10-K

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

Form 10-K

Mark One
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For The Fiscal Year Ended December 31, 2008
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Transition Period from          to

Commission File Number 333-147720

Broadview Networks Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	11-3310798 (I.R.S. Employer Identification Number)
800 Westchester Avenue, Suite N501 Rye Brook, NY 10573 (Address of principal executive offices)	10573 (Zip Code)

(914) 922-7000

(Registrant’s telephone number, including area code)

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

NONE

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

NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o     No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.  Yes  þ     No o

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the 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.  þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer þ Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

NOT APPLICABLE because no public equity market exists for such shares, the aggregate market value of the common stock held by non-affiliates of the Company is not determinable.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

Class	Outstanding at March 24, 2009
Series A common stock, $.01 par value	9,342,880
Series B common stock, $.01 par value	360,050

DOCUMENTS INCORPORATED BY REFERENCE

NONE.

TABLE OF CONTENTS

			Page
PART I
	Item 1.	Business		1
	Item 1A.	Risk Factors		26
	Item 1B.	Unresolved Staff Comments		39
	Item 2.	Properties		39
	Item 3.	Legal Proceedings		39
	Item 4.	Submission of Matters to a Vote of Security Holders		40
PART II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		40
	Item 6.	Selected Consolidated Financial Data		40
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		43
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		61
	Item 8.	Financial Statements and Supplementary Data		62
	Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		92
	Item 9A.	Controls and Procedures		92
	Item 9B.	Other Information		93
PART III
	Item 10.	Directors, Executive Officers and Corporate Governance		93
	Item 11.	Executive Compensation		99
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		107
	Item 13.	Certain Relationships and Related Transactions, and Director Independence		110
	Item 14.	Principal Accountant Fees and Services		111
PART IV
	Item 15.	Exhibits and Financial Statement Schedules		112
	Schedule II	Valuation and Qualifying Accounts		112
EX-3.1: TENTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
EX-10.21: ESCROW AGREEMENT
EX-10.22: 1997 STOCK OPTION PLAN
EX-10.23: 2000 STOCK OPTION PLAN
EX-12.1: RATIO OF EARNINGS TO FIXED CHARGES
EX-21.1: SUBSIDIARIES OF BROADVIEW NETWORKS HOLDINGS, INC.
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION
EX-32.2: CERTIFICATION

In this report, references to “Broadview,” the “Company,” “we,” “us” and “our” refer to Broadview Networks Holdings, Inc. and its subsidiaries unless the context indicates otherwise. For periods prior to January 14, 2005, all references to “Broadview,” “we,” “us,” the “Company” or “our” are to Bridgecom Holdings, Inc. and its subsidiaries. In connection with the Bridgecom merger that occurred on January 14, 2005, Bridgecom Holdings, Inc. was deemed the accounting acquirer. Except as the context otherwise requires, references to “Eureka Acquisition” are to Eureka Acquisition Corporation, references to “InfoHighway” are to Eureka Broadband Corporation doing business as InfoHighway Communications, references to “ATX” are to ATX Communications, Inc., references to “Bridgecom” are to Bridgecom Holdings, Inc. and its subsidiaries, references to “MCG” are to MCG Capital Corporation, references to “Baker” are to Baker Communications Fund, L.P. and Baker Communications Fund II (QP) L.P., collectively, and references to “NEA” are to New Enterprise Associates VII, L.P., NEA Presidents Fund, New Enterprise Associates 9, L.P., NEA Ventures 1998, L.P. and New Enterprise Associates 10, L.P., collectively. References to “fiscal year” mean the year ending or ended December 31. For example, “fiscal year 2008” means the period from January 1, 2008 to December 31, 2008.

References to “2006 notes” are to the August 23, 2006 offering of $210.0 million aggregate principal amount of our 113/8% senior secured notes due 2012. References to “2007 notes” are to the May 14, 2007 offering of

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$90.0 million aggregate principal amount of our 113/8% senior secured notes due 2012. References to “notes” are to the 2006 notes and the 2007 notes. References to “2006 Transactions” are to (i) the offering of the 2006 notes and (ii) the ATX acquisition and the related 2006 financings, including (a) entry into our credit facility on August 23, 2006, (b) the repayment and termination of our senior secured credit facility then in effect, (c) the repayment of approximately $1.0 million of principal of our outstanding senior unsecured subordinated notes due 2009 and (d) the conversion of the remaining $73.8 million of principal outstanding under our senior unsecured subordinated notes due 2007 and 2009 into shares of convertible preferred stock and common stock. References to “2007 Transactions” are to (i) the offering of the 2007 notes and (ii) the InfoHighway merger. References to the “Transactions” are to the 2006 Transactions and 2007 Transactions.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains both historical and “forward-looking statements.” All statements other than statements of historical fact included in this report that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements including, in particular, the statements about our plans, objectives, strategies and prospects regarding, among other things, our financial condition, results of operations and business. We have identified some of these forward-looking statements with words like “believe,” “may,” “will,” “should,” “expect,” “intend,” “plan,” “predict,” “anticipate,” “estimate” or “continue” and other words and terms of similar meaning. These forward-looking statements may be contained throughout this report, including but not limited to statements under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These forward-looking statements are based on current expectations about future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control and could cause our actual results to differ materially from those matters expressed or implied by forward-looking statements. Many factors mentioned in our discussion in this report will be important in determining future results. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Forward-looking statements (including oral representations) are only predications or statements of current plans, which we review continuously. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties, including, among other things, risks associated with:

•  servicing our substantial indebtedness;

•  our history of operating losses;

•  the elimination or relaxation of certain regulatory rights and protections;

•  billing and other disputes with vendors;

•  failure to maintain interconnection and service agreements with incumbent local exchange and other carriers;

•  the loss of customers in an adverse economic environment;

•  regulatory uncertainties in the communications industry;

•  system disruptions or the failure of our information systems to perform as expected;

•  the failure to anticipate and keep up with technological changes;

•  inability to provide services and systems at competitive prices;

•  difficulties associated with collecting payment from incumbent local exchange carriers, interexchange carriers and wholesale customers;

•  the highly competitive nature of the communications market in which we operate including competition from incumbents, cable operators and other new market entrants, and declining prices for communications services;

•  continued industry consolidation;

•  the intellectual property infringement litigation involving the provision of Voice over Internet Protocol (“VoIP”) services;

•  restrictions in connection with our indenture governing the notes and credit agreement governing the credit facility;

•  government regulation;

•  increased regulation of Internet-protocol-based service providers;

•  vendor bills related to past periods;

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•  the ability to maintain certain real estate leases and agreements;

•  interruptions in the business operations of third party service providers;

•  the loss of our customers;

•  limits on our ability to seek indemnification for losses from individuals and entities from whom we have acquired assets and operations;

•  disruption and instability in the financial markets;

•  the financial difficulties by others in our industry;

•  the failure to retain and attract management and key personnel;

•  the failure to manage and expand operations effectively;

•  the failure to successfully engage in future acquisitions;

•  misappropriation of our intellectual property and proprietary rights;

•  the possibility of incurring liability for information disseminated through our network;

•  service network disruptions due to software or hardware bugs of the network equipment; and

•  fraudulent usage of our network and services.

Because our actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements, we cannot give any assurance that any of the events anticipated by these forward-looking statements will occur or, if any of them do, what impact they will have on our business, results of operations and financial condition. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We do not undertake any obligation to update these forward-looking statements to reflect new information, future events or otherwise, except as may be required under federal securities laws.

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PART I

Item 1.   Business

Company Overview

We are a leading competitive communications solutions provider, in terms of revenue, offering innovative services and applications to meet the evolving requirements of small and medium sized enterprise customers spanning numerous industry sectors. We offer many of our services on a national basis, with a focused network presence in 20 markets across 10 states throughout the Northeast and Mid-Atlantic United States, including major metropolitan markets such as New York, Philadelphia, Baltimore, Washington, D.C. and Boston. Our network architecture pairs the strength of a traditional infrastructure with an Internet-Protocol (“IP”) platform, enabling the industry’s dynamic shift to integrated IP services. While offering traditional voice and data services, our flagship products integrate traditional voice services, including local and long distance, with high speed data services over our IP infrastructure, encompassing Voice Over Internet Protocol (“VoIP”), hosted IP PBX services, Multiprotocol Label Switching (“MPLS”), unified messaging, managed services, cabling, hardware, professional services and other value-added services, delivered via T1 and unbundled network element loops. In addition, our network topology incorporates metro Ethernet access technology, enabling us to provide multi-megabit Ethernet services via unbundled network element loops to customers served from selected major metropolitan collocations. These service offerings are provided to a wide array of industries including professional services, manufacturing, real estate, retail, automotive, non-profit groups and many others.

For the year ended December 31, 2008, we generated revenues of $500.7 million. For the year ended December 31, 2008, revenues from retail end-users represented approximately 86.6% of our total revenues, revenues from wholesale end-users represented approximately 3.8% of our total revenues and revenues from carrier access and reciprocal compensation represented approximately 5.7% of our total revenues. We recorded net losses of $41.5 million in 2006, $65.5 million in 2007, and $42.9 million in 2008. In addition, as of December 31, 2008, we had $336.8 million of total outstanding indebtedness.

We target small and medium sized business or enterprise customers located primarily within the footprint of our switching centers and our 260 collocations in 20 Northeast and Mid-Atlantic regional markets. We focus our sales efforts on communications-intensive business customers who require multiple products that can be cost-effectively delivered on our network. These customers generally purchase higher margin services in multi-year contracts resulting in higher customer retention rates. As of December 31, 2008, we provided services to approximately 70,000 business customers and had approximately 70% of our total lines provisioned on-net.

The company, doing business as Broadview Networks since its acquisition in 2005, was founded in 1996 as Bridgecom International, Inc. to take advantage of the competitive opportunities in the local exchange communications market created by the Telecommunications Act of 1996 (the “Telecommunications Act”). Since then, management has responded to market and regulatory changes by strategically deploying facilities and merging with or acquiring companies with the necessary footprint, facilities and customer base to sustain and organically grow our business. We merged with Broadview Networks on January 14, 2005 to transfer our small and medium enterprise customers clustered in the New York metropolitan area to our own switches, gaining improved margins, more control over service delivery and more comprehensive customer care.

On September 29, 2006, we acquired ATX, which has provided us with broader opportunities in our existing markets and access to new markets and larger business customers. ATX delivered voice and data services, as well as hosted and managed communications solutions, to business customers throughout the Mid-Atlantic, including Southeastern Pennsylvania, with a concentration in the Philadelphia metro market. ATX’s market, combined with Broadview’s existing market strength in the New York metro area, made us one of the market leaders in the Northeast and Mid-Atlantic corridor. The ATX acquisition also enabled us to extend our geographic footprint within the Mid-Atlantic region and to serve additional cities such as Baltimore and Washington, D.C. ATX’s advanced data and managed service offerings enhanced our suite of products and services. In addition, ATX’s ability to provide high-capacity voice and data services to business customers complemented our focus on providing integrated T-1-based services to new and existing customers.

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On May 31, 2007, we acquired InfoHighway. InfoHighway delivered voice and data services, as well as hosted and managed communications solutions, to business customers in the Northeastern United States. InfoHighway’s network-based solutions include a wide range of hosted private branch exchange solutions (“HPBX”), converged services based on VoIP technology and high-bandwidth Internet access products. InfoHighway had large concentrations of customers in the New York metropolitan market, including Northern New Jersey. In addition, InfoHighway’s approximately 500 lit buildings allowed us access to customers over a cost-effective shared infrastructure. The acquisition of InfoHighway has resulted in greater business density and network utilization.

On September 18, 2008, we acquired the assets of Lightwave Communications, LLC (“Lightwave”) and its affiliate Adera, LLC (“Adera”). Lightwave is a competitive local exchange carrier operating primarily in the Mid-Atlantic region of the United States. We expect this acquisition to complement our acquisition of ATX and enable us to further penetrate into the Mid-Atlantic region.

We believe our network assets and facilities have the breadth and flexibility to address the complex voice and data demands of our target customers. Our network is comprised of Nortel DMS-500 and Lucent 5ESS multi-service switches, an Alcatel DEX switch, MetaSwitch Internet-Protocol softswitch Call Agents and gateways, a Lucent Compact Switch, Juniper M-Series and Cisco Internet-Protocol routers, Actelis ML Series and Hatteras Networks Ethernet access systems, 260 collocations in the central offices of Verizon Communications, Inc. and its affiliates (collectively, “Verizon”) and approximately 3,000 route miles of metro and long-haul fiber. By providing services utilizing our own and leased facilities, we believe we can (i) enhance service quality and reliability, (ii) maintain attractive margins and cash flow, (iii) provide advanced services, (iv) have greater control over customer care and service delivery and (v) reduce exposure to regulatory risks. We access our customers using unbundled network elements (including unbundled network element loops), special access circuits and digital T-1 and DS3 transmission lines for our on-net end-users. In addition, we have commercial agreements with Verizon and AT&T Inc. (“AT&T”), under which we offer off-net alternatives.

We purchase and install our own switching and collocation equipment and use our owned metro and long-haul fiber or lease the required transmission capacity. We occasionally purchase fiber transmission capacity, but only after achieving high utilization of our leased transmission capacity. We generally deploy capital after reaching a sufficient critical mass of customers, reducing the risk of stranding assets in under-utilized markets thereby recouping our investment in a shorter period of time.

Finally, we have cost-effectively developed a scalable, proprietary integrated operational support system (“OSS”) that seamlessly integrates real-time management and reporting of sales activities, order entry and tracking, network inventory and service provisioning/delivery, billing, customer care, network management and trouble reporting and automated testing and repair. In addition, our OSS delivers sophisticated on-line tools to our direct, agent and wholesale sales executives, as well as to our customers, to directly input, manage and control their orders, bills and services in real time. Our integrated OSS is a core component of our success, enabling us to efficiently and effectively operate our existing business, evolve to integrate new technologies and service offers and integrate acquisitions.

Industry Overview

The market for communications services, particularly local voice, is dominated by the incumbent local exchange carriers in the United States. These carriers consist primarily of the Regional Bell Operating Companies (“RBOCs”), which include Verizon, AT&T, Inc. (“AT&T”) and Qwest. While the RBOCs own substantially all of the local exchange networks in their respective operating regions, competitive communications providers hold significant market share. According to data from the Federal Communication Commission (“FCC”), as of December 31, 2007, competitive communications providers served 28.7 million, or 18.1%, of end-user lines in the United States. In addition, the number of competitive communications providers in the United States has been reduced as the industry continues to consolidate. Since June 2005, we believe over 60 mergers and acquisitions have been completed. While the RBOCs provide a broad range of communications services, we believe that they have neglected the small and medium sized business segment due to an increased focus on the global enterprise business segments of the market, increased competitive pressures in the residential market and the integration of recent mergers and acquisitions. We believe this lack of focus from the RBOCs has created an increased demand for

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alternatives in the small and medium sized business communications market. Consequently, we view the market as a sustainable growth opportunity and have therefore focused our strategies on providing small and medium sized businesses with a competitive communications solution.

Our Strengths

We believe that we have the following competitive strengths:

Significant Growth Potential of Our Newer Product Offerings.  We believe that our current market penetration and ability to deliver a complete end-to-end communications solution to small and medium sized business customers, including access, voice and data services, equipment, applications and professional services, provides us with significant growth potential. According to data prepared by the FCC, as of December 31, 2007 there are approximately 16.5 million business lines in our target market. We focus our sales efforts on communications intensive business customers who require multiple services and complex communications solutions. We believe these organizations have historically been underserved by the Regional Bell Operating Companies and have limited alternatives for high quality integrated communications products and services. We believe that this demand, combined with our current product and service offerings, presents us with significant growth opportunities which will enable us to increase our market penetration within our operating footprint. As of December 31, 2008, we served approximately 70,000 business customers and approximately 800,000 line equivalents in 20 markets across 10 states throughout the Northeast and Mid-Atlantic United States, including major metropolitan cities such as New York, Philadelphia, Baltimore, Washington, D.C. and Boston.

Experience Integrating Companies and Providing New Services.  Since our inception, we have acquired and successfully integrated companies and assets into our operations. We have cost-effectively migrated off-net customers to our network, integrated OSS infrastructure and aligned cost structures. For example, our experience and operating platform allowed us to successfully integrate the operations and customers of ATX and InfoHighway in a timely and cost-efficient manner, while continuing to explore other strategic acquisition opportunities, including our recent acquisition of Lightwave’s assets. The scalability and breadth of our network and integrated OSS infrastructure enables us to increase our customer base with minimal incremental capital and personnel investment.

Unique Integrated OSS Infrastructure.  We believe that our integrated OSS differentiates our operations in the market and provides us with a sustainable advantage over our competition. Our integrated OSS seamlessly combines and automates the order entry and provisioning process in real-time. The system delivers customer- and sales channel-facing web portals, extensive sales automation tools, efficient electronic order entry, flow-through network service provisioning, high volume and multi-location billing, alarm and event surveillance, performance management, trouble ticketing and automated service testing and repair. Our customers have the ability to customize and transform their bills into effective management reports for monitoring costs and usage. The summary billing information and the detailed billing data are available on our e-Care customer web portal and can be downloaded into data processing formats for further analyses. We have also developed a user-friendly and fully automated platform for our direct and indirect sales forces, which allows them to enter and track orders, trouble tickets and commissions online, thereby allowing them to effectively service and manage our customers. We continually expand and enhance the capabilities of our OSS, providing ever more sophisticated tools for our direct and indirect sales executives and customers to order, monitor and manage their services and billing information, extending our advantage.

Award Winning Customer Service.  Our highly personalized approach to customer service is one of the primary contributors to our customer retention. We closely monitor key operating and customer service performance metrics. Capturing and analyzing this information allows us to improve our internal operating functions, drive increased profitability and quickly respond to changes in demographics, customer behavior and industry trends. Our customer service and account management personnel continually monitor and analyze customer service trends, identify at-risk customers and develop and implement retention strategies and Company-wide programs that address the changing needs of our customer base. As a result of our customer service initiatives, we received numerous quality awards, including being certified as a Center of Excellence by the Center for Customer Driven Quality at Purdue University, being awarded the American Business Award for Best Customer Service Organization and winning the Stevie^® Award for Best Sales Support Team.

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Facilities-Based Network Infrastructure.  Our network has the ability to deliver traditional services, such as Plain Old Telephone Service (“POTS”) and T-1 lines, as well as Digital Subscriber Line (“DSL”) and next generation services, such as dynamic VoIP integrated T-1s, hosted VoIP solutions, Ethernet in the First Mile and MPLS Virtual Private Networks. We provide services to our customers primarily through our network of owned telecommunications switches, data routers, application servers and related equipment and owned and leased communications lines and transport facilities. As of December 31, 2008, approximately 70% of our total lines were on-net. We have deployed an IP based platform that facilitates the development of next generation services and the migration of our traffic and customer base to a more cost-effective and efficient IP based infrastructure, which enhances the performance of our network.. Contrary to many providers of VoIP and IP based services, we do not rely on the public internet and therefore are able to ensure quality of service and differentiated services by exercising direct control of our IP infrastructure.

Experienced and Proven Senior Management Team.  Our team of senior executives and operating managers has significant experience in the communications industry and extensive knowledge of our local markets. Members of our executive management team have an average of 20 years of experience in managing communications companies. In addition to industry knowledge, members of our management team have public company operational experience and expertise in integrating acquired facilities with our existing facilities. In connection with our many mergers and acquisitions, our senior management team successfully consolidated back-office systems and processes into a single OSS, integrated operations and cultures, combined products, strategies and sales channels, and migrated more than 115,000 off-net lines to our network in a timely and cost-efficient manner.

Our Markets

We have focused our network deployment and marketing efforts in markets throughout the Northeast and Mid-Atlantic United States, where Verizon and AT&T are the Regional Bell Operating Companies. According to data prepared by the FCC as of December 31, 2007, there are approximately 16.5 million business lines in our target geographic market. We target small and medium sized business or enterprise customers located within the footprint of our switching centers and our approximately 260 collocations. We believe small and medium sized business customers have historically been underserved by the RBOCs. In addition, we believe our next generation services will allow us to continue to gain market share and enter into new markets without abandoning our core installed base. We serve the following markets:

Region	Market
New York Metro	New York City Long Island Westchester
Pennsylvania	Allentown Harrisburg Philadelphia
Upstate New York	Buffalo Syracuse Albany
Massachusetts	Boston Metro Western MA
New Jersey	Northern NJ Southern NJ
Rhode Island	Rhode Island
New Hampshire	New Hampshire
Maryland	Baltimore
Delaware	Delaware
District of Columbia	District of Columbia
Northern Virginia	Northern Virginia
Connecticut	Connecticut

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Our Customers

Our customer base consists primarily of small and medium sized business customers in 20 markets across 10 states throughout the Northeast and Mid-Atlantic United States, including major metropolitan markets such as New York, Philadelphia, Baltimore, Washington, D.C. and Boston. We also provide services to residential customers, although we no longer actively market to new residential accounts. Approximately 87% of our revenues are generated from retail end-user billing.

Our retail business customers represent a wide variety of industries, including healthcare services, education, personal services, retail, auto (dealers/service/repair), real estate, non-profits, associations and professional services. As of December 31, 2008, no single retail customer represented more than 1% of our total revenue.

Our wholesale line of business serves other communications providers with voice and data services, data collocation, and other value added products and services.

Products and Services

We provide our customers with a comprehensive array of circuit-switched and IP-based voice and data communications services, including local and long-distance voice services, integrated voice and data services, Internet services and private data networking as well as value-added products and services, such as telecommunications hardware, hosted services and managed network solutions. Our business is to deliver end-to-end communications solutions to our target customers, with a focus on helping them solve their critical and complex infrastructure, productivity and security needs through a combination of products and services.

We leverage the scalability and broad technology base of our network architecture to deliver products that address the increasingly complex communications needs of our customers. MPLS and softswitch equipment deployed throughout the network allows us to deliver IP-based services and provide our customers with cost-effective alternatives to traditional products. Our products and services are offered with a range of alternatives and customized packages, allowing us to meet the specific requirements and objectives of a larger number of potential business customers. Our sales and marketing initiatives focus on bundling our products and services into a single competitively priced solution for each customer. This bundling adds value for our business customers and increases the overall profitability of our operations.

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The following table summarizes our product and service offerings:

Value-Added Products and Services	Data Services	Voice Services
• Hosted VoIP solutions • Automated attendant • Unified messaging • Telecommuting • Integrated services • Traditional and converged telephone systems • Enhanced e-mail security • Managed firewall • Content filtering • Managed Wide Area Network • Local Area Network/Wide Area Network integration • Inside wiring • Data backup and recovery • Disaster recovery services • Unified Communications solutions • Fixed-Mobile Convergence solutions	• Dedicated Internet T-1 access • Broadband Internet access • Dial-up, DSL data service and Symmetric DSL Internet access • E-mail • Collocation • IP Virtual Private Networks (MPLS and Remote Access Switching) • Metro Ethernet Services	• Local, regional, domestic and international services • T-1 Primary rate interface and Session Initiation Protocol services • Private line • Voicemail • Caller identification • Call waiting • Call forwarding • Conference calling • VoIP • Toll free services

Value-Added Products and Services

Leveraging our infrastructure, systems, technology, applications and vision, we provide advanced integrated product suites that deliver the most value to our customers, simplifying their businesses and providing many operational and economic benefits.

Hosted VoIP Solutions.  One of our fastest growing product lines, our hosted VoIP solutions, packages business-grade VoIP with advanced telephone equipment and managed network security into innovative and feature-rich solutions for unified communications. Built on redundant, carrier-grade platforms for better reliability, security, flexibility and scalability, our hosted VoIP solutions leverage advanced VoIP functionality and QoS management while covering all service, equipment and management. Our customers gain productivity, bridging telephone and computer communications through a converged IP network, resulting in more efficient use of bandwidth, intuitive management tools, 24×7 expert network monitoring, and ongoing product upgrades and enhancements that are all included in the solution. Our hosted VoIP offering also enables centralized control for administrators, including streamlined implementation of everyday configuration needs through a secure and user-friendly Internet-based web portal. Disaster avoidance and recovery capabilities are also integrated into the service package, providing for business continuity in the event of customer location outages and other scenarios. Successful implementation, whether to retire an older system or to prepare an organization for migration to next generation services, is enhanced by a thorough process of gathering detailed requirements, evaluating network readiness, assessing quality based on qualitative and quantitative measurements, and conducting administrator and end-user training for each customer deployment.

Integrated Services.  We offer integrated voice and data packages to small and medium sized businesses, including a variety of service options designed to accommodate our customers’ needs. Our integrated offerings result in significant performance and cost efficiencies compared to discrete services purchased from separate

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competitive carriers. We also offer multiple products in a bundle offering delivery over a common circuit. These integrated packages are our primary product offerings, driving increased revenue per customer and higher customer retention. We offer a dynamic IP-based Integrated T-1 service leveraging our MetaSwitch IP-based Call Agents and softswitch gateways and our MPLS network to deliver highly flexible voice and data services over an IP-based T-1.

Managed Services.  Our managed services include web hosting services, managed IP Virtual Private Networks, managed firewalls, managed Wide Area Network services, managed e-mail security, content filtering and online data backup and recovery. These solutions are designed to allow IT organizations and leaders within companies to outsource certain day-to-day management and ongoing maintenance of these mission critical applications, without sacrificing vision or control, in order to enable typically over-extended internal resources to focus on the core objectives of the business. While improving security and productivity and simultaneously lowering total cost of ownership for the customer, these services enhance the depth and profitability of our customer relationships.

Data Services

Our data service offerings are designed to provide a full range of services targeted at businesses that require single or multipoint high-speed, dedicated data connections. We provide dedicated transmission capacity on our networks to customers that desire high bandwidth data links between locations, or to the Internet. Internet connections are provided via DSLs, T-1, DS3 or Ethernet, depending on our customer’s bandwidth and security needs. Point-to-point services include MPLS, which is often used as a frame relay replacement. In addition, our IP Virtual Private Network data network services include multiple classes of service for differentiated levels of quality of service, or QoS, service level agreements and security. In addition, through arrangements with national IP network providers, we offer these services on a nationwide basis to those of our business customers who have locations outside of our network footprint. These services enable customers to deploy tailored, IP-based business applications for secure internal enterprise, business-to-business and business-to-customer data communications among geographically dispersed locations, while also affording high-speed access to the Internet.

Voice Services

We provide customized packages of voice services to meet our customers’ voice communication needs. We offer local telephone services, including basic voice services and vertical features such as call forwarding, call waiting, call transfer, calling number identification/calling name identification plus enhanced services such as voice mail and direct inward dialing. Our services are provided by leveraging our circuit-switched and IP-based network infrastructure. We utilize unbundled network element loops, digital T-1 lines and, in certain instances, our commercial agreements with Verizon and AT&T to access our customers. In addition to our local service offerings, we offer a range of dedicated long distance services to customers connected to our network. These include services that originate and terminate within the same local transport area and in different local transport areas, international services, one plus outbound services and inbound toll-free services. We also offer ancillary long distance services such as operator assistance, calling cards and conference calling. In instances where a customer may have locations outside our network footprint, preventing us from connecting directly to our network, we resell long distance services of other communications carriers through agreements we have with those carriers. We generally provide our long distance services as part of a bundle that includes one or more of our other service offerings.

Sales and Marketing

Our retail sales organization consists of two separate sales channels: direct sales and agent partners. Each channel enables us to provide a bundled product offering of voice and data communications, hardware and managed network services through a consultative analysis of each customer’s specific needs. By developing a detailed proposal based on each customer’s individual requirements for network configuration, service reliability, future expansion and budget constraints, we deliver the quality, reliability and value that customers demand. Our pricing and sales commission plans provide significant incentives for sales of higher-margin T-1-based products in our on-net territories for two- and three-year terms.

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Our largest sales channel is our direct sales division. As of December 31, 2008, this group consisted of approximately 200 quota-bearing sales representatives. This group focuses primarily on selling to new small and medium sized business end-user customers using vertical marketing and networking strategies to maximize their results.

Our agent division’s main objective is to leverage our strengths to specific market segments through independent contractors. The agent division focuses on customers who are already aligned with a communications consultant that may not provide many of the services we provide and who are looking to their consultant for a solution. Currently, our agent division maintains approximately 300 relationships.

In early 2009, we shut down a third sales channel. The inside sales channel consisted of third-party marketing firms and internal telemarketing sales representatives acquired in connection with the Lightwave acquisition who focused on smaller customers. These customers were slightly outside of our target market, had lower customer retention, had higher bad debt and it was no longer cost-effective to maintain efforts to acquire more of them.

In addition to our retail channels, we offer services to other carriers and resellers through our Wholesale division. The Wholesale division leverages our network strength and our leading back office automation systems to deliver a reseller-branded suite of voice, data, IP and integrated services for resale, where the reseller retains the customer relationship and is responsible for sales, customer care and billing.

Marketing support is provided to our sales channels in many forms. In addition to printed materials and sales promotions, our sales professionals are provided with qualified leads and vertical marketing programs. There are two referral programs to generate leads for our direct sales channels. The Business Community Partnership program enables individuals and businesses to earn upfront and residual payments by providing leads that result in sales by the direct sales force. We are also a sponsor of various associations. Brand recognition is developed through press releases, media advertising, and editorial coverage in industry publications. We also participate in both national and local trade shows and various other events. We build rapport and goodwill with both customers and prospects through a sports marketing program.

Customer Service and Retention

Our customer relationship management division uses a multi-tiered, multi-channel level of support to target specific levels of service to our retail and wholesale customers as well as our multiple sales distribution channels. Since 2004, our customer relationship management division has been certified as a Center of Excellence by Purdue University’s Center for Customer Driven Quality utilizing Benchmark Portal. This certification utilizes an independent audit of efficiency and effectiveness measures ranked among telecommunications industry peers. In 2006, we also won the American Business Award for Best Customer Service Organization. Our inbound contact center, 1-800-BROADVIEW, is staffed 24 hours per day, 7 days per week, 365 days per year with customer care representatives who handle all aspects of a customer’s communications including billing questions, payments, repairs, changes of service, and new service requests. Redundant physical facilities are staffed and operated in Pennsylvania and New York with automatic cut-over capabilities. All facilities are staffed by specialists who are trained to handle all of our customers’ requests.

Our customer relationship management division also provides dedicated personalized support to our larger customers through our Enterprise Service Group. Dedicated representatives are assigned to each customer and the customer’s invoice has the name of their representative and direct toll-free number on it. In addition, our Enterprise team is staffed with Enterprise Project Managers who are dedicated to delivery of new products and services to these customers. Our largest accounts also have field support from the total solutions management team. Our total solutions management teams call on customers in person to address service issues and provide consultation and to market additional products and services.

The direct and agent sales distribution channels are supported by a dedicated team of individuals focused on the success of their assigned sales channel. Sales regions have dedicated service representatives who handle service requests from the field direct sales and agent sales forces. In 2009, we won the 2009 Stevie Award for Best Sales Support Team. The award specifically recognized the achievements of Broadview’s commission team, which supports multiple sales channels including direct, agent and affinity partners. In 2008 the team overhauled

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Broadview’s legacy commissioning systems resulting in expedited payment schedules, reduced processing times, and enhanced reporting capabilities. The team’s outstanding performance contributed to greater employee, agent and partner satisfaction.

Providing a superior customer experience is a major focus of our customer relationship management team. We collect statistical and direct feedback from customers regarding their recent service experience and use the information to refine and improve our processes as well as measure the effectiveness of the organization. We conduct in-depth customer disconnect and satisfaction studies to understand key drivers of our customer’s satisfaction, loyalty, and reasons for canceling their service. We also use a cross-functional churn analysis task force that analyzes customer churn and patterns and makes recommendations to senior operations management on ways to improve our customers’ experience.

Our customer relationship management division utilizes various technologies to gain efficiencies and improve the level of service and options for customers. In addition to having the option to speak to a representative 24/7, customers also have several self-service options. Our interactive voice response system, known as Express Care, provides automated telephone billing and collections options as well as network outage notifications. The system also utilizes value based routing to prioritize high value customers as first priority response. Our e-Care web-based options allow customers the same billing and payment options as well as the ability to download and analyze billing detail and copies of their bill. Our new eCare Enterprise web-based application provides even more customer self serve capabilities, including the ability to enter and track trouble tickets, and to perform toll free and DID number rerouting, all in real time. Customers can also contact customer relationship management through the contact manager application on the e-Care site. Customer relationship management also utilizes a fully automated system that continually updates customers about ongoing repair issues via e-mail or outbound phone call.

Network Deployment

Our network architecture pairs the strength of a traditional infrastructure with an IP platform, built into our core and extended to the edge, to support dynamic growth of VoIP, MPLS and other “next generation” technologies. In addition, our network topology incorporates metro Ethernet access in key markets, enabling high bandwidth “first-mile” connectivity directly to strategically located business opportunities.

Voice and Data Switches

We currently have Nortel DMS-500 and Lucent 5ESS multi-service switches, an Alcatel DEX switch, MetaSwitch IP call agents and softswitch gateways and a Lucent Compact Switch serving multiple markets in ten states. Our switches offer a complete suite of voice services, delivering local, long distance, Centrex services and a full suite of Class services that our customers currently utilize. We deploy Cisco MGX/BPX ATM switches and IP and Ethernet routers and switches from Cisco, Foundry Networks and Extreme Networks.

Collocations and Edge Equipment

We are currently collocated in approximately 260 Verizon end offices in the New York City metro area, Upstate New York (including Syracuse, Albany, Buffalo), Massachusetts, Rhode Island, New Hampshire, New Jersey, Pennsylvania, Maryland, Delaware and Washington, D.C. The Zhone Universal Edge UE9000, the CTDI Intelligent Multi-service Access System, or IMAS, and the Lucent AnyMedia Access System deployed in incumbent local exchange carrier collocations, allow us to deliver POTS, T-1 voice, Primary Rate Interface T-ls, integrated voice and data T-ls and a full suite of DSL high speed data services using incumbent local exchange carrier unbundled network element loops. We have deployed Actelis ML Series and Hatteras Networks Ethernet access systems in certain major metropolitan collocations allowing us to provide multi-megabit Ethernet access services. We will continue to expand this technology in other service areas.

On-Net (“Lit”) Buildings

With the acquisition of InfoHighway, we have approximately 500 commercial buildings in metro New York and Washington, D.C., which have Ethernet switches and routers, as well as integrated access devices. Voice, data and Internet services are provided directly to customers within the buildings over in-building wiring and optical

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fiber which allows for rapid installation of services. We manage the riser plant within some of these buildings on behalf of the landlords under contracts.

ATM Backbone Network and IP Network Equipment

We have deployed Cisco Systems’ MGX/BPX family of ATM edge/core switches to power our regional and inter-city ATM backbone network. The MGX/BPX product family provides multi-service switching capability to support voice, data, and video applications. We use various Cisco and Juniper core and edge aggregation routers to support our various IP-based services. Our current offering of IP services include dedicated Internet access and site to site Virtual Private Networks, including MPLS based services providing multiple classes of services. We deploy the Redback SMS-1800 Broadband Access Termination system to support Symmetric DSL and DSL data services.

Fiber Network and Fiber Equipment

We operate a multi-state fiber network consisting of local metropolitan fiber rings and interstate long haul fiber systems. The fiber network consists of our owned fiber, dark fiber, Indefeasible Rights to Use, and light-wave Indefeasible Rights to Use from multiple providers. We have approximately 3,000 route fiber miles consisting of both our owned fiber and dark fiber, pursuant to Indefeasible Rights to Use. We currently have Lucent FT2000 OC48, Lucent OLS 40G DWDM systems and Turin Networks optical transport systems in operation on the fiber network.

Feature/Application Servers

We have deployed Hosted VoIP solutions, encompassing Hosted IP Key and Hosted IP private branch exchange feature/application servers from Natural Convergence and Broadsoft, respectively. These platforms provide enhanced applications to our business customers and are a highly desirable alternative to purchasing and operating their own key systems or private branch exchanges. In conjunction with these hosted services, we offer our customers advanced Mitel and Polycom IP station sets. For those customers who want to own and operate their own IP private branch exchanges, we offer the Nortel BCM product line, Mitel 3300 IP PBX products and the Cisco Call Manager product line. In addition, we provide Unified Messaging services through our Common Voices NowMessage and Broadsoft Messaging platforms.

Customer Access Methods

Our strategy for acquiring new customers and expanding our market share is designed to generate revenues from targeted customers before we deploy significant network capital. Thus, we acquire customers in targeted geographic areas using off-net access methods, and then build out collocations based on our penetration in specific Regional Bell Operating Company central offices. This strategy enables us to take advantage of the pre-existing switching and transport facilities of the Regional Bell Operating Company and/or other access providers, thus minimizing our need to spend capital in advance of orders and reducing our risk of inefficient capital investments or stranded plant. Once we reach sufficient customer density within a Verizon central office, we generally deploy the necessary equipment and facilities to allow us to provide on-net service in that Verizon central office.

When constructing our network, we retained ownership of the intelligent components such as switches, network electronics and software, but lease the readily available transport elements. This strategy provides us with significant cost and time-to-market advantages. By owning our switches, we can configure our network to provide high performance, high reliability and cost-effective solutions for our customers’ needs. By leasing our transport lines, we can reduce upfront capital expenditures, and offer service ubiquitously within a collocation, which leads to a larger addressable market than business models that are based solely and largely on building dedicated facilities to specific customer locations.

The deployment of on-net facilities allows us to improve margins, provides the greatest flexibility in offering product solutions and provides us with greater control over surveillance and repair of facilities. As of December 31, 2008, we had approximately 260 collocations that allowed us to serve approximately 70% of our total lines through an on-net arrangement, either T-1 or unbundled network element loops.

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We serve our customers through one or more of the following access methods:

On-net T-1:  On-net T-1 is a leased high capacity connection directly from our collocation equipment to the customer’s location. This T-1 can provide voice, data or integrated communications services to our customers. This access method is the fastest growing segment of our business.

On-net unbundled network element loops:  To provide voice lines to residential and small business accounts, we collocate our access equipment in a Verizon central office and lease unbundled network element loops from our collocation to the customer premise. These on-net loops can provide residential or business POTS, or DSL data service, which can deliver voice and data over a single network loop. In addition, through the use of our Actelis ML-series and Hatteras Networks Ethernet access systems, we are providing T-1 equivalent and multi-megabit Ethernet access services via unbundled network element loops to customers served from selected major metropolitan collocations, significantly increasing our margins and expanding our service offerings.

Off-Net:  Off-net access methods are used to implement our strategy by acquiring customers located in Verizon central offices in which there is not yet sufficient density to build a collocation. Off-net access is also used to be able to serve all locations of a multi-location account. There are two major forms of off-net access. The first is utilizing the transport and/or loops and facilities of a communications provider other than the RBOC. We have contracts with several major providers of access and transport. The second is provided through RBOCs. We have entered into commercial agreements with Verizon and AT&T which guarantee multi-year availability and predictable pricing for the required access and associated features needed to provide off-net services to our end-users. Our commercial agreements with Verizon extend through 2010 and our commercial agreement with AT&T extends into June 2009.

Service Agreements with Carriers

We obtain services from Verizon through state-specific interconnection agreements, commercial agreements, local wholesale tariffs and interstate contract tariffs. We currently have interconnection agreements in effect with Verizon for, among others, the states of New York, Massachusetts, New Jersey, Pennsylvania, Virginia, Maryland, Delaware, New Hampshire, Rhode Island and Washington, D.C. Though the initial terms of all of our interconnection agreements have expired, each of these agreements contains an “evergreen” provision that allows the agreement to continue in effect until terminated. We are in the process of renegotiating with Verizon the terms of our multiple New York interconnection agreements. Following its acquisition of Verizon’s network assets in the states of Vermont, New Hampshare and Maine, the Verizon interconnection agreements for those states were assigned by Verizon to Fairpoint and we are in the process of negotiating commericial agreements with Fairpoint for those states. Our commercial agreements with Verizon allow us to purchase off-net services from Verizon at unbundled network element — platform rates subject to a surcharge that is now fixed for the remainder of the term of the agreement. The principal Verizon commercial agreements expire in 2010, but are subject to earlier termination in certain circumstances, such as a material breach by us or modification of the agreement by state regulation. We are currently in negotiations with Verizon to extend our principal commercial agreement. We are required under two of our three remaining commercial agreements with Verizon to maintain certain volumes of loops on a “take-or-pay” basis. Our Verizon interstate contract tariffs allow us to purchase high capacity loops and transport at discounted rates. The interstate contract tariffs require us to maintain a certain number of channel terminations on a “take-or-pay” basis. We have entered into five- and seven-year interstate contract tariffs for Verizon’s southern and northern territories. For the State of Connecticut, we have both an interconnection and a commercial agreement with Southern New England Telephone Company, a subsidiary of AT&T, the latter providing us with access to off-net services. This agreement expires in June 2009. We are currently in negotiation with AT&T to extend the SNET commercial agreement.

We maintain agreements with a number of other carriers for the provision of network facilities, including fiber routes and high capacity loops and transport, and local voice and data services. These agreements often provide cost-effective alternatives to Verizon-provided services. We also maintain agreements with a number of different long distance carriers. Under the terms of these long distance contracts, after meeting certain minimum purchasing requirements, we are able to choose which services and in what volume we wish to obtain the services from each

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carrier. Finally, we maintain agreements with various entities for ancillary services such as out-of-band signaling and directory assistance.

For more information, see “Risk Factors — Our ability to provide services and systems at competitive prices is dependent on our ability to negotiate and enforce is dependent on our ability to negotiate and enforce interconnection and other agreements.”

Integrated OSS

We have developed and continue to improve and update our integrated sales automation, order processing, service provisioning, billing, payment, collection, customer service, network surveillance, testing, repair and information systems that enable us to offer and deliver high-quality, competitively priced telecommunication services to our customers. Through dedicated electronic data connections with the Regional Bell Operating Companies, from which we purchase local access services including unbundled network element loops, and our commercial agreements, resale services and T-1, as well as connections to our long distance carriers we have designed our systems to process information on a “real time” basis.

Our core OSS combines extensive internal developments with our superior licensed software and applications, all internally integrated through in-house development resources. Software supporting business processes and operations has been developed in-house largely in Java, with some front end systems written in Microsoft’s .net, supporting both portability and scalability. Systems supporting network management and operation are composed of licensed core applications platforms that have been extensively customized and integrated by in-house software developers. Process automation is achieved through various applications, which are integrated with workflow to track, report on and drive workorders through from start to finish. Our systems are designed to require single data entry and maximum flow-through from the initial contact with prospective customers, through order entry and on to service provisioning. We use BEA Weblogic to develop and extend our workflows across the various applications, driving automation of processes and the flow of orders and repair throughout the organization. Our applications include the following:

Sales, Order Entry and Provisioning Systems

Our sales automation, order entry and provisioning systems enable us to shorten the customer provisioning time cycle and reduce associated costs. The sales management toolset begins with SalesTrak, a unified portal offering an extensive array of sales tools and capabilities. Among the sales tools available on SalesTrak is iLead, a web-based sales process and funnel management application. iLead manages the sales process from initial prospecting through to close, and includes a hierarchical set of reports and dashboards designed to provide extensive oversight and sales forecasting accuracy. Information entered into iLead flows through the entire sales and order entry process, augmented along the way as additional information is obtained or required. The progression from lead to opportunity, proposal, signed deal and order entry is seamlessly managed through a tightly coupled software system thus ensuring single data entry and data consistency. Central to our sales system support environment is an application called eSales Enterprise. eSales Enterprise uses the information gathered by the Sales Rep to construct clean, professional proposals. eSales Enterprise is also the online vehicle Sales and Marketing use to approve the terms and conditions of any proposal extended to a customer and, upon closing a deal, is the application used to invoke the order fulfillment process. Prior to submitting an order for access services to the Regional Bell Operating Company, we perform customer credit approval and automatically obtain and process the customer’s service record detailing the customer’s existing phone service to establish their data records in our centralized customer records database. This has enabled us to deliver a highly automated flow-through customer provisioning process for qualified and verified orders.

Our order entry system has been extended, through a dedicated web portal, AgentTrak, to provide these same capabilities to our indirect sales forces. Through our SalesTrak and AgentTrak portals, our sales team, agents and other indirect sales teams can track provisioning status, trouble reports and commissions in real-time.

In addition to automating the ordering and provisioning of new services, our provisioning system automates the addition of customer lines to existing customer accounts, as well as the changing of the features associated with

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that particular customer’s service. Recently added functionality also provides for the automation of many of the functions of customer service moves, further reducing manual work and providing increased operating efficiency.

Customer Relationship Management System

Our customer relationship management systems include e-Care and OpenCafe. e-Care allows our customers to directly monitor and manage their accounts online. OpenCafe provides our customer service representatives with real time access to all information pertinent to the customer, in an organized and easy to use front end system. In addition, OpenCafe is directly coupled with our trouble ticketing and repair tracking system, allowing instant access to repair status and reporting. We also have a repair system that allows our customer service representatives to analyze customer troubles and repair service issues in real-time, while the customer is on the phone. This system leverages extensive analysis and repair logic developed in-house, providing a simple and highly intuitive front end portal to the service representative. We continue to develop and implement improvements to OpenCafe, delivering more front-line capabilities to our customer service representatives, reducing the length of customer service calls and improving the customer experience. In addition, as stated above, our SalesTrak and AgentTrak portals allow our sales representatives and agents to have direct visibility into our systems to better serve our customers by monitoring customer accounts. In 2008, we extended many self-care capabilities to our customers through enhancements to our e-Care application, such as customer entry and tracking of trouble tickets (including full visibility to our internal repair activity logs), real-time customer control of toll free and DID number rerouting, and other functions.

Network Management Systems

Our network management systems include: TTI Netrac, our network alarm surveillance, analysis and reporting system; TTI NeTkT, our integrated trouble ticketing and repair tracking system; Syndesis NetProvision Activator, our DSL provisioning automation system; JDSU’s NetOptimize, our traffic data collection and analysis system; JDSU’s NetAnalyst, our T-1 integrated testing management system; Harris TAC, our copper loop integrated testing system; and Telcordia Xpercom, our network inventory records system. With these core licensed applications, our in-house software developers have, through Application Program Interfaces, developed overarching control and management software applications to leverage these systems, and integrated the functionality to our business support applications to deliver seamless service, provisioning and billing. Through these systems, we have automated many key trouble management and resolution functions, including fault isolation, service testing, trouble ticket generation, forwarding, tracking and escalation, automated reporting to our customers and automated close-out of tickets upon customer-acknowledged completions. In addition, we have leveraged these applications to deliver a work force management, assignment and tracking application, maximizing the efficiency of our field workforce.

Billing System

Our in house developed billing system enables us to preview and run each of our multiple bill cycles and customer account information for the many different, tailored service packages, increasing customer satisfaction while minimizing revenue leakage. Our full color, multi-location bill provides the flexibility for customers to customize the arrangement of lines by location, while offering extensive and intuitive management reports that allow customers the insight to manage their communications costs and usage. All billing information is available on-line via our e-Care customer web portal, for viewing, analysis downloading and on-line payment. And all billing information, including a pdf image of the actual bill, is available on demand in real-time to our customers and customer care representatives for review or discussion with our customers, increasing customer satisfaction. Our customer invoice includes management reports and graphical representations of customer billing information, particularly useful for multi-location customers. We have successfully evolved and enhanced our billing system to support our continually growing suite of services and the dramatically increasing volumes of customers since its initial development. Our billing system capabilities have been a key strength in support of our successful M&A strategy and ability to successfully integrate companies and customer bases while avoiding customer disruption. In 2008, we leveraged the capabilities of our billing system to develop enhanced account profitability tools for sales, marketing and customer care, for use in account management and competitive bidding scenarios.

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Cost Assurance System

Our cost assurance system, Bill Data Analyzer (“BDA”), enables us to analyze the multiple incumbent local exchange carrier and long distance carrier bills that we receive on a monthly basis, performing comprehensive audits and identifying inconsistencies and charging irregularities. BDA automatically generates the appropriate reports and paperwork required for filing with the incumbent local exchange carrier or long distance carriers to pursue our claims and ensure timely processing.

Collections Management System

Our automated collections management system is integrated with our billing and customer relationship management systems, which increases the efficiency of our collections process, accelerates the collection of accounts receivable and assists in the retention of valuable customers.

Competition

The communications industry is highly competitive. We believe we compete principally by offering superior customer service, accurate billing, a broad set of services and systems and competitive pricing. We compete with the Regional Bell Operating Companies, other competitive local exchange carriers and new market entrants (including cable TV companies, VoIP providers and wireless companies), interexchange carriers, data/Internet service providers and vendors, installers and communication management companies.

Regional Bell Operating Companies

In each of our existing markets, we face, and expect to continue to face, significant competition from RBOCs, which currently dominate their local communications markets as a result of their historic monopoly position. The RBOCs have also offer long distance, data and Internet services.

The RBOCs have long-standing relationships and strong reputations with their customers, as well as financial, technical, marketing personnel and other resources substantially greater than ours. In addition, the RBOCs have the potential to subsidize competitive services with revenues from a variety of businesses and currently benefit from existing regulations that favor them over us in some respects. We expect that the RBOCs will continue to be the beneficiaries of increased pricing flexibility and relaxed regulatory oversight, which may provide them with additional competitive advantages.

Competitive Local Exchange Carriers and New Market Entrants

We face competition from other competitive local exchange carriers, operating both on a facilities and non-facilities basis. Some of these carriers have competitive advantages over us, including substantially greater financial, personnel and other resources, brand name recognition and long-standing relationships with customers. In addition, the industry has seen a number of mergers and consolidations among competitive local exchange carriers in an effort to gain a competitive advantage in the sector, while some have entered and subsequently emerged from bankruptcy with dramatically altered business plans and financial structures. Both of these groups may have the ability to offer more competitive rates than we can offer.

In addition, we face competition from new and potential market entrants such as cable television companies, wireless service providers, electric utilities and providers using VoIP over the public Internet or private networks. Cable television companies have entered the communications market by upgrading their networks with hybrid fiber coaxial lines and installing facilities to provide fully interactive transmission of broadband voice, video and data communications. While many competitive local exchange carriers have always targeted small and medium size enterprises and multi-location customers, cable television companies are increasingly targeting these customers and are often doing so at rates lower than we generally offer. Wireless services providers are providing not only voice, but also broadband, substitutes for traditional wireline local telephones. Electric utility companies have existing assets and low cost access to capital that could allow them to enter a market and accelerate network development. Many VoIP providers operate down-market from our target audience and are offering a lower quality service, with little or no QoS, primarily to residential customers. Many incumbent local exchange carriers and interexchange

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carriers have deployed VoIP technology for business customers by offering higher quality, QoS-supported, services. VoIP providers are currently subject to substantially less regulation than traditional local telephone companies and do not pay certain taxes and regulatory charges that we are required to pay.

Interexchange Carriers

Interexchange carriers that provide long distance and other communications services offer or have the capability to offer switched local, long distance, data and Internet services. Some of these carriers have vast financial resources and a much larger service footprint than us. In addition, there have been a number of mergers and consolidations among interexchange carriers and between incumbent local exchange carriers and interexchange carriers that have allowed carriers to expand dramatically the reach of their services and, thus, to gain a significant competitive advantage. These consolidated entities may have the ability to offer more services and more competitive rates than we can offer.

Data/Internet Services Providers

The Internet services market is highly competitive, and we expect that competition will continue to intensify. Internet service, including both Internet access and on-line content services, is provided by Internet services providers, incumbent local exchange carriers, satellite-based companies, interexchange carriers and cable television companies. Many of these companies provide direct access to the Internet and a variety of supporting services to businesses and individuals. In addition, many of these companies, such as AOL and MSN, offer online content services consisting of access to closed, proprietary information networks. Interexchange carriers, among others, are aggressively entering the Internet access markets. Long distance providers have substantial transmission capabilities, traditionally carry data to large numbers of customers and have an established billing system infrastructure that permits them to add new services. Satellite companies are offering broadband access to Internet from desktop PCs. Cable companies are providing Internet services using cable modems to customers in major markets. Many of these competitors have substantially greater financial, technological, marketing, personnel, brand recognition and other resources than those available to us.

Vendors, Installers and Communication Management Companies

We compete with numerous equipment vendors and installers and communications management companies for business telephone systems and related services. We generally offer our products at prices consistent with other providers and differentiate our service through our product packages and customer service.

Intellectual Property

We rely on a combination of patent, copyright, trademark and trade secret laws, as well as licensing agreements, third party non-disclosure agreements and other contractual provisions and technical measures to protect our intellectual property rights. No individual patent, trademark or copyright is material to our business. Generally, our licensing agreements are perpetual in duration.

We have granted security interests in our trademarks, copyrights and patents to our lenders pursuant to our credit agreement governing the credit facility and the indenture governing the notes.

Employees

As of December 31, 2008, we had approximately 1,290 employees, including approximately 200 quota-bearing sales representatives. Our employees are not members of any labor unions. We believe that relations with our employees are good. We have not experienced any work stoppage due to labor disputes.

Available Information

All periodic and current reports, registration statements, and other filings that we are required to file with the Securities and Exchange Commission (“SEC”), including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to

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Section 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge from the SEC’s website (http://www.sec.gov) or public reference room at 100 F. Street N.E., Washington, D.C. 20549 (1-800-SEC-0330) or through our website at http://www.broadviewnet.com. Such documents are available as soon as reasonably practicable after electronic filing of the material with the SEC. Copies of these reports (excluding exhibits) may also be obtained free of charge, upon written request to: Investor Relations, Broadview Networks Holdings, Inc., 800 Westchester Avenue, Suite N501, Rye Brook, NY 10573.

Our website address is included in this report for information purposes only. Our website and the information contained therein or connected thereto are not incorporated into this Annual Report on Form 10-K.

See also “Directors, Executive Officers and Corporate Governance — Code of Business Conduct and Ethics” for more information regarding our Code of Business Conduct and Ethics.

Regulation

Overview

We are subject to federal, state, local and foreign laws, regulations, and orders affecting the rates, terms, and conditions of certain of our service offerings, our costs, and other aspects of our operations, including our relations with other service providers. Regulation varies from jurisdiction to jurisdiction, and may change in response to judicial proceedings, legislative and administrative proposals, government policies, competition, and technological developments. We cannot predict what impact, if any, such changes or proceedings may have on our business, financial condition or results of operations, and we cannot guarantee that regulatory authorities will not raise material issues regarding our compliance with applicable regulations.

The FCC has jurisdiction over our facilities and services to the extent they are used in the provision of interstate or international communications services. State regulatory public utility commissions generally have jurisdiction over facilities and services to the extent they are used in the provision of intrastate services. Local governments may regulate aspects of our business through zoning requirements, permit or right-of-way procedures, and franchise fees. Foreign laws and regulations apply to communications that originate or terminate in a foreign country. Generally, the FCC and state public utility commissions do not regulate Internet, video conferencing, or certain data services, although the underlying communications components of such offerings may be regulated. Our operations also are subject to various environmental, building, safety, health, and other governmental laws and regulations.

Federal law generally preempts state statutes and regulations that restrict the provision of competitive local, long distance and enhanced services. Because of this preemption, we are generally free to provide the full range of local, long distance and data services in every state. While this federal preemption greatly increases our potential for growth, it also increases the amount of competition to which we may be subject. In addition, the cost of enforcing federal preemption against certain state policies and programs may be large and may involve considerable delay.

Federal Regulation

The Communications Act grants the FCC authority to regulate interstate and foreign communications by wire or radio. The FCC imposes extensive regulations on common carriers that have some degree of market power such as incumbent local exchange carriers. The FCC imposes less regulation on common carriers without market power, such as us. The FCC permits these non-dominant carriers to provide domestic interstate services (including long distance and access services) without prior authorization; but it requires carriers to receive an authorization to construct and operate telecommunications facilities and to provide or resell communications services, between the United States and international points. Further, we remain subject to numerous requirements of the Communications Act, including certain provisions of Title II applicable to all common carriers which require us to offer service upon reasonable request and pursuant to just and reasonable charges and terms, and which prohibit any unjust or unreasonable discrimination in charges or terms. The FCC has authority to impose additional requirements on non-dominant carriers.

The Telecommunications Act amended the Communications Act to eliminate many barriers to competition in the U.S. communications industry. Under the Telecommunications Act, any entity, including cable television

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companies and, electric and gas utilities, may enter any communications market, subject to reasonable state certification requirements and regulation of safety, quality and consumer protection. Because implementation of the Telecommunications Act remains subject to numerous federal and state policy rulemaking proceedings and judicial review, there is still ongoing uncertainty as to the impact it will have on us. The Telecommunications Act is intended to increase competition. Among other things, the Telecommunications Act opened the local exchange services market by requiring incumbent local exchange carriers to permit competitive carriers to interconnect to their networks at any technically feasible point and requires them to utilize certain parts of their networks at FCC-regulated (generally cost based) rates; it also established requirements applicable to all local exchange carriers. Examples include:

•  Reciprocal Compensation.  Requires all incumbent local exchange carriers and competitive local exchange carriers to complete calls originated by competing carriers under reciprocal arrangements at prices based on a reasonable approximation of incremental cost or through mutual exchange of traffic without explicit payment.

•  Resale.  Requires all incumbent local exchange carriers and competitive local exchange carriers to permit resale of their communications services without unreasonable or discriminatory restrictions or conditions. In addition, incumbent local exchange carriers are required to offer for resale wholesale versions of all communications services that the incumbent local exchange carrier provides at retail to subscribers that are not telecommunications carriers at discounted rates, based on the costs avoided by the incumbent local exchange carrier in the wholesale offering.

•  Access to Rights-of-Way.  Requires all incumbent local exchange carriers and competitive local exchange carriers and any other public utility that owns or controls poles, conduits, ducts, or rights-of-way used in whole or in part for wire communications, to permit competing carriers (and cable television systems) access to those poles, ducts, conduits and rights-of-way at regulated prices. Competitive local exchange carrier rates for access to its poles, ducts, conduits and rights-of-way, however, are not regulated.

The Telecommunications Act also codifies the incumbent local exchange carriers’ equal access and nondiscrimination obligations and preempts inconsistent state regulation.

Legislation.  Congress is considering various measures that would impact telecom laws in the United States. The prospects and timing of potential legislation remain unclear, and as such, we cannot predict the outcome of any such legislation upon our business.

Unbundled Network Elements.  The Telecommunications Act requires incumbent local exchange carriers to provide requesting telecommunications carriers with nondiscriminatory access to network elements on an unbundled basis at any technically feasible point on rates, terms and conditions that are just, reasonable and non-discriminatory, in accordance with the other requirements set forth in Sections 251 and 252 of the Telecommunications Act. The Telecommunications Act gives the FCC authority to determine which network elements must be made available to requesting carriers such as us. The FCC is required to determine whether the failure to provide access to such network elements would impair the ability of the carrier seeking access to provide the services it seeks to offer. Based on this standard, the FCC developed an initial list of Regional Bell Operating Company network elements that must be unbundled on a national basis in 1996. Those initial rules were set aside by the U.S. Supreme Court and the FCC subsequently developed revised unbundling rules, which also were set aside on appeal.

In August 2003, in the Triennial Review Order (“TRO”), the FCC substantially modified its rules governing access to unbundled network elements. The FCC limited requesting carrier access to certain aspects of the loop, transport, switching and signaling/databases unbundled network elements but continued to require some unbundling of these elements. In the TRO, the FCC also determined that certain broadband elements, including fiber-to-the-home loops in greenfield situations, broadband services over fiber-to-the-home loops in overbuild situations, packet switching, and the packetized portion of hybrid loops, are not subject to unbundling obligations. On March 2, 2004, the U.S. Court of Appeals for the D.C. Circuit vacated certain portions of the TRO and remanded to the FCC for further proceedings.

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In December 2004, the FCC adopted an Order on Remand of the TRO (“TRRO”), which became effective on March 11, 2005. The TRRO further modified the unbundling obligations of incumbent local exchange carriers. Under certain circumstances, the FCC removed the incumbent local exchange carriers’ unbundling obligations with regard to high capacity local loops and dedicated transport and eliminated the obligation to provide local switching. Under the FCC’s new rules, the availability of high capacity loops and transport depends upon new tests based on the capacity of the facility, the business line density of incumbent wire centers, and the existence of collocated fiber providers in incumbent wire centers. Subsequent to the release of the TRRO, we entered into a number of commercial agreements with Verizon, under which we continue to have access to local switching from Verizon during the terms of the agreements. We have replaced delisted unbundled network element loops and transport with special access, generally at prices significantly higher than unbundled network element rates, unless we can locate alternative suppliers offering more favorable rates.

FCC rules implementing the local competition provisions of the Telecommunications Act permit competitive local exchange carriers to lease unbundled network elements at rates determined by State public utility commissions employing the FCC’s Total Element Long Run Incremental Cost forward-looking, cost-based pricing model. On September 15, 2003, the FCC opened a proceeding reexamining the Total Element Long Run Incremental Cost methodology and wholesale pricing rules for communications services made available for resale by incumbent local exchange carriers in accordance with the Telecommunications Act. This proceeding will comprehensively reexamine whether the Total Element Long Run Incremental Cost pricing model produces unpredictable pricing inconsistent with appropriate economic signals; fails to adequately reflect the real-world attributes of the routing and topography of an incumbent local exchange carrier’s network; and creates disincentives to investment in facilities by understating forward-looking costs in pricing Regional Bell Operating Company network facilities and overstating efficiency assumptions. The application and effect of a revised Total Element Long Run Incremental Cost pricing model on the communications industry generally and on our business activities cannot be determined at this time.

In orders released in August 2004, the FCC extended the unbundling relief it had previously provided to fiber-to-the-home loops to fiber-to-the-curb. On October 27, 2004, the FCC issued an order granting requests by the Regional Bell Operating Companies that the FCC forbear from enforcing the independent unbundling requirements of Section 271 of the Communications Act with regard to the broadband elements that the FCC had previously determined were not subject to unbundling obligations (fiber-to-the-home loops, fiber-to-the-curb loops, the packetized functionality of hybrid loops, and packet switching).

On September 23, 2005, the FCC released an order that largely deregulates “wireline broadband Internet access service.” The FCC refers to “wireline broadband Internet access service” as a service that uses existing or future wireline facilities of the telephone network to provide subscribers with access to the Internet, including by means of both next generation fiber-to-the-premises services and all digital subscriber lines. This decision by the FCC follows the decision by the United States Supreme Court in the Brand X case, issued June 27, 2005, in which the Court held that cable systems are not legally required to lease access to competing providers of Internet access service. Consistent with the FCC’s previous classification of cable modem service as an information service, the FCC classified broadband Internet access service as an information service because it intertwines transmission service with information processing and is not, therefore, a “pure” transmission service such as frame relay or ATM, which remain classified as communications services. The FCC required that existing transmission arrangements between broadband Internet access service providers and their customers be made available for a one year period from the effective date of the Order. This Order does not affect competitive local exchange carriers’ ability to obtain unbundled network elements, but does relieve the incumbent local exchange carriers of any duty to offer Digital Subscriber Line transmission services subject to regulatory oversight. We cannot predict the effect of the Order on our business.

On September 16, 2005, the FCC partially granted Qwest’s petition seeking forbearance from the application of the FCC’s dominant carrier regulation of interstate services, and Section 251(c) requirements throughout the Omaha, Nebraska Metropolitan Statistical Area. The FCC granted Qwest the requested relief in nine of its 24 Omaha central offices where it determined that competition from intermodal (cable) service providers was “extensive.” Although the FCC required that Qwest continue to make unbundled network elements available, in the nine (9) specified central offices, Qwest will only have to do so at non- Total Element Long Run Incremental

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Cost rates. The FCC did not grant Qwest the requested relief regarding its collocation and interconnection obligations. On January 30, 2007, the FCC partially granted ACS of Anchorage, Inc.’s petition seeking forbearance from the application of the FCC’s dominant carrier regulation of interstate services, and Section 251(c) requirements throughout the Anchorage, Alaska local exchange carrier study area. The FCC granted ACS the requested relief in five of its 11 Anchorage central offices where it determined that “competition by the local cable operator . . . ensures that market forces will protect the interests of consumers.” Although the FCC required that ACS continue to make unbundled network elements available in the five (5) central offices in which the requested relief was granted, ACS will only have to do so at commercially-negotiated rates. Because we do not operate in either the Omaha, Nebraska or Anchorage, Alaska Metropolitan Statistical Areas, these decisions will not have a direct impact on us.

In December 2007, the FCC denied a Verizon petition for relief comparable to that accorded Qwest and ACS — forbearance from the application of the FCC’s dominant carrier regulation of interstate services, and Section 251(c) unbundling requirements — in six Metropolitan Statistical Areas, including the New York-Northern New Jersey-Long Island, NY-NJ-PA Metropolitan Statistical Area, the Philadelphia-Camden-Wilmington PA-NJ-DE-MD Metropolitan Statistical Area and the Boston-Cambridge-Quincy, MA-NH Metropolitan Statistical Area — three of our largest markets. Verizon has appealed that denial to the U.S. Court of Appeals for the D,C, Circuit. Moreover, Verizon subsequently filed for comparable relief in two other markets, in which one — Rhode Island — we operate. Also pending before the FCC are petitions seeking unbundled relief in certain non-Verizon markets in which we do not operate (Denver, Colorado; Minneapolis, Minnesota; Phoenix, Arizona and Seattle, Washington). We cannot predict the outcome of pending or future forbearance proceedings or appeals or the effect that these proceedings may have on our business or operations.

On March 19, 2006, the FCC, by inaction, granted Verizon’s Petition for Forbearance from the application of the FCC’s Computer II and Title II requirements to Verizon’s Broadband service offerings. Arguably, the grant of Verizon’s petition permits Verizon to offer DSL, ATM, Frame Relay and T-1 services on a non-common carrier basis, free from unbundling and Total Element Long Run Incremental Cost pricing requirements. Through various ex parte filings, however, Verizon appeared to narrow its petition to ask for far more limited relief, arguably limiting the requested relief to a select group of service offerings. Other incumbent local exchange carriers, including AT&T, Embarq Corporation and Citizens Communication Company, have filed similar forbearance petitions. On October 12, 2007, the FCC agreed that AT&T’s existing packet-switched broadband telecommunications services and existing optical transmission services could be treated as non-dominant and would no longer be subject to certain regulatory requirements. On October 25, 2007, the FCC granted similar forbearance relief to Embarq and Citizens. We cannot predict the effect, if any, on our business of the “deemed” grant of the Verizon petition or the grant, if it occurs, of any of the other incumbent local exchange carrier petitions. On December 5, 2007, the FCC ruled against Verizon on forbearance.

On November 30, 2007, the FCC initiated a rulemaking proceeding to examine the process by which forbearance petitions are to be reviewed. Among other things, the FCC has sought public comment on (i) which procedural rules, if any, should be adopted, (ii) whether petitioners seeking forbearance will be precluded from modifying their petitions and (iii) whether petitioners seeking forbearance from Sections 251 and/or 271 should be required to provide supporting data at the wire center level. We cannot predict the outcome of this rulemaking proceeding or its impact on our business or operations.

Special Access.  The FCC is undertaking a comprehensive review of rules governing the pricing of special access service offered by incumbent local exchange carriers subject to price cap regulation. Special access pricing by these carriers currently is subject to price cap rules, as well as pricing flexibility rules which permit these carriers to offer volume and term discounts and contract tariffs (Phase I pricing flexibility) and/or remove from price caps regulation special access service in a defined geographic area (Phase II pricing flexibility) based on showings of competition. In its Notice of Proposed Rulemaking (“NPRM”), the FCC tentatively concludes to continue to permit pricing flexibility where competitive market forces are sufficient to constrain special access prices, but undertakes an examination of whether the current triggers for pricing flexibility accurately assess competition and have worked as intended. The NPRM also asks for comment on whether certain aspects of incumbent local exchange carrier special access tariff offerings (e.g., basing discounts on previous volumes of service; tying nonrecurring charges and termination penalties to term commitments; and imposing use restrictions in connection with discounts) are unreasonable. By Public Notice dated July 9, 2007, the FCC invited parties to update the record in its special access

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rulemaking to address, among other things, the impact of industry consolidation on the availability of alternative facilities. We cannot predict the impact, if any, the NPRM will have on our network cost structure.

Interconnection Agreements.  Pursuant to FCC rules implementing the Telecommunications Act, we negotiate interconnection agreements with incumbent local exchange carriers to obtain access to unbundled network element services, generally on a state-by-state basis. These agreements typically have three-year terms. We currently have interconnection agreements in effect with Verizon for, among others, New York, Massachusetts, New Jersey, Pennsylvania, New Hampshire, Vermont, Maryland, Virginia, Delaware, Rhode Island and Washington, D.C. We have an interconnection agreement with Southern New England Telephone Company, a subsidiary of AT&T, in Connecticut. If we enter new markets, we expect to establish interconnection agreements with incumbent local exchange carriers on an individual state basis. In the states of Vermont, New Hampshire and Maine, we will need to negotiate new interconnection agreements with Fairpoint following its acquisition of Verizon’s network assets in these states. Changes to our agreements based upon recent FCC orders ultimately will be incorporated into our interconnection agreements, but whether these changes will be affected by state public utility commission order, tariff, negotiation or arbitration is uncertain.

We are in the process of renegotiating our interconnection agreement with Verizon in New York. If the negotiation process does not produce, in a timely manner, an interconnection agreement that we find acceptable, we may petition the New York public utility commission to arbitrate any disputed issues. Arbitration decisions in turn may be appealed to federal courts. We cannot predict how successful we will be in negotiating terms critical to our provision of local network services in New York, and we may be forced to arbitrate certain provisions of our New York agreements. Interconnection agreement arbitration proceedings before other state commissions may result in decisions that could affect our business, but we cannot predict the extent of any such impact. As an alternative to negotiating an interconnection agreement, we may adopt, in its entirety, another carrier’s approved agreement.

Collocation.  FCC rules generally require incumbent local exchange carriers to permit competitors to collocate equipment used for interconnection and/or access to unbundled network elements. Changes to those rules, upheld in 2002 by the U.S. Court of Appeals for the D.C. Circuit, allow competitors to collocate multifunctional equipment and require incumbent local exchange carriers to provision crossconnects between collocated carriers. We cannot determine the effect, if any, of future changes in the FCC’s collocation rules on our business or operations.

Regulation of Internet Service Providers.  To date, the FCC has treated Internet service providers as enhanced service providers, which are generally exempt from federal and state regulations governing common carriers. Nevertheless, regulations governing the disclosure of confidential communications, copyright, excise tax and other requirements may apply to our Internet access services. In addition, the FCC released an NPRM in September 2005 seeking comment on a broad array of consumer protection regulations for broadband Internet access services, including rules regarding the protection of Customer Proprietary Network Information slamming, truth in billing, network outage reporting, service discontinuance notices, and rate-averaging requirements. We cannot predict whether the FCC will adopt new rules regulating broadband Internet access services and, if it does so, how such rules would affect us, except that new obligations could increase the costs of providing DSL service.

Moreover, Congress has passed a number of laws that concern the Internet and Internet users. Generally, these laws limit the potential liability of Internet service providers and hosting companies that do not knowingly engage in unlawful activity. We expect that Congress will continue to consider various bills concerning the Internet and Internet users, some of which, if signed into law, could impose additional obligations on us.

Long Distance Competition.  Section 271 of the Communications Act, enacted as part of the Telecommunications Act, established a process by which an RBOC could obtain authority to provide long distance service in a state within its region. Each Regional Bell Operating Company was required to demonstrate that it had satisfied a 14-point competitive checklist and that granting such authority would be in the public interest. All of the Regional Bell Operating Companies or RBOCs have received FCC approval to provide in-state long distance service within their respective regions. Receipt of Section 271 authority by the RBOCs has resulted in increased competition in certain markets and services.

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The RBOCs have a continuing obligation to comply with the 14-point competitive checklist, and are subject to continuing oversight by the FCC and state public utility commissions. Each Regional Bell Operating Company must provide unbundled access to unbundled network elements at just and reasonable rates and comply with state-specific Performance Assurance Plans pursuant to which a Regional Bell Operating Company that fails to provide access to its facilities in a timely and commercially sufficient manner must provide to affected competitive local exchange carriers compensation in the form of cash or service credits. We routinely receive Performance Assurance Plan payments from Verizon in a number of states, although Verizon has petitioned various state public utility commissions to reduce the amount and extent of future payments. Our ability to obtain adequate interconnection and access to unbundled network elements on a timely basis and at cost effective rates could be adversely affected by an RBOC’s failure to comply with its Section 271 obligations.

Detariffing.  The FCC has largely eliminated carriers’ obligations to file with the FCC tariffs containing prices, terms and conditions of service and has required carriers to withdraw all of their federal tariffs other than those relating to access services. Our interstate and international rates nonetheless must still be just and reasonable and nondiscriminatory. Our state tariffs remain in place. Detariffing precludes our ability to rely on filed rates, terms, and conditions as a means of providing notice to customers of prices, terms and conditions under which we offer services, and requires us instead to rely on individually negotiated agreements with end-users. We have, however, historically relied primarily on our sales force and marketing activities to provide information to our customers regarding the rates, terms, and conditions of service and expect to continue to do so. Further, in accordance with the FCC’s orders we maintain a schedule of our rates, terms and conditions for our domestic and international private line services on our web site.

Intercarrier Compensation.  The FCC’s intercarrier compensation rules include rules governing access charges, which govern the payments that interexchange carriers and commercial mobile radio service providers make to local exchange carriers to originate and terminate long distance calls, and reciprocal compensation rules, which generally govern the compensation between telecommunications carriers for the transport and termination of local traffic. We purchase long distance service on a wholesale basis from interexchange carriers who pay access fees to local exchange carriers for the origination and termination of our long distance communications traffic. Generally, intrastate access charges are higher than interstate access charges. Therefore, to the degree access charges increase or a greater percentage of our long distance traffic is intrastate our costs of providing long distance services will increase. As a local exchange provider, we bill long distance providers access charges for the origination and termination of those providers’ long distance calls. Accordingly, in contrast with our long distance operations, our local exchange business benefits from the receipt of intrastate and interstate long distance traffic. As an entity that collects and remits access charges, we must properly track and record the jurisdiction of our communications traffic and remit or collect access charges accordingly. The result of any changes to the existing regulatory scheme for access charges or a determination that we have been improperly recording the jurisdiction of our communications traffic could have a material adverse effect on our business, financial condition and results of operations.

The FCC has stated that existing intercarrier compensation rules constitute transitional regimes and has promised to reform them. On March 3, 2005, the FCC released a further NPRM seeking comment on a variety of proposals to replace the current system of intercarrier payments, under which the compensation rate depends on the type of traffic at issue, the type of carriers involved, and the end points of the communication, with a unified approach for access charges and reciprocal compensation. In connection with the FCC’s rulemaking proceeding, a number of industry groups attempted to negotiate a plan that would bring all intercarrier compensation and access charges to a unified rate over a negotiated transition period. The FCC called for public comment on one such plan designated the Missoula Plan. In November 2008, the FCC issued a Further Notice of Proposed Rulemaking, setting forth various proposals for the reform of its intercarrier compensation regime. Because we both make payments to and receive payments from other carriers for the exchange of local and long distance calls, we will be affected by changes in the FCC’s intercarrier compensation rules. We cannot predict the impact that any such changes may have on our business.

On October 2, 2007, the FCC issued a Notice of Proposed Rulemaking to address the issue of “traffic pumping.” The Notice was prompted by allegations by interexchange carriers that certain local exchange carriers had greatly increased their switched access traffic by deploying chat lines, conference bridges and other similar high

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call volume operations and that the volume of traffic resulted in inflated returns which in turn brought into question the justness and reasonableness of the tariffed access charges being imposed on interexchange carriers. While we cannot predict the outcome of this proceeding, it could impact the access charges we are allowed to bill interexchange carriers.

On April 18, 2001, the FCC adopted a new order regarding intercarrier compensation for Internet service provider-bound traffic. In that Order, the FCC established a new intercarrier compensation mechanism for Internet service provider-bound traffic with declining rates over a three year period. In addition to establishing a new rate structure, the FCC capped the amount of Internet service provider bound traffic that would be “compensable” and prohibited payment of intercarrier compensation for Internet service provider-bound traffic to carriers entering new markets. The April 2001 order was appealed to the D.C. Circuit. On May 3, 2002, the U.S. Court of Appeals for D.C. Circuit found that the FCC had not provided an adequate legal basis for its ruling, and therefore remanded the matter to the FCC. In the interim, the Court let the FCC’s rules stand. In November 2008, the FCC issued revised rules governing the intercarrier compensation reqime that would govern ISP-bound traffic. On October 8, 2004, the FCC adopted an order in response to a July 2003 Petition for Forbearance filed by Core Communications (“Core Petition”) asking the FCC to forbear from enforcing the rate caps, growth cap, and new market and mirroring rules of the remanded April 2001 order. The FCC granted the Core Petition with respect to the growth cap and the new market rules, but denied the Core Petition as to the rate caps and mirroring rules.

Verizon/MCI Merger.  On October 31, 2005, the FCC unanimously approved the Verizon-MCI merger with relatively limited conditions in certain areas. The FCC’s conditions took the form of voluntary conditions offered by the merging parties, as follows: Verizon agreed to (i) freeze unbundled network element rates for a period of two years, and (ii) freeze certain high-capacity special access rates for existing in-region MCI customers for 30 months, both of which have now expired. Although the Department of Justice, in its consent decrees approving the merger concluded that the merger would reduce competition in certain markets for special access, primarily for business customers, it required only that Verizon sell or divest, at market rates, ten-year leases for loops into certain buildings along with leases for dark fiber transport necessary to connect the loops to the facility of the purchaser of the lease. The end result is that Verizon must sell dark fiber leases to 350 buildings. Other than the benefits derived from the merger conditions, we cannot predict the impact of the Verizon/MCI merger on our business.

CALEA.  The Communications Assistance for Law Enforcement Act (“CALEA”) requires communications providers to provide law enforcement officials with call content and/or call identifying information under a valid electronic surveillance warrant, and to reserve a sufficient number of circuits for use by law enforcement officials in executing court-authorized electronic surveillance. Because we provide facilities-based services, we incur costs in meeting these requirements. Noncompliance with these requirements could result in substantial fines. Although we attempt to comply with these requirements, we cannot assure that we would not be subject to a fine in the future.

In August 2005, the FCC extended CALEA obligations to facilities-based providers of broadband Internet access service and to interconnected VoIP services. The current compliance deadline is set for May 2007. Several parties have appealed the FCC’s order imposing new requirements. Unless the decision is overturned on appeal, we could face increased compliance costs, which are uncertain in nature because the specific assistance-capability requirements for providers of broadband Internet access service have not yet been established.

Customer Proprietary Network Information.  FCC rules protect the privacy of certain information about customers that communications carriers, including us, acquire in the course of providing communications services. Customer Proprietary Network Information includes information related to the quantity, technological configuration, type, destination and the amount of use of a communications service. The FCC’s initial Customer Proprietary Network Information rules initially prevented a carrier from using Customer Proprietary Network Information to market certain services without the express approval of the affected customer, referred to as an opt-in approach. In July 2002, the FCC revised its opt-in rules in a manner that limits our ability to use the Customer Proprietary Network Information of our subscribers without first engaging in extensive customer service processes and record keeping. Recently, the FCC further modified its Customer Proprietary Network Information requirements to, among other things, extend Customer Proprietary Network Information regulations to interconnected VoIP providers, require annual carrier certifications and to impose additional limitations on the release of Customer Proprietary Network Information without express customer approval. We use our subscribers’ Customer

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Proprietary Network Information in accordance with applicable regulatory requirements. However, if a federal or state regulatory body determines that we have implemented those guidelines incorrectly, we could be subject to fines or penalties. In addition, correcting our internal customer systems and Customer Proprietary Network Information processes could generate significant administrative expenses.

Universal Service.  Section 254 of the Communications Act and the FCC’s implementing rules require all communications carriers providing interstate or international communications services to periodically contribute to the Universal Service Fund (“USF”). The USF supports several programs administered by the Universal Service Administrative Company with oversight from the FCC, including: (i) communications and information services for schools and libraries, (ii) communications and information services for rural health care providers, (iii) basic telephone service in regions characterized by high communications costs, (iv) basic telephone services for low income consumers, and (v) interstate access support. Based on the total funding needs for these programs, the FCC determines a contribution factor, which it applies to each contributor’s interstate and international end-user communications revenues. We measure and report our revenues in accordance with rules adopted by the FCC. The contribution rate factors are calculated and revised quarterly and we are billed for our contribution requirements each month based on projected interstate and international end-user communications revenues, subject to periodic true up. USF contributions may be passed through to consumers on an equitable and nondiscriminatory basis either as a component of the rate charged for communications services or as a separately invoiced line item.

A proceeding pending before the FCC has the potential to significantly alter our USF contribution obligations. The FCC is considering changing the basis upon which our USF contributions are determined from a revenue percentage measurement to a connection or telephone number measurement. Adoption of this proposal could have a material adverse affect on our costs, our ability to separately list USF contributions on end-user bills, and our ability to collect these fees from our customers. In addition, the Federal-State Joint Board on high-cost universal service support has recently announced that it intended to take a “fresh look” at high-cost universal service support.

The application and effect of changes to the USF contribution requirements and similar state requirements on the communications industry generally and on certain of our business activities cannot be predicted. If our collection procedures result in over collection, we could be required to make reimbursements of such over collection and be subject to penalty, which could have a material adverse affect on our business, financial condition and results of operations. If a federal or state regulatory body determines that we have incorrectly calculated or remitted any USF contribution, we could be subject to the assessment and collection of past due remittances as well as interest and penalties thereon.

Telephone Numbering.  The FCC oversees the administration and the assignment of local telephone numbers, an important asset to voice carriers, by NeuStar, Inc., in its capacity as North American Numbering Plan Administrator. Extensive FCC regulations govern telephone numbering, area code designation, and dialing procedures. Since 1996, the FCC has permitted businesses and residential customers to retain their telephone numbers when changing local telephone companies, referred to as local number portability. The availability of number portability is important to competitive carriers like us, because customers, especially businesses, may be less likely to switch to a competitive carrier if they cannot retain their existing telephone numbers.

Slamming.  A customer’s choice of local or long distance communications company is encoded in the customer’s record, which is used to route the customer’s calls so that the customer is served and billed by the desired company. A customer may change service providers at any time, but the FCC and some states regulate this process and require that specific procedures be followed. Slamming occurs when these specific procedures are not followed, such as when a customer’s service provider is changed without proper authorization or as a result of fraud. The FCC has levied substantial fines for slamming. The risk of financial damage, in the form of fines, penalties and legal fees and costs and to business reputation from slamming is significant. We maintain internal procedures designed to ensure that our new subscribers are switched to us and billed in accordance with federal and state regulations. Because of the volume of service orders that we may process, it is possible that some carrier changes inadvertently may be processed without authorization. Therefore, we cannot guarantee that we will not be subject to slamming complaints in the future.

Taxes and Regulatory Fees.  We are subject to numerous local, state and federal taxes and regulatory fees, including but not limited to a three percent federal excise tax on local, FCC regulatory fees and public utility

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commission regulatory fees. We have procedures in place to ensure that we properly collect taxes and fees from our customers and remit such taxes and fees to the appropriate entity pursuant to applicable law and/or regulation. If our collection procedures prove to be insufficient or if a taxing or regulatory authority determines that our remittances were inadequate, we could be required to make additional payments, which could have a material adverse effect on our business, financial condition and results of operations.

State Regulation

The Communications Act maintains the authority of individual states to impose their own regulation of rates, terms and conditions of intrastate services, so long as such regulation is not inconsistent with the requirements of federal law or has not been preempted. Because we provide communications services that originate and terminate within individual states, including both local service and in-state long distance toll calls, we are subject to the jurisdiction of the public utility commission and other regulators in each state in which we provide such services. For instance, we must obtain a Certificate of Public Convenience and Necessity (“CPCN”), or similar authorization before we may commence the provision of communications services in a state. We have obtained CPCNs to provide facilities based or resold competitive local and interexchange service in, among others, New York, Massachusetts, New Jersey, Pennsylvania, Virginia, Maryland, Delaware, New Hampshire, Rhode Island, Connecticut and Washington, D.C. There can be no guarantee that we will receive authorizations we may seek in other states in the future.

In addition to requiring certification, state regulatory authorities may impose tariff and filing requirements and obligations to contribute to state universal service and other funds. State public utility commissions also regulate, to varying degrees, the rates, terms and conditions upon which we and our competitors conduct retail business. In general, state regulation of incumbent local exchange carrier retail offerings is greater than the level of regulation applicable to competitive local exchange carriers. In a number of states, however, Verizon either has obtained or is actively seeking some level of increased pricing flexibility or deregulation, either through amendment of state law or through proceedings before state public utility commissions. Such increased pricing flexibility could have an adverse effect on our competitive position in those states because it could allow Verizon to reduce retail rates to customers while wholesale rates that we pay to it stay the same or increase. We cannot predict whether these efforts will materially affect our business.

We also are subject to state laws and regulations regarding slamming, cramming, and other consumer protection and disclosure regulations. These rules could substantially increase the cost of doing business in any particular state. State commissions have issued or proposed substantial fines against competitive local exchange carriers for slamming or cramming. The risk of financial damage, in the form of fines, penalties and legal fees and costs and to business reputation from slamming is significant. A slamming complaint before a state commission could generate substantial litigation expenses. In addition, state law enforcement authorities may use their consumer protection authority against us if we fail to meet applicable state law requirements.

States also retain the right to sanction a service provider or to revoke certification if a service provider violates relevant laws or regulations. If any regulatory agency were to conclude that we are or were providing intrastate services without the appropriate authority or otherwise in violation of law, the agency could initiate enforcement actions, which could include the imposition of fines, a requirement to disgorge revenues, or refusal to grant regulatory authority necessary for the future provision of intrastate services. We may be subject to requirements in some states to obtain prior approval for, or notify the state commission of, any transfers of control, sales of assets, corporate reorganizations, issuance of stock or debt instruments and related transactions. Although we believe such authorizations could be obtained in due course, there can be no assurance that state commissions would grant us authority to complete any of these transactions, or that such authority would be granted on a timely basis.

Rates for intrastate switched access services, which we provide to long-distance companies to originate and terminate in-state toll calls, are subject to the jurisdiction of the state in which the call originated and/or terminated. Such regulation by states could have a material adverse affect on our revenues and business opportunities within that state. State public utility commissions also regulate the rates incumbent local exchange carriers charge for interconnection, access to network elements, and resale of services by competitors. State public utility commissions may initiate cost cases to re-price unbundled network elements and to establish rates for wholesale services that are

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no longer required to be provided as unbundled network elements under the TRRO. Any such proceedings may affect the rates, terms, and conditions contained in our interconnection agreements or in other wholesale agreements with incumbent local exchange carriers. We cannot predict the outcome of these proceedings. The pricing, terms and conditions under which the incumbent local exchange carriers in each of the states in which we currently operate offers such services may preclude or reduce our ability to offer a competitively viable and profitable product within these and other states on a going forward basis.

State regulators establish and enforce wholesale service quality standards that Regional Bell Operating Companies must meet in providing network elements to competitive local exchange carriers like us. These plans sometimes require payments from the incumbent local exchange carriers to the competitive local exchange carriers if quality standards are not met. Verizon is asking various state commissions where we operate to modify the state wholesale quality plans in ways that would reduce or eliminate certain wholesale quality standards. Changes in performance standards could result in reduced payments and a diminution of the service quality we receive. We cannot predict how state commissions will respond to such requests, nor the ultimate impact of such decisions on our business, financial condition or results of operations.

Local Regulation

In some municipalities where we have installed facilities, we are required to pay license or franchise fees based on a percentage of our revenues generated from within the municipal boundaries. We cannot guarantee that fees will remain at their current levels following the expiration of existing franchises or that other local jurisdictions will not impose similar fees.

Regulation of VoIP

Federal and State

The use of the public Internet and private Internet protocol networks to provide voice communications services, including VoIP, has been largely unregulated within the United States. To date, the FCC has not imposed regulatory surcharges or most forms of traditional common carrier regulation upon providers of Internet communications services, although it has recently ruled that VoIP providers must contribute to the USF. The FCC has also imposed obligations on providers of two-way interconnected VoIP services to provide E911 service, and it has extended CALEA obligations to such VoIP providers. The FCC has also imposed on VoIP providers the obligation to “port” customers’ telephone numbers when customers switch carriers and desire to retain their numbers. As a provider of interconnected VoIP services, we will bear costs as a result of these various mandates.

On February 12, 2004, the FCC adopted an NPRM to address, in a comprehensive manner, the future regulation of services and applications making use of Internet protocol, including VoIP. In the absence of federal legislation, we expect that through this proceeding the FCC will resolve certain regulatory issues relating to VoIP services and develop a regulatory framework that is unique to IP telephony providers or that subjects VoIP providers to minimal regulatory requirements. We cannot predict when, or if, the FCC may take such actions. The FCC may determine that certain types of Internet telephony should be regulated like basic interstate communications services, rendering VoIP calls subject to the access charge regime that permits local telephone companies to charge long distance carriers for the use of the local telephone networks to originate and terminate long-distance calls, generally on a per minute basis. The FCC’s pending review of intercarrier compensation policies (discussed above) also may have an adverse impact on enhanced service providers.

On October 23, 2007, Feature Group IP, a provider of VoIP, petitioned the FCC to either rule that access charges do not apply to VoIP service or to forbear from applying access charges to VoIP service. Embarq filed a petition seeking essentially the opposite result. The FCC denied the Feature Group IP petition and Embark has withdrawn its petition. Feature Group IP has petitioned the FCC for reconsideration of its action and appealed the FCC’s denial to the U.S. Court of Appeals for the D.C. Circuit. We cannot predict the outcome of this appeal or its impact on our business or operations.

The FCC is also considering several petitions filed by individual companies concerning the regulatory rights and obligations of providers of IP-based voice services, and networks that handle IP-based voice traffic or that

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exchange that traffic with operators of Public Switched Telephone Network (“PSTN”) facilities We cannot predict the outcome of any of these petitions and regulatory proceedings or any similar petitions and regulatory proceedings pending before the FCC or state public utility commissions. Moreover, we cannot predict how their outcomes may affect our operations or whether the FCC or state public utility commissions will impose additional requirements, regulations or charges upon our provision of services related to IP communications.

In a series of decisions issued in 2004, the FCC clarified that the FCC, not the state public utility commissions, has jurisdiction to decide the regulatory status of IP-enabled services, including VoIP. On November 12, 2004, in response to a request by Vonage Holdings Corp. (“Vonage”), a VoIP services provider, the FCC issued an order preempting traditional telephone company regulation of VoIP service by the Minnesota public utility commission, finding that the service cannot be separated into interstate and intrastate communications without negating federal rules and policies. In April 2004, the FCC issued an order concluding that, under current rules, AT&T’s phone-to-phone IP telephony service is a telecommunications service upon which interstate access charges may be assessed. This decision, however, is limited to interexchange service that: (1) uses ordinary customer premises equipment with no enhanced functionality; (2) originates and terminates on the public switched telephone network; and (3) undergoes no net protocol conversion and provides no enhanced functionality to end-users due to the provider’s use of IP technology. The FCC made no determination regarding retroactive application of its ruling, and stated that the decision does not preclude it from adopting a different approach when it resolves the IP-enabled services or intercarrier compensation rulemaking proceedings.

Other aspects of VoIP and Internet telephony services, such as regulations relating to the confidentiality of data and communications, copyright issues, taxation of services, and licensing, may be subject to federal or state regulation. Similarly, changes in the legal and regulatory environment relating to the Internet connectivity market, including regulatory changes that affect communications costs or that may increase the likelihood of competition from Regional Bell Operating Companies or other communications companies could increase our costs of providing service.

Other Domestic Regulation

We are subject to a variety of federal, state, local, and foreign environmental, safety and health laws, and governmental regulations. These laws and regulations govern matters such as the generation, storage, handling, use, and transportation of hazardous materials, the emission and discharge of hazardous materials into the atmosphere, the emission of electromagnetic radiation, the protection of wetlands, historic sites, and endangered species and the health and safety of employees. We also may be subject to laws requiring the investigation and cleanup of contamination at sites it owns or operates or at third-party waste disposal sites. Such laws often impose liability even if the owner or operator did not know of, or was not responsible for, the contamination. We operate numerous sites in connection with our operations. We are not aware of any liability or alleged liability at any operated sites or third-party waste disposal sites that would be expected to have a material adverse effect on our business, financial condition or results of operations. Although we monitor our compliance with environmental, safety and health laws and regulations, we cannot give assurances that it has been or will be in complete compliance with these laws and regulations. We may be subject to fines or other sanctions by federal, state and local governmental authorities if we fail to obtain required permits or violate applicable laws and regulations.

Item 1A.   Risk Factors

Our business faces many risks. Accordingly, prospective investors and shareholders should carefully consider the risks and uncertainties described below and the other information in this report, including the consolidated financial statements and notes to consolidated financial statements. If any of the following risks or uncertainties actually occurs, our business, financial condition or results of operations would likely suffer. Additional risks and uncertainties not presently known to us or that are not currently believed to be important to you also may adversely affect our company.

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Our substantial indebtedness may restrict our operating flexibility, could adversely affect our financial health and could prevent us from fulfilling our financial obligations.

As of December 31, 2008, we had $336.8 million of total outstanding indebtedness. Our indebtedness could significantly affect our financial health and our ability to fulfill our financial obligations. For example, a high level of indebtedness could:

•  make it more difficult for us to satisfy our current and future debt obligations;

•  make it more difficult for us to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes;

•  require us to dedicate a substantial portion of our cash flows from operating activities to the payment of principal and interest on our indebtedness, thereby reducing the funds available to us for our operations and other purposes, including investments in service development, capital spending and acquisitions;

•  place us at a competitive disadvantage to our competitors who are not as highly leveraged as we are;

•  make us vulnerable to interest rate fluctuations, if we incur any indebtedness that bears interest at variable rates;

•  impair our ability to adjust to changing industry and market conditions; and

•  make us more vulnerable in the event of a further downturn in general economic conditions or in our business or changing market conditions and regulations.

Although the indenture governing the notes and the credit agreement governing our credit facility will limit our ability and the ability of our subsidiaries to incur additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and, under certain circumstances, debt incurred in compliance with these restrictions could be substantial. In addition, the indenture governing the notes and the credit agreement governing our credit facility will not prevent us from incurring obligations that do not constitute indebtedness. See the section entitled, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.” To the extent that we incur additional indebtedness or such other obligations, the risks associated with our substantial leverage, including our possible inability to service our debt, would increase.

Our outstanding indebtedness of $300.0 million in the form of 113/8% senior secured notes are due in 2012. We cannot assure you that we will be able to refinance or repay these notes on or prior to the 2012 maturity date.

We have a history of operating losses and we may not be profitable in the future.

We have experienced significant operating losses. We recorded operating losses $17.2 million in 2006, $32.1 million in 2007 and $3.0 million for the year ended December 31, 2008. During the same periods, we also recorded net losses of $41.5 million, $65.5 million and $42.9 million, respectively. We expect to continue to have losses for the foreseeable future. We cannot assure you that our revenues will grow or that we will become profitable in the future.

Our current billing disputes with our vendors may cause us to pay our vendors certain amounts of money, which could materially adversely affect our business, financial condition, results of operations and cash flows and which may cause us to be unable to meet certain financial covenants related to our senior indebtedness.

Although we have recently resolved a variety of disputes with Verizon, including mutual releases as of April 1, 2008, we remained involved in a variety of disputes with multiple carrier vendors relating to billings of approximately $17.0 million as of December 31, 2008, of which 29% percent of these disputes are with Verizon and the remainder of these disputes are with a significant number of other carriers. When we identify an error in a vendor’s bill, we dispute the amount that we believe to be incorrect and often withhold payment for that portion of the invoice. Errors we routinely identify on bills include, but are not limited to, vendors billing us for services we did not consume, vendors billing us for services we did not order, vendors billing us for services that should have been billed to another carrier, vendors billing us for services using incorrect rates or incorrect tariff, and vendors failing to

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provide the necessary supporting detail to allow us to bill our customers or verify the accuracy of the bill. These problems are exacerbated because vendors periodically bill for services months or years after the services are provided. While we hope to resolve these disputes through negotiation, we may be compelled to arbitrate these matters. The resolution of these disputes may require us to pay the vendor an amount that is greater than the amount for which we have planned or even the amount the vendor claims is owed if late payment charges are assessed, which could materially adversely affect our business, financial condition, results of operations and cash flows and which may cause us to be unable to meet certain financial covenants related to our senior indebtedness, which would result in a default under such indebtedness. In the event that disputes are not resolved in our favor and we are unable to pay the vendor charges in a timely manner, the vendor may deny us access to the network facilities that we require to serve our customers. If the vendor notifies us of an impending “embargo” of this nature, we may be required to notify our customers of a potential loss of service which may cause a substantial loss of customers. It is not possible at this time to predict the outcome of these disputes.

Elimination or relaxation of regulatory rights and protections could harm our business, results of operations and financial condition.

Section 10 of the Communications Act requires the FCC to forbear from applying individual provisions of the Communications Act or its various enabling regulations upon a showing that a statutory provision or a regulation is unnecessary to ensure that rates and practices remain just, reasonable and non-discriminatory and to otherwise protect consumers and that forbearance is generally in the public interest and would promote competition. Pursuant to Section 10, the FCC has effectively deregulated Verizon’s provision of certain broadband services provided to enterprise customers and has more recently extended similar relief to other incumbent local exchange carriers, including AT&T, Embarq Corporation and Citizens Communication Company. Exercising its forbearance authority, the FCC has also relieved certain incumbent local exchange carriers in certain markets of their obligation to provide other competitive local exchange carriers, or competitive local exchange carriers, with unbundled access to network elements at rates mandated by state regulatory commissions. Although we do not provide service in any of the impacted markets and hence are not directly affected by these latter rulings, Verizon has appealed the FCC’s denial of its request for forbearance from the application of the FCC’s dominant carrier regulation of interstate services, and Section 251(c) unbundling requirements in six Metropolitan Statistical Areas, including the New York-Northern New Jersey-Long Island, NY-NJ-PA Metropolitan Statistical Area, the Philadelphia-Camden-Wilmington PA-NJ-DE-MD Metropolitan Statistical Area and the Boston-Cambridge-Quincy, MA-NH Metropolitan Statistical Area — three of our largest markets. Verizon has also petitioned for comparable relief throughout the State of Rhode Island. We cannot predict the outcome of pending or future forbearance proceedings or appeals or the effect that these proceedings may have on our business or operations.

FCC rules currently allow Verizon and other incumbent local exchange carriers to unilaterally retire copper loop facilities that provide the “last mile” connection to certain customers with limited regulatory oversight. Verizon has filed more than 100 notices of copper plant retirement with the FCC and has announced its intention to retire its copper network over the next 7 years. While we, in conjunction with other competitive local exchange carriers, have petitioned the FCC to strengthen the rules governing copper plant retirement, there are no assurances that we will be successful in this effort. Because it would limit the availability of facilities necessary to provide certain services to our customers, wide scale retirement of copper loops by Verizon could have an adverse impact on our business and operations.

A discussion of legal and regulatory developments is included in the section entitled “Regulation.”

The communications market in which we operate is highly competitive, and we may not be able to compete effectively against companies that have significantly greater resources than we do, which could cause us to lose customers and impede our ability to attract new customers.

The communications industry is highly competitive and is affected by the introduction of new services and systems by, and the market activities of, major industry participants. We have not achieved, and do not expect to achieve, a major share of the local access lines for any of the communications services we offer. In each of our

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markets we compete with the incumbent local exchange carrier serving that area. Large competitors have the following advantages over us:

•  long-standing relationships and strong reputation with customers;

•  financial, technical, marketing, personnel and other resources substantially greater than ours;

•  more funds to deploy communications services and systems that compete with ours;

•  the potential to subsidize competitive services with revenue from a variety of businesses;

•  anticipated increased pricing flexibility and relaxed regulatory oversight;

•  larger networks; and

•  benefits from existing regulations that favor the incumbent local exchange carriers.

We also face, and expect to continue to face, competition from other current and potential market entrants, such as other competitive local exchange carriers cable television companies, wireless service providers and electric utility companies. While many competitive local exchange carriers have always targeted small and medium sized enterprises and multi-location customers, cable television companies are increasingly targeting these customers and are doing so at rates lower than we generally offer. We are also increasingly subject to competition from providers using VoIP over the public Internet or private networks. VoIP providers are currently subject to substantially less regulation than traditional local telephone companies and do not pay certain taxes and regulatory charges that we are required to pay. In addition, the development of new technologies could give rise to significant new competitors in the local market.

In the long distance communications market, we face competition from the incumbent local exchange carriers, large and small interexchange carriers, wireless carriers and IP-based service providers. Long distance prices have decreased substantially in recent years and are expected to continue to decline in the future as a result of increased competition. If this trend continues, we anticipate that revenues from our network services and other service offerings will likely be subject to significant price pressure.

Our customers are impacted by conditions in the economy as a whole. As conditions in the economy worsen, our customers may experience increasing business downturns or bankruptcies. Such adverse economic impacts may result in reduced sales, higher churn and greater bad debt for us. Any combination of these factors could adversely impact our operating results and financial performance.

To service our indebtedness, including the notes, we will require a significant amount of cash. The ability to generate cash depends on many factors beyond our control.

Our ability to repay or to refinance our obligations with respect to our indebtedness, including the notes, and to fund planned capital expenditures will depend on our future financial and operating performance. This, to a certain extent, is subject to general economic, financial, competitive, business, legislative, regulatory and other factors that are beyond our control. These factors could include operating difficulties, diminished access to necessary network facilities, increased operating costs, significant customer churn, pricing pressures, the response of competitors, regulatory developments and delays in implementing strategic initiatives.

We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. As of December 31, 2008, we required approximately $136.5 million in cash to service the interest due on our notes throughout the life of the notes. We may need to refinance all or a portion of our indebtedness, including the notes, at or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness, including the notes and our credit facility, on commercially reasonable terms or at all.

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System disruptions or the failure of our information systems to perform as expected could result in increased capital expenditures, customer and vendor dissatisfaction, loss of business or the inability to add new customers or additional services.

Our success ultimately depends on providing reliable service. Although our network has been designed to minimize the possibility of service disruptions or other outages, it may be disrupted by problems in the network, such as equipment failures and problems with a competitor’s or vendor’s system, such as physical damage to telephone lines or power surges and outages. In addition, our engineering and operations organizations continually monitor and analyze the utilization of our network. As a result, they may develop projects to modify or eliminate network circuits that are underutilized. This ongoing process may result in limited network outages for a subset of our customers. Any disruption in our network could cause the loss of customers and result in additional expenses.

Disruptions caused by security breaches, terrorism or for other reasons, could harm our future operating results. The day-to-day operation of our business is highly dependent on our ability to protect our communications and information technology systems from damage or interruptions by events beyond our control. Sabotage, computer viruses or other infiltration by third parties could damage or disrupt our service, damage our facilities, damage our reputation, and cause us to lose customers, among other things. A catastrophic event could materially harm our operating results and financial condition. Catastrophic events could include a terrorist attack in markets where we operate or a major earthquake, fire, or similar event that would affect our central offices, corporate headquarters, network operations center or network equipment.

Our ability to provide our services and systems at competitive prices is dependent on our ability to negotiate and enforce favorable interconnection and other agreements.

Our ability to continue to obtain favorable interconnection, unbundling, service provisioning and pricing terms, and the time and expense involved in negotiating interconnection agreements and amendments, can be adversely affected by ongoing legal and regulatory activity. All of our interconnection agreements provide either that a party is entitled to demand renegotiation of particular provisions or of the entire agreement based on intervening changes in law resulting from ongoing legal and regulatory activity, or that a change of law is immediately effective in the agreement and set out a dispute resolution process if the parties do not agree upon the change of law. The initial terms of all of our interconnection agreements with incumbent local exchange carriers have expired; however, each of our agreements contains an “evergreen” provision that allows the agreement to continue in effect until terminated. If we were to receive a termination notice from an incumbent local exchange carrier, we may be able to negotiate a new agreement or initiate an arbitration proceeding at the relevant state commission before the agreement expired. In addition, the Telecommunications Act, gives us the right to opt into interconnection agreements, which have been entered into by other carriers, provided the agreement is still in effect and provided that we adopt the entire agreement. We are in the process of renegotiating the terms of our New York interconnection agreements with Verizon. We cannot assure you that we will be able to successfully renegotiate these agreements or any other interconnection agreement on terms favorable to us or at all.

As noted above, we have entered into commercial agreements with Verizon to purchase a substitute product called Verizon Wholesale Advantage Service at unbundled network platform rates subject to a surcharge that is fixed for the remainder of the agreement and have converted substantially all of our unbundled network platform lines to this new product. Our principal commercial agreements with Verizon expire in 2010 and are subject to earlier termination in certain circumstances, including assertion thereover of jurisdiction by a regulatory authority. If our commercial agreements with Verizon were to be terminated or expire, we would be required to convert all of the lines thereunder to resale, which would likely be substantially less favorable to us. We cannot assure you that our commercial agreements with Verizon will be renewed at the end of their terms or that they will not be terminated before the end of their terms.

We also have entered into a commercial agreement with AT&T through which we serve a significant percentage of our customers in the State of Connecticut. This agreement expires in June 2009. As with our Verizon commercial agreement, if our AT&T commercial agreement were to expire, we would be required to convert all of the lines thereunder to resale, which would likely be substantially less favorable to us. We cannot assure you that our commercial agreement with AT&T will be renewed at the end of its terms.

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We have recently entered into amendments of our various interconnection and commercial agreements with Verizon which provide for assurance of timely payment. Under these amendments, we could be compelled to provide letters of credit in an amount of up to two months anticipated billings if in any two months of a consecutive 12 month period, we fail to pay when due undisputed amounts that in total exceed 5% of the total amount invoiced by Verizon during the month and fail to cure such nonpayment within five business days of Verizon’s written notice of nonpayment. The provision of such letters of credit could adversely impact our liquidity position. The amendments also substantially limit the time period within which both we and Verizon can (i) backbill for services rendered to the other and (ii) dispute charges for services rendered to the other.

We are also currently involved in a variety of disputes with vendors relating to billings of approximately $17.0 million as of December 31, 2008. For more information, see the risk factor entitled “— Our current billing disputes with our vendors may cause us to pay our vendors certain amounts of money, which could materially adversely affect our business, financial condition, results of operations and cash flows and which may cause us to be unable to meet certain financial covenants related to our senior indebtedness.”

If the incumbent local exchange carriers with which we have interconnection agreements engage in anticompetitive practices or we experience difficulties in working with the incumbent local exchange carriers, our ability to offer services on a timely and cost-effective basis will be materially and adversely affected.

Our business depends on our ability to interconnect with incumbent local exchange carrier networks and to lease from them certain essential network elements. We obtain access to these network elements and services under terms established in interconnection agreements that we have entered into with incumbent local exchange carriers. Like many competitive communications services providers, from time to time, we have experienced difficulties in working with incumbent local exchange carriers with respect to obtaining information about network facilities, ordering and maintaining network elements and services, interconnecting with incumbent local exchange carrier networks and settling financial disputes. These difficulties can impair our ability to provide local service to customers on a timely and competitive basis. If an incumbent local exchange carrier refuses to cooperate or otherwise fails to support our business needs for any other reason, including labor shortages, work stoppages, cost-cutting initiatives or disruption caused by mergers, other organizational changes or terrorist attacks, our ability to offer services on a timely and cost-effective basis will be materially and adversely affected.

We are subject to substantial government regulation that may restrict our ability to provide local services and may increase the costs we incur to provide these services.

We are subject to varying degrees of federal, state and local regulation. Pursuant to the Communications Act, the FCC exercises jurisdiction over us with respect to interstate and international services. We must comply with various federal regulations, such as the duty to contribute to Universal Service Fund and other subsidies. If we fail to comply with federal reporting and regulatory requirements, we may incur fines or other penalties, including loss of our authority to provide services.

The FCC’s Triennial Review Order, subsequent Triennial Review Remand Order and related decisions have reduced our ability to access certain elements of incumbent local exchange carrier telecommunications platforms in several ways that have affected our operations. First, we no longer have the right to require incumbent local exchange carriers to sell us unbundled network platforms. Because of this, we entered into commercial agreements with Verizon to purchase a substitute product called Verizon Wholesale Advantage Service at unbundled network platform rates subject to a surcharge that increases over time and have converted to this new product all of our unbundled network platform lines that were not migrated to our network. We are required under certain of our commercial agreements with Verizon to maintain certain volumes of loops on a “take-or-pay” basis. Our commercial agreements with Verizon have limited terms that expire in 2010, but are subject to earlier termination in certain circumstances, including upon assertion thereover of jurisdiction by a regulatory authority. Termination of our Verizon commercial agreements would result in a substantial increase in our cost of service. Second, in certain central offices, we no longer have the right to require incumbent local exchange carriers to sell to us as unbundled network elements, or have limited access rights to unbundled network element high capacity circuits that connect our central switching office locations to customers’ premises. Third, we no longer have the right to require incumbent local exchange carriers to sell to us unbundled network element transport between our switches and

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incumbent local exchange carrier switches. Fourth, we have only limited or no access to unbundled network element DS1 or DS3 transport on certain interoffice routes. Petitions currently pending before the FCC could, if granted, further reduce our access to unbundled network element loops and transport. In these instances where we lose unbundled access to high capacity circuits or interoffice transport, we must either find alternative suppliers or purchase substitute circuits from the incumbent local exchange carrier as special access, which increases our costs. Finally, our access to certain broadband elements of the incumbent local exchange carrier network has been limited or eliminated in certain circumstances.

State regulatory commissions also exercise jurisdiction over us to the extent we provide intrastate services. We are required to obtain regulatory authorization and/or file tariffs with regulators in most of the states in which we operate. State regulatory commissions also often regulate the rates, terms and conditions at which we offer service. We have obtained the necessary certifications to provide service, but each commission retains the authority to revoke our certificate if that commission determines that we have violated any condition of our certification or if it finds that doing so would be in the public interest. While we believe we are in compliance with regulatory requirements, our interpretation of our obligations may differ from those of regulatory authorities.

Both federal and state regulators require us to pay various fees and assessments, file periodic reports and comply with various rules regarding the contents of our bills, protection of subscriber privacy, service quality and similar consumer protection matters on an ongoing basis. If we fail to comply with these requirements, we may be subject to fines or potentially be asked to show cause as to why our certificate of authority to provide service should not be revoked.

A discussion of legal and regulatory developments is included in the section entitled “Regulation.”

Difficulties we may experience with incumbent local exchange carriers, interexchange carriers, and wholesale customers over payment issues may harm our financial performance.

We have at times experienced difficulties collecting amounts due to us for services that we provide to incumbent local exchange carriers and interexchange carriers. These balances due to us can be material. We generally have been able to reach mutually acceptable settlements to collect overdue and disputed payments, but we cannot assure you that we will be able to do so in the future.

Our interconnection agreements allow incumbent local exchange carriers to decrease order processing, disconnect customers and increase our security deposit obligations for delinquent payments. If an incumbent local exchange carrier makes an enforceable demand for an increased security deposit, we could have less cash available for other expenses. If an incumbent local exchange carrier were to cease order processing or disconnect customers our business and operations would be materially and adversely affected.

Periodically, our wholesale customers experience financial difficulties. To the extent that the credit quality of our wholesale customers deteriorates or they seek bankruptcy protection, we may have difficulty collecting amounts due for services that we have provided to them. While we maintain security deposits and often retain the right to solicit end-user customers, we cannot assure you that such mechanisms will provide us adequate protection.

We periodically have disagreements with incumbent local exchange carriers and interexchange carriers regarding the interpretation and application of laws, rules, regulations, tariffs and agreements. Adverse resolution of these disagreements may impact our revenues and our costs of service, both prospectively and retroactively. For example, we and often other competitive local exchange carriers believe that (i) incumbent local exchange carrier tandem transit charges are not applicable to traffic terminated to wireless carriers because Verizon tariffs in key states do not provide for such application, (ii) dedicated port charges are not chargeable to competitive local exchange carriers because such charges are associated with switched access services and incumbent local exchange carriers do not provide such services to competitive local exchange carriers and competitive local exchange carriers do not purchase such services from incumbent local exchange carriers, (iii) the level of access charges due to local exchange carriers or payable by interexchange carriers and the amounts chargeable for network services or facilities may be in different instances either understated or overstated, (iv) switched access charges do not apply to VoIP traffic because VoIP services are not telecommunications services and (v) VoIP providers, as providers of information services, are deemed end-users for purposes of the FCC’s access charge regime. Certain local

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exchange carriers and interexchange carriers may disagree with the interpretations we and other competitive local exchange carriers hold. Some of the disagreements, such as those involving tandem transit and dedicated port charges, can be quantified and are included among our outstanding billing disputes with Verizon and other carriers, (see “Risk Factors — Risks Related to Our Industry and Business — Our current billing disputes with our vendors may cause us to pay our vendors certain amounts of money and could materially adversely affect our business, financial condition, results of operations and cash flows and which may cause us to be unable to meet certain financial covenants related to our senior indebtedness),while others, such as those involving VoIP services and access charges, cannot be quantified because their resolution will depend upon public policy determinations not yet made by the FCC. If one or more of such disagreements were resolved through litigation or arbitration against us, such adverse resolution could have a material adverse effect on our business, results of operations and financial condition.

Continued industry consolidation could further strengthen our competitors, and could adversely affect our prospects.

Consolidation in the telecommunications industry is occurring at a rapid pace. In addition to the combinations of Verizon and MCI and SBC, AT&T and BellSouth, numerous competitive local exchange carrier combinations have occurred, including several which directly impact our markets such as Paetec/US LEC, Cavalier/Talk America and Choice One/CTC/Conversent. This consolidation strengthens our competitors and poses increased competitive challenges for us. The incumbent local exchange carrier/interexchange carrier combinations not only provide the incumbent local exchange carriers with national and international networks, but eliminate the two most effective and well financed opponents of the incumbent local exchange carriers in federal and state legislative and regulatory forums and potentially reduce the availability of non-incumbent local exchange carrier network facilities. The competitive local exchange carrier combinations will provide direct competitors with greater financial, network and marketing assets.

Providers of VoIP service have been the target of recent intellectual property infringement litigation that may materially and adversely affect our ability and/or the ability of other providers to continue to sell or provide VoIP service.

Certain providers of VoIP service have been and may in the future continue to be the target of intellectual property infringement litigation with respect to their provision of VoIP service. Some of these actions have been resolved in a manner adverse to the VoIP providers. Vonage America, Inc., for example, has been found to have violated certain patents held by Verizon and Sprint Nextel in providing its VoIP service. Other actions have been brought against competitive local exchange carriers and cable television providers of VoIP. These and similar actions may materially and adversely affect our ability and/or the ability of other providers to continue to sell or provide VoIP service. While we have no reason to believe that our provision of VoIP service infringes any third party intellectual property, if it were to be so found, our business could be adversely impacted. It can also be adversely impacted if any of our wholesale customers that are providing VoIP service were to be unable to continue to provide such service as a result of infringement of intellectual property held by others.

The indenture governing the notes and the credit agreement governing our credit facility contain restrictive and operating covenants that limit our operating flexibility, and we may obtain a credit facility in the future that may include similar or additional restrictions.

The indenture and credit agreement contain covenants that, among other things, restrict our ability to take specific actions, even if we believe them to be in our best interest, including restrictions on our ability to:

•  incur or guarantee additional indebtedness or issue preferred stock;

•  pay dividends or distributions on, or redeem or repurchase, capital stock;

•  create liens with respect to our assets;

•  make investments, loans or advances;

•  prepay subordinated indebtedness;

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•  enter into transactions with affiliates;

•  merge, consolidate or sell our assets; and

•  engage in any business other than activities related or complementary to communications.

In addition, any future credit facility may impose financial covenants that require us to comply with specified financial ratios and tests, including minimum quarterly earnings before interest, taxes, depreciation and amortization (“EBITDA”), senior debt to total capitalization, maximum capital expenditures, maximum leverage ratios and minimum interest coverage ratios. We cannot assure you that we will be able to meet these requirements or satisfy these covenants in the future. If we fail to do so, our indebtedness thereunder could become accelerated and payable at a time when we are unable to pay them. This could adversely affect our ability to carry out our business plan and would have a negative effect on our financial condition.

The communications industry faces significant regulatory uncertainties and the adverse resolution of these uncertainties could harm our business, results of operations and financial condition.

If current or future regulations change, we cannot assure you that the FCC or state regulators will grant us any required regulatory authorization or refrain from taking action against us if we are found to have provided services without obtaining the necessary authorizations, or to have violated other requirements of their rules and orders. Delays in receiving required regulatory approvals or the enactment of new adverse regulation or regulatory requirements may slow our growth and have a material adverse effect upon our business, results of operations and financial condition. The Telecommunications Act remains subject to judicial review and ongoing proceedings before the FCC and state regulators, including proceedings relating to interconnection pricing, access to and pricing for unbundled network elements and special access services and other issues that could result in significant changes to our business and business conditions in the communications industry generally. Recent decisions by the FCC have eliminated or reduced our access to certain elements of incumbent local exchange carrier telecommunications platforms that we use to serve our customers and increased the rates that we pay for such elements. Other proceedings are pending before the FCC that could potentially further limit our access to these network elements or further increase the rates we must pay for such elements. Likewise, proceedings before the FCC could impact the availability and price of special access facilities. Other proceedings before the FCC could result in an increase in the amount we pay to other carriers or a reduction in the revenues we derive from other carriers in, or retroactive liability for, access charges and reciprocal compensation. Still other proceedings before the FCC could result in increases in the cost of regulatory compliance. A number of states also have proceedings pending that could impact our access to and the rates we pay for network elements. Other state proceedings could limit our pricing and billing flexibility. Our business would be substantially impaired if the FCC, the courts, or state commissions eliminated our access to the facilities and services we use to serve our customers, substantially increased the rates we pay for facilities and services or adversely impacted the revenues we receive from other carriers or our customers. In addition, congressional legislative efforts to rewrite the Telecommunications Act or enact other telecommunications legislation, as well as various state legislative initiatives, may cause major industry and regulatory changes. We cannot predict the outcome of these proceedings or legislative initiatives or the effects, if any, that these proceedings or legislative initiatives may have on our business and operations.

A discussion of legal and regulatory developments is included in the section entitled “Regulation.”

The effects of increased regulation of IP-based service providers are unknown.

While the FCC has to date generally subjected Internet service providers to less stringent regulatory oversight than traditional common carriers, it has recently imposed certain regulatory obligations on providers of Interconnected VoIP and/or facilities based broadband Internet access providers, including the obligations to contribute to the Universal Service Fund, to provide emergency 911 services and/or to comply with the Communications Assistance for Law Enforcement Act. Some states have imposed taxes, fees and/or surcharges on VoIP telephony services. The imposition of additional regulations on Internet service providers could have a material adverse effect on our business.

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Declining prices for communications services could reduce our revenues and profitability.

We may fail to achieve acceptable profits due to pricing. Prices in telecommunication services have declined substantially in recent years, a trend which may continue. Accordingly, we cannot predict to what extent we may need to reduce our prices to remain competitive or whether we will be able to sustain future pricing levels as our competitors introduce competing services or similar services at lower prices. Our ability to meet price competition may depend on our ability to operate at costs equal to or lower than our competitors or potential competitors.

Certain real estate leases and agreements are important to our business and failure to maintain such leases and agreements could adversely affect us.

Our switches are housed in facilities owned by third parties. Our use of these various facilities is subject to multiple real estate leases. If we were to lose one or more of these leases, the resultant relocation of one or more of our switches would be costly and disruptive to our business and customers. We cannot assure you that we will be able to maintain all of the real estate leases governing our multiple switch sites.

We maintain agreements which allow us to install equipment and utilize in-building wiring and, in some cases, optical fiber in more than 500 commercial buildings in metro New York and Washington, D.C. We owe past royalties, which could total approximately $0.7 million, on a number of these agreements; the terms of other agreements have expired. If we were to lose some or all of our “lit-building” agreements, our business could be adversely impacted.

We depend on a limited number of third party service providers for long distance and other services, and if any of these providers were to experience significant interruptions in its business operations, or were to otherwise cease to provide such services to us, our ability to provide services to our customers could be materially and adversely affected.

We depend on a limited number of third party service providers for long distance, data and other services. If any of these third party providers were to experience significant interruptions in their business operations, terminate their agreements with us or fail to perform the services or meet the standards of quality required under the terms of our agreements with them, our ability to provide these services to our customers could be materially and adversely affected for a period of time that we cannot predict. If we have to migrate the provision of these services to an alternative provider, we cannot assure you that we would be able to timely locate alternative providers of such services, that we could migrate such services in a short period of time without significant customer disruption so as to avoid a material loss of customers or business, or that we could do so at economical rates.

The communications industry is undergoing rapid technological changes, and new technologies may be superior to the technologies we use. We may fail to anticipate and keep up with such changes.

The communications industry is subject to rapid and significant changes in technology and in customer requirements and preferences. If we fail to anticipate and keep up with such changes we could lose market share, which could reduce our revenue. We have developed our business based, in part, on traditional telephone technology. Subsequent technological developments may reduce the competitiveness of our network and require expensive unanticipated upgrades or additional communications products that could be time consuming to integrate into our business and could cause us to lose customers and impede our ability to attract new customers. We may be required to select one technology over another at a time when it might be impossible to predict with any certainty which technology will prove to be more economic, efficient or capable of attracting customers. In addition, even though we utilize new technologies, such as VoIP, we may not be able to implement them as effectively as other companies with more experience with those new technologies. In addition, while we have recently purchased and deployed new technology including VoIP softswitches, Ethernet in the First Mile and MPLS, or MPLS, core and edge routers, we may not be able to implement new technology as effectively as other companies with more experience with new technology.

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Limits exist on our ability to seek indemnification for losses from individuals and entities from whom we have acquired assets and operations.

When we acquire a company, we generally secure from the sellers indemnity protection against certain types of liabilities. Such indemnity protection is generally subject to a deductible and a cap, as well as a time limit. If undisclosed or unknown liabilities fall below the deductible or over the cap or such liabilities are not discovered until after the time limit, the indemnity will not protect us. Moreover, a seller may contest our indemnity claims or be unable to fund such claims. As a result we may be liable for liabilities of businesses we have acquired.

We are exposed to risks associated with disruption and instability in the financial markets.

U.S. and global credit and equity markets have recently undergone significant disruption, making it difficult for many businesses to obtain financing on acceptable terms. In addition, equity markets are continuing to experience wide fluctuations in value. If these conditions continue or worsen, our cost of borrowing may increase, and it may be more difficult to obtain financing in the future. In addition, an increasing number of financial institutions and insurance companies have reported significant deterioration in their financial condition. If any of the significant lenders, insurance companies or other financial institutions are unable to perform their obligations under our credit agreement, insurance policies or other contracts, and we are unable to find suitable replacements on acceptable terms, our results of operations, liquidity and cash flows could be adversely affected. Additionally, a substantial portion of our revenues comes from customers whose spending patterns may be affected by prevailing economic conditions. A sustained decline in the financial stability of the market could have a negative impact on our business and results of operations.

The financial difficulties faced by others in our industry could adversely affect our public image and our financial results.

Certain competitive communications services providers, long distance carriers and other communications providers have experienced substantial financial difficulties over the past few years. To the extent that carriers in financial difficulties purchase services from us, we may not be paid in full or at all for services we have rendered. Further, the perception of instability of companies in our industry may diminish our ability to obtain further capital and may adversely affect the willingness of potential customers to purchase their communications services from us.

If we are unable to retain and attract management and key personnel, we may not be able to execute our business plan.

We believe that our success is due, in part, to our experienced management team. Losing the services of one or more members of our management team could adversely affect our business and our expansion efforts, and possibly prevent us from further improving our operational, financial and information management systems and controls. We do not maintain key man life insurance on any of our officers. As we continue to grow, we will need to retain and hire additional qualified sales, marketing, administrative, operating and technical personnel, and to train and manage new personnel.

Our ability to implement our business plan is dependent on our ability to retain and hire a large number of qualified new employees each year. The competition for qualified technical and sales personnel is intense in the telecommunications industry and in our markets. If we are unable to hire sufficient qualified personnel, our customers could experience inadequate customer service and delays in the installation and maintenance of access lines.

Our success depends on the ability to manage and expand operations effectively.

Our ability to manage and expand operations effectively will depend on the ability to:

•  offer high-quality, reliable services at reasonable costs;

•  introduce new technologies;

•  install and operate telecommunications switches and related equipment;

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•  lease access to suitable transmission facilities at competitive prices;

•  scale operations;

•  obtain successful outcomes in disputes and in litigation, rule-making, legislation and regulatory proceedings;

•  successfully negotiate, adopt or arbitrate interconnection agreements with other carriers;

•  acquire necessary equipment, software and facilities;

•  integrate existing and newly acquired technology and facilities, such as switches and related equipment;

•  evaluate markets;

•  add products;

•  monitor operations;

•  control costs;

•  maintain effective quality controls;

•  hire, train and retain qualified personnel;

•  enhance operating and accounting systems;

•  address operating challenges;

•  adapt to market and regulatory developments; and

•  obtain and maintain required governmental authorizations.

In order for us to succeed, these objectives must be achieved in a timely manner and on a cost-effective basis. If these objectives are not achieved, we may not be able to compete in existing markets or expand into new markets.

In addition, we have grown rapidly since inception and expect to continue to grow primarily by expanding our product offerings, adding and retaining customers, acquisitions and leveraging our network and operational infrastructure. We expect this growth to place a strain on our operational, human and financial resources, particularly if the growth is through acquisitions. The ability to manage operations and expansion effectively depends on the continued development of plans, systems and controls for operational, financial and management needs. We cannot give any assurance that these requirements can be satisfied or that our operations and growth can be managed effectively. A failure to satisfy these requirements could have a material adverse effect on our financial condition and the ability to implement fully its growth and operating plans.

We may engage in future acquisitions that are not successful or fail to integrate acquired businesses into our operations, which may adversely affect our competitive position and growth prospects.

As part of our business strategy, we may seek to expand through the acquisition of other businesses that we believe are complementary to our business. We may be unable to identify suitable acquisition candidates, or if we do identify suitable acquisition candidates, we may not complete those transactions commercially favorable to us or at all, which may adversely affect our competitive position and growth prospects.

If we acquire another business, we may face difficulties, including:

•  integrating that business’s personnel, services, products or technologies into our operations;

•  retaining key personnel of the acquired business;

•  failing to adequately identify or assess liabilities of that business;

•  failing to achieve the forecasts we used to determine the purchase price of that business; and

•  diverting our management’s attention from the normal daily operation of our business.

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These difficulties could disrupt our ongoing business and increase our expenses. As of the date of this report, we have no agreements to enter into any material acquisition transaction.

In addition, our ability to complete acquisitions will depend, in part, on our ability to finance these acquisitions, including the costs of acquisition and integration. Our ability may be constrained by our cash flow, the level of our indebtedness at the time, restrictive covenants in the agreements governing our indebtedness, conditions in the securities markets, regulatory constraints and other factors, many of which are beyond our control. If we proceed with one or more acquisitions in which the consideration consists of cash, we may use a substantial portion of our available cash to complete the acquisitions. If we finance one or more acquisitions with the proceeds of indebtedness, our interest expense and debt service requirements could increase materially. The financial impact of acquisitions could materially affect our business and could cause substantial fluctuations in our quarterly and yearly operating results.

Misappropriation of our intellectual property and proprietary rights could impair our competitive position, and defending against intellectual property infringement and misappropriation claims could be time consuming and expensive and, if we are not successful, could cause substantial expenses and disrupt our business.

We rely on a combination of patent, copyright, trademark and trade secret laws, as well as licensing agreements, third party non-disclosure agreements and other contractual provisions and technical measures to protect our intellectual property rights. There can be no assurance that these protections will be adequate to prevent our competitors from copying or reverse-engineering our hardware or software products, or that our competitors will not independently develop technologies that are substantially equivalent or superior to our technology.

In addition, we cannot be sure that the products, services, technologies and advertising we employ in our business do not or will not infringe valid patents, trademarks, copyrights or other intellectual property rights held by third parties. We may be subject to legal proceedings and claims from time to time relating to intellectual property of others in the ordinary course of our business. Defending against intellectual property infringement or misappropriation claims could be time consuming and expensive regardless of whether we are successful, and could cause substantial expenses and disrupt our business.

As an Internet access provider, we may incur liability for information disseminated through our network.

The law relating to the liability of Internet access providers and on-line services companies for information carried on or disseminated through their networks is unsettled. As the law in this area develops, the potential imposition of liability upon us for information carried on and disseminated through our network could require us to implement measures to reduce our exposure to such liability, which may require the expenditure of substantial resources or the discontinuation of certain products or service offerings. Any costs that are incurred as a result of such measures or the imposition of liability could harm our business.

MCG, Baker, NEA and other significant investors control us, and their interests as equity holders may conflict with interests of noteholders.

MCG, Baker, NEA and other significant investors control us. Through their ownership of preferred stock and common stock, they are and will be able to cause, among other things, the election of a majority of the members of the board of directors and the approval of any action requiring the approval of our shareholders, including a change of control, a public offering, merger or sale of assets or stock. These interests may conflict with the interests of noteholders. For example, if we encounter financial difficulties or are unable to pay our debts as they mature, the interests of our equity holders may conflict with the interests of our note holders. In addition, our equity holders may have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their equity investments, even though such transactions might involve risks to holders of our notes. Changes in control of the Company or of some of our equity holders could trigger requirements that we repay the notes. They may in the future own businesses that directly or indirectly compete with ours. They may also pursue acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us. Pursuant to our charter, our significant stockholders have no duty to present corporate

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opportunities to us. If a corporate opportunity is presented to them or their affiliates, then such significant stockholder will have no liability to us for acting upon such opportunity without presenting it to us.

Item 1B.   Unresolved Staff Comments

We are a non-accelerated filer. However, we note that we have received comments from the SEC in connection with our pending initial public offering. These will be addressed by the Company once the structure regarding the initial public offering has been finalized.

Item 2.   Properties

Our corporate headquarters is located in Rye Brook, New York. We do not own any facilities. The table below lists our current material leased facilities.

			Approximate
Location	Lease Expiration		Square Footage
Offices:
King of Prussia, PA		January 2011		102,085
Rye Brook, NY		May 2016		57,293
Newark, NJ		April 2011		24,819
New York, NY		June 2009		24,375
New York, NY		April 2015		21,111
Long Island City, NY		September 2012		20,000
Quincy, MA		September 2013		14,637
Melville, NY		March 2011		13,152
Switches:
New York, NY		May 2012		38,500
Philadelphia, PA		July 2023		16,617
Long Island City, NY		July 2009		21,112
Charlestown, MA		April 2010		12,490
Philadelphia, PA		April 2009		21,000
Horsham, PA		November 2010		9,244
Syracuse, NY		October 2014		8,000
Philadelphia, PA		January 2013		5,928
Herndon, VA		June 2010		5,000

Item 3.   Legal Proceedings

We are currently a party to several legal actions. We are one of a large number of defendants in a lawsuit brought by VoxPath Networks, Inc. (“VoxPath”) in the U.S. District Court for the Eastern District of Texas in April 2008. VoxPath alleges that our hosted IP PBX service infringes upon a patent held by it. VoxPath seeks injunctive relief as well as undisclosed damages. We are currently involved in active discussions aimed at settling this matter.

AT&T Communications of New York, Inc. and Teleport Communications Group, Inc. commenced an action against us in the U.S. District Court for the Southern District of New York in March 2008. Plaintiffs seek monetary relief, including recovery of amounts billed for switched access service. This matter has been referred to the New York Public Service Commission.

We are also a party to certain legal actions and regulatory investigations and enforcement proceedings arising in the ordinary course of business. We do not believe that the ultimate outcome of any of the foregoing actions will result in any liability that would have a material adverse effect on our financial condition, results of operations or cash flows.

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We are involved in certain billing and contractual disputes with our vendors. For more information regarding our contractual disputes with our vendors, see the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors — Risks Relating to Our Industry and Business — Our current billing disputes with Verizon and other carriers may cause us to pay certain amounts of money and could materially adversely affect our business, financial condition, results of operations and cash flows” and “— Our ability to provide our services and systems at competitive prices is dependent on our ability to negotiate and enforce favorable interconnection and other agreements.”

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

Not applicable.

PART II

Item 5.   Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

There is no established public trading market for our common stock or preferred stock. We have not paid cash dividends for the past two fiscal years and we do not anticipate that we will pay any dividends to holders of our common stock in the foreseeable future, and our ability to pay dividends is restricted by the instruments governing our outstanding indebtedness. Any payment of cash dividends on our common stock in the future will be at the discretion of our board of directors and will depend upon our results of operations, earnings, capital requirements, financial condition, future prospects, contractual restrictions and other factors deemed relevant by our board of directors.

The following table lists the number of record holders by each class of stock as of March 24, 2009:

	Holders of
Class of Equity Security	Record
Common stock A		207
Common stock B		36
Series A Preferred stock		1
Series A-1 Preferred stock		1
Series B Preferred stock		133
Series B-1 Preferred stock		90
Series C Preferred stock		36

See Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters — Securities authorized for issuance under equity compensation plans” for information regarding our equity compensation plans.

Item 6.   Selected Consolidated Financial Data

The following tables set forth our selected consolidated financial data for the periods indicated. The selected consolidated financial data for the years ended December 31, 2006, 2007 and 2008 and as of December 31, 2007 and 2008 have been derived from our audited consolidated financial statements included elsewhere in this report. The selected consolidated financial data for the years ended December 31, 2004 and 2005 and as of December 31, 2004, 2005 and 2006 have been derived from our audited consolidated financial statements not included elsewhere in this report. In connection with the Bridgecom merger on January 14, 2005, MCG, the sole owner of Bridgecom, became the largest owner of our capital stock and appointed the members of our board and our chief executive officer. In addition, many of our senior management roles were filled by members of Bridgecom’s senior management team. Accordingly, Bridgecom was deemed the accounting acquirer with Broadview becoming the surviving corporate entity. The financial data for the two months ended February 29, 2004 and the ten months ended December 31, 2004 reflect that of Bridgecom alone. The financial data for the two months ended February 29, 2004 are derived from the financial statements of Bridgecom prior to its acquisition by MCG (predecessor). The financial data for periods

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after March 1, 2004 are derived from the financial statements of Bridgecom after such merger. The financial data subsequent to January 14, 2005 include Bridgecom and the acquired business of Broadview. The financial data for the year ended December 31, 2005 include 12 months of financial data for Bridgecom and 111/2 months of financial data for the acquired business of Broadview. The financial data for the year ended December 31, 2006 include 12 months of financial data for Broadview and three months of financial data for ATX. The financial data for the year ended December 31, 2007 include 12 months of financial data for Broadview and ATX and 7 months of financial data for InfoHighway.

The following financial information is qualified by reference to and should be read in conjunction with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and Notes to Consolidated Financial Statements included elsewhere in this report. All dollar amounts are in thousands, except per share data. For more information regarding securities authorized for issuance under equity compensation plans, see Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”

	Predecessor			Successor
				Ten Months
	Two Months			Ended
	Ended February 29,			December 31,			Years Ended December 31,
	2004			2004			2005			2006			2007			2008
Statements of operations data:
Revenues	$	13,631		$	72,826		$	240,396		$	272,653		$	451,159		$	500,736
Operating expenses:
Cost of revenues(1)		7,081			36,105			115,214			130,841			234,166			257,883
Selling, general and administrative(2)		5,363			30,523			94,138			105,986			166,322			170,596
Software development		—			—			2,301			1,819			2,293			1,639
Depreciation and amortization		284			8,554			45,756			49,781			75,980			73,608
Impairment charges		—			—			—			—			4,000			—
Merger integration costs		10			2,834			4,531			1,430			500			—
Total operating expenses		12,738			78,016			261,940			289,857			483,261			503,726
Income (loss) from operations		893			(5,190	)		(21,544	)		(17,204	)		(32,102	)		(2,990	)
Other income (expense)		(1,001	)		(4,523	)		—			21			240			(8	)
Interest expense		(704	)		(3,399	)		(17,842	)		(25,463	)		(34,390	)		(39,514	)
Interest income		29			31			458			1,395			1,489			702
Loss before provision for income taxes		(783	)		(13,081	)		(38,928	)		(41,251	)		(64,763	)		(41,810	)
Provision for income taxes		(2	)		(3,802	)		—			(262	)		(726	)		(1,056	)
Net loss		(785	)		(16,883	)		(38,928	)		(41,513	)		(65,489	)		(42,866	)
Dividends on preferred stock		—			—			(22,002	)		(32,996	)		(55,031	)		(63,890	)
Modification of preferred stock		—			—			—			—			(95,622	)		—
Loss available to common shareholders	$	(785	)	$	(16,883	)	$	(60,930	)	$	(74,509	)	$	(216,142	)	$	(106,756	)
Loss available per common share — basic and diluted				$	(7.74	)	$	(9.54	)	$	(10.07	)	$	(23.09	)	$	(11.03	)
Weighted average common shares outstanding — basic and diluted					2,181,437			6,385,863			7,396,610			9,359,132			9,675,916

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	Predecessor			Successor
				Ten Months
	Two Months			Ended
	Ended February 29,			December 31,			Years Ended December 31,
	2004			2004			2005			2006			2007			2008
Statement of cash flow data:
Cash flows provided by (used in):
Operating activities	$	(652	)	$	(1,735	)	$	8,151		$	13,296		$	(2,671	)	$	27,239
Investing activities		(1,038	)		(40,336	)		(20,731	)		(115,568	)		(88,824	)		(68,708	)
Financing activities		784			36,654			25,407			129,471			89,541			23,541

	Successor
	As of December 31,
	2004		2005			2006		2007			2008
Balance Sheet data:
Cash and cash equivalents	$	3,926	$	16,753		$	43,952	$	41,998		$	24,070
Investment securities		—		—			—		—			23,533
Property and equipment, net		9,086		39,547			61,395		77,373			85,248
Goodwill		8,379		27,964			69,632		96,154			98,111
Total assets		67,366		197,113			318,325		381,798			359,028
Total debt, including current portion		23,875		147,204			217,769		313,990			336,778
Total stockholders’ equity (deficiency)		19,707		(12,572	)		20,470		(22,715	)		(65,266	)

(1)	Exclusive of depreciation and amortization.
(2)	Includes share-based compensation of $308, $673, $754, $2,552 and $293 for the ten months ended December 31, 2004 and for the years ended December 31, 2005, 2006, 2007 and 2008 respectively.

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the “Selected Consolidated Financial Data” and the Consolidated Financial Statements and Notes to Consolidated Financial Statements included elsewhere in this report. Certain information contained in the discussion and analysis set forth below and elsewhere in this report, including information with respect to our plans and strategies for our business and related financing, includes forward-looking statements that involve risk and uncertainties. In evaluating such statements, prospective investors should specifically consider the various factors identified in this report that could cause results to differ materially from those expressed in such forward-looking statements, including matters set forth in the section entitled “Risk Factors”. Many of the amounts and percentages presented in this discussion and analysis have been rounded for convenience of presentation, and all amounts are presented in thousands.

Overview

We are a leading competitive communications provider, in terms of revenue, offering voice and data communications and managed network solutions to small and medium sized business customers in 20 markets across 10 states throughout the Northeast and Mid-Atlantic United States, including major metropolitan markets such as New York, Philadelphia, Baltimore, Washington, D.C. and Boston. To meet the demands of communications-intensive business customers, we offer dedicated local and long distance voice, high-speed data and integrated services, as well as value-added products and services such as managed services. Our network architecture pairs the strength of a traditional infrastructure with an IP platform, built into our core and extended to the edge, to support dynamic growth of VoIP, MPLS and other next generation technologies. In addition, our network topology incorporates metro Ethernet access in key markets, enabling us to provide T-1 equivalent and high-speed Ethernet access services via unbundled network element loops to customers served from selected major metropolitan collocations, significantly increasing our margins while also enhancing capacity and speed of certain service offerings.

The Company, doing business as Broadview Networks since its acquisition in 2005, was founded in 1996 as Bridgecom International, Inc. to take advantage of the competitive opportunities in the local exchange communications market created by the Telecommunications Act. Since then, management has responded to market and regulatory changes by strategically deploying facilities and merging with or acquiring companies with the necessary footprint, facilities and customer base to sustain and organically grow our business. We merged with Broadview Networks on January 14, 2005 to transfer our small and medium enterprise customers clustered in the New York metropolitan area to our own switches, gaining improved margins, more control over service delivery, and more comprehensive customer care.

On September 18, 2008, we acquired the assets of Lightwave. Lightwave is a competitive local exchange carrier operating primarily in the Mid-Atlantic region of the United States. We expect this acquisition to complement the acquisition of ATX and enable us to further penetrate into the Mid-Atlantic region.

On May 31, 2007, we acquired InfoHighway. InfoHighway delivers voice and data services, as well as hosted and managed communications solutions, to business customers in the Northeastern United States. InfoHighway’s network-based solutions include a wide range of hosted private branch exchange, or PBX, converged services based on VoIP technology and high-bandwidth Internet access products. InfoHighway has large concentrations of customers in the New York metropolitan market, including Northern New Jersey. In addition, InfoHighway’s approximately 500 lit buildings in the New York and Washington D.C. metro areas allow us access to customers over a cost-effective shared infrastructure. The acquisition of InfoHighway has resulted in greater business density and network utilization, which supports margin expansion.

On September 29, 2006, we acquired ATX, which has provided us with broader opportunities in our existing markets and access to new markets and larger business customers. ATX delivers voice and data services, as well as hosted and managed communications solutions, to business customers throughout the Mid-Atlantic, including Southeastern Pennsylvania, with a concentration in the Philadelphia metro market. We believe this market, combined with Broadview’s and InfoHighway’s existing market strength in the New York metro area, makes us one of the market leaders in the Northeast and Mid-Atlantic corridor. The ATX acquisition as well as InfoHighway’s

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presence also enabled us to extend our geographic footprint within the Mid-Atlantic region and to serve additional cities such as Baltimore and Washington, D.C. ATX’s advanced data and managed service offerings enhanced our suite of products and services. In addition, ATX’s ability to provide high-capacity voice and data services to business customers complements our focus on providing integrated T-1 based services to new and existing customers.

We have experienced significant operating losses, both prior to and following the ATX and InfoHighway acquisitions. In addition, ATX and InfoHighway each experienced significant operating losses prior to the respective acquisitions. We recorded operating losses of $17.2 million, $32.1 million and $3.0 million for the years ended December 31, 2006, 2007 and 2008, respectively. During the same periods, we also recorded net losses of $41.5 million, $65.5 million and $42.9 million, respectively. We expect to continue to have losses for the foreseeable future, although we anticipate that the synergies we have identified through the combination of the three entities, if effectuated, may offer some areas of increasing operating efficiencies leading to potentially more profitable net results. In addition, as of December 31, 2008, we had $336.8 million of outstanding indebtedness.

Our business is subject to several macro trends, some of which negatively affect our operating performance. Among these negative trends are lower usage per customer, which translates into less usage based revenue and lower unit pricing for certain services. In addition, we continue to face other industry wide trends including rapid technology changes and overall increases in competition from existing large competitors such as Verizon and established cable operators, other competitive local exchange carriers and new entrants such as VoIP, wireless and other service providers. These factors are mitigated by several positive trends. These include a more stable customer base, increasing revenue per customer due to the trend of customers to buy more products from us as we deploy new technology and expand our offerings, a focus on larger customers than our average existing base and an overall increase in demand for data, managed and enhanced services.

As of December 31, 2008, we have approximately 300 sales, sales management and sales support employees, including approximately 200 quota-bearing sales representatives, who target small and medium sized business customers requiring four to 500 lines physically located within the footprint of our switching centers and approximately 260 collocations. We focus our sales efforts on communications intensive business customers who purchase multiple products that can be cost-effectively delivered on our network. These customers generally purchase high margin services in multi-year contracts and result in high retention rates. We believe that a lack of focus on the small and medium sized business segment from the Regional Bell Operating Companies has created an increased demand for alternatives in the small and medium sized business communications market. Consequently, we view this market as a sustainable growth opportunity and have focused our strategies on providing small and medium sized businesses with a competitive communications solution.

We focus our business strategy on providing services based on our T-1 based products, which we believe offer greater value to customers, increase customer retention and provide revenue growth opportunities for us. Historically, the Company’s revenue was dominated by off-net, voice revenue from smaller customers. Due to the organic transition towards T-1 based products and the acquisition of ATX and InfoHighway, we have transitioned a large percentage of our revenue base. Assuming the Bridgecom merger, ATX acquisition and InfoHighway acquisition each occurred on January 1, 2006, our combined revenue from T-1 based products and managed services would have grown by approximately 13% from 2007 to 2008. Revenue from the sale of T-1 based products and managed services grew by approximately 9% from the fourth quarter of 2007 to the fourth quarter of 2008, and now represents approximately 42% of our total revenue and approximately 48% of our retail revenue stream, with typical incremental gross profit margins in excess of 60%.

Our facilities-based network encompasses approximately 3,000 route miles of metro and long-haul fiber, approximately 260 collocations and approximately 500 lit buildings. Our network has the ability to deliver traditional services, such as POTS and T-1 lines, as well as DSL, or Digital Subscriber Line, and next generation services, such as dynamic VoIP integrated T-1s, Ethernet in the first mile, hosted VoIP solutions, and MPLS Virtual Private Networks. We provide services to our customers primarily through our network of owned telecommunications switches, data routers and related equipment and owned and leased communications lines and transport facilities using a variety of access methods, including unbundled network element loops, special access circuits and digital T-1 transmission lines for our on-net customers. We have deployed an IP-based platform that facilitates the

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development of next generation services and the migration of our traffic and customer base to a more cost-effective and efficient IP-based infrastructure, which enhances the performance of our network. As of December 31, 2008, approximately two-thirds of our total lines were provisioned on-net.

We measure our operational performance using a variety of indicators including: (i) revenue; (ii) the percentage of our revenue that comes from customers that we serve on-net for target products; (iii) gross margin; (iv) operating expenses as a percentage of revenue; (v) EBITDA margin; (vi) free cash flow; (vii) revenue and profit per customer; and (viii) customer and revenue retention. We also monitor key operating and customer service metrics to improve customer service, maintain the quality of our network and reduce costs.

Results of Operations

The following table sets forth, for the periods indicated, certain financial data as a percentage of total revenues.

	Years Ended December 31,
	2006			2007			2008
Revenues:
Voice and data services		87.3	%		87.7	%		86.6	%
Wholesale		4.7	%		2.8	%		3.8	%
Access		5.5	%		5.6	%		5.7	%
Total network services		97.5	%		96.1	%		96.1	%
Other		2.5	%		3.9	%		3.9	%
Total revenues		100.0	%		100.0	%		100.0	%
Operating expenses:
Network services		46.1	%		49.6	%		49.0	%
Other cost of revenues		1.9	%		2.3	%		2.5	%
Selling, general and administrative		38.8	%		36.9	%		34.1	%
Software development		0.7	%		0.5	%		0.3	%
Depreciation and amortization		18.3	%		16.8	%		14.7	%
Impairment charges		0.0	%		0.9	%		0.0	%
Merger integration costs		0.5	%		0.1	%		0.0	%
Total operating expenses		106.3	%		107.1	%		100.6	%
Loss from operations		(6.3	)%		(7.1	)%		(0.6	)%
Other income		0.0	%		0.1	%		0.0	%
Interest expense		(9.3	)%		(7.6	)%		(7.9	)%
Interest income		0.5	%		0.3	%		0.1	%
Loss before provision for income taxes		(15.1	)%		(14.3	)%		(8.4	)%
Provision for income taxes		(0.1	)%		(0.2	)%		(0.2	)%
Net loss		(15.2	)%		(14.5	)%		(8.6	)%

Key Components of Results of Operations

Revenues

Our revenues, as detailed in the table above, consist of network services revenues, which consists primarily of voice and data managed and hosted services, wholesale services and access services. Voice and data services consist of local dial tone, long distance and data services, as well as managed and hosted services. Wholesale services consist of voice and data services, data collocation services and transport services. Carrier access and reciprocal compensation revenue consists primarily of usage charges that we bill to other carriers to originate and terminate

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their calls to and from our customers. Network services revenues represents a predominantly recurring revenue stream linked to our retail and wholesale customers.

Monthly recurring network services revenues are recognized in the month the services are used. In the case of local service revenues, monthly recurring local services charges are billed in advance but accrued for and recognized on a prorated basis based on length of service in any given month. Non-recurring revenues associated with line installations are recognized over the average life of the customers. Long distance and access charges are billed in arrears and accrued for and recognized in the month the services are provided.

We generate approximately 87% of our revenues from retail end customer voice and data products and services. Revenue from end customer data includes T-1/T-3, integrated T-1 data and other managed services trending to an increasing percentage of our overall revenue even as voice revenues, predominately POTS and long distance services, remain the core of our revenue base. Data cabling, service installation and wiring and phone systems sales and installation also form a small but growing portion of our overall business. We continue to focus on data, managed and hosted services as growth opportunities as we expect the industry to trend toward lower usage components of legacy products such as long distance and local usage. This lower usage is primarily driven by trends toward customers using more online and wireless communications.

Cost of Revenues (exclusive of depreciation and amortization)

Our network services cost of revenues consist primarily of the cost of operating our network facilities. Determining our cost of revenues requires significant estimates. The network components for our facilities-based business include the cost of:

•  leasing local loops and digital T-1 lines which connect our customers to our network;

•  leasing high capacity digital lines that connect our switching equipment to our collocations;

•  leasing high capacity digital lines that interconnect our network with the incumbent local exchange carriers;

•  leasing space, power and terminal connections in the incumbent local exchange carrier central offices for collocating our equipment;

•  signaling system network connectivity; and

•  Internet transit and peering, which is the cost of delivering Internet traffic from our customers to the public Internet.

The costs to obtain local loops, digital T-1 lines and high capacity digital interoffice transport facilities from the incumbent local exchange carriers vary by carrier and by state and are regulated under federal and state laws. We do not anticipate any significant changes in Verizon local loop, digital T-1 line or high capacity digital interoffice transport facility rates in the near future. Except for our lit buildings, in virtually all areas, we obtain local loops, T-1 lines and interoffice transport capacity from the incumbent local exchange carriers. We obtain interoffice facilities from carriers other than the incumbent local exchange carriers, where possible, in order to lower costs and improve network redundancy; however, in most cases, the incumbent local exchange carriers are our only source for local loops and T-1 lines.

Our off-net network services cost of revenues consists of amounts we pay to Verizon and AT&T pursuant to our commercial agreements with them. Rates for such services are prescribed in the commercial agreements and available for the term of the agreements. Rates were subject to a surcharge that increased by a predetermined amount on each of the first, second and third anniversaries of the agreement term and is now fixed for the duration of the agreement term. The commercial agreements require certain minimum purchase obligations, which we have met in all of the years we were under the commercial agreements.

Our network services cost of revenues also includes the fees we pay for long distance, data and other services. We have entered into long-term wholesale purchasing agreements for these services. Some of the agreements contain significant termination penalties and/or minimum usage volume commitments. In the event we fail to meet minimum volume commitments, we may be obligated to pay underutilization charges. We do not anticipate having to pay any underutilization charges in the foreseeable future.

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Gross Profit (exclusive of depreciation and amortization)

Gross profit (exclusive of depreciation and amortization), as presented in this Management’s Discussion and Analysis, represents net loss, before income taxes, interest income, interest expense, merger integration costs, impairment charges, depreciation and amortization, software development expenses and selling, general and administrative expenses. Gross profit is a non-GAAP financial measure used by our management, together with financial measures prepared in accordance with GAAP such as revenue and cost of revenue, to assess our historical and prospective operating performance.

The following table sets forth, for the periods indicated, a reconciliation of gross profit to net loss as net loss is calculated in accordance with GAAP:

	Years Ended December 31,
	2006			2007			2008
Net loss	$	(41,513	)	$	(65,489	)	$	(42,866	)
Add back non-gross profit items included in net loss:
Provision for income taxes		262			726			1,056
Interest and other expenses		24,047			32,661			38,820
Impairment charges		—			4,000			—
Merger integration costs		1,430			500			—
Depreciation and amortization		49,781			75,980			73,608
Software development		1,819			2,293			1,639
Selling, general and administrative		105,986			166,322			170,596
Gross profit	$	141,812		$	216,993		$	242,853

Gross profit is a measure of the general efficiency of our network costs in comparison to our revenue. As we expense the current cost of our network against current period revenue, we use the gross profit measure as a tool to monitor our progress with regards to network optimization and other operating metrics.

Our management also uses gross profit to evaluate performance relative to that of our competitors. This financial measure permits a comparative assessment of operating performance, relative to our performance based on our GAAP results, while isolating the effects of certain items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies. Our management believes that gross profit is a particularly useful comparative measure within our industry.

We provided information relating to our gross profit so that analysts, investors and other interested persons have the same data that management uses to assess our operating performance, which permits them to obtain a better understanding of our operating performance and to evaluate the efficacy of the methodology and information used by our management to evaluate and measure such performance on a standalone and a comparative basis.

Our gross profit may not be directly comparable to similarly titled measures reported by other companies due to differences in accounting policies and items excluded or included in the adjustments, which limits its usefulness as a comparative measure. In addition, gross profit has other limitations as an analytical financial measure. These limitations include the following:

•  gross profit does not reflect our capital expenditures, future requirements for capital expenditures or contractual commitments to purchase capital equipment;

•  gross profit does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, associated with our indebtedness;

•  although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will likely have to be replaced in the future, and gross profit does not reflect any cash requirements for such replacements; and

•  gross profit does not reflect the SG&A expenses necessary to run our ongoing operations.

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Our management compensates for these limitations by relying primarily on our GAAP results to evaluate its operating performance and by considering independently the economic effects of the foregoing items that are or are not reflected in gross profit. As a result of these limitations, gross profit should not be considered as an alternative to net loss, as calculated in accordance with GAAP, as a measure of operating performance.

Selling, General and Administrative

SG&A is comprised primarily of salaries and related expenses, non-cash compensation, occupancy costs, sales and marketing expenses, commission expenses, bad debt expense, billing expenses, professional services and insurance expenses.

Determining our allowance for doubtful accounts receivable requires significant estimates. In determining the proper level for the allowance we consider factors such as historical collections experience, the aging of the accounts receivable portfolio and economic conditions. We perform a credit review process on each new customer that involves reviewing the customer’s current service provider bill and payment history, matching customers with national databases for delinquent customers and, in some cases, requesting credit reviews through Dun & Bradstreet Corporation.

During February 2008, we engaged Grant Thornton to help facilitate our compliance with Section 404 for the year ended December 31, 2008. The costs we incurred during 2008 to become compliant with Section 404 were a direct increase to our general and administrative expenses. These costs totaled $471 for the year ended December 31, 2008.

Depreciation and Amortization

Our depreciation and amortization expense currently includes depreciation for network related voice and data equipment, fiber, back-office systems, furniture, fixtures, leasehold improvements, office equipment and computers and amortization of intangibles associated with mergers, acquisitions and software development costs. All internal costs directly related to the future development of our integrated OSS, including salaries of certain employees, are capitalized and depreciated over their useful lives. Capitalized third-party customer installation costs are amortized over the approximate average life of a customer.

Year Ended December 31, 2007 Compared to the Year Ended December 31, 2008

Set forth below is a discussion and analysis of our results of operations for the years ended December 31, 2007 and 2008.

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The following table provides a breakdown of components of our statements of operations for the years ended December 31, 2007 and 2008:

	Years Ended December 31,
	2007					2008
			% of Total					% of Total
	Amount		Revenues			Amount		Revenues			% Change
Revenues:
Network services	$	433,698		96.1	%	$	481,390		96.1	%		11.0	%
Other		17,461		3.9	%		19,346		3.9	%		10.8	%
Total revenues	$	451,159		100.0	%	$	500,736		100.0	%		11.0	%
Cost of revenues:
Network services	$	223,677		49.6	%	$	245,356		49.0	%		9.7	%
Other		10,489		2.3	%		12,527		2.5	%		19.4	%
Total cost of revenues	$	234,166		51.9	%	$	257,883		51.5	%		10.1	%
Gross profit:
Network services	$	210,021		46.5	%	$	236,034		47.1	%		12.4	%
Other		6,972		1.6	%		6,819		1.4	%		(2.2	)%
Total gross profit	$	216,993		48.1	%	$	242,853		48.5	%		11.9	%

Revenues

Revenues for the years ended December 31, 2007 and 2008 were as follows:

	Years Ended December 31,
	2007					2008
			% of Total					% of Total
	Amount		Revenues			Amount		Revenues			% Change
Revenues:
Voice and data services	$	395,653		87.7	%	$	433,568		86.6	%		9.6	%
Wholesale		12,693		2.8	%		19,096		3.8	%		50.4	%
Access		25,352		5.6	%		28,726		5.7	%		13.3	%
Total network services		433,698		96.1	%		481,390		96.1	%		11.0	%
Other		17,461		3.9	%		19,346		3.9	%		10.8	%
Total revenues	$	451,159		100.0	%	$	500,736		100.0	%		11.0	%

Voice and data service revenue, increased primarily due to the addition of InfoHighway in May 2007. InfoHighway’s voice and data revenues were $80.7 million for the year ended December 31, 2008, an increase of $29.5 million from $51.2 million included in our revenues during the year ended December 31, 2007. Though we increased our revenue in absolute dollars, our business is subject to several other trends. These include lower line churn than in prior years, higher revenue per customer due to the trend toward multiple products per customer, a focus on larger customers than our average existing base, increase in demand for data services, offset by lower usage revenue per customer, lower price per unit for certain services and a lower number of lines and customers. Our wholesale revenue increased primarily as a result of organic growth and the inclusion of $1.5 million of wholesale revenue from InfoHighway. The carrier access revenues increased primarily due to the inclusion of $7.6 million in carrier access revenue through the acquisition of InfoHighway for the year ended December 31, 2008 as compared with $5.1 million included during the year ended December 31, 2007. The increase in other revenue is due primarily to the increased number of phone equipment sales to customers resulting from the inclusion of the cabling division that was acquired in the InfoHighway transaction.

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Cost of Revenues (exclusive of depreciation and amortization)

Cost of revenues were $257.9 million for the year ended December 31, 2008, an increase of 10.1% from $234.2 million for the same period in 2007. The increase is primarily attributable to the increase in cost of revenues from the addition of InfoHighway in May 2007, totaling $51.4 million in the aggregate for the year ended December 31, 2008 an increase of $16.0 million from $35.4 million included in our cost of revenues during the year ended December 31, 2007. Our costs consist primarily of those incurred from other providers and those incurred from the cost of our network. Costs where we purchased services or products from third party providers comprised $204.2 million, or 79.2% of our total costs for the year ended December 31, 2008 and $199.8 million, or 85.3% in the year ended December 31, 2007. The most significant components of our costs purchased from third party providers consist of costs related to our Verizon wholesale advantage contract (formerly UNE-P), UNE-L and T-1 costs, which totaled $52.3 million, $26.4 million and $54.2 million, respectively, for the year ended December 31, 2008. We have experienced a decrease in costs where we purchased services or products from third parties as a percentage of total cost of revenues primarily due to our effective migration of lines to lower cost platforms. During 2008, we finalized a settlement with Verizon which extinguished virtually all outstanding disputes between the parties as of March 31, 2008, which resulted in a gain. In addition, the Company continued to evaluate all outstanding disputes and adjusted dispute liabilities accordingly for those disputes. The net impact of adjustments to dispute liabilities from the Verizon settlement and for other existing disputes did not result in a significant impact to the balance sheet or statement of operations.

Gross Profit (exclusive of depreciation and amortization)

Gross profit was $242.9 million for the year ended December 31, 2008, on increase of 11.9% from $217.0 million for the same period in 2007. As a percentage of revenue gross profit increased to 48.5% for the year ended December 31, 2008 from 48.1% for the same period in 2007. The increase in gross profit is primarily due to increased revenue combined with lower costs resulting from provisioning more lines from resale and unbundled network platform to on-net. Gross margin percentages are also higher than prior periods. We are focusing sales initiatives towards increasing the amount of data and integrated T-1 lines sold, as we believe that these initiatives will produce incrementally higher margins than those currently reported from POTS services. In addition, as we continue to drive additional cost saving initiatives, including provisioning customers to our on-net facilities, identifying additional inaccuracies in billing from existing carriers, renegotiating existing agreements and executing new agreements with additional interexchange carriers, we believe that the cost of revenues may increase at a lower rate than their respective associated revenue.

Selling, General and Administrative

SG&A expenses were $170.6 million for the year ended December 31, 2008, an increase of 2.6% from $166.3 million for the same period in 2007. The increase is primarily due to the addition of InfoHighway in May 2007, which accounts for $22.0 million of our SG&A expenses for the year ended December 31, 2008 an increase of $4.7 million from $17.3 million included in our SG&A during the year ended December 31, 2007. This increase is partially offset by the implementation of cost saving measures during the integration of ATX and InfoHighway.

Although costs increased in absolute dollars, SG&A expenses decreased from 36.9% to 34.1% of revenue from the year ended December 31, 2007 to the same period in 2008. This decrease in costs as a percentage of revenue is primarily due to the achievement of cost savings in various categories including headcount, professional services and other costs where the Company was able to achieve synergies due to the mergers with InfoHighway and ATX.

Depreciation and Amortization

Depreciation and amortization costs were $73.6 million for the year ended December 31, 2008, a decrease of 3.2% from $76 million for the same period in 2007. This decrease in amortization and depreciation expense was due to fully amortizing acquired intangible assets related to the Broadview acquisition in 2005 during the quarter ended March 31, 2008. Amortization expense included in our results for these acquired intangible assets for the year ended December 31, 2008 was $1.3 million, a decrease of $6.6 million from $7.9 million included in our results for the year ended December 31, 2007. The decrease was partially offset by increases in amortization expense due to the

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acquisition of InfoHighway in May 2007, including amortization of intangible assets of $12.3 million for the year ended December 31, 2008. InfoHighway’s amortization expense included in our results for the year ended December 31, 2007 was $8.8 million.

Interest

Interest expense was $39.5 million for the year ended December 31, 2008, an increase of 14.8% from 34.4 million for the same period in 2007. The increase was primarily due to higher interest expense as a result of having a higher average outstanding debt balance for the years ended December 31, 2008 compared to 2007. The higher average debt balance is due primarily to the $90.0 million of notes that we issued in May 2007 and $23.5 million in total borrowings from our Revolving Credit Facility during September and October of 2008. Our effective interest rates for the year ended December 31, 2007 and 2008 is as follows:

	Years Ended December 31,
	2007			2008
Interest expense	$	34,390		$	39,514
Weighted average debt outstanding	$	276,563		$	315,988
Effective interest rate		12.43	%		12.50	%

Net Loss

Our net loss was $42.9 million for the year ended December 31, 2008, a decrease of 34.5% from $65.5 million for the same period in 2007. The decrease in net loss is a result of the factors discussed above.

Year Ended December 31, 2006 Compared to the Year Ended December 31, 2007

Set forth below is a discussion and analysis of our results of operations for the years ended December 31, 2006 and 2007.

The following table provides a breakdown of components of our statements of operations for the years ended December 31, 2006 and 2007:

	Years Ended December 31,
	2006					2007
			% of Total					% of Total
	Amount		Revenues			Amount		Revenues			% Change
Revenues:
Network services	$	265,934		97.5	%	$	433,698		96.1	%		63.1	%
Other		6,719		2.5	%		17,461		3.9	%		159.9	%
Total revenues	$	272,653		100.0	%	$	451,159		100.0	%		65.5	%
Cost of revenues:
Network services	$	125,741		46.1	%	$	223,677		49.6	%		77.9	%
Other		5,100		1.9	%		10,489		2.3	%		105.7	%
Total cost of revenues	$	130,841		48.0	%	$	234,166		51.9	%		79.0	%
Gross profit:
Network services	$	140,193		51.4	%	$	210,021		46.6	%		49.8	%
Other		1,619		0.6	%		6,972		1.5	%		330.7	%
Total gross profit	$	141,812		52.0	%	$	216,993		48.1	%		53.0	%

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Revenues

Revenues for the year ended December 31, 2006 and 2007 were as follows:

	Years Ended December 31,
	2006					2007
			% of Total					% of Total
	Amount		Revenues			Amount		Revenues			% Change
Revenues:
Voice and data services	$	238,005		87.3	%	$	395,653		87.7	%		66.2	%
Wholesale		12,901		4.7	%		12,693		2.8	%		(1.6	)%
Access		15,028		5.5	%		25,352		5.6	%		68.7	%
Total network services		265,934		97.5	%		433,698		96.1	%		63.1	%
Other		6,719		2.5	%		17,461		3.9	%		159.9	%
Total revenues	$	272,653		100.0	%	$	451,159		100.0	%		65.5	%

Voice and data services increased due to the addition of ATX in September 2006 and InfoHighway in May 2007. Though we increased our revenue in absolute dollars, our business is subject to several other trends. These include lower line churn than in prior years, higher revenue per customer due to the trend toward multiple products per customer, a focus on larger customers than our average existing base, increase in demand for data services, lower usage revenue per customer and lower price per unit for certain services. Our wholesale revenue as a percentage of our total revenue decreased primarily due to the elimination of revenues previously derived from ATX and InfoHighway before their acquisitions. The carrier access revenues increased primarily due to the inclusion of $11.3 million in carrier access terminations through the acquisition of ATX and InfoHighway. The increase in other revenue is due primarily to the increased number of phone equipment sold to customers resulting from the inclusion of the operating division that was acquired in the InfoHighway transaction.

Cost of Revenues (exclusive of depreciation and amortization)

Total cost of revenues was $234.2 million for the year ended December 31, 2007, an increase of 79.0% from $130.8 million for 2006. The increase is primarily attributable to the increase in cost of revenues from the addition of ATX in September 2006 and InfoHighway in May 2007, totaling $93.3 million in the aggregate, net of costs eliminated as part of the integration process.

Our costs consist primarily of those incurred from other providers and those incurred from the cost of our network. Costs where we purchased services or products from third party providers comprised $199.8 million, or 85.3% of our total costs in 2007 and $109.2 million, or 83.5% in 2006. The primary drivers include costs related to our wholesale advantage contract with Verizon (formerly UNE-P) and UNE-L costs, which accounted for 19.5% and 34.4% of our total costs of sales, respectively, in 2007 and 24.4% and 35.5%, respectively, in 2006 as we effectively migrated lines to lower cost platforms. Total cost incurred in the operation of our network other than UNE-P and UNE-L costs increased to $34.4 million, or 14.7% of our total costs of revenues in 2007 from $19.9 million, or 15.2%, in 2006.

Our cost of revenues increased from 48.0% of revenue in 2006 to 51.9% of revenue in 2007. The primary drivers for this increase as a percentage of revenue were increases to our wholesale advantage costs from Verizon for off-net POTS customers, and the impact of the cost structure of both InfoHighway and ATX. Both InfoHighway and ATX had historically higher costs as a percent of revenue than legacy Broadview, resulting in lower gross margin percentages.

Gross Profit (exclusive of depreciation and amortization)

Total gross profit was $217.0 million for the year ended December 31, 2007, an increase of 53.0% from $141.8 million for the same period in 2006. The increase in gross profit is primarily due to the addition of ATX in September 2006 and InfoHighway in May 2007, which totaled $87.8 million, and lower costs resulting from provisioning more lines from resale and unbundled network platform to on-net. Gross margin percentages are lower

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than prior periods due primarily to the acquisition of InfoHighway and ATX, each of which had lower gross margins than legacy Broadview, as well as margin compression on our legacy POTS business. We are focusing sales initiatives towards increasing the amount of data and integrated T-1 lines sold, as we believe that these initiatives will produce incrementally higher margins than those currently reported from POTS services. In addition, as we continue to drive additional cost saving initiatives, including provisioning customers to our on-net facilities, identifying additional inaccuracies in billing from existing carriers, renegotiating existing agreements and executing new agreements with additional interexchange carriers, we believe that the cost of revenues may increase at a lower rate than their respective associated revenue.

Selling, General and Administrative

Selling, general and administrative expenses were $166.3 million for the year ended December 31, 2007, an increase of 57% from $106.0 million for the same period in 2006. The increase is primarily due to the addition of ATX in September 2006 and InfoHighway in May 2007, which in total account for $51.2 million of the increase in selling, general and administrative costs, partially offset by the implementation of cost saving measures during the integration of the two companies. Absent the acquisition of ATX and InfoHighway, there were no material changes in the selling, general and administrative expenses between 2006 and 2007.

Although costs increased in absolute dollars, selling, general and administrative expenses decreased from 38.8% to 36.9% of revenue from 2006 to 2007. This decrease in costs as a percentage of revenue is primarily due to the achievement of cost savings in various categories including headcount, professional services and other costs where the company was able to achieve synergies due to the mergers with InfoHighway and ATX.

Depreciation and Amortization

Depreciation and amortization costs were $76.0 million for the year ended December 31, 2007, an increase of 52.6% from $49.8 million for the same period in 2006. The increase was primarily due to the acquisition of ATX in September 2006 and InfoHighway in May 2007, including amortization of intangible assets of $15.1 million, as well as increased depreciation of $9.5 million on the capital expenditures made during 2006 and 2007 for the expansion of our network facilities, back-office systems and capital directly associated with adding customers to our network.

Impairment Charges

During 2007, we began the process of rebranding our operations following the acquisitions of InfoHighway and ATX. As a result of this rebranding, we believe that the ATX trademark, which was initially considered to be an indefinite-lived asset, has a remaining useful life of three years. We considered the change in the estimated useful life to be an indication that the carrying amount of the ATX trademark may not be recoverable, which required us to evaluate the ATX trademark for impairment. As a result of our evaluation we incurred an impairment charge of $4.0 million during the fourth quarter of 2007, which was the excess of the carrying value over the estimated fair value of the ATX trademark.

Interest

Interest expense was $34.4 million for the year ended December 31, 2007, an increase of 34.9% from $25.5 million for the same period in 2006. The increase was primarily due to higher interest expense as a result of having a higher average outstanding debt balance for the year ended December 31, 2007 compared to 2006. The higher average debt balance is due primarily to the $210.0 million of notes that we issued in August 2006 and $90.0 million of notes that we issued in May 2007, partially offset by the payoff of the previously existing senior

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secured notes and the conversion of the principal plus accrued interest on the subordinated notes into equity. Our effective interest rates for the years ended December 31, 2006 and 2007 is as follows:

	Years Ended December 31,
	2006			2007
Interest expense, excluding conversion fee and financing cost write-off	$	22,738		$	34,390
Weighted average debt outstanding	$	181,938		$	276,563
Effective interest rate		12.50	%		12.43	%

During 2006, in connection with the issuance of the notes, we extinguished all outstanding subordinated debt, plus accrued interest. We paid a conversion fee to all debt holders who converted to equity, which amounted to $1,531 and was recorded in interest expense. Additionally, deferred financing costs of $1,194 attributable to the extinguished debt were written-off to interest expense during 2006.

Net Loss

Our net loss was $65.5 million for the year ended December 31, 2007, an increase of 57.8% from $41.5 million for the same period in 2006. The increase in net loss is a result of the factors discussed above.

Off-Balance Sheet Arrangements

We have no special purpose or limited purpose entities that provide off-balance sheet financing, liquidity, or market or credit risk support, and we do not currently engage in hedging, research and development services, or other relationships that expose us to any liabilities that are not reflected on the face of our financial statements.

Liquidity and Capital Resources

Our principal sources of liquidity are cash from operations, our cash and cash equivalents and investments and access to undrawn portions of our $25.0 million credit facility and our $10.0 million capital lease line. Our material short-term liquidity requirements consist of interest on our notes, capital expenditures and working capital. Our principal long-term liquidity requirements consist of the principal amount of our notes. Based on our current level of operations and anticipated growth, we believe that our existing cash, cash equivalents and available borrowings under our credit facility will be sufficient to fund our operations and to service our notes for at least the next 12 months. Further, a significant majority of our planned capital expenditures are “success-based” expenditures, meaning that it is directly linked to new revenue, and if they are made, they will be made only when it is determined that they will directly lead to more profitable revenue. During the year ended December 31, 2008, we utilized our capital lease line to fund $3.2 million of equipment purchases. As of December 31, 2008, we have $8.8 million of capital lease obligations outstanding under this capital lease line. In connection with the acquisition of Lightwave, we borrowed $10 million from the Revolving Credit Facility. Due to continuing uncertainty in the credit markets, the Company borrowed an additional $13.5 million from the Revolving Credit Facility during October 2008, which are being held in US Treasury notes. We have invested $23.5 million in US Treasuries during the month of October 2008. Our remaining cash and cash equivalents of $24 million as of December 31, 2008 are being held in several large financial institutions, although most of our balances do exceed the FDIC insurance limits.

As of December 31, 2008, we required approximately $136.5 million in cash to service the interest due on our notes throughout the life of the notes. We may need to refinance all or a portion of our indebtedness, including the notes, at or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness, including the notes and our credit facility, on commercially reasonable terms or at all. However, we continuously evaluate and consider all financing opportunities. Any future acquisitions or other significant unplanned costs or cash requirements may also require that we raise additional funds through the issuance of debt or equity

Disputes

During December 2008, we finalized a settlement with Verizon, which extinguished virtually all outstanding disputes between the parties as of March 31, 2008. The settlement included a comprehensive mutual release of any liability or potential liability between the parties effective as of that date. We nonetheless continue to be involved in

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a variety of disputes with multiple carrier vendors relating to billings of approximately $17.0 million as of December 31, 2008, of which 29% percent of these disputes are with Verizon and the remainder of these disputes are with a significant number of other carriers. While we hope to resolve these disputes through negotiation, we may be compelled to litigate or arbitrate these matters. The resolution of these disputes may require us to pay the vendor an amount that is greater than the amount for which we have planned or even the amount the vendor claims is owed if late payment charges are assessed, which could materially adversely affect our business, financial condition, results of operations and cash flows and which may cause us to be unable to meet certain financial covenants related to our senior indebtedness, which would result in a default under such indebtedness. In the event that disputes are not resolved in our favor and we are unable to pay the vendor charges in a timely manner, the vendor may deny us access to the network facilities that we require to serve our customers. If the vendor notifies us of an impending “embargo” of this nature, we may be required to notify our customers of a potential loss of service which may cause a substantial loss of customers. It is not possible at this time to predict the outcome of these disputes.

We believe we have accrued an amount appropriate to settle all remaining disputed charges. However, it is possible that the actual settlement of any remaining disputes may differ from our reserves and that we may settle at amounts greater than the estimates. We have sufficient cash on hand to fund any differences between our expected and actual settlement amounts.

Credit Facility

On August 23, 2006, we entered into our credit facility, a $25.0 million five-year revolving credit facility. The credit facility has a $15.0 million letters of credit subfacility. As of December 31, 2008, we had $23.5 million of outstanding borrowings and $80 of letters of credit under our revolving credit facility. Any outstanding amounts under this facility are subject to a borrowing base limitation based on an advance rate of 85% of the amount of our eligible receivables (net of reserves established by The CIT Group/Business Credit, Inc., as administrative agent), of ours and our domestic subsidiaries, including future acquisitions, with the eligibility criteria to be agreed upon.

The interest rates per annum applicable to the loans under our credit facility are, at our option, equal to either a base rate or a eurodollar rate, in each case, plus an applicable margin percentage. The base rate will be the greater of (i) prime rate; and (ii) 50 basis points over the federal funds effective rate from time to time. The eurodollar rate is the rate at which the eurodollar deposits for one, two, three or six (or if available from each lender, nine or twelve) months, as chosen by us, are offered in the interbank eurodollar market. The applicable margin is equal to (x) 1.75% in the case of base rate loans and (y) 2.75% in the case of eurodollar loans. In the case of base rate loans, interest will be paid quarterly in arrears. In the case of eurodollar loans, interest will be payable at the end of each interest period, and, in any event, at least every three months.

We are required to pay certain on-going fees in connection with the credit facility, including letter of credit fees on any letters of credit issued under the facility at a per annum rate of 2.75%, issuance fees in respect thereof and commitment fees on the unused commitments at a per annum rate of 0.50%.

Indebtedness under our credit facility is guaranteed by all of our direct and indirect subsidiaries (other than certain immaterial subsidiaries) that are not borrowers thereunder and is secured by a security interest in all of our subsidiaries’ tangible and intangible assets (including, without limitation, intellectual property, real property, licenses, permits and all of our and our subsidiaries’ capital stock (other than voting capital stock of our subsidiaries that exceeds 65% of such voting capital stock) and all funds and investment property on deposit therein or credited thereto and certain other excluded assets).

Our credit facility contains financial, affirmative and negative covenants and requirements affecting us and our subsidiaries. In general, the financial covenants provide for, among other things, delivery of financial statements and other financial information to the lenders and notice to the lenders upon the occurrence of certain events. The affirmative covenants include, among other things, standard covenants relating to our operations and our subsidiaries’ businesses and compliance with all applicable laws, material applicable provisions of ERISA and material agreements. Our credit facility contains negative covenants and restrictions on our actions and our subsidiaries’, including, without limitation, incurrence of additional indebtedness, restrictions on dividends and other restricted payments, prepayments of debt, liens, sale-leaseback transactions, loans and investments, hedging arrangements,

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mergers, transactions with affiliates, changes in business and restrictions on our ability to amend the indenture governing the notes and terms of our subordinated debt.

Our credit facility contains customary representations and warranties and events of default, including payment defaults, cross-payment defaults and cross events of default, certain events of bankruptcy, certain events under ERISA, loss of assets, loss or expiry of license, failure to comply with certain rules and regulations, material judgments, actual or asserted invalidity of the guarantees, change in nature of business and change in control. Upon the occurrence of an event of default, the credit facility may be terminated, any amounts due thereunder may be automatically due and payable and the borrowers shall deposit in a cash collateral account an amount equal to 105% of the aggregate then undrawn and unexpired amount of all outstanding letters of credit.

As of December 31, 2008, we were in compliance with all restrictive covenants and financial ratios and tests set forth in the credit agreement governing our credit facility.

2006 Note and 2007 Note Offerings

On August 23, 2006, we completed an offering of $210.0 million aggregate principal amount of 113/8% senior secured notes due 2012. We used the net proceeds from the offering and sale of the 2006 notes (i) to fund the ATX acquisition, (ii) to fund the repayment of the entire $79.0 million of principal amount outstanding under our senior secured credit facility that was then in effect, (iii) to fund the repayment of approximately $1.0 million of principal of our senior unsecured subordinated notes due 2009 and (iv) for general corporate purposes.

On May 14, 2007, we completed an offering of $90.0 million aggregate principal amount of 113/8% senior secured notes due 2012 at an issue price of 105.750%, totaling gross proceeds of approximately $95.2 million. We used the net proceeds from the offering and sale of the 2007 notes to fund the InfoHighway merger, pay related fees and expenses and for general corporate purposes. The 2007 notes were an additional issuance of our existing 113/8% senior secured notes due 2012 and were issued under the same indenture dated as of August 23, 2006 and supplemented as of September 29, 2006, May 14, 2007 and May 31, 2007.

In connection with the offering of the notes, we agreed to offer to exchange the notes for a new issue of substantially identical debt securities registered under the Securities Act. On November 14, 2007, we exchanged $300.0 million of the notes, representing 100% of the outstanding aggregate principal amount, for an equal principal amount of 113/8% senior secured notes due 2012 that have been registered under the Securities Act. We may, from time to time, repurchase these notes in open market purchases, privately negotiated transactions or otherwise.

Year Ended December 31, 2007 Compared to the Year Ended December 31, 2008

Cash Flows from Operating Activities

Cash provided by operating activities was $27.2 million for the year ended December 31, 2008, compared to cash used in operating activities of $2.7 million for 2007. The change in cash flows from our operating activities was due primarily to improvements in our operating results as a result of factors discussed above, which resulted in a reduction in our net loss to $42.9 million for the year ended December 31, 2008 from $65.5 million for 2007. Cash provided by operating activities also increased in 2008 due to improved accounts receivable collections compared with 2007. Additionally, during 2007 we paid $15.2 million to settle disputed billings which substantially increased our cash used in operating activities during 2007. During the years ended 2008 and 2007, we paid $37.6 million and $32.0 million, respectively in interest, primarily to our note holders.

Cash Flows from Investing Activities

Cash used in investing activities was $68.7 million for the year ended December 31, 2008, compared to cash used in investing activities of $88.8 million for 2007. The change in use of cash in investing activities was primarily due to the acquisition of InfoHighway in May 2007 offset by increased capital expenditures for the expansion of our network and back-office systems, the purchase of $23.5 million of short-term U.S.Treasury notes and cash paid of $5.0 million to acquire Lightwave during the year ended December 31, 2008. Our capital expenditures increased to $39.8 million during the year ended December 31, 2008 from $30.4 million for 2007. The expansion of our

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Company as a result of the InfoHighway merger and ATX acquisition has resulted in an increase in our capital expenditures due to the higher level of success based capital to support the combined companies.

Cash Flows from Financing Activities

Cash flows provided by financing activities was $23.5 million for the year ended December 31, 2008, compared to cash provided by financing activities of $89.5 million for 2007. The change in cash flows from financing activities was primarily due to the completion of an offering of $90.0 million aggregate principal amount of the 2007 notes in the year ended December 31, 2007 as compared to the same period in 2008, which included $23.5 million in borrowings from our credit facility.

Year Ended December 31, 2006 Compared to Year Ended December 31, 2007

Cash Flows from Operating Activities

Cash used in operating activities was $2.7 million for the year ended December 31, 2007, compared to cash provided by operating activities of $13.3 million for 2006. The decrease in cash provided by operating activities was due primarily to the payment of $15.2 million to settle disputed billings and a $12.4 million increase in net accounts receivable due to changes in the timing of billing cycles of our acquired companies.

Cash Flows from Investing Activities

Cash used in investing activities was $88.8 million for the year ended December 31, 2007, compared to cash used in investing activities of $115.6 million for 2006. The change in use of cash in investing activities was primarily due to less cash consideration for the acquisition of InfoHighway compared to the ATX acquisition. In the year ended December 31, 2007, we spent $30.4 million on capital expenditures for the purchase of property and equipment, compared to $23.1 million for 2006. This increase was primarily due to the inclusion of the capital expenditures for ATX and InfoHighway of an aggregate amount of $1.9 million in the 2007 period for the expansion of network and back-office systems.

Cash Flows from Financing Activities

Cash flows provided by financing activities was $89.5 million for the year ended December 31, 2007, compared to cash provided by financing activities of $129.5 million for 2006. The decrease in cash flows from financing activities was primarily due to less debt issuances in 2007 as compared to 2006.

Contractual Obligations

The following table summarizes our future contractual cash obligations as of December 31, 2008. The following numbers are presented in thousands.

			Less Than		1-3		3-5		More Than
	Total		1 Year		Years		Years		5 Years
113/8% senior secured notes due 2012	$	300,000	$	—	$	—	$	300,000	$	—
Cash interest for notes		136,500		34,125		68,250		34,125		—
Credit facility		23,500		—		23,500		—		—
Capital lease obligations		9,354		4,142		4,888		324		—
Operating leases		44,552		11,296		16,911		7,510		8,835
		513,906		49,563		113,549		341,959		8,835
Purchase commitment obligations:
Communications commitment		74,608		26,224		48,384		—		—
Total contractual obligations	$	588,514	$	75,787	$	161,933	$	341,959	$	8,835

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New Accounting Standards

Several new accounting standards have been issued. None of these standards had a material impact on our financial position, results of operations, or liquidity.

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and establishes a hierarchy that categorizes and prioritizes the sources to be used to estimate fair value. SFAS 157 also expands financial statement disclosures about fair value measurements. On February 12, 2008, the FASB issued FASB Staff Position (FSP) 157-2 which delays the effective date of SFAS 157 for one year, for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). SFAS 157 and FSP 157-2 are effective for financial statements issued for fiscal years beginning after November 15, 2007. We have elected a partial deferral of SFAS 157 under the provisions of FSP 157-2 related to the measurement of fair value used when evaluating goodwill, other intangible assets and other long-lived assets for impairment. The impact of partially adopting SFAS 157 effective January 1, 2008 did not have a material impact on the our financial statements.

In December 2007, the SEC issued SAB No. 110, “Share-Based Payment” (“SAB 110”). SAB 110 establishes the continued use of the simplified method for estimating the expected term of equity based compensation. The simplified method was intended to be eliminated for any equity based compensation arrangements granted after December 31, 2007. SAB 110 is being published to help companies that may not have adequate exercise history to estimate expected terms for future grants. We do not expect the adoption of SAB 110 to have a material effect on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (Revised) (“SFAS 141(R)”), to replace SFAS 141, Business Combinations (“SFAS 141”). SFAS 141(R) requires the use of the acquisition method of accounting, defines the acquirer, establishes the acquisition date and broadens the scope to all transactions and other events in which one entity obtains control over one or more other businesses. This statement is effective for business combinations or transactions entered into for fiscal years beginning on or after December 15, 2008. The adoption of this statement is not expected to have a material impact on our financial position or results of operations.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51 (SFAS 160). This Statement amends the original Accounting Review Board (ARB) No. 51 Consolidated Financial Statements to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This Statement is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008 and may not be applied before that date. We have evaluated SFAS 160 and have determined that it will have no impact on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS 161”). SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. The objective of the guidance is to provide users of financial statements with an enhanced understanding of how and why an entity uses derivative instruments: how an entity accounts for derivative instruments and related hedged items and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years beginning after November 15, 2008. We have evaluated SFAS 161 and have determined that it will have no impact on our consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With

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Generally Accepted Accounting Principles.” The adoption of this statement is not expected to have a material effect on our financial statements.

Application of Critical Accounting Policies and Estimates

The preparation of the consolidated financial statements in accordance with GAAP requires us to make judgments, estimates and assumptions regarding uncertainties that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. We use historical experience and all available information to make these judgments and estimates and actual results could differ from those estimates and assumptions that are used to prepare our financial statements at any given time. Despite these inherent limitations, management believes that Management’s Discussion and Analysis of Financial Condition and Results of Operations and the accompanying consolidated financial statements and footnotes provide a meaningful and fair perspective of our financial condition and our operating results for the current period.

We consider an accounting estimate to be critical if it requires assumptions to be made that were uncertain at the time the estimate was made and changes in the estimate or different estimates that could have been selected could have a material impact on our consolidated results of operations or financial condition. We believe the following critical accounting policies represent the more significant judgments and estimates used in the preparation of our audited consolidated financial statements herein.

Revenue Recognition

Our revenues consist primarily of network services revenues, which includes primarily voice and data services, wholesale services and access services. Our network services revenues are derived primarily from subscriber usage and fixed monthly recurring fees. Such revenue is recognized in the month the actual services and other charges are provided and costs incurred, with deferral of revenues recognized for those monthly charges that are billed in advance. Services rendered for which the customer has not been billed are recorded as unbilled revenues until the period such billings are provided. Revenues from carrier interconnection and access are recognized in the month in which the service is provided. Revenues and direct costs related to up-front service installation fees are deferred and amortized generally over four years, which is based on the estimated expected life of our customer base. The estimate of the expected life of our customer base was based in part on an analysis of customer churn from which it was determined that our monthly churn was approximately 2% along with our decision to extend our customers’ minimum contract term beyond two years. The effect of changing the estimated expected life of our customer base by one year would result in less than a $0.2 million change in the amount of revenue recognized on an annual basis.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are reported at their outstanding unpaid principal balances reduced by an allowance for doubtful accounts. We estimate doubtful accounts based on historical bad debts, factors related to the specific customers’ ability to pay, percentages of aged receivables and current economic trends. For example, inactive and bankrupt customer balances are normally reserved at 80% to 100%, respectively. We typically reserve 100% for all carrier balances 120 days outstanding or older and for all bankrupt carrier balances. The aggregate reserve balance is re-evaluated at each balance sheet date. A hypothetical increase in our aggregate reserve balance of 10% would result in an increase to our bad debt expense of $1.2 million.

Impairment of Long-Lived Assets

We review our long-lived assets, including definite-lived intangible assets, for impairment in accordance with the provisions of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In analyzing potential impairments, projections of future cash flows are used to estimate fair value and are compared to the carrying amount of the asset. There is inherent subjectivity involved in estimating future cash flows, which can have a material impact on the amount of potential impairments.

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Goodwill and Other Intangible Assets

We perform impairment tests at least annually on all goodwill and indefinite-lived intangible assets in accordance with SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS 142”). SFAS 142 requires goodwill and indefinite-lived intangible assets to be tested for impairment using a consistent measurement date, which for us is the fourth quarter of each year, or more frequently if impairment indicators arise. The evaluation of goodwill and indefinite-lived intangibles for impairment is primarily based on a discounted cash flow model that includes estimates of future cash flows. There is inherent subjectivity involved in estimating future cash flows, which can have a material impact on the amount of any potential impairment.

Disputes

We are, in the ordinary course of business, billed certain charges from other carriers that we believe are either erroneous or relate to prior periods. We carefully review our vendor invoices and frequently dispute inaccurate or inappropriate charges. In cases where we dispute certain charges, we frequently pay only undisputed amounts on vendor invoices. The amount of disputed charges may remain outstanding for some time pending resolution or compromise.

Management does not believe a payment of the entire amount of disputed charges will occur. We therefore account for our disputed billings from carriers based on the estimated settlement amount of disputed balances. The settlement estimate is based on a number of factors including historical results of prior dispute settlements. We periodically review the outstanding disputes and reassess the likelihood of success in the event of the resolution of these disputes. We believe we have accrued an amount appropriate to settle all remaining disputed charges. However, it is possible that the actual settlement of any remaining disputes may differ from our reserves and that we may settle at amounts greater than the estimates.

Income Taxes

We recognize deferred income taxes using the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for differences between the financial reporting and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in which the differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. In addition, valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. At December 31, 2008, we had net operating loss carryforwards available totaling $136.4 million, which expire through 2028. We have provided a full valuation allowance against the net deferred tax asset as of 2008 because we do not believe it is more likely than not that this asset will be realized. If we achieve profitability, the net deferred tax assets may be available to offset future income tax liabilities.

Uncertainty in Income Taxes

In July 2006, the Financial Accounting Standards Board, or FASB, issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, or FIN 48. FIN 48 requires the use of a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in income tax positions. Only tax positions that meet the more likely than not recognition threshold at the effective date may be recognized upon adoption of FIN 48. We adopted FIN 48 effective January 1, 2007 and recorded a cumulative effect adjustment of $287 to opening retained earnings.

Prior to the adoption of FIN 48, we had two significant tax benefits that involved uncertainty. The first of which related to our tax position surrounding management and administrative services provided by MCG. The second, related to our tax position with respect to warrants issued to MCG. As of December 31, 2008, we have not included a liability for unrecognized income tax benefits principally due to a settlement reached with the Internal Revenue Services during July 2007 relating to these tax matters.

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Other Matters

At December 31, 2008, we had net operating loss (“NOL”) carryforwards for federal income tax purposes. The amount of such available NOL carryforwards which may be available to offset future income was approximately $136.4 million. To the extent that our ability to use these NOL carryforwards against any future taxable income is limited, our cash flow available for operations and debt service would be reduced. The company has provided a full valuation allowance against the net deferred tax assets as of December 31, 2008 because management believes it is more likely than not that this asset will not be realized.

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, our financial position is subject to a variety of risks, such as the collectability of our accounts receivable and the recoverability of the carrying values of our long-term assets. Our long-term obligations consist primarily of long-term debt with fixed interest rates. We are not exposed to market risks from changes in foreign currency exchange rates or commodity prices. We do not hold any derivative financial instruments nor do we hold any securities for trading or speculative purposes.

We continually monitor the collectability of our accounts receivable and have not noted any significant changes in our collections as a result of the current economic and market conditions. We believe that our allowance for doubtful accounts is adequate as of December 31, 2008. Should the market conditions continue to worsen or should our customers’ ability to pay decrease, we may be required to increase our allowance for doubtful accounts, which would result in a charge to our SG&A expenses.

Our available cash balances are invested on a short-term basis (generally overnight) and, accordingly, are not subject to significant risks associated with changes in interest rates. Substantially all of our cash flows are derived from our operations within the United States and we are not subject to market risk associated with changes in foreign exchange rates.

Our investment securities are classified as available for sale, and consequently, are recorded on the balance sheet at fair value with unrealized gains and losses reflected in stockholders’ equity. Our investment securities are comprised solely of short-term US. Treasury notes with original maturity dates of six months. These investment securities like all fixed income instruments, are subject to interest rate risk and will fall in value if market interest rates increase.

The fair value of our 113/8% senior secured notes due 2012 at December 31, 2008, was approximately $207.0 million. Throughout March 2009, the value of these notes ranged from $153.0 million to $159.0 million. Our senior secured notes, like all fixed rate securities are subject to interest rate risk and will fall in value if market interest rates increase.

The fair value of the long-term debt outstanding under our Revolving Credit Facility approximates its carrying value of $23.5 million due to its variable interest rate. A hypothical change in interest rates of 100 basis points would change our interest expense by $235 on an annual basis.

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Item 8.   Consolidated Financial Statements and Supplementary Data

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm	63
Consolidated Balance Sheets at December 31, 2007 and 2008	64
Consolidated Statements of Operations for the years ended December 31, 2006, 2007 and 2008	65
Consolidated Statements of Stockholders’ Equity (Deficiency) for the years ended December 31, 2006, 2007 and 2008	66
Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2007 and 2008	67
Notes to Consolidated Financial Statements	68
Financial Statement Schedule	112

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of

Broadview Networks Holdings, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Broadview Networks Holdings, Inc. and Subsidiaries (the “Company”) as of December 31, 2008 and 2007 and the related consolidated statements of operations, stockholders’ (deficiency) equity and cash flows for each of the three years in the period ended December 31, 2008. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule 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. We were not engaged to perform an audit of the Company’s 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, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Broadview Networks Holdings, Inc. and Subsidiaries at December 31, 2008 and 2007 and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for uncertainty in income taxes effective January 1, 2007.

/s/  Ernst & Young LLP

New York, New York

March 24, 2009

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BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

	December 31,
	2007			2008
	(In thousands, except
	share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	41,998		$	24,070
Investment securities		—			23,533
Accounts receivable, less allowance for doubtful accounts of $10,082 and $11,934		56,426			53,486
Other current assets		8,463			12,614
Total current assets		106,887			113,703
Property and equipment, net		77,373			85,248
Goodwill		96,154			98,111
Intangible assets, net of accumulated amortization of $109,335 and $150,556		82,841			45,220
Other assets		18,543			16,746
Total assets	$	381,798		$	359,028
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
Current liabilities:
Accounts payable	$	21,247		$	17,044
Accrued expenses and other current liabilities		43,952			42,699
Taxes payable		10,818			10,680
Deferred revenues		10,148			11,967
Current portion of capital lease obligations and equipment notes		3,136			4,142
Total current liabilities		89,301			86,532
Long-term debt		304,740			327,424
Deferred rent payable		2,628			2,400
Capital lease obligations and equipment notes, net of current portion		6,114			5,212
Deferred income taxes payable		1,141			2,071
Other		589			655
Total liabilities		404,513			424,294
Stockholders’ deficiency:
Common stock A — $.01 par value; authorized 80,000,000, issued and outstanding 9,342,880 shares		107			107
Common stock B — $.01 par value; authorized 10,000,000, issued and outstanding 360,050 shares		4			4
Series A Preferred stock — $.01 par value; authorized 89,526 shares, designated, issued and outstanding 87,254 shares entitled in liquidation to $123,880 and $139,428		1			1
Series A-1 Preferred stock — $.01 par value; authorized 105,000 shares, designated, issued and outstanding 100,702 shares, entitled in liquidation to $142,973 and $160,917		1			1
Series B Preferred stock — $.01 par value; authorized 93,180 shares, designated, issued and outstanding 91,202 shares entitled in liquidation to $129,485 and $145,737		1			1
Series B-1 Preferred stock — $.01 par value; authorized 86,000 shares, designated, issued and outstanding 64,986 shares entitled in liquidation to $92,265 and $103,845		1			1
Series C Preferred stock — $.01 par value; authorized 52,332 shares, designated, issued and outstanding 14,402 shares entitled in liquidation to $13,011 and $15,577		—			—
Additional paid-in capital		140,270			140,563
Accumulated deficit		(163,100	)		(205,966	)
Accumulated other comprehensive income		—			22
Total stockholders’ deficiency		(22,715	)		(65,266	)
Total liabilities and stockholders’ deficiency	$	381,798		$	359,028

See notes to consolidated financial statements.

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BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

	Years Ended December 31,
	2006			2007			2008
	(In thousands, except share amounts)
Revenues	$	272,653		$	451,159		$	500,736
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization)		130,841			234,166			257,883
Selling, general and administrative (includes share-based compensation of $754, $2,552 and $293)		105,986			166,322			170,596
Software development		1,819			2,293			1,639
Depreciation and amortization		49,781			75,980			73,608
Impairment charges		—			4,000			—
Merger integration costs		1,430			500			—
Total operating expenses		289,857			483,261			503,726
Loss from operations		(17,204	)		(32,102	)		(2,990	)
Other income (expenses)		21			240			(8	)
Interest expense		(25,463	)		(34,390	)		(39,514	)
Interest income		1,395			1,489			702
Loss before provision for income taxes		(41,251	)		(64,763	)		(41,810	)
Provision for income taxes		(262	)		(726	)		(1,056	)
Net loss		(41,513	)		(65,489	)		(42,866	)
Dividends on preferred stock		(32,996	)		(55,031	)		(63,890	)
Modification of preferred stock		—			(95,622	)		—
Loss available to common shareholders	$	(74,509	)	$	(216,142	)	$	(106,756	)
Loss available per common share — basic and diluted	$	(10.07	)	$	(23.09	)	$	(11.03	)
Weighted average common shares outstanding — basic and diluted		7,396,610			9,359,132			9,675,916

See notes to consolidated financial statements.

65

BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity (Deficiency)

	Years Ended December 31,
	2006						2007						2008
	Shares			Amount			Shares			Amount			Shares		Amount
	(In thousands, except share amounts)
Series A common stock
Balance at beginning of year		6,605,872		$	66			8,871,427		$	102			9,342,880	$	107
Cancellation of shares		(1,307,770	)		—			(97,435	)		(1	)		—		—
Shares issued in InfoHighway acquisition		—			—			568,888			6			—		—
Issuance of shares pursuant to conversion of senior unsecured subordinated notes		3,573,325			36			—			—			—		—
Balance at end of year		8,871,427			102			9,342,880			107			9,342,880		107
Series B common stock
Balance at beginning of year		—			—			—			—			360,050		4
Issuance of shares pursuant to management incentive plan		—			—			360,050			4			—		—
Balance at end of year		—			—			360,050			4			360,050		4
Series A Preferred stock
Balance at beginning of year		89,521			1			89,521			1			87,254		1
Cancellation of shares pursuant to management incentive plan		—			—			(2,267	)		—			—		—
Balance at end of year		89,521			1			87,254			1			87,254		1
Series A-1 Preferred Stock
Balance at beginning of year		—			—			100,702			1			100,702		1
Issuance of shares pursuant to conversion of senior unsecured subordinated notes		100,702			1			—			—			—		—
Balance at end of year		100,702			1			100,702			1			100,702		1
Series B Preferred Stock
Balance at beginning of year		92,832			1			92,832			1			91,202		1
Cancellation of shares		—			—			(1,630	)		—			—		—
Balance at end of year		92,832			1			91,202			1			91,202		1
Series B-1 Preferred Stock
Balance at beginning of year		—			—			42,231			—			64,986		1
Shares issued in InfoHighway acquisition		—			—			22,755			1			—		—
Issuance of shares pursuant to conversion of senior unsecured subordinated notes		42,231			—			—			—			—		—
Balance at end of year		42,231			—			64,986			1			64,986		1
Series C Preferred Stock
Balance at beginning of year		—			—			—			—			14,402		—
Issuance of shares pursant to management incentive plan		—			—			14,402			—			—		—
Balance at end of year		—			—			14,402			—			14,402		—
Additional paid-in capital
Balance at beginning of year		—			44,254			—			117,689			—		140,270
Stock based compensation		—			—			—			2,388			—		293
Repurchase of shares		—			—			—			(1,538	)		—		—
Shares issued in InfoHighway acquisition		—			—			—			17,446			—		—
Warrants issued in InfoHighway acquisition		—			—			—			4,285			—		—
Deferred compensation		—			754			—			—			—		—
Adoption of SFAS No. 123R		—			(1,083	)		—			—			—		—
Issuance of shares pursuant to conversion of senior unsecured subordinated notes		—			73,764			—			—			—		—
Balance at end of year		—			117,689			—			140,270			—		140,563
Accumulated deficit
Balance at beginning of year		—			(55,811	)		—			(97,324	)		—		(163,100	)
Adoption of FIN 48		—			—			—			(287	)		—		—
Net loss		—			(41,513	)		—			(65,489	)		—		(42,866	)
Balance at end of year		—			(97,324	)		—			(163,100	)		—		(205,966	)
Accumulated other comprehensive income
Balance at beginning of year		—			—			—			—			—		—
Unrealized gain on investment securities		—			—			—			—			—		22
Balance at end of year		—			—			—			—			—		22
Deferred compensation
Balance at beginning of year		—			(1,083	)		—			—			—		—
Adoption of SFAS No. 123R		—			1,083			—			—			—		—
Balance at end of year		—			—			—			—			—		—
Total stockholders’ equity (deficiency)		—		$	20,470			—		$	(22,715	)		—	$	(65,266	)

See notes to consolidated financial statements.

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BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

	Years Ended December 31,
	2006			2007			2008
	(In thousands)
Cash flows from operating activities
Net loss	$	(41,513	)	$	(65,489	)	$	(42,866	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation		19,302			31,907			32,322
Amortization and write-off of deferred financing costs		2,383			2,437			2,639
Amortization of intangible assets		30,479			44,206			41,221
Amortization of bond premium		—			(435	)		(816	)
Provision for doubtful accounts		4,115			6,546			5,539
Noncash subordinated debt interest		4,920			—			—
Stock-based compensation		754			2,552			293
Deferred income taxes		—			1,141			930
Impairment		—			4,000			—
Other		(3	)		251			55
Changes in operating assets and liabilities:
Restricted cash		(460	)		460			—
Accounts receivable		(1,492	)		(12,357	)		(1,887	)
Prepaid expenses and other current assets		(1,328	)		725			(4,133	)
Other assets		(208	)		(2,186	)		(767	)
Accounts payable		(15,598	)		1,400			(4,203	)
Accrued expenses and other current liabilities		11,349			(19,680	)		(2,293	)
Deferred revenue		260			1,970			1,433
Deferred rent		336			(119	)		(228	)
Net cash provided by (used in) operating activities		13,296			(2,671	)		27,239
Cash flows from investing activities
Acquisition, net of cash and restricted cash acquired		(88,787	)		(56,638	)		(4,953	)
Purchase of investment securities		—			—			(23,500	)
Purchase of property and equipment		(23,146	)		(30,418	)		(39,786	)
Merger acquisition costs		(3,635	)		(1,768	)		(311	)
Other		—			—			(158	)
Net cash used in investing activities		(115,568	)		(88,824	)		(68,708	)
Cash flows from financing activities
Proceeds from capital lease financing and equipment notes		7,794			5,217			3,789
Payments on capital lease obligations and equipment notes		(3,367	)		(3,760	)		(3,685	)
Repayments of long-term debt		(84,000	)		—			—
Repayments of revolving credit facility		—			(12,005	)		(402	)
Proceeds from issuance of subordinated debt		10,000			—			—
Repayment of subordinated debt		(972	)		—			—
Proceeds from issuance of long-term debt		210,000			95,175			—
Drawdowns on revolving credit facility		—			11,500			23,902
Payment of subordinated debt conversion fees		(1,531	)		—			—
Payment of deferred financing fees		(8,453	)		(4,883	)		—
Payments for shares purchased under under MIP		—			(1,703	)		—
Other		—			—			(63	)
Net cash provided by financing activities		129,471			89,541			23,541
Net increase (decrease) in cash and cash equivalents		27,199			(1,954	)		(17,928	)
Cash and cash equivalents at beginning of year		16,753			43,952			41,998
Cash and cash equivalents at end of year	$	43,952		$	41,998		$	24,070
Supplemental disclosure of cash flow information
Cash paid during the year for interest	$	7,123		$	32,008		$	37,581
Supplemental schedule of non-cash information
Equity securities issued in connection with acquisition	$	—		$	21,742		$	—

See notes to consolidated financial statements.

67

BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(in thousands, except share information)

1.   Organization and Description of Business

Broadview Networks Holdings, Inc. (the “Company,”), formerly Bridgecom Holdings, Inc., is an integrated communications company whose primary interests consist of its wholly-owned subsidiaries, Broadview Networks, Inc. (“BNI”), Bridgecom Holdings, Inc. (“BH”), and Corecomm-ATX Inc., competitive local exchange carriers. The Company also provides phone systems and other customer service offerings through its subsidiary, Bridgecom Solutions Group, Inc. (“BSG”). The Company was founded in 1996 to take advantage of the deregulation of the U.S. telecommunications market following the Telecommunications Act of 1996. The Company has one reportable segment, which provides domestic wireline telecommunications services consisting of local and long distance voice services, Internet, and data services to commercial and residential customers in the mid-atlantic region of the United States.

2.   Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation. We have reclassified prior year amounts to conform to the current year presentation.

Revenue Recognition

The Company’s revenue is derived primarily from subscriber usage and fixed monthly recurring fees. Such revenue is recognized in the month the actual services and other charges are provided and costs are incurred, with deferral of revenue and prepayment of those monthly charges that are billed in advance. Services rendered for which the customer has not been billed are recorded as unbilled revenues until the period such billings are provided. Cable and wiring revenues are recognized when the Company provides the services. Revenue and direct costs related to up-front service installation fees are deferred and amortized over 4 years.

Unbilled revenue included in accounts receivable represents revenue for earned services, which was billed in the succeeding month and totaled $10,323 and $8,494 as of December 31, 2007 and 2008, respectively.

Revenue from carrier interconnection and access amounting to $15,028, $25,352 and $28,726 in the years ended December 31, 2006, 2007 and 2008, respectively, is recognized in the month in which service is provided.

Costs of Revenue

Costs of revenue include direct costs of sales and network costs. Direct costs of sales include the costs incurred with telecommunication carriers to render services to customers. Network costs include the costs of fiber and access, points of presence, repairs and maintenance, rent and utilities of the telephone, internet data network, as well as salaries and related expenses of network personnel. Network costs are recognized during the month in which the service is utilized. The Company accrues for network costs incurred but not billed by the carrier.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company’s cash and cash equivalents are being held in several large financial institution, which are members of the FDIC, although most of our balances do exceed the FDIC insurance limits.

Investment Securities

Investment securities represent the Company’s investment in short-term US. Treasury notes. The Company’s primary objectives for purchasing these investment securities are liquidity and safety of principal. The Company

68

BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

considers these investment securities to be available-for-sale as defined in SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities (“SFAS 115”). Accordingly, these investments are recorded at their fair value of $23,533, The fair value of these investment securities are based on publicly quoted market prices, which are Level 1 inputs, pursuant to the guidance of SFAS 157, Fair Value Measurements (“SFAS 157”). All of the Company’s investment securities mature in less than one year. The amortized cost of these investment securities is $23,511. During the year ended December 31, 2008, the Company recorded a gross unrealized gain of $22, which is recorded as other comprehensive income.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are reported at their outstanding unpaid principal balances reduced by an allowance for doubtful accounts. The Company estimates doubtful accounts based on historical bad debts, factors related to the specific customers’ ability to pay, percentages of aged receivables and current economic trends. Allowances for doubtful accounts are recorded as selling, general and administrative expenses. The Company writes off accounts deemed uncollectible after efforts to collect such accounts are not successful.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful life is three years for computer equipment, five years for furniture and fixtures, and seven years for network equipment. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the related lease term. Capitalized software costs are amortized on a straight-line basis over the estimated useful life, typically two years. Construction in progress includes amounts incurred in the Company’s expansion of its network. The amounts include switching and co-location equipment, switching and co-location facilities design and co-location fees. The Company has not capitalized interest to date since the construction period has been short in duration and the related imputed interest expense incurred during that period was insignificant. When construction of each switch or co-location facility is completed, the balance of the assets is transferred to network equipment and depreciated in accordance with the Company’s policy. Maintenance and repairs are expensed as incurred.

Impairment of Long-Lived Assets

Long-lived assets, including intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate, in management’s judgment, that the carrying amount of an asset (or asset group) may not be recoverable. In analyzing potential impairments, projections of future cash flows from the asset group are used to estimate fair value. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset group, a loss is recognized for the difference between the estimated fair value and carrying value of the asset group. The projections are based on assumptions, judgments and estimates of growth rates for the related business, anticipated future economic, regulatory and political conditions, the assignment of discount rates relative to risk and estimates of terminal values.

Goodwill

Goodwill is the excess of the purchase price over the fair value of net assets acquired in business combinations accounted for as purchases. In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”) the Company evaluates its goodwill for impairment annually on October 1 and when events and circumstances warrant such review. Impairment charges, if any, are charged to the results of operations. The recoverability of goodwill is assessed at a reporting unit level, which is the lowest asset group level for which identifiable cash flows are largely independent of the cash flows of other asset groups, and is based on projections of discounted cash flows. The Company has one reporting unit. The projections of future operating cash flow necessary to conduct the impairment review, are based on assumptions, judgments and estimates of growth rates for

69

BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

the related business, anticipated future economic, regulatory and political conditions, the assignment of discount rates relative to risk and estimates of terminal values.

Third Party Conversion Costs

The Company currently capitalizes third party conversion costs incurred to provision customers to its network. These costs include external vendor charges, but exclude costs incurred internally. At January 1, 2006, the Company changed the third party conversion costs amortization period from two to four years. The Company believes that an amortization period of four years better reflects the expected life of its current customer base, which was based in part on a churn analysis performed by management from which it was determined that monthly customer churn was approximately 2% along with a decision by management to extend the minimum contract term for its customers beyond two years. The effect of changing this estimate in useful life was a reduction of depreciation expense and a decrease to net loss of $2,951, $2,018 and $1,344 for the years ended December 31, 2006, 2007 and 2008 respectively. The impact of this change on a per share basis for the years ended December 31, 2006, 2007 and 2008 was $0.40, $0.22 and $0.14 respectively.

Debt Issuance Costs

The costs related to the issuance of long-term debt are deferred and amortized into interest expense, using the effective interest method, over the life of each debt issuance.

Significant Vendor

The Company purchased approximately 70% of its telecommunication services from one vendor during the year ended December 31, 2008. Accounts payable in the accompanying consolidated balance sheets include approximately $24,500 and $8,718 as of December 31, 2007 and December 31, 2008, respectively, due to this vendor.

Income Taxes

The Company recognizes deferred income taxes using the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for differences between the financial reporting and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in which the differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. In addition, valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

Uncertainty in Income Taxes

In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 requires the use of a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in income tax positions. Only tax positions that meet the more likely than not recognition threshold at the effective date may be recognized upon adoption of FIN 48. The Company adopted FIN 48 effective January 1, 2007 and recorded a cumulative effect adjustment of $287 to opening retained earnings. Prior to the adoption of FIN 48, the Company had two significant tax benefits that involved uncertainty. The first of which related to the Company’s tax position surrounding management and administrative services provided by MCG. The second related to the Company’s tax position with respect to warrants issued to MCG. As of December 31, 2008, the Company does not have a liability for unrecognized income tax benefits principally due to a settlement reached with the Internal Revenue Services during July 2007 relating to these tax matters.

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BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Stock-Based Compensation

The Company records compensation expense associated with stock options and other forms of equity compensation in accordance with SFAS No. 123R, Share-Based Payment (“SFAS 123R”). As permitted under SFAS 123R, the Company uses the Black-Scholes-Merton (“BSM”) option-pricing model to determine the fair value of stock-based awards.

Software Development Costs

The Company capitalizes the cost of internal use software in accordance with Statement of Position 98-1, Accounting for the Cost of Computer Software Developed or Obtained for Internal Use (“SOP 98-1”). SOP 98-1 provides guidance for the accounting for computer software developed or acquired for internal use, including the requirement to capitalize certain costs and the amortization of these costs. Costs for preliminary stage projects are expensed as incurred while application stage projects are capitalized.

The latter costs are typically internal payroll costs of employees associated with the development of internal use computer software. The Company commences amortization of the software on a straight-line basis over the estimated useful life, typically two years, when it is ready for intended use.

During the years ended December 31, 2006, 2007 and 2008, the Company capitalized approximately $2,184, $2,175 and $2,764 of software development costs, respectively, which are included in property and equipment. Amortization expense related to these assets was approximately $2,768, $2,715 and $2,270 for the years ended December 31, 2006, 2007 and 2008, respectively. The unamortized balance of capitalized software development costs as of December 31, 2007 and 2008 is $2,200 and $2,694, respectively.

Advertising

The Company expenses advertising costs in the period incurred and these amounts are included in selling, general and administrative expenses. Advertising expenses approximated $536, $1,234 and $1,843 for the years ended December 31, 2006, 2007 and 2008, respectively.

Disputes

The Company accounts for disputed billings from carriers based on the estimated settlement amount of disputed balances. The estimate is based on a number of factors including historical results of prior dispute settlements with the carriers and is periodically reviewed by management to reassess the likelihood of success. Actual settlements may differ from estimated amounts (see Note 16).

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of revenues and expenses during the reporting period. Management periodically reviews such estimates and assumptions as circumstances dictate. Actual results could differ from those estimates.

Comprehensive Loss

Comprehensive loss represents the change in net assets of a business enterprise during a period from non-owner sources. The Company’s comprehensive loss is comprised exclusively of unrealized gains on the company’s

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BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

investments in US Treasury notes. The comprehensive loss for the years ended December 31 2006, 2007 and 2008 is as follows:

	Years Ended December 31,
	2006			2007			2008
Net loss	$	(41,513	)	$	(65,489	)	$	(42,866	)
Unrealized gain on investment securities		—			—			22
Comprehensive loss	$	(41,513	)	$	(65,489	)	$	(42,844	)

3.   Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and establishes a hierarchy that categorizes and prioritizes the sources to be used to estimate fair value. SFAS 157 also expands financial statement disclosures about fair value measurements. On February 12, 2008, the FASB issued FASB Staff Position (FSP) 157-2 which delays the effective date of SFAS 157 for one year, for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). SFAS 157 and FSP 157-2 are effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company has elected a partial deferral of SFAS 157 under the provisions of FSP 157-2 related to the measurement of fair value used when evaluating goodwill, other intangible assets and other long-lived assets for impairment. The impact of partially adopting SFAS 157 effective January 1, 2008 did not have a material impact on the Company’s financial statements.

In December 2007, the SEC issued SAB No. 110, “Share-Based Payment” (“SAB 110”). SAB 110 establishes the continued use of the simplified method for estimating the expected term of equity based compensation. The simplified method was intended to be eliminated for any equity based compensation arrangements granted after December 31, 2007. SAB 110 is being published to help companies that may not have adequate exercise history to estimate expected terms for future grants. The Company does not expect the adoption of SAB 110 to have a material effect on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (Revised) (“SFAS 141(R)”), to replace SFAS 141, Business Combinations (“SFAS 141”). SFAS 141(R) requires the use of the acquisition method of accounting, defines the acquirer, establishes the acquisition date and broadens the scope to all transactions and other events in which one entity obtains control over one or more other businesses. This statement is effective for business combinations or transactions entered into for fiscal years beginning on or after December 15, 2008. The Company is still evaluating the impact of SFAS 141(R), however, the adoption of this statement is not expected to have a material impact on our financial position or results of operations.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51 (SFAS 160). This Statement amends the original Accounting Review Board (ARB) No. 51 Consolidated Financial Statements to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This Statement is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008 and may not be applied before that date. Management has evaluated SFAS 160 and has determined that it will have no impact on the Company’s consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS 161”). SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. The objective of the guidance is to provide

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users of financial statements with an enhanced understanding of how and why an entity uses derivative instruments: how an entity accounts for derivative instruments and related hedged items and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years beginning after November 15, 2008. Management has evaluated SFAS 161 and has determined that it will have no impact on the Company’s consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” The adoption of this statement is not expected to have a material effect on the Company’s financial statements.

4.   Acquisitions and Merger Agreements

2008 Acquisition

As of June 12, 2008, the Company entered into an asset purchase agreement to acquire substantially all of the assets of Lightwave Communications, LLC (“Lightwave”) and its affiliate Adera, LLC (“Adera”). Lightwave is a competitive local exchange carrier operating primarily in the Mid-Atlantic region of the United States. Lightwave filed for bankruptcy protection in February 2008. On July 11, 2008, the Bankruptcy Court granted the sale order authorizing the sale of Lightwave’s and Adera’s assets to the Company. Pursuant to the sale order, the Company was required to place $4,640 in escrow until the close of the transaction, which occurred on September 18, 2008. Accordingly, the results of operations of Lightwave are included in these consolidated financial statements beginning September 19, 2008.

The consolidated results of the Company reflect the acquisition under the purchase method of accounting in accordance with SFAS 141. The preliminary purchase price paid by the Company totaled $6,192, including the cash released from escrow. A portion of the purchase price, the $750 Holdback amount, is due to be paid to the sellers on September 18, 2009. Under certain circumstances specified on the asset purchase agreement, the Holdback amount will be adjusted to reflect changes in the purchase price. The Company is required to pay additional purchase consideration for the value of the accounts receivable acquired, an estimate of which is included in the purchase price. However, the accounts receivable amount is subject to further adjustment, which would impact both the overall purchase price paid by the Company as well as the value ascribed to the accounts receivable in the final purchase price allocation.

The purchase price was allocated to the assets acquired and liabilities assumed on a preliminary basis based on their estimated fair values on the date of acquisition. The Company will not finalize its allocation of the purchase price until the value ascribed to accounts receivable is finalized. When finalized, any changes to the preliminary purchase price allocation will result in changes to the carrying amounts of the net assets acquired.

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The preliminary purchase price allocation of the Lightwave transaction is as follows:

Assets acquired:
Accounts receivable	$	712
Other current assets		18
Property and equipment		411
Goodwill		2,185
Customer-based intangibles		3,600
Other assets		12
Total assets acquired		6,938
Liabilities assumed:
Current liabilities		746
Net assets acquired	$	6,192

2007 Acquisition

On February 23, 2007, the Company entered into an agreement and plan of merger to acquire all of the outstanding capital stock of Eureka Broadband Corporation, a competitive local exchange carrier operating primarily in the northeastern United States, in a transaction that closed on May 31, 2007 (the “2007 Merger”). Accordingly, the results of InfoHighway are included in these consolidated financial statements beginning June 1, 2007. The consolidated results of the Company reflect the acquisition under the purchase method of accounting in accordance with SFAS 141.

The purchase price consisted of a combination of cash and equity securities. Each share of capital stock of InfoHighway was converted into the right to receive cash and shares of the Company’s Series B-1 Preferred Stock, shares of Class A Common Stock and warrants to purchase units of the Company’s Series B-1 Preferred Stock and Class A Common Stock. The aggregate purchase price paid by the Company is as follows:

Cash paid, net of cash acquired of $7,841	$	56,638
Equity securities issued, including warrants		21,742
Acquisition costs		1,504
	$	79,884

The Company issued 22,755 shares of Series B-1 Preferred Stock and 568,888 shares of Class A Common Stock, with an aggregate value of $17.5 million. The shares of Series B-1 Preferred Stock and Class A Common Stock issued in the transaction have the same voting rights as existing Series B-1 Preferred Shares and Class A Common Stock. The warrants to acquire 16,976 units, with each such unit comprised of 1 share of Series B-1 Preferred Stock and 25 shares of Class A Common Stock, are generally exercisable for a period of up to five years, with the exercise price of each warrant unit determined based on the cash flow generated from a certain customer of the legacy InfoHighway entity during the two year period following closing of the acquisition. As certain cash flow parameters are met as calculated and agreed upon for the twelve months ended May 31, 2008 and the twelve months ended May 31, 2009, the exercise price on the warrants may decrease from $883.58 per unit to an exercise price of $0.01 per unit. The aggregate value of the warrants of $4.2 million at May 31, 2007, the close of the InfoHighway acquisition, was determined utilizing the Black-Scholes model assuming a 2.5 year expected life, a volatility based on market comparable entities of 55%, no expected dividends, an exercise price of $883.58 per unit and a risk free rate of 4.9%. The fair value of the warrants utilized inputs for similar securities, which are Level 2 inputs, pursuant to the guidance of SFAS 157.

The Company concluded the potential decrease in the exercise price of the warrants was contingent consideration and accounted for the warrants as of the date of acquisition. SFAS 141 discusses the accounting

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Notes to Consolidated Financial Statements — (Continued)

for contingent consideration made in a purchase that is based on maintaining or achieving specified earnings levels. SFAS 141 provides that contingent consideration determinable at the date of acquisition should be included in determining the cost of an acquired entity and recorded at that date. Contingent consideration is determinable when the contingency is resolved or not contingent beyond a reasonable doubt and the consideration is issued or issuable. Additional consideration that becomes payable as a result of the resolution of a contingency based on earnings in specified periods after the acquisition date is added to the cost of the acquired entity. As of the date of acquisition, the Company concluded that any exercise price below the $883.58 was not certain beyond a reasonable doubt and therefore would not be recorded as part of the purchase price until the contingency period was over and the exercise price was known.

As of March 23, 2009, the exercise price on the first traunch of warrants has not been determined. Negotiations are occurring between the Company and the warrant holders as to how certain carrier disputes relating specifically to InfoHighway that were in existence at the acquisition date and arising subsequent to that date will be handled in the cash flow calculation. The Company has concluded based on the criteria set forth in SFAS 141 that it will not adjust the value of the warrants until an exercise price has been determined. When the exercise price for the first traunch of warrants is resolved, the Company will utilize a Black-Scholes model to determine the aggregate value of the warrants. If the Company determines that the value of the warrants has increased, the Company will record additional merger consideration and related goodwill at the point in time of such determination. The Company evaluated the warrants under EITF Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, and determined that once the exercise price is resolved, the warrants will be classified in equity. The Company will account for the second traunch of warrants in the same way after the cash flows generated for the twelve months ended May 31, 2009 have been calculated and agreed upon.

The total purchase price has been allocated to the assets acquired and liabilities assumed based on their respective fair value as of May 31, 2007. There is no resulting goodwill that is expected to be deductible for tax purposes. The liabilities included in the acquisition cost allocation for exit activities included severance costs of terminated InfoHighway employees affected by the merger. These liabilities were accounted for in accordance with Emerging Issues Task Force (“EITF”) 95-3, Recognition of Liabilities in Connection with a Purchase Business Combination (“EITF 95-3”).

The purchase price of the InfoHighway transaction was allocated as follows:

Assets acquired, excluding cash:
Accounts receivable	$	9,302
Other current assets		880
Property and equipment		17,435
Goodwill		26,258
Customer-based intangibles		46,800
Other intangibles		4,400
Other non-current assets		495
Total assets acquired		105,570
Liabilities assumed:
Current liabilities		25,686
Net assets acquired	$	79,884

2006 Acquisition

On June 26, 2006, the Company entered into a stock purchase agreement with ATX and its shareholders in a transaction that closed on September 29, 2006 (the “2006 Merger”). Accordingly, the results of ATX are included in

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these consolidated financial statements beginning September 30, 2006. ATX is a facilities-based competitive communications provider operating in the mid-Atlantic Region states including Pennsylvania, New Jersey, Delaware, Maryland and the District of Columbia.

The Company purchased all of the outstanding capital stock of ATX for net aggregate cash consideration of approximately $88,787. The total purchase consideration has been allocated to the assets acquired and liabilities assumed based on their respective fair value as of September 30, 2006. Goodwill is expected to be deducted for tax purposes (see Note 13). The liabilities included in the acquisition cost allocation for exit activities included severance costs for terminated ATX executives and employees affected by the merger. These liabilities were accounted for in accordance with EITF 95-3.

The purchase price of the transaction as determined based on fair value was allocated as follows:

Assets acquired:
Cash and cash equivalents	$	10,646
Restricted cash		1,508
Accounts receivable		19,441
Other current assets		3,817
Property and equipment		17,607
Goodwill		38,033
Customer-based intangibles		21,412
Other intangibles		7,909
Other non-current assets		1,811
Total assets acquired		122,184
Liabilities assumed:
Current liabilities		20,732
Other liabilities		511
Total liabilities assumed		21,243
Net assets acquired	$	100,941

The following unaudited pro forma financial information for the 2006 and 2007 aquisitions was prepared in accordance with SFAS 141 and assumes the acquisition had occurred at the beginning of the periods presented. The unaudited pro forma information is provided for informational purposes only. These pro forma results are based upon the respective historical financial statements of the respective companies. The pro forma results of operations do not necessarily reflect the results that would have occurred had the acquisition occurred at the beginning of the periods presented or the results that may occur in the future.

The unaudited pro forma combined results are as follows for the years ended December 31, 2006 and 2007:

	Years Ended December 31,
	2006			2007
Revenues	$	507,906		$	498,965
Net loss	$	(60,720	)	$	(75,703	)
Loss available per common share — basic and diluted	$	(9.70	)	$	(23.59	)

Loss available per common share includes the effect of the dividends accumulated on the Company’s Preferred Stock as well as the effect of a modification to the Preferred Stock (see Note 17).

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Included in the consolidated statement of operations for the years ended December 31, 2006, 2007 and 2008 are merger integration costs of approximately $1,430, $500 and $0 respectively, which consist primarily of network shutdown costs incurred to shut down components of the Company’s network and to migrate its customers from legacy billing systems to the Company’s billing platform. Additionally, these costs also include severance costs and consulting fees related to former employees.

5.   Other Assets

Other current assets consist of the following at December 31:

	December 31,
	2007		2008
Deferred carrier charges	$	2,563	$	4,956
Prepaid expenses		3,903		2,449
Other		1,997		5,209
Total other current assets	$	8,463	$	12,614

Other non-current assets consist of the following at December 31:

	December 31,
	2007		2008
Deferred financing costs	$	12,094	$	9,518
Lease security and carrier deposits		2,778		2,274
Other		3,671		4,954
Total other non-current assets	$	18,543	$	16,746

The Company incurred deferred financing costs of $4,888 related to the issuance of long term debt in 2007 (see Note 10). Amortization of deferred financing costs amounted to approximately $1,173, $2,286 and $2,639 for the years ended December 31, 2006, 2007 and 2008, respectively.

As of December 31, 2008, other non-current assets includes $3,385 of costs associated with the registration statement filed with the SEC for a potential initial public offering including underwriting fees, legal fees and other costs incurred directly related to our initial public offering. Such costs will be charged against the gross proceeds of the offering when completed or charged to operations should the Company elect not to complete the offering.

6.   Property and Equipment

Property and equipment, at cost, consists of the following at December 31:

	December 31,
	2007			2008
Network equipment	$	107,286		$	142,954
Computer and office equipment		19,196			20,512
Capitalized software costs		10,607			13,371
Furniture and fixtures and other		8,574			8,923
Leasehold improvements		5,386			5,486
		151,049			191,246
Less accumulated depreciation and amortization		(73,676	)		(105,998	)
	$	77,373		$	85,248

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Notes to Consolidated Financial Statements — (Continued)

Property and equipment includes amounts acquired under capital leases of approximately $10,120 and $9,847, respectively, net of accumulated depreciation and amortization of approximately $4,591 and $7,966, respectively, at December 31, 2007 and 2008.

On January 1, 2008, the Company changed the estimated useful lives of certain property and equipment acquired in the InfoHighway acquisition to conform the useful lives of this property and equipment to their estimated useful lives as determined by the Company. The impact of this change resulted in a reduction in depreciation expense of $1,439 for the year ended December 31, 2008.

7.   Identifiable Intangible Assets and Goodwill

The Company accounts for intangible assets under SFAS 142. The Company’s intangible assets, consisting primarily of its customer base and trademark, were valued as follows:

Customer Relationships:  The Company’s customer relationships are composed of subscribers to the Company’s various telecommunications services. The multi-period excess earnings method, a variant of the income approach, was utilized to value the customer relationship intangibles.

The customer relationship intangibles are amortized on a straight line basis over the average expected life of the customer relationships based on the Company’s historical disconnect statistics or on an accelerated method over their useful lives in proportion to the expected benefits to be received. The lives range from four to eleven years. The unamortized balances are evaluated for potential impairment based on future estimated cash flows when an impairment indicator is present.

Trademark:  The Company’s trademarks were valued using a variant of the income approach, referred to as the relief from royalty method.

The Company’s ATX trademark was considered to have an indefinite life at the date it was acquired. During the fourth quarter of 2007, the Company began the process of rebranding its operations following the acquisitions of InfoHighway and ATX. As a result of the rebranding process, the Company believes that the remaining useful life of the ATX trademark is three years and will be amortized on a straight-line basis. The Company considered this change in the estimated useful life to be an indication that the carrying amount of the ATX trademark may not be recoverable and required the Company to evaluate the ATX trademark for impairment. As a result of the evaluation, the Company incurred an impairment charge of $4.0 million during the fourth quarter of 2007, which was the excess of the carrying value over the estimated fair value of the ATX trademark.

The InfoHighway trademark intangible assets is amortized on an accelerated method over its useful life in proportion to the expected benefits to be received. The life of this intangible asset is four years. The unamortized balance is evaluated for impairment based on future estimated cash flows when an impairment indicator is present.

The components of intangible assets at December 31 are as follows:

	December 31,
	2007							2008
	Gross							Gross
	Carrying		Accumulated			Net Carrying		Carrying		Accumulated			Net Carrying
	Value		Amortization			Value		Value		Amortization			Value
Customer base	$	183,867	$	(107,168	)	$	76,699	$	187,467	$	(146,012	)	$	41,455
Trademarks		7,400		(1,258	)		6,142		7,400		(3,635	)		3,765
Other		909		(909	)		—		909		(909	)		—
	$	192,176	$	(109,335	)	$	82,841	$	195,776	$	(150,556	)	$	45,220

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Amortization of intangible assets for the years ended December 31, 2006, 2007 and 2008 amounted to $30,479, $44,206 and $41,221, respectively.

Future projected amortization expense for the years ended December 31 is as follows:

2009	$	17,737
2010		12,431
2011		5,305
2012		3,486
20013		2,194
Thereafter		4,067
	$	45,220

Changes in the carrying amount of goodwill are as follows:

Balance at December 31, 2006	$	69,632
Effects of 2007 acquisition		26,258
Other		264
Balance at December 31, 2007		96,154
Effects of 2008 acquisition		2,185
Other		(228	)
Balance at December 31, 2008	$	98,111

8.   Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following at December 31:

	December 31,
	2007		2008
Recurring network costs and other operating accruals	$	23,488	$	23,796
Accrued interest(a)		11,375		11,485
Merger transaction costs(b)		2,090		633
Payroll related liabilities		6,840		6,234
Other		159		551
Total accrued expenses and other current liabilities	$	43,952	$	42,699

(a)	Represents accrued interest on the Senior Secured Notes. Interest is paid semi-annually on March 1 and September 1 of each year.
(b)	The accrual for merger transaction costs consists of the following:

				Lease
	Severance			Terminations			Other			Total
Balance at December 31, 2007	$	1,388		$	632		$	70		$	2,090
Additions		102			—			—			102
Payments		(604	)		(499	)		(70	)		(1,173	)
Adjustments		(386	)		—			—			(386	)
Balance at December 31, 2008	$	500		$	133		$	—		$	633

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Notes to Consolidated Financial Statements — (Continued)

9.   Obligations Under Capital and Operating Leases

Capital Leases

In March 2006, the Company entered into a capital lease facility, as amended in October 2006, with a third party that allows the Company to finance the acquisition of up to $12,500, or as otherwise limited by our indenture (see Note 10), of network related equipment through December 31, 2008. The Company is obligated to repay the borrowings in thirteen quarterly installments. At the end of the final installment period, the Company has the option of renewing, returning or purchasing the equipment at a mutually agreed fair value which is not to exceed 18% of original equipment cost. The company had borrowings of $8,768 outstanding on this facility at December 31, 2008.

The future minimum lease payments under all capital leases at December 31, 2008 are as follows:

2009	$	5,637
2010		4,021
2011		1,811
2012		341
		11,810
Less amounts representing interest		(2,456	)
		9,354
Less current portion		(4,142	)
Capital lease obligations, net of current portion	$	5,212

Amortization of capital leases is included in depreciation and amortization expense in the consolidated statements of operations.

Operating Leases

The Company rents office space, switch locations and equipment under various operating leases. The future minimum lease payments under operating leases at December 31, 2008 are as follows:

2009	$	11,296
2010		10,456
2011		6,455
2012		4,542
2013		2,968
Thereafter		8,835
Total minimum lease payments	$	44,552

Future minimum lease payments are net of sublease rentals as follows:

2009	$	587
2010		498
2011		109
Total sublease rentals	$	1,194

Total rent expenses under these operating leases, including escalation charges for real estate taxes and other expenses, totaled $7,703, $11,979 and $11,324 for the years ended December 31, 2006, 2007 and 2008, respectively. The Company’s sublease rental income was $284, $706 and $566 for the years ended December 31, 2006,

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2007 and 2008, respectively. Rent expense is charged to operations ratably over the terms of the leases, which results in deferred rent payable.

10.   Debt

Senior Secured Notes

On August 23, 2006, the Company issued $210,000 principal amount of 113/8% Senior Secured Notes due 2012 (the “Senior Secured Notes”). The net proceeds from the Senior Secured Notes were used to fund the ATX acquisition, repay indebtedness under the Company’s senior secured credit facility and senior unsecured subordinated notes due 2009, and for general corporate purposes. On May 14, 2007, we completed an additional offering of $90,000 aggregate principal amount of 113/8% Senior Secured Notes due 2012 at an issue price of 1053/4%, generating gross proceeds of $95,175. We used such proceeds from the offering to fund the InfoHighway merger, which closed on May 31, 2007, pay related fees and expenses and for general corporate purposes. The remaining unamortized bond premium of $3,924 at December 31, 2008 is included in long term debt. For the year ended December 31, 2007 and 2008, bond premium amortization amounted to $435 and $816 respectively.

The Company is required to pay cash interest on the principal amount of the notes at a rate of 113/8% per annum, which is due semi-annually on March 1 and September 1 of each year, commencing on March 1, 2007. The Senior Secured Notes mature on September 1, 2012. The notes are fully, unconditionally and irrevocably guaranteed on a senior secured basis, jointly and severally, by each of the Company’s existing and future domestic restricted subsidiaries. The notes and the guarantees rank senior in right of payment to all existing and future subordinated indebtedness of the Company and its subsidiary guarantors, as applicable, and equal in right of payment with all existing and future senior indebtedness of the Company and of such subsidiaries.

The notes and the guarantees are secured by a lien on substantially all of the Company’s assets provided, however, that pursuant to the terms of an intercreditor agreement, the security interest in those assets consisting of receivables, inventory, deposit accounts, securities accounts and certain other assets that secure the notes and the guarantees are contractually subordinated to a lien thereon that secures the Company’s five-year senior revolving credit facility with an aggregate principal amount of $25,000 (the “Revolving Credit Facility”) and certain other permitted indebtedness.

The Indenture contains covenants limiting the Company’s ability to, among other things: incur or guarantee additional indebtedness or issue certain preferred stock; pay dividends; redeem or purchase equity interests; redeem or purchase subordinated debt; make certain acquisitions or investments; create liens; enter into transactions with affiliates; merge or consolidate; make certain restricted payments; and transfer or sell assets, including equity interests of existing and future restricted subsidiaries. The Company was in compliance with all covenants at December 31, 2008.

Revolving $25,000 Senior Credit Facility

On August 23, 2006, the Company entered into a five year, revolving $25,000 Senior Credit Facility (“Revolving Credit Facility”). Any outstanding amounts under this facility are subject to a borrowing base limitation based on an advance rate of 85% of the amount of eligible receivables, as defined. The borrowing base eligibility calculation exceeds the amount required to draw on the entire Revolving Credit Facility; therefore the remaining availability under the Revolving Credit Facility and the letter of credit sublimit are fully available for borrowing. The loans bear interest on a base rate method or LIBOR method, in each case plus an applicable margin percentage, at the option of the Company. Interest on the LIBOR loans is paid on a monthly or quarterly basis, and interest on the base rate loans is paid on a quarterly basis. In connection with the acquisition of Lightwave, the Company borrowed $10,000 from the Revolving Credit Facility during September 2008 and due to continuing uncertainty in the credit markets, the Company borrowed an additional $13,500 million from the Revolving Credit Facility during October 2008.

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The Revolving Credit Facility also has a sublimit of $15,000 for the issuance of letters of credit. On the consummation of the ATX acquisition in August 2006, $7,802 of letters of credit were issued in lieu of vendor security deposits. Such letters of credit were returned in March 2007. During 2008, $80 of letters of credit were issued to regulatory bodies, all of which are outstanding against this facility at December 31, 2008.

Indebtedness under the Revolving Credit Facility is guaranteed by all of our direct and indirect subsidiaries that are not borrowers thereunder and is secured by a security interest in all of our and our subsidiaries’ tangible and intangible assets.

The Revolving Credit Facility contains negative covenants and restrictions on our assets and our subsidiaries’ actions, including, without limitation, incurrence of additional indebtedness, restrictions on dividends and other restricted payments, prepayments of debt, liens, sale-leaseback transactions, loans and investments, hedging arrangements, mergers, transactions with affiliates, changes in business and restrictions on our ability to amend the indenture and terms of our subordinated debt.

Certain of our assets have been pledged to the above creditors pursuant to the debt agreements. Each of our subsidiaries has guaranteed the outstanding debt. The parent company of these subsidiaries has no independent assets or operations and the guarantees are full and unconditional and joint and several.

Senior Credit Facility

Under the then existing senior credit facility, the Company was required to pay interest in arrears, with varying interest rates on amounts of indebtedness. The senior credit facility contained financial and non-financial covenants. On August 23, 2006, upon the completion of the Company’s offering of the Senior Secured Notes, the Company repaid in full the then outstanding balance of $79,000 on the senior credit facility.

Senior Subordinated Debt

In connection with the 2005 Merger, the Company entered into a note purchase agreement with MCG and the other existing equity holders whereby the Company issued senior unsecured subordinated notes (“Subordinated Debt”) due 2009. In June 2005 and July 2006, the Company issued additional subordinated notes to those equity holders on terms identical to the existing senior subordinated debt. In general, the terms of the senior subordinated debt include an interest rate of 12% until December 31, 2008. In August 2006, in connection with the issuance of the Senior Secured Notes, the Company extinguished all outstanding Subordinated Debt, plus accrued interest. The Company converted $73,764 into common stock and series A-1 and B-1 preferred stock, and repaid the remaining balance of $972. The Company paid a conversion fee to all debt holders who converted to equity. This fee amounted to $1,531 and was recorded in interest expense.

11.   Shareholders’ Equity (Deficiency)

Equity

In July 2006, in anticipation of the acquisition of ATX and the refinancing of the existing senior unsecured subordinated notes, the Company authorized two new series of preferred stock, Series A-1 Preferred Stock, and Series B-1 Preferred Stock. At the refinancing, holders of the senior unsecured subordinated notes were offered the option to convert their existing notes into shares of either Series A-1 Preferred Stock and Class A Common Stock or Series B-1 Preferred Stock and Class A Common Stock at a conversion price per preferred share of $516.35. Each converting note holder also received a number of shares of Class A Common Stock equal to twenty-five times the number of shares of preferred stock purchased. The two series of preferred stock are pari passu with the existing Series A and Series B of preferred stock.

As of December 31, 2008, there were 87,254 shares of Series A Preferred Stock outstanding. Each share of Series A Preferred Stock is non redeemable, but carries a liquidation preference of $1,597.96 per share, with an

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Notes to Consolidated Financial Statements — (Continued)

aggregate liquidation preference of the Series A Preferred Stock of $139.4 million as of December 31, 2008. The liquidation preference increases at an annual rate of 12%, compounded quarterly. To realize a liquidation preference, the holder must simultaneously surrender 25 shares of common stock for each share of preferred stock liquidated. Each share of Series A Preferred Stock is convertible for a $50 conversion price at the option of the holder or upon a qualifying initial public offering (“IPO”) event into that number of common shares equal to the liquidation preference at the date of conversion divided by fifty dollars. The Series A Preferred Stock votes together with the Series A-1 Preferred Stock on certain matters requiring a class specific vote and is entitled to 30 votes per Series A Preferred Share on all matters requiring a vote of all shareholders.

As of December 31, 2008, there were 100,702 shares of Series A-1 Preferred Stock outstanding. Each Share of Series A-1 Preferred Stock is non redeemable, but carries a liquidation preference identical to the Series A Preferred Stock of $1,597.96 per share, with an aggregate liquidation preference of the Series A-1 Preferred Stock of $160.9 million as of December 31, 2008. The liquidation preference increases at an annual rate of 12%, compounded quarterly. In order to realize a liquidation preference, the holder must simultaneously surrender 25 shares of common stock for each share of preferred stock liquidated. Each share of Series A-1 Preferred Stock is convertible for a $50 conversion price at the option of the holder or upon a qualifying IPO event into that number of common shares equal to the liquidation preference at the date of conversion divided by fifty dollars. The Series A-1 Preferred Stock votes together with the Series A Preferred Stock on certain matters requiring a class specific vote and is entitled to 30 votes per Series A-1 Preferred Share on all matters requiring a vote of all shareholders.

As of December 31, 2008, there were 91,202 shares of Series B Preferred Stock outstanding. Each share of Series B Preferred Stock is non redeemable, but carries a liquidation preference of $1,597.96 per share with an aggregate liquidation preference of the Series B Preferred Stock of $145.7 million as of December 31, 2008. The liquidation preference increases at an annual rate of 12%, compounded quarterly. In order to realize a liquidation preference, the holder must simultaneously surrender 25 shares of common stock for each share of preferred stock liquidated. Each share of Series B Preferred Stock is convertible for a $50 conversion price at the option of the holder or upon a qualifying IPO event into that number of common shares equal to the liquidation preference at the date of conversion divided by fifty dollars. The Series B Preferred Stock votes together with the Series B-1 Preferred Stock on certain matters requiring a class specific vote and is entitled to 20 votes per Series B Preferred Share on all matters requiring a vote of all shareholders.

As of December 31, 2008, there were 64,986 shares of Series B-1 Preferred Stock outstanding. Each Share of Series B-1 Preferred Stock is non redeemable, but carries a liquidation preference identical to the Series B Preferred Stock of $1,597.96 per share with an aggregate liquidation preference of the Series B-1 Preferred Stock of $103.8 million as of December 31, 2008. The liquidation preference increases at an annual rate of 12%, compounded quarterly. In order to realize a liquidation preference, the holder must simultaneously surrender 25 shares of common stock for each share of preferred stock liquidated. Each share of Series B-1 Preferred Stock is convertible for a $50 conversion price at the option of the holder or upon a qualifying IPO event into that number of common shares equal to the liquidation preference at the date of conversion divided by fifty dollars. The Series B-1 Preferred Stock votes together with the Series B Preferred Stock on certain matters requiring a class specific vote and is entitled to 20 votes per Series B-1 Preferred Share on all matters requiring a vote of all shareholders.

As of December 31, 2008, there were 14,402 shares of Series C Preferred Stock outstanding. Each share of Series C Preferred Stock is non redeemable, but carries a liquidation preference equal to the Series A Preferred Share liquidation preference less $516.35 or $1,081.61 per share as of December 31, 2008. At December 31, 2008, the aggregate liquidation preference of the Series C Preferred Stock is $15.6 million. To realize a liquidation preference, the holder must simultaneously surrender 25 shares of common stock for each share of preferred stock liquidated. Each share of Series C Preferred Stock is convertible for a $50 conversion price at the option of the holder or upon a qualifying IPO event into that number of common shares equal to the liquidation preference at the date of conversion divided by fifty dollars. The Series C Preferred Stock is non voting.

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Notes to Consolidated Financial Statements — (Continued)

The Company’s Charter provides that if the following events occur (defined in the Charter as “Liquidations”), the holders of preferred stock shall be entitled to be paid the liquidation preference associated with the preferred stock prior to any payment or distribution to holders of junior securities: (1) the Company shall (i) commence a voluntary bankruptcy, (ii) consent to an involuntary bankruptcy, (iii) make an assignment for the benefit of its creditors, or (iv) admit in writing its inability to pay its obligations; (2) an order of involuntary bankruptcy is commenced in respect of the Company and the order is unstayed and in effect for 60 consecutive days and on account of such event the Company liquidates, dissolves or winds-up; (3) the Company shall otherwise liquidate, dissolve or wind-up; and (4) the Company shall (i) merge or consolidate and the Company is not the surviving entity of such merger or consolidation, (ii) merge or consolidate and the Company is the surviving entity of such merger or consolidation, though the pre-merger or pre-consolidation holders of the Company’s capital stock cease to maintain control of the Company, (iii) sell substantially all of the assets of the Company, or (iv) sell a majority of the voting stock of the Company. Neither the Charter nor any other agreement contains a contractual redemption feature relating to the preferred stock. There are no provisions in the Charter that explicitly or contractually permit the preferred shareholders to trigger a liquidation payment or distribution upon the occurrence of any of the Liquidation events.

As of December 31, 2008, there were 9,342,880 shares of Series A common stock outstanding. During 2006, 1,307,770 shares of common stock held by the Company’s previous senior lenders were repurchased for nominal consideration, which approximated fair value, after the repayment of the Company’s senior credit facility. The Series A common stock is entitled to 1 vote per share on all matters requiring a vote of all shareholders.

As of December 31, 2008, there were 360,050 shares of Series B common stock outstanding. Upon a qualifying IPO event, each share of Series B common stock is automatically converted into one share of Series A common stock.

As a result of the 2005 Merger effective January 14, 2005 and related transactions, MCG, the indirect controlling stockholder of BH, effectively became the owner of stock representing (1) 60% of the voting power of the Company’s capital stock and (2) approximately 40% of the Company’s capital stock on a fully diluted basis, excluding options reserved but not issued under the Company’s employee stock incentive plan as of January 14, 2005. Pursuant to the 2005 Merger, MCG exchanged its 100% interest in BH’s corporate parent for Series A preferred stock and Class A common stock of the Company. BH was considered to be the acquirer for accounting purposes (see Note 1).

Immediately prior to the 2005 Merger, all existing series of capital stock of BNI were reclassified into Series B Preferred Stock and Class A common stock.

As of December 31, 2008, stock options to acquire 136 shares of Series B Preferred Stock and 3,445 shares of Common Stock are outstanding under the Company’s 1997 and 2000 Stock Option Plans. The Company is no longer authorized to issue any additional awards under the Company’s 1997 and 2000 Stock Option Plans.

As of December 31, 2008, a warrant to acquire 46 shares of Series B Preferred Stock and 1,151 shares of Class A common stock is outstanding.

12.   Stock Based Compensation

Restricted Stock Awards

In conjunction with the 2005 Merger, the Company issued restricted stock awards to replace previously held stock options (see below). The awards consisted of 1,900 shares of Series A preferred stock and 47,500 shares of Class A common stock and vested over three years at a percentage rate of 40/30/30 based on service requirements. In 2005, an additional grant with similar vesting terms was provided to one of the Company’s executives of 368 shares of Series A preferred stock, 383 shares of Series B preferred stock and 18,750 shares of Class A common stock.

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Notes to Consolidated Financial Statements — (Continued)

In February 2007, the Company’s board adopted and its shareholders subsequently approved the Company’s Management Incentive Plan (the “MIP”), pursuant to which the Company is authorized to grant stock options and restricted stock to certain of its employees. Pursuant to the MIP, there are 52,332 shares of Series C Preferred Stock and 1,308,297 shares of non-voting Class B Common Stock reserved for issuance. In April 2007, grants of restricted stock representing 14,402 shares of Series C Preferred Stock and 360,050 shares of Class B Common Stock were completed. As a condition and in conjunction with the MIP grants, all vested share-based awards then outstanding and held by participants in the MIP were repurchased for cash consideration of $1.7 million and all unvested share-based awards then outstanding and held by participants in the MIP were cancelled in exchange for the issuance of new awards under the MIP. Under FASB Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation (“FIN 44”), if a company cancels or settles an award and replaces that award with a new type of award, a new measurement date would be required and additional compensation expense is recognized over the remaining vesting period. All of the awards, including modified awards required to be remeasured under FIN 44 and new awards issued, were valued at the grant date at fair market value using public company comparables, recent comparable transactions and discounted cash flow valuation methodologies.

Grants under the MIP consisted of both vested and unvested securities. Unvested securities will generally vest in ratable annual installments over the three-year period following the grant based on service requirements. The incremental value for the fair value of the MIP awards over the fair value of the awards repurchased or cancelled and the fair value of all vested MIP awards not representing grants for repurchased and cancelled securities were expensed immediately at the grant date, totaling $1.7 million.

The following table summarizes the Company’s restricted stock award activity:

									Weighted-Average
	Series A and B			Series C		Series A and B			Grant Date Fair
	Preferred			Preferred		Common			Value
Outstanding December 31, 2005		2,650			—		66,250		$	502.43
Grants		—			—		—			—
Forfeit/Cancel/Repurchase		—			—		—			—
Outstanding December 31, 2006		2,650			—		66,250			502.43
Grants		—			14,402		360,050			137.50
Forfeit/Cancel/Repurchase		(2,650	)		—		(66,250	)		502.43
Outstanding December 31, 2007		—			14,402		360,050			137.50
Grants		—			—		—			—
Forfeit/Cancel/Repurchase		—			—		—			—
Outstanding December 31, 2008		—			14,402		360,050		$	137.50

Total compensation expense, which is included in selling, general & administrative expense, for restricted stock awards for the year ended December 31, 2006 was $754. Total compensation expense for the new restricted stock awards and the unvested portion of the modified awards for the year ended December 31, 2007 and 2008 was $2,173 and $84 respectively. At December 31, 2008 the total compensation cost related to unvested awards not yet recognized is $39 and is expected to be recognized over a period of approximately one year.

Stock Options

In April 2007 pursuant to the MIP, grants of options to acquire 21,599 units comprised of 1 share of Series C Preferred Stock and 25 shares of Class B Common Stock were completed. Options under the MIP were granted with an exercise price equal to the fair market value of a unit determined as of the grant date subsequent to the approval by the board of the individual grants. The fair market value was determined utilizing the Black-Scholes model with an exercise price equal to the assumed fair market value of an underlying unit of $137.50, a three year expected life of the option, a volatility based on market comparable entities of 55%, no dividend yield and a risk free rate of 4.5%.

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BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

The following table summarizes the Company’s stock option activity:

	Series C			Average
	Preferred			Exercise Price
Outstanding December 31, 2005		—		$	—
Grants		—			—
Forfeit/Cancel/Repurchase		—			—
Outstanding December 31, 2006		—			—
Grants		21,599			137.50
Forfeit/Cancel/Repurchase		(699	)		137.50
Outstanding December 31, 2007		20,900			137.50
Grants		—			—
Forfeit/Cancel/Repurchase		(696	)		137.50
Outstanding December 31, 2008		20,204		$	137.50

Total compensation expense for stock options for the years ended December 31, 2007 and 2008 was $378 and $209, respectively. There was no corresponding expense for the year ended December 31, 2006. As of December 31, 2008 options to acquire 8,413 of the 20,204 Series C units are vested, but none of the options are currently exercisable. The remaining contractual term of the outstanding options is approximately one year. At December 31, 2008, the total compensation cost related to unvested awards not yet recognized is $259 and is expected to be recognized over a period of approximately one year.

13.   Income Taxes

The components of the provision for income taxes for the years ended December 31, 2006, 2007, and 2008 consist of the following:

	Years Ended December 31,
	2006		2007			2008
Current:
Federal	$	—	$	(293	)	$	(25	)
State		262		164			151
Deferred		—		855			930
	$	262	$	726		$	1,056

The following table shows the principal reasons for the difference between the effective income tax rate and the statutory federal income tax rate during the years ended December 31, 2006, 2007 and 2008:

	Years Ended December 31,
	2006			2007			2008
Statutory federal income tax rate		34.0	%		35.0	%		35.0	%
State and local income tax, net of federal tax benefits		0.4	%		0.2	%		0.4	%
Permanent items		0.0	%		0.3	%		3.3	%
Valuation allowance		(34.4	)%		(35.5	)%		(38.3	)%
Effective income tax rate		0.0	%		0.0	%		0.4	%

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Notes to Consolidated Financial Statements — (Continued)

Deferred taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. The components of the net deferred tax assets (liabilities) consist of the following at December 31, 2007 and 2008:

	December 31,
	2007			2008
Deferred tax assets:
Current
Accounts receivable	$	3,856		$	4,565
Deferred revenue		3,882			4,577
Other		2,153			789
Total deferred tax assets-current		9,891			9,931
Noncurrent
Net operating loss carry forwards		49,342			52,157
Customer lists		3,625			5,008
Trademark		1,403			1,607
Other		2,218			990
Total deferred tax assets-noncurrent		56,588			59,762
Total deferred tax assets	$	66,479		$	69,693
Deferred tax liabilities:
Noncurrent
Customer Lists		23,713			11,098
Trademark		1,297			670
Goodwill		1,141			2,071
Accelerated Depreciation		13,389			13,282
Total deferred tax liabilities-noncurrent		39,540			27,121
Net deferred tax assets — current:
Deferred tax assets-current	$	9,891		$	9,931
Valuation allowance		(9,891	)		(9,931	)
Net current deferred tax assets	$	—		$	—
Net deferred tax liabilities — noncurrent:
Deferred tax assets-noncurrent	$	56,588		$	59,762
Deferred tax liabilities-noncurrent		(39,540	)		(27,121	)
Valuation allowance		(18,189	)		(34,712	)
Net noncurrent deferred tax liabilities	$	(1,141	)	$	(2,071	)

The Company completed a study in 2006 and in 2007 of its available net operating loss carryforwards (“NOLs”) resulting from the 2005 Merger and the InfoHighway merger. The utilization of these NOL carryovers is subject to restrictions pursuant to Section 382 of the Internal Revenue Code. As such, it was determined that certain NOLs recorded by the Company as deferred tax assets were limited. At December 31, 2008, the Company had net operating loss carryforwards available totaling $136,357, which expire through 2028. The Company has provided a full valuation allowance against the net deferred tax asset as of December 31, 2007 and 2008 because management does not believe it is more likely than not that this asset will be realized. If the Company achieves profitability, the net deferred tax assets may be available to offset future income tax liabilities.

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Notes to Consolidated Financial Statements — (Continued)

In July 2007, the Company reached a settlement with the Internal Revenue Service related to an audit of Bridgecom Holdings, Inc. for fiscal years 2002 through 2004 that resulted in an adjustment to its existing net operating loss carryforwards of approximately $2,900. Additionally, the Company received a refund of $300 which was recorded as a benefit to income tax expense. The Company also reversed liabilities of $293 which had been previously recorded in accordance with FIN 48 (see below). The Company currently has no federal tax examinations in progress.

In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 requires the use of a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in income tax positions. Only tax positions that meet the more likely than not recognition threshold at the effective date may be recognized upon adoption of FIN 48. The Company adopted FIN 48 effective January 1, 2007 and recorded a cumulative effect adjustment of $287 to opening retained earnings of which $18 was interest and penalties. In addition, the Company reduced $1,751 of a deferred tax asset and its associated valuation allowance. Prior to the adoption of FIN 48, such expenses would have been recorded as interest expense. The Company’s December 31, 2008 balance sheet includes no liability for unrecognized income tax benefits principally due to the settlement with the Internal Revenue Service as noted above.

14.   Employee Savings and Retirement Plan

During 2007, the Company had three active contributory defined contribution plans under Section 401(k) of the Internal Revenue Code (the “Code”) covering all qualified employees. Two of these plans, which historically covered the employees of ATX and InfoHighway, have been terminated effective December 31, 2007. Assets of the participants covered under these plans were transferred into the Company’s remaining plan. Participants may elect to defer up to 20% of their annual compensation, subject to an annual limitation as provided by the Code. The Company’s matching contribution to this plan is discretionary. For the year ended December 31, 2006 and 2007, the Company made contributions of approximately $32 and $144, respectively, to these plans. For the year ended December 31, 2008, the company did not make any contributions to the plan.

15.   Fair Values of Financial Instruments

In the normal course of business, the Company’s financial position is subject to a variety of risks, such as the collectability of accounts receivable and the recoverability of the carrying values of its long-term assets. The Company’s long-term obligations consist primarily of long-term debt with fixed interest rates. The Company is not exposed to market risks from changes in foreign currency exchange rates or commodity prices.

The Company’s financial instruments include cash and cash equivalents, investments in U.S. Treasury notes, trade accounts receivable, accounts payable, and long-term debt. The Company’s available cash balances are invested on a short-term basis (generally overnight) and, accordingly, are not subject to significant risks associated with changes in interest rates. All of the Company’s cash flows are derived from operations within the United States and are not subject to market risk associated with changes in foreign exchange rates. The carrying amount of the Company’s cash and cash equivalents, trade accounts receivable and accounts payable reported in the consolidated balance sheet as of December 31, 2008 are deemed to approximate fair value because of their liquidity and short-term nature. The carrying amounts of the Company’s investments in U.S. Treasury notes are recorded at their fair value of $23,533, which is based on publicly quoted market prices as of December 31, 2008,

The fair value of our 113/8% senior secured notes due 2012 at December 31, 2008, was approximately $207.0 million, which was based on the closing price of the notes at that date.

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Notes to Consolidated Financial Statements — (Continued)

16.   Commitments and Contingencies

The Company has employment agreements with certain key executives at December 31, 2008. These agreements provide for base salaries and performance bonuses over periods ranging from one to two years. These employment agreements also provide for severance compensation for a period of up to 12 months after termination.

The Company has standby letters of credit outstanding of $1,565 which are fully collateralized by either domestic certificates of deposit or the letter of credit subfacility under the Company’s revolving credit facility.

The Company has, in the ordinary course of its business, disputed certain billings from carriers and has recorded the estimated settlement amount of the disputed balances. The settlement estimate is based on various factors, including historical results of prior dispute settlements. The amount of such charges in dispute at December 31, 2008 was approximately $17.0 million, of which 29% is with Verizon and 71% is with other carriers. The Company believes that the ultimate settlement of these disputes will be at amounts less than the amount disputed and has accrued the estimated settlement in accounts payable and accrued expenses and other current liabilities at December 31, 2008. It is possible that actual settlement of such disputes may differ from these estimates and the Company may settle at amounts greater than the estimates.

In December 2008, the Company finalized a settlement with the local exchange carrier operating subsidiaries of our major telecommunications supplier, which extinguished virtually all outstanding disputes between the parties as of March 31, 2008. Additionally, the settlement included a comprehensive mutual release between the parties effective as of that date.

In February 2007, the Company finalized a settlement with its major telecommunications supplier and paid $15.2 million to extinguish approximately $39.0 million of outstanding disputes. In connection with the settlement, in 2006 the Company recorded a reduction in costs of revenues of approximately $5.0 million.

The Company has entered into commercial agreements with vendors under which it purchases certain services that it had previously leased under the unbundled network platform provisions of the Telecommunications Act of 1996 as well as special access services. For the years ended December 31, 2006, 2007 and 2008, the Company met the minimum purchase obligations during each year. The agreements, which expire in 2010 and 2011 require certain minimum purchase obligations and contain fixed but escalating pricing over their term. The future obligations under these agreements as of December 31, 2008 are as follows:

2009	$	26,224
2010		24,935
2011		23,449
Total future obligations	$	74,608

The Company is involved in claims and legal actions arising in the ordinary course of business. Management is of the opinion that the ultimate outcome of these matters will not have a material adverse impact on the Company’s consolidated financial position, results of operations, or cash flows.

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Notes to Consolidated Financial Statements — (Continued)

17.   Earnings per share

The following is a reconciliation of the numerators and denominators of the basic and diluted net loss per share computations for the years ended December 31, 2006, 2007 and 2008 (in thousands, except per share amounts):

	Years Ended December 31,
	2006			2007			2008
Loss available to common shareholders (Numerator):
Net loss	$	(41,513	)	$	(65,489	)	$	(42,866	)
Dividends on preferred stock		(32,996	)		(55,031	)		(63,890	)
Modification of preferred stock		—			(95,622	)		—
Loss available to common shareholders	$	(74,509	)	$	(216,142	)	$	(106,756	)
Shares (Denominator):
Weighted average common shares outstanding:
Class A common stock		7,396,610			9,131,327			9,342,880
Class B common stock		—			227,805			333,036
Weighted average common shares outstanding — basic and diluted		7,396,610			9,359,132			9,675,916
Loss available per common share — basic and diluted	$	(10.07	)	$	(23.09	)	$	(11.03	)

For the years ended December 31, 2006, 2007 and 2008, the Company had outstanding options, warrants, restricted stock units and preferred stock as disclosed in Notes 11 and 12, which were convertible into or exercisable for common shares that were not included in the calculation of diluted loss per common share because the effect would have been anti-dilutive.

Dividends accumulate on the Company’s Series A, A1, B and B1 Preferred Stock. Per SFAS No. 128, Earnings Per Share, loss available to common shareholders must be computed by adding any dividends accumulated for the period to net losses. Dividends accumulated but undeclared for the years ended December 31, 2006, 2007 and 2008 were $33.0 million, $55.0 million and $63.9 million respectively.

In February 2007, the Company added a provision to the Series A, A-1, B and B-1 Preferred Stock providing for an Absolute Liquidation Preference (“ALP”). The ALP concept was added to the Company’s Charter in anticipation of a management incentive plan implemented by the Company in March 2007, under which management would receive options and restricted stock awards of Series C Preferred Stock. Before adding an ALP concept, the Series A, A-1, B and B-1 Preferred Stock shared pro rata in any distributions made by the Company up to their stated value of $1,000 plus accrued dividends. The ALP ensured that before any distribution is provided to any other stockholders, such as the Series C Preferred Stockholders, the Series A, A-1, B and B-1 Preferred Stockholders will receive $516.35 per share and then all series of preferred stock, including the Series C Preferred Stock will share pro rata.

The Company considered the change to the preferred stock provisions to be a modification, which required extinguishment accounting. As a result, $95.6 million, which is the difference between the fair value of these preferred shares at the time of the modification and their carrying value, was added to the Company’s net loss to arrive at a loss available to common shareholders for the year ended December 31, 2007. This event had no impact on the Company’s balance sheet as it has no net effect on the Company’s preferred share balances or on its additional paid-in capital balance.

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Notes to Consolidated Financial Statements — (Continued)

18.   Unaudited Quarterly Results of Operations

The following is the unaudited quarterly results of operations for the years ended December 31, 2007 and 2008. We believe that the following information reflects all normal recurring adjustments necessary for a fair presentation on the information for the period presented. The operating results for any quarter are not necessarily indicative of results for any future period.

	2008
	Three Months Ended
	March 31,			June 30,			September 30			December 31,
Revenues	$	123,543		$	128,313		$	125,535		$	123,345
Cost of revenues (exclusive of depreciation and amortization)	$	66,021		$	65,427		$	65,026		$	61,409
Income (loss) from operations	$	(3,981	)	$	1,196		$	800		$	(1,005	)
Net loss	$	(13,581	)	$	(9,030	)	$	(9,173	)	$	(11,082	)
Dividends on preferred stock		(15,352	)		(15,730	)		(16,202	)		(16,688	)
Loss available to common shareholders	$	(28,933	)	$	(24,760	)	$	(25,375	)	$	(27,770	)
Loss available per common share — basic and diluted(1)	$	(2.99	)	$	(2.56	)	$	(2.62	)	$	(2.87	)
Weighted average common shares outstanding — basic and diluted		9,667,680			9,676,996			9,679,455			9,679,455

	2007
	Three Months Ended
	March 31,			June 30,(2)			September 30			December 31,(3)
Revenues	$	95,821		$	106,524		$	123,652		$	125,162
Cost of revenues (exclusive of depreciation and amortization)	$	49,547		$	53,699		$	64,890		$	66,030
Loss from operations	$	(8,055	)	$	(6,655	)	$	(6,115	)	$	(11,277	)
Net loss	$	(15,252	)	$	(15,354	)	$	(14,990	)	$	(19,892	)
Dividends on preferred stock		(12,309	)		(13,346	)		(14,471	)		(14,905	)
Modification of preferred stock		(95,622	)		—			—			—
Loss available to common shareholders	$	(123,183	)	$	(28,700	)	$	(29,461	)	$	(34,797	)
Loss available per common share — basic and diluted(1)	$	(13.92	)	$	(3.11	)	$	(3.05	)	$	(3.60	)
Weighted average common shares outstanding — basic and diluted		8,848,454			9,240,321			9,667,680			9,667,680

(1)	The sum of quarterly per share amounts may not equal per share amounts reported for year-to-date periods. This is due to changes in the number of weighted-average shares outstanding and the effects of rounding for each period.
(2)	The Company acquired InfoHighway on May 31, 2007. Accordingly, the Company’s results of operations include the operations of InfoHighway from June 1, 2007.
(3)	We recognized an impairment charge due to the rebranding of ATX.

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

None.

Item 9A.   Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our Company’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Management’s Annual Report on Internal Control Over Financial Reporting

As required by SEC Rule 15d-15(b), we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2008. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2008. As defined in SEC Rules 13a-15(f) and 15d-15(f), internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Our internal control over financial reporting includes those policies and procedures that:

1. Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the Company’s transactions and the dispositions of assets of the Company;

2. Provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of our management and Board of Directors; and

3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation and presentation and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In connection with the preparation of our annual consolidated financial statements, management has conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework set forth in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of those controls. Based on this evaluation, we have concluded that, as of December 31, 2008, our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

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During our fourth fiscal quarter of 2008, there has been no change in our internal control over financial reporting (as defined in SEC Rules 13a-15(f) or 15d-15(f)) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the temporary rules of the SEC that permit us to provide only management’s report in this annual report.

Item 9B.   Other Information

None.

PART III

Item 10.   Directors, Executive Officers and Corporate Governance

Our board of directors is currently comprised of the following ten members: Steven F. Tunney, as Chairman of the Board; Samuel F. Rubenstein; John S. Patton, Jr.; B. Hagen Saville; David C. Ruberg; Robert Manning; Peter J. Barris; and Raul Martynek; Richard W. Roedel; and Michael K. Robinson.

Mr. Tunney, Mr. Rubenstein, Mr. Patton and Mr. Saville were appointed by MCG, Mr. Ruberg and Mr. Manning were appointed by Baker, Mr. Barris was appointed by NEA and Mr. Martynek was appointed by InfoHighway’s legacy shareholders.

Set forth below are the names and positions of our executive officers and directors as of December 31, 2008.

Name	Position
Michael K. Robinson	Chief Executive Officer, President and Director
Brian P. Crotty	Chief Operating Officer
Corey Rinker	Chief Financial Officer, Treasurer and Assistant Secretary
Charles C. Hunter	Executive Vice President, General Counsel and Secretary
Kenneth A. Shulman	Chief Technology Officer and Chief Information Officer
Terrence J. Anderson	Executive Vice President — Corporate Development and Assistant Treasurer
Steven F. Tunney	Chairman of the Board
Richard W. Roedel	Director and Chairman of the Audit Committee
Samuel G. Rubenstein	Director
John S. Patton, Jr.	Director
B. Hagen Saville	Director
David C. Ruberg	Director
Robert Manning	Director
Peter J. Barris	Director
Raul Martynek	Director

All directors have served on our board of directors since at least the time of the Bridgecom merger in January 2005 except Mr. Saville, who joined subsequent to that event to replace another director designated by MCG who had resigned from the board, Mr. Martynek, who was appointed to our board of directors following his nomination from the former InfoHighway stockholders pursuant to our amended and restated shareholders agreement, and Mr. Roedel and Mr. Robinson who were appointed to our board on January 8, 2009. All directors are elected to serve until their successors are elected and qualified, until such director’s death, or until such director shall have resigned or shall have been removed. Likewise all executive officers are appointed to serve until their successors are appointed and qualified, until such officer’s death, or until such officer shall have resigned or shall have been removed.

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Biographies of Executive Officers

Michael K. Robinson, Chief Executive Office, President and Director (52).  Mr. Robinson joined the Company as the Chief Executive Officer in March 2005 and is responsible for all operations and strategy for the Company. Mr. Robinson was appointed to our board of directors on January 8, 2009. Prior to March 2005, Mr. Robinson had been with US LEC Corp., a publicly traded competitive communications provider, as executive vice president and chief financial officer since July 1998, responsible for all financial operations including treasury, general accounting and internal controls, investor relations, billing and information systems development, information technology, human resources and real estate. Prior to joining US LEC, Mr. Robinson spent 10 years in various management positions with the telecommunications division of Alcatel, including executive vice president and chief financial officer of Alcatel Data Networks and the worldwide financial operations of the enterprise and data networking division of Alcatel. Prior to these roles, Mr. Robinson was chief financial officer of Alcatel Network Systems. Before joining Alcatel, Mr. Robinson held various management positions with Windward International and Siecor Corp. (now Corning). Mr. Robinson participates in various industry associations. Mr. Robinson holds a masters degree in business administration from Wake Forest University.

Brian P. Crotty, Chief Operating Officer (38).  Mr. Crotty, Chief Operating Officer, has over 15 years of senior management experience in the telecom industry. In his role with Broadview, he is responsible for all operational aspects of the Company including sales, marketing, provisioning, billing, network operations, repair, field services and customer service. Mr. Crotty formerly served as Bridgecom’s Chief Operating Officer prior to its merger with Broadview. Prior to joining Bridgecom in 2000, he held a succession of positions with CoreComm Ltd., a publicly traded integrated communications provider with facilities throughout the Northeast and Midwest, most recently acting as Director of Operations. Mr. Crotty joined CoreComm Ltd., through the acquisition of USN Communications Inc. where he held a succession of senior management roles in both sales and operations, most recently as Vice President of Operations. Prior to that, Mr. Crotty was the co-founder and served as Executive Vice President of The Millennium Group, one of the first competitive local exchange carriers in the state of Wisconsin. In addition, Mr. Crotty has also served in a managerial position with CEI Communications, which he founded. Mr. Crotty obtained a degree in Business Administration from St. Norbert College.

Corey Rinker, Chief Financial Officer, Treasurer and Assistant Secretary (50).  Mr. Rinker, a certified public accountant and attorney, joined the Company (originally with Bridgecom) as Chief Financial Officer in January 2001 following seven years of experience serving in similar positions with both privately held and publicly traded corporations including The Intellisource Group, a Safeguard Scientifics, Inc. partnership company (NYSE:SFE). Mr. Rinker also possesses nearly a decade of cumulative experience with predecessors of the Big Four accounting firms of Deloitte & Touche LLP and Ernst & Young LLP, serving in senior managerial positions in the tax and consulting areas. Mr. Rinker also serves as the Secretary and Treasurer of Broadview. He has an accounting degree, with honors, from the University of Massachusetts at Amherst and a J.D. degree from Yeshiva University’s Cardozo School of Law.

Charles C. Hunter, Executive Vice President, General Counsel and Secretary (56).  Mr. Hunter has served as Executive Vice President, Secretary, and General Counsel of Broadview since 2003 (originally with Bridgecom), where he continues to be responsible for the corporate and legal affairs of the Company, including federal and state public policy advocacy. He is a 25-year veteran of telecommunications law and policy who has been involved in the competitive communications industry for nearly two decades. Prior to joining Broadview, Mr. Hunter headed the Hunter Communications Law Group P.C., a District of Columbia based boutique telecommunications law firm with a nationwide clientele. He began his legal career as a trial attorney with the Federal Maritime Commission and afterwards was a partner specializing in telecommunications matters at the Chicago-based law firm of Gardner, Carton and Douglas and the Washington, D.C. based law firm of Herron, Burchette, Ruckert and Rothwell. Mr. Hunter received his J.D. from the Duke University School of Law and his undergraduate degree from the University of Michigan at Ann Arbor. He is a member of the bars of the State of New York, the District of Columbia, the U.S. Supreme Court and numerous Federal Appellate Courts.

Kenneth A. Shulman, Chief Technology Officer and Chief Information Officer (55).  Mr. Shulman joined Broadview Networks in 1999 as Chief Technology Officer. In this role, he is responsible for the architecture, technology, standards and evolution plans for the company’s integrated communications networks and services. As

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Chief Information Officer, Mr. Shulman is also responsible for the Company’s patented integrated provisioning, billing and customer relationship management systems, software and IT infrastructure. Mr. Shulman has over 30 years of leadership experience in communications technology. He previously served as vice president of local network technology for AT&T, a position he assumed when AT&T acquired Teleport Communications Group (TCG) in 1998. From 1987 to 1998, Mr. Shulman held officer positions with TCG, including as senior vice president and chief technology officer. Earlier, he was director of systems engineering for MCI International. Before that, Mr. Shulman specialized in network planning with Bell Communications Research Inc. (Bellcore) and Bell Laboratories. He holds a B.S. in electrical engineering from the State University of New York at Stony Brook, an M.S. in electrical engineering from the University of Rochester, and an M.B.A. from The Wharton School of Business at the University of Pennsylvania. Mr. Shulman has served on many technical advisory boards, and currently serves on advisory boards of Baker Capital, Vonair and T3 Communications.

Terrence J. Anderson, Executive Vice President — Corporate Development and Assistant Treasurer (42).  Mr. Anderson was a co-founder of Broadview Networks in 1996 and has served as Executive Vice President, Finance, since the Company’s inception. His current role includes corporate development, business planning and financial analysis. He has led efforts to raise capital. Previously, as a vice president in the media and telecommunications finance group of Chemical Banking Corp. from 1988 to 1995, Mr. Anderson was responsible for originating and executing transactions and financing for diverse customers, including several large cable operators. Mr. Anderson holds a bachelor’s degree in economics from Princeton University and an M.B.A. with honors from Columbia University.

Biographies of Directors

Steven F. Tunney, Sr. (48).  Mr. Tunney has served as the President of MCG since May 2001 and as its Chief Executive Officer since 2006. Prior to that, he served as MCG’s Chief Operating Officer from 1998 to 2006, its Chief Financial Officer and Secretary from 1998 to 2000 and its Treasurer from 1998 to 2002. Mr. Tunney also serves on MCG’s board of directors, as well as the Investment and Enterprise Risk Committees, and, from 2001 to 2007, on its Valuation Committee. Prior to co-founding MCG, Mr. Tunney was a Vice President at First Union Corp. and Signet Banking Corp. From 1989 to 1995, Mr. Tunney was the Chief Financial Officer of Cambridge Information Group, Inc. From 1986 to 1989, Mr. Tunney was the Financial Manager of Legent Corporation, an international software development firm. From 1982 to 1986, Mr. Tunney was an auditor with PricewaterhouseCoopers. Mr. Tunney earned a B.S. in Business Administration from Towson State University in 1982 and is a certified public accountant. He also serves on the board of directors of Jet Plastica Investors, LLC, JetBroadband Holdings, LLC, MCG Capital Corporation, National Product Services, Inc., Radiopharmacy Investors, LLC, Solutions Capital G.P., LLC and Superior Industries Investors, LLC.

Richard W. Roedel (59).  Mr. Roedel spent much of his career with BDO Seidman LLP, an international accounting and consulting firm, where he ultimately served as Chairman and Chief Executive Officer. Mr Roedel currently serves as director of Brightpoint, Inc., IHS Inc., Sealy Corporation, Lorillard, Inc. and Luna Innovations Incorporated. Mr Roedel is chairman of the audit committees of Brightpoint, Sealy, Lorillard, Inc. and Luna Innovations Incorporated. Mr Roedel is also a board member of the Association of Audit Committee Members, Inc., a not-for-profit organization dedicated to strengthening audit committees. Mr. Roedel was on the board and chairman of the audit committee of Dade Behring Holdings, Inc. from October 2002 until November 2007 when Dade was acquired by Siemens AG. Mr. Roedel served in various capacities at Take-Two Interactive Software, Inc. from 2002 until 2005, including Chairman and Chief Executive Officer. From 1971 through 2000, he was employed by BDO Seidman LLP, becoming an audit partner in 1980, later being promoted in 1990 to Managing Partner in Chicago and then Managing Partner in New York in 1994 and finally in 1999 to Chairman and Chief Executive Officer. Mr Roedel is a graduate of The Ohio State University and a C.P.A.

Samuel G. Rubenstein (47).  Mr. Rubenstein has served as an executive vice president and the general counsel of MCG since 2000 and served as the corporate secretary of MCG from 2000 to 2007. Mr. Rubenstein is responsible for the corporate and legal affairs of MCG, including corporate governance matters. Prior to joining MCG, Mr. Rubenstein was partner in the Washington, D.C. office of Bryan Cave LLP, where his practice focused primarily on commercial and corporate finance transactions. He began his career practicing law as an attorney in the Washington, D.C. office of the law firm of Pepper Hamilton, LLP. Mr. Rubenstein received his J.D. from the George

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Washington University National Law Center and his B.B.A. from the University of Texas at Austin. He also serves on the board of directors of Cleartel Communications, Inc., Coastal Sunbelt, LLC, GMC Television Broadcasting Holdings, Inc., Jet Plastica Investors, LLC, Jet Broadband Holdings, LLC, LMS Intellibound Investors, LLC, National Product Services, Inc., RadioPharmacy Investors, LLC, Solutions Capital G.P., LLC, Superior Industries Investors, LLC, TNR Entertainment Corp., and Total Sleep Holdings, Inc.

B. Hagen Saville (47).  Mr. Saville is Executive Vice President and co-founder of MCG and a member of its Board of Directors. He is responsible for MCG’s business development activities and management of portfolio investments and sits on the firm’s Investment committee. Mr. Saville has been employed by MCG and its predecessors since January, 1994. Earlier in his career, Mr. Saville was employed in commercial and investment banking. Mr. Saville also serves on the board of directors of Coastal Sunbelt, LLC, Jet Plastica Industries, Inc., National Product Services, Inc., Radiopharmacy Investors, LLC, Solutions Capital G.P., LLC, Superior Industries Investors, LLC, TNR Entertainment Corp., and Total Sleep Holdings, Inc.

John S. Patton, Jr. (50).  Mr. Patton is a managing director and vice president of MCG. He is responsible for investment decisions and relationship management in MCG’s telecommunications practice, which focuses on competitive local exchange, long distance, data, Internet, wireless and communications support, including tower ownership and management. Using MCG’s flexible approach to funding and structuring capital, Mr. Patton has managed transactions that have allowed his customers to expand their product lines and distribution channels and make the necessary capital investments in provisioning capacity to support growth. Prior to joining MCG, Mr. Patton was a Vice President at First Union Corp. and Signet Banking Corp. He also serves on the board of directors of Cleartel Communications, Inc.

Peter J. Barris (55).  Mr. Barris is the managing general partner of NEA. He has been with NEA since 1992, and he serves as the general partner of New Enterprise Associates VII, L.P., New Enterprise Associates 9, L.P., New Enterprise Associates 10, L.P. and NEA Presidents Fund. Mr. Barris specializes in information technology companies. His current board memberships include Boingo Wireless Inc., eCommerce Industries Inc., eZiba Inc., Hillcrest Communications Inc., Mainstream Data Inc., Megisto Systems Inc. and Neutral Tandem Inc. He also serves on the board of directors of the Mid-Atlantic Venture Association Inc., the National Venture Capital Association Inc. and Venture Philanthropy Partners. His prior board memberships include UUNET Technologies Inc. (sold to MCI), AMISYS (acquired by HBO), CareerBuilder (acquired by Knight Ridder/Tribune Co.), Mobius Management Systems Inc., SALIX Technologies (acquired by Tellabs) and Tripod Inc. (acquired by Lycos, Inc.). Mr. Barris is a member of the Board of Trustees of Northwestern University, the Board of Overseers of the Tuck School at Dartmouth College and the Board of Advisors of the Tuck’s Center for Private Equity and Entrepreneurship at Dartmouth. Before joining NEA, Mr. Barris was President and Chief Operating Officer at Legent Corporation and Senior Vice President and General Manager of the Systems Software Division at UCCEL Corp. He also held various management positions between 1977 and 1985 at General Electric Company, including Vice President and General Manager at GE Information Services. He received a Masters in Business Administration from Dartmouth College and a Bachelor of Science in Electrical Engineering from Northwestern University.

David C. Ruberg (62).  Mr. Ruberg is the CEO of InterXion, NV, a privately held European carrier neutral collocation data center provider. Prior to joining InterXion, Mr. Ruberg was a General Partner of Baker Capital. He joined Baker in 2001 as the Chief Executive Officer in residence and became a General Partner in 2003. Prior to joining Baker, Mr. Ruberg was the Chief Executive Officer of Intermedia Communications Inc., a publicly traded competitive communications services provider, as well as Chairman of its majority-owned subsidiary, Digex, Inc, a web hosting company. Prior to Intermedia Communications, Inc., he was general manager of Data General Corporation’s PC and Systems Integration Division and also led the company’s Wide Area Network Products Division. Before Data General Corp., Mr. Ruberg ran design and development software organizations for database and data communications companies. He began his career as a scientist at AT&T Bell Labs, specializing in the development of compilers, operating systems, and communications systems. Mr. Ruberg serves on the boards of Adaptix Inc. and QSC AG. Mr. Ruberg holds a Bachelor’s Degree from Middlebury College and received his Masters in Computer and Communication Sciences from the University of Michigan.

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Robert Manning (49).  Mr. Manning is a manager of the general partner of Baker Capital. Prior to joining Baker Capital in 2002, Mr. Manning was CFO of Intermedia Communications, Inc., an integrated communications services provider, and a director of its majority-owned subsidiary, Digex, Inc., a provider of complex, managed, web hosting services. Prior to Intermedia, he was an investment banker to the cable television and communications industries for nine years acting as both agent and principal. Mr. Manning left investment banking in 1991 to become one of the founding executives of DMX, Inc., a digital audio cable network that was sold to Liberty Media in 1996. Mr. Manning serves on the board of directors of Adaptix Inc. (Chairman), InterXion, N.V., DigiTV Plus Inc. and Wine.com (Chairman). Mr. Manning also serves on the Board of Trustees of the Maritime Aquarium in Norwalk, Connecticut. Mr. Manning is a graduate of Williams College.

Raul Martynek (43).  Mr. Martynek currently serves as a Senior Advisor to Plainfield Asset Management, a $5B hedge fund located in Greenwich, CT. Mr. Martynek advises Plainfield on investments opportunities in the telecommunications sector and also works with portfolio companies on strategic and tactical initiatives. Prior to joining Plainfield, Mr. Martynek was Director, President & CEO of InfoHighway Communications, a CLEC with $120M in annual revenue operating in the Northeastern United States. InfoHighway was acquired by Broadview Networks, a Ryebrook, NY based CLEC, in May of 2007. Mr. Martynek was elected CEO in 2003 with a mandate to achieve profitability following the meltdown in the telecom sector. He guided the company to net income profitability within 12 months. Prior to being CEO, Mr. Martynek was Chief Operating Officer of a predecessor company, Eureka Networks from 1998 to 2003. Eureka Networks acquired InfoHighway in August 2005. As COO, he developed and executed on detailed integration and financial synergy plans for the consolidation of six companies acquired between 2000 and 2003. From 1995 to 1998, Mr. Martynek was the Executive Vice President of GGN, a non-facilities based carrier than merged with Eureka Networks in 2000. Mr. Martynek holds a BA in Political Science from SUNY-Binghamton and received a Master in International Finance from Columbia University School of International and Public Affairs in 1992.

Code of Business Conduct and Ethics

We have adopted a code of business conduct and ethics that is applicable to our principal executive officer and principal financial and accounting officer, as well as all our other employees. A copy of the code of business conduct and ethics may be found on our website at www.broadviewnet.com. Our website is not incorporated by reference into this report. At any time that the code of ethics is not available on our website, we will provide a copy upon written request made to Office of the Chief Financial Officer, Broadview Networks Holdings, Inc., 800 Westchester Avenue, Rye Brook, NY 10573. We caution you that any information that is included in our website is not part of this report. If we amend the code of ethics, or grant any waiver from a provision of the code of ethics that applies to our executive officers or directors, we will publicly disclose such amendment or waiver as required by applicable law, including by posting such amendment or waiver on our website at www.broadviewnet.com or by filing a Form 8-K with the SEC.

Board of Directors and Committees of the Board of Directors

Pursuant to our certificate of incorporation, our board of directors must be comprised of between one and eleven members. We currently have ten members on our board of directors. Pursuant to our charter and our amended and restated shareholders agreement, currently four directors have been designated by MCG, two directors have been designated by Baker and one director has been designated by NEA. For more information, see above and the section entitled “Certain Relationships and Related Transactions, and Director Independence”.

At this time, we have not formed any committees of the board of directors other than our audit committee, as discussed below. Instead, our board of directors acts as a group to perform the functions of a compensation committee and from time to time, our board appoints ad hoc committees. In 2007, the board of directors appointed an ad hoc compensation committee, comprising of Steven F. Tunney and David C. Ruberg, for the purposes of reviewing the documentation, construction and administration of the MIP pursuant to which our named executive officers (and other members of our management team) may be granted equity.

In addition, our board of directors reviews and approves compensation and benefit plans for executive officers and reviews general compensation policies with the objective to attract and retain superior talent and to achieve our

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strategic and financial goals. The board also administers our stock option plans and grants; and evaluates and assesses executive performance. Pursuant to our amended and restated shareholders agreement, we have agreed to take all actions necessary to cause at least two directors designated by MCG and one director designated by Baker to be appointed to each committee of the board of directors.

In March 2009, we formed an audit committee of the board of directors consisting of Richard W. Roedel, Steven F. Tunney, Jr. and Raul Martynek. Prior to this time, our board of directors acted as a group to perform the functions of an audit committee and reviewed the work products of our independent auditors and were involved in the process of confirming that our auditors were independent. Our board of directors determined that its members demonstrated the capability of analyzing and evaluating our financial statements.

Our audit committee will appoint, determine the compensation for and supervise our independent auditors, review our internal accounting procedures, systems of internal controls and financial statements, review and approve the services provided by our internal and independent auditors, including the results and scope of their audit, and resolve disagreements between management and our independent auditors. Richard W. Roedel is the chairman of the committee and is designated as the “audit committee financial expert” as that term is defined in the rules and regulations promulgated under the Exchange Act.

Our audit committee has adopted a charter to govern its membership and function. A copy of the audit committee charter may be found on our website at www.broadviewnet.com.

Compensation Committee Interlocks and Insider Participation

None of our executive officers has served as a member of a compensation committee or the board of directors (or other committee serving an equivalent function or, in the absence of any such committee, the entire board of directors) of any other entity whose executive officers serve as a director of our Company.

No officer or employee of the Company, or former officer of the Company, has participated in deliberations of our board of directors concerning executive compensation in the year ended December 31, 2008.

Indemnification

We intend to maintain directors’ and officers’ liability insurance. We expect to enter into indemnification agreements with our directors to provide our directors and certain of their affiliated parties with additional indemnification and related rights.

Compensation Committee Report

The Board of Directors has reviewed and discussed the Compensation Discussion and Analysis with the Company’s management. Based on this review and these discussions, the Board of Directors recommended that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K.

The Board of Directors

Steven F. Tunney — Chairman of the Board

Richard W. Roedel — Chairman of Audit Committee

Samuel G. Rubenstein

John S. Patton, Jr.

B. Hagen Saville

David C. Ruberg

Robert Manning

Peter J. Barris

Raul Martynek

Michael K. Robinson

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Item 11.   Executive Compensation

COMPENSATION DISCUSSION & ANALYSIS

Compensation decisions with respect to our named executive officers have primarily been based on the goal of recruiting, retaining and motivating individuals who can help us meet and exceed our strategic financial and operational goals. We evaluate the amount of total compensation paid to each of our named executive officers during any fiscal year and primarily consider the growth of the company, corporate financial and operating goals, individual performance and industry trends in setting individual compensation levels for our named executive officers. Our compensation programs have historically been weighted toward cash compensation, but we have also placed emphasis on equity-based compensation in order to better align the interests of our named executive officers with those of our stakeholders.

Determination of Compensation

Our board of directors is responsible for establishing and making decisions with respect to the compensation and benefit plans applicable to our named executive officers. Each year, our board reviews, modifies, and approves proposals prepared by our ad hoc compensation committee and our Chief Executive Officer to determine the adjustments, if any, that need to be made to each element of our named executive officers’ (other than our Chief Executive Officer’s) compensation, including base salary, annual bonus and long-term equity awards. Mr. Tunney and Mr. Ruberg continue to serve as our ad hoc compensation committee. Based upon recommendations from the Chief Executive Officer, the ad hoc committee reviews, modifies and makes final recommendations with respect to base salaries, annual bonuses and long-term equity awards for our named executive officers.

In determining the levels and mix of compensation, the Chief Executive Officer, the ad hoc compensation committee, and the board have generally not relied on formulaic guidelines, but rather sought to maintain a flexible compensation program which allowed the company to adapt components and levels of compensation to motivate and reward individual executives within the context of our desire to attain certain strategic and financial goals. In addition to any objective criteria, subjective factors considered in compensation determinations include an executive’s skills and capabilities, contributions as a member of the executive management team, contributions to our overall performance, and whether the total compensation potential and structure is sufficient to ensure the retention of an executive when considering the compensation potential that may be available elsewhere. We also seek to reward our named executive officers for the successful completion or implementation of discrete projects, including projects relating to mergers and acquisitions, integration, strategic initiatives, and network deployment. Our general goal is to provide a total compensation package (irrespective of the individual components) that is competitive with our peer companies.

In 2007, we engaged the Radford Surveys & Consulting unit of Aon Consulting (Aon) to do a comprehensive study of the compensation program for our named executive officers and compare it against the compensation programs offered by our peer companies. The group which comprises our peer companies was determined by us in consultation with Aon based on factors such as services provided, size, EBITDA, and maturity of business. The following 15 companies were jointly identified by us and Aon as our peer companies.

•  Akamai Technologies Inc.

•  CBeyond Inc.

•  Covad Communications Group Inc.

•  Equinix Inc.

•  InfoSpace Inc.

•  Leap Wireless International Inc.

•  Limelight Networks Inc.

•  McLeod USA Inc.

•  MetroPCS Communications Inc.

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•  Ntelos Holdings Corp.

•  Paetec Holding Corp.

•  Radiant Systems Inc.

•  Savvis, Inc.

•  Time Warner Telecom

•  XO Holdings

The results of the study were used by the board, the ad hoc compensation committee, and our Chief Executive Officer in determining the appropriate level of compensation for each of our named executive officers for our 2008 fiscal year. Certain companies used in the Aon study were acquired during 2008 and are no longer public reporting entities. Accordingly, our board plans on receiving an updated study for use in determining the appropriate level of compensation for each of our named executive officers for our 2009 fiscal year.

Components of Compensation

For 2008, the compensation provided to our named executive officers consisted of the same elements generally available to our non-executive employees, including base salary, annual bonus and other perquisites and benefits, each of which is described in more detail below. We believe that the mix of cash- and equity-based compensation over the long-term, as well as the ratio of fixed to performance-based compensation, provides us with an effective means to attract, motivate, and retain our named executive officers. Since equity grants were initiated under our Management Incentive Plan (MIP) in 2007, the Board did not make additional grants in 2008, as the majority of the 2007 grants had a 3-year vesting period. The Board will continue to review the potential for MIP grants periodically.

Although 2008 was a difficult year in the general business capital markets, our board determined that no significant changes to our compensation programs were required, as our business model of recurring revenue is more appropriately aligned with a longer term view of compensation.

Base Salary

The base salary payable to each named executive officer is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities. Additionally, the company intends to be competitive with its peer companies and in the telecommunications sector generally. Base salary is reviewed periodically by our board, with our Chief Executive Officer and ad hoc compensation committee providing recommendations to the board for each named executive officer (other than the Chief Executive Officer). In determining base salary, the board considers individual performance during the prior year, the mix of fixed to overall compensation, and subjective considerations relating to individual contributions, including contributions to the successful completion of discrete projects, as discussed above under “Determination of Compensation.” As noted in the summary compensation table listed below, our board increased our named executive officers’ base salaries during 2008, based upon a number of factors including scope of responsibility, integration of ATX & InfoHighway, improvement of various operative metrics & individual performance. The operative metrics consisted primarily of EBITDA margin but also includes revenue, the percentage of our revenue that comes from customers that we serve on-net and free cash flow. The AON study was also used as part of the analysis.

Annual Bonuses

Annual bonuses are intended to compensate executives for achieving our annual financial and strategic goals, including overall company performance, growth, achievement of synergies from acquisitions, and exceptional individual performance during the year. The amount of the annual bonus earned by each of our named executive officers with respect to our 2008 fiscal year, if any, has not been determined by our board as of the date of this disclosure. We expect such determination, if any, to be made in the second quarter of 2009 and will disclose the payment basis of such bonuses on a Form 8-K promptly following the board’s determination. Based upon completion of the InfoHighway integration and improvement of various operating metrics, including EBITDA margin and revenue metrics, an accrual relating to bonuses to be paid company-wide of $1.5 million was included in the fourth quarter results.

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401(k) Savings Plan

We maintain a tax-qualified employee savings and retirement plan covering all of our full-time employees, including our named executive officers. Under the 401(k) plan, employees may elect to reduce their current compensation up to the statutorily prescribed annual limit and have the amount of such reduction contributed to the plan. From time to time, we match contributions, up to certain pre-established limits, made by our employees. Our named executive officers participate in the 401(k) plan on the same basis as our other employees, except for rules that govern 401(k) plans with regard to highly compensated employees which may limit our named executive officers from achieving the maximum amount of contributions under the plan.

Perquisites and Other Benefits

Our named executive officers are eligible to receive the same benefits, including life and health insurance benefits, which are available to all employees. Our Chief Executive Officer receives temporary housing near the company headquarters and transportation to and from his principal place of residence. Any personal tax liability created by this reimbursement or for items paid for directly by the company will be “grossed up” by the Company to cover the Chief Executive Officer’s estimated income tax liability. The board determined that these benefits were necessary to attract our Chief Executive Officer to join the company in 2005 and believe that these benefits continue to be essential elements of his compensation package.

Severance Benefits

Certain of our named executive officers are entitled to receive severance benefits upon certain qualifying terminations of employment, pursuant to the provision of such executives’ employment agreements. These severance arrangements are primarily intended to retain our named executives, and do not apply upon a voluntary termination except for our Chief Executive Officer whose compensation arrangement includes provisions allowing for voluntary termination for good reason.

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SUMMARY COMPENSATION TABLE

The following table shows information regarding the compensation earned during the fiscal year ended December 31, 2008, 2007 and 2006 by our named executive officers (Chief Executive Officer, Chief Financial Officer and our four other most highly compensated executive officers who were employed by us as of
December 31, 2008, and whose total compensation exceeded $100,000 during that fiscal year).

							Stock		Option
					Bonus		Awards		Awards		All Other
Name and Principal Position	Year		Salary		(1)		(2)		(3)		Compensation			Total
Michael K. Robinson		2008	$	436,264	$	—	$	31,402	$	101,627	$	120,446(4	)	$	689,739
President and Chief		2007		400,000		400,000		598,923		97,420		91,955			1,588,298
Executive Officer		2006		400,000		300,000		219,813		—		96,400			1,016,213
Corey Rinker		2008		268,242		—		12,284		14,528		—			295,054
Executive Vice President, Chief		2007		260,000		90,000		225,889		9,685		80,898			666,472
Financial Officer, Treasurer and		2006		260,000		75,000		129,703		—		—			464,703
Assistant Secretary
Brian P. Crotty		2008		328,736		—		28,354		40,337		—			397,427
Chief Operating Officer		2007		310,000		205,000		480,089		26,891		77,417			1,099,397
		2006		310,000		190,000		175,550		—		—			675,550
Charles C. Hunter		2008		265,000		—		11,129		14,528		—			290,657
Executive Vice President,		2007		250,000		100,000		198,164		9,685		—			557,849
General Counsel and Secretary		2006		250,000		75,000		83,954		—		—			408,954
Terrence J. Anderson		2008		265,000		—		15,362		31,459		—			311,821
Executive Vice President, Finance		2007		250,000		165,000		205,963		20,972		—			641,935
and Corporate Development		2006		250,000		150,000		—		—		—			400,000
Ken A. Shulman		2008		265,000		—		11,814		24,195		—			301,009
Executive Vice President, Chief		2007		250,000		125,000		161,012		16,130		—			552,142
Technology Officer and Chief		2006		250,000		100,000		—		—		—			350,000
Information Officer

(1)	In 2009, the ad hoc compensation committee of the board of directors approved a $1.5 million discretionary bonus pool that will be allocated among our named executive officers and other employees. This pool was established to reward these individuals for their efforts in connection with continued progress with respect to completion of the InfoHighway integration and improvement of various operating metrics. As of the date of this report, the portion of the pool that will be allocated to each of our named executive officers as their 2008 annual bonuses has not been determined. We expect such amounts to be determined in the second quarter of 2009 and will file a Form 8-K promptly after this information is determined.
(2)	Represents the gross compensation cost we recognized for financial statement reporting purposes with respect to the applicable fiscal year in accordance with Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, or SFAS 123(R). For additional information on the calculation of the net compensation expense including the valuation assumptions used, please refer to note 12 of our audited consolidated financial statements. We did not grant any new stock awards during 2008. The compensation expense reflected is for stock awards granted in previous years.
(3)	Represents the gross compensation cost we recognized for financial statement reporting purposes with respect to the applicable fiscal year in accordance with Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, or SFAS 123(R). For additional information on the calculation of the net compensation expense including the valuation assumptions used, please refer to note 12 of our audited consolidated financial statements. We did not grant any new option awards during 2008. The compensation expense reflected is for option awards granted in previous years.

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(4) Represents company paid travel expenses of $21,000 and lodging expenses of $42,000 incurred by Mr. Robinson during 2008, which were grossed up by $57,446 to make him whole for taxes he was required to pay.

Narrative Disclosure Relating to Summary Compensation Tables

Chief Executive Officer Employment Agreement

On February 10, 2005, we entered into an employment agreement with Mr. Robinson, pursuant to which he agreed to serve as our Chief Executive Officer for a three-year term with automatic one-year renewals. Mr. Robinson is entitled to a minimum base salary and is eligible to receive an annual bonus, as determined by our board, with a target bonus of between 30% and 100% of his annual base salary. If Mr. Robinson’s employment is terminated by us other than for cause, death or disability, by Mr. Robinson for good reason, or if we fail to extend the employment agreement, Mr. Robinson is entitled to (i) an amount equal to 100% of the sum of (a) his annual base salary and (b) the average of the annual cash performance bonus paid to Mr. Robinson over the previous three fiscal years, such amount to be paid in equal installments over 12 months, and (ii) immediate vesting of any unvested equity. Additionally, if any amounts payable to Mr. Robinson following a change in control become subject to an excise tax under Section 280G of the Internal Revenue Code, he will be entitled to a gross up payment to make him whole for any excise tax he is required to pay. As of the date of this report, we are working on a revised employment agreement with Mr. Robinson. We expect such employment agreement to be completed in the second quarter of 2009 and will file a Form 8-K promptly thereafter.

Under the employment agreement, Mr. Robinson has agreed to a non-compete provision pursuant to which he cannot compete with us for a period of one year following any termination of his employment. Mr. Robinson is also subject to a non-solicit covenant which prohibits him from soliciting, among others, our officers and employees for a period of two years following the termination of his employment. The employment agreement also contains customary confidentiality provisions.

Employment Agreements with Other Named Executive Officers

We are currently a party to substantially similar employment agreements with Messrs. Rinker, Crotty, Hunter, Anderson and Shulman. Pursuant to these employment agreements, each executive agreed to serve as an executive officer for a one-year term with automatic one-year renewals. Each executive is entitled to a minimum base salary and is eligible to receive an annual bonus with the target bonus and actual cash bonus amount to be determined by the board each fiscal year. Upon a termination of employment (i) by us other than for cause, death or disability, (ii) as a result of our failure to renew his employment agreement, or (iii) in the case of Mr. Anderson and Mr. Shulman only, the executive’s resignation for “good reason” (as defined in the employment agreement), the executive will be entitled to continue to receive his base salary for a period of one year following termination.

Messrs. Crotty, Rinker, Hunter and Shulman are barred from competing with us for a period of one year following any termination of employment. Mr. Anderson’s employment agreement contains a non-compete provision pursuant to which he cannot compete with us until the earlier of the date on which his severance payments cease or the date which is one year following the termination of his employment. Each employment agreement also contains non-solicit provisions which prohibit the executive from soliciting, among others, our officers and employees for a period of two years following the termination of his employment. The employment agreements also contain customary confidentiality provisions. As of the date of this report, we are working on revised employment agreements with Messrs. Rinker, Crotty, Hunter, Anderson and Shulman. We expect such employment agreements to be completed in the second quarter of 2009 and will file a Form 8-K promptly thereafter.

Management Incentive Plan

In February 2007, our board adopted the MIP, pursuant to which we may grant options and restricted stock to our named executive officers (and certain other key management employees). Grants of shares or options under the plan are be valued at the fair market value at the time of grant and approved by our board. Each option granted pursuant to the MIP is designed to comply with Section 409A of the Internal Revenue Code of 1986, as amended, or

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the Internal Revenue Code, in order to avoid the imposition of a 20% penalty tax to our named executive officers (and other participants). If a participating employee is terminated by us or our successor without cause following a change in control of the company, all options and shares of restricted stock granted to the named executive officer pursuant to the MIP will immediately vest. An initial public offering will not constitute a change in control.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

	Option Awards(1)								Stock Awards(1)
	Number of Units		Number of Units						Number of		Market Value
	Underlying		Underlying						Units That		of Units That
	Unexercised		Unexercised						Have Not		Have Not
	Options		Options		Option		Option		Vested		Vested
Name	Vested		Unvested(2)		Exercise Price		Expiration Date		(2)		(3)
Michael K. Robinson		2,256		3,610	$	137.50		3/30/2010		—	$	—
Corey Rinker		258		516		137.50		3/30/2010		103		14,163
Brian P. Crotty		716		1,433		137.50		3/30/2010		287		39,463
Charles C. Hunter		258		516		137.50		3/30/2010		103		14,163
Terrence J. Anderson		559		1,117		137.50		3/30/2010		223		30,663
Ken A. Shulman		430		859		137.50		3/30/2010		172		23,650

(1)	Securities granted under the MIP have been presented as units for purposes of this table only. Each unit represents 1 share of Series C preferred stock and 25 shares of Class B common stock. However, while presented as a unit for convenience, the actual grants represent separate and distinct securities for accounting and securities law purposes.
(2)	The unvested portion of the award will vest in equal annual installments at the end of March of 2009 and 2010.
(3)	The market value of the shares assumes a price of $137.50 per unit which represents the fair market value of a unit as of December 31, 2008. Determined in reliance on a valuation performed in April 2007, which was the last valuation performed by the Company.

OPTION EXERCISES AND STOCK VESTED AT FISCAL YEAR-END

The following table provides information for each named executive officer with respect to the shares of restricted stock which vested during 2008 and with respect to the stock option award exercises during 2008 including the number of shares acquired upon exercise and the resulting value realized from the exercise.

				Stock Awards
				Number of Units
	Class or Series			Acquired on		Value Realized
Name	of Stock			Vesting		on Vesting
Michael K. Robinson		—			—	$	—
Corey Rinker		(1	)		52		7,150
Brian P. Crotty		(1	)		143		19,663
Charles C. Hunter		(1	)		52		7,150
Terrence J. Anderson		(1	)		112		15,400
Ken A. Shulman		(1	)		86		11,825

(1) Securities granted under the MIP have been presented as units for purposes of this table only. Each unit represents 1 share of Series C preferred stock and 25 shares of Class B common stock. However, while presented as a unit for convenience, the actual grants represent separate and distinct securities for accounting and securities law purposes. The market value of the units acquired upon vesting is based on a unit price of $137.50 per unit. The amounts shown in the Value Realized on Vesting column is calculated by multiplying the number of units by the fair value of the underlying shares on the vesting date.

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Potential Payments Upon Termination Or Change In Control

Pursuant to the employment agreements with our named executive officers, the material terms of which have been summarized above in the Narrative Disclosure Relating to the Summary Compensation Table, upon certain terminations of employment, our named executive officers are entitled to payments of compensation and benefits. The table below reflects the amount of compensation and benefits payable to each named executive officer in the event of (i) termination for cause or, in the case of our Chief Executive Officer only, without good reason prior to a change in control (“voluntary termination”), (ii) termination other than for cause or with good reason (“involuntary termination”), (iii) termination by reason of an executive’s death or disability, and (iv) an involuntary termination following a change in control (“change in control termination”). The amounts shown assume that the applicable triggering event occurred on December 31, 2008, and therefore, are estimates of the amounts that would be paid to the named executive officers upon the occurrence of such triggering event. For purposes of the MIP, “change in control” means (i) the sale or disposition of the assets of the Company; or (ii) any person or group becomes the beneficial owner of more than 50% of the total voting power of the voting stock of the Company pursuant to a transaction where the “investors” (as defined in the MIP) cease to control the board.

				Equity Acceleration		Value of Tax
Name	Event	Cash Severance		(1)		Gross-Up		Total
Michael K. Robinson	Voluntary Termination	$	—	$	—	$	—	$	—
	Involuntary Termination		850,000		203,279		—		1,053,279
	Death or Disability		—		—		—		—
	Change in Control Termination		850,000		203,279		—		1,053,279
Corey Rinker	Voluntary Termination		—		—		—		—
	Involuntary Termination		270,000		—		—		270,000
	Death or Disability		—		—		—		—
	Change in Control Termination		270,000		43,218		—		313,218
Brian P. Crotty	Voluntary Termination		—		—		—		—
	Involuntary Termination		335,000		—		—		335,000
	Death or Disability		—		—		—		—
	Change in Control Termination		335,000		120,155		—		455,155
Charles C. Hunter	Voluntary Termination		—		—		—		—
	Involuntary Termination		270,000		—		—		270,000
	Death or Disability		—		—		—		—
	Change in Control Termination		270,000		43,218		—		313,218
Terrence J. Anderson	Voluntary Termination		—		—		—		—
	Involuntary Termination		270,000		—		—		270,000
	Death or Disability		—		—		—		—
	Change in Control Termination		270,000		93,561		—		363,561
Ken A. Shulman	Voluntary Termination		—		—		—		—
	Involuntary Termination		270,000		—		—		270,000
	Death or Disability		—		—		—		—
	Change in Control Termination		270,000		72,020		—		342,020

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(1)

The calculation of the value of the equity acceleration is determined by calculating the number of units that would vest in connection with the applicable event (each unit representing 1 share of Series C preferred stock and 25 shares of Class B common stock) and multiplying it by $56.31 in the case of an option award or $137.50 in the case of a stock award, which represents the fair market value of a unit as of the date of grant in April 2007. For additional information on the calculation of the fair market value of stock award units or option award units, please refer to note 12 of our audited consolidation financial statements.

(2)

Pursuant to the terms of Mr. Robinson’s employment agreement, in the event that any payment under the agreements constitutes an “excess parachute payment” under Section 280G of the Internal Revenue Code, he will be entitled to a gross-up payment to cover the 20% excise tax which may be imposed on such payment pursuant to Section 4999 of the Internal Revenue Code (amount shown is estimate).

DIRECTOR COMPENSATION

During 2008, no compensation was paid to any of the Company’s directors, primarily due to their status as representatives of significant shareholders. In the event that new directors are elected to the Company’s board who are neither executives, nor significant shareholders, the Company may compensate such individual for their role on the board and board committees. It is anticipated that the compensation for such members of the board would be approved by the Company’s board that may be in place at that time. The Company’s directors are reimbursed for normal and customary expenses submitted in association with their participation at board meetings and committee meetings.

In connection with Mr. Roedel’s appointment as a director and chairman of the audit committee of the Board, Mr. Roedel will receive $80,000 in annual cash compensation and approximately $40,000 in annual equity compensation or its equivalent in cash as agreed to the board and Mr. Roedel.

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

The following table and footnotes set forth, as of December 31, 2008, certain information regarding the beneficial ownership of our capital stock by:

•  each stockholder known by us to beneficially own more than 5% of each class of our outstanding stock;

•  each of our directors and executive officers; and

•  all directors and executive officers as a group.

Unless otherwise indicated, the address for each shareholder listed is c/o Broadview Networks Holdings, Inc., 800 Westchester Avenue, Suite 501, Rye Brook, NY 10573. Except as otherwise indicated, each of the persons named in this table has sole voting and investment power with respect to all the shares indicated. For purposes of calculations in the following chart, as of December 31, 2008, there were 9,342,880 shares outstanding of Class A Common Stock, 336,575 shares outstanding of Class B Common Stock, 87,254 shares outstanding of Series A Preferred Stock, 100,702 shares outstanding of Series A-1 Preferred Stock, 91,202 shares outstanding of Series B Preferred Stock, 64,986 shares outstanding of Series B-1 Preferred Stock and 13,463 shares outstanding of Series C Preferred Stock. Beneficial ownership is determined in accordance with SEC rules and generally represents voting or investment power with respect to securities. Shares of common stock subject to issuance upon conversion of our preferred stock, exercise of options and warrants within 60 days of the date hereof are deemed outstanding for computing the percentage of the person holding such securities, but are not deemed outstanding for computing the percentage of any other person. Warrants issued in connection with the InfoHighway merger are not exercisable within 60 days of the date hereof.

						Class A										Class B
	Class A					Common Stock on an					Class B					Common Stock on an
	Common Stock					As-Converted Basis(1)					Common Stock					As-Converted Basis(1)
	Amount					Amount					Amount					Amount
	and		Percent of			and		Percent of			and		Percent of			and		Percent of
	Nature of		Outstanding			Nature of		Outstanding			Nature of		Outstanding			Nature of		Outstanding
	Beneficial		Shares			Beneficial		Shares			Beneficial		Shares			Beneficial		Shares
	Ownership		of Class			Ownership		of Class			Ownership		of Class			Ownership		of Class
Steven F. Tunney(2)		4,698,987		50.3	%		10,705,898		69.7	%							4,698,987		50.3	%
B. Hagen Saville(2)		4,698,987		50.3	%		10,705,898		69.7	%							4,698,987		50.3	%
Samuel G. Rubenstein(2)		4,698,987		50.3	%		10,705,898		69.7	%							4,698,987		50.3	%
John S. Patton, Jr(2)		4,698,987		50.3	%		10,705,898		69.7	%							4,698,987		50.3	%
Robert Manning(3)		1,508,506		16.1	%		3,436,932		30.5	%							1,508,506		16.1	%
Peter J. Barris(4)		821,345		8.8	%		1,871,326		18.0	%							821,345		8.8	%
Michael Robinson(5)												92,075		27.4	%
Brian Crotty(6)												59,650		17.7	%
Terrence J. Anderson(7)												51,750		15.4	%
Kenneth A. Shulman(8)												32,225		9.6	%
Corey Rinker(9)												24,625		7.3	%
Charles Hunter(10)												22,875		6.8	%
Directors and Executive Officers as a Group(11)		7,028,838		75.2	%		16,014,156		87.4	%		283,200		84.1	%		7,028,838		75.2	%
MCG(2)		4,698,987		50.3	%		10,705,898		69.7	%							4,698,987		50.3	%
Baker(3)		1,508,506		16.1	%		3,436,932		30.5	%							1,508,506		16.1	%
NEA(4)		821,345		8.8	%		1,871,326		18.0	%							821,345		8.8	%
Com Ventures(12)		360,109		3.9	%		820,460		8.4	%							360,109		3.9	%
WPG(13)		224,072		2.4	%		510,519		5.3	%							224,072		2.4	%
Apollo(14)		165,965		1.8	%		378,129		4.0	%							165,965		1.8	%
Trimaran(15)		128,985		1.4	%		293,875		3.1	%							128,985		1.4	%

(1) The calculation of Class A Common Stock on an As-Converted Basis includes all shares of Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock and Series B-1 Preferred Stock and warrants and options convertible or exercisable into Class A Common Stock within 60 days of December 31, 2008. This

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	does not include shares of capital stock, warrants or options that are convertible or exercisable into Class A Common Stock upon a change of control or qualifying initial public offering.
	The calculation of Class B Common Stock on an As-Converted Basis includes all shares of Series C Preferred Stock, warrants and options convertible or exercisable into Class B Common Stock within 60 days of December 31, 2008. This does not include shares of capital stock, warrants or options that are convertible or exercisable into Class B Common Stock upon a change of control or qualifying initial public offering.
(2)	MCG beneficially owns (i) 87,254 shares of our Series A Preferred Stock, which represents 100.0% of the outstanding shares of our Series A Preferred Stock and (ii) 100,702 shares of our Series A-1 Preferred Stock, which represents 100% of the outstanding shares of our Series A-1 Preferred Stock. Each of Mr. Tunney, Mr. Saville, Mr. Rubenstein and Mr. Patton are officers of MCG Capital Corporation. By virtue of such relationship, each of Mr. Tunney, Mr. Saville, Mr. Rubenstein and Mr. Patton, may be deemed to beneficially own the shares listed as beneficially owned by MCG. Each of Mr. Tunney, Mr. Saville, Mr. Rubenstein and Mr. Patton disclaims beneficial ownership of such shares.
(3)	Baker beneficially owns (i) 38,119 shares of our Series B Preferred Stock, which represents 41.8% of the outstanding shares of our Series B Preferred Stock and (ii) 22,221 shares of our Series B-1 Preferred Stock, which represents 34.2% of the outstanding shares of our Series B-1 Preferred Stock. Mr. Manning is a manager of the general partners of Baker Communications Fund, L.P. and Baker Communications Fund II (QP) L.P. By virtue of such relationship, Mr. Manning may be deemed to beneficially own the shares listed as beneficially owned by Baker. Mr. Manning disclaims beneficial ownership of such shares.
(4)	NEA beneficially owns (i) 20,838 shares of our Series B Preferred Stock, which represents 22.8% of the outstanding shares of our Series B Preferred Stock and (ii) 12,016 shares of our Series B-1 Preferred Stock, which represents 18.5% of the outstanding shares of our Series B-1 Preferred Stock. Mr. Barris is the managing general partner of New Enterprise Associates VII, L.P., New Enterprise Associates 9, L.P., New Enterprise Associates 10, L.P. and NEA Presidents Fund. By virtue of such relationship, Mr. Barris may be deemed to beneficially own the shares listed as beneficially owned by NEA. Mr. Barris disclaims beneficial ownership of such shares.
(5)	Mr. Robinson beneficially owns 3,683 shares of our Series C Preferred Stock, which represents 27.4% the outstanding shares of our Series C Preferred Stock.
(6)	Mr. Crotty beneficially owns 2,386 shares of our Series C Preferred Stock, which represents 17.7% of the outstanding shares of our Series C Preferred Stock.
(7)	Mr. Anderson beneficially owns 2,070 shares of our Series C Preferred Stock, which represents 15.4% of the outstanding shares of our Series C Preferred Stock.
(8)	Mr. Shulman beneficially owns 1,289 shares of our Series C Preferred Stock, which represents 9.6% of the outstanding shares of our Series C Preferred Stock.
(9)	Mr. Rinker beneficially owns 985 shares of our Series C Preferred Stock, which represents 7.3% of the outstanding shares of our Series C Preferred Stock.
(10)	Mr. Hunter beneficially owns 915 shares of our Series C Preferred Stock, which represents 6.8% of the outstanding shares of our Series C Preferred Stock.
(11)	The Directors and Executive Officers as a group beneficially own (i) 87,254 shares of our Series A Preferred Stock, which represents 100.0% of the outstanding shares of our Series A Preferred Stock, (ii) 100,702 shares of our Series A-1 Preferred Stock, which represents 100% of the outstanding shares of our Series A-1 Preferred Stock, (iii) 58,957 shares of our Series B Preferred Stock, which represents 64.6% of the outstanding shares of our Series B Preferred Stock, (iv) 34,237 shares of our Series B-1 Preferred Stock, which represents 52.7% of the outstanding shares of our Series B-1 Preferred Stock and (v) 11,328 shares of our Series C Preferred Stock, which represents 84.1% of the outstanding shares of our Series C Preferred Stock.
(12)	References to Com Ventures are to Communications Ventures II, L.P., ComVentures IV, L.P., Communications Ventures II Affiliates Fund, L.P., ComVentures IV CEO Fund, L.P., and ComVentures IV Entrepreneurs’ Fund, L.P. Com Ventures beneficially owns (i) 10,191 shares of our Series B Preferred Stock, which represents

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	11.2% of the outstanding shares of our Series B Preferred Stock and (ii) 4,213 shares of our Series B-1 Preferred Stock, which represents 6.5% of the outstanding shares of our Series B-1 Preferred Stock.
(13)	References to WPG are to Weiss, Peck & Greer Venture Associates IV, L.L.C., WPG Enterprise Fund III, L.L.C., Weiss, Peck & Greer Venture Associates IV Cayman, L.P., and WPG Information Sciences Entrepreneur Fund, L.P. WPG beneficially owns (i) 6,418 shares of our Series B Preferred Stock, which represents 7.0% of the outstanding shares of our Series B Preferred Stock and (ii) 2,545 shares of our Series B-1 Preferred Stock, which represents 3.9% of the outstanding shares of our Series B-1 Preferred Stock.
(14)	References to Apollo are to APEUREKAGGN, LLC. Apollo beneficially owns 6,639 shares of our Series B-1 Preferred Stock, which represents 10.2% of the outstanding shares of our Series B-1 Preferred Stock.
(15)	References to Trimaran are to CIBC Capital Corporation, CIBC Employee Private Equity Fund, Trimaran Capital, LLC, Trimaran Fund II, LLC, and Trimaran Parallel Fund II, LLC.Trimaran beneficially owns 5,159 shares of our Series B-1 Preferred Stock, which represents 7.9% of the outstanding shares of our Series B-1 Preferred Stock.

The Company has filed a registration statement on Form S-1 (File No. 333-147720) in connection with its initial public offering. An initial public offering may result in a change of control of the Company.

Securities authorized for issuance under equity compensation plans

Equity Compensation Plan Information
							Number of Remaining
	Number of						Units Available
	Restricted		Number of		Exercise Price of		for Future Issuance
	Stock		Options		Outstanding		under Equity
Plan Category	Units(1)		Units(1)		Option Units		Compensation Plans
Equity compensation plans approved by security holders(2)		14,402		20,900	$	137.50		17,030
Total		14,402		20,900	$	137.50		17,030

(1)	Securities granted under the MIP have been presented as units for purposes of this table only. Each unit represents 1 share of Series C preferred stock and 25 shares of Class B common stock. However, while presented as a unit for convenience, the actual grants represent separate and distinct securities for accounting and securities law purposes.
(2)	For a description of the material features of the MIP, see the section entitled “Executive Compensation — Compensation Discussion & Analysis.”

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Item 13.   Certain Relationships and Related Transactions, and Director Independence

Amended and Restated Shareholders Agreement

We are party to an amended and restated shareholders agreement with MCG, Baker, NEA, ComVentures, WPG, and certain other shareholders of Broadview. The agreement governs certain rights of such shareholders as set forth below. This summary is not a complete description of all the terms of the agreement.

The agreement imposes certain transfer restrictions on our securities and grants certain rights to the parties to the agreement, including, among other things, rights of first offer, drag-along rights and tag-along rights. Those participation rights, and certain other rights granted under the agreement, will terminate following an initial public offering of common stock, if the common stock so offered nets proceeds to us of not less than $50 million, or a Qualified Public Offering. Certain shareholders also have the right to participate in the issuance or sale of our shares on a pro-rata basis under the agreement.

The agreement, and our charter, provide that prior to a Qualified Public Offering, MCG will have the right to elect up to four directors to our board of directors; Baker will have the right to elect up to two directors; NEA will have the right to elect up to one director; and the InfoHighway stockholders will have the right to elect up to one director. If we do not consummate an exit transaction within six months from and after the date of an exit transaction notice from the holders of Series B Preferred Stock exercising the rights set forth in the preceding paragraph, the number of directors serving on the board of directors will increase by three. In that case, MCG will have the right to elect up to four directors, Baker will have the right to elect up to two directors, NEA will have the right to elect up to one director, the InfoHighway stockholders will have the right to elect up to one director and MCG, Baker, NEA and the InfoHighway stockholders will jointly select the remaining three directors.

The rights and obligations of each shareholder party to the agreement, except for the drag-along rights and registration rights of the parties, will terminate upon the earliest of: (i) such shareholder ceases to own our securities; (ii) a Qualified Public Offering; and (iii) any sale, lease, or other disposition of all or substantially all of our assets or any merger, reorganization, consolidation, or recapitalization transaction or any transaction in which the holders of our capital stock immediately prior to such transaction do not continue to own more than 50% of the voting power of the entity surviving such transaction.

Pursuant to the agreement, certain corporate action also requires the approval by holders of our Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock and/or the Series C-1 Preferred Stock. The agreement also contains certain registration rights pursuant to which certain shareholders received piggyback registration rights, demand registration rights and Form S-3 registration rights.

Employment Agreements

We have employment agreements with certain of our executive officers, which are described in the section entitled “Executive Compensation.”

Policies and Procedures Regarding Transactions with Related Persons

Any transaction of the Company that is required to be reported under Item 404(a) of Regulation S-K is disclosed to the full board of directors and is reviewed and approved in accordance with applicable law. In addition, our shareholders agreement and the indenture governing our notes contains provisions restricting our ability to enter into transactions with affiliates. Any such transaction must be made on terms no less favorable to us than it would be if we entered into a similar relationship with an unaffiliated third party. Other than the provisions in the shareholders agreement and the indenture governing our notes we do not have written policies and procedures evidencing the foregoing. The entire board is responsible for overseeing the application of these polices and procedures.

Director Independence

At this time the independence requirements of Rule 4200 of NASDAQ and SEC Rule 10A-3 are not applicable to the Company. As a result, we have not assessed the independence of the members of the board of directors.

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Item 14.   Principal Accountant Fees and Services

Fees for professional services provided by our independent auditors Ernst & Young LLP, in each of the following categories for the years ended December 31, 2007 and 2008 (in thousands):

	Years Ended December 31,
	2007		2008
Audit Fees	$	2,304	$	1,666
Audit-Related Fees		423		—
Tax Fees		154		—
All Other Fees		—		—
Total Fees	$	2,881	$	1,666

Fees for audit services include fees associated with the annual audit and reviews of the Company’s quarterly reports on Form 10-Q, accounting consultation and work incurred in connection with the filing of our registrations statements. Audit related fees principally include fees associated with audits and due diligence completed in connection with acquisitions. Tax fees included tax compliance, tax advice and tax planning. All fees charged by Ernst & Young LLP, our independent registered public accounting firm, were reviewed and approved by the Board of Directors.

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PART IV

Item 15.   Exhibits and Financial Statement Schedules

(a) Financial Statements and Schedules

The following financial statements and schedules listed below are included in this Form 10-K.

Financial Statements (See Item 8)

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2008 and 2007

Consolidated Statements of Operations for the Years Ended December 31, 2008, 2007 and 2006

Consolidated Statements of Stockholders’ Equity (Deficiency) for the Years Ended December 31, 2008, 2007, and 2006

Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007, and 2006

Notes to Consolidated Financial Statements

Financial Statement Schedules

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
BROADVIEW NETWORKS HOLDINGS, INC. AND SUBSIDIARIES

	Balance at
	Beginning of		Charges to		Other						Balance at
	Period		Expenses		Accounts			Deductions(b)			End of Period
Allowance for uncollectible accounts receivable:
Year Ended December 31, 2006	$	6,695	$	6,384	$	4,724	(a)	$	(9,832	)	$	7,971
Year Ended December 31, 2007		7,971		6,546		5,380	(a)		(9,815	)		10,082
Year Ended December 31, 2008		10,082		5,539		10,476			(14,163	)		11,934
Valuation allowance for deferred tax assets:
Year Ended December 31, 2006	$	84,642	$	—	$	(83,668	)(c)	$	—		$	974
Year Ended December 31, 2007		974		—		27,106	(d)		—			28,080
Year Ended December 31, 2008		28,080		—		16,563			—			44,643

(a)	Allowance for Uncollectible Accounts Receivable includes $3,485 and $1,273 of allowances for uncollectible accounts receivable as of acquisition dates from business combinations occurring during the year ended December 31, 2006 and 2007, respectively and recoveries of amounts previously written off.
(b)	Allowance for Uncollectible Accounts Receivable includes amounts written off as uncollectible.
(c)	Net effect of the completion of the study of the available net operating loss carryforwards (“NOLs”) resulting from the 2005 merger and current year activity.
(d)	Net effect of purchase accounting in relation to 2007 merger and current year activity.

(b) Exhibits

Exhibit
No.			Description
	2	.1	Stock Purchase Agreement, dated as of June 26, 2006, by and among Broadview Networks Holdings, Inc., ATX Communications, Inc., the stockholders of ATX Communications, Inc. and, for the limited purposes set forth therein, Leucadia National Corporation.(a)
	2	.2	Agreement and Plan of Merger, dated as of February 23, 2007, by and among Broadview Networks Holdings, Inc., Eureka Acquisition Corporation, Eureka Broadband Corporation, the significant stockholders of Eureka Broadband Corporation set forth therein and Jeffrey Ginsberg, as agent for the stockholders of Eureka Broadband Corporation.(a)

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Exhibit
No.			Description
	3	.1	Tenth Amended and Restated Certificate of Incorporation, dated May 31, 2007, of Broadview Networks Holdings, Inc.*
	3	.2	Second Amended and Restated Bylaws of Broadview Networks Holdings, Inc.(a)
	4	.1	Indenture, dated as of August 23, 2006, by and among Broadview Networks Holdings, Inc., the Guarantors named therein and The Bank of New York, as trustee.(a)
	4	.2	Supplemental Indenture, dated as of September 29, 2006, by and among Broadview Networks Holdings, Inc., the Guarantors named therein and The Bank of New York, as trustee.(a)
	4	.3	Form of Exchange 113/8% Senior Secured Note due 2012.(a)
	4	.4	Form of Guarantee of Exchange 113/8% Senior Secured Note due 2012.(a)
	4	.5	Second Supplemental Indenture, dated as of May 14, 2007, by and among Broadview Networks Holdings, Inc., the Guarantors named therein and The Bank of New York, as trustee.(a)
	4	.6	Third Supplemental Indenture, dated as of May 31, 2007, by and among Broadview Networks Holdings, Inc., the Guarantors named therein and The Bank of New York, as trustee.(a)
	4	.7	Security Agreement, dated as of August 23, 2006, by and among by and among Broadview Networks Holdings, Inc, the subsidiaries of Broadview Networks Holdings, Inc. named therein and The Bank of New York, as collateral agent.(a)
	4	.8	Supplement to the Security Agreement, dated as of September 29, 2006, by and among Broadview Networks Holdings, Inc, the subsidiaries of Broadview Networks Holdings, Inc. named therein and The Bank of New York, as collateral agent.(a)
	4	.9	Second Supplement to the Security Agreement, dated as of May 31, 2007, by and among Broadview Networks Holdings, Inc, the subsidiaries of Broadview Networks Holdings, Inc. named therein and The Bank of New York, as collateral agent.(a)
	10	.1	Management Incentive Plan, dated as of February 9, 2007, of Broadview Networks Holdings, Inc.(a)
	10	.2	Employment Agreement, dated as of February 10, 2005, by and between Broadview Networks Holdings, Inc. and Michael K. Robinson.(a)(c)
	10	.3	Employment Agreement, dated as of March 3, 1994, by and between Bridgecom Holdings, Inc. and Brian Crotty.(a)(c)
	10	.4	Employment Agreement, dated as of January 14, 2004, by and between Broadview Networks Holdings, Inc. and Terrence J. Anderson.(a)(c)
	10	.5	Employment Agreement, dated as of January 14, 2005, by and between Broadview Networks Holdings, Inc. and Kenneth Shulman.(a)(c)
	10	.6	Employment Agreement, dated as of March 3, 1994, by and between Bridgecom Holdings, Inc. and Charles Hunter.(a)(c)
	10	.7	Employment Agreement, dated as of March 3, 2994, by and between Bridgecom Holdings, Inc. and Corey Rinker.(a)(c)
	10	.8	Credit Agreement, dated as of August 23, 2006, by and among Broadview Networks Holdings, Inc., Broadview Networks, Inc., Broadview Networks of Massachusetts, Inc., Broadview Networks of Virginia, Inc., the Lenders named therein, Jefferies & Company, Inc., as syndication agent, and The CIT Group/Business Credit, Inc., as administrative agent, collateral agent and documentation agent.(a)
	10	.9	Collateral Agreement, dated as of August 23, 2006, by and among Broadview Networks Holdings, Inc., the Subsidiary Grantors named therein and The CIT Group/Business Credit, Inc., as administrative agent.(a)
	10	.10	Supplement to the Collateral Agreement, dated as of October 20, 2006, by and among Broadview Networks Holdings, Inc., the Subsidiary Grantors named therein and The CIT Group/Business Credit, Inc., as administrative agent.(a)
	10	.11	Second Supplement to the Collateral Agreement, dated as of June 26, 2007, by and among Broadview Networks Holdings, Inc., the Subsidiary Grantors named therein and The CIT Group/Business Credit, Inc., as administrative agent.(a)
	10	.12	Guaranty Agreement, dated as of August 23, 2006, by and among the Subsidiary Grantors named therein and The CIT Group/Business Credit, Inc., as administrative agent.(a)

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Exhibit
No.			Description
	10	.13	Supplement to the Guaranty Agreement, dated as of October 20, 2006, by and among the Subsidiary Grantors named therein and The CIT Group/Business Credit, Inc., as administrative agent.(a)
	10	.14	Second Supplement to the Guaranty Agreement, dated as of June 26, 2007, by and among the Subsidiary Grantors named therein and The CIT Group/Business Credit, Inc., as administrative agent.(a)
	10	.15	Intercreditor Agreement, dated as of August 23, 2006, by and among The CIT Group/Business Credit, Inc., as administrative agent, The Bank of New York, as trustee, collateral agent and second priority agent, Broadview Networks Holdings, Inc. and the Subsidiary Grantors named therein.(a)
	10	.16	Joinder to the Intercreditor Agreement, dated as of October 20, 2006, by and among The CIT Group/Business Credit, Inc., as administrative agent, The Bank of New York, as trustee, collateral agent and second priority agent, Broadview Networks Holdings, Inc. and the Subsidiary Grantors named therein.(a)
	10	.17	Amendment No. 1 to the Intercreditor Agreement, dated as of May 10, 2007, by and among The CIT Group/Business Credit, Inc., as administrative agent, The Bank of New York, as trustee, collateral agent and second priority agent, Broadview Networks Holdings, Inc. and the Subsidiary Grantors named therein.(a)
	10	.18	Joinder No. 2 to the Intercreditor Agreement, dated as of June 26, 2007, by and among The CIT Group/Business Credit, Inc., as administrative agent, The Bank of New York, as trustee, collateral agent and second priority agent, Broadview Networks Holdings, Inc. and the Subsidiary Grantors named therein.(a)
	10	.19	Third Amended and Restated Shareholders Agreement, by and among Broadview Networks Holdings, Inc. and the shareholders named therein, dated as of May 31, 2007.(b)
	10	.20	Indemnity Escrow Agreement, dated May 31, 2007, between Broadview Networks Holdings, Inc., the agent for the former stockholders of Eureka Broadband Corporation and JP Morgan Chase Bank, N.A.(b)
	10	.21	Escrow Agreement, dated September 29, 2006, by and among ATX Communications, Inc., LUK CLEC LLC, Broadview Networks Holdings, Inc. and JPMorgan Chase Bank, N.A.*
	10	.22	1997 Stock Option Plan.(c)*
	10	.23	2000 Stock Option Plan.(c)*
	12	.1	Ratio of Earnings to Fixed Charges.*
	21	.1	Subsidiaries of Broadview Networks Holdings, Inc.*
	31	.1	Certification pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
	31	.2	Certification pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
	32	.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
	32	.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

*	Filed herewith.
(a)	Incorporated by reference to Broadview Networks Holdings, Inc.’s Form S-4/A filed on October 16, 2007 (File No. 333-142946).
(b)	Incorporated by reference to Broadview Networks Holdings, Inc.’s Form 8-K filed on November 19, 2007 (File No. 333-142946).
(c)	Management contract or compensatory plan or arrangement.

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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, on the 24th day of March, 2009.

BROADVIEW NETWORKS HOLDINGS, INC.

By:  /s/  Michael K. Robinson

Name:     Michael K. Robinson

Title:  Chief Executive Officer, President and Director

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

Signature	Title	Date
/s/  Michael K. Robinson Michael K. Robinson	President, Chief Executive Officer, and Director (Principal Executive Officer)	March 24, 2009
/s/  Corey Rinker Corey Rinker	Chief Financial Officer, Treasurer and Assistant Secretary (Principal Financial and Accounting Officer)	March 24, 2009
/s/  Steven F. Tunney Steven F. Tunney	Director	March 24, 2009
/s/  Richard W. Roedel Richard W. Roedel	Director	March 24, 2009
/s/  Samuel G. Rubenstein Samuel G. Rubenstein	Director	March 24, 2009
/s/  John S. Patton, Jr. John S. Patton, Jr.	Director	March 24, 2009
/s/  B. Hagen Saville B. Hagen Saville	Director	March 24, 2009
/s/  David C. Ruberg David C. Ruberg	Director	March 24, 2009
/s/  Robert Manning Robert Manning	Director	March 24, 2009
/s/  Peter J. Barris Peter J. Barris	Director	March 24, 2009
/s/  Raul Martynek Raul Martynek	Director	March 24, 2009

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SUPPLEMENTAL INFORMATION TO BE FURNISHED
WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS
WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT

No annual report or proxy material has been sent to security holders.

116

EX-3.1

Exhibit 3.1

Execution Copy

TENTH AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

BROADVIEW NETWORKS HOLDINGS, INC.

          THE UNDERSIGNED, being the duly appointed and acting Executive Vice President of Broadview Networks Holdings, Inc. (the “Company”), a corporation organized and existing under the General Corporation Law of the State of Delaware (the “DGCL”), hereby certifies on behalf of the Company and not in his individual capacity, as follows:

          A. The name of the Company is Broadview Networks Holdings, Inc.

          B. The Certificate of Incorporation was originally filed with the Secretary of State on November 19, 1996. At the time of the original filing on November 19, 1996, the name of the Company was Coaxicom, Inc. Such Certificate of Incorporation was amended and/or restated as of June 29, 1998, September 10, 1998, April 23, 1999, July 6, 2000, March 11, 2002, January 14, 2005, August 23, 2006, January 30, 2007 and February 23, 2007 (the “Amended and Restated Certificate of Incorporation”).

          C. This Tenth Amended and Restated Certificate of Incorporation which restates and integrates and also amends the Amended and Restated Certificate of Incorporation was duly adopted by the requisite vote of the Company’s Board of Directors and stockholders in accordance with the applicable provisions of Sections 242 and 245 of the DGCL. This Tenth Amended and Restated Certificate of Incorporation shall be effective upon filing with the Secretary of State of the State of Delaware in accordance with the provisions of Section 103 of the DGCL.

          D. The text of the Amended and Restated Certificate of Incorporation is hereby restated and further amended to read in its entirety as follows:

ARTICLE ONE

     The name of the corporation is Broadview Networks Holdings, Inc. (the “Company”).

ARTICLE TWO

     The address of the Company’s registered office in the State of Delaware is 2711 Centerville Road, Suite 400, Wilmington, DE 19808, in the County of New Castle. The name of its registered agent at such address is Corporation Service Company.

ARTICLE THREE

     The purpose of the Company is to engage in any lawful act or activity for which corporations may be organized under the DGCL.

ARTICLE FOUR

     A. Authorized Capital. The total number of shares of all classes of capital stock which the Company shall have authority to issue is 100,000,000 shares divided into three classes: (i) 80,000,000 shares of Class A Common Stock, par value $.01 per share (“Class A Common Stock”), (ii) 10,000,000 shares of Class B Common Stock, par value $.01 per share (“Class B Common Stock”), and (iii) 10,000,000 shares of Preferred Stock, par value $.01 per share (“Preferred Stock”). The Class A Common Stock and the Class B Common Stock are sometimes hereinafter referred to collectively as the “Common Stock.” Except as otherwise set forth in this Article Four, all shares of the Class A Common Stock and the Class B Common Stock shall be identical and shall entitle the holders thereof to the same rights, powers, and preferences. All calculations in respect of the shares of capital stock of the Company shall be made to the nearest ten decimal places without rounding.

     B. Common Stock.

          1. Dividends.

               (a) Holders of Class A Common Stock and Class B Common Stock shall be entitled to receive dividends, when, as and if declared by the Board of Directors, out of the assets of the Company which are by law available therefor, payable in cash, in securities or other property of the Company.

               (b) If and when dividends on the Class A Common Stock or Class B Common Stock are declared payable from time to time by the Board of Directors, holders of Class A Common Stock and the Class B Common Stock shall be entitled to share equally, on a per share basis, in such dividends; provided, however, that, if dividends are declared that are payable in shares of Common Stock (or rights to receive shares of Common Stock), such dividends shall be payable at the same rate on all such classes of Common Stock, and shall be payable in respect of a particular class of Common Stock in shares of that particular class of stock, so that holders of Class A Common Stock shall receive only shares of Class A Common Stock and holders of Class B Common Stock shall receive only shares of Class B Common Stock.

          2. Subdivision or Combination. If the Company shall in any manner subdivide or combine the outstanding shares of Class A Common Stock or Class B Common Stock, such outstanding shares of Class A Common Stock and Class B Common Stock shall be proportionally subdivided or combined in the same manner and on the same basis, so that holders of Class A Common Stock shall receive or continue to hold only shares of Class A Common Stock in respect thereof and holders of Class B Common Stock shall receive or continue to hold only shares of Class B Common Stock in respect thereof.

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          3. Voting Rights. Except as required in this Tenth Amended and Restated Certificate of Incorporation or by law, or as provided by the Board of Directors in its designation of any series of Preferred Stock pursuant to Section C of this Article Four, the holders of shares of Preferred Stock and Class A Common Stock shall vote together as a single class and holders of any class of capital stock of the Company shall not be entitled to any separate class vote on any matter. The number of authorized shares of Class A Common Stock or Class B Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in voting power of all of the then-outstanding shares of capital stock of the Company entitled to vote thereon, irrespective of the provisions of Section 242(b)(2) of the DGCL. A holder of a share of Class A Common Stock shall be entitled to one (1) vote for each share of Class A Common Stock. Holders of Class B Common Stock shall have no voting rights except as provided by law.

          4. Conversion of Class B Common Stock.

               (a) Immediately prior to the consummation of a Qualified IPO, all then outstanding shares of Class B Common Stock shall be automatically converted into shares of Class A Common Stock at the conversion ratio of one share of Class B Common Stock for each share of Class A Common Stock and, from and after such consummation, no further shares of Class B Common Stock shall be issued. “Qualified IPO” shall mean any issuance and sale of shares of Common Stock which occurs in an underwritten public offering registered under the Securities Act of 1933, as amended, and provides net proceeds to the Company of not less than $50,000,000.

               (b) The Company shall at all times reserve and keep available for issuance upon the conversion of the Class B Common Stock free from any preemptive rights, such number of its authorized but unissued shares of Class A Common Stock as shall from time to time be necessary to permit the conversion of all outstanding shares of Class B Common Stock (including, for these purposes, shares of Class B Common Stock issuable upon the conversion of outstanding shares of Series C Preferred Stock) into shares of Class A Common Stock, and shall take all action required to increase the authorized number of shares of Class A Common Stock if necessary to permit the conversion of all outstanding shares of Class B Common Stock (including, for these purposes, shares of Class B Common Stock issuable upon the conversion of outstanding shares of Series C Preferred Stock).

               (c) Each conversion of shares of a class of Common Stock, in accordance with Section (B)(4)(a) of this Article Four, into shares of another class of Common Stock shall be effected immediately upon delivery by the Company of notice of such conversion to the holder of such shares of Common Stock. A conversion shall be deemed to have been effected immediately upon delivery by the Company of notice of such conversion to the holder of such shares of Common Stock, and at such time the rights of the holder of the converted class of Common Stock as such holder shall cease and the person or persons in whose name or names the certificate or certificates (if such shares are certificated) for shares of the other class of Common Stock are to be issued upon such conversion shall be deemed to have become the holder or holders of record of the shares of such other class of Common Stock issuable upon such conversion. If a holder of the shares of Common Stock issuable upon such conversion desires the receipt of a certificate representing such shares of Common Stock, he may request

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such certificate upon the surrender of the certificate or certificates representing the shares to be converted at the principal office of the Company (or such other office or agency of the Company as the Company may designate by notice in writing to the holder or holders of the Common Stock) at any time during normal business hours.

               (d) Promptly after such surrender and the receipt of such written notice, the Company shall issue and deliver in accordance with the surrendering holder’s instructions the certificate or certificates for shares of the class of Common Stock issuable upon such conversion (if such shares are certificated).

               (e) The issuance of certificates for any class of Common Stock upon the conversion of any other class of Common Stock shall be made without charge to the holders of such shares for any issuance tax in respect thereof or other cost incurred by the Company in connection with such conversion and the related issuance of any class of Common Stock. The Company shall not close its books against the transfer of any class of Common Stock issued or issuable upon the conversion of any other class of Common Stock in any manner which would interfere with the timely conversion of any other class of Common Stock.

               (f) When any shares of Class A Common Stock or Class B Common Stock are acquired by the Company, including upon conversion of shares of one class of Common Stock into shares of another class of Common Stock, the Company shall take all such actions as are necessary (including, without limitation, the retirement of such shares) so as to cause such shares to resume the status of authorized and unissued shares of the class of Common Stock to which they belong.

     C. Preferred Stock. The Board of Directors is authorized, subject to limitations prescribed by law, the Shareholders’ Agreement (as defined in Section (C)(1)(k) of this Article Four), and this Tenth Amended and Restated Certificate of Incorporation to provide for the issuance of shares of Preferred Stock in one or more series, to establish the number of shares to be included in each such series, and to fix the designations, voting powers, preferences, and rights of the shares of each such series, and any qualifications, limitations or restrictions thereof. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of a majority of the votes entitled to be cast by the holders of capital stock of the Company without the separate vote of the holders of the Preferred Stock as a class.

          1. Series A Preferred Stock and Series A-1 Preferred Stock

               (a) Designation, Number and Rank.

                    (i) 89,526 shares of Preferred Stock are hereby designated as 12% Participating Series A Preferred Stock, par value $.01 per share (the “Series A Preferred Stock”).

                    (ii) 105,000 shares of Preferred Stock are hereby designated as 12% Participating Series A-1 Preferred Stock, par value $.01 per share (the “Series A-1 Preferred Stock”).

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                    (iii) The Series A Preferred Stock and Series A-1 Preferred Stock shall, with respect to payment of dividends, redemption payments and the distribution of assets upon liquidation, winding-up or dissolution, rank (i) senior to all Junior Securities (as defined in Section (C)(1)(k) of this Article Four), (ii) in some respects senior to and in some respects on a parity with all Junior Parity Securities as more fully described herein (as defined in Section (C)(1)(k) of this Article Four), (iii) on a parity with all Parity Securities (as defined in Section (C)(1)(k) of this Article Four) and (iv) junior to all Senior Securities (as defined in Section (C)(1)(k) of this Article Four).

               (b) Dividends and Distributions.

                    (i) Dividend Rights

                         (1) The holders of shares of Series A Preferred Stock or Series A-1 Preferred Stock shall be entitled to receive on each Dividend Payment Date (as defined in Section (C)(1)(k) of this Article Four) out of lawfully available funds therefor, in respect of the Dividend Period (as defined in Section (C)(1)(k) of this Article Four) ending on (and including) the date immediately prior to such Dividend Payment Date, dividends on each share of Series A Preferred Stock or Series A-1 Preferred Stock at the rate of 12% per annum on the Series A Accrued Value or Series A-1 Accrued Value (both as defined in Section (C)(1)(k) of this Article Four), respectively, for each such share thereof from and after the Issuance Date (as defined in Section (C)(1)(k) of this Article Four), provided that with respect to the Initial Dividend Period (as defined in Section (C)(1)(k) of this Article Four), the dividends set forth above shall be prorated based on the number of days in such period. Such dividends shall be fully cumulative and accumulate and accrue on a daily basis (computed on the basis of a 360-day year of twelve 30-day months) and compound quarterly in arrears on the Dividend Payment Dates at the rate indicated above and in the manner set forth herein, whether or not they have been declared and whether or not there are profits, surplus or other funds of the Company legally available for the payment of dividends.

                         (2) Such dividends shall, at the option of the Company, either be paid in cash out of lawfully available funds therefor or accrue and compound and be added to the Series A Accrued Value and Series A-1 Accrued Value on the applicable Dividend Payment Dates. Each such dividend which is payable in cash shall be payable on the Dividend Payment Date out of lawfully available funds therefor to the holders of record of shares of the Series A Preferred Stock and Series A-1 Preferred Stock, as they appear on the transfer books of the Company at the close of business on the day immediately preceding such Dividend Payment Date. Any dividend that is not otherwise paid in cash on the applicable Dividend Payment Date (whether due to the Company’s election not to pay such dividend in cash, its inability to pay such dividend in cash, or otherwise) shall automatically, and without any action on the part of the Company, accrue and compound and be added to the Series A Accrued Value and Series A-1 Accrued Value on such Dividend Payment Date.

                    (ii) Additional Dividends. In addition to dividends payable pursuant to Section (C)(1)(b)(i) of this Article Four, in the event any dividends are declared or paid or any other distribution is made on or with respect to the Common Stock (as defined in Section (C)(1)(k) of this Article Four), the holders of the Series A Preferred Stock or Series A-1

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Preferred Stock as of the record date established by the Board for such dividend or distribution on the Common Stock shall be entitled to receive as additional dividends (the “Additional Dividends”) out of lawfully available funds therefor an amount (whether in the form of cash, securities or other property) equal to the amount (and in the form) of the dividends or distribution that such holder would have received had the Series A Preferred Stock or Series A-1 Preferred Stock been converted into Common Stock as of the date immediately prior to the record date of such dividend or distribution on the Common Stock; provided, however, that if the Company declares and pays a dividend or makes a distribution on the Common Stock consisting in whole or in part of Common Stock, then no such dividend or distribution shall be payable in respect of the Series A Preferred Stock or Series A-1 Preferred Stock on account of the portion of such dividend or distribution on the Common Stock payable in Common Stock to the extent that the applicable anti-dilution adjustment under Section (C)(1)(g)(viii) of this Article Four shall be made in connection therewith; and provided, further, that if the Company declares and pays a dividend or makes a distribution on the Common Stock consisting in whole or part of evidences of its indebtedness, assets (excluding any regular periodic cash dividend but including any extraordinary cash dividend), capital stock (other than Common Stock) or rights to subscribe for capital stock (other than Common Stock), then no such dividend or distribution shall be payable in respect of the Series A Preferred Stock or Series A-1 Preferred Stock on account of the portion of such dividend or distribution on the Common Stock payable in evidences of its indebtedness, assets (excluding any regular periodic cash dividend but including any extraordinary cash dividend), capital stock (other than Common Stock) or rights to subscribe for capital stock (other than Common Stock) to the extent that the applicable anti-dilution adjustment under Section (C)(1)(g)(ix) of this Article Four shall be made in connection therewith. The record date for any such Additional Dividends shall be the record date for the applicable dividend or distribution on the Common Stock, and any such Additional Dividends shall be payable on the same payment date as the payment date for the dividend or other distribution on the Common Stock established by the Board.

                    (iii) Restricted Payments.

                         (1) Except with respect to repurchases made after January 14, 2005 by the Company of Junior Securities from the stockholders of the Company for nominal value (the aggregate payment by the Company for all such repurchased stock not to exceed $100.00) and except with respect to repurchases of Preferred Stock, Class A Common Stock and options to purchase Common Stock, for an aggregate purchase price not to exceed $1,800,000, from participants in the Company’s management incentive plan approved on February 9, 2007 (the “Management Incentive Plan”) in accordance with the Restricted Stock Settlement Agreements to be executed in connection with issuances of stock or options under the Management Incentive Plan, so long as any shares of Series A Preferred Stock or Series A-1 Preferred Stock remain outstanding, the Company shall not, directly or indirectly, make any Junior Securities Distribution (as defined in Section (C)(1)(k) of this Article Four) unless (A) all accrued and unpaid dividends on the shares of Series A Preferred Stock and Series A-1 Preferred Stock shall have been paid in full and (B) sufficient amounts shall have been paid or set apart for the payment of the dividend for the current Dividend Period with respect to the Series A Preferred Stock and Series A-1 Preferred Stock and the current dividend period with respect to any Junior Parity Securities and Parity Securities.

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                         (2) Except with respect to repurchases of Series C Preferred Stock pursuant to the Management Incentive Plan to the extent such repurchases either are approved by the Board or are for nominal value and except with respect to repurchases of Preferred Stock, Class A Common Stock and options to purchase Common Stock, for an aggregate purchase price not to exceed $1,800,000, from participants in the Management Incentive Plan in accordance with the Restricted Stock Settlement Agreements to be executed in connection with issuances of stock or options under the Management Incentive Plan, so long as any shares of Series A Preferred Stock or Series A-1 Preferred Stock remain outstanding, the Company shall not make any Junior Parity Securities Distribution (as defined in Section (C)(1)(k) of this Article Four) or Parity Securities Distribution (as defined in Section (C)(1)(k) of this Article Four) unless (A) all accrued and unpaid dividends on the shares of Series A Preferred Stock and Series A-1 Preferred Stock shall have been paid and (B) sufficient amounts shall have been paid or set apart for the payment of the dividend for the current Dividend Period with respect to the Series A Preferred Stock and Series A-1 Preferred Stock and the current dividend period with respect to any Junior Parity Securities and Parity Securities; provided, however, that dividends may be declared and paid on Parity Securities if dividends are declared and paid on the Series A Preferred Stock and Series A-1 Preferred Stock (in accordance with the terms of Section (C)(1)(b)(i) of this Article Four) ratably in proportion to the respective aggregate amounts of dividends accrued and unpaid on such Parity Securities and accrued and unpaid on the Series A Preferred Stock and Series A-1 Preferred Stock; and further provided that dividends may be declared and paid on Junior Parity Securities if (x) the Absolute Liquidation Preference has been fully paid with respect to the Series A Preferred Stock, the Series A-1 Preferred Stock, the 12% Participating Series B Preferred Stock, par value $.01 per share (the “Series B Preferred Stock”) and the 12% Participating Series B-1 Preferred Stock, par value $.01 per share (the “Series B-1 Preferred Stock”) and (y) dividends are declared and paid on the Series A Preferred Stock and Series A-1 Preferred Stock (in accordance with the terms of Section (C)(1)(b)(i) of this Article Four) ratably in proportion to the respective aggregate amounts of dividends accrued and unpaid on such Junior Parity Securities and accrued and unpaid on the Series A Preferred Stock and Series A-1 Preferred Stock.

                    (iv) Priority With Respect To Junior Securities. Holders of shares of Series A Preferred Stock or Series A-1 Preferred Stock shall be entitled to receive the dividends provided for in this Section (C)(1)(b) of this Article Four in preference to and in priority over any dividends upon any Junior Securities.

                    (v) Dividends After Conversion. Notwithstanding anything in this Section (C)(1)(b) of this Article Four to the contrary, all accumulated and unpaid Series A Preferred Stock and Series A-1 Preferred Stock dividends shall be canceled upon the conversion of the Series A Preferred Stock and Series A-1 Preferred Stock into Class A Common Stock in accordance with Section (C)(1)(g) of this Article Four.

               (c) Redemption.

                    (i) General. The Company shall have no right to redeem any shares of Series A Preferred Stock or Series A-1 Preferred Stock.

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                    (ii) No Selective Repurchase Offers. Except with respect to repurchases of Series C Preferred Stock pursuant to the Management Incentive Plan to the extent such repurchases either are approved by the Board or are for nominal value and except with respect to repurchases of Preferred Stock, Class A Common Stock and options to purchase Common Stock, for an aggregate purchase price not to exceed $1,800,000, from participants in the Management Incentive Plan in accordance with the Restricted Stock Settlement Agreements to be executed in connection with issuances of stock or options under the Management Incentive Plan, neither the Company nor any of its Subsidiaries shall repurchase any outstanding shares of Series A Preferred Stock, Series A-1 Preferred Stock, Parity Securities or Junior Parity Securities unless the Company either (i) offers to purchase all of the then outstanding shares of Series A Preferred Stock, Series A-1 Preferred Stock, Parity Securities and Junior Parity Securities or (ii) offers to purchase shares of Series A Preferred Stock, Series A-1 Preferred Stock, Parity Securities and Junior Parity Securities from the holders in proportion to the respective number of shares of Series A Preferred Stock, Series A-1 Preferred Stock, Parity Securities and Junior Parity Securities held by each holder. In any such repurchase by the Company, if all shares of Series A Preferred Stock and Series A-1 Preferred Stock are not being repurchased, then the number of shares of Series A Preferred Stock, Series A-1 Preferred Stock, Parity Securities and Junior Parity Securities to be repurchased shall be allocated among all shares of Series A Preferred Stock, Series A-1 Preferred Stock, Parity Securities and Junior Parity Securities held by holders which accept the Company’s repurchase offer so that the shares of Series A Preferred Stock, Series A-1 Preferred Stock, Parity Securities and Junior Parity Securities are repurchased from such holders in proportion to the respective number of shares of Series A Preferred Stock, Series A-1 Preferred Stock, Parity Securities and Junior Parity Securities held by each such holder which accepts the Company’s offer (or in such other proportion as agreed by all such holders who accept the Company’s offer). In addition, in any such repurchase by the Company, the aggregate purchase price paid for shares of, and the aggregate consideration to be received by the holders of, Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock and Series C Preferred Stock shall be allocated such that (i) first, holders of Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock and Series B-1 Preferred Stock shall receive the Absolute Liquidation Preference with respect to each share of Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock and Series B-1 Preferred Stock and (ii) second, all remaining proceeds shall be allocated among the holders of Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock and Series C Preferred Stock in proportion to the respective number of shares of Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock and Series C Preferred Stock held by each such holder which accepts the Company’s offer (or in such other proportion as agreed by all such holders who accept the Company’s offer). Nothing in this Section (C)(1)(c)(ii) of this Article Four shall obligate a holder of shares of Series A Preferred Stock or Series A-1 Preferred Stock to accept the Company’s repurchase offer.

               (d) Voting Rights.

                    (i) Subject to Section (C)(1)(d)(ii) of this Article Four, in addition to any voting rights provided by law or set forth in this Section (C)(1) of this Article Four, the holder of each share of Series A Preferred Stock or Series A-1 Preferred Stock shall be

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entitled to vote on all matters and shall be entitled to 30 votes per share of Series A Preferred Stock or Series A-1 Preferred Stock.

                    (ii) All calculations of votes per share of Series A Preferred Stock or Series A-1 Preferred Stock shall be made to the nearest ten decimal places without rounding. Nothing in this Tenth Amended and Restated Certificate of Incorporation (as amended or restated from time to time), or the Company’s Bylaws shall prohibit or otherwise impede the casting of fractional votes or delivery of fractional consents by a holder of Series A Preferred Stock or Series A-1 Preferred Stock.

                    (iii) Except as required by law, or as otherwise provided in this Tenth Amended and Restated Certificate of Incorporation, including Section (C)(1)(j) of this Article Four, the holders of shares of Series A Preferred Stock, Series A-1 Preferred Stock, Class A Common Stock, Series B Preferred Stock and Series B-1 Preferred Stock, shall vote together as a single class and not as separate classes.

               (e) Reacquired Shares. Any shares of Series A Preferred Stock or Series A-1 Preferred Stock converted, purchased or otherwise acquired by the Company in any manner whatsoever shall be retired promptly after the acquisition thereof and may not be reissued as shares of Series A Preferred Stock or Series A-1 Preferred Stock. Upon such retirement, the Company shall take all necessary action so that such shares shall become authorized but undesignated shares of Preferred Stock of the Company and may be reissued as part of another series of Preferred Stock of the Company.

               (f) Liquidation, Dissolution or Winding Up.

                    (i) Liquidation Preference. In the event of a Liquidation (as defined in Section (C)(1)(k) of this Article Four), then, before any payment or distribution to the holders of Junior Securities (but, in the case of clauses (i) through (iii) in the definition of Liquidation, after payment or provision for the payment of the debts and other liabilities of the Company), each holder of a share of Series A Preferred Stock shall be entitled to receive an amount equal to the sum of the Series A Liquidation Preference (as defined in Section (C)(1)(k) of this Article Four) and, if the Absolute Liquidation Preference with respect to such share has not yet been paid by the Company, the Absolute Liquidation Preference and each holder of a share of Series A-1 Preferred Stock shall be entitled to receive an amount equal to the sum of the Series A-1 Liquidation Preference (as defined in Section (C)(1)(k) of this Article Four) and, if the Absolute Liquidation Preference with respect to such share has not yet been paid by the Company, the Absolute Liquidation Preference.

                    In the event of a Liquidation (as defined in Section (C)(1)(k) of this Article Four), then, before any payment or distribution to the holders of Junior Parity Securities, (but, in the case of clauses (i) through (iii) in the definition of Liquidation, after payment or provision for the payment of the debts and other liabilities of the Company), each holder of a share of Series A Preferred Stock shall be entitled to receive an amount equal to the Absolute Liquidation Preference (as defined in Section (C)(1)(k) of this Article Four) unless the Absolute Liquidation Preference with respect to such share has previously been paid by the Company, and each holder of a share of Series A-1 Preferred Stock shall be entitled to receive an

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amount equal to the Absolute Liquidation Preference (as defined in Section (C)(1)(k) of this Article Four) unless the Absolute Liquidation Preference with respect to such share has previously been paid by the Company.

                    The Company may pay all or any portion of the Absolute Liquidation Preference to be paid with respect to shares of Series A Preferred Stock and Series A-1 Preferred Stock prior to a Liquidation; provided, however, that in no case shall the Company pay all or any portion of the Absolute Liquidation Preference more than one time with respect to any share of Series A Preferred Stock or Series A-1 Preferred Stock.

                    With respect to each share of Series A Preferred Stock and Series A-1 Preferred Stock: (A) In the event that any cash payments are made, at any time, in respect of the Series A Liquidation Preference, such Series A Liquidation Preference shall be reduced on a dollar for dollar basis by the amount of such cash payments; (B) in the event that any cash payments are made, at any time, in respect of the Series A-1 Liquidation Preference, such Series A-1 Liquidation Preference shall be reduced on a dollar for dollar basis by the amount of such cash payments; and (C) in the event that any cash payments are made, at any time, in respect of the Absolute Liquidation Preference, such Absolute Liquidation Preference shall be reduced on a dollar for dollar basis by the amount of such cash payments.

                    (ii) Insufficient Assets. If, upon any such Liquidation, the assets to be distributed to the holders of Series A Preferred Stock, Series A-1 Preferred Stock, Junior Parity Securities and Parity Securities shall be insufficient to permit payment of the full amount of the Series A Liquidation Preference and the Absolute Liquidation Preference with respect to each share of Series A Preferred Stock plus the full amount of the Series A-1 Liquidation Preference and the Absolute Liquidation Preference with respect to each share of Series A-1 Preferred Stock plus amounts due on Liquidation with respect to each share of Junior Parity Securities and Parity Securities, the assets of the Company to be distributed among the holders of Series A Preferred Stock, Series A-1 Preferred Stock, Junior Parity Securities and Parity Securities shall first be distributed ratably among holders of Series A Preferred Stock, Series A-1 Preferred Stock and Parity Securities until such holders have received the Absolute Liquidation Preference with respect to all shares of Series A Preferred Stock, Series A-1 Preferred Stock and Parity Securities and all remaining assets shall be distributed ratably among holders of Series A Preferred Stock, Series A-1 Preferred Stock, Junior Parity Securities and Parity Securities.

                    (iii) No Rights to Remaining Assets. After the payment to holders of the Series A Preferred Stock and Series A-1 Preferred Stock of the full amount of the Series A Liquidation Preference and Series A-1 Liquidation Preference, respectively, and the Absolute Liquidation Preference, if applicable, to which they are entitled under this Section (C)(1)(f) of this Article Four, the holders of Series A Preferred Stock and Series A-1 Preferred Stock as such shall have no right or claim to any of the remaining assets of the Company.

                    (iv) In-Kind Distributions. Whenever the distribution provided for in this Section (C)(1)(f) of this Article Four shall be payable in securities or other property other than cash, the value of such distribution shall be the Fair Market Value (as defined in Section (C)(1)(k) of this Article Four).

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                    (v) Notice of Liquidation Event. Written notice of a Liquidation stating a payment date, the amount payable pursuant to Section (C)(1)(f)(i) of this Article Four, and the place where such amount shall be payable shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt), (b) three (3) days after sent by e-mail (with such communication to be in PDF format), with electronic confirmation of sending, provided that a copy is sent on the same day by registered mail, return receipt requested, in each case to the appropriate mailing and e-mail addresses set forth below (or to such other mailing and e-mail addresses as a party may designate by notice to the other parties in accordance with this provision), or (c) when actually delivered if sent by any other method that results in delivery (with written confirmation of receipt), not less than twenty (20) days prior to the payment date stated therein, to the holders of record of shares of Series A Preferred Stock and Series A-1 Preferred Stock, such notice to be addressed to each such holder at its address as shown by the records of the Company.

                    (vi) In connection with the receipt of the Series A Liquidation Preference or the Series A-1 Liquidation Preference in accordance with Section (C)(1)(f)(i) of this Article Four, if the holder of a share of Series A Preferred Stock or Series A-1 Preferred Stock, as applicable, is receiving the amount set forth in clause (x) of the definition of the term “Series A Liquidation Preference” or clause (x) of the definition of the term “Series A-1 Liquidation Preference” in respect to such share (and is not receiving the amount set forth in clause (y) of such definitions), the Company shall cancel 25 shares of Class A Common Stock or Class B Common Stock, or any combination thereof, held by such holder, for each such share of Series A Preferred Stock or Series A-1 Preferred Stock prior to or concurrent with the receipt of such amount. Such shares of Common Stock shall be cancelled by the Company without payment of consideration to such holder solely in respect of such shares of Common Stock.

               (g) Conversion of Series A Preferred Stock and Series A-1 Preferred Stock.

                    (i) Optional Conversion. Subject to the provision for adjustment set forth in this Section (C)(1)(g) of this Article Four, each share of Series A Preferred Stock and Series A-1 Preferred Stock shall be convertible, at the option of the holder thereof at any time and from the time to time after the date hereof, into a number of fully paid and nonassessable shares of Class A Common Stock equal to the quotient obtained by dividing (x) the Series A Accrued Value or Series A-1 Accrued Value, as applicable, on such share calculated through and including the date of such conversion by (y) the Conversion Price (as defined in Section (C)(1)(k) of this Article Four) in effect on the date of such conversion.

                    (ii) Mandatory Conversion. Subject to the provision for adjustment set forth in this Section (C)(1)(g) of this Article Four, in the event the Company undertakes to consummate a Qualified IPO (as defined in Section (C)(1)(k) of this Article Four), if approved by (i) a majority of the members of the Board whether or not there exist any vacancies on the Board, (ii) the holders of that percentage of the outstanding voting power of the shares of the Series A Preferred Stock and Series A-1 Preferred Stock that equals the sum of (x) the percentage of the outstanding voting power of the shares of the Series B Preferred Stock and Series B-1 Preferred Stock held by the largest holder (or group of affiliated holders) of Series B Preferred Stock and Series B-1 Preferred Stock at the Effective Time and (y) 1%, by affirmative

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vote at a meeting or by written consent (voting together as a separate class and to the exclusion of the holders of all other classes or series of capital stock of the Company), and (iii) the holders of that percentage of the outstanding voting power of the shares of the Series B Preferred Stock and Series B-1 Preferred Stock that equals the sum of (x) the percentage of the outstanding voting power of the shares of the Series B Preferred Stock and Series B-1 Preferred Stock held by the largest holder (or group of affiliated holders) of Series B Preferred Stock and Series B-1 Preferred Stock at the Effective Time and (y) 1%, by affirmative vote at a meeting or by written consent (voting together as a separate class and to the exclusion of the holders of all other classes or series of capital stock of the Company), each share of Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock and 12% Participating Series C Preferred Stock, par value $.01 per share (“Series C Preferred Stock”), shall be automatically converted into a number of fully paid and nonassessable shares of Class A Common Stock equal to the quotient obtained by dividing (x) the Series A Accrued Value, Series A-1 Accrued Value, Series B Accrued Value, Series B-1 Accrued Value or the amount described in clause (x) of the definition of Series C Liquidation Preference, as applicable, on such share calculated through and including the date of such conversion by (y) the Conversion Price in effect on the date of such conversion; provided, however, that such conversion shall be effective immediately prior to the consummation of such Qualified IPO and shall be conditioned upon such consummation.

                    (iii) Conversion Procedure.

                         (1) Conversion of Series A Preferred Stock or Series A-1 Preferred Stock pursuant to Section (C)(1)(g)(i) may be effected by any holder thereof upon the surrender to the Company at the offices of the Company, or at the office of any agent or agents of the Company, as may be designated by the Board (the “Transfer Agent”), of the certificates representing Series A Preferred Stock or Series A-1 Preferred Stock to be converted (if such shares are certificated) accompanied by a written notice stating that such holder elects to convert all or a specified portion of such holder’s shares of Series A Preferred Stock or Series A-1 Preferred Stock in accordance with the provisions of this Section (C)(1)(g)(ii) of this Article Four and specifying the name or names in which such holder wishes the certificate or certificates for shares of Class A Common Stock to be issued (if such shares are certificated). The Company shall pay any issue and transfer taxes that may be payable in respect of any issue or delivery of shares of Class A Common Stock on conversion of Series A Preferred Stock or Series A-1 Preferred Stock pursuant hereto. As promptly as practicable, and in any event within five Business Days (as defined in Section (C)(1)(k) of this Article Four) after the surrender of such certificates representing Series A Preferred Stock or Series A-1 Preferred Stock and the receipt of such notice relating thereto, the Company shall deliver or cause to be delivered (i) certificates representing the number of duly authorized, validly issued, fully paid and nonassessable shares of Class A Common Stock (if such shares are certificated) to which the holder of Series A Preferred Stock or Series A-1 Preferred Stock being converted shall be entitled and (ii) if less than all of the shares represented by the surrendered certificates are being converted, a new certificate (if such shares are certificated) representing the number of shares of Series A Preferred Stock or Series A-1 Preferred Stock which remains outstanding upon such partial conversion. Such conversion shall be deemed to have been made at the close of business on the date of giving such notice so that the rights of the holder thereof as to Series A Preferred Stock or Series A-1 Preferred Stock being converted shall cease except for the right to receive

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shares of Class A Common Stock in accordance herewith, and the person entitled to receive the shares of Class A Common Stock shall be treated for all purposes as having become the record holder of such shares of Class A Common Stock at such time.

                         (2) The Company shall at all times reserve and keep available for issuance upon the conversion of Series A Preferred Stock and Series A-1 Preferred Stock, free from any preemptive rights, such number of its authorized but unissued shares of Class A Common Stock as will from time to time be necessary to permit the conversion of all outstanding shares of Series A Preferred Stock and Series A-1 Preferred Stock into shares of Class A Common Stock, and shall take all action required to increase the authorized number of shares of Class A Common Stock, if necessary, to permit the conversion of all outstanding shares of Series A Preferred Stock and Series A-1 Preferred Stock. The Company shall take all actions as may be necessary to assure that all such shares of Class A Common Stock may be so issued without violation of any applicable law (including applicable federal and state securities laws) or governmental regulation or any requirements of any domestic national securities exchange or other market upon which shares of Class A Common Stock may be listed (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance).

                         (3) The Company shall not close its books against the transfer of Series A Preferred Stock, Series A-1 Preferred Stock or Class A Common Stock issued or issuable upon conversion of Series A Preferred Stock or Series A-1 Preferred Stock in any manner which interferes with the timely conversion of Series A Preferred Stock or Series A-1 Preferred Stock. The Company shall assist and cooperate with any holder of shares of Series A Preferred Stock or Series A-1 Preferred Stock required to make any governmental filings or obtain any governmental approval prior to or in connection with any conversion of such shares hereunder (including making any filings required to be made by the Company).

                         (4) If the shares of Class A Common Stock issuable by reason of such conversion of Series A Preferred Stock or Series A-1 Preferred Stock are convertible into or exchangeable for any other stock or securities of the Company, the Company shall, at the converting holder’s option, upon surrender of shares of Series A Preferred Stock or Series A-1 Preferred Stock to be converted by such holder as provided above together with any notice, statement or payment required to effect such conversion or exchange of Class A Common Stock, deliver to such holder, or as otherwise specified by such holder, a certificate or certificates representing the stock or securities into which the shares of Class A Common Stock issuable by reason of such conversion are so convertible or exchangeable, registered in such name or names and in such denomination or denominations as such holder has specified.

                    (iv) Adjustments Upon Changes in Capitalization.

                         (1) Except with respect to Excluded Securities (as defined in clause (3) below), in case the Company shall issue any shares of Common Stock or Common Stock Equivalents after the date the first share of Series A Preferred Stock or Series A-1 Preferred Stock, as applicable, is issued (the “Issue Date”) without consideration or at a price per share (or having a conversion, exchange or exercise price per share) of less than the Conversion Price as of the date of such issuance then, and, in each such case, the Conversion

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Price shall be appropriately adjusted by multiplying (A) the Conversion Price in effect on the day immediately prior to the date of issuance of such shares of Common Stock or Common Stock Equivalents by (B) a fraction, the denominator of which shall be the sum of (1) the number of Shares of Common Stock Outstanding (as defined in Section (C)(1)(k) of this Article Four) on such date prior to such issuance and (2) the number of additional shares of Common Stock issued (or issuable upon conversion, exchange or exercise of such Common Stock Equivalents), and the numerator of which shall be the sum of (x) the number of Shares of Common Stock Outstanding on such date prior to such issuance and (y) the number of shares of Common Stock purchasable at the Conversion Price in effect on the day immediately prior to the date of issuance of such shares of Common Stock or Common Stock Equivalents with the aggregate consideration receivable by the Company for the total number of shares of Common Stock so issued (or, in the case of issuances of Common Stock Equivalents, issuable upon conversion, exchange or exercise of such Common Stock Equivalents). An adjustment made pursuant to this clause (1) shall be made on the next Business Day following the date on which any such issuance is made and shall be effective retroactively to the close of business on the date of such issuance. For purposes of this clause (1), the consideration receivable by the Company in connection with the issuance of additional shares of Common Stock or of Common Stock Equivalents since the Issue Date shall be deemed to be equal to (X) in the case the consideration received by the Company is cash, the sum of the aggregate offering price, excluding any amounts paid or receivable for accrued interest or accrued dividends (before deduction of underwriting discounts or commissions or fees and expenses payable to third parties, if any) of all such Common Stock and/or Common Stock Equivalents plus the minimum aggregate amount, if any, payable upon conversion, exchange or exercise of any such Common Stock Equivalents, and (Y) in the case the consideration received by the Company is other than cash, the Fair Market Value (before deduction of underwriting discounts or commissions or fees and expenses payable to third parties, if any). The issuance or reissuance of any shares of Common Stock (whether treasury shares or newly issued shares) pursuant to a dividend or distribution on, or subdivision, combination or reclassification of, the outstanding shares of Common Stock requiring an adjustment in the Conversion Price pursuant to Section (C)(1)(g)(viii) of this Article Four shall not be deemed to constitute an issuance of Common Stock or Common Stock Equivalents by the Company to which this clause (1) applies. Upon the expiration or termination of any unconverted, unexchanged or unexercised Common Stock Equivalents for which an adjustment has been made pursuant to this clause (1), the adjustments shall not forthwith be reversed to effect such Conversion Price as would have been in effect at the time of such expiration or termination had such Common Stock Equivalents, to the extent outstanding immediately prior to such expiration or termination, never been issued.

                         (2) If, at any time, the purchase price provided for in any Common Stock Equivalents shall decrease, the additional consideration, if any, payable upon the conversion or exchange of any Common Stock Equivalents shall decrease, or the rate at which any Common Stock Equivalents are convertible into or exchangeable for Common Stock shall increase, the Conversion Price in effect at the time of such change shall be readjusted to the Conversion Price which would have been in effect at such time had such Common Stock Equivalents still outstanding provided for such purchase price, reduced additional consideration or increased conversion rate, as the case may be, at the time initially granted, issued or sold.

                         (3) “Excluded Securities” shall mean: (A) shares of Common Stock issued or issuable upon conversion of Class B Common Stock into Class A

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Common Stock in accordance with Section (B)(4) of this Article Four; (B) shares of Common Stock issued or issuable upon conversion of the Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock or Series C Preferred Stock in accordance with Section (C)(1)(g)(i), (C)(2)(g)(i) or (C)(3)(g)(i) of this Article Four; (C) shares of Common Stock issued or issuable upon conversion or exercise of any Common Stock Equivalents outstanding on the Issue Date; (D) any shares of Common Stock Equivalents and shares of Common Stock issued or issuable to directors, officers, employees or consultants of the Company following the Issue Date pursuant to any stock option, restricted stock, stock purchase or stock bonus plan, or other equity-based agreement, plan or arrangement, approved by the Board or the Compensation Committee of the Board, prior to the date on which the Management Incentive Plan was approved by the Board, in an amount not exceeding up to 1,137,219 shares of Common Stock in the aggregate for all such issuances (less any such shares as to which the right to such shares was forfeited in connection with an individual’s participation in the Management Incentive Plan pursuant to the terms of the Restricted Stock Settlement Agreements); (E) any shares of capital stock issued as a stock dividend or upon any stock split or other subdivision or combination of shares of the Company’s capital stock, (F) any shares of capital stock issued in connection with business acquisitions, strategic partnerships and alliances, and financing transactions (other than capital stock issued to parties unrelated to any such transaction, in exchange for cash, to provide equity financing for any such transaction), (G) any shares of Common Stock issued in connection with a public offering of Common Stock registered under the Securities Act of 1933, as amended, (H) any shares of capital stock issued pursuant to pre-emptive rights under Section 7 of the Shareholders’ Agreement, (I) any shares of Series A-1 Preferred Stock or Series B-1 Preferred Stock with an Issuance Date of August 23, 2006 and (J) any shares of Series C Preferred Stock and Class B Common Stock issued pursuant to the Management Incentive Plan, not to exceed 52,332 shares of Series C Preferred Stock and 1,308,297 shares of Class B Common Stock.

                         (4) If the Company shall set a record date for the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution and shall thereafter, and before such dividend or distribution is paid or delivered to stockholders entitled thereto, legally abandon its plan to pay or deliver such dividend or distribution, then no adjustment in the Conversion Price then in effect shall be made by reason of the taking of such record, and any such adjustment previously made as a result of the taking of such record shall be reversed.

                         (5) Successive adjustments pursuant to this Section (C)(1)(g) of this Article Four shall be made without duplication whenever any event specified in this Section (C)(1)(g) of this Article Four shall require a Conversion Price adjustment.

                         (6) All calculations of the Conversion Price shall be made to the nearest ten decimal places without rounding. No adjustment to the Conversion Price pursuant to this Section (C)(1)(g)(iv) of this Article Four shall be required unless such adjustment would require an increase or decrease of at least 1% in the Conversion Price; provided, however, that any adjustments which by reason of this Section (C)(1)(g)(iv)(6) of this Article Four are not required to be made shall be carried forward and taken into account in any subsequent adjustment. Anything in Section (C)(1)(g) of this Article Four to the contrary notwithstanding, in no event shall the then current Conversion Price be increased as a result of

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any calculation made at any time pursuant to Section (C)(1)(g) of this Article Four (other than pursuant to Section (C)(1)(g)(viii) of this Article Four in connection with a combination (by reverse stock split or otherwise) of the outstanding shares of Common Stock into a smaller number of shares).

                         (7) In connection with the conversion of any shares of Series A Preferred Stock or Series A-1 Preferred Stock pursuant to this Section (C)(1)(g) of this Article Four, no fractions of shares of Class A Common Stock shall be issued, but in lieu thereof the Company shall pay a cash adjustment in respect of such fractional interest in an amount equal to such fractional interest multiplied by the Closing Price per share of Class A Common Stock on the day on which such shares of Series A Preferred Stock or Series A-1 Preferred Stock are deemed to have been converted. If more than one share of Series A Preferred Stock or Series A-1 Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares of Class A Common Stock issuable upon conversion thereof shall be computed on the basis of the total number of shares of Series A Preferred Stock or Series A-1 Preferred Stock so surrendered.

                    (v) [intentionally omitted]

                    (vi) Transfer Books. The Company will at no time close its transfer books against the transfer of any Series A Preferred Stock, Series A-1 Preferred Stock or any shares of Common Stock issued or issuable upon the conversion of any shares of such Series A Preferred Stock or Series A-1 Preferred Stock, except as may otherwise be required to comply with applicable securities laws.

                    (vii) [intentionally omitted]

                    (viii) Adjustments for Dividends, Subdivisions and Combinations. If the Company at any time (i) pays any dividend, or makes any distribution, on the outstanding shares of Common Stock in shares of Common Stock without payment of any consideration by the holders of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) the outstanding shares of Common Stock, or (iii) combines (by reverse stock split or otherwise) the outstanding shares of Common Stock into a smaller number of shares, then, and in each such case, the Conversion Price in effect immediately prior to such event or the record date therefor, whichever is earlier, shall be adjusted so that the holder of any shares of Series A Preferred Stock or Series A-1 Preferred Stock thereafter convertible into Common Stock pursuant to this Section (C)(1)(g) of this Article Four shall be entitled to receive the number of shares of Common Stock which such holder would have owned or have been entitled to receive after the happening of any of the events described above, had such shares of Series A Preferred Stock or Series A-1 Preferred Stock been converted into Common Stock immediately prior to the happening of such event or the record date therefor, whichever is earlier.

                    (ix) Special Dividends; Repurchases.

                         (1) In case the Company after the Issuance Date shall distribute to all holders of shares of Common Stock evidences of its indebtedness, assets

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(excluding any regular periodic cash dividend but including any extraordinary cash dividend), capital stock (other than Common Stock) or rights to subscribe for capital stock (other than Common Stock), the Conversion Price in effect immediately prior to the date of such distribution (or the date immediately prior to the date of the public announcement of such distribution, whichever is earlier) shall be adjusted by multiplying such Conversion Price by a fraction of which (x) the numerator is the remainder of (i) the Closing Price per share of Common Stock on such date, minus (ii) the Fair Market Value as of such date of the portion of assets, evidences of indebtedness, capital stock or subscription rights so distributed or paid applicable to one share of Common Stock, and (y) the denominator is the Closing Price per share of Common Stock on such date, such adjustment to become effective immediately prior to the opening of business on the day following the date of distribution or purchase; provided, however, that no adjustment shall be made (A) if such issuance is an issuance of Excluded Securities or (B) if an adjustment shall otherwise be made with respect to such distribution or issuance pursuant to Section (C)(1)(g)(iv) of this Article Four; and further provided, however, that if in any case the numerator of such fraction shall be zero or less than zero, no adjustment shall be made in such case. The Company shall provide any holder of Series A Preferred Stock or Series A-1 Preferred Stock, upon receipt of a written request therefor, with any indenture or other instrument defining the rights of the holders of any indebtedness, assets, subscription rights or capital stock referred to in this subparagraph (ix).

                         (2) In case the Company after the Issuance Date shall purchase or otherwise acquire for value any shares of Common Stock or Common Stock Equivalents in an Above Market Repurchase (as defined in Section (C)(1)(k) of this Article Four), the Conversion Price in effect immediately prior to the date of such purchase or other acquisition (or the date immediately prior to the date of the public announcement of such purchase or other acquisition) shall be reduced to an amount determined by multiplying the Conversion Price in effect immediately prior to such purchase or other acquisition, by a fraction of which (x) the numerator shall be (A) the product of (1) the number of Shares of Common Stock Outstanding immediately prior to such purchase or other acquisition and (2) the Fair Market Value per share of Common Stock in effect on the Business Day immediately prior to the earlier of (i) the date of such purchase or other acquisition and (ii) the date immediately prior to the date of the public announcement of such purchase or other acquisition, minus (B) the aggregate consideration paid by the Company in such Above Market Repurchase (plus, in the case of Common Stock Equivalents, the aggregate additional consideration which would have been paid to the Company upon exercise, conversion or exchange), and (y) the denominator of which is the product of (A) the number of Shares of Common Stock Outstanding immediately after such purchase or other acquisition multiplied by (B) the Fair Market Value per share of Common Stock in effect on the Business Day immediately prior to the earlier of (i) the date of such purchase or other acquisition and (ii) the date immediately prior to the date of the public announcement of such purchase or other acquisition.

                    (x) Provisions for Organic Changes. Prior to the consummation of any Organic Change (as defined in Section (C)(1)(k) of this Article Four), the Company shall make appropriate provisions to ensure that each holder of Series A Preferred Stock and/or Series A-1 Preferred Stock shall thereafter have the right to acquire and receive, in lieu of or in addition to (as the case may be) the shares of Common Stock immediately theretofore acquirable and receivable upon the conversion of such holder’s Series A Preferred

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Stock and Series A-1 Preferred Stock, such shares of securities or assets as such holder would have received in connection with such Organic Change if such holder had converted its Series A Preferred Stock and Series A-1 Preferred Stock, as applicable immediately prior to such Organic Change. In each such case, the Company shall also make appropriate provisions to ensure that the provisions of this Section (C)(1)(g) of this Article Four shall thereafter be applicable to the Series A Preferred Stock and Series A-1 Preferred Stock. The Company shall not effect any such Organic Change unless, prior to the consummation thereof, the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets provides in its charter documents and in the definitive agreement providing for such Organic Change the obligation to deliver to each such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to acquire.

                    (xi) Recapitalization, Conversion and Exchange of Shares. If any recapitalization, conversion or exchange of shares or any other change in the Company’s capital structure, or any other event occurs of the type contemplated by the provisions of this Section (C)(1)(g) of this Article Four but in any such case, which is not expressly provided for by the provisions of this Section (C)(1)(g) of this Article Four (including the granting of stock appreciation rights, phantom stock rights or other rights with equity features), the Board shall make an appropriate adjustment to the Conversion Price so as to protect the rights of the holders of Series A Preferred Stock and Series A-1 Preferred Stock.

                    (xii) Exclusion from Conversion Price Adjustments. No adjustment to the Conversion Price shall be made or shall be applicable under this Section (C)(1)(g) of this Article Four with respect to (i) the issuance of shares of Series A-1 Preferred Stock or Series B-1 Preferred Stock on August 23, 2006 in connection with the conversion of the Notes outstanding under the Note Purchase Agreement, dated January 14, 2005 among the Company, the purchasers named therein and MCG Capital Corporation as Administrative Agent, (ii) the issuance of shares of Series C Preferred Stock and/or Class B Common Stock, including without limitation upon exercise of options to purchase Series C Preferred Stock and/or Class B Common Stock, pursuant to the Management Incentive Plan (not to exceed 52,332 shares of Series C Preferred Stock and 1,308,297 shares of Class B Common Stock) and (iii) the issuance of shares of Series B-1 Preferred Stock and Class A Common Stock issued pursuant to the Agreement and Plan of Merger, dated February 23, 2007, among the Company, Eureka Acquisition Corporation, a Delaware corporation, Eureka Broadband Corporation, a Delaware corporation, the significant stockholders or Eureka Broadband Corporation set forth therein, and Jeffrey Ginsberg, as agent of the stockholders of Eureka Broadband Corporation (the “Eureka Merger Agreement”), or issued as a result of the exercise of warrants to purchase Series B-1 Preferred Stock and Class A Common Stock issued pursuant to the Eureka Merger Agreement.

               (h) Reports as to Adjustment.

                    (i) Notice of Conversion Price Adjustment. Upon any adjustment of the Conversion Price then in effect pursuant to the provisions of Section (C)(1)(g) of this Article Four, then, and in each such case, the Company shall promptly deliver to the Transfer Agent of Series A Preferred Stock, Series A-1 Preferred Stock and the Common Stock

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and to each of the holders of Series A Preferred Stock, Series A-1 Preferred Stock and the Common Stock, a certificate signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company setting forth in reasonable detail the event requiring the adjustment, the method by which such adjustment was calculated (including any Fair Market Value determinations made by the Board) and the Conversion Price then in effect following such adjustment. Where appropriate, such notice to holders of Series A Preferred Stock and Series A-1 Preferred Stock may be given in advance.

                    (ii) Notice of Organic Change. The Company shall also give written notice to the holders of Series A Preferred Stock or Series A-1 Preferred Stock at least twenty (20) days prior to the date on which any Organic Change takes place.

               (i) Protection of Rights. Any registered holder of Series A Preferred Stock or Series A-1 Preferred Stock may proceed to protect and enforce its rights with any and all remedies available at law or in equity.

               (j) Protective Voting Rights and Powers. So long as shares of Series A Preferred Stock or Series A-1 Preferred Stock are outstanding, the Company shall not without first obtaining the approval (by vote at a meeting or by written consent) of the holders of a majority in voting power of the outstanding shares of Series A Preferred Stock and Series A-1 Preferred Stock entitled to vote (voting together as a class but separately from and to the exclusion of the holders of all other classes or series of stock of the Company):

                    (i) amend, alter, repeal, restate, or supplement this Tenth Amended and Restated Certificate of Incorporation or its Bylaws (in each case, whether by reclassification, merger, consolidation, reorganization or otherwise) in a manner which alters or changes, in any manner, the number of shares, or the powers, preferences or rights, of the Series A Preferred Stock or the Series A-1 Preferred Stock or which would adversely affect the powers, preferences or rights of the Series A Preferred Stock or the Series A-1 Preferred Stock; or

                    (ii) change the authorized number of shares of Preferred Stock, the Series A Preferred Stock or the Series A-1 Preferred Stock.

               (k) Definitions. In addition to any other terms defined in this Section (C)(1) of this Article Four, the following terms shall have the meanings indicated when used in this Section (C)(1) of this Article Four:

               “Above Market Repurchase” shall mean any purchase (by tender or exchange offer, open market purchase, privately negotiated purchase or otherwise) of all or any portion of the Company’s Common Stock or Common Stock Equivalents where such purchase is for aggregate consideration that exceeds the product of (x) the aggregate number of shares of Common Stock or Common Stock Equivalents being purchased multiplied by (y) the Closing Price of the Common Stock on the date of such purchase minus, in the case of Common Stock Equivalents, the aggregate additional consideration which would have been paid to the Company upon exercise, conversion or exchange.

               “Absolute Liquidation Preference” shall mean (x) $516.35 per share of Series A Preferred Stock or Series A-1 Preferred Stock less (y) the aggregate amount of any cash

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dividends paid, pursuant to Section (C)(1)(b)(i)(2) of this Article Four, with respect to each share of the Series A Preferred Stock and Series A-1 Preferred Stock; provided that the Absolute Liquidation Preference with respect to any share of Series A Preferred Stock or Series A-1 Preferred Stock shall not be reduced to an amount less than $0.00.

               “Additional Dividends” has the meaning given in Section (C)(1)(b)(ii) of this Article Four.

               “Board” means the Board of Directors of the Company.

               “Business Day” means any day other than a Saturday, Sunday, or a day on which commercial banks in the City of New York are authorized or obligated by law or executive order to close.

               “BV-BC Merger Agreement” shall mean the Amended and Restated Agreement and Plan of Merger by and among the Company, BridgeCom Holdings, Inc., a Delaware corporation, MCG IH II, Inc., a Delaware corporation, MCG Capital Corporation, a Delaware corporation, the Principal Company Stockholders named therein and certain other parties thereto, dated as of November 22, 2004.

               “Class A Common Stock” means the Class A Common Stock, par value $.01 per share, of the Company.

               “Class B Common Stock” means the Class B Common Stock, par value $.01 per share, of the Company.

               “Closing Price” per share of Common Stock on any date shall mean the closing sale price on such day or, in case no such sale takes place on such day, the average of the reported closing bid and asked prices, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange, Inc. (or other national securities exchange), the Nasdaq National Market System or the Nasdaq SmallCap Market, or, if such security is not so reported in the principal consolidated transaction reporting system, the last quoted sale price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or such other system then in use, or, if on any such date the Common Stock or such other securities are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker, selected in good faith by the Board and acceptable to the holders of a majority of the outstanding shares of Series A Preferred Stock and Series A-1 Preferred Stock, making a market in the Common Stock or such other securities of the Company. If the Common Stock or such other securities are not so reported or publicly traded, “Closing Price” shall mean the Fair Market Value.

               “Common Stock” shall mean shares of Class A Common Stock and Class B Common Stock.

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               “Common Stock Equivalent” shall mean securities convertible into, or exchangeable or exercisable for, shares of Common Stock and options, warrants and rights to acquire such convertible securities.

               “Conversion Price” means $50.00, subject to adjustment as provided in Section (C)(1)(g) of this Article Four.

               “Dividend Payment Date” shall mean the last Business Day of each calendar quarter.

               “Dividend Period” shall mean the Initial Dividend Period and, thereafter, each quarterly period from and including a Dividend Payment Date to the next following Dividend Payment Date (but without including such later Dividend Payment Date).

               “Effective Time” shall have the meaning set forth in the BV-BC Merger Agreement.

               “Eureka Merger Agreement” shall mean the Agreement and Plan of Merger, dated February 23, 2007, among the Company, Eureka Acquisition Corporation, a Delaware corporation, Eureka Broadband Corporation, a Delaware corporation, the significant stockholders or Eureka Broadband Corporation set forth therein, and Jeffrey Ginsberg, as agent of the stockholders of Eureka Broadband Corporation.

               “Excluded Securities” has the meaning given in Section (C)(1)(g)(iv)(3) of this Article Four.

               “Fair Market Value” shall mean the price that a willing buyer would pay to a willing seller in an arm’s length transaction, it being understood that the buyer and seller in arriving at such price in determining the value would each consider, the other factors customarily considered by valuation professionals, as the Board in good faith shall reasonably determine. The Board shall promptly provide written notice of any Fair Market Value determination to the holders of the outstanding shares of Series A Preferred Stock and Series A-1 Preferred Stock; provided, however, that if the Board has provided notice of such determination in connection with its obligations under Section (C)(1)(h)(i) of this Article Four, the Board shall not be required to provide a separate notice.

               “Initial Dividend Period” shall mean the dividend period commencing on the Issuance Date and ending on (and including) the date immediately prior to the first Dividend Payment Date to occur thereafter.

               “Issuance Date” shall mean: (i) with respect to any share of Series A Preferred Stock, the date on which the Company initially issues such share of Series A Preferred Stock, regardless of the number of times transfer of such share is made on the stock records of the Company and regardless of the number of certificates which may be issued to evidence such share; and (ii) with respect to any share of Series A-1 Preferred Stock, August 23, 2006, regardless of the number of times transfer of such share is made on the stock records of the Company, regardless of the number of certificates which may be issued to evidence such share

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and regardless of when such share is actually issued. For clarification, clause (ii) above shall have the effect that all shares of Series A-1 Preferred Stock (including but not limited to shares that are issued after August 23, 2006) are entitled to accrued dividends in an amount equal to the amount of dividends that would have accrued from August 23, 2006, regardless of when such shares are actually issued.

               “Issue Date” has the meaning given in Section (C)(1)(g)(iv)(1) of this Article Four.

               “Junior Parity Securities” shall mean each class or series of capital stock of the Company now or hereafter authorized, issued or outstanding the terms of which specifically provide that such class or series will rank junior to the Series A Preferred Stock and Series A-1 Preferred Stock with respect to payment of dividends or distributions, or the distribution of assets upon liquidation, winding up or dissolution until the Absolute Liquidation Preference has been paid with respect to the Series A Preferred Stock and Series A-1 Preferred Stock but on a parity with the Series A Preferred Stock and Series A-1 Preferred Stock after payment of such Absolute Liquidation Preferences. The Series C Preferred Stock shall constitute Junior Parity Securities. This definition of Junior Parity Securities shall include, without limitation, any Common Stock Equivalents exercisable or exchangeable for or convertible into any Junior Parity Securities.

               “Junior Parity Securities Distribution” shall mean the declaration or payment on account of, or setting apart for payment money for a sinking or other similar fund for, the purchase, redemption or other retirement of Junior Parity Securities (other than by conversion into or exchange for Junior Securities) or any Common Stock Equivalents exercisable or exchangeable for or convertible into any shares of Junior Parity Securities, or any distribution in respect thereof (except for (i) dividends on Junior Parity Securities which are payable solely in additional shares of Junior Parity Securities, or by the increase in the liquidation value of Junior Parity Securities, in each case, as required by the terms of such Junior Parity Securities or (ii) cashless exercises of options), either directly or indirectly, and whether in cash, obligations, Common Stock, Common Stock Equivalents or other property, or the purchase or redemption by any corporation or other entity directly or indirectly controlled by the Company of any of the Junior Parity Securities or any Common Stock Equivalents exercisable or exchangeable for or convertible into any Junior Parity Securities.

               “Junior Securities” shall mean the Company’s Common Stock and all classes and series of capital stock of the Company now or hereafter authorized, issued or outstanding which by their terms expressly provide that they are junior to the Series A Preferred Stock and Series A-1 Preferred Stock, or which do not specify their rank, with respect to payment of dividends or distributions, or the distribution of assets upon liquidation, winding up or dissolution. This definition of Junior Securities shall include, without limitation, any Common Stock Equivalents exercisable or exchangeable for or convertible into any Junior Securities.

               “Junior Securities Distribution” shall mean the declaration or payment on account of, or setting apart for payment money for a sinking or other similar fund for, the purchase, redemption or other retirement of, any Junior Securities, or any distribution in respect

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thereof (except for (i) dividends on Junior Securities which are payable solely in additional             shares of Junior Securities, as required by the terms of such Junior Securities, or (ii) cashless exercises of options), either directly or indirectly, and whether in cash, obligations, Common Stock, Common Stock Equivalents or other property, or the purchase or redemption by any Person directly or indirectly controlled by the Company of any of the Junior Securities.

               “Liquidation” shall mean that (i) the Company shall (A) commence a voluntary case under the Federal bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency or similar law, (B) consent to the entry of an order for relief in an involuntary case under such law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company, or of any substantial part of its property, (C) make an assignment for the benefit of its creditors, or (D) admit in writing its inability to pay its debts generally as they become due, (ii)(A) a decree or order for relief in respect of the Company shall be entered by a court having jurisdiction in the premises in an involuntary case under the Federal bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and (B) any such decree or order shall be unstayed and in effect for a period of 60 consecutive days and on account of any such event the Company shall liquidate, dissolve or wind up, (iii) the Company shall otherwise liquidate, dissolve or wind up, or (iv) the Company shall (A) merge or consolidate with a Person (other than a merger (i) which only involves a change in the Company’s state of incorporation or (ii) with a wholly-owned subsidiary (directly or indirectly)), and pursuant to such merger or consolidation the Company is not the surviving entity; (B) merge or consolidate, and pursuant to such merger or consolidation the Company is the surviving entity but the holders of the Company’s outstanding equity securities immediately prior to such merger or consolidation (x) are not the holders of equity securities of the Company that represent at least 50% of the total number of votes entitled to be cast in the election of directors immediately following such merger or consolidation or (y) have otherwise relinquished control of the Company following such merger or consolidation; (C) sell or transfer all or substantially all of the assets of the Company to one or more Persons that are not wholly-owned subsidiaries (directly or indirectly) of the Company in any transaction (in a transaction not described in clauses (i) through (iii)) or series of transactions, or (D) sell or transfer a majority of the voting stock of the Company to one or more Persons that are not wholly-owned subsidiaries (directly or indirectly) of the Company in any transaction or series of transactions. Notwithstanding anything to the contrary in this definition of “Liquidation,” the transactions contemplated or effected by the BV-BC Merger Agreement (as defined in this Section (C)(1)(k) of this Article Four) shall not be deemed to be a Liquidation.

               “Management Incentive Plan” shall mean the management incentive plan of the Company as approved on February 9, 2007.

               “Organic Change” shall mean any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Company’s assets to another Person or other transaction which is effected in such a manner that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) securities or assets

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with respect to or in exchange for Common Stock; provided, however, that an Organic Change shall exclude a Liquidation.

               “Parity Securities” shall mean each class or series of capital stock of the Company now or hereafter authorized, issued or outstanding the terms of which specifically provide that such class or series will rank on a parity with the Series A Preferred Stock and Series A-1 Preferred Stock with respect to payment of dividends and distributions, and the distribution of assets upon liquidation, winding up or dissolution. The Series B Preferred Stock and Series B-1 Preferred Stock shall constitute Parity Securities, but the Series C Preferred Stock shall not constitute Parity Securities. This definition of Parity Securities shall include, without limitation, any Common Stock Equivalents exercisable or exchangeable for or convertible into any Parity Securities.

               “Parity Securities Distribution” shall mean the declaration or payment on account of, or setting apart for payment money for a sinking or other similar fund for, the purchase, redemption or other retirement of Parity Securities (other than by conversion into or exchange for Junior Securities) or any Common Stock Equivalents exercisable or exchangeable for or convertible into any shares of Parity Securities, or any distribution in respect thereof (except for (i) dividends on Parity Securities which are payable solely in additional shares of Parity Securities, or by the increase in the liquidation value of Parity Securities, in each case, as required by the terms of such Parity Securities or (ii) cashless exercises of options), either directly or indirectly, and whether in cash, obligations, Common Stock, Common Stock Equivalents or other property, or the purchase or redemption by any corporation or other entity directly or indirectly controlled by the Company of any of the Parity Securities or any Common Stock Equivalents exercisable or exchangeable for or convertible into any Parity Securities.

               “Person” shall mean any individual, firm, corporation, limited liability company, partnership or other entity, and shall include any successor (by merger or otherwise) of such entity.

               “Qualified IPO” shall mean any issuance and sale of shares of Common Stock which occurs in an underwritten public offering registered under the Securities Act of 1933, as amended, and provides net proceeds to the Company of not less than $50,000,000.

               “Restricted Stock Settlement Agreements” means both (i) the Restricted Stock Settlement Agreement, dated April 2007, by and among the Company, MCG Capital Corporation, a Delaware corporation, BridgeCom Holdings, Inc., a Delaware corporation, and the individual grantee named therein and (ii) the Restricted Stock Settlement Agreement, dated April 2007, by and among the Company and the individual grantee named therein.

               “Senior Securities” shall mean each class or series of capital stock of the Company now or hereafter authorized, issued or outstanding the terms of which specifically provide that such class or series will rank senior to the Series A Preferred Stock and Series A-1 Preferred Stock with respect to payment of dividends and distributions, and the distribution of assets upon liquidation, winding up or dissolution. This definition of Senior Securities shall include, without limitation, any Common Stock Equivalents exercisable or exchangeable for or convertible into any Senior Securities.

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               “Series A Accrued Value” shall mean, with respect to a share of Series A Preferred Stock, as at any date, the sum of (as adjusted for any split, subdivision, combination, consolidation, recapitalization or similar event with respect to the Series A Preferred Stock) (i) the Series A Stated Value, plus (ii) an amount equal to the aggregate of all accrued but unpaid dividends (whether or not declared) on such share through and including such date which have been added to Series A Accrued Value pursuant to Section (C)(l)(b)(i)(2) of this Article Four, minus (iii) any amounts paid in respect of the Series A Liquidation Preference.

               “Series A Liquidation Preference” shall mean the greater of (x) the Series A Accrued Value on a share of Series A Preferred Stock less the Absolute Liquidation Preference, as at any date, or (y) the amount of securities, cash or other property that would be payable to such holder in the Liquidation in respect of Class A Common Stock issuable upon conversion of such share of Series A Preferred Stock if all outstanding shares of Series A Preferred Stock were converted into Class A Common Stock immediately prior to the Liquidation in accordance with Section (C)(1)(g) of this Article Four hereof less the Absolute Liquidation Preference, as at any date.

               “Series A Objecting Parties” has the meaning given in the definition of Fair Market Value in this Section (C)(1)(k) of this Article Four.

               “Series A Preferred Stock” has the meaning given in Section (C)(1)(a)(i) of this Article Four.

               “Series A Stated Value” shall mean, with respect to a share of Series A Preferred Stock, $1,000 (as adjusted for any split, subdivision, combination, consolidation, recapitalization or similar event with respect to the Series A Preferred Stock).

               “Series A-1 Accrued Value” shall mean, with respect to a share of Series A-1 Preferred Stock, as at any date, the sum of (as adjusted for any split, subdivision, combination, consolidation, recapitalization or similar event with respect to the Series A-1 Preferred Stock) (i) the Series A-1 Stated Value, plus (ii) an amount equal to the aggregate of all accrued but unpaid dividends (whether or not declared) on such share through and including such date which have been added to Series A-1 Accrued Value pursuant to Section (C)(l)(b)(i)(2) of this Article Four, minus (iii) any amounts paid in respect of the Series A-1 Liquidation Preference; provided that, irrespective of the aforementioned sum, on the first Dividend Payment Date following the Issuance Date with respect to the Series A-1 Preferred Stock the Series A-1 Accrued Value shall be reset and shall equal the Series A Accrued Value on such date.

               “Series A-1 Liquidation Preference” shall mean the greater of (x) the Series A-1 Accrued Value on a share of Series A-1 Preferred Stock less the Absolute Liquidation Preference, as at any date, or (y) the amount of securities, cash or other property that would be payable to such holder in the Liquidation in respect of Class A Common Stock issuable upon conversion of such share of Series A-1 Preferred Stock if all outstanding shares of Series A-1 Preferred Stock were converted into Class A Common Stock immediately prior to the Liquidation in accordance with Section (C)(1)(g) of this Article Four hereof less the Absolute Liquidation Preference, as at any date.

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               “Series A-1 Preferred Stock” has the meaning given in Section (C)(1)(a)(ii) of this Article Four.

               “Series A-1 Stated Value” shall mean, with respect to a share of Series A-1 Preferred Stock, the amount that equals the Series A Accrued Value of the Series A Preferred Stock as of August 23, 2006 (as adjusted for any split, subdivision, combination, consolidation, recapitalization or similar event with respect to the Series A-1 Preferred Stock).

               “Series B Preferred Stock” shall mean the 12% Participating Series B Preferred Stock, par value $.01 per share of the Company.

               “Series B-1 Preferred Stock” shall mean the 12% Participating Series B-1 Preferred Stock, par value $.01 per share of the Company.

               “Series C Preferred Stock” shall mean the 12% Participating Series C Preferred Stock, par value $.01 per share of the Company.

               “Shareholders’ Agreement” means the Third Amended and Restated Shareholders Agreement, dated as of May 31, 2007, by and among the Company and the stockholders party thereto, as amended from time to time. The Company will provide a copy of the Shareholders’ Agreement to any stockholder of the Company upon request.

               “Shares of Common Stock Outstanding” shall mean at any time, with respect to the Company, the sum of (i) all shares of Common Stock issued and outstanding at such time, (ii) all shares of Common Stock which are then issuable upon conversion of the Series A Preferred Stock, (iii) all shares of Common Stock which are then issuable upon conversion of the Series A-1 Preferred Stock, (iv) all shares of Common Stock which are then issuable upon conversion of the Series B Preferred Stock, (v) all shares of Common Stock which are then issuable upon conversion of the Series B-1 Preferred Stock or upon the exercise of warrants to purchase Series B-1 Preferred Stock and (vi) all shares of Common Stock which are then issuable upon conversion of the Series C Preferred Stock.

               “Subsidiaries” of the Company shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by the Company.

               “Transfer Agent” has the meaning given in Section (C)(1)(g)(iii) of this Article Four.

                         (1) Notices. Unless otherwise expressly specified or permitted by the terms hereof, all notices, demands and other communications to be given or delivered under or by reason of the provisions of this Section (C)(1) of this Article Four shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt), (b) three (3) days after sent by e-mail (with such communication to be in PDF format), with electronic confirmation of sending, provided that a copy is sent on the same day by registered mail, return receipt requested, in each case to the appropriate mailing and e-mail addresses set forth below (or to such other mailing and e-mail addresses as a party may designate by notice to the other parties in accordance with this provision), or (c) when actually

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delivered if sent by any other method that results in delivery (with written confirmation of receipt) to the following addresses:

Broadview Networks Holdings, Inc.
800 Westchester Ave
5^th Floor, Suite N501
Rye Brook, NY 10573
Attention: Chief Executive Officer

or at such other address as may have been furnished in writing by the Company to the holders of the outstanding shares of Series A Preferred Stock or Series A-1 Preferred Stock.

               2. Series B Preferred Stock and Series B-1 Preferred Stock

                    (a) Designation, Number and Rank.

                         (i) 93,180 shares of Preferred Stock are hereby designated as 12% Participating Series B Preferred Stock, par value $.01 per share (the “Series B Preferred Stock”).

                         (ii) 86,000 shares of Preferred Stock are hereby designated as 12% Participating Series B-1 Preferred Stock, par value $.01 per share (the “Series B-1 Preferred Stock”).

                         (iii) The Series B Preferred Stock and Series B-1 Preferred Stock shall, with respect to payment of dividends, redemption payments and the distribution of assets upon liquidation, winding-up or dissolution, rank (i) senior to all Junior Securities (as defined in Section (C)(2)(k) of this Article Four), (ii) in some respects senior to and in some respects on a parity with all Junior Parity Securities as more fully described herein (as defined in Section (C)(2)(k) of this Article Four), (iii) on a parity with all Parity Securities (as defined in Section (C)(2)(k) of this Article Four) and (iv) junior to all Senior Securities (as defined in Section (C)(2)(k) of this Article Four).

                    (b) Dividends and Distributions.

                         (i) Dividend Rights.

                              (1) The holders of shares of Series B Preferred Stock or Series B-1 Preferred Stock shall be entitled to receive on each Dividend Payment Date (as defined in Section (C)(2)(k) of this Article Four) out of lawfully available funds therefor, in respect of the Dividend Period (as defined in Section (C)(2)(k) of this Article Four) ending on (and including) the date immediately prior to such Dividend Payment Date, dividends on each share of Series B Preferred Stock or Series B-1 Preferred Stock at the rate of 12% per annum on the Series B Accrued Value or Series B-1 Accrued Value (both as defined in Section (C)(2)(k) of this Article Four), respectively, for each such share thereof from and after the Issuance Date (as defined in Section (C)(2)(k) of this Article Four), provided that with respect to the Initial Dividend Period (as defined in Section (C)(2)(k) of this Article Four), the dividends set forth above shall be prorated based on the number of days in such period. Such dividends shall be

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fully cumulative and accumulate and accrue on a daily basis (computed on the basis of a 360-day year of twelve 30-day months) and compound quarterly in arrears on the Dividend Payment Dates at the rate indicated above and in the manner set forth herein, whether or not they have been declared and whether or not there are profits, surplus or other funds of the Company legally available for the payment of dividends.

                              (2) Such dividends shall, at the option of the Company, either be paid in cash out of lawfully available funds therefor or accrue and compound and be added to the Series B Accrued Value and Series B-1 Accrued Value on the applicable Dividend Payment Dates. Each such dividend which is payable in cash shall be payable on the Dividend Payment Date out of lawfully available funds therefor to the holders of record of shares of the Series B Preferred Stock and Series B-1 Preferred Stock, as they appear on the transfer books of the Company at the close of business on the day immediately preceding such Dividend Payment Date. Any dividend that is not otherwise paid in cash on the applicable Dividend Payment Date (whether due to the Company’s election not to pay such dividend in cash, its inability to pay such dividend in cash, or otherwise) shall automatically, and without any action on the part of the Company, accrue and compound and be added to the Series B Accrued Value and Series B-1 Accrued Value on such Dividend Payment Date.

                         (ii) Additional Dividends. In addition to dividends payable pursuant to Section (C)(2)(b)(i) of this Article Four, in the event any dividends are declared or paid or any other distribution is made on or with respect to the Common Stock (as defined in Section (C)(2)(k) of this Article Four), the holders of the Series B Preferred Stock or Series B-1 Preferred Stock as of the record date established by the Board for such dividend or distribution on the Common Stock shall be entitled to receive as additional dividends (the “Additional Dividends”) out of lawfully available funds therefor an amount (whether in the form of cash, securities or other property) equal to the amount (and in the form) of the dividends or distribution that such holder would have received had the Series B Preferred Stock or Series B-1 Preferred Stock been converted into Common Stock as of the date immediately prior to the record date of such dividend or distribution on the Common Stock; provided, however, that if the Company declares and pays a dividend or makes a distribution on the Common Stock consisting in whole or in part of Common Stock, then no such dividend or distribution shall be payable in respect of the Series B Preferred Stock or Series B-1 Preferred Stock on account of the portion of such dividend or distribution on the Common Stock payable in Common Stock to the extent that the applicable anti-dilution adjustment under Section (C)(2)(g)(viii) of this Article Four shall be made in connection therewith; and provided, further, that if the Company declares and pays a dividend or makes a distribution on the Common Stock consisting in whole or part of evidences of its indebtedness, assets (excluding any regular periodic cash dividend but including any extraordinary cash dividend), capital stock (other than Common Stock) or rights to subscribe for capital stock (other than Common Stock), then no such dividend or distribution shall be payable in respect of the Series B Preferred Stock or Series B-1 Preferred Stock on account of the portion of such dividend or distribution on the Common Stock payable in evidences of its indebtedness, assets (excluding any regular periodic cash dividend but including any extraordinary cash dividend), capital stock (other than Common Stock) or rights to subscribe for capital stock (other than Common Stock) to the extent that the applicable anti-dilution adjustment under Section (C)(2)(g)(ix) of this Article Four shall be made in connection therewith. The record date for any such Additional Dividends shall be the record date for the applicable dividend or distribution on

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the Common Stock, and any such Additional Dividends shall be payable on the same payment date as the payment date for the dividend or other distribution on the Common Stock established by the Board.

                    (iii) Restricted Payments.

                         (1) Except with respect to repurchases made after January 14, 2005 by the Company of Junior Securities from the stockholders of the Company for nominal value (the aggregate payment by the Company for all such repurchased stock not to exceed $100.00) and except with respect to repurchases of Preferred Stock, Class A Common Stock and options to purchase Common Stock, for an aggregate purchase price not to exceed $1,800,000, from participants in the Management Incentive Plan in accordance with the Restricted Stock Settlement Agreements to be executed in connection with issuances of stock or options under the Management Incentive Plan, so long as any shares of Series B Preferred Stock or Series B-1 Preferred Stock remain outstanding, the Company shall not, directly or indirectly, make any Junior Securities Distribution (as defined in Section (C)(2)(k) of this Article Four) unless (A) all accrued and unpaid dividends on the shares of Series B Preferred Stock and Series B-1 Preferred Stock shall have been paid in full and (B) sufficient amounts shall have been paid or set apart for the payment of the dividend for the current Dividend Period with respect to the Series B Preferred Stock and Series B-1 Preferred Stock and the current dividend period with respect to any Junior Parity Securities and Parity Securities.

                         (2) Except with respect to repurchases of Series C Preferred Stock pursuant to the Management Incentive Plan to the extent such repurchases either are approved by the Board or are for nominal value and except with respect to repurchases of Preferred Stock, Class A Common Stock and options to purchase Common Stock, for an aggregate purchase price not to exceed $1,800,000, from participants in the Management Incentive Plan in accordance with the Restricted Stock Settlement Agreements to be executed in connection with issuances of stock or options under the Management Incentive Plan, so long as any shares of Series B Preferred Stock or Series B-1 Preferred Stock remain outstanding, the Company shall not make any Junior Parity Securities Distribution (as defined in Section (C)(2)(k) of this Article Four) or Parity Securities Distribution (as defined in Section (C)(2)(k) of this Article Four) unless (A) all accrued and unpaid dividends on the shares of Series B Preferred Stock and Series B-1 Preferred Stock shall have been paid and (B) sufficient amounts shall have been paid or set apart for the payment of the dividend for the current Dividend Period with respect to the Series B Preferred Stock and Series B-1 Preferred Stock and the current dividend period with respect to any Junior Parity Securities and Parity Securities; provided, however, that dividends may be declared and paid on Parity Securities if dividends are declared and paid on the Series B Preferred Stock and Series B-1 Preferred Stock (in accordance with the terms of Section (C)(2)(b)(i) of this Article Four) ratably in proportion to the respective aggregate amounts of dividends accrued and unpaid on such Parity Securities and accrued and unpaid on the Series B Preferred Stock and Series B-1 Preferred Stock; and further provided that dividends may be declared and paid on Junior Parity Securities if (x) the Absolute Liquidation Preference has been fully paid with respect to the Series A Preferred Stock, the Series A-1 Preferred Stock, the Series B Preferred Stock and the Series B-1 Preferred Stock and (y) dividends are declared and paid on the Series B Preferred Stock and Series B-1 Preferred Stock (in accordance with the terms of Section (C)(2)(b)(i) of this Article Four) ratably in proportion to the respective aggregate

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amounts of dividends accrued and unpaid on such Junior Parity Securities and accrued and unpaid on the Series B Preferred Stock and Series B-1 Preferred Stock.

                         (iv) Priority With Respect To Junior Securities. Holders of shares of Series B Preferred Stock or Series B-1 Preferred Stock shall be entitled to receive the dividends provided for in this Section (C)(2)(b) of this Article Four in preference to and in priority over any dividends upon any Junior Securities.

                         (v) Dividends After Conversion. Notwithstanding anything in this Section (C)(2)(b) of this Article Four to the contrary, all accumulated and unpaid Series B Preferred Stock and Series B-1 Preferred Stock dividends shall be canceled upon the conversion of the Series B Preferred Stock and Series B-1 Preferred Stock into Class A Common Stock in accordance with Section (C)(2)(g) of this Article Four.

                    (c) Redemption.

                         (i) General. The Company shall have no right to redeem any shares of Series B Preferred Stock or Series B-1 Preferred Stock.

                         (ii) No Selective Repurchase Offers. Except with respect to repurchases of Series C Preferred Stock pursuant to the Management Incentive Plan to the extent such repurchases either are approved by the Board or are for nominal value and except with respect to repurchases of Preferred Stock, Class A Common Stock and options to purchase Common Stock, for an aggregate purchase price not to exceed $1,800,000, from participants in the Management Incentive Plan in accordance with the Restricted Stock Settlement Agreements to be executed in connection with issuances of stock or options under the Management Incentive Plan, neither the Company nor any of its Subsidiaries shall repurchase any outstanding shares of Series B Preferred Stock, Series B-1 Preferred Stock, Parity Securities or Junior Parity Securities unless the Company either (i) offers to purchase all of the then outstanding shares of Series B Preferred Stock, Series B-1 Preferred Stock, Parity Securities and Junior Parity Securities or (ii) offers to purchase shares of Series B Preferred Stock, Series B-1 Preferred Stock, Parity Securities and Junior Parity Securities from the holders in proportion to the respective number of shares of Series B Preferred Stock, Series B-1 Preferred Stock, Parity Securities and Junior Parity Securities held by each holder. In any such repurchase by the Company, if all shares of Series B Preferred Stock and Series B-1 Preferred Stock are not being repurchased, then the number of shares of Series B Preferred Stock, Series B-1 Preferred Stock, Parity Securities and Junior Parity Securities to be repurchased shall be allocated among all shares of Series B Preferred Stock, Series B-1 Preferred Stock, Parity Securities and Junior Parity Securities held by holders which accept the Company’s repurchase offer so that the shares of Series B Preferred Stock, Series B-1 Preferred Stock, Parity Securities and Junior Parity Securities are repurchased from such holders in proportion to the respective number of shares of Series B Preferred Stock, Series B-1 Preferred Stock, Parity Securities and Junior Parity Securities held by each such holder which accepts the Company’s offer (or in such other proportion as agreed by all such holders who accept the Company’s offer). In addition, in any such repurchase by the Company, the aggregate purchase price paid for shares of, and the aggregate consideration to be received by the holders of, Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock and Series C Preferred Stock shall be allocated such that (i) first,

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holders of Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock and Series B-1 Preferred Stock shall receive the Absolute Liquidation Preference with respect to each share of Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock and Series B-1 Preferred Stock and (ii) second, all remaining proceeds shall be allocated among the holders of Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock and Series C Preferred Stock in proportion to the respective number of shares of Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock and Series C Preferred Stock held by each such holder which accepts the Company’s offer (or in such other proportion as agreed by all such holders who accept the Company’s offer). Nothing in this Section (C)(2)(c)(ii) of this Article Four shall obligate a holder of shares of Series B Preferred Stock or Series B-1 Preferred Stock to accept the Company’s repurchase offer.

                    (d) Voting Rights.

                         (i) Subject to Section (C)(2)(d)(ii) of this Article Four, in addition to any voting rights provided by law or set forth in this Section (C)(2) of this Article Four. the holder of each share of Series B Preferred Stock or Series B-1 Preferred Stock shall be entitled to vote on all matters and shall be entitled to 20 votes per share of Series B Preferred Stock or Series B-1 Preferred Stock.

                         (ii) All calculations of votes per share of Series B Preferred Stock or Series B-1 Preferred Stock shall be made to the nearest ten decimal places without rounding. Nothing in this Tenth Amended and Restated Certificate of Incorporation (as amended or restated from time to time), or the Company’s Bylaws shall prohibit or otherwise impede the casting of fractional votes or delivery of fractional consents by a holder of Series B Preferred Stock or Series B-1 Preferred Stock.

                         (iii) Except as required by law, or as otherwise provided in this Tenth Amended and Restated Certificate of Incorporation, including Section (C)(2)(j) of this Article Four, the holders of shares of Series A Preferred Stock, Series A-1 Preferred Stock, Class A Common Stock, Series B Preferred Stock and Series B-1 Preferred Stock shall vote together as a single class and not as separate classes.

                    (e) Reacquired Shares. Any shares of Series B Preferred Stock or Series B-1 Preferred Stock converted, purchased or otherwise acquired by the Company in any manner whatsoever shall be retired promptly after the acquisition thereof and may not be reissued as shares of Series B Preferred Stock or Series B-1 Preferred Stock. Upon such retirement, the Company shall take all necessary action so that such shares shall become authorized but undesignated shares of Preferred Stock of the Company and may be reissued as part of another series of Preferred Stock of the Company.

                    (f) Liquidation, Dissolution or Winding Up.

                         (i) Liquidation Preference. In the event of a Liquidation (as defined in Section (C)(2)(k) of this Article Four), then, before any payment or distribution to the holders of Junior Securities (but, in the case of clauses (i) through (iii) in the definition of

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Liquidation, after payment or provision for the payment of the debts and other liabilities of the Company), each holder of a share of Series B Preferred Stock shall be entitled to receive an amount equal to the sum of the Series B Liquidation Preference (as defined in Section (C)(2)(k) of this Article Four) and, if the Absolute Liquidation Preference with respect to such share has not yet been paid by the Company, the Absolute Liquidation Preference and each holder of a share of Series B-1 Preferred Stock shall be entitled to receive an amount equal to the sum of the Series B-1 Liquidation Preference (as defined in Section (C)(2)(k) of this Article Four) and, if the Absolute Liquidation Preference with respect to such share has not yet been paid by the Company, the Absolute Liquidation Preference.

                         In the event of a Liquidation (as defined in Section (C)(2)(k) of this Article Four), then, before any payment or distribution to the holders of Junior Parity Securities, (but, in the case of clauses (i) through (iii) in the definition of Liquidation, after payment or provision for the payment of the debts and other liabilities of the Company), each holder of a share of Series B Preferred Stock shall be entitled to receive an amount equal to the Absolute Liquidation Preference (as defined in Section (C)(2)(k) of this Article Four) unless the Absolute Liquidation Preference with respect to such share has previously been paid by the Company, and each holder of a share of Series B-1 Preferred Stock shall be entitled to receive an amount equal to the Absolute Liquidation Preference (as defined in Section (C)(2)(k) of this Article Four) unless the Absolute Liquidation Preference with respect to such share has previously been paid by the Company.

                         The Company may pay all or any portion of the Absolute Liquidation Preference to be paid with respect to shares of Series B Preferred Stock and Series B-1 Preferred Stock prior to a Liquidation; provided, however, that in no case shall the Company pay all or any portion of the Absolute Liquidation Preference more than one time with respect to any share of Series B Preferred Stock or Series B-1 Preferred Stock.

                         With respect to each share of Series B Preferred Stock and Series B-1 Preferred Stock: (A) In the event that any cash payments are made, at any time, in respect of the Series B Liquidation Preference, such Series B Liquidation Preference shall be reduced on a dollar for dollar basis by the amount of such cash payments; (B) in the event that any cash payments are made, at any time, in respect of the Series B-1 Liquidation Preference, such Series B-1 Liquidation Preference shall be reduced on a dollar for dollar basis by the amount of such cash payments; and (C) in the event that any cash payments are made, at any time, in respect of the Absolute Liquidation Preference, such Absolute Liquidation Preference shall be reduced on a dollar for dollar basis by the amount of such cash payments.

                         (ii) Insufficient Assets. If, upon any such Liquidation, the assets to be distributed to the holders of Series B Preferred Stock, Series B-1 Preferred Stock, Junior Parity Securities and Parity Securities shall be insufficient to permit payment of the full amount of the Series B Liquidation Preference and the Absolute Liquidation Preference with respect to each share of Series B Preferred Stock plus the full amount of the Series B-1 Liquidation Preference and the Absolute Liquidation Preference with respect to each share of Series B-1 Preferred Stock plus amounts due on Liquidation with respect to each share of Junior Parity Securities and Parity Securities, the assets of the Company to be distributed among the holders of Series B Preferred Stock, Series B-1 Preferred Stock, Junior Parity Securities and

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Parity Securities shall be distributed ratably among holders of Series B Preferred Stock, Series B-1 Preferred Stock and Parity Securities until such holders have received the Absolute Liquidation Preference with respect to all shares of Series B Preferred Stock, Series B-1 Preferred Stock and Parity Securities and all remaining assets shall be distributed ratably among holders of Series B Preferred Stock, Series B-1 Preferred Stock, Junior Parity Securities and Parity Securities.

                         (iii) No Rights to Remaining Assets. After the payment to holders of the Series B Preferred Stock and Series B-1 Preferred Stock of the full amount of the Series B Liquidation Preference and Series B-1 Liquidation Preference, respectively, and the Absolute Liquidation Preference, if applicable, to which they are entitled under this Section (C)(2)(f) of this Article Four, the holders of Series B Preferred Stock and Series B-1 Preferred Stock as such shall have no right or claim to any of the remaining assets of the Company.

                         (iv) In-Kind Distributions. Whenever the distribution provided for in this Section (C)(2)(f) of this Article Four shall be payable in securities or other property other than cash, the value of such distribution shall be the Fair Market Value (as defined in Section (C)(2)(k) of this Article Four).

                         (v) Notice of Liquidation Event. Written notice of a Liquidation stating a payment date, the amount payable pursuant to Section (C)(2)(f)(i) of this Article Four, and the place where such amount shall be payable shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt), (b) three (3) days after sent by e-mail (with such communication to be in PDF format), with electronic confirmation of sending, provided that a copy is sent on the same day by registered mail, return receipt requested, in each case to the appropriate mailing and e-mail addresses set forth below (or to such other mailing and e-mail addresses as a party may designate by notice to the other parties in accordance with this provision), or (c) when actually delivered if sent by any other method that results in delivery (with written confirmation of receipt), not less than twenty (20) days prior to the payment date stated therein, to the holders of record of shares of Series B Preferred Stock and Series B-1 Preferred Stock, such notice to be addressed to each such holder at its address as shown by the records of the Company.

                         (vi) In connection with the receipt of the Series B Liquidation Preference or the Series B-1 Liquidation Preference in accordance with Section (C)(2)(f)(i) of this Article Four, if the holder of a share of Series B Preferred Stock or Series B-1 Preferred Stock, as applicable, is receiving the amount set forth in clause (x) of the definition of the term “Series B Liquidation Preference” or clause (x) of the definition of the term “Series B-1 Liquidation Preference” in respect to such share (and is not receiving the amount set forth in clause (y) of such definitions), the Company shall cancel 25 shares of Class A Common Stock or Class B Common Stock, or any combination thereof, held by such holder, for each such share of Series B Preferred Stock or Series B-1 Preferred Stock prior to or concurrent with the receipt of such amount. Such shares of Common Stock shall be cancelled by the Company without payment of consideration to such holder solely in respect of such shares of Common Stock.

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                    (g) Conversion of Series B Preferred Stock and Series B-1 Preferred Stock.

                         (i) Optional Conversion. Subject to the provision for adjustment set forth in this Section (C)(2)(g) of this Article Four, each share of Series B Preferred Stock and Series B-1 Preferred Stock shall be convertible, at the option of the holder thereof at any time and from the time to time after the date hereof, into a number of fully paid and nonassessable shares of Class A Common Stock equal to the quotient obtained by dividing (x) the Series B Accrued Value or Series B-1 Accrued Value, as applicable, on such share calculated through and including the date of such conversion by (y) the Conversion Price (as defined in Section (C)(2)(k) of this Article Four) in effect on the date of such conversion.

                         (ii) Mandatory Conversion. Subject to the provision for adjustment set forth in this Section (C)(2)(g) of this Article Four, in the event the Company undertakes to consummate a Qualified IPO (as defined in Section (C)(2)(k) of this Article Four), if approved by (i) a majority of the members of the Board whether or not there exist any vacancies on the Board, (ii) the holders of that percentage of the outstanding voting power of the shares of the Series A Preferred Stock and Series A-1 Preferred Stock that equals the sum of (x) the percentage of the outstanding voting power of the shares of the Series B Preferred Stock and Series B-1 Preferred Stock held by the largest holder (or group of affiliated holders) of Series B Preferred Stock and Series B-1 Preferred Stock at the Effective Time and (y) 1%, by affirmative vote at a meeting or by written consent (voting together as a separate class and to the exclusion of the holders of all other classes or series of capital stock of the Company), and (iii) the holders of that percentage of the outstanding voting power of the shares of the Series B Preferred Stock and Series B-1 Preferred Stock that equals the sum of (x) the percentage of the outstanding voting power of the shares of the Series B Preferred Stock and Series B-1 Preferred Stock held by the largest holder (or group of affiliated holders) of Series B Preferred Stock and Series B-1 Preferred Stock at the Effective Time and (y) 1%, by affirmative vote at a meeting or by written consent (voting together as a separate class and to the exclusion of the holders of all other classes or series of capital stock of the Company), each share of Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock and 12% Participating Series C Preferred Stock, par value $.01 per share (“Series C Preferred Stock”) shall be automatically converted into a number of fully paid and nonassessable shares of Class A Common Stock equal to the quotient obtained by dividing (x) the Series A Accrued Value, Series A-1 Accrued Value, Series B Accrued Value, Series B-1 Accrued Value or the amount described in clause (x) of the definition of Series C Liquidation Preference, as applicable, on such share calculated through and including the date of such conversion by (y) the Conversion Price in effect on the date of such conversion; provided, however, that such conversion shall be effective immediately prior to the consummation of such Qualified IPO and shall be conditioned upon such consummation.

                         (iii) Conversion Procedure.

                              (1) Conversion of Series B Preferred Stock or Series B-1 Preferred Stock pursuant to Section (C)(1)(g)(i) may be effected by any holder thereof upon the surrender to the Company at the offices of the Company, or at the office of any agent or agents of the Company, as may be designated by the Board (the “Transfer Agent”), of the

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certificates representing Series B Preferred Stock or Series B-1 Preferred Stock to be converted (if such shares are certificated) accompanied by a written notice stating that such holder elects to convert all or a specified portion of such holder’s shares of Series B Preferred Stock or Series B-1 Preferred Stock in accordance with the provisions of this Section (C)(2)(g)(ii) of this Article Four and specifying the name or names in which such holder wishes the certificate or certificates for shares of Class A Common Stock to be issued (if such shares are certificated). The Company shall pay any issue and transfer taxes that may be payable in respect of any issue or delivery of shares of Class A Common Stock on conversion of Series B Preferred Stock or Series B-1 Preferred Stock pursuant hereto. As promptly as practicable, and in any event within five Business Days (as defined in Section (C)(2)(k) of this Article Four) after the surrender of such certificates representing Series B Preferred Stock or Series B-1 Preferred Stock and the receipt of such notice relating thereto, the Company shall deliver or cause to be delivered (i) certificates representing the number of duly authorized, validly issued, fully paid and nonassessable shares of Class A Common Stock (if such shares are certificated) to which the holder of Series B Preferred Stock or Series B-1 Preferred Stock being converted shall be entitled and (ii) if less than all of the shares represented by the surrendered certificates are being converted, a new certificate (if such shares are certificated) representing the number of shares of Series B Preferred Stock or Series B-1 Preferred Stock which remains outstanding upon such partial conversion. Such conversion shall be deemed to have been made at the close of business on the date of giving such notice so that the rights of the holder thereof as to Series B Preferred Stock or Series B-1 Preferred Stock being converted shall cease except for the right to receive shares of Class A Common Stock in accordance herewith, and the person entitled to receive the shares of Class A Common Stock shall be treated for all purposes as having become the record holder of such shares of Class A Common Stock at such time.

                              (2) The Company shall at all times reserve and keep available for issuance upon the conversion of Series B Preferred Stock and Series B-1 Preferred Stock, free from any preemptive rights, such number of its authorized but unissued shares of Class A Common Stock as will from time to time be necessary to permit the conversion of all outstanding shares of Series B Preferred Stock and Series B-1 Preferred Stock into shares of Class A Common Stock, and shall take all action required to increase the authorized number of shares of Class A Common Stock, if necessary, to permit the conversion of all outstanding shares of Series B Preferred Stock and Series B-1 Preferred Stock. The Company shall take all actions as may be necessary to assure that all such shares of Class A Common Stock may be so issued without violation of any applicable law (including applicable federal and state securities laws) or governmental regulation or any requirements of any domestic national securities exchange or other market upon which shares of Class A Common Stock may be listed (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance).

                              (3) The Company shall not close its books against the transfer of Series B Preferred Stock, Series B-1 Preferred Stock or Class A Common Stock issued or issuable upon conversion of Series B Preferred Stock or Series B-1 Preferred Stock in any manner which interferes with the timely conversion of Series B Preferred Stock or Series B-1 Preferred Stock. The Company shall assist and cooperate with any holder of shares of Series B Preferred Stock or Series B-1 Preferred Stock required to make any governmental

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filings or obtain any governmental approval prior to or in connection with any conversion of such shares hereunder (including making any filings required to be made by the Company).

                              (4) If the shares of Class A Common Stock issuable by reason of such conversion of Series B Preferred Stock or Series B-1 Preferred Stock are convertible into or exchangeable for any other stock or securities of the Company, the Company shall, at the converting holder’s option, upon surrender of shares of Series B Preferred Stock or Series B-1 Preferred Stock to be converted by such holder as provided above together with any notice, statement or payment required to effect such conversion or exchange of Class A Common Stock, deliver to such holder, or as otherwise specified by such holder, a certificate or certificates representing the stock or securities into which the shares of Class A Common Stock issuable by reason of such conversion are so convertible or exchangeable, registered in such name or names and in such denomination or denominations as such holder has specified.

                         (iv) Adjustments Upon Changes in Capitalization.

                              (1) Except with respect to Excluded Securities (as defined in clause (3) below), in case the Company shall issue any shares of Common Stock or Common Stock Equivalents after the date the first share of Series B Preferred Stock or Series B-1 Preferred Stock, as applicable, is issued (the “Issue Date”) without consideration or at a price per share (or having a conversion, exchange or exercise price per share) of less than the Conversion Price as of the date of such issuance then, and, in each such case, the Conversion Price shall be appropriately adjusted by multiplying (A) the Conversion Price in effect on the day immediately prior to the date of issuance of such shares of Common Stock or Common Stock Equivalents by (B) a fraction, the denominator of which shall be the sum of (1) the number of Shares of Common Stock Outstanding (as defined in Section (C)(2)(k) of this Article Four) on such date prior to such issuance and (2) the number of additional shares of Common Stock issued (or issuable upon conversion, exchange or exercise of such Common Stock Equivalents), and the numerator of which shall be the sum of (x) the number of Shares of Common Stock Outstanding on such date prior to such issuance and (y) the number of shares of Common Stock purchasable at the Conversion Price in effect on the day immediately prior to the date of issuance of such shares of Common Stock or Common Stock Equivalents with the aggregate consideration receivable by the Company for the total number of shares of Common Stock so issued (or, in the case of issuances of Common Stock Equivalents, issuable upon conversion, exchange or exercise of such Common Stock Equivalents). An adjustment made pursuant to this clause (1) shall be made on the next Business Day following the date on which any such issuance is made and shall be effective retroactively to the close of business on the date of such issuance. For purposes of this clause (1), the consideration receivable by the Company in connection with the issuance of additional shares of Common Stock or of Common Stock Equivalents since the Issue Date shall be deemed to be equal to (X) in the case the consideration received by the Company is cash, the sum of the aggregate offering price, excluding any amounts paid or receivable for accrued interest or accrued dividends (before deduction of underwriting discounts or commissions or fees and expenses payable to third parties, if any) of all such Common Stock and/or Common Stock Equivalents plus the minimum aggregate amount, if any, payable upon conversion, exchange or exercise of any such Common Stock Equivalents, and (Y) in the case the consideration received by the Company is other than cash, the Fair Market Value (before deduction of underwriting discounts or commissions or fees and expenses payable to third parties, if any). The issuance or

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reissuance of any shares of Common Stock (whether treasury shares or newly issued shares) pursuant to a dividend or distribution on, or subdivision, combination or reclassification of, the outstanding shares of Common Stock requiring an adjustment in the Conversion Price pursuant to Section (C)(2)(g)(viii) of this Article Four shall not be deemed to constitute an issuance of Common Stock or Common Stock Equivalents by the Company to which this clause (1) applies. Upon the expiration or termination of any unconverted, unexchanged or unexercised Common Stock Equivalents for which an adjustment has been made pursuant to this clause (1), the adjustments shall not forthwith be reversed to effect such Conversion Price as would have been in effect at the time of such expiration or termination had such Common Stock Equivalents, to the extent outstanding immediately prior to such expiration or termination, never been issued.

                              (2) If, at any time, the purchase price provided for in any Common Stock Equivalents shall decrease, the additional consideration, if any, payable upon the conversion or exchange of any Common Stock Equivalents shall decrease, or the rate at which any Common Stock Equivalents are convertible into or exchangeable for Common Stock shall increase, the Conversion Price in effect at the time of such change shall be readjusted to the Conversion Price which would have been in effect at such time had such Common Stock Equivalents still outstanding provided for such purchase price, reduced additional consideration or increased conversion rate, as the case may be, at the time initially granted, issued or sold.

                              (3) “Excluded Securities” shall mean: (A) shares of Common Stock issued or issuable upon conversion of Class B Common Stock into Class A Common Stock in accordance with Section (B)(4) of this Article Four; (B) shares of Common Stock issued or issuable upon conversion of the Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock or Series C Preferred Stock in accordance with Section (C)(1)(g)(i), (C)(2)(g)(i) or (C)(3)(g)(i) of this Article Four; (C) shares of Common Stock issued or issuable upon conversion or exercise of any Common Stock Equivalents outstanding on the Issue Date; (D) any shares of Common Stock Equivalents and shares of Common Stock issued or issuable to directors, officers, employees or consultants of the Company following the Issue Date pursuant to any stock option, restricted stock, stock purchase or stock bonus plan, or other equity-based agreement, plan or arrangement, approved by the Board or the Compensation Committee of the Board prior to the date on which the Management Incentive Plan was adopted by the Board, in an amount not exceeding up to 1,137,219 shares of Common Stock in the aggregate (less any such shares as to which the right to such shares was forfeited in connection with an individual’s participation in the Management Incentive Plan); (E) any shares of capital stock issued as a stock dividend or upon any stock split or other subdivision or combination of shares of the Company’s capital stock, (F) any shares of capital stock issued in connection with business acquisitions, strategic partnerships and alliances, and financing transactions (other than capital stock issued to parties unrelated to any such transaction, in exchange for cash, to provide equity financing for any such transaction), (G) any shares of Common Stock issued in connection with a public offering of Common Stock registered under the Securities Act of 1933, as amended, (H) any shares of capital stock issued pursuant to pre-emptive rights under Section 7 of the Shareholders’ Agreement, (I) any shares of Series A-1 Preferred Stock or Series B-1 Preferred Stock with an Issuance Date of August 23, 2006 and (J) any shares of Series C Preferred Stock and Class B Common Stock issued pursuant to the Management Incentive Plan, not to exceed 52,332 shares of Series C Preferred Stock and 1,308,297 shares of Class B Common Stock.

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                              (4) If the Company shall set a record date for the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution and shall thereafter, and before such dividend or distribution is paid or delivered to stockholders entitled thereto, legally abandon its plan to pay or deliver such dividend or distribution, then no adjustment in the Conversion Price then in effect shall be made by reason of the taking of such record, and any such adjustment previously made as a result of the taking of such record shall be reversed.

                              (5) Successive adjustments pursuant to this Section (C)(2)(g) of this Article Four shall be made without duplication whenever any event specified in this Section (C)(2)(g) of this Article Four shall require a Conversion Price adjustment.

                              (6) All calculations of the Conversion Price shall be made to the nearest ten decimal places without rounding. No adjustment to the Conversion Price pursuant to this Section (C)(2)(g)(iv) of this Article Four shall be required unless such adjustment would require an increase or decrease of at least 1% in the Conversion Price; provided, however, that any adjustments which by reason of this Section (C)(2)(g)(iv)(6) of this Article Four are not required to be made shall be carried forward and taken into account in any subsequent adjustment. Anything in Section (C)(2)(g) of this Article Four to the contrary notwithstanding, in no event shall the then current Conversion Price be increased as a result of any calculation made at any time pursuant to Section (C)(2)(g) of this Article Four (other than pursuant to Section (C)(2)(g)(viii) of this Article Four in connection with a combination (by reverse stock split or otherwise) of the outstanding shares of Common Stock into a smaller number of shares).

                              (7) In connection with the conversion of any shares of Series B Preferred Stock or Series B-1 Preferred Stock pursuant to this Section (C)(2)(g) of this Article Four, no fractions of shares of Class A Common Stock shall be issued, but in lieu thereof the Company shall pay a cash adjustment in respect of such fractional interest in an amount equal to such fractional interest multiplied by the Closing Price per share of Class A Common Stock on the day on which such shares of Series B Preferred Stock or Series B-1 Preferred Stock are deemed to have been converted. If more than one share of Series B Preferred Stock or Series B-1 Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares of Class A Common Stock issuable upon conversion thereof shall be computed on the basis of the total number of shares of Series B Preferred Stock or Series B-1 Preferred Stock so surrendered.

                         (v) [intentionally omitted]

                         (vi) Transfer Books. The Company will at no time close its transfer books against the transfer of any Series B Preferred Stock, Series B-1 Preferred Stock or any shares of Common Stock issued or issuable upon the conversion of any shares of such Series B Preferred Stock or Series B-1 Preferred Stock, except as may otherwise be required to comply with applicable securities laws.

                         (vii) [intentionally omitted]

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                         (viii) Adjustments for Dividends, Subdivisions and Combinations. If the Company at any time (i) pays any dividend, or makes any distribution, on the outstanding shares of Common Stock in shares of Common Stock without payment of any consideration by the holders of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) the outstanding shares of Common Stock, or (iii) combines (by reverse stock split or otherwise) the outstanding shares of Common Stock into a smaller number of shares, then, and in each such case, the Conversion Price in effect immediately prior to such event or the record date therefor, whichever is earlier, shall be adjusted so that the holder of any shares of Series B Preferred Stock or Series B-1 Preferred Stock thereafter convertible into Common Stock pursuant to this Section (C)(2)(g) of this Article Four shall be entitled to receive the number of shares of Common Stock which such holder would have owned or have been entitled to receive after the happening of any of the events described above, had such shares of Series B Preferred Stock or Series B-1 Preferred Stock been converted into Common Stock immediately prior to the happening of such event or the record date therefor, whichever is earlier.

                         (ix) Special Dividends; Repurchases.

                              (1) In case the Company after the Issuance Date shall distribute to all holders of shares of Common Stock evidences of its indebtedness, assets (excluding any regular periodic cash dividend but including any extraordinary cash dividend), capital stock (other than Common Stock) or rights to subscribe for capital stock (other than Common Stock), the Conversion Price in effect immediately prior to the date of such distribution (or the date immediately prior to the date of the public announcement of such distribution, whichever is earlier) shall be adjusted by multiplying such Conversion Price by a fraction of which (x) the numerator is the remainder of (i) the Closing Price per share of Common Stock on such date, minus (ii) the Fair Market Value as of such date of the portion of assets, evidences of indebtedness, capital stock or subscription rights so distributed or paid applicable to one share of Common Stock, and (y) the denominator is the Closing Price per share of Common Stock on such date, such adjustment to become effective immediately prior to the opening of business on the day following the date of distribution or purchase; provided, however, that no adjustment shall be made (A) if such issuance is an issuance of Excluded Securities or (B) if an adjustment shall otherwise be made with respect to such distribution or issuance pursuant to Section (C)(2)(g)(iv) of this Article Four; and further provided, however, that if in any case the numerator of such fraction shall be zero or less than zero, no adjustment shall be made in such case. The Company shall provide any holder of Series B Preferred Stock or Series B-1 Preferred Stock, upon receipt of a written request therefor, with any indenture or other instrument defining the rights of the holders of any indebtedness, assets, subscription rights or capital stock referred to in this subparagraph (ix).

                              (2) In case the Company after the Issuance Date shall purchase or otherwise acquire for value any shares of Common Stock or Common Stock Equivalents in an Above Market Repurchase (as defined in Section (C)(2)(k) of this Article Four), the Conversion Price in effect immediately prior to the date of such purchase or other acquisition (or the date immediately prior to the date of the public announcement of such purchase or other acquisition) shall be reduced to an amount determined by multiplying the Conversion Price in effect immediately prior to such purchase or other acquisition, by a fraction

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of which (x) the numerator shall be (A) the product of (1) the number of Shares of Common Stock Outstanding immediately prior to such purchase or other acquisition and (2) the Fair Market Value per share of Common Stock in effect on the Business Day immediately prior to the earlier of (i) the date of such purchase or other acquisition and (ii) the date immediately prior to the date of the public announcement of such purchase or other acquisition, minus (B) the aggregate consideration paid by the Company in such Above Market Repurchase (plus, in the case of Common Stock Equivalents, the aggregate additional consideration which would have been paid to the Company upon exercise, conversion or exchange), and (y) the denominator of which is the product of (A) the number of Shares of Common Stock Outstanding immediately after such purchase or other acquisition multiplied by (B) the Fair Market Value per share of Common Stock in effect on the Business Day immediately prior to the earlier of (i) the date of such purchase or other acquisition and (ii) the date immediately prior to the date of the public announcement of such purchase or other acquisition.

                         (x) Provisions for Organic Changes. Prior to the consummation of any Organic Change (as defined in Section (C)(2)(k) of this Article Four), the Company shall make appropriate provisions to ensure that each holder of Series B Preferred Stock and/or Series B-1 Preferred Stock shall thereafter have the right to acquire and receive, in lieu of or in addition to (as the case may be) the shares of Common Stock immediately theretofore acquirable and receivable upon the conversion of such holder’s Series B Preferred Stock and Series B-1 Preferred Stock, such shares of securities or assets as such holder would have received in connection with such Organic Change if such holder had converted its Series B Preferred Stock and Series B-1 Preferred Stock, as applicable, immediately prior to such Organic Change. In each such case, the Company shall also make appropriate provisions to ensure that the provisions of this Section (C)(2)(g) of this Article Four shall thereafter be applicable to the Series B Preferred Stock and Series B-1 Preferred Stock. The Company shall not effect any such Organic Change unless, prior to the consummation thereof, the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets provides in its charter documents and in the definitive agreement providing for such Organic Change the obligation to deliver to each such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to acquire.

                         (xi) Recapitalization, Conversion and Exchange of Shares. If any recapitalization, conversion or exchange of shares or any other change in the Company’s capital structure, or any other event occurs of the type contemplated by the provisions of this Section (C)(2)(g) of this Article Four but in any such case, which is not expressly provided for by the provisions of this Section (C)(2)(g) of this Article Four (including the granting of stock appreciation rights, phantom stock rights or other rights with equity features), the Board shall make an appropriate adjustment to the Conversion Price so as to protect the rights of the holders of Series B Preferred Stock and Series B-1 Preferred Stock.

                         (xii) Exclusion from Conversion Price Adjustments. No adjustment to the Conversion Price shall be made or shall be applicable under this Section (C)(1)(g) of this Article Four with respect to (i) the issuance of shares of Series A-1 Preferred Stock or Series B-1 Preferred Stock on August 23, 2006 in connection with the conversion of the Notes outstanding under the Note Purchase Agreement, dated January 14, 2005 among the Company, the purchasers named therein and MCG Capital Corporation as

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Administrative Agent, (ii) the issuance of shares of Series C Preferred Stock and/or Class B Common Stock, including without limitation upon exercise of options to purchase Series C Preferred Stock and/or Class B Common Stock, pursuant to the Management Incentive Plan (not to exceed 52,332 shares of Series C Preferred Stock and 1,308,297 shares of Class B Common Stock) and (iii) the issuance of shares of Series B-1 Preferred Stock and Class A Common Stock issued pursuant to the Eureka Merger Agreement, or issued as a result of the exercise of warrants to purchase Series B-1 Preferred Stock and Class A Common Stock issued pursuant to the Eureka Merger Agreement.

                    (h) Reports as to Adjustment.

                         (i) Notice of Conversion Price Adjustment. Upon any adjustment of the Conversion Price then in effect pursuant to the provisions of Section (C)(2)(g) of this Article Four, then, and in each such case, the Company shall promptly deliver to the Transfer Agent of Series B Preferred Stock, Series B-1 Preferred Stock and the Common Stock and to each of the holders of Series B Preferred Stock, Series B-1 Preferred Stock and the Common Stock, a certificate signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company setting forth in reasonable detail the event requiring the adjustment, the method by which such adjustment was calculated (including any Fair Market Value determinations made by the Board) and the Conversion Price then in effect following such adjustment. Where appropriate, such notice to holders of Series B Preferred Stock and Series B-1 Preferred Stock may be given in advance.

                         (ii) Notice of Organic Change. The Company shall also give written notice to the holders of Series B Preferred Stock or Series B-1 Preferred Stock at least twenty (20) days prior to the date on which any Organic Change takes place.

                    (i) Protection of Rights. Any registered holder of Series B Preferred Stock or Series B-1 Preferred Stock may proceed to protect and enforce its rights with any and all remedies available at law or in equity.

                    (j) Protective Voting Rights and Powers. So long as shares of Series B Preferred Stock or Series B-1 Preferred Stock are outstanding, the Company shall not without first obtaining the approval (by vote at a meeting or by written consent) of the holders of a majority in voting power of the outstanding shares of Series B Preferred Stock and Series B-1 Preferred Stock entitled to vote (voting together as a class but separately from and to the exclusion of the holders of all other classes or series of stock of the Company):

                         (i) amend, alter, repeal, restate, or supplement this Tenth Amended and Restated Certificate of Incorporation or its Bylaws (in each case, whether by reclassification, merger, consolidation, reorganization or otherwise) in a manner which alters or changes, in any manner, the number of shares, or the powers, preferences or rights, of the Series B Preferred Stock or Series B-1 Preferred Stock or which would adversely affect the powers, preferences or rights of the Series B Preferred Stock or Series B-1 Preferred Stock; or

                         (ii) change the authorized number of shares of Preferred Stock, the Series B Preferred Stock or the Series B-1 Preferred Stock.

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                    (k) Definitions. In addition to any other terms defined in this Section (C)(2) of this Article Four, the following terms shall have the meanings indicated when used in this Section (C)(2) of this Article Four:

                    “Above Market Repurchase” shall mean any purchase (by tender or exchange offer, open market purchase, privately negotiated purchase or otherwise) of all or any portion of the Company’s Common Stock or Common Stock Equivalents where such purchase is for aggregate consideration that exceeds the product of (x) the aggregate number of shares of Common Stock or Common Stock Equivalents being purchased multiplied by (y) the Closing Price of the Common Stock on the date of such purchase minus, in the case of Common Stock Equivalents, the aggregate additional consideration which would have been paid to the Company upon exercise, conversion or exchange.

                    “Absolute Liquidation Preference” shall mean (x) $516.35 per share of Series B Preferred Stock or Series B-1 Preferred Stock less (y) the aggregate amount of any cash dividends paid, pursuant to Section (C)(1)(b)(i)(2) of this Article Four, with respect to each share of the Series B Preferred Stock and Series B-1 Preferred Stock; provided that the Absolute Liquidation Preference with respect to any share of Series B Preferred Stock or Series B-1 Preferred Stock shall not be reduced to an amount less than $0.00.

                    “Additional Dividends” has the meaning given in Section (C)(2)(b)(ii) of this Article Four.

                    “Board” means the Board of Directors of the Company.

                    “Business Day” means any day other than a Saturday, Sunday, or a day on which commercial banks in the City of New York are authorized or obligated by law or executive order to close.

                    “BV-BC Merger Agreement” shall mean the Amended and Restated Agreement and Plan of Merger by and among the Company, BridgeCom Holdings, Inc., a Delaware corporation, MCG IH II, Inc., a Delaware corporation, MCG Capital Corporation, a Delaware corporation, the Principal Company Stockholders named therein and certain other parties thereto, dated as of November 22, 2004.

                    “Class A Common Stock” means the Class A Common Stock, par value $.01 per share, of the Company.

                    “Class B Common Stock” means the Class B Common Stock, par value $.01 per share, of the Company.

                    “Closing Price” per share of Common Stock on any date shall mean the closing sale price on such day or, in case no such sale takes place on such day, the average of the reported closing bid and asked prices, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange, Inc. (or other national securities exchange), the Nasdaq National Market System or the Nasdaq SmallCap Market, or, if such security is not so reported in the principal consolidated transaction reporting system, the last quoted sale price or, if not so quoted, the

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average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or such other system then in use, or, if on any such date the Common Stock or such other securities are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker, selected in good faith by the Board and acceptable to the holders of a majority of the outstanding shares of Series B Preferred Stock and Series B-1 Preferred Stock, making a market in the Common Stock or such other securities of the Company. If the Common Stock or such other securities are not so reported or publicly traded, “Closing Price” shall mean the Fair Market Value.

                    “Common Stock” shall mean shares of Class A Common Stock and Class B Common Stock.

                    “Common Stock Equivalent” shall mean securities convertible into, or exchangeable or exercisable for, shares of Common Stock and options, warrants and rights to acquire such convertible securities.

                    “Conversion Price” means $50.00, subject to adjustment as provided in Section (C)(2)(g) of this Article Four.

                    “Dividend Payment Date” shall mean the last Business Day of each calendar quarter.

                    “Dividend Period” shall mean the Initial Dividend Period and, thereafter, each quarterly period from and including a Dividend Payment Date to the next following Dividend Payment Date (but without including such later Dividend Payment Date).

                    “Effective Time” shall have the meaning set forth in the BV-BC Merger Agreement.

                    “Eureka Merger Agreement” shall mean the Agreement and Plan of Merger, dated February 23, 2007, among the Company, Eureka Acquisition Corporation, a Delaware corporation, Eureka Broadband Corporation, a Delaware corporation, the significant stockholders or Eureka Broadband Corporation set forth therein, and Jeffrey Ginsberg, as agent of the stockholders of Eureka Broadband Corporation.

                    “Excluded Securities” has the meaning given in Section (C)(2)(g)(iv)(3) of this Article Four.

                    “Fair Market Value” shall mean the price that a willing buyer would pay to a willing seller in an arm’s length transaction, it being understood that the buyer and seller in arriving at such price in determining the value would each consider, the other factors customarily considered by valuation professionals, as the Board in good faith shall reasonably determine. The Board shall promptly provide written notice of any Fair Market Value determination to the holders of the outstanding shares of Series B Preferred Stock and Series B-1 Preferred Stock; provided, however, that if the Board has provided notice of such determination in connection with its obligations under Section (C)(2)(h)(i) of this Article Four, the Board shall not be required to provide a separate notice.

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                    “Initial Dividend Period” shall mean the dividend period commencing on the Issuance Date and ending on (and including) the date immediately prior to the first Dividend Payment Date to occur thereafter.

                    “Issuance Date” shall mean: (i) with respect to any share of Series B Preferred Stock, the date on which the Company initially issues such share of Series B Preferred Stock, regardless of the number of times transfer of such share is made on the stock records of the Company and regardless of the number of certificates which may be issued to evidence such share; and (ii) with respect to any share of Series B-1 Preferred Stock, August 23, 2006, regardless of the number of times transfer of such share is made on the stock records of the Company, regardless of the number of certificates which may be issued to evidence such share and regardless of when such share is actually issued. For clarification, clause (ii) above shall have the effect that all shares of Series B-1 Preferred Stock (including but not limited to shares that are issued after August 23, 2006) are entitled to dividends in an amount equal to the amount of dividends that would have accrued from August 23, 2006, regardless of when such shares are actually issued.

                    “Issue Date” has the meaning given in Section (C)(2)(g)(iv)(1) of this Article Four.

                    “Junior Parity Securities” shall mean each class or series of capital stock of the Company now or hereafter authorized, issued or outstanding the terms of which specifically provide that such class or series will rank junior to the Series B Preferred Stock and Series B-1 Preferred Stock with respect to payment of dividends or distributions, or the distribution of assets upon liquidation, winding up or dissolution until the Absolute Liquidation Preference has been paid with respect to the Series B Preferred Stock and Series B-1 Preferred Stock but on a parity with the Series B Preferred Stock and Series B-1 Preferred Stock after payment of such Absolute Liquidation Preferences. The Series C Preferred Stock shall constitute Junior Parity Securities. This definition of Junior Parity Securities shall include, without limitation, any Common Stock Equivalents exercisable or exchangeable for or convertible into any Junior Parity Securities.

                    “Junior Parity Securities Distribution” shall mean the declaration or payment on account of, or setting apart for payment money for a sinking or other similar fund for, the purchase, redemption or other retirement of Junior Parity Securities (other than by conversion into or exchange for Junior Securities) or any Common Stock Equivalents exercisable or exchangeable for or convertible into any shares of Junior Parity Securities, or any distribution in respect thereof (except for (i) dividends on Junior Parity Securities which are payable solely in additional shares of Junior Parity Securities, or by the increase in the liquidation value of Junior Parity Securities, in each case, as required by the terms of such Junior Parity Securities or (ii) cashless exercises of options), either directly or indirectly, and whether in cash, obligations, Common Stock, Common Stock Equivalents or other property, or the purchase or redemption by any corporation or other entity directly or indirectly controlled by the Company of any of the Junior Parity Securities or any Common Stock Equivalents exercisable or exchangeable for or convertible into any Junior Parity Securities.

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                    “Junior Securities” shall mean the Company’s Common Stock and all classes and series of capital stock of the Company now or hereafter authorized, issued or outstanding which by their terms expressly provide that they are junior to the Series B Preferred Stock and Series B-1 Preferred Stock, or which do not specify their rank, with respect to payment of dividends or distributions, or the distribution of assets upon liquidation, winding up or dissolution. This definition of Junior Securities shall include, without limitation, any Common Stock Equivalents exercisable or exchangeable for or convertible into any Junior Securities.

                    “Junior Securities Distribution” shall mean the declaration or payment on account of, or setting apart for payment money for a sinking or other similar fund for, the purchase, redemption or other retirement of, any Junior Securities, or any distribution in respect thereof (except for (i) dividends on Junior Securities which are payable solely in additional shares of Junior Securities, as required by the terms of such Junior Securities, or (ii) cashless exercises of options), either directly or indirectly, and whether in cash, obligations, Common Stock, Common Stock Equivalents or other property, or the purchase or redemption by any Person directly or indirectly controlled by the Company of any of the Junior Securities.

                    “Liquidation” shall mean that (i) the Company shall (A) commence a voluntary case under the Federal bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency or similar law, (B) consent to the entry of an order for relief in an involuntary case under such law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company, or of any substantial part of its property, (C) make an assignment for the benefit of its creditors, or (D) admit in writing its inability to pay its debts generally as they become due, (ii)(A) a decree or order for relief in respect of the Company shall be entered by a court having jurisdiction in the premises in an involuntary case under the Federal bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and (B) any such decree or order shall be unstayed and in effect for a period of 60 consecutive days and on account of any such event the Company shall liquidate, dissolve or wind up, (iii) the Company shall otherwise liquidate, dissolve or wind up, or (iv) the Company shall (A) merge or consolidate with a Person (other than a merger (i) which only involves a change in the Company’s state of incorporation or (ii) with a wholly-owned subsidiary (directly or indirectly)), and pursuant to such merger or consolidation the Company is not the surviving entity; (B) merge or consolidate, and pursuant to such merger or consolidation the Company is the surviving entity but the holders of the Company’s outstanding equity securities immediately prior to such merger or consolidation (x) are not the holders of equity securities of the Company that represent at least 50% of the total number of votes entitled to be cast in the election of directors immediately following such merger or consolidation or (y) have otherwise relinquished control of the Company following such merger or consolidation; (C) sell or transfer all or substantially all of the assets of the Company to one or more Persons that are not wholly-owned subsidiaries (directly or indirectly) of the Company in any transaction (in a transaction not described in clauses (i) through (iii)) or, series of transactions, or (D) sell or transfer a majority of the voting stock of the Company to one or more Persons that are not wholly-owned subsidiaries (directly or indirectly) of the Company in any transaction or series of transactions. Notwithstanding anything to the contrary in this

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definition of “Liquidation,” the transactions contemplated or effected by the BV-BC Merger Agreement (as defined in this Section (C)(2)(k) of this Article Four) shall not be deemed to be a Liquidation.

                    “Organic Change” shall mean any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Company’s assets to another Person or other transaction which is effected in such a manner that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) securities or assets with respect to or in exchange for Common Stock; provided, however, that an Organic Change shall exclude a Liquidation.

                    “Parity Securities” shall mean each class or series of capital stock of the Company now or hereafter authorized, issued or outstanding the terms of which specifically provide that such class or series will rank on a parity with the Series B Preferred Stock and Series B-1 Preferred Stock with respect to payment of dividends and distributions, and the distribution of assets upon liquidation, winding up or dissolution. The Series A Preferred Stock and the Series A-1 Preferred Stock shall constitute Parity Securities, but the Series C Preferred Stock shall not constitute Parity Securities. This definition of Parity Securities shall include, without limitation, any Common Stock Equivalents exercisable or exchangeable for or convertible into any Parity Securities.

                    “Parity Securities Distribution” shall mean the declaration or payment on account of, or setting apart for payment money for a sinking or other similar fund for, the purchase, redemption or other retirement of Parity Securities (other than by conversion into or exchange for Junior Securities) or any Common Stock Equivalents exercisable or exchangeable for or convertible into any shares of Parity Securities, or any distribution in respect thereof (except for (i) dividends on Parity Securities which are payable solely in additional shares of Parity Securities, or by the increase in the liquidation value of Parity Securities, in each case, as required by the terms of such Parity Securities or (ii) cashless exercises of options), either directly or indirectly, and whether in cash, obligations, Common Stock, Common Stock Equivalents or other property, or the purchase or redemption by any corporation or other entity directly or indirectly controlled by the Company of any of the Parity Securities or any Common Stock Equivalents exercisable or exchangeable for or convertible into any Parity Securities.

                    “Person” shall mean any individual, firm, corporation, limited liability company, partnership or other entity, and shall include any successor (by merger or otherwise) of such entity.

                    “Qualified IPO” shall mean any issuance and sale of shares of Common Stock which occurs in an underwritten public offering registered under the Securities Act of 1933, as amended, and provides net proceeds to the Company of not less than $50,000,000.

                    “Restricted Stock Settlement Agreements” means both (i) the Restricted Stock Settlement Agreement, dated April 2007, by and among the Company, MCG Capital Corporation, a Delaware corporation, BridgeCom Holdings, Inc., a Delaware corporation, and the individual grantee named therein and (ii) the Restricted Stock Settlement Agreement, dated April 2007, by and among the Company and the individual grantee named therein.

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                    “Senior Securities” shall mean each class or series of capital stock of the Company now or hereafter authorized, issued or outstanding the terms of which specifically provide that such class or series will rank senior to the Series B Preferred Stock and Series B-1 Preferred Stock with respect to payment of dividends and distributions, and the distribution of assets upon liquidation, winding up or dissolution. This definition of Senior Securities shall include, without limitation, any Common Stock Equivalents exercisable or exchangeable for or convertible into any Senior Securities.

                    “Series A Preferred Stock” shall mean the 12% Participating Series A Preferred Stock, par value $.01 per share of the Company.

                    “Series A-1 Preferred Stock” shall mean the 12% Participating Series A-1 Preferred Stock, par value $.01 per share of the Company.

                    “Series B Accrued Value” shall mean, with respect to a share of Series B Preferred Stock, as at any date, the sum of (as adjusted for any split, subdivision, combination, consolidation, recapitalization or similar event with respect to the Series B Preferred Stock) (i) the Series B Stated Value, plus (ii) an amount equal to the aggregate of all accrued but unpaid dividends (whether or not declared) on such share through and including such date which have been added to Series B Accrued Value pursuant to Section (C)(2)(b)(i)(2) of this Article Four, minus (iii) any amounts paid in respect of the Series B Liquidation Preference.

                    “Series B Liquidation Preference” shall mean the greater of (x) the Series B Accrued Value on a share of Series B Preferred Stock less the Absolute Liquidation Preference, as at any date, or (y) the amount of securities, cash or other property that would be payable to such holder in the Liquidation in respect of Class A Common Stock issuable upon conversion of such share of Series B Preferred Stock if all outstanding shares of Series B Preferred Stock were converted into Class A Common Stock immediately prior to the Liquidation in accordance with Section (C)(2)(g) of this Article Four hereof less the Absolute Liquidation Preference, as at any date.

                    “Series B Objecting Parties” has the meaning given in the definition of Fair Market Value in this Section (C)(2)(k) of this Article Four.

                    “Series B Preferred Stock” has the meaning given in Section (C)(2)(a)(i) of this Article Four.

                    “Series B Stated Value” shall mean, with respect to a share of Series B Preferred Stock, $1,000 (as adjusted for any split, subdivision, combination, consolidation, recapitalization or similar event with respect to the Series B Preferred Stock).

                    “Series B-1 Preferred Stock” has the meaning given in Section (C)(2)(a)(ii) of this Article Four.

                    “Series B-1 Accrued Value” shall mean, with respect to a share of Series B-1 Preferred Stock, as at any date, the sum of (as adjusted for any split, subdivision, combination, consolidation, recapitalization or similar event with respect to the Series B-1 Preferred Stock) (i) the Series B-1 Stated Value, plus (ii) an amount equal to the aggregate of all

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accrued but unpaid dividends (whether or not declared) on such share through and including such date which have been added to Series B-1 Accrued Value pursuant to Section (C)(2)(b)(i)(2) of this Article Four, minus (iii) any amounts paid in respect of the Series B-1 Liquidation Preference; provided that, irrespective of the aforementioned sum, on the first Dividend Payment Date following the Issuance Date with respect to the Series B-1 Preferred Stock the Series B-1 Accrued Value shall be reset and shall equal the Series B Accrued Value on such date.

                    “Series B-1 Liquidation Preference” shall mean the greater of (x) the Series B-1 Accrued Value on a share of Series B-1 Preferred Stock less the Absolute Liquidation Preference, as at any date, or (y) the amount of securities, cash or other property that would be payable to such holder in the Liquidation in respect of Class A Common Stock issuable upon conversion of such share of Series B-1 Preferred Stock if all outstanding shares of Series B-1 Preferred Stock were converted into Class A Common Stock immediately prior to the Liquidation in accordance with Section (C)(2)(g) of this Article Four hereof less the Absolute Liquidation Preference, as at any date.

                    “Series B-1 Preferred Stock” shall mean the 12% Participating Series B-1 Preferred Stock, par value $.01 per share of the Company.

                    “Series B-1 Stated Value” shall mean, with respect to a share of Series B-1 Preferred Stock, the amount that equals the Series A Accrued Value of the Series A Preferred Stock as of August 23, 2006 (as adjusted for any split, subdivision, combination, consolidation, recapitalization or similar event with respect to the Series B-1 Preferred Stock).

                    “Series C Preferred Stock” shall mean the 12% Participating Series C Preferred Stock, par value $.01 per share of the Company.

                    “Shareholders’ Agreement” means the Third Amended and Restated Shareholders’ Agreement, dated as of May 31, 2007, by and among the Company and the shareholders party thereto, as amended from time to time. The Company will provide a copy of the Shareholders’ Agreement to any stockholders upon request.

                    “Shares of Common Stock Outstanding” shall mean at any time, with respect to the Company, the sum of (i) all shares of Common Stock issued and outstanding at such time, (ii) all shares of Common Stock which are then issuable upon conversion of the Series A Preferred Stock, (iii) all shares of Common Stock which are then issuable upon conversion of the Series A-1 Preferred Stock, (iv) all shares of Common Stock which are then issuable upon conversion of the Series B Preferred Stock, (v) all shares of Common Stock which are then issuable upon conversion of the Series B-1 Preferred Stock or upon the exercise of warrants to purchase Series B-1 Preferred Stock and (vi) all shares of Common Stock which are then issuable upon conversion of the Series C Preferred Stock all shares of Common Stock which are then issuable upon conversion of the Series C Preferred Stock or upon the exercise of options to purchase Series C Preferred Stock.

                    “Subsidiaries” of the Company shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by the Company.

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                    “Transfer Agent” has the meaning given in Section (C)(2)(g)(iii) of this Article Four.

                    (l) Notices. Unless otherwise expressly specified or permitted by the terms hereof, all notices, demands and other communications to be given or delivered under or by reason of the provisions of this Section (C)(2) of this Article Four shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt), (b) three (3) days after sent by e-mail (with such communication to be in PDF format), with electronic confirmation of sending, provided that a copy is sent on the same day by registered mail, return receipt requested, in each case to the appropriate mailing and e-mail addresses set forth below (or to such other mailing and e-mail addresses as a party may designate by notice to the other parties in accordance with this provision), or (c) when actually delivered if sent by any other method that results in delivery (with written confirmation of receipt) to the following addresses:

Broadview Networks Holdings, Inc.
800 Westchester Ave
5^th Floor, Suite N501
Rye Brook, NY 10573
Attention: Chief Executive Officer

or at such other address as may have been furnished in writing by the Company to the holders of the outstanding shares of Series B Preferred Stock or Series B-1 Preferred Stock.

               3. Series C Preferred Stock

                    (a) Designation, Number and Rank.

                         (i) 52,332 shares of Preferred Stock are hereby designated as 12% Participating Series C Preferred Stock, par value $.01 per share (the “Series C Preferred Stock”).

                         (ii) The Series C Preferred Stock shall, with respect to payment of dividends, redemption payments and the distribution of assets upon liquidation, winding-up or dissolution, rank (i) senior to all Junior Securities (as defined in Section (C)(3)(k) of this Article Four), (ii) in some respects junior to and in some respects on a parity with all Senior Parity Securities as more fully described herein (as defined in Section (C)(3)(k) of this Article Four), (iii) on a parity with all Parity Securities (as defined in Section (C)(3)(k) of this Article Four) and (iv) junior to all Senior Securities (as defined in Section (C)(3)(k) of this Article Four).

                    (b) Dividends and Distributions.

                         (i) Dividend Rights.

                              (1) Except as described in Section (C)(3)(b)(i)(2) of this Article Four, the holders of shares of Series C Preferred Stock shall be entitled to receive on each Dividend Payment Date (as defined in Section (C)(3)(k) of this Article Four) out of lawfully available funds therefor, in respect of the Dividend Period (as defined in Section (C)(3)(k) of this Article Four) ending on (and including) the date immediately prior to such Dividend Payment Date, dividends on each share of Series C Preferred Stock at the rate of 12% per annum on the Series C Accrued Value (as defined in Section

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(C)(3)(k) of this Article Four) for each such share thereof from and after the Issuance Date (as defined in Section (C)(3)(k) of this Article Four), provided that with respect to the Initial Dividend Period (as defined in Section (C)(3)(k) of this Article Four), the dividends set forth above shall be prorated based on the number of days in such period. Such dividends shall be fully cumulative and accumulate and accrue on a daily basis (computed on the basis of a 360-day year of twelve 30-day months) and compound quarterly in arrears on the Dividend Payment Dates at the rate indicated above and in the manner set forth herein, whether or not they have been declared and whether or not there are profits, surplus or other funds of the Company legally available for the payment of dividends.

                              (2) Such dividends shall, at the option of the Company, either be paid in cash out of lawfully available funds therefor or accrue and compound and be added to the Series C Accrued Value on the applicable Dividend Payment Dates; provided that no such dividends shall be paid in cash with respect to the Series C Preferred Stock unless and until the Absolute Liquidation Preference has been paid in full with respect to all shares of Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock and Series B-1 Preferred Stock; and provided further that, with respect to any time period in which cash dividends are paid with respect to the Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock and Series B-1 Preferred Stock, the amount of any dividends that accrue with respect to the Series C Preferred Stock shall be reduced by the amount of such cash dividend paid with respect to each share of Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock and Series B-1 Preferred Stock; and provided further that at no time shall the Series C Accrued Value exceed the Series A Accrued Value. Each such dividend which is payable in cash shall be payable on the Dividend Payment Date out of lawfully available funds therefor to the holders of record of shares of the Series C Preferred Stock, as they appear on the transfer books of the Company at the close of business on the day immediately preceding such Dividend Payment Date. Except as otherwise provided in this Section (C)(3)(b)(i)(2) of this Article Four, any dividend that is not otherwise paid in cash on the applicable Dividend Payment Date (whether due to the Company’s election not to pay such dividend in cash, its inability to pay such dividend in cash, or otherwise) shall automatically, and without any action on the part of the Company, accrue and compound on such Dividend Payment Date.

                         (ii) Additional Dividends. In addition to dividends payable pursuant to Section (C)(3)(b)(i) of this Article Four, in the event any dividends are declared or paid or any other distribution is made on or with respect to the Common Stock (as defined in Section (C)(3)(k) of this Article Four), the holders of the Series C Preferred Stock as of the record date established by the Board for such dividend or distribution on the Common Stock shall be entitled to receive as additional dividends (the “Additional Dividends”) out of lawfully available funds therefor an amount (whether in the form of cash, securities or other property) equal to the amount (and in the form) of the dividends or distribution that such holder would have received had the Series C Preferred Stock been converted into Common Stock as of the date immediately prior to the record date of such dividend or distribution on the Common Stock; provided, however, that if the Company declares and pays a dividend or makes a distribution on the Common Stock consisting in whole or in part of Common Stock, then no such dividend or distribution shall be payable in respect of the Series C Preferred Stock on account of the portion

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of such dividend or distribution on the Common Stock payable in Common Stock to the extent that the applicable anti-dilution adjustment under Section (C)(3)(g)(viii) of this Article Four shall be made in connection therewith; and provided, further, that if the Company declares and pays a dividend or makes a distribution on the Common Stock consisting in whole or part of evidences of its indebtedness, assets (excluding any regular periodic cash dividend but including any extraordinary cash dividend), capital stock (other than Common Stock) or rights to subscribe for capital stock (other than Common Stock), then no such dividend or distribution shall be payable in respect of the Series C Preferred Stock on account of the portion of such dividend or distribution on the Common Stock payable in evidences of its indebtedness, assets (excluding any regular periodic cash dividend but including any extraordinary cash dividend), capital stock (other than Common Stock) or rights to subscribe for capital stock (other than Common Stock) to the extent that the applicable anti-dilution adjustment under Section (C)(3)(g)(ix) of this Article Four shall be made in connection therewith. The record date for any such Additional Dividends shall be the record date for the applicable dividend or distribution on the Common Stock, and any such Additional Dividends shall be payable on the same payment date as the payment date for the dividend or other distribution on the Common Stock established by the Board.

                         (iii) Restricted Payments.

                              (1) Except with respect to repurchases made after January 14, 2005 by the Company of Junior Securities from the stockholders of the Company for nominal value (the aggregate payment by the Company for all such repurchased stock not to exceed $100.00) and except with respect to repurchases of Preferred Stock, Class A Common Stock and options to purchase Common Stock, for an aggregate purchase price not to exceed $1,800,000, from participants in the Management Incentive Plan in accordance with the Restricted Stock Settlement Agreements to be executed in connection with issuances of stock or options under the Management Incentive Plan, so long as any shares of Series C Preferred Stock remain outstanding, the Company shall not, directly or indirectly, make any Junior Securities Distribution (as defined in Section (C)(3)(k) of this Article Four) unless (A) all accrued and unpaid dividends on the shares of Series C Preferred Stock shall have been paid in full and (B) sufficient amounts shall have been paid or set apart for the payment of the dividend for the current Dividend Period with respect to the Series C Preferred Stock and the current dividend period with respect to any Senior Parity Securities and Parity Securities.

                              (2) Except with respect to repurchases of Series C Preferred Stock pursuant to the Management Incentive Plan to the extent such repurchases either are approved by the Board or are for nominal value and except with respect to repurchases of Preferred Stock, Class A Common Stock and options to purchase Common Stock, for an aggregate purchase price not to exceed $1,800,000, from participants in the Management Incentive Plan in accordance with the Restricted Stock Settlement Agreements to be executed in connection with issuances of stock or options under the Management Incentive Plan, so long as any shares of Series C Preferred Stock remain outstanding, the Company shall not make any Parity Securities Distribution (as defined in Section (C)(3)(k) of this Article Four) unless (A) all accrued and unpaid dividends on the shares of Series C Preferred Stock shall have been paid and (B) sufficient amounts shall have been paid or set apart for the payment of the dividend for the current Dividend Period with respect to the Series C Preferred Stock and the current dividend

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period with respect to any Parity Securities; provided, however, that dividends may be declared and paid on Parity Securities if dividends are declared and paid on the Series C Preferred Stock (in accordance with the terms of Section (C)(3)(b)(i) of this Article Four) ratably in proportion to the respective aggregate amounts of dividends accrued and unpaid on such Parity Securities and accrued and unpaid on the Series C Preferred Stock.

                              After the Absolute Liquidation Preference has been paid in full with respect to all outstanding shares of Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock and Series B-1 Preferred Stock, so long as any shares of Series C Preferred Stock remain outstanding, the Company shall not make any Senior Parity Securities Distribution (as defined in Section (C)(3)(k) of this Article Four) unless (A) all accrued and unpaid dividends on the shares of Series C Preferred Stock shall have been paid and (B) sufficient consideration shall have been paid or set apart for the payment of the dividend for the current Dividend Period with respect to the Series C Preferred Stock and the current dividend period with respect to any Senior Parity Securities and Parity Securities; provided, however, that dividends may be declared and paid on Senior Parity Securities if dividends are declared and paid on the Series C Preferred Stock (in accordance with the terms of Section (C)(3)(b)(i) of this Article Four) ratably in proportion to the respective aggregate amounts of dividends accrued and unpaid on such Senior Parity Securities and accrued and unpaid on the Series C Preferred Stock and Parity Securities.

                         (iv) Priority With Respect To Junior Securities. Holders of shares of Series C Preferred Stock shall be entitled to receive the dividends provided for in this Section (C)(3)(b) of this Article Four in preference to and in priority over any dividends upon any Junior Securities.

                         (v) Dividends After Conversion. Notwithstanding anything in this Section (C)(3)(b) of this Article Four to the contrary, all accumulated and unpaid Series C Preferred Stock dividends shall be canceled upon the conversion of the Series C Preferred Stock into Class B Common Stock in accordance with Section (C)(3)(g) of this Article Four.

                    (c) Redemption.

                         (i) General. The Company shall have no right to redeem any shares of Series C Preferred Stock.

                         (ii) No Selective Repurchase Offers. Except with respect to repurchases of Series C Preferred Stock pursuant to the Management Incentive Plan to the extent such repurchases either are approved by the Board or are for nominal value and except with respect to repurchases of Preferred Stock, Class A Common Stock and options to purchase Common Stock, for an aggregate purchase price not to exceed $1,800,000, from participants in the Management Incentive Plan in accordance with the Restricted Stock Settlement Agreements to be executed in connection with issuances of stock or options under the Management Incentive Plan, neither the Company nor any of its Subsidiaries shall repurchase any outstanding shares of Series C Preferred Stock, Senior Parity Securities or Parity Securities unless the Company either (i) offers to purchase all of the then outstanding shares of Series C Preferred Stock, Senior Parity Securities and Parity Securities or (ii) offers to purchase shares of Series C Preferred Stock,

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Senior Parity Securities and Parity Securities from the holders in proportion to the respective number of shares of Series C Preferred Stock, Senior Parity Securities and Parity Securities held by each holder. In any such repurchase by the Company, if all shares of Series C Preferred Stock are not being repurchased, then the number of shares of Series C Preferred Stock, Senior Parity Securities and Parity Securities to be repurchased shall be allocated among all shares of Series C Preferred Stock, Senior Parity Securities and Parity Securities held by holders which accept the Company’s repurchase offer so that the shares of Series C Preferred Stock, Senior Parity Securities and Parity Securities are repurchased from such holders in proportion to the respective number of shares of Series C Preferred Stock, Senior Parity Securities and Parity Securities held by each such holder which accepts the Company’s offer (or in such other proportion as agreed by all such holders who accept the Company’s offer). In addition, in any such repurchase by the Company, the aggregate purchase price paid for shares of, and the aggregate consideration to be received by the holders of, Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock and Series C Preferred Stock shall be allocated such that (i) first, holders of Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock and Series B-1 Preferred Stock shall receive the Absolute Liquidation Preference with respect to each share of Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock and Series B-1 Preferred Stock and (ii) second, all remaining proceeds shall be allocated among the holders of Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock and Series C Preferred Stock in proportion to the respective number of shares of Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock and Series C Preferred Stock held by each such holder which accepts the Company’s offer (or in such other proportion as agreed by all such holders who accept the Company’s offer). Nothing in this Section (C)(3)(c)(ii) of this Article Four shall obligate a holder of shares of Series C Preferred Stock to accept the Company’s repurchase offer.

                    (d) Voting Rights. Holders of Series C Preferred Stock shall have no voting rights except as provided by law.

                    (e) Reacquired Shares. Except with respect to shares repurchased by the Company for nominal value, any shares of Series C Preferred Stock converted, purchased or otherwise acquired by the Company in any manner whatsoever shall be retired promptly after the acquisition thereof and may not be reissued as shares of Series C Preferred Stock. Upon such retirement, the Company shall take all necessary action so that such shares shall become authorized but undesignated shares of Preferred Stock of the Company and may be reissued as part of another series of Preferred Stock of the Company.

                    (f) Liquidation, Dissolution or Winding Up.

                         (i) Liquidation Preference. In the event of a Liquidation (as defined in Section (C)(3)(k) of this Article Four), then, before any payment or distribution to the holders of Junior Securities (but, in the case of clauses (i) through (iii) in the definition of Liquidation, after payment or provision for the payment of the debts and other liabilities of the Company), each holder of a share of Series C Preferred Stock shall be entitled to receive an amount equal to the Series C Liquidation Preference (as defined in Section (C)(3)(k) of this Article Four). In the event that any payments are made, at any time, in respect of the Series C Liquidation Preference, the Series C

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Liquidation Preference shall be reduced on a dollar for dollar basis by the amount of such payments.

                    (ii) Insufficient Assets. If, upon any such Liquidation, the assets to be distributed to the holders of Series C Preferred Stock, Senior Parity Securities and Parity Securities shall be insufficient to permit payment of the full amount of the Series C Liquidation Preference with respect to each share of Series C Preferred Stock plus amounts due on Liquidation with respect to each share of Senior Parity Securities and Parity Securities, the assets of the Company to be distributed among the holders of Series C Preferred Stock, Senior Parity Securities and Parity Securities shall be distributed ratably among holders of Senior Parity Securities until such holders have received the Absolute Liquidation Preference with respect to all shares of Senior Parity Securities and all remaining assets shall be distributed ratably among holders of Series C Preferred Stock, Senior Parity Securities and Parity Securities.

                    (iii) No Rights to Remaining Assets. After the payment to holders of the Series C Preferred Stock of the full amount of the Series C Liquidation Preference to which they are entitled under this Section (C)(3)(f) of this Article Four, the holders of Series C Preferred Stock as such shall have no right or claim to any of the remaining assets of the Company.

                    (iv) In-Kind Distributions. Whenever the distribution provided for in this Section (C)(3)(f) of this Article Four shall be payable in securities or other property other than cash, the value of such distribution shall be the Fair Market Value (as defined in Section (C)(3)(k) of this Article Four).

                    (v) Notice of Liquidation Event. Written notice of a Liquidation stating a payment date, the amount payable pursuant to Section (C)(3)(f)(i) of this Article Four, and the place where such amount shall be payable shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt), (b) three (3) days after sent by e-mail (with such communication to be in PDF format), with electronic confirmation of sending, provided that a copy is sent on the same day by registered mail, return receipt requested, in each case to the appropriate mailing and e-mail addresses set forth below (or to such other mailing and e-mail addresses as a party may designate by notice to the other parties in accordance with this provision), or (c) when actually delivered if sent by any other method that results in delivery (with written confirmation of receipt), not less than twenty (20) days prior to the payment date stated therein, to the holders of record of shares of Series C Preferred Stock, such notice to be addressed to each such holder at its address as shown by the records of the Company.

                    (vi) In connection with the receipt of the Series C Liquidation Preference in accordance with Section (C)(3)(f)(i) of this Article Four, if the holder of a share of Series C Preferred Stock is receiving the amount set forth in clause (x) of the definition of the term “Series C Liquidation Preference” in respect to such share (and is not receiving the amount set forth in clause (y) of such definitions), the Company shall cancel 25 shares of Class A Common Stock or Class B Common Stock, or any combination thereof, held by such holder, for each such share of Series C Preferred Stock prior to or concurrent with the receipt of such

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amount. Such shares of Common Stock shall be cancelled by the Company without payment of consideration to such holder solely in respect of such shares of Common Stock.

                    (g) Conversion of Series C Preferred Stock.

                         (i) Optional Conversion. Subject to the provision for adjustment set forth in this Section (C)(3)(g) of this Article Four, each share of Series C Preferred Stock shall be convertible, at the option of the holder thereof at any time and from the time to time after the date hereof, into a number of fully paid and nonassessable shares of Class B Common Stock equal to the quotient obtained by dividing (x) the amount described in clause (x) of the definition of Series C Liquidation Preference with respect to such share calculated through and including the date of such conversion by (y) the Conversion Price (as defined in Section (C)(3)(k) of this Article Four) in effect on the date of such conversion.

                         (ii) Mandatory Conversion. Subject to the provision for adjustment set forth in this Section (C)(3)(g) of this Article Four, in the event the Company undertakes to consummate a Qualified IPO (as defined in Section (C)(3)(k) of this Article Four), if approved by (i) a majority of the members of the Board whether or not there exist any vacancies on the Board, (ii) the holders of that percentage of the outstanding voting power of the shares of the Series A Preferred Stock and Series A-1 Preferred Stock that equals the sum of (x) the percentage of the outstanding voting power of the shares of the Series B Preferred Stock and Series B-1 Preferred Stock held by the largest holder (or group of affiliated holders) of Series B Preferred Stock and Series B-1 Preferred Stock at the Effective Time and (y) 1%, by affirmative vote at a meeting or by written consent (voting together as a separate class and to the exclusion of the holders of all other classes or series of capital stock of the Company), and (iii) the holders of that percentage of the outstanding voting power of the shares of the Series B Preferred Stock and Series B-1 Preferred Stock that equals the sum of (x) the percentage of the outstanding shares of the Series B Preferred Stock and Series B-1 Preferred Stock held by the largest holder (or group of affiliated holders) of Series B Preferred Stock and Series B-1 Preferred Stock at the Effective Time and (y) 1%, by affirmative vote at a meeting or by written consent (voting together as a separate class and to the exclusion of the holders of all other classes or series of capital stock of the Company), each share of Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock and Series C Preferred Stock shall be automatically converted into a number of fully paid and nonassessable shares of Class A Common Stock equal to the quotient obtained by dividing (x) the Series A Accrued Value, Series A-1 Accrued Value, Series B Accrued Value, Series B-1 Accrued Value or the amount described in clause (x) of the definition of Series C Liquidation Preference, as applicable, on such share calculated through and including the date of such conversion by (y) the Conversion Price in effect on the date of such conversion; provided, however, that such conversion shall be effective immediately prior to the consummation of such Qualified IPO and shall be conditioned upon such consummation.

                         (iii) Conversion Procedure.

                              (1) Conversion of Series C Preferred Stock pursuant to Section (C)(3)(g)(i) may be effected by any holder thereof upon the surrender to the Company at the offices of the Company, or at the office of any agent or agents of the Company, as may be

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designated by the Board (the “Transfer Agent”), of the certificates representing Series C Preferred Stock to be converted (if such shares are certificated) accompanied by a written notice stating that such holder elects to convert all or a specified portion of such holder’s shares of Series C Preferred Stock in accordance with the provisions of this Section (C)(3)(g)(ii) of this Article Four and specifying the name or names in which such holder wishes the certificate or certificates for shares of Class B Common Stock or Class A Common Stock, as applicable, to be issued (if such shares are certificated). The Company shall pay any issue and transfer taxes that may be payable in respect of any issue or delivery of shares of Class B Common Stock or Class A Common Stock, as applicable, on conversion of Series C Preferred Stock pursuant hereto. As promptly as practicable, and in any event within five Business Days (as defined in Section (C)(3)(k) of this Article Four) after the surrender of such certificates representing Series C Preferred Stock and the receipt of such notice relating thereto, the Company shall deliver or cause to be delivered (i) certificates (if such shares are certificated) representing the number of duly authorized, validly issued, fully paid and nonassessable shares of Class B Common Stock or Class A Common Stock, as applicable, to which the holder of Series C Preferred Stock being converted shall be entitled and (ii) if less than all of the shares represented by the surrendered certificates are being converted, a new certificate (if such shares are certificated) representing the number of shares of Series C Preferred Stock which remains outstanding upon such partial conversion. Such conversion shall be deemed to have been made at the close of business on the date of giving such notice so that the rights of the holder thereof as to Series C Preferred Stock being converted shall cease except for the right to receive shares of Class B Common Stock or Class A Common Stock, as applicable, in accordance herewith, and the person entitled to receive the shares of Class B Common Stock or Class A Common Stock, as applicable, shall be treated for all purposes as having become the record holder of such shares of Class B Common Stock or Class A Common Stock, as applicable, at such time.

                              (2) The Company shall at all times reserve and keep available for issuance upon the conversion of Series C Preferred Stock, free from any preemptive rights, such number of its authorized but unissued shares of Class B Common Stock as will from time to time be necessary to permit the conversion of all outstanding shares of Series C Preferred Stock into shares of Class B Common Stock, and shall take all action required to increase the authorized number of shares of Class B Common Stock, if necessary, to permit the conversion of all outstanding shares of Series C Preferred Stock. The Company shall take all actions as may be necessary to assure that all such shares of Class B Common Stock may be so issued without violation of any applicable law (including applicable federal and state securities laws) or governmental regulation or any requirements of any domestic national securities exchange or other market upon which shares of Class B Common Stock may be listed (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance).

                              (3) The Company shall not close its books against the transfer of Series C Preferred Stock or Class B Common Stock issued or issuable upon conversion of Series C Preferred Stock in any manner which interferes with the timely conversion of Series C Preferred Stock. The Company shall assist and cooperate with any holder of shares of Series C Preferred Stock required to make any governmental filings or obtain any governmental approval prior to or in connection with any conversion of such shares hereunder (including making any filings required to be made by the Company).

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                              (4) If the shares of Class B Common Stock issuable by reason of such conversion of Series C Preferred Stock are, at the option of the holder of such Class B Common Stock, convertible into or exchangeable for any other stock or securities of the Company, the Company shall, at the converting holder’s option, upon surrender of shares of Series C Preferred Stock to be converted by such holder as provided above together with any notice, statement or payment required to effect such conversion or exchange of Class B Common Stock, deliver to such holder, or as otherwise specified by such holder, a certificate or certificates representing the stock or securities into which the shares of Class B Common Stock issuable by reason of such conversion are so convertible or exchangeable, registered in such name or names and in such denomination or denominations as such holder has specified.

                         (iv) Adjustments Upon Changes in Capitalization.

                              (1) Except with respect to Excluded Securities (as defined in clause (3) below), in case the Company shall issue any shares of Common Stock or Common Stock Equivalents after the date the first share of Series C Preferred Stock is issued (the “Issue Date”) without consideration or at a price per share (or having a conversion, exchange or exercise price per share) of less than the Conversion Price as of the date of such issuance then, and, in each such case, the Conversion Price shall be appropriately adjusted by multiplying (A) the Conversion Price in effect on the day immediately prior to the date of issuance of such shares of Common Stock or Common Stock Equivalents by (B) a fraction, the denominator of which shall be the sum of (1) the number of Shares of Common Stock Outstanding (as defined in Section (C)(3)(k) of this Article Four) on such date prior to such issuance and (2) the number of additional shares of Common Stock issued (or issuable upon conversion, exchange or exercise of such Common Stock Equivalents), and the numerator of which shall be the sum of (x) the number of Shares of Common Stock Outstanding on such date prior to such issuance and (y) the number of shares of Common Stock purchasable at the Conversion Price in effect on the day immediately prior to the date of issuance of such shares of Common Stock or Common Stock Equivalents with the aggregate consideration receivable by the Company for the total number of shares of Common Stock so issued (or, in the case of issuances of Common Stock Equivalents, issuable upon conversion, exchange or exercise of such Common Stock Equivalents). An adjustment made pursuant to this clause (1) shall be made on the next Business Day following the date on which any such issuance is made and shall be effective retroactively to the close of business on the date of such issuance. For purposes of this clause (1), the consideration receivable by the Company in connection with the issuance of additional shares of Common Stock or of Common Stock Equivalents since the Issue Date shall be deemed to be equal to (X) in the case the consideration received by the Company is cash, the sum of the aggregate offering price, excluding any amounts paid or receivable for accrued interest or accrued dividends (before deduction of underwriting discounts or commissions or fees and expenses payable to third parties, if any) of all such Common Stock and/or Common Stock Equivalents plus the minimum aggregate amount, if any, payable upon conversion, exchange or exercise of any such Common Stock Equivalents, and (Y) in the case the consideration received by the Company is other than cash, the Fair Market Value (before deduction of underwriting discounts or commissions or fees and expenses payable to third parties, if any). The issuance or reissuance of any shares of Common Stock (whether treasury shares or newly issued shares) pursuant to a dividend or distribution on, or subdivision, combination or reclassification of, the outstanding shares of Common Stock requiring an adjustment in the Conversion Price pursuant

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to Section (C)(3)(g)(viii) of this Article Four shall not be deemed to constitute an issuance of Common Stock or Common Stock Equivalents by the Company to which this clause (1) applies. Upon the expiration or termination of any unconverted, unexchanged or unexercised Common Stock Equivalents for which an adjustment has been made pursuant to this clause (1), the adjustments shall not forthwith be reversed to effect such Conversion Price as would have been in effect at the time of such expiration or termination had such Common Stock Equivalents, to the extent outstanding immediately prior to such expiration or termination, never been issued.

                              (2) If, at any time, the purchase price provided for in any Common Stock Equivalents shall decrease, the additional consideration, if any, payable upon the conversion or exchange of any Common Stock Equivalents shall decrease, or the rate at which any Common Stock Equivalents are convertible into or exchangeable for Common Stock shall increase, the Conversion Price in effect at the time of such change shall be readjusted to the Conversion Price which would have been in effect at such time had such Common Stock Equivalents still outstanding provided for such purchase price, reduced additional consideration or increased conversion rate, as the case may be, at the time initially granted, issued or sold.

                              (3) “Excluded Securities” shall mean: (A) shares of Common Stock issued or issuable upon conversion of Class B Common Stock into Class A Common Stock in accordance with Section (B)(4) of this Article Four; (B) shares of Common Stock issued or issuable upon conversion of the Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock or Series C Preferred Stock in accordance with Section (C)(1)(g)(i), (C)(2)(g)(i) or (C)(3)(g)(i) of this Article Four; (C) shares of Common Stock issued or issuable upon conversion or exercise of any Common Stock Equivalents outstanding on the Issue Date; (D) any shares of Common Stock Equivalents and shares of Common Stock issued or issuable to directors, officers, employees or consultants of the Company following the Issue Date pursuant to any stock option, restricted stock, stock purchase or stock bonus plan, or other equity-based agreement, plan or arrangement, approved by the Board or the Compensation Committee of the Board prior to the date on which the Management Incentive Plan was approved by the Board, in an amount not exceeding up to 1,137,219 shares of Common Stock in the aggregate (less any such shares as to which the right to such shares was forfeited in connection with an individual’s participation in the Management Incentive Plan); (E) any shares of capital stock issued as a stock dividend or upon any stock split or other subdivision or combination of shares of the Company’s capital stock, (F) any shares of capital stock issued in connection with business acquisitions, strategic partnerships and alliances, and financing transactions (other than capital stock issued to parties unrelated to any such transaction, in exchange for cash, to provide equity financing for any such transaction), (G) any shares of Common Stock issued in connection with a public offering of Common Stock registered under the Securities Act of 1933, as amended, (H) any shares of capital stock issued pursuant to pre-emptive rights under Section 7 of the Shareholders’ Agreement, (I) any shares of Series A-1 Preferred Stock or Series B-1 Preferred Stock with an Issuance Date of August 23, 2006 and (J) any shares of Series C Preferred Stock and Class B Common Stock issued pursuant to the Management Incentive Plan, not to exceed 52,332 shares of Series C Preferred Stock and 1,308,297 shares of Class B Common Stock.

                              (4) If the Company shall set a record date for the holders of its Common Stock for the purpose of entitling them to receive a dividend or other

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distribution and shall thereafter, and before such dividend or distribution is paid or delivered to stockholders entitled thereto, legally abandon its plan to pay or deliver such dividend or distribution, then no adjustment in the Conversion Price then in effect shall be made by reason of the taking of such record, and any such adjustment previously made as a result of the taking of such record shall be reversed.

                              (5) Successive adjustments pursuant to this Section (C)(3)(g) of this Article Four shall be made without duplication whenever any event specified in this Section (C)(3)(g) of this Article Four shall require a Conversion Price adjustment.

                              (6) All calculations of the Conversion Price shall be made to the nearest ten decimal places without rounding. No adjustment to the Conversion Price pursuant to this Section (C)(3)(g)(iv) of this Article Four shall be required unless such adjustment would require an increase or decrease of at least 1% in the Conversion Price; provided, however, that any adjustments which by reason of this Section (C)(3)(g)(iv)(6) of this Article Four are not required to be made shall be carried forward and taken into account in any subsequent adjustment. Anything in Section (C)(3)(g) of this Article Four to the contrary notwithstanding, in no event shall the then current Conversion Price be increased as a result of any calculation made at any time pursuant to Section (C)(3)(g) of this Article Four (other than pursuant to Section (C)(3)(g)(viii) of this Article Four in connection with a combination (by reverse stock split or otherwise) of the outstanding shares of Common Stock into a smaller number of shares).

                              (7) In connection with the conversion of any shares of Series C Preferred Stock pursuant to this Section (C)(3)(g) of this Article Four, no fractions of shares of Class B Common Stock or Class A Common Stock, as applicable, shall be issued, but in lieu thereof the Company shall pay a cash adjustment in respect of such fractional interest in an amount equal to such fractional interest multiplied by the Closing Price per share of Class B Common Stock or Class A Common Stock, as applicable, on the day on which such shares of Series C Preferred Stock are deemed to have been converted. If more than one share of Series C Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares of Class B Common Stock or Class A Common Stock, as applicable, issuable upon conversion thereof shall be computed on the basis of the total number of shares of Series C Preferred Stock so surrendered.

                         (v) [intentionally omitted]

                         (vi) Transfer Books. The Company will at no time close its transfer books against the transfer of any Series C Preferred Stock or any shares of Common Stock issued or issuable upon the conversion of any shares of such Series C Preferred Stock, except as may otherwise be required to comply with applicable securities laws.

                         (vii) [intentionally omitted]

                         (viii) Adjustments for Dividends, Subdivisions and Combinations. If the Company at any time (i) pays any dividend, or makes any distribution, on the outstanding shares of Common Stock in shares of Common Stock without payment of any

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consideration by the holders of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) the outstanding shares of Common Stock, or (iii) combines (by reverse stock split or otherwise) the outstanding shares of Common Stock into a smaller number of shares, then, and in each such case, the Conversion Price in effect immediately prior to such event or the record date therefor, whichever is earlier, shall be adjusted so that the holder of any shares of Series C Preferred Stock thereafter convertible into Common Stock pursuant to this Section (C)(3)(g) of this Article Four shall be entitled to receive the number of shares of Common Stock which such holder would have owned or have been entitled to receive after the happening of any of the events described above, had such shares of Series C Preferred Stock been converted into Common Stock immediately prior to the happening of such event or the record date therefor, whichever is earlier.

                         (ix) Special Dividends; Repurchases.

                              (1) In case the Company after the Issuance Date shall distribute to all holders of shares of Common Stock evidences of its indebtedness, assets (excluding any regular periodic cash dividend but including any extraordinary cash dividend), capital stock (other than Common Stock) or rights to subscribe for capital stock (other than Common Stock), the Conversion Price in effect immediately prior to the date of such distribution (or the date immediately prior to the date of the public announcement of such distribution, whichever is earlier) shall be adjusted by multiplying such Conversion Price by a fraction of which (x) the numerator is the remainder of (i) the Closing Price per share of Common Stock on such date, minus (ii) the Fair Market Value as of such date of the portion of assets, evidences of indebtedness, capital stock or subscription rights so distributed or paid applicable to one share of Common Stock, and (y) the denominator is the Closing Price per share of Common Stock on such date, such adjustment to become effective immediately prior to the opening of business on the day following the date of distribution or purchase; provided, however, that no adjustment shall be made (A) if such issuance is an issuance of Excluded Securities or (B) if an adjustment shall otherwise be made with respect to such distribution or issuance pursuant to Section (C)(3)(g)(iv) of this Article Four; and further provided, however, that if in any case the numerator of such fraction shall be zero or less than zero, no adjustment shall be made in such case. The Company shall provide any holder of Series C Preferred Stock, upon receipt of a written request therefor, with any indenture or other instrument defining the rights of the holders of any indebtedness, assets, subscription rights or capital stock referred to in this subparagraph (ix).

                              (2) In case the Company after the Issuance Date shall purchase or otherwise acquire for value any shares of Common Stock or Common Stock Equivalents in an Above Market Repurchase (as defined in Section (C)(3)(k) of this Article Four), the Conversion Price in effect immediately prior to the date of such purchase or other acquisition (or the date immediately prior to the date of the public announcement of such purchase or other acquisition) shall be reduced to an amount determined by multiplying the Conversion Price in effect immediately prior to such purchase or other acquisition, by a fraction of which (x) the numerator shall be (A) the product of (1) the number of Shares of Common Stock Outstanding immediately prior to such purchase or other acquisition and (2) the Fair Market Value per share of Common Stock in effect on the Business Day immediately prior to the earlier of (i) the date of such purchase or other acquisition and (ii) the date immediately prior to

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the date of the public announcement of such purchase or other acquisition, minus (B) the aggregate consideration paid by the Company in such Above Market Repurchase (plus, in the case of Common Stock Equivalents, the aggregate additional consideration which would have been paid to the Company upon exercise, conversion or exchange), and (y) the denominator of which is the product of (A) the number of Shares of Common Stock Outstanding immediately after such purchase or other acquisition multiplied by (B) the Fair Market Value per share of Common Stock in effect on the Business Day immediately prior to the earlier of (i) the date of such purchase or other acquisition and (ii) the date immediately prior to the date of the public announcement of such purchase or other acquisition.

                              (x) Provisions for Organic Changes. Prior to the consummation of any Organic Change (as defined in Section (C)(3)(k) of this Article Four), the Company shall make appropriate provisions to ensure that each holder of Series C Preferred Stock shall thereafter have the right to acquire and receive, in lieu of or in addition to (as the case may be) the shares of Common Stock immediately theretofore acquirable and receivable upon the conversion of such holder’s Series C Preferred Stock, such shares of securities or assets as such holder would have received in connection with such Organic Change if such holder had converted its Series C Preferred Stock immediately prior to such Organic Change. In each such case, the Company shall also make appropriate provisions to ensure that the provisions of this Section (C)(3)(g) of this Article Four shall thereafter be applicable to the Series C Preferred Stock. The Company shall not effect any such Organic Change unless, prior to the consummation thereof, the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets provides in its charter documents and in the definitive agreement providing for such Organic Change the obligation to deliver to each such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to acquire.

                              (xi) Recapitalization, Conversion and Exchange of Shares. If any recapitalization, conversion or exchange of shares or any other change in the Company’s capital structure, or any other event occurs of the type contemplated by the provisions of this Section (C)(3)(g) of this Article Four but in any such case, which is not expressly provided for by the provisions of this Section (C)(3)(g) of this Article Four (including the granting of stock appreciation rights, phantom stock rights or other rights with equity features), the Board shall make an appropriate adjustment to the Conversion Price so as to protect the rights of the holders of Series C Preferred Stock.

                              (xii) Exclusion from Conversion Price Adjustments. No adjustment to the Conversion Price shall be made or shall be applicable under this Section (C)(1)(g) of this Article Four with respect to (i) the issuance of shares of Series A-1 Preferred Stock or Series B-1 Preferred Stock on August 23, 2006 in connection with the conversion of the Notes outstanding under the Note Purchase Agreement, dated January 14, 2005 among the Company, the purchasers named therein and MCG Capital Corporation as Administrative Agent, (ii) the issuance of shares of Series C Preferred Stock and/or Class B Common Stock, including without limitation upon exercise of options to purchase Series C Preferred Stock and/or Class B Common Stock, pursuant to the Management Incentive Plan (not to exceed 52,332 shares of Series C Preferred Stock and 1,308,297 shares of Class B Common Stock) and (iii) the issuance of shares of Series B-1 Preferred Stock and Class A Common Stock

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issued pursuant to the Eureka Merger Agreement, or issued as a result of the exercise of warrants to purchase Series B-1 Preferred Stock and Class A Common Stock issued pursuant to the Eureka Merger Agreement.

                         (h) Reports as to Adjustment.

                              (i) Notice of Conversion Price Adjustment. Upon any adjustment of the Conversion Price then in effect pursuant to the provisions of Section (C)(3)(g) of this Article Four, then, and in each such case, the Company shall promptly deliver to the Transfer Agent of Series C Preferred Stock and the Common Stock and to each of the holders of Series C Preferred Stock and the Common Stock, a certificate signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company setting forth in reasonable detail the event requiring the adjustment, the method by which such adjustment was calculated (including any Fair Market Value determinations made by the Board) and the Conversion Price then in effect following such adjustment. Where appropriate, such notice to holders of Series C Preferred Stock may be given in advance.

                              (ii) Notice of Organic Change. The Company shall also give written notice to the holders of Series C Preferred Stock at least twenty (20) days prior to the date on which any Organic Change takes place.

                         (i) Protection of Rights. Any registered holder of Series C Preferred Stock may proceed to protect and enforce its rights with any and all remedies available at law or in equity.

                         (j) Protective Voting Rights and Powers. So long as shares of Series C Preferred Stock are outstanding, the Company shall not, directly or indirectly, without first obtaining the approval (by vote at a meeting or by written consent) of the holders of a majority in voting power of the outstanding shares of Series C Preferred Stock entitled to vote (voting together as a class but separately from and to the exclusion of the holders of all other classes or series of stock of the Company):

                              (i) amend, alter, repeal, restate, or supplement this Tenth Amended and Restated Certificate of Incorporation or its Bylaws (in each case, whether by reclassification, merger, consolidation, reorganization or otherwise) in a manner which alters or changes, in any manner, the number of shares, or the powers, preferences or rights, of the Series C Preferred Stock or which would adversely affect the powers, preferences or rights of the Series C Preferred Stock; or

                              (ii) change the authorized number of shares of Preferred Stock or the Series C Preferred Stock.

                         (k) Definitions. In addition to any other terms defined in this Section (C)(3) of this Article Four, the following terms shall have the meanings indicated when used in this Section (C)(3) of this Article Four:

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                    “Above Market Repurchase” shall mean any purchase (by tender or exchange offer, open market purchase, privately negotiated purchase or otherwise) of all or any portion of the Company’s Common Stock or Common Stock Equivalents where such purchase is for aggregate consideration that exceeds the product of (x) the aggregate number of shares of Common Stock or Common Stock Equivalents being purchased multiplied by (y) the Closing Price of the Common Stock on the date of such purchase minus, in the case of Common Stock Equivalents, the aggregate additional consideration which would have been paid to the Company upon exercise, conversion or exchange.

                    “Absolute Liquidation Preference” shall mean, with respect to each share of Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock or Series B-1 Preferred Stock (x) $516.35 less (y) the aggregate amount of any cash dividends paid with respect to each share of the Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock and Series B-1 Preferred Stock; provided that the Absolute Liquidation Preference with respect to any share of Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock or Series B-1 Preferred Stock shall not be reduced to an amount less than $0.00.

                    “Additional Dividends” has the meaning given in Section (C)(3)(b)(ii) of this Article Four.

                    “Board” means the Board of Directors of the Company.

                    “Business Day” means any day other than a Saturday, Sunday, or a day on which commercial banks in the City of New York are authorized or obligated by law or executive order to close.

                    “BV-BC Merger Agreement” shall mean the Amended and Restated Agreement and Plan of Merger by and among the Company, BridgeCom Holdings, Inc., a Delaware corporation, MCG IH II, Inc., a Delaware corporation, MCG Capital Corporation, a Delaware corporation, the Principal Company Stockholders named therein and certain other parties thereto, dated as of November 22, 2004.

                    “Class A Common Stock” means the Class A Common Stock, par value $.01 per share, of the Company.

                    “Class B Common Stock” means the Class B Common Stock, par value $.01 per share, of the Company.

                    “Closing Price” per share of Common Stock on any date shall mean the closing sale price on such day or, in case no such sale takes place on such day, the average of the reported closing bid and asked prices, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange, Inc. (or other national securities exchange), the Nasdaq National Market System or the Nasdaq SmallCap Market, or, if such security is not so reported in the principal consolidated transaction reporting system, the last quoted sale price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or such other

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system then in use, or, if on any such date the Common Stock or such other securities are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker, selected in good faith by the Board and acceptable to the holders of a majority of the outstanding shares of Series C Preferred Stock, making a market in the Common Stock or such other securities of the Company. If the Common Stock or such other securities are not so reported or publicly traded, “Closing Price” shall mean the Fair Market Value.

                    “Common Stock” shall mean shares of Class A Common Stock and Class B Common Stock.

                    “Common Stock Equivalent” shall mean securities convertible into, or exchangeable or exercisable for, shares of Common Stock and options, warrants and rights to acquire such convertible securities.

                    “Conversion Price” means $50.00, subject to adjustment as provided in Section (C)(3)(g) of this Article Four.

                    “Dividend Payment Date” shall mean the last Business Day of each calendar quarter.

                    “Dividend Period” shall mean the Initial Dividend Period and, thereafter, each quarterly period from and including a Dividend Payment Date to the next following Dividend Payment Date (but without including such later Dividend Payment Date).

                    “Effective Time” shall have the meaning set forth in the BV-BC Merger Agreement.

                    “Eureka Merger Agreement” shall mean the Agreement and Plan of Merger, dated February 23, 2007, among the Company, Eureka Acquisition Corporation, a Delaware corporation, Eureka Broadband Corporation, a Delaware corporation, the significant stockholders or Eureka Broadband Corporation set forth therein, and Jeffrey Ginsberg, as agent of the stockholders of Eureka Broadband Corporation.

                    “Excluded Securities” has the meaning given in Section (C)(3)(g)(iv)(3) of this Article Four.

                    “Fair Market Value” shall mean the price that a willing buyer would pay to a willing seller in an arm’s length transaction, it being understood that the buyer and seller in arriving at such price in determining the value would each consider, the other factors customarily considered by valuation professionals, as the Board in good faith shall reasonably determine. The Board shall promptly provide written notice of any Fair Market Value determination to the holders of the outstanding shares of Series C Preferred Stock; provided, however, that if the Board has provided notice of such determination in connection with its obligations under Section (C)(3)(h)(i) of this Article Four, the Board shall not be required to provide a separate notice.

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                    “Initial Dividend Period” shall mean the dividend period commencing on the Issuance Date and ending on (and including) the date immediately prior to the first Dividend Payment Date to occur thereafter.

                    “Issuance Date” shall mean with respect to any share of Series C Preferred Stock, the date on which the Company initially issues such share of Series C Preferred Stock, regardless of the number of times transfer of such share is made on the stock records of the Company and regardless of the number of certificates which may be issued to evidence such share.

                    “Issue Date” has the meaning given in Section (C)(3)(g)(iv)(1) of this Article Four.

                    “Junior Securities” shall mean the Company’s Common Stock and all classes and series of capital stock of the Company now or hereafter authorized, issued or outstanding which by their terms expressly provide that they are junior to the Series C Preferred Stock, or which do not specify their rank, with respect to payment of dividends or distributions, or the distribution of assets upon liquidation, winding up or dissolution. This definition of Junior Securities shall include, without limitation, any Common Stock Equivalents exercisable or exchangeable for or convertible into any Junior Securities.

                    “Junior Securities Distribution” shall mean the declaration or payment on account of, or setting apart for payment money for a sinking or other similar fund for, the purchase, redemption or other retirement of, any Junior Securities, or any distribution in respect thereof (except for (i) dividends on Junior Securities which are payable solely in additional shares of Junior Securities, as required by the terms of such Junior Securities, or (ii) cashless exercises of options), either directly or indirectly, and whether in cash, obligations, Common Stock, Common Stock Equivalents or other property, or the purchase or redemption by any Person directly or indirectly controlled by the Company of any of the Junior Securities.

                    “Liquidation” shall mean that (i) the Company shall (A) commence a voluntary case under the Federal bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency or similar law, (B) consent to the entry of an order for relief in an involuntary case under such law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company, or of any substantial part of its property, (C) make an assignment for the benefit of its creditors, or (D) admit in writing its inability to pay its debts generally as they become due, (ii)(A) a decree or order for relief in respect of the Company shall be entered by a court having jurisdiction in the premises in an involuntary case under the Federal bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and (B) any such decree or order shall be unstayed and in effect for a period of 60 consecutive days and on account of any such event the Company shall liquidate, dissolve or wind up, (iii) the Company shall otherwise liquidate, dissolve or wind up, or (iv) the Company shall (A) merge or consolidate with a Person (other than a merger (i) which only involves a change in the Company’s state of incorporation or (ii) with a wholly-owned subsidiary (directly or indirectly)), and pursuant to such merger or

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consolidation the Company is not the surviving entity; (B) merge or consolidate, and pursuant to such merger or consolidation the Company is the surviving entity but the holders of the Company’s outstanding equity securities immediately prior to such merger or consolidation (x) are not the holders of equity securities of the Company that represent at least 50% of the total number of votes entitled to be cast in the election of directors immediately following such merger or consolidation or (y) have otherwise relinquished control of the Company following such merger or consolidation; (C) sell or transfer all or substantially all of the assets of the Company to one or more Persons that are not wholly-owned subsidiaries (directly or indirectly) of the Company in any transaction (in a transaction not described in clauses (i) through (iii)) or, series of transactions, or (D) sell or transfer a majority of the voting stock of the Company to one or more Persons that are not wholly-owned subsidiaries (directly or indirectly) of the Company in any transaction or series of transactions. Notwithstanding anything to the contrary in this definition of “Liquidation,” the transactions contemplated or effected by the BV-BC Merger Agreement (as defined in this Section (C)(3)(k) of this Article Four) shall not be deemed to be a Liquidation.

                    “Organic Change” shall mean any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Company’s assets to another Person or other transaction which is effected in such a manner that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) securities or assets with respect to or in exchange for Common Stock; provided, however, that an Organic Change shall exclude a Liquidation.

                    “Parity Securities” shall mean each class or series of capital stock of the Company now or hereafter authorized, issued or outstanding the terms of which specifically provide that such class or series will rank on a parity with the Series C Preferred Stock with respect to payment of dividends and distributions, and the distribution of assets upon liquidation, winding up or dissolution. This definition of Parity Securities shall include, without limitation, any Common Stock Equivalents exercisable or exchangeable for or convertible into any Parity Securities.

                    “Parity Securities Distribution” shall mean the declaration or payment on account of, or setting apart for payment money for a sinking or other similar fund for, the purchase, redemption or other retirement of Parity Securities (other than by conversion into or exchange for Junior Securities) or any Common Stock Equivalents exercisable or exchangeable for or convertible into any shares of Parity Securities, or any distribution in respect thereof (except for (i) dividends on Parity Securities which are payable solely in additional shares of Parity Securities, or by the increase in the liquidation value of Parity Securities, in each case, as required by the terms of such Parity Securities or (ii) cashless exercises of options), either directly or indirectly, and whether in cash, obligations, Common Stock, Common Stock Equivalents or other property, or the purchase or redemption by any corporation or other entity directly or indirectly controlled by the Company of any of the Parity Securities or any Common Stock Equivalents exercisable or exchangeable for or convertible into any Parity Securities.

                    “Person” shall mean any individual, firm, corporation, limited liability company, partnership or other entity, and shall include any successor (by merger or otherwise) of such entity.

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                    “Qualified IPO” shall mean any issuance and sale of shares of Common Stock which occurs in an underwritten public offering registered under the Securities Act of 1933, as amended, and provides net proceeds to the Company of not less than $50,000,000.

                    “Restricted Stock Settlement Agreements” means both (i) the Restricted Stock Settlement Agreement, dated April 2007, by and among the Company, MCG Capital Corporation, a Delaware corporation, BridgeCom Holdings, Inc., a Delaware corporation, and the individual grantee named therein and (ii) the Restricted Stock Settlement Agreement, dated April 2007, by and among the Company and the individual grantee named therein.

                    “Senior Parity Securities” shall mean each class or series of capital stock of the Company now or hereafter authorized, issued or outstanding the terms of which specifically provide that such class or series will rank senior to the Series C Preferred Stock with respect to payment of dividends or distributions or the distribution of assets upon liquidation, winding up or dissolution until the Absolute Liquidation Preference has been paid with respect to such Senior Parity Securities but on a parity with the Series C Preferred Stock after payment of such Absolute Liquidation Preferences. The Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock and Series B-1 Preferred Stock shall constitute Senior Parity Securities. This definition of Senior Parity Securities shall include, without limitation, any Common Stock Equivalents exercisable or exchangeable for or convertible into any Senior Parity Securities.

                    “Senior Securities” shall mean each class or series of capital stock of the Company now or hereafter authorized, issued or outstanding the terms of which specifically provide that such class or series will rank senior to the Series C Preferred Stock with respect to payment of dividends and distributions, and the distribution of assets upon liquidation, winding up or dissolution. This definition of Senior Securities shall include, without limitation, any Common Stock Equivalents exercisable or exchangeable for or convertible into any Senior Securities.

                    “Series A Preferred Stock” shall mean the 12% Participating Series A Preferred Stock, par value $.01 per share of the Company.

                    “Series A-1 Preferred Stock” shall mean the 12% Participating Series A-1 Preferred Stock, par value $.01 per share of the Company.

                    “Series B Preferred Stock” shall mean the 12% Participating Series B Preferred Stock, par value $.01 per share of the Company.

                    “Series B-1 Preferred Stock” shall mean the 12% Participating Series B-1 Preferred Stock, par value $.01 per share of the Company.

                    “Series C Accrued Value” shall mean, with respect to a share of Series C Preferred Stock, as at any date, the amount that equals the Series A Accrued Value of the Series A Preferred Stock as of such date.

                    “Series C Liquidation Preference” shall mean the greater of (x) the Series C Accrued Value on a share of Series C Preferred Stock less the Absolute Liquidation

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Preference, as at any date, or (y) the amount of securities, cash or other property that would be payable to such holder in the Liquidation in respect of Class A Common Stock issuable upon conversion of such share of Series C Preferred Stock if all outstanding shares of Series C Preferred Stock were converted into Class A Common Stock immediately prior to the Liquidation in accordance with Section (C)(3)(g) of this Article Four hereof; provided that holders of Series C Preferred Stock shall not be entitled to receive the amount described in clause (y) of this definition unless either (i) all holders of Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock and Series B-1 Preferred Stock have received payment in full in respect of the Series A Liquidation Preference, the Series A-1 Liquidation Preference, the Series B Liquidation Preference and the Series B-1 Liquidation Preference, respectively, as well as, with respect to all such holders, payment in full in respect of the Absolute Liquidation Preference or (ii) the amounts described in clause (y) of the definitions of each of Series A Liquidation Preference, Series A-1 Liquidation Preference, Series B Liquidation Preference and Series B-1 Liquidation Preference is greater than the amounts described in clause (x) of each of such definitions.

                    “Series C Objecting Parties” has the meaning given in the definition of Fair Market Value in this Section (C)(3)(k) of this Article Four.

                    “Series C Preferred Stock” shall mean the 12% Participating Series C Preferred Stock, par value $.01 per share of the Company.

                    “Shareholders’ Agreement” means the Third Amended and Restated Shareholders Agreement, dated as of May 31, 2007, by and among the Company and the stockholders party thereto, as amended from time to time. The Company will provide a copy of the Shareholders’ Agreement to any stockholder of the Company upon request.

                    “Shares of Common Stock Outstanding” shall mean at any time, with respect to the Company, the sum of (i) all shares of Common Stock issued and outstanding at such time, (ii) all shares of Common Stock which are then issuable upon conversion of the Series A Preferred Stock, (iii) all shares of Common Stock which are then issuable upon conversion of the Series A-1 Preferred Stock, (iv) all shares of Common Stock which are then issuable upon conversion of the Series B Preferred Stock, (v) all shares of Common Stock which are then issuable upon conversion of the Series B-1 Preferred Stock or upon the exercise of warrants to purchase Series B-1 Preferred Stock and (vi) all shares of Common Stock which are then issuable upon conversion of the Series C Preferred Stock or upon the exercise of options to purchase Series C Preferred Stock.

                    “Subsidiaries” of the Company shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by the Company.

                    “Transfer Agent” has the meaning given in Section (C)(3)(g)(iii) of this Article Four.

                    (l) Notices. Unless otherwise expressly specified or permitted by the terms hereof, all notices, demands and other communications to be given or delivered under or

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by reason of the provisions of this Section (C)(3) of this Article Four shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt), (b) three (3) days after sent by e-mail (with such communication to be in PDF format), with electronic confirmation of sending, provided that a copy is sent on the same day by registered mail, return receipt requested, in each case to the appropriate mailing and e-mail addresses set forth below (or to such other mailing and e-mail addresses as a party may designate by notice to the other parties in accordance with this provision), or (c) when actually delivered if sent by any other method that results in delivery (with written confirmation of receipt) to the following addresses:

Broadview Networks Holdings, Inc.
800 Westchester Ave
5^th Floor, Suite N501
Rye Brook, NY 10573
Attention: Chief Executive Officer

or at such other address as may have been furnished in writing by the Company to the holders of the outstanding shares of Series C Preferred Stock.

ARTICLE FIVE

     A. The business and affairs of the Company shall be managed by or under the direction of the Board of Directors. The Board of Directors may exercise all such authority and powers of the Company and do all such lawful acts and things as are not by law or this Tenth Amended and Restated Certificate of Incorporation directed or required to be exercised or done by the stockholders.

     B. The number of directors which shall constitute the whole Board of Directors shall be fixed by, or in the manner provided in, the Bylaws; provided, however, that the number of directors shall not be less than one (1) nor more than eleven (11).

     C. Elections of directors need not be by written ballot unless the Bylaws of the Company shall provide otherwise.

     D. Subject to the provisions of Article Six of this Tenth Amended and Restated Certificate of Incorporation, the Board of Directors is authorized to make, amend and repeal the Bylaws of the Company; provided, however that the affirmative vote of a majority of the holders of the Series A Preferred Stock and the Series A-1 Preferred Stock, voting together as a single class, shall be required in order to amend, supplement, repeal, revise, restate or otherwise modify Article III Section 18 thereof.

     E. In the event of any deadlock or impasse in the voting of the members of the board of Directors, such deadlock or impasse shall be resolved by the Chairman of the Board in accordance with the Shareholders Agreement.

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ARTICLE SIX

     A director of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director; provided, however, that the foregoing shall not eliminate or limit the liability of a director (i) for any breach of the director’s duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL or (iv) for any transaction from which the director derived an improper personal benefit. If the DGCL is hereafter amended to permit further elimination or limitation of the personal liability of directors, then the liability of a director of the Company shall be eliminated or limited to the fullest extent permitted by the DGCL as so amended. Any repeal or modification of this Article Six by the stockholders of the Company or otherwise shall not adversely affect any right or protection of a director of the Company existing at the time of such repeal or modification.

ARTICLE SEVEN

     The Company shall indemnify its directors and officers to the fullest extent authorized or permitted by applicable law, as now or hereafter in effect, and such right to indemnification shall continue as to a person, who has ceased to be a director or officer of the Company and shall inure to the benefit of his or her heirs, executors and legal representatives; provided, however, that, except for proceedings to enforce rights to indemnification, the Company shall not be obligated to indemnify any director or officer (or his or her heirs, executors or legal representatives) in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors. The right to indemnification conferred by this Article Seven shall include the right to be paid by the Company the expenses incurred in defending or otherwise participating in any proceeding in advance of its final disposition upon receipt by the Company of an undertaking by or on behalf of the director or officer receiving advancement to repay the amount advanced if it shall ultimately be determined that such person is not entitled to be indemnified by the Company under this Article Seven.

     The Company may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Company similar to those conferred in this Article to directors and officers of the Company.

     The right to indemnification and to the advancement of expenses conferred in this Article Seven shall not be exclusive of any other right which any person may have or hereafter acquire under this Tenth Amended and Restated Certificate of Incorporation, the Bylaws of the Company, any statute, agreement, vote of shareholders or disinterested directors or otherwise.

     Any repeal or modification of this Article Seven by the stockholders of the Company shall not adversely affect any rights to indemnification and to the advancement of expenses of a director, officer, employee or agent of the Company existing at the time of such repeal or modification with respect to any acts or omissions occurring prior to such repeal or modification.

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ARTICLE EIGHT

     The Company reserves the right to amend, alter, change or repeal any provision contained in this Tenth Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.

ARTICLE NINE

     A. If a Significant Stockholder (or, except as set forth below, any of its officers, employees, directors, agents, stockholders, members, partners, affiliates or Subsidiaries) acquires knowledge of a potential transaction or matter which may be a Corporate Opportunity or otherwise is then exploiting any Corporate Opportunity, the Company shall have no interest in such Corporate Opportunity and no expectancy that such Corporate Opportunity be offered to it, any such interest or expectancy being hereby renounced, so that such Person shall have no duty to present such Corporate Opportunity to the Company and shall have the right to hold and exploit any such Corporate Opportunity for its (and its officers’, employees’, directors’, agents’, stockholders’, members’, partners’, affiliates’ or Subsidiaries’) own account or to direct, sell, assign or transfer such Corporate Opportunity to Persons other than the Company or any Subsidiary of the Company. Such Person shall not breach any fiduciary duty to the Company or to its stockholders by reason of the fact that such Person does not present such Corporate Opportunity to the Company or pursues, acquires or exploits such Corporate Opportunity for itself or directs, sells, assigns or transfers such Corporate Opportunity to another Person.

     B. Notwithstanding the provisions of Clause (A) of this Article Nine, the Company does not renounce any interest or expectancy it may have in any Corporate Opportunity that is offered in writing to any person (i) who is an officer of the Company and who is also a director but not an officer or employee of a Significant Stockholder if such opportunity is expressly offered to such person solely in his or her capacity as an officer of the Company and such Corporate Opportunity relates solely to the Company; (ii) who is a director but not an officer of the Company and who is also a director, officer or employee of a Significant Stockholder, if such opportunity is expressly offered to such person solely in his or her capacity as a director of the Company and such Corporate Opportunity relates solely to the Company; (iii) who is an officer or employee of a Significant Stockholder and an officer of the Company if such opportunity is expressly offered to such person solely in his or her capacity as an officer or employee of the Company and such Corporate Opportunity relates solely to the Company; or (iv) who is the president or chief executive officer (other than an officer, director or employee of a Significant Stockholder that serves on a transitional or interim basis). If the Company does not within a reasonable period of time begin to pursue, or thereafter continue to pursue, such Corporate Opportunity diligently and in good faith, the other person may then pursue or hold such Corporate Opportunity for its (and its officers’, employees’, directors’, agents’, stockholders’, members’, partners’, affiliates’ or Subsidiaries’) own account or direct, sell, assign or transfer such Corporate Opportunity to Persons other than the Company or any Subsidiary of the Company. A Corporate Opportunity not allocated and pursued in accordance with the foregoing shall not, solely by reason of the lack of allocation and pursuit of the Corporate Opportunity in accordance with the foregoing, be or be deemed to be a breach of any fiduciary duty, but shall be governed by the DGCL and other applicable law.

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     C. For purposes of this Article Nine, (a) the term “Company” shall mean the Company and all corporations, partnerships, joint ventures, associations, limited liability companies and other entities in which the Company beneficially owns (directly or indirectly) 50% or more of the outstanding voting stock, voting power, partnership interests or similar voting interests; (b) the term “Corporate Opportunity” shall mean only an investment, business opportunity or prospective economic advantage (i) in which the Company could have an interest or expectancy, (ii) which the Company is financially able to undertake, or with respect to which the Company would reasonably be able to obtain debt or equity financing, and (iii) which is, from its nature, in the line or lines of the Company’s business or reasonable expansion thereof; and (c) the term “Significant Stockholder” shall mean each of (1) MCG IH II, Inc. and MCG Capital Corporation; (2) Baker Communications Fund, L.P., Baker Communications Fund II (QP), L.P.; (3) Communications Ventures II, L.P., Communications Ventures Affiliates Fund II, L.P., ComVentures IV, L.P., ComVentures IV CEO Fund, L.P. and ComVentures IV Entrepreneurs’ Fund, L.P.; (4) New Enterprise Associates VII, Limited Partnership, New Enterprise Associates 9, Limited Partnership, New Enterprise Associates 10, Limited Partnership, NEA Presidents’ Fund, L.P., NEA Ventures 1998, L.P.; (5) WPG Enterprise Fund III, L.L.C., Weiss, Peck & Greer Venture Associates IV, L.L.C., WPG Information Sciences Entrepreneur Fund, L.P. and Weiss, Peck & Greer Venture Associates IV Cayman, L.P. and each of their respective affiliates (as defined in Rule 405 promulgated under the Securities Act of 1933, as amended), provided, however, that for purposes of this definition of Significant Stockholder, none of the Significant Stockholders, on one hand, or the Company, on the other hand, shall be deemed to be affiliates of one another.

     D. Neither the alteration, amendment or repeal of this Article Nine nor the adoption of any provision of this Tenth Amended and Restated Certificate of Incorporation inconsistent with this Article Nine shall eliminate or reduce the effect of this Article Nine in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article Nine, would accrue or arise prior to such alteration, amendment, repeal or adoption.

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     IN WITNESS WHEREOF, Broadview Networks Holdings, Inc. has caused this Tenth Amended and Restated Certificate of Incorporation to be signed by Corey Rinker, its Chief Financial Officer, Treasurer and Assistant Secretary, this 31st day of May, 2007.

BROADVIEW NETWORKS HOLDINGS, INC.
By:	/s/ Corey Rinker
	Name:	Corey Rinker
	Title:	Chief Financial Officer, Treasurer and Assistant Secretary

[Signature Page to Tenth Amended and Restated Certificate of Incorporation]

EX-10.21

                                                                   Exhibit 10.21

                                ESCROW AGREEMENT

     ESCROW AGREEMENT, dated as of September 29, 2006 (the "Agreement"), by and
among ATX Communications, Inc., a Delaware corporation (the "Company"). LUK CLEC
LLC, a Delaware limited liability company, in its capacity as the agent,
representative and attorney-in-fact of the Sellers (as hereinafter defined) (the
"Sellers' Representative"). Broadview Networks Holdings, Inc. (the "Buyer"), a
Delaware corporation, and JPMorgan Chase Bank, N.A., a National Banking
Association, as escrow agent (the "Escrow Agent"). Defined terms used herein but
not defined herein shall have the meanings ascribed to such terms in the
Purchase Agreement (as defined below).

                                    RECITALS:

     WHEREAS, Buyer and the stockholders of the Company listed on Schedule 1
hereto (collectively, the "Sellers") are parties to a Stock Purchase Agreement,
dated as of June 26, 2006 (the "Purchase Agreement"), pursuant to which Buyer
will purchase, and Sellers will sell, all of the outstanding shares of capital
stock of the Company (the "Shares"), upon the terms more fully set forth in the
Purchase Agreement;

     WHEREAS, Section 9.8 of the Purchase Agreement provides for the payment by
Sellers of certain liabilities of the Company which arose in connection with the
Company's reorganization under Chapter 11 of the United States Bankruptcy Code;

     WHEREAS, Section 12 of the Purchase Agreement provides for the
indemnification of Buyer by Sellers for certain losses that may be incurred by
Buyer;

     WHEREAS, pursuant to Section 11 of the Purchase Agreement, LUK CLEC LLC was
appointed as the Sellers' Representative in connection with the Purchase
Agreement and this Agreement, and LUK CLEC LLC agreed to act as the Sellers'
Representative; and

     WHEREAS, this Agreement is an essential part of the consideration for which
Buyer is willing to enter into the Purchase Agreement and to consummate the
transactions contemplated thereby.

     NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, it is hereby agreed as follows:

     1. Appointment of Escrow Agent; Escrow Account.

     (a) Buyer and the Sellers' Representative hereby designate and appoint the
Escrow Agent as escrow agent to act in accordance with the terms of this
Agreement, and the Escrow Agent agrees to act as such escrow agent on the terms,
conditions and provisions provided in this Agreement.



     (b) Simultaneously with the execution of this Agreement, Buyer has
deposited $3,240,863.17 (the "Escrow Amount") with the Escrow Agent in a
separate account to be maintained by the Escrow Agent (the "Escrow Account").

     (c) The Escrow Amount and any interest earned in the Escrow Account, as may
be reduced from time to time in accordance with this Agreement, shall be
hereinafter referred to as the "Escrow Account Balance." The Escrow Agent shall
hold, invest, reinvest, manage, administer, distribute and dispose of the Escrow
Account Balance in accordance with the terms and conditions of this Agreement.

     2. Investment of Escrow Account Balance. Until the termination of this
Agreement, the Escrow Account Balance shall be fully invested and reinvested in
a JPMorgan Chase Bank Money Market Account, or as otherwise mutually instructed
by Buyer and the Sellers' Representative and acceptable to the Escrow Agent, by
the Escrow Agent, who shall have the authority to liquidate any investment as
required to administer its duties hereunder. The parties acknowledge that the
Escrow Agent shall not be responsible for any diminution in value of the Escrow
Account Balance due to losses resulting from authorized investments made
pursuant to this Agreement.

     3. Payments From Escrow. The Escrow Agent shall hold the Escrow Account
Balance in accordance with this Agreement and shall make payments from the
Escrow Account Balance only as provided by Sections 3, 4 and 12 hereof or as
further directed in writing by both Buyer and the Sellers' Representative:

     (a) In the event the Escrow Agent is duly instructed to disburse funds out
of the Escrow Account Balance to any party under the terms of this Agreement,
the Escrow Agent shall disburse such funds in one of the following manners (as
specified in such instruction): (i) by mailing a check to such party at the
address set forth in the instruction; or (ii) by wire transfer of immediately
available funds to the account specified in such instruction; provided that if
the Escrow Agent is instructed to transfer funds from the Escrow Account to any
bank for the account of any party, the Escrow Agent may require the party
issuing the instruction to agree to appropriate security procedures to verify
that the instruction is that of such issuing party.

     (b) Buyer shall be paid such amounts as are authorized to be paid to Buyer
pursuant to Section 4 below.

     (c) Within two (2) banking days of the Escrow Agent's having received a
copy of a Final Determination for an Open Claim, the amount, if any, payable to
Buyer under the Final Determination for such Open Claim shall be paid to Buyer
from the Claim Reserve for such Open Claim and the balance of such Claim Reserve
shall be returned to the Escrow Account, except as described in Section 4(e) or
Section 5, less amounts payable to the Escrow Agent pursuant to Section 12
below.


                                       2



     (d) All payments to be made to Sellers' Representative pursuant to this
Agreement shall be made to:

                            [Intentionally Omitted]

     4. Buyer Claims. The procedure for payments from the Escrow Account shall
be as follows:

     (a) From time to time but subject to Section 4(e) below, as Buyer
determines that it is entitled to an indemnification payment under Section 12 of
the Purchase Agreement or a payment with respect to Chapter 11 Claims under
Section 9.8 of the Purchase Agreement, Buyer may request payment from the Escrow
Account Balance by giving written notice of its claim in substantially the form
of Exhibit 1 to the Escrow Agent and the Sellers' Representative, certifying in
such notice the nature of the claim, the amount of Damages, the provisions in
the Purchase Agreement on which the claim is based and a certification that such
request for payment is required to be made by any Sellers pursuant to Section
9.8 of the Purchase Agreement or Section 12 of the Purchase Agreement and being
made in good faith (a "Claim Notice").

     (b) If the Escrow Agent has not received written objection to a Claim
Notice given by Buyer in accordance with the preceding Section 4(a) from the
Sellers' Representative within 15 banking days after receipt by the Escrow Agent
and Sellers' Representative of the Claim Notice from Buyer, the claim stated in
such Claim Notice shall be conclusively deemed to be approved by the Sellers'
Representative and the Escrow Agent shall promptly thereafter pay to Buyer, in
the manner specified in the Claim Notice, from the Escrow Account Balance the
amount of such claim to the extent of the Escrow Account Balance, plus any
interest accrued on such amount through the date of payment. The Escrow Agent
shall have no responsibility to verify that Buyer has complied with the
provisions of the preceding Section 4(a), but instead may assume that upon
receipt of the request from Buyer, the provisions of Section 4(a) have been so
complied with.

     (c) If within said 15 banking days the Escrow Agent shall have received
from the Sellers' Representative a written objection to the claim by Buyer,
certifying the nature of and grounds for such objection and that such objection
is being made in good faith (a copy of which shall in each case be sent to Buyer
by the Sellers' Representative in accordance with the provisions of Section 16
below), then such claim shall be deemed to be an "Open Claim" and the Escrow
Agent shall reserve within the Escrow Account an amount of the Escrow Account
Balance equal to the amount of the Open Claim (which amount for each Open Claim,
together with any amounts earned pursuant to Section 2 after the date of receipt
of the Claim Notice with respect to the amount stated in the Claim Notice, is
referred to herein as the "Claim Reserve"). Such Open Claim shall be resolved in
accordance with Section 4(d) of this Agreement.


                                       3



     (d) The amount constituting the Claim Reserve for each Open Claim shall be
paid by the Escrow Agent from the Escrow Account Balance to Buyer only either
(i) in accordance with a joint written instruction by Buyer and the Sellers'
Representative or (ii) if and to the extent consistent with a copy of a final
determination, finding, order, judgment and/or award from a court or other
agreed upon arbiter of competent jurisdiction and authority pertaining to the
Open Claim, sent to the Escrow Agent and the Sellers' Representative by Buyer
(each a "Final Determination"), and any portion of the Claim Reserve for such
Open Claim not so required to be paid to Buyer shall be returned to the Escrow
Account.

     (e) Upon the date that is 24 months after the date hereof, the Escrow
Account Balance shall be paid to the Sellers' Representative less (i) any amount
as to which a Final Determination has been made in favor of Buyer but which has
not yet been paid to Buyer and (ii) any amounts that have been identified by
Buyer in a Claim Notice but as to which a Final Determination has not yet been
made. Notwithstanding this Section 4(e), (i) any amounts as to which a Final
Determination has been made in favor of Buyer shall be paid to Buyer in
accordance with Section 3(c) and (ii) any amounts that have been identified by
Buyer in a Claim Notice as to which a Final Determination has not yet been made
shall remain in the Escrow Account until a Final Determination has been made and
shall be released to Buyer or the Sellers' Representative, as applicable, in
accordance with such Final Determination and shall be paid in the manner
specified in this Agreement. Any release of the Escrow Account Balance to the
Sellers' Representative shall not be deemed or construed as a release of Sellers
or Sellers' Representative, by Buyer, from any liability relating to the
Purchase Agreement or this Agreement.

     5. Termination, (a) This Agreement shall terminate on the earliest to occur
of:

          (i)  the date on which the Escrow Agent shall have been notified in
               writing by both Buyer and the Sellers' Representative that this
               Agreement shall be terminated; or

          (ii) the date on which the Escrow Agent shall have delivered the
               entire Escrow Account Balance to Buyer and/or the Sellers'
               Representative in accordance with the provisions of Section 3 or
               Section 4 of this Agreement.

     In the event of a termination pursuant to clause (i) above, the Escrow
Account Balance shall be delivered to such party or parties as are indicated in
the written notice from Buyer and the Seller's Representative.

     (b) Upon termination of this Agreement as set forth in this Section 5, the
Escrow Agent shall be discharged from all further obligations or
responsibilities hereunder.

     6. Duties of Escrow Agent. The instructions of the parties set forth herein
are irrevocable, and the Escrow Agent shall act only in accordance with such
instructions and instructions contained in any amendment or amendments to this
Agreement executed by all parties hereto and not in accordance with any contrary
instructions from any third person. The


                                        4



duties and obligations of the Escrow Agent shall be determined solely by the
express provisions of this Agreement, and the Escrow Agent shall not be liable
except for the performance of its duties and obligations as are specifically set
forth herein.

     The Escrow Agent shall provide to the Sellers' Representative and Buyer
monthly statements reflecting the Escrow Account Balance and the income earned
thereon.

     7. Liability of Escrow Agent. In order to induce the Escrow Agent to act as
escrow agent hereunder, the parties hereto agree that:

     (a) the Escrow Agent shall not in any way be bound or affected by any
amendment or modification of this Agreement, unless the same shall have been
agreed to in writing by the Escrow Agent;

     (b) the Escrow Agent shall not be under any duty to give the property held
hereunder any greater degree of care than it gives its own similar property, but
in no event shall the Escrow Agent give the property held hereunder anything
less than reasonable care;

     (c) the Escrow Agent may act in reliance upon, and shall incur no liability
for or in respect of any action taken or omitted to be taken or anything
suffered by it in reliance upon, any notice, direction, consent, certificate,
affidavit, statement or other paper or document reasonably believed by the
Escrow Agent to be genuine and to have been presented or signed by the proper
party or parties;

     (d) the Escrow Agent shall not at any time be under any duty or
responsibility to make a determination of any facts contained in any certificate
delivered pursuant hereto or to make any independent verification of the
statements or signatures in such certificate or amounts delivered thereby. The
Escrow Agent shall not be responsible for any failure by Buyer, the Sellers'
Representative or Sellers to comply with any of their respective covenants
contained in this Agreement, the Purchase Agreement or any other agreement;

     (e) the Escrow Agent shall be under no duty or obligation to take any legal
action in connection with this Agreement or to enforce, through the institution
of legal proceedings or otherwise, any of its rights as Escrow Agent hereunder
or any rights of any other party hereto pursuant to this Escrow Agreement or any
other agreement, nor shall it be required to defend any action or legal
proceeding which, in its opinion, would or might involve the Escrow Agent in any
cost, expense, loss or liability;

     (f) the Escrow Agent may engage or be interested in any financial or other
transaction with the parties hereunder as freely as if it were not the Escrow
Agent hereunder;

     (g) the Escrow Agent shall be entitled to rely upon advice of counsel (the
reasonable cost of which shall be borne by Buyer and Sellers) of its choosing in
reference to any matter connected herewith, and shall have full and complete
authorization and protection for any action taken or suffered by it hereunder in
good faith and in accordance with the opinion of such counsel and shall not be
liable for any mistake of fact or error of judgment, or for any acts or
omissions of any kind, unless caused by its willful misconduct or gross
negligence;


                                        5



     (h) notwithstanding anything to the contrary contained herein, if the
Escrow Agent shall be uncertain as to its duties or rights hereunder, shall
receive any notice, advice, direction, or other document from any other party
with respect to this Agreement which, in its opinion, is in conflict with any of
the provisions of this Agreement, or should be advised that a dispute has arisen
with respect to the payment, ownership, or right of possession of or to the
Escrow Account Balance or any part thereof (or as to the delivery, non-delivery,
or content of any notice, advice, direction or other document), the Escrow Agent
shall be entitled (but not obligated), without liability to anyone, to refrain
from taking any action other than to use its best efforts to keep safely the
Escrow Account Balance until the Escrow Agent shall be directed otherwise in
writing by the other parties hereto or by an order, decree or judgment of a
court of competent jurisdiction which has been finally affirmed on appeal or
which by lapse of time or otherwise is no longer subject to appeal, but the
Escrow Agent shall be under no duty to institute or to defend any proceedings,
although it may institute or defend such proceedings;

     (i) Buyer and the Sellers' Representative hereby authorize the Escrow
Agent, if the Escrow Agent is threatened with litigation or is sued, to
interplead all interested parties in any court of competent jurisdiction and to
deposit the Escrow Account Balance with the clerk of that court; and

     (j) this Agreement sets forth exclusively the duties of the Escrow Agent
with respect to any and all matters pertinent hereto and no implied duties or
obligations shall be read into this Agreement against the Escrow Agent.

     8. Indemnification. Buyer and the Sellers' Representative on behalf of
Sellers each covenant and agree to jointly and severally indemnify and hold
harmless the Escrow Agent against any costs or expenses (including attorneys'
fees and expenses), judgments, fines, losses, claims, damages, liabilities and
amounts paid in settlement in connection with any claim, action, suit,
proceeding or investigation arising out of or pertaining to this Agreement, and
in the event of any such claim, action, suit, proceeding or investigation: (a)
Buyer, on the one hand, and the Sellers' Representative on behalf of Sellers, on
the other hand, shall each pay the reasonable fees and expenses of counsel
selected by the Escrow Agent, promptly as statements therefor are received; and
(b) Buyer and the Sellers' Representative on behalf of Sellers will cooperate in
the defense of any such matter; except that Buyer and the Sellers'
Representative on behalf of Sellers shall not have any obligation to indemnify
the Escrow Agent against any cost, expense, judgment, fine, loss, claim, damage,
liability or settlement amount arising out of or pertaining to this Agreement
arising from the Escrow Agent's own gross negligence or willful misconduct. The
obligations of Buyer and the Sellers' Representative under this paragraph shall
survive: (i) the delivery of the Escrow Account Balance pursuant to this
Agreement; (ii) the termination of this Agreement; and (iii) the resignation or
removal of the Escrow Agent, In the event that Buyer or the Sellers'
Representative makes any payment pursuant to this Section 8, the party making
the payment shall have the right to seek contribution from the other party (or
parties in the case of Sellers) in the aggregate amount of 50% of the amount so
paid; provided, however, that in the event of a dispute between Buyer and the
Sellers' Representative, the prevailing party in such proceeding shall be
entitled to recover from the other party those costs and expenses of the Escrow
Agent incurred under this Section 8 in connection with such proceeding, in
addition to such other costs and expenses as may be applicable in such
proceeding. The parties hereby grant the Escrow Agent a lien on, right of
set-off against and security interest in the Escrow Fund


                                        6



for the payment of any claim for indemnification, compensation, expenses and
amounts due hereunder, without limiting the obligations of the Buyer and
Sellers' Representative, on behalf of the Sellers, hereunder.

     9. Taxes. Buyer, on the one hand, and the Sellers' Representative on behalf
of Sellers, on the other hand, jointly and severally agree to assume any and all
obligations imposed now or hereafter by any applicable tax law with respect to
the payment of the Escrow Account Balance under this Agreement. Buyer and the
Sellers' Representative undertake to instruct the Escrow Agent in writing with
respect to the Escrow Agent's responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and governmental
reporting in connection with its acting as Escrow Agent under this Agreement. To
the extent the Escrow Agent complies with such instructions, Buyer, on the one
hand, and the Sellers' Representative on behalf of Sellers, on the other hand,
jointly and severally agree to indemnify and hold the Escrow Agent harmless from
any liability on account of the failure to withhold or deduct taxes or the
failure to obtain proper certifications or to properly report to governmental
authorities to which the Escrow Agent may be or become subject in connection
with or which arises out of this Agreement, including costs and expenses
(including reasonable legal fees), interest and penalties.

     Anything in this Escrow Agreement to the contrary notwithstanding, in no
event shall the Escrow Agent be liable for special, indirect or consequential
loss or damage of any kind whatsoever (including but not limited to lost
profits), even if the Escrow Agent has been advised of the likelihood of such
loss or damage and regardless of the form of action.

     10. Resignation. The Escrow Agent may at any time resign as Escrow Agent by
mailing written notice to Buyer and the Sellers' Representative of such
intention on its part, specifying the date on which its desired resignation
shall become effective. Upon receiving such notice of resignation, Buyer and the
Sellers' Representative shall promptly appoint a successor escrow agent by
written instrument signed on behalf of Buyer and the Sellers' Representative,
one copy of which shall be delivered to each of the resigning Escrow Agent and
the successor escrow agent. If Buyer and the Sellers' Representative shall fail
to make such appointment within a period of 30 days after they have been
notified in writing of such resignation by the resigning Escrow Agent, then the
resigning Escrow Agent may apply to any court of competent jurisdiction in the
State of New York for the appointment of a successor escrow agent. Such
resignation shall become effective upon the acceptance of the appointment by the
successor escrow agent as provided in this Section 9. Upon resignation, the
Escrow Agent shall be entitled to payment by Buyer and the Sellers'
Representative of any amounts then due it hereunder. Any successor escrow agent
shall have all the rights, obligations and immunities of the Escrow Agent set
forth herein.

     11. Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but except as set forth in Section 9, neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto without the prior written consent of
the other parties, not to be unreasonably withheld or delayed, nor is this
Agreement intended to confer upon any other person except the parties hereto any
rights or remedies hereunder.


                                        7



     12. Banking Days. If any date on which the Escrow Agent is required to make
an investment or a delivery pursuant to the provisions hereof is not a banking
day, then the Escrow Agent shall make such investment or delivery on the next
succeeding banking day. A banking day shall be any day on which the Escrow
Agent's offices in New York, NY are open for business.

     13. Escrow Costs. The fees, costs and expenses payable to the Escrow Agent
hereunder, including those identified on the Fee Schedule attached hereto, shall
be paid (a) one- half by Buyer and (b) one-half by the Sellers' Representative
on behalf of Sellers. The Escrow Agent shall be entitled to withhold from any
payment to be made hereunder to any party hereunder amounts due from such party
pursuant to this Agreement.

     The Escrow Agent acknowledges and agrees that it is holding the Escrow
Account (and all amounts on deposit therein) in its capacity as escrow agent and
that it has no right to apply amounts (including any investments) in the Escrow
Account against any obligations of the other parties to this Agreement that do
not arise under this Agreement.

     14. Taxpayer Identification Number and Withholding. Upon execution of this
Agreement, Buyer and the Sellers' Representative on behalf of Sellers shall
provide the Escrow Agent with a fully executed W-8 or W-9 IRS form, as
applicable, which shall include Buyer's and Sellers' respective Taxpayer
Identification Numbers ("TIN") assigned by the Internal Revenue Service. In
addition, all interest or other income earned under the Escrow Agreement shall
be allocated and/or paid pursuant to the terms of this Agreement.
Notwithstanding the terms of this Agreement, the Escrow Agent shall report and,
as required, withhold any taxes as it determines may be required by any law or
regulation in effect at the time of the distribution.

     15. Tax Treatment. Buyer and the Sellers' Representative (on behalf of the
Sellers) agree that the funds that are transferred to the Escrow Account shall
be treated as an installment obligation for purposes of Section 453 of the
Internal Revenue Code of 1986, as amended. Buyer and the Sellers' Representative
(on behalf of the Sellers) hereby agree to treat the Escrow Account Balance as
owned by the Buyer and not received by the Sellers' Representative, in all cases
to the extent not paid to the Sellers' Representative pursuant hereto, and to
file all Tax Returns on a basis consistent with such treatment. All investment
income earned or realized on the amounts in the Escrow Account Balance shall be
accounted for by the Escrow Agent separately from the amount originally
deposited in the Escrow Account and such investment income shall be treated as
having been received by the Buyer for United States federal and state income tax
purposes. Unless otherwise required by law, Buyer and the Sellers'
Representative (on behalf of the Sellers) hereby agree that, for United States
federal and state income tax purposes, Buyer shall report investment income as
its income and shall report related expenses as its expenses.

     16. Notices. All notices and other communications pursuant to or in
connection with this Agreement shall be in writing and shall be deemed to have
been given and received when actually hand delivered, two banking days after
dispatch by recognized overnight delivery service, or seven days after mailing
by certified or registered mail with proper postage affixed and return receipt
requested, in each case to the address of the party set forth below (or to


                                        8



any changed address provided by any party to the other parties by notice given
as provided herein):

     If to Buyer:                Broadview Networks Holdings, Inc.
                                 800 Westchester Avenue
                                 5th Floor - Suite N501
                                 Rye Brook, NY 10573
                                 Attn: General Counsel
                                 Telecopy: (914)742-5818

     Copy to:                    Willkie Farr & Gallagher LLP
                                 787 Seventh Avenue
                                 New York, New York 10019
                                 Attn: Jeffrey R. Poss, Esq.
                                 Telecopy: (212) 728-9536

     And to:                     MCG Capital Corporation
                                 1100 Wilson Boulevard
                                 Suite 3000
                                 Arlington, VA 22209
                                 Attn: Samuel G. Rubenstein, General Counsel
                                 Telecopy: (703) 247-7545

     If to any Seller (or the
     Sellers' Representative):   LUK CLEC LLC
                                 315 Park Avenue South
                                 New York, New York 10010
                                 Attn: Joseph S. Steinberg, President
                                 Telecopy: (212) 598-4869

     Copy to:                    Weil, Gotshal & Manges LLP
                                 767 Fifth Avenue
                                 New York, NY 10153
                                 Attn: Andrea Bernstein, Esq.
                                 Telecopy: (212)310-8007

     If to Escrow Agent:         JPMorgan Chase Bank, N.A.
                                 4 New York Plaza, 21st Floor
                                 New York, New York 10004
                                 Attn: Audrey Mohan
                                 Telecopy: 212-623-6168

     17. Security Procedures. In the event that fund transfer instructions are
given (other than in writing at the time of execution of this Escrow Agreement),
the Escrow Agent is authorized to seek confirmation of such instructions by
telephone call-back to the person or persons designated on Schedule 2 hereto
("Schedule 2"), and the Escrow Agent may rely upon the confirmation of anyone
purporting to be the person or persons so designated. The persons


                                        9



and telephone numbers for call-backs may be changed only in writing actually
received and acknowledged by the Escrow Agent. If the Escrow Agent is unable to
contact any of the authorized representatives identified in Schedule 2, the
Escrow Agent is hereby authorized to seek confirmation of such instructions by
telephone call-back to any one or more of the relevant party's executive
officers ("Executive Officers"), which shall include the titles of President and
Chief Financial Officer, as the Escrow Agent may select. The Escrow Agent may
rely upon the confirmation of anyone purporting to be any such officer. The
Escrow Agent and the beneficiary's bank in any funds transfer may rely solely
upon any account numbers or similar identifying numbers provided by Buyer or the
Sellers' Representative to identify (i) the beneficiary, (ii) the beneficiary's
bank or (iii) an intermediary bank. The Escrow Agent may apply any of the
escrowed funds for any payment order it executes using any such identifying
number, even when its use may result in a person other than the beneficiary
being paid or the transfer of funds to a bank other than the beneficiary's bank
or an intermediary bank designated. The parties to this Escrow Agreement
acknowledge that these security procedures are commercially reasonable.

     18. Account Opening Information. To assist the government in preventing the
funding of terrorism and money laundering activities, pursuant to federal law
the Escrow Agent is required to obtain, verify and record certain information
that identifies each person or entity opening an escrow account. As such,
concurrently with the execution of this Agreement, each of the Company, the
Sellers' Representative, the Sellers, and Buyer shall provide any information
requested by the Escrow Agent that will allow the Escrow Agent to identify each
of the parties to this Agreement.

     19. Amendment and Modification; Waiver. This Agreement may be amended,
modified or supplemented only by written agreement of each of the parties hereto
(it being agreed that the Escrow Agent shall execute such amendment,
modification or supplement unless such amendment, modification or supplement
adversely affects the Escrow Agent or imposes additional duties or obligations
on it hereunder).

     Any of the terms, covenants, representations, warranties or conditions
hereof may be waived by a written instrument executed by the party or parties
waiving compliance. Any waiver by any party of any condition, or of the breach
of any provision, term, covenant, representation or warranty contained in this
Agreement, in any one or more instances, shall not be deemed to be nor construed
as a further or continuing waiver of any such condition, or of the breach of any
other provision, term, covenant, representation or warranty of this Agreement
and, except as otherwise expressly provided herein, no failure or delay by a
party hereto in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, and no single or partial exercise thereof shall preclude
any right of further exercise or the exercise of any other right, power or
privilege.

     20. Governing Law. This Agreement shall be governed by the laws of the
State of New York (regardless of the laws that might otherwise govern under
applicable New York principles of conflicts of law) as to all matters, including
but not limited to matters of validity, construction, effect, performance and
remedies, and such operating circulars of any Federal Reserve Bank, federal laws
and regulations, funds transfer system rules and general commercial bank
practices applicable to funds transfer and related activities.


                                       10




     21. Sellers' Representative. All references to Sellers in this Agreement
may be treated by Escrow Agent and, if applicable, Buyer as references to
Sellers' Representative. Any action taken by the Sellers' Representative,
including, without limitation, the execution of any amendment or modification of
this Agreement pursuant to Section 18, shall be deemed to have been taken by
each of the Sellers. Escrow Agent and, if applicable, Buyer are hereby relieved
from any liability to Sellers for any acts done by Escrow Agent or Buyer in
accordance with any decision, act, consent or instruction of Sellers'
Representative.

     22. Not Exclusive Remedy. Sellers acknowledge and agree that the remedies
provided for herein (including the disbursements from the Escrow Account) shall
not be Buyer's exclusive remedy in respect of any indemnification or other claim
that Buyer may have in connection with the consummation of the transactions
contemplated by the Purchase Agreement, and that Buyer shall, notwithstanding
its execution and delivery of this Agreement, retain all of its rights and
remedies that are provided for in the Purchase Agreement.

     23. Severability. In the event that any part of this Agreement is declared
by any court or other judicial or administrative body to be null, void or
unenforceable, said provision shall survive to the extent it is not so declared,
and all of the other provisions of this Agreement shall remain in full force and
effect.

     24. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be deemed an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument. Any
counterpart may be executed by facsimile signature, and such facsimile signature
shall be deemed an original.

     25. Interpretation. The section headings contained in this Agreement are
solely for the purpose of reference, are not part of this Agreement and shall
not in any way affect the meaning or interpretation of this Agreement.

     26. Entire Agreement. This Agreement, and, as among the Company, the
Sellers' Representative, the Sellers, and the Buyer, the Purchase Agreement,
including the schedules and exhibits attached hereto and thereto, embodies the
entire agreement and understanding of the parties hereto in respect of the
subject matter hereof. There are no restrictions, promises, representations,
warranties, covenants or undertakings regarding this subject matter, other than
those expressly set forth or referred to herein or therein.

     27. Force Majeure. No party to this Escrow Agreement is liable to any other
party for losses due to, or if it is unable to perform its obligations under the
terms of this Escrow Agreement because of, acts of God, fire, floods, strikes,
equipment or transmission failure, or other causes reasonably beyond its
control.

                  [Remainder of page intentionally left blank.]


                                       11


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

                                        COMPANY:

                                        ATX COMMUNICATIONS, INC.


                                        By: /s/ David Larsen
                                            ------------------------------------
                                        Name: David Larsen
                                        Title: President

                                        As Seller's Representative:

                                        SELLERS' REPRESENTATIVE:


                                        LUK-CLEC LLC


                                        By: /s/ Joseph A. Orlando
                                            ------------------------------------
                                        Name: Joseph A. Orlando
                                        Title: Vice President

                                        BUYER:


                                        BROADVIEW NETWORKS HOLDINGS, INC.


                                        By: /s/ Corey Rinker
                                            ------------------------------------
                                        Name: Corey Rinker
                                        Title: CFO

                      [Signature Page to Escrow Agreement]





                                        ESCROW AGENT:

                                        JPMORGAN CHASE BANK. N. A.


                                        By: /s/ SAVERIO A. LUNETTA
                                            ------------------------------------
                                        Name: SAVERIO A. LUNETTA
                                        Title: VICE PRESIDENT

                      [Signature Page to Escrow Agreement]

EX-10.22

                                                                   Exhibit 10.22

                                 COAXICOM, INC.

                            (a New York corporation)

                             1997 STOCK OPTION PLAN

                                   SECTION 1.
                              PURPOSE OF THE PLAN

     The purpose of the Coaxicom, Inc. 1997 Stock Option Plan (the "Plan") is to
(i) further the growth and success of Coaxicom, Inc. (the "Company") and any
entity in which the Company holds a controlling interest (its "Subsidiaries") by
enabling directors and employees of, and independent consultants and contractors
to, the Company and any of its Subsidiaries to acquire shares of the common
stock, $.01 par value per share (the "Common Stock"), of the Company, thereby
increasing their personal interest in such growth and success, and (ii) provide
a means of rewarding outstanding performance by such persons to the Company
and/or its Subsidiaries. Options granted under the Plan may be either "incentive
stock options" ("ISOs"), intended to qualify as such under the provisions of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
non-qualified stock options ("NSOs"). For purposes of the Plan, the terms
"Parent" and "Subsidiary" mean "Parent Corporation" and "Subsidiary
Corporation," respectively, as such terms are defined in Sections 425(e) and (f)
of the Code. Unless the context otherwise requires, any ISO or NSO shall
hereinafter be referred to an Option.

                                   SECTION 2.
                   ADMINISTRATION; PROCEDURES; INTERPRETATION

     (a) Administration. The Plan shall be administered by the Board of
Directors of the Company (the "Board").

     (b) Procedures. Subject to the By-Laws of the Company, the Board shall
adopt such rules and regulations as it shall deem appropriate concerning the
frequency of meetings and the administration of the Plan.

     (c) Interpretation. Except as otherwise expressly provided in the Plan, the
Board shall have all powers with respect to the administration of the Plan,
including, without limitation, full power and authority to interpret the
provisions of the Plan and any Option Agreement (as defined in Section 5(b)),
and to resolve all questions arising under the Plan. All decisions of the Board
shall be conclusive and binding on all participants in the Plan.



                                   SECTION 3.
                      SHARES OF STOCK SUBJECT TO THE PLAN

     (a) Number of Shares. Subject to the provisions of Section 9 (relating to
adjustments upon changes in capital structure and other corporate transactions),
the number of shares of Common Stock subject at any one time to Options
granted under the Plan, plus the number of shares of Common stock theretofore
issued and delivered pursuant to the exercise of Options granted under the Plan,
shall not exceed 10,000 shares. If and to the extent that Options granted under
the Plan terminate, expire or are canceled without having been fully exercised,
new. Options may be granted under the Plan with respect to the shares of Common
Stock covered by the unexercised portion of such terminated, expired or canceled
Options.

     (b) Character of Shares. The shares of Common Stock issuable upon exercise
of an Option granted under the Plan shall be (i) authorized but unissued shares
of Common Stock, (ii) shares of Common Stock held in the Company's treasury or
(iii) a combination of the foregoing.

     (c) Reservation of Shares. The number of shares of Common Stock reserved
for issuance under the Plan shall at no time be less than the maximum number of
shares which may be purchased at any time pursuant to outstanding options.

                                   SECTION 4.
                                  ELIGIBILITY

     (a) General. Options may be granted under the plan only to (i) persons who
are employees of, or independent consultants to, the Company or any of its
Subsidiaries and (ii) persons who are directors of the Company or any of its
Subsidiaries Options granted to employees of the Company or any of its
Subsidiaries shall be, in the discretion of the Board, either ISOs or NSOs, and
Options granted to independent consultants or directors of the Company or any of
its Subsidiaries shall be NSOs. Notwithstanding the foregoing, Options may be
conditionally granted to a person who is a prospective employee or director of,
or independent consultant to, the Company or any of its Subsidiaries; provided,
however, that any such conditional grant of an ISO to a prospective employee
shall, by its terms, become effective no earlier than the date on which such
person actually becomes an employee.

     (b) Exceptions. Notwithstanding anything contained in Section 4(a) to the
contrary:

     (i) no ISO may be granted under the Plan to an employee who owns, directly
or indirectly (within the meaning of Sections 422(b)(6) and 425(d) of the Code),
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company or of its Parent, if any, or any of its Subsidiaries,
unless (A) the Option Price (as defined in Section 6(a)) for the shares of
Common Stock subject to such ISO is fixed at not less than 110% of the Fair
Market Value of such shares on the date of grant (as determined in accordance
with Section 6(b)) and (B) such ISO by its terms is not exercisable after the
expiration of five years from the date it is granted; and



     (ii) no Option may be granted to a person who has been appointed pursuant
to Section 2(a) to serve on the Board effective as of a future date at any time
during the period from the date such appointment is made to the date such
appointment is to become.

                                   SECTION 5.
                                GRANT OF OPTIONS

     (a) General. Options may be granted under the Plan at any time and from
time to time on or prior to the tenth anniversary of the Effective Date (as
defined in Section 11). Subject to the provisions of the Plan, the Board shall
have plenary authority, in its discretion, to determine:

          A. the persons (from among the classes of person eligible to receive
     Options under the Plan) to whom Options shall be granted (the "Optionees");

          B. the time or times at which Options shall be granted;

          C. the number of shares subject to each Option;

          D. the Option Price of the shares subject to each Option, which price,
     in the case of ISOs, shall not be less than the minimum specified in
     Section 4(b)(i) or 6(a) (as applicable); and

          E. the time or times when each Option shall become exercisable and the
     duration of the exercise period.

     (b) Option Agreements. Each Option granted under the Plan shall be
designated as an ISO or an NSO and shall be subject to the terms and conditions
applicable to ISOs and/or NSOs (as the case may be) set forth in the Plan. In
addition, each Option shall be evidenced by a written agreement (an "Option
Agreement") containing such terms and conditions and in such form, not
inconsistent with the Plan, as the Board shall, in its discretion, provide. Each
Option Agreement shall be executed by the Company and the Optionee.

     (c) No Evidence of Employment or Service. Nothing contained in the Plan or
in any Option Agreement shall confer upon any Optionee any right with respect to
the continuation of his or her employment by or service with the Company or any
of its Subsidiaries or interfere in any way with the right of the Company or any
such Subsidiary (subject to the terms of any separate agreement to the contrary)
at any time to terminate such employment or service or to increase or decrease
the compensation of the Optionee from the rate in existence at the time of the
grant of an Option.

     (d) Date of Grant. The date of grant of an Option under this Plan shall be
the date as of which the Board approves the grant; provided, however, that in
the case of an ISO, the date of grant shall in no event be earlier than the date
as of which the Optionee becomes an employee of the Company or one of its
Subsidiaries.



                                   SECTION 6.
                                  OPTION PRICE

     (a) General. Subject to Section 9, the price (the "Option Price") at which
each share of Common Stock subject to an Option granted under the Plan may be
purchased shall be determined by the Board at the time the Option is granted;
provided, however, that in the case of an ISO, such Option Price shall in no
event be less than 100% of the Fair Market Value of such share of Common Stock
on the date of grant (as determined in accordance with Section 6(b)); and
provided further, however, that in the case of an NSO granted at any time after
the initial public offering of the Common Stock, such Option Price shall in no
event be less than 100% of the Fair Market Value of such Common Stock on the
date of grant (as determined in accordance with Section 6(b)).

     (b) Determination of Fair Market Value. Subject to the requirement of
Section 422 of the Code, for purposes of the Plan, the "Fair Market Value" of
shares of the Common Stock shall be equal to:

          (i) if such shares are publicly traded, (x) the closing price, if
     applicable, or the average of the last bid and asked prices on the date of
     grant or, if lower, the average of the daily closing prices (or the means
     between the last bid and asked prices for days on which no sales took
     place) of the 30 business days immediately preceding the date of grant, in
     the over-the-counter market as reported by NASDAQ or (y) if the Common
     Stock is then traded on a national securities exchange, the average of the
     high and low prices on the date of grant or, if lower, the average of the
     daily closing prices (or the means between the last bid and asked prices
     for days on which no sales took place) of the 30 business days immediately
     preceding the date of grant, on the principal national securities exchange
     on which such security is so traded; or

          (ii) if there is no public trading market for such shares, the fair
     market value of such shares on the date of grant as determined by the
     Board, without regard in respect to any such determination for any
     discount, including, without limitation, for the fact that such share is
     held by a minority stockholder, that there is no public market for the
     stock or, if there were a public market for such stock, such stock would be
     "restricted" as defined under Rule 144 promulgated under the Securities Act
     of 1933, as amended (the "Securities Act"), after taking into consideration
     all other factors which it deems appropriate, including, without
     limitation, recent sale and offer prices of the Common Stock in private
     transactions negotiated at arms' length.

Notwithstanding anything contained in the Plan to the contrary, all
determinations pursuant to Section 6(b)(ii) shall be made without regard to any
restriction other than a restriction which, by its terms, will never lapse.

     (c) Rend of NSOs. Subsequent to the date of grant of any NSO, the Board
may, at its discretion and with the consent of the Optionee, establish a new
Option Price for such NSO so as to increase or decrease the Option Price of such
NSO.



                                   SECTION 7.
                            EXERCISABILITY OF OPTIONS

     (a) Board Determination. Each Option granted under the Plan shall be
exercisable at such time or times, or upon the occurrence of such event or
events, and for such number of shares subject to the Option, as shall be
determined by the Board and set forth in the Option Agreement evidencing such
Option; provided, however, that if the Company files a registration statement
under the Securities Act for the initial public offering of its securities, no
Option granted under the Plan shall be exercisable during the 180-day period
immediately following the effective date of such registration statement. Subject
to the proviso of the immediately preceding sentence, if an Option is not at the
time of grant immediately exercisable, the Board may (i) in the Option Agreement
evidencing such Option, provide for the acceleration of the exercise date or
dates of the subject Option upon the occurrence of specified events and/or (ii)
at any time prior to the complete termination of an Option, accelerate the
exercise date or dates of such Option.

     (b) Automatic Termination of Option. The unexercised portion of any Option
granted under the Plan shall automatically terminate and be of no further force
of effect upon the first to occur of the following:

          (i) the tenth anniversary of the date on which such Option is granted
     or, in the case of any ISO granted to a person described in Section 4(b),
     the fifth anniversary of the date on which such ISO is granted;

          (ii) in the case of an ISO, unless the Optionee has elected to convert
     such ISO into an NSO, the expiration of three months from the date that the
     Optionee ceased to be an employee of the Company or any of its Subsidiaries
     (other than as a result of an Involuntary Termination (as defined in clause
     iii) below)); provided, however, that if the

     Optionee shall die during such three-month period, the time of termination
     of the unexercised portion of such Option shall be the expiration of 12
     months from the date that such Optionee ceased to be an employee or
     director of, or independent consultant or contractor to, the Company or any
     of its Subsidiaries;

          (iii) in the case of an ISO, unless the Optionee has elected to
     convert such ISO into an NSO, the expiration of 6 months from the date that
     the Optionee ceased to be an employee of the Company or any of its
     Subsidiaries, if such termination is due to such Optionee's death or
     permanent and total disability (within the meaning of Section 22(e)(3) of
     the Code) (an "Involuntary Termination");

          (iv) the expiration of such period of time or the occurrence of such
     event as the Board in its discretion may provide in the Option Agreement;

          (v) except to the extent permitted by Section 9(b)(ii), the date

     on which an Option or any part thereof or right of privilege relating
     thereto is transferred (otherwise than by will or the laws of descent and
     distribution), assigned, pledged, hypothecated, attached or otherwise
     disposed of by the Optionee; and

          (vi) if the Optionee is an employee of the Company, upon Termination
     for Cause.



The Board shall have the power to determine what constitutes a Termination For
Cause for purposes of the Plan and the date upon which such Termination For
Cause shall occur. All such determinations shall be final and conclusive and
binding upon the Optionee. Anything contained in the Plan to the contrary
notwithstanding, unless otherwise provided in an Option Agreement, no Option
granted under the Plan shall be affected by any change of duties or position of
the Optionee (including a transfer to or from the Company or one of its
Subsidiaries), so long as such Optionee continues to be an employee or director
of, or independent consultant or contractor to, the Company or one of its
Subsidiaries.

     (c) Limitations on Exercise. Anything contained in the Plan to the contrary
notwithstanding, an ISO granted under the Plan to an Optionee shall not be
considered an ISO to the extent that the aggregate Fair Market Value on the date
of grant of such ISO (as determined in accordance with Section 6(b)) of all
stock with respect to which incentive stock options are exercisable for the
first time by such Optionee during any calendar year (under all plans of the
Company and its Subsidiaries) exceeds $100,000.

                                   SECTION 8.
                             PROCEDURE FOR EXERCISE

     (a) Payment. At the time an Option is granted under the Plan, the Board
may, in its discretion, permit the Optionee to utilize one or more of the
following forms of payment upon the exercise of an Option:

          (i) cash or personal or certified check payable to the Company in an
     amount equal to the aggregate Option Price of the shares with respect to
     which the Option is being exercised;

          (ii) stock certificates representing shares of Common Stock having a
     Fair Market Value on the date of exercise (as determined in accordance with
     Section 6(b)) equal to the aggregate Option Price of the shares with
     respect to which the Option is being excised; or

          (iii) a combination of the methods set forth in clauses (i) and (ii).

     (b) Notice. An Optionee may exercise an Option granted under the Plan in
whole or in part (but for the purchase of whole shares only), as provided in the
Option Agreement evidencing the Option, by delivering a written notice (the
"Notice") to the Secretary of the Company. The Notice shall state:

          (i) that the Optionee elects to exercise the Option;

          (ii) the number of shares with respect to which the Option is being
     exercised (the "Optioned Shares").

          (iii) the method of payment for the Optioned Shares;



          (iv) the date upon which the Optionee desires to consummate the
     purchase, it being understood that the date so specified may not be more
     than 15 calendar days subsequent to the delivery of Notice to the Company;

          (v) a copy of any election filed by the Optionee pursuant to Section
     83(b) of the Code; and

          (vi) such further provisions consistent with the Plan as the Board may
     from time to time require.

     The exercise date of an Option shall be the later of (i) the date on which
the Company receives the Notice from the Optionee and (ii) the date on which the
Company receives the Notice from the Optionee.

     (c) Issuance of Certificates. The Company shall issue a stock certificate
in the name of the Optionee (or such other person exercising the Option in
accordance with the provisions of Section 10(b)) for the Optioned Shares as soon
as practicable after receipt of the Notice and payment of the aggregate Option
Price for such shares. Neither the Optionee nor any person exercising an Option
in accordance with the provisions of Section 10(b) shall have any privileges as
a stockholder of the Company with respect to any shares of stock subject to an
Option granted under the Plan until the date of the issuance of a stock
certificate pursuant to this Section 8(c).

                                   SECTION 9.
                                  ADJUSTMENTS

     (a) Changes in Capital Structure. Subject to Section 9(b), if the Common
Stock is changed by reason of a stock split, reverse stock split, stock dividend
or capitalization, or converted into or exchanged for other securities as a
result of a merger, consolidation or reorganization, the Board shall make such
adjustments in the number and class of shares of stock with respect to which
Options may be granted under the Plan as shall be equitable and appropriate in
order to make such Options, as nearly as may be practicable, equivalent to such
Options immediately prior to such change. A corresponding adjustment changing
the number and class of shares allocated to, and the Option Price of, each
Option or portion thereof outstanding at the time of such change shall likewise
be made. Notwithstanding anything contained in the Plan to the contrary, in the
case of ISOs, no adjustment under this Section 9(a) shall be appropriate if such
adjustment (i) would constitute a modification, extension or renewal of such ISO
within the meaning of Section 422 and 425 of the Code, and the regulations
promulgated by the Treasury Department thereunder, or (ii) would, under Section
422 of the Code and the regulations promulgated by the Treasury Department
thereunder, be considered as the adoption of a new plan requiring stockholder
approval.

     (b) Corporate Transactions. The following rules shall apply in connection
with the dissolution or liquidation of the Company, a reorganization, merger or
consolidation in which the Company is not the surviving corporation, or a sale
of all or substantially all of the assets of the Company to another person or
entity (a "Corporate Transactions"):



     (i) each holder of an Option outstanding at such time shall be given (A)
written notice of such Corporate Transaction at least 20 days prior to its
proposed effective date (as specified in such notice) and (B) an opportunity,
during the period commencing on the delivery date of such notice and ending 10
days prior to the proposed effective date of such transaction, to exercise the
Option to the full extent to which such Option would have been exercisable by
the Optionee at the expiration of such 20 day period; provided, however, that
upon the occurrence of a Corporate Transaction, all Options granted under the
Plan and not so exercised shall automatically terminate; and

     (ii) notwithstanding anything contained in the Plan to the contrary,
Section 9(b)(i) shall not be applicable if provision shall be made in connection
with such Corporate Transaction for the assumption of outstanding Options by, or
the substitution for such Options of new options covering the stock of, the
surviving successor or purchasing corporation or a parent or subsidiary thereof,
with appropriate adjustments as to the number, kind and option prices of shares
subject to such options; provided, however, that in the case of ISOs, the Board
shall, to the extent not inconsistent with the best interests of the Company of
its Subsidiaries (such best interests to be determined in good faith by the
Board in its sole discretion), use its best efforts to ensure that any such
assumption or substitution will not constitute a modification, extension or
renewal of the ISOs within the meaning of Section 425(h) of the Code and the
regulations promulgated by the Treasury Department thereunder.

     (c) Special Rules. The following rules shall apply in connection with
Section 9(a) and (b) above:

          (i) no fractional shares shall be issued as a result of any such
     adjustment, and any fractional shares resulting from the computations
     pursuant to Section 9(a) or (b) shall be eliminated without consideration
     from the respective Options;

          (ii) no adjustment shall be made for cash dividends or the issuance to
     stockholders of rights to subscribe for additional shares of Common Stock
     or other securities; and

          (iii) any adjustments referred to in Section 9(a) or (b) shall be made
     by the Board in its sole discretion and shall be conclusive and binding on
     all persons holding Options granted under the Plan.

                                   SECTION 10.
                   RESTRICTIONS ON OPTIONS AND OPTIONED SHARES

     (a) Compliance with Securities Laws. No Options shall be granted under the
Plan, and no shares of Common Stock shall be issued and delivered upon the
exercise of Options granted under the Plan, unless and until the Company and/or
the Optionee shall have complied with all applicable federal or state
registration, listing and/or qualification requirements and all other
requirements of law or of any regulatory agencies having jurisdiction. The Board
in its discretion may, as a condition to the exercise of any Option granted
under the Plan, require an Optionee (i) to represent in writing that the shares
of Common Stock received upon the exercise of an Option are being acquired for
investment and not with a view to distribution and (ii) to make such other
representations and warranties as are deemed appropriate by the Company. Stock
certificates representing shares of Common Stock acquired upon the exercise of
Options



that have not been registered under the Securities Act shall, if required by the
Board, bear the following legend and such additional legends as may be required
by the Option Agreement evidencing a particular Option:

     "THE REGISTERED HOLDER HEREOF HAS REPRESENTED TO THE ISSUER OF THE SHARES
     REPRESENTED THIS CERTIFICATE THAT HE HAS ACQUIRED SUCH SHARES FOR
     INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION. ACCORDINGLY, SUCH SHARES HAVE
     NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
     STATE SECURITIES OR BLUE SKY LAWS, AND MAY NOT BE SOLD, TRANSFERRED,
     PLEDGED OR HYPOTHECATED UNLESS SUBSEQUENTLY REGISTERED THEREUNDER OR AN
     EXEMPTION FROM REGISTRATION THEREUNDER IS AVAILABLE."

     (b) Nonassignability of Option Rights. No Option granted under this Plan
shall be assignable or otherwise transferable by the Optionee except by will or
by the laws of descent and distribution. An Option may be exercised during the
lifetime of the Optionee only by the Optionee. If an Optionee dies, his or her
Option shall thereafter be exercisable, during the period specified in Section
7(b)(ii) or (iii) as applicable, by his or her executors or administrators to
the full extent to which such Option was exercisable by the Optionee at the time
of his or her death.

                                   SECTION 11.
                             EFFECTIVE DATE OF PLAN

     This Plan shall become effective on the date (the "Effective Date") of its
adoption by the Board; provided, however, that on Option shall be exercisable by
an Optionee unless and until the Plan shall have been approved by the
stockholders of the Company in accordance with the provisions of its Certificate
of Incorporation and By-laws, which approval shall be obtained by a simple
majority vote of stockholders, voting either in person or by proxy, at a duly
held stockholders' meeting, or by written consent, within 12 months before or
after the adoption of the Plan by the Board.

                                   SECTION 12.
                     EXPIRATION AND TERMINATION OF THE PLAN

     Except with respect to Options then outstanding, the Plan shall expire on
the first to occur of (i) the tenth anniversary of the date on which the Plan is
adopted by the Board, (ii) the tenth anniversary of the date on which the Plan
is approved by the stockholders of the Company and (iii) the date as of which
the Board, in its sole discretion, determined that the Plan shall terminate (the
"Expiration Date"). Any Options outstanding as of the Expiration Date shall
remain in effect until they have been exercised or terminated or have expired by
their respective terms.



                                   SECTION 13.
                                AMENDMENT OF PLAN

     The Board may at any time prior to the Expiration Date modify and amend the
Plan in any respect; provided, however, that the approval of the holders of a
majority of the votes that may be cast by all of the holders of shares of
capital stock of the Company, if any, entitled to vote thereon shall be obtained
prior to any such amendment becoming effective if such approval is required by
law or is necessary to comply with regulations promulgated by the SEC under
Section 16(b) of the 1934 Act or with Section 422 of the Code or the regulations
promulgated by the Treasury Department thereunder.

                                   SECTION 14.
                                    CAPTIONS

     The use of captions in this Plan is for convenience. The captions are not
intended to provide substantive rights.

                                   SECTION 15.
                           DISQUALIFYING DISPOSITIONS

     If Optioned Shares acquired by exercise of an ISO granted under this Plan
are disposed of within two years following tie date of grant of the ISO or one
year following the issuance of the Optioned Shares to the Optionee (a
"Disqualifying Disposition"), the holder of the Optioned Shares shall,
immediately prior to such Disqualifying Disposition, notify the Company in
writing of the date and terms of such Disqualifying Disposition and provide such
other information regarding the Disqualifying Disposition as the Company may
reasonably require.

                                   SECTION 16.
                               WITHHOLDING TAXES

     Whenever under the Plan shares of Common Stock are to be delivered by an
Optionee upon exercise of an NSO, the Company shall be entitled to require as a
condition of delivery that the Optionee remit or, in appropriate cases, agree to
remit when due, an amount sufficient to satisfy all current or estimated future
federal, state and local withholding tax and employment tax requirements
relating thereto. At the time of a Disqualifying Disposition, the Optionee shall
remit to the Company in cash the amount of any applicable federal, state and
local withholding taxes and employment taxes.

                                   SECTION 17.
                                OTHER PROVISIONS

     Each Option granted under the Plan may contain such other terms and
conditions not inconsistent with the Plan as may be determined by the Board, in
its sole discretion. Notwithstanding the foregoing, each ISO granted under the
Plan shall include those terms and conditions which are necessary to qualify the
ISO as an "incentive stock option" within the



meaning of Section 422 of the Code and the regulations thereunder and shall not
include any terms or conditions which are inconsistent therewith.

                                   SECTION 18.
                               NUMBER AND GENDER

     With respect to words used in this Plan, the singular form shall include
the plural form, the masculine gender shall include the feminine gender, and
vice-versa, as the context requires.

                                   SECTION 19.
                                 GOVERNING LAW

     The validity and construction of this Plan and the instruments evidencing
the Options granted hereunder shall be governed by the laws of the State of
Delaware.

As adopted by the Board of Directors of Coaxicom, Inc. as of January 31, 1997

EX-10.23

                                                                   Exhibit 10.23

                        BROADVIEW NETWORKS HOLDINGS, INC.
                            (a Delaware corporation)

                          2000 LONG-TERM INCENTIVE PLAN

                                   SECTION 1.
                               PURPOSE OF THE PLAN

     (a) Purpose. The purpose of the Broadview Networks Holdings, Inc. 2000
Long-Term Incentive Plan (the "Plan") is to (i) further the growth and success
of Broadview Networks Holdings, Inc. (the "Company") and any entity in which the
Company holds a controlling interest (its "Subsidiaries") by enabling directors
and employees of, and independent consultants and contractors to, the Company
and any of its Subsidiaries to acquire shares of the common stock, $.01 par
value per share (the "Common Stock"), of the Company, thereby increasing their
personal interest in such growth and success, and (ii) provide a means of
rewarding outstanding performance by such persons to the Company and/or its
Subsidiaries. For purposes of the Plan, the terms "Parent" and "Subsidiary" mean
"Parent Corporation" and "Subsidiary Corporation," respectively, as such terms
are defined in Sections 424(e) and (f) of the Internal Revenue Code of 1986 (the
"Code").

     (b) Participation. Subject to the terms and conditions of the Plan, the
Committee (as defined in Section 2) shall determine and designate from time to
time, from among the "Eligible Individuals" those persons who will be granted
one or more Awards under the Plan and thereby become "Participants" in the Plan.
For purposes of the Plan, the term "Eligible Individual" shall mean any employee
or director (including directors who are not employees of the Company or a
Subsidiary (a "Non-Employee Director")) of the Company or a Subsidiary, and any
consultant or other person providing services to the Company or a Subsidiary.

     (c) Effective Date. Subject to the approval of the shareholders of the
Company at the Company's 2000 annual meeting of its shareholders, the Plan shall
be effective as of February 3, 2000 (the "Effective Date"); provided, however,
that to the extent that Awards are granted under the Plan prior to its approval
by shareholders, the Awards shall be contingent on the approval of the Plan by
the shareholders of the Company at such annual meeting. The Plan shall be of
unlimited duration and, in the event of Plan termination shall remain in effect
as long as any Awards under it are outstanding; provided, however, that no
Awards may be granted under the Plan after the tenth anniversary of the
Effective Date (except for Awards granted pursuant to commitments entered into
prior to such ten-year anniversary).


                                   SECTION 2.
                                 ADMINISTRATION

     (a) Administration. So long as the Company is subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Plan shall
be administered by a committee (the "Committee") selected by the Board and shall
consist of not fewer than two members of the Board or such greater number as may
be required for compliance with Rule 16b-3 issued under the Exchange Act, none
of whom shall be eligible to receive Awards under the Plan except as provided in
subsection 4(c).

     (b) Powers of Committee. The authority to manage and control the operation
and administration of the Plan shall be vested in the Committee, subject to the
following:

          (i) Subject to the provisions of the Plan, the Committee will have the
     authority and discretion to select which Eligible Individuals will receive
     Awards, to determine the time or times of receipt, to determine the types
     of Awards and the number of Shares covered by the Awards, to establish the
     terms, conditions, performance criteria, restrictions, and other provisions
     of such Awards, and to cancel or suspend Awards.

          (ii) Subject to the provisions of the Plan, the Committee will have
     the authority and discretion to determine the extent to which Awards under
     the Plan will be structured to conform to the requirements applicable to
     "Performance-Based Compensation" (as that term is used in Section
     162(m)(4)(C) of the Code), and to take such action, establish such
     procedures, and impose such restrictions at the time such Awards are
     granted as the Committee determines to be necessary or appropriate to
     conform to such requirements.

          (iii) The Committee will have the authority and discretion to
     interpret the Plan, to establish, amend and rescind any rules and
     regulations relating to the Plan, to determine the terms and provisions of
     any agreements made pursuant to the Plan and to make all other
     determinations that may be necessary or advisable for the administration of
     the Plan.

          (iv) Any interpretation of the Plan by the Committee and any decision
     made by it under the Plan is final and binding on all persons.

     (c) Delegation by Committee. Except to the extent prohibited by applicable
law or the rules of any stock exchange or NASDAQ (if appropriate), the Committee
may allocate all or any portion of its responsibilities and powers to any one or
more of its members and may delegate all or any part of its responsibilities and
powers to any person or persons selected by it. Any such allocation or
delegation may be revoked by the Committee at any time.


                                       2



     (d) Information to be Furnished to Committee. The Company and Subsidiaries
shall furnish the Committee such data and information as it determines may be
required for it to discharge its duties. The records of the Company and
Subsidiaries as to an employee's or Participant's employment (or other provision
of services), termination of employment (or cessation of the provision of
services), leave of absence, reemployment and compensation shall be conclusive
on all persons unless determined to be incorrect. Participants and other persons
entitled to benefits under the Plan must furnish the Committee such evidence,
data or information as the Committee consider desirable to carry out the terms
of the Plan.

     (e) Liability and Indemnification of Committee. No member or authorized
delegate of the Committee shall be liable to any person for any action taken or
omitted in connection with the administration of the Plan unless attributable to
his own fraud or willful misconduct; nor shall the Company or any Subsidiary be
liable to any person for any such action unless attributable to fraud or willful
misconduct on the part of an employee of the Company of any Subsidiary. The
Committee, the individual members thereof, and persons acting as the authorized
delegates of the Committee under the Plan, shall be indemnified by the Company
against any and all liabilities, losses, costs and expenses (including legal
fees and expenses) of whatsoever kind and nature which may be imposed on,
incurred by or asserted against the Committee or its members or authorized
delegates by reason of the performance of a Committee function if the Committee
or its members or authorized delegates did not act dishonestly or in willful
violation of the law or regulation under which such liability, loss, cost or
expense arises. This indemnification shall not duplicate but may supplement any
coverage available under any applicable insurance.

                                   SECTION 3.
                      SHARES OF STOCK SUBJECT TO THE PLAN

     (a) Character of Shares. The shares of Common Stock with respect to which
Awards may be made under the Plan shall be shares currently authorized but
unissued or currently held or subsequently acquired by the Company as treasury
shares, including shares purchased in the open market or in private
transactions.

     (b) Number of Shares. Subject to the following provisions of this Section
3, the maximum number of shares of Common Stock that may be delivered to
Participants and their beneficiaries under the Plan shall be equal to the sum
of: (i) 5,200,000 shares of Common Stock; and (ii) any shares of Common Stock
that are represented by Awards granted under the Plan which are forfeited,
expire or are canceled without delivery of shares of Common Stock or which
result in the forfeiture of the shares of Common Stock back to the Company.

          (x) To the extent any shares of Common Stock covered by an Award are
     not delivered to a Participant or beneficiary because the Award is
     forfeited or canceled, or the shares of Common Stock are not delivered
     because the Award is settled in cash or used to satisfy the applicable tax
     withholding obligation, such


                                       3



     shares shall not be deemed to have been delivered for purposes of
     determining the maximum number of shares of Common Stock available for
     delivery under the Plan.

          (y) If the Price of any Option granted under the Plan is satisfied by
     tendering shares of Common Stock to the Company (by either actual delivery
     or by attestation), only the number of shares of Common Stock issued net of
     the shares of Common Stock tendered shall be deemed delivered for purposes
     of determining the maximum number of shares of Stock available for delivery
     under the Plan.

     (c) Limitations. The following additional maximums are imposed under the
Plan.

          (i) The maximum number of shares of Common Stock that may be issued by
     Options intended to be ISOs (as defined in Section 4) shall be 5,200,000
     shares.

          (ii) The maximum number of shares that may be covered by Awards
     granted to any one individual pursuant to Section 4 or 5 (relating to
     Options and SARs) shall be 1,500,000 shares during any one calendar-year
     period. If an Option is in tandem with an SAR, such that the exercise of
     the Option or SAR with respect to a share of Common Stock cancels the
     tandem SAR or Option right, respectively, with respect to such share, the
     tandem Option and SAR rights with respect to each share of Common Stock
     shall be counted as covering but one share of Common Stock for purposes of
     applying the limitations of this paragraph (ii).

          (iii) The maximum number of shares of Common Stock that may be issued
     in conjunction with Awards granted pursuant to Section 6 (relating to Share
     Awards) shall be 1,000,000 shares.

          (iv) For Restricted Share Awards that are intended to be
     "performance-based compensation" (as that term is used for purposes of Code
     section 162(m)), no more than 1,000,000 shares of Common Stock may be
     subject to such Awards granted to any one individual during any
     one-calendar-year period. If, after shares have been earned, the delivery
     is deferred, any additional shares attributable to dividends during the
     deferral period shall be disregarded.

                                   SECTION 4.
                                    OPTIONS

     (a) General. Options granted under the Plan may be either "incentive stock
options" ("ISOs"), intended to qualify as such under the provisions of Section
422 of the Code, or non-qualified stock options ("NSOs"). Options granted to
employees of the Company or any of its Subsidiaries shall be, in the discretion
of the Committee, either ISOs or NSOs, and Options granted to independent
consultants or directors of the Company or any of its Subsidiaries shall in all
events


                                       4


be NSOs. Unless the context otherwise requires, any ISO or NSO shall hereinafter
be referred to as an "Option". Notwithstanding anything contained in this
subsection (a) to the contrary, no ISO may be granted under the Plan to an
employee who owns, directly or indirectly (within the meaning of Sections
422(b)(6) and 424(d) of the Code), stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of its Parent,
if any, or any of its Subsidiaries, unless (A) the Option Price (as defined in
subsection (d) below) for the shares of Common Stock subject to such ISO is
fixed at not less than 110% of the Fair Market Value of such shares on the date
of grant and (B) such ISO by its terms is not exercisable after the expiration
of five years from the date it is granted.

     (b) Eligibility. The Committee shall designate the Participants to whom
Options are to be granted under this Section and shall determine the number of
shares subject to each such Option; provided, however, that the entire Board
shall make such determinations with respect to Non-Employee Directors. If the
Committee grants ISOs, to the extent required by Section 422 of the Code, the
ISO shall not be considered an ISO to the extent that the aggregate Fair Market
Value on the date of grant of such ISO of all stock with respect to which ISOs
are exercisable for the first time by such Optionee during any calendar year
(under all plans of the Company and its Subsidiaries) exceeds $100,000.

     (c) Price. The determination and payment of the purchase price of a share
under each Option granted under this Section shall be subject to the following:

          (i) The price (the "Option Price") at which each share of Common Stock
     subject to an Option granted under the Plan may be purchased shall be
     determined by the Committee at the time the Option is granted; provided,
     however, that in the case of an ISO, such Option Price shall in no event be
     less than 100% of the Fair Market Value of such share of Common Stock on
     the date of grant.

          (ii) Subject to the following provisions of this subsection, the full
     purchase price of each share purchased upon the exercise of any Option
     shall be paid at the time of such exercise (or such later date as may be
     permitted by the Committee in the case of a cashless exercise) and, as soon
     as practicable thereafter, a certificate representing the shares so
     purchased shall be delivered to the person entitled thereto.

          (iii) The purchase price shall be payable in cash or by tendering
     shares by actual delivery or attestation (valued at Fair Market Value as of
     the day of exercise) that have been held by the Participant at least six
     months, or in any combination thereof, as determined by the Committee.

          (iv) Subject to the requirement of Section 422 of the Code, for
     purposes of the Plan, the "Fair Market Value" of shares of the Common Stock
     shall be equal to:


                                       5



               (A) if such shares are publicly traded, (x) the closing price, if
          applicable, or the average of the last bid and asked prices on the
          date of grant or, if lower, the average of the daily closing prices
          (or the means between the last bid and asked prices for days on which
          no sales took place) of the 30 business days immediately preceding the
          date of grant, in the over-the-counter market as reported by NASDAQ or
          (y) if the Common Stock is then traded on a national securities
          exchange, the average of the high and low prices on the date of grant
          or, if lower, the average of the daily closing prices (or the means
          between the last bid and asked prices for days on which no sales took
          place) of the 30 business days immediately preceding the date of
          grant, on the principal national securities exchange on which such
          security is so traded; or

               (B) if there is no public trading market for such shares, the
          fair market value of such shares on the date of grant as determined by
          the Committee, without regard in respect to any such determination for
          any discount, including, without limitation, for the fact that such
          share is held by a minority stockholder, that there is no public
          market for the stock or, if there were a public market for such stock,
          such stock would be "restricted" as defined under Rule 144 promulgated
          under the Securities Act of 1933, as amended (the "Securities Act"),
          after taking into consideration all other factors which it deems
          appropriate, including, without limitation, recent sale and offer
          prices of the Common Stock in private transactions negotiated at arms'
          length. Notwithstanding anything contained in the Plan to the
          contrary, all determinations pursuant to this paragraph shall be made
          without regard to any restriction other than a restriction which, by
          its terms, will never lapse.

               (C) For purposes of determining the Fair Market Value of shares
          that are sold pursuant to a cashless exercise program, Fair Market
          Value shall be the price at which such shares are sold.

     (d) Exercise. Except as otherwise expressly provided in the Plan, an Option
granted under subsection (b) above shall be exercisable in accordance with the
following terms of this subsection:

          (i) Each such Option granted under the Plan shall be exercisable at
     such time or times, or upon the occurrence of such event or events, and for
     such number of shares subject to the Option, as shall be determined by the
     Committee and set forth in the Option Agreement evidencing such Option.
     Subject to the proviso of the immediately preceding sentence, if an Option
     is not at the time of grant immediately exercisable, the Committee may (A)
     in the Option Agreement evidencing such Option, provide for the
     acceleration of the exercise date or dates of the subject Option


                                       6



     upon the occurrence of specified events and/or (B) at any time prior to the
     complete termination of an Option, accelerate the exercise date or dates of
     such Option.

          (ii) No Option may be exercised by a Participant after the Expiration
     Date (as defined in subsection (g) below) applicable to that Option.

          (iii) If Optioned Shares acquired by exercise of an ISO granted under
     this Plan are disposed of within two years following the date of grant of
     the ISO or one year following the issuance of the Optioned Shares to the
     Optionee (a "Disqualifying Disposition"), the holder of the Optioned Shares
     shall, immediately prior to such Disqualifying Disposition, notify the
     Company in writing of the date and terms of such Disqualifying Disposition
     and provide such other information regarding the Disqualifying Disposition
     as the Company may reasonably require.

     (e) Post-Exercise Limitations. The Committee, in its discretion, may impose
such restrictions on shares acquired pursuant to the exercise of an Option as it
determines to be desirable, including, without limitation, restrictions relating
to disposition of the shares and forfeiture restrictions based on service,
performance, share ownership by the Participant and such other factors as the
Committee determines to be appropriate.

     (f) Expiration Date. The "Expiration Date" with respect to an Option
granted pursuant to subsection (b) above means the date established as the
Expiration Date by the Committee at the time of the grant; provided, however,
that unless determined otherwise by the Committee, the Expiration Date with
respect to any Option shall not be later than the earliest to occur of:

          (i) the tenth anniversary of the date on which such Option is granted
     or, in the case of any ISO granted to a person described in subsection (a)
     above, the fifth anniversary of the date on which such ISO is granted;

          (ii) the expiration of three months from the date that the Optionee
     ceased to be an employee of the Company or any of its Subsidiaries (other
     than as a result of death, permanent and total disability (within the
     meaning of Section 22(e)(3) of the Code) or Termination for Cause (as
     defined below)); provided, however, that if the Optionee shall die during
     such three-month period, the time of termination of the unexercised portion
     of such Option shall be the expiration of six months from the date that
     such Optionee ceased to be an employee or director of, or independent
     consultant or contractor to, the Company or any of its Subsidiaries;

          (iii) the expiration of six months from the date that the Optionee
     ceased to be an employee of the Company or any of its Subsidiaries, if such
     termination is due to such Optionee's death or permanent and total
     disability;


                                       7



          (iv) except to the extent permitted by subsection 8(e), the date on
     which an Option or any part thereof or right or privilege relating thereto
     is transferred (otherwise than by will or the laws of descent and
     distribution), assigned, pledged, hypothecated, attached or otherwise
     disposed of by the Optionee; and

          (v) if the Optionee is an employee of the Company, upon Termination
     for Cause.

     The Committee shall have the power to determine what constitutes a
     Termination For Cause for purposes of the Plan and the date upon which such
     Termination For Cause shall occur. All such determinations shall be final
     and conclusive and binding upon the Optionee. Anything contained in the
     Plan to the contrary notwithstanding, unless otherwise provided in an
     Option Agreement, no Option granted under the Plan shall be affected by any
     change of duties or position of the Optionee (including a transfer to or
     from the Company or one of its Subsidiaries), so long as such Optionee
     continues to be an employee or director of, or independent consultant or
     contractor to, the Company or one of its Subsidiaries.

                                   SECTION 5.
                           STOCK APPRECIATION RIGHTS

     (a) Definition. Subject to the terms of this Section 5, a "Stock
Appreciation Right" ("SAR") granted under the Plan entitles the Participant to
receive, in cash or Common Stock (as determined in accordance with subsection
(d)), value equal to all or a portion of the excess of: (i) the Fair Market
Value of a specified number of shares of Common Stock at the time of exercise;
over (ii) a specified price which shall not be less than 100% of the Fair Market
Value of the Common Stock at the time the SAR is granted, or, if granted in
tandem with an Option, the exercise price with respect to shares under the
tandem Option.

     (b) Eligibility. Subject to the provisions of the Plan, the Committee shall
designate the Participants to whom SARs are to be granted under the Plan, shall
determine the exercise price or a method by which the price shall be established
with respect to each such SAR, and shall determine the number of shares of
Common Stock on which each SAR is based. A SAR may be granted in connection with
all or any portion of a previously or contemporaneously granted Option or not in
connection with an Option. If a SAR is granted in connection with an Option
then, in the discretion of the Committee, the SAR may, but need not, be granted
in tandem with the Option.

     (c) Exercise. The exercise of SARs shall be subject to the following:

          (i) If a SAR is not in tandem with an Option, then the SAR shall be
     exercisable in accordance with the terms established by the Committee in
     connection with such rights, and may include, without limitation,
     conditions relating to


                                       8



     completion of a specified period of service, achievement of performance
     standards prior to exercise of the SARs, or achievement of objectives
     relating to Common Stock ownership by the Participant. However, except as
     otherwise expressly provided in the Plan, no SAR subject to this Section
     may be exercised by a Participant after the Expiration Date applicable to
     that SAR.

          (ii) If a SAR is in tandem with an Option, then the SAR shall be
     exercisable at the time the tandem Option is exercisable. The exercise of a
     SAR will result in the surrender of the corresponding rights under the
     tandem Option.

     (d) Settlement of Award. Upon the exercise of a SAR, the value to be
distributed to the Participant, in accordance with subsection (a) above, shall
be distributed in shares of Common Stock (valued at their Fair Market Value at
the time of exercise), in cash or in a combination thereof, in the discretion of
the Committee.

     (e) Post-Exercise Limitations. The Committee, in its discretion, may impose
such restrictions on shares of Common Stock acquired pursuant to the exercise of
a SAR as it determines to be desirable, including, without limitation,
restrictions relating to disposition of the shares and forfeiture restrictions
based on service, performance, ownership of Common Stock by the Participant, and
such other factors as the Committee determines to be appropriate.

     (f) Expiration Date. If a SAR is in tandem with an Option, then the
"Expiration Date" for the SAR shall be the Expiration Date for the related
Option. If a SAR is not in tandem with an Option, then the "Expiration Date" for
the SAR shall be the date established as the Expiration Date by the Committee;
provided, however, that subject to the following provisions of this subsection
(f), the Expiration Date with respect to any SAR shall not be later than the
earliest to occur of:

          (i) the ten-year anniversary of the date on which the SAR is granted;

          (ii) if the Participant's date of Termination occurs by reason of
     death or permanent and total disability, the six-month anniversary of such
     date of Termination;

          (iii) if the Participant's date of Termination occurs by reason other
     than death, permanent and total disability or Termination for Cause, the
     three-month anniversary of such date of Termination; and

          (iv) If the Participant's date of Termination occurs for reasons of
     Cause, such date of Termination.


                                       9



                                   SECTION 6.
                                  SHARE AWARDS

     (a) Definition. Subject to the terms of this Section, a Share Award under
the Plan is a grant of shares to a Participant, the earning, vesting or
distribution of which is subject to one or more conditions established by the
Committee. Such conditions may relate to events (such as performance or
continued employment) occurring before or after the date the Share Award is
granted, or the date the shares are earned by, vested in or delivered to the
Participant. If the vesting of Share Awards is subject to conditions occurring
after the date of grant, the period beginning on the date of grant of a Share
Award and ending on the vesting or forfeiture of such shares (as applicable) is
referred to as the "Restricted Period". Share Awards may provide for delivery of
the shares of Shares at the time of grant or may provide for a deferred delivery
date. A Share Award may, but need not, be made in conjunction with a cash-based
incentive compensation program maintained by the Company and may, but need not,
be in lieu of cash otherwise awardable under such program.

     (b) Eligibility. The Company shall designate the Participants to whom Share
Awards are to be granted and the number of shares that are subject to each such
Award.

     (c) Terms and Conditions of Awards. Share Awards granted to Participants
under the Plan shall be subject to the following terms and conditions:

          (i) Beginning on the date of grant (or, if later, the date of
     distribution) of shares comprising a Share Award, and including any
     applicable Restricted Period, the Participant as owner of such shares shall
     have the right to vote such shares.

          (ii) Payment of dividends with respect to Share Awards shall be
     subject to the following:

               (A) On and after the date that a Participant has a fully earned
          and vested right to the shares comprising a Share Award and the shares
          have been distributed to the Participant, the Participant shall have
          all dividend rights (and other rights) of a shareholder with respect
          to such shares.

               (B) Prior to the date that a Participant has a fully earned and
          vested right to the shares comprising a Share Award, the Committee, in
          its sole discretion, may award Dividend Rights with respect to such
          shares.

               (C) On and after the date that a Participant has a fully earned
          and vested right to the shares comprising a Share Award, but before
          the shares have been distributed to the Participant, the Participant
          shall be entitled to Dividend Rights with respect to such shares, at
          the time and in the form determined by the Committee.


                                       10



               (D) A "Dividend Right" with respect to shares comprising a Share
          Award shall entitle the Participant, as of each dividend payment date,
          to an amount equal to the dividends payable with respect to a share
          multiplied by the number of such shares. Dividend Rights shall be
          settled in cash or in shares valued at Fair Market Value as of the
          date of settlement, as determined by the Committee, shall be payable
          at the time determined by the Committee and shall be subject to such
          other terms and conditions as the Committee may determine.

                                   SECTION 7.
                                  ADJUSTMENTS

     (a) Changes in Capital Structure. Subject to subsection (b) below, if the
Common Stock is changed by reason of a stock split, reverse stock split, stock
dividend or capitalization, or converted into or exchanged for other securities
as a result of a merger, consolidation or reorganization, the Committee shall
make such adjustments in the number and class of shares of stock with respect to
which Awards may be granted under the Plan as shall be equitable and appropriate
in order to make such Awards, as nearly as may be practicable, equivalent to
such Awards immediately prior to such change. A corresponding adjustment
changing the number and class of shares allocated to Options and SARs, and the
Option Price of each Option or portion thereof outstanding at the time of such
change shall likewise be made. Notwithstanding anything contained in the Plan to
the contrary, in the case of ISOs, no adjustment under this subsection (a) shall
be appropriate if such adjustment (i) would constitute a modification, extension
or renewal of such ISO within the meaning of Section 422 and 424 of the Code,
and the regulations promulgated by the Treasury Department thereunder, or (ii)
would, under Section 422 of the Code and the regulations promulgated by the
Treasury Department thereunder, be considered as the adoption of a new plan
requiring stockholder approval.

     (b) Corporate Transactions. The following rules shall apply in connection
with the dissolution or liquidation of the Company, a reorganization, merger or
consolidation in which the Company is not the surviving corporation, or a sale
of all or substantially all of the assets of the Company to another person or
entity (a "Corporate Transaction"):

          (i) each holder of an Option or a SAR outstanding at such time shall
     be given (A) written notice of such Corporate Transaction at least 20 days
     prior to its proposed effective date (as specified in such notice) and (B)
     an opportunity, during the period commencing on the delivery date of such
     notice and ending 10 days prior to the proposed effective date of such
     transaction, to exercise the Option or SAR to the full extent to which such
     Option or SAR would have been exercisable by the Optionee at the expiration
     of such 20-day period;

     provided, however, that upon the occurrence of a Corporate Transaction for
     which shareholders of the Company receive cash, all Awards granted under
     the Plan shall become nonforfeitable; and


                                       11



     provided, further, all Options and SARs granted under the Plan and not so
     exercised shall automatically terminate; and

          (ii) notwithstanding anything contained in the Plan to the contrary,
     paragraph (i) shall not be applicable if provision shall be made in
     connection with such Corporate Transaction for the assumption of
     outstanding Options and SARs by, or the substitution for such Options and
     SARs of new options and SARs covering the stock of, the surviving successor
     or purchasing corporation or a parent or subsidiary thereof, with
     appropriate adjustments as to the number, kind and option prices of shares
     subject to such Options and SARs;

     provided, however, that in the case of ISOs, the Board shall, to the extent
     not inconsistent with the best interests of the Company or its Subsidiaries
     (such best interests to be determined in good faith by the Board in its
     sole discretion), use its best efforts to ensure that any such assumption
     or substitution will not constitute a modification, extension or renewal of
     the ISOs within the meaning of Section 424(h) of the Code and the
     regulations promulgated by the Treasury Department thereunder.

     (c) Special Rules. The following rules shall apply in connection with
subsection (a) and (b) above:

          (i) no fractional shares shall be issued as a result of any such
     adjustment, and any fractional shares resulting from the computations
     pursuant to subsection (a) or (b) shall be eliminated without consideration
     from the respective Options;

          (ii) no adjustment shall be made for cash dividends or the issuance to
     stockholders of rights to subscribe for additional shares of Common Stock
     or other securities; and

          (iii) any adjustments referred to in subsection (a) or (b) shall be
     made by the Committee in its sole discretion and shall be conclusive and
     binding on all persons holding Options granted under the Plan.

                                   SECTION 8.
                                   OPERATION

     (a) Limit on Distribution. Distribution of shares or other amounts under
the Plan shall be subject to the following:

          (i) Notwithstanding any other provision of the Plan, the Company shall
     have no liability to deliver any shares under the Plan or make any other
     distribution of benefits under the Plan unless such delivery or
     distribution would comply with all applicable laws and the applicable
     requirements of any securities exchange or similar entity.


                                       12



          (ii) In the case of a Participant who is subject to Section 16(a) and
     16(b) of the Exchange Act, the Committee may, at any time, add such
     conditions and limitations to any Award to such Participant, or any feature
     of any such Award, as the Committee, in its sole discretion, deems
     necessary or desirable to comply with Section 16(a) or 16(b) and the rules
     and regulations thereunder or to obtain any exemption therefrom.

          (iii) To the extent that the Plan provides for issuance of
     certificates to reflect the transfer of shares, the transfer of such shares
     may be effected on a non-certificated basis, to the extent not prohibited
     by applicable law or the rules of any stock exchange.

     (b) Performance-Based Compensation. To the extent that the Committee
determines that it is necessary or desirable to conform any Awards under the
Plan with the requirements applicable to "Performance-Based Compensation", it
may, at or prior to the time an Award is granted, take such steps and impose
such restrictions with respect to such Award as it determines to be necessary to
satisfy such requirements including, without limitation:

          (i) The establishment of performance goals that must be satisfied
     prior to the payment or distribution of benefits under such Awards.

          (ii) The submission of such Awards and performance goals to the
     Company's shareholders for approval and making the receipt of benefits
     under such Awards contingent on receipt of such approval.

          (iii) Providing that no payment or distribution be made under such
     Awards unless the Committee certifies that the goals and the applicable
     terms of the Plan and Agreement reflecting the Awards have been satisfied.

     To the extent that the Committee determines that the foregoing requirements
     relating to Performance-Based Compensation do not apply to Awards under the
     Plan because the Awards constitute Options or SARs, the Committee may, at
     the time the Award is granted, conform the Awards to alternative methods of
     satisfying the requirements applicable to Performance-Based Compensation.

     (c) Withholding. All Awards and other payments under the Plan are subject
to withholding of all applicable taxes, which withholding obligations may be
satisfied, with the consent of the Committee, through the surrender of shares
which the Participant already owns or to which a Participant is otherwise
entitled under the Plan; provided, however, previously-owned shares that have
been held by the Participant less than six months or shares to which the
Participant is entitled under the Plan may only be used to satisfy the minimum
tax withholding required by applicable law.

     (d) Transferability. Awards under the Plan are not transferable except as
designated by the Participant by will or by the laws of descent and distribution
or, to the extent provided by the Committee, pursuant to a qualified domestic
relations order (within the meaning of the Code and


                                       13



applicable rules thereunder). To the extent that the Participant who receives an
Award under the Plan has the right to exercise such Award, the Award may be
exercised during the lifetime of the Participant only by the Participant.
Notwithstanding the foregoing provisions of this subsection, the Committee may
permit Awards under the Plan to be transferred to or for the benefit of the
Participant's family (including, without limitation, to a trust or partnership
for the benefit of a Participant's family), subject to such procedures as the
Committee may establish. In no event shall an ISO be transferable to the extent
that such transferability would violate the requirements applicable to such
Option under Code section 422.

     (e) Notices. Any notice or document required to be filed with the Committee
under the Plan will be properly filed if delivered or mailed by registered mail,
postage prepaid, to the Committee, in care of the Company or the Subsidiary, as
applicable, at its principal executive offices. The Committee may, by advance
written notice to affected persons, revise such notice procedure from time to
time. Any notice required under the Plan (other than a notice of election) may
be waived by the person entitled to notice.

     (f) Form and Time of Elections. Unless otherwise specified herein, each
election required or permitted to be made by any Participant or other person
entitled to benefits under the Plan, and any permitted modification or
revocation thereof, shall be in writing filed with the Committee at such times,
in such form, and subject to such restrictions and limitations, not inconsistent
with the terms of the Plan, as the Committee shall require.

     (g) Agreement With Company. At the time of an Award to a Participant under
the Plan, the Committee may require a Participant to enter into an agreement
with the Company (the "Agreement"), in a form specified by the Committee,
agreeing to the terms and conditions of the Plan and to such additional terms
and conditions, not inconsistent with the Plan, as the Committee may, in its
sole discretion, prescribe.

     (h) Limitation of Implied Rights.

          (i) Neither a Participant nor any other person shall, by reason of the
     Plan, acquire any right in or title to any assets, funds or property of the
     Company or any Subsidiary whatsoever, including, without limitation, any
     specific funds, assets, or other property which the Company, in its sole
     discretion, may set aside in anticipation of a liability under the Plan. A
     Participant shall have only a contractual right to the amounts, if any,
     payable under the Plan, unsecured by any assets of the Company and any
     Subsidiary. Nothing contained in the Plan shall constitute a guarantee by
     the Company or any Subsidiary that the assets of such companies shall be
     sufficient to pay any benefits to any person.


                                       14



          (ii) The Plan does not constitute a contract of employment, and
     selection as a Participant will not give any employee or advisor the right
     to be retained in the employ or service of the Company or any Subsidiary,
     nor any right or claim to any benefit under the Plan, unless such right or
     claim has specifically accrued under the terms of the Plan. Except as
     otherwise provided in the Plan, no Award under the Plan shall confer upon
     the holder thereof any right as a shareholder of the Company prior to the
     date on which he fulfills all service requirements and other conditions for
     receipt of such rights and shares are registered in his name.

     (i) Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.

     (j) Action by Company or Subsidiary. Any action required or permitted to be
taken by the Company or any Subsidiary shall be by resolution of its board of
directors, or by action of one or more members of the board (including a
committee of the board) who are duly authorized to act for the board or (except
to the extent prohibited by applicable law or the rules of any stock exchange)
by a duly authorized officer of the Company.

     (k) Gender and Number. Where the context admits, words in any gender shall
include any other gender, words in the singular shall include the plural and the
plural shall include the singular.

     (1) Applicable Law. The provisions of the Plan shall be construed in
accordance with the laws of the State of Delaware, without giving effect to
choice of law principles.

                                   SECTION 9.
                                AMENDMENT OF PLAN

     The Board may at any time prior modify and amend the Plan in any respect;
provided, however, that the approval of the holders of a majority of the votes
that may be cast by all of the holders of shares of capital stock of the
Company, if any, entitled to vote thereon shall be obtained prior to any such
amendment becoming effective if such approval is required by law or is necessary
to comply with regulations promulgated by the SEC under Section 16(b) of the
Securities Act or with Section 422 of the Code or the regulations promulgated by
the Treasury Department thereunder.

As adopted by the Board of Directors of Broadview Networks Holdings, Inc. as of
February 3, 2000.


                                       15

EX-12.1

Exhibit 12.1

BROADVIEW NETWORKS HOLDINGS, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

	Predecessor			Successor
	Two Months			Ten Months
	Ended			Ended
	February 29,			Decembr 31,			Years Ended December 31,
	2004			2004			2005			2006			2007			2008
Earnings:
Income (loss) from before provision for income taxes	$	(783	)	$	(13,081	)	$	(38,928	)	$	(41,251	)	$	(64,763	)	$	(41,810	)
Interest charges		704			3,399			17,842			25,463			34,390			39,514
Interest factor in operating rents(1)		121			524			2,365			2,568			3,993			3,775
Total income (loss)		42			(9,158	)		(18,721	)		(13,220	)		(26,380	)		1,479
Fixed charges:
Interest charges		704			3,399			17,842			25,463			34,390			39,514
Interest factor in operating rents(1)		121			524			2,365			2,568			3,993			3,775
Total fixed charges		825			3,923			20,207			28,031			38,383			43,289
Ratio of earnings to fixed charges		—			—			—			—			—			—
Deficiency	$	(783	)	$	(13,081	)	$	(38,928	)	$	(41,251	)	$	(64,763	)	$	(41,810	)

(1) For purposes of computing the ratio of earnings to fixed charges, earnings consist of earnings before income taxes plus fixed charges. Fixed charges consists of interest expense and the portion (approximately 33%) of rental expense that management believes is representative of the interest component of rental expense.

EX-21.1

Exhibit 21.1

SUBSIDIARIES OF BROADVIEW NETWORKS HOLDINGS, INC.

Broadview Networks Holdings, Inc., a Delaware corporation, owns, directly or indirectly, the following subsidiaries:

	State or Jurisdiction of
Name of Subsidiary	Incorporation or Organization
Broadview Networks, Inc.		New York
BV-BC Acquisition Corp.		Delaware
Broadview NP Acquisition Corp.		Delaware
Open Support Systems LLC		Connecticut
Broadview Networks of Virginia, Inc.		Virginia
Broadview Networks of Massachusetts, Inc.		Delaware
Bridgecom Holdings, Inc.		Delaware
Bridgecom International, Inc.		Delaware
Bridgecom Solutions Group, Inc.		Delaware
Trucom Corporation		New York
ATX Communications, Inc.		Delaware
CoreComm-ATX, Inc.		Delaware
ATX Licensing, Inc.		Delaware
ATX Telecommunications Services of Virginia, LLC		Delaware
CoreComm Services, LLC		Delaware
CoreComm Communications, LLC		Delaware
CCL Historical, Inc.		Delaware
CoreComm Newco, Inc.		Delaware
FCC Holdco I, Inc.		Delaware
CoreComm-Voyager, Inc.		Delaware
CoreComm Internet Group, Inc.		Delaware
Voyager Information Networks, Inc.		Michigan
Voyager Data Services, Inc.		Delaware
CCL Historical Illinois, Inc.		Delaware
CCL Historical Indiana, Inc.		Delaware
CCL Historical Maryland, Inc.		Delaware
CCL Historical Massachusetts, Inc.		Delaware
CCL Historical Michigan, Inc.		Delaware
CCL Historical Missouri, Inc.		Delaware
CCL Historical New Jersey, Inc.		Delaware
CCL Historical New York, Inc.		Delaware
CCL Historical Ohio, Inc.		Delaware
CCL Historical Rhode Island, Inc.		Delaware
CCL Historical Vermont, Inc.		Delaware
CCL Historical West Virginia, Inc.		Delaware
CCL Historical Pennsylvania, Inc.		Delaware
Cortelyou Communications Corp.		Delaware
Digicom, Inc.		Ohio
Eureka Broadband Corporation		Delaware
Eureka Holdings, Inc.		Delaware
Eureka Holdings, LLC		Delaware
Eureka Telecom of VA, Inc.		Virginia
Eureka Telecom, Inc.		New York
Eureka Networks, LLC		Delaware
Nex-i.com, Inc.		New Jersey
InfoHighway Communications Corporation		Delaware
Info-Highway International, Inc.		Texas
ARC Networks, Inc.		Delaware
A.R.C. Networks, Inc.		New York
InfoHighway of Virginia, Inc.		Virginia

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Michael K. Robinson, certify that:

1. I have reviewed this annual report on Form 10-K of Broadview Networks Holdings, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. 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

d. 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 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.

/s/  Michael K. Robinson

Michael K. Robinson

Chief Executive Officer, President and Director

Date: March 24, 2009

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Corey Rinker, certify that:

1. I have reviewed this annual report on Form 10-K of Broadview Networks Holdings, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

e. 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;

f. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

g. 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

h. 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 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.

/s/  Corey Rinker

Corey Rinker

Chief Financial Officer, Treasurer and Assistant Secretary

Date: March 24, 2009

EX-32.1

Exhibit 32.1

CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael K. Robinson, the Chief Executive Officer of Broadview Networks Holdings, Inc. (the “Company”), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

•  the Form 10-K of the Company for the year ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-K”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

•  the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  Michael K. Robinson

Michael K. Robinson

Chief Executive Officer, President and Director

Date: March 24, 2009

EX-32.2

Exhibit 32.2

CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Corey Rinker, the Chief Financial Officer of Broadview Networks Holdings, Inc. (the “Company”), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

•  the Form 10-K of the Company for the year ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-K”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

•  the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  Corey Rinker

Corey Rinker

Chief Financial Officer, Treasurer and Assistant Secretary

Date: March 24, 2009