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                              As filed with the Securities and Exchange Commission on October 27, 2005
                                                                                                 Registration No. 333-124971


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



                                                           AMENDMENT NO. 8 TO
                                                     FORM S-1
                                              REGISTRATION STATEMENT
                                                                UNDER
                                                       THE SECURITIES ACT OF 1933




                      CBEYOND COMMUNICATIONS, INC.
                                                      (Exact name of registrant as specified in its charter)
                    Delaware                                                   4813                                           59-3636526
            (State or Other Jurisdiction of                        (Primary Standard Industrial                                (IRS Employer
           Incorporation or Organization)                             Classification Number)                                 Identification No.)
                                                      320 Interstate North Parkway, Suite 300
                                                               Atlanta, Georgia 30339
                                                                   (678) 424-2400
                     (Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)




                                                                James F. Geiger
                                                Chairman, President and Chief Executive Officer
                                                        Cbeyond Communications, Inc.
                                                    320 Interstate North Parkway, Suite 300
                                                             Atlanta, Georgia 30339
                                                                 (678) 424-2400
                              (Name, address, including zip code, and telephone number, including area code, of agent for service)




                                                                         Copies to:
                    Christopher L. Kaufman, Esq.                                                            John T. Gaffney, Esq.
                         Joel H. Trotter, Esq.                                                          Cravath, Swaine & Moore LLP
                       Latham & Watkins LLP                                                                   Worldwide Plaza
                      555 Eleventh Street, N.W.                                                              825 Eighth Avenue
                       Washington, D.C. 20004                                                            New York, New York 10019
                           (202) 637-2200                                                                      (212) 474-1000



     Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of
this registration statement.
     If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act, check the following box. 
      If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement number of the earlier effective registration statement for the same
offering. 
      If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective registration statement for the same
offering. 
      If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier effective registration statement for the same
offering. 
      If the delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. 



    The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the registration
statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
Table of Contents

Subject to Completion, Dated October 27, 2005

Prospectus




6,104,575 Shares
Common Stock
This is our initial public offering of common stock. We are offering 6,104,575 shares. No public market currently exists for our
common stock.

We have applied for the listing of our common stock on the Nasdaq National Market under the symbol ―CBEY.‖ We currently
estimate that the initial public offering price will be between $13.00 and $14.00 per share.

Investing in the shares involves risks. See “ Risk Factors ” beginning on page 8.
                                                                                  Per Share        Total
Public offering price                                                         $                    $
Underwriting discounts and commissions                                        $                    $
Proceeds, before expenses, to Cbeyond                                         $                    $
Proceeds, before expenses, to Cbeyond from participating
  stockholders (see ―Underwriting‖)                                           $                    $

We have granted the underwriters a 30-day option to purchase up to 882,352 additional shares of common stock from us on the
same terms and conditions set forth above. The option may be exercised solely to cover over-allotments, if any.

Neither the Securities and Exchange Commission nor any state or foreign securities commission or regulatory authority
has approved or disapproved of these securities, or determined if this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares offered to the public on or about               , 2005.

                                         Deutsche Bank Securities

Raymond James
                                             Thomas Weisel Partners LLC
                                                                                               ThinkEquity Partners LLC
The date of this prospectus is            , 2005.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities,
and we are not soliciting offers to buy these securities in any state or jurisdiction where the offer or sale is not permitted.
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Table of Contents

                                                   TABLE OF CONTENTS

                                                                                        Pag
                                                                                         e
Prospectus Summary                                                                         1
Risk Factors                                                                               8
Cautionary Notice Regarding Forward-Looking Statements                                    19
Use of Proceeds                                                                           20
Dividend Policy                                                                           20
Capitalization                                                                            21
Dilution                                                                                  22
Selected Consolidated Financial and Operating Data                                        23
Non-GAAP Financial Measures                                                               25
Management’s Discussion and Analysis of Financial Condition and Results of Operations     27
Industry Overview                                                                         59
Business                                                                                  64
Government Regulation                                                                     79
Management                                                                                88
Certain Relationships and Related Transactions                                           105
Principal Stockholders                                                                   107
Description of Capital Stock                                                             110
United States Federal Income Tax Consequences to Non-United States Holders               113
Shares Eligible for Future Sale                                                          117
Underwriting                                                                             119
Legal Matters                                                                            123
Experts                                                                                  123
Where You Can Find More Information                                                      123
Report of Independent Registered Public Accounting Firm                                  F-1

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                                                     PROSPECTUS SUMMARY

     This summary highlights selected information contained elsewhere in this prospectus and does not contain all of the
information you should consider in making your investment decision. You should read the following summary together with the
more detailed information regarding us and our common stock, including our consolidated financial statements and the related
notes, appearing elsewhere in this prospectus.

                                                             Cbeyond
Overview

     We provide managed Internet Protocol-based communications services to our target market of small businesses in selected
large metropolitan areas. Our services include local and long distance voice services, broadband Internet access, email,
voicemail, web hosting, secure backup and file sharing and virtual private network. Our voice services are delivered using Voice
over Internet Protocol, or VoIP, technology, and all of our services are delivered over our secure all-Internet Protocol, or IP,
network. We provide quality of service and achieve network and call reliability comparable to that of traditional phone networks
while incurring significantly lower capital expenditures and operating costs. We believe our all-IP network platform enables us to
deliver an integrated bundle of communications services that may otherwise be unaffordable or impractical for our customers to
obtain.

     We first launched our service in Atlanta in April 2001 and now also operate in Dallas, Denver, Houston and Chicago. As of
June 30, 2005, we were providing communications services to 17,435 customer locations.

     We believe that the attractive value proposition of our integrated bundled communications service offering and our ability to
successfully replicate our business model in new markets have enabled us to achieve significant growth. Primarily driven by our
growth in new customers, our revenues grew from $65.5 million in 2003 to $113.3 million in 2004 and $73.4 million in the first six
months of 2005. Our net operating losses have decreased over this same period, from $25.7 million in 2003 to $7.3 million in 2004
and $1.4 million in the first six months of 2005.

      Our IP/VoIP Network Architecture . We deliver our services over a single, private all-IP network using only a high speed T-1
connection, or multiple T-1 connections, rather than the public Internet, which is employed by other VoIP companies such as
Vonage and Skype Technologies. Our network allows us to provide a wide array of voice and data services, attractive service
features (such as real-time online additions and changes), quality of service and network and call reliability comparable to that of
traditional telephone networks. We believe our network requires significantly lower capital expenditures and operating costs
compared to traditional service providers using legacy circuit-switched technologies, which require separate networks to provide
voice and data services.

      Our Target Market and Value Proposition . Our target market is businesses with 4 to 200 employees in large metropolitan
cities, using five or more phone lines. According to 2005 Dun & Bradstreet data, there are approximately 1.4 million businesses
with 5 to 249 employees in the 25 largest markets in the United States. We are currently in five of these markets and plan to
launch service in six additional markets by the end of 2009.

     We provide integrated packages of managed services at competitively priced, flat monthly fees under fixed-length contracts.
We also offer our customers a range of enhanced services for additional fees. Our target customers generally do not have
dedicated in-house resources to address their communications requirements fully. Our service offerings allow these customers
access to advanced communications services without having to develop their own internal

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expertise. Our primary competitors, the traditional local telephone companies, do not generally offer packages of similar managed
services to our target market. We believe that our value proposition, along with our fixed-length contracts, have contributed to our
low historical monthly customer churn rate. We calculate our monthly customer churn rate by dividing the number of customers
who discontinue service with us during a month by the total number of customers at the beginning of that month. Churn rate is a
significant statistic for communications service providers, which compete for other providers’ customers. Our current customer
churn rate may not be indicative of future rates because the initial term for most of our customer contracts has not yet expired.

VoIP Technology and Business Models

       VoIP technology enables the convergence of voice and data services onto one integrated network using technologies that
digitize voice communications into IP packets for transport on either private, managed IP networks or over the public Internet. As
VoIP technology has matured over the past decade, service providers have utilized its capabilities to establish business models
that vary both in terms of the type of service they deliver and the target end-customer.
                                                Public Internet / Best Efforts                                 Managed Networks

                                        Long Distance/                   PC-to-PC/                 Cable
                                       Calling Card VoIP              Broadband VoIP           Broadband VoIP                 Private Managed
                                                                                                                                VoIP Networks
Service                                 Inexpensive long            Inexpensive voice calls   Integrated VoIP and              Integrated VoIP,
                                          distance calls                                       broadband Internet             broadband Internet
                                                                                                     access                 access, enhanced data
                                                                                                                                   services
                                                                      Consumers, small
Target Customers                      Consumers, wholesale                                        Consumers                       Businesses
                                                                     offices, home offices
                                                                                                                             Leased and owned
Network                                  Public Internet                Public Internet       Cable infrastructure
                                                                                                                               infrastructure
                                                                                                 Cablevision,                      Cbeyond
Examples                                   Net2Phone                    Skype/Vonage
                                                                                              Time Warner Cable

Our Strategy
      We intend to grow our business in our current markets and to replicate our approach in additional markets. We have adopted
a strategy with the following principal components:

•     Focus solely on the small-business market in large metropolitan areas . We target small businesses, most of which do not
      have dedicated in-house resources to address their communications requirements fully and may therefore view themselves
      as inadequately served by the larger telecommunications providers.

•     Offer comprehensive packages of managed IP communications services . We offer our local and long distance voice
      services and broadband Internet access applications only on a bundled basis under fixed-length, flat-rate contracts. We
      expect to integrate wireless services with our existing wireline services in the first half of 2006 and offer these services solely
      as a component of our bundled offerings.

•     Increase penetration of enhanced services to our customer base. We seek to achieve higher revenue per customer and
      lower churn by providing enhanced services in addition to our base offering. As of June 30, 2005, our average customer
      used a total of 4.6 applications, whether as part of a package or purchased as an additional service.

•     Focus sales and marketing resources on achieving significant market penetration. We will continue to deploy a relatively
      large direct sales force in each of the markets that we enter,

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      in contrast to many of our competitors, which have deployed smaller sales forces in a greater number of markets. We
      believe that our approach has resulted in our obtaining market share at a faster rate.

•     Replicate our business model in new markets . Each time we expand into a new market, we use the same disciplined
      financial and operational reporting system to enable us to closely monitor our costs, market penetration and provisioning of
      customers and maintain consistent standards across all of our markets. We intend to launch service into six additional
      markets by the end of 2009.

Our Strengths

      We believe we benefit from the following strengths:

•     Our all-IP network . We are able to provide a wide range of enhanced communications services in a cost-efficient manner
      over a single network, in contrast to traditional communications providers which may require separate, incremental networks
      or substantial network upgrades in order to support similar services.

•     Capital efficiency . We believe that our business approach requires lower capital and operating expenditures to bring our
      markets to positive cash flow compared to communications carriers using legacy technologies and operating processes. In
      addition, our deployment of capital is largely success-based, meaning we incur incremental capital expenditures only as our
      customer base grows.

•     Our automated and integrated business processes . Our front and back office systems are highly automated and integrated
      to synchronize multiple tasks, including installation, billing and customer care. We believe this allows us to lower our
      customer service costs, efficiently monitor the performance of our network and provide responsive customer support.

•     Our highly regimented but personalized sales model . Our direct sales representatives follow a disciplined daily schedule
      and meet face-to-face with customers each day as part of a transaction-oriented but personalized and consultative selling
      process.

•     Our experienced management team with focus on operating excellence . Our top three executive officers have an average
      of 20 years of experience in the communications industry, including both startups and mature businesses.

•     Our strong balance sheet and liquidity position. We have a strong balance sheet with approximately $44.1 million in cash
      and investments and no debt after giving effect to this offering, assuming an initial public offering price of $13.50 per share,
      the midpoint of the initial public offering price range indicated on the cover of this prospectus. We believe that the net
      proceeds from this offering, together with revenues from operations and cash on hand, will be sufficient to fund our capital
      expenditures and operating expenses, including those related to our current plans for expansion. As of June 30, 2005, we
      had an accumulated deficit of approximately $153.4 million, as adjusted to give effect to the repayment of our indebtedness
      upon the consummation of this offering.



     Our principal executive offices are located at 320 Interstate North Parkway, Suite 300, Atlanta, Georgia 30339. Our
telephone number is (678) 424-2400 and our website address is http://www.cbeyond.net . Information contained on our website is
not a prospectus and does not constitute part of this prospectus.

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                                                         THE OFFERING

Common stock offered by us in this offering   6,104,575 shares (see ―Underwriting‖)
Common stock to be outstanding after this     25,441,245 shares
offering
Over-allotment option                        882,352 shares
Use of proceeds from this offering           We estimate that our net proceeds from this offering will be approximately $73.6
                                             million, based on an assumed initial public offering price of $13.50 per share, the
                                             midpoint of the initial public offering price range indicated on the cover of this
                                             prospectus. We intend to use the net proceeds from this offering to repay all
                                             outstanding principal and accrued interest owed under our credit facility with Cisco
                                             Capital and terminate the facility, to fund increased capital expenditures in
                                             connection with our expansion and for working capital and general corporate
                                             purposes. See ―Use of Proceeds.‖
Dividend policy                              We do not anticipate paying any dividends on our common stock in the foreseeable
                                             future.
Risk Factors                                 See ―Risk Factors‖ and other information included in this prospectus for a
                                             discussion of factors you should carefully consider before deciding to invest in our
                                             common stock.
Reserved Nasdaq National Market            ―CBEY‖
symbol
Unless we indicate otherwise, all information in this prospectus:
     • gives effect to a 1 for 3.88 reverse stock split occurring in connection with this offering;
     • includes 164,969 common shares outstanding as of August 31, 2005;
     • gives effect to the conversion of all outstanding shares of our Series B preferred stock and Series C preferred stock,
        which will automatically occur immediately prior to completion of this offering;
     • gives effect to the conversion of accrued dividends on our Series B preferred stock and Series C preferred stock into
        shares of our common stock as if such conversion occurred on September 30, 2005;
     • excludes 3,306,481 shares that may be issued upon the exercise of options outstanding as of August 31, 2005, of which
        2,088,080 are currently exercisable at a weighted average purchase price of $4.18 per share, 720,028 shares that may
        be issued upon the exercise of warrants outstanding as of August 31, 2005, all of which are currently exercisable at a
        weighted average purchase price of $0.07 per share and 255,102 shares that are reserved for issuance pursuant to our
        stock option plans; and
     • assumes no exercise of the underwriters’ over-allotment option.

                                                         Risk Factors
      You should carefully read and consider the information set forth in ―Risk Factors‖ beginning on page 8 of this prospectus and
all other information set forth in this prospectus before investing in our common stock.

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                                                       SUMMARY CONSOLIDATED FINANCIAL DATA

      The following table summarizes our financial and other operating data for the periods indicated. Our historical results are not
necessarily indicative of future operating results. You should read the information set forth below in conjunction with
―Capitalization,‖ ―Selected Consolidated Financial and Operating Data,‖ ―Management’s Discussion and Analysis of Financial
Condition and Results of Operations‖ and with our consolidated financial statements and their related notes included elsewhere in
this prospectus.
                                                                                                                                                                     Six Months
                                                                                                          Year Ended December 31,                                  Ended June 30,

                                                                                                     2002                 2003                 2004                2004             2005

                                                                                                                                  (in thousands)
Statement of Operations Data:
Revenue                                                                                          $   20,956           $   65,513          $ 113,311            $ 51,452           $ 73,358
Operating expenses:
     Cost of service (exclusive of $6,672, $12,947, $17,611, $8,362 and $ 9,783 depreciation
        and amortization, respectively)                                                              11,558               21,815                31,725             14,083           21,824
     Selling, general and administrative (exclusive of $7,544, $8,324, $5,036, $3,169 and $
        1,869 depreciation and amortization, respectively)                                           42,197               48,085                65,159             30,318           41,288
     Write-off of public offering costs                                                                  —                    —                  1,103                 —                —
     Depreciation and amortization                                                                   14,216               21,271                22,647             11,531           11,652

            Total operating expenses                                                                 67,971               91,171               120,634             55,932           74,764

Operating loss                                                                                       (47,015 )            (25,658 )             (7,323 )           (4,480 )          (1,406 )
Other income (expense):
      Interest income                                                                                       411               715                  637                328               508
      Interest expense                                                                                   (4,665 )          (2,333 )             (2,788 )           (1,615 )          (1,315 )
      Gain recognized on troubled debt restructuring                                                      4,338                —                    —                  —                 —
      Loss on disposal of property and equipment                                                           (222 )          (1,986 )             (1,746 )             (425 )            (273 )
      Other income (expense), net                                                                           (35 )            (220 )               (236 )             (149 )             (22 )

Net loss                                                                                         $ (47,188 )          $ (29,482 )         $ (11,456 )          $ (6,341 )         $ (2,508 )


                                                                                                                                                                     Six Months
                                                                                                 Year Ended December 31,                                           Ended June 30,

                                                                                          2002                   2003                   2004                   2004                  2005

Other Operating Data:
Customer locations (1)                                                                    4,472                 9,687                14,713                    12,074                17,435
Average monthly churn rate (2)                                                             1.3%                  1.0%                 1.0%                      1.0%                  1.0%
Average monthly revenue per customer location (3)                                        $ 658                 $ 771               $    774                  $    788              $    761
Employees (4)                                                                               381                   428                   586                       525                   665

                                                                                                                 As of                                         Pro forma as of
                                                                                                              December 31,                                      June 30, 2005

                                                                                                                                                                                  As
                                                                                                          2003                   2004                     Actual              Adjusted(5)

                                                                                                                                      (in thousands)
Balance Sheet Data (at period end):
Cash and cash equivalents                                                                            $      5,127           $     22,860              $     23,498            $      34,128
Marketable securities                                                                                      21,079                 14,334                    10,000                   10,000
Working capital                                                                                             2,240                  8,776                     3,222                   28,524
Total assets                                                                                               87,048                 99,203                    97,870                  108,500
Long-term debt, including current portion                                                                  67,628                 70,331                    67,907                       —
Convertible preferred stock                                                                                54,835                 78,963                    83,893                       —
Stockholders’ (deficit) equity                                                                            (55,311 )              (73,573 )                 (80,767 )                 81,664

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                                                                                                                                                         Six Months
                                                                                                    Year Ended December 31,                            Ended June 30,

                                                                                                2002              2003              2004              2004             2005

                                                                                                              (in thousands, except per share data)
Other Financial Data:
Capital expenditures (6)                                                                    $ 28,447          $ 26,205          $ 23,741          $   12,537       $   10,364
Net cash provided by (used in) operating activities                                         $ (33,589 )       $ (5,895 )        $ 13,877          $    1,837       $    7,985
Net cash provided by (used in) investing activities                                         $ (12,120 )       $   4,625         $ (3,921 )        $     (242 )     $   (1,746 )
Net cash provided by (used in) financing activities                                         $ 47,886          $     927         $   7,777         $   (4,150 )     $   (5,601 )
Net loss attributable to common stockholders per common share, basic and diluted            $ (429.88 )       $ (310.75 )       $ (143.71 )       $   (76.79 )     $   (50.18 )
Weighted average common shares outstanding,
  basic and diluted (7)                                                                             112               115               129               127              147

Segment Financial data:
Revenue:
     Atlanta                                                                                $   11,262        $   27,033        $   42,236        $   19,754       $   25,402
     Dallas                                                                                      6,064            19,813            33,129            15,428           20,035
     Denver                                                                                      3,630            18,667            35,051            15,955           22,494
     Houston                                                                                        —                 —              2,895               315            5,128
     Chicago                                                                                        —                 —                 —                 —               299

            Total revenue                                                                   $   20,956        $   65,513        $ 113,311         $   51,452       $   73,358

Operating profit (loss):
     Atlanta                                                                                $    (3,838 )     $     7,384       $    18,922       $     8,904      $    11,505
     Dallas                                                                                      (5,319 )             678             7,281             3,358            5,625
     Denver                                                                                      (4,151 )           2,568            13,404             5,728            9,142
     Houston                                                                                         —               (210 )          (4,658 )          (2,295 )           (879 )
     Chicago                                                                                         —                 —               (568 )             (10 )         (3,476 )
     Corporate                                                                                  (33,707 )         (36,078 )         (41,704 )         (20,165 )        (23,323 )

            Total operating loss                                                            $ (47,015 )       $ (25,658 )       $    (7,323 )     $    (4,480 )    $    (1,406 )

Non-GAAP Financial Data:
Adjusted EBITDA (8)
      Atlanta                                                                               $    (1,637 )     $    11,851       $    24,986       $    11,786      $    14,541
      Dallas                                                                                     (3,736 )           4,235            12,353             5,764            8,268
      Denver                                                                                     (3,387 )           5,230            17,750             7,707           11,709
      Houston                                                                                        —               (187 )          (3,954 )          (2,076 )           (190 )
      Chicago                                                                                        —                 —               (565 )              (9 )         (3,318 )
      Corporate                                                                                 (24,017 )         (25,495 )         (33,768 )         (15,943 )        (20,612 )

            Total adjusted EBITDA                                                           $ (32,777 )       $    (4,366 )     $   16,802        $     7,229      $   10,398


(1)   Denotes individual customer locations and excludes our employees and both the employees of Cisco Capital Systems, Inc. and certain third parties selling our
      services, determined at period end.
(2)   Calculated for each period as the average of monthly churn, which is defined for a given month as the number of customer locations disconnected in that month
      divided by the number of customer locations on our network at the beginning of that month.

(3)   Calculated as the revenue for a period divided by the average of the number of customer locations at the beginning of the period and the number of customer locations
      at the end of the period, divided by the number of months in the period.

(4)   Employees include all full-time employees and exclude temporary workers and contractors.

(5)   Adjusted to reflect the sale of 6,104,575 shares of common stock by us at an assumed offering price of $13.50, the midpoint of the initial public offering price range
      indicated on the cover of this prospectus, as if such sale had occurred on June 30, 2005.
(6)   Represents cash and non-cash purchases of property and equipment, on a combined basis.

(7)   Does not give effect to the conversion of any outstanding shares of our Series B preferred stock and Series C preferred stock.

(8)   Adjusted EBITDA is not a substitute for operating income, net income, or cash flow from operating activities as determined in accordance with generally accepted
      accounting principles, or GAAP, as a measure of performance or liquidity. We define adjusted EBITDA as net income (loss) before interest, taxes, depreciation and
      amortization expenses, excluding non-cash stock option compensation, write-off of public offering costs and gain recognized on troubled debt restructuring, loss on
      disposal of property and equipment and other non-operating income or expense. We provide information relating to our total adjusted EBITDA so that investors have
      the same data that our management employs in assessing the overall operation of our business. Total adjusted EBITDA allows our chief operating decision maker to
      assess the performance of our business on a consolidated basis that corresponds to the

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     measure used to assess the ability of our operating segments to produce operating cash flow to fund working capital needs, to service debt obligations and to fund
     capital expenditures. In particular, total adjusted EBITDA permits a comparative assessment of our operating performance, relative to our performance based on our
     GAAP results, while isolating the effects of depreciation and amortization, which may vary among segments without any correlation to their underlying operating
     performance, and of non-cash stock option compensation, which is a non-cash expense that varies widely among similar companies. See ―Non-GAAP Financial
     Measures‖ for a more detailed discussion of our reasons for including adjusted EBITDA data in this prospectus and for material limitations with respect to the usefulness
     of this measurement. The following table sets forth a reconciliation of total adjusted EBITDA to net loss:

                                                                                                          Year Ended                                Six Months Ended
                                                                                                         December 31,                                    June 30,

                                                                                             2002               2003                2004            2004             2005

                                                                                                                            (in thousands)
Reconciliation of total adjusted EBITDA to Net loss:
     Total adjusted EBITDA for reportable segments                                        $ (32,777 )       $    (4,366 )       $    16,802     $     7,229      $    10,398
            Depreciation and amortization                                                   (14,216 )           (21,271 )           (22,647 )       (11,531 )        (11,652 )
            Non-cash stock option compensation                                                  (22 )               (21 )              (375 )          (178 )           (152 )
            Write-off of public offering costs                                                   —                   —               (1,103 )            —                —
            Interest income                                                                     411                 715                 637             328              508
            Interest expense                                                                 (4,665 )            (2,333 )            (2,788 )        (1,615 )         (1,315 )
            Gain recognized on troubled debt restructuring                                    4,338                  —                   —               —                —
            Loss on disposal of property and equipment                                         (222 )            (1,986 )            (1,746 )          (425 )           (273 )
            Other income (expense), net                                                         (35 )              (220 )              (236 )          (149 )            (22 )

Net loss                                                                                  $ (47,188 )       $ (29,482 )         $ (11,456 )     $    (6,341 )    $    (2,508 )



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                                                           RISK FACTORS

       Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors and all
other information contained in this prospectus, including our consolidated financial statements and the related notes, before
investing in our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and
uncertainties that we are unaware of, or that we currently believe are not material, also may become important factors that affect
us. If any of the following risks materialize, our business, financial condition or results of operations could be materially harmed. In
that case, the trading price of our common stock could decline, and you could lose some or all of your investment.

Risks Related to Our Business

We have never been profitable and our losses could continue.

      We have experienced significant losses in the past. For the years ended December 31, 2002, 2003 and 2004, we recorded
net losses of approximately $47.2 million, $29.5 million and $11.5 million, respectively, and for the six months ended June 30,
2005, we recorded a net loss of approximately $2.5 million. We recorded operating losses of approximately $47.0 million,
$25.7 million and $7.3 million for the years ended December 31, 2002, 2003 and 2004, respectively, and $1.4 million for the six
months ended June 30, 2005. As of June 30, 2005, we had an accumulated deficit of approximately $158.3 million. We have
never generated sufficient cash flow from operations to fund our expenses. We have never been profitable and can give no
assurance that our losses will not continue.

We face intense competition from other providers of communications services that have significantly greater resources
than we do. Several of these competitors are better positioned to engage in competitive pricing, which may impede our
ability to implement our business model of attracting customers away from such providers.

     The market for communications services is highly competitive. We compete, and expect to continue to compete, with many
types of communications providers, including traditional local telephone companies. In the future, we may also face increased
competition from cable television companies, new VoIP-based service providers or other managed service providers with similar
business models to our own. We expect to integrate wireless services with our existing wireline services in the first half of 2006
and will then face competition from wireless service providers as well. Our current or future competitors may provide services
comparable or superior to those provided by us, or at lower prices, or adapt more quickly to evolving industry trends or changing
market requirements.

      A substantial majority of our target customers are existing small businesses that are already purchasing communications
services from one or more of these providers. The success of our operations is dependent on our ability to persuade these small
businesses to leave their current providers. Many of these providers have competitive advantages over us, including substantially
greater financial, personnel and other resources, better access to capital, brand name recognition and long-standing relationships
with customers. These resources may place us at a competitive disadvantage in our current markets and limit our ability to expand
into new markets. Because of their greater financial resources, some of our competitors can also better afford to reduce prices for
their services and engage in aggressive promotional activities. Such tactics could have a negative impact on our business. For
example, some of our competitors have adopted pricing plans such that the rates that they charge are not always substantially
higher, and in some cases are lower, than the rates that we charge for similar services. In addition, other providers are offering
unlimited or nearly unlimited use of some of their services

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for an attractive monthly rate. Due to these and other competitive pricing pressures, we currently expect average monthly revenue
per customer location to remain relatively flat or decline in the foreseeable future. Any of the foregoing factors could require us to
reduce our prices to remain competitive or cause us to lose customers, resulting in a decrease in our revenue.

Increasing use of VoIP technology by our competitors, entry into the market by new providers employing VoIP
technology and improvements in quality of service of VoIP technology provided over the public Internet could increase
competition.

     Our success is based partly on our ability to provide discounted local and long distance voice services by taking advantage
of cost savings achieved by employing VoIP technology, as compared to using traditional networks. The adoption of VoIP
technology by other communications carriers, including existing competitors such as local telephone companies that currently use
legacy technologies, could increase price competition. Moreover, other VoIP providers could also enter the market. Because
networks using VoIP technology can be deployed with less capital investment than traditional networks, there are lower barriers to
entry in this market and it may be easier for new entrants to emerge. Increased competition may require us to lower our prices or
may make it more difficult for us to retain our existing customers or add new customers.

     We believe we generally do not compete with VoIP providers who use the public Internet to transmit communications traffic,
as these providers generally do not provide the level and quality of service typically demanded by the business customers we
serve. However, future advances in VoIP technology may enable these providers to offer an improved level and quality of service
to business customers over the public Internet and with lower costs than using a private network. This development could result in
increased price competition.

The success of our expansion plans depends on a number of factors that are beyond our control.

     We have grown our business by entering new geographical markets, and we plan to expand into six additional markets by
the end of 2009. We have never undertaken such a broad expansion plan and there can be no guarantee that our expansion
plans will be successful. Our success in expanding to new markets depends on the following factors:

      •   the availability and retention of qualified and effective local management;

      •   the overall economic health of the new markets;

      •   the number and effectiveness of competitors;

      •   our ability to establish a relationship and work effectively with the local telephone company for the provision of access
          lines to customers; and

      •   the maintenance of state regulation that protects us from unfair business practices by local telephone companies or
          others with greater market power who have relationships with us as both competitors and suppliers.

Our operational support systems and business processes may not be adequate to effectively manage our growth.

    Our continued success depends on the scalability of our systems and processes. As of June 30, 2005, none of our individual
market operations have supported levels of customers in excess

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of 6,000, and our centralized systems and processes have not supported more than 17,500 customers. We cannot be certain that
our systems and processes are adequate to support ongoing growth in customers. Failure to manage our future growth effectively
could harm our quality of service and customer relationships, which could increase our customer churn, result in higher operating
costs, write-offs or other accounting charges, and otherwise materially harm our financial condition and results of operations.

We may not be able to continue to grow our customer base at historic rates, which would result in a decrease in the rate
of revenue growth.

      From December 31, 2003 to December 31, 2004, we experienced an annual growth rate in customer locations of 52%. We
may not experience this same growth rate in the future, and we may not grow at all, in our current markets. Future growth in our
existing markets may be more difficult than our growth has been to date due to increased or more effective competition in the
future, difficulties in scaling our business systems and processes, or difficulty in maintaining sufficient numbers of qualified market
management personnel, sales personnel and qualified integrated access device installation service providers to obtain and
support additional customers. Failure to continue to grow our customer base at historic rates would result in a corresponding
decrease in the rate of our revenue growth.

We depend on third party providers who install our integrated access devices at customer locations. We must maintain
relationships with efficient installation service providers in our current cities and identify similar providers as we enter
new markets in order to maintain quality in our operations.

      The installation of integrated access devices at customer locations is an essential step that enables our customers to obtain
our service. We outsource the installation of integrated access devices to a number of different installation vendors in each
market. We must insure that these vendors adhere to the timelines and quality that we require to provide our customers with a
positive installation experience. In addition, we must obtain these installation services at reasonable prices. If we are unable to
continue maintaining a sufficient number of installation vendors in our markets who provide high quality service at reasonable
prices to us, we may have to use our own employees to perform installations of integrated access devices. We may not be able to
manage such installations effectively using our own employees with the quality we desire and at reasonable costs.

We depend on local telephone companies for the installation and maintenance of our customers’ T-1 access lines and
other network elements and facilities.

      Our customers’ T-1 access lines are installed and maintained by local telephone companies in each of our markets. If the
local telephone company does not perform the installation properly or in a timely manner, our customers could experience
disruption in service and delays in obtaining our services. Since inception, we have experienced routine delays in the installation
of T-1 lines by the local telephone companies to our customers in each of our markets, although these delays have not yet
resulted in any material impact to our ability to compete and add customers in our markets. Any work stoppage action by
employees of a local telephone company that provides us services in one of our markets could result in substantial delays in
activating new customers’ lines and could materially harm our operations. Although local telephone companies may be required to
pay fines and penalties to us for failures to provide us with these installation and maintenance services according to prescribed
time intervals, the negative impact on our business of such failures could substantially exceed the amount of any such cash
payments. Furthermore, we are also dependent on traditional local telephone

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companies for access to their colocation facilities and we utilize certain of their network elements. Failure of these elements or
damage to a local telephone company’s colocation facility would cause disruptions in our service.

Some of our services are dependent on facilities and systems maintained by third parties over which we have no control,
the failure of which could cause interruptions or discontinuation of some of our services, damage our reputation, cause
us to lose customers and limit our growth.

      We provide some of our existing services, such as email and webhosting, by reselling to our customers services provided by
third parties, and we expect to integrate wireless services with our existing wireline services in the first half of 2006 by reselling
wireless services provided by an established third-party wireless carrier. We do not have control over the networks and other
systems maintained by these third parties. If our third-party providers fail to maintain their facilities properly or fail to respond
quickly to network or other problems, our customers may experience interruptions in the service they obtain from us. Any service
interruptions experienced by our customers could negatively impact our reputation, cause us to lose customers and limit our ability
to attract new customers.

If we cannot negotiate new (or extensions of existing) interconnection agreements with local telephone companies on
acceptable terms, it will be more difficult and costly for us to provide service to our existing customers and to expand
our business.

      We have agreements for the interconnection of our network with the networks of the local telephone companies covering
each market in which we operate. These agreements also provide the framework for service to our customers when other local
carriers are involved. We will be required to negotiate new interconnection agreements to enter new markets in the future. In
addition, we will need to negotiate extension or replacement agreements as our existing interconnection agreements expire. Most
of our interconnection agreements have terms of three years, although the parties may mutually decide to amend the terms of
such agreements. If we cannot negotiate new interconnection agreements or renew our existing interconnection agreements on
favorable terms or at all, we may invoke binding arbitration by state regulatory agencies. The arbitration process is expensive and
time-consuming, and the results of an arbitration may be unfavorable to us. If we are unable to obtain favorable interconnection
terms, it would harm our existing operations and opportunities to grow our business in our current and new markets.

The fixed pricing structure for our integrated packages makes us vulnerable to price increases by our suppliers for
network equipment and access fees for circuits that we lease to gain access to our customers.

      We offer our integrated packages to customers at a fixed price for one, two, or three years. If we experience an increase in
our costs due to price increases from our suppliers or vendors or increases in access, installation or interconnection fees payable
to local telephone companies, we will not be able to pass these increases on to our customers immediately and this could
materially harm our results of operations.

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We are regulated by the Federal Communications Commission, state public service commissions, and local regulating
governmental bodies. Changes in regulation could result in price increases on the circuits that we lease from the local
telephone companies or in our losing the right to lease these circuits from them.

      We operate in a highly regulated industry and are subject to regulation by telecommunications authorities at the federal, state
and local levels. Changes in regulatory policy could increase the fees we must pay to third parties, make certain required
elements of our network less readily available to us, or subject us to more stringent requirements that could cause us to incur
additional operating expenditures.

      The T-1 connections we provide to our customers are leased primarily from our competitors, the local telephone companies.
The rules of the Federal Communications Commission, or FCC, adopted under the Telecommunications Act of 1996 generally
entitle us to lease these connections at wholesale prices based on incremental costs. However, a recent federal court decision led
the FCC to revise some of these rules in February 2005, limiting our right to purchase at these wholesale prices in some
situations, which is likely to increase our cost for some of these T-1 connections. Our rights of access to the facilities of local
telephone companies may also change as a result of future legislation or regulatory decisions. Although we expect that we will
continue to be able to obtain T-1 connections for our customers, we may not be able to do so at current prices. If we lose the right
to obtain these connections at current prices, we will need to either negotiate new commercial arrangements with the local
telephone companies to obtain the connections, perhaps at unfavorable rates and conditions, or obtain other means of providing
connections to our customers, which may be expensive and require a long timeframe to implement.

     Also, the FCC is currently considering changing its rules for calculating incremental cost-based rates, which could result in
either increases or decreases in our cost to lease these facilities. Significant increases in wholesale prices, especially for the loop
element we use most extensively, could materially harm our business.

The FCC is reexamining its policies towards VoIP and telecommunications in general. Changes in regulation could
subject us to additional fees or increase the competition we face.

      We currently operate as a regulated common carrier, which subjects us to some regulatory obligations. The FCC recently
adopted new rules that require ―interconnected VoIP providers‖ to enable emergency 911 services for all customers that are
comparable to the 911 services provided by traditional telephone networks, and to implement certain capabilities for the
monitoring of communications by law enforcement agencies pursuant to a subpoena or court order. We currently comply with the
911 requirements and law enforcement assistance requirements applicable to traditional telecommunications carriers, and do not
believe that the FCC’s new rules will impose significant additional obligations and costs on us. However, the FCC is re-examining
its other policies towards services provided over IP networks, such as our VoIP technology, and the results of these proceedings
could impose additional fees or limitations on us.

     Regulatory decisions may also affect the level of competition we face. Reduced regulation of retail services offered by local
telephone companies could increase the competitive advantages those companies enjoy, cause us to lower our prices in order to
remain competitive or otherwise make it more difficult for us to attract and retain customers.

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Our network depends on new IP technology that has not been widely deployed. As a result, the adaptability and
reliability of this technology remains uncertain.

      In contrast to the legacy circuit-switch technology used by the traditional telephone companies and other providers of
traditional communications services, our network is based on IP technology. This technology is much newer and has not been
used on active networks for as long. Although we believe that IP technology is well-designed for the provision of a broad array of
communications services to high numbers of users, we cannot assure you that our IP-based network can adapt to future
technological advancements, that it can handle increasingly higher volumes of voice and data traffic as we grow our business or
as our customers’ usage increases, or that it will be reliable over long periods of time. Any failure of our network or any
deterioration in our quality of service compared to those of other providers of communications services could cause an increase in
our customer churn rate and make it difficult for us to acquire new customers.

Our competitors may be better positioned than we are to adapt to rapid changes in technology, and we could lose
customers.

      The communications industry has experienced, and will probably continue to experience, rapid and significant changes in
technology. Technological changes, such as the use of wireless network access to customers in place of the T-1 access lines we
lease from the local telephone companies, could render aspects of the technology we employ suboptimal or obsolete and provide
a competitive advantage to new or larger competitors who might more easily be able to take advantage of these opportunities.
Some of our competitors, including the local telephone companies, have a much longer operating history, more experience in
making upgrades to their networks and greater financial resources than we do. We cannot assure you that we will obtain access
to new technologies as quickly or on the same terms as our competitors, or that we will be able to apply new technologies to our
existing networks without incurring significant costs or at all. In addition, responding to demand for new technologies would require
us to increase our capital expenditures, which may require additional financing in order to fund. As a result of those factors, we
would lose customers and our financial results could be harmed.

We have had material weaknesses in internal control over financial reporting in the past and cannot assure you that
additional material weaknesses will not be identified in the future. Our failure to implement and maintain effective
internal control over financial reporting could result in material misstatements in our financial statements which could
require us to restate financial statements, cause investors to lose confidence in our reported financial information and
have a negative effect on our stock price.

      During the past two years, management and our independent registered public accounting firm have identified material
weaknesses in our internal control over financial reporting, as defined in the standards established by the American Institute of
Certified Public Accountants, that affected our financial statements for each of the years in the four-year period ended December
31, 2004. See ―Management’s Discussion and Analysis of Financial Condition and Results of Operations—Internal Control Over
Financial Reporting.‖

     The material weaknesses in our internal control over financial reporting during the past three years related to a lack of
adequate procedures for recording certain expenses and assets, incorrect calculation of certain telecommunications transactional
fees, failure to record certain accounting entries between us and our leasing subsidiary and the restatement of our financial
statements for the 2001, 2002 and 2003 fiscal years. The net restatement adjustments resulting

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from these errors affected our prior year results by increasing our 2001 net loss by $0.1 million, or 0.3%, reducing our 2002 net
loss by $3.8 million, or 7.4%, and increasing our 2003 net loss by $0.3 million, or 0.9%.

      We cannot assure you that additional significant deficiencies or material weaknesses in our internal control over financial
reporting will not be identified in the future. Any failure to maintain or implement required new or improved controls, or any
difficulties we encounter in their implementation, could result in additional significant deficiencies or material weaknesses, cause
us to fail to meet our periodic reporting obligations or result in material misstatements in our financial statements. Any such failure
could also adversely affect the results of periodic management evaluations and annual auditor attestation reports regarding the
effectiveness of our internal control over financial reporting that will be required when the SEC’s rules under Section 404 of the
Sarbanes-Oxley Act of 2002 become applicable to us beginning with our Annual Report on Form 10-K for the year ending
December 31, 2006, to be filed in early 2007. The existence of a material weakness could result in errors in our financial
statements that could result in a restatement of financial statements, cause us to fail to meet our reporting obligations and cause
investors to lose confidence in our reported financial information, leading to a decline in our stock price.

System disruptions could cause delays or interruptions of our service, which could cause us to lose customers or incur
additional expenses.

      Our success depends on our ability to provide reliable service. Although we have designed our network service to minimize
the possibility of service disruptions or other outages, our service may be disrupted by problems on our system, such as
malfunctions in our software or other facilities, overloading of our network and problems with the systems of competitors with
which we interconnect, such as physical damage to telephone lines and power surges and outages. Although we have
experienced isolated power disruptions and other outages for short time periods, we have not had any system disruptions of a
sufficient duration or magnitude that would have a significant impact to our customers or our business. Any significant disruption in
our network could cause us to lose customers and incur additional expenses.

Business disruptions, including disruptions caused by security breaches, terrorism or other disasters, could harm our
future operating results.

      The day-to-day operation of our business is highly dependent on the integrity of our communications and information
technology systems, and on our ability to protect those systems from damage or interruptions by events beyond our control.
Sabotage, computer viruses or other infiltration by third parties could damage our systems. Such events could disrupt our service,
damage our facilities, damage our reputation, and cause us to lose customers, among other things, and could harm our results of
operations. In addition, a catastrophic event could materially harm our operating results and financial condition. Catastrophic
events could include a terrorist attack on the United States, or a major earthquake, fire, or similar event that affects our central
offices, corporate headquarters, network operations center or network equipment. We believe that communications
infrastructures, such as the one on which we rely, may be vulnerable in the case of such an event and our markets, which are
metropolitan markets, or Tier 1 markets, may be more likely to be the targets of terrorist activity.

Our customer churn rate may increase.

     Although our customer churn rate was approximately 1% per month as of June 30, 2005, we cannot assure you that we will
be able to maintain this rate in the future. Customer churn occurs when a customer switches to one of our competitors or when a
customer discontinues

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its business altogether. Changes in the economy, as well as increased competition from other providers, can both impact our
customer churn rate. We cannot predict future pricing by our competitors, but we anticipate that aggressive price competition will
continue. Lower prices offered by our competitors could contribute to an increase in customer churn. In addition, our historical
customer churn rates may not be indicative of future rates because the initial term for most of our customer contracts has not yet
expired. As of June 30, 2005, approximately 14% of our customer contracts will expire during the remainder of 2005 and
approximately 33% of our existing customer contracts will expire in 2006.

We obtain the majority of our network equipment and software from Cisco Systems, Inc. Our success depends upon the
quality, availability, and price of Cisco’s network equipment and software.

      We obtain the majority of our network equipment and software from Cisco Systems, Inc., or Cisco Systems. In addition, we
rely on Cisco Systems for technical support and assistance. Although we believe that we maintain a good relationship with Cisco
Systems and our other suppliers, if Cisco Systems or any of our other suppliers were to terminate our relationship or were to
cease making the equipment and software we use, our ability to maintain, upgrade or expand our network could be impaired.
Although we believe that we would be able to address our future equipment needs with equipment obtained from other suppliers,
we cannot assure you that such equipment would be compatible with our network without significant modifications or cost, if at all.
If we were unable to obtain the equipment necessary to maintain our network, our ability to attract and retain customers and
provide our services would be impaired. In addition, our success depends on our obtaining network equipment and software at
affordable prices. Significant increases in the price of these products would harm our financial results and may increase our
capital requirements.

We depend on third party vendors for information systems. If these vendors discontinue support for the systems we use
or fail to maintain quality in future software releases, we could sustain a negative impact on the quality of our services to
customers, the development of new services and features, and the quality of information needed to manage our
business.

      We have entered into agreements with vendors that provide for the development and operation of back office systems such
as ordering, provisioning and billing systems. We also rely on vendors to provide the systems for monitoring the performance and
condition of our network. The failure of those vendors to perform their services in a timely and effective manner at acceptable
costs could materially harm our growth and our ability to monitor costs, bill customers, provision customer orders, maintain the
network and achieve operating efficiencies. Such a failure could also negatively impact our ability to retain existing customers or to
attract new customers.

If we are unable to generate the cash that we need to pursue our business plan, we may have to raise additional capital
on terms unfavorable to our stockholders.

     The actual amount of capital required to fund our operations and development may vary materially from our estimates. If our
operations fail to generate the cash that we expect, we may have to seek additional capital to fund our business. If we are
required to obtain additional funding in the future, we may have to sell assets, seek debt financing or obtain additional equity
capital. In addition, any indebtedness we incur in the future could subject us to restrictive covenants limiting our flexibility in
planning for, or reacting to changes in, our business. If we do not comply with such covenants, our lenders could accelerate
repayment of our debt or

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restrict our access to further borrowings. If we raise funds by selling more stock, your ownership in us will be diluted, and we may
grant future investors rights superior to those of the common stock that you are purchasing. If we are unable to obtain additional
capital when needed, we may have to delay, modify or abandon some of our expansion plans. This could slow our growth,
negatively affect our ability to compete in our industry and adversely affect our financial condition.

                                                 RISKS RELATED TO THIS OFFERING

No market currently exists for our common stock. We cannot assure you that an active trading market will develop for
our stock.

      Prior to this offering, you could not buy or sell our common stock publicly. We have filed an application for the listing of our
common stock on the Nasdaq National Market. We cannot predict the extent to which investor interest in our company will lead to
the development of a trading market on the Nasdaq or otherwise or how liquid that market might become. An active public market
for our common stock may not develop or be sustained after this offering. If a market does not develop or is not sustained, it may
be difficult for you to sell your shares of common stock at a price that is attractive to you, or at all. The initial public offering price of
our common stock will be determined through negotiations between the representatives of the underwriters and us and may not
be indicative of the price that will prevail in the open market, which may be lower. See ―Underwriting.‖

Future sales of shares by existing stockholders or issuances of our common stock by us could reduce our stock price.

      If our existing stockholders sell substantial amounts of our common stock in the public market or we issue additional shares
of common stock following this offering, the market price of our common stock could decline. Upon completion of this offering we
will have 25,441,245 outstanding shares of common stock. In conjunction with this offering, our directors, officers and
stockholders representing an aggregate of over 90% of our common stock outstanding after conversion of our preferred stock and
immediately prior to the completion of this offering have entered into lock-up agreements with the underwriters or similar lock-up
agreements with us under which they have agreed not to sell their shares of our common stock until 180 days from the date of this
prospectus, without the consent of the representatives of the underwriters. We have also agreed that we will not sell additional
shares of our common stock during this period. However, these lock-up agreements are subject to important exceptions. See
―Underwriting.‖ After these lock-up agreements terminate, an additional 19,297,342 shares will be eligible for sale in the public
market. In addition, the 3,306,481 shares subject to outstanding options, of which 2,088,080 are currently exercisable, and the
shares reserved for future issuance under our stock option plan will become available for sale immediately upon the exercise of
such options. Our 2005 Equity Incentive Award Plan contains an evergreen provision that may increase the number of shares
available for issuance each year under that plan.

Anti-takeover provisions in our charter documents and Delaware corporate law might deter acquisition bids for us that
you might consider favorable.

     We intend to amend and restate our certificate of incorporation prior to the closing of this offering. This amended and
restated certificate of incorporation will provide for a classified board of directors; the inability of our stockholders to call special
meetings of stockholders, to act by written consent, to remove any director or the entire board of directors without cause, or to fill
any vacancy on the board of directors; and advance notice requirements for stockholder

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proposals. Our board of directors will also be permitted to authorize the issuance of preferred stock with rights superior to the
rights of the holders of common stock without any vote or further action by our stockholders. These provisions and other
provisions under Delaware law could make it difficult for a third party to acquire us, even if doing so would benefit our
stockholders.

You will incur immediate and substantial dilution.

     The initial public offering price is expected to be substantially higher than the pro forma net book value per share of our
outstanding common stock. Based upon the issuance and sale of 6,104,575 shares of common stock by us at an assumed initial
public offering price of $13.50 per share, the midpoint of the initial public offering price range indicated on the cover of this
prospectus, investors purchasing common stock in this offering will incur immediate and substantial dilution in the amount of
$10.28 per share. In addition, we have issued options to acquire common stock at prices below the initial public offering price. To
the extent these outstanding options are exercised, there will be further dilution to investors in this offering. See ―Dilution.‖

Our stock does not have a trading history and the price of our common stock is subject to volatility and trends in the
communications industry in general.

      The trading price of our common stock is likely to be volatile. The stock market, and the stock of companies in our industry in
particular, has experienced extreme volatility, and this volatility has often been unrelated to the operating performance of particular
companies. Prices for the common stock will be determined in the marketplace and may be influenced by many factors, including
variations in our financial results, changes in earnings estimates by industry research analysts, investors’ perceptions of us and
general economic, industry and market conditions. Many of these factors are beyond our control.

Insiders will continue to have substantial control over us after this offering. This may prevent you and other
stockholders from influencing significant corporate decisions and may harm the market price of our common stock.

      After this offering, our directors, executive officers and principal stockholders, together with their affiliates, will beneficially
own, in the aggregate, approximately 32.74% of our outstanding common stock, or 31.63% if the underwriters exercise their
over-allotment option in full. These stockholders may have interests that conflict with yours and, if acting together, may have the
ability to determine the outcome of matters submitted to our stockholders for approval, including the election and removal of
directors and any merger, consolidation or sale of all or substantially all of our assets. In addition, these stockholders, acting
together, may have the ability to control the management and affairs of our company. Accordingly, this concentration of ownership
may harm the market price of our common stock by:

      •   delaying, deferring or preventing a change in control;

      •   impeding a merger, consolidation, takeover or other business combination involving us; or

      •   discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.

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Because we do not currently intend to pay dividends on our common stock, stockholders will benefit from an investment
in our common stock only if it appreciates in value.

      The continued expansion of our business will require substantial funding. Accordingly, we do not currently anticipate paying
any dividends on shares of our common stock. Any determination to pay dividends in the future will be at the discretion of our
board of directors and will depend upon results of operations, financial condition, contractual restrictions, restrictions imposed by
applicable law and other factors our board of directors deems relevant. Accordingly, if you purchase shares in this offering,
realization of a gain on your investment will depend on the appreciation of the price of our common stock. There is no guarantee
that our common stock will appreciate in value or even maintain the price at which stockholders have purchased their shares.

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                            CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

      Our disclosure and analysis in this prospectus concerning our operations, cash flows and financial position, including, in
particular, the likelihood of our success in expanding our business and our assumptions regarding the regulatory environment,
include forward-looking statements. Statements that are predictive in nature, that depend upon or refer to future events or
conditions, or that include words such as ―expect,‖ ―anticipate,‖ ―intend,‖ ―plan,‖ ―believe,‖ ―estimate‖ and similar expressions, are
forward-looking statements. Although these statements are based upon reasonable assumptions, including projections of sales,
operating margins, earnings, cash flow, working capital and capital expenditures, they are subject to risks and uncertainties that
are described more fully in this prospectus in the section titled ―Risk Factors.‖ These forward-looking statements represent our
estimates and assumptions only as of the date of this prospectus and are not intended to give any assurance as to future results.
As a result, you should not place undue reliance on any forward-looking statements. We assume no obligation to update any
forward-looking statements to reflect actual results, changes in assumptions or changes in other factors, except as required by
applicable securities laws. Factors that might cause future results to differ include, but are not limited to, the following:

      •   the timing of the initiation, progress or cancellation of significant contracts or arrangements;

      •   the mix and timing of services sold in a particular period;

      •   our need to balance the recruitment and retention of experienced management and personnel with the maintenance of
          high labor utilization;

      •   rapid technological change and the timing and amount of start-up costs incurred in connection with the introduction of
          new services or the entrance into new markets;

      •   the inability to attract sufficient customers in new markets;

      •   changes in estimates of taxable income or utilization of deferred tax assets in foreign jurisdictions which could
          significantly affect our effective tax rate; and

      •   general economic and business conditions.

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                                                         USE OF PROCEEDS

      Assuming an initial public offering price of $13.50 per share, the midpoint of the initial public offering price range indicated on
the cover of this prospectus, we estimate that our net proceeds from this offering will be approximately $73.6 million, or $84.6
million if the underwriters exercise their over-allotment option in full, after deducting underwriting discounts and commissions and
other estimated expenses payable by us of $8.9 million, or $9.7 million, respectively.

      We expect to use the net proceeds from this offering to:

      •   repay all outstanding principal and accrued interest under our credit facility with Cisco Capital, which was $62.9 million as
          of June 30, 2005, and terminate the facility; and

      •   provide approximately $10.6 million for general corporate purposes, including increased capital expenditures and startup
          costs (primarily selling, general and administrative expenses) for our expansion into two new markets by the end of 2009,
          in addition to the four new markets we have already scheduled for expansion using existing funds and cash we expect to
          generate from operations (without regard to any net proceeds from this offering) over the same period.

     The amounts borrowed under our existing credit facility are due in full on March 31, 2010. At June 30, 2005, the outstanding
indebtedness under our credit facility was $62.9 million, which bears interest at an effective rate of 6.75%. We used the
borrowings under our credit facility during 2004, amounting to approximately $13.5 million, for purchases of property and
equipment. Upon early repayment of this debt, we will recognize a gain of approximately $5.0 million relating to the remaining
carrying value in excess of principal recorded in conjunction with our troubled debt restructuring.

     We are not currently a party to any agreements or commitments and we have no current understandings with respect to any
acquisitions, although we review potential acquisition candidates and business combination proposals from time to time.

     We have not determined the amounts we plan to spend on certain of the items listed above or the timing of these
expenditures. As a result, we will have broad discretion to allocate the net proceeds from this offering. Until we use the net
proceeds, we may invest them in short-term, interest-bearing, investment grade and U.S. government securities.

                                                          DIVIDEND POLICY

      We have never paid or declared any dividends on our common stock, and do not anticipate paying any dividends for the
indefinite future. The terms of our credit facility restrict our ability to pay dividends on our common stock. Although we intend to
terminate our credit facility upon the consummation of this offering, we intend to retain all future earnings, if any, for use in the
operation of our business and to fund future growth. The decision whether to pay dividends will be made by our board of directors
in light of conditions then existing, including factors such as our results of operations, financial condition and requirements,
business conditions and covenants under any applicable contractual arrangements.

                                                                   20
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                                                             CAPITALIZATION

      The following table sets forth our capitalization as of June 30, 2005 on an actual basis and on a pro forma basis, as adjusted
to effect:

      •    the repayment of all outstanding principal and accrued interest under our credit facility with Cisco Capital, which will
           decrease cash and cash equivalents by $62.9 million and decrease total long term debt (excluding capital leases) by
           $67.9 million (after giving effect to $5.0 million recorded as the carrying value in excess of principal);

      •    the issuance and sale of shares of our common stock in this offering at an assumed offering price of $13.50 per share,
           the midpoint of the initial public offering price range indicated on the cover of this prospectus, after deducting underwriting
           discounts and commissions and estimated offering expenses payable by us, which will increase cash and cash
           equivalents by $73.6 million, common stock by $61,046 and additional paid-in capital by $73.5 million; and

      •    the conversion of all our outstanding shares of and accrued dividends on Series B preferred stock and Series C preferred
           stock into an aggregate of 18,600,597 shares of our common stock, which will increase common stock by $186,006 and
           additional paid-in capital by $83.7 million (without giving effect to preferred dividends accrued after June 30, 2005).

     You should read the following table in conjunction with the consolidated financial statements and the related notes,
―Management’s Discussion and Analysis of Financial Condition and Results of Operations‖ and ―Use of Proceeds‖ included
elsewhere in this prospectus.
                                                                                                               As of June 30, 2005

                                                                                                                               Pro Forma
                                                                                                           Actual             As Adjusted

                                                                                                             (amounts in thousands,
                                                                                                              except per share data)
Cash and cash equivalents                                                                              $     23,498          $         34,128
Marketable securities                                                                                        10,000                    10,000

                                                                                                       $     33,498          $         44,128

Total long-term debt, excluding capital leases                                                         $     67,907          $             —
Preferred stock                                                                                              83,893                        —
Stockholders’ deficit:
  Common stock, $0.01 par value per share:
    65,722 shares authorized;
    162 shares issued and outstanding; 24,867 shares issued and outstanding, pro forma
    as adjusted                                                                                                   2                   248
  Deferred stock compensation                                                                                  (912 )                (912 )
  Additional paid-in capital                                                                                 78,482               235,685
  Accumulated deficit                                                                                      (158,339 )            (153,357 )

     Total stockholders’ (deficit) equity                                                                   (80,767 )                  81,664

          Total capitalization                                                                         $     71,033          $         81,664


                                                                     21
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                                                                                 DILUTION

       Our net tangible book value as of June 30, 2005 was $1.7 million, or $10.22 per share. Net tangible book value per share is
determined at any date by subtracting our total liabilities from the total book value of our tangible assets and dividing the
difference by the number of our shares of common stock deemed to be outstanding at that date. Dilution is the amount by which
the offering price paid by the purchasers of our common stock to be sold in this offering exceeds the net tangible book value per
share after this offering. Assuming that the 6,104,575 shares of our common stock offered by this prospectus are sold at an initial
public offering price of $13.50 per share, the midpoint of the initial public offering price range indicated on the cover of this
prospectus, after deducting the estimated underwriting discounts and commissions and offering expenses payable by us and the
application of the net proceeds therefrom to repay certain indebtedness as described under ―Use of Proceeds,‖ our pro forma net
tangible book value of our common stock, as of June 30, 2005, would have been approximately $80.2 million, or $3.22 per share.
This represents an immediate decrease in pro forma net tangible book value of $7.00 per share to existing stockholders and an
immediate dilution of $10.28 per share to new investors purchasing shares of common stock in this offering. The following table
illustrates this substantial and immediate per share dilution to new investors:
                                                                                                                                                                         Per
                                                                                                                                                                        Share

Assumed initial public offering price share                                                                                                                          $ 13.50
    Historical net tangible book value per share as of June 30, 2005                                                                            $     10.22
    Decrease attributable to conversion of preferred stock                                                                                           (10.13 )

      Pro forma net tangible book value per share as of June 30, 2005                                                                                  0.09

      Increase per share attributable to sale of common stock in this offering                                                                         3.13

Pro forma as adjusted net tangible book value per share after this offering                                                                                               3.22

Dilution of pro forma net tangible book value per share to new investors                                                                                             $ 10.28


      The following table summarizes, as of June 30, 2005, on a pro forma basis the total number of shares of common stock
purchased from us, the total consideration paid to us, assuming an initial public offering price of $13.50 per share, the midpoint of
the initial public offering price range indicated on the cover of this prospectus (before deducting the estimated underwriting
discount and commissions and offering expenses payable by us in connection with this offering), and the average price per share
paid by existing stockholders and by new investors purchasing shares in this offering:
                                                                                                                                                                     Average
                                                                                                                                                                     Price Per
                                                                              Shares Purchased                              Total Consideration                       Share

                                                                            Number               Percent                  Amount                  Percent

Existing stockholders (1)                                                 18,762,663                   75 %        $    138,119,996                    63 %         $    7.36
Investors in this offering                                                 6,104,575                   25 %              82,411,766                    37 %             13.50

      Total                                                               24,867,238                 100 %         $    220,531,762                  100 %          $     8.87

(1)   Includes 18,600,597 shares resulting from the conversion of all of our outstanding shares of preferred stock as of June 30, 2005 and after giving effect to a 1 for 3.88
      reverse stock split.

      The tables and calculations above assume no exercise of:

      •    stock options outstanding as of June 30, 2005 to purchase 3,319,773 shares of common stock at a weighted average
           exercise price of $6.02 per share;

      •    warrants outstanding as of June 30, 2005 to purchase 720,028 shares of common stock at a weighted exercise price of
           $0.07; or

      •    the underwriters’ over-allotment option.

      To the extent any of these options are exercised, there will be further dilution to new investors.

                                                                                      22
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                                            SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

     The following table sets forth our selected consolidated statements of operations, balance sheets and other financial data for
the periods indicated and have been derived from our consolidated financial statements included elsewhere in this prospectus.
The selected financial data is qualified by reference to and should be read in conjunction with ―Management’s Discussion and
Analysis of Financial Condition and Results of Operations‖ and our consolidated financial statements and related notes included
elsewhere in this prospectus.
                                                                Date of
                                                               Inception
                                                              (March 28,
                                                                2000) to
                                                             December 31,                                                                               Six Months
                                                                 2000                          Year Ended December 31,                                Ended June 30,

                                                                                   2001              2002            2003            2004            2004            2005

                                                                                        (dollars in thousands, except per share data)
Statement of Operations Data:
Revenue                                                      $          —      $     1,439       $   20,956      $   65,513      $ 113,311       $   51,452      $   73,358
Operating expenses:
   Cost of service (exclusive of $ —, $2,035, $6,672,
     $12,947, $17,611, $8,362 and $9,783 depreciation
     and amortization, respectively)                                    —            3,812           11,558          21,815           31,725         14,083          21,824
   Selling, general and administrative (exclusive of $241,
     $5,318, $7,544, $8,324, $5,036, $3,169 and $1,869
     depreciation and amortization, respectively)                   11,438         26,928            42,197          48,085           65,159         30,318          41,288
   Write-off of public offering costs                                   —              —                 —               —             1,103             —               —
   Depreciation and amortization                                       241          7,353            14,216          21,271           22,647         11,531          11,652

      Total operating expenses                                      11,679         38,093            67,971          91,171          120,634         55,932          74,764

Operating loss                                                     (11,679 )       (36,654 )         (47,015 )       (25,658 )        (7,323 )        (4,480 )        (1,406 )
Other income (expense):
      Interest income                                                  440             675               411             715             637             328             508
      Interest expense                                                  —           (3,181 )          (4,665 )        (2,333 )        (2,788 )        (1,615 )        (1,315 )
      Gain recognized on troubled debt restructuring                    —               —              4,338              —               —               —               —
      Minority interest in earnings                                  1,094             779                —               —               —               —               —
      Loss on disposal of property and equipment                        (7 )           (14 )            (222 )        (1,986 )        (1,746 )          (425 )          (273 )
      Other income (expense), net                                       (1 )             7               (35 )          (220 )          (236 )          (149 )           (22 )

Net loss                                                     $     (10,153 )   $ (38,388 )       $ (47,188 )     $ (29,482 )     $ (11,456 )     $    (6,341 )   $    (2,508 )

Balance Sheet Data (at period end):
Cash and cash equivalents                                    $      15,601     $     3,293       $     5,470     $     5,127     $    22,860     $     2,572     $    23,498
Marketable securities                                                   —           28,000            35,000          21,079          14,334          15,175          10,000
Working capital                                                     11,965          23,679            25,215           2,240           8,776          (4,367 )         3,222
Total assets                                                        33,592          71,219            96,583          87,048          99,203          81,201          97,870
Long-term debt, including current portion                               —           33,957            51,932          67,628          70,331          69,216          67,907
Convertible preferred stock                                         38,166          76,972            48,455          54,835          78,963          58,307          83,893
Stockholders’ deficit                                              (10,453 )       (48,841 )         (19,519 )       (55,311 )       (73,573 )       (64,928 )       (80,767 )
Other Financial Data:
Capital expenditures (1)                                            17,877        25,608            28,447          26,205          23,741           12,537          10,364
Net cash provided by (used in) operating activities                 (7,533 )     (28,642 )         (33,589 )        (5,895 )        13,877            1,837           7,985
Net cash provided by (used in) investing activities                (17,877 )     (41,834 )         (12,120 )         4,625          (3,921 )           (242 )        (1,746 )
Net cash provided by (used in) financing activities                 41,011        58,168            47,886             927           7,777           (4,150 )        (5,601 )
Net loss per common share, basic and diluted                 $     (119.44 )   $ (342.75 )       $ (429.88 )     $ (310.75 )     $ (143.71 )     $   (76.79 )    $   (50.18 )
Weighted average common shares outstanding, basic
  and diluted                                                           85              112              112             115             129             127             147
Non-GAAP Financial Data:
Total adjusted EBITDA (2)                                    $     (11,438 )   $ (29,301 )       $ (32,777 )     $    (4,366 )   $    16,802     $     7,229     $   10,398

                                                                                   23
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(1)   Represents cash and non-cash purchases of property and equipment on a combined basis.
(2)   Adjusted EBITDA is not a substitute for operating income, net income, or cash flow from operating activities as determined in accordance with generally accepted
      accounting principles, or GAAP, as a measure of performance or liquidity. See ―Non-GAAP Financial Measures‖ for our reasons for including adjusted EBITDA data in
      this prospectus and for material limitations with respect to the usefulness of this measurement. The following table sets forth a reconciliation of total adjusted EBITDA
      to net loss:

                                                           Date of
                                                          Inception
                                                         (March 28,
                                                           2000) to
                                                        December 31,                                                                                     Six Months
                                                            2000                              Year Ended December 31,                                  Ended June 30,

                                                                                 2001             2002              2003             2004             2004             2005

                                                                                   (dollars in thousands)
Reconciliation of total adjusted EBITDA to Net
  loss:
     Total adjusted EBITDA for reportable
         segments                                       $        (11,438 )    $ (29,301 )      $ (32,777 )      $    (4,366 )    $    16,802      $     7,229      $    10,398
            Depreciation and amortization                           (241 )       (7,353 )        (14,216 )          (21,271 )        (22,647 )        (11,531 )        (11,652 )
            Non-cash stock option compensation                        —              —               (22 )              (21 )           (375 )           (178 )           (152 )
            Write-off of public offering costs                        —              —                —                  —            (1,103 )             —                —
            Interest income                                          440            675              411                715              637              328              508
            Interest expense                                          —          (3,181 )         (4,665 )           (2,333 )         (2,788 )         (1,615 )         (1,315 )
            Minority interest                                      1,094            779               —                  —                —                —                —
            Gain recognized on troubled debt
               restructuring                                          —                 —            4,338                 —                —                —                —
            Loss on disposal of property and
               equipment                                              (7 )            (14 )           (222 )         (1,986 )         (1,746 )           (425 )           (273 )
            Other expense (income), net                               (1 )              7              (35 )           (220 )           (236 )           (149 )            (22 )

Net loss                                                $        (10,153 )    $ (38,388 )      $ (47,188 )      $ (29,482 )      $ (11,456 )      $    (6,341 )    $    (2,508 )



                                                                                      24
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                                                 NON-GAAP FINANCIAL MEASURES

     We use the total adjusted EBITDA of our reportable segments as a principal indicator of the operating performance of our
business on a consolidated basis. Our chief executive officer, who is our chief operating decision maker, also uses our segment
adjusted EBITDA to evaluate the performance of our reportable segments in accordance with SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information . EBITDA represents net income before interest, taxes, depreciation and
amortization. We define adjusted EBITDA as net income (loss) before interest, taxes, depreciation and amortization expenses,
excluding non-cash stock option compensation, write-off of public offering costs, gain recognized on troubled debt restructuring,
loss on disposal of property and equipment and other non-operating income or expense. Our total adjusted EBITDA represents
the sum of adjusted EBITDA for each of our segments.

     Our total adjusted EBITDA is a non-GAAP financial measure. Our management uses total adjusted EBITDA in its
decision-making processes relating to the operation of our business together with GAAP measures such as revenue and income
from operations.

      Our calculation of total adjusted EBITDA excludes:

      •   the write-off of public offering costs incurred in 2004 and the gain on troubled debt restructuring recognized in 2002, both
          of which are non-recurring items; and

      •   non-cash stock option compensation, loss on disposal of property and equipment and other non-operating income or
          expense, each of which our management views as non-operating and non-cash expenses that are not related to
          management’s assessment of the operating results and performance of our segments or our consolidated operations.

      Our management believes that total adjusted EBITDA permits a comparative assessment of our operating performance,
relative to our performance based on our GAAP results, while isolating the effects of depreciation and amortization, which may
vary from period to period without any correlation to underlying operating performance, and of non-cash stock option
compensation, which is a non-cash expense that varies widely among similar companies. We provide information relating to our
total adjusted EBITDA so that investors have the same data that we employ in assessing our overall operations. We believe that
trends in our total adjusted EBITDA are a valuable indicator of the operating performance of our company on a consolidated basis
and of our operating segments’ ability to produce operating cash flow to fund working capital needs, to service debt obligations
and to fund capital expenditures.

      In addition, total adjusted EBITDA is a useful comparative measure within the communications industry because the industry
has experienced recent trends of increased merger and acquisition activity and financial restructurings, which have led to
significant variations among companies with respect to capital structures and cost of capital (which affect interest expense) and
differences in taxation and book depreciation of facilities and equipment (which affect relative depreciation expense), including
significant differences in the depreciable lives of similar assets among various companies, as well as non-operating and one-time
charges to earnings, such as the effect of debt restructurings.

       Accordingly, total adjusted EBITDA allows analysts, investors and other interested parties in the communications industry to
facilitate company to company comparisons by eliminating some of the foregoing variations. Total adjusted EBITDA as used in
this prospectus may not, however, be directly comparable to similarly titled measures reported by other companies due to
differences in accounting policies and items excluded or included in the adjustments, which limits its usefulness as a comparative
measure.

                                                                   25
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     Our calculation of total adjusted EBITDA is not directly comparable to EBIT (earnings before interest and taxes) or EBITDA.
In addition, total adjusted EBITDA does not reflect:

      •   our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

      •   changes in, or cash requirements for, our working capital needs;

      •   our interest expense, or the cash requirements necessary to service interest or principal payments on our debts; and

      •   any cash requirements for the replacement of assets being depreciated and amortized, which will often have to be
          replaced in the future, even though depreciation and amortization are non-cash charges.

     Total adjusted EBITDA is not intended to replace operating income, net income and other measures of financial performance
reported in accordance with GAAP. Rather, total adjusted EBITDA is a measure of operating performance that you may consider
in addition to those measures. Because of these limitations, total adjusted EBITDA should not be considered as a measure of
discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily
on our GAAP results and using total adjusted EBITDA as a supplemental financial measure.

                                                                 26
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                                       MANAGEMENT’S DISCUSSION AND ANALYSIS OF
                                    FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      You should read the following discussion together with “Selected Consolidated Financial and Operating Data” and our
consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains
forward-looking statements about our business and operations, based on current expectations and related to future events and
our future financial performance, that involve risks and uncertainties. Our actual results may differ materially from those we
currently anticipate as a result of many important factors, including the factors we describe under “Risk Factors,” “Cautionary
Notice Regarding Forward-Looking Statements” and elsewhere in this prospectus.

Overview

     We provide managed IP-based communications services to our target customers of small businesses with 4 to 200
employees in selected large metropolitan areas. We provide these services through bundled packages of local and long distance
voice services and broadband Internet services, together with additional applications and services, for an affordable fixed monthly
fee under contracts with terms of one, two or three years. We currently operate in Atlanta, Dallas, Denver, Houston and Chicago.

      We sell four basic bundled packages of services, primarily delineated by the number of local voice lines provided to the
customer. Each of our BeyondVoice packages includes local and long distance voice services and broadband Internet access,
plus the customer’s choice of either an e-business pack (including our email and web hosting applications) or a communications
pack (including our voicemail and other voice-related applications). Customers may also choose to add extra features or lines for
an additional fee. In addition, we expect to integrate wireless services with our existing wireline services in the first half of 2006.

    We deliver our services over an all-IP network, which we believe affords greater service flexibility and significantly lower
network costs than traditional service providers using circuit-switch technologies. We believe our high degree of systems
automation contributes to operational efficiencies and lower costs in our support functions.

      We sell our services primarily through a direct sales force in each market, supplemented by sales agents. These agents
often have other business relationships with the customer and, in many cases, perform equipment installations for us at our
customers’ sites. A significant portion of our new customers is generated by referrals from existing customers and partners. We
offer financial incentives to our customers and other sources for referrals.

      We compete primarily against incumbent local exchange carriers and, to a lesser extent, against competitive local exchange
carriers, both of which are local telephone companies. Local telephone companies do not generally have the same focus on our
target market and principally concentrate on medium or large enterprises or residential customers. We compete primarily based
on our high-value bundled services that bring many of the same managed services to our customers that have historically been
available only to large businesses, as well as based on our customer care, network reliability and operational efficiencies.

     We formed Cbeyond and began the development of our network and business processes following our first significant
funding in early 2000. We launched our service first in Atlanta in April 2001, followed by Dallas in October 2001 and Denver in
January 2002. During the remainder of 2002 and 2003, we focused on building our customer bases in these markets. As a result
of our progress, we decided to launch our service in additional markets. We launched our service in Houston in March 2004 and
subsequently in Chicago in March 2005. We plan to expand into six additional markets by the end of 2009.

                                                                   27
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     We focus on adjusted EBITDA as a principal indicator of the operating performance of our business. EBITDA represents net
income before interest, taxes, depreciation and amortization. We define adjusted EBITDA as net income (loss) before interest,
taxes, depreciation and amortization expenses, excluding stock-based compensation expense, write-off of public offering costs,
gain recognized on troubled debt restructuring, loss on disposal of property and equipment and other non-operating income or
expense. In our presentation of segment financial results, adjusted EBITDA for a segment does not include corporate overhead
expense and other centralized operating costs. We believe that adjusted EBITDA trends are a valuable indicator of our operating
segments’ relative performance and of whether our operating segments are able to produce operating cash flow to fund working
capital needs, to service debt obligations and to fund capital expenditures.

     We seek to achieve positive adjusted EBITDA, excluding corporate overhead, in our new markets within 18 to 22 months
from launch. We first achieved positive adjusted EBITDA in Atlanta, Dallas, Denver and Houston within 17 months from launch in
each market. Whether we achieve positive adjusted EBITDA in new markets within the same timeframe depends on a number of
factors, including the local pricing environment, the competitive landscape and our costs to obtain unbundled network elements
from the local telephone company in each market, including elements such as loops, dedicated transport, circuit switching and
operational support systems. We divide our business into five operating segments: Atlanta, Dallas, Denver, Houston and Chicago.

      We believe our business approach requires significantly less capital to launch operations compared to traditional
communications companies using legacy technologies. Most of our capital expenditures related to expanding into new markets
are success-based, incurred only as our customer base grows. Based on our historical experience, in the first year of a new
market launch, approximately 60% of our network capital expenditures are success-based and, thereafter, approximately 85% of
our network capital expenditures are success-based. We believe the success-based nature of our capital expenditures mitigates
the risk of unprofitable expansion. We have a relatively low fixed-cost component in our budgeted capital expenditures associated
with each new market we enter, particularly in comparison to service providers employing time-division multiplexing, which is a
technique for transmitting multiple channels of separate data, voice and/or video signals simultaneously over a single
communication medium, or circuit-switch technology, which is a switch that establishes a dedicated circuit for the entire duration of
a call.

Revenue

     The majority of our customers buy our BeyondVoice I package, which serves customers with 5-14 local voice lines, or
generally 30 or fewer employees. We also sell BeyondVoice II and BeyondVoice II Plus to customers with 15-24 local voice lines,
or generally 31-100 employees. Our BeyondVoice III package is typically offered to customers with 101-200 employees. Each
BeyondVoice I customer receives all our services over a dedicated broadband T-1 connection providing a maximum bandwidth of
1.5 Mbps (megabits per second). BeyondVoice II and BeyondVoice II Plus customers receive their services over two dedicated
T-1 connections offering a maximum bandwidth of 2.0 and 3.0 Mbps, respectively. BeyondVoice III customers receive their
services over three dedicated T-1 connections offering a maximum bandwidth of 4.5 Mbps. We believe that our customers highly
value the level of bandwidth offered with our services. As of June 30, 2005, approximately 86.2% of our customer base have
BeyondVoice I, 6.9% have BeyondVoice II, 6.5% have BeyondVoice II Plus and 0.4% have BeyondVoice III.

      Average monthly revenue per customer location increased from $658 per customer location in 2002 to $771 per customer
location in 2003, due to an increasing percentage of BeyondVoice

                                                                 28
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II and BeyondVoice II Plus customers in 2003. Average monthly revenue per customer location further increased to $774 in 2004.
We expect average monthly revenue per customer location to remain relatively flat or decline in the foreseeable future due to
competitive pricing pressures. Customer revenues represented approximately 96.1% of total revenues in 2004. Revenues from
access charges paid to us by other communications companies to terminate calls to our customers represented approximately
3.9% of revenues in 2004. We expect that our revenues from wireless services will be less than 2% of our overall revenues in
2006.

Expenses

      Cost of Service. Our cost of service represents costs directly related to the operation of our network, including payments to
the local telephone companies and other communications carriers such as long distance providers, for access, interconnection
and transport fees for voice and Internet traffic, customer circuit installation expenses paid to the local telephone companies, fees
paid to third party providers of certain applications such as web hosting services, colocation rents and other facility costs, and
telecommunications-related taxes and fees. The primary component of cost of service is the access fees paid to local telephone
companies for the T-1 circuits we lease on a monthly basis to provide connectivity to our customers. These access circuits link our
customers to our network equipment located in a colocation facility, which we lease from local telephone companies. The access
fees for these circuits vary by state and are the primary reason for differences in cost of service across our markets. We lease all
of our access circuits on a wholesale basis as unbundled network element loops or extended enhanced links as provided for
under the FCC’s Telecommunications Elemental Long Run Incremental Cost rate structure. We employ unbundled network
element loops when the customer’s T-1 circuit is located where it can be connected to a local telephone company’s central office
where we have a colocation, and we use extended enhanced links when we do not have a central office colocation available to
serve a customer’s T-1 circuit. Approximately half of our circuits are provisioned using unbundled network element loops and half
using extended enhanced links. Our monthly expenses are significantly less when using unbundled network element loops than
extended enhanced links, but unbundled network element loops require us to incur the capital expenditures of central office
colocation equipment. We install central office colocation equipment in those central offices having the densest concentration of
small businesses. We usually launch operations in a new market with several colocations and add additional colocation facilities
over time as we confirm the most advantageous locations in which to deploy the equipment. We believe our discipline of leasing
these T-1 access circuits on a wholesale basis rather than on the basis of retail, or special access, rates from the local telephone
companies is an important component of our operating cost structure.

      We receive service credits that are recognized as offsets against cost of service from various local telephone companies to
adjust for prior period errors in billing, including the effect of price decreases retroactively applied upon the enactment of new rates
as mandated by regulatory bodies. These service credits are often the result of negotiated resolutions of bill disputes that we
conduct with our vendors. We also receive payments that are recognized as offsets against cost of service from the local
telephone companies in the form of performance penalties that are assessed by state regulatory commissions based on the local
telephone companies’ performance in the delivery of circuits and other services that we use in our network. Because of the many
factors as noted that impact the amount and timing of service credits and performance penalties, estimating the ultimate outcome
of these situations is uncertain. Accordingly, we recognize service credits and performance penalties as offsets to cost of service
when the ultimate resolution and amount are known. These items do not follow any predictable trends and often result in
variances when comparing the amounts received over multiple periods.

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      Selling, General and Administrative Expenses. Our selling, general and administrative expenses consist of salaries and
related costs for employees and other expenses related to sales and marketing, engineering, information technology, billing,
regulatory, administrative, collections and legal and accounting functions. Our selling, general and administrative expenses
include both fixed and variable costs. Fixed selling expenses include salaries and office rents. Variable selling costs include
commissions and marketing collateral. Fixed general and administrative costs include the cost of staffing certain corporate
overhead functions such as IT, marketing, administrative, billing and engineering, and associated costs, such as office rent, legal
and accounting fees, property taxes and recruiting costs. Variable general and administrative costs include the cost of provisioning
and customer activation staff, which grows with the level of installation of new customers, and the cost of customer care and
technical support staff, which grows with the level of total customers on our network. As we expand into new markets, certain fixed
costs are likely to increase; however, these increases are intermittent and not proportional with the growth of customers.

     Write-off of Public Offering Costs. In 2004, we began work in connection with an initial public offering of our common stock.
In connection with the proposed offering, we incurred direct expenses, which were primarily legal and accounting fees with outside
service firms, of $1.1 million. We have expensed these costs. In 2005, however, we expect to capitalize similar costs and
subsequently deduct them from the proceeds of the proposed initial public offering as a charge against additional paid-in capital,
due to their being incurred shortly before the transaction.

      Depreciation and Amortization Expense. Depreciation is applied using the straight-line method over the estimated useful
lives of the assets once the assets are placed in service. We generally depreciate network-related equipment, which represents
the majority of our assets, over either a 3 or 5 year period, with approximately 50% over each of 3 years and 5 years. We
depreciate IT equipment and licenses over 3 years and furniture over 7 years. The value of leasehold improvements is amortized
over 2 to 5 years, which is the shorter of the respective lease term or duration of economic benefit of the assets.

       Interest Expense (Net). Interest expense (net) consists of interest charges paid on our long-term debt through our credit
facility with Cisco Capital, interest charges recognized under capital lease obligations incurred in connection with certain software
licenses, interest income earned on cash and cash equivalents, marketable securities, long-term investments, restricted cash
equivalents, and non-cash income recognized through the amortization of a portion of the gain recorded in connection with the
conversion of a portion of our debt with Cisco Capital into Series B preferred stock in November 2002.

      Gain Recognized on Troubled Debt Restructuring . The gain recognized in connection with the conversion of our debt with
Cisco Capital into Series B preferred stock in November 2002 was recorded as a troubled debt restructuring under SFAS No. 15.
A portion of the gain was recognized at the time of the transaction. However, the total amount of the gain could not be recorded as
a result of the variable interest rate of the debt. Therefore, the remaining carrying value in excess of principal at the restructuring
was included in the balance of long-term debt. This carrying value in excess of principal is reduced on an ongoing basis as
interest payments are made until the expiration or prepayment of the debt. This reduction partially offsets interest expense.

     Loss on Disposal of Property and Equipment. We record losses on the disposal of equipment primarily when customer
premise equipment (integrated access devices) is not returned to us following the disconnection of customers from our service.
We also record losses on the impairment or disposition of assets, primarily network equipment that has become obsolete or is no
longer in service and software licenses that are no longer in use. In addition,

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we write down the unrealized value of certain marketable securities to their fair market value if their value is dependent on variable
interest rates and they are unlikely to recover their value in the near future.

     Income Taxes. As a result of our operating losses, we have paid no income taxes to date. We expect to pay no income taxes
through at least 2007, in part due to our net operating loss carryforwards.

Internal Control Over Financial Reporting

      Overview . We have had material weaknesses in internal control over financial reporting in the past. In connection with the
audit of our 2003 and 2004 fiscal years, our management and our independent registered public accounting firm identified matters
involving our internal control over financial reporting that constituted material weaknesses as defined by the American Institute of
Certified Public Accountants under AU Section 325, pursuant to which:

      •   material weaknesses are defined as reportable conditions in which the design or operation of one or more of the internal
          control components does not reduce to a relatively low level the risk that misstatements caused by errors or irregularities
          in amounts that would be material in relation to the consolidated financial statements being audited may occur and not be
          detected within a timely period by employees in the normal course of performing their assigned functions; and

      •   reportable conditions are defined as matters representing significant deficiencies in the design or operation of internal
          control that, in the judgment of our independent registered public accounting firm, could adversely affect our ability to
          initiate, record, process and report financial data consistent with our management’s assertions in our consolidated
          financial statements.

     These definitions in AU Section 325 are consistent with the definitions of significant deficiency and material weakness as
defined by the Public Company Accounting Oversight Board in Auditing Standard No. 2. AS No. 2 contains the requirements for
compliance with Section 404 of the Sarbanes-Oxley Act of 2002. Unlike AS No. 2, however, under which internal control over
financial reporting is considered at year-end, the AICPA standards involve the assessment of reportable conditions and material
weaknesses over the periods under audit.

      We are committed to maintaining effective internal control over financial reporting to provide reasonable assurance regarding
the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
Our accounting personnel report regularly to our audit committee on all accounting and financial matters. In addition, our audit
committee actively communicates with and oversees the engagement of our independent registered public accounting firm. Based
on the actions we have taken to date to enhance the reliability and effectiveness of our internal control over financial reporting, our
management believes that there is no material weakness in our internal control as of the date of this prospectus because we have
remediated the underlying causes of the identified material weaknesses. However, our independent registered public accounting
firm has not evaluated the measures we have taken to address the two material weaknesses identified by our independent
registered public accounting firm in its management letter in connection with the audit of our financial statements for 2004 and will
not be able to confirm to us that the material weaknesses have been remediated until our independent registered public
accounting firm has completed the audit of our financial statements for 2005.

    In the third quarter of 2004, management commenced a review of internal control over financial reporting and related
accounting processes and procedures for purposes of complying

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with Section 404 of the Sarbanes-Oxley Act. This review is ongoing. Under Section 404, management would have to evaluate,
and its independent registered public accounting firm would have to opine on the effectiveness of, internal control over financial
reporting beginning with our Annual Report on Form 10-K for the year ending December 31, 2006, due to be filed in March 2007.
We expect to hire an independent consulting firm in 2005 with expertise in Section 404 compliance to assist us in satisfying our
obligations under Section 404 with respect to our internal control over financial reporting.

      As of the date of this prospectus, our management believes that our internal control over financial reporting is effective at a
reasonable assurance level. However, internal control over financial reporting cannot provide absolute assurance of achieving
financial reporting objectives due to its inherent limitations because internal control involves human diligence and compliance and
is subject to lapses in judgment and breakdowns from human failures. Nonetheless, these inherent limitations are known features
of the financial reporting process, and it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

     Although we believe we have remediated the material weaknesses that have been identified in connection with the audit of
our 2003 and 2004 financial statements, we may in the future have additional material weaknesses in our internal control over
financial reporting. Failure to implement and maintain effective internal control over financial reporting could result in material
misstatements in our financial statements. See ―Risk Factors.‖

      Material Weaknesses in 2003 . In March 2004, in connection with the audit of our financial statements for the three years
ended December 31, 2003, our independent registered public accounting firm identified errors in the timing and accuracy of the
accounting for transactions in our financial statement close process. These errors related to accounting for a troubled debt
restructuring, timing errors, carrying values of assets and mathematical mistakes. The control deficiencies related to these errors
were determined to constitute a material weakness in our internal control over financial reporting. The material weakness related
to our lack of procedures designed to ensure the proper recording of expenses and assets under the full accrual method of
accounting in accordance with GAAP. In most cases, the errors resulted from recording transactions in an incorrect time period.
We believe these control deficiencies occurred because accounting personnel who are no longer employed by us made incorrect
judgments concerning accruals and because in 2003 we did not maintain sufficient staffing of our accounting department and did
not have accounting management personnel with adequate training and familiarity with the application of GAAP and policies and
procedures relating to internal control over financial reporting. In addition, we had not at that time established sufficient internal
control over financial reporting designed to ensure the proper functioning of the financial statement close process.

      Upon being informed of the material weakness, our management and the audit committee of our board of directors took
steps to correct the errors that had been identified and to remediate the material weakness relating to the identified accruals and
our financial statement close process:

      •   We retained the services of another major public accounting firm to assist us in re-closing our 2001, 2002 and 2003
          financial statement periods. This process included re-performing accounting reconciliations for all accounts where errors
          were detected during the initial phases of the audit. Upon completion of the re-closing, our independent registered public
          accounting firm concluded the audit of the 2003 consolidated financial statements and related restatement of information
          in the 2002 and 2001 consolidated financial statements.

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      •   All identified instances of errors in our records, procedures and controls were reviewed, analyzed and corrected by us.

      •   We replaced our accounting management and most of our accounting staff with more experienced personnel with
          additional training and expertise, including an experienced Chief Accounting Officer and a Controller.

      •   We enlarged the size of our accounting staff from seven employees to fifteen employees, including additional
          management-level accounting personnel. This increase in size enables further segregation of duties and allows additional
          levels of internal review and supervision within our accounting organization.

      •   We established formal, documented accounting policies and procedures to improve our internal control over financial
          reporting, including policies and procedures relating to accruals and our financial statement close process. These policies
          and procedures govern approvals, documentation requirements, standardized recordkeeping, asset tracking and the use
          of our purchase order system.

      •   We re-closed each of our quarterly financial statement periods for 2002, 2003, and 2004 and engaged our independent
          registered public accounting firm to perform a review of each quarterly period in 2003 and 2004 under Statement on
          Auditing Standard No. 100, Interim Financial Information , or SAS 100.

      Based upon these changes, we believe that the material weaknesses relating to the full accrual method of accounting and
our financial statement close process were remediated in 2004. The management letter we received from our independent
registered public accounting firm in connection with the audit of our financial statements for 2004 did not include a material
weakness relating to these issues.

     In connection with re-closing our 2001, 2002 and 2003 financial statement periods, we restated our 2001 and 2002 financial
statements. The 2002 restatement adjustments resulted in a net decrease of $3.9 million to our net loss in 2002, including an
adjustment of $4.7 million relating to a gain on a troubled debt restructuring. The other restatement adjustments netted to
approximately $0.8 million and related to: net timing errors of $0.1 million; errors in the carrying value of assets of $0.4 million; and
mathematical mistakes and oversight of $0.3 million. Restatement adjustments to 2001 amounted to an increase in net loss for
2001 totaling less than $0.1 million and related primarily to timing adjustments. The restatement also resulted in a cumulative
increase in total assets of $1.8 million and a cumulative decrease in total liabilities of $1.8 million as of December 31, 2002.

      Material Weaknesses in 2004 . Subsequent to restating the 2001 and 2002 annual periods, our new accounting
management and staff re-closed each of the quarterly periods during 2002, 2003 and 2004. During this process and in preparation
for the annual audit for 2004, two additional historical errors were identified. Management determined that these errors required
restatement of the financial statements for the 2001, 2002 and 2003 fiscal years. The resulting restatements were determined to
constitute a material weakness in internal control over financial reporting.

      While management believes the underlying causes of the material weaknesses were remediated in 2004 and therefore were
not present at December 31, 2004, the restatement of our financial statements for 2001, 2002 and 2003 constituted a material
weakness. Consequently, our independent registered public accounting firm is not able to determine that the material weakness
resulting from the restatement has been remediated and cannot confirm to us that the two material weaknesses identified in 2004
have been remediated until the completion of the audit for the fiscal year ended December 31, 2005. Management believes that
the material

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weakness resulting from the restatement of our prior periods has been remediated by the steps management took during 2004 to
remediate the two material weaknesses. Since management believes that the material weakness resulting from our restatement
have been remediated, management also believes that our internal control over financial reporting is effective at a reasonable
assurance level as of the date of this prospectus.

      The material weaknesses in 2004 resulted from:

      •   our accounting for our liability for a telecommunications transactional fee that we pay to federal and state agencies; and

      •   the accounting entries needed to record asset purchases for and consolidate the accounts of our leasing company
          subsidiary.

      The first error related to the calculation of our liability for a telecommunications transactional fee that we pay to federal and
state administrative agencies and was detected by new reconciliation procedures put in place by new accounting management in
response to the material weakness identified in connection with the 2003 audit. The procedures included a reconciliation of tax
and telecommunications transactional fee liabilities, at an individual tax level, both to the subsequent returns filed and to our billing
system. This error resulted from both user and system errors in connection with the internal reports we use to calculate our
telecommunications transactional fee liabilities. Our correction of the error affected our prior year results by increasing our
expenses by $0.2 million and $0.4 million in 2002 and 2003, respectively, and increasing our liabilities by $0.2 million and $0.6
million in 2002 and 2003, respectively. We have redesigned the reports upon which the regulatory filings are based so that they
reflect the appropriate telecommunications transactional fee liability amounts. We have also re-trained the personnel who use the
reports so that they understand the proper use of the reports in the calculation of remittance amounts. In addition, we have
instituted review and approval controls and continue to employ our dual reconciliations against both the returns and billing system
to verify our ending accrual balances. We believe that our revised procedures and controls, which were implemented in the fourth
quarter of 2004 and were in operation with respect to the year end financial statement close process, remediated this material
weakness prior to December 31, 2004.

      The second material weakness relates to recording asset purchases for our leasing company and recording proper
eliminating consolidation entries between us and our wholly- owned leasing company subsidiary that we have used to purchase
certain equipment used in our operations. This error was detected as part of the SAS 100 quarterly reviews and included our
failure to record sales taxes in the cost basis of the asset and the subsequent depreciation of the sales tax portion of the asset. In
addition, we improperly recognized sales tax expense as it was assessed and paid on inter-company leases, rather than recording
a sales tax liability at the date of asset purchase and applying future sales tax payments against the liability. These errors resulted
in the misclassification of depreciation expense and sales tax expense and a misstatement of the related equipment and sales tax
payable balance sheet accounts for 2001, 2002 and 2003. By discontinuing the practice of purchasing assets at the leasing
subsidiary and having the leasing subsidiary lease the assets to the operating subsidiary, we remediated the control deficiency
relating to the proper recordation of asset purchases on January 1, 2004, the date this practice was discontinued. Management is
evaluating alternative approaches with respect to the leasing subsidiary structure, including the potential termination of the
structure. Our correction of these errors resulted in adjustments to operating results for 2002 and 2003. These adjustments
included a decrease in 2002 and 2003 to our selling, general and administrative expenses of $0.4 million and $0.7 million,
respectively, and an increase to our depreciation and amortization expense of $0.4 million and $0.8 million, respectively. These
adjustments also increased property and equipment, net, for 2002 and 2003 by $1.8 million and

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$2.8 million, respectively, and increased accrued expenses by $1.8 million and $2.8 million in 2002 and 2003, respectively.
Although we had not used this leasing company structure for equipment we purchased in 2004, our ending balance sheets were
incorrect and required adjustment.

      We implemented the revised consolidating methodology in the fourth quarter of 2004 prior to our closing the December 31,
2004 financial statements. We also established steps in our monthly closing process to improve our internal control over financial
reporting. These steps include designing appropriate standard monthly journal entries to account for this activity, training
accounting personnel on the proper accounting treatment and instituting review and approval controls in this area. Management
believes that these steps, which we took during the fourth quarter of 2004, had the effect of remediating this material weakness
prior to December 31, 2004.

      Conclusion . In addition to remediating the material weaknesses that have been identified, we have established formal,
documented accounting policies and procedures to improve our internal control over financial reporting to provide reasonable
assurance regarding the reliability of our financial reporting. These policies and procedures require: two levels of approval for
inputs to, and outputs from, our financial accounting system; detailed minimum documentation requirements for cash
disbursements, journal entries, account reconciliations and other accounting-related documents; standardized organization and
maintenance of accounting files; enhanced accounts payable procedures designed to effectively monitor invoices that are
distributed for internal approval; improved tracking of assets and their in-service dates for purposes of depreciation; and
procedures for deploying the existing purchase order system to identify unbilled goods and services from vendors. In addition, all
approvals within the process require the dated signature of at least two persons from our accounting management. Management
believes that we have enhanced the reliability and effectiveness of our internal control over financial reporting such that our
internal control over financial reporting is effective at a reasonable assurance level as of the date of this prospectus.

Results of Operations
                                                                      Six Months Ended June 30,          Increase/
                                                                      2004                 2005         (Decrease)

                                                                             (unaudited)
                                                                           (in thousands)
                    Revenue                                      $    51,452           $    73,358         42.6%
                    Cost of service (exclusive of depreciation
                      and amortization)                               14,083                21,824         55.0%
                    Selling, general and administrative costs
                      (exclusive of depreciation and
                      amortization)                                   30,318                41,288         36.2%
                    Depreciation and amortization expense             11,531                11,652          1.0%

                    Operating loss                                     (4,480 )             (1,406 )      (68.6% )
                    Other income (expense)                             (1,861 )             (1,102 )      (40.8% )

                    Net loss                                     $     (6,341 )        $    (2,508 )      (60.4% )


Six Months Ended June 30, 2004 Compared to Six Months Ended June 30, 2005

      Revenue. Revenue increased $21.9 million, or 42.6%, from $51.5 million in the six months ended June 30, 2004 to $73.4
million in the six months ended June 30, 2005. The increase in revenue resulted from an increase in customers from 12,074 at
June 30, 2004 to 17,435 at June 30, 2005. Average monthly revenue per customer location declined from $788 in the six months

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ended June 30, 2004 to $761 in the six months ended June 30, 2005. Although the proportion of our customers purchasing our
BeyondVoice II and II Plus service packages, at higher average monthly revenue per customer location, was higher in the first six
months of 2005 than in the first six months of 2004, the impact of this trend was more than offset by the effect of competitive
pricing pressure on new contracts and contract renewals, resulting in a higher level of promotions and discounts offered to
customers at the time of contract signature. We expect average monthly revenue per customer location to remain relatively flat or
decline in the foreseeable future due to competitive pricing pressures. Customer revenues represented approximately 95.1% and
97.2% of total revenues in the six months ended June 30, 2004 and 2005, respectively. Revenues from access charges paid to us
by other communications companies, to terminate calls to our customers, represented approximately 4.9% and 2.8% of revenues
in the six months ended June 30, 2004 and 2005, respectively. The decline in revenues from access charges as a percentage of
total revenues is due to reductions in access rates on interstate calls as mandated by the FCC. Our segment contributions to the
$21.9 million increase in revenue in the six months ended June 30, 2005 as compared to the six months ended June 30, 2004
were $5.6 million from Atlanta, $4.6 million from Dallas, $6.5 million from Denver, $4.8 million from Houston, which was launched
in March 2004, and $0.3 million from Chicago, which was launched in March 2005.

      Cost of Service. Cost of service increased $7.7 million, or 55.0%, from $14.1 million in the first six months of 2004 to $21.8
million in the first six months of 2005. This increase is directly attributable to the increase in the number of customers from June
30, 2004 to June 30, 2005. As a percentage of total revenue, cost of service increased from 27.4% in the first six months of 2004
to 29.8% in the first six months of 2005. The increase in cost of service as a percentage of revenue is primarily due to a reduction
in the amount of service credits and performance penalties received from local telephone companies in the first six months of
2005, which are recognized as offsets to cost of service, as compared to those received in the first six months of 2004. Service
credits and performance penalties totaled $2.0 million and $0.9 million in the first six months of 2004 and 2005, respectively, and
were 3.9% and 1.2% of revenue in the first six months of 2004 and 2005, respectively. Service credits arise from billing and
service disputes between telecommunications carriers and us. They are resolved by negotiation among the parties or through the
intervention of a regulatory body. We cannot predict the level of errors in charges from our suppliers, nor can we predict the
proportion of disputes that we will win. Similarly, performance penalties are assessed by the state public service commissions
against local telephone companies for failing to meet publicly mandated standards in their capacity as suppliers of circuits and
services. The amount of performance penalties for failure to meet standards varies by state, and we expect variations in the
performance of our suppliers and, therefore, in our receipt of penalty payments. For these reasons, we expect service credits and
performance penalties to vary in an unpredictable manner in the future.

      Circuit access fees, or line charges, which primarily relate to our lease of T-1 circuits connecting our equipment at network
points of colocation to our equipment located at our customers’ premises, represented the largest component of cost of service
and were $7.7 million in the first six months of 2004 and $11.4 million in the first six months of 2005. The increase in circuit access
fees of $3.7 million in the first six months of 2005 as compared to the first six months of 2004 is a direct result of the increase in
the number of customers. Circuit access fees as a percentage of revenue were 15.0% in the first six months of 2004 and 15.5% in
the first six months of 2005. Circuit access fees as a percentage of revenue increased because the increased costs arising from
the FCC rule changes and the startup operations in Chicago in the first six months of 2005 exceeded the rate reductions in circuit
access fees in Texas mandated by the state regulatory commission in March 2005, which affected only the second quarter of
2005.

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       The other principal components of cost of service include long distance charges, installation costs to connect new circuits,
the cost of transport circuits between network points of presence, the cost of local interconnection with the local telephone
companies’ networks, Internet access costs, the cost of third party applications we provide to our customers, access costs paid by
us to other carriers to terminate calls from our customers, certain network-related taxes and fees and offsetting service credits
from various local telephone companies. The amount of these other principal components of cost of service were $8.4 million and
$11.4 million in the first six months of 2004 and 2005 respectively, an increase of $3.0 million. Of this $3.0 million increase, 88.9%
is attributable to increased costs in long distance, applications, installation, transport circuits, and taxes and fees, all of which grew
as a direct result of the addition of customers on our network. In addition, we recorded $0.4 million in costs associated with
terminating access that were not billed to us prior to the first six months of 2005. Other costs within this category were reduced in
absolute dollars in the first six months of 2005 versus the first six months of 2004 or were reduced as a percentage of revenue as
a result of negotiated price decreases or other cost savings that we achieved.

     In February 2005, the FCC issued its Triennial Review Remand Order, or TRRO, and adopted new rules, effective March 11,
2005, governing the obligations of incumbent local exchange carriers, or ILECs, to afford access to certain of their network
elements, if at all, and the cost of such facilities. The TRRO reduces the ILECs’ obligations to provide high-capacity loops within,
and dedicated transport facilities between, certain ILEC wire centers that are deemed to be sufficiently competitive, based upon
various factors such as the number of fiber-based colocators and/or the number of business access lines within these wire
centers. In addition, certain caps are imposed regarding the number of unbundled network element, or UNE, facilities that
companies like us may have on a single route or into a single building. Where the wire center conditions or the caps are
exceeded, the TRRO eliminates the ILECs’ obligations to provide these high-capacity circuits to competitors at the discounted
rates historically received under the 1996 Telecommunications Act. See ―Government Regulation.‖

      The rates charged by ILECs for our high-capacity circuits in place on March 11, 2005 that were affected by the FCC’s new
rules are increased 15% effective for one year until March 2006, although the scope of this increase is uncertain because the new
FCC rules are subject to interpretation by state regulatory agencies. In addition, by March 10, 2006, we will be required to
transition these existing facilities to alternative arrangements, such as other competitive facilities or the higher-priced ―special
access services‖ offered by the ILECs, unless we can negotiate other rate structures with the ILECs. Subject to any contractual
protections under our existing interconnection agreements with ILECs, beginning March 11, 2005, we are also subject to the
ILECs’ higher ―special access‖ pricing for any new installations of DS-1 loops and/or DS-1 and DS-3 transport facilities in the
affected ILEC wire centers, on the affected transport routes or that exceeded the caps.

      We are able to estimate the probable liability for implementation of certain provisions of the TRRO and have accrued
approximately $0.5 million through June 30, 2005 for these increased costs, and this amount has been charged to cost of service
in the six months ended June 30, 2005. We believe this estimate provides for the total cost impact related to wire centers and
transport routes we determined to be sufficiently competitive to be subject to the FCC’s new rules. However, we believe that there
is insufficient information for us to make a reasonable estimate of the increased costs associated with the caps imposed on the
number of circuits that we may have on a single route or into a single building. Due to inconsistencies and ambiguities in the FCC
order as to the application of the DS-1 loop and DS-1 transport caps, the cost impacts for Atlanta, Denver and Chicago will not be
reasonably estimable until the state of Georgia, Colorado and Illinois, respectively, interprets the rule. We believe that such
information does exist for the Dallas and Houston markets, resulting in a probable liability of approximately $0.1

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million, which we accrued and, which is reflected as a cost of service in the results of operations through June 30, 2005.

      Certain aspects of the new FCC rules are subject to ongoing court challenges and the implementation of the new FCC rules
is subject to multiple interpretations. We cannot predict the results of future court rulings, or how the FCC may respond to any
such rulings, or any changes in the availability of unbundled network elements as the result of future legislative or regulatory
decisions. Recent state regulatory rulings have, however, reduced circuit access fees in certain states where we operate. In
particular, the circuit access fees and other costs that we incur in Texas were reduced based on a state regulatory order that went
into effect in March 2005. We began realizing benefits from this state ruling in the second quarter of 2005. We have also made
changes in our network architecture to respond to the increases in transport circuit costs in order to mitigate the impact of the FCC
rule changes. We will continue to identify and implement these mitigation efforts on an ongoing basis. While there can be no
assurance that our circuit access fees and transport costs will not increase in the future, the cost increases arising from recent
changes in the FCC rules have to date been offset by the cost reductions in our Texas cities and other reductions arising from
changes in our network architecture made in response to the new rules. For these reasons, although these costs may increase in
the future, our circuit access fees and transport circuit costs as a percentage of revenue were unchanged at 15.3% and 2.4%,
respectively, in both the first and second quarters of 2005.

     Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $11.0 million, or
36.2%, from $30.3 million in the first six months of 2004 to $41.3 million in the first six months of 2005. The increase in the dollar
amount of selling, general and administrative expenses is a result of the growth in our business. Selling, general and
administrative expenses as a percentage of revenues were 58.9% and 56.3% in the first six months of 2004 and 2005,
respectively. We expect selling, general and administrative costs to continue to decrease as a percentage of revenue in 2005 as
our customer base and revenues grow without proportional increases in our expenses.

     Salaries, wages and benefits, which include commissions paid to our direct sales representatives, comprised 69.7% and
68.0% of our total selling, general and administrative expenses in the first six months of 2004 and 2005, respectively. Salaries,
wages and benefits increased $7.0 million from $21.1 million in the first six months of 2004 to $28.1 million in the first six months
of 2005. Our headcount at June 30, 2004 and 2005 was 525 and 665, respectively.

      Marketing costs, including advertising, increased $0.5 million from $0.3 million in the first six months of 2004 to $0.8 million in
the first six months of 2005. Our marketing costs will continue to increase as we add customers and expand to new markets.

       Other selling, general and administrative costs, which include professional fees, outsourced services, rent and other facilities
costs, maintenance, recruiting fees, travel and entertainment costs, property taxes and bad debt expense, increased $3.6 million
from $8.8 million in the first six months of 2004 to $12.4 million in the first six months of 2005, due to the addition of new
operations and to the growth in centralized expenses needed to keep pace with the growth in customers. As a percentage of
revenue, other selling, general and administrative costs declined slightly from 17.2% in the first six months of 2004 to 16.9% in the
first six months of 2005.

     Write-off of Public Offering Costs. In the first quarter of 2004, we began work in connection with an initial public offering of
our common stock, and during 2004 we incurred direct expenses in connection with these activities, which were primarily legal
and accounting fees with outside service firms, of $1.1 million. We expensed these costs in the fourth quarter of 2004 because we
determined at that time that a public offering was not imminent and that

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considerable time had elapsed since the incurrence of the majority of these costs. In 2005, however, we began incurring similar
costs and have determined to capitalize them and subsequently deduct them from the proceeds of the proposed initial public
offering as a charge against additional paid-in capital, due to their being incurred shortly before and directly related to the
transaction. Our results of operation were therefore not impacted by the write-off of public offering costs in either the first six
months of 2004 or 2005.

      Depreciation and Amortization Expense. Depreciation and amortization expense increased $0.2 million, or 1.7%, from $11.5
million in the first six months of 2004 to $11.7 million in the first six months of 2005. Depreciation and amortization expense
increased because the increase in depreciation and amortization resulting from new purchases exceeded the reduction in
depreciation and amortization resulting from property and equipment becoming fully depreciated.

       Interest Expense (Net). Interest expense incurred as a result of our credit facility with Cisco Capital and our capital lease
obligations, prior to the effects of our accounting for the troubled debt restructuring, decreased $0.5 million from $2.8 million in the
first six months of 2004 to $2.3 million in the first six months of 2005, due to a decrease in the interest rate under our credit facility.
The offset to interest expense associated with the accounting for the restructuring of troubled debt, as described in Note 7 of our
financial statements, decreased $0.2 million from $1.2 million in the first six months of 2004 to $1.0 million in the first six months of
2005 due to a decline in interest rates. Interest income increased $0.2 million from $0.3 million in the first six months of 2004 to
$0.5 million in the first six months of 2005. These factors resulted in a decrease of $0.5 million in interest expense (net) from $1.3
million in the first six months of 2004 to $0.8 million in the first six months of 2005.

      Loss on Disposal of Property and Equipment. Our loss on disposal of equipment decreased $0.1 million from $0.4 million in
the first six months of 2004 to $0.3 million in the first six months of 2005 due to a decreased number of unrecoverable integrated
access devices from disconnected customers and a lower amount of write-offs of certain network and software assets that we
replaced due to obsolescence or upgrade.

     Net Loss. Net loss decreased $3.8 million from $6.3 million in the first six months of 2004 to $2.5 million in the first six
months of 2005. The decrease in net loss resulted from the significant increase in revenues and a significantly slower rate of
increase in cost of service and selling, general and administrative expenses. Our segment contributions to the $3.8 million
improvement in net loss were $2.7 million from Atlanta, $2.4 million from Dallas, $3.5 million from Denver, and $1.4 million from
Houston, which was launched in March 2004. These segment improvements were directly attributable to the increased number of
customers on our network. Offsetting these contributions to the improvement in our net loss were startup losses from Chicago,
which was launched in March 2005, of $3.5 million and increased losses from our Corporate group of $2.7 million.

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Year Ended December 31, 2003 Compared to Year Ended December 31, 2004
                                                                      Year Ended December 31,             Increase/
                                                                      2003                2004           (Decrease)

                                                                           (in thousands)
                    Revenue                                       $   65,513           $ 113,311            73.0%
                    Cost of service (exclusive of depreciation
                      and amortization)                               21,815                31,725          45.4%
                    Selling, general and administrative costs
                      (exclusive of depreciation and
                      amortization)                                   48,085                65,159          35.5%
                    Write-off of public offering costs                    —                  1,103         100.0%
                    Depreciation and amortization expense             21,271                22,647           6.5%

                    Operating loss                                    (25,658 )             (7,323 )       (71.5% )
                    Other income (expense)                             (3,824 )             (4,133 )         8.1%

                    Net loss                                      $ (29,482 )          $ (11,456 )         (61.1% )


     Revenue. Revenue increased $47.8 million, or 73.0%, from $65.5 million in 2003 to $113.3 million in 2004. The increase in
revenue resulted from an increase in customers from 9,687 at December 31, 2003 to 14,713 at December 31, 2004. Average
monthly revenue per customer location remained essentially the same, increasing from $771 in 2003 to $774 in 2004. Although an
increasing proportion of our customers used our BeyondVoice II and II Plus service packages, at higher average revenue per
customer location in 2004 than in 2003, the impact of this trend was offset by the effect of competitive pricing pressure on new
contracts and contract renewals, resulting in a higher level of promotions and discounts offered to customers at the time of
contract signature. We expect average monthly revenue per customer location to remain relatively flat or decline in the
foreseeable future due to competitive pricing pressures. Customer revenues represented approximately 94.8% and 96.1% of total
revenues in 2003 and 2004, respectively. Revenues from access charges paid to us by other communications companies, to
terminate calls to our customers, represented approximately 5.2% and 3.9% of revenues in 2003 and 2004, respectively. Our
segment contributions to the $47.8 million increase in revenue from 2003 to 2004 were $15.2 million from Atlanta, $13.3 million
from Dallas, $16.4 million from Denver, and $2.9 million from Houston, which was launched in March 2004.

     Cost of Service. Cost of service increased $9.9 million, or 45.4%, from $21.8 million in 2003 to $31.7 million in 2004. This
increase is directly attributable to the increase in number of customers in 2004. As a percentage of total revenue, cost of service
decreased from 33.3% in 2003 to 28.0% in 2004. The decrease in cost of service as a percentage of revenue is primarily due to
the more efficient utilization of our network as the number of customers increased, as well as contractual rate reductions
negotiated from Internet and long-distance vendors.

      Circuit access fees, or line charges, which primarily relate to our lease of T-1 circuits connecting our equipment at network
points of colocation to our equipment located at our customers’ premises, represented the largest component of cost of service
and were $10.9 million in 2003 and $17.3 million in 2004. The increase in circuit access fees of $6.4 million in 2004 was a direct
result of the increase in the number of customers. While circuit access fees increased as a percentage of total cost of service from
2003 to 2004, circuit access fees decreased as a percentage of revenue. Circuit access fees were 16.6% of revenue in 2003 and
15.3% of revenue in 2004.

     The other principal components of cost of service include long distance charges, installation costs to connect new circuits,
the cost of transport circuits between network points of presence,

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the cost of local interconnection with the local telephone companies’ networks, Internet access costs, the cost of third party
applications we provide to our customers, access costs paid by us to other carriers to terminate calls from our customers, and
certain network-related taxes and fees. The amount of these other principal components of cost of service were $13.1 million in
2003 and $17.7 million in 2004, an increase of $4.6 million. 95.9% of this $4.6 million increase is attributable to increased costs in
long distance charges, taxes and fees, third party applications, and transport circuits, all of which grew as a direct result of the
addition of customers on our network, and, in the case of third party applications, as a result of our customers using more
applications that we obtain from third parties at additional cost.

      In addition, we record offsetting amounts arising from service credits and performance penalties under our agreements with
local telephone companies, which totaled $2.2 million in 2003 and $3.3 million in 2004.

     Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $17.1 million, or
35.6%, from $48.1 million in 2003 to $65.2 million in 2004. The increase in the dollar amount of selling, general and administrative
expenses is a result of the growth in our business. Selling, general and administrative expenses were 73.4% of revenues in 2003
and 57.5% of revenue in 2004.

     Salaries, wages and benefits, which include commissions paid to our direct sales representatives, comprised 71.1% and
66.0% of our total selling, general and administrative expenses in 2003 and 2004, respectively. Salaries, wages and benefits
increased $8.8 million from $34.2 million in 2003 to $43.0 million in 2004. Our headcount at December 31, 2003 and 2004 was
428 and 586, respectively.

     Marketing costs, including advertising increased $0.7 million from $0.3 million in 2003 to $1.0 million in 2004 in order to
acquire customers in 2004.

       Other selling, general and administrative costs, which includes professional fees, outsourced services, rent and other
facilities costs, maintenance, recruiting fees, travel and entertainment costs, property taxes and bad debt expense, increased $6.3
million from $12.4 million in 2003 to $18.7 million in 2004, due to the addition of new operations and to the growth in centralized
expenses needed to keep pace with the growth in customers.

     Write-off of Public Offering Costs. In early 2004, we began work in connection with an initial public offering of our common
stock, and during 2004 we incurred direct expenses, which were primarily legal and accounting fees with outside service firms, of
$1.1 million. We expensed these costs in 2004 because they were incurred a considerable time before any public offering was
actually made.

      Depreciation and Amortization Expense. Depreciation and amortization expense increased $1.3 million, or 6.1%, from $21.3
million in 2003 to $22.6 million in 2004. The increase in depreciation and amortization expense was attributable to property and
equipment purchases made in 2004.

     Interest Expense (Net). Interest expense incurred as a result of our credit facility with Cisco Capital and our capital lease
obligations, prior to the effects of our accounting for the troubled debt restructuring, increased $0.2 million from $4.9 million in
2003 to $5.1 million in 2004, primarily due to our increased amounts outstanding under our credit facility. The offset to interest
expense associated with the accounting for the restructuring of troubled debt, as described in Note 7 of our financial statements,
decreased $0.3 million from $2.6 million in 2003 to $2.3 million in 2004 due to a decline in interest rates. Interest income
decreased $0.1 million from $0.7 million in 2003 to $0.6 million in 2004, because the amount of outstanding interest

                                                                  41
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earning investments decreased from early 2003, shortly after our November 2002 Series B preferred stock investment, through
2004, as we converted these investments to cash in order to fund our business and make principal payments on our debt. These
factors resulted in an increase of $0.6 million in interest expense (net) from $1.6 million in 2003 to $2.2 million in 2004.

     Loss on Disposal of Property and Equipment . Our loss on disposal of equipment decreased $0.3 million from $2.0 million in
2003 to $1.7 million in 2004 due to a decreased number of unrecoverable integrated access devices from disconnected customers
and a lower amount of writeoff of certain network and software assets that we replaced due to obsolescence or upgrade.

      Net Loss. Net loss decreased $18.0 million from $29.5 million in 2003 to $11.5 million in 2004. The decrease in net loss
resulted from the significant increase in revenues in 2004 and a significantly slower rate of increase in cost of service and selling,
general and administrative expenses. Our segment contributions to the $18.0 million improvement in net loss were $11.5 million
from Atlanta, $6.4 million from Dallas, and $10.7 million from Denver. These segment improvements were directly attributable to
the increased number of customers on our network. Offsetting this improvement in our net loss were startup losses from Houston,
which was launched in March 2004, of $4.5 million, pre-launch losses from Chicago of $0.6 million, and losses contributed from
our Corporate group of $5.5 million.

Year Ended December 31, 2002 Compared to Year Ended December 31, 200 3
                                                                       Year Ended December 31,             Increase/
                                                                       2002                2003           (Decrease)

                                                                            (in thousands)
                    Revenue                                       $    20,956           $    65,513         212.6%
                    Cost of service                                    11,558                21,815          88.7%
                    Selling, general and administrative costs          42,197                48,085          14.0%
                    Depreciation and amortization expense              14,216                21,271          49.6%

                    Operating loss                                     (47,015 )             (25,658 )      (45.4% )
                    Gain recognized on troubled debt
                      restructuring                                      4,338                   —         (100.0% )
                    Other income (expense)                              (4,511 )              (3,824 )      (15.2% )

                    Net loss                                      $ (47,188 )           $ (29,482 )         (37.5% )


      Revenue. Revenue increased $44.5 million, or 212.6%, from $21.0 million in 2002 to $65.5 million in 2003. The increase in
revenue resulted primarily from an increase in customers from 4,472 at December 31, 2002 to 9,687 at December 31, 2003 and,
to a lesser extent, from an increase in average monthly revenue per customer location. Average monthly revenue per customer
location increased 17.2% from $658 in 2002 to $771 in 2003. This increase resulted from the introduction of BeyondVoice II and II
Plus, which were first introduced in 2002 and increased in usage in 2003. Customer revenues represented approximately 95.5%
and 94.8% of total revenues in 2002 and 2003, respectively. Revenues from access charges paid to us by other communications
companies to terminate calls to our customers represented approximately 4.5% and 5.2% of revenues in 2002 and 2003,
respectively. Our segment contributions to the $44.5 million increase in revenue from 2002 to 2003 were $15.8 million from
Atlanta, $13.7 million from Dallas, and $15.0 million from Denver.

     Cost of Service. Cost of service increased $10.2 million, or 88.7%, from $11.6 million in 2002 to $21.8 million in 2003. This
increase is directly attributable to the increase in number of customers in 2003. As a percentage of total revenue, cost of service
decreased from 55.2% in

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2002 to 33.3% in 2003. The decrease in cost of service as a percentage of revenue is primarily due to the more efficient utilization
of our network as the number of customers increased, as well as negotiated contractual rate reductions from Internet and
long-distance vendors.

      Circuit access fees, or line charges, which primarily relate to our lease of T-1 circuits connecting our equipment at network
points of colocation to our equipment located at our customers’ premises, represented the largest component of cost of service
and were $5.1 million in 2002 and $10.9 million in 2003. The increase in circuit access fees of $5.8 million in 2003 was a direct
result of the increase in the number of customers. While circuit access fees increased as a percentage of total cost of service from
2002 to 2003, they decreased as a percentage of revenue. Circuit access fees were 24.3% of revenue in 2002 and 16.6% of
revenue in 2003. The other principal components of cost of service include long distance charges, installation costs to connect
new circuits, the cost of transport circuits between network points of presence, the cost of local interconnection with the local
telephone companies’ networks, Internet access costs, the cost of third party applications we provide to our customers, access
costs paid by us to other carriers to terminate calls from our customers, and certain network-related taxes and fees and offsetting
service credits from various telecommunications vendors. These other principal components of cost of service were $6.6 million in
2002 and $13.1 million in 2003, an increase of $6.5 million. 92.0% of this $6.5 million increase is attributable to increased costs in
long distance charges, taxes and fees, transport circuits, installation, and local interconnection, all of which grew as a direct result
of the addition of customers on our network.

      We also receive offsetting payments from the local telephone companies in the form of service credits and performance
penalties that are assessed by state regulatory commissions based on the local telephony companies’ performance in the delivery
of circuits and other services that we use in our network.

     Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $5.9 million, or
14.0%, from $42.2 million in 2002 to $48.1 million in 2003. The increase in the dollar amount of selling, general and administrative
expenses is a result of the growth in our business. Selling, general and administrative expenses were 201.0% of revenues in 2002
and 73.4% of revenue in 2003.

     Salaries, wages and benefits, which include commissions paid to our direct sales representatives, comprised 72.0% and
71.1% of our total selling, general and administrative expenses in 2002 and 2003, respectively. Salaries, wages and benefits
increased $3.8 million from $30.4 million in 2002 to $34.2 million in 2003. Our headcount at December 31, 2002 and 2003 was
381 and 428, respectively.

     Marketing costs, including advertising, increased $0.2 million in 2003 from $0.1 million in 2002 to $0.3 million in 2003 in order
to acquire customers in 2003. Our marketing costs will continue to increase as we continue to add customers and expand to new
markets.

       Other selling, general and administrative costs, which includes professional fees, outsourced services, rent and other
facilities costs, maintenance, recruiting fees, travel and entertainment costs, property taxes and bad debt expense, increased $0.8
million in 2003 from $11.6 million in 2002 to $12.4 million in 2003, due to the growth in centralized expenses needed to keep pace
with the growth in customers.

     Depreciation and Amortization Expense. Depreciation and amortization expense increased $7.1 million, or 50.0%, from
$14.2 million in 2002 to $21.3 million in 2003. The increase in depreciation and amortization expense was attributable to property
and equipment purchases made in 2003.

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     Interest Expense (Net). Interest expense incurred as a result of our credit facility with Cisco Capital and our capital lease
obligations, prior to the effects of our accounting for the troubled debt restructuring, increased $0.2 million from $4.7 million in
2002 to $4.9 million in 2003, primarily due to declining interest rates on our variable rate debt. The offset to interest expense
associated with the accounting for the restructuring of troubled debt, as described in Note 7 of our financial statements, increased
$2.2 million from $0.4 million in 2002 to $2.6 million in 2003 due to our having a full year to record the reduction of the carrying
value in excess of principal against interest expense in 2003 versus only two months in 2002 following the debt restructuring in
November 2002. Interest income increased $0.3 million from $0.4 million in 2002 to $0.7 million in 2003, primarily because the
amount of outstanding interest earning investments increased beginning in late 2002 as a result of our November 2002 Series B
preferred stock investment. These factors resulted in the decrease of $2.7 million in interest expense (net) from $4.3 million in
2002 to $1.6 million in 2003.

     Gain Recognized on Troubled Debt Restructuring . We recorded a $4.3 million gain from the conversion of a portion of our
Cisco Capital debt into Series B preferred stock, through a troubled debt restructuring, in 2002. No corresponding gain was
recorded in 2003 or subsequently, although the resulting carrying value in excess of principal offsets interest expense as interest
payments are made.

     Loss on Disposal of Property and Equipment. Our loss on disposal of equipment increased $1.8 million from $0.2 million in
2002 to $2.0 million in 2003, due to an increased number of unrecoverable integrated access devices from disconnected
customers and our write-off of certain network and software assets that we replaced due to obsolescence or upgrade.

      Net Loss. Net loss decreased $17.7 million from $47.2 million in 2002 to $29.5 million in 2003. The decrease in net loss
resulted from the significant increase in revenues in 2003 and a significantly slower rate of increase in cost of service and selling,
general and administrative expenses. Our segment contributions to the $17.7 million improvement in net loss were $11.1 million
from Atlanta, $5.8 million from Dallas, and $6.6 million from Denver. These segment improvements were directly attributable to the
increased number of customers on our network. Pre-launch losses from Houston were $0.2 million, and the balance, or $5.6
million in losses, was contributed from our Corporate group.

Segment Data

     We monitor and analyze our financial results on a segment basis for reporting and management purposes. At June 30, 2005,
our segments were geographic and included Atlanta, Dallas, Denver, Houston and Chicago. The balance of our operations is in
our Corporate group, which operations consist of corporate executive, administrative and support functions and unallocated
centralized operations, which includes network operations, customer care and provisioning. We do not allocate these Corporate
costs to the other segments and believe that the decision not to allocate these centralized costs provides a better evaluation of our
revenue-producing geographic segments. In addition to segment results, we use aggregate adjusted EBITDA to assess the
operating performance of the overall business. Because our chief executive officer, who is our chief operating decision maker,
primarily evaluates the performance of our segments on the basis of adjusted EBITDA, we believe that segment adjusted EBITDA
data should be available to investors so that investors have the same data that we employ in assessing our overall operations.
Our chief operating decision maker also uses revenue to measure our operating results and assess performance, and each of
revenue and adjusted EBITDA is presented herein in accordance with SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information .

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      EBITDA is a non-GAAP financial measure commonly used by investors, financial analysts and ratings agencies. EBITDA is
generally defined as net income (loss) before interest, taxes, depreciation and amortization. However, we use the non-GAAP
financial measure adjusted EBITDA, and that, in our case, further excludes stock-based compensation expense, write-off of public
offering costs, gain recognized on troubled debt restructuring, gain or loss on asset dispositions and other non-operating income
or expense. We have presented adjusted EBITDA because this financial measure, in combination with revenue and operating
expense, is an integral part of the internal reporting system used by our management to assess and evaluate the performance of
our business and its operating segments both on a consolidated and on an individual basis.

     Other public companies may define adjusted EBITDA in a different manner or present varying financial measures.
Accordingly, our presentation may not be comparable to other similarly titled measures of other companies. Our calculation of
adjusted EBITDA is also not directly comparable to EBIT (earnings before interest and taxes) or EBITDA. We believe that
adjusted EBITDA, while providing useful information, should not be considered in isolation or as an alternative to other financial
measures determined under GAAP, such as operating income or loss.

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      Our segment data is presented below:

                                                                                                           Six Months
                                                         Year Ended December 31,                         Ended June 30,

                                                       2002            2003             2004            2004            2005

                                                                                 (in thousands)
Revenue:
   Atlanta                                         $   11,262      $   27,033       $   42,236      $   19,754      $   25,402
   Dallas                                               6,064          19,813           33,129          15,428          20,035
   Denver                                               3,630          18,667           35,051          15,955          22,494
   Houston                                                 —               —             2,895             315           5,128
   Chicago                                                 —               —                —               —              299

           Total revenue                           $   20,956      $   65,513       $ 113,311       $   51,452      $   73,358

Adjusted EBITDA
    Atlanta                                        $    (1,637 )   $    11,851      $    24,986     $    11,786     $    14,541
    Dallas                                              (3,736 )         4,235           12,353           5,764           8,268
    Denver                                              (3,387 )         5,230           17,750           7,707          11,709
    Houston                                                 —             (187 )         (3,954 )        (2,076 )          (190 )
    Chicago                                                 —               —              (565 )            (9 )        (3,318 )
    Corporate                                          (24,017 )       (25,495 )        (33,768 )       (15,943 )       (20,612 )

           Total adjusted EBITDA                   $ (32,777 )     $    (4,366 )    $   16,802      $     7,229     $   10,398

Operating profit (loss)
   Atlanta                                         $    (3,838 )   $     7,384      $    18,922     $     8,904     $    11,505
   Dallas                                               (5,319 )           678            7,281           3,358           5,625
   Denver                                               (4,151 )         2,568           13,404           5,728           9,142
   Houston                                                  —             (210 )         (4,658 )        (2,295 )          (879 )
   Chicago                                                  —               —              (568 )           (10 )        (3,476 )
   Corporate                                           (33,707 )       (36,078 )        (41,704 )       (20,165 )       (23,323 )

           Total operating loss                    $ (47,015 )     $ (25,658 )      $    (7,323 )   $    (4,480 )   $    (1,406 )

Total assets
    Atlanta                                        $   12,677      $   16,227       $   12,552      $   15,345      $   12,525
    Dallas                                             11,591          14,528           11,920          14,306          11,161
    Denver                                              8,326          12,382           11,731          12,794          11,753
    Houston                                                 6             930            5,355           3,900           7,258
    Chicago                                                —               —             2,322              86           4,079
    Corporate                                          63,983          42,981           55,323          34,770          51,094

           Total assets                            $   96,583      $   87,048       $   99,203      $   81,201      $   97,870

Capital expenditures
    Atlanta                                        $     8,389     $     7,944      $     2,742     $     2,161     $     1,965
    Dallas                                               8,344           6,181            2,870           1,899           1,287
    Denver                                               7,030           6,379            3,903           2,357           1,744
    Houston                                                 —              948            4,041           2,857           1,653
    Chicago                                                 —               —             2,325              87           1,650
    Corporate                                            4,684           4,753            7,860           3,176           2,065

           Total capital expenditures              $   28,447      $   26,205       $   23,741      $   12,537      $   10,364

Reconciliation of adjusted EBITDA to Net loss:
   Total adjusted EBITDA for reportable segments   $ (32,777 )     $    (4,366 )    $    16,802     $     7,229     $    10,398
         Depreciation and amortization               (14,216 )         (21,271 )        (22,647 )       (11,531 )       (11,652 )
         Non-cash stock option compensation              (22 )             (21 )           (375 )          (178 )          (152 )
           Write-off of public offering costs                   —              —          (1,103 )           —              —
           Interest income                                     411            715            637            328            508
           Interest expense                                 (4,665 )       (2,333 )       (2,788 )       (1,615 )       (1,315 )
           Gain recognized on troubled debt
              restructuring                                 4,338              —              —              —              —
           Loss on disposal of property and equipment        (222 )        (1,986 )       (1,746 )         (425 )         (273 )
           Other income (expense), net                        (35 )          (220 )         (236 )         (149 )          (22 )

Net loss                                                $ (47,188 )    $ (29,482 )    $ (11,456 )    $   (6,341 )   $   (2,508 )


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     The operating results from our operating segments reflect the costs of a pre-launch phase in each market in which the local
network is installed and initial staffing is hired, followed by a startup phase, beginning with the launch of service operations, when
customer installations begin. Our sales efforts, our service offerings and the prices we charge customers for our services are
generally consistent across our operating segments. Operating expenses include cost of service and selling, general and
administrative costs incurred directly in the markets where we serve customers. Although our network design and market
operations are generally consistent across all our operating segments, certain costs differ among the various geographical
markets. These cost differences result from different numbers of network central office colocations, prices charged by the local
telephone companies for customer T-1 access circuits, prices charged by local telephone companies and other
telecommunications providers for transport circuits, office rents and other costs that vary by region.

     We record costs in our markets prior to launching service to customers. We launched service in Atlanta in April 2001, in
Dallas in September 2001, in Denver in January 2002, in Houston in March 2004 and in Chicago in March 2005. In the last quarter
of 2003 we incurred expenses primarily relating to the staffing of our Houston office and the cost of obtaining network circuits in
Houston. In the last quarter of 2004 we incurred expenses primarily relating to the staffing of our Chicago office and the cost of
obtaining network circuits in Chicago. We attained positive adjusted EBITDA in Atlanta, Dallas and Denver within 17 months from
launch.

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Unaudited Quarterly Results of Operations

       The following table presents our unaudited condensed quarterly financial data:
                                                                                         Three Months Ended

                              Mar. 31,      June 30,           Sept. 30,      Dec. 31,        Mar. 31,        June 30,           Sept. 30,      Dec. 31,        Mar. 31,        Jun. 30,
                               2003           2003              2003           2003            2004             2004              2004           2004            2005            2005

Quarterly Statement of
Operations Data:                                                                    (unaudited)
                                                                   (dollars in thousands, except per share data)

Revenue                      $   11,775     $   14,356     $      18,126      $   21,256      $   24,503      $   26,949     $      29,732      $   32,127      $   35,176      $   38,182
Operating expenses:
  Cost of service,
     excluding
     depreciation and
     amortization                 4,784          5,206              5,673           6,152           6,431          7,651              8,485           9,158         10,444          11,380
  Selling, general and
     administrative,
     excluding
     depreciation and
     amortization                10,838         11,552            11,955          13,740          14,672          15,645            16,902          17,940          20,175          21,113
  Write-off of public
     offering cost                   —              —                  —               —               —              —                  —            1,103              —               —
  Depreciation and
     amortization                 4,634          5,112              5,557           5,968           6,306          5,225              5,360           5,756           5,674           5,978

           Total operating
              expenses           20,256         21,870            23,185          25,860          27,409          28,521            30,747          33,957          36,293          38,471

Operating loss                   (8,481 )       (7,514 )           (5,059 )        (4,604 )        (2,906 )       (1,572 )           (1,015 )        (1,830 )        (1,117 )          (289 )
Other income (expense):
  Interest income                   160            190                194             171             167            161                160             149             248             260
  Interest expense                 (352 )         (439 )             (749 )          (793 )          (822 )         (793 )             (562 )          (611 )          (631 )          (684 )
  Loss on disposal of
      property and
      equipment                    (133 )         (168 )             (195 )        (1,490 )          (198 )         (227 )             (328 )          (993 )           (79 )          (194 )
  Other income
      (expense), net                (10 )          (84 )              (67 )           (59 )           (31 )         (119 )              (52 )           (34 )              3            (25 )

Net loss                     $   (8,816 )   $   (8,015 )   $       (5,876 )   $    (6,775 )   $    (3,790 )   $   (2,550 )   $       (1,797 )   $    (3,319 )   $    (1,576 )   $      (932 )

Net loss attributable to
  common stockholders        $ (10,288 )    $   (9,550 )   $       (7,474 )   $    (8,424 )   $    (5,469 )   $   (4,282 )   $       (3,602 )   $    (5,186 )   $    (3,961 )        (3,417 )
Net loss attributable to
  common stockholders
  per common
  share—basic and
  diluted                    $   (92.03 )   $   (84.82 )   $       (66.31 )   $    (68.37 )   $    (43.77 )   $   (33.02 )   $       (27.59 )   $    (39.50 )   $    (28.63 )   $    (21.96 )
Quarterly Segment
  Financial Data:
Revenues:
  Atlanta                    $    5,117     $    6,134     $        7,413     $     8,369     $     9,482     $   10,271     $      10,908      $   11,573      $   12,356      $   13,046
  Dallas                          3,638          4,183              5,533           6,459           7,374          8,054             8,686           9,015           9,714          10,321
  Denver                          3,020          4,039              5,180           6,428           7,642          8,314             9,182           9,914          10,834          11,660
  Houston                            —              —                  —               —                5            310               956           1,625           2,266           2,862
  Chicago                            —              —                  —               —               —              —                 —               —                6             293

           Total revenues    $   11,775     $   14,356     $      18,126      $   21,256      $   24,503      $   26,949     $      29,732      $   32,127      $   35,176      $   38,182

Operating profit (loss)
  Atlanta                    $    1,425     $    1,082     $        1,874     $     3,003     $     4,248     $    4,656     $        4,798     $     5,220     $     5,489     $     6,016
  Dallas                           (572 )         (432 )              675           1,007           1,462          1,896              1,861           2,062           2,512           3,113
  Denver                           (622 )          510                917           1,763           2,595          3,135              3,420           4,254           4,363           4,779
  Houston                            —              —                 (23 )          (187 )        (1,031 )       (1,264 )           (1,218 )        (1,144 )          (578 )          (301 )
  Chicago                            —              —                  —               —               (4 )           (5 )              (23 )          (536 )        (1,500 )        (1,976 )
  Corporate                      (8,712 )       (8,674 )           (8,502 )       (10,190 )       (10,176 )       (9,990 )           (9,853 )       (11,686 )       (11,403 )       (11,920 )

           Total operating
              loss           $   (8,481 )   $   (7,514 )   $       (5,059 )   $    (4,604 )   $    (2,906 )   $   (1,572 )   $       (1,015 )   $    (1,830 )   $    (1,117 )   $      (289 )
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                                                                                        Three Months Ended

                            Mar. 31,       June 30,           Sept. 30,      Dec. 31,             Mar. 31,      June 30,           Sept. 30,      Dec. 31,       Mar. 31,        Jun. 30,
                             2003            2003              2003           2003                 2004           2004              2004           2004           2005            2005

Quarterly Segment
Financial Data:                                                                        (unaudited)
                                                                                 (dollars in thousands)
Adjusted EBITDA
  Atlanta                   $    2,312     $    2,137     $        3,084     $     4,318      $       5,679     $    6,107     $        6,356     $    6,844     $     7,001     $     7,540
  Dallas                           129            386              1,641           2,079              2,641          3,123              3,159          3,431           3,813           4,455
  Denver                          (140 )        1,120              1,641           2,609              3,549          4,159              4,556          5,487           5,624           6,085
  Houston                           —              —                 (21 )          (166 )             (963 )       (1,113 )           (1,007 )         (871 )          (264 )            74
  Chicago                           —              —                  —               —                  (4 )           (4 )              (22 )         (535 )        (1,496 )        (1,822 )
  Corporate                     (6,148 )       (6,044 )           (5,844 )        (7,459 )           (7,414 )       (8,529 )           (8,595 )       (9,232 )       (10,036 )       (10,576 )

           Total adjusted
              EBITDA        $   (3,847 )   $   (2,401 )   $         501      $     1,381      $       3,488     $    3,743     $        4,447     $    5,124     $     4,642     $     5,756

Reconciliation of total
  adjusted EBITDA to
  Net loss:
  Total adjusted EBITDA
     for reportable
     segments               $   (3,847 )   $   (2,401 )   $         501      $     1,381      $       3,488     $    3,743     $        4,447     $    5,124     $     4,642     $     5,756
     Depreciation and
         amortization           (4,634 )       (5,112 )           (5,557 )        (5,968 )           (6,306 )       (5,225 )           (5,360 )       (5,756 )        (5,674 )        (5,978 )
     Non-cash stock
         option
         compensation               —              (1 )               (3 )           (17 )              (88 )          (90 )             (102 )          (95 )           (85 )           (67 )
     Write-off of public
         offering cost              —              —                  —               —                  —              —                  —          (1,103 )            —               —
     Interest income               160            190                194             171                167            161                160            149             248             260
     Interest expense             (352 )         (439 )             (749 )          (793 )             (822 )         (793 )             (562 )         (611 )          (631 )          (684 )
     Loss on disposal of
         property and
         equipment                (133 )         (168 )             (195 )        (1,490 )             (198 )         (227 )             (328 )         (993 )           (79 )          (194 )
     Other income
         (expense), net            (10 )          (84 )              (67 )           (59 )              (31 )         (119 )              (52 )          (34 )              3            (25 )

Net loss                    $   (8,816 )   $   (8,015 )   $       (5,876 )   $    (6,775 )    $      (3,790 )   $   (2,550 )   $       (1,797 )   $   (3,319 )   $    (1,576 )   $      (932 )

Quarterly Other Operating
  Data:
Customers                        5,645          6,980             8,365           9,687             10,778          12,074            13,406          14,713         15,978          17,435
Churn                            1.1%           1.0%              0.9%            0.9%               1.0%            1.0%              1.0%            1.0%           1.0%            1.0%
ARPU                        $   775.95     $   758.05     $      787.49      $   784.98       $     798.22      $   786.19     $      777.91      $   761.70     $   764.10      $   761.79

Liquidity and Capital Resources

      Overview . We commenced operations in 2001. Until 2004, we funded our operations primarily through issuance of an
aggregate of $120.8 million in equity securities and borrowings under a line of credit facility established with Cisco Capital, used
principally to purchase property and equipment from Cisco Systems. In 2004, we recorded positive cash flow from operating
activities for the first time and, in addition, raised $17.0 million from issuance of equity securities. Our total borrowings under the
Cisco Capital line of credit were $83.1 million, and the amount outstanding was $62.9 million, as of June 30, 2005, in addition to
$25.0 million which was borrowed in 2001 and subsequently converted into Series B preferred stock in November 2002.

     Cash Flows From Operations. Cash used in operating activities was $33.6 million in 2002 and $5.9 million in 2003. Cash
provided by operating activities was $13.9 million in 2004. Cash provided by operating activities was $1.8 million in the first six
months of 2004, compared to cash provided by operating activities of $8.0 million in the first six months of 2005.

    The increase in cash provided by operating activities of $6.2 million from the six months ended June 30, 2004 to the six
months ended June 30, 2005 is comprised of a decrease in net loss of $3.8 million, an increase in the provision for doubtful
accounts of $0.5 million resulting

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from our increase in customers, a decrease of $0.3 million in interest expense associated with the reduction in carrying value in
excess of principal resulting from the restructuring of a portion of our Cisco Capital debt in 2002, an increase of $1.8 million in net
changes in operating assets and liabilities, and an increase in depreciation and amortization expense of $0.1 million resulting from
the growth in assets arising from the growth in customers and the addition of assets needed to support our new operations in
Houston and Chicago, offset by a decrease of $0.2 million in loss on disposal of property and equipment due to an improvement in
recovery of integrated access devices from disconnected customers and a decrease of $0.1 million in the write-down of
marketable securities. In the first six months of 2004, we adjusted the carrying value of marketable securities by $0.1 million to fair
market value. In the first six months of 2005, we sold our marketable securities at fair market value and transferred the balance to
our cash and cash equivalents account.

       The increase in cash provided by operating activities of $19.8 million from 2003 to 2004 is comprised of a decrease in net
loss of $18.0 million, an increase in depreciation and amortization expense of $1.4 million resulting from an increase in property
and equipment at a lower rate of increase than the previous period due to price reductions on new purchases and the retirement
of fully depreciated assets acquired in 2000 and 2001, an increase in the change in the provision for doubtful accounts of $1.0
million resulting from our increase in customers, a decrease of $0.3 million in interest expense associated with the reduction in
carrying value in excess of principal resulting from the restructuring of a portion of our Cisco Capital debt in 2002 and an increase
in non-cash stock compensation expense of $0.3 million arising from stock option grants made in 2004, offset by a decrease of
$0.2 million in loss on disposal of property and equipment and a decrease of $1.1 million in net changes in operating assets and
liabilities.

      The decrease in cash used by operating activities of $27.7 million from 2002 to 2003 is comprised of a decrease in net loss
of $17.7 million, an increase in depreciation and amortization expense of $7.1 million resulting from our increase in property and
equipment, an increase in the change in the provision for doubtful accounts of $0.3 million resulting from our increase in
customers and an increase in loss on disposal of property and equipment of $1.8 million, offset by a decrease in the non-cash
portion of interest expense of $0.4 million, a decrease in compensation expense from forgiveness of officer notes receivable of
$0.3 million, an increase of $2.1 million in interest expense associated with the reduction in carrying value in excess of principal
resulting from the restructuring of a portion of our Cisco Capital debt in 2002 and a decrease of $0.8 million in net changes in
operating assets and liabilities.

      Cash Flows From Investing Activities. Cash used in investing activities was $12.1 million in 2002, compared to cash provided
by investing activities of $4.6 million in 2003 and cash used in investing activities of $3.9 million in 2004. Cash used in investing
activities was $0.2 million in the first six months of 2004 compared to $1.7 million in the first six months of 2005.

      Our principal cash investments are for purchases of property and equipment and purchases of marketable securities. Cash
purchases of property and equipment primarily include non-network capital expenditures, such as the cost of software licenses
and implementation costs associated with our operational support systems as well as our financial and administrative systems,
servers and other equipment needed to support our software packages, personal computers, internal communications equipment,
furniture and fixtures and leasehold improvements to our office space. Our cash purchases of property and equipment were $5.2
million, $9.1 million and $10.2 million for 2002, 2003 and 2004, respectively. Our cash purchases of property and equipment were
$6.0 million and $6.3 million in the first six months of 2004 and 2005, respectively. As discussed below, network-related capital
expenditures have primarily been financed through our credit facility with Cisco Capital and are shown as supplemental data to the
statement of cash flows.

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      We invest excess cash balances in the marketable securities of highly-rated corporate and government issuers. Purchases
of marketable securities were $7.1 million, $14.5 million and $11.8 million in 2002, 2003 and 2004, respectively. Purchases of
marketable securities were $12.5 million and $9.8 million in the first six months of 2004 and 2005, respectively. We periodically
redeem our marketable securities in order to transfer the funds into other operating and investing activities. We redeemed $28.0
million and $18.0 million in 2003 and 2004, respectively; there were no redemptions of marketable securities in 2002. We
redeemed $18.0 million and $14.4 million in marketable securities in the first six months of 2004 and 2005, respectively.

      Non-cash Purchases of Property and Equipment. Non-cash purchases of property and equipment consist of our network
capital expenditures which are purchased primarily from Cisco Systems and financed through our credit facility with Cisco Capital.
These capital expenditures are recorded as non-cash purchases because they are directly financed by Cisco Capital without the
exchange of cash for the assets that we purchase. Network capital expenditures include the purchase of integrated access
devices, T-1 aggregation routers, trunking gateway routers, softswitches, other network routers, associated growth expenditures
related to these items, diagnostic and test equipment, colocation and data center buildout expenditures and equipment installation
costs. Our non-cash purchases of property and equipment were $23.3 million, $17.1 million and $13.5 million, in 2002, 2003 and
2004, respectively. Our non-cash purchases of property and equipment were $6.5 million and $4.0 million in the first six months of
2004 and 2005, respectively. The decrease in non-cash purchases of property and equipment from 2002 to 2004 resulted from
reduced prices for network components obtained and network efficiencies gained through the growth of our customer base in
each market. The decrease in non-cash purchases of property and equipment from the first six months of 2004 to the first six
months of 2005 was due to reduced purchases and more favorable pricing.

       Our Cisco Capital credit facility is available for borrowing to fund our purchases through December 31, 2005. Upon the
consummation of this offering, however, we anticipate repaying all outstanding principal and accrued interest under our credit
facility with Cisco Capital and terminating the facility. Thereafter, we will not record non-cash purchases of property and equipment
because we will purchase these types of assets for cash entirely.

     Our capital expenditures, which include both cash and non-cash purchases of property and equipment, were $28.4 million in
2002, $26.2 million in 2003 and $23.7 million in 2004. Our capital expenditures were $12.5 million and $10.4 million in the first six
months of 2004 and 2005, respectively. Our capital expenditures resulted from growth in customers in our existing markets,
network additions needed to support our entry into new markets, and enhancements and development costs related to our
operational support systems, in order to offer additional applications and services to our customers. We expect that future capital
expenditures will continue to be concentrated in these areas and that capital expenditures will be approximately $27.0 million in
2005. We believe that capital efficiency is a key advantage of the IP-based network technology that we employ.

      Cash Flows From Financing Activities. Cash flows provided by financing activities decreased $47.0 million in 2003 from
$47.9 million in 2002 to $0.9 million in 2003. Cash flows provided by financing activities increased $6.9 million in 2004 from $0.9
million in 2003 to $7.8 million in 2004. Our cash flows used in financing activities were $4.2 million and $5.6 million in the first six
months of 2004 and 2005, respectively. The principal components of cash flows provided by financing activities are proceeds from
long-term debt and capital leases, repayment of long-term debt and capital leases, proceeds from the issuance of preferred stock
offset by financing issuance costs. The increase in cash flows provided by financing activities of $6.9 million from 2003 to 2004 is
due to proceeds from the issuance of preferred stock of $16.9 million offset by a

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decrease in the amount of proceeds from long-term debt of $5.0 million and an increase in the amount of repayment of long-term
debt and capital leases of $4.8 million. In December 2004, we sold $17.0 million of Series C preferred stock to our existing Series
B preferred stockholders and certain new investors. Under the terms of our Cisco Capital credit facility, as described below, we
make monthly borrowings to finance the purchase of property and equipment, and we also make quarterly repayments of principal
and interest on the debt. In addition, we have financed the purchase of certain software assets through capital lease
arrangements with companies other than Cisco Capital.

     The decrease in cash flows provided by financing activities of $47.0 million from 2002 to 2003 is primarily due to the
issuance of $42.1 million in Series B preferred stock in 2002, with no corresponding preferred stock issuance in 2003. In addition,
our proceeds from the issuance of long-term debt decreased $1.1 million from 2002 to 2003, and our repayment of long-term debt
increased $4.6 million from 2002 to 2003.

     The increase in cash flows used in financing activities of $1.5 million from the first six months of 2004 to the first six months
of 2005 is due to an increase in the amount of repayment of principal on our debt of $1.3 million and a decrease in the amount of
proceeds from new borrowings of $0.5 million, offset by an increase of $0.1 million in proceeds from the issuance of common
stock arising from increased exercises of stock options and a decrease of $0.2 million in financing issuance costs relating to
amendments made to our loan with Cisco Capital and to our Series C preferred stock.

      We believe that cash on hand plus cash generated from operating activities and the proceeds from this offering will be
sufficient to fund capital expenditures, operating expenses and other cash requirements over the next twelve months. Our long
term cash requirements include the capital necessary to fund the next phase of our market expansion, which anticipates launching
operations in six additional markets by the end of 2009. Our business plan assumes that cash flow from operating activities of our
mature markets will offset the negative cash flow from operating activities and cash flow from financing activities of our six
additional markets as they are launched on a staggered basis over the next three years. We intend to adhere to our policy of fully
funding all future market expansions in advance and do not anticipate entering markets without having more than sufficient cash
on hand to cover projected cash needs.

     With the completion of this stock offering, we anticipate fully repaying all existing obligations to Cisco Capital under our credit
agreement, thus significantly reducing our overall short-term and long-term commitments.

       Financing Arrangements with Cisco Capital . In 2002, we entered into an amended and restated credit agreement with our
principal lender Cisco Capital, under which Cisco Capital agreed to provide up to $115.4 million in available credit. This credit
facility was subsequently amended to reduce the amount of available credit to $105.4 million. Borrowings under the credit facility
become available in increments subject to our satisfaction of certain operational and financial covenants over time. Up to $70.0
million is available for equipment loans through December 31, 2005, of which $57.0 million was borrowed and $43.3 million was
outstanding as of June 30, 2005. Up to $19.5 million is available to fund network-related services, such as network installation,
provided by Cisco Systems, and certain non-Cisco Systems network equipment through December 31, 2005, of which $15.3
million was borrowed and $11.8 million was outstanding as of June 30, 2005. The aggregate balance of loans to finance Cisco
Systems services and non-Cisco Systems network equipment, excluding up to $2.0 million to fund certain types of non-Cisco
Systems network equipment, is limited to 25% of outstanding equipment loans. Up to $15.9 million was made available to finance
interest expense on the loan during the period of November 1, 2002 through September 30, 2003, of which $10.7 million was
borrowed and $7.8 million was outstanding as of June 30, 2005. Total borrowings under the credit facility

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were $83.1 million, and the amount outstanding was $62.9 million, as of June 30, 2005. The effective interest rate charged on
outstanding borrowings at June 30, 2005 was 6.75%.

      Our credit facility contains certain quarterly financial covenants, including leverage, interest coverage and capitalization
ratios, as well as reporting covenants, for which we have occasionally obtained waivers. We are currently in compliance with all of
the covenants under the credit facility.

     In connection with our credit facility, we granted to Cisco Capital warrants which will permit Cisco Capital to acquire up to
713,593 shares of our common stock at an exercise price of $0.04 per share and 6,435 shares of our common stock at an
exercise price of $3.88 per share. All warrants are exercisable until March 31, 2010.

     Commitments. The following table summarizes our long-term commitments as of June 30, 2005, including commitments
pursuant to debt agreements and operating lease obligations:
                                                                                       Payments Due by Period
                                                                                        (Dollars in thousands)

                                                     Less than 1                                                 More than 5
Contractual Obligations                                 Year            1 to 3 Years             3 to 5 years      Years           Total

Long-term debt                                      $    13,030         $    26,610          $        23,284     $       —     $   62,924
Capital lease obligations                                   369                 195                       —              —            564
Operating lease obligations                               1,909               5,884                    6,107         13,635        27,535
Deferred installation revenues                              671                 520                       —              —          1,191
Anticipated interest payments                             3,873               4,962                    1,493             —         10,328

Total                                               $    19,852         $    38,170          $        30,885     $   13,635    $ 102,542


     Upon the consummation of this offering, we expect to repay all outstanding principal and accrued and unpaid interest owed
under our existing credit facility with Cisco Capital (comprising all of the long-term debt as described in the table above) and
terminate the facility.

Stock-Based Compensation

      We have generally granted stock options at exercise prices at least equal to the fair value of our common stock on the date
of grant. Our compensation committee has responsibility for setting the exercise price for our stock option grants. During our
history as a private company, our compensation committee determined our common stock’s fair value based upon the
committee’s review and consideration of such factors as: independent external valuation events such as arms-length transactions
in our shares; significant business milestones that may have affected the value of our business; and internal valuation estimates
based on discounted cash flow analysis of our financial results or other metrics, such as multiples of revenue and adjusted
EBITDA.

     For options granted during the period before a publicly traded share price for our common stock was available, our
compensation committee determined the exercise price of our stock options based upon the following guidelines: each period
(monthly before 2005 and quarterly thereafter), the committee would set the exercise price for stock options to be granted that
month based on the last independent external valuation event; the committee would review whether significant business
milestones that had occurred since the last external valuation event warranted a change in exercise price; and, at least once every
six months, the committee would review the exercise price and compare the current price to internal valuation estimates if no
independent external valuation information was available.

     For options granted during the twelve months preceding June 30, 2005, our compensation committee performed internal
valuations that relied principally upon the price at which

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unrelated third parties purchased our preferred stock in November 2002, July 2004 and December 2004. In the absence of
significant business milestones or revised internal valuation estimates, the compensation committee determined that the most
recent external valuation event provided the best indicator of fair value. We did not obtain a separate contemporaneous valuation
for each grant in the absence of external valuation events, and separate third-party valuations would not have been feasible for
each grant.

     Our internal valuation estimates relied principally upon the price that unrelated third parties had paid for shares of our stock
because our compensation committee determined that then-recent transactions in our preferred stock provided the best available
evidence of fair value. In addition, the committee compared this data to valuation estimates using a discounted cash flow method
and a guideline public company approach performed as of December 2004.

      The discounted cash flow method is an approach commonly used to value business interests that involves estimating the
future cash flows of the business and discounting them to their present value. We selected a discount rate based on consideration
of the risks inherent in the investment and market rates of return available from alternative investments of similar type and quality.
Our cash flow assumptions used in the discounted cash flow method excluded provisions for debt service and reflected the cash
flows available to all suppliers of capital (both debt and equity). Accordingly, the discount rate we applied to the cash flow
assumptions reflected the return required by all providers of capital. This discount rate represented our weighted average cost of
capital, which was calculated by weighting the after-tax required returns on debt and equity by their respective percentages of total
capital. The return required by each class of investor reflects the rate of return investors would expect to earn on other
investments of equivalent risk. The cost of debt reflected the estimated cost at the time of the internal valuation to obtain long-term
debt financing. The cost of equity reflected the required return on equity estimated by the capital asset pricing model. Based on
these assumptions, the discount rate used was our weighted average cost of capital, which was estimated at 15.0% to 20.0%.
This was the discount rate we used in our discounted cash flow analysis.

      In addition, we supplemented the discounted cashflow method using the guideline public company approach, which
estimates fair value using earnings or book value multiples derived from the stock price of publicly traded companies engaged in a
similar line of business. We accorded less weight to the guideline public company approach due to the difficulty of making direct
comparisons between the guideline companies and Cbeyond as a result of differences in financial and operating performance,
growth, size, leverage, relative risk, customer base and revenue composition.

      After estimating our business enterprise value using the discounted cash flow and guideline public company methods, we
adjusted the indicated business enterprise value range for the value of net debt, employee stock options and warrants. A 20%
discount was also applied to the resulting equity value to account for the lack of marketability and lack of control of our shares.
This internal valuation estimate supplemented, and was consistent with, our determination of fair value based upon the prices that
unrelated third parties paid for our shares in July 2004 and December 2004.

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    Our stock option grants in 2004 and 2005 to date occurred each month from June 2004 through December 2004 and in
February 2005. The table below sets forth the number of options issued, the exercise price of the option and the fair value of our
common stock at the date of grant during the twelve months ended June 30, 2005.
                                                                                                               Fair
                                                                                 Options       Exercise      value of
                    Month issued                                                 issued         price        common

                    July 2004                                                     11,211       $   12.03    $   10.75
                    August 2004                                                   35,825       $   12.03    $   10.75
                    September 2004                                                 9,278       $   12.03    $   10.71
                    October 2004                                                   7,474       $   12.03    $   10.71
                    November 2004                                                 65,722       $   12.03    $   10.67
                    December 2004                                                 33,892       $   11.83    $   10.67
                    February 2005                                                597,294       $   11.83    $   10.67

      Other than certain option grants in June 2004 to purchase a total of 27,835 shares of our common stock, the exercise price
of the options granted during the foregoing period exceeded the estimated fair value of the underlying common stock. Accordingly,
none of these grants resulted in the recognition of compensation expense. In June 2004, option grants for a total of 27,835
underlying shares were granted at an exercise price of $3.88 per share to individuals who had previously been advised that they
would receive option grants with an exercise price equal to the purchase price of our Series B preferred stock in November 2002.
Based on our internal valuations and contemporaneous data relating to a third-party purchase of shares of our preferred and
common stock, we recorded deferred stock compensation of $191,160 for these June 2004 option grants, representing the
difference between the fair value of our common stock and the option exercise price at the date of grant. For the options granted
in February 2005, we did not obtain a contemporaneous valuation and instead used the most recently performed valuation from
December 2004 because our compensation committee believed the December 2004 valuation continued to be the best indicator
of fair value for the February 2005 grant.

      Since February 2005, we believe that the fair value of our common stock has increased as a result of market considerations,
including discussions with the underwriters in this offering, and the increase in value held by the common stockholders that will
result from a successful public offering, which includes the conversion of our preferred stock into common stock and thereby
eliminates the preferences and rights attributable to the preferred stock. We believe this valuation approach is consistent with
valuation methodologies applied to similarly situated companies pursuing an initial public offering. We have not granted options
since February 2005 and do not expect to grant additional options prior the completion of this offering.

      As of June 30, 2005 we had options to purchase 3,319,774 shares outstanding with a weighted average exercise price of
$6.02 per share. Assuming an initial public offering price of $13.50 per share (the mid-point of the range set forth on the cover of
this prospectus), we believe these options have a total intrinsic value (defined as the difference between the fair value of the
underlying common shares and the exercise price of the options) of approximately $19.4 million for our 2,071,334 vested options
and $5.4 million for our 1,248,440 unvested options.

Critical Accounting Policies

     We prepare consolidated financial statements in accordance with accounting principles generally accepted in the United
States, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues
and expenses, and related disclosures in our consolidated financial statements and accompanying notes. We believe that

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of our significant accounting policies, which are described in Note 1 to the consolidated financial statements included herein, the
following involved a higher degree of judgment and complexity, and are therefore considered critical. While we have used our best
estimates based on the facts and circumstances available to us at the time, different estimates reasonably could have been used
in the current period, or changes in the accounting estimates that we used are reasonably likely to occur from period to period
which may have a material impact on the presentation of our financial condition and results of operations. Although we believe
that our estimates, assumptions, and judgments are reasonable, they are based upon information presently available. Actual
results may differ significantly from these estimates under different assumptions, judgments or conditions.

     Revenue Recognition. We recognize revenues when earned. Revenue derived from local voice and data services is billed
monthly in advance and deferred until earned at the end of the month. Revenues derived from other telecommunications services,
including long distance, excess charges over monthly rate plans and terminating access fees from other carriers, are recognized
monthly as services are provided and billed in arrears.

      Revenue derived from customer installation and activation, which represented less than 1% of total revenues in 2004, is
deferred and amortized over the average estimated customer life of three years on a straight-line basis. Although our historical
customer churn rate would indicate approximately a four year average customer life, most of our customers enter a three year
contract with us. Due to the length of time we have been operating, the initial term of most of our customer contracts has not yet
expired. Accordingly, we do not have sufficient experience to estimate whether the average customer life will in fact exceed the
term of the customer contract and use the shorter contract period for purposes of amortizing revenues and costs from customer
installation and activation. Related installation and activation costs are deferred only to the extent that revenue is deferred and are
amortized on a straight-line basis in proportion to revenue recognized.

     Our marketing promotions include various rebates, discounts and customer reimbursements that fall under the scope of EITF
Issue No. 00-22, Accounting for “Points” and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and Offers for
Free Products or Services to be Delivered in the Future , and EITF Issue No. 01-09, Accounting for Consideration Given by a
Vendor to a Customer . In accordance with these pronouncements, we record any cash or customer credit consideration as a
reduction in revenue when earned by the customer. For rebate obligations earned over time, we ratably allocate the cost of
honoring the rebates over the underlying rebate period.

      Allowance for Doubtful Accounts. We have established an allowance for doubtful accounts through charges to selling,
general and administrative expense. The allowance is established based upon the amount we ultimately expect to collect from
customers, and is estimated based on a number of factors, including a specific customer’s ability to meet its financial obligations
to us, as well as general factors, such as the length of time the receivables are past due, historical collection experience and the
general economic environment. Customer accounts are written off against the allowance upon disconnection of the customers’
service, at which time the accounts are deemed to be uncollectible. Generally, customer accounts are considered delinquent and
service is disconnected when they are sixty days in arrears from their last payment date. Our allowance for doubtful accounts was
$0.8 million, $0.8 million and $1.0 million in 2002, 2003 and 2004, respectively. If the financial condition of our customers were to
deteriorate, resulting in an impairment of their ability to make payments, or if economic conditions worsened, additional
allowances may be required in the future, which could have a material effect on our consolidated financial statements. If we made
different judgments or utilized different estimates for any period, material differences in the amount and timing of our expenses
could result.

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     Impairment of Long-Lived Assets. In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets , we review long-lived assets for impairment when events or changes in circumstances indicate the carrying
value of such assets may not be recoverable. If an indication of impairment is present, we compare the asset’s estimated fair
value to its carrying amount. If the estimated fair value of the asset is less than the carrying amount of the asset, we record an
impairment loss equal to the excess of the asset’s carrying amount over its fair value. The fair value is determined based on
valuation techniques such as a comparison to fair values of similar assets or using a discounted cash flow analysis. In 2002, 2003
and 2004, we recorded $1.0 million, $3.9 million and $3.1 million, respectively, of aggregate asset impairment.

      Stock-Based Compensation . We account for stock-based compensation using the intrinsic value method prescribed in APB
No. 25, Accounting for Stock Issued to Employees , or APB No. 25, and related interpretations. SFAS No. 123, Accounting for
Stock-Based Compensation , as amended by SFAS No. 148, Accounting for Stock-Based Compensation—Transition and
Disclosure, encourages, but does not require, companies to record compensation for stock-based employee compensation plans
at fair value. We recognize non-cash compensation expense for stock options by measuring the excess, if any, of the estimated
fair value of our common stock at the date of grant over the amount an employee must pay to acquire the stock and amortizing
that excess on a straight-line basis over the vesting period of the applicable stock options. Prior to this offering, there has been no
public market for our stock and therefore no objective value for our stock. In order to determine stock-based compensation
expense, we used estimates of the fair value of our common stock based on independent external valuation events, such as
arms-length transactions in our shares, significant business milestones that may have affected the value of our business, and
internal valuation estimates based on discounted cash flow analysis of our financial results or other metrics, such as multiples of
revenue and adjusted EBITDA. Although we believe that these valuation standards are reasonable and generally accepted
methods of estimating fair value, they inherently involve a level of subjectivity and judgment.

      Valuation Allowances for Deferred Tax Assets . We have established allowances that we use in connection with valuing
expense charges associated with our deferred tax assets. Our valuation allowance for our net deferred tax asset is designed to
take into account the uncertainty surrounding the realization of our net operating losses and our other deferred tax assets in the
event that we record positive income for income tax purposes. For federal and state tax purposes, our net operating loss
carry-forwards could be subject to significant limitations on annual use. To account for this uncertainty we have recorded a
valuation allowance for the full amount of our net deferred tax asset. As a result the value of our deferred tax assets on our
balance sheet is zero.

Recent Accounting Pronouncements

      In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity . SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial
instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within
its scope as a liability or an asset in some circumstances. SFAS No. 150 is effective for the first interim period beginning after
June 15, 2003. Our adoption of this Standard did not have an impact on our financial statements.

     In December 2003, the SEC issued SAB No. 104, Revenue Recognition . SAB No. 104 codifies, revises and rescinds certain
sections of SAB No. 101 in order to make this interpretive guidance consistent with current authoritative accounting and auditing
guidance and SEC rules and regulations. The changes noted in SAB No. 104 did not have an impact on our financial statements.

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      In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (SFAS No. 123(R)), which is a
revision of SFAS No. 123. SFAS No. 123(R) supersedes APB No. 25 and amends SFAS No. 95, Statement of Cash Flows .
Generally the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R)
requires all share-based payments to employees, including grants of employee stock options, to be recognized in the statement of
operations based on their fair values. Pro forma disclosure is no longer an alternative upon adopting SFAS No. 123(R).

     We must adopt SFAS No. 123(R) no later than January 1, 2006. Early adoption will be permitted in periods in which financial
statements have not yet been issued. SFAS No. 123(R) permits public companies to adopt its requirements using one of two
methods:

      •   A modified prospective method in which compensation cost is recognized beginning with the effective date (a) based on
          the requirements of SFAS No. 123(R) for all share-based payments granted after the effective date and (b) based on the
          requirements of SFAS No. 123(R) for all awards granted to employees prior to the effective date of SFAS No. 123(R) that
          remain unvested on the effective date.

      •   A modified retrospective method which includes the requirements of the modified prospective method described above,
          but also permits entities to restate based on the amounts previously recognized under SFAS No. 123 for purposes of pro
          forma disclosures either (a) all prior periods presented or (b) prior interim periods of the year of adoption.

     We plan to adopt SFAS No. 123(R) on January 1, 2006 and we are still evaluating which methodology we will follow. The
impact of adopting SFAS No. 123(R) cannot be predicted at this time because it will depend on the level of share-based payments
granted in the future. However, had we adopted SFAS No. 123(R) in prior periods, the impact would have approximated the
impact of SFAS No. 123 as described in the disclosure of pro forma net income and earnings per share in Note 2 to the financial
statements.

Quantitative and Qualitative Disclosures About Market Risk

     All of our financial instruments that are sensitive to market risk are entered into for purposes other than trading. Our primary
market risk exposure is related to our marketable securities. We place our marketable securities investments in instruments that
meet high credit quality standards as specified in our investment policy guidelines. Marketable securities invested in a mutual fund
were approximately $14.3 million at December 31, 2004. The mutual funds’ assets are comprised primarily of U.S. government
securities and instruments based on U.S. government securities with a target duration of approximately two years.

      Interest on amounts drawn under our $105.4 million credit facility varies based on LIBOR and our leverage ratio. Based on
the $64.4 million outstanding balance as of December 31, 2004, a 1% change in the applicable rate would change the amount of
interest paid for 2005 by $0.6 million.

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                                                            INDUSTRY OVERVIEW

      We participate in the communications services industry as a managed services provider. Within the communications
industry, we compete primarily in wireline voice and Internet broadband markets and have a presence in markets for web hosting,
virtual private network and other enhanced services.

The Market for Communications Services

     According to International Data Corporation, or IDC, the U.S. wireline voice and data communications market’s revenues for
2004 were estimated at $215.8 billion, a decline from the market’s total revenues of $221.2 billion in 2003, as a result of increased
competition, changes in technology and other factors. The industry is typically segmented by both customer and service type. IDC
estimates that businesses accounted for revenues of $118.5 billion in 2004, with the remaining $97.3 billion of revenues
representing consumer spending. Of the total business-segment revenue, IDC estimates that small businesses, which it defines
as those with fewer than 100 employees, accounted for $47.0 billion of revenues. The wireline market can also be segmented by
service type, including local and long distance voice services, data transport and various enhanced services. In 2004, according to
IDC, the small business segment accounted for an estimated $25.4 billion in local voice revenue, $12.1 billion in long distance
voice revenue, $8.5 billion in value-added data services revenue and $1.0 billion in revenue from access charges and other
services.

Telecom Act

      Prior to the passage of the Telecommunications Act of 1996, or Telecom Act, the communications industry was dominated
by a monopoly local exchange carrier in each region. The Telecom Act brought significant change to the industry, which now
generally comprises a few very large incumbent carriers, and many smaller alternative telecommunications carriers. Recently
announced mergers, such as the proposed merger of SBC and AT&T, are increasing the trend towards consolidation of the larger
carriers.

    The primary objective of the Telecom Act was to drive greater value for end-customers through increased competition.
Important goals of the Telecom Act included:

      •   stimulating facilities-based local competition;

      •   encouraging the rapid deployment of broadband services; and

      •   enabling innovative service offerings.

     The Telecom Act made possible a new era of communications competition by requiring traditional carriers to make
unbundled network elements available to alternative carriers at wholesale or discounted rates. New operators could leverage
access, transport and switching unbundled network elements to deliver service to customers. Competitive local telephone
companies emerged to offer voice, data and Internet services to businesses and consumers in competition with the regional Bell
operating companies, other traditional local telephone companies, and interexchange carriers.

Competitive Carriers

       Competitive carriers include the traditional cable television companies, utility companies, Internet service providers, providers
utilizing VoIP technology and other hybrid service providers offering a range of communications services. Competitive carriers
utilize several types

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of business strategies, deploy various network architectures and serve a range of customers. They can be broadly segmented into
two groups:

      •   Facilities-based providers. These providers offer service to end users either exclusively or predominantly over their own
          facilities. Typically, facilities-based providers operate their own switching networks and either build their own facilities or
          lease last-mile facilities from the traditional local telephone companies. These ―last-mile‖ facilities include connection
          between the end-user customer’s premises and the serving central office, generally referred to as the local loop, and the
          facilities between the serving central offices and other central offices that are necessary for the routing of calls through
          the local network, generally referred to as interoffice transport. The Telecom Act requires that traditional local telephone
          companies make these local loop and interoffice transport facilities available to competitors on an unbundled basis.
          These unbundled facilities are offered today by the traditional local telephone companies in accordance with the Telecom
          Act and include voice-grade and high capacity unbundled network element loops (such as T-1 circuits) and high capacity
          interoffice transport.

      •   Non-facilities-based providers . These providers do not operate their own facilities but instead use the facilities of other
          providers exclusively. Non-facilities-based providers resell retail service that is offered to them at a wholesale discount
          and re-brand these services to their end user customers. Resale was contemplated and required by the Telecom Act and
          allows a competitive carrier rapidly to offer end-to-end service delivery targeted at consumers without owning any
          facilities. Currently, most non-facilities based carriers purchase a package of services known as the unbundled network
          element platform from traditional local telephone companies at wholesale prices based on incremental costs.

      According to Gartner Research, there were well over 300 competitive carriers by early 2001, but that number dwindled
significantly as many of these operators went out of business or dissolved as a result of financial distress and merger and
acquisition activity. The first wave of entrants to leverage the Telecom Act faced numerous challenges in implementing successful
business strategies. Some of the challenges included significant build-out costs in advance of market penetration that left many
with underutilized networks and high debt burdens, no clear cost advantage over the traditional local telephone companies as they
deployed similar circuit-switched networks, and operational challenges in selling and provisioning local services.

VoIP Technology and Business Models

      VoIP technology enables the convergence of voice and data services onto a single integrated network using technologies
that digitize voice communications into IP packets for transport on either private, managed IP networks or over the public Internet.
Voice and data traffic is packetized, transported and routed to the desired location using IP addressing. In traditional
circuit-switched telephony, a direct connection between the parties on a voice call provides a permanent link for the duration of the
communication. This link is a dedicated circuit, and the bandwidth cannot be used for any other purpose during the call. In VoIP
telephony, multiple conversations and data services are sent over a single network as separate streams of data packets. VoIP
uses the network more efficiently because it combines multiple sets of data over a single integrated network and dynamically
allocates available bandwidth according to usage levels.

      There are two distinct strategies that carriers adopt in deploying VoIP services:

      •   Voice as an application over the public Internet . In this strategy, packets are not identified and prioritized by content and
          the network operates on a best-efforts basis. These service

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          providers focus primarily on the consumer market. Under this strategy, the quality of voice traffic may not be as high as
          that delivered by other VoIP carriers or carriers using traditional technologies due to problems such as network reliability
          and packet loss where a voice packet is misdirected or delayed, resulting in poor voice quality or loss of transmission. We
          do not use the public Internet to provide local and long distance voice services.

      •   Voice over IP networks that are owned and managed by operators . In this strategy, voice traffic travels over a private
          data network (instead of the public Internet) and receives priority over other types of traffic to produce quality of service
          that is similar to the traditional circuit-switched network. This is the strategy we use to provide our VoIP services.

     VoIP can provide significant benefits to communications service providers compared to traditional circuit-switched networks.
Significant benefits include:

      Lower Capital Expenditures . VoIP technology enables operators to deploy lower cost voice switching platforms, frequently
called softswitches, as opposed to circuit-switch technologies. Softswitches afford significant cost advantages over circuit
switches. For example, a network using softswitches uses fewer (and less costly) network elements, requires fewer
telecommunications circuits and has lower maintenance costs than a network using circuit-switches. VoIP technology requires
fewer network elements because it deploys a single network that transports both voice and data, compared to traditional
telephony architecture where multiple networks are deployed. VoIP technology requires only a single network because of its ability
to packetize voice and dynamically allocate bandwidth, allowing a converged IP network to have significantly over-subscribed
transport resources, which reduces operator requirements to build additional capacity. This is particularly advantageous in last
mile facilities, which connect the operator to the end customer. In addition, in a softswitched network, capital expenditures can be
success-based, incurred only as the service provider’s customer base grows.

      Lower Operating Expenditures . By deploying a single converged network for both voice and data services, the service
provider can achieve significant operating efficiencies in provisioning, monitoring and maintaining the network. In the traditional
operator environment, service providers must manage separate networks for various voice and data services. Also, the transport
efficiency mentioned above requires less leased capacity, as more customers can be served on a given transport circuit.

     New Service Offerings . The softswitch architecture underpinning VoIP enables the rapid and cost-effective introduction of
new services and features, which can be introduced without changing the existing network. All services are provided over the
integrated network, so there is no requirement for additional capacity or modifications to introduce new service offerings.
Compared to legacy networks built on proprietary standards and protocols, VoIP networks facilitate the development of new
applications because they use open standards and protocols.

      Historically, IP networks have had disadvantages in delivering voice services when compared with mature, traditional
circuit-switched networks. These disadvantages have included inferior quality of service, limited scalability, reliability and
functionality, fewer features and a limited deployment history. Since the early VoIP deployments in the 1990s, service providers
and technology manufactures have gained significant operational and development experience with voice on an IP network. As a
result, the underlying technology has matured significantly, improving quality, reliability and scalability and broadening the scope
of available features.

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         VoIP Business Models

     As VoIP technology has matured over the past decade, service providers have utilized its capabilities to establish business
models that vary both in terms of the type of service they deliver and the target end-customer. The following table summarizes
selected models that have been deployed from the 1990s through the present:
                                     Public Internet / Best Efforts                               Managed Networks

                             Long Distance/                   PC-to-PC/              Cable
                            Calling Card VoIP              Broadband VoIP        Broadband VoIP                      Private Managed
                                                                                                                      VoIP Networks
 Service                   Inexpensive long             Inexpensive voice    Integrated VoIP and                 Integrated VoIP,
                             distance calls                   calls           broadband Internet                broadband Internet
                                                                                    access                      access, enhanced
                                                                                                                   data services

                                                        Consumers, small
                             Consumers,
 Target Customers                                         offices, home          Consumers                            Businesses
                              wholesale
                                                              offices

                                                                                                                Leased and owned
 Network                    Public Internet               Public Internet    Cable infrastructure
                                                                                                                  infrastructure

                                                                                Cablevision,                           Cbeyond
 Examples                     Net2Phone                   Skype/Vonage
                                                                             Time Warner Cable

The Market for Managed Network Services

     The managed network market encompasses a variety of services ranging from network monitoring, maintenance and
customer premises equipment procurement and installation to hosted solutions such as security and IP telephony. Managed
network services are delivered over a centrally managed IP platform and over secure broadband connections and include
enhanced services such as IP virtual private network, website and intranet hosting, network security, storage, email and instant
messaging.

     Although small businesses have traditionally developed in-house solutions to many managed network needs, there is a trend
towards third-party management. We seek to capitalize on this trend. According to IDC, the primary reasons why small and
medium sized businesses use or are considering using managed network services include a reduction in total cost of network
operations, improvement of network availability and performance, the lack of appropriate level of IT staffing and security concerns
such as business continuity and firewalls.

      Small businesses surveyed by Forrester Research use and outsource or plan to use and outsource web hosting (43%),
intrusion detection (29%), business continuity / disaster recovery (27%), application hosting (27%), managed voice (26%) and
firewalls (22%). Small businesses typically use a local carrier to procure their managed network services.

       Web Hosting . According to IDC, in 2004 web hosting revenues in the United States were estimated at $6.1 billion, of which
$2.7 billion was generated by small businesses. The United States small business web hosting market is expected to show a
compounded annual growth rate of 12.5% for the period from 2003 to 2008 and to reach $4.5 billion by 2008. The major factors
fueling growth in the small business segment include increased web site adoption, increased small business spending on growth
initiatives and conversion of in-house hosters.

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IDC predicts that the percentage of small businesses with web sites will increase from about 46% in 2003 to nearly 66% in 2008,
and that 80% of these small businesses will use third parties to host their web sites.

     The main reasons for small businesses to outsource web hosting include cost savings, lack of in-house expertise, security
and improvement of site performance and stability. In addition, small businesses typically do not have the capital to build a robust
data center environment. Competition in this segment is based on service features, pricing and bundling of web hosting services
as part of a larger communications or Internet access packages. The key success factors in this market are brand recognition,
value-added solutions and strong distribution channels and partnerships.

     Virtual Private Network . According to IDC, IP virtual private network revenues for the U.S. reached $12.5 billion in 2004. The
U.S. IP virtual private network market is expected to grow at an estimated compounded annual growth rate of 10.8% for the period
from 2004 to 2009 and to reach $20.9 billion in revenue in 2009. The main trends driving growth are security enhancements, new
features, conversion of do-it-yourself solutions, growth in IP based applications, competitive pricing and increased flexibility
compared to legacy alternatives.

     Security . According to IDC, worldwide security and vulnerability management software revenues reached $1.2 billion in
2003 and are estimated at $1.5 billion in 2004. According to IDC, revenues in this market are expected to grow at an estimated
compounded annual growth rate of 20.3% for the period from 2003 to 2008. Key trends driving demand in the security market
include assurance of high uptime for network applications, administrative cost reduction and integration of security with current
systems and network management systems.

     Storage . According to IDC, storage services spending in the United States reached $11.3 billion in 2004 and is expected to
reach $13.9 billion in 2009, or a compounded annual growth rate of 4.3% for the period from 2004 to 2009. Key industry trends
include consolidation of storage devices, increasing concern with data overload and subsequent management costs and pressure
to meet regulatory compliance regarding data storage in specific applications such as email.

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                                                              BUSINESS

Overview

       We provide managed IP-based communications services to our target market of small businesses in selected large
metropolitan areas. Our services include local and long distance voice services, broadband Internet access, email, voicemail, web
hosting, secure backup and file sharing and virtual private network. Our voice services are delivered using VoIP technology, and
all of our services are delivered over our secure all-IP network, rather than over the best-efforts public Internet. Our network allows
us to manage quality of service and achieve network and call reliability comparable to that of traditional phone networks.

     We believe our all-IP network platform enables us to deliver an integrated bundle of communications services that may
otherwise be unaffordable or impractical for our customers to obtain. We manage all aspects of our service offerings for our
customers, including installation, provisioning, monitoring, proactive fault management and billing. We first launched our service in
Atlanta in April 2001 and now also operate in Dallas, Denver, Houston and Chicago. We intend to expand into six additional
markets by the end of 2009, each of which will be selected from the 25 national markets in which we do not have a presence. Our
determination of which cities to expand into is largely dependent on the relevant market conditions at the time of entry.

      We reported approximately $113.3 million in revenue in 2004, as compared to $65.5 million in 2003. We reported $16.8
million of adjusted EBITDA, and net losses of $11.5 million, on a consolidated basis in 2004. Our adjusted EBITDA increased from
$7.2 million for the six months ended June 30, 2004 to approximately $10.4 million for the six months ended June 30, 2005, and
our net losses decreased from approximately $6.3 million to $2.5 million during the same period. We seek to achieve positive
adjusted EBITDA, excluding corporate overhead, in our new markets within 18 to 22 months from launch. We first achieved
positive adjusted EBITDA in Atlanta, Dallas and Denver within 17 months from launch in each market. Whether we achieve
positive adjusted EBITDA in new markets within the same timeframe depends on a number of factors, including the local pricing
environment, the competitive landscape and our costs to obtain unbundled network elements from the local telephone companies
in each market. As of June 30, 2005, we were providing communications services to 17,435 customer locations.

      Our IP/VoIP Network Architecture . We deliver our services over a single all-IP network using T-1 connections. This allows us
to provide a wide array of voice and data services, attractive service features (such as real-time online additions and changes),
quality of service and network and call reliability comparable to that of traditional telephone networks. Unlike traditional
voice-centric circuit switched communications networks, which require separate networks in order to provide voice and data
services, we employ a single integrated network, which uses technologies that digitize voice communications into IP packets and
converges them with other data services for transport on an IP network. We transmit our customers’ voice and data traffic over our
secure private network and do not use the public Internet, which is employed by other VoIP companies such as Vonage and
Skype Technologies. Our network design exploits the convergence of voice and data services and we believe requires
significantly lower capital expenditures and operating costs compared to traditional service providers using legacy technologies.
The integration of our network with our automated front and back office systems allows us to monitor network performance,
quickly provision customers and offer our customers the ability to add or change services online, thus reducing our customer care
expenses. We believe that our all-IP network and automated support systems enable us to continue to offer new services to our
customers in an efficient manner. For example, in the first half of 2006, we expect to leverage the flexibility of our IP network and
back-office systems to

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integrate wireless services with our existing wireline services. We currently have an arrangement with an established national
wireless carrier, which will provide the wireless services we will sell to our customers under our own brand when our wireless
support processes and systems have become operational.

      Our Target Market and Value Proposition . Our target market is businesses with 4 to 200 employees in large metropolitan
cities, using five or more phone lines. According to 2005 Dun & Bradstreet data, there are approximately 1.4 million businesses
with 5 to 249 employees in the 25 largest markets in the United States. We are currently in five of these markets and plan to
launch into six additional markets by the end of 2009.

      We provide each of our integrated packages of managed services at a competitively priced, fixed monthly fee. Certain
enhanced services are available as optional add-ons, and we charge per- minute fees for long distance telephone usage in
excess of included plan minutes. We believe that we provide a differentiated value proposition to our customers, most of which do
not have dedicated in-house resources to fully address their communications requirements, and who therefore value the ease of
use and comprehensive management that we offer. Our primary competitors, the local telephone companies, do not generally
offer packages of similar managed services to our target market. We believe that this value proposition, along with our fixed-length
contracts, has been crucial to achieving our historical monthly customer churn rate, which was approximately 1% as of June 30,
2005.

Our Strategy

     We intend both to grow our business in our current markets and to replicate our approach in additional markets. To achieve
our goal of profitably delivering sophisticated communications tools to small businesses in our current and future markets, we
have adopted a strategy with the following principal components:

      •   Focus solely on the small-business market in large metropolitan areas . We target small businesses, most of which do not
          have dedicated in-house resources to address their communications requirements fully and place a high value on
          customer support. By focusing exclusively on small business customers, we believe we are able to differentiate ourselves
          from larger service providers and deliver superior service that small business customers value.

      •   Offer comprehensive packages of managed IP communications services . We seek to be the single-source provider of
          our customers’ wireline local and long distance voice services and data communications needs. All of our customers
          subscribe to one of our integrated BeyondVoice packages of applications. Each of our BeyondVoice packages includes
          local and long distance voice services and broadband Internet access, plus the customer’s choice of either an e-business
          pack (including our email and web hosting applications) or a communications pack (including our voicemail and other
          voice-related applications). All of our services are delivered over high-capacity T-1 connections. We do not offer our local
          and long distance voice services and broadband Internet access applications on an unbundled basis. We offer our
          services only under fixed-length, flat-rate contracts. We believe that this approach results in high average revenue per
          customer location and a low customer churn rate. In the first half of 2006, we expect to add wireless voice and data
          services, including wireless email, wireless synchronization of calendar and contacts and wireless web browsing to our
          service offerings. We also plan to offer integrated wireless/wireline applications such as unified messaging, one number
          service and simultaneous ring. These wireless services will only be offered in conjunction with our core BeyondVoice
          package and we do not plan to offer wireless

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          services on a stand-alone basis. Rather, we expect to provide our customers with a bundled wireless and wireline offering
          with one bill and shared minutes across their business.

      •   Increase penetration of enhanced services to our customer base. We seek to achieve higher revenue and margin per
          customer, increase customer productivity and satisfaction and reduce customer churn by providing enhanced services in
          addition to our local and long distance voice services and broadband Internet access applications. As of June 30, 2005,
          our average customer used a total of 4.6 applications, whether as part of a package or purchased as an additional
          service. As of June 30, 2005, our customers used enhanced applications such as voicemail services (51% of our
          customers), email services (45%), web hosting (37%), calling card services (7%), virtual private network (8%), conference
          calling services (4%), secure backup and fileshare (5%) and BeyondOffice remote connectivity services (5%).

      •   Focus sales and marketing resources on achieving significant market penetration. We have chosen to focus our sales
          and marketing efforts on only five markets to date, believing that this approach allows us to more effectively serve our
          small business customers and grow market share in these markets. We will continue to deploy a relatively large direct
          sales force in each of the markets that we enter, in contrast to many of our competitors, who have deployed smaller sales
          forces in a greater number of markets. We believe that our approach has resulted in our obtaining market share, and
          therefore profitability, at a faster rate and better financial results than would have resulted from an approach that
          emphasized having a sales presence in more markets.

      •   Replicate our business model in new markets . We currently operate in five markets and intend to expand into six
          additional markets by the end of 2009. Each time we expand into a new market, we adhere to the same process for
          choosing, preparing, launching and operating in those markets. In launching our business in each new market, we use
          the same disciplined financial and operational reporting system to enable us to closely monitor our costs, market
          penetration and provisioning of customers and maintain consistent standards across all of our markets.

Our Strengths

     Our business is focused on rapidly growing a loyal customer base, while maintaining capital and operating efficiency. We
believe we benefit from the following strengths:

      •   Our all-IP network . We are able to provide a wide range of enhanced communications services in a cost-efficient manner
          over a single network, in contrast to traditional communications providers, which may require separate, incremental
          networks or substantial network upgrades in order to support similar services. Our all-IP network architecture allows us to
          provide a comprehensive package of managed communications services including VoIP, with high network reliability and
          high quality of service.

      •   Capital efficiency . We believe that our business approach requires lower capital and operating expenditures to bring our
          markets to positive cash flow compared to communications carriers using legacy technologies and operating processes.
          In addition, our deployment of capital is largely success-based, meaning we incur incremental capital only as our
          customer base grows. Historically, in the first year of a new market launch, approximately 60% of our network capital
          expenditures have been success-based and, thereafter, approximately 85% of our network capital expenditures have
          been success-based.

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      •   Our automated and integrated business processes . We believe that the combination of our disciplined approach to sales,
          installation and service together with our automated business processes allow us to streamline our operations and
          maintain low operating costs. Our front and back office systems are highly automated and are integrated to synchronize
          multiple tasks, including installation, billing and customer care. We believe this allows us to lower our customer service
          costs, efficiently monitor the performance of our network and provide automated and responsive customer support.

      •   Our highly regimented but personalized sales model . We believe we have a distinctive approach to recruiting, training
          and deploying our direct sales representatives, which ensures a uniform sales culture and an effective means of acquiring
          new customers. Our direct sales representatives follow a disciplined daily schedule and meet face-to-face with customers
          each day as part of a transaction-oriented but personalized and consultative selling process.

      •   Our experienced management team with focus on operating excellence . Our senior management team has substantial
          industry experience. Our top three executive officers have an average of 20 years of experience in the communications
          industry and have worked at a broad range of communications companies, both at startups and mature businesses,
          including local telephone companies, long distance carriers, competitive carriers, web hosting companies, Internet and
          data providers and wireless communications providers.

      •   Our strong balance sheet and liquidity position. We have a strong balance sheet with over $44.1 million in cash and
          investments and no debt after giving effect to this offering assuming an initial public offering price of $13.50 per share, the
          midpoint of the initial public offering price range indicated on the cover of this prospectus. We believe that the net
          proceeds from this offering, together with revenues from operations and cash on hand, will be sufficient to fund our capital
          expenditures and operating expenses, including those related to our current plans to expand into six additional markets
          by the end of 2009.

     We believe our strategies and strengths have contributed to our financial and operating performance, including high revenue
growth, attractive average revenue per customer location and low customer churn.

Our Customers

     We are targeting entrepreneurial-class businesses, or those with 4 to 200 employees in certain of the 25 largest metropolitan
markets in the United States. According to 2005 Dun & Bradstreet data, there are approximately 1.4 million businesses with 5 to
249 employees in the 25 largest markets in the United States. We are focusing on these markets because of their high
concentration of small businesses. We believe that pursuing these markets will allow us to maximize the resources we can apply
by operating in the densest areas of small business in the United States. As of June 30, 2005, we were providing communications
services to 17,435 customer locations and had processed over 3.0 billion VoIP minutes since our inception.

      The majority of our target customers currently receive communications services from local telephone companies, and many
of these businesses have more than one provider for the basic services of local and long distance voice services and Internet
access. These businesses, in most cases, do not receive the focus and personalized attention that larger enterprises enjoy and
often lag behind larger businesses in the adoption of productivity-enhancing and cost-effective service offerings.

     The small businesses we target typically lack affordable access to a T-1 broadband connection and typically do not have
dedicated in-house resources to manage their communications needs. Approximately 75% of our customer base uses 5 to 8 local
voice lines,

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although the larger size customers in our range represent an increasing percentage of the total. Because we focus solely on small
businesses, no single customer or group of customers represents a significant percentage of our customer base or revenues.
Similarly, no single vertical customer segment represents a significant percentage of our base. Legal offices, physicians and
architecture firms each make up greater than 10% of our customer base, while other services-related segments such as retail, real
estate, banking and accounting firms each comprise 7% to 10% of our customer base. Other sectors such as insurance,
not-for-profits, consulting and software development firms are also represented. We believe that small businesses look for the
following characteristics in choosing a service provider: competitive pricing, focus on small-business solutions, dedicated
customer care, a simplified, single bill and comprehensive service management.

Our Managed Service Offerings

          Integrated Service Offerings

     We offer integrated managed communications services through our BeyondVoice packages, which are provided over one to
three dedicated T-1 connections. The BeyondVoice packages are essentially one basic product in four sizes, depending on the
customer’s size and need for bandwidth:
                                              BeyondVoice I         BeyondVoice II        BeyondVoice II Plus        BeyondVoice III

Customer profile                              Businesses with        Businesses with          Businesses with          Businesses with
                                                 5 to 14 lines        15 to 24 lines           15 to 24 lines           36 to 48 lines
                                              (typically 4 to 30   (typically 30 to 100     (typically 30 to 100    (typically 100 to 200
                                                 employees)            employees)          employees with high      employees with high
                                                                                             bandwidth needs)         bandwidth needs)

Broadband connection                           One dedicated         Two dedicated           Two dedicated            Three dedicated
                                               T-1 connection       T-1 connections          T-1 connections          T-1 connections

Number of voice lines                                 5                    15                       24                       36

Included local minutes per month                 Unlimited              Unlimited               Unlimited                Unlimited

Included domestic long distance minutes per        1,500                 3,000                    6,000                    9,000
   month

Internet access                                Speed up to 1.5      Speed up to 2.0          Speed up to 3.0          Speed up to 4.5
                                                    Mbps;                Mbps;                    Mbps;                    Mbps;
                                              unlimited monthly    unlimited monthly        unlimited monthly        unlimited monthly
                                                    usage                usage                    usage                    usage

      Each of our BeyondVoice packages includes local and long distance voice services and broadband Internet access, plus the
customer’s choice of either an e-business pack (including our email and web hosting applications) or a communications pack
(including our voicemail and other voice-related applications). The local and long distance voice services in our BeyondVoice
packages include enhanced 911 services, which are comparable to the 911 services offered over traditional telephone networks,
and business class features, which include call forwarding, call hunting, call transfer, call waiting, caller ID and three-way calling.

          Enhanced Services

    In addition to the applications offered in our BeyondVoice packages, we currently offer other services which include secure
backup and file share, virtual private network, calling cards,

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conference calling, 800 numbers and other voice features. In the future, we plan to offer other applications, such as network
security, calendar share, fax to email and secure desktop. Our enhanced services are sold on an a la carte basis to subscribers of
our BeyondVoice bundled packages.

Sales and Marketing

         Overview

      Our sales force targets small businesses that have 4 to 200 employees and 5 or more phone lines. We believe that the
traditional local telephone companies have not concentrated their sales and marketing efforts on this business segment. Our
direct sales representatives meet face-to-face with customers each day as part of a transaction-oriented but personalized and
consultative selling process. We adhere to the same sales and operating procedures in every market we enter. We track the
performance of our sales team by maintaining detailed activity measurements in each of our markets.

      We offer our customers a comprehensive communications solution that is simplified into four BeyondVoice packages sold at
fixed, predetermined prices. We permit our sales people to sell only our offered packages and do not allow them to make
discounted sales or alter the BeyondVoice packages (other than to add enhanced services or in connection with company-wide
promotions). We believe that value is the primary motivating factor for our customers. We believe that our commitment to offering
integrated packages of services helps to simplify the entry of orders into our automated provisioning and installation process.
Through our strategy of offering bundled services, we seek to become the single-source provider of our customers’ wireline
communications services. We believe these factors contribute to our low customer churn rate.

         Sales Channels

     Direct Sales . The cornerstone of our sales efforts is our direct sales force. At June 30, 2005, we employed 272 direct sales
representatives and 75% of our sales resulted from our direct sales efforts.

      We believe we have a distinctive approach to recruiting and training our direct sales representatives which ensures a uniform
sales approach and a consistent measure of revenue targets. We typically recruit individuals without prior telecommunications
sales experience so that we can exclusively provide all of their formal training. The ongoing nature of our training is an essential
part of our business strategy. We require our sales personnel to maintain a regimented daily schedule of training, appointment
setting and face-to-face meetings with customers, resulting in a transaction-oriented, but personalized and consultative selling
process.

     A substantial part of the compensation for our sales force is based on commission. We reinforce our clear expectations of
success through a system of increasing quotas and advancement for those who succeed. We promote from within and develop
our own sales management talent from promising sales representatives, who have the opportunity to advance as we grow.

     Inside Sales . In 2004 we established an inside sales group in order to respond to web-based and telephone inquiries from
customer prospects. In addition to telephone-based sales to these prospects, the inside sales group evaluates and forwards
potential customer prospects to our direct sales representatives and sells additional applications to our existing customers. At
June 30, 2005 we employed 8 inside sales representatives and our inside sales group accounted for approximately 5% of our
sales.

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      Indirect Sales . We supplement our direct sales force and our inside sales force with our channel partners, who leverage
their preexisting business relationships with the customer and act as sales agents for us. The channel partners include
value-added resellers, local area network consultants and other IT and telecommunications consultants to small businesses. As
compensation for their services, our channel partners receive ongoing residual payments on their sales. At June 30, 2005 we
employed 14 indirect sales representatives and our channel partners contributed approximately 20% of our sales.

         Referrals Program

      We believe we are building a culture of referrals that benefits both our direct and indirect selling efforts. We obtain
approximately 30% of our new customers from our referral program through our current base of customers and through our
referral partners. Our customers and referral partners are eligible to receive a one-time referral credit for each new customer they
refer.

         Marketing and Advertising

    We focus our marketing resources on our direct and indirect sales efforts and programs that support those efforts. We
market ourselves as ―the last communications company a small business will ever need.‖ We have launched a focused marketing
campaign of targeted direct mail, print and online media but have not committed our resources to traditional brand advertising. Our
marketing expenses for the year ended December 31, 2004 were $1.0 million.

Operations

       Once a customer is signed, we believe we provide a highly differentiated customer experience in each aspect of the service
relationship. Our automated and optimized business processes are designed to provide rapid and reliable installation, accurate
billing and responsive, 24x7 care and support using both web-enabled and human resources.

         Installation

      We employ a team of service coordinators in each of our markets to handle the order entry and customer installation
process. A centralized circuit provisioning and customer activation group takes responsibility for ensuring that T-1 circuits from the
local telephone company to the customer’s location are provisioned correctly and on time, together with local number portability
and the appropriate features and applications ordered by the customer. We seek to provision our BeyondVoice I customers within
30 calendar days, our BeyondVoice II and BeyondVoice II Plus customers within 40 calendar days and our BeyondVoice III
customers within 60 calendar days. Our automated processes allow us to reduce the time and human intervention necessary to fill
our circuit orders with the local telephone company. Currently, a majority of all circuit orders receive a firm order commitment from
the local telephone company with no human intervention in less than twelve hours from submission. Once an order is submitted,
an outsourced technician is dispatched to the customer’s location to install the integrated access device, connecting the
customer’s equipment to our network, and to activate and test the services. After installation of the integrated access device, new
services added by the customer will work with the customer’s existing equipment and require no further equipment changes or
capital expenditures.

         Billing

     We bill all of our customers online via email. Full billing detail and analytical capabilities are available to our customers on the
web through our Cbeyond Online website. We do not send

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any paper bills. In addition, over 30% of our customers pay us online, either via credit card, electronic funds transfer, or automatic
account debit. During 2004, on average, our days sales outstanding, which relates outstanding receivables to the number of days
of revenue, was 16. Approximately 85% of our customer bills are paid on time or within 30 days of being overdue. Because we
employ flat-rate billing in advance, customers are able to budget their costs, billing is simplified and errors are kept to a minimum.
Because billing-related calls are often the largest percentage of calls into customer care among communications service
providers, our approach to billing greatly reduces the amount of resources needed in our customer care organization. Moreover,
our automated systems enable us to easily disconnect and reconnect our services, which assists us in effectively collecting unpaid
bills.

          Customer Care and Cbeyond Online

     We offer our customers 24x7 support through live access to dedicated care representatives and through online resources.
Although customers can choose to speak with one of our Cbeyond representatives on a real-time basis, Cbeyond Online has
become our primary channel for customer care.

      We offer a broad range of capabilities online, including functions allowing customers to:

      •   review their requested services and accept their installation (for new customers);

      •   view, pay and analyze their bills;

      •   view and modify their services and account features;

      •   view and modify account information;

      •   research products and troubleshoot issues using the section of our web site devoted to frequently asked questions, which
          we call our Find-It-Fast knowledge base; and

      •   submit requests for account changes.

     Since we completed our comprehensive upgrade of Cbeyond Online in 2003, call center service requests per customer have
decreased. As we have grown, our care costs per customer have also decreased. Automated care and support have provided
another key point of differentiation for our customers, one that simultaneously empowers the customer and increases our
operational efficiency.

     Underpinning our care and support operations is a network that provides our customers with reliable and high quality service.
Our network operations group manages and tracks network performance. We have deployed state-of-the-art network monitoring
and diagnostic tools to provide our care representatives and network operations center personnel with real-time insight into
problem areas and the information needed to address them.

Our All-IP Network Architecture

      We deliver our services over a single all-IP network using T-1 connections to connect customers to our network. This allows
us to provide a wide array of voice and data services, attractive service features (such as real-time online adds and changes), and
network reliability and call quality comparable to that of traditional telephone networks. Unlike traditional voice-centric
circuit-switched communications networks, we employ a single integrated network using technologies that digitize voice
communications into IP packets and converge them with other data services for transport on an IP network. We transmit our
customers’ voice traffic over our secure private network and do not rely on the best efforts public Internet. Our network design
exploits the convergence of voice and data services and requires significantly lower capital expenditures and operating costs
compared to traditional service providers using legacy technologies. The integration of our network with our automated front and
back office systems

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allows us to monitor network performance, quickly provision customers and offer our customers the ability to add or change
services online, thus reducing our customer care expenses. We believe that our all-IP network and automated support systems
enable us to continue to offer new services to our customers in an efficient manner.

      There are two distinct strategies that carriers adopt in deploying VoIP services:

      •   Voice as an application over the public Internet . Because calls are carried over the public Internet and not over a private
          network such as ours, service is often provided on a best-efforts basis. These service providers focus mainly on the
          consumer market. We believe that these offerings may lack the call quality, network reliability, security and service
          features that business customers require.

      •   Our managed IP network . We have deployed an all-IP network over which voice calls primarily travel over a managed IP
          connection as opposed to the public Internet. This approach allows us to deliver quality of service similar to the quality of
          a public switched telephone network. In our model, voice is an application over a private data network.

     In addition, some equipment makers have focused their VoIP efforts in the area of selling VoIP-enabled customer premises
equipment, including private branch exchanges and desktop phones, to commercial users who wish to take advantage of this
equipment’s intelligent features and cost-saving capabilities. To date, the large enterprise segment has been the primary adopter
of VoIP customer premises equipment, and most of our customers continue to use legacy analog customer premises equipment
with our IP network services. We have not focused on VoIP customer premises equipment to date because we believe that tying
the sale of our services to the adoption of new customer premises equipment will tend to slow the volume of sales, since we
believe that most small businesses would prefer to defer expensive equipment upgrades. In early 2005 we began technical trials
of our BeyondVoice with Session Internet Protocol connect offering, which gives customers the ability to directly interconnect their
Session Internet Protocol-enabled IP private branch exchanges with our Session Internet Protocol-enabled IP network. SIP is a
communications industry standard that brings a variety of intelligent and convenient features and functionality to communications
software and equipment. As the prices of VoIP customer premises equipment decrease and demand for the equipment increases
among small businesses in the future, we expect to begin offering services that complement the demand and deployment of this
equipment by our customers.

    The main advantage of our IP network architecture is its low cost structure relative to traditional circuit-switched networks.
Our more efficient single-network approach enables us, relative to the historical experiences of legacy carriers, to:

      •   buy fewer network components (and at lower cost);

      •   lease fewer telecommunications circuits;

      •   employ fewer staff;

      •   rent less colocation space;

      •   incur lower maintenance costs; and

      •   integrate fewer support systems.

      Legacy competitive carriers often manage numerous overlapping and interconnected network technologies to provide the
package of services that we provide on our single all-IP network. Legacy network architectures can include: a circuit-switched
local or long distance voice network, digital subscriber line, IP and frame relay data transmission networks, and asynchronous
transfer mode and synchronous optical network intracity transport networks. These different legacy networks generally require the
expense and complexity of dedicated circuits and network transmission and monitoring equipment. We believe that we benefit
from the efficiency of being able to provide all our services over a single network.

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      The following diagram illustrates the high level components of our communications network:




      A call placed over our all-IP network typically operates in the following manner:

      •   the call travels from the customer’s telephone equipment ( A ), typically a legacy time-division multiplexing system or
          private branch exchange, to our integrated access device ( B ) installed at the customer’s premise;

      •   the integrated access device ( B ) converts the analog voice call into packets of data using Internet protocol;

      •   these packets of data are sent from the integrated access device ( B ) via one of two types of dedicated T-1 connection:

             •   over an unbundled network element loop T-1 line ( C-1) to our T-1 aggregation router ( D ), colocated at a local
                 telephone company’s central office, which concentrates the traffic and sends it over a dedicated DS-3 circuit ( E ) to
                 our colocation aggregation router ( F ); or

             •   over an enhanced extended link T-1 line ( C-2) , which connects directly to our colocation aggregation router at the
                 city tandem colocation center ( F );

      •   the colocation aggregation router ( F ) located in leased space in the city tandem colocation center routes the data to the
          trunking gateway ( G );

      •   the trunking gateway ( G ), which is also located in leased space in the city tandem colocation center, converts the
          packets back into analog signal and sends the call into the public switched telephone network public switched telephone
          network ( H ), for delivery to the intended recipient; and

      •   the call routing that takes place in the city tandem colocation center is directed by our softswitch ( I ), which operates as a
          call agent and is a central component of our IP network.

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     Our softswitch is a primary component of our IP network. A softswitch is a sophisticated set of software code residing on
compact, and relatively low cost, servers. In contrast to circuit-switches employed by legacy service providers with their large
upfront investment and significant space requirements, softswitches require relatively small upfront investment and minimal space.
The softswitch, located remotely at our own data center location, handles call control and routing, providing the intelligent core of
the network; voice traffic is never actually routed through the softswitch. In addition, the service capabilities, or business class
features, reside in the softswitch and are imparted to specific users through the network. We generally employ dedicated
softswitches for each of our markets, although the technology does not require that the softswitches reside physically in the
markets they serve, affording us further space economies. In the future we believe our softswitch infrastructure will evolve to
become distributed in design, and a combination of systems may serve one or more markets.

      Local calls enter the public switched telephone network via the trunking gateway and are usually terminated by the local
telephone company at no charge to us under the ―bill and keep‖ arrangement of our interconnection agreement. See ―Government
Regulation.‖ Long distance calls are handed off to an interexchange carrier, or long distance carrier, by the trunking gateway for
termination at a remote city. We currently have agreements in place with Global Crossing and MCI to act as long distance carriers
for our voice traffic. The interexchange carriers charge us on a per-minute basis for traffic we send them, and they embed the
terminating access fees they pay to local telephone companies as part of our rates. We believe that, in the future, we may be able
to hand off long distance traffic to interexchange carriers in the form of VoIP traffic, which, depending on regulatory developments,
may allow us to reduce the rates we pay for long distance by the amount of the terminating access fees. Long distance carriage is
a commodity service with multiple quality providers competing with relatively undifferentiated services, and we have been able to
take advantage of steadily decreasing rates.

     In addition to voice traffic, we carry broadband Internet traffic from the customer’s personal computer to the integrated
access device and out to our network in the same manner as voice traffic. When the data packets reach a gateway router, they
are handed off to an Internet transit provider, such as Level(3) Communications or MCI, under contract with us, for routing over
the public Internet.

     One of the benefits of our IP network is the ability to integrate voice and data packets seamlessly. Bandwidth for voice is
dynamically allocated, which allows the customer to enjoy full access to the 1.5 Mbps of bandwidth a T-1 connection affords when
no voice traffic is present on the access circuit. When a customer activates a voice line, the allocated bandwidth automatically
adjusts to allow the caller the amount of the T-1 connection needed to process his call. Since legacy time-division multiplexing
service providers must dedicate fixed portions of their customer circuits to voice and data, they are unable to employ dynamic
bandwidth allocation. This feature allows us to provide increased speed and performance to our customers in their Internet usage
while assuring high quality voice service.

    We organize our network into three groupings of equipment and circuits for purposes of network management and quality
measurement:

      •   the core network, which is located in our data centers and primarily comprises softswitches, backbone routers and media
          and feature servers;

      •   the distribution network, which includes colocation equipment such as T-1 aggregation routers and trunking gateways, as
          well as DS-3 transport circuits; and

      •   the access network, which comprises the T-1 local loops and integrated access devices that connect customers’
          equipment to our extended network.


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      Our software monitors network quality and tracks potential problems by monitoring each of these network groupings.

      The largest single monthly expense associated with our network is the cost of leasing T-1 circuits to connect to our
customers. We lease T-1s primarily from the local telephone companies on a wholesale basis using unbundled network element
loops or enhanced extended loops. An enhanced extended link consists of a T-1 loop connected to the unbundled interoffice
transport unbundled network element. This allows us to obtain the functionality of a T-1 loop without the need for colocation in the
local telephone company’s serving office. We are able to take advantage of T-1 unbundled network element loop and enhanced
extended links and the associated cost-based pricing of each because we meet certain qualifying criteria established by the FCC
for use of these services and because we have built the processes and systems to take advantage of these wholesale circuits, in
contrast to many competitive carriers, which lease T-1 circuits under special access, or retail, pricing. See ―Government
Regulation.‖

      We employ these wholesale T-1 circuits as follows:

      •   Unbundled network element loops . An unbundled network element loop is the facility that extends from the customer’s
          premises to our equipment colocated in the local exchange company end-office that serves that customer location. We
          employ unbundled network element loops when we have a colocation in the central office that serves a customer. We use
          high-capacity T-1 unbundled loops to serve our customers.

      •   Enhanced extended links . An enhanced extended link is a combination of an unbundled T-1 loop and an associated
          transport element that are joined together by the local telephone company at the end-office serving the customer location.
          This allows us to obtain access to customer premises without having a colocation at the serving central office. The
          current FCC rules require local telephone companies to provide T-1 enhanced extended links to carriers subject to certain
          local use criteria, which we meet.

      Approximately half of our circuits are provisioned using unbundled network element loops and half using enhanced extended
links. Our monthly expenses are significantly less when using unbundled network element loops rather than enhanced extended
links, but unbundled network element loops require us to incur the capital expenditures of central office colocation equipment. We
lease DS-3 circuits from local telephone companies or competitive carriers to carry traffic from the end-office colocation to our
equipment in a tandem wire center colocation. We install central office colocation equipment in those central offices having the
densest concentration of small businesses. We usually launch a market with several colocations and add colocations as the
business grows. For example, in Atlanta, our most mature market, we currently have 15 colocations.

     Our VoIP technology allows us to concentrate approximately five times as many T-1 circuits onto our DS-3 transport circuits
as legacy time-division multiplexing providers. Specifically, we can dynamically allocate available transport bandwidth and can
converge and mix voice and data traffic on the network, which offers us significant cost savings.

     Our software-based VoIP architecture also provides the flexibility to add services and change features quickly, in contrast to
legacy providers whose systems have historically required them to make time consuming physical moves, adds and changes. We
believe that our all-IP, private network is optimized to deliver services in an efficient, flexible and cost-effective manner.

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Front and Back Office Systems Architecture

     We have combined our streamlined business processes with best-in-class commercial software packages that we have
integrated to create a platform for delivery of our automated front and back office systems. We believe that the integration of our
IP network with our front and back office platform supports an efficient cost structure.

      These are the cornerstones of our IT strategy:

      •   deploying commercial software applications and making use of application service providers instead of building our own
          custom software;

      •   operating a single customer facing system tightly integrated with back office provisioning, activation and billing systems;

      •   using automated and web interfaces to extend our business processes to customers and partners; and

      •   embedding business process management throughout our front and back office platform.

     We believe that the software packages we have deployed are scalable, based on successful implementation and operation
of such software packages by much larger enterprises with greater volumes of transactions. In addition, they can be customized
by the incorporation of our specially tailored business processes. We enjoy the advantages of third-party maintenance and
updates from companies with substantial research and development staffs.

     Underlying our entire front and back office systems architecture is a comprehensive set of enterprise application integration
code, with Siebel workflow and standard messaging and communications tools handling the majority of the interfaces.

      Our front office systems consist of:

      •   Customer relationship management . We use Siebel’s customer relationship management software to handle sales order
          entry and management, commissions, customer care, field service functions, integrated access device management and
          channel partner relationship management.

      •   Online customer self-service . Our web-enabled customer self-service capabilities are primarily handled through a
          commercially available software system that manages our electronic bill presentment and payment functions, customer
          care requests and account and service management.

      Our back office systems consist of:

      •   Provisioning . We use an application service provider to conduct our gateway with local telephone companies and
          electronic bonding activities, including circuit orders and local number portability.

      •   Activation . We have licensed software that handles our network inventory and activation functions, and we have an
          outsourcing arrangement with a third party to provide telephone number inventory functions.

      •   Billing . Billing and payment processing are conducted through software we have licensed, and we handle billing
          mediation functions through other licensed software.

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Relationship with Cisco Systems

      Cisco Systems supplies our VoIP network technology. When we began our business in 2000, we evaluated a number of
softswitch technologies and VoIP platforms. As a result, we determined that Cisco Systems’ softswitch represented the most
advanced softswitch for our needs, incorporating business class features that business users require with a higher degree of
reliability and sophistication than other competing technologies. In addition, we chose a single-vendor solution in an effort to
mitigate the risk of integrating equipment from multiple vendors in a relatively new technology.

      We have enjoyed a strategic relationship with Cisco Systems. We have benefited from being the first significant installment
of Cisco Systems’ voice solution as the primary architecture in a communications service provider and, accordingly, have been
able to influence the development and refinement of Cisco Systems’ VoIP technology. In addition to the technical relationship, we
have also enjoyed marketing and other business advantages from our relationship with Cisco Systems.

     In addition, Cisco Systems has, through its affiliate Cisco Capital, extended vendor financing to us for the equipment and
services we purchase from them, as well as certain network-related expenditures with non-competing third party providers.
Although we have continued to purchase only Cisco Systems network components to date, we believe that the risk of integrating
competing products has greatly diminished, and we will deploy those products with the best combination of price and performance
going forward, whether from Cisco Systems or competing manufacturers.

Competition

     As a managed services provider in the communications industry, we broadly compete with companies that could provide
both voice and enhanced services to small businesses in our markets.

       As a provider of voice services, our primary competitors are the traditional local phone companies: BellSouth Corp. in
Atlanta, Qwest Communications International, Inc. in Denver and SBC Communications, Inc. in Dallas, Houston and Chicago.
Based on information provided by our customers at the time of activation, over two-thirds of our customers used a traditional local
telephone company for local telephone service prior to signing with us, and the remainder used competitive local telephone
companies. Many of our customers used multiple vendors for local and long distance voice services and broadband Internet
access and have enjoyed the convenience of a sole-sourced service since signing with us. In addition to the local telephone
companies, we compete with other competitive carriers in each of our markets. These competitive carriers include XO
Communications, Inc., NuVox Communications, USLEC Corp., McLeod USA, Inc., ICG Communications, Inc., Eschelon Telecom,
Inc., Birch Telecom and ITC^Deltacom, Inc., among many others. Covad Communications began offering IP-based voice services
to business customers in 2004, following its purchase of GoBeam, Inc., a wholesale provider of VoIP services. Covad operates in
all of our markets. We believe that in the future many of our communications competitors could adopt the use of VoIP technology
similar to ours.

      Furthermore, there are other providers using VoIP technology, such as Vonage Holdings Corp., Skype Technologies SA,
deltathree, Inc. and 8x8, Inc., which offer service using the public Internet to access their customers. We do not currently view
these companies as our direct competitors because they primarily serve the consumer market and businesses with fewer than
four lines. Certain cable television companies, such as Cox Communications, Inc., Comcast Cable Communications, Inc.,
TimeWarner Cable, Inc. and Cablevision Systems Corp., have

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deployed VoIP primarily to address consumers and to compete better against local telephone companies for residential
customers, although each of these companies does offer packaged services to small business customers. Certain other
VoIP-based companies, such as Net2Phone, Inc., have built a business model based on wholesale VoIP services to cable
companies that do not wish to develop or operate completely their own VoIP services. We do not view Net2Phone and other VoIP
wholesalers as competitors, given their consumer focus. We expect that, in the future, other companies may be formed to take
advantage of our VoIP-based business model. Existing companies may also expand their focus in the future to target small
business customers. In addition, certain utility companies have begun experimenting with delivering voice and high speed data
services over power lines.

History

     We incorporated in March 2000 as Egility Communications, Inc. and changed our name in April 2000 to Cbeyond
Communications, Inc. In November 2002, we recapitalized by merging the limited liability company that served as our holding
company into Cbeyond Communications, Inc., the surviving entity in the merger. Cbeyond Communications, Inc. now serves as a
holding company for our subsidiaries and directly owns all of the equity interests of our operating company, Cbeyond
Communications, LLC.

Intellectual Property

     We do not own any patent registrations, applications, or licenses. We maintain and protect trade secrets, know-how and
other proprietary information regarding many of our business processes and related systems. We also hold several federal
trademark registrations, including:

      •   Cbeyond Communications ;  ®




      •   BeyondVoice ; ®




      •   BeyondOffice ; and
                        ®




      •   The last communications company a small business will ever need .    ®




Employees

     At June 30, 2005, we had 665 employees. None of our employees are represented by labor unions. We believe that relations
with our employees are good.

Properties

       We lease a 59,415 square-foot facility for our corporate headquarters in Atlanta. We also lease data center facilities in
Atlanta and in Dallas as well as sales office facilities in each of our markets outside of Atlanta. Our total rental expenses in 2004
were approximately $0.5 million for our colocation and data center facilities and approximately $1.7 million for our offices. We do
not own any real estate. Our management believes that our properties, taken as a whole, are in good operating condition and are
suitable for our business operations. As we expand our business into new markets, we expect to lease additional data center
facilities and sales office facilities.

Legal Proceedings

     From time to time we are involved in legal proceedings arising in the ordinary course of our business. We believe that we
have adequately reserved for these liabilities and that there is no litigation pending that could have a material adverse effect on
our results of operations and financial condition.

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                                                  GOVERNMENT REGULATION

Overview

      Our communications services business is subject to varying degrees of federal, state and local regulation. We have chosen
to operate as a common carrier and therefore are voluntarily subject to the jurisdiction of both federal and state regulatory
agencies, which have the authority to review our prices, terms and conditions of service. The regulatory agencies exercise
minimal control over our prices and services, but do impose various obligations such as reporting, payment of fees and
compliance with consumer protection and public safety requirements. In contrast to other VoIP-based carriers, we have elected to
operate as a common carrier and our business does not rely on favorable regulatory treatment for VoIP-based carriers in
particular.

      We operate as a facilities-based carrier and have received all necessary state and FCC authorizations to do so. Unlike
resale carriers, we do not rely upon access to incumbent local exchange carrier switching facilities or capabilities and have not
relied on the FCC’s former unbundled network element platform, or ―UNE Platform‖ or ―UNE-P‖ rules. As a facilities-based carrier,
we have undertaken a variety of regulatory obligations, including (for example) providing access to emergency 911 systems,
permitting law enforcement officials access to our network upon proper authorization, contributing to the cost of the FCC’s
universal service program and making our services accessible to persons with disabilities.

     By operating as a common carrier, we also benefit from certain legal rights established by federal legislation, especially the
Telecom Act, which gives us and other competitive entrants the right to interconnect to the networks of incumbent telephone
companies and access to elements of their networks on an unbundled basis. These rights are not available to those VoIP
providers who do not operate as common carriers. We have used these rights to gain interconnection with the incumbent
telephone companies and to purchase selected UNEs at wholesale prices, especially T-1 loop UNEs that provide us access to our
customers’ premises.

      The FCC and state regulators are considering a variety of issues that may result in changes in the regulatory environment in
which we operate our business. However, the FCC’s August 2003 ―Triennial Review Order,‖ discussed below, maintained the
general framework of regulation that allows us to purchase the UNEs that we buy. In addition, some of these changes may affect
our competitors differently than us. For example, the FCC’s recent elimination of the UNE-P rules (as discussed in more detail
below) will affect resale carriers that seek to compete against us, but will not affect us because we do not rely on UNE-P. Changes
in the universal service fund may affect the fees we are required to pay to contribute to funding this program, but since we and our
competitors generally pass these fees through to customers, we expect any changes to have minimal competitive effect. Similarly,
we do not expect changes in inter-carrier compensation rules to have a material effect on us, because we derive the vast majority
of our revenues directly from our customers, rather than from other carriers. We do not collect reciprocal compensation for
termination of local calls, and we derive relatively little revenue from access charges for origination and termination of long
distance calls over our network. In addition, reviews by state public service commissions have recently resulted in rate reductions
for the circuits we lease in Colorado, Georgia and Texas.

     The FCC is also considering adopting new regulations governing VoIP services. Although we use VoIP technology
extensively in our network, we currently expect these rules to have more impact on service providers who do not currently operate
as common carriers. For example, the FCC may make these providers subject to some obligations (like universal service
contributions and access for persons with disabilities) that we have already undertaken to fulfill. The FCC recently has adopted
new rules that require ―interconnected VoIP providers‖ to

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enable all customers to access 911 emergency services and to provide certain capabilities for the monitoring of communications
by properly-authorized law enforcement agencies. We believe that these rules will affect potential competitors more than they do
us, because we already provide 911 access and law enforcement access capabilities in compliance with the requirements that
apply to common carriers.

     Although the nature and effects of governmental regulation are not predictable with certainty, we believe that the FCC is
unlikely to enact rules that extinguish our basic right or ability to compete in the telecommunications markets and that any rule
changes that affect us will continue to be accompanied by transition periods sufficient to allow us to adjust our business practices
accordingly. The following sections describe in more detail the regulatory developments described above and other regulatory
matters that may affect our business.

Regulatory Framework

      Our business relies heavily on the use of T-1 unbundled network element loops and enhanced extended links that include
T-1 loop components, for access to customer premises. Our existing strategy is based on FCC rules that require incumbent local
exchange carriers to provide us these elements at favorable prices. As a result of a recent court decision, the FCC issued new
rules, which became effective on March 11, 2005, limiting the obligation of incumbent local exchange carriers to provide certain
elements at cost-based prices. Some portions of the new FCC rules do not affect us, such as rules eliminating unbundled circuit
switching, used by UNE-P providers. The new rules require incumbent local exchange carriers to continue providing T-1
unbundled network element loops, which is the element we rely upon most heavily for access to customer premises, in most
situations, but with exceptions for loops served out of high-traffic central offices. This exception may affect our cost for obtaining
access to T-1 loops in some of the central business districts we serve, as discussed in more detail below. The new FCC rules are
subject to continuing court challenges. The discussion of regulatory issues below describes the rules in effect as of the date of this
prospectus, as well as proceedings pending at this date; however, these rules may change at any time due to future court and
FCC decisions, and we are unable to predict how such future developments may affect our business.

         The Telecom Act

      The Telecom Act, which substantially revised the Communications Act of 1934, has established the regulatory framework for
the introduction of competition for local communications services throughout the United States by new competitive entrants such
as us. Before the passage of the Telecom Act, states typically granted an exclusive franchise in each local service area to a single
dominant carrier, often a former subsidiary of AT&T known as a regional Bell operating company, which owned the entire local
exchange network and operated a virtual monopoly in the provision of most local exchange services in most locations in the
United States. The regional Bell operating companies, following some recent consolidation, now consist of BellSouth, Verizon,
Qwest Communications and SBC Communications.

      Among other things, the Telecom Act preempts state and local governments from prohibiting any entity from providing
communications service, which has the effect of eliminating prohibitions on entry that existed in almost half of the states at the
time the Telecom Act was enacted. At the same time, the Telecom Act preserved state and local jurisdiction over many aspects of
local telephone service and, as a result, we are subject to varying degrees of federal, state and local regulation.

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     We believe that the Telecom Act provided the opportunity to accelerate the development of competition at the local level by,
among other things, requiring the incumbent carriers to cooperate with competitors’ entry into the local exchange market. To that
end, incumbent local exchange carriers are required to allow interconnection of their network with competitive networks.
Incumbent local exchange carriers are further required by the Telecom Act to provide access to certain elements of their network
to competitive local exchange carriers.

      We have developed our business, including being designated as a common carrier, and designed and constructed our
networks to take advantage of the features of the Telecom Act that require cooperation from the incumbent carriers and believe
that the continued viability of the provisions relating to these matters is critical to the success of the competitive regime
contemplated by the Telecom Act. There have been numerous attempts to revise or eliminate the basic framework for competition
in the local exchange services market through a combination of federal legislation, adoption of new rules by the FCC, and
challenges to existing and proposed regulations by the incumbent carriers. We anticipate that Congress will consider a range of
proposals to modify the Telecom Act over the next few years, including some proposals that could restrict or eliminate our access
to elements of the incumbent local exchange carriers’ network, although we consider it unlikely, based on statements of both
telecommunications analysts and Congressional leaders, that Congress would reverse the fundamental policy of encouraging
competition in communications markets.

     Congress is also likely to consider legislation that would address the impact of the Internet on the current framework in the
Telecom Act. Such legislation could seek to make unregulated VoIP and Internet providers subject to regulatory fees and taxes
currently assessed on regulated communications service providers. Since we are already regulated and are subject to these fees
and taxes, such legislation could remove a potential competitive advantage enjoyed by some other VoIP providers.

         Federal Regulation

      The FCC regulates interstate and international communications services, including access to local communications networks
for the origination and termination of these services. We provide interstate and international services on a common carrier basis.
The FCC requires all common carriers to receive an authorization to construct and operate communications facilities and to
provide or resell communications services, between the United States and international points. We have secured authority from
the FCC for the installation, acquisition and operation of our wireline network facilities to provide facilities-based domestic and
international services.

      The FCC imposes extensive economic regulations on incumbent local exchange carriers due to their ability to exercise
market power. The FCC imposes less regulation on common carriers without market power including, to date, competitive local
exchange carriers. Unlike incumbent carriers, we are not currently subject to price cap or rate of return regulation, which leaves us
free to set our own prices for end user services subject only to the general federal guidelines that our charges for interstate and
international services be just, reasonable and non-discriminatory. We have filed tariffs with the FCC containing interstate rates we
charge to other carriers for access to our network, also called interstate access charges. The rates we can charge for interstate
access, unlike our end user services, are limited by FCC rules. We are also required to file periodic reports, to pay regulatory fees
based on our interstate revenues and to comply with FCC regulations concerning the content and format of our bills, the process
for changing a customer’s subscribed carrier and other consumer protection matters. The FCC has authority to impose monetary
forfeitures and to condition or revoke a carrier’s operating authority for violations of these requirements. Our operating costs are
increased by the need to assure compliance with these regulatory obligations.

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      The Telecom Act is intended to increase competition. Specifically, the Telecom Act opens the local services market by
requiring incumbent local exchange carriers to permit interconnection to their networks and establishing incumbent local exchange
carrier obligations with respect to interconnection with the networks of other carriers, provision of services for resale, unbundled
access to elements of the local network, arrangements for local traffic exchange between both incumbent and competitive
carriers, number portability, access to phone numbers, access to rights-of-way, dialing parity and colocation of communications
equipment in incumbent central offices. Incumbent local exchange carriers are required to negotiate in good faith with carriers
requesting any or all of these arrangements. If the negotiating carriers cannot reach agreement within a prescribed time, either
carrier may request binding arbitration of the disputed issues by the state regulatory commission. Where an agreement has not
been reached, incumbent local exchange carriers remain subject to interconnection obligations established by the FCC and state
communications regulatory commissions.

      The Telecom Act also eliminated provisions of prior law restricting the regional Bell operating companies from providing long
distance services and engaging in communications equipment manufacturing. The Telecom Act permitted the regional Bell
operating companies to provide long distance service to customers outside of states in which the regional Bell operating company
provides local telephone service, immediately upon its enactment. It also permitted a regional Bell operating company to enter the
long distance market within its local telephone service area upon showing that certain statutory conditions have been met and
obtaining FCC approval. The FCC has approved regional Bell operating company petitions for in-region long-distance for every
state in the nation, and each regional Bell operating company is now permitted to offer long-distance service to its local telephone
customers. Regional Bell operating companies have recently petitioned the FCC to remove some of the conditions they had to
meet to obtain long-distance approval, including in particular conditions that impose obligations to provide access to regional Bell
operating company broadband UNEs beyond what the FCC has required in its Triennial Review Order, which is discussed below
in more detail. We do not know whether the FCC will grant any such relief. We do not currently use any UNEs obtained
exclusively under these regional Bell operating company long-distance entry conditions, but we may seek to do so in the future if
other options for obtaining UNEs are foreclosed by changes in regulations.

     Triennial Review Order and Appeals . As discussed above, we rely on provisions of the Telecom Act that require the
incumbent local exchange carriers to provide competitors access to elements of their local network on an unbundled basis, known
as UNEs. The Telecom Act requires that the FCC consider whether competing carriers would be impaired in their ability to offer
telecommunications services without access to particular UNEs.

      The FCC’s ―Triennial Review Order‖ of August 2003, substantially revised its rules interpreting and enforcing these
requirements, while maintaining the general regulatory framework under which we purchase our UNEs. However, a March 2004
court decision required the FCC to reconsider portions of its Order, and as a result the FCC further revised the rules in a ―Remand
Order‖ adopted in late 2004, effective March 11, 2005. The FCC also issued interim rules that required incumbent local exchange
carriers to continue providing UNEs under the former rules until March 11.

      The Triennial Review Order denied competitors access to incumbent local exchange carrier packet switching capabilities
provided over some fiber loop facilities and severely restricted their access to fiber loops to homes and other ―primarily residential‖
locations such as apartment buildings. We currently do not use any incumbent local exchange carrier switching or
fiber-to-the-home UNEs, so we were not materially affected by this ruling, although the FCC’s

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reference to ―predominantly residential‖ premises conceivably could restrict our access to some small business customers. The
FCC ruling also adopted new eligibility requirements for the use of EELs. Under these rules, a carrier seeking to purchase an EEL
must certify that each circuit so purchased meets specific criteria designed to ensure that the circuit will be used to provide local
exchange voice service. We believe, and are prepared to so certify, that all of our EEL circuits satisfy these criteria. These aspects
of the Order were not affected by the Remand Order.

      The FCC Remand Order decided that incumbent local exchange carriers will no longer be required to provide access to
unbundled circuit switching capabilities, which previously allowed resale carriers to offer the UNE-P at incremental cost-based
rates. These resale carriers will be permitted to continue purchasing existing UNE-P arrangements for a period of one year after
March 11, 2005, after which they will have to either convert their customers to other arrangements or discontinue serving them.
We do not use incumbent local exchange carrier circuit switching in our network, so we were not affected directly by this
development, but limitations on the availability of UNE Platform may make it more difficult for resale competitive local exchange
carriers to compete against our services.

      The FCC Remand Order for the most part required that incumbent local exchange carriers continue to make access
available to competitors for the high capacity loop and transport UNEs we use. However, the new rules placed new conditions and
limitations on the incumbent local exchange carriers’ obligation to unbundle these elements.

      Incumbent local exchange carriers have to continue providing T-1 unbundled network element loops at cost-based rates,
except in central offices serving more than 38,000 or more business lines in which four or more fiber-based competitors have
colocated. Because many of our customers are located in high-density central business districts, some of our existing T-1 loops
are affected by this new limitation. An incumbent local exchange carrier also does not have to provide more than 10 T-1 loops to
any single building, even in an area in which T-1 loops are unbundled. A 12-month transition period from March 11, 2005 is
provided to transition any embedded T-1 loops that are no longer UNEs to another service. During the transition period, the circuit
price is increased to 115% of the rate previously paid by the carrier.

      Incumbent local exchange carriers also have to continue providing both T-1 and DS-3 transport circuits, except on routes
connecting certain high-traffic central offices. For T-1 transport (including transport as a component of a T-1 EEL), the exception
applies if both central offices serve at least 38,000 business lines or have four or more fiber-based colocators. For DS-3 transport,
the exception applies if both central offices serve at least 24,000 business access lines or have three or more colocators. Again,
because of the nature of the markets we serve, many of the T-1 EELs and DS-3 transport circuits we use are affected by this
exception. There is also a cap of 12 DS-3 transport circuits available on an unbundled basis from an incumbent local exchange
carrier on any given route, even where the high-traffic exception does not apply. A 12-month transition period from March 11,
2005, is provided for any current UNE transport that is no longer available as a UNE under the new rules. During the transition
period, the circuit price is increased to 115% of the rate previously paid by the carrier.

     The new FCC rules are subject to ongoing court challenges. We cannot predict the results of future court rulings, or how the
FCC may respond to any such rulings, or any changes in the availability of UNEs as the result of future legislative or regulatory
decisions.

      We expect that access to current and new customer locations will continue to be available to us regardless of future changes
in the FCC rules, although not necessarily at current prices. All incumbent local exchange carriers are required, independent of
the UNE rules, to offer us some form of T-1 loop and transport services. It is possible that the FCC may establish rates for some of
these services at levels that are comparable to current UNE rates, or that we may be able to negotiate reasonable prices for these
services through commercial negotiations with

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incumbent local exchange carriers. However, we cannot assure you that either of these possibilities will occur. If all other options
were unavailable, we would have to pay retail special access rates for these services.

      TELRIC Proceeding . In late 2003, the FCC initiated a proceeding to address the methodology used to price UNEs and to
determine whether the current methodology—total element long-run incremental cost, or TELRIC—should be modified.
Specifically, the FCC is evaluating whether adjustments should be made to permit incumbent local exchange carriers to recover
their actual embedded costs and whether to change the time horizon used to project the forward looking costs. The FCC is
unlikely to adopt any changes to its rules within the next year, but we cannot be certain as to either the timing or the result of the
agency’s action.

      Special Access Proceeding . When it recently revised its UNE rules, the FCC also released a Notice of Proposed
Rulemaking to initiate a comprehensive review of rules governing the pricing of special access service offered by incumbent local
exchange carriers subject to price cap regulation (including BellSouth, SBC, Qwest, Verizon and some other incumbent local
exchange carriers). To the extent we are no longer able to obtain certain T-1 loops and DS-3 transport circuits as UNEs, we may
choose to obtain equivalent circuits as special access, in which case our costs will be determined by the incumbent local
exchange carriers’ special access pricing. Special access pricing by the major incumbent local exchange carriers currently is
subject to price cap rules as well as pricing flexibility rules which permit these carriers to offer volume and term discounts and
contract tariffs (Phase I pricing flexibility) and remove special access service in a defined geographic area from price caps
regulation (Phase II pricing flexibility) based on showings of competition. The Notice of Proposed Rulemaking tentatively
concludes that the FCC should continue to permit pricing flexibility where competitive market forces are sufficient to constrain
special access prices, but it will undertake an examination of whether the current triggers for pricing flexibility (based on certain
levels of colocation by competitors within the defined geographic area) accurately assess competition and have worked as
intended. The Notice of Proposed Rulemaking also asks for comment on whether certain aspects of incumbent local exchange
carrier special access tariff offerings ( e.g. , basing discounts on previous volumes of service; tying nonrecurring charges and
termination penalties to term commitments; and imposing use restrictions in connection with discounts), are unreasonable. Given
the early stage of the proceeding, we cannot predict the impact, if any, the Notice of Proposed Rulemaking will have on our cost
structure.

      Intercarrier Compensation . In 2001, the FCC initiated a proceeding to address intercarrier compensation issues; that is,
rules that require one carrier to make payment to another carrier for access to the other’s network. In its notice of proposed
rulemaking, the FCC sought comment on some possible advantages of moving from the current rules to a bill and keep structure
for all traffic types in which carriers would recover costs primarily from their own customers, not from other carriers. In February
2005, the FCC requested further comments on these issues and on several specific proposed plans for restructuring intercarrier
compensation. We currently have negotiated bill and keep arrangements with other local carriers for the exchange of local traffic,
so we have no revenue exposure associated with reciprocal compensation for local traffic. We do, however, collect revenue for
access charges relating to the origination and termination of long distance traffic with other carriers. If the FCC were to move to a
mandatory bill and keep arrangement for this traffic or to a single cost based rate structure, at significantly lower rates than we
currently charge, our revenues would be reduced. We believe, however, that we have much less reliance on this type of revenue
than many other competitive providers because the vast majority of our revenue derives from our end user customers. We also
consider it likely that, if the FCC does adopt a bill and keep regime, it will provide some opportunity for carriers to adjust other
rates to offset lost access revenues. We cannot predict either the timing or the result of this FCC rulemaking.

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     There are also several petitions before the FCC that could potentially affect our interstate access charges. Specifically, if the
FCC disallows inclusion of certain functionality in the rates that competitive carriers may assess, it would result in lower revenue
associated with access charges. These developments are not expected to have a material effect on us because of the relatively
small portion of our revenue derived from these charges.

     Regulatory Treatment of VoIP . In February 2004, the FCC initiated a proceeding to address the appropriate regulatory
framework for VoIP providers. Currently, the status of VoIP providers is not clear, although a report issued by the FCC in 1998
suggests that some forms of VoIP may constitute ―telecommunications services‖ that are subject to regulation as common carriers
under federal law. The 1998 report also suggested, however, that this regulatory treatment would not apply until after the FCC
determined which specific services were subject to regulation. The new FCC proceeding will attempt to determine what, if any,
regulation is appropriate for VoIP providers and whether the traffic carried by these providers will be subject to access charges.
The principal focus of this rulemaking is on whether VoIP providers should be subject to some or all of the regulatory obligations of
common carriers.

      As part of this proceeding, the FCC adopted new rules on June 3, 2005, requiring all ―interconnected VoIP providers‖ to
enable all of their customers to reach designated emergency services by dialing 911 within 120 days. These providers also will be
required to deliver notices to their customers advising them of limitations in their 911 emergency services, and to make certain
compliance filings with the FCC. We anticipate that these rules will impose substantial new costs on VoIP companies that have
not been operating as common carriers, and that full compliance within 120 days of the rules’ effective date may be difficult or
impossible for those companies that offer VoIP over the public Internet. As a regulated common carrier, however, we already
provide ―traditional‖ 911 service over our dedicated network, and therefore believe that the new FCC rules were not intended to
apply to us. Because the FCC’s definition of the term ―interconnected VoIP provider‖ is not entirely clear, the rules conceivably
could be interpreted to include us. If we were subject to these rules, we would already be in substantial compliance with the 911
dialing capabilities they require, and we have taken steps to notify our customers about these capabilities. We therefore do not
expect compliance with the rules would entail a material increase in our costs.

      The FCC is continuing to consider whether to impose other obligations on VoIP providers. It recently voted to impose
requirements to provide access to 911 emergency services and to permit duly authorized law enforcement officials to monitor
communications. Other issues being considered include, for example, whether VoIP providers should contribute to the cost of the
FCC’s universal service program. Since we have already undertaken these obligations, this FCC rulemaking could require VoIP
entrants that do not currently operate as common carriers to share some of the same burdens as us. It is also possible that we
might be able to avail ourselves of lighter regulation in some regards once the FCC clarifies the regulatory framework and
requirements. However, we rely upon our common carrier status for our ability to interconnect with incumbent local exchange
carrier networks and obtain access to elements of those networks at incremental cost-based rates. Therefore, we will not seek to
operate in any manner inconsistent with our status as a regulated common carrier under the Telecom Act, even if such an option
becomes available under new FCC rules.

       Wireline Broadband Classification Proceedings . In 2002, the FCC initiated a proceeding to examine whether it should
classify incumbent local exchange carriers’ provision of broadband Internet access services as information services subject to
Title I of the Telecom Act instead of telecommunications services subject to the common carrier obligations of Title II. In a recent
case (National Cable & Telecommunications Assoc. v. Brand X Internet Services) , the U.S. Supreme Court decided that the FCC
has broad discretion in deciding what (if any) competitive

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access obligations should apply under Title I of the Telecom Act. In light of the Brand X decision, the FCC moved quickly to adopt
an order in this proceeding. On August 5, 2005, the FCC voted to reclassify incumbent local exchange company broadband
Internet access services as Title I information services that are not subject to common carrier regulation. As a result of the FCC’s
decision, the incumbent local exchange carriers will no longer be required to provide unbundled broadband access, subject to a
one year transition for existing customers. The FCC order does not appear to impact our rights to access the incumbent local
exchange carriers’ facilities that we use to provide our retail service offerings, such as T-1 loops and extended enhanced links.

     Non-Dominant Classification Proceeding . In 2001, the FCC initiated a proceeding to determine whether incumbent local
exchange carriers should be reclassified as non-dominant in provision of broadband services. The primary impact of this
reclassification would be that incumbent local exchange carriers’ rates would not be subject to extensive tariffing and rate
regulation. We are not a customer of incumbent local exchange carrier retail broadband services and therefore would not be
affected directly by deregulation of these services. Changes in these regulations could, however, increase the ability of the
incumbent local exchange carriers to compete against our services.

          State Regulation

      State agencies exercise jurisdiction over intrastate telecommunications services, including local telephone service and
in-state toll calls. Colorado, Georgia, Illinois and Texas each have adopted statutory and regulatory schemes that require us to
comply with telecommunications certification and other regulatory requirements. To date, we are authorized to provide intrastate
local telephone, long-distance telephone and operator services in Colorado, Georgia and Texas, as well as in 11 other states
where we are not yet operational. As a condition to providing intrastate telecommunications services, we are required, among
other things, to:

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

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

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

      Generally, state regulatory authorities can condition, modify, cancel, terminate or revoke certificates of authority to operate in
a state for failure to comply with state laws or the rules, regulations and policies of the state regulatory authority. Fines and other
penalties may also be imposed for such violations. As we expand our operations, the requirements specific to any individual state
will be evaluated to ensure compliance with the rules and regulations of each state.

      In addition, the states have authority under the Telecom Act to determine whether we are eligible to receive funds from the
federal universal service fund. They also have authority to approve or (in limited circumstances) reject agreements for the
interconnection of telecommunications carriers’ facilities with those of the incumbent local exchange carrier, to arbitrate disputes
arising in negotiations for interconnection and to interpret and enforce interconnection agreements. In exercising this authority, the
states determine the rates, terms

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and conditions under which we can obtain access to those loop and transport UNEs that are required to be available under the
FCC rules. The states may re-examine these rates, terms and conditions from time to time. In the past, we have benefited from
state review of UNE loop rates in Georgia, Colorado and Texas, although we cannot assure you that this trend will continue.

      State governments and their regulatory authorities may also assert jurisdiction over the provision of intra-state IP
communications services where they believe that their telecommunications regulations are broad enough to cover regulation of IP
services. Various state regulatory authorities have initiated proceedings to examine the regulatory status of IP telephony services.
We operate as a regulated carrier subject to state regulation, rules and fees, and therefore do not expect to be affected by these
proceedings. The FCC proceeding on VoIP is expected to address, among other issues, the appropriate role of state governments
in the regulation of these services.

         Local Regulation

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

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                                                            MANAGEMENT

Directors, Executive Officers and Other Key Employees

       The following table sets forth information concerning our directors and executive officers as of May 1, 2005:
                                         Ag
Name                                      e    Position

James F. Geiger                           46   Chairman, President and Chief Executive Officer
J. Robert Fugate                          44   Executive Vice President and Chief Financial Officer
Robert R. Morrice                         57   Executive Vice President, Sales and Service
Richard J. Batelaan                       39   Chief Operations Officer
Christopher C. Gatch                      33   Vice President and Chief Technical Officer
Henry C. Lyon                             41   Vice President and Chief Accounting Officer
Joseph Oesterling                         38   Vice President and Chief Information Officer
Brooks A. Robinson                        33   Vice President and Chief Marketing Officer
Brian E. Craver                           36   Vice President, Sales
Kurt Abkemeier                            35   Vice President, Finance and Treasurer
Julia O. Strow                            46   Vice President, Regulatory and Legislative Affairs
Anthony M. Abate                          41   Director
John Chapple                              52   Director
Douglas C. Grissom                        38   Director
D. Scott Luttrell                         50   Director
James N. Perry, Jr.                       45   Director
Robert Rothman                            52   Director

     James F. Geiger has been our Chairman, President and Chief Executive Officer since he founded Cbeyond in 1999. Prior to
founding Cbeyond, Mr. Geiger was Senior Vice President and Chief Marketing Officer of Intermedia Communications. Mr. Geiger
was also in charge of Digex, Intermedia’s complex web-hosting organization, since acquisition and until just prior to its carve-out
IPO. Before he joined Intermedia, Mr. Geiger was a founding principal and CEO of FiberNet, a metropolitan area network provider,
which was sold to Intermedia in 1996. In the 1980’s Mr. Geiger held various sales and marketing management positions at
Frontier Communications, Inc. He began his career at Price Waterhouse (now PricewaterhouseCoopers LLP) and received a
bachelor’s degree in public accounting and pre-law from Clarkson University. In addition, Mr. Geiger currently serves as Vice
Chairman of the board of directors of Comptel/ALTS, the leading trade association representing competitive facilities-based
telecommunications services providers, and formerly served as Chairman of ALTS, prior to its merger with Comptel. Mr. Geiger
also serves on the board of directors of the Marist School, an independent Catholic School of the Marist Fathers and Brothers,
and the Hands On Network, a national volunteer organization that promotes civic engagement in communities.

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      J. Robert Fugate has been our Executive Vice President and Chief Financial Officer since 2000. Mr. Fugate leads our
financial and accounting operations, business development and investor relations, and is a founder of Cbeyond. From 1988 until
the founding of Cbeyond, Mr. Fugate served as chief financial officer for several telecommunications and technology companies,
including Splitrock Services, Inc., a nationwide Internet and data network services provider, and Mobile Telecommunication
Technologies Corp. (later SkyTel Communications Corp.), or Mtel, an international provider of wireless data services. In 1997,
approximately a year after Mr. Fugate left Mtel, private plaintiffs brought a class action alleging insider trading, misleading
statements and other federal securities law violations against Mtel, six of its executive officers, including Mr. Fugate, and one of its
directors. The action primarily related to the feasibility of Mtel’s two-way paging product and capacity constraints on its one-way
paging system. The action was settled in 1998 prior to any deposition of Mr. Fugate. Prior to joining to Cbeyond, Mr. Fugate
oversaw numerous public securities offerings, as well as other financial transactions, and was previously an investment banker at
Prudential-Bache Securities. He began his career at Mobile Communications Corporation of America. Mr. Fugate received an
MBA from Harvard Business School and a bachelor’s degree from the University of Mississippi.

      Robert R. Morrice has been our Executive Vice President, Sales and Service since 1999. Mr. Morrice oversees the launch,
sales and delivery of our products and services. Prior to co-founding Cbeyond, Mr. Morrice was vice president of retail sales and
an officer of Intermedia Communications. Prior to Intermedia, Mr. Morrice served at Sprint Communications in a variety of
positions, including Southeast regional director for National Accounts, and led sales efforts for Precision Systems, Inc., a
Florida-based telecommunications software company. Mr. Morrice has a bachelor’s degree in social sciences from Campbell
University and a master’s degree in education psychology from Wayne State University.

      Richard J. Batelaan has been our Chief Operations Officer since 2001. Mr. Batelaan manages our operations units including
customer care, field operations, systems operations, network operations, network planning, provisioning, service activation and
ILEC relations. Before joining us in 2001, Mr. Batelaan was co-founder and chief operations officer of BroadRiver
Communications, a provider of VoIP, Internet access and virtual private network services, from 1999 to 2001. In 2001, BroadRiver
Communications filed for bankruptcy and ceased operations. Previously, Mr. Batelaan spent 12 years with BellSouth, a regional
ILEC based in Atlanta. Mr. Batelaan moved to the Internet services arm of the company, BellSouth.net, where he served in
numerous roles including director of network operations, director of engineering, vice president of operations and chief operations
officer. Mr. Batelaan has a bachelor’s degree in electrical engineering from the Georgia Institute of Technology and a master’s
degree in information networking from Carnegie-Mellon University.

      Christopher C. Gatch joined us in 1999 and is our Chief Technology Officer. Prior to co-founding Cbeyond, Mr. Gatch was
vice president of business development, later becoming vice president of product development and then vice president of
engineering. Before joining us, Mr. Gatch worked at Intermedia Communications, where his last role was senior director of
strategic marketing, focusing on research and development of VoIP alternatives for the company. He also serves on the board of
the Cisco BTS 10200 Users Group and the Service Provider Board of the International Packet Communications Consortium,
which provides leadership on projects that are of importance to carriers and service providers. Mr. Gatch has a bachelor’s degree
in computer engineering from Clemson University and a master’s degree in the management of technology from the Georgia
Institute of Technology.

     Henry C. Lyon joined us in 2004 and serves as our Chief Accounting Officer. Prior to joining us, Mr. Lyon was vice president
and corporate controller and chief accounting officer for World Access, Inc., a provider of international long distance service
focused on markets in Europe,

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from 2000 to 2004. In April 2001, World Access, Inc. filed for bankruptcy and commenced liquidation proceedings. Mr. Lyon also
held positions as vice president and corporate controller for Nova Corporation, as principal for Broadstreet Development
Company, LLC and as audit manager for Ernst & Young LLP. Mr. Lyon graduated from the University of Georgia in 1986 with a
bachelor degree in Business Administration in Accounting.

     Joseph Oesterling joined us in 2000 and is responsible for the development and support of all of our operational support
systems (OSS). He also oversees billing operations and business intelligence solutions. Before joining us, Mr. Oesterling held
leadership roles in information technology with Capital One, Security Capital Group, Booz-Allen & Hamilton, Sony and IBM.
Mr. Oesterling is a member of the User Steering Committee for Daleen and a member of the Customer Advisory Board for
NeuStar. Mr. Oesterling holds an MBA from the University of Texas at Austin and a bachelor of science degree in computer
science from Purdue University.

     Brooks A. Robinson joined us in 2000 and serves as our Chief Marketing Officer. He leads our marketing organization,
including business strategy, product marketing, sales operations and communications. Prior to co-founding Cbeyond, Mr.
Robinson worked for Cambridge Strategic Management Group (CSMG), a strategy consulting firm in Boston, where he managed
consulting engagements that focused on strategy development and business case due diligence for the telecom and high tech
sectors. Previously, Mr. Robinson managed consulting engagements for Deloitte Consulting in Toronto and held various
engineering positions at Nortel Networks in Ottawa. Mr. Robinson holds a bachelor of applied science degree in electrical
engineering and management science from the University of Waterloo (Canada) and the University of Queensland (Australia).

      Brian E. Craver joined us in 1999 and serves as our Vice President of Sales, where he is responsible for our direct and
indirect sales channels, sales operations and sales analysis. Prior to co-founding Cbeyond, Mr. Craver was senior director of ISP
sales for Intermedia Communications. Previously, Mr. Craver was a business services manager for Sprint Corporation and held
sales positions with Telus Communications. Mr. Craver studied engineering and business finance at Florida State University.

     Kurt Abkemeier joined us in June 2005 and serves as our Vice President of Finance and our Treasurer. Prior to joining us,
Mr. Abkemeier was director of finance and strategic planning at AirGate PCS, Inc., a regional wireless telecommunications service
provider. Mr. Abkemeier also held various senior management positions within telecommunications-related companies and was a
senior sell-side research analyst at JP Morgan & Co. analyzing telecommunications companies. Mr. Abkemeier graduated with a
bachelor of science degree in applied economics from Cornell University.

      Julia O. Strow joined us in 2000 and is our Vice President of Regulatory and Legislative Affairs. She is responsible for
building our Government and Industry Relations organization with primary responsibility for our advocacy with government
agencies (e.g., federal and state regulatory commissions, Congress and state legislatures) and for our compliance with federal
and state regulations. Prior to joining us, Ms. Strow was affiliated with Intermedia Communications in a regulatory position. Ms.
Strow also held positions in BellSouth’s regulatory department as well as product management positions in BellSouth’s Carrier
Marketing organization. Ms. Strow has been extremely active in various FCC proceedings working on behalf of Cbeyond and
represents us with national industry associations representing our interests in Washington, D.C. Ms. Strow graduated from the
University of Texas in 1981 with a bachelor of science in communications.

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      Anthony M. Abate became a director in 2000 as a designee of Battery Ventures. Mr. Abate has recently served as a General
Partner of Ironside Ventures and has over 19 years of experience in media, communication services and technology fields. Prior
to joining Cbeyond, he was a General Partner at Battery Ventures where he led several investments, including Battery’s
investment in Cbeyond. Prior to Battery, Mr. Abate was a Vice President at Whitney & Co. Mr. Abate also spent five years at
McKinsey & Company, focusing on leading telecom, cellular, cable and Internet companies. Prior to business school, Mr. Abate
was an officer in the United States Air Force, where he led technical development initiatives in data communications and
advanced computational platform. Mr. Abate received a BSE in Electrical Engineering from Duke University (summa cum laude)
and an MBA from Harvard Business School with honors.

     John Chapple became a director in March 2004. Mr. Chapple has served as President, Chief Executive Officer and
Chairman of the board of directors of Nextel Partners and its subsidiaries since August 1998. Mr. Chapple has over 24 years of
experience in the wireless communications and cable television industries. From 1978 to 1983, he served on the senior
management team of Rogers Cablesystems before moving to American Cablesystems as senior vice president of operations from
1983 to 1988. From 1988 to 1995, he served as executive vice president of operations for McCaw Cellular Communications and
subsequently AT&T Wireless Services following the merger of those companies. From 1995 to 1997, Mr. Chapple was the
president and chief operating officer for Orca Bay Sports and Entertainment in Vancouver, B.C. Orca Bay owned and operated
Vancouver’s National Basketball Association and National Hockey League sports franchises in addition to the General Motors
Place sports arena and retail interests. Mr. Chapple is the past chairman of Cellular One Group and the Personal Communications
Industry Association, past vice-chairman of the Cellular Telecommunications & Internet Association and has been on the Board of
Governors of the NHL and NBA. Mr. Chapple is currently on the Syracuse University Maxwell School Board of Advisors and the
Fred Hutchinson Cancer Research Business Alliance board of governors. Mr. Chapple received a bachelor’s degree from
Syracuse University and a graduate degree from Harvard University’s advanced Management Program.

    Douglas C. Grissom became a director in 2000 as a designee of Madison Dearborn Partners. Prior to joining Madison
Dearborn Partners, Mr. Grissom was with Bain Capital, Inc., McKinsey & Company, Inc. and Goldman, Sachs & Co. Mr. Grissom
concentrates on investments in the communications industry and currently serves on the boards of directors of Intelsat, Ltd. and
Great Lakes Dredge & Dock Corporation. Mr. Grissom received a bachelor’s degree from Amherst College and an MBA from
Harvard Business School.

      D. Scott Luttrell became a director in 2000 and is the designee of Battery Ventures, Madison Dearborn Partners and Vantage
Point Venture Partners. Mr. Luttrell is the founder of LCM Group, Inc., an investment company based in Tampa, Florida and
specializing in funds management and financial consulting services, alternative asset, private equity and real estate investing.
Since 1988, Mr. Luttrell has served as CEO of LCM Group, Inc. Mr. Luttrell served from 1991 through 2000 as principal and senior
officer of Caxton Associates, LLC, a New York based diversified investment firm. Mr. Luttrell’s responsibilities with Caxton
included Senior Trading Manager, Director of Global Fixed Income and a senior member of the firm’s portfolio risk management
committee. Mr. Luttrell has diverse investment experience in private equity, foreign exchange, fixed income and the alternative
investment asset class. Prior to joining Caxton, Mr. Luttrell was a member at the Chicago Board of Trade, where he was involved
in various trading and investment activities as an officer and partner of Chicago based TransMarket Group and related entities.
Mr. Luttrell received a bachelor’s degree in Business Administration/Finance from Southern Methodist University in Dallas, Texas.

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     James N. Perry, Jr. became a director in 2000 as a designee of Madison Dearborn Partners. Mr. Perry serves as a
managing director at Madison Dearborn Partners, which he co-founded. Previously, Mr. Perry was with First Chicago Venture
Capital. Mr. Perry concentrates on investments in the communications industry and currently serves on the boards of directors of
Band-X, Cinemark, Inc., Intelsat, Ltd., Madison River Telephone Company and Nextel Partners. Mr. Perry received his bachelor’s
degree from the University of Pennsylvania and his MBA from the University of Chicago.

     Robert Rothman became a director in 2004 as a designee of certain of our investors. Mr. Rothman is Chairman and Chief
Executive Officer of Black Diamond Group, Inc. and Chairman of Bank of St. Petersburg Holdings, Inc. in Tampa, Florida. He was
Chairman of the Board and Chief Executive Officer of Consolidated International Group, Inc., which owned and operated
insurance companies in Europe and North America, from 1987 to 1999. Prior to founding the Consolidated Group of companies in
1987, he was Executive Vice President and Chief Financial Officer of Beneficial Insurance Group. Mr. Rothman is a member of
the Advisory Council for the University of Chicago Graduate School of Business; Vice-Chairman of the Board of H. Lee Moffitt
Cancer Center & Research Institute Hospital, Inc.; and Chairman of the Board of Trustees of the Academy of the Holy Names. Mr.
Rothman obtained a B.A. Degree in Economics from Queens College of the City University of New York and an MBA in Finance
from the University of Chicago, Graduate School of Business.

Board of Directors

     Our board of directors has responsibility for our overall corporate governance and meets regularly throughout the year. Our
bylaws permit our board of directors to establish by resolution the authorized number of directors, and eight directors are currently
authorized. Upon the completion of this offering we will have nine authorized directors, consisting of Messrs. Geiger, Abate,
Chapple, Grissom, Luttrell, Perry and Rothman and two other directors to be determined.

      We have entered into a shareholders agreement with Madison Dearborn Partners, Battery Ventures, Vantage Point Venture
Partners and other stockholders, which permits each of Madison Dearborn Partners, Battery Ventures and Vantage Point Venture
Partners to appoint designated directors to serve as members of our board. Each designated director will remain a member of the
board following the completion of this offering until his or her successor is duly elected and qualified or until his or her death,
resignation, retirement, disqualification, removal or otherwise. Of our directors who will serve following the completion of this
offering, Madison Dearborn Partners has designated Messrs. Grissom and Perry; Battery Ventures has designated Mr. Abate;
each of Madison Dearborn Partners, Battery Ventures and Vantage Point Venture Partners has designated Mr. Luttrell; and
certain holders of our stock have designated Mr. Rothman. These rights to appoint designated directors under the shareholders
agreement will terminate upon the completion of this offering.

      Upon completion of this offering, our board of directors will be divided into three classes. One class will be elected at each
annual meeting of stockholders for a term of three years. The Class I directors, whose term will expire at the 2005 annual meeting
of stockholders, are Messrs. Abate and Perry. The Class II directors, whose term will expire at the 2006 annual meeting of
stockholders, are Messrs. Chapple, Luttrell and Rothman. The Class III directors, whose term will expire at the 2007 annual
meeting of stockholders, are Messrs. Geiger and Grissom. At each annual meeting of stockholders, the successors to directors
whose terms will then expire will be elected to serve from the time of election and qualification until the third annual meeting
following election or special meeting held in lieu thereof and until their successors are duly

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elected and qualified. Executive officers are elected by and serve at the direction of our board of directors. There are no family
relationships between any of our directors or executive officers. The composition of our board of directors and its committees will
comply, when required, with the applicable rules of the Nasdaq Stock Market and applicable law.

Committees of the Board of Directors

     We are managed under the direction of our board of directors. Upon completion of this offering, our board of directors will
have an audit committee, compensation committee and nominating and corporate governance committee. In addition, from time to
time, special committees may be established under the direction of the board of directors when necessary to address specific
issues. We will adopt new charters for the audit committee, compensation committee and nominating and corporate governance
committee prior to the completion of this offering.

          Audit Committee

     Upon completion of this offering, the audit committee will consist of Messrs. Grissom, Luttrell and Rothman. Mr. Grissom will
serve as the chairman of this committee. Our board of directors has determined that Mr. Rothman is ―financially sophisticated‖ as
required by the rules of the Nasdaq Stock Market and Rule 10A-3 of the Securities Exchange Act of 1934, as amended, and is an
―audit committee financial expert‖ as defined by the rules and regulations of the SEC and any similar requirements of the Nasdaq
Stock Market. The functions of this committee will include:

      •   meeting with our management periodically to consider the adequacy of our internal controls and the objectivity of our
          financial reporting;

      •   appointing the independent auditors, determining the compensation of the independent auditors and pre-approving the
          engagement of the independent auditors for audit or non-audit services;

      •   having oversight of our independent auditors, including reviewing the independence and quality control procedures and
          the experience and qualifications of our independent auditors’ senior personnel that are providing us audit services;

      •   meeting with the independent auditors and reviewing the scope and significant findings of the audits performed by them,
          and meeting with management and internal financial personnel regarding these matters;

      •   reviewing our financing plans, the adequacy and sufficiency of our financial and accounting controls, practices and
          procedures, the activities and recommendations of our auditors and our reporting policies and practices, and reporting
          recommendations to our full board of directors for approval;

      •   establishing procedures for the receipt, retention and treatment of complaints regarding internal accounting controls or
          auditing matters and the confidential, anonymous submission by employees of concerns regarding questionable
          accounting or auditing matters; and

      •   following the completion of this offering, preparing the reports required by the rules of the SEC to be included in our
          annual proxy statement.

     Each of our independent auditors and our financial personnel will have regular private meetings with this committee and will
have unrestricted access to this committee.

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          Compensation Committee

     Upon completion of this offering, the compensation committee will consist of Messrs. Abate, Chapple and Grissom. Mr.
Grissom will serve as the chairman of this committee. The functions of this committee will include:

      •   establishing overall employee compensation policies and recommending to our board major compensation programs;

      •   reviewing and approving the compensation of our corporate officers and directors, including salary and bonus awards;

      •   administering our various employee benefit, pension and equity incentive programs;

      •   reviewing executive officer and director indemnification and insurance matters; and

      •   following the completion of this offering, preparing an annual report on executive compensation for inclusion in our proxy
          statement.

          Nominating and Corporate Governance Committee

     Upon completion of this offering, the nominating and corporate governance committee will consist of Messrs. Abate, Luttrell
and Perry. Mr. Luttrell will serve as the chairman of this committee. The functions of this committee will include:

      •   assisting the board of directors in selecting new directors;

      •   evaluating the overall effectiveness of the board of directors; and

      •   reviewing developments in corporate governance compliance.

          Compensation Committee Interlocks and Insider Participation

      The compensation committee of our board of directors consists of Messrs. Abate, Chapple and Grissom. During 2004:

      •   none of the members of the compensation committee was an officer (or former officer) or employee of ours or any of our
          subsidiaries;

      •   none of the members of the compensation committee entered into (or agreed to enter into) any transaction or series of
          transactions with us or any of our subsidiaries in which the amount involved exceeded $60,000;

      •   none of our executive officers was a director or compensation committee member of another entity an executive officer of
          which served on our compensation committee; and

      •   none of our executive officers served on the compensation committee (or another board committee with similar functions)
          of another entity an executive officer of which served as a director on our board of directors.

          Director Compensation

       Historically, we have not provided compensation to our directors, although we have reimbursed the out-of-pocket expenses
they have incurred to attend board meetings. Following the completion of this offering, our outside directors, Messrs. Abate,
Chapple, Luttrell and Rothman, will be paid annual retainers of $10,000 each for all services rendered. In addition, such directors
will receive $1,000 for each board meeting attended in person and $500 for each board meeting attended telephonically. Those
directors serving three-year terms have received 25,733 options at an exercise price of fair market value as of the date granted, of
which one-third cliff vest on the one year anniversary; and those serving one-year terms received approximately 8,591 options at
an exercise price of fair market value as of the date granted.

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Messrs. Grissom, Perry and Rothman have not received option grants for their service as directors. Future equity awards to
directors will be within the discretion of our board of directors. We do not maintain a medical, dental or retirement benefits plan for
these directors.

       Our chairman, Mr. Geiger, is employed by us and is not separately compensated for his service as a director.

Executive Compensation

     The following table sets forth the cash and non-cash compensation paid by us or on our behalf to our chief executive officer
and each of the four other most highly compensated executive officers, or, collectively, the named executive officers, as of
December 31, 2004:

                                                            SUMMARY COMPENSATION TABLE
                                                                                                                                       Annual Compensation

Name and Principal Position                                                                                              Year          Salary($)        Bonus($)

James F. Geiger                                                                                                          2004          256,000          47,955
  Chairman, President and Chief Executive Officer
J. Robert Fugate                                                                                                         2004          200,000          36,537
   Executive Vice President and Chief Financial Officer
Robert R. Morrice                                                                                                        2004          200,000          36,537
 Executive Vice President, Sales and Service
James T. Markle(1)                                                                                                       2004          200,000          37,537
  Executive Vice President, Networks and Technology
Richard J. Batelaan                                                                                                      2004          167,723          30,143
  Chief Operations Officer

(1)    We deeply regret that Mr. Markle passed away in March 2005.

Option Grants in 2004

    We did not grant any stock appreciation rights or options to purchase shares of our common stock to any of the named
executive officers in 2004.

Option Grants in 2005

     On February 15, 2005, we granted options to our named executive officers for the following amounts of shares of our
common stock, all of which have an exercise price of $11.83: 282,423 to Mr. Geiger; 54,124 to Mr. Fugate; 38,660 to Mr. Morrice;
2,577 to Mr. Markle; and 23,196 to Mr. Batelaan.

2004 Option Values

     The following table sets forth information regarding the number and value of unexercisable and exercisable options to
purchase our common stock outstanding as of December 31, 2004:
                                                                                          Number of Securities
                                                                                         Underlying Unexercised                 Value of Unexercised
                                                                                               Options(#)                           Options($)(1)

Name                                                                               Exercisable           Unexercisable   Exercisable               Unexercisable

James F. Geiger                                                                       823,156                123,970      7,918,277                  1,192,587
J. Robert Fugate                                                                      183,107                 29,891      1,761,070                    287,549
Robert R. Morrice                                                                     159,464                 19,748      1,533,617                    189,978
James T. Markle                                                                       106,928                 52,509      1,028,350                    505,139
Richard J. Batelaan                                                                    36,263                 20,803        347,443                    199,636

(1)    The value of the unexercised options is based on an assumed offering price of $13.50 per share.
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Employee Benefit Plans

          2005 Equity Incentive Award Plan

      We intend to adopt a 2005 Equity Incentive Award Plan, or the 2005 plan, that will become effective on the day prior to the
day on which we become subject to the reporting requirements of the Exchange Act. The principal purposes of the 2005 plan are
to provide incentives for our officers, employees and consultants, as well as the officers, employees and consultants of any of our
subsidiaries. We believe that grants of options, restricted stock and other awards will stimulate their personal and active interest in
our development and financial success, and induce them to remain in our employ or continue to provide services to us. In addition
to awards made to officers, employees or consultants, the 2005 plan permits us to grant options to our directors.

     Under the 2005 plan, 2,190,722 shares of our common stock (or the equivalent in other equity securities) are initially
reserved for issuance upon exercise of options, stock appreciation rights, or SARs, and other awards, or upon vesting of restricted
stock awards or restricted stock units. The number of shares initially reserved for issuance under the 2005 plan will be increased
by:

      •   244,727 shares representing the shares remaining available for issuance under our 2002 Equity Incentive Plan and our
          2000 Stock Incentive Plan as of the effective date of the 2005 plan (assuming an effective date of June 30, 2005), plus

      •   those shares represented by awards under our 2002 Equity Incentive Plan and our 2000 Stock Incentive Plan that are
          forfeited, cancelled, repurchased or that expire on or after the effective date of the 2005 plan.

     In addition, the 2005 plan contains an evergreen provision that allows for an annual increase in the number of shares
available for issuance under the plan on January 1 of each year during the ten-year term of the 2005 plan, beginning on January
1, 2006. Under this evergreen provision, the annual increase in the number of shares shall be equal to the lesser of:

      •   such number of shares as is necessary to bring the sum of the total share reserve under the 2005 plan on the first day of
          the relevant fiscal year, plus the number of outstanding awards and unvested shares of restricted stock under the 2005
          plan, the 2002 Equity Incentive Plan and the 2000 Stock Incentive Plan on the first day of the relevant fiscal year, to
          18.5% of our outstanding capital stock on the first day of the relevant fiscal year (calculated on a fully-diluted basis); and

      •   an amount determined by our board of directors.

     No individual may be granted awards under the 2005 plan representing more than 1,804,124 shares in any calendar year. In
no event may more than 12,886,598 shares be reserved for issuance under the 2005 plan.

      The principal features of the 2005 plan are summarized below. This summary is qualified in its entirety by reference to the
text of the 2005 plan, which is filed as an exhibit to the registration statement of which this prospectus is a part.

      Administration. The compensation committee of our board of directors will administer the 2005 plan. To administer the 2005
plan, our compensation committee must consist of at least two members of our board of directors, each of whom is an ―outside
director,‖ within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code, a non-employee
director for purposes of Rule 16b-3 under the Securities Exchange Act of 1934, or

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the Exchange Act, and an independent director within the meaning of the Nasdaq Stock Market. Subject to the terms and
conditions of the 2005 plan, our compensation committee has the authority to select the persons to whom awards are to be made,
to determine the number of shares to be subject thereto and the terms and conditions thereof, and to make all other
determinations and to take all other actions necessary or advisable for the administration of the 2005 plan. Our compensation
committee is also authorized to adopt, amend or rescind rules relating to administration of the 2005 plan. Our board of directors
may at any time abolish the compensation committee and revest in itself the authority to administer the 2005 plan. The full board
of directors will administer the 2005 plan with respect to awards to non-employee directors.

      Eligibility . Options, SARs, restricted stock and other awards under the 2005 plan may be granted to individuals who are then
our officers or employees or are the officers or employees of any of our subsidiaries. Such awards may also be granted to our
directors and consultants. Only employees may be granted incentive stock options, or ISOs.

     Awards . The 2005 plan provides that our compensation committee (or the board of directors, in the case of awards to
non-employee directors) may grant or issue stock options, SARs, restricted stock, restricted stock units, dividend equivalents,
performance awards, stock payments and other stock related benefits, or any combination thereof. Each award will be set forth in
a separate agreement with the person receiving the award and will indicate the type, terms and conditions of the award.

      •   Nonqualified Stock Options , or NQSOs, will provide for the right to purchase shares of our common stock at a specified
          price which may not be less than fair market value on the date of grant, and usually will become exercisable (at the
          discretion of our compensation committee or the board of directors, in the case of awards to non-employee directors) in
          one or more installments after the grant date, subject to the participant’s continued employment or service with us and/or
          subject to the satisfaction of corporate performance targets and individual performance targets established by our
          compensation committee. NQSOs may be granted for any term specified by our compensation committee (or the board of
          directors, in the case of awards to non-employee directors).

      •   Incentive Stock Options will be designed to comply with the provisions of the Internal Revenue Code and will be subject
          to specified restrictions contained in the Internal Revenue Code. Among such restrictions, ISOs must have an exercise
          price of not less than the fair market value of a share of common stock on the date of grant, may only be granted to
          employees, must expire within a specified period of time following the optionee’s termination of employment, and must be
          exercised within the 10 years after the date of grant. In the case of an ISO granted to an individual who owns (or is
          deemed to own) at least 10% of the total combined voting power of all classes of our capital stock, the 2005 plan provides
          that the exercise price must be at least 110% of the fair market value of a share of common stock on the date of grant
          and the ISO must expire upon the fifth anniversary of the date of its grant.

      •   Restricted Stock may be granted to participants and made subject to such restrictions as may be determined by our
          compensation committee (or the board of directors, in the case of awards to non-employee directors). Restricted stock,
          typically, may be forfeited for no consideration or repurchased by us at the original purchase price if the conditions or
          restrictions are not met. In general, restricted stock may not be sold, or otherwise transferred, until restrictions are
          removed or expire. Purchasers of restricted stock, unlike recipients of options, will have voting rights and will receive
          dividends, if any, prior to the time when the restrictions lapse.


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      •   Restricted Stock Units may be awarded to participants, typically without payment of consideration, but subject to vesting
          conditions based on continued employment or service or on performance criteria established by our compensation
          committee (or the board of directors, in the case of awards to non-employee directors). Like restricted stock, restricted
          stock units may not be sold, or otherwise transferred or hypothecated, until vesting conditions are removed or expire.
          Unlike restricted stock, stock underlying restricted stock units will not be issued until the restricted stock units have
          vested, and recipients of restricted stock units generally will have no voting or dividend rights prior to the time when
          vesting conditions are satisfied.

      •   Stock Appreciation Rights may be granted in connection with stock options or other awards, or separately. SARs granted
          in connection with stock options or other awards typically will provide for payments to the holder based upon increases in
          the price of our common stock over the exercise price of the related option or other award, but alternatively may be based
          upon criteria such as book value. Except as required by Section 162(m) of the Internal Revenue Code with respect to a
          SAR intended to qualify as performance-based compensation as described in Section 162(m) of the Internal Revenue
          Code, there are no restrictions specified in the 2005 plan on the exercise of SARs or the amount of gain realizable
          therefrom, although restrictions may be imposed by our compensation committee (or the board of directors, in the case of
          awards to non-employee directors) in the SAR agreements. Our compensation committee (or the board of directors, in
          the case of awards to non-employee directors) may elect to pay SARs in cash or in common stock or in a combination of
          both.

      •   Dividend Equivalents represent the value of the dividends, if any, per share paid by us, calculated with reference to the
          number of shares covered by the stock options, SARs or other awards held by the participant.

      •   Performance Awards may be granted by our compensation committee (or the board of directors, in the case of awards to
          non-employee directors) on an individual or group basis. Generally, these awards will be based upon specific
          performance targets and may be paid in cash or in common stock or in a combination of both. Performance awards may
          include ―phantom‖ stock awards that provide for payments based upon increases in the price of our common stock over a
          predetermined period. Performance awards may also include bonuses that may be granted by our compensation
          committee (or the board of directors, in the case of awards to non-employee directors) on an individual or group basis
          and which may be payable in cash or in common stock or in a combination of both.

      •   Stock Payments may be authorized by our compensation committee (or the board of directors, in the case of awards to
          non-employee directors) in the form of common stock or an option or other right to purchase common stock as part of a
          deferred compensation arrangement in lieu of all or any part of compensation, including bonuses, that would otherwise be
          payable in cash to the key employee or consultant.

    Corporate Transactions . In the event of a change of control where the acquiror does not assume or replace awards granted
under the 2005 plan, awards issued under the 2005 plan will be subject to accelerated vesting such that 100% of such award will
become vested and exercisable or payable, as applicable. Under the 2005 plan, a change of control is generally defined as:

      •   the transfer or exchange in a single or series of related transactions by our stockholders of more than 50% of our voting
          stock to a person or group;

      •   a change in two-thirds of the incumbent members of our board of directors during any two-year period;

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      •   a merger or consolidation in which we are a party, other than a merger or consolidation which results in our outstanding
          voting securities immediately before the transaction continuing to represent a majority of the voting power of the acquiring
          company’s outstanding voting securities;

      •   the sale, exchange, or transfer of all or substantially all of our assets; or

      •   our liquidation or dissolution.

     Securities Laws and Federal Income Taxes . The 2005 plan is designed to comply with various securities and federal tax
laws as follows:

      •   Securities Laws . The 2005 plan is intended to conform with all provisions of the Securities Act and the Exchange Act and
          any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, including without
          limitation, Rule 16b-3. The 2005 plan will be administered, and options will be granted and may be exercised, only in such
          a manner as to conform to such laws, rules and regulations.

      •   General Federal Tax Consequences . Under current federal laws, in general, recipients of awards and grants of NQSOs,
          SARs, restricted stock, restricted stock units, dividend equivalents, performance awards, and stock payments under the
          plan are taxable under Section 83 of the Internal Revenue Code upon their receipt of common stock or cash with respect
          to such awards or grants and, subject to Section 162(m) of the Internal Revenue Code, we will be entitled to an income
          tax deduction with respect to the amounts taxable to such recipients. However, Section 409A of the Internal Revenue
          Code provides certain new requirements on non-qualified deferred compensation arrangements. Certain awards under
          the 2005 plan are subject to the requirements of Section 409A, in form and in operation. For example, the following types
          of awards will be subject to Section 409A: SARs settled in cash, restricted stock unit awards and other awards that
          provide for deferrals of compensation. If a plan award is subject to and fails to satisfy the requirements of Section 409A,
          the recipient of that award may recognize ordinary income on the amounts deferred under the award, to the extent
          vested, which may be prior to when the compensation is actually or constructively received. Also, if an award that is
          subject to Section 409A fails to comply, Section 409A imposes an additional 20% federal income tax on compensation
          recognized as ordinary income, as well as interest on such deferred compensation.

     Under Sections 421 and 422 of the Internal Revenue Code, recipients of ISOs are generally not taxable on their receipt of
common stock upon their exercises of ISOs if the ISOs and option stock are held for specified minimum holding periods and, in
such event, we are not entitled to income tax deductions with respect to such exercises. Participants in the 2005 plan will be
provided with detailed information regarding the tax consequences relating to the various types of awards and grants under the
2005 plan.

      •   Section 162(m) Limitation . In general, under Section 162(m) of the Internal Revenue Code, income tax deductions of
          publicly-held corporations may be limited to the extent total compensation (including base salary, annual bonus, stock
          option exercises and non-qualified benefits paid) for certain executive officers exceeds $1,000,000 (less the amount of
          any ―excess parachute payments‖ as defined in Section 280G of the Internal Revenue Code) in any one year. However,
          under Section 162(m), the deduction limit does not apply to certain ―performance-based compensation‖ established by an
          independent compensation committee that is adequately disclosed to, and approved by, stockholders. In particular, stock
          options and SARs will satisfy the ―performance-based compensation‖ exception if the awards are made by a qualifying
          compensation committee, the 2005 plan

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         sets the maximum number of shares that can be granted to any person within a specified period and the compensation is
         based solely on an increase in the stock price after the grant date. Specifically, the option exercise price must be equal to
         or greater than the fair market value of the stock subject to the award on the grant date. Under a Section 162(m) transition
         rule for compensation plans of corporations which are privately held and which become publicly held in an initial public
         offering, the 2005 plan will not be subject to Section 162(m) until a specified transition date, which is the earlier of:

             •   the material modification of the 2005 plan;

             •   the issuance of all employer stock and other compensation that has been allocated under the 2005 plan; or

             •   the first meeting of stockholders at which directors are to be elected that occurs after the close of the third calendar
                 year following the calendar year in which the initial public offering occurs.

     After the transition date, rights or awards granted under the 2005 plan, other than options and SARs, will not qualify as
―performance-based compensation‖ for purposes of Section 162(m) unless such rights or awards are granted or vest upon
pre-established objective performance goals, the material terms of which are disclosed to and approved by our stockholders.
Thus, we expect that such other rights or awards under the plan will not constitute performance-based compensation for purposes
of Section 162(m).

      We have attempted to structure the 2005 plan in such a manner that, after the transition date the compensation attributable
to stock options and SARs which meet the other requirements of Section 162(m) will not be subject to the $1,000,000 limitation.
We have not, however, requested a ruling from the IRS or an opinion of counsel regarding this issue.

         2002 Equity Incentive Plan

     We adopted our 2002 Equity Incentive Plan in November 2002. We have reserved a total of 3,608,247 shares of our
common stock for issuance under the 2002 plan. As of June 30, 2005, options to purchase a total of 50,464 shares of our
common stock had been exercised, options to purchase 3,314,960 shares of our common stock were outstanding and 242,823
shares of our common stock remained available for grant. As of June 30, 2005, the outstanding options were exercisable at a
weighted average exercise price of $6.01 per share.

     The maximum number of shares that may be subject to awards granted under the 2002 plan to any individual in any
calendar year cannot exceed 2,577,320.

     After the effective date of the 2005 plan, no additional awards will be granted under the 2002 plan and all awards granted
under the 2002 plan that expire without having been exercised or are cancelled, forfeited or repurchased will become available for
grant under the 2005 plan.

    The principal features of the 2002 plan are summarized below, but the summary is qualified in its entirety by reference to the
2002 plan, which is filed as an exhibit to the registration statement of which this prospectus is a part.

      Administration . The compensation committee of our board of directors administers the 2002 plan. To administer the 2002
plan following the completion of our initial public offering, our compensation committee must be constituted as described above in
connection with the 2005 plan. Subject to the terms and conditions of the 2002 plan, our compensation committee has the
authority to select the persons to whom awards are to be made, to determine the number of shares to be subject thereto and the
terms and conditions thereof, and to make all other determinations and to take all other actions necessary or advisable for the
administration

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of the 2002 plan. Our compensation committee is also authorized to adopt, amend or rescind rules relating to administration of the
2002 plan. Our board of directors may at any time abolish the compensation committee and revest in itself the authority to
administer the 2002 plan.

    Eligibility . Options and restricted stock under the 2002 plan may be granted to individuals who are then our officers,
employees or consultants or are the officers, employees or consultants of any of our parent or subsidiary corporations. Such
awards may also be granted to our directors. Only employees may be granted ISOs.

     Awards . The 2002 plan provides that our compensation committee may grant or issue stock options or restricted stock or
any combination thereof. Each award will be set forth in a separate agreement with the person receiving the award and will
indicate the type, terms and conditions of the award.

      •   Nonqualified Stock Options provide for the right to purchase shares of our common stock at a specified price which may
          be no less than 85% of the fair market value on the date of grant, and usually will become exercisable (at the discretion of
          our compensation committee) in one or more installments after the grant date, subject to the participant’s continued
          employment with us and/or subject to the satisfaction of our performance targets and individual performance targets
          established by our compensation committee. Under the 2002 plan, in the case of an NQSO granted to an individual who
          owns (or is deemed to own) at least 10% of the total combined voting power of all classes of our capital stock, the 2002
          plan provides that the exercise price must be at least 110% of the fair market value of a share of common stock on the
          date of grant. NQSOs may be granted for a maximum 10 year term.

      •   Incentive Stock Options are designed to comply with the provisions of the Internal Revenue Code and will be subject to
          specified restrictions contained in the Internal Revenue Code. Among such restrictions, ISOs must have an exercise price
          of not less than the fair market value of a share of common stock on the date of grant, may only be granted to employees,
          must expire within a specified period of time following the optionee’s termination of employment, and must be exercised
          within the 10 years after the date of grant, but may be subsequently modified to disqualify them from treatment as ISOs.
          Under the 2002 plan, in the case of an ISO granted to an individual who owns (or is deemed to own) at least 10% of the
          total combined voting power of all classes of our capital stock, the 2002 plan provides that the exercise price must be at
          least 110% of the fair market value of a share of common stock on the date of grant and the ISO must expire upon the
          fifth anniversary of the date of its grant.

      •   Restricted Stock may be granted to participants and made subject to such restrictions as may be determined by our
          compensation committee. Restricted stock, typically, may be forfeited for no consideration or repurchased by us at the
          original purchase price if the conditions or restrictions are not met. In general, restricted stock may not be sold, or
          otherwise transferred, until restrictions are removed or expire. Purchasers of restricted stock, unlike recipients of options,
          will have voting rights and will receive dividends, if any, prior to the time when the restrictions lapse.

     Corporate Transactions . In the event of a change of control where the acquiror does not assume or replace awards granted
under the 2002 plan, awards issued under the 2002 plan held by persons whose status as employees, consultants or directors
has not terminated as of the date of the change of control will be subject to accelerated vesting such that 100% of such award will
become vested and exercisable or payable, as applicable. Under the 2002 plan, a change of control is generally defined as:

      •   a merger or consolidation in which we are a party, other than a merger or consolidation which results in our outstanding
          voting securities immediately before the transaction

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          continuing to represent a majority of the voting power of the acquiring company’s outstanding voting securities;

      •   the sale, exchange, or transfer of 50% or more of our assets; or

      •   our dissolution, liquidation or winding-up.

      Securities Laws and Federal Income Taxes . The 2002 plan is also designed to comply with various securities and federal
tax laws as described above in connection with the 2005 plan.

     2000 Stock Incentive Plan . We have reserved a total of 6,782 shares of common stock for issuance under our 2000 Stock
Incentive Plan. As of June 30, 2005, options to purchase a total of 65 shares of common stock had been exercised, options to
purchase 4,814 shares of common stock were outstanding and 1,904 shares of common stock remained available for grant. As of
June 30, 2005, the outstanding options were exercisable at a weighted average exercise price of approximately $13.43 per share.

     After the effective date of the 2005 plan, no additional awards will be granted under the 2000 plan and all awards granted
under the 2000 plan that expire without having been exercised or are cancelled, forfeited or repurchased will become available for
grant under the 2005 plan.

    The principal features of the 2005 plan are summarized below. This summary is qualified in its entirety by reference to the
2000 plan, which is filed as an exhibit to the registration statement of which this prospectus is a part.

      Administration . The compensation committee of our board of directors administers the 2000 plan. To administer the 2000
plan following the completion of our initial public offering, our compensation committee must be constituted as described above in
connection with the 2005 plan. Subject to the terms and conditions of the 2000 plan, our compensation committee has the
authority to select the persons to whom awards are to be made, to determine the number of shares to be subject thereto and the
terms and conditions thereof, and to make all other determinations and to take all other actions necessary or advisable for the
administration of the 2000 plan. Our compensation committee is also authorized to adopt, amend or rescind rules relating to
administration of the 2000 plan. Our board of directors may at any time abolish the compensation committee and revest in itself
the authority to administer the 2000 plan.

      Eligibility . Options, restricted stock awards and SARs under the 2000 plan may be granted to individuals who are then our
officers, employees or consultants or are the officers, employees or consultants of any of our parent or subsidiary corporations.
Such awards may also be granted to our directors. Only employees may be granted ISOs.

       Awards . The 2000 plan provides that our compensation committee may grant or issue stock options, restricted stock or
SARs or any combination thereof. Each award will be set forth in a separate agreement with the person receiving the award and
will indicate the type, terms and conditions of the award.

      •   Nonqualified Stock Options provide for the right to purchase shares of our common stock at a specified price which may
          be no less than the fair market value on the date of grant, and usually will become exercisable (at the discretion of our
          compensation committee) in one or more installments after the grant date, subject to the participant’s continued
          employment with us and/or subject to the satisfaction of our performance targets and individual performance targets
          established by our compensation committee. NQSOs may be granted for a maximum 10 year term.

      •   Incentive Stock Options are designed to comply with the provisions of the Internal Revenue Code and will be subject to
          specified restrictions contained in the Internal

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          Revenue Code. Among such restrictions, ISOs must have an exercise price of not less than the fair market value of a
          share of common stock on the date of grant, may only be granted to employees, must expire within a specified period of
          time following the optionee’s termination of employment, and must be exercised within the 10 years after the date of grant,
          but may be subsequently modified to disqualify them from treatment as ISOs. Under the 2000 plan, in the case of an ISO
          granted to an individual who owns (or is deemed to own) at least 10% of the total combined voting power of all classes of
          our capital stock, the 2000 plan provides that the exercise price must be at least 110% of the fair market value of a share
          of common stock on the date of grant and the ISO must expire upon the fifth anniversary of the date of its grant.

      •   Restricted Stock may be granted to participants and made subject to such restrictions as may be determined by our
          compensation committee. Restricted stock, typically, may be forfeited for no consideration or repurchased by us at the
          original purchase price if the conditions or restrictions are not met. In general, restricted stock may not be sold, or
          otherwise transferred, until restrictions are removed or expire. Purchasers of restricted stock, unlike recipients of options,
          will have voting rights and will receive dividends, if any, prior to the time when the restrictions lapse.

      •   Stock Appreciation Rights may be granted in connection with stock options or other awards, or separately. SARs granted
          in connection with stock options or other awards typically will provide for payments to the holder based upon increases in
          the price of our common stock over the exercise price of the related option or other award, but alternatively may be based
          upon criteria such as book value. There are no restrictions in the 2000 plan on the exercise of SARs or the amount of
          gain realizable therefrom, although restrictions may be imposed by our compensation committee in the SAR agreements.
          Our compensation committee may elect to pay SARs in cash or in common stock or in a combination of both.

      Corporate Transactions . In the event of a sale of the company, each option granted under the 2000 plan will become vested
and exercisable if, within 12 months following the sale of the company the option holder is terminated by the company other than
for cause or resigns for good reason. Under the 2000 plan, a sale of the company is generally defined as:

      •   a merger, consolidation or other transaction in which we are a party, other than a merger or consolidation which results in
          our outstanding voting securities immediately before the transaction continuing to represent a majority of the voting power
          of the acquiring company’s outstanding voting securities; or

      •   the sale, exchange, or transfer of all or substantially all of our assets.

      Securities Laws and Federal Income Taxes . The 2000 plan is also designed to comply with various securities and federal
tax laws as described above in connection with the 2005 plan.

Executive Employment Agreements

      Messrs. Geiger, Fugate, Morrice, Batelaan, Gatch, Lyon, Oesterling, Robinson, Craver and Abkemeier and Ms. Strow are
at-will employees. We have entered into employment agreements with each of our executive officers. Each of these employment
agreements provides for:

      •   in the event that the executive is terminated without cause or if the executive resigns with good reason, continued
          payment to the executive of his or her base salary for 12 months, accelerated vesting of 20% of each of the executive’s
          stock awards on the date of termination and, with respect to stock awards granted to the executive on or after the

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          effective date of the employment agreement, a one-year period for the executive to exercise such stock awards following
          the date of termination (two years in the case of Mr. Geiger);

      •   in the event of the executive’s death or if the executive is terminated without cause or resigns with good reason following
          certain change of control events, immediate vesting of all of the executive’s unvested stock awards;

      •   in the event the executive’s employment is terminated as a result of his or her disability, accelerated vesting of the
          executive’s unvested stock awards so that 60% of each such stock award is vested as of the date of termination (if not
          already vested to that percentage); and

      •   nondisclosure of our confidential information and, after the termination of the executive’s employment with us,
          non-solicitation of our employees and a one-year non-compete.

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                                   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Registration Rights Agreement

      We have entered into a registration rights agreement with Madison Dearborn Partners, Battery Ventures, Vantage Point
Venture Partners, B-ETC, 118 Capital Fund LLC, Liberty Mutual Insurance Company, CCOS Florida Limited, Black Diamond
Capital, Ballast Point Ventures, certain of each of their affiliates and certain other individuals. Under the agreement, the holders of
our preferred stock have rights to register shares of our capital stock. For three years after this offering, holders of registrable
securities, as defined in the agreement, will have the right to require us to effect registration under the Securities Act of their
registrable securities, subject to specific value minimums and our board of directors’ right to defer the registration for a period of
up to 180 days in certain circumstances. These stockholders also have the right to cause us to register their securities on Form
S-3 when it becomes available to us if they propose to register securities having a value of at least $10 million, subject to the
board of directors’ right to defer the registration for a period of up to 90 days. In addition, if we propose to register securities under
the Securities Act, then the stockholders who are party to the agreement will have a right (which they have waived for this
offering), subject to quantity limitations we determine, or determined by underwriters if the offering involves an underwriting, to
request that we register their registrable securities. We will bear all registration expenses (but only up to $50,000 for registrations
on Form S-3) incurred in connection with registrations. We have agreed to indemnify the investors against liabilities related to the
accuracy of the registration statement used in connection with any registration effected under the agreement.

      As part of their lock-up agreements with the underwriters, some of our stockholders have agreed not to make any demand
for or exercise any rights with respect to the registration of their shares for a period of at least 180 days following the date of this
prospectus without the prior written consent of Deutsche Bank Securities Inc. on behalf of the underwriters.

Stockholders Agreement

      We have entered into an agreement with Madison Dearborn Partners, Battery Ventures, Vantage Point Venture Partners,
B-ETC, 118 Capital Fund LLC, Liberty Mutual Insurance Company, CCOS Florida Limited, BVCF, Black Diamond Capital, Ballast
Point Ventures, certain of each of their affiliates and certain other individuals that, among other things, provides them with the right
to designate some members of our board of directors and contains certain transfer restrictions on our shares. Battery Ventures
and VantagePoint each have the right to appoint one director to the board of directors, MDCP has the right to appoint two
directors, our chief executive officer has the right to appoint one director, Battery Ventures, VantagePoint and MDCP together
have the right to appoint one outside director and the holders of our Series C preferred stock have the right to appoint one
director. Messrs. Geiger, Grissom, Perry, Abate, Chapple, Luttrell and Rothman have been appointed pursuant to the
stockholders agreement. These provisions of the stockholders agreement will terminate by their terms upon consummation of this
offering.

Executive Purchase Agreements

    We have agreements with our named executive officers, as described in ―Management—Executive Employment
Agreements.‖

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Relationship with Cisco Capital and Cisco Systems

      Cisco Capital, our principal lender and one of our principal stockholders, is affiliated with a major supplier of equipment to us.
In the year ended December 31, 2004, we purchased $13.5 million of equipment and services from Cisco Systems through
financing from Cisco Capital.

      We are a party to a credit agreement with Cisco Capital under which we currently owe $62.9 million. As of June 30, 2005, the
effective interest rate under our credit facility for all borrowings outstanding was 6.75%. When we entered into the credit
agreement with Cisco Capital, we granted warrants and other rights to Cisco Capital that, upon the consummation of this offering,
will permit Cisco Capital to acquire up to 713,593 shares of our common stock at an exercise price of $0.04 per share and up to
6,435 shares of our common stock at an exercise price of $3.88 per share, at any time on or before March 31, 2010. We are
currently in compliance with all conditions, restrictions, and covenants contained in the credit facility. In accordance with an
arrangement we have with Cisco Capital, we expect to use proceeds of this offering to terminate our credit facility with Cisco
Capital and to repay all outstanding principal and accrued interest, at which time we will have no outstanding indebtedness.

Employment Agreements

    Each of our named executive officers currently employed by us is a party to an employment agreement with us. See
―Management—Executive Employment Agreements.‖

Participation in this Offering

     Concurrently with our offering to the public and pursuant to this prospectus, we are also offering shares of our common stock
to two of our directors, Messrs. D. Scott Luttrell and Robert Rothman, who have indicated an interest in purchasing an aggregate
of $3.0 million of shares of our common stock.

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                                                                 PRINCIPAL STOCKHOLDERS

     The following table provides summary information regarding the beneficial ownership of our outstanding capital stock as of
July 31, 2005, after giving effect to a 1 for 3.88 reverse stock split, for:

       •   each of the executive officers;

       •   each of our directors;

       •   each person or group who beneficially owns more than 5% of our capital stock; and

       •   all of our directors and executive officers as a group.

    Except as otherwise indicated, each of the stockholders has sole voting and investment power with respect to the shares
beneficially owned. The address for each director and executive officer is c/o Cbeyond Communications, Inc., 320 Interstate North
Parkway, Suite 300, Atlanta, Georgia 30339.
                                                                                       Shares Beneficially
                                                                                         Owned Before                              Percentage Owned After this
Name of Beneficial Owner                                                                this Offering (1)                                  Offering (1)

                                                                                                                               Without                       With
                                                                                     Number              Percent            Over-Allotment              Over-Allotment

Executive Officers and Directors
James F. Geiger (2)                                                                   880,263              4.45 %                      3.40 %                      3.29 %
J. Robert Fugate (3)                                                                  205,069              1.07 %                         *                           *
Robert R. Morrice (4)                                                                 166,021                 *                           *                           *
Richard J. Batelaan (5)                                                                48,204                 *                           *                           *
Brian E. Craver (6)                                                                    90,547                 *                           *                           *
Christopher C. Gatch (7)                                                               87,131                 *                           *                           *
Henry C. Lyon (8)                                                                       6,443                 *                           *                           *
Brooks A. Robinson (9)                                                                 55,276                 *                           *                           *
Joseph Oesterling (10)                                                                 52,521                 *                           *                           *
Julia O. Strow (11)                                                                    42,223                 *                           *                           *
Kurt Abkemeier                                                                            —                   *                           *                           *
Anthony M. Abate (12)                                                                  17,139                 *                           *                           *
Douglas C. Grissom (13)                                                             5,620,062             29.65 %                     22.43 %                     21.66 %
D. Scott Luttrell (14)                                                                472,919              2.49 %                      2.33 %                      2.25 %
James N. Perry, Jr. (15)                                                            5,620,062             29.65 %                     22.43 %                     21.66 %
John Chapple (16)                                                                       8,590                 *                           *                           *
Robert Rothman (17)                                                                   453,302              2.39 %                      2.25 %                      2.18 %
All directors and executive officers as a group
   (17 persons)                                                                     8,205,709             43.29 %                     32.74 %                     31.63 %
Beneficial owners of 5% or more
Madison Dearborn Partners III, L.P. (18)                                            5,620,062             29.65 %                     22.43 %                     21.66 %
VantagePoint Venture Partners (19)                                                  3,422,441             18.05 %                     13.66 %                     13.19 %
Battery Ventures (20)                                                               3,250,981             17.15 %                     12.97 %                     12.53 %
Cisco Systems Capital Corporation (21)                                              1,767,732              8.98 %                      6.86 %                      6.63 %
Adams Street Partners, LLC (22)                                                     1,106,898              5.84 %                      4.42 %                      4.27 %
Metalmark Capital LLC (23)                                                          1,021,901              5.39 %                      4.08 %                      3.94 %

*     Less than 1% beneficial ownership.

(1)   Beneficial ownership of shares is determined in accordance with the rules of the SEC and generally includes any shares over which a person exercises sole or shared
      voting or investment power. Except as indicated by footnote, and subject to applicable community property laws, to our knowledge, each stockholder identified in the
      table possesses sole voting and investment power with respect to all shares of common stock shown as beneficially owned by the stockholder. The number of shares
      beneficially owned by a person includes shares of common stock subject to options and warrants held by that person that are currently exercisable or exercisable
      within 60 days of July 31, 2005 and not subject to repurchase as of that date. Shares issuable pursuant to options and warrants are deemed outstanding for calculating
      the percentage ownership of the person holding the options and warrants but are not deemed outstanding for the purposes of calculating the percentage ownership of
      any other person. For
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       purposes of this table, the number of shares of common stock outstanding as of July 31, 2005 is deemed to be 18,955,735. For purposes of calculating the percentage
       beneficially owned by any person, shares of common stock issuable to such person upon the exercise of any options or warrants exercisable within 60 days of July 31,
       2005 are also assumed to be outstanding.

(2)     Includes options for 824,646 shares of common stock.

(3)     Includes options for 184,131 shares of common stock.

(4)     Includes options for 159,464 shares of common stock.

(5)     Includes options for 37,153 shares of common stock.

(6)     Includes options for 75,111 shares of common stock.

(7)     Includes options for 72,438 shares of common stock.

(8)     Includes options only.

(9)     Includes options for 48,282 shares.

(10)     Includes options for 47,976 shares.

(11)     Includes options for 40,573 shares of common stock.

(12)     Includes options only.

(13)     Consists of shares owned by Madison Dearborn Capital Partners III, L.P. Mr. Grissom is a Director of Madison Dearborn Partners and as such shares voting and
         investment power with other directors. Mr. Grissom disclaims beneficial ownership of the shares owned by Madison Dearborn Capital Partners III, L.P.

(14)     Includes options for 8,591 shares. Mr. Luttrell is the Chief Executive Officer and founder of LCM Group, Inc. 118 Capital Fund, Inc. owns 414,466 shares; LCM Profit
         Sharing Plan owns 4,533 shares; and 2514 Multi-Strategy Fund LP owns 45,330 shares. 118 Capital Fund, Inc., LCM Profit Sharing Plan and 2514 Multi-Strategy
         Fund LP are part of an affiliated group of investment partnerships commonly controlled by LCM Group, Inc. Mr. Luttrell has indicated an interest in purchasing,
         concurrently with our offering to the public generally, an aggregate of $1.5 million of our common stock directly from us and not through underwriters or any brokers or
         dealers. Assuming an initial public offering price of $13.50 per share, the midpoint of the initial public offering price range indicated on the cover of this prospectus, we
         will offer 111,111 shares to Mr. Luttrell and, after giving effect to his purchase, he will beneficially own a total of 584,031 shares of our common stock, representing
         the percentage owned after this offering as indicated in the above table.

(15)     Consists of shares owned by Madison Dearborn Capital Partners III, L.P. Mr. Perry is a Managing Director of Madison Dearborn Partners and as such shares voting
         and investment power with other directors. Mr. Perry disclaims beneficial ownership of the shares owned by Madison Dearborn Capital Partners III, L.P.

(16)     Includes options only.

(17)     Consists of shares owned by Black Diamond Capital II, LLC. Mr. Rothman is Chairman and Chief Executive Officer of Black Diamond Capital II, LLC, and as such
         shares voting and investment power with respect to such shares. Mr. Rothman has indicated an interest in purchasing, concurrently with our offering to the public
         generally, an aggregate of $1.5 million of our common stock directly from us and not through underwriters or any brokers or dealers. Assuming an initial public
         offering price of $13.50 per share, the midpoint of the initial public offering price range indicated on the cover of this prospectus, we will offer 111,111 shares to Mr.
         Rothman and, after giving effect to his purchase, he will beneficially own a total of 564,414 shares of our common stock, representing the percentage owned after this
         offering as indicated in the above table. Mr. Rothman may be considered an affiliate or associated person of a broker-dealer that is not participating in this offering.
         He represents that he acquired his shares in the ordinary course of business and at the time of purchase had no agreement or understanding, directly or indirectly,
         with any person to distribute the securities.

(18)     Includes 5,489,924 shares owned by Madison Dearborn Capital Partners III, L.P.; 121,899 shares owned by Madison Dearborn Special Equity III, LP; and 8,239
         shares owned by Special Advisors Fund I, LLC. Madison Dearborn Capital Partners III, L.P., Madison Dearborn Special Equity III, LP and Special Advisors Fund I
         LLC are part of an affiliated group of investment partnerships and limited liability companies commonly controlled by Madison Dearborn Partners III, L.P. Messrs.
         John A. Canning, Jr., Paul J. Finnegan and Samuel M. Mencoff have joint control over the shares held by Madison Dearborn Partners, and as such, they share voting
         and investment power with respect to such shares. Messrs. Canning, Jr., Finnegan and Mencoff disclaim beneficial ownership with respect to such shares. The
         address of this stockholder is c/o Madison Dearborn Partners, Three First National Plaza, Suite 3800, Chicago, IL 60602.

(19)     Includes 1,001,035 shares owned by VantagePoint Venture Partners III(Q), LP; 122,344 shares owned by VantagePoint Venture Partners III, LP; 2,063,179 shares
         owned by VantagePoint Venture Partners IV(Q), LP; 207,654

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       shares owned by VantagePoint Ventures Partners IV, LP; and 28,229 shares owned by VantagePoint Venture Partners IV Principals Fund, LP. VantagePoint Venture
       Partners III(Q), LP, VantagePoint Venture Partners III, LP, VantagePoint Venture Partners IV(Q), LP, VantagePoint Ventures Partners IV, LP and Venture Partners IV
       Principals Fund, LP are part of an affiliated group of investment partnerships commonly controlled by VantagePoint Venture Partners. Messrs. Alan Salzman and
       James Marver are managing members of the general partners of the limited partnerships that hold such shares, and as such, they share voting and investment power
       with respect to such shares. Messrs. Salzman and Marver disclaim beneficial ownership with respect to such shares. The address of this stockholder is c/o
       VantagePoint Venture Partners, 444 Madison Avenue, 39 th Floor, New York, NY 10022.

(20)   Includes 2,994,701 shares owned by Battery Ventures V, LP; 191,256 shares owned by Battery Ventures Convergence Fund, LP; and 65,024 shares owned by
       Battery Investment Partners V, LLC. Battery Ventures V, LP, Battery Ventures Convergence Fund, LP and Battery Investment Partners V, LLC are part of an affiliated
       group of investment partnerships and limited liability companies commonly controlled by Battery Ventures. The address of this stockholder is c/o Battery Ventures, 20
       William Street, Suite 200, Wellesley, MA 02481.

(21)   Includes warrants to purchase 720,029 shares of common stock. Cisco Systems Capital Corporation is a wholly-owned subsidiary of Cisco Systems, Inc. The
       address of this stockholder is 6005 Plumas Street, Suite 101, Reno, NV 89509.

(22)   Represents shares owned by BVCF IV, of which Adams Street Partners, LLC is the general partner. Mr. George Spencer is a member of Adams Street Partners, LLC
       and has shared voting and investment power with respect to such shares. The address of this stockholder is c/o Adams Street Partners, One North Wacker Dr., Suite
       2200, Chicago, IL 60606.

(23)   Represents shares owned by Capital Partners IV Technology Holdings L.P., which is jointly owned by Morgan Stanley Dean Witter Capital Partners IV, L.P., MSDW
       IV 892 Investors, L.P. and Morgan Stanley Dean Witter Capital Investors IV, L.P. Morgan Stanley Dean Witter Capital Partners IV, L.P., MSDW IV 892 Investors, L.P.
       and Morgan Stanley Dean Witter Capital Investors IV, L.P. are managed by an affiliate of Metalmark Capital LLC pursuant to an agreement between an affiliate of
       Morgan Stanley and such affiliate of Metalmark. Metalmark is an independent private equity firm managed by former senior members of Morgan Stanley Capital
       Partners, and as such, they share voting and investment power with respect to such shares. The former senior members of Morgan Stanley Capital Partners disclaim
       beneficial ownership with respect to such shares. The address of this stockholder is 1177 Avenue of the Americas, 40 th floor, New York, NY 10036. MSDW IV may be
       considered an affiliate or associated person of a broker-dealer that is not participating in this offering. It represents that it acquired its shares in the ordinary course of
       business and at the time of purchase had no agreement or understanding, directly or indirectly, with any person to distribute the securities.

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                                                DESCRIPTION OF CAPITAL STOCK

      Upon completion of this offering, our authorized capital stock will consist of 50,000,000 shares of common stock, $0.01 par
value and 15,000,000 shares of preferred stock, $0.01 par value, the rights and preferences of which may be designated by the
board of directors. The following description of our capital stock is only a summary and is qualified in its entirety by reference to
the actual terms and provisions of the capital stock contained in our second amended and restated certificate of incorporation,
which will become effective as of the completion of this offering, and our amended and restated bylaws, both of which will be in
effect upon the completion of this offering. As of June 30, 2005, there were 162,066 shares of our common stock issued and
outstanding, 17,074,992 shares of Series B preferred stock issued and outstanding and 525,605 shares of Series C preferred
stock issued and outstanding. As of June 30, 2005, the preferred stock was convertible into 18,600,597 shares of common stock.
All of the preferred stock will automatically convert into shares of common stock immediately prior to the completion of this
offering. The number of shares of common stock our preferred stock converts into at the time of this offering will be 18,600,597
shares plus an additional number of shares based on the dividends that accrue on the preferred stock between June 30, 2005 and
the date of this offering.

Common Stock

      Holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and
do not have cumulative voting rights. Accordingly, holders of a majority of the shares of common stock entitled to vote in any
election of directors may elect all of the directors standing for election. Holders of common stock are entitled to receive ratably
such dividends, if any, as may be declared by the board of directors out of funds legally available therefor, subject to any
preferential dividend rights of outstanding preferred stock. Upon the liquidation, dissolution or winding up of our company, the
holders of common stock are entitled to receive ratably our net assets available after the payment of all debts and other liabilities
and subject to the prior rights of any outstanding preferred stock. Holders of the common stock have no preemptive, subscription,
redemption or conversion rights. The outstanding shares of common stock are, and the shares that we offer in this offering will be,
when issued and paid for, validly issued, fully paid and nonassessable. The rights, preferences and privileges of holders of
common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred
stock which we may designate and issue in the future. Upon the closing of this offering, there will be no shares of preferred stock
outstanding.

Preferred Stock

      Immediately prior to the completion of this offering, all of our outstanding Series B and Series C preferred stock will convert
into common stock. After the completion of this offering, the board of directors will be authorized, subject to certain limitations
prescribed by law, without further stockholder approval, to issue from time to time up to an aggregate of 15,000,000 shares of
preferred stock in one or more series and to fix the designations, preferences, rights and any qualifications, limitations or
restrictions of the shares of each such series thereof, including the dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, including sinking fund provisions, redemption price or prices, liquidation preferences and the number of
shares constituting any series or designations of such series. The issuance of preferred stock may have the effect of delaying,
deferring or preventing a change of control of our company. We have no present plans to issue any shares of preferred stock.

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Warrants

     As of June 30, 2005, there were warrants outstanding to purchase a total of 720,028 shares of common stock. The warrant
to purchase 713,593 shares at $0.04 per share and the warrant to purchase 6,435 shares at $3.88 per share will both expire in
March 2010.

Certain Anti-Takeover, Limited Liability and Indemnification Provisions

      As noted above, our board of directors, without stockholder approval, has the authority under our certificate of incorporation
to issue preferred stock with rights superior to the rights of the holders of common stock. As a result, preferred stock could be
issued quickly and easily, could adversely affect the rights of holders of common stock and could be issued with terms calculated
to delay or prevent a change of control of our company or make removal of management more difficult.

      Election and Removal of Directors. Our certificate and bylaws provides for the division of our board of directors into three
classes, as nearly equal in number as possible, with the directors in each class serving for a three-year term, and one class being
elected each year by our stockholders. Directors may be removed only for cause. This system of electing and removing directors
may tend to discourage a third party from making a tender offer or otherwise attempting to obtain control of us and may maintain
the incumbency of the board of directors, as it generally makes it more difficult for stockholders to replace a majority of directors.

      Stockholder Meetings. Our bylaws provide that the stockholders may not call a special meeting of our stockholders. Instead,
only the board of directors or the president will be able to call special meetings of stockholders.

     Requirements for Advance Notification of Stockholder Nominations and Proposals. Our bylaws establish advance notice
procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than
nominations made by or at the direction of the board of directors or one of its committees.

      Delaware Anti-Takeover Law. We are a Delaware corporation subject to Section 203 of the Delaware General Corporation
Law, which prohibits a publicly held Delaware corporation from engaging in a ―business combination,‖ as defined in clause (c)(3)
of that section, with an ―interested stockholder,‖ as defined in clause (c)(5) of that section, for a period of three years after the time
the stockholder became an interested stockholder, subject to limited exceptions provided under Section 203.

      Limitation of Officer and Director Liability and Indemnification Arrangements. Our certificate limits the liability of our directors
to the maximum extent permitted by Delaware law. Specifically, our directors will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except liability for:

      •   any breach of their duty of loyalty to the corporation or its stockholders;

      •   acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

      •   unlawful payments of dividends or unlawful stock repurchases or redemptions; or

      •   any transaction from which the director derived an improper personal benefit.

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       This charter provision has no effect on any non-monetary remedies that may be available to us or our stockholders, nor does
it relieve us or our officers or directors from compliance with federal or state securities laws. The certificate also generally provides
that we shall indemnify, to the fullest extent permitted by law, any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit, investigation, administrative hearing or any other proceeding by reason
of the fact that he is or was a director or officer of ours, or is or was serving at our request as a director, officer, employee or agent
of another entity, against expenses incurred by him in connection with such proceeding. An officer or director shall not be entitled
to indemnification by us if:

      •   the officer or director did not act in good faith and in a manner he reasonably believed to be in, or not opposed to, our
          best interests; or

      •   with respect to any criminal action or proceeding, the officer or director had reasonable cause to believe his conduct was
          unlawful.

    Our charter and bylaw provisions and provisions of Delaware law may have the effect of delaying, deterring or preventing a
change of control of our company.

Transfer Agent and Registrar

      Wachovia Bank, N.A. is the transfer agent and registrar for the common stock.

Nasdaq National Market

      We have applied for the qualification of our common stock on the Nasdaq National Market under the symbol ―CBEY.‖

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                UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS

      The following is a summary of the material U.S. federal income tax consequences to non-U.S. holders of the ownership and
disposition of our common stock, but does not purport to be a complete analysis of all the potential tax considerations relating
thereto. This summary is based upon the provisions of the Internal Revenue Code of 1986, as amended, or the Code, Treasury
regulations promulgated thereunder, administrative rulings and judicial decisions, all as of the date hereof. These authorities may
be changed, possibly retroactively, so as to result in U.S. federal income tax consequences different from those set forth below.
This summary is applicable only to non-U.S. holders who hold our common stock as a capital asset (generally, an asset held for
investment purposes). We have not sought any ruling from the Internal Revenue Service, or the IRS, with respect to the
statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS will agree
with such statements and conclusions.

CIRCULAR 230 DISCLOSURE

TO COMPLY WITH INTERNAL REVENUE SERVICE CIRCULAR 230, YOU ARE HEREBY NOTIFIED THAT: (A) ANY
DISCUSSION OF FEDERAL TAX ISSUES IN THIS PROSPECTUS IS NOT INTENDED OR WRITTEN TO BE RELIED UPON,
AND CANNOT BE RELIED UPON BY YOU, FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON
YOU UNDER THE INTERNAL REVENUE CODE; (B) ANY SUCH DISCUSSION IS INCLUDED HEREIN BY THE ISSUER IN
CONNECTION WITH THE PROMOTION OR MARKETING (WITHIN THE MEANING OF CIRCULAR 230) BY THE ISSUER
AND THE UNDERWRITERS OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN BY THE ISSUER; AND (C) YOU
SHOULD SEEK ADVICE BASED ON YOUR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

     This summary also does not address the tax considerations arising under the laws of any foreign, state or local jurisdiction.
In addition, this discussion does not address tax considerations applicable to an investor’s particular circumstances or to investors
that may be subject to special tax rules, including, without limitation:

      •   banks, insurance companies, or other financial institutions;

      •   persons subject to the alternative minimum tax;

      •   tax-exempt organizations;

      •   dealers in securities or currencies;

      •   traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;

      •   partnerships or other pass-through entities or investors in such entities;

      •   ―controlled foreign corporations,‖ ―passive foreign corporations,‖ ―foreign personal holding companies‖ and corporations
          that accumulate earnings to avoid U.S. federal income tax;

      •   U.S. expatriates or former long-term residents of the United States;

      •   persons who hold our common stock as a position in a hedging transaction, ―straddle,‖ ―conversion transaction‖ or other
          risk reduction transaction; or

      •   persons deemed to sell our common stock under the constructive sale provisions of the Code.

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     In addition, if a partnership holds our common stock, the tax treatment of a partner generally will depend on the status of the
partner and upon the activities of the partnership. Accordingly, partnerships which hold our common stock and partners in such
partnerships should consult their tax advisors.

      This discussion is for general information only and is not tax advice. You are urged to consult your tax advisor with respect to
the application of the U.S. federal income tax laws to your particular situation, as well as any tax consequences of the purchase,
ownership and disposition of our common stock arising under the U.S. federal estate or gift tax rules or under the laws of any
state, local, foreign or other taxing jurisdiction or under any applicable tax treaty.

Non-U.S. Holder Defined

     For purposes of this discussion, you are a non-U.S. holder if you are a holder that, for U.S. federal income tax purposes, is
not a U.S. person. For purposes of this discussion, you are a U.S. person if you are:

      •   an individual who is a citizen or resident of the United States, including an alien individual who is a lawful permanent
          resident of the United States or who meets the ―substantial presence‖ test under Section 7701(b) of the Code;

      •   a corporation or other entity taxable as a corporation for U.S. tax purposes created or organized in the United States or
          under the laws of the United States or of any state therein or the District of Columbia;

      •   an estate whose income is subject to U.S. federal income tax regardless of its source; or

      •   a trust (1) whose administration is subject to the primary supervision of a U.S. court and which has one or more U.S.
          persons who have the authority to control all substantial decisions of the trust or (2) which has made an election to be
          treated as a U.S. person.

Distributions

     If distributions are made on shares of our common stock, those payments will constitute dividends for U.S. tax purposes to
the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To
the extent those distributions exceed both our current and our accumulated earnings and profits, they will constitute a return of
capital and will first reduce your basis in our common stock, but not below zero, and then will be treated as gain from the sale of
stock.

     Any dividend paid to you generally will be subject to U.S. withholding tax either at a rate of 30% of the gross amount of the
dividend or such lower rate as may be specified by an applicable tax treaty. In order to receive a reduced treaty rate, you must
provide us with an IRS Form W-8BEN or other appropriate version of IRS Form W-8 certifying qualification for the reduced rate.

      Dividends received by you that are effectively connected with your conduct of a U.S. trade or business (and, where a tax
treaty applies, are attributable to a U.S. permanent establishment maintained by you) are exempt from such withholding tax. In
order to obtain this exemption, you must provide us with an IRS Form W-8ECI properly certifying such exemption. Such effectively
connected dividends, although not subject to withholding tax, are taxed at the same graduated rates applicable to U.S. persons,
net of any allowable deductions and credits. In addition, if you are a corporate non-U.S. holder, dividends you receive that are
effectively connected with your conduct of a U.S. trade or business may also be subject to a branch profits tax at a rate of 30% or
such lower rate as may be specified by an applicable tax treaty.

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    If you are eligible for a reduced rate of withholding tax pursuant to a tax treaty, you may obtain a refund of any excess
amounts currently withheld if you file an appropriate claim for refund with the IRS in a timely manner.

Gain on Disposition of Common Stock

     You generally will not be required to pay U.S. federal income tax on any gain realized upon the sale or other disposition of
our common stock unless;

      •   the gain is effectively connected with your conduct of a U.S. trade or business (and, where a tax treaty applies, is
          attributable to a U.S. permanent establishment maintained by you);

      •   you are an individual who is present in the United States for a period or periods aggregating 183 days or more during the
          calendar year in which the sale or disposition occurs and certain other conditions are met; or

      •   our common stock constitutes a U.S. real property interest by reason of our status as a ―United States real property
          holding corporation‖ for U.S. federal income tax purposes (a ―USRPHC‖) at any time within the shorter of the five-year
          period preceding the disposition or your holding period for our common stock.

     We believe that we are not currently and will not become a USRPHC. However, because the determination of whether we
are a USRPHC depends on the fair market value of our U.S. real property relative to the fair market value of our other business
assets, there can be no assurance that we will not become a USRPHC in the future. Even if we become USRPHC, however, as
long as our common stock is regularly traded on an established securities market, such common stock will be treated as U.S. real
property interests only if you actually or constructively hold more than 5% of our common stock.

      If you are a non-U.S. holder described in the first bullet above, you will be required to pay tax on the net gain derived from
the sale under regular graduated U.S. federal income tax rates, and corporate non-U.S. holders described in the first bullet above
may be subject to the branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. If
you are an individual non-U.S. holder described in the second bullet above you will be required to pay a flat 30% tax on the gain
derived from the sale, which tax may be offset by U.S. source capital losses. You should consult any applicable income tax
treaties that may provide for different rules.

Backup Withholding and Information Reporting

      Generally, we must report annually to the IRS the amount of dividends paid to you, your name and address, and the amount
of tax withheld, if any. A similar report is sent to you. These information reporting requirements apply even if withholding was not
required. Pursuant to tax treaties or other agreements, the IRS may make its reports available to tax authorities in your country of
residence.

     Payments of dividends made to you will not be subject to backup withholding if you establish an exemption, for example by
properly certifying your non-U.S. status on a Form W-8BEN or another appropriate version of Form W-8. Notwithstanding the
foregoing, backup withholding at a rate of up to 31%, with a current rate of 28%, may apply if either we or our paying agent has
actual knowledge, or reason to know, that you are a U.S. person.

    Payments of the proceeds from a disposition of our common stock effected outside the United States by a non-U.S. holder
made by or through a foreign office of a broker generally will not be subject to information reporting or backup withholding.
However, information

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reporting (but not backup withholding) will apply to such a payment if the broker is a U.S. person, a controlled foreign corporation
for U.S. federal income tax purposes, a foreign person 50% or more of whose gross income is effectively connected with a U.S.
trade or business for a specified three-year period, or a foreign partnership with certain connections with the United States, unless
the broker has documentary evidence in its records that the beneficial owner is a non-U.S. holder and specified conditions are met
or an exemption is otherwise established.

      Payments of the proceeds from a disposition of our common stock by a non-U.S. holder made by or through the U.S. office
of a broker is generally subject to information reporting and backup withholding unless the non-U.S. holder certifies as to its
non-U.S. holder status under penalties of perjury or otherwise establishes an exemption from information reporting and backup
withholding.

     Backup withholding is not an additional tax. Rather, the U.S. income tax liability of persons subject to backup withholding will
be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may be obtained,
provided that the required information is furnished to the IRS in a timely manner.

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                                              SHARES ELIGIBLE FOR FUTURE SALE

     If our stockholders sell substantial amounts of our common stock, including shares issued upon the exercise of outstanding
options or warrants, in the public market following this offering, the market price of our common stock could decline. These sales
also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem
appropriate.

      Prior to this offering, there was no public market for our common stock. Upon completion of this offering, we will have
outstanding an aggregate of 25,441,245 shares of our common stock, assuming no exercise of the underwriters’ over-allotment
option and no exercise of outstanding options or warrants. Of these shares, all of the shares sold in this offering will be freely
tradeable without restriction or further registration under the Securities Act, unless those shares are purchased by ―affiliates‖ as
that term is defined in Rule 144 under the Securities Act. The shares we are offering to two of our directors will be subject to the
lock-up agreements described in ―Lock-Up Agreements,‖ and the directors are affiliates of ours and would be subject to the
volume limitations of Rule 144 described below. In addition to the shares sold in this offering, the shares eligible for sale in the
public market are as follows:
     Number of Shares       Date

7,870                       As of the date of this prospectus.
31,459                      After 90 days from the date of this prospectus (subject, in some cases, to volume limitations).
19,297,342                  At various times after 180 days from the date of this prospectus as described below under ―Lock-up
                            Agreements.‖

Rule 144

    In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person who has
beneficially owned shares of our common stock for at least one year would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of:

      •   1% of the number of shares of our common stock then outstanding, which will equal approximately 254,412 shares
          immediately after this offering; or

      •   the average weekly trading volume of our common stock on the Nasdaq National Market during the four calendar weeks
          preceding the filing of a notice on Form 144 with respect to that sale.

     Sales under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current
public information about us.

Rule 144(k)

     Under Rule 144(k), a person who is not deemed to have been one of our affiliates at any time during the three months
preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, including the holding
period of any prior owner other than an affiliate, is entitled to sell those shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.

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Rule 701

       In general, under Rule 701 of the Securities Act as currently in effect, any of our employees, consultants or advisors who
purchase shares of our common stock from us in connection with a compensatory stock or option plan or other written agreement
is eligible to resell those shares 90 days after the effective date of this offering in reliance on Rule 144, but without compliance
with some of the restrictions, including the holding period, contained in Rule 144.

Lock-Up Agreements

      All of our officers and directors and stockholders representing an aggregate of over 90% of our common stock outstanding
after conversion of our preferred stock and immediately prior to the completion of this offering have entered into lock-up
agreements under which they have agreed not to transfer or dispose of, directly or indirectly, any shares of our common stock
held by them as of the completion of this offering or any securities convertible into or exercisable or exchangeable for shares of
our common stock for a period of at least 180 days after the date of this prospectus without the prior written consent of Deutsche
Bank Securities Inc. on behalf of the underwriters.

Options

     Upon completion of this offering, stock options to purchase a total of 3,306,481 shares of our common stock will be
outstanding. These stock options have a weighted average exercise price of $6.02 and a weighted average of 7.9 years until
expiration.

     Following this offering, we intend to file a registration statement on Form S-8 under the Securities Act covering 3,306,481
shares of our common stock issued or issuable upon the exercise of stock options, subject to outstanding options or reserved for
issuance under our stock option plans. Accordingly, shares registered under the registration statement on Form S-8 will, subject to
Rule 144 provisions applicable to affiliates, be available for sale in the open market, except to the extent that the shares are
subject to vesting restrictions or the contractual restrictions described above. See ―Management—Employee Benefit Plans.‖

Warrants

     Upon completion of this offering, there will be warrants outstanding to purchase 713,593 shares of our common stock at
$0.04 per share and 6,435 shares of our common stock at $3.88 per share, all of which will expire in March 2010.

Registration Rights

      Upon completion of this offering, the holders of 19,171,702 shares of our common stock will have rights to require or
participate in the registration of those shares under the Securities Act. The holder of warrants to purchase 720,028 shares of our
common stock upon exercise of such warrants will also be entitled to piggyback registration rights with respect to shares of our
common stock issuable upon the exercise of such warrant. As part of the lock-up agreements described above, all of our officers
and directors and stockholders representing an aggregate of over 90% of our common stock outstanding after conversion of our
preferred stock and immediately prior to the completion of this offering have agreed not to make any demand for or exercise any
rights with respect to the registration of those shares for a period of at least 180 days after the date of this prospectus without the
prior written consent of Deutsche Bank Securities Inc. on behalf of the underwriters. For a detailed description of certain of these
registration rights see ―Certain Relationships and Related Transactions—Registration Rights Agreement.‖

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                                                            UNDERWRITING

      Deutsche Bank Securities Inc. will act as book-running manager for our offering to the public. Subject to the terms and
conditions of the underwriting agreement, the underwriters named below, through their representative Deutsche Bank Securities
Inc., have severally agreed to purchase from us the following respective number of shares of our common stock for sale to the
public:
                                                                                                                                 Number
Underwriters                                                                                                                    of Shares

Deutsche Bank Securities Inc.
Raymond James & Associates, Inc.
Thomas Weisel Partners LLC
ThinkEquity Partners LLC
    Total                                                                                                                      5,882,353

      Concurrently with our offering to the public, we are offering shares of our common stock to Messrs. D. Scott Luttrell and
Robert Rothman, who have indicated an interest in purchasing shares of our common stock at the public offering price with an
aggregate price of $3.0 million, which represents an aggregate of 222,222 shares of our common stock assuming an initial public
offering price of $13.50 per share, the midpoint of the initial public offering price range indicated on the cover of this prospectus.
Messrs. Luttrell and Rothman are members of our board of directors. We are offering these shares directly to Messrs. Luttrell and
Rothman and not through underwriters or any brokers or dealers. The shares offered to Messrs. Luttrell and Rothman will not be
subject to any underwriting discounts or commissions. The shares will not be purchased unless the offering to the public is
consummated.

     The underwriting agreement provides that the obligations of the several underwriters to purchase the shares of common
stock we are offering to the public are subject to certain conditions precedent, including the absence of any material adverse
change in our business and the receipt of certain certificates, opinions and letters from us, our counsel and the independent
auditors. The underwriting agreement provides that the underwriters will purchase all of the shares of our common stock offered to
the public pursuant to this prospectus if any of these shares are purchased. The underwriters are not obligated to purchase the
shares covered by the over-allotment option described below.

     We have been advised by the representative of the underwriters that the underwriters propose to offer the shares of our
common stock to the public at the public offering price set forth on the cover of this prospectus and to dealers at a price that
represents a concession not in excess of $           per share under the public offering price. The underwriters may allow, and
these dealers may re-allow, a concession of not more than $             per share to other dealers. After the initial public offering,
representatives of the underwriters may change the offering price and other selling terms.

      We have granted to the underwriters an option to purchase up to an aggregate of 882,352 additional shares of our common
stock. The option is exercisable not later than 30 days after the date of this prospectus. Under the option, the underwriters may
purchase the 882,352 additional shares of our common stock at the public offering price less the underwriting discounts and
commissions set forth on the cover page of this prospectus, and only to cover over-allotments made in connection with the sale of
the common stock offered by this prospectus. To the extent that the underwriters exercise the option, each of the underwriters will
become obligated, subject to certain conditions, to purchase approximately the same percentage of the additional shares of our
common stock subject to the option as the number of shares of our common stock to be purchased by it in the above table bears
to the total number of shares of our common stock offered by this prospectus. We will be obligated, pursuant to the option, to sell
these

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additional shares of our common stock to the underwriters to the extent the option is exercised. If any additional shares of our
common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the 5,882,353
shares are being offered to the public by this prospectus.

      The underwriting discounts and commissions per share are equal to the public offering price per share of our common stock
less the amount paid by the underwriters to us per share of our common stock. The underwriting discounts and commissions
are       % of the initial public offering price. We have agreed to pay the underwriters the following discounts and commissions,
assuming either no exercise or full exercise by the underwriters of the underwriters’ over-allotment option:
                                                   Per Share                                             Total

                                         Without                   With                 Without                          With
                                      Over-allotment           Over-allotment        Over-allotment                  Over-allotment

Underwriting discounts and
  commissions payable by us          $                    $                     $                                $
Expenses payable by us                     $0.56                    $0.49             $3,298,053                      $3,298,053

     In addition, we estimate that the total expenses of this offering, excluding underwriting discounts and commissions, will be
approximately $3.3 million.

    We have agreed to indemnify the underwriters against some specified types of liabilities, including liabilities under the
Securities Act, and to contribute to payments the underwriters may be required to make in respect of any of these liabilities.

      Each of our officers and directors, and stockholders representing an aggregate of over 90% of our common stock
outstanding after conversion of our preferred stock and immediately prior to the completion of this offering, have agreed not to
offer, sell, contract to sell or otherwise dispose of, or enter into any transaction that is designed to, or could be expected to, result
in the disposition of any shares of our common stock or other securities convertible into or exchangeable or exercisable for shares
of our common stock or derivatives of our common stock owned by these persons prior to this offering or common stock issuable
upon exercise of options or warrants held by these persons for a period of 180 days after the effective date of the registration
statement of which this prospectus is a part without the prior written consent of Deutsche Bank Securities Inc., as representative
of the underwriters. This consent may be given at any time without public notice. 18,809,921 shares of our common stock will be
subject to these lock-up agreements. An additional 533,173 shares of our common stock will be subject to similar lock-up
agreements with us. We have entered into a similar agreement with the representative of the underwriters.

     If we release earnings results or announce material news during the last 17 days of the lock-up period, or if prior to the
expiration of the lock-up period we announce that we will release earnings during the 15-day period following the last day of the
lock-up period, then the lock-up period automatically will be extended until the end of the 18-day period beginning on the date of
the earnings release or material news announcement unless Deutsche Bank Securities Inc., as representative of the underwriters,
waives such extension in writing.

     On December 29, 2004, affiliates of Raymond James & Associates, Inc. purchased 655,737 shares of our Series C Preferred
Stock, representing 169,004 shares of common stock after conversion of the preferred stock and the completion of the reverse
stock split, in a private placement. These shares may be deemed by the NASD to be underwriting compensation pursuant to
Conduct Rule 2710 of the NASD. In addition, unless an exemption is granted by the NASD or is otherwise available under
Conduct Rule 2710, these shares will be subject to lock-up

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restrictions under Conduct Rule 2710(g) for the 180-day period immediately following the commencement of sales in this offering.

      At our request, the underwriters have agreed to reserve up to 5% of the shares of common stock for sale at the initial offering
price to our directors, officers, employees, business associates, and other parties related to us. We will indemnify the underwriters
for certain liabilities they may incur in connection with the offering to the public of shares to such persons. The number of shares
available for sale to the public will be reduced to the extent these persons purchase the reserved shares. Any shares not so
purchased will be offered by the underwriters to the general public on the same basis as other shares offered in this prospectus.

     The representative of the underwriters advised us that the underwriters do not intend to confirm sales to any account over
which they exercise discretionary authority.

      In connection with our offering to the public, the underwriters may purchase and sell shares of our common stock in the open
market. These transactions may include over-allotments or short sales, purchases to cover positions created by short sales and
stabilizing transactions.

      Over-allotment involves the sale by the underwriters of a greater number of shares than they are required to purchase in the
offering, which creates a short position. The short position may be either a covered short position or a naked short position. In
covered short positions, the number of shares over-allotted by the underwriters is not greater than the number of shares the
underwriters may purchase from us in this offering pursuant to the over-allotment option. The underwriters may close out any
short position either by exercising their over-allotment option with us or by purchasing shares in the open market. In determining
the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares
available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment
option. In naked short positions, the number of shares involved is greater than the number of shares subject to the over-allotment
option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position
is more likely to be created if underwriters are concerned that there may be downward pressure on the price of the shares in the
open market prior to the completion of this offering.

    Stabilizing transactions consist of various bids for or purchases of our common stock made by the underwriters in the open
market prior to the completion of this offering.

      The underwriters may impose a penalty bid. This occurs when a particular underwriter repays to the other underwriters a
portion of the underwriting discount received by it because the representatives of the underwriters have repurchased shares sold
by or for the account of that underwriter in stabilizing or short covering transactions.

     Purchases to cover a short position and stabilizing transactions may have the effect of preventing or slowing a decline in the
market price of our common stock. Additionally, these purchases, along with the imposition of the penalty bid, may stabilize,
maintain or otherwise affect the market price of our common stock. As a result, the price of our common stock may be higher than
the price that might otherwise exist in the open market. These transactions may be effected on the Nasdaq National Market, in the
over-the-counter market or otherwise.

      A prospectus in electronic format will be made available on Internet web sites maintained by one or more of the lead
underwriters of this offering and may be made available on web sites maintained by other underwriters. Other than the prospectus
in electronic format, the information on any underwriter’s web site and any information contained in any other web site maintained
by an underwriter is not part of the prospectus or the registration statement of which the prospectus forms a part.

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Pricing of This Offering

     Prior to this offering, there has been no public market for our common stock. Consequently, the initial public offering price of
our common stock will be determined by negotiation among us and the representative of the underwriters. Among the primary
factors that will be considered in determining the public offering price are:

      •   prevailing market conditions;

      •   our results of operations in recent periods;

      •   the present stage of our development;

      •   the market capitalizations and stages of development of other companies that we and the representatives of the
          underwriters believe to be comparable to our business; and

      •   estimates of our business potential.

                                                                 122
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                                                         LEGAL MATTERS

     The validity of the shares of common stock offered hereby will be passed upon for us by our counsel, Latham & Watkins
LLP, Washington, D.C. Various regulatory matters will be passed upon for us by Swidler Berlin LLP, Washington, D.C. The
underwriters have been represented by Cravath, Swaine & Moore LLP, New York, New York.

                                                             EXPERTS

     The consolidated financial statements of Cbeyond Communications, Inc., and subsidiaries at December 31, 2003 and 2004,
and for each of the three years in the period ended December 31, 2004, appearing in this prospectus and registration statement
have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in
accounting and auditing.

                                         WHERE YOU CAN FIND MORE INFORMATION

      We have filed with the SEC a registration statement under the Securities Act of 1933, as amended, referred to as the
Securities Act, with respect to the shares of our common stock offered by this prospectus. This prospectus, filed as a part of the
registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules
thereto as permitted by the rules and regulations of the SEC. For further information about us and our common stock, you should
refer to the registration statement. This prospectus summarizes provisions that we consider material of certain contracts and other
documents to which we refer you. Because the summaries may not contain all of the information that you may find important, you
should review the full text of those documents. We have included copies of those documents as exhibits to the registration
statement.

      The registration statement and the exhibits thereto filed with the SEC may be inspected, without charge, and copies may be
obtained at prescribed rates, at the public reference room maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549. You may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. The
registration statement and other information filed by us with the SEC are also available at the SEC’s website at http://www.sec.gov
. You may request copies of the filing, at no cost, by telephone at (678) 424-2400 or by mail at Cbeyond Communications, Inc.,
320 Interstate North Parkway, Suite 300, Atlanta, Georgia 30339.

     As a result of this offering, we and our stockholders will become subject to the proxy solicitation rules, annual and periodic
reporting requirements, restrictions of stock purchases and sales by affiliates and other requirements of the Exchange Act. W e are
not currently subject to those requirements. We will furnish our stockholders with annual reports containing audited financial
statements certified by independent auditors and quarterly reports containing unaudited financial statements for the first three
quarters of each fiscal year.

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 Index to Consolidated Financial Statements

   Years ended December 31, 2002, 2003 and 2004

                                                          CONTENTS

Report of Independent Registered Public Accounting Firm              F-1

Audited Financial Statements
Consolidated Balance Sheets                                          F-2
Consolidated Statements of Operations                                F-4
Consolidated Statements of Stockholders’ Deficit                     F-5
Consolidated Statements of Cash Flows                                F-6
Notes to Consolidated Financial Statements                           F-8
Table of Contents

                            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Cbeyond Communications, Inc.

     We have audited the accompanying consolidated balance sheets of Cbeyond Communications, Inc. and Subsidiaries (the
―Company‖) as of December 31, 2003 and 2004, and the related consolidated statements of operations, stockholders’ deficit and
cash flows for each of the three years in the period ended December 31, 2004. Our audits also included the financial statement
schedule listed in the Index at Item 16(b). These financial statements and schedule are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

     We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over
financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated
financial position of the Company at December 31, 2003 and 2004, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the information set forth therein.

                                                                        /s/ ERNST & YOUNG LLP

Atlanta, Georgia
May 14, 2005, except Note 15 as to which the date is October 26, 2005

                                                                  F-1
Table of Contents

                                   CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARIES

                                             CONSOLIDATED BALANCE SHEETS
                                       (Amounts in thousands, except per share amounts)
                                                                                            December 31                June 30

                                                                                         2003             2004          2005

                                                                                                                   (unaudited)
Assets
Current assets:
    Cash and cash equivalents                                                        $    5,127     $ 22,860       $     23,498
    Marketable securities                                                                21,079       14,334             10,000
    Accounts receivable, net of allowance for doubtful accounts of $785 and $1,033
      as of December 31, 2003 and 2004, respectively, and $1,735 as of June 30,
      2005                                                                                4,175            5,356          8,029
    Prepaid expenses                                                                      1,227            1,420          1,654
    Other assets                                                                            635            1,047            834

           Total current assets                                                          32,243           45,017         44,015
Property and equipment, net                                                              52,555           51,947         50,416
Long-term investments                                                                       267              567            303
Restricted cash equivalents                                                                 823              762            787
Deferred customer installation costs                                                        597              525            520
Deferred public offering cost                                                                —                —           1,465
Other assets                                                                                563              385            364

           Total assets                                                              $ 87,048       $ 99,203       $     97,870


                                                             F-2
Table of Contents

                                         CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARIES

                                          CONSOLIDATED BALANCE SHEETS—(CONTINUED)
                                          (Amounts in thousands, except per share amounts)
                                                                                          December 31                     June 30

                                                                                   2003                 2004                2005

                                                                                                                         (unaudited)
Liabilities and stockholders’ deficit
Current liabilities:
    Accounts payable                                                           $      5,773        $       5,327     $        4,560
    Accrued compensation and benefits                                                 2,542                3,945              3,015
    Accrued taxes                                                                     4,293                4,839              5,197
    Accrued telecommunications costs                                                  3,080                3,788              5,679
    Accrued professional fees                                                           640                  862              1,561
    Deferred rent                                                                       531                  994              1,427
    Deferred customer revenue                                                            —                   638              1,932
    Deferred installation revenue                                                       571                  693                671
    Other accrued expenses                                                              858                1,153              1,711
    Current portion of capital lease obligations                                        293                  336                369
    Current portion of long-term debt                                                11,422               13,666             14,671

           Total current liabilities                                                 30,003               36,241             40,793
Deferred installation revenue                                                           597                  525                520
Long-term portion of capital lease obligations                                          718                  382                195
Long-term debt                                                                       56,206               56,665             53,236
Convertible Series B preferred stock, $0.01 par value; 15,206 shares
  authorized; 12,398, 12,407, and 12,407 shares issued and
  outstanding at December 31, 2003 and 2004 and June 30, 2005,
  respectively                                                                       54,835               62,068             65,957
Convertible Series C preferred stock, $0.01 par value; 1,546 shares
  authorized; 1,437 shares issued and outstanding                                         —               16,895             17,936
Stockholders’ deficit:
  Common stock, $0.01 par value; 65,722 shares authorized, 124, 132
    and 162 shares issued and outstanding at December 31, 2003 and
    2004 and June 30, 2005, respectively                                                  1                    1                  2
  Deferred stock compensation                                                        (1,432 )             (1,210 )             (912 )
  Additional paid-in capital                                                         78,543               78,598             78,482
  Accumulated deficit                                                              (132,423 )           (150,962 )         (158,339 )

           Total stockholders’ deficit                                              (55,311 )            (73,573 )          (80,767 )

           Total liabilities and stockholders’ deficit                         $     87,048        $      99,203     $       97,870


                                                         See accompanying notes.


                                                                   F-3
Table of Contents

                                  CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARIES

                                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                         (Amounts in thousands, except per share data)
                                                                                                                Six months ended
                                                                     Year ended December 31                          June 30

                                                             2002              2003              2004          2004                 2005

                                                                                                                      (unaudited)

Revenue                                                  $   20,956        $   65,513         $ 113,311      $ 51,452          $ 73,358
Operating expenses:
   Cost of service (exclusive of depreciation and
      amortization of $6,672, $12,947, $17,611,
      $8,362 and $9,783 respectively, shown
      separately below)                                      11,558            21,815            31,725        14,083               21,824
   Selling, general and administrative (exclusive of
      depreciation and amortization of $7,544,
      $8,324, $5,036 $3,169 and $1,869,
      respectively, shown separately below)                  42,197            48,085            65,159        30,318               41,288
   Write-off of public offering costs                            —                 —              1,103            —                    —
   Depreciation and amortization                             14,216            21,271            22,647        11,531               11,652

Total operating expenses                                     67,971            91,171           120,634        55,932               74,764

Operating loss                                               (47,015 )         (25,658 )          (7,323 )     (4,480 )             (1,406 )
Other income (expense):
    Interest income                                              411               715               637          328                  508
    Interest expense                                          (4,665 )          (2,333 )          (2,788 )     (1,615 )             (1,315 )
    Gain recognized on troubled debt restructuring             4,338                —                 —            —                    —
    Loss on disposal of property and equipment                  (222 )          (1,986 )          (1,746 )       (425 )               (273 )
    Other income (expense), net                                  (35 )            (220 )            (236 )       (149 )                (22 )

Net loss                                                     (47,188 )         (29,482 )        (11,456 )      (6,341 )             (2,508 )
Dividends accreted on preferred stock                           (958 )          (6,254 )         (7,083 )      (3,411 )             (4,869 )

Net loss attributable to common stockholders             $ (48,146 )       $ (35,736 )        $ (18,539 )    $ (9,752 )        $ (7,377 )

Net loss attributable to common stockholders per
 common share:
     Basic and diluted                                   $ (429.88 )       $ (310.75 )        $ (143.71 )    $ (76.79 )        $ (50.18 )

Weighted average common shares outstanding:
   Basic and diluted                                             112               115              129           127                  147


                                                     See accompanying notes.


                                                               F-4
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                                             CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARIES

                                        CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
                                                      (Amounts in thousands)
                                                                    Additional                          Officer                            Total
                                                                     Paid-in          Deferred          Notes         Accumulated      Stockholders’
                                              Common Stock           Capital        Compensation      Receivable         Deficit          Deficit

                                                        Par
                                             Shares    Value

Balance at December 31, 2001                     —    $      —     $         —      $          —      $      (300 )   $    (48,541 )   $      (48,841 )
  Conversion of Class A preferred stock
     to common stock                            112          1          74,509                 —               —                —              74,510
  Issuance of warrants for common stock
     in connection with debt restructuring       —           —            2,657                —               —                —               2,657
  Issuance of stock options to vendors for
     services                                    —           —               22                —               —                —                  22
  Forgiveness of notes receivable from
     officers                                    —           —               —                 —             300                —                 300
  Accretion of preferred dividends               —           —               —                 —              —               (958 )             (958 )
  Accretion of issuance costs                    —           —              (21 )              —              —                 —                 (21 )
  Net and comprehensive loss                     —           —               —                 —              —            (47,188 )          (47,188 )

Balance at December 31, 2002                    112          1          77,167                 —               —           (96,687 )          (19,519 )
  Exercise of stock options                      12          —              49                 —               —                —                  49
  Issuance of stock options to employees         —           —           1,477             (1,477 )            —                —                  —
  Deferred stock compensation expense            —           —              —                  21              —                —                  21
  Forfeiture of options                          —           —             (24 )               24              —                —                  —
  Accretion of preferred dividends               —           —              —                  —               —            (6,254 )           (6,254 )
  Accretion of issuance costs                    —           —            (126 )               —               —                —                (126 )
  Net and comprehensive loss                     —           —              —                  —               —           (29,482 )          (29,482 )

Balance at December 31, 2003                    124          1          78,543             (1,432 )            —          (132,423 )          (55,311 )
  Exercise of stock options                       8          —              30                 —               —                —                  30
  Issuance of stock options to employees         —           —             191               (191 )            —                —                  —
  Issuance of stock options to
     non-employees for services                  —           —               78              (78 )             —                —                  —
  Deferred stock compensation expense            —           —               —               375               —                —                 375
  Forfeiture of options                          —           —             (116 )            116               —                —                  —
  Accretion of preferred dividends               —           —               —                —                —            (7,083 )           (7,083 )
  Accretion of issuance costs                    —           —             (128 )             —                —                —                (128 )
  Net and comprehensive loss                     —           —               —                —                —           (11,456 )          (11,456 )

Balance at December 31, 2004                    132          1          78,598             (1,210 )            —          (150,962 )          (73,573 )
  Exercise of stock options                      30          1             115                 —               —                —                 116
  Issuance of stock options to
     non-employees for services                  —           —               16              (16 )             —                —                  —
  Deferred stock compensation expense            —           —               —               152               —                —                 152
  Forfeiture of options                          —           —             (162 )            162               —                —                  —
  Accretion of preferred dividends               —           —               —                —                —            (4,869 )           (4,869 )
  Accretion of issuance costs                    —           —              (85 )             —                —                —                 (85 )
  Net and comprehensive loss                     —           —               —                —                —            (2,508 )           (2,508 )

Balance at June 30, 2005 (unaudited)            162   $      2     $    78,482      $        (912 )   $        —      $   (158,339 )   $      (80,767 )



                                                                 See accompanying notes.

                                                                             F-5
Table of Contents

                                   CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARIES

                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                (Amounts in thousands)
                                                                                                               Six Months
                                                                 Year ended December 31                       Ended June 30

                                                         2002             2003               2004          2004                 2005

                                                                                                                  (unaudited)
Operating activities
Net loss                                              $ (47,188 )      $ (29,482 )        $ (11,456 )    $ (6,341 )        $ (2,508 )
Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
     Depreciation and amortization                       14,216            21,271            22,647        11,531               11,652
     Provision for doubtful accounts                      1,107             1,369             2,393         1,236                1,723
     Loss on disposal of property and equipment             222             1,986             1,746           425                  273
     Non-cash portion of interest expense                   390                —                 —             —                    —
     Compensation expense from forgiveness of
        officer notes receivable                            300                  —                  —             —                    —
     Interest expense offset by reduction in
        carrying value in excess of principal               (449 )          (2,578 )          (2,281 )     (1,226 )               (961 )
     Write-down of marketable securities to fair
        value                                                   —             220               235           149                      —
     Gain recognized on troubled debt
        restructuring                                     (4,338 )               —               —             —                    —
     Non-cash stock compensation expense                      —                  21             362           178                  134
     Issuance of stock options to vendors for
        services                                                22               —                  13            —                    18
     Changes in operating assets and liabilities:
        Accounts receivable                               (3,061 )          (2,971 )          (3,574 )     (2,089 )             (4,396 )
        Prepaid expenses and other current assets           (567 )              (3 )            (603 )       (944 )                (22 )
        Other receivables                                    304                —                 —            —                    —
        Other assets                                        (720 )            (183 )             516           67               (1,437 )
        Accounts payable                                   2,382               180              (446 )     (2,200 )               (767 )
        Accrued employee benefits                            402             1,333             1,403           55                 (930 )
        Other accrued expenses                             2,909             2,901             2,994        1,068                5,211
        Other liabilities                                    480                41               (72 )        (72 )                 (5 )

Net cash provided by (used in) operating activities     (33,589 )           (5,895 )         13,877         1,837                7,985

                                                                F-6
Table of Contents

                                  CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARIES

                             CONSOLIDATED STATEMENTS OF CASH FLOWS—(CONTINUED)
                                             (Amounts in thousands)
                                                                                                              Six Months
                                                             Year ended December 31                          Ended June 30

                                                      2002             2003               2004            2004                 2005

                                                                                                                 (unaudited)

Investing activities
Purchases of property and equipment                    (5,190 )         (9,083 )          (10,192 )        (5,997 )            (6,319 )
Increase from restricted cash equivalents                 124              193                 61             225                 (25 )
Purchases of marketable securities                     (7,074 )        (14,492 )          (11,790 )       (12,470 )            (9,839 )
Proceeds from asset disposals                              20                7                 —               —                   —
Redemption of marketable securities                        —            28,000             18,000          18,000              14,437

Net cash provided by (used in) investing
 activities                                           (12,120 )          4,625             (3,921 )          (242 )            (1,746 )
Financing activities
Proceeds from long-term debt                           7,023             5,959             1,003              713                 246
Repayment of long-term debt and capital leases          (471 )          (5,081 )          (9,861 )         (4,583 )            (5,908 )
Proceeds from issuance of preferred stock, net        42,112                —             16,917               —                   —
Repayment of officer loan                                 50                —                 —                —                   —
Proceeds from exercise of stock options                   —                 49                30               21                 116
Financing issuance costs                                (828 )              —               (312 )           (301 )               (55 )

Net cash provided by (used in) financing
 activities                                           47,886               927              7,777          (4,150 )            (5,601 )

Net increase (decrease) in cash and cash
 equivalents                                            2,177             (343 )          17,733           (2,555 )               638
Cash and cash equivalents at beginning of year          3,293            5,470             5,127            5,127              22,860

Cash and cash equivalents at end of year          $     5,470      $     5,127        $   22,860      $     2,572          $ 23,498

Supplemental disclosure
Interest paid                                     $     4,662      $     4,910        $     5,070     $     2,841          $    2,276

Non-cash purchases of property and equipment      $   23,257       $   17,122         $   13,549      $     6,540          $    4,045


                                                 See accompanying notes.


                                                             F-7
Table of Contents

                                      CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARY

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                     December 31, 2004
                                      (Amounts in thousands, except per share amounts)

1.    Description of Business

     Cbeyond Communications, Inc., a privately held communications service provider, was incorporated on March 28, 2000 in
Delaware, for the purpose of providing voice and broadband data services to small and medium size business users in major
metropolitan areas across the United States. As of December 31, 2004, these services were provided in the metropolitan Atlanta,
Georgia; Dallas, Texas; Houston, Texas; and Denver, Colorado areas.

      Until November 1, 2002, Cbeyond Communications, Inc. was a wholly-owned subsidiary of Cbeyond Investors LLC
(―Investors LLC‖), a holding company. On November 1, 2002, Investors LLC was merged with and into Cbeyond Communications,
Inc. As of and prior to that date, Investors LLC had no operations or assets other than its ownership of Cbeyond Communications,
Inc. (See Note 5).

2.    Summary of Significant Accounting Policies

     Unaudited Interim Results

      The accompanying June 30, 2004 and 2005 unaudited consolidated financial statements and information have been
prepared in accordance with accounting principles generally accepted in the United States for interim financial information and
with the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management
these financial statements contain all normal adjustments considered necessary to present fairly the financial position, results of
operations and cash flows for the periods indicated.

     Principles of Consolidation

     The consolidated financial statements include the accounts of Cbeyond Communications, Inc. and its wholly-owned
subsidiaries (collectively, the ―Company‖). All significant intercompany balances and transactions have been eliminated in the
consolidation process.

     Revenue Recognition

     Revenues are recognized when earned. Revenue derived from local voice and data services is billed in advance and
deferred until earned. Revenues derived from other telecommunications services, including long distance, excess charges over
monthly rate plans and terminating access fees from other carriers, are recognized monthly as services are provided and billed in
arrears.

       Revenue derived from customer installation and activation is deferred and amortized over the average estimated customer
life of three years on a straight-line basis. Related installation and activation costs are deferred only to the extent that revenue is
deferred and are amortized on a straight-line basis in proportion to revenue recognized.

    The Company’s marketing promotions include various rebates, discounts and customer reimbursements that fall under the
scope of Emerging Issues Task Force (―EITF‖) Issue No. 00-22, Accounting for “Points” and Certain Other Time-Based or
Volume-Based Sales Incentive

                                                                   F-8
Table of Contents

                                     CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARY

                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Offers, and Offers for Free Products or Services to be Delivered in the Future , and EITF Issue No. 01-09, Accounting for
Consideration Given by a Vendor to a Customer . In accordance with these pronouncements, the Company records any cash or
customer credit consideration as a reduction in revenue when earned by the customer. For rebate obligations earned over time,
the Company ratably allocates the cost of honoring the rebates over the underlying rebate period.

   Allowance for Doubtful Accounts

      The Company has established an allowance for doubtful accounts through charges to selling, general and administrative
expense. The allowance is established based upon the amount the Company ultimately expects to collect from customers, and is
estimated based on a number of factors, including a specific customer’s ability to meet its financial obligations to the Company, as
well as general factors, such as length of time the receivables are past due, historical collection experience and the general
economic environment. Customer accounts are written off against the allowance upon disconnection of the customers’ service, at
which time the accounts are deemed to be uncollectible. Generally, customer accounts are considered delinquent and service is
disconnected when they are sixty days in arrears from their last payment.

   Use of Estimates

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

   Cash and Cash Equivalents

     Cash and cash equivalents include all highly liquid investments with original maturities of three months or less at the date of
purchase. The carrying amount of cash and cash equivalents approximates fair value.

   Restricted Cash and Cash Equivalents

      Restricted cash and cash equivalents consist of certificates of deposit held as collateral for letters of credit issued on behalf
of the Company. Some vendors providing services to the Company require letters of credit to be redeemed in the event the
Company cannot meet its obligations to the vendor. These letters of credit are issued to the Company’s vendors, and in return, the
Company is required to maintain cash or cash equivalents on hand with the bank at a dollar amount equal to the letters of credits
outstanding, the majority of which is maintained in 5 year certificates of deposit, with the remainder in a restricted cash account
with a commercial bank. In the event market conditions change and the letters of credit outstanding increase beyond the level of
cash on hand at a commercial bank, the Company will be required to provide additional capital. The Company’s collateral
requirements (restricted cash) were $823 and $762 as of December 31, 2003 and 2004, respectively.

                                                                 F-9
Table of Contents

                                     CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARY

                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

   Marketable Securities

       Marketable securities consist of highly rated asset-backed government agency obligations and other debt securities,
preferred stock redeemable at the option of the Company, and mutual funds. All marketable securities are classified as
investments available for sale as the Company does not have the intent or ability to hold the investments to the underlying original
maturities. The Company’s investments available for sale are carried at fair value or at cost, which approximates fair value. There
were no realized gains or losses on the sale of securities. The Company considers the unrealized losses at December 31, 2003
and 2004 to be other than temporary because the underlying securities held by the mutual funds are interest rate sensitive and
are unlikely to recover their value in the near future. Further, due to the Company’s early growth stage, it is unlikely the Company
will retain the current investments until interest rates decline. Accordingly, the Company has reflected losses of $220 and $235 in
earnings for 2003 and 2004, respectively, and has reduced the cost basis of the investments to fair value.

      The adjusted cost bases, which equal fair value, are as follows:
                                                                                        December 31                June 30

                                                                                     2003             2004          2005

                                                                                                               (unaudited)
            Mutual Fund                                                           $ 14,079      $ 14,334       $         —
            Corporate Bonds                                                          5,000            —              10,000
            Municipal Bonds                                                             —             —                  —
            Other Debt Securities                                                    2,000            —                  —

            Total Marketable Securities                                           $ 21,079      $ 14,334       $     10,000


      The mutual fund’s target duration is two years +/- 0.5 years, and its expected interest rate sensitivity and benchmark are
based on the two-year U.S. Treasury note. Substantially all of the fund’s assets are invested in U.S. government securities and in
instruments based on U.S. government securities. The balance of the fund may be invested in non-U.S. government securities
rated AAA, or comparable rating, at the time of purchase. As of December 31, 2003, the Company also held debt securities
consisting of corporate bonds with an estimated market value of $300 maturing on July 1, 2014, and $4,700 maturing on January
1, 2038, and preferred stock with an estimated market value of $2,000 redeemable at the option of the Company.

   Property and Equipment

    Property and equipment is stated at cost and depreciated over estimated useful lives using the straight-line method.
Leasehold improvements are amortized over the shorter of the life of the lease or the duration of their economic value to the
Company. Repair and maintenance costs are expensed as incurred.

     Network engineering costs incurred during the construction phase of the Company’s networks are capitalized as part of
property and equipment and recorded as construction-in-progress until the projects are completed and placed into service.

   Income Taxes

       Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used

                                                                F-10
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                                    CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARY

                            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

for income tax purposes. Such amounts are measured using enacted tax rates that are expected to be in effect when the
differences reverse.

   Impairment and Other Losses on Long-Lived Assets

      The Company evaluates impairment losses on long-lived assets used in operations when events and circumstances indicate
that the assets might be impaired. If the Company’s review indicates that the carrying value of an asset will not be recoverable,
based on a comparison of the carrying value of the asset to the undiscounted cash flows, the impairment will be measured by
comparing the carrying value of the asset to the fair value. Fair value will be determined based on quoted market values,
discounted cash flows or appraisals. The Company’s review will be at the lowest levels for which there are identifiable cash flows
that are largely independent of the cash flows of other business units.

      During 2003 and 2004, the Company replaced certain categories of network equipment with newer equipment having greater
functionality in order to improve network efficiency and performance. The equipment being replaced had no further use in the
network, and the replacement of this class of assets comprised a substantial portion of the loss on disposal of fixed assets in each
year. During the normal course of operations, the Company also writes equipment off that it is not able to recover from former
customers. This equipment resides at customer locations to enable connection to the Company’s telecommunications network.
The gross value of equipment written off during 2002, 2003, and 2004 was $1,014, $3,896 and $3,073, respectively.

   Marketing Costs

    The Company expenses marketing costs, including advertising, in support of its sales efforts as these costs are incurred.
Such costs amounted to approximately $78, $278 and $1,021 during 2002, 2003 and 2004, respectively.

   Deferred Financing Costs

     In connection with entering into a Credit Facility with Cisco Systems Capital Corporation (―Cisco Capital‖) in February 2001,
the Company recorded $377 of deferred costs. In connection with the first amendment to the facility in 2002 (see Note 7), the
Company recorded $103 of additional deferred loan costs. Deferred financing costs of $393, net of accumulated amortization,
were written off in November 2002 as a reduction in the gain on troubled debt restructuring (see Note 7).

       During March 2004, the Company recorded an additional $301 of deferred costs associated with an amendment to this
facility, of which $38 has been amortized to interest expense as of December 31, 2004. The Company also recorded additional
deferred costs of $11 during 2004 pertaining to an amendment which was not finalized until 2005. In accordance with the
Company’s policy, these costs will begin amortizing on the effective date of the amendment over the then remaining life of the
facility.

   Concentrations of Risk

    Financial instruments that potentially subject the Company to significant concentrations of credit risk consist of trade
accounts receivable, which are unsecured. The Company’s risk is

                                                                F-11
Table of Contents

                                    CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARY

                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

limited due to the fact that there is no significant concentration with one customer or group of customers. Because the Company’s
operations were conducted in Atlanta, Georgia; Dallas, Texas; Houston, Texas; and Denver, Colorado, its revenues and
receivables were geographically concentrated in these cities.

   Fair Value

      The Company has used the following methods and assumptions in estimating its fair value disclosures for financial
instruments:

      •    The carrying amounts reflected in the consolidated balance sheets for cash and cash equivalents, restricted cash and
           cash equivalents, marketable securities and accounts receivable equals or approximates their respective fair values.

      •    The carrying amounts reflected in the consolidated balance sheets for long-term debt approximates fair value due to
           variable interest rates. The carrying amounts reported in the consolidated balance sheets for capital leases approximate
           fair value due to the use of imputed interest rates based on the variable interest rates of the Company’s debt.

   Stock-Based Compensation

      The Company has chosen to account for stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (―APB No. 25‖), and related
interpretations. Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (―SFAS No.
123‖), as amended by Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation-
Transition and Disclosure, encourages, but does not require, companies to record compensation for stock-based employee
compensation plans at fair value. Accordingly, non-cash compensation expense for stock options is determined by measuring the
excess, if any, of the estimated fair value of the Company’s common stock at the date of grant over the amount an employee must
pay to acquire the stock and amortizing that excess on a straight-line basis over the vesting period of the applicable stock options.

                                                                F-12
Table of Contents

                                    CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARY

                            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

      Had the Company elected to adopt the fair value recognition provisions of SFAS No. 123, pro forma net loss would be as
follows (see Note 9):
                                                                                                              Six Months ended
                                                                Year ended December 31                             June 30

                                                         2002             2003              2004            2004                 2005

                                                                                                                   (unaudited)
Net loss attributable to common stockholders         $ (48,146 )       $ (35,736 )       $ (18,539 )    $    (9,752 )        $ (7,377 )
Add: total stock-based compensation expense
  determined under the intrinsic value based
  method                                                        —                21            362             169                  133
Deduct: total stock-based compensation
  expense determined under the fair value
  based method                                              (166 )         (1,172 )          (1,880 )          (842 )            (1,443 )

Pro forma net loss attributable to common
  stockholders                                       $ (48,312 )       $ (36,887 )       $ (20,057 )    $ (10,425 )          $ (8,687 )

Net loss attributable to common stockholders
 per common share:
     Basic and diluted—as reported                   $ (429.88 )       $ (310.75 )       $ (143.71 )    $    (76.79 )        $ (50.18 )

     Basic and diluted—pro forma                     $ (431.36 )       $ (320.76 )       $ (155.48 )    $    (82.09 )        $ (59.10 )



     The Company accounts for equity instruments issued to non-employees in accordance with the provisions of SFAS No. 123
and EITF Issue No. 96-18, Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in
Conjunction with, Selling Goods or Services. All transactions in which goods or services are the consideration received for the
issuance of equity instruments are accounted for based on the fair value of the equity instrument issued, which the Company
deems more reliably measurable than the fair value of the consideration received. The measurement date of the fair value of the
equity instrument issued is the earlier of the date on which the counterparty’s performance, or obligation to perform, is complete or
the date on which it is probable that performance will occur.

     During 2002, and 2004 , respectively, the Company issued 10 and 13 common stock options to vendors for services. In
2002, the value of the options issued amounted to $22, which was recognized at the time of issuance. In 2004, these options were
valued at $78, of which $13 was recognized in selling, general and administrative expenses.

   Basic and Diluted Net Loss Attributable to Common Stockholders per Common Share

      Basic net loss attributable to common stockholders per common share excludes dilution for potential common stock
issuances and is computed by dividing net loss attributable to common stockholders by the weighted-average number of common
shares outstanding for the period. As the Company reported a net loss for all periods presented, the conversion of Preferred Stock
into 17,526 shares of common stock, stock options of 2,882 and warrants of 720 was not considered in the computation of diluted
net loss attributable to common stockholders per common share for the year ended December 31, 2004 because their effect is
anti-dilutive.

                                                                F-13
Table of Contents

                                     CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARY

                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

     Recent Accounting Pronouncements

      In December 2004, the Financial Accounting Standards Board (―FASB‖) issued Statement of Financial Accounting Standard
No. 123 (revised 2004), Share-Based Payment (―SFAS No. 123(R)‖), which is a revision of SFAS No. 123. SFAS No. 123(R)
supersedes APB No. 25, and amends SFAS No. 95, Statement of Cash Flows . Generally the approach in SFAS No. 123(R) is
similar to the approach described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the statement of operations based on their fair values. Pro forma
disclosure is no longer an alternative upon adopting SFAS No. 123(R).

     SFAS No. 123(R) must be adopted by the Company no later than January 1, 2006. Early adoption will be permitted in
periods in which financial statements have not yet been issued. SFAS No. 123(R) permits public companies to adopt its
requirements using one of two methods:

       •   A ―modified prospective‖ method in which compensation cost is recognized beginning with the effective date (a) based
           on the requirements of SFAS No. 123(R) for all share-based payments granted after the effective date and (b) based on
           the requirements of SFAS No. 123(R) for all awards granted to employees prior to the effective date of SFAS
           No. 123(R) that remain unvested on the effective date.

       •   A ―modified retrospective‖ method which includes the requirements of the modified prospective method described
           above, but also permits entities to restate based on the amounts previously recognized under SFAS No. 123(R) for
           purposes of pro forma disclosures either (a) all prior periods presented or (b) prior interim periods of the year of
           adoption.

       The Company plans to adopt SFAS No. 123(R) on January 1, 2006 and is still evaluating which methodology it will follow.

3.    Property and Equipment

       Property and equipment consist of:
                                                                                                                           Six Months
                                                                                Year ended December 31,                   ended June 30

                                                                 Useful Lives             2003                2004               2005

                                                                  (In years)                                                  (unaudited)
Network and lab equipment                                          3–5                $   61,495          $    79,638     $        87,692
Leasehold improvements                                             2–5                     2,193                2,813               3,289
Computers and software                                              3                     23,999               26,685              28,187
Furniture and fixtures                                              7                      1,476                1,806               2,251
Construction-in-progress                                                                   3,969                2,906               2,360

                                                                                           93,132             113,848            123,779
Less accumulated depreciation and amortization                                            (40,577 )           (61,901 )          (73,363 )

Property and equipment, net                                                           $   52,555          $    51,947     $        50,416


       Substantially all the assets of the Company have been pledged as collateral for the Company’s credit facility.

                                                                 F-14
Table of Contents

                                   CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARY

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

     During 2001, the Company entered into a purchase arrangement with a supplier. Under the terms of the arrangement, for
each purchase of specific types of equipment, the Company earned certain incentive credits that could be used to purchase other
types of equipment from the supplier. The value of earned but unused and unrecorded credits were $1,595 as of December 31,
2003. During 2004, this program ended and all credits were used by December 31, 2004.

4.    Notes Receivable from Officers

     In March 2000, the Company loaned $300 to certain officers in exchange for units in a subsidiary. Interest was accrued at
6.8% per annum. The original maturity date of these loans was March 28, 2005. Additionally, in 2001, a further $50 was advanced
to an officer of the Company, which was interest free and was repaid in 2002.

     In January 2003, the Board of Directors of the Company elected to forgive the principal balances and accrued interest of
these notes receivable. Other expense of $357 was recorded in 2002 to establish a reserve for the balances forgiven. Beginning
in January 2003, the Company’s policy is to not issue loans to officers.

5.    Capitalization

     Stock Purchase Agreements

     On March 28, 2000, the Company entered into a Stock Purchase Agreement (―Agreement‖) with Investors LLC whereby
Investors LLC purchased 10,135 shares of the Company’s convertible Class A preferred stock, par value $0.01 per share, for an
aggregate commitment of $13.4345 per share. Additionally, as of December 31, 2001, Investors LLC purchased one share of the
Company’s common stock for $3.88.

    In April 2001, Investors LLC, Cbeyond Communications, Inc. (―Cbeyond‖), and Cbeyond Communications LLC (―Operating
LLC‖) consummated a transaction hereinafter referred to as the ―Management Rollup.‖ Prior to this transaction, Investors LLC
owned 100% of Cbeyond and Cbeyond owned 90.27% of Operating LLC.

     The 9.73% minority ownership in Operating LLC was owned by the Cbeyond Founders who are also investors in Investors
LLC. The Management Rollup resulted in Investors LLC directly acquiring from these Founders the preferred and common units
they owned directly in Operating LLC. The transaction was completed by exchanging preferred and common units in Investors
LLC for the preferred and common units in Operating LLC. The transaction resulted in the $1,629 of minority interest being
reclassified to stockholders’ equity. Subsequent to this transaction, Investors LLC exchanged the preferred and common units in
Operating LLC for preferred stock in Cbeyond. As a result of this transaction, Operating LLC became a wholly-owned subsidiary of
Cbeyond.

      In November 2002, Investors LLC merged with and into Cbeyond pursuant to an Agreement and Plan of Merger. As a result
of the merger, Cbeyond became the holder of all of the assets and liabilities of Investors LLC. Under the Agreement and Plan of
Merger, all of the outstanding preferred and common units of Investors LLC were converted to shares of Cbeyond’s common
stock at a ratio of one share to every 100 units, regardless of class. The common stock of Cbeyond outstanding prior to the
merger was cancelled.

                                                             F-15
Table of Contents

                                    CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARY

                            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

      In conjunction with the merger, Cbeyond’s certificate of incorporation was amended to authorize 16,753 shares of Series B
preferred stock (―Series B‖) and 65,722 shares of common stock. Immediately following the merger, pursuant to a Stock Purchase
Agreement, Cbeyond issued 12,398 shares of Series B for $3.88 per share; including 753 shares issued in conjunction with the
cancellation of debt (see Note 7). The merger of Investors LLC with and into Cbeyond, together with the conversion of preferred
and common units of Investors LLC into Cbeyond’s common stock and the issuance of Series B in November 2002, are hereafter
collectively referred to as the ―November 2002 Equity Reorganization.‖ The difference in the amount of proceeds implied by the
number of Series B shares issued and the amount of cash actually received arises from the prior overfunding of Class A preferred
shares subscribed by one of the original Class A investors. This investor purchased Series B shares and was given credit toward
their Series B purchase in the amount of their prior overfunding of Class A shares. Additionally, Cbeyond issued 112 shares of
common stock to satisfy the conversion of the Investors LLC units noted above.

     In December 2004, Cbeyond amended its certificate of incorporation to authorize 15,206 shares of Series B and 1,546
shares of Series C preferred stock (―Series C‖) and, pursuant to a Stock Purchase Agreement with substantially all of the existing
Series B preferred stockholders and certain other investors, Cbeyond issued 1,437 shares of Series C for $11.83 per share.
Additionally, the Company issued 9 shares of Series B to an existing Series B preferred stockholder at $3.88 per share under the
stockholders’ prior stock purchase agreement.

      Each share of the Series B and Series C (collectively, the ―Preferred Stock‖) is convertible initially into one share of the
Company’s common stock. The conversion price per share of common stock is equal to be the original price paid per share of
Preferred Stock. All of the shares of Preferred Stock will automatically convert to common stock in the event of a firm commitment,
underwritten public offering of at least $50,000 of the Company’s common stock, subject to adjustment for certain dilutive events.
Beginning November 1, 2007, the holders of the Preferred Stock may require redemption of the shares in cash from the Company
if certain conditions have not occurred. If the redemption provision is exercised, the repurchase price would be the greater of (a)
the Liquidation Value, or (b) the fair market value per share of the Company as determined by provisions outlined in the Second
Amended and Restated Shareholder Agreement.

      The Preferred Stock accumulates dividends at an annual rate of 12% compounded daily on the Preferred Stock’s liquidation
value. The liquidation value of the Preferred Stock is equal to the original price paid per share of Preferred Stock plus cumulative
unpaid dividends. As of December 31, 2002, 2003 and 2004 and June 30, 2005, no dividends have been declared or paid and
cumulative unpaid dividends on the Preferred Stock were $958, $7,212, $14,295 and $19,164 (unaudited), respectively. The
Company’s amended and restated certificate of incorporation provides for the accumulated dividends to be paid in common stock
in lieu of cash upon conversion of the Preferred Stock.

      The holders of the Company’s common stock and Preferred Stock vote as one class, with each share of Preferred Stock
entitled to one vote for each share of common stock issuable upon conversion.

     As of December 31, 2004, Cbeyond was authorized to issue up to 15,206 shares of Series B and 1,546 shares of Series C,
of which 12,407 and 1,437, respectively, were issued and outstanding.

                                                                F-16
Table of Contents

                                     CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARY

                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

     Common Stock

     As of December 31, 2004, 65,722 shares of common stock were authorized and 132 shares were issued and outstanding,
17,526 shares are reserved for conversion of Preferred Stock, 2,924 shares are reserved for issuance under the Company’s 2002
Stock Incentive Plan, and 720 shares are reserved for issuance upon the exercise of outstanding warrants (see Note 7).

6.    Classification of Preferred Stock

     As discussed in Note 5, the Company’s Preferred Stock is redeemable through the exercise of a put option upon the vote of
a majority of the holders of the Preferred Stock beginning November 1, 2007 if there has not been either a sale of the Company or
a qualified initial public offering of its common stock. If the put option is exercised, the repurchase price would be the greater of (a)
the Liquidation Value, or (b) the fair market value per share of the Company as determined by provisions outlined in the Second
Amended and Restated Shareholder Agreement. The Company has classified its Preferred Stock outside of equity in accordance
with EITF Topic D-98, Classification and Measurement of Redeemable Securities (―Topic D-98‖), because the redemption
provisions of the put option are not solely within the control of the Company, without regard to the probability of whether the
redemption requirements would ever be triggered.

      Topic D-98 establishes that the initial carrying value of the Preferred Stock should be the fair value at the date of issuance.
Topic D-98 further provides that if the Preferred Stock is not redeemable currently and that it is not probable that the security will
become redeemable, then subsequent adjustments to redemption value are not necessary until it is probable that the Preferred
Stock will become redeemable. Accordingly, since inception, the Company determined that it is not probable that a qualified initial
public offering of its stock would not be achieved before November 1, 2007. In making this determination, the Company assessed
the likelihood of redemption based on the Preferred Stock redemption provisions and the specific facts and circumstances at each
reporting period. The Company’s business plan since inception was to expand into numerous major metropolitan markets
replicating a similar operating model. Successful execution of this business model was predicated on obtaining significant funds
through a public offering of its common stock within a reasonable period of time after inception.

      As discussed in Note 5, the Preferred Stock accrues dividends at an annual rate of 12% compounded daily and are payable
in common stock in lieu of cash upon conversion of the Preferred Stock. Dividends are cumulative and accrue whether or not
declared by the Board of Directors. Because the dividends are cumulative and can be converted into shares of common stock at
any time at the Preferred Stockholders’ option, the Company has accreted the value of these dividends.

                                                                  F-17
Table of Contents

                                      CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARY

                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

      The following table summarizes the Preferred Stock transactions during the period covered by these financial statements:
                                                                                                  Class A           Series B            Series C

Balance at December 31, 2001                                                                  $        76,972      $       —          $        —
    Conversion to common stock                                                                        (76,972 )         2,462                  —
    Issuance of preferred stock                                                                            —           42,112                  —
    Issuance of preferred stock in connection with debt restructuring                                      —            2,902                  —
    Accretion of preferred dividends                                                                       —              958                  —
    Accretion of issuance costs                                                                            —               21                  —

Balance at December 31, 2002                                                                                  —        48,455                  —
    Accretion of preferred dividends                                                                          —         6,254                  —
    Accretion of issuance costs                                                                               —           126                  —

Balance at December 31, 2003                                                                                  —        54,835                 —
    Issuance of preferred stock                                                                               —            35             16,882
    Accretion of preferred dividends                                                                          —         7,072                 11
    Accretion of issuance costs                                                                               —           126                  2

Balance at December 31, 2004                                                                                  —        62,068             16,895
    Adjustments to issuance costs                                                                             —            —                 (24 )
    Accretion of preferred dividends                                                                          —         3,826              1,043
    Accretion of issuance costs                                                                               —            63                 22

Balance at June 30, 2005 (unaudited)                                                          $               —    $ 65,957           $ 17,936


7.   Long-Term Debt

      Long-term debt consisted of the following:
                                                                                      December 31,                         June 30,
                                                                               2003                    2004                  2005

                                                                                                                       (unaudited)
            Credit Facility:
                Principal balance                                          $   59,403             $     64,387         $     62,924
                Carrying value in excess of principal                           8,225                    5,944                4,983

                                                                                67,628                  70,331               67,907
            Less current portion                                               (11,422 )               (13,666 )            (14,671 )

            Long-term debt                                                 $   56,206             $     56,665         $     53,236


      The Company formally entered into a Credit Facility with Cisco Capital in February 2001 (the ―Credit Facility‖). The Credit
Facility provided the Company with a commitment of up to $240,000. However, only $114,000 was initially available to borrow as
of December 31, 2001 to support the Company’s entry into its first five markets. The Credit Facility is secured by substantially all
of the assets and equity of the Company and restricts the payment of dividends. Borrowings under the facility bear interest at a
rate of LIBOR plus margin of between 3.5% and 5.5% depending on the Company’s leverage ratio.

     In March 2002, the Company amended its Credit Facility (―First Amendment‖). The First Amendment increased the initial
availability from $114,000 to $146,000 in support of the

                                                                F-18
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                                    CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARY

                            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Company’s entry into its first five markets. The total original commitment of $240,000 was reduced to the $146,000 available for
the first five markets. The maturity date for the loan was lengthened from March 31, 2008 to March 31, 2010 and the borrowing
period was extended by one year. Additionally, this amendment allowed for quarterly interest expenses applicable to open
tranches under the Credit Facility to be paid through direct draws against the Credit Facility for a two-year period beginning March
31, 2002.

      In November 2002, the Company amended the Credit Facility (―Second Amendment‖). In conjunction with the Second
Amendment, Cisco Capital cancelled $25,000 of the amount outstanding in exchange for 753 shares of Series B (―Debt
Exchange‖). The Second Amendment also reduced the total commitment to $115,400. The Second Amendment required that the
Company receive a minimum of $40,000 in additional equity capital in order to fully access Tranches 1 and 2, the available
borrowings of which totaled $70,500, and Tranche X of up to $15,900, available for the financing of interest payments through
March 31, 2004. In addition, the Second Amendment required that the Company receive a minimum of $54,000 in aggregate
additional equity capital in order to access Tranche 3, which made an additional $29,000 in borrowings available prior to March
31, 2005. Through the November 2002 Equity Reorganization, the Company received $42,112 in equity capital, satisfying the
borrowing requirements for Tranches 1 and 2.

      In June 2003, the Company again amended the Credit Facility (―Third Amendment‖). For all borrowings outstanding as of
June 30, 2003, amounting to approximately $51,694, the Third Amendment fixed the base interest rate at 3.35%, but allows the
margin to fluctuate within a prescribed range based on changes in the Company’s leverage ratio. At the time of the Third
Amendment and until June 30, 2004, the applicable rate was 8.85%, which represents the maximum rate that may be charged on
this portion of the debt. Since June 30, 2004 and continuing through December 31, 2004, the applicable rate on this portion of the
debt was 6.85%. Borrowings against the Credit Facility after June 30, 2003 continue to bear interest at a rate of LIBOR plus a
margin of between 3.5% and 5.5%, depending on the Company’s leverage ratio at the time. From June 30, 2003 until June 30,
2004, the margin applicable to these borrowings was 5.5%. From June 30, 2004 and continuing through December 31, 2004, the
margin applicable to these borrowings was 3.5%. The effective rate on these borrowings at December 31, 2004 was 5.5%.

      In March 2004, the Company amended its Credit Facility (―Fourth Amendment‖). The Fourth Amendment extended the
borrowing availability period for Tranche 2 from March 31, 2004 until March 31, 2005. The Fourth Amendment further provided
that Tranche 3 would be reduced from $29,000 to $19,000 and that, as soon as the Company has fully borrowed under Tranche 2,
the additional $19,000 of funds would be available to borrow, provided that the Company had obtained at least $11,000 in
additional equity funding prior to December 31, 2004. The Company’s Series C preferred stock investment in December 2004
resulted in $17,000 in additional equity funding. In addition, the Fourth Amendment provided that the first borrowing under
Tranche 3, which occurred in 2005, would result in the acceleration of vesting of Cisco Capital’s outstanding warrants in their
entirety. The borrowing period for Tranche 3 extends until December 31, 2005, and no further borrowing is available after that
date. In addition, the Fourth Amendment includes certain adjustments to the loan covenants.

     Future borrowings available under the Credit Facility as of December 31, 2004 are restricted to purchases of network
equipment and services. As of December 31, 2004, the remaining

                                                               F-19
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                                      CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARY

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

availability under Tranche 2 of $2,405 was available to borrow until March 31, 2005 and an additional $19,000 (Tranche 3) is
available for borrowing until December 31, 2005.

      Subsequently, in March 2005, the Company amended its Credit Facility (―Fifth Amendment‖). The Fifth Amendment made
certain adjustments to the loan covenants as a result of the Company’s entry into its fifth market, Chicago, and the financial impact
of that expansion.

      Beginning June 30, 2003, as each tranche closes, equal principal installments and current interest charges are paid quarterly
over the remaining duration of the Credit Facility. These payments are based on the amount drawn down in each tranche as of the
closing of the particular tranche. The Company incurs commitment fees (1% per annum as of December 31, 2004) on the
undrawn amount of the loan commitment. Commitment fees are recorded as interest expense and totaled $971, $676, and $214
in 2002, 2003 and 2004, respectively.

      Principal payments, excluding amortization of the carrying value in excess of principal, under the Credit Facility for the next
five years are:
                                                                                                            Long-Term
                                                                                                              Debt

                    2005                                                                                    $ 11,837
                    2006                                                                                      12,365
                    2007                                                                                      12,365
                    2008                                                                                      12,365
                    2009                                                                                      12,365
                    Thereafter                                                                                 3,090

                                                                                                            $ 64,387


      As a result of the significant discount on the value of the Company’s debt cancelled in the Debt Exchange, the Company
accounted for the exchange as a troubled debt restructuring in accordance with SFAS No. 15 and EITF Issue No. 02-4,
Determining whether Debtor’s Modification or Exchange of Debt Instruments is within the Scope of FASB Statement No. 15 .
Under SFAS No. 15, a gain is recognized to the extent that the carrying amount of the debt before the restructuring, net of
unamortized discounts and loan costs and other consideration exchanged as partial settlement, exceeds future contractual
payments (principal and interest combined) of the restructured debt. Based on this calculation, the Company recorded a gain of
$4,338 at the date of the restructuring. Projected future interest payments estimated based on the interest rate in effect at the date
of the restructuring, approximately 7.3%, are considered carrying value in excess of principal. As interest is paid in subsequent
periods, payments are applied against the carrying value, resulting in no interest expense after the date of restructuring, except to
the extent that actual interest rates fluctuate. During 2003 and 2004, such changes in estimates totaled approximately $282 and
$259 and are reflected as an increase in interest expense. The effects of such fluctuations are recognized in the period the
applicable interest rate changes, except that no gain is recorded until it can no longer be offset by future payments.

                                                                 F-20
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                                     CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARY

                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

      The balance of the carrying value in excess of principal liability as of June 30, 2005 is as follows:

Debt cancelled                                                                                                            $ 25,000
Less:
    Value of preferred stock exchanged                                                                                        (2,902 )
    Warrants issued with restructure                                                                                          (2,215 )
    Unamortized debt discount                                                                                                 (3,636 )
    Unamortized deferred financing costs written off                                                                            (393 )
    Restructuring transaction costs                                                                                             (264 )

Carrying value in excess of principal at restructure                                                                          15,590

Gain on restructuring of debt                                                                                                 (4,338 )
Interest payments recorded as a reduction of carrying value in 2002                                                             (449 )

Carrying value in excess of principal as of December 31, 2002                                                                 10,803
Interest payments recorded as a reduction of carrying value in 2003                                                           (2,578 )

Carrying value in excess of principal as of December 31, 2003                                                                  8,225
Interest payments recorded as a reduction of carrying value in 2004                                                           (2,281 )

Carrying value in excess of principal as of December 31, 2004                                                             $    5,944

Interest payments recorded as a reduction of carrying value for the six months ended June 30, 2005                              (961 )

Carrying value in excess of principal as of June 30, 2005 (unaudited)                                                     $    4,983


     In connection with the Credit Facility, the Company provided Cisco Capital warrants to acquire shares of the Company’s
common stock. When the Credit Facility was established in February 2001, the Company issued Cisco Capital warrants (―First
Issuance‖) to purchase 543 shares of common stock at an exercise price of $13.4345 per share. The First Issuance had a
maximum life of 5 years and was valued at $1,218. In connection with the First Amendment, the Company issued Cisco Capital
warrants (―Second Issuance‖) in April 2002 to purchase 101 shares of common stock at an exercise price of $13.4345 per share.
The Second Issuance had a maximum life of 5 years and was valued at $442. The fair value of these warrants was capitalized as
deferred loan costs, and the remaining unamortized loan costs were subsequently offset against the carrying value of the debt
cancelled in the Debt Exchange. As a result of the November 2002 Equity Reorganization, the First and Second Issuances were
subject to the 1 share for 100 stock exchange, and a new replacement warrant was issued to Cisco Capital (―Third Issuance‖)
allowing for the purchase of 6 shares of common stock at an exercise price of $3.88 per share. The warrants contained in the
Third Issuance are exercisable until March 31, 2010, and the warrants in the First and Second Issuances are no longer
outstanding.

      In connection with the Second Amendment, the Company issued to Cisco Capital warrants (―Fourth Issuance‖) to acquire up
to 714 shares of the Company’s common stock at an exercise price of $0.04 per share. The warrants are exercisable through
March 31, 2010, or upon the occurrence of a triggering event (―Trigger Event‖), which is defined as a sale of the Company or its
assets or the consummation of a qualified initial public offering. Upon the occurrence of a Trigger Event that results in a valuation
of the equity of the Company at $300,000 or less, none of the warrants in the Fourth Issuance are exercisable. A Trigger Event
that results in a valuation of the equity of the Company at $400,000 or greater renders all of the warrants in the Fourth

                                                                  F-21
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                                      CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARY

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Issuance to be exercisable, and a Trigger Event giving a valuation of the Company’s equity between $300,000 and $400,000
results in a pro rata portion of the warrants to be exercisable. In addition, the Fourth Amendment provided for the warrants from
the Fourth Issuance to become exercisable upon any borrowing under Tranche 3, which occurred in 2005. The fair value of the
Fourth Issuance was $2,199, which was offset against the carrying value of the debt canceled in conjunction with the Debt
Exchange. The warrants contained in the Third and Fourth Issuances are currently outstanding.

    The Company calculated the fair value of the warrants issued using a binomial valuation model and the following
assumptions:
                                                                                      Issuance

                                                 First                   Second                       Third                        Fourth
                                            (February 2001)            (April 2002)              (November 2002)               (November 2002)

Volatility                                           125.7 %                  97.4 %                        97.9 %                        97.9 %
Fair value of common stock                  $       310.40         $        669.22               $          3.10               $          3.10
Life of warrants                                         5                       5                           7.4                           7.4
Risk-free interest rate                               4.89 %                  4.65 %                        3.64 %                        3.64 %

8.   Income Taxes

     The income tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial
statements and their respective income tax bases, which give rise to deferred tax assets and liabilities, as of December 31, 2004
and 2003 are as follows:
                                                                                                                   2003                2004

Deferred tax assets:
    Net operating loss                                                                                       $     39,559          $   45,637
    Carrying value in excess of principal                                                                           3,167               2,289
    Allowance for doubtful accounts                                                                                   208                 465
    Impairment of investments                                                                                          85                 175
    Accrued liabilities                                                                                             1,368               1,463
    Organization costs                                                                                                 69                  14
    Other                                                                                                             827                 221

     Gross deferred tax assets                                                                                     45,283              50,264

Deferred tax liabilities:
    Property and equipment                                                                                           4,305               4,958

Gross deferred tax liabilities                                                                                       4,305               4,958

Net deferred tax assets                                                                                             40,978              45,306
Valuation allowance                                                                                                (40,978 )           (45,306 )

Net deferred taxes                                                                                           $            —        $          —


      The Company has net operating loss carryforwards of approximately $118,537, which begin expiring in 2015. Utilization of
existing net operating loss carryforwards may be limited in future years if significant ownership changes were to occur. The
Company has recorded a valuation allowance equal to the net deferred tax assets at December 31, 2003 and 2004, due to the
uncertainty of future taxable income.

                                                               F-22
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                                   CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARY

                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

9.   Stock Incentive Plans

      In November 2002, in connection with the Company’s recapitalization, the Company adopted the Cbeyond Communications,
Inc. 2002 Equity Incentive Plan (―Incentive Plan‖) and issued 1,621 and 295 options thereunder with respective vesting periods of
two and three years. The Incentive Plan permits the grant of nonqualified stock options, incentive stock options and stock
purchase rights. The number of shares of common stock that may be issued pursuant to the Plan is 3,608. Substantially all of the
options granted under the Incentive Plan following the 2002 recapitalization vest at a rate of 25% per year over four years,
although the Board of Directors may occasionally approve a different vesting period. Options are granted at exercise prices equal
to or greater than 85% of estimated fair value of the Company’s common stock on the date of grant. For each fiscal year since the
2002 recapitalization, the Company has determined the fair value of its common stock by the Company has determined the fair
value of its common stock by using independent external valuation events such as arms-length transactions in our shares,
significant business milestones that may have affected the value of our business, and internal valuation estimates based on
discounted cash flow analysis of our financial results or other metrics, such as multiples of revenue and adjusted EBITDA. Options
expire 10 years after the grant date.

     In conjunction with the merger of Investors LLC and the Company, the number of shares to be issued upon exercise of
options issued under the Cbeyond Communications, Inc. 2000 Stock Incentive Plan (―2000 Plan‖) was adjusted to provide for the
optionee to purchase one share of the Company’s new common stock in lieu of each 100 shares of the Company’s old common
stock.

                                                              F-23
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                                        CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARY

                                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

    A summary of the status of the Incentive Plan and the 2000 Plan is presented in the table below (options issued under the
2000 Plan have been retroactively restated to reflect the effect of the November 2002 Equity Reorganization):
                                                                                                                        Weighted
                                                                                                                        Average
                                                                                                    Shares            Exercise Price

Outstanding, December 31, 2001                                                                           6            $    13.4248
    Granted                                                                                          2,103                  3.8940
    Forfeited                                                                                           (2 )               13.4248

Outstanding, December 31, 2002                                                                       2,107                   3.9110
    Granted                                                                                            714                   3.8800
    Exercised                                                                                          (12 )                 3.8804
    Forfeited                                                                                         (145 )                 3.9669

Outstanding, December 31, 2003                                                                       2,664                  3.8998
    Granted                                                                                            344                 11.3502
    Exercised                                                                                           (8 )                3.8800
    Forfeited                                                                                         (118 )                4.1147

Outstanding, December 31, 2004                                                                       2,882                  4.7809
    Granted                                                                                            597                 11.8340
    Exercised                                                                                          (30 )                3.9002
    Forfeited                                                                                         (129 )                5.9857

Outstanding, June 30, 2005 (unaudited)                                                               3,320            $      6.0190

Options exercisable, December 31, 2002                                                               1,083            $      3.8959

Options exercisable, December 31, 2003                                                               1,463            $      3.9898

Options exercisable, December 31, 2004                                                               2,003            $      3.9006

Options available for future grant                                                                     699


     The weighted-average fair value of all options at grant date for options granted in 2002, 2003, and 2004 was $1.8302,
$3.8757 and $5.5736 per share, respectively. The amount by which fair value of the stock exceeds an option’s exercise price at
the applicable grant date is amortized over the vesting period and recognized as non-cash stock option compensation in the
consolidated statement of operations. The weighted-average remaining contractual life of outstanding options at December 31,
2004 is 8.2 years.

    The following table provides additional information based on the exercise prices of options outstanding at December 31,
2004:
                                                                   Options           Options          Contractual
                    Option Price                                  Outstanding       Exercisable          Life

                    $3.88                                              2,564             1,999                  8.1
                    $11.83                                                34                —                  10.0
                    $12.03                                               280                —                   9.6
                    $13.42                                                 4                 4                  6.5

                    Total                                              2,882             2,003                  8.2


                                                              F-24
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                                     CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARY

                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

     The Company follows APB No. 25 and related Interpretations in accounting for its stock options. Under APB No. 25, if the
exercise price of the Company’s employee stock options equals the market value of the underlying stock on the date of the grant,
no compensation expense is recognized.

     Pro forma information regarding net loss, as presented in Note 3, is required by SFAS No. 123, as amended by SFAS No.
148, and has been determined as if the Company had accounted for its employee stock options under the fair value method of
SFAS No. 123 as of its effective date. The fair value of these options was estimated at the date of grant using a binomial
option-pricing model with the following weighted-average assumptions:
                                                                                          2002                 2003               2004

Risk-free interest rate                                                                    4.4 %                3.7 %              3.4 %
Expected dividend yield                                                                    0.0 %                0.0 %              0.0 %
Expected volatility                                                                       97.5 %               79.2 %             53.7 %
Expected lives (years)                                                                     7.2                  7.6                7.5

10.   Commitments

      The Company has entered into various operating and capital leases, with expirations through 2011, for network facilities,
office space, equipment, and software used in its operations. Future minimum lease obligations under noncancelable operating
leases and maturities of capital lease obligations as of December 31, 2004 are as follows:
                                                                                                   Operating          Capital

            2005                                                                                   $   2,671          $ 380
            2006                                                                                       1,722            400
            2007                                                                                       1,223
            2008                                                                                       1,246
            2009                                                                                       1,246
            Thereafter                                                                                 3,341

                                                                                                   $ 11,449              780

            Less amounts representing interest                                                                            (62 )

            Present value of minimum lease payments                                                                      718
            Less current portion                                                                                         336

            Obligations under capital leases—net of current portion                                                   $ 382


     Total rent expense for the years ended December 31, 2002, 2003 and 2004 was $1,856, $2,017 and $2,218, respectively.
Certain real estate leases have fixed escalation clauses. Expense under such operating leases is recorded on a straight-line basis
over the life of the lease.

      The net book value of the software under capital leases at December 31, 2003 and 2004 was $1,197 and $870, respectively.
The Company applies its incremental borrowing rate in effect at the time a capital lease is initiated to determine the present value
of the future minimum lease payments.

     At December 31, 2004, the Company had outstanding letters of credit of $762. These letters of credit expire at various times
through December 2006 and collateralize the Company’s

                                                                F-25
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                                     CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARY

                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

obligations to third parties for leased space. The fair value of these letters of credit approximates contract values.

11.   Employee Benefit Plan

     The Company has a 401(k) Profit Sharing Plan (―Plan‖) for the benefit of eligible employees and their beneficiaries. All
employees are eligible to participate in the Plan on the first day of the following quarter of the Plan year following the date of hire
provided they have reached the age of 18. The Plan provides for an employee deferral up to 25% of eligible compensation. The
Plan does not provide for a matching contribution by the employer.

12.   Segment Information

     The Company is organized and managed on a geographical segment basis, as follows: Atlanta, Dallas, Denver, Houston and
Chicago. The balance of operations are centralized in the Corporate group and serve all customers and markets. The Corporate
group primarily consists of executive, administrative and support functions and unallocated operations, including network
operations, customer care, and customer provisioning. The Corporate costs are not allocated to the individual operating
segments.

    Specifically, the Company’s chief operating decision maker allocates resources to and evaluates the performance of its
segments based on revenue, direct operating expenses, and certain non-GAAP financial measures. The accounting policies of the
Company’s reportable segments are the same as those described in the summary of significant accounting policies.

     The asset totals disclosed by segment are directly managed at the segment level and include accounts receivable and
certain fixed assets uniquely identifiable with the operations of a particular segment. Corporate assets primarily include cash and
cash equivalents, investments, fixed assets, and other assets.

                                                                  F-26
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                                     CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARY

                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

      The table below presents information about the Company’s reportable segments:
                                                                                                                    Six Months
                                                                 Year Ended December 31,                          Ended June 30,

                                                          2002             2003                2004            2004                 2005

                                                                                                                      (unaudited)
Revenue:
   Atlanta                                            $   11,262       $   27,033          $   42,236      $   19,754         $     25,402
   Dallas                                                  6,064           19,813              33,129          15,428               20,035
   Denver                                                  3,630           18,667              35,051          15,955               22,494
   Houston                                                    —                —                2,895             315                5,128
   Chicago                                                    —                —                   —               —                   299

           Total revenue                              $   20,956       $   65,513          $ 113,311       $   51,452         $     73,358

Adjusted EBITDA
    Atlanta                                           $    (1,637 )    $    11,851         $    24,986     $    11,786        $      14,541
    Dallas                                                 (3,736 )          4,235              12,353           5,764                8,268
    Denver                                                 (3,387 )          5,230              17,750           7,707               11,709
    Houston                                                    —              (187 )            (3,954 )        (2,076 )               (190 )
    Chicago                                                    —                —                 (565 )            (9 )             (3,318 )
    Corporate                                             (24,017 )        (25,495 )           (33,768 )       (15,943 )            (20,612 )

           Total Adjusted EBITDA                      $ (32,777 )      $    (4,366 )       $   16,802      $     7,229        $     10,398

Operating profit (loss):
   Atlanta                                            $    (3,838 )    $     7,384         $    18,922     $     8,904        $      11,505
   Dallas                                                  (5,319 )            678               7,281           3,358                5,625
   Denver                                                  (4,151 )          2,568              13,404           5,728                9,142
   Houston                                                     —              (210 )            (4,658 )        (2,295 )               (879 )
   Chicago                                                     —                —                 (568 )           (10 )             (3,476 )
   Corporate                                              (33,707 )        (36,078 )           (41,704 )       (20,165 )            (23,323 )

           Total operating loss                       $ (47,015 )      $ (25,658 )         $    (7,323 )   $    (4,480 )      $      (1,406 )

Depreciation and amortization expense:
    Atlanta                                           $     2,201      $    4,465          $     6,064     $     2,882        $       3,036
    Dallas                                                  1,581           3,557                5,072           2,406                2,643
    Denver                                                    765           2,663                4,346           1,979                2,567
    Houston                                                     2              24                  703             219                  689
    Chicago                                                    —               —                     3               1                  158
    Corporate                                               9,667          10,562                6,459           4,044                2,559

           Total depreciation and amortization        $   14,216       $   21,271          $   22,647      $   11,531         $     11,652


                                                              F-27
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                                        CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARY

                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
                                                                                                                  Six Months
                                                               Year Ended December 31,                          Ended June 30,

                                                        2002              2003               2004            2004                 2005

                                                                                                                    (unaudited)
Capital expenditures:
    Atlanta                                         $    8,389        $     7,944        $     2,742     $     2,161         $      1,965
    Dallas                                               8,344              6,181              2,870           1,899                1,287
    Denver                                               7,030              6,379              3,903           2,357                1,744
    Houston                                                 —                 948              4,041           2,857                1,653
    Chicago                                                 —                  —               2,325              87                1,650
    Corporate                                            4,684              4,753              7,860           3,176                2,065

           Total capital expenditures               $   28,447        $   26,205         $   23,741      $   12,537          $    10,364

Total assets:
    Atlanta                                         $   12,677        $   16,227         $   12,552      $   15,345          $    12,525
    Dallas                                              11,591            14,528             11,920          14,306               11,161
    Denver                                               8,326            12,382             11,731          12,794               11,753
    Houston                                                  6               930              5,355           3,900                7,258
    Chicago                                                 —                 —               2,322              86                4,079
    Corporate                                           63,983            42,981             55,323          34,770               51,094

           Total assets                             $   96,583        $   87,048         $   99,203      $   81,201          $    97,870


                                                                                                                  Six Months
                                                               Year Ended December 31,                          Ended June 30,

                                                        2002              2003               2004            2004                 2005

                                                                                                                    (unaudited)
Reconciliation of Adjusted EBITDA to Net
 income (loss):
   Total Adjusted EBITDA for reportable
     segments                                       $ (32,777 )       $    (4,366 )      $    16,802     $     7,229         $     10,398
         Depreciation and amortization                (14,216 )           (21,271 )          (22,647 )       (11,531 )            (11,652 )
         Non-cash stock option compensation               (22 )               (21 )             (375 )          (178 )               (152 )
         Write-off of public offering cost                 —                   —              (1,103 )            —                    —
         Interest income                                  411                 715                637             328                  508
         Interest expense                              (4,665 )            (2,333 )           (2,788 )        (1,615 )             (1,315 )
         Minority interest                                 —                   —                  —               —                    —
         Gain recognized on trouble debt
            restructuring                                4,338                   —                  —               —                    —
         Loss on disposal of property and
            equipment                                      (222 )          (1,986 )           (1,746 )          (425 )               (273 )
         Other income (expense), net                        (35 )            (220 )             (236 )          (149 )                (22 )

Net income (loss)                                   $ (47,188 )       $ (29,482 )        $ (11,456 )     $    (6,341 )       $     (2,508 )


13.   Initial Public Offering Costs

      In 2004, the Company began work in connection with an initial public offering of common stock. In connection with the
proposed offering, the Company incurred legal and accounting fees of approximately $1.1 million. Although such transaction costs
are typically deferred and

                                                               F-28
Table of Contents

                                     CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARY

                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

deducted from the proceeds of this offering as a charge against additional paid-in capital, due to the length of time that has
transpired since these costs were incurred and other considerations, management determined it was appropriate to expense such
costs.

14.   Contingencies Arising After Year-end (unaudited)

       In February 2005, the Federal Communications Commission (the ―FCC‖) issued its Triennial Review Remand Order (the
―TRRO‖) and adopted new rules, effective March 11, 2005, governing the obligations of incumbent local exchange carriers
(―ILECs‖) to afford access to certain of their network elements, if at all, and the cost of such facilities. The TRRO reduces the
ILECs’ obligations to provide high-capacity loops within, and dedicated transport facilities between, certain ILEC wire centers that
are deemed to be sufficiently competitive, based upon various factors such as the number of fiber-based colocators and/or the
number of business access lines within such wire centers. In addition, certain caps are imposed regarding the number of UNE
facilities that a company, like the Company, may have on a single route or into a single building. Where the wire center conditions
or the caps are exceeded, the TRRO eliminates the ILECs’ obligations to provide these high-capacity circuits to competitors at the
discounted rates historically received under the 1996 Telecommunications Act.

     The rates charged by ILECs for the Company’s high-capacity circuits in place on March 11, 2005 that were affected by the
FCC’s new rules are increased 15% effective for one year until March 2006, although the scope of this increase is uncertain
because the new FCC rules are subject to interpretation by state regulatory agencies. In addition, by March 10, 2006, the
Company will be required to transition those existing facilities to alternative arrangements, such as other competitive facilities or
the higher-priced ―special access services‖ offered by the ILECs, unless another rate has been negotiated. Subject to any
contractual protections under the Company’s existing interconnection agreements with ILECs, beginning March 11, 2005, the
Company is also subject to the ILECs’ higher ―special access‖ pricing for any new installations of DS-1 loops and/or DS-1 and
DS-1 transport facilities in the affected ILEC wire centers, on the affected transport routes or that exceeded the caps.

      The Company is able to estimate the probable liability for implementation of certain provisions of the TRRO and has accrued
approximately $535 through June 30, 2005 for these liabilities, which has been charged to cost of service sold in the six months
ended June 30, 2005. The estimate includes $485 for the total cost impact related to wire centers and transport routes deemed
sufficiently competitive. However, the Company believes that there is insufficient information to make a reasonable estimate of the
increased costs associated with the caps imposed on the number of circuits that the Company may have on a single route or into
a single building. Due to inconsistencies and ambiguities in the FCC order as to the application of the loop and transport caps, the
cost impacts for Atlanta, Denver and Chicago will not be reasonably estimable until the state of Georgia, Colorado and Illinois,
respectively, interprets the rule. The Company believes that such information does exist for the Dallas and Houston markets,
resulting in a probable liability of approximately $50, which the Company accrued and, which is reflected as a cost of service in the
results of operations through June 30, 2005.

15.     Stock Split (unaudited)

On September 19, 2005, the Company’s Board of Directors approved a 1 for 3.88 reverse stock split effective as of October 26,
2005. All shares and per share data have been adjusted retroactively to reflect the stock split.

                                                                 F-29
Table of Contents

You should rely only on the information contained in this prospectus. We and the underwriters have not authorized
anyone to provide you with different or additional information. This prospectus is not an offer to sell or a solicitation of
an offer to buy our common stock in any jurisdiction where it is unlawful to do so. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of the date of delivery of this prospectus or of
any sale of our common stock.

                                                                    TABLE OF CONTENTS
                                                                                                                        Page
Prospectus Summary                                                                                                           1
Risk Factors                                                                                                                 8
Cautionary Notice Regarding Forward-Looking Statements                                                                      19
Use of Proceeds                                                                                                             20
Dividend Policy                                                                                                             20
Capitalization                                                                                                              21
Dilution                                                                                                                    22
Selected Consolidated Financial and Operating Data                                                                          23
Non-GAAP Financial Measures                                                                                                 25
Management’s Discussion and Analysis of Financial Condition and Results of Operations                                       27
Industry Overview                                                                                                           59
Business                                                                                                                    64
Government Regulation                                                                                                       79
Management                                                                                                                  88
Certain Relationships and Related Transactions                                                                             105
Principal Stockholders                                                                                                     107
Description of Capital Stock                                                                                               110
United States Federal Income Tax Consequences to Non-United States Holders                                                 113
Shares Eligible for Future Sale                                                                                            117
Underwriting                                                                                                               119
Legal Matters                                                                                                              123
Experts                                                                                                                    123
Where You Can Find More Information                                                                                        123
Report of Independent Registered Public Accounting Firm                                                                    F-1

Until             , 2005 (25 days after commencement of this offering), all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the
dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or
subscriptions.




6,104,575 Shares
Common Stock


Deutsche Bank Securities
Raymond James
Thomas Weisel Partners LLC
ThinkEquity Partners LLC



Prospectus
, 2005
Table of Contents

                                                                  PART II

                                       INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 13.      OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     Set forth below is a table of the registration fee for the Securities and Exchange Commission, the filing fee for the National
Association of Securities Dealers, Inc., the listing fee for the Nasdaq National Market and estimates of all other expenses to be
incurred in connection with the issuance and distribution of the securities described in the registration statement, other than
underwriting discounts and commissions:

                    SEC registration fee                                                                 $      20,303.25
                    NASD filing fee                                                                             17,750.00
                    Nasdaq National Market listing fee                                                         100,000.00
                    Printing and engraving expenses                                                            300,000.00
                    Legal fees and expenses                                                                  1,500,000.00
                    Accounting fees and expenses                                                               900,000.00
                    Transfer agent and registrar fees                                                           10,000.00
                    Miscellaneous                                                                              450,000.00

                        Total                                                                            $   3,298,053.25


ITEM 14.      INDEMNIFICATION OF DIRECTORS AND OFFICERS

      We are incorporated under the laws of the State of Delaware. Reference is made to Section 102(b)(7) of the Delaware
General Corporation Law, or DGCL, which enables a corporation in its original certificate of incorporation or an amendment
thereto to eliminate or limit the personal liability of a director for violations of the director’s fiduciary duty, except (1) for any breach
of the director’s duty of loyalty to the corporation or its stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) pursuant to Section 174 of the DGCL, which provides for liability of
directors for unlawful payments of dividends of unlawful stock purchase or redemptions or (4) for any transaction from which a
director derived an improper personal benefit.

      Reference is also made to Section 145 of the DGCL, which provides that a corporation may indemnify any person, including
an officer or director, who is, or is threatened to be made, party to any threatened, pending or completed legal action, suit or
proceeding, whether civil, criminal, administrative or investigative, other than an action by or in the right of such corporation, by
reason of the fact that such person was an officer, director, employee or agent of such corporation or is or was serving at the
request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may
include expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by
such person in connection with such action, suit or proceeding, provided such officer, director, employee or agent acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the corporation’s best interest and, for criminal
proceedings, had no reasonable cause to believe that his conduct was unlawful. A Delaware corporation may indemnify any
officer or director in an action by or in the right of the corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is
successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him against
the expenses that such officer or director actually and reasonably incurred.

                                                                     II-1
Table of Contents

     Our amended and restated bylaws provide for indemnification of the officers and directors to the fullest extent permitted by
applicable law. We plan to enter into indemnity agreements with our directors, officers and certain key employees prior to the
effectiveness of this offering.

    The Underwriting Agreement provides for indemnification by the underwriters of the registrant and its officers and directors
for certain liabilities arising under the Securities Act, or otherwise.

ITEM 15.      RECENT SALES OF UNREGISTERED SECURITIES

      Set forth in chronological order is information regarding all securities sold and employee stock options granted from May
2002 to date (except as otherwise noted) by us and by Cbeyond Investors, LLC, which merged with us in November 2002. Also
included is the consideration, if any, received for such securities, and information relating to the section of the Securities Act of
1933, as amended, and the rules of the Securities and Exchange Commission pursuant to which the following issuances were
exempt from registration. None of these securities was registered under the Securities Act. No award of options involved any sale
under the Securities Act. No sale of securities involved the use of an underwriter and no commissions were paid in connection
with the sales of any securities.

     1. At various times during the period from May 2002 through May 2005, we granted options to purchase an aggregate of
3,757,202 shares of common stock to employees and directors at exercise prices ranging from $3.88 to $13.43 per share.

      2. On November 1, 2002, we issued and sold an aggregate of 12,382,173 shares of Series B participating preferred stock at
different closing dates during a 30-day period for an aggregate purchase price of $48,104,738 to certain holders of our Class A
preferred stock, members of Cbeyond Investors, LLC, and a number of new investors.

     3. On November 1, 2002, we issued warrants to purchase 713,594 shares of our Common Stock at an exercise price of $.04
per share and 6,435 shares of our Common Stock at an exercise price of $3.88 per share to Cisco Systems Capital Corporation in
connection with the second amendment and restatement of our credit agreement with Cisco Systems Capital Corporation.

     4. On November 1, 2002, we issued 111,803 shares of Common Stock for $3.88 per share to holders of common and
preferred units of Cbeyond Investors, LLC, as a result of the conversion of units to Common Stock effected by the merger of
Cbeyond Investors, LLC into Cbeyond Communications, Inc.

     5. On December 29, 2004, we issued and sold 1,436,533 shares of Series C participating preferred stock for an aggregate
purchase price of $17.0 million to certain holders of our Series B preferred stock and a number of new investors.

     6. On December 29, 2004, we issued and sold 9,006 shares of Series B participating preferred stock for a purchase price of
$34,945 to a holder of our Class A Preferred Stock pursuant to a pre-existing arrangement with the holder.

     The issuances of the securities described in paragraph 1 were exempt from registration under the Securities Act under Rule
701, as transactions pursuant to compensatory benefit plans and contracts relating to compensation as provided under such Rule
701. The recipients of such options and common stock were our employees and directors, who received the securities under our
compensatory benefit plans or a contract relating to compensation. Appropriate legends were affixed to the share certificates
issued in such transactions. All recipients either received adequate information from us or had adequate access, through their
employment with us or otherwise, to information about us.

                                                                 II-2
Table of Contents

       The issuances of the securities described in paragraphs 2 through 6 were exempt from registration under the Securities Act
in reliance on Section 4(2) because the issuance of securities to recipients did not involve a public offering. The recipients of
securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to
resale or distribution thereof, and appropriate legends were affixed to share certificates and warrants issued in such transactions.
Each of the recipients of securities in the transactions described in paragraphs 2 through 6 were accredited or sophisticated
persons and had adequate access, through employment, business or other relationships, to information about us.

     All of the shares of Series B preferred stock described in paragraphs 2 and 6 and all of the shares of Series C preferred
stock described in paragraph 5 will automatically convert into shares of common stock prior to completion of this offering.

                                                                 II-3
Table of Contents

ITEM 16.       EXHIBITS AND FINANCIAL STATEMENT SCHEDULE

(a) Exhibits
 Exhibit No.                                                         Description of Exhibit

        1.1†         Form of Underwriting Agreement.
        3.1†         Amended and Restated Certificate of Incorporation of Cbeyond Communications, Inc.
         3.2         Second Amended and Restated Certificate of Incorporation of Cbeyond Communications, Inc.
        3.3†         Amended and Restated Bylaws of Cbeyond Communications, Inc.
         3.4         Second Amended and Restated Bylaws of Cbeyond Communications, Inc.
        4.1†         Form of stock certificate of common stock.
         5.1         Opinion of Latham & Watkins LLP.
      10.1†          Second Amended and Restated Shareholders Agreement, dated as of December 29, 2004, by and among
                       Cbeyond Communications, Inc. and the other parties thereto.
      10.2†          Third Amended and Restated Registration Rights Agreement, dated as of December 29, 2004, by and
                       among Cbeyond Communications, Inc. and the other signatories thereto.
      10.3†          Second Amended and Restated Credit Agreement, dated as of November 1, 2002, by and among Cbeyond
                       Communications, LLC, Cbeyond Communications, Inc. and Cisco Systems Capital Corporation.
      10.4†          Stock Purchase Agreement, dated as of November 1, 2002, by and between Cbeyond Communications, Inc.
                       and Cisco Systems Capital Corporation.
      10.5†          Amendment No. 1 to Second Amended and Restated Credit Agreement, dated as of June 30, 2003, by and
                      among Cbeyond Communications, LLC, Cbeyond Communications, Inc. Cbeyond Leasing, LP and Cisco
                      Systems Capital Corporation.
      10.6†          Amendment No. 2 to Second Amended and Restated Credit Agreement, dated as of March 2004, by and
                      among Cbeyond Communications, LLC, Cbeyond Communications, Inc. Cbeyond Leasing, LP and Cisco
                      Systems Capital Corporation.
      10.7†          Amendment No. 3 to Second Amended and Restated Credit Agreement, dated as of February 18, 2005, by
                      and among Cbeyond Communications, LLC, Cbeyond Communications, Inc. Cbeyond Leasing, LP and
                      Cisco Systems Capital Corporation.
        10.8         Stock Subscription Warrant of Cisco Systems Capital Corporation, dated as of March 31 2004, to Purchase
                       Shares of Common Stock of Cbeyond Communications, Inc.
      10.9†          Stock Subscription Warrant of Cisco Systems Capital Corporation, dated as of November 1, 2002, to
                       Purchase Shares of Common Stock of Cbeyond Communications, Inc.
      10.10          2005 Equity Incentive Award Plan of Cbeyond Communications, Inc.
    10.11†           2002 Equity Incentive Plan of Cbeyond Communications, Inc.
    10.12†           2000 Stock Incentive Plan (as amended) of Cbeyond Communications, Inc.

                                                              II-4
Table of Contents

 Exhibit No.                                                          Description of Exhibit


    10.13†            Executive Purchase Agreement, dated as of March 28, 2000, by and among Egility Communications, LLC,
                        Egility Communications, Inc., Egility Investors, LLC and James F. Geiger.
    10.14†            Executive Purchase Agreement, dated as of March 28, 2000, by and among Egility Communications, LLC,
                        Egility Communications, Inc., Egility Investors, LLC and J Robert Fugate.
    10.15†            Executive Purchase Agreement, dated as of March 28, 2000, by and among Egility Communications, LLC,
                        Egility Communications, Inc., Egility Investors, LLC and Robert R. Morrice.
    10.16†            Executive Purchase Agreement, dated as of January 31, 2002, by and among Cbeyond Communications,
                        Inc., Cbeyond Investors, LLC and Richard J. Batelaan.
    10.17†            Amendment No. 1 to Executive Purchase Agreement, dated as of May 28, 2003, by and among Cbeyond
                       Communications, Inc. and Richard J. Batelaan.
    10.18†            Form of Stock Option Grant Notice and Stock Option Agreement under the 2005 Equity Incentive Award
                        Plan of Cbeyond Communications, Inc.
    10.19†            Form of Restricted Stock Award Grant Notice and Restricted Stock Award Agreement under the 2005 Equity
                        Incentive Plan of Cbeyond Communications, Inc.
    10.20†            Form of Indemnity Agreement.
    10.21†            Form of Amended and Restated At-Will Employment Agreement.
    10.22†            Form of Subscription Agreement.
        23.1          Consent of Ernst & Young LLP, independent registered public accounting firm.
        23.2          Consent of Latham & Watkins LLP (included in Exhibit 5.1).
      24.1†           Power of Attorney dated May 16, 2005.
      24.2†           Power of Attorney dated June 30, 2005.

†     Previously filed.

                                                               II-5
Table of Contents

(b) Financial Statement Schedules

    The following financial schedule is a part of this registration statement and should be read in conjunction with the
consolidated financial statements of Cbeyond Communications, Inc.:

                                    CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARIES

                                  SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
                                      Years Ended December 31, 2002, 2003 and 2004
                                                 (Dollars in thousands)
                                                                                           Additions
                                                                           Balance         Charged
                                                                              at            to Cost                            Balance
                                                                          Beginning           and            Less               at End
                                                                           of Year         Expenses        Deductions          of Year

Allowance for Doubtful Accounts Receivable
2002                                                                      $     90        $   1,107        $     (408 )       $     789
2003                                                                           789            1,369            (1,373 )             785
2004                                                                           785            2,393            (2,146 )           1,033

ITEM 17.      UNDERTAKINGS

       Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the ―Securities Act‖) may be permitted to
directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the final adjudication of such issues.

      The undersigned Registrant hereby undertakes that:

            (1) For purposes of determining any liability under the Securities Act, the information omitted from this form of
      prospectus filed as part of the registration statement in reliance upon Rule 430A and contained in this form of prospectus
      filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of the
      registration statement as of the time it was declared effective.

            (2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a
      form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the
      offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

     The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the Underwriting
Agreement, certificates in such denomination and registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.

                                                                 II-6
Table of Contents

                                                           SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Atlanta,
State of Georgia on October 27, 2005.

                                                                               C BEYOND C OMMUNICATIONS , I NC .

                                                                               By:              /s/   J AMES F. G EIGER
                                                                                                        James F. Geiger
                                                                                         Chairman, President and Chief Executive Officer

     Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the
following persons in the capacities and on the dates indicated.
                              Signature                                     Title                                       Date



                                 *                      Chairman, President and Chief Executive                 October 27, 2005
                                                         Officer
                        James F. Geiger


              /s/     J. R OBERT F UGATE                Executive Vice President and Chief Financial            October 27, 2005
                                                          Officer
                        J. Robert Fugate


                /s/    H ENRY C. L YON                  Chief Accounting Officer                                October 27, 2005

                         Henry C. Lyon


                                 *                      Director                                                October 27, 2005

                        Anthony M. Abate


                                 *                      Director                                                October 27, 2005

                         John Chapple


                                 *                      Director                                                October 27, 2005

                       Douglas C. Grissom


                                 *                      Director                                                October 27, 2005

                         D. Scott Luttrell


                                 *                      Director                                                October 27, 2005

                       James N. Perry, Jr.


                                 *                      Director                                                October 27, 2005

                        Robert Rothman


*By:                    /s/    J. R OBERT F UGATE
                                     J. Robert Fugate
                                     Attorney-in-Fact
II-7
                                                                                                                                    Exhibit 3.2

                                                 SECOND AMENDED AND RESTATED
                                                 CERTIFICATE OF INCORPORATION
                                                              OF
                                                 CBEYOND COMMUNICATIONS, INC.

                                                                *     *       *

      Cbeyond Communications, Inc., a corporation organized and existing under the laws of the State of Delaware (hereinafter referred to as
the “ Corporation ”), hereby certifies as follows:

      1. The Corporation filed its original Certificate of Incorporation with the Secretary of State of the State of Delaware (the “ Delaware
Secretary of State ”) on March 22, 2000 under the name “egility Communications, Inc.” (the “ Original Certificate of Incorporation ”). The
Original Certificate of Incorporation was subsequently amended and restated on March 28, 2000, November 1, 2002 and December 29, 2004
(as so amended, the “ Amended and Restated Certificate of Incorporation ”).

     2. This Amended and Restated Certificate of Incorporation of the Corporation (this “ Amended and Restated Certificate of
Incorporation ”) has been duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State
of Delaware by the directors and stockholders of the Corporation. This Amended and Restated Certificate of Incorporation restates, amends and
supersedes the provisions of the Original Certificate of Incorporation and all prior amendments and restatements of the Original Certificate of
Incorporation.

      3. Upon the effectiveness of this Amended and Restated Certificate of Incorporation (the “ Effective Time ”), all outstanding shares of
Common Stock (as defined herein) immediately prior to the Effective Time shall be split, or subdivided, on a 1 for 3.88 basis, whereby each
holder of Common Stock, without further action by such holder, shall receive one share of Common Stock in exchange for every 3.88
outstanding shares of Common Stock immediately prior to the Effective Time.

      4.   The Amended and Restated Certificate of Incorporation of the Corporation shall be amended and restated to read in its entirety as
follows:

                                                                       I.

     The name of this corporation is Cbeyond Communications, Inc.

                                                                      II.

    The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, City of Wilmington, County of
New Castle, and the name of the registered agent of the Corporation in the State of Delaware at such address is The Corporation Trust
Company.
                                                                         III.

     The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware (“ DGCL ”).

                                                                         IV.

      A.     CLASSES OF STOCK . The Corporation is authorized to issue two classes of stock to be designated, respectively, “Common
Stock” and “Preferred Stock.” The total number of shares of stock that the Corporation shall have authority to issue are 65,000,000 shares, of
which (i) 50,000,000 shares shall be Common Stock, $0.01 par value per share (the “ Common Stock ”) and (ii) 15,000,000 shall be shares of
Preferred Stock, $0.01 par value per share (the “ Preferred Stock ”).

      B.       PREFERRED STOCK . Subject to the limitations and in the manner provided by law, the Board of Directors of the Corporation
(the “ Board of Directors ”) or a duly-authorized committee of the Board of Directors, in accordance with the laws of the State of Delaware, is
hereby authorized to, from time to time, provide by resolution for the issuance of shares of Preferred Stock in one or more series and, by filing
a certificate pursuant to the applicable law of the State of Delaware (hereinafter referred to as “ Preferred Stock Designation ”), setting forth
such resolution, to establish the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights
of the shares of each such series and the qualifications, limitations and restrictions thereof. The authority of the Board of Directors with respect
to each series shall include, but not be limited to, determination of the following: (i) the designation of the series, which may be by
distinguishing number, letter or title; (ii) the number of shares of the series, which number the Board of Directors may thereafter (except where
otherwise provided in the Preferred Stock Designation) increase or decrease (but not below the number of shares thereof then outstanding);
provided that, in case the number of shares of any series shall be so decreased, the shares constituting such decrease shall upon the taking of
any action required by applicable law resume the status which they had prior to the adoption of the resolution originally fixing the number of
shares of such series as well as the number of shares authorized for issuance in each series; (iii) the amounts or rates at which dividends will be
payable on, and the preferences, if any, of shares of the series in respect of dividends, and whether such dividends, if any, shall be cumulative
or noncumulative; (iv) dates at which dividends, if any, shall be payable; (v) the redemption rights and price or prices, if any, for shares of the
series; (vi) the terms and amount of any sinking fund, if any, provided for the purchase or redemption of shares of the series; (vii) the amounts
payable on, and the preferences, if any, of shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding
up of the affairs of the Corporation; (viii) whether the shares of the series shall be convertible into, or exchangeable, or redeemable for, shares
of any other class or series, or any other security, of the Corporation or any other Corporation, and, if so, the specification of such other class or
series or such other security, the conversion or exchange price or prices or rate or rates, any adjustments thereof, the date or dates at which such
shares shall be convertible or exchangeable and all other terms and conditions upon which such conversion or exchange may be made; (ix) the
voting rights, if any, of the holders of shares of the series generally or upon

                                                                          2
specified events; and (x) any other rights, powers, preferences of such shares as are permitted by law.

                                                                         V.

      For the management of the business and for the conduct of the affairs of the Corporation, and in further definition, limitation and
regulation of the powers of the Corporation, of its Board of Directors and of its stockholders or any class thereof, as the case may be, it is
further provided that:

     A.     BOARD OF DIRECTORS.

            1.     POWERS; NUMBER OF DIRECTORS. The management of the business and the conduct of the affairs of the Corporation
shall be vested in its Board of Directors. The number of directors which shall constitute the whole Board of Directors shall be fixed by the
Board of Directors in the manner provided in the bylaws of the Corporation.

           2.      ELECTION OF DIRECTORS.

                    a.    The Board of Directors shall be divided into three classes, designated Class I, Class II and Class III. Directors shall be
assigned to each class in accordance with a resolution or resolutions adopted by the Board of Directors such that Class I, Class II and Class III
shall each consist of an equal number of Directors to the extent practicable. At the first annual meeting of stockholders following the Effective
Date, the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years. At the second
annual meeting of stockholders following the Effective Date, the term of office of the Class II directors shall expire and Class II directors shall
be elected for a full term of three years. At the third annual meeting of stockholders following the Effective Date, the term of office of the Class
III directors shall expire and Class III directors shall be elected for a full term of three years. At each succeeding annual meeting of
stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual
meeting.

                     b.     If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to
maintain a number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will
a decrease in the number of directors shorten the term of any incumbent director. A director shall hold office until the annual meeting for the
year in which his or her term expires and until his or her successor shall be elected and shall qualify, subject, however, to prior death,
resignation, retirement, disqualification or removal from office.

               3 . VACANCIES. Any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or
other causes and any newly created directorships resulting from any increase in the number of directors, shall be filled by a majority of the
members of the Incumbent Board then in office , even though less than a quorum of the Board of Directors, and not by the stockholders. The
newly created or eliminated directorships resulting from such increase or decrease shall, if reasonably possible, be apportioned by the Board of

                                                                          3
Directors among the three classes of directors so as to ensure that no one class has more than one director more than any other class. To the
extent reasonably possible, consistent with the foregoing, any newly created directorships shall be added to those classes whose terms of office
are to expire at the latest dates following such allocation and newly eliminated directorships shall be subtracted from those classes whose terms
of office are to expire at the earliest dates following such allocation, unless otherwise provided for from time to time by resolution adopted by a
majority of the members of the Incumbent Board then in office, although less than a quorum. In the event of a vacancy in the Board of
Directors, the remaining directors, except as otherwise provided by law, may exercise the powers of the full Board of Directors until the
vacancy is filled. Any director elected in accordance with this section shall hold office for the remainder of the full term of the director for
which the vacancy was created or occurred and until such director’s successor shall have been elected and qualified. The “Incumbent Board”
shall mean those directors of the Corporation who, as of the Effective Date, constitute the Board of Directors of the Corporation, provided that
(i) any person becoming a director subsequent to such date whose election, or nomination for election by the Corporation’s stockholders, is
approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the
directors of the Corporation, as such terms are used Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended) or (ii) any person appointed by the Incumbent Board to fill a vacancy, shall also be considered a member of the Incumbent Board of
the Corporation.

     B.     ACTION BY STOCKHOLDERS .

            1. Special meetings of the stockholders of the Corporation, for any purpose or purposes, may be called at any time by the
President of the Corporation and shall be called by the President or the Secretary at the request in writing of a majority of the Board of
Directors. Special meetings of the stockholders of the Corporation may not be called by any other person or persons.

           2.     No action shall be taken by the stockholders of the Corporation except at duly called annual or special meeting of
stockholders of the Corporation or as otherwise provided by the bylaws of the Corporation.

          3.     Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before
any meeting of the stockholders of the Corporation shall be given in the manner provided in the bylaws of the Corporation.

     C.      BYLAWS

           1.     In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors is
expressly authorized to make, adopt, alter, amend, change or repeal the bylaws of the Corporation by resolutions adopted by the affirmative
vote of a majority of the entire Board of Directors, subject to any bylaw requiring the affirmative vote of a larger percentage of the members of
the Board of Directors.

                                                                         4
             2. Stockholders may not make, adopt, alter, amend, change or repeal the bylaws of the Corporation except upon the affirmative
vote of at least 75% of the votes entitled to be cast by the holders of all outstanding shares then entitled to vote generally in the election of
directors, voting together as a single class.

                                                                         V.

     The Corporation is to have perpetual existence.

                                                                        VII.

     A.      The personal liability of the directors of the Corporation is hereby eliminated to the fullest extent permitted by paragraph (7) of
subsection (b) of Section 102 of the DGCL, as the same may be amended or supplemented.

       B.      If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.

       C. The Corporation shall have power, to the fullest extent permitted by Section 145 of the DGCL, as the same may be amended or
supplemented, to indemnify any person who was or is a party or is threatened to be made a party to an action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, by reason of the fact that the person is or was a director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or
other enterprise from and against any and all of the expenses, liabilities or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such person.

       D.     Indemnification conferred pursuant to this Article VII shall include the right to be paid by the Corporation the expenses incurred in
defending or otherwise participating in any proceeding in advance of its final disposition upon receipt by the Corporation of an undertaking by
or on behalf of the person receiving advancement to repay the amount advanced if it shall ultimately be determined that such person is not
entitled to be indemnified by the Corporation under this Article VII.

      E.     Neither any amendment nor repeal of this Article VII, nor the adoption of any provision of this Corporation’s Certificate of
Incorporation inconsistent with this Article VII, shall eliminate or reduce the effect of this Article VII in respect of any matter occurring, or any
action or proceeding accruing or arising or that, but for this Article VII, would accrue or arise, prior to such amendment, repeal or adoption of
an inconsistent provision.

                                                                          5
                                                                       VII.

       The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon the stockholders herein are granted subject to
this reservation. Notwithstanding the foregoing, no amendment, alteration, change or repeal may be made to Article V or this Article VIII
without the affirmative vote of the holders of at least 75% of the outstanding voting power of the Corporation, voting together as a single class.

                                                                 *      *      *

                                                                        6
     IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Incorporation to be signed by its
Executive Vice President, Chief Financial Officer and Secretary, this day of          2005.

                                                                                By:
                                                                                Name:      J. Robert Fugate
                                                                                Title:     Executive Vice President,
                                                                                           Chief Financial Officer and
                                                                                           Secretary
                                                                                                                                    Exhibit 3.4

                                            SECOND AMENDED AND RESTATED BYLAWS
                                                            OF
                                               CBEYOND COMMUNICATIONS, INC.

                                           Incorporated under the Laws of the State of Delaware

                                                                 ARTICLE I

                                                         OFFICES AND RECORDS

    Section 1.1. Delaware Office. The principal office of the Corporation in the State of Delaware shall be located in the City of
Wilmington, County of New Castle, and the name and address of its registered agent is Corporation Trust Company, 1209 Orange Street .

     Section 1.2. Other Offices. The Corporation may have such other offices, either within or without the State of Delaware, as the Board of
Directors may designate or as the business of the Corporation may from time to time require.

     Section 1.3. Books and Records. The books and records of the Corporation may be kept at the Corporation’s headquarters in Atlanta,
Georgia or at such other locations outside the State of Delaware as may from time to time be designated by the Board of Directors.

                                                                 ARTICLE II

                                                             STOCKHOLDERS

     Section 2.1. Annual Meeting. The annual meeting of the stockholders of the Corporation shall be held at such date, place and/or time as
may be fixed by resolution of the Board of Directors.

      Section 2.2. Special Meeting. Subject to the rights of the holders of any series of preferred stock, par value $.01 per share, of the
Corporation (the “Preferred Stock”) or any other series or class of stock as set forth in the Certificate of Incorporation to elect additional
directors under specified circumstances, special meetings of the stockholders may be called only by the Chairman of the Board or by the Board
of Directors pursuant to a resolution adopted by a majority of the total number of directors which the Corporation would have if there were no
vacancies (the “Whole Board”).

     Section 2.3. Place of Meeting. The Board of Directors may designate the place of meeting for any meeting of the stockholders. If no
designation is made by the Board of Directors, the place of meeting shall be the principal office of the Corporation.

      Section 2.4. Notice of Meeting. Written or printed notice, stating the place, day and hour of the meeting and the purpose or purposes for
which the meeting is called, shall be prepared and delivered by the Corporation not less than ten days nor more than sixty days before the date
of the meeting, either personally, or by mail, to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall he
deemed to be delivered when deposited in the United States mail with postage thereon prepaid, addressed to the stockholder at his address
      as it appears on the stock transfer books of the Corporation. Such further notice shall be given as may be required by law. Meetings may
be held without notice if all stockholders entitled to vote are present (except as otherwise provided by law), or if notice is waived by those not
present. Any previously scheduled meeting of the stockholders may be postponed and (unless the Certificate of Incorporation otherwise
provides) any special meeting of the stockholders may be cancelled, by resolution of the Board of Directors upon public notice given prior to
the time previously scheduled for such meeting of stockholders.

      Section 2.5. Quorum and Adjournment. Except as otherwise provided by law or by the Certificate of Incorporation, the holders of a
majority of the voting power of the outstanding shares of the Corporation entitled to vote generally in the election of directors (the “Voting
Stock”), represented in person or by proxy, shall constitute a quorum at a meeting of stockholders, except that when specified business is to be
voted on by a class or series voting separately as a class or series, the holders of a majority of the voting power of the shares of such class or
series shall constitute a quorum for the transaction of such business. The chairman of the meeting or a majority of the shares of Voting Stock so
represented may adjourn the meeting from time to time, whether or not there is such a quorum (or, in the case of specified business to be voted
on by a class or series, the chairman or a majority of the shares of such class or series so represented may adjourn the meeting with respect to
such specified business). No notice of the time and place of adjourned meetings need be given except as required by law. The stockholders
present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.

      Section 2.6. Proxies. At all meetings of stockholders, a stockholder may vote by proxy executed in writing by the stockholder or as may
be permitted by law, or by his duly authorized attorney-in-fact. Such proxy must be filed with the Secretary of the Corporation or his
representative at or before the time of the meeting.

     Section 2.7. Notice of Stockholder Business and Nominations.

      (A) Annual Meetings of Stockholders . (1) Nominations of persons for election to the Board of Directors of the Corporation and the
proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (a) pursuant to the Corporation’s
notice of meeting delivered pursuant to Section 2.4 of these Bylaws, (b) by or at the direction of the President of the Corporation or the Board
of Directors or (c) by any stockholder of the Corporation who is entitled to vote at the meeting, who complied with the notice procedures set
forth in clauses (2) and (3) of this paragraph (A) of this Bylaw and who was a stockholder of record at the time such notice is delivered to the
Secretary of the Corporation.

      (2) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of
paragraph (A)(1) of this Bylaw, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and such
other business must otherwise be a proper matter for stockholder action. To be timely, a stockholder’s notice shall be delivered to the Secretary
at the principal executive offices of the Corporation not less than seventy days nor more than ninety days prior to the first anniversary of the
preceding year’s annual meeting, provided , however , that in the event that the date of the annual meeting is advanced by more than twenty
days, or delayed by more than seventy days,

                                                                         2
from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the ninetieth day prior to such annual
meeting and not later than the close of business on the later of the seventieth day prior to such annual meeting or the tenth day following the
day on which public announcement of the date of such meeting is first made. Such stockholder’s notice shall set forth (a) as to each person
whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation
14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 14a-11 thereunder, including such person’s
written consent to being named in the proxy statement as a nominee and to serving as a director if elected; (b) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for
conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on
whose behalf the proposal is made; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the
nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial
owner and (ii) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such
beneficial owner. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the
giving of a stockholder’s notice as described above.

      (3) Notwithstanding anything in the second sentence of paragraph (A)(2) of this Bylaw to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement naming all of the
nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least eighty days prior to the first
anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Bylaw shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of
the Corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the
Corporation.

      (B) Special Meetings of Stockholders . Only such business shall be conducted at a special meeting of stockholders as shall have been
brought before the meeting pursuant to the Corporation’s notice of meeting pursuant to Section 2.4 of these Bylaws. Nominations of persons
for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the
Corporation’s notice of meeting (a) by or at the direction of the Board of Directors or (b) by any stockholder of the Corporation who is entitled
to vote at the meeting, who complies with the notice of procedures set forth in this Bylaw and who is a stockholder of record at the time such
notice is delivered to the Secretary of the Corporation. In the event the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be), for
election to such position(s) as are specified in the Corporation’s Notice of Meeting, if the stockholder’s notice as required by paragraph (A)(2)
of this Bylaw shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the ninetieth day prior to
such special meeting and not

                                                                          3
later than the close of business on the later of the seventieth day prior to such special meeting or the tenth day following the day on which
public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at
such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of
a stockholder’s notice as described above.

      (C) General . (1) Only persons who are nominated in accordance with the procedures set forth in this Bylaw shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance
with the procedures set forth in this Bylaw. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, the chairman
of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting
was made in accordance with the procedures set forth in this Bylaw and if any proposed nomination or business is not in compliance with this
Bylaw, to declare that such defective proposal or nomination shall be disregarded.

     (2) For purposes of this Bylaw, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

     (3) Notwithstanding the foregoing provisions of this Bylaw, a stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Bylaw. Nothing in this Bylaw shall be
deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under
the Exchange Act.

      Section 2.8. Procedure for Election of Directors. Election of directors at all meetings of the stockholders at which directors are to be
elected shall be by written ballot, and, except as otherwise set forth in the Certificates of Incorporation with respect to the right of the holders of
any series of Preferred Stock or any other series or class of stock to elect additional directors under specified circumstances, a plurality of the
votes cast thereat shall elect directors. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, all matters other
than the election of directors submitted to the stockholders at any meeting shall be decided by the affirmative vote of a majority of the voting
power of the outstanding Voting Stock present in person or represented by proxy at the meeting and entitled to vote thereon.

      Section 2.9. Inspectors of Elections; Opening and Closing the Polls.

       (A) The Board of Directors by resolution shall appoint one or more inspectors, which inspector or inspectors may include individuals who
serve the Corporation in other capacities, including, without limitation, as officers, employees, agents or representatives of the Corporation, to
act at the meeting and make a written report thereof. One or more persons may be designated as alternate inspectors to replace any inspector
who fails to act. If no inspector or alternate has been appointed to act, or if all inspectors or alternates who have been appointed are unable to
act, at a meeting of stockholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before
discharging his or her duties, shall

                                                                          4
take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The
inspectors shall have the duties prescribed by the General Corporation Law of the State of Delaware.

     (B) The chairman of the meeting shall fix and announce at the meeting the date and time of the opening and the closing of the polls for
each matter upon which the stockholders will vote at a meeting.

      Section 2.10. Consent of Stockholders in Lieu of Meeting. Stockholders of the Corporation may not act by written consent in lieu of
holding an annual or special meeting of stockholders.

                                                                   ARTICLE III

                                                            BOARD OF DIRECTORS

      Section 3.1. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of its Board of
Directors. In addition to the powers and authorities by these Bylaws expressly conferred upon them, the Board of Directors may exercise all
such powers of the Corporation and do all such lawful acts and things as are not by law, by the Certificate of Incorporation or by these Bylaws
required to be exercised or done by the stockholders.

      Section 3.2. Number, Tenure and Qualifications. Subject to the rights of the holders of any series of Preferred Stock, or any other
series or class of stock as set forth in the Certificate of Incorporation, to elect directors under specified circumstances, the number of directors
shall be fixed from time to time exclusively pursuant to a resolution adopted by a majority of the Whole Board.

     Section 3.3. Regular Meetings. A regular meeting of the Board of Directors shall be held without notice other than this Bylaw
immediately after, and at the same place as, each annual meeting of stockholders. The Board of Directors may, by resolution, provide the time
and place for the holding of additional regular meetings without notice other than such resolution.

      Section 3.4. Special Meetings. Special meetings of the Board of Directors shall be called at the request of the Chairman of the Board, the
President or a majority of the Board of Directors. The person or persons authorized to call special meetings of the Board of Directors may fix
the place and time of the meetings.

      Section 3.5. Notice. Notice of any special meeting shall be given to each director at his business or residence in writing or by telegram or
by telephone communication. If mailed, such notice shall be deemed adequately delivered when deposited in the United States mails so
addressed, with postage thereon prepaid, at least five days before such meeting. If by telegram, such notice shall be deemed adequately
delivered when the telegram is delivered to the telegraph company at least twenty-four hours before such meeting. If by facsimile transmission,
such notice shall be transmitted at least twenty-four hours before such meeting. If by telephone, the notice shall be given at least twelve hours
prior to the time set for the meeting. Neither the

                                                                          5
business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice of such
meeting, except for amendments to these Bylaws as provided under Section 8.1 of Article VIII hereof. A meeting may be held at any time
without notice if all the directors are present (except as otherwise provided by law) or if those not present waive notice of the meeting in
writing, either before or after such meeting.

     Section 3.6. Conference Telephone Meetings. Members of the Board of Directors, or any committee thereof, may participate in a
meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at
such meeting.

      Section 3.7. Quorum. A whole number of directors equal to at least a majority of the Whole Board shall constitute a quorum for the
transaction of business, but if at any meeting of the Board of Directors there shall be less than a quorum present, a majority of the directors
present may adjourn the meeting from time to time without further notice. The act of the majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board of Directors.

      Section 3.8. Vacancies. Subject to the rights of the holders of any series of Preferred Stock, or any other series or class of stock as set
forth in the Certificate of Incorporation, to elect additional directors under specified circumstances, and unless the Board of Directors otherwise
determines, vacancies resulting from death, resignation, retirement, disqualification, removal from office or other cause, and newly created
directorships resulting from any increase in the authorized number of directors, may be filled only by the affirmative vote of a majority of the
remaining directors, though less than a quorum of the Board of Directors, and directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of office of the class to which they have been elected expires and until such director’s
successor shall have been duly elected and qualified. No decrease in the number of authorized directors constituting the Whole Board shall
shorten the term of any incumbent director.

     Section 3.9. Committee.

      (A) The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or
members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Any such
committee, to the extent permitted by law and to the extent provided in the resolution of the Board of Directors, shall have and may exercise all
the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal
of the Corporation to be affixed to all papers which may require it.

                                                                         6
      (B) Unless the Board of Directors otherwise provides, each committee designated by the Board of Directors may make, alter and repeal
rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to these Bylaws.

      Section 3.10. Removal. Subject to the rights of the holders of any series of Preferred Stock, or any other series or class of stock as set
forth in the Certificate of Incorporation, to elect additional directors under specified circumstances, any director, or the entire Board of
Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 75 percent of
the voting power of the then outstanding Voting Stock, voting together as a single class.

                                                                  ARTICLE IV

                                                                   OFFICERS

      Section 4.1. Elected Officers. The elected officers of the Corporation shall be a Chairman of the Board, a President, a Secretary, a
Treasurer, and such other officers as the Board of Directors from time to time may deem proper. The Chairman of the Board shall be chosen
from the directors. All officers chosen by the Board of Directors shall each have such powers and duties as generally pertain to their respective
offices, subject to the specific provisions of this Article IV. Such officers shall also have powers and duties as from time to time may be
conferred by the Board of Directors or by any committee thereof.

      Section 4.2. Election and Term of Office. The elected officers of the Corporation shall be elected annually by the Board of Directors at
the regular meeting of the Board of Directors held after each annual meeting of the stockholders. If the election of officers shall not be held at
such meeting, such election shall be held as soon thereafter as convenient. Subject to Section 4.7 of these Bylaws, each officer shall hold office
until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign.

       Section 4.3. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the stockholders and of the Board of
Directors. The Chairman of the Board shall be responsible for the general management of the affairs of the Corporation and shall perform all
duties incidental to his office which may be required by law and all such other duties as are properly required of him by the Board of Directors.
Except where by law the signature of the President is required, the Chairman of the Board shall possess the same power as the President to sign
all certificates, contracts, and other instruments of the Corporation which may be authorized by the Board of Directors. He shall make reports
to the Board of Directors and the stockholders, and shall perform all such other duties as are properly required of him by the Board of
Directors. He shall see that all orders and resolutions of the Board of Directors and of any committee thereof are carried into effect.

     Section 4.4. President. The President shall act in a general executive capacity and shall assist the Chairman of the Board in the
administration and operation of the Corporation’s business and general supervision of its policies and affairs. The President shall, in the
absence of or because of the inability to act of the Chairman of the Board, perform all duties of the

                                                                         7
Chairman of the Board and preside at all meetings of stockholders and of the Board of Directors. The President may sign, alone or with the
Secretary, or an Assistant Secretary, or any other proper officer of the Corporation authorized by the Board of Directors, certificates, contracts,
and other instruments of the Corporation as authorized by the Board of Directors.

      Section 4.5. Secretary. The Secretary shall give, or cause to be given, notice of all meetings of stockholders and directors and all other
notices required by law or by these Bylaws, and in case of his absence or refusal or neglect so to do, any such notice may be given by any
person thereunto directed by the Chairman of the Board or the President, or by the Board of Directors, upon whose request the meeting is called
as provided in these Bylaws. He shall record all the proceedings of the meetings of the Board of Directors, any committees thereof and the
stockholders of the Corporation in a book to be kept for that purpose, and shall perform such other duties as may be assigned to him by the
Board of Directors, the Chairman of the Board or the President. He shall have the custody of the seal of the Corporation and shall affix the
same to all instruments requiring it, when authorized by the Board of Directors, the Chairman of the Board or the President, and attest to the
same.

      Section 4.6. Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate
receipts and disbursements in books belonging to the Corporation. The Treasurer shall deposit all moneys and other valuables in the name and
to the credit of the Corporation in such depositaries as may be designated by the Board of Directors. The Treasurer shall disburse the funds of
the Corporation as may be ordered by the Board of Directors, the Chairman of the Board, or the President, taking proper vouchers for such
disbursements. The Treasurer shall render to the Chairman of the Board, the President and the Board of Directors, whenever requested, an
account of all his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the
Treasurer shall give the Corporation a bond for the faithful discharge of his duties in such amount and with such surety as the Board of
Directors shall prescribe.

     Section 4.7. Removal. Any officer elected by the Board of Directors may be removed by the Board of Directors whenever, in their
judgment, the best interests of the Corporation would be served thereby. No elected officer shall have any contractual rights against the
Corporation for compensation by virtue of such election beyond the date of the election of his successor, his death, his resignation or his
removal, whichever event shall first occur, except as otherwise provided in an employment contract or an employee plan.

     Section 4.8. Vacancies. A newly created office and a vacancy in any office because of death, resignation, or removal may be filled by the
Board of Directors for the unexpired portion of the term at any meeting of the Board of Directors.

                                                                         8
                                                                    ARTICLE V

                                                 STOCK CERTIFICATES AND TRANSFERS

      Section 5.1. Stock Certificates and Transfers.

      (A) The interest of each stockholder of the Corporation shall be evidenced by certificates for shares of stock in such form as the
appropriate officers of the Corporation may from time to time prescribe. The shares of the stock of the Corporation shall be transferred on the
books of the Corporation by the holder thereof in person or by his attorney, upon surrender for cancellation of certificates for the same number
of shares, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, and with such proof of the authenticity
of the signature as the Corporation or its agents may reasonably require.

      (B) The certificates of stock shall be signed, countersigned and registered in such manner as the Board of Directors may by resolution
prescribe, which resolution may permit all or any of the signatures on such certificates to be in facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at
the date of issue.

                                                                    ARTICLE VI

                                                               INDEMNIFICATION

      Section 6.1. Right to Indemnification. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable
law as it presently exists or may hereafter be amended, any person (an “Indemnitee”) who was or is made or is threatened to be made a party or
is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”), by reason of
the fact that he, or a person for whom he is the legal representative, is or was a director or officer of the Corporation or, while a director or
officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability
and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such Indemnitee. Notwithstanding the preceding sentence,
except as otherwise provided in Section 6.3, the Corporation shall be required to indemnify an Indemnitee in connection with a proceeding (or
part thereof) commenced by such Indemnitee only if the commencement of such proceeding (or part thereof) by the Indemnitee was authorized
by the Board of Directors of the Corporation.

      Section 6.2. Prepayment of Expenses. The Corporation shall pay the expenses (including attorneys’ fees) incurred by an Indemnitee in
defending any proceeding in advance of its final disposition, provided , however , that, to the extent required by law, such payment of expenses
in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the Indemnitee to repay all amounts
advanced if it should be ultimately determined that the Indemnitee is not entitled to be indemnified under this Article VI or otherwise.

      Section 6.3. Claims. If a claim for indemnification or payment of expenses under this Article VI is not paid in full within sixty days after
a written claim therefor by the Indemnitee has been received by the Corporation, the Indemnitee may file suit to recover the unpaid amount

                                                                           9
of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the
Corporation shall have the burden of proving that the Indemnitee is not entitled to the requested indemnification or payment of expenses under
applicable law.

      Section 6.4. Nonexclusivity of Rights. The rights conferred on any Indemnitee by this Article VI shall not be exclusive of any other
rights which such Indemnitee may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these Bylaws,
agreement, vote of stockholders or disinterested directors or otherwise.

      Section 6.5. Other Sources. The Corporation’s obligation, if any, to indemnify or to advance expenses to any Indemnitee who was or is
serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or nonprofit
entity shall be reduced by any amount such Indemnitee may collect as indemnification or advancement of expenses from such other
corporation, partnership, joint venture, trust, enterprise or nonprofit enterprise.

      Section 6.6. Amendment or Repeal. Any repeal or modification of the foregoing provisions of this Article VI shall not adversely affect
any right or protection hereunder of any Indemnitee in respect of any act or omission occurring prior to the time of such repeal or modification.

      Section 6.7. Other Indemnification and Prepayment of Expenses. This Article VI shall not limit the right of the Corporation, to the
extent and in the manner permitted by law, to indemnify and to advance expenses to persons other than Indemnitees when and as authorized by
appropriate corporate action.

                                                                  ARTICLE VII

                                                      MISCELLANEOUS PROVISIONS

    Section 7.1. Fiscal Year. The fiscal year of the Corporation shall begin on the first day of January and end on the thirty-first day of
December of each year.

      Section 7.2. Dividends. The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its
outstanding shares in the manner and upon the terms and conditions provided by law and its Certificate of Incorporation.

     Section 7.3. Seal. The corporate seal shall have inscribed the name of the Corporation thereon and shall be in such form as may be
approved from time to time by the Board of Directors.

      Section 7.4. Waiver of Notice. Whenever any notice is required to be given to any stockholder or director of the Corporation under the
provisions of the General Corporation Law of the State of Delaware, a waiver thereof in writing, signed by the person or persons entitled to
such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be
transacted at, nor the purpose of, any annual or special meeting of the stockholders of the Board of Directors need be specified in any waiver of
notice of such meeting.

                                                                         10
      Section 7.5. Audits. The accounts, books and records of the Corporation shall be audited upon the conclusion of each fiscal year by an
independent certified public accountant selected by the Board of Directors, and it shall be the duty of the Board of Directors to cause such audit
to be made annually.

      Section 7.6. Resignations. Any director or any officer, whether elected or appointed, may resign at any time by serving written notice of
such resignation on the Chairman of the Board, the President or the Secretary, and such resignation shall be deemed to be effective as of the
close of business on the date said notice is received by the Chairman of the Board, the President, or the Secretary or at such later date as is
stated therein. No formal action shall be required of the Board of Directors or the stockholders to make any such resignation effective.

      Section 7.7. Contracts. Except as otherwise required by law, the Certificate of Incorporation or these Bylaws, any contracts or other
instruments may be executed and delivered in the name and on the behalf of the Corporation by such officer or officers of the Corporation as
the Board of Directors may from time to time direct. Such authority may be general or confined to specific instances as the Board may
determine. The Chairman of the Board, the President or any Vice President may execute bonds, contracts, deeds, leases and other instruments
to be made or executed for or on behalf of the Corporation. Subject to any restrictions imposed by the Board of Directors or the Chairman of
the Board, the President or any Vice President of the Corporation may delegate contractual powers to others under his jurisdiction, it being
understood, however, that any such delegation of power shall not relieve such office of responsibility with respect to the exercise of such
delegated power.

      Section 7.8. Proxies. Unless otherwise provided by resolution adopted by the Board of Directors, the Chairman of the Board, the
President or any Vice President may from time to time appoint an attorney or attorneys or agent or agents of the Corporation, in the name and
on behalf of the Corporation, to cast the votes which the Corporation may be entitled to cast as the holder of stock or other securities in any
other corporation or other entity, any of whose stock or other securities may be held by the Corporation, at meetings of the holders of the stock
or other securities of such other corporation or other entity, or to consent in writing, in the name of the Corporation as such holder, to any
action by such other corporation or other entity, and may instruct the person or persons so appointed as to the manner of casting such votes or
giving such consent, and may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal or
otherwise, all such written proxies or other instruments as he may deem necessary or proper in the premises.

                                                                ARTICLE VIII

                                                               AMENDMENTS

     Section 8.1. Amendments. These Bylaws may be amended, altered, added to, rescinded or repealed at any meeting of the Board of
Directors or of the stockholders, provided notice of the proposed change was given in the notice of the meeting and, in the case of a

                                                                       11
meeting of the Board of Directors, in a notice given no less than twenty-four hours prior to the meeting; provided , however , that,
notwithstanding any other provisions of these Bylaws or any provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any affirmative vote of the holders of any particular class or series of the stock required by law, the Certificate of Incorporation or
these Bylaws, the affirmative vote of the holders of at least 75 percent of the voting power of the then outstanding Voting Stock, voting
together as a single class, shall be required in order for stockholders to alter, amend or repeal any provision of these Bylaws or to adopt any
additional bylaw.

                                                                         12
                                                                                                                                         Exhibit 5.1

                                                                                           555 Eleventh Street, N.W., Suite 1000
                                                                                           Washington, D.C. 20004-1304
                                                                                           Tel: (202) 637-2200 Fax: (202) 637-2201
                                                                                           www.lw.com




                                                                                           FIRM / AFFILIATE OFFICES
                                                                                           Boston               New York
                                                                                           Brussels             Northern Virginia
                                                                                           Chicago              Orange County
                                                                                           Frankfurt            Paris
                                                                                           Hamburg              San Diego
                                                                                           Hong Kong            San Francisco
October 27, 2005
                                                                                           London               Shanghai
                                                                                           Los Angeles          Silicon Valley
Cbeyond Communications, Inc.                                                               Milan                Singapore
320 Interstate North Parkway, Suite 300                                                    Moscow               Tokyo
Atlanta, Georgia 30339                                                                     New Jersey           Washington, D.C.

               Re:    Cbeyond Communications, Inc.; Registration Statement (File No. 333-124971) on Form S-1 for the issuance and sale of
                      shares of Common Stock, par value $0.01 per share

Ladies and Gentlemen:

      We have acted as special counsel to Cbeyond Communications, Inc., a Delaware corporation (the “Company”), in connection with the
proposed registration of up to (i) 6,764,705 shares (including 882,352 shares subject to the underwriters’ over-allotment option) (the
“Underwritten Shares”) of common stock of the Company, par value $0.01 per share (the “Common Stock”) and (ii) a total number of shares
equal to $3.0 million, at the public offering price per share, of Common Stock (the “Concurrent Shares” and, together with the Underwritten
Shares, the “Shares”) pursuant to a registration statement on Form S-1 under the Securities Act of 1933, as amended (the “Act”), filed with the
Securities and Exchange Commission (the “Commission”) on May 16, 2005 (File No. 333–124971), as amended to date (the “Registration
Statement”). This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Act, and no
opinion is expressed herein as to any matter pertaining to the contents of the Registration Statement or Prospectus, other than as to the validity
of the Shares.

       As such counsel, we have examined such matters of fact and questions of law as we have considered appropriate for purposes of this
letter. With your consent, we have relied upon the foregoing and upon certificates and other assurances of officers of the Company and others
as to factual matters without having independently verified such factual matters.

      We are opining herein only as to General Corporation Law of the State of Delaware, and we express no opinion with respect to the
applicability to the subject transaction, or the effect thereon, of any other laws.

       Subject to the foregoing, it is our opinion that, as of the date hereof, when certificates representing the Shares in the form of the specimen
certificate examined by us have been manually signed by an authorized officer of the transfer agent and registrar therefor, and have been
delivered to and paid for by the underwriters and by the participating stockholders in the circumstances contemplated by the form of
underwriting agreement and by the form of subscription agreement each respectively filed as an exhibit to the Registration Statement, the
issuance and sale of the Shares will have been duly authorized by all necessary corporate action of the Company, and the Shares will be validly
issued, fully paid and nonassessable.

      This opinion is for your benefit in connection with the Registration Statement and may be relied upon by you and by persons entitled to
rely upon it pursuant to the applicable provisions of federal securities laws. We consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to our firm in the Prospectus under the heading “Legal Matters.” In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the
Commission thereunder.

                                                                                           Very truly yours,

                                                                                           /s/ Latham & Watkins LLP
                                                                                                                                       Exhibit 10.8

THIS WARRANT AND THE COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION, AND MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAWS. THE OFFERING OF THIS SECURITY HAS NOT BEEN REVIEWED OR
APPROVED BY ANY STATE SECURITIES ADMINISTRATOR.

                                   AMENDED AND RESTATED STOCK SUBSCRIPTION WARRANT

                                                         To Purchase Common Stock of
                                                         Cbeyond Communications, Inc.

Date of Initial Issuance:                 November 1, 2002
Number of Shares:                         Up to 2,768,744, as calculated below
Initial Warrant Price:                    $0.01
Expiration Date:                          March 31, 2010

      THIS CERTIFIES THAT for value received, CISCO SYSTEMS CAPITAL CORPORATION , a Nevada corporation, or its
registered assigns (hereinafter called “Holder”) shall be entitled to receive from CBEYOND COMMUNICATIONS, INC. , a Delaware
corporation (“Company”), upon the exercise of this Warrant (which exercise shall happen automatically upon the occurrence of a Sale Trigger
Event and upon the election of Holder in accordance with the terms hereof during the Post-Exercise Event Term, so long as such exercise
occurs on or before March 31, 2010 (the “Expiration Date”)), a number of shares of common stock, $0.01 par value, of Company (the
“Common Stock”) equal to the product of (x) 2,768,744, multiplied by (y) the Additional Equity Percentage, at the Warrant Price, payable as
provided herein. The exercise of this Warrant shall be subject to the provisions, limitations and restrictions herein contained. After the earlier to
occur of (x) a Qualified IPO and (y) a Tranche 3 Loan Drawdown, this Warrant may be exercised in whole or in part during the Post-Exercise
Event Term. This Amended And Restated Stock Subscription Warrant replaces that certain Stock Subscription Warrant initially issued on
November 1, 2002 covering 2,768,744 shares of Common Stock of the Company.

SECTION 1. Definitions .

     For all purposes of this Warrant, the following terms shall have the meanings indicated (any capitalized terms used herein and not
otherwise defined herein to have the meanings ascribed to them in the Agreement):

      “ Additional Equity Percentage ” shall mean, as of the date of the Trigger Event, the then current Equity Value of Company minus $300
million divided by $100 million; provided , however , that, for purposes of the calculation of the Additional Equity Percentage, if the Equity
Value of Company as of the date of the Trigger Event shall be greater than $400 million, the
Equity Value of Company shall be deemed to be $400 million. If the Equity Value of Company as of the date of the Trigger Event shall be
$300 million or less, then the Additional Equity Percentage shall equal zero. In the event that the Trigger Event is the occurrence of a Tranche
3 Loan Drawdown, the Additional Equity Percentage shall be deemed to be 100%.

      “ Agreement ” shall mean the Second Amended and Restated Credit Agreement dated as of November 1, 2002 among Company, the
Borrower each Additional Borrower named therein, Holder, the other Lenders named therein and the Agent, as amended by Amendment No. 1,
dated June 30, 2003, and as amended by Amendment No. 2, dated March 25, 2004, under which Holder and the other Lenders have agreed to
make certain credit extensions to Company.

      “ Appraiser ” shall mean an independent investment bank or other firm qualified to act as an appraiser and having experience in the
telecommunications industry.

    “ Borrower ” shall mean Cbeyond Communications LLC, a Delaware limited liability company and wholly-owned subsidiary of the
Company, and a borrower under the Agreement.

       “ Equity Value ” shall mean (i) in the event that the Trigger Event is a transaction described in subsection (a) of the definition of “Trigger
Event”, the aggregate of any cash, marketable securities (the value of which shall be equal to average of the daily closing prices of such
securities for the 15 consecutive business days ending on the last business day before the day in question) and other consideration (the fair
market value of which shall be valued in good faith by the Board of the Company (the “ Board ”)) received by Company as consideration, less
the liabilities of Company immediately after consummation of such transaction, (ii) in the event that the Trigger Event is a transaction
described in subsection (b) of the definition of “Trigger Event”, the aggregate of any cash, marketable securities (the value of which shall be
equal to average of the daily closing prices of such securities for the 15 consecutive business days ending on the last business day before the
day in question) and other consideration (the fair market value of which shall be valued in good faith by the Board) received by the selling
stockholders of Company pursuant to such transaction, and (iii) in the event that the Trigger Event is a Qualified IPO, the price per share of
Common Stock as set forth in the Qualified IPO prospectus multiplied by the number of shares of Common Stock outstanding (on a fully
diluted basis assuming the conversion or exercise of all securities convertible into or exercisable for Common Stock and including, without
limitation, this Warrant) immediately prior to such Qualified IPO, plus the aggregate liquidation preference of all outstanding shares of
preferred stock of Company immediately prior to such Qualified IPO that are not convertible into shares of Common Stock. With respect to
any good faith valuation of the fair market value of consideration made by the Board in accordance with this definition, Holder shall have the
right, within ten (10) days of its receipt of any such valuation, to give notice to Company that it disagrees with such valuation. Holder and
Company shall then have ten (10) days from the date of such notice by Holder to discuss and mutually agree upon such valuation. If, upon the
expiration such ten (10) day period, Holder and Company have not mutually agreed upon such valuation, then an appraisal of the fair market
value of such consideration shall be conducted in accordance with this paragraph. The Appraiser shall be mutually agreed upon by Holder and
Company within ten (10) days of the end of the ten (10) day period set forth in the previous sentence. In the event that Holder and

                                                                          2
Company are unable to mutually agree upon the Appraiser within such ten (10) day period, then the Appraiser shall be selected by the President
of the American Arbitration Association (the “ AAA ”) in New York, New York, who shall utilize the criteria set forth in the definition of
“Appraiser” to make such a selection. Upon being selected by the parties or the President of the AAA, as the case may be, the Appraiser shall
have twenty (20) days to make a determination with respect to the fair market value of the applicable consideration. Such valuation by the
Appraiser shall be conclusive and binding on Holder and Company. All costs arising out of or related to such appraisal shall be borne by
Holder.

      “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended from time to time.

      “ Exercise Event ” shall mean the occurrence of either (x) a Qualified IPO, or (y) a Tranche 3 Loan Drawdown.

      “ Post-Exercise Event Term ” shall mean the period beginning on the earlier to occur of (x) the date of a Qualified IPO, and (y) the date
of a Tranche 3 Loan Drawdown and ending on the Expiration Date.

      “ Qualified IPO ” shall mean a sale of Common Stock by Company or selling shareholders of Company in which (a) the Common Stock
shall have been registered pursuant to an effective registration statement under the Securities Act, and (b) the aggregate net proceeds received
by Company and the selling stockholders in connection with such registration statement equals or exceeds $50 million.

    “ Registration Rights Agreement ” shall mean that certain Second Amended and Restated Registration Rights Agreement dated as of
November 1, 2002, as amended, among Company, the Preferred Holders and the Common Holders.

      “ Sale Trigger Event ” shall mean a Trigger Event which occurs in accordance with either subsection (a) or (b) of the definition of the
term “Trigger Event.”

      “ Securities Act ” shall mean the Securities Act of 1933, as amended from time to time.

     “ Tranche 3 Loan Drawdown ” shall mean the drawdown and receipt by the Borrower of all or any portion of the proceeds of the Tranche
3 Loans, or any equipment or services provided by Cisco Systems, Inc. representing the proceeds of such Tranche 3 Loans.

      “ Tranche 3 Loans ” shall have the meaning ascribed to such term in the Agreement.

       “ Trigger Event ” shall mean any of (a) the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions,
of all or substantially all of the assets of Company and its subsidiaries, taken as a whole (other than a collateral assignment by Company and its
subsidiaries of such assets to any lender as security for Company’s and its subsidiaries obligations to such lender), (b) a merger, consolidation,
sale of securities, recapitalization or similar transaction the result of which is that the beneficial owners of Company’s outstanding

                                                                          3
voting stock immediately prior to the transaction cease to own directly or indirectly at least 50% of the voting power of the outstanding voting
stock of Company or the surviving entity after consummation of such transaction(s), or (c) the date of an Exercise Event.

     “ Warrant Price ” shall mean $0.01 per share, subject to adjustment in accordance with Section 6 hereof.

     “ Warrants ” shall mean this Warrant and any other Warrant or Warrants issued to any transferees of such original holder or subsequent
holder.

     “ Warrant Shares ” shall mean shares of Common Stock, subject to adjustment or change as herein provided, purchased or purchasable by
Holder upon the exercise hereof.

SECTION 2. Exercise of Warrant.

     2.1 Procedure for Exercise of Warrant .

      (a) Upon the occurrence of a Sale Trigger Event (but only in the event that the Sale Trigger Event occurs on or before the Expiration
Date), this Warrant shall be automatically exercised and the Company shall issue to Holder that number of whole shares of Common Stock (or,
if applicable, the consideration per whole share that holders of Common Stock are entitled to receive in the transaction constituting a Sale
Trigger Event) computed using the formula set forth in subsection (d) below.

     (b) If the Exercise Event is a Qualified IPO, then upon the occurrence of a Qualified IPO, the Holder shall have the right, during the
Post-Exercise Event Term, to exercise this Warrant in whole or in part (but not as to any fractional share of Common Stock) by delivering to
Company at its office referred to in Section 13 hereof at any time and from time to time during the Post-Exercise Event Term of this Warrant
the Notice of Exercise in the form of Exhibit A attached hereto. In such event of a Qualified IPO, this Warrant shall be exercisable, in the
aggregate for all exercises of this Warrant, for an aggregate of up to that number of whole shares of Common Stock computed using the
formula set forth in subsection (d) below or, if the Holder elects to pay the Warrant Price in cash, the Holder shall receive, against such
payment of the Warrant Price, the full number of whole shares of Common Stock issuable upon such exercise.

      (c) If the Exercise Event is the occurrence of the Tranche 3 Loan Drawdown, then upon the occurrence of the Tranche 3 Loan Drawdown
the Holder shall have the right, during the Post-Exercise Event Term, to exercise this Warrant in whole or in part (but not as to any fractional
share of Common Stock) by delivering to Company at its office referred to in Section 13 hereof at any time and from time to time during the
Post-Exercise Event Term of this Warrant the Notice of Exercise in the form of Exhibit A attached hereto. In such event of the occurrence of
the Tranche 3 Loan Drawdown, this Warrant shall be exercisable, in the aggregate for all exercises of this Warrant, for an aggregate of up to
2,768,744 whole shares of Common Stock.

                                                                        4
     (d) The formula referred to in subsections (a) and (b) above shall be as follows:

                                            CS =       WCS x (CMP-WP)
                                                            CMP

Where

     CS          equals the number of shares of Common Stock to be issued to Holder
     WCS         equals the number of shares of Common Stock purchasable under the Warrant or, if only a portion of the Warrant is
                 being exercised, the portion of the Warrant being exercised (at the date of such calculation)
     CMP         equals the Current Market Price (at the date of such calculation)
     WP          equals the Warrant Price (as adjusted to the date of such calculation)

       (e) In the event of any exercise (whether in accordance with subsections (a), (b) or (c) above) of the rights represented by this Warrant, a
certificate or certificates for the shares of Common Stock so purchased (if applicable in the case of an exercise in accordance with subsection
(a) above), registered in the name of Holder or, subject to compliance with Section 7.2, such other name or names as may be designated by
Holder, shall be delivered to Holder hereof within a reasonable time, not exceeding fifteen (15) days after (i) the consummation of a Sale
Trigger Event, or (ii) the exercise of such rights in accordance with subsections (b) or (c). The person in whose name any certificate for shares
of Common Stock is issued upon such exercise shall for all purposes be deemed to have become the holder of record of such shares on the date
of the such exercise, irrespective of the date of delivery of such certificate, except that, if the date of such compliance is a date when the stock
transfer books of Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the
next succeeding date on which the stock transfer books are open.

      2.2 Transfer Restriction Legend . Each certificate for Warrant Shares shall bear the following legend (and any additional legend
required by (i) any applicable state securities laws and (ii) any securities exchange upon which such Warrant Shares may, at the time of such
exercise, be listed) on the face thereof unless at the time of exercise such Warrant Shares shall be registered under the Securities Act:

     “The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be sold or
     transferred in the absence of such registration or an exemption therefrom under said Act.”

Any certificate issued at any time in exchange or substitution for any certificate bearing such legend (except a new certificate issued upon
completion of a public distribution under a registration statement of the securities represented thereby) shall also bear such legend unless, in the
opinion of counsel for Holder thereof (which counsel shall be reasonably satisfactory to Company) the securities represented thereby are not, at
such time, required by law to bear such legend.

                                                                         5
SECTION 3. Covenants as to Common Stock . Company covenants and agrees that all shares of Common Stock that may be issued upon the
exercise of the rights represented by this Warrant shall, upon issuance, be validly issued, fully paid and nonassessable, and free from all taxes,
liens and charges with respect to the issue thereof. The Company further covenants and agrees that it shall pay when due and payable any and
all federal and state taxes (other than federal or state income taxes or similar laws) which may be payable in respect of the issue of this Warrant
or any Common Stock or certificates therefor issuable upon the exercise of this Warrant, except that, if Warrant Shares or new Warrants shall
be registered in a name or names other than the name of the Holder, funds sufficient to pay all transfer taxes payable as a result of such transfer
shall be paid by the Holder at the time of delivery of the Notice of Exercise.

SECTION 4. Representations and Warranties Regarding Capitalization Issues . As of the initial issuance hereof, Company does not have
outstanding any securities convertible into or exchangeable for, or any rights to subscribe for or to purchase, or any options or warrants for the
purchase of, or any agreement providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character
relating to, its capital stock, in each case other than as disclosed in writing to Holder prior to the date hereof.

SECTION 5. Adjustment of Number of Shares . Upon each adjustment of the Warrant Price as provided in Section 6 (other than clause
(i) thereof), Holder shall thereafter be entitled to purchase, at the Warrant Price resulting from such adjustment, only the number of shares
(calculated to the nearest tenth of a share) obtained by multiplying the Warrant Price in effect immediately prior to such adjustment by the
number of shares purchasable pursuant hereto immediately prior to such adjustment and dividing the product thereof by the Warrant Price
resulting from such adjustment.

SECTION 6. Adjustment of Warrant Price . The Warrant Price shall be subject to adjustment from time to time as follows:

      (i) If Company shall at any time or from time to time during the period commencing on the date of issuance of this Warrant and ending
upon the earlier to occur of (A) a Sale Trigger Event, (B) the exercise of the rights represented by this Warrant after the occurrence of Qualified
IPO, or (B) March 31, 2010 (the “Adjustment Period”), issue shares of Common Stock other than Excluded Stock (as hereinafter defined)
without consideration or for a consideration per share less than the Warrant Price in effect immediately prior to the issuance of such Common
Stock, the Warrant Price in effect immediately prior to each such issuance shall forthwith (except as provided in this clause (i)) be adjusted to a
price equal to the quotient obtained by dividing:

           (A) an amount equal to the sum of

           (x) the total number of shares of Common Stock outstanding (including any shares of Common Stock deemed to have been issued
           pursuant to subdivision (3) of this clause (i) and to clause (ii) below) immediately prior to such issuance multiplied by the Warrant
           Price in effect immediately prior to such issuance, plus

                                                                         6
     (y) the consideration received by Company upon such issuance,

by

     (B) the total number of shares of Common Stock outstanding (including any shares of Common Stock deemed to have been issued
     pursuant to subdivision (3) of this clause (i) and to clause (ii) below) immediately after the issuance of such Common Stock.

For the purposes of any adjustment of the Warrant Price pursuant to this clause (i), the following provisions shall be applicable:

1.    In the case of the issuance of Common Stock for cash, the consideration shall be deemed to be the amount of cash paid therefor
      after deducting therefrom any discounts, commissions or other expenses allowed, paid or incurred by Company for any
      underwriting or otherwise in connection with the issuance and sale thereof.

2.    In the case of the issuance of Common Stock for a consideration in whole or in part other than cash, the consideration other than
      cash shall be deemed to be the fair market value thereof as determined by the Board, irrespective of any accounting treatment;
      provided, however, that such fair market value as determined by the Board, together with any cash consideration being paid, shall
      not exceed an aggregate amount equal to the product of (i) the aggregate Current Market Price per share of Common Stock as
      determined as provided in clause (vii) below, multiplied by (ii) the number of shares of Common Stock being issued in such
      issuance.

3.    In the case of the issuance of (i) options to purchase or rights to subscribe for Common Stock, (ii) securities or obligations by their
      terms convertible into or exchangeable for Common Stock or (iii) options to purchase or rights to subscribe for such convertible or
      exchangeable securities or obligations:

      (A)    the aggregate maximum number of shares of Common Stock deliverable upon exercise of such options to purchase or rights
             to subscribe for Common Stock shall be deemed to have been issued at the time such options or rights were issued and for a
             consideration equal to the consideration (determined in the manner provided in subdivisions (1) and (2) above with the
             proviso in subdivision (2) being applied to the number of shares of Common Stock deliverable upon such exercise), if any,
             received by Company upon the issuance of such options or rights plus the minimum purchase price provided in such options
             or rights for the Common Stock covered thereby;

      (B)    the aggregate maximum number of shares of Common Stock deliverable upon conversion of or in exchange for any such
             convertible or exchangeable securities or obligations or upon the exercise of options to

                                                                   7
                  purchase or rights to subscribe for such convertible or exchangeable securities or obligations and subsequent conversions or
                  exchanges thereof shall be deemed to have been issued at the time such securities or obligations were issued or such options
                  or rights were issued and for a consideration equal to the consideration received by Company for any such securities or
                  obligations and related options or rights (excluding any cash received on account of accrued interest or accrued dividends),
                  plus the additional consideration, if any, to be received by Company upon the conversion or exchange of such securities or
                  obligations or the exercise of any related options or rights (the consideration in each case to be determined in the manner
                  provided in subdivisions (1) and (2) above with the proviso in subdivision (2) being applied to the number of shares of
                  Common Stock deliverable upon such conversion, exchange or exercise);

           (C)     on any change in the number of shares of Common Stock deliverable upon exercise of any such options or rights or
                   conversion of or exchange for such convertible or exchangeable securities or obligations, other than a change resulting from
                   the antidilution provisions thereof, the Warrant Price shall forthwith be readjusted to such Warrant Price as would have
                   obtained had the adjustment made upon the issuance of such options, rights or securities or obligations not converted prior
                   to such change or options or rights related to such securities or obligations not converted prior to such change being made
                   upon the basis of such change; and

           (D)     on the expiration of any such options or rights, the termination of any such rights to convert or exchange or the expiration of
                   any options or rights related to such convertible or exchangeable securities or obligations, the Warrant Price shall forthwith
                   be readjusted to such Warrant Price as would have obtained had the adjustment made upon the issuance of such options,
                   rights, securities or options or rights related to such securities or obligations being made upon the basis of the issuance of
                   only the number of shares of Common Stock actually issued upon the conversion or exchange of such securities or
                   obligations or upon the exercise of the options or rights related to such securities or obligations.

      (ii) “Excluded Stock” shall mean shares of Common Stock issued by the Company (1) as a stock dividend payable in shares of Common
Stock or upon any subdivision or split up of the outstanding shares of Common Stock, under any of the circumstances for which an adjustment
is provided in clauses (iii) or (iv) of this Section 6 or in Section 8, (2) in connection with the issuance of Common Stock (including any share
of Common Stock deemed to have been issued pursuant to subdivision (3) of clause (i) above) under any stock option or other similar incentive
plan or stock option arrangement approved by the Board (appropriately adjusted for stock splits and combinations) to directors, officers, or
employees of, consultants or providers of goods or services to, Company, Borrower or any of their respective Subsidiaries or any other person
eligible to acquire Common Stock of Company under said plans or arrangements, (3)

                                                                        8
upon conversion of shares of the Company’s Series B Participating Preferred Stock, par value $0.01 per share, (4) as non-voting Common
Stock issued in exchange for voting Common Stock (or vice versa) on a share for share basis, (5) which has already been deemed issued
hereunder and taken into account in the adjustment of the Warrant Price to the extent required by this Section 6, (6) in connection with the
issuances of Common Stock pursuant to the exercise of any warrant issued in connection with a public offering or private placement of debt
securities in an aggregate principal amount of not less than $25,000,000, and (7) in connection with the issuance of Common Stock pursuant to
the exercise of the warrant to purchase 24,969 shares of Common Stock issued to Holder.

      (iii) If, at any time during the Adjustment Period, the number of shares of Common Stock outstanding is increased by a stock dividend
payable in shares of Common Stock or by a subdivision or split-up of shares of Common Stock, then, following the record date fixed for the
determination of holders of Common Stock entitled to receive such stock dividend, subdivision or split-up, the Warrant Price shall be
appropriately decreased and the number of shares of Common Stock issuable upon the exercise hereof shall be increased in proportion to such
increase in outstanding shares.

      (iv) If, at any time during the Adjustment Period, the number of shares of Common Stock outstanding is decreased by a combination of
the outstanding shares of Common Stock, then, following the record date for such combination, the Warrant Price shall be appropriately
increased and the number of shares of Common Stock issuable upon the exercise hereof shall be decreased in proportion to such decrease in
outstanding shares.

       (v) In case, at any time during the Adjustment Period, Company shall declare a cash dividend upon its Common Stock payable otherwise
than out of earnings or earned surplus or shall distribute to holders of its Common Stock shares of its capital stock (other than Common Stock),
stock or other securities of other persons, evidences of indebtedness issued by Company or other persons, assets (excluding cash dividends and
distributions) or options or rights (excluding options to purchase and rights to subscribe for Common Stock or other securities of Company
convertible into or exchangeable for Common Stock), then, in each such case, immediately following the record date fixed for the
determination of the holders of Common Stock entitled to receive such dividend or distribution, the Warrant Price in effect thereafter shall be
determined by multiplying the Warrant Price in effect immediately prior to such record date by a fraction of which the numerator shall be an
amount equal to the difference of (x) the Current Market Price of one share of Common Stock minus (y) the fair market value (as determined
by the Board, whose determination shall be conclusive) of the amount of cash, stock, securities, evidences of indebtedness, assets, options or
rights, as the case may be, so distributed in respect of one share of Common Stock, and of which the denominator shall be such Current Market
Price.

     (vi) All calculations under this Section 6 shall be made to the nearest cent or to the nearest one-tenth (1/10) of a share, as the case may be.

      (vii) For the purpose of any computation pursuant to this Section 6, the Current Market Price at any date of one share of Common Stock
shall be deemed to be the average of the daily

                                                                         9
closing prices for the 10 consecutive business days ending on the last business day before the day in question (as adjusted for any stock
dividend, split, combination or reclassification that took effect during such 10 business day period). The closing price for each day shall be the
last reported sales price regular way or, in case no such reported sales took place on such day, the average of the last reported bid and asked
prices regular way, in either case on the principal national securities exchange on which the Common Stock is listed or admitted to trading or as
reported by Nasdaq (or if the Common Stock is not at the time listed or admitted for trading on any such exchange or if prices of the Common
Stock are not reported by Nasdaq then such price shall be equal to the average of the last reported bid and asked prices on such day as reported
by The National Quotation Bureau Incorporated or any similar reputable quotation and reporting service, if such quotation is not reported by
The National Quotation Bureau Incorporated); provided, however, that if the Common Stock is not traded in such manner that the quotations
referred to in this clause (vii) are available for the period required hereunder, the Current Market Price shall be determined in good faith by the
Board or, if such determination cannot be made, by a nationally recognized independent investment banking or accounting firm selected by the
Board (or if such selection cannot be made, by a nationally recognized independent investment banking or accounting firm selected by the
AAA in accordance with its rules).

      (viii) Whenever the Warrant Price shall be adjusted as provided in this Section 6, Company shall prepare a statement showing the facts
requiring such adjustment and the Warrant Price that shall be in effect after such adjustment. Company shall cause a copy of such statement to
be sent by mail, first class postage prepaid, to each Holder at its, his or her address appearing on Company’s records. Where appropriate, such
copy may be given in advance and may be included as part of the notice required to be mailed under the provisions of clause (x) of this
Section 6.

      (ix) Adjustments made pursuant to clauses (iii), (iv) and (v) above shall be made on the date such dividend, subdivision, split-up,
combination or distribution, as the case may be, is made, and shall become effective at the opening of business on the business day next
following the record date for the determination of stockholders entitled to such dividend, subdivision, split-up, combination or distribution.

       (x) In the event Company shall propose to take any action of the types described in clauses (iii), (iv), or (v) of this Section 6, Company
shall forward, at the same time and in the same manner, to Holder such notice, if any, which Company shall give to the holders of capital stock
of Company.

      (xi) In any case constituting a Sale Trigger Event in which the provisions of this Section 6 shall require that an adjustment shall become
effective immediately after a record date for such Sale Trigger Event, Company may defer until the occurrence of such Sale Trigger Event
issuing to Holder all or any part of this Warrant which is exercised after such record date the additional shares of capital stock issuable upon
such exercise by reason of the adjustment required by such Sale Trigger Event over and above the shares of capital stock issuable upon such
exercise before giving effect to such adjustment; provided, however, that Company shall deliver to such Holder a due bill or other appropriate
instrument evidencing such Holder’s right to receive such additional shares upon the occurrence of such Sale Trigger Event requiring such
adjustment.

                                                                        10
SECTION 7. Ownership .

      7.1 Ownership of This Warrant . Company may deem and treat the person in whose name this Warrant is registered as the holder and
owner hereof (notwithstanding any notations of ownership or writing hereon made by anyone other than Company) for all purposes and shall
not be affected by any notice to the contrary until presentation of this Warrant for registration of transfer as provided in this Section 7.

      7.2 Transfer and Replacement . Subject to the restrictions of Section 7.3 hereof, this Warrant and all rights hereunder are transferable in
whole or in part upon the books of Company by Holder hereof in person or by duly authorized attorney, and a new Warrant or Warrants, of the
same tenor as this Warrant but registered in the name of the transferee or transferees (and in the name of Holder, if a partial transfer is effected)
shall be made and delivered by Company upon surrender of this Warrant duly endorsed, at the office of Company referred to in Section 13
hereof, together with a properly executed Assignment (in the form of Exhibit B or Exhibit C hereto, as the case may be). Upon receipt by
Company of evidence reasonably satisfactory to it of the loss, theft or destruction, and, in such case, of indemnity or security reasonably
satisfactory to it, and upon surrender of this Warrant if mutilated, Company shall make and deliver a new Warrant of like tenor, in lieu of this
Warrant. This Warrant shall be promptly cancelled by Company upon the surrender hereof in connection with any transfer or replacement.
Except as otherwise provided above, in the case of the loss, theft or destruction of a Warrant, Company shall pay all expenses, taxes and other
charges payable in connection with any transfer or replacement of this Warrant, other than stock transfer taxes (if any) payable in connection
with a transfer of this Warrant, which shall be payable by Holder. Holder shall not transfer this Warrant and the rights hereunder except in
compliance with federal and state securities laws.

        7.3 Restrictions on Transfer . Holder shall not transfer, directly or indirectly, the Warrant or any Warrant Shares owned or controlled by
it (i) to any person with substantial operations as a telecommunications service provider, (ii) in amounts of less than 100,000 Warrant Shares in
any single transaction (such number shall be adjusted proportionately each time an adjustment is made under Section 5 as to the number of
shares subject to this Warrant), or (iii) to any person who is not an “accredited investor” as that term is defined in Regulation D promulgated
under the Securities Act.

SECTION 8.

      8.1 Mergers, Consolidation, Sales . In the case of any proposed consolidation or merger of Company with another entity, or the
proposed sale of all or substantially all of its assets to another person or entity, that does not constitute a Trigger Event or any other proposed
reorganization or reclassification of the capital stock of Company, then, as a condition of such consolidation, merger, sale, reorganization or
reclassification that does not constitute a Trigger Event, Company shall give 30 days’ prior written notice thereof to Holder hereof and lawful
and adequate provision shall be made whereby Holder shall thereafter have the right to receive upon

                                                                         11
the basis and upon the terms and conditions specified herein, in lieu of the shares of the Common Stock of Company immediately theretofore
purchasable hereunder, such shares of stock, securities or assets as may (by virtue of such consolidation, merger, sale, reorganization or
reclassification) be issued or payable with respect to or in exchange for the number of shares of such Common Stock purchasable hereunder
immediately before such consolidation, merger, sale, reorganization or reclassification. In any such case appropriate provision shall be made
with respect to the rights and interests of Holder to the end that the provisions hereof shall thereafter be applicable as nearly as may be
practicable, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise of this Warrant.

     8.2 Approved Sale .

      (i) Notwithstanding the foregoing, in the event that the Board votes for and consents to a Sale Trigger Event (an “Approved Sale”) Holder
(which term when used in this Section 8.2 shall include Holder’s successors, assigns and transferees) shall vote for (to the extent Holder has
voting rights), consent to and raise no objections against such Approved Sale. If the Approved Sale is structured (A) as a merger or
consolidation, Holder shall waive any dissenters rights, appraisal rights or similar rights in connection with such merger or consolidation and
agree to accept in exchange for the Warrant, the consideration the Holder would have received had the Warrant been exercised for shares of
Common Stock prior to such merger or consolidation, or (B) as a sale of securities, Holder shall agree to sell all of Holder’s Warrants, Warrant
Shares and other securities of Company held by Holder on the terms and conditions of the Approved Sale. Holder shall take all necessary or
desirable actions in connection with the consummation of the Approved Sale as reasonably requested by the Board.

      (ii) The obligations of Holder with respect to an Approved Sale are subject to the satisfaction of the following conditions: (A) upon the
consummation of the Approved Sale, Holder shall, without duplication, receive in consideration of the shares of Common Stock then held by
Holder (including shares acquired by Holder upon exercise of its Warrants in connection with such Approved Sale), the same per share
consideration that is received by other holders of Common Stock in consideration of their shares of Common Stock that are sold in or voted in
favor of such Approved Sale, and (B) if the holders of Common Stock and/or Class B Preferred Stock (or equity securities exchangeable
therefor) are given an option as to the form and consideration to be received, Holder shall be given the same option.

SECTION 9. Notice of Dissolution or Liquidation . In case of any distribution of the assets of Company in dissolution or liquidation (except
under circumstances when the foregoing Section 8 shall be applicable), Company shall give notice thereof to Holder hereof and shall make no
distribution to shareholders until the expiration of ten (10) days from the date of mailing of the aforesaid notice and, in any case, Holder hereof
may exercise this Warrant within thirty (30) days from the date of the giving of such notice, and all rights herein granted not so exercised
within such thirty-day period shall thereafter become null and void. Such distribution of the assets of Company shall, for purposes of this
Section 9, be deemed a Sale Trigger Event and the date of such notice shall, for purposes of this Section 9, be deemed the date of a Sale Trigger
Event.

                                                                        12
SECTION 10. Fractional Shares . Fractional shares shall not be issued upon the exercise of this Warrant but in any case where Holder would,
except for the provisions of this Section 10, be entitled under the terms hereof to receive a fractional share upon the complete exercise of this
Warrant, Company shall, upon the exercise of this Warrant for the largest number of whole shares then called for, pay a sum in cash equal to
the excess of the value of such fractional share (determined in such reasonable manner as may be prescribed in good faith by the Board) over
the Warrant Price for such fractional share.

SECTION 11. S pecial Arrangements of Company . Company covenants and agrees that during the Adjustment Period, unless otherwise
approved by Holder:

      11.1 Shall Not Amend Certificate . Company shall not amend its certificate or articles, as the case may be, of incorporation to eliminate
as an authorized class of capital stock that class denominated as “Common Stock” on the date hereof.

     11.2 Shall Bind Successors . This Warrant shall be binding upon any corporation or other person or entity succeeding to Company by
merger or consolidation.

SECTION 12. Registration . Company covenants and agrees that the Holder shall be offered the right to become a party to the Registration
Rights Agreement.

SECTION 13. Notices . Any notice or other document required or permitted to be given or delivered to Holder shall be delivered at, or sent by
certified or registered mail to, Holder at its address for notices set forth in the Agreement or to such other address as shall have been furnished
to Company in writing by Holder. Any notice or other document required or permitted to be given or delivered to Company shall be delivered
at, or sent by certified or registered mail to, Company at its address for notices set forth in the Agreement or to such other address as shall have
been furnished in writing to Holder by Company. Any notice so addressed and mailed by registered or certified mail shall be deemed to be
given when so mailed. Any notice so addressed and otherwise delivered shall be deemed to be given when actually received by the addressee.

SECTION 14. No Rights as Stockholder; Limitation of Liability . This Warrant shall not entitle Holder to any of the rights of a shareholder
of Company except upon exercise in accordance with the terms hereof. No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no mere enumeration herein of the rights or privileges of Holder, shall give rise to any liability of
Holder for the Warrant Price hereunder or as a shareholder of Company, whether such liability is asserted by Company or by creditors of
Company.

SECTION 15. Law Governing . THE VALIDITY, INTERPRETATION, AND ENFORCEMENT OF THIS WARRANT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.

SECTION 16. Amendments . This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by both parties (or any respective predecessor in interest thereof). The headings in this Warrant are for purposes of
reference only and shall not affect the meaning or construction of any of the provisions hereof.’

                                                                         13
         IN WITNESS WHEREOF, Company has caused this Warrant to be signed by its duly authorized officer this 31st day of March, 2004.

                                                                                   Cbeyond Communications, Inc.

                                                                                   By:          /s/ J. Robert Fugate

                                                                                   Title:       CFO

Agreed and Accepted

Cisco Systems Capital Corporation

By:            /s/ David A. Rogan

Title:         PRESIDENT, CISCO CAPITAL

                                                                     14
                                                                  EXHIBIT A

                                                      FORM OF NOTICE OF EXERCISE

                                                [To be signed only upon exercise of the Warrant]

                                            TO BE EXECUTED BY THE REGISTERED HOLDER
                                               TO EXERCISE THE ATTACHED WARRANT

      The undersigned hereby exercises the right to purchase                 shares of Common Stock which the undersigned is entitled to
purchase by the terms of the attached Warrant according to the conditions thereof, herewith directs Company to issue                 shares, and
either (i) directing the Company to withhold               shares in lieu of payment of the Warrant Price, as described in Section 2.1 of the
Warrant or (ii) enclosing payment of the Warrant Price for such shares].

     All shares to be issued pursuant hereto (i) shall be issued only following the making of usual and customary investment representations
appropriate under the circumstances and (ii) shall be issued in the name of and the initial address of such person to be entered on the books of
Cbeyond Communications, Inc. shall be:

     The shares are to be issued in certificates of the following denominations:



                                                                                       [Type Name of Holder]

                                                                                       By:
                                                                                       Title:

Dated:
                                                                EXHIBIT B

                                                         FORM OF ASSIGNMENT
                                                              (ENTIRE)

                                             [To be signed only upon transfer of entire Warrant]

                                          TO BE EXECUTED BY THE REGISTERED HOLDER
                                             TO TRANSFER THE ATTACHED WARRANT

FOR VALUE RECEIVED                                hereby sells, assigns and transfers unto                                 all rights of the
undersigned under and pursuant to the attached Warrant, and the undersigned does hereby irrevocably constitute and
appoint                       Attorney to transfer said Warrant on the books of Cbeyond Communications, Inc., with full power of
substitution.



                                                                                     [Type Name of Holder]

                                                                                     By:
                                                                                     Title:

Dated:

NOTICE

The signature to the foregoing Assignment must correspond to the name as written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
                                                                   EXHIBIT C

                                                            FORM OF ASSIGNMENT
                                                                 (PARTIAL)

                                               [To be signed only upon partial transfer of Warrant]

                                             TO BE EXECUTED BY THE REGISTERED HOLDER
                                                TO TRANSFER THE ATTACHED WARRANT

FOR VALUE RECEIVED                                              hereby sells, assigns and transfers unto                                      (i) the
rights of the undersigned to purchase                  shares of Common Stock under and pursuant to the attached Warrant, and (ii) on a
non-exclusive basis, all other rights of the undersigned under and pursuant to the attached Warrant, it being understood that the undersigned
shall retain, severally (and not jointly) with the transferee(s) named herein, all rights assigned on such non-exclusive basis. The undersigned
does hereby irrevocably constitute and appoint                                            Attorney to transfer said Warrant on the books of Cbeyond
Communications, Inc., with full power of substitution.



                                                                                         [Type Name of Holder]

                                                                                         By:
                                                                                         Title:

Dated:

NOTICE

The signature to the foregoing Assignment must correspond to the name as written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
                                                                                                                                  Exhibit 10.10

                                               CBEYOND COMMUNICATIONS, INC.
                                          FORM OF 2005 EQUITY INCENTIVE AWARD PLAN

                                                                 ARTICLE 1

                                                                  PURPOSE

      The purpose of the Cbeyond Communications, Inc. 2005 Equity Incentive Award Plan (the “ Plan ”) is to promote the success and
enhance the value of Cbeyond Communications, Inc., a Delaware corporation (the “ Company ”), by linking the personal interests of the
members of the Board, Employees, and Consultants to those of Company stockholders and by providing such individuals with an incentive for
performance to generate returns to Company stockholders. The Plan is further intended to provide flexibility to the Company in its ability to
motivate, attract, and retain the services of members of the Board, Employees, and Consultants upon whose judgment, interest, and special
effort the successful conduct of the Company’s operation is largely dependent.

                                                                 ARTICLE 2

                                                  DEFINITIONS AND CONSTRUCTION

     Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates
otherwise. The singular pronoun shall include the plural where the context so indicates.

      2.1 “ Administrator ” means the entity that conducts the general administration of the Plan as provided herein. With reference to the
administration of the Plan with respect to Awards granted to Independent Directors, the term “ Administrator ” shall refer to the Board. With
reference to the administration of the Plan with respect to any other Award, the term “ Administrator ” shall refer to the Committee unless the
Board has assumed the authority for administration of the Plan generally as provided in Section 13.1. With reference to the duties of the
Committee under the Plan which have been delegated to one or more persons pursuant to Section 13.5, the term “ Administrator ” shall refer to
such person(s) unless the Committee or the Board has revoked such delegation.

    2.2 “ Award ” means an Option, a Restricted Stock award, a Stock Appreciation Right award, a Dividend Equivalents award, a Stock
Payment award, a Restricted Stock Unit award or a Performance-Based Award granted to a Participant pursuant to the Plan.

     2.3 “ Award Agreement ” means any written or electronic agreement, contract, or other instrument or document evidencing an Award.

     2.4 “ Board ” means the Board of Directors of the Company.

      2.5 “ Cause ,” unless otherwise defined in an employment or services agreement between the Participant and the Company or any Parent
or Subsidiary, means a Participant’s dishonesty, fraud, gross or willful misconduct against the Company or any Parent or Subsidiary,
unauthorized use or disclosure of confidential information or trade secrets of the Company or any Parent or Subsidiary, or conviction of, or plea
of nolo contendre to, a crime punishable by law (except misdemeanor violations), in each case as determined by the Administrator, and its
determination shall be conclusive and binding .
     2.6 “ Change in Control ” means and includes each of the following:

            (a) the acquisition, directly or indirectly, by any “person” or “group” (as those terms are defined in Sections 3(a)(9), 13(d) and 14(d)
of the Exchange Act and the rules thereunder) of “beneficial ownership” (as determined pursuant to Rule 13d-3 under the Exchange Act) of
securities entitled to vote generally in the election of directors (“ voting securities ”) of the Company that represent 50% or more of the
combined voting power of the Company’s then outstanding voting securities, other than:

                (i) an acquisition by a trustee or other fiduciary holding securities under any employee benefit plan (or related trust) sponsored
     or maintained by the Company or any person controlled by the Company or by any employee benefit plan (or related trust) sponsored or
     maintained by the Company or any person controlled by the Company, or

              (ii) an acquisition of voting securities by the Company or a corporation owned, directly or indirectly by the stockholders of the
     Company in substantially the same proportions as their ownership of the stock of the Company, or

                 (iii) an acquisition of voting securities pursuant to a transaction described in subsection (c) below that would not be a Change
     in Control under subsection (c), or

                 (iv) an acquisition of voting securities pursuant to the Company’s initial public offering of the Stock;

            Notwithstanding the foregoing, the following event shall not constitute an “acquisition” by any person or group for purposes of this
Section 2.6: an acquisition of the Company’s securities by the Company which causes the Company’s voting securities beneficially owned by a
person or group to represent 50% or more of the combined voting power of the Company’s then outstanding voting securities; provided ,
however , that if a person or group shall become the beneficial owner of 50% or more of the combined voting power of the Company’s then
outstanding voting securities by reason of share acquisitions by the Company as described above and shall, after such share acquisitions by the
Company, become the beneficial owner of any additional voting securities of the Company, then such acquisition shall constitute a Change in
Control; or

            (b) during any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with
any new director(s) (other than a director designated by a person who shall have entered into an agreement with the Company to effect a
transaction described in subsections (a) or (c) of this Section 2.6 whose election by the Board or nomination for election by the Company’s
stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the
two year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof;
or

            (c) the consummation by the Company (whether directly involving the Company or indirectly involving the Company through one
or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or
substantially all of the Company’s assets or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:

                 (i) which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent
     (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the

                                                                         2
     transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or
     otherwise succeeds to the business of the Company (the Company or such person, the “ Successor Entity ”) directly or indirectly, at least
     a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and

                 (ii) after which no person or group beneficially owns voting securities representing 50% or more of the combined voting
     power of the Successor Entity; provided , however , that no person or group shall be treated for purposes of this paragraph (ii) as
     beneficially owning 50% or more of combined voting power of the Successor Entity solely as a result of the voting power held in the
     Company prior to the consummation of the transaction; or

           (d) the Company’s stockholders approve a liquidation or dissolution of the Company.

            For purposes of subsection (a) above, the calculation of voting power shall be made as if the date of the acquisition were a record
date for a vote of the Company’s stockholders, and for purposes of subsection (c) above, the calculation of voting power shall be made as if the
date of the consummation of the transaction were a record date for a vote of the Company’s stockholders.

           The Administrator shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a
Change in Control of the Company has occurred pursuant to the above definition, and the date of the occurrence of such Change in Control and
any incidental matters relating thereto.

     2.7 “ Code ” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations issued thereunder.

     2.8 “ Committee ” means the committee of the Board described in Article 13.

     2.9 “ Consultant ” means any consultant or adviser if:

           (a) The consultant or adviser renders bona fide services to the Company or any Parent or Subsidiary;

            (b) The services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising
transaction and do not directly or indirectly promote or maintain a market for the Company’s securities; and

           (c) The consultant or adviser is a natural person who has contracted directly with the Company or any Parent or Subsidiary to render
such services.

     2.10 “ Covered Employee ” means an Employee who is, or is likely to become, a “covered employee” within the meaning of Section
162(m)(3) of the Code.

      2.11 “ Disability ” means a permanent and total disability within the meaning of Section 22(e)(3) of the Code, as it may be amended from
time to time.

     2.12 “ Dividend Equivalents ” means a right granted to a Participant pursuant to Article 8 to receive the equivalent value (in cash or
Stock) of dividends paid on Stock.

                                                                          3
     2.13 “ Effective Date ” shall mean the date immediately prior to the Public Trading Date.

    2.14 “ Eligible Individual ” means any person who is a member of the Board, a Consultant or an Employee, as determined by the
Administrator.

     2.15 “ Employee ” means any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Company or
any Parent or Subsidiary.

     2.16 “ Exchange Act ” means the Securities Exchange Act of 1934, as amended from time to time.

     2.17 “ Existing Plan ” has the meaning set forth in Section 3.1(a).

     2.18 “ Expiration Date ” has the meaning set forth in Section 14.3.

     2.19 “ Fair Market Value ” means, as of any date, the value of Stock determined as follows:

            (a) If the Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such
stock as quoted on such exchange or system for the last market trading day prior to the date of determination for which a closing sales price is
reported, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

           (b) If the Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall
be the mean of the closing bid and asked prices for the Stock on the date prior to the date of determination as reported in The Wall Street
Journal or such other source as the Administrator deems reliable; or

          (c) In the absence of an established market for the Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.

     2.20 “ Incentive Stock Option ” means an Option that is intended to be an incentive stock option and meets the requirements of Section
422 of the Code or any successor provision thereto.

     2.21 “ Independent Director ” means a member of the Board who is not an Employee.

     2.22 “ Non-Employee Director ” means a member of the Board who qualifies as a “Non-Employee Director” as defined in Rule
16b-3(b)(3) of the Exchange Act, or any successor rule.

     2.23 “ Non-Qualified Stock Option ” means an Option that is not intended to be or otherwise does not qualify as an Incentive Stock
Option.

       2.24 “ Option ” means a right granted to a Participant pursuant to Article 5 of the Plan to purchase a specified number of shares of Stock
at a specified price during specified time periods. An Option may be either an Incentive Stock Option or a Non-Qualified Stock Option.

      2.25 “ Parent ” means any “parent corporation” as defined in Section 424(e) of the Code and any applicable regulations promulgated
thereunder of the Company or any other entity which beneficially owns, directly or indirectly, a majority of the outstanding voting stock or
voting power of the Company.

                                                                         4
    2.26 “ Participant ” means any Eligible Individual who, as a member of the Board, a Consultant or an Employee, has been granted an
Award pursuant to the Plan.

     2.27 “ Performance-Based Award ” means an Award granted to selected Covered Employees pursuant to Articles 6 and 8, but which is
subject to the terms and conditions set forth in Article 9.

      2.28 “ Performance Criteria ” means the criteria that the Administrator selects for purposes of establishing the Performance Goal or
Performance Goals for a Participant for a Performance Period. The Performance Criteria that will be used to establish Performance Goals are
limited to the following: net earnings (either before or after interest, taxes, depreciation and amortization), sales or revenue, net income (either
before or after taxes), operating earnings, cash flow (including, but not limited to, operating cash flow and free cash flow), return on net assets,
return on stockholders’ equity, return on sales, gross or net profit margin, working capital, earnings per share and price per share of Stock, any
of which may be measured either in absolute terms or as compared to any incremental increase or as compared to results of a peer group. The
Administrator shall, within the time prescribed by Section 162(m) of the Code, define in an objective fashion the manner of calculating the
Performance Criteria it selects to use for such Performance Period for such Participant.

      2.29 “ Performance Goals ” means, for a Performance Period, the goals established in writing by the Administrator for the Performance
Period based upon the Performance Criteria. Depending on the Performance Criteria used to establish such Performance Goals, the
Performance Goals may be expressed in terms of overall Company performance or the performance of a Subsidiary, division or other
operational unit, or an individual. The Administrator, in its discretion, may, within the time prescribed by Section 162(m) of the Code, adjust or
modify the calculation of Performance Goals for such Performance Period in order to prevent the dilution or enlargement of the rights of
Participants (i) in the event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event, or development, or (ii) in
recognition of, or in anticipation of, any other unusual or nonrecurring events affecting the Company, or the financial statements of the
Company, or in response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions.

      2.30 “ Performance Period ” means the one or more periods of time, which may be of varying and overlapping durations, as the
Administrator may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a
Participant’s right to, and the payment of, a Performance-Based Award.

     2.31 “ Plan ” means this Cbeyond Communications, Inc. 2005 Equity Incentive Award Plan, as it may be amended from time to time.

     2.32 “ Public Trading Date ” means the first date upon which the Company is subject to the reporting requirements of Section 13 or
15(d)(2) of the Exchange Act.

      2.33 “ Qualified Performance-Based Compensation ” means any compensation that is intended to qualify as “qualified
performance-based compensation” as described in Section 162(m)(4)(C) of the Code.

     2.34 “ Restricted Stock ” means Stock awarded to a Participant pursuant to Article 6 that is subject to certain restrictions and may be
subject to risk of forfeiture or repurchase.

     2.35 “ Restricted Stock Unit ” means a right to receive a share of Stock during specified time periods granted pursuant to Section 8.3.

                                                                         5
     2.36 “ Securities Act ” means the Securities Act of 1933, as amended from time to time.

     2.37 “ Section 409A Award ” has the meaning set forth in Section 10.1.

     2.38 “ Stock ” means the common stock of the Company and such other securities of the Company that may be substituted for Stock
pursuant to Article 12.

      2.39 “ Stock Appreciation Right ” or “ SAR ” means a right granted pursuant to Article 7 to receive a payment equal to the excess of the
Fair Market Value of a specified number of shares of Stock on the date the SAR is exercised over the Fair Market Value of such number of
shares of Stock on the date the SAR was granted as set forth in the applicable Award Agreement.

      2.40 “ Stock Payment ” means (a) a payment in the form of shares of Stock, or (b) an option or other right to purchase shares of Stock, as
part of any bonus, deferred compensation or other arrangement, made in lieu of all or any portion of the compensation, granted pursuant to
Section 8.2.

    2.41 “ Subsidiary ” means any “subsidiary corporation” as defined in Section 424(f) of the Code and any applicable regulations
promulgated thereunder of the Company or any other entity of which a majority of the outstanding voting stock or voting power is beneficially
owned directly or indirectly by the Company.

     2.42 “ Successor Entity ” has the meaning set forth in Section 2.6.

      2.43 “ Termination of Consultancy ” means the time when the engagement of a Participant as a Consultant to the Company or a Parent
or Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, by resignation, discharge, death or
retirement, but excluding terminations where there is a simultaneous commencement of employment with the Company or any Parent or
Subsidiary. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of
Consultancy, including, but not by way of limitation, the question of whether a Termination of Consultancy resulted from a discharge for good
cause, and all questions of whether a particular leave of absence constitutes a Termination of Consultancy. Notwithstanding any other provision
of the Plan, the Company or any Parent or Subsidiary has an absolute and unrestricted right to terminate a Consultant’s service at any time for
any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in writing.

     2.44 “ Termination of Directorship ” shall mean the time when a Participant who is a Non-Employee Director ceases to be a member of
the Board for any reason, including, but not by way of limitation, a termination by resignation, failure to be elected, death or retirement. The
Board, in its sole and absolute discretion, shall determine the effect of all matters and questions relating to Termination of Directorship with
respect to Non-Employee Directors.

      2.45 “ Termination of Employment ” shall mean the time when the employee-employer relationship between a Participant and the
Company or any Parent or Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, a termination
by resignation, discharge, death, disability or retirement; but excluding: (a) terminations where there is a simultaneous reemployment or
continuing employment of a Participant by the Company or any Parent or Subsidiary, (b) at the discretion of the Administrator, terminations
which result in a temporary severance of the employee-employer relationship, and (c) at the discretion of the Administrator, terminations which
are followed by the simultaneous establishment of a consulting relationship by the Company or a Parent or Subsidiary with the former
employee. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of
Employment, including, but not by way of

                                                                        6
limitation, the question of whether a Termination of Employment resulted from a discharge for good cause, and all questions of whether a
particular leave of absence constitutes a Termination of Employment; provided , however , that, with respect to Incentive Stock Options, unless
otherwise determined by the Administrator in its discretion, a leave of absence, change in status from an employee to an independent contractor
or other change in the employee-employer relationship shall constitute a Termination of Employment if, and to the extent that, such leave of
absence, change in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable
regulations and revenue rulings under said Section.

                                                                  ARTICLE 3

                                                     SHARES SUBJECT TO THE PLAN

     3.1 Number of Shares .

            (a) Subject to Article 12 and Section 3.1(b), the aggregate number of shares of Stock which may be issued or transferred pursuant to
Awards under the Plan shall be the sum of: (i) 2,190,722 shares; plus (ii) the number of shares of Stock remaining available for issuance and
not subject to awards granted under the Cbeyond Communications, Inc. 2002 Equity Incentive Plan and the Cbeyond Communications, Inc.
2000 Stock Incentive Plan (together, the “ Existing Plans ”) as of the Effective Date; plus (iii) with respect to awards granted under the
Existing Plans on or before the Effective Date that expire or are canceled without having been exercised in full or shares of Stock that are
forfeited or repurchased pursuant to the terms of awards granted under the Existing Plan, the number of shares of Stock subject to each such
award as to which such award was not exercised prior to its expiration or cancellation or which are forfeited to or repurchased by the Company.
The aggregate number of shares of Stock authorized for issuance under the Existing Plans was 3,615,030 shares and, accordingly, the total
number of shares of Stock under clauses (ii) and (iii) in the preceding sentence shall not exceed 3,615,030 shares. In addition, subject to Article
12, commencing on January 1, 2006, and on each January 1 thereafter during the term of the Plan, the number of shares of Stock which shall be
made available for sale under the Plan shall be increased by that number of shares of Stock equal to the lesser of (i) (A) 18.5% of the
Company’s outstanding shares of Stock on such date, calculated on a fully-diluted basis, less (B) the sum of (1) the aggregate number of shares
of Stock remaining available for issuance under the Plan as of such date, plus (2) the aggregate number of shares of Stock subject to
outstanding Awards and unvested shares of Restricted Stock granted under the Plan as of such date, plus (3) the number of shares of Stock
subject to outstanding awards and unvested shares of restricted stock granted under the Existing Plans as of such date, or (ii) a lesser amount
determined by the Board. The number of shares of Stock determined under clause (i)(A) above (i.e., 18.5% of the Company’s outstanding
shares of Stock on each January 1 during the term of the Plan) shall be increased by the number of shares of Stock issuable with respect to any
outstanding awards of any entity acquired in any transaction during the term of the Plan pursuant to which the purchase price is paid by the
Company or any Parent or Subsidiary in cash (determined as of the closing of such transaction), to the extent such awards are assumed, or other
awards are issued in substitution for such outstanding awards, by the Company or any Parent or Subsidiary. Notwithstanding anything in this
Section 3.1(a) to the contrary, the number of shares of Stock that may be issued or transferred pursuant to Awards under the Plan shall not
exceed an aggregate of 12,886,598 shares, subject to Article 12 and Section 3.1(b).

            (b) To the extent that an Award terminates, expires, or lapses for any reason, any shares of Stock subject to the Award shall again
be available for the grant of an Award pursuant to the Plan. Additionally, any shares of Stock tendered or withheld to satisfy the grant or
exercise price or tax withholding obligation pursuant to any Award shall again be available for the grant of an Award pursuant to the Plan. If
any shares of Restricted Stock are forfeited by a Participant or repurchased by

                                                                         7
the Company pursuant to Section 6.3 hereof, such shares shall again be available for the grant of an Award pursuant to the Plan. The payment
of Dividend Equivalents in cash in conjunction with any outstanding Awards shall not be counted against the shares available for issuance
under the Plan.

          (c) Notwithstanding the provisions of this Section 3.1, no shares of Stock may again be optioned, granted or awarded if such action
would cause an Incentive Stock Option to fail to qualify as an Incentive Stock Option under Section 422 of the Code.

      3.2 Stock Distributed . Any Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Stock,
treasury stock or Stock purchased on the open market.

      3.3 Limitation on Number of Shares Subject to Awards . Notwithstanding any provision in the Plan to the contrary, and subject to Article
12, the maximum number of shares of Stock with respect to one or more Awards that may be granted to any one Participant during any
calendar year shall be 1,804,124; provided, however, that the foregoing limitation shall not apply prior to the Public Trading Date and,
following the Public Trading Date, the foregoing limitation shall not apply until the earliest of: (a) the first material modification of the Plan
(including any increase in the number of shares reserved for issuance under the Plan in accordance with Section 3.1); (b) the issuance of all of
the shares of Stock reserved for issuance under the Plan; (c) the expiration of the Plan; (d) the first meeting of stockholders at which members
of the Board are to be elected that occurs after the close of the third calendar year following the calendar year in which occurred the first
registration of an equity security of the Company under Section 12 of the Exchange Act; or (e) such other date required by Section 162(m) of
the Code and the rules and regulations promulgated thereunder.

                                                                  ARTICLE 4

                                                   ELIGIBILITY AND PARTICIPATION

     4.1 Eligibility . Persons eligible to participate in this Plan include Employees, Consultants and members of the Board, as determined by
the Administrator.

       4.2 Participation . Subject to the provisions of the Plan, the Administrator may, from time to time, select from among all Eligible
Individuals those to whom Awards shall be granted and shall determine the nature and amount of each Award. No individual shall have any
right to be granted an Award pursuant to this Plan.

      4.3 Foreign Participants . Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in
which the Company and its Parents or Subsidiaries operate or have Eligible Individuals, the Administrator, in its sole discretion, shall have the
power and authority to: (i) determine which Parents or Subsidiaries shall be covered by the Plan; (ii) determine which Eligible Individuals
outside the United States are eligible to participate in the Plan; (iii) modify the terms and conditions of any Award granted to Eligible
Individuals outside the United States to comply with applicable foreign laws; (iv) establish subplans and modify exercise procedures and other
terms and procedures, to the extent such actions may be necessary or advisable (any such subplans and/or modifications shall be attached to
this Plan as appendices); provided, however , that no such subplans and/or modifications shall increase the share limitations contained in
Sections 3.1 and 3.3 of the Plan; and (v) take any action, before or after an Award is made, that it deems advisable to obtain approval or comply
with any necessary local governmental regulatory exemptions or approvals. Notwithstanding the foregoing, the Administrator may not take any
actions hereunder, and no Awards shall be granted, that would violate the Exchange Act, the Code, any securities law or governing statute or
any other applicable law.

                                                                        8
                                                                  ARTICLE 5

                                                              STOCK OPTIONS

     5.1 General . The Administrator is authorized to grant Options to Eligible Individuals on the following terms and conditions:

            (a) Exercise Price . The exercise price per share of Stock subject to an Option shall be determined by the Administrator and set forth
in the Award Agreement; provided that the exercise price per share for any Option shall not be less than 100% of the Fair Market Value per
share of the Stock on the date of grant.

            (b) Time and Conditions of Exercise . The Administrator shall determine the time or times at which an Option may be exercised in
whole or in part; provided that the term of any Option granted under the Plan shall not exceed ten years. The Administrator shall also determine
the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised. The Administrator may
extend the term of any outstanding Option in connection with any Termination of Employment, Termination of Directorship or Termination of
Consultancy of the Participant holding such Option, or amend any other term or condition of such Option relating to such a Termination of
Employment, Termination of Directorship or Termination of Consultancy.

             (c) Payment . The Administrator shall determine the methods, terms and conditions by which the exercise price of an Option may
be paid, and the form and manner of payment, including, without limitation, payment in the form of cash, a promissory note bearing interest at
no less than such rate as shall then preclude the imputation of interest under the Code, shares of Stock, or other property acceptable to the
Administrator and payment through the delivery of a notice that the Participant has placed a market sell order with a broker with respect to
shares of Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds
of the sale to the Company in satisfaction of the Option exercise price; provided that payment of such proceeds is then made to the Company
upon settlement of such sale, and the methods by which shares of Stock shall be delivered or deemed to be delivered to Participants.
Notwithstanding any other provision of the Plan to the contrary, no Participant who is a member of the Board or an “executive officer” of the
Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to pay the exercise price of an Option, or continue any
extension of credit with respect to the exercise price of an Option with a loan from the Company or a loan arranged by the Company, in any
method which would violate Section 13(k) of the Exchange Act.

         (d) Evidence of Grant . All Options shall be evidenced by an Award Agreement between the Company and the Participant. The
Award Agreement shall include such additional provisions as may be specified by the Administrator.

      5.2 Incentive Stock Options . Incentive Stock Options may be granted only to employees (as defined in accordance with Section 3401(c)
of the Code) of the Company or a Subsidiary which constitutes a “subsidiary corporation” of the Company within Section 424(f) of the Code or
a Parent which constitutes a “parent corporation” of the Company within the meaning of Section 424(e) of the Code, and the terms of any
Incentive Stock Options granted pursuant to the Plan must comply with the following additional provisions of this Section 5.2 in addition to the
requirements of Section 5.1:

           (a) Ten Percent Owners . An Incentive Stock Option shall be granted to any individual who, at the date of grant, owns stock
possessing more than ten percent of the total combined voting power of all classes of Stock of the Company or any “subsidiary corporation” of
the Company or

                                                                        9
“parent corporation” of the Company (each within the meaning of Section 424 of the Code) only if such Option is granted at an exercise price
per share that is not less than 110% of the Fair Market Value per share of the Stock on the date of the grant and the Option is exercisable for no
more than five years from the date of grant.

            (b) Transfer Restriction . An Incentive Stock Option shall not be transferable by the Participant other than by will or by the laws of
descent or distribution.

           (c) Right to Exercise . During a Participant’s lifetime, an Incentive Stock Option may be exercised only by the Participant.

            (d) Failure to Meet Requirements. Any Option (or portion thereof) purported to be an Incentive Stock Option which, for any reason,
fails to meet the requirements of Section 422 of the Code shall be considered a Non-Qualified Stock Option.

      5.3 Substitution of Stock Appreciation Rights . The Administrator may provide in the Award Agreement evidencing the grant of an
Option that the Administrator, in its sole discretion, shall have to right to substitute a Stock Appreciation Right for such Option at any time
prior to or upon exercise of such Option; provided that such Stock Appreciation Right shall be exercisable with respect to the same number of
shares of Stock for which such substituted Option would have been exercisable.

                                                                   ARTICLE 6

                                                      RESTRICTED STOCK AWARDS

     6.1 Grant of Restricted Stock . The Administrator is authorized to make Awards of Restricted Stock to any Eligible Individual selected by
the Administrator in such amounts and subject to such terms and conditions as determined by the Administrator. All Awards of Restricted
Stock shall be evidenced by an Award Agreement.

      6.2 Issuance and Restrictions . Restricted Stock shall be subject to such repurchase restrictions, forfeiture restrictions, restrictions on
transferability and other restrictions as the Administrator may impose (including, without limitation, limitations on the right to vote Restricted
Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times,
pursuant to such circumstances or installments or otherwise as the Administrator determines at the time of the grant of the Award or thereafter.
Alternatively, these restrictions may lapse pursuant to the satisfaction of one or more Performance Goals or other specific performance goals as
the Administrator determines to be appropriate at the time of the grant of the Award or thereafter, in each case on a specified date or dates or
over any period or periods determined by the Administrator.

      6.3 Repurchase or Forfeiture . Except as otherwise determined by the Administrator at the time of the grant of the Award or thereafter,
upon a Participant’s Termination of Employment, Termination of Directorship or Termination of Consultancy during the applicable restriction
period, Restricted Stock that is at that time subject to restrictions shall be forfeited or subject to repurchase by the Company (or its assignee)
under such terms as the Administrator shall determine; provided, however , that the Administrator may (a) provide in any Restricted Stock
Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of a
Participant’s Termination of Employment, Termination of Directorship or Termination of Consultancy under certain circumstances, and (b) in
other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock.

                                                                        10
       6.4 Certificates for Restricted Stock . Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the
Administrator shall determine. If certificates representing shares of Restricted Stock are registered in the name of the Participant, certificates
must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company may,
at its discretion, retain physical possession of the certificate until such time as all applicable restrictions lapse or the Award Agreement may
provide that the shares shall be held in escrow by an escrow agent designated by the Company.

                                                                   ARTICLE 7

                                                      STOCK APPRECIATION RIGHTS

       7.1 Grant of Stock Appreciation Rights . A Stock Appreciation Right may be granted to any Eligible Individual selected by the
Administrator. A Stock Appreciation Right shall be subject to such terms and conditions not inconsistent with the Plan as the Administrator
shall impose and shall be evidenced by an Award Agreement.

     7.2 Terms of Stock Appreciation Rights .

           (a) A Stock Appreciation Right shall have a term set by the Administrator. A Stock Appreciation Right shall be exercisable in such
installments as the Administrator may determine. A Stock Appreciation Right shall cover such number of shares of Stock as the Administrator
may determine. The exercise price per share of Stock subject to each Stock Appreciation Right shall be set by the Administrator.

            (b) A Stock Appreciation Right shall entitle the Participant (or other person entitled to exercise the Stock Appreciation Right
pursuant to the Plan) to exercise all or a specified portion of the Stock Appreciation Right (to the extent then exercisable pursuant to its terms)
and to receive from the Company an amount determined by multiplying (i) the amount (if any) by which the Fair Market Value of a share of
Stock on the date of exercise of the Stock Appreciation Right exceeds the exercise price per share of the Stock Appreciation Right, by (ii) the
number of shares of Stock with respect to which the Stock Appreciation Right shall have been exercised, subject to any limitations the
Administrator may impose.

     7.3 Payment and Limitations on Exercise .

            (a) Subject to Sections 7.3(b) and (c), payment of the amounts determined under Sections 7.2(b) above shall be in cash, in Stock
(based on its Fair Market Value as of the date the Stock Appreciation Right is exercised) or a combination of both, as determined by the
Administrator.

           (b) To the extent payment for a Stock Appreciation Right is to be made in cash, the Award Agreement shall, to the extent necessary
to comply with the requirements of Section 409A of the Code, specify the date of payment, which may be different than the date of exercise of
the Stock Appreciation Right. If the date of payment for a Stock Appreciation Right is later than the date of exercise, the Award Agreement
may specify that the Participant be entitled to earnings on such amount until paid.

            (c) To the extent any payment under Section 7.2(b) is effected in Stock, it shall be made subject to satisfaction of all provisions of
Article 5 above pertaining to Options.

                                                                         11
                                                                   ARTICLE 8

                                                        OTHER TYPES OF AWARDS

     8.1 Dividend Equivalents .

            (a) Any Eligible Individual selected by the Administrator may be granted Dividend Equivalents based on the dividends on the
shares of Stock that are subject to any Award, to be credited as of dividend payment dates, during the period between the date the Award is
granted and the date the Award is exercised, vests or expires, as determined by the Administrator. Such Dividend Equivalents shall be
converted to cash or additional shares of Stock by such formula and at such time and subject to such limitations as may be determined by the
Administrator.

         (b) Dividend Equivalents granted with respect to Options or SARs that are intended to be Qualified Performance-Based
Compensation shall be payable, with respect to pre-exercise periods, regardless of whether such Option or SAR is subsequently exercised.

      8.2 Stock Payments . Any Eligible Individual selected by the Administrator may receive Stock Payments in the manner determined from
time to time by the Administrator; provided , that unless otherwise determined by the Administrator such Stock Payments shall be made in lieu
of base salary, bonus, or other cash compensation otherwise payable to such Eligible Individual. The number of shares shall be determined by
the Administrator and may be based upon the Performance Goals or other specific performance goals determined appropriate by the
Administrator.

      8.3 Restricted Stock Units . The Administrator is authorized to make Awards of Restricted Stock Units to any Eligible Individual selected
by the Administrator in such amounts and subject to such terms and conditions as determined by the Administrator. At the time of grant, the
Administrator shall specify the date or dates on which the Restricted Stock Units shall become fully vested and nonforfeitable, and may specify
such conditions to vesting as it deems appropriate. Alternatively, Restricted Stock Units may become fully vested and nonforfeitable pursuant
to the satisfaction of one or more Performance Goals or other specific performance goals as the Administrator determines to be appropriate at
the time of the grant of the Restricted Stock Units or thereafter, in each case on a specified date or dates or over any period or periods
determined by the Administrator. At the time of grant, the Administrator shall specify the maturity date applicable to each grant of Restricted
Stock Units which shall be no earlier than the vesting date or dates of the Award and may be determined at the election of the Eligible
Individual to whom the Award is granted. On the maturity date, the Company shall transfer to the Participant one unrestricted, fully
transferable share of Stock for each Restricted Stock Unit that is vested and scheduled to be distributed on such date and not previously
forfeited. The Administrator shall specify the purchase price, if any, to be paid by the Participant to the Company for such shares of Stock.

      8.4 Term . Except as otherwise provided herein, the term of any Award of Dividend Equivalents, Stock Payments or Restricted Stock
Units shall be set by the Administrator in its discretion.

     8.5 Exercise or Purchase Price . The Administrator may establish the exercise or purchase price, if any, of any Award of Stock Payments
or Restricted Stock Units; provided, however , that such price shall not be less than the par value of a share of Stock on the date of grant, unless
otherwise permitted by applicable state law.

    8.6 Form of Payment . Payments with respect to any Awards granted under Sections 8.1, 8.2 or 8.3 shall be made in cash, in Stock or a
combination of both, as determined by the Administrator.

                                                                         12
    8.7 Award Agreement . All Awards under this Article 8 shall be subject to such additional terms and conditions as determined by the
Administrator and shall be evidenced by a written Award Agreement.

                                                                 ARTICLE 9

                                                   PERFORMANCE-BASED AWARDS

      9.1 Purpose . The purpose of this Article 9 is to provide the Administrator the ability to qualify Awards other than Options and SARs and
that are granted pursuant to Articles 6 and 8 as Qualified Performance-Based Compensation. If the Administrator, in its discretion, decides to
grant a Performance-Based Award to a Covered Employee, the provisions of this Article 9 shall control over any contrary provision contained
in Articles 6 or 8; provided, however , that the Administrator may in its discretion grant Awards to Covered Employees that are based on
Performance Criteria or Performance Goals but that do not satisfy the requirements of this Article 9.

      9.2 Applicability . This Article 9 shall apply only to those Covered Employees selected by the Administrator to receive
Performance-Based Awards. The designation of a Covered Employee as a Participant for a Performance Period shall not in any manner entitle
the Participant to receive an Award for the period. Moreover, designation of a Covered Employee as a Participant for a particular Performance
Period shall not require designation of such Covered Employee as a Participant in any subsequent Performance Period and designation of one
Covered Employee as a Participant shall not require designation of any other Covered Employees as a Participant in such period or in any other
period.

      9.3 Procedures with Respect to Performance-Based Awards . To the extent necessary to comply with the Qualified Performance-Based
Compensation requirements of Section 162(m)(4)(C) of the Code, with respect to any Award granted under Articles 6 and 8 which may be
granted to one or more Covered Employees, no later than ninety (90) days following the commencement of any fiscal year in question or any
other designated fiscal period or period of service (or such other time as may be required or permitted by Section 162(m) of the Code), the
Administrator shall, in writing, (a) designate one or more Covered Employees, (b) select the Performance Criteria applicable to the
Performance Period, (c) establish the Performance Goals, and amounts of such Awards, as applicable, which may be earned for such
Performance Period, and (d) specify the relationship between Performance Criteria and the Performance Goals and the amounts of such
Awards, as applicable, to be earned by each Covered Employee for such Performance Period. Following the completion of each Performance
Period, the Administrator shall certify in writing whether the applicable Performance Goals have been achieved for such Performance Period.
In determining the amount earned by a Covered Employee, the Administrator shall have the right to reduce or eliminate (but not to increase)
the amount payable at a given level of performance to take into account additional factors that the Administrator may deem relevant to the
assessment of individual or corporate performance for the Performance Period.

      9.4 Payment of Performance-Based Awards . Unless otherwise provided in the applicable Award Agreement, a Participant must be
employed by the Company or a Parent or Subsidiary on the day a Performance-Based Award for such Performance Period is paid to the
Participant. Furthermore, a Participant shall be eligible to receive payment pursuant to a Performance-Based Award for a Performance Period
only if the Performance Goals for such period are achieved.

      9.5 Additional Limitations . Notwithstanding any other provision of the Plan, any Award which is granted to a Covered Employee and is
intended to constitute Qualified Performance-Based Compensation shall be subject to any additional limitations set forth in Section 162(m) of
the Code (including any amendment to Section 162(m) of the Code) or any regulations or rulings issued thereunder

                                                                      13
that are requirements for qualification as qualified performance-based compensation as described in Section 162(m)(4)(C) of the Code, and the
Plan shall be deemed amended to the extent necessary to conform to such requirements.

                                                                     ARTICLE 10

                                           COMPLIANCE WITH SECTION 409A OF THE CODE

      10.1 Awards subject to Code Section 409A . Any Award that constitutes, or provides for, a deferral of compensation subject to Section
409A of the Code (a “ Section 409A Award ”) shall satisfy the requirements of Section 409A of the Code and this Article 10, to the extent
applicable. The Award Agreement with respect to a Section 409A Award shall incorporate the terms and conditions required by Section 409A
of the Code and this Article 10.

      10.2 Distributions under a Section 409A Award .

            (a) Subject to subsection (b), any shares of Stock or other property or amounts to be paid or distributed upon the grant, issuance,
vesting, exercise or payment of a Section 409A Award shall be distributed in accordance with the requirements of Section 409A(a)(2) of the
Code, and shall not be distributed earlier than:

                   (i) the Participant’s separation from service, as determined by the Secretary of the Treasury;

                   (ii) the date the Participant becomes disabled;

                   (iii) the Participant’s death;

                   (iv) a specified time (or pursuant to a fixed schedule) specified under the Award Agreement at the date of the deferral
compensation;

                   (v) to the extent provided by the Secretary of the Treasury, a change in the ownership or effective control of the Company or
a Parent or Subsidiary, or in the ownership of a substantial portion of the assets of the Company or a Parent or Subsidiary; or

                   (vi) the occurrence of an unforeseeable emergency with respect to the Participant.

            (b) In the case of a Participant who is a “specified employee,” the requirement of paragraph (a)(i) shall be met only if the
distributions with respect to the Section 409A Award may not be made before the date which is six months after the Participant’s separation
from service (or, if earlier, the date of the Participant’s death). For purposes of this subsection (b), a Participant shall be a “specified employee”
if such Participant is a key employee (as defined in Section 416(i) of the Code without regard to paragraph (5) thereof) of a corporation any
stock of which is publicly traded on an established securities market or otherwise, as determined under Section 409A(a)(2)(B)(i) of the Code
and the Treasury Regulations thereunder.

            (c) The requirement of paragraph (a)(vi) shall be met only if, as determined under Treasury Regulations under Section
409A(a)(2)(B)(ii) of the Code, the amounts distributed with respect to the unforeseeable emergency do not exceed the amounts necessary to
satisfy such unforeseeable emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution,

                                                                         14
after taking into account the extent to which such unforeseeable emergency is or may be relieved through reimbursement or compensation by
insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe
financial hardship).

           (d) For purposes of this Section, the terms specified therein shall have the respective meanings ascribed thereto under Section 409A
of the Code and the Treasury Regulations thereunder.

      10.3 Prohibition on Acceleration of Benefits . The time or schedule of any distribution or payment of any shares of Stock or other
property or amounts under a Section 409A Award shall not be accelerated, except as otherwise permitted under Section 409A(a)(3) of the Code
and the Treasury Regulations thereunder.

     10.4 Elections under Section 409A Awards .

            (a) Any deferral election provided under or with respect to an Award to any Eligible Individual, or to the Participant holding a
Section 409A Award, shall satisfy the requirements of Section 409A(a)(4)(B) of the Code, to the extent applicable, and, except as otherwise
permitted under paragraph (i) or (ii) below, any such deferral election with respect to compensation for services performed during a taxable
year shall be made not later than the close of the preceding taxable year, or at such other time as provided in Treasury Regulations.

                  (i) In the case of the first year in which an Eligible Individual or a Participant holding a Section 409A Award, becomes
     eligible to participate in the Plan, any such deferral election may be made with respect to services to be performed subsequent to the
     election with thirty days after the date the Eligible Individual, or the Participant holding a Section 409A Award, becomes eligible to
     participate in the Plan, as provided under Section 409A(a)(4)(B)(ii) of the Code.

                 (ii) In the case of any performance-based compensation based on services performed by an Eligible Individual, or the
     Participant holding a Section 409A Award, over a period of at least twelve months, any such deferral election may be made no later than
     six months before the end of the period, as provided under Section 409A(a)(4)(B)(iii) of the Code.

            (b) In the event that a Section 409A Award permits, under a subsequent election by the Participant holding such Section 409A
Award, a delay in a distribution or payment of any shares of Stock or other property or amounts under such Section 409A Award, or a change
in the form of distribution or payment, such subsequent election shall satisfy the requirements of Section 409A(a)(4)(C) of the Code, and:

                 (i) such subsequent election may not take effect until at least twelve months after the date on which the election is made,

                  (ii) in the case such subsequent election relates to a distribution or payment not described in Section 10.2(a)(ii), (iii) or (vi),
     the first payment with respect to such election may be deferred for a period of not less than five years from the date such distribution or
     payment otherwise would have been made, and

                (iii) in the case such subsequent election relates to a distribution or payment described in Section 10.2(a)(iv), such election
     may not be made less than twelve months prior to the date of the first scheduled distribution or payment under Section 10.2(a)(iv).

                                                                          15
      10.5 Compliance in Form and Operation . A Section 409A Award, and any election under or with respect to such Section 409A Award,
shall comply in form and operation with the requirements of Section 409A of the Code and the Treasury Regulations thereunder.

                                                                   ARTICLE 11

                                                 PROVISIONS APPLICABLE TO AWARDS

      11.1 Stand-Alone and Tandem Awards . Awards granted pursuant to the Plan may, in the discretion of the Administrator, be granted
either alone, in addition to, or in tandem with, any other Award granted pursuant to the Plan. Awards granted in addition to or in tandem with
other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.

      11.2 Award Agreement . Awards under the Plan shall be evidenced by Award Agreements that set forth the terms, conditions and
limitations for each Award which may include the term of an Award, the provisions applicable in the event of the Participant’s Termination of
Employment, Termination of Directorship or Termination of Consultancy, and the Company’s authority to unilaterally or bilaterally amend,
modify, suspend, cancel or rescind an Award.

     11.3 Limits on Transfer .

             (a) Except as otherwise provided by the Administrator pursuant to Section 11.3(b), no right or interest of a Participant in any Award
may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a Parent or Subsidiary, or shall be subject
to any lien, obligation, or liability of such Participant to any other party other than the Company or a Parent or Subsidiary. Except as otherwise
provided by the Administrator pursuant to Section 11.3(b), no Award shall be assigned, transferred, or otherwise disposed of by a Participant
other than by will or the laws of descent and distribution, unless and until such Award has been exercised, or the shares underlying such Award
have been issued, and all restrictions applicable to such shares have lapsed.

            (b) Notwithstanding Section 11.3(a), the Administrator, in its sole discretion, may permit an Award (other than an Incentive Stock
Option) to be transferred to, exercised by and paid to any one or more Permitted Transferees (as defined below), subject to the following terms
and conditions: (i) an Award transferred to a Permitted Transferee shall not be assignable or transferable by the Permitted Transferee other than
by will or the laws of descent and distribution; (ii) any Award which is transferred to a Permitted Transferee shall continue to be subject to all
the terms and conditions of the Award as applicable to the original Participant (other than the ability to further transfer the Award); and (iii) the
Participant and the Permitted Transferee shall execute any and all documents requested by the Administrator, including, without limitation
documents to (A) confirm the status of the transferee as a Permitted Transferee, (B) satisfy any requirements for an exemption for the transfer
under applicable federal and state securities laws and (C) evidence the transfer. For purposes of this Section 11.3(b), “ Permitted Transferee ”
shall mean, with respect to a Participant, any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece,
nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any
person sharing the Participant’s household (other than a tenant or employee), a trust in which these persons (or the Participant) control the
management of assets, and any other entity in which these persons (or the Participant) own more than fifty percent of the voting interests, or
any other transferee specifically approved by the Administrator.

                                                                         16
      11.4 Beneficiaries . Notwithstanding Section 11.3, a Participant may, in the manner determined by the Administrator, designate a
beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s death. A
beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions
of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and Award Agreement otherwise provide, and
to any additional restrictions deemed necessary or appropriate by the Administrator. If the Participant is married and resides in a community
property state, a designation of a person other than the Participant’s spouse as his or her beneficiary with respect to more than 50% of the
Participant’s interest in the Award shall not be effective without the prior written consent of the Participant’s spouse. If no beneficiary has been
designated or survives the Participant, payment shall be made to the person entitled thereto pursuant to the Participant’s will or the laws of
descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided
the change or revocation is filed with the Administrator.

     11.5 Stock Certificates; Book-Entry Procedures .

             (a) Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates
evidencing shares of Stock pursuant to the exercise of any Award, unless and until the Board has determined, with advice of counsel, that the
issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authorities and, if applicable,
the requirements of any exchange on which the shares of Stock are listed or traded. All Stock certificates delivered pursuant to the Plan are
subject to any stop-transfer orders and other restrictions as the Administrator deems necessary or advisable to comply with federal, state, or
foreign jurisdiction, securities or other laws, rules and regulations and the rules of any national securities exchange or automated quotation
system on which the Stock is listed, quoted, or traded. The Administrator may place legends on any Stock certificate to reference restrictions
applicable to the Stock. In addition to the terms and conditions provided herein, the Administrator may require that a Participant make such
reasonable covenants, agreements, and representations as the Administrator, in its discretion, deems advisable in order to comply with any such
laws, regulations, or requirements. The Administrator shall have the right to require any Participant to comply with any timing or other
restrictions with respect to the settlement or exercise of any Award, including a window-period limitation, as may be imposed in the discretion
of the Administrator.

            (b) Notwithstanding any other provision of the Plan, unless otherwise determined by the Administrator or required by applicable
law, rule or regulation, the Company shall not deliver to any Participant certificates evidencing shares of Stock issued in connection with any
Award and instead such shares of Stock shall be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan
administrator).

      11.6 Paperless Exercise . In the event that the Company establishes, for itself or using the services of a third party, an automated system
for the exercise of Awards, such as a system using an internet website or interactive voice response, then the paperless exercise of Awards by a
Participant may be permitted through the use of such an automated system.

                                                                        17
                                                                  ARTICLE 12

                                                   CHANGES IN CAPITAL STRUCTURE

     12.1 Adjustments .

             (a) In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation, spin-off,
recapitalization, distribution of Company assets to stockholders (other than normal cash dividends), or any other corporate event affecting the
Stock or the share price of the Stock, the Administrator may make such proportionate adjustments, if any, as the Administrator in its discretion
may deem appropriate to reflect such change with respect to (i) the aggregate number and type of shares that may be issued under the Plan
(including, but not limited to, adjustments of the limitations in Sections 3.1 and 3.3, provided that any adjustment of the limitations in Section
3.1 shall be subject to the fourth sentence of Section 3.1); (ii) the terms and conditions of any outstanding Awards (including, without
limitation, any applicable performance targets or criteria with respect thereto); and (iii) the grant, exercise or purchase price per share for any
outstanding Awards under the Plan. Any adjustment affecting an Award intended as Qualified Performance-Based Compensation shall be made
consistent with the requirements of Section 162(m) of the Code.

            (b) In the event of any transaction or event described in Section 12.1(a) or any unusual or nonrecurring transactions or events
affecting the Company, any affiliate of the Company, or the financial statements of the Company or any affiliate (including without limitation
any Change in Control), or of changes in applicable laws, regulations or accounting principles, and whenever the Administrator determines that
such action is appropriate in order to prevent the dilution or enlargement of the benefits or potential benefits intended to be made available
under the Plan or with respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws,
regulations or principles, the Administrator, in its sole discretion and on such terms and conditions as it deems appropriate, either by the terms
of the Award or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Participant’s request,
is hereby authorized to take any one or more of the following actions:

                     (i) To provide for either (A) termination of any such Award in exchange for an amount of cash, if any, equal to the amount
that would have been received upon the exercise of such Award or realization of the Participant’s rights (and, for the avoidance of doubt, if as
of the date of the occurrence of the transaction or event described in this Section 12.1(b) the Administrator determines in good faith that no
amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be
terminated by the Company without payment) or (B) the replacement of such Award with other rights or property selected by the Administrator
in its sole discretion;

                    (ii) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or
shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kind of shares and prices; and

                    (iii) To make adjustments in the number and type of shares of Stock (or other securities or property) subject to outstanding
Awards, and in the number and kind of outstanding Restricted Stock and/or in the terms and conditions of (including the grant or exercise
price), and the criteria included in, outstanding options, rights and awards and options, rights and awards which may be granted in the future;

                                                                        18
                  (iv) To provide that such Award shall be exercisable or payable or fully vested with respect to all shares covered thereby,
notwithstanding anything to the contrary in the Plan or the applicable Award Agreement; and

                   (v) To provide that the Award cannot vest, be exercised or become payable after such event.

       12.2 Acceleration Upon a Change in Control . Notwithstanding Section 12.1(b), and except as may otherwise be provided in any
applicable Award Agreement or other written agreement entered into between the Company and a Participant, if a Change in Control occurs
and a Participant’s Awards are not continued, converted, assumed, or replaced by (i) the Company or a Parent or Subsidiary of the Company,
or (ii) a Successor Entity, such Awards shall become fully exercisable and/or payable, as applicable, and all forfeiture, repurchase and other
restrictions on such Awards shall lapse immediately prior to such Change in Control. Upon, or in anticipation of, a Change in Control, the
Administrator may cause any and all Awards outstanding hereunder to terminate at a specific time in the future, including but not limited to the
date of such Change in Control, and shall give each Participant the right to exercise such Awards during a period of time as the Administrator,
in its sole and absolute discretion, shall determine.

      12.3 No Other Rights . Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any
class or any dissolution, liquidation, merger, or consolidation of the Company or any other corporation. Except as expressly provided in the
Plan or pursuant to action of the Administrator under the Plan, no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of
shares of Stock subject to an Award or the grant or exercise price of any Award.

                                                                 ARTICLE 13

                                                             ADMINISTRATION

       13.1 Administrator . The Administrator of the Plan shall be the Compensation Committee of the Board (or another committee or a
subcommittee of the Board to which the Board delegates administration of the Plan) (such committee, the “ Committee ”), which Committee
shall consist solely of two or more members of the Board each of whom is both an “outside director,” within the meaning of Section 162(m) of
the Code, a Non-Employee Director and an “independent director” under the rules of the Nasdaq Stock Market. Notwithstanding the foregoing:
(a) the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to all Awards
granted to Independent Directors, and for purposes of such Awards the term “ Administrator ” as used in this Plan shall be deemed to refer to
the Board,, and (b) the Committee may delegate its authority hereunder to the extent permitted by Section 13.5. Appointment of Committee
members shall be effective upon acceptance of appointment. In its sole discretion, the Board may at any time and from time to time exercise
any and all rights and duties of the Administrator under the Plan except with respect to matters which under Rule 16b-3 under the Exchange
Act or Section 162(m) of the Code, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the
Committee. Committee members may resign at any time by delivering written notice to the Board. Vacancies in the Committee may only be
filled by the Board.

       13.2 Action by the Administrator . A majority of the Administrator shall constitute a quorum. The acts of a majority of the members
present at any meeting at which a quorum is present, and, subject to applicable law, acts approved in writing by a majority of the Administrator
in lieu of a meeting,

                                                                       19
shall be deemed the acts of the Administrator. Each member of the Administrator is entitled to, in good faith, rely or act upon any report or
other information furnished to that member by any officer or other employee of the Company or any Parent or Subsidiary, the Company’s
independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in
the administration of the Plan.

      13.3 Authority of Administrator . Subject to any specific designation in the Plan, the Administrator has the exclusive power, authority and
discretion to:

           (a) Designate Participants to receive Awards;

           (b) Determine the type or types of Awards to be granted to each Participant;

           (c) Determine the number of Awards to be granted and the number of shares of Stock to which an Award will relate;

             (d) Determine the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise price,
grant price, or purchase price, any reload provision, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions
or restrictions on the exercisability of an Award, and accelerations or waivers thereof, any provisions related to non-competition and recapture
of gain on an Award, based in each case on such considerations as the Administrator in its sole discretion determines; provided, however , that
the Administrator shall not have the authority to accelerate the vesting or waive the forfeiture of any Performance-Based Awards;

         (e) Determine whether, to what extent, and pursuant to what circumstances an Award may be settled in, or the exercise price of an
Award may be paid in, cash, Stock, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered;

           (f) Prescribe the form of each Award Agreement, which need not be identical for each Participant;

           (g) Decide all other matters that must be determined in connection with an Award;

           (h) Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;

           (i) Interpret the terms of, and any matter arising pursuant to, the Plan or any Award Agreement; and

           (j) Make all other decisions and determinations that may be required pursuant to the Plan or as the Administrator deems necessary
or advisable to administer the Plan.

      13.4 Decisions Binding . The Administrator’s interpretation of the Plan, any Awards granted pursuant to the Plan, any Award Agreement
and all decisions and determinations by the Administrator with respect to the Plan are final, binding, and conclusive on all parties.

      13.5 Delegation of Authority . To the extent permitted by applicable law, the Committee may from time to time delegate to a committee
of one or more members of the Board or one or more officers of the Company the authority to grant or amend Awards to Participants other than
(a) senior executives of the Company who are subject to Section 16 of the Exchange Act, (b) Covered Employees, or (c) officers of the
Company (or members of the Board) to whom authority to grant or amend Awards has been

                                                                         20
delegated hereunder. Any delegation hereunder shall be subject to the restrictions and limits that the Committee specifies at the time of such
delegation, and the Committee may at any time rescind the authority so delegated or appoint a new delegatee. At all times, the delegatee
appointed under this Section 13.5 shall serve in such capacity at the pleasure of the Committee.

                                                                 ARTICLE 14

                                                 EFFECTIVE AND EXPIRATION DATES

     14.1 Effective Date . The Plan will be effective as of the Effective Date.

      14.2 Approval of Plan by Stockholders . The Plan will be submitted for the approval of the Company’s stockholders within twelve (12)
months after the date of the Board’s initial adoption of the Plan. Awards may be granted or awarded prior to such stockholder approval,
provided , that such Awards shall not be exercisable nor shall such Awards vest prior to the time when the Plan is approved by the
stockholders, and provided further , that if such approval has not been obtained at the end of said twelve-month period, all Awards previously
granted or awarded under the Plan shall thereupon be canceled and become null and void. In addition, if the Board determines that Awards
other than Options or Stock Appreciation Rights which may be granted to Section 162(m) Participants should continue to be eligible to qualify
as performance-based compensation under Section 162(m)(4)(C) of the Code, the Performance Criteria must be disclosed to and approved by
the Company’s stockholders no later than the first stockholder meeting that occurs in the fifth year following the year in which the Company’s
stockholders previously approved the Plan, as amended and restated to include the Performance Criteria.

      14.3 Expiration Date . The Plan will expire on, and no Award may be granted pursuant to the Plan after, the earlier of the tenth
anniversary of (i) the date this Plan is approved by the Board or (ii) the date this Plan is approved by the Company’s stockholders (the “
Expiration Date ”). Any Awards that are outstanding on the tenth anniversary of the Effective Date shall remain in force according to the terms
of the Plan and the applicable Award Agreement.

                                                                 ARTICLE 15

                                        AMENDMENT, MODIFICATION, AND TERMINATION

      15.1 Amendment, Modification, And Termination . The Board may terminate, amend or modify the Plan at any time and from time to
time; provided, however , that (a) to the extent necessary to comply with any applicable law, regulation, or stock exchange rule, the Company
shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required, and (b) stockholder approval is
required for any amendment to the Plan that increases the number of shares available under the Plan (other than any adjustment as provided by
Article 12). Notwithstanding any provision in this Plan to the contrary, absent approval of the stockholders of the Company, no Option may be
amended to reduce the per share exercise price of the shares subject to such Option below the per share exercise price as of the date the Option
is granted and, except as permitted by Article 12, no Option may be granted in exchange for, or in connection with, the cancellation or
surrender of an Option having a higher per share exercise price.

    15.2 Awards Previously Granted . No termination, amendment, or modification of the Plan shall adversely affect in any material way any
Award previously granted pursuant to the Plan without the prior written consent of the Participant.

                                                                       21
                                                                 ARTICLE 16

                                                          GENERAL PROVISIONS

     16.1 No Rights to Awards . No Participant, Employee, or other person shall have any claim to be granted any Award pursuant to the Plan,
and neither the Company nor the Administrator is obligated to treat Participants, Employees, and other persons uniformly.

     16.2 No Stockholders Rights . Except as otherwise provided herein, a Participant shall have none of the rights of a stockholder with
respect to shares of Stock covered by any Award until the Participant becomes the record owner of such shares of Stock.

       16.3 Withholding . The Company or any Parent or Subsidiary shall have the authority and the right to deduct or withhold, or require a
Participant to remit to the Company an amount sufficient to satisfy federal, state, local and foreign taxes (including the Participant’s
employment tax obligations) required by law to be withheld with respect to any taxable event concerning a Participant arising as a result of this
Plan. The Administrator may in its discretion and in satisfaction of the foregoing requirement allow a Participant to elect to have the Company
or a Parent or Subsidiary, as applicable, withhold shares of Stock otherwise issuable under an Award (or allow the return of shares of Stock)
having a Fair Market Value equal to the sums required to be withheld. Notwithstanding any other provision of the Plan, the number of shares of
Stock which may be withheld with respect to the issuance, vesting, exercise or payment of any Award (or which may be repurchased from the
Participant of such Award within six months (or such other period as may be determined by the Administrator) after such shares of Stock were
acquired by the Participant from the Company) in order to satisfy the Participant’s federal, state, local and foreign income and payroll tax
liabilities with respect to the issuance, vesting, exercise or payment of the Award shall be limited to the number of shares which have a Fair
Market Value on the date of withholding or repurchase equal to the aggregate amount of such liabilities based on the minimum statutory
withholding rates for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable
income.

      16.4 No Right to Employment or Services . Nothing in the Plan or any Award Agreement shall interfere with or limit in any way the right
of the Company or any Parent or Subsidiary to terminate any Participant’s employment or services at any time, nor confer upon any Participant
any right to continue in the employ or service of the Company or any Parent or Subsidiary.

      16.5 Unfunded Status of Awards . The Plan is intended to be an unfunded plan for incentive compensation. With respect to any payments
not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights
that are greater than those of a general creditor of the Company or any Parent or Subsidiary.

      16.6 Indemnification . To the extent allowable pursuant to applicable law, the Administrator (and each member thereof) shall be
indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by
such member in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she
may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in
satisfaction of judgment in such action, suit, or proceeding against him or her; provided he or she gives the Company an opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company’s
Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold
them harmless.

                                                                       22
     16.7 Relationship to other Benefits . No payment pursuant to the Plan shall be taken into account in determining any benefits pursuant to
any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Parent or Subsidiary
except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.

     16.8 Expenses . The expenses of administering the Plan shall be borne by the Company and its Subsidiaries.

     16.9 Titles and Headings . The titles and headings of the Sections in the Plan are for convenience of reference only and, in the event of
any conflict, the text of the Plan, rather than such titles or headings, shall control.

      16.10 Fractional Shares . No fractional shares of Stock shall be issued and the Administrator shall determine, in its discretion, whether
cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by rounding up or down as appropriate.

      16.11 Limitations Applicable to Section 16 Persons . Notwithstanding any other provision of the Plan, the Plan, and any Award granted
or awarded to any Participant who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in
any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 under the Exchange Act) that
are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan and Awards granted or awarded
hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

      16.12 Government and Other Regulations . The obligation of the Company to make payment of awards in Stock or otherwise shall be
subject to all applicable laws, rules, and regulations, and to such approvals by government agencies as may be required. The Company shall be
under no obligation to register pursuant to the Securities Act, any of the shares of Stock paid pursuant to the Plan. If the shares paid pursuant to
the Plan may in certain circumstances be exempt from registration pursuant to the Securities Act, the Company may restrict the transfer of such
shares in such manner as it deems advisable to ensure the availability of any such exemption.

     16.13 Governing Law . The Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the State
of Delaware, without regard to the conflicts of law principles thereof.

                                                                        23
                                                                                                                              Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the reference to our firm under the caption “Experts” and to the use of our report dated May 14, 2005, except Note 15 as to
which the date is October 26, 2005, in the Registration Statement (Amendment No. 8 to Form S-1 No. 333-124971) and related Prospectus of
Cbeyond Communications, Inc. and Subsidiaries for the registration of its common stock.


Atlanta, Georgia                                                          /s/ Ernst & Young LLP
October 26, 2005