1054290--3/7/2006--US_LEC

related topics

{financial, litigation, operation}

{system, service, information}

{debt, indebtedness, cash}

{personnel, key, retain}

{acquisition, growth, future}

{stock, price, share}

{capital, credit, financial}

{regulation, change, law}

{stock, price, operating}

{competitive, industry, competition}

The Company will not be able to expand operations if capital is not available when it is needed. If the Company makes acquisitions, it will incur additional risks that could be harmful to our business. An inability to market and develop additional services may adversely affect the Company s ability to retain existing customers or attract new customers. The Company faces intense competition that could adversely affect its business. The loss of key personnel could adversely affect the Company s operations and growth. A failure to manage processes and systems for ordering, provisioning and billing effectively, or the failure of third parties to deliver these services on a timely and accurate basis, could have a material adverse effect on the Company s ability to retain existing customers or to attract and retain new customers. A failure to operate switches and other network equipment successfully could have a material adverse effect on the Company s operations and the ability to attract and retain customers or to enter additional markets. We and other industry participants are frequently involved in disputes over issues that are important to our financial and operational success. Further legislation and regulatory rulemaking is expected to occur as the industry continues to deregulate and as we enter new markets or offer new products. Rulings or legislation adverse to us could have a material adverse effect on our operations and financial well being. There are significant uncertainties about the future availability and pricing of unbundled network elements and related elements from incumbent local exchange carriers. The FCC has undertaken a review of Special Access pricing which, if decided adversely to us, could have an adverse impact on the prices we pay for components of our network. The outcome of pending rule-making proceedings addressing the proper framework for all intercarrier compensation could have an adverse effect on our results of operations and cash flow. An adverse outcome in pending litigation with an IXC involving access charges, if ultimately successful, could have a material adverse impact on our financial condition, results of operations and cash flow. The inability to negotiate new interconnection agreements, or extensions or replacements of existing interconnection agreements, on acceptable terms and conditions could adversely affect the Company s results of operations. System disruptions could cause delays or interruptions of service, which could cause the Company to lose customers. The interest expense associated with the Notes will reduce the cash available to fund our operations, execute our growth strategy and repay the principal amount of the Notes. The indenture relating to the Notes and the loan and security agreement relating to our Revolving Facility contain restrictive covenants that may limit the Company s flexibility, and a breach of any of the covenants may cause the Company to be in default under either or both of these instruments. We may not have the cash or access to alternative sources of financing to redeem our Series A Convertible Preferred Stock (the Preferred Stock ) in April of 2010. The interests of the holders of the Company s Preferred Stock may not be aligned with the interests of the Company s common stockholders.

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1054290--3/7/2006--US_LEC_CORP