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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
or
[  ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________Commission file number: 333-41040

NUVOX, INC.
(Exact name of registrant as specified in its charter)

|DELAWARE(State or other jurisdiction of
incorporation or organization)                              |  | 43-1820855
(I.R.S. EmployerIdentification No.)
|--------------------------------------------------------------------------------------------------- |  | ----------------------------------------------
|16090 Swingley Ridge Road, Suite 500Chesterfield, Missouri
(Address of Principal Executive Offices) |  | 63017(Zip Code)                               

Registrants telephone number, including area code: (636) 537-5700

Securities registered pursuant to Section 12(b) of the Act:        None.

Securities registered pursuant to Section 12(g) of the Act:        None.

Indicate by check mark 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 [X]    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.  [X]

The registrant is a privately held corporation and has no non-voting common equity. There is no trading
in the registrants common equity. The aggregate market value of the voting stock held by non-affiliates of the
registrant is therefore not determinable.

At March 1, 2002, 9,839,895 shares of the registrants common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.





i

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TABLE OF CONTENTS

|PART I  |                                                                                       | 1 
|------- | ------------------------------------------------------------------------------------- | --
|        |                                                                                       |   
|Item 1. | Business                                                                              | 1 
|Item 2. | Properties                                                                            | 31
|Item 3. | Legal Proceedings                                                                     | 32
|Item 4. | Submission of Matters to a Vote of
      Security Holders                             | 32
|        |                                                                                       |   
|PART II |                                                                                       | 33
|        |                                                                                       |   
|Item 5. | Market for the Registrants Common
      Equity and Related Shareholder Matters       | 33
|Item 6. | Selected Financial Data                                                               | 34
|Item 7. | Managements Discussion and Analysis of Financial Condition
and Results of Operations | 36
|Item 8. | Financial Statements and Supplementary Data                                           | 51
|Item 9. | Changes in and
Disagreements with Accountants on Accounting and Financial Disclosure  | 51

|PART III                                                                                                                                                                               |                                                                        | 52
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | --
|                                                                                                                                                                                       |                                                                        |   
|Item
    10.                                                                                                                                                                           | Directors and Executive Officers
      of the Registrant               | 52
|Item
    11.                                                                                                                                                                           | Executive Compensation                                                 | 56
|Item
    12.                                                                                                                                                                           | Security Ownership of Certain
      Beneficial Owners and Management   | 60
|Item
    13.                                                                                                                                                                           | Certain Relationships and Related
      Transactions                   | 65
|                                                                                                                                                                                       |                                                                        |   
|PART IV                                                                                                                                                                                |                                                                        | 66
|                                                                                                                                                                                       |                                                                        |   
|Item 14.                                                                                                                                                                               | Exhibits, Financial Statement
      Schedules, and Reports on Form 8-K | 66
|                                                                                                                                                                                       |                                                                        |   
|SIGNATURES                                                                                                                                                                             | 67                                                                    
|SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS
FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT
REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT | 68                                                                    
|INDEX TO EXHIBITS                                                                                                                                                                      | E-1                                                                   

ii



References in this Form
10-K to we, us, our and NuVox mean NuVox, Inc., a Delaware corporation,
and our subsidiaries and predecessors, unless the context suggests otherwise.
Some of the statements contained in this Form 10-K discuss our business plans or
future prospects or state other forward-looking information. These statements
are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and are subject to known and unknown risks, uncertainties
and other factors that could cause the actual results to differ materially from
those contemplated by these statements. These forward-looking statements are
based on various factors and have been derived using numerous assumptions. In
some cases, you can identify these forward-looking statements by words like
may, will, should, expect, plan, anticipate, believe, estimate,
predict, project, intend or potential or the negative of those words and
other similar expressions. You should be aware that those statements only
reflect our predictions, assumptions and estimates regarding future events and
circumstances. Actual events or results may differ substantially as a result of
risks and uncertainties facing us, including risks and uncertainties regarding
the continued development of our business and the markets for our services and
products and the continued availability and sufficiency of our capital.
Important factors that could cause our actual results to be materially different
from these forward-looking statements are disclosed in Item 1 under the heading
Business - Risk Factors Relating to Our Business and Operations and elsewhere
in this Report on Form 10-K.

PART I

Item 1. Business.

NuVox is a rapidly growing, facilities-based
integrated communications provider. We position ourselves as the integrated
communications provider of choice, delivering superior broadband services and
customer care in 30 markets in 13 contiguous midwestern and southeastern states.
We adopted NuVox Communications as our new operating name in February 2001. Vox
means voice in Latin. NuVox expresses our intent to be a new voice in the
telecommunications and Internet industry by offering our customers alternatives
for all of their business communications needs.

At December 31, 2001 we
were providing services to approximately 36,000 customers with approximately
153,000 total access lines in service (including approximately 11,000 on-net
customers with approximately 136,000 total access lines in service) and 29 of
our 30 markets were reporting positive gross margins. On-net lines refers to
services provided to customers over our own network platforms.

Annualized total
revenues increased 130% during 2001 from $46.8 million in December 2000 to
$107.6 million in December 2001. Annualized broadband revenues increased 249%
during 2001 from $25.7 million and 55% of total revenues in December 2000 to
$89.8 million and 84% of total revenues in December 2001. Broadband revenues
include revenues from our bundled local, long distance, Internet and broadband
data communications services.

1

We offer small to
mid-sized businesses and other end users a wide array of reliable broadband
products and services, including

- local voice and data services,
- domestic and international long distance
  services,
- dedicated and dial-up high-speed Internet access,
  web page design, development and hosting and domain name services,
  and
- unified voice, e-mail and fax messaging and other
  advanced data services, including local area and wide area network management,
  virtual private networks, audio conferencing and remote
access.

We offer our customers
the convenience of meeting all of their communications needs through one
provider, with a single consolidated monthly bill. We become the integrated
communications provider of choice in our markets by providing

- a comprehensive suite of integrated voice, data
  and Internet products and services,
- timely customer service initiation and changes,
  accurate billing and 24/7 network surveillance through our advanced operations
  support systems, and
- personalized, responsive customer service through
  our locally based sales forces and customer support
personnel.

On November 1, 2000, we
completed our merger with TriVergent Communications, a broadband
telecommunications company based in Greenville, South Carolina. We now have
networks located in Missouri, Kansas, Oklahoma, Arkansas, Illinois, Indiana,
Ohio, South Carolina, North Carolina, Georgia, Florida, Kentucky and Tennessee.

NuVox was founded in
June 1998 by a management team led by Robert A. Brooks, a founder of several
successful high growth telecommunications companies, including, most recently,
CenCom Cable and Brooks Fiber Properties. Our chairman and chief executive
officer, David L. Solomon, is an experienced telecommunications entrepreneur who
most recently has served as a board member and advisor to Diveo Broadband
Networks, Inc. and executive vice president and chief financial officer of
Brooks Fiber. TriVergent adopted a smart-build broadband strategy during 1999
that was similar to NuVoxs strategy. TriVergent was founded in 1997 by a
management team led by Charles S. Houser, our vice chairman. Our president and
chief operating officer, G. Michael Cassity, became TriVergents president and
chief operating officer in March 2000. Prior to joining TriVergent he served in
a variety of senior executive positions with BellSouth. Our management team has
extensive experience in telecommunications network management, provisioning,
billing, customer service, operations support system design and implementation,
sales, marketing, finance, and legal and regulatory affairs, including
significant entrepreneurial experience in emerging telecommunications companies.

We have raised total
equity and debt capital of $775 million, consisting of $550 million of equity
and a $225 million senior secured credit facility. We ended 2001 with $47
million of cash and short-term investments, $163.8 million of senior debt
(including $161.2 million under our senior secured credit facility) and $63.8
million of undrawn financing committed under our senior secured credit facility.
At year-end, our total available capital was $110.8 million and our net
debt-to-invested-equity ratio was 21.25%.

2

Our Business Strategy

We want to be
considered by our customers, employees and investors as the integrated
communications provider of choice, delivering superior broadband services and
customer care. Our efforts are driven by our core values of customer focus,
integrity and respect with continual emphasis on sales and customer service
activation and delivery, service and support.

The principal elements of our business strategy are
to:

Offer a
comprehensive, bundled suite of voice and data products and
services. Our integrated network platforms
allow for the delivery of a wide range of integrated telecommunications products
and services. We currently provide a comprehensive bundled suite of local voice
and data services, domestic and international long distance services, dedicated
and dial-up high-speed Internet access, remote access, local and wide area
network management, virtual private networks, web page design, development and
hosting, domain name services, unified voice, e-mail and fax messaging, voice
conferencing and other advanced data services. This enables our customers to
satisfy all of their business communications needs through one provider, with a
single, consolidated monthly bill.

Primarily target
small to medium-sized business customers in second and third tier
markets. We are primarily targeting small to
medium-sized business customers because we believe these customers are
increasingly seeking integrated, cost-effective communications solutions
delivered by a single service provider. We believe these businesses generally
have been underserved by the incumbent telephone companies largely because the
incumbent providers have devoted greater marketing focus and resources to more
profitable, larger businesses. We are primarily in second and third tier
markets, which we believe have also generally been underserved by the incumbent
telephone companies because they have devoted greater marketing focus and
resources to larger markets. We consider second tier markets as metropolitan
areas with populations ranging from 950,000 to two million and third tier
markets as metropolitan areas with populations ranging from 250,000 to 950,000.
We believe that our ability to provide a comprehensive bundled suite of voice
and broadband data services and superior customer care helps distinguish us from
many of the other competitive local telephone companies in our markets.

Provide superior
customer service through local sales and customer support
personnel. We have assembled an experienced
direct sales force and customer support presence in each of our markets to
market and service our targeted customer base through face-to-face, personal
interaction. We also have established agency relationships with value added
resellers and system integrators to augment our marketing efforts in each of our
markets. We believe this approach gives us a competitive advantage over the
incumbent telephone companies in smaller markets, where the incumbent telephone
companies generally do not have a significant local presence. We believe that
the personal, local interaction of our customer sales, service and support
personnel with our customers helps us establish strong customer relationships,
grow our customer base and reduce churn.

3

Leverage advanced
operations support systems. Our advanced,
automated operations support systems and procedures are designed to rapidly
transmit and process the data required to enter, schedule, provision and track
our customer orders from the point of sale to the installation and testing of
service and include trouble management, inventory, billing, collection and
customer service systems. Our operations support systems have the scalability to
permit us to leverage our investment as we grow our business. These critical
information systems not only automate our customer care, provisioning and
billing processes but also serve as critical operational and reporting tools
designed to highlight the status of all of our network facilities, service
orders and customer service and accounts. Our operations support systems permit
us to reduce our sale-to-installation intervals and to provide our customers
with superior customer service, accurate billing and real-time network
monitoring and reporting.

Establish electronic
bonding with the incumbent telephone companies in each market. To improve the efficiency of our customer service initiation
processes, we have aggressively pursued electronic bonding with incumbent
telephone companies in each of our markets. Electronic bonding refers to the
on-line and real-time connection of our operations support systems with those of
another carrier. We believe electronic bonding allows us to reduce our costs,
efficiently process customer orders and improve our customer care because we are
able to more readily identify any problems with a customers service order.
Without electronic bonding with incumbent telephone companies, our service
initiation process would have to be accomplished via fax and e-mail to the
incumbent telephone companies. This process creates numerous opportunities for
errors and delays in provisioning. Electronic bonding reduces errors and
decreases the time required to install and initiate customer service. We have
established electronic bonding with Southwestern Bell, Ameritech, BellSouth and
NeuStars local number portability database.

Deploy networks in a
capital efficient manner. The recent
significant advancements in technology, coupled with changes in regulations,
have permitted us to more efficiently deploy the strategic elements of our
networks and lease those elements which are not essential or cost-effective for
us to own or control. We have taken advantage of these opportunities in two
ways:

| | Deploy networks
that accommodate integrated high speed data and voice
transmissions. Our networks currently
utilize at their core both asynchronous transfer mode packet-switching for data
transmissions and traditional Class 5 circuit-switching for voice transmissions.
A switch is electronic equipment that interconnects transmission paths, or
circuits, to allow telecommunications service providers to route voice and data
transmissions to their destination. Circuit-based switches, which traditionally
have been used in the public telephone network, establish a dedicated channel
for each communication, such as a telephone call for voice or fax, maintain the
channel for the duration of the call, and disconnect the channel at the
conclusion of the call. Packet-based switches, on the other hand, format the
information to be transmitted into a series of shorter digital messages called
packets, consisting of a portion of the complete message plus the addressing
information to identify the destination and return address. Packet switch-based
networks can commingle packets from several communications sources together
simultaneously onto a single channel, which allows for more efficient network
utilization and the transmission of more information through a given
communications channel. Asynchronous transfer mode, or ATM, is a
packet-switching technology that was specifically developed to allow
simultaneous switching and transmission of integrated voice and data traffic at
varying rates of transmission. We integrate our customers voice and data
transmissions over a single T-1 circuit or other access element through the use
of integrated access devices which we install in our customers premises. We
have deployed an inter-city ATM network interconnecting all of our 30 networks.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4

| | We have deployed Class 5 voice switches to support a
complete range of voice services and the electronic interfaces to the public
switched telephone network necessary for voice transmission. The public switched
telephone network is the worldwide voice telephone network accessible to all
persons with telephones and access privileges. Electronic interfaces are
hardware and software links connecting different equipment and technologies that
facilitate the transfer of voice or data transmissions to and from the public
switched telephone network. Our network architecture, which is designed to
accommodate the high-speed transmission of data with packet-switching technology
at its core, allows us to efficiently accommodate the increasing demands placed
on telecommunications networks by Internet and other data-focused applications
without the congestion and bottlenecking that the incumbent telephone companies
are experiencing on their circuit-switched networks. Our data-focused,
packet-switched networks also allow us to use network capacity more efficiently
by handling peak demand more effectively and avoiding network congestion, and
provide us the flexibility to deliver new and advanced, integrated voice and
data services that meet our customers changing communications needs.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Obtain access to all targeted business customers in each market. Initially, we have leased unbundled network and customer access
elements and various dedicated circuits from the incumbent telephone company in
each of our markets to provide access to our customers. This has allowed us to                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | avoid the time-consuming and costly process of
  overbuilding the incumbent telephone companys network,reduce time to market, andgain access to the total addressable targeted
  customer base in each market.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

Leverage the
significant telecommunications industry experience of our management
team. Our management team has significant
telecommunications industry and entrepreneurial experience in emerging
telecommunications companies. Our chairman and chief executive officer, David L.
Solomon, played a significant role in the development and success of Brooks
Fiber as its chief financial officer and executive vice president. G. Michael
Cassity, our president and chief operating officer, has more than 29 years of
leadership experience in the telecommunications industry. The members of our
management team have extensive experience in telecommunications network
management, provisioning, billing, customer service, operations support system
design and implementation, sales, marketing, finance, and legal and regulatory
affairs, including significant entrepreneurial experience in emerging
telecommunications companies.

Pursue acquisitions
and other strategic business relationships.
We intend to continue to expand through acquisitions and through forging
advantageous relationships with strategic business partners. A number of
companies in our industry have recently announced that they were either shutting
down, curtailing operations or seeking reorganization under the bankruptcy laws.
This has enabled NuVox to acquire customers and assets on advantageous terms and
accelerate our market penetration, expand the scope of our product and service
offerings and acquire additional experienced personnel. During 2001, we entered
into several cooperative arrangements with providers exiting certain of our
markets which resulted in our acquisition of more than 400 additional customers. In
February 2001, we purchased all of the outstanding stock of American
Telecommunications, Inc. of Charleston and an affiliated equipment and services
company. In January 2002, we acquired the Cincinnati Internet access and web
hosting business and assets of One.Net, a Cincinnati-based unit of U.S. Net, and
entered into an agreement with Edge Connections, Inc., a facilities-based
broadband provider serving multi-tenant commercial properties, to acquire its
Atlanta business and assets.

5

Our Products and Services

We offer and provide our customers with a broad array
of integrated telecommunications products and services. We currently offer the
following voice and data services:

| |                         |                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                       
| | ----------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Type of Service         | What We Provide                                                                                                                                                                                                                                                                             
| | Local Switched          | We offer a full complement of local switched
services, including local dial tone, 911, directory assistance and
operator-assisted calling. We also offer local number portability and expanded
local area calling plans that are generally unavailable from the incumbent
telephone company.
| | Advanced Local Features | The advanced software and equipment on our networks enables us
to offer advanced local features to supplement our local switched services,
including                                                                                                                                        
| |                         | three-way calling,speed dialing,call waiting,call forwarding,caller ID,last number redial,caller call-back,priority call,long distance account codes,900 number blocking,                                                                                                                    | hunting, which refers to a service that rolls over
  calls to lines that are not busy,calling number delivery, also referred to as
  automatic number identification and dialed number, identification
  service,direct inward dialing,voice conferencing andvoicemail
| | Long Distance           | We provide a full range of domestic, international
and toll-free long distance services, including                                                                                                                                                                                          
| |                         | one-plus outbound calling,inbound toll free,directory assistance,calling cards, andtime-of-day routing and other enhanced
  features.                                                                                                                                                     
| |                         | We purchase these services wholesale from long
distance carriers for resale to our customers.                                                                                                                                                                                               
| | Dedicated Access        | We offer private line, dedicated access services to
customers who desire high capacity transmission connections to interconnect
multiple locations.                                                                                                                                         

6

| | Type of Service                 | What We Provide                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Internet                        | We offer dedicated high speed and dial-up Internet
access services, as well as e-mail, web site design and development, web page
hosting, domain name services, remote network access and web-based account
access.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | Advanced Voice and DataServices | We offer high speed, digital packet-switched
transmission services, such as wide area network interconnection and virtual
private networks, and managed router services and equipment. Data services
include high-speed data file transfer, data network linking and other enhanced
services that use a variety of voice, data and digital interface standards,
including unified voice mail, e-mail and fax messaging. We also offer integrated
services digital network primary rate interface service, which is a service
based on international standards that allows two-way, simultaneous voice and
data transmission in digital formats over the same transmission line and thereby
reduces costs for end-users and results in more efficient use of available
facilities.
| | Network Equipment               | We provide voice and data networking design,
equipment sales and installation services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Cabling Services                | We provide inside wiring services to customers on a
custom basis, including cable drops, telephone drops and other wire-based
installation services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

Network Architecture

We employ a traditional
T-1/voice over TDM (time division multiplexing) serving strategy which enables
us to provide our customers with customized, reliable integrated solutions for
all of their voice and data communications requirements. We have deployed both
ATM data switches and Class 5 voice switches in our networks to create flexible
platforms to provide such integrated products and services. Our ATM broadband
switches can accommodate our customers increasing demands for high-speed data
transmission services and enable us to make efficient use of our network
capacity to provide bundled solutions to our customers. Our Class 5 voice
switches provide the functionality to support full-featured voice services, as
well as the necessary interfaces to the public switched telephone network or
PSTN, using standard interfaces such as the SS7 signaling network and 911
signaling to emergency agencies.

We have constructed our
networks using what is generally referred to as a smart build, capital
efficient approach. In contrast to fiber-based carriers that install their own
fiber optic transmission facilities and switches to reach their customers, we
have installed our own voice and data switching infrastructure, but we lease the
transmission elements of our networks from the incumbent telephone companies and
other providers in our markets.

7

Pursuant to our smart build construction strategy, we
have

- installed advanced asynchronous transfer mode or
  ATM packet-switches for data transmissions and Class 5 circuit switches for
  voice transmissions in our leased hub facilities,
- deployed an inter-city ATM network interconnecting
  all of our 30 markets,
- leased dedicated trunks or circuits from the
  incumbent telephone companies and other carriers in our markets to connect our
  switching platforms and equipment to the central offices of the incumbent
  telephone companies,
- installed access equipment in collocation sites
  that we lease in the central offices of the incumbent telephone companies in
  our markets, which permits us to access the customers served by those central
  offices,
- leased existing incumbent telephone company
  connections throughout our local market areas, also called the local loop,
  which connect our customers to the central offices of the incumbent telephone
  companies or directly to our network facilities, and
- installed multi-service equipment at our
  customers premises.

We have deployed ATM
data switches and Class 5 voice switches to provide data and voice switching
services in our 30 markets. As of December 31, 2001, we have deployed ATM data
switches in each of our markets and a total of 14 Class 5 voice switches. We
expect to install 2 to 4 additional Class 5 voice switches during 2002 as
additional markets mature to a level that warrants this successbased spending.
Our advanced ATM data switches allow us to offer a wide array of data
transmission services such as high-speed dedicated Internet access and data file
transfer and virtual private networks. Our Class 5 voice switches provide the
functionality to support basic voice services as well as advanced features such
as call forwarding, caller ID, etc. Our broadband network platforms allow us to
provide our customers with fully integrated solutions for all of their voice,
data, fax and video communications requirements.

Each of our network
hubs is connected to one or more central offices of the incumbent telephone
company in the market served by that network. We lease dedicated transmission
facilities to connect our switching platforms and equipment to these central
offices. The equipment we install in our collocation sites within the incumbent
telephone company central offices or at our customers premises allows for
advanced features and functionality, the combination of voice and data traffic
and the efficient use of leased transmission facilities.

We had 205 collocation
sites in service as of December 31, 2001 within incumbent telephone company
central offices in our 30 markets. The equipment in our collocation sites
enables us to provide our voice and data products and services to our customers
over T-1 access, unbundled local loops, digital subscriber line or DSL access
and other customer access facilities. We also lease from the incumbent telephone
companies in our markets enhanced extended loops or EELs, which consist of
end-to-end unbundled local loop, multiplexing/concentrating equipment and
dedicated interoffice - transport combinations, which permit us to serve
customers by extending a customers loop from the end office serving that
customer to a different end office in which we have collocation facilities. This
has enabled us to reduce the number of collocation sites required to serve our
customers, which results in reduced cost of sales and improved margins.

8

Once traffic volume
justifies further investment, we may lease unused fiber from other carriers or
construct our own fiber networks to connect our networks to our customers.
Unused fiber is known as dark fiber because it is leased without the
electronic equipment required to transmit traffic over the fiber. We believe
that dark fiber will be readily available in most of our markets.

We believe that our
smart-build construction strategy offers a number of advantages over the network
build-out strategy of the fiber-based competitive local telephone companies by
allowing us to

- accelerate our market entry by nine to 18 months
  through eliminating or at least deferring the need to obtain city franchises,
  rights-of-way and building access permits and to deploy fiber optic
  transmission facilities,
- reduce our initial capital expenditures in each
  market, allowing us to focus our capital resources on the critical areas of
  network equipment, sales, marketing, and operations support systems, instead
  of on construction of extensive costly fiber optic transmission facilities to
  reach our customers,
- improve our return on capital by generating
  revenue with a smaller capital investment,
- defer capital expenditures for additional network
  assets until the time when revenue generated by customer demand justifies such
  expenditures, and
- address business customers throughout our markets
  and not just in those areas accessible from owned fiber transmission
  facilities.

The following diagram
represents our current network architecture, including equipment in incumbent
telephone company central offices and at customer premises:



9

Markets

The following table presents information concerning
our current 30 markets:

|Market                           |   | EstimatedAddressableBusiness Lines (1) |  | On-NetVoice Linesin Service(2) |  | ApproximatePopulation(3) |  | Incumbent LocalExchange Carrier
|-------------------------------- | - | -------------------------------------- |  | ------------------------------ |  | ------------------------ |  | -------------------------------
|St. Louis, MO/East St. Louis, IL |   | 634,635                                |  | 9,039                          |  | 2,548,238                |  | Southwestern Bell              
|Springfield, MO                  |   | 65,259                                 |  | 4,781                          |  | 296,345                  |  | Southwestern Bell              
|Kansas City, MO                  |   | 337,825                                |  | 8,308                          |  | 1,755,899                |  | Southwestern Bell              
|Wichita, KS                      |   | 97,377                                 |  | 2,807                          |  | 512,965                  |  | Southwestern Bell              
|Little Rock, AR                  |   | 102,326                                |  | 3,076                          |  | 548,352                  |  | Southwestern Bell              
|Tulsa, OK                        |   | 137,695                                |  | 4,365                          |  | 756,493                  |  | Southwestern Bell              
|Oklahoma City, OK                |   | 193,334                                |  | 3,764                          |  | 1,026,657                |  | Southwestern Bell              
|Greenville/Spartanburg, SC       |   | 164,489                                |  | 5,316                          |  | 929,565                  |  | BellSouth                      
|Atlanta, GA                      |   | 967,515                                |  | 4,626                          |  | 3,541,230                |  | BellSouth                      
|Greensboro/                      | ) |                                        |  |                                |  | 775,283                  |  | BellSouth                      
|Burlington/                      | ) | 263,345                                |  | 1,962                          |  | 121,664                  |  | BellSouth                      
|Winston-Salem, NC                | ) |                                        |  |                                |  | 279,043                  |  | BellSouth                      
|Indianapolis, IN                 |   | 427,194                                |  | 6,963                          |  | 1,492,297                |  | Ameritech                      
|Akron, OH                        |   | 188,074                                |  | 3,561                          |  | 680,142                  |  | Ameritech                      
|Wilmington, NC                   |   | 54,299                                 |  | 1,833                          |  | 222,108                  |  | BellSouth                      
|Cincinnati, OH                   |   | 352,900                                |  | 4,713                          |  | 1,597,352                |  | Cincinnati Bell;               
|                                 |   |                                        |  |                                |  |                          |  | Sprint/United                  
|Columbus, OH                     |   | 361,777                                |  | 3,876                          |  | 1,447,646                |  | Ameritech                      
|Dayton, OH                       |   | 168,400                                |  | 2,692                          |  | 950,661                  |  | Ameritech                      
|Lexington, KY                    |   | 88,397                                 |  | 2,091                          |  | 441,073                  |  | GTE/Verizon                    
|Miami/Ft. Lauderdale, FL         |   | 829,811                                |  | 3,338                          |  | 3,514,404                |  | BellSouth                      
|Charlotte, SC                    |   | 318,457                                |  | 2,700                          |  | 1,321,068                |  | BellSouth                      
|Raleigh, NC                      |   | 266,975                                |  | 1,325                          |  | 1,025,253                |  | BellSouth                      
|Columbia, SC                     |   | 96,495                                 |  | 1,223                          |  | 488,207                  |  | BellSouth                      
|Jacksonville, FL                 |   | 217,995                                |  | 2,002                          |  | 1,008,623                |  | BellSouth                      
|Louisville, KY                   |   | 179,181                                |  | 1,321                          |  | 991,765                  |  | BellSouth                      
|Nashville, TN                    |   | 213,055                                |  | 1,762                          |  | 1,117,178                |  | BellSouth                      
|Knoxville, TN                    |   | 126,779                                |  | 1,698                          |  | 672,087                  |  | BellSouth                      
|Charleston, SC                   |   | 94,803                                 |  | 2,359                          |  | 552,803                  |  | BellSouth                      
|                                 |   | 6,948,342                              |  | 91,501                         |  |                          |  |                                

---

|(1) | Addressable business lines are the
      voice lines used by businesses in a particular market and capable of being
      served by a provider. We consider addressable business lines an indicator
      of the size of the market that we may serve. These numbers are our
      estimates based upon business line information obtained in 1999 from PNR
      Associates, Inc., which maintains a database of the number of business
      access lines in the respective markets, and increased based on an assumed
      annual growth rate of 7%, which growth rate is based on historical growth
      rate information available from the Federal Communications
      Commission.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Represents NuVox on-net voice lines
      in service as of January 31, 2002. On-net voice and data access lines in
      service as of January 31, 2002 totaled 151,069. On-net access lines are
      those used to provide services over NuVoxs own network
      platforms.                                                                                                                                                                                                                                                                                                                                                                                                            
|(3) | Populations are based on 1996 U.S.
      Census Data.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

10

Operations Support Systems

To effectively serve our customers and manage our
business, we are implementing advanced operations support systems which have
been designed to automate our critical business functions. We have either
acquired these systems from, or developed them with, third party vendors with
proven software and extensive knowledge of these systems.

Our operations support system platforms

- are scalable,
- may be employed either centrally or in more than
  one location, and
- automate many of the functions that previously
  required multiple manual entries of customer information to accomplish order
  entry, provisioning, switch administration, customer care and
  billing.

The legacy systems
previously used by incumbent telephone companies and other providers were not
only labor-intensive but also created numerous opportunities for errors in
provisioning services and billing, delays in installation, poor customer
service, and significant added expenses due to duplicated efforts and the need
to correct service and billing problems.

To initiate service for a customer, we must interface
with the systems of the incumbent telephone companies and wholesale long
distance providers. We have established electronic bonding with the primary
incumbent telephone companies in our markets. These electronic interfaces allow
us to create service requests online, leading to faster installations of
customer orders through a reduction in errors associated with manually inputting
orders received via fax or e-mail. This has improved our productivity by
decreasing the period between the time of sale and the time a customers line is
installed and provisioned on our networks. We have completed electronic bonding
with Southwestern Bell, Ameritech, BellSouth and NeuStars local number
portability database.

Our operations support system platforms are designed
to integrate all of our essential business applications, covering such functions
as

- entering, scheduling, provisioning and tracking of
  customer service orders,
- real-time trouble-shooting, 24/7 network
  surveillance and network inventory,
- accurate, on-time billing,
- electronic bonding with incumbent telephone
  companies and other business partners,
- sales force management applications,
- customer relationship management,
- credit verification, and
- financial and operational reporting.

11

To date, we have implemented provisioning, inventory
and order management, billing, network surveillance and mediation, customer
relationship management, sales management, trouble management, database
management, and financial and operational reporting systems and we plan to
further enhance these systems during 2002.

Our operations support system platforms allow us to
issue a single billing statement for all of our local, long distance and
Internet services. Our user friendly billing statement provides our customers
with more enhanced billing detail and is easy to read and understand. Our
billing system has the ability to handle multiple hierarchies for commercial
accounts and accommodate a variety of output media, including paper, electronic
datafile, web site access and diskette.

Sales and Customer Support

We have assembled an experienced direct sales and
customer support presence in each of our markets to sell and provision our
services and service our customers through face-to-face interaction. We believe
this approach provides us with a competitive advantage over the incumbent
telephone companies in smaller markets, where the incumbent telephone companies
generally do not have a significant local presence, and reflects one of our core
values: delivery of responsive, personalized service to our customers.

We believe that our personal, local interaction with
our customers helps us establish strong customer relationships, grow our
customer base and reduce churn. We also believe that a personalized, responsive
approach is more effective with smaller businesses, which typically do not have
management personnel focusing on their telecommunications requirements. We
target small to medium-sized business customers who typically have up to 250
employees and use up to 50 access lines. As of December 31, 2001, our average
on-net customer had approximately 12.4 access lines in service.

We establish sales and customer support offices
serving each of our local markets. Each local office has a sales manager, who
manages an average of eight sales account executives and support staff. We use
quota-based commission plans and incentive programs to reward and retain our top
sales performers and to encourage building and maintaining strong customer
relationships.

We also support our direct sales force through
indirect channels such as the value-added resellers and systems integrators who
market our products and services to their customers. In addition, we utilize
media and other promotional campaigns to publicize our products and build brand
name awareness. Our marketing department also supports our sales efforts by
performing competitive product and service analyses through the review of other
providers tariffs and offerings.

Employees

As of December 31, 2001, we had 1,107 full-time
employees, including 420 sales and sales support personnel, of whom 304 were
quota-bearing sales persons. None of our employees is represented by a labor
union or subject to a collective bargaining agreement. We have not experienced
any work stoppages due to labor disputes and believe that our relationships with
our employees are good.

12

Competition

Overview

NuVox operates in a highly competitive environment
and we do not have a significant market share in any of our respective markets.
Further, the continuing trend toward business alliances in the
telecommunications industry, and the further reduction of regulatory and
technological barriers to entry, will likely give rise to significant new
competition.

While there are many competitors in the broadly
defined telecommunications market, we focus our attention on actual and
near-term potential competitors in the geographic areas and market segments in
which we offer service. Current and potential competitors and their strengths
and weaknesses are described below.

Existing Competitors

Incumbent Telephone
Companies. In each of the markets in which
NuVox operates, the incumbent telephone company is our principal competitor.
Incumbent telephone companies currently dominate our markets with a more than
90% market share. Incumbent telephone companies benefit from favorable
regulations and have long standing customer relationships, brand name
recognition, significant financial, technical and marketing resources and,
subject to regulatory approval, the ability to lower prices or engage in
substantial volume or term discounts. In addition, incumbent telephone companies
have existing fiber optic networks and switches. We believe we can compete with
incumbent telephone companies by focusing on the communications requirements of
small and medium-sized business customers and by providing high quality,
market-driven products and services with responsive customer service at prices
below those charged by the incumbent telephone companies.

We believe that the incumbent telephone company in
each of our markets controls more than 90% of the business access lines in our
markets. As a result, we must purchase or lease a significant portion of our
underlying network from the incumbent telephone companies, which are currently
BellSouth, Southwestern Bell, Ameritech, GTE/Verizon, Cincinnati Bell and
Sprint/United. Some of the network components that we purchase or lease from the
incumbent telephone companies include unbundled network elements, inside wiring
and transmission services. This significant reliance on a primary competitor is
burdensome and typically time consuming. See Regulation below for a discussion
of the regulatory requirements that apply to the incumbent telephone companies
provision of unbundled network elements and other services to other providers
such as NuVox.

Long Distance
Telephone Companies. AT&T, WorldCom and
Sprint are among the long distance telephone companies that are now offering
bundled local and long distance services to their existing and prospective
customers. Some of these long distance carriers have entered the local service
market primarily through acquisitions of local service providers, such as
AT&Ts purchase of Teleport Communications Group and WorldComs acquisitions
of MFS Communications Company and Brooks Fiber Properties. We believe that,
although these long distance companies have acquired significant local assets,
currently they are not primarily focused on the provision of local services in
second and third tier markets. Instead, they have continued to focus on their
primary service offering, long distance, and are attempting to leverage their
customer relationships to offer basic local services. We believe that our
advanced network platforms, integrated product and service offerings and local
sales presence position us to distinguish ourselves from the long distance
telephone companies in our markets.

13

Competitive Local
Telephone Companies. NuVox faces significant
competition from other competitive local telephone companies in our markets. The
principal competitive local telephone companies that provide local services in
our markets include

| | Adelphia Business Solutions,Allegience Telecom,Birch Telecom,Business Telecom, Inc.,Cbeyond Communications,Choice One,e.spire Communications,ITC DeltaCom, |  | KMC Telecom,Logix Communications,McLeodUSA,Network Telephone,NewSouth Communications,XO Communications,Time Warner Communications andUS LEC.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------

We believe that additional competitors may also
develop plans to enter our markets in the future. However, not all of the other
competitive local telephone companies in our markets focus on the same target
customers as we do or have product offerings as comprehensive as ours.

Recent and Potential New Communications
Providers

In addition to the incumbent telephone companies,
long distance carriers and other competitive local telephone companies, NuVox
may also face competition from other potential entrants in local service
markets. These non-traditional providers include

- cable television operators,
- electric utilities,
- fixed and mobile wireless and PCS operators,
  and
- Internet service providers.

Cable TV
Operators. We expect cable television
operators will attempt to leverage their broadband networks to provide voice
services to their existing, largely residential, customer base. In addition to
technology and network architecture issues, cable operators must overcome the
public perception of historically poor levels of customer service and high
prices. However, we believe that, because the strength of these entities is in
the service territories of their existing facilities, their primary focus is and
will continue to be the residential market and that they will position
themselves as a low cost, high bandwidth alternative to the incumbent telephone
company with bundled local, long distance, Internet access and cable television
product offerings.

Electric
Utilities. Electric utilities have a large
customer base, and many have fiber networks that could be used to provide
telecommunications services. Many electric utilities have increased their
installation of fiber optic cable to augment their current core services. Unlike
cable television operators, electric utilities have extensive networks covering
both business and residential customers. Electric utilities also have the
advantage of having existing customer relations, access to rights of way,
building access and, in most cases, regional political influence. Disadvantages
include inexperience in telecommunications, a generally poor record in
diversification investments, little experience in competitive markets, and
stringent regulatory and capital market limitations on the use of rate base
capital.

14

Wireless
Operators. Cellular and PCS operators may
also be a source of competitive local telephone service, using the available
bandwidth on their networks. However, with the significant capital outlays made
by wireless operators for license fees as well as equipment purchases to build
their network infrastructures, we expect that, in the near term, these companies
will continue to focus their marketing and operational efforts on the wireless
mobile market. Moreover, we believe that these wireless operators will largely
be users of competitive local telephone company services to transmit their calls
among radio/transmitter sites and generally avoid the traditional local services
market.

Internet Service
Providers. We believe that Internet service
providers may try to expand their scope of operations to provide more
traditional telecommunications services to complement their Internet access
services and leverage their subscriber bases. We believe Internet service
providers will initially focus on the long distance market, in which it is
easier to administer and provision quality customer service, and eventually may
vertically integrate to provide full service local telecommunications or be
acquired by existing local or long distance telecommunications providers to
allow the acquiring companies to further their own vertical integration into the
Internet access market.

Regulation

NuVoxs business is subject to extensive federal,
state and local regulation.

Federal Regulation

The FCC regulates interstate and international
telecommunications services, including the use of local telephone facilities to
originate and terminate interstate and international calls. NuVox provides such
services on a common carrier basis. The FCC imposes extensive regulations on
common carriers that have some degree of market power, like the incumbent
telephone companies. However, the FCC to date has imposed less regulation on
common carriers, such as NuVox, that lack significant market power. The FCC
requires NuVox to receive and maintain authorizations to provide and resell
telecommunications services between the United States and international points.

Under the Telecommunications Act of 1996, any entity,
including cable television companies and electric and gas utilities, may enter
any telecommunications market, subject to conditions in the Telecommunications
Act and reasonable state regulation of safety, quality and consumer protection.
Because implementation of the Telecommunications Act is subject to numerous
federal and state policy rulemaking proceedings, legislative initiatives and
judicial review, there is still uncertainty as to what impact the
Telecommunications Act and any additional legislation will have on NuVox in the
future.

The Telecommunications Act is intended to increase
competition. The Telecommunications Act opens the local services market by
requiring all local telephone companies to permit interconnection to their
networks and imposes other obligations on incumbent telephone companies or, in
some cases, all local telephone companies, including:

- Interconnection. All local telephone companies must permit their
competitors to interconnect with their facilities. Incumbent telephone
companies are required to permit interconnection at any technically
feasible point within their networks, on nondiscriminatory terms, and at
prices based on cost, which may include a reasonable profit. At the option
of the carrier seeking interconnection, the incumbent telephone company
must offer to collocate the requesting carriers equipment in the
incumbent telephone companys premises, except where the incumbent
telephone company can demonstrate space limitations or other technical
impediments to collocation.

15

- Unbundled Access. All incumbent telephone companies are required to provide
  nondiscriminatory unbundled access to FCC and state telecommunications
  regulatory commission-defined network elements, which include network
  facilities, equipment, features, functions, and capabilities, at any
  technically feasible point within their networks, on nondiscriminatory terms,
  and at prices based on cost, which may include a reasonable profit.
- Access to Rights-Of-Way. All local telephone companies are required to permit
  competing carriers access to poles, ducts, conduits and rights-of-way at
  regulated prices.
- Reciprocal Compensation. All local telephone companies are required to complete
  calls originated by other local telephone companies under reciprocal
  compensation arrangements at prices based on costs or otherwise negotiated by
  the parties.
- Resale. All
  local telephone companies must permit resale of their telecommunications
  services without unreasonable restrictions or conditions. In addition,
  incumbent telephone companies are required to offer wholesale versions of all
  retail services to other telecommunications carriers for resale at discounted
  rates, based on the costs avoided by the incumbent telephone company in the
  wholesale offering.
- Number Portability. All local telephone companies must permit users of telecommunications
  services to retain existing telephone numbers without impairment of quality,
  reliability or convenience when switching from one telecommunications carrier
  to another.
- Dialing Parity. All local telephone companies must provide equal access to competing
  providers of telephone exchange service and toll service, and they must also
  provide nondiscriminatory access to telephone numbers, operator services,
  directory assistance, and directory listing, with no unreasonable dialing
  delays.

Incumbent telephone companies are required to
negotiate in good faith with carriers requesting any or all of the above
arrangements. If the negotiating carriers cannot reach agreement within a
prescribed time, either carrier may request binding arbitration of the disputed
issues by the state regulatory commission. Where an agreement has not been
reached, incumbent telephone companies remain subject to interconnection
obligations established by the FCC and state telecommunication regulatory
commissions.

Incumbent Telephone Companies' Provision of
Long Distance Services

The Telecommunications Act codifies the incumbent
telephone companies' equal access and nondiscrimination obligations and preempts
inconsistent state regulations. The Telecommunications Act also contains special
provisions that replace prior antitrust restrictions that prohibited the
regional Bell operating companies, including SBC, Ameritech and BellSouth, from
providing long distance services and engaging in telecommunications equipment
manufacturing. The Telecommunications Act permits the regional Bell operating
companies to enter the long distance service market outside their local service
areas immediately upon its enactment. Further, the Telecommunications Act
permits a regional Bell operating company to enter the long distance market in
its in-region states upon FCC approval, if it satisfies several procedural and
substantive requirements, including:

16

- a showing that the regional Bell
operating company has entered into interconnection agreements or, under
some circumstances, has offered to enter into such agreements in those
states in which it seeks long distance
relief,
- satisfaction by these interconnection agreements
  of a 14-point "checklist" of competitive requirements, and
- a showing that the regional Bell operating
  company's entry into long distance markets is in the public
  interest.

Previously, Verizon and
SBC have received permission from the FCC to begin providing in-region long
distance services in a combined total of ten states (Verizon in New York,
Connecticut, Pennsylvania, Massachusetts and Rhode Island; and SBC in Texas,
Kansas, Oklahoma, Missouri and Arkansas, which latter four SBC states include
NuVox markets). Applications to the FCC covering four additional states are
currently pending (Verizon for Vermont and New Jersey; and BellSouth for
Louisiana and Georgia). It is likely that SBC, Ameritech, BellSouth and Qwest
will petition and receive approval to offer long distance services in additional
states during the remainder of 2002. (NuVox does not currently operate in any
states in the Qwest region.) This may have an unfavorable effect on NuVoxs
business. NuVox is legally able to offer its customers both long distance and
local services, while the regional Bell operating companies continue to be
barred from offering combined local and long distance services, except in the
states noted above. This ability to offer "one-stop shopping" gives NuVox a
marketing advantage that we will no longer enjoy as SBC, Ameritech and BellSouth
are permitted to offer in-region long distance services in additional states
where we operate. The other incumbent telephone companies, including Sprint and
Broadwing Communications, already may do so.

Tauzin-Dingell Bill

On February 27, 2002 the United States House of
Representatives passed H.R.1542, as amended, the Internet Freedom and Broadband
Deployment Act (known as the Tauzin-Dingell Bill). Tauzin-Dingell would, among
other things, allow regional Bell operating companies to enter the in-region,
interLATA market for data services without the necessity of demonstrating
compliance with the competitive checklist provisions of Section 271 of the
Telecommunications Act of 1996, and would remove federal and state mandatory
unbundling requirements applicable to the incumbent LECs network elements to
the extent such network elements are used for the provision of advanced (i.e.,
broadband) services. Tauzin-Dingells prospects for passage in the United States
Senate are doubtful due to opposition by key Senate leaders. However, if
ultimately enacted into law Tauzin-Dingell could have the effect of increasing
facilities cost for NuVox and other carriers that use incumbent LEC network
elements, which could make it more difficult for carriers such as NuVox to
compete with the incumbent LECs.

Interconnection and Unbundled
Access

In August 1996, the FCC established rules
implementing the incumbent telephone company interconnection obligations
described above. On July 18, 1997, the Eighth Circuit vacated portions of the
FCC's decision and narrowly interpreted the FCC's power to prescribe and enforce
rules implementing the Telecommunications Act. On January 25, 1999, the United
States Supreme Court reversed the Eighth Circuit decision and reaffirmed the
FCC's broad authority to issue rules implementing the Telecommunications Act,
although it did vacate a rule determining which network elements the incumbent
telephone companies must provide to competitors on an unbundled basis.

17

On November 5, 1999, the FCC released a ruling in
response to the Supreme Court's decision that detailed three significant changes
affecting the incumbent telephone companies' obligations to provide unbundled
network elements to competitors. First, the FCC indicated that the incumbent
telephone companies no longer were required to provide access to operator and
directory assistance services.  However, the FCC expanded the definitions of two
previously defined unbundled network elements so that the incumbent telephone
companies are now required to provide unbundled access to portions of local
loops and dark fiber optic loops and transport. In the highest density zones of
the top 50 metropolitan statistical areas in the country, including St. Louis,
Kansas City, Indianapolis, Columbus, Cincinnati, Nashville, Charlotte,
Greensboro, Miami and Ft. Lauderdale, the incumbent telephone companies have the
option of either (1) refusing to make unbundled local circuit switching
available for customers with four or more lines or (2) refusing to provide
direct access to end-to-end loop/transport combinations known as enhanced
electronic links or EELs. Also, in subsequent orders the FCC has established
conditions under which competitive carriers can obtain EELs on an indirect
basis, by converting facilities initially ordered under the incumbent telephone
companies special access tariffs. SWBT and BellSouth have chosen, or have been
required, to provide direct access to EELs in some or all of the state
jurisdictions in which they operate, but Ameritech and Cincinnati Bell have
refused to do so. NuVox makes only limited use of unbundled local circuit
switching network elements, but where necessary has ordered special access
circuits. We believe that some or all of these special access facilities can be
converted to EELs pursuant to the FCCs decisions and we are in the process of
converting such facilities to EELs to effect cost savings. The United States
Telecom Association and others appealed the FCC's ruling, and the FCC is
conducting further proceedings that will address the availability of unbundled
network elements and may include further consideration of special access to EEL
conversions. We cannot predict the outcome of that appeal, or that FCC
proceeding, or other proceedings that might arise from the FCC's ruling.

On July 18, 2000, the Eighth Circuit issued a
decision on remand from the Supreme Court's reversal of the Eight Circuits 1997
decision referred to above. In the July 18 decision, the Eighth Circuit vacated
parts of the FCC's interconnection pricing standard included in the local
competition rules adopted in August 1996. Those rules had required state
commissions to base the rates that incumbent telephone companies charge to
competitive local telephone companies for interconnection and for the use of
unbundled network elements on the costs that would be incurred by the incumbent
carriers using the most efficient technology available, rather than the
technology actually used by the incumbent carrier and furnished to the
competitive carrier. The Eighth Circuit held that the FCC should have based such
rates on the cost of the incumbent carrier's actual facilities. On September 22,
2000, the Eighth Circuit stayed that part of its July 18 decision vacating the
FCC's pricing rule basing interconnection rates on the most efficient technology
available pending Supreme Court disposition of appeals of that decision filed by
AT&T, WorldCom, the FCC and others. The Supreme Court granted certiorari,
has heard arguments in the case, and is expected to decide the appeal during its
2002 term. If the July 18 decision is upheld by the Supreme Court, it is not
clear to what extent, or how quickly, the pricing standard required by the
Eighth Circuit would be reflected in state commission-approved interconnection
agreements. Eventually, however, if upheld, such pricing standard could result
in higher interconnection and unbundled element rates, which could make it more
difficult for competitive carriers such as NuVox to compete profitably with the
incumbent telephone companies.

On December 9, 1999, the FCC released an order
requiring the incumbent carriers to offer "line sharing" arrangements that will
permit competitors to offer DSL service over the same copper wires used by the
incumbent to provide voice service, and a number of incumbent providers have
entered into line sharing agreements with DSL providers, some of whom may
compete with NuVox in providing DSL access services. On January 19, 2001 the FCC
issued certain clarifications to its line sharing order. The specific prices and
terms of particular line sharing arrangements are being determined by
negotiation or by decisions of state utility commissions, and vary between
agreements and jurisdictions. The United States Telecom Association and others
have challenged the FCCs ruling. The FCC is conducting further proceedings
regarding issues that may have a substantial effect on the ability of
competitive carriers to compete effectively in the DSL market, including matters
related to rights to collocation in the remote terminals being deployed by the
incumbent telephone companies, and various issues related to the deployment of
broadband services (see discussion below).

18

On March 31, 1999, the FCC established rules
addressing how incumbent telephone companies must allow competitive local
telephone companies like NuVox to collocate their equipment in the incumbent
carriers' central offices. The FCC required the incumbent telephone companies to
allow competitors to collocate equipment that is "used or useful" for either
interconnection or access to unbundled network elements. In March 2000, the
United States Court of Appeals for the District of Columbia Circuit vacated
portions of the FCC's March 1999 collocation ruling. The court concluded that,
in requiring the incumbents to provide collocation for equipment that is "used
or useful" for interconnection or access to unbundled elements, the FCC had
applied an overbroad interpretation of the relevant statutory language, which
requires incumbent carriers to provide collocation only for equipment that is
"necessary for interconnection or access." The appeals court did not identify
the specific types of equipment that would be considered necessary but remanded
the portion of the FCC's order as to the definition of "necessary" to the FCC
for reconsideration. Similarly, the court decided that the FCC must reconsider
its reasons for requiring incumbent telephone companies, under its collocation
rules, to give competitors the option of collocating equipment in any unused
space within the incumbent telephone company's premises, to the extent
technically feasible, and prohibiting incumbent telephone companies from
requiring competitors to collocate in isolated space separate from the incumbent
telephone company's own equipment. The appeals court did preserve portions of
the FCC's collocation rules, however, including "cageless" collocation and
collocation cost allocation provisions.

On August 10, 2000, the FCC released an order
reconsidering its March 1999 collocation ruling that strengthened its
collocation requirements in some respects, including a new requirement that an
incumbent carrier provide physical collocation space within 90 calendar days of
a competitor's request, with exceptions, and allow competitors to construct
"adjacent structures" on land owned or controlled by the incumbent carrier if
there is no space left inside the central office. Competitive providers like
NuVox may want to utilize these adjacent structures to collocate their equipment
and interconnect with remote terminals of the incumbent telephone companies,
thereby increasing the addressable market for their DSL services. The FCC also
requested and received further comment on the issues remanded by the D.C.
Circuit's ruling. The FCCs decision on remand was released on August 8, 2001.
In that decision the FCC justified and reinstated many of the rules that had
been vacated and remanded by the appellate court. Most notably, the FCC adopted
a broad definition of the necessary standard and thereby established a basis
for competitive carriers collocation of most multi-functional equipment. The
FCC also confirmed the incumbent LECs obligation to provision cross-connects
between CLECs collocated within the same incumbent LEC central office, but held
that enforcement of the cross-connect requirements should be handled by the
state commissions. Verizon, SBC and BellSouth have appealed the FCCs decision
to the U.S. Court of Appeals for the D.C. Circuit, and we are unable to predict
the outcome of that judicial review. NuVox believes that all of its collocated
equipment meets the necessary standard as now revisited by the FCC and NuVox
has not experienced any significant problems in deploying and maintaining its
equipment in any collocation site.

While these court and FCC proceedings were pending,
NuVox entered into interconnection agreements with a number of incumbent
telephone companies through negotiations or adoption of another competitive
local telephone company's approved agreements. These agreements remain in
effect, although in some cases one or both parties may be entitled to demand
renegotiation of particular provisions based on intervening changes in the law.
It is uncertain whether NuVox will be able to obtain renewal or renegotiation of
these agreements on favorable terms when they expire, particularly with regard
to the types of equipment we can collocate at an incumbent's premises and the
rates we will be charged for interconnection and access to unbundled network
elements.

19

In December, 2001 the FCC initiated two Notices of
Proposed Rulemakings addressing issues of interest to competitive carriers: (a)
an NPRM investigating whether incumbent LECs should be granted non-dominant
status for their retail broadband services (Advanced Services Non-Dominance
NPRM); and (b) an NPRM for the purpose of a periodic review
of which incumbent LEC network elements should be subject to the mandatory
unbundling (i.e., UNE) requirements of the Telecommunications Act of 1996
(Triennial Review). In February, 2002 the FCC initiated a third proceeding, an
NPRM to investigate possible policy changes for the purpose of encouraging the
deployment of broadband services. In the Advanced Services Non-Dominance NPRM
the FCC tentatively concluded that regulation of incumbent LECs retail
broadband services should be classified as non-dominant and subject to relaxed
regulatory treatment. In the Broadband NPRM a majority of the FCC tentatively
concluded that integrated broadband transport/internet access service offered by
wireline carriers should be classified as an information service rather than a
telecommunications service. At the same time, the Triennial Review NPRM raises
the possibility that some incumbent LEC facilities that are currently available
as UNEs (and therefore available at cost-based prices) could be removed from the
coverage of mandatory unbundling requirements and thereafter be available to
competitive carriers such as NuVox only at higher rates. While it is not clear
how quickly the FCC will render decisions in these proceedings or what the
ultimate results will be, these cases carry a potential for changes in federal
policy which could reduce regulation of incumbent LEC retail and wholesale
services in a manner that may make it more difficult for competitive carriers
such as NuVox to compete against the incumbent LECs in the market for voice and
broadband services.

Interstate Access Charges

In three orders released on December 24, 1996, May
16, 1997, and May 31, 2000, the FCC made major changes in the interstate access
charge structure. In the 1996 order, the FCC removed restrictions on incumbent
telephone companies' ability to lower access prices and relaxed the regulation
of new switched access services in those markets where there are other providers
of access services. If federal regulators do not effectively monitor this
increased pricing flexibility, it could have a material adverse effect on our
ability to compete in providing interstate access services.

In the 1997 order, the FCC announced and began to
implement its plan to bring interstate access rate levels more in line with
costs. Pursuant to this plan, the FCC has adopted rules that grant incumbent
telephone companies subject to price cap regulation increased pricing
flexibility upon demonstrations of increased competition or potential
competition in relevant markets. The FCC elaborated on these access pricing
flexibility rules in an order released on August 27, 1999. The manner in which
the FCC implements this approach to lowering access charge levels could have a
material effect on NuVoxs access charge revenues and on our ability to compete
in providing interstate access services. Several parties appealed the 1997 order
and on August 19, 1998, the 1997 order was affirmed by the U.S. Court of Appeals
for the Eighth Circuit.

In the 2000 order, the FCC adopted several proposals
to further reform access charge rate structures, relying heavily on a proposal
submitted by a coalition of long distance companies and incumbent telephone
companies referred to as "CALLS." These and related actions will result in
significant changes to access charge rate structures and rate levels. As
incumbents' access rates are reduced, NuVox may experience downward market
pressure on its own access rates, although the effect may be mitigated to some
extent as recovery by both incumbent and competitive local service providers of
per minute charges to long distance carriers is shifted to per line charges
recovered from end-users.

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In August 1999, the FCC asked for comment on claims
by some long distance carriers that competitive local telephone companies were
charging those carriers excessively high rates for access to competitive local
telephone company customers. Specifically, the FCC asked whether it should
regulate competitive local telephone company access charges to ensure that these
charges are not unreasonable. Thereafter, two coalitions of competitive local
telephone companies asked the FCC to prevent AT&T from withdrawing its long
distance services from customers of those local telephone companies. The FCC
addressed the issue of competitive carrier access charges in a series of
decisions issued during 2001.

On April 27, 2001 the FCC issued its CLEC Access Charge Order
which set interstate switched access charge rate caps for competitive local
service providers starting at 2.5 cents per minute and transitioning down over a
three year period to parity with incumbent LEC access charges. On May 30, 2001
the FCC rendered a decision in a complaint case brought by AT&T and Sprint
against BTI Telecom, a competitive local service provider. In the
BTI Decision, the FCC found BTIs interstate switched access charges to have been
excessive and found the maximum reasonable rate to have been 2.7 cents per
minute for the most recent time period. The third decision came in the form of a
declaratory ruling released on October 22, 2001, in which the FCC held that
long-distance carriers could not refuse a reasonable request for access service,
and that a reasonable request is made whenever a caller places a long-distance
call to a customer served by a competitive local service provider whose access
charges are presumptively lawful. As a result of these FCC decisions, the level
of access charges that can be levied by competitive local service providers such
as NuVox has been reduced, but at the same time these decisions have
substantially reduced the level of uncertainty regarding the ability of
competitive local service providers to recover access revenues from
long-distance companies at the newly establish rate caps. NuVox has recently
entered into a comprehensive settlement with AT&T regarding recovery of
access charges for past periods and prospectively.

Reciprocal Compensation For Calls To Internet
Service Providers

A number of incumbent telephone companies throughout
the country, including SBC, BellSouth and Verizon, contested whether the
obligation to pay reciprocal compensation should apply to telephone calls
received by end users who provide Internet access services (dial-up internet
calls). These end users are commonly known as Internet service providers or
"ISPs," who have large amounts of incoming calls. As interpreted by the FCC, the
Telecommunications Act requires that, where a subscriber of one local telephone
company places a local call that must be handed off to a second local telephone
company for delivery to the called party, the first carrier must pay reciprocal
compensation to the second carrier for terminating the call. The incumbent
telephone companies claimed that dial-up internet calls are interstate in nature
and that such calls therefore should be exempt from reciprocal compensation
arrangements applicable to local calls carried by two local telephone companies.
Competitive local telephone companies contended that interconnection agreements
providing for reciprocal compensation contain no exception for dial-up internet
calls and reciprocal compensation is therefore applicable. In response to
carriers' requests for clarification, the FCC, on February 25, 1999, declared
that, while Internet traffic is jurisdictionally mixed, it is largely interstate
in nature. The FCC also found that the reciprocal compensation requirement in
the Telecommunications Act did not apply to dial-up internet calls. The FCC did
not, however, determine whether dial-up internet calls are subject to reciprocal
compensation in any particular instance. In this regard, the FCC concluded that
carriers were bound by their existing interconnection agreements, as interpreted
by state commissions, and thus were subject to reciprocal compensation
obligations to the extent provided in their interconnection agreements or as
determined by state commissions. Concurrent with its decision, the FCC opened a
rulemaking proceeding to adopt an appropriate prospective inter-carrier
compensation mechanism for dial-up internet calls.

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In March 2000, the U.S. Court of Appeals for the D.C.
Circuit vacated the FCC's February 1999 ruling, finding that the FCC order did
not include a satisfactory explanation for its holding that dial-up internet
calls are not subject to the Telecommunications Act's reciprocal compensation
provisions. In response on April 6, 2001 the FCC issued its ISP Remand Order. In that
decision the FCC held that while dial-up internet calls are not subject to the
same Section 251 reciprocal compensation provisions of the Telecommunications
Act of 1996 as local voice calls, dial-up internet traffic is nonetheless
subject to the FCCs jurisdiction under Section 201. The FCC went on to
establish a separate set of lower compensation rates for termination of dial-up
internet calls. Those rates phase down over a three-year period. The decision
also establishes limits on the potential growth of dial-up internet traffic that
can be subject to the new rates, and the FCC indicated its strong preference for
a bill and keep system (where no monetary compensation is exchanged) as the
long-term compensation regime for dial-up internet traffic. The FCC thereafter
opened a proceeding to conduct a comprehensive review of various inter-carrier
compensation issues, including the question of the appropriate long-term
compensation system for dial-up internet traffic. The ISP Remand Order will reduce revenues
for those competitive local service providers with a substantial number of ISP
customers in states which previously required payment of reciprocal compensation
on dial-up internet calls. NuVox has a relatively small number of ISP customers
and therefore will not experience a material reduction in revenues from this
decision. Regarding reciprocal compensation for local traffic under Section 251
of the Act, rates in most state commissions are declining and some states have
already moved to a bill and keep system. This has the effect of reducing both
revenue and cost for competitive local service providers such as NuVox.

Detariffing

In November 1996, the FCC ordered non-dominant long
distance carriers, like NuVox, to cease filing tariffs for domestic long
distance services. The FCC's order required mandatory detariffing for long
distance services and gave interstate long distance service providers nine
months to withdraw federal tariffs and move to contractual relationships with
their customers. A federal appeals court subsequently stayed this order.

In March 1999, the FCC adopted further rules that,
while still maintaining mandatory detariffing, required long distance carriers
to make specific public disclosures on the services providers' Internet web
sites of their rates, terms and conditions for domestic interstate services. The
effective date of these rules also was delayed until an appeals court could rule
on the appeal of the FCC's detariffing order. On April 8, 2000, the United
States Court of Appeals for the D.C. Circuit upheld the FCC's mandatory
detariffing decision. The FCC subsequently issued a notice establishing a
nine-month transition to mandatory detariffing. By July 31, 2001, carriers were
required to cancel all tariffs for interstate domestic long distance services.
Subsequent to that date, the prices, terms and conditions pursuant to which
domestic providers offer service to customers have been governed by contract.
The transition to contracts contemplated by this FCC rule change should have
limited effect for carriers such as NuVox, since our established business
practice includes signing contracts with customers, and because the FCCs
detariffing procedures allow for the use of standardized rates, terms and
conditions displayed on a carriers website.

In June 1997, the FCC allowed non-dominant local
service providers to withdraw, on a permissive basis, their tariffs for
interstate access services provided to long distance carriers. Thereafter, the
FCC initiated proceedings to consider whether such local service providers, such
as NuVox, should be required to withdraw their interstate access services
tariffs. In its April 27, 2001 CLEC Access Charge Order the FCC determined that it would
require mandatory detariffing of interstate switched access services by
non-dominant local service providers only if such a carrier seeks to levy rates
at a level higher than the rate caps established in that decision. So long as
non-dominant local service providers maintain interstate switched access charges
at or below the federally-mandated rate caps, such carriers retain the right to
provide interstate access services pursuant to tariffs. NuVox has elected to
maintain its interstate

22

switched access rates pursuant to tariff, which
action should avoid the significant additional effort, expense and revenue
uncertainty that would result from attempting to negotiate bilateral access
services contracts with long distance carriers.

The FCC continues to require that service providers
obtain authority to provide services between the United States and foreign
points and file tariffs for international services.

Universal Service Subsidies

On May 8, 1997, the FCC released an order
establishing a significantly expanded federal universal service subsidy regime.
For example, the FCC established new subsidies for telecommunications and
information services provided to qualifying schools and libraries. The FCC also
expanded the federal subsidies for local telephone services provided to
low-income consumers. Providers of interstate telecommunications service, such
as NuVox, must pay for a portion of these programs. NuVoxs share of these
federal subsidy funds is based on our share of certain defined
telecommunications end user revenues. Currently, the FCC is assessing such
payments on the basis of a provider's revenue for the previous year. The FCC
recently adopted rules for subsidizing service provided to consumers in high
cost areas, which may result in further substantial increases in the overall
cost of the subsidy program. Additionally, in connection with considering
whether to classify broadband internet access service provided by wireline
carriers as an information service rather than a telecommunications service,
the FCC is currently evaluating whether such service should be subject to
universal service support requirements. In a separate inquiry, the FCC is
considering whether to change from a revenue-based to an access line-based
universal service support mechanism. We estimate that our contribution liability
for 2002 will be immaterial. With respect to subsequent periods, however, we are
currently unable to quantify the amount of subsidy payments that we will be
required to make or the effect that these required payments will have on our
financial condition.

State Regulation

To provide intrastate services, the operating
subsidiaries of NuVox are required to have certificates of public convenience
and necessity from state regulatory agencies and to comply with state
requirements for telecommunications utilities, including state tariffing
requirements.

State agencies require our subsidiaries to file
periodic reports, pay various fees and assessments, and comply with rules
governing quality of service, consumer protection and other issues. Although the
specific requirements vary from state to state, state regulations tend to be
more detailed than FCC regulations because of the strong public interest in the
quality of basic local service. We intend to continue to comply with all
applicable state regulations, and as a general matter do not expect that these
requirements of industry-wide applicability will have a material adverse effect
on our business. However, no assurance can be given that the imposition of new
regulatory burdens in a particular state will not affect the profitability of
our services in that state.

The state public utility commissions also play a
significant role in the on-going implementation of the Telecommunications Act of
1996. Of particular importance, these state regulatory agencies set specific
prices for incumbent LEC unbundled network elements (consistent with pricing
methods established by the FCC) and have either exclusive or concurrent
jurisdiction (along the FCC and federal courts) to rule on actions brought by
competitive local service providers, such as NuVox, against incumbent LECs for
enforcement of interconnection agreements. We are unable to predict the outcome
of pending or future state regulatory proceedings dealing with these issues, but
state level decisions in these areas can have a material effect on NuVoxs cost
of providing service and on its ability to compete against the incumbent LECs.

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In certain states, including two states where NuVox
operates (Kansas and Oklahoma), incumbent LECS have initiated efforts to obtain
reduced regulation of their services and facilities through state legislative
efforts. It is likely that similar incumbent LEC initiatives efforts will be
initiated in additional states during the remainder of 2002. While these efforts
will encounter substantial opposition by competitive local service providers
such as NuVox, from consumer groups and, in some instances, by the state
regulatory commissions, we cannot predict the outcome of this activity or its
effect on NuVox.

Local Regulation

Our networks are subject to numerous local
regulations such as building codes and licensing. Such regulations often vary on
a city by city and county by county basis. If we decide in the future to install
our own fiber optic transmission facilities, we will need to obtain
rights-of-way over private and publicly owned land.

Risk Factors Relating to Our Business and Operations

We expect to incur significant additional losses
in 2002 and 2003.

As of December 31, 2001, we had accumulated deficits
of $267.9 million, and for the year ended December 31, 2001, we had a net loss
of $177.3 million and negative adjusted EBITDA of $83.7 million. EBITDA consists
of earnings (loss) before net interest, income taxes, depreciation and
amortization, and amounts reported as adjusted EBITDA have been adjusted to
exclude the cumulative effect of change in accounting principle, unrealized loss
on derivative instrument, minority interests, equity in loss of affiliate,
stock-based compensation expense, restructuring charge, loss on write-off of
investments and the extraordinary item relating to the early retirement of debt.
We expect to continue to experience operating losses and negative EBITDA, as we
expand our operations and grow our customer base. We may not generate sufficient
revenues, achieve or sustain positive EBITDA or profitability, or generate
sufficient positive consolidated cash flow or obtain sufficient capital to meet
our working capital, capital expenditure and debt service requirements.

We have incurred a substantial amount of
indebtedness, which could negatively affect our ability to operate and finance
our business.

We have incurred a substantial amount of indebtedness
to fund our current 30 markets, including the initial operating losses of those
markets. Our existing senior secured credit facility contains, and future debt
financings likely will contain, covenants that will require us to maintain
specified financial ratios and satisfy financial tests, as well as limitations
on our ability to incur indebtedness, create liens, make investments, make
capital expenditures, pay dividends and effect other specified transactions and
payments. The risks and uncertainties affecting our business and the emerging
telecommunications industry could cause our future results to fall below the
required levels and cause a default under our debt facilities.

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In addition, our high level of indebtedness could
adversely affect our prospects by

- limiting our ability to obtain additional
  financing for working capital, capital expenditures, debt service requirements
  and other purposes,
- requiring that we dedicate a substantial portion
  of our cash flow from operations, if any, to the payment of principal of and
  interest on our indebtedness,
- limiting our flexibility in planning for, or
  reacting to changes in, our business,
- making us more highly leveraged than some of our
  competitors, which may place us at a competitive disadvantage, and
- increasing our vulnerability to the prolonged
  downturn in our business.

We might not be able to obtain additional
capital.

We will require additional financing, or require
additional financing sooner than anticipated, if

- our current plans or projections change or prove
  to be inaccurate,
- we have underestimated our cost
  projections,
- we are unable to fully utilize our
  $225 million senior secured credit facility,
- necessary to respond to changes in demand for our
  services and to regulatory and technological developments,
- we identify attractive additional market
  opportunities, or
- required to fund acquisitions or joint
  ventures.

Additional capital may not be available to us.
Furthermore, our operations may not produce positive consolidated cash flow in
amounts sufficient to meet our additional capital requirements. If we are unable
to raise and generate sufficient funds, we may be required to modify, delay or
abandon some of our planned market development, which could delay or limit our
growth.

As part of our business strategy, we plan to
continue to expand through acquisitions and other strategic investments, which
involve substantial risks.

Growth through acquisitions and other strategic
investments involves substantial risks. We may not be able to identify and
negotiate additional acquisitions on satisfactory terms, or finance or obtain
financing needed to complete any acquisitions. If we make any acquisition, we
may not be able to successfully integrate the acquired business into our
operations and the acquired business may not perform as expected. Other risks
involved in acquisitions are

- possible incurrence of unanticipated costs of the
  acquired businesses,
- possible loss of key personnel,
- the potential disruption of our ongoing business
  and diversion of resources and management time,
- the possible inability of management to maintain
  uniform standards, controls, procedures and policies,

25

- the risks of entering markets in which management
  may have little or no prior direct experience, and
- the potential impairment of relationships with
  employees, suppliers and customers as a result of changes in
  management.

We may also enter into joint ventures and other
strategic investment transactions, which involve the risk that we will not have
control over the joint venture or other strategic partnership and that a joint
venture or strategic partner may have economic, business or legal interests or
objectives that are inconsistent with our interests or objectives. These
business partners may also be unable to meet their economic or other
obligations, which could force us to fulfill those obligations or abandon or
curtail the venture.

Our future success is highly dependent upon our
ability to manage our relationships with incumbent telephone
companies.

We depend upon the technology, cooperation and
capabilities of the incumbent telephone companies in our markets in order to
properly provision and service our customers. The success of our network
deployment strategy is highly dependent on our ability to interconnect with, and
obtain facilities from, the incumbent telephone companies in our markets on a
timely basis and on satisfactory terms. Federal law currently requires most of
the incumbent telephone companies to lease or unbundle elements of their
networks and permit competitive providers like us to purchase the network
elements we need. However, incumbents may not provide these unbundled network
elements in a timely manner, and prices and other terms and conditions for these
elements may not be favorable to us.

Despite the adoption of the Telecommunications Act of
1996 and related FCC regulations that are designed to allow new competitive
telephone companies like us to compete with the incumbent telephone companies,
like many other competitive providers, we have experienced difficulties in
working with the incumbent telephone companies in our initial markets. This has
interfered with our ability to provision and service our customers and has
increased our costs.

Potential changes in federal and state law and
regulations could adversely affect our ability to successfully implement our
business plan.

Proposed legislation is pending in the United States
Congress and proposed changes in regulations are being considered by the FCC
which would reduce regulation of incumbent LECs. Similar incumbent LEC-backed
efforts have been initiated in several state legislatures. If adopted, these
proposals could hasten the entry of incumbent LECs into the in-region, interLATA
market for data services, water down safeguards against anti-competitive
conduct, and/or cut back on the mandatory unbundling requirements that are
applicable to incumbent LECs under current law. (See, discussion inRegulatorysection, above, regarding Tauzin-Dingell bill and FCC Advanced Services
Non-Dominance NPRM, Broadband NPRM and Triennial Review proceeding, and
regarding state legislative activity.) These incumbent LEC-supported initiatives
have created some uncertainty about the FCCs rules governing the pricing, terms
and conditions of agreements needed to obtain interconnections and network
facilities, and could make negotiating and enforcing these agreements more
difficult and protracted in the future. If we are unable to obtain high quality,
reliable and reasonably priced services from the incumbent telephone companies
in our markets, our cost of providing services may increase and customers may
not subscribe for our services.

26

We may not be able to provision and service our
customers if we cannot secure sufficient transmission capacity to meet our
future needs.

We may not be able to continue to lease adequate
transmission capacity in our markets or obtain comparable arrangements from
other carriers. Because we lease rather than build local transmission capacity
in each of our markets, we would be unable to service our customers if we could
not obtain adequate transmission capacity. Insufficient capacity could result in
the loss of existing customers and the inability to add new customers and could
limit our ability to enter new markets.

The successful implementation of our business plan
will depend in part upon growth in the demand for Internet access and high-speed
data products and services by small to medium-sized businesses.

We offer high speed Internet access and data
transmission and other enhanced data products and services primarily to small
and medium-sized businesses. The success of our Internet and data services
business will depend upon the demand for these products and services by our
target customers. If demand for Internet access and high speed data products and
services does not grow as anticipated, we may not be able to achieve our
business objectives. The demand for dedicated, high-speed Internet access and
other high-speed data products and services by small to medium-sized businesses
is evolving and depends on a number of factors. These factors include growth in
consumer and business use of new interactive technologies, further development
of technologies that facilitate interactive communications between organizations
and targeted audiences, security concerns and increases in transmission
capacity.  Furthermore, our ability to accommodate growth in
demand, if any, for these products and services will depend on our ability to
hire, train and retain qualified personnel and to further enhance our products
and services to adapt to technological and competitive changes. In addition, the
market for high-speed data transmission is relatively new and evolving.
Providers of high-speed data services are testing products from various
suppliers for a multitude of applications, and industry standards are still
being developed.

A failure to effectively provide advanced Internet
access services to our customers could harm our business.

In addition to providing voice and data services, we
act as an Internet service provider to our customers. The Internet is comprised
of many Internet service providers that operate their own networks and
interconnect with each other at various points to permit them to exchange
traffic. However, we may not be able to develop or maintain relationships with
providers with adequate network infrastructure or expand or adapt our network
infrastructure to meet the Internet service requirements of our customers.
Because Internet access and web hosting services are critical to many of our
customers businesses, the inability to meet customer requirements or any
significant interruption in our services could result in lost profits or other
indirect or consequential damages to customers, which could cause them to switch
to another Internet service provider or to seek to recover credits for such
service interruptions from us.

Our operations and growth depend upon the ability
of third party suppliers to provide advanced, reliable network equipment on a
timely basis.

The suppliers of our network equipment may not be
able to meet our equipment requirements on a timely basis, and equipment may not
perform as expected. The following factors could disrupt our operations,
jeopardize service to our customers and limit our ability to introduce new
services and obtain and retain customers

27

- extended interruption in the supply of network
  equipment,
- material increase in prices,
- significant delay by suppliers in their shipment
  of products, their release of new products or the failure of their products to
  perform as expected,
- financial failures of key suppliers,
and
- extended delay in transitioning to the products of
  an alternative supplier, if necessary.

As an example, during 2001 we experienced some
problems with some advanced network equipment, which did not perform as
expected, causing delays in our sales and installation efforts and increased
costs. To address these problems, we have installed alternative equipment
utilizing traditional telephone technologies, which does not have some of the
capabilities that the more advanced equipment was designed to provide. Similar
problems may arise in the future.

If we fail to successfully implement, integrate
and maintain sophisticated operations support systems, this would adversely
affect our ability to realize anticipated operational efficiencies and to
efficiently provision, service and bill our customers.

Sophisticated back office information and processing
systems are vital to our ability to monitor costs, render single monthly
invoices for bundled services, provision customer orders, provide timely
customer service and achieve operating efficiencies. We have developed, with
third-party vendors, scalable operations support systems that are designed to
handle all of our customer service, order management, provisioning, billing,
collection and trouble management processing. We also automate many of the
functions for which carriers have historically required multiple manual entries
of customer information. The failure of our operations support systems to
perform as expected or to interface with incumbent telephone companies and other
providers, or our inability to adequately identify all of the information and
processing needs and to upgrade the systems as necessary, would adversely affect
our ability to provision, service and bill our customers.

Our success is highly dependent on our ability to
hire and retain qualified management, technical and sales personnel.

We are managed by our key executive officers, most
notably Mr. David L. Solomon, our chairman and chief executive officer, and Mr.
G. Michael Cassity, our president and chief operating officer. We do not
maintain key person life insurance for any of our executive officers. The loss
of the services of one or more of our key executive officers could have a
material adverse effect on our ability to achieve our strategic objectives.

Our success also will depend in large part on our
ability to attract and retain a large and effective sales force and other highly
skilled and qualified management and technical personnel. The competition for
qualified personnel in the telecommunications industry is intense. We may not be
able to attract and retain the qualified management, technical and sales
personnel necessary to achieve our objectives.

Our reliance on other carriers to provide long
distance transmission services could adversely affect the profitability of our
long distance services.

We provide long distance services to our customers as
part of our offering of bundled telecommunications services. We rely on other
carriers to provide us with long distance transmission services. Agreements with
these carriers typically provide for the resale of long distance services on a
per-minute basis and some contain minimum volume commitments. If we fail to meet
any minimum volume commitments, we must pay under-utilization charges, and if we
underestimate our transmission capacity needs, we may be required to obtain
additional capacity through more expensive means, each of which could adversely
affect our ability to offer long distance services profitably. In addition, the
long distance business is extremely competitive and prices
have declined substantially in recent years and are expected to continue to
decline.

28

Incumbent telephone companies have a dominant
market share in each of our markets and may take actions that will adversely
affect our ability to attract and retain customers and operate
profitably.

In each of our markets, we compete principally with
the incumbent telephone companies serving that market, which initially have been
Southwestern Bell, Ameritech, BellSouth, GTE/Verizon, Cincinnati Bell and
Sprint/United. The incumbent telephone companies have long-standing
relationships and name recognition with their customers, financial, technical
and marketing resources substantially greater than ours, and the potential to
fund competitive services with cash flows from a variety of businesses.  Incumbent telephone companies presently have more
than a 90% market share in each of our markets. For these reasons, we face a
significant threat to our ability to attract and retain customers. In addition,
recent regulatory initiatives designed to promote competition with the incumbent
telephone companies have also been accompanied by increased pricing flexibility
for, and relaxation of regulatory oversight of, the incumbent telephone
companies and have enabled incumbent companies to offer bundled local and long
distance services. This may present incumbent telephone companies with an
opportunity to subsidize services that compete with our services with revenues
generated from non-competitive services, which would allow incumbent telephone
companies to offer competitive services at lower prices. If the incumbent
telephone companies engage in discount pricing practices, we may not be able to
achieve or maintain adequate market share or margins or compete effectively with
the incumbent telephone companies in our target markets.

Increasing competition from a number of other
providers in each of our target markets also could adversely affect our ability
to achieve or maintain adequate market share and operate profitably.

We believe that second and third tier markets will
support only a limited number of competitors and that operations in markets with
multiple competitive providers are likely to be unprofitable for one or more of
these providers. We expect to experience increasing competition in our target
markets from other providers of integrated communications services, which are

- large long distance companies, such as AT&T,
  WorldCom and Sprint, which offer integrated local, long distance and data
  telecommunications services,
- the regional Bell operating companies, such as
  Southwestern Bell, Ameritech and BellSouth, which have gained or are
  aggressively seeking regulatory authority under the Telecommunications Act to
  offer bundled local and long distance telecommunications services in their own
  local regions, and
- other competitive providers.

Many of our competitors have financial, technical,
marketing, personnel and other resources, including brand name recognition,
substantially greater than ours. These competitors also may offer prices that
are lower than our prices. As a result, we may not be able to achieve or
maintain adequate market share or margins, or compete effectively, in our
markets.

29

A growing number of competitors are deploying
alternative technologies to provide voice and data transmission services which
may be more attractive to our potential customers.

The construction of networks utilizing new
technologies such as Internet telephony, cable modem service and wireless
networks might also create significant new competitors that may have lower costs
or alternative products which may be more attractive to our potential customers.
For example, Qwest Communications International Inc., Level 3 Communications
Inc. and Williams Communications Group have deployed extensive fiber optic
communications networks utilizing Internet-based technologies. In addition,
Sprint and AT&T have announced that they intend to transition their
respective network infrastructures to Internet protocol platforms in order to
offer their customers integrated voice and data solutions. Other companies are
using wireless technologies to provide high speed integrated local, long
distance and data telecommunications services.

Other potential competitors in our markets include
electric utilities, cable television companies, resellers, and microwave,
satellite and other wireless telecommunications providers. Some electric
utilities can transmit Internet and data services over their power lines at
speeds comparable to those achievable by telephone companies with traditional
transmission technologies. With the continuing consolidation in the cable
television industry, cable television companies have emerged as a significant
new threat to more traditional providers of telecommunications services. Other
new competitors are utilizing alternative transmission facilities, including
satellite transmission, which can also be used to provide high capacity voice,
data and Internet access and interactive services. These companies may offer
alternative products at competitive prices which may negatively impact our
ability to obtain and retain customers.

Government regulations might restrict our
operations or improve the competitive position of our principal competitors.

Unlike some of our competitors, particularly the
incumbent telephone companies, we are not currently subject to some of the more
burdensome requirements of federal regulations. However, our ability to compete
in the communications industry depends upon a continued favorable,
pro-competitive regulatory environment. New regulations or legislation affording
greater flexibility and regulatory relief to our larger competitors or imposing
greater restrictions on our operations may significantly harm our ability to
compete.

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Item 2. Properties.

NuVox is headquartered in Chesterfield, Missouri, and
we lease offices and space in a number of locations, primarily for sales offices
and network equipment installations. The table below lists our leased facilities
and number of collocation sites in service, as of December 31, 2001:

|Location                       |  | Purpose                   |  | LeaseExpiration |  | ApproximateSquare Footage |  | Number ofCollocationSites in Service
|------------------------------ |  | ------------------------- |  | --------------- |  | ------------------------- |  | ------------------------------------
|Chesterfield, Missouri         |  | Headquarters              |  | April 2007      |  | 50,600                    |  |                                    
|St. Louis, Missouri            |  | Hub Site Facility         |  | February 2009   |  | 9,635                     |  | 17                                  
|Springfield, Missouri          |  | Office & Hub Site         |  | June 2009       |  | 7,700                     |  | 2                                   
|                               |  | Facility                  |  |                 |  |                           |  |                                     
|Kansas City (Lenexa),          |  | Office & Hub Site         |  | March 2009      |  | 7,452                     |  | 20                                  
|Kansas                         |  | Facility                  |  |                 |  |                           |  |                                     
|Wichita, Kansas                |  | Office & Hub Site         |  | May 2009        |  | 7,500                     |  | 4                                   
|                               |  | Facility                  |  |                 |  |                           |  |                                     
|Little Rock, Arkansas          |  | Office & Hub Site         |  | April 2009      |  | 7,200                     |  | 6                                   
|                               |  | Facility                  |  |                 |  |                           |  |                                     
|Tulsa, Oklahoma                |  | Office & Hub Site         |  | November 2009   |  | 8,592                     |  | 5                                   
|                               |  | Facility                  |  |                 |  |                           |  |                                     
|Oklahoma City, Oklahoma        |  | Office & Hub Site         |  | October 2009    |  | 6,161                     |  | 14                                  
|                               |  | Facility                  |  |                 |  |                           |  |                                     
|Greenville, South
    Carolina |  | Office Space              |  | December 2010   |  | 92,653                    |  | 9                                   
|                               |  | Office Space              |  | August 2003     |  | 26,800                    |  |                                     
|                               |  | Office Space              |  | July 2009       |  | 11,209                    |  |                                     
|                               |  | Equipment Warehouse       |  | February 2003   |  | 9,000                     |  |                                     
|Atlanta, Georgia               |  | Sales Office              |  | January 2005    |  | 4,584                     |  | 15                                  
|                               |  | Hub Site Facility         |  | July 2009       |  | 6,403                     |  |                                     
|Greensboro, North
    Carolina |  | Sales Office              |  | January 2005    |  | 4,731                     |  | 6                                   
|                               |  | Hub Site Facility         |  | December 2009   |  | 4,500                     |  |                                     
|                               |  | Office & Hub SiteFacility |  | April 2002      |  | 1,404                     |  |                                     
|Indianapolis, Indiana          |  | Hub Site Facility         |  | March 2009      |  | 7,521                     |  | 12                                  
|                               |  | Sales Office              |  | August 2004     |  | 4,833                     |  |                                     
|Akron, Ohio                    |  | Hub Site Facility         |  | February 2010   |  | 7,261                     |  | 8                                   
|Wilmington, North
    Carolina |  | Sales Office              |  | February 2005   |  | 12,122                    |  | 3                                   
|                               |  | Hub Site Facility         |  | May 2010        |  | 5,000                     |  |                                     
|Cincinnati, Ohio               |  | Office & Hub Site         |  | February 2010   |  | 7,980                     |  | 15                                  
|                               |  | Facility                  |  |                 |  |                           |  |                                     
|Columbus, Ohio                 |  | Hub Site Facility         |  | May 2010        |  | 4,600                     |  | 15                                  
|                               |  | Sales Office              |  | May 2010        |  | 3,967                     |  |                                     
|Dayton, Ohio                   |  | Office & Hub Site         |  | March 2010      |  | 7,814                     |  | 10                                  
|                               |  | Facility                  |  |                 |  |                           |  |                                     
|Lexington, Kentucky            |  | Office & Hub Site         |  | April 2010      |  | 8,438                     |  | 3                                   
|                               |  | Facility                  |  |                 |  |                           |  |                                     
|Miami, Florida                 |  | Sales Office              |  | September 2005  |  | 6,989                     |  | 12                                  
|                               |  | Hub Site Facility         |  | July 2009       |  | 15,445                    |  |                                     
|Charlotte, North
Carolina      |  | Sales Office              |  | May 2005        |  | 4,363                     |  | 10                                  
|                               |  | Hub Site Facility         |  | March 2010      |  | 9,338                     |  |                                     

31

|Location                         |  | Purpose           |  | LeaseExpiration |  | ApproximateSquare Footage |  | Number ofCollocationSites in Service
|-------------------------------- |  | ----------------- |  | --------------- |  | ------------------------- |  | ------------------------------------
|Raleigh, North
      Carolina    |  | Sales Office      |  | July 2010       |  | 5,023                     |  | 2                                   
|                                 |  | Hub Site Facility |  | August 2010     |  | 6,745                     |  |                                     
|Columbia, South
      Carolina   |  | Sales Office      |  | July 2005       |  | 2,440                     |  | 3                                   
|Jacksonville,
      Florida      |  | Sales Office      |  | October 2005    |  | 6,759                     |  | 2                                   
|                                 |  | Hub Site Facility |  | May 2010        |  | 5,883                     |  |                                     
|Louisville,
      Kentucky       |  | Office & Hub Site |  | March 2010      |  | 7,690                     |  | 2                                   
|                                 |  | Facility          |  |                 |  |                           |  |                                     
|Nashville,
      Tennessee       |  | Sales Office      |  | October 2005    |  | 5,762                     |  | 4                                   
|                                 |  | Hub Site Facility |  | May 2010        |  | 8,645                     |  |                                     
|Knoxville,
      Tennessee       |  | Sales Office      |  | August 2005     |  | 4,582                     |  | 2                                   
|Charleston,
      South Carolina |  | Sales Office      |  | May 2005        |  | 3,706                     |  | 4                                   
|                                 |  | Hub Site Facility |  | July 2010       |  | 5,150                     |  |                                     
|                                 |  | Sales Office      |  | January 2004    |  | 5,950                     |  |                                     

Item 3.  Legal Proceedings.

NuVox is not a party to any pending legal proceedings
that we believe would, individually or in the aggregate, have a material adverse
effect on our financial condition or results of operations.

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

None

32

PART II

Item 5. Market for the Registrants Common Equity
and Related Shareholder Matters.

No Established Public Trading
Market

There is no established
public trading market for NuVoxs common equity. NuVox has not applied for, and
has no current intention to apply for, listing or authorization for quotation of
its common or preferred stock on any securities exchange or on The Nasdaq Stock
Market or any other quotation system. The table below sets forth the number of
holders of record of NuVoxs common stock and each series of preferred stock,
each outstanding share of which currently is convertible into one share of
common stock of NuVox, as of March 1, 2002.

| | Class of Capital Stock                               |  | Holders of Record | 
| | ---------------------------------------------------- |  | ----------------- | 
| | Common Stock                                         |  | 160               | 
| | Series A Convertible Preferred
      Stock           |  | 14                | 
| | Series A-1 Convertible Preferred Stock               |  | 3                 | 
| | Series B Convertible Preferred
      Stock           |  | 58                | 
| | Series C-1 Convertible Preferred
      Stock         |  | 6                 | 
| | Series C-2 Convertible Preferred
      Stock         |  | 19                | 
| | Series C-3 Convertible Preferred
      Stock         |  | 25                | 
| | Series D Convertible Preferred
      Stock           |  | 186               | 
| | Series E-1 to E-12 Convertible
      Preferred Stock |  | 81                | 

Dividend Policy

NuVox has never paid
any dividends on its common or preferred stock and does not anticipate paying
dividends in the foreseeable future. NuVoxs senior secured credit facility
contains covenants that restrict the ability of NuVoxs operating subsidiaries
to declare or pay dividends to the registrant and financial ratio covenants that
together effectively prohibit NuVox from paying any cash dividends on its common
or preferred stock for the foreseeable future. See Item 7 - Managements
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources. No cash dividends may be declared and paid on
the NuVox common stock so long as any shares of NuVox preferred stock are
outstanding.

33

Item 6. Selected Financial Data.

The following selected consolidated historical
financial data of NuVox has been derived from our historical financial
statements, which are included at pages F-1 to F-24. The following data should
be read in conjunction with the historical consolidated financial statements of
NuVox, and the related notes, and Managements Discussion and Analysis of
Financial Condition and Results of Operations included as Item 7 of this report
beginning on page 36. Financial data for 2000 includes the results of operations
of TriVergent Communications and of Shared Telcom Services subsequent to the
dates of the acquisitions. See the unaudited pro forma condensed results of
operations, combining the results of NuVox with the results of TriVergent and
Shared Telcom as if these acquisitions had occurred on January 1, 1999,
contained in Note 5 of the notes to NuVoxs consolidated financial statements
filed pursuant to Item 8 of this report. Financial data for 2001 includes the
results of operations of American Telecommunications, Inc. of Charleston and an
affiliated company for the part of the year subsequent to the date of
acquisition.

Basic and diluted loss
per share for NuVox have been computed using the weighted average number of
shares of common stock outstanding during each period. The weighted average
number of shares was based on common stock outstanding for basic and diluted
loss per share. All other common share equivalents, including assumption of
preferred stock conversion and exercise of common stock options and warrants,
are excluded from the calculation of net loss per share due to their
anti-dilutive effect.

Included in Other Financial Data of NuVoxs
historical financial data below are adjusted EBITDA amounts. EBITDA consists of
earnings (loss) before net interest, income taxes, depreciation and
amortization, and amounts reported as adjusted EBITDA have been adjusted to
exclude the cumulative effect of change in accounting principle, unrealized loss
on derivative instrument, minority interests, equity in loss of affiliate,
stock-based compensation expense, restructuring charge, loss on write-off of
investments and the extraordinary item relating to the early extinguishment of
debt. Management believes EBITDA is a measure commonly used in the
telecommunications industry in assessing companies operating performance,
leverage and ability to incur and service debt. Adjusted EBITDA is presented to
enhance an understanding of NuVoxs operating results and is not intended to
represent cash flow or results of operations in accordance with accounting
principles generally accepted in the United States of America. NuVoxs senior
secured credit facility contains covenants based on EBITDA that require the
borrower to maintain interest coverage and leverage ratios. EBITDA is not a
measure of financial performance under accounting principles generally accepted
in the United States of America and should not be considered an alternative to
earnings (loss) from operations and net income (loss) as a measure of
performance or an alternative to cash flow as a measure of liquidity. Neither
EBITDA nor adjusted EBITDA is necessarily comparable to similarly titled
measures of other companies. Each is thus susceptible to varying calculations.
The consolidated statements of cash flows, which include cash used in and
provided by operating, investing and financing activities of NuVox, as
calculated under accounting principles generally accepted in the United States
of America, are included with our consolidated financial statements contained
herein.

34

NUVOX CONSOLIDATED HISTORICAL FINANCIAL DATA

|                                                          |  | Years Ended December 31,                       
|--------------------------------------------------------- |  | -----------------------------------------------
|                                                          |  | 2001                                           
|                                                          |  | (in thousands, except share and per share data)
|Consolidated Statement of Operations Data:                |  |                                                
|Revenue                                                   |  |                                                
|Costs and expenses:                                       |  |                                                
|Cost of communications services                           |  |                                                
|Selling, general and administrative                       |  |                                                
|Stock-based compensation expense                          |  |                                                
|Depreciation and amortization                             |  |                                                
|Restructuring charge                                      |  |                                                
|Total costs and expenses                                  |  |                                                
|Loss from operations                                      |  |                                                
|Other income (expense):                                   |  |                                                
|Interest income                                           |  |                                                
|Interest expense                                          |  |                                                
|Unrealized loss on derivative instrument                  |  |                                                
|Loss on write-off of investments                          |  |                                                
|Equity in loss of affiliate                               |  |                                                
|Total other income (expense)                              |  |                                                
|Minority interest                                         |  |                                                
|Extraordinary item                                        |  |                                                
|Cumulative effect of change in accounting  principle      |  |                                                
|Net loss                                                  |  |                                                
|Net loss per share, basic and diluted                     |  |                                                
|Weighted average common shares outstanding                |  |                                                
|Other Financial Data:                                     |  |                                                
|Capital expenditures                                      |  |                                                
|Adjusted EBITDA                                           |  |                                                
|Cash flows from operating activities                      |  |                                                
|Cash flows from investing activities                      |  |                                                
|Cash flows from financing activities                      |  |                                                
|                                                          |  | As of December 31,                             
|                                                          |  | 2001                                           
|Consolidated Balance Sheet Data:Cash and cash equivalents |  |                                                
|Property and equipment, net                               |  |                                                
|Total assets                                              |  |                                                
|Long-term debt, including current maturities              |  |                                                
|Stockholders' equity                                      |  |                                                

---

|(1) | NuVox was organized on June 15, 1998 under the name Gabriel Communications, Inc.
|--- | ----------------------------------------------------------------------------------

35

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

Company Overview

NuVox, Inc. is a
rapidly growing, facilities-based, integrated communications provider. We
position ourselves as the integrated communications provider of choice,
delivering superior broadband services and customer care in 30 markets in 13
contiguous midwestern and southeastern states. We offer a wide array of
broadband products and services primarily to small and medium-sized businesses
in second and third tier markets. We compete with incumbent telephone companies
and other providers by providing high quality, integrated voice and data
services, excellent service and prices below those charged by the incumbent
telephone companies.

The principal elements
of our business strategy include targeting end users with a wide range of
innovative products and services that provide comprehensive business solutions
for all of their communications requirements; focusing primarily on small to
medium-sized businesses; providing superior customer service through our local
sales and customer support personnel; deploying data-centric network platforms
in a capital efficient manner; leveraging our experienced management team; and
pursuing acquisitions and strategic alliances to expand and complement our
business. We have been providing these products and services since we commenced
commercial operations in June 1999. As of December 31, 2001, NuVox was providing
services to approximately 36,000 customers with approximately 153,000 total
access lines in service (including approximately 11,000 on-net customers with
approximately 136,000 total access lines in service).

In contrast to carriers
that construct their own fiber optic transmission facilities to reach customers,
we have not built our own network connections to each individual customer.
Instead, as part of our smart build network construction strategy, we have
installed our own voice and data switches but we lease our transmission
facilities from incumbent telephone companies and other providers within our
local markets. We have also installed and connected our own access equipment in
collocation sites that we lease in the central offices of the incumbent
telephone companies in our markets, a process which is commonly referred to in
the telecommunications industry as collocation. This network construction
strategy enables us to reach the entire targeted customer base in each market
without having to build our own fiber optic transmission facilities in order to
establish network connections to each customer. To date, capital expenditures
have been primarily for the build out of our network and operations support
systems infrastructure. Future incremental network infrastructure costs are
expected to be substantially lower and more directly related to demand driven
capital expenditures associated with the installation of new revenue producing
services.

We believe that our
smart-build construction strategy offers a number of advantages over the network
build-out strategy of the fiber-based competitive local telephone companies by
allowing us to

- improve our return on capital by generating
  revenue with a smaller capital investment,
- defer capital expenditures for additional network
  assets until the time when revenue generated by customer demand justifies such
  expenditures, and
- address business customers throughout our markets
  and not just in those areas accessible from owned fiber transmission
  facilities.

The development of our
business and the deployment and expansion of our networks require significant
expenditures, a portion of which is incurred before the realization of revenue.
We have experienced negative operating cash flow from our inception through
December 31, 2001 totalling approximately $194.9 million. Our negative cash flow
from operations increased to $117.5 million for the year ended December 31, 2001
from $61.2 million in the same period in 2000. We expect to continue to incur
negative operating cash flow for a period of time as we expand our operations
and grow our

36

customer base. Expenses are expected to exceed
revenue in each location in which we offer service until a sufficient customer
base is established.

Telecommunications Industry
Environment

There are a number of
significant uncertainties facing the telecommunications industry during 2002
including

- the negative impacts of the slowing economy which
  have been exacerbated by the events of September 11,
- continuing efforts by bank lenders to reduce their
  telecommunications exposures which limit the options for emerging
  telecommunications companies to obtain additional financing, and
- regulatory uncertainties inherent in legislative
  and regulatory initiatives currently underway.

Since March 2000, there
has been a prolonged and continuing downturn in telecommunications capital
markets, particularly for emerging telecommunications companies. This has made
incremental capital available to only a select few best-managed companies with
sound business plans. In addition, the downturn in the economy, which began in
2001 and accelerated following the events of September 11, has lessened
telecommunications demand and curtailed growth rates. All of this has led a
number of over-leveraged providers to shift business focus, abandon markets,
curtail operations, re-capitalize and seek reorganization under the bankruptcy
laws. It has also caused end users to reconsider the advisability of obtaining
their communications services from alternative providers.

In addition, the telecommunications sector is faced
with significant regulatory uncertainties during 2002. The regional Bell
companies are pursuing legislative initiatives designed to reverse the
pro-competitive provisions of the landmark 1996 Telecommunications Act. At the
same time, the FCC has commenced rulemaking proceedings which could result in
regulatory relief for the regional Bell companies from some of their existing
obligations to make network components available to competitors at cost-based
prices. The robust local telecommunications competition envisioned when the 1996
Telecommunications Act was passed has been painstakingly slow to develop due, in
large measure, to the anti-competitive practices of the incumbent carriers. The
emerging telecommunications industry is dependent on aggressive regulatory
enforcement to ensure the pro-competitive goals of the 1996 Act are realized.

Despite these challenges, NuVox was able to attract
meaningful amounts of incremental equity and debt financing during 2000 and
2001, and during 2001 was able to achieve significant growth. However, the financial covenants in our senior secured credit
facility require that, during 2002, we effect significant quarterly increases in
covenanted revenues (total revenues less resale, carrier access and reciprocal
compensation revenues) and access lines installed over the levels we achieved in
2001, and, at the same time, that we effect continuing quarterly improvements in
margins and achieve positive EBITDA in the fourth quarter of 2002. These
aggressive targets will require us to maintain superior execution in sales,
provisioning and customer service and support, while at the same time
controlling and managing our operating, selling, general, administrative and
capital expenditures.

While there are many
uncertainties facing NuVox and our industry during 2002, we believe that
companies that can survive the current sector shake out will ultimately benefit
from diminished competition as other companies disappear through bankruptcy and
acquisition. This should enable the survivors to acquire customers and assets on
advantageous terms, accelerate market penetration and achieve higher margins.

37

TriVergent Merger

On November 1, 2000,
NuVox completed its merger with State Communications, Inc., d/b/a TriVergent
Communications, a broadband telecommunications company based in Greenville,
South Carolina, which merged with and into a wholly-owned subsidiary of NuVox.
We have integrated the operations of the two companies by

- restructuring into a unified organization with
  common salary structures, commission plans, benefit programs and payroll and
  e-mail systems,
- developing a common product portfolio throughout
  our entire 30-market service area,
- adopting common operations support system
  platforms for billing, collection, provisioning, trouble management,
  surveillance, customer service, financial and operational reporting, and other
  essential business functions, and
- aggressively pursuing cost containment measures,
  including reductions in network costs through use of less costly network
  elements and more efficient network utilization, as well as measures to
  contain increases in selling, general and administrative
  expenses.

NuVox issued
approximately 52.2 million shares of common and preferred stock and options and
warrants to acquire approximately 12.2 million shares of common stock to
consummate the transaction. Total consideration, inclusive of transaction costs
and options and warrants assumed, was approximately $245.6 million. The
acquisition has been accounted for using the purchase method of accounting.

Shared Telcom Acquisition

On December 11, 2000,
NuVox purchased all of the outstanding stock of Shared Telcom Services, Inc., a
provider of local and long distance telecommunications services in Indianapolis.
NuVox paid $10.4 million in cash and assumed certain liabilities
of Shared
Telcom. The acquisition has been accounted for using the purchase method of
accounting.

American Telecommunications of Charleston
Acquisition

On February 1, 2001, NuVox purchased all of the
outstanding stock of American Telecommunications, Inc. of Charleston and an
affiliated company, a Charleston, South Carolina based interconnect equipment
and services company. NuVox paid $1.6 million in cash, issued 209,059 shares of common stock valued at $0.8 million and
assumed $0.3 million of liabilities of American Telecommunications. The acquisition has
been accounted for using the purchase method of accounting.

38

Operating StatisticsThe following table
      provides selected operational data:

|                                                        |  | As of December 31,
|------------------------------------------------------- |  | ------------------
|                                                        |  | 2001              
|Markets in operation                                    |  |                   
|Addressable market - business voice lines (in millions) |  |                   
|Addressable market - total voice lines (in millions)    |  |                   
|Total access lines in service(a)                        |  |                   
|On-net access lines in service(b)                       |  |                   
|Total customers served (a)                              |  |                   
|Customers served, on-net(b)                             |  |                   
|Annualized December revenues                            |  |                   
|On-net December revenues per broadband customer         |  |                   
|December gross margin (%)                               |  |                   
|Voice switches installed                                |  |                   
|ATM switches installed                                  |  |                   
|Central office collocations in service                  |  |                   
|Sales employees                                         |  |                   
|Total employees                                         |  |                   

---

|(a) | Includes 16,907 and 25,242 resale
      lines at December 31, 2001 and 2000, respectively. NuVox expects that the
      number of resale lines will continue to decrease as we pursue our business
      strategy of providing services primarily over our own network
      platforms.                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | On-net refers to services
      provided to customers over our own network platforms. During the year
      ended December 31, 2001, on-net lines installed totaled 115,123 lines (a
      269% year-to-year increase in on-net lines installed), average installs
      per day increased from 269 in December 2000 to 678 in December 2001 and
      median provisioning intervals decreased from 43 days in December 2000 to
      34 days in December 2001. All customers have signed either one, two or
      three year contracts.

Results of Operations

Inasmuch as we have
significantly increased the scope and size of our operations, our revenues and
expenses for the year ended December 31, 2001 were significantly greater than
the revenues and expenses for the year ended December 31, 2000. Also, since we
are using the purchase method of accounting for acquisitions, we have only
recognized revenues and related operating costs resulting from these
transactions since the respective acquisition dates.

39

Year Ended December 31, 2001 Compared to Year
Ended December 31, 2000

REVENUE

Our revenues increased
487% to $83.0 million for the year ended December 31, 2001 from $14.1 million
for the year ended December 31, 2000. The substantial increase in revenue
reflects the increase from five operational markets in service on January 1,
2000 to 30 operational markets in service on January 1, 2001 (including 16
markets acquired in the TriVergent merger on November 1, 2000), improvements in
sales and provisioning productivity, and the impact of our development
activities and acquisitions during 2000 and 2001. Revenues for the year ended
December 31, 2001 attributable to the five markets in service on January 1, 2000
totaled $18.7 million, a 139% increase over $7.8 million of revenues
attributable to those markets in 2000. Revenues attributable to core broadband
products increased 473% from $10.7 million in 2000 to $61.4 million in
2001.

We generate revenues from:

- local calling services, including basic voice
  calling services and advanced local features such as call waiting and call
  forwarding,
- long distance services, which include a full range
  of domestic, international and toll-free long distance services,
- dedicated, high speed Internet access services,
  including DSL Internet access,
- website design and development, web page hosting
  and domain name services, audio conferencing, and remote access
  service,
- advanced data services, such as high speed data
  transmission and unified voice mail, e-mail and fax messaging services, local
  and wide area network management and virtual private networks,
- access charges, which we earn by connecting our
  customers to their selected long distance carrier for outbound calls or by
  delivering inbound long distance traffic to the local service customers of
  long distance carriers,
- reciprocal compensation, which entitles us to
  compensation for terminating local calls made by customers of other carriers
  to our customers, and
- network design and installation services and
  telecommunications equipment sales.

We price our local
calling services competitively with those of the incumbent telephone companies
and offer our customers combined service discounts designed to give them
incentives to purchase bundled local, long distance and data services under one,
two and three year commitments.

Local voice service revenues for the year ended
December 31, 2001 and 2000 were $48.6 million and $7.5 million, respectively (of
which $37.6 million and $6.2 million, respectively, were derived from services
provided on-net). Local voice service revenues include the monthly recurring
charges for basic service, charges for advanced local features and reciprocal
compensation. Long distance service revenues for the year ended December 31,
2001 and 2000 were $12.1 million and $2.6 million, respectively. Revenues
generated from Internet access, web, data and other services and products for
year ended December 31, 2001 and 2000 were $22.3 million and $4.0 million
respectively.

As a result of the
TriVergent and Shared Telecom acquisitions, our revenues include revenues from
resale services. Resale lines in service declined 33% to 16,907 at December 31,
2001 (representing 11% of total lines in service) from 25,242 at December 31,
2000 (representing 42% of total lines in service). Resale revenues for the year
ended December 31, 2001 totaled $14.9 million. Resale revenues are expected to
decrease as a percentage of total revenues as we pursue our business strategy of
providing services primarily over our own networks and transition business
resale customers to such networks.

40

A significant contributor to our overall revenue
growth has been the addition of new markets as well as the growth in existing
markets. Annualized revenues increased to $107.6 million based on December 2001
revenues from $46.8 million based on December 2000 revenues (a 130% year-to-year
increase). Annualized broadband revenues increased 249% from $25.7 million and
55% of total revenues in December 2000 to $89.8 million and 84% of total
revenues in December 2001. Annualized revenues for the five markets in service
as of January 1, 2000 increased to $25 million, based on December 2001 revenues,
from $10.7 million based on December 2000 revenues (a 134% year-to-year
increase). We continue to grow our revenue base as evidenced by the total number
of access lines in service increasing to 153,363 at December 31, 2001, of which
136,456 were on-net, as compared to 59,871 access lines in service at December
31, 2000, of which 34,629 were on-net. Total customers have grown to 35,763 as
of December 31, 2001, of which 11,085 were served on-net, as compared with
29,993 customers at December 31, 2000, of which 3,990 were served on-net.

COST AND EXPENSES

Our cost of
communication services amounted to $64.8 million for the year ended December 31,
2001 compared to $11.9 million for the same period in 2000. The increase in cost
of communication services resulted from the deployment of our networks and
growth in access lines in service, and correlates to the increase in revenue
between the year ended December 31, 2001 and 2000. Gross margin increased to 22%
of revenue for the year ended December 31, 2001 as compared with a gross margin
of 16% in the year ended December 31, 2000, as a result of the revenue and
access line growth, and continued improvement in the utilization of our network
facilities. Gross margin in the fourth quarter of 2001 was 29% as compared to
13% in the fourth quarter of 2000. Our cost of communication services includes
recurring costs associated with

- leasing the high capacity transport facilities
  that connect our switching equipment to our equipment located in incumbent
  telephone companies central offices,
- leasing the T-1 access, unbundled local loop lines
  and other customer access facilities that connect our customers to our
  networks,
- leasing and obtaining electrical power for our
  collocation facilities,
- leasing space used to collocate our customer
  access equipment in incumbent telephone companies central offices,
- purchasing long distance services for resale to
  our customers, and
- providing Internet access to our
  customers.

We have interconnection agreements with Southwestern
Bell, Ameritech, BellSouth, GTE/Verizon, Cincinnati Bell and Sprint/United for
network and collocation facilities. The costs to lease the local loop lines and
high-capacity digital transport facilities from incumbent telephone companies
vary by company and are regulated by state authorities. We believe that there
are multiple vendors of high-speed transport facilities in each of our markets
in addition to the incumbent telephone company. These vendors are an alternate
source for transport facilities and generally provide these facilities at lower
costs than those charged by the incumbent telephone companies. We expect that
the total cost of leasing communications services will increase with the volume
of customers, and expect these costs to be a significant part of ongoing costs
of services.

We have agreements with
WorldCom, Inc., Qwest Communications and Global Crossing to provide us with long
distance transmission services. These agreements provide for the resale of long
distance services on a per-minute basis and the Global Crossing agreement has a
minimum usage requirement. We expect to exceed this minimum usage requirement
over the life of the agreement. We also expect that our total costs for
transmission capacity will increase as our customers long distance

41

calling volume increases, and that these costs will
be a significant portion of the costs we incur to provide long distance
services.

The primary expenses
associated with providing Internet access to customers are the cost of
interconnecting our network with national Internet service providers and the
cost of hosting or paying for the hosting of web services.

Our selling, general
and administrative expenses increased to $101.9 million for year ended December
31, 2001 compared to $51.7 million for the same period in 2000. The increase in
selling, general and administrative expenses is primarily due to increases in
the number of employees from 247 at January 1, 2000 to 1,133 at December 31,
2000 and other costs associated with the expansion of our networks and services.
However, selling, general and administrative expenses remained relatively
constant throughout 2001 and declined to 123% of revenues in 2001 from 366% of
revenues in 2000.

Our selling, general
and administrative expenses include salaries and related personnel costs,
facilities expenses, sales and marketing expenses, information systems costs,
education and training costs, and professional services and consulting fees. As
a result of cost containment measures being taken, we do not expect significant
increases in selling, general and administrative expenses other than expenses
directly related to the growth in our customer base. We employ a direct local
sales force in each of our markets. We use quota-based commission plans and
incentive programs to compensate our sales personnel. We supplement our direct
sales force through the use of agents such as value-added resellers and system
integrators, who are compensated on a commission basis. We also use print and
other media advertising campaigns to a limited extent to create product and
brand awareness.

In connection with the
TriVergent merger, a portion of the purchase price was allocated to the
intrinsic value of the unvested portion of NuVox options issued to TriVergent
employees. This amount totaled $6.0 million, and was recorded as unearned
stock-based compensation and included in stockholders equity in accounting for
the transaction as of November 1, 2000. This intrinsic value of the unearned
stock-based compensation is being amortized over the remaining vesting period of
the related options through 2003. Accordingly, $2.8 million and $430,000 was
recorded as amortization of stock-based compensation in the years ended December
31, 2001 and 2000, respectively.

Depreciation and
amortization expense increased to $66.2 million for the year ended December 31,
2001 from $18.0 million for the same period in 2000, including amortization
of goodwill totalling $15.8 million and $2.3 million, respectively. This reflects the
completion of the deployment of our 30 networks, as well as the recording of
amortization of intangible assets related to acquisitions.

Interest expense for
the year ended December 31, 2001 was $13.3 million as compared to interest
expense of $4.6 million in the same period in 2000. The increase in interest
expense relates to borrowings and commitment fees under our expanded senior
secured credit facility which replaced the former facility on November 1, 2000.
See Liquidity and Capital Resources below.

Interest income is
earned on the short-term investment of available cash. Interest income decreased
from $4.2 million in the year ended December 31, 2000 to $1.8 million in the
same period in 2001, due to decreases in our average cash balances.

The $5.7 million
unrealized loss on derivative instrument during the year ended December 31, 2001
is attributable to changes in the fair value of our interest rate swaption
agreement and interest rate cap and floor agreement. The $5.0 million loss on
write-offs of investments is attributable to the cessation of operations by two
companies in which we had such investments.

We had an operating
loss of $152.7 million and negative adjusted EBITDA of $83.7 million for the
year ended December 31, 2001, compared to an operating loss of $69.4 million and
negative adjusted EBITDA of $49.4 million for the year ended December 31, 2000.
We expect to continue to experience operating losses and negative adjusted
EBITDA as we expand our operations and grow our customer base, although the
amounts have declined 24% from a peak negative adjusted EBITDA loss of $23.0

42

million for the three months ended March 31, 2001 to
$17.4 million for the three months ended December 31, 2001.

The implementation of
statement of Financial Accounting Standard (SFAS) No. 133, Accounting for Derivative Instruments and Hedging
Activities, on January 1, 2001 resulted in a
$2.5 million cumulative loss due to change in accounting principle recorded
during 2001.

Our net loss for the
year ended December 31, 2001 was $177.3 million compared to $72.7 million for
the year ended December 31, 2000.

Year Ended December 31, 2000 Compared to Year
Ended December 31, 1999

REVENUES

Our revenues increased
to $14.1 million for the year ended December 31, 2000 from $452,000 for the year
ended December 31, 1999. The substantial increase in revenue reflects the impact
of our continued development activities and the increase from five operational
markets in service as of December 31, 1999 to 30 operational markets at December
31, 2000.

Local voice service revenues for the years ended
December 31, 2000 and 1999 were $7.5 million and $150,000, respectively (of
which $6.2 million and $150,000, respectively, were derived from services
provided on-net). Local voice service revenues include the monthly recurring
charge for basic service, charges for advanced local features, reciprocal
compensation and, to a lesser extent, non-recurring charges for installation of
service. Long distance service revenues for 2000 and 1999 were $2.6 million and
$48,000, respectively. Revenues generated from Internet access, web, data and
other services and products for 2000 and 1999 were $4.0 million and $255,000,
respectively.

A significant
contributor to our overall revenue growth has been the addition of new markets
as well as the growth in our existing markets. Annualized revenues increased to
$46.8 million based on December 2000 revenues from $2.5 million based on
December 1999 revenues. Annualized revenues for the five markets in service as
of December 31, 1999 increased to $10.7 million, based on December 2000
revenues. We continue to grow our revenue base as evidenced by the total number
of access lines in service increasing to 59,871 at December 31, 2000, of which
34,629 were on-net, as compared to 3,458 on-net access lines in service at
December 31, 1999. Total customers grew to 29,993 as of December 31, 2000, of
which 3,990 were served on-net, as compared with 251 total on-net customers at
December 31, 1999.

COST AND EXPENSES

Our cost of
communication services amounted to $11.9 million for the year ended December 31,
2000 compared to $496,000 for the year ended December 31, 1999. The increase in
cost of communication services resulted from the deployment of our networks and
growth in access lines in service, and correlates to the increase in revenue
from 1999 to 2000. Gross margin increased to 16.1% of revenue for the year ended
December 31, 2000 as compared with a negative gross margin of 9.7% in the year
ended December 31, 1999. The increase in gross margin is due to more efficient
utilization of leased transport and customer access facilities as the customer
base has increased in each of our markets.

43

Our selling, general
and administrative expenses increased to $51.7 million for the year ended
December 31, 2000 compared to $16.6 million in fiscal 1999. The increase in
selling, general and administrative expenses is primarily due to increases in
the number of employees and other costs associated with the expansion of our networks and
services. We added 886 employees, including an additional 163 sales employees,
between December 31, 1999 and December 31, 2000 as 25 additional markets became
operational, including 16 former TriVergent markets.

A total of $430,000 was recorded as amortization of
stock-based compensation in 2000.

Depreciation and amortization expense increased to
$18.0 million for the year ended December 31, 2000 from $2.0 million for 1999. This
reflects the completion of networks and initiation of services in 30 markets,
including 16 former TriVergent markets, by December 31, 2000, as well as the
recording of amortization of intangible assets related to the TriVergent and
Shared Telcom transactions.

Interest expense for
the year ended December 31, 2000 was $4.6 million as compared to interest
expense of $215,000 in 1999. The increase in interest expense relates to
borrowings and commitment fees under our former senior secured credit facility
and our expanded senior secured credit facility which replaced the former
facility on November 1, 2000. See Liquidity and Capital Resources
below.

Interest income is
earned on the short-term investment of available cash. Interest income increased
from $1.5 million in 1999 to $4.2 million in 2000, due to increases in our
average cash balances.

We had an operating
loss of $69.4 million and negative adjusted EBITDA of $49.4 million for the year
ended December 31, 2000, compared to an operating loss of $18.6 million and
negative adjusted EBITDA of $16.6 million for 1999.

Our net loss for the
year ended December 31, 2000 was $72.7 million compared to $17.3 million for
1999.

Liquidity and Capital Resources

As of December 31,
2001, we had $47.0 million of cash and short-term investments, and $63.8 million
of undrawn financing committed under our senior secured credit facility,
providing total available capital of $110.8 million, and our net
debt-to-invested-equity ratio was 21.25%.

Our financing plan is
predicated on obtaining the funding required for each market to reach positive
free cash flow prior to committing to the development of that market. By using
this approach, we seek to avoid being in the position of seeking additional
capital to fund a market after we have already made a significant capital
investment in that market. We believe that, by raising all required capital
prior to making any commitments in a market, we can raise capital on more
favorable terms and conditions.

As a result of our
review during the second quarter of 2001 of our current and future business
plans, financial position, market position, growth opportunities, operational
and regulatory challenges, and other factors affecting our business, we
determined that it was prudent and in the best interests of our investors to
raise additional equity capital to fund the ongoing operations of our business.
Pursuant to a rights offering during the third quarter of 2001, we raised an
additional $87 million of equity from our existing investors. We had originally
targeted raising $75 million but increased the size of the offering due to
over-subscriptions. To further increase our financial flexibility, we plan to
seek additional debt, lease and/or equity financing but have not as yet secured
any commitments for any such additional financing. The risks we face that could
cause us not to be fully funded include, but are not limited to, our ability to
successfully market our services to current and new customers, manage and
control our costs, successfully transfer new customers to our networks
and borrow under our credit facility or access alternative financing
sources.

44

As of December 31,
2001, we have raised total equity and debt capital of $775.0 million, consisting
of:

- equity capital of $400.0 million invested by NuVox
  stockholders,
- equity capital of $150.0 million invested by
  former TriVergent stockholders prior to the merger of TriVergent and Gabriel
  on November 1, 2000, and
- debt capital of up to $225.0 million under
our senior secured credit facility.

Gabriel Communications
Finance Company, an indirect wholly-owned subsidiary of NuVox, secured an
expanded $225 million senior secured credit facility on November 1, 2000, which
replaced its then existing $90 million senior credit facility. Approximately
$98.2 million was drawn at that date to repay the previous secured credit
facilities of Gabriel Communications Finance and TriVergent and to pay other
expenses relating to the TriVergent merger. The $225 million credit facility
consists of a $40 million term loan facility, a $60 million revolving credit
facility, and $125 million in two-year delayed draw term loan facilities,
including a $45 million facility provided by Nortel Networks, Inc. to provide
financing for the purchase of equipment and services from Nortel Networks.
Borrowings are available, subject to the satisfaction of certain terms and
conditions, primarily to provide financing for capital expenditures and working
capital and the credit facility is predicated on our 30-market business plan.
Pursuant to an amendment to the terms of the facility effective September 21,
2001, borrowings are limited to no more than $175 million prior to April 1,
2002, $200 million prior to June 30, 2002 and $225 million thereafter. The
lenders commitments to honor borrowing requests under the two-year delayed draw
term loan facilities expire on November 1, 2002 if borrowings in the amount of
their respective commitments are not drawn on or before such date. Quarterly
repayment of outstanding borrowings under the term loan and revolving credit
facilities will commence on December 31, 2003 and continue through September 30,
2006. Interest on outstanding borrowings varies based on the borrowers leverage
ratio (the interest rate at December 31, 2001 was 6.46%). The initial commitment
fee on the unused portion of the credit facility was 1.50% per annum, payable
quarterly, and the rate is reduced based upon usage (the applicable commitment
fee percentage at December 31, 2001 was 0.75%).

Obligations under the
credit facility are guaranteed by NuVox, its direct wholly-owned subsidiary,
Gabriel Communications Properties, Inc., and all of the existing and
subsequently acquired subsidiaries of the borrower. The facility is secured by a
pledge of all of the capital stock of Gabriel Communications Properties, Inc.,
the borrower and each of the borrowers subsidiaries and a security interest in
the assets of Gabriel Communications Properties, Inc., other than its
unrestricted subsidiaries, and of the borrower and each of the borrowers
subsidiaries.

45

The credit facility
contains restrictive covenants that, among other things, impose limitations on
indebtedness, liens, investments, acquisitions, capital expenditures, dividends
and other specified transactions and payments, and require the borrower and
NuVox to maintain operating and financial performance measures at the end of
each calendar quarter, including not exceeding specified levels of adjusted
EBITDA loss, achieving specified minimum levels of adjusted revenues (gross
revenues less resale, carrier access and reciprocal compensation revenues),
access lines and gross profit and maintaining specified levels of minimum
available cash (which, for purposes of the covenants, means the sum of the
unused commitments under the credit facility plus our cash and cash
equivalents). For each fiscal quarter ending on or prior to June 30, 2003, we
must meet or exceed the following financial covenants:

|     |  |   | Mininum AdjustedRevenues |  | MinimumAccess Lines |  |   | Minimum GrossProfit |  | Maximum adjustedEBITDALoss/Minimumadjusted
      EBITDA |                    | MinimumAvailable
      Cash |  
|---- |  | - | ------------------------ |  | ------------------- |  | - | ------------------- |  | ------------------------------------------------------- | ------------------ | --------------------------- | -
|     |  |   |                          |  |                     |  |   |                     |  |                                                         |                    |                             |  
|1Q02 |  | $ | 25.7
million             |  | 162,000             |  | $ | 11.5
million        |  | $                                                       | (14.1
    million) |                             | $
|2Q02 |  |   | 31.4
million             |  | 196,000             |  |   | 14.9
million        |  |                                                         | (9.8
million)      |                             |  
|3Q02 |  |   | 37.7
million             |  | 233,000             |  |   | 18.8
million        |  |                                                         | (5.3
million)      |                             |  
|4Q02 |  |   | 44.4
million             |  | 272,000             |  |   | 23.2
million        |  |                                                         | 100,000            |                             |  
|1Q03 |  |   | 51.8
million             |  | 313,000             |  |   | 30.4
million        |  |                                                         | 8.9 million        |                             |  
|2Q03 |  |   | 59.0
million             |  | 356,000             |  |   | 34.4
million        |  |                                                         | 13.0 million       |                             |  

The credit facility
contains provisions for increases and decreases of such financial covenant
amounts in the event of certain acquisitions or asset sales, respectively, for
which total consideration, when aggregated with the consideration paid or
received in all other acquisitions or asset sales since September 21, 2001 or
since the date of any future adjustment, exceeds $5 million in the aggregate.

We have heretofore maintained full compliance with each of our applicable financial
covenants. However, there can be no assurance that we will be able to achieve
the results required by our financial covenants and actual results may vary
materially from those required by our credit facility as a result of the risks
we face, including the risks that we may not be able to achieve the required
levels of sales growth and revenue per line. The restrictive covenants in our
credit facility effectively prohibit us from paying any cash dividends on our
common stock and preferred stock for the foreseeable future.

Borrowings under the
credit facility during the year ended December 31, 2001 totaled $63.0 million
(including $18 million borrowed from Nortel Networks) and outstanding borrowings
totaled $161.2 million at December 31, 2001 (including $32 million of
outstanding borrowings from Nortel Networks) at an interest rate of 6.46%.

46

The following tables
summarize, as of December 31, 2001, our contractual payment obligations related
to existing debt and lease agreements, as well as various other obligations and
contingent commitments:

|                                   |  | Payments Due by Period (in thousands)
|---------------------------------- |  | -------------------------------------
|Contractual Obligations            |  | Total                                
|Long Term Debt                     |  | $ 163,898                            
|Lease Obligations                  |  | 43,381                               
|Other Long-Term Obligations(1)     |  | 10,700                               
|Total Contractual Cash Obligations |  | $217,979                             

---

|(1) | Long distance capacity agreements
|--- | ---------------------------------

|                                   |  | Amount of Commitment ExpirationPer Period (in thousands)
|---------------------------------- |  | --------------------------------------------------------
|Other Commercial Commitments       |  | TotalAmountsCommitted                                   
|Lines of Credit                    |  | $                                                      
|Standby Letters of Credit          |  | 1,236                                                   
|Guarantees                         |  |                                                        
|Standby Repurchase Obligations     |  |                                                        
|Total Other Commercial Commitments |  | $1,236                                                  

For the year ended
December 31, 2001 and 2000, capital expenditures totaled $86.8 million and $93.7
million, respectively. Such capital expenditures have included the costs of
assets necessary for deploying the networks in our initial 30 markets (including capital expenditures associated with the
former TriVergent markets since the date of acquisition),
establishing our network operations control centers and providing the operations
and other support systems necessary for our business. We estimate that our
capital expenditures for 2002 will total approximately $45.0 million.

We will continue to
deploy capital for the development of our existing markets and to allow for
demand-driven capital spending. In response to demand initially encountered for
our services, we may consider the development of additional markets beyond our
initial 30 markets. However, we intend to continue our financing plan of
obtaining the funding necessary to support additional markets prior to
committing to the development of any additional markets. In addition, we may
require additional funding to take advantage of additional opportunities, effect
acquisitions, develop new services or otherwise respond to changing business
conditions or developments in the telecommunications industry.

47

The actual amount and
timing of our future capital requirements may differ materially from our
estimates as a result of, among other things

- a change in or inaccuracy of our development plans
  or projections,
- changes in our working capital
  requirements,
- the demand for our services,
- regulatory and technological developments,
  including new opportunities in the telecommunications industry, and
- the consummation of
acquisitions.

Our revenues and our
costs of deploying our networks and operating our business will depend on a
variety of factors, including

- the extent of price and service competition for
  telecommunications services in our markets,
- our ability to develop, acquire and integrate the
  necessary operations support systems,
- the number of customers and the services for which
  they subscribe and the time required to provision those customers,
- our ability to implement on-going cost containment
  measures and to avoid significant increases in selling, general and
  administrative expenses, and
- the impact of changes in technology and
  telecommunication regulations.

Actual costs and revenues may vary from expected
amounts, possibly to a material degree, and these variations may affect our
future capital requirements.

Critical Accounting Policies and Estimates

Our consolidated
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of our
financial statements requires us to make estimates and assumptions that affect
the reported amounts of our assets and liabilities and the disclosure of our
contingent assets and liabilities at the date of the financial statements and
the reported amounts of our revenues and expenses during the reporting period.
We base our estimates and assumptions upon historical experience and on various
other factors that we believe to be reasonable based upon available information.

The following critical accounting policies, among
others, involve subjective and complex judgments about inherently uncertain
matters and are important to the portrayal of our financial condition and
results:

- valuation of long-lived assets;
- estimating the allowance for doubtful accounts
  receivable; and
- valuation of goodwill and acquired intangible
  assets.

48

Long-lived
assets.Our long-lived assets include
network equipment, leasehold improvements, computer hardware and software,
office equipment, furniture and fixtures, vehicles, and
construction-in-progress. We record these assets at our cost and depreciate our
carrying values using the straight-line method over their estimated useful
lives. The estimated useful lives of our network equipment range from five to
seven years. The estimated useful lives of our other property and equipment
range from two to seven years.

We would reduce the
carrying value of an asset if we determined that an impairment in value has
occurred. We measure the recoverability of the carrying amount of an asset by
comparing such amount to our estimate of the future undiscounted cash flows that
we expect will be generated by our use of that asset. We would recognize an
impairment loss if we determined that the amount of such cash flows was likely
to be less than the carrying amount of the asset. Factors which could cause an
impairment loss would include obsolescence, failure of particular equipment to
perform as we expected, or technological changes. We have not recognized any
impairment loss through December 31, 2001.

Allowance for
doubtful accounts.When we prepare our
financial statements, we must make estimates of the collectibility of our
accounts receivable. To do this, we perform on-going credit evaluations of our
end-user customers and, based upon payment history and the customers credit
worthiness, we request deposits from customers when we determine this is prudent
based on the customers credit profile. We continuously monitor collections and
payments from our customers, including other carriers, and maintain a provision
for estimated credit losses based on historical experience and any specific
customer collection issues that we have identified. While such credit losses
have historically been within our expectations and the provisions we have
established, we cannot guarantee that we will continue to experience the same
rates of credit losses that we have in the past. As of December 31, 2001, our
accounts receivable balance was $18 million, net of our allowance for doubtful
accounts of $2.7 million. During 2001, we increased our provision for doubtful
accounts by $3.8 million, or 3.3% of revenues, and we recorded write-offs of
uncollected accounts receivable totalling $2.1 million.

Goodwill and
acquired intangible assets.We reassess the carrying value of
goodwill and acquired intangible assets whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. Factors
we consider important which could trigger an impairment review include
the

- significant underperformance relative to
  historical or projected future operating results,
- significant changes in the manner of our use of
  the acquired assets or the strategy for our overall business,
- significant negative industry or economic trends,
  and
- significant declines in the stock prices of
  publicly-traded comparable companies.

When we determine that the carrying value of goodwill and acquired intangible
assets may not be recoverable based upon the existence of one or more
of the above indicators of impairment, we measure any impairment based on a
projected cash flow method. Through December 31, 2001, projected cash flows were
analyzed on an undiscounted basis and without interest charges in accordance
with Statement of Financial Accounting Standards No. 121. Under this methodology
we have not recorded any impairment loss through December 31, 2001.

49

On January 1, 2002,
Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and
Other Intangible Assets became effective for the Company and, as a result, we
will cease to amortize our remaining $228.6 million of goodwill and we will
assess our unamortized goodwill at least annually for impairment in accordance
with the provisions of SFAS No. 142.

Impact of Recently Issued Accounting Standards

In June 2001, the FASB
issued SFAS No. 141,Business
Combinations. This standard eliminates the
pooling of interests method of accounting for business combinations and requires
the purchase method of accounting to be used for business combinations. The
standard is effective for acquisitions initiated after June 30, 2001.

In June 2001, the FASB
also issued SFAS No. 142,Goodwill and Other
Intangible Assets. We adopted this standard
on January 1, 2002. Under SFAS 142, goodwill and acquired intangible assets with
indefinite lives will no longer be amortized. Our goodwill amortization for the
years ended December 31, 2001 and 2000 was $15.8 million and $2.3 million,
respectively. As of December 31, 2001, we had unamortized goodwill of $228.6
million, which is subject to the provisions of SFAS No. 142. In lieu of
amortization, we are required to perform an initial impairment review of our
unamortized goodwill in 2002 and an impairment review at least annually
thereafter through the application of a fair value-based test. SFAS No. 142
identifies discounted projected cash flows, multiples of earnings of revenue, or
similar performance measures as appropriate techniques in determining fair
value. Based upon a preliminary evaluation under these new guidelines, we
estimate that a possibly substantial goodwill impairment loss will be recognized
upon implementation of SFAS No. 142, based upon current market conditions. We
will complete our initial impairment review of our unamortized goodwill during
the first half of 2002.

In June 2001, the FASB
issued SFAS No., 143,Accounting for Asset
Retirement Obligations.We will adopt this
standard on January 1, 2003. This standard applies to legal obligations
associated with the retirement of tangible long-lived assets that result from
acquisitions, construction, or development or the normal operation of long-lived
assets. We believe that the adoption of this standard will not have a material
impact on our consolidated financial position or results of operations.

In August 2001, the
FASB issued SFAS No. 144,Accounting for the
Impairment or Disposal of Long-Lived Assets.
This standard addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. This standard supersedes SFAS No. 121,Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of.Based upon a preliminary evaluation we do not believe that the adoption
of this standard will have a material impact on our consolidated financial
position or results of operations upon adoption on January 1, 2002.

50

Item 7A. Quantitative and Qualitative Disclosures
About Market Risk.

At December 31, 2001
and December 31, 2000, the carrying value of our debt obligations was $163.9
million and $98.2 million respectively and the weighted average interest rate on
our debt obligations was 6.46% and 11.02% respectively. Because the interest
rates on our debt obligations are at floating rates, we are exposed to interest
rate risks. If market interest rates had been 1% higher, our interest expense
for the year ended December 31, 2001 and 2000 would have been increased by $1.3
million and $337,000 respectively.

The terms of our senior secured credit facility
require us to maintain agreements to hedge against such interest rate risks with
an aggregate notional principal amount of not less than 50% of the aggregate
principal amount of the outstanding indebtedness thereunder. Accordingly,
effective March 30, 2001, we have in place a derivative financial agreement
which includes an interest rate swaption agreement and interest rate cap and
floor agreements. This agreement limits our exposure to and benefits from
interest rate fluctuations on our variable rate debt within a certain range of
rates. At December 31, 2001, the fair value of this interest rate collar
agreement was $(9.3) million. The fair value of this interest rate collar
agreement is estimated based on quotes from brokers and represents the estimated
amount we would expect to pay to terminate the agreement on December 31, 2001.
During 2001, we recorded a $5.7 million unrealized loss on derivative instrument
and a $2.5 million cumulative loss due to change in accounting principle, both
of which are attributable to decreases in the fair value of this interest rate
collar agreement.

As we expand our
operations, we may begin to use various other financial instruments, including
derivative financial instruments, in the ordinary course of business, for
purposes other than trading. These instruments could include letters of credit,
guarantees of debt and interest rate swap agreements. We do not intend to use
derivative financial instruments for speculative purposes. Similar to the
existing derivative financial agreement utilized by the Company, interest rate
swap agreements would be used to reduce our exposure to risks associated with
interest rate fluctuations. By their nature, these instruments involve risk,
including the risk of nonperformance by counterparties, and our maximum
potential loss may exceed the amount recognized in our balance sheet. We will
attempt to control our exposure to counterparty credit risk through monitoring
procedures.

Item 8. Financial Statements and Supplementary
Data.

The financial
statements listed in Item 14, including the notes thereto and the report thereon
of KPMG LLP, are included in this report beginning on page F-1.

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

Not applicable.

51

PART III

Item 10. Directors and Executive Officers of the
Registrant.

The following table sets forth the executive officers
and directors of NuVox.

|Name                       | Age | Position(s)                                                                       
|-------------------------- | --- | ----------------------------------------------------------------------------------
|Executive Officers         |     |                                                                                   
|David L. Solomon           | 42  | Chief Executive Officer, Chairman and Director                                    
|G. Michael Cassity         | 52  | President and Chief Operating Officer and Director                                
|John P. Denneen            | 61  | Executive Vice President - Corporate Development and Legal Affairs and Secretary  
|Marguerite A. Forrest      | 47  | Senior Vice President - Human Resources and Administration and Assistant Secretary
|Michael E. Gibson          | 43  | Senior Vice President and Chief Financial Officer                                 
|Michael C. Morey           | 43  | Senior Vice President - Sales and Marketing                                       
|Paul A. Pitts              | 49  | Senior Vice President - Operations, Planning and Engineering                      
|Josephine Young            | 50  | Senior Vice President - Chief Information Officer                                 
|Non-Management Directors   |     |                                                                                   
|Robert R. Gheewalla        | 34  | Director                                                                          
|Charles S. Houser          | 58  | Vice Chairman and Director                                                        
|L. Watts Hamrick, III      | 42  | Director                                                                          
|Michael R. Hannon          | 41  | Director                                                                          
|William Laverack, Jr.      | 44  | Director                                                                          
|G. Jackson Tankersley, Jr. | 52  | Director                                                                          
|Jack Tyrrell               | 55  | Director                                                                          

NuVoxs board of directors is classified into three
classes of three board seats each. The terms of Messrs. Tankersley, Gheewalla
and Tyrrell will expire in 2002, the terms of Messrs. Hannon, Houser and Solomon
will expire in 2003 and the terms of Messrs. Cassity, Hamrick and Laverack will
expire in 2004. There are no arrangements or understandings between any of the
directors, executive officers, or any other persons pursuant to which any of
NuVoxs directors or executive officers have been selected for their respective
positions.

The board of directors has an executive committee, a
finance committee, an audit committee and a compensation committee. Directors
are not compensated for their services as directors, but non-employee directors
are reimbursed for expenses incurred in connection with their attendance at
board and committee meetings.

Executive Officers

David L.
Solomon, chief executive officer, chairman
and a director of NuVox, is an experienced telecommunications entrepreneur. He
served as executive vice president and chief financial officer of Brooks Fiber
from 1994 until its acquisition by WorldCom in 1998. During this period, he
played a major role in its capital raising and growth activities, raising more
than $1.5 billion of debt and equity and completing numerous acquisitions. Prior
to joining NuVox in December 1999, Mr. Solomon served as an advisor to Diveo
Broadband Networks, Inc., a competitive telecommunications provider with
operations throughout South America, and he also serves as a director of that
company. Mr. Solomon is also an investment director and founder of Meritage
Private Equity Fund, L.P., a private investment fund specializing in communications network and services
companies. Prior to joining Brooks Fiber, he was a partner of KPMG LLP, where he
gained more than 13 years public company accounting and financial experience.
He is a member of the American Institute and Tennessee Society of CPAs.

52

G. Michael
Cassity, president and chief operating
officer and a director of NuVox, since the TriVergent merger, became
TriVergents president and chief operating officer and a director in March 2000.
He has more than 29 years of leadership experience in the telecommunications
industry. Prior to joining TriVergent, Mr. Cassity served as vice president and
chief procurement officer of BellSouth Corporation, vice president of network
operations for BellSouths northern states, vice president of BellSouths
strategic management unit and vice president of organization planning and
development. Prior to becoming an officer at BellSouth, Mr. Cassity served in
numerous positions including network operations, human resources, strategic
planning, financial management, corporate and community affairs and regulatory
vice president for Tennessee. He is a member of the Board of Directors of Visual
Networks, Inc.

John P.
Denneen, executive vice president  corporate
development and legal affairs, since August 1999 and secretary of NuVox since
November 1998, has more than 35 years of experience in U.S. and international
corporate and business law with particular emphasis on securities transactions,
mergers and acquisitions, corporate finance and joint ventures. Prior to joining
NuVox, Mr. Denneen was a senior partner of Bryan Cave LLP, a leading
international law firm, for over 12 years, where he headed the legal teams that
assisted Brooks Fiber in issuing more than $1.5 billion of debt and equity
securities and completing numerous acquisitions, concluding with its $3 billion
merger with WorldCom, Inc. While at Bryan Cave LLP, Mr. Denneen also represented
several other competitive telecommunications providers in connection with their
capital raising activities.

Marguerite A.
Forrest, senior vice president  human
resources and administration and assistant secretary of NuVox, brings more than
20 years of professional management, operational and technical experience in the
communications industry. Prior to joining NuVox in June 1998, Ms. Forrest served
as vice president and assistant secretary for Brooks Fiber. She was a member of
the start-up management team since that corporation was founded in 1993, charged
with the responsibilities for human resources, corporate administration and
shareholder communication. Previous management and technical experience included
responsibility for drafting and system design activities for Cencom Cable
Associates, Group W Cablevision and Telcom Engineering, Inc. Ms. Forrest is the
sister-in-law of Michael E. Gibson, senior vice president and chief financial
officer of NuVox.

Michael E.
Gibson, senior vice president and chief
financial officer of NuVox since January 2000, is highly experienced in
financial operations in the telecommunications industry. Most recently, Mr.
Gibson has been employed as a financial advisor to telecommunications start-up
companies, playing a major role in negotiating and closing over $250 million of
debt and equity financing during 1999. He served as vice president and treasurer
of Brooks Fiber from that companys inception in 1993 until its acquisition by
WorldCom in 1998. Mr. Gibson oversaw all activities related to financial
operations, planning and analysis, including acquisitions, treasury, SEC
reporting and risk management. Prior to joining Brooks Fiber, Mr. Gibson served
as a finance director for Cencom Cable for five years, with responsibility for
budgeting, financial planning, accounting, payment processing and human
resources. Prior to joining Cencom Cable, Mr. Gibson was an audit manager at
Arthur Andersen & Co., gaining extensive experience in providing auditing
and business advisory services mainly to telecommunications and cable television
companies. Mr. Gibson is the brother-in-law of Ms. Forrest.

53

Michael C.
Morey, senior vice president - sales and
marketing, joined NuVox in March 2001. He has almost 20 years of sales executive
experience in the telecommunications industry. From 2000 to February 2001, Mr.
Morey was the chief executive officer, president and co-founder of NewTERA,
Inc., a next-generation optical exchange carrier based in Sacramento,
California. From 1995 to 2000, Mr. Morey served in various capacities, most
recently as regional vice president, with Electric Lightwave, Inc., an
integrated communications provider. Mr. Morey also held various management
positions for AT&T from 1982 to 1995, including serving as area manager in
St. Louis from 1992 to 1995.

Paul A. Pitts,senior vice president  operations, planning and engineering, joined NuVox at
the time of the TriVergent merger. Before joining TriVergent in May 2000, Mr.
Pitts was employed at South Central Bell, Bellcore, and BellSouth. From 1999 to
2000 he was General Manager of Network Operations for BellSouth in Upstate South Carolina.
He managed a variety of functions, including installation, provisioning,
maintenance, construction, Central Office operations, and engineering. Mr. Pitts
also served BellSouth as Regional Director of Network Systems Support,
overseeing network operating system platforms, performance contracts, and
software security, and as Regional Director of Network Reliability and Systems
Support, supporting the Network Reliability Centers and supervising the Regional
Emergency Control Center and Disaster Recovery Operations.

Josephine Young, senior vice president  chief information officer, joined NuVox in May
2001. She has more than 20 years of leadership, project management, and quality
and process improvement experience in Information Technology and software
management. She has worked in the telecommunications, medical, financial, and
aerospace industries. Ms. Young came to NuVox from Digital Access, Inc. where
she was Senior Vice President/CIO. She also has held leadership positions with
XO Communications, FHP Healthcare, and Southern Pacific Telecommunications. In
her career, Ms. Young had successfully led many high profile, business-critical
projects by building teams, creating internal partnerships, and guiding
professionals in setting and achieving goals.

Non-Management Directors

Robert R.
Gheewalla, a director of NuVox since December
2001, is a managing director of Goldman, Sachs & Co. responsible for its
telecommunications private equity investments. He joined Goldman, Sachs &
Co. in 1989 and became vice president in 1998 and a managing director in 2000.

Charles S.
Houser, vice chairman of NuVox and a director
since November 2000, was a co-founder and chairman of the board of directors and
chief executive officer of TriVergent and has more than 17 years of experience
in the telecommunications industry as an investor and a senior manager. In 1996
and 1997, Mr. Houser was a principal and co-founder of Seruus Ventures, LLC and
Seruus Telecom Fund LP, both venture capital firms specializing in
telecommunications companies. From 1989 to 1996, Mr. Houser was chairman and
chief executive officer of Corporate Telemanagement Group, Inc., a long distance
company that merged with LCI International Inc. in 1995. From 1987 to 1989, Mr.
Houser was president of The Consilium Group, Inc., a venture capital firm. From
1983 to 1987, he was president and in 1986 became chief executive officer of
Tel/Man, Inc., a long distance company that merged with SouthernNet, Inc., where
he also served as chief operating officer. Mr. Houser serves on the board of
directors of Seruus Ventures, LLC; Seruus Telecom Fund, L.P.; Teleco, Inc., a
national telecommunications equipment distributor and manufacturer; iBasis,
Inc., an Internet-based communications carrier; and from 1990 until March 2000,
Summit Financial Corporation, a Greenville, South Carolina-based bank holding
company.

54

L. Watts
Hamrick, IIIhas been a director of NuVox since
November 2000 and previously had been a director of TriVergent since October
1998. Mr. Hamrick has been a senior vice president with Wachovia Capital
Partners, Inc. (formerly First Union Capital Partners, Inc.), an equity and
mezzanine capital investment group of Wachovia Corporation, since March 1995.
Mr. Hamrick joined First Union Capital Partners in 1988. Prior to joining First
Union Capital Partners, Mr. Hamrick was a senior tax consultant at Price
Waterhouse in New York.

Michael R.
Hannon, a director of NuVox since May 2000,
is a partner of J. P. Morgan Partners, LLC, a global private equity fund with
over $30 billion under management. Mr. Hannon has been affiliated with J. P.
Morgan Partners and its predecessors since January 1988. His duties at J. P.
Morgan Partners include being co-head of its Technology, Media and
Telecommunications practice. Mr. Hannon is currently a director of Entercom
Communications.

William Laverack,
Jr., a director of NuVox since December 1998,
has been managing director of Whitney & Co. since 1993. Previously, he was
with Gleacher & Co., Inc. and Morgan Stanley & Co., Incorporated. He is
a director of HOB Entertainment, Inc., NeuroMetrix, Inc., Knology, Inc. and
Informio, Inc.

G. Jackson
Tankersley, Jr., a director of NuVox since
October 2001, is founder and principal of Meritage Private Equity Funds. Prior
to founding Meritage in 1998, he served as a general partner for each of the
private equity partnerships of The Centennial Funds, a venture capital investing
entity he co-founded in 1981. He is a director of Inflow, Ecrix and Masergy,
Meritage portfolio companies.

Jack Tyrrell, a
director of NuVox since November 2000, previously had been a director on
TriVergents board since October 1998. Currently a managing partner at Richland
Ventures, Mr. Tyrrell has been a founding partner of five venture capital funds
since 1985. Mr. Tyrrell has served on the boards of Regal Cinemas, Six Flags,
Oxford Health Plans, Medaphis and Regent Communications and currently serves on
the boards of several private companies.

55

Item 11. Executive Compensation.

The following table
sets forth all compensation awarded, earned or paid for fiscal 1999, 2000 and
2001 to (i) NuVoxs chief executive officer, and (ii) the persons who constitute
the four most highly compensated executive officers of NuVox based upon
compensation earned or paid for fiscal 2001 other than the chief executive
officer, to whom we refer to collectively as the named executive
officers.

Summary Compensation Table

|                                                                                                                  |  |              |  |                     |                        |                                                 |  |                                  |  |               |  |  |  |                      |  |  | Long-Term Compensation
|----------------------------------------------------------------------------------------------------------------- |  | ------------ |  | ------------------- | ---------------------- | ----------------------------------------------- |  | -------------------------------- |  | ------------- |  |  |  | -------------------- |  |  | ----------------------
|                                                                                                                  |  |              |  | Annual Compensation |                        | Securities UnderlyingOptions andWarrants (#)(3) |  | All OtherCompensation($)(4)     
|Name andPrincipal Position                                                                                        |  | Year         |  | Salary ($)          |                        | Bonus ($)(1)                                    |  | Other Annual Compensation ($)(2)
|David L. Solomon,   Chairman and Chief   Executive Officer                                                        |  | 200120001999 |  |                     | 400,000325,000        |                                                 |  |                                  |  | 225,000     |  |  |  | 23,008(5)207,427(5) |  |  |                       
|G. Michael Cassity,   President and Chief   Operating Officer(6)                                                  |  | 200120001999 |  |                     | 300,000  40,000       |                                                 |  |                                  |  | 125,000     |  |  |  | 18,655(7)          |  |  |                       
|John P. Denneen,   Executive Vice President -   Corporate Development and   Legal Affairs and
Secretary           |  | 200120001999 |  |                     | 205,000185,000  70,833 |                                                 |  |                                  |  | 83,25028,333 |  |  |  | 114,342(8)         |  |  |                       
|Michael E. Gibson,   Senior Vice President and   Chief Financial Officer(9)                                       |  | 200120001999 |  |                     | 180,000160,000        |                                                 |  |                                  |  | 64,000      |  |  |  |                   |  |  |                       
|Marguerite A. Forrest,   Senior Vice President -   Human Resources and   Administration and   Assistant Secretary |  | 200120001999 |  |                     | 145,000130,000120,000  |                                                 |  |                                  |  | 52,00024,000 |  |  |  |                   |  |  |                       

---

|(1) | Represents bonuses earned in the
      reported year, which were paid in the following year. The payment of
      bonuses is at the discretion of the compensation committee of the board of
      directors.                                                                                                                                                                                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Except as disclosed in footnotes 5,
      7 and 8, the value of incidental personal perquisites furnished by NuVox
      to the named executive officers during 1999, 2000 and 2001 did not exceed
      the lesser of $50,000 or 10% of the total annual salary and bonus reported
      for the named executive officer.                                                                                                                                                                                                                          
|(3) | Represents shares of NuVox stock
      subject to compensatory stock options and warrants granted during the
      year.                                                                                                                                                                                                                                                                                                                                                                                                                            
|(4) | Reflects matching contributions
      made under NuVoxs 401(k) plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(5) | Mr. Solomon was elected vice
      chairman and chief executive officer of NuVox in December 1999. Represents
      (a) 33,333 shares of common stock awarded in lieu of $100,000 of Mr.
      Solomons bonus award for 2000 and (b) use of a company apartment and
      automobile in St. Louis and reimbursement of travel expense between his
      office in Nashville and his office in St. Louis, in accordance with the
      terms of his employment agreement, which in the aggregate totaled $107,427
      in 2000 and $23,008 in 2001.
|(6) | Mr. Cassity was formerly president
      and chief operating officer of TriVergent and became president and chief
      operating officer of NuVox effective upon the closing of the TriVergent
      merger on November 1, 2000.                                                                                                                                                                                                                                                                                                                   
|(7) | Represents reimbursement of
      relocation expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

56

|(8) | Mr. Denneen was elected executive
      vice president - corporate development and legal affairs of NuVox in
      August 1999. Represents (a) the excess of the fair market value of 30,000
      shares of NuVox common stock sold to Mr. Denneen on September 24, 1999
      over the amount paid by him for such shares, plus an amount reimbursed
      during 1999 for the payment of taxes on such excess, which in the
      aggregate totaled $112,842 and (b) other personal
  benefits.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(9) | Mr. Gibson was elected senior vice
      president and chief financial officer of NuVox in January
    2000.                                                                                                                                                                                                                                                                                                                                                                                      

The following table
sets forth information regarding Series F-1 preferred stock option grants under
the NuVox 2001 Incentive Stock Plan to the named executive officers during the
fiscal year ended December 31, 2001. None of such options was exercisable as of
December 31, 2001 and no stock appreciation rights were granted during 2001.

Option Grants In Last Fiscal Year

|                      | Individual Grants                                       |                                                           
|--------------------- | ------------------------------------------------------- | ----------------------------------------------------------
|Name                  | Number ofsecuritiesunderlyingoptions/warrantsgranted(#) | Percent of totaloptions/warrantsgranted toemployeesin 2001
|5%                    | 10%                                                    
|David L. Solomon      | 2,000,000                                               | 11.17                                                     
|G. Michael Cassity    | 1,500,000                                               | 8.38                                                      
|John P. Denneen       | 700,000                                                 | 3.91                                                      
|Michael E. Gibson     | 400,000                                                 | 2.23                                                      
|Marguerite A. Forrest | 375,000                                                 | 2.09                                                      

---

|(1) | The exercise price was set by the
      compensation committee of NuVoxs board of directors at a price of not
      less than 80% of the fair market value of the Series F-1 preferred stock
      of NuVox on the date of grant in accordance with the terms of the 2001
      Stock Incentive Plan.                                                                                                                                                                                              
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The plan pursuant to which the
      options and warrants were granted provides for earlier expiration dates
      upon the option holders termination of employment.                                                                                                                                                                                                                                                                                                                              
|(3) | All options vest and become
      exercisable as follows: 12/36 upon completion of one year of continuous
      employment subsequent to the date of grant (10/16/01) and an additional
      1/36 upon completion of each full month of continuous employment
      thereafter.                                                                                                                                                                                                                    
|(4) | The dollar amounts under the 5% and
      10% columns were calculated as required by the rules of the Securities and
      Exchange Commission and, therefore, are not intended to forecast possible
      future appreciation, if any, of the price of the stock of NuVox. The
      amounts shown reflect differences between the exercise price and the
      assumed appreciation price at the assumed annual rates of appreciation
      through the tenth anniversary of the dates of
  grant.

57

The following table sets forth information regarding
aggregate common stock option/warrant exercises during the fiscal year ended
December 31, 2001 and the number and value of exercisable and unexercisable
options and warrants to purchase NuVox common stock held by the named executive
officers as of December 31, 2001.

Aggregated Common Stock Option/Warrant Exercises
in Last Fiscal Year andFiscal Year-End Option/Warrant Values

|Name                  |  | SharesAcquired onExercise (#) |  | Number of securitiesunderlying unexercisedoptions/warrants atDecember 31, 2001 (#) |  | Value of unexercisedin-the-moneyoptions/warrants atDecember 31, 2001 ($) (1)
|--------------------- |  | ----------------------------- |  | ---------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------
|                      |  |                               |  | Exercisable                                                                        |  | Unexercisable                                                               
|David L. Solomon      |  |                              |  | 2,369,870                                                                          |  | 566,668                                                                     
|G. Michael Cassity    |  |                              |  | 359,832                                                                            |  | 719,667                                                                     
|John P. Denneen       |  |                              |  | 411,922                                                                            |  | 220,001                                                                     
|Michael E. Gibson     |  |                              |  | 235,897                                                                            |  | 183,334                                                                     
|Marguerite A. Forrest |  |                              |  | 161,537                                                                            |  | 100,001                                                                     

---

|(1) | There is no public market for any
      of NuVoxs securities. However, the aggregate liquidation preferences of
      NuVoxs Convertible Preferred Stock exceed $687 million. Accordingly,
      based on comparable public company valuations, NuVox does not believe that
      the common stockholders would have received any distribution upon a
      liquidation of NuVox at December 31, 2001 and, accordingly, does not
      believe that any of its common stock options were in-the-money at December
      31, 2001.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table sets forth information regarding
participation grants under the NuVox, Inc. 2001 Performance Plan to the named
executive officers during the fiscal year ended December 31, 2001.

Long-Term Incentive Plans  Awards in Last Fiscal Year

|                      |  |                                     |  | Estimated Future Payouts Under Non-Standard Price-Based Plans
|--------------------- |  | ----------------------------------- |  | -------------------------------------------------------------
|Name                  |  | PercentageParticipation in Pool (1) |  | Equity Value at orBelow InitialThresholdAmount               
|David L. Solomon      |  | 24.25                               |  |                                                             
|G. Michael Cassity    |  | 19.00                               |  |                                                             
|John P. Denneen       |  | 4.00                                |  |                                                             
|Michael E. Gibson     |  | 2.75                                |  |                                                             
|Marguerite A. Forrest |  | 2.50                                |  |                                                             

---

|(1) | Represents percentage
      participations in Pool established under the NuVox, Inc. 2001 Performance
      Plan. The Pool is limited to the amount, if any, allocated upon the
      occurrence of a Valuation Event (a Change in Control or initial public
      offering). No amount shall be payable if the equity value of NuVox as of
      the date of the Valuation Event does not exceed the Initial Threshold
      Amount ($301 million plus the aggregate liquidation preferences of any
      future issuances of preferred stock which is senior to, or pari passu
      with, NuVoxs Series D Convertible Preferred Stock or which is senior to
      NuVoxs Series E Convertible Preferred Stock, other than any issuances of
      Series D preferred stock upon exercise of presently outstanding warrants).
      If the equity value of NuVox as of the date of the Valuation Event is
      equal to, or less than, the sum of $781 million plus the aggregate
      liquidation preferences of any such future issuances, the amount allocated
      to the Pool shall be 6% of the amount by which such equity value exceeds
      the Initial Threshold Amount and if such equity value is more than the sum
      of such amounts, the amount allocated to the Pool shall be 7% of the
      amount by which such equity value exceeds the Initial Threshold
      Amount.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Represents an implied payout at each of the specified
equity values (assuming an Initial Threshold Amount of $301 million).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

58

Employment Agreements

NuVox has entered into
employment agreements with each of the named
executive officers, copies of which have been filed as exhibits to this report.

The terms of these
agreements will expire on December 31, 2002, with respect to Mr. Solomon,
and on varying dates from February 15, 2003 to October 31, 2003 for the other named executive
officers, unless sooner terminated or extended. As compensation for their
respective services, each officer will receive an annual base salary at a rate
determined by NuVoxs compensation committee, which may be increased but not
decreased (except, in the case of certain of the named executive officers, as a result of an across-the-board adjustment affecting all of
NuVoxs most senior executives proportionately). Mr. Solomon has agreed to reduce his contractually provided salary for 2002 from
$475,000 to $400,000. Each of the named executive
officers is also eligible for an annual performance bonus at varying maximum
percentages of his or her annual base salary. These percentages are 100% for Mr.
Solomon and range from 30% to 50% for the other named executive officers.
Mr. Solomons annual bonus may be paid, at his
option, in any combination of cash or shares of our Series F preferred stock.

Upon termination of the
employment of any of the named executive officers, he or she will be eligible,
depending on the reason for termination, for the salary and lump sum payments
and benefits described below:

- if his or her employment is terminated by death or
  incapacity, the named executive officer will receive 12 months of base salary
  and the maximum bonus for which he or
  she was eligible in the year in which the termination occurred, and, in the
  case of Messrs. Solomon and Denneen, his unvested stock options and
  participation grants will become exercisable,
- if the named executive
officer (other than Mr. Cassity) is terminated without good cause,
as defined in the agreements, he or she will receive his or her salary for the
remainder of the year (in the case of Messrs. Solomon and Denneen) and for the
remainder of the month (in the case of the other named executive officers) and
an amount equal to two times his then current annual base salary and benefits
for the remainder of the term of the agreement, in the case of
Messrs. Solomon and Denneen, and, in the case of the other named executive
officers, salary for 12 months thereafter and benefits for 12 months (or the
balance of the term if shorter), in each case subject to offset if such named
executive officer accepts alternative employment during the payment period, and
his or her unvested stock options and participation grants will become
exercisable,
- if the named executive officer (other than Mr. Cassity) resigns for "good
  reason" as defined in the agreements, he or she will receive his or her salary
  and benefits for a period of 12 months thereafter, in each case, other than Messrs. Solomon and Denneen, subject to
  offset if the named executive officer accepts alternative employment during
  the payment period, and his or her unvested stock options and participation
  grants will be forfeited,
- if Mr. Cassity terminates his employment agreement for Good Reason,
as defined in his agreement (including as a result of a breach thereof by
NuVox), prior to a change in control as defined in his agreement, he
will continue to be entitled to receive his salary, bonus and benefits until the
first anniversary of his termination, and, if after a change in
control, until the later of the first anniversary or March 6, 2003, and
his unvested stock options will become exercisable,
- if employment is terminated following a change of
  control, as defined in the agreements, the named executive officer will
  receive salary for the balance of the year, benefits for the balance of the
  term and an amount equal to three times, in the case of Messrs. Solomon and Denneen, and two times in the case of the other named executive
  officers, of his or her then current annual base salary and the maximum bonus
  for which he or she was eligible for that year, and, except in the case of Mr. Cassity, his or her unvested stock
  options and participation grants will become exercisable, and

59

- if the employee is terminated with good cause or
  if the employee resigns without "good reason", he or she shall receive only
  the salary and benefits accrued through the termination date, and his or her
  unvested stock options and participation grants will be
  forfeited.

If any such payment would be subject to the excise
tax imposed by Section 4999 of the Internal Revenue Code or any interest or
penalties with respect to such tax, the named executive officer, other than Mr. Cassity, would also be
entitled to receive an additional payment, net of income and excise taxes, to
compensate him or her for such tax, interest and penalties.

Compensation Committee Interlocks and Insider
Participation

None of the members of the compensation committee of
the board of directors is or has been an officer or employee of NuVox or any of
its subsidiaries. In addition, none of the members of the compensation committee
had any relationships with NuVox or any other entity that require disclosure
under the SECs rules and regulations.

Item 12. Security Ownership of Certain Beneficial
Owners and Management.

The table below sets forth information regarding the
beneficial ownership of NuVoxs voting securities as of March 1, 2002 by

- each person or entity who is known by NuVox to
  beneficially own 5% or more of any class of NuVoxs voting
  securities,
- each of NuVoxs directors,
- each of the named executive officers of NuVox
  and
- all of NuVoxs directors and executive officers as
  a group.

Unless otherwise indicated below, the individuals
listed below maintain a mailing address of c/o NuVox, Inc., 16090 Swingley Ridge
Road, Suite 500, Chesterfield, Missouri 63107. Unless otherwise indicated below,
to NuVoxs knowledge, each person or group identified possesses sole voting and
investment power with respect to the shares beneficially owned by that person or
group, subject to community property laws where applicable.

The number of shares and percentages are determined
on the basis of 521,925,926 shares, which is the total number of outstanding
shares of common stock that would be outstanding assuming exercise of all
outstanding warrants for Series E preferred stock (by surrendering shares of
NuVox common or preferred stock as consideration for the exercise
price) and conversion of all outstanding shares of preferred stock.

60

|Beneficial Owner(includes related entities)                           | Voting Securities |  | Percentage of VotingSecurities | 
|--------------------------------------------------------------------- | ----------------- |  | ------------------------------ | 
|                                                                      |                   |  |                                | 
|5%
      Stockholders                                                 |                   |  |                                | 
|Goldman, Sachs & Co.
      affiliates(1)                              | 94,950,128        |  | 18.19%                         | 
|Whitney & Co.(2)                                                      | 72,283,534        |  | 13.85%                         | 
|J.P. Morgan Partners, LLC(3)                                          | 58,439,385        |  | 11.20%                         | 
|Meritage Private Equity Fund L.P.(4)                                  | 44,071,798        |  | 8.44%                          | 
|Moore Group(5)                                                        | 37,327,653        |  | 7.15%                          | 
|Richland Group(6)                                                     | 31,810,569        |  | 6.09%                          | 
|Brooks Investments, L.P.(7)                                           | 30,407,881        |  | 5.83%                          | 
|Directors and Executive
      Officers                                |                   |  |                                | 
|William Laverack, Jr.(2)                                              | 72,283,534        |  | 13.85%                         | 
|Michael R. Hannon(3)                                                  | 58,439,385        |  | 11.20%                         | 
|G. Jackson Tankersley, Jr.(4)                                         | 44,071,798        |  | 8.44%                          | 
|Jack Tyrrell(6)                                                       | 31,810,569        |  | 6.09%                          | 
|L. Watts Hamrick, III(8)                                              | 21,323,550        |  | 4.09%                          | 
|Charles S. Houser(9)                                                  | 11,982,278        |  | 2.30%                          | 
|David L. Solomon(10)                                                  | 4,168,604         |  | *                              | 
|G. Michael Cassity(11)                                                | 2,154,545         |  | *                              | 
|Marguerite A. Forrest(12)                                             | 2,296,627         |  | *                              | 
|John P. Denneen(13)                                                   | 1,390,675         |  | *                              | 
|Michael E. Gibson(14)                                                 | 556,042           |  | *                              | 
|Paul A. Pitts(15)                                                     | 154,839           |  | *                              | 
|Michael C. Morey(16)                                                  | 95,000            |  | *                              | 
|Josephine Young                                                       |                  |  |                               | 
|Robert R. Gheewalla(1)                                                |                  |  |                               | 
|Directors and executive
      officers,   as a group (15 persons)(17) | 250,727,446       |  | 47.99%                         | 

---

|*   | less than 1%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes (i)
6,699,077 shares of Series D preferred stock, 13,625,244 shares of Series
E-1 preferred stock, 572,260 shares of Series E-7 preferred stock, and
35,766,255 shares of Series E-12 preferred stock. Also includes 565,839
shares of common stock and 7,457,245 shares of Series D preferred stock
issuable upon exercise of currently exercisable warrants beneficially
owned by GS Capital Partners III, L.P., (ii) 1,841,653 shares of Series D
preferred stock, 3,745,737 shares of Series E-1 preferred stock, 157,321
shares of Series E-7 preferred stock, and 9,832,557 shares of Series E-12
preferred stock. Also includes 155,554 shares of common stock and
2,050,082 shares of Series D preferred stock issuable upon exercise of
currently exercisable warrants beneficially owned by GS Capital Partners
III Offshore, L.P., (iii) 309,270 shares of Series D preferred stock,
629,022 shares of Series E-1 preferred stock, 26,419 shares of Series E-7
preferred stock, and 1,651,188 shares of Series E-12 preferred stock. Also
includes 26,122 shares of common stock and 344,273 shares of Series D
preferred stock issuable upon exercise of currently exercisable warrants
beneficially owned by Goldman, Sachs & Co. Verwaltungs GmbH, (iv)
1,536,339 shares of Series E-1 preferred stock and 64,526 shares
of Series E-7 preferred stock. Also includes 17,600
shares of common stock issuable upon exercise of currently exercisable warrants
beneficially owned by Stone Street Fund 1998, L.P., (v) 463,659 shares of Series
E-1 preferred stock and 19,474 shares of Series E-7 preferred stock. Also
includes 5,311 shares of common stock issuable upon exercise of currently
exercisable warrants beneficially owned by Bridge Street Fund 1998, L.P., (vi)
590,000 shares of Series D preferred stock and 3,150,000 shares of Series E-12
preferred stock. Also includes 46,201 shares of common stock and 621,972 shares
of Series D preferred stock issuable upon exercise of currently exercisable
warrants owned by Stone Street Fund 2000 LP; and (vii) 393,333 shares of Series
D preferred stock and 2,100,000 shares of Series E-12 preferred stock. Also
includes 13,943 shares of common stock and 472,652 shares of Series D preferred
stock issuable upon exercise of currently exercisable warrants beneficially
owned by Bridge Street Special Opportunities Fund 2000, LP. Mr. Robert R.
Gheewalla is a Vice President of Goldman, Sachs & Co. but not does not
share, and disclaims, beneficial ownership in these shares. Goldman, Sachs &
Co. and Mr. Gheewalla maintain a mailing address at 85 Broad Street, New York,
NY 10004.

61

|(2) | Includes (i) 1,484,443 shares of
Series D preferred stock and 14,647,059 shares of Series E-1 preferred
stock. Also includes 167,799 shares of common stock and 1,484,443 shares
of Series D preferred stock issuable upon exercise of currently
exercisable warrants beneficially owned by J.H. Whitney III, L.P., (ii)
5,415,757 shares of Series D preferred stock and 42,750,001 shares of
Series E-12 preferred stock. Also includes 489,753 shares of common stock
and 5,415,757 shares of Series D preferred stock issuable upon exercise of
currently exercisable warrants beneficially owned by J.H. Whitney IV,
L.P., and (iii) 35,769 shares of Series D preferred stock and 352,941
shares of Series E-1 preferred stock. Also includes 4,043 shares of common
stock and 35,769 shares of Series D preferred stock issuable upon exercise
of currently exercisable warrants beneficially owned by Whitney Strategic
Partners III, L.P. Mr. William Laverack, Jr. is a managing director of
Whitney & Co. and shares but disclaims beneficial ownership in these
shares. Whitney & Co. and Mr. Laverack maintain a mailing address at 4
Stamford Plaza, Stamford, CT 06902.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Includes (i) 10,000,000 shares of
      Series D preferred stock, 5,000,001 shares of Series E-1 preferred stock,
      and 27,000,001 shares of Series E-12 preferred stock, and (ii) 366,598
      shares of common stock and 16,072,785 shares of Series D preferred stock
      issuable upon exercise of currently exercisable warrants. J.P. Morgan
      Partners (SBIC), LLC is controlled by J.P. Morgan Partners, L.L.C. Mr. Michael
      R. Hannon is a partner of J.P. Morgan Partners, LLC and shares but
      disclaims beneficial ownership in these shares. J.P. Morgan Partners, LLC
      and Mr. Hannon maintain a mailing address at 1221 Avenue of the Americas,
      39thFloor, New York, NY 10020.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(4) | Includes (i) 4,384,000 shares of
      Series D preferred stock, 10,960,000 shares of Series E-2 preferred stock,
      and 17,536,001 shares of Series E-12 preferred stock. Also includes
      326,456 shares of common stock and 5,435,695 shares of Series D preferred
      stock issuable upon exercise of currently exercisable warrants
      beneficially owned by Meritage Private Equity Fund L.P., (ii) 536,000
      shares of Series D preferred stock, 1,340,000 shares of Series E-2
      preferred stock, and 2,144,002 shares of Series E-12 preferred stock. Also
      includes 39,913 shares of common stock and 664,584 shares of Series D
      preferred stock issuable upon exercise of currently exercisable warrants
      beneficially owned by Meritage Private Equity Parallel Fund L.P., and
      (iii) 80,000 shares of Series D preferred stock, 200,000 shares of Series
      E-2 preferred stock, and 319,998 shares of Series E-12 preferred stock.
      Also includes 5,956 shares of common stock and 99,193 shares of Series D
      preferred stock issuable upon exercise of currently exercisable warrants
      beneficially owned by Meritage Entrepreneurs Fund, LP. Each of these
      entities maintains a mailing address at 1600 Wynkoop, S300, Denver,
      Colorado 80202. Mr. David L. Solomon is an investment director of Meritage
      Private Equity Fund, L.P. and may share but disclaims beneficial ownership
      in these shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(5) | Includes (i) 1,496,438 shares of
      Series D preferred stock and 7,382,713 shares of Series E-3 preferred
      stock. Also includes 82,484 shares of common stock and 1,496,438 shares of
      Series D preferred stock issuable upon exercise of currently exercisable
      warrants beneficially owned by Moore Global Investments, Ltd., (ii)
      7,382,714 shares of Series E-3 preferred stock. Also includes 82,484
      shares of common stock issuable upon exercise of currently exercisable
      warrants beneficially owned by Moore Overseas Technology Investment Fund,
      LDC, (iii) 7,382,714 shares of Series E-3 preferred stock. Also includes
      82,484 shares of common stock issuable upon exercise of currently
      exercisable warrants beneficially owned by Moore Technology Venture Fund,
      LLC, (iv) 1,620,088 shares of Series D preferred stock and 1,220,064
      shares of Series E-3 preferred stock. Also includes 13,747 shares of
      common stock and 1,620,088 shares of Series D preferred stock issuable
      upon exercise of currently exercisable warrants beneficially owned by
      Moore Technology Venture Fund II, LLC, and (v) 7,382,713 shares of Series
      E-3 preferred stock. Also includes 82,484 shares of common stock issuable
      upon exercise of currently exercisable warrants beneficially owned by
      Remington Investment Strategies, L.P. All of the foregoing entities are
      affiliates. Moore Group maintains a mailing address at 1251 Avenue of the
      Americas, 53rd Floor, New York, NY 10020.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(6) | Includes (i) 1,155,687 shares of
      Series D preferred stock and 9,758,710 shares of Series E-3 preferred
      stock and 128,741 shares of common stock and 1,322,353 shares of Series D
      preferred stock issuable upon exercise of currently exercisable warrants
      beneficially owned by Richland Ventures II, L.P., (ii) 1,829,773 shares of
      Series D preferred stock and 14,765,431 shares of Series E-3 preferred
      stock and 164,969 shares of common stock and 2,163,107 shares of Series D
      preferred stock issuable upon exercise of currently exercisable warrants
      beneficially owned by Richland Ventures III, L.P., (iii) 29,262 shares of
      Series D preferred stock and 300,040 shares of Series E-3 preferred stock
      and 3,379 shares of common stock and 29,262 shares of Series D preferred
      stock issuable upon exercise of currently exercisable warrants
      beneficially owned by John Ryan Tyrrell, (iv) 12,319 shares of Series D
      preferred stock and 121,559 shares of Series
E-3 preferred stock and 1,374 shares of common stock and
12,319 shares of Series D preferred stock issuable upon exercise of currently
exercisable warrants beneficially owned by Portia B. Ortale, (v) 512 shares of
Series D preferred stock and 5,061 shares of Series E-3 preferred stock and 57
shares of common stock and 512 shares of Series D preferred stock issuable upon
exercise of currently exercisable warrants beneficially owned by Beverly Ann
Schrichte, and (vi) 512 shares of Series D preferred stock and 5,061 shares of
Series E-3 preferred stock and 57 shares of common stock and 512 shares of
Series D preferred stock issuable upon exercise of currently exercisable
warrants beneficially owned by Linda F. Swafford. All of the foregoing entities
and individuals are affiliates and maintain a mailing address at 200 31st Avenue
North, Suite 200, Nashville, TN 37203-1205. Mr. Jack Tyrrell is a managing
partner at Richland Ventures and, except as set forth above, shares but
disclaims beneficial ownership of these shares.

62

|(7) | Includes (i) 2,533,687 shares of
      Series D preferred stock, 3,999,999 shares of Series E-1 preferred stock,
      2,000,000 shares of Series E-7 preferred stock, and 15,999,998 shares of
      Series E-12 preferred stock. Also includes 229,123 shares of common stock
      and 2,533,687 shares of Series D preferred stock issuable upon exercise of
      currently exercisable warrants beneficially owned by Brooks Investments,
      L.P., (ii) 291,373 shares of Series D preferred stock, 999,999 shares of
      Series E-1 preferred stock, and 1,500,002 shares of Series E-12 preferred
      stock. Also includes 28,640 shares of common stock and 291,373 shares of
      Series D preferred stock issuable upon exercise of currently exercisable
      warrants beneficially owned by RAB Partnership, L.P. All of the foregoing
      entities are affiliates. Each of these entities maintains a mailing
      address at 16650 Chesterfield Grove Rd., Suite 110, Chesterfield, MO
      63005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(8) | Includes (i) 5,158,543 shares of
      Series E-3 preferred stock and 57,281 common shares issuable upon exercise
      of currently exercisable warrants, beneficially owned by
      First Union Merchant Banking 1998 II, LLC. (ii) 10,744,135 shares of
      Series E-3 preferred stock, and 120,290 common shares issuable upon
      exercise of currently exercisable warrants, beneficially
      owned by First Union Merchant Banking 1999 II, LLC, (iii) 2,278,363 shares
      of Series D preferred stock, and 2,945,030 shares of Series D preferred stock issuable upon exercise of currently exercisable warrants
      beneficially owned by First Union Merchant
      Banking 2001, LLC, and (iv) 19,908 shares of common stock issuable upon
      exercise of currently exercisable warrants beneficially owned by Wachovia
      Capital Partners, Inc. Mr. Hamrick disclaims beneficial ownership of all
      of these shares. Mr. Hamrick maintains a mailing address at 301 South
      College St., Charlotte, NC 28288-0732.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(9) | Includes (i) 84,624 shares of
      Series D preferred stock, 746,103 shares of Series E-3 preferred stock,
      926,579 shares of Series E-9 preferred stock, and 4,424 shares of Series
      E-11 preferred stock. Also includes 84,624 shares of Series D preferred
      stock and 128,859 shares of common stock issuable upon exercise of
      currently exercisable warrants and 1,238,718 shares of common stock
      issuable upon exercise of currently exercisable options beneficially owned
      by Charles S. Houser, (ii) 23,333 shares of Series D preferred stock,
      9,000 shares of Series E-4 preferred stock, 2,034,486 shares of Series
      E-10 preferred stock, and 4,424 shares of Series E-11 preferred stock.
      Also includes 23,333 shares of Series D preferred stock issuable upon
      exercise of currently exercisable warrants, and 921,665 shares of common
      stock issuable upon exercise of currently exercisable options beneficially
      owned by Shaler P. Houser, (iii) 195 shares of Series D preferred stock
      and 14,746 shares of common stock. Also includes 195 shares
      of Series D preferred stock issuable upon exercise of currently
      exercisable warrants beneficially owned by Charles S. Houser Family Trust
      Agreement I, (iv) 195 shares of Series D preferred stock and 14,746 shares
      of common stock. Also includes 195 shares of Series D
      preferred stock issuable upon exercise of currently exercisable warrants
      beneficially owned by Charles S. Houser Family Trust Agreement II, (v) 195
      shares of Series D preferred stock and 14,746 shares of common stock. Also includes 195 shares of Series D preferred stock
      issuable upon exercise of currently exercisable warrants beneficially
      owned by Charles S. Houser Family Trust Agreement III, (vi) 18,225 shares
      of Series D preferred stock and 1,653,470 shares of Series E-10 preferred
      stock. Also includes 18,225 shares of Series D preferred stock issuable
      upon exercise of currently exercisable warrants, and 258,065 shares of
      common stock issuable upon exercise of currently exercisable options
      beneficially owned by Charles L. Houser, (vii) 46,635 shares of Series D
      preferred stock, 360,158 shares of Series E-3 preferred stock, and 99,999
      shares of Series E-4 preferred stock. Also includes 46,635 shares of
      Series D preferred stock and 13,963 shares of common stock issuable upon
      exercise of currently exercisable warrants beneficially owned by Houser
      Charitable Remainder UniTrust, (viii) 12,000 shares of Series D preferred
      stock, 997 shares of Series E-8 preferred stock, and 397,163 shares of
      Series E-9 preferred stock. Also includes 18,697 shares of Series D
      preferred stock, issuable upon exercise of currently exercisable warrants
      beneficially owned by Houser Enterprises, L.P., (ix) 33,333 shares of
      Series D preferred stock and 607,302 shares of Series E-8 preferred stock.
      Also includes 48,117 shares of Series D preferred stock issuable upon
      exercise of currently exercisable warrants beneficially owned by Janie P.
      Houser, (x) 11,540 shares of Series D preferred stock and 265,440 shares
      of Series E-10 preferred stock. Also includes 20,040 shares of Series D
      preferred stock issuable upon exercise of currently exercisable warrants
      beneficially owned by Melissa Mulwee Houser, (xi) 1,165 shares of Series D
      preferred stock and 101,752 shares of Series E-10 preferred stock. Also
      includes 1,165 shares of Series D preferred stock issuable upon exercise
      of currently exercisable warrants beneficially owned by Jennifer Houser
      McGriff, (xii) 6,922 shares of Series D preferred stock, 22,120 shares of
      Series E-10 preferred stock, and 6,636 shares of Series E-11 preferred
      stock. Also includes 13,588 shares of Series D preferred stock issuable
      upon exercise of currently exercisable warrants beneficially owned by
      Nicole Houser, (xiii) 1,766 shares of Series D preferred stock, 55,300
      shares of Series E-8 preferred stock, and 5,902 shares of Series E-9
      preferred stock. Also includes 1,766 shares of Series D preferred stock
      issuable upon exercise of currently exercisable warrants beneficially
      owned by Irrevocable Trust FBO Jennifer L. Houser McGriff, (xiv) 101,347 shares of Series D preferred
stock and 999,997 shares of Series E-4 preferred stock. Also includes 101,347
shares of Series D preferred stock issuable upon exercise of currently
exercisable warrants beneficially owned by Seruus Telecom Fund, L.P., (xv) 76
shares of Series D preferred stock and 165,900 shares of Series E-11 preferred
stock. Also includes 76 shares of Series D preferred stock issuable upon
exercise of currently exercisable warrants beneficially owned by Seruus
Ventures, LLC., (xvi) 20,135 shares of Series D preferred stock and 100,003
shares of Series E-4 preferred stock. Also includes 30,135 shares of Series D
preferred stock issuable upon exercise of currently exercisable warrants
beneficially owned by Investment Trust Co. of Florida, FBO Charles S. Houser, and
(xvii) 443 shares of Series D preferred stock and 38,710 shares of Series E-10
preferred stock. Also includes 443 shares of Series D preferred stock issuable
upon exercise of currently exercisable warrants beneficially owned by Mr. and
Mrs. Robert L. Sims. All of the foregoing entities and individuals are
affiliates. Charles S. Houser disclaims beneficial ownership of all of the
foregoing shares except those set forth in clause (i) above. Each of the
foregoing entities and individuals maintains a mailing address at 200 North Main
Street, Greenville, SC 29601.

63

|(10) | Includes 163,858 shares of Series D
      preferred stock, 1,020,000 shares of Series E-4 preferred stock, and
      445,004 shares of Series E-12 preferred stock. Also includes 1,592,552
      shares of common stock and 163,858 shares of Series D preferred stock
      issuable upon exercise of currently exercisable warrants, and 783,332
      shares of common stock issuable upon exercise of currently exercisable
      options beneficially owned by Mr. Solomon. Does not include (i) the shares
      beneficially owned by Meritage Private Equity Fund, L.P. in footnote 6, a
      private investment fund for which Mr. Solomon serves as an investment
      director and member of the general partner, (ii) the shares beneficially
      owned by Brooks Investments, L.P. in footnote 7, in which Mr. Solomon is
      an investor, or (iii) 79,996 shares of Series E-12 preferred stock owned
      by trusts for the benefit of Mr. Solomons minor children, over which Mr.
      Solomon does not have voting or investment power and disclaims beneficial
      ownership.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(11) | Includes 123,053 shares of Series D
      preferred stock, 916,734 shares of Series E-3 preferred stock, and 345,006
      shares of Series E-4 preferred stock. Also includes 10,367 shares of
      common stock and 123,053 shares of Series D preferred stock issuable upon
      exercise of currently exercisable warrants, and 636,332 shares of common
      stock issuable upon exercise of currently exercisable options beneficially
      owned by Mr. Cassity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(12) | 190,006 shares of Series D
      preferred stock, 300,000 shares of Series E-7 preferred stock, and
      1,438,598 shares of Series E-12 preferred stock. Also includes 103,018
      shares of common stock and 190,006 shares of Series D preferred stock
      issuable upon exercise of currently exercisable warrants, and includes
      74,999 shares of common stock issuable upon the exercise of currently
      exercisable options, beneficially owned by the MAF Revocable Trust. Does
      not include the shares of stock beneficially owned by Brooks Investments,
      L.P., in which Ms. Forrest is an investor, or the shares of stock owned by
      RAB Partnership, in which Ms. Forrest has an interest, each of which are
      described in footnote 7.                                                                                                                                                                                                                                                                                                                        
|(13) | Includes 88,870 shares of Series D
      preferred stock, 240,000 shares of Series E-4 preferred stock, 30,000
      shares of Series E-7 preferred stock, and 525,000 shares of Series E-12
      preferred stock. Also includes 207,937 shares of common stock and 88,870
      shares of Series D preferred stock issuable upon exercise of currently
      exercisable warrants, and 209,998 shares of common stock issuable upon
      exercise of currently exercisable options beneficially owned by Mr.
      Denneen.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(14) | Includes 23,406 shares of Series D
      preferred stock and 240,000 shares of Series E-4 preferred stock. Also
      includes 144,231 shares of common stock and 23,406 shares of Series D
      preferred stock issuable upon exercise of currently exercisable warrants,
      and 124,999 shares of common stock issuable upon exercise of currently
      exercisable options beneficially owned by Mr. Gibson.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(15) | Includes 154,839 shares of common
      stock issuable upon exercise of currently exercisable options,
      beneficially owned by Mr. Pitts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(16) | Includes 95,000 shares of common
      stock issuable upon exercise of currently exercisable options,
      beneficially owned by Mr. Morey.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(17) | Includes (i) 28,193,719 shares of
      Series D preferred stock, (ii) 20,000,001 shares of Series E-1 preferred
      stock, (iii) 12,500,000 shares of Series E-2 preferred stock, (iv)
      42,881,535 shares of Series E-3 preferred stock, (v) 3,054,005 shares of
      Series E-4 preferred stock, (vi) 330,000 shares of Series E-7 preferred
      stock, (vii) 663,599 shares of Series E-8 preferred stock, (viii)
      1,373,882 shares of Series E-9 preferred stock, (ix) 4,115,978 shares of
      Series E-10 preferred stock, (x) 181,384 shares of Series E-11 preferred
      stock, (xi) 92,158,605 shares of Series E-12 preferred stock, (xii)
      36,679,290 shares of Series D preferred stock issuable upon exercise of
      currently exercisable warrants, (xiii) 4,097,501 shares of common stock
      issuable upon exercise of currently exercisable warrants, and (xiv)
      4,497,947 shares of common stock issuable upon exercise of currently
      exercisable options.                                                                                         

64

Item 13. Certain Relationships and Related
Transactions.

Series D Loan Program

Pursuant to the NuVox, Inc. Series D Loan Program,
the named executive officers received the following loans to provide funding for
his or her respective participation in NuVox's Series D preferred stock
placement pursuant to the Series D Securities Purchase Agreement dated as of
September 20, 2001: Mr. Solomon - $230,589; Mr. Cassity - $184,580; Mr. Denneen
- $133,305; Mr. Gibson - $35,109; and Ms. Forrest - $285,009. The loans were
evidenced by 4.76% promissory notes due September 30, 2006, one-third of which
are full recourse obligations of the named executive officer. The notes are
secured by pledges of the shares of Series D preferred stock acquired with the
proceeds of the loans. Any shares used to repay the loans will be applied first
to satisfy the outstanding principal and accrued interest due on the
non-recourse portions of the notes. Payment would be accelerated in the event of
a termination of the employment of the named executive officer by NuVox for
"cause" or by the named executive officer without "good reason" (as each of said
terms is defined in the loan program).

Other

Goldman Sachs Credit Partners L.P. acted as sole lead
arranger, sole book runner and syndication agent, and First Union National Bank
acted as administrative agent and collateral agent, for NuVox's $225 million
senior secured credit facility dated as of October 31, 2000 and Amendment No. 1
thereto effective September 21, 2001. The commitments of Goldman Sachs Credit
Partners L.P. and First Union National Bank under the credit facility total $35
million and $30 million, respectively. Under the credit facility, each lender
receives commitment fees, interest payments and agency and other customary fees
for its services. Goldman Sachs Credit Partners L.P. is affiliated with Goldman,
Sachs & Co., of which Mr. Gheewalla is a managing director. First Union
National Bank is affiliated with Wachovia Capital Partners, Inc., of which Mr.
Hamrick is a senior vice president.

65

PART IV

Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K.

|(a)(1) | The following consolidated financial
statements of NuVox, Inc. and the notes thereto, the related report thereon of
the independent auditors, and financial statement schedules are filed pursuant
to Item 8 of this report: |            
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------
|       |                                                                                                                                                                                                                              | Page       
|       | Independent Auditors
    Report                                                                                                                                                                                             | F-1        
|       | Consolidated Balance Sheets as of
      December 31, 2001 and 2000                                                                                                                                                           | F-2        
|       | Consolidated Statements of
      Operations for the years ended December 31,                                                                                                                                                 |            
|       | 2001, 2000 and 1999                                                                                                                                                                                                          | F-3        
|       | Consolidated Statements of Changes
      in Stockholders Equity for the years                                                                                                                                               |            
|       | ended December 31, 2001, 2000 and
      1999                                                                                                                                                                                 | F-4        
|       | Consolidated Statements of Cash
      Flows for the years ended December 31,                                                                                                                                                 |            
|       | 2001, 2000 and 1999                                                                                                                                                                                                          | F-5        
|       | Notes to Consolidated Financial
      Statements                                                                                                                                                                             | F-6 to F-24
|       |                                                                                                                                                                                                                              |            
|(a)(2) | The
      following financial statement schedule is filed as part of this report
      pursuant to Item 8 and Item 14(d) of this report:                                                                                     |            
|       |                                                                                                                                                                                                                              |            
|       |                                                                                                                                                                                                                              | Page       
|       |                                                                                                                                                                                                                              |            
|       | Schedule II - Valuation and
      Qualifying Accounts                                                                                                                                                                        | F-25       
|(a)(3) | See Index to Exhibits appearing on pages E-1
to E-3 of this report for a list of exhibits filed with or incorporated by
reference in this report.                                                                            |            
|(b)    | Reports on Form
      8-K:No reports on Form 8-K were filed
      during the last quarter of the period covered by this
  report.                                                                                            |            
|(c)    | The registrant hereby files
      herewith or incorporates herein by reference the exhibits identified on
      the Index to Exhibits appearing on pages E-1 to E-3 of this
      report.                                    |            

66

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.

| | NUVOX, INC.
| | -----------
| | By         
| | Name:      
| | Title:     
| | 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 and on the dates indicated.

|Name                                                     | Title                                                                                                            | Date          
|-------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------- | --------------
|/s/ David L. SolomonDavid L. Solomon                     | Chief Executive Officer, Chairman
of the Board and Director                                                      | March 28, 2002
|/s/ Michael E. GibsonMichael E. Gibson                   | Senior Vice President and Chief
Financial Officer (Principal
Accounting Officer and Principal
Financial Officer) | March 28, 2002
|/s/ G. Michael CassityG. Michael Cassity                 | Director                                                                                                         | March 28, 2002
|/s/ Robert R. GheewallaRobert R. Gheewalla               | Director                                                                                                         | March 28, 2002
|/s/ Charles S. HouserCharles S. Houser                   | Director                                                                                                         | March 28, 2002
|/s/ L. Watts Hamrick, IIIL. Watts Hamrick, III           | Director                                                                                                         | March 28, 2002
|/s/ Michael R. HannonMichael R. Hannon                   | Director                                                                                                         | March 28, 2002
|/s/ William Laverack, Jr.William Laverack, Jr.           | Director                                                                                                         | March 28, 2002
|/s/ G. Jackson Tankersley, Jr.G. Jackson Tankersley, Jr. | Director                                                                                                         | March 28, 2002
|/s/ Jack TyrrellJack Tyrrell                             | Director                                                                                                         | March 28, 2002

67

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

(a)     No annual report to security holders covering the
fiscal year ended December 31, 2001 has been sent to security holders at the
time of filing of this report. The registrant may send such an annual report
subsequent to the filing of this report and, if so, shall furnish copies to the
Commission when it is sent to security holders.

(b)     No proxy material has been sent to the
registrants security holders with respect to any annual or other meeting of
security holders.

68

Independent Auditors
Report

The Board of DirectorsNuVox, Inc.:

We have audited the accompanying consolidated balance sheets
of NuVox, Inc. and subsidiaries as of December 31, 2001 and 2000, and the
related consolidated statements of operations, changes in stockholders equity,
and cash flows for each of the years in the three-year period ended December 31,
2001. In connection with our audits of the consolidated financial statements, we
also have audited the accompanying financial statement schedule. These
consolidated financial statements and financial statement schedule are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position of NuVox, Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and cash flows for each of the years in the three-year period ended December 31, 2001 in conformity
with accounting principles generally accepted in the United States of America.  Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 2 to
the consolidated financial statements, the Company changed its method of
accounting for derivative instruments and hedging activities in 2001.

/s/ KPMG LLP

St. Louis, Missouri February 22, 2002

F-1

NUVOX, INC.AND SUBSIDIARIESConsolidated Balance Sheets(in thousands, except share data)

|                                                                                                                                                                                                                                                                                |        |         | December 31, |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------ | ------- | ------------ | -
|                                                                                                                                                                                                                                                                                | Assets |         | 2001         |  
|Current assets:                                                                                                                                                                                                                                                                 |        |         |              |  
|Cash and cash
equivalents                                                                                                                                                                                                                                                       |        | $       | 46,973       |  
|Accounts receivable, net
      of allowance for                                                                                                                                                                                                                                 |        |         |              |  
|doubtful accounts of
      $2,680 and $985 in 2001 and 2000, respectively                                                                                                                                                                                                       |        | 17,993  |              |  
|Prepaid expenses and
      other current assets                                                                                                                                                                                                                                 |        | 9,021   |              |  
|Preferred stock
      subscriptions receivable                                                                                                                                                                                                                                  |        |        |              |  
|Total current assets                                                                                                                                                                                                                                                            |        |         | 73,987       |  
|Property and equipment,
    net                                                                                                                                                                                                                                                 |        |         | 256,167      |  
|Other noncurrent assets:                                                                                                                                                                                                                                                        |        |         |              |  
|Investments                                                                                                                                                                                                                                                                     |        |         |             |  
|Goodwill, net                                                                                                                                                                                                                                                                   |        |         | 228,599      |  
|Deferred financing costs                                                                                                                                                                                                                                                        |        |         | 7,597        |  
|Other assets                                                                                                                                                                                                                                                                    |        |         | 2,086        |  
|Total other noncurrent assets                                                                                                                                                                                                                                                   |        |         | 238,282      |  
|Total assets                                                                                                                                                                                                                                                                    |        | $       | 568,436      |  
|Liabilities and
      Stockholders Equity                                                                                                                                                                                                                                      |        |         |              |  
|Current liabilities:                                                                                                                                                                                                                                                            |        |         |              |  
|Accounts payable                                                                                                                                                                                                                                                                |        | $       | 15,344       |  
|Accrued liabilities and
      other current liabilities                                                                                                                                                                                                                         |        | 27,125  |              |  
|Total current
liabilities                                                                                                                                                                                                                                                       |        |         | 42,469       |  
|Other long-term liabilities                                                                                                                                                                                                                                                     |        |         | 936          |  
|Deferred hedge liability                                                                                                                                                                                                                                                        |        |         | 9,303        |  
|Long-term debt                                                                                                                                                                                                                                                                  |        |         | 163,804      |  
|Total long-term
    liabilities                                                                                                                                                                                                                                                 |        |         | 174,043      |  
|Total liabilities                                                                                                                                                                                                                                                               |        |         | 216,512      |  
|Minority interest                                                                                                                                                                                                                                                               |        |         | 1,214        |  
|Stockholders equity:                                                                                                                                                                                                                                                           |        |         |              |  
|Preferred stock  Series
      A through F, $.01 par value, 800,000,000 shares     authorized; 212,779,300 and
      99,302,505 issued and outstanding in 2001     and 2000, respectively; liquidation preferences of $687,024 and $456,656
     in 2001 and 2000, respectively |        | 2,128   |              |  
|Common stock, $.01 par
      value, 900,000,000 shares authorized;                                                                                                                                                                                                              |        |         |              |  
|12,423,242 and
      19,494,405 issued in 2001 and 2000, respectively                                                                                                                                                                                                           |        | 124     |              |  
|Additional paid-in
    capital                                                                                                                                                                                                                                                  |        |         | 621,346      |  
|Common stock in treasury
      at cost, 0 and 100,000 shares in 2001 and 2000, respectively                                                                                                                                                                                     |        |        |              |  
|Unearned stock-based
      compensation                                                                                                                                                                                                                                         |        |         | (1,508)      |  
|Accumulated deficit                                                                                                                                                                                                                                                             |        |         | (267,898)    |  
|Receivables from
      shareholders                                                                                                                                                                                                                                             |        |         | (3,482)      |  
|Total stockholders
    equity                                                                                                                                                                                                                                                  |        |         | 350,710      |  
|Total liabilities and
      stockholders equity                                                                                                                                                                                                                                | $      | 568,436 |              | $

See accompanying notes to consolidated financial
statements.

F-2

NUVOX, INC.AND SUBSIDIARIES

Consolidated Statements of Operations
Years ended December 31, 2001, 2000 and 1999(in thousands, except share and per share data)

|                                                                                                                     |           | 2001       |  |          | 2000      |  |          | 1999      | 
|-------------------------------------------------------------------------------------------------------------------- | --------- | ---------- |  | -------- | --------- |  | -------- | --------- | 
|Revenue                                                                                                              | $         | 83,016     |  | $        | 14,132    |  | $        | 452       | 
|Operating expenses:                                                                                                  |           |            |  |          |           |  |          |           | 
|Cost of communication
      services (exclusive of depreciation and                                                  |           |            |  |          |           |  |          |          
|amortization, shown
      separately below)                                                                          | 64,849    |            |  | 11,855   |           |  | 496      |          
|Selling, general and
      administrative                                                                            | 101,878   |            |  | 51,667   |           |  | 16,559   |          
|Stock-based compensation
      expense                                                                               | 2,814     |            |  | 430      |           |  |         |          
|Depreciation and
      amortization                                                                                  |           | 66,198     |  |          | 18,041    |  |          | 1,955     | 
|Restructuring
      charge                                                                                           |           |           |  |          | 1,560     |  |          |          | 
|Total operating
      expenses                                                                                       | 235,739   |            |  | 83,553   |           |  | 19,010   |          
|Loss from operations                                                                                                 |           | (152,723)  |  |          | (69,421)  |  |          | (18,558)  | 
|Other income (expense):                                                                                              |           |            |  |          |           |  |          |           | 
|Interest income                                                                                                      |           | 1,838      |  |          | 4,197     |  |          | 1,477     | 
|Interest expense                                                                                                     |           | (13,275)   |  |          | (4,593)   |  |          | (215)     | 
|Unrealized loss on
      derivative instrument                                                                       | (5,658)   |            |  |         |           |  |         |          
|Loss on write-off of
      investments                                                                               | (5,013)   |            |  |         |           |  |         |          
|Equity in loss
      of affiliate                                                                                    |           | (279)      |  |          | (686)     |  |          |          | 
|Total other income (expense)                                                                                         | (22,387)  |            |  | (1,082)  |           |  | 1,262    |          
|Net loss before minority interest, extraordinary item and                                                            |           |            |  |          |           |  |          |          
|cumulative effect of change in accounting principle                                                                  | (175,110) |            |  | (70,503) |           |  | (17,296) |          
|Extraordinary item related to early extinguishment of debt                                                           |          |            |  | (2,417)  |           |  |         |          
|Minority interest                                                                                                    |           | 271        |  |          | 194       |  |          |          | 
|Net loss before cumulative effect of change in                                                                       |           |            |  |          |           |  |          |          
|accounting principle                                                                                                 |           | (174,839)  |  |          | (72,726)  |  |          | (17,296)  | 
|Cumulative effect of
      change in accounting principle                                                            | (2,470)   |            |  |         |           |  |         |          
|Net loss                                                                                                             | $         | (177,309)  |  | $        | (72,726)  |  | $        | (17,296)  | 
|Net loss per share,
      basic and diluted:                                                                         |           |            |  |          |           |  |          |          
|Net loss before
      extraordinary item and cumulative effect               of change in accounting
      principle | $         | (9.40)     |  | $        | (8.65)    |  | $        | (3.25)    | 
|Extraordinary item                                                                                                   |           |           |  |          | (0.29)    |  |          |          | 
|Cumulative effect of change in accounting principle                                                                  | (0.13)    |            |  |         |           |  |         |          
|Net loss per share                                                                                                   | $         | (9.53)     |  | $        | (8.94)    |  | $        | (3.25)    | 
|Weighted average number
      of common shares     outstanding,
      basic and diluted                              |           | 18,607,709 |  |          | 8,132,037 |  |          | 5,322,409 | 

See accompanying notes to consolidated financial
statements

F-3

NUVOX COMMUNICATIONS, INC. AND
SUBSIDIARIES

Consolidated Statements of
Changes in Stockholders Equity Years ended December 31,2001, 2000 and 1999 (in
thousands, except share data)

|                                                  | Preferred StockSeries A through F |   | Common Stock |  | AdditionalPaid-In |  | Unearned Stock-based |  | Accumulated |  | Treasury     |  | PreferredStockSubscriptions |  | Loans to |  | TotalStockholders'
|------------------------------------------------- | --------------------------------- | - | ------------ |  | ----------------- |  | -------------------- |  | ----------- |  | ------------ |  | --------------------------- |  | -------- |  | ------------------
|                                                  | Shares                            |   | Amount       |  | Shares            |  | Amount               |  | Capital     |  | Compensation |  | Deficit                     |  | Stock    |  | Receivable        
|Balance, December 31, 1998                        | 8,950,000                         | $ | 90           |  | 5,200,000         |  | $52                  |  | $82,820     |  |             |  | $(567)                      |  |         |  | $(53,700)         
|Net loss for the year     ended December 31, 1999 |                                  |   |             |  |                  |  |                     |  |            |  |             |  | (17,296)                    |  |         |  |                  
|Issuance of stock                                 | 21,025,000                        |   | 210          |  | 269,200           |  | 3                    |  | 12,906      |  |             |  |                            |  |         |  | 53,700            
|Balance, December 31, 1999                        | 29,975,000                        |   | 300          |  | 5,469,200         |  | 55                   |  | 95,726      |  |             |  | (17,863)                    |  |         |  |                  
|Net loss for the year     ended December 31, 2000 |                                  |   |             |  |                  |  |                     |  |            |  |             |  | (72,726)                    |  |         |  |                  
|Issuance of stock                                 | 69,327,505                        |   | 693          |  | 14,025,205        |  | 140                  |  | 438,260     |  | (5,522)      |  |                            |  |         |  |                  
|Purchase of treasury stock, at cost               |                                  |   |             |  |                  |  |                     |  |            |  |             |  |                            |  | (416)    |  |                  
|Balance, December 31, 2000                        | 99,302,505                        |   | 993          |  | 19,494,405        |  | 195                  |  | 533,986     |  | (5,522)      |  | (90,589)                    |  | (416)    |  |                  
|Net loss for the year     ended December 31, 2001 |                                  |   |             |  |                  |  |                     |  |            |  |             |  | (177,309)                   |  |         |  |                  
|Issuance of stock                                 | 124,217,393                       |   | 1,242        |  | 421,102           |  | 4                    |  | 88,372      |  |             |  |                            |  |         |  |                  
|Conversions of stock                              | (10,740,598)                      |   | (107)        |  | (7,355,159)       |  | (74)                 |  |            |  |             |  |                            |  |         |  |                  
|Purchase of treasury stock, at cost               |                                  |   |             |  |                  |  |                     |  |            |  |             |  |                            |  | (148)    |  |                  
|Retirement of treasury stock                      |                                  |   |             |  | (137,106)         |  | (1)                  |  | (563)       |  |             |  |                            |  | 564      |  |                  
|Stock-based compensation     and forfeitures      |                                  |   |             |  |                  |  |                     |  | (449)       |  | 4,014        |  |                            |  |         |  |                  
|Balance, December 31, 2001                        | 212,779,300                       |   | $2,128       |  | 12,423,242        |  | $124                 |  | $621,346    |  | (1,508)      |  | $(267,898)                  |  | $       |  | $                

See accompanying notes to consolidated financial statements.

F-4

NUVOX, INC.AND SUBSIDIARIES

Consolidated Statements of Cash Flows
Years ended December 31, 2001, 2000 and 1999(in thousands)

|                                                                                                                                |           | 2001      |  |           | 2000     |  |          | 1999     | 
|------------------------------------------------------------------------------------------------------------------------------- | --------- | --------- |  | --------- | -------- |  | -------- | -------- | 
|Cash flows from operating
      activities:                                                                                     |           |           |  |           |          |  |          |          | 
|Net loss                                                                                                                        | $         | (177,309) |  | $         | (72,726) |  | $        | (17,296) | 
|Adjustments to reconcile net loss to                                                                                            |           |           |  |           |          |  |          |          | 
|net cash used in operating activities:                                                                                          |           |           |  |           |          |  |          |          | 
|Depreciation and amortization                                                                                                   |           | 66,198    |  |           | 18,041   |  |          | 1,955    | 
|Minority interest                                                                                                               |           | (271)     |  |           | (194)    |  |          |         | 
|Equity in loss of affiliate                                                                                                     |           | 279       |  |           | 686      |  |          |         | 
|Stock-based compensation
      expense                                                                                          | 2,814     |           |  | 430       |          |  |         |         
|Restructuring charge                                                                                                            |           |          |  |           | 1,560    |  |          |         | 
|Loss on early
      extinguishment of debt                                                                                      |          |           |  | 2,417     |          |  |         |         
|Provision for doubtful accounts                                                                                                 |           | 3,850     |  |           | 440      |  |          | 16       | 
|Loss on write-off of investments                                                                                                |           | 5,013     |  |           |         |  |          |         | 
|Unrealized loss on
      derivative instrument                                                                                  | 5,658     |           |  |          |          |  |         |         
|Cumulative effect of
      change in accounting principle                                                                       | 2,470     |           |  |          |          |  |         |         
|Changes in assets and liabilities:                                                                                              |           |           |  |           |          |  |          |          | 
|Increase in accounts receivable                                                                                                 |           | (16,113)  |  |           | (3,412)  |  |          | (421)    | 
|Increase in prepaid expenses and other assets                                                                                   | (10,270)  |           |  | (13,523)  |          |  | (829)    |         
|Increase in accounts payable                                                                                                    |           | 10,849    |  |           | 1,264    |  |          | 1,166    | 
|Increase (decrease) in accrued liabilities and other current liabilities                                                        | (11,314)  |           |  | 3,856     |          |  | 3,189    |         
|Net cash used in operating activities                                                                                           | (118,146) |           |  | (61,161)  |          |  | (12,220) |         
|                                                                                                                                |           |           |  |           |          |  |          |          | 
|Cash flows from investing
      activities:                                                                                     |           |           |  |           |          |  |          |          | 
|Payments related to
      acquisitions, net of cash                                                                             | (1,800)   |           |  | (10,372)  |          |  |         |         
|Proceeds from liquidated affiliate                                                                                              |           | 656       |  |           |         |  |          |         | 
|Purchases of property and equipment                                                                                             |           | (86,844)  |  |           | (93,727) |  |          | (35,564) | 
|Purchase of investments                                                                                                         |           | (1,250)   |  |           | (3,250)  |  |          | (2,000)  | 
|Net cash used in
      investing activities                                                                                     | (89,238)  |           |  | (107,349) |          |  | (37,564) |         
|                                                                                                                                |           |           |  |           |          |  |          |          | 
|Cash flows from financing
      activities:                                                                                     |           |           |  |           |          |  |          |          | 
|Capital contributions
      from minority interest                                                                              |          |           |  | 1,680     |          |  |         |         
|Repayments of long-term debt                                                                                                    |           |          |  |           | (93,854) |  |          |         | 
|Proceeds from long-term debt                                                                                                    |           | 65,637    |  |           | 98,153   |  |          | 20,000   | 
|Payments of financing costs                                                                                                     |           | (2,760)   |  |           | (5,558)  |  |          | (2,638)  | 
|Proceeds from issuance of stock                                                                                                 |           | 86,136    |  |           | 211,438  |  |          | 66,819   | 
|Purchase of treasury stock                                                                                                      |           | (148)     |  |           | (416)    |  |          |         | 
|Proceeds from exercise
      of stock options                                                                                   |          |           |  | 5         |          |  |         |         
|Other                                                                                                                           |           | (526)     |  |           |         |  |          |         | 
|Net cash provided by
      financing activities                                                                                 | 148,339   |           |  | 211,448   |          |  | 84,181   |         
|                                                                                                                                |           |           |  |           |          |  |          |          | 
|Net increase (decrease)
      in cash                                                                                           | (59,045)  |           |  | 42,938    |          |  | 34,397   |         
|                                                                                                                                |           |           |  |           |          |  |          |          | 
|Cash, beginning of year or
      period                                                                                         |           | 106,018   |  |           | 63,080   |  |          | 28,683   | 
|                                                                                                                                |           |           |  |           |          |  |          |          | 
|Cash, end of year or
    period                                                                                                 | $         | 46,973    |  | $         | 106,018  |  | $        | 63,080   | 
|Supplemental disclosures
      of cash flow information:                                                                        |           |           |  |           |          |  |          |         
|Cash paid during the year for interest                                                                                          | $         | 10,881    |  | $         | 2,359    |  | $        | 142      | 
|Cash paid during
      the year for income taxes                                                                                | $         |          |  |           |         |  |          |         | 
|Supplemental information for non cash investing activities:
     Transfer of assets from property and equipment to Other Assets | $         | 10,700    |  |           |         |  |          |         | 
|Accrued capital expenditures                                                                                                    | $         |          |  |           | 22,392   |  |          |         | 

See accompanying notes to consolidated financial
statements.

F-5

NUVOX, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(1)     General

NuVox, Inc. (NuVox or the Company) was incorporated as a Delaware corporation in June 1998
for the purpose of being a facilities-based provider
of integrated voice, data and Internet telecommunications services in selected
markets in the United States. As of December 31, 2001, NuVox was operational in
30 markets throughout the midwestern and southeastern United States.

NuVox has incurred
substantial operating losses and capital expenditures, resulting in negative
cash flow since its inception, and expects to continue to experience significant
operating losses and negative cash flow as it expands its operations and
develops its networks and grows its customer base. NuVox intends to fund the
negative operating cash flows through its debt and equity capital.

(2)      Summary of Significant Accounting Policies

Basis of Presentation

The accompanying
financial statements have been prepared on the accrual basis of accounting in
conformity with accounting principles generally accepted in the United States of
America. The presentation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those
estimates. The Company's comprehensive loss is equal to the reported net loss for the years
ended December 31, 2001, 2000 and 1999.

Consolidation

The accompanying
consolidated financial statements include the accounts of NuVox, Inc., its
wholly owned subsidiaries and affiliated companies in which NuVox has a
controlling interest. Until April 30, 2001, NuVox had a fifty percent interest
in a joint venture which was accounted for under the equity method. On April 30,
2001 the joint venture was liquidated. All significant intercompany balances and
transactions have been eliminated.

Cash and Cash Equivalents

Cash totalling
approximately $47.0 million and $106.0 million at December 31, 2001 and 2000,
respectively, is invested overnight in money market accounts. NuVox considers
all highly liquid investments with a maturity of three months or less when
purchased to be cash equivalents. The cost of these investments approximates
fair value.

Prepaid Expenses and Other Current Assets

Prepaid expenses and
other current assets consist of prepaid rent, prepaid insurance, prepaid
software maintenance, and facility installation costs. Prepayments are expensed
on a straight-line basis over the life of the underlying agreements. Facility
installation costs are amortized on a straight-line basis over a two-year period, which approximates the average term of the Company's customer contracts.

F-6

Property and Equipment

Property and equipment
includes network equipment, leasehold improvements, computer hardware and
software, office equipment, furniture and fixtures, vehicles, and
construction-in-progress. These assets are stated at cost. The cost of
construction, additions, and substantial betterments of property and equipment
is capitalized. The cost of maintenance and repairs is expensed as incurred. Property and equipment are depreciated
using the straight-line method over estimated economic lives as follows:

| |                                             | Years | 
| | ------------------------------------------- | ----- | 
| | Network equipment                           | 5-7   | 
| | Leasehold improvements                      | 5     | 
| | Computer hardware and
      software        | 3-5   | 
| | Office equipment, furniture and
      other | 7     | 
| | Transportation equipment                    | 5     | 

Goodwill

Goodwill results from the
excess of the cost of the business acquired over the fair value of the net
assets acquired. For the years ended December 31, 2001 and 2000, amortization of goodwill
was approximately $15.8 million and $2.3 million, respectively. The Company will adopt Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS No.
142), in 2002. This new standard requires the Company to discontinue
amortization of goodwill and other indefinite lived intangible assets.

Deferred Financing Costs

Costs incurred in connection with securing the Company's debt facilities, including underwriting, legal
and professional costs, are deferred and amortized over the term of the financing using the straight-line
method.  For the years ended December 31, 2001, 2000 and 1999, amortization of deferred financing costs was
approximately $0.7 million, $0.4 million and $0 million, respectively.

Income Taxes

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

Asset Impairment

NuVox management evaluates the recoverability of long-lived assets, including investments, goodwill,
property and equipment, on a periodic basis.  Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of
the carrying amount of an asset is measured by a comparison of the carrying amount of the asset to future
undiscounted cash flows expected to be generated by the asset.  If such asset  is considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair
value of the asset.  There have been no impairments through December 31, 2001.

F-7

Stock-based Compensation

NuVox applies the intrinsic
value method in accounting for employee stock options and warrants. The
financial impact on the net loss, as calculated under the fair value method, is
disclosed in Note 8.

Revenue Recognition

Revenue for voice, data and
other services provided to end users and for interconnection and carrier access,
including reciprocal compensation, is recognized in the month in which the
service is provided. Revenues from installation and activation activities are
recognized as revenue to the extent of the direct costs associated with such
activities with the remainder deferred and recognized over a two year period, which approximates the average term of the Company's customer
contracts. Revenue from
network design services and telecommunications equipment sales is recognized in
the month provided.

Concentrations of Risk

The Company has no
concentration of credit risk within its receivables. As of and for the years
ended December 31, 2001 and 2000, no customer represented more than 10% of the Companys
receivables or revenue.

The Company leases its
transport and customer access facilities from a limited number of suppliers and
is dependent upon the availability of capacity from those suppliers. The Company
is vulnerable to the risk of being able to renew favorable supplier contracts
and of the supplier not timely processing orders for the Companys customers.
The Company also is at risk with respect to regulatory agreements that govern
the rates charged by its suppliers.

The Company is dependent on
local exchange carriers to provide access service for the origination and
termination of long distance and local traffic. Historically, access charges for
these services have made up a significant percentage of the overall cost of
providing long distance and local services. To the extent that the access
services of the local exchange carriers are used, the Company and its customers
are subject to the quality of service, equipment failures and service
interruptions of the local exchange carriers.

Fair Value of Financial Instruments

The
Companys financial instruments are short-term trade receivables and
payables, long-term debt, capital lease obligations and an interest rate hedging
agreement. Management believes the carrying amounts of the financial instruments
classified as current assets and liabilities approximate their fair values
because of their short-term nature. Management believes the carrying value of
its long-term debt and capital lease obligations approximate fair value because
they bear market rates of interest. Management discloses the fair value of the
interest rate hedging agreement in Note 7.

Loss per Share

Basic and diluted loss per
share have been computed using the weighted average number of shares of common
stock outstanding during each period. The weighted average number of shares was
based on common stock outstanding for basic and diluted loss per share. All
other common share equivalents, including assumption of preferred stock
conversion and stock option and warrant exercise, are excluded from the
calculation of net loss per share due to their anti-dilutive effect.

Segment Information

Segments are determined under
the management approach, which designates the internal reporting that is used by
management for making operating decisions and assessing performance as the
source of reportable segments. NuVox operates in a single industry segment,
Communication Services. Operations are managed and
financial performance is evaluated based on the delivery of various
communications services to customers.

F-8

Derivative Instruments and Hedging Activities

Until January 1, 2001, the Company accounted for derivative instruments on a cash basis.
In June 2000, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 138, Accounting for Derivative Instruments and Hedging Activities, an Amendment of FASB
Statement No.133.  SFAS 133, as amended, which establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other contracts, and for hedging activities.
SFAS 133, as amended, requires an entity to recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.  If certain conditions are met, a
derivative may be specifically designated as a hedge in one of three categories.  The accounting for changes in
the fair value of a derivative (that is, gains and losses) depends on the intended use of the derivative and the
resulting designation.  Under SFAS 133, as amended, an entity that elects to apply hedge accounting is required
to establish, at the inception of the hedge, the method it will use for assessing the effectiveness or
ineffectiveness of the hedging derivative.   Those methods must be consistent with the entity's approach to
managing risk.  On January 1, 2001, the Company implemented SFAS 133, as amended.   The implementation of SFAS
133, as amended, resulted in a cumulative loss due to the change in accounting principle of approximately $2.5
million and an unrealized loss on derivative instrument of approximately $5.7 million for the twelve months ended
December 31, 2001. The Companys interest
rate hedging instrument does not qualify under SFAS 133 for hedge accounting.
Thus, the changes in the fair market value of the instrument, which reflects
market prices and volatility at the balance sheet date, are recorded to the
statement of operations.

Recent Accounting Pronouncements

In June 2001, the FASB issued SFAS No. 141, Business Combinations.  This standard eliminates the pooling
of interests method of accounting for business combinations and requires the purchase method of accounting to be
used for business combinations.  The standard is effective for acquisitions initiated after June 30, 2001.

In June 2001, the FASB also issued SFAS No. 142, Goodwill and Other Intangible Assets.  The Company will
adopt this standard on January 1, 2002.  Under SFAS 142, goodwill and acquired intangible assets with indefinite
lives will no longer be amortized.  The Companys goodwill amortization for the years ended December 31, 2001 and
2000 was $15.8 million and $2.3 million, respectively.  This standard also requires that goodwill and acquired
intangible assets with indefinite lives be subject to at least an annual assessment for impairment through the
application of a fair value-based test.  As of December 31, 2001, the Company had unamortized goodwill of $228.6
million , which will be subject to the provisions of SFAS No. 142.    SFAS No. 142 identifies discounted
projected cash flows, multiples of earnings or revenue, or similar performance measures as appropriate techniques
in determining fair value.  While only a preliminary evaluation under these new guidelines has been completed at
this time, the Company estimates a possibly substantial goodwill impairment loss will be recognized upon
implementation of SFAS No. 142, based upon current market conditions.  Management will complete its initial
impairment review of the Company's unamortized goodwill during the first half of 2002.

In June 2001, the FASB issued SFAS No., 143, Accounting for Asset Retirement Obligations.  The Company
will adopt this standard on January 1, 2003. This standard applies to legal obligations associated with the
retirement of tangible long-lived assets that result from acquisitions, construction, or development or the
normal operation of long-lived assets.  The Companys management believes that the adoption of this standard will
not have a material impact on the Companys consolidated financial position or results of operations.

F-9

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets.  This standard addresses financial accounting and reporting for the impairment or disposal of long-lived
assets.  This standard supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of.  Based upon a preliminary evaluation, the Company does not believe that the
adoption of this standard will have a material impact on the Companys consolidated financial position or results
of operations upon adoption on January 1, 2002.

(3)     Property and Equipment

Property and equipment consist of the following (in thousands):

| |                                                | December 31, | 
| | ---------------------------------------------- | ------------ | 
| |                                                | 2001         | 
| | Network equipment                              | $   237,234  | 
| | Computer hardware and software                 | 37,514       | 
| | Leasehold improvements                         | 14,178       | 
| | Transportation equipment                       | 7,836        | 
| | Furniture and office equipment                 | 6,647        | 
| | Other                                          | 1,141        | 
| | Property and equipment, in service             | 304,550      | 
| | Less accumulated depreciation and amortization | 65,625       | 
| | Property and equipment, in service, net        | 238,925      | 
| | Construction-in-progress                       | 17,242       | 
| | Property and equipment, net                    | $   256,167  | 

During the years ended December 31, 2001, 2000 and 1999, depreciation expense was $48.9 million, $15.4 million
and $1.9 million, respectively.

(4)     Investments

On December 2, 1999, NuVox
invested $2.0 million to purchase 583,090 Series B convertible preferred shares
of Tachion Networks, Inc. (Tachion), a privately-held next generation switch
manufacturer. In June, 2001, NuVox wrote off the investment in Tachion due to
the cessation of operations by that company, resulting in a loss on write-off of
investment of $2.0 million which is included in other income (expense) in the
accompanying consolidated statements of operations.

On March 21, 2000, NuVox
entered into a joint venture, GCI Transportation Company, L.L.C. Under the terms
of the agreement, NuVox owns a 70% interest in the joint venture and Brooks
International Aviation, L.L.C. owns the remaining 30% interest. As of December
31, 2001, NuVox and Brooks International Aviation, L.L.C. have contributed $3.3
million and $1.7 million, respectively.

On March 22, 2000, NuVox
entered into a joint venture, WebBizApps, L.L.C. Under the terms of the
agreement, NuVox agreed to contribute $4.5 million in exchange for a 50%
interest in the joint venture. NuVox contributed $3.3 million in March 2000. The
joint venture partner contributed $4.5 million in assets and received a
distribution of $2.0 million in March 2000. In January 2001, NuVox contributed
its remaining $1.2 million. In June 2001, this joint venture was liquidated and
rights to continue marketing the product line were acquired by NuVox. NuVox also
received cash of $656,000 and a loss on write-off of investment of $3.0 million
was recorded which is included in other income (expense) in the accompanying
consolidated statements of operations.

F-10

(5)     Acquisitions

Acquisition of American Telecommunications, Inc. of
Charleston

In February 2001, NuVox
purchased all of the outstanding stock of American Telecommunications, Inc. of
Charleston and an affiliated company, a Charleston, South Carolina based
interconnect equipment and services company (AT). Under terms of the agreement,
NuVox paid $1.6 million in cash, issued 209,059 shares of common stock valued at
$0.8 million and assumed $0.3 million of liabilities of AT. The $2.7 million
purchase price was allocated based upon the fair value of the assets acquired
and the liabilities assumed with the excess of approximately $2.3 million
recorded as goodwill. The acquisition has been accounted for using the purchase
method of accounting. Accordingly, the results of operations of AT are included
in NuVoxs results of operations subsequent to the date of the purchase.

TriVergent Merger

On November 1, 2000, NuVox completed its merger with State Communications, Inc., d/b/a TriVergent
Communications, which merged with and into a wholly-owned subsidiary of NuVox.  To consummate the transaction,
NuVox issued approximately 52.2 million shares of common and preferred stock and options and warrants to acquire
approximately 12.2 million shares of common stock in exchange for outstanding TriVergent common and preferred
stock and options and warrants to acquire TriVergent common stock.  Total consideration was approximately $245.6
million, inclusive of transaction costs and options and warrants assumed of $21.1 million.  The acquisition has
been accounted for using the purchase method of accounting.  Accordingly, the results of operations for
TriVergent are included in NuVox's results of operations subsequent to the date of the merger.

In connection with the TriVergent merger, the Company also issued to the holders of TriVergent and NuVox
preferred stock warrants to purchase 7,999,931 shares of NuVox common stock at an exercise price of $6.00 per
share, which  expired without exercise on October 31, 2001, and warrants to purchase 4,999,942 shares of NuVox
common stock at an exercise price of $10.25 per share, which expire on October 31, 2002.

Allocation of the purchase price was finalized during 2001 based upon the fair value of the assets acquired and the liabilities
assumed with the excess of approximately $ 228.0 million recorded as goodwill. Also, as a result of indirect
expenses in connection with the merger, the Company recorded a $1.6 million restructuring charge primarily
related to duplicate software.

In connection with the merger, liabilities assumed and cash paid were as follows (in thousands):

| | Property and equipment                 | $   109,678    | 
| | -------------------------------------- | -------------- | 
| | Other assets                           | 237,076        | 
| | Liabilities assumed                    | (127,335)      | 
| | Unearned stock-based compensation      | 5,192          | 
| | Total consideration paid               | $   224,611    | 
| | Lesscommon and preferred stock issued | 224,611        | 
| | Net cash paid                          | $           
 | 

F-11

Acquisition of Shared Telcom Services

On December 11, 2000, NuVox
purchased all of the outstanding stock of Shared Telcom Services, Inc. (STS).
Under terms of the agreement, NuVox paid $10.4 million in cash and assumed
certain liabilities of STS. The acquisition has been accounted for using the
purchase method of accounting. Accordingly, the results of operations to STS are
included in NuVoxs results of operations subsequent to the date of the merger.
The purchase price was allocated based upon the fair value of assets acquired
and liabilities assumed with the excess of approximately $10.9 million recorded
as goodwill, as follows (in thousands):

| | Fair value of assets acquired, excluding
      cash acquired | $       1,003 | 
| | ------------------------------------------------------------ | ------------- | 
| | Less  liabilities assumed                                   | 1,543         | 
| | Net deficit acquired                                         | 540           | 
| | Total consideration paid                                     | 10,371        | 
| | Goodwill recorded                                            | $     10,911  | 

The following represents the
unaudited pro forma results of operations of NuVox for the years ended December
31, 2000 and December 31, 1999 as if the TriVergent merger and the STS
acquisition had been consummated as of January 1, 1999. The pro forma results of
operations are prepared for comparative purposes only and do not necessarily
reflect the results that would have occurred had those transactions occurred at
the beginning of the periods presented or the results which may occur in the
future (in thousands):

| |                                             | Year Ended December 31, | 
| | ------------------------------------------- | ----------------------- | 
| |                                             | 2000                    | 
| | Revenues                                    | $      35,048           | 
| | Total operating costs and
      expenses    | (156,712)               | 
| | Loss from operations                        | (121,664)               | 
| | Net Loss                                    | (128,698)               | 
| | Net Loss per share, basic and
      diluted | (15.63)                 | 

(6)     Accrued Expenses and Other
      Current Liabilities

Accrued expenses and other
      current liabilities consisted of the following (in thousands):

| |                                                | December 31, | 
| | ---------------------------------------------- | ------------ | 
| |                                                | 2001         | 
| | Accrued capital
    expenditures               | $     2,246  | 
| | Acquisition liabilities                        | 6,092        | 
| | Accrued employee
expenses                      | 4,563        | 
| | Accrued costs of communications
      services | 3,039        | 
| | Accrued taxes                                  | 4,956        | 
| | Other                                          | 6,229        | 
| | Total                                          | $   27,125   | 

F-12

(7)     Long Term Debt

On October 28, 1999, Gabriel Communications Finance Company (the Borrower), a wholly-owned subsidiary of the Company, entered into a $90
million senior secured credit facility primarily to finance capital expenditures
and to provide working capital. This facility consisted of an $80 million term
loan facility and a $10 million revolving credit facility. On November 1, 2000,
the outstanding balance was repaid, the facility was extinguished, and the
Company recorded a loss on early extinguishment of debt of $2.4 million.

On November 1, 2000, the
Borrower secured an expanded $225 million eight-year senior secured credit
facility (Credit Facility). An aggregate of $98.2 million was drawn at that
date to repay the previous secured credit facilities of the Borrower and
TriVergent and pay certain other expenses relating to the TriVergent
merger.

The $225 million credit facility consists of a $40 million term loan facility, a $60 million six-year
revolving credit facility, and $125 million in two-year delayed draw term loan facilities, including a $45
million facility provided by Nortel Networks, Inc. to provide financing for the purchase of equipment and
services from Nortel Networks.  The credit facility is available, subject to satisfaction of certain terms and
conditions, primarily to provide financing for capital expenditures and working capital. Pursuant to an
amendment effective September 21, 2001, borrowings are limited to no more than $175 million prior to April 1,
2002, $200 million prior to June 30, 2002 and $225 million thereafter.  The lenders' commitments to honor
borrowing requests under the two-year delayed draw term loan facilities expire on November 1, 2002 if borrowings
in the amount of their respective commitments are not drawn on or before such date.  Quarterly repayment of
outstanding borrowings under the term loan and revolving credit facilities will commence on December 31, 2003 and
continue through September 30, 2006.  Interest on outstanding borrowings varies based on the Borrower's leverage
ratio and is initially the London Interbank Offer Rate (LIBOR) plus 4.50% (the interest rate at December 31, 2001
was 6.46%).  The initial commitment fee on the unused portion of the credit facility was 1.50% per annum, paid
quarterly, and is reduced based upon usage (the applicable commitment fee percentage at December 31, 2001 was
0.75%).  Obligations under the credit facility are guaranteed by NuVox, its direct wholly-owned subsidiary,
Gabriel Communications Properties, Inc., and all of the existing and subsequently acquired subsidiaries of the
Borrower.  The credit facility is secured by a pledge of all of the capital stock of Gabriel Communications
Properties, Inc., the Borrower and each of the Borrower's subsidiaries and a security interest in the assets of
Gabriel Communications Properties, Inc. (other than its unrestricted subsidiaries) the Borrower and each of the
Borrower's subsidiaries.

The credit facility contains restrictive covenants that, among other things, impose limitations on indebtedness,
liens, investments, capital expenditures, dividends and other specified transactions and payments, and requires
the Borrower and NuVox to maintain certain operating and financial performance measures at the end of each
calendar quarter, including not exceeding specified levels of adjusted EBITDA (earnings before interest, taxes,
depreciation and amortization, adjusted to exclude the effects of other non-cash items) loss, achieving specified
minimum levels of adjusted revenues (gross revenues less resale, carrier access and reciprocal compensation
revenues), access lines and gross profit and maintaining specified levels of minimum available cash (which, for
purposes of the covenants, means the sum of the unused commitments under the credit facility plus our cash and
cash equivalents).  For each fiscal quarter ending on or prior to June 30, 2003, the Company must meet or exceed
the following financial covenants:

F-13

|     |  |   | Minimum AdjustedRevenues |  | MinimumAccessLines |  |   | MinimumGross Profit |  |   | Maximum adjustedEBITDALoss/Minimumadjusted EBITDA |  | MinimumAvailable Cash |             
|---- |  | - | ------------------------ |  | ------------------ |  | - | ------------------- |  | - | ------------------------------------------------- |  | --------------------- | ------------
|1Q02 |  | $ | 25.7 million             |  | 162,000            |  | $ | 11.5 million        |  | $ | (14.1 million)                                    |  | $                     | 67.0 million
|2Q02 |  |   | 31.4 million             |  | 196,000            |  |   | 14.9 million        |  |   | (9.8 million)                                     |  |                       | 43.5 million
|3Q02 |  |   | 37.7 million             |  | 233,000            |  |   | 18.8 million        |  |   | (5.3 million)                                     |  |                       | 23.5 million
|4Q02 |  |   | 44.4 million             |  | 272,000            |  |   | 23.2 million        |  |   | 100,000                                           |  |                       | 7.0 million 
|1Q03 |  |   | 51.8 million             |  | 313,000            |  |   | 30.4 million        |  |   | 8.9 million                                       |  |                       | 5.0 million 
|2Q03 |  |   | 59.0 million             |  | 356,000            |  |   | 34.4 million        |  |   | 13.0 million                                      |  |                       | 5.0 million 

The credit facility contains provisions for increases and decreases of such financial covenant amounts
in the event of certain acquisitions or asset sales, respectively, for which total consideration, when aggregated
with the consideration paid or received in all other acquisitions or asset sales since September 21, 2001 or
since the date of any future adjustment, exceeds $5 million in the aggregate.

The Company has heretofore maintained full compliance with each of its applicable financial covenants.  The
restrictive covenants in the credit facility effectively prohibit NuVox from paying any cash dividends on its
common stock and preferred stock for the foreseeable future.

Borrowings under the Credit Facility during the year ended December 31, 2001 totaled $63.0 million (including $18
million borrowed from Nortel Networks) and outstanding borrowings totaled $161.2 million at December 31, 2001
(including $32 million of outstanding borrowings from Nortel Networks) at an interest rate of 6.46%.

On September 14, 2001, GCI
Transportation Company, L.L.C. (GCI), an affiliate which is 70% owned by the
Company, obtained a $2.76 million secured credit facility primarily
to finance working capital of GCI. The aggregate $2.76
million was drawn at that date. Monthly repayments of the outstanding borrowings
commenced on November 1, 2001 and continue through October 1, 2019. Interest on
the outstanding borrowings is variable at LIBOR plus 2.95%. At December 31,
2001, $2.7 million remained outstanding under this facility at an interest rate
of 5.5%.

Principal maturities of long-term debt at December 31, 2001
are as follows (in thousands):

| | 2002       | $ | 94      | 
| | ---------- | - | ------- | 
| | 2003       |   | 4,127   | 
| | 2004       |   | 18,234  | 
| | 2005       |   | 26,297  | 
| | 2006       |   | 112,923 | 
| | Thereafter |   | 2,223   | 
| | Total      | $ | 163,898 | 

As of December 31, 2001, the
Company has in place an interest rate hedging agreement in the form of an
interest rate collar. This collar limits the Companys exposure to and
benefits from interest rate fluctuations on its variable rate debt to within a
certain range of rates. At December 31, 2001, the fair value of the collar was
$(9.3) million. The fair value of this interest rate collar is estimated based
on quotes from brokers and represents the estimated amount that the Company
would expect to pay to terminate the agreement at December 31, 2001.

F-14

(8)     Stock-based
      Compensation

Pursuant to the
Companys 1998 and 2001 Stock Incentive Plans, the Company has granted
non-qualified stock options and warrants to employees. The Company has
authorized the issuance of 32,681,552 shares of Series F Convertible Preferred
Stock under the 2001 Stock Incentive Plan. The Company does not plan to grant
any additional options under the 1998 Stock Incentive Plan. Each option and warrant enables the employee to purchase one share of
stock at the exercise price, subject to applicable vesting provisions. The
nonqualified stock options and warrants have terms of 10 years from the dates of
the grant. One-third of the nonqualified common stock options vest upon
completion of each of the first, second and third full year of service after the
dates of grant. The warrants are fully vested on the date of issuance. The
nonqualified preferred stock options vest one-third upon completion of one full
year of service after the date of grant and an additional 1/36 upon completion
of each full month of continuous service thereafter.

As stated in Note 2, NuVox
      applies the intrinsic value method in accounting for its
    stock-based compensation incentive plans. Had compensation costs
for the stock options and warrants issued during 2001, 2000, and 1999 been
determined based upon the fair value methodology, the Companys reported and pro
forma net loss (in thousands) and net loss per share for the years ended
December 31, 2001, 2000 and 1999 would have been as follows:

| |                                  | 2001          |  | 2000         |  | 1999         | 
| | -------------------------------- | ------------- |  | ------------ |  | ------------ | 
| | Reported net loss                | $   (177,309) |  | $   (72,726) |  | $   (17,296) | 
| | Pro forma net loss               | (177,919)     |  | (73,940)     |  | (17,908)     | 
| | Reported net loss per
    share  | (9.53)        |  | (8.94)       |  | (3.25)       | 
| | Pro forma net loss per
    share | (9.56)        |  | (9.09)       |  | (3.36)       | 

The fair value of each option and warrant grant was estimated using the Black-Scholes option-pricing model with the
following weighted average assumptions:

| |                          | 2001 |  | 2000 |  | 1999 | 
| | ------------------------ | ---- |  | ---- |  | ---- | 
| | Dividend yield           |     |  |     |  |     | 
| | Expected volatility      | 0%   |  | 0%   |  | 0%   | 
| | Risk free interest rate  | 4%   |  | 5%   |  | 5%   | 
| | Expected life (in years) | 5    |  | 5    |  | 10   | 

F-15

The following is a summary of
activity with respect to common stock options and warrants under the 1998 Stock
Incentive Plan.

|                                                           | Shares Subject toOptions & Warrants |  | Price |               | Weighted AverageExercise Price
|---------------------------------------------------------- | ----------------------------------- |  | ----- | ------------- | ------------------------------
|Options and warrants outstanding at      December 31, 1998 | 78,000                              |  |       | $2.40         |                               
|Granted                                                    | 2,697,950                           |  |       | $2.40         |                               
|Canceled                                                   | (10,450)                            |  |       | $2.40         |                               
|Exercised                                                  |                                    |  |       |              |                               
|Options and warrants outstanding at      December 31, 1999 | 2,765,500                           |  |       | $2.40         |                               
|Granted                                                    | 3,658,800                           |  |       | $2.40  $5.60 |                               
|Canceled                                                   | (474,683)                           |  |       | $2.40  $5.60 |                               
|Exercised                                                  | (6,040)                             |  |       | $2.40         |                               
|Options and warrants outstanding at      December 31, 2000 | 5,943,577                           |  |       |               |                               
|Granted                                                    | 1,090,263                           |  |       | $4.00  $8.00 |                               
|Anti-dilution adjustment*                                  | 1,262,692                           |  |       | $1.04         |                               
|Canceled                                                   | (857,005)                           |  |       | $2.40  $5.60 |                               
|Exercised                                                  | (2,833)                             |  |       | $2.40         |                               
|Options and warrants outstanding at      December 31, 2001 | 7,436,694                           |  |       |               |                               

---

|* | Warrants to purchase 670,000 shares at $3.00 per share were adjusted to 1,932,692 shares
at $1.04 per share as a result of the placement of 59,903,994 Series D units at
$1.50 per unit on September 20, 2001.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following is a summary as of December 31, 2001 of options and warrants outstanding under the 1998
Stock Incentive Plan:

| | Shares Outstanding |           | Exercise Price | 
| | ------------------ | --------- | -------------- | 
| |                    | 1,932,692 |                | 
| |                    | 2,058,614 |                | 
| |                    | 306,650   |                | 
| |                    | 2,793,173 |                | 
| |                    | 312,565   |                | 
| |                    | 33,000    |                | 
| |                    | 7,436,694 |                | 

Exercisable options and warrants under the 1998 Stock Incentive Plan totalled 4,149,612,
1,355,092 and 645,500 at December 31, 2001, 2000 and 1999, respectively.  The weighted average exercise price per share
of the exercisable options was $2.34, $2.40 and $2.40, respectively.

Pursuant to an employee stock purchase program under the 1998 Stock Incentive Plan, NuVox issued 555,000 shares of common stock at $2.40 per
share and 124,000 shares of common stock at $3.20 per share during 2000 and 269,200 shares of common stock at
$2.40 per share during 1999.

F-16

Pursuant to the terms of the TriVergent merger agreement, NuVox assumed and adopted, at November 1,
2000, the plan under which TriVergent had granted Common Stock options to its employees.  The following is a
summary of activity with respect to NuVox stock options issued at November 1, 2000 in substitution for options
outstanding immediately prior to the effective time of the merger under the TriVergent plan.

|                                         | Shares Subject toOptions |  | Price |                | Weighted AverageExercise Price
|---------------------------------------- | ------------------------ |  | ----- | -------------- | ------------------------------
|Options outstanding at November 1, 2000  | 10,946,207               |  |       | $1.36  $13.56 |                               
|Granted                                  |                         |  |       |               |                               
|Canceled                                 | (55,408)                 |  |       | $5.56          |                               
|Exercised                                |                         |  |       |               |                               
|Options outstanding at December 31, 2000 | 10,890,799               |  |       |                |                               
|Granted                                  |                         |  |       |               |                               
|Canceled                                 | (1,318,157)              |  |       | $2.03  $5.56  |                               
|Exercised                                | (206,563)                |  |       | $1.36  $3.84  |                               
|Options outstanding at December 31, 2001 | 9,366,079                |  |       |                |                               

The following is a summary as of December 31, 2001 of options outstanding under the TriVergent Plan:

| | Shares Outstanding |           | Exercise Price | 
| | ------------------ | --------- | -------------- | 
| |                    | 812,910   |                | 
| |                    | 239,121   |                | 
| |                    | 2,474,745 |                | 
| |                    | 885,151   |                | 
| |                    | 1,690,547 |                | 
| |                    | 1,389,970 |                | 
| |                    | 546,435   |                | 
| |                    | 663,600   |                | 
| |                    | 663,600   |                | 
| |                    | 9,366,079 |                | 

Exercisable options under the TriVergent plan totaled 6,203,431 and 4,007,438 at December 31, 2001 and
2000, respectively.  The weighted average exercise price per share of the exercisable options was $3.27 and
$2.57, respectively.

F-17

On October 16, 2001, NuVox adopted the 2001 Stock Incentive Plan.  The following is a summary of
activity with respect to Series F preferred stock options under this plan:

|                                         | Shares Subject toOptions |  | Price |       | Weighted AverageExercise Price
|---------------------------------------- | ------------------------ |  | ----- | ----- | ------------------------------
|Options issued at October 16, 2001       | 17,909,000               |  |       | $0.59 |                               
|Canceled                                 | (488,000)                |  |       | $0.59 |                               
|Options outstanding at December 31, 2001 | 17,421,000               |  |       |       |                               

There were no exercisable options under the 2001 Stock Incentive Plan at December 31, 2001.

(9)     Stockholders
      Equity

NuVoxs  authorized common stock consists of 900,000,000 shares of which 12,423,242 shares were issued
and outstanding as of December 31, 2001.  The Company's authorized preferred stock consists of 800,000,000
shares.  On September 20, 2001, NuVox closed a private placement of shares of Series D Convertible Preferred
Stock pursuant to which proceeds from the sale of 59,903,994 shares of Series D Convertible Preferred Stock at
$1.50 per share, or $89.8 million, were received, of which  $87.1 million was paid in cash and $2.7 million was
paid in five year notes.  The various series of Series E Preferred Stock have been issued and are issuable
pursuant to Series E warrants which were issued together with the Series D Convertible Preferred Stock. During
the three months ended December 31, 2001, an aggregate of 64,313,398 shares of
Series E Preferred Stock were issued in exchange for 10,740,598 shares of Series
A-C Preferred Stock and 7,355,392 shares of Common Stock.

In
addition, the Company has a $0.8 million receivable outstanding at December 31,
2001 from an existing employee for the purchase of TriVergent preferred stock.

Set forth below are the shares authorized,
liquidation preferences, conversion prices, and shares issued and outstanding
for each series of NuVox preferred stock:

|Series of Preferred Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | SharesAuthorized                                                                                                                                                                                                         |  | InitialLiquidationPreference |                                                                                                                             | ConversionPrice |  | Shares Issued &OutstandingDecember 31,                                                                                      | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------- | --------------------------------------------------------------------------------------------------------------------------- | --------------- |  | --------------------------------------------------------------------------------------------------------------------------- | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                          |  |                              |                                                                                                                             |                 |  |                                                                                                                             | 
|Series A Preferred Stock
Series A-1 Preferred Stock
Series B Preferred Stock
Series C-1 Preferred Stock
Series C-2 Preferred Stock
Series C-3 Preferred Stock
Series D Preferred Stock (2)
Series E-1 Preferred Stock (3)
Series E-2 Preferred Stock (3)
Series E-3 Preferred Stock (3)
Series E-4 Preferred Stock (3)
Series E-5 Preferred Stock (3)
Series E-6 Preferred Stock (3)
Series E-7 Preferred Stock (3)
Series E-8 Preferred Stock (3)
Series E-9 Preferred Stock (3)
Series E-10 Preferred Stock (3)
Series E-11 Preferred Stock (3)
Series E-12 Preferred Stock (3)
Series F-1 Preferred Stock (4)
Undesignated |  | 26,850,000
3,125,000
30,430,612
5,374,481
15,786,710
17,735,703
155,000,000
80,550,000
12,500,000
133,284,618
16,486,756
281,415
681,793
5,180,000
663,599
1,388,154
5,202,623
221,200
213,014,284
24,000,000
52,243,052 |  |                              | $3.00
$4.00
$7.00
$2.17
$3.39
$3.84
$3.00
$1.18
$1.14
$1.08
$1.00
$0.92
$0.90
$0.50
$0.30
$0.13
$0.11
$0.0045
$1.08
$0.59
 |                 |  | $1.04
$1.29
$2.05
$0.84
$1.14
$1.25
$1.50
$1.00
$1.00
$1.00
$1.00
$0.92
$0.90
$0.50
$0.30
$0.13
$0.11
$0.0045
$1.00
$0.59
 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | 800,000,000                                                                                                                                                                                                              |  |                              |                                                                                                                             |                 |  |                                                                                                                             | 

F-18
(1)
    Includes 433,094 shares subscribed
      at December 31, 2000 and issued during the three months ended March 31,
      2001.(2)
    Ranks prior to common stock and all
      other series of preferred stock as to liquidation preference and preferred
      return.(3)
    Ranks prior to common stock and
      Series A, A-1, B, C-1, C-2 and C-3 preferred stock, junior to Series D
      preferred stock and pari passu with any series of the Series F
      preferred stock and all other series of Series E preferred stock as to
      liquidation preference and preferred return.(4)
    Series F-1 preferred stock has been
      authorized for issuance under NuVoxs 2001 Stock Option Program. Under
      this program, stock options to purchase up to 32,681,552 shares of Series
      F preferred stock (including 24,000,000 shares of Series F-1 preferred
      stock) may be issued to employees of NuVox.These liquidation
preference amounts will be adjusted for any stock dividends, combinations or
splits with respect to NuVoxs capital stock. In the event of any liquidation
dissolution or winding up of the Company (which includes an acquisition of the
Company or any sale or other disposition of all or substantially all of its
assets or stock), the holders of these series of preferred stock will be
entitled to the greater of
an amount equal to the sum of the applicable
  liquidation preference amount plus a preferred return on the respective
  initial liquidation preference amount of 8% per annum, with such return to
  begin accruing as of the original issue dates of the Series A, Series A-1,
  Series B, Series D and Series F-1 preferred stock, as of September 1, 2000 for
  the Series C-1, Series C-2 and Series C-3 preferred stock, and as of September
  1, 2001 for the various series of Series E preferred stock, orthe amount such holders would have received if
  they had converted their preferred stock into common stock immediately prior
  to the liquidation event;thereafter, the holders of the preferred stock would
have no right or claim to the remaining assets and funds of NuVox, if any.

F-19
Holders of shares of the preferred stock are not
entitled to receive cash dividends. No cash dividends may be declared and paid
to holders of shares of the common stock so long as any shares of the preferred
stock are outstanding.

Holders of shares of
the preferred stock are entitled to cast one vote per share of common into which
their shares of preferred stock are then convertible, except that until March
31, 2002 (or such earlier date as is determined by the Board of Directors), each
share of each series of Series E preferred stock shall only be entitled to the
number of votes for each such share held that would equal (a) in the case of any
such share of Series E preferred stock that was issued pursuant to the exercise
of a Series E warrant and the consideration used in such exercise was a share or
a fraction of a share of preferred stock, the number of shares of common stock
that would have resulted (on the record date for the meeting) from conversion of
such shares of preferred stock (or fraction thereof) that were used as such consideration for such share of Series E
preferred stock, (b) in the case of any such share of Series E preferred stock
that was issued pursuant to the exercise of a Series E warrant and the
consideration used in such exercise was a share or a fraction of a share of
common stock, the number of shares of common stock (or fraction thereof) that
were used as such consideration for such share of Series E preferred stock and
(c) in the case of any other share of Series E preferred stock, the number of
shares of common stock resulting from conversion of such shares on the record
date for the meeting. The holders of the Series A, Series A-1, Series B, Series
C-1, Series C-2, Series C-3, Series D, each of the series of Series E and Series
F-1 preferred stock and common stock will vote together as a single class on all
matters as to which such holders are entitled to vote, except when voting
separately by class is required by Delaware law. Each holder of shares of any
series of Series E preferred stock has agreed, when and as requested by NuVox in
connection with any proposed amendment to its charter, to vote, or cause to be
voted, all shares of any series of Series E preferred stock which such
stockholder owns from time to time in favor of any amendment to the charter
provided that (i) at least a majority of the shares of all of the series of
Series E preferred stock, voting as a single class, have agreed to vote in favor
of such amendment, and (ii) to the extent that such amendment would affect the
powers, preferences or special rights of the holders of the various series of
Series E preferred stock, it would affect the holders of all of the series of
Series E preferred stock in an equivalent or proportionate manner.

F-20
In addition to the options and warrants described in Note 8, at December 31, 2001, the following stock purchase
warrants were issued and outstanding:


Description
    
    Exercise Price
    
    Expiration DateCommon Stock:750,000
    
    $1.04
    
    October 31, 2008978,421
    
    $1.81
    
    March 16, 2002  May 27, 2006221,200
    
    $2.03
    
    May 27, 20064,999,942
    
    $10.25  (1)
    
    October 31, 20026,949,563Series D Preferred Stock (2):59,903,994
    
    $1.50
    
    September 30, 200610,474,659
    
    $0.01
    
    September 30, 200670,378,653Series E Preferred Stock (3):382,088,567
    
    $1.00
    
    March 31, 2002(1)
    These warrants were issued pursuant
      to the TriVergent merger agreement.(2)
    In order to exercise the $0.01
      Series D warrants, a holder must also exercise an equal number of $1.50
      Series D warrants. The Series D warrants may be exercised either for cash
      and/or by surrendering shares of NuVox common or preferred stock having a
      fair market value equal to the exercise price and/or by net cashless
      exercise.(3)
    The Series E warrants may be
      exercised either for cash and/or by surrendering shares of NuVox common or
      preferred stock valued at the original purchase price paid for such shares
      (or at $1.00 per share for shares of common stock purchased for less than $1.00 per share
and at the initial liquidation preference for shares of Series C-1, C-2 and C-3
preferred stock).(10)     Income Taxes

The Company did not record a provision for income taxes because
      the Company has had losses for both financial reporting and tax purposes since
inception. The primary differences between income tax benefit and the amount of
tax benefit that would be expected to result by applying the federal statutory
rate of 35% to the loss before income taxes are as follows (in thousands):

Year Ended December 31,2001
    
    2000
    
    1999Expected federal income tax benefit
State income tax benefit
Goodwill amortization and other
Valuation allowance
    $   62,058       
  1,099 
(6,117)
(57,040)
    
    $   25,454  
      2,078
     (1,029)
   (26,503)
    
    $     5,881  
        518
           
      (6,399)Income tax benefit
    $          
    
    $        
    
    $        F-21
The tax effects of the  temporary differences that give rise to significant portions of the deferred tax assets and
      deferred tax liabilities are as follows (in thousands):

December 31,2001
    
    2000Deferred tax assets:Start-up costs and other assets
    $     2,543
    
    
    $     2,717Accrued liabilities
    2,783
    
    
    Unrealized loss on derivative instrument
    3,004
    
    
    Capital loss carryover
    700
    
    
    Net operating loss carryforward
    131,444
    
    
    68,595Gross deferred tax assets
    140,474
    
    
    71,312Less valuation allowance
    (135,223)
    
    
    (67,702)Total deferred assets
    5,251
    
    
    3,610Deferred tax liabilities:Depreciation and amortization
    4,417
    
    
    3,074Investment in partnership
    834
    
    
    536Total deferred tax liabilities
    5,251
    
    
    3,610Net deferred tax asset
    $     
    
    
    $     In assessing the realizability of deferred tax assets, management considers whether it is more likely
than not that some portion or all of the deferred tax assets will not be realized.  The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable income during the periods in which those
temporary differences become deductible.  Management considers projected future taxable income and tax planning
strategies in making this assessment.  Based upon the level of historical taxable losses, limitations imposed by
Section 382 of the Internal Revenue Code and projections for future losses over the periods which the deferred
tax assets are deductible, management determined that a 100% valuation allowance of net deferred tax assets was
appropriate.  Accordingly, a valuation allowance has been established for the excess of the deferred tax assets
over deferred tax liabilities.

At December 31, 2001, NuVox had net operating loss carryforwards for federal income tax purposes of
$355.6 million, which are available to offset future federal taxable income of $9.9 million through 2018, $99.5 million through
2019, $75.9 million through 2020 and $170.3 million through 2021.

The valuation allowance for deferred tax assets at December 31, 2001 includes $44.2 million related to the
TriVergent acquisition which, when recognized, will be credited to goodwill and not recognized as an income tax
benefit.

F-22
(11)     Loss Per Share

A reconciliation of the number of shares used in the
      calculation of basic and diluted loss per share follows:

Year Ended December 31,2001
    
    2000
    
    1999Shares outstanding  beginning of period
    19,394,405
    
    5,469,200
    
    5,200,000Weighted average number of common
      shares issued
    326,917
    
    2,662,837
    
    122,409Weighted average number of common shares repurchased or converted
    (1,113,613)
    
    
    
    Weighted average number of common shares outstanding 
      end of period
    18,607,709
    
    8,132,037
    
    5,322,409Dilutive effect of preferred stock conversion and employee stock
      options and warrants
    
    
    
    
    Diluted shares
    outstanding
    18,607,709
    
    8,132,037
    
    5,322,409In calculating diluted loss per share for the years ended December 31, 2001, 2000 and 1999, stock
options and warrants to purchase 493,640,556,  31,344,834 and 3,025,500 shares of common stock, respectively, and
preferred stock convertible into common shares of 222,745,739,  98,869,411 and 29,975,000, respectively, were
outstanding but were not included in the computation of diluted loss per share due to their antidilutive effect.


(12)     Commitments and
      Contingencies
NuVox has entered into various operating lease agreements for office space and equipment.  NuVox has
also entered into software maintenance contracts.  Future minimum lease obligations related to the Company's
operating leases with initial lease terms in excess of one year and maintenance contracts at December 31, 2001
are as follows (in thousands):


2002
    
    $     7,5942003
    
    6,6632004
    
    5,6722005
    
    4,7992006
    
    4,289Thereafter
    
    $   14,364Total
    
    43,381Rent expense totaled approximately $8.8 million, $3.0 million and $0.8 million for the years ended December 31, 2001,
2000 and 1999, respectively.

Also, the Company has a long
distance capacity agreement with a long haul telecommunications provider. Under
the agreement, the Company is liable for a yearly minimum usage charge according
to the schedule below (in thousands):

2002
    
    $     2,2002003
    
    2,4002004
    
    2,6002005
    
    3,500Total
    
    $  10,700F-23
In the event such yearly
commitments are not met, the Company is required to remit 100% of the difference
between the yearly commitment and actual usage. Such amount, if necessary, would
be recorded as costs of services in the period incurred. The agreement extends
through December 31, 2005.

(13)     Employee Benefit
      Plans

The Company maintains an employee benefit plan for all eligible employees of the Company under the
provisions of the Internal Revenue Code Section 401(k).  The NuVox, Inc. 401(k) Plan allows employees to
contribute up to 15% of compensation and, for 2000 and 2001, the Company matched 50% of employee contributions up
to 6% of total compensation, subject to certain adjustments and limitations.  As of the close of business on
December 31, 2001 the Company match was eliminated.  A total of approximately $1.0 million and $0.3 million was charged to
operations for the Company's matching contributions in 2001 and 2000, respectively.  No expense was charged to
operations in 1999.

Pursuant to the NuVox, Inc.
2001 Performance Plan, senior management employees (vice president and above)
were awarded during 2001 varying fixed percentage participations in any
appreciation in the equity value of the Company over an amount equal to the sum
of (a) $301 million and (b) the aggregate liquidation preference of any
preferred stock issued after September 20, 2001 which is senior to or pari
passu with the Series D preferred stock or which is senior to the Series E
preferred stock (other than any issuances of Series D preferred stock issued
upon exercise of then outstanding Series D warrants) (Initial Threshold
Amount). Future awards, if any, will be based on appreciation in the
equity value of the Company from the date of grant (but in no event less than
the Initial Threshold Amount). The aggregate payments under this plan may not
exceed 7% of the amount by which the Companys equity value as of the date
of the first to occur of an initial public offering or change in control exceeds
the Initial Threshold Amount. Awards will generally vest over a three year
period, provided, however, in the event of a change in control of the Company,
50% of the then unvested portion of an employees award will become
immediately vested, and in the event of a termination of an employees
employment either by the Company without cause or by the employee for good
reason, within 12 months following a change in control, all of an
employees award will immediately become fully vested. The award payments,
if any, will be calculated based on the equity value of the Company as of the
date of the first to occur of a change in control or initial public offering.
The awards will be payable in cash, stock or a combination of both depending on
the nature of the event which triggers the award calculation. The award payments
will not become payable to an employee until such employee becomes or, in the
case of a participant who has terminated employment, would have become, fully
vested in the award.

F-24
NUVOX, INC.SCHEDULE II - VALUATION AND QUALIFYING
ACCOUNTS(In thousands)

Balance atbeginning ofyear/period
    
    Additionscharged tocosts andexpenses
    
    Additionscharged toother accounts
    
    Deductions
    
    Acquisitions
    
    Balance atend of yearFor the year endedDecember 31, 1999Allowance for doubtful accounts
    $             
    
    $             15
    
    $             
    
    $             
    
    $             
    
    $             15Total valuation and qualifying accounts
    $             
    
    $             15
    
    $             
    
    $             
    
    $             
    
    $             15For the year endedDecember 31, 2000Allowance for doubtful accounts
    $             15
    
    $             541
    
    $             
    
    $             334
    
    $             763
    
    $             985Total valuation and qualifying accounts
    $             15
    
    $             541
    
    $             
    
    $             334
    
    $             763
    
    $             985For the year endedDecember 31, 2001Allowance for doubtful accounts
    $             985
    
    $             3,850
    
    $             
    
    $             2,155
    
    $             
    
    $             2,680Total valuation and qualifying accounts
    $             985
    
    $             3,850
    
    $             
    
    $             2,155
    
    $             
    
    $             2,680F-25
INDEX TO EXHIBITS

ExhibitNumber
     Description2.1
     Agreement and Plan of Merger, dated as of June 9,
2000, by and among the registrant, Triangle Acquisition, Inc. and State
Communications, Inc., incorporated herein by reference to Annex A to the
information statement/prospectus included in the registrants Registration
Statement on Form S-4 (File No. 333-41040) (the Form S-4)*.3.1
     Amended and Restated Certificate of Incorporation
effective November 1, 2000, incorporated herein by reference to Exhibit 3.1 to
the registrants report on Form 10-K for the fiscal year ended December 31, 2000
(the 2000 Form 10-K).3.2
     Certificate of Amendment to Article First of the
Amended and Restated Certificate of Incorporation effective February 13, 2001,
incorporated herein by reference to Exhibit 3.2 to the 2000 Form 10-K.3.3
     Certificate of Amendment to Article Fourth of the
Amended and Redated Certificate of Incorporation effective September 20, 2001,
incorporated herein by reference to Exhibit 3.3 to the registrants Report on
Form 10-Q for the quarterly period ended September 30, 2001 (the third quarter
Form 10-Q).3.4
     By-laws, as amended as of March 21, 2000,
incorporated herein by reference to Exhibit 3.2 to the Form S-4.4.1
     Form of $10.25 Warrant Agreement between the
registrant and the holders of preferred stock of the registrant, incorporated
herein by reference to Exhibit 4.2 to the Form S-4.4.2
     Composite Conformed Copy of Shareholders Agreement
dated August 14, 1998, as amended as of November 18, 1998, December 13, 1999 and
September 20, 2001, by and among the registrant and its employee stockholders,
filed herewith.4.3
     Composite Conformed Copy of Amended and Restated
Stockholders Agreement dated as of March 31, 2000, as amended as of September
20, 2001, among the registrant and the stockholders of the registrant, filed
herewith.4.4
     Composite Conformed Copy of Amended and Restated
Registration Rights Agreement dated as of March 31, 2000, as amended as of
September 20, 2001, among the registrant and the stockholders of the registrant,
filed herewith.10.1
     Securities Purchase Agreement, dated as of November
18, 1998, as amended by agreement dated as of December 14, 1998, by and among
the registrant and purchasers of Series A Preferred Stock of the registrant,
incorporated by reference to Exhibit 10.1 to the Form S-4.10.2
     Securities Purchase Agreement, dated as of December
13, 1999, by and among the registrant, Meritage Private Equity Fund, L.P.,
Meritage Private Equity Parallel Fund L.P. and Meritage Entrepreneurs Fund, L.P.
for the purchase of Series A-1 Preferred Stock of the registrant, incorporated
by reference to Exhibit 10.2 to the Form S-4.10.3
     Securities Purchase Agreement, dated as of March 31,
2000, by and among the registrant and purchasers of Series B Preferred Stock of
the registrant, incorporated by reference to Exhibit 10.3 to the Form S-4.E-1
10.4
     Amendments to Securities Purchase
      Agreements dated as of October 25, 2000, by and among the registrant and holders
      of its Series A, Series A-1 and Series B Preferred Stock, incorporated herein by reference
      to Exhibit 10.4 to the 2000 Form 10-K.10.5
     Securities Purchase Agreement
      dated as of September 20, 2001, by and among the registrant and purchasers of
      Series D Preferred Stock and related warrants, filed
herewith. *10.6
     NuVox, Inc. 1998 Stock Incentive
      Plan, as amended, incorporated by reference to Exhibit 10.4 to the Form S-4. **10.7
     NuVox/TriVergent Corporation Employee Incentive Plan, incorporated herein by reference
                           to Exhibit 10.6 to the 2000 Form 10-K. **10.8
     NuVox, Inc. 2001 Performance Plan, incorporated herein by reference to Exhibit 10.1 to
                           the third quarter Form 10-Q. **10.9
     NuVox, Inc. Series D Loan Program, incorporated herein by reference to Exhibit 10.2 to
                           the third quarter Form 10-Q. **10.10
     NuVox, Inc. 2001 Stock Incentive Plan, incorporated herein by reference to Exhibit
                           10.3 to the third quarter Form 10-Q. **10.11
     Employment Agreement dated
as of December 13, 1999 between the registrant and David L. Solomon,
incorporated herein by reference to Exhibit 10.6 to the Form S-4. **10.12
     Employment Agreement dated as of October 31, 2000,
                           between the registrant and Charles S. Houser, incorporated herein by reference to Exhibit 10.8 to the 2000 Form 10-K 2001. **10.13
     Amendment to Employment Agreement dated as of October 16, 2001 between the registrant and Charles S. Houser, filed herewith. **10.14
     Employment Agreement dated as of March 10, 2000 between G. Michael Cassity, and State
Communications, Inc., incorporated herein by reference to Exhibit 10.9.2 to State
Communications, Inc.'s registration statement on Form S-1 (File No. 333-34834). **10.15
     Employment Agreement dated
as of August 15, 2000 between the registrant and John P. Denneen, incorporated
herein by reference to Exhibit 10.11 to the Form S-4. **10.16
     Employment Agreement dated as of October 16, 2001 between the registrant and
                           Marguerite A. Forrest, filed herewith. **10.17
     Employment Agreement dated as of October 16, 2001 between the registrant and Michael
                           E. Gibson, filed herewith. **10.18
     Employment Agreement dated as of October 16, 2001 between the registrant and Michael
                           C. Morey, filed herewith. **10.19
     Employment Agreement dated as of October 16, 2001 between the registrant and Paul A.
                           Pitts, filed herewith. **10.20
     Employment Agreement dated as of October 16, 2001 between the registrant and Josephine
                           Young, filed herewith. **10.21
     Credit and Guaranty Agreement, dated as of October 31, 2000 (Credit and Guaranty
                           Agreement) by and among the registrant, Gabriel Communications Finance Company
                           (Borrower), Gabriel Communications Properties, Inc., certain subsidiaries of
                           Borrower, as Guarantors, the lenders party thereto from time to time, Goldman Sachs
                           Credit Partners L.P., as Sole Lead Arranger, Sole Book Runner and Syndication Agent,
                           First Union National Bank, as Administrative Agent and Collateral Agent, Barclays Bank
                           Plc, as Documentation Agent and CIT Lending Services Corporation, as Co-Documentation
                           Agent, incorporated herein by reference to Exhibit 10.14 to the 2000 Form 10-K. *E-2
10.22
     Amendment No. 1, effective as of September 21, 2001, to Credit and Guaranty Agreement,
                           incorporated herein by reference to Exhibit 10.1 to the registrant's Report on Form
                           8-K dated (date of earlier event reported) September 21, 2001.11.1
     Statement regarding computation of loss per share (included in Note 11 to the
                           registrant's consolidated financial statements filed herewith).21.1
     Subsidiaries of the registrant.23.1
     Consent of KPMG LLP.*
     Schedules omitted pursuant to Regulation S-K, Item 601.  The registrant hereby undertakes to furnish
           such schedules to the Commission supplementally upon request.**
     Management contract or compensatory plan, contract or arrangement required to be filed pursuant to
           Regulation S-K, Item 601(b)(10)(iii).E-3