10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007

COMMISSION FILE NUMBER: 000-32647

KNOLOGY, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	58-2424258
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
KNOLOGY, INC. 1241 O.G. SKINNER DRIVE WEST POINT, GEORGIA	31833
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (706) 645-8553

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

Title of Each Class	Name of Exchange on Which Registered
Common Stock, $0.01 par value	The NASDAQ Stock Market, LLC

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

Options to Purchase Shares of Common Stock

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

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  ¨

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 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, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨	Accelerated filer  þ
Non-accelerated filer  ¨	Smaller reporting company  ¨
(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  ¨   No  þ

The aggregate market value of the outstanding common equity held by non-affiliates of the registrant at June 29, 2007, was approximately $485.6 million, computed based on the closing sale price as quoted on the Nasdaq National Market on that date.

As of February 29, 2008, we had 35,467,079 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

Parts of the registrant’s proxy statement on Schedule 14A for its 2007 Annual Meeting of Stockholders, to be held May 7, 2008, are incorporated by reference into Part III of this Form 10-K.

TABLE OF CONTENTS

		PAGE
PART I
ITEM 1.	BUSINESS	4
ITEM 1A.	RISK FACTORS	33
ITEM 1B.	UNRESOLVED STAFF COMMENTS	40
ITEM 2.	PROPERTIES	40
ITEM 3.	LEGAL PROCEEDINGS	41
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	41
PART II
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	42
ITEM 6.	SELECTED FINANCIAL DATA	44
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	45
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	59
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	59
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	59
ITEM 9A.	CONTROLS AND PROCEDURES	60
ITEM 9B.	OTHER INFORMATION	61
PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	62
ITEM 11.	EXECUTIVE COMPENSATION	66
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	66
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	66
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	66
PART IV
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	67
SIGNATURES		74
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1
EX-21.1 SUBSIDIARIES OF KNOLOGY, INC.
EX-23.1 CONSENT OF BDO SEIDMAN, LLP
EX-23.2 CONSENT OF DELOITTE & TOUCHE LLP
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
EX-32.1 SECTION 906 CERTIFICATION OF THE CEO
EX-32.2 SECTION 906 CERTIFICATION OF THE CFO

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CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K for the year ended December 31, 2007 contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, specifically, the information under the captions “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as other places in this annual report. Statements in this annual report that are not historical facts are “forward-looking statements.” Such forward-looking statements include those relating to:

• our acquisition of Graceba Total Communications Group, Inc.;

• our anticipated capital expenditures;

• our anticipated sources of capital and other funding;

• plans to develop future networks and upgrade facilities;

• the current and future markets for our services and products;

• the effects of regulatory changes on our business;

• competitive and technological developments;

• possible acquisitions, alliances or dispositions; and

• projected revenues, liquidity, interest costs and income.

The words “estimate,” “project,” “intend,” “expect,” “believe,” “may,” “could,” “plan,”, “will,” “should” and similar expressions are intended to identify forward-looking statements. Wherever they occur in this annual report or in other statements attributable to us, forward-looking statements are necessarily estimates reflecting our best judgment. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. The most significant of these risks, uncertainties and other factors are discussed above. We caution you to carefully consider these risks and those risks and uncertainties listed under the caption “Risk Factors” in this annual report and not to place undue reliance on our forward-looking statements. Except as required by law, we assume no responsibility for updating any forward-looking statements.

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PART I

For convenience in this annual report, “Knology,” “we,” “us,” and “the Company” refer to Knology, Inc. and our consolidated subsidiaries, taken as a whole.

ITEM 1. BUSINESS

We were formed as a Delaware corporation in September 1998, and began trading publicly on the Nasdaq National Market in December 2003. We are a fully integrated provider of video, voice, data and advanced communications services to residential and business customers in nine markets in the Southeastern United States and two markets in the Midwestern United States. For the year ended December 31, 2007, our revenues were $347.7 million and we had a net loss attributable to common stockholders of $43.9 million. Video, voice, data and other revenues accounted for approximately 42%, 34%, 23% and 1%, respectively, of our consolidated revenues for the year ended December 31, 2007. We report an aggregate number of connections for video, voice and data services. For example, a single customer who purchases cable television, local telephone and Internet access services would count as three connections. As of December 31, 2007, we had approximately 643,000 total connections.

We provide our services over our wholly owned, fully upgraded minimum 750 MHz interactive broadband network. As of December 31, 2007, our network passed approximately 887,000 marketable homes, which are residential and business units passed by our broadband network that are listed in our database and which we do not believe are covered by exclusive arrangements with other providers of competing services. Our network is designed with sufficient capacity to meet the growing demand for high-speed and high-bandwidth video, voice and data services, as well as the introduction of new communications services.

We have operating experience in marketing, selling, provisioning, servicing and operating video, voice and data systems and services. We have delivered a bundled service offering for nine years, and we are supported by a management team with decades of experience operating video, voice and data networks. We provide a full suite of video, voice and data services in Alabama, Florida, Georgia, Iowa, Minnesota, South Carolina, South Dakota and Tennessee, which are in the Southeastern and Midwestern regions of the United States. We offer our bundled service to all of our marketable passings.

We have built our Company through:

• construction and expansion of our broadband network to offer integrated video, voice and data services;

• organic growth of connections through increased penetration of services to new marketable homes and our existing customer base, along with new service offerings;

• upgrades of acquired networks to introduce expanded broadband services, including bundled voice and data services; and

• acquisitions of other broadband companies.

On April 3, 2007, we completed the $255 million acquisition of PrairieWave Holdings, Inc. (PrairieWave), a video, voice and high-speed Internet broadband services provider in the Rapid City and Sioux Falls, South Dakota regions, as well as portions of Minnesota and Iowa. In 2006, PrairieWave had revenues totaling $88.3 million and as of December 31, 2006, PrairieWave’s network passed approximately 113,000 homes and had approximately 157,000 business and residential connections.

Recent Developments

In January 2008, we acquired Graceba Total Communications Group, Inc. (Graceba), a voice, video and high-speed Internet broadband services provider to residential and business customers in Dothan, Alabama. The

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$75 million transaction was funded with the payment of $16 million of cash on hand and the proceeds of a $59 million incremental term loan facility under the Company’s existing credit facility. The incremental debt bears interest at LIBOR plus 2.75% and provides for 1% principal amortization annually with the balance due on June 30, 2012. The company has fixed the floating LIBOR rate at 3.995% through an interest rate swap contract. See Note 14 of the “Notes to Consolidated Financial Statements” elsewhere in this annual report.

Website Access to SEC Filings

The Company makes its SEC filings, including its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, available free of charge on the Company’s Internet website, www.knology.com, as soon as reasonably practicable after the reports are electronically filed with or furnished to the SEC.

Our Industry

In recent years, regulatory developments and advances in technology have substantially altered the competitive dynamics of the communications industry and blurred the lines among traditional video, voice and data providers. The Telecommunications Act of 1996 and its implementation through Federal Communications Commission (FCC) regulation have encouraged competition in these markets. Advances in technology have made the transmission of video, voice and data on a single platform feasible and economical. Communications providers seek to bundle products to leverage their significant capital investments, protect market share in their core service offerings from new sources of competition, and achieve operating efficiencies by providing more than one service over their networks at lower incremental costs while increasing revenue from the existing customer base.

Incumbent cable operators are working to expand their core services by offering a bundled package of services, including the provision of Internet Protocol (IP) based voice services for their customers. Most of the major providers have rolled out or announced plans to roll out Voice over Internet Protocol (VoIP) services.

We believe the future of the industry will include a broader competitive landscape in which communications providers will offer bundled video, voice and data services and compete with each other based on scope and depth of the service offering, pricing and convenience.

Our Strategy

Our goal is to be the leading provider of integrated broadband communications services to residential and business customers in our target markets and to fully leverage the capacity and capability of our interactive broadband network. The key components of our strategy include:

• Focus on offering fully integrated bundles of video, voice and data services. We provide video, voice and data services over our broadband network and promote the adoption of these services by new and existing customers in bundled offerings. Bundling is central to our operating strategy and provides us with meaningful revenue opportunities, enables us to increase penetration and operating efficiencies, facilitates customer service, and reduces customer acquisition and installation costs. We believe that offering our customers a bundle of video, voice and data services allows us to maximize the revenue generating capability of our network, increase revenue per customer, provide greater pricing flexibility and promote customer retention.

• Leverage our broadband network to provide new services. We built our high-capacity, interactive broadband network with fiber optics as close to the customer as economically feasible. Our entire network is a minimum of 750MHz, which enables us to provide at least 750 MHz of capacity and two-way capability to all of our homes passed in these markets. We have invested in advanced technology platforms that support advanced communications services and multiple emerging

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interactive services such as video-on-demand, subscriber video-on-demand, digital video recorder, interactive television, high-definition television, hosted IP Centrex services, passive optical network (PON) services and Gigabit Ethernet services in our markets.

• Deliver industry-leading customer service. Outstanding customer service is a critical element of our operating philosophy. Through our Augusta, Georgia call center, which we operate 24 hours a day, seven days a week, and our Sioux Falls, South Dakota call center, we deliver personalized and responsive customer care that promotes customer loyalty. Through our network operations center (NOC), we monitor and evaluate network performance and quality of service. Our philosophy is to be proactive in retaining customers rather than reactive, and we strive to resolve service delivery problems prior to the customer becoming aware of them. Because we own our network and actively monitor our digital services from a centralized location to the customer premises, we have greater control over the quality of the services we deliver to our customers and, as a result, the overall customer experience. We have an enterprise management system that enhances our service capability by providing us with a single platform for sales, provisioning, customer care, trouble ticketing, credit control, scheduling and dispatch of service calls, as well as providing our customers with a single bill for all services.

• Pursue expansion opportunities. We have a history of acquiring, integrating, upgrading and expanding systems, enabling us to offer bundled video, voice and data services and increasing our revenue opportunity, penetration and operating efficiency. To augment our organic growth, we will pursue value-enhancing expansion opportunities meeting our previously described target market criteria that allow us to leverage our experience as a bundled broadband provider and endorse our operating philosophy of delivering profitable growth. These opportunities include acquisitions and edge-out expansion in new or existing markets. We will continue to evaluate growth opportunities based on targeted return requirements.

Our Interactive Broadband Network

Our network is critical to the implementation of our operating strategy, allowing us to offer bundled video, voice and data services to our customers in an efficient manner and with a high level of service. In addition to providing high capacity and scalability, our network has been specifically engineered to have increased reliability, including features such as:

• redundant fiber routing and use of SONET protocol which enables the rapid, automatic redirection of network traffic in the event of a fiber cut;

• back-up power supplies in our network which ensure continuity of our service in the event of a power outage; and

• network monitoring to the customer premises for all digital video, voice and data services.

Technical overview

Our interactive broadband network consists of fiber-optic cable, coaxial cable and copper wire. Fiber-optic cable is a communications medium that uses hair-thin glass fibers to transmit signals over long distances with minimum signal loss or distortion. In most of our network, our system’s main high capacity fiber-optic cables connect to multiple nodes throughout our network. These nodes are connected to individual homes and buildings by coaxial cable and are shared by a number of customers, generally 500 homes. We have sufficient fibers in our cables to further subdivide our nodes to 125 homes if growth so dictates. Our network has excellent broadband frequency characteristics and physical durability, which is conducive to providing video, data transmission and voice service.

As of December 31, 2007, our network consisted of approximately 13,000 miles of network, passed approximately 887,000 marketable homes and served approximately 643,000 connections. Our interactive

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broadband network is designed using redundant fiber-optic cables. Our SONET rings are “self-healing,” which means that they provide for the very rapid, automatic redirection of network traffic so that if there is a single point of failure on a fiber ring, our service will continue.

We power our network from locations called hub sites, each of which is equipped with a generator and battery back-up power source to allow service to continue during a power outage. Additionally, individual nodes that are served by hubs are equipped with back-up power. Our redundant fiber-optic cables and network powering systems allow us to provide circuit-based voice services consistent with industry reliability standards for traditional telephone systems.

We monitor our network 24 hours a day, seven days a week from our NOC in West Point, Georgia. Technicians in each of our service areas schedule and perform installations and repairs and monitor the performance of our interactive broadband network. We actively maintain the quality of our network to minimize service interruptions and extend the network’s operational life.

Video

We offer video services over our network in the same way that traditional cable companies provide cable TV service. Our network is designed for an analog and digital two-way interactive transmission with fiber-optic cable carrying signals from the headend to hubs, and to distribution points (nodes) within our customers’ neighborhoods, where the signals are transferred to our coaxial cable network for delivery to our customers.

Voice

We offer telephone service over our broadband network in much the same way local phone companies provide service. We install a network interface box outside a customer’s home or an Embedded Multimedia Terminal Adapter (EMTA) in the home to provide dial tone service. Our network interconnects with those of other local phone companies. We provide long-distance service using leased facilities from other telecommunications service providers. We have multiple Class 4 and Class 5 full-featured Nortel DMS 500 switches located in West Point, Georgia, Huguley, Alabama, and Rapid City and Viborg South Dakota that direct all of our voice traffic and allow us to provide enhanced custom calling services including call waiting, call forwarding and three-way calling. We also operate a telephone system in Valley, Alabama, West Point, Georgia, and Viborg, South Dakota where we are the rural incumbent telephone company.

Data

We provide Internet access using high-speed cable modems in much the same way customers currently receive Internet services over modems linked to the local telephone network. The cable modems we presently use are significantly faster than dial-up modems generally in use today. Our customers’ Internet connections are always on, and there is no need to dial-up for access to the Internet or wait to connect through a port leased by an Internet service provider. We provide our customers with a high level of data transfer rates through multiple peering arrangements with tier-one Internet facility providers.

Our Bundled Service Offering

We offer a complete solution of video, voice and data services in all of our markets.

We offer a broad range of service bundles designed to address the varying needs and interests of existing and potential customers. We sell individual services at prices competitive to those of the incumbent providers, but attractively price additional services from our bundle. Bundling our services enables us to increase

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penetration, average revenue per customer (ARPC) and operating efficiencies, facilitate customer service, reduce customer acquisition and installation costs, and increase customer retention.

Our bundled strategy means that we may deliver more than one service to each customer, and therefore we report an aggregate number of connections for video, voice and data services. For example, a single customer who purchases local video, voice and data services would count as three connections.

Video services

We offer our customers a full array of video services and programming choices. Customers generally pay initial connection charges and fixed monthly fees for video service. As of December 31, 2007, we provided video services to 227,659 connections. As of December 31, 2007, 50% of our video connections subscribed for digital video.

Our analog video service offering comprises the following:

• Basic Service: All of our video customers receive a package of basic programming, which generally consists of local broadcast television and local community programming, including public, educational and government access channels.

• Expanded Basic Service: This expanded programming level includes approximately 65 channels of satellite-delivered or non-broadcast channels, such as ESPN, MTV, USA, CNN, The Discovery Channel, Nickelodeon and various home shopping networks.

• Premium Channels: These channels provide commercial-free movies, sports and other special event entertainment programming, such as HBO, Showtime, Starz, Encore and Cinemax and are available at an additional charge above our expanded basic and digital tiers of services.

Our platform enables us to provide an attractive service offering of extensive programming as well as interactive services. Our digital video service consists of approximately 210 digital channels of programming, including our expanded basic cable service and approximately 45 music channels. We have introduced new service offerings to strengthen our competitive position and generate additional revenues, including high definition TV, digital video recorder, video-on-demand and subscription video-on-demand. Video-on-demand permits customers to order movies and other programming on demand with DVD-like functions on a fee-per-viewing basis. Subscription video-on-demand is a similar service that has specific content available from our premium channel offerings for an incremental charge.

Voice services

Our voice services include local and long-distance telephone services. Our telephone packages can be customized to include different combinations of the following core services:

• local area calling plans;

• flat-rate local and long-distance plans;

• a variety of calling features; and

• measured and fixed rate toll packages based on usage.

For local service, our customers pay a fixed monthly rate, plus additional charges per month for custom and advanced calling features such as call waiting, caller ID, caller ID on TV and voicemail. We also offer off-net voice services to a small number of customers through an arrangement with a local utility provider in Newnan, Georgia.

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Residential data services

We offer tiered data services to both residential and business customers that include high-speed connections to the Internet using cable modems. Because a customer’s Internet service is offered over the existing cable connection in the home, no second phone line is required and there is no disruption of service when the phone rings or when the television is on. We offer IntroNet, a high speed service aimed at first-time or dial-up Internet users. IntroNet is available at speeds of 256k which is faster than traditional dial-up, but slower than our typical high-speed service, and priced at a discount to our faster product. The IntroNet product has been successful in capturing additional market share for us and providing a customer base to which higher speed data services may be marketed. Our data packages generally include the following:

• speed from six up to eight megabits per second;

• specialized technical support 24 hours a day, seven days a week;

• access to exclusive local content, weather, national news, sports and financial reports;

• value-added features such as e-mail accounts, on-line storage, spam protection and parental controls; and

• a DOCSIS-compliant modem installed by a trained professional.

Business voice and data services

Our broadband network also supports services to business customers, and accordingly, we have developed a full suite of products for small, medium and large enterprises. We offer the traditional bundled product offering to these business customers. We also have developed new products to meet the more complex voice and data needs of the larger business sector. We offer passive optical network service, which enables our customers to have T-1 voice services and data speeds of up to 1 gigabit per second on our fiber network. We have introduced our Matrix product offering, which can replace customers’ aging, low functionality PBX products with an IP Centrex voice and data service that offers more flexible features at a lower cost. In addition, we offer a virtual private network service to provide businesses with multiple sites the ability to exchange information privately among their locations over our network. We serve our business customers from locally based business offices with customer service and network support 24 hours a day, seven days a week.

Broadband carrier services

We use extra, unused capacity on our network to offer wholesale services to other local and long distance telephone companies, Internet service providers and other integrated services providers, called broadband carrier services. While this is not a part of our core strategy, we believe our interactive broadband network offers other service providers a reliable and cost competitive alternative to other telecommunications service providers.

Customer Service and Billing

Customer service

Customer service is an essential element of our operations and marketing strategy, and we believe our quality of service and responsiveness differentiates us from many of our competitors. A significant number of our employees are dedicated to customer service activities, including:

• sales and service upgrades;

• customer activations and provisioning;

• service issue resolutions; and

• administration of our customer satisfaction programs.

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We provide customer service 24 hours a day, seven days a week. Our representatives are cross-trained to handle customer service transactions for all of our products and currently exceed the industry standards for call answer times. We operate two centralized customer service call centers in Augusta, Georgia and Sioux Falls, South Dakota, which handle all customer service transactions. In addition, we provide our business customers with a centralized Business Customer Care Center that is distinctly dedicated to our business customers 24 hours per day, 7 days per week. Also located in Augusta, Georgia, we have found this dedicated facility improves our responsiveness to customer needs and distinguishes our product in the market. We believe it is a competitive advantage to provide our customers with the convenience of a single point of contact for all customer service issues for our video, voice and data service offerings and is consistent with our bundling strategy.

We monitor our network 24 hours a day, seven days a week. Through our network operations center, we monitor our digital video, voice and data services to the customer level and our analog video services to the node level. We strive to resolve service delivery problems prior to the customer being aware of any service interruptions.

Billing

We are an early adopter of a single billing platform for video, voice and data services, which is part of an enterprise management system that we have implemented system wide. This system, which was developed to our specifications, enables us to send a single bill to our customers for video, voice and data services.

Sales and Marketing

We believe that we were the first-to-market service provider of a bundled video, voice and data communications service package in each of our current markets, except the Pinellas market, which we entered via acquisition in 2004. Our sales and marketing materials emphasize the convenience, savings and improved service that can be obtained by subscribing to our bundled services.

We position ourselves as the local provider of choice in our markets, with a strong local customer interface and community presence, while simultaneously taking advantage of economies of scale from the centralization of certain marketing functions.

We have a sales staff in each of our markets including managers and direct sales teams for both residential and business services. Our standard residential team consists of direct sales, outbound sales, front counter sales, and local market coordination as well as support personnel. Our business services sales team consists of our account executives, specialized business installation coordinators and dedicated installation service teams. Our call center sales team handles all inbound telemarketing sales.

Our sales team is cross-trained on all our products to support our bundling strategy. The sales team is compensated based on connections and is therefore motivated to sell more than one product to each customer. Our marketing and advertising strategy is to target bundled service prospects utilizing a broad mix of media tactics including broadcast television, cross channel cable spots, radio, newspaper, outdoor space, Internet and direct mail. We have utilized database-marketing techniques to shape our offers, segment and target our prospect base to increase response and reduce acquisition costs.

We have implemented customer relationship management and retention techniques, as well as customer referral tactics, including newsletters and personalized e-mail communications. These programs are designed to increase loyalty and retention and to vertically integrate our current base of customers.

Pricing for Our Products and Services

Our core products are pre-packaged into triple-play bundles and two-product bundles. The bundles significantly reduce the number of plans our sales and call center personnel handle, simplifying the customer’s

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experience and reducing the products supported in the billing system by our Information Technology (IT) department. Product acceptance by new and existing customers has been strong.

We attractively price our services to promote sales of bundled packages. We offer bundles of two or more services with tiered features and prices to meet the demands of a variety of customers. We also sell individual services at prices competitive to those of the incumbent providers. An installation fee is charged to new and reconnected customers. We charge monthly fees for cable customer premise equipment.

Programming

We purchase some of our programming directly from the program networks by entering into affiliation agreements with the programming suppliers. We also benefit from our membership with the National Cable Television Cooperative (NCTC), which enables us to take advantage of volume discounts. As of December 31, 2007, approximately 64% of our programming was sourced from the cooperative, which also handles our contracting and billing arrangements on this programming.

Markets

Current Markets

As of December 31, 2007, we served the following markets with our interactive broadband network:

Year Added	Source	Market	Marketable Homes 12/31/2007	Year Services First Offered By Knology
				Video	Voice	Data
1995	Acquired	Montgomery, AL	90,800	1995	1997	1997
1995	Acquired	Columbus, GA	71,500	1995	1998	1998
1997	Acquired	Panama City, FL	61,700	1997	1998	1998
1998	Acquired	Huntsville, AL	84,400	1998	1999	1999
1998	Built	Charleston, SC	69,100	1998	1998	1998
1998	Built	Augusta, GA	55,300	1998	1998	1998
1999	Acquired	West Point, GA	12,400	1999	1999	1999
2000	Built	Knoxville, TN	39,700	2001	2001	2001
2003	Acquired	Pinellas, FL	273,600	2003	2004	2003
2007	Acquired	Rapid City, SD	49,345	2007	2007	2007
2007	Acquired	Sioux Falls, SD	64,213	2007	2007	2007

New markets

In addition to the markets served by PrairieWave that we acquired and Graceba that we are acquiring, we plan to evaluate expansion of our operations to other markets that have the size, market conditions, demographics and geographical location consistent with our business strategy. We plan to evaluate target cities that have the following characteristics, among others:

• targeted return requirements;

• an average of at least 70 homes per mile;

• competitive dynamics that allow us to be the leading provider of integrated video, voice and data services; and

• conditions that will afford us the opportunity to capture a substantial number of customers.

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Competition

We compete with a variety of communications companies because of the broad number of video, voice and data services we offer. Competition is based on service, content, reliability, bundling, value and convenience. Virtually all markets for video, voice and data services are extremely competitive, and we expect that competition will intensify in the future. Our competitors are often larger, better-financed companies with greater access to capital resources. These incumbents presently have numerous advantages as a result of their historic monopolistic control of their respective markets, brand recognition, economies of scale and scope and control of limited conduit relationships.

Video services

Cable television providers. Cable television systems are operated under non-exclusive franchises granted by local authorities, which may result in more than one cable operator providing video services in a particular market. Other cable television operations exist in each of our current markets, and many of those operations have long-standing customer relationships with the residents in those markets. Our competitors currently include Bright House Networks (Bright House), Charter Communications, Inc. (Charter), Comcast Corporation (Comcast), Mediacom Communication Corporation (Mediacom), Midcontinent Communications (Midco) and Time Warner Cable, Inc. (Time Warner). We also encounter competition from direct broadcast satellite systems, including Direct TV, Inc. (DirecTV) and Echostar Communications Corporation (Echostar) that transmit signals to small dish antennas owned by the end-user.

According to industry sources, as of November 2007, satellite television providers served approximately 31.6% of pay television customers in the United States; however, the satellite provider penetration in our markets is less. Competition from direct broadcast satellites could become significant as developments in technology increase satellite transmitter power and decrease the cost and size of equipment. Additionally, providers of direct broadcast satellites are not required to obtain local franchises or pay franchise fees. The Intellectual Property and Communications Omnibus Reform Act of 1999 permits satellite carriers to carry local television broadcast stations and is expected to enhance satellite carriers’ ability to compete with us for customers. As a result, we expect competition from these companies to increase.

Other television providers. Cable television distributors may, in some markets, compete for customers with other video programming distributors and other providers of entertainment, news and information. Alternative methods of distributing the same or similar video programming offered by cable television systems exist. Congress and the FCC have encouraged these alternative methods and technologies in order to offer services in direct competition with existing cable systems. These competitors include satellite master antenna television systems, local telephone companies and Internet content providers.

We compete with systems that provide multichannel program services directly to hotel, motel, apartment, condominium and other multiunit complexes through a satellite master antenna—a single satellite dish for an entire building or complex. These systems are generally free of any regulation by state and local governmental authorities. Pursuant to the Telecommunications Act of 1996, these systems, called satellite master antenna television systems, are not commonly owned or managed and do not cross public rights-of-way and, therefore, do not need a franchise to operate.

The Telecommunications Act of 1996 eliminated many restrictions on local telephone companies offering video programming, and we may face increased competition from those companies. Several major local telephone companies, including AT&T, Qwest Communications (Qwest) and Verizon, started to provide video services to homes.

In addition to other factors, we compete with these companies using programming content, including the number of channels and the availability of local programming. We obtain our programming by entering into

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contracts or arrangements with video programming suppliers. A programming supplier may enter into an exclusive arrangement with one of our video competitors, creating a competitive disadvantage for us by restricting our access to programming.

Voice services

In providing local and long-distance voice services, we compete with the incumbent local phone company, various long-distance providers and VoIP telephone providers in each of our markets. AT&T, Qwest and Verizon, are the incumbent local phone companies in our current markets and are particularly strong competitors. We also compete with a number of providers of long-distance telephone services, such as AT&T, Embarq (formerly Sprint) and Verizon. In addition, we compete with a variety of smaller, more regional, competitors that lease network components from AT&T or Verizon and focus on the commercial segment of our markets. Recent regulatory decisions have reduced the economic opportunity for many of these providers.

We expect to continue to face intense competition in providing our telephone and related telecommunications services. The Telecommunications Act of 1996 allows service providers to enter markets that were previously closed to them. Incumbent local telephone carriers are no longer protected from significant competition in local service markets.

We are anticipating an increase in the deployment of VoIP telephone services. Following years of development, VoIP has been deployed by a variety of service providers including other Multiple System Operators (MSOs) such as Cox Communications, Charter and Comcast and independent service providers such as Vonage Holding Corporation. Unlike circuit switched technology, this technology does not require ownership of the last mile and eliminates the need to rent the last mile from the Regional Bell operating companies (RBOCs). VoIP is essentially a data service and can be more feature rich than traditional circuit-switched telephone service. The VoIP providers will have differing levels of success based on their brand recognition, financial support, technical abilities, and legal and regulatory decisions. The following competitors have launched VoIP residential service: Mediacom in our Columbus, Georgia market, Comcast in our Augusta, Georgia, Panama City, Florida, Huntsville, Alabama, Knoxville, Tennessee and Charleston, South Carolina markets, Charter in our Columbus, Georgia, Montgomery and Valley, Alabama markets, and Bright House in our Pinellas, Florida market.

We believe that wireless telephone service, such as cellular and personal communication services, or PCS, currently is viewed by most consumers as a supplement to, not a replacement for, traditional telephone service. Wireless service generally is more expensive than traditional local telephone service and is priced on a usage-sensitive basis. However, there is evidence to indicate that wireless is gaining consideration as a replacement service, and the rate differential between wireless and traditional telephone service has begun to decrease and is expected to further decrease and lead to more competition between providers of these two types of services.

Data services

Providing data services is a rapidly growing business and competition is increasing in each of our markets. Some of our competitors benefit from greater experience, resources, marketing capabilities and name recognition. Cable television companies have entered the Internet access market. The incumbent cable television company in each of our markets currently offers high-speed Internet access services.

Other competitive high-speed data providers include:

• incumbent local exchange carriers that provide dial-up and DSL services;

• traditional dial-up Internet service providers;

• competitive local exchange carriers;

• providers of satellite-based Internet access services; and

• wireless RF providers (WiFi).

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A large number of companies provide businesses and individuals with direct access to the Internet and a variety of supporting services. In addition, many companies such as AOL and Microsoft Corporation offer online services consisting of access to closed, proprietary information networks with services similar to those available on the Internet, in addition to direct access to the Internet. These companies generally offer data services over telephone lines using computer modems. Some of these data service providers also offer high-speed integrated services using digital network connections and DSL connections to the Internet, and the focus on delivering high-speed services is expected to increase.

Bundled Services

Several of our competitors have initiated business plans to deploy their own versions of the triple-play bundle in our markets. Comcast, Charter, Bright House, Mediacom, Midco and other MSOs are in varying stages of launching VoIP and thereby enabling their third service offering. Bright House launched VoIP in the Pinellas County market in mid-2004. Comcast and Charter have made numerous announcements about launching voice services and have done so in all of our markets. It is inevitable that these providers will launch VoIP in all of their markets in the not too distant future.

AT&T and Verizon have each initiated agreements/partnerships with satellite providers enabling their third service offering, video. The RBOCs each have facilities-based initiatives to construct broadband (last-mile) networks in several markets nationwide. None of these networks currently overlap with Knology. The RBOCs’ ability to provide the three services will increase competition for subscribers within Knology’s markets.

Knology believes that its emphasis on proven technology for deploying telephone service enhances its product offering relative to the MSOs for the near future.

Legislation and regulation

We operate in highly regulated industries and both our cable and telecommunications services are subject to regulation at the federal, state and local levels. Providers of Internet services generally are not subject to regulation. We are required to obtain and maintain local franchises, which is our primary authority to provide video services and to occupy and use the public rights-of-way to provide cable services. Both federal and state regulators require us to obtain telecommunications operating authority, obtain approvals of various corporate and financing transactions, 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. Local authorities also impose various regulatory requirements, including reporting and fee requirements, and also govern our use of the public rights-of-way to provide telecommunications. If we fail to comply with these existing requirements, or are unable to timely comply with new or modified requirements, we may be subject to fines or potentially be asked to show cause as to why our authority to provide services should not be revoked. The time and expense of complying with federal, state and local regulations and demonstrating such compliance could increase our costs of providing services and could have a material adverse effect on our business, results of operations and financial condition.

Federal, state and local regulators may not grant us any required regulatory authorization and may take action against us regarding our compliance with applicable statutory and regulatory requirements. Delays in receiving regulatory approvals, the enactment of new adverse statutory and regulatory requirements and related compliance and enforcement activity may negatively impact our growth and could have a material adverse effect upon our business, results of operations and financial condition.

Implementation of the Communications Act of 1934, as amended, is an ongoing process at both the federal and state levels and it remains subject to judicial review. Ongoing proceedings before the FCC and state regulators include proceedings relating to interconnection access and pricing (including consideration of ILEC requests for “forbearance” from regulations governing their provision of broadband services), access to and

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pricing of special access services and other issues that could have a significant impact on our business and the business condition in the telecommunications industry generally. These proceedings could potentially impact the availability of special access facilities or further increase our costs or impact the flexibility and operating costs of our competitors. In addition, there are other proceedings relating to, among other things, regulation of IP-based services, privacy, billing, universal service and other subsidy programs, intercarrier compensation, numbering related issues and other issues that could have a significant impact on our business and business conditions in the communications industry generally. These and future proceedings at the federal and state levels may result in regulatory changes which would cause us to incur additional operating expenditures, reduce our revenues, negatively impact our growth, assist our competitors, or have some other material adverse effect upon our business. Regulation varies in each jurisdiction and may change in response to judicial decisions, legislative initiatives and administrative orders, government policies, competition and technological developments. We cannot predict what impact, if any, such changes or proceedings may have on our business or results of operations and we cannot guarantee that regulatory authorities will not raise material issues regarding our compliance with applicable regulations.

Common carriers are exempt from regulation by the Federal Trade Commission (FTC). However, to the extent we provide non-common carrier services, including Internet access services and interconnected VoIP services, we may be subject to FTC jurisdiction, especially with respect to advertised claims regarding such services.

In addition, congressional efforts to rewrite the 1996 Act or enact other legislation, as well as various state legislative initiatives, may cause major industry and regulatory changes adverse to our cable, telecommunications, and Internet access businesses. 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, results of operations and financial condition.

The following is a summary of federal laws and regulations affecting the growth and operation of the cable television and telecommunications industries and a description of relevant state and local laws. It does not purport to be a complete summary of all present and proposed legislation and regulations pertaining to our operations.

Federal Regulation

Cable Television Consumer Protection and Competition Act of 1992

The Cable Television Consumer Protection and Competition Act of 1992, or the 1992 Cable Act, increased the regulation of the cable industry by imposing rules governing, among other things:

• rates for tiers of cable video services;

• access to programming by competitors of cable operators and restrictions on certain exclusivity arrangements by cable operators;

• access to cable channels by unaffiliated programming services;

• terms and conditions for the lease of channel space for commercial use by parties unaffiliated with the cable operator;

• ownership of cable systems;

• customer service requirements;

• mandating carriage of certain local television broadcast stations by cable systems and the right of television broadcast stations to withhold consent for cable systems to carry their stations;

• technical standards; and

• cable equipment compatibility.

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The legislation also encouraged competition with existing cable television systems by:

• allowing municipalities to own and operate their own cable television systems without a franchise;

• preventing franchising authorities from granting exclusive franchises or unreasonably refusing to award additional franchises covering an existing cable system’s service area; and

• prohibiting the common ownership of cable systems and other types of multichannel video distribution systems.

Telecommunications Act of 1996

The Telecommunications Act of 1996 (1996 Act) and the FCC rules implementing the 1996 Act radically altered the regulatory structure of telecommunications markets by mandating that states permit competition for local telephone services. The 1996 Act placed certain requirements on most incumbent local exchange carriers to open their networks to competitors, resell their services at a wholesale discount, and permit other carriers to collocate equipment on incumbent local exchange carrier premises. Rural carriers may be exempt from these incumbent local exchange carrier requirements, as currently is the case with our incumbent local exchange carrier subsidiaries, Interstate Telephone, Valley Telephone, PrairieWave Community Telephone, and Graceba Total Communications. The following is a summary of the interconnection and other rights granted by the 1996 Act, as implemented by the FCC’s regulations, that are most important for full local telecommunications competition, and our belief as to the effect of the requirements, assuming vigorous implementation.

• interconnection of competitors with the networks of incumbents and other carriers, which permits customers of competitors to exchange traffic with customers connected to other networks;

• unbundling of voice grade and DS0 (and most DS1 and DS3) local loops and transport facilities and other elements of the incumbent local exchange carriers’ networks, as well as collocation rights, which allows competitors to selectively gain access to incumbent carriers’ facilities that connect the incumbent carriers’ central offices with customer premises, to transmission facilities that connect to incumbents’ central offices, and certain incumbent network capabilities, thereby enabling competitors to serve customers not directly connected to their networks on a facilities basis;

• reciprocal compensation, which mandates arrangements for local traffic exchange between both incumbent and competitive carriers and compensation for terminating local traffic originating on other carriers’ networks, thereby improving competitors’ margins for local service;

• number portability, which allows customers to change local carriers without changing telephone numbers, thereby removing a significant barrier for a potential customer to switch to a different carrier’s local voice services; and

• dialing parity, which enables competitors to provide telephone numbers to new customers on the same basis as the incumbent carrier.

This 1996 Act also permitted RBOCs under certain conditions to apply to the FCC for authority to provide long-distance services, which authority has now been approved throughout the RBOCs’ territories.

The 1996 Act also included significant changes in the regulation of cable operators. For example, the FCC’s authority to regulate the rates for “cable programming service” tiers, that is all tiers other than the lowest level “basic service tier,” of all cable operators expired on March 31, 1999. The legislation also:

• repealed the anti-trafficking provisions of the 1992 Cable Act, which required cable systems to be owned by the same person or company for at least three years before they could be sold to a third party;

• eliminated mandatory franchising requirements and the payment of franchise fees for Open Video System (OVS) operators, although local franchising authorities may still impose such obligations;

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• allows cable operators to enter telecommunications markets which historically have been closed to them;

• limits the rights of franchising authorities to require certain technology or to prohibit or condition the provision of telecommunications services by the cable operator; and

• adjusts the favorable pole attachment rates afforded cable operators under federal law such that they could be increased to a higher “telecommunications carrier” rate, if the cable operator also provides telecommunications services over its network.

Regulation of Cable Services

The FCC, the principal federal regulatory agency with jurisdiction over cable television, has promulgated regulations covering many aspects of cable television operations. The FCC may enforce its regulations through the imposition of fines, the issuance of cease and desist orders and/or the imposition of other administrative sanctions. A brief summary of certain key federal regulations follows.

Rate regulation. The 1992 Cable Act authorized rate regulation for certain cable services and equipment. The Act eliminated oversight by the FCC and the community of all but the basic service tier. The 1992 Cable Act requires communities to certify with the FCC before regulating basic cable rates. Cable service rate regulation does not apply where a cable operator demonstrates to the FCC that it is subject to effective competition in the community. To the extent that any municipality attempts to regulate our basic rates or equipment, we believe we could demonstrate to the FCC that our systems all face effective competition and, therefore, are not subject to rate regulation.

On February 9, 2006, the FCC released a report describing the possibility of multichannel video programming distributors (MVPD) to offer a la carte and themed-tier services, and thus increasing consumer choice in purchasing video programming and providing substantial consumer benefits. In the previous report, the FCC concluded that a la carte pricing did not provide substantial economic benefits to consumers and, instead, increased the costs, including operational and marketing for MVPDs. The new report concludes that a la carte pricing and themed-tiers do provide real economic benefits to consumers. The FCC did not adopt the finding of the new report and it has not required that cable system operators offer a la carte pricing or themed-tiers. Material changes in the rate requirements may be considered in the future and, if such changes are adopted, the profitability of our cable business could be adversely affected.

Ownership limits. On December 18, 2007, the FCC adopted an order (albeit the text of the order has not yet been released) setting the number of subscribers a cable operator may serve (a horizontal limit) at 30 percent nationwide. The FCC also issued in the same proceeding a Further Notice of Proposed Rulemaking in which it seeks comments on key issues relating to the appropriate vertical ownership limits (the number of channels a cable operator may devote to its affiliated programming networks) and related cable and broadcast attribution rules. We are in compliance with the ownership limits. To the extent the FCC establishes new vertical limits, we believe we could demonstrate compliance with any such restrictions. However, as noted above, the text of the FCC’s order and further rulemaking have not been released; examination of these texts when released may reveal other potential impacts, which could be adverse to our operations.

Program access. To promote competition with incumbent cable operators by independent cable programmers, the 1992 Cable Act placed restrictions on dealings between cable programmers and cable operators. Satellite video programmers affiliated with cable operators are prohibited from favoring those cable operators over competing distributors of multichannel video programming, such as satellite television operators and competitive cable operators such as us. These restrictions are designed to limit the ability of vertically integrated satellite cable programmers from offering exclusive programming arrangements or preferred pricing or non-price terms to cable operators. In an order released October 1, 2007, the FCC found that the existing ban on exclusive contracts between vertically integrated programmers and cable operators continues to be necessary to preserve and protect competition and diversity in the distribution of video programming, and agreed to retain it again for five years, until October 5, 2012.

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The Communications Act requires a cable system with 36 or more activated channels to designate a significant portion of its channel capacity for commercial leased access by third parties to provide programming that may compete with services offered by the cable operator (leased access channels). The FCC regulates various aspects of such third party commercial use of channel capacity on our cable systems, including the rates and some terms and conditions of the commercial use. On November 27, 2007, the FCC adopted an order that establishes more specific leased access customer service standards and increased enforcement of those standards, faster cable operator response times to information requests and more appropriate leased access disputes. The FCC simultaneously adopted a Further Notice of Proposed Rulemaking seeking comments on applying the revised rate methodology to programmers transmitting predominantly sales presentations or program length commercials.

Carriage of broadcast television signals. The 1992 Cable Act established broadcast signal carriage requirements that allow local commercial television broadcast stations to elect every three years whether to require the cable system to carry the station (must-carry) or whether to require the cable system to negotiate for consent to carry the station (retransmission consent). The most recent election by broadcasters became effective on January 1, 2006. Stations are generally considered local to a cable system where the system is located in the station’s Nielsen designated market area. Cable systems must obtain retransmission consent for the carriage of all distant commercial broadcast stations, except for certain superstations, that are commercial satellite-delivered independent stations such as WGN. Pursuant to the Satellite Home Viewer Improvement Act, the FCC enacted rules governing retransmission consent negotiations between broadcasters and all distributors of multichannel video programming (including cable operators). Local non-commercial television stations are also given mandatory carriage rights, subject to certain exceptions, within a certain limited radius. Non-commercial stations are not given the option to negotiate for retransmission consent. Must-carry requests may decrease the attractiveness of the cable operator’s overall programming offerings by including less popular programming on the channel line-up, while retransmission consent elections may involve cable operator payments (or other concessions) to the programmer. We carry some stations pursuant to retransmission consent agreements and pay fees for such consents or have agreed to carry additional services. We carry other stations pursuant to must-carry elections.

By statute, cable operators must make local broadcasters’ primary video and program-related material viewable by all of their subscribers. In an order released November 30, 2007, the FCC adopted rules to ensure all cable subscribers, including those with analog TV sets, can view broadcast television after the transition to digital television occurs on February 17, 2009. The new FCC rules allow cable operators to comply with the viewability requirement by choosing to either: (1) carry the digital signal in analog format, or (2) carry the signal only in digital format, provided that all subscribers have the necessary equipment to view the broadcast content. The viewability requirements extend to February 2012 with the FCC committing to review them during the final year of this period in light of the state of technology and the marketplace. We expect to be able to comply with the viewability requirements to ensure that cable subscribers with analog television sets can continue to view all must-carry stations after the end of the DTV transition, but our implementation might be flawed, and circumstances outside our control may make it impossible for us to comply in a timely fashion, in which case we may be subject to investigations and potential fines and penalties.

Registration procedures and reporting requirements. Before beginning operation in a particular community, all cable television systems must file a registration statement with the FCC listing the broadcast signals they will carry and certain other information. Additionally, cable operators periodically are required to file various informational reports with the FCC. Cable operators that operate in certain frequency bands, including us, are required on an annual basis to file the results of their periodic cumulative leakage testing measurements. Operators that fail to make this filing or who exceed the FCC’s allowable cumulative leakage index risk being prohibited from operating in those frequency bands in addition to other sanctions.

Equal Employment Opportunity (EEO) Rules and Policies. The 1992 Cable Act established rules that prohibit discrimination by cable operators. They also require cable operators to provide notice of job vacancies and to undertake additional outreach measures, such as job fairs and scholarship programs, while at the same

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time affording them enough flexibility to create the programs most effective for their communities. The FCC established specific record keeping obligations relating to EEO compliance. In addition, the EEO rules will be enforced through review at renewal time, at mid-term for larger broadcasters, and through random audits and targeted investigations resulting from information received as to possible violations. To the extent the FCC conducts an audit, we believe that we could demonstrate compliance with the requirements.

Franchise authority. Cable television systems operate pursuant to franchises issued by local franchising authorities (which are the cities, counties or political subdivisions in which a cable operator provides cable service). Local franchising authority is premised upon the cable operator’s facilities crossing the public rights-of-way. Franchises are typically of fixed duration with the prospect for renewal. These franchises must be nonexclusive. The terms of local franchises vary by community, but typically include requirements concerning service rates, franchise fees, construction timelines, mandated service areas, customer service standards, technical requirements, public, educational and government access channels, and channel capacity. Franchises often may be terminated, or penalties may be assessed, if the franchised cable operator fails to adhere to the conditions of the franchise. Although largely discretionary, the exercise of local franchise authority is limited by federal law. For example, local franchise authorities may not issue exclusive franchises, may not require franchise fees that exceed 5% of gross revenues from the provision of cable services, and may not mandate the use of a particular technology. Local franchise authorities are permitted to charge fees other than cable franchise fees, such as fees for a telecommunications providers’ use of public rights-of-way. We hold cable franchises in all of the franchise areas in which we provide service. We believe that the conditions in our franchises are fairly typical for the industry. Our franchises generally provide for the payment of fees to the municipality ranging from 3% to 5% of revenues from telephone and cable television service, respectively. The Telecommunications Act of 1996 exempted those telecommunications services provided by a cable operator or its affiliate from cable franchise requirements, although municipalities retain authority to regulate the manner in which a cable operator uses the public rights-of-way to provide telecommunications services.

On December 20, 2006, the FCC adopted an order establishing rules and providing guidance to implement Section 621(a)(1) of the Communications Act of 1934, and prohibiting franchising authorities from unreasonably refusing to award competitive franchises for the provision of cable services. The FCC concluded that the current operation of the franchising process constitutes an unreasonable barrier to entry that impedes the achievement of the interrelated federal goals of enhanced cable competition and accelerated broadband deployment. The FCC discussed several ways by which local franchising authorities are unreasonably refusing to award competitive franchises, including drawn-out local negotiations with no time limits; unreasonable build-out requirements; unreasonable requests for “in-kind” payments that attempt to subvert the five percent cap on franchise fees; and unreasonable demands with respect to public, educational and government access (or PEG). In order to eliminate the unreasonable barriers to entry into the cable market, and to encourage investment in broadband facilities, the Commission: preempted local laws, regulations, and requirements, including local level-playing-field provisions, to the extent they impose greater restrictions on market entry than those adopted under the order. This order should be beneficial to us by facilitating our provision of cable service in a more expeditious manner subject to fewer requirements imposed by local franchising authorities, although the decision may make it easier for new competitors to provide video services in competition with us. The FCC simultaneously opened a rulemaking proceeding in which it seeks comments on how its findings should affect existing franchisees. Certain parties filed petitions for review in various federal appellate courts of the FCC’s order. The petitions have been consolidated and are pending in the United States Court of Appeals for the Sixth Circuit. On October 31, 2007, the FCC adopted a second report and order concluding that many of the findings of the first order should be made applicable to incumbent operators. The second order has been appealed in federal court. It is impossible to predict how the courts will rule on these petitions.

Several state legislatures have streamlined the franchising processes in their states or have adopted statewide franchises, including Florida, Georgia, Iowa, and South Carolina. State legislation regarding streamlined or state-wide video franchising has also been introduced and is actively being considered in a number of states, including Tennessee. It is impossible to predict whether or when such state legislation might pass.

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Franchise renewal. Franchise renewal, or approval for the sale or transfer of a franchise, may involve the imposition of additional requirements not present in the initial franchise (such as facility upgrades or funding for public, educational, and government access channels). Although franchise renewal is not guaranteed, federal law imposes certain standards to prohibit the arbitrary denial of franchise renewal. Our franchises generally have 10 to 15 year terms, and we expect our franchises to be renewed by the relevant franchising authority before or upon expiration. The order adopted by the FCC in December 2006 reduces the potential for unreasonable conditions being imposed upon us during renewal just as is the case with new competitive franchises.

Franchise transfer. Under federal law, local franchise authorities are required to act on a cable operator’s franchise transfer request within 120 days after receipt of all information required by FCC regulations and the franchising authority. Approval is deemed granted if the franchising authority fails to act within such period.

Pole attachments. Federal law requires utilities, defined to include all local telephone companies and electric utilities except those owned by municipalities and co-operatives, to provide cable operators and telecommunications carriers (with the exception of incumbent LECs) with nondiscriminatory access to poles, ducts, conduit and rights-of-way at just and reasonable rates, except where states have certified to the FCC that they regulate pole access and pole attachment rates. The right to access is beneficial to facilities-based providers such as us. Federal law also establishes principles to govern the pricing of and terms of such access. Utilities may charge telecommunications carriers (and cable operators providing both cable television service and telecommunications service, such as us) a different (often higher) rate for pole attachments than they charge cable operators providing solely cable service. The FCC adopted rules implementing the two different statutory formulas for pole attachment rates. These regulations became effective on February 8, 2001, and increases in attachment rates relative to rates for providers that exclusively provide cable service resulting from the regulations were phased-in in equal annual increments over a period of five years. The phase-in is now complete. Currently, 18 states plus the District of Columbia have certified to the FCC, leaving pole attachment matters to be regulated by those states. Of the states in which we operate, none has certified to the FCC. The FCC has clarified that the provision of Internet services by a cable operator does not affect the agency’s jurisdiction over pole attachments by that cable operator, nor does it affect the rate formula otherwise applicable to the cable operator. Although the U.S. Court of Appeals for the Eleventh Circuit overturned the FCC’s conclusion, the U.S. Supreme Court ultimately upheld the FCC. In late 2007, the Commission initiated a rulemaking proceeding to examine the pole attachment rate formula, specifically whether a single rate should apply to all attachers and whether incumbent local exchange carriers should be entitled to the same rate as other telecommunications service providers, among other matters.

Inside wiring of multiple dwelling units. FCC rules provide generally that, in cases where the cable operator owns the wiring inside a multiple dwelling unit but has no right of access to the premises, the multiple dwelling unit owner may give the cable operator notice in the event it intends to permit another cable operator to provide service there. The cable operator then must elect whether to remove the inside wiring, sell the inside wiring to the multiple dwelling unit owner at a price not to exceed the replacement cost of the wire on a per-foot basis, or abandon the inside wiring. The FCC also adopted rules that, among other things, require utilities (including incumbent local exchange carriers and other local exchange carriers) to provide telecommunications carriers and cable operators with reasonable and nondiscriminatory access to utility-owned or controlled conduits and rights-of-way in all “multiple tenant environments” (including, for example, apartment buildings, office buildings, campuses, etc.) in those states where the FCC possesses authority to regulate pole attachments, i.e., in those states where the state government has not certified to the FCC that it regulates utility pole attachments and rights-of-way matters.

In late 2004, in response to a remand decision by the U.S. Court of Appeals for the DC Circuit, the FCC initiated a rulemaking proceeding to examine how cable television inside wiring rules pertain to home run wiring. Home run wiring is wiring located behind sheet rock, which is considered to be physically inaccessible for purposes of determining the demarcation point between inside wiring and home run wiring. The comment cycle ended in December 2004, but the FCC has not released a decision in that proceeding.

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Access to and competition in multiple dwelling units by and among video operators. The FCC has preempted laws and rules that restrict occupants of multiple dwelling units from placing small satellite antennas on their balconies (or areas under the occupant’s exclusive use). The FCC’s action increases the ability of satellite television operators such as DirecTV to compete with us in certain multiple dwelling units. The FCC recently decided not to abrogate or restrict existing or future exclusive video multiple dwelling unit access contracts by multichannel video programming distributors. The decision not to abrogate existing exclusive multiple dwelling unit access contracts may restrict us in competing with the incumbent cable operator (or other video competitors) in those multiple dwelling units where another cable operator has obtained an exclusive access arrangement.

Privacy. Federal law restricts the manner in which cable operators can collect and disclose data about individual system customers. Federal law also requires that the cable operator periodically provide all customers with written information about its policies regarding the collection and handling of data about customers, their privacy rights under federal law and their enforcement rights. Cable operators must also take such actions as are necessary to prevent unauthorized access to personally identifiable information. Failure to adhere to these requirements subjects the cable operator to payment of damages, attorneys’ fees and other costs.

Copyright. Cable television systems are subject to federal compulsory copyright licensing covering carriage of broadcast signals. In exchange for making semi-annual payments to a federal copyright royalty pool and meeting certain other obligations, cable operators obtain a statutory license to retransmit broadcast signals. The amount of the royalty payment varies, depending on the amount of system revenues from certain sources, the number of distant signals carried, and the location of the cable system with respect to over-the-air television stations.

Adjustments in copyright royalty rates are made through an arbitration process supervised by the U.S. Copyright Office. The modification or elimination of the compulsory copyright licensing scheme could adversely affect our ability to provide our customers with their desired broadcast programming.

Internet service. The FCC rejected requests by some Internet service providers to require cable operators to provide unaffiliated Internet service providers with direct access to the operators’ broadband facilities. A contrary decision may have facilitated greater competition by non-facilities-based Internet service providers with our broadband service offerings. In addition, the FCC sought comment on the scope of its jurisdiction to regulate cable modem service and the extent to which state and local governments may regulate cable modem service. Although the FCC has indicated a clear preference for minimizing regulation of broadband services, future regulation of cable modem service by federal, state or local government entities remains possible. The FCC also sought comment on whether it should resolve any disputes that may arise over cable operators’ previous collection of franchise fees from their customers based, in part, on cable modem service revenues, or whether the FCC should leave such matters to the courts. There remains a risk that we will confront litigation on this issue. See also “Regulatory treatment of cable modem service” under “Regulation of Telecommunications Services.”

Regulatory fees. The FCC requires payment of annual regulatory fees by the various industries it regulates, including the cable television industry. Regulatory fees may be passed on to customers as external cost adjustments to rates for basic cable service.

Fees are also assessed for other FCC licenses, including licenses for business radio, cable television relay systems and earth stations. These fees, however, may not be collected directly from customers as long as the FCC’s rate regulations remain applicable to the cable system.

Tier buy-through. The tier buy-through prohibition of the 1992 Cable Act generally prohibits cable operators from requiring subscribers to purchase a particular service tier, other than the basic service tier, in order to obtain access to video programming offered on a per-channel or per-program basis. In general, a cable television operator has the right to select the channels and services that are available on its cable system. With the exception of certain channels, such as local broadcast television channels, that are required to be carried by

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federal law as part of the basic tier, as discussed above, the cable operator has broad discretion in choosing the channels that will be available and how those channels will be packaged and marketed to subscribers. In order to maximize the number of subscribers, the cable operator selects channels that are likely to appeal to a broad spectrum of viewers. If the Congress or the FCC were to place more stringent requirements on how we package our services, it could have an adverse effect on our profitability.

Potential regulatory changes. The regulation of cable television systems at the federal, state, and local levels is subject to the political process and has seen constant change over the past decade. Material additional changes in the law and regulatory requirements must be anticipated in the future, even if what those changes will be cannot be ascertained with any certainty at this time. Our business could be adversely affected by future regulations.

Regulation of Telecommunication Services

Our telecommunications services are subject to varying degrees of federal, state and local regulation. Pursuant to the Communications Act of 1934, as amended by the Telecommunications Act of 1996, the FCC generally exercises jurisdiction over the facilities of, and the services offered by, telecommunications carriers that provide interstate or international communications services. Barring federal preemption, state regulatory authorities retain jurisdiction over the same facilities to the extent that they are used to provide intrastate communications services, as well as facilities solely used to provide intrastate services. Local regulation is largely limited to management of the occupation and use of county or municipal public rights-of-way. Various international authorities may also seek to regulate the provision of certain services.

As explained above, incumbent local exchange carriers are subject to obligations (under Section 251(c) of the federal Communications Act) to open their networks to competitive access, including both unbundling and collocation obligations, as well as heightened interconnection obligations and a duty to make their services available to resellers at a wholesale discount rate. The Communications Act includes an exemption from Section 251(c) requirements for rural telephone companies, absent a finding by the appropriate state commission that the request is not unduly economically burdensome. Interstate Telephone, Valley Telephone, PrairieWave Community Telephone, and Graceba Total Communications are all rural telephone companies as defined by the federal Communications Act. With respect to Valley Telephone and Graceba Total Communications, the Alabama Public Service Commission has determined that these companies qualify as rural incumbent LECs and therefore should be exempt from the incumbent local exchange carrier interconnection requirements under Section 251(c) of the Communications Act. Similarly, the Georgia Public Service Commission and the South Dakota Public Utilities Commission have determined that Interstate Telephone and PrairieWave Community Telephone, respectively, are rural carriers and should be exempt from these incumbent local exchange carrier interconnection requirements under Section 251(c), In the event the circumstances upon which these determinations are based change in the future, it is possible these conclusions could be revisited and reversed, exposing either company to the incumbent local exchange carrier interconnection, unbundling, wholesale discount, and/or collocation obligations.

Tariffs and detariffing. Several of our subsidiaries, Knology of Alabama, Inc.; Knology of Florida, Inc.; Knology of Georgia, Inc.; Knology of South Carolina, Inc.; and Knology of Tennessee, Inc.; PrairieWave Communications, Inc.; PrairieWave Telecommunications, Inc.; PrairieWave Black Hills, LLC; and Wiregrass Telecom, Inc. are classified by the FCC as non-dominant carriers with respect to both domestic interstate and international long-distance carrier services and competitive local exchange carrier services. As non-dominant carriers, these subsidiaries’ rates presently are not generally regulated by the FCC, although the rates are still subject to general requirements that they be just, reasonable, and nondiscriminatory. The FCC has ordered mandatory detariffing of non-dominant carriers’ interstate and international interexchange services, except in very limited circumstances. Rather, we must post standard rates, terms, and conditions on the Internet and negotiate and/or execute individual agreements with each of our customers to cover the rates, terms and conditions for our provision of such services, including limitations on liability. The FCC’s detariffing regime has

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no impact on our tariffs for intrastate services, nor does it affect the federal access charge tariff system. It is uncertain whether we will be able to execute individual agreements with each of our long-distance customers on favorable terms going forward and whether the additional costs of having to comply with this regime will have an adverse effect on our revenues. There is also some uncertainty about whether, in the absence of a tariff, such carrier protections such as strict limitations on liability, can be negotiated with the end users and, if they are, whether they are enforceable.

Non-dominant local exchange carriers are not permitted to file tariffs with the FCC for their interstate access services if the charges for such services are higher than FCC benchmarks established in 2001. If a non-dominant carrier’s charges for interstate access services are equal to or below the FCC-established benchmark, it is permitted, but not required, to file tariffs with the FCC for such services. Our interstate access services fall within the FCC-established benchmark and we have a tariff on file with the FCC for those services. While we do not know what the FCC will ultimately decide in its intercarrier compensation proceeding (see “Interconnection and Compensation for Transport and Termination,” below), we can be expected to face continued “downward pressure” on our switched access rates in the future.

Interstate Telephone, Valley Telephone, PrairieWave Community Telephone, and Graceba Total Communications are regulated by the FCC as dominant carriers in the provision of interstate switched access services. As dominant carriers, Interstate Telephone, Valley Telephone, PrairieWave Community Telephone, and Graceba Total Communications must file tariffs with the FCC and must provide the FCC with notice prior to changing their rates, terms or conditions of interstate access services. Interstate Telephone has its own tariffs on file with the FCC, while Valley Telephone, PrairieWave Community Telephone and Graceba Total Communications concur in tariffs filed by the National Exchange Carrier Association. Interstate Telephone, Valley Telephone, PrairieWave Community Telephone, and Graceba Total Communications are each classified as non-dominant in the provision of interstate and international interexchange services, rendering them subject to mandatory detariffing at the FCC for such services, as described above.

Interconnection. The Telecommunications Act of 1996 established a national policy to foster the development of local telephone competition. This Act preempts laws that prohibit competition for local telephone services and establishes requirements and standards for local network interconnection, unbundling of network elements, and resale. The Telecommunications Act of 1996 also requires incumbent local exchange carriers to enter into mutual compensation arrangements with competitive local exchange companies for transport and termination of local calls on each other’s networks. The interconnection, unbundling, and resale standards were developed by the FCC in a series of orders and have been further implemented by the states and reviewed by the federal courts of appeals. The terms of interconnection agreements between incumbent local exchange carriers and other telecommunications carriers have been, and are likely to continue to be, overseen by the states. A majority of the federal circuit courts of appeals, including the Court of Appeals for the Eleventh Circuit (which covers many of our markets), have concluded that the states possess such authority.

We have local interconnection agreements with AT&T (formerly BellSouth), CenturyTel, Embarq (formerly Sprint), Qwest, and Verizon for, among other things, the transport and termination of local telephone traffic. These agreements have been filed with, and approved by, the applicable regulatory authority in each state in which we conduct our operations and in which the agreements apply. Our interconnection arrangements are subject to changes as a result of changes in laws and regulations, and there is no guarantee that the rates and terms concerning our interconnection arrangements with incumbent local carriers under which we operate today will be available in the future.

Intercarrier compensation for transport and termination. The FCC has concluded that calls to Internet service providers are jurisdictionally interstate and the exchange of ISP-bound traffic is not subject to the reciprocal compensation requirements of the Communications Act. The FCC established an interim scheme, however, whereby traffic below a 3:1 originating-to-terminating ratio is presumed to be reciprocal compensation traffic and traffic above 3:1 is presumed to be ISP-bound. While the FCC decision was remanded by the U.S. Court of Appeals for the D.C. Circuit to the FCC for further elaboration and as to the legal basis for its decision,

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the Court let the interim regulations remain in effect. Until the FCC addresses the issue again, ISP-bound traffic is generally being exchanged at a lower rate than other reciprocal compensation traffic. Except for PrairieWave, under our interconnection agreements, we exchange local traffic with incumbent carriers on a bill-and-keep basis (in which no compensation is actually paid). The PrairieWave/Qwest agreement specifies a rate for, and the payment of, reciprocal compensation.

In March 2005, the FCC issued a further notice of proposed rulemaking requesting comment on various proposals to replace the existing intercarrier compensation regimes with a unified regime designed for the developing marketplace, including the transport and termination of IP-enabled traffic (see “Regulatory treatment of voice over Internet Protocol (IP) services,” below). As part of the proceeding, the FCC will review numerous aspects of intercarrier compensation, including transport and termination. Supplemental requests for comment were issued in July and November 2006 on specific intercarrier compensation proposals, all of which remain pending. Any future FCC’s decision in this proceeding or any other involving intercarrier compensation will likely impact the amounts that we both pay and receive from all carriers with whom we are interconnected, whether directly or indirectly.

Number portability. All providers of telecommunications services, as well as providers of interconnected Voice over Internet Protocol (VoIP) service, must offer service provider local number portability, which the FCC has defined as the ability of end users to retain, at the same location, existing telephone numbers when switching local telephone companies without impairment of quality, reliability or convenience. Number portability is intended to remove one barrier to entry faced by new competitors, which would otherwise have to persuade customers to switch local service providers despite having to change telephone numbers. Although number portability generally benefits our competitive local exchange carrier operations, it represents a burden to Valley Telephone, Interstate Telephone, PrairieWave Community Telephone, and Graceba Total Communications. Moreover, wireline-to-wireless number portability may have an adverse impact on all wireline carriers because end users may port more numbers from wireline to wireless carriers than vice versa. Any changes to regulations regarding the recovery of number portability costs would likely shift costs from ILECs to their competitors, which could have an overall adverse effect on our business.

Universal service. The FCC has adopted rules implementing the universal service requirements of the Telecommunications Act of 1996. The federal universal service fund is the support mechanism established by the FCC to ensure that high quality, affordable telecommunications service is available to all Americans. Pursuant to the FCC’s universal service rules, all telecommunications providers currently must contribute a percentage of their telecommunications revenues to the federal universal service fund. In June 2006, the FCC adopted an order extending the obligation to make payments to the universal service fund to providers of interconnected VoIP services. As a telecommunications carrier and /or provider of interconnected VoIP services, we are required to contribute to the federal universal service fund on the basis of our projected, collected interstate and international end user telecommunications revenues. The FCC devises a quarterly factor for contribution to the federal universal service fund based on the ratio of total projected demand for universal service support as compared to total end user interstate and international revenue for a given quarter. The contribution factor for the fourth quarter of 2007 was 11.0%. Accordingly, for the fourth quarter of 2007, we contributed approximately 11% of our combined interstate and international end user telecommunications revenues to the federal universal service fund. The contribution rate is reviewed quarterly and may increase, raising our costs of operations.

Contributors to the federal Universal Service Fund may assess a federal universal service surcharge on their non-carrier customers, either as a flat amount or a percentage of a customer’s service charges; however, this amount may not exceed the total amount of the universal service contribution factor currently in effect. (Carrier customers of contributors to the Universal Service Fund may avoid such surcharges if they certify to their provider that either they or their own customers contribute to the Fund.) As a result, we are precluded from assessing a federal universal service-related charge on our end user customers in excess of the current relevant interstate and international telecommunications portion of each customer’s bill times the relevant contribution factor. We remain able to recover legitimate administrative costs relating to our contribution to the federal

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Universal Service Fund, provided that such cost recovery is made through areas other than our universal service line item surcharge.

The FCC currently is conducting a comprehensive review of the rules governing contributions to the federal universal service fund. The FCC is considering the adoption of an alternative universal service contribution methodology under which affected providers would contribute to the federal Universal Service Fund based on either the number of end user connections, the number of working telephone numbers, or the amount of capacity per connection. Although the timing or outcome of this proceeding and its effect on our business cannot be predicted, if any of these proposals are implemented, the amount of our contributions to the federal universal service fund may increase, and could negatively impact our business, prospects, gross profits, cash flows and financial condition. The Congress is also considering several pieces of legislation which could affect the basis on which universal service contributions are made and how the funds are distributed. Legislative or regulatory changes to federal universal service funding obligations could adversely affect us by increasing the payments owed to support the fund. Changes to the universal service fund distribution mechanisms could affect our abilities, or the opportunities for our qualified customers, to apply for and receive universal service funding.

Access charge reform. The FCC has adopted several orders in recent years having the effect of reducing switched access charges imposed by local telephone companies for origination and termination of interstate long-distance traffic. Overall decreases in local telephone carriers’ access charges as contemplated by the FCC’s access reform policies would likely put downward pricing pressure on our charges to domestic interstate and international long-distance carriers for comparable access. Changes to the federal access charge regime could adversely affect us by reducing the revenues that we generate from charges to domestic interstate and international long-distance carriers for originating and terminating interstate traffic over our telecommunications facilities.

The FCC has adopted an order, the MAG Plan, to reform interstate access charges and universal service support for rate-of-return incumbent local exchange carriers such as Valley Telephone, Interstate Telephone, PrairieWave Community Telephone, and Graceba Total Communications. The MAG Plan is designed to lower access charges toward cost, replace implicit support for universal service with explicit support that is portable to all eligible telecommunications carriers, and provide certainty and stability for the small and mid-sized local telephone companies serving rural and high-cost areas by permitting them to continue to set rates based on a rate-of-return of 11.25%, thereby encouraging rural investment. The MAG Plan, as adopted, will reduce switched access fees for small incumbent local exchange carriers and protect universal service in areas served by those incumbent local exchange carriers. Although the MAG Plan significantly reduces per-minute access charge revenues to these carriers, it is designed to protect them for at least the term of the plan from potentially much larger revenue reductions. On February 12, 2004, the FCC issued an order regarding the MAG Plan designed to streamline the FCC’s rules further and increase rural carriers’ flexibility to respond to market conditions.

The FCC issued a Notice of Public Rulemaking on January 31, 2005 in WC Docket No. 05-25. On July 9, 2007, the FCC issued a Public Notice inviting interested parties to refresh the record in the proceeding. This proceeding includes a broad examination of the regulatory framework that is applied to local exchange carriers’ interstate special access services preventing them from exceeding certain prices after June 30, 2005. In conducting this examination, the FCC announced that it seeks comment on the special access regulatory regime that should follow the expiration of the Coalition for Affordable Local and Long Distance Service (CALLS) plan, including whether to maintain or modify the Commission’s pricing flexibility rules for special access services. We cannot predict whether the FCC will further modify its access change rules as a result of this proceeding or the effect that any such changes would have on our business.

In July and November 2006, the FCC requested further comment in its intercarrier compensation proceeding (WC Docket No. 01-92) which is considering replacing the existing intercarrier compensation regimes with a unified regime designed for the developing marketplace, as previously discussed. As part of the proceeding, the FCC is reviewing most aspects of intercarrier compensation, including access charges. Any FCC decision in this

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proceeding will impact the amounts that we both pay and receive from all carriers with whom we are interconnected, both directly and indirectly, although the net effect of any such FCC order for our operations cannot be predicted at this time (see discussion of intercarrier compensation, above).

In October 2006, the FCC launched a new rulemaking considering new regulations designed to ensure that, when a small incumbent local exchange carrier or a competitive local exchange carrier experiences large growth in access traffic, its access charges remain just and reasonable. Were the Commission to adopt rules in this proceeding that affect any of our local exchange carrier operations, it could increase our regulatory burdens and costs of doing business and adversely affect our ability to adequately recover our costs of providing access services.

Regulatory treatment of voice over Internet Protocol (IP) services. Currently, the FCC and state regulators do not treat most IP-enabled services, including those offering real time voice transmissions, as regulated telecommunications services. A number of providers are using VoIP to compete with our voice services, and some providers using VoIP may be avoiding certain regulatory obligations or access charges for interexchange services that might otherwise be due if such voice over IP offerings were subject to regulation. However, in March 2004, the FCC commenced a rulemaking proceeding to comprehensively address the regulatory treatment of IP-enabled services, including VoIP applications. Although we cannot predict when the FCC will issue a decision in this proceeding, the FCC issued an order in 2004 precluding states from regulating interconnected VoIP services, subsequently clarifying that such services are subject to its exclusive jurisdiction when providers do not know the geographic location of their customers. It is not clear whether future decisions from the FCC will clarify the extent to which it intends to assert exclusive jurisdiction over VoIP and other IP-enabled services. In response to individual petitions for declaratory ruling, the FCC has addressed specific VoIP applications. For example, in 2004, the FCC ruled that an AT&T service using VoIP solely as an intermediate routing technology is a telecommunications service. By contrast, the FCC ruled that pulver.com’s Free World Dialup service, which enables customers to make computer-to-computer VoIP calls, is an information service. The FCC currently has before it a series of petitions for declaratory rulings requesting clarification on which parties are interexchange carriers for purposes of access charge liability on any IP-enabled traffic subject to access charges, whether interexchange carriers not directly connected to local exchange carriers can be subject to access charges, and whether intermediate, terminating LECs can rely on certification by their customers that traffic is enhanced services traffic in making decisions regarding the routing of an intercarrier compensation for access traffic and other issues. In October 2007 and January 2008, two companies filed petitions for forbearance with the FCC containing contradictory requests which, if granted, would, as a general matter, either relieve many if not most VoIP services from any future duty to pay access charges or involve a determination that many if not most VoIP services are subject access charges in the future (and possibly that they were subject to access charges in the past as well.) These petitions are likely to be decided together in late 2008 or January of 2009. The FCC is also considering as part of its intercarrier compensation proceeding various proposals to address problems with so-called “phantom traffic,” traffic terminated on the local switched telephone network which is often, although not exclusively, IP-enabled and which allegedly has been stripped of signaling information which allegedly prevents terminating LECs from determining whether the traffic is interexchange traffic that may be subject to access charges. Decisions and regulations adopted in these and other similar proceedings could lead to an increase in the costs of VoIP providers if they become subject to additional regulation (in the absence of forbearance from the same), and may change the compensation structure for IP-enabled services. At this time, we are unable to predict the impact, if any, that additional regulatory action on these issues will have on our business.

Other aspects of VoIP and Internet telephony services, such as regulations relating to the confidentiality of data and communications, copyright issues, taxation of services, licensing and 911 emergency access, may be subject to federal or state regulation. For instance, in 2002 the FCC undertook an examination of whether emergency 911 requirements should be extended to packet-based networks and services, and on June 3, 2005 it released an order requiring providers of certain VoIP services to provide enhanced 911 emergency services to their customers. Those requirements continue to be implemented and are subject to a series of petitions for

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reconsideration, for waiver, and requests for extension. Compliance with these and other regulations the FCC may adopt regarding the treatment of VoIP services could increase ours costs of providing service. On May 3, 2006, the FCC determined that both facilities-based broadband Internet access and interconnected VoIP providers should be subject to the same wiretap rules as providers of traditional telecommunications services. The new rules require that all facilities-based broadband Internet access and interconnected VoIP service providers are technically capable of opening their networks to provide access to law enforcement agencies by May 14, 2007. Similarly, the FCC in June of 2006 extended USF contribution requirements to providers of interconnected VoIP services, as discussed above. Finally, in November 2007, the FCC ruled that interconnected VoIP providers must offer local number portability. Such 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.

Forbearance and Other Relief to Dominant Carriers. The Telecommunications Act of 1996 permits the FCC to forbear from requiring telecommunications carriers to comply with certain regulations if certain conditions are present. Future reduction or elimination of federal regulatory requirements could free us from regulatory burdens, but also might increase the flexibility of our competitors. For example, the FCC allowed a petition filed by Verizon for forbearance from Title II regulation of its broadband services to become effective by operation of statute. Although there is some dispute about which specific services were deregulated, especially in the absence of an affirmative decision by the FCC, a letter filed in the record by Verizon states that its request covered all (i) packet switched services capable of 200 kbps in each direction and (ii) non-TDM based optical networking, optical hubbing and optical transmission services. In 2007, the FCC released orders that appear to confirm that the relief granted was limited to those services specified in Verizon’s letter. An appeal of the FCC’s “decision” was dismissed on procedural grounds. (The FCC has indicated that it plans to adopt an order addressing Verizon’s petition and limiting in certain respects the relief Verizon previously had received. As of January 31, 2008, that order had not been adopted.) Similar petitions for forbearance from regulation of broadband services filed by AT&T, Embarq, and Frontier were granted in part in late 2007. Specifically, in October 2007, the FCC granted AT&T forbearance from the application of dominant carrier tariff filing, cost support, discontinuance, domestic transfer of control and certain Computer Inquiry requirements to broadband services with regard to (1) its existing non-TDM-based, packet-switched services capable of transmitting 200 kbps or greater in each direction and (2) its existing non-TDM-based optical transmission services. These services include frame relay services, ATM services, LAN services, Ethernet-based services, video transmission services, optical network services, and wave-based services. The grant was restricted to services that AT&T currently offers and lists in its petitions, and excludes all TDM-based, DS1 and DS3 services. An appeal of this partial grant is pending. Qwest has a similar application pending which must be resolved by late 2008. As a result of the grants of the Verizon, AT&T and Embarq petitions, our costs (and those of our competitors) of purchasing Ethernet, OCn, SONET and similar services from these carriers could increase significantly, as the rates, terms and conditions offered in non-tariffed “commercial agreements” may become less favorable and we may not be able to purchase these services from alternative vendors. Changes to the rates, terms and conditions under which we purchase Ethernet, OCn and SONET services may increase our costs and may have a material adverse effect on our business, results of operations and financial condition.

The FCC, in December 2007, denied a forbearance request by Verizon that sought relief in its six largest markets from unbundling and other ILEC obligations under the Telecommunications Act of 1996. A similar request by Qwest involving four of its largest markets is pending and must be decided later in 2008. While we expect the major ILECs to file similar petitions covering other markets, as a condition to FCC approval of its merger with BellSouth, AT&T, the ILEC in a majority of our markets, committed not to seek additional forbearance relief with respect to any of its markets prior to June 29, 2010.

In November 2007, in response to a petition for rulemaking filed by a group of competitive carriers, the Commission launched a forbearance proceeding to address how it handles forbearance requests. It is unclear at this point whether the FCC will adopt new procedures and, if they do, whether the new procedures will make it easier or more difficult for our largest competitors to obtain regulatory relief.

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In 2007, Qwest, AT&T, Verizon and Embarq were granted non-dominant status in their provision of interexchange or long distance services. In addition, the RBOCs were relieved of their obligation to offer long-distance services through a separate affiliate. As a result of these de-regulatory measures, ILECs may be able to compete against our services more aggressively.

The FCC also is considering a request by Embarq to forbear from enforcement of rules requiring the filing of contract tariffs issued under pricing flexibility rules. We cannot predict the outcome of this proceeding or whether other ILECs will file requests for forbearance similar to Embarq’s. If the FCC were to grant such requests, it could make it easier for the ILECs to compete with us legitimately or through unlawful price discrimination. Increased competition could raise our costs associated with customer retention and acquisition and may have a material adverse effect on our business, results of operations and financial condition.

Advanced services. The FCC’s Triennial Review Order, effective October 2, 2003, significantly changed many of the regulations governing the telecommunications industry. Among the changes adopted, the FCC determined that all-fiber loops to a customer’s premises are not subject to the mandatory unbundling provisions of the Telecommunications Act of 1996, and that in the case of “hybrid” loops containing some fiber and some copper, the broadband capabilities of these loops do not need to be unbundled. These rulings give the incumbent local exchange carriers greater control over whether, and at what price, broadband access facilities will be made available to third parties. Although the U.S. Court of Appeal for the D.C. Circuit vacated and remanded several aspects of the Triennial Review Order, the FCC’s decisions regarding broadband unbundling were upheld. Subsequently, the FCC extended its deregulation of broadband facilities to fiber loops deployed to multi-tenant buildings or campuses where the predominant use is residential and to loops with no more than 500 feet of copper (so-called “fiber-to-the-curb” loops). In October 2004, the FCC exempted the former Bell Telephone Company entities from long distance market entry provisions to the extent those provisions might have imposed a separate obligation to unbundled all fiber or fiber-to-the-curb broadband loops.

On August 5, 2005, the FCC issued an order finding that wireline broadband Internet access services are “information services” functionally integrated with a telecommunications component and therefore eliminated the long-standing requirement that incumbent local exchange companies share the underlying transmission component used to provide Internet access services. The FCC had previously required facilities-based providers to offer that wireline broadband transmission component separately from their Internet service as a stand-alone service on a common-carrier basis, and thus had previously classified that component as a telecommunications service. As a result of the more recent decision, incumbent local exchange companies may refuse to offer underlying broadband transmission services to unaffiliated providers of broadband services or charge above-cost rates that make it economically infeasible for unaffiliated providers to compete with the incumbent local exchange company’s broadband services. These carriers may contend that, as a result of the FCC’s wireline broadband order, they will no longer provide high capacity facilities as network elements for use in providing Internet access. If so, some of our competitors that currently rely on unbundled network elements may be forced to substitute higher priced special access services for this purpose.

Regulatory treatment of cable modem services. Cable modem services that do not contain a separate telecommunications service offering are treated as “information services” under applicable FCC precedent which has been upheld by the U.S. Supreme Court. As a result, cable modem providers are not required to comply with common carrier telecommunications obligations, except to the extent that the Commission decides to apply similar obligations using its authority under Title I of the Communications Act, as amended. However, we have offered, and will likely continue to offer, access to our network on a wholesale basis. Notwithstanding the determination that cable modem services are “information services,” the FCC could decide to treat providers of cable modem service as telecommunications carriers for purposes of universal service contribution obligations and other social regulation similar to what the FCC has done for VoIP services. See Regulatory treatment of voice over Internet Protocol (IP) services, above. In addition, to the extent they do not otherwise apply, cable modem service providers may become subject to local franchise and right-of-way requirements separately applicable to telecommunications carriers, including franchise fees. Results imposing authorization and other

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telecommunications carrier requirements, obligations to contribute to universal service, franchise fees, or similar burdens would likely have the effect of increasing the costs of providing cable modem service relative to non-cable-based alternatives, such as providers of Internet access through DSL service, depending upon how the FCC treats non-cable-based providers with respect to obligations traditionally applied to providers of “telecommunications” service.

Access to, and competition in, multiple dwelling units by and among telecommunications carriers. In October 2000, the FCC prohibited telecommunications carriers from entering into future exclusive access agreements with building owners or managers in commercial (but not residential) multi-tenant environments. Simultaneously, the FCC adopted rules that require utilities (including incumbent local exchange carriers and other local exchange carriers) to provide telecommunications carriers (and cable operators) with reasonable and non-discriminatory access to utility-owned or controlled conduits and rights-of-way in all multiple tenant environments (e.g., apartment buildings, office buildings, campuses, etc.) in those states where the state government has not certified to the FCC that it regulates utility pole attachments and rights-of-way matters. The FCC has pending before it the question of whether to adopt rules abrogating existing exclusive telecommunications carrier access arrangements in commercial multitenant environments. The FCC is also considering whether to extend prohibitions against exclusivity to residential multiple dwelling units. Finally, the FCC is considering rules that would require owners of multi-tenant environments to allow telecommunications carriers nondiscriminatory access to their buildings. If adopted, these requirements may facilitate our access (as well as the access of competitors) to customers in multi-tenant environments, at least with regard to its provision of telecommunications services. These prospective requirements, if adopted, may also increase competition in multiple dwelling units and other multi-tenant environments where we currently provide service.

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. Such protected information, known as Customer Proprietary Network Information (CPNI), includes information related to the quantity, technological configuration, type, destination and the amount of use of a communications service. Certain states have also adopted state-specific CPNI rules. The FCC’s initial CPNI rules prevented a carrier from using CPNI 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 CPNI of our subscribers without first engaging in extensive customer service processes and record keeping. The FCC’s Enforcement Bureau recently directed all telecommunications carriers to submit an annual certification stating that they are in compliance with the Commission’s CPNI rules. In April 2007, the FCC revised its existing CPNI rules to modify the means by which customers may obtain access to call records, and by which carriers may obtain customer approval for the sharing of CPNI with independent contractors and joint venture partners. Additionally, notify customers immediately of certain account changes and notify the United States Secret Service, the Federal Bureau of Investigation and customers if a security breach results in the unauthorized disclosure of CPNI. We filed our most recent compliance certificate with the FCC on February 29, 2008, stating that we use our subscribers’ CPNI in accordance with applicable regulatory requirements. However, if a federal or state regulatory body determines that we have implemented the FCC’s requirements incorrectly, we could be subject to fines or penalties. In addition, both the FCC and Congress are considering whether additional security measures should be adopted to prevent the unauthorized disclosure of sensitive customer information held by telecommunications companies.

Telephone Numbering. The FCC oversees the administration and the assignment of local telephone numbers. AT&T and Verizon have asked the FCC to move from a system where cost recovery is allocated according to a carriers’ proportion of overall industry revenue to a cost recovery mechanism based on usage. While we cannot predict the outcome of this proceeding, if the ILECs’ proposals are adopted, our costs would increase significantly.

Communications Assistance for Law Enforcement Act. The Communications Assistance for Law Enforcement Act (CALEA) requires communications providers to provide law enforcement officials with call content and call identifying information under a valid electronic surveillance warrant, reserve a sufficient number

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of circuits for use by law enforcement officials in executing lawful electronic surveillance and adopt and adhere to specific system security policies and record keeping requirements. In 2005, the FCC concluded that CALEA also applies to facilities-based broadband Internet access providers and providers of interconnected VoIP. As a network operator, we are subject to these requirements.

Additional requirements. The FCC imposes additional obligations on all telecommunications carriers to which we are subject, including obligations to:

• interconnect, directly or indirectly, with other carriers and not to install equipment that cannot be connected with the facilities of other carriers;

• ensure that their services are accessible and usable by persons with disabilities;

• present bills to customers in a manner that is clear and not misleading. ;

• provide telecommunications relay service either directly or through arrangements with other carriers or service providers, which service enables hearing impaired individuals to communicate by telephone with hearing individuals through an operator at a relay center;

• comply with verification procedures in connection with changing a customer’s carrier;

• maintain equipment, facilities, and services in such a manner as to allow for the interception of wire and electronic communications and access to call-identifying information by authorized law enforcement;

• pay annual regulatory fees to the FCC; and

• contribute to the Telecommunications Relay Services Fund, as well as funds to support telephone numbering administration and local number portability.

State Telecommunications Regulation

Traditionally, the states have exercised jurisdiction over intrastate telecommunications services. Additionally, some states have imposed taxes, fees or surcharges applicable to VoIP telephony services. The Telecommunications Act of 1996 modifies the dimensions of state authority in relation to federal authority. It also prohibits states and localities from adopting or imposing any legal requirement that may prohibit, or have the effect of prohibiting, market entry by new providers of interstate or intrastate telecommunications services. The FCC is required to preempt any such state or local requirement to the extent necessary to enforce the Telecommunications Act of 1996’s open market entry requirements. States and localities may, however, continue to regulate the provision of intrastate telecommunications services (barring federal preemption) and require carriers to obtain certificates or licenses before providing service.

Alabama, Georgia, Florida, Iowa, Kentucky, Minnesota, South Carolina, South Dakota, and Tennessee each have adopted statutory and regulatory schemes that require us to comply with telecommunications certification and other regulatory requirements. To date, we are authorized to provide intrastate local telephone, long-distance telephone and operator services in Alabama, Georgia, Florida, Iowa, Kentucky, Minnesota, South Carolina, South Dakota, and Tennessee. As a condition of providing intrastate telecommunications services, we are required, depending upon specific state requirements, among other things:

• to file and maintain intrastate tariffs or price lists describing the rates, terms and conditions of our services;

• to comply with state regulatory reporting, tax and fee obligations, including contributions to state-administered universal service funds; and

• to comply with, and to submit to, state regulatory jurisdiction over consumer protection policies (including regulations governing customer privacy, changing of service providers, and content of customer bills), complaints, transfers of control and certain financing transactions.

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Generally, state regulatory authorities can condition, modify, cancel, terminate or revoke certificates of authority to operate in a state for failure to comply with state laws or the rules, regulations and policies of the state regulatory authority. Fines and other penalties may also be imposed for such violations. As we expand our telecommunications services into new states, we will likely be required to obtain certificates of authority to operate, and be subject to similar ongoing regulatory requirements, in those states as well. We are certificated in all states where we currently have operations and certification is required. We cannot be sure that we will retain such certifications or that we will receive authorization for markets in which we expect to operate in the future.

A number of state regulatory commissions are reviewing the rules governing the amount CLECs may charge for intrastate switched access services. The result of any such proceedings could require us to reduce our current rates for intrastate access to a level at or below the ILEC carrier’s rates or in the alternative, to file cost-studies in a rate proceeding at the applicable state commission. Such developments would require us to reduce rates and revenues or to expend additional funds to develop and file cost studies in order to attempt to secure state approval to maintain higher access charge rates, and either of which could result in a material adverse effect on our business, results of operations and financial condition.

In addition, the states are involved in the determinations under the Telecommunications Act of 1996 whether we are eligible to receive funds from the federal universal service fund. They also possess authority to approve or (in limited circumstances) reject agreements for the interconnection of telecommunications carriers’ facilities with those of the local exchange carrier, and to arbitrate disputes arising in negotiations for interconnection. As mentioned previously, most federal courts of appeals, including the Court of Appeals for the Eleventh Circuit (which covers many of our markets), have concluded that state public service commissions have the authority under Section 252 of the federal Communications Act to interpret and enforce interconnection agreements. The states also have jurisdiction over whether Interstate Telephone, Valley Telephone, PrairieWave Community Telephone, and Graceba Total Communications will continue to be subject to exemptions as rural carriers from the incumbent local exchange carrier obligations under Section 251(c) of the Communications Act.

Interstate Telephone, Valley Telephone, PrairieWave Community Telephone, and Graceba Total Communications are subject to additional requirements under state law, including rate regulation and quality of service requirements. In Alabama, both Interstate Telephone and Graceba Total Communications Valley Telephone are subject to a form of alternative rate regulation. Valley Telephone and PrairieWave Community Telephone, operating in Georgia and South Dakota, are also subject to a form of alternate rate regulation. Under this alternative form of regulation, the companies have limited ability to raise rates for intrastate telephone services, but the Alabama and Georgia Public Service Commissions and the South Dakota Public Utilities Commission do not regulate the rate of return earned by the companies. Rate regulation for the states in which PrairieWave operates (South Dakota, Minnesota, and Iowa) is largely limited to ensuring that rates are not discriminatory.

Many states also have unfair and deceptive trade practice statutes that apply to the billing of telecommunications and non-telecommunications services by communications carriers. Failure to comply with these requirements could lead to significant litigation risks, claims and fines.

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

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Local Telecommunications Regulation

In certain locations, we must obtain local franchises, licenses or other operating rights and street opening and construction permits to install, expand and operate our telecommunications facilities in the public rights-of-way. In some of the areas where we provide services, we pay license or franchise fees based on a percentage of gross revenues. Municipalities that do not currently impose fees on providers of telecommunications might seek to impose them in the future, and after the expiration of our existing franchises, fees could increase. Under the Telecommunications Act, state and local governments retain the right to manage the public rights-of-way and to require fair and reasonable compensation from telecommunications providers, on a competitively neutral and nondiscriminatory basis, for use of public rights-of-way. As noted above, these activities must be consistent with the Telecommunications Act, and may not have the effect of prohibiting us from providing telecommunications services in any particular local jurisdiction.

If an existing franchise or license agreement were to be terminated prior to its expiration date and we were forced to remove our facilities from the streets or abandon them in place, our operations in that area would cease, which could have a material adverse effect on our business as a whole. We believe that the provisions of the Telecommunications Act barring state and local requirements that prohibit or have the effect of prohibiting any entity from providing telecommunications service should be construed to limit any such action, but there is no guarantee that they would be.

Environmental Regulation

We are subject to a variety of federal, state, and local environmental, safety and health laws, and regulations governing 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 we own or operate 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 several sites in connection with our operations. Our switch site and some customer premise locations are equipped with back-up power sources in the event of an electrical failure. Each of our switch site locations has battery and diesel fuel powered backup generators, and we use batteries to back-up some of our customer premise equipment. We believe that we currently are in compliance with the relevant federal, state, and local requirements in all material respects, and 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 us.

Franchises

As described above, cable television systems and local telephone systems generally are constructed and operated under the authority of nonexclusive franchises, granted by local and/or state governmental authorities. Franchises typically contain many conditions, such as: time limitations on commencement and completion of system construction, customer service standards including number of channels, the provision of free service to schools and certain other public institutions and the maintenance of insurance and indemnity bonds.

As of December 31, 2007, Knology held approximately 95 cable franchises. We are currently in the process of renegotiating one of our existing franchises in Huntsville Alabama. Knology has never had a franchise revoked and it has never been denied a franchise renewal. Although franchises historically have been renewed, renewals may include less favorable terms and conditions then existing franchises. We believe that the conditions in our franchises are fairly typical for the industry. Our franchises generally provide for the payment of fees to the municipality ranging from 3% to 5% of revenues from telephone and cable television services. Our franchises generally have 10- to 15-year terms, and we expect our franchises to be renewed by the relevant franchising authority before or upon expiration.

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Local regulation of cable television operations and franchising matters is currently subject to federal regulation under the Communications Act of 1934, as amended and the corresponding regulations of the FCC. As discussed in the” Legislation and Regulation” section above, the FCC has taken recent steps toward streamlining the franchising process. See “Legislation and Regulation—Regulation of Cable Services.”

Prior to the scheduled expiration of most franchises, we may initiate renewal proceedings with the relevant franchising authorities. The Cable Communications Policy Act of 1984 provides for an orderly franchise renewal process in which the franchising authorities may not unreasonably deny renewals. If a renewal is withheld and the franchising authority takes over operation of the affected cable system or awards the franchise to another party, the franchising authority must pay the cable operator the “fair market value” of the system. The Cable Communications Policy Act of 1984 also established comprehensive renewal procedures requiring that the renewal application be evaluated on its own merit and not as part of a comparative process with other proposals.

The Cable Communications Policy Act of 1984 also prohibits franchising authorities from granting exclusive franchises or unreasonably refusing to award additional franchises covering an existing cable system’s service area. The FCC, in late 2006, took actions (which are under appeal) to streamline this process and expedite the entry of new cable operators into the local markets of their choice. While this makes it easier for us to enter new markets, it also makes it easier for competitors to enter the markets in which we currently have franchises.

Employees

At December 31, 2007 we had 1,686 full-time employees. We consider our relations with our employees to be good, and we structure our compensation and benefit plans in order to attract and retain high-caliber personnel. We will need to recruit additional employees in order to implement our expansion plan, including general managers for each new city and additional personnel for installation, sales, customer service and network construction. We recruit from several major industries for employees with skills in video, voice and data technologies.

ITEM 1A. RISK FACTORS

Risks Related to Our Business

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

As of December 31, 2007, we had an accumulated deficit of $610.9 million. We expect to incur net losses for the next several years as our business matures. Our ability to generate profits and positive cash flow from operating activities will depend in large part on our ability to increase our revenues to offset the costs of operating our network and providing services. If we cannot achieve and maintain operating profitability or positive cash flow from operating activities, our business, financial condition and operating results will be adversely affected.

Failure to obtain additional funding may limit our ability to complete our existing networks or to expand our business.

As of December 31, 2007, we had working capital of $6.8 million but $610.9 million of accumulated deficit. If we expand our build out in existing or new markets, it will have to be funded by cash flow from operations in that market or from additional financings. If financing is available, it may not be obtained on a timely basis and with acceptable terms. See Item 7—”Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources”.

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Our substantial indebtedness may adversely affect our cash flows, future financing and flexibility.

As of December 31, 2007, we had approximately $565.3 million of outstanding indebtedness, including accrued interest, and our stockholders’ deficit was $35.0 million. We pay interest in cash on our credit facilities. Our level of indebtedness could adversely affect our business in a number of ways, including:

• we may have to dedicate a significant amount of our available funding and cash flow from operating activities to the payment of interest and the repayment of principal on outstanding indebtedness;

• depending on the levels of our outstanding debt and the terms of our debt agreements, we may have trouble obtaining future financing for working capital, capital expenditures, general corporate and other purposes;

• high levels of indebtedness may limit our flexibility in planning for or reacting to changes in our business; and

• increases in our outstanding indebtedness and leverage will make us more vulnerable to adverse changes in general economic and industry conditions, as well as to competitive pressure.

We may not be able to make future principal and interest payments on our indebtedness.

We currently generate sufficient cash flow from operating activities to service our indebtedness. However, our ability to make future principal and interest payments on our debt depends upon our future performance, which is subject to general economic conditions, industry cycles and financial, business and other factors affecting our operations, many of which are beyond our control. If we cannot grow and generate sufficient cash flow from operating activities to service our debt payments, we may be required, among other things to:

• seek additional financing in the debt or equity markets;

• refinance or restructure all or a portion of our debt;

• sell selected assets; or

• reduce or delay planned capital expenditures.

These measures may not be sufficient to enable us to service our debt. In addition, any such financing, refinancing or sale of assets may not be available on commercially reasonable terms, or at all.

Restrictions on our business imposed by our debt agreements could limit our growth or activities.

Our credit agreements place operating and financial restrictions on us and our subsidiaries. These restrictions affect, and any restrictions created by future financings will affect, our and our subsidiaries’ ability to, among other things:

• incur additional debt;

• create or incur liens on our assets;

• make certain investments;

• use the proceeds from the sale of assets;

• pay cash dividends on or redeem or repurchase our capital stock;

• utilize excess liquidity except for debt reduction;

• engage in potential mergers and acquisitions, sale/leaseback transactions or other fundamental changes in the nature of our business; and

• make capital expenditures.

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In addition, our credit facilities require us to maintain specified financial ratios, such as debt to EBITDA (earnings before income, taxes, depreciation and amortization) and EBITDA to cash interest. These limitations may affect our ability to finance our future operations or to engage in other business activities that may be in our interest. If we violate any of these restrictions or any restrictions created by future financings, we could be in default under our agreements and be required to repay our debt immediately rather than at scheduled maturity.

We may not be able to integrate acquired businesses successfully.

We consummated the acquisitions of PrairieWave in April 2007, and Graceba in January 2008, and are operating in three additional markets. Our future growth and profitability will depend in part on the success of our integration of the acquired operations into our operations. Our ability to successfully integrate such operations will depend on a number of factors, including our ability to devote adequate personnel to the integration process, while still managing our current operations effectively. We may experience difficulties in integrating the acquired businesses, which could increase our costs or adversely impact our ability to operate our business.

Future acquisitions and joint ventures could strain our business and resources.

If we acquire existing companies or networks or enter into joint ventures, we may:

• miscalculate the value of the acquired company or joint venture;

• divert resources and management time;

• experience difficulties in integrating the acquired business or joint venture with our operations;

• experience relationship issues, such as with customers, employees and suppliers, as a result of changes in management;

• incur additional liabilities or obligations as a result of the acquisition or joint venture; and

• assume additional financial burdens or dilution in connection with the transaction.

Additionally, ongoing consolidation in our industry may reduce the number of attractive acquisition targets.

The demand for our bundled broadband communications services may be lower than we expect.

The demand for video, voice and data services, either alone or as part of a bundle, cannot readily be determined. Our business could be adversely affected if demand for bundled broadband communications services is materially lower than we expect. If the markets for the services we offer, including voice and data services, fail to develop, grow more slowly than anticipated or become saturated with competitors, our ability to generate revenue will suffer.

Competition from other providers of video services could adversely affect our results of operations.

To be successful, we will need to retain our existing video customers and attract video customers away from our competitors. Some of our competitors have advantages over us, such as long-standing customer relationships, larger networks, and greater experience, resources, marketing capabilities and name recognition. In addition, a continuing trend toward business combinations and alliances in the cable television area and in the telecommunications industry as a whole as well as changes in the regulatory environment facilitating entry for additional providers of video service may result in the emergence of significant new competitors for us. In providing video service, we currently compete with Bright House, Charter, Comcast, Mediacom, Midcontinent and Time Warner. We also compete with satellite television providers, including DirecTV and Echostar. Legislation now allows satellite television providers to offer local broadcast television stations. This may reduce our current advantage over satellite television providers and our ability to attract and maintain customers.

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The providers of video services in our markets have, from time to time, adopted promotional discounts. We expect these promotional discounts in our markets to continue into the foreseeable future and additional promotional discounts may be adopted. We may need to offer additional promotional discounts to be competitive, which could have an adverse impact on our revenues. In addition, incumbent local phone companies may market video services in their service areas to provide a bundle of services. As telephone service providers offer video services in our markets, it could increase our competition for our video and voice services and for our bundled services.

Competition from other providers of voice services could adversely affect our results of operations.

In providing local and long-distance telephone services, we compete with the incumbent local phone company in each of our markets. We are not the first provider of telephone services in most of our markets and we therefore must attract customers away from other telephone companies. AT&T, Qwest and Verizon are the primary incumbent local exchange carriers in our targeted region. They offer both local and long-distance services in our markets and are particularly strong competitors. In the future, we may face other competitors, such as cable television service operators who have announced their intention to offer telephone services with Internet-based telephony. If cable operators offer voice services in our markets, it could increase competition for our bundled services. Other wireline-based carriers also compete with us for voice services, including competitive local exchange carriers and VoIP service providers.

Competition from other providers of data services could adversely affect our results of operations.

Providing data services is a rapidly growing business and competition is increasing in each of our markets. Some of our competitors have advantages over us, such as greater experience, resources, marketing capabilities and name recognition. In providing data services, we compete with:

• traditional dial-up Internet service providers;

• incumbent local exchange carriers that provide dial-up and digital subscriber line (DSL) services;

• providers of satellite-based Internet access services;

• competitive local exchange carriers; and

• cable television companies.

In addition, some providers of data services have reduced prices and engaged in aggressive promotional activities. We expect these price reductions and promotional activities to continue into the foreseeable future and additional price reductions may be adopted. We may need to lower our prices for data services to remain competitive and this could adversely affect our results of operations.

Our programming costs are increasing, which could reduce our gross profit.

Programming has been our largest single operating expense and we expect this to continue. In recent years, the cable industry has experienced rapid increases in the cost of programming, particularly sports programming. Our relatively small base of subscribers limits our ability to negotiate lower programming costs. We expect these increases to continue, and we may not be able to pass our programming cost increases on to our customers. In addition, as we increase the channel capacity of our systems and add programming to our expanded basic and digital programming tiers, we may face additional market constraints on our ability to pass programming costs on to our customers. Any inability to pass programming cost increases on to our customers would have an adverse impact on our gross profit. See “Legislation and Regulation—Federal Regulation—Regulation of Cable Services—Program Access” for more information.

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Programming exclusivity in favor of our competitors could adversely affect the demand for our video services.

We obtain our programming by entering into contracts or arrangements with programming suppliers. A programming supplier could enter into an exclusive arrangement with one of our video competitors that could create a competitive advantage for that competitor by restricting our access to this programming. If our ability to offer popular programming on our cable television systems is restricted by exclusive arrangements between our competitors and programming suppliers, the demand for our video services may be adversely affected and our cost to obtain programming may increase. See “Legislation and Regulation—Federal Regulation—Regulation of Cable Services—Program access” for more information.

The rates we pay for pole attachments may increase significantly.

The rates we must pay utility companies for space on their utility poles is the subject of frequent disputes. If the rates we pay for pole attachments were to increase significantly or unexpectedly, it would cause our network to be more expensive to operate. It could also place us at a competitive disadvantage with video and telecommunications service providers who do not require, or who are less dependent upon, pole attachments, such as satellite providers and wireless voice service providers. See “Legislation and Regulation—Federal Regulation—Regulation of Cable Services—Pole Attachments” for more information.

Loss of interconnection arrangements could impair our telephone service.

We rely on other companies to connect our local telephone customers with customers of other local telephone providers. We presently have access to AT&T’s telephone network under a nine-state interconnection agreement, which expires on December 16. 2010. We have access to Verizon’s telephone network in Florida under an interconnection agreement covering Florida, which expires November 19, 2008. We continue to exchange traffic with Verizon in Florida through an existing interconnection arrangement currently subject to the rates, terms, and conditions of the terminated agreement. We are currently engaged in the process of adopting a new interconnection agreement with Verizon. If the AT&T agreement is not renewed or terminated, or a new Verizon agreement is not executed, we could be adversely affected and our interconnection arrangements could be on terms less favorable than those we receive currently.

It is generally expected that the Telecommunications Act of 1996 will continue to undergo considerable interpretation and implementation, which could have a negative impact on our interconnection agreements with AT&T and Verizon. It is also possible that further amendments to the Communications Act of 1934 may be enacted which could have a negative impact on our interconnection agreements with AT&T and Verizon. The contractual arrangements for interconnection and access to unbundled network elements with incumbent carriers generally contain provisions for incorporation of changes in governing law. Thus, future FCC, state public service commission and/or court decisions may negatively impact the rates, terms and conditions of the interconnection services we have obtained and may seek to obtain under these agreements, which could adversely affect our business, financial condition or results of operations. Our ability to compete successfully in the provision of services will depend on the nature and timing of any such legislative changes, regulations and interpretations and whether they are favorable to us or to our competitors. See “Legislation and Regulation” for more information.

We could be negatively impacted by future interpretation or implementation of regulations.

The current communications and cable legislation is complex and in many areas sets forth policy objectives to be implemented by regulation at the federal, state, and local levels. It is generally expected that the Communications Act of 1934, as amended, the Telecommunications Act of 1996 and implementing regulations and decisions, as well as applicable state laws and regulations, will continue to undergo considerable interpretation and implementation. Regulations that enhance the ability of certain classes of our competitors, or interpretation of existing regulations to the same effect, would adversely affect our competitive position. It is also

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possible that further amendments to the Communications Act of 1934 and state statutes to which we or our competitors are subject may be enacted. Our ability to compete successfully will depend on the nature and timing of any such legislative changes, regulations, and interpretations and whether they are favorable to us or to our competitors. See “Legislation and Regulation” for more information.

We operate our network under franchises that are subject to non-renewal or termination.

Our network generally operates pursuant to franchises, permits or licenses typically granted by a municipality or other state or local government controlling the public rights-of-way. Often, franchises are terminable if the franchisee fails to comply with material terms of the franchise order or the local franchise authority’s regulations. Although none of our existing franchise or license agreements have been terminated, and we have received no threat of such a termination, one or more local authorities may attempt to take such action. We may not prevail in any judicial or regulatory proceeding to resolve such a dispute.

Further, franchises generally have fixed terms and must be renewed periodically. Local franchising authorities may resist granting a renewal if they consider either past performance or the prospective operating proposal to be inadequate. In a number of jurisdictions, local authorities have attempted to impose rights-of-way fees on providers that have been challenged as violating federal law. A number of FCC and judicial decisions have addressed the issues posed by the imposition of rights-of-way fees on competitive local exchange carriers and on video distributors. To date, the state of the law is uncertain and may remain so for some time. We may become subject to future obligations to pay local rights-of-way fees that are excessive or discriminatory.

The local franchising authorities can grant franchises to competitors who may build networks in our market areas. A recent FCC decision facilitates competitive video entry by limiting the actions that local franchising authorities may take when reviewing applications by new competitors. Local franchise authorities have the ability to impose regulatory constraints or requirements on our business, including those that could materially increase our expenses. In the past, local franchise authorities have imposed regulatory constraints, by local ordinance or as part of the process of granting or renewing a franchise, on the construction of our network. They have also imposed requirements on the level of customer service we provide, as well as other requirements. The local franchise authorities in our markets may also impose regulatory constraints or requirements that may be found to be consistent with applicable law but which could increase our expenses in operating our business. See “Legislation and Regulation” for more information.

We may not be able to obtain telephone numbers for new voice customers in a timely manner.

In providing voice services, we rely on access to numbering resources in order to provide our customers with telephone numbers. A shortage of or a delay in obtaining new numbers from numbering administrators, as has sometimes been the case for local exchange carriers in the recent past, could adversely affect our ability to expand into new markets or enlarge our market share in existing markets.

We may encounter difficulties in implementing and developing new technologies.

We have invested in advanced technology platforms that support advanced communications services and multiple emerging interactive services, such as video-on-demand, subscriber video-on-demand, digital video recording, interactive television, IP Centrex services and passive optical network services. We have also invested in our new enterprise management system. However, existing and future technological implementations and developments may allow new competitors to emerge, reduce our network’s competitiveness or require expensive and time-consuming upgrades or additional equipment, which may also require the write-down of existing equipment. In addition, we may be required to select in advance one technology over another and may not choose the technology that is the most economic, efficient or attractive to customers. We may also encounter difficulties in implementing new technologies, products and services and may encounter disruptions in service as a result.

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We may encounter difficulties expanding into additional markets.

To expand into additional cities we will have to obtain pole attachment agreements, construction permits, telephone numbers, franchises and other regulatory approvals. Delays in entering into pole attachment agreements, receiving the necessary construction permits and conducting the construction itself have adversely affected our schedule in the past and could do so again in the future. Difficulty in obtaining numbering resources may also adversely affect our ability to expand into new markets. We may face legal or similar resistance from competitors who are already in markets we wish to enter. For example, a competitor may oppose or delay our video franchise application or our request for pole attachment space. These difficulties could significantly harm or delay the development of our business in new markets. See “Legislation and Regulation—Federal Regulation—Regulation of Cable Services—Program Access” for more information.

We depend on the services of key personnel to implement our strategy. If we lose the services of our key personnel or are unable to attract and retain other qualified management personnel, we may be unable to implement our strategy.

Our business is currently managed by a small number of key management and operating personnel. We do not have any employment agreements with, nor do we maintain “key man” life insurance policies on, these or any other employees. The loss of members of our key management and certain other members of our operating personnel could adversely affect our business.

Our ability to manage our anticipated growth depends on our ability to identify, hire and retain additional qualified management personnel. While we are able to offer competitive compensation to prospective employees, we may still be unsuccessful in attracting and retaining personnel, which could affect our ability to grow effectively and adversely affect our business.

Since our business is concentrated in specific geographic locations, our business could be adversely impacted by a depressed economy and natural disasters in these areas.

We provide our services to areas in Alabama, Florida, Georgia, Iowa, Minnesota, South Carolina, South Dakota and Tennessee, which are in the Southeastern and Midwestern regions of the United States. A stagnant or depressed economy in the United States and the Southeastern or Midwestern United States in particular could affect all of our markets and adversely affect our business and results of operations.

Our success depends on the efficient and uninterrupted operation of our communications services. Our network is attached to poles and other structures in our service areas, and our ability to provide service depends on the availability of electric power. A tornado, hurricane, flood, mudslide or other natural catastrophe in one of these areas could damage our network, interrupt our service and harm our business in the affected area. In addition, many of our markets are close together, and a single natural catastrophe could damage our network in more than one market.

Risks Related to Relationships with Stockholders, Affiliates and Related Parties

A small number of stockholders control a significant portion of our stock and could exercise significant influence over matters requiring stockholder approval, regardless of the wishes of other stockholders.

As of February 29, 2008, Gilder, Ganon, Howe & Co. LLC, our largest stockholder, owned approximately 16.4% of our outstanding common stock. Farallon Capital Management, LLC, owned approximately 14.0% of our outstanding common stock. Donald W. Burton, a member of our board of directors, owned or controlled approximately 8.9% of our common stock, including shares owned by the Burton Partnerships, of which Donald W. Burton is a general partner. Further, approximately 6.3% of our outstanding common stock was owned by Campbell B. Lanier, III, the chairman of our board of directors, and members of Mr. Lanier’s immediate family. As a result, these stockholders have significant voting power with respect to the ability to:

• authorize additional shares of capital stock or otherwise amend our certificate of incorporation or bylaws;

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• elect our directors; or

• effect a merger, sale of assets or other corporate transaction.

The extent of ownership by these stockholders may also discourage a potential acquirer from making an offer to acquire us. This could reduce the value of our stock.

Risks Related to Our Common Stock

If we issue more stock in future offerings, the percentage of our stock that our stockholders own will be diluted.

As of February 29, 2008, we had 35,467,079 shares of common stock outstanding. We also had outstanding on that date options to purchase 3,327,734 shares of common stock and warrants to purchase 1,000,000 shares of common stock Our authorized capital stock includes 200,000,000 shares of common stock and 199,000,000 shares of preferred stock, which our board of directors has the authority to issue without further stockholder action. Future stock issuances also will reduce the percentage ownership of our current stockholders.

Our board of directors has the authority to issue, without stockholder approval, shares of preferred stock with rights and preferences senior to the rights and preferences of the common stock. As a result, our board of directors could issue shares of preferred stock with the right to receive dividends and the assets of the company upon liquidation prior to the holders of the common stock.

The value of our stock could be hurt by substantial price fluctuations.

The value of our common stock could be subject to sudden and material increases and decreases. The value of our stock could fluctuate in response to:

• our quarterly operating results;

• changes in our business;

• changes in the market’s perception of our bundled services;

• changes in the businesses or market perceptions of our competitors; and

• changes in general market or economic conditions.

In addition, the stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the value of securities of many companies. These changes often appear to occur without regard to specific operating performance. The value of our common stock could increase or decrease based on change of this type. These fluctuations could materially reduce the value of our stock. Fluctuations in the value of our stock will also affect the value of our outstanding warrants and options, which may adversely affect stockholders’ equity, net income or both.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our primary assets consist of voice, video and data distribution plant and equipment, including voice switching equipment, data receiving equipment, data decoding equipment, data encoding equipment, headend reception facilities, distribution systems and customer premise equipment.

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Our plant and related equipment are generally attached to utility poles under pole rental agreements with public electric utilities, electric cooperative utilities, municipal electric utilities and telephone companies. In certain locations our plant is buried underground. We own or lease real property for signal reception sites. Our headend locations are located on owned or leased parcels of land.

We own or lease the real property and buildings for our market administrative offices, customer call centers, data center, and our corporate offices.

The physical components of our broadband systems require maintenance as well as periodic upgrades to support the new services and products we may introduce. We believe that our properties are generally in good operating condition and are suitable for our business operations.

ITEM 3. LEGAL PROCEEDINGS

We are subject to litigation in the normal course of our business. However, in our opinion, there is no legal proceeding pending against us which would have a material adverse effect on our financial position, results of operations or liquidity. We are also a party to regulatory proceedings affecting the segments of the communications industry generally in which we engage in business.

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

None.

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PART II

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

Market Information

Our common stock has traded on the Nasdaq Global Market under the ticker symbol “KNOL” since December 18, 2003. The following table sets forth the high and low sales prices as reported on the Nasdaq Global Market for the period from January 1, 2006 through December 31, 2007:

	High		Low
2007
Fourth Quarter	$	17.16	$	11.12
Third Quarter	$	18.22	$	12.88
Second Quarter	$	19.73	$	16.04
First Quarter	$	15.83	$	10.38
2006
Fourth Quarter	$	11.12	$	9.82
Third Quarter	$	10.76	$	8.75
Second Quarter	$	10.07	$	6.50
First Quarter	$	6.83	$	3.50

Holders

As of February 29, 2008, there were approximately 391 stockholders of record of our common stock (excluding beneficial owners of shares registered in nominee or street name).

Dividends

We have never declared or paid any cash dividends on our common stock and do not anticipate paying cash dividends on our common stock in the foreseeable future. It is the current policy of our board of directors to retain earnings to finance the upgrade and expansion of our operations. Future declarations and payments of dividends, if any, will be determined based on the then-current conditions, including our earnings, operations, capital requirements, financial condition, and other factors our board of directors deems relevant. From its issuance in May 2005 until its conversion to common stock in June 2006, we accrued dividends on our Series AA preferred stock at an 8% annual rate, which could have been paid in cash or additional shares of the Series AA preferred stock. However, pursuant to the restrictions of our credit agreements, we were prohibited from paying dividends in cash other than cash in lieu of fractional shares. During the years ended December 31, 2007, 2006 and 2005, respectively, we issued zero, 216,621 and 58,742 shares of Series AA preferred stock as dividends.

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Comparison of Cumulative Total Stockholder Return

The following graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent we specifically incorporate it by reference into such filing.

The following graph and table set forth our cumulative total stockholder return as compared to the NASDAQ Composite Index and the NASDAQ Telecommunications Index since the close of business on December 18, 2003, the effective date of the registration of our common stock under the Securities Act of 1933, as amended. This graph assumes that $100 was invested on December 18, 2003 in Knology’s common stock, or was invested on November 30, 2003 in the NASDAQ Composite Index or the NASDAQ Telecommunications Index, as set forth below, and assumes reinvestment of all dividends.

	Cumulative Total Return
	December 18, 2003		December 31, 2003		December 31, 2004		December 31, 2005		December 31, 2006		December 31, 2007
Knology, Inc	$	100.00	$	96.27	$	41.58	$	40.94	$	113.43	$	136.25
NASDAQ Composite		100.00		102.07		110.63		113.90		127.26		140.45
NASDAQ Telecommunications		100.00		106.79		112.91		109.03		138.65		143.59

There have been no recent sales of unregistered securities. Additionally, we did not repurchase any shares of our common stock during the fourth quarter ended December 31, 2007.

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ITEM 6. SELECTED FINANCIAL DATA

The selected financial data set forth below should be read in conjunction with Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our consolidated financial statements and the related notes, and other financial data included elsewhere in this annual report.

	Year Ended December 31,
	2003			2004			2005			2006			2007
	(in thousands, except per share)
Statement of Operations Data:
Operating revenues	$	172,938		$	211,458		$	230,857		$	258,991		$	347,652
Operating expenses:
Direct costs		47,754			64,266			69,616			75,497			104,060
Selling, operations and administrative		92,137			114,143			113,529			116,191			138,509
Depreciation and amortization		77,806			74,163			74,490			68,189			85,776
Reorganization professional fees		84			0			0			0			0
Capital markets activity and other		0			880			606			1,623			219
Asset impairment and severance		0			0			334			0			0
Non-cash stock option compensation		1,883			3,625			2,101			2,025			2,799
Litigation fees		907			377			46			0			0
Total operating expenses		220,571			257,454			260,722			263,525			331,363
Operating income (loss)		(47,633	)		(45,996	)		(29,865	)		(4,534	)		16,289
Interest expense, net		(28,796	)		(30,342	)		(33,645	)		(33,722	)		(40,622	)
Loss on debt extinguishment		0			0			0			0			(27,375	)
Gain (loss) on interest rate derivative instrument		0			0			267			(63	)		(758	)
Gain (loss) on adjustments of warrants to market		929			535			37			(464	)		(262	)
Other income (expense), net		(12,288	)		133			(12	)		25			(53	)
Loss from continuing operations before discontinued operations		(87,788	)		(75,670	)		(63,218	)		(38,758	)		(52,781	)
Income from discontinued operations		0			106			8,404			0			8,863
Net loss		(87,788	)		(75,564	)		(54,814	)		(38,758	)		(43,918	)
Preferred stock dividends		0			0			(588	)		(747	)		0
Net loss attributable to common stockholders	$	(87,788	)	$	(75,564	)	$	(55,402	)	$	(39,505	)	$	(43,918	)
Basic and diluted net loss per share from continuing operations attributable to common stockholders	$	(5.17	)	$	(3.20	)	$	(2.69	)	$	(1.41	)	$	(1.51	)
Basic and diluted net loss per share attributable to common stockholders	$	(5.17	)	$	(3.19	)	$	(2.33	)	$	(1.41	)	$	(1.25	)
Other Financial Data:
Capital expenditures	$	35,533		$	63,592		$	31,613		$	27,821		$	45,792
Cash provided by operating activities		29,512			22,263			18,818			30,543			57,507
Cash used in investing activities		(96,993	)		(40,941	)		(5,555	)		(26,028	)		(293,073	)
Cash provided by (used in) financing activities		45,383			4,185			(7,162	)		(5,121	)		270,437
	December 31,
	2003			2004			2005			2006			2007
	(in thousands)
Balance Sheet Data:
Net working capital	$	42,935		$	3,201		$	(14,235	)	$	(9,670	)	$	6,810
Property and equipment, net		336,060			326,499			285,638			243,831			403,476
Total assets		463,712			418,587			375,534			336,561			601,437
Long-term liabilities		271,317			286,888			271,167			271,301			562,938
Total liabilities		312,819			333,924			322,172			319,188			636,387
Accumulated deficit		(397,853	)		(473,420	)		(528,234	)		(566,992	)		(610,910	)
Total stockholders’ equity (deficit)		150,893			86,269			33,511			17,373			(34,950	)

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

Overview

We are a fully integrated provider of video, voice, data and advanced communications services to residential and business customers in nine markets in the southeastern United States, as well as two markets in South Dakota. We provide a full suite of video, voice and data services in Huntsville and Montgomery, Alabama; Panama City and portions of Pinellas County, Florida; Augusta, Columbus and West Point, Georgia; Charleston, South Carolina; Knoxville, Tennessee; and Rapid City and Sioux Falls, South Dakota, as well as portions of Minnesota and Iowa. Our primary business is the delivery of bundled communication services over our own network. In addition to our bundled package offerings, we sell these services on an unbundled basis.

We have built our business through:

• construction and expansion of our broadband network to offer integrated video, voice and data services;

• organic growth of connections through increased penetration of services to new marketable homes and our existing customer base;

• upgrades of acquired networks to introduce expanded broadband services including bundled video, voice and data services; and

• acquisitions of broadband systems.

The following discussion includes details, highlights and insight into our consolidated financial condition and results of operations, including recent business developments, critical accounting policies, estimates used in preparing the financial statements and other factors that are expected to affect our prospective financial condition. The following discussion and analysis should be read in conjunction with our “Selected Consolidated Financial Data” and our financial statements and related notes elsewhere in this annual report.

To date, we have experienced operating losses as a result of the expansion of our service territories and the construction of our network. We expect to continue to focus on increasing our customer base and expanding our broadband operations. Our ability to generate profits will depend in large part on our ability to increase revenues to offset the costs of construction and operation of our business.

During 2007, we completed several key transactions to improve our financial condition and liquidity. These transactions include the following:

• In April 2007, we completed the $255 million acquisition of PrairieWave, which has delivered significant increases in key operating and financial metrics as well as being free cash flow accretive.

• We simplified the capital structure and significantly reduced the cost of capital by entering into a $555 million credit facility, the proceeds of which were used to fund the PrairieWave transaction and refinance our existing credit facilities.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require us to make estimates and assumptions. We believe that, of our significant accounting estimates described in Note 2 of “Notes to Consolidated Financial Statements” included elsewhere in this annual report, the following may involve a higher degree of judgment and complexity.

Allowance for Doubtful Accounts. We use estimates to determine our allowance for bad debts. These estimates are based on historical collection experience, current trends, credit policy and a percentage of our delinquent customer accounts receivable.

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Capitalization of labor and overhead costs. Our business is capital intensive, and a large portion of the capital we have raised to date has been spent on activities associated with building, extending, upgrading and enhancing our network. As of December 31, 2006 and 2007, the net carrying amount of our property, plant and equipment was approximately $243.8 million, 72% of total assets, and $403.4 million, 65% of total assets, respectively. Total capital expenditures for the years ended December 31, 2005, 2006 and 2007 were approximately $31.6 million, $27.8 million and $45.8 million, respectively.

Costs associated with network construction, network enhancements and initial customer installation are capitalized. Costs capitalized as part of the initial customer installation include materials, direct labor, and certain indirect costs. These indirect costs are associated with the activities of personnel who assist in connecting and activating the new service and consist of compensation and overhead costs associated with these support functions. The costs of disconnecting service at a customer’s premise or reconnecting service to a previously installed premise are charged to operating expense in the period incurred. Costs for repairs and maintenance are charged to operating expense as incurred, while equipment replacement and significant enhancements, including replacement of cable drops from the pole to the premise, are capitalized.

We make judgments regarding the installation and construction activities to be capitalized. We capitalize direct labor and certain indirect costs using operational data and estimations of capital activity. We calculate standards for items such as the labor rates, overhead rates and the actual amount of time required to perform a capitalizable activity. Overhead rates are established based on an estimation of the nature of costs incurred in support of capitalizable activities and a determination of the portion of costs that is directly attributable to capitalizable activities.

Judgment is required to determine the extent to which overhead is incurred as a result of specific capital activities, and therefore should be capitalized. The primary costs that are included in the determination of the overhead rate are (1) employee benefits and payroll taxes associated with capitalized direct labor, 2i) direct variable costs associated with capitalizable activities, consisting primarily of installation costs, (3) the cost of support personnel that directly assist with capitalizable installation activities, and (4) indirect costs directly attributable to capitalizable activities.

While we believe our existing capitalization policies are reasonable, a significant change in the nature or extent of our system activities could affect management’s judgment about the extent to which we should capitalize direct labor or overhead in the future. We monitor the appropriateness of our capitalization policies, and perform updates to our internal studies on an ongoing basis to determine whether facts or circumstances warrant a change to our capitalization policies.

Valuation of Long-Lived and Intangible Assets and Goodwill. We assess the impairment of identifiable long-lived assets and related goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” and SFAS No. 144 “Accounting for Asset Impairment.” Factors we consider important and that could trigger an impairment review include the following:

• significant underperformance of our assets relative to expected historical or projected future operating results;

• significant changes in the manner in which we use our assets or significant changes in our overall business strategy; and

• significant negative industry economic trends.

We perform a goodwill impairment test annually in accordance with SFAS No. 142 on January 1. Based on the results of the test, we recorded no impairment loss to our goodwill as of January 1, 2006, 2007 and 2008.

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Significant and Subjective Estimates. The following discussion and analysis of our results of operations and financial condition is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and contingent liabilities. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for us to judge the application. On an ongoing basis, we evaluate our estimates, including those related to collectibility of accounts receivable, valuation of inventories and investments, recoverability of goodwill and intangible assets, income taxes and contingencies. We base our judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making estimates about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. See our consolidated financial statements and related notes thereto included elsewhere in this annual report, which contain accounting policies and other disclosures required by accounting principles generally accepted in the United States.

Homes Passed and Connections

We report homes passed as the number of residential and business units, such as single residence homes, apartments and condominium units, passed by our broadband network and listed in our database. “Marketable homes passed” are homes passed other than those we believe are covered by exclusive arrangements with other providers of competing services. Because we deliver multiple services to our customers, we report the total number of connections for video, voice and data rather than the total number of customers. We count each video, voice or data purchase as a separate connection. For example, a single customer who purchases cable television, local telephone and Internet access services would count as three connections. We do not record the purchase of digital video services by an analog video customer as an additional connection. As we continue to sell bundled services, we expect more of our video customers to purchase voice, data and other enhanced services in addition to basic video services. Accordingly, we expect that our number of voice and data connections will grow faster than our video connections and will represent a higher percentage of our total connections in the future.

Revenues

Our operating revenues are primarily derived from monthly charges for video, voice and Internet data services and other services to residential and business customers. We provide these services over our network. Our products and services involve different types of charges and in some cases a different method of accounting for or recording revenues. Below is a description of our significant sources of revenue:

• Video revenues. Our video revenues consist of fixed monthly fees for expanded basic, premium and digital cable television services, as well as fees from pay-per-view movies, fees for video-on-demand and events such as boxing matches and concerts that involve a charge for each viewing. Video revenues accounted for approximately 44.6%, 44.4% and 42.1% of our consolidated revenues for the years ended December 31, 2005, 2006 and 2007, respectively.

• Voice revenues. Our voice revenues consist primarily of fixed monthly fees for local service and enhanced services, such as call waiting, voice mail and measured and flat rate long-distance service. Voice revenues accounted for approximately 33.6%, 31.8% and 33.7% of our consolidated revenues for the years ended December 31, 2005, 2006 and 2007, respectively.

• Data revenues. Our data revenues consist primarily of fixed monthly fees for data service and rental of cable modems. Data revenues accounted for approximately 21.0%, 22.6% and 22.7% of our consolidated revenues for the years ended December 31, 2005, 2006 and 2007, respectively. Providing data services is a rapidly growing business and competition is increasing in each of our markets.

• Other revenues. Other revenues result principally from broadband carrier services. Other revenues accounted for approximately .8%, 1.2% and 1.4% of our consolidated revenues for the years ended December 31, 2005, 2006 and 2007, respectively.

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Our ability to increase the number of our connections and, as a result, our revenues is directly affected by the level of competition we face in each of our markets with respect to each of our service offerings:

• In providing video services, we currently compete with AT&T, Bright House, Charter, Comcast, Mediacom, MidContinent Communications and Time Warner. We also compete with satellite television providers such as DirecTV and Echostar. Our other competitors include broadcast television stations and other satellite television companies. We expect in the future to face additional competition from telephone companies providing video services within their service areas.

• In providing local and long-distance telephone services, we compete with the incumbent local phone company and various long-distance providers in each of our markets. AT&T, Verizon and Qwest are the incumbent local phone companies in our markets. They offer both local and long-distance services in our markets and are particularly strong competitors. We also compete with providers of long-distance telephone services, such as AT&T, MCI and Sprint. We also expect an increase in the deployment of VoIP services and expect to continue to compete with Vonage Holding Company, Comcast and other providers.

• In providing data services, we compete with traditional dial-up Internet service providers; incumbent local exchange carriers that provide dial-up and DSL services; providers of satellite-based Internet access services; cable television companies; and providers of wireless high-speed data services. Providing data services is a rapidly growing business and competition is increasing in each of our markets. Some of our competitors have competitive advantages such as greater experience, resources, marketing capabilities and stronger name recognition.

Costs and Expenses

Our operating expenses primarily include cost of services, selling, operations and administrative expenses and depreciation and amortization.

Direct costs include:

• Direct costs of video services. Direct cost of video services consists primarily of monthly fees to the National Cable Television Cooperative and other programming providers. Programming costs are our largest single cost and we expect this trend to continue. Programming costs as a percentage of video revenue were approximately 47.2%, 48.8% and 52.0% for the years ended December 31, 2005, 2006 and 2007, respectively. We have entered into contracts with various entities to provide programming to be aired on our network. We pay a monthly fee for these programming services, generally based on the average number of subscribers to the program, although some fees are adjusted based on the total number of subscribers to the system and/or the system penetration percentage. Because programming cost is partially based on the number of subscribers, it will increase as we add more subscribers. It will also increase as costs per channel increase over time.

• Direct costs of voice services. Direct costs of voice services consist primarily of transport cost and network access fees. The direct cost of voice services as a percentage of voice revenues was approximately 16.6%, 15.9% and 15.8% for the years ended December 31, 2005, 2006 and 2007, respectively.

• Direct costs of data services. Direct costs of data services consist primarily of transport cost and network access fees. The direct cost of data services as a percentage of data revenue was 3.7%, 3.1% and 4.5% for the years ended December 31, 2005, 2006 and 2007, respectively.

• Direct costs of other services. Direct costs of other services consist primarily of transport cost and network access fees. The direct cost of other services as a percentage of other revenue was 10.7%, 18.7% and 16.5% for the years ended December 31, 2005, 2006 and 2007, respectively.

• Pole attachment and other network rental expenses. Pole attachment and other network rental expenses consist primarily of pole attachments rents paid to utility companies for space on their utility poles to

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deliver our various services and network hub rents. Pole attachment and other network rental expenses as a percentage of total revenue was approximately 1.6%, 1.5% and 1.4% of total revenues for the years ended December 31, 2005, 2006 and 2007, respectively.

Relative to our current product mix, we expect voice, data and other revenue will become larger percentages of our overall revenue, and potentially will provide higher gross profits. Based on the anticipated changes in our revenue mix, we expect that our consolidated cost of services as a percentage of our consolidated revenues will decrease.

Selling, general and administrative expenses include:

• Sales and marketing expenses. Sales and marketing expenses include the cost of sales and marketing personnel and advertising and promotional expenses.

• Network operations and maintenance expenses. Network operations and maintenance expenses include payroll and departmental costs incurred for network design, 24 hours a day, seven days a week maintenance monitoring and plant maintenance activity.

• Service and installation expenses. Service and installation expenses include payroll and departmental cost incurred for customer installation and service technicians.

• Customer service expenses. Customer service expenses include payroll and departmental costs incurred for customer service representatives and customer service management, primarily at our centralized call center.

• General and administrative expenses. General and administrative expenses consist of corporate and subsidiary management and administrative costs.

Depreciation and amortization expenses include depreciation of our interactive broadband networks and equipment and amortization of costs in excess of net assets and other intangible assets related to acquisitions.

As our sales and marketing efforts continue and our networks expand, we expect to add customer connections resulting in increased revenue. We also expect our cost of services and operating expenses to increase as we add connections and grow our business.

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Results of Operations

The following table sets forth financial data as a percentage of operating revenues for the years ended December 31, 2005, 2006 and 2007.

	Year Ended December 31,
	2005		2006		2007
Operating revenues:
Video	44	%	44	%	42	%
Voice	34		32		34
Data	21		23		23
Other	1		1		1
Total operating revenues	100		100		100
Operating expenses:
Direct costs	30		29		30
Selling, general and administrative expenses	51		46		41
Depreciation and amortization	32		26		24
Capital markets activity and other	0		1		0
Total operating expenses	113		102		95
Operating income (loss)	(13	)	(2	)	5
Other income (expense):
Interest income	1		0		0
Interest expense	(15	)	(13	)	(12	)
Loss on debt extinguishment	0		0		(8	)
(Loss) gain on interest rate derivative instrument	0		0		0
(Loss) gain on adjustment of warrants to market	0		0		0
Other income (expense), net	0		0		0
Total other income (expense)	(14	)	(13	)	(20	)
Loss before income taxes, discontinued operations and preferred stock dividends	(27	)	(15	)	(15	)
Income tax benefit (provision)	0		0		0
Income from discontinued operations	3		0		2
Preferred stock dividend	0		0		0
Net loss attributable to common stockholders	(24	)%	(15	)%	(13	)%

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Quarterly Comparison

The following table presents certain unaudited consolidated statements of operations and other operating data for our eight most recent quarters. The information for each of these quarters is unaudited and has been prepared on the same basis as our audited consolidated financial statements appearing elsewhere in this annual report. In the opinion of our management, all necessary adjustments, consisting only of normal recurring adjustments, have been included to present fairly the unaudited quarterly results when read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. We believe that results of operations for interim periods should not be relied upon as any indication of the results to be expected or achieved in any future periods or any year as a whole.

	Quarters ended
	Mar. 31, 2006			June 30, 2006			Sept. 30, 2006			Dec. 31, 2006			Mar. 31, 2007			June 30, 2007			Sept. 30, 2007			Dec. 31, 2007
	(in thousands, except per share and operating data)
Revenues	$	62,699		$	64,113		$	65,250		$	66,929		$	69,019		$	91,553		$	92,327		$	94,753
Direct costs		18,514			18,888			18,958			19,137			20,479			27,549			28,758			27,274
Loss from continuing operations		(10,674	)		(9,847	)		(10,495	)		(7,742	)		(6,693	)		(33,362	)		(6,730	)		(5,996	)
Net income (loss)		(10,674	)		(9,847	)		(10,495	)		(7,742	)		(6,693	)		(32,998	)		1,769			(5,996	)
Basic and diluted net income (loss) per share	$	(.46	)	$	(.42	)	$	(.30	)	$	(.23	)	$	(.19	)	$	(.94	)	$	.05		$	(.17	)
Homes passed		960,034			962,391			965,678			968,187			971,566			1,093,448			1,095,492			1,097,455
Marketable homes passed		751,574			753,769			756,568			758,928			762,003			883,401			885,419			887,365
Video connections (1)		177,546			177,410			178,708			178,618			180,876			224,766			227,810			227,659
Video penetration (2)		23.6	%		23.5	%		23.6	%		23.5	%		23.7	%		25.4	%		25.7	%		25.7	%
Digital video connections		58,638			59,327			61,060			63,007			65,627			94,218			105,517			112,782
Digital penetration of video connections		33.0	%		33.4	%		34.2	%		35.3	%		36.3	%		41.9	%		46.3	%		49.5	%
Voice connections		155,337			158,033			160,362			161,498			163,972			232,112			235,040			235,434
Voice penetration (2)		20.7	%		21.0	%		21.2	%		21.3	%		21.5	%		26.3	%		26.5	%		26.5	%
Data connections		111,476			114,633			119,397			122,195			126,723			169,974			176,547			179,565
Data penetration (2)		14.8	%		15.2	%		15.8	%		16.1	%		16.6	%		19.2	%		19.9	%		20.2	%
Total connections		444,359			450,076			458,467			462,311			471,571			626,852			639,397			642,658
Average monthly revenue per connection	$	47.66		$	47.89		$	47.79		$	48.42		$	49.16		$	48.90		$	48.87		$	49.17

(1) Video connections include customers who receive analog or digital video services.

(2) Penetration is measured as a percentage of marketable homes passed.

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

Revenues. Operating revenues increased 34.2% from $259.0 million for the year ended December 31, 2006, to $347.7 million for the year ended December 31, 2007. Operating revenues from video services increased 27.5% from $114.9 million for the year ended December 31, 2006, to $146.5 million for the same period in 2007. Operating revenues from voice services increased 42.3% from $82.4 million for the year ended December 31, 2006, to $117.3 million for the same period in 2007. Operating revenues from data services increased 34.8% from $58.6 million for the year ended December 31, 2006, to $79.0 million for the same period in 2007. Operating revenues from other services increased 59.2% from $3.1 million for the year ended December 31, 2006, to $4.9 million for the same period in 2007.

The increased revenues from video, voice and data and other services are due primarily to an increase in the number of connections, from 462,311 as of December 31, 2006, to 642,658 as of December 31, 2007 and rate increases effective the first quarter of 2007. The additional connections resulted primarily from the PrairieWave acquisition and:

• continued growth in our bundled customers;

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• continued strong growth in business sales; and

• continued penetration in our mature markets.

We added video connections in 2007 as the popularity of additional services and products such as digital video recorders (DVRs), high-definition televisions and broadcasts continued to grow. We expect to add new video connections in the future, but as our video segment matures in our current markets, we expect to grow at a decreasing rate compared to our historical experience. While the number of new video connections may grow at a declining rate, we believe that the opportunity to increase revenue and video gross profits is available through price increases and the introduction of new products and new technology. New voice and data connections are expected to increase as we continue our sales and marketing efforts directed at selling customers a bundle of services, penetrating untapped market segments and offering new services. Relative to our current product mix, we expect voice and data revenue will become larger percentages of our overall revenue, and potentially will provide higher gross profits. Based on the anticipated changes in our revenue mix, we expect that our consolidated cost of services as a percentage of consolidated revenues will decrease.

Direct costs. Direct costs increased 37.8% from $75.5 million for the year ended December 31, 2006, to $104.1 million for the year ended December 31, 2007. Direct costs of services for video services increased 35.9% from $56.0 million for the year ended December 31, 2006, to $76.2 million for the same period in 2007. Direct costs of services for voice services increased 41.2% from $13.1 million for the year ended December 31, 2006, to $18.5 million for the same period in 2007. Direct costs of services for data services increased 98.0% from $1.8 million for the year ended December 31, 2006, to $3.5 million for the same period in 2007. Direct costs of services for other services increased 40.6% from $574,000 for the year ended December 31, 2006, to $808,000 for the same period in 2007. Pole attachment and other network rental expenses increased 26.3% from $4.0 million for the year ended December 31, 2006, to $5.0 million for the same period in 2007. The increase in direct costs was primarily from the acquisition of PrairieWave. We expect our direct costs to increase as we add more connections. The increase in direct costs of video services is primarily due to programming costs increases, which have been increasing over the last several years on an aggregate basis due to an increase in subscribers and on a per subscriber basis due to an increase in costs per program channel. We expect this trend to continue and may not be able to pass these higher costs on to customers because of competitive factors, which could adversely affect our cash flow and gross profit. We expect increases in voice, data and other costs of services with the additions of leased facilities used to backhaul our traffic to our switching facilities as connections and data capacity requirements increase.

Selling, general and administrative. Our selling, general and administrative increased 19.5% from $118.2 million for the year ended December 31, 2006, to $141.3 million for the year ended December 31, 2007. The increase in our operating costs, included in selling, general and administrative, is consistent with our acquisition of PrairieWave and growth in connections and customers in 2007, and included increases in personnel cost, sales and marketing, bad debt and general office expenses, that were partially offset by reductions in tax and insurance expense. We incurred one time charges related to travel and other PrairieWave integration costs, included in selling, general and administrative, of $654,000 for the year ended December 31, 2007. Our non-cash stock option compensation expense, included in selling, general and administrative, increased from $2.0 million for the year ended December 31, 2006, to $2.8 million for the year ended December 31, 2007.

Depreciation and amortization. Our depreciation and amortization increased from $68.2 million for the year ended December 31, 2006, to $85.8 million for the year ended December 31, 2007, primarily due to the PrairieWave acquisition. We expect depreciation and amortization expense to decrease as our overall capital expenditures decrease and existing long-lived assets become fully depreciated.

Capital markets activity and other. Our capital markets activity and other were $1.6 million for the year ended December 31, 2006, compared to $219,000 for the year ended December 31, 2007. The capital market activities in 2006 were primarily one-time charges related to the amendment of our first lien credit facility. The capital market activities in 2007 were primarily one-time charges related to due diligence performed on potential acquisitions.

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Loss on debt extinguishment. In 2007, we recorded a loss of $27.4 million on the early extinguishment of debt related to the prepayment penalty payment and writeoff of debt issuance costs for the existing credit facilities.

Interest income. Interest income was $365,000 for the year ended December 31, 2006, compared to $784,000 for the same period in 2007. The increase in interest income primarily reflects a higher average cash and cash equivalent balance during the year ended December 31, 2007.

Interest expense. Interest expense increased from $34.1 million for the year ended December 31, 2006, to $41.4 million for the year ended December 31, 2007. The increase in interest expense is primarily a result of the amendment of our term loan for the PrairieWave acquisition.

Gain (loss) on interest rate derivative instrument. Our loss on interest rate derivative instrument was $63,000 for the year ended December 31, 2006, compared to $758,000 for the year ended December 31, 2007. We paid $1.3 million for a hedge instrument, which became effective July 29, 2005 and was scheduled to terminate July 29, 2008. The agreement had a fair value of $1.5 million as of December 31, 2006. We terminated this agreement on April 18, 2007 for cash proceeds of $716,000 in connection with our entry into a new hedge agreement with a notional amount of $555 million. See Note 4 of the “Notes to Consolidated Financial Statements” included elsewhere in this annual report.

Gain (loss) on adjustment of warrants to market. During 2006, we adjusted the carrying value of the outstanding warrants to purchase our common stock to market value based on the published per share market value of our common stock. The published per share market value of our common stock on December 31, 2006 was $10.64 resulting in a $464,000 loss on the adjustment of warrants to market value. During 2007, we adjusted the carrying value of the outstanding warrants to purchase our common stock to market value based on the published per share market value of our common stock. The warrants to purchase shares of common stock for an exercise price of $0.10 per share expired October 22, 2007. The published market per share value of our common stock on October 22, 2007 was $16.73 resulting in a $337,000 loss on the adjustment of warrants to market value, offset by a gain of $75,000 on forfeited warrants, resulting in a loss of $262,000 on the adjustment of warrants.

Other income (expense), net. Other income (expense), net decreased from income of $25,000 for the year ended December 31, 2006, to expense of $53,000 for the year ended December 31, 2007, primarily due to the disposition of property, plant and equipment.

Income tax provision. We recorded no income tax provision for the years ended December 31, 2006 and 2007, respectively, as our net operating losses are fully offset by a valuation allowance.

Loss before discontinued operations. We incurred a loss before discontinued operations of $38.8 million for the year ended December 31, 2006, compared to a loss before discontinued operations of $52.8 million for the year ended December 31, 2007.

Income from discontinued operations. On September 7, 2007, we sold our telephone directory business to Yellow Book USA for $8.6 million. This business was included in the April 2007 acquisition of PrairieWave, and we intended to operate this business after its acquisition. After recording transactions costs of $139,000 and writing off net assets of $210,000, the company recorded a gain of $8.3 million. The net income from the directory business for the year ended December 31, 2007 was $612,000 and is also included in income from discontinued operations.

Preferred stock dividends. We issued 216,621 additional shares of the Series AA convertible preferred stock in the year ended December 31, 2006 as a stock dividend, and recognized dividends of $747,000 for the year ended December 31, 2006. All the outstanding shares of the Series AA preferred stock were converted to shares of common stock in June 2006.

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Net loss attributable to common stockholders. We incurred a net loss attributable to common stockholders of $39.5 million and $43.9 million for the years ended December 31, 2006 and 2007, respectively. We expect net losses to decrease as our business matures.

Year Ended December 31, 2006 Compared to Year Ended December 31, 2005

Revenues. Operating revenues increased 12.2% from $230.9 million for the year ended December 31, 2005, to $259.0 million for the year ended December 31, 2006. Operating revenues from video services increased 11.5% from $103.0 million for the year ended December 31, 2005, to $114.9 million for the same period in 2006. Operating revenues from voice services increased 6.2% from $77.6 million for the year ended December 31, 2005, to $82.4 million for the same period in 2006. Operating revenues from data services increased 20.9% from $48.5 million for the year ended December 31, 2005, to $58.6 million for the same period in 2006. Operating revenues from other services increased 74.4% from $1.8 million for the year ended December 31, 2005, to $3.1 million for the same period in 2006.

The increased revenues from video, voice and data and other services are due primarily to an increase in the number of connections, from 432,849 as of December 31, 2005, to 462,311 as of December 31, 2006. The additional connections resulted primarily from:

• continued growth in our bundled customers;

• continued reduction in the rate of churn of connections as a greater portion of our customer base is bundled;

• continued strong growth in business sales; and

• continued penetration in our mature markets.

We added video connections in 2006 as the popularity of additional services and products such as DVR’s, high-definition televisions and broadcast continued to grow.

Direct costs. Direct costs increased 8.4% from $69.6 million for the year ended December 31, 2005, to $75.5 million for the year ended December 31, 2006. Direct costs of services for video services increased 9.5% from $51.2 million for the year ended December 31, 2005, to $56.0 million for the same period in 2006. Direct costs of services for voice services increased 2.2% from $12.9 million for the year ended December 31, 2005, to $13.1 million for the same period in 2006. Direct costs of services for data services increased 1.0% from $1.8 million for the year ended December 31, 2005, to $1.8 million for the same period in 2006. Direct costs of services for other services increased 204.4% from $189,000 for the year ended December 31, 2005, to $574,000 for the same period in 2006. Pole attachment and other network rental expenses increased 10.1% from $3.6 million for the year ended December 31, 2005, to $4.0 million for the same period in 2006. We expect our direct costs to increase as we add more connections. The increase in direct costs of video services is primarily due to programming costs increases, which have been increasing over the last several years on an aggregate basis due to an increase in subscribers and on a per subscriber basis due to an increase in costs per program channel. We expect this trend to continue and may not be able to pass these higher costs on to customers because of competitive factors, which could adversely affect our cash flow and gross profit. We expect increases in voice, data and other costs of services with the additions of leased facilities used to backhaul our traffic to our switching facilities as connections and data capacity requirements increase.

Selling, general and administrative. Our selling, general and administrative increased 1.9% from $116.0 million for the year ended December 31, 2005, to $118.2 million for the year ended December 31, 2006. The increase in our operating costs, included in selling, general and administrative, is consistent with our growth in connections and customers in 2006, and included increases in personnel cost, cost of billing our customers, insurance and general office expenses, that were partially offset by reductions in outside or contract labor and bad debt expense. Our litigation fees, included in selling, general and administrative, decreased from $46,000 for

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the year ended December 31, 2005, to $0 for the year ended December 31, 2006, primarily due to conclusion of the Insight litigation. Our non-cash stock option compensation expense, included in selling, general and administrative, decreased from $2.1 million for the year ended December 31, 2005, to $2.0 million for the year ended December 31, 2006.

Depreciation and amortization. Our depreciation and amortization decreased from $74.5 million for the year ended December 31, 2005, to $68.2 million for the year ended December 31, 2006. We expect depreciation and amortization expense to decrease as our overall capital expenditures decrease and existing long-lived assets become fully depreciated.

Capital markets activity and other. Our capital markets activity and other were $606,000 for the year ended December 31, 2005, compared to $1.6 million for the year ended December 31, 2006. The capital market activities in 2005 included $62,000 of one-time charges related to the amendment of our first lien credit facility and a $544,000 loss on the early extinguishment of debt related to the repayment of all amounts outstanding under our credit facilities with Wachovia Bank, National Association and CoBank, ACB and the redemption of our 12% senior notes due in 2009.

Interest income. Interest income was $1.1 million for the year ended December 31, 2005, compared to $365,000 for the same period in 2006. The decrease in interest income primarily reflects a lower average cash and cash equivalent balance during the year ended December 31, 2006.

Interest expense. Interest expense decreased from $34.7 million for the year ended December 31, 2005, to $34.1 million for the year ended December 31, 2006. The decrease in interest expense for 2006 is primarily a result of the June 2006 amendment of our first lien term loan reducing the effective interest rate to LIBOR plus 2.5% from LIBOR plus 5.5%.

Gain (loss) on interest rate derivative agreement. We paid $1.3 million for an interest rate cap agreement, which became effective July 29, 2005. The cap agreement had a fair value of $1.54 million as of December 31, 2005 and $1.47 million as of December 31, 2006, resulting in a derivative loss of $63,000.

Gain (loss) on the adjustment of warrants to market. During 2005, we adjusted the carrying value of the outstanding warrants to purchase our common stock to market value based on the published per share market value of our common stock. The published per share market value of our common stock on December 31, 2005 was $3.84 resulting in a $37,000 gain on the adjustment of warrants to market. During 2006, we adjusted the carrying value of the outstanding warrants to purchase our common stock to market value based on the published per share market value of our common stock. The published per share market value of our common stock on December 31, 2006 was $10.64 resulting in a $464,000 loss on the adjustment of warrants to market value.

Other income (expense), net. Other income (expense), net increased from expense of $12,000 for the year ended December 31, 2005, to income of $25,000 for the year ended December 31, 2006.

Income tax provision. We recorded no income tax provision for the years ended December 31, 2005 and 2006, respectively, as our net operating losses are fully offset by a valuation allowance.

Loss before discontinued operations. We incurred a loss before discontinued operations of $63.2 million for the year ended December 31, 2005, compared to a loss before discontinued operations of $38.8 million for the year ended December 31, 2006.

Income from discontinued operations. Following the guidance of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” we deemed the Cerritos, California cable system to be a long-lived asset to be disposed of based on our actions taken to sell the property. We recorded income from discontinued operations of $8.4 million, including the gain from disposal of the asset, for the year ended December 31, 2005.

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Preferred stock dividends. We issued 58,742 and 216,621 additional shares of the Series AA convertible preferred stock in the years ended December 31, 2005 and 2006, respectively, as a stock dividend, and recognized dividends of $588,000 and $747,000 for the years ended December 31, 2005 and 2006, respectively. All the outstanding shares of the Series AA preferred stock were converted to shares of common stock in June 2006.

Net loss attributable to common stockholders. We incurred a net loss attributable to common stockholders of $55.4 million and $39.5 million for the years ended December 31, 2005 and 2006, respectively.

Liquidity and Capital Resources

Overview.

As of December 31, 2007, we had approximately $47.9 million of cash, cash equivalents and restricted cash on our balance sheet. Our net working capital on December 31, 2007 was $6.8 million, compared to net working deficit of $9.7 million as of December 31, 2006.

The Company’s current financial condition has been significantly influenced by positive cash flow from operations and changes in our debt capital structure. On March 14, 2007, the Company entered into an Amended and Restated Credit Agreement that provides for a $580.0 million credit facility, consisting of a $555.0 million term loan and a $25.0 million revolving credit facility, of which $1.5 million was outstanding as unused letters of credit as of December 31, 2007. The term loan bears interest at LIBOR plus 2.25% and amortizes at a rate of 1% per annum, payable quarterly, with a June 30, 2012 maturity date.

On January 4, 2008, the Company entered into a First Amendment to Amended and Restated Credit Agreement which provides for a $59.0 million incremental term loan to partially fund the $75.0 million Graceba Total Communications Group, Inc. acquisition purchase price. The term loan bears interest at LIBOR plus 2.75% and amortizes at a rate of 1% per annum, payable quarterly, with a June 30, 2012 maturity date.

As discussed above, the borrowings under our term loans bear interest at variable rates and expose us to interest rate risk. If interest rates increase, our debt service obligations on our variable rate debt would also increase even though the amount borrowed remained the same. In May 2007, the Company entered into a new interest rate swap contract to mitigate interest rate risk on a notional amount of $555.0 million amortizing 1% annually. The swap agreement fixes 100% of the floating rate debt at 4.977% until July 3, 2010. In December 2007, the Company entered into a new interest rate swap contract to mitigate interest rate risk on a notional amount of $59.0 million amortizing 1% annually, which relates to an additional new borrowing to partially fund the Graceba acquisition. The swap agreement fixes 100% of the floating rate debt at 3.995% until September 30, 2010.

We believe there is adequate liquidity from cash on hand and cash provided from operations to fund capital expenditures, operating expenses and debt service through 2008. Should we require additional funding, we have available a $25.0 million revolving loan. We believe that cash on hand and the cash flows from the existing Knology business plus the expected cash flows from the Graceba operations will be adequate to fund the operations, capital expenditures and debt service requirements of the combined business through 2008.

As of December 31, 2007 we are in compliance with all of our debt covenants.

Operating, Investing and Financing Activities.

As of December 31, 2007, we had a net working capital of $6.8 million, compared to net working deficit of $9.7 million as of December 31, 2006. The reduction in the working capital deficit from December 31, 2006 to December 31, 2007 is primarily due to an increase in trade accounts receivable resulting from customer connection growth and higher revenues and cash received from the sale of the directory business.

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Net cash provided by operating activities from continuing operations totaled $19.2 million, $30.5 million and $57.0 million for the years ended December 31, 2005, 2006 and 2007, respectively, and operating activities from discontinued operations used net cash of $0.4 million for the year ended December 31, 2006 and provided net cash of $0.5 million for the year ended December 31, 2007. The net cash flow activity related to operations consists primarily of changes in operating assets and liabilities and adjustments to net income for non-cash transactions including:

• depreciation and amortization;

• loss on debt extinguishment;

• non-cash stock option compensation;

• accretion of second term lien loan;

• non-cash bank loan interest expense;

• non-cash (gain) loss on interest rate derivative instrument;

• provision for bad debt;

• loss on disposition of assets; and

• (gain) loss on adjustment of warrants to market.

Net cash used in investing activities was $5.5 million, $26.0 million and $293.1 million for the years ended December 31, 2005, 2006 and 2007, respectively. Investing activities in 2005 consisted primarily of $31.6 million of capital expenditures and $4.0 million for the purchase of short-term investments, partially offset by $16.6 million from the sale of short-term investments, $9.7 million proceeds from the sale of discontinued operations, and $3.8 million of cash pledged as security that was returned. The sale of discontinued operations was a result of the sale of our cable assets in Cerritos, California to WaveDivision Holdings, LLC for $10.0 million in cash. Our investing activities in 2006 primarily consisted of $27.8 million of capital expenditures, partially offset by $1.9 million of cash pledged as security that was returned. Our investing activities in 2007 primarily consisted of $256.2 million purchase of PrairieWave, and $45.8 million of capital expenditures, partially offset by $8.6 million proceeds from sale of discontinued operations. The sale of discontinued operations was a result of the sale of our telephone directory business to Yellow Book USA for $8.6 million, of which $860,000 was placed in escrow, and will be paid out in September 2008, subject to any indemnification claims by Yellow Book, but was recognized into income at the sale date.

Net cash used in financing activities totaled $7.2 million and $5.1 million for the years ended December 31, 2005 and 2006, respectively, and net cash provided by financing activities totaled $270.4 million for the year ended December 31, 2007. In 2005, financing activities consisted primarily of $296.0 million in principal payments on debt, $9.7 million of expenditures related to issuance of debt and $1.3 million for the purchase of a interest rate hedge agreement with Credit Suisse First Boston International, partially offset by $280.0 million of proceeds from the first lien and the second lien credit agreement and $20.0 million in gross proceeds from the issuance of our Series AA preferred stock. In 2006, financing activities consisted primarily of $2.2 million in principal payments on debt and $3.5 million of expenditures related to issuance of debt, which represents a 2% call premium associated with the amendment of the first lien term loan facility, partially offset by $584,000 of proceeds from stock options exercised. In 2007, financing activities consisted primarily of $555.0 million proceeds from first lien term loan, $1.7 million proceeds from stock options exercised and $716,000 proceeds from unwinding the interest rate derivative instrument, partially offset by $273.7 million in principal payments on debt and $13.3 million of expenditures related to issuance of debt.

Capital Expenditures, Operating Expenses and Debt Service

We spent approximately $45.8 million in capital expenditures during 2007, of which approximately $26.7 million related to the purchase and installation of customer premise equipment, $7.8 million related to

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plant extensions and enhancements and $11.3 million related to network equipment, billing and information systems and other capital items.

We expect to spend approximately $50.0 million in capital expenditures during 2008. We believe we will have sufficient cash on hand and cash from internally generated cash flow to cover our planned operating expenses, capital expenditures and service our debt during 2008. The credit agreements and covenants on our new debt limit the amount of our capital expenditures on an annual basis.

In 2008, we will expand into a market in Dothan, Alabama through the $75.0 million acquisition of Graceba, which was completed January 2008. See Note 14 of the “Notes to Consolidated Financial Statements” included elsewhere in this annual report.

We do not intend to expand into other markets or make further acquisitions until the required funding is available.

Contractual Obligations

The following table sets forth, as of December 31, 2007, our long-term debt, capital leases, operating lease and other obligations for 2008, the following four years and thereafter. The long-term debt obligations are our principal payments on cash debt service obligations. Interest is comprised of interest payments on cash debt service and capital lease obligations. The capital lease obligations are our future rental payments under one lease with a 10-year term, Video on Demand equipment and network fiber leasing agreements. Operating lease obligations are the future minimum rental payments required under the operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 2007.

	Payment due by period
Contractual obligations (in millions)	Total		January 1, 2008 through December 31, 2008		January 1, 2009 through December 31, 2010		January 1, 2011 through December 31, 2012		After December 31, 2012
	(in thousands)
Long-term debt obligations	$	552.2	$	5.5	$	11.1	$	535.6	$	0
Interest		168.5		40.4		79.4		48.7		0
Capital lease obligation		3.1		.6		1.4		1.1		0
Operating lease obligations		19.1		4.4		6.0		3.6		5.1
Programming contracts(1)		242.8		80.8		162.0		0		0
Pole attachment obligations (2)		13.5		4.5		9.0		0		0
Total	$	999.2	$	136.2	$	268.9	$	589.0	$	5.1

(1) We have entered into contracts with various entities to provide programming to be aired by us. We pay a monthly fee for the programming services, generally based on the number of average video subscribers to the program, although some fees are adjusted based on the total number of video subscribers to the system and/or the system penetration percentage. The amounts presented are based on the estimated number of connections we will have in future periods through the completion of the current contracts.

(2) Federal law requires utilities, defined to include all local telephone companies and electric utilities except those owned by municipalities and co-operatives, to provide cable operators and telecommunications carriers with nondiscriminatory access to poles, ducts, conduit and rights-of-way at just and reasonable rates. Utilities may charge telecommunications carriers a different rate for pole attachments than they charge cable operators providing solely cable service. The amounts presented are based on the estimated number of poles we will attach to in future periods through the completion of the current contracts.

As discussed above, we currently expect to spend $50.0 million in capital expenditures in 2008. We expect to fund our contractual obligations, programming costs, expected capital expenditures and service debt using a

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portion of the approximately $46.4 million of cash and cash equivalents on hand as of December 31, 2007, with the remainder funded by cash flow generated by operations. Beyond 2008, we may need to raise additional capital through equity offerings, asset sales or debt refinancing to grow the business through any potential merger and acquisition activity.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company uses interest rate swap and interest rate cap contracts to manage the impact of interest rate changes on earnings and operating cash flows. Interest rate swaps involve the receipt of variable-rate amounts in exchange for fixed-rate payments over the life of the agreements without exchange of the underlying principal amount. Interest rate caps involve the receipt of variable-rate amounts beyond a specified strike price over the life of the agreements without exchange of the underlying principal amount. The Company believes these agreements are with counter-parties who are creditworthy financial institutions.

The Company has adopted FASB Statement No. 133 (subsequently amended by SFAS Nos. 137 and 138), “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”). This statement requires that all derivatives be recorded in the balance sheet as either an asset or liability measured at fair value, and that changes in fair value be recognized currently in earnings unless specific hedge accounting criteria are met. For derivatives designated as qualifying cash flow hedges, the effective portion of changes in fair value of the derivatives is initially recognized in other comprehensive income and subsequently reclassified as an increase or decrease to interest expense in the same periods in which the related interest on the variable-rate debt affects earnings. The ineffective portions are recognized directly in earnings. Upon early termination of a derivative instrument that has been designated as a hedge, the resulting gains or losses are deferred and amortized as adjustments to interest expense of the related debt over the remaining period covered by the terminated instrument. The Company has formally documented, designated and assessed at inception of the derivative instruments. Based on criteria listed in SFAS No. 133 pertaining to cash flow derivative instruments that are interest rate swaps, the Company has assessed that the swap agreements are completely effective and therefore there are no ineffectiveness. The Company assesses for ineffectiveness on a quarterly basis. The Company uses derivative instruments as risk management tools and not for trading purposes.

In July 2005, the Company entered into an interest rate cap agreement with Credit Suisse First Boston International with a notional amount of $280.0 million to cap its adjustable LIBOR rate at 5%, mitigating interest rate risk on the first and second lien term loans. The Company paid $1.3 million for this cap agreement, which became effective July 29, 2005 and terminated July 29, 2008. The Company did not designate the cap agreement as an accounting hedge under SFAS No. 133. Accordingly changes in fair value of the cap agreement were recorded through earnings as derivative gains/(losses). “Gain (loss) on interest rate derivative instrument” was $267,000, $(63,000) and $(758,000) for the years ended December 31, 2005, 2006 and 2007, respectively. On April 18, 2007, the Company unwound its existing interest rate cap agreement for $716,000 cash proceeds.

On April 18, 2007, the Company entered into a new interest rate swap contract to mitigate interest rate risk on a notional amount of $555.0 million amortizing 1% annually. The swap agreement fixes 100% of the floating rate debt at 4.977% until July 3, 2010. The interest rate hedge instrument is designated as a hedge under SFAS No. 133. Changes in the fair value of the swap agreement are initially recorded as “Accumulated Other Comprehensive Loss” in the equity section of the balance sheet and subsequently reclassified to “Interest Expense” on the statement of operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Item 8 is incorporated by reference to pages F-1 through F-21 of this annual report.

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

None.

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ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of December 31, 2007. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2007, the Company’s disclosure controls and procedures are effective.

Evaluation of Internal Control over Financial Reporting. Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, the Company has included a report on management’s assessment of the design and effectiveness of its internal control over financial reporting as part of this Annual Report on Form 10-K for the year ended December 31, 2007. The Company’s independent registered public accounting firm also audited, and reported on the effectiveness of internal control over financial reporting. Management’s report is included below under the caption “Management’s Report on Internal Control over Financial Reporting” and the independent registered public accounting firm’s attestation report entitled “Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting” is included in Item 8 of this annual report.

Changes in Internal Control over Financial Reporting. There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2007 based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2007.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

The effectiveness of our internal control over financial reporting as of December 31, 2007 has been audited by BDO Seidman, LLP, an independent registered public accounting firm, as stated in their report which is included elsewhere herein.

Date: March 14, 2008
/s/    RODGER L. JOHNSON	/s/    M. TODD HOLT
Rodger L. Johnson	M. Todd Holt
President and Chief Executive Officer	Chief Financial Officer

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following table sets forth information regarding our officers and directors. Our board of directors is divided among three classes, with members serving three-year terms expiring in the years indicated.

Name	Age	Position	Current Term Expires
Rodger L. Johnson	60	President, Chief Executive Officer and Director	2008
M. Todd Holt	40	Chief Financial Officer, Vice President of Finance and Administration, Treasurer and Corporate Controller
Felix L. Boccucci, Jr.	49	Vice President of Business Development
Weldon A.Feightner	47	Vice President and Regional General Manager
Allan H. Goodson	50	Vice President and Regional General Manager
Bruce D. Herman	51	Vice President, Mergers and Acquisitions
Ronald K. Johnson	53	Vice President, Business Sales and Service
Marcus R. Luke, PhD	53	Chief Technology Officer
Bret T. McCants	48	Senior Vice President of Operations
Anthony J. Palermo	52	Vice President of Marketing
Richard D. Perkins	49	Vice President of Information Technology
Andrew M. Sivell	48	Vice President of Network Operations
Brad M. Vanacore	53	Vice President of Human Resources
Chad S. Wachter	41	Vice President, General Counsel and Secretary
Campbell B. Lanier, III	57	Chairman of the Board	2008
Alan A. Burgess (1)	72	Director	2009
Donald W. Burton (2)	64	Director	2010
Eugene I. Davis (1)(3)	53	Director	2008
O. Gene Gabbard (1)(2)	67	Director	2009
William H. Scott, III (2)(3)	60	Director	2010

(1) Member of the audit committee.

(2) Member of the compensation and stock option committee.

(3) Member of the nominating committee.

Provided below are biographies of each of the officers and directors listed in the table above.

Rodger L. Johnson has served as President and as a director since April 1999 and as our Chief Executive Officer since June 1999. Prior to joining us, Mr. Johnson had served as President and Chief Executive Officer, as well as a Director, of Communications Central, Inc., a publicly traded provider of pay telephone services, since November 1995. Prior to joining Communications Central, Mr. Johnson served as the President and Chief Executive Officer of JKC Holdings, Inc., a consulting company providing advice to the information processing industry. In that capacity, Mr. Johnson also served as the Chief Operating Officer of CareCentric, Inc., a publicly traded medical software manufacturer. Before founding JKC Holdings, Inc., Mr. Johnson served for approximately eight years as the President and Chief Operating Officer and as the President and Chief Executive Officer of Firstwave Technologies, Inc., a publicly traded sales and marketing software provider. Mr. Johnson spent his early career from June 1971 to November 1984 with AT&T where he worked in numerous departments, including sales, marketing, engineering, operations and human resources. In his final job at AT&T, he directed the development of consumer market sales strategies for the northeastern United States, a territory encompassing 10.5 million customers at the time.

M. Todd Holt has served as our Chief Financial Officer since August 2005. Mr. Holt served as our Corporate Controller from 1998 to July 2005. Mr. Holt is a member of the American Institute of Certified Public Accountants and previously practiced public accounting as an audit manager with Ernst & Young.

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Felix L. Boccucci, Jr. has served as Vice President Regulatory Affairs/Governmental Affairs since February 2008. Previously Mr. Boccucci served as Vice President of Business Development since August 1997, and he served as the Chief Financial Officer, Treasurer and Secretary from November 1995 through August 1997. From October 1994 until December 1995, he served as Vice President Finance-Broadband of ITC Holding. As Vice President Finance-Broadband of ITC Holding Company, Mr. Boccucci conducted a feasibility study that led to Knology’s formation in 1996. Prior to such time, Mr. Boccucci worked for GTE Corporation, a telecommunications company, which merged with Contel Corporation in March 1991. From May 1993 to October 1994, he served as a Senior Financial Analyst for GTE. From 1991 to 1993, Mr. Boccucci served as Financial Director for GTE’s Central Area Telephone Operations. From 1987 to 1991, he was the Assistant Vice President Controller in charge of Contel’s Eastern Region Telephone Operations comprising 13 companies in 12 states. Mr. Boccucci is a Certified Public Accountant in the Commonwealth of Virginia and holds a BS degree in business Administration with a concentration in Accounting from Shepherd University.

Weldon A. Feightner serves as Vice President and Regional General Manager of Regional Operations where he is responsible for the company’s systems in Sioux Falls and Rapid City, South Dakota; Columbus, Georgia; Dothan and Montgomery, Alabama; and Panama City, Florida. His management career with Knology spans more than 10 years, and he has been engaged in the industry for more than 29 years. Prior to his tenure with Knology, Mr. Feightner was Regional Manager with FrontierVision, a broadband communications cable company responsible for operations in Michigan, Ohio and Kentucky. He has also worked in Cincinnati as General Manager for United Video Cable Company and as Technical Operations Manager for Time Warner.

Allan H. Goodson joined Knology in June 2000 and serves as Vice President of Regional Operations, where he is responsible for the Huntsville, Knoxville, Charleston and Augusta divisions, as well as Call Center operations. Prior to joining Knology, Mr. Goodson was the Executive Vice President and Chief Operating Officer of On Command Corp., an international telecommunications company specializing in commercial hotel in-room television entertainment and Internet products. During his 20 years in the telecommunications industry, Mr. Goodson also held positions with STC Cable Corporation and TCI.

Bruce D. Herman has served as Vice President, Mergers and Acquisitions, since September 2007, and was Chief Executive Officer of PrairieWave Communications prior to its acquisition by Knology in April 2007. Previous experience included Chief Financial Officer, Treasurer, and corporate and financial analysis positions at Ford Motor Company, USL Capital Corp, Hexcel Corp, and Martin Group Inc. Mr. Herman was actively involved in over a dozen mergers and acquisitions opportunities at each of his prior companies, and was responsible for two post-acquisition integration efforts.

Ronald K. Johnson serves as Vice President, Business Sales and Service for Knology and has over 25 years experience in marketing and selling telecommunications to businesses. Mr. Johnson started in the industry with AT&T and served in various sales and marketing roles, including working with large multi-national corporations to optimize their use of telecommunications for both voice and data networks. He also established critical sales functions used to propose data networking solutions provided via satellite networks (VSAT). After leaving AT&T, Mr. Johnson led the marketing efforts of a small video conferencing company and then moved into the newly competitive local telephone service arena to sell telecommunications services to business customers for MediaOne in Atlanta. After AT&T’s purchase of MediaOne, Mr. Johnson joined BroadRiver Communications as the Vice President of Sales. BroadRiver was one of the first pure IP telephony service providers to target small to medium size businesses. Mr. Johnson joined Knology in September of 2002 to grow the Knology Business Services organization into a premier provider of leading edge products and service.

Marcus R. Luke, Ph.D. has served as Chief Technology Officer since August 1997. Prior to this he served as our Vice President of Network Construction from November 1995 until August 1997, and Director of Engineering of Cybernet Holding, L.L.C. from May 1995 until November 1995. Prior to joining us, Dr. Luke served as Southeast Division Construction Manager for TCI from July 1993 to May 1995. From July 1987 to June 1993, he served as Area Technical Manager for TCI’s southeast area. Dr. Luke worked for Storer

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Communications Inc. from 1985 to 1987 as Vice President of Engineering. Prior to 1985, he spent 12 years in various engineering and management positions with Storer Communications Inc.

Bret T. McCants has served as our Senior Vice President of Operations since January 2007. In his 10 years with Knology, Mr. McCants has also served as Vice President and Regional General Manager and Vice President of Network Construction. Prior to joining Knology, Mr. McCants spent 16 years in the electric utility industry with experience in operations, engineering, communications and sales and marketing.

Anthony J. Palermo rejoined the Knology Broadband Services Management team as Vice President of Marketing in 2007. In this role, he will be responsible for Knology’s Marketing, Marketing Communications, Product Development and Management. Previous to rejoining Knology, Mr. Palermo led Scientific-Atlanta’s SciCare Broadband Services business as Vice President of Business Development and Emerging Markets. In his role at Scientific-Atlanta, he was responsible for SciCare’s product management, sales and marketing support, consulting, and training activities. Mr. Palermo served as Corporate Vice President for Operations, Sales and Marketing at broadband provider Knology, Inc. from 1999 through 2004. He has held operations and marketing positions with several other software and telecommunications firms such as Brock Control Systems, Interactive Financial Services and AT&T Long Lines.

Richard D. Perkins has served as Knology’s Vice President of Information Technology and Billing since January 2003. Mr. Perkins has over 20 years experience directing the development and deployment of management systems spanning a variety of industries, mostly manufacturing and telecommunications. Prior to joining Knology, he held various leadership roles during his 10 years with Perot Systems, a leading Dallas Texas IT consulting firm.

Andrew M. Sivell has served as Vice President of Network Operations since October 2000 where he is responsible for switching, digital transport, network provisioning, video services and the Network Operation Center’s functions. From May 1998 to June 2003, Mr. Sivell served as our Director of Network Operations. Mr. Sivell has 28 years experience in the communications industry, having held technical management positions with Interstate Fibernet, Intercel, MCI, Telecom USA and Southern Net.

Brad M. Vanacore has served as the Corporate Vice President of Human Resources for Knology since October 2005. He has worked for the ITC Holding Company since 1995 and previously served as the Senior Vice President Human Resources for ITC Financial Services and PRE Holdings, Inc. His current responsibilities include compensation and benefits, employee relations, recruitment, training, payroll and several legal compliance duties. Mr. Vanacore was also the Corporate Vice President of Human Resources and Administration at Powertel, Inc., a regional wireless phone service provider, from 1995-2001. Mr. Vanacore has prior work experience as the Vice President of Human Resources at another start-up company, Cott Beverages, USA, a national soft drink manufacturer. He began his career with United Technologies Corporation, where he spent 15 years working in labor relations, negotiations, arbitrations and various Human Resources generalist capacities.

Chad S. Wachter has served as Vice President since October 1999 and as General Counsel and Secretary since August 1998. From April 1997 to August 1998, Mr. Wachter served as Assistant General Counsel of Powertel, Inc., which was a provider of wireless communications services. From May 1990 until April 1997, Mr. Wachter was an associate and then a partner with Capell, Howard, Knabe & Cobbs, P.A. in Montgomery, Alabama.

Campbell B. Lanier, III has been a director since November 1995 and has served as our Chairman of the Board since September 1998. Since July 2003, Mr. Lanier has served as Chairman and Chief Executive Officer of Magnolia Holding Company, LLC and ITC Holding Company, LLC; Magnolia Holding Company, LLC operates a promotional goods business, a transaction processing business and a consulting business. Mr. Lanier served as Chairman of the Board and Chief Executive Officer of ITC Holding until May 2003 and served as a director of the company from its inception in May 1989 until its sale to West Corporation on May 9, 2003. In

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addition, Mr. Lanier was also an officer and director of several former subsidiaries of ITC Holding Company. In conjunction with the transaction with the West Corporation, the ITC Holding Company name was transferred to an entity owned by Mr. Lanier and is currently organized as ITC Holding Company, LLC. Mr. Lanier has served as a Managing Director of South Atlantic Private Equity Fund, IV, Limited Partnership since July 1997. He has also served as board member of Interactive Communications, Inc. (InComm), since May, 2005.

Alan A. Burgess has been one of our directors since January 1999. From 1967 until his retirement in 1997, Mr. Burgess was a partner with Accenture (formerly Andersen Consulting). Over his 30-year career he held a number of positions with Accenture, including Managing Partner of Regulated Industries from 1974 to 1989. In 1989, he assumed the role of Managing Partner of the Communications Industry Group. In addition, he served on Accenture’s Global Management council and was a member of the Partner Income Committee.

Donald W. Burton has been one of our directors since January 1996. Since December 1983, he has served as Managing General Partner of South Atlantic Venture Funds. Mr. Burton also has been the General Partner of the Burton partnerships since October 1979. He has served as President and Chairman of South Atlantic Capital Corporation since 1997 and South Atlantic Capital, Inc. since 1997. Mr. Burton is a Director of BlackRock Investment Managers (ClusterA), Capital Southwest Corporation and several private companies. Mr. Burton also serves as a member of the Investment Advisory Council of the Florida State Board of Administration until December 31, 2007.

Eugene I. Davis has been one of our directors since November 2002. Mr. Davis is Chairman and Chief Executive Officer of Pirinate Consulting Group, L.L.C., a privately held consulting firm, and of RBX Industries, Inc., a manufacturer and distributor of rubber and plastic products. From May 1999 to June 2001, he served as Chief Executive Officer of SmarTalk Teleservices Corp., an independent provider of prepaid calling cards. Mr. Davis was Chief Operating Officer of Total-Tel Communications, Inc., a long-distance telecommunications provider from October 1998 to March 1999. Mr. Davis currently serves as the chairman of the board of Atlas Air Worldwide Holdings, Inc. Mr. Davis was elected to our board of directors pursuant to our stockholders agreement, which permitted certain holders of the Series D preferred stock to designate a nominee to serve as director for a three-year term.

O. Gene Gabbard has been one of our directors since September 2003. Mr. Gabbard has worked independently as an entrepreneur and consultant since February 1993. From August 1990 to January 1993, Mr. Gabbard served as Executive Vice President and Chief Financial Officer of MCI Communications Corporation. Mr. Gabbard also served from June 1998 to June 2002 on the board of ClearSource, Inc. (now Grande Communications Inc.), a provider of broadband communications services. In January 2005, Mr. Gabbard was appointed to the Board of Directors of COLT Telecom Group SA, Luxembourg, a provider of telecommunications service to businesses throughout Europe. Since June 2006, he has also been a member of the board and audit committee of Hughes Communications, Inc., Germantown, Maryland, the leading provider of satellite based data communications systems and services. He is currently a Special Limited Partner in Ballast Point Ventures, a venture capital fund based in St. Petersburg, Florida. Mr. Gabbard is nominee for Class I Director.

William H. Scott, III has been one of our directors since November 1995. He served as President of ITC Holding Company from December 1991 and was a director of that company until its sale in May 2003. Mr. Scott is an investor in and director of several private companies.

The remaining information required by this Item 10 will be contained in our definitive proxy statement for our 2008 Annual Meeting of Stockholders to be filed with the SEC (the Proxy Statement) in the sections entitled “Information About Our Executive Officers, Directors and Nominees,” “Meetings and Committees of the Board”, “Section 16(a) Beneficial Ownership Reporting Compliance” and possibly elsewhere therein, and such information is incorporated in this Annual Report on Form 10-K by this reference.

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We have adopted a code of ethics that applies to our employees, officers and directors, including our chief executive officer, chief financial officer, principal accounting officer and controller. This code of ethics is posted on our website located at www.knology.com. The code of ethics may be found as follows: from our main web page, first click on “About Us” at the bottom of the page and then on “Investor Relations.” Next, click on “Corporate Governance.” Finally, click on “Standards of Conduct.” We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of this code of ethics by posting such information on our website, at the address and location specified above.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item 11 will be contained in the section entitled “Executive Compensation”, “Compensation Committee Interlocks and Insider Participation” and “Meetings and Committees of the Board” of our Proxy Statement and possibly elsewhere therein, and such information is incorporated in this Annual Report on Form 10-K by this reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item 12 will be contained in the sections entitled “Principal Stockholders” of our Proxy Statement and possibly elsewhere therein, and such information is incorporated in this Annual Report on Form 10-K by this reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item 13 will be contained in the section entitled “Transactions with Related Persons” of our Proxy Statement and possibly elsewhere therein, and such information is incorporated in this Annual Report on Form 10-K by this reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item 14 will be contained in the section entitled “Fees Paid to Independent Registered Public Accounting Firms” of our Proxy Statement and possibly elsewhere therein, and such information is incorporated in this Annual Report on Form 10-K by this reference.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1) The following Consolidated Financial Statements of the Company and independent auditors’ reports are included in Item 8 of this Form 10-K.

Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting

Reports of Independent Registered Public Accounting Firms.

Consolidated Balance Sheets as of December 31, 2006 and 2007.

Consolidated Statements of Operations for the Years Ended December 31, 2005, 2006 and 2007.

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2005, 2006 and 2007.

Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2006 and 2007.

Notes to Consolidated Financial Statements.

(a)(2) All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission either have been included in the Consolidated Financial Statements of the Company or the notes thereto, are not required under the related instructions or are inapplicable, and therefore have been omitted.

(a)(3) The following exhibits are either provided with this Form 10-K or are incorporated herein by reference:

Exhibit No.	Exhibit Description
2.1	Agreement and Plan of Merger, dated January 8, 2007, among Knology, Inc., PrairieWave Holdings, Ins., Knology Acquisition Sub, Inc., ALTA Communications VIII, L.P. and certain equity holders of PrairieWave Holdings, Inc. (Incorporated herein by reference to Exhibit 2.1 to Knology, Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2007 (File No. 000-32647)).
2.2	Share Purchase Agreement, dated November 2, 2007, by and among Graceba Total Communications, Inc., C. Christopher Dupree, Knology, Inc., and Knology of Alabama, Inc.
3.1	Amended and Restated Certificate of Incorporation of Knology, Inc. (Incorporated herein by reference to Exhibit 3.1 to Knology, Inc.’s Quarterly Report Form 10-Q for the period ended June 30, 2004 (File No. 000-32647)).
3.2	Certificate of Designations of Powers, Preferences, Rights, Qualifications, Limitations and Restrictions of Series X Junior Participating Preferred Stock of Knology, Inc. (Incorporated herein by reference to Exhibit 3.1 to Knology, Inc.’s Current Report on Form 8-K filed July 29, 2005 (File No. 000-32647)).
3.3	Bylaws of Knology, Inc. (Incorporated herein by reference to Exhibit 3.2 to Knology Inc. Registration Statement on Form S-1 (File No. 333-89179)).
4.1	Stockholder Protection Rights Agreement, dated as of July 27, 2005, by and between Knology, Inc. and Wachovia Bank, N.A., acting as Rights Agent (which includes as Exhibit A thereto the Form of Rights Certificate) (Incorporated herein by reference to Exhibit 4.1 to Knology, Inc.’s Current Report on Form 8-K filed July 29, 2005 (File No. 000-32647)).
10.1.1	Stockholders Agreement dated February 7, 2000 among Knology, Inc., certain holders of the Series A preferred stock, the holders of Series B Preferred stock, certain management holders and certain additional stockholders (Incorporated herein by reference to Exhibit 10.84 to Knology, Inc.’s Post-Effective Amendment No. 2 to Form S-1 (File No. 333-89179)).

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Exhibit No.	Exhibit Description
10.1.2	Amendment No. 1 to Stockholders Agreement, dated as of February 7, 2000, by and among Knology, Inc. and the other signatories thereto, dated as of January 12, 2001, by and among Knology, Inc. and the other signatories thereto (Incorporated herein by reference to Exhibit 10.2 to Knology, Inc.’s Current Report on Form 8-K filed January 26, 2001 (File No. 000-32647)).
10.1.3	Amendment No. 2 to Stockholders Agreement, dated as of February 7, 2000, by and among Knology, Inc. and the other signatories thereto, as amended as of January 12, 2001, dated as of October 18, 2002, by and among Knology, Inc. and the other signatories thereto (Incorporated herein by reference to Exhibit 10.1.3 to Knology, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 000-32647)).
10.2	Lease, dated June 1, 2003 by and between D. L. Jordan, L.L.P. Family Partnership and Knology, Inc. (Incorporated herein by reference to Exhibit 10.62 to Knology, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 000-32647)).
10.3	Pole Attachment Agreement dated January 1, 1998 by and between Gulf Power Company and Beach Cable, Inc. (Incorporated herein by reference to Exhibit 10.7 to Knology Broadband, Inc.’s Registration Statement on Form S-4 (File No. 333-43339)).
10.4	Telecommunications Facility Lease and Capacity Agreement, dated September 10, 1996, by and between Troup EMC Communications, Inc. and Cybernet Holding, Inc. (Incorporated herein by reference to Exhibit 10.16 to Knology Broadband, Inc.’s Registration Statement on Form S-4 (File No. 333-43339)).
10.5	Master Pole Attachment agreement dated January 12, 1998 by and between South Carolina Electric and Gas and Knology Holdings, Inc. d/b/a/ Knology of Charleston (Incorporated herein by reference to Exhibit 10.17 to Knology Broadband, Inc.’s Registration Statement on Form S-4 (File No. 333-43339)).
10.6	Lease Agreement, dated December 5, 1997 by and between The Hilton Company and Knology of Panama City, Inc. (Incorporated herein by reference to Exhibit 10.25 to Knology Broadband, Inc.’s Registration Statement on Form S-4 (File No. 333-43339)).
10.7	Certificate of Membership with National Cable Television Cooperative, dated January 29, 1996, of Cybernet Holding, Inc. (Incorporated herein by reference to Exhibit 10.34 to Knology Broadband, Inc.’s Registration Statement on Form S-4 (File No. 333-43339)).
10.8	Ordinance No. 99-16 effective March 16, 1999 between Columbus consolidated Government and Knology of Columbus Inc. (Incorporated herein by reference to Exhibit 10.18 to Knology Broadband, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 333-43339)).
10.9	Ordinance No. 16-90 (Montgomery, Alabama) dated March 6, 1990 (Incorporated herein by reference to Exhibit 10.44 to Knology Broadband, Inc.’s Registration Statement on Form S-4 (File No. 333-43339)).
10.10	Ordinance No. 50-76 (Montgomery, Alabama) (Incorporated herein by reference to Exhibit 10.45 to Knology Broadband, Inc.’s Registration Statement on Form S-4 (File No. 333-43339)).
10.11	Ordinance No. 9-90 (Montgomery, Alabama) dated January 16, 1990 (Incorporated herein by reference to Exhibit 10.45.1 to Knology Broadband, Inc.’s Registration Statement on Form S-4 (File No. 333-43339)).
10.12	Resolution No. 58-95 (Montgomery, Alabama) dated April 6, 1995 (Incorporated herein by reference to Exhibit 10.46 to Knology Broadband, Inc.’s Registration Statement on Form S-4 (File No. 333-43339)).

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Exhibit No.	Exhibit Description
10.13	Ordinance No. 78-2007 (Montgomery, Alabama), dated November 5, 2007.
10.14	Resolution No. 97-22 (Panama City Beach, Florida) dated December 3, 1997 (Incorporated herein by reference to Exhibit 10.49 to Knology Broadband, Inc.’s Registration Statement on Form S-4 (File No. 333-43339)).
10.15	Ordinance No. 5999 (Augusta, Georgia) dated January 20, 1998 (Incorporated herein by reference to Exhibit 10.53 to Knology Broadband, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 333-43339)).
10.16	Ordinance No. 1723 (Panama City, Florida) dated March 10, 1998 (Incorporated herein by reference to Exhibit 10.54 to Knology Broadband, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 333-43339)).
10.17	Franchise Agreement (Charleston County, South Carolina) dated December 15, 1998 (Incorporated herein by reference to Exhibit 10.31 to Knology Broadband, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 333-43339)).
10.18	Ordinance No. 1998-47 (North Charleston, South Carolina) dated May 28, 1998 (Incorporated herein by reference to Exhibit 10.32 to Knology Broadband, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 333-43339)).
10.19	Ordinance No. 1998-77 (Charleston, South Carolina) dated April 28, 1998 (Incorporated herein by reference to Exhibit 10.33 to Knology Broadband, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 333-43339)).
10.20	Ordinance No. 98-5 (Columbia County, Georgia) dated August 18, 1998 (Incorporated herein by reference to Exhibit 10.34 to Knology Broadband Inc.’s Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 333-43339)).
10.21	Network Access Agreement dated July 1, 1998 between SCANA Communications, Inc., f/k/a MPX Systems, Inc. and Knology Holdings, Inc. (Incorporated herein by reference to Exhibit 10.36 to Knology Broadband, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 333-43339)).
10.22*	Master Agreement for Internet Access Services dated January 2, 2002, by and between ITC/\DeltaCom, Inc. and Knology, Inc. (Incorporated herein by reference to Exhibit 10.21 to Knology, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2001 (File No. 000-32647)).
10.23*	Collocation Agreement for Multiple Sites dated on or about June 1998 between Interstate FiberNet, Inc. and Knology Holdings, Inc. (Incorporated herein by reference to Exhibit 10.38 to Knology Broadband, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 333-43339)).
10.240*	Lease Agreement dated October 12, 1998 between Southern Company Services, Inc. and Knology Holdings, Inc. (Incorporated herein by reference to Exhibit 10.39 to Knology Broadband, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 333-43339)).
10.25	Facilities Transfer Agreement dated February 11, 1998 between South Carolina Electric and Gas Company and Knology Holdings, Inc., d/b/a Knology of Charleston (Incorporated herein by reference to Exhibit 10.40 to Knology Broadband, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 333-43339)).
10.26	License Agreement dated March 3, 1998 between BellSouth Telecommunications, Inc. and Knology Holdings, Inc. (Incorporated herein by reference to Exhibit 10.41 to Knology Broadband, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 333-43339)).

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Exhibit No.	Exhibit Description
10.27	Pole Attachment Agreement dated February 18, 1998 between Knology Holdings, Inc. and Georgia Power Company (Incorporated herein by reference to Exhibit 10.44 to Knology Broadband, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 333-43339)).
10.28	Assignment Agreement dated March 4, 1998 between Gulf Power Company and Knology of Panama City, Inc. (Incorporated herein by reference to Exhibit 10.46 to Knology Broadband, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 333-43339)).
10.29	Pole Attachment Agreement, dated April 12, 2007, between PrairieWave Black Hills, LLC and Black Hills Power, Inc.
10.30	Carrier Services Agreement dated July 16, 2001, between Business Telecom, Inc. and Knology, Inc. (Incorporated herein by reference to Exhibit 10.2 to Knology, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 (File No. 000-32647)).
10.31*	Reseller Services Agreement dated September 9, 1998 between Business Telecom, Inc. and Knology Holdings, Inc. (Incorporated herein by reference to Exhibit 10.51 to Knology Broadband, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 333-43339)).
10.32*	Private Line Services Agreement dated September 10, 1998 between BTI Communications Corporation and Knology Holdings, Inc. (Incorporated herein by reference to Exhibit 10.52 to Knology Broadband, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 333-43339)).
10.33	Right of First Refusal and Option Agreement, Dated November 19, 1999 by and between Knology of Columbus, Inc. and ITC Service Company, Inc. (Incorporated herein by reference to Exhibit 10.60 to Knology, Inc.’s Registration Statement on Form S-1 (File No. 333-89179)).
10.34	Services Agreement dated November 2, 1999 between Knology, Inc. and ITC Service Company, Inc. (Incorporated herein by reference to Exhibit 10.61 to Knology, Inc.’s Registration Statement on Form S-1 (File No. 333-89179)).
10.35	Support Agreement, dated November 2, 1999 between Interstate Telephone Company, Inc. and ITC Service Company, Inc. (Incorporated herein by reference to Exhibit 10.62 to Knology, Inc.’s Registration Statement on Form S-1 (File No. 333-89179)).
10.36**	Knology, Inc. Amended and Restated 2002 Long Term Incentive Plan (Incorporated by reference to Exhibit B to Knology, Inc.’s Proxy Statement for the 2004 Annual Meeting of Shareholders (File No. 000-32647)).
10.37	Warrant Agreement, dated as of December 3, 1999, between Knology, Inc. and United States Trust Company of New York (including form of Warrant Certificate) (Incorporated herein by reference to Exhibit 10.65 to Knology, Inc.’s Registration Statement on Form S-1 (File No. 333-89179)).
10.38	Warrant Registration Rights Agreement, dated as of December 3, 1999, between Knology, Inc. and United States Trust Company of New York (Incorporated herein by reference to Exhibit 10.66 to Knology, Inc.’s Registration Statement on Form S-1 (File No. 333-89179)).
10.39	Knology, Inc. Spin-Off Plan (Incorporated herein by reference to Exhibit 10.71 to Knology, Inc.’s Registration Statement on Form S-1 (File No. 333-89179)).
10.40	Residual Note from Knology, Inc. to ITC Holding Company, Inc. (Incorporated herein by reference to Exhibit 10.74 to Knology, Inc.’s Registration Statement on Form S-1 (File No. 333-89179)).

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Exhibit No.	Exhibit Description
10.41	Joint Ownership Agreement dated as of December 8, 1998, among ITC Service Company, Powertel, Inc., ITC/\DeltaCom Communications, Inc. and Knology Holdings, Inc. (Incorporated herein by reference to Exhibit 10.48 to Knology, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 000-32647)).
10.42*	On/Line Operating and License Agreement dated March 18, 1998 between Knology Holdings, Inc. and CableData, Inc. (Incorporated herein by reference to Exhibit 10.49 to Knology, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 000-32647)).
10.43*	Dedicated Capacity Agreement between DeltaCom and Knology Holdings, Inc. dated August 22, 1997. (Incorporated herein by reference to Exhibit 10.50 to Knology, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 000-32647)).
10.44*	Agreement for Telecommunications Services dated April 28, 1999 between ITC/\DeltaCom Communications, Inc. and Knology Holdings, Inc. (Incorporated herein by reference to Exhibit 10.51 to Knology, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 000-32647)).
10.45*	Amendment to Master Capacity Lease dated November 1, 1999 between Interstate Fibernet, Inc. and Knology Holdings, Inc. (Incorporated herein by reference to Exhibit 10.52 to Knology, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 000-32647)).
10.46	Duct Sharing Agreement dated July 27, 1999 between Knology Holdings, Inc. and Interstate Fiber Network. (Incorporated herein by reference to Exhibit 10.53 to Knology, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 000-32647)).
10.47	Assumption of Lease Agreement dated November 9, 1999 between Knology Holdings, Inc. ITC Holding Company, Inc. and J. Smith Lanier II. (Incorporated herein by reference to Exhibit 10.54 to Knology, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 000-32647)).
10.48	Assumption of Lease Agreement dated November 9, 1999 among Knology Holdings, Inc. ITC Holding Company, Inc. and Midtown Realty, Inc. (Incorporated herein by reference to Exhibit 10.55 to Knology, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 000-32647)).
10.49*	Contract for Centrex Switching Services dated January 4, 1999 between Interstate Telephone Company and InterCall, Inc. (Incorporated herein by reference to Exhibit 10.56 to Knology, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 000-32647)).
10.50	Sublease Agreement, dated as of December 30, 2003, by and between Verizon Media Ventures, Inc. and Knology Broadband of Florida, Inc. (Incorporated herein by reference to Exhibit 10.53 to Knology, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 000-32647)).
10.51	Transfer Agreement, dated January 7, 2004, by and between Pinellas County, Florida, Verizon Media Ventures Inc., Knology Broadband of Florida, Inc. and Knology New Media, Inc. (Incorporated herein by reference to Exhibit 10.56 to Knology, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 000-32647)).
10.52	City of St. Petersburg Ordinance No. 643-G, dated November 20, 2003, Approving an Extension of the Knology Broadband of Florida, Inc. Cable Television Franchise from September 9, 2006 to September 9, 2009 (Incorporated herein by reference to Exhibit 10.57 to Knology, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 000-32647)).
10.53	Transfer Agreement, dated December 16, 2003, by and between the City of Clearwater and Verizon Media Ventures Inc., Knology, Inc., Knology Broadband of Florida, Inc. and Knology New Media, Inc. (Incorporated herein by reference to Exhibit 10.58 to Knology, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 000-32647)).

71

Exhibit No.	Exhibit Description
10.54	MCI Internet Dedicated OC12 Burstable Agreement, dated June 11, 2003, by and between Knology, Inc. and MCI WORLDCOM Communications, Inc. (Incorporated herein by reference to Exhibit 10.59 to Knology, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 000-32647)).
10.55	Consent to Assignment and Assumption, dated December 17, 2003, among Verizon Media Ventures Inc., Progress Energy Florida, Inc. and Knology Broadband of Florida, Inc. (Incorporated herein by reference to Exhibit 10.60 to Knology, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 000-32647)).
10.56	Lease, dated March 5, 2004, by and between Ted Alford and Knology, Inc. (Incorporated herein by reference to Exhibit 10.61 to Knology, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 000-32647)).
10.57**	Form of Stock Option Agreement (Incorporated herein by reference to Exhibit 10.62 to Knology, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 000-32647)).
10.58**	Description of Named Executive Officer and Director Compensation Arrangements (Incorporated herein by reference to Exhibit 10.57 to Knology, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2005 (File No. 000-32647)).
10.59	Amended and Restated Credit Agreement, dated as of March 14, 2007, among Knology, Inc., as Borrower and the Lenders and Issuers Party thereto and Credit Suisse, as Administrative Agent and Collateral Agent and Jefferies & company, Inc., as Syndication Agent, Royal Bank of Canada and CIT Lending Services Corporation, as Co-Documentation Agents, and Credit Suisse Securities (USA) LLC, as Sole Bookrunner and Sole Lead Arranger (Incorporated herein by reference to Exhibit 10.1 to Knology, Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2007 (File No. 000-32647)).
10.60	Amended and Restated Pledge and Security Agreement, dated as of April 3, 2007, by and among Knology, Inc. as a Grantor and Each Other Grantor From Time to Time Party Thereto and Credit Suisse, Cayman Islands Branch, as Collateral Agent (Incorporated herein by reference to Exhibit 10.4 to Knology, Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2007 (File No. 000-32647)).
10.61	Amended and Restated Trademark Security Agreement, dated as of April 3, 2007, by and among Knology, Inc., Knology Broadband, Inc., Valley Telephone Co., LLC, Black Hills FiberCom, LLC and PrairieWave Communications, Inc., each as a Grantor and Each Other Grantor From Time to Time Party Thereto and Credit Suisse, Cayman Islands Branch, as Collateral Agent (Incorporated herein by reference to Exhibit 10.5 to Knology, Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2007 (File No. 000-32647)).
10.62	Amended and Restated Guaranty, dated as of April 3, 2007, executed by each Guarantor From Time to Time Party Thereto in Favor of the Administrative Agent, the Collateral Agent, each Lender, each Issuer and Each Other Holder of an Obligation (Incorporated herein by reference to Exhibit 10.6 to Knology, Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2005 (File No. 000-32647)).
10.63	Revolving Note, dated as of April 3, 2007, in favor of Royal Bank of Canada (Incorporated herein by reference to Exhibit 10.2 to Knology, Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2005 (File No. 000-32647)).
10.64	Revolving Note, dated as of April 3, 2007, in favor of CoBank, ACB (Incorporated herein by reference to Exhibit 10.3 to Knology, Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2005 (File No. 000-32647)).

72

Exhibit No.	Exhibit Description
10.65**	Knology, Inc. 2006 Incentive Plan (Incorporated herein by reference to Exhibit 99.1 to Knology Inc.’s Current Report on Form 8-K filed on May 9, 2006 (File No. 000-32647)).
10.66	Amended and Restated Credit Agreement
21.1	Subsidiaries of Knology, Inc.
23.1	Consent of BDO Seidman, LLP.
23.2	Consent of Deloitte & Touche LLP.
31.1	Certification of the Chief Executive Officer of Knology, Inc. pursuant to Securities Exchange Act Rule 13a-14.
31.2	Certification of the Chief Financial Officer of Knology, Inc. pursuant to Securities Exchange Act Rule 13a-14.
32.1	Statement of the Chief Executive Officer of Knology, Inc. pursuant to §18 U.S.C. S. 1350.
32.2	Statement of the Chief Financial Officer of Knology, Inc. pursuant to §18 U.S.C. S. 1350.

* Confidential treatment has been requested pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. The copy on file as an exhibit omits the information subject to the confidentiality request. Such omitted information has been filed separately with the Commission.

** Compensatory plan or arrangement.

73

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.

KNOLOGY, INC.
By:	/s/    RODGER L. JOHNSON
	Rodger L. Johnson
	President and Chief Executive Officer

March 14, 2008

(Date)

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

SIGNATURE	TITLE	DATE
/s/    CAMPBELL B. LANIER, III         Campbell B. Lanier, III	Chairman of the Board     and Director	March 14, 2008
/s/    RODGER L. JOHNSON         Rodger L. Johnson	President, Chief Executive Officer     and Director     (Principal executive officer)	March 14, 2008
/s/    M. TODD HOLT         M. Todd Holt	Chief Financial Officer,     Vice President of Finance and     Administration, Treasurer and     Corporate Controller     (Principal financial officer and     principal accounting officer)	March 14, 2008
/s/    ALAN A. BURGESS         Alan A. Burgess	Director	March 14, 2008
/s/    DONALD W. BURTON         Donald W. Burton	Director	March 14, 2008
/s/    EUGENE I. DAVIS         Eugene I. Davis	Director	March 14, 2008
/s/    O. GENE GABBARD         O. Gene Gabbard	Director	March 14, 2008
/s/    WILLIAM H. SCOTT III         William H. Scott III	Director	March 14, 2008

74

I ndex to Consolidated Financial Statements

Knology, Inc.
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting	F-2
Reports of Independent Registered Public Accounting Firms	F-3
Consolidated Balance Sheets as of December 31, 2006 and 2007	F-5
Consolidated Statements of Operations for the Years Ended December 31, 2005, 2006, and 2007	F-6
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2005, 2006, and 2007	F-7
Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2006, and 2007	F-8
Notes to Consolidated Financial Statements	F-10

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Board of Directors and Stockholders

Knology, Inc.

West Point, Georgia

We have audited Knology, Inc.’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Knology, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit 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 effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed 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. A company’s 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 transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of 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 management and directors of the company; 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, internal control over financial reporting 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.

As indicated in the accompanying “Item 9A. Management’s Report on Internal Control over Financial Reporting”, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of PrairieWave Holdings, Inc., which was acquired on April 3, 2007, and which is included in the consolidated balance sheets of Knology, Inc. as of December 31, 2007, and the related consolidated statements of income, stockholders’ equity, and cash flows for the year then ended. PrairieWave Holdings, Inc. constituted 43% and (20)% of total assets and net assets, respectively, as of December 31, 2007, and 19% and (16)% of revenues and net income (loss), respectively, for the year then ended. Management did not assess the effectiveness of internal control over financial reporting of PrairieWave Holdings, Inc. because of the timing of the acquisition which was completed on April 3, 2007. Our audit of internal control over financial reporting of Knology, Inc. also did not include an evaluation of the internal control over financial reporting of PrairieWave Holdings, Inc.

In our opinion, Knology, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Knology, Inc. as of December 31, 2007 and 2006, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2007 and our report dated March 14, 2008 expressed an unqualified opinion thereon.

/s/ BDO Seidman, LLP

Atlanta, Georgia

March 14, 2008

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Knology, Inc.

West Point, Georgia

We have audited the accompanying consolidated balance sheets of Knology, Inc. as of December 31, 2007 and 2006 and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Knology, Inc. at December 31, 2007 and 2006, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Knology, Inc.’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 14, 2008 expressed an unqualified opinion thereon.

/s/ BDO Seidman, LLP

Atlanta, Georgia

March 14, 2008

F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Knology, Inc.:

We have audited the accompanying consolidated statements of operations, stockholders’ equity and cash flows for the year ended December 31, 2005 of Knology, Inc. and subsidiaries (“the Company”). These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of the Company for the year ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

Atlanta, Georgia

March 20, 2006

F-4

KNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

	DECEMBER 31,
	2006			2007
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	11,577		$	46,448
Restricted cash		1,620			1,459
Accounts receivable, net of allowance for doubtful accounts of $687 and $975 as of December 31, 2006 and 2007, respectively		22,511			30,154
Prepaid expenses and other		2,509			2,198
Total current assets		38,217			80,259
PROPERTY, PLANT AND EQUIPMENT, NET:
System and installation equipment		614,422			796,922
Test and office equipment		53,182			62,537
Automobiles and trucks		8,442			9,707
Production equipment		781			781
Land		4,281			6,108
Buildings		17,608			35,734
Construction and premise inventory		7,613			8,329
Leasehold improvements		2,340			2,368
		708,669			922,486
Less accumulated depreciation and amortization		(464,838	)		(519,010	)
Property, plant, and equipment, net		243,831			403,476
OTHER LONG-TERM ASSETS:
Goodwill		40,834			98,638
Deferred debt issuance costs, net		9,912			11,092
Interest rate hedge instrument		1,474			0
Investments		1,243			2,536
Intangible and other assets, net		1,050			5,436
Total assets	$	336,561		$	601,437
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt	$	2,302		$	6,162
Accounts payable		19,076			26,834
Accrued liabilities		15,525			25,865
Unearned revenue		10,984			14,588
Total current liabilities		47,887			73,449
NONCURRENT LIABILITIES:
Long-term debt, net of current portion		270,711			549,156
Interest rate hedge instrument		0			13,782
Warrants		590			0
Total noncurrent liabilities		271,301			562,938
Total liabilities		319,188			636,387
COMMITMENTS AND CONTINGENCIES (NOTE 6)
STOCKHOLDERS’ EQUITY:
Preferred stock, $.01 par value per share; 199,000,000 shares authorized, 0 shares issued and outstanding at December 31, 2006 and 2007, respectively		0			0
Non-voting common stock, $.01 par value per share; 25,000,000 shares authorized, none outstanding		0			0
Common stock, $.01 par value per share; 200,000,000 shares authorized, 34,780,896 and 35,310,012 shares issued and outstanding at December 31, 2006 and 2007, respectively		348			353
Additional paid-in capital		584,017			589,389
Accumulated other comprehensive loss		0			(13,782	)
Accumulated deficit		(566,992	)		(610,910	)
Total stockholders’ equity (deficit)		17,373			(34,950	)
Total liabilities and stockholders’ equity	$	336,561		$	601,437

See notes to consolidated financial statements.

F-5

KNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

	YEAR ENDED DECEMBER 31,
	2005			2006			2007
OPERATING REVENUES:
Video	$	103,039		$	114,884		$	146,457
Voice		77,602			82,434			117,316
Data		48,453			58,599			78,986
Other		1,763			3,074			4,893
Total operating revenues		230,857			258,991			347,652
OPERATING EXPENSES:
Direct costs (excluding depreciation and amortization)		69,616			75,497			104,060
Selling, general and administrative expenses		116,010			118,216			141,308
Depreciation and amortization		74,490			68,189			85,776
Capital markets activity and other		606			1,623			219
Total operating expenses		260,722			263,525			331,363
OPERATING INCOME (LOSS)		(29,865	)		(4,534	)		16,289
OTHER INCOME (EXPENSE):
Interest income		1,074			365			784
Interest expense		(34,719	)		(34,087	)		(41,406	)
Loss on debt extinguishment		0			0			(27,375	)
Gain (loss) on interest rate derivative instrument		267			(63	)		(758	)
Gain (loss) on adjustment of warrants to market		37			(464	)		(262	)
Other income (expense), net		(12	)		25			(53	)
Total other expense		(33,353	)		(34,224	)		(69,070	)
LOSS FROM CONTINUING OPERATIONS		(63,218	)		(38,758	)		(52,781	)
INCOME FROM DISCONTINUED OPERATIONS (includes gains on disposal of $8,320 and $8,251 in 2005 and 2007, respectively) (Note 10)		8,404			0			8,863
NET LOSS		(54,814	)		(38,758	)		(43,918	)
PREFERRED STOCK DIVIDENDS		(588	)		(747	)		0
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(55,402	)	$	(39,505	)	$	(43,918	)
LOSS FROM CONTINUING OPERATIONS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(2.69	)	$	(1.41	)	$	(1.51	)
INCOME FROM DISCONTINUED OPERATIONS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS		0.35			0.00			0.25
BASIC AND DILUTED NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(2.33	)	$	(1.41	)	$	(1.25	)
BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING		23,751,085			27,931,470			35,064,110

See notes to consolidated financial statements.

F-6

KNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(DOLLARS IN THOUSANDS)

	COMMON STOCK			ADDITIONAL PAID-IN CAPITAL			ACCUMULATED OTHER COMPREHENSIVE LOSS			ACCUMULATED DEFICIT			TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)
	SHARES	AMOUNT
BALANCE, December 31, 2004	23,697,787	$	237	$	559,452		$	0		$	(473,420	)	$	86,269
Net loss											(54,814	)		(54,814	)
Exercise of stock options	71,183		1		121									122
Non-cash stock option compensation					2,101									2,101
Preferred stock offering costs					(348	)								(348	)
Preferred stock dividends					(588	)								(588	)
Exercise of warrants	16,512		1		33									34
Conversion of preferred stock to common stock	367,719		3		732									735
BALANCE, December 31, 2005	24,153,201	$	242	$	561,503		$	0		$	(528,234	)	$	33,511
Net loss											(38,758	)		(38,758	)
Exercise of stock options	201,295		2		582									584
Non-cash stock option compensation	105,495		1		2,024									2,025
Preferred stock dividends					(747	)								(747	)
Exercise of warrants	18,777				161									161
Conversion of preferred stock to common stock	10,302,128		103		20,494									20,597
BALANCE, December 31, 2006	34,780,896	$	348	$	584,017		$	0		$	(566,992	)	$	17,373
Net loss											(43,918	)		(43,918	)
Change in fair value of interest rate swap								(13,782	)					(13,782	)
Exercise of stock options	478,178		4		1,720									1,724
Non-cash stock option compensation					2,799									2,799
Exercise of warrants	50,938		1		853									854
BALANCE, December 31, 2007	35,310,012	$	353	$	589,389		$	(13,782	)	$	(610,910	)	$	(34,950	)

See notes to consolidated financial statements.

F-7

KNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

	YEAR ENDED DECEMBER 31,
	2005			2006			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(54,814	)	$	(38,758	)	$	(43,918	)
Income and gain on discontinued operations		8,404			0			8,863
Loss from continuing operations		(63,218	)		(38,758	)		(52,781	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		74,490			68,189			85,776
Loss on debt extinguishment		544			0			9,251
Non-cash stock option compensation		2,101			2,025			2,799
Accretion of second lien term loan		332			660			169
Non-cash bank loan interest expense		1,226			3,841			3,077
Non-cash (gain) loss on interest rate derivative instrument		(267	)		63			758
Provision for bad debt		4,080			3,449			5,004
Loss on disposition of assets		25			333			67
(Gain) loss on adjustment of warrants to market		(37	)		464			262
Changes in operating assets and liabilities:
Accounts receivable		(4,439	)		(6,677	)		(6,592	)
Prepaid expenses and other		91			(637	)		1,427
Accounts payable		(419	)		(934	)		344
Accrued liabilities		6,420			(2,325	)		7,316
Unearned revenue		(1,706	)		850			133
Total adjustments		82,441			69,301			109,791
Net cash provided by operating activities from continuing operations		19,223			30,543			57,010
Net cash provided by (used in) operating activities from discontinued operations		(405	)		0			497
Net cash provided by operating activities		18,818			30,543			57,507
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(31,613	)		(27,821	)		(45,792	)
Purchase of short term investments		(4,000	)		0			0
Proceeds from sale of short term investments		16,625			0			0
Purchase of PrairieWave, net of cash acquired		0			0			(256,162	)
Franchise and other intangible expenditures		(295	)		(246	)		(377	)
Proceeds from sale of property		170			122			498
Change in restricted cash		3,828			1,917			161
Net cash used in investing activities from continuing operations		(15,285	)		(26,028	)		(301,672	)
Net cash provided by investing activities from discontinued operations		9,730			0			8,599
Net cash used in investing activities		(5,555	)		(26,028	)		(293,073	)

F-8

KNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)

(DOLLARS IN THOUSANDS)

	YEAR ENDED DECEMBER 31,
	2005			2006			2007
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long term debt		280,000			0			555,000
Principal payments on debt and short-term borrowings		(295,992	)		(2,243	)		(273,688	)
Expenditures related to issuance of long term debt		(9,675	)		(3,464	)		(13,316	)
Proceeds from issuance of convertible preferred stock		20,000			0			0
Expenditures related to issuance of convertible preferred stock		(348	)		0			0
Stock options exercised		122			584			1,724
Proceeds from unwind of interest rate derivative instrument		(1,270	)		0			716
Proceeds from exercised warrants		1			2			1
Net cash provided by (used in) financing activities		(7,162	)		(5,121	)		270,437
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		6,101			(606	)		34,871
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		6,082			12,183			11,577
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	12,183		$	11,577		$	46,448
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest	$	30,906		$	30,186		$	32,679
Non-cash financing activities: Debt acquired (adjusted) in capital lease transactions	$	1,303		$	(52	)	$	682
Preferred stock dividend paid in kind	$	588		$	747		$	0
Preferred stock conversion to common	$	0		$	19,285		$	0
Detail of acquisition:
Accounts receivables, net		0			0			6,287
Prepaid expenses		0			0			1,322
Property, plant and equipment		0			0			197,726
Goodwill		0			0			57,804
Customer base		0			0			4,402
Intangible and other assets		0			0			1,234
Investments		0			0			1,293
Accounts payable		0			0			(7,414	)
Accrued liabilities		0			0			(3,022	)
Unearned revenue		0			0			(3,470	)
Cash paid for acquisition, net of cash acquired of $2,680	$	0		$	0		$	256,162

See notes to consolidated financial statements

F-9

Notes to Consolidated Financial Statements

December 31, 2005, 2006 and 2007

(dollars in thousands, except share data)

1. Organization, Nature of Business, and Basis of Presentation

Organization and Nature of Business

Knology, Inc. and its subsidiaries (“Knology” or the “Company”) is a publicly traded company incorporated under the laws of the State of Delaware in September 1998.

Knology and its subsidiaries own and operate an advanced interactive broadband network and provide residential and business customers broadband communications services, including analog and digital cable television, local and long-distance telephone, high-speed Internet access, and broadband carrier services to various markets in the southeastern and midwestern United States. Certain subsidiaries are subject to regulation by state public service commissions of applicable states for intrastate telecommunications services. For applicable interstate matters related to telephone service, certain subsidiaries are subject to regulation by the Federal Communications Commission.

Basis of presentation

The consolidated financial statements of Knology have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The statements include the accounts of the Company’s wholly owned subsidiaries. All intercompany transactions and balances have been eliminated. Investments in which the Company does not exercise significant influence are accounted for using the cost method of accounting.

The Company operates as one operating segment.

Certain prior year amounts have been reclassified to conform to current year presentation. Corresponding changes have been made to the Company’s Consolidated Balance Sheet, Statements of Operations and Statements of Cash Flows as appropriate.

On April 3, 2007, the Company completed its acquisition of PrairieWave Holdings, Inc. (“PrairieWave”), a voice, video and high-speed Internet broadband services provider in the Rapid City and Sioux Falls, South Dakota regions, as well as portions of Minnesota and Iowa. The financial position and results of operations for PrairieWave Holdings, Inc. are included in the Company’s consolidated financial statements since the date of acquisition.

On January 4, 2008, the Company completed its acquisition of Graceba Total Communications Group, Inc. (“Graceba”), a voice, video and high-speed Internet broadband services provider in Dothan, Alabama. The Company’s presented consolidated financial statements do not include Graceba Total Communications Group, Inc. financial condition or results of operations.

2. Summary of Significant Accounting Policies

Accounting estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. On an on-going basis, the Company evaluates its estimates, including those related to collectibility of accounts receivable, valuation of inventories and investments, useful lives of property, plant and

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equipment, recoverability of goodwill and intangible assets, income taxes and contingencies. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. These changes in estimates are recognized in the period they are realized.

Cash and cash equivalents

Cash and cash equivalents are highly liquid investments with a maturity of three months or less at the date of purchase and consist of time deposits and investment in money market funds with commercial banks and financial institutions.

Restricted cash

Restricted cash is presented as a current asset since the associated maturity dates expire within one year of the balance sheet date. As of December 31, 2006, the Company had $1,620 of cash that is restricted in use, all of which is pledged as collateral for amounts potentially payable under certain insurance, lease, franchise and surety bond agreements. As of December 31, 2007, the Company had $1,459 of cash that is restricted in use, $590 of which the Company has pledged as collateral related to certain insurance, franchise and surety bond agreements. The remaining $869 is in escrow in connection with the sale of discontinued operations (see Note 10).

Allowance for doubtful accounts

The allowance for doubtful accounts represents the Company’s best estimate of probable losses in the accounts receivable balance. The allowance is based on known troubled accounts, historical experience and other currently available evidence. The Company writes off and sends to collections any accounts receivable 110 days past due. Activity in the allowance for doubtful accounts is as follows:

Year ended December 31	Balance at beginning of period		Charged to operating expenses		Write-offs, net of recoveries		Balance at end of period
2005	$	724	$	4,080	$	3,918	$	886
2006	$	886	$	3,449	$	3,648	$	687
2007	$	687	$	5,004	$	4,716	$	975

Property, plant, and equipment

Property, plant, and equipment are stated at cost. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the assets, commencing when the asset is installed or placed in service. Maintenance, repairs, and renewals are charged to expense as incurred. The cost and accumulated depreciation of property and equipment disposed of are removed from the related accounts, and any gain or loss is included in or deducted from income. Depreciation and amortization (excluding telephone plant which is depreciated by composite rates regulated by the Public Service Commission), are provided over the estimated useful lives as follows:

	Years
Buildings	25
System and installation equipment	3-10
Production equipment	9
Test and office equipment	3-7
Automobiles and trucks	5
Leasehold improvements	5-25

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Depreciation expense for the years ended December 31, 2005, 2006 and 2007 was $73,581, $68,351 and $83,989, respectively. Inventories are valued at the lower of cost (determined on a weighted average basis) or market and include customer premise equipment and certain plant construction materials. These items are transferred to system and installation equipment when installed.

Goodwill and intangible assets

The Company constructs and operates its cable systems under non-exclusive cable franchises that are granted by state or local governmental authorities for varying lengths of time. As of December 31, 2007, the Company has obtained these franchises through acquisitions of cable systems accounted for as purchase business combinations and construction of new cable systems.

Summarized below are the carrying values and accumulated amortization of intangible assets that will continue to be amortized under FASB Statement No. 142, “Accounting for Goodwill and Other Intangible Assets” (“SFAS No. 142”), as well as the carrying value of goodwill.

	2006		2007		Amortization Period (Years)
Customer base	$	460	$	4,862	2-3
Other		914		2,517	1-10
Gross carrying value of intangible assets subject to amortization		1,374		7,379
Less accumulated amortization		742		2,528
Net carrying value		632		4,851
Goodwill		40,834		98,638
Total goodwill and intangibles	$	41,466	$	103,489

Goodwill represents the excess of the cost of businesses acquired over fair value or net identifiable assets at the date of acquisition. Goodwill is subject to a periodic impairment assessment by applying a fair value test based upon a two-step method. The first step of the process compares the fair value of the reporting unit with the carrying value of the reporting unit, including any goodwill. The Company utilizes a discounted cash flow valuation methodology to determine the fair value of the reporting unit. If the fair value of the reporting unit exceeds the carrying amount of the reporting unit, goodwill is deemed not to be impaired in which case the second step in the process is unnecessary. If the carrying amount exceeds fair value, the Company performs the second step to measure the amount of impairment loss. Any impairment loss is measured by comparing the implied fair value of goodwill, calculated per SFAS No. 142, with the carrying amount of goodwill at the reporting unit, with the excess of the carrying amount over the fair value recognized as an impairment loss. The Company has adopted January 1 as the calculation date and has evaluated these assets as of January 1, 2006, 2007 and 2008, and no impairment was identified.

Amortization expense related to intangible assets was $378, $(162) and $1,787 for the years ended December 31, 2005, 2006 and 2007, respectively. In April 2006, the Company adjusted amortization of multiple dwelling unit signing bonuses over the life of the contract instead of the one year policy which resulted in a negative expense of $370.

F-12

Scheduled amortization of intangible assets for the next five years as of December 31, 2007 is as follows:

2008	$	1,532
2009		1,143
2010		1,123
2011		856
2012		89
Thereafter		108
	$	4,851

Deferred debt issuance costs

Deferred debt issuance costs include costs associated with the issuance and refinancing of debt and credit facilities (Note 4). Deferred debt issuance costs are amortized to interest expense over the contractual term of the debt using the effective interest method. Deferred debt issuance costs and the related useful lives and accumulated amortization at December 31, 2006 and 2007 are as follows:

	2006			2007			Amortization Period (Years)
Previous deferred issuance costs	$	8,764		$	9,912		4-6
Expenditures related to bank loan		3,464			13,316		4-6
Accumulated amortization		(2,316	)		(2,934	)
Loss on early extinguishment of debt		0			(9,202	)
Deferred issuance costs, net	$	9,912		$	11,092		4-6

Derivative Financial Instruments

The Company uses interest rate swap and interest rate cap contracts to manage the impact of interest rate changes on earnings and operating cash flows. Interest rate swaps involve the receipt of variable-rate amounts in exchange for fixed-rate payments over the life of the agreements without exchange of the underlying principal amount. Interest rate caps involve the receipt of variable-rate amounts beyond a specified strike price over the life of the agreements without exchange of the underlying principal amount. The Company believes these agreements are with counter-parties who are creditworthy financial institutions.

The Company has adopted FASB Statement No. 133 (subsequently amended by SFAS Nos. 137 and 138), “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”). This statement requires that all derivatives be recorded in the balance sheet as either an asset or liability measured at fair value, and that changes in fair value be recognized currently in earnings unless specific hedge accounting criteria are met. For derivatives designated as qualifying cash flow hedges, the effective portion of changes in fair value of the derivatives is initially recognized in other comprehensive income and subsequently reclassified as an increase or decrease to interest expense in the same periods in which the related interest on the variable-rate debt affects earnings. The ineffective portions are recognized directly in earnings. Upon early termination of a derivative instrument that has been designated as a hedge, the resulting gains or losses are deferred and amortized as adjustments to interest expense of the related debt over the remaining period covered by the terminated instrument. The Company has formally documented, designated and assessed at inception of the derivative instruments. Based on criteria listed in SFAS No. 133 pertaining to cash flow derivative instruments that are interest rate swaps, the Company has assessed that the swap agreements are completely effective and therefore there are no ineffectiveness. The Company assesses for ineffectiveness on a quarterly basis. The Company uses derivative instruments as risk management tools and not for trading purposes.

F-13

In July 2005, the Company entered into an interest rate cap agreement with Credit Suisse First Boston International with a notional amount of $280,000 to cap its adjustable LIBOR rate at 5%, mitigating interest rate risk on the first and second lien term loans. The Company paid $1,270 for this cap agreement, which became effective July 29, 2005 and terminated July 29, 2008. The Company did not designate the cap agreement as an accounting hedge under SFAS No. 133. Accordingly changes in fair value of the cap agreement were recorded through earnings as derivative gains/(losses). “Gain (loss) on interest rate derivative instrument” was $267, $(63) and $(758) for the years ended December 31, 2005, 2006 and 2007, respectively. On April 18, 2007, the Company unwound its existing interest rate cap agreement for $716 cash proceeds.

On April 18, 2007, the Company entered into a new interest rate swap contract to mitigate interest rate risk on a notional amount of $555,000 amortizing 1% annually. The swap agreement fixes 100% of the floating rate debt at 4.977% until July 3, 2010. The interest rate hedge instrument is designated as a hedge under SFAS No. 133. Changes in the fair value of the swap agreement are initially recorded as “Accumulated Other Comprehensive Loss” in the equity section of the balance sheet and subsequently reclassified to “Interest Expense” on the statement of operations. The swap agreement has an estimated fair value of $(13,474) as of December 31, 2007, which approximates the cost to settle the outstanding contract based on dealer quote considering current market rates.

On December 19, 2007, the Company entered into an interest rate swap contract to mitigate interest rate risk on a notional amount of $59,000 amortizing 1% annually, in connection with the first amendment debt associated with the acquisition of Graceba Total Communications. The swap agreement fixes 100% of the floating rate debt at 3.995% until September 30, 2010. The interest rate hedge instrument is designated as a hedge under SFAS No. 133. Changes in the fair value of the swap agreement are recorded as “Accumulated Other Comprehensive Loss” in the equity section of the balance sheet. The swap agreement has an estimated fair value of $(308) as of December 31, 2007, which approximates the cost to settle the outstanding contract based on dealer quote considering current market rates.

Valuation of long-lived assets

Under FASB Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”), the Company reviews long-lived assets for impairment when circumstances indicate the carrying amount of an asset may not be recoverable based on the undiscounted future cash flows of the asset. If the carrying amount of the asset is determined not to be recoverable, a write-down to fair value is recorded. The Company has evaluated these assets as of December 31, 2007, and no impairment was identified.

Direct Costs

Cost of services related to video consists primarily of monthly fees to the National Cable Television Cooperative and other programming providers and is generally based on the average number of subscribers to each program. Cost of services related to voice and data services and other consists primarily of transport cost and network access fees specifically associated with each of these revenue streams. Pole attachment and other network rental expenses consist primarily of pole attachments rents paid to utility companies for space on their utility poles to deliver the Company’s various services and network hub rents.

Stock based compensation

In December 2002, the FASB issued SFAS No. 148 “Accounting for Stock-Based Compensation-Transition and Disclosure,” which amended FASB Statement No. 123 to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amended the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. Finally, this Statement amended APB Opinion No. 28, “Interim Financial Reporting,” to require disclosure about those effects in interim

F-14

financial information. In December 2002, the Company elected to adopt the recognition provisions of SFAS No. 123 which was considered the preferable accounting method for stock-based employee compensation. The Company also elected to report the change in accounting principle using the prospective method in accordance with SFAS No. 148. Under the prospective method, the recognition of compensation costs is applied to all employee awards granted, modified, vested or settled after the beginning of the fiscal year in which the recognition provisions are first applied. As a result, the Company recorded $2,101, $2,025 and $2,799 of non-cash stock option compensation expense for the years ended December 31, 2005, 2006 and 2007, respectively.

Investments

Investments and equity ownership in associated companies consisted of the following at December 31, 2006 and 2007:

	2006		2007
Grande Communications (“Grande”) common stock, 10,946,556 shares in 2006 and 2007.	$	1,243	$	1,243
PrairieWave Condominium Association (“PWCA”)		0		1,293
Investments	$	1,243	$	2,536

At December 31, 2007, the Company, through its wholly owned subsidiaries, owned approximately 1.5% of Grande. The Company’s investment in Grande is accounted for under the cost method of accounting adjusted for impairment write downs.

As part of the PrairieWave acquisition, the Company acquired an investment in PWCA. In 2003, PrairieWave formed PWCA to which it contributed land with a book value of $1,207 and other assets of $86. On June 10, 2003, PrairieWave and a real estate developer entered into a Condominium Unit Purchase Agreement, whereby the developer committed to construct a building connected to PrairieWave’s headquarters building. The real estate developer paid PrairieWave one dollar and granted them the option to acquire its condominium interest in PWCA and the building to be constructed for approximately $5,200. The option is exercisable from June 1, 2012 to May 31, 2013. PrairieWave appoints two members and the real estate developer appoints one member to PWCA’s three-member board. The Company’s investment in PWCA is accounted for under the equity method of accounting.

Accrued liabilities

Accrued liabilities at December 31, 2006 and 2007 consist of the following:

	2006		2007
Accrued trade expenses	$	3,639	$	8,022
Accrued property taxes		2,453		2,612
Accrued compensation		4,901		5,268
Accrued interest		4,532		9,963
Total	$	15,525	$	25,865

Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities are reasonable estimates of their fair values due to the short maturity of these financial instruments.

F-15

Revenue recognition

Knology accounts for the revenue, costs and expense related to residential cable services (including video, voice, data and other services) in accordance with SFAS No. 51 “Financial Reporting by Cable Television Companies.” Installation revenue for residential cable services is recognized to the extent of direct selling costs incurred. Direct selling costs have exceeded installation revenue in all reported periods. Credit risk is managed by disconnecting services to customers who are delinquent.

All other revenue is accounted for in accordance with Staff Accounting Bulletin (SAB) No. 104 “Revenue Recognition.” In accordance with SAB No. 104, revenue from advertising sales is recognized as the advertising is transmitted over the Company’s broadband network. Revenue derived from other sources, including commercial data and other services, is recognized as services are provided, as persuasive evidence of an arrangement exists, the price to the customer is fixed and determinable and collectibility is reasonably assured.

The Company generates recurring revenues for its broadband offerings of video, voice and data and other services. Revenues generated from these services primarily consists of a fixed monthly fee for access to cable programming, local phone services and enhanced services and access to the Internet. Additional fees are charged for services including pay-per-view movies, events such as boxing matches and concerts, long distance service and cable modem rental. Revenues are recognized as services are provided and advance billings or cash payments received in advance of services performed are recorded as unearned revenue.

Advertising costs

The Company expenses all advertising costs as incurred. Approximately $5,189, $5,228 and $6,803 of advertising expense are recorded in the Company’s consolidated statements of operations for the years ended December 31, 2005, 2006, and 2007, respectively.

Sources of supplies

The Company purchases customer premise equipment and plant materials from outside vendors. Although numerous suppliers market and sell customer premise equipment and plant materials, the Company currently purchases each customer premise component from a single vendor and has several suppliers for plant materials. If the suppliers are unable to meet the Company’s needs as it continues to operate its business, it could adversely affect operating results.

Credit risk

The Company’s accounts receivable potentially subject the Company to credit risk, as collateral is generally not required. The Company’s risk of loss is limited due to advance billings to customers for services and the ability to terminate access on delinquent accounts. The potential for material credit loss is mitigated by the large number of customers with relatively small receivable balances. The carrying amounts of the Company’s receivables approximate their fair values.

Income taxes

The Company utilizes the liability method of accounting for income taxes, as set forth in SFAS No. 109, “Accounting for Income Taxes.” Under the liability method, deferred taxes are determined based on the difference between the financial and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Deferred tax benefit represents the change in the deferred tax asset and liability balances (Note 7).

On January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). The Interpretation addresses the determination of whether tax benefits

F-16

claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. FIN 48 also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. At the date of adoption, and as of December 31, 2007, the Company did not have a liability for unrecognized tax benefits.

Net loss per share

The Company follows SFAS No. 128, “Earnings Per Share,” which requires the disclosure of basic net loss per share and diluted net loss per share. Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net loss per share gives effect to all potentially dilutive securities. The effect of the Company’s warrants (1,074,221, 1,055,444 and 1,000,000 in 2005, 2006 and 2007, respectively), stock options (3,026,117, 3,145,617 and 3,080,892 shares in 2005, 2006 and 2007, respectively using the treasury stock method) and preferred stock (1,985,081, zero and zero shares in 2005, 2006 and 2007, respectively) were not included in the computation of diluted EPS as their effect was antidilutive. The warrants expire December 2013 and each warrant is a right to buy one common stock at an exercise price of $9.00 per share.

New accounting pronouncements

In December 2007, the FASB issued SFAS No. 141R , “Business Combinations” (SFAS No. 141R”) and SFAS No. 160, “Consolidations” (“SFAS No. 160”). These statements establish principles and requirements for how an acquirer in a business combination recognizes and measures the assets acquired, liabilities assumed, and any noncontrolling interest (previously referred to as minority interest) in the acquiree. SFAS No. 141R and SFAS No. 160 are effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption is prohibited.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities-Including an Amendment of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 allows companies to measure certain financial instruments at fair value without having to apply complex hedge accounting provisions and to report unrealized gains and losses on items elected items in earnings. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company does not expect that the adoption of SFAS No. 159 will have a material impact on its results of operations or financial position.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements providing a single definition of fair value, which should result in increased consistency and comparability in fair value measurements. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued FSP 157-2 “Partial Deferral of the Effective Date of Statement 157” (“FSP 157-2”). FSP 157-2 delays the effective date of SFAS No. 157 for all nonfinancial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008. The Company does not expect that the adoption of SFAS No. 157 will have a material impact on its results of operations or financial position.

3. Employee Benefit Plan

The Company has a 401(k) Profit Sharing Plan (the “Plan”) for the benefit of eligible employees and their beneficiaries. All employees are eligible to participate in the Plan on the first day of employment. The Plan

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provides for a matching contribution at the discretion of the board up to 8% of eligible contributions. The Company contributions for the years ended December 31, 2005, 2006, and 2007 were $1,006, $1,101 and $1,450, respectively.

4. Long-Term Debt

On June 29, 2005, the Company entered into a First Lien Credit Agreement and Second Lien Credit Agreement providing the Company with aggregate cash proceeds of $280,000. These proceeds, together with cash on hand, were used to repay all amounts outstanding under the Company’s then existing credit facilities and to redeem our 12% senior notes due 2009, which were redeemed on July 29, 2005. The second lien was issued at a discount of 4% for $95,000, which accreted up to a face amount of $99,000 on June 29, 2011.

In 2005, the Company entered into an interest rate cap agreement for a notional amount of $280,000 to cap its variable LIBOR rate at 5%, mitigating interest rate risk on its first and second lien term loans. On April 18, 2007, the Company unwound its existing interest rate cap agreement for $716 cash proceeds. The Company has recorded a loss of $758 for year ended December 31, 2007. The changes in the fair value of the cap agreement were recorded as a “Gain (loss) on interest rate derivative instrument” in other income (expense) since the cap rate agreement was not designated as a hedge under SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities”.

On June 30, 2006, Amendment No. 1 to the First Lien Credit Agreement became effective. The Amendment reduced the interest rate on the Company’s first lien term loan from LIBOR plus 5.5% to LIBOR plus 2.5%. The provisions of the First Lien Credit Agreement required a 2% pre-payment premium of $3,455 for the amendment.

On March 14, 2007, the Company entered into an Amended and Restated Credit Agreement that provides for a $580,000 credit facility, consisting of a $555,000 term loan and a $25,000 revolving credit facility. On April 3, 2007, the Company received proceeds of $555,000 to fund the $255,000 PrairieWave Holdings, Inc. acquisition purchase price, refinance the Company’s first and second lien agreements, and pay transaction costs associated with the transactions. The term loan bears interest at LIBOR plus 2.25% and amortizes at a rate of 1% per annum, payable quarterly, with a June 30, 2012 maturity date.

On April 18, 2007, the Company entered into a new interest rate swap contract to mitigate interest rate risk on a notional amount of $555,000 amortizing 1% annually. The swap agreement fixes 100% of the floating rate debt at 4.977% until July 3, 2010. The interest rate hedge instrument is designated as a hedge under SFAS No. 133. Changes in the fair value of the swap agreement are initially recorded as “Accumulated Other Comprehensive Loss” in the equity section of the balance sheet and subsequently reclassified to “Interest Expense” on the statement of operations.

On January 4, 2008 the Company entered into a First Amendment to the Amended and Restated Credit Agreement (“the Credit Agreement”) which provides for a $59,000 incremental term loan used to fund the $75,000 Graceba Total Communications Group, Inc. acquisition purchase price. The term loan bears interest at LIBOR plus 2.75% and amortizes at a rate of 1% per annum, payable quarterly, with a June 30, 2012 maturity date. In December 2007, the Company entered into a new interest rate swap contract to mitigate interest rate risk on a notional amount of $59,000 amortizing 1% annually. The swap agreement, which became effective January 4, 2008, fixes 100% of the floating rate debt at 3.995% until September 30, 2010. The interest rate hedge instrument is designated as a hedge under SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities.” Changes in the fair value of the swap agreement are initially recorded as “Accumulated Other Comprehensive Loss” in the equity section of the balance sheet and subsequently reclassified to “Interest Expense” on the statement of operations.

F-18

Long-term debt at December 31, 2006 and 2007 consists of the following:

	2006		2007
First Lien term loan, at a rate of LIBOR plus 2.25% (7.48% at December 31, 2007), with $5,550 annual principal amortization paid quarterly ($2,775 for 2007), interest payable quarterly with final principal and any unpaid interest due June 30, 2012	$	0	$	552,225
First Lien term loan, at a rate of LIBOR plus 2.5% (7.88% at December 31, 2006), with $1,850 annual principal amortization paid quarterly ($1,850 for 2006 and 2007), interest payable quarterly with final principal and any unpaid interest due June 29, 2010		171,825		0
Second Lien term loan, with a face amount of $99,000, at a rate of LIBOR plus 10% (13.88% at December 31, 2006, 8.5% cash and 1.5% PIK, $1,521 for 2006, $387 for 2007), interest payable quarterly, with principal and any unpaid interest due June 29, 2011		98,286		0
Capitalized lease obligations, at rates between 7% and 8%, with monthly principal and interest payments through December 2012		2,902		3,093
		273,013		555,318
Less current maturities		2,302		6,162
	$	270,711	$	549,156

Following are maturities of long-term debt for each of the next five years as of December 31, 2007

2008	$	6,162
2009		6,215
2010		6,274
2011		6,443
2012		530,224
Thereafter		0
Total	$	555,318

The first lien and incremental term loans are guaranteed by all of the Company’s subsidiaries. The term loans are also secured by first liens on all of the Company’s assets and the assets of its guarantor subsidiaries.

The Credit Agreement contains customary representations and warranties and various affirmative and negative covenants, including:

• limitations on the incurrence of additional debt;

• limitations on the incurrence of liens;

• restrictions on investments;

• restrictions on the sale of assets;

• restrictions on the payment of cash dividends on and the redemption or repurchase of capital stock;

• mandatory prepayment of amounts outstanding, as applicable, with excess cash flow, proceeds from asset sales, proceeds from the issuance of debt obligations, proceeds from any equity offerings, and proceeds from casualty losses;

• restrictions on mergers and acquisitions, sale/leaseback transactions and fundamental changes in the nature of our business;

• limitations on capital expenditures; and

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• maintenance of minimum ratios of debt to EBITDA (as defined in the credit agreements) and EBITDA to cash interest.

The Credit Agreement also includes customary events of default, including but not limited to:

• nonpayment of principal, interest or other fees or amounts;

• incorrectness of representations and warranties in any material respect;

• violations of covenants;

• cross defaults and cross acceleration;

• bankruptcy;

• material judgments;

• ERISA events;

• actual or asserted invalidity of provisions of or liens created under guarantees or security documents;

• material violations of environmental laws;

• defaults under material contractual obligations; and

• the failure to maintain licenses and franchises if such failure would have a material adverse effect.

As of December 31, 2007, the Company was in compliance with its debt covenants.

The estimated fair value of the Company’s variable-rate debt is subject to the effects of interest rate risk. On December 31, 2007, the estimated fair value of that debt, based on dealer quote considering current market rates, was approximately $530,000, compared to a carrying value of $552,000.

5. Operating and Capital Leases

The Company leases office space, utility poles, and other assets for varying periods, some of which have renewal or purchase options and escalation clauses. Leases that expire are generally expected to be renewed or replaced by other leases. Total rental expense for all operating leases was approximately $2,724, $4,132 and $4,435 for the years ended December 31, 2005, 2006, and 2007, respectively. Future minimum rental payments required under the operating and capital leases that have initial or remaining non-cancelable lease terms, in excess of one year as of December 31, 2007 are as follows:

	Capitalized Leases		Operating Leases
2008	$	838	$	4,391
2009		840		3,328
2010		842		2,674
2011		1,333		2,000
2012		205		1,642
Thereafter		0		5,067
Total minimum lease payments	$	4,058	$	19,102
Less imputed interest		965
Present value of minimum capitalized lease payments		3,093
Less current portion		612
Long-term capitalized lease obligations	$	2,481

F-20

The Company has recorded $3,604, $3,552 and $4,233 for the years ended December 31, 2005, 2006 and 2007, respectively, as property, plant and equipment due to capital lease transactions for land, Video on Demand equipment, and for the buildout of various multiple dwelling units. The amortization of the capital leases is recorded in Depreciation and Amortization with other property, plant and equipment. The base rentals recorded to the multiple dwelling unit capital leases are contingent upon the Company acquiring subscribers. The Company has agreed to pay various amounts per subscriber to the lessors as the base monthly rentals. The lease terms are seven years. In accordance with FASB No. 13, “Accounting for Leases,” the Company has projected the number of subscribers to record the capital asset and liability and will update the projections to actual subscribers on a quarterly basis.

6. Commitments and Contingencies

Purchase commitments

The Company has entered into contracts with various entities to provide programming to be aired by the Company. The Company pays a monthly fee for the programming services, generally based on the number of average video subscribers to the program, although some fees are adjusted based on the total number of video subscribers to the system and/or the system penetration percentage. Total programming fees were approximately $48,649, $52,612 and $71,412 for the years ended December 31, 2005, 2006, and 2007, respectively. The Company estimates that it will pay approximately $80,773, $81,000 and $81,000 in programming fees under these contracts in 2008, 2009 and 2010, respectively.

Legal proceedings

The Company is subject to litigation in the normal course of its business. However, in the Company’s opinion, there is no legal proceeding pending against it that would have a material adverse effect on its financial position, results of operations or liquidity. The Company is also a party to regulatory proceedings affecting the segments of the communications industry generally in which it engages in business.

Unused Letters of Credit

The Company’s unused letters of credit for vendors and suppliers was $1,526 as of December 31, 2007, which reduces the funds available under the $25,000 five year senior secured revolving loan and letter of credit facility.

7. Income Taxes

The benefit/(provision) for income taxes from continuing operations consisted of the following for the years ended December 31, 2006 and 2007:

	2006			2007
Current	$	0		$	0
Deferred		2,673			26,988
(Increase) decrease in valuation allowance		(2,673	)		(26,988	)
Income tax benefit (provision)	$	0		$	0

The Company had a net increase in deferred tax liabilities of $5,997 as a result of the PrairieWave acquisition. Accordingly, there is a $5,997 decrease in the valuation allowance attributable to the acquisition of PrairieWave.

F-21

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of deferred tax assets and liabilities as of December 31, 2006 and 2007 are as follows:

	2006			2007
Current deferred tax assets:
Inventory reserve	$	351		$	11
Allowance for doubtful accounts		255			356
Other		1,012			1,748
Valuation allowance		(1,618	)		(2,115	)
Total current deferred taxes		0			0
Non-current deferred tax assets:
Net operating loss & other attributes carryforwards		58,644			83,016
Deferred loan interest		587			0
Deferred revenues		252			188
Depreciation and amortization		(29,650	)		(35,542	)
Investment marked to market		4,626			4,626
Compensation and benefits		656			1,036
Gain on discontinued operations		(2,753	)		0
Other		1,145			677
Valuation allowance		(33,507	)		(54,001	)
Total non-current deferred tax assets		0			0
Net deferred income taxes	$	0		$	0

The $6,426 Other deferred tax asset from 2006 has been broken out to give more detail and is now reported as Investment mark to market, Compensation and benefits, and Other.

At December 31, 2007, the Company had available federal net operating loss carryforwards of approximately $228,000, of which $42,000 relate to the PrairieWave acquisition, that expire from 2008 to 2027. Approximately $74,000 of this carryforward is subject to annual limitations due to a change in ownership of the Company, as defined in the Internal Revenue Code. In addition, the Company had approximately $2,200 in federal net operating losses from share-based payment awards for which it has not recorded a financial statement benefit as per SFAS No. 123R. The Company also had various state net operating loss carryforwards totaling approximately $494,000. Unless utilized, the state net operating loss carryforwards expire from 2008 to 2026. For 2007, management has recorded a total valuation allowance of $51,000 against its deferred tax assets including the operating loss carryforwards.

A reconciliation of the income tax provision computed at statutory tax rates to the income tax provision for the years ended December 31, 2006 and 2007 is as follows:

	2006		2007
Income tax benefit at statutory rate	34	%	34	%
State income taxes, net of federal benefit	4	%	5	%
Interest—high yield debt	(3	)%	(1	)%
Disqualifying Dispositions of ISO’s	0	%	3	%
(Increase) decrease in valuation allowance	(35	)%	(41	)%
Income tax benefit (provision)	0	%	0	%

On January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). The Interpretation addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48,

F-22

the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. FIN 48 also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. At the date of adoption, and as of December 31, 2007, the Company did not have a liability for unrecognized tax benefits.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2007, the Company made no provisions for interest or penalties related to uncertain tax positions.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state jurisdictions. For federal tax purposes, the Company’s 2004 through 2007 tax years remain open for examination by the tax authorities under the normal three year statute of limitations. Generally, for state tax purposes, the Company’s 2004 through 2007 tax years remain open for examination by the tax authorities under a four year statute of limitations.

8. Equity Interests

Capital transactions

The Company has authorized 200,000,000 shares of $0.01 par value common stock, 199,000,000 shares of $0.01 par value preferred stock, and 25,000,000 shares of $0.01 par value non-voting common stock.

Knology, Inc. stock option plans

In 2006, the board of directors and stockholders approved the Knology, Inc. 2006 Incentive Plan (the “2006 Plan”). The 2006 Plan authorizes the issuance of up to 2 million shares of common stock pursuant to stock option awards. The maximum number of shares of common stock that may be granted under the 2006 Plan to any one person during any one calendar year is 300,000. The aggregate dollar value of any option-based award that may be paid to any one participant during any one calendar year under the 2006 Plan is $1,000. The 2006 Plan is administered by the compensation and stock option committee of the board of directors. Options granted under the plans are intended to qualify as “incentive stock options” under Section 422 of the Internal Revenue Code of 1986, as amended. The exercise price shall be determined by the board of directors, provided that the exercise price shall not be less than the fair value of the common stock at the dates of grant. The options expire 10 years from the date of grant.

Statement of Financial Accounting Standards No. 123 and 123R

In 2002, the Company elected to adopt the fair value recognition of compensation cost provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”). The Company also elected to report the change in accounting principle from APB No. 25 using the prospective method in accordance with SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure”. Under the prospective method, the recognition of compensation cost is applied to all employee awards granted, modified, vested, or settled after the beginning of the fiscal year in which the recognition provisions are first applied. In December 2002, the Company canceled all outstanding awards for common stock as of December 31, 2002 and granted an equal number of replacement options at the current fair market value with the same expiration date as the related canceled option. The replacement options, as well as all other awards granted and settled during 2002, were included in the calculation of compensation cost in accordance with SFAS No. 123 and SFAS No. 148. In

F-23

January 2006, FAS 123R was adopted with no impact to the Company’s financial statements. The following represent the expected stock option compensation expense for the next five years assuming no additional grants.

2008	$	2,042
2009		1,987
2010		631
2011		155
2012		0
	$	4,815

The fair value of stock options was estimated at the date of grant using a Black-Scholes option pricing model and the following weighted average assumptions in 2005, 2006, and 2007:

Common	2005		2006		2007
Risk-free interest rate	3.64-4.13	%	4.53-5.07	%	3.49-5.03	%
Expected dividend yield	0	%	0	%	0	%
Expected lives	Four years		Four years		Four years
Expected forfeiture rate	0	%	23	%	12	%
Expected volatility	68	%	46	%	46	%

A summary of the status of the Company’s stock options at December 31, 2007 is presented in the following table:

	Common shares		Weighted average exercise price per share		Weighted average fair value price per share		Weighted average remaining contractual life	Intrinsic Value
Outstanding at December 31, 2004	2,026,285		$	8.94
Granted	1,722,521			1.83	$	1.01
Forfeited	(651,506	)		7.19
Exercised	(71,183	)		1.71				$	25
Outstanding at December 31, 2005	3,026,117		$	5.41			7.98	$	3,192
Granted	1,019,899			6.07	$	2.53
Forfeited	(279,463	)		7.45
Expired	(419,641	)		8.28
Exercised	(201,295	)		3.39				$	1,193
Outstanding at December 31, 2006	3,145,617		$	5.19			7.77	$	19,061
Granted	508,820			14.98	$	5.83
Forfeited	(97,902	)		7.25
Expired	(50,215	)		6.69
Exercised	(425,428	)		4.27				$	5,069
Outstanding at December 31, 2007	3,080,892		$	6.84			7.29	$	21,001
Exercisable shares at December 31, 2007	1,649,904		$	5.50			6.36	$	13,639

Cash received from option exercises under all share-based payment arrangements was $122, $584 and $1,724 for the years ended December 31, 2005, 2006 and 2007, respectively. There were no actual tax benefits realized for the tax deductions from option exercises of the share-based payment arrangements for the years ended December 31, 2005, 2006 and 2007.

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The following table sets forth the exercise price range, number of shares, weighted average exercise price, and remaining contractual lives by groups of similar price and grant date:

Common shares

Range of exercise prices	Outstanding as of 12/31/2007	Weighted average remaining contractual life	Weighted average exercise price		Exercisable as of 12/31/2007	Weighted average exercise price
$1.70-$1.70	839,646	7.34	$	1.70	619,784	$	1.70
$1.75-$3.70	621,933	7.81	$	2.84	339,022	$	2.31
$3.75-$7.94	900,645	6.85	$	7.06	481,620	$	6.67
$7.96-$17.35	620,407	8.28	$	14.07	112,897	$	10.99
$17.93-$35.68	98,261	1.47	$	28.62	96,581	$	28.80

At December 31, 2007, 1,649,904 options for the Company’s common shares with a weighted average of $5.50 per share were exercisable by employees of the Company. At December 31, 2006, 1,584,969 options for the Company’s common shares with a weighted average of $5.64 per share were exercisable by employees of the Company. At December 31, 2005, 1,830,610 options for the Company’s common shares with a weighted average price of $6.50 per share were exercisable by employees of the Company.

Restricted Stock

On January 26, 2006, the Company granted 210,980 shares of performance-based restricted shares with a market value of $781 to certain officers. On the grant date, 50% of the shares immediately vested. On the anniversary date, the remaining shares vested 25% each in 2007 and 2008.

On January 30, 2007, the Company granted 244,800 shares of performance-based restricted shares with a market value of $3,192 to certain officers. The shares vest equally on each of the three anniversaries following the grant date.

Warrants

The Company had outstanding warrants issued in connection with the 1997 high-yield debt offering with a fair value of $590 and $0 at December 31, 2006 and 2007, respectively. The warrants to purchase shares of common stock for an exercise price of $.10 per share expired in October 2007. The Company has received $1 for the exercise of 16,512 warrants, $2 for the exercise of 18,777 warrants, and $1 for the exercise of 50,938 warrants for the years ended December 31, 2005, 2006 and 2007, respectively. The Company adjusted the carrying value of the warrants based on the closing price of the Company’s common stock at the end of each reporting period. For the years ended December 31, 2005, 2006 and 2007 the company recorded gain (loss) of $37, $(464) and $(262), respectively.

9. Related Party Transactions

Relatives of the chairman of the Company’s board of directors are stockholders and employees of one of the Company’s insurance providers. The commission costs charged to the Company for insurance services were approximately $248, $250 and $275 for the years ended December 31, 2005, 2006, and 2007, respectively.

10. Disposal of Discontinued Operations

On September 12, 2005, the Company sold its cable assets in Cerritos, California to WaveDivision Holdings, LLC for $10,000 in cash, subject to customary closing adjustments of $235. Cash proceeds of $1,000 were placed in escrow, of which $500 was paid out on March 20, 2006 and the remaining $500 was paid out on

F-25

September 12, 2006. After recording transaction costs of $836 and writing off net assets of $609, the Company recorded a gain of $8,300. The income associated with the Cerritos cable system is presented separately in the statement of operations as income from discontinued operations ($84 for 2005). The Cerritos cable system generated approximately $2,259 of revenue for the year ended December 31, 2005.

On September 7, 2007, the Company sold its telephone directory business to Yellow Book USA for $8,600. The directory serves communities in Rapid City and the Northern Black Hills, South Dakota; and in Northeastern Wyoming. This business was included in the PrairieWave acquisition in April 2007, but is a non-core business outside of the Company’s strategic video, voice and data products and services. The Company has received cash proceeds of $8,600, of which $860 was placed in escrow, and will be paid out in September 2008, subject to any indemnification claims by Yellow Book. After recording transaction costs of $139 and disposing of net assets of $210, the company recorded a gain of $8,251, which is included in income from discontinued operations. Net income of $612 associated with the directory business since the April 3, 2007 acquisition is also included as income from discontinued operations in the statement of operations.

11. Redeemable Convertible Preferred Stock

In May 2005, the Company issued 920,000 shares of a newly created series of preferred stock, the Series AA convertible preferred stock (the “Preferred Stock”), in a private offering to certain new and existing investors at a purchase price of $10.00 per share, for aggregate gross proceeds before expenses of $9.2 million. In October 2005, the Company received gross offering proceeds of $10.8 million and certain selling stockholders received proceeds of $1.9 million for the resale of a portion of their shares issued in May 2005. In November 2005, the Company used net offering proceeds to pay down principal of $10.4 million on the first lien debt. Dividends accrued on the Preferred Stock at an 8% annual rate, which could have been paid in cash or additional shares of the Preferred Stock. However, pursuant to the restrictions of the Company’s credit agreements, the Company is prohibited from paying dividends in cash other than cash in lieu of fractional shares. For the years ended December 31, 2005 and 2006, respectively, 58,742 and 216,621 shares of Preferred Stock were issued as dividends. Dividends paid on Preferred stock were $588 and $747 for the years ended December 31, 2005 and 2006, respectively. The shares of the Preferred Stock were: (i) immediately convertible upon the request of the stockholder of record, (ii) mandatorily convertible at a future date when the common stock is traded at a quoted price of $8.00 or higher for a certain period of time, and (iii) redeemable beginning December 31, 2011. Each share of the Preferred Stock was convertible into a number of shares of Common Stock equal to the quotient of the Liquidation Value of the Preferred Stock divided by $2.00, subject to proportional anti-dilution adjustments for stock dividends, stock splits and similar transactions affecting the Common Stock as well as “institutional weighted average” adjustments for issuances of Common Stock and Common Stock equivalents. The Company’s Preferred Stock was not classified as a liability since the redemption was contingent upon the holder’s not exercising its option to convert into a fixed number of shares, five shares of common for each share of preferred. The Company follows the guidance in Accounting Series Release 268, “Presentation in Financial Statements of Redeemable Preferred Stocks” (“ASR 268”). ASR 268 highlights the redemption obligation of the securities and the fact that amounts attributable to these securities are not part of permanent capital. Accordingly, it has classified its preferred shares in the accompanying consolidated balance sheet between liabilities and permanent equity in the caption Redeemable Convertible Preferred Stock.

On June 22, 2006, the volume weighted average sales price of the Company’s Common Stock exceeded $8.00 for the 20th consecutive trading day, and each of the outstanding 1,928,538 shares of the Preferred Stock mandatorily converted into, including accrued dividends, 5.0921 shares of the Company’s common stock without any further action by the holders. The Company paid cash in lieu of issuing fractional shares based on the closing price of $8.94.

12. Acquisition

On April 3, 2007, the Company completed its acquisition of PrairieWave Holdings, Inc., a voice, video and high-speed internet broadband services provider in the Rapid City and Sioux Falls, South Dakota regions, as well

F-26

as portions of Minnesota and Iowa. The Company’s purchase of PrairieWave Holdings, Inc. is a strategic acquisition that combines companies with similar business models and philosophies such as:

• operating in secondary and tertiary markets

• servicing bundled customers

• providing solid financial margins

• delivering industry-leading customer service

The Company used the proceeds of the Amended and Restated Credit Agreement to fund the $255,000 purchase price and related transaction costs of the PrairieWave acquisition, as well as refinance all amounts outstanding under the Company’s existing first and second lien credit facilities dated June 29, 2005. The financial position and results of operations for PrairieWave Holdings, Inc. are included in the Company’s presented consolidated financial statements since the date of acquisition. The total purchase price for the assets acquired, net of liabilities assumed and including direct acquisition costs was $256,162. Goodwill represents the excess of the cost of the business acquired over fair value or net identifiable assets at the date of acquisition. Since the Company purchased 100% of the outstanding stock of PrairieWave, none of the Goodwill is deductible for tax purposes.

The following table summarizes the allocation of purchase price to the fair values of the assets acquired, net of liabilities and direct acquisition costs as of December 31, 2007.

	December 31, 2007
Assets acquired:
Accounts receivable, net	$	6,287
Prepaid expenses		1,322
Property, plant and equipment		197,726
Investments		1,293
Goodwill		57,804
Customer base		4,402
Intangible and other assets		1,234
Total assets acquired		270,068
Liabilities assumed:
Accounts payable		7,414
Accrued liabilities		3,022
Unearned revenue		3,470
Total liabilities assumed		13,906
Purchase price, net of cash acquired of $2,680	$	256,162

The amounts reflected above include costs associated with the Company’s restructuring plan which was formed upon completion of the acquisition. The restructuring plan includes involuntary employee termination costs for severance pay and stay bonuses and marketing costs associated with rebranding. The following table summarizes the costs associated with the restructuring plan.

	Severance pay and stay bonus			Rebranding costs
Acquisition accrual	$	803		$	778
Payments		(629	)		(25	)
Accrual Balance at December 31, 2007	$	174		$	753

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13. Unaudited Pro Forma Results of Operations

The following unaudited pro forma consolidated results of operations for the years ended December 31, 2006 and 2007 assume that the acquisition of PrairieWave occurred on January 1, 2006. The unaudited pro forma information is presented for informational purposes only and may not be indicative of the actual results of the operations had the acquisition occurred on the assumed date, nor is the information necessarily indicative of future results of operations.

	Year ended December 31, 2006			Year ended December 31, 2007
Operating revenues	$	347,257		$	371,392
Loss before extraordinary items		(42,313	)		(16,999	)
Net loss from continuing operations		(42,313	)		(16,999	)
Net loss per share from continuing operations		(1.51	)		(.48	)

14. Subsequent Events (unaudited)

On January 4, 2008, the Company completed its stock acquisition of Graceba Total Communications Group, Inc., a voice, video, and high-speed Internet broadband services provider in Dothan, Alabama. In 2007, Graceba had revenues totaling $19,725 and as of December 31, 2007 had approximately 25,712 business and residential connections. The Company’s purchase of Graceba is a strategic acquisition that fits well in its concentrated Southeastern footprint and combines companies with similar business models and philosophies such as:

• operating in secondary and tertiary markets

• servicing bundled customers

• providing solid financial margins

• delivering industry-leading customer service

The Company used the $59,000 proceeds of the First Amendment to the Amended and Restated Credit Agreement and cash on hand to fund the $75,000 purchase price. The incremental term loan bears interest at LIBOR plus 2.75% and amortizes at a rate of 1% per annum, payable quarterly, with a June 30, 2012 maturity date. In December 2007, the Company entered into a new interest rate swap contract to mitigate interest rate risk on a notional amount of $59,000 amortizing 1% annually. The swap agreement which became effective January 4, 2008, fixes 100% of the floating rate debt at 3.995% until September 30, 2010.

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EX-2.2

Exhibit 2.2

EXECUTION COPY

SHARE PURCHASE AGREEMENT

BY AND AMONG

GRACEBA TOTAL COMMUNICATIONS, INC.,

C. CHRISTOPHER DUPREE,

KNOLOGY, INC.,

AND KNOLOGY OF ALABAMA, INC.

NOVEMBER 2, 2007

TABLE OF CONTENTS

		Page
ARTICLE I - THE TRANSACTION		1
Section 1.1.	The Transaction	1
Section 1.2.	Closing	1
ARTICLE II - PAYMENT WITH RESPECT TO SECURITIES; OTHER CLOSING PAYMENTS; POST-CLOSING ADJUSTMENTS		2
Section 2.1.	Payment with respect to Securities	2
Section 2.2.	Payments at Closing for Indebtedness	3
Section 2.3.	Payments at Closing for Expenses	3
Section 2.4.	Estimated Working Capital Adjustment	3
Section 2.5.	Post Closing Adjustments	4
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDER		7
Section 3.1.	Existence; Good Standing; Authority	7
Section 3.2.	Capitalization	8
Section 3.3.	Subsidiaries	9
Section 3.4.	No Conflict; Consents	9
Section 3.5.	Financial Statements; Off-Financial Statement Transactions; Interested Party Transactions	10
Section 3.6.	Absence of Certain Changes	11
Section 3.7.	Litigation	11
Section 3.8.	Taxes	11
Section 3.9.	Employee Benefit Plans	14
Section 3.10.	Property	16
Section 3.11.	Labor and Employment Matters	17
Section 3.12.	Contracts and Commitments	19
Section 3.13.	Intellectual Property	20
Section 3.14.	Environmental Matters	21
Section 3.15.	Insurance	22
Section 3.16.	No Brokers	23
Section 3.17.	Compliance with Laws	23
Section 3.18.	Franchises and Company Licenses	24
Section 3.19.	System	25
Section 3.20.	Conduct of Business in Ordinary Course of Business	26
Section 3.21.	Letters of Credit, Bonds, Etc	27
Section 3.22.	Accounts Receivable	27
Section 3.23.	Assets of Company	27
Section 3.24.	Exclusive Dealing	27
Section 3.25.	No Material Adverse Effect	27
Section 3.26.	Knowledge	27

i

ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER		28
Section 4.1.	Organization	28
Section 4.2.	Authorization; Validity of Agreement; Necessary Action	28
Section 4.3.	No Conflict; Consents	28
Section 4.4.	Required Financing	29
Section 4.5.	Brokers	29
Section 4.6.	Litigation	29
Section 4.7.	No Other Representations	29
ARTICLE V - CONDUCT OF BUSINESS PENDING THE CLOSING		30
Section 5.1.	Conduct of Business Prior to Closing	30
ARTICLE VI - ADDITIONAL AGREEMENTS		32
Section 6.1.	Access to Information and System	32
Section 6.2.	Confidentiality	33
Section 6.3.	Consents and Filings; Further Assurances	33
Section 6.4.	Officers’ and Directors’ Indemnification	36
Section 6.5.	Tax Matters	37
Section 6.6.	Books and Records	39
Section 6.7.	Employment Matters	39
Section 6.8.	Interim Financial Statements; Other Reports	40
Section 6.9.	Exclusivity	40
Section 6.10.	Further Action	40
Section 6.11.	Financing	40
ARTICLE VII - CONDITIONS TO THE CLOSING		41
Section 7.1.	Conditions to the Obligations of Each Party to Effect the Closing	41
Section 7.2.	Additional Conditions to Obligations of Parent and Buyer to Effect the Closing	41
Section 7.3.	Additional Conditions to Obligations of the Shareholder and the Company to Effect the Closing	44
ARTICLE VIII - SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION		45
Section 8.1.	Survival of Representations, Warranties and Covenants	45
Section 8.2.	Indemnification	46
Section 8.3.	Limitations on Liability	46
Section 8.4.	Defense of Claims	48
Section 8.5.	No Indemnifiable Claims Resulting From Governmental Authority Action	50
ARTICLE IX - TERMINATION, AMENDMENT AND WAIVER		50
Section 9.1.	Termination	50
Section 9.2.	Effect of Termination	51
Section 9.3.	Amendment	51
Section 9.4.	Extension; Waiver	51

ii

ARTICLE X - GENERAL PROVISIONS		52
Section 10.1.	Notices	52
Section 10.2.	Disclosure Schedules	53
Section 10.3.	Assignment	54
Section 10.4.	Severability	54
Section 10.5.	No Agreement Until Executed	54
Section 10.6.	Certain Definitions	54
Section 10.7.	Interpretation	56
Section 10.8.	Fees and Expenses	57
Section 10.9.	Choice of Law/Consent to Jurisdiction	57
Section 10.10.	Specific Performance	57
Section 10.11.	Mutual Drafting	57
Section 10.12.	Miscellaneous	58

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EXHIBITS

Exhibit A	Form of Escrow Agreement
Exhibit B	Aging Report
Exhibit C	Form of Legal Opinion
Exhibit D	Form of Employment Offer Letter
Exhibit E	Form of Restrictive Covenants Agreement
SCHEDULES
Schedule 2.2	Indebtedness
Schedule 3.1(a)	Existence; Good Standing; Authority
Schedule 3.2(a)	Capitalization
Schedule 3.3(a)	Subsidiaries
Schedule 3.3(b)	Foreign Qualifications of Subsidiaries
Schedule 3.4	No Conflicts; Consents (with respect to the Company and the Shareholder)
Schedule 3.5(a)	Financial Statements
Schedule 3.5(b)	Non-Audit Services
Schedule 3.5(d)	Transactions with Affiliates
Schedule 3.6	Absence of Certain Changes
Schedule 3.7	Litigation
Schedule 3.8	Taxes
Schedule 3.9(a)	Employee Benefit Plans
Schedule 3.9(d)	Effect of Transaction on Benefits
Schedule 3.9(f)	Plan Termination Liabilities
Schedule 3.9(h)	Nonqualified Deferred Compensation Plan
Schedule 3.10(a)	Owned Real Property
Schedule 3.10(b)	Leased Real Property
Schedule 3.10(e)	Permitted Encumbrances
Schedule 3.10(f)	Easements
Schedule 3.11(a)	Labor and Employment Matters
Schedule 3.11(b)	Organized Labor Agreements
Schedule 3.11(c)	Employees
Schedule 3.11(d)	Independent Contractors
Schedule 3.11(e)	Severance Agreements
Schedule 3.12	Contracts and Commitments
Schedule 3.13(a)	Patents, Marks and Copyrights
Schedule 3.13(c)	Intellectual Property Licenses
Schedule 3.13(e)	Publicly Available Material
Schedule 3.14	Environmental Matters
Schedule 3.15	Insurance
Schedule 3.17(a)	Compliance with Laws
Schedule 3.17(b)	FCC Matters
Schedule 3.18	Franchises and Company Licenses
Schedule 3.19(a)	Information Regarding the System
Schedule 3.19(b)	Services of the System

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Schedule 3.19(e)	Commitments of the System
Schedule 3.19(f)	Material Conduit Access Agreements
Schedule 3.20	Conduct of Business in the Ordinary Course of Business
Schedule 3.21	Letters of Credit, Bonds, Etc.
Schedule 4.3	No Conflicts; Consents (with respect to Parent and Buyer)
Schedule 5.1	Conduct of Business
Schedule 5.1(p)	Company CapEx Budget Pending Closing
Schedule 6.1(b)	Phase 1 Properties
Schedule 6.3(f)	Extension of Leases
Schedule 7.2(f)	Required Consents
Schedule 7.2(o)	Split-Out Assets
Schedule 10.6(e)	Excluded Items for EBITDA Calculation / EBITDA Example
Schedule 10.6(l)	Working Capital Methodology

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SHARE PURCHASE AGREEMENT

This SHARE PURCHASE AGREEMENT (this “Agreement”) is dated as of November 2, 2007, by and among GRACEBA TOTAL COMMUNICATIONS, INC., an Alabama corporation (the “Company”), C. CHRISTOPHER DUPREE, an individual resident of the State of Alabama (the “Shareholder”), KNOLOGY, INC., a Delaware corporation (“Parent”), and KNOLOGY OF ALABAMA, INC., a Delaware corporation (“Buyer”). Capitalized terms used in this Agreement and not otherwise defined herein are defined in Section 10.6.

WHEREAS, the Shareholder owns all Securities of the Company;

WHEREAS, Parent, Buyer, the Company and the Shareholder wish to effect a business combination by providing for the purchase by Buyer from the Shareholder of all of the Securities of the Company upon the terms and conditions set forth in this Agreement (the “Transaction”);

WHEREAS, the Boards of Directors of the Company, Parent and Buyer have approved and adopted this Agreement, the Transaction and the other transactions contemplated hereby and have determined that this Agreement, the Transaction and the other transactions contemplated hereby are in the best interest of their respective stockholders;

WHEREAS, the Shareholder, by his execution of this Agreement, has approved and adopted this Agreement, the Transaction and the other transactions contemplated hereby;

WHEREAS, as an essential condition to Parent’s and Buyer’s willingness to enter into this Agreement and to consummate the Transaction, the Shareholder has agreed to execute and comply with the Restrictive Covenants Agreement (as defined below); and

WHEREAS, Parent, Buyer, the Company and the Shareholder desire to make certain representations, warranties, covenants and agreements in connection with the Transaction and to prescribe various conditions to the Transaction.

NOW THEREFORE, in consideration of the mutual agreements and covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I -THE TRANSACTION

Section 1.1. The Transaction. Subject to the terms and conditions of this Agreement, at the Closing (as defined below), the Shareholder will sell, transfer, assign, convey and deliver to Buyer, and Buyer will purchase, acquire, receive and accept from the Shareholder, for the Total Consideration (as defined below), all Securities of the Company free and clear of any and all Encumbrances (as defined below) and rights of others whatsoever.

Section 1.2. Closing. Unless this Agreement is terminated earlier in accordance with its terms, the closing of the Transaction (the “Closing”) shall occur (i) as of 10:00 a.m. local time in Atlanta, Georgia on or before January 12, 2008 if the conditions set forth in Sections 7.1, 7.2

and 7.3 have been satisfied or waived (other than conditions required to be satisfied at the Closing) as of such date or (ii) if such conditions have not been satisfied or waived as of such date, the Closing shall occur no later than the fifth Business Day (as defined below) after the conditions set forth in Sections 7.1, 7.2 and 7.3 have been satisfied or waived (other than conditions required to be satisfied at the Closing); and, provided further that, the foregoing notwithstanding, the Closing may occur on any other date and/or at any other time agreed upon in writing by the Company, the Shareholder, Buyer and Parent. The date on which the Closing occurs pursuant to the foregoing sentence is referred to in this Agreement as the “Closing Date.” The Closing shall take place at the offices of Morris, Manning & Martin, LLP, 1600 Atlanta Financial Center, 3343 Peachtree Road NE, Atlanta, Georgia 30326, or at such other place as agreed to in writing by the Company, the Shareholder, Buyer and Parent. “Business Day” means any day other than a Saturday or Sunday or a day on which the FedWire System operated by the Federal Reserve Bank of New York is closed.

ARTICLE II - -PAYMENT WITH RESPECT TO SECURITIES; OTHER CLOSING

PAYMENTS; POST-CLOSING ADJUSTMENTS

Section 2.1. Payment with respect to Securities.

(a) The total amount payable at the Closing by Parent and Buyer to the Shareholder in full payment for and on account of the sale of the Securities provided for in Section 1.1 above shall equal (A) the Closing Consideration (as defined below), plus or minus (B) the aggregate amount of any additional payments to be made by or to the Shareholder under this Agreement, including, without limitation, payments under Section 2.5, Section 6.5(f) or Article VIII and/or pursuant to the Escrow Agreement (collectively, the “Total Consideration”). The amount to be delivered by Buyer to the Shareholder in cash at the Closing shall be an amount equal to: (i) Seventy-Five Million Dollars ($75,000,000) (the “Transaction Price”), subject to possible increase pursuant to Section 2.5; plus (ii) the Estimated Working Capital Adjustment (which number shall be subtracted if it is a negative number); less (iii) the aggregate amount of all Indebtedness (as defined below) of the Company to be paid by Parent and Buyer pursuant to Section 2.2; less (iv) all Company Expenses (as defined below) to be paid by Parent and Buyer pursuant to Section 2.3; less (v) the Escrow Amount (as defined below) (collectively, the “Closing Consideration”). The aggregate amount of all Indebtedness of the Company to be paid by Parent and Buyer pursuant to Section 2.2 shall be treated by Parent and Buyer as a capital contribution to the Company by Buyer immediately prior to the payment of such Indebtedness to the Company’s lenders.

(b) At the Closing, Parent shall cause to be delivered to SunTrust Bank, a Georgia banking corporation (the “Escrow Agent”), an amount in cash equal to $3,000,000 (the “Escrow Amount”), such deposit to constitute an escrow fund (the “Escrow Fund”). The Escrow Fund shall be governed by the terms hereof and the terms of an escrow agreement to be entered into by and among Parent, the Shareholder and the Escrow Agent, such escrow agreement to be substantially in the form attached hereto as Exhibit A (the “Escrow Agreement”). The Escrow Fund shall be held in escrow and shall be available to settle certain contingencies as provided in Section 2.5 and Article VIII of this Agreement and will be distributable to the Shareholder and/or Parent in accordance with the Escrow Agreement.

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Section 2.2. Payments at Closing for Indebtedness. As of the Closing Date, Parent shall repay, by wire transfer of immediately available funds, all indebtedness then outstanding under those certain agreements, instruments, and facilities entered into by and among the Company and various lending institutions, all of such agreements, instruments and facilities being as described on Schedule 2.2 attached hereto (collectively, the “Indebtedness”); provided that the Company has provided payoff letters from the lenders of such Indebtedness. Parent and Buyer, on the one hand, and the Company and the Shareholder, on the other hand, will cooperate in arranging for such repayment and shall take such reasonable actions as may be necessary to facilitate such repayment and to facilitate the release, in connection with such repayment, of any mortgages, pledges, liens, security interests, encumbrances, claims, charges, conditional sale agreements and restrictions of any kind or character (collectively, “Encumbrances”) securing such Indebtedness and the delivery of payoff letters to Parent or Parent’s lenders. Payment of Indebtedness shall serve as a reduction of the Total Consideration pursuant to Section 2.1(a) above.

Section 2.3. Payments at Closing for Expenses. As of the Closing Date, Parent and Buyer shall provide funds to the Company and Shareholder (as appropriate) in an amount equal to the amount of (and which shall be used to pay) all outstanding fees and expenses of the Shareholder, the Company and each of its Subsidiaries in connection with the negotiation and the consummation of the transactions contemplated by this Agreement that have not been paid on or prior to the Closing Date (the “Company Expenses”). Payment of such Company Expenses shall serve as a reduction to the Total Consideration pursuant to Section 2.1(a) above.

Section 2.4. Estimated Working Capital Adjustment.

(a) At least twenty (20) Business Days prior to the Closing Date, the Shareholder shall deliver to Parent and Buyer a good faith estimate of what the Company’s Net Working Capital will be as of the close of business on the Closing Date (the “Shareholder’s Estimated Working Capital”), together with supporting documentation for such estimate and any additional information relating thereto reasonably requested by Parent or Buyer. Parent and its accountants and advisors shall be given full access to all of the Company’s and its Subsidiaries’ books and records for purposes of evaluating the accuracy and completeness of the Shareholder’s Estimated Working Capital. If Parent believes, in good faith, that the Shareholder’s Estimated Working Capital is in error, Parent may challenge the amount of the Shareholder’s Estimated Working Capital within ten (10) Business Days following its receipt of the Shareholder’s Estimated Working Capital by delivering a written notice of disagreement to the Shareholder. If Parent does not timely deliver a notice of disagreement to the Shareholder, the amount of the Closing Consideration to be paid at the Closing shall be based on the Shareholder’s Estimated Working Capital as delivered to Parent. If Parent timely delivers a written notice of disagreement to the Shareholder, Parent and the Shareholder shall use their good faith efforts to resolve any disputes with respect to the Shareholder’s Estimated Working Capital prior to the Closing Date, and the amount of Closing Consideration to be paid at the Closing shall be based on the Estimated Working Capital (as defined below) as mutually agreed to in writing by Parent and the Shareholder. If Parent timely delivers a notice of disagreement to the Shareholder but Parent and the Shareholder are unable to resolve their dispute regarding the Shareholder’s Estimated Working Capital within four (4) Business Days of the delivery by Parent to the Shareholder of such notice of disagreement, then the amount of Closing Consideration to be paid at the Closing

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shall be based on the amount of working capital set forth in such notice of disagreement. “Estimated Working Capital” shall mean the estimate of what the Company’s Net Working Capital will be at the close of business on the Closing Date as determined by the parties pursuant to this Section 2.4(a).

(b) The target working capital will be a range between $500,000 and $850,000 in Net Working Capital. The “Estimated Working Capital Adjustment” shall be a dollar amount calculated as follows:

(i) If Estimated Working Capital is equal to or greater than $500,000 but less than or equal to $850,0000, then the Estimated Working Capital Adjustment shall be zero; or

(ii) If Estimated Working Capital is less than $500,000, then the Estimated Working Capital Adjustment shall be equal to the amount of Estimated Working Capital calculated in accordance with Section 2.4(a) minus $500,000; or

(iii) If Estimated Working Capital is greater than $850,000, then the Estimated Working Capital Adjustment shall be equal to the amount of Estimated Working Capital calculated in accordance with Section 2.4(a) minus $850,000.

Section 2.5. Post Closing Adjustments.

(a) Within sixty (60) days following the Closing Date, Parent shall prepare and deliver to the Shareholder a consolidated balance sheet of the Company and its Subsidiaries as of the close of business on the Closing Date (the “Closing Balance Sheet”), and a consolidated statement of operations of the Company and its Subsidiaries for the fiscal year ended December 31, 2007 (the “Closing Statement of Operations”). The Closing Balance Sheet will include Parent’s calculation of the Company’s actual Net Working Capital as of the close of business on the Closing Date (the “Closing Working Capital”) and a certificate based on such Closing Balance Sheet setting forth Parent’s calculation of the Closing Working Capital Adjustment (as defined below). The Closing Statement of Operations will include Parent’s calculation of EBITDA and a certificate based on such Closing Statement of Operations setting forth Parent’s calculations of the Closing EBITDA Adjustment (as defined below). The Closing Balance Sheet, the Closing Statement of Operations, the Closing Working Capital Adjustment and the Closing EBITDA Adjustment and the related certificates, collectively, are referred to herein as, the “Closing Statement”. The Closing Balance Sheet and the Closing Statement of Operations shall be prepared in accordance with GAAP, consistent with past practices and, with respect to the Closing Balance Sheet, consistent with the practices, policies and procedures used in preparation of the Base Balance Sheet (as defined below), and each shall be certified by an authorized officer of Parent. The preparation of the Closing Statement shall be for the sole purpose of determining the Closing Working Capital Adjustment in accordance with Section 2.5(b) and the Closing EBITDA Adjustment in accordance with Section 2.5(d). The Shareholder shall have twenty (20) Business Days following its receipt of the Closing Statement (the “Review Period”) to review the same. On or before the expiration of the Review Period, the Shareholder shall deliver to Parent a written statement accepting or objecting to each item set forth on the Closing Statement. If the Shareholder objects to any item set forth on the Closing Statement, such statement shall include an itemization of the Shareholder’s objections and the reasons therefor. The Shareholder shall be deemed to have accepted each item on the Closing Statement to which the Shareholder has not properly objected during the Review Period.

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(b) The “Closing Working Capital Adjustment” shall be a dollar amount calculated as follows:

(i) If Closing Working Capital is equal to or greater than $500,000 but less than or equal to $850,000, then the Closing Working Capital Adjustment shall be zero, and any previously-made Estimated Working Capital Adjustment shall be reversed and, if applicable, refunded to the appropriate party (which amount will be paid directly by the parties without any deductions from the Escrow Fund); or

(ii) If Closing Working Capital and Estimated Working Capital are both less than $500,000, then the Closing Working Capital Adjustment shall be equal to (A) Estimated Working Capital minus (B) Closing Working Capital; or

(iii) If Closing Working Capital is less than $500,000 and Estimated Working Capital is between $500,000 and $850,000, then the Closing Working Capital Adjustment shall be equal to (A) $500,000 minus (B) Closing Working Capital; or

(iv) If Closing Working Capital is less than $500,000 and Estimated Working Capital is greater than $850,000, then the Closing Working Capital Adjustment shall be equal to (A) $500,000 minus the Closing Working Capital plus (B) the Estimated Working Capital minus $850,000; or

(v) If Closing Working Capital is greater than $850,000 and Estimated Working Capital is less than $500,000, then the Closing Working Capital Adjustment shall be equal to (A) Estimated Working Capital minus $500,000 plus (B) $850,000 minus Closing Working Capital; or

(vi) If Closing Working Capital is greater than $850,000 and Estimated Working Capital is between $500,000 and $850,000, then the Closing Working Capital Adjustment shall be equal to (A) $850,000 minus (B) Closing Working Capital; or

(vii) If Closing Working Capital and Estimated Working Capital are both greater than $850,000, then the Closing Working Capital Adjustment shall be equal to (A) Closing Working Capital minus (B) Estimated Working Capital.

(c) The Closing Working Capital Adjustment set forth on the Closing Statement, as accepted or deemed accepted under Section 2.5(a) or, if applicable, as determined in accordance with Section 2.5(f) below, shall constitute the “Final Closing Working Capital Adjustment” for purposes of determining the working capital adjustments to the Total Merger Consideration.

(d) The “Closing EBITDA Adjustment” shall mean the product of (i) the difference between FY 2007 EBITDA minus $9,275,000, with the result of such calculation being deemed to equal zero (0) if such result is a positive number, multiplied by (ii) 7.6.

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(e) The Closing EBITDA Adjustment set forth on the Closing Statement, as accepted or deemed accepted under Section 2.5(a) or, if applicable, as determined in accordance with Section 2.5(f) below, shall constitute the “Final Closing EBITDA Adjustment” for purposes of determining the EBITDA adjustment to the Total Merger Consideration.

(f) If the Shareholder objects to any item on the Closing Statement within the Review Period, Parent and the Shareholder shall promptly and in good faith attempt to resolve such objections. Any such objections that cannot be resolved between Parent and the Shareholder within thirty (30) days following Parent’s receipt of the Shareholder’s statement of objections shall be resolved in accordance with this Section 2.5(f). Any such unresolved objections shall be submitted to Jackson Thornton (the “Accounting Referee”) for review and resolution, with instructions to complete the same as promptly as practicable, but in any event within thirty (30) days of its engagement, and to make any calculations in accordance with GAAP and the terms and conditions of this Agreement including, with respect to the Closing Balance Sheet, in a manner that is consistent with the practices, policies and procedures used in preparation of the Base Balance Sheet. Such Accounting Referee shall deliver a statement setting forth its own calculation of the Closing Working Capital Adjustment and/or the Closing EBITDA Adjustment, as the case may be, within thirty (30) days of the submission of the matter to such firm, which calculation, absent manifest error, shall be binding and conclusive on the parties and not subject to appeal. The fees and costs of the Accounting Referee, if one is required, shall be payable by the party whose calculations of the disputed amounts in the aggregate were farthest from the actual amounts as determined by the Accounting Referee.

(g) If the Final Closing Working Capital Adjustment is a positive amount, Parent shall receive (out of the Escrow Fund) an amount in cash equal to the Final Closing Working Capital Adjustment, including all interest earned thereon. In the event the Final Closing Working Capital Adjustment is a negative amount, then Parent shall pay to the Shareholder an amount in cash equal to the Final Closing Working Capital Adjustment, plus interest on such amount, from the Closing Date until the date of determination of the Final Closing Working Capital Adjustment, earned at the same rate of interest as was earned on the Escrow Fund for the same period of time, and shall distribute such amount to the Shareholder. Any payment made under this Section 2.5(g) shall be made within five (5) Business Days of the final determination of the Final Closing Working Capital Adjustment.

(h) If the Final Closing EBITDA Adjustment is a negative amount, Parent shall receive (out of the Escrow Fund) an amount in cash equal to the absolute value of the Final Closing EBITDA Adjustment, including all interest earned thereon. Any payment made under this Section 2.5(h) shall be made within five (5) Business Days of the final determination of the Final Closing EBITDA Adjustment.

(i) If the Final Closing Working Capital Adjustment and the Final Closing EBITDA Adjustment are determined simultaneously, they may be aggregated and, if applicable, offset against each other.

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ARTICLE III -REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND

THE SHAREHOLDER

The Company and the Shareholder jointly and severally make to Parent and Buyer each and every one of the representations and warranties contained in this Article III.

Section 3.1. Existence; Good Standing; Authority.

(a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Alabama. The Company has all requisite corporate power and authority to own, use, operate, lease and transfer its properties and carry on its business as currently conducted. The Company is duly licensed or qualified to do business as a foreign corporation under the laws of each jurisdiction listed on Schedule 3.1(a) and each other jurisdiction in which the character of its properties or in which the transaction of its business makes such qualification necessary, except where the failure to be so licensed or qualified would not have or be reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect (as defined below). The Company has delivered to Parent true, correct and complete copies of (a) its Articles of Incorporation and Bylaws, in each case as amended through the date hereof, (b) all of its committee charters, codes of conduct or other comparable governing documents, in each case as amended through the date hereof, (c) all the written consents and minutes of the meetings of its Board of Directors and each committee of its Board of Directors held since its inception and (d) all the written consents and minutes of the meetings of its shareholders held since its inception. There are no amendments pending with respect to the Company’s Articles of Incorporation or Bylaws. “Company Material Adverse Effect” means any event, change, circumstance, effect or state of facts that (i) is or could reasonably be expected to be materially adverse to the business, financial condition, operations, assets, liabilities or results of operations of the Company and its Subsidiaries, taken as a whole; provided, however, that a Company Material Adverse Effect under this clause (i) shall not include the effect of any event, change, circumstance, effect or state of facts arising out of or attributable to any of the following: (1) matters affecting the telecommunications industry generally, including the multi-channel video programming distribution, voice communications (including voice over internet protocol) or high speed internet services industries, that do not affect the Company’s business disproportionately as compared to other similarly situated participants in the telecommunications industry, (2) the public announcement of this Agreement or the fact that this Agreement will be consummated or (3) any changes in federal or state laws that do not affect the Company’s business disproportionately as compared to other similarly situated participants in the telecommunications industry or (ii) has prevented, materially impaired or materially delayed, or could reasonably be expected to prevent, materially impair or materially delay, the ability of the Company, any Subsidiary or the Shareholder to perform its or his obligations under this Agreement or to consummate the transactions contemplated hereby.

(b) The Company has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement, the performance by the Company of its obligations hereunder and the consummation of the transactions contemplated hereby have been duly authorized by the Board of Directors of the Company at a meeting duly called and held at which all directors of the Company were present in accordance with the Bylaws of the Company. This Agreement has been duly executed and delivered by the Company, and assuming the due authorization, execution and delivery of

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this Agreement by Parent and Buyer, this Agreement constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general equitable principles (regardless of whether enforcement is sought in a proceeding at law or in equity) (collectively, “General Enforceability Exceptions”).

(c) The Shareholder has the power and authority to execute and deliver this Agreement and to perform his obligations hereunder. This Agreement has been duly executed and delivered by the Shareholder, and assuming the due authorization, execution and delivery of this Agreement by Parent and Buyer, this Agreement constitutes a legal, valid and binding obligation of the Shareholder, enforceable against the Shareholder in accordance with its terms, except as such enforceability may be limited by the General Enforceability Exceptions.

Section 3.2. Capitalization.

(a) The total amount of authorized capital stock of the Company as of the date of this Agreement consists of One Million (1,000,000) shares of Common Stock, par value $0.01 per share (the “Common Stock”), of which Forty-Five (45) shares are issued and outstanding. There are no Securities of the Company except for the Common Stock. Schedule 3.2(a) sets forth a list of all Common Stock held by the Company in its treasury. Schedule 3.2(a) sets forth a true, correct and complete list of the number of shares of Common Stock held by each registered holder thereof as of the date hereof, and such list sets forth the true, correct and complete name, address and contact number for each such registered holder. The Shareholder owns all right, title and interest in and to all Securities of the Company. No Person other than the Shareholder owns, legally or beneficially, or has the right to acquire or cause the issuance of, or has any rights of first refusal or preemptive or other similar right, or voting rights with respect to, any Securities of the Company.

(b) All of the issued and outstanding Securities of the Company have been duly authorized and validly issued, are fully paid and non-assessable and are not subject to and were not issued in violation of any purchase option, call option, right of first refusal, pre-emptive right, subscription right or any similar right under any provision of the Alabama Business Corporation Act, the Company’s Articles of Incorporation or Bylaws or any contract to which the Company or the Shareholder is a party or is otherwise bound or which exists. None of the outstanding Securities of the Company have been issued, sold or resold in violation of any federal, state or other securities law. There are no options, preemptive rights, warrants, calls, rights, commitments or agreements of any kind to which the Company or any of its Subsidiaries or the Shareholder is a party, or by which the Company or any of its Subsidiaries or the Shareholder is bound, or which, to the Company’s knowledge, exist obligating the Company or any of its Subsidiaries or the Shareholder to issue, deliver or sell, or cause to be issued, delivered or sold, any Securities of the Company or any of its Subsidiaries or obligating the Company or any of its Subsidiaries or the Shareholder to grant, extend or accelerate the vesting of or otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. There are no rights or obligations, contingent or otherwise (including rights of first refusal in favor of the Company), of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Securities of the Company or any of its Subsidiaries or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any such

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Subsidiary or any other Person. There are no registration rights or other agreements or understandings to which the Company or any of its Subsidiaries or the Shareholder is a party or by which it or they are bound with respect to any Securities of the Company or any of its Subsidiaries. There are no agreements to which the Company or the Shareholder is a party or which exist with respect to the voting of any Securities of the Company or that restrict the transfer of any Securities. There are no accrued and unpaid dividends with respect to any outstanding Securities of the Company.

Section 3.3. Subsidiaries.

(a) The Company’s Subsidiaries are listed on Schedule 3.3(a). Schedule 3.3(a) also sets forth the name, jurisdiction of organization, outstanding shares of capital stock and the registered holders thereof for each of the Company’s Subsidiaries. The Company owns directly or indirectly all of the outstanding Securities or other equity interests of each of the Company’s Subsidiaries, free and clear of all Encumbrances. Except as set forth in Schedule 3.3(a), neither the Company nor any Subsidiary owns, directly or indirectly, any Securities of any other Person.

(b) Each of the Company’s Subsidiaries is a corporation duly incorporated or organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite corporate power and authority to own, use, operate, lease and transfer its properties and carry on its business as currently conducted. Each such Subsidiary is duly licensed or qualified to do business as a foreign corporation in each jurisdiction listed on Schedule 3.3(b) and each other jurisdiction in which the character of its properties or in which the transaction of its business makes such qualification necessary, except where the failure to be so licensed or qualified would not be reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect. The Company has delivered to Parent true, correct and complete copies of the following documents: (i) the articles of incorporation and bylaws (or similar organizational documents), in each case as amended through the date hereof, of each of the Company’s Subsidiaries, (ii) all the written consents and minutes of the meetings of the Boards of Directors of each of the Company’s Subsidiaries and each committee of such Boards of Directors held since inception; and (iii) all the written consents and minutes of the meetings of the stockholders of each of the Company’s Subsidiaries held since inception.

Section 3.4. No Conflict; Consents. The execution and delivery by the Company and the Shareholder of this Agreement, and the consummation by the Company and the Shareholder of the Transaction and the other transactions contemplated hereby in accordance with the terms hereof, do not (i) except as set forth on Schedule 3.4, violate, conflict with or result in a default (whether after the giving of notice, lapse of time or both) under, or give rise to a right of termination, material modification or acceleration of, any Franchise, Material Contract or material Company License to which the Company, any of its Subsidiaries or the Shareholder is a party or by which the Company’s, any of its Subsidiaries’ or the Shareholder’s assets are bound; (ii) violate any provision of the Company’s or its Subsidiaries’ articles of incorporation or bylaws (or other organizational documents); (iii) cause the Company, its Subsidiaries or the Shareholder to violate any provision of any law, regulation or rule, or any order of, or any restriction imposed by, any court or other Governmental Authority applicable to the Company, any of its Subsidiaries or the Shareholder, except where such violation would not be reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect; (iv) except as set forth on Schedule 3.4, require from the Company, any of its Subsidiaries or the

9

Shareholder any notice to, declaration or filing with, or consent or approval of any Governmental Authority or other third party, including any such notice, declaration, filing or consent that is necessary to prevent the termination of any right, privilege, license or qualification of the Company or its Subsidiaries; or (v) except as set forth on Schedule 3.4, result in the creation of any Encumbrance or give to any Person other than Parent or Buyer any interest, right or claim, in or with respect to any of the Company’s or its Subsidiaries’ assets or properties.

Section 3.5. Financial Statements; Off-Financial Statement Transactions; Interested Party Transactions.

(a) The Company has delivered to Parent and Buyer the following financial statements, true, complete and correct copies of which are attached hereto as Schedule 3.5(a) (collectively, the “Financial Statements”):

(i) Audited consolidated balance sheets of the Company and its Subsidiaries as of December 31, 2005 and December 31, 2006, and audited consolidated statements of income and retained earnings and consolidated statements of cash flows for each of the years then ended;

(ii) An unaudited consolidated balance sheet of the Company and its Subsidiaries as of September 30, 2007 (the “Base Balance Sheet”); and

(iii) An unaudited consolidated statement of operations of the Company and its Subsidiaries for the period ended September 30, 2007.

(b) Subject to the absence of footnotes and normal and recurring year-end audit adjustments with respect to any unaudited Financial Statements, the Financial Statements have been prepared in accordance with GAAP consistently applied and present fairly and accurately in all material respects the consolidated financial condition, results of operations, income and cash flows of the Company at and for the periods presented. All Subsidiaries of the Company that are required by GAAP to be consolidated in the Financial Statements have been so consolidated. Schedule 3.5(b) contains a description of all non-audit services performed by the Company’s auditors for the Company and its Subsidiaries since January 1, 2005 and the fees paid for such services. The Company has delivered or made available to Parent true, correct and complete copies of all policies, manuals and other documents promulgating the Company’s internal accounting controls.

(c) Neither the Company nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, partnership agreement or any similar contract (including any contract relating to any transaction, arrangement or relationship between or among the Company or any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance, special purpose or limited purpose Person, on the other hand) where the purpose or intended effect of such arrangement is to avoid disclosure of any material transaction involving the Company or any of its Subsidiaries in the Financial Statements.

(d) Except as set forth on Schedule 3.5(d), there are no loans, leases, contracts, commitments or other continuing arrangements or agreements, whether written or oral, between the Company, on the one hand, and the Shareholder or any officer or director of the Company, on the other hand.

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Section 3.6. Absence of Certain Changes. Except as set forth on Schedule 3.6, since September 30, 2007 (a) the Company and its Subsidiaries have operated only in the ordinary course of business consistent with past practices, and (b) there has been no change in the condition (financial or otherwise), assets or business of the Company or its Subsidiaries, except such changes that have not had or would not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect.

Section 3.7. Litigation. Except as disclosed on Schedule 3.7, there is no (a) claim, action, suit, proceeding at law or in equity by any Person, (b) arbitration or administrative or other proceeding by or before, or to the Company’s knowledge, investigation, inquiry or subpoena by or before, any Governmental Authority, or (c) audit or investigation pending or, to the Company’s knowledge, threatened against the Company, any of its Subsidiaries or the Shareholder either (i) with respect to this Agreement or the transactions contemplated hereby or (ii) otherwise against or affecting the Company, any of its Subsidiaries or the Shareholder or their respective properties or assets. Neither the Company nor any of its Subsidiaries nor the Shareholder is subject to any order, judgment or decree entered in any lawsuit or proceeding that would constitute a Company Material Adverse Effect or would prevent the consummation of the transactions contemplated by this Agreement. Except as disclosed on Schedule 3.7, there has not been, since January 1, 2004, nor are there currently, any internal investigations or inquiries being conducted by the Company, its Subsidiaries, their respective Boards of Directors or other equivalent management bodies, any third party or any Governmental Authority, in each case, concerning any illegal activity, fraud, violation of Company policy or misconduct or willful or negligent wrong doing with respect to financial, accounting or Tax matters or matters involving conflicts of interest, self-dealing, fraudulent or negligent conduct or other misfeasance or malfeasance with respect to the Company, its Subsidiaries or the Shareholder.

Section 3.8. Taxes. Except as set forth on Schedule 3.8:

(a) The Company and its Subsidiaries have timely filed or been included in, or will timely file or be included in, all Tax Returns required to be filed by them or in which they are to be included with respect to Taxes for any period ending on or before the Closing Date, taking into account any extension of time to file granted to or obtained on behalf of the Company or any of its Subsidiaries, and all such Tax Returns were correct and complete in all material respects;

(b) The Company and its Subsidiaries have paid or caused to be paid all Taxes due and owing (whether or not shown on such Tax Returns) or have made provision, in accordance with GAAP, for all Taxes owed or properly accruable through the Closing Date;

(c) The Company (and any predecessor of the Company) has been a validly electing S corporation within the meaning of Code §1361 and §1362 (and any corresponding provisions of state or local Tax law) at all times since January 1, 2004, and the Company will be an S corporation up to and including the day before the Closing Date;

(d) Schedule 3.8 identifies each Subsidiary that is a “qualified subchapter S subsidiary” within the meaning of Code §1361(b)(3)(B) (and any corresponding provisions of

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state or local Tax law). Each Subsidiary so identified has been and will be a qualified subchapter S subsidiary at all times since the date shown on such schedule up to and including the day before the Closing Date;

(e) Neither the Company nor any of its Subsidiaries currently is the beneficiary of any extension of time within which to file any federal or state income Tax Return or any other material Tax Return, and neither the Company nor any of its Subsidiaries has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency;

(f) Neither the IRS nor any other Governmental Authority is asserting by written notice to the Company or any of its Subsidiaries or, to the Company’s knowledge, proposing to assert against the Company or its Subsidiaries, any deficiency or claim for any amount of additional Taxes;

(g) No federal, state, local or foreign audits or other administrative proceedings or court proceedings are pending with regard to any Taxes or Tax Returns of the Company or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries has received a written notice of any actual or threatened audits or proceedings or is otherwise aware of any such audits or proceedings;

(h) No claim has been made by a taxing authority of a jurisdiction where the Company or any Subsidiary does not file a Tax Return that the Company or any Subsidiary is or may be subject to taxation in that jurisdiction, and no power of attorney has been granted by the Company or any of its Subsidiaries with respect to any matters related to Taxes that is currently in force;

(i) All Taxes and other assessments and levies which the Company and its Subsidiaries were or are required to withhold or collect have been withheld and collected and have been paid over to the proper Governmental Authorities;

(j) There are no Encumbrances for Taxes upon the assets of the Company or its Subsidiaries, except for Encumbrances relating to current Taxes not yet due;

(k) Neither the Company nor any of its Subsidiaries has ever been a member of an affiliated group of corporations filing a combined federal income Tax Return (other than a group the common parent of which is or was the Company) nor does the Company or any of its Subsidiaries have any liability for Taxes of any other Person (other than the Company or any of its Subsidiaries) under Treasury Regulations Section 1.1502-6 (or any similar provision of foreign, state or local law);

(l) Neither the Company nor any of its Subsidiaries is a party to any agreement or arrangement requiring the indemnification, sharing or allocation of Taxes;

(m) Neither the Company nor any of its Subsidiaries has distributed the stock of another entity or had its stock distributed by another entity in a transaction that was purported or intended to be governed in whole or in part by Code Sections 355 or 361;

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(n) Neither the Company nor any of its Subsidiaries has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code;

(o) Neither the Company nor any of its Subsidiaries is a party to any agreement, contract, arrangement or plan that has resulted or could result, separately or in the aggregate, in the payment of (i) any “excess parachute payment” within the meaning of Code §280G (or any corresponding provision of state, local or foreign Tax law) or (ii) any amount that will not be fully deductible as a result of Code §162(m) (or any corresponding provision of state, local or foreign Tax law).

(p) Neither the Company nor any of its Subsidiaries has agreed to, nor is required to make, any adjustment under Section 481 of the Code by reason of a change in accounting method;

(q) None of the assets of the Company or any of its Subsidiaries is “tax-exempt use property” within the meaning of Section 168(h) of the Code;

(r) Neither the Company nor any of its Subsidiaries is currently a party to a joint venture, partnership, or other arrangement that is treated as a partnership for tax purposes;

(s) Neither the Company nor any of its Subsidiaries has been a party to any cost sharing agreement subject to the provisions of Treas. Reg. §1.482-7;

(t) The Company or its Subsidiaries have documentation (which was in existence as of the time an affected Tax Return was filed) meeting the requirements of Code Section 6662(e)(3)(B) with respect to all transactions with related parties subject to the provisions of Code Section 482;

(u) Neither the Company nor any of its Subsidiaries has ever had, and does not have, a permanent establishment in any foreign country, as defined in any applicable Tax treaty or convention between the United States of America and such foreign country;

(v) The Company and its Subsidiaries have not (A) taken any deduction or received any Tax benefit arising from their participation in a “tax shelter” as defined for purposes of Section 6111(c) of the Code, (B) participated in a “listed transaction” as defined in Treas. Reg. §1.6011-4(b)(2) or Treas. Reg. §1.6011-4T(b)(2) and designated by the Internal Revenue Service as such in published guidance issued prior to the Closing Date, or (C) participated in a “loss transaction” as defined in Treas. Reg. §1.6011-4(b)(5) or Treas. Reg. §1.6011-4T(b)(5); and

(w) The unpaid Taxes of the Company and its Subsidiaries (A) did not, as of the Base Balance Sheet Date, exceed the reserve for Tax liability (as distinguished from any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the Base Balance Sheet (as distinguished from in any notes thereto) and (B) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company and its Subsidiaries in filing their Tax Returns. Since the Base Balance Sheet Date, neither the Company nor any of its Subsidiaries has incurred any liability for Taxes arising from extraordinary gains or losses, as that term is used in GAAP, outside the ordinary course of business consistent with past custom and practice.

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Section 3.9. Employee Benefit Plans.

(a) Schedule 3.9(a) sets forth a list of all Company Plans (as defined below) sponsored or maintained by the Company or any of its Subsidiaries within the past seven (7) years or with respect to which the Company or any of its Subsidiaries has made or has had any obligation to make contributions or provide benefits within the past seven (7) years. For purposes of this Agreement, “Company Plans” shall mean any “employee benefit plan”, as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and any other profit-sharing, bonus, stock option, stock purchase, stock ownership, phantom stock, pension, retirement, employment, severance, deferred compensation, excess benefit, supplemental unemployment, post-retirement medical or life insurance, welfare, incentive, sick leave, disability, medical hospitalization, vision, dental, life insurance, cafeteria, flexible spending account, or other insurance or benefit plan, trust, arrangement, policy, practice, arrangement or understanding (whether written or, if material, oral) (1) that are sponsored, maintained or to which contributions are made (now or within the past seven (7) years) by the Company or any of its Subsidiaries for the benefit of current or former employees, directors, officers, leased employees, independent contractors or agents of the Company or any of its Subsidiaries, or their current or former spouses, dependents, or other beneficiaries, or (2) with respect to which the Company or any of its Subsidiaries or any ERISA Affiliate of the Company could have any liability. For purposes of the preceding sentence, the term “ERISA Affiliate” means any trade or business (whether or not incorporated) that together with the Company is treated as a single employer pursuant to Sections 414(b), (c), (m) or (o) of the Code. Except as disclosed on Schedule 3.9(a), neither the Company nor any of its Subsidiaries, ERISA Affiliates, or sponsors maintains or contributes to (or is obligated to contribute to) (now or within the past seven (7) years) any “employee pension plan,” as defined in Section 3(2) of ERISA, that is subject to Title IV of ERISA or Section 412 of the Code, any “multiple employer welfare arrangement,” as defined in Section 3(40) of ERISA, or any “multiemployer plan,” as defined in Sections 3(37) or 4001(a)(3) of ERISA. Except as set forth on Schedule 3.9(a), none of the Company Plans provides benefits for any individual who, at the time the benefit is to be provided, is a former director, officer, or employee of, or other provider of services to, the Company or any of its Subsidiaries, except as may be required under the Consolidate Omnibus Budget Reconciliation Act of 1985, as amended (or similar state law) and at the expense of the participant or the participant’s beneficiary, or except for any Company Plan which meets the qualification requirements of Section 401(a) of the Code.

(b) The Company Plans have been administered in all material respects in accordance with the applicable provisions of ERISA and the Code, and all applicable laws. Each Company Plan that is intended to qualify under Section 401(a) of the Code has (A) either (1) received a favorable determination from the IRS regarding its qualification thereunder, or the expiration of the requisite period under applicable regulations promulgated by the IRS under the Code or IRS pronouncements in which to apply for such determination letter and to make any amendments necessary to obtain a favorable determination has not occurred, or (2) has been established under a prototype plan for which an IRS opinion letter has been obtained by the plan sponsor and is valid as to the adopting employer, and (B) to the knowledge of the Company, nothing has occurred or could reasonably be expected to occur that has caused or would reasonably be expected to cause the loss of such qualification or the imposition of any penalty or Tax.

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(c) There is neither any pending litigation, suit, or proceeding nor, to the knowledge of the Company, any litigation, suit or proceeding threatened in writing against the Company related to the Company Plans which would be reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect. Other than claims for benefits arising in the ordinary course of business of the Company Plans, to the knowledge of the Company, no claims, investigations, lawsuits, arbitrations or other controversies are pending or threatened against the Company Plans, or any trustee, fiduciary, custodian, administrator or other person holding or controlling assets of any Company Plan and, to the knowledge of the Company, no basis for any such claim exists.

(d) Except as expressly contemplated by this Agreement or as set forth on Schedule 3.9(d), neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment becoming due to any Employee (as defined below) of the Company or any of its Subsidiaries or under any Company Plan, (ii) increase any benefits otherwise payable under any Company Plan or (iii) result in the acceleration of the time of payment or vesting of any such benefits under any Company Plan.

(e) No non-exempt “prohibited transaction” (within the meaning of Section 4975 of the Code and/or Section 406 of ERISA) has occurred with respect to any Company Plan. The Company and its Subsidiaries have not been notified that any Company Plan is under audit or investigation by any Governmental Authority, and no Company Plan is subject to, or has in the past been subject to, any voluntary compliance, amnesty, closing agreement or other similar program.

(f) Except as set forth on Schedule 3.9(f), each Company Plan may, without any liability (other than liability for benefits already accrued under such Company Plan) be amended, terminated or otherwise discontinued at any time.

(g) Neither the Company nor any ERISA Affiliate is obligated to make any parachute payments as such term is defined in Section 280G of the Code, and neither is a party to any agreement that would reasonably be likely to obligate it, or any successor in interest, to make any parachute payments that will not be deductible under Section 280G of the Code. Neither the Company nor any ERISA Affiliate is obligated to make reimbursement or gross-up payments to any person in respect to excess parachute payments. Without limiting the generality of the foregoing, no economic benefit that could be received (whether in cash or property or the vesting of property) as a result of the execution and delivery of this Agreement or the consummation of the transactions contemplated by this Agreement, including as a result of termination of employment on or following the Closing Date, by or for the benefit of any director, officer, employee or consultant of the Company or any of its Affiliates who is a “disqualified individual” (within the meaning of the Treasury Regulation Section 1.280G-1) would be characterized as an “excess parachute payment” (within the meaning of Section 280G(b)(1) of the Code). No “disqualified individual” is entitled to receive any additional payment from the Company, any of its Subsidiaries or any other Person in the event that the excise tax required by Section 4999(a) of the Code is imposed on such “disqualified individual.”

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(h) Each Company Plan that is a “nonqualified deferred compensation plan” (as defined in Section 409A(d)(1) of the Internal Revenue Code) and was in existence prior to October 3, 2004, has not been “materially modified” (within the meaning of Section 885(d)(2)(B) of the American Jobs Creation Act of 2004 and any applicable guidance issued thereunder) since October 3, 2004, in a manner which would cause amounts deferred in taxable years beginning before January 1, 2005 under such plan to be subject to Section 409A of the Internal Revenue Code. Except as set forth on Schedule 3.9(h), each Company Plan that is a “nonqualified deferred compensation plan” (as defined in Section 409A(d)(1) of the Internal Revenue Code) and which has not been terminated has been operated in good faith compliance with the provisions of Section 409A of the Internal Revenue Code and Notice 2005-1 since January 1, 2005, and no amount payable or benefit available under any Company Plan is taxable to any individual by reason of Section 409A of the Internal Revenue Code.

Section 3.10. Property.

(a) Schedule 3.10(a) sets forth a true, complete and correct list of all real property owned by the Company or any of its Subsidiaries (the “Owned Real Property”). The Company or a Subsidiary (as indicated on Schedule 3.10(a)) has good and marketable fee simple title to all of the Owned Real Property, free and clear of all Encumbrances, except for Permitted Encumbrances (as defined below).

(b) Schedule 3.10(b) sets forth a true, complete and correct list of each real property lease, sublease, license or other occupancy agreement, including any modification, amendment or supplement thereto and any other related document or agreement that is currently in effect and has been executed or entered into by the Company or any of its Subsidiaries (including any of the foregoing which the Company or any of its Subsidiaries has subleased or assigned to another Person and as to which the Company or such Subsidiary remains liable) (each a “Real Property Lease”). Each property subject to a Real Property Lease is a “Leased Real Property.” With respect to each Real Property Lease:

(i) the Company or its Subsidiary, as applicable, has a valid and enforceable leasehold interest to the leasehold estate on such Leased Real Property, except as such enforceability may be limited by the General Enforceability Exceptions, and the Company or such Subsidiary holds the leasehold estate on such Leased Real Property free and clear of all Encumbrances, except for Permitted Encumbrances;

(ii) such Real Property Lease has been duly authorized and executed by the Company or such Subsidiary, as applicable, and is in full force and effect;

(iii) neither the Company nor such Subsidiary is in default under such Real Property Lease, nor is any other party to such Real Property Lease in default, and no event has occurred which, with notice or the passage of time, or both, would give rise to a default by the Company or such Subsidiary, as applicable, under such Real Property Lease;

(iv) all rents and additional rents and other sums, expenses and charges due to date by the Company or such Subsidiary under such Real Property Lease have been paid;

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(v) the lessee under such Real Property Lease has been in peaceable possession since the commencement of the original term thereof;

(vi) no waiver, indulgence or postponement of the lessee’s obligations under such Real Property Lease has been granted by the lessor; and

(vii) there are no outstanding claims of breach or indemnification or notice of default or termination under such Real Property Lease.

(c) The improvements on the Owned Real Properties and the Leased Real Properties are in a state of good maintenance and repair and are adequate and suitable for the purposes for which they are presently being used, and, to the Company’s knowledge, there are no material repair or restoration works needed in connection with any of the Owned Real Properties or Leased Real Properties that the Company or any of its Subsidiaries are responsible to make. The Company or one of its Subsidiaries is in physical possession and actual and exclusive occupation of the whole of each of the Owned Real Properties and the Leased Real Properties. Neither the Company nor any of its Subsidiaries owes any brokerage commission with respect to any Owned Real Property or any Leased Real Property.

(d) The Company and its Subsidiaries have good and valid title to, or enforceable leasehold interests in, or valid rights under contract to use, all personal property and assets owned or used by it or them (personal, tangible and intangible), in each case free and clear of all Encumbrances, except for Permitted Encumbrances.

(e) “Permitted Encumbrances” shall mean Encumbrances (i) for Taxes, fees, assessments or other governmental charges which are not delinquent, (ii) for carriers’, warehousemens’, mechanics’, landlords’, materialmens’, repairmens’ or other similar Encumbrances arising in the ordinary course of business, (iii) consisting of pledges or deposits required in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation or to secure liability to insurance carriers, (iv) of landlords which are inchoate arising solely by operation of law with respect to the Leased Real Property, (v) mortgages, deeds of trust, ground leases or other encumbrances upon the Leased Real Property granted by the landlords of such property that do not materially interfere with the use of such property by the Company or (vi) as set forth on Schedule 3.10(e).

(f) Schedule 3.10(f) sets forth the material rights to use all other real property used by the Company’s business pursuant to easements and rights of way (“Easements”). The Company has valid and enforceable rights to use the Easements, subject only to Permitted Encumbrances.

Section 3.11. Labor and Employment Matters.

(a) Except as set forth on Schedule 3.11(a), the Company and each of its Subsidiaries are in compliance with all federal, state and local laws, rules, regulations and ordinances respecting employment and employment practices, terms and conditions of employment, termination of employment, occupational safety and health, immigration, and wages and hours, and are not engaged in any unfair labor practice, as defined in the National Labor Relations Act or other applicable law. There has been no “mass layoff” or “plant closing” within the meaning

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of the Worker Adjustment and Retraining Notification Act of 1988, as amended, and any similar state or local “mass layoff” or “plant closing” law with respect to the Company or any of its Subsidiaries within the six (6) months prior to Closing. There is no unfair practice complaint pending with respect to any Employees of the Company or its Subsidiaries or, to the Company’s knowledge, threatened before the National Labor Relations Board or any other Governmental Authority.

(b) Except as set forth on Schedule 3.11(b), neither the Company, any Subsidiary of the Company nor any of their respective Affiliates is a party to or otherwise bound, or has ever been bound, by any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, and none of the Employees of the Company and its Subsidiaries is represented by a labor union or labor organization. Neither the Company nor any Subsidiary of the Company is subject to any charge, demand, petition or representation proceeding seeking to compel, require or demand it to bargain with any labor union or labor organization nor, as of the date of this Agreement, is there pending or, to the Company’s knowledge, threatened, any material labor strike, picketing, handbilling, dispute, grievance, arbitration, walkout, work stoppage, slow-down or lockout involving the Company or any Subsidiary of the Company. There have not been any labor union organizational campaigns by or directed at any Employees of the Company or its Subsidiaries. To the Company’s knowledge, no representation petition with respect to any Employee has been filed with the National Labor Relations Board. The Company and its Subsidiaries have not experienced any primary work stoppage.

(c) Schedule 3.11(c) lists each of the Company’s and any Company Subsidiaries’ employees as of the date hereof (the “Employees”) and his/her (i) job title and work location and (ii) date of hire.

(d) Schedule 3.11(d) lists the names of each current independent contractor retained by the Company or any Company Subsidiary who performs services for the Company or any Company Subsidiary (“Independent Contractors”) and the current rate of compensation paid to each such Independent Contractor. Schedule 3.11(d) specifies the site at which each such Independent Contractor performs services for the Company or any Company Subsidiary. Except as set forth in Schedule 3.11(d), the Independent Contractors, and all other independent contractors who have previously rendered services to the Company or any Company Subsidiary, have been and are legally, properly and appropriately treated as non-employees for all Tax purposes, as well as all ERISA and employee benefit purposes. There has been no determination by any Governmental Authority that any Independent Contractor constitutes an employee of the Company or any Company Subsidiary, and to the Company’s knowledge, there is no basis for a Governmental Authority or any other Person to make such a claim. There has been no investigation or Claim made by or, to the Company’s knowledge, threatened by any Person or Governmental Authority that any Independent Contractor constitutes an employee of the Company or any Company Subsidiary. The Company and each Company Subsidiary have paid or accrued all compensation and all other monetary amounts earned by any Independent Contractors or due and owing to any of the Independent Contractors.

(e) Except as set forth on Schedule 3.11(e), the services of all Employees and Independent Contractors of the Company or any of its Subsidiaries may be terminated at any time by the Company or one of its Subsidiaries without any liability except for any ongoing liability, such as the continuing liabilities with respect to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), that are mandated by applicable law.

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Section 3.12. Contracts and Commitments. Except as set forth on Schedules 3.10(b) or 3.12, neither the Company nor any Subsidiary of the Company nor (as applicable) the Shareholder is a party to the following types of agreements (written or oral):

(a) any partnership agreement or joint venture agreement which requires a payment, or delivery of assets or services, in excess of Fifty Thousand Dollars ($50,000) in any 12-month period;

(b) any agreement with another Person materially limiting or restricting the ability of the Company or any Subsidiary of the Company to enter into or engage in any market or line of business including agreements with exclusivity, “most favored customer” pricing or other similar provisions;

(c) any agreements for the sale of any of the assets of the Company or any of its Subsidiaries, other than in the ordinary course of business, or for the grant to any person of any preferential rights to purchase any of its assets;

(d) any lease, sub-lease, license, sub-license or other agreement with respect to real property;

(e) any agreement of the Company or any of its Subsidiaries with the Shareholder or any other Affiliate of the Company;

(f) any agreement of the Company or any of its Subsidiaries or the Shareholder relating to the acquisition, issuance, voting, registration, sale or transfer, preemptive rights, participation rights, rights of first refusal, repurchase or redemption rights of or with respect to any Securities of the Company;

(g) any agreement with respect to the intellectual property of the Company and its Subsidiaries;

(h) any collective bargaining or union agreement to which the Company or any of its Subsidiaries is bound;

(i) any agreement relating to the incurrence, assumption, surety or guarantee of any indebtedness;

(j) any agreement relating to interconnection, reciprocal compensation, co-location, cable TV programming and retransmission/must carry, conduits, pole attachments and rights of way with respect to the same; or

(k) any other agreement (or group of related agreements) the performance of which will require aggregate payments, or delivery of assets or services, to or from the Company or any of its Subsidiaries in excess of Fifty Thousand Dollars ($50,000) in any 12-month period.

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Each of the contracts set forth on Schedule 3.12 (the “Material Contracts”) is in full force and effect and constitutes a legal, valid and binding obligation of the Company and/or its Subsidiaries or the Shareholder, as applicable, enforceable against them in accordance with its terms, except as such enforceability may be limited by the General Enforceability Exceptions. The Company, one of its Subsidiaries or the Shareholder, as applicable, has performed all of their material obligations (except those that have not yet become due) under, and is not in violation or breach of or default under, any of the Material Contracts, except for such non-performance, violation or breach which would not have or reasonably be expected to have a Company Material Adverse Effect. The Company or the Shareholder has paid in full all amounts owed by the Company or the Shareholder, respectively, in connection with the Material Contracts, regardless of whether or not such amounts have been invoiced to the Company or the Shareholder, respectively. To the Company’s knowledge, each of the other parties to each of the Material Contracts has performed all of their material obligations (except those that have not yet become due) under, and is not in violation or breach of or default under, such Material Contracts. Except as set forth on Schedule 3.12, the execution of this Agreement and the consummation of the transactions contemplated hereby will not conflict with or cause a breach of any of the Material Contracts, and no notice to or approval or consent of any other party to any of the Material Contracts is required in order for those Material Contracts to continue in full force and effect without breach, default, acceleration or any change in terms after the Closing.

Section 3.13. Intellectual Property.

(a) Schedule 3.13(a) sets forth an accurate and complete list of all Patents, registered and unregistered Marks and registered Copyrights owned by the Company and its Subsidiaries and used in connection with the business of the Company and its Subsidiaries as currently conducted.

(b) The Intellectual Property owned, and to the knowledge of the Company, the Intellectual Property used, practiced, licensed or otherwise commercially exploited by the Company or its Subsidiaries does not (i) constitute an unauthorized use or misappropriation of any patent, copyright, trademark, trade secret or other intellectual property right of any Person or (ii) infringe, constitute an unauthorized use of, or violate any other right of any Person (including pursuant to any non-disclosure agreements or obligations to which Company or its Subsidiaries or any of their present or former employees or consultants is a party).

(c) Schedule 3.13(c) sets forth a complete and accurate list of all material licenses, sublicenses and other agreements to which the Company and/or its Subsidiaries is a party (i) granting any other Person the right to use the Intellectual Property, or (ii) pursuant to which Company or its Subsidiaries are authorized to use any third party Intellectual Property, which are incorporated in, are, or from a part of any product manufactured, distributed, or sold or any service provided by the Company or any Subsidiary or which are otherwise used (or currently proposed to be used) by the Company or its Subsidiaries in the business of the Company as currently conducted, other than commercial off-the-shelf software.

(d) The Company and each of its Subsidiaries has been and is in material compliance with the terms and conditions of any and all privacy policies and other policies governing the use of its and other Persons’ data, used in connection with the Company’s and its Subsidiaries’ business, as well as all industry standards and applicable laws and regulations on privacy and

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marketing. No claims, demands, or allegations have been made by any Person or Governmental Authority against the Company or its Subsidiaries asserting that it has not complied with the terms and conditions of any such policies, standards, laws or regulations and to the knowledge of the Company, no such claims are threatened by any Person or Governmental Authority, nor are there, to the knowledge of the Company, any valid grounds for any such claim.

(e) Except as set forth on Schedule 3.13(e), the Intellectual Property owned, and to the knowledge of the Company, the Intellectual Property used, practiced or otherwise commercially exploited by the Company or its Subsidiaries, contains no Publicly Available Material (as defined below), and no Publicly Available Material operates with or has been incorporated in whole or in part into any part therein, and no Publicly Available Material has been used in whole or in part in the development of any part of the Intellectual Property owned by the Company or its Subsidiaries in a manner that may subject Intellectual Property in whole or in part, to all or part of the license obligations governing any Publicly Available Materials.

(f) For purposes of this Agreement, “Publicly Available Materials” means (i) any material that contains, or is derived in any manner (in whole or in part) from, any material that is distributed as free software, open source, “copyleft,” or similar licensing or distribution models, other than material that has been clearly and conspicuously released into the public domain by its copyright holders, and (ii) any material that requires as a condition of its use, modification and/or distribution that such material or other material incorporated into, derived from or distributed with such material: (A) be disclosed or distributed in source code form; (B) be licensed for the purpose of making derivative works; or (C) be redistributable at no charge, other than a nominal fee or copying charge.

Section 3.14. Environmental Matters. Except as set forth on Schedule 3.14, or as would not be reasonably likely to have a Company Material Adverse Effect:

(a) the Company and the Subsidiaries are in compliance with all Environmental Laws (as defined below) applicable to their operations and the use of the Leased Real Properties and the Owned Real Properties;

(b) neither the Company nor any of its Subsidiaries (nor, to the Company’s knowledge, any of the Company’s predecessors or Affiliates) has generated, transported, treated, stored, or disposed of any Hazardous Material (as defined below) at or on the Leased Real Properties or Owned Real Properties, except in compliance with all applicable Environmental Laws, and to the Company’s knowledge, there has been no Release (as defined below) or threat of Release of any Hazardous Material by the Company or any of its Subsidiaries at or on the Leased Real Properties or the Owned Real Properties;

(c) neither the Company nor any of its Subsidiaries has (i) received written notice under the citizen suit provisions of any Environmental Law; (ii) received any written request for information, notice, demand letter, administrative inquiry or written complaint or claim from any Governmental Authority under any Environmental Law; or (iii) been subject to or, to the Company’s knowledge, threatened with any lawsuit or governmental or citizen enforcement action with respect to any Environmental Law or arising from a Release;

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(d) the Company and its Subsidiaries have, and there currently are in full force and effect, all Company Licenses (as defined below) required under any Environmental Law for the Company’s or its Subsidiaries’ activities and operations at the Leased Real Properties and Owned Real Properties, and none of the Company or its Subsidiaries has received written notification from any Governmental Authority that any such Company Licenses will be modified, suspended or revoked;

(e) there are no underground storage tanks, landfills, current or former waste disposal areas or polychlorinated biphenyls at or on the Leased Real Properties or Owned Real Properties;

(f) there are no pending or, to the Company’s knowledge, threatened claims under any Environmental Law against (i) the Company or any of its Subsidiaries or (ii) to the Company’s knowledge, any Person whose liability for such claim the Company or any of its Subsidiaries has retained or assumed either by contract or by operation of law, and none of the Company or any of its Subsidiaries has contractually retained or assumed any liabilities that could reasonably be expected to provide the basis for any environmental claim; and

(g) there have been no environmental investigations, studies, tests, audits, reviews or other analyses conducted by, on behalf of, or which are in the possession of, the Company or any of its Subsidiaries which have not been delivered or made available to Parent.

“Environment” means soil, surface waters, groundwater, land, stream sediments, surface or subsurface strata and ambient air. “Environmental Laws” means all laws rules, regulations, orders, decrees, applicable common law, judgments or binding agreements issued, promulgated or entered into by or with any Governmental Authority with applicable authority over such matters, relating to pollution or protection of the Environment, including, without limitation, the federal Comprehensive Environmental Response, Compensation and Liability Act, the Resource Conservation and Recovery Act, the Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, the Endangered Species Act and similar federal, state and local laws. “Hazardous Material” means any pollutant, toxic substance, hazardous waste, hazardous material, hazardous substance, petroleum or petroleum-containing product as listed or regulated under any applicable Environmental Law. “Release” means any releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, depositing, dispersing, migrating or disposing of a Hazardous Material into the Environment or within any building, structure, facility or fixture.

Section 3.15. Insurance. Schedule 3.15 sets forth a list of the material insurance policies held by, or for the benefit of, the Company and its Subsidiaries as of the date of this Agreement, and true, correct and complete copies of all such insurance policies have been delivered or made available to Parent. Each such insurance policy is valid and binding and in full force and effect, all premiums due thereunder have been paid, and neither the Company nor any of its Subsidiaries has received any notice of cancellation or termination in respect of any such policy or notice of default thereunder. Neither the Company nor any of its Subsidiaries has received notice that any insurer under any policy under which the Company or any of its Subsidiaries is covered is denying liability with respect to a claim thereunder or defending any claim under a reservation of rights clause. Except as set forth on Schedule 3.15, since January 1, 2005, neither the Company nor any of its Subsidiaries has filed for any claims exceeding $10,000 against any of its insurance policies, exclusive of health insurance policies. None of

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such policies will lapse or terminate by reason of the transactions contemplated by this Agreement. Neither the Company nor any of its Subsidiaries has received written notice from any of its insurance carriers that any premiums will be materially increased in the future or that any insurance coverage listed on Schedule 3.15 will not be available in the future on substantially the same terms now in effect.

Section 3.16. No Brokers. Neither the Company, its Subsidiaries, the Shareholder nor any of their Affiliates has entered into any contract, arrangement or understanding with any Person that may result in the obligation of such entity to pay any finder’s fees, brokerage or agent’s commissions or other like payments in connection with the negotiations leading to this Agreement or consummation of the transactions contemplated hereby, except that the Company and the Shareholder have retained and will owe fees to RSM EquiCo Capital Markets, LLC.

Section 3.17. Compliance with Laws.

(a) Except as disclosed on Schedule 3.17(a), neither the conduct of the Company’s business as it is currently conducted nor the operation of the System as it is currently operated violates or infringes any law, statute, ordinance, regulation, rule order, judgment or decree of any Governmental Authority or constitutes an event of default under the Franchises currently in effect, except as would not have or would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, and the Company has not received any written notice of any such violation or default by the Company or any of its Subsidiaries. Except as disclosed on Schedule 3.17(a), no Person or Governmental Authority has alleged in writing any violation, infringement, or event of default, and no event or circumstance has occurred that with notice, lapse of time or both would constitute a violation, infringement, or event of default thereunder. Schedule 3.17(a) sets forth the true, complete and correct 2007 Basic Signal Leakage Performance Reports (FCC Form 320), which contain the Company’s cumulative leakage index audit for the System as required under FCC Rule 76.611. Except as set forth on Schedule 3.17(a), the System is in material compliance with all the signal leakage criteria prescribed by the FCC for each relevant reporting period.

(b) The Company has delivered or made available to Parent true, correct and complete copies of (i) all FCC rate forms filed by the Company or any of its Subsidiaries with respect to the System, (ii) all other FCC forms filed by the Company or any of its Subsidiaries with respect to the System and (iii) all correspondence by the Company or any of its Subsidiaries with any Governmental Authority relating to rate regulation generally or specific rates charged to subscribers with respect to the System, including copies of any complaints filed with the FCC with respect to any rates charged to subscribers of the System, and any other documentation supporting an exemption from the rate regulation provisions of the Cable Act claimed by the Company or any of its Subsidiaries with respect to the System, in the case of each (i) – (iii), to the extent filed, sent, or received on or after January 1, 2004. Schedule 3.17(b) sets forth a list of (a) all pending complaints with respect to any rates which have been filed by the Company or any of its Subsidiaries with the FCC for the System, (b) any franchising authority that has filed FCC Form 328 for certification to regulate any of the rates of the System since January 1, 2004, and (c) any other complaints, formal or informal, which have been filed against the Company or any of its Subsidiaries, at the FCC. Neither the Company nor any of its Subsidiaries has received any notice from any Governmental Authority with respect to an intention to enforce customer service standards pursuant to the Cable Act, and neither the Company nor any of its Subsidiaries

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has agreed with any Governmental Authority to establish customer service standards that exceed the FCC standards promulgated pursuant to the Cable Act. Except as set forth on Schedule 3.17(b), the System has been conducted, and at the Closing will be conducted, in accordance with the Cable Act and the rules and regulations of the FCC promulgated thereunder. The Company and its Subsidiaries have timely submitted to the FCC all required filings, including cable television registration statements, annual reports, employment reports, aeronautical frequency usage notices, universal service fund worksheets and related filings, and any applicable traffic and circuit reports.

(c) The Company and its Subsidiaries have timely submitted all reports to state regulatory agencies as required by such agencies by virtue of the Company and its Subsidiaries holding the Franchises and the Company Licenses.

(d) The Company has delivered or made available to Parent true, correct and complete copies of all current reports and filings for the reporting periods beginning with January 1, 2004, that have been made or filed by the Company pursuant to the Copyright Act and the rules and regulations of the U.S. Copyright Office with respect to the System, and, regarding those reports and filings to be made or filed by the Company with the U.S. Copyright Office with respect to the System between the date of this Agreement and the Closing, the Company will deliver the same to Parent promptly after filing. The Company has timely filed all semi-annual statements of account and paid all compulsory licensing fees required by the Copyright Act and the rules and regulations of the United States Copyright Office with respect to the System.

Section 3.18. Franchises and Company Licenses. Schedule 3.18 contains (i) a description of the Franchises and (ii) a true, correct and complete list of all material licenses, telecommunications franchises, permits, authorizations, registrations and certifications of any Governmental Authority, which have been issued to the Company, any of its Subsidiaries or any of their Affiliates and are currently in effect (excluding the Franchises, the “Company Licenses”). The Company has delivered or made available to Parent a true, correct and complete copy of each Franchise and Company License. The Franchises and the Company Licenses represent all of the licenses, permits, authorizations, registrations and certifications necessary to operate the Company’s business as it is operated on the date hereof and as would reasonably be expected to be required as of immediately prior to the Closing. Each Franchise and Company License is valid and in full force and effect, except to the extent the failure of any Company License to be valid and in full force and effect would not have or would not be reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect. None of the Franchises or any of the Company Licenses is subject to any conditions or restrictions other than such as may exist by virtue of acts of the United States Congress, the rules and regulations of federal regulatory agencies or laws and rules adopted by the various Governmental Authorities in the jurisdictions where the Company or any of its Subsidiaries operates the Company’s business or as would not have or reasonably be expected to have a Company Material Adverse Effect. Other than orders, actions, proceedings or investigations generally applicable to the cable television or telecommunications industries in the United States or in the State of Alabama, there are no proceedings pending which could materially and adversely affect the validity of the Franchises, the Company Licenses or the terms and provisions thereof. There is no investigation or proceeding pending or, to the knowledge of the Company, threatened that could result in the termination, revocation, suspension, or restriction of any Franchise or Company License or the

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imposition of any fine, penalty or other sanctions for violation of any legal or regulatory requirements relating to any Franchise or Company License, except to the extent the termination, revocation, suspension, or restriction of any Franchise or Company License or the imposition of any fine, penalty or other sanctions would not have or would not be reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect. Except as disclosed on Schedule 3.18, (i) the System and the other assets of the Company and its Subsidiaries are being operated, and the Company’s business is being conducted, in compliance with the Franchises and the Company Licenses in all material respects, (ii) neither the Company nor any of its Subsidiaries has received any notice from a Governmental Authority threatening any enforcement action with respect to the Franchises, stating that the System is not in compliance with the terms of the Franchises or stating that the Franchises will not be renewed, (iii) neither the Company nor any of its Subsidiaries has received any notice threatening any enforcement action with respect to any Company License, stating that the System is in noncompliance with the terms of such Company License or stating that such Company License will not be renewed, or will be revoked or altered (iv) no Governmental Authority currently has any right to purchase the System or any portion thereof, (v) none of the Franchises or the Company Licenses are, to the Company’s knowledge, under consideration to be revoked or adversely modified in any material respect and (vi) there are no undisclosed material obligations with respect to the Franchises or the Company Licenses, other than those set forth in the Franchises or the Company Licenses. Except as set forth in Schedule 3.18, none of the Franchises or the Company Licenses shall be affected in any manner by the consummation of the transactions contemplated hereby, except to the extent such effect would not have or would not be reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect.

Section 3.19. System.

(a) Schedule 3.19(a) sets forth a true, correct and complete statement, to the Company’s knowledge, as of the date set forth in Schedule 3.19(a), of the following information with respect to the System:

(i) the approximate number of route miles included in the Company and its Subsidiaries’ assets and served by the System’s headend;

(ii) the approximate number of homes passed in the System;

(iii) the applicable MHz capacity and the channel capacity of the System; and

(iv) the number of subscribers served by the System by subscriber type.

(b) Schedule 3.19(b) sets forth a complete and accurate description of the following information relating to the System, as of the date of this Agreement:

(i) (A) a description of the broadcast basic service, expanded basic service, the digital service, pay TV and a la carte services, and voice and data services available from the System, (B) a rate code table showing all rate codes including retail rates and discounts as of September 30, 2007, (C) retail rate cards for September 30, 2007, and (D) subscriber counts by tier of service for September 30, 2007; and

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(ii) the stations and signals carried by the System, the channel position of each such signal and station and all FCC aeronautical frequencies utilized by the System.

The System is capable of providing all channels, stations and signals reflected as being carried by the System on Schedule 3.19(b).

(c) Except for regularly scheduled franchise fees that have accrued under the Franchises, which fees have been computed in accordance therewith and timely paid in full, there are no franchise fees payable with respect to the Franchises. There are no fees payable with respect to any conduit agreement. Neither the Company nor any of its Affiliates has been notified in writing by any Governmental Authority or other Person regarding any material adjustment to the amount of franchise fees to be paid by the Company to such Governmental Authority or Person.

(d) Neither the Company nor any of its Affiliates has received any FCC order requiring the System to carry a television broadcast signal or to terminate carriage of a television broadcast signal, and to the Company’s knowledge, no television broadcast station has complained to the Company or filed a written complaint with the FCC claiming that the Company carried or refused to carry a television broadcast signal in violation of the requirements of the FCC’s mandatory broadcast signal carriage rules.

(e) Except as described on Schedule 3.19(e), (i) there are no unfulfilled binding material commitments for capital improvements obligated to be made in connection with the System, (ii) no commitment to any Governmental Authority has been made to maintain a local office in any location and (iii) no commitment has been made to any Governmental Authority to pay franchise fees or other amounts to any such Governmental Authority after the date hereof in excess of the amounts set forth in the Franchises.

(f) Schedule 3.19(f) contains a list of all conduit access and pole attachment agreements used in the Company’s business or needed to conduct the Company’s business. All of the conduit in which any underground coaxial cable is used to serve customers of the System on the date hereof and on the Closing Date is owned exclusively by the Company or its Subsidiaries. All underground coaxial cable used in the operation of the System to serve customers on the date hereof and on the Closing Date is located within such conduit (except for “drops” that are direct-buried and except for other non-material portions of such coaxial cable). Neither the Company nor, to the Company’s knowledge, any other Person has granted any other Person any right to use such conduit.

Section 3.20. Conduct of Business in Ordinary Course of Business. Except as disclosed on Schedule 3.20, since the date of the Base Balance Sheet, the Company has conducted its business in the ordinary course of business consistent with the Company’s past practice, and has not (i) made any material increase in compensation payable or to become payable, or benefits provided or to become provided, to any of the employees of the Company or any of its Subsidiaries, or any material change in personnel policies, insurance benefits or other compensation arrangements affecting the employees of the Company or any of its Subsidiaries, in each case other than in the ordinary course of business, (ii) made any sale, assignment, lease or other transfer of, or incurred any indebtedness or Encumbrance including leases and licenses granted by the Company to a third party (other than a Permitted Encumbrance) with respect to,

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any of the Company or its Subsidiaries’ assets (other than inventory used, sold or destroyed in the ordinary course of business), other than obsolete assets no longer usable in the operation of the Company’s business or other assets sold or disposed of in the ordinary course of business with suitable replacements being obtained therefor as reasonably necessary or advisable for the continued operation of the Company’s business, (iii) made any offers to existing or prospective customers inconsistent with the disclosure set forth on Schedule 3.19(b) or (iv) suffered any Company Material Adverse Effect.

Section 3.21. Letters of Credit, Bonds, Etc.. Except as set forth on Schedule 3.21, there are no letters of credit or franchise, construction, fidelity, performance, surety or other bonds, or guarantees in lieu of bonds, posted or required to be posted by the Company or its Affiliates in connection with the operation of the Company’s business.

Section 3.22. Accounts Receivable. All of the accounts receivable related to the Company’s business (a) are reflected and properly recorded on the books and records of the Company, including the Financial Statements; (b) represent sales actually made in the ordinary course of business consistent with past practice for goods or services delivered or rendered in bona fide arm’s-length transactions; (c) constitute valid, undisputed or adequately reserved claims, (d) are not subject to any assertions of set-off, reduction, counterclaim, claim or, to the Company’s knowledge, dispute, in any case in excess of the amount reserved against such items; (e) have not been extended or rolled over in order to make them current; (f) are current except as set forth in the aging report attached hereto as Exhibit B (the “Aging Report”); and (g) are or will be represented by one or more invoices, each of which has been generated in the ordinary course, and provides for payment to be made, in the name of the Company. The accounts receivable data set forth in the Aging Report is true, complete and correct in all material respects as of the date thereof and was prepared consistent with past practice.

Section 3.23. Assets of Company. Upon the consummation of the Closing, the assets and properties owned and validly licensed by the Company and its Subsidiaries will comprise all the assets and properties necessary to permit Parent and Buyer to conduct the Company’s Business and operate the System in the same manner as the Company’s business is being conducted and the System is being operated on the date hereof and at the Closing Date.

Section 3.24. Exclusive Dealing. Except as permitted by Section 7.1(o), Neither the Company nor any of its Affiliates is a party to any currently effective agreement involving, directly or indirectly, the sale or transfer of any Securities of the Company, any assets of the Company or any of its Subsidiaries (other than inventory in the ordinary course), or the System to any Person other than Parent and Buyer.

Section 3.25. No Material Adverse Effect. Since December 31, 2006, no event or circumstance has occurred and no condition has existed that has had, or that could reasonably be expected to have, a Company Material Adverse Effect.

Section 3.26. Knowledge. Whenever a representation or warranty made by the Company herein refers to the “knowledge of the Company”, the “Company’s knowledge” or a similar phase, such knowledge shall be deemed to consist only of the actual knowledge, after reasonable investigation and inquiry, on the date hereof and on the Closing Date, of C. Christopher Dupree, James Etheridge and Todd Andrews.

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ARTICLE IV -REPRESENTATIONS AND WARRANTIES OF

PARENT AND BUYER

Parent and Buyer hereby jointly and severally make to the Company and the Shareholder each of the representations and warranties contained in this Article IV.

Section 4.1. Organization. Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and each has all requisite corporate power and authority to own, use, operate, lease and transfer its properties and to carry on its respective business as currently conducted. Buyer is duly licensed or qualified to do business as a foreign corporation under the laws of each jurisdiction in which the character of its properties or in which the transaction of its business makes such qualification necessary, except where the failure to be so licensed or qualified would not be reasonably likely to have, individually or in the aggregate, a Parent Material Adverse Effect (as defined below). “Parent Material Adverse Effect” means any event, change, circumstance, effect or state of facts that (i) is or could reasonably be expected to be materially adverse to the business, financial condition, operations, assets, liabilities or results of operations of Parent and its Subsidiaries, taken as a whole; provided, however, that a Parent Material Adverse Effect under this clause (i) shall not include the effect of any event, change, circumstance, effect or state of facts arising out of or attributable to any of the following: (1) matters affecting the telecommunications industry generally, including the multi-channel video programming distribution, voice communications (including voice over internet protocol) or high speed internet services industries, that do not affect Parent’s business disproportionately as compared to other similarly situated participants in the telecommunications industry, (2) the public announcement of this Agreement or the fact that this Agreement will be consummated or (3) any changes in federal or state laws that do not affect Parent’s business disproportionately as compared to other similarly situated participants in the telecommunications industry or (ii) has prevented, materially impaired or materially delayed, or could reasonably be expected to prevent, materially impair or materially delay, the ability of Parent or Buyer to perform its obligations under this Agreement or to consummate the transactions contemplated hereby.

Section 4.2. Authorization; Validity of Agreement; Necessary Action. Each of Parent and Buyer has all requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution, delivery and performance by Parent and Buyer of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action by the board of directors of Parent and the board of directors of Buyer and by Parent as the sole stockholder of Buyer, and no other action on the part of Parent or Buyer is necessary to authorize the execution and delivery by Parent or Buyer of this Agreement and the consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by Parent and Buyer and, assuming due and valid authorization, execution and delivery hereof by each of the Company and the Shareholder, is a valid and binding obligation of each of Parent and Buyer, as the case may be, enforceable against each of them in accordance with its terms, except as such enforceability may be limited by the General Enforceability Exceptions.

Section 4.3. No Conflict; Consents. The execution and delivery by Parent and Buyer of this Agreement, and the consummation by Parent and Buyer of the Transaction and the other

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transactions contemplated hereby in accordance with the terms hereof, do not (i) violate, conflict with or result in a default (whether after the giving of notice, lapse of time or both) under, or give rise to a right of termination of, any contract, agreement, permit, license, authorization or obligation to which Parent or Buyer is a party or by which its assets are bound; (ii) violate any provision of the organizational documents of Parent or Buyer; (iii) cause Parent or Buyer to violate any provision of any law, regulation or rule, or any order of, or any restriction imposed by, any court or other Governmental Authority applicable to Parent or Buyer; or (iv) except as set forth on Schedule 4.3, require from Parent or Buyer any notice to, declaration or filing with, or consent or approval of any Governmental Authority or other third party.

Section 4.4. Required Financing. Parent has delivered to the Company a copy of that certain commitment letter dated November 2, 2007 issued by General Electric Capital Corporation, CoBank, ACB, CIT Lending Services Corporation and Raymond James Bank, FSB (the “Commitment Letter”) which, subject to the conditions specified in such Commitment Letter, will provide Parent with sufficient funds to consummate the Transaction, including, without limitation, to pay the Total Consideration in accordance with this Agreement (such funding, the “Financing”). The Commitment Letter is not subject to any conditions other than as set forth therein, has been duly executed by Parent and, to Parent’s knowledge, by all other parties thereto, and is in full force and effect on the date hereof. All commitment and other fees required to be paid under the Commitment Letter prior to the date hereof have been paid. As of the date hereof, Parent believes in good faith that it will be successful in obtaining the Financing contemplated by the Commitment Letter.

Section 4.5. Brokers. Neither Parent, Buyer, nor any of either of their Affiliates has entered into any contract, arrangement or understanding that will result in the obligation of such Person to pay any finder’s fees, brokerage or agent’s commissions or other like payments in connection with the negotiations leading to this Agreement or consummation of the Transaction.

Section 4.6. Litigation. Except for actions, proceedings or investigations affecting the cable television and telecommunications industries in general, there is no suit, claim, action, proceeding or investigation pending or, to the knowledge of the senior management of Parent or Buyer, threatened against Parent or Buyer, and neither Parent nor Buyer is subject to any outstanding order, writ, judgment, injunction or decree of any Governmental Authority that, in either case, would be reasonably likely, individually or in the aggregate, to (a) prevent or materially delay the consummation of the Transaction or (b) otherwise prevent or materially delay performance by Parent or Buyer of any of their material obligations under this Agreement.

Section 4.7. No Other Representations. Parent and Buyer understand and agree that they are acquiring the Company through the Transaction without reliance upon any express or implied representations or warranties of any nature, whether in writing, orally or otherwise, made by or on behalf of or imputed to the Company, any of its Subsidiaries or the Shareholder, except for the representations and warranties made by the Company and the Shareholder that are expressly set forth in Article III of this Agreement.

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ARTICLE V -CONDUCT OF BUSINESS PENDING THE CLOSING

Section 5.1. Conduct of Business Prior to Closing. The Company and the Shareholder agree that, between the date hereof and the Closing Date, the Company and its Subsidiaries shall operate their respective businesses and use and maintain their respective assets solely in the ordinary course of business, consistent with past practices and shall use all commercially reasonable efforts to preserve their business relationships with their respective customers, employees and other Persons having a business relationship with the Company and each of its Subsidiaries. Except as described in Schedule 5.1 and without limiting the generality of the foregoing, the Shareholder and the Company specifically agree that, without Parent’s prior written consent, the Shareholder, the Company and its Subsidiaries will not:

(a) authorize for issuance, issue or sell or agree or commit to issue or sell (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise), or modify the terms (through amendment, reclassification, reorganization, merger or otherwise) of, any Securities or equity equivalents or the Company or any of its Subsidiaries;

(b) make any change to the articles of incorporation (or other organizational documents (other than the bylaws)) of the Company or any of its Subsidiaries, or change the authorized capital stock or equity interests of the Company or any of its Subsidiaries, and with respect to the Shareholder, enter into any agreement or agreements (or discussions regarding any such agreement) for the sale, transfer, pledge or other disposition of the Securities of the Company or its Subsidiaries or consummate any such sale, transfer, pledge or other disposition;

(c) materially change accounting policies or procedures, including, without limitation, changes in accounting policies and procedures with respect to salaries and benefits, bad debt, charitable donations, lease payments and non-core business expenses, except as required by law or by GAAP;

(d) increase the rates of direct compensation or bonus compensation payable or to become payable to any officer, director or employee of the Company or any Subsidiary, except (i) in the Company’s ordinary course of business consistent with past practice with respect to both timing and amount, (ii) with respect to bonuses, in accordance with the Company’s bonus plans or procedures set forth on Schedule 5.1 and in the Company’s ordinary course of business with respect to both timing and amount, and (iii) as otherwise agreed between the parties;

(e) make any material acquisition or capital expenditure other than (i) in the ordinary course of business or (ii) as necessary to comply with the Franchises and the Company Licenses;

(f) fail to use, preserve and maintain the assets of the Company and its Subsidiaries on a basis consistent with past practice and fail to keep such assets, in all material respects, in good working condition, ordinary wear and tear excepted;

(g) fail to maintain the insurance policies covering the assets of the Company and its Subsidiaries that are in effect as of the date of this Agreement;

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(h) fail to pay the debts and obligations incurred by the Company and its Subsidiaries as they become due or waive, release or assign any material rights or claims;

(i) commit any act or omit to do any act which effectuates or causes an amendment or modification to, or a breach of or termination of (excluding any expiration due to the passage of time), any of the contracts set forth on Schedule 3.12, enter into any lease for real property that is not terminable without penalty on no more than sixty (60) days notice, materially modify or amend or enter into any lease for the headend site or enter any contract outside the ordinary course of business, provided that anything in this Agreement notwithstanding, the Company shall be allowed to review, modify and enter into programming agreements in the ordinary course of business upon compliance with Section 5.1(u) (if applicable);

(j) fail to maintain the Company’s and its Subsidiaries’ books, accounts and records in the usual manner and on a basis consistent with past practice, except as required by law or by GAAP;

(k) enter into any agreement or agreements (or discussions regarding any such agreement) for the sale or transfer of any material assets, or consummate any such sale or transfer, except for sales of obsolete equipment no longer usable in the operation of the Company’s business and as permitted under Section 7.2(o);

(l) change the rates or packages offered to the Company’s customers, provided that the Company shall not be precluded from (i) seeking usual and ordinary rate increases or (ii) decreasing rates as required by applicable law;

(m) fail to bill and collect from customers on a basis consistent with past practices;

(n) fail to promptly inform Parent in writing of any event, condition or circumstance that could be reasonably expected to result in a Company Material Adverse Effect;

(o) fail to maintain inventory and spare equipment at levels consistent with the Company’s past practice;

(p) fail to maintain capital expenditures in accordance with the Company’s capital expenditures budget set forth on Schedule 5.1(p) and as otherwise necessary to comply with the Franchises and the Company Licenses;

(q) create, assume or permit to exist any Encumbrance upon any assets except for Permitted Encumbrances;

(r) fail to continue to advertise in a manner that is consistent with past practice;

(s) change any method of tax accounting or make a tax election or change an existing tax election;

(t) fail to timely notify Parent of and, at Parent’s timely request, discuss all planned material sales and marketing programs, including all new sales offers, discount plans or customer retention plans;

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(u) add any programming channels in addition to those set forth on Schedule 3.19(b), unless the Company provides Parent with notice of such proposed addition and within twenty (20) days of Parent’s receipt of such notice, Parent does not object to such addition by written notice to the Company;

(v) fail to implement procedures for disconnection and discontinuance of service to subscribers whose accounts are delinquent in accordance with the Company’s policies and practices as in effect during the six month period preceding the date of this Agreement;

(w) dispose of, license or permit to lapse any rights in, to or for the use of any material Intellectual Property used in the Company’s business;

(x) settle any material claims, actions, arbitrations, disputes or other proceedings, including any such matters that would result in the Company or any Subsidiary being enjoined in any material respect from engaging in the transactions contemplated by this Agreement or materially adversely affecting the Company’s business;

(y) waive, release or assign any material right relating to the Company’s business or assets; and

(z) enter into any agreement, commitment or undertaking to do any of the activities prohibited by the foregoing provisions or that is otherwise inconsistent with the foregoing.

ARTICLE VI -ADDITIONAL AGREEMENTS

Section 6.1. Access to Information and System.

(a) Between the date of this Agreement and the Closing Date, the Company shall, and shall cause each of its Subsidiaries and each of the Company’s and its Subsidiaries’ officers, employees and agents, to give Parent and Buyer and their representatives reasonable access upon reasonable notice to the facilities, properties, employees, books and records, systems and operations (including billing and information technology) of the Company and its Subsidiaries as from time to time may be reasonably requested.

(b) Any such investigation by Parent or Buyer shall not unreasonably interfere with or disrupt any of the businesses or operations of the Company or its Subsidiaries. Neither Parent nor Buyer shall, prior to the Closing Date, have any contact whatsoever with respect to the Company or any of its Subsidiaries or with respect to the transactions contemplated by this Agreement with any partner, lender, lessor, vendor, customer, supplier, employee or consultant of the Company or any of its Subsidiaries, except in consultation with the Company and then only with the express prior approval of the Company, which approval shall not be unreasonably withheld, conditioned or delayed. All requests by Parent or Buyer for access or information shall be submitted or directed exclusively to an individual or individuals to be designated by the Company. Neither Parent nor Buyer shall be permitted to conduct any invasive tests on any Property without the prior written consent of the Company; provided, however, that Parent may, at its expense, have Phase 1 environmental assessments performed on the properties set forth on Schedule 6.1(b) prior to the Closing Date.

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Section 6.2. Confidentiality. The parties shall adhere to the terms and conditions of that certain letter agreement dated on or about August 1, 2007 by and between Parent and the Company (the “Confidentiality Agreement”).

Section 6.3. Consents and Filings; Further Assurances.

(a) Each of the Shareholder, the Company, Parent and Buyer shall use their respective commercially reasonable efforts to obtain the authorizations, consents, orders and approvals necessary for their execution and delivery of, and the performance of their obligations pursuant to, this Agreement. If required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder (the “HSR Act”) and if the appropriate filing of a Notification and Report Form for Certain Mergers and Acquisitions pursuant to the HSR Act has not been filed prior to the date hereof, each party hereto agrees to make an appropriate filing of a Notification and Report Form for Certain Mergers and Acquisitions with respect to the transactions contemplated by this Agreement within ten (10) Business Days after the date hereof, to request early termination of the applicable waiting period and to supply promptly any additional information and documentary material that may be requested pursuant to the HSR Act. The parties hereto shall promptly respond to any requests for additional information from any Governmental Authority or other third party in respect thereof. Parent and the Shareholder shall each pay one-half of all filing and related fees in connection with any such filings that must be made by any of the parties under the HSR Act. Each of Parent, Buyer, the Shareholder and the Company hereby covenants and agrees to use its commercially reasonable efforts to secure termination of any waiting periods under the HSR Act or any other applicable law and to obtain the approval of the Federal Trade Commission (the “FTC”), the Antitrust Division of the United States Department of Justice (the “DOJ”) or any other Governmental Authority, as applicable, for the Transaction and the other transactions contemplated hereby; provided, however, that notwithstanding any other provision of this Agreement, Parent shall not be required, as a condition to obtaining such approval, to divest or hold separate or otherwise take or commit to take any action or enter into any agreement that limits its freedom of action with respect to all or any portion of Parent’s or any of its Subsidiaries’ assets, businesses or lines of business, and neither the Shareholder, the Company nor any of its Subsidiaries shall make any such divestiture or take any such action or make any such commitment with respect to the Company or any of its Subsidiaries’ business or assets in connection with obtaining any such approval without Parent’s prior written consent.

(b) Each of the parties shall use all commercially reasonable efforts to take, or cause to be taken, all appropriate action to do, or cause to be done, all things necessary, proper or advisable under applicable law or otherwise to consummate and make effective the transactions contemplated by this Agreement and all other agreements contemplated hereby as promptly as practicable, including to (i) obtain the consents and approvals of the third parties and Governmental Authorities listed on Schedule 3.4 and (ii) promptly make all necessary filings, and thereafter make any other required submissions required under applicable law with respect to this Agreement and the transactions contemplated herein.

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(c) Section 6.3(b) notwithstanding, the Shareholder and the Company shall use commercially reasonable efforts to prepare and file, or cause to be prepared and filed, within 30 Business Days after the date of this Agreement, all applications, including FCC Forms 394 or other appropriate forms required to be filed (i) with the FCC and (ii) with any other Governmental Authority that are necessary for the transfer of control of the Franchises in connection with the consummation of the Transaction. Parent shall provide to the Shareholder and the Company all information deemed reasonably necessary by the Shareholder and the Company for the completion of the FCC Forms 394 required to be filed in order to obtain the approvals necessary to transfer the Franchises (including information reasonably required by the terms of the Franchises and requested by the Company), and agrees to cooperate reasonably, diligently, and in good faith with the Shareholder and the Company in the preparation of such FCC Forms 394 to permit the filing of such FCC Forms 394. Following the execution hereof, until the Closing, the Shareholder and the Company shall timely send or cause to be sent all required renewal letters with respect to the Franchises pursuant to Section 626(a) of the Cable Act to the proper Governmental Authority. The Shareholder and the Company shall not and shall cause its Subsidiaries to not, without Parent’s prior written consent, agree or accede to any material modifications or amendments to, or in connection with, or the imposition of any material condition to the renewal of, any of the Franchises that, individually or in the aggregate, will impose a material obligation on Parent following the Closing. The Shareholder and the Company shall, to the extent reasonably practicable, notify Parent of all meetings, hearings and other discussions before or with Governmental Authorities in connection with the renewal or extension of any Franchise, any governmental authorization relating to a Franchise or the granting of a Required Consent (as defined below) such that Parent’s representatives can participate to the extent reasonably practicable in such proceedings.

(d) Section 6.3(b) notwithstanding, the Shareholder and the Company shall use commercially reasonable efforts to prepare and file, or cause to be prepared and filed, within 30 Business Days after the date of this Agreement, all applications required to be filed with the FCC and with any other Governmental Authority that are necessary for the transfer of control of any Company Licenses in connection with the consummation of the Transaction. Parent shall provide to the Shareholder and the Company all information deemed reasonably necessary by the Shareholder and the Company for the completion of the applications necessary to obtain the approvals necessary to transfer the Company Licenses (including information reasonably required by the terms of the Company Licenses and requested by the Shareholder and the Company), and agrees to cooperate reasonably, diligently, and in good faith with the Shareholder and the Company in the preparation of such applications to permit the filing of such applications. From the date of this Agreement until the Closing Date, upon Parent’s request, the Shareholder and the Company shall use commercially reasonable efforts to obtain an extension or renewal of any Company License that has expired or will expire prior to July 31, 2007, and such extension or renewal shall be for a term reasonably requested by Parent and shall otherwise be on substantially the same or on other commercially reasonable terms that are reasonably acceptable to Parent. The Shareholder and the Company shall not and shall cause its Subsidiaries to not, without Parent’s prior written consent, agree or accede to any material modifications or amendments to, or in connection with, or the imposition of any material condition to the renewal of, any of the Company Licenses that, individually or in the aggregate, will impose a material obligation on Parent following the Closing. The Shareholder and the Company shall, to the extent reasonably practicable, notify Parent of all meetings, hearings and other discussions

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before or with Governmental Authorities in connection with the renewal or extension of any Company License or the granting of a Required Consent such that Parent’s representatives can participate to the extent reasonably practicable in such proceedings.

(e) Upon Parent’s reasonable request, the Shareholder and the Company shall deliver with each FCC Form 394 a proposed Franchise transfer resolution, which will include a request to extend, for a term of 36 months following the Closing, on substantially the same or on other commercially reasonable terms that are reasonably acceptable to Parent, any Franchise that has expired or will expire after the date hereof and prior to the date which is 30 months after the Closing Date in accordance with its terms. From the date of this Agreement until the Closing, upon Parent’s reasonable request, the Shareholder and the Company shall seek to obtain any such extension or renewal of any Franchise that has expired or will expire after the date hereof and prior to the date which is 30 months after the Closing Date in accordance with its terms in the ordinary course of business, provided, that, in any event, the Shareholder and the Company will use commercially reasonable efforts to obtain such extension or renewal (i) with a term of 36 months following the Closing and (ii) on substantially the same or on other commercially reasonable terms that are reasonably acceptable to Parent.

(f) From the date of this Agreement until the Closing Date, upon Parent’s request, the Shareholder and the Company shall use commercially reasonable efforts to obtain an extension or renewal of any lease set forth on Schedule 6.3(f), and such extension or renewal shall be for a term of up to 36 months (as so requested by Parent) and shall otherwise be on substantially the same or on other commercially reasonable terms that are reasonably acceptable to Parent; provided, however, that no such extension or renewal shall require the Company to incur or pay any extension or renewal fees; provided further, however, that no ordinary course rental increase will be considered an extension or renewal fee.

(g) The Shareholder and the Company shall not, and shall not permit any Subsidiary to, agree, without Parent’s prior written consent to any material change to the terms of any Franchise, Company License or Material Contract as a condition to obtaining any consent or approval related to such Franchise, Company License or Material Contract. If in connection with obtaining any consent or approval, a Governmental Authority or other third party seeks to impose any condition or adverse change to any Franchise, Company License or Material Contract to which such consent or approval relates as a requirement for granting such consent or approval, the Shareholder and the Company shall promptly notify Parent of such fact, and the Shareholder and the Company shall not agree to such condition or adverse change unless Parent shall, in its reasonable discretion, consent to such condition or change in writing.

(h) Each of Parent and Buyer shall use commercially reasonable efforts to assist the Shareholder and the Company in obtaining the Required Consents, including (i) providing to such third parties and Governmental Authorities such financial statements and other financial information as such third parties or Governmental Authority may reasonably request and (ii) agreeing to commercially reasonable adjustments to the terms of the Franchises, Company Licenses and Material Contracts with such third parties and Governmental Authorities (provided that neither party hereto shall be required to agree to any adjustment increasing the amount payable with respect thereto).

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Section 6.4. Officers’ and Directors’ Indemnification.

(a) In the event of any threatened or actual claim, action, suit, proceeding or investigation, whether civil, criminal or administrative, including, without limitation, any such claim, action, suit, proceeding or investigation in which any Person who is now, or has been at any time prior to the date hereof, or who becomes prior to the Closing Date, a director, officer, employee, fiduciary or agent of the Company or any of its Subsidiaries (the “Indemnified Parties”) is, or is threatened to be, made a party based in whole or in part on, or arising in whole or in part out of, or pertaining to (i) the fact that he or she is or was a director, officer, employee, fiduciary or agent of the Company or any of its Subsidiaries, or is or was serving at the request of the Company or any of its Subsidiaries as a director, officer, employee, fiduciary or agent of another corporation, partnership, joint venture, trust or other enterprise or (ii) the negotiation, execution or performance of this Agreement or any of the transactions contemplated hereby, whether in any case asserted or arising before or after the Closing Date, the Company, Parent and Buyer agree to cooperate and use their reasonable best efforts to defend against and respond thereto. It is understood and agreed that the Company shall indemnify and hold harmless, and after the Closing Date Parent shall indemnify and hold harmless, as and to the full extent permitted by applicable law, each Indemnified Party against any losses, claims, damages, liabilities, costs, expenses (including reasonable attorneys’ fees and expenses), judgments, fines and amounts paid in settlement in connection with any such threatened or actual claim, action, suit, demand, proceeding or investigation, and in the event of any such threatened or actual claim, action, suit, proceeding or investigation (whether asserted or arising before or after the Closing Date), (A) the Company, and Parent after the Closing Date, shall promptly pay expenses incurred by each Indemnified Party as the same are incurred in advance of the final disposition of any claim, suit, proceeding or investigation to such Indemnified Party, (B) the Indemnified Parties may retain counsel satisfactory to them, and the Company, and Parent after the Closing Date, shall pay all fees and expenses of such counsel for the Indemnified Parties within thirty (30) days after statements therefor are received and (C) the Company, and Parent after the Closing Date, will use their respective reasonable best efforts to assist in the vigorous defense of any such matter; provided, however, that none of the Company or Parent shall be liable for any settlement effected without its prior written consent (which consent shall not be unreasonably withheld); and provided further that the Company and Parent shall have no obligation hereunder to any Indemnified Party when and if a court of competent jurisdiction shall ultimately determine, and such determination shall have become final and non-appealable, that indemnification of such Indemnified Party in the manner contemplated hereby is prohibited by applicable law. Any Indemnified Party wishing to claim indemnification under this Section 6.4, upon learning of any such claim, action, suit, proceeding or investigation, shall notify the Company, and Parent after the Closing Date, thereof; provided that the failure to so notify shall not affect the obligations of the Company and Parent except to the extent such failure to notify materially prejudices such party.

(b) Parent and Buyer agree that all rights to indemnification or exculpation existing in favor of, and all limitations on the personal liability of, each present and former director, officer, employee, fiduciary and agent of the Company and its Subsidiaries provided for in their respective articles of incorporation or by-laws or otherwise in effect as of the date hereof shall continue in full force and effect for a period of six (6) years from the Closing Date; provided, however, that all rights to indemnification in respect of any claims asserted or made within such

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period shall continue until the disposition of such claim. From and after the Closing Date, Parent also agrees to indemnify and hold harmless the present and former officers and directors of the Company and its Subsidiaries in respect of acts or omissions occurring prior to the Closing Date to the extent provided in any written indemnification agreements between the Company and/or one or more of its Subsidiaries.

(c) On the Closing Date, Parent shall purchase an extended reporting period endorsement under the Company’s existing directors’ and officers’ liability insurance coverage for the Company’s and its Subsidiaries’ directors and officers in a form reasonably acceptable to the Company that shall provide such directors and officers with coverage for six (6) years following the Closing Date of not less than the existing coverage and have other terms not materially less favorable to, the insured Persons than the directors’ and officers’ liability insurance coverage presently maintained by the Company. Parent shall maintain such policy in full force and effect, and continue to honor the obligations thereunder.

(d) The obligations under this Section 6.4 shall not be terminated or modified in such a manner as to adversely affect any Indemnified Party to whom this Section 6.4 applies without the consent of such Indemnified Party (it being expressly agreed that the Indemnified Parties to whom this Section 6.4 applies shall be third party beneficiaries of this Section 6.4 and shall be entitled to enforce the covenants contained herein).

(e) In the event Parent or its successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each such case, to the extent necessary proper provision shall be made so that the successors and assigns of Parent assume the obligations set forth in this Section 6.4.

Section 6.5. Tax Matters.

(a) Preparation and Filing of Tax Returns.

(i) The Shareholder shall prepare and file, or shall cause to be prepared and filed, all Tax Returns of the Company and its Subsidiaries with respect to Pre-Closing Periods which are due after the Closing Date, and the Shareholder shall use the Company’s certified public accountant, Jackson Thornton LLP, to prepare such Tax Returns, so long as such accountant is willing to perform such services upon reasonable terms and conditions, and shall provide each such Tax Return to Parent for its review and comment at least fifteen (15) Business Days prior to the date on which such Tax Return is to be filed, and the Shareholder shall make changes to each such Tax Return as are reasonably requested by Parent so long as such changes are permitted by applicable law. Such Tax Returns shall be prepared in a manner consistent with past practices except as required by changes in applicable law. To the extent permitted by applicable law, the Shareholder shall include any income, gain, loss, deduction or other tax items for such periods on his Tax Returns in a manner consistent with the Schedule K-1s prepared by the Company for such periods. Further, the Shareholder shall cause any amounts shown to be due on such Tax Returns to be remitted to the applicable taxing authorities no later than the due date of such Tax Returns.

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(ii) Parent (and its Subsidiaries and Affiliates) shall not amend any Tax Returns of the Company or its Subsidiaries for any Pre-Closing Period without the prior written consent of the Shareholder, which consent shall not be unreasonably withheld.

(b) End of Tax Year. Parent shall not take any action, or permit any action to be taken, that may prevent the tax year of the Company and its Subsidiaries from ending for federal and applicable state, local and foreign income tax purposes at the end of the day on the Closing Date.

(c) S Corporation Status. The Company and the Shareholder shall not take or allow any action, other than the sale of the Company’s stock pursuant to this Agreement, that would result in the revocation or termination of the Company’s status as a validly electing S corporation within the meaning of Code §1361 and §1362 (and corresponding provisions of state or local Tax law).

(d) Cooperation on Tax Matters. Notwithstanding anything to the contrary in Sections 8.4 and 8.5, Parent and the Shareholder shall cooperate fully, as and to the extent reasonably requested by the other parties, in connection with the filing of Tax Returns or any amended Tax Returns, any Tax audits, Tax proceedings or other Tax-related claims, the authorization and execution of any appropriate powers of attorney to accomplish the foregoing, allowing the Shareholder to review Tax Returns to determine or verify the proper amounts payable thereunder, and any mechanisms or payment processes reasonably requested by the Shareholder to pay any Tax refunds to the Shareholder to the extent, but only to the extent, that the Shareholder is entitled thereto pursuant to Section 6.5(f) hereof. Such cooperation shall include, upon the Shareholder’s request, providing records and information that are reasonably relevant to any such matters, making employees available on a mutually convenient basis to provide additional information, and explaining any materials provided pursuant to this Section 6.5. Without the prior written consent of the Shareholder, neither Parent nor Buyer will make any election under Code §338 (or any corresponding provision of state or local Tax law). Parent and its Subsidiaries and Affiliates shall not destroy or dispose of any Tax workpapers, schedules or other materials and documents supporting Tax Returns of the Company and its Subsidiaries for Pre-Closing Periods until the seventh (7th) anniversary of the Closing Date without the prior written consent of the Shareholder and, before any disposition or destruction of such materials at any time, Parent shall give the Shareholder the opportunity to take possession of such materials and documents.

(e) Transfer Taxes. All transfer, value added, excise, stock transfer, stamp, recording, registration and any similar Taxes (including penalties and interest thereon, “Transfer Taxes”) that become payable in connection with the Transaction and other transactions contemplated hereby shall be borne 50% by Parent and 50% by the Shareholder. The applicable parties shall cooperate in filing such forms and documents as may be necessary to permit any such Transfer Tax to be assessed and paid on or prior to the Closing Date in accordance with any available pre-sale filing procedure, and to obtain any exemption or refund of any such Transfer Tax. The Shareholder shall have no obligation for any Taxes that arise from actions taken by Parent or Buyer after the Closing Date with respect to the Company or its assets.

(f) Tax Refunds. The Shareholder shall be entitled to receive from the Company (or its Affiliates) all Tax refunds for Taxes paid with respect to Pre-Closing Periods. The Shareholder shall have no obligation for any Taxes that arise from actions taken by Parent or Buyer after the Closing Date with respect to the Company or its assets.

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Section 6.6. Books and Records. Parent and Buyer shall, and shall cause the Company and each of the Company’s Subsidiaries to, until the seventh (7th) anniversary of the Closing Date, retain all books, records and other documents pertaining to the business of the Company and its Subsidiaries in existence on the Closing Date and to make the same available for inspection and copying by the Shareholder at the expense of the Shareholder during the normal business hours of Parent, Buyer, the Company or such Subsidiary, as applicable, upon reasonable request and upon reasonable notice. No such books, records or documents shall be destroyed after the seventh (7th) anniversary of the Closing Date without first advising the Shareholder in writing and giving the Shareholder a reasonable opportunity to obtain possession thereof.

Section 6.7. Employment Matters.

(a) As of the Closing Date, the Company shall have terminated all Company Plans except for those Company Plans that Parent requests not be terminated. Parent shall take all necessary action so that, after the Closing Date, any current or former employee of the Company who is eligible to participate in a Company Plan as of the Closing Date shall either be eligible to continue his or her participation in such Company Plan or participate in a corresponding employee benefit plan maintained by Parent or any of its subsidiaries, subject to the terms of such corresponding plan. Unless otherwise agreed to in writing by the parties, within thirty (30) days prior to the Closing Date, Parent shall provide written notification to Company of the Company Plans to be terminated and Company plans to be maintained post-Closing. Parent shall determine which current or former employees of the Company will continue participation in a Company Plan after the Closing Date and which will commence participation in a corresponding employee benefit plan maintained by Parent or any of its subsidiaries after the Closing Date and, with respect to current or former employees who transfer participation to such a corresponding plan, when such transfer will occur. Parent need not treat all current and former employees of the Company (including those who are similarly situated) in the same manner with respect to which plans they participate in and when, if at all, they transfer participation from a Company Plan to a corresponding employee benefit plan maintained by Parent or any of its subsidiaries. Parent may take such actions (or cause its subsidiaries or the Company after the Closing Date to take such actions) as are necessary or advisable to accomplish the foregoing, including, without limitation, amending the eligibility provisions of the employee benefit plans maintained by Parent, its subsidiaries or the Company after the Closing Date.

(b) Except as otherwise provided in this Section 6.7, nothing in this Agreement shall be interpreted as limiting the power of the Company after the Closing Date to amend or terminate any particular Company Plan or any other particular employee benefit plan, program, agreement or policy or as requiring the Company after the Closing Date or Parent to offer to continue (other than as required by its terms) any Company Plan or any written employment contract or to continue the employment of any specific person; provided, however, that no such termination or amendment may take away benefits or any other payments already accrued as of the time of such termination or amendment without the consent of such person, except as allowed by law.

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Section 6.8. Interim Financial Statements; Other Reports.

(a) Not later than 30 days after the end of each calendar month and each fiscal quarter following the date hereof and through and until the Closing Date, the Company shall prepare and deliver to Parent current and updated consolidated aging reports, unaudited balance sheets, statements of cash flows (including detailed capital expenditures) and statements of operations, each as of the end of and for each calendar month and calendar quarter following the date hereof and certified by the Company’s Chief Financial Officer (collectively, the “Interim Financial Statements”), and such Interim Financial Statements will be prepared in good faith using reasonable allocations and assumptions from the books and records of account of the Company and its Subsidiaries, which books and records shall be kept in the normal course of business and in accordance with GAAP, and in accordance with the Company’s past practices.

(b) Not later than thirty (30) days after the end of each calendar month ended following the date hereof and through and until the Closing Date, the Company shall prepare and deliver to Parent updated subscriber information, including gross connections by product, disconnections by product, churn by product and average revenue per customer by product, as of the end of and for each full calendar month following the date hereof.

Section 6.9. Exclusivity. The Shareholder agrees on his own behalf and on behalf of his Affiliates that following the date hereof until the earlier of (a) the Closing Date or (b) the termination of this Agreement, the Shareholder shall not, and shall cause his Affiliates and their respective directors, employees, representatives and agents (collectively, the “Shareholder Parties”) not to, discuss, pursue or enter into any contract with respect to a possible sale or other disposition (whether by merger, reorganization, recapitalization or otherwise) of all or any part of the Securities of the Company or its Subsidiaries or all or any material part of his or their assets with any other Person (an “Acquisition Proposal”) or provide any information to any Person other than Parent and Buyer (and their representatives) with respect to an Acquisition Proposal. The Shareholder shall, and shall cause the Company Parties to, (i) immediately cease and cause to be terminated any and all contracts, discussions and negotiations with all Persons other than Parent and Buyer (and their representatives) regarding the foregoing and (ii) promptly notify Parent if any Acquisition Proposal or any inquiry or contact with any Person other than Parent and Buyer (and their representatives) with respect thereto is subsequently made to any Company Party.

Section 6.10. Further Action. At and following the Closing, each party hereto will execute such further documents and instruments and take such further actions as may reasonably be requested by one or more of the other parties to consummate the Transaction and effect the other purposes of this Agreement.

Section 6.11. Financing.

(a) Parent shall use its commercially reasonable efforts to (i) arrange and obtain the Financing on the terms and conditions described in the Commitment Letter, (ii) negotiate and finalize definitive agreements with respect thereto on the terms and conditions contained in the Commitment Letter, (iii) satisfy on a timely basis all conditions applicable to Parent or Buyer in such definitive agreements that are within their control and (iv) consummate the Financing no later than the Closing. Notwithstanding the foregoing, Parent shall not be prohibited from

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obtaining and consummating financing on terms other than those contemplated by the Commitment Letter, provided that Parent’s efforts to obtain such alternate financing terms are not reasonably expected to materially delay or prevent the Financing and consummation of the transactions contemplated by this Agreement.

(b) In the event that any portion of the Financing becomes unavailable in the manner or from the sources contemplated in the Commitment Letter, (i) Parent shall promptly deliver a written notice of such fact to the Shareholder (the “Financing Termination Notice”), and (ii) Parent shall use its commercially reasonable efforts to obtain alternative financing from alternative sources, on terms, reasonably acceptable to Parent and that Parent does not reasonably expect to materially delay the consummation of the transactions contemplated by this Agreement. If Parent is successful in obtaining such alternative financing, Parent shall inform the Shareholder of such fact by delivering written notice to the Shareholder (the “Alternative Financing Notice”). If Parent has not delivered the Alternative Financing Notice to the Shareholder by the ninetieth (90th) day following the date of delivery to the Shareholder of the Financing Termination Notice or such later date as agreed to in writing by the parties, (i) Parent may terminate this Agreement upon three (3) Business Days prior written notice to the Shareholder without any liability and (ii) the Shareholder may terminate this Agreement upon three (3) Business Days prior written notice to Parent without any liability, in each case, so long as no Alternative Financing Notice is received by the Shareholder prior to the effective date of such termination; provided, however, that nothing in this Section 6.11(b) shall be deemed to affect any party’s right to terminate this Agreement pursuant to Section 9.1.

(c) The Company and its Subsidiaries shall provide such assistance and cooperation as Parent, Buyer and their Affiliates may reasonably request in connection with their efforts to obtain and consummate the Financing.

ARTICLE VII -CONDITIONS TO THE CLOSING

Section 7.1. Conditions to the Obligations of Each Party to Effect the Closing. The respective obligations of each party to effect the Transaction are subject to the fulfillment at or prior to the Closing, of each of the following conditions:

(a) Hart-Scott-Rodino Act. The waiting period (and any extension thereof) applicable to the consummation of the Transaction under the HSR Act shall have expired or been terminated.

(b) No Injunctions, Orders or Restraints; Illegality. No preliminary or permanent injunction or other order, decree or ruling issued by a court or other Governmental Authority of competent jurisdiction nor any statute, rule, regulation or executive order promulgated or enacted by any Governmental Authority of competent jurisdiction shall be in effect which would have the effect of (i) making the consummation of the Transaction illegal or (ii) otherwise prohibiting the consummation of the Transaction.

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Section 7.2. Additional Conditions to Obligations of Parent and Buyer to Effect the Closing. The obligations of Parent and Buyer to effect the Transaction are further subject to the satisfaction of the following conditions, any one or more of which may be waived by Parent and Buyer at or prior to the Closing:

(a) Representations and Warranties. The representations and warranties of the Company and the Shareholder set forth in this Agreement shall be true and correct in all material respects as of the Closing Date (disregarding for such purposes any qualifications as to “materiality” or “Company Material Adverse Effect” set forth in such representations and warranties), except to the extent such representations and warranties expressly relate to a specific date in which case such representations and warranties shall be true and correct in all material respects as of such date (disregarding for such purposes any qualifications as to “materiality” or “Company Material Adverse Effect” set forth in such representations and warranties). Parent shall have received a certificate to the effect set forth in the preceding sentence dated as of the Closing Date duly executed by the Shareholder.

(b) Performance and Obligations of the Company. The Company and the Shareholder shall have performed or complied with, in all material respects, all agreements and covenants required by this Agreement to be performed or complied with by it or him, respectively, on or prior to the Closing Date. Parent shall have received a certificate to the effect set forth in the preceding sentence dated as of the Closing Date duly executed by the Shareholder.

(c) Officer’s Certificate. The Company shall have delivered a certificate of an authorized officer of the Company, dated as of the Closing Date, certifying as to (i) the incumbency of officers of the Company executing documents executed and delivered in connection herewith, (ii) the copies of the Articles of Incorporation and Bylaws of the Company, each as in effect from the date of this Agreement until the Closing Date, and (iii) a copy of all minutes of the meetings or unanimous written consents of the Company Board authorizing and approving this Agreement, the Transaction and the other transactions contemplated hereby.

(d) Estimated Working Capital. The Shareholder shall have delivered the Shareholder’s Estimated Working Capital to Parent and Buyer at least twenty (20) Business Days prior to the Closing Date. The Estimated Working Capital Adjustment shall have been finally determined in accordance with Section 2.4 on or before the Closing Date.

(e) Company Capitalization as of the Closing Date; Closing Date Payment Schedule. The Shareholder shall have delivered a certificate, dated as of the Closing Date, certifying as to the total number and type of outstanding Securities of the Company as of the Closing Date, and the registered holders thereof. At least three (3) Business Days prior to the Closing Date, the Company shall deliver to Parent a schedule of Closing Date payments, which shall set forth (i) the payments to be made by Parent on the Closing Date to the Shareholder (including employment and other applicable withholding Taxes) and the Escrow Agent and (ii) the amounts to be paid by Parent on behalf of the Company in connection with Closing, including amounts with respect to Indebtedness and the Company Expenses.

(f) Required Consents. The consents or approvals of all Persons set forth on Schedule 7.2(f) (the “Required Consents”) shall have been obtained and shall be in full force and effect.

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(g) Escrow Agreement. The Shareholder shall have executed and delivered the Escrow Agreement.

(h) Legal Opinion. Parent and Buyer shall have received an opinion of Johnston, Hinesley, Flowers, Clenney & Turner, P.C., counsel to the Company and its Subsidiaries, dated the Closing Date, in form and substance reasonably satisfactory to Parent and Parent’s legal counsel and covering the matters set forth on Exhibit C attached hereto.

(i) Employee Matters. The Company shall have taken those actions with respect to its employment agreements and other Company Plans as agreed to in writing between the Company and Parent. The Shareholder shall have executed and delivered the employment offer letter (in the form attached hereto as Exhibit D, the “Employment Offer Letter”) .

(j) Material Adverse Effect. Since the date of this Agreement, there shall have occurred no Company Material Adverse Effect, and Parent shall have received a certificate signed by the Shareholder and the chief financial officer of the Company to such effect.

(k) Cash on Hand. The Company shall have cash on hand of at least $415,000 as of and immediately following the Closing Date, as certified by an authorized officer of the Company in a certificate that is dated as of the Closing Date.

(l) Resignation Letters. All directors of the Company and its Subsidiaries shall have tendered their written resignations to be effective immediately prior to the Closing.

(m) Financing. Parent shall have received the Financing substantially on the terms and conditions set forth in the Commitment Letter or, if applicable, the Alternative Financing Notice.

(n) Payoff Letters and Releases of Liens. The Company’s lenders and other creditors shall have provided payoff letters and evidence of applicable lien releases and/or filings to be filed with respect to the Indebtedness and any other Encumbrances on the assets of the Company or its Subsidiaries, all in form and substance satisfactory to Parent and Parent’s lenders.

(o) Transfer of Assets. The Company shall have irrevocably sold and transferred all of its right, title and interest in and to those assets that are listed on Schedule 7.2(o) hereto to the Shareholder, to an entity that is wholly-owned by him or to the Shareholder’s designee for the aggregate consideration of $10.00 cash in hand paid by the Shareholder to the Company; it being understood and agreed that such sale and transfer shall be accomplished pursuant to a written agreement that is acceptable in form and substance to Parent.

(p) Jackson Thornton Review of Interim Financial Statements. The Company shall have delivered to Parent a review of the Company’s September 30, 2007 unaudited consolidated financial statements by Jackson Thornton, which financial statements shall have been prepared in accordance with GAAP and which shall not be materially adversely different from the September 30, 2007 unaudited financial statements of the Company reviewed by Parent prior to the date hereof.

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(q) Restrictive Covenants Agreement. The Shareholder shall have executed and delivered to Parent, Buyer and the Company the restrictive covenants agreement attached hereto as Exhibit E (the “Restrictive Covenants Agreement”).

Section 7.3. Additional Conditions to Obligations of the Shareholder and the Company to Effect the Closing. The obligation of the Shareholder and the Company to effect the Transaction is further subject to the satisfaction of the following conditions, any one or more of which may be waived by the Shareholder at or prior to the Closing:

(a) Representations and Warranties. The representations and warranties of Parent and Buyer set forth in this Agreement shall be true and correct in all material respects as of the Closing Date (disregarding for such purposes any qualifications as to “materiality” or “Parent Material Adverse Effect” set forth in such representations and warranties), except to the extent such representations and warranties expressly relate to a specific date in which case such representations and warranties shall be true and correct in all material respects as of such date (disregarding for such purposes any qualifications as to “materiality” or “Parent Material Adverse Effect” set forth in such representations and warranties). The Shareholder shall have received a certificate to the effect set forth in the preceding sentence dated as of the Closing Date duly executed by an officer of Parent and Buyer.

(b) Performance of Obligations of Parent and Buyer. Each of Parent and Buyer shall have performed or complied with, in all material respects, all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing Date. The Shareholder shall have received a certificate to the effect set forth in the preceding sentence dated as of the Closing Date duly executed by an officer of Parent and Buyer.

(c) Officer’s Certificate. Each of Parent and Buyer shall have delivered a certificate of an authorized officer, dated as of the Closing Date, certifying as to (i) the incumbency of its officers executing documents executed and delivered in connection herewith, (ii) copies of their respective incorporation documents as in effect as of the Closing Date and (iii) a copy of the votes of their respective boards of directors (and in the case of Buyer, the resolutions of Parent as its sole stockholder) authorizing and approving this Agreement, the Transaction and the other transactions contemplated hereby.

(d) Escrow Agreement. Parent and the Escrow Agent shall have executed and delivered the Escrow Agreement.

(e) Employment Offer Letter. Parent shall have executed and delivered the Employment Offer Letter.

(f) Material Adverse Effect. Since the date of this Agreement, there shall have occurred no Company Material Adverse Effect.

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ARTICLE VIII -SURVIVAL OF REPRESENTATIONS AND WARRANTIES;

INDEMNIFICATION

Section 8.1. Survival of Representations, Warranties and Covenants.

(a) All covenants in this Agreement shall survive the Closing and remain in full force and effect indefinitely (unless any such covenant by its terms terminates as of an earlier date). Except as otherwise provided in this Agreement, each of the representations and warranties contained in Article III and Article IV will terminate, without further action, on the date that is the twelve (12) month anniversary of the Closing Date (the “Anniversary Date”), except for Sections 3.1, 3.2, 3.8, 3.10(a), 3.10(d), 3.14, 3.16, 4.1, 4.2 and 4.5, which representations and warranties shall continue until expiration of their respective statutes of limitations.

(b) The indemnification contained in this Article VIII will survive the Closing and shall remain in effect:

(i) to the expiration of the applicable statute of limitations with respect to any indemnifiable claim related to the breach of any covenant or the breach of any representation or warranty contained in Sections 3.1, 3.2, 3.8, 3.10(a), 3.10(d), 3.14, 3.16, 4.1, 4.2 and 4.5; and

(ii) until the Anniversary Date for any indemnifiable claims that are not specified in Section 8.1(b)(i).

Unless a claim for indemnification with respect to any alleged breach of any representation or warranty is asserted by notice given as herein provided that identifies a particular breach and the underlying facts relating thereto, which notice is given within the applicable period of survival for such representation or warranty, such claim may not be pursued and is irrevocably waived after such time. Without limiting the generality or effect of the foregoing sentence, no claim for indemnification with respect to any representation or warranty will be deemed to have been properly made except (i) to the extent it is based upon a Third Party Claim (as defined below) or (ii) to the extent based on Indemnifiable Losses (as defined below) incurred by an Indemnitee (as defined below) for which indemnification is provided under Section 8.2(a) or Section 8.2(b), and such indemnification claim is made or brought prior to the expiration of the survival period for such representation or warranty. For purposes of clarity, claims asserted in writing before the applicable period of survival for such representation or warranty terminates shall be deemed timely made regardless of whether litigation or arbitration proceedings are commenced by such date. Notwithstanding anything to the contrary in this Agreement, if either party makes a claim for indemnification in writing and in accordance with the terms of this Agreement with respect to any matter for which indemnification is provided under Section 8.2(a) or Section 8.2(b) prior to the applicable expiration date as provided in Section 8.1(b), the indemnification contained in this Article VIII with respect to such claim shall survive with respect to all Indemnifiable Losses, whenever incurred, until such claim is finally resolved in accordance with the terms hereof.

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Section 8.2. Indemnification.

(a) Following the Closing, and subject to the other sections of this Article VIII, the Shareholder will indemnify, defend and hold harmless Parent, Buyer and their Affiliates and their respective directors, officers, and agents from and against all Indemnifiable Losses, relating to, resulting from or arising out of:

(i) any inaccuracy in or breach of any of the representations and warranties made by the Company or the Shareholder in Article III and the certificate provided pursuant to Section 7.2(a) of this Agreement; and

(ii) a breach by the Company or the Shareholder of any covenant or agreement of the Company or the Shareholder contained in this Agreement.

(b) Following the Closing, and subject to the other sections of this Article VIII, Parent will indemnify, defend and hold harmless the Shareholder from and against all Indemnifiable Losses relating to, resulting from or arising out of:

(i) any inaccuracy in or breach of any of the representations or warranties made by Parent or Buyer in Article IV and the certificate provided pursuant to Section 7.3(a) of this Agreement; and

(ii) a breach by Parent or Buyer of any covenant or agreement of Parent or Buyer contained in this Agreement.

(c) All payments made on behalf of the Shareholder (including out of the Escrow Fund) by Parent or by Buyer (or any of their respective Affiliates), as the case may be, to or for the benefit of other parties pursuant to Section 6.5 or this Article VIII shall be treated as adjustments to the Total Consideration for tax purposes, and such agreed treatment shall govern for purposes of this Agreement. Parent, Buyer and the Company shall file all Tax Returns consistent with such treatment. As between Parent and the Shareholder, upon the settlement or resolution of any claim for indemnification by Parent or Buyer while the Escrow Fund remains held by the Escrow Agent, Parent and the Shareholder agree to provide joint written instructions to the Escrow Agent regarding the disbursement of funds to the applicable party, all in accordance with the Escrow Agreement.

Section 8.3. Limitations on Liability.

(a) For purposes of this Agreement:

(i) “Indemnification Payment” means any amount of Indemnifiable Losses required to be paid pursuant to this Agreement;

(ii) “Indemnitee” means any Person entitled to indemnification under this Agreement;

(iii) “Indemnifying Party” means any Person required to provide indemnification under this Agreement; and

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(iv) “Indemnifiable Losses” means any losses, liabilities, damages, costs, expenses, assessments, fines, interest, penalties, awards, deficiencies and other obligations and expenses (including reasonable out-of-pocket attorneys’ fees and expenses and other out-of-pocket expenses incurred in investigating, preparing or defending the foregoing) actually incurred in connection with any actual or threatened (provided that any such threats are in writing) actions, suits, demands, assessments, judgments and settlements, in any such case (x) reduced by the amount of insurance proceeds actually recovered from any Person or entity with respect thereto and (y) excluding any such losses, liabilities, damages, costs and expenses to the extent that the underlying liability or obligation is the result of the gross negligence or willful misconduct of the Indemnitee.

(b) As between the Company, any Affiliate of the Company and the Shareholder, on the one hand, and Parent and any Affiliate of Parent, on the other hand, the remedies, rights and obligations set forth in this Article VIII will be the exclusive remedies, rights and obligations with respect to the liabilities and obligations referred to in Sections 8.2(a)(i) and 8.2(b)(i) and any breach of the representations or warranties set forth in this Agreement, except with respect to matters of fraud. Without limiting the foregoing, as a material inducement to entering into this Agreement, to the fullest extent permitted by law, each of the parties waives any claim or cause of action that it otherwise might assert based upon any breach of the representations or warranties set forth in this Agreement, except for claims or causes of action brought under and subject to the terms and conditions of this Article VIII and except with respect to matters of fraud.

(c) Notwithstanding any other provision of this Agreement or of any applicable law, except for Indemnifiable Losses arising out of or relating to any inaccuracy of representations and warranties under Sections 3.1, 3.2 and 3.8 (which shall not be subject to this Section 8.3(c)), no Indemnitee will be entitled to indemnification for a claim against an Indemnifying Party for any Indemnifiable Losses arising out of or relating to any inaccuracy of representations or warranties under Sections 8.2(a)(i) or 8.2(b)(i) until the aggregate amount of Indemnifiable Losses incurred by such Indemnitee exceeds $100,000 (all amounts up to and including such amount, the “Basket Amount”); provided, however, that in the event the aggregate amount of Indemnifiable Losses incurred by such Indemnitee exceeds the Basket Amount, then the Indemnifying Party shall be liable for all Indemnifiable Losses, including the Basket Amount.

(d) Notwithstanding any other provision of this Agreement, the indemnification obligation of the Shareholder under Section 8.2(a)(i) or the indemnification obligation of Parent under Section 8.2(b)(i) shall not exceed an amount equal to the Transaction Price, respectively (the “Cap Limitation”); provided, however, that the Cap Limitation shall not apply to breaches of the representations and warranties set forth in Sections 3.1, 3.2, 3.8, 3.10(a), 3.10(d), 3.14, 4.1 and 4.2 or to matters of fraud. The Shareholder shall be obligated to provide indemnification for all Indemnifiable Losses that may be asserted pursuant to Section 8.2(a). Parent shall be obligated to provide indemnification for all Indemnifiable Losses that may be asserted pursuant to Section 8.2(b). Notwithstanding anything to the contrary in this Article VIII or Section 6.5, all amounts due from the Shareholder pursuant to Article VIII or Section 6.5 shall be paid (i) out of the Escrow Fund to the extent that funds are then held in the Escrow Fund and (ii) if at any time or from time to time, the funds then held in the Escrow Fund are insufficient to pay such

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amounts, then the Shareholder shall promptly pay the amount of such deficiency directly to Parent; provided, however, that the Shareholder shall not be obligated to reimburse Parent for an aggregate amount greater than the Transaction Price.

(e) No Indemnifying Party shall be liable to or obligated to indemnify any Indemnitee hereunder for any punitive or exemplary damages, or any consequential, special or multiple damages, except to the extent such damages have been recovered by a third person (including a Governmental Authority) and are the subject of a Third Party Claim for which indemnification is available under this Article VIII.

(f) The Company, Parent and the Shareholder shall cooperate with each other with respect to resolving any claim or liability with respect to which one Party is obligated to indemnify the other Party hereunder, including by making commercially reasonable efforts to mitigate or resolve any such claim or liability.

(g) No Indemnitee shall be entitled to indemnification hereunder for any Indemnifiable Losses arising from a breach of any representation, warranty, covenant or agreement set forth herein (and the amount of any Indemnifiable Losses incurred in respect of such breach shall not be included in the calculation of any limitations on indemnification set forth herein) to the extent that such liability is specifically included in the calculation of the Estimated Working Capital and/or the Closing Working Capital.

(h) Any liability for indemnification under this Section 8.3 shall be determined without duplication of recovery by reason of the state of facts giving rise to such liability constituting a breach of more than one representation, warranty, covenant, or agreement.

Section 8.4. Defense of Claims.

(a) If any Indemnitee receives notice of the assertion of any claim or of the commencement of any action or proceeding by any Third Party (a “Third Party Claim”) against such Indemnitee, with respect to which an Indemnifying Party is obligated to provide indemnification under this Agreement, the Indemnitee will give such Indemnifying Party reasonably prompt written notice thereof, but in any event not later than ten (10) calendar days after receipt of notice of such Third Party Claim; provided, however, that the failure of the Indemnitee to so notify the Indemnifying Party shall only relieve the Indemnifying Party from its obligation to indemnify the Indemnitee pursuant to this Article VIII to the extent that the Indemnifying Party is materially prejudiced by such failure (whether as a result of the forfeiture of substantive rights or defenses or otherwise). Upon receipt of notification of a Third Party Claim, the Indemnifying Party shall be entitled, upon written notice to the Indemnitee, to assume the investigation and defense thereof; provided, however, that the Indemnifying Party shall not have the right to control the defense unless and until the Indemnifying Party agrees in writing to indemnify the Indemnitee with respect to such Third Party Claim, subject to the applicable limitations set forth herein. Whether or not the Indemnifying Party elects to assume the investigation and defense of any Third Party Claim, the Indemnitee shall have the right to employ separate counsel and to participate in the investigation and defense thereof; provided, however, that the Indemnitee shall pay the fees and disbursements of such separate counsel unless (i) the employment of such separate counsel has been specifically authorized in writing by the Indemnifying Party, (ii) the Indemnifying Party has failed to assume the defense of such

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Third Party Claim within a reasonable time after receipt of notice thereof, or (iii) the named parties to the proceeding in which such claim, demand, action or cause of action has been asserted include both the Indemnifying Party and such Indemnitee and, in the reasonable judgment of counsel to such Indemnitee, there exists one or more defenses that are in conflict with those available to the Indemnifying Party. Notwithstanding the foregoing, the Indemnifying Party shall not be liable for the fees and disbursements of more than one counsel for all Indemnitees in connection with any one proceeding or any similar or related proceedings arising from the same general allegations or circumstances. Without the prior written consent of the Indemnitee, the Indemnifying Party will not enter into any settlement of any Third Party Claim that would lead to liability or create any financial or other obligation on the part of the Indemnitee unless such settlement includes as an unconditional term thereof the release of the Indemnitee from all liability in respect of such Third Party Claim. If a settlement offer solely for money damages is made by the applicable third party claimant (which offer provides for a full and unconditional release of the Indemnitee), and the Indemnifying Party notifies the Indemnitee in writing of the Indemnifying Party’s willingness to accept the settlement offer and pay the amount called for by such offer without reservation of any rights or defenses against the Indemnitee, the Indemnitee may continue to contest such claim, free of any participation by the Indemnifying Party, and the amount of any ultimate liability with respect to such Third Party Claim that the Indemnifying Party has an obligation to pay hereunder shall be limited to the lesser of (1) the amount of the settlement offer that the Indemnitee declined to accept plus the Indemnifiable Losses of the Indemnitee relating to such Third Party Claim through the date of its rejection of the settlement offer or (2) the aggregate Indemnifiable Losses of the Indemnitee with respect to such claim.

(b) Any claim by an Indemnitee on account of an Indemnifiable Loss that does not result from a Third Party Claim will be asserted by giving the Indemnifying Party reasonably prompt written notice thereof, but in any event not later than 30 calendar days after the incurrence thereof, provided, however, that the failure of the Indemnitee to notify the Indemnifying Party shall only relieve the Indemnifying Party from its obligation to indemnify the Indemnitee pursuant to this Article VIII to the extent that the Indemnifying Party is materially prejudiced by such failure (whether as a result of the forfeiture of substantive rights or defenses or otherwise). The Indemnifying Party will have a period of 30 calendar days within which to respond in writing to such claim. If the Indemnifying Party does not so respond within such thirty (30) calendar day period, the Indemnifying Party will be deemed to have rejected such claim, in which event the Indemnitee will be free to pursue such remedies as may be available to the Indemnitee on the terms and subject to the provisions of this Article VIII.

(c) If, after the making of any Indemnification Payment, the amount of the Indemnifiable Loss to which such payment relates is reduced by actual recovery, settlement or otherwise under any insurance coverage, or pursuant to any claim, recovery, settlement or payment by or against any other entity, the amount of such reduction (less any costs, expenses, premiums or Taxes incurred in connection therewith) will promptly be repaid by the Indemnitee to the Indemnifying Party. Upon making any Indemnification Payment, the Indemnifying Party will, to the extent of such Indemnification Payment, be subrogated to all rights of the Indemnitee against any third party that is not an Affiliate of the Indemnitee in respect of the Indemnifiable Loss to which the Indemnification Payment relates; provided that (i) the Indemnifying Party shall then be in compliance with its obligations under this Agreement in respect of such

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Indemnifiable Loss, and (ii) until the Indemnitee recovers full payment of its Indemnifiable Loss, all claims of the Indemnifying Party against any such third party on account of said Indemnification Payment will be subrogated and subordinated in right of payment to the Indemnitee’s rights against such third party. Without limiting the generality or effect of any other provision of this Article VIII, each such Indemnitee and Indemnifying Party will duly execute upon request all instruments reasonably necessary to evidence and perfect the above-described subrogation and subordination rights.

Section 8.5. No Indemnifiable Claims Resulting From Governmental Authority Action. No party has any indemnifiable or otherwise compensable claim that any of the other parties’ representations or warranties is inaccurate, or that any covenant or agreement has been breached, if such claim is predicated on any new law or any action or order enacted or taken by a Governmental Authority after the Closing and that is effective retroactively for periods of time prior to the Closing; provided that the first party had no knowledge of such law, action or order prior to the Closing.

ARTICLE IX -TERMINATION, AMENDMENT AND WAIVER

Section 9.1. Termination. This Agreement may be terminated at any time prior to the Closing Date:

(a) by the mutual written consent of Parent and the Shareholder; or

(b) by either the Shareholder, on the one hand, or Parent, on the other hand, by written notice to the other party:

(i) if any Governmental Authority of competent jurisdiction shall have issued an injunction or taken any other action (which injunction or other action the parties hereto shall use their commercially reasonable efforts (which shall not include any divestiture, commencement of litigation or other extraordinary act) to lift) that permanently restrains, enjoins or otherwise prohibits the consummation of the Transaction, and such injunction or other action shall have become final and non-appealable; or

(ii) if the consummation of the Transaction shall not have occurred on or before one hundred twenty (120) days following the date of this Agreement (the “End Date”), provided, however, that the right to terminate this Agreement under this Section 9.1(b)(ii) shall not be available to any party whose failure to comply with any provision of this Agreement has been the cause of, or resulted in, the failure of the Transaction to occur on or before such date; or

(c) by Parent, if the Shareholder or the Company shall have breached or failed to perform in any respect any of its representations, warranties, covenants or other agreements set forth in this Agreement, or if any representations or warranties of the Shareholder or the Company shall have become untrue, which breach or failure to perform or untrue representation or warranty (A) would give rise to the failure of a condition set forth in Section 7.2 and (B) cannot be or has not been cured within thirty (30) days after Parent’s giving written notice to

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the Shareholder of such breach (a “Company Material Breach”) (provided, in each case, that Parent is not then in Parent Material Breach of any representation, warranty, covenant or other agreement set forth in this Agreement); or

(d) by the Shareholder, if Parent or Buyer shall have breached or failed to perform in any respect any of its representations, warranties, covenants or other agreements set forth in this Agreement or if any representations or warranties of Parent or Buyer shall have become untrue, which breach or failure to perform (i) would give rise to the failure of a condition set forth in Section 7.3 and (ii) cannot be or has not been cured within thirty (30) days after the Shareholder’s giving written notice to Parent of such breach (a “Parent Material Breach”) (provided that the Shareholder and the Company are not then in Company Material Breach of any representation, warranty, covenant or other agreement set forth in this Agreement); or

(e) by either Parent or the Shareholder pursuant to Section 6.11(b).

Section 9.2. Effect of Termination. In the event of the termination of this Agreement pursuant to Section 9.1, this Agreement shall forthwith become null and void and have no effect, without any liability on the part of Parent, Buyer, the Company or the Shareholder or their respective directors, officers, employees, partners, managers, members or stockholders and all rights and obligations of any party hereto shall cease, except for the agreements contained in Section 6.2, this Section 9.2 and Article X; provided, however, that nothing contained in this Section 9.2 shall relieve any party from liabilities or damages arising out of any breach by such party of any of its covenants contained in this Agreement.

Section 9.3. Amendment. This Agreement may be amended by the parties hereto by an instrument in writing signed on behalf of each of the parties hereto at any time.

Section 9.4. Extension; Waiver. At any time prior to the Closing Date, the parties hereto may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties of the other party contained herein or in any document delivered pursuant hereto and (c) waive compliance by the other party with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of the party against which such extension or waiver is to be enforced. Waiver of any term or condition of this Agreement by a party shall not be construed as a waiver of any subsequent breach or waiver of the same term or condition by such party, or a waiver of any other term or condition of this Agreement by such party.

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ARTICLE X -GENERAL PROVISIONS

Section 10.1. Notices. The parties’ addresses and facsimile numbers for notices are as follows:

(a) if to the Company prior to the Closing, to:

Graceba Total Communications, Inc.

2660 Montgomery Highway

Dothan, AL 36303

Attn: C. Christopher Dupree

Facsimile: (334)699-3291

With a copy to:

Johnston, Hinesley, Flowers, Clenney & Turner, P.C.

291 North Oates Street

Dothan, AL 36303

Attn: G. David Johnston, Esq.

Facsimile: (334) 793-6603

(b) if to the Shareholder, to:

C. Christopher Dupree

201 Hazelwood Avenue

Dothan, AL 36303

Facsimile: (334) 699-0075

with copy to:

Johnston, Hinesley, Flowers, Clenney & Turner, P.C.

291 North Oates Street

Dothan, AL 36303

Attn: G. David Johnston, Esq.

Facsimile: (334) 793-6603

(c) if to Parent, to:

Knology, Inc.

1241 O.G. Skinner Drive

West Point, GA 31833

Attn: General Counsel

Facsimile: (706) 645-0148

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with a copy to:

Morris, Manning & Martin, LLP

1600 Atlanta Financial Center

3343 Peachtree Road, NE

Atlanta, GA 30326

Attn: Terresa R. Tarpley, Esq.

Facsimile: (404) 365-9532

(d) If to Buyer or the Company after the Closing, to:

Knology of Alabama, Inc.

1241 O.G. Skinner Drive

West Point, GA 31833

Attn: General Counsel

Facsimile: (706) 645-0148

with a copy to:

Morris, Manning & Martin, LLP

1600 Atlanta Financial Center

3343 Peachtree Road, NE

Atlanta, GA 30326

Attn: Terresa R. Tarpley, Esq.

Facsimile: (404) 365-9532

All notices and other communications will (a) if delivered personally or sent by overnight courier (such as FedEx) to an address provided in this Section 10.1, be deemed given upon personal delivery or upon confirmation of delivery by such courier to the indicated address, as the case may be, (b) if sent by facsimile transmission to a facsimile number provided in this Section 10.1, be deemed given when receipt of transmission has been orally confirmed by the receiving party, and (c) if sent by first class, certified or registered mail to an address provided in this Section 10.1, be deemed given and delivered three (3) Business Days after deposit in the United States mail (in each case regardless of whether such notice, request or other communication is actually received). Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other party in accordance with this Section 10.1.

Section 10.2. Disclosure Schedules. The section number headings in the schedules to this Agreement (the “Schedules”) correspond to the Section numbers in this Agreement and any information disclosed in any section of the Schedules shall be deemed to be disclosed and incorporated into any other section of the Schedules where such disclosure would be appropriate and reasonably apparent. The disclosure of any information on the Schedules shall not be deemed to constitute an acknowledgment that such information is required to be disclosed in connection with the representations and warranties made by Parent, Buyer, the Shareholder or the Company, as applicable, in this Agreement or that such information is material.

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Section 10.3. Assignment. Except as expressly permitted by the terms hereof, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned (including by merger or operation of law) by any of the parties hereto without the prior written consent of the other parties.

Section 10.4. Severability. If any provision of this Agreement, or the application thereof to any person or circumstance is held invalid or unenforceable, the remainder of this Agreement, and the application of such provision to other persons or circumstances, shall not be affected thereby, and to such end, the provisions of this Agreement are agreed to be severable.

Section 10.5. No Agreement Until Executed. Irrespective of negotiations among the parties or the exchanging of drafts of this Agreement, this Agreement shall not constitute or be deemed to evidence a contract, agreement, arrangement or understanding among the parties hereto unless and until this Agreement is executed by the parties hereto.

Section 10.6. Certain Definitions. For purposes of this Agreement:

(a) An “Affiliate” of any Person means another Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person.

(b) “Articles of Incorporation” means the Company’s Articles of Incorporation, as amended through the date of this Agreement.

(c) “Cable Act” means Title VI of the Communications Act of 1934, as amended, 47 U.S.C. Sections 151 et seq., all other provisions of the Cable Communications Policy Act of 1984 and the provisions of the Cable Television Consumer Protection and Competition Act of 1992, and the provisions of the Telecommunications Act of 1996, amending Title VI of the Communications Act of 1934, in each case as amended and the rules and regulations, policies and published decisions of the FCC thereunder, as in effect from time to time.

(d) “Code” shall mean the Internal Revenue Code of 1986, as amended.

(e) “EBITDA” means the Company’s consolidated total operating revenues less the Company’s consolidated total direct operations expenses, total support expenses and operating taxes, each for the Company’s fiscal year ended December 31, 2007, and specifically excluding those additional items set forth on Schedule 10.6(e) and will be calculated in accordance with the example set forth on Schedule 10.6(e).

(f) “Franchises” means all franchises used in the conduct of the Company’s, its Subsidiaries’ and their Affiliates’ business, all as set forth on Schedule 3.18.

(g) “FY 2007 EBITDA” means the consolidated EBITDA of the Company and its Subsidiaries for the Company’s Fiscal Year ended December 31, 2007.

(h) “Governmental Authority” means any government or political subdivision, whether federal, state, local or foreign, or any agency or instrumentality of any such government or political subdivision, or any federal, state, local or foreign court or arbitrator.

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(i) “Intellectual Property” means all intellectual property rights owned or used by the Company or any Subsidiary of the Company arising from or in respect of the following, whether protected, created or arising under the laws of the United States or any other jurisdiction: (i) all patents and applications therefor, including continuations, divisionals, continuations-in-part, or reissues of patent applications and patents issuing thereon (collectively, “Patents”), (ii) all fictional business names, trademarks, service marks, trade names, service names, brand names, trade dress rights, logos, Internet domain names and corporate names and general intangibles of a like nature, together with the goodwill associated with any of the foregoing, and all applications, registrations and renewals thereof (collectively, “Marks”), (iii) copyrights and registrations and applications therefor, works of authorship and mask work rights (collectively, “Copyrights”), (iv) discoveries, concepts, research and development, know-how, formulae, inventions, compositions, manufacturing and production processes and techniques, procedures, designs, drawings, specifications, and other proprietary and confidential information, including customer lists, supplier lists, pricing and cost information, business and marketing plans and proposals of Company, in each case excluding any rights in respect of any of the foregoing that comprise or are protected by Copyrights or Patents, and (v) any and all: (A) computer programs, including any and all software implementations of algorithms, models and methodologies, whether in source code or object code; (B) databases and complications, including any and all data and collections of data, whether machine readable or otherwise; (C) descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing; and (D) all documentation including user manuals and other training documentation related to any of the foregoing.

(j) “IRS” means the Internal Revenue Service of the United States.

(k) “Net Working Capital” means the amount of current assets (excluding cash, notes receivable and accrued interest on notes receivable) less current liabilities (excluding accrued interest expense) of the Company, based upon a balance sheet prepared in accordance with generally accepted accounting principles as applied in the United States on a consistent basis (“GAAP”), consistent with the practices, policies and procedures used in preparation of the Base Balance Sheet and, for the sake of clarity, will include only those items and will be calculated in accordance with the example set forth on Schedule 10.6(l) attached hereto.

(l) “Person” means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity or group (as defined in Section 13(d) of the Exchange Act).

(m) “Pre-Closing Period” shall mean any taxable year or period that ends on or before the Closing Date and, with respect to any taxable year or period beginning before and ending after the Closing Date, the portion of such taxable year or period ending on and including the Closing Date. For purposes of this Agreement, in the case of any taxable year or period of a Company or a Subsidiary which includes the Closing Date (but does not end on that day), (i) Property Taxes allocable to the Pre-Closing Period shall be equal to the amount of such Property Taxes for the entire taxable year or period multiplied by a fraction, the numerator of which is the number of days during the taxable year or period that are in the Pre-Closing Period and the denominator of which is the number of days in the entire taxable year or period, and (ii) Taxes (other than Property Taxes) of a Company or a Subsidiary for the Pre-Closing Period shall be computed as if such taxable year or period (and the taxable year or period of any entity taxable as a partnership in which the Company or the Subsidiary owns a direct or indirect interest) ended as of the close of business on the Closing Date.

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(n) “Property Taxes” means real, personal and intangible ad valorem property taxes.

(o) “Securities” means any note, stock, treasury stock, security future bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting right, voting-trust certificate, certificate of deposit for a security, any put, call straddle, option, warrant or privilege on any security (including any interest therein or based on the value thereof), or, in general, any interest or instrument commonly known as a “security,” or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant, option or right (including, without limitation, any preemptive right or right of first refusal) to subscribe to or purchase, any of the foregoing.

(p) “Subsidiary” means any corporation more than fifty percent (50%) of whose outstanding voting securities, or any partnership, joint venture or other entity more than fifty percent (50%) of whose total equity interest, is directly or indirectly owned by Parent or the Company, as the case may be.

(q) “System” means the physical plant and other assets used by the Company and its Subsidiaries to provide telecommunications, cable services and other related services to the Company’s subscribers in those markets covered by the Franchises.

(r) “Tax” or “Taxes” means any federal, state, local or foreign income, gross receipts, capital gains, franchise, alternative or add-on minimum, estimated, sales, use, goods and services, transfer, registration, value added, excise, natural resources, severance, stamp, occupation, premium, windfall profit, environmental, customs, duties, real property, special assessment, personal property, capital stock, social security, unemployment, employment, disability, payroll, license, employee or other withholding, contributions or other tax, of any kind whatsoever, including any interest, penalties or additions to tax or additional amounts in respect of the foregoing.

(s) “Tax Returns” means returns, declarations, reports, claims for refund, information returns or other documents (including any related or supporting schedules, statements or information) filed or required to be filed with respect to Taxes.

Section 10.7. Interpretation. When a reference is made in this Agreement to an Article, Section, Schedule or Exhibit, such reference will be to an Article or Section of, or a Schedule or Exhibit to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include”, “includes” or “including” are used in this Agreement, they will be deemed to be followed by the words “without limitation.” The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement will refer to this Agreement as a whole and not to any particular provision of this Agreement. All terms used herein with initial capital letters have the meanings ascribed to them herein and all terms defined in this Agreement will have such defined meanings

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when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred to herein, or in any agreement or instrument that is referred to herein, means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns. The word “extent” in the phrase “to the extent” means the degree to which a subject or thing extends, and such phrase shall not simply mean “if.” Whenever a party hereto is allowed or required to provide a consent, approval or waiver or to take any discretionary action or make any discretionary determination with respect to any matter, unless the applicable provision explicitly states to the contrary, such consent, approval, waiver action or determination may be given, taken, made or withheld in such party’s sole, complete and absolute discretion.

Section 10.8. Fees and Expenses. Except as otherwise set forth in this Agreement, whether or not the Transaction is consummated, each of Parent (on behalf of Parent and Buyer), on the one hand, and the Shareholder (on behalf of the Shareholder and the Company), on the other hand, shall bear its own expenses in connection with the negotiation and the consummation of the transactions contemplated by this Agreement.

Section 10.9. Choice of Law/Consent to Jurisdiction. All disputes, claims or controversies arising out of or relating to this Agreement, or the negotiation, validity or performance of this Agreement, or the transactions contemplated hereby shall be governed by and construed in accordance with the laws of the State of Delaware. Each of the parties hereby consents to personal jurisdiction, service of process and venue in the federal or state courts of the State of Delaware for any claim, suit or proceeding arising under this Agreement, or in the case of a Third Party Claim subject to indemnification hereunder, in the court where such claim is brought.

Section 10.10. Specific Performance. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of proper jurisdiction, including without limitation the obligation to close the Transaction on the Closing Date pursuant to Section 1.2 hereof. Such remedies shall not be exclusive and shall be in addition to any other remedies that any party may have under Article VIII of this Agreement.

Section 10.11. Mutual Drafting. The parties hereto are sophisticated and have been represented by attorneys throughout the transactions contemplated hereby who have carefully negotiated the provisions hereof. As a consequence, the parties do not intend that the presumptions of laws or rules relating to the interpretation of contracts against the drafter of any particular clause should be applied to this Agreement or any agreement or instrument executed in connection herewith, and therefore waive their effects.

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Section 10.12. Miscellaneous. This Agreement (a) constitutes, together with the Confidentiality Agreement, the Schedules and Exhibits attached hereto, and the documents, instruments and certificates referred to herein which form a part hereof, or which are entered into in connection herewith, the entire agreement and supersedes all of the prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof, (b) shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns and is not intended to confer upon any other person (except as set forth below) any rights or remedies hereunder and (c) may be executed in two or more counterparts which together shall constitute a single agreement. Section 6.4 and 8.2 are intended to be for the benefit of those persons described therein and the covenants contained therein may be enforced by such persons.

Signatures on following page.

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IN WITNESS WHEREOF, the parties hereto have executed, or have caused this Agreement to be executed by their respective officers thereunto duly authorized, all as of the date first written above.

PARENT:
KNOLOGY, INC.
By:	/s/ Chad S. Wachter
Name:	Chad S. Wachter
Title:	VP and General Counsel
BUYER:
KNOLOGY OF ALABAMA, INC.
By:	/s/ Chad S. Wachter
Name:	Chad S. Wachter
Title:	VP and General Counsel
COMPANY:
GRACEBA TOTAL COMMUNICATIONS, INC.
By:	/s/ Chris Dupree
Name:	Chris Dupree
Title:	President, CEO & Chairman
SHAREHOLDER:
/s/ C. Christopher Dupree
C. CHRISTOPHER DUPREE

EX-10.13

Exhibit 10.13

CABLE TELEVISION FRANCHISE ORDINANCE

FOR THE

CITY OF MONTGOMERY, ALABAMA

AND

KNOLOGY OF MONTGOMERY, INC.

D/B/A KNOLOGY, INC.

November 5, 2007

TABLE OF CONTENTS

SECTION 1.	SHORT TITLE AND DEFINITIONS		1
	1.	Short Title	1
	2.	Definitions	1
SECTION 2.	GRANT OF AUTHORITY AND GENERAL PROVISIONS		5
	1.	Grant of Franchise	5
	2.	Grant of Nonexclusive Authority	5
	3,	Lease or Assignment Prohibited	6
	4.	Franchise Term	6
	5.	Previous Franchises	6
	6.	Compliance with Applicable Laws, Resolutions and Ordinances	6
	7.	Rules of Grantee	7
	8.	Territorial Area Involved	7
	9.	Written Notice	7
	10.	Ownership of Grantee	7
SECTION 3.	CONSTRUCTION STANDARDS		8
	1.	Registration, Permits Construction Codes and Cooperation	8
	2.	Ongoing Construction	8
	3.	Use of existing poles or conduits	9
	4.	Minimum Interference	9
	5.	Disturbance or damage	10
	6.	Temporary Relocation	10
	7.	Emergency	10
	8.	Tree Trimming	11
	9.	Protection of facilities	11
	10.	Installation records	11
	11.	Locating facilities	11
	12.	City’s rights	11
	13.	Relocation delays	12
	14.	Interference with City Facilities	12
	15.	Interference with Utility Facilities	12
	16.	Collocation	12
	17.	Safety Requirements	12
SECTION 4.	DESIGN PROVISION		13
	1.	System Upgrade: Minimum Channel Capacity	13
	2.	Construction Timetable	13
	3.	Interruption of Service	14
	4.	Emergency Alert Capability	14
	5.	Technical Standards	14
	6.	Special Testing	14
	7.	FCC Reports	15
	8.	Interconnection	15
	9.	Annexation	15

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	10.	Line Extension	15
	11.	Lockout Device	16
SECTION 5.	SERVICE PROVISIONS		16
	1.	Regulation of Service Rates	16
	2.	Non-Standard Installations	16
	3	Sales Procedures	16
	4.	Consumer Protection and Service Standards	16
	5.	Subscriber Contracts	20
	6.	Refund Policy	20
	7.	Late Fees	20
	8.	Local Office Policy	20
SECTION 6.	ACCESS CHANNEL(S) PROVISIONS		20
	1.	Grantee Support for PEG Access	20
	2.	Compliance with Federal Law	21
SECTION 7.	OPERATION AND ADMINISTRATION PROVISIONS		21
	1.	Administration of Franchise	21
	2.	Delegated-Authority	21
	3.	Franchise Fee	21
	4.	Discounted Rates	21
	5.	Not Franchise Fees	22
	6.	Access to Records	22
	7.	Reports and Maps to be Filed with City	23
	8.	Periodic Evaluation	23
SECTION 8.	GENERAL FINANCIAL AND INSURANCE PROVISIONS		24
	1.	Letter of Credit	24
	2.	Liquidated Damages	25
	3.	Liability Insurance	26
	4.	Indemnification	27
	5.	Grantee’s Insurance	28
SECTION 9.	SALE, ABANDONMENT, TRANSFER, AND REVOCATION OF FRANCHISE		29
	1.	City’s Right to Revoke	29
	2.	Procedures for Revocation	29
	3	Abandonment of Service	30
	4.	Removal After Abandonment. Termination or Forfeiture	30
	5.	Sale or Transfer of Franchise	30
SECTION 10.	PROTECTION OF INDIVIDUAL RIGHTS		32
	1.	Discriminatory Practices Prohibited	32
	2.	Subscriber Privacy	32
SECTION 11.	UNAUTHORIZED CONNECTIONS AND MODIFICATIONS		33
	1.	Unauthorized Connections or Modifications Prohibited	33

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	2.	Removal or Destruction Prohibited	33
	3.	Penalty	33
SECTION 12.	MISCELLANEOUS PROVISIONS		33
	1.	Franchise Renewal	33
	2.	Work Performed by Others	33
	3.	Amendment of Franchise Ordinance	33
	4.	Compliance with Federal, State and Local Laws	33
	5.	Nonenforcement by City	34
	6.	Rights Cumulative	34
	7.	Grantee Acknowledgment of Validity of Franchise	34
	8.	Force Majeure	34
SECTION 13.	PUBLICATION EFFECTIVE DATE; ACCEPTANCE AND EXHIBITS		35
	1.	Publication, Effective Date	35
	2.	Acceptance	35
EXHIBIT A.	OWNERSHIP		1
EXHIBIT B.	COMMITMENT TO PEG ACCESS FACILITIES AND EQUIPMENT		1
EXHIBIT C.	SERVICE TO PUBLIC AND PRIVATE BUILDINGS
EXHIBIT D.	ADDITIONAL TWO-WAY CONNECTIONS TO PUBLIC INSTITUTIONS		1
EXHIBIT E.	DESCRIPTION OF SYSTEM		1
EXHIBIT F.	FRANCHISE FEE PAYMENT WORKSHEET		1

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ORDINANCE NO. 78-2007

AN ORDINANCE GRANTING A FRANCHISE TO KNOLOGY OF MONTGOMERY, INC. D/B/A KNOLOGY, INC., TO CONSTRUCT, OPERATE, AND MAINTAIN A CABLE SYSTEM IN THE CITY OF MONTGOMERY, ALABAMA SETTING FORTH CONDITIONS ACCOMPANYING THE GRANT OF THE FRANCHISE; PROVIDING FOR REGULATION AND USE OF THE SYSTEM AND THE PUBLIC RIGHTS-OF-WAY AND PRESCRIBING PENALTIES FOR THE VIOLATION OF THE PROVISIONS HEREIN;

The City Council of the City of Montgomery Alabama ordains:

STATEMENT OF INTENT AND PURPOSE

City intends, by the adoption of this Franchise, to bring about the further development of a Cable System, and the continued operation of it. Such development can contribute significantly to the communication needs and desires of the residents and citizens of City and the public generally. Further, City may achieve better utilization and improvement of public services and enhanced economic development with the development and operation of a Cable System.

Adoption of this Franchise is, in the judgment of the City Council, in the best interests of City and its residents.

FINDINGS

In the review of the request for renewal by Grantee and negotiations related thereto, and as a result of a public hearing, the City Council makes the following findings:

1. Grantee’s technical ability, financial condition, legal qualifications, and character were considered and approved in a full public proceeding after due notice and a reasonable opportunity to be heard;

2. Grantee’s plans for constructing, upgrading, and operating the Cable System were considered and found adequate and feasible in a full public proceeding after due notice and a reasonable opportunity to be heard;

3. The Franchise granted to Grantee by City complies with the existing applicable state statutes, federal laws and regulations; and

4. The Franchise granted to Grantee is nonexclusive.

SECTION 1.

SHORT TITLE AND DEFINITIONS

1. Short Title. This Franchise Ordinance shall be known and cited as the Cable Television Franchise Ordinance.

2. Definitions. For the purposes of this Franchise, the following terms, phrases, words, and their derivations shall have the meaning given herein. When not inconsistent with the

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context, words in the singular number include the plural number, and words in the plural number include the singular number. The word “shall” is always mandatory and not merely directory. The word “may” is directory and discretionary and not mandatory. Words not defined shall be given their common and ordinary meaning.

a. “Applicable Laws” means any law, statute, charter, ordinance, rule, regulation, code, license, certificate, franchise, permit, writ, ruling, award, executive order, directive, requirement, injunction (whether temporary, preliminary or permanent), judgment, decree or other order issued, executed, entered or deemed applicable by any governmental authority.

b. “Basic Cable Service” means any Service tier which includes the lawful retransmission of local television broadcast signals and any public, educational, and governmental access programming required by the Franchise to be carried on the basic tier. Basic Cable Service as defined herein shall be the definition set forth in 47 U.S.C. § 543(b)(7).

c. “Cable Service” or “Service” means (A) the one-way transmission to Subscribers of (i) Video Programming or (ii) Other Programming Service, and (B) Subscriber interaction, if any, which is required for the selection or use of such Video Programming or Other Programming Service. Cable Service as defined herein shall be the definition set forth in 47 U.S.C. § 522(6).

d. “Cable System” or “System” means a facility, consisting of a set of closed transmission paths and associated signal generation, reception, and control equipment that is designed to provide Cable Service which includes Video Programming and which is provided to multiple Subscribers within a community, but such term does not include:

i. a facility that serves only to retransmit the television signals of one (1) or more television broadcast stations;

ii. a facility that serves Subscribers without using any public Right-of-Way;

iii. a facility of common carrier which is subject, in whole or in part, to the provisions of 47 U.S.C. § 201 et seq., except that such facility shall be considered a Cable System (other than for purposes of 47 U.S.C. § 541(c)) to the extent such facility is used in the transmission of Video Programming directly to Subscribers, unless the extent of such use is solely to provide interactive on-demand services;

iv. an open video system that complies with 47 U.S.C. § 573; or

v. any facilities of any electric utility used solely for operating its electric utility systems.

Cable System as defined herein shall be the definition set forth in 47 U.S.C. § 522(7).

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e. “Channel” or “Cable Channel” means a portion of the electromagnetic frequency spectrum which is used in a Cable System and which is capable of delivering a television Channel as defined by the FCC. Cable Channel as defined herein shall be the definition set forth in 47 U.S.C. § 522(4).

f. “City” means City of Montgomery, a municipal corporation, in the State of Alabama, acting by and through its City Council, or its lawfully appointed designee.

g. “City Council” means the governing body of the City of Montgomery, Alabama.

h. “Converter” means an electronic device which converts signals to a frequency acceptable to a television receiver of a Subscriber.

i. “Drop” means the cable that connects the ground block on the Subscriber’s residence to the nearest feeder cable of the System.

j. “FCC” means the Federal Communications Commission and any legally appointed, designated or elected agent or successor.

k. “Franchise” or “Cable Franchise” means this franchise ordinance and the regulatory and contractual relationship established hereby.

l. “Franchise Fee” includes any tax, fee, or assessment of any kind imposed by the City or other governmental entity on Grantee or Subscriber, or both, solely because of their status as such. It does not include any tax, fee, or assessment of general applicability (including any such tax, fee, or assessment imposed on both utilities and cable operators or their services but not including a tax, fee, or assessment which is unduly discriminatory against cable operators or cable Subscribers); capital costs which are required by the Franchise to be incurred by Grantee for public, educational, or governmental access facilities; requirements or charges incidental to the awarding or enforcing of the Franchise, including payments for bonds, security funds, letters of credit, insurance, indemnification, penalties, or liquidated damages; or any fee imposed under Title 17 of the United States Code. Franchise Fee defined herein shall be the definition set forth in 47 U.S.C. § 542(g).

m. “Grantee” is Knology of Montgomery, Inc. d/b/a Knology, Inc., its lawful successors, transferees or assignees.

n. “Gross Revenue” means any and all revenue derived by Grantee from the operation of its Cable System to provide Cable Service within the City including, but not limited to, 1) all Cable Service fees, 2) Franchise Fees, 3) late fees and returned check fees, 4) Installation and reconnection fees, 5) upgrade and downgrade fees, 6) local, state and national advertising revenue, 7) home shopping commissions, 8) equipment rental fees, and 9) written or electronic Channel guide revenue. The term “Gross Revenue” shall not include launch fees, bad debts or any taxes or fees on Services furnished by Grantee imposed upon

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Subscribers by any municipality, state or other governmental unit, including the FCC regulatory fee, credits, refunds and any amounts collected from Subscribers for deposits, PEG fees or PEG support. City and Grantee acknowledge and agree that Grantee will maintain its books and records in accordance with generally accepted accounting principles (GAAP).

o. “Installation” means any connection of the System from feeder cable to the point of connection including Standard Installations and custom Installations with the Subscriber Converter or other terminal equipment.

p. “Lockout Device” means an optional mechanical or electrical accessory to a Subscriber’s terminal which inhibits the viewing of a certain program, certain Channel, or certain Channels provided by way of the Cable System.

q. “Normal Business Hours” means those hours during which most similar businesses in City are open to serve customers. In all cases, “Normal Business Hours” must include some evening hours, at least one (1) night per week and/or some weekend hours. Normal Business Hours as defined herein shall be the definition set forth in 47 C.F.R. § 76.309.

r. “Normal Operating Conditions” means those Service conditions which are within the control of Grantee. Those conditions which are not within the control of Grantee include, but are not limited to, natural disasters, civil disturbances, power outages, telephone network outages, and severe or unusual weather conditions. Those conditions which are ordinarily within the control of Grantee include, but are not limited to, special promotions, pay-per-view events, rate increases, regular peak or seasonal demand periods, and maintenance or upgrade of the Cable System. Normal Operating Conditions as defined herein shall be the definition set forth in 47 C.F.R. § 76.309.

s. “Other Programming Service” means information that a cable operator makes available to all Subscribers generally. Other Programming Services as defined herein shall be the definition set forth in 47 U.S.C. § 522(14).

t. “PEG” means public, educational and governmental.

u. “Person” is any Person, firm, partnership, association, corporation, company, limited liability entity or other legal entity.

v. “Right-of-Way” or “Rights-of-Way” means the area on, below, or above any real property in City in which the City has an interest including, but not limited to any street, road, highway, alley, sidewalk, parkway, utility easements or any other place, area, or real property owned by or under the control of City which are dedicated for compatible use.

w. “Right-of-Way Ordinance” means any ordinance or other applicable code requirements regarding regulation, management and use of Rights-of-Way in City, including registration and permitting requirements.

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x. “Service Area” or “Franchise Area” means the entire geographic area within the City as it is now constituted or may in the future be constituted.

y. “Service Interruption” means the loss of picture or sound on one (1) or more Cable Channels. Service Interruption as defined herein shall be the definition set forth in 47 C.F.R. § 76.309.

z. “Standard Installation” means any residential or commercial Installation which can be completed using a Drop of one hundred fifty (150) feet or less.

aa. “Subscriber” means any Person who receives broadcast programming distributed by a Cable System and does not further distribute it. Subscriber as defined herein shall be the definition set forth in 47 C.F.R. § 76.5(ee).

bb. “Video Programming” means programming provided by, or generally considered comparable to programming provided by, a television broadcast station. Video Programming as defined herein shall be the definition set forth in 47 U.S.C, § 522(20).

SECTION 2.

GRANT OF AUTHORITY AND GENERAL PROVISIONS

1. Grant of Franchise. This Franchise is granted pursuant to the terms and conditions contained herein. Failure of Grantee to provide a System as described herein, or meet the obligations and comply with all provisions herein, shall be deemed a violation of this Franchise.

2. Grant of Nonexclusive Authority.

a. The Grantee shall have the right and privilege, subject to the permitting and other lawful requirements of City ordinance, rule or procedure, to construct, erect, and maintain, in, upon, along, across, above, over and under the Rights-of-Way in City a Cable System and shall have the right and privilege to provide Cable Service. The System constructed and maintained by Grantee or its agents shall not interfere with other uses of the Rights-of-Way. Grantee shall make use of existing poles and other above and below ground facilities available to Grantee to the extent it is technically and economically feasible to do so.

b. Notwithstanding the above grant to use Rights-of-Way, no Right-of-Way shall be used by Grantee if City determines, in its sole discretion, that such use is inconsistent with the terms, conditions, or provisions by which such Right-of-Way was created or dedicated, or with the present use of the Right-of-Way.

c. This Franchise shall be nonexclusive, and City reserves the right to grant use of said Rights-of-Way to any Person at any time during the period of this Franchise for the provision of Cable Service.

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d. The Grantee acknowledges and agrees that the City reserves the right to grant one (1) or more additional franchises or other similar lawful authorization to provide Cable Services within the City; provided, however, that no such franchise or similar lawful authorization shall contain material terms or conditions which, when considered as a whole, are substantially more favorable or less burdensome to the competitive provider than the material terms and conditions herein. The parties agree that this provision shall not require a word for word identical franchise or authorization for a competitive entity so long as the overall regulatory and financial burdens on each entity are generally equivalent.

e. Notwithstanding any provision to the contrary, should any non-wireless facilities based entity provide Cable Service within the Franchise Area during the term of this Franchise without a Franchise granted by the City and the City has the legal authority under State and Federal law to impose a Franchise on such entity, then Grantee shall have all rights which may be available to assert, at Grantee’s option, that this Franchise is rendered “commercially impracticable,” and invoke the modification procedures set forth in Section 625 of the Cable Act.

3. Lease or Assignment Prohibited. No Person may lease Grantee’s System for the purpose of providing Cable Service until and unless such Person shall have first obtained and shall currently hold a valid franchise or other lawful authorization containing substantially similar burdens and obligations to this Franchise. Any assignment of rights under this Franchise shall be subject to and in accordance with the requirements of Section 9.5 of this Franchise. This provision shall not prevent Grantee from complying with any commercial leased access requirements or any other provisions of Applicable Law.

4. Franchise Term. This Franchise shall be in effect for a period of ten (10) years from the date of execution by City, unless sooner renewed, revoked or terminated as herein provided.

5. Previous Franchises. Upon acceptance by Grantee as required by Section 13.2 herein, this Franchise shall supersede and replace any previous ordinance or other authorization granting a franchise to Grantee. Ordinance No. 67-89 dated November 21, 1989, as amended, is hereby expressly repealed.

6. Compliance with Applicable Laws, Resolutions and Ordinances.

a. The terms of this Franchise shall define the contractual rights and obligations of Grantee with respect to the provision of Cable Service and operation of the System in City. However, Grantee shall at all times during the term of this Franchise be subject to all lawful exercise of the police power, statutory rights, local ordinance-making authority of the City. This Franchise may also be modified or amended with the written consent of City and Grantee as provided in Section 12.3 herein.

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b. Grantee shall comply with the terms of any City ordinance or regulation of general applicability which addresses usage of the Rights-of-Way within City, which may have the effect of superseding, modifying or amending the terms herein, except that Grantee shall not, through application of such City ordinance or regulation of Rights-of-Way, be subject to additional burdens with respect to usage of Rights-of-Way which exceed burdens on similarly situated Rights-of-Way users.

c. In the event of any conflict between this Franchise and any City ordinance or regulation which addresses usage of the Rights-of-Way, the terms of this Franchise shall govern, provided however Grantee shall at all times comply with City ordinances of general applicability promulgated by the City in accordance with its police powers.

7. Rules of Grantee. Grantee shall have the authority to promulgate such rules, regulations, terms and conditions governing the conduct of its business as shall be reasonably necessary to enable said Grantee to exercise its rights and perform its obligations under this Franchise and to assure uninterrupted Service to each and all of its Subscribers; provided that such rules, regulations, terms and conditions shall not be in conflict with Applicable Laws.

8. Territorial Area Involved. This Franchise is granted for the corporate boundaries of City, as they exist from time to time. Access to Cable Service shall not be denied to any group of potential cable Subscribers because of the income of the potential cable Subscribers or the area in which such group resides.

9. Written Notice. All notices, reports, or demands required to be given in writing under this Franchise shall be sent via registered or certified mail or shall be deemed to be given when delivered personally to any officer of Grantee or City Clerk or forty-eight (48) hours after it is deposited in the United States mail in a sealed envelope, postage prepaid thereon, addressed to the party to whom notice is being given, as follows:

If to City:	City Clerk
	P.O. Box 1111
	Montgomery, Alabama 36101
If to Grantee:	Knology of Montgomery, Inc.
	1241 O.G. Skinner Drive
	West Point, GA 31833
	Attention: Director of Legal Affairs

Such addresses may be changed by either party upon notice to the other party given as provided in this section.

10. Ownership of Grantee. Grantee represents and warrants to City that the names of the shareholders, partners, members or other equity owners of the Grantee and any of the shareholders, partners, members and/or other equity owners of Grantee are as set forth in Exhibit A hereto.

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SECTION 3.

CONSTRUCTION STANDARDS

1. Registration, Permits, Construction Codes, and Cooperation.

a. Grantee shall comply with the construction requirements of local, state and federal laws.

b. Grantee agrees to obtain a permit as required by City prior to removing, abandoning, relocating or reconstructing, if necessary, any portion of its facilities. Notwithstanding the foregoing, City understands and acknowledges there may be instances when Grantee is required to make repairs, in compliance with federal or state laws, that are of an emergency nature. Grantee will notify City prior to such repairs, if practicable, and will obtain the necessary permits in a reasonable time after notification to City.

c. Reimbursement paid through the permitting process is separate and in addition to any other fees included in the Franchise. Grantee, at the time of or prior to submitting construction plans, shall provide City with a description of the type of Service to be provided by the Grantee in sufficient detail for City to determine compliance with the Franchise and Applicable Laws.

d. City may issue reasonable policy guidelines to all grantees to establish procedures for determining how to control issuance of engineering permits to multiple grantees for the use of the same Rights-of-Way for their facilities. Grantee shall cooperate with City in establishing such policy and comply with the procedures established by the City Administrator or his or her designee to coordinate the issuance of multiple engineering permits in the same Right-of-Way segments.

e. Grantee shall first obtain the written approval of City prior to commencing any construction or reconstruction on the Rights-of-Way and public places of City.

f. Failure to obtain permits or comply with permit requirements shall subject Grantee to all enforcement remedies available to City under Applicable Laws or this Franchise.

g. Grantee shall meet with developers and be present at pre-construction meetings to ensure that the newly constructed Cable System facilities are installed in new developments within City in a timely manner.

h. If requested by the City, Grantee shall hold an annual meeting with City to coordinate construction plans of both parties for the upcoming year.

2. Ongoing Construction. Grantee shall notify City at least ten (10) days prior to the commencement of any construction in any Rights-of-Way. Grantee shall provide to City

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a detailed site plan of any proposed construction or excavation. Grantee shall not open or disturb the surface of any Rights-of-Way or public place for any purpose without first having obtained a permit to do so in the manner provided by law. All excavation shall be coordinated with other utility excavation or construction so as to minimize disruption to the public. Any excavation shall be backfilled without delay and lawns, berms, gardens, shrubs, and flower beds returned and restored in as good a condition as before work involving such disturbance was done. Any excessive or loose dirt, gravel, mud or sand shall be removed from the property and deposited at an approval disposal site.

3. Use of existing poles or conduits.

a. Grantee shall utilize existing and/or replacement poles, conduits and other facilities whenever commercially reasonable and shall not construct or install any new, different or additional poles, conduits or other facilities on public property until the written approval of City is obtained. No location or any pole or wire-holding structure of Grantee shall be a vested interest, and such poles or structures shall be removed or modified by Grantee at its own expense whenever City determines that the public convenience would be enhanced thereby.

b. The facilities of Grantee shall be installed underground in those areas of City where existing telephone and electric services are both underground at the time of construction by Grantee. In areas where either telephone or electric utility facilities are installed aerially at the time of System construction, Grantee may install its facilities aerially; however, at such time as the existing aerial facilities are placed underground, Grantee shall likewise place its facilities underground at its sole cost. If City requires utilities to bury lines which are currently overhead, and the City financially participates in said undergrounding, then the City will consider providing the same cost sharing to the Grantee.

c. To the extent permitted under Grantee’s pole attachment agreements, City shall have the right to over-lash additional cable and related attachments to Grantee’s System free of charge. Where such over-lashing is pursuant to a planned large-scale construction project, City shall provide a minimum of ten (10) days advance notice to the Grantee. For all other over-lashing, City shall provide notice that is reasonably practicable under the circumstances. The City rights to over-lash facilities on Grantee’s System shall be limited to City owned facilities which are to be used for noncommercial, governmental/educational applications.

4. Minimum Interference.

a. Grantee shall use its best efforts to give reasonable prior notice to any adjacent private property owners who will be negatively affected or impacted by Grantee’s work in the Rights-of-Way.

b. All transmission and distribution structures, lines and equipment erected by Grantee shall be located so as to cause minimum interference with the unencumbered use of Rights-of-Way and other public places and minimum interference with the rights and reasonable convenience of property owners who adjoin any of the Rights-of-Way and public places.

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c. Except as may be reasonably required to gain access to easements, Grantee shall provide advance notice to any private property owner and shall obtain authorization prior to commencing work on private property. The City acknowledges that it may be impractical to provide such notice with regard to work in an easement running along the backs of a lot.

5. Disturbance or damage. Any and all Rights-of-Way, or public or private property, which are disturbed or damaged during the construction, repair, replacement, relocation, operation, maintenance, expansion, extension or reconstruction of the System shall be promptly and fully restored by Grantee, at its expense, to a condition as good as that prevailing prior to Grantee’s work, as determined by City. If Grantee shall fail to promptly perform the restoration required herein, after written request of City and reasonable opportunity to satisfy that request, City shall have the right to put the Rights-of-Way back into condition as good as that prevailing prior to Grantee’s work. In the event City determines that Grantee is responsible for such disturbance or damage, Grantee shall be obligated to fully reimburse City for such restoration within thirty (30) days after its receipt of City’s invoice thereof.

6. Temporary Relocation.

a. At any time during the period of the Franchise, Grantee shall, at its own expense, protect, support, temporarily disconnect, relocate or remove any of its property when, in the opinion of City, (i) the same is required by reason of traffic conditions, public safety, Rights-of-Way vacation, freeway or Rights-of-Way construction, alteration to or establishment of any Rights-of-Way or any facility within the Rights-of-Way, sidewalk, or other public place, including but not limited to, installation of sewers, drains, waterlines, power lines, traffic signal lines or transportation facilities; or (ii) a City project or activity makes disconnection, removal, or relocation necessary or less expensive for City.

b. Grantee shall, on request of any Person holding a permit to move a building, temporarily raise or lower its wires to permit the movement of such buildings. The expense of such temporary removal or raising or lowering of wires shall be paid by the Person requesting the same, and Grantee shall have the authority to require such payment in advance. Grantee shall be given not less than five (5) days advance notice to arrange such temporary wire alterations.

7. Emergency. Whenever, in case of fire or other emergency, it becomes necessary in the judgment of the City Administrator, police chief, fire chief, or their delegates, to remove or damage any of Grantee’s facilities, no charge shall be made by Grantee against City for restoration, repair or damages.

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8. Tree Trimming. Grantee shall comply with all applicable provisions of the Code of Ordinances of the City regarding the trimming of any tress on public property or in the Rights-of-Way.

9. Protection of facilities. Nothing contained in this section shall relieve any Person from liability arising out of the failure to exercise reasonable care to avoid damaging Grantee’s facilities while performing any work connected with grading, regrading or changing the line of any Rights-of-Way or public place or the construction or reconstruction of any sewer or water system.

10. Installation records. Each Grantee shall keep accurate Installation records of the location of all facilities in the Rights-of-Way and public ways and furnish them to City upon reasonable request. Grantee shall cooperate with City to furnish such information in an electronic mapping format, if reasonably possible compatible with the then-current City electronic mapping format. Upon completion of new or relocation construction of underground facilities in the Rights-of-Way and public ways, Grantee shall provide City with Installation records in an electronic format, if reasonably possible compatible with the then-current City electronic mapping format showing the location of the underground and above ground facilities.

11. Locating facilities.

a. If, during the design process for public improvements, City discovers a potential conflict with proposed construction, Grantee shall either: (a) locate and, if necessary, expose its facilities in conflict or (b) use a location service under contract with City to locate or expose its facilities. Grantee is obligated to furnish the location information in a timely manner, but in no case longer than thirty (30) days.

b. City reserves the prior and superior right to lay, construct, erect, install, use, operate, repair, replace, remove, relocate, regrade, widen, realign, or maintain any Rights-of-Way and public ways, aerial, surface, or subsurface improvement, including but not limited to water mains, traffic control conduits, cable and devices, sanitary or storm sewers, subways, tunnels, bridges, viaducts, or any other public construction within the Rights-of-Way of City limits.

12. City’s rights. Subject to Applicable Laws, when City uses its prior superior right to the Rights-of-Way and public ways, Grantee shall move its property that is located in the Rights-of-Way and public ways, at its own cost, to such a location as City directs. Nothing in this Franchise shall be construed to prevent City from constructing, maintaining, repairing or relocating sewers; grading, paving, maintaining, repairing, relocating and/or altering any Right-of-Way; constructing, laying down, repairing, maintaining or relocating any water mains; or constructing, maintaining, relocating, or repairing any sidewalk or other public work.

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13. Relocation delays.

a. Subject to Grantee’s compliance with Section 3.12 above, if Grantee’s relocation effort so delays construction of a public project causing City to be liable for delay damages, Grantee shall reimburse City for those damages attributable to the delay created by Grantee. In the event Grantee should dispute the amount of damages attributable to Grantee, the matter shall be referred to the City engineer for a decision. In the event that Grantee disagrees with the City engineer’s decision, the matter shall be submitted to the Mayor for determination, whose decision shall be final and binding upon Grantee as a matter of City review, but nothing herein waives any right of appeal to the courts.

b. In the event City becomes aware of a potential delay involving Grantee’s facilities, City shall promptly notify Grantee of this potential delay.

14. Interference with City Facilities. The Installation, use and maintenance of the Grantee’s facilities within the Rights-of-Way and public ways authorized herein shall be in such a manner as not to interfere with City’s placement, construction, use and maintenance of its Rights-of-Way and public ways, Rights-of-Way lighting, water pipes, drains, sewers, traffic signal systems or other City systems that have been, or may be, installed, maintained, used or authorized by City.

15. Interference with Utility Facilities.

a Grantee agrees not to install, maintain or use any of its facilities in such a manner as to damage or interfere with any existing facilities of another utility located within the Rights-of-Way and public ways of City and agrees to relocate its facilities, if necessary, to accommodate another City facility relocation.

b Nothing in this section is meant to limit any rights Grantee may have under Applicable Laws to be compensated for the cost of relocating its facilities from the utility that is requesting the relocation.

16. Collocation. To maximize public and employee safety, to minimize visual clutter of aerial plant, and to minimize the amount of trenching and excavation in and along City Rights-of-Way and sidewalks for underground plant, Grantee shall make every commercially reasonable effort to collocate compatible facilities within the Rights-of-Way subject to the engineering requirements of the owners of utility poles and other facilities.

17. Safety Requirements.

a. Grantee shall at all times employ ordinary and reasonable care and shall install and maintain in use nothing less than commonly accepted methods and devices for preventing failures and accidents which are likely to cause damage or injuries.

b. Grantee shall install and maintain its System and other equipment in accordance with City’s codes and the requirements of the National Electric Safety Code and

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all other applicable FCC, state and local regulations, and in such manner that they will not interfere with City communications technology related to health, safety and welfare of the residents.

c. Cable System structures, and lines, equipment and connections in, over, under and upon the Rights-of-Way of City, wherever situated or located, shall at all times be kept and maintained in good condition, order, and repair so that the same shall not menace or endanger the life or property of City or any Person.

SECTION 4.

DESIGN PROVISIONS

1. System Upgrade/Construction: Minimum Channel Capacity.

a. Grantee shall operate and maintain for the term of this Franchise a System providing a minimum of 750 MHz capacity. Design specifications found in Exhibit E attached hereto are hereby incorporated as part of this Franchise.

b. The System will utilize a hybrid fiber-coaxial architecture. In addition, the System will be designed with the capability to transmit return signals upstream in the 5-40 MHz spectrum. In conjunction with the upgrade/construction, Grantee shall replace any existing headend equipment with state-of-the-art standard frequency headend equipment which is technically necessary to meet FCC technical standards.

c. Grantee shall operate and maintain a System capable of providing non-video services such as high-speed data transmission, Internet access, and Other Programming Services.

d. All final programming decisions remain the discretion of Grantee in accordance with this Franchise, provided that Grantee notifies City and Subscribers in writing thirty (30) days prior to any Channel additions, deletions, or realignments, and further subject to Grantee’s signal carriage obligations hereunder and pursuant to 47 U.S.C. § 531-536, and further subject to City’s rights pursuant to 47 U.S.C. § 545. Location and relocation of the PEG Channels shall be governed by Section 6 and Exhibit B.

2. System Construction.

On or about thirty (30) days prior to any system construction, affected Subscribers will receive a letter notifying them of same, which letter shall include Grantee’s telephone number that Subscribers can use to contact Grantee with any questions or concerns they may have. No less than forty-eight (48) hours before construction, all affected houses will receive written notification regarding Grantee’s construction schedule which will also include the scope of work to be performed and Grantee’s telephone number. Nothing shall prohibit Grantee from consolidating the notices required in this subparagraph.

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3. Interruption of Service. Grantee shall interrupt Service only for good cause and for the shortest time possible. Such interruption shall occur during periods of minimum use of the System. If Service is interrupted for a total period of more than twenty-four (24) continuous hours in any thirty (30) day period, Subscribers shall be credited pro rata for such interruption.

4. Emergency Alert Capability. Grantee shall immediately provide the System capability to allow the City to transmit from the Emergency Operation Center, 911 Communications Parkway, or other said location at City’s discretion, an emergency alert signal to all participating Subscribers, in the form of an audio message on all Channels within the City simultaneously in the event of disaster or public emergency. The City shall be solely responsible for the content of any message which the City generates on the emergency alert system. Grantee shall only be responsible for the proper functioning of the emergency alert system. In addition, Grantee shall at all times comply with the Emergency Alert System standards pursuant to Title 47, Section 11, Subparts A-E of the Code of Federal Regulations, as may be amended or modified from time to time.

5. Technical Standards. The technical standards used in the operation of the System shall comply, at minimum, with the technical standards promulgated by the FCC relating to Cable Systems pursuant to Title 47, Section 76, Subpart K of the Code of Federal Regulations, as may be amended or modified from time to time, which regulations are expressly incorporated herein by reference. In addition, Grantee is subject to the technical standards outlined in Exhibit E attached hereto.

6. Special Testing.

a. City shall have the right to inspect and test all construction or Installation work performed pursuant to the provisions of the Franchise. In addition, City may require special testing of a location or locations within the System as desired at any time during the term of this Franchise. Demand for such special tests may be made on the basis of complaints received or other evidence indicating an unresolved controversy or noncompliance or for routine verification of Grantee’s compliance with FCC technical standards. City shall endeavor to so arrange its request for such special testing so as to minimize hardship or inconvenience to Grantee or to the Subscribers caused by such testing.

b. Before ordering such tests, Grantee shall be afforded thirty (30) days advance written notice. City shall meet with Grantee prior to requiring special tests to discuss the need for such and, if possible, visually inspect those locations which may be the focus of concern. If, after such meetings and inspections, City wishes to require special tests and the thirty (30) days have elapsed, the tests shall be conducted by Grantee at Grantee’s expense and may be observed by a qualified engineer selected by City. Grantee shall participate and cooperate in such testing and shall not assess City or Subscribers any additional fees or costs associated with time or labor Grantee may incur as a result of its participation in such testing.

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7. FCC Reports. The results of any tests required to be filed by Grantee with the FCC shall upon request of City also be filed with City or its designee within ten (10) days of the date of request.

8. Interconnection. At the request of the City, Grantee shall interconnect with adjacent Cable Systems to facilitate the two-way distribution of PEG Access Channels and/or Institutional Network. All decisions regarding whether to interconnect and the terms and conditions of any such interconnect shall be a matter of agreement between the cable operators involved. If the cable operators are unable to reach agreement the City shall, in its sole discretion, have authority to impose reasonable interconnection requirements and the costs of such interconnection shall be proportionately divided between the cable operators.

9. Annexation. Upon the annexation of any additional land area by the City, if the annexed area is not currently served by a cable operator it will be subject to the other provisions of this Section 4. If the annexed area is served by a cable operator, Grantee has the option to extend its Cable System to the newly annexed area if Grantee determines that it is economically feasible to do so. Upon the annexation of any additional land area by the City, the annexed area shall be subject to all the terms of this Franchise upon sixty (60) days of written notification by the City to Grantee. A cable operator other than Grantee whose Cable System already passes homes in an annexed area shall not extend its Cable System beyond those homes which it passes at the time the annexation occurs unless it otherwise obtains a franchise from the City.

10. Line Extension.

a. Grantee shall construct and operate its Cable System so as to provide Service to all parts of its Franchise area as provided in this Franchise and having a density equivalent of thirty (30) residential units per cable mile of System, as measured from the nearest tap on the Cable System.

b. Where the density is less than that specified above, Grantee shall inform Persons requesting Service of the possibility of paying for Installation or a line extension and shall offer to provide them with a free written estimate of the cost, which shall be provided within fifteen (15) working days of such a request. The charge for Installation or extension for each Person requesting Service shall not exceed a pro rata share of the actual cost of extending the Service.

c. Any residential and/or commercial unit located within one hundred fifty (150) feet of the nearest tap on Grantee’s System shall be connected to the System at no charge other than the Standard Installation charge. Grantee shall, upon request by any potential Subscriber residing in City beyond the one hundred fifty (150) foot limit, extend Service to such Subscriber provided that the Subscriber shall pay the net additional Drop costs.

d. Under Normal Operating Conditions, if Grantee cannot perform Installations within the times specified in applicable customer standards, the Subscriber may

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request and is entitled to receive a credit equal to the charge for a Standard Installation. For any Installation that is not a free Installation or a Standard Installation, Grantee shall provide the Subscriber with a written estimate of all charges within seven (7) days of a request by the Subscriber. Failure to comply will subject Grantee to appropriate enforcement actions. This section does not apply to the introduction of new products and services when Grantee is utilizing a phased introduction.

11. Lockout Device. Upon the request of a Subscriber, Grantee shall make available by sale or lease a Lockout Device allowing Channels on the System to be blocked.

SECTION 5.

SERVICE PROVISIONS

1. Regulation of Service Rates. City may regulate rates for the provision of Cable Service, equipment, or any other communications service provided over the System in accordance with applicable federal law, in particular 47 C.F.R. Part 76 subpart N. In the event the City has the legal authority to regulate rates and chooses to regulate rates it shall, in accordance with 47 C.F.R. § 76.910, obtain certification from the FCC, if applicable. The City shall follow all applicable FCC rate regulations and shall ensure that appropriate personnel are in place to administer such regulations. City reserves the right to regulate rates for any future Services to the extent permitted by law.

2. Non-Standard Installations. Grantee shall install and provide Cable Service to any Person requesting other than a Standard Installation provided that said Cable Service can meet FCC technical specifications and all payment and policy obligations are met. In such case, Grantee may charge for the incremental increase in material and labor costs incurred beyond the Standard Installation.

3. Sales Procedures. Grantee shall not exercise deceptive sales procedures when marketing any of its Services within City. In its initial communication or contact with a non-Subscriber or current Subscriber seeking alternative options, Grantee shall inform the non-Subscriber of all levels of Service available, including the lowest priced Basic Cable Service tier and free Service tiers. Grantee shall have the right to market door-to-door during reasonable hours consistent with local ordinances and regulation.

4. Consumer Protection and Service Standards. Grantee shall maintain a convenient local customer service and bill payment location in the City for receiving Subscriber payments, handling billing questions, equipment replacement and customer service information. The Grantee shall comply with the standards and requirements for customer service set forth below and shall comply with all applicable regulations relating to customer service obligations, including any amendments to 47 C.F.R. § 76.309 during the term of this Franchise.

a. Cable System office hours and telephone availability.

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i. Grantee will maintain a local, toll-free or collect call telephone access line which will be available to its Subscribers twenty-four (24) hours a day, seven (7) days a week.

(1) Trained Grantee representatives will be available to respond to customer telephone inquiries during Normal Business Hours.

(2) After Normal Business Hours, the access line may be answered by a service or an automated response system, including an answering machine. Inquiries received after Normal Business Hours must be responded to by a trained Grantee representative on the next business day.

ii. Under Normal Operating Conditions, telephone answer time by a customer representative, including wait time, shall not exceed thirty (30) seconds when the connection is made. If the call needs to be transferred, transfer time shall not exceed thirty (30) seconds. These standards shall be met no less then ninety percent (90%) of the time under Normal Operating Conditions, measured on a quarterly basis.

iii. Grantee shall not be required to acquire equipment or perform surveys to measure compliance with the telephone answering standards above unless an historical record of complaints indicates a clear failure to comply.

iv. Under Normal Operating Conditions, the customer will receive a busy signal less than three percent (3%) of the time.

v. Customer service center and bill payment locations will be open at least during Normal Business Hours and will be conveniently located.

b. Installations, Outages and Service Calls. Under Normal Operating Conditions, each of the following standards will be met no less than ninety-five percent (95%) of the time measured on a quarterly basis.

i. Standard Installations will be performed within seven (7) business days after an order has been placed. “Standard” Installations are those that are located up to one hundred fifty (150) feet from the existing distribution system.

ii. Excluding conditions beyond the control of Grantee, Grantee will begin working on “Service Interruptions” promptly and in no event later than twenty-four (24) hours after the interruption becomes known. Grantee must begin actions to correct other Service problems the next business day after notification of the Service problem.

iii. The “appointment window” alternatives for Installations, Service calls, and other Installation activities will be either a specific time or, at maximum, a four (4) hour time block during Normal Business Hours.

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(Grantee may schedule Service calls and other Installation activities outside of Normal Business Hours for the express convenience of the customer.)

iv. Grantee may not cancel an appointment with a customer after the close of business on the business day prior to the scheduled appointment.

v. If Grantee’s representative is running late for an appointment with a customer and will not be able to keep the appointment as scheduled, the customer will be contacted. The appointment will be rescheduled, as necessary, at a time which is convenient for the customer.

c. Communications between Grantee and Subscribers.

i. Notifications to Subscribers:

(1) Grantee will provide written information on each of the following areas at the time of Installation of Service, at least annually to all Subscribers, and at any time upon request:

(a) Products and Services offered;

(b) Prices and options for programming Services and conditions of subscription to programming and other Services;

(c) Installation and Service maintenance policies;

(d) Instructions on how to use the Cable Service;

(e) Channel positions of programming carried on the System; and

(f) Billing and complaint procedures, including the address and telephone number of the City’s cable office.

(2) Subscribers will be notified of any changes in rates, programming Services or Channel positions as soon as possible in writing. Notice must be given to Subscribers a minimum of thirty (30) days in advance of such changes if the change is within the control of the Grantee. In addition, the Grantee shall notify Subscribers thirty (30) days in advance of any significant changes in the other information required by Section 5.4(c)(i)(l).

(3) In addition to the requirement of subparagraph (2) of this section regarding advance notification to Subscribers of any changes in rates, programming services or Channel positions, Grantee shall give thirty (30) days written notice to both Subscribers and the

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City before implementing any rate or Service change. Such notice shall state the precise amount of any rate change and briefly explain in readily understandable fashion the cause of the rate change (e.g., inflation, change in external costs or the addition/deletion of Channels). When the change involves the addition or deletion of Channels, each Channel added or deleted must be separately identified. For purposes of the carriage of digital broadcast signals, the Grantee need only identify for Subscribers, the television signal added and not whether that signal may be multiplexed during certain dayparts.

(4) To the extent Grantee is required to provide notice of Service and rate changes to Subscribers, the Grantee may provide such notice using any reasonable written means at its sole discretion.

(5) Notwithstanding any other provision of this section, Grantee shall not be required to provide prior notice of any rate change that is the result of a regulatory fee, Franchise Fee, or any other fee, tax, assessment, or charge of any kind imposed by any federal agency, state, or City on the transaction between the Grantee and the Subscriber.

ii. Billing:

(1) Consistent with 47 C.F.R. § 76.1619, bills will be clear, concise and understandable. Bills must be fully itemized, with itemizations including, but not limited to, Basic Cable Service and premium Service charges and equipment charges. Bills will also clearly delineate all activity during the billing period, including optional charges, rebates and credits.

(2) In case of a billing dispute, the Grantee must respond to a written complaint from a Subscriber within thirty (30) days.

iii. Refunds: Refund checks will be issued promptly, but no later than either:

(1) The Subscriber’s next billing cycle following resolution of the request or thirty (30) days, whichever is earlier, or

(2) The return of the equipment supplied by Grantee if Service is terminated.

iv. Credits: Credits for Service will be issued no later than the Subscriber’s next billing cycle following the determination that a credit is warranted.

Grantee shall provide City with a quarterly compliance report specific to the System in the Service Area, which report information shall describe in detail Grantee’s compliance with each and every term and provision of this section.

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5. Subscriber Contracts. Grantee shall file with City any standard form residential Subscriber contract utilized by Grantee. If no such written contract exists, Grantee shall file with the City a document completely and concisely stating the length and terms of the Subscriber contract offered to customers. The length and terms of any Subscriber contract(s) shall be available for public inspection during Normal Business Hours. A list of Grantee’s current Subscriber rates and charges for Cable Service shall be maintained on file with City and shall be available for public inspection.

6. Refund Policy. If a Subscriber’s Cable Service is interrupted or discontinued without cause, for twenty-four (24) or more consecutive hours, the Grantee shall, upon request by Subscriber, credit such Subscriber pro rata for such interruption. For this purpose, every month will be assumed to have thirty (30) days.

7. Late Fees. Grantee shall comply with all applicable state and federal laws with respect to any assessment, charge, cost, fee or sum, however characterized, that the Grantee imposes upon a Subscriber for late payment of a bill. The City reserves the right to enforce Grantee’s compliance with all Applicable Laws to the maximum extent legally permissible.

8. Local Office Policy.

a. Grantee shall maintain a location in City for receiving Subscriber inquiries, bill payments, and equipment transfers. The location must be staffed by a Person capable of receiving inquiries and bill payments and the location shall be open a minimum of forty (40) hours per week. In addition, Grantee shall maintain a drop box locations within the Service Area for receiving Subscriber payments after hours.

b. Payments at Grantee’s drop box locations shall be deemed received on the date such payments are picked up by Grantee which shall occur no less than twenty- four (24) hours after each and every due date for Subscriber bills.

SECTION 6.

ACCESS CHANNEL(S) PROVISIONS

1. Grantee Support for PEG Access. Grantee shall provide the following support for PEG access usage within the Service Area:

a. Provision of the Channels designated in Exhibit B of this Agreement for local PEG programming and access use at no charge in accordance with the requirements of Exhibit B.

b. Support of PEG programming to the extent specified in Exhibit B of this Agreement.

c. Provision of free public building Installation and Cable Service and a fiber connection to City’s network as more clearly specified in Exhibit B.

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2. Compliance with Federal Law. Grantee and City agree that the PEG access support fee referenced in Exhibit B will not be deemed to be “Franchise Fees” within the meaning of Section 622 of the Cable Act (47 U.S.C. §542), and such obligations shall not be deemed to be (i) “payments in kind” or any involuntary payments chargeable against the Franchise Fees to be paid to the City by Grantee pursuant to Section 7 hereof or (ii) part of the Franchise Fees to be paid to City by Grantee pursuant to Section 7 hereof.

SECTION 7.

OPERATION AND ADMINISTRATION PROVISIONS

1. Administration of Franchise. The City Administrator or other designee shall have continuing regulatory jurisdiction and supervision over the System and the Grantee’s operation under the Franchise; provided, however, that the City Council shall retain the sole authority to take enforcement action pursuant to this Franchise.

2. Delegated-Authority. The City may appoint a citizen advisory body or may delegate to any other body or Person authority to monitor the performance of Grantee pursuant to the Franchise. Grantee shall cooperate with any such delegates of City.

3. Franchise Fee.

a. During the term of the Franchise, Grantee shall pay quarterly to City a Franchise Fee in an amount equal to five percent (5%) of its quarterly Gross Revenues, or such other amounts as are subsequently permitted by federal statute.

b. Any payments due under this provision shall be payable quarterly. The payment shall be made within forty-five (45) days of the end of each of Grantee’s fiscal quarters together with a report showing the basis for the computation in form and substance substantially the same as Exhibit F attached hereto. In the event that a Franchise Fee payment or other sum due is not received by the City on or before the date due, or is underpaid, Grantee shall pay in addition to the payment, or sum due, interest from the due date at an annual rate equal to prune plus two percent (2%).

c. All amounts paid shall be subject to audit and recomputation by City and acceptance of any payment shall not be construed as an accord that the amount paid is in fact the correct amount. In the event the City should conduct a review of Grantee’s books and records pursuant to Section 7.6 of this Franchise and such review indicates a Franchise Fee underpayment of two percent (2%) or more, the Grantee shall assume all reasonable documented costs of such audit, and pay same upon demand by the City.

4. Discounted Rates. If Grantee’s Subscribers are offered what is, in effect, a discount for “bundled” services (i.e. Subscribers obtain Cable Services and some other, non-cable goods or service) then for the purpose of calculating Gross Revenues, the discount shall be applied proportionately to cable and non-cable goods and services, in accordance with the following example:

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Assume a Subscriber’s charge for a given month for Cable Service alone would be $40, for local telephone service alone would be $30, and for high-speed service alone would be $30, for a total of $100. In fact, the three (3) services are offered in effect at a combined rate where the Subscriber receives what amounts to a twenty percent (20%) discount from the rates that would apply to a service if purchased individually (i.e. $80 per month for all three (3) services). The discount (here, $20) for Gross Revenue computation purposes would be applied pro rata so that Gross Revenues for Cable Service are deemed to be $32 ($40 less 20% of $40). The result would be the same if the Subscriber received a $20 discount for telephone service on the condition that he or she also subscribes to Cable Service at standard rates.

In no event shall Grantee be permitted to evade or reduce applicable franchise fee payments required to be made to City due to discounted bundled services.

5. Not Franchise Fees.

a. Grantee acknowledges and agrees that the Franchisee Fees payable by Grantee to City pursuant to this section shall take precedence over all other payments, contributions, services, equipment, facilities, support, resources or other activities to be provided or performed by Grantee pursuant to this Franchise and that the Franchise Fees provided for in this section of this Franchise shall not be deemed to be in the nature of a tax, and shall be in addition to any and all taxes of general applicability and other fees and charges which Grantee shall be required to pay to City and/or to any other governmental authority, all of which shall be separate and distinct obligations of Grantee.

b. Grantee shall not apply or seek to apply or make any claim that all or any part of the Franchisee Fees or other payments or contributions to be made by Grantee to City pursuant to this Franchise shall be deducted from or credited or offset against any taxes, fees or assessments or general applicability levied or imposed by City or any other governmental authority, including any such tax, fee or assessment imposed on both utilities and cable operators or their services.

c. Grantee shall not apply or seek to apply all or any part of any taxes, fees or assessments or general applicability levied or imposed by the City or any other governmental authority (including any such tax, fee or assessment imposed on both utilities and cable operators or their services) as a deduction or other credit from or against any of the Franchise Fees or other payments or contributions to be paid or made pursuant by Grantee to City to this Franchisee which shall be deemed to be separate and distinct obligations of Grantee.

6. Access to Records. The City shall have the right to inspect, upon reasonable notice and during Normal Business Hours, or require Grantee to provide within a reasonable time copies of any records maintained by Grantee which relate to System operations including specifically Grantee’s accounting and financial records. City acknowledges that some of

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the records which may be provided by Grantee may be classified as confidential and therefore may subject Grantee to competitive disadvantage if made public. City shall therefore maintain the confidentiality of any and all records provided to it by Grantee which are not required to be made public pursuant to Applicable Laws. Grantee shall produce such books and records for City’s inspection at Grantee’s local office within the Service Area or at such other mutually agreed upon location within the City. To the extent it is necessary for City to send representatives to a location outside of the City to inspect Grantee’s books and records, Grantee shall be responsible for all travel costs incurred by City representatives.

7. Reports and Maps to be Filed with City.

a. Grantee shall file with the City, at the time of payment of the Franchise Fee, a report of all Gross Revenues in form and substance as Exhibit F attached hereto.

b. If required by City, Grantee shall provide City a written or computer-stored record of all service calls and interruptions or degradation of Service experienced for the preceding two (2) years, provided that such complaints result in or require a service call, subject to the Subscriber’s right of privacy.

c. City and Grantee shall mutually agree, at the times and in the form prescribed, such other reasonable reports with respect to Grantee’s operations pursuant to this Franchise.

d. If required by City, Grantee shall furnish to and file with City Administrator the maps, plats, and permanent records of the location and character of all facilities constructed, including underground facilities, and Grantee shall file with City updates of such maps, plats and permanent records annually if changes have been made in the System.

8. Periodic Evaluation.

a. City may require evaluation sessions at any time during the term of this Franchise, upon fifteen (15) days written notice to Grantee.

b. Topics which may be discussed at any evaluation session may include, but are not limited to, application of new technologies, System performance, programming offered, access Channels, facilities and support, municipal uses of cable, Subscriber rates, customer complaints, amendments to this Franchise, judicial rulings, FCC rulings, line extension policies and any other topics City deems relevant.

c. As part of any periodic evaluation proceeding the City shall have the right to visit and/or inspect the Grantee’s headend facility, customer service center and any other facilities of Grantee whether or not located in the City to the extent such facilities are in any way related to Grantee’s ability to provide Cable Services to the City.

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d. As a result of a periodic review or evaluation session, upon notification from City, Grantee shall meet with City and undertake good faith efforts to reach agreement on changes and modifications to the terms and conditions of the Franchise which are both economically and technically feasible as measured over the remaining life of the Franchise.

SECTION 8.

GENERAL FINANCIAL AND INSURANCE PROVISIONS

1. Letter of Credit

a. In the event that the City has reason to believe that the Grantee has defaulted in the performance of any provision of this Franchise, except as excused by force majeure, the City shall notify the Grantee in writing, by certified mail, of the provision or provisions of which the City believes Grantee to be in default and the details relating thereto (“Alleged Default Notice”).

b. Within ten (10) days of receipt of an Alleged Default Notice from the City, Grantee shall provide the City with an irrevocable letter of credit in the sum of Seventy-Five Thousand and No/100 Dollars ($75,000.00). The letter of credit shall insure the faithful performance by the Grantee of all the provisions of this Franchise, and compliance with all orders, permits and directions of the City and the payment by Grantee of any claim, penalties, damages, liens and taxes due the City related thereto or which arise by reason of the construction, operation or maintenance of the Cable System. The letter of credit shall be provided by Grantee regardless of whether Grantee disputes the alleged violation. Any failure by Grantee to provide the letter of credit as required herein shall constitute a separate breach of this Franchise. Once the proceeding addressing the alleged violation has been completed the Grantee shall be relieved of maintaining the letter of credit until such time as another alleged violation notification is received by Grantee at which time the process shall begin again.

c. The Grantee shall have thirty (30) days from the receipt of an Alleged Default Notice to:

i. Respond to the City in writing, contesting the City’s assertion of default and providing such information or documentation as may be necessary to support the Grantee’s position; or

ii. Cure any such default. The time for Grantee to correct any violation or liability shall be extended by City if the necessary action to correct such violation or liability is of such a nature or character as to require more than thirty (30) days within which to perform, provided Grantee provides written notice that it requires more than thirty (30) days to correct such violations or liability, commences the corrective action within the thirty (30) day period and thereafter uses reasonable diligence to correct the violation or liability.

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d. In the event that the City finds that Grantee failed to respond to such an Alleged Default Notice to cure the default or to take reasonable steps to cure the default, the City shall promptly schedule a public hearing to consider that matter. The City shall provide written notice at least fourteen (14) days prior to the date of the hearing. The Grantee shall be provided reasonable opportunity to offer evidence and be heard at such public hearing.

e. In the event that the City, after public hearing, determines that a continuing state of default exists and that its cure is unlikely or untimely, the City may determine to pursue one (1) of the following:

i. assess liquidated damages in accordance with the schedule set forth in Section 8.2 below;

ii. determine the amount of actual damages to the City of the default and draw upon all or any appropriate part of the letter of credit provided herein;

iii. seek specific performance of any provision in this Franchise which reasonably lends itself to such remedy, as an alternative to damages;

iv. pursue a separate action for damages in a court of competent jurisdiction;

v. pursue the procedures for revocation of the Franchise under Section 9.2 herein; or

vi. invoke any other lawful remedy available to the City.

f. If the City draws upon the letter of credit or any subsequent letter of credit delivered pursuant hereto, in whole or in part, the City shall provide written notice of such draw to Grantee and Grantee shall replace or replenish to its full amount the same within ten (10) days after such notice. This shall be a continuing obligation for any draws upon the letter of credit.

g. If the City determines that a default exists after a public hearing, the Grantee shall have the right to a review of such decision in any court of competent jurisdiction.

2. Liquidated Damages

a. For the violation of any of the following provisions of this Franchise, liquidated damages shall be paid by the Grantee to the City, subject to the due process provisions of Section 8.1 above. Any such liquidated damages shall be assessed as of the date the Grantee received the Alleged Default Notice.

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i. For failure to provide documents, reports, maps or information required by the terms of this Franchise, One hundred and No/100 Dollars ($100.00) for each day that such failure occurs or continues.

ii. For failure to provide the Cable Services Grantee has agreed to provide, including the requirements to maintain and operate the Cable System in accordance with Section 4 herein, One hundred and No/100 Dollars ($100.00) per day, for each day that such failure occurs or continues

iii. For failure to comply with Section 6 and Exhibit B regarding PEG Channels, One hundred fifty and No/100 Dollars ($150.00) per day for each day that such violation exists.

iv. For failure to materially comply with Customer Service Standards set forth in Section 5 herein, one hundred and No/100 Dollars ($100.00) per day for each day the violation continues, except where compliance is measured quarterly, in which case liquidated damages shall be as follows: (a) Franchisee shall be liable for liquidated damages in the amount of two thousand and No/100 Dollars ($2,000.00) for the first offence for each quarter in which such standards were not met; four thousand and No/100 Dollars ($4,000.00) for the second offence for each quarter in which such standards were not met; and six thousand and No/100 Dollars ($6,000.00) for the third offence for each quarter in which such standards were not met.

b. Each of the above-mentioned cases of non-compliance result in damage to the City, its residents, businesses and institutions, compensation for which will be difficult or impossible to ascertain. The Grantee agrees that the liquidated damages in the amounts set forth above are fair and reasonable compensation for such damage. The Grantee agrees that said foregoing amounts are liquidated damages not a penalty or forfeiture, and are within one (1) or more exclusions to the term “Franchise Fee” provided by Section 622(g)(2)(A)-(D) of the Cable Act.

c. Payment of liquidated damages mandated by the City in accordance with the terms of this Franchise shall be considered a cure and full and final resolution of the alleged violation for the time period specified and shall not thereafter be considered, for any purpose, as an event of noncompliance for such specified period. Nothing herein shall prevent the City from initiating another violation proceeding pursuant to the terms of this Franchise in the event another alleged violation of such provision of the Franchise should arise.

3. Liability Insurance.

a. Upon the effective date, Grantee shall, at its sole expense take out and maintain during the term of this Franchise commercial general liability insurance with a company licensed to do business in the State of Alabama with a rating by A.M. Best & Co. of not less than “B” that shall protect the Grantee, City and its

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officials, officers, directors, employees and agents from claims which may arise from operations under this Franchise, whether such operations be by the Grantee, its officials, officers, directors, employees and agents or any subcontractors of Grantee. This liability insurance shall include, but shall not be limited to, protection against claims arising from bodily and personal injury and damage to property, resulting from Grantee’s vehicles, products and operations. Grantee shall maintain, throughout the term of the Franchise, liability insurance insuring Grantee and the City in the minimum amounts of:

i. Three Million and No/100 Dollars ($3,000,000.00) for bodily injury or death to any one (1) Person;

ii, Three Million and No/100 Dollars ($3,000,000.00) for bodily injury or death resulting from any one accident;

iii. Five Million and No/100 Dollars ($5,000,000.00) in the form of an umbrella policy.

b. The following endorsements shall be attached to the liability policy:

i. The policy shall provide coverage on an “occurrence” basis.

ii. The policy shall cover personal injury as well as bodily injury.

iii. The policy shall cover blanket contractual liability subject to the standard universal exclusions of contractual liability included in the carrier’s standard endorsement as to bodily injuries, personal injuries and property damage.

iv. Broad form property damage liability shall be afforded.

v. City shall be named as an additional insured on the policy.

vi. An endorsement shall be provided which states that the coverage is primary insurance and that no other insurance maintained by the City will be called upon to contribute to a loss under this coverage.

vii. Standard form of cross-liability shall be afforded.

viii. An endorsement stating that the policy shall not be canceled without thirty (30) days notice of such cancellation given to City.

c. Grantee shall submit to City documentation of the required insurance, including a copy of the policy showing that the City is an additional insured, as well as all properly executed endorsements.

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4. Indemnification

a. Grantee shall indemnify, defend and hold City, its officers, boards, commissions, agents and employees (collectively the “Indemnified Parties”) harmless from and against any and all lawsuits, claims, causes or action, actions, liabilities, demands, damages, judgments, settlements, disability, losses, expenses (including attorney’s fees and disbursements of counsel) and costs of any nature that any of the Indemnified Parties may at any time suffer, sustain or incur arising out of, based upon or in any way connected with the Grantee’s operations, the exercise of the Franchise, the breach of Grantee of its obligations under this Franchise and/or the activities of Grantee, it subcontractors, employees and agents hereunder. Grantee shall be solely responsible for and shall indemnify, defend and hold the Indemnified Parties harmless from and against any and all matters relative to payment of Grantee’s employees, including compliance with Social Security and withholdings. Grantee shall not be required to provide indemnification to City for programming cablecast over the PEG access Channels administered by City. Grantee shall not be required to indemnify City for negligence or misconduct on the part of City or its officials, boards, commissions, agents, or employees.

b. The indemnification obligations of Grantee set forth in this Franchise are not limited in any way by the amount or type of damages or compensation payable by or for Grantee under Workers’ Compensation, disability or other employee benefit acts, acceptance of insurance certificates required under this Franchise or the terms, applicability or limitations of any insurance held by Grantee.

c. City does not, and shall not, waive any rights against Grantee which it may have by reason of the indemnification provided for in this Franchise, because of the acceptance by City, or the deposit with City by Grantee, of any of the insurance policies described in this Franchise.

d. The indemnification of City by Grantee provided for in this Franchise shall apply to all damages and claims for damages of any kind suffered by reason of any of the Grantee’s operations referred to in this Franchise, regardless of whether or not such insurance policies shall have been determined to be applicable to any such damages or claims for damages.

5. Grantee’s Insurance.

Grantee shall not commence any Cable System reconstruction work or permit any subcontractor to commence work until all insurance required under this Franchise has been obtained. Said insurance shall be maintained in full force and effect until the expiration of this Franchise.

a. In order for City to assert its rights to be indemnified, defended, and held harmless, City must, with respect to each claim:

i. Promptly notify Grantee in writing of any claim or legal proceeding which gives rise to such right;

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ii. Afford Grantee the opportunity to participate in and fully control any compromise, settlement or other resolution or disposition of any claim or proceeding; and

iii. Fully cooperate with reasonable requests of Grantee, at Grantee’s expense, in its participation in, and control, compromise, settlement or resolution or other disposition of such claim or proceeding subject to subparagraph (ii) above.

SECTION 9.

SALE, ABANDONMENT, TRANSFER AND REVOCATION OF FRANCHISE

1. City’s Right to Revoke.

a. In addition to all other rights which City has pursuant to law or equity, City reserves the right to commence proceedings to revoke, terminate or cancel this Franchise, and all rights and privileges pertaining thereto, if it is determined by City that after notice and an opportunity to cure as reordered herein;

i. Grantee has violated material provisions(s) of this Franchise and has not cured; or

ii. Grantee has attempted to evade any of the provisions of the Franchise; or

iii. Grantee has practiced fraud or deceit upon City.

b. City may revoke this Franchise without the hearing otherwise required herein if Grantee is adjudged a bankrupt.

2. Procedures for Revocation.

a. City shall provide Grantee with written notice of a Franchise violation consistent with Section 8 of this Franchise and shall allow Grantee thirty (30) days subsequent to receipt of the notice in which to correct the violation or to provide adequate assurance of performance in compliance with the Franchise.

b. Should City determine to proceed with a revocation proceeding, Grantee shall be provided the right to a public hearing affording due process before the City Council prior to the effective date of revocation. City shall provide Grantee with written notice of its decision together with written findings of fact supplementing said decision.

c. Only after the public hearing and upon written notice of the determination by City to revoke the Franchise may Grantee appeal said decision with an appropriate state or federal court or agency.

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d. During the appeal period, the Franchise shall remain in full force and effect unless the term thereof sooner expires or unless continuation of the Franchise would endanger the health, safety and welfare of any Person or the public.

3. Abandonment of Service. Grantee may not abandon the System or any portion thereof without having first given three (3) months written notice to City. Grantee may not abandon the System or any portion thereof without compensating City for damages resulting from the abandonment, including all costs incident to removal of the System.

4. Removal After Abandonment, Termination or Forfeiture.

a. In the event of termination or forfeiture of the Franchise or abandonment of the System, City shall have the right to require Grantee to remove all or any portion of the System from all Rights-of-Way and public property within City.

b. If Grantee has failed to commence removal of System, or such part thereof as was designated by City, within thirty (30) days after written notice of City’s demand for removal is given, or if Grantee has failed to complete such removal within twelve (12) months after written notice of City’s demand for removal is given, City shall have the right to apply funds secured by the letter of credit and performance bond toward removal and/or declare all right, title, and interest to the System to be in City with all rights of ownership including, but not limited to, the right to operate the System or transfer the System to another for operation by it.

5. Sale or Transfer of Franchise.

a. No sale or transfer of the Franchise, or sale, transfer, or fundamental corporate change of or in Grantee, including, but not limited to, a fundamental corporate change in Grantee’s parent corporation or any entity having a controlling interest in Grantee, the sale of a controlling interest in the Grantee’s assets, a merger including the merger of a subsidiary and parent entity, consolidation, or the creation of a subsidiary or affiliate entity, shall take place until a written request has been filed with City requesting approval of the sale, transfer, or corporate change and such approval has been granted or deemed granted; provided, however, that said approval shall not be required where Grantee grants a security interest in its Franchise and/or assets to secure an indebtedness.

b. Any sale, transfer, exchange or assignment of stock in Grantee, or Grantee’s parent corporation or any other entity having a controlling interest in Grantee, so as to create a new controlling interest therein, shall be subject to the requirements of this Section 9.5. The term “controlling interest” as used herein is not limited to majority stock ownership, but includes actual working control in whatever manner exercised. In any event, as used herein, a new “controlling interest” shall be deemed to be created upon the acquisition through any transaction or group of transactions of a legal or beneficial interest of fifteen percent (15%) or more by one (1) Person. Acquisition by one (1) Person of an interest of five percent (5%) or more in a single transaction shall require notice to City.

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c. The Grantee shall file, in addition to all documents, forms and information required to be filed by Applicable Laws, the following:

i. All contracts, agreements or other documents that constitute the proposed transaction and all exhibits, attachments, or other documents referred to therein which are necessary in order to understand the terms thereof; and

ii. A list detailing all documents filed with any state or federal agency related to the transaction including, but not limited to the FCC, the FTC, the FEC, the SEC or applicable state departments and agencies. Upon request, Grantee shall provide City with a complete copy of any such document; and

iii. Any other documents or information related to the transaction as may be specifically requested by the City.

d. City shall have such time as is permitted by Applicable Laws in which to review a transfer request.

e. The Grantee shall reimburse City for all the legal, administrative, and consulting costs and fees associated with City’s review of any request to transfer. Nothing herein shall prevent Grantee from negotiating partial or complete payment of such costs and fees by the transferee. Grantee may not itemize any such reimbursement on Subscriber bills, but may recover such expenses in its Subscriber rates.

f. In no event shall a sale, transfer, corporate change, or assignment of ownership or control pursuant to subparagraph (a) or (b) of this section be approved without the transferee becoming a signatory to this Franchise and assuming all rights and obligations thereunder, and assuming all other rights and obligations of the transferor to the City including, but not limited to, any adequate guarantees or other security instruments required by the City.

g. In the event of any proposed sale, transfer, corporate change, or assignment pursuant to subparagraph (a) or (b) of this section, City shall have the right to purchase the System.

h. City shall be deemed to have waived its right to purchase the System pursuant to this section only in the following circumstances:

i. If City does not indicate to Grantee in writing, within sixty (60) days of receipt of written notice of a proposed sale, transfer, corporate change, or assignment as contemplated in Section 9.5 (g) above, its intention to exercise its right of purchase; or

ii. It approves the assignment or sale of the Franchise as provided within this section.

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i. No Franchise may be transferred if City determines Grantee is in noncompliance of the Franchise unless an acceptable compliance program has been approved by City. The approval of any transfer of ownership pursuant to this section shall not be deemed to waive any rights of City to subsequently enforce noncompliance issues relating to this Franchise even if such issues predated the approval, whether known or unknown to City.

SECTION 10.

PROTECTION OF INDIVIDUAL RIGHTS

1. Discriminatory Practices Prohibited. Grantee shall not deny Service, deny access, or otherwise discriminate against Subscribers or general citizens on the basis of race, color, religion, national origin, sex, age, status as to public assistance, affectional preference, or disability. Grantee shall comply at all times with all other Applicable Laws, and all executive and administrative orders relating to nondiscrimination.

2. Subscriber Privacy.

a. No signals may be transmitted from a Subscriber terminal for purposes of monitoring individual viewing patterns or practices without the express written permission of the Subscriber. Such written permission shall be for a limited period of time not to exceed one (1) year which may be renewed at the option of the Subscriber. No penalty shall be invoked for a Subscriber’s failure to provide or renew such authorization. The authorization shall be revocable at any time by the Subscriber without penalty of any kind whatsoever. Such permission shall be required for each type or classification of activity planned for the purpose of monitoring individual viewing patterns or practices.

b. No lists of the names and addresses of Subscribers or any lists that identify the viewing habits of Subscribers shall be sold or otherwise made available to any party other than to Grantee or its agents for Grantee’s service business use or to City for the purpose of Franchise administration, and also to the Subscriber subject of that information, unless Grantee has received specific written authorization from the Subscriber to make such data available. Such written permission shall be for a limited period of time not to exceed one (1) year which may be renewed at the option of the Subscriber. No penalty shall be invoked for a Subscriber’s failure to provide or renew such authorization. The authorization shall be revocable at any time by the Subscriber without penalty of any kind whatsoever.

c. Written permission from the Subscriber shall not be required for the conducting of system wide or individually addressed electronic sweeps for the purpose of verifying System integrity or monitoring for the purpose of billing. Confidentiality of such information shall be subject to the provision set forth in subparagraph (b) of this section.

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d. Subscribers and non-Subscribers may request to be put on a list to prevent solicitations from Grantee.

e. Grantee shall not include any mandatory arbitration provisions of any kind in any Subscriber contracts.

SECTION 11.

UNAUTHORIZED CONNECTIONS AND MODIFICATIONS

1. Unauthorized Connections or Modifications Prohibited. It shall be unlawful for any firm, Person, group, company, corporation, or governmental body or agency, without the express consent of the Grantee, to make or possess, or assist anybody in making or possessing, any unauthorized connection, extension, or division, whether physically, acoustically, inductively, electronically or otherwise, with or to any segment of the System or receive Services of the System without Grantee’s authorization.

2. Removal or Destruction Prohibited. It shall be unlawful for any firm, Person, group, company, or corporation to willfully interfere, tamper, remove, obstruct, or damage, or assist thereof, any part or segment of the System for any purpose whatsoever,

3. Penalty. Any firm Person, group, company, or corporation found guilty of violating this section may be fined not less than Twenty and No/100 Dollars ($20.00) and the costs of the action nor more than Five Hundred and No/100 Dollars ($500.00) and the costs of the action for each and every subsequent offense. Each continuing day of the violation shall be considered a separate occurrence.

SECTION 12.

MISCELLANEOUS PROVISIONS

1. Franchise Renewal. Any renewal of this Franchise shall be performed in accordance with Applicable Laws. The term of any renewed Franchise shall be limited to a period not to exceed fifteen (15) years.

2. Work Performed by Others. All applicable obligations of this Franchise shall apply to any subcontractor or others performing any work or services pursuant to the provisions of this Franchise, however, in no event shall any such subcontractor or other performing work obtain any rights to maintain and operate a System or provide Cable Service. Grantee shall provide notice to City of the name(s) and address(es) of any entity, other than Grantee, which performs substantial services pursuant to this Franchise.

3. Amendment of Franchise Ordinance. Grantee and City may agree, from time to time, to amend this Franchise. Such written amendments may be made subsequent to a review session pursuant to Section 7 or at any other time if City and Grantee agree that such an amendment will be in the public interest or if such an amendment is required due to changes in federal, state or local laws; provided, however, nothing herein shall restrict City’s exercise of its police powers.

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4. Compliance with Federal, State and Local Laws.

a. If any federal or state law or regulation shall require or permit City or Grantee to perform any service or act or shall prohibit City or Grantee from performing any service or act which may be in conflict with the terms of this Franchise, then as soon as possible following knowledge thereof, either party shall notify the other of the point in conflict believed to exist between such law or regulation. Grantee and City shall conform to state and federal laws and regulations and rules regarding cable communications as they become effective.

b. If any term, condition or provision of this Franchise or the application thereof to any Person or circumstance shall, to any extent, be held to be invalid or unenforceable, the remainder hereof and the application of such term, condition or provision to Persons or circumstances other than those as to whom it shall be held invalid or unenforceable shall not be affected thereby, and this Franchise and all the terms, provisions and conditions hereof shall, in all other respects, continue to be effective and complied with provided the loss of the invalid or unenforceable clause does not substantially alter the agreement between the parties. In the event such law, rule or regulation is subsequently repealed, rescinded, amended or otherwise changed so that the provision which had been held invalid or modified is no longer in conflict with the law, rules and regulations then in effect, said provision shall thereupon return to full force and effect and shall thereafter be binding on Grantee and City.

5. Nonenforcement by City. Grantee shall not be relieved of its obligations to comply with any of the provisions of this Franchise by reason of any failure or delay of City to enforce prompt compliance. City may only waive its rights hereunder by expressly so stating in writing. Any such written waiver by City of a breach or violation of any provision of this Franchise shall not operate as or be construed to be a waiver of any subsequent breach or violation.

6. Rights Cumulative. All rights and remedies given to City by this Franchise or retained by City herein shall be in addition to and cumulative with any and all other rights and remedies, existing or implied, now or hereafter available to City, at law or in equity, and such rights and remedies shall not be exclusive, but each and every right and remedy specifically given by this Franchise or otherwise existing or given may be exercised from time to time and as often and in such order as may be deemed expedient by City and the exercise of one or more rights or remedies shall not be deemed a waiver of the right to exercise at the same time or thereafter any other right or remedy.

7. Grantee Acknowledgment of Validity of Franchise. Grantee acknowledges that it has had an opportunity to review the terms and conditions of this Franchise and that under current law Grantee believes that said terms and conditions are not unreasonable or arbitrary, and that Grantee believes City has the power to make the terms and conditions contained in this Franchise.

8. Force Majeure. Neither party shall be liable for any failure of performance hereunder due to causes beyond its reasonable control including but not limited to; acts of God, fire, explosion, vandalism, storm or other similar catastrophes; national emergencies; insurrection; riots or wars.

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SECTION 13.

PUBLICATION EFFECTIVE DATE; ACCEPTANCE AND EXHIBITS

1. Publication, Effective Date. This Franchise shall be published in accordance with applicable local and state law. The effective date of this Franchise shall be the date of acceptance by Grantee in accordance with the provisions of Section 13.2.

2. Acceptance.

a. Grantee shall accept this Franchise within thirty (30) days of its enactment by the City Council, unless the tune for acceptance is extended by City. Such acceptance by the Grantee shall be deemed the grant of this Franchise for all purposes; provided, however, this Franchise shall not be effective until all City ordinance adoption procedures are complied with and all applicable timelines have run for the adoption of a City ordinance. In the event acceptance does not take place, or should all ordinance adoption procedures and timelines not be completed, this Franchise and any and all rights granted hereunder to Grantee shall be null and void.

b. Upon acceptance of this Franchise, Grantee and City shall be bound by all the terms and conditions contained herein.

c. Grantee shall accept this Franchise in the following manner:

i. This Franchise will be properly executed and acknowledged by Grantee and delivered to City.

ii. With its acceptance, Grantee shall also deliver any insurance certificates as required herein that have not previously been delivered.

Passed and adopted by the City Council this 6^th day of November, 2007.

ATTEST:		CITY OF MONTGOMERY, ALABAMA
By:	/s/ Brenda Sue Blalock	By:	/s/ Bobby Bright
Its:	City Clerk	Its:	May or 11/7/07

ACCEPTED: This Franchise is accepted, and we agree to be bound by its terms and conditions.

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	KNOLOGY OF MONTGOMERY, INC.
Date: 16th, November 2007	By:	Illegible
	Its:	SVP Operations

SWORN TO BEFORE ME this

16^th day of November, 2007.

Cynthia S. Alsabrook

NOTARY PUBLIC

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EXHIBIT A

OWNERSHIP

A-1

EXHIBIT B

GRANTEE COMMITMENT TO

PEG ACCESS FACILITIES AND EQUIPMENT

1. PUBLIC, EDUCATIONAL AND GOVERNMENT (PEG) ACCESS CHANNELS Grantee shall make two (2) video Channels available exclusively for PEG use (“PEG Channels”). Initially the two (2) Channels shall be provided by Grantee for shared PEG access as designated in City’s sole discretion. At least one (1) of the two (2) shared PEG Channels will be located at Channel 96 throughout the term of the Franchise. Grantee shall also make available one (1) additional Channel for PEG use (for a total of three (3) PEG Channels) upon ninety (90) days advance written notice from the City. One (1) of the three (3) Channels shall, upon request of the City, be scrambled for City’s exclusive internal use at no cost to the City. Grantee shall be responsible for all costs associated with said scrambled Channel. The PEG Channels shall be dedicated for PEG use for the term of the Franchise, provided that Grantee may upon written request to City, utilize any PEG Channels for commercial or non-commercial programming when they are not scheduled for PEG use. City and Grantee shall establish rules and procedures for such scheduling in accordance with Section 611 of the Cable Act (47 U.S.C. § 531).

2. PEG OPERATIONS. City may, in its sole discretion, negotiate agreements with neighboring jurisdictions served by the same Cable System, educational institutions or others to share the expenses of supporting the PEG Channels.

3. TITLE TO PEG EQUIPMENT. City shall retain title to any PEG equipment currently in use for PEG purposes which was purchased by Grantee during the preceding Franchise term.

4. RELOCATION OF PEG CHANNELS. Grantee shall not relocate any PEG access Channel to a different Channel number unless specifically required by Applicable Laws or unless otherwise agreed to in writing by City. Grantee shall provide City and all Subscribers with at least sixty (60) days prior written notice of any legally required relocation. In the event any PEG access Channel(s) is relocated, Grantee shall reimburse City up to Fifteen Thousand and No/100 Dollars ($15,000.00) for all costs associated with such move including change of letterhead, promotion of new Channel location and promotional spots for the new location and inform Subscribers of the new Channel location through bill inserts and newspaper advertisements.

5. PROMOTION OF PEG ACCESS. To the extent permitted by Grantee’s billing process, Grantee shall allow the City to place bill stuffers in Grantee’s Subscriber statements at a cost to the City not to exceed Grantee’s cost, no less frequently than once per year upon the written request of the City and at such times that the placement of such materials would not materially and adversely effect Grantee’s cost for the production and mailing of such statements. The City agrees to pay Grantee in advance for the actual cost of such bill stuffers. Grantee shall also make available PEG access information provided by City in Subscriber packets at the time of Installation and at the counter in the System’s business office serving the Service Area. Grantee shall also distribute, at no charge to City, through advertising insertion equipment, twenty-five (25) weekly promotional and

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awareness commercial spots, on a “run of schedule” basis, produced at the City’s cost and submitted by the City in a format compatible with such advertising insertion equipment once Grantee has acquired and activated such capability. Grantee shall also include a listing of the known programming to be cablecast on PEG access Channels in or on any electronic program guide of Services for the Cable System.

6. PEG ACCESS SUPPORT. Grantee shall remit to the City a per Subscriber fee of twenty-five cents ($0.25) per month to fund capital expenditures related solely to public, educational and governmental access (hereinafter “Access Fee”). The Access Fee may be used in City’s sole discretion for PEG capital expenditures. In year five (5) of the term of this Franchise Grantee may require that the City undertake a review of the Access Fee to determine whether such fee should be reduced or eliminated. If so requested the City shall schedule a public hearing to consider the matter and Grantee shall have an opportunity to be heard at such hearing. The City Council shall have sole discretion to determine whether any change to the Access Fee is appropriate. In no event may the Access Fee be increased to more than twenty-five cents ($0.25). Any and all payments by Grantee to City in support of PEG access programming including the Access Fee shall not be deemed “Franchise Fees” within the meaning of Section 622 of the Cable Act (47 U.S.C. Section 542).

The Grantee may, on an annual basis, upon 60 days written request to City, seek verification that the Access Fee has been used for capital purchases related to PEG access. The City shall be permitted to hold all or a portion of the Access Fee from year to year as a designated fund to permit the City to make large capital expenditures, if necessary. Moreover, if City chooses to borrow from itself or a financial institution revenue for large PEG access capital purchases or capital expenditures, City shall be permitted to make periodic repayments using the Access Fee. If Grantee believes City has failed to demonstrate compliance with the expenditure limitations of the Access Fee, Grantee shall provide City with written notice of its objections. The parties shall thereafter meet at the reasonable request of either party to address the objections identified by Grantee. If Grantee reasonably concludes that City has expended Access Fees in a manner inconsistent with the limitations imposed herein, the Grantee may, after thirty (30) days written notice to the City, advise the City of its intention to terminate payment of the Access Fee. If the City disputes Grantee’s allegation the City may commence a franchise violation proceeding against Grantee pursuant to the terms of this Franchise . In the event the City commences a franchise violation proceeding against Grantee, the Grantee shall continue to collect the Access Fee and hold the disputed monies in a separate interest bearing account until a final order is issued and any appeals exhausted. Any monies so held shall be distributed in accordance with any final order (after exhaustion of any and all appeals) or as City and Grantee might agree.

7. DIGITIZATION OF ANALOG CHANNELS. Grantee may, at its own discretion, move analog PEG Channels to digital format, if and when all Subscribers who wish to receive the Channels already have the necessary equipment to view programs in digital format. Grantee shall enter into good-faith negotiations with the City over the frequency allocation, Channel assignment and menu placement of new PEG digital television Channels prior to making such assignments.

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8. DROPS TO DESIGNATED BUILDINGS.

a. Grantee shall provide free of charge throughout the term of this Franchise, Installation of one (1) network Drop, one (1) cable outlet, and one (1) Converter, if necessary, and the highest level of Cable Service offered by Grantee, excluding pay-per-view, pay-per-channel (premium) programming, high-speed data services or newly created non-video Cable Services, without charge to the institutions identified on Exhibit C attached hereto and made a part hereof, and such other public institutions subsequently designated by City as determined in City’s sole discretion. This requirement shall not include any digital tier of Services Grantee may offer unless and until such time as Grantee’s digital programming reduces the amount of spectrum available for analog programming to less than approximately sixty (60) Channels of analog programming. Grantee shall be responsible for the costs of extension to subsequently designated institutions for the first five hundred (500) feet as measured from Grantee’s nearest active plant. The institution shall pay the net additional Drop or extension costs beyond the five hundred (500) feet.

b. In the event Grantee provides cable modem service in the City and passes a location not already receiving cable and cable modem service, Grantee shall provide the public schools (K-12) and the library (and its branches) with free cable modem, free Installation and free monthly cable modem/high-speed data service throughout the term of this Franchise.

c. Additional Subscriber network Drops and/or outlets in any of the locations identified on Exhibit C will be installed by Grantee at the lowest actual cost of Grantee’s time and material. Alternatively, said institutions may add outlets at their own expense, as long as such Installation meets Grantee’s standards and approval which shall not be unreasonably withheld. Grantee shall have three (3) months from the date of City designation of additional accredited schools or public institutions or relocations to complete construction of the Drop and the outlet unless weather or other conditions beyond the control of Grantee requires more time.

9. LIVE BROADCAST FACILITIES AND TWO-WAY NETWORK.

a. Grantee shall, at no cost to City unless otherwise specified herein, provide a return connection to facilitate the exchange of programming, including live cablecasting of programming from those locations identified in Exhibit D, attached hereto and made a part hereof.

b. The City and Grantee agree that Grantee shall, on or before April 1, 2008, complete all construction work to facilitate a fiber path for live cablecasting from the City Hall to Grantee’s headend.

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EXHIBIT C

SERVICE TO PUBLIC AND PRIVATE BUILDINGS

1. Woodcrest Park Community Center (off Thornwood Dr)

2. Intermodal Facility (Molton Street)

3. Fire Department Training Facility (North Court Street)

4. Gateway Park Lodge

** Other Buildings owned by the City of Montgomery that are newly constructed or newly purchased subsequent to the effective date of the franchise that are within 300 feet of the Knology cable system

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EXHIBIT D

ADDITIONAL TWO-WAY CONNECTIONS TO PUBLIC INSTITUTIONS

1. From Cramton Bowl to Troy University (Studio facility)

2. From Lagoon Park to established City owned fiber network

3. From Gateway Park to established City owned fiber network

4. From Museum of Fine Arts to established City owned fiber network

5. From City Fire Stations to established City owned fiber network

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EXHIBIT E

DESCRIPTION OF SYSTEM

1. The Cable System shall be designed, constructed, routinely inspected, and maintained to guaranty the Cable System meets or exceeds the requirements of the most current additions of the National Electrical Code (NFPA 70) and the National Electrical Safety Code (ANSI C2). In all matters requiring interpretation of either of these codes, the City’s interpretation shall control over all other sources and interpretations.

2. General Requirements. Grantee shall use equipment used in high-quality, reliable, modern Cable Systems of similar design.

3. General Description. The Cable System shall provide Subscribers with a technically advanced and reliable Cable System. The System shall operate with 750 MHz of bandwidth, capable of delivering a minimum of seventy-five (75) Channels of programming. The design will provide the benefits of proven seventy-five (75) Channel electronics while positioning the System for expansion of bandwidth and Channel capacity as technology and future services develop.

4. Technical Specifications. The System shall meet or exceed FCC requirements. In no event shall the System fall below the following standards:

a. The System shall be capable of meeting the following distortion parameters:

1.	Carrier to RMS Noise	48 dB
2.	Carrier to Second Order	53 dB
3.	Carrier to Cross Modulation	51 dB
4.	Carrier to Composite Triple Beat	53 dB

b. The frequency response of a single Channel as measured across any 6 MHz analog Channel shall not exceed +/- 2 dB.

c. The frequency response of the entire passband shall not exceed N/10+ 2 dB for the entire System where N is the number of amplifiers in cascade.

d. The System shall be designed such that at a minimum all technical specifications of this Franchise Agreement are met.

e. The System shall be designed such that no noticeable degradation in signal quality will appear at the Subscriber terminal.

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EXHIBIT F

FRANCHISE FEE PAYMENT WORKSHEET

TRADE SECRET – CONFIDENTIAL

	Month/Year	Month/Year	Month/Year	Total
Basic Cable Service
Installation Charge
Bulk Revenue
Expanded Basic Service
Pay Service
Pay-per-view
Guide Revenue
Franchise Fee Revenue
Advertising Revenue
Home Shopping Revenue
Digital Services
Inside Wiring
Other Revenue
Equipment Rental
Processing Fees
Bad Debt
REVENUE
Fee Calculated

Fee Factor: 5%

F-1

EX-10.29

Exhibit 10.29

Contract # 16194

JOINT USE AGREEMENT

This Agreement, dated as of the 12th day of April , 2007, (Effective Date) is entered into by and between BLACK HILLS POWER Inc., a South Dakota corporation, whose post office address is P. O. Box 1400, Rapid City, South Dakota 57709-1400, hereinafter referred to as Company and Prairie Wave Black Hills, LLC, a SD Corporation, whose post office address is P.O. Box 89213, Sioux Falls, SD 57109-9213, hereinafter referred to as Licensee.

1. DEFINITIONS AND RECITALS.

1.1 Definitions. The following capitalized words and phrases when used in this Agreement shall have the respective meanings as follows:

“Agreement” is this Joint Use Agreement.

“Attachment(s)” is the erection, installation, maintenance and attachment by Licensee of Licensee’s Facilities to Company’s Poles pursuant to this Agreement.

“Cable Operator” shall have the meaning given such term in 47 U.S.C. § 522(5)

“Cable Service” shall have the meaning given such term in 47 U.S.C. § 522(6).

“Company” is Black Hills Power, Inc., an electric utility and a party to this Agreement.

“Facilities” are Licensee’s cables, wires, all communication attachments, apparatus, appliances, antennas, and related equipment for Attachment to Company’s Poles.

“Fee Schedule” is the schedule of fee, charges, and rents attached hereto as Exhibit E, as may be amended from time to time by Company upon written notice to Licensee.

“Licensee” is Prairie Wave Black Hills, LLC, a party to this Agreement.

“Other Attachers” include any telephone, communications or cable utility or other party, excluding Company and Licensee, that has a statutory or contractual right of attachment to Company’s poles or use of Company’s trenches.

“Overlashing” refers to the practice by which a new cable or wire is wrapped around an existing cable or wire, rather than being strung and bolted separately.

“Poles” are the pole or poles belonging to Company to which Licensee has made or wishes to make Attachments.

“Telecommunications Carrier” shall have the meaning given such term in 47 U.S.C. § 153(44).

“Telecommunications Service” shall have the meaning given such term in 47 U.S.C. § 153(46).

1.2 Recitals. Licensee is a Cable Operator or a Telecommunications Carrier. Licensee will need to erect and maintain Facilities to make Attachment to Company’s Poles. The purpose of this Agreement is to set forth all the terms and conditions under which Company agrees to the Attachment, pursuant to and consistent with 47 U.S.C. § 224 et seq. as amended by 47 U.S.C. § 703, and the rules and regulations promulgated thereunder, to the extent applicable.

2. USE AND PURPOSE. The grant of a license and permit under the terms of this Agreement are for the purpose of enabling the Licensee to provide lawful communications services.

3. PERMIT. Company hereby permits Licensee to make Attachments to Company’s Poles for the purpose of providing lawful communications services, subject to the following terms and conditions set forth in this Agreement. The permit granted hereunder is and shall be deemed to be a revocable, nonexclusive license. Except as otherwise permitted herein, before making Attachments to any Poles, Licensee shall apply and receive a permit from Company. The permit requirement will be waived for new service drops added to Poles on which Licensee already has an Attachment. A sample of the application and permit are attached as Exhibit A and Exhibit B respectively.

3.1 Licensee shall make application to Company in the form of Exhibit A (each, an “Application”). Along with an Application, Licensee shall furnish Company with the necessary maps, specifically indicating the Poles to be attached, the span lengths between poles, the number and character of Attachments to be placed on such Poles, the proposed Attachment height, the proposed Attachment mid-span height, and any other information required by Exhibit A.

3.2 Licensee shall furnish Company pole strength calculations with each Application. Pole strength calculations will only be required for poles: (a) where BHP general rules for meeting NESC standards under heavy loading conditions aren’t used; or (b) poles that are class 3, class 4 or class 5; or (c) poles that have conductor spans greater than 275 feet; (d) or poles that have 3 or more existing attachments. Pole calculations may be performed on a representative basis if desired.

3.3 Company shall notify Licensee, in the form of Exhibit B (each, a “Permit), at the time of Application, if any of the requested space on Pole is reserved for Company’s use pursuant to a bona fide development plan that reasonably and specifically projects a need for such facilities for the provision of Company’s core utility services.

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3.4 Company shall notify Licensee, in the form of Exhibit B, if Poles for which Application is being made are inadequate to support such additional Facilities. The Permit shall describe the make-ready changes required to accommodate Licensee’s Attachments.

3.5 The Notice of Completion by Licensee, attached as Exhibit C hereto, shall be signed by a Licensee representative. The Notice of Completion shall be returned to Company within thirty (30) days after installation has been completed. Company reserves the right to remove any Attachments that do not have a Notice of Completion by Licensee.

3.6 Company may deny Licensee access to its Poles where there is insufficient capacity and for reasons of safety, reliability and generally applicable engineering reasons.

3.7 No Application is required for Overlashing. However, Licensee must provide Company a pole strength calculation within sixty (60) days of Overlashing and is responsible for any make-ready costs attributed to its Overlashing.

4. MAINTENANCE AND REMOVAL. Licensee shall, at its own expense, make and maintain Attachments in a safe condition and in a manner suitable to Company that is consistent with the safe use of Poles by Company or Other Attachers. Said use shall not interfere with the working use of existing facilities.

4.1 Whenever it is necessary to replace or relocate a jointly-used Pole, Licensee shall, upon thirty (30) days advance written notice from Company, relocate, replace, or renew its Attachments, and transfer them to substituted Poles, or perform any other work in connection with Facilities that may be required by Company, unless upon such notice, Licensee requests that Company perform the work on Licensee’s behalf at the cost listed in the Fee Schedule (which may be amended from time to time without prior notice) and Company agrees to do such work. Should Licensee fail to transfer its Attachments to the new or relocated joint pole at the time specified, or fail to request Company to perform such work, Company may elect to do such work, and will do so under the same standards that Licensee is held to. Licensee shall be responsible for all costs incurred by Company associated with transfer of Licensee’s Attachments and removal of abandoned pole per the cost listed in the Fee Schedule. In the event the Licensee fails to transfer its Attachments and Company performs such transfer, Company shall not be liable for any loss or damage to Licensee’s Facilities, service interruptions or business losses which may result, except for losses resulting from the gross negligence or intentional misconduct of Company or its employees, agents, contractors, or subcontractors.

4.2 In cases of emergency, Company may arrange to relocate, replace or renew the Facilities, transfer them to substituted Poles or perform any other work in

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connection with Facilities that may be required in the maintenance, replacement, removal or relocation of Poles. The Licensee shall, on demand, reimburse Company for the expense thereby incurred.

4.3 If a Pole is being removed pursuant to the request of a private property owner, where Company and Licensee’s Facilities are legally located on such private property, Company shall not remove the Pole until Licensee has removed Attachment.

5. POLE SUPPORT. In the event that any Poles of Company to which Licensee desires to make Attachments are inadequate to support such additional Facilities in accordance with Company specifications or where Licensee’s Attachments can be accommodated only by rearranging Company’s Facilities, Company will notify Licensee in writing, in the form of Exhibit B, of the make-ready changes necessary to accommodate Licensee’s Attachments. If Licensee still desires to make the Attachment and confirms the same in writing, in the form of Exhibit B, Company will make such make-ready changes or replace such inadequate Poles and Licensee will, on demand, reimburse Company for the entire nonbetterment portion of the cost and expense thereof. The costs and expenses shall include but not be limited to the increased cost of larger Poles, sacrificed life of Poles removed, cost of removal less any salvage recovery and the expense of transferring Company’s and, if applicable, Other Attachers’ Facilities from the old to the new Poles. In the event any Other Attacher refuses to accommodate Licensee’s Attachments upon reasonable notice from Licensee, Company shall cause such Other Attachers to accommodate Licensee’s Attachments when necessary.

5.1 If any Poles to which Licensee has made Attachments are inadequate to support additional Company facilities in accordance with the aforementioned specifications of this Agreement, and such additional Company facilities are required by Company pursuant to a bona fide development plan, as identified in the Permit, Company shall notify Licensee to this effect. Upon such notice, Licensee shall remove its Facilities from such Poles within thirty (30) days therefrom or shall indicate its desire to continue to maintain its Facilities on such Poles, in which event Company will make such changes or replace such inadequate Poles with suitable Poles and Licensee will, on demand, reimburse Company for the entire nonbetterment portion of the cost and expense thereof, including the increased cost of larger Poles, sacrificed life of Poles removed, cost of removal less any salvage recovery and the expense of transferring Company’s and, if applicable, Other Attachers’ Facilities from the old to the new Poles.

5.2 Any unbalanced loading of Company’s Poles caused by the placement of the Licensee’s Facilities shall be properly guyed and anchored by Licensee. Any strengthening of Poles (guying) required in accordance with the aforementioned specifications to accommodate the Attachments of Licensee shall be at the expense of Licensee. Licensee may not place new anchor Attachments on Company anchors without prior written approval from Company.

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5.3 Upon completion of all changes, the Licensee shall have the right to use the Poles jointly and to make Attachments in accordance with the terms of the Permit and of this Agreement. Licensee shall, at its own expense, make Attachments in such manner so as not to interfere with the service of Company. All Poles jointly used under this Agreement shall remain the property of Company, and any payments made by the Licensee for changes in Pole lines under this Agreement shall not entitle the Licensee to ownership of any of said Poles.

6. CODE COMPLIANCE; SAFETY. No Attachment shall be made except as may be lawfully made. Licensee’s Facilities and Attachments shall be erected and maintained in accordance with the requirements and specifications of the most recent National Electrical Safety Code, and any amendments or revisions of said Code, in accordance with applicable grandfathering provisions. Attachments must be in compliance with any generally applicable rules or orders now in effect or that hereafter may be issued by any other authority having jurisdiction and with Company construction standards provided with the applicable Permit.

6.1 Licensee shall further comply with all applicable federal requirements that may be imposed by the Federal Energy Regulatory Commission and Occupational Safety and Health Administration as well as with any state and local requirements affecting pole Attachments.

6.2 Licensee shall comply with all applicable federal, state, and local laws and regulations and ordinances applicable to hazardous materials as defined in 40 CFR 260 et seq. Licensee shall not use any premises or easement on which any Pole is located for treatment, storage, use or disposal of hazardous materials. Licensee shall be responsible for any expense for compliance with the requirements of any federal, state, or local laws, regulations or ordinances for damage caused directly or indirectly, by the activities of the Licensee or Licensee’s agents, employees, or contractors.

6.3 In the event Company should change or adopt a rule(s) or practice(s) policy for the joint use of Poles by Licensee, Company shall give Licensee written notice of such change or adoption in the manner set forth in Section 27 of this Agreement, and Licensee agrees to make such changes or alterations as set forth in the policy, on a going-forward basis.

7. ACKNOWLEDGEMENT. Licensee hereby acknowledges and agrees that Company does not warrant the condition of the Poles, facilities and equipment on such Poles, or the premises surrounding such Poles as to its safety whatsoever, and Licensee hereby assumes all risk of any damage, injury or loss of any nature whatsoever caused by or in connection with the use of said Poles, facilities and equipment on such Poles, or the premises surrounding said Poles and Licensee agrees to indemnify, defend, protect and hold Company harmless in connection with Section 16 of this Agreement. It is further understood and agreed by and between the parties that in the performance of making Attachments under this Agreement, Licensee, its agents, employees, contractors and subcontractors will necessarily be required to work near, adjacent to, and in the vicinity of electrically energized lines, transformers

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or other equipment of Company, and it is the intention that energy therein will not be interrupted during the continuance of this Agreement, except in an emergency endangering life, grave personal injury or property. Licensee is fully and solely responsible for seeing that its employees, agents, contractors and subcontractors have the necessary skill, knowledge, training and experience in order to protect themselves, their fellow employees, employees of Company, and the general public, from harm or injury while making the Attachments permitted pursuant to this Agreement. In the event Company de-energizes any equipment or line at Licensee’s request, Licensee shall reimburse Company in full for the actual, direct, and indirect costs and expenses incurred in order to comply with Licensee’s request for de-energization of any equipment or line. Licensee warrants that it is apprised of, conscious of, and understands the imminent dangers inherent in the work necessary to make the Attachments on Company’s Poles by Licensee’s personnel, employees, agents, contractors or subcontractors, and accepts it as Licensee’s duty and sole responsibility to notify and inform its personnel, employees, contractors and subcontractors of such dangers, and to keep them informed regarding the same.

8. ABANDONMENT OF JOINT USE POLES. If Company desires at any time to abandon any joint use Pole, it shall give Licensee notice in writing to that effect. Licensee shall be responsible for removal of its Attachments from such pole(s) within a sixty (60) day time period. If Licensee does not remove its Attachment within said time period, Licensee shall be responsible for all costs incurred by Company associated with removal of Licensee’s Attachments and removal of abandoned pole per the cost listed in the Fee Schedule.

8.1 Licensee may at any time abandon the use of a joint use Pole by giving Company written notice of such abandonment in the form of Exhibit D attached to this Agreement, and removing from such Poles all Attachments that Licensee may have. No refund of any rental will be due on account of such removal. Should Licensee wish to make Attachments to such Poles thereafter, it shall make Application and receive a Permit as provided in Section 3.

9. LIMITATION OF LIABILITY. Company reserves to itself, its successors and assigns, the right to maintain its Poles and to operate its facilities thereon in such manner as will best enable it to fulfill its own service requirements in accordance with applicable law. Company shall not be liable to Licensee for any interruption to service of Licensee, for interference with the operation of Licensee’s Attachments or damages to Licensee’s Facilities or property arising in any manner out of Company’s use of its Poles hereunder, except for losses resulting from the gross negligence or intentional misconduct of Company or its employees, agents, contractors or subcontractors.

10. AUTHORITY AND RIGHT OF WAY. Upon request, Licensee shall submit to Company evidence satisfactory to Company, of Licensee’s authority to make Attachments within public streets, highways and other thoroughfares and Licensee shall secure any necessary consent from federal, state or municipal authorities or from the owners of property to make Attachments at all the locations of Poles. Where Licensee does not have authority from the property owner to place its Attachments on or across said property, Company may deny the request for Attachments, or if in place, require the removal of said Facilities. Licensee shall

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indemnify and reimburse Company for all loss and expense which result from any claims of governmental bodies or others that Licensee does not have a sufficient right or authority for Attachments at the locations of Poles.

10.1 This Agreement shall not constitute an assignment of any Company rights to use the public or private property upon which the Poles are located.

10.2 Upon notice from Company to Licensee that the use of any Pole is forbidden by municipal authorities or property owners, the permit covering the use of such Poles shall immediately terminate and the Facilities of Licensee shall be removed within thirty (30) days from the affected Poles; provided, however, removal of Licensee’s Attachments and Facilities may be delayed while Licensee is challenging in a court or administrative tribunal of competent jurisdiction any claim by municipal authority or property owner that Licensee’s use of such Poles is unauthorized or forbidden.

11. REGULATORY AND OTHER PUBLIC OR PRIVATE APPROVALS. In the event of any change in any law, rule or regulation of any regulatory agencies having jurisdiction over Company or Licensee, then the parties shall take such additional action as may reasonably be required to promptly obtain any required approvals or other action by such agencies. In the event such approval is conditioned upon changes not acceptable to either party, the objecting party may terminate this Agreement by 180 days prior written notice to the other party and after satisfaction of any and all outstanding obligations.

11.1 Company acknowledges that Licensee, as a Cable Operator or Telecommunication Carrier under the rules and regulations of the Federal Communications Commission (“FCC”) is subject to certain federal requirements. Company hereby agrees to cooperate in good faith with Licensee, in its efforts to comply with applicable federal requirements.

12. INSPECTIONS. Company reserves the right to inspect the installation of Licensee’s Attachments on its Poles and to make inspections, semi-annually, or more often as plant conditions may warrant, of the entire plant of Licensee. Such inspections made or not, shall not operate to relieve Licensee of any responsibility, obligation or liability assumed under this Agreement. To facilitate Company’s notification to the Licensee in emergency situations, all Licensee cables should be visibly tagged with either:

• the Licensee’s generally-recognized business name

• an identifying company logo

• an emergency telephone number

• other mutually-agreed-upon identifying symbols

If an inspection finds that any of the Licensee’s Attachments do not conform with the requirements, specification, rules, and regulations specified in Section 5 and Section 6 of this Agreement, then Company shall notify Licensee of such nonconformance, and Licensee shall correct such nonconformance within thirty (30) days of notice thereof. If Licensee fails to correct such nonconformance within thirty (30) days of such notice, Company may as

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determined in its sole discretion, (i) terminate this Agreement pursuant to Section 17 hereof or (ii) correct such nonconformance on behalf of Licensee, or (iii) refuse Permit of future Attachments. If Company chooses to correct Licensee nonconformance, Licensee shall reimburse Company for all costs incurred by Company after such 60-day period to correct such nonconformance.

13. ATTACHMENT INVENTORY; UNAUTHORIZED ATTACHMENT. Upon request of Company or Licensee, the parties shall make a joint field check to verify the accuracy of Attachment records and Licensee shall, on demand, reimburse Company for the expense of such inspections on the basis of the actual cost incurred by Company. If, as a result of any such joint field check, Attachments are found for which Licensee has no Permit, the parties agree to update their records and Company will adjust billings for the current year accordingly. Field checks shall not occur more than once every five (5) years.

13.1 If any Licensee Facilities for which no Permit has been issued are found attached to Company’s Poles, Company shall require Licensee to submit, within fifteen (15) days after the date of written notification from Company of the unauthorized Attachment, an Application per Section 3 of this Agreement. If such Application is not received by Company within the specified time period, Licensee shall immediately remove its unauthorized Attachment, or Company may remove such Attachment, and the expense of such removal shall be borne by Licensee. All unauthorized attachments shall be billed per the amount listed on the Fee Schedule.

13.2 No act or failure to act by Company with regard to said unauthorized Attachment shall be deemed as ratification or the licensing of the unauthorized Attachment. If any Permit should be subsequently issued, said Permit shall not operate retroactively or constitute a waiver by Company of any of its rights or privileges under this Agreement; provided, however, that the Licensee shall be subject to all liabilities, obligations, and responsibilities of this Agreement from its inception in regard to said unauthorized Attachment.

14. RENTAL FEES AND OTHER PAYMENTS. Licensee shall pay Company a rental rate per Attachment per year plus those other fees, charges and rents set forth in the Fee Schedule. Rental fees will be based on the number of Attachments being maintained on the 1st day of January of each year during which this Agreement remains in effect. Said rental shall by payable annually within thirty (30) days of Licensee’s receipt of the invoice for each year during which this Agreement remains in effect. Invoices are typically sent within the first quarter of the calendar year. Changes in rental rates may occur annually upon sixty (60) days notice by giving notice pursuant to Section 27 of this Agreement. Upon request, Company shall also provide its updated rental rate calculation.

14.1 Where Company and Licensee have joint use of jointly owned Poles, Company shall calculate the joint use rental payable by Licensee to Company and bill Licensee, and Licensee shall calculate the joint use rental payable by Company to Licensee and bill Company.

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14.2 All other amounts payable under this Agreement, shall be due and payable within thirty (30) days of Licensee’s receipt of an invoice therefore. Any payment not made within thirty (30) days shall bear interest at a rate of 1.5% per month. Nonpayment of any undisputed fees shall constitute a default of this Agreement.

15. DAMAGE TO FACILITIES. Licensee and Company shall exercise reasonable precautions to avoid damage to each others Facilities and damage to Other Attachers Facilities. If damage to Licensee, Company, or Other Attachers Facilities occurs, the responsible party shall make an immediate report to the other party of the occurrence of any damage.

16. INDEMNIFICATION AND LIABILITY INSURANCE. Licensee shall indemnify, protect, save harmless and insure Company from and against any and all fines and governmental impositions, third party claims for damage to property and injury or death to persons, including payments made under any Worker’s Compensation law or under any plan for employee’s disability and death benefits and including all expenses incurred in defending against any claims or demands, including attorney’s fees, which may arise out of or be caused by the negligence or intentional misconduct of Licensee, its agents and employees under this Agreement, except to the extent of Company’s negligence or intentional misconduct.

Company shall indemnify, protect, save harmless and insure Licensee from and against any and all fines and governmental impositions, third party claims for damage to property and injury or death to persons, including payments made under any Worker’s Compensation law or under any plan for employee’s disability and death benefits and including all expenses incurred in defending against any claims or demands including attorney’s fees, which may arise out of or be caused by the negligence or intentional misconduct of Company, its agents and employees under this Agreement, except to the extent of Licensee’s negligence or intentional misconduct.

Licensee shall carry insurance in such form and in such companies as are satisfactory to Company to protect the parties hereto from and against any and all claims, demands, actions, judgments, costs, expenses, and liabilities of every name and nature which may arise or result, directly or indirectly, from or by reason of such loss, injury or damage. The amounts of such insurance against liability due to damage to property shall be not less than One Million Dollars ($1,000,000) as to any one claim or damage and Two Million Dollars ($2,000,000) as to any one occurrence, and against liability due to injury to or death of persons, shall be not less than One Million Dollars ($1,000,000) as to any one person and Two Million Dollars ($2,000,000) as to any one occurrence. Nothing in this paragraph, however, shall be construed as a requirement that the Licensee shall purchase or have in effect more than Six Million Dollars ($6,000,000) aggregate coverage. Licensee shall also carry such insurance as will protect it from all claims under any Worker’s Compensation laws in effect that may be applicable to it. All insurance here required shall be furnished by Licensee at its own expense and shall remain in force for the entire life of this Agreement. Licensee shall submit to Company certificates in duplicate, from all companies insuring Licensee showing that Licensee is properly insured for all liabilities of

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Licensee under this Agreement and that it will not cancel or change any policy of insurance issued to Licensee except after thirty (30) days notice in writing to Company. Such insurance, if obtained outside the State of South Dakota, shall be countersigned by a South Dakota insurance agent pursuant to South Dakota law.

17. DEFAULT. If either party fails to comply with any of the provisions of this Agreement or defaults on any of its obligations under this Agreement and fails within thirty (30) days after written notice to correct such default or noncompliance, the non-defaulting party may at its option, terminate this Agreement or the Permit or Permits covering the Poles as to which such default or noncompliance shall have occurred. In case of termination of the Agreement, no refund of accrued rental shall be made.

17.1 If upon written notification of default or noncompliance from Company, Licensee is unable to cure such default or noncompliance within thirty (30) days; Licensee shall provide Company with written statement acknowledging the default or nonconformance and provide a timeline for correction of default or noncompliance. If the default or noncompliance is not corrected within the revised time period, Company may at its option, terminate this Agreement or the permit or the permits covering the Poles as to which such default or noncompliance shall have occurred, unless additional time is granted by Company. In case of termination of the Agreement, no refund of accrued rental shall be made.

17.2 If the Licensee shall default in the performance of any work which it is obliged to do under this Agreement, Company may elect to do such work, and the Licensee shall reimburse Company for the cost upon demand, if Licensee would have been required to reimburse Company for such cost in accordance with the terms of this Agreement.

18. PAYMENT OF TAXES. Each party shall pay all taxes and assessments lawfully levied on its own property attached to the jointly used Poles. The taxes and assessments which are levied on said joint use Poles shall be paid by Company provided, however, that any tax, fee or charge levied on Company’s Poles solely because of their use by the Licensee shall be paid by Licensee.

19. NONWAIVER. Failure of either party to enforce or insist upon compliance with any of the terms or conditions of this Agreement or to give notice or declare this Agreement or the Attachment rights hereunder terminated shall not constitute a general waiver or relinquishment of any terms or conditions of the Agreement but the same shall be and remain at all times in full force and effect.

20. NONEXCLUSIVE. Nothing herein contained shall be construed as affecting the rights or privileges conferred by Company, by contract or otherwise, to Other Attachers, not parties to this Agreement, to use any Poles covered by this Agreement; and Company shall have the right to continue and extend such rights or privileges. The Attachment privileges herein granted shall at all times be subject to such existing contracts and arrangements.

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21. SALE OR ASSIGNMENT OF FACILITIES. Licensee shall not assign, sublet, sell, convey, or otherwise transfer its rights and obligations under this License, without providing notice to Company pursuant to Section 27 and obtaining prior written consent, which consent shall not be unreasonably withheld; provided however that Licensee may transfer its rights and obligations under this Agreement to any entity controlled by, controlling, or under common control with Licensee, or to any entity purchasing all or substantially all assets of Licensee, provided that such transferee agrees to be bound by the terms of this Agreement.

22. OWNERSHIP. Use of Poles extended under this Agreement shall not create or vest in Licensee any ownership or property rights in said Poles, but Licensee’s rights therein shall be and remain a mere license. Nothing herein contained shall be construed to compel Company to maintain any of said Poles for a period longer than demanded by its own service requirements.

23. TERM. This Agreement shall become effective on the Effective Date and continue for an initial term of 5 years. The Agreement shall thereafter automatically renew for successive one (1) year terms. Either party may terminate this Agreement by giving the other party at least three (3) months written notice. Upon termination of this Agreement in accordance with any of its terms, Licensee shall remove its Facilities from all Poles within three (3) months. If not removed within three (3) months after the termination date, Company shall have the right to remove them at the cost and expense of Licensee and without any liability therefore.

23.1 If Licensee does not have existing Attachments on the Poles of Company and fails to commence construction on the Poles of Company within the period of six (6) months after the effective date of this Agreement, then this Agreement shall be null and void, and of no further force and effect.

24. PRIOR AGREEMENTS SUPERSEDED. This Agreement supersedes and replaces any and all previous Agreements entered into by and between Company and Licensee with respect to the subject matter of this Agreement.

25. CHARGES AND ASSESSMENTS. In the event that any governmental authority imposes a franchise, occupation, business sales, license, excise, privilege, attachment or similar charge of any kind on Company as a result of Licensee making or having made Attachments to the Poles the amount of such imposition, assessment or charge shall be paid by the Licensee to Company pursuant to the provisions of Section 14 hereof.

26. BINDING ON SUCCESSORS AND ASSIGNS. Subject to the provisions of Section 21 hereof, this Agreement shall extend to and bind the successors and assigns of the parties hereto.

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27. NOTICE. Any notice, demand or request required or authorized by this Agreement shall be deemed properly given if mailed, by first class U.S mail with postage prepaid certified return receipt requested and with postage prepaid or a nationally recognized overnight courier to:

Black Hills Corporation

P. O. Box 1400

Rapid City, South Dakota 57709

on behalf of Company, and to:

Prairie Wave Black Hills

ATTN: LEGAL DEPARTMENT

5100 S. Broadband Lane

Sioux Falls, SD 57108

on behalf of the Licensee.

28. GOVERNING LAW. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of South Dakota.

29. JURISDICTION AND VENUE. Any action brought to enforce this Agreement or arising out of this Agreement shall be brought only in the United States District Court for the District of South Dakota or South Dakota state court, unless the FCC has subject matter jurisdiction over the proceedings, in which case the proceedings shall be brought before the FCC. Each party is subject to personal jurisdiction within the courts of South Dakota and waives any and all objections to personal jurisdiction. With the exception of proceedings before the FCC, or appeals arising from those FCC proceedings, venue shall be Rapid City, South Dakota, and each party waives any and all objections to that forum.

30. CONFLICT WITH LAWS. If any provision of the Agreement contained herein conflicts with or violates any federal, state or local laws, regulations or orders of governmental agencies, such provision shall be construed as closely to the original meaning within the bounds of the law. The execution of this Agreement is not a waiver of either parties’ rights or obligations under law.

31. COMPLETE AGREEMENT. This Agreement shall be considered the complete Agreement of the parties pertaining to the matters set forth herein. The provisions of this Agreement shall not be changed except in writing, duly executed by Company and Licensee.

32. FORCE MAJEURE. In the event of the performance of any party’s obligations hereunder is prevented or delayed due to compliance with any law, ruling, order, regulation, requirement of any federal, state or municipal government or departments or agency thereof or court of competent jurisdiction, any acts of God, any acts or omission of any other party to this Agreement or any third-party, any fires, war, insurrection, riot, strikes, telecommunications failures or acts of terrorism or any other cause beyond reasonable control of such party, then such party shall be excused from performance of such the obligations affected by such event for as long as (a) such event continues and (b) such party continues to use commercially reasonable efforts to recommence performance of such obligations to the extent possible without delay.

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IN WITNESS WHEREOF, the parties hereto have caused these presents to be duly executed the day and year first above written.

	BLACK HILLS POWER
ATTEST	/s/ Stuart Wevik
	Stuart Wevik
/s/ Sara M. Williamson	Vice President Operations
Sara M. Williamson
			APPROVED KEF Law Group Date 4/13/07
	LICENSEE
	/s/ William P. Heaston
	By	William P. Heaston
	Its	Corp Counsel
ATTEST
/s/ Kristie Lyngstod

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EXHIBIT A

APPLICATION FOR POLE ATTACHMENT

Send to:	PART I
Black Hills Power	Application No.
Distribution, Engineering and Operations	Date Received:
P.O. Box 1400
Rapid City, South Dakota 57709-1400

Applicant Information:

Name:
Address:
Phone:	Fax:	Date Submitted:
Contact person:

Requirements:

1.	This Application will not be processed without the following information:
	a.	Licensee shall furnish Company construction drawings for each Pole with the Application. The drawings must include the necessary maps, specifically indicating the Poles of Company to be attached, the number and character of the attachments to be placed on such Poles, height of existing attachments, and cable span lengths.
	b.	Licensee shall furnish Company pole strength calculations with the Application for poles: (a) where BHP general rules for meeting NESC standards under heavy loading conditions aren’t used; or (b) poles that are class 3, class, 4 or class, 5; or (c) poles that have conductor spans greater than 275 feet; (d) or poles that have 3 or more existing attachments.
2.	The following clearance requirements must be met:
		Minimum Clearance from Powerlines
				Pole	Mid -Span
		From a neutral conductor		30”	12”
		From an energized conductor apparatus		40”	30”
		From an underground riser		40” from the point where the cable terminates
		From a grounded streetlight		12”
		Minimum Clearance from the Ground
		If not crossing driveways or roads		12” (unless loading calculation provided
			states a lower attachment height is acceptable)
		If crossing driveway and roads		18’ (unless loading calculation provided
			states a lower attachment height is acceptable)
		If crossing a house moving route		25’
		If crossing a railroad track		26’
3.	Licensee is not permitted to increase the number of Attachments to a Pole without first receiving approval from Company.

EXHIBIT A

APPLICATION FOR CABLE/STRAND POLE ATTACHMENT

PART II

Page          of         

Application No.                 

Date Received:                     

Application:

This application is made for permission to install attachments to the poles indicated in the sketch attached hereto.

Number of Attachments:

Proposed installation date:

Type of cable and strand:

Weight per foot of cable and stand:

Diameter of cable and strand:

Self-supporting or lashed cable:

NESC design tension (only for Applications that require a load calculation):

By:

Title:

EXHIBIT B

PERMIT FOR ATTACHMENTS

Date:                                     

Permit No.                          

TO:

Permission is hereby granted to make the attachments as requested in Application No.                      dated                     , subject to the terms and conditions of the Agreement between our companies dated                     , and further subject to acceptance by the Applicant of the obligation to reimburse Black Hills Power in the amount of $ time and material in payment for necessary rearrangements and/or replacements of plant to accommodate such attachments as shown on the attached sketch.

Review Time Estimate:	$
Make Ready Work Estimate:	$
Company Reserving Space:	YES NO

BLACK HILLS POWER

By

Title:

Engineer:

Area Operations Supervisor (if applicable):                                                              

Poles added this Permit:                     

BHP W.O.#                     

To: Black Hills Power

Distribution, Engineering and Operations

P. O. Box 1400

Rapid City, South Dakota 57709-1400

The rearrangement and/or replacement of plant as indicated is hereby authorized and payment of the costs above quoted will be made upon demand.

Permit from Black Hills Power covering this Application has also been accepted.

Notice of Completion by Licensee, Exhibit C, is due thirty (30) days after installation

By:

Title:

Forward in duplicate

EXHIBIT C

NOTICE OF COMPLETION BY LICENSEE

Date                     

To: Black Hills Power

Distribution, Engineering and Operations

P. O. Box 1400

Rapid City, South Dakota 57709

This is to advise that attachments to your company’s poles as covered by Permit No.                     , BHP Work Order No.                             , have now been made. By his/her signature below, the Licensee certifies all Attachments meet the following clearance requirements:

Minimum Clearance from Powerlines
	Pole	Mid -Span
From a neutral conductor	30”	12”
From an energized conductor apparatus	40”	30”
From an underground riser	40” from the point where the cable terminates
From a grounded streetlight	12”
Minimum Clearance from the Ground
If not crossing driveways or roads	12” (unless loading calculation provided states a lower attachment height is acceptable)
If crossing driveway and roads	18’ (unless loading calculation provided states a lower attachment height is acceptable)
If crossing a house moving route	25’
If crossing a railroad track	26’

The due date for this notice is thirty (30) days after installation is complete.

Licensee

By

Title

Forward in duplicate

EXHIBIT D

NOTIFICATION OF REMOVAL

Date:                                     

Notice No.                          

To: Black Hills Power

Distribution, Engineering and Operations

P. O. Box 1400

Rapid City, South Dakota 57709

In accordance with the terms and conditions of the Agreement between our respective companies dated                     , notification of removal of attachments to the poles indicated in the sketch attached is hereby given effective date:                     

By

Title

To:

Notice acknowledged, date:                     

Poles discontinued this notice:                     

BLACK HILLS POWER

By

Title

Forward in duplicate

EXHIBIT E

FEES, CHARGES, AND RENTS

BASED ON FCC FORMULA

Pre-permit Application Review Fee:	$ Time and Material
Make-Ready Charges:	$ Time and Material
Inventory Fee:	$ Time and Material
Attachment Transfer/Removal Fee:	$ Time and Material
Attachment Nonconformance Fee:	$ Time and Material
Unauthorized Attachment Fee:	Back rent at current annual rental rate from the date of the last audit, or from the actual attachment date if adequately demonstrated, plus interest at 12% per year. If an attachment inventory has not been performed within a 7 year period, the back rent will not exceed 7 years.
Pole Attachment (Annual Fee):	Based on FCC formula

IMPORTANT

If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be endorsed. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s).

If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s).

DISCLAIMER

The Certificate of Insurance on the reverse side of this form does not constitute a contract between the issuing insurer(s), authorized representative or producer, and the certificate holder, nor does it affirmatively or negatively amend, extend or alter the coverage afforded by the policies listed thereon.

EX-10.66

EXHIBIT 10.66

EXECUTION COPY

FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”) dated as of January 4, 2008 by and among KNOLOGY, INC, a Delaware corporation (the “Borrower”), each Guarantor party hereto, each of the Incremental Term Loan Lenders party hereto, and CREDIT SUISSE, acting through one or more of its branches, as Administrative Agent (the “Administrative Agent”).

WHEREAS, the Borrower, the Lenders named therein, the Administrative Agent and certain other parties have entered into that certain Amended and Restated Credit Agreement dated as of March 14, 2007 (as amended and in effect immediately prior to the date hereof, the “Credit Agreement”);

WHEREAS, the Incremental Term Loan Lenders party hereto desire to provide to the Borrower an Incremental Term Loan in the aggregate principal amount of $59,000,000 pursuant to and in accordance with Section 2.1(c) of the Credit Agreement; and

WHEREAS, the Borrower intends to use the proceeds from such Incremental Term Loan to fund a portion of the purchase price of all of the outstanding equity interests of Graceba Total Communications, Inc., an Alabama corporation (“Graceba”) pursuant to that certain Share Purchase Agreement dated November 2, 2007 among, the Borrower, Graceba, the sole shareholder of Graceba, and Knology of Alabama, Inc., an Alabama corporation and a Wholly-Owned Subsidiary of the Borrower (“Knology Alabama”), pursuant to which Graceba shall become a Wholly-Owned Subsidiary of Knology Alabama.

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

Section 1. Specific Amendments to Credit Agreement. Subject to satisfaction of the conditions contained in Section 2 hereof, the parties hereto agree that the Credit Agreement is amended, effective as of the Amendment Effective Date (as defined below), as follows:

(a) The Credit Agreement is amended by adding the following definitions to Section 1.1 thereof in the appropriate alphabetical location:

“Incremental Term Loan Applicable Margin” means with respect to the Incremental Term Loan made on the First Amendment Effective Date and maintained (i) as Base Rate Loans, a rate equal to 1.75% per annum and (ii) as Eurodollar Rate Loans, a rate equal to 2.75% per annum.”

“Incremental Term Loan Commitment” means the commitment of a Lender to make an Incremental Term Loan to the Borrower in the aggregate principal amount outstanding equal to the amount set forth opposite such Lender’s name on Schedule III (Incremental Term Loan Commitments), as amended to reflect each Assignment and Acceptance executed by such Lender and as such amount may be reduced pursuant to this Agreement.”

“Incremental Term Loan Lenders” means each Lender that has an Incremental Term Loan Commitment as set forth in the First Amendment.”

“First Amendment” means that certain First Amendment to Amended and Restated Credit Agreement dated as of January 4, 2008 among the Borrower, the Incremental Term Loan Lenders a party thereto and the Administrative Agent.”

“First Amendment Effective Date” means January 4, 2008, the date of the effectiveness of the First Amendment.”

“Graceba” means Graceba Total Communications, Inc., an Alabama corporation.”

“Graceba Acquisition” means the Borrower’s acquisition of all of the outstanding equity interests of Graceba pursuant to that certain Share Purchase Agreement dated November 2, 2007 among, the Borrower, the sole shareholder of Graceba, Graceba, and Knology of Alabama, Inc., an Alabama corporation and a Wholly-Owned Subsidiary of the Borrower (as used in this definition, “Knology Alabama”), the sole shareholder of the Graceba and the Graceba, pursuant to which Graceba shall become a Wholly-Owned Subsidiary of Knology Alabama.”

“Graceba Merger Consideration” means $75,000,000 cash consideration paid to the sole shareholder of Graceba pursuant to the Graceba Acquisition.”

(b) The Credit Agreement is amended by adding to the end of Section 2.1 thereof the following new subsection (d):

“(d) Incremental Term Loan Commitments. On the terms contained in this subsection (d) and subject to the conditions contained in this Agreement, each Incremental Term Loan Lender severally, and not jointly, agrees to make an Incremental Term Loan in Dollars to the Borrower on the First Amendment Effective Date, in an amount equal to such Lender’s Incremental Term Loan Commitment. Amounts of such Incremental Term Loans repaid or prepaid may not be reborrowed.

(i) Notwithstanding the rates of interest specified in Section 2.10(a), each Incremental Term Loan made pursuant to this subsection (d) shall bear interest on the unpaid principal amount thereof from the date such Incremental Term Loans are made until paid in full, except as otherwise provided in Section 2.10(c), as follows:

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(A) if a Base Rate Loan, at a rate per annum equal to the sum of (A) the Base Rate as in effect from time to time plus (B) the Incremental Term Loan Applicable Margin; and

(B) if a Eurodollar Rate Loan, at a rate per annum equal to the sum of (A) the Eurodollar Rate determined for the applicable Interest Period plus (B) the Incremental Term Loan Applicable Margin in effect from time to time during such Eurodollar Interest Period.

(ii) The Borrower promises to repay such Incremental Term Loans made pursuant to this subsection (d) on the first Business Day following each Fiscal Quarter set forth below in the amounts set forth below:

Date	Incremental Term Loan Payment Amount
March 31, 2008	$	147,500
June 30, 2008	$	147,500
September 30, 2008	$	147,500
December 31, 2008	$	147,500
March 31, 2009	$	147,500
June 30, 2009	$	147,500
September 30, 2009	$	147,500
December 31, 2009	$	147,500
March 31, 2010	$	147,500
June 30, 2010	$	147,500
September 30, 2010	$	147,500
December 31, 2010	$	147,500
March 31, 2011	$	147,500
June 30, 2011	$	147,500
September 30, 2011	$	147,500
December 31, 2011	$	147,500
March 31, 2012	$	147,500
June 30, 2012	$	147,500
Term Loan Maturity Date	$	56,345,000

(iii) Each Incremental Term Loan made pursuant to this subsection (d), shall mature on the Term Loan Maturity Date.

(iv) Except as otherwise provided in this subsection (d), each Incremental Term Loan that is made pursuant to this subsection (d) shall, for all other purposes of this Agreement, be considered a “Term Loan” as such term is defined in this Agreement.”

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(c) The Credit Agreement is amended by deleting Section 4.13 thereof and substituting in lieu thereof the following:

“The proceeds of the Term Loan are being used by the Borrower (and, to the extent distributed to them by the Borrower, each other Loan Party) solely (a) to refinance all Existing Indebtedness and Existing Target Debt and related transaction costs, fees and expenses, (b) for the payment of the Transaction Costs, (c) to pay the Net Merger Consideration in connection with the Acquisition and (d) to pay a portion of the Graceba Merger Consideration in connection with the Graceba Acquisition. The proceeds of the Revolving Loans and Letters of Credit will be used by the Borrower (and, to the extent distributed to them by the Borrower, each other Loan Party) solely to provide for working capital and for general corporate purposes. Letters of Credit will be used solely to support payment obligations incurred in the ordinary course of business by the Borrower and its Subsidiaries.”

(d) The Credit Agreement is amended by adding Schedule III (Incremental Term Loan Commitments) in its entirety, as set forth on Exhibit A attached hereto.

Section 2. Conditions Precedent. This Amendment shall become effective as of the date (the “Amendment Effective Date”) the Administrative Agent received each of the following, each in form and substance satisfactory to the Administrative Agent:

(a) A counterpart of this Amendment duly executed by the Borrower, each Guarantor, the Administrative Agent and the Incremental Term Loan Lenders party hereto;

(b) Certified copies of resolutions of the Board of Directors of the Borrower and each Guarantor approving the consummation of the Incremental Term Loans described in this Amendment and the execution, delivery and performance of this Amendment and the other documents to be executed in connection therewith;

(c) A favorable opinion of counsel for the Borrower and each Guarantor, addressed to the Administrative Agent and the Lenders and in form and substance and from counsel reasonably satisfactory to the Administrative Agent [and the Incremental Term Loan Lenders];

(d) All representations and warranties set forth in Section 4 of this Amendment are true and correct on and as of the Amendment Effective Date;

(e) Before and after giving effect to the Incremental Term Loan described in this Amendment, such Incremental Term Loans do not violate any Requirement of Law on the date of or immediately following such Incremental Term Loans and are not enjoined temporarily, preliminarily or permanently; and

(f) All fees and expenses (including reasonable fees and expenses of counsel) due and payable as of the Amendment Effective Date, in accordance with Section 3.3(b) of the Credit Agreement.

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Section 3. Guarantor Acknowledgment. Each Guarantor hereby reaffirms its continuing obligations to the Administrative Agent and the Lenders under the Guaranty and agrees that the transactions contemplated by this Amendment shall not in any way affect the validity and enforceability of the Guaranty, or reduce, impair or discharge the obligations of such Guarantor thereunder and that the Incremental Term Loans made pursuant to this Amendment, together with all accrued but unpaid interest thereon, shall constitute “Obligations” under the Guaranty.

Section 4. Representations. On and as of the Amendment Effective Date, the Borrower and the Guarantors represent and warrant to the Administrative Agent, the Lenders and the Incremental Term Loan Lenders that:

(a) Authorization. The execution, delivery and performance by the Borrower and the Guarantors of this Amendment and the performance by the Borrower of the Credit Agreement, as amended by this Amendment, and the consummation of the transactions contemplated hereby: (i) are within such Borrower’s or Guarantor’s corporate or limited liability company powers; (ii) have been or, at the time of delivery thereof will have been duly authorized by all necessary corporate, limited liability company and other action, including the consent of shareholders or members where required. Each of this Amendment and the Credit Agreement, as amended by this Amendment, will be, when delivered hereunder, the legal, valid and binding obligation of the Borrower and each Guarantor party thereto, enforceable against such Borrower or Guarantor in accordance with its terms.

(b) Compliance with Laws, etc. The execution, delivery and performance by the Borrower and the Guarantors of this Amendment and the performance by the Borrower of the Credit Agreement, as amended by this Amendment, in accordance with their respective terms, do not and will not (A) contravene or violate the Borrower, the Guarantors or any of their Subsidiaries’ respective Constituent Documents, (B) violate any other Requirement of Law applicable to the Borrower (including Regulations T, U and X of the Federal Reserve Board), or any order or decree of any Governmental Authority or arbitrator applicable to the Borrower or the Guarantors, (C) conflict with or result in the breach of, or constitute a default under, or result in or permit the termination or acceleration of, any material Contractual Obligation or Related Document of the Borrower, the Guarantors or any of their Subsidiaries or (D) result in the creation or imposition of any Lien upon any property of the Borrower, the Guarantors or any of their Subsidiaries, other than those in favor of the Secured Parties pursuant to the Collateral Documents.

(c) Pro Forma Financial Compliance. The Borrower is in compliance with the financial covenants contained in Sections 5.1 and 5.2 (Financial Covenants) of the Credit Agreement on the Amendment Effective Date for the most recently ended Fiscal Quarter on a pro forma basis both before and after giving effect to such Incremental Term Loans described herein.

(d) Representations and Warranties. The representations and warranties set forth in Article IV (Representations and Warranties) and in the other Loan Documents are true and correct in all material respects on and as of any such date after the Amendment Effective Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case such

5

representations and warranties shall have been true and correct in all material respects as of such earlier date; provided, however, that solely for purposes of representations and warranties made on the Amendment Effective Date with respect to the Graceba and its Subsidiaries, such representations and warranties shall be limited to the Specified Representations.

(e) No Default. No Default or Event of Default has occurred and is continuing as of the date hereof nor will exist immediately after giving effect to this Amendment.

Section 5. Acknowledgment of the Incremental Term Loan Lenders. Each Incremental Term Loan Lender party hereto acknowledges and confirms that (i) it is an existing “Lender” as defined in the Credit Agreement and (ii) as of the date hereof, the applicable lending offices and address for notices as set forth on Schedule II of the Credit Agreement remain true and correct information with respect to such Lender as an Incremental Term Loan Lender.

Section 6. Certain References. Each reference to the Credit Agreement in any of the Loan Documents shall be deemed to be a reference to the Credit Agreement as amended by this Amendment.

Section 7. Benefits. This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.

Section 8. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

Section 9. Effect. Except as expressly herein amended, the terms and conditions of the Credit Agreement and the other Loan Documents remain in full force and effect. The amendments contained herein shall be deemed to have prospective application only, unless otherwise specifically stated herein. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Lenders or the Administrative Agent under the Credit Agreement, nor constitute a waiver or amendment of any provision of the Credit Agreement or for any purpose except as expressly set forth herein. After the Amendment Effective Date, this Amendment and the Credit Agreement shall be read together as a single instrument and this Amendment shall constituent a Loan Document.

Section 10. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original and shall be binding upon all parties, their successors and assigns.

Section 11. Definitions. All capitalized terms not otherwise defined herein are used herein with the respective definitions given them in the Credit Agreement, as amended by this Amendment.

[Signatures Contained on the Following Pages]

6

IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to Amended and Restated Credit Agreement to be executed by their authorized officers all as of the day and year first written above.

KNOLOGY, INC., as Borrower
By:	/s/ M. Todd Holt
Name:	M. Todd Holt
Title:	Chief Financial Officer, Vice President, Treasurer, and Assistant Secretary

[Signatures Continue on Next Page]

KNOLOGY OF KNOXVILLE, INC.
KNOLOGY OF NASHVILLE, INC.
KNOLOGY OF KENTUCKY, INC.
KNOLOGY BROADBAND, INC.
KNOLOGY NEW MEDIA, INC.
KNOLOGY BROADBAND OF FLORIDA, INC.
ITC GLOBE, INC.
KNOLOGY OF AUGUSTA, INC.
KNOLOGY OF COLUMBUS, INC.
KNOLOGY OF MONTGOMERY, INC.
KNOLOGY OF FLORIDA, INC.
KNOLOGY OF SOUTH CAROLINA, INC.
KNOLOGY OF CHARLESTON, INC.
KNOLOGY OF HUNTSVILLE, INC.
KNOLOGY OF ALABAMA, INC.
VALLEY TELEPHONE CO. LLC,
INTERSTATE TELEPHONE COMPANY
KNOLOGY OF GEORGIA, INC.
GLOBE TELECOMMUNICATIONS, INC.
PRAIRIEWAVE HOLDINGS, INC.
PRAIRIEWAVE COMMUNICATIONS, INC.
PRAIRIEWAVE TELECOMMUNICATIONS, INC.
PRAIRIEWAVE COMMUNITY TELEPHONE, INC.
PRAIRIEWAVE BLACK HILLS, LLC
BLACK HILLS FIBER SYSTEMS, INC.
BHFC PUBLISHING, LLC
BLACK HILLS PUBLISHING MONTANA, LLC each as Guarantor
By:	/s/ M. Todd Holt
Name:	M. Todd Holt
Title:	Chief Financial Officer, Vice President, Treasurer, and Assistant Secretary

[Signatures Continue on Next Page]

[Signature Page to First Amendment to

Amended and Restated Credit Agreement for Knology, Inc.]

CREDIT SUISSE, CAYMAN ISLANDS BRANCH, as Administrative Agent
By:	/s/ DAVID DODD
Name:	DAVID DODD
Title:	VICE PRESIDENT
By:	/s/ JAMES NEIRA
Name:	JAMES NEIRA
Title:	ASSOCIATE

[Signatures Continued on Next Page]

[Signature Page to First Amendment to

Amended and Restated Credit Agreement for Knology, Inc.]

GENERAL ELECTRIC CAPITAL CORPORATION, as an Incremental Term Loan Lender
By:	/s/ KARL KIEFFER
Name:	KARL KIEFFER
Title:	DULY AUTHORIZED SIGNATORY

[Signatures Continued on Next Page]

[Signature Page to First Amendment to

Amended and Restated Credit Agreement for Knology, Inc.]

COBANK, ACB, as an Incremental Term Loan Lender
By:	/s/ K A. Oliver
Name:	K A. Oliver
Title:	Assistant Vice President

[Signatures Continued on Next Page]

[Signature Page to First Amendment to

Amended and Restated Credit Agreement for Knology, Inc.]

CIT LENDING SERVICES CORPORATION, as an Incremental Term Loan Lender
By:	/s/ Anthony Holland
Name:	Anthony Holland
Title:	Vice President

[Signatures Continued on Next Page]

[Signature Page to First Amendment to

Amended and Restated Credit Agreement for Knology, Inc.]

RAYMOND JAMES BANK, FSB, as an Incremental Term Loan Lender
By:	/s/ Andrew D. Hahn
Name:	Andrew D. Hahn
Title:	Senior Vice President

EXHIBIT A

SCHEDULE III

Incremental Term Loan Commitments

Lender	Incremental Term Loan Commitments
General Electric Capital Corporation	$	21,000,000.00
CoBank, ACB	$	15,000,000.00
CIT Lending Services Corporation	$	13,000,000.00
Raymond James Bank, FSB	$	10,000,000.00
TOTAL	$	59,000,000.00

EX-21.1

EXHIBIT 21.1

SUBSIDIARIES OF KNOLOGY, INC.

Knology Broadband, Inc.

Knology Broadband of Florida, Inc.

Knology New Media, Inc.

Knology of Alabama, Inc.

Knology of Augusta, Inc.

Knology of Charleston, Inc.

Knology of Columbus, Inc.

Knology of Florida, Inc.

Knology of Georgia, Inc.

Knology of Huntsville, Inc.

Knology of Kentucky, Inc.

Knology of Knoxville, Inc.

Knology of Montgomery, Inc.

Knology of Nashville, Inc.

Knology of South Carolina, Inc.

Knology of Tennessee, Inc.

Globe Telecommunications, Inc.

ITC Globe, Inc.

Interstate Telephone Company

Valley Telephone Co., LLC

PrairieWave Holdings, Inc.

PrairieWave Communications, Inc.

PrairieWave Telecommunications, Inc.

PrairieWave Community Telephone, Inc.

PrairieWave Black Hills, LLC, f/k/a Black Hills FiberCom, LLC

Black Hills Fiber Systems, Inc.

PrairieWave Condominium Association, Inc.

BHFC Publishing, LLC

Black Hills Publishing Montana, LLC

Graceba Total Communications, Inc.

Graceba Broadband Services, Inc.

Wiregrass Telcom, Inc.

Communications One, Inc.

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Knology, Inc.

West Point, Georgia

We hereby consent to the incorporation by reference in Registration Statement No. 333-136566 on Form S-3, Post-Effective Amendment No. 6 to Registration Statement No. 333-89179 on Form S-3, and Registration Statement Nos. 333-136570, 333-127113, 333-103248 and 333-34540 on Form S-8 of Knology, Inc. of our reports dated March 14, 2008, relating to the consolidated financial statements and the effectiveness of Knology, Inc.’s internal control over financial reporting which appear in this Form 10-K.

/s/ BDO Seidman, LLP

Atlanta, Georgia

March 14, 2008

EX-23.2

EXHIBIT 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-136566 on Form S-3, Post-Effective Amendment No. 6 to Registration Statement No. 333-89179 on Form S-3, and Registration Statement Nos. 333-136570, 333-127113 and 333-103248 on Form S-8 of our report dated March 20, 2006, relating to the consolidated financial statements of Knology, Inc. and subsidiaries (the “Company”) for the year ended December 31, 2005, appearing in and incorporated by reference in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

/s/ Deloitte & Touche LLP

Atlanta, Georgia

March 14, 2008

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Rodger L. Johnson, certify that:

1. I have reviewed this Annual Report on Form 10-K of Knology, 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.

Date: March 14, 2008

/s/ Rodger L. Johnson

Rodger L. Johnson

President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, M. Todd Holt, certify that:

1. I have reviewed this Annual Report on Form 10-K of Knology, 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.

Date: March 14, 2008

/s/ M. Todd Holt

M. Todd Holt

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

STATEMENT OF THE CHIEF EXECUTIVE OFFICER

OF KNOLOGY, INC.

PURSUANT TO 18 U.S.C. § 1350

AS ADOPTED PURSUANT TO

§ 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned hereby certifies in his capacity as an officer of Knology, Inc. (the “Company”) that, to his knowledge, this annual report on Form 10-K for the period ended December 31, 2007, as filed with the Securities and Exchange Commission (this “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, and the information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 14, 2008

/s/ Rodger L. Johnson

Rodger L. Johnson

President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

STATEMENT OF THE CHIEF FINANCIAL OFFICER

OF KNOLOGY, INC.

PURSUANT TO 18 U.S.C. § 1350

AS ADOPTED PURSUANT TO

§ 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned hereby certifies in his capacity as an officer of Knology, Inc. (the “Company”) that, to his knowledge, this annual report on Form 10-K for the period ended December 31, 2007, as filed with the Securities and Exchange Commission (this “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, and the information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 14, 2008

/s/ M. Todd Holt

M. Todd Holt

Chief Financial Officer