of the Registrable Securities and specifying the intended method of disposition thereof, the Company will use its commercially reasonable efforts to effect the registration under the Securities Act and, if requested, applicable Canadian Securities Laws of such Registrable Securities (which registration shall also include any Registrable Securities requested by the other Holders to be included in such registration request made by the Requesting Party).  Upon receiving the request from the Requesting Party, the Company shall give written notice to the Holders of Registrable Securities of the intent to register Registrable Securities under the Securities Act and, if applicable, the Canadian Securities Laws and such Holder’s right to participate in such registration at least 30 days prior to the anticipated filing date of the registration pursuant to this Article III.  Upon the written request of any Holder made within 15 days after the receipt of the Company’s notice (which request shall specify the number of Registrable Securities intended to be disposed of by such Holder), the Company shall use its commercially reasonable efforts to effect the proposed registration under the Securities Act and, if applicable, Canadian Securities Laws of all Registrable Securities which the Company has been so requested to register by such Holders to the extent requisite to permit the disposition of the Registrable Securities so to be registered.  If a registration pursuant to this Section 3.1 involves an underwritten public offering, any such Holder may elect, in writing no less than five business days prior to the effective date of the registration statement filed in connection with such registration, not to register such securities in connection with such registration.  The Company will pay all Registration Expenses in connection with each registration of Registrable Securities requested pursuant to this Article III.

Notwithstanding the foregoing, in no event shall the Company have any obligation to effect a registration under this Section 3.1 unless the amount of the Registrable Securities requested to be included in such offering would result in initial aggregate proceeds (determined at the time of the time of the initial filing of the registration statement relating thereto) of at least $3,000,000; provided, however, that if the Holders have at least one demand registration right remaining, the Holders may make a demand registration pursuant to this

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Section 3.1 if such demand registration is for the remaining shares of Registrable Securities of such Holders, even if such offering would result in initial aggregate proceeds (determined at the time of the time of the initial filing of the registration statement relating thereto) less than $3,000,000.

Notwithstanding anything in this Article III to the contrary, in no event will the Holders collectively be entitled to more than three registrations pursuant to this Section 3.1, except that the following shall not constitute a registration for this purpose: a registration so requested (i) that is not deemed to have been effected pursuant to Section 3.3 or (ii) where the number of Registrable Securities included by the Holders in such registration and sold pursuant thereto is less than 75% of the number of shares of Registrable Securities sought to be included by the Holders in such registration.

3.2Effective Registration Statement.  A registration requested pursuant to this Article III shall not be deemed to have been effected:

(i)unless a registration statement with respect thereto has become effective and remained effective in compliance with the provisions of the Securities Act and, if applicable, Canadian Securities Laws for at least six months with respect to the disposition of all Registrable Securities covered by such registration statement or, if earlier, until such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition thereof set forth in such registration statement, other than primarily as a result of acts or omissions of any participating Holder or any authorized agent thereof;

(ii)if after it has become effective, such registration is interfered with by any stop order, injunction or other order or requirement of the SEC, the applicable Canadian securities regulatory authorities or other Governmental Entity for any reason not attributable to any participating Holder or any authorized agent thereof and has not thereafter become effective; or

(iii)if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not satisfied or waived.

3.3Shelf Registration.  If the Company has used and is then permitted to use registration statements pursuant to Rule 415 under the Securities Act and, if applicable, pursuant to an equivalent provision under Canadian Securities Laws, including National instrument 44-102, as applicable (the “Shelf Registration”) for the sale of IDSs or Common Stock, the Majority Sellers shall be permitted to request that any registration under this Article III be made under a Shelf Registration.  The Company shall use its commercially reasonable efforts to keep such Shelf Registration continuously effective for the period beginning on the date on which the Shelf Registration is declared effective and ending on the first date that there are no Registrable Securities covered by such registration.  During the period during which the Shelf Registration is effective, the Company shall supplement or make amendments to the Shelf Registration, if required by the Securities Act or Canadian Securities Laws or if reasonably requested by the Majority Sellers or an underwriter of Registrable Securities, including to reflect any specific plan

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of distribution or method of sale, and shall use its commercially reasonable efforts to have such supplements and amendments declared effective, if required, as soon as practicable after filing.

3.4Priority in Requested Registrations.  If a requested registration pursuant to this Article III involves an underwritten offering and the managing underwriter (in consultation with the underwriter appointed by the Majority Sellers pursuant to Section 3.7 below) advises the Company and the Holders in writing that, in its opinion, the number of securities requested to be included in such registration by all Holders, the Company and other holders (including securities of the Company which are not Registrable Securities and which the holder thereof has the right to include in any such registration) exceeds the largest number of securities which can be sold without reasonably expecting to have an adverse effect on such offering, including the price at which such securities can be sold, the number of such securities to be included in such registration shall be reduced to such extent, and the Company shall include in such registration such maximum number of securities as follows: (a) first, all the Registrable Securities requested to be included in such registration by the Holders, (b) second, to the extent that the number of Registrable Securities which the Holders have requested to be included in such registration is less than the number of securities which the Company has been advised can be sold in such offering without having the adverse effect referred to above, all the securities which the Company proposes to sell for its own account and (c) third, to the extent that the number of securities which the Holders have requested to be included in such registration and the number of securities which the Company proposes to sell for its own account is, in the aggregate, less than the number of securities which the Company has been advised can be sold in such offering without having the adverse effect referred to above, the number of securities requested to be included in such registration by all other holders thereof which number shall be limited to such extent, and, subject to any rights of such other holders, shall be allocated pro rata among all such holders on the basis of the relative number of such securities then held by each such holder; provided that any such amount thereby allocated to any such holder that exceeds such holder’s request shall be reallocated among the remaining requesting holders in like manner.  If any Holder advises the managing underwriter of any underwritten offering that the Registrable Securities and other securities covered by the registration statement cannot be sold in such offering within a price range acceptable to such Holder, then such Holder shall have the right to exclude all or any portion of its Registrable Securities from registration.

3.5Postponements in Requested Registrations.  (a) If, upon receipt of a registration request pursuant to Section 3.1, the Company is advised in writing by a nationally recognized investment banking firm in the United States or Canada selected by the Company that, in such firm’s opinion, a registration by the Company at the time and on the terms requested would adversely affect any public offering of securities of the Company (other than in connection with employee benefit and similar plans) (a “Company Offering”) with respect to which the Company has commenced preparations for a registration prior to the receipt of a registration request pursuant to Section 3.1 and the Company furnishes the Holders with a certificate signed by the Chief Executive Officer or Chief Financial Officer of the Company to such effect (the “Transaction Delay Notice”) promptly after such request, the Company shall not be required to effect a registration pursuant to Section 3.1 until the earliest of (i) 30 days after the completion of such Company Offering, (ii) promptly after the abandonment of such Company Offering or (iii) 90 days after the date of the Transaction Delay Notice; provided that in any event the Company shall not be required to effect any registration prior to the termination,

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waiver or reduction of any “blackout period” required by the underwriters to be applicable to the Holders in connection with any Company Offering; provided further that in no event shall the Company delay such registration for more than 180 days.

(b)If upon receipt of a registration request pursuant to Section 3.1 or while a registration request pursuant to Section 3.1 is pending, the Company determines in its good faith judgment that the filing of a registration statement or any amendment thereto would require disclosure of material information which the Company has a bona fide business purpose for preserving as confidential and the Company provides the Holders written notice (the “Information Delay Notice” and, together with the Transaction Delay Notice, the “Delay Notice”) thereof promptly after the Company makes such determination, which shall be made promptly after the receipt of any request, the Company shall not be required to comply with its obligations under Section 3.1 until the earlier of (i) the date upon which such material information is disclosed to the public or ceases to be material or (ii) 30 days after the Holders’ receipt of such Information Delay Notice.

(c)Notwithstanding the foregoing provisions of this Section 3.5, the Company shall be entitled to serve only one Delay Notice (A) within any period of 180 consecutive days or (B) with respect to any two consecutive registrations requested pursuant to Section 3.1.

3.6Expenses.  The Company will pay all Registration Expenses in connection with the registrations requested pursuant to Section 3.1.

3.7Selection of Underwriters.  If in any requested registration pursuant to this Article III the Majority Sellers request that such registration shall be in the form of an underwritten offering, such offering shall be an underwritten offering and the Company, in consultation with the Majority Sellers, shall have the right to select any investment banker and manager or co-managers to administer the offering.  The Company and all participating Holders shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting, as well as all other documents customary in similar offerings, including underwriting agreements, custody agreements, powers of attorney, and indemnification agreements.

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ARTICLE IV

INCIDENTAL REGISTRATION

4.1Right to Include Registrable Securities.  If the Company proposes to register any of its IDSs or Common Stock under the Securities Act (other than: (i) a registration in connection with an employee stock option or other benefit plan; (ii) a registration on Form S-4 or any successor or similar form; (iii) an Exchange Shelf Registration; or (iv) a similar registration under Canadian Securities Laws) and applicable Canadian Securities Laws (or under the Securities Act or applicable Canadian Securities Laws if the offering will not be registered under both the Securities Act and applicable Canadian Securities Laws), whether or not for sale for its own account (and including any registration pursuant to a request or demand registration right of any other person), at any time, then the Company will each such time, subject to the provisions of Section 4.2 hereof, give written notice to the Holders of its intention to do so and of the Holders’ rights under this Article IV, at least 30 days prior to the anticipated filing date of the registration statement relating to such registration.  Such notice shall offer the Holders the opportunity to include in such registration statement such number of Registrable Securities as each Holder may request.  Upon the written request of any Holder made within 15 days after the receipt of the Company’s notice (which request shall specify the number of Registrable Securities intended to be disposed of by such Holder), the Company shall use its commercially reasonable efforts to effect the proposed registration under the Securities Act and, if applicable, Canadian Securities Laws of all Registrable Securities which the Company has been so requested to register by such Holder to the extent requisite to permit the disposition of the Registrable Securities so to be registered; provided that (i) if such registration involves an underwritten offering, any such Holder must sell its Registrable Securities to the underwriters selected by the Company on the same terms and conditions as apply to the Company (except that indemnification obligations of any such Holder shall be limited to those obligations set forth in Article VII hereof) and (ii) if, at any time after giving written notice of its intention to register any securities pursuant to this Section 4.1 and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register such securities, the Company shall give written notice to each such Holder and, thereupon, shall be relieved of its obligation to register any Registrable Securities in connection with such registration.  If a registration pursuant to this Section 4.1 involves an underwritten public offering, any such Holder may elect, in writing no less than five business days prior to the effective date of the registration statement filed in connection with such registration, not to register such securities in connection with such registration.  No registration effected under this Article IV shall relieve the Company of its obligations to effect registrations upon request under Article III hereof.  The Company will pay all Registration Expenses in connection with each registration of Registrable Securities requested pursuant to this Article IV.

4.2Priority in Incidental Registrations.  If a registration pursuant to this Article IV involves an underwritten offering and the managing underwriter advises the Company in writing that, in its opinion, the number of securities (including IDSs and all Registrable Securities) which the Company, the Holders and any other persons intend to include in such registration exceeds the largest number of securities which can be sold without reasonably expecting to have an adverse effect on such offering, including the price at which such securities can be sold, the number of such securities to be included in such registration shall be reduced to

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such extent, and the Company will include in such registration such maximum number of securities as follows: first, all the securities the Company proposes to sell for its own account pursuant to Section 4.1 in such registration and second, to the extent that the number of securities which the Company proposes to sell for its own account pursuant to Section 4.1 hereof is less than the number of securities which the Company has been advised can be sold in such offering without having the adverse effect referred to above, the aggregate of the number of Registrable Securities requested to be included in such registration by the Holders and the number of any other such securities requested to be included in such registration by other holders shall be limited to such extent, and shall be allocated pro rata among the Holders and all such holders on the basis of the relative number of such securities then held by each Holder and each such holder; provided that any such amount thereby allocated to each Holder or any such other holder that exceeds such Holder’s or such holder’s request, respectively, shall be reallocated among the Holders and the remaining requesting holders in like manner, as applicable.

ARTICLE V

HOLDBACK AGREEMENTS

5.1Restrictions on Public Sale by the Company and Others.  If any registration of Registrable Securities shall be made in connection with an underwritten public offering, the Company agrees (i) not to effect any public sale or distribution of any IDSs, Common Stock, Common Stock Equivalents, or other securities or of any security convertible into or exchangeable or exercisable for any IDSs, Common Stock, Common Stock Equivalents, or other securities of the Company (other than in connection with an employee stock option or other benefit plan) during the 30 days prior to, and during the 90-day period beginning on, the closing date of the sale of the Registrable Securities pursuant to an effective registration statement (except as part of such registration) and (ii) that any agreement entered into on or after the date of this Agreement pursuant to which the Company issues or agrees to issue any privately placed IDSs, Common Stock, Common Stock Equivalents, or other securities shall contain a provision under which holders of such securities agree not to effect any public sale or distribution of any such securities during the period referred to in the foregoing clause (i), including any sale pursuant to Rule 144 under the Securities Act and the equivalent provisions under Canadian Securities Laws, including OSC Rule 45-501 (except as part of such registration, if permitted).

ARTICLE VI

REGISTRATION PROCEDURES

6.1Registration Procedures.  If and whenever the Company is required to use its commercially reasonable efforts to effect or cause the registration of any Registrable Securities under the Securities Act and, if applicable, Canadian Securities Laws as provided in this Agreement, other than an Exchange Shelf Registration, the Company will, as expeditiously as possible:

(a)use its commercially reasonable efforts to prepare and file with the SEC and, if applicable, Canadian securities regulatory authorities within 90 days (or, for registration

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on a Form S-3 or any similar short-form registration statement, 60 days), after receipt of a request for registration with respect to such Registrable Securities, a registration statement or prospectus on any form for which the Company then qualifies or which counsel for the Company shall deem appropriate, and which form shall be available for the sale of the Registrable Securities in accordance with the intended methods of distribution thereof, and use its commercially reasonable efforts to cause such registration statement to become and remain effective as promptly as practicable, subject to the Majority Holders’ right to defer the Company’s request for the acceleration of effectiveness of any such registration statement as may be necessary to accommodate the anticipated timetable for such offering; provided that before filing with the SEC and, if applicable, Canadian securities regulatory authorities a registration statement or prospectus or any amendments or supplements thereto, the Company will (i) furnish to the selling Holders copies of the form of prospectus (including the preliminary prospectus) proposed to be filed and furnish to counsel for the selling Holders copies of all such documents proposed to be filed, which documents will be subject to the review of such counsel and shall not be filed without the approval of such counsel (which approval shall not be unreasonably withheld) and (ii) notify the selling Holders of any stop order issued or threatened by the SEC and/or applicable Canadian securities regulatory authorities and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered;

(b)subject to Section 3.3 in the case of a Shelf Registration, prepare and file with the SEC and, if applicable, Canadian securities regulatory authorities such amendments and supplements to such registration statement and the prospectus (including each preliminary prospectus) used in connection therewith as may be necessary to keep such registration statement effective for a period of not less than 180 days or such shorter period which will terminate when all Registrable Securities covered by such registration statement have been sold (but not before the expiration of the 90-day period referred to in Section 4(3) of the Securities Act and Rule 174 thereunder and the equivalent provision under Canadian Securities Laws), and comply with the provisions of the Securities Act and the Canadian Securities Laws applicable to it with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement;

(c)promptly furnish to each Holder and each underwriter, if any, of Registrable Securities covered by such registration statement such number of copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto), the prospectus included in such registration statement (including each preliminary prospectus), in conformity with the requirements of the Securities Act and, if applicable, Canadian Securities Laws, copies of any correspondence with the SEC and/or the applicable Canadian securities regulatory authorities or their staff relating to the registration statement and such other documents as any Holder or underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities by such Holder;

(d)use its commercially reasonable efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions as any Holder or each underwriter, if any, reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder and each underwriter, if any, to consummate the disposition in such jurisdictions of the Registrable Securities; provided

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that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (d), (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction;

(e)use its commercially reasonable efforts to cause the Registrable Securities covered by such registration statement to be registered with or approved by such other Governmental Entities as may be necessary by virtue of the business and operations of the Company to enable the selling Holders to consummate the disposition of such Registrable Securities;

(f)immediately notify the selling Holders at any time when a prospectus relating thereto is required to be delivered under the Securities Act and/or Canadian Securities Laws of the happening of any event which comes to the Company’s attention if as a result of such event the prospectus included in such registration statement contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and the Company will promptly prepare and furnish to the selling Holders a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;

(g)use its commercially reasonable efforts to prevent the issuance of and obtain the withdrawal of any stop order suspending the effectiveness of a registration statement relating to the Registrable Securities or of any order preventing or suspending the use of any preliminary or final prospectus at the earliest practicable moment;

(h)if requested by the managing underwriter or underwriters or any selling Holder, immediately incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriters and each applicable selling Holder agree and reasonably request should be included therein relating to the plan of distribution with respect to such Registrable Securities, including information with respect to the number of Registrable Securities being sold to such underwriters, the purchase price being paid therefor by such underwriters and with respect to any other terms of the underwritten (or best efforts underwritten) offering of the Registrable Securities to be sold in such offering; and make all required filings of such prospectus supplement or post-effective amendment as soon as notified of the matters to be incorporated in such prospectus supplement or post-effective amendment;

(i)cooperate with the selling Holders and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends; and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters may request at least three business days prior to any sale of the Registrable Securities to the underwriters;

(j)use its commercially reasonable efforts to cause all such Registrable Securities to be listed on each securities exchange or quotation system on which the same

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securities issued by the Company are then listed, and enter into such customary agreements including a listing application and indemnification agreement in customary form if the applicable listing requirements are satisfied, and to provide a transfer agent and registrar for such Registrable Securities covered by such registration statement no later than the effective date of such registration statement;

(k)enter into such customary agreements (including an underwriting agreement in customary form) and take all such other actions as the Majority Sellers or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities, including customary indemnification and making appropriate members of senior management of the Company available (subject to consulting with them in advance as to schedule) for customary participation in “road show” presentations to potential investors;

(l)make available for inspection by the Holders, any underwriter participating in any disposition pursuant to such registration statement, and any attorney, accountant or other agent retained by any Holder or underwriter (collectively, the “Inspectors”), all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, if any, as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company’s and its subsidiaries’ officers, directors and employees to supply all information and respond to all inquiries reasonably requested by any such Inspector in connection with such registration statement;

(m)in an underwritten offering, use its commercially reasonable efforts to obtain (i) an opinion or opinions of counsel to the Company and (ii) a “cold comfort” letter or letters from the Company’s independent public accountants in customary form and covering such matters of the type customarily covered by opinions and “cold comfort” letters (provided that the term “customarily” as applied to any Registrable Securities shall be deemed to include, without limitation, letters and opinions delivered to the Company in the IPO) as the underwriter reasonably requests;

(n)otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the SEC and, if applicable, Canadian securities regulatory authorities, and make available to its security holders, within the required time periods, an earning statement covering the required periods, which earning statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder or any successor provisions thereto and, if applicable, the equivalent provisions under Canadian Securities Laws;

(o)promptly prior to the filing of any document which is to be incorporated by reference into the registration statement or the prospectus (after the initial filing of the registration statement) and, if applicable, the Canadian Prospectus (including each preliminary prospectus), provide copies of such document to counsel to the selling Holders and to the managing underwriters, if any, make the Company’s representatives available for discussion of such document and make such changes in such document prior to the filing thereof as counsel for the selling Holders may reasonably request;

(p)promptly notify the selling Holders, counsel for the selling Holders, and the managing underwriter or agent and provide them with copies of such relevant documents,

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(i) when the registration statement, or any post-effective amendment to the registration statement, shall have become effective, or any supplement to the prospectus or any amendment to the prospectus shall have been filed, (ii) of the receipt of any comments from the SEC or applicable Canadian securities regulatory authorities, (iii) of any request of the SEC or applicable Canadian securities regulatory authorities to amend the registration statement or amend or supplement the prospectus or for additional information, and (iv) of the issuance by the SEC or applicable Canadian securities regulatory authorities of any stop order suspending the effectiveness of the registration statement or of any order preventing or suspending the use of any prospectus, or of the suspension of the qualification of the registration statement for offering or sale in any jurisdiction, or of the institution or threatening of any proceedings for any of such purposes; and

(q)cooperate with the selling Holders and each underwriter or agent 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 and/or the NASD.

It shall be a condition precedent to the obligation of the Company to take any action pursuant to this Agreement in respect of the securities which are to be registered at the request of any Holder that such Holder shall furnish to the Company such information regarding the securities held by such Holder and the intended method of disposition thereof as the Company shall reasonably request in connection with such registration.

Each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in clause (f) of Section 6.1 hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Holder receives the copies of the prospectus supplement or amendment contemplated by clause (f) of Section 6.1 hereof, and, if so directed by the Company, such Holder will deliver to the Company (at the Company’s expense) all copies, 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. In the event the Company shall give any such notice, the period mentioned in clause (b) of Section 6.1 hereof shall be extended by the greater of (i) three months or (ii) the number of days during the period from and including the date of the giving of such notice pursuant to clause (f) of Section 6.1 hereof to and including the date when such Holder shall have received the copies of the prospectus supplement or amendment contemplated by clause (f) of Section 6.1 hereof.

ARTICLE VII

INDEMNIFICATION

7.1Indemnification by the Company.  In the event of any registration of any Registrable Securities under the Securities Act and, if applicable, Canadian Securities Laws pursuant to Article III or IV hereof, the Company will, and it hereby does, indemnify and hold harmless, to the full extent permitted by law, each selling Holder, their directors and officers, employees, stockholders, general partners, limited partners, members, advisory directors and managing directors (and directors, officers, stockholders, general partners, limited partners, members, advisory directors, managing directors and controlling persons thereof), each other

18

person who participates as an underwriter in the offering or sale of such securities and each other person, if any, who controls, is controlled by or is under common control with any such Holder or any such underwriter within the meaning of the Securities Act and, if applicable, Canadian Securities Laws, against any and all losses, claims, damages or liabilities, joint or several, and expenses (including any amounts paid in any settlement effected with the Company’s consent) to which such Holder, any such director, or officer, employee, stockholder, general or limited partner, member, or advisory or managing director or any such underwriter or controlling person may become subject under the Securities Act and, if applicable, Canadian Securities Laws, state securities or blue sky laws, common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) or expenses arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained, on the effective date thereof, in any registration statement under which such Registrable Securities were registered under the Securities Act and, if applicable, Canadian Securities Laws, any prospectus (including each preliminary prospectus) contained therein, or any amendment or supplement thereto or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of a prospectus (including each preliminary prospectus), in light of the circumstances under which they are made), and the Company will reimburse each such Holder and each such director, officer, employee, general partner, limited partner, advisory director, managing director or underwriter and controlling person for any legal or any other expenses reasonably incurred by them as such expenses are incurred in connection with investigating or defending such loss, claim, liability, action or proceeding; provided that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement or amendment or supplement thereto or in any such prospectus (including each preliminary prospectus) in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such Holder or such director, officer, employee, general or limited partner, managing director or underwriter specifically stating that it is for use in the preparation thereof; provided, further, that the Company shall not be required to indemnify any such person if such untrue statement or omission or alleged untrue statement or omission was contained or made in any preliminary prospectus and corrected in the final prospectus or any amendment or supplement thereto and the final prospectus does not contain any other untrue statement or omission or alleged untrue statement or omission of a material fact that was the subject matter of the related proceeding and any such loss, liability, claim, damage or expense suffered or incurred by such indemnified person resulted from any action, claim or suit by any person who purchased Registrable Securities which are the subject thereof from such indemnified person and it is established in the related proceeding that such indemnified person failed to deliver or provide a copy of the final prospectus (as amended or supplemented) to such person with or prior to the confirmation of the sale of such Registrable Securities sold to such person if required by applicable law, unless such failure to deliver or provide a copy of the final prospectus (as amended or supplemented) was a result of noncompliance by the Company with this Agreement or as a result of the failure of the Company to provide such final prospectus.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of each Holder or any such director, officer, employee, general partner, limited partner, managing

19

director, underwriter or controlling person and shall survive the transfer of such securities by any Holder.

7.2Indemnification by Holders and Underwriters.  The Company may require, as a condition to including Registrable Securities in any registration statement filed in accordance with Article III or IV hereof, that the Company will have received an undertaking reasonably satisfactory to it from any selling Holder or any underwriter to indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 7.1) the Company and its directors, officers, employees, controlling persons and all other prospective sellers and their respective directors, officers, general and limited partners, managing directors, and their respective controlling persons, against any and all losses, claims, damages or liabilities, joint or several, and expenses (including any amounts paid in any settlement effected with the consent of the applicable Holder and underwriter) to which the Company and its directors, officers, employees, controlling persons or any other prospective sellers and their respective directors, officers, general and limited partners, managing directors, and their respective controlling persons may become subject under the Securities Act and, if applicable, Canadian Securities Laws, state securities or blue sky laws, common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) or expenses arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained, on the effective date thereof, in any registration statement under which such Registrable Securities were registered under the Securities Act or applicable Canadian Securities Laws, any prospectus (including each preliminary prospectus) contained therein, or any amendment or supplement thereto or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of a prospectus (including each preliminary prospectus), in light of the circumstances under which they are made), and the applicable Holder and underwriter will reimburse the Company and its directors, officers, employees, controlling persons and all other prospective sellers and their respective directors, officers, general and limited partners, managing directors, and their respective controlling persons for any legal or any other expenses reasonably incurred by them as such expenses are incurred in connection with investigating or defending such loss, claim, liability, action or proceeding; provided that any Holder and any underwriter shall only be liable in any such case if any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement or amendment or supplement thereto or in any such prospectus (including each preliminary prospectus) in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such Holder or any such underwriter specifically stating that it is for use in the preparation thereof; provided, further, that such Holder or underwriter shall not be required to indemnify the Company if such untrue statement or omission or alleged untrue statement or omission was contained or made in any preliminary prospectus and corrected in the final prospectus or any amendment or supplement thereto and the final prospectus does not contain any other untrue statement or omission or alleged untrue statement or omission of a material fact that was the subject matter of the related proceeding and is covered by such Holder’s or underwriter’s obligation under this Section 7.2 and any such loss, liability, claim, damage or expense suffered or incurred by the Company resulted from any action, claim or suit by any person who purchased Registrable Securities or other securities of the Company which are the subject thereof from the Holder or the Company or another holder and it is established in

20

the related proceeding that a copy of the final prospectus (as amended or supplemented) was delivered or provided to such person with or prior to the confirmation of the sale of such Registrable Securities sold to such Person if required by applicable law.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any such director, officer, employee or controlling person or other indemnified person.  No Holder shall be liable under any indemnity provided pursuant to this Article VII for any amounts exceeding the product of the purchase price per Registrable Security and the number of Registrable Securities being sold pursuant to such registration statement or prospectus by such Holder.

7.3Notices of Claims, Etc.  Promptly after receipt by an indemnified party hereunder of written notice of the commencement of any action or proceeding with respect to which a claim for indemnification may be made pursuant to this Article VII, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party, promptly give written notice to the latter of the commencement of such action; provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding Sections of this Article VII, except to the extent that the indemnifying party is actually materially prejudiced by such failure to give notice.  In case any such action is brought against an indemnified party, unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party will be entitled to participate in and, jointly with any other indemnifying party similarly notified, to assume the defense thereof, to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof, unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties arises in respect of such claim after the assumption of the defense thereof or a court of competent jurisdiction determines that the indemnifying party is not vigorously defending such action or proceeding.  An indemnifying party will not be subject to any liability for any settlement made without its consent (which consent shall not be unreasonably withheld).  No indemnifying party will consent to entry of any judgment or enter into any settlement of any pending or threatened proceeding which (i) does not include as an unconditional term thereof the giving by the claimant or plaintiff to all indemnified parties of a release from all liability in respect to such claim or litigation, (ii) involves the imposition of equitable remedies or the imposition of any non-financial obligations on such indemnified party or (iii) otherwise adversely affects such indemnified party, other than as a result of the imposition of financial obligations for which such indemnified party will be indemnified hereunder.  Notwithstanding anything to the contrary contained herein, an indemnifying party will not be obligated to pay the fees and expenses of more than one counsel (together with local counsel) for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels (together with the fees of local counsel).

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7.4Contribution.  If the indemnification provided for in this Article VII is unavailable to an indemnified party under Section 7.1 or Section 7.2 hereof (other than by reason of exceptions provided in those Sections) in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each applicable 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 benefits received by the indemnifying party on the one hand and the indemnified party on the other, and the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations.  The relative fault of the indemnifying party, on the one hand, and of the indemnified party, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  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 7.1 or Section 7.2, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim.

The Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 7.4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph.  Notwithstanding the provisions of this Section 7.4, no Holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities sold by such Holder and distributed to the public were offered to the public exceeds the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  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.

7.5Other Indemnification.  Indemnification similar to that specified in Section 7.1 and Section 7.2 (with appropriate modifications) shall be given by the Company and each Holder with respect to any required registration or other qualification of securities under any law or with any Governmental Entity other than as required by the Securities Act or applicable Canadian Securities Laws.

7.6Non-Exclusivity.  The obligations of the parties under this Article VII shall be in addition to any liability which any party may otherwise have to any other party.

7.7Indemnification Payments.  The indemnification and contribution required by Sections 7.1, 7.2 and 7.4 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or any expense, loss, damage or liability is incurred.

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ARTICLE VIII

MISCELLANEOUS

8.1Remedies.  The Company and each Holder acknowledge and agree that in the event of any breach of this Agreement by any of them, the Holders and the Company would be irreparably harmed and could not be made whole by monetary damages.  Each party accordingly agrees to waive the defense in any action for specific performance that a remedy at law would be adequate and that the parties, in addition to any other remedy to which they may be entitled at law or in equity, shall be entitled to compel specific performance of this Agreement.

8.2Agreements; Restrictive Legends.  A copy of this Agreement shall be filed with the secretary of the Company and kept with the records of the Company.  Each certificate representing Class B Common Stock or Registrable Securities subject to this Agreement shall bear the following legend on the face thereof (in addition to any legend required by state securities or “blue sky” laws):

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE AND ARE SUBJECT TO AN INVESTOR RIGHTS AGREEMENT.  A COPY OF THE INVESTOR RIGHTS AGREEMENT IS AVAILABLE FOR INSPECTION AT THE COMPANY’S PRINCIPAL OFFICES.  NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF THE INVESTOR RIGHTS AGREEMENT.  THE HOLDER OF THIS CERTIFICATE AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF SUCH INVESTOR RIGHTS AGREEMENT.”

The Company agrees to promptly remove (or cause to be removed) the legend set forth above and to take such further action to remove any restrictions on the Registrable Securities in connection with a transfer that is pursuant to a registration statement effective under the Securities Act and, if applicable, a receipted prospectus under applicable Canadian securities laws, or exempt from such registration or filing both in the United States and, if applicable, Canada.

8.3Notices.  Any notice, request, instruction or other document to be given hereunder by any party hereto to another party hereto shall be in writing, shall be delivered personally or sent by certified or registered mail, postage prepaid, return receipt requested, or by Federal Express or other delivery service, to the address of the party set forth below or to such other address as the party to whom notice is to be given may provide in a written notice to the Company, a copy of which written notice shall be maintained on file with the Secretary of the Company.

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(a)If to the Company, to:

Otelco Inc.
505 Third Avenue East
Oneonta, Alabama 35121
Phone:  (205) 625-3574
Facsimile:  (205) 625-3523

with a copy (which shall not constitute notice) to:

(b)O’Melveny & Myers LLP
7 Time Square
New York, NY  10036
Attention:  Adam Weinstein, Esq.
Facsimile:  (212) 326-2061

(c)If to Seaport, to:

c/o Seaport Capital
199 Water Street
20^th Floor
New York, NY 10038
Attention:  Steve McCall
Phone:  (212) 847-8900
Facsimile:  (212) 425-1420

with a copy (which shall not constitute notice) to:

O’Melveny & Myers LLP
Times Square Tower
7 Times Square
New York, New York  10036
Attention:  Adam Weinstein, Esq.
Facsimile:  (212) 326-2061

(d)If to CEA, to:

c/o Seaport Capital
199 Water Street
20^th Floor
New York, NY 10038
Attention:  Steve McCall
Phone:  (212) 847-8900
Facsimile:  (212) 425-1420

(e)If to BancBoston, to:

BancBoston Ventures Inc.
175 Federal Street
Mailstop MA DE 10210A

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Boston, MA  02110
Phone: (617) 434-5146
Facsimile: (617) 434-1153

(f)If to Sternberg, to:

Hans Sternberg
c/o Starmount Life Ins. Co.
The Starmount Building
7800 Office Park Blvd.
Baton Rouge, LA 70809
Phone: (225) 924-4267
Facsimile: (225) 926-6292

(g)If to any individual Holder, to the address of such individual Holder set forth on the signature page hereto.

Any notice, request, instruction or document shall be deemed to have been received on the date of delivery thereof.

8.4Applicable Law.  This Agreement shall be governed by, and interpreted in accordance with, the laws of the State of New York.

8.5Jurisdiction.  The courts of the State of New York in New York County and the United States District Court for the Southern District of New York shall have jurisdiction over the parties with respect to any dispute or controversy between them arising under or in connection with this agreement and, by execution and delivery of this Agreement, each of the parties to this Agreement submits to the non-exclusive jurisdiction of those courts, including but not limited to the in personam and subject matter jurisdiction of those courts, waives any objections to such jurisdiction on the grounds of venue or forum non conveniens, the absence of in personam or subject matter jurisdiction and any similar grounds, consents to service of process by mail (in accordance with Section 8.3) or any other manner permitted by law, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement.

8.6MUTUAL WAIVER OF JURY TRIAL.  THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT.

8.7Severability.  The invalidity, illegality or unenforceability of one or more of the provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of this Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

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8.8Other Agreements.  Nothing contained in this Agreement shall be deemed to be a waiver of, or release from, any obligations any party hereto may have under, or any restrictions on the transfer of Registrable Securities or other securities of the Company imposed by, any other agreement.

8.9Successors; Assigns; Transferees.  The provisions of this Agreement shall be binding upon and accrue to the benefit of the parties hereto and their respective heirs, personal representatives, successors and permitted assigns.  In addition, and whether or not any express assignment shall have been made, the provisions of this Agreement which are for the benefit of the Holders shall also be for the benefit of and enforceable by any Transferee or subsequent holder of Registrable Securities, subject to the provisions contained herein; provided that the Company is given written notice at the time or within 30 days of said transfer, stating the name and address of the Transferee and identifying the securities with respect to which the rights under this Agreement are being transferred; and provided, further, that the Transferee or assignee of such rights assumes in writing the obligations of such Holder under this Agreement (in which case such Holder shall be released from such obligations).  Each Holder shall have the exclusive option to determine which rights and obligations shall be assigned to any Transferee.

8.10Information to be Furnished by the Holders.  Each Holder shall furnish to the Company such information as the Company may reasonably request and as shall be required in connection with the registration and related proceedings referred to herein.

8.11Amendments, Waivers.  This Agreement may not be amended, modified or supplemented and no waivers of or consents to departures from the provisions hereof may be given unless consented to in writing by the Company and the Majority Holders; provided, however, that any amendment, modification, supplement or waiver of or to this Agreement that treats any Holder differently than any other Holder shall require the consent of the Majority Holders of each group of similarly treated Holders.

8.12Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same Agreement.

8.13Limited Liability.  Notwithstanding any other provision of this Agreement neither the stockholders, members, general partners, limited partners, advisory directors or managing directors, or any directors or officers of any stockholders, members, general partners, limited partners, advisory directors or managing directors, nor any future stockholders, members, general partners, limited partners, advisory directors or managing directors, if any, of any Holder shall have any personal liability for performance of any obligation of such Holder under this Agreement.

8.14Adjustments Affecting Registrable Securities.  The Company will not take any action, or permit any change to occur, with respect to the Registrable Securities which would (i) adversely affect the ability of any Holder to include such Registrable Securities in a registration undertaken pursuant to this Agreement or (ii) adversely affect the marketability of such Registrable Securities in any such registration.

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8.15Rule 144.  If the Company is subject to the requirements of Section 13, 14 or 15(d) of the Exchange Act, the Company covenants that it will file with the SEC and, if applicable, Canadian securities regulatory authorities in a timely manner any reports required to be filed by it under the Securities Act, the Exchange Act and Canadian Securities Laws (or, if the Company is not required to file such reports, it will, upon the request of any Holder, make publicly available such information) and it will take such further action as any Holder may reasonably request, so as to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may be amended from time to time, (ii) any similar rule or regulation hereafter adopted by the SEC or (iii) an equivalent prospectus exemption under Canadian Securities Laws, including OSC Rule 45-501.  Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements.

8.16Other Registration Rights.  (a) The Company covenants that it will not grant any right of registration under the Securities Act or applicable Canadian Securities Laws relating to any of its IDSs, shares of Common Stock, Subordinated Notes, Common Stock Equivalents, or other securities to any person unless the Holders shall be entitled to have included in any registration effected (i) pursuant to Article III hereof, all Registrable Securities requested by it to be so included prior to the inclusion of any securities requested to be registered by the persons entitled to any such other registration rights pursuant to any provision providing incidental registration rights comparable to those contained in Article IV hereof and (ii) pursuant to Article IV hereof, pro rata with the inclusion of any securities requested to be registered by the persons entitled to any such other registration rights pursuant to any provision providing incidental registration rights comparable to those contained in Article IV hereof.

(a)If the Company at any time grants to any other holders of IDSs, Common Stock, Subordinated Notes, Common Stock Equivalents, or other securities of the Company any rights to request the Company to effect the registration (whether requested or incidental) under the Securities Act or applicable Canadian Securities Laws of any such securities on any terms more favorable to such holders than the terms set forth in this Agreement, the terms of this Agreement shall, at the request of the Majority Holders, be deemed amended or supplemented to the extent necessary to provide the Holders such more favorable rights and benefits.

(b)The Company covenants that it will not enter into, or cause or permit any of its subsidiaries to enter into, any agreement which conflicts with or limits or prohibits the exercise of the rights granted to the Holders in this Agreement.

8.17Limitation on Separate Registration of Common Stock.  Notwithstanding anything in this Agreement to the contrary, nothing herein shall require the Company to separately register the Common Stock (not in the form of IDSs) at any time that the Common Stock is not then actively traded on the New York Stock Exchange, American Stock Exchange, Toronto Stock Exchange or any other national securities exchange, or Nasdaq.

8.18Headings.  The headings and captions contained herein are for convenience of reference only and shall not control or affect the meaning or construction of any provision hereof.

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8.19Currency.  All references herein to “$” or “dollars” refer to United States currency.  Any determination herein as to price shall be made in (or converted into) U.S. dollars.

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IN WITNESS WHEREOF, each of the parties hereto have duly executed this Agreement as of the date and time first above written.

OTELCO INC.
By:	/s/ Michael D. Weaver
	Name: Michael D. Weaver
	Title: Chief Executive Officer
CEA CAPITAL PARTNERS USA, L.P.
By: Seaport Associates, LLC its authorized representative
By:	/s/ Stephen McCall
	Name: Stephen McCall
	Title: Vice President
CEA CAPITAL PARTNERS USA CI, L.P.
By: Seaport Associates, LLC its authorized representative
By:	/s/ Stephen McCall
	Name: Stephen McCall
	Title: Vice President
SEAPORT CAPITAL PARTNERS II, L.P.
By: CEA Investment Partners II, LLC, its General Partner
By: Seaport Associates, LLC its Member and authorized representative
By:	/s/ Stephen McCall
	Name: Stephen McCall
	Title: Vice President
SEAPORT INVESTMENTS, LLC
By:	/s/ Stephen McCall
	Name: Stephen McCall
	Title: Vice President

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BANCBOSTON VENTURES INC.
By:	/s/ Lars A. Swanson
	Name: Lars A. Swanson
	Title: Director
MID-MISSOURI PARENT LLC
By:	/s/ Denise M. Day
	Name: Denise M. Day
	Title: Co-President
/s/ Michael D. Weaver
Michael D. Weaver
Address for Notices:
/s/ Sean Reilly
Sean Reilly
Address for Notices:
/s/ Kevin Reilly
Kevin Reilly
Address for Notices:
STERNBERG CONSULTING INC.
By:	/s/ H. J. Sternberg
	Name: H. J. Sternberg
	Title: CEO

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EX-10.1

Exhibit 10.1

EXECUTION COPY

CREDIT AGREEMENT

Dated as of December 21, 2004

among

OTELCO INC.,

as Borrower,

THE OTHER CREDIT PARTIES SIGNATORY HERETO,

as Credit Parties,

THE LENDERS SIGNATORY HERETO

FROM TIME TO TIME,

as Lenders,

and

GENERAL ELECTRIC CAPITAL CORPORATION,

as Administrative Agent, Agent and Lender

COBANK, ACB

as Syndication Agent and Lender

TABLE OF CONTENTS

1	AMOUNT AND TERMS OF CREDIT
	1.1	Credit Facilities
	1.2	[Intentionally Omitted]
	1.3	Prepayments
	1.4	Use of Proceeds
	1.5	Interest and Applicable Margins
	1.6	[Intentionally Omitted]
	1.7	[Intentionally Omitted]
	1.8	Cash Management Systems
	1.9	Fees
	1.10	Receipt of Payments
	1.11	Application and Allocation of Payments
	1.12	Loan Account and Accounting
	1.13	Indemnity
	1.14	Access
	1.15	Taxes
	1.16	Capital Adequacy; Increased Costs; Illegality
	1.17	Single Loan
2	CONDITIONS PRECEDENT
	2.1	Conditions to the Initial Loans
	2.2	Further Conditions to Each Loan
3	REPRESENTATIONS AND WARRANTIES
	3.1	Corporate Existence; Compliance with Law
	3.2	Executive Offices, Collateral Locations, FEIN
	3.3	Corporate Power, Authorization, Enforceable Obligations
	3.4	Financial Statements and Projections
	3.5	Material Adverse Effect
	3.6	Ownership of Property; Liens
	3.7	Labor Matters
	3.8	Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness
	3.9	Government Regulation
	3.10	Margin Regulations
	3.11	Taxes
	3.12	ERISA
	3.13	No Litigation
	3.14	Brokers
	3.15	Intellectual Property
	3.16	Full Disclosure; Perfection of Liens

i

	3.17	Environmental Matters
	3.18	Insurance
	3.19	Accounts
	3.20	Government Contracts
	3.21	Customer and Trade Relations
	3.22	Agreements and Other Documents
	3.23	Solvency
	3.24	Mid-Missouri Acquisition Agreement
	3.25	[Intentionally Omitted]
	3.26	Subordinated Debt
	3.27	Capitalization
	3.28	OFAC
	3.29	Patriot Act
4	FINANCIAL STATEMENTS AND INFORMATION
	4.1	Reports and Notices
	4.2	Communication with Accountants
5	AFFIRMATIVE COVENANTS
	5.1	Maintenance of Existence and Conduct of Business
	5.2	Payment of Charges
	5.3	Books and Records
	5.4	Insurance; Damage to or Destruction of Collateral
	5.5	Compliance with Laws
	5.6	Supplemental Disclosure
	5.7	Intellectual Property
	5.8	Environmental Matters
	5.9	Landlords’ Agreements, Mortgagee Agreements, Bailee Letters and Real Estate Purchases
	5.10	Interest Rate Protection
	5.11	CoBank Capital
	5.12	Further Assurances
	5.13	Subsidiaries and Collateral
	5.14	Change of Law Applicable to Mid-Missouri Telephone
	5.15	Post Closing Covenants
6	NEGATIVE COVENANTS
	6.1	Mergers, Subsidiaries, Etc.
	6.2	Investments; Loans and Advances
	6.3	Indebtedness
	6.4	Employee Loans and Affiliate Transactions
	6.5	Capital Structure and Business
	6.6	Guaranteed Indebtedness
	6.7	Liens
	6.8	Sale of Stock and Assets
	6.9	ERISA

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	6.10	Financial Covenants
	6.11	Hazardous Materials
	6.12	Sale/Leasebacks
	6.13	Cancellation of Indebtedness
	6.14	Restricted Payments
	6.15	Change of Corporate Name or Location; Change of Fiscal Year
	6.16	No Impairment of Intercompany Transfers
	6.17	No Speculative Transactions
	6.18	[Intentionally Omitted]
	6.19	Changes Relating to Subordinated Debt; Material Contracts
	6.20	Holding Companies
	6.21	Designated Senior Debt
	6.22	Limitations on Accumulation of Funds
	6.23	Limitations on Creation of Subsidiaries
7	TERM
	7.1	Termination
	7.2	Survival of Obligations Upon Termination of Financing Arrangements
8	EVENTS OF DEFAULT; RIGHTS AND REMEDIES
	8.1	Events of Default
	8.2	Remedies
	8.3	Waivers by Credit Parties
9	ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT
	9.1	Assignment and Participations
	9.2	Appointment of Agent
	9.3	Agent’s Reliance, Etc.
	9.4	GE Capital and Affiliates
	9.5	Lender Credit Decision
	9.6	Indemnification
	9.7	Successor Agent
	9.8	Setoff and Sharing of Payments
	9.9	Advances; Payments; Non-Funding Lenders; Information; Actions in Concert
10	SUCCESSORS AND ASSIGNS
	10.1	Successors and Assigns
11	MISCELLANEOUS
	11.1	Complete Agreement; Modification of Agreement
	11.2	Amendments and Waivers; Joinder Agreement
	11.3	Fees and Expenses
	11.4	No Waiver

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11.5	Remedies
11.6	Severability
11.7	Conflict of Terms
11.8	Confidentiality
11.9	GOVERNING LAW
11.10	Notices
11.11	Section Titles
11.12	Counterparts
11.13	WAIVER OF JURY TRIAL
11.14	Press Releases and Related Matters
11.15	Reinstatement
11.16	Advice of Counsel
11.17	No Strict Construction

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INDEX OF APPENDICES

Annex A (Recitals)	-	Definitions
Annex B (Section 1.2)	-	[Intentionally Omitted]
Annex C (Section 1.8)	-	Cash Management System
Annex D (Section 2.1(a))	-	Closing Checklist
Annex E (Section 4.1(a))	-	Financial Statements and Projections -- Reporting
Annex F (Section 4.1(b))	-	Collateral Reports
Annex G (Section 6.10)	-	Financial Covenants
Annex H (Section 9.9(a))	-	Lenders’ Wire Transfer Information
Annex I (Section 11.10)	-	Notice Addresses
Annex J (from Annex A-
Commitments definition)	-	Commitments as of Closing Date
Exhibit 1.1(a)(i)	-	Form of Notice of Revolving Credit Advance
Exhibit 1.1(a)(ii)	-	Form of Revolving Note
Exhibit 1.1(b)	-	Form of Term Note
Exhibit 1.1(c)(i)	-	Form of Notice of Swing Line Advance
Exhibit 1.1(c)(ii)	-	Form of Swing Line Note
Exhibit 1.5(e)	-	Form of Notice of Conversion/Continuation
Exhibit 5.13		Form of Joinder Agreement
Exhibit 6.3(a)(viii)		Form of Subordinated Intercompany Note
Exhibit 9.1(a)	-	Form of Assignment Agreement
Schedule A		Consolidated EBITDA - 2004
Schedule 1.1	-	Agent’s Representatives
Disclosure Schedule 1.4	-	Sources and Uses; Funds Flow Memorandum
Disclosure Schedule 3.1	-	Type of Entity; State of Organization; Telecommunications Approvals
Disclosure Schedule 3.2	-	Executive Offices, Collateral Locations, FEIN
Disclosure Schedule 3.4(a)	-	Financial Statements
Disclosure Schedule 3.4(b)	-	Pro Forma
Disclosure Schedule 3.6	-	Real Property
Disclosure Schedule 3.7	-	Labor Matters
Disclosure Schedule 3.8	-	Ventures, Subsidiaries and Affiliates; Outstanding Stock
Disclosure Schedule 3.11	-	Tax Matters
Disclosure Schedule 3.12	-	ERISA Plans
Disclosure Schedule 3.13	-	Litigation
Disclosure Schedule 3.14	-	Brokers
Disclosure Schedule 3.15	-	Intellectual Property
Disclosure Schedule 3.17	-	Hazardous Materials
Disclosure Schedule 3.18	-	Insurance
Disclosure Schedule 3.19	-	Accounts
Disclosure Schedule 3.20	-	Government Contracts
Disclosure Schedule 3.22	-	Material Agreements
Disclosure Schedule 6.2	-	Investments

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Disclosure Schedule 6.3	-	Indebtedness
Disclosure Schedule 6.4(a)	-	Transactions with Affiliates
Disclosure Schedule 6.6		Guaranteed Indebtedness
Disclosure Schedule 6.7	-	Existing Liens

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This CREDIT AGREEMENT (this “Agreement”), dated as of December 21, 2004 among OTELCO INC., a Delaware corporation (“Borrower”); the other Credit Parties signatory hereto; GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation (in its individual capacity, “GE Capital”), for itself, as Lender, and as Agent for Lenders, and the other Lenders signatory hereto from time to time.

RECITALS

WHEREAS, Borrower has requested that Lenders extend revolving and term credit facilities to Borrower of up to Ninety-Five Million Dollars ($95,000,000) in the aggregate for the purpose of refinancing certain indebtedness of Borrower and to provide (a) working capital financing for Borrower, (b) funds for other general corporate purposes of Borrower and (c) funds for other purposes permitted hereunder; and for these purposes, Lenders are willing to make certain loans and other extensions of credit to Borrower of up to such amount upon the terms and conditions set forth herein; and

WHEREAS, Borrower has agreed to secure all of its obligations under the Loan Documents by granting to Agent, for the benefit of Agent and Lenders, a security interest in and lien upon substantially all of its existing and after-acquired personal and real property; and

WHEREAS, each of the Guarantors is willing to guarantee all of the obligations of Borrower to Agent and Lenders under the Loan Documents and to grant to Agent, for the benefit of Agent and Lenders, a security interest in and lien upon substantially all of its existing and after-acquired personal and real property to secure such guaranty; and

WHEREAS, capitalized terms used in this Agreement shall have the meanings ascribed to them in Annex A and, for purposes of this Agreement and the other Loan Documents, the rules of construction set forth in Annex A shall govern.  All Annexes, Disclosure Schedules, Exhibits and other attachments (collectively, “Appendices”) hereto, or expressly identified to this Agreement, are incorporated herein by reference, and taken together with this Agreement, shall constitute but a single agreement.  These Recitals shall be construed as part of the Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, and for other good and valuable consideration, the parties hereto agree as follows:

1AMOUNT AND TERMS OF CREDIT

1.1Credit Facilities.

(a)Revolving Credit Facility.

(i)Subject to the terms and conditions hereof, each Revolving Lender agrees to make available to Borrower from time to time until the Commitment Termination Date its Pro Rata Share of advances (each, a “Revolving Credit Advance”).

The Pro Rata Share of the Revolving Loan of any Revolving Lender shall not at any time exceed its separate Revolving Loan Commitment.  The obligations of each Revolving Lender hereunder shall be several and not joint.  Until the Commitment Termination Date and subject to the terms and conditions hereof, Borrower may from time to time borrow, repay and reborrow under this Section 1.1(a); provided, that the amount of any Revolving Credit Advance to be made at any time shall not exceed Borrowing Availability at such time.  Each Revolving Credit Advance shall be made on notice by Borrower to one of the representatives of Agent identified in Schedule 1.1 at the address specified therein.  Any such notice must be given no later than (1) 1:00 p.m. (New York time) on the Business Day of the proposed Revolving Credit Advance, in the case of an Index Rate Loan, or (2) 11:00 a.m. (New York time) on the date which is three (3) Business Days prior to the proposed Revolving Credit Advance, in the case of a LIBOR Loan.  Each such notice (a ”Notice of Revolving Credit Advance”) must be given in writing (by telecopy or overnight courier) substantially in the form of Exhibit 1.1(a)(i), and shall include the information required in such Exhibit and such other information as may be required by Agent.  If Borrower desires to have the Revolving Credit Advances bear interest by reference to a LIBOR Rate, it must comply with Section 1.5(e).

(ii)Except as provided in Section 1.12, Borrower shall execute and deliver to each Revolving Lender a note to evidence the Revolving Loan Commitment of that Revolving Lender.  Each note shall be in the principal amount of the Revolving Loan Commitment of the applicable Revolving Lender, dated the Closing Date and substantially in the form of Exhibit 1.1(a)(ii) (each a “Revolving Note” and, collectively, the “Revolving Notes”).  Each Revolving Note shall represent the obligation of Borrower to pay the amount of the applicable Revolving Lender’s Revolving Loan Commitment or, if less, such Revolving Lender’s Pro Rata Share of the aggregate unpaid principal amount of all Revolving Credit Advances to Borrower together with interest thereon as prescribed in Section 1.5.  The entire unpaid balance of the Revolving Loan and all other non-contingent Obligations shall be immediately due and payable in full in immediately available funds on the Commitment Termination Date.

(b)Term Loan.

(i)Subject to the terms and conditions hereof, each Term Lender agrees to make a term loan (collectively, the “Term Loan”) on the Closing Date to Borrower in the original principal amount of its Term Loan Commitment.  The obligations of each Term Lender hereunder shall be several and not joint.  The Term Loan shall be evidenced by promissory notes substantially in the form of Exhibit 1.1(b) (each a “Term Note” and collectively the “Term Notes”), and, except as provided in Section 1.12, Borrower shall execute and deliver each Term Note to the applicable Term Lender.  Each Term Note shall represent the obligation of Borrower to pay the amount of the applicable Term Lender’s Term Loan Commitment, together with interest thereon as prescribed in Section 1.5.

(ii)[Intentionally Omitted]

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(iii)The entire unpaid balance of the Term Loan shall be due and payable in full in immediately available funds on the Commitment Termination Date, if not sooner paid in full.  No payment with respect to the Term Loan may be reborrowed.

(iv)Each payment of principal with respect to the Term Loan made pursuant to this Section 1.1(b) shall be paid to Agent for the ratable benefit of each Term Lender, ratably in proportion to each such Term Lender’s respective Term Loan Commitment.

(c)Swing Line Facility.

(i)Subject to the terms and conditions hereof, the Swing Line Lender shall make available from time to time until the Commitment Termination Date advances (each, a “Swing Line Advance”) in accordance with this Section 1.1(c).  The aggregate amount of Swing Line Advances outstanding shall not exceed at any time the lesser of (A) the Swing Line Commitment and (B) the Maximum Amount less the sum of the outstanding balance of the Revolving Loan at such time and the Reserves in effect at such time (“Swing Line Availability”).  Until the Commitment Termination Date, Borrower may from time to time borrow, repay and reborrow under this Section 1.1(c).  Each Swing Line Advance shall be made pursuant to a notice of Swing Line Advance (a “Notice of Swing Line Advance”) in writing substantially in the form of Exhibit 1.1(c)(i), delivered by Borrower to the Swing Line Lender and Agent in accordance with this Section 1.1(c).  Any such notice must be given no later than 1:00 p.m. (New York time) on the Business Day of the proposed Swing Line Advance.  Unless the Swing Line Lender has received at least one Business Day’s prior written notice from Requisite Revolving Lenders instructing it not to make a Swing Line Advance, the Swing Line Lender shall, notwithstanding the failure of any condition precedent set forth in Section 2.2, be entitled to fund that Swing Line Advance, and to have such Revolving Lender make Revolving Credit Advances in accordance with Section 1.1(c)(iii) or purchase participating interests in accordance with Section 1.1(c)(iv).  Notwithstanding any other provision of this Agreement or the other Loan Documents, the Swing Line Loan shall constitute an Index Rate Loan.  Borrower shall repay the aggregate outstanding principal amount of the Swing Line Loan upon demand therefor by Agent.

(ii)Borrower shall execute and deliver to the Swing Line Lender a promissory note to evidence the Swing Line Commitment.  Such note shall be in the principal amount of the Swing Line Commitment of the Swing Line Lender, dated the Closing Date and substantially in the form of Exhibit 1.1(c)(ii) (the “Swing Line Note”).  The Swing Line Note shall represent the obligation of Borrower to pay the amount of the Swing Line Commitment or, if less, the aggregate unpaid principal amount of all Swing Line Advances made to Borrower together with interest thereon as prescribed in Section 1.5.  The entire unpaid balance of the Swing Line Loan and all other noncontingent Obligations shall be immediately due and payable in full in immediately available funds on the Commitment Termination Date if not sooner paid in full.

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(iii)The Swing Line Lender, at any time and from time to time but no less frequently than once weekly, shall on behalf of Borrower (and Borrower hereby irrevocably authorizes the Swing Line Lender to so act on its behalf) request each Revolving Lender (including the Swing Line Lender) to make a Revolving Credit Advance to Borrower (which shall be an Index Rate Loan) in an amount equal to that Revolving Lender’s Pro Rata Share of the principal amount of the Swing Line Loan (the “Refunded Swing Line Loan”) outstanding on the date such notice is given.  Unless any of the events described in Sections 8.1(h) or 8.1(i) has occurred (in which event the procedures of Section 1.1(c)(iv) shall apply) and regardless of whether the conditions precedent set forth in this Agreement to the making of a Revolving Credit Advance are then satisfied, each Revolving Lender shall disburse directly to Agent, its Pro Rata Share of a Revolving Credit Advance on behalf of the Swing Line Lender, prior to 3:00 p.m. (New York time), in immediately available funds on the Business Day next succeeding the date that notice is given.  The proceeds of the Revolving Credit Advances referred to in the immediately preceding sentence shall be immediately paid to the Swing Line Lender and applied to repay the Refunded Swing Line Loan.

(iv)If, prior to refunding a Swing Line Loan with a Revolving Credit Advance pursuant to Section 1.1(c)(iii), one of the events described in Sections 8.1(h) or 8.1(i) has occurred, then, subject to the provisions of Section 1.1(c)(v) below, each Revolving Lender shall, on the date such Revolving Credit Advance was to have been made for the benefit of Borrower, purchase from the Swing Line Lender an undivided participation interest in the Swing Line Loan in an amount equal to its Pro Rata Share of such Swing Line Loan.  Upon request, each Revolving Lender shall promptly transfer to the Swing Line Lender, in immediately available funds, the amount of its participation interest.

(v)Each Revolving Lender’s obligation to make Revolving Credit Advances in accordance with Section 1.1(c)(iii) and to purchase participation interests in accordance with Section 1.1(c)(iv) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right that such Revolving Lender may have against the Swing Line Lender, Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of any Default or Event of Default; (C) any inability of Borrower to satisfy the conditions precedent to borrowing set forth in this Agreement at any time or (D) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.  If any Revolving Lender does not make available to Agent or the Swing Line Lender, as applicable, the amount required pursuant to Sections 1.1(c)(iii) or 1.1(c)(iv), as the case may be, the Swing Line Lender shall be entitled to recover such amount on demand from such Revolving Lender, together with interest thereon for each day from the date of non-payment until such amount is paid in full at the Federal Funds Rate for the first two Business Days and at the Index Rate thereafter.

(d)Reliance on Notices.  Agent shall be entitled to rely upon, and shall be fully protected in relying upon, any Notice of Revolving Credit Advance, Notice of Swing Line Advance, Notice of Conversion/Continuation or similar notice believed by Agent to be genuine.  Agent may assume that each Person executing and delivering any

4

notice in accordance herewith was duly authorized, unless the responsible individual acting thereon for Agent has actual knowledge to the contrary.

1.2[Intentionally Omitted].

1.3Prepayments.

(a)Voluntary Prepayments.  Borrower may at any time on at least three (3) days’ prior notice to Agent and Lenders voluntarily prepay all of the Term Loan.  In addition, subject to the following sentence, Borrower may at any time on at least three (3) days’ prior written notice to Agent and Lenders voluntarily prepay part of the Term Loan; provided that any such partial prepayment shall be in a minimum amount of $500,000 and integral multiples of $250,000 in excess of such amount.  Notwithstanding the preceding sentence, if Borrower has given notice of a voluntary partial prepayment of the Term Loan (such notice, a “Voluntary Partial Prepayment Notice”), any Term Lender holding a portion of the Term Loan may elect, by notice to Agent prior to the prepayment date, to decline the amount of such voluntary partial prepayment of the Term Loan to the extent it would be applied to prepay the portion of the Term Loan held by such declining Term Lender assuming none of the Term Lenders declined such prepayment (the aggregate amount, if any, so declined by the declining Term Lenders in respect of a Voluntary Partial Prepayment Notice, the “Declined Voluntary Prepayment Amount”), in which case (i) in respect of a Voluntary Partial Prepayment Notice Borrower may only prepay the Term Loan, and shall prepay the Term Loan, in each case in an amount equal to the amount of the voluntary partial prepayment specified in such Voluntary Partial Prepayment Notice less the Declined Voluntary Prepayment Amount in respect thereof and (ii) the amount prepaid shall be applied to the Term Loan pursuant to Section 1.11(a) for the ratable benefit of each Term Lender that did not decline such prepayment.  In addition, Borrower may at any time on at least 10 days’ prior written notice to Agent terminate the Revolving Loan Commitment; provided that upon such termination, all Loans and other Obligations shall be immediately due and payable in full.  Any such voluntary prepayment and any such termination of the Revolving Loan Commitment must be accompanied by the payment of the Fee required by Section 1.9(c), if any, plus the payment of any LIBOR funding breakage costs in accordance with Section 1.13(b).  Upon any such termination of the Revolving Loan Commitment, Borrower’s right to request Revolving Credit Advances shall simultaneously be terminated.

(b)Mandatory Prepayments.

(i)If at any time the sum of the outstanding balances of the Revolving Loan and the Swing Line Loan exceed the Maximum Amount less the Reserves as then in effect, Borrower shall immediately repay the aggregate outstanding Revolving Credit Advances to the extent required to eliminate such excess.

(ii)No later than the Business Day following receipt by any Credit Party of Net Cash Proceeds of any Disposition (other than Excluded Disposition Proceeds), Borrower shall prepay the Obligations in amount equal to the Net Cash Proceeds of such Disposition; provided, however, that so long as (a) no Default or Event

5

of Default has occurred and is continuing, (b) the Net Cash Proceeds of all Dispositions (other than Excluded Disposition Proceeds) from the first day of the then current Fiscal Year through the applicable date of determination do not exceed $1,000,000 in the aggregate for all Credit Parties combined and (c) the applicable Credit Party shall have delivered to Agent written notice on or prior to the fifth Business Day after such Disposition (if such Disposition is a Condemnation) or on or prior to the third Business Day prior to the consummation of such Disposition (if such Disposition is not a Condemnation) of its election to allocate all or a portion of the Net Cash Proceeds of such Disposition to reinvest in capital assets used or to be used in the businesses of the Credit Parties of the type engaged in by the Credit Parties as of the Closing Date or businesses reasonably related thereto (a “Reinvestment Transaction”), the applicable Credit Party may apply all or a portion of such Net Cash Proceeds to such Reinvestment Transaction within 180 days following such Disposition; provided, further, that (1) any portion of such Net Cash Proceeds that Borrower does not so elect in such written notice to allocate to such Reinvestment Transaction shall be applied to prepay the Loans in accordance with this Section 1.3(b)(ii) no later than the Business Day following receipt thereof by Agent; (2) until such Reinvestment Transaction is consummated, the amount of such Net Cash Proceeds allocated to such Reinvestment Transaction shall either be (x) deposited in a cash collateral account held by Agent or (y) applied to reduce the outstanding principal balance of the Revolving Loan (which application shall not result in a permanent reduction of the Revolving Loan Commitment) and upon such application to the Revolving Loan Agent shall establish a Reserve against the Borrowing Availability in an amount equal to the amount of such proceeds so applied; (3) Borrower may request a Revolving Credit Advance or release from such cash collateral account, as applicable, to fund such Reinvestment Transaction and so long as the conditions in Section 2.2 have been met, Revolving Lenders shall make such Revolving Credit Advance or Agent shall release funds from such cash collateral account to fund such Reinvestment Transaction; (4) in the event such Net Cash Proceeds have been applied against the Revolving Loan, the Reserve established with respect to such Net Cash Proceeds shall be reduced by the amount of such Revolving Credit Advance; and (5) if such Reinvestment Transaction is not consummated within 180 days following such Disposition or to the extent any portion of such Net Cash Proceeds allocated to such Reinvestment Transaction are not applied to such Reinvestment Transaction within 180 days following such Disposition, (A) such Net Cash Proceeds then held in such account shall immediately be applied to prepay the Loans in accordance with this Section 1.3(b)(ii) and (B) any Reserve allocated to such Reinvestment Transaction shall be immediately utilized through the borrowing by Borrower of a Revolving Credit Advance, the proceeds of which shall be applied to the prepayment of the Loans in accordance with this Section 1.3(b)(ii).

(iii)No later than the Business Day following receipt by any Credit Party of Net Cash Proceeds of any Debt Issuance (other than Excluded Debt Issuance Proceeds) or any Stock Issuance (other than Excluded Stock Issuance Proceeds), Borrower shall prepay the Obligations in an amount equal to such Net Cash Proceeds.  No later than the Business Day following the ninetieth (90th) day following receipt by any Credit Party of Net Cash Proceeds of any Debt Issuance referred to in clause (c) or (d) of the definition of Excluded Debt Issuance Proceeds, Borrower shall prepay the Obligations in an amount equal to the amount (if any) of the Net Cash Proceeds from

6

such Debt Issuance that have not been applied as provided in subclause (i) or (ii) of such clause (c) or (d), as applicable.  No later than the Business Day following the ninetieth (90th) day following receipt by any Credit Party of Net Cash Proceeds of any Stock Issuance referred to in clause (c) of the definition of Excluded Stock Issuance Proceeds, Borrower shall prepay the Obligations in an amount equal to the amount (if any) of the Net Cash Proceeds from such Stock Issuance that have not been applied as provided in subclauses (i), (ii), (iii) or (iv) of such clause (c).

(iv)On each IDS Payment Date occurring on or after June 30, 2005 on which the payment of cash interest on one or more series or issues of IDS Subordinated Notes is then prohibited pursuant to Section 6.14 (such one or more series or issues of IDS Subordinated Notes, the “Subject IDS Subordinated Notes”), Borrower shall prepay the Obligations in an aggregate amount equal to the lesser of:

(A) 100% of the amount of (I) Distributable Cash as of such IDS Payment Date minus (II) the aggregate amount of cash dividends paid by Borrower on its common stock and cash interest payments made by Borrower on the Subordinated Debt in accordance with Sections 6.14(e) and (f) during the period from January 1, 2005 through the end of the Fiscal Quarter most recently ended prior to such IDS Payment Date, and

(B) 60% of the Consolidated Interest Expense (excluding any PIK Amounts) accrued to and including such IDS Payment Date from the immediately preceding IDS Payment Date which is attributable to such Subject IDS Subordinated Notes.

(v)On each IDS Payment Date occurring on or after June 30, 2005 on which the payment of cash dividends on Borrower’s Class A common stock is then prohibited pursuant to Section 6.14, Borrower shall prepay the Obligations in an aggregate amount equal to:

(A) 75% of the amount of Excess Cash as of such IDS Payment Date, minus

(B) the sum of (1) the aggregate amount of cash dividends paid by Borrower on its Class A common stock in accordance with Section 6.14(e) during the period from January 1, 2005 through the end of the Fiscal Quarter most recently ended prior to such IDS Payment Date and (2) the amount, if any, of any mandatory prepayment of the Loans on such IDS Payment Date pursuant to Section 1.3(b)(iv).

(vi)Borrower shall prepay the Obligations from insurance and condemnation proceeds in accordance with Section 5.4(c) and the Mortgages, respectively.

The Agent shall give prompt notice to each Lender of the amount of each mandatory prepayment made by Borrower under this Section 1.3(b).  Notwithstanding the foregoing, if the amount of any mandatory prepayment made by Borrower under this Section 1.3(b)

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(other than Section 1.3(b)(i)) shall be for less than all of the Term Loan (a “Mandatory Partial Term Prepayment” and the amount thereof the “Mandatory Partial Term Prepayment Amount”), any Term Lender holding a portion of the Term Loan may elect, by notice to Agent promptly following such Lender’s receipt of notice thereof pursuant to the preceding sentence, to decline to receive its ratable share of such Mandatory Partial Term Prepayment Amount, in which case the Mandatory Partial Term Prepayment Amount shall be applied to the Term Loan pursuant to Section 1.11(a) for the ratable benefit of each Term Lender that did not decline such prepayment.

(c)Application of Certain Mandatory Prepayments.  Any prepayments made by Borrower pursuant to Sections 1.3(b)(ii), (b)(iii), (b)(iv) or (b)(v) above, and any prepayments from insurance and condemnation proceeds in accordance with Section 5.4(c) and the Mortgage(s), respectively, shall be applied as follows:  first, to Fees and reimbursable expenses of Agent then due and payable pursuant to any of the Loan Documents; second, to interest then due and payable on the Loans, ratably in proportion to the interest accrued as to each Loan; and third, to prepay the outstanding principal balance of the Loans, ratably in proportion to the outstanding principal balance of each Loan.  Neither the Revolving Loan Commitment nor the Swing Line Commitment shall be permanently reduced by the amount of any such prepayments.

(d)Intentionally Omitted.

(e)No Implied Consent.  Nothing in this Section 1.3 shall be construed to constitute Agent’s or any Lender’s consent to any transaction that is not permitted by other provisions of this Agreement or the other Loan Documents.

1.4Use of Proceeds.  Borrower shall utilize the proceeds of the Term Loan, the Revolving Loan and the Swing Line Loan solely for the Refinancing (and to pay any related transaction expenses), and for the financing of Borrower’s ordinary working capital and general corporate purposes, including Permitted Acquisitions, Restricted Payments and Consolidated Capital Expenditures, in each case to the extent not prohibited by this Agreement.  Disclosure Schedule (1.4) contains a description of Borrower’s sources and uses of funds as of the Closing Date, including Loans to be made on that date, and a funds flow memorandum detailing how funds from each source are to be transferred to particular uses.

1.5Interest and Applicable Margins.

(a)Borrower shall pay interest to Agent, for the ratable benefit of Lenders in accordance with the various Loans being made by each Lender, in arrears on each applicable Interest Payment Date, at the following rates:  (i) with respect to the Revolving Credit Advances, the Index Rate plus the Applicable Revolver Index Margin per annum or, at the election of Borrower, the applicable LIBOR Rate plus the Applicable Revolver LIBOR Margin per annum, based on the aggregate Revolving Credit Advances outstanding from time to time; (ii) with respect to the Term Loan, the Index Rate plus the Applicable Term Loan Index Margin per annum or, at the election of Borrower, the applicable LIBOR Rate plus the Applicable Term Loan LIBOR Margin per

8

annum; and (iii) with respect to the Swing Line Loan, the Index Rate plus the Applicable Revolver Index Margin per annum.

The Applicable Margins are as follows:

Applicable Revolver Index Margin	3.00	%
Applicable Revolver LIBOR Margin	4.00	%
Applicable Term Loan Index Margin	3.00	%
Applicable Term Loan LIBOR Margin	4.00	%

(b)If any payment on any Loan becomes due and payable on a day other than a Business Day, the maturity thereof will be extended to the next succeeding Business Day (except as set forth in the definition of LIBOR Period) and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.

(c)All computations of Fees calculated on a per annum basis and interest shall be made by Agent on the basis of a 360-day year (or, in the case of interest on Index Rate Loans, a 365 or 366 day year, as applicable), in each case for the actual number of days occurring in the period for which such interest and Fees are payable.  The Index Rate is a floating rate determined for each day.  Each determination by Agent of an interest rate and Fees hereunder shall be final, binding and conclusive on Borrower, absent manifest error.

(d)So long as an Event of Default has occurred and is continuing, the interest rates applicable to the Loans shall be increased by two percentage points (2%) per annum above the rates of interest otherwise applicable hereunder (“Loan Default Rate”), and all outstanding Loans shall bear interest at the Loan Default Rate applicable to such Loans.  Interest at the Loan Default Rate shall accrue from the initial date of such Event of Default until that Event of Default is cured or waived and shall be payable upon demand.  Any other amounts payable hereunder (other than the Loans) or the other Loan Documents that are not paid when due shall bear interest, from the date when due until paid in full, at a rate per annum equal to the Index Rate plus the Applicable Term Loan Index Margin plus two percentage points (2%).

(e)So long as no Event of Default has occurred and is continuing, Borrower shall have the option to (i) request that any Revolving Credit Advance be made as a LIBOR Loan, (ii) convert at any time all or any part of outstanding Loans (other than the Swing Line Loan) from Index Rate Loans to LIBOR Loans, (iii) convert any LIBOR Loan to an Index Rate Loan, subject to payment of LIBOR breakage costs in accordance with Section 1.13(b) if such conversion is made prior to the expiration of the LIBOR Period applicable thereto, or (iv) continue all or any portion of any Loan (other than the Swing Line Loan) as a LIBOR Loan upon the expiration of the applicable LIBOR Period and the succeeding LIBOR Period of that continued Loan shall commence on the first day after the last day of the LIBOR Period of the Loan to be continued.  Any Loan or

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group of Loans having the same proposed LIBOR Period to be made or continued as, or converted into, a LIBOR Loan must be in a minimum amount of $1,000,000 and integral multiples of $500,000 in excess of such amount.  Any such election must be made by 11:00 a.m. (New York time) on the third Business Day prior to (1) the date of any proposed Advance which is to bear interest at the LIBOR Rate, (2) the end of each LIBOR Period with respect to any LIBOR Loans to be continued as such, or (3) the date on which Borrower wishes to convert any Index Rate Loan to a LIBOR Loan for a LIBOR Period designated by Borrower in such election.  If no election is received with respect to a LIBOR Loan by 11:00 a.m. (New York time) on the third Business Day prior to the end of the LIBOR Period with respect thereto (or an Event of Default has occurred and is continuing), that LIBOR Loan shall be converted to an Index Rate Loan at the end of its LIBOR Period.  Borrower must make such election by notice to Agent in writing, by telecopy or overnight courier.  In the case of any conversion or continuation, such election must be made pursuant to a written notice (a “Notice of Conversion/Continuation”) in the form of Exhibit 1.5(e).

(f)Notwithstanding anything to the contrary set forth in this Section 1.5, if a court of competent jurisdiction determines in a final order that the rate of interest payable hereunder exceeds the highest rate of interest permissible under law (the “Maximum Lawful Rate”), then so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable hereunder shall be equal to the Maximum Lawful Rate; provided, however, that if at any time thereafter the rate of interest payable hereunder is less than the Maximum Lawful Rate, Borrower shall continue to pay interest hereunder at the Maximum Lawful Rate until such time as the total interest received by Agent, on behalf of Lenders, is equal to the total interest that would have been received had the interest rate payable hereunder been (but for the operation of this paragraph) the interest rate payable since the Closing Date as otherwise provided in this Agreement. Thereafter, interest hereunder shall be paid at the rate(s) of interest and in the manner provided in Sections 1.5(a) through (e), unless and until the rate of interest again exceeds the Maximum Lawful Rate, and at that time this paragraph shall again apply.  In no event shall the total interest received by any Lender pursuant to the terms hereof exceed the amount that such Lender could lawfully have received had the interest due hereunder been calculated for the full term hereof at the Maximum Lawful Rate.  If the Maximum Lawful Rate is calculated pursuant to this paragraph, such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which such calculation is made.  If, notwithstanding the provisions of this Section 1.5(f), a court of competent jurisdiction shall finally determine that a Lender has received interest hereunder in excess of the Maximum Lawful Rate, Agent shall, to the extent permitted by applicable law, promptly apply such excess in the order specified in Section 1.11 and thereafter shall refund any excess to Borrower or as a court of competent jurisdiction may otherwise order.

1.6[Intentionally Omitted].

1.7[Intentionally Omitted].

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1.8Cash Management Systems.  On or prior to the Closing Date, Borrower will establish and will maintain until the Termination Date, the cash management systems described in Annex C (the “Cash Management Systems”).

1.9Fees.

(a)Borrower shall pay to GE Capital, individually, the Fees specified in the GE Capital Fee Letter at the times specified for payment therein. On the Closing Date, Borrower shall pay to each Lender the Fees specified in the Lender Fee Letter.

(b)As additional compensation for the Revolving Lenders, Borrower shall pay to Agent, for the ratable benefit of such Lenders, in arrears, on each Interest Payment Date for Index Rate Loans prior to the Commitment Termination Date and on the Commitment Termination Date, a Fee for Borrower’s non-use of available funds in an amount equal to either:

(i)where the average daily closing principal balances of the Revolving Loan and Swing Line Loan outstanding during such period is less than fifty percent (50%) of the Maximum Amount, three-fourths of one percent (0.75%) per annum (calculated on the basis of a 360 day year for actual days elapsed) of the difference between (x) the Maximum Amount (as in effect from time to time) and (y) the average for the period of the daily closing balance of the Revolving Loan and Swing Line Loan outstanding during the period for which such Fee is due;

(ii)where the average daily closing principal balances of the Revolving Loan and Swing Line Loan outstanding during such period is equal to or greater than fifty percent (50%) of the Maximum Amount, one-half of one percent (0.50%) per annum (calculated on the basis of a 360 day year for actual days elapsed) of the difference between (x) the Maximum Amount (as in effect from time to time) and (y) the average for the period of the daily closing balances of the Revolving Loan and Swing Line Loan outstanding during the period for which such Fee is due.

(c)If Borrower voluntarily prepays all or any portion of the Term Loan pursuant to Section 1.3(a), Borrower shall pay to Agent, for the benefit of the Term Lenders being prepaid, as liquidated damages and compensation for the costs of being prepared to make funds available hereunder an amount equal to the Applicable Percentage (as defined below) multiplied by the principal amount of the Term Loan so prepaid.  As used herein, the term “Applicable Percentage” shall mean (x) three percent (3%), in the case of a prepayment on or prior to the first anniversary of the Closing Date, (y) two percent (2%), in the case of a prepayment after the first anniversary of the Closing Date but on or prior to the second anniversary thereof, and (z) one percent (1%), in the case of a prepayment after the second anniversary of the Closing Date but on or prior to the third anniversary thereof.  After the third anniversary of the Closing Date, the Applicable Percentage shall mean zero percent.  The Credit Parties agree that the Applicable Percentages are a reasonable calculation of Lenders’ lost profits in view of the difficulties and impracticality of determining actual damages resulting from an early termination of the Commitments.

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(d)[Intentionally Omitted]

1.10Receipt of Payments.  Borrower shall make each payment under this Agreement not later than 2:00 p.m. (New York time) on the day when due in immediately available funds in Dollars to the Collection Account.  For purposes of computing interest and Fees and determining Borrowing Availability as of any date, all payments shall be deemed received on the Business Day on which immediately available funds therefor are received in the Collection Account prior to 2:00 p.m. New York time.  Payments received after 2:00 p.m. New York time on any Business Day or on a day that is not a Business Day shall be deemed to have been received on the following Business Day.

1.11Application and Allocation of Payments.

(a)So long as no Event of Default has occurred and is continuing, (i) payments matching specific scheduled payments then due shall be applied to those scheduled payments; (ii) voluntary prepayments shall be applied in accordance with the provisions of Section 1.3(a); and (iii) mandatory prepayments shall be applied as set forth in Section 1.3(c).  All payments and prepayments applied to a particular Loan shall be applied ratably to the portion thereof held by each Lender as determined by its applicable Pro Rata Share, except as otherwise provided in Section 1.3(a) and Section 1.3(b) if a Term Lender declines a partial prepayment of the Term Loan.  As to any other payment, and as to all payments made when an Event of Default has occurred and is continuing or following the Commitment Termination Date, Borrower hereby irrevocably waives the right to direct the application of any and all payments received from or on behalf of Borrower and unless expressly stated otherwise in this Agreement, payments shall be applied to amounts then due and payable in the following order:  (1) to Fees and Agent’s expenses reimbursable hereunder; (2) to interest on the Loans, ratably in proportion to the interest accrued as to each Loan; (3) to principal payments on the Loans, ratably in proportion to the outstanding principal balance of each Loan; and (4) to all other Obligations including expenses of Lenders to the extent reimbursable under Section 11.3.

(b)Agent is authorized to, and at its sole election may, charge to the Revolving Loan balance on behalf of Borrower and cause to be paid all Fees, expenses, Charges, costs (including insurance premiums in accordance with Section 5.4(a)) and interest and principal, other than principal of the Revolving Loan, owing by Borrower under this Agreement or any of the other Loan Documents if and to the extent Borrower fails to pay promptly any such amounts as and when due, even if the amount of such charges would exceed Borrowing Availability at such time.  At Agent’s option and to the extent permitted by law, any charges so made shall constitute part of the Revolving Loan hereunder.

1.12Loan Account and Accounting.  Agent shall maintain a loan account (the “Loan Account”) on its books to record:  all Advances and the Term Loan, all payments made by Borrower, and all other debits and credits as provided in this Agreement with respect to the Loans or any other Obligations.  All entries in the Loan Account shall be made in accordance with Agent’s customary accounting practices as in

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effect from time to time. The balance in the Loan Account, as recorded on Agent’s most recent printout or other written statement, shall, absent manifest error, be presumptive evidence of the amounts due and owing to Agent and Lenders by Borrower; provided that any failure to so record or any error in so recording shall not limit or otherwise affect Borrower’s duty to pay the Obligations.  Agent shall render to Borrower a monthly accounting of transactions with respect to the Loans setting forth the balance of the Loan Account for the immediately preceding month.  Unless Borrower notifies Agent in writing of any objection to any such accounting (specifically describing the basis for such objection), within 30 days after the date thereof, each and every such accounting shall, absent manifest error, be deemed final, binding and conclusive on Borrower in all respects as to all matters reflected therein.  Only those items expressly objected to in such notice shall be deemed to be disputed by Borrower.  Notwithstanding any provision herein contained to the contrary, any Lender may elect (which election may be revoked) to dispense with the issuance of Notes to that Lender and may rely on the Loan Account as evidence of the amount of Obligations from time to time owing to it.

1.13Indemnity.

(a)Each Credit Party that is a signatory hereto shall jointly and severally indemnify and hold harmless each of Agent, Lenders and their respective Affiliates, and each such Person’s respective officers, directors, employees, attorneys, agents and representatives (each, an “Indemnified Person”), from and against any and all suits, actions, proceedings, claims, damages, losses, liabilities and expenses (including reasonable attorneys’ fees and disbursements and other costs of investigation or defense, including those incurred upon any appeal) that may be instituted or asserted by any third party or by any Credit Party against or incurred by any such Indemnified Person as the result of credit having been extended, suspended or terminated under this Agreement and the other Loan Documents and the administration of such credit, and in connection with or arising out of the transactions contemplated hereunder and thereunder and any actions or failures to act in connection therewith, including any and all Environmental Liabilities and legal costs and expenses arising out of or incurred in connection with disputes between or among any parties to any of the Loan Documents (collectively, “Indemnified Liabilities”); provided, that no such Credit Party shall be liable for any indemnification to an Indemnified Person to the extent that any such suit, action, proceeding, claim, damage, loss, liability or expense results from (i) that Indemnified Person’s gross negligence or willful misconduct as finally determined by a court of competent jurisdiction or (ii) any dispute among any of Agent and the Lenders which dispute does not involve any Credit Party.  NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.

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(b)To induce Lenders to provide the LIBOR Rate option on the terms provided herein, if (i) any LIBOR Loans are repaid in whole or in part prior to the last day of any applicable LIBOR Period (whether that repayment is made pursuant to any provision of this Agreement or any other Loan Document or occurs as a result of acceleration, by operation of law or otherwise); (ii) Borrower shall default in payment when due of the principal amount of or interest on any LIBOR Loan; (iii) Borrower shall refuse to accept any borrowing of, or shall request a termination of, any borrowing of, conversion into or continuation of, LIBOR Loans after Borrower has given notice requesting the same in accordance herewith; or (iv) Borrower shall fail to make any prepayment of a LIBOR Loan after Borrower has given a notice thereof in accordance herewith, then Borrower shall indemnify and hold harmless each Lender from and against all losses, costs and expenses resulting from or arising from any of the foregoing.  Such indemnification shall include any loss (excluding loss of margin) or expense arising from the reemployment of funds obtained by it or from fees payable to terminate deposits from which such funds were obtained.  For the purpose of calculating amounts payable to a Lender under this Section 1.13(b), each Lender shall be deemed to have actually funded its relevant LIBOR Loan through the purchase of a deposit bearing interest at the LIBOR Rate in an amount equal to the amount of that LIBOR Loan and having a maturity comparable to the relevant LIBOR Period; provided, that each Lender may fund each of its LIBOR Loans in any manner it sees fit, and the foregoing assumption shall be utilized only for the calculation of amounts payable under this subsection.  As promptly as practicable under the circumstances, each Lender shall provide Borrower with its written calculation of all amounts payable pursuant to this Section 1.13(b), and such calculation shall be binding on the parties hereto unless Borrower shall object in writing within ten (10) Business Days of receipt thereof, specifying the basis for such objection in detail.

1.14Access.  Each Credit Party that is a party hereto shall, during normal business hours, from time to time upon reasonable prior notice as frequently as Agent reasonably determines to be appropriate:  (a) provide Agent and any of its officers, employees and agents access during normal business hours to its properties, facilities and senior management employees (including officers) of each Credit Party and to the Collateral, (b) permit Agent, and any of its officers, employees and agents, to inspect and make extracts from any Credit Party’s books and records and to audit in scope and manner consistent with lending industry practices any Credit Party’s books and records, and (c) permit Agent, and its officers, employees and agents, to inspect, review, evaluate and make test verifications and counts of the Accounts, Inventory and other Collateral of any Credit Party (collectively, an “Inspection”); provided that Borrower shall be obligated to reimburse Agent for its costs and expenses incurred in connection with an Inspection only (i) for each Inspection commenced while an Event of Default has occurred and is continuing and (ii) for one Inspection per year commenced while no Event of Default has occurred and is continuing.  If an Event of Default has occurred and is continuing or if access is necessary to preserve or protect the Collateral as reasonably determined by Agent, each such Credit Party shall provide such access to Agent and to each Lender at all times and without advance notice.  Furthermore, so long as any Event of Default has occurred and is continuing, Borrower shall provide Agent and each Lender with access to its suppliers and customers. Each Credit Party shall make available to Agent and its counsel, as promptly as reasonably practical under the circumstances,

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originals or copies of all books and records that Agent may reasonably request.  Each Credit Party shall deliver any document or instrument necessary for Agent, as it may from time to time reasonably request, to obtain records from any service bureau or other Person that maintains records for such Credit Party, and shall maintain duplicate records or supporting documentation on media, including computer tapes and discs owned by such Credit Party.  Agent will give Lenders at least five (5) days’ prior written notice of regularly scheduled audits.  Representatives of other Lenders may accompany Agent’s representatives on regularly scheduled audits at no charge to Borrower.

1.15Taxes.

(a)Any and all payments by Borrower hereunder or under the Notes shall be made, in accordance with this Section 1.15, free and clear of and without deduction for any and all present or future Taxes.  If Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under the Notes, (i) the sum payable shall be increased as much as shall be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 1.15) Agent or Lenders, as applicable, receive an amount equal to the sum they would have received had no such deductions been made, (ii) Borrower shall make such deductions, and (iii) Borrower shall pay the full amount deducted to the relevant taxing or other authority in accordance with applicable law.  Within thirty (30) days after the date of any payment of Taxes, Borrower shall furnish to Agent the original or a certified copy of a receipt evidencing payment thereof.  Agent and Lenders shall not be obligated to return or refund any amounts received pursuant to this Section.

(b)Each Credit Party that is a signatory hereto shall jointly and severally indemnify and, within ten (10) days of demand therefor, pay Agent and each Lender for the full amount of Taxes (including any Taxes imposed by any jurisdiction on amounts payable under this Section 1.15) paid by Agent or such Lender, as appropriate, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally asserted.

(c)Each Lender organized under the laws of a jurisdiction outside the United States (a “Foreign Lender”) as to which payments to be made under this Agreement or under the Notes are exempt from United States withholding tax under an applicable statute or tax treaty shall provide to Borrower and Agent a properly completed and executed IRS Form W-8ECI or Form W-8BEN or other applicable form, certificate or document prescribed by the IRS or the United States certifying as to such Foreign Lender’s entitlement to such exemption (a “Certificate of Exemption”).  Any foreign Person that seeks to become a Lender under this Agreement shall provide a Certificate of Exemption to Borrower and Agent prior to becoming a Lender hereunder.  No foreign Person may become a Lender hereunder if such Person fails to deliver a Certificate of Exemption in advance of becoming a Lender.

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1.16Capital Adequacy; Increased Costs; Illegality.

(a)If any Lender shall have determined that any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order regarding capital adequacy, reserve requirements or similar requirements or compliance by any Lender with any request or directive from any Governmental Authority charged with the administration or interpretation thereof or otherwise having jurisdiction in respect thereof regarding capital adequacy, reserve requirements or similar requirements (whether or not having the force of law), in each case, adopted after the Closing Date, increases or would have the effect of increasing the amount of capital, reserves or other funds required to be maintained by such Lender and thereby reducing the rate of return on such Lender’s capital as a consequence of its obligations hereunder, then Borrower shall from time to time upon demand by such Lender (with a copy of such demand to Agent) pay to Agent, for the account of such Lender, additional amounts sufficient to compensate such Lender for such reduction.  A certificate as to the amount of that reduction and showing the basis of the computation thereof submitted by such Lender to Borrower and to Agent shall, absent manifest error, be final, conclusive and binding for all purposes.

(b)If, due to either (i) the introduction of or any change in any law or regulation (or any change in the interpretation thereof by any Governmental Authority charged with the administration or interpretation thereof or otherwise having jurisdiction in respect thereof) or (ii) the compliance with any guideline or request from any Governmental Authority (whether or not having the force of law), in each case adopted after the Closing Date, there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining any LIBOR Loan, then Borrower shall from time to time, upon demand by such Lender (with a copy of such demand to Agent), pay to Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost.  A certificate as to the amount of such increased cost, submitted to Borrower and to Agent by such Lender, shall be conclusive and binding on Borrower for all purposes, absent manifest error.  Each Lender agrees that, as promptly as practicable after it becomes aware of any circumstances referred to above which would result in any such increased cost, the affected Lender shall, to the extent not inconsistent with such Lender’s internal policies of general application, use reasonable commercial efforts to minimize costs and expenses incurred by it and payable to it by Borrower pursuant to this Section 1.16(b).  In no event shall Borrower be obligated to compensate any Lender pursuant to this Section 1.16(b) for any increased cost incurred by such Lender more than 180 days prior to the date that such Lender notifies Borrower of such Lender’s intention to claim compensation under this Section 1.16(b) (except that, if the circumstances referred to above which would result in any such increased cost is retroactive, then the 180 day period referred to above shall be extended to include the period of retroactive effect thereof).

(c)Notwithstanding anything to the contrary contained herein, if the introduction of or any change in any law or regulation (or any change in the interpretation thereof by any Governmental Authority charged with the administration or interpretation thereof or otherwise having jurisdiction in respect thereof) shall make it unlawful, or any Governmental Authority shall assert that it is unlawful, for any Lender to agree to make or to make or to continue to fund or maintain any LIBOR Loan, then, unless that Lender is able to make or to continue to fund or to maintain such LIBOR Loan at another branch

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or office of that Lender without, in that Lender’s opinion, adversely affecting it or its Loans or the income obtained therefrom, on notice thereof and demand therefor by such Lender to Borrower through Agent, (i) the obligation of such Lender to agree to make or to make or to continue to fund or maintain LIBOR Loans shall terminate and (ii) Borrower shall forthwith (but not earlier than the last day of the applicable LIBOR Period, except if required by law) prepay in full all outstanding LIBOR Loans owing to such Lender, together with interest accrued thereon, unless Borrower, within five (5) Business Days after the delivery of such notice and demand, converts all LIBOR Loans into Index Rate Loans.

(d)Within fifteen (15) days after receipt by Borrower of written notice and demand from any Lender (an “Affected Lender”) for payment of additional amounts or increased costs as provided in Sections 1.15(a), 1.16(a) or 1.16(b), Borrower may, at its option, notify Agent and such Affected Lender of its intention to replace the Affected Lender.  So long as no Default or Event of Default has occurred and is continuing, Borrower, with the consent of Agent, may obtain, at Borrower’s expense, a replacement Lender (“Replacement Lender”) for the Affected Lender, which Replacement Lender must be reasonably satisfactory to Agent.  If Borrower obtains a Replacement Lender within 90 days following notice of its intention to do so, the Affected Lender must sell and assign its Loans and Commitments to such Replacement Lender for an amount equal to the principal balance of all Loans held by the Affected Lender and all accrued interest and Fees with respect thereto through the date of such sale; provided, that Borrower shall have reimbursed such Affected Lender for the additional amounts or increased costs that it is entitled to receive under this Agreement through the date of such sale and assignment.  Notwithstanding the foregoing, Borrower shall not have the right to obtain a Replacement Lender if the Affected Lender rescinds its demand for increased costs or additional amounts within five (5) Business Days following its receipt of Borrower’s notice of intention to replace such Affected Lender.  Furthermore, if Borrower gives a notice of intention to replace and does not so replace such Affected Lender within ninety (90) days thereafter, Borrower’s rights under this Section 1.16(d) shall terminate and Borrower shall promptly pay all increased costs or additional amounts demanded by such Affected Lender pursuant to Sections 1.15(a), 1.16(a) and 1.16(b).

1.17Single Loan.  All Loans to Borrower and all of the other Obligations of Borrower arising under this Agreement and the other Loan Documents shall constitute one general obligation of Borrower secured, until the Termination Date, by all of the Collateral.

2CONDITIONS PRECEDENT

2.1Conditions to the Initial Loans.  No Lender shall be obligated to make any Loan on the Closing Date, or to take, fulfill, or perform any other action hereunder, until the following conditions have been satisfied or provided for in a manner satisfactory to Agent and Lenders, or waived in writing by Agent and Lenders:

(a)Credit Agreement; Loan Documents.  This Agreement or counterparts hereof shall have been duly executed by, and delivered to, Borrower, each

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other Credit Party, Agent and Lenders; and Agent and Lenders shall have received such documents, instruments, agreements and legal opinions as Agent or any Lender shall reasonably request in connection with the transactions contemplated by this Agreement and the other Loan Documents, including all those listed in the Closing Checklist attached hereto as Annex D, each in form and substance reasonably satisfactory to Agent and Lenders.

(b)Repayment of Prior Lender Obligations; Satisfaction of Outstanding L/Cs.  (i) Agent and Lenders shall have received a fully executed original of a pay-off letter reasonably satisfactory to Agent confirming that all of the Prior Lender Obligations will be repaid in full from the proceeds of the Term Loan and the initial Revolving Credit Advance and all Liens upon any of the property of Borrower or any of its Subsidiaries in favor of Prior Lender Agent or any Prior Lender shall be terminated by Prior Lender Agent or such Prior Lender, as the case may be, immediately upon such payment; and (ii) all letters of credit, if any, issued or guaranteed by Prior Lender shall have been cash collateralized.

(c)Approvals.  Agent and Lenders shall have received (i) satisfactory evidence that the Credit Parties have obtained all required consents and approvals of all Persons including all requisite Governmental Authorities, including the FCC, any applicable PSC and any applicable Franchising Authority, to the execution, delivery and performance of this Agreement and the other Loan Documents and the consummation of the Related Transactions or (ii) an officer’s certificate in form and substance reasonably satisfactory to Agent affirming that no such consents or approvals are required.

(d)[Intentionally Omitted]

(e)Payment of Fees.  Borrower shall have paid the Fees required to be paid on the Closing Date in the respective amounts specified in Section 1.9 (including the Fees specified in the Fee Letters), and shall have reimbursed Agent for all fees, costs and expenses of closing presented as of the Closing Date.

(f)Capital Structure; Other Indebtedness.  The capital structure of each Credit Party and the terms and conditions of all Indebtedness of each Credit Party shall be as described in the Registration Statement or otherwise acceptable to Agent and Lenders in their reasonable discretion.

(g)Due Diligence.  Agent shall have completed its business and legal due diligence, including a roll forward of its previous Collateral audit with results reasonably satisfactory to Agent.

(h)Consummation of Related Transactions.  Agent and Lenders shall have received fully executed copies of the Mid-Missouri Acquisition Agreement and each of the Related Transactions Documents, each of which shall be in form and substance reasonably satisfactory to Agent and Lenders. The Mid-Missouri Acquisition and the other Related Transactions shall have been consummated in accordance with the terms of the Mid-Missouri Acquisition Agreement and the other Related Transactions

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Documents.  On the Closing Date, Borrower shall have issued Initial IDS Securities having an aggregate issue price of not less than $ 131.6 million and Initial Non-IDS-Linked Subordinated Notes having an aggregate issue price of not less than $ 8.5 million.

(i)Consolidated Senior Leverage Ratio and Consolidated Total Leverage Ratio.   As of the Closing Date and on a Pro Forma Basis after giving effect to the Related Transactions, the Consolidated Senior Leverage Ratio shall not exceed 2.76 to 1.00 and the Consolidated Total Leverage Ratio shall not exceed 5.70 to 1.00, and Agent and Lenders shall have received a certificate of Borrower certifying thereto as required by paragraph CC of Annex D.

2.2Further Conditions to Each Loan.

(a)Except as otherwise expressly provided herein, no Revolving Lender shall be obligated to fund any Advance, if, as of the date thereof:

(i)any representation or warranty by any Credit Party contained herein or in any other Loan Document is untrue or incorrect as of such date (A) as stated if such representation or warranty contains an express materiality qualification or (B) in any material respect if such representation or warranty does not contain such a qualification, except to the extent that such representation or warranty expressly relates to an earlier date (in which case such representation or warranty shall not have been untrue or incorrect as of such earlier date (A) as stated if such representation or warranty contains an express materiality qualification or (B) in any material respect if such representation or warranty does not contain such a qualification) and except for changes therein expressly permitted or expressly contemplated by this Agreement, and Requisite Revolving Lenders have determined not to make such Advance (or have instructed the Swing Line Lender not to make such Advance) as a result of the fact that such representation or warranty is untrue or incorrect as aforesaid;

(ii)any event or circumstance having a Material Adverse Effect has occurred since the date hereof and Requisite Revolving Lenders have determined not to make such Advance (or have instructed the Swing Line Lender not to make such Advance) as a result of the fact that such event or circumstance has occurred;

(iii)any Default or Event of Default has occurred and is continuing or would result from the funding of such Advance, and Requisite Revolving Lenders shall have determined not to make such Advance (or have instructed the Swing Line Lender not to make such Advance) as a result of that Default or Event of Default; or

(iv)after giving effect to any Revolving Advance, the outstanding principal amount of the Revolving Loan would exceed the Maximum Amount less the sum of the then outstanding principal amount of the Swing Line Loan and the Reserves then in effect, or after giving effect to any Swing Line Advance, the outstanding principal amount of the Swing Line Loan would exceed the lesser of (A) the Swing Line Commitment and (B) the Maximum Amount less the sum of the then outstanding principal amount of the Revolving Loan and the Reserves then in effect.

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(b)Except as otherwise expressly provided herein, no Term Lender shall be obligated to fund the Term Loan if, as of the date thereof:

(i)any representation or warranty by any Credit Party contained herein or in any other Loan Document is untrue or incorrect as of such date (A) as stated if such representation or warranty contains an express materiality qualification or (B) in any material respect if such representation or warranty does not contain such a qualification, except to the extent that such representation or warranty expressly relates to an earlier date (in which case such representation or warranty shall not have been untrue or incorrect as of such earlier date (A) as stated if such representation or warranty contains an express materiality qualification or (B) in any material respect if such representation or warranty does not contain such a qualification) and except for changes therein expressly permitted or expressly contemplated by this Agreement, and Requisite Term Lenders have determined not to fund the Term Loan as a result of the fact that such representation or warranty is untrue or incorrect as aforesaid;

(ii)any event or circumstance having a Material Adverse Effect has occurred since the date hereof and Requisite Term Lenders have determined not to fund the Term Loan as a result of the fact that such event or circumstance has occurred; or

(iii)any Default or Event of Default has occurred and is continuing and Requisite Term Lenders shall have determined not to fund the Term Loan as a result of that Default or Event of Default.

The request and acceptance by Borrower of the proceeds of any Advance or the Term Loan shall be deemed to constitute, as of the date thereof, (i) a representation and warranty by Borrower that the conditions in this Section 2.2 have been satisfied and (ii) a reaffirmation by Borrower of the granting and continuance of Agent’s Liens, on behalf of itself and Lenders, pursuant to the Collateral Documents.

3REPRESENTATIONS AND WARRANTIES

To induce Lenders to make the Loans, the Credit Parties executing this Agreement, jointly and severally, make the following representations and warranties to Agent and each Lender with respect to all Credit Parties, each and all of which shall survive the execution and delivery of this Agreement.

3.1Corporate Existence; Compliance with Law.  Each Credit Party (a) is a corporation, limited liability company or limited partnership duly organized, validly existing and in good standing under the laws of its respective jurisdiction of incorporation or organization, and, in the case of the entities that are Credit Parties as of the Closing Date, their respective jurisdiction of incorporation or organization are as set forth in Disclosure Schedule (3.1); (b) is duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect; (c) has the requisite

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power and authority and the legal right to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates under lease and to conduct its business as now, heretofore and proposed to be conducted; (d) subject to specific representations regarding Environmental Laws, has all licenses, permits, consents or approvals from or by, and has made all filings with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct, in each case except where the failure to do so, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect; (e) is in compliance with its charter and bylaws or partnership or operating agreement, as applicable; and (f) subject to specific representations set forth herein regarding ERISA, Environmental Laws, FCC, tax and other laws, is in compliance with all applicable provisions of law and regulation, except where the failure to comply, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.  Except as set forth in Disclosure Schedule (3.1), each Credit Party has all Communications Licenses and Governmental Authorizations and has filed all required federal and state applications and notifications, in each case necessary for the operation of the Telecommunications Businesses in the United States respectively conducted by the Credit Parties (the Communications Licenses, Governmental Authorizations and federal and state applications and notifications necessary for the operation of the Telecommunications Businesses in the United States respectively conducted by the Credit Parties, the “Telecommunications Approvals”), except for those Telecommunications Approvals the absence of which, individually or in the aggregate, could not reasonably be expect to have a Material Adverse Effect.  As of the Closing Date, Disclosure Schedule (3.1) correctly lists (i) all such Communications Licenses and Governmental Authorizations; (ii) the geographical area to which each of such Communications Licenses and Governmental Authorizations relates; (iii) the Governmental Authority that issued each of such Communications Licenses and Governmental Authorizations; (iv) the expiration date, if any, of each of such Communications Licenses and Governmental Authorizations; and (v) if not issued in the name of a Credit Party, the name of the Person in whose name such Communications Licenses and Governmental Authorizations are nominally issued.  All Telecommunications Approvals granted to the Credit Parties remain in full force and effect, except to the extent the failure thereof to be in full force and effect, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, and have not been revoked, suspended, canceled or modified in any adverse way, that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, and are not subject to any conditions or requirements that are not generally imposed by the FCC, any PSC, any Franchising Authority or any other Governmental Authority upon the holders of such Telecommunications Approvals that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.  Except as set forth in Disclosure Schedule (3.1), each Credit Party has paid all Franchise, license, regulatory or other fees and charges which have become due pursuant to any Telecommunications Approvals, except for fees or charges the failure to pay, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.  Except as set forth in Disclosure Schedule (3.1), no Credit Party is in violation of, or in default of, in a manner that, individually or in the aggregate, could reasonably be

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expected to have a Material Adverse Effect, any applicable telecommunications statute of the United States or any state in which it operates, or any applicable rule, regulation or requirement of the FCC, any PSC, any Franchising Authority, any other Governmental Authority or any Telecommunications Approval.  There are no pending or, to the knowledge of any Credit Party, threatened formal complaints, proceedings, letters of inquiry, notices of apparent liability, investigations, protests, petitions or other written objections against any Credit Party at the FCC or the PSC or Franchising Authority of any jurisdiction in which any Credit Party operates, except for matters which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

3.2Executive Offices, Collateral Locations, FEIN.  As of the Closing Date, Disclosure Schedule (3.2) sets forth (i) each Credit Party’s name as it appears in official filings in the state of its incorporation or other organization, (ii) the type of entity of each Credit Party, (iii) the organizational identification number issued by each Credit Party’s state of incorporation or organization or a statement that no such number has been issued, and (iv) each Credit Party’s state of organization or incorporation.  As of the Closing Date, the current location of each Credit Party’s chief executive office and the warehouses and premises at which any Collateral is located are set forth in Disclosure Schedule (3.2), and none of such locations has changed within 12 months preceding the Closing Date.  In addition, Disclosure Schedule (3.2) lists the federal employer identification number of each Credit Party.

3.3Corporate Power, Authorization, Enforceable Obligations.  The execution, delivery and performance by each Credit Party of the Loan Documents to which it is a party and the creation of all Liens provided for therein:  (a) are within such Person’s power; (b) have been duly authorized by all necessary corporate, limited liability company or limited partnership action; (c) do not contravene any provision of such Person’s charter, bylaws or partnership or operating agreement as applicable; (d) do not violate any law or regulation, or any order or decree of any court or other Governmental Authority except where such violation, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect; (e) do not conflict with or result in the breach or termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which such Person is a party or by which such Person or any of its property is bound; (f) do not result in the creation or imposition of any Lien upon any of the property of such Person other than those in favor of Agent, on behalf of itself and Lenders, pursuant to the Loan Documents; and (g) do not require the consent or approval of any Governmental Authority or any other Person, except (i) those referred to in Section 2.1(c), all of which will have been duly obtained, made or complied with prior to the Closing Date and (ii) any consents or approvals of any Person other than a Governmental Authority where the failure to obtain such consents or approvals of any such Person, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.  Each of the Loan Documents shall be duly executed and delivered by each Credit Party that is a party thereto and each such Loan Document shall constitute a legal, valid and binding obligation of such Credit Party enforceable against it in accordance with its terms, except as may be limited by bankruptcy, insolvency,

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reorganization, moratorium or other similar laws relating to or limiting creditors rights generally or by general principles of equity, regardless of whether considered in a proceeding in equity or at law.

3.4Financial Statements and Projections.  Except for the Projections, all Financial Statements concerning Borrower and its Subsidiaries that are referred to below have been prepared in accordance with GAAP consistently applied throughout the periods covered (except as disclosed therein and except, with respect to unaudited Financial Statements, for the absence of footnotes and normal year-end audit adjustments) and present fairly in all material respects the financial position of the Persons covered thereby as at the dates thereof and the results of their operations and cash flows for the periods then ended.

(a)Financial Statements.  The following Financial Statements attached hereto as Disclosure Schedule (3.4(a)) have been delivered to Agent and Lenders on the date hereof:

(i)The audited consolidated balance sheets of Borrower and its Subsidiaries as of December 31, 2002 and 2003 and the related consolidated statements of operations, members’ equity and cash flows for each of the three Fiscal Years in the period ended December 31, 2003, certified by BDO Seidman, LLP, and the audited consolidated balance sheet of Mid-Missouri Holding and its Subsidiaries as of December 31, 2003 and the related consolidated statements of operations, stockholder’s equity and cash flows for the year then ended, certified by BDO Seidman, LLP.

(ii)The unaudited consolidated balance sheet of Borrower and its Subsidiaries as of September 30, 2004 and the related consolidated statements of operation, members’ equity and cash flows for the previous three Fiscal Quarters then ended.

(iii)The unaudited consolidated balance sheet of Mid-Missouri Holding and its Subsidiaries as of September 30, 2004 and the related consolidated statements of operations, stockholder’s equity and cash flows for the previous three Fiscal Quarters then ended.

(b)Pro Forma.  The Pro Forma delivered on the date hereof and attached hereto as Disclosure Schedule (3.4(b)) (i) was prepared by Borrower giving pro forma effect to the Related Transactions, (ii) was based on (A) the unaudited consolidated balance sheet of Borrower and its Subsidiaries as of September 30, 2004 and (B) the unaudited consolidated balance sheet of Mid-Missouri Holding and its Subsidiaries as of September 30, 2004, (iii) was prepared based upon substantially the same accounting principles as those used in the preparation of the financial statements described above and (iv) on a pro forma basis, presents fairly in all material respects the financial position of the Persons covered thereby as at the date thereof.

(c)Projections. The Projections included in the Confidential Information Memorandum previously delivered to the Lenders have been prepared by

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Borrower in light of the past operations of its businesses, but including future payments of known contingent liabilities, and reflect projections giving effect to the Related Transactions for the five (5) year period beginning on the Closing Date on a year-by-year basis.  The Projections are based upon substantially the same accounting principles as those used in the preparation of financial statements described above and the estimates and assumptions stated therein, all of which Borrower believes to be reasonable in light of then-current conditions and then-current facts known to Borrower at the time prepared and as of the Closing Date and, as of the Closing Date, reflect Borrower’s good faith and reasonable estimates of the future financial performance of Borrower and of the other information projected therein for the period set forth therein.

3.5Material Adverse Effect.  Between December 31, 2003 and the Closing Date, (a) no Credit Party has incurred any obligations, contingent or noncontingent liabilities, liabilities for Charges, long-term leases or unusual forward or long-term commitments that are not reflected in the Pro Forma and that, alone or in the aggregate, could reasonably be expected to have a Material Adverse Effect, (b) no contract, lease or other agreement or instrument has been entered into by any Credit Party or has become binding upon any Credit Party’s assets, and no law or regulation known by the Credit Parties to be applicable to any Credit Party has been adopted that, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect, and (c) no Credit Party is in default and to the best of each Credit Party’s knowledge no third party is in default under any material contract, lease or other agreement or instrument, that alone or in the aggregate could reasonably be expected to have a Material Adverse Effect.  Between December 31, 2003 and the Closing Date no event or circumstance has occurred, that alone or together with other events or circumstances, could reasonably be expected to have a Material Adverse Effect.

3.6Ownership of Property; Liens.  As of the Closing Date, the real property listed in Disclosure Schedule (3.6) constitutes all of the real property owned, leased or subleased by any Credit Party.  Each Credit Party owns good and marketable fee simple title to all of its owned Real Estate, and valid and marketable leasehold interests in all of its leased Real Estate, all as described on Disclosure Schedule (3.6), and copies of all such leases or a summary of terms thereof reasonably satisfactory to Agent have been delivered or otherwise made available to Agent. As of the Closing Date, all Material Real Estate is listed on Disclosure Schedule (3.6) under the heading “Material Real Estate.”  Disclosure Schedule (3.6) further describes any Real Estate with respect to which any Credit Party is a lessor, sublessor or assignor as of the Closing Date.  Each Credit Party also has good and, as applicable, marketable title to, valid leasehold interests in, or other valid rights to use, all of its personal property and assets.  As of the Closing Date, none of the properties and assets of any Credit Party are subject to any Liens other than Permitted Encumbrances, and there are no facts, circumstances or conditions known to any Credit Party that may result in any Liens (including Liens arising under Environmental Laws) other than Permitted Encumbrances.  Each Credit Party has received all deeds, assignments, waivers, consents, nondisturbance and attornment or similar agreements, bills of sale and other documents, and has duly effected all recordings, filings and other actions necessary to establish, protect and perfect such Credit Party’s right, title and interest in and to all such Real Estate and other properties

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and assets.  Disclosure Schedule (3.6) also describes any purchase options, rights of first refusal or other similar contractual rights in effect on the Closing Date pertaining to any Real Estate owned by any Credit Party.   Disclosure Schedule (3.6) also describes any purchase options, rights of first refusal or other similar contractual rights in effect on the Closing Date pertaining to any Credit Party’s leasehold interest (1) in any Real Estate leased by such Credit Party which was created or granted by any Credit Party or any Person claiming by, through or under a Credit Party and (2) to the knowledge the Credit Parties, in any Material Real Estate leased by such Credit Party which was created or granted by any other Person. As of the Closing Date, no portion of any Credit Party’s Real Estate has suffered any material damage by fire or other casualty loss that has not heretofore been repaired and restored in all material respects to its original condition or otherwise remedied.  As of the Closing Date, all permits required to have been issued or appropriate to enable the Real Estate to be lawfully occupied and used for all of the purposes for which it is currently occupied and used have been lawfully issued and are in full force and effect, except for those permits the absence of which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

3.7Labor Matters.  Except as set forth in Disclosure Schedule (3.7), as of the Closing Date: (a) no strikes or other material labor disputes against any Credit Party are pending or, to any Credit Party’s knowledge, threatened; (b) hours worked by and payment made to employees of each Credit Party comply with the Fair Labor Standards Act and each other federal, state, local or foreign law applicable to such matters; (c) all payments due from any Credit Party for employee health and welfare insurance have been paid or accrued as a liability on the books of such Credit Party; (d) no Credit Party is a party to or bound by any collective bargaining agreement, management agreement, consulting agreement, employment agreement, bonus, restricted stock, stock option, or stock appreciation plan or agreement or any similar plan, agreement or arrangement (and true and complete copies of any agreements described on Disclosure Schedule (3.7) have been delivered to Agent); (e) there is no organizing activity involving any Credit Party pending or, to any Credit Party’s knowledge, threatened by any labor union or group of employees; (f) there are no representation proceedings pending or, to any Credit Party’s knowledge, threatened with the National Labor Relations Board, and no labor organization or group of employees of any Credit Party has made a pending demand for recognition; and (g) there are no complaints or charges against any Credit Party pending or, to the knowledge of any Credit Party, threatened to be filed with any Governmental Authority or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment by any Credit Party of any individual, except any of the foregoing that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

3.8Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.  Except as set forth in Disclosure Schedule (3.8), as of the Closing Date, no Credit Party has any Subsidiaries, is engaged in any joint venture or partnership with any other Person, or is an Affiliate of any other Person.  As of the Closing Date, all of the issued and outstanding Stock of each Credit Party (other than Borrower) is owned by each of the Stockholders and in the amounts set forth in Disclosure Schedule (3.8).

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Except as set forth in Disclosure Schedule (3.8), there are no outstanding rights to purchase, options, warrants or similar rights or agreements pursuant to which any Credit Party (other than Borrower) may be required to issue, sell, repurchase or redeem any of its Stock or other equity securities or any Stock or other equity securities of its Subsidiaries.  All outstanding Indebtedness and Guaranteed Indebtedness of each Credit Party as of the Closing Date (except for the Obligations) is described in Section 6.3 (including Disclosure Schedule (6.3)).  None of the Holding Companies has engaged in any trade or business, or has any assets (other than Stock of its Subsidiaries and assets incidental to the ownership thereof), or has Incurred any Indebtedness or Guaranteed Indebtedness (other than Indebtedness permitted under Section 6.3 and Guaranteed Indebtedness permitted under Section 6.6).

3.9Government Regulation.  No Credit Party is an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company,” as such terms are defined in the Investment Company Act of 1940.  No Credit Party is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, or any other federal or state statute that restricts or limits its ability to incur Indebtedness or to perform its obligations hereunder. The making of the Loans by Lenders to Borrower, the application of the proceeds thereof and repayment thereof and the consummation of the Related Transactions will not violate any provision of any such statute or any rule, regulation or order issued by the Securities and Exchange Commission.

3.10Margin Regulations.  No Credit Party is engaged, nor will it engage, principally or as one of its important activities, in the business of extending credit for the purpose of “purchasing” or “carrying” any “margin stock” as such terms are defined in Regulation U of the Federal Reserve Board as now and from time to time hereafter in effect (such securities being referred to herein as “Margin Stock”).  No Credit Party owns any Margin Stock as of the Closing Date.  None of the proceeds of the Loans or other extensions of credit under this Agreement will be used, directly or indirectly, for the purpose of purchasing or carrying any Margin Stock, for the purpose of reducing or retiring any Indebtedness that was originally incurred to purchase or carry any Margin Stock or for any other purpose that could reasonably be expected to cause any of the Loans or other extensions of credit under this Agreement to be considered a “purpose credit” within the meaning of Regulations T, U or X of the Federal Reserve Board.  No Credit Party will take or permit to be taken any action that could reasonably be expected to cause any Loan Document to violate any regulation of the Federal Reserve Board.

3.11Taxes.  All Federal, state and other material tax returns, reports and statements, including information returns, required by any Governmental Authority to be filed by any Credit Party have been filed with the appropriate Governmental Authority and all Charges have been paid prior to the date on which any fine, penalty, interest or late charge may be added thereto for nonpayment thereof, excluding Charges or other amounts being contested in accordance with Section 5.2(b).  Proper and accurate amounts have been withheld by each Credit Party from its respective employees for all periods in full and complete compliance with all applicable federal, state, local and foreign laws and such withholdings have been timely paid to the respective Governmental Authorities.

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Disclosure Schedule (3.11) sets forth as of the Closing Date those taxable years for which any Credit Party’s tax returns are currently being audited by the IRS or any other applicable Governmental Authority and any assessments or threatened assessments in connection with such audit, or otherwise currently outstanding.  Except as described in Disclosure Schedule (3.11), as of the Closing Date no Credit Party has executed or filed with the IRS or any other Governmental Authority any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any Charges.  None of the Credit Parties and their respective predecessors are liable for any Charges:  (a) under any agreement (including any tax sharing agreements) or (b) to each Credit Party’s actual knowledge, as a transferee.  As of the Closing Date, no Credit Party has agreed or been requested to make any adjustment under IRC Section 481(a), by reason of a change in accounting method or otherwise, which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

3.12ERISA.

(a)Disclosure Schedule (3.12) lists all Plans and separately identifies all Pension Plans, including Title IV Plans, Multiemployer Plans, ESOPs and Welfare Plans, including all Retiree Welfare Plans in effect as of the Closing Date.  Copies of all such listed Plans, together with a copy of the latest IRS/DOL 5500-series form for each such Plan (other than any Multiple Employer Plan or any Multiemployer Plan) have been delivered to Agent.  Except with respect to Multiple Employer Plans and Multiemployer Plans, each Qualified Plan has been determined by the IRS to qualify under Section 401 of the IRC, the trusts created thereunder have been determined to be exempt from tax under the provisions of Section 501 of the IRC, and nothing has occurred that would cause the loss of such qualification or tax-exempt status except where the failure to so qualify or the loss of such qualification, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.  Each Plan is in compliance with the applicable provisions of ERISA and the IRC, including the timely filing of all reports required under the IRC or ERISA, including the statement required by 29 CFR Section 2520.104-23 except for any noncompliance that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.  Neither any Credit Party nor ERISA Affiliate has failed to make any material contribution or pay any material amount due as required by either Section 412 of the IRC or Section 302 of ERISA or the terms of any such Plan.  Neither any Credit Party nor ERISA Affiliate has engaged in a “prohibited transaction,” as defined in Section 406 of ERISA and Section 4975 of the IRC, in connection with any Plan, that would subject any Credit Party to a material tax on prohibited transactions imposed by Section 502(i) of ERISA or Section 4975 of the IRC.

(b)Except as set forth in Disclosure Schedule (3.12):  (i) no Title IV Plan (other than the NTCA Retirement and Security Program (the “NTCA Plan”)) has any Unfunded Pension Liability that, in the aggregate for all such Title IV Plans combined, exceeds $100,000 and the liability of the Credit Parties and ERISA Affiliates with respect to the Unfunded Pension Liability under the NTCA Plan is not material; (ii) no ERISA Event or event described in Section 4062(e) of ERISA with respect to any Title IV Plan has occurred or is reasonably expected to occur in either case that, individually or in the aggregate, could reasonably be expected to have a Material Adverse

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Effect; (iii) there are no pending, or to the knowledge of any Credit Party, threatened claims (other than claims for benefits in the normal course), sanctions, actions or lawsuits, asserted or instituted against any Plan (other than a Multiple Employer Plan or a Multiemployer Plan) or any Person as fiduciary or sponsor of any Plan (other than a Multiple Employer Plan or a Multiemployer Plan) that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; (iv) no Credit Party or ERISA Affiliate has incurred or reasonably expects to incur any material liability as a result of a complete or partial withdrawal from a Multiemployer Plan; (v) within the last five years no Title IV Plan of any Credit Party or ERISA Affiliate has been terminated, whether or not in a “standard termination” as that term is used in Section 404(b)(1) of ERISA, nor has any Title IV Plan of any Credit Party or ERISA Affiliate (determined at any time within the past five years) with Unfunded Pension Liabilities been transferred outside of the “controlled group” (within the meaning of Section 4001(a)(14) of ERISA) of any Credit Party or ERISA Affiliate except for any Transfer or transaction that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect; (vi) except in the case of any ESOP, as of the Closing Date, Stock of all Credit Parties and their ERISA Affiliates makes up, in the aggregate, no more than 10% of fair market value of the assets of any Plan (other than a Multiple Employer Plan or a Multiemployer Plan) measured on the basis of fair market value as of the latest valuation date of any Plan; and (vii) as of the Closing Date, no liability under any Title IV Plan has been satisfied with the purchase of a contract from an insurance company that is not rated AAA by the Standard & Poor’s Corporation or an equivalent rating by another nationally recognized rating agency.

3.13No Litigation.  No action, claim, lawsuit, demand, investigation or proceeding is now pending or, to the knowledge of any Credit Party, threatened against any Credit Party, before any Governmental Authority or before any arbitrator or panel of arbitrators (collectively, “Litigation”), (a) that challenges any Credit Party’s right or power to enter into or perform any of its obligations under the Loan Documents to which it is a party, or the validity or enforceability of any Loan Document or any action taken thereunder, or (b) that has a reasonable risk of being determined adversely to any Credit Party and that, if so determined, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.  Except as set forth on Disclosure Schedule (3.13), as of the Closing Date there is no Litigation pending or threatened that seeks damages in excess of $500,000 or injunctive relief against, or alleges criminal misconduct of, any Credit Party.

3.14Brokers.  Except as set forth on Disclosure Schedule (3.14), no broker or finder acting on behalf of any Credit Party or Affiliate thereof brought about the obtaining, making or closing of the Loans or the Related Transactions, and no Credit Party or Affiliate thereof has any obligation to any Person in respect of any finder’s or brokerage fees in connection therewith.

3.15Intellectual Property.  As of the Closing Date, each Credit Party owns or has rights to use all Intellectual Property necessary to continue to conduct its business as now or heretofore conducted by it or proposed to be conducted by it, and each Patent, Trademark and registered Copyright and each License with respect to any such

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Patent, Trademark or registered Copyright, is listed, together with application or registration numbers, as applicable, and together with each owner thereof, in Disclosure Schedule (3.15).  Each Credit Party conducts its business and affairs without infringement of or interference with any Intellectual Property of any other Person except for any such infringement or interference that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.  Except as set forth in Disclosure Schedule (3.15), no Credit Party is aware of any infringement claim by any other Person with respect to any Intellectual Property except for any infringement or interference that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

3.16Full Disclosure; Perfection of Liens.  The information contained in this Agreement, any of the other Loan Documents, the Financial Statements, the Collateral Reports and the other written reports from time to time delivered hereunder or any written statement furnished by or on behalf of any Credit Party to Agent or any Lender pursuant to the terms of this Agreement do not contain and will not contain any untrue statement of a material fact or omit to state a material fact known to any Credit Party and necessary to make the statements contained herein or therein not misleading in light of the circumstances under which they were made.  Projections from time to time delivered hereunder are or will be based in all material respects upon the estimates and assumptions stated therein, all of which Borrower believed at the time of delivery to be reasonable in light of then current conditions and then current facts known to Borrower as of such delivery date, and reflect Borrower’s good faith and reasonable estimates of the future financial performance of Borrower and of the other information projected therein for the period set forth therein, it being understood that the Projections are not facts and the actual performance of the entities covered by the Projections may differ significantly from that projected.  The Liens granted to Agent, on behalf of itself and Lenders, pursuant to the Collateral Documents will at all times be fully perfected first priority Liens in and to the Collateral described therein, subject, as to priority, only to Permitted Encumbrances.

3.17Environmental Matters.

(a)Except as set forth in Disclosure Schedule (3.17), as of the Closing Date:  (i) the Real Estate is free of contamination from any Hazardous Material except for such contamination that would not materially and adversely impact any Credit Party’s ability to use such Real Estate in the operation of its business and that would not result in Environmental Liabilities that, individually or in the aggregate, could reasonably be expected to exceed $500,000; (ii) no Credit Party has caused or suffered to occur any Release of Hazardous Materials on, at, in, under, above, to, from or about any of its Real Estate that would result in Environmental Liabilities that, individually or in the aggregate, could reasonably be expected to exceed $500,000; (iii) the Credit Parties are in compliance with all Environmental Laws, except for such noncompliance that would not result in Environmental Liabilities which, individually or in the aggregate, could reasonably be expected to exceed $500,000; (iv) the Credit Parties have obtained, and are in compliance with, all Environmental Permits required by Environmental Laws for the operations of their respective businesses as presently conducted or as proposed to be

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conducted, except where the failure to so obtain or comply with such Environmental Permits would not result in Environmental Liabilities that, individually or in the aggregate, could reasonably be expected to exceed $500,000, and to the knowledge of the Credit Parties all such Environmental Permits are valid, uncontested and in good standing; (v) no Credit Party has actual knowledge of any facts, circumstances or conditions, including any Releases of Hazardous Materials, that are likely to result in any Environmental Liabilities of any Credit Party which, individually or in the aggregate, could reasonably be expected to exceed $500,000, and no Credit Party has knowingly permitted any current or former tenant or occupant of the Real Estate to engage in any such operations; (vi) there is no Litigation arising under or related to any Environmental Laws, Environmental Permits or Hazardous Material that seeks damages, penalties, fines, costs or expenses in excess of $500,000 or injunctive relief against, or that alleges criminal misconduct by, any Credit Party; (vii) no written notice has been received by any Credit Party identifying it as a “potentially responsible party” or requesting information under CERCLA or analogous state statutes, and to the actual knowledge of the Credit Parties, there are no facts, circumstances or conditions that may result in any Credit Party being identified as a “potentially responsible party” under CERCLA or analogous state statutes; and (viii) the Credit Parties have provided to Agent copies of all environmental reports, reviews and audits and all material written information pertaining to actual or potential Environmental Liabilities, in each case if prepared by or at the instruction of, or otherwise in the possession or control of, any Credit Party, in each case relating to any Credit Party.

(b)Each Credit Party hereby acknowledges and agrees that none of the Lenders or Agent (i) is now, or has ever been, in control of any of the Real Estate or any Credit Party’s affairs, and (ii) has the capacity through the provisions of the Loan Documents or otherwise to influence any Credit Party’s conduct with respect to the ownership, operation or management of any of its Real Estate or compliance with Environmental Laws or Environmental Permits.

3.18Insurance.  Disclosure Schedule (3.18) lists all insurance policies of any nature maintained, as of the Closing Date, for current occurrences by each Credit Party, as well as a summary of the terms of each such policy.  As of the Closing Date, each Credit Party is in compliance with its obligations under Section 5.4.

3.19Accounts.  Disclosure Schedule (3.19) lists all banks and other financial institutions at which any Credit Party maintains deposit or other accounts as of the Closing Date and such Schedule correctly identifies the name, address and telephone number of each depository, the name in which the account is held, a description of the purpose of the account, the complete account number therefor and, if such account is a deposit account, whether such account is (a) a “Blocked Account”, “Excluded Account” or “Disbursement Account” for the purposes of Annex C or (b) a “Mid-Missouri Account”.

3.20Government Contracts.  Except as set forth in Disclosure Schedule (3.20), as of the Closing Date, no Credit Party is a party to any contract or agreement with any Governmental Authority and no Credit Party’s Accounts are subject to the

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Federal Assignment of Claims Act (31 U.S.C. Section 3727) or any similar state or local law.

3.21Customer and Trade Relations.  As of the Closing Date, there exists no actual or, to the knowledge of any Credit Party, threatened termination or cancellation of, or any material adverse modification or change in the business relationship of any Credit Party with any customer or supplier that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

3.22Agreements and Other Documents.  As of the Closing Date, each Credit Party has provided to Agent or its counsel, on behalf of Lenders, accurate and complete copies (or summaries) of all of the following agreements or documents to which it is subject as of the Closing Date and each of which is listed in Disclosure Schedule (3.22):  (i) supply agreements and purchase agreements not terminable by such Credit Party within 60 days following written notice issued by such Credit Party and involving transactions in excess of $1,000,000 per annum; (ii) leases of Equipment having a remaining term of one year or longer and requiring aggregate rental and other payments in excess of $500,000 per annum;  (iii) licenses and permits held by the Credit Parties, the absence of which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; (iv) instruments and documents evidencing any Indebtedness or Guaranteed Indebtedness of such Credit Party and any Lien granted by such Credit Party with respect thereto; and (v) instruments and agreements evidencing the issuance of any equity securities, warrants, rights or options to purchase equity securities of such Credit Party.  Except as set forth on Disclosure Schedule (3.22), as of the Closing Date, no Credit Party is a party to or bound by any surety bond agreement or bonding requirement with respect to products or services sold by it or any trademark or patent license agreement with respect to products sold by it.

3.23Solvency.  Both before and after giving effect to (a) the Loans to be made on the Closing Date or such other date as Loans requested hereunder are made, (b) the disbursement of the proceeds of such Loans pursuant to the instructions of Borrower, (c) the Refinancing and the consummation of the other Related Transactions and (d) the payment and accrual of all transaction costs in connection with the foregoing, each Credit Party is and will be Solvent.

3.24Mid-Missouri Acquisition Agreement.  As of the Closing Date, Borrower has delivered to Agent and Lenders a complete and correct copy of the Mid-Missouri Acquisition Agreement (including all schedules, exhibits, amendments, supplements, modifications, assignments and all other documents delivered pursuant thereto or in connection therewith).  No Credit Party and no other Person party thereto is in default in any material respect in the performance or compliance with any provisions thereof.  The Mid-Missouri Acquisition Agreement complies in all material respects with, and the Mid-Missouri Acquisition has been consummated in accordance in all material respects with, all applicable laws.  The Mid-Missouri Acquisition Agreement is in full force and effect as of the Closing Date and has not been terminated, rescinded or withdrawn.  All requisite approvals by Governmental Authorities having jurisdiction over the seller (or sellers) under the Mid-Missouri Acquisition Agreement, any Credit Party

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and other Persons referenced therein, with respect to the transactions contemplated by the Mid-Missouri Acquisition Agreement, have been obtained, and no such approvals imposed any conditions to the consummation of the transactions contemplated by the Mid-Missouri Acquisition Agreement or to the conduct by any Credit Party of its business thereafter.  To each Credit Party’s actual knowledge, none of the representations or warranties in the Mid-Missouri Acquisition Agreement made by Mid-Missouri Parent, LLC thereunder contain any untrue statement of a material fact or omit any fact necessary to make the statements therein not misleading.  As of the Closing Date, each of the representations and warranties given by each applicable Credit Party in the Mid-Missouri Acquisition Agreement is true and correct in all material respects.  Notwithstanding anything contained in the Mid-Missouri Acquisition Agreement to the contrary, such representations and warranties of the Credit Parties are incorporated into this Agreement by this Section 3.24 and shall, solely for purposes of this Agreement and the benefit of Agent and Lenders, survive the consummation of the Mid-Missouri Acquisition.

3.25[Intentionally Omitted]

3.26Subordinated Debt.  As of the Closing Date, Borrower has delivered to Agent and Lenders a complete and correct copy of the Initial IDS Subordinated Notes Documents (including all schedules, exhibits, amendments, supplements, modifications, assignments and all other documents delivered pursuant thereto or in connection therewith).  Borrower has the corporate power and authority to incur the Indebtedness evidenced by the Initial IDS Subordinated Notes.  The subordination provisions contained in the Initial IDS Subordinated Notes Documents and, on and after the execution, delivery and/or Incurrence thereof, any Subsequent IDS Subordinated Notes Documents and any Additional Subordinated Debt Documents, are enforceable against Borrower, the Guarantors party thereto and the holders of such Indebtedness by Agent and Lenders.  All Obligations constitute “Senior Lender Indebtedness”, “Designated Senior Indebtedness” and “Senior Indebtedness” or like term under and as defined in (i) the Initial IDS Subordinated Notes Documents, entitled to the benefits of the subordination provisions contained in the Initial IDS Subordinated Notes Documents and, (ii) on and after the execution, delivery and/or Incurrence thereof, any Subsequent IDS Subordinated Notes Documents and any Additional Subordinated Debt Documents, entitled to the benefits of the subordination provisions contained in any Subsequent IDS Subordinated Notes Documents and any Additional Subordinated Debt Documents.  This Agreement and the other Loan Documents constitute “Senior Credit Documents” or like term as defined in the Initial IDS Subordinated Notes Documents and, on and after the execution, delivery and/or Incurrence thereof, any Subsequent IDS Subordinated Notes Documents and any Additional Subordinated Debt Documents.  The Incurrence of the Obligations does not violate the Initial IDS Subordinated Notes Documents and, on and after the execution, delivery and/or Incurrence thereof, any Subsequent IDS Subordinated Notes Documents and any Additional Subordinated Debt Documents.  The Incurrence of the Revolving Credit Commitment on the Closing Date and any Revolving Credit Advance on the date of borrowing hereunder does not and would not violate the Initial IDS Subordinated Notes Documents and, on after the execution, delivery and/or Incurrence thereof, any Subsequent IDS Subordinated Notes Documents and any Additional Subordinated Debt Documents.  Borrower acknowledges

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that Agent and each Lender are entering into this Agreement and are extending the Commitments in reliance upon this Section 3.26 and the subordination provisions of the Initial IDS Subordinated Notes Documents and, on and after the execution, delivery and/or Incurrence thereof, of any Subsequent IDS Subordinated Notes Documents and any Additional Subordinated Debt Documents.

3.27Capitalization.  On the Closing Date, after giving effect to the Loans and the Related Transactions, the authorized Stock of Borrower shall consist of (a) 2,000,000 shares of preferred stock, par value $0.01 per share, none of which are issued or outstanding, (b)  20,000,000 shares of Class A common stock, par value $0.01 per share (such authorized shares of Class A common stock, together with any subsequently authorized shares of such common stock, the “Class A Common Stock”) of which 9,652,951 shares are issued and outstanding (and of which 8,659,000 shall be included in the Initial IDS Securities) and (c) 800,000 shares of Class B common stock, par value $0.01 per share (such authorized shares of Class B common stock, together with any subsequently authorized shares of such common stock, the “Class B Common Stock”) of which 544,671 shares are issued and outstanding.   All such outstanding shares have been duly and validly issued, are fully paid and nonassessable and are free of preemptive rights.  Except as disclosed in the Registration Statement, on the Closing Date, Borrower does not have outstanding any Stock convertible into or exchangeable for its 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 Stock or any Stock appreciation or similar rights.

3.28OFAC.  No Credit Party (i) is a person whose property or interest in property is blocked or subject to blocking pursuant to Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (ii) engages in any dealings or transactions prohibited by such executive order, or is otherwise associated with any such person in any manner violative of such executive order, or (iii) is a person on the list of Specially Designated Nationals and Blocked Persons or subject to the limitations or prohibitions under any other U.S. Department of Treasury’s Office of Foreign Assets Control regulation or executive order.

3.29Patriot Act.  Each Credit Party is in compliance with (i) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, and (ii) the Uniting And Strengthening America By Providing Appropriate Tools Required To Intercept And Obstruct Terrorism (USA Patriot Act of 2001).  No part of the proceeds of the Loans will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

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4FINANCIAL STATEMENTS AND INFORMATION

4.1Reports and Notices.

(a)Each Credit Party executing this Agreement hereby agrees that from and after the Closing Date and until the Termination Date, it shall deliver to Agent or to Agent and Lenders, as required, the Financial Statements, Compliance Certificates, notices, Projections and other information at the times, to the Persons and in the manner set forth in Annex E.

(b)Each Credit Party executing this Agreement hereby agrees that from and after the Closing Date and until the Termination Date, it shall deliver to Agent or to Agent and Lenders, as required, the various Collateral Reports at the times, to the Persons and in the manner set forth in Annex F.

4.2Communication with Accountants.  Each Credit Party executing this Agreement authorizes (a) Agent and (b) so long as an Event of Default has occurred and is continuing, each Lender, to communicate directly with its independent certified public accountants, including BDO Seidman LLP, and authorizes and shall request those accountants to disclose and make available to Agent and each Lender any and all Financial Statements and other supporting financial documents, schedules and information relating to any Credit Party (including copies of any issued management letters) with respect to the business, results of operations, financial condition and other affairs of any Credit Party, provided that an officer of Borrower will be given the reasonable opportunity to participate in any direct communication with the Credit Parties’ independent public accountants.

5AFFIRMATIVE COVENANTS

Each Credit Party executing this Agreement jointly and severally agrees as to all Credit Parties that from and after the date hereof and until the Termination Date:

5.1Maintenance of Existence and Conduct of Business.  Each Credit Party shall:  do or cause to be done all things necessary to preserve and keep in full force and effect its corporate or organizational existence (except to the extent permitted by Section 6.1) and its material rights and franchises; continue to conduct its business substantially as now conducted or as otherwise permitted hereunder; and at all times maintain, preserve and protect all of its material assets and properties used or useful in the conduct of its business, and keep the same in reasonable repair, working order and condition in all material respects (taking into consideration ordinary wear and tear) and from time to time make, or cause to be made, all necessary or appropriate repairs, replacements and improvements thereto consistent with industry practices.

5.2Payment of Charges.

(a)Subject to Section 5.2(b), each Credit Party shall pay and discharge or cause to be paid and discharged promptly all Charges payable by it, including (i) Charges imposed upon it, its income and profits, or any of its material property (real,

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personal or mixed) and all Charges with respect to tax, social security and unemployment withholding with respect to its employees, except such unpaid Charges which will not cumulatively in the aggregate for all unpaid Charges of all Credit Parties result in more than $100,000 in liabilities for all Credit Parties combined, (ii) lawful claims for labor, materials, supplies and services or otherwise, and (iii) all storage or rental charges payable to warehousemen and bailees, in each case, before any thereof shall become past due, except in the case of clauses (ii) and (iii) where the failure to pay or discharge such Charges, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

(b)Each Credit Party may in good faith contest, by appropriate proceedings, the validity or amount of any Charges, Taxes or claims described in Section 5.2(a); provided, that (i) adequate reserves with respect to such contest are maintained on the books of such Credit Party, in accordance with GAAP, (ii) no Lien shall be imposed to secure payment of such Charges (other than payments to warehousemen and/or bailees) that is superior to any of the Liens securing payment of the Obligations and such contest is maintained and prosecuted continuously and with diligence and operates to suspend collection or enforcement of such Charges, (iii) none of the Collateral becomes subject to forfeiture or loss as a result of such contest, and (iv) such Credit Party shall promptly pay or discharge such contested Charges, Taxes or claims and all additional charges, interest, penalties and expenses, if any, and shall deliver to Agent evidence reasonably acceptable to Agent of such compliance, payment or discharge, if such contest is terminated or discontinued adversely to such Credit Party or the conditions set forth in this Section 5.2(b) are no longer met.

5.3Books and Records.  Each Credit Party shall keep adequate books and records with respect to its business activities in which proper entries, reflecting all financial transactions, are made in order to permit the preparation of financial statements in accordance with GAAP.

5.4Insurance; Damage to or Destruction of Collateral.

(a)The Credit Parties shall, at their sole cost and expense, maintain (i) the policies of insurance described on Disclosure Schedule (3.18) as in effect on the date hereof or (ii) casualty insurance on all real and personal property on an all risks basis (including the perils of flood and quake), covering the repair and replacement cost of all such property and coverage for business interruption and public liability insurance (including products/completed operations liability coverage) in each case of the kinds customarily carried or maintained by Persons of established reputation engaged in similar businesses and in each case with insurers and in amounts reasonably acceptable to Agent (it being agreed that any insurer having an A.M. Best policy holders rating of at least “A minus” shall be acceptable to Agent). Such policies of insurance (or the loss payable and additional insured endorsements delivered to Agent) shall contain provisions pursuant to which the insurer agrees to provide 30 days (or, in the case of cancellation for nonpayment of premium, 10 days’) prior written notice to Agent in the event of any non-renewal, cancellation or amendment of any such insurance policy.  If any Credit Party at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance

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required above or to pay all premiums relating thereto, Agent may at any time or times thereafter obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto that Agent reasonably deems advisable.  Agent shall have no obligation to obtain insurance for any Credit Party or pay any premiums therefor.  By doing so, Agent shall not be deemed to have waived any Default or Event of Default arising from any Credit Party’s failure to maintain such insurance or pay any premiums therefor.  All sums so disbursed, including reasonable attorneys’ fees, court costs and other charges related thereto, shall be payable on demand by Borrower to Agent and shall be additional Obligations hereunder secured by the Collateral.

(b)Agent reserves the right at any time upon any change in any Credit Party’s insurance risk profile (including any change in the product mix maintained by any Credit Party or any laws affecting the potential liability of such Credit Party) to require additional forms and limits of insurance to, in Agent’s opinion, adequately protect both Agent’s and Lenders’ interests in all or any portion of the Collateral and to ensure that each Credit Party is protected by insurance in amounts and with coverage customary for its industry; provided that so long as no Event of Default has occurred and is continuing, the Credit Parties shall be required to obtain such additional forms and limits of insurance only on the annual renewal date of the applicable insurance policy (or on a date reasonably selected by Agent if there is no such annual renewal date).  If reasonably requested by Agent, each Credit Party shall deliver to Agent from time to time a report of a reputable insurance broker, reasonably satisfactory to Agent, with respect to its insurance policies.

(c)Each Credit Party shall deliver to Agent, in form and substance reasonably satisfactory to Agent, endorsements to all general liability and other liability policies naming Agent, on behalf of itself and Lenders, as additional insured. Each Credit Party (other than Mid-Missouri Telephone) shall deliver to Agent, in form and substance reasonably satisfactory to Agent, endorsements to all “All Risk” and business interruption insurance naming Agent, on behalf of itself and Lenders, as lender’s loss payee.  Each Credit Party (other than Mid-Missouri Telephone) irrevocably makes, constitutes and appoints Agent (and all officers, employees or agents designated by Agent), so long as any Default or Event of Default has occurred and is continuing or the anticipated insurance proceeds exceed $500,000, as each such Credit Party’s true and lawful agent and attorney-in-fact for the purpose of making, settling and adjusting claims under such “All Risk” policies of insurance, endorsing the name of each such Credit Party on any check or other item of payment for the proceeds of such “All Risk” policies of insurance and for making all determinations and decisions with respect to such “All Risk” policies of insurance.  Agent shall have no duty to exercise any rights or powers granted to it pursuant to the foregoing power-of-attorney.  Borrower shall promptly notify Agent and Lenders of any loss, damage or destruction to the Collateral in the amount of $500,000 or more, whether or not covered by insurance, and if any Credit Party receives insurance proceeds in respect of any such loss, damage or destruction to the Collateral, it shall immediately pay them to Agent for application in accordance with this Section 5.4(c) (it being understood that proceeds of business interruption insurance shall be retained by the applicable Credit Party except during the occurrence and continuance of a Default or an Event of Default).  After deducting from such proceeds the expenses, if any, incurred by

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Agent in the collection or handling thereof, Agent may, at its option, apply such proceeds to the reduction of the Obligations of Borrower in accordance with Section 1.3(c) or permit or require each Credit Party to use such money, or any part thereof, to promptly begin and diligently pursue the replacement, repair, restoration or rebuilding of the Collateral with materials and workmanship of substantially the same quality as existed before the loss, damage or destruction.  Notwithstanding the foregoing, if the casualty giving rise to such insurance proceeds could not reasonably be expected to have a Material Adverse Effect and such insurance proceeds do not exceed $500,000 in the aggregate, Agent shall permit the applicable Credit Party either to replace, restore, repair or rebuild the property or to reinvest such proceeds in revenue producing capital assets used in the businesses of the Credit Parties of the type engaged in by the Credit Parties as of the Closing Date or businesses reasonably related thereto; provided that if such Credit Party has not completed or entered into binding agreements to complete such replacement, restoration, repair or rebuilding within 180 days following such casualty or has not consummated such reinvestment within 180 days following such casualty, Agent may apply such insurance proceeds to the Obligations of Borrower in accordance with Section 1.3(c).  All insurance proceeds that are to be made available to any Credit Party to replace, repair, restore or rebuild such Collateral or to fund such reinvestment shall either be (x) deposited in a cash collateral account held by Agent or (y) applied by Agent to reduce the outstanding principal balance of the Revolving Loan (which application shall not result in a permanent reduction of the Revolving Loan Commitment) and upon such application, Agent shall establish a Reserve against the Borrowing Availability in an amount equal to the amount of such proceeds so applied.  Thereafter, such funds shall be made available to Borrower to provide funds to replace, repair, restore or rebuild such Collateral or to fund such reinvestment as follows:  (i) Borrower shall request a Revolving Credit Advance or release from such cash collateral account be made to fund such replacement, repair, restoration or rebuilding or to fund such reinvestment in the amount requested to be released; (ii) so long as the conditions in Section 2.2 have been met, Revolving Lenders shall make such Revolving Credit Advance or Agent shall release funds from such cash collateral account; and (iii) in the case of insurance proceeds applied against the Revolving Loan, the Reserve established with respect to such insurance proceeds shall be reduced by the amount of such Revolving Credit Advance.  To the extent not used to replace, repair, restore or rebuild the Collateral or to fund such reinvestment, such insurance proceeds shall be applied in accordance with Section 1.3(c) and such Reserve shall be immediately utilized through the borrowing by Borrower of a Revolving Credit Advance, the proceeds of which shall be applied to prepay the Loans in accordance with Section 1.3(c).

5.5Compliance with Laws.  Each Credit Party shall comply with all federal, state, local and foreign laws and regulations applicable to it, including those relating to ERISA and labor matters and Environmental Laws and Environmental Permits, except to the extent that the failure to comply, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.  Each Credit Party shall duly and timely comply in all respects with any applicable telecommunications statutes of the United States or any state in which it operates, or any applicable rule, regulation or requirement of the FCC, any PSC, any Franchising Authority and any other Governmental Authority and all Telecommunications Approvals, except to the extent that

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such failure, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

5.6Supplemental Disclosure.  From time to time as may be reasonably requested by Agent (which request will not be made more frequently than once each year absent the occurrence and continuance of a Default or an Event of Default), the Credit Parties shall supplement each Disclosure Schedule hereto, or any representation herein or in any other Loan Document, with respect to any matter hereafter arising that, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Disclosure Schedule or as an exception to such representation or that is necessary to correct any information in such Disclosure Schedule or representation which has been rendered materially inaccurate thereby (and, in the case of any supplements to any Disclosure Schedule, such Disclosure Schedule shall be appropriately marked to show the changes made therein); provided that (a) no such supplement to any such Disclosure Schedule or representation shall (x) amend, supplement or otherwise modify any Disclosure Schedule or representation, or (y) be deemed a waiver of any Default or Event of Default resulting from the matters disclosed therein, except as consented to by Agent and Requisite Lenders in writing and in the case of clause (x) except for changes permitted or required by Annex C and changes otherwise constituting matters expressly permitted or expressly contemplated by this Agreement and (b) no supplement shall be required or permitted as to representations and warranties that relate solely to the Closing Date.

5.7Intellectual Property.  Each Credit Party will conduct its business and affairs without infringement of or interference with any Intellectual Property of any other Person and shall comply with the terms of its Licenses, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

5.8Environmental Matters.  Each Credit Party shall and shall cause each Person within its control to:  (a) conduct its operations and keep and maintain its Real Estate in compliance with all Environmental Laws and Environmental Permits other than noncompliance that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect; (b) implement any and all investigation, remediation, removal and response actions that are appropriate or necessary to operate the Real Estate in the manner presently operated or to otherwise materially comply with Environmental Laws and Environmental Permits pertaining to the presence, generation, treatment, storage, use, disposal, transportation or Release of any Hazardous Material on, at, in, under, above, to, from or about any of its Real Estate; (c) notify Agent promptly after such Credit Party has actual knowledge of any violation of Environmental Laws or Environmental Permits or any Release on, at, in, under, above, to, from or about any Real Estate that is reasonably likely to result in Environmental Liabilities in excess of $500,000; and (d) promptly forward to Agent a copy of any written order, notice, request for information or any communication or report received by such Credit Party in connection with any such violation or Release or any other matter relating to any Environmental Laws or Environmental Permits that could reasonably be expected to result in Environmental Liabilities in excess of $500,000, in each case whether or not the

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Environmental Protection Agency or any other Governmental Authority has taken or threatened any action in connection with any such violation, Release or other matter.  If Agent at any time has a reasonable basis to believe that there is a violation of any Environmental Laws or Environmental Permits by any Credit Party or any Environmental Liability arising thereunder, or a Release of Hazardous Materials on, at, in, under, above, to, from or about any of its Real Estate, that, in each case, could reasonably be expected to have a Material Adverse Effect, then each Credit Party shall, upon Agent’s written request (i) cause the performance of such environmental audits relating to the suspected violation or Release, including subsurface sampling of soil and groundwater, and preparation of such environmental reports, at Borrower’s expense, as Agent may from time to time reasonably request, which shall be conducted by reputable environmental consulting firms reasonably acceptable to Agent and shall be in form and substance reasonably acceptable to Agent, and (ii) permit Agent or its representatives to have access to all Real Estate for the purpose of conducting such environmental audits and testing as Agent deems reasonably appropriate relating to the suspected violation or Release, including subsurface sampling of soil and groundwater.  Borrower shall reimburse Agent for the costs of such audits and tests and the same will constitute a part of the Obligations secured hereunder.

5.9Landlords’ Agreements, Mortgagee Agreements, Bailee Letters and Real Estate Purchases.  Each Credit Party shall obtain a landlord’s agreement, mortgagee agreement or bailee letter, as applicable, from the lessor of each leased property, mortgagee of owned property or bailee with respect to any warehouse, processor or converter facility or other location where Collateral having a value, individually or in the aggregate, in excess of $250,000 is stored or located, which agreement or letter shall contain a waiver or subordination of all Liens or claims that the landlord, mortgagee or bailee may assert against the Collateral at that location, and shall otherwise be reasonably satisfactory in form and substance to Agent.  After the Closing Date, no real property or warehouse space shall be leased having annual rental payments in excess of $50,000 by any Credit Party and no Inventory (other than Inventory of Mid-Missouri Telephone) shall be shipped to a processor or converter under arrangements established after the Closing Date without the prior written consent of Agent, unless and until a satisfactory landlord agreement or bailee letter, as appropriate, shall first have been obtained with respect to such location.  To the extent permitted hereunder, if any Credit Party (other than Mid-Missouri Telephone) proposes to acquire a fee ownership interest or leasehold interest in any Material Real Estate after the Closing Date, it shall concurrently provide to Agent a mortgage or deed of trust or leasehold mortgage or deed of trust, as applicable, granting Agent a first priority Lien on such Real Estate or leasehold interest therein, as applicable, together with environmental audits, mortgage title insurance commitment, real property survey, local counsel opinion(s), and, if required by Agent, supplemental casualty insurance and flood insurance, and such other documents, instruments or agreements, in each case, reasonably requested by Agent, and in each case, in form and substance reasonably satisfactory to Agent.  In addition, if any Real Property owned or leased by any Credit Party (other than Mid-Missouri Telephone) shall subsequently become or be determined to be Material Real Estate, promptly following a request from Agent, such Credit Party shall provide to Agent a mortgage or deed of trust or leasehold mortgage or deed of trust, as applicable, granting Agent a first

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priority Lien on such Real Estate, or leasehold interest therein, as applicable, together with environmental audits, mortgage title insurance commitment, real property survey, local counsel opinion(s), and, if required by Agent, supplemental casualty insurance and flood insurance, and such other documents, instruments or agreements, in each case, reasonably requested by Agent, and in each case, in form and substance reasonably satisfactory to Agent.

5.10Interest Rate Protection.  Within 30 days after the Closing Date and at all times thereafter prior to the Commitment Termination Date, Borrower shall enter into and maintain interest rate cap, swap or collar agreements, or other agreements or arrangements designed to provide protection against fluctuations in interest rates, which shall be on terms, for periods and with counterparties reasonably acceptable to Agent, and pursuant to which Borrower is protected against increases in interest rates from and after the date of such contracts as to a notional amount of not less than fifty percent (50%) and no greater than one hundred percent (100%) of all Loans outstanding from time to time for an initial term of at least two years.

5.11CoBank Capital.  So long as CoBank is a Lender hereunder, Borrower will acquire or maintain ownership of non-voting participation certificates in CoBank in such amounts and at such times as CoBank may require in accordance with CoBank’s Bylaws and Capital Plan (as each may be amended from time to time), except that the maximum amount of non-voting participation certificates that Borrower may be required to purchase in CoBank in connection with the Loans may not exceed the maximum amount permitted by the Bylaws at the time this Agreement is entered into. The rights and obligations of the parties with respect to such non-voting participation certificates and any distributions made on account thereof or on account of Borrower’s patronage with CoBank shall be governed by CoBank’s Bylaws. 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 Borrower from CoBank, will be taken into account by Borrower at the stated dollar amounts whether the distribution is evidenced by a participation certificate or other form of written notice that such distribution has been made and recorded in the name of Borrower on the records of CoBank. CoBank’s Pro Rata Share of the Loans and other Obligations due to CoBank shall be secured by a statutory first lien on all equity which Borrower may now own or hereafter acquire in CoBank.  Such equity shall not, however, constitute security for the Obligations due to any other Lender.  CoBank shall not be obligated to set off or otherwise apply such equities to Borrower’s obligations to CoBank.

5.12Further Assurances.  Each Credit Party executing this Agreement agrees that it shall and shall cause each other Credit Party to, at such Credit Party’s expense and upon request of Agent or Requisite Lenders, duly execute and deliver, or cause to be duly executed and delivered, to Agent and Lenders such further instruments and do and cause to be done such further acts as may be necessary or proper in the reasonable opinion of Agent or Requisite Lenders to carry out more effectively the provisions and purposes of this Agreement and each other Loan Document.

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5.13Subsidiaries and Collateral.  The Credit Parties will take such action from time to time as shall be necessary to ensure that (i) all Subsidiaries of Borrower are Credit Parties hereunder, (ii) all Subsidiaries of Borrower (other than Mid-Missouri Telephone) are Guarantors under the Subsidiary Guaranty, (iii) Borrower and all Subsidiaries of Borrower (other than Mid-Missouri Telephone) are Grantors under the Security Agreement and Agent (for the benefit of itself and the Lenders) has first priority perfected Liens (subject to Permitted Encumbrances), in substantially all the assets of Borrower and such Subsidiaries, consistent with the provisions of the Security Agreement, and (iv) Borrower and all Subsidiaries of Borrower (other than Mid-Missouri Holdings) are Pledgors under the Pledge Agreement and Agent (for the benefit of itself and the Lenders) has first priority perfected Liens in one hundred percent (100%) of the outstanding Stock of each of the Subsidiaries of Borrower (other than the Stock of Mid-Missouri Telephone) consistent with the provisions of the Pledge Agreement. 

5.14Change of Law Applicable to Mid-Missouri Telephone.

(a)Mid-Missouri Telephone shall execute and deliver to Agent (i) a guaranty substantially in the form of the Subsidiary Guaranty (or a Joinder Agreement in respect of the Subsidiary Guaranty) not later than 30 days after Mid-Missouri Telephone shall have obtained knowledge that Mid-Missouri Telephone shall not be required by applicable law to obtain consent from the PSC in the State of Missouri in order to execute and deliver such a guaranty and (ii) a security agreement substantially in the form of the Security Agreement (or a Joinder Agreement in respect of the Security Agreement) not later than 30 days after Mid-Missouri Telephone shall not be required by applicable law to obtain consent from the PSC in the State of Missouri in order to execute and deliver such a security agreement.

(b)Mid-Missouri Holding shall execute and deliver to Agent a Joinder Agreement in respect of the Pledge Agreement and shall pledge all of the Stock of Mid-Missouri Telephone pursuant to the terms of the Pledge Agreement not later than 30 days after Mid-Missouri Telephone shall have obtained knowledge that Mid-Missouri Telephone shall not be required by applicable law to obtain consent from the PSC in the State of Missouri in order for its Stock to be pledged to Agent under the Pledge Agreement.

(c)Upon (i) the execution and delivery by Mid-Missouri Telephone of (A) the guaranty (or Joinder Agreement) referred to in paragraph (a) of this Section 5.14 and (B) the security agreement (or Joinder Agreement) referred to in paragraph (a) of this Section 5.14 and (ii) the execution and delivery by Mid-Missouri Holding of a Joinder Agreement in accordance with paragraph (b) of this Section 5.14, any provision in the Loan Documents that specifically excludes Mid-Missouri Telephone shall, mutatis mutandis, be deemed to also apply to Mid-Missouri Telephone.

(d)The Credit Parties shall notify Agent and the Lenders promptly upon obtaining knowledge that Mid-Missouri Telephone and Mid-Missouri Holding will be required to execute and deliver documents pursuant to the foregoing clauses of this Section 5.14.  In such event, if and to the extent reasonably requested by Agent or

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Requisite Lenders, Mid-Missouri Telephone and Mid-Missouri Holding will cause to be delivered to Agent and Lenders all other relevant documentation of the type described in Section 2 and the Closing Checklist with respect thereto.

5.15Post Closing Covenants.

  Each Credit Party executing this Agreement agrees that it shall and shall cause each other Credit Party to:

(a)(i) no later than February 22, 2005, deliver to Agent title policies and surveys on the Real Estate identified as “Material Real Estate” on Disclosure Schedule (3.6), in each case, in form and substance reasonably satisfactory in all respects to Agent in its sole discretion and (ii) at the request of Agent, promptly correct, remove or cause to be corrected or removed, as applicable, any title or survey matter objectionable to Agent;

(b)no later than January 20, 2005, to the extent not delivered on the Closing Date, for each Credit Party formed in Alabama, verification that such Person is in tax good standing in Alabama, in each case dated as of a recent date and certified by the Alabama Secretary of State or other authorized Governmental Authority;

(c)no later than March 21, 2005, to the extent not delivered on the Closing Date, for each Credit Party formed in Missouri, verification that such Person is in tax good standing in Missouri, in each case dated as of a recent date and certified by the Missouri Secretary of State or other authorized Governmental Authority;

(d)no later than March 21, 2005, deliver to Agent (i) a legal opinion addressed to Agent and Lenders from Lathrop & Gage L.C., special Missouri counsel to Borrower, opining as to the capitalization of Imagination and (ii) a legal opinion addressed to Agent and Lenders from Wilkerson & Bryan, P.C., special Alabama counsel to Borrower, opining as to the capitalization of each Credit Party incorporated in Alabama, in each case reasonably satisfactory to Agent; and

(e)no later than January 5, 2005, (i) amend or cause the amendment of the Amended and Restated Certificate of Incorporation of Mid-Missouri Holding to delete Article Eighth thereof and (ii) deliver to the Agent an updated opinion from O’Melveny & Myers LLP, special New York counsel to Borrower, reflecting deletion of the reference to such Certificate of Incorporation in paragraph 9 of the opinion of such special counsel delivered on the Closing Date.

6NEGATIVE COVENANTS

Each Credit Party executing this Agreement jointly and severally agrees as to all Credit Parties that from and after the date hereof until the Termination Date:

6.1Mergers, Subsidiaries, Etc.  (a) No Credit Party shall directly or indirectly, by operation of law or otherwise, (x) form or acquire any Subsidiary, or (y)

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merge with, consolidate with, acquire all or substantially all of any division, unit or business of, acquire all or substantially all of the assets of, acquire all or a substantial portion of the Stock of, or otherwise combine with or acquire, any Person, whether in a single transaction or a series of related transactions, individually or together with any other Credit Parties, except (i) as permitted by Section 6.1(b) below, (ii) so long as no Default or Event of Default has occurred and is continuing or would result therefrom, (A) any Subsidiary of Borrower may merge or consolidate with or convey all or substantially all of its assets to Borrower provided that Borrower is the surviving entity from any such transaction, (B) any Subsidiary of Borrower may merge or consolidate with or convey all or substantially all of its assets to a Subsidiary Guarantor provided that such Subsidiary Guarantor is the surviving entity from any such transaction and (C) Borrower or any Subsidiary of Borrower may form a Subsidiary organized under the laws of the United States so long as contemporaneously therewith such Subsidiary becomes a Credit Party, becomes a Subsidiary Guarantor and grants a Lien on its assets to Agent in accordance with Section 5.13, and (iii) the Mid-Missouri Acquisition consummated on the Closing Date.

(b)Notwithstanding Section 6.1(a), after the Closing Date, (x) Borrower or any Subsidiary Guarantor may acquire all or substantially all of any division, unit or business of or all or substantially all of the assets of, or (y) Borrower or any Subsidiary of Borrower that is a Credit Party may acquire all of the Stock of, any Person (the “Target”) (in each case, a “Permitted Acquisition”) subject to the satisfaction of each of the following conditions:

(i)Agent shall receive at least thirty (30) Business Days’ prior written notice (or such shorter period as Agent may agree) of such proposed Permitted Acquisition, which notice shall include a reasonably detailed description of such proposed Permitted Acquisition;

(ii)such Permitted Acquisition shall only involve (A) assets located in the United States and comprising a business, or those assets of a business, of the type engaged in by the Credit Parties as of the Closing Date or, as applicable, a business, or those assets of a business, reasonably related thereto or (B) the Stock of a Person organized in the United States whose assets comprise such a business, and in each case which business would not subject Agent or any Lender to regulatory or third party approvals in connection with the exercise of its rights and remedies under this Agreement or any other Loan Documents other than types of approvals applicable to the exercise of such rights and remedies with respect to the Guarantors prior to such Permitted Acquisition;

(iii)such Permitted Acquisition shall be consensual and shall have been approved by the Target’s board of directors (or other governing body);

(iv)no additional Indebtedness, Guaranteed Indebtedness, contingent obligations or other contingent liabilities shall be Incurred or otherwise be reflected on a consolidated balance sheet of Borrower and Target after giving effect to such Permitted Acquisition, except (A) Loans made hereunder, (B) Indebtedness secured

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by purchase money Liens and Capital Leases entered into in the ordinary course of Target’s business, provided that (1) the principal amount of such Indebtedness and Capital Lease Obligations with respect to such Capital Leases, together with the aggregate amount of all other outstanding purchase money Indebtedness and Capital Lease Obligations of the Credit Parties, shall not exceed $1,000,000 at any one time, (2) such purchase money Liens and Capital Leases are not created in contemplation of such Permitted Acquisition and secure only those principal obligations and any charges or interest accruing thereon which such purchase money Liens or Capital Leases secure on the date that such Permitted Acquisition is consummated, (3) such Indebtedness does not exceed 100% of the purchase price of the subject assets, and (4) such purchase money Liens or Capital Leases do not extend to any asset other than the assets being purchased or acquired with such purchase money Indebtedness or the assets being leased in connection with such Capital Leases, (C) contingent obligations and contingent liabilities that do not exceed $500,000 for each such Permitted Acquisition, (D) Guaranteed Indebtedness permitted by Section 6.6, and (E) Indebtedness of Borrower Incurred to finance such Permitted Acquisition to the extent such Indebtedness is expressly permitted under Section 6.3(a)(vii), (xv) or (xvi) and to the extent that no Default or Event of Default has occurred and is continuing or would result after giving effect to such Permitted Acquisition;

(v)the sum of all amounts payable in connection with all Permitted Acquisitions made after the Closing Date (including all deferred payments, all non-compete payments, all transaction costs, the fair market value of all Stock issued in connection therewith and all Indebtedness and any earn out payments or similar obligations Incurred in connection therewith or otherwise reflected on a consolidated balance sheet of Borrower and Target) shall not exceed $25,000,000 in any Fiscal Year for all Credit Parties combined;

(vi)on a Pro Forma Basis, after giving effect to such Permitted Acquisition, the Target shall not have incurred an operating loss for the trailing twelve-month period preceding the date of such Permitted Acquisition, as determined based upon the Target’s financial statements for its most recently completed fiscal year and its most recent interim financial period completed within sixty (60) days prior to the date of consummation of such Permitted Acquisition;

(vii)the business and assets acquired in such Permitted Acquisition shall be free and clear of all Liens (other than Permitted Encumbrances);

(viii)the Borrower shall be the surviving entity of any merger or consolidation involving Borrower in connection with any Permitted Acquisition, and at or prior to the closing of any Permitted Acquisition, Agent will be granted a first priority perfected Lien (subject to Permitted Encumbrances) in substantially all the assets acquired pursuant thereto, consistent with the provisions of the Security Agreement, and in the outstanding Stock of the Target, and the applicable Credit Parties and the Target shall have executed such documents (including a Joinder Agreement, if applicable) and taken such actions as may be reasonably requested by Agent in connection therewith;

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(ix)concurrently with delivery of the notice referred to in clause (i) above, Borrower shall have delivered to Agent and Lenders, in form reasonably satisfactory to Agent:

(A)a pro forma consolidated balance sheet, income statement and cash flow statement of Borrower and its Subsidiaries (the “Acquisition Pro Forma”), based on recent financial statements, which shall fairly present in all material respects the assets, liabilities, financial position and results of operations and cash flows of Borrower and its Subsidiaries in accordance with GAAP consistently applied (subject to normal year end audit adjustments and the absence of footnotes), but taking into account such Permitted Acquisition and the funding of all Loans in connection therewith, and such Acquisition Pro Forma shall reflect that on a Pro Forma Basis, no Default or Event of Default has occurred and is continuing or would result after giving effect to such Permitted Acquisition and the Credit Parties would have been in compliance with the Financial Covenants for the Test Period reflected in the Compliance Certificate most recently delivered to Agent pursuant to Section 4.1 prior to consummation of such Permitted Acquisition (after giving effect to such Permitted Acquisition and all Advances funded in connection therewith as if made on the first day of such period);

(B)updated versions of the most recently delivered Projections covering the three (3) year period commencing on the date of such Permitted Acquisition and otherwise prepared in accordance with the Projections (the “Acquisition Projections”) and based upon historical financial data of a recent date reasonably satisfactory to Requisite Lenders, taking into account such Permitted Acquisition; and

(C)a certificate of the chief financial officer of Borrower to the effect that:  (w) Borrower (after taking into consideration all rights of contribution and indemnity each Credit Party has against each other Credit Party) will be Solvent upon the consummation of such Permitted Acquisition; (x) the Acquisition Pro Forma fairly presents in all material respects the financial position of Borrower and its Subsidiaries (on a consolidated basis) as of the date thereof after giving effect to such Permitted Acquisition; (y) the Acquisition Projections are reasonable estimates of the future financial performance of Borrower and its Subsidiaries subsequent to the date thereof based upon the historical performance of the Credit Parties and the Target and show that the Credit Parties shall continue to be in compliance with the Financial Covenants for the 3-year period thereafter; and (z) the Credit Parties have completed their due diligence

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investigation with respect to the Target and such Permitted Acquisition, which investigation was conducted in a manner similar to that which would have been conducted by a prudent purchaser of a comparable business and the results of which investigation were delivered to Agent and Lenders;

(x)(A) at least five (5) days prior to the date of such Permitted Acquisition, Agent and Lenders shall have received the then current draft of the acquisition agreement, in form and substance reasonably satisfactory to Agent (it being agreed that an acquisition agreement reflecting commercially reasonable terms otherwise acceptable to a prudent purchaser of such assets or Stock in such industry shall be reasonably satisfactory to Agent) and, upon request of Agent, related agreements and instruments, and all opinions, certificates, lien search results and other documents reasonably requested by Agent or any Lender (collectively, the “Related Documents”), including those specified in the last two sentences of Section 5.9, (B) at least two (2) Business Days prior to the date of such Permitted Acquisition, Agent and Lenders shall have received, a copy of the substantially final acquisition agreement and, upon request of Agent, Related Documents and all such documentation shall not differ in any material respect from the previous draft provided to Agent and Lenders, unless in each case changes to the previous draft are reasonably satisfactory to Agent (it being agreed that changes reflecting commercially reasonable terms otherwise acceptable to a prudent purchaser of such assets or Stock in such industry shall be reasonably satisfactory to Agent) and (C) on or prior to two (2) Business Days after the closing of such Permitted Acquisition, Agent and Lenders shall have received a copy of the final acquisition agreement and, upon request of Agent, Related Documents;

(xi)at the time of such Permitted Acquisition and after giving effect thereto, no Default, Event of Default, Interest Deferral Period or Dividend Suspension Period has occurred and is continuing; and

(xii)Agent and Lenders shall have received reasonably satisfactory evidence of compliance with all regulatory requirements with respect to such Permitted Acquisition.

6.2Investments; Loans and Advances.Except as otherwise expressly permitted by this Section 6, no Credit Party shall make or permit to exist any Investment in any Person, except:

(a)Investments comprised of (i) notes payable, or stock or other securities issued by Account Debtors to the Credit Parties pursuant to negotiated agreements with respect to settlement of such Account Debtor’s Accounts in the ordinary course of business and (ii) Investments received in connection with the bankruptcy or reorganization of suppliers or customers and in settlement of delinquent obligations of, and other disputes with, suppliers or customers arising in the ordinary course of business;

(b)Investments existing on the Closing Date and listed on (Disclosure Schedule (6.2);

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(c)so long as Agent has not delivered an Activation Notice, Borrower may make Investments, subject to Control Letters in favor of Agent for the benefit of Lenders or otherwise subject to a perfected security interest in favor of Agent for the benefit of Lenders, in (i) marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency thereof maturing within one year from the date of acquisition thereof, (ii) commercial paper maturing no more than one year from the date of creation thereof and currently having the highest rating obtainable from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc., (iii) certificates of deposit maturing no more than one year from the date of creation thereof issued by commercial banks incorporated under the laws of the United States of America, each having combined capital, surplus and undivided profits of not less than $300,000,000 and having a senior unsecured rating of “A” or better by a nationally recognized rating agency (an “A Rated Bank”), (iv) time deposits maturing no more than 30 days from the date of creation thereof with A Rated Banks, (v) mutual funds that invest substantially all their assets in one or more of the Investments described in clauses (i) through (iv) above, and (vi) others approved by Agent in its reasonable discretion;

(d)any Credit Party may make capital contributions to any other Credit Party; provided that the aggregate amount of (i) all capital contributions to, intercompany loans to and other Investments in Mid-Missouri Telephone shall not at any time exceed $2,000,000 for all Credit Parties combined and (ii) all intercompany loans by Mid-Missouri Telephone shall not at any time exceed such amounts permitted under Section 6.3(a)(viii)(F);

(e)intercompany loans and advances by any Credit Party to any other Credit Party to the extent permitted by Section 6.3(a)(viii);

(f)Permitted Acquisitions and Investments of a Person existing at the time such Person becomes a Subsidiary of a Credit Party in connection with a Permitted Acquisition or at the time such Person is merged or consolidated with or into a Credit Party in connection with a Permitted Acquisition, provided that such Investments are not made in contemplation of such Permitted Acquisition;

(g)Investments consisting of deferred payment obligations received as consideration from Asset Sales effected in accordance with the requirements of Section 6.8, so long as such Investments do not in the aggregate exceed $250,000 at any time for all Credit Parties combined;

(h)prepaid expenses, negotiable instruments held for collection and lease, and utility and workers’ compensation, performance and other similar deposits, in each case, created in the ordinary course of business;

(i)Guaranteed Indebtedness permitted by Section 6.6;

(j)Hedging Obligations of Borrower required or permitted by Section 5.10;

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(k)Loans and advances to employees of any Credit Party in the ordinary course of business, in each case to the extent permitted by Section 6.4(b);

(l)the Mid-Missouri Acquisition consummated on the Closing Date; and

(m)other Investments by the Credit Parties not exceeding $1,000,000 in the aggregate at any time outstanding for all Credit Parties combined, provided that this Section 6.2(m) shall not be applicable to Investments in Mid-Missouri Telephone.

6.3Indebtedness.

(a)No Credit Party shall create, incur, assume or permit to exist any Indebtedness, except (without duplication):

(i)Indebtedness secured by purchase money security interests and Capital Leases permitted in Section 6.7(c) and refinancings thereof or amendments or modifications thereof that do not have the effect of increasing the principal amount thereof or changing the amortization thereof (other than to extend the same) and that are otherwise on terms and conditions no less favorable to any Credit Party, Agent or any Lender, as determined by Agent, than the terms of the Indebtedness or Capital Lease being refinanced, amended or modified;

(ii)the Loans and the other Obligations;

(iii)unfunded pension fund and other employee benefit plan obligations and liabilities to the extent they are permitted to remain unfunded under applicable law;

(iv)existing Indebtedness described in Disclosure Schedule (6.3) and refinancings thereof or amendments or modifications thereof that do not have the effect of increasing the principal amount thereof or changing the amortization thereof (other than to extend the same) and that are otherwise on terms and conditions no less favorable to any Credit Party, Agent or any Lender, as determined by Agent, than the terms of the Indebtedness being refinanced, amended or modified; provided, however,  that this Section 6.3(a)(iv) shall not be applicable to Subordinated Debt;

(v)unsecured, subordinated Indebtedness of Borrower evidenced by the Initial IDS Subordinated Notes issued on the Closing Date as a part of the Related Transactions, in an aggregate principal amount that does not exceed at any time $85,000,000 (less the amount of any repayments of principal thereof after the Closing Date);

(vi)unsecured, subordinated Indebtedness of Borrower evidenced by any Initial IDS-Linked Subordinated Notes issued after the Closing Date as part of Initial IDS Securities required to be issued pursuant to the Investor Rights Agreement upon exchange of any Class B common stock of Borrower issued on the Closing Date as a part of the Related Transactions so long as (A) no Default, Event of

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Default, Interest Deferral Period or Dividend Suspension Period has occurred and is continuing or would result as of the date of issuance thereof and all the Exchange Conditions (as defined in the Initial IDS Subordinated Notes Indenture) are satisfied at the time of such issuance and exchange, (B) on a Pro Forma Basis after giving effect to the Incurrence of such Indebtedness, the Credit Parties shall (I) have a Consolidated Total Leverage Ratio of not more than 6.0 to 1.0 and (II) be in compliance with the Financial Covenants and (C) Borrower shall have furnished to Agent and Lenders prior to the Incurrence thereof a certificate from a Responsible Officer of Borrower certifying as to compliance with the requirements of the preceding clauses (A) and (B) and containing the calculations demonstrating compliance with the preceding clause (B);

(vii)Permitted Additional Subordinated Debt of Borrower, so long as (A) the aggregate outstanding principal amount thereof (excluding any PIK Amounts in respect thereof) does not exceed $25,000,000 at any time, (B) no Default, Event of Default, Interest Deferral Period or Dividend Suspension Period has occurred and is continuing or would result as of the date of issuance thereof, (C) on a Pro Forma Basis after giving effect to the Incurrence of such Indebtedness (excluding PIK Amounts in respect thereof payable after the initial Incurrence of such Indebtedness), the Credit Parties shall (I) have a Consolidated Total Leverage Ratio of not more than 6.0 to 1.0 and (II) be in compliance with the Financial Covenants, (D) the terms of such Indebtedness otherwise comply with the provisions of the definition of Permitted Additional Subordinated Debt, (E) all of the proceeds thereof shall be applied (I) concurrently with the issuance thereof, to refinance Permitted Additional Subordinated Debt of Borrower or (II) not later than 90 days after the date of issuance thereof, (x) to finance a Permitted Acquisition, (y) to finance permitted Consolidated Capital Expenditures or (z) to prepay the Loans, and (F) Borrower shall have furnished to Agent and Lenders prior to the Incurrence thereof a certificate from a Responsible Officer of Borrower certifying as to compliance with the requirements of the preceding clauses (A), (B), (C) and (D) and containing the calculations demonstrating compliance with the preceding clause (C);

(viii)Indebtedness consisting of intercompany loans and advances made by a Credit Party to any other Credit Party; provided, that: (A) the Credit Party that is the recipient of any intercompany loan or advance (for purposes of this paragraph, the “Obligor”) shall have executed and delivered a demand note in the form of Exhibit 6.3(a)(viii) (an “Intercompany Note”) to evidence any such intercompany Indebtedness owing at any time to the Credit Party providing such intercompany loan or advance (for purposes of this paragraph, the “Holder”), which Intercompany Note shall be pledged and delivered to Agent pursuant to the applicable Pledge Agreement or Security Agreement as additional collateral security for the Obligations (except for any such Intercompany Note executed and delivered to Mid-Missouri Telephone); (B) Borrower, the applicable Obligor and the applicable Holder shall record all intercompany transactions on its respective books and records in a manner reasonably satisfactory to Agent; (C) the obligations of the applicable Obligor and the applicable Holder under any such Intercompany Note shall be subordinated to the Obligations of Borrower and each other Credit Party hereunder in accordance with the terms of the Intercompany Note; (D) at the time any such intercompany loan or advance is made by any Credit Party and after giving effect thereto, Borrower and such Credit Party shall be Solvent; (E) Agent has not

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delivered a notice to Borrower prohibiting such intercompany loans and advances following the occurrence and during the continuance of a Default or Event of Default; and (F) the aggregate amount of (I) intercompany loans to, capital contributions to and other Investments in Mid-Missouri Telephone shall not at any time exceed $2,000,000 for all Credit Parties combined and (II) intercompany loans by Mid-Missouri Telephone shall not at any time exceed $2,000,000;

(ix)[Intentionally Omitted];

(x)Indebtedness constituting Hedging Obligations of Borrower required or permitted by Section 5.10;

(xi)Guaranteed Indebtedness permitted by Section 6.6;

(xii)Indebtedness of 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);

(xiii)Indebtedness constituting temporary bank overdrafts in the ordinary course of business that are promptly repaid;

(xiv)[Intentionally Omitted];

(xv)unsecured, subordinated Indebtedness of Borrower evidenced by any Subsequent IDS Subordinated Notes issued after the Closing Date under any Subsequent IDS Subordinated Notes Indenture, so long as (A) no Default, Event of Default, Interest Deferral Period or Dividend Suspension Period has occurred and is continuing or would result as of the date of issuance thereof, (B) on a Pro Forma Basis after giving effect to the Incurrence of such Indebtedness (excluding PIK Amounts in respect thereof payable after the initial Incurrence of such Indebtedness), the Credit Parties shall (I) have a Consolidated Total Leverage Ratio of not more than 6.0 to 1.0 and (II) be in compliance with the Financial Covenants, (C) the terms of such Indebtedness otherwise comply with the provisions of the definitions of Subsequent IDS-Linked Subordinated Notes and Subsequent Non-IDS-Linked Subordinated Notes, (D) all of the proceeds thereof shall be applied (I) concurrently with the issuance thereof, to refinance IDS Subordinated Notes or Permitted Additional Subordinated Debt of Borrower or (II) not later than 90 days after the date of issuance thereof, (x) to finance a Permitted Acquisition, (y) to finance permitted Consolidated Capital Expenditures or (z) to prepay the Loans, and (E) Borrower shall have furnished to Agent and Lenders prior to the Incurrence thereof a certificate from a Responsible Officer of Borrower certifying as to compliance with the requirements of the preceding clauses (A), (B) and (C) and containing the calculations demonstrating compliance with the preceding clause (B); and

(xvi)additional unsecured Indebtedness of Borrower, so long as (A) the aggregate outstanding principal amount thereof (excluding any PIK Amounts in

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respect thereof) does not exceed $5,000,000 at any time, (B) no Default, Event of Default, Interest Deferral Period or Dividend Suspension Period has occurred and is continuing or would result as of the date of issuance thereof, (C) on a Pro Forma Basis after giving effect to the Incurrence of such Indebtedness (excluding PIK Amounts in respect thereof payable after the initial Incurrence of such Indebtedness), the Credit Parties shall (I) have a Consolidated Total Leverage Ratio of not more than 6.0 to 1.0 and (II) be in compliance with the Financial Covenants, and (D) Borrower shall have furnished to Agent and Lenders prior to the Incurrence thereof a certificate from a Responsible Officer of Borrower certifying as to compliance with the requirements of the preceding clauses (A), (B) and (C) and containing the calculations demonstrating compliance with the preceding clause (C).

(b)No Credit Party shall, directly or indirectly, voluntarily purchase, redeem, defease or prepay any principal of, premium, if any, interest or other amount payable in respect of any Indebtedness, other than (i) the Obligations; (ii) Indebtedness secured by a Permitted Encumbrance if the asset securing such Indebtedness has been sold or otherwise disposed of in accordance with Sections 6.8(b) or (c); (iii) Indebtedness permitted by Section 6.3(a)(iv) upon any refinancing thereof in accordance with Section 6.3(a)(iv); (iv) Indebtedness permitted by Sections 6.3(a)(v), (vi) or (xv) upon any refinancing thereof in accordance with Section 6.3(a)(xv); (v) Indebtedness permitted by Section 6.3(a)(vii) upon any refinancing thereof in accordance with Section 6.3(a)(vii); (vi) Indebtedness permitted by Sections 6.3(a)(i) and (viii) so long as no Default or Event of Default has occurred and is continuing or would result therefrom; (vii) Indebtedness permitted by Section 6.3(a)(iii); and (viii) as otherwise permitted in Section 6.14.

6.4Employee Loans and Affiliate Transactions.

(a)Except as otherwise expressly permitted in this Section 6 with respect to Affiliates and except for transactions referred to on Disclosure Schedule (6.4(a)), no Credit Party shall enter into or be a party to any transaction with any other Credit Party or any Affiliate thereof except in the ordinary course of, and pursuant to the reasonable requirements of, such Credit Party’s business and upon fair and reasonable terms that are no less favorable to such Credit Party than would be obtained in a comparable arm’s length transaction with a Person not an Affiliate of such Credit Party.  In addition, if any such transaction or series of related transactions, except for such transactions between Borrower and any Subsidiary Guarantor or between Subsidiary Guarantors in the ordinary course of business, involves payments in excess of $1,000,000 in the aggregate, the terms of these transactions must be disclosed in advance to Agent and Lenders.  All such transactions existing as of the date hereof are described in Disclosure Schedule (6.4(a)).

(b)No Credit Party shall enter into any lending or borrowing transaction with any employees of any Credit Party, except loans to its respective employees on an arm’s-length basis in the ordinary course of business consistent with past practices for travel and entertainment expenses, relocation costs and similar purposes and stock purchase and option financing up to a maximum of $1,000,000 in the aggregate at any one time outstanding for all Credit Parties combined.

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6.5Capital Structure and Business.

(a)No Credit Party shall:

(i) permit any Person (other than Borrower or any Credit Party that is a Pledgor under the Pledge Agreement) to own any Stock of any Subsidiary of Borrower, except that the Stock of Mid-Missouri Telephone shall be owned by Mid-Missouri Holding; or

(ii) issue or sell any Stock to any Person, except that:

(A) any Subsidiary of Borrower may issue Stock to Borrower or any Pledgor (other than Mid-Missouri Telephone) under the Pledge Agreement;

(B) Mid-Missouri Telephone may issue Stock to Mid-Missouri Holding;

(C) Imagination may issue Stock to Mid-Missouri Telephone;

(D) Borrower may issue or sell its Class A common stock for fair market value so long as no Change of Control occurs after giving effect thereto, no holding company of Borrower exists after giving effect thereto and either such Class A common stock is issued as consideration for a Permitted Acquisition or such Class A common stock is issued for cash and not later than 90 days after the date of issuance thereof the Net Cash Proceeds from the issuance thereof are applied (1) to finance a Permitted Acquisition, (2) to finance a permitted Consolidated Capital Expenditure, (3) to prepay Subordinated Debt, (4) to prepay the Loans as required by Section 1.3(b)(iii) or (5) to make any repurchase of shares of its common stock permitted by Section 6.14(l); and

(E) Borrower may issue Class A common stock as part of Initial IDS Securities required to be issued pursuant to the Investor Rights Agreement upon exchange of any Class B common stock of Borrower issued on the Closing Date as a part of the Related Transactions so long as the Initial IDS-Linked Subordinated Notes issued as part of such Initial IDS Securities are permitted to be issued under Section 6.3(a)(vi).

(b)No Credit Party shall amend its charter, bylaws, operating agreement or other organizational documents, in either case in a manner that would adversely affect Agent or Lenders or such Credit Party’s duty or ability to repay the Obligations (it being understood that any amendment to authorize, or increase the authorized shares of, any class of common stock of Borrower that is not Disqualified Stock would not be prohibited).  Each Credit Party that is a limited liability company agrees that at all times (i) the limited liability company interests, membership interests, units or other interests in such Credit Party shall be represented by one or more certificates and (ii) such certificates and such Credit Party’s operating agreement or other organizational documents shall expressly provide that it is a security governed by Article 8-102 of the Code.

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(c)No Credit Party shall engage in any business other than the businesses engaged in by it on the Closing Date or businesses reasonably related thereto.

6.6Guaranteed Indebtedness.  No Credit Party shall create, incur, assume or permit to exist any Guaranteed Indebtedness except:

(a)Guaranteed Indebtedness by endorsement of instruments or items of payment for deposit to the general account of any Credit Party;

(b)Guaranteed Indebtedness incurred for the benefit of any other Credit Party if the primary obligation of such other Credit Party is permitted by this Agreement, provided that if the payment of such primary obligation is subordinated to the payment of any of the Obligations, then the payment of such Guaranteed Indebtedness shall be subordinated to the payment of the Obligations on the same basis that such primary obligation is so subordinated;

(c)Guaranteed Indebtedness existing on the date hereof and described in Disclosure Schedule 6.6;

(d)the Guaranties;

(e)Guaranteed Indebtedness incurred in the ordinary course of business of a Credit Party with respect to surety and appeal bonds, performance and return-of-money bonds and other similar obligations of such Credit Party up to $250,000 in the aggregate for all Credit Parties combined;

(f)Guaranteed Indebtedness arising under indemnity agreements with title insurers to cause such title insurers to issue in favor of Agent mortgagee title insurance policies; and

(g)additional Guaranteed Indebtedness of the Credit Parties not to exceed an aggregate outstanding principal amount of $250,000 at any time for all Credit Parties combined.

6.7Liens.  No Credit Party shall create, incur, assume or permit to exist any Lien on or with respect to its Accounts or any of its other properties or assets (whether now owned or hereafter acquired) except for:

(a) Permitted Encumbrances;

(b) Liens in existence on the date hereof and summarized on Disclosure Schedule (6.7) securing Indebtedness described on Disclosure Schedule (6.3) and permitted refinancings, extensions and renewals thereof, including extensions or renewals of any such Liens; provided that the principal amount so secured is not increased and the Lien does not attach to any other property;

(c) Liens created after the date hereof by conditional sale or other title retention agreements (including Capital Leases) or in connection with purchase money

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Indebtedness with respect to Equipment and Fixtures acquired by any Credit Party in the ordinary course of business or in connection with purchase money Indebtedness and Capital Leases expressly permitted to be assumed under Section 6.1(b)(iv) in connection with Permitted Acquisitions, involving the Incurrence of an aggregate amount of purchase money Indebtedness (including any assumed purchase money Indebtedness) and Capital Lease Obligations (including any assumed Capital Lease Obligations) of not more than $1,000,000 outstanding at any one time for all such Liens for all Credit Parties combined (provided that such Liens attach only to the assets subject to such purchase money Indebtedness and such Indebtedness is incurred within ninety (90) days following such purchase and does not exceed 100% of the purchase price of the subject assets);

(d) leases and subleases of Real Property of a Credit Party granted to others which do not materially interfere with the ordinary conduct of the business of Borrower or any of its Subsidiaries; and

(e) Liens arising from Uniform Commercial Code financing statement filings regarding operating leases entered into by Borrower and its Subsidiaries in the ordinary course of business.

In addition, no Credit Party shall become a party to any agreement, note, indenture or instrument, or take any other action, that would prohibit the creation of a Lien on any of its properties or other assets in favor of Agent, on behalf of itself and Lenders, as additional collateral for the Obligations, except (i) operating leases, Capital Leases, Licenses and agreements evidencing purchase money Indebtedness, in each case which only prohibit Liens upon the assets that are subject thereto, (ii) customary non-assignment clauses in agreements entered into in the ordinary course of business, (iii) contracts for the sale of assets permitted by Section 6.8 and (iv) restrictions imposed by applicable law.

6.8Sale of Stock and Assets.  No Credit Party shall sell, lease, license, transfer, convey, assign or otherwise dispose of, in a single transaction or a series of related transactions, any of its Properties or other assets, including the Stock of any of its Subsidiaries (whether in a public or a private offering or otherwise) or any of its Accounts (each, an “Asset Sale”), other than:

(a) the sale of Inventory in the ordinary course of business;

(b) the sale, transfer, conveyance or other disposition by a Credit Party of Equipment, Fixtures or Real Estate that are obsolete, surplus or no longer used or useful in such Credit Party’s business and having a book value not exceeding $500,000 in any single transaction or $1,000,000 in the aggregate in any Fiscal Year for all Credit Parties combined;

(c) the sale of other Equipment and Fixtures having a book value not exceeding $500,000 in any single transaction or $1,000,000 in the aggregate in any Fiscal Year for all Credit Parties combined;

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(d) the sale of Investments permitted by Section 6.2(c) in the ordinary course of business;

(e) the sale of Investments acquired in settlements or bankruptcies of customers and suppliers;

(f) Sale/Leaseback Transactions permitted by and entered into in accordance with Section 6.12;

(g) dispositions of customer accounts by a Credit Party in connection with compromise or collections in the ordinary course of business;

(h) leases and subleases permitted under Section 6.7(d);

(i) transfers of assets by Borrower or any Subsidiary thereof to Borrower or any Subsidiary Guarantor;

(j) Restricted Payments permitted by Section 6.14;

(k) Condemnations and casualties; and

(l) the sale of Investments of a Person existing at the time such Person became a Subsidiary of a Credit Party in connection with a Permitted Acquisition or at the time such Person merged or consolidated with or into a Credit Party in connection with a Permitted Acquisition, provided that such Investments were not made in contemplation of such Permitted Acquisition;

provided that each Asset Sale pursuant to the foregoing clauses of this Section 6.8 (other than clauses (j) and (k)) shall be for fair market value and (other than Section 6.8(i)) for proceeds consisting of at least 75% cash.  With respect to any Asset Sale permitted by this Section 6.8 (other than Sections 6.8(h), (j) and (k)), subject to Section 1.3(b), Agent agrees on reasonable prior written notice to release its Lien on such assets or other properties in order to permit the applicable Credit Party to effect such disposition and shall execute and deliver to Borrower, at Borrower’s expense, appropriate documentation to acknowledge the release of Lien in respect thereof as reasonably requested by Borrower.

6.9ERISA.  No Credit Party shall, or shall cause or permit any ERISA Affiliate to, cause or permit to occur (i) an event that could result in the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of ERISA or (ii) an ERISA Event to the extent such ERISA Event could reasonably be expected to result in taxes, penalties or other liability of $500,000 in the aggregate.

6.10Financial Covenants.  Borrower shall not breach or fail to comply with any of the Financial Covenants.

6.11Hazardous Materials.  No Credit Party shall cause or permit a Release of any Hazardous Material on, at, in, under, above, to, from or about any of the

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Real Estate where such Release would (a) violate in any respect, or form the basis for any Environmental Liabilities under, any Environmental Laws or Environmental Permits or (b) otherwise adversely impact any Credit Party’s ability to use any of the Real Estate or any of the Collateral, in each case in the operation of its business, other than such violations or Environmental Liabilities that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

6.12Sale/Leasebacks.  No Credit Party shall engage in any Sale/Leaseback Transaction, synthetic lease or similar transaction involving any of its assets, except that within ninety (90) days following the date on which any Equipment or Fixtures are put in service by any Credit Party, such Credit Party may enter into a Sale/Leaseback Transaction with respect to such Equipment or Fixtures to the extent permitted by Section 6.7(c).

6.13Cancellation of Indebtedness.  No Credit Party shall cancel any claim or debt owing to it, except for reasonable consideration negotiated on an arm’s-length basis and in the ordinary course of its business.

6.14Restricted Payments.  No Credit Party shall make any Restricted Payment, except that:

(a)  intercompany loans and advances may be made by any Credit Party to any other Credit Party to the extent permitted by Section 6.3(a)(viii);

(b) Subsidiaries of Borrower may pay dividends and distributions to Borrower or any Subsidiary Guarantor and Imagination may pay dividends and distributions to Mid-Missouri Telephone;

(c) any Credit Party may make employee loans permitted under Section 6.4(b);

(d) any Credit Party may make payments of principal and interest of Intercompany Notes issued in accordance with Section 6.3(a)(viii);

(e) on each IDS Payment Date (other than March 30, 2005), so long as (i) no Default or Event of Default has occurred and is continuing or would occur as a consequence of the payment of such cash dividends, (ii) no Interest Deferral Period has occurred and is continuing, (iii) no Dividend Suspension Period has occurred and is continuing, (iv) no Deferred Interest remains unpaid under any Subordinated Debt and (v) the Compliance Certificate required to be delivered pursuant to Section 4.1 in respect of the Fiscal Quarter most recently ended prior to such IDS Payment Date has been timely delivered, Borrower may declare and pay quarterly cash dividends to the holders of its Class A common stock on such IDS Payment Date in an aggregate amount which, together with the aggregate amount of all other cash dividends paid by Borrower on its Class A common stock (excluding cash dividends paid by Borrower on its Class A common stock on March 30, 2005 pursuant to Section 6.14(m)) and redemptions or repurchases (excluding such redemptions or repurchases permitted by Section 6.14(l)) by Borrower of shares of its common stock from its officers, employees, consultants and

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directors in connection with the termination of employment or engagement of any such Person after the Closing Date, is less than the amount of Excess Cash as of such IDS Payment Date;

(f) on each IDS Payment Date (other than March 30, 2005) (for these purposes, a “Subject IDS Payment Date”), subject to Section 6.19(b) hereof and the subordination provisions of the applicable Subordinated Debt Documents and the other terms of Article 10 of the applicable IDS Subordinated Notes Indenture (and the comparable provisions of the applicable Additional Subordinated Debt Documents) and so long as (i) no Interest Deferral Period has occurred and is continuing and (ii) the Compliance Certificate required to be delivered pursuant to Section 4.1 in respect of the Fiscal Quarter most recently ended prior to such Subject IDS Payment Date has been timely delivered, Borrower may pay quarterly accrued and unpaid interest on the Subordinated Debt and prepay any Deferred Interest in cash on such Subject IDS Payment Date in an aggregate amount not to exceed:

(I)Distributable Cash as of such Subject IDS Payment Date minus

(II)the aggregate amount of (A) cash dividends paid by Borrower on its Class A common stock during the period from January 1, 2005 through the end of the Fiscal Quarter most recently ended prior to such Subject IDS Payment Date (excluding cash dividends paid by Borrower on its Class A common stock on March 30, 2005 pursuant to Section 6.14(m)), (B) cash redemptions or cash repurchases (excluding such redemptions or repurchases permitted by Section 6.14(l)) during such period by Borrower of shares of its common stock from its officers, employees, consultants and directors in connection with the termination of employment or engagement of any such Person and (C) cash interest payments made by Borrower on the Subordinated Debt during such period (excluding cash interest payments made by Borrower on the Initial IDS Subordinated Notes on March 30, 2005 pursuant to Section 6.14(m));

provided, however, that notwithstanding the foregoing provisions of this Section 6.14(f), if, prior to such Subject IDS Payment Date the payment of interest on a particular series or issue of Subordinated Debt has been deferred pursuant to the interest deferral provisions of the Subordinated Debt Documents applicable to such particular series or issue of Subordinated Debt on eight (8) IDS Payment Dates in the aggregate occurring prior to such Subject IDS Payment Date, then subject to Section 6.19(b) hereof and the subordination provisions of such Subordinated Debt Documents and the other terms of Article 10 of the IDS Subordinated Notes Indenture (or the comparable provisions of the Additional Subordinated Debt Documents) applicable to such particular series or issue of Subordinated Debt, Borrower may pay quarterly accrued and unpaid interest on such

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particular series or issue of Subordinated Debt (and prepay Deferred Interest) in cash on such Subject IDS Payment Date;

(g) at any time that no Default or Event of Default has occurred and is continuing or would result, IDS Subordinated Notes permitted by Sections 6.3(a)(v), (vi) or (xv) may be refinanced with the proceeds of Subsequent IDS Subordinated Notes in accordance with Section 6.3(a)(xv) and Permitted Additional Subordinated Debt permitted by Section 6.3(a)(vii) may be refinanced with the proceeds of Subsequent IDS Subordinated Notes in accordance with Section 6.3(a)(xv) or Permitted Additional Subordinated Debt in accordance with Section 6.3(a)(vii);

(h) the Credit Parties may make the Restricted Payments on the Closing Date contemplated by the Restructuring Documents as a part of the Related Transactions;

(i) Borrower may redeem or repurchase shares of its common stock from its officers, employees, consultants and directors in connection with the termination of employment or engagement of any such Person, provided that (i) no Default or Event of Default has occurred and is continuing or would result therefrom and (ii) the aggregate amount paid in respect of all such shares so redeemed or repurchased does not exceed $2,000,000 in any Fiscal Year;

(j) Borrower may issue Class A common stock as part of Initial IDS Securities required to be issued pursuant to the Investor Rights Agreement upon exchange of any Class B common stock of Borrower issued on the Closing Date as a part of the Related Transactions so long as the Initial IDS-Linked Subordinated Notes issued as part of such Initial IDS Securities are permitted to be issued under Section 6.3(a)(vi);

(k) Borrower may pay dividends on its common stock solely in shares of common stock of Borrower;

(l) so long as no Default or Event of Default has occurred and is continuing or would result, Borrower may repurchase shares of its common stock solely in exchange for or with cash received from an issuance of its common stock permitted by Section 6.5(a); and

(m) on March 30, 2005, subject to Section 6.19(b) hereof and the subordination provisions of and the other terms of Article 10 of the Initial IDS Subordinated Notes Indenture and so long as no Default or Event of Default has occurred and is continuing or would result, Borrower may pay current interest on the Initial IDS Subordinated Notes in an aggregate amount not to exceed $2,958,000.00 and Borrower may pay cash dividends on its Class A common stock in an aggregate amount not to exceed $1,706,000.00.

6.15Change of Corporate Name or Location; Change of Fiscal Year.  No Credit Party shall (a) change its name as it appears in official filings in the state of its incorporation or other organization,(b) change its chief executive office, principal place of business or corporate offices, (c) change the type of entity that it is, (d) change its organization identification number, if any, issued by its state of incorporation or other

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organization, or (e) change its state of incorporation or organization, in each case without at least 30 days prior written notice to Agent and after any action required to be taken in accordance with Section 5.13 and any other action reasonably requested by Agent in connection therewith, including to continue the perfection of any Liens in favor of Agent, on behalf of Lenders, in any Collateral, has been completed or taken, and provided that any such new location shall be in the continental United States.  No Credit Party shall change its Fiscal Year, except that a Subsidiary that becomes a Credit Party in connection with a Permitted Acquisition may change its Fiscal Year to conform to that of Borrower.

6.16No Impairment of Intercompany Transfers.  No Credit Party shall directly or indirectly enter into or become bound by any agreement, instrument, indenture or other obligation (other than this Agreement and the other Loan Documents) that could directly or indirectly restrict, prohibit or require the consent of any Person with respect to the payment of dividends or distributions or the making or repayment of intercompany loans by a Subsidiary of Borrower to Borrower except for (a) the Loan Documents, and (b) restrictions imposed by applicable law or any applicable rule, regulation or order.

6.17No Speculative Transactions.  No Credit Party shall engage in any transaction involving commodity options, futures contracts or similar transactions, except solely to hedge against fluctuations in interest rates required or permitted by Section 5.10.

6.18[Intentionally Omitted].

6.19Changes Relating to Subordinated Debt; Material Contracts.

(a)No Credit Party shall change or amend the terms of any Subordinated Debt (or any indenture, note, guarantee, agreement or other Subordinated Debt Document in connection therewith) if the effect of such amendment is to:  (i) increase the interest rate on such Subordinated Debt (or on any Deferred Interest thereon) or change the manner of payment thereof (including changes from cash interest to payment-in-kind interest); (ii) change the dates upon which payments of principal, interest or other amounts are due on such Subordinated Debt other than to extend such dates; (iii) change any default or event of default other than to delete or make less restrictive any default provision therein, or add any covenant with respect to such Subordinated Debt; (iv) change the redemption or prepayment provisions of such Subordinated Debt other than to extend the dates therefor or to reduce the premiums payable in connection therewith; (v) grant any security or collateral to secure payment of such Subordinated Debt or provide any additional guaranty with respect to such Subordinated Debt (other than, with respect to a new Subsidiary (or Mid-Missouri Telephone) that becomes a Subsidiary Guarantor, a subordinated guaranty by such new Subsidiary or Mid-Missouri Telephone issued after such new Subsidiary or Mid-Missouri Telephone becomes a Subsidiary Guarantor and in the form of the subordinated guaranty issued in connection with the Initial IDS Subordinated Notes Documents); (vi) change the subordination provisions thereof; (vii) change the interest deferral provisions thereof; or (viii) change or amend any other term if such change or amendment would materially increase the obligations of any Credit Party thereunder or confer additional material

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rights on the holder of such Subordinated Debt in a manner adverse to any Credit Party, Agent or any Lender.

(b)No Credit Party shall make any payment on any Indebtedness (other than the Obligations) in contravention of the terms of the subordination provisions with respect to any series or issue of Subordinated Debt or other Indebtedness or any of the other terms of Articles 10 and 12 of the Initial IDS Subordinated Notes Indenture or any Subsequent IDS Subordinated Notes Indenture (or the comparable provisions of any Additional Subordinated Debt Documents), including, without limitation, terms which prohibit payments (other than payments of Obligations) (i) during the continuance of a default, or (ii) if specified Indebtedness is accelerated, or (iii) if a payment blockage notice is delivered.

(c)After the issuance thereof, no Credit Party shall change or amend the terms of any Indebtedness (other than the Obligations) in a manner adverse to any Credit Party, Agent or any Lender.

(d)No Credit Party shall change or amend in any manner adverse to the interests of the Lenders the terms of its certificate of formation or organization, operating agreement, certificate of incorporation or other organizational documents (including by-laws) or any agreement entered into by any Credit Party with respect to its Stock, or enter into any new agreement in any manner adverse to the interests of the Lenders with respect to its Stock (it being understood that any amendment to the certificate of incorporation of Borrower to authorize, or increase the authorized shares of, any class of common stock (other than Disqualified Stock) of Borrower would not be prohibited).

(e)No Credit Party shall change or amend the terms of the following material contract: the M&A Software License.

6.20Holding Companies.  None of the Holding Companies shall engage in any trade or business, or own any assets (other than Stock of its Subsidiaries and assets incidental to the ownership thereof) or Incur any Indebtedness or Guaranteed Indebtedness (other than Indebtedness permitted under Section 6.3 and Guaranteed Indebtedness permitted under Section 6.6).

6.21Designated Senior Debt.  Borrower shall not designate any Indebtedness (other than the Obligations) as “Designated Senior Indebtedness” or “Senior Lender Indebtedness” or like term for purposes of any Subordinated Debt Document.

6.22Limitations on Accumulation of Funds.  To the extent permitted by the Missouri PSC without seeking Missouri PSC consent, (i) Mid-Missouri Telephone shall not accumulate cash or cash equivalents (including funds on deposit in bank accounts and Investments of the type permitted by Section 6.2(c)) in excess of cash balances as may be reasonably required to be maintained by it to pay expenses incurred by it in the ordinary course of business, and (ii) Mid-Missouri Telephone shall immediately pay cash dividends or otherwise make cash distributions to Mid-Missouri

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Holding or, to the extent permitted by Section 6.2(d) and Section 6.3(a)(viii), intercompany loans to Borrower in an aggregate amount equal to all such cash and cash equivalents then accumulated by Mid-Missouri Telephone in excess of such cash balances.  No Credit Party (other than Borrower and Mid-Missouri Telephone) shall accumulate cash or cash equivalents (including funds on deposit in bank accounts and Investments of the type permitted by Section 6.2(c)) in excess of cash balances as may be reasonably required to be maintained by it to pay expenses incurred by it in the ordinary course of business, and each such Credit Party shall immediately from time to time pay cash dividends or otherwise make cash distributions to the Credit Party of which it is a Subsidiary or, to the extent permitted by Section 6.2(d) and Section 6.3(a)(viii), intercompany loans to Borrower in an aggregate amount equal to all such cash and cash equivalents then accumulated by it in excess of such cash balances.

6.23Limitations on Creation of Subsidiaries.  No Credit Party will establish, create or acquire after the Closing Date any Subsidiary, provided that the Credit Parties shall be permitted to establish, create and, to the extent permitted by Section 6.1, acquire Subsidiaries so long as (i) each such new Subsidiary is a Wholly-Owned Subsidiary, (ii) all of the Stock of each such new Subsidiary is pledged pursuant to the Pledge Agreement and the certificates representing such Stock, together with stock or other powers duly executed in blank, are delivered to Agent for the benefit of Lenders, and (iii) each such new Subsidiary executes and delivers to Agent and Lenders (1) a Joinder Agreement whereby such Subsidiary becomes a party to this Agreement as a “Credit Party” hereunder, a party to the Subsidiary Guaranty as a “Guarantor” thereunder, a party to the Security Agreement as a “Grantor” thereunder and, if applicable, a party to the Pledge Agreement as a “Pledgor” thereunder and (2) if and to the extent reasonably requested by Agent or Required Lenders, all other relevant documentation of the type described in Section 2 and the Closing Checklist as such new Subsidiary would have had to deliver if such new Subsidiary were a Credit Party on the Closing Date.

7TERM

7.1Termination.  The financing arrangements contemplated hereby shall be in effect until the Commitment Termination Date, and the Loans and all other Obligations (other than contingent indemnity and expense reimbursement provisions for which no claim has been made) shall be automatically due and payable in full on such date.

7.2Survival of Obligations Upon Termination of Financing Arrangements.  Except as otherwise expressly provided for herein or in any other Loan Document, no termination or cancellation (regardless of cause or procedure) of any financing arrangement under this Agreement shall in any way affect or impair the obligations, duties and liabilities of the Credit Parties or the rights of Agent and Lenders relating to any unpaid portion of the Loans or any other Obligations, due or not due, liquidated, contingent or unliquidated or any transaction or event occurring prior to such termination, or any transaction or event, the performance of which is required after the Commitment Termination Date.  Except as otherwise expressly provided herein or in any other Loan Document, all undertakings, agreements, covenants, warranties and

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representations of or binding upon the Credit Parties, and all rights of Agent and each Lender, all as contained in the Loan Documents, shall not terminate or expire, but rather shall survive any such termination or cancellation and shall continue in full force and effect until the Termination Date; provided, that the provisions of Section 11, the payment obligations under Sections 1.15 and 1.16,  and the indemnities contained in the Loan Documents shall survive the Termination Date.

8EVENTS OF DEFAULT; RIGHTS AND REMEDIES

8.1Events of Default.  The occurrence of any one or more of the following events (regardless of the reason therefor) shall constitute an “Event of Default” hereunder:

(a)Borrower (i) fails to make any payment of principal of any of the Loans when due and payable, or (ii) fails to make any payment of interest on, or Fees owing in respect of, any of the Loans or any of the other Obligations within three (3) days following the due date thereof, or (iii) fails to pay or reimburse Agent or Lenders for any expense reimbursable hereunder or under any other Loan Document within five (5) Business Days following Agent’s demand for such reimbursement or payment of expenses.

(b)Any Credit Party fails or neglects to perform, keep or observe any of the provisions of Sections 1.4, 1.8, 5.4(a), 5.15 or 6, or any of the provisions set forth in Annex C or G, respectively.

(c)Any Credit Party fails or neglects to perform, keep or observe any of the provisions of Section 4 or any provisions set forth in Annex E or F, respectively, and the same shall remain unremedied for three (3) Business Days or more.

(d)Any Credit Party fails or neglects to perform, keep or observe any other provision of this Agreement or of any of the other Loan Documents (other than any provision embodied in or covered by any other clause of this Section 8.1) and the same shall remain unremedied for thirty (30) days or more after any Credit Party first obtains knowledge or is notified of such failure or neglect.

(e)A default or breach occurs under any other agreement, document or instrument to which any Credit Party is a party that is not cured within any applicable grace period therefor, and such default or breach (i) involves the failure to make any payment when due in respect of any Indebtedness or Guaranteed Indebtedness (other than the Obligations and other than Guaranteed Indebtedness with respect to which the primary obligation is not itself Indebtedness) of any Credit Party in excess of $500,000 in the aggregate (including (x) undrawn committed or available amounts and (y) amounts owing to all creditors under any combined or syndicated credit arrangements), or (ii) causes, or permits any holder of such Indebtedness or Guaranteed Indebtedness or a trustee to cause, such Indebtedness or Guaranteed Indebtedness or a portion thereof in excess of $500,000 in the aggregate to become due prior to its stated maturity or prior to its regularly scheduled dates of payment, or cash collateral to be demanded in respect

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thereof, in each case, regardless of whether such right is exercised by such holder or trustee.

(f)Any representation or warranty herein or in any other Loan Document or in any written statement, report, financial statement or certificate made or delivered to Agent or any Lender by any Credit Party is untrue or incorrect as of the date when made or deemed made (i) as stated if such representation or warranty contains an express materiality qualification or (ii) in any material respect if such representation and warranty does not contain such a qualification.

(g)Assets of any Credit Party with a fair market value of $500,000 or more are attached, seized, levied upon or subjected to a writ or distress warrant, or come within the possession of any receiver, trustee, custodian or assignee for the benefit of creditors of any Credit Party and such condition continues for thirty (30) days or more.

(h)A case or proceeding is commenced against any Credit Party seeking a decree or order in respect of such Credit Party (i) under the Bankruptcy Code or any other applicable federal, state or foreign bankruptcy or other similar law, (ii) appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for such Credit Party or for any substantial part of any such Credit Party’s assets, or (iii) ordering the winding-up or liquidation of the affairs of such Credit Party, and such case or proceeding shall remain undismissed or unstayed for sixty (60) days or more or a decree or order granting the relief sought in such case or proceeding is granted by a court of competent jurisdiction.

(i)Any Credit Party (i) files a petition seeking relief under the Bankruptcy Code or any other applicable federal, state or foreign bankruptcy or other similar law, (ii) consents to or fails to contest in a timely and appropriate manner to the institution of proceedings thereunder or to the filing of any such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for such Credit Party or for any substantial part of any such Credit Party’s assets, (iii) makes an assignment for the benefit of creditors, (iv) takes any action in furtherance of any of the foregoing, or (v) admits in writing its inability to, or is generally unable to, pay its debts as such debts become due.

(j)A final judgment or judgments for the payment of money in excess of $500,000 in the aggregate at any time are outstanding against one or more of the Credit Parties and the same are not, within thirty (30) days after the entry thereof, discharged or execution thereof stayed or bonded pending appeal, or such judgments are not discharged prior to the expiration of any such stay.

(k)Any material provision of any Loan Document for any reason ceases to be valid, binding and enforceable in accordance with its terms (or any Credit Party shall challenge the enforceability of any Loan Document or shall assert in writing, or engage in any action or inaction based on any such assertion, that any provision of any of the Loan Documents has ceased to be or otherwise is not valid, binding and enforceable in accordance with its terms), or any Lien created under any Loan Document

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ceases to be a valid and perfected first priority Lien (except as otherwise permitted herein or therein) in any of the Collateral purported to be covered thereby.

(l)Any Change of Control occurs.

(m)(i) a notice of termination shall have been delivered under Section 4 of the M&A Software License or under any Replacement Software Agreement and the applicable Replacement Software Required Actions shall not have been completed when required as set forth in the definition of Replacement Software Required Actions; or (ii) the M&A Software License (or, if applicable, any Replacement Software Agreement), as applicable, shall terminate or expire prior to the completion of the applicable Replacement Software Required Actions; or (iii) Agent shall have exercised its rights to cure a default (as set forth in the Software Amendment and Consent or any Replacement Amendment and Consent) of Otelco Telephone LLC or other applicable Credit Party under the M&A Software License (or Replacement Software Agreement, if applicable) without reimbursement within two (2) days thereof for the reasonable costs, fees and expenses associated therewith.

(n)[Intentionally Omitted.]

(o)Any Telecommunications Approval, including any FCC License, PSC Authorization or Franchise, of any Credit Party shall expire or terminate or be modified, revoked or otherwise lost which in any case could reasonably be expected to have a Material Adverse Effect.

(p)Any Event of Default (as such term is respectively defined in the Initial IDS Subordinated Notes Indenture, any Subsequent IDS Subordinated Notes Indenture or any Additional Subordinated Debt Document) occurs and is continuing.

8.2Remedies.

(a)If any Default or Event of Default has occurred and is continuing, Agent, at the written request of the Requisite Revolving Lenders, shall, without notice, suspend the Revolving Loan and Swing Line Loan facilities with respect to additional Advances, whereupon any additional Advances shall be made in the sole discretion of the Requisite Revolving Lenders so long as such Default or Event of Default is continuing.

(b)If any Event of Default has occurred and is continuing, Agent may (and at the written request of the Requisite Lenders, shall), without notice:  (i) terminate the Revolving Loan Commitment and Swing Line Commitment with respect to further Advances; (ii) declare all or any portion of the Obligations, including all or any portion of any Loan to be forthwith due and payable, all without presentment, demand, protest or further notice of any kind, all of which are expressly waived by Borrower and each other Credit Party; or (iii) exercise any rights and remedies provided to Agent under the Loan Documents or at law or equity, including all remedies provided under the Code; provided, that upon the occurrence of an Event of Default specified in Sections 8.1(h) or (i), the Revolving Loan Commitment and Swing Line Commitment shall be immediately terminated and all of the Obligations, including the Revolving Loan and the Swing Line

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Loan, shall become immediately due and payable without declaration, notice or demand by any Person.

8.3Waivers by Credit Parties.  Except as otherwise provided for in this Agreement or by applicable law, each Credit Party waives:  (a) presentment, demand and protest and notice of presentment, dishonor, notice of intent to accelerate, notice of acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties at any time held by Agent on which any Credit Party may in any way be liable, and hereby ratifies and confirms whatever Agent may do in this regard, (b) all rights to notice and a hearing prior to Agent’s taking possession or control of, or to Agent’s replevy, attachment or levy upon, the Collateral or any bond or security that might be required by any court prior to allowing Agent to exercise any of its remedies, and (c) the benefit of all valuation, appraisal, marshaling and exemption laws.

9ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT

9.1Assignment and Participations.

(a)Subject to the terms of this Section 9.1, any Lender may make an assignment to a Qualified Assignee of, or sale of participations in, at any time or times, the Loan Documents, Loans and any Commitment or any portion thereof or interest therein, including any Lender’s rights, title, interests, remedies, powers or duties thereunder.  Any assignment by a Lender shall:  (i)(A) except for an assignment to an Affiliate (as defined in clause (a) and/or (b) of the definition of “Affiliate” in Annex A) of the assigning Lender, require the consent of Agent (which consent shall not be unreasonably withheld or delayed with respect to a Qualified Assignee) and (B) require the execution of an assignment agreement (an “Assignment Agreement”) substantially in the form attached hereto as Exhibit 9.1(a) and otherwise in form and substance reasonably satisfactory to, and acknowledged by, Agent; (ii) be conditioned on the assignee Lender representing to the assigning Lender and Agent that it is purchasing the applicable Loans to be assigned to it for its own account, for investment purposes and not with a view to the distribution thereof; (iii) after giving effect to any such partial assignment, the assignee Lender shall have Commitments in an amount at least equal to $2,500,000 and the assigning Lender shall have retained Commitments in an amount at least equal to $2,500,000; and (iv) except for an assignment to an Affiliate (as defined in clause (a) and/or (b) of the definition of “Affiliate” in Annex A) of the assigning Lender, include a payment to Agent of an assignment fee of $3,500.  In the case of an assignment by a Lender under this Section 9.1, the assignee shall have, to the extent of such assignment, the same rights, benefits and obligations as all other Lenders hereunder.  The assigning Lender shall be relieved of its obligations hereunder with respect to its Commitments or assigned portion thereof from and after the date of such assignment.  Borrower hereby acknowledges and agrees that any assignment shall give rise to a direct obligation of Borrower to the assignee and that the assignee shall be considered to be a “Lender”.  In all instances, each Lender’s liability to make Loans hereunder shall be several and not joint and shall be limited to such Lender’s Pro Rata Share of the

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applicable Commitment.  In the event Agent or any Lender assigns or otherwise transfers all or any part of the Obligations, Agent or any such Lender shall so notify Borrower and Borrower shall, upon the request of Agent or such Lender, execute new Notes in exchange for the Notes, if any, being assigned.  Notwithstanding the foregoing provisions of this Section 9.1(a), any Lender may at any time pledge the Obligations held by it and such Lender’s rights under this Agreement and the other Loan Documents to a Federal Reserve Bank, and any lender that is an investment fund may assign the Obligations held by it and such Lender’s rights under this Agreement and the other Loan Documents to another investment fund managed by the same investment advisor; provided, that no such pledge to a Federal Reserve Bank shall release such Lender from such Lender’s obligations hereunder or under any other Loan Document.

(b)Any participation by a Lender of all or any part of its Commitments shall be made with the understanding that all amounts payable by Borrower hereunder shall be determined as if that Lender had not sold such participation, and that the holder of any such participation shall not be entitled to require such Lender to take or omit to take any action hereunder except actions directly affecting (i) any reduction in the principal amount of, or interest rate or Fees payable with respect to, any Loan in which such holder participates, (ii) any extension of the scheduled amortization of the principal amount of any Loan in which such holder participates or the final maturity date thereof, and (iii) any release of all or substantially all of the Collateral (other than in accordance with the terms of this Agreement, the Collateral Documents or the other Loan Documents).  Solely for purposes of Sections 1.13, 1.15, 1.16 and 9.8, Borrower acknowledges and agrees that a participation shall give rise to a direct obligation of Borrower to the participant and the participant shall be considered to be a “Lender”.  Except as set forth in the preceding sentence neither Borrower nor any other Credit Party shall have any obligation or duty to any participant.  Neither Agent nor any Lender (other than the Lender selling a participation) shall have any duty to any participant and may continue to deal solely with the Lender selling a participation as if no such sale had occurred.

(c)Except as expressly provided in this Section 9.1, no Lender shall, as between Borrower and that Lender, or Agent and that Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment, transfer or negotiation of, or granting of participation in, all or any part of the Loans, the Notes or other Obligations owed to such Lender.

(d)Each Credit Party executing this Agreement shall assist any Lender permitted to sell assignments or participations under this Section 9.1 as reasonably required to enable the assigning or selling Lender to document any such assignment or participation, including the execution and delivery of any and all agreements, notes and other documents and instruments as shall be reasonably requested.

(e)A Lender may furnish any information concerning Credit Parties in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants); provided that such Lender shall obtain from

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assignees or participants confidentiality covenants substantially equivalent to those contained in Section 11.8.

(f)Any entity that purchases a participation in the Loans pursuant to Section 9.2(b) shall not be entitled to receive any greater payment under Section 1.16(a) with respect to capital adequacy or similar requirements, Section 1.16(b) with respect to increased costs, Section 1.16(c) with respect to the inability to make LIBOR Loans or Section 1.15(a) with respect to withholding taxes, than the applicable Lender would have been entitled to receive with respect to the participation sold to such participant, unless the sale of the participation to such participant is made with the Borrower’s prior written consent or unless such sale is made while an Event of Default has occurred and is continuing.

(g)Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Lender”), may grant to a special purpose funding vehicle (an “SPC”), identified as such in writing by the Granting Lender to Agent and Borrower, the option to provide to Borrower all or any part of any Loans that such Granting Lender would otherwise be obligated to make to Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Loan; and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof.  The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if such Loan were made by such Granting Lender.  No SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender).  Any SPC may (i) with notice to, but without the prior written consent of, Borrower and Agent and assign all or a portion of its interests in any Loans to the Granting Lender or to any financial institutions (consented to by Borrower and Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC.  This Section 9.1(g) may not be amended without the prior written consent of each Granting Lender, all or any of whose Loans are being funded by an SPC at the time of such amendment.  For the avoidance of doubt, the Granting Lender shall for all purposes, including without limitation, the approval of any amendment or waiver of any provision of any Loan Document or the obligation to pay any amount otherwise payable by the Granting Lender under the Loan Documents, continue to be the Lender of record hereunder.

9.2Appointment of Agent.  GE Capital is hereby appointed to act on behalf of all Lenders as Agent under this Agreement and the other Loan Documents.  The provisions of this Section 9.2 are solely for the benefit of Agent and Lenders and no Credit Party nor any other Person shall have any rights as a third party beneficiary of any of the provisions hereof.  In performing its functions and duties under this Agreement and the other Loan Documents, Agent shall act solely as an agent of Lenders and does not assume and shall not be deemed to have assumed any obligation toward or relationship of

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agency or trust with or for any Credit Party or any other Person.  Agent shall have no duties or responsibilities except for those expressly set forth in this Agreement and the other Loan Documents.  The duties of Agent shall be mechanical and administrative in nature and Agent shall not have, or be deemed to have, by reason of this Agreement, any other Loan Document or otherwise a fiduciary relationship in respect of any Lender.  Except as expressly set forth in this Agreement and the other Loan Documents, Agent shall not have any duty to disclose, and shall not be liable for failure to disclose, any information relating to any Credit Party or any of their respective Subsidiaries or any Account Debtor that is communicated to or obtained by GE Capital or any of its Affiliates in any capacity.  Neither Agent nor any of its Affiliates nor any of their respective officers, directors, employees, agents or representatives shall be liable to any Lender for any action taken or omitted to be taken by it hereunder or under any other Loan Document, or in connection herewith or therewith, except for damages caused by its or their own gross negligence or willful misconduct.

If Agent shall request instructions from Requisite Lenders, Requisite Revolving Lenders, Requisite Term Lenders or all affected Lenders with respect to any act or action (including failure to act) in connection with this Agreement or any other Loan Document (other than any action or failure to act that is the subject of a mandatory provision of this Agreement or any Loan Documents), then Agent shall be entitled to refrain from such act or taking such action unless and until Agent shall have received instructions from Requisite Lenders, Requisite Revolving Lenders, Requisite Term Lenders, or all affected Lenders, as the case may be, and Agent shall not incur liability to any Person by reason of so refraining.  Agent shall be fully justified in failing or refusing to take any action hereunder or under any other Loan Document (a) if such action would, in the opinion of Agent, be contrary to law or the terms of this Agreement or any other Loan Document, (b) if such action would, in the opinion of Agent, expose Agent to Environmental Liabilities or (c) if Agent shall not first be indemnified to its satisfaction against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action.  Without limiting the foregoing, no Lender shall have any right of action whatsoever against Agent as a result of Agent acting or refraining from acting hereunder or under any other Loan Document in accordance with the instructions of Requisite Lenders, Requisite Revolving Lenders, Requisite Term Lenders or all affected Lenders, as applicable.

9.3Agent’s Reliance, Etc.  Neither Agent nor any of its Affiliates nor any of their respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement or the other Loan Documents, except for damages caused by its or their own gross negligence or willful misconduct as finally determined by a court of competent jurisdiction.  Without limiting the generality of the foregoing, Agent:  (a)  may treat the payee of any Note as the holder thereof until Agent receives written notice of the assignment or transfer thereof signed by such payee and in form reasonably satisfactory to Agent; (b) may consult with legal counsel, independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts; (c) makes no warranty or representation to any Lender and shall not be responsible to any

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Lender for any statements, warranties or representations made in or in connection with this Agreement or the other Loan Documents; (d) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or the other Loan Documents on the part of any Credit Party or to inspect the Collateral (including the books and records) of any Credit Party; (e) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; and (f) shall incur no liability under or in respect of this Agreement or the other Loan Documents by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopy, telegram, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties.

9.4GE Capital and Affiliates.  With respect to its Commitments hereunder, GE Capital shall have the same rights and powers under this Agreement and the other Loan Documents as any other Lender and may exercise the same as though it were not Agent; and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated, include GE Capital in its individual capacity.  GE Capital and its Affiliates may lend money to, invest in, and generally engage in any kind of business with, any Credit Party, any of their Affiliates and any Person who may do business with or own securities of any Credit Party or any such Affiliate, all as if GE Capital were not Agent and without any duty to account therefor to Lenders.  GE Capital and its Affiliates may accept fees and other consideration from any Credit Party for services in connection with this Agreement or otherwise without having to account for the same to Lenders.  Each Lender acknowledges the potential conflict of interest between GE Capital as a Lender holding disproportionate interests in the Loans and GE Capital as Agent.

9.5Lender Credit Decision.  Each Lender acknowledges that it has, independently and without reliance upon Agent or any other Lender and based on the Financial Statements referred to in Section 3.4(a) and such other documents and information as it has deemed appropriate, made its own credit and financial analysis of the Credit Parties and its own decision to enter into this Agreement.  Each Lender also acknowledges that it will, independently and without reliance upon Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement.  Each Lender acknowledges the potential conflict of interest of each other Lender as a result of Lenders holding disproportionate interests in the Loans, and expressly consents to, and waives any claim based upon, such conflict of interest.

9.6Indemnification.  Lenders agree to indemnify Agent (to the extent not reimbursed by Credit Parties and without limiting the obligations of Borrower hereunder), ratably according to their respective Pro Rata Shares, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against Agent in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted to be taken by Agent in connection therewith; provided, that no Lender shall be liable for any portion of

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such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from Agent’s gross negligence or willful misconduct as finally determined by a court of competent jurisdiction.  Without limiting the foregoing, each Lender agrees to reimburse Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including reasonable counsel fees) incurred by Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement and each other Loan Document, to the extent that Agent is not reimbursed for such expenses by Credit Parties.

9.7Successor Agent.  Agent may resign at any time by giving not less than 30 days’ prior written notice thereof to Lenders and Borrower.  Upon any such resignation, the Requisite Lenders shall have the right to appoint a successor Agent.  If no successor Agent shall have been so appointed by the Requisite Lenders and shall have accepted such appointment within 30 days after the resigning Agent’s giving notice of resignation, then the resigning Agent may, on behalf of Lenders, appoint a successor Agent, which shall be a Lender, if a Lender is willing to accept such appointment, or otherwise shall be a commercial bank or financial institution or a subsidiary of a commercial bank or financial institution if such commercial bank or financial institution is organized under the laws of the United States of America or of any State thereof and has a combined capital and surplus of at least $300,000,000.  If no successor Agent has been appointed pursuant to the foregoing, within 30 days after the date such notice of resignation was given by the resigning Agent, such resignation shall become effective and the Requisite Lenders shall thereafter perform all the duties of Agent hereunder until such time, if any, as the Requisite Lenders appoint a successor Agent as provided above. Any successor Agent appointed by Requisite Lenders hereunder shall be subject to the approval of Borrower, such approval not to be unreasonably withheld or delayed; provided that such approval shall not be required if a Default or an Event of Default has occurred and is continuing.  Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall succeed to and become vested with all the rights, powers, privileges and duties of the resigning Agent.  Upon the earlier of the acceptance of any appointment as Agent hereunder by a successor Agent or the effective date of the resigning Agent’s resignation, the resigning Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents, except that any indemnity rights or other rights in favor of such resigning Agent shall continue.  After any resigning Agent’s resignation hereunder, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was acting as Agent under this Agreement and the other Loan Documents.

9.8Setoff and Sharing of Payments.  In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence and during the continuance of any Event of Default and subject to Section 9.9(f), each Lender is hereby authorized at any time or from time to time, without notice to any Credit Party or to any other Person, any such notice being hereby expressly waived, to offset and to appropriate and to apply any and all balances held by it at any of its offices for the account of Borrower or any Guarantor (regardless of whether such

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balances are then due to Borrower or any Guarantor) and any other properties or assets at any time held or owing by that Lender or that holder to or for the credit or for the account of Borrower or any Guarantor against and on account of any of the Obligations that are not paid when due.  Any Lender exercising a right of setoff or otherwise receiving any payment on account of the Obligations in excess of its Pro Rata Share thereof shall purchase for cash (and the other Lenders or holders shall sell) such participations in each such other Lender’s or holder’s Pro Rata Share of the Obligations as would be necessary to cause such Lender to share the amount so offset or otherwise received with each other Lender or holder in accordance with their respective Pro Rata Shares (other than offset rights exercised by any Lender with respect to Sections 1.13, 1.15 or 1.16).  Each Lender’s obligation under this Section 9.8 shall be in addition to and not in limitation of its obligations to purchase a participation in an amount equal to its Pro Rata Share of the Swing Line Loans under Section 1.1.  Borrower and each Guarantor agrees, to the fullest extent permitted by law, that (a) any Lender may exercise its right to offset with respect to amounts in excess of its Pro Rata Share of the Obligations and may sell participations in such amounts so offset to other Lenders and holders and (b) any Lender so purchasing a participation in the Loans made or other Obligations held by other Lenders or holders may exercise all rights of offset, bankers’ lien, counterclaim or similar rights with respect to such participation as fully as if such Lender or holder were a direct holder of the Loans and the other Obligations in the amount of such participation.  Notwithstanding the foregoing, if all or any portion of the offset amount or payment otherwise received is thereafter recovered from the Lender that has exercised the right of offset, the purchase of participations by that Lender shall be rescinded and the purchase price restored without interest.

9.9Advances; Payments; Non-Funding Lenders; Information; Actions in Concert.

(a)Advances; Payments.

(i)Agent shall notify Revolving Lenders, promptly after receipt of a Notice of Revolving Credit Advance and in any event prior to 1:00 p.m. (New York time) on the date such Notice of Revolving Credit Advance is received, by telecopy, telephone or other similar form of transmission.  Each Revolving Lender shall make the amount of such Lender’s Pro Rata Share of such Revolving Credit Advance available to Agent in same day funds by wire transfer to Agent’s account as set forth in Annex H not later than 3:00 p.m. (New York time) on the requested funding date, in the case of an Index Rate Loan and not later than 11:00 a.m. (New York time) on the requested funding date in the case of a LIBOR Loan.  After receipt of such wire transfers (or, in Agent’s sole discretion, before receipt of such wire transfers), subject to the terms hereof, Agent shall make the requested Revolving Credit Advance to Borrower.  All payments by each Revolving Lender shall be made without setoff, counterclaim or deduction of any kind.

(ii)Not less than once during each calendar week or more frequently at Agent’s election (each, a “Revolving Lender Settlement Date”), Agent shall advise each Revolving Lender by telephone, or telecopy of the amount of such Revolving

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Lender’s Pro Rata Share of principal, interest and Fees paid for the benefit of Revolving Lenders with respect to each applicable Revolving Loan.  Provided that each Revolving Lender is not a Non-Funding Lender as of such Revolving Lender Settlement Date, Agent shall pay to each Revolving Lender such Revolving Lender’s Pro Rata Share of principal, interest and Fees paid by Borrower since the previous Revolving Lender Settlement Date for the benefit of such Revolving Lender on the Revolving Loans held by it.  To the extent that any Revolving Lender is a Non-Funding Lender, Agent shall be entitled to set off the funding short-fall against that Non-Funding Lender’s Pro Rata Share of all payments received from Borrower.  Such payments shall be made by wire transfer to such Revolving Lender’s account (as specified by such Lender in Annex H or the applicable Assignment Agreement or by such Lender to Agent in a separate notice) not later than 2:00 p.m. (New York time) on the next Business Day following each Revolving Lender Settlement Date.

(iii)Provided that each Term Lender is not a Non-Funding Lender as of the Term Lender Settlement Date, Agent shall pay to each Term Lender such Term Lender’s Pro Rata Share of principal, interest and Fees paid by Borrower for the benefit of such Term Lender on the Term Loan held by it on the day Agent receives such payments from Borrower if received by Agent prior to 2:00 p.m. (New York time) and on the next Business Day after receipt by Agent if received after 2:00 p.m. (New York time) (as applicable, the “Term Lender Settlement Date”).  To the extent that any Term Lender is a Non-Funding Lender, Agent shall be entitled to set off the funding short-fall against that Non-Funding Lender’s Pro Rata Share of all payments received from Borrower.  Such payments shall be made by wire transfer to such Term Lender’s account (as specified by such Term Lender in Annex H or the applicable Assignment Agreement or by such Lender to Agent in a separate notice).

(b)Availability of Lender’s Pro Rata Share.  Agent may assume that each Revolving Lender will make its Pro Rata Share of each Revolving Credit Advance available to Agent on each funding date.  If such Pro Rata Share is not, in fact, paid to Agent by such Revolving Lender when due, Agent will be entitled to recover such amount on demand from such Revolving Lender without setoff, counterclaim or deduction of any kind.  If any Revolving Lender fails to pay the amount of its Pro Rata Share forthwith upon Agent’s demand, Agent shall promptly notify Borrower and Borrower shall promptly (and, in any event, within one (1) Business Day after receipt of such notice) repay such amount to Agent.  Nothing in this Section 9.9(b) or elsewhere in this Agreement or the other Loan Documents shall be deemed to require Agent to advance funds on behalf of any Revolving Lender or to relieve any Revolving Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that Borrower may have against any Revolving Lender as a result of any default by such Revolving Lender hereunder.  To the extent that Agent advances funds to Borrower on behalf of any Revolving Lender and is not reimbursed therefor on the same Business Day as such Advance is made, Agent shall be entitled to retain for its account all interest accrued on such Advance until reimbursed by the applicable Revolving Lender.

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(c)Return of Payments.

(i)If Agent pays an amount to a Lender under this Agreement in the belief or expectation that a related payment has been or will be received by Agent from Borrower and such related payment is not received by Agent, then Agent will be entitled to recover such amount from such Lender on demand without setoff, counterclaim or deduction of any kind.

(ii)If any amount received by Agent under this Agreement must be returned to Borrower or paid to any other Person pursuant to any insolvency law or otherwise, then, notwithstanding any other term or condition of this Agreement or any other Loan Document, Agent will not be required to distribute any portion thereof to any Lender.  In addition, each Lender will repay to Agent on demand any portion of such amount that Agent has distributed to such Lender, together with interest at such rate, if any, as Agent is required to pay to Borrower or such other Person, without setoff, counterclaim or deduction of any kind.

(d)Non-Funding Lenders.  The failure of any Non-Funding Lender to make any Revolving Credit Advance or any payment required by it hereunder, or to purchase any participation in any Swing Line Loan to be made or purchased by it on the date specified therefor shall not relieve any other Lender (each such other Revolving Lender, an “Other Lender”) of its obligations to make such Advance or payment on such date, but neither any Other Lender nor Agent shall be responsible for the failure of any Non-Funding Lender to make an Advance or make any other payment required hereunder.  Notwithstanding anything set forth herein to the contrary, a Non-Funding Lender shall not have any voting or consent rights under or with respect to any Loan Document or constitute a “Lender” or a “Revolving Lender” (or be (or have its Commitment) included in the calculation of “Requisite Lenders” or “Requisite Revolving Lenders” hereunder) for any voting or consent rights under or with respect to any Loan Document.  At Borrower’s request, Agent or a Person acceptable to Agent shall have the right with Agent’s consent and in Agent’s sole discretion (but shall have no obligation) to purchase from any Non-Funding Lender, and each Non-Funding Lender agrees that it shall, at Agent’s request, sell and assign to Agent or such Person, all of the Commitments of that Non-Funding Lender for an amount equal to the principal balance of all Loans held by such Non-Funding Lender and all accrued interest and fees with respect thereto through the date of sale, such purchase and sale to be consummated pursuant to an executed Assignment Agreement.

(e)Dissemination of Information.  Agent shall use reasonable efforts to provide Lenders with any notice of Default or Event of Default received by Agent from, or delivered by Agent to, any Credit Party, with notice of any Event of Default of which Agent has actually become aware and with notice of any action taken by Agent following any Event of Default; provided, that Agent shall not be liable to any Lender for any failure to do so, except to the extent that such failure is attributable to Agent’s gross negligence or willful misconduct as finally determined by a court of competent jurisdiction.  Lenders acknowledge that Borrower is required to provide Financial Statements and Collateral Reports to Lenders in accordance with Annexes E and F hereto and agree that Agent shall have no duty to provide the same to Lenders.

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(f)Actions in Concert.  Anything in this Agreement to the contrary notwithstanding, each Lender hereby agrees with each other Lender that no Lender shall take any action to protect or enforce its rights arising out of this Agreement or the Notes (including exercising any rights of setoff) without first obtaining the prior written consent of the Requisite Lenders, it being the intent of Lenders that any such action to protect or enforce rights under this Agreement and the Notes shall be taken in concert and at the direction or with the consent of the Requisite Lenders.

10SUCCESSORS AND ASSIGNS

10.1Successors and Assigns.  This Agreement and the other Loan Documents shall be binding on and shall inure to the benefit of each Credit Party, Agent, Lenders and their respective successors and assigns (including, in the case of any Credit Party, a debtor-in-possession on behalf of such Credit Party and any surviving corporation in a merger to which such Credit Party is a party which merger is permitted by this Agreement), except as otherwise provided herein or therein.  No Credit Party may assign, transfer, hypothecate or otherwise convey its rights, benefits, obligations or duties hereunder or under any of the other Loan Documents without the prior express written consent of Agent and Lenders.  Any such purported assignment, transfer, hypothecation or other conveyance by any Credit Party without the prior express written consent of Agent and Lenders shall be void.  The terms and provisions of this Agreement are for the purpose of defining the relative rights and obligations of each Credit Party, Agent and Lenders with respect to the transactions contemplated hereby and no Person shall be a third party beneficiary of any of the terms and provisions of this Agreement or any of the other Loan Documents.

11MISCELLANEOUS

11.1Complete Agreement; Modification of Agreement.  The Loan Documents constitute the complete agreement between the parties with respect to the subject matter thereof and may not be modified, altered or amended except as set forth in Section 11.2.  Any letter of interest, commitment letter, fee letter (other than the GE Capital Fee Letter and the Lender Fee Letter) or confidentiality agreement, if any, between any Credit Party and Agent or any Lender or any of their respective Affiliates, predating this Agreement and relating to a financing of substantially similar form, purpose or effect shall be superseded by this Agreement.

11.2Amendments and Waivers; Joinder Agreement

(a)Except for actions expressly permitted to be taken by Agent, no amendment, modification, termination or waiver of any provision of this Agreement or any other Loan Document, or any consent to any departure by any Credit Party therefrom, shall in any event be effective unless the same shall be in writing and (i) in the case of this Agreement, signed by Borrower, by Requisite Lenders, Requisite Revolving Lenders, Requisite Term Lenders or all affected Lenders, as applicable, and by Agent (if the same affects the rights or duties of Agent) and (ii) in the case of any other Loan Document, signed by the parties thereto and consented to by Requisite Lenders, Requisite Revolving Lenders, Requisite Term Lenders or all affected Lenders, as applicable.  Except as set forth in clauses (b) and (c) below, all such amendments, modifications,

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terminations or waivers requiring the consent of any Lenders shall require the written consent of Requisite Lenders.

(b)No amendment, modification, termination or waiver of or consent with respect to any provision of this Agreement that waives compliance with the conditions precedent (i) set forth in Section 2.2(a) to the funding of any Advance shall be effective unless the same shall be in writing and signed by the Requisite Revolving Lenders and Borrower or (ii) set forth in Section 2.2(b) to the funding of the Term Loan shall be effective unless the same shall be in writing and signed by the Requisite Term Lenders and Borrower.  Notwithstanding anything contained in this Agreement to the contrary, no waiver or consent with respect to any Default or any Event of Default shall be effective for purposes of (A) the conditions precedent to the funding of any Advance set forth in Section 2.2(a) unless the same shall be in writing and signed by the Requisite Revolving Lenders and Borrower, (B) Section 1.5(e) relating to the conversion or continuation of any Advance unless the same shall be in writing and signed by the Requisite Revolving Lenders and Borrower, (C) the conditions precedent to the funding of the Term Loan set forth in Section 2.2(b) unless the same shall be in writing and signed by the Requisite Term Lenders and Borrower or (D) Section 1.5(e) relating to the conversion or continuation of the Term Loan unless the same shall be in writing and signed by the Requisite Term Lenders and Borrower.

(c)No amendment, modification, termination or waiver shall, unless in writing and signed by each Lender directly affected thereby:  (i) increase the principal amount of any Lender’s Commitment (which action shall be deemed to directly affect all Lenders); (ii) reduce the principal of, rate of interest on or prepayment premiums or other Fees payable with respect to any Loan of any affected Lender; (iii) extend any scheduled payment date (other than payment dates of mandatory prepayments under Section 1.3(b)(ii)-(v)) or final maturity date of the principal amount of any Loan of any affected Lender; (iv) waive, forgive, defer, extend or postpone any payment of interest or Fees as to any affected Lender; (v) release any Guaranty or, except as otherwise permitted herein or in the other Loan Documents, release, or permit any Credit Party to sell or otherwise dispose of, any Collateral with a value exceeding $5,000,000 in the aggregate (which action shall be deemed to directly affect all Lenders); (vi) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans that shall be required for Lenders or any of them to take any action hereunder; and (vii) amend or waive this Section 11.2 or the definitions of the terms “Requisite Lenders”, “Requisite Term Lenders” or “Requisite Revolving Lenders” insofar as such definitions affect the substance of this Section 11.2.  Furthermore, no amendment, modification, termination or waiver affecting the rights or duties of Agent under this Agreement or any other Loan Document shall be effective unless in writing and signed by Agent, in addition to Lenders required hereinabove to take such action.  Each amendment, modification, termination or waiver shall be effective only in the specific instance and for the specific purpose for which it was given.  No amendment, modification, termination or waiver shall be required for Agent to take additional Collateral pursuant to any Loan Document. No amendment, modification, termination or waiver of any provision of any Note shall be effective without the written concurrence of the holder of that Note.  No notice to or demand on any Credit Party in any case shall entitle such Credit Party or any other Credit

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Party to any other or further notice or demand in similar or other circumstances.  Any amendment, modification, termination, waiver or consent effected in accordance with this Section 11.2 shall be binding upon each Lender at the time such amendment, modification, termination, waiver or consent is effected and each future Lender.

(d)If, in connection with any proposed amendment, modification, waiver or termination (other than with respect to any waiver relating to the payment of any premium payable in connection with any prepayment of the Loans) requiring the consent of all affected Lenders, the consent of Requisite Lenders is obtained, but the consent of other Lenders whose consent is required is not obtained (any such Lender whose consent is not obtained as described in this clause being referred to as a “Non-Consenting Lender”) then, at Borrower’s request Agent (if Agent so agrees to purchase in its sole discretion), or a Person reasonably acceptable to Agent (if such Person so agrees to purchase in its sole discretion), shall have the right with Agent’s consent (but Agent shall have no obligation) to purchase from such Non-Consenting Lenders, and such Non-Consenting Lenders agree that they shall sell and assign to Agent or such Person, as applicable, all of the Commitments of such Non-Consenting Lenders for an amount equal to the principal balance of all Loans held by the Non-Consenting Lenders and all accrued interest and Fees with respect thereto through the date of sale, such purchase and sale to be consummated pursuant to an executed Assignment Agreement.

(e)Upon payment in full in cash of all of the Obligations (other than contingent indemnity and expense reimbursement obligations for which no claim has been made) and termination of the Commitments, and so long as no suits, actions proceedings, or claims are pending or threatened against any Indemnified Person asserting any damages, losses or liabilities that are Indemnified Liabilities, Agent shall deliver to Borrower termination statements, mortgage releases and other documents necessary or appropriate to evidence the termination of the Liens securing payment of the Obligations.

(f)Upon the execution and delivery by any Person to Agent of a Joinder Agreement, as applicable as provided in such Joinder Agreement, (a) such Person shall become and be a Credit Party hereunder, and each reference in this Agreement or any other Loan Document to a “Credit Party” shall also mean and be a reference to such Person, (b) such Person shall become and be a Guarantor under the Subsidiary Guaranty, and each reference in this Agreement or any other Loan Document to a “Guarantor” shall also mean and be a reference to such Person, (c) such Person shall become and be a Grantor under the Security Agreement, and each reference in this Agreement or any other Loan Document to a “Grantor” shall also mean and be a reference to such Person, (d) such Person shall become and be a Pledgor under the Pledge Agreement, and each reference in this Agreement or any other Loan Document to a “Pledgor” shall also mean and be a reference to such Person, and (e) each reference in this Agreement, the Subsidiary Guaranty, the Security Agreement and the Pledge Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import, and each reference in any Loan Document to the “Credit Agreement”, “Subsidiary Guaranty”, “Security Agreement”, “Pledge Agreement” or “thereunder”, “thereof” or words of like import referring to the Agreement, Subsidiary Guaranty, Security Agreement or Pledge

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Agreement shall mean and be a reference to this Agreement, Subsidiary Guaranty, the Security Agreement or Pledge Agreement, as applicable, as supplemented by such Joinder Agreement.  Each Credit Party agrees that (i) no consent of such Credit Party is required for the execution and delivery by any other Person of a Joinder Agreement or for such Person to become a party to this Agreement or any other Loan Document by executing and delivering such Joinder Agreement and (ii) its obligations under this Agreement and the other Loan Documents shall not be affected or diminished by any other Person becoming or failing to become a party to this Agreement or any other Loan Document.

11.3Fees and Expenses.  Borrower shall reimburse Agent for all fees, costs and expenses (including the reasonable fees and expenses of all of its counsel, advisors, consultants (provided that such consultants were engaged with the consent (not to be unreasonably withheld) of Borrower) and auditors) incurred in connection with the negotiation, preparation and filing and/or recordation of the Loan Documents.  Borrower shall reimburse Agent (and, with respect to clauses (c), (d), (e) and (f) below, all Lenders) for all fees, costs and expenses, including the reasonable fees, costs and expenses of counsel or other advisors (including environmental and management consultants and appraisers) incurred in connection with:

(a)the forwarding to Borrower or any other Person on behalf of Borrower by Agent of the proceeds of any Loan;

(b)any amendment, modification or waiver of, or consent with respect to, or termination of, any of the Loan Documents or Related Transactions Documents or advice in connection with the administration of the Loans made pursuant hereto or its rights hereunder or thereunder;

(c)any litigation, contest, dispute, suit, proceeding or action (whether instituted by Agent, any Lender, any Credit Party or any other Person and whether as a party, witness or otherwise) in any way relating to the Collateral, any of the Loan Documents or any other agreement to be executed or delivered in connection herewith or therewith, including any litigation, contest, dispute, suit, case, proceeding or action, and any appeal or review thereof, in connection with a case commenced by or against any or all of the Credit Parties or any other Person that may be obligated to Agent by virtue of the Loan Documents, including any such litigation, contest, dispute, suit, proceeding or action arising in connection with any work-out or restructuring of the Loans during the pendency of one or more Events of Default; provided, that no Person shall be entitled to reimbursement under this clause (c) in respect of any litigation, contest, dispute, suit, proceeding or action to the extent any of the foregoing results from such Person’s gross negligence or willful misconduct as finally determined by a court of competent jurisdiction or to the extent any of the foregoing results from any dispute among any of Agent and the Lenders which dispute does not involve any Credit Party;

(d)any attempt to enforce any remedies of Agent or any Lender against any or all of the Credit Parties or any other Person that may be obligated to Agent or any Lender by virtue of any of the Loan Documents, including any such attempt to

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enforce any such remedies in the course of any work-out or restructuring of the Loans during the pendency of one or more Events of Default;

(e)any workout or restructuring of the Loans during the pendency of one or more Events of Default; and

(f)upon the occurrence and during the continuation of any Default or Event of Default, efforts to verify, protect, evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of any of the Collateral;

including, as to each of clauses (a) through (f) above, all reasonable attorneys’ and other professional and service providers’ fees arising from such services and other advice, assistance or other representation, including those in connection with any appellate proceedings, and all expenses, costs, charges and other fees incurred by such counsel and others in connection with or relating to any of the events or actions described in this Section 11.3, all of which shall be payable, on demand, by Borrower to Agent or Lender, as applicable.  Without limiting the generality of the foregoing, such expenses, costs, charges and fees may include:  fees, costs and expenses of accountants, environmental advisors, appraisers, investment bankers, management and other consultants and paralegals; court costs and expenses; photocopying and duplication expenses; court reporter fees, costs and expenses; long distance telephone charges; air express charges; telegram or telecopy charges; secretarial overtime charges; and expenses for travel, lodging and food paid or incurred in connection with the performance of such legal or other advisory services.

11.4No Waiver.  Agent’s or any Lender’s failure, at any time or times, to require strict performance by the Credit Parties of any provision of this Agreement or any other Loan Document shall not waive, affect or diminish any right of Agent or such Lender thereafter to demand strict compliance and performance herewith or therewith.  Any suspension or waiver of an Event of Default shall not suspend, waive or affect any other Event of Default whether the same is prior or subsequent thereto and whether the same or of a different type.  Subject to the provisions of Section 11.2, none of the undertakings, agreements, warranties, covenants and representations of any Credit Party contained in this Agreement or any of the other Loan Documents and no Default or Event of Default by any Credit Party shall be deemed to have been suspended or waived by Agent or any Lender, unless such waiver or suspension is by an instrument in writing signed by an officer of or other authorized employee of Agent and the applicable required Lenders and directed to Borrower specifying such suspension or waiver.

11.5Remedies.  Agent’s and Lenders’ rights and remedies under this Agreement shall be cumulative and nonexclusive of any other rights and remedies that Agent or any Lender may have under any other agreement, including the other Loan Documents, by operation of law or otherwise.  Recourse to the Collateral shall not be required.

11.6Severability.  Wherever possible, each provision of this Agreement and the other Loan Documents shall be interpreted in such a manner as to be effective

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and valid under applicable law, but if any provision of this Agreement or any other Loan Document shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement or such other Loan Document.

11.7Conflict of Terms.  Except as otherwise provided in this Agreement or any of the other Loan Documents by specific reference to the applicable provisions of this Agreement, if any provision contained in this Agreement conflicts with any provision in any of the other Loan Documents, the provision contained in this Agreement shall govern and control.

11.8Confidentiality.  Agent and each Lender agree to use commercially reasonable efforts (equivalent to the efforts Agent or such Lender applies to maintain the confidentiality of its own confidential information) to maintain as confidential all confidential information provided to them by the Credit Parties and designated as confidential for a period of three (3) years following receipt thereof, except that Agent and each Lender may disclose such information (a) to Persons employed or engaged by Agent or such Lender; (b) to any bona fide assignee or participant or potential assignee or participant that has agreed to comply with the covenant contained in this Section 11.8 (and any such bona fide assignee or participant or potential assignee or participant may disclose such information to Persons employed or engaged by them as described in clause (a) above); (c) as required or requested by any Governmental Authority or reasonably believed by Agent or such Lender (based on advice of Agent’s or such Lender’s counsel) to be compelled by any court decree, subpoena or legal or administrative order or process; (d) as, on the advice of Agent’s or such Lender’s counsel, is required by law; (e) in connection with the exercise of any right or remedy under the Loan Documents or in connection with any Litigation to which Agent or such Lender is a party; or (f) that ceases to be confidential through no fault of Agent or any Lender.

11.9GOVERNING LAW.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.  EACH CREDIT PARTY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK COUNTY, CITY OF NEW YORK, NEW YORK SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE CREDIT PARTIES, AGENT AND LENDERS PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED

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OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT.  EACH CREDIT PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH CREDIT PARTY HEREBY WAIVES ANY OBJECTION THAT SUCH CREDIT PARTY MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.  EACH CREDIT PARTY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT PARTY AT THE ADDRESS SET FORTH IN ANNEX I OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH CREDIT PARTY’S ACTUAL RECEIPT THEREOF OR FIVE (5) BUSINESS DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID.

11.10Notices.  Except as otherwise provided herein, whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by any other parties, or whenever any of the parties desires to give or serve upon any other parties any communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and shall be deemed to have been validly served, given or delivered (a) upon the earlier of actual receipt and five (5) Business Days after deposit in the United States Mail, registered or certified mail, return receipt requested, with proper postage prepaid, (b) upon transmission, when sent by telecopy or other similar facsimile transmission (with such telecopy or facsimile promptly confirmed by delivery of a copy by personal delivery or United States Mail as otherwise provided in this Section 11.10); (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address or facsimile number indicated in Annex I or to such other address (or facsimile number) as may be substituted by notice given as herein provided.  The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice.  Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration or other communication to any Person (other than Borrower or Agent) designated in Annex I to receive copies shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration or other communication.

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11.11Section Titles.  The Section titles and Table of Contents contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto.

11.12Counterparts.  This Agreement may be executed in any number of separate counterparts, each of which shall be an original and all of which shall collectively constitute one agreement.

11.13WAIVER OF JURY TRIAL.  BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY, THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.  THEREFORE, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG AGENT, LENDERS AND ANY CREDIT PARTY ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.

11.14Press Releases and Related Matters.  Each Credit Party executing this Agreement agrees that neither it nor its Affiliates will in the future issue any press releases or other public disclosure using the name of GE Capital or any Lender or its affiliates or referring to this Agreement, the other Loan Documents or the Related Transactions Documents without at least 2 Business Days’ prior notice to GE Capital (and, if such disclosure will use the name of any Lender, to such Lender) and without the prior written consent of GE Capital (and, if such disclosure will use the name of any Lender, such Lender) unless (and only to the extent that) such Credit Party or Affiliate is required to do so under law and then, in any event, such Credit Party or Affiliate will consult with GE Capital (and, if such disclosure will use the name of any Lender, such Lender) before issuing such press release or other public disclosure.  Each Credit Party consents to the publication by Agent or any Lender of advertising material relating to the financing transactions contemplated by this Agreement using any Credit Party’s name, product photographs, logo or trademark.  Agent or such Lender shall provide a draft of any such tombstone or similar advertising material to each Credit Party for review and approval (such approval not to be unreasonably withheld or delayed) prior to the publication thereof.  Agent reserves the right to provide to industry trade organizations information necessary and customary for inclusion in league table measurements.

11.15Reinstatement.  This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against any Credit Party for liquidation or reorganization, should any Credit Party become insolvent or make an assignment for the benefit of any creditor or creditors or should a receiver or trustee be appointed for all or any significant part of any Credit Party’s assets, and shall continue to

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be effective or to be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though such payment or performance had not been made.  In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

11.16Advice of Counsel.  Each of the parties represents to each other party hereto that it has discussed this Agreement and, specifically, the provisions of Sections 11.9 and 11.13, with its counsel.

11.17No Strict Construction.  The parties hereto have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

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IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first written above.

OTELCO INC.
By:	/s/ Michael D. Weaver
Name: Michael Dan Weaver
Title: Chief Executive Officer
OTELCO TELECOMMUNICATIONS LLC
By:	/s/ Michael D. Weaver
	Name: Michael Dan Weaver
	Title: Chief Executive Officer
OTELCO TELEPHONE LLC
By:	/s/ Michael D. Weaver
	Name: Michael Dan Weaver
	Title: Chief Executive Officer
HOPPER HOLDING COMPANY, INC.
By:	/s/ Michael D. Weaver
	Name: Michael Dan Weaver
	Title: Chief Executive Officer
HOPPER TELECOMMUNICATIONS COMPANY, INC.
By:	/s/ Michael D. Weaver
	Name: Michael Dan Weaver
	Title: Chief Executive Officer
BRINDLEE HOLDINGS LLC
By:	/s/ Michael D. Weaver
	Name: Michael Dan Weaver
	Title: Chief Executive Officer

[Signature Page - Credit Agreement]

BRINDLEE MOUNTAIN TELEPHONE COMPANY
By:	/s/ Michael D. Weaver
	Name: Michael Dan Weaver
	Title: Chief Executive Officer
PAGE & KISER COMMUNICATIONS, INC.
By:	/s/ Michael D. Weaver
	Name: Michael Dan Weaver
	Title: Chief Executive Officer
BLOUNTSVILLE TELEPHONE COMPANY, INC.
By:	/s/ Michael D. Weaver
	Name: Michael Dan Weaver
	Title: Chief Executive Officer
MID-MISSOURI HOLDING CORP.
By:	/s/ Michael D. Weaver
	Name: Michael Dan Weaver
	Title: Chief Executive Officer
MID-MISSOURI TELEPHONE COMPANY
By:	/s/ Michael D. Weaver
	Name: Michael Dan Weaver
	Title: Chief Executive Officer
IMAGINATION, INC.
By:	/s/ Michael D. Weaver
	Name: Michael Dan Weaver
	Title: Chief Executive Officer

GENERAL ELECTRIC CAPITAL CORPORATION, as Agent and a Lender
By:	/s/ Matthew A. Toth III
	Duly Authorized Signatory

AIG ANNUITY INSURANCE COMPANY, as a Lender
By:	/s/ Christopher F. Ochs
Name:			Christopher F. Ochs
Title:		Vice President

COBANK, ACB, as a Lender
By:	/s/ Rick Freeman
Name:			Rick Freeman
Title:		Vice President

ANNEX A (Recitals)

to

CREDIT AGREEMENT

DEFINITIONS

Capitalized terms used in the Loan Documents shall have (unless otherwise provided elsewhere in the Loan Documents) the following respective meanings and all references to Sections, Exhibits, Schedules or Annexes in the following definitions shall refer to Sections, Exhibits, Schedules or Annexes of or to the Agreement:

“Account Debtor” means any Person who may become obligated to any Credit Party under, with respect to, or on account of, an Account, Chattel Paper or General Intangibles (including a payment intangible).

“Accounting Changes” has the meaning ascribed thereto in Annex G.

“Accounts” means all “accounts,” as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, including (a) all accounts receivable, other receivables, book debts and other forms of obligations (other than forms of obligations evidenced by Chattel Paper or Instruments), (including any such obligations that may be characterized as an account or contract right under the Code), (b) all of each Credit Party’s rights in, to and under all purchase orders or receipts for goods or services, (c) all of each Credit Party’s rights to any goods represented by any of the foregoing (including unpaid sellers’ rights of rescission, replevin, reclamation and stoppage in transit and rights to returned, reclaimed or repossessed goods), (d) all rights to payment due to any Credit Party for property sold, leased, licensed, assigned or otherwise disposed of, for a policy of insurance issued or to be issued, for a secondary obligation incurred or to be incurred, for energy provided or to be provided, for the use or hire of a vessel under a charter or other contract, arising out of the use of a credit card or charge card, or for services rendered or to be rendered by such Credit Party or in connection with any other transaction (whether or not yet earned by performance on the part of such Credit Party), (e) all healthcare insurance receivables, and (f) all collateral security of any kind, now or hereafter in existence, given by any Account Debtor or other Person with respect to any of the foregoing.

“Activation Event” and “Activation Notice” have the meanings ascribed thereto in Annex C.

“Additional Subordinated Debt Documents” means, for any Permitted Additional Subordinated Debt, the loan agreement, credit agreement, note purchase agreement, indenture or other definitive agreement for such Indebtedness to which any

A-1

applicable Credit Party is a party, together with any related notes, guarantees and other documents contemplated to be delivered by any Credit Party thereunder.

“Advance” means any Revolving Credit Advance or Swing Line Advance, as the context may require.

“Affiliate” means, with respect to any Person, (a) each Person that, directly or indirectly, owns or controls, whether beneficially, or as a trustee, guardian or other fiduciary, 10% or more of the Stock having ordinary voting power in the election of directors of such Person, (b) each Person that controls, is controlled by or is under common control with such Person, (c) each of such Person’s officers, directors, joint venturers and partners and (d) in the case of Borrower, the immediate family members, including spouses and lineal descendants of individuals who are Affiliates of Borrower.  For the purposes of this definition, “control” of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise; provided, however, that the term “Affiliate” shall specifically exclude Agent and each Lender.

“Agent” means GE Capital in its capacity as Agent for Lenders or its successor appointed pursuant to Section 9.7.

“Agreement” means the Credit Agreement by and among Borrower, the other Credit Parties party thereto, GE Capital, as Agent and Lender and the other Lenders from time to time party thereto, as the same may be amended, supplemented, restated or otherwise modified from time to time.

“Appendices” has the meaning ascribed to it in the recitals to the Agreement.

“Applicable Margins” means collectively the Applicable Revolver Index Margin, the Applicable Term Loan Index Margin, the Applicable Revolver LIBOR Margin and the Applicable Term Loan LIBOR Margin.

“Applicable Revolver Index Margin” means the per annum interest rate margin from time to time in effect and payable in addition to the Index Rate applicable to the Revolving Loan, as determined by reference to Section 1.5(a).

“Applicable Revolver LIBOR Margin” means the per annum interest rate from time to time in effect and payable in addition to the LIBOR Rate applicable to the Revolving Loan, as determined by reference to Section 1.5(a).

“Applicable Term Loan Index Margin” means the per annum interest rate from time to time in effect and payable in addition to the Index Rate applicable to the Term Loan, as determined by reference to Section 1.5(a).

A-2

“Applicable Term Loan LIBOR Margin” means the per annum interest rate from time to time in effect and payable in addition to the LIBOR Rate applicable to the Term Loan, as determined by reference to Section 1.5(a).

“Asset Sale” has the meaning ascribed to it in Section 6.8.

“Assignment Agreement” has the meaning ascribed to it in Section 9.1(a).

“Bankruptcy Code” means the provisions of Title 11 of the United States Code, 11 U.S.C. §§ 101 et seq.

“Blocked Account” means each deposit account designated as a “Blocked Account” on Disclosure Schedule (3.19), as amended from time to time in accordance with paragraph (d) of Annex C.

“Borrower” has the meaning ascribed thereto in the preamble to the Agreement.

“Borrowing Availability” means as of any date of determination the Maximum Amount less the sum of (i) the Revolving Loan and Swing Line Loan then outstanding and (ii) the Reserves as then in effect.

“Brindlee Holdings” means Brindlee Holdings LLC, a Delaware limited liability company.

“Business Day” means any day that is not a Saturday, a Sunday or a day on which banks are required or permitted to be closed in the State of New York and in reference to LIBOR Loans shall mean any such day that is also a LIBOR Business Day.

“Capital Lease” means, with respect to any Person, any lease of any property (whether real, personal or mixed) by such Person as lessee that, in accordance with GAAP, would be required to be classified and accounted for as a capital lease on a balance sheet of such Person.

“Capital Lease Obligation” means, with respect to any Capital Lease of any Person, the amount of the obligation of the lessee thereunder that, in accordance with GAAP, would appear on a balance sheet (excluding the footnotes thereto) of such lessee in respect of such Capital Lease.

“Cash Management Systems” has the meaning ascribed to it in Section 1.8.

“CERCLA” has the meaning ascribed to it in the definition of Environmental Laws.

“Change of Control” means any of the following:  (a) any person or group of persons (within the meaning of the Securities Exchange Act of 1934), other than Permitted Holders, shall have acquired beneficial ownership (within the meaning of Rule 13d-3

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promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 50% or more of the issued and outstanding shares of capital Stock of Borrower having the right to vote for the election of directors of Borrower under ordinary circumstances; (b) during any period of twelve consecutive calendar months, individuals who at the beginning of such period constituted the board of directors of Borrower (together with any new directors whose election by the board of directors of Borrower or whose nomination for election by the Stockholders of Borrower was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason other than death or disability to constitute a majority of the directors then in office; (c) Borrower ceases to own and control all of the economic and voting rights associated with all of the outstanding capital Stock of any of its Subsidiaries; or (d) a “change of control” or similar event shall occur as provided in any Subordinated Debt Document and, on and after the execution, delivery and/or Incurrence thereof, or any other agreement governing or evidencing any other material Indebtedness of Borrower.

“Charges” means all federal, state, county, city, municipal, local, foreign or other governmental taxes (including taxes owed to the PBGC at the time due and payable), levies, assessments, charges or claims upon or relating to (a) the Collateral, (b) the Obligations, (c) the employees, payroll, income or gross receipts of any Credit Party, (d) any Credit Party’s ownership or use of any properties or other assets, or (e) any other aspect of any Credit Party’s business.

“Chattel Paper” means any “chattel paper,” as such term is defined in the Code, including electronic chattel paper, now owned or hereafter acquired by any Credit Party, wherever located.

“Closing Date” means December 21, 2004.

“Closing Checklist” means the schedule, including all appendices, exhibits or schedules thereto, listing certain documents and information to be delivered in connection with the Agreement, the other Loan Documents and the transactions contemplated thereunder, substantially in the form attached hereto as Annex D.

“Code” means the Uniform Commercial Code as the same may, from time to time, be enacted and in effect in the State of New York; provided, that to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, Agent’s or any Lender’s Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of New York, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions.

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“Collateral” means the property covered by the Security Agreement, the Mortgages, the Pledge Agreements and the other Collateral Documents and any other property, real or personal, tangible or intangible, now existing or hereafter acquired, that may at any time be or become subject to a security interest or Lien in favor of Agent, on behalf of itself and Lenders, to secure the Obligations.

“Collateral Documents” means the Security Agreement, the Pledge Agreements, the Guaranties, the Mortgages, the Patent Security Agreement, the Trademark Security Agreement, the Copyright Security Agreement and all similar agreements entered into guaranteeing payment of, or granting a Lien upon property as security for payment of, the Obligations.

“Collateral Reports” means the reports with respect to the Collateral referred to in Annex F.

“Collection Account” means that certain account of Agent, account number 502-328-54 in the name of Agent at Deutsche Bank Trust Company Americas in New York, New York ABA No. 021 001 033, or such other account as may be specified in writing by Agent as the “Collection Account.”

“Commitment Termination Date” means the earliest of (a) December 21, 2009, (b) the date of termination of Lenders’ obligations to make Advances or permit existing Loans to remain outstanding pursuant to Section 8.2(b), and (c) the date of indefeasible prepayment in full by Borrower of the Loans and the permanent reduction of the Commitments to zero dollars ($0).

“Commitments” means (a) as to any Lender, the aggregate of such Lender’s Revolving Loan Commitment (including without duplication the Swing Line Lender’s Swing Line Commitment as a subset of its Revolving Loan Commitment) and Term Loan Commitment as set forth on Annex J to the Agreement or in the most recent Assignment Agreement executed by such Lender and (b) as to all Lenders, the aggregate of all Lenders’ Revolving Loan Commitments (including without duplication the Swing Line Lender’s Swing Line Commitment as a subset of its Revolving Loan Commitment) and Term Loan Commitments, which aggregate commitment shall be Ninety-Five Million Dollars ($95,000,000) on the Closing Date, as to each of clauses (a) and (b), as such Commitments may be reduced, amortized or adjusted from time to time in accordance with the Agreement.

“Communications Laws” means, collectively, the Communications Act of 1934, as amended, and the rules, orders, regulations and other applicable requirements of the FCC promulgated thereunder, as from time to time in effect.

“Communications License” means any license, authorization, certification, waiver or permit required from the FCC, any PSC, any Franchising Authority or any other relevant Governmental Authority acting under applicable law or regulations pertaining to or regulating the Telecommunications Business of the Credit Parties, including any FCC License, any PSC Authorization and any Franchise.

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“Compliance Certificate” has the meaning ascribed to it in Annex E.

“Condemnation” means any taking of Property, or any part thereof or interest therein, for public or quasi-public use under the power of eminent domain, by reason of any public improvement or condemnation proceeding, or in any other manner.

“Confidential Information Memorandum” means the Confidential Offer Memorandum dated May, 2004 of CIBC World Markets delivered to Agent.

“Consolidated Capital Expenditures” means, with respect to the Credit Parties, all expenditures (by the expenditure of cash or the Incurrence of Indebtedness) by the Credit Parties during any measuring period for any fixed assets or improvements or for replacements, substitutions or additions thereto, that have a useful life of more than one year and that are required to be capitalized under GAAP.  Notwithstanding anything to the contrary contained above or otherwise required by GAAP, to the extent the amount of Consolidated Capital Expenditures is to be determined for purposes of calculating Consolidated Fixed Charges for any period ending on or prior to the first anniversary of the Closing Date, Consolidated Capital Expenditures shall be deemed to equal the sum of (i) the amount of Consolidated Capital Expenditures for the period commencing on the Closing Date and ending on the applicable date of determination, and (ii) the product of (A) $317,000 and (B) twelve (12) minus the number of months (including fractional representations of partial months) occurring since the Closing Date.

“Consolidated Depreciation and Amortization Expense” means with respect to the Credit Parties for any period, the total amount of depreciation and amortization expense of the Credit Parties for such period on a consolidated basis and otherwise determined in accordance with GAAP.

“Consolidated EBITDA” means, with respect to the Credit Parties for any period, Consolidated Net Income for such period plus, without duplication: (i) taxes paid and provision for taxes based on income or profits of the Credit Parties for such period to the extent such taxes or provision for taxes were deducted in computing Consolidated Net Income, plus (ii) Consolidated Interest Expense for such period to the extent the same was deducted in computing Consolidated Net Income, plus (iii) Consolidated Depreciation and Amortization Expense for such period to the extent such Consolidated Depreciation and Amortization Expense was deducted in computing Consolidated Net Income, plus (iv) any non-recurring fees, expenses or charges related to any Securities Offering, any Investment permitted pursuant to Section 6.2, acquisition or Indebtedness permitted to be Incurred by the Agreement (in each case, whether or not successful), deducted in such period in computing Consolidated Net Income, plus (v) the amount of annual management and advisory fees and related expenses paid to Seaport Capital deducted in such period in computing Consolidated Net Income during any period prior to the Closing Date, plus (vi) any other non-cash charges reducing Consolidated Net Income for such period (excluding any such charge which requires an accrual of, or cash reserve for, anticipated cash charges for any future period).  Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization of, a Subsidiary of Borrower shall be added to Consolidated Net Income

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to compute Consolidated EBITDA only to the extent (and in the same proportion) that the Net Income of such Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be paid as a dividend to Borrower by such Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Subsidiary or its stockholders.  Notwithstanding anything to the contrary contained above or otherwise required by GAAP, to the extent Consolidated EBITDA is to be determined for any period that includes any of the Fiscal Quarters ending on March 31, 2004, June 30, 2004, September 30, 2004, and December 31, 2004, Consolidated EBITDA for such Fiscal Quarters shall be as set forth on Schedule A.

“Consolidated Fixed Charges” means, with respect to the Credit Parties for any fiscal period, (a) the aggregate of all Consolidated Interest Expense during such period (excluding any PIK Amounts Incurred during such period) plus (b) scheduled payments of principal with respect to Indebtedness of the Credit Parties during such period (excluding any such payments made prior to the Closing Date), plus (c) Consolidated Capital Expenditures during such period (other than Consolidated Capital Expenditures to the extent financed with equity proceeds, asset sale proceeds, insurance or condemnation proceeds or Indebtedness), plus (d) all Taxes paid in cash during such period (excluding any such payments made in the period beginning on the Closing Date and ending on December 31, 2005 to the extent such payments relate to Taxes incurred prior to the Closing Date).

“Consolidated Fixed Charge Coverage Ratio” means, as of any date of determination, the ratio of (a) Consolidated EBITDA for the period of four consecutive Fiscal Quarters most recently ended on or prior to such date to (b) Consolidated Fixed Charges for such period.

“Consolidated Interest Expense” means, with respect to the Credit Parties for any period, consolidated interest expense of the Credit Parties for such period, to the extent such expense was deducted in computing Consolidated Net Income, determined on a consolidated basis and otherwise determined in accordance with GAAP, plus, to the extent not included in such consolidated interest expense, and to the extent Incurred by any Credit Party, without duplication: (i) interest expense attributable to leases constituting part of a Sale/Leaseback Transaction and/or Capital Lease Obligations, (ii) amortization of debt discount and debt issuance cost, (iii) capitalized interest (including, for the avoidance of doubt, any PIK Amounts), (iv) non-cash interest expense, (v) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing, (vi) net costs associated with Hedging Obligations (including amortization of fees), (vii) interest Incurred in connection with Investments in discontinued operations, (viii) interest in respect of Indebtedness of any other Person to the extent such Indebtedness is guaranteed by any Credit Party, but only to the extent that such interest is actually paid by any Credit Party, (ix) the earned discount or yield with respect to the sale of receivables and (x) accrued interest on Subordinated Debt, whether or not it is deductible for tax purposes (and whether or not it is deferred).  Notwithstanding anything to the contrary contained above or otherwise required by

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GAAP, to the extent Consolidated Interest Expense is to be determined for purposes of calculating Consolidated Fixed Charges for any period ending on or prior to September 30, 2005, Consolidated Interest Expense shall be deemed to equal actual Consolidated Interest Expense for the period commencing on January 1, 2005 and ending on the applicable date of determination, in each case multiplied by a fraction, the numerator of which is twelve (12) and the denominator of which is the number of full months occurring since January 1, 2005.

“Consolidated Net Income” means, with respect to the Credit Parties for any period, the aggregate of the Net Income of the Credit Parties for such period, on a consolidated basis; provided, however, that: (i) any net after-tax extraordinary gains or losses (less all fees and expenses relating thereto) shall be excluded; (ii) any increase in amortization or depreciation resulting from purchase accounting in relation to any acquisition that is consummated after the Closing Date, net of taxes, shall be excluded; (iii) the Net Income for such period shall not include the cumulative effect of a change in accounting principles during such period; (iv) any net after-tax income or loss from discontinued operations and any net after-tax gains or losses on disposal of discontinued operations shall be excluded; (v) any net after-tax gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions other than in the ordinary course of business (as determined in good faith by the Board of Directors) shall be excluded; (vi) the Net Income for such period of any Person that is not a Subsidiary of Borrower, or that is accounted for by the equity method of accounting, shall be included only to the extent of the amount of dividends or distributions or other payments paid in cash (or to the extent converted into cash) to Borrower or a Subsidiary thereof in respect of such period; (vii) the Net Income for such period of any Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary of its Net Income is not at the date of determination permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary or its stockholders, unless such restrictions with respect to the payment of dividends or in similar distributions have been legally waived; provided that the net loss of any such Subsidiary shall be included; (viii) any non-cash compensation expenses realized for grants of performance shares, stock options or other stock awards to officers, directors and employees of Borrower or any Subsidiary shall be excluded and (ix) any non-cash impairment charges resulting from the application of Statement of Financial Accounting Standards No. 142 shall be excluded.

“Consolidated Senior Leverage Ratio” means, as of any date of determination, the ratio of (a) the outstanding amount of Consolidated Senior Secured Debt as of such date to (b) Consolidated EBITDA for the period of four consecutive Fiscal Quarters most recently ended on or prior to such date.

“Consolidated Senior Secured Debt” means, as of any date of determination, the sum of (i) the outstanding principal amount of the Loans hereunder, plus (ii) the aggregate stated balance sheet amount of all Capital Lease Obligations of the

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Credit Parties on a consolidated basis, and (iii) any other secured Indebtedness of the Credit Parties on a consolidated basis.

“Consolidated Total Debt” means, as of any date of determination, without duplication, the sum of (a) the aggregate stated balance sheet amount of all Indebtedness of the Credit Parties on a consolidated basis, including the outstanding principal amount of Consolidated Senior Secured Debt and the Subordinated Notes, (b) the stated amount of all reimbursement and other obligations of the Credit Parties with respect to letters of credit, bankers’ acceptances, bank guaranties, surety bonds and similar instruments, whether or not matured, and (c) the aggregate stated balance sheet amount or the stated amount of all Guaranteed Indebtedness (except Guaranteed Indebtedness with respect to which the primary obligation is not itself Indebtedness) as to the Credit Parties on a consolidated basis.

“Consolidated Total Leverage Ratio” means, as of any date of determination, the ratio of (a) the outstanding amount of Consolidated Total Debt as of such date to (b) Consolidated EBITDA for the Test Period most recently ended on or prior to such date.

“Contracts” means all “contracts,” as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, in any event, including all contracts, undertakings, or agreements (other than rights evidenced by Chattel Paper, Documents or Instruments) in or under which any Credit Party may now or hereafter have any right, title or interest, including any agreement relating to the terms of payment or the terms of performance of any Account.

“Control Letter” means a letter agreement between Agent and (i) the issuer of uncertificated securities with respect to uncertificated securities in the name of any Credit Party, (ii) a securities intermediary with respect to securities, whether certificated or uncertificated, securities entitlements and other financial assets held in a securities account in the name of any Credit Party or (iii) a futures commission merchant or clearing house, as applicable, with respect to commodity accounts and commodity contracts held by any Credit Party, whereby, among other things, the issuer, securities intermediary or futures commission merchant disclaims any security interest in the applicable financial assets, acknowledges the Lien of Agent, on behalf of itself and Lenders, on such financial assets, and agrees to follow the instructions or entitlement orders of Agent without further consent by the affected Credit Party.

“Copyright License” means any and all rights now owned or hereafter acquired by any Credit Party under any written agreement granting any right to use any Copyright or Copyright registration.

“Copyright Security Agreements” means the Copyright Security Agreements made in favor of Agent, on behalf of itself and Lenders, by each applicable Credit Party.

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“Copyrights” means all of the following now owned or hereafter adopted or acquired by any Credit Party:  (a) all copyrights and General Intangibles of like nature (whether registered or unregistered), all registrations and recordings thereof, and all applications in connection therewith, including all registrations, recordings and applications in the United States Copyright Office or in any similar office or agency of the United States, any state or territory thereof, or any other country or any political subdivision thereof, and (b) all reissues, extensions or renewals thereof.

“Credit Parties” means Borrower and each of its Subsidiaries.

“Debt Issuance” means the Incurrence by any Credit Party of any Indebtedness.

“Default” means any event that, with the passage of time or notice or both, would, unless cured or waived, become an Event of Default.

“Deferred Interest” means accrued interest (including interest on Deferred Interest) on the IDS Subordinated Notes or any other Subordinated Debt for any period the payment of which is deferred pursuant to the applicable IDS Subordinated Notes Indenture or other applicable Additional Subordinated Debt Document.

“Deposit Accounts” means all “deposit accounts” as such term is defined in the Code, now or hereafter held in the name of any Credit Party.

“Disbursement Account” means each deposit account designated as a “Disbursement Account” on Disclosure Schedule (3.19), as amended from time to time in accordance with paragraph (d) of Annex C.

“Disclosure Schedules” means the Schedules prepared by Borrower and denominated as Disclosure Schedules (1.4) through (6.16) in the Index to the Agreement.

“Disposition” means (i) any sale, assignment, lease, transfer or other disposition (including any Sale/Leaseback Transaction or any sale of any of Stock of any Subsidiary of Borrower) of any Property by any Credit Party to any other Person and/or (ii) any casualty to any Property or any Condemnation.  The term Disposition shall not include any Debt Issuance or Stock Issuance.

“Disqualified Stock” means, with respect to any Person, any Stock of such Person which, by its terms (or by the terms of any security into which it is convertible or for which it is redeemable or exchangeable), or upon the happening of any event: (i) matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise; (ii) is convertible or exchangeable for Indebtedness or Disqualified Stock; or (iii) is redeemable at the option of the holder thereof, in whole or in part, in each case prior to the first anniversary of the maturity date of the Initial IDS Subordinated Notes issued on the Closing Date; provided, however, that only the portion of Stock which so matures or is mandatorily redeemable, is so convertible or exchangeable or is so redeemable at the option of the holder thereof prior to such first anniversary shall be deemed to be Disqualified Stock; provided further, however, that if such Stock is issued to any

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employee or to any plan for the benefit of employees of Borrower or its Subsidiaries or by any such plan to such employees, such Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by Borrower in order to satisfy applicable statutory or regulatory obligations or as a result of such employee’s termination, death or disability.  Notwithstanding any provision to the contrary herein, Borrower’s Class B common stock that is exchangeable for Initial IDS-Linked Subordinated Notes shall not be Disqualified Stock.  In addition, notwithstanding clause (iii) of this definition, any Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require Borrower to repurchase such Stock upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Stock if the terms of such Stock provide that Borrower may not repurchase or redeem any such Stock pursuant to such provisions unless such repurchase or redemption complies with Section 6.14.

“Distributable Cash” means, as of any specified date, an amount of cash equal to the remainder of:

(a)Consolidated EBITDA for the period (taken as one accounting period) from January 1, 2005 through the end of the Fiscal Quarter most recently ended prior to such specified date (for these purposes, the subject period), less

(b)the sum of:

(i) Consolidated Interest Expense (exclusive of original issue discount amortization, non-cash interest expense (including any PIK Amounts) and current and deferred interest payable with respect to the Subordinated Debt) for such subject period;

(ii) any mandatory prepayment during such subject period that results in a permanent reduction to the principal amount (or commitments under a revolving facility) of Indebtedness payable under the Loan Documents prior to its scheduled maturity (to the extent not included in clause (i) above) for such subject period (other than any mandatory prepayment pursuant to Section 1.3(b)(ii), (iii) or (vi)); provided that if such Indebtedness is Incurred in any such period that replaces such Indebtedness previously prepaid or commitments under a revolving facility are increased to previous levels, which prepayment (or reduction in commitments under a revolving credit facility) resulted in a reduction to Distributable Cash pursuant to this clause, Distributable Cash shall be increased by an amount up to such previous reduction;

(iii) Consolidated Capital Expenditures made in cash during such subject period (except to the extent financed with (x) an Incurrence of Indebtedness, until such Indebtedness is repaid, (y) equity proceeds or (z) insurance proceeds) minus Net Cash Proceeds (except to the extent such Net Cash Proceeds is included in Consolidated EBITDA) of any Disposition applied during

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such subject period pursuant to the IDS Subordinated Notes Indenture and this Agreement to finance such Consolidated Capital Expenditures; and

(iv) consolidated cash income Tax expense of the Credit Parties for income Taxes paid in cash during such subject period minus cash income tax refunds received by any of the Credit Parties during such subject period;

provided, however, that amounts shall be included in this clause (b) for any period only to the extent not duplicative of any cost or expense which is reflected in Consolidated Net Income for such period and which has not been added back to Net Income in calculating Consolidated EBITDA for such period.

“Dividend Suspension Period” means, with respect to any period (for these purposes, the “subject period”) consisting of one or more consecutive, four-Fiscal Quarter periods of Borrower as of the end of which either (a) the Consolidated Fixed Charge Coverage Ratio is less than 1.20 to 1.00 or (b) the Consolidated Senior Leverage Ratio is greater than 3.10 to 1.00, the period commencing on the date Borrower is required to deliver a Compliance Certificate pursuant to Section 4.1 in respect of the first such four-Fiscal Quarter period in such subject period and ending on date on which Borrower delivers a Compliance Certificate pursuant to Section 4.1 in respect of the last Fiscal Quarter of Borrower in such subject period.

“Documents” means any “documents,” as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, wherever located.

“Dollars” or “$” means lawful currency of the United States of America.

“Environmental Laws” means all applicable federal, state, local and foreign laws, statutes, ordinances, codes, rules and regulations, now or hereafter in effect, and any applicable judicial or administrative interpretation thereof, including any applicable judicial or administrative order, consent decree, order or judgment, imposing liability or standards of conduct for or relating to the regulation and protection of human health, safety, the environment and natural resources (including ambient air, surface water, groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic species and vegetation).  Environmental Laws include the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. §§ 9601 et seq.) (“CERCLA”); the Hazardous Materials Transportation Authorization Act of 1994 (49 U.S.C. §§ 5101 et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. §§ 136 et seq.); the Solid Waste Disposal Act (42 U.S.C. §§ 6901 et seq.); the Toxic Substance Control Act (15 U.S.C. §§ 2601 et seq.); the Clean Air Act (42 U.S.C. §§ 7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C. §§ 1251 et seq.); the Occupational Safety and Health Act (29 U.S.C. §§ 651 et seq.); and the Safe Drinking Water Act (42 U.S.C. §§ 300(f) et seq.), and any and all regulations promulgated thereunder, and all analogous state, local and foreign counterparts or equivalents and any transfer of ownership notification or approval statutes.

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“Environmental Liabilities” means, with respect to any Person, all liabilities, obligations, responsibilities, response, remedial and removal costs, investigation and feasibility study costs, capital costs, operation and maintenance costs, losses, damages, punitive damages, property damages, natural resource damages, consequential damages, treble damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts and consultants), fines, penalties, sanctions and interest incurred as a result of or related to any claim, suit, action, investigation, proceeding or demand by any Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law, including any arising under or related to any Environmental Laws, Environmental Permits, or in connection with any Release or threatened Release or presence of a Hazardous Material whether on, at, in, under, from or about or in the vicinity of any real or personal property.

“Environmental Permits” means all permits, licenses, authorizations, certificates, approvals or registrations required by any Governmental Authority under any Environmental Laws.

“Equipment” means all “equipment,” as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, wherever located and, in any event, including all such Credit Party’s machinery and equipment, including processing equipment, conveyors, machine tools, data processing and computer equipment, including embedded software and peripheral equipment and all engineering, processing and manufacturing equipment, office machinery, furniture, materials handling equipment, tools, attachments, accessories, automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock and other equipment of every kind and nature, trade fixtures and fixtures not forming a part of real property, together with all additions and accessions thereto, replacements therefor, all parts therefor, all substitutes for any of the foregoing, fuel therefor, and all manuals, drawings, instructions, warranties and rights with respect thereto, and all products and proceeds thereof and condemnation awards and insurance proceeds with respect thereto.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any regulations promulgated thereunder.

“ERISA Affiliate” means, with respect to any Credit Party, any trade or business (whether or not incorporated) that, together with such Credit Party, are treated as a single employer within the meaning of Sections 414(b), (c), (m) or (o) of the IRC.

“ERISA Event” means, with respect to any Credit Party or any ERISA Affiliate, (a) any event described in Section 4043(c) of ERISA with respect to a Title IV Plan; (b) the withdrawal of any Credit Party or ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (c) the complete or partial withdrawal (within the meaning of Section 4203 or 4205 of ERISA) of any Credit Party or any ERISA Affiliate from any Multiemployer Plan; (d) the filing of a notice of intent to terminate a Title IV Plan or the treatment of a plan amendment as a termination under

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Section 4041 of ERISA; (e) the institution of proceedings to terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) the failure by any Credit Party or ERISA Affiliate to make when due required contributions to a Multiemployer Plan or Title IV Plan unless such failure is cured within thirty (30) days; (g) any other event or condition that could reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan or for the imposition of liability under Section 4069 or 4212(c) of ERISA; (h) the termination of a Multiemployer Plan under Section 4041A of ERISA or the reorganization or insolvency of a Multiemployer Plan under Section 4241 or 4245 of ERISA; or (i) the loss of a Qualified Plan’s qualification or tax exempt status; or (j) the termination of a Plan described in Section 4064 of ERISA.

“ESOP” means a Plan that is intended to satisfy the requirements of Section 4975(e)(7) of the IRC.

“Event of Default” has the meaning ascribed to it in Section 8.1.

“Excess Cash” means, as of any specified date, an amount equal to the remainder of (a) Distributable Cash for the period (taken as one accounting period) from January 1, 2005 through the end of the Fiscal Quarter most recently ended prior to such specified date (for these purposes, the subject period), less (b) the sum of cash interest payments (except for payments made pursuant to Section 6.14(m)) made by Borrower in respect of the Subordinated Debt during such subject period and on such specified date.

“Excluded Account” means each deposit account designated as an “Excluded Account” on Disclosure Schedule (3.19), as amended from time to time in accordance with paragraph (d) of Annex C.

“Excluded Debt Issuance Proceeds” means (a) the Net Cash Proceeds from the Debt Issuance pursuant to the transactions consummated on the Closing Date which constitute Related Transactions and which are consummated in accordance with the Related Transaction Documents as they exist on the Closing Date, (b) the Net Cash Proceeds from any Debt Issuance by any Credit Party that is permitted pursuant to Section 6.3(a)(i), (ii), (iv), (v), (viii), (x), (xiii) or (xvi), (c) the Net Cash Proceeds from any Debt Issuance by Borrower that is permitted pursuant to Section 6.3(a)(vii), but only to the extent that the Net Cash Proceeds therefrom are applied (i) concurrently with the issuance thereof, to refinance Permitted Additional Subordinated Debt of Borrower in accordance with Section 6.3(a)(vii) or (ii) not later than 90 days after any Debt Issuance referred to in this clause (c), the Net Cash Proceeds therefrom are applied (x) to finance a Permitted Acquisition or (y) to finance permitted Consolidated Capital Expenditures, and (d) the Net Cash Proceeds from any Debt Issuance by Borrower that is permitted pursuant to Section 6.3(a)(xv), but only to the extent that the Net Cash Proceeds therefrom are applied (i) concurrently with the issuance thereof, to refinance IDS Subordinated Notes of Borrower in accordance with Section 6.3(a)(xv) or Permitted Additional Subordinated Debt of Borrower in accordance with Section 6.3(a)(xv) or (ii) not later than 90 days after any Debt Issuance referred to in this clause (d), the Net Cash Proceeds therefrom are

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applied (x) to finance a Permitted Acquisition or (y) to finance permitted Consolidated Capital Expenditures.

“Excluded Disposition Proceeds” means (I) the Net Cash Proceeds of any Disposition permitted by Section 6.8(a), (d), (f), (g) (h), (i) or (j), (II) the Net Cash Proceeds of any Condemnation to the extent the application of such proceeds is addressed under a Mortgage and (III) the proceeds of casualty insurance which are addressed under Section 5.4(c).

“Excluded Stock Issuance Proceeds” means (a) the Net Cash Proceeds from the Stock Issuance pursuant to the transactions consummated on the Closing Date which constitute Related Transactions and which are consummated in accordance with the Related Transaction Documents, (b) the Net Cash Proceeds from any Stock Issuance by any Subsidiary of Borrower that is permitted pursuant to Section 6.5, or (c) the Net Cash Proceeds from any Stock Issuance by Borrower that is permitted pursuant to Section 6.5, but only to the extent that not later than 90 days after any such Stock Issuance by Borrower, such Net Cash Proceeds are applied (i) to finance a Permitted Acquisition, (ii) to finance permitted Consolidated Capital Expenditures, (iii) to prepay Subordinated Debt or (iv) to repurchase shares of Borrower’s common stock permitted by Section 6.14(l).

“Fair Labor Standards Act” means the Fair Labor Standards Act, 29 U.S.C. §201 et seq.

“Fair Market Value” means, with respect to any asset or property, the price which could be negotiated in an arm’s-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction.

“FCC” means the Federal Communication Commission and any successor thereto.

“FCC License” means any Governmental Authorization granted or issued by the FCC.

“Federal Funds Rate” means, for any day, a floating rate equal to the federal funds effective rate publicly quoted from time to time by The Wall Street Journal as the federal funds “effective rate” (or, if The Wall Street Journal ceases quoting a federal funds effective rate, the weighted average of the rates on overnight federal funds transactions among members of the Federal Reserve System as determined by Agent by reference to the federal funds rate publicly quoted in a reputable business publication selected by Agent in good faith, which determination shall be final, binding and conclusive (absent manifest error)).

“Federal Reserve Board” means the Board of Governors of the Federal Reserve System.

“Fee Letters” means the GE Capital Fee Letter and the Lender Fee Letter.

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“Fees” means any and all fees payable to Agent or any Lender pursuant to the Agreement or any of the other Loan Documents.

“Final Maturity Date” means December 21, 2009.

“Financial Covenants” means the financial covenants set forth in Annex G.

“Financial Statements” means the consolidated income statements, statements of cash flows and balance sheets of Borrower delivered in accordance with Section 3.4 and Annex E.

“Fiscal Month” means any of the monthly accounting periods of Borrower.

“Fiscal Quarter” means any of the quarterly accounting periods of Borrower, ending on March 31, June 30, September 30 and December 31 of each year.

“Fiscal Year” means any of the annual accounting periods of Borrower ending on December 31 of each year.

“Fixtures” means all “fixtures” as such term is defined in the Code, now owned or hereafter acquired by any Credit Party.

“Franchise” means an initial Governmental Authorization or renewal thereof issued by a Franchising Authority which authorizes the acquisition, ownership, construction or operation of a cable television system.

“Franchising Authority” means any Governmental Authority authorized by any federal, state or local law to grant a Franchise or to exercise jurisdiction over the rates or services provided by a cable television system pursuant to a Franchise or over Persons holding a Franchise.

“GAAP” means generally accepted accounting principles in the United States of America, consistently applied, as such term is further defined in Annex G to the Agreement.

“GE Capital” means General Electric Capital Corporation, a Delaware corporation.

“GE Capital Fee Letter” means that certain letter, dated as of the Closing Date, between GE Capital and Borrower with respect to certain Fees to be paid from time to time by Borrower to GE Capital.

“General Intangibles” means “general intangibles,” as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, including all right, title and interest that such Credit Party may now or hereafter have in or under any Contract, all payment intangibles, customer lists, Licenses, Copyrights, Trademarks,

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Patents, and all applications therefor and reissues, extensions or renewals thereof, rights in Intellectual Property, interests in partnerships, joint ventures and other business associations, licenses, permits, copyrights, trade secrets, proprietary or confidential information, inventions (whether or not patented or patentable), technical information, procedures, designs, knowledge, know-how, software, data bases, data, skill, expertise, experience, processes, models, drawings, materials and records, goodwill (including the goodwill associated with any Trademark or Trademark License), all rights and claims in or under insurance policies (including insurance for fire, damage, loss and casualty, whether covering personal property, real property, tangible rights or intangible rights, all liability, life, key man and business interruption insurance, and all unearned premiums), uncertificated securities, choses in action, deposit, checking and other bank accounts, rights to receive tax refunds and other payments, rights to receive dividends, distributions, cash, Instruments and other property in respect of or in exchange for pledged Stock and Investment Property, rights of indemnification, all books and records, correspondence, credit files, invoices and other papers, including without limitation all tapes, cards, computer runs and other papers and documents in the possession or under the control of such Credit Party or any computer bureau or service company from time to time acting for such Credit Party.

“Goods” means any “goods” as defined in the Code, now owned or hereafter acquired by any Credit Party, wherever located, including embedded software to the extent included  in “goods” as defined in the Code, manufactured homes, standing timber that is cut and removed for sale and unborn young of animals.

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, and any agency, department, court, central bank or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government (including, without limitation, the FCC, any PSC and any Franchising Authority).

“Governmental Authorization” means any authorization, approval, consent, franchise, license, covenant, order, ruling, permit, certification, exemption, notice, declaration or similar right, undertaking or other action of, to or by, or any material filing, qualification or registration with, any Governmental Authority, including any FCC License, any PSC Authorization and any Franchise.

“Guaranteed Indebtedness” means, as to any Person, any obligation of such Person guaranteeing, providing comfort or otherwise supporting any Indebtedness, lease, dividend, or other obligation (“primary obligation”) of any other Person (the “primary obligor”) in any manner, including any obligation or arrangement of such Person to (a) purchase or repurchase any such primary obligation, (b) 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 or any balance sheet condition of the primary obligor, (c) 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, (d) protect the beneficiary of such arrangement from loss (other than

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product warranties given in the ordinary course of business) or (e) indemnify the owner of such primary obligation against loss in respect thereof.  The amount of any Guaranteed Indebtedness at any time shall be deemed to be an amount equal to the lesser at such time of (x) the stated or determinable amount of the primary obligation in respect of which such Guaranteed Indebtedness is incurred and (y) the maximum amount for which such Person may be liable pursuant to the terms of the instrument embodying such Guaranteed Indebtedness, or, if not stated or determinable, the maximum reasonably anticipated liability (assuming full performance) in respect thereof.

“Guaranties” means, collectively, the Subsidiary Guaranty and any other guaranty executed by any Guarantor in favor of Agent and Lenders in respect of the Obligations.

“Guarantor” means each Credit Party (other than Borrower and Mid-Missouri Telephone) and each other Person, if any, that (i) executes a guaranty or other similar agreement in favor of Agent, for itself and the ratable benefit of Lenders, in connection with the transactions contemplated by the Agreement, or (ii) becomes a “Guarantor” under the Subsidiary Guaranty by the execution of a Joinder Agreement.

“Hazardous Material” means any substance, material or waste that is regulated by, or forms the basis of liability now or hereafter under, any Environmental Laws, including any material or substance that is (a) defined as a “solid waste,” “hazardous waste,” “hazardous material,” “hazardous substance,” “extremely hazardous waste,”  “restricted hazardous waste,” “pollutant,” “contaminant,” “hazardous constituent,” “special waste,” “toxic substance” or other similar term or phrase under any Environmental Laws, or (b) petroleum or any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB’s), or any radioactive substance.

“Hedging Obligations” means, with respect to any Person, the obligations of such Person under: (i) currency exchange, interest rate or commodity swap agreements, currency exchange, interest rate or commodity cap agreements and currency exchange, interest rate or commodity collar agreements; and (ii) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange, interest rates or commodity prices.

“Holding Companies” means each of Borrower, Brindlee Holdings, Hopper Holding, Mid-Missouri Holding and Page and Kiser Communications.

“Hopper Holding” means Hopper Holding Company, Inc., an Alabama corporation.

“IDS Payment Date” means the 30th day of each March, June, September and December (or, if such  day is not a Business Day, the first Business Day following such day) commencing March 30, 2005.

“IDS Securities” means Initial IDS Securities and Subsequent IDS Securities.

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“IDS Subordinated Notes” means (i) the Initial IDS Subordinated Notes and (ii) any Subsequent IDS Subordinated Notes.

“IDS Subordinated Notes Documents” means the Initial IDS Subordinated Notes Documents and any Subsequent IDS Subordinated Notes Documents.

“IDS Subordinated Notes Indenture” means (i) the Initial IDS Subordinated Notes Indenture and (ii) the Subsequent IDS Subordinated Notes Indenture.

“Imagination” means Imagination, Inc., a Missouri corporation.

“Incur” means issue, assume, guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Stock of a Person existing at the time such Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Subsidiary.

“Indebtedness” means, with respect to any Person: (i) the principal and premium (if any) of any indebtedness of such Person, whether or not contingent:  (a) in respect of borrowed money, (b) evidenced by bonds, notes, debentures or similar instruments or letters of credit or bankers’ acceptances (or, without duplication, reimbursement agreements in respect thereof), (c) representing the deferred and unpaid purchase price of any property, which purchase price is due more than six months after the date of placing the property in service or taking delivery and title thereto, (d) in respect of Capital Lease Obligations or (e) representing any Hedging Obligations, if and to the extent that any of the foregoing Indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability on a balance sheet (excluding the footnotes thereto) of such Person prepared in accordance with GAAP; (ii) to the extent not otherwise included, any Guaranteed Indebtedness as to such Person (other than by endorsement of negotiable instruments for collection in the ordinary course of business and other than Guaranteed Indebtedness with respect to which the primary obligation is not itself Indebtedness); and (iii) to the extent not otherwise included, Indebtedness of another Person secured by a Lien on any asset owned by such Person (whether or not such Indebtedness is assumed by such Person); provided, however, that the amount of such Indebtedness will be the lesser of (a) the Fair Market Value of such asset at such date of determination and (b) the amount of such Indebtedness of such other Person; provided, further, that any obligation of Borrower or any Subsidiary in respect of account credits to participants under the LTIP or any successor or similar compensation plan, shall be deemed not to constitute Indebtedness.

“Indemnified Liabilities” has the meaning ascribed to it in Section 1.13.

“Indemnified Person” has the meaning ascribed to it in Section 1.13.

“Index Rate” means, for any day, a floating rate equal to the higher of (i) the rate publicly quoted from time to time by The Wall Street Journal as the “prime rate” (or, if The Wall Street Journal ceases quoting a prime rate, the highest per annum rate of interest published by the Federal Reserve Board in Federal Reserve statistical release

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H.15 (519) entitled “Selected Interest Rates” as the Bank prime loan rate or its equivalent), and (ii) the Federal Funds Rate plus 50 basis points per annum.  Each change in any interest rate provided for in the Agreement based upon the Index Rate shall take effect at the time of such change in the Index Rate.

“Index Rate Loan” means a Loan or portion thereof bearing interest by reference to the Index Rate.

“Initial IDS Common Stock” means (i) the shares of the Class A common stock of Borrower issued on the Closing Date pursuant to the Registration Statement and which comprise a portion of the Initial IDS Securities and (ii) the shares of the Class A common stock of Borrower issued after the Closing Date as part of the Initial IDS Securities required to be issued pursuant to the Investor Rights Agreement upon exchange of any Class B common stock of Borrower issued on the Closing Date as part of the Related Transactions.

“Initial IDS Documents” means the Registration Statement, the Initial IDS Securities, the Initial IDS Subordinated Notes Documents and the other documents and agreements entered into in connection with the issuance of Initial IDS Securities or Initial IDS Subordinated Notes.

“Initial IDS Securities” means income deposit securities of Borrower comprised of one share of Initial IDS Common Stock and a certain principal amount of Initial IDS-Linked Subordinated Notes.

“Initial IDS-Linked Subordinated Notes” means (i) the senior subordinated notes of Borrower issued on the Closing Date pursuant to the Initial IDS Subordinated Notes Indenture as part of the Related Transactions and which comprise a portion of the Initial IDS Securities and (ii) the senior subordinated notes of Borrower issued after the Closing Date pursuant to the Initial IDS Subordinated Notes Indenture as part of Initial IDS Securities required to be issued pursuant to the Investor Rights Agreement upon exchange of any Class B common stock of Borrower issued on the Closing Date as part of the Related Transactions.

“Initial IDS Subordinated Notes” means (i) the Initial IDS-Linked Subordinated Notes and (ii) the Initial Non-IDS-Linked Subordinated Notes.

“Initial IDS Subordinated Notes Documents” means the Initial IDS Subordinated Notes, the Initial IDS Subordinated Notes Indenture and each other document executed by any Credit Party pursuant to any such document.

“Initial IDS Subordinated Notes Indenture” means the Indenture dated as of December 21, 2004, between Borrower, as issuer, the Subsidiaries of Borrower party thereto, as guarantors, and the Initial IDS Subordinated Notes Trustee.

“Initial IDS Subordinated Notes Trustee” means Wells Fargo Bank, National Association, as indenture trustee pursuant to the Initial IDS Subordinated Notes Indenture.

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“Initial Non-IDS-Linked Subordinated Notes” means the senior subordinated notes of Borrower issued on the Closing Date pursuant to the Initial IDS Subordinated Notes Indenture as part of the Related Transactions but which do not comprise a portion of Initial IDS Securities.

“Instruments” means all “instruments,” as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, wherever located, and, in any event, including all certificates of deposit, and all promissory notes and other evidences of indebtedness, other than instruments that constitute, or are a part of a group of writings that constitute, Chattel Paper.

“Intellectual Property” means any and all Licenses, Patents, Copyrights, Trademarks, and the goodwill associated with such Trademarks.

“Intercompany Notes” has the meaning ascribed to it in Section 6.3.

“Interest Deferral Period” means, with respect to any period (for these purposes, the “subject period”) consisting of one or more consecutive, four-Fiscal Quarter periods of Borrower as of the end of which either (a) the Consolidated Fixed Charge Coverage Ratio is less than 1.15 to 1.00 or (b) the Consolidated Senior Leverage Ratio is greater than 3.20 to 1.00, the period commencing on the date Borrower is required to deliver a Compliance Certificate pursuant to Section 4.1 in respect of the first such four-quarter period in such subject period and ending on the date on which Borrower delivers a Compliance Certificate pursuant to Section 4.1 in respect of the last Fiscal Quarter of Borrower in such subject period.

“Interest Payment Date” means (a) as to any Index Rate Loan, each March 21, June 21, September 21 and December 21; and (b) as to any LIBOR Loan, the last day of the applicable LIBOR Period, provided, that in the case of any LIBOR Period greater than three months in duration, interest shall be payable at three month intervals and on the last day of such LIBOR Period; and provided further that, in addition to the foregoing, each of (x) the date upon which all of the Commitments have been terminated and the Loans have been paid in full and (y) the Commitment Termination Date shall be deemed to be an “Interest Payment Date” with respect to any interest that has then accrued under the Agreement.

“Inventory” means any “inventory,” as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, wherever located, and in any event including inventory, merchandise, goods and other tangible personal property that are held by or on behalf of any Credit Party for sale or lease or are furnished or are to be furnished under a contract of service, or that constitute raw materials, work in process, finished goods, returned goods, supplies or materials of any kind, nature or description used or consumed or to be used or consumed in such Credit Party’s business or in the processing, production, packaging, promotion, delivery or shipping of the same, including all supplies and embedded software.

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“Investment Property” means all “investment property,” as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, wherever located, including (i) all securities, whether certificated or uncertificated, including stocks, bonds, interests in limited liability companies, partnership interests, treasuries, certificates of deposit, and mutual fund shares; (ii) all securities entitlements of any Credit Party,  including the rights of such Credit Party to any securities account and the financial assets held by a securities intermediary in such securities account and any free credit balance or other money owing by any securities intermediary with respect to that account; (iii) all securities accounts of any Credit Party; (iv) all commodity contracts of any Credit Party; and (v) all commodity accounts held by any Credit Party.

“Investments” means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of loans (including guarantees), advances or capital contributions (excluding accounts receivable, trade credit and advances to customers and commission, travel and similar advances to officers, employees and consultants made in the ordinary course of business), purchases or other acquisitions for consideration (including agreements providing for the adjustment of purchase price) of Indebtedness, Stock or other securities issued by any other Person and investments that are required by GAAP to be classified on the balance sheet of Borrower in the same manner as the other investments included in this definition to the extent such transactions involve the transfer of cash or other property by such Person to such other Person.  The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustment for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment.

“Investor Rights Agreement” means the Investor Rights Agreement dated as of December 21, 2004 among Borrower and the holders of Borrower’s Class B common stock on the Closing Date.

“IRC” means the Internal Revenue Code of 1986, as amended, and all regulations promulgated thereunder.

“IRS” means the Internal Revenue Service.

“Joinder Agreement” means a joinder agreement substantially in the form of Exhibit 5.13 to the Agreement.

“Lenders” means GE Capital, the other Lenders named on the signature pages of the Agreement, and any other Person that becomes a “Lender” hereunder pursuant to Section 1.16(d) or Section 9.1(a).

“Lender Fee Letter” means that certain letter, dated as of the Closing Date, between the initial Lenders and Borrower with respect to certain Fees to be paid on the Closing Date by Borrower to the initial Lenders.

“Letter-of-Credit Rights” means “letter-of-credit rights” as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, including

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rights to payment or performance under a letter of credit, whether or not such Credit Party, as beneficiary, has demanded or is entitled to demand payment or performance.

“LIBOR Business Day” means a Business Day on which banks in the City of London are generally open for interbank or foreign exchange transactions.

“LIBOR Loan” means a Loan or any portion thereof bearing interest by reference to the LIBOR Rate.

“LIBOR Period” means, with respect to any LIBOR Loan, each period commencing on a LIBOR Business Day selected by Borrower pursuant to the Agreement and ending one, two, three or six months thereafter, as selected by Borrower’s irrevocable notice to Agent as set forth in Section 1.5(e); provided, that the foregoing provision relating to LIBOR Periods is subject to the following:

(a)if any LIBOR Period would otherwise end on a day that is not a LIBOR Business Day, such LIBOR Period shall be extended to the next succeeding LIBOR Business Day unless the result of such extension would be to carry such LIBOR Period into another calendar month in which event such LIBOR Period shall end on the immediately preceding LIBOR Business Day;

(b)any LIBOR Period that would otherwise extend beyond the Commitment Termination Date shall end two (2) LIBOR Business Days prior to such date;

(c)any LIBOR Period that begins on the last LIBOR Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such LIBOR Period) shall end on the last LIBOR Business Day of a calendar month;

(d)Borrower shall select LIBOR Periods so as not to require a payment or prepayment of any LIBOR Loan during a LIBOR Period for such Loan; and

(e)Borrower shall select LIBOR Periods so that there shall be no more than ten (10) separate LIBOR Loans in existence at any one time.

“LIBOR Rate” means for each LIBOR Period, a rate of interest determined by Agent equal to:

(a)the offered rate for deposits in United States Dollars for the applicable LIBOR Period that appears on Telerate Page 3750 as of 11:00 a.m. (London time), on the second full LIBOR Business Day next preceding the first day of such LIBOR Period (unless such date is not a Business Day, in which event the next succeeding Business Day will be used); divided by

(b)a number equal to 1.0 minus the aggregate (but without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on the day that is two (2) LIBOR Business Days prior to the beginning of such

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LIBOR Period (including basic, supplemental, marginal and emergency reserves under any regulations of the Federal Reserve Board or other Governmental Authority having jurisdiction with respect thereto, as now and from time to time in effect) for Eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Federal Reserve Board) that are required to be maintained by a member bank of the Federal Reserve System.

If such interest rates shall cease to be available from Telerate News Service, the LIBOR Rate shall be determined from such financial reporting service or other information as shall be acceptable to Agent.

“License” means any Copyright License, Patent License, Trademark License or other license of rights or interests now held or hereafter acquired by any Credit Party.

“Lien” means any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, security interest, easement or encumbrance, or priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Code or comparable law of any jurisdiction).

“Litigation” has the meaning ascribed to it in Section 3.13.

“Loan Account” has the meaning ascribed to it in Section 1.12.

“Loan Documents” means the Agreement, the Notes, the Collateral Documents, the Fee Letters and all other agreements, instruments, documents and certificates identified in the Closing Checklist executed and delivered to, or in favor of, Agent or any Lenders and including all other pledges, powers of attorney, consents, assignments, contracts, notices, and all other written matter whether heretofore, now or hereafter executed by or on behalf of any Credit Party, or any employee of any Credit Party, and delivered to Agent or any Lender in connection with the Agreement or the transactions contemplated thereby.

“Loans” means the Revolving Loan, the Swing Line Loan and the Term Loan.

“LTIP” means any long-term incentive or similar compensation plan maintained by Borrower or its Subsidiaries.

“M&A Software License” means that certain License Agreement for Software Programs, executed by Martin and Associates, Inc. dated June 14, 1999 and by OTELCO Telephone, LLC dated June 18, 1999.

“Management Group” means the group consisting of the directors, executive officers and other personnel of Borrower on the Closing Date.

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“Margin Stock” has the meaning ascribed to it in Section 3.10.

“Material Adverse Effect” means a material adverse effect on (a) the business, assets, operations or financial or other condition of the Credit Parties considered as a whole, (b) Borrower’s ability to pay any of the Loans or any of the other Obligations in accordance with the terms of the Agreement or the ability of any Credit Party to perform any of its other obligations under the Loan Documents, (c) the Collateral or Agent’s Liens, on behalf of itself and Lenders, on the Collateral or the priority of such Liens, or (d) Agent’s or any Lender’s rights and remedies under the Agreement and the other Loan Documents.

“Material Real Estate” means (i) the Real Estate subject to any Mortgage, (ii) any Real Estate having a value in excess of $250,000, (iii) any Real Estate leased, subleased or used by any Credit Party with respect to which the aggregate annual payments therefor exceed $50,000, and/or (iv) any Real Estate that the Requisite Lenders have determined is material to the business, operations, assets or financial condition of the Credit Parties.

“Maximum Amount” means, as of any date of determination, an amount equal to the Revolving Loan Commitment of all Lenders as of that date.

“Mid-Missouri Acquisition” means the acquisition by Borrower of all of the Stock of Mid-Missouri Holding pursuant to the terms of the Mid-Missouri Acquisition Agreement.

“Mid-Missouri Acquisition Agreement” means the Agreement and Plan of Merger dated as of December 21, 2004 among Mid-Missouri Parent, LLC, Mid-Missouri Holding, Borrower and Otelco Merger Subsidiary, Inc.

“Mid-Missouri Entities” means Mid-Missouri Holding, Mid-Missouri Telephone and Imagination.

“Mid-Missouri Holding” means Mid-Missouri Holding Corp., a Delaware corporation.

“Mid-Missouri Telephone” means Mid-Missouri Telephone Company, a Missouri corporation.

“Moody’s” means Moody’s Investors Service, Inc., and any successor rating agency.

“Mortgaged Properties” has the meaning assigned to it in Annex D.

“Mortgages” means each of the mortgages, deeds of trust, leasehold mortgages, leasehold deeds of trust, collateral assignments of leases or other real estate security documents delivered by any Credit Party to Agent on behalf of itself and Lenders with respect to the Mortgaged Properties, all in form and substance reasonably satisfactory to Agent.

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“Multiemployer Plan” means a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA, and to which any Credit Party or ERISA Affiliate is making, is obligated to make or has made or been obligated to make, contributions on behalf of participants who are or were employed by any of them.

“Multiple Employer Plan” means a “section 413(c) plan” as defined in Treasury Regulations Section 1.413-2 and to which any Credit Party or ERISA Affiliate is making, is obligated to make or has made or been obligated to make, contributions on behalf of participants who are or were employed by any of them.

“Net Cash Proceeds” means:

(a) with respect to any Disposition, (i) the aggregate amount of cash proceeds received by any Credit Party in respect of such Disposition (including any cash proceeds received at any time by any Credit Party as income or other proceeds of any noncash proceeds or other consideration in respect of any Disposition as and when received), less (ii) the sum without duplication of the following amounts, but only to the extent not already deducted in arriving at the amount referred to in clause (a)(i) above: (A) commissions and other reasonable and customary transaction costs, fees and expenses properly attributable to such Disposition and payable by any Credit Party in connection therewith (in each case, paid to non-Affiliates); (B) taxes payable by any Credit Party in connection with such Disposition; (C) amounts payable by any Credit Party to holders of senior Liens (to the extent such Liens constitute Permitted Encumbrances hereunder), if any, on the Property that is the subject of such Disposition and required to be, and which is, repaid by any Credit Party under the terms thereof as a result thereof (including in order to obtain the consent of such holders to make such Disposition); (D) an appropriate reserve for indemnities, purchase price adjustments and other contingent liabilities in accordance with GAAP in connection with such Disposition; and (E) an appropriate reserve for income taxes in accordance with GAAP in connection with respect of such Disposition; provided that the reversal of any such reserve shall be deemed to be cash proceeds received by a Credit Party in respect of such Disposition; and

(b) with respect to any Debt Issuance or Stock Issuance, the gross amount of cash proceeds paid to or received by any Credit Party in respect of such Debt Issuance or Stock Issuance as the case may be (including any cash proceeds received at any time by any Credit Party as income or other proceeds of any noncash proceeds or other consideration in respect of any Debt Issuance or Stock Issuance as and when received), net of underwriting discounts and commissions and other reasonable costs and expenses directly incurred by such Credit Party and paid to non-Affiliates in connection therewith.

“Net Income” means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends.

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“Non-Funding Lender” means any Lender that has failed to fund all payments and Advances required to be made by it and purchased all participations required to be purchased by it under the Agreement and the other Loan Documents.

“Notes” means, collectively, the Revolving Notes, the Swing Line Note and the Term Notes.

“Notice of Conversion/Continuation” has the meaning ascribed to it in Section 1.5(e).

“Notice of Revolving Credit Advance” has the meaning ascribed to it in Section 1.1(a).

“Notice of Swing Line Advance” has the meaning ascribed to it in Section 1.1(c).

“Obligations” means all loans, advances, debts, liabilities and obligations, for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or such amounts are liquidated or determinable) owing by any Credit Party to Agent or any Lender, and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any note, agreement or other instrument, arising under the Agreement or any of the other Loan Documents.  This term includes all principal, interest (including all interest that accrues after the commencement of any case or proceeding by or against any Credit Party in bankruptcy, whether or not allowed in such case or proceeding), Fees, Charges, expenses, attorneys’ fees and any other sum chargeable to any Credit Party under the Agreement or any of the other Loan Documents.

“Page and Kiser Communications” means Page and Kiser Communications, Inc., an Alabama corporation.

“Patent License” means rights under any written agreement now owned or hereafter acquired by any Credit Party granting any right with respect to any invention on which a Patent is in existence.

“Patent Security Agreements” means the Patent Security Agreements made in favor of Agent, on behalf of itself and Lenders, by each applicable Credit Party.

“Patents” means all of the following in which any Credit Party now holds or hereafter acquires any interest:  (a) all letters patent of the United States or any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or of any other country, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State or any other country, and (b) all reissues, continuations, continuations-in-part or extensions thereof.

“PBGC” means the Pension Benefit Guaranty Corporation.

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“Pension Plan” means a Plan described in Section 3(2) of ERISA.

“Permitted Acquisition” has the meaning ascribed to it in Section 6.1(b).

“Permitted Additional Subordinated Debt” means Indebtedness of Borrower evidenced by a new issue of unsecured, subordinated debt securities of Borrower, so long as (a) such Indebtedness has a final maturity no earlier than two years after the Final Maturity Date and no amortization prior to two years after the Final Maturity Date; (b) such Indebtedness does not (i) have guarantors that are not Subsidiary Guarantors, (ii) have obligors other than Borrower or (iii) provide for security; (c) the subordination provisions, standstill provisions and remedies of such Indebtedness are identical to (or, from the perspective of the Lenders, more favorable than) those which applied to the Initial IDS-Linked Subordinated Notes issued on the Closing Date; (d) such Indebtedness has covenants, defaults and other terms that are not, taken as a whole, less favorable to Borrower and its Subsidiaries than those which applied to the Initial IDS-Linked Subordinated Notes issued on the Closing Date; (e) the documentation governing such Indebtedness is otherwise reasonably satisfactory to Agent (it being understood that documentation substantially identical to the Initial IDS Subordinated Notes Documents shall be reasonably satisfactory to Agent); and (f) such Indebtedness is issued in accordance with Section 6.3(a)(vii).

“Permitted Encumbrances” means the following encumbrances:  (a) Liens for taxes or assessments or other governmental Charges not yet due and payable or which are being contested in accordance with Section 5.2(b); (b) pledges or deposits of money securing statutory obligations under workmen’s compensation, unemployment insurance, social security or public liability laws or similar legislation (excluding Liens under ERISA); (c) pledges or deposits of money securing bids, tenders, contracts (other than contracts for the payment of money) or leases to which any Credit Party is a party as lessee made in the ordinary course of business; (d) inchoate and unperfected workers’, mechanics’ or similar liens arising in the ordinary course of business, so long as such Liens attach only to Equipment, Fixtures and/or Real Estate; (e) carriers’, warehousemen’s, suppliers’ or other similar possessory liens arising in the ordinary course of business and securing liabilities in an outstanding aggregate amount not in excess of $1,000,000 at any time for all Credit Parties combined, so long as such Liens attach only to Inventory; (f) deposits securing, or in lieu of, surety, appeal or customs bonds in proceedings to which any Credit Party is a party; (g) any attachment or judgment lien not constituting an Event of Default under Section 8.1(j); (h) zoning restrictions, easements, licenses, or other restrictions on the use of any Real Estate or other minor irregularities in title (including leasehold title) thereto, so long as the same do not materially impair the use, value, or marketability of such Real Estate; (i) presently existing or hereafter created Liens in favor of Agent, on behalf of Lenders; and (j) Liens expressly permitted under clauses (b) and (c) of Section 6.7 of the Agreement.

“Permitted Holders” means Seaport Capital and the Management Group.

“Person” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability

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company, institution, public benefit corporation, other entity or government (whether federal, state, county, city, municipal, local, foreign, or otherwise, including any instrumentality, division, agency, body or department thereof).

“PIK Amounts” means, (a) in respect of any Subsequent IDS Subordinated Notes as to which the Subsequent IDS Subordinated Notes Documents governing such Subsequent IDS Subordinated Notes provides that payments of interest due and owing in respect of such Subsequent IDS Subordinated Notes are not required to be paid in cash, but may instead be paid with a payment-in-kind by automatically adding to the outstanding principal amount of such Subsequent IDS Subordinated Notes an amount equal to the accrued, and unpaid, interest on such Subsequent IDS Subordinated Notes, the amount equal to the aggregate of all paid payment-in-kind interest that is added to the outstanding principal of such Subsequent IDS Subordinated Notes, (b) in respect of any Permitted Additional Subordinated Debt as to which the Additional Subordinated Debt Documents governing such Permitted Additional Subordinated Debt provides that payments of interest due and owing in respect of such Permitted Additional Subordinated Debt are not required to be paid in cash, but may instead be paid with a payment-in-kind by automatically adding to the outstanding principal amount of such Permitted Additional Subordinated Debt an amount equal to the accrued, and unpaid, interest on such Permitted Additional Subordinated Debt, the amount equal to the aggregate of all paid payment-in-kind interest that is added to the outstanding principal of such Permitted Additional Subordinated Debt, and (c) in respect of any Indebtedness Incurred pursuant to Section 6.3(a)(xvi) as to which the documentation governing such Indebtedness provides that payments of interest due and owing in respect of such Indebtedness are not required to be paid in cash, but may instead be paid with a payment-in-kind by automatically adding to the outstanding principal amount of such Indebtedness an amount equal to the accrued, and unpaid, interest on such Indebtedness, the amount equal to the aggregate of all paid payment-in-kind interest that is added to the outstanding principal of such Indebtedness.

“Plan” means, at any time, an “employee benefit plan,” as defined in Section 3(3) of ERISA, that any Credit Party or ERISA Affiliate maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any Credit Party.

“Pledge Agreements” means (i) the Pledge Agreement of even date herewith executed by Borrower and each other Credit Party that is a signatory thereto in favor of Agent, on behalf of itself and Lenders, pledging all Stock of the Subsidiary of Borrower other than Mid-Missouri Telephone and (ii) any other pledge agreement entered into after the Closing Date by any Credit Party (as required by the Agreement or any other Loan Document).

“Preferred Stock” means any Stock with preferential right of payment of dividends or upon liquidation, dissolution, or winding up.

“Prior Credit Agreement” means that certain Amended and Restated Credit Agreement dated as of June 30, 2003 among Borrower (as successor in interest to

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Rural LEC Acquisition LLC), the Subsidiary Borrowers referred to therein, CoBank, ACB, as Administrative Agent, and each of the lenders party thereto from time to time, as amended, modified or supplemented.

“Prior Credit Agreement Documents” means the Prior Credit Agreement, together with each other agreement, instrument or document executed and delivered in connection therewith or pursuant thereto (including the “Loan Documents” as defined in the Prior Credit Agreement).

“Prior Lender Agent” means CoBank, ACB as administrative agent under the Prior Credit Agreement.

“Prior Lenders” means CoBank, ACB and any other lender party to the Prior Credit Agreement and/or the Prior Master Loan Agreement.

“Prior Lender Obligations” means all obligations of Borrower and the other Credit Parties arising under or in connection with any of the Prior Credit Agreement Documents and/or the Prior Master Loan Agreement Documents.

“Prior Master Loan Agreement” means that certain Master Loan Agreement dated as of November 17, 1999 between Mid-Missouri Holding and CoBank, ACB, as amended, modified or supplemented.

“Prior Master Loan Agreement Documents” means the Prior Master Loan Agreement, together with each other agreement, instrument or document executed and delivered in connection therewith or pursuant thereto (including the “Loan Documents” as defined in the Prior Master Loan Agreement).

“Proceeds” means “proceeds,” as such term is defined in the Code, including (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to any Credit Party from time to time with respect to any of the Collateral, (b) any and all payments (in any form whatsoever) made or due and payable to any Credit Party from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any Governmental Authority (or any Person acting under color of governmental authority), (c) any claim of any Credit Party against third parties (i) for past, present or future infringement of any Patent or Patent License, or (ii) for past, present or future infringement or dilution of any Copyright, Copyright License, Trademark or Trademark License, or for injury to the goodwill associated with any Trademark or Trademark License, (d) any recoveries by any Credit Party against third parties with respect to any litigation or dispute concerning any of the Collateral, including claims arising out of the loss or nonconformity of, interference with the use of, defects in, or infringement of rights in, or damage to, Collateral, (e) all amounts collected on, or distributed on account of, other Collateral, including dividends, interest, distributions and Instruments with respect to Investment Property and pledged Stock, and (f) any and all other amounts, rights to payment or other property acquired upon the sale, lease, license, exchange or other disposition of Collateral and all rights arising out of Collateral.

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“Pro Forma” means the unaudited consolidated balance sheet of Borrower and its Subsidiaries as of September 30, 2004  after giving pro forma effect to the Related Transactions.

“Pro Forma Basis” means, for purposes of determining compliance with any financial covenant or test hereunder, determining whether the conditions to the Incurrence of Indebtedness pursuant to Section 6.3 have been met and determining whether the conditions precedent to a Permitted Acquisition have been met, that the subject transaction shall be deemed to have occurred as of the first day of the four consecutive fiscal quarters most recently ended for which annual or quarterly financial statements shall have been delivered in accordance with the provisions hereof (the “Reference Period”).  For purposes of making calculations on a “Pro Forma Basis” hereunder, (a) any Permitted Acquisition shall be calculated on a pro forma basis assuming that such Permitted Acquisition had occurred on the first day of the Reference Period, provided that any adjustments made that are not permitted pursuant to Regulation S-X under the Securities Act of 1933 shall be subject to the consent of Agent, (b) any Indebtedness to be Incurred by any Person in connection with the consummation of any Debt Issuance or Permitted Acquisition will be assumed to have been Incurred on the first day of the Reference Period, (c) the gross interest expenses, determined in accordance with GAAP, with respect to such Indebtedness assumed to have been Incurred on the first day of the Reference Period that bears interest at a floating rate shall be calculated at the current rate under the agreement governing such Indebtedness (including this Agreement if the Indebtedness is Incurred hereunder), and (d) any gross interest expense, determined in accordance with GAAP, Incurred during the Reference Period that was or is to be refinanced with proceeds of Indebtedness assumed to have been Incurred as of the first day of the Reference Period will be excluded from the calculation for which a Pro Forma Basis is being given.

“Projections” means Borrower’s forecasted consolidated: (a) balance sheets; (b) profit and loss statements;  and (c) cash flow statements, in each case included in the Confidential Information Memorandum previously delivered to the Lenders.

“Property” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

“Pro Rata Share” means with respect to all matters relating to any Lender (a) with respect to the Revolving Loan, the percentage obtained by dividing (i) the Revolving Loan Commitment of that Lender by (ii) the aggregate Revolving Loan Commitments of all Lenders, (b) with respect to the Term Loan, the percentage obtained by dividing (i) the Term Loan Commitment of that Lender by (ii) the aggregate Term Loan Commitments of all Lenders, as any such percentages may be adjusted by assignments permitted pursuant to Section 9.1, (c) with respect to all Loans, the percentage obtained by dividing (i) the aggregate Commitments of that Lender by (ii) the aggregate Commitments of all Lenders, and (d) with respect to all Loans on and after the Commitment Termination Date, the percentage obtained by dividing (i) the aggregate outstanding principal balance of the Loans held by that Lender, by (ii) the outstanding principal balance of the Loans held by all Lenders.

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“PSC” means any state Governmental Authority that exercises jurisdiction over the rates or services or the acquisition, ownership, construction or operation of any telecommunications systems or over Persons who own, construct or operate a telecommunications system, in each case by reason of the nature or type of the business subject to regulation and not pursuant to laws and regulations of general applicability to Persons conducting business in such state, including, without limitation, the PSC of Alabama and the PSC of Missouri.

“PSC Authorization” means any Governmental Authorization granted or issued by a PSC.

“Qualified Plan” means a Pension Plan that is intended to be tax-qualified under Section 401(a) of the IRC.

“Qualified Assignee” means (a) any Lender, any Affiliate (as defined in clause (a) and/or (b) of the definition of “Affiliate” in this Annex A) of any Lender and, with respect to any Lender that is an investment fund that invests in commercial loans, any other investment fund that invests in commercial loans and that is managed or advised by the same investment advisor as such Lender or by an Affiliate (as defined in clause (a) and/or (b) of the definition of “Affiliate” in this Annex A) of such investment advisor, and (b) any commercial bank, savings and loan association or savings bank or any other entity which is an “accredited investor” (as defined in Regulation D under the Securities Act) which extends credit or buys loans as one of its businesses, including insurance companies, mutual funds, lease financing companies and commercial finance companies, in each case, which has a rating of BBB or higher from S&P and a rating of Baa2 or higher from Moody’s at the date that it becomes a Lender and which, through its applicable lending office, is capable of lending to Borrower without the imposition of any withholding or similar taxes greater than those taxes imposed by the assigning Lender at the time of such assignment; provided that no Person or Affiliate (as defined in clause (a) and/or (b) of the definition of “Affiliate” in this Annex A) of such Person (other than a Person that is already a Lender) holding Subordinated Debt or Stock issued by any Credit Party shall be a Qualified Assignee.

“Ratable Share” has the meaning ascribed to it in Section 1.1(b).

“Real Estate” means all real property owned, leased, subleased or used by any Credit Party.

“Refinancing” means the repayment in full by Borrower of the Prior Lender Obligations on the Closing Date.

“Refunded Swing Line Loan” has the meaning ascribed to it in Section 1.1(c)(iii).

“Registration Statement” means that certain Form S-1 Registration Statement, as amended, of Borrower filed with the Securities and Exchange Commission under the Securities Act of 1933, effective on December 15, 2004, and dated December 16, 2004

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in respect of the Initial IDS Securities and the Initial IDS Subordinated Notes issued and sold by Borrower on the Closing Date.

“Related Transactions” means the borrowing of the Term Loan on the Closing Date, the initial borrowing (if any) under the Revolving Loan on the Closing Date, the Mid-Missouri Acquisition, the Restructuring, the Refinancing, the issuance by Borrower of Initial IDS Securities and Initial IDS Subordinated Notes on the Closing Date pursuant to the Initial IDS Documents, the payment of all fees, costs and expenses associated with all of the foregoing and the execution and delivery of all of the Related Transactions Documents.

“Related Transactions Documents” means the Mid-Missouri Acquisition Agreement, the Restructuring Documents, the Initial IDS Documents and the Loan Documents, and all other agreements or instruments executed in connection with the Related Transactions.

“Relationship Bank” means each of the banks specified on Disclosure Schedule (3.19) on the Closing Date and such other bank or banks reasonably acceptable to Agent.

“Release” means any release, spill, emission, leaking, pumping, pouring, emitting, emptying, escape, injection, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Material in the indoor or outdoor environment, including the movement of Hazardous Material through or in the air, soil, surface water, ground water or property.

“Replacement Amendment and Consent” has the meaning ascribed to it in the definition of Replacement Software Required Actions.

“Replacement Software Agreement” has the meaning ascribed to it in the definition of Replacement Software Required Actions.

“Replacement Software Required Actions” means, (a) in the case of delivery of a notice of termination under Section 4 of the M&A Software License or under any Replacement Software Agreement, (i) no later than 60 days after delivery of such notice of termination, the applicable Credit Party shall have (A) executed (1) an agreement with a reputable software vendor in form and substance reasonably satisfactory to Agent (the “Replacement Software Agreement”) in respect of the purchase or license by such Credit Party of software with substantially similar functionality (or enhanced functionality) as the software subject to the M&A Software License (the “Replacement Software”) and (2) an amendment to the Software Amendment and Consent in form and substance reasonably satisfactory to Agent (the “Replacement Amendment and Consent”) and (B) provided Agent with reasonably satisfactory evidence concerning the proposed implementation of the Replacement Software, (ii) no later than 30 days after delivery of such notice of termination, Borrower shall have delivered to Agent a certificate from a Responsible Officer reporting as to the progress of the implementation of the Replacement Software and certifying that the implementation

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thereof shall be completed no later than thirty (30) days prior to the date of termination of the M&A Software License or Replacement Software Agreement, as applicable and (iii) the Replacement Software shall have become functionally operational in the businesses of the Credit Parties no later than thirty (30) days prior to the date of termination of the M&A Software License or Replacement Software Agreement, as applicable and (b) in the case of a termination or expiry of the M&A Software License or any Replacement Software Agreement, (i) the applicable Credit Party shall have executed a Replacement Software Agreement and Replacement Amendment and Consent prior to such termination or expiry and (ii) the Replacement Software shall have become functionally operational in the businesses of the Credit Parties on or prior to the date of such termination or expiry.

“Replacement Software” has the meaning ascribed to it in the definition of Replacement Software Required Actions.

“Requisite Lenders” means Lenders having (a) more than 50% of the Commitments of all Lenders, or (b) if the Commitments have been terminated, more than 50% of the aggregate outstanding amount of the Loans.

“Requisite Revolving Lenders” means Lenders having (a) more than 50% of the Revolving Loan Commitments of all Lenders, or (b) if the Revolving Loan Commitments have been terminated, more than 50% of the aggregate outstanding amount of the Revolving Loan.

“Requisite Term Lenders” means Lenders holding more than 50% of the aggregate principal amount of the Term Loan then outstanding.

“Reserves” means, as of any date, any reserve against the Borrowing Availability established by Agent pursuant to Section 1.3(b)(ii) or Section 5.4.

“Responsible Officer” means the chief executive officer, president, chief financial officer, principal accounting officer or treasurer of Borrower.

“Restricted Payment” means (a) the declaration or payment of any dividend or the Incurrence of any liability to make any other payment or distribution of cash or other property or assets in respect of Stock; (b) any payment on account of the purchase, redemption, defeasance, sinking fund or other retirement of any Credit Party’s Stock or any other payment or distribution made in respect thereof, either directly or indirectly; (c) any payment or prepayment of principal of, premium, if any, or interest, fees or other charges on or with respect to, and any redemption, purchase, retirement, defeasance, sinking fund or similar payment and any claim for rescission with respect to, any Subordinated Debt or any other Indebtedness of any Credit Party subordinated to any of the Obligations; (d) any payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire Stock of any Credit Party now or hereafter outstanding; (e) any payment of a claim for the rescission of the purchase or sale of, or for material damages arising from the purchase or sale of, any shares of any Credit Party’s Stock or of a claim for reimbursement,

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indemnification or contribution arising out of or related to any such claim for damages or rescission; (f) any payment, loan, contribution, or other transfer of funds or other property to any Stockholder or Affiliate of any Credit Party other than payment of compensation in the ordinary course of business to Stockholders who are employees of such Credit Party; and (g) any payment of management fees (or other fees of a similar nature) by any Credit Party to any Stockholder of  any Credit Party or its Affiliates.

“Restructuring” means (i) the conversion on the Closing Date of Rural LEC Acquisition LLC from a Delaware limited liability company into a Delaware corporation under the name “Otelco Inc.” and (ii) in connection with such conversion, the conversion on the Closing Date of each membership interest in Rural LEC Acquisition LLC to a combination of shares of Borrower’s Class B common stock and Initial IDS Securities as provided in Section 2 of Article IV of the certificate of incorporation of Borrower as filed with the Delaware Secretary of State and in effect on the Closing Date.

“Restructuring Documents” means (i) the Certificate of Conversion from a limited liability company to a corporation of Rural LEC Acquisition LLC and (ii) the certificate of incorporation of Borrower as filed with the Delaware Secretary of State and in effect on the Closing Date.

“Retiree Welfare Plan” means, at any time, a Welfare Plan that provides for continuing coverage or benefits for any participant or any beneficiary of a participant after such participant’s termination of employment, other than continuation coverage provided pursuant to Section 4980B of the IRC and at the sole expense of the participant or the beneficiary of the participant.

“Revolving Credit Advance” has the meaning ascribed to it in Section 1.1(a)(i).

“Revolving Lenders” means, as of any date of determination, Lenders having a Revolving Loan Commitment.

“Revolving Loan” means, at any time, the aggregate amount of Revolving Credit Advances outstanding to Borrower.

“Revolving Loan Commitment” means (a) as to any Revolving Lender, the aggregate commitment of such Revolving Lender to make Revolving Credit Advances as set forth on Annex J to the Agreement or in the most recent Assignment Agreement executed by such Revolving Lender and (b) as to all Revolving Lenders, the aggregate commitment of all Revolving Lenders to make Revolving Credit Advances, which aggregate commitment shall be Fifteen Million Dollars ($15,000,000) on the Closing Date, as such amount may be adjusted, if at all, from time to time in accordance with the Agreement.

“Revolving Note” has the meaning ascribed to it in Section 1.1(a)(ii).

“Sale/Leaseback Transaction” means an arrangement relating to property now owned or hereafter acquired by Borrower or a Subsidiary whereby Borrower or a

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Subsidiary transfers such property to a Person and Borrower or such Subsidiary leases it from such Person, other than leases between Borrower and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries.

“Seaport Capital” means Seaport Capital Partners II, L.P.

“Securities Offering” means any public or private sale of IDS Securities or common stock or Preferred Stock of Borrower (other than Disqualified Stock), other than public offerings with respect to IDS Securities or Borrower’s Common Stock registered on Form S-8.

“Security Agreement” means the Security Agreement of even date herewith entered into by and among Agent, on behalf of itself and Lenders, and each Credit Party that is a signatory thereto.

“Software” means all “software” as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, other than software embedded in any category of Goods, including all computer programs and all supporting information provided in connection with a transaction related to any program.

“Software Amendment and Consent” has the meaning ascribed to it in paragraph BB of Annex D.

“Solvent” means, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person; (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature; and (d) such Person is not engaged in a business or transaction, and is not about to engage in a business or transaction, for which such Person’s property would constitute an unreasonably small capital.  The amount of contingent liabilities (such as litigation, guaranties and pension plan liabilities) at any time shall be computed as the amount that, in light of all the facts and circumstances existing at the time, represents the amount that can be reasonably be expected to become an actual or matured liability.

“Stock” means all shares, options, warrants, general or limited partnership interests, membership interests, participations or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity whether voting or nonvoting, including (i) common stock, preferred stock or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934) and (ii) common stock represented by IDS Securities and common stock outstanding upon the separation of IDS Securities into the securities represented thereby.

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“Stock Issuance” means any issuance by any Credit Party of any Stock to any Person or receipt by any Credit Party of a capital contribution from any Person, including the issuance of Stock pursuant to the exercise of options or warrants and the conversion of any Indebtedness to Stock.

“Stockholder” means, with respect to any Person, each holder of Stock of such Person.

“Subordinated Debt” means Indebtedness evidenced by the Initial IDS Subordinated Notes, any Subsequent IDS Subordinated Notes and any Permitted Additional Subordinated Debt.

“Subordinated Debt Documents” means the Initial IDS Subordinated Notes Documents, any Subsequent IDS Subordinated Notes Documents and any Additional Subordinated Debt Documents.

“Subsequent IDS Common Stock” means Class A common stock of Borrower with terms identical to the terms of the Initial IDS Common Stock.

“Subsequent IDS-Linked Subordinated Notes” means Indebtedness of Borrower evidenced by a new issue of unsecured, subordinated notes of Borrower, so long as (a) such Indebtedness has a final maturity no earlier than two years after the Final Maturity Date and no required amortizations prior to two years after the Final Maturity Date; (b) such Indebtedness does not (i) have guarantors that are not Subsidiary Guarantors, (ii) have obligors other than Borrower or (iii) provide for security; (c) all other terms of such Indebtedness (including subordination provisions, standstill provisions, defaults, remedies, covenants, redemption provisions, interest deferral mechanics and other terms but excluding the applicable interest rate and the principal amount thereof) are identical to (or, from the perspective of the Lenders, more favorable than) those which applied to the Initial IDS-Linked Subordinated Notes issued on the Closing Date; (d) such Indebtedness is incurred concurrently with the issuance of Subsequent IDS Common Stock and results in the same proportional allocation between equity and debt as existed after the issuance of Initial IDS Common Stock and Initial IDS Subordinated Notes on the Closing Date; (e) the documentation governing such Indebtedness is otherwise reasonably satisfactory to Agent (it being understood that documentation substantially identical to the Initial IDS Subordinated Notes Documents shall be reasonably satisfactory to Agent); and (f) such Indebtedness is issued in accordance with Section 6.3(a)(xv).

“Subsequent IDS Securities” means income deposit securities of Borrower comprised of one share of Subsequent IDS Common Stock and a certain principal amount of Subsequent IDS-Linked Subordinated Notes.

“Subsequent IDS Subordinated Notes” means (i) the Subsequent IDS-Linked Subordinated Notes and (ii) the Subsequent Non-IDS-Linked Subordinated Notes.

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“Subsequent IDS Subordinated Notes Documents” means the Subsequent IDS Subordinated Notes, the Subsequent IDS Subordinated Notes Indenture and each other document executed by any Credit Party pursuant to any such document.

“Subsequent IDS Subordinated Notes Indenture” means any indenture or similar agreement entered into in connection with the issuance of Subsequent IDS Subordinated Notes.

“Subsequent Non-IDS-Linked Subordinated Notes” means Indebtedness of Borrower evidenced by a new issue of unsecured, subordinated notes of Borrower issued concurrently with an issuance of Subsequent IDS-Linked Subordinated Notes pursuant to a Subsequent IDS Subordinated Notes Indenture in an aggregate principal amount sufficient to satisfy applicable guidelines of tax advisors of Borrower, so long as such Indebtedness has terms identical to such Subsequent IDS-Linked Subordinated Notes other than not comprising a portion of Subsequent IDS Securities.

“Subsidiary” means, with respect to any Person, (a) any corporation of which an aggregate of more than 50% of the outstanding Stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, Stock of any other 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, directly or indirectly, owned legally or beneficially by such Person or one or more Subsidiaries of such Person, or with respect to which any such Person has the right to vote or designate the vote of 50% or more of such Stock whether by proxy, agreement, operation of law or otherwise, and (b) any partnership or limited liability company in which such Person and/or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital contribution) of more than 50% or of which any such Person is a general partner or may exercise the powers of a general partner.  Unless the context otherwise requires, each reference to a Subsidiary shall be a reference to a Subsidiary of the Borrower.

“Subsidiary Guarantor” means each Credit Party that is a Guarantor under the Subsidiary Guaranty.

“Subsidiary Guaranty” means the Subsidiary Guaranty of even date herewith executed by each Subsidiary of Borrower (other than Mid-Missouri Telephone) in favor of Agent, on behalf of itself and Lenders.

“Supporting Obligations” means all “supporting obligations” as such term is defined in the Code, including letters of credit and guaranties issued in support of Accounts, Chattel Paper, Documents, General Intangibles, Instruments, or Investment Property.

“Swing Line Advance” has the meaning ascribed to it in Section 1.1(c)(i).

“Swing Line Availability” has the meaning ascribed to it in Section 1.1(c)(i).

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“Swing Line Commitment” means, as to the Swing Line Lender, the commitment of the Swing Line Lender to make Swing Line Advances as set forth on Annex J to the Agreement, which commitment constitutes a subfacility of the Revolving Loan Commitment of the Swing Line Lender.

“Swing Line Lender” means CoBank, ACB.

“Swing Line Loan” means at any time, the aggregate amount of Swing Line Advances outstanding to Borrower.

“Swing Line Note” has the meaning ascribed to it in Section 1.1(c)(ii).

“Taxes” means taxes, levies, imposts, deductions, Charges or withholdings, and all liabilities with respect thereto, excluding taxes imposed on or measured by the net income of Agent or a Lender by the jurisdictions under the laws of which Agent and Lenders are organized or conduct business or any political subdivision thereof.

“Telecommunications Approvals” shall have the meaning ascribed to it in Section 3.1.

“Telecommunications Assets” means all assets, rights (contractual or otherwise) and properties, real or personal, whether tangible or intangible, used or intended for use in connection with a Telecommunications Business.

“Telecommunications Business” means the business of (i) transmitting or providing services relating to the transmission of voice, video or data through transmission facilities, (ii) constructing, creating, developing or producing communications networks, related network transmission, equipment, software, devices and content for use in a communications or content distribution business or (iii) evaluating, participating or pursuing any other activity or opportunity that is primarily related to (i) or (ii) above.

“Termination Date” means the date on which (a) the Loans have been indefeasibly repaid in full, (b) all other Obligations (other than contingent indemnity and expense reimbursement obligations for which no claim has been made) under the Agreement and the other Loan Documents have been completely discharged, and (c) Borrower shall not have any further right to borrow any monies under the Agreement.

“Term Lenders” means those Lenders having Term Loan Commitments.

“Term Lender Settlement Date” has the meaning assigned to it in Section 9.9(a)(iii).

“Term Loan” has the meaning assigned to it in Section 1.1(b)(i).

“Term Loan Commitment” means (a) as to any Lender with a Term Loan Commitment, the commitment of such Lender to make its Pro Rata Share of the Term

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Loan as set forth on Annex J to the Agreement or in the most recent Assignment Agreement executed by such Lender, and (b) as to all Lenders with a Term Loan Commitment, the aggregate commitment of all Lenders to make the Term Loan, which aggregate commitment shall be Eighty Million Dollars ($80,000,000) on the Closing Date.  After advancing the Term Loan, each reference to a Lender’s Term Loan Commitment shall refer to that Lender’s Pro Rata Share of the outstanding Term Loan.

“Term Note” has the meaning assigned to it in Section 1.1(b)(i).

“Test Period” means each period of four consecutive Fiscal Quarters ended as provided in the relevant provision or definition in the Agreement.

“Title IV Plan” means a Pension Plan (other than a Multiemployer Plan), that is covered by Title IV of ERISA, and that any Credit Party or ERISA Affiliate maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them.

“Trademark Security Agreements” means the Trademark Security Agreements made in favor of Agent, on behalf of Lenders, by each applicable Credit Party.

“Trademark License” means rights under any written agreement now owned or hereafter acquired by any Credit Party granting any right to use any Trademark.

“Trademarks” means all of the following now owned or hereafter adopted or acquired by any Credit Party:  (a) all trademarks, trade names, corporate names, business names, trade styles, service marks, logos, other source or business identifiers, prints and labels on which any of the foregoing have appeared or appear, designs and general intangibles of like nature (whether registered or unregistered), all registrations and recordings thereof, and all applications in connection therewith, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state or territory thereof, or any other country or any political subdivision thereof; (b) all reissues, extensions or renewals thereof; and (c) all goodwill associated with or symbolized by any of the foregoing.

“Unfunded Pension Liability” means, at any time, the aggregate amount, if any, of the sum of (a) the amount by which the present value of all accrued benefits under each Title IV Plan exceeds the fair market value of all assets of such Title IV Plan allocable to such benefits in accordance with Title IV of ERISA, all determined as of the most recent valuation date for each such Title IV Plan using the actuarial assumptions for funding purposes in effect under such Title IV Plan, and (b) for a period of 5 years following a transaction which might reasonably be expected to be covered by Section 4069 of ERISA, the liabilities (whether or not accrued) that could be avoided by any Credit Party or any ERISA Affiliate as a result of such transaction.

“Welfare Plan” means a Plan described in Section 3(i) of ERISA.

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“Wholly Owned Subsidiary” of any Person means a Subsidiary of such Person 100% of the outstanding Stock or other ownership interests of which (other than directors’ qualifying shares) shall at the time be owned by such Person and/or by one or more Wholly Owned Subsidiaries of such Person.

Rules of construction with respect to accounting terms used in the Agreement or the other Loan Documents shall be as set forth in Annex G.  All other undefined terms contained in any of the Loan Documents shall, unless the context indicates otherwise, have the meanings provided for by the Codeto the extent the same are used or defined therein;in the event that any term is defined differently in different Articles or Divisions of the Code, the definition contained in Article or Division 9 shall control.  Unless otherwise specified, references in the Agreement or any of the Appendices to a Section, subsection or clause refer to such Section, subsection or clause as contained in the Agreement.  The words “herein,” “hereof” and “hereunder” and other words of similar import refer to the Agreement as a whole, including all Annexes, Exhibits and Schedules, as the same may from time to time be amended, restated, modified or supplemented, and not to any particular section, subsection or clause contained in the Agreement or any such Annex, Exhibit or Schedule.

Any reference in the Agreement or any other Loan Document to a Loan Document shall include all appendices, exhibits or schedules thereto, and all amendments, restatements, supplements or other modifications thereto, and shall refer to the Agreement or such Loan Document as the same may be in effect at any and all times such reference becomes operative.

Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, feminine and neuter genders.  The words “including”, “includes” and “include” shall be deemed to be followed by the words “without limitation”; the word “or” is not exclusive; references to Persons include their respective successors and assigns (to the extent and only to the extent permitted by the Loan Documents) or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons; and all references to statutes and related regulations shall include any amendments of the same and any successor statutes and regulations.  Whenever any provision in any Loan Document refers to the “actual knowledge” of any Credit Party, such words are intended to signify that such Credit Party has actual knowledge or awareness of a particular fact or circumstance.  Whenever any provision in any Loan Document refers to the “knowledge” (or an analogous phrase) of any Credit Party without the word “actual”, such words are intended to signify that such Credit Party has actual knowledge or awareness of a particular fact or circumstance or that such Credit Party, if it had exercised reasonable diligence, would have known or been aware of such fact or circumstance.

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ANNEX B

to

CREDIT AGREEMENT

[INTENTIONALLY OMITTED]

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ANNEX C (Section 1.8)

to

CREDIT AGREEMENT

CASH MANAGEMENT SYSTEM

Each Credit Party (other than Mid-Missouri Telephone) shall establish and maintain the Cash Management Systems described below.  It is undertstood that each reference to a “Credit Party” or a “Subsidiary” in this Annex C only shall constitute a reference to each Credit Party or Subsidiary other than Mid-Missouri Telephone.

(a)On or before the Closing Date, the applicable Credit Party shall cause each Blocked Account maintained by such Credit Party at a Relationship Bank to become subject to a tri-party blocked account agreement in accordance with paragraph (c) of this Annex C.  Except for such closures or replacements expressly permitted or required by paragraph (d) of this Annex C, the Credit Parties shall, until the Termination Date, at all times maintain each Blocked Account at the Relationship Bank at which such account was established.  On or before the Closing Date and until the Termination Date, each applicable Credit Party shall (i) request in writing and otherwise take reasonable steps to ensure that all Account Debtors forward payment directly to one or more Blocked Accounts or to Borrower or the applicable Subsidiary and (ii) deposit and cause its Subsidiaries to deposit or cause to be deposited promptly, and in any event no later than the second Business Day after the receipt thereof, all cash, checks, drafts or other similar items of payment relating to or constituting payments made in respect of any and all Collateral into one or more Blocked Accounts or, to the extent permitted by paragraph (b) of this Annex C, into one or more Excluded Accounts or Disbursement Accounts.

(b)Each Credit Party may maintain, in its name, at a Relationship Bank, one or more Disbursement Accounts.  No Credit Party shall accumulate or maintain cash in Disbursement Accounts as of any date of determination in excess of (x) checks outstanding against such accounts and paid as of such date, (y) payroll requirements outstanding and paid as of such date, and (z) amounts necessary to meet ordinary course minimum balance requirements of the applicable Relationship Bank in respect thereof as of such date.  Each Credit Party may maintain, in its name, at a Relationship Bank, one or more Excluded Accounts.  The Credit Parties agree that at no time shall the  aggregate amount on deposit in all Excluded Accounts and all other accounts of the Credit Parties (other than Disbursement Accounts or Blocked Accounts) exceed $100,000 in the aggregate at any time for all Credit Parties combined (the “Threshold Amount”); provided; however, that no Event of Default shall occur solely by reason of the amount on deposit in all Excluded Accounts and such other accounts combined exceeding the Threshold Amount if (i) the amount in excess of the Threshold Amount is transferred to a Blocked Account within one Business Day of such excess having occurred and (ii) at the close of business on such Business Day the amount on deposit in all Excluded Accounts and such other accounts combined does not exceed the Threshold Amount.

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 (c)On or before the Closing Date each Relationship Bank shall have, in respect of each Blocked Account located at such Relationship Bank, entered into a tri-party blocked account agreement with Agent, for the benefit of itself and Lenders, and Credit Parties, as applicable, in form and substance reasonably acceptable to Agent, which shall become operative on or prior to the Closing Date.  Unless Agent shall agree otherwise, each such blocked account agreement (and each blocked account agreement referred to in paragraph (b) and (d) of this Annex C) shall provide, among other things, that (i) all items of payment deposited in such account are held by such bank as agent or bailee-in-possession for Agent, on behalf of itself and Lenders, (ii) the bank executing such agreement has no rights of setoff or recoupment or any other claim against such account, as the case may be, other than for payment of its service fees and other charges directly related to the administration of such account and for returned checks or other items of payment, and (iii) from and after the Closing Date with respect to banks at which a Blocked Account is maintained, such bank agrees, from and after the receipt of a notice (an “Activation Notice”) from Agent (which Activation Notice may be given by Agent at any time at which an Event of Default has occurred and is continuing (an “Activation Event”)), to forward immediately all amounts in each Blocked Account to the Collection Account through daily sweeps from such Blocked Account into the Collection Account.

(d)After the Closing Date, no Credit Party shall (i) close any deposit or other account, (ii) establish any deposit or other account or (iii) upon a Target becoming a Credit Party in connection with a Permitted Acquisition, continue to maintain such Credit Party’s deposit or other accounts; provided, however, that

(A) a Credit Party may (I) close a deposit account in accordance with the final sentence of this paragraph (d), (II) close a Disbursement Account or Excluded Account so long as all amounts on deposit therein, if any, shall have been transferred to a Blocked Account prior to the closure thereof and (III) with the prior written consent of Agent, close a Blocked Account so long as all amounts on deposit therein, if any, shall have been transferred to another Blocked Account prior to the closure thereof;

(B) upon a Target becoming a Credit Party in connection with a Permitted Acquisition, such Credit Party may maintain its deposit accounts at the bank or banks at which such deposit accounts were established if the requirements of clause (C) of this paragraph (d) shall have been satisfied concurrently with such Person becoming a Credit Party as if such Person were establishing accounts under such clause (C);

(C) so long as no Event of Default has occurred and is continuing, any Credit Party may establish a deposit account at a Relationship Bank subject to the satisfaction of the following conditions:

(I) Borrower shall have delivered to Agent (1) written notice  setting forth the Relationship Bank at which such account shall be established, whether the applicable account is either a “Blocked Account”, “Disbursement Account” or “Excluded Account” for purposes of this

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Annex C and a description of the proposed use therefor and (2) an amended Disclosure Schedule (3.19) reflecting the information specified in the immediately preceding clause (1); and

(II) in the case of a Blocked Account, prior to the time of the opening thereof, the applicable Credit Party, the Relationship Bank at which such Blocked Account is located and Agent shall have executed and delivered to Agent a tri-party blocked account agreement with respect to such account, in form and substance reasonably satisfactory to Agent.

Borrower shall deliver to Agent (1) a list of all deposit accounts maintained by the Credit Parties together with the delivery of annual audited consolidated financial statements in accordance with paragraph (b) of Annex E and (2) within five (5) Business Days after the request of Agent, information concerning such accounts (including deposits and withdrawals therefrom) as Agent may reasonably request.  Borrower shall, or, as applicable, shall cause its applicable Subsidiary to, close a deposit account or accounts (and establish replacement deposit accounts in accordance with clause (C) of this paragraph (d)) promptly and in any event within 30 days following notice from Agent that the creditworthiness of any bank holding the referenced account or accounts is no longer acceptable in Agent’s reasonable judgment, or as promptly as practicable and in any event within sixty (60) days following notice from Agent that the operating performance, funds transfer or availability procedures or performance with respect to accounts of the bank holding such account or accounts or Agent’s liability under any tri-party blocked account agreement with such bank is no longer acceptable in Agent’s reasonable judgment.

(e)The Blocked Accounts, Disbursement Accounts and Excluded Accounts shall be cash collateral accounts, with all cash, checks and other similar items of payment in such accounts securing payment of the Loans and all other Obligations, and in which Borrower and each Subsidiary thereof shall have granted a Lien to Agent, on behalf of itself and Lenders, pursuant to the Security Agreement.

(f)All amounts deposited in the Collection Account shall be deemed received by Agent in accordance with Section 1.10 and shall be applied (and allocated) by Agent in accordance with Section 1.11.  In no event shall any amount be so applied unless and until such amount shall have been credited in immediately available funds to the Collection Account.

(g)Borrower shall and shall cause its Subsidiaries, officers, employees, agents, directors or other Persons acting for or in concert with the Credit Parties, each a “Related Person”) to (i) hold in trust for Agent, for the benefit of itself and Lenders, all checks, cash and other items of payment received by Borrower or any such Related Person, and (ii) within two (2) Business Days after receipt by Borrower or any such Related Person of any checks, cash or other items of payment, deposit the same into a Blocked Account.  Borrower on behalf of itself and each Related Person thereof acknowledges and agrees that all cash, checks or other items of payment constituting

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proceeds of Collateral are part of the Collateral.  All proceeds of the sale or other disposition of any Collateral shall be deposited directly into Blocked Accounts.

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ANNEX D (Section 2.1(a))

to

CREDIT AGREEMENT

CLOSING CHECKLIST

In addition to, and not in limitation of, the conditions described in Section 2.1 of the Agreement, pursuant to Section 2.1(a), the following items must be received by Agent and Lenders in form and substance satisfactory to Agent and Lenders on or prior to the Closing Date (each capitalized term used but not otherwise defined herein shall have the meaning ascribed thereto in Annex A to the Agreement):

A.Appendices.  All Appendices to the Agreement, in form and substance satisfactory to Agent.

B.Revolving Notes, Swing Line Note and Term Notes.  Duly executed originals of the Revolving Notes, Swing Line Note and Term Notes for each applicable Lender, dated the Closing Date.

C.Security Agreement.  Duly executed originals of the Security Agreement, dated the Closing Date, and all instruments, documents and agreements executed pursuant thereto.

D.Insurance.  Satisfactory evidence that the insurance policies required by Section 5.4 are in full force and effect, together with appropriate evidence showing loss payable and/or additional insured clauses or endorsements, as requested by Agent, in favor of Agent, on behalf of Lenders.

E.Security Interests and Code Filings.  (a) Evidence satisfactory to Agent that Agent (for the benefit of itself and Lenders) has a valid and perfected first priority security interest in the Collateral, including (i) such documents duly executed by each Credit Party (including financing statements under the Code and other applicable documents under the laws of any jurisdiction with respect to the perfection of Liens) as Agent may request in order to perfect its security interests in the Collateral, (ii) copies of Code search reports listing all effective financing statements that name any Credit Party as debtor, together with copies of such financing statements, none of which shall cover the Collateral, except for those relating to the Prior Lender Obligations (all of which shall be terminated on the Closing Date) and others approved by Agent, and (iii) a perfection certificate duly executed on behalf of each Credit Party.

(b)Evidence satisfactory to Agent, including copies, of all UCC-1 and other financing statements filed in favor of any Credit Party with respect to each location, if any, at which Inventory may be consigned.

(c)Control Letters from (i) all issuers of uncertificated securities and financial assets, if any, held by any Credit Party (other than Mid-Missouri Telephone),

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(ii) all securities intermediaries with respect to all securities accounts and securities entitlements, if any, of any Credit Party (other than Mid-Missouri Telephone), and (iii) all futures commission agents and clearing houses with respect to all commodities contracts and commodities accounts, if any, held by any Credit Party (other than Mid-Missouri Telephone).

F.Payoff Letter; Termination Statements.  Copies of a duly executed payoff letter, in form and substance reasonably satisfactory to Agent, by and between all parties to the Prior Lender loan documents evidencing repayment in full of all Prior Lender Obligations, together with (a) UCC-3 or other appropriate termination statements, in form and substance satisfactory to Agent, manually signed by Prior Lender Agent or the applicable Prior Lender releasing all liens of Prior Lender Agent or any Prior Lender upon any of the real or personal property of each Credit Party, and (b) termination of all blocked account agreements, bank agency agreements or other similar agreements or arrangements or arrangements in favor of Prior Lender Agent or Prior Lender or relating to any Prior Lender Obligations.

G.Intellectual Property Security Agreements.  Duly executed originals of Trademark Security Agreements, Copyright Security Agreements and Patent Security Agreements, each dated the Closing Date and signed by each Credit Party (other than Mid-Missouri Telephone) which owns Trademarks, Copyrights and/or Patents, as applicable, all in form and substance reasonably satisfactory to Agent, together with all instruments, documents and agreements executed pursuant thereto.

H.Intentionally Omitted.

I.Subsidiary Guaranties.  Guaranties executed by and each direct and indirect Subsidiary of Borrower (other than Mid-Missouri Telephone) in favor of Agent, for the benefit of Lenders.

J.Intentionally Omitted.

K.Initial Notice of Revolving Credit Advance.  Duly executed originals of a Notice of Revolving Credit Advance, dated the Closing Date, with respect to any Revolving Credit Advance to be requested by Borrower on the Closing Date.

L.Letter of Direction.  Duly executed originals of a letter of direction from Borrower addressed to Agent, on behalf of itself and Lenders, with respect to the disbursement on the Closing Date of the proceeds of the Term Loan and the initial Revolving Credit Advance.

M.Cash Management System; Blocked Account Agreements.  Evidence satisfactory to Agent that, as of the Closing Date, Cash Management Systems complying with Annex C to the Agreement have been established and are currently being maintained in the manner set forth in such Annex C, together with copies of duly executed tri-party blocked account agreements, reasonably satisfactory to Agent, with the banks as required by Annex C.

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N.Charter and Good Standing.  For each Credit Party, such Person’s (a) charter and all amendments thereto, (b) good standing certificates (including verification of tax status) in its state of incorporation or organization and (c) good standing certificates (including verification of tax status) and certificates of qualification to conduct business in each jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, each dated a recent date prior to the Closing Date and certified by the applicable Secretary of State or other authorized Governmental Authority.

O.Bylaws and Resolutions.  For each Credit Party, (a) such Person’s bylaws and all charter documents including partnership and/or operating agreements, together with all amendments thereto and (b) resolutions of such Person’s Board of Directors and partners, members and stockholders, as applicable, approving and authorizing the execution, delivery and performance of the Loan Documents to which such Person is a party and the transactions to be consummated in connection therewith, each certified as of the Closing Date by such Person’s corporate or organizational secretary or an assistant secretary as being in full force and effect without any modification or amendment.

P.Incumbency Certificates.  For each Credit Party, signature and incumbency certificates of the officers of each such Person executing any of the Loan Documents, certified as of the Closing Date by such Person’s corporate secretary or an assistant secretary as being true, accurate, correct and complete.

Q.Opinions of Counsel.  Duly executed originals of opinions of O’Melveny & Myers LLP, counsel for the Credit Parties, and FCC and state regulatory counsel for the Credit Parties, together with (a) any special communications and local counsel opinions reasonably requested by Agent and (b) reliance letters with respect to such legal opinions delivered in connection with the Related Transactions reasonably requested by Agent, each in form and substance reasonably satisfactory to Agent and its counsel, dated the Closing Date and addressed to Agent and Lenders.

R.Pledge Agreements.  Duly executed originals of each of the Pledge Agreements accompanied by (as applicable) (a) share certificates representing all of the outstanding Stock being pledged pursuant to such Pledge Agreement and stock powers for such share certificates executed in blank and (b) the original Intercompany Notes and other instruments evidencing Indebtedness being pledged pursuant to such Pledge Agreement, duly endorsed in blank.

S.Accountants’ Letters.  A letter from the Credit Parties to their independent auditors authorizing the independent certified public accountants of the Credit Parties to communicate with Agent and Lenders in accordance with Section 4.2.

T.Appointment of Agent for Service.  An appointment of CT Corporation (or other agent reasonably acceptable to Agent) as each Credit Party’s agent for service of process.

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U.Solvency Certificate. Agent shall have received a solvency certificate of Borrower satisfactory in form and substance to Agent.

V.Fee Letters.  Duly executed originals of the Fee Letters.

W.Officer’s Certificate.  Agent shall have received duly executed originals of a certificate of the chief executive officer and chief financial officer of Borrower, dated the Closing Date, confirming compliance with the conditions set forth in Section 2.2 at the Closing Date.

X.Waivers.  Agent, on behalf of Lenders, shall have received landlord waivers and consents, bailee letters and mortgagee agreements in form and substance reasonably satisfactory to Agent, in each case as required pursuant to Section 5.9.

Y.Mortgages.  Mortgages covering all of the Material Real Estate (except for Material Real Estate owned by Mid-Missouri Telephone) (the “Mortgaged Properties”) together with:  (a) title insurance policies, current as-built surveys, zoning letters and certificates of occupancy, in each case reasonably satisfactory in form and substance to Agent, in its sole discretion; (b) evidence that counterparts of the Mortgages have been recorded in all places to the extent necessary or desirable, in the judgment of Agent, to create a valid and enforceable first priority lien (subject to Permitted Encumbrances) on each Mortgaged Property in favor of Agent for the benefit of itself and Lenders (or in favor of such other trustee as may be required or desired under local law); and (c) an opinion of counsel in each state in which any Mortgaged Property is located in form and substance and from counsel reasonably satisfactory to Agent.

Z.[Intentionally Omitted].

AA.[Intentionally Omitted].

BB.M&A Software License.  Agent shall have received an amendment and consent to the M&A Software License (the “Software Amendment and Consent”) in form and substance reasonably satisfactory to Agent.

CC.Audited Financials; Financial Condition.  Agent shall have received the Financial Statements, Projections and other materials set forth in Section 3.4, certified by Borrower’s chief financial officer, in each case in form and substance satisfactory to Agent, and Agent shall be satisfied, in its sole discretion, with all of the foregoing.  Agent shall have further received a certificate of the chief executive officer and/or the chief financial officer of Borrower, (I) based on such Pro Forma and Projections, to the effect that (a) Borrower will be Solvent upon the consummation of the transactions contemplated herein; (b) the Pro Forma fairly presents the financial condition of Borrower as of the date thereof after giving effect to the transactions contemplated by the Loan Documents; (c) the Projections are based upon estimates and assumptions stated therein, all of which Borrower believes to be reasonable in light of current conditions and current facts known to Borrower and, as of the Closing Date, reflect Borrower’s good faith and reasonable estimates of its future financial performance

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and of the other information projected therein for the period set forth therein; and (d) containing such other statements with respect to the solvency of Borrower and matters related thereto as Agent shall request, and (II) certifying that as of the Closing Date and on a Pro Forma Basis after giving effect to the Related Transactions, the Consolidated Senior Leverage Ratio does not exceed 2.76 to 1.00 and the Consolidated Total Leverage Ratio does not exceed 5.70 to 1.00.

DD.Assignment of Representations, Warranties, Covenants and Indemnities.  Agent shall have received a duly executed copy of an Assignment of Representations, Warranties, Covenants and Indemnities in respect of the rights of the Credit Parties under the Mid-Missouri Acquisition Agreement, which assignment shall be expressly permitted under the Mid-Missouri Acquisition Agreement or shall have been consented to in writing by the seller thereunder.

EE.Other Documents.  Such other certificates, documents and agreements respecting any Credit Party as Agent may reasonably request.

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ANNEX E (Section 4.1(a))

to

CREDIT AGREEMENT

FINANCIAL STATEMENTS AND PROJECTIONS — REPORTING

Borrower shall deliver or cause to be delivered to Agent or to Agent and Lenders, as indicated, the following:

(a)[Intentionally Omitted].

(b)Quarterly Financials.  To Agent and Lenders, within forty-five (45) days after the end of each Fiscal Quarter, the following consolidated financial statements for Borrower and its Subsidiaries, certified by the chief financial officer of Borrower:  (i) unaudited balance sheets as of the close of such Fiscal Quarter and the related statements of income and cash flow for that portion of the Fiscal Year ending as of the close of such Fiscal Quarter and (ii) unaudited statements of income and cash flows for such Fiscal Quarter, in each case setting forth in comparative form the figures for the corresponding period in the prior year and the figures contained in the Projections for such Fiscal Year, all prepared in accordance with GAAP (subject to normal year-end adjustments and the absence of footnotes).  Such financial statements shall be accompanied by (A) a statement in reasonable detail (each, a “Compliance Certificate”) signed by a Responsible Officer of Borrower (i) showing the calculations used in determining compliance with each of the Financial Covenants that is tested on a quarterly basis, (ii) showing the calculations of the Consolidated Fixed Charge Coverage Ratio and Consolidated Senior Leverage Ratio for the Credit Parties for the four-fiscal quarter period ending on the last day of the period covered by such financial statements, (iii) certifying whether a Dividend Suspension Period or Interest Deferral Period shall have occurred and be continuing, (iv) certifying as to the number of access lines operated by the Credit Parties as of the end of the prior Fiscal Quarter and (v) showing the calculations of Distributable Cash and Excess Cash, in each case, for the prior Fiscal Quarterand (B) the certification of the chief financial officer of Borrower that (i) such financial statements present fairly in all material respects in accordance with GAAP (subject to normal year-end adjustments and the absence of footnotes) the financial position and results of operations and cash flows of Borrower and its Subsidiaries, on a consolidated basis, as at the end of such Fiscal Quarter and for that portion of the Fiscal Year then ended, (ii) any other information presented is true, correct and complete in all material respects and that there was no Default or Event of Default in existence as of such time or, if a Default or Event of Default has occurred and is continuing, describing the nature thereof and all efforts undertaken to cure such Default or Event of Default.  In addition, Borrower shall deliver to Agent and Lenders, within forty-five (45) days after the end of each Fiscal Quarter, a management discussion and analysis that includes a comparison to budget for that portion of the Fiscal Year ending as of the close of such Fiscal Quarter and a comparison of performance for that portion of the Fiscal Year ending as of the close of such Fiscal Quarter to the corresponding period in the prior year.

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(c)Operating Plan.  To Agent and Lenders, as soon as available, but not later than thirty (30) days after the end of each Fiscal Year, an annual operating plan for Borrower, approved by the Board of Directors of Borrower, for the following Fiscal Year, which (i) includes a statement of all of the material assumptions on which such plan is based, (ii) includes a monthly budget for the following year and (iii) integrates sales, gross profits, operating expenses, operating profit and cash flow projections, all prepared on the same basis and in similar detail as that on which operating results are reported (and in the case of cash flow projections, representing management’s good faith estimates of future financial performance based on historical performance), and including plans for personnel, Consolidated Capital Expenditures and facilities.

(d)Annual Audited Financials. To Agent and Lenders, within ninety (90) days after the end of each Fiscal Year, audited Financial Statements for Borrower and its Subsidiaries on a consolidated basis, consisting of balance sheets and statements of income and retained earnings and cash flows, setting forth in comparative form in each case the figures for the previous Fiscal Year, which Financial Statements shall be prepared in accordance with GAAP and certified without qualification as to going concern status or like qualification or scope of the audit, by an independent certified public accounting firm of national standing or otherwise acceptable to Agent.  Such Financial Statements shall be accompanied by (i) a statement prepared in reasonable detail showing the calculations used in determining compliance with each of the Financial Covenants, (ii) a report from such accounting firm to the effect that, in connection with their audit examination, nothing has come to their attention to cause them to believe that a Default or Event of Default has occurred (or specifying those Defaults and Events of Default that they became aware of), it being understood that such audit examination extended only to accounting matters and that no special investigation was made with respect to the existence of Defaults or Events of Default, (iii) a letter addressed to Agent, on behalf of itself and Lenders, in form and substance reasonably satisfactory to Agent and subject to standard qualifications required by nationally recognized accounting firms, signed by such accounting firm acknowledging that Agent and Lenders are entitled to rely upon such accounting firm’s certification of such audited Financial Statements, (iv) the annual letters to such accountants in connection with their audit examination detailing contingent liabilities and material litigation matters, and (v) the certification of the chief executive officer or chief financial officer of Borrower that all such Financial Statements present fairly in all material respects in accordance with GAAP the financial position and results of operations and cash flows of Borrower and its Subsidiaries on a consolidated basis, as at the end of such Fiscal Year and for the period then ended, and that there was no Default or Event of Default in existence as of such time or, if a Default or Event of Default has occurred and is continuing, describing the nature thereof and all efforts undertaken to cure such Default or Event of Default.

(e)Management Letters.  To Agent and Lenders, within five (5) Business Days after receipt thereof by any Credit Party, copies of all management letters, exception reports or similar letters or reports received by such Credit Party from its independent certified public accountants.

E-2

(f)Default Notices.  To Agent and Lenders, as soon as practicable, and in any event within five (5) Business Days after an executive officer of Borrower has actual knowledge of the existence of any Default, Event of Default or other event that has had a Material Adverse Effect, telephonic or telecopied notice specifying the nature of such Default or Event of Default or other event, including the anticipated effect thereof, which notice, if given telephonically, shall be promptly confirmed in writing on the next Business Day.

(g)SEC Filings and Press Releases.  To Agent and Lenders, promptly upon their becoming available, copies of (or, if made publicly available on publicly accessible electronic medium (e.g. internet, EDGAR or other another similar medium), notice of posting to such electronic media):  (i) all Financial Statements, reports, notices and proxy statements made publicly available by any Credit Party to its security holders generally; (ii) all regular and periodic reports and all registration statements and prospectuses, if any, filed by any Credit Party with any securities exchange or with the Securities and Exchange Commission or any governmental or private regulatory authority; and (iii) all press releases and other statements made available by any Credit Party to the public concerning material changes or developments in the business of any such Person.

(h)Subordinated Debt and Equity Notices.  To Agent and Lenders, as soon as practicable, copies of all material written notices given or received by any Credit Party with respect to any Subordinated Debt or Stock of such Person, and, within two (2) Business Days after any Credit Party obtains knowledge of any matured or unmatured event of default with respect to any Subordinated Debt, notice of such event of default.

(i)Supplemental Schedules.  To Agent and Lenders, supplemental disclosures, if any, required by Section 5.6.

(j)Litigation.  To Agent and Lenders in writing, promptly upon learning thereof, notice of any Litigation commenced or threatened against any Credit Party that (i) seeks damages in excess of $500,000, (ii) seeks injunctive relief, (iii) is asserted or instituted against any Plan, its fiduciaries or its assets or against any Credit Party or ERISA Affiliate in connection with any Plan, (iv) alleges criminal misconduct by any Credit Party, or (v) alleges the violation of any law regarding, or seeks remedies in connection with, any Environmental Liabilities reasonably likely to be in excess of $500,000.

(k)Insurance Notices.  To Agent and Lenders, disclosure of losses or casualties required by Section 5.4.

(l)Lease Default Notices.  To Agent, within two (2) Business Days after receipt thereof, copies of (i) any and all default notices received under or with respect to any leased location or public warehouse where Collateral having a value, individually or in the aggregate, in excess of $250,000 is stored or located, and (ii) such other notices or documents with respect to such leased locations or public warehouses as Agent may reasonably request.

E-3

(m)Lease Amendments.  To Agent, within two (2) Business Days after receipt thereof, copies of any amendment to a lease of Material Real Estate.

(n)Regulatory Notices.  To Agent and Lenders, promptly upon receipt of notice of (i) any actual or threatened forfeiture, non-renewal, cancellation, termination, revocation, suspension, impairment or material modification of any material Telecommunications Approval held by any Credit Party, or any notice of default or forfeiture with respect to any such material Telecommunications Approval, or (ii) any refusal by the FCC, any PSC or any Franchising Authority to renew or extend any such material Communications License, a certificate of an Responsible Officer specifying the nature of such event, the period of existence thereof, and what action such Credit Party is taking and propose to take with respect thereto.

(o)Change of Location.  To Agent and Lenders, within ten (10) Business Days after the change of location thereof, notice of change in locations at which Collateral having a value, individually or in the aggregate, in excess of $100,000, is held or stored, or the location of its records concerning such Collateral.

(p)Other Documents.  To Agent and Lenders, such other financial and other information respecting any Credit Party’s business or financial condition as Agent or any Lender shall, from time to time, reasonably request.

E-4

ANNEX F (Section 4.1(b))

to

CREDIT AGREEMENT

COLLATERAL REPORTS

Borrower shall deliver or cause to be delivered the following:

(a)[Intentionally Omitted]

(b)[Intentionally Omitted]

(c)[Intentionally Omitted]

(d)To Agent, at the time of delivery of each of the quarterly Financial Statements delivered pursuant to Annex E, (i) a listing of government contracts of  Borrower subject to the Federal Assignment of Claims Act of 1940; and (ii) a list of any applications for the registration of any Patent, Trademark or Copyright filed by any Credit Party with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in the prior Fiscal Quarter;

(e)[Intentionally Omitted]

(f)To Agent, at Borrower’s expense, such appraisals of its assets as Agent may reasonably request at any time after the occurrence and during the continuance of a Default or an Event of Default, such appraisals to be conducted by an appraiser, and in form and substance reasonably satisfactory to Agent; and

(g)Such other reports, statements and reconciliations with respect to the Collateral or Obligations of any or all Credit Parties as Agent or any Lender shall from time to time request in its reasonable discretion.

F-1

ANNEX G (Section 6.10)

to

CREDIT AGREEMENT

FINANCIAL COVENANTS

Borrower shall not breach or fail to comply with any of the following financial covenants, each of which shall be calculated (i) in accordance with GAAP consistently applied or (ii) to the extent a Permitted Acquisition shall have been consummated after the first day of the then applicable Test Period, on a Pro Forma Basis giving effect to such Permitted Acquisition in accordance with GAAP consistently applied:

 (a)Minimum Consolidated Fixed Charge Coverage Ratio.  Credit Parties shall have, at the end of each Fiscal Quarter, a Consolidated Fixed Charge Coverage Ratio for the Test Period ending with such Fiscal Quarter of not less than 1.10 to 1.00.

 (b)Maximum Consolidated Senior Leverage Ratio.  Credit Parties shall have, at the end of each Fiscal Quarter, a Consolidated Senior Leverage Ratio as of the last day of such Fiscal Quarter and for the Test Period ending with such Fiscal Quarter of not more than 3.30 to 1.00.

Unless otherwise specifically provided herein, any accounting term used in the Agreement shall have the meaning customarily given such term in accordance with GAAP, and all financial computations hereunder shall be computed in accordance with GAAP consistently applied.  That certain items or computations are explicitly modified by the phrase “in accordance with GAAP” shall in no way be construed to limit the foregoing.  If any “Accounting Changes” (as defined below) occur and such changes result in a change in the calculation of the financial covenants, standards or terms used in the Agreement or any other Loan Document, then Borrower, Agent and Lenders agree to enter into negotiations in order to amend such provisions of the Agreement so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating Borrower’s and its Subsidiaries’ financial condition and results of operations shall be the same after such Accounting Changes as if such Accounting Changes had not been made; provided, however, that the agreement of Requisite Lenders to any required amendments of such provisions shall be sufficient to bind all Lenders.  “Accounting Changes” means (i) changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants (or successor thereto or any agency with similar functions), (ii) changes in accounting principles concurred in by Borrower’s certified public accountants; (iii) purchase accounting adjustments under FASB 141 or 142 and EITF 88-16, and the application of the accounting principles set forth in FASB 109, including the establishment of reserves pursuant thereto and any subsequent reversal (in whole or in part) of such reserves; and (iv) the reversal of any

G-1

reserves established as a result of purchase accounting adjustments.  All such purchase accounting adjustments resulting from expenditures made subsequent to the Closing Date (including capitalization of costs and expenses or payment of pre-Closing Date liabilities) shall be treated as expenses in the period the expenditures are made and deducted as part of the calculation of Consolidated EBITDA in such period.  If Borrower and Requisite Lenders agree upon the required amendments, then after appropriate amendments have been executed and the underlying Accounting Change with respect thereto has been implemented, any reference to GAAP contained in the Agreement or in any other Loan Document shall, only to the extent of such Accounting Change, refer to GAAP, consistently applied after giving effect to the implementation of such Accounting Change.  If Borrower and Requisite Lenders cannot agree upon the required amendments within thirty (30) days following the date of implementation of any Accounting Change, then (i) all Financial Statements shall be prepared, delivered and made after giving effect to the underlying Accounting Change, and (ii) all calculations of financial covenants and other standards and terms in accordance with the Agreement and the other Loan Documents shall be prepared, delivered and made without regard to the underlying Accounting Change.  For purposes of Section 8.1, a breach of a Financial Covenant contained in this Annex G shall be deemed to have occurred as of the last day of any specified measurement period, regardless of when the Financial Statements reflecting such breach are delivered to Agent or any Lender.

G-2

ANNEX H (Section 9.9(a))

to

CREDIT AGREEMENT

LENDERS’ WIRE TRANSFER INFORMATION

Name:	General Electric Capital Corporation
Bank:	Deutsche Bank Trust Company Americas
	New York, New York
ABA #:	021001033
Account #:	50232854
Account Name:	GECC/CAF Depository
Reference:	CFC Otelco

H-1

ANNEX I (Section 11.10)

to

CREDIT AGREEMENT

NOTICE ADDRESSES

(A)If to Agent or GE Capital, at

General Electric Capital Corporation

201 Merritt 7

Norwalk, CT 06851

Attention:  Jose Alberto Cepeda, Account Manager

Telecopier No.:  203-956-4543

Telephone No.: 203-956-4751

with copies to:

Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Attention:  Fred Bass, Esq.

Telecopier No.:  212-259-6333

Telephone No.:  212-259-6330

and

General Electric Capital Corporation

201 Merritt 7

Norwalk, CT 06851

Attention:  Corporate Counsel-Global Media & Communications

Telecopier No.:  203-956-4258

Telephone No.:  203-956-4785

(B)If to AIG Annuity Insurance Company,

Payment notices to:

AIG Global Investment Group

c/o The Bank of New York

Attn:  P & I Department

P.O. Box 19266

Newark, NJ  07195

Telephone:  718-315-3026

Fax:  718-315-3076

I-1

Duplicate payment notices and compliance information to:

AIG Annuity Reinsurance

c/o AIG Global Investment Group

2929 Allen Parkway, A36-04

Houston, Texas  77019-2155

Attn:  Private Placement Department

Fax:  713-831-1072

All other correspondence to:

AIG Global Investment Group

2929 Allen Parkway, A36-01

Houston, Texas  77019-2155

Attn:  Legal Department - Investment Management

Fax:  (713) 831-2328

(C)If to CoBank, ACB, at

CoBank, ACB

5500 South Quebec Street

Greenwood Village, Colorado 80111

Attention: Communications and Energy Banking Group

Telecopier No.:  303-224-2639

(D)If to Borrower, at

Otelco Inc.

505 3rd Avenue East

Oneonta, Alabama 35121
Attention: President

Telecopier No.:  205-625-3528

Telephone No.:  205-625-3574

(E)If to any other Credit Party, at

c/o Otelco Inc.

505 3rd Avenue East

Oneonta, Alabama 35121
Attention: President

Telecopier No.:  205-625-3528

Telephone No.:  205-625-3574

I-2

ANNEX J (from Annex A - Commitments definition)

to

CREDIT AGREEMENT

Lender(s):

GENERAL ELECTRIC CAPITAL CORPORATION
Revolving Loan Commitment:	$	7,500,000
Term Loan Commitment:	$	27,500,000
AIG ANNUITY INSURANCE COMPANY
Revolving Loan Commitment:	-0-
Term Loan Commitment:	$	30,000,000
COBANK, ACB
Revolving Loan Commitment:
(including a Swing Line Commitment of $1,500,000)	$	7,500,000
Term Loan Commitment:	$	22,500,000

J-1

Schedule A

Consolidated EBITDA - 2004

For the purposes of determining “Consolidated EBITDA” for  any period that includes any of the Fiscal Quarters ending on March 31, 2004, June 30, 2004, September 30, 2004 and December 31, 2004:

(a) Consolidated EBITDA for the Fiscal Quarter ending on March 31, 2004 shall equal the sum of the amounts appearing in rows 1, 2, and 3 under the heading “Consolidated EBITDA” in the table below;

(b) Consolidated EBITDA for the Fiscal Quarter ending on June 30, 2004 shall equal the sum of the amounts appearing in rows 4, 5, and 6 under the heading “Consolidated EBITDA” in the table below;

(c) Consolidated EBITDA for the Fiscal Quarter ending on September 30, 2004 shall equal the sum of the amounts appearing in rows 7, 8, and 9 under the heading “Consolidated EBITDA” in the table below; and

(d) Consolidated EBITDA for the Fiscal Quarter ending on December 31, 2004 shall equal the sum of the amounts appearing in rows 10, 11, and 12 under the heading “Consolidated EBITDA” in the table below; provided, however, that on or prior to March 31, 2005, Borrower shall deliver to Agent an officer’s certificate of the chief financial officer of Borrower that sets forth the amount representing the actual Consolidated EBITDA for the month ended December 31, 2004, and upon delivery of such officer’s certificate the estimated amount marked by an asterisk below in row 12 under the heading “Consolidated EBITDA” in the table below shall be deemed to be the amount appearing on such officer’s certificate.

Row/Month	Otelco Adjusted EBITDA				Mid Missouri Adjusted EBITDA			Consolidated EBITDA
1. Jan-04	$	2,094,856			$	478,640		$	2,573,496
2. Feb-04	$	2,137,300			$	520,179		$	2,657,479
3. Mar-04	$		2,052,154		$	440,464		$	2,492,618
4. Apr-04	$		2,003,014		$	438,490		$	2,441,504
5. May-04	$		2,092,524		$		454,263	$	2,546,787
6. Jun-04	$		2,069,299		$		478,781	$	2,548,080
7. Jul-04	$		1,994,850		$		589,414	$	2,584,264
8. Aug-04	$		2,046,157		$		494,926	$	2,541,083
9. Sep-04	$		2,317,250		$		532,469	$	2,849,719
10. Oct-04	$		2,114,262		$		374,064	$	2,488,326
11. Nov-04	$		2,022,878		$		455,864	$	2,478,742
12. Dec-04*	$			2,163,306	$		315,152	$	2,478,458	*
	$			25,107,850	$		5,572,706	$	30,680,556

J-2

EX-12.1

Exhibit 12.1

Statement Setting Forth Detail for Computation of Ratio of Earnings to Fixed Charges

(dollars in thousands)

	Year ended December 31,
	2000			2001		2002		2003		2004
Interest expense	$	6,333		$	8,065	$	4,585	$	3,384	$	3,679
Income before income taxes	(330		)	1,752		11,017		11,600		10,074
Ratio of earnings to fixed charges (1)	—			1.2		3.4		4.4		3.7

(1)           Ratio of income before taxes plus interest expense to interest expense. For the year ended December 31, 2002, we had a deficiency to cover fixed charges of $330,000.

EX-31.1

Exhibit 31.1

CERTIFICATION BY CHIEF EXECUTIVE OFFICER

I, Michael D. Weaver, certify that:

1.I have reviewed this annual report on Form 10-K of Otelco Inc.;

2.Based on my knowledge, this 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 report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a.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 registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   March 31, 2005

/s/ Michael D. Weaver

Michael D. Weaver

President & Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION BY CHIEF FINANCIAL OFFICER

I, Curtis L. Garner, Jr., certify that:

1.I have reviewed this annual report on Form 10-K of Otelco Inc.;

2.Based on my knowledge, this 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 report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a.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 registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   March 31, 2005

/s/ Curtis L. Garner, Jr.

Curtis L. Garner, Jr.

Chief Financial Officer

EX-32.1

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 of Otelco Inc. (the “Company”) on Form 10-K for the period ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael D. Weaver, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

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/ Michael D. Weaver

Michael D. Weaver

Chief Executive Officer

March 31, 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.

EX-32.2

  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 of Otelco Inc. (the “Company”) on Form 10-K for the period ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Curtis L. Garner, Jr., Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

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/ Curtis L. Garner, Jr.

Curtis L. Garner, Jr.

Chief Financial Officer

March 31, 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.