Document:

EXHIBIT 10.48

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                        THE CHILLICOTHE TELEPHONE COMPANY

                       -----------------------------------

                                WAIVER AGREEMENT
                           Dated as of August 8, 2002

                                       re

                             NOTE PURCHASE AGREEMENT
                            Dated as of June 1, 1998

                       -----------------------------------

                       Re: $12,000,000 6.62% Senior Notes
                                Due June 1, 2018

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<PAGE>
                                WAIVER AGREEMENT

     THIS WAIVER  AGREEMENT dated as of August 8, 2002 (the or this "Waiver") is
between THE CHILLICOTHE  TELEPHONE COMPANY, an Ohio corporation (the "Company"),
and each of the institutions which is a signatory to this Waiver  (collectively,
the "Noteholders").

                                    RECITALS:

     A. The Company and each of the Noteholders have heretofore entered into the
Note  Purchase   Agreement  dated  as  of  June  1,  1998  (the  "Note  Purchase
Agreement").  The Company has  heretofore  issued the  $12,000,000  6.62% Senior
Notes due June 1, 2018 (the "Notes")  dated June 23, 1998,  pursuant to the Note
Purchase  Agreement.  The Noteholders are the holders of 100% of the outstanding
principal amount of the Notes.

     B. The Company and the Noteholders now desire to waive a certain  provision
of the Note Purchase  Agreement as of July 1, 2002 (the "Effective Date") in the
respect, but only in the respect, hereinafter set forth.

     C.  Capitalized  terms  used  herein  shall  have the  respective  meanings
ascribed  thereto in the Note Purchase  Agreement  unless herein  defined or the
context shall otherwise require.

     D. All requirements of law have been fully complied with and all other acts
and things necessary to make this Waiver a valid,  legal and binding  instrument
according  to its  terms for the  purposes  herein  expressed  have been done or
performed.

     NOW, THEREFORE,  upon the full and complete  satisfaction of the conditions
precedent to the effectiveness of the Waiver set forth in SS.2.1 hereof,  and in
consideration of good and valuable  consideration the receipt and sufficiency of
which is hereby acknowledged, the Company and the Noteholders do hereby agree as
follows:

SECTION 1. WAIVER.

     Upon  and  by  virtue  of  this  Waiver   becoming   effective   as  herein
contemplated,  the  failure of the  Company  to comply  with the  provisions  of
Section 5(i) of the Note Purchase  Agreement on or prior to the Effective  Date,
which constitutes an Event of Default under the Note Purchase  Agreement,  shall
be deemed to have been  waived by the  Noteholders  during the  period  from and
including  the  Effective  Date  through  and  until,  but  not  including,  the
Expiration Date (as defined  below),  which Event of Default has occurred solely
as a result  of cash  transferred  to  Horizon  Services,  Inc.,  an  affiliated
company,  which was not reimbursed by June 30, 2002. The term "Expiration  Date"
shall mean the  earlier  of (a)  August 30,  2002 or (b) the date upon which the
Company enters into a Second Amendment to the Note Purchase  Agreement  pursuant
to which Section 5(i) of the Note Purchase  Agreement is amended and/or restated
such that the Company is no longer in violation thereof.

<PAGE>

     The Company  understands and agrees that the waiver  contained in this SS.1
pertains  only to the Default and Event of Default  herein  described and to the
extent so described  and not to any other  Default or Event of Default which may
exist under, or any other matters arising in connection  with, the Note Purchase
Agreement or to any rights which the  Noteholders  have arising by virtue of any
such other actions or matters.

SECTION 2. MISCELLANEOUS.

     Section  2.1.  This Waiver  shall  become  effective  and binding  upon the
Company and the  Noteholders  on the  Effective  Date upon the Company's and the
Noteholders' acceptance in the space below.

     Section 2.2. This Waiver shall be construed in connection  with and as part
of the Note Purchase Agreement,  and except as modified and expressly amended by
this Waiver, all terms,  conditions and covenants contained in the Note Purchase
Agreement  and the Notes are  hereby  ratified  and shall be and  remain in full
force and effect.

     Section  2.3.  Any  and  all  notices,  requests,  certificates  and  other
instruments  executed and  delivered  after the  execution  and delivery of this
Waiver  may  refer  to the  Note  Purchase  Agreement  without  making  specific
reference to this Waiver but nevertheless all such references shall include this
Waiver unless the context otherwise requires.

     Section 2.4. The descriptive  headings of the various  Sections or parts of
this  Waiver  are for  convenience  only and shall not  affect  the  meaning  or
construction of any of the provisions hereof.

     Section 2.5.  This Waiver shall be governed by and  construed in accordance
with Ohio law.

                                       2
<PAGE>

     Section  2.6.  The  execution  hereof by you shall  constitute  a  contract
between us for the uses and purposes  hereinabove set forth, and this Waiver may
be  executed  in  any  number  of   counterparts,   each  executed   counterpart
constituting an original, but all together only one agreement.

                                   THE CHILLICOTHE TELEPHONE COMPANY

                                   By  /s/ Thomas McKell
                                       -------------------------------------
                                   Its President
                                       -------------------------------------

Accepted and Agreed to:

                                   AMERICAN UNITED LIFE INSURANCE COMPANY

                                   By  /s/ Kent R. Adams
                                       -------------------------------------
                                   Its Vice President, Fixed Income Securities
                                       -------------------------------------

                                   THE STATE LIFE INSURANCE COMPANY

                                   By  /s/ Kent R. Adams
                                       -------------------------------------
                                   Its Vice President, Fixed Income Securities
                                       -------------------------------------

                                       3

1561829Exhibit 10.49

                             NOTE PURCHASE AGREEMENT

                                  by and among
                        THE CHILLICOTHE TELEPHONE COMPANY

                                       and
                   THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
                          AIG ANNUITY INSURANCE COMPANY
                                       AND
                            MODERN WOODMEN OF AMERICA
                           DATED AS OF AUGUST 1, 2002
                        THE CHILLICOTHE TELEPHONE COMPANY
                         $30,000,000 6.64% SENIOR NOTES
                               DUE AUGUST 1, 2012

<PAGE>
                                Table of Contents
<TABLE>
<CAPTION>
<S>               <C>                                                              <C>

SECTION           HEADING                                                          PAGE
Section 1.        Purchase and Sale of Notes..........................................1
(a)               The Notes...........................................................1
(b)               Purchases to Be Several.............................................1
(c)               Late Payments.......................................................1
(d)               Manner of Payment...................................................1
(e)               Payment on Non-Business Days........................................1
Section 2.        Prepayments of the Notes............................................1
(a)               Voluntary Payments with Premium.....................................2
(b)               Manner of Effecting Voluntary Prepayment............................2
Section 3.        Representations and Warranties......................................3
(a)               Corporate Organization..............................................3
(b)               Conflicting Agreements and Other Matters............................3
(c)               Due Authorization, etc..............................................3
(d)               Legal Proceedings; Compliance with Law..............................3
(e)               Financial Statements................................................4
(f)               Title to Assets.....................................................4
(g)               Securities Matters..................................................4
(h)               Licenses and Permits................................................4
(i)               No Defaults on Indebtedness.........................................4
(j)               Tax Returns.........................................................4
(k)               No Margin Stock.....................................................5
(l)               ERISA Matters.......................................................5
(m)               Brokers and Finders.................................................5
(n)               Use of Proceeds.....................................................5
(o)               Investment Company Act..............................................5
(p)               Public Utility......................................................5
(q)               Full Disclosure.....................................................5
(r)               Regulatory Approval.................................................5
(s)               Existing Debt and Restricted Investments............................6
(t)               Foreign Assets Control Regulations, Etc.............................6
(u)               Status under Certain Statutes.......................................6
Section 4.        Affirmative Covenants...............................................6
(a)               Payment.............................................................6
(b)               Maintenance of Books and Records....................................6
(c)               Inspection of Books and Records.....................................6
(d)               Financial Information...............................................6
(e)               Quarterly Financial Statements......................................6
(f)               Annual Financial Statements.........................................7
(g)               Financial Certification.............................................7
(h)               Copies of Management Letters, etc...................................7
(i)               Copies of Regulatory Reports........................................8
(j)               Corporate Existence.................................................8
(k)               Payment of Taxes and Claims.........................................8
(l)               Maintenance of Properties and Licenses..............................8
(m)               Insurance...........................................................8
(n)               Net Worth...........................................................8
(o)               Notice of Default...................................................8
(p)               Exchange of Notes...................................................8
(q)               Qualified Retirement Plans..........................................9
Section 5.        Negative Covenants..................................................9
(a)               Limitation on Consolidated Total Debt...............................9
(b)               Limitations on Debt of Restricted Subsidiaries......................9
(c)               Subordination of Claims.............................................9
(d)               Sale of Assets......................................................9

                                       i
<PAGE>

(e)               Merger and Consolidation............................................9
(f)               Maintenance of Present Business....................................10
(g)               Transactions with Affiliates.......................................10
(h)               Permitted Liens....................................................10
(i)               Restricted Payments and Restricted Investments.....................11
(j)               Fixed Charges......................................................11
(k)               Sale of Accounts...................................................11
(l)               Guaranties; Etc....................................................11
(m)               Restricted Subsidiaries............................................11
Section 6.        Conditions Precedent...............................................11
Section 7.        Defaults...........................................................12
Section 8.        Payments on and Registration and Transfer of Notes.................13
Section 9.        Expenses...........................................................14
Section 10.       Delivery of Documents; Pro Rata Payments; Amendments and Consents..14
(a)               Delivery of Documents..............................................14
(b)               Pro Rata Payments..................................................14
(c)               Amendments and Consents............................................14
Section 11.       Investment Purpose.................................................15
Section 12.       Definitions........................................................15
Section 13.       Designation of Subsidiaries........................................19
Section 14.       Survival of Representations and Warranties.........................20
Section 15.       Successors and Assigns.............................................20
Section 16.       Notices............................................................20
Section 17.       Governing Law......................................................20
Section 18.       Counterparts.......................................................20
Section 19.       Captions...........................................................20
</TABLE>

APPENDIX I        --       Purchasers, Note Allocations and Wire Instructions
SCHEDULE 3(d)     --       Legal Proceedings
EXHIBIT A         --       Form of Note
EXHIBIT B         --       Subsidiaries
EXHIBIT C         --       Existing Debts and Liens
EXHIBIT D         --       Existing Restricted Investments
EXHIBIT E-1       --       Form of Opinion of Counsel to the Company
EXHIBIT E-2       --       Form of Opinion of Purchasers' Special Counsel

                                       ii
<PAGE>

                           Note Purchase Agreement
                      RE: THE CHILLICOTHE TELEPHONE COMPANY
                         $30,000,000 6.64% SENIOR NOTES
                               DUE AUGUST 1, 2012

DATED AS OF AUGUST 1, 2002
TO THE PURCHASERS NAMED IN APPENDIX I HERETO:

Dear Sirs:

     The undersigned,  The Chillicothe  Telephone  Company,  an Ohio corporation
(herein called the  "Company"),  hereby  confirms its agreements set forth below
with the parties listed on Appendix I hereto  (herein called the  "Purchasers").
Reference is made to Section 12 hereof for definitions of capitalized terms used
herein and not otherwise defined.

     Section 1. Purchase and Sale of Notes.

     (a) The Notes. Subject to the terms and conditions herein, the Company will
sell to each of the  Purchasers on August __, 2002, or such later date as may be
fixed by the  Purchasers  on at least three days'  prior  written  notice to the
Company, or as may be mutually agreed upon with the Purchasers (the date of sale
being  herein  called  the  "Closing  Date"),  and each of the  Purchasers  will
purchase from the Company on the Closing  Date, at 100% of the principal  amount
thereof,  a promissory  note of the Company  (which,  together  with any note or
notes  issued in  substitution  therefor,  are  herein  collectively  called the
"Notes"  and  individually  a "Note"),  in the  principal  amount  specified  on
Appendix I hereto,  dated the Closing Date. The entire  principal  amount of the
Notes shall be due and payable on August 1, 2012.  The Notes shall bear interest
from the Closing Date until payment in full of the principal  amount  thereof at
the rate of 6.64% per annum (provided that solely for the purpose of determining
the portion of annual  interest  allocable to any interest  payment  period,  it
shall be assumed that a year is comprised of 360 days and twelve 30-day months),
payable semi-annually on the 1st day of February and August, commencing February
1, 2003,  and  continuing  until payment in full of the principal  amount of the
Notes. The Notes shall be subject to optional and mandatory prepayment as herein
provided,  shall in all respects be subject to the terms of this Agreement,  and
shall be substantially in the form of Exhibit A hereto.

     (b)  Purchases  to Be  Several.  The  purchase  of each of the Notes by the
respective  Purchasers  shall be separate and several,  but the purchase of each
Note shall be a condition concurrent to the purchase of each other Note.

     (c) Late Payments.  Any payment of principal or (to the extent permitted by
applicable  law)  interest  on the Notes not paid  when due,  whether  at stated
maturity, by acceleration or otherwise, shall thereafter bear interest at a rate
per annum equal to 8.64%  (provided  that in no event shall such rate exceed the
maximum rate permitted by law).

     (d) Manner of Payment.  The  Purchasers  will pay the purchase price of the
Notes by wire transfer of immediately  available  Federal funds to such accounts
as shall be specified  by the  Company,  or in such other funds or in such other
manner as may be mutually agreed upon by the Purchasers and the Company, against
delivery of the Notes to Purchasers' special counsel,  Chapman and Cutler, which
will be made at the  offices of Chapman  and  Cutler,  111 West  Monroe  Street,
Chicago,  Illinois  60603 at 10:00 A.M.,  Chicago,  Illinois time on the Closing
Date.

     (e) Payment on Non-Business Days. Whenever any payment to be made hereunder
or under the Notes  shall be stated to be due on a  Saturday,  Sunday or holiday
for banks  under the laws of the States of New York,  Texas,  Illinois  or Ohio,
such payment may be made on the next succeeding business day.

<PAGE>

     Section 2. Prepayments of the Notes.

     (a) Voluntary Payments with Premium. The Company may, at its option, at any
time, prepay the Notes in whole or in part (but if in part only in the aggregate
amount of $1,000,000 or integral multiples thereof), upon 30 days' prior written
notice to the holders of the Notes,  and upon  payment of a  prepayment  premium
equal to the excess, if any, of (i) the amount equal to the present value of all
installments  of principal  and interest  which are avoided by such  prepayment,
determined by discounting  such payments of principal and interest at a rate per
annum equal to .50% plus the Treasury Yield Percentage,  over (ii) the principal
amount to be  prepaid.  In no event shall such  prepayment  premium be less than
zero.

     (b) Manner of  Effecting  Voluntary  Prepayment.  In the event the  Company
shall give notice of any prepayment in accordance with Section 2(a) above,  such
notice  shall  specify  the  principal  amount of the Notes to be  prepaid,  the
Section  pursuant to which  prepayment  is being made,  and the date of proposed
prepayment,  and  thereupon  such  principal  amount,  together with accrued and
unpaid interest  thereon to the prepayment date and together with the applicable
premium, if any, shall become due and payable on the prepayment date.

     (c) Change in Control.

     (i) Notice of Change in Control or Control Event. The Company will,  within
10 business days after any  Responsible  Officer has knowledge of the occurrence
of any Change in Control or Control Event, give written notice of such Change in
Control or Control  Event to each holder of Notes.  In the case that a Change in
Control has  occurred,  such notice  shall  contain and  constitute  an offer to
prepay the Notes as  described  in clause (ii) of this Section 2(c) and shall be
accompanied by the certificate described in clause (v) of this Section 2(c).

     (ii)  Offer to Prepay  Notes.  The offer to prepay  Notes  contemplated  by
clause (i) of this Section 2(c) shall be an offer to prepay,  in accordance with
and subject to this Section 2(c),  all, but not less than all, the Notes held by
each holder (in this case only,  "holder" in respect of any Note  registered  in
the  name  of a  nominee  for a  disclosed  beneficial  owner  shall  mean  such
beneficial  owner) on a date specified in such offer (the  "Proposed  Prepayment
Date") that is not less than 15 business days and not more than 30 business days
after  the date of such  offer (if the  Proposed  Prepayment  Date  shall not be
specified in such offer, the Proposed Prepayment Date shall be the 30th business
day after the date of such offer).

     (iii)  Acceptance;  Rejection.  A holder of Notes may  accept  the offer to
prepay made pursuant to this Section 2(c) by causing a notice of such acceptance
to be  delivered  to the Company at least 5 business  days prior to the Proposed
Prepayment Date. A failure by a holder of Notes to respond to an offer to prepay
made  pursuant to this Section 2(c) shall be deemed to  constitute an acceptance
of such offer by such holder.

     (iv)  Prepayment.  Prepayment  of the Notes to be prepaid  pursuant to this
Section 2(c) shall be at 100% of the  principal  amount of such Notes,  plus the
premium  specified in Sections  2(a) and (b) hereof  determined  for the date of
prepayment with respect to such principal amount, together with interest on such
Notes accrued to the date of prepayment.  On the business day preceding the date
of prepayment, the Company shall deliver to each holder of Notes being prepaid a
statement showing the prepayment  premium due in connection with such prepayment
and setting forth the details of the computation of such amount.  The prepayment
shall be made on the Proposed Prepayment Date.

     (v) Officer's Certificate.  Each offer to prepay the Notes pursuant to this
Section  2(c)  shall  be  accompanied  by a  certificate,  executed  by a Senior
Financial  Officer of the Company and dated the date of such offer,  specifying:
(A) the Proposed  Prepayment  Date; (B) that such offer is made pursuant to this
Section 2(c); (C) the principal  amount of each Note offered to be prepaid;  (D)
the  estimated  prepayment  premium  due  in  connection  with  such  prepayment
(calculated  as if the date of such  notice  were  the date of the  prepayment),
setting  forth the details of such  computation;  (E) the interest that would be
due on each Note offered to be prepaid, accrued to the Proposed Prepayment Date;
(F) that the  conditions  of this Section 2(c) have been  fulfilled;  and (G) in
reasonable detail, the nature and date of the Change in Control.

     (vi) "Change in Control" Defined.  A "Change in Control" shall be deemed to
have occurred if any Person or Persons (other than members of the McKell Family)
acting  in  concert,  together  with  Affiliates  thereof,   (individually,   an
"Acquiring  Person"  and  collectively,   "Acquiring   Persons")  shall  in  the
aggregate,  directly or indirectly,  control or own  (beneficially or otherwise)
more than 50% (by number of shares) of the issued and  outstanding  Voting Stock
of the Company;  provided,  however,  that if (A) the long-term senior unsecured

                                       2
<PAGE>

debt of each  Acquiring  Person is rated "A-" or above by  Standard & Poor's (or
the equivalent by any other nationally  recognized rating service) or (B) at the
time of the acquisition by an Acquiring  Person or Acquiring  Persons of control
or  ownership  of  more  than  50% (by  number  of  shares)  of the  issued  and
outstanding  Voting Stock of the  Company,  the Notes are rated "A-" or above by
Standard & Poor's (or the equivalent by any other nationally  recognized  rating
service),  then and in either such event,  a "Change of Control" shall be deemed
not to have occurred.

     (vii) "Control Event" Defined. "Control Event" means:

     (A) the execution by the Company or any of its  Subsidiaries  or Affiliates
of any agreement or letter of intent with respect to any proposed transaction or
event  or  series  of  transactions  or  events  which,  individually  or in the
aggregate, may reasonably be expected to result in a Change in Control, or

     (B) the execution of any written  agreement which,  when fully performed by
the parties thereto, would result in a Change in Control.

     Section 3. Representations and Warranties.

     The Company represents and warrants to the Purchasers as follows:

     (a)  Corporate   Organization.   The  Company  and  its   Subsidiaries  are
corporations  organized and existing and in good standing  under the laws of the
State of Ohio,  and are duly  qualified to do business and are in good  standing
under the laws of each state where the nature of the  business  done or property
owned require such qualification. The Company is organized under the laws of the
State  of  Ohio.  Exhibit  B  hereto  correctly  sets  forth  the  name  of each
Subsidiary,  its state of  incorporation  and the percentage of the  outstanding
capital stock of such Subsidiary owned by the Company or another Subsidiary, and
indicates whether such Subsidiary is a Restricted  Subsidiary.  The Company does
not own, directly or indirectly,  more than 1% of the total outstanding  capital
stock of any class of any other  corporation  except  for the  capital  stock of
ComNet,  Inc.  of which the Company  owns  approximately  5% of the  outstanding
capital stock thereof.

     (b)  Conflicting  Agreements and Other  Matters.  Neither the execution and
delivery by the Company of this Agreement and the Notes,  nor the performance or
observance by the Company or any Subsidiary of any of the terms or conditions of
this  Agreement or the Notes,  will (i) conflict  with, or result in a breach of
the terms, conditions or provisions of, or constitute a default under, or result
in any  violation  of,  or result  in the  creation  of any Lien upon any of the
properties  or  assets  of  the  Company  or any  Subsidiary  pursuant  to,  the
Certificate  of  Incorporation  or Code of  Regulations  of the  Company  or any
Subsidiary, any award of any arbitrator, or any indenture, contract or agreement
(including  any  agreement  with  stockholders),  instrument,  order,  judgment,
decree,  statute, law, rule or regulation to which the Company or any Subsidiary
is subject,  or (ii) require any  registration or filing with, or any consent or
approval  of, any  Federal,  state or local  governmental  agency or  authority,
except  for the  Application  for  Consent  and  Authority  to  issue  and  sell
$30,000,000  of  Senior  Unsecured  Notes  submitted  to  the  Public  Utilities
Commission  of Ohio  (the  "Commission"),  which  was  filed  June 3,  2002 (the
"Application")  and the approval thereof by the Commission which was obtained by
the Company on June 27, 2002.

     (c) Due  Authorization,  etc. The sale of the Notes and the  execution  and
delivery of this Agreement and the Notes are within the corporate  powers of the
Company and have been duly authorized by all necessary action of the Company and
its  Subsidiaries.  The Notes and this  Agreement  have been duly  executed  and
delivered  by  the  Company  and  constitute   the  legal,   valid  and  binding
obligations,  contracts and agreements of the Company  enforceable in accordance
with their respective terms.

     (d) Legal  Proceedings;  Compliance  With Law. Except as listed on Schedule
3(d) hereto,  there are no actions,  suits,  or  proceedings  pending or, to the
knowledge  of  the  Company,  threatened  against  the  Company  or  any  of its
Subsidiaries  or any property of the Company or any of its  Subsidiaries  in any
court or before any  federal,  state,  municipal or other  governmental  agency,
which,  if decided  adversely to the Company or any of its  Subsidiaries,  would

                                       3
<PAGE>

have a materially  adverse effect upon the Company or any of its Subsidiaries or
upon the  business  or  properties  of the  Company or any of its  Subsidiaries.
Neither the Company nor any of its  Subsidiaries  is in default  with respect to
any order of any court or governmental agency.

     Neither the  Company nor any  Subsidiary  (1) is in  violation  of any law,
ordinance, franchise, governmental rule or regulation to which it is subject; or
(2) has failed to obtain any license,  permit,  franchise or other  governmental
authorization  necessary  to the  ownership of its property or to the conduct of
its  business,  which  violation  or failure to obtain would  materially  affect
adversely the business,  prospects,  profits, properties or condition (financial
or otherwise) of the Company and its  Subsidiaries,  taken as a whole, or impair
the  ability  of the  Company  to  perform  its  obligations  contained  in this
Agreement or the Notes.

     (e) Financial  Statements.  The Company has  furnished to the  Purchasers a
consolidated  balance  sheet,  statement  of income and  retained  earnings  and
statement  of cash flows of the  Company  and its  Subsidiaries  for each of the
fiscal years ended December 31, 1998,  December 31, 1999,  December 31, 2000 and
December 31, 2001,  respectively,  each  certified  by Arthur  Andersen  L.L.P.,
independent  certified  public  accountants,   and  unaudited  consolidated  and
consolidating balance sheets,  statements of income and retained earnings of the
Company and its  Subsidiaries  for the three months  ended March 31, 2002.  Said
financial  statements fairly present the financial  condition of the Company and
its  Subsidiaries  at the date(s)  thereof and the results of  operations of the
Company and its Subsidiaries for the period(s) indicated, all in conformity with
generally  accepted  accounting  principles  consistently  followed  through the
period(s)  involved.  There  have  been  no  material  adverse  changes  in  the
condition,  financial or otherwise,  of the Company and its  Subsidiaries  since
December 31, 2001.

     (f)  Title to  Assets.  The  Company  and its  Subsidiaries  have  good and
marketable  title in fee  simple  to all  real  property  and good  title to all
personal  property  they  purport  to own,  including  (except as they have been
affected by  transactions in the ordinary course of business) all properties and
assets  reflected in the most recent  balance sheet  referred to in Section 3(e)
hereof. In the case of property used in their trades or businesses but not owned
by them, the Company and its Subsidiaries have a valid,  binding and enforceable
right to use  such  property  pursuant  to a  written  lease,  license  or other
agreement.  All of the assets of the Company and its  Subsidiaries  are free and
clear of all Liens (other than Liens permitted by Section 5(h) hereof).

     (g) Securities Matters. Neither the Company nor any of its Subsidiaries nor
any agent  acting on the behalf of the  Company or any of its  Subsidiaries  has
offered the Notes or any part thereof, or any similar obligation for sale to, or
solicited  any offers to buy such  Notes,  or any part  thereof,  or any similar
obligation  from,  any Person or Persons so as to bring the issue or sale of the
Notes  within the  provisions  of Section 5 of the  Securities  Act of 1933,  as
amended,  and neither the Company nor any of its Subsidiaries will sell or offer
for sale any note or any similar obligation of the Company or any Subsidiary to,
or  solicit  any  offer to buy any  similar  obligation  of the  Company  or any
Subsidiary  from,  any Person or Persons so as to bring the issue or sale of the
Notes  within the  provisions  of Section 5 of the  Securities  Act of 1933,  as
amended.

     (h) Licenses and Permits.  The Company and its  Subsidiaries  have procured
and are now in possession of all licenses or permits required by federal,  state
or  local  laws  for  the  operation  of the  business  of the  Company  and its
Subsidiaries in each  jurisdiction  wherein the Company or any Subsidiary is now
conducting or proposes to conduct business.

     (i) No  Defaults  on  Indebtedness.  Neither  the  Company  nor  any of its
Subsidiaries is in default in the payment of the principal of or interest on any
indebtedness  for  borrowed  money nor is in  default  under any  instrument  or
agreement  under and subject to which any  indebtedness  for borrowed  money has
been  issued,  and no  event  has  occurred  under  the  provisions  of any such
instrument or agreement  which with or without the passing of time or the giving
of  notice,  or both,  constitutes  or  would  constitute  an  event of  default
thereunder.

     (j) Tax Returns.  The Company and its  Subsidiaries  have filed all federal
and state  income tax returns  which,  to the  knowledge  of the officers of the
Company, are required to be filed, and have paid all taxes shown on said returns
and all  assessments  received  by them to the extent that they have become due.
The federal  income tax returns of the Company have been finally  determined  by
the  Internal  Revenue  Service to be  satisfactory  (or have been closed by the
applicable statute of limitations) for all years prior to and including the year
ended  1997.  No claims  have been  asserted  against  the Company in respect of
Federal income tax returns for any subsequent year.

                                       4
<PAGE>

     (k) No Margin Stock.  Neither the Company nor any of its Subsidiaries  owns
any Margin Stock or has any present  intention to own any Margin Stock.  None of
the  proceeds  received  by the Company or any  Subsidiary  from the sale of the
Notes will be used for the purpose of buying or  carrying a Margin  Stock or for
the  purpose of  reducing  or retiring  any  indebtedness  which was  originally
incurred to purchase a Margin  Stock or for any other  purpose not  permitted by
Regulation U (12 CFR Part 221) of the Board of Governors of the Federal  Reserve
System,  as amended from time to time,  or for the purpose of buying or carrying
or trading in any securities under such  circumstances as to involve the Company
in a violation of Regulation X (12 CFR Part 224) of said Board or to involve any
broker or dealer in a violation of Regulation T (12 CFR Part 220) of said Board.
As used in this Section,  the phrase  "purpose of buying or carrying" shall have
the meaning assigned thereto in said Regulation U.

     (l) ERISA  Matters.  Each Plan of the Company and each ERISA  Affiliate  in
which any employees of the Company or any ERISA  Affiliate  participate  that is
subject to any provisions of ERISA is being  administered in accordance with the
documents  and   instruments   governing  such  Plan,  and  such  documents  and
instruments  are  consistent  with those  provisions  of ERISA and the  Internal
Revenue Code which have become effective and operative with respect to such Plan
as of the  date of this  Agreement.  No such  Plan  has  incurred  any  material
accumulated  funding  deficiency  within the  meaning  of  Section  302 of ERISA
(whether or not  waived),  and neither the Company nor any ERISA  Affiliate  has
incurred any material liability (including any material contingent liability) to
the PBGC in  connection  with any such Plan.  No such Plan nor any trust created
thereunder nor any trustee or administrator thereof has engaged in a "prohibited
transaction" within the meaning of ERISA or Section 4975 of the Internal Revenue
Code and the  issuance  and sale of the Notes as  contemplated  hereby  will not
constitute  a  "prohibited  transaction".  No such  Plan nor any  trust  created
thereunder  has been  terminated,  nor have there been any  "reportable  events"
within  the  meaning of  Section  4043 of ERISA  with  respect to any such Plan.
Neither the Company nor any ERISA Affiliate  contributes to or has any employees
who are covered by any "multiemployer  plan," as such term is defined in Section
3(37) of ERISA, and neither the Company nor any ERISA Affiliate has incurred any
withdrawal liability with respect to any such multiemployer plan.

     (m)  Brokers and  Finders.  Neither the  Company,  any agent  acting on its
behalf nor any Person  controlling,  controlled by or under common  control with
the  Company  has taken any  action  the  effect of which  would be to cause the
Purchasers to be liable for any broker's,  finder's or agent's fee or commission
in  connection  with  the  placement  of the  Notes  or any  other  transactions
contemplated by this Agreement.  The Company has retained  National City Bank as
its agent for placement of the Notes and is solely  responsible for any fees and
expenses payable to such agent.

     (n) Use of Proceeds. The Company will use the net proceeds from the sale of
the Notes (i) to retire short term debt and refinance  existing  debt,  and (ii)
for general corporate purposes.

     (o) Investment Company Act. Neither the Company nor any of its Subsidiaries
is an "investment  company" or a company "controlled" by an "investment company"
(as each of the quoted terms is defined or used in the Investment Company Act of
1940, as amended).

     (p) Public Utility.  The Company is an operating  public utility subject to
the  jurisdiction  of the Public  Utilities  Commission  of Ohio and the Federal
Communications Commission.

     (q) Full  Disclosure.  Neither this  Agreement,  the  financial  statements
referred to in Section 3(e) hereof,  the Information  Memorandum dated June 2002
and  prepared by National  City Bank,  nor any other  document,  certificate  or
instrument  delivered to the  Purchasers  on behalf of the Company or any of its
Subsidiaries in connection with the  transactions  contemplated  hereby contains
any  untrue  statement  of a  material  fact or omits to state a  material  fact
necessary in order to make the statements contained therein not misleading.

     (r)  Regulatory  Approval.  The issue and sale of the  Notes  have,  to the
extent required by law, been duly authorized by the Public Utilities  Commission
of Ohio which  authorization is not subject to any appeal or modification  which
could  affect  the  validity  or  terms  of the  Notes,  and no  other  consent,
exemption,  approval or  authorization  by any other  governmental  authority is
required in connection  with the execution and delivery of this Agreement or the
issue and sale of the Notes.

                                       5
<PAGE>

     (s) Existing Debt and Restricted  Investments.  Exhibit C hereto  correctly
describes all Debt of the Company and Liens securing any such Debt as of July 1,
2002.  Exhibit D hereto  correctly  describes the Restricted  Investments of the
Company as of June 30, 2002, all of which were made prior to June 30, 2002.

     (t) Foreign  Assets Control  Regulations,  Etc. (1) Neither the sale of the
Notes by the Company  hereunder nor its use of the proceeds thereof will violate
the Trading with the Enemy Act, as amended, or any of the foreign assets control
regulations  of the United  States  Treasury  Department  (31 CFR,  Subtitle  B,
Chapter V, as amended) or any enabling  legislation or executive  order relating
thereto.

     (2)  Neither  the  Company nor any of its  Subsidiaries  has  violated  the
provisions of United States Executive Order 13224 of September 24, 2001 Blocking
Property  and  Prohibiting  Transactions  With  Persons Who Commit,  Threaten to
Commit,  or Support  Terrorism  (Exec.  Order No. 13, 223, 66 Fed.  Reg.  49,079
(2001)) or the provisions of Public Law 107-56 (USA Patriot Act).

     (u) Status under Certain  Statutes.  Neither the Company nor any Subsidiary
is subject to regulation  under the Public Utility  Holding Company Act of 1935,
as amended,  the ICC Termination  Act of 1995, as amended,  or the Federal Power
Act, as amended.

     Section 4. Affirmative Covenants.

     The Company  covenants  and agrees that, so long as any amount shall remain
unpaid on any of the Notes, it will:

     (a) Payment.  Duly and  punctually pay or cause to be paid the principal of
and  interest on the Notes and will duly and  punctually  perform or cause to be
performed all things on its part or on the part of any  Subsidiary to be done or
performed under this Agreement and the Notes.

     (b)  Maintenance  of Books and  Records.  At all times  keep and cause each
Subsidiary  to keep proper  books of record and account in which full,  true and
correct entries will be made of their  transactions in accordance with generally
accepted  accounting  principles  applied on a consistent  basis  throughout the
periods involved.

     (c)  Inspection of Books and Records.  At all  reasonable  times permit and
cause  each   Subsidiary   to  permit  the   holders  of  the  Notes  and  their
representatives  to inspect its books and records and to make extracts therefrom
and to inspect its properties and operations.

     (d)  Financial  Information.  From  time to time  furnish  and  cause  each
Subsidiary  to  furnish  the  holders  of the Notes  with such  information  and
statements  as the  holders  of the  Notes  may  reasonably  request  concerning
performance  by it of the covenants and  agreements  contained in this Agreement
and the Notes,  and with copies of all financial  statements and reports that it
shall send or make available to its stockholders; and in the event that an Event
of Default has occurred,  and the Company shall have notified the holders of the
Notes that such Event of Default has been  corrected,  the Company  shall,  upon
request of the holders of at least 66-2/3% of the unpaid principal amount of the
Notes at the time  outstanding,  for the  purpose of showing  that such Event of
Default has been corrected, furnish to the holders of the Notes a signed copy of
an audit report or, if such matter may be covered in a special report, a special
report  prepared and certified by an  independent  certified  public  accountant
selected by the Company and satisfactory to the holders of the Notes, confirming
that  such  Event of  Default  has been  corrected.  All  expenses  incurred  in
connection  with such  report  shall be borne by the  Company.  Nothing  in this
Section 4(d), however,  shall diminish,  defer,  postpone or otherwise limit the
right of the  holders  of the Notes to take any  action  permitted  by Section 7
hereof.

     (e) Quarterly  Financial  Statements.  Furnish to the holders of the Notes,
within  60 days  after  the close of each  quarterly  accounting  period in each
fiscal year of the  Company and its  Subsidiaries,  (i) a  consolidated  balance
sheet and consolidated  statement of income and retained earnings reflecting the
financial  condition of the Company and its Subsidiaries at the end of each such
quarterly  period and the  results of  operations  during  such  period,  all in

                                       6
<PAGE>

reasonable  detail, and setting forth comparable figures for the same accounting
period  in the  preceding  fiscal  year,  and  (ii) a  separate  balance  sheet,
statement of income and retained  earnings for each  Subsidiary  reflecting  the
financial  condition of each Subsidiary at the end of such quarterly  period and
the results of  operation  during such period,  all in  reasonable  detail,  and
setting forth comparable figures for the same accounting period in the preceding
fiscal year.

     The Company shall also furnish to the holders of the Notes,  within 60 days
after the close of each  quarterly  accounting  period  in each  fiscal  year of
Telcom, a consolidated  balance sheet and  consolidated  statement of income and
retained  earnings   reflecting  the  financial  condition  of  Telcom  and  its
subsidiaries  at the end of each quarterly  period and the results of operations
during such period,  all in  reasonable  detail,  and setting  forth  comparable
figures for the same accounting period in the preceding fiscal year.

     (f) Annual  Financial  Statements.  Furnish to the holders of the Notes, as
soon as  available,  but in any event  within  120 days  after the close of each
fiscal year of the Company,  duplicate signed copies of an audit report prepared
and certified (without  qualification as to the scope of the audit) by KPMG, LLP
or another firm of independent certified public accountants of national standing
selected  by the  Company and  satisfactory  to the holders of the Notes,  which
report shall  include a  consolidated  and  consolidating  balance  sheet of the
Company  and  its  Subsidiaries  as at the end of such  year,  consolidated  and
consolidating  statements of income and retained earnings of the Company and its
Subsidiaries and consolidated and consolidating  statements of cash flows of the
Company and its Subsidiaries  reflecting the operations during said year, all in
reasonable detail and setting forth comparable  figures for the preceding fiscal
year,  which report shall be accompanied by a statement by such  accounting firm
certifying that in making the  examination  upon which such report was based, no
information  came to its attention  which to its  knowledge  indicated a default
under this Agreement had occurred or specifying any such default.

     The  Company  shall also  furnish to the  holders of the Notes,  as soon as
available,  but in any event within 120 days after the close of each fiscal year
of Telcom,  duplicate  signed  copies of an audit report  prepared and certified
(without  qualification  as to the scope of the  audit) by KPMG,  LLP or another
firm of independent  certified public  accountants of national standing selected
by Telcom and  satisfactory  to the  holders of the Notes,  which  report  shall
include a consolidated  and  accompanying  supplementary  consolidating  balance
sheet of Telcom and its  subsidiaries  as at the end of such year,  consolidated
and accompanying  supplementary  consolidating statements of income and retained
earnings  of Telcom  and its  subsidiaries  and  consolidated  and  accompanying
supplementary   consolidating  statements  of  cash  flows  of  Telcom  and  its
subsidiaries  reflecting  the  operations  during said year,  all in  reasonable
detail and setting forth comparable figures for the preceding fiscal year.

     (g) (i) Financial Certification. At the time of the delivery to the holders
of the  Notes of the  reports  referred  to in  Sections  4(e) and 4(f)  hereof,
deliver to the holders of the Notes a certificate  signed by its chief financial
officer, certifying that (s)he has reviewed the provisions of this Agreement and
stating,  in his or her opinion,  if such be the fact,  that the Company and its
Subsidiaries  have not been and are not in default  as to any of the  provisions
contained in this Agreement, or, in the event the Company or its Subsidiaries is
or was in default,  setting forth the details of such default.  Such certificate
shall set forth the  computations  upon which such officer based the  conclusion
that the Company and its Restricted Subsidiaries are and have been in compliance
with Sections 4(n) and (r), and 5(b), (d), (h), (i) and (j) hereof.

     (ii) Restricted Subsidiaries.  If and so long as Unrestricted  Subsidiaries
constitute,  in the  aggregate,  more than 10% of  Consolidated  Total Assets or
contribute,  in the aggregate, more than 10% of Consolidated Net Earnings in any
fiscal period,  then for such fiscal periods,  and within the respective periods
provided in  paragraphs  (e) and (f) above,  deliver to the holders of the Notes
consolidated financial statements of the character and for the dates and periods
as  provided  in said  paragraphs  (e)  and (f)  covering  the  Company  and its
Restricted Subsidiaries.

     (h) Copies of Management Letters, etc. Furnish to the holders of the Notes,
promptly  after the receipt  thereof by the  Company,  copies of all  management
letters or similar documents  submitted to the Company by independent  certified
public  accountants in connection  with each annual and any interim audit of the
accounts of the Company or its Subsidiaries.

                                       7
<PAGE>

     (i) Copies of  Regulatory  Reports.  Furnish  to the  holders of the Notes,
promptly after transmittal or filing thereof by the Company, copies of all proxy
statements, notices and reports as it shall send to its stockholders,  copies of
all registration  statements  (without  exhibits) and all reports which it files
with the  Securities  and Exchange  Commission or any other  regulatory  agency,
other  than  routine  reports  filed  with  respect to  employee  benefit  plans
(excepting  those annual reports with respect to each such plan requested by the
holders of the Notes in writing pursuant to Section 4(q) hereof).

     (j) Corporate Existence. Maintain and cause each Subsidiary to maintain its
corporate existence in good standing (except that the corporate existence of any
Restricted  Subsidiary may be terminated  pursuant to a merger or  consolidation
permitted  under Section 5(e) of this  Agreement) and comply with all applicable
laws and  regulations of the United States and of each state thereof and of each
political subdivision thereof and of any and all other governmental authorities.

     (k)  Payment  of Taxes and  Claims.  Pay and cause each  Subsidiary  to pay
before  they  become  delinquent  (a) all taxes,  assessments  and  governmental
charges or levies imposed on the Company, any Subsidiary or upon the property of
the  Company  or any  Subsidiary,  (b) all  claims or  demands  of  materialmen,
mechanics,  carriers,  warehousemen,  landlords and other like persons which, if
unpaid,  might  result in the  creation of a Lien or charge upon any property of
the  Company  or any  Subsidiary;  and (c) all  claims,  assessments  or  levies
required to be paid by the Company or any Subsidiary  pursuant to any agreement,
contract,  law,  ordinance or  governmental  rule or  regulation  governing  any
pension,  retirement,  profit-sharing  or any similar plan of the Company or any
Subsidiary, provided that the Company or such Subsidiary shall have the right to
contest  in good  faith,  by  appropriate  proceedings  promptly  initiated  and
diligently  conducted  which will prevent the forfeiture or sale of any property
of the Company or such  Subsidiary  or any  material  interference  with the use
thereof by the Company or such Subsidiary, the validity, amount or imposition of
any of the  foregoing  items and upon such good faith contest to delay or refuse
payment  thereof,  if such reserve or other  appropriate  provision,  if any, as
shall be required by generally  accepted  accounting  principles shall have been
made therefor.

     (l)  Maintenance  of  Properties  and  Licenses.  Maintain  and cause  each
Subsidiary to maintain and keep its properties in good repair, working order and
condition,  and from time to time make all needful and proper repairs,  renewals
and replacements so that the business carried on in connection  therewith may be
properly and advantageously conducted at all times. The Company will do or cause
to be done all things  necessary to  preserve,  renew and keep in full force and
effect  the  rights,  licenses,  permits,  agency  agreements,  and trade  names
material to the conduct of its business  and maintain and operate such  business
properly  and  efficiently  and in  substantially  the  manner  in  which  it is
presently conducted and operated.

     (m)  Insurance.   Maintain  and  cause  each  Subsidiary  to  maintain,  in
financially sound insurance companies of recognized standing, insurance of types
and in amounts usually maintained by similar companies in similar businesses.

     (n) Net Worth.  At all times  during  each  twelve-month  period  ending on
December 31 in each year,  commencing  with the  twelve-month  period  ending on
December  31,  2002,  maintain  Consolidated  Adjusted Net Worth in an amount at
least  equal  to  $30,000,000,  plus 25% of  Consolidated  Net  Income,  if any,
determined on a cumulative  basis for each fiscal year of the Company  ending on
or after December 31, 2002 and prior to the  twelve-month  period for which such
determination  is being made (without  reduction for any  Consolidated  Net Loss
incurred in any such fiscal year).

     (o) Notice of Default.  Give the holders of Notes prompt  notice in writing
of any condition or event which  constitutes an Event of Default under Section 7
hereof, or which,  after notice or lapse of time, or both, would constitute such
an Event of Default.

     (p) Exchange of Notes.  At any time, at its expense upon written request of
the holder of a Note and surrender of the Note for such purpose, issue new Notes
in  exchange  therefor in such  denominations  of at least  $1,000,000  (or such
smaller amount equal to the then  outstanding  principal amount of such Note) as
shall be specified by the holder of such Note, in an aggregate  principal amount
equal  to  the  then  unpaid  principal  amount  of  the  Note  surrendered  and
substantially  in the  form  of  Exhibit  A,  with  appropriate  insertions  and
variations,  and bearing  interest from the date to which interest has been paid
on the Note surrendered.

                                       8
<PAGE>

     (q)  Qualified  Retirement  Plans.  Cause each Plan of the  Company and any
ERISA  Affiliate in which any  employees  of the Company or any ERISA  Affiliate
participate  that is subject to any  provisions  of ERISA and the  documents and
instruments  governing each such Plan to be conformed to when necessary,  and to
be  administered in a manner  consistent with those  provisions of ERISA and the
Internal  Revenue  Code  which  may,  from time to time,  become  effective  and
operative  with  respect to such Plans;  and if  requested by the holders of the
Notes in writing  from time to time,  furnish to the holders of the Notes a copy
of any annual  report with respect to each such plan that the Company files with
the Internal  Revenue Service  pursuant to ERISA. The Company will not, and will
not permit any ERISA  Affiliate to (i) engage in any  "prohibited  transaction,"
(ii) incur any "accumulated  funding  deficiency,"  whether or not waived, (iii)
terminate any Plan in a manner which could result in the imposition of a Lien on
any property of the Company or any ERISA Affiliate, or (iv) incur any withdrawal
liability in connection with any "multiemployer plan."

     Section 5. Negative Covenants.

     The Company  covenants  and agrees that so long as any amount  shall remain
unpaid on the Notes,  it will not and will not permit any Restricted  Subsidiary
to:

     (a) Limitation on Consolidated Total Debt. Permit, at the end of any fiscal
quarter of the Company,  Consolidated  Total Debt to exceed 60% of  Consolidated
Total Capitalization as of such fiscal quarter end.

     (b)  Limitations  on Debt of  Restricted  Subsidiaries.  In the case of any
Restricted  Subsidiary,  create,  assume,  incur,  guarantee or otherwise become
liable in  respect  of any Debt  (other  than  Debt to the  Company  or  another
Restricted  Subsidiary),  unless at the time such  Debt is  incurred,  and after
giving effect thereto and the application of the proceeds thereof, the aggregate
amount of all Debt of Subsidiaries,  plus the aggregate amount of all other Debt
secured by Liens permitted by Section 5(h)(ix)  hereof,  would not exceed 20% of
Consolidated Adjusted Net Worth.

     (c)  Subordination of Claims.  Subordinate or permit to be subordinated any
claim against,  or obligation of another Person held or owned by it to any other
claim against, or obligation of, such other Person.

     (d)  Sale  of  Assets.  Sell,  lease,  transfer  or  otherwise  dispose  of
(collectively, a "Disposition"), all or any part of its assets (other than sales
or  dispositions in the ordinary course of business) if either (i) the aggregate
amount of all Dispositions in any fiscal year exceeds 10% of Consolidated  Total
Assets  determined as of the end of the  immediately  preceding  fiscal year, or
(ii) the aggregate  amount of all  Dispositions  from and after the date of this
Agreement  exceeds 25% of Consolidated  Total Assets determined as of the end of
the  immediately  preceding  fiscal year (a Disposition  of assets  described in
clause (i) or (ii) above is referred to herein as a "substantial part"), except:
(i) any Restricted  Subsidiary may sell, lease or otherwise dispose of, all or a
substantial part of its assets to the Company or a Restricted  Subsidiary;  (ii)
the  Company  may sell,  lease,  transfer  or  otherwise  dispose  of,  all or a
substantial  part of its  assets if the net  proceeds  of such sales are used to
purchase other property of a similar nature of at least  equivalent value within
one year of such  sale;  and (iii) the  Company  may sell,  lease,  transfer  or
otherwise dispose of all or a substantial part of its assets if the net proceeds
of such sale are used to prepay Senior Debt  (including the Notes) on a pro rata
basis;  provided that any prepayment of the Notes must be in accordance with the
terms of and with the premium specified in Sections 2(a) and (b) hereof.

     (e) Merger and  Consolidation.  Merge or consolidate  with any  corporation
provided that (i) any Restricted  Subsidiary may be merged or consolidated  with
the  Company  (if the  Company is the  surviving  corporation)  or with  another
Restricted Subsidiary and (ii) the Company may merge or consolidate with another
corporation if (A) the surviving  corporation  would be organized under the laws
of the  United  States  or any  state  thereof,  (B) the  surviving  corporation
expressly  assumes the  obligations  of the Company under this Agreement and the
Notes, (C) the surviving  corporation  shall have caused to be delivered to each
holder of the Notes an opinion of nationally recognized  independent counsel, or
other independent  counsel reasonably  satisfactory to the holders of the Notes,
to the effect that all agreements or instruments  effecting such  assumption are
enforceable in accordance  with their terms and comply with the terms of hereof,
and (D)  immediately  following  the merger or  consolidation  and after  giving
effect thereto (1) no event or condition would exist which,  with or without the
lapse of time or the giving of notice,  or both,  would  constitute  an Event of
Default,  and (2) the  Consolidated  Adjusted  Net Worth of the  Company and its
Restricted  Subsidiaries  would be no less than the  Consolidated  Adjusted  Net
Worth of the Company and its Restricted  Subsidiaries  immediately  prior to the
merger or consolidation.

                                       9
<PAGE>

     (f)  Maintenance  of Present  Business.  Engage in any business  other than
Existing Lines of Business, nor purchase or invest,  directly or indirectly,  in
any  substantial  amount of assets or  property  other than  assets or  property
useful and to be used in Existing Lines of Business.

     (g)  Transactions  with  Affiliates.  Enter  into  or  be a  party  to  any
transaction or arrangement with any Affiliate  (including,  without  limitation,
the purchase from, sale to or exchange of property with, or the rendering of any
service by or for, any Affiliate), except in the ordinary course of and pursuant
to  the  reasonable   requirements  of  the  business  of  the  Company  or  its
Subsidiaries and upon fair and reasonable terms no less favorable to the Company
or any of its Subsidiaries  than would be obtained in a comparable  arm's-length
transaction with a Person other than an Affiliate.

     (h) Permitted Liens. Create,  assume, or suffer to exist any Liens upon any
of its property or assets, whether now owned or hereafter acquired, except:

     (i) Liens for taxes or assessments or other governmental  charges or levies
not  yet  due or  which  are  being  contested  in  good  faith  by  appropriate
proceedings  promptly  initiated and  diligently  conducted,  if such reserve or
other appropriate provision,  if any, as shall be required by generally accepted
accounting principles shall have been made therefor;

     (ii)  other  Liens  incidental  to the  conduct  of their  business  or the
ownership of their  respective  properties which were not incurred in connection
with  borrowing of money or the obtaining of advances or credit and which do not
in the  aggregate  materially  detract  from the  value of their  properties  or
materially impair the use thereof in the operation of the business;

     (iii) Liens on assets of any  Restricted  Subsidiary  securing Debt of such
Restricted Subsidiary to the Company or to another Restricted Subsidiary;

     (iv) Liens (i) on  property  of the  Company or any  Restricted  Subsidiary
securing all or any part of the purchase price or cost of  construction  of such
property  created   contemporaneously  with,  or  within  270  days  after,  the
acquisition or completion of construction,  (ii) on any property existing at the
time of  acquisition  thereof by the Company or any Restricted  Subsidiary,  and
(iii) existing on the property of any Person at the time such Person is acquired
(whether  by  purchase  of stock or  assets,  by  merger  or  consolidation,  or
otherwise) by the Company or any Restricted  Subsidiary;  provided that (A) none
of such Liens shall encumber any other property or assets of the Company and its
Restricted Subsidiaries, and (B) the principal amount of the Debt secured by any
such Lien shall not exceed 100% of the fair market value of the property subject
thereto at the time such Lien was created;

     (v)  presently  existing  Liens  described  in  Exhibit  C hereto  securing
existing  Debt  described  in Exhibit  C, and any  replacements,  extensions  or
renewals of such Debt;  provided that no such replacement,  extension or renewal
shall increase the principal amount thereof;

     (vi) Liens of or  resulting  from any  judgment or award,  the time for the
appeal or petition for rehearing of which shall not have expired,  or in respect
of which the Company or a Restricted  Subsidiary shall at any time in good faith
be  prosecuting  an appeal or proceeding  for a review and in respect of which a
stay of execution  pending such appeal or proceeding  for review shall have been
secured;

     (vii) Liens incurred in connection with obtaining or performing  government
contracts;

     (viii)  Liens on any  property of the  Company;  provided  that the Company
shall  have  granted  to the  holders of the Notes a pari passu Lien on the same
property,  and the  holders of any such Lien and the  holders of the Notes shall
have entered into an  intercreditor  agreement in form and substance  reasonably
satisfactory  to the holders of the Notes providing for such pari passu ranking;
and

                                       10
<PAGE>

     (ix) Liens in addition  to those  permitted  by clauses (i) through  (viii)
above, securing Debt of the Company or any Restricted Subsidiary,  provided that
at the  time of the  incurrence  of any such  Lien the sum of (i) the  aggregate
principal  amount of all Debt  secured by Liens  permitted  by this clause (ix),
plus (ii) the  aggregate  amount of Debt of  Subsidiaries  incurred  within  the
limitations of Section 5(b),  shall not exceed 20% of Consolidated  Adjusted Net
Worth.

     (i) Restricted Payments and Restricted Investments.

     (1) Declare or make, or incur any liability to make any Restricted Payments
or Restricted Investments, except:

     (A) a Restricted Subsidiary may pay dividends to the Company; and

     (B) subject to the  limitations  in clauses (2) and (3) below,  the Company
and its  Restricted  Subsidiaries  may declare or make  Restricted  Payments and
Restricted  Investments,  provided that  immediately  after giving effect to any
such action,  (x) no Event of Default or event which with the passing of time or
the giving of notice, or both, would constitute an Event of Default shall exist,
and  (y)  the  aggregate  amount  of  all  Restricted  Payments  and  Restricted
Investments  made on or after the Closing  Date to and  including  the date such
Restricted Payment or Restricted Investment is declared or made, as the case may
be, would not exceed the sum of (i) $7,500,000,  plus (ii) 60% of any Cumulative
Consolidated  Net Income,  minus (iii) 100% of any Cumulative  Consolidated  Net
Loss,  plus (iv) the net  proceeds to the Company  from any  issuance of capital
stock from and after the Closing Date;

     (2) In  addition  to the  limitations  contained  in clause (1) above,  the
aggregate amount of all Restricted Investments of the Company and its Restricted
Subsidiaries  outstanding  at any time on or after the  Closing  Date  shall not
exceed the greater of (a)  $7,500,000  or (b) 15% of  Consolidated  Adjusted Net
Worth.

     In valuing any  Investments for the purpose of applying the limitations set
forth in this Section  5(i),  Investments  shall be taken at the  original  cost
thereof,  without  allowance for any subsequent  write-offs or  appreciation  or
depreciation therein, but less any amount repaid or recovered in cash on account
of capital or principal.

     (j)  Fixed  Charges.  Permit,  as  of  the  end  of  each  fiscal  quarter,
Consolidated  Net  Income  Available  for  Fixed  Charges  for  the  immediately
preceding  twelve-month  period to be less than 200% of Fixed  Charges  for such
twelve-month period.

     (k) Sale of Accounts. Sell with recourse,  discount or otherwise sell to an
Affiliate any notes  receivable or accounts  receivable  for an amount less than
the face amount  thereof,  less a reserve factor for credit losses adjusted from
time to time to reflect actual credit loss experience.

     (l) Guaranties;  Etc. Be or become liable in respect of any Guaranty of any
obligation  of any  Affiliate,  or grant any  security  interest in or otherwise
pledge any of its assets to secure any obligation of any Affiliate.

     (m) Restricted Subsidiaries.  Permit at any time all of the then designated
Restricted Subsidiaries,  together with the Company, to constitute less than 75%
of the total amount of all assets of the Company and its Subsidiaries determined
on a  consolidated  basis  in  accordance  with  generally  accepted  accounting
principles.

     Section 6. Conditions Precedent.

     The  obligations  of the  Purchasers to purchase the Notes,  as provided in
Section 1 hereof, shall be subject to the satisfaction, on or before the Closing
Date, of the following conditions:

                                       11
<PAGE>

     (a) The representations and warranties  contained in Section 3 hereof shall
be true and correct as of the Closing Date;  the Company shall not be in default
with  respect to any of the  provisions  hereof,  and there shall exist no event
which,  with the  passage  of time or the  giving  of  notice,  or  both,  would
constitute  such  a  default;  and  the  Company  shall  have  delivered  to the
Purchasers a certificate signed by a responsible  officer of the Company to such
effects.

     (b) The Purchasers  shall have received from Porter Wright Morris & Arthur,
counsel for the Company, a favorable opinion in form and substance  satisfactory
to the  Purchasers  as to all matters  specified  in Exhibit E-1 hereto and such
other matters incident to the transaction herein  contemplated as the Purchasers
may reasonably request.

     (c) The Purchasers shall have received from their special counsel,  Chapman
and  Cutler,  a  favorable  opinion in form and  substance  satisfactory  to the
Purchasers,  as to all  matters  specified  in Exhibit E-2 hereto and as to such
other matters incident to the transaction herein  contemplated as the Purchasers
may reasonably request.

     (d) The Purchasers shall have received a Uniform Commercial Code Search and
judgment and tax lien searches  against the Company and each Subsidiary from the
States of Ohio and every other state as the Purchasers  may reasonably  request,
dated  as of a date no  more  than  fifteen  days  prior  to the  Closing  Date,
certified by a reporting service satisfactory to the Purchasers,  and disclosing
no Liens other than those permitted under Section 5(h) of this Agreement.

     (e) The  Company  shall have  provided  the  Purchasers  with copies of all
approvals  from the Public  Utilities  Commission of Ohio and any other state or
federal  governmental  agency or agencies  from whom  regulatory  approvals  are
necessary for the  consummation of all of the transactions  contemplated  hereby
and which approvals are not subject to appeal or modification which could affect
the validity or terms of the Notes.

     (f) Neither the Company nor any  Subsidiary  shall have suffered a material
adverse  change in  financial  condition,  nor shall  there  exist any  material
action,  suit  or  proceeding  pending,  or to  the  knowledge  of  the  Company
threatened,  against the Company nor any Subsidiary  which, if decided adversely
to the Company or any  Subsidiary,  would have a materially  adverse effect upon
the Company or any Subsidiary or upon any of their businesses or properties.

     (g)  All  proceedings  to be  taken  in  connection  with  the  transaction
contemplated  by this  Agreement  and all  documents  incident  thereto shall be
satisfactory  in form and substance to the  Purchasers and their counsel and the
Purchasers  shall have received copies of all documents which the Purchasers may
reasonably request.

     Section 7. Defaults.

     If one or more Events of Default shall occur, that is to say, if

     (a) default  shall be made in the punctual  payment of the  principal of or
premium,  if any, on any of the Notes when due, whether by regular  installment,
upon prepayment, by acceleration, at maturity or otherwise; or

     (b) default shall have been made in the punctual payment of any interest on
any of the Notes when due, whether by regular installment,  upon prepayment,  by
acceleration at maturity or otherwise, and such default shall have continued for
a period of five days; or

     (c) the  Company or any  Restricted  Subsidiary  defaults in any payment of
principal of or interest on any other  obligation  for borrowed money beyond any
period of grace provided with respect thereto or in the performance of any other
agreement,  term or condition  contained in any  agreement  under which any such
obligation  is created if the effect of such default is to cause,  or permit the
holder or holders of any obligation of the Company or any Restricted  Subsidiary
in excess of  $1,000,000  (or a trustee on behalf of such  holder or holders) to
cause, such obligation to become due prior to its stated maturity; or

                                       12
<PAGE>

     (d) an  order  for  relief  shall  be  entered  in any  Federal  Bankruptcy
proceeding in which the Company or any Restricted  Subsidiary is the debtor;  or
bankruptcy,  receivership,   insolvency,  reorganization,  relief,  dissolution,
liquidation or other similar  proceedings  shall be instituted by or against the
Company or any  Subsidiary  or all or any part of the property of the Company or
any Restricted  Subsidiary under the Federal Bankruptcy Code or any other law of
the United States or any  bankruptcy or insolvency law of any state of competent
jurisdiction; or

     (e) the Company or any Restricted Subsidiary shall have become insolvent or
unable to pay its debts as they mature, cease doing business as a going concern,
make an assignment for the benefit of creditors,  admit in writing its inability
to pay its debts as they  become due,  or if a trustee,  receiver or  liquidator
shall be  appointed  for the  Company or any  Restricted  Subsidiary  or for any
substantial  portion of the assets of the Company or any Restricted  Subsidiary;
or

     (f) default shall be made in the  performance or observance of any covenant
contained in Section 5 of this Agreement; or

     (g) default shall be made in the  performance or observance of any other of
the terms,  covenants or  conditions  of this  Agreement  and such default shall
continue for a period of thirty days after  written  notice  thereof  shall have
been given by the holders of Notes to the Company; or

     (h)  final  judgments  or  orders  for the  payment  of money in  excess of
$1,000,000  in the  aggregate  shall be  rendered  against  the  Company  or any
Restricted  Subsidiary  and such  judgments or orders shall remain  unsatisfied,
unstayed and  unbonded for a period of 30 days after the date such  judgments or
orders are required to be paid; or

     (i) if any representation or warranty contained in this Agreement or in any
other document supplied to the holders of Notes by the Company or any Subsidiary
in  connection  with  this  transaction  proves  to be false as of the time this
Agreement was made  (provided  that, if the Company shall have given the holders
of the Notes written notice that any such  representation  or warranty was false
at the time this  Agreement  was made,  which  notice  shall  describe the facts
giving  rise to the  breach  of any such  representation  or  warranty,  and the
holders of the Notes  shall not have  declared  an Event of  Default  under this
clause (i) based on the  information  contained  in the notice  from the Company
within  sixty (60) days of such  notice,  then the holders of the Notes shall be
deemed to have  waived any Event of Default  under this  clause (i) based on the
information contained in the notice from the Company),

     then the holder of the Note if only one Note shall be  outstanding,  or the
holders of at least  two-thirds  of the principal  amount of the Notes,  if more
than one Note shall be  outstanding,  may at its or their  option,  by notice in
writing to the  Company,  declare the Note or all of the Notes,  as the case may
be, to be forthwith due and payable and thereupon the Note, or all of the Notes,
shall be and become due and payable,  together with interest accrued thereon and
the premium  specified in Section 2(a) hereof  (whether or not prepayment  would
then be permitted by said Section  2(a))  (provided  that if an Event of Default
results from the filing of a voluntary or involuntary petition in any bankruptcy
proceeding  in which the  Company or any  Subsidiary  is the  debtor,  the Notes
thereupon  shall  immediately  become due and  payable,  with  interest  accrued
thereon  and the  premium  specified  in Section  2(a)  hereof  (whether  or not
prepayment  would then be permitted by said  Section  2(a)),  without any notice
from the  holders of the Notes or  otherwise),  and the holder or holders of the
Note or Notes may take any action or  proceeding at law or in equity which it or
they deem advisable for the protection of its or their  interests to collect and
enforce  payment,  and the  Company  shall  pay all  expenses,  court  costs and
reasonable  attorneys'  fees incurred in  connection  with or arising out of any
default hereunder.

     Section 8. Payments on and Registration and Transfer of Notes.

     The Company agrees that it will make payment of the principal of,  premium,
if any and  interest  on the Notes by wire  transfer  of  immediately  available
federal funds with sufficient information to identify the source and application
of  funds  to each of the  Purchasers  in  accordance  with  the  wire  transfer
instructions  set forth in  Appendix I hereto,  or to such other  accounts or in

                                       13
<PAGE>

such  other  manner as may from time to time be  designated  by the  holder of a
Note,  without  presentment  of the Notes and without the rendering of any bills
therefor. The Company shall keep at its principal office a register in which the
Company shall provide for the  registration of the Notes and of transfers of the
Notes (the "Note  Register").  Upon  surrender  of any Note for  transfer at the
office of the Company, the Company shall execute and deliver, in the name of the
designated  transferee  a new Note in a  principal  amount  equal to the  unpaid
principal  amount of, and dated the date to which interest has been paid on, the
Note so surrendered.  When a Note shall be presented or surrendered for transfer
it shall be duly endorsed, or be accompanied by a written instrument of transfer
duly executed, by the holder thereof or his attorney duly authorized in writing.
The  Company  may treat the Person in whose name the Note is  registered  on the
Note  Register as the owner of the Note for the purpose of receiving  payment of
principal of and interest on the Note and for all other purposes and the Company
shall not be affected by notice to the contrary.

     Section 9. Expenses.

     The  Company  agrees,  whether  or not the  purchase  of the  Notes  herein
contemplated  shall be  consummated,  to pay and save  the  Purchasers  harmless
against  liability  for the  payment of all  out-of-pocket  expenses  arising in
connection  with this  transaction  including any  documentary  stamp taxes (and
including interest and penalties, if any), which may be determined to be due and
payable  with  respect to the  execution  and  delivery  of the  Notes,  and the
reasonable  fees and  expenses of counsel to the  Purchasers.  The Company  also
agrees to pay, and to save the  Purchasers  harmless  against  liability for the
payment of, the  reasonable  fees and expenses of counsel to the  Purchasers  in
connection with any documentation and related services arising after the Closing
Date in  connection  with  the  preparation  of  waivers  or  amendments  of any
provisions of this Agreement and the Notes.  In addition,  the Company agrees to
pay, and to save the holders of the Notes  harmless  against,  all  brokerage or
finders fees incurred in the transaction contemplated by this Agreement.

     Section 10.  Delivery  of  Documents;  Pro Rata  Payments;  Amendments  and
Consents.

     (a) Delivery of Documents. All notices, certificates,  requests, statements
and other  documents  required or permitted to be delivered to the Purchasers or
the holders of Notes by any  provision  hereof  shall also be  delivered to each
holder of a Note.

     (b) Pro Rata Payments. All interest payments and payments or prepayments of
principal  shall  be made  and  applied  pro rata on all  Notes  outstanding  in
accordance with the respective unpaid principal amounts thereof.

     (c)  Amendments and Consents.  (1) The  registered  holder or holders of at
least  two-thirds  of the  unpaid  principal  amount  of the  Notes  at the time
outstanding  may by agreement  with the Company  amend this  Agreement,  and any
consent,  notice,  request or demand  required or  permitted  to be given by the
Purchasers  or the  holders  of the  Notes  by any  provision  hereof  shall  be
sufficient  if given by the  holder or  holders  of at least  two-thirds  of the
unpaid principal amount of Notes at the time  outstanding  except that,  without
the  written  consent of the  holders of all Notes at the time  outstanding,  no
amendment to this Agreement  shall extend the maturity of any Note, or alter the
rate of interest or any premium  payable with respect to any Note, or affect the
amount of any required  prepayments,  or reduce the  proportion of the principal
amount of the Notes required with respect to any consent.

     (2) The Company will provide each holder of the Notes  (irrespective of the
amount of Notes then owned by it) with sufficient information,  sufficiently far
in advance of the date a decision is required,  to enable such holder to make an
informed and considered decision with respect to any proposed amendment,  waiver
or  consent  in respect  of any of the  provisions  hereof or of the Notes.  The
Company will deliver  originally  executed copies of each  amendment,  waiver or
consent effected pursuant to the provisions of this Section 10(c) to each holder
of  outstanding  Notes  promptly  following the date on which it is executed and
delivered by, or receives the consent or approval of, the  requisite  holders of
Notes.

     (3) The Company will not directly or indirectly pay or cause to be paid any
remuneration,  whether by way of  supplemental  or additional  interest,  fee or
otherwise, or grant any security, to any holder of Notes as consideration for or
as an  inducement  to the entering  into by any holder of Notes of any waiver or
amendment of any of the terms and provisions  hereof unless such remuneration is

                                       14
<PAGE>

concurrently  paid,  or security  is  concurrently  granted,  on the same terms,
ratably to each  holder of Notes then  outstanding  even if such  holder did not
consent to such waiver or amendment.

     (4)  Solely for the  purpose  of  determining  whether  the  holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement  or the Notes,  or have  directed  the  taking of any action  provided
herein  or in the  Notes to be taken  upon the  direction  of the  holders  of a
specified   percentage  of  the  aggregate   principal   amount  of  Notes  then
outstanding,  Notes  directly or  indirectly  owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.

     Section 11. Investment Purpose.

     Each Purchaser  represents  that its acquisition of the Notes by it will be
for investment and not with a view to resale in connection with any distribution
thereof, it being understood,  however,  that the disposition of the property of
each Purchaser shall at all times be within its control.

     Section 12. Definitions.

     For purposes of this Agreement the following terms shall have the following
meanings:

     "Affiliate" shall mean any Person (i) which directly or indirectly  through
one or more  intermediaries  controls,  or is controlled  by, or is under common
control with, the Company,  (ii) which  beneficially owns or holds 5% or more of
any class of the voting stock of the  Company,  (iii) 5% or more of any class of
the voting stock (or in the case of a Person which is not a  corporation,  5% or
more of the  equity  interest)  of  which is  beneficially  owned or held by the
Company or a Subsidiary,  (iv) any director,  officer of employee of the Company
or any  Subsidiary  or other Person  described  in clauses  (i),  (ii) and (iii)
hereof, and (v) any spouse,  lineal descendant or ascendant,  brother or sister,
by blood, adoption or marriage, of any Person listed in clauses (i) through (iv)
hereof, and spouses of such ascendants,  descendants,  brothers and sisters. The
term "control"  means the  possession,  directly or indirectly,  of the power or
cause the direction of the management and policies of a Person,  whether through
the ownership of voting stock, by contract or otherwise.

     "Capital  Lease" shall mean any lease of property which in accordance  with
generally accepted  accounting  principles should be capitalized on the lessee's
balance sheet or for which the amount of the asset and  liability  thereunder as
if so capitalized should be disclosed in a note to such balance sheet.

     "Capitalized Lease Obligations" shall mean lease payment  obligations under
Capital Leases.

     "Closing Date" shall have the meaning set forth in Section l(a).

     "Consolidated  Adjusted  Net Worth" shall mean  Consolidated  Stockholders'
Equity less all Investments in Affiliates.

     "Consolidated  Net Income (Net Loss)" shall mean,  for any period,  the net
after-tax income (or net loss) of the Company and its Restricted Subsidiaries on
a consolidated basis determined in accordance with generally accepted accounting
principles  consistent  with those  followed  in  preparation  of the  financial
statements  referred to in Section 3(e),  excluding (i) extraordinary  gains and
losses  and  (ii)  any  equity  interest  of  the  Company  and  its  Restricted
Subsidiaries  in the  unremitted  earnings  of any  corporation  which  is not a
Restricted Subsidiary.

     "Consolidated  Net Income  Available for Fixed Charges" shall mean, for any
period,  Consolidated  Net Income for such period,  plus (i) all  deductions for
taxes levied in respect of income deducted in computing  Consolidated Net Income
for such period,  and (ii) Fixed Charges deducted in computing  Consolidated Net
Income for such period.

                                       15
<PAGE>

     "Consolidated  Stockholders' Equity" shall mean Consolidated  Stockholders'
Equity of the Company and its Restricted  Subsidiaries  determined in accordance
with generally accepted accounting principles.

     "Consolidated Total Assets" shall mean, as of any date, the total amount of
all  assets of the  Company  and its  Restricted  Subsidiaries  determined  on a
consolidated basis in accordance with generally accepted  accounting  principles
consistent  with those  followed  in  preparation  of the  financial  statements
referred to in Section 3(e).

     "Consolidated  Total  Capitalization"  shall  mean the sum of  Consolidated
Adjusted Net Worth and Consolidated Total Debt.

     "Consolidated  Total Debt" shall mean, as of any date, the aggregate amount
of all Debt of the  Company  and its  Restricted  Subsidiaries  determined  on a
consolidated basis in accordance with generally accepted  accounting  principles
consistent  with those  followed  in  preparation  of the  financial  statements
referred to in Section 3(e).

     "Cumulative Consolidated Net Income" shall mean the excess, if any, of:

     (i) the sum of (A)  Consolidated  Net Income,  if any,  for each  completed
fiscal  year of the  Company  commencing  on or after  January  1,  2002 and (B)
Consolidated Net Income, if any, for each completed quarter ending after the end
of the most recently completed fiscal year of the Company; over

     (ii) the sum of (A)  Consolidated  Net  Loss,  if any,  for each  completed
fiscal  year of the  Company  commencing  on or after  January  1,  2002 and (B)
Consolidated  Net Loss, if any, for each completed  quarter ending after the end
of the most recently completed fiscal year of the Company.

     "Cumulative Consolidated Net Loss" shall mean the excess, if any, of:

     (i) the sum of (A) Consolidated Net Loss, if any, for each completed fiscal
year of the Company  commencing on or after January 1, 2002 and (B) Consolidated
Net Loss, if any, for each  completed  quarter  ending after the end of the most
recently completed fiscal year of the Company; over

     (ii) the sum of (A)  Consolidated  Net Income,  if any, for each  completed
fiscal  year of the  Company  commencing  on or after  January  1,  2002 and (B)
Consolidated Net Income, if any, for each completed quarter ending after the end
of the most recently completed fiscal year of the Company.

     "Debt" shall mean (i)  indebtedness  for borrowed money or for the deferred
purchase price of property or services, including without limitation Capitalized
Lease Obligations,  but excluding trade accounts payable and accrued liabilities
arising  in the  ordinary  course  of  business,  (ii)  any  other  indebtedness
evidenced by a promissory note or other instrument, (iii) the face amount of all
letters of credit issued for the account of any Person and, without  duplication
all drafts drawn  thereunder,  (iv) any  indebtedness  for borrowed money or the
deferred  purchase  price  of  property  or  services  secured  by a Lien on any
property of any Person,  whether or not such indebtedness has been assumed,  and
(v) Guaranties or other contingent obligations for any indebtedness described in
clauses (i) through (iv).

     "ERISA" shall mean the Employee  Retirement Income Security Act of 1974 and
the regulations adopted pursuant thereto.

     "ERISA  Affiliate"  shall  mean  each  trade or  business  (whether  or not
incorporated) which,  together with the Company,  would be deemed to be a single
employer within the meaning of Section 4001(b)(1) of ERISA.

     "Event of Default" shall have the meaning set forth in Section 7.

     "Existing Lines of Business" shall mean operations in the voice,  video and
data communications and information technology industry.

                                       16
<PAGE>

     "Fixed  Charges"  shall mean,  for any period,  all  consolidated  interest
expense on all Debt and all rental expense on all operating  leases  deducted in
computing Consolidated Net Income for such period, determined in accordance with
generally  accepted  accounting  principles  consistent  with those  followed in
preparation of the financial statements referred to in Section 3(e).

     "Funded  Debt" shall mean any Debt payable more than one year from the date
of its  creation  (or which is  renewable at the option of the obligor to a date
more than one year from the date of its creation), including the current portion
thereof,  which under generally accepted  accounting  principles is shown on the
balance sheet as a liability,  including but not limited to the Notes,  any Debt
outstanding  under  a  revolving  credit  or  similar  agreement  providing  for
borrowings  (and  renewables and extensions  thereof) over a period of more than
one year  notwithstanding  that any such Debt may be payable on demand or within
one year after the creation  thereof,  any Capitalized Lease Obligations and any
Guaranty with respect to Funded Debt of another Person.

     "Guaranties"  by  any  Person  shall  mean  all  obligations   (other  than
endorsements  in the ordinary  course of business of negotiable  instruments for
deposit or collection) of such Person  guaranteeing,  or in effect guaranteeing,
any indebtedness, dividend or other obligation of any other Person (the "primary
obligor")  in any manner,  whether  directly or  indirectly  including,  without
limitation,  all  obligations  incurred  through  an  agreement,  contingent  or
otherwise,  by such Person:  (i) to purchase such  indebtedness or obligation or
any property or assets constituting security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of such  indebtedness or obligation or (y)
to maintain  working  capital or other balance  sheet  condition or otherwise to
advance or make available funds for the purchase or payment of such indebtedness
or  obligation,  (iii) to lease  property  or to  purchase  securities  or other
property or services primarily for the purpose of payment of the indebtedness or
obligation,  or (iv)  otherwise  to  assure  the  owner of the  indebtedness  or
obligation of the primary obligor against loss in respect thereof.

     "Investments" shall mean with respect to any Person all investments by such
Person,  in cash or by delivery of property,  made directly or indirectly in any
property or assets or in any other Person,  whether by  acquisition of shares of
capital  stock,  Debt  or  other  obligations  or  by  loan,  advance,   capital
contribution  or  otherwise;  provided,  that  "Investments"  shall  not mean or
include (i) investments by such Person in property to be used or consumed in the
ordinary course of business, (ii) receivables arising from the sale of goods and
services in the ordinary course of business, and (iii) the billing or collection
of the accounts receivable of such Person by another on behalf of such Person.

     "Liens" shall mean as to any Person, any mortgage,  lien,  pledge,  adverse
claim,  charge,  security  interest  or other  encumbrance  of any kind  whether
presently  effective  or  springing  in or on, or any  interest  or title of any
vendor,  lessor,  lender  or  other  secured  party to or of such  Person  under
conditional  sale or other  title  retention  agreement  or  Capital  Lease with
respect to, any property or asset of such Person,  or the signing or filing of a
financing  statement  which names such  Person as debtor,  or the signing of any
security  agreement  authorizing any other party as the secured party thereunder
to file any financing statement.

     "Margin  Stock"  shall have the  meaning  ascribed  to that term in Section
221.2 of Regulation U (12 CFR Part 221) of the Board of Governors of the Federal
Reserve Board.

     "McKell Family" shall mean and include Robert McKell,  Thomas McKell, David
McKell,  Joseph  McKell  and  Helen  McKell  Sproat,  and the  heirs,  legatees,
descendants  and blood  relatives to the third degree of  consanguinity  of each
such individual.

     "Note" or "Notes" shall have the meaning set forth in Section 1(a).

     "Note Register" shall have the meaning set forth in Section 8.

     "PBGC"  shall mean the Pension  Benefit  Guaranty  Corporation  established
under ERISA, or any successor thereto.

     "Permitted Investments" shall mean (i) Investments in direct obligations of
the United States government  maturing within one year from the date of purchase
thereof;  (ii)  certificates  of  deposit,  repurchase  agreements,  and bankers
acceptances with final maturities of one year or less issued by U.S.  commercial
banks having capital and surplus  aggregating not less than $100,000,000;  (iii)

                                       17
<PAGE>

if so permitted by law,  savings  deposits in national banks and federal savings
and loan associations having capital stock and surplus aggregating not less than
$100,000,000,  provided that the  aggregate of all such savings  deposits at any
one bank or savings and loan association  shall not exceed $150,000 at any time;
(iv) commercial  paper rated A-1 or P-1 or above by recognized  rating services;
(v) money  market  preferred  stock  rated  "AA" or above by  recognized  rating
services; (vi) tax exempt, floating rate option tender bonds, backed by a letter
of credit  issued by a bank rated "AA" or above by  Standard & Poor's or "Aa" or
above by Moody's  Investors  Service;  (vii) municipal auction rate certificates
rated  "AA"  or  above  by  one  or  more  recognized  rating  services;  (viii)
Investments in Restricted Subsidiaries;  (ix) travel and expense advances of the
Company  and its  Restricted  Subsidiaries  to  their  respective  officers  and
employees in the ordinary course of business;  and (x) Securities rated "BBB" or
above by  Standard  & Poor's  or "Baa" or above by  Moody's  Investors  Service;
provided, that the aggregate value of all such Securities shall not exceed 5% of
Consolidated Adjusted Net Worth at any time.

     "Person"  shall  mean  an  individual,  partnership,  corporation,  limited
liability  company,  trust or  unincorporated  organization,  or a government or
agency or political subdivision thereof.

     "Plan"  shall mean any  employee  pension  benefit or other plan within the
meaning  of Section  3(2) of ERISA  that is subject to Title IV of ERISA,  other
than any "multiemployer plan" within the meaning of Section 3(37) of ERISA.

     "Prohibited Transaction" shall have the meaning set forth in Section 2(b).

     "Purchaser"  or  "Purchasers"  shall  have  the  meaning  set  forth in the
preamble.

     "Responsible Officer" shall mean any Senior Financial Officer and any other
officer  of the  Company  with  responsibility  for  the  administration  of the
relevant portion of this Agreement.

     "Restricted  Investments"  shall mean all Investments  other than Permitted
Investments.

     "Restricted Payments" shall mean (i) payment or declaration of any dividend
or any other  distribution  on account of any class of stock  (including  in the
term "stock" any warrant or option or other right to purchase  such stock of the
Company  or  any  Restricted  Subsidiary)  of  the  Company  or  any  Restricted
Subsidiary  excluding  any  distribution  which may be payable  solely in common
stock of the  corporation  making  the  distribution,  (ii)  direct or  indirect
redemptions, purchases, or other acquisitions of shares of stock of the Company,
and (iii) any optional prepayment by the Company or any Restricted Subsidiary of
any Subordinated Debt of the Company or any Restricted Subsidiary.

     "Restricted   Subsidiary"  shall  mean  any  Subsidiary   designated  as  a
"Restricted  Subsidiary"  on Exhibit B hereto or  designated as such pursuant to
Section 13.

     "Security"  shall  have  the  meaning  set  forth  in  Section  2(1) of the
Securities Act of 1933, as amended.

     "Senior  Debt"  shall  mean all  Funded  Debt  which  does  not  constitute
Subordinated Debt.

     "Senior  Financial   Officer"  shall  mean  the  chief  financial  officer,
principal accounting officer, treasurer or comptroller of the Company.

     "Standard & Poor's" shall mean Standard & Poor's  Ratings Group, a division
of McGraw-Hill.

     "Subordinated  Debt" shall mean all Debt which is expressly  subordinate in
right of  payment  pursuant  to its  terms to the  Notes,  whether  or not it is
subordinated to other indebtedness of the Company.

                                       18
<PAGE>

     "Subsidiary"  or  "Subsidiaries"  shall  mean the  corporations  listed  on
Exhibit B hereto, and any other corporation or corporations more than 50% of the
outstanding  capital stock of every class of which is hereafter owned,  directly
or indirectly, by the Company.

     "Telcom" shall mean Horizon Telcom, Inc., an Ohio corporation and corporate
parent of the Company.

     "Total  Capitalization" shall mean, as of any date, the sum of Consolidated
Adjusted Net Worth and Consolidated Total Debt.

     "Treasury Yield Percentage" shall mean, as of any date, (i) the most recent
weekly  average  yield on actively  traded U.S.  Treasury  obligations  having a
constant  maturity  equal to the average life of the  payments of principal  and
interest  that are avoided by any  prepayment  as determined by reference to the
week-ending figures published in the most recent Statistical Release which shall
have become  available  at least two  business  days prior to the date fixed for
prepayment,  or  (ii)  if a  Statistical  Release  is not  then  published,  the
arithmetic  average  (rounded  to the nearest  .01%) of the per annum  yields to
maturity for each business day during the week ending at least two business days
prior to the date as of which such  determination  is made, of all the issues of
actively traded marketable United States Treasury fixed interest rate securities
with a constant  maturity equal to the average life of the payments of principal
and interest that are avoided by any prepayment  (excluding all such  securities
which can be surrendered at the option of the holder at face value in payment of
any Federal  estate tax,  which  provide for tax benefits to the holder or which
were issued at substantial discount) as published in The Wall Street Journal or,
if The Wall Street Journal shall cease such publication,  based on average asked
prices  (or  yields)  as  quoted  by  each of  three  United  States  government
securities  dealers of recognized  national  standing selected by the holders of
the Notes.  If the average life of the payments of principal  and interest  that
are avoided by any  prepayment  is not equal to the constant  maturity of a U.S.
Treasury obligation for which a weekly average yield is published or quoted, the
Treasury Yield  Percentage shall be calculated by linear  interpolation  (to the
nearest  one-twelfth  of a year) from the most recent weekly  average  yields of
actively traded U.S. Treasury obligations for which such yields are published or
quoted for the two maturities most closely  corresponding  to such average life;
provided,  however,  that if the average life of the  payments of principal  and
interest that are avoided by any  prepayment is less than one year, the Treasury
Yield  Percentage  shall equal the most recent weekly average yield published or
quoted on actively traded U.S. Treasury  obligations with a constant maturity of
one year.

     "Unrestricted  Subsidiary"  shall  mean  any  Subsidiary  which  is  not  a
Restricted Subsidiary.

     "Voting  Stock"  shall  mean  capital  stock of any class or  classes  of a
corporation  having power under ordinary  circumstances  to vote for election of
members of the board of directors  of such  corporation,  or persons  performing
similar functions.

     Section 13. Designation of Subsidiaries.

     The Company may designate or redesignate any  Unrestricted  Subsidiary as a
Restricted Subsidiary and may designate or redesignate any Restricted Subsidiary
as an Unrestricted Subsidiary; provided that:

     (a) the  Company  shall  have  given not less than 10 days'  prior  written
notice to the  holders of the Notes that the Board of  Directors  of the Company
has made such determination;

     (b) at the time of such designation or redesignation  and immediately after
giving effect thereto, no Default or Event of Default would exist;

     (c) in the  case  of  the  designation  of a  Restricted  Subsidiary  as an
Unrestricted  Subsidiary and after giving effect thereto,  (i) such Unrestricted
Subsidiary  so designated  shall not,  directly or  indirectly,  own any Debt or
capital  stock or similar  equity  interests  of the  Company or any  Restricted
Subsidiary, (ii) such designation shall be deemed a Disposition under, and shall
be  permitted  by the  provisions  of,  Section  5(d) and (iii) such  Restricted
Subsidiary  shall  not at any  time  after  the  date  of  this  Agreement  have
previously been designated as an Unrestricted Subsidiary more than once; and

                                       19
<PAGE>

     (d) in the  case of the  designation  of an  Unrestricted  Subsidiary  as a
Restricted  Subsidiary and after giving effect thereto, (i) all outstanding Debt
of such  Restricted  Subsidiary  so  designated  shall be  permitted  within the
applicable  limitations  of Sections 5(a) and 5(b),  (ii) all existing  Liens of
such  Restricted   Subsidiary  so  designated  shall  be  permitted  within  the
applicable   limitations   of  Section   5(h)  (other  than   Section   5(h)(v),
notwithstanding  that any such Lien existed as of the Closing  Date),  and (iii)
such  Unrestricted  Subsidiary  shall  not at any  time  after  the date of this
Agreement have previously  been designated as a Restricted  Subsidiary more than
once.

     Section 14. Survival of Representations and Warranties.

     All representations  and warranties  contained herein or made in writing by
the Company in connection  herewith  shall survive the execution and delivery of
this Agreement and of the Notes.

     Section 15. Successors and Assigns.

     All covenants and agreements in this Agreement contained by or on behalf of
any of the parties  hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not.

     Section 16. Notices.

     All communications provided for hereunder shall be sent by first class mail
and, if to the  Purchasers,  addressed to the  Purchasers at the notice  address
listed on Appendix I hereto, and if to the Company, addressed to The Chillicothe
Telephone Company, P.O. Box 480, 68 East Main Street,  Chillicothe,  Ohio 45601,
Attention:  Mr. Jack E.  Thompson,  or to such other address with respect to any
party as such shall notify the other parties in writing.

     Section 17. Governing Law.

     This  Agreement is being  delivered  and is intended to be performed in the
State of Ohio,  and shall be construed and enforced in accordance  with the laws
of such State.

     Section 18. Counterparts.

     This Agreement may be executed  simultaneously in two or more counterparts,
each of which shall be an original,  but all of which shall  constitute  but one
agreement.

     Section 19. Captions.

     The captions in this  Agreement are for  convenience  only and shall not be
considered in the interpretation of any of the provisions hereof.

                            THE BALANCE OF THIS PAGE
                            INTENTIONALLY LEFT BLANK

                                       20
<PAGE>

     If the Purchasers are in agreement with the foregoing, please sign the form
of acceptance on the enclosed  counterpart of this letter and return the same to
the undersigned. Upon acceptance by all the Purchasers, this letter shall become
a binding agreement between the Purchasers and the undersigned.

Very truly yours,

THE CHILLICOTHE TELEPHONE COMPANY

By  /s/ Thomas McKell
   -----------------------------------
   Its:  President

The foregoing Agreement is accepted
as of the date first above written

THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
AIG ANNUITY INSURANCE COMPANY

By:  AIG Global Investment Corp., investment adviser

By  /s/ Douglas H. Allen
   -----------------------------------
   Name:   Douglas H. Allen
   Title:  Vice President

MODERN WOODMEN OF AMERICA

By  /s/ Nick S. Coin
   -----------------------------------
    Name:   Nick S. Coin
    Title:  Treasurer & Investment Manager

                                       21
<PAGE>

                                   Appendix I

PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASER       NOTES TO BE PURCHASED

The Variable Annuity Life Insurance Company $10,000,000
c/o AIG Global Investment Corporation
P. O. BOX 3247
HOUSTON, TEXAS  77253-3247
Attention:  Private Placement Department, A36-04
Facsimile Number:  (713) 831-1072

Overnight Mailing Address:
2929 Allen Parkway, A36-04
Houston, Texas  77019-2155

Payments
All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal or other immediately  available funds  (identifying each payment as "The
Chillicothe  Telephone  Company,  6.64% Senior Notes due 2012,  PPN 169240 C* 7,
principal, premium or interest") to:

ABA #011000028
State Street Bank and Trust Company
Boston, Massachusetts 02101
Re:  The Variable Annuity Life Insurance Company
AC-0125-821-9
OBI=PPN Number and description of payment
Fund Number PA 54

Notices
All notices of payment on or in respect of the Notes and written confirmation of
each such payment to:

The Variable Annuity Life Insurance Company and PA 54
c/o State Street Bank Corporation
Insurance Services
801 Pennsylvania
Kansas City, Missouri  64105
Facsimile Number:  (816) 691-3619

Duplicate payment notices and all other  correspondences  to be addressed to The
Variable Annuity Life Insurance  Company and PA 54 at the address first provided
above with a copy to:

AIG Global Investments Corporation
Legal Department - Investment Management
2929 Allen Parkway, Suite A36-01
Houston, Texas  77019-2155
Facsimile Number:  (713) 831-2328

Name of Nominee in which Notes are to be issued:  None
Taxpayer I.D. Number:  74-1625348

                                       22
<PAGE>

PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASER       NOTES TO BE PURCHASED

AIG Annuity Insurance Company       $10,000,000
c/o AIG Global Investment Corporation
Attention:  Private Placements Department, A36-04
P. O. Box 3247
Houston, Texas  77253-3247
Facsimile Number:  (713) 831-1072

Overnight Mailing Address:
2929 Allen Parkway, A36-04
Houston, Texas  77019-2155

Payments
All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal or other immediately  available funds  (identifying each payment as "The
Chillicothe  Telephone  Company,  6.64% Senior Notes due 2012,  PPN 169240 C* 7,
principal, premium or interest") to:

ABA #011000028
State Street Bank and Trust Company
Boston, Massachusetts  02101
Re:  AIG Annuity Insurance Company
AC-7215-132-7
OBI=PPN # and description of payment
Fund Number PA WE1B

Notices
All notices of payment on or in respect of the Notes and written confirmation of
each such payment to:

AIG Annuity Insurance Company and PA WE1B
c/o State Street Bank Corporation
Insurance Services
801 Pennsylvania
Kansas City, Missouri  64105
Facsimile Number:  (816) 691-3619

Duplicate payment notices and all other  correspondences  to be addressed to AIG
Annuity Insurance Company and PA WE1B as first provided above with a copy to:

AIG Global Investment Corp.
Legal Department - Investment Management
2929 Allen Parkway, Suite A36-01
Houston, Texas  77019-2155
Facsimile Number:  (713) 831-2328

Name of Nominee in which Notes are to be issued:  None
Taxpayer I.D. Number:  75-0770838

                                       23
<PAGE>

PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASER       NOTES TO BE PURCHASED

Modern Woodmen of America  $10,000,000
1701 First Avenue
Rock Island, Illinois  61201
Attention:  Investment Department

Payments
All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal or other immediately  available funds  (identifying each payment as "The
Chillicothe  Telephone  Company,  6.64% Senior Notes due 2012,  PPN 169240 C* 7,
principal, premium or interest") to:

The Northern Trust Company
50 South LaSalle Street
Chicago, Illinois  60675
ABA #071-000-152
Account Name:  Modern Woodmen of America
Account Number 84352

Notices
All notices and  communications to be addressed as first provided above,  except
notices with respect to payments and written  confirmation of each such payment,
to be addressed Attention: Investment Accounting Department
Name of Nominee in which Notes are to be issued:  None
Taxpayer I.D. Number:  36-1493430

                                       24
<PAGE>

                                  SCHEDULE 3(D)
                                Legal Proceedings

                                      None

                                       25
<PAGE>

                                    Exhibit A

THIS NOTE HAS NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD OR OTHERWISE  TRANSFERRED EXCEPT IN COMPLIANCE WITH SUCH ACT
AND APPLICABLE STATE SECURITIES LAWS.

THE CHILLICOTHE TELEPHONE COMPANY
6.64% SENIOR NOTE

$________________.____________, 20__

PPN 169240 C* 7

FOR VALUE RECEIVED, the undersigned,  THE CHILLICOTHE TELEPHONE COMPANY, an Ohio
corporation  (the  "Company"),  hereby  promises  to  pay  to  _________________
____________________  or  registered  assigns by wire  transfer  of  immediately
available  Federal funds to the account specified on Appendix I to the Agreement
(hereinafter  defined) with  sufficient  information  to identify the source and
application  of funds,  or to such other  account or in such other manner as the
holder of this Note shall specify by notice in writing to the Company, in lawful
money of the United States,  the principal sum of  _____________________________
DOLLARS  ($____________) on August 1, 2012, and to pay interest in like money on
the unpaid  principal  balance  hereof at the rate of 6.64% per annum  (provided
that  solely  for the  purpose of  determining  the  portion of annual  interest
allocable to any  interest  payment  period,  it shall be assumed that a year is
comprised of 360 days and twelve  30-day  months) from the date hereof,  payable
semi-annually  on the 1st day of  February  and August in each year,  commencing
February 1, 2003, and continuing  until payment in full of the principal  amount
of this Note.

Any payment of principal or (to the extent permitted by applicable law) interest
on this Note not paid when due, whether at stated  maturity,  by acceleration or
otherwise,  shall  thereafter  bear  interest at a rate per annum equal to 8.64%
(provided  that in no event shall such rate exceed the maximum rate permitted by
law).  This  Note  is  issued  pursuant  to  a  Note  Purchase   Agreement  (the
"Agreement") entered into among the Company, The Variable Annuity Life Insurance
Company, AIG Annuity Insurance Company and Modern Woodmen of America dated as of
August 1, 2002 and is subject to optional and mandatory prepayment,  in whole or
in part, in the amounts,  upon the notice, with the premium,  and subject to the
conditions specified in the Agreement.  As provided in the Agreement,  this Note
is transferable only on the Note Register of the Company, upon surrender of this
Note for transfer,  duly endorsed,  or  accompanied  by a written  instrument of
transfer  duly  executed by the  registered  holder  hereof or his attorney duly
authorized in writing.  The Company may treat the Person in whose name this Note
is registered  as the owner hereof for the purpose of receiving  payment and for
all other  purposes,  and the Company shall not be affected by any notice to the
contrary.
In case an Event of  Default,  as defined in the  Agreement,  shall  occur,  the
principal  of this Note may be  declared  due and payable in the manner and with
the  effect  provided  in the  Agreement.  This Note  shall be  governed  by and
construed in accordance with the laws of the State of Ohio.

THE CHILLICOTHE TELEPHONE COMPANY

By:
    --------------------------------
    Its

                                       26
<PAGE>

                                    Exhibit B
                                  Subsidiaries

                                      None

                                       27

<PAGE>

                                    Exhibit C
                             Existing Debt and Liens
                               as of July 1, 2002

                                       28
<PAGE>
                                    Exhibit D
                         Existing Restricted Investments
                               as of June 30, 2002

                                       29
<PAGE>

                                   Exhibit E-1
                    Form of Opinion of Counsel to the Company

     (i) The Company is duly  organized,  validly  existing and in good standing
under  the  laws of the  State of Ohio  and has the  corporate  power to own and
operate its properties and to carry on its business and to execute,  deliver and
perform the Note Purchase Agreement and the Notes.

     (ii)  Each  Subsidiary  is duly  organized,  validly  existing  and in good
standing under the laws of the State of its  incorporation and has the corporate
power to own and operate its properties and to carry on its business.

     (iii)  The  Company  and each  Subsidiary  are each  duly  qualified  to do
business and are in good standing in each  jurisdiction  where the nature of the
business conducted or property owned by it require such  qualification,  and the
Company and each such  Subsidiary  have all  necessary  licenses  and permits to
carry on their businesses in each such jurisdiction.

     (iv) The Note Purchase Agreement and the Notes have been duly authorized by
all  necessary  corporate  action of the  Company,  have been duly  executed and
delivered,  and are the legal,  valid and  binding  obligations  of the  Company
enforceable in accordance with their respective terms, except as the enforcement
thereof may be limited by laws generally affecting the enforcement of creditors'
rights and by general principles of equity.

     (v) The loans evidenced by the Notes are not usurious under Ohio law.

     (vi) The  execution  and  delivery  by the  Company  of the  Note  Purchase
Agreement and the Notes, or the performance or observance by the Company and its
Subsidiaries of any of the terms or conditions of the Note Purchase Agreement or
the Notes  will not,  (A)  conflict  with,  or result in a breach of the  terms,
covenants or  provisions  of, or  constitute a default  under,  or result in any
violation  of, or result in the creation of any Lien upon any of the  properties
or assets of the Company or its  Subsidiaries  pursuant to, the  Certificate  of
Incorporation  or Code of  Regulations of the Company or its  Subsidiaries,  any
award of any arbitrator, or any indenture,  contract or agreement (including any
agreement with stockholders), instrument, order, judgment, decree, statute, law,
rule, or regulation  to which the Company or its  Subsidiary is subject,  or (B)
require any filing or  registration  with,  or any  consent or approval  of, any
Federal, state or local governmental agency or authority, except the approval of
the Public Utilities Commission of Ohio.

     (vii)  There are no actions,  suits or  proceedings  pending or  threatened
against or  affecting  the Company or its  Subsidiaries,  or any property of the
Company or its Subsidiaries,  in any court or before any governmental  authority
or arbitration  board or tribunal which, if decided  adversely to the Company or
its  Subsidiaries,  would involve the  possibility  of materially  and adversely
affecting the properties,  business,  prospects, profits or condition (financial
other otherwise) of the Company or its Subsidiaries.

     (viii) The issuance sale and delivery of the Notes are exempt  transactions
under the  Securities Act of 1933, as amended,  and do not require  registration
under  the  Securities  Act of 1933,  as  amended,  or the  qualification  of an
indenture in respect thereof under the Trust Indenture Act of 1939, as amended.

     (ix)  Neither the Company nor any  Subsidiary  is, or will be,  solely as a
result of the execution, delivery and performance of the Note Purchase Agreement
or the  issuance  and sale of the  Notes,  subject  to  regulation  as a "public
utility company" or a "holding company" under the Public Utility Holding Company
Act of 1935, as amended.

     (x) The  issuance  of the Notes and the use of the  proceeds of the sale of
the Notes in  accordance  with the  provisions of and  contemplated  by the Note
Purchase Agreement will not result in a violation of Section 7 of the Securities
Exchange  Act of  1934,  as  amended,  or  any  related  regulations,  including
Regulations T, U and X of the Board of Governors of the Federal  Reserve System,
12 C.F.R. Chapter II.

     (xi) Neither the Company nor any Subsidiary is an "investment company" or a
company "controlled" by an "investment company" under the Investment Company Act
of 1940, as amended.

                                       30
<PAGE>

     (xii) No taxes,  including,  without limitation,  intangible or documentary
stamp taxes,  mortgage taxes,  transfer taxes or similar charges, are payable to
the State of Ohio (or any  political  subdivision  thereof)  on  account  of the
execution  and delivery of the Note  Purchase  Agreement,  or the Notes,  or the
creation of the  indebtedness  evidenced  thereby or the creation of the estates
created thereby, except for nominal filing or recording fees.

     (xiii) The issue and sale of the Notes have, to the extent required by law,
been  duly  authorized  by  the  Public  Utilities   Commission  of  Ohio  which
authorization  is not subject to any appeal or  modification  which could affect
the validity or terms of the Notes, and no other consent, exception, approval or
authorization by any other governmental authority is required in connection with
the execution and delivery of the Note Purchase  Agreement or the issue and sale
of the Notes.

                                       31
<PAGE>

                                   Exhibit E-2

Description of Special Counsel's Closing Opinion

The closing  opinion of Chapman and Cutler,  special  counsel to the Purchasers,
called for by SS.6(C) of the Note Agreement  shall be dated the Closing Date and
addressed to the Purchasers,  shall be satisfactory in form and substance to the
Purchasers and shall be to the effect that:

     1. The Company is a  corporation,  validly  existing  and in good  standing
under  the  laws of the  State  of Ohio  and has  the  corporate  power  and the
corporate  authority to execute and deliver the Note  Agreement and to issue the
Notes.

     2. The Note Agreement has been duly  authorized by all necessary  corporate
action on the part of the Company,  has been duly  executed and delivered by the
Company and  constitutes  the legal,  valid and binding  contract of the Company
enforceable in accordance  with its terms,  subject to  bankruptcy,  insolvency,
fraudulent conveyance or similar laws affecting creditors' rights generally, and
general  principles of equity  (regardless  of whether the  application  of such
principles is considered in a proceeding in equity or at law).

     3. The Notes have been duly authorized by all necessary corporate action on
the part of the Company,  have been duly  executed and  delivered by the Company
and  constitute  the  legal,  valid  and  binding  obligations  of  the  Company
enforceable in accordance with their terms,  subject to bankruptcy,  insolvency,
fraudulent conveyance or similar laws affecting creditors' rights generally, and
general  principles of equity  (regardless  of whether the  application  of such
principles is considered in a proceeding in equity or at law).

     4. The  issuance,  sale and  delivery of the Notes under the  circumstances
contemplated by the Note  Agreements  does not, under existing law,  require the
registration  of the Notes under the Securities Act of 1933, as amended,  or the
qualification of an indenture under the Trust Indenture Act of 1939, as amended.

The  opinion of Chapman  and Cutler  shall also state that the opinion of Porter
Wright Morris & Arthur is  satisfactory  in scope and form to Chapman and Cutler
and that, in their opinion, the Purchasers are justified in relying thereon.

In rendering the opinion set forth in paragraph 1 above,  Chapman and Cutler may
rely solely upon an examination of the Articles of  Incorporation  certified by,
and a certificate  of good standing of the Company from,  the Secretary of State
of the State of Ohio,  the  By-laws  of the  Company  and the  general  business
corporation  law of the State of Ohio.  The  opinion  of  Chapman  and Cutler is
limited  to the laws of the  State of Ohio and the  Federal  laws of the  United
States.

With  respect to matters of fact upon which such  opinion is based,  Chapman and
Cutler may rely on appropriate  certificates of public officials and officers of
the Company.  With respect to all matters in such opinion  which are governed by
the laws of the State of Ohio,  Chapman  and Cutler  may rely on the  opinion of
Porter Wright Morris & Arthur.

                                       32
1562059v1

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