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					                                                                                                                        Discussion Materials




December 18, 2006

The information contained herein is CONFIDENTIAL and has been prepared exclusively for the benefit and use of the Board of Directors and the management and may not be used for any
other purpose or be discussed, reproduced, disseminated, quoted or referred to at any time, in any manner, or for any purpose without the prior written consent of The McLean Group, LLC.
Contents


  Section   Description                   Page

     I.     The McLean Group Overview       3
     II.    Capital Formation Process      15
    III.    Sell-Side Process              22
    IV.     Preliminary Market Research    26




                                                 CONFIDENTIAL
                                                        Page 2
SECTION I



The McLean Group Overview




                            CONFIDENTIAL
                                   Page 3
Investment Bankers to the Middle Market


            With headquarters in Washington, DC and investment bankers in Sacramento, Winnipeg, Boston,
            Columbus, Raleigh, and Atlanta, The McLean Group is a boutique investment bank focused on the
            middle market businesses with sales ranging between $5 million and $300 million.

            The McLean Group’s core service offering includes:

                   Merger and Acquisition (M&A) Advisory

                   Corporate Finance

                   Business Valuation Services

            While the firm has historically focused on the mid-Atlantic region of the United States, The McLean
            Group has a national presence. In addition, The McLean Group is a member of an international
            consortium of independent M&A firms, collectively called IMAP, thereby allowing the to leverage
            global connections for all of our clients.

            NASD Registered Broker/Dealer
            McLean Securities, a wholly owned affiliate of The McLean Group, is a registered broker/dealer
            with the NASD (National Association of Securities Dealers) and a member of SIPC (Security
            Investors Protection Corporation). All of The McLean Group’s investment bankers are registered
            representatives with the NASD.




                                                                                                        CONFIDENTIAL
                                                                                                               Page 4
Industry Experience

Our firm has a general practice, with clients spanning a diverse array of industries; however, we command expertise in
the following market sectors:


               Government
                                           IT Services; Defense & Intelligence; Staff Augmentation; Manufacturing
               Contracting



                                  Software; Hardware; Travel, Transportation, & Hospitality; E-Learning; Business Process
                Technology
                                                             Management; Logistics; Internet



             Business Services                      Consulting; Restaurants; Staffing Providers; Logistics




            Telecommunications                        Integrators; Hardware; RBOC; Wireless; Internet




               Construction                           Residential; Commercial; Institutional; Industrial




               Manufacturing                Scrap Metal Processing; Hydraulic Manufacturing; Specialty Woodworking




             Renewable Fuels                                          Ethanol Refining



                                                                                                                            CONFIDENTIAL
                                                                                                                                   Page 5
M&A Advisory

Merger & Acquisition Advisory
 Sell Side Representation: The scope of our assignments depend upon the goals of each client. In the past, our
mandates have ranged from resolving business succession issues to providing shareholders or estates with liquidity. Our
involvement has ranged from full representation to special assignments where we are retained on a specific transaction
with a buyer or investor already identified. In these situations, where a seller has already identified a buyer, the seller
benefits in hiring The McLean Group by getting an objective view of value, an assist with negotiations and where
appropriate, an expansion of the number of potential buyers.
 Acquisition Advisory: The McLean Group represents corporations, private equity firms and investors in acquiring
businesses. We help formulate strategy, identify targets, initiate contact and negotiate the terms of the agreement. We
also raise acquisition financing, when necessary.
 Divestitures: We work closely with corporate executives to execute divestitures and spin-offs of subsidiaries, divisions,
product lines or assets that no longer fit into their long range plans. Most companies do not have staff dedicated to selling
a division or subsidiary and they rely on us to provide a high level of professional expertise. We use our resources to
identify the most likely buyers and conduct the most widespread and confidential auction possible.
 Management Buyouts: We help the management of companies conceive and structure buyout plans. We advise on
alternative courses of action, anticipate responses by the shareholders, make presentations to the Board of Directors and
shareholders, negotiate the transaction and arrange financing, both debt and equity.
 Recapitalizations: Companies use recapitalizations for many reasons. They are done to provide liquidity for
shareholders, reduce ownership in closely held companies, while keeping controlling shareholders in place, or to reduce
the overall cost of capital. We help companies determine the appropriate capital structure so that future growth is not
sacrificed and negotiate the necessary debt and/or equity.




                                                                                                                     CONFIDENTIAL
                                                                                                                            Page 6
Corporate Finance

Corporate Finance
 Private Equity: The McLean Group helps clients by originating, structuring and raising equity from private equity firms,
institutions, corporate investors, and high net-worth individuals. We continually track their industry sectors, size and
ownership preferences. We have developed relationships with many potential equity providers. Our strength lies in
understanding our client’s needs and matching them with an investor’s requirements.
 Senior Debt: We assist clients in the raising of senior debt by originating, structuring and placing senior credit facilities
with commercial banks, finance companies and senior debt funds. We do forecasts, perform a debt capacity analysis,
prepare a private placement memorandum, make presentations, solicit lenders, lead negotiations and coordinate the
closing of the transaction. We maintain frequent contact with senior credit officers at lending institutions and understand
their changing lending parameters and risk tolerances.
 Subordinated Debt: The McLean Group raises subordinated debt, for clients, on a stand alone basis or as part of a
more comprehensive capital offering involving senior debt and/or equity. Subordinated debt can boost debt capacity by
providing more capital than what a senior lender is willing to provide. It is also a less expensive means of raising capital
than equity and is less dilutive than equity. We maintain relationships with providers of subordinated debt, including
insurance companies, hedge funds and private funds. This allows us to understand investment criteria and match our
client with the most appropriate investor.




                                                                                                                       CONFIDENTIAL
                                                                                                                              Page 7
Our Business Valuation Practice

As a core competency and complement to its M&A business, The McLean Group provides formal business valuation
services for a variety of transaction, financial reporting, and tax purposes, including:


      Financial Reporting                                  General Business Valuations
       Purchase price allocation (SFAS 141)                Section 409A purposes
       Goodwill impairment tests (SFAS 142)                Buy/sell agreements
       Stock option expense (SFAS 123R)                    Estate and tax planning
       Analysis of long-lived assets (SFAS 144)            Exit planning




      Equity Incentive Plans                               Litigation Support
       Employee Stock Ownership Plans (ESOPs)              Dissenting/oppressed shareholders
       Private company equity incentive plans              Lost profits and lost asset values
                                                            Business interruption claims
                                                            Intellectual property infringement
      Transaction Opinions
       Fairness opinions
       Capital adequacy opinions




                                                                                                     CONFIDENTIAL
                                                                                                            Page 8
Differentiators Drive Our Performance


  Successful and Extensive Track Record                            Market Awareness
                                                        Maintains extensive and ongoing contact
  Acted as financial advisor on dozens of
                                                       with multiple industry and market sectors
 successful M&A transaction and capital
 formation assignments                                  Continues active relationships with a wide
                                                       range of capital providers
  Generates most of its new business from
                                                        Ensures our professionals stay abreast of
 former clients, and its well-established
                                                       changing conditions in the markets we serve.
 network of attorneys, accountants, and other
 dealmakers with whom the firm has had
 successful prior experience




      Involvement of Senior Management                           Experienced Professionals
  Engages senior bankers extensively on a daily        Leverages senior level professionals’ broad
 basis in rendering services under all of the firm’s   experience in all aspects of corporate finance,
 engagements.                                          from technical skills to deal execution.
  Expects its professionals to not only develop        Draws on significant prior work experience,
 new business, but to participate in or lead the       either in industry, managing and operating
 management      and    execution    of    those       businesses, or in public accounting.
 engagements.
                                                        Creates approach that creates a corporate
  Benefits clients everyday through our bankers’      finance engagement team with professionals who
 experience and sound judgment.                        have accounting, tax, deal execution, and
                                                       business experience relevant to our clients and
                                                       the specific transaction.

                                                                                                      CONFIDENTIAL
                                                                                                             Page 9
IMAP Provides Global Reach, Local Expertise

            The McLean Group is a member of the International Network of M&A Partners. With 58 member
            firms and 79 offices across the globe, IMAP is a rising force in today’s global marketplace. For the
            nine months ending September 2006, IMAP firms have completed 180 deals with a total value of
            $5.7 billion.

            Formed in 1971, IMAP unites over 300 M&A professionals on four continents, leveraging each
            other’s localized experience and expertise in completing cross-border transactions within an
            increasingly global environment. TMG’s membership in IMAP allows the firm to leverage a network
            that rivals and surpasses the capabilities, deal values, and deal volumes of Wall Street firms.

            IMAP’s historical results are highlighted below:
                     • 2005: 220 transactions totaling US$ 4.0 billion   • 2002: 217 transactions totaling US$ 4.4 billion
                     • 2004: 190 transactions totaling US$ 5.8 billion   • 2001: 199 transactions totaling US$ 2.1 billion
                     • 2003: 210 transactions totaling US$ 3.5 billion   • 2000: 182 transactions totaling US$ 3.1 billion




                                                                                                                             CONFIDENTIAL
                                                                                                                                   Page 10
TMG is a Proven Deal-Maker


Merger & Acquisition Advisory




Corporate Finance               Business Valuation




                                                     CONFIDENTIAL
                                                           Page 11
Advisor Coverage

   We pride ourselves on what we consider an above average level of focus for each client. Not only does each client receive a
   minimum of four advisors, but our senior level advisors are actively involved on the assignment on a daily basis.


           Banker                       Tom Swanson                Dennis Roberts            Andy Smith                Ryan Saylor
                                    Transaction Execution     Transaction Execution    Transaction Experience    Transaction Experience
                                    Transaction Experience   Transaction Experience           Valuation                 Valuation
                                          Marketing             Client positioning      Financial St. Analysis    Financial St. Analysis
                                         Negotiation               Negotiation           Document Drafting         Document Drafting
        Skill Sets                   Industry Knowledge        Industry Knowledge                                 Industry Knowledge

 TMG Due Diligence

 Draft PPM

 Draft Target List

 Marketing

 1st /2nd Round Mngt. Pres.

 LOI

 Investor Due Diligence

 Closing


           Coverage



                                                                                                                           CONFIDENTIAL
                                                                                                                                 Page 12
SECTION II



Capital Formation Process




                            CONFIDENTIAL
                                  Page 13
Transaction Process



         Phase I                       Phase II                      Phase III                   Phase IV
  Preparation/Screening               Marketing                     Evaluation                 Consummation



      [0 to 45 days]               [45 to 120 days]               [120 to 150 days]             [150 to 180 days]

  Establish transaction        Contact prospective           Preliminary due diligence     Complete due diligence
   objectives and parameters     investors/ lenders
                                                               Provide additional            Facilitate completion of
  Create a potential           Narrow the potential           financial and operational      the documentation
   acquirer/partner list         investor/ lender list          information, as
                                                                appropriate                   Close transaction
  Draft Company Profile and    Answer initial information
   Confidential Information      requests                      Request best and final        Assist with financial risk
  Memorandum                                                    terms                          minimization
                                Execute NDAs and
                                 provide Confidential          Evaluate offers and select
                                 Information Memoranda          Investor / lender

                                Schedule management
                                 presentations

                                Solicit 1st round terms
                                 sheets




                                                                                                                 CONFIDENTIAL
                                                                                                                       Page 14
Process Drivers



  There are several factors which are key to a successful capital formation process;
    they include:

   Strategic and Financial Issues – Proper fit of the target in the investor/lender’s
    strategy and availability of funds to complete the transaction

   Acquisition’s Timing – Favorable economic and industry outlook

   Business Performance – Company’s plans and forecast for the business

   Market Potential – Size and diversity of the company’s markets

   Valuation – Breadth of accretive value ranges supported in the market

   Transaction’s Viability – Presumed desire to complete process quickly

   Deal control – Degree of control over transaction process




                                                                                         CONFIDENTIAL
                                                                                               Page 15
What Investors Look For



   1.    A company that can become highly profitable and dominate the industry

   2.    A company that can go public or be acquired within four to seven years

   3.    A complete management team with a strong leader

   4.    A strong innovator, technologist or marketing person

   5.    A significant competitive advantage (differentiator)

   6.    Realistic revenue projections and capital needs

   7.    A large and fast growing market

   8.    Clearly defined customer and distribution channels

   9.    Evidence of market acceptance (orders, letters of intent, beta sites, etc.)

   10.   A proprietary or exclusive position created by intellectual property or a substantial
         market lead




                                                                                                 CONFIDENTIAL
                                                                                                       Page 16
SECTION III



Sell-Side Process




                    CONFIDENTIAL
                          Page 17
The McLean Group Process

The McLean Group runs a proven and efficient process that creates competition with flexible deadlines, yet leaves the
door open for preemptive and creative offers.

     Timeline (135-255 days)                                                                                        45— 75 days
                                                                                        15 — 30 days
                                                           45 — 90 days
                     30 — 60 days




                                                                                                                                   Negotiate
     Understand                                   Develop                    Market The                   Select The
                                                                                                                                   The
     Objectives                                   Strategy                   Company                      Buyer
                                                                                                                                   Transaction


    Understand objectives:      Determine preliminary         Contact potential         Solicit indications      Identify and manage
     - Pricing, structure,        range of value of IP           partners                   of interest                transaction issues
        timing                   Prepare descriptive           Distribute initial        Evaluate proposals       Coordinate detailed
    Assemble the team            materials                      information               Negotiate LOIs           due diligence
    Perform initial due         Develop positioning           Solicit interest          Evaluate offers          Advise on structure
     diligence                    strategy for strategic        Leverage IMAP             Present client with      Negotiate agreement
    Understand management        & financial buyers             membership                 analysis of partners     Close transaction
     concerns                    Finalize contact              Execute NDAs with          as well as term sheet
     - Set strategies to meet     strategy                       interested parties        Select investor
       corporate goals           Present to client             Provide more info
    Discuss structural           final memorandum &            Work with
     legal tax issues             candidate list                 management to
                                                                 prepare presentation
                                                                Conduct presentation



                                                                                                                                        CONFIDENTIAL
                                                                                                                                              Page 18
Maximizing Value


       The McLean Group can provide the Company with significant value by:
              Helping the Company effectively package and position itself to generate interest from
             multiple groups:
                         Corporations seeking strategic add-ons
                         Private Equity Firms
              Generating a carefully orchestrated discrete auction over a specific time frame
              Negotiating a transaction to capture and maximize the business’s strategic value in a way
             that realizes value to the shareholders and their personal goals
   $




            Intrinsic         Positioning        Generating   Creating   Negotiating      Premium
             Value                                Audience      An                         Value
                                                              Auction


                                                                                                           CONFIDENTIAL
                                                                                                                 Page 19
Seller’s Advantage Curve



       Sellers and their investment banker must maximize their leverage early in the process:




      Seller




      Buyer




               Management       Multiple      LOI Negotiations    Exclusivity to Buyer      Closing
               Presentation      Offers



                                 The Negotiation Leverage Curve


                                                                                                      CONFIDENTIAL
                                                                                                            Page 20
SECTION IV



Preliminary Market Research




                              CONFIDENTIAL
                                    Page 21
Overview of Memphis Networx

Business Overview

Memphis Networx engineers and operates a state-of-the-art fiber based platform that allows for scaleable broadband
connectivity for various mediums across the Memphis and Shelby County areas of Tennessee. The Memphis Network
architecture is comprised of Metro Core and Metro Access components. Metro Core is the area of the network which
links traffic aggregation points such as Central Offices, Carrier Hotels, and Data Centers. Memphis Networx creates a
diversely routed, physical ring architecture that connects these aggregation points together over the most advanced
DWDM, SONET and Ethernet equipment to enable the delivery of a full suite of connectivity solutions. Metro Access is
the area of the network which connects enterprises to the Metro Core and to other enterprises. Leveraging next-
generation technology, Memphis Networx extends SONET Transport, Metro Ethernet, Collocation, Internet Security
services from any business to any other business on our Metro Access network component, resulting in rapid ‘grow on
demand’ transport for voice, video, or data applications.

Financial Overview

Below is a summary of the financial results of the Company which we used as a basis in our analysis.


                                          Year Ending December 31,
                                                               2006E
                            Revenue                         $5,508,488
                            EBITDA                             N/M




                                                                                                              CONFIDENTIAL
                                                                                                                    Page 22
Summary of Market Multiples

The chart below is based on the public company multiples and M&A transaction multiples for the telecommunications
industry:
    Public Companies




                       LTM Revenue multiples




                       LTM EBITDA multiples




                           Revenue multiples
    Transactions




                            EBITDA multiples




                                               0x   2x   4x   6x      8x        10x        12x        14x

The public companies are assumed to be more developed and have lower growth expectations. The M&A
transactions may be more indicative of the potential strategic value of a niche operator with high growth
expectations.
                                                                                                             CONFIDENTIAL
                                                                                                                   Page 23
M&A Transactions

             Target                                                                                                                            Implied Enterprise
 Status         Acquirer                       Target Business Description                                     % Sought        Consideration         Value          TEV/ Revenue     TEV/ EBITDA
 Announced   Broadwing Corporation             Broadwing Corporation, through its subsidiaries, provides                  100 Combinations               1,233.40             1.37                 -
                 Level 3 Communications Inc.
                 (NasdaqNM:LVLT)               data and Internet, broadband transport, and voice

                                               communications services to small to large enterprise

                                               customers, carriers, and other communications service

                                               providers in the United States. The company is

                                               headquartered in Austin, Texas.
 Closed      Neuf Cegetel                      Neuf Cegetel provides broadband services in France. The                    5.8 Cash                       4,109.65             1.76                 -
                 Groupe SFR Cegetel
                                               company offers telephone and Internet, voice over IP, triple

                                               play modem and broadband services, long-distance fiber

                                               optic network, and IP connectivity and Ethernet services.

                                               Neuf Cegetel was formerly known as Louis Dreyfus

                                               Communication. The company was founded in 1998 and is

                                               based in Levallois, France.
 Closed      Fibernet Group plc                Fibernet Group plc provides telecommunications services to                 100 Cash                         123.33             1.38             3.82
                 Global Crossing Ltd.
                                               large enterprises, and other telecommunications and internet
                 (NasdaqNM:GLBC)
                                               service companies. Its products and solutions included
                                               enterprise solutions, carrier solutions, ISP solutions, IP
                                               communications, and fibre optic networks. The company also
                                               engages in the design, supply, installation, management, and
                                               support of high speed digital networks. Fibernet provides its
                                               services from its own national fibre optic networks and
                                               metropolitan networks. Fibernet Group is headquartered in
                                               Basingstoke, the United Kingdom.
 Closed      OneEighty Communications, Inc.    OneEighty Communications, Inc. provides integrated                         100 Cash                           9.50             1.32                 -
                Eschelon Telecom Inc.
                (NasdaqNM:ESCH)                communications services in the United States. It offers local

                                               and long distance, digital subscriber line, Internet access,

                                               Web hosting, and data services over high-speed and

                                               broadband connections. It also provides ethernet connectivity

                                               to the Internet, private line ethernet services, TLS/MAN

                                               services, and carrier/service provider interconnection. The

                                               company was founded in 1995 and is based in Billings,

                                               Montana.




                                                                                                                                                                                       CONFIDENTIAL
                                                                                                                                                                                             Page 24
   M&A Transactions, cont.

Announcment               Target                                                                                                                                          Implied Enterprise
    Date      Status        Acquirer                                            Target Business Description                             % Sought          Consideration         Value          TEV/ Revenue      TEV/ EBITDA


5/4/2006         Closed            Mpower Holding Corp.              Mpower Holding Corporation provides broadband data and                  100 Cash                          201.88                  1.03               11.48
                                      U.S. TelePacific Corp.
                                                                     voice communication services to business and wholesale
                                                                     customers in the United States. As of February 28, 2006, it
                                                                     served approximately 48,700 business customers and
                                                                     approximately 14,600 residential customers. Mpower Holding
                                                                     was founded in 1995 and is headquartered in Pittsford, New
                                                                     York.

6/7/2006         Closed            Broadnet AG                       Broadnet AG operates as a broadband Internet carrier in                  67 Common Equity                   66.55                 1.27               13.07
                                       QSC AG (DB:QSC)
                                                                     Germany. It provides broadband communications solutions to
                                                                     business customers based on wireless and DSL technology.
                                                                     The company also offers network services, such as voice
                                                                     over Internet protocol (IP), IP Centrex, virtual private
                                                                     networks, hotspots, hosting/housing, and security solutions.
                                                                     Broadnet is headquartered in Hamburg, Germany.

4/10/2006        Closed            Mid-Maine Communications          Mid-Maine Communications provides telecommunication                     100 Cash                            61.25                 2.75               11.51
                                       Otelco Inc.
                                                                     services in the United States. It offers business and
                                                                     residential local telephone service, as well as Internet service
                                                                     platforms supporting DSL and traditional dial up Internet
                                                                     access. The company serves residential and business
                                                                     customers. Mid-Maine Communications was founded in 1994
                                                                     and is headquartered in Bangor, Maine with office in Portland,
                                                                     Maine.

1/25/2006        Closed            Progress Telecom, LLC             Progress Telecom, LLC provides wireline and wireless                    100 Combinations                  137.45                  1.96                    -
                                       Level 3 Communications Inc.
                                                                     broadband network services for carriers and enterprises in
                                       (NasdaqNM:LVLT)
                                                                     the eastern United States. It offers private line services,
                                                                     Internet protocol services, optical wave length services,
                                                                     ethernet services, network operations center services,
                                                                     solutions for wireless carriers, fixed wireless services, voice
                                                                     peering technology, and wireless infrastructure services. The
                                                                     company was founded in 1998 and is headquartered in St.
                                                                     Petersburg, Florida.


                                                                                                                                                         Low                                   1.03x             3.82x
                                                                                                                                                        Mean                                   1.61x             9.97x
                                                                                                                                                        Median                                 1.38x             11.50x
                                                                                                                                                         High                                  2.75x             13.07x




                                                                                                                                                                                                              CONFIDENTIAL
                                                                                                                                                                                                                    Page 25
Public Companies



                                    Market Capitalization

                                                                                                     in local currency
                                                    Stock        Stock Price     Stock Price        % of             Shares        Market          Net        Enterprise
Company Name                         Ticker         Price       52 Week High    52 Week Low     52 Week High       Outstanding   Capitalization    Debt         Value

BellSouth Corp.                       BLS              45.78           47.09           26.42            97.2%         1,824.1        83,505.8     16,146.0      99,651.8
Time Warner Telecom Inc.             TWTC              20.96           21.20            9.38            98.9%           142.0         2,976.2        876.5       3,852.7
XO Holdings, Inc.                    XOHO               4.20            5.53            2.22            75.9%           182.0           764.4        155.4         919.8
D&E Communications Inc.              DECC              12.51           13.90            8.05            90.0%            14.4           180.0        204.6         384.5
FiberNet Telecom Group Inc.          FTGX               6.07            6.90            1.50            88.0%             7.0            42.5          8.5          51.1




                                    Financial Performance


                                               in local currency                                                     Calender Year (CY)
                                          Last Twelve Months (LTM)                                2006 E                                          2007 E
Company Name                      Revenue          EBITDA          EPS          Revenue           EBITDA             EPS         Revenue          EBITDA        EPS

BellSouth Corp.                      20,837.0         9,499.0           1.74        $35,396.3       $13,675.3            $2.37      $36,350.4     $14,473.7         $2.57
Time Warner Telecom Inc.                758.1           275.7          (0.42)           807.7           284.2              NA         1,057.6         363.7           NA
XO Holdings, Inc.                     1,407.6            72.3          (0.55)             NA              NA               NA             NA            NA            NA
D&E Communications Inc.                 175.8            63.8           0.55            169.3            62.8             0.63          168.7          68.3           0.9
FiberNet Telecom Group Inc.              37.8             4.3          (0.83)            39.7             5.1              NA            46.0           7.3           NA




   Public company pricing as of December 18, 2006.




                                                                                                                                                              CONFIDENTIAL
                                                                                                                                                                    Page 26
Public Companies

                                                Comparative Analysis


                                             YOY Revenue        EBITDA       Net Income       Current         Quick       Days Sales    Sales/Working      Sales/Asset       Debt/Equity
Company Name                                   Growth           Margin         Margin          Ratio          Ratio       Outstanding    Capital Ratio        Ratio            Ratio

BellSouth Corp.                                      1.9%          45.6%           16.1%           0.67           0.52         43.96           (7.06)              0.35           71.6%
Time Warner Telecom Inc.                             9.5%          36.4%          -12.7%           1.79           1.67         23.90            3.99               0.44          525.2%
XO Holdings, Inc.                                   -3.0%           5.1%          -10.4%           1.14           1.05         34.34           35.56               1.26           74.5%
D&E Communications Inc.                              5.1%          36.3%            5.9%           0.89           0.59         34.31          (46.38)              0.34          113.3%
FiberNet Telecom Group Inc.                         13.9%          11.4%          -20.8%           0.90           0.84         23.19          (38.30)              0.53           31.2%


Low                                                 -3.0%           5.1%          -20.8%           0.67           0.52         23.19          (46.38)               0.3           31.2%
Mean                                                 5.5%          26.9%           -4.4%           1.08           0.93         31.94          (10.44)               0.6          163.2%
Median                                               5.1%          36.3%          -10.4%           0.90           0.84         34.31           (7.06)               0.4           74.5%
High                                                13.9%          45.6%           16.1%           1.79           1.67         43.96           35.56                1.3          525.2%



                                                  Valuation Multiples


                                                                                   Enterprise Value                                                      Price to Earnings
                                                          LTM                        CY 2006 E                     CY 2007 E                LTM             CY 2006 E        CY 2007 E
Company Name                                 Revenue            EBITDA      Revenue            EBITDA      Revenue          EBITDA          EPS                 EPS            EPS

BellSouth Corp.                                      4.78x         10.49x          2.82x           7.29x          2.74x         6.89x          26.32x            19.32x           17.83x
Time Warner Telecom Inc.                             5.08x         13.98x          4.77x          13.56x          3.64x        10.59x         -50.47x               NA               NA
XO Holdings, Inc.                                    0.65x         12.72x            NA              NA             NA            NA           -7.69x               NA               NA
D&E Communications Inc.                              2.19x          6.03x          2.27x           6.12x          2.28x         5.63x          22.68x            19.86x           13.90x
FiberNet Telecom Group Inc.                          1.35x         11.91x          1.29x             NA           1.11x           NA           -7.31x               NA               NA


Low                                                  0.65x          6.03x          1.29x           6.12x          1.11x         5.63x         -50.47x            19.32x           13.90x
Mean                                                 2.81x         11.02x          2.79x           8.99x          2.44x         7.70x          -3.30x            19.59x           15.86x
Median                                               2.19x         11.91x          2.54x           7.29x          2.51x         6.89x          -7.31x            19.59x           15.86x
High                                                 5.08x         13.98x          4.77x          13.56x          3.64x        10.59x          26.32x            19.86x           17.83x

Private Company Comparables (includes 40% liquidity discount)
Low                                                  0.39x          3.62x          0.77x           3.67x          0.67x         3.38x         -30.28x            11.59x            8.34x
Mean                                                 1.69x          6.61x          1.67x           5.39x          1.47x         4.62x          -1.98x            11.75x            9.52x
Median                                               1.31x          7.14x          1.53x           4.37x          1.51x         4.13x          -4.39x            11.75x            9.52x
High                                                 3.05x          8.39x          2.86x           8.13x          2.19x         6.36x          15.79x            11.91x           10.70x




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Next Steps

Next Steps

As a next step, the following additional valuation analysis could be performed:
          Discounted cash flow analysis based on the Company’s current forecast and potential forecast based on the
           synergies of the buyer.
          A detailed analysis of the Company’s forecast and earning’s expectations.
          A detailed assessment of the Company’s value qualitative and financial value drivers.




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                                                                                                                   Page 28
Questions?




             CONFIDENTIAL
                   Page 29
Valuation, Pricing and Terms

Valuation, Pricing and Terms

No analysis of value, based on an unbiased form of market value, could feasibly take into consideration the potential
synergistic value or investment value that Memphis Networx may have to a particular buyer or investor. In fact, actual
transaction values are equally a function of:
 The investment banker’s ability to orchestrate an effective auction
 The timing of the transaction
 Various other qualitative factors inherent in the buyer and the seller

Specific transaction terms often drive final pricing and the ultimate value of a transaction. Such significant terms include:
 Amount of cash consideration (vs. stock or notes payable)
 Tax structure of the transaction
 Contingent consideration (earn-outs), if any
 Conditions of seller’s ongoing management agreements
 Representation and warranties
 Etc.




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                                                                                                                            Page 30
Limiting Conditions

Users of this valuation research should be aware that business valuations are based on future earnings potential that
may or may not materialize. Therefore, the actual results achieved during the projection period will vary from the
projections utilized in this valuation, and the variations may be material. Valuation is an imprecise science and
reasonable people can differ in their estimates of value.

Not a Fairness Opinion

Users of this report should also realize that this is not a fairness opinion. We have not provided an opinion as to the
fairness of any specific transaction, as such a transaction’s unique terms would have a significant impact on the
underlying analysis and reasonableness of the considered transaction. This report does not express, explicitly or
implicitly, an opinion as to the fairness of any transaction.

Management Representations

We have relied upon the representations of management and its advisors concerning the value and useful condition of
all equipment, real estate, investments used in the business, and any other assets or liabilities except as specifically
stated to the contrary in this report. We have not attempted to confirm whether or not all assets of the business are free
and clear of liens and encumbrances, or that the Company has good title to all assets.

In performing our research, we also relied on management’s representations of the Company’s financial statements,
forecasts of future operations, and other financial data provided by management. We did not audit, compile, or review
those financial statements, forecasts, or financial data, nor will we express an opinion or any form of assurance on them.
Therefore, our engagement cannot be relied on to disclose errors, irregularities, or illegal acts, including fraud that may
exist.




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                                                                                                                          Page 31
           The McLean Group, LLC
          1660 International Drive – Suite 450
                  McLean, VA 22102
                     703-827-0200
                  www.mcleanllc.com




M&A | Corporate Finance | Business Valuation

                                                 CONFIDENTIAL
                                                       Page 32
Preliminary Timetable




                            Finalize
      Gather               Potential                                 Confidentiality
    Company                Investor/                              Agreements Secured;
   Information            Lender List                              CIM Disseminated




       Week 1            Week 4         Week 5          Week 7   Week 8        Week 10   Week 11        Week 14




                                            Contact Potential
                                           Investors/Lenders;
                                             Solicit Interest                               Answer Prospective
                                                                                            Investors/Lenders ’
                                                                                            Questions; Compile
             Draft Confidential                                                          Requested Information and
                Information                                                                   Assess Interest
              Memorandum




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                                                                                                                           Page 33
Preliminary Timetable (cont.)




 Review/Finalize                 Investors’ / Lenders’       Finalize Term
                                                                                                                              Announce
  Management                     Visits - Management             Sheet
                                                                                                                          Transaction/Closing
  Presentation                      Presentations




         Week 15              Week 17         Week 19         Week 20             Week 21           Week 22          Week 23       Week 24




   Receive Non- Binding                         Negotiate
   Indications of Interest;                    Term Sheets
    Determine Short List                                                        Investor / Lender Due Diligence;
                                                                             Review/Negotiate Definitive Agreement




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                                                                                                                                                      Page 34
TMG Board of Advisors




                        CONFIDENTIAL
                              Page 35
TMG Advisory Team - Example


Dennis Roberts                                                         Andy Smith
Chairman                                                               Managing Director
droberts@mcleanllc.com                                                 asmith@mcleanllc.com
703.827.0008                                                           703.827.0233


Dennis Roberts is Chairman of The McLean Group, LLC. Mr.               Mr. Smith is the Managing Director of The McLean Group's business
Roberts has more than 35 years of accounting and investment-           valuation practice, a middle market investment bank which performs
banking experience involving a multitude of transactions across a      business valuations for public and private companies for transaction,
wide variety of industries and markets and has been awarded the        financial reporting, stock option plan, tax, and estate planning
prestigious ACG’s Dealmaker of the Year award.                         purposes. He has a broad background of experience, including
                                                                       public accounting, investment banking, and financial operations
Mr. Roberts was the founder, chairman, and CEO of a publicly held      management.
regional holding company from 1984 to 1992. Prior to that, he was
founder and senior partner of a large Washington, DC-area              His career began with KPMG Peat Marwick where he served as a
accounting firm that he sold to his partners in 1987. While a          corporate finance and audit manager in its Washington DC, Moscow,
practicing Certified Public Accountant, Mr. Roberts focused on M&A,    Russia, and Almaty, Kazakhstan offices. He later joined Washington
commercial finance, and similar transactions. Until 1995, Mr.          Equity Partners as an associate director where he assisted in
Roberts was the managing partner for the Washington, D.C. regional     various international wireless telecommunications transactions. He
office of Matrix Capital Markets Group, a regional investment bank     also worked with a strategic advisory group to Lucent Technologies
specializing in M&A representation and corporate finance.              and was formerly the director of finance of a wireless telecom
                                                                       services company.
A graduate of Benjamin Franklin University (subsequently merged
with George Washington University), Mr. Roberts is also a Certified    Mr. Smith is a graduate of the University of Richmond's E. Claiborne
Valuation Analyst (CVA), is accredited in Business Valuation (ABV)     School of Business. He is a Certified Public Accountant (CPA),
by The American Institute of Certified Public Accountants, and is an   Accredited in Business Valuation (ABV), Accredited Senior Appraiser
enrolled Federal Tax Accountant. He teaches, lectures, and writes      (ASA), Certified Valuation Analyst (CVA), and Certified Management
on M&A, business valuation, and corporate finance to national          Accountant (CMA). He is a National Association of Securities
audiences. He is a National Association of Securities Dealers          Dealers (NASD) registered representative and financial and
(NASD) registered representative and firm principal (Series 7, 24,     operations principal (Series 7, 28, and 63). He is also a national
28, 63).                                                               instructor with the National Association of Certified Valuation
                                                                       Analysts.




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                                                                                                                                          Page 36
Assembling the Team




  Key members of the transaction team include:

     Owners and key managers

     Attorneys (with specific transaction experience)

     Accountants (before-the-fact clean-up and after-the-fact compliance, tax specialists)

     Investment bankers (valuation, marketing, and negotiation experts)




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                                                                                                    Page 37
Introduction

Purpose & Procedures

The purpose of this analysis is to perform a preliminary market research of the electronic equipment manufacturers
industry. The purpose of our analysis is to provide management with research to help assess the potential value of
Memphis Networx. (“the Company”).

We have performed a preliminary review of the market as it relates to the electronic equipment manufacturers industry.
As part of our analysis, we reviewed several leading investment banking databases and:
 Analyzed a sample of comparable company transactions
 Analyzed a sample of guideline public companies

Our analysis focused on market-based indications of value. We did not perform a detailed analysis of the Company’s
value drivers. We also did not perform a discounted cash flow analysis or other income-based approach. Such an
analysis would take into account the specific growth expectations of the Company.

Limiting Conditions

The scope of this analysis was limited and this analysis does not constitute a formal estimate of Fair Market Value. Fair
Market Value is a hypothetical concept utilized in legal, tax planning, ESOP valuation, and in similar contexts.
Accordingly, this report should not be used for any stock option, tax and estate, litigation, or other formal valuation
purposes.

This report should not be used for any other purpose, except as specified above. This report should also not be
interpreted as a fairness opinion for any proposed transaction. This report may not be used and should not be used for
any purposes other than assisting Memphis Networx. This report has been prepared for Memphis Networx and is
strictly confidential. The accompanying report and the underlying assumptions and limiting conditions are an integral
part of our analysis.



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                                                                                                                        Page 38

				
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