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<SEC-DOCUMENT>0000020520-04-000049.txt : 20041104
<SEC-HEADER>0000020520-04-000049.hdr.sgml : 20041104
<ACCEPTANCE-DATETIME>20041104141600
ACCESSION NUMBER:		0000020520-04-000049
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		11
CONFORMED PERIOD OF REPORT:	20040930
FILED AS OF DATE:		20041104
DATE AS OF CHANGE:		20041104

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CITIZENS COMMUNICATIONS CO
		CENTRAL INDEX KEY:			0000020520
		STANDARD INDUSTRIAL CLASSIFICATION:	TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813]
		IRS NUMBER:				060619596
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-11001
		FILM NUMBER:		041119148

	BUSINESS ADDRESS:	
		STREET 1:		HIGH RIDGE PK BLDG 3
		CITY:			STAMFORD
		STATE:			CT
		ZIP:			06905
		BUSINESS PHONE:		2036145600

	MAIL ADDRESS:	
		STREET 1:		THREE HIGH RIDGE PARK
		CITY:			STAMFORD
		STATE:			CT
		ZIP:			06905

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	CITIZENS UTILITIES CO
		DATE OF NAME CHANGE:	19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>form10q3qtr2004.txt
<DESCRIPTION>3RD QUARTER 2004 FORM 10-Q
<TEXT>




                         CITIZENS COMMUNICATIONS COMPANY


                                    FORM 10-Q


                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)


                     OF THE SECURITIES EXCHANGE ACT OF 1934


                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004




<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                For the quarterly period ended September 30, 2004
                                               ------------------

                                       or
                                       --

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

              For the transition period from _________to__________

                        Commission file number: 001-11001
                                                ---------

                         CITIZENS COMMUNICATIONS COMPANY
              ----------------------------------------------------
             (Exact name of registrant as specified in its charter)

         Delaware                                    06-0619596
 ------------------------------            ----------------------------------
(State or other jurisdiction of           (I.R.S. Employer Identification No.)
 incorporation or organization)


       3 High Ridge Park
     Stamford, Connecticut                             06905
- ---------------------------------------               --------
(Address of principal executive offices)             (Zip Code)

                                 (203) 614-5600
               --------------------------------------------------
              (Registrant's telephone number, including area code)

                                       N/A
               ---------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                              Yes X   No
                                 ---     ---

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act).

                              Yes X   No
                                 ---     ---

The number of shares outstanding of the registrant's  Common Stock as of October
29, 2004 was 335,451,474.

<PAGE>
<TABLE>
<CAPTION>
                CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES

                                      Index

                                                                                                     Page No.
                                                                                                     --------
   Part I.  Financial Information (Unaudited)

    Financial Statements

<S>                                                                                                      <C>
       Consolidated Balance Sheets at September 30, 2004 and December 31, 2003                            2

       Consolidated Statements of Operations for the three months ended September 30, 2004 and 2003       3

       Consolidated Statements of Operations for the nine months ended September 30, 2004 and 2003        4

       Consolidated Statements of Shareholders' Equity for the year ended
       December 31, 2003 and the nine months ended September 30, 2004                                     5

       Consolidated  Statements of  Comprehensive  Income for the three and nine
       months ended September 30, 2004 and 2003                                                           5

       Consolidated Statements of Cash Flows for the nine months ended September 30, 2004 and 2003        6

       Notes to Consolidated Financial Statements                                                         7

     Management's Discussion and Analysis of Financial Condition and Results of Operations               23

     Quantitative and Qualitative Disclosures about Market Risk                                          38

     Controls and Procedures                                                                             39


   Part II.  Other Information

     Legal Proceedings                                                                                   39

     Other Information                                                                                   39

     Exhibits and Reports on Form 8-K                                                                    40

     Signature                                                                                           42

</TABLE>
                                       1
<PAGE>
<TABLE>
<CAPTION>

                          PART I. FINANCIAL INFORMATION

   Item 1.    Financial Statements
              --------------------

                CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                ($ in thousands)
                                   (Unaudited)

                                                                September 30, 2004  December 31, 2003
                                                                ------------------  -----------------
ASSETS
- ------
Current assets:
<S>                                                              <C>                 <C>
   Cash and cash equivalents                                     $   199,027          $   583,671
   Accounts receivable, less allowances of $35,558 and
     $47,332, respectively                                           230,348              253,652
   Other current assets                                               35,752               40,984
   Assets held for sale                                                  -                 23,130
                                                                -------------        -------------
     Total current assets                                            465,127              901,437

Property, plant and equipment, net                                 3,375,980            3,525,640
Goodwill, net                                                      1,940,318            1,940,318
Other intangibles, net                                               716,706              812,407
Investments                                                           21,738               57,103
Other assets                                                         477,661              457,384
                                                                -------------        -------------
         Total assets                                            $  6,997,530        $  7,694,289
                                                                =============        =============

LIABILITIES AND EQUITY
- ----------------------
Current liabilities:
   Long-term debt due within one year                            $     6,366         $    88,002
   Accounts payable                                                  145,311             166,819
   Other current liabilities                                         296,262             322,805
   Liabilities related to assets held for sale                           -                11,128
                                                                -------------       -------------
     Total current liabilities                                       447,939             588,754

Deferred income taxes                                                446,182             447,056
Customer advances for construction and contributions in aid of
  construction                                                        94,598             122,035
Other liabilities                                                    300,250             264,382
Equity units                                                             -               460,000
Long-term debt                                                     4,324,817           4,195,629
Company Obligated Mandatorily Redeemable Convertible Preferred
  Securities*                                                            -               201,250

Shareholders' equity:
   Common stock, $0.25 par value (600,000,000 authorized shares;
     334,811,000 and 284,709,000 outstanding and 334,816,000 and
     295,434,000 issued at September 30, 2004 and December 31,
     2003, respectively)                                              83,704              73,858
   Additional paid-in capital                                      1,693,979           1,953,317
   Accumulated deficit                                              (304,499)           (365,181)
   Accumulated other comprehensive loss, net of tax                  (89,368)            (71,676)
   Treasury stock                                                        (72)           (175,135)
                                                                -------------       -------------
     Total shareholders' equity                                    1,383,744           1,415,183
                                                                -------------       -------------
        Total liabilities and equity                             $ 6,997,530         $ 7,694,289
                                                                =============       =============
</TABLE>
     * Represents securities of a subsidiary trust, the sole assets of which are
     securities  of a subsidiary  partnership,  substantially  all the assets of
     which are convertible  debentures of the company. The consolidation of this
     item changed  effective January 1, 2004 as a result of the application of a
     newly mandated  accounting standard "FIN 46R." Please see footnote 14 for a
     complete discussion.


                    The accompanying Notes are an integral part of these
                       Consolidated Financial Statements.


                                       2
<PAGE>
<TABLE>
<CAPTION>
                    PART I. FINANCIAL INFORMATION (Continued)

                CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
                   ($ in thousands, except per-share amounts)
                                   (Unaudited)

                                                                                          2004             2003
                                                                                      --------------   --------------
<S>                                                                                       <C>               <C>
Revenue                                                                                   $ 545,393         $595,037

Operating expenses:
     Cost of services (exclusive of depreciation and amortization)                           51,273           85,869
     Other operating expenses                                                               204,928          220,134
     Depreciation and amortization                                                          141,380          151,878
     Loss on impairment                                                                           -            4,000
     Management succession and strategic alternatives expenses (see Note 12)                 75,858                -
                                                                                      --------------   --------------
Total operating expenses                                                                    473,439          461,881
                                                                                      --------------   --------------

Operating income                                                                             71,954          133,156

Investment and other income (loss), net                                                     (13,651)         (24,277)
Interest expense                                                                             90,864          103,124
                                                                                      --------------   --------------
      Income (loss) before income taxes, dividends on convertible preferred
       securities                                                                           (32,561)           5,755
Income tax benefit                                                                          (21,271)          (7,210)
                                                                                      --------------   --------------
     Income (loss) before dividends on convertible preferred securities                     (11,290)          12,965

Dividends on convertible preferred securities, net of tax benefit
     of $0 and $(963), respectively*                                                              -            1,553
                                                                                      --------------   --------------
     Net income (loss) available to common shareholders                                   $ (11,290)        $ 11,412
                                                                                      ==============   ==============

Basic and diluted income (loss) available to common shareholders                          $   (0.04)        $   0.04
                                                                                      ==============   ==============

</TABLE>

     * The  consolidation  of this item changed  effective  January 1, 2004 as a
     result of the  application  of a newly  mandated  accounting  standard "FIN
     46R." Please see footnote 14 for a complete discussion.


              The accompanying Notes are an integral part of these
                       Consolidated Financial Statements.


                                       3
<PAGE>
<TABLE>
<CAPTION>
                    PART I. FINANCIAL INFORMATION (Continued)

                CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
                   ($ in thousands, except per-share amounts)
                                   (Unaudited)

                                                                                           2004             2003
                                                                                       --------------   --------------
<S>                                                                                       <C>              <C>
Revenue                                                                                   $1,647,952       $1,890,853
                                                                                                   -
Operating expenses:
     Cost of services (exclusive of depreciation and amortization)                           156,632          312,625
     Other operating expenses                                                                631,103          688,590
     Depreciation and amortization                                                           429,650          440,785
     Reserve for telecommunications bankruptcies                                                   -            2,260
     Restructuring and other expenses                                                              -            9,950
     Loss on impairment                                                                            -            4,000
     Management succession and strategic alternatives expenses (see Note 12)                  90,632                -
                                                                                       --------------   --------------
Total operating expenses                                                                   1,308,017        1,458,210
                                                                                       --------------   --------------
 Operating income                                                                            339,935          432,643

Investment and other income, net                                                              16,856           55,132
Interest expense                                                                             286,298          318,836
                                                                                       --------------   --------------
     Income before income taxes, dividends on convertible preferred
       securities, and cumulative effect of change in accounting principle                    70,493          168,939
Income tax expense                                                                            15,123           57,150
                                                                                       --------------   --------------
      Income before dividends on convertible preferred securities and
       cumulative effect of change in accounting principle                                    55,370          111,789

Dividends on convertible preferred securities, net of tax benefit
     of $0 and $(2,889), respectively*                                                             -            4,658
                                                                                       --------------   --------------
     Income before cumulative effect of change in accounting principle                        55,370          107,131

Cumulative effect of change in accounting principle, net of tax
     of $0 and $41,591, respectively                                                               -           65,769
                                                                                       --------------   --------------
     Net income available to common shareholders                                          $   55,370       $  172,900
                                                                                       ==============   ==============
 Basic income available to common shareholders:
     Income before cumulative effect of change in accounting principle                    $     0.19       $     0.38
     Cumulative effect of change in accounting principle                                           -             0.23
                                                                                       --------------   --------------
     Net income available to common shareholders                                          $     0.19       $     0.61
                                                                                       ==============   ==============
 Diluted income available to common shareholders:
     Income before cumulative effect of change in accounting principle                    $     0.18       $     0.37
     Cumulative effect of change in accounting principle                                           -             0.22
                                                                                       --------------   --------------
     Net income available to common shareholders                                          $     0.18       $     0.59
                                                                                       ==============   ==============
</TABLE>

     * The  consolidation  of this item changed  effective  January 1, 2004 as a
     result of the  application  of a newly  mandated  accounting  standard "FIN
     46R." Please see footnote 14 for a complete discussion.


              The accompanying Notes are an integral part of these
                       Consolidated Financial Statements.


                                       4
<PAGE>
<TABLE>
<CAPTION>
                    PART I. FINANCIAL INFORMATION (Continued)

                CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE YEAR ENDED DECEMBER 31, 2003 AND THE NINE MONTHS ENDED SEPTEMBER 30, 2004
                                ($ in thousands)
                                   (Unaudited)


                                                                                Accumulated
                                      Common Stock     Additional                 Other         Treasury Stock       Total
                                    ------------------   Paid-In   Accumulated  Comprehensive ------------------- Shareholders'
                                    Shares    Amount     Capital     Deficit       Loss       Shares     Amount      Equity
                                    -------- --------- ------------ ----------- ------------  -------- ----------- -----------

<S>              <C>                <C>       <C>      <C>          <C>           <C>        <C>      <C>         <C>
Balances January 1, 2003            294,080   $73,520  $ 1,943,406  $ (553,033)   $(102,169) (11,598)  $(189,585) $1,172,139
   Stock plans                        1,354       338        9,911           -            -      873      14,450      24,699
   Net income                             -         -            -     187,852            -        -           -     187,852
   Other comprehensive income, net
     of tax and reclassifications
     adjustments                          -         -            -           -       30,493        -           -      30,493
                                    -------- --------- ------------ ----------- ------------ -------- ----------- -----------
Balances December 31, 2003          295,434    73,858    1,953,317    (365,181)     (71,676) (10,725)   (175,135)  1,415,183
   Stock plans                        3,195       799       (5,428)          -            -    6,404     106,759     102,130
   Conversion of EPPICS               7,704     1,926       97,806           -            -      725      11,646     111,378
   Conversion of Equity Units        28,483     7,121      396,221           -            -    3,591      56,658     460,000
   Dividends on common stock of
     $2.25 per share                      -         -     (747,937)          -            -        -           -    (747,937)
   Net income                             -         -            -      55,370            -        -           -      55,370
   Tax benefit on equity forward
     contracts                            -         -            -       5,312            -        -           -       5,312
   Other comprehensive loss, net of
     tax and reclassifications
     adjustments                          -         -            -           -      (17,692)       -           -     (17,692)
                                    -------- --------- ------------ ----------- ------------ -------- ----------- -----------
Balances September 30, 2004         334,816   $83,704  $ 1,693,979  $ (304,499)   $ (89,368)      (5)  $     (72) $1,383,744
                                    ======== ========= ============ =========== ============ ======== =========== ===========


              The accompanying Notes are an integral part of these
                       Consolidated Financial Statements.


                CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
                                ($ in thousands)
                                   (Unaudited)

                                             For the three months ended September 30,    For the nine months ended September 30,
                                             ---------------------------------------    ----------------------------------------
                                                  2004               2003                     2004                  2003
                                             ------------------   ------------------    --------------------   -----------------

Net income (loss)                                  $ (11,290)       $ 11,412                $ 55,370             $ 172,900
Other comprehensive income (loss), net of
  tax and reclassifications adjustments*             (16,652)          2,520                 (17,692)                7,318
                                             ------------------   ------------------    --------------------   -----------------
  Total comprehensive income (loss)                $ (27,942)       $ 13,932                $ 37,678             $ 180,218
                                             ==================   ==================    ====================   =================

</TABLE>
               * Consists of unrealized holding gains/(losses) of
             marketable securities and/or the transfer of previously
          unrealized gains to the current period income statement as a
                        result of the sale of securities.


              The accompanying Notes are an integral part of these
                       Consolidated Financial Statements.



                                       5

<PAGE>
<TABLE>
<CAPTION>
                    PART I. FINANCIAL INFORMATION (Continued)

                CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
                                ($ in thousands)
                                   (Unaudited)
                                                                                 2004              2003
                                                                            ----------------  ----------------


<S>                                                                             <C>               <C>
Income before cumulative effect of change in accounting principle               $   55,370       $   107,131
Adjustments to reconcile net income to net cash
   provided by operating activities:
       Depreciation and amortization expense                                       429,650           440,785
       Gain on expiration/settlement of customer advances                          (25,345)           (6,165)
       Gain on capital lease termination/restructuring                                   -           (65,724)
       Stock based compensation expense                                             43,631             5,720
       Loss on extinguishment of debt                                               20,368            10,704
       Loss on impairment                                                                -             4,000
       (Gain)/loss on sale of assets                                                (9,365)           11,792
       Other non-cash adjustments                                                    8,449             (130)
       Deferred taxes, net                                                          15,123            91,488
       Change in accounts receivable                                                17,895            57,091
       Change in accounts payable and other liabilities                            (22,674)          (88,062)
       Change in other current assets                                                5,232             6,547
                                                                            ----------------  ----------------
Net cash provided by operating activities                                          538,334           575,177

Cash flows from (used by) investing activities:
       Proceeds from sale of assets, net of selling expenses                        59,045           380,735
       Capital expenditures                                                       (201,310)         (191,658)
       Other assets purchased                                                      (26,715)             (770)
                                                                            ----------------  ----------------
Net cash from (used by) investing activities                                      (168,980)          188,307

Cash flows from (used by) financing activities:
       Dividends paid                                                             (747,937)                -
       Long-term debt payments                                                    (513,798)         (551,425)
       Premiums paid to retire debt                                                (20,368)          (10,704)
       Issuance of common stock                                                    530,197            10,357
       Repayment of customer advances for
         construction and contributions in aid of construction                      (2,092)           (7,765)
                                                                            ----------------  ----------------
Net cash used by financing activities                                             (753,998)         (559,537)

Increase (decrease) in cash and cash equivalents                                  (384,644)          203,947
Cash and cash equivalents at January 1,                                            583,671           393,177
                                                                            ----------------  ----------------

Cash and cash equivalents at September 30,                                      $  199,027       $   597,124
                                                                            ================  ================

Cash paid during the period for:
       Interest                                                                 $  264,174       $   303,913
       Income taxes                                                             $    2,196       $     2,425

Non-cash investing and financing activities:
       Change in fair value of interest rate swaps                              $      973       $    (1,238)
       Conversion of EPPICS                                                     $  111,379       $         -
       Investment writedowns                                                    $    5,286       $       201

</TABLE>

              The accompanying Notes are an integral part of these
                       Consolidated Financial Statements.


                                       6
<PAGE>
                    PART I. FINANCIAL INFORMATION (Continued)

                CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES

(1)  Summary of Significant Accounting Policies:
     ------------------------------------------

     (a)  Basis of Presentation and Use of Estimates:
          Citizens  Communications  Company and its subsidiaries are referred to
          as "we," "us" "our" or the  "Company"  in this report.  Our  unaudited
          consolidated  financial  statements  have been  prepared in accordance
          with accounting  principles generally accepted in the United States of
          America (GAAP) and should be read in conjunction with the consolidated
          financial  statements  and notes included in our 2003 Annual Report on
          Form 10-K. Certain  reclassifications  of balances previously reported
          have been made to  conform to current  presentation.  All  significant
          intercompany   balances  and  transactions  have  been  eliminated  in
          consolidation.   These  unaudited  consolidated  financial  statements
          include all adjustments,  which consist of normal  recurring  accruals
          necessary to present fairly the results for the interim periods shown.

          The  preparation  of  financial  statements  in  conformity  with GAAP
          requires management to make estimates and assumptions which affect the
          amounts of assets, liabilities,  revenue and expenses we have reported
          and our disclosure of contingent assets and liabilities at the date of
          the  financial  statements.  Actual  results  may  differ  from  those
          estimates.  We believe that our critical  estimates  are  depreciation
          rates,  pension  assumptions,   calculations  of  impairment  amounts,
          reserves established for receivables, income taxes and contingencies.

          Certain information and footnote disclosures have been excluded and/or
          condensed  pursuant to Securities  and Exchange  Commission  rules and
          regulations.  The results of the interim  periods are not  necessarily
          indicative of the results for the full year.

     (b)  Cash Equivalents:
          We consider all highly liquid investments with an original maturity of
          three months or less to be cash equivalents.

     (c)  Revenue Recognition:
          Incumbent  Local Exchange  Carrier (ILEC) - Revenue is recognized when
          services are provided or when  products  are  delivered to  customers.
          Revenue that is billed in advance includes:  monthly recurring network
          access services,  special access services and monthly  recurring local
          line  charges.  The  unearned  portion of this  revenue  is  initially
          deferred  as a  component  of other  liabilities  on our  consolidated
          balance  sheet and  recognized  in revenue  over the  period  that the
          services are  provided.  Revenue  that is billed in arrears  includes:
          non-recurring  network  access  services,  switched  access  services,
          non-recurring  local services and long-distance  services.  The earned
          but unbilled  portion of this revenue is  recognized in revenue in our
          statement  of  operations  and accrued in accounts  receivable  in the
          period that the services are provided.  Excise taxes are recognized as
          a liability  when billed.  Installation  fees and their related direct
          and incremental costs are initially deferred and recognized as revenue
          and  expense  over the  average  term of a customer  relationship.  We
          recognize as current period expense the portion of installation  costs
          that exceeds installation fee revenue.

          Electric  Lightwave,  LLC.  (ELI) -  Revenue  is  recognized  when the
          services are provided. Revenue from long-term prepaid network services
          agreements  including  Indefeasible  Rights to Use (IRU), are deferred
          and recognized on a straight-line  basis over the terms of the related
          agreements. Installation fees and their related direct and incremental
          costs are  initially  deferred and  recognized  as revenue and expense
          over the average  term of a customer  relationship.  We  recognize  as
          current period expense the portion of installation  costs that exceeds
          installation fee revenue.

     (d)  Goodwill and Other Intangibles:
          Intangibles represent the excess of purchase price over the fair value
          of identifiable  tangible  assets  acquired.  We undertake  studies to
          determine  the fair  values of assets  and  liabilities  acquired  and
          allocate   purchase  prices  to  assets  and  liabilities,   including
          property,  plant  and  equipment,   goodwill  and  other  identifiable
          intangibles.  On January 1, 2002,  we adopted  Statement  of Financial
          Accounting  Standards  (SFAS) No. 142,  "Goodwill and Other Intangible
          Assets,"  which  applies to all goodwill and other  intangible  assets
          recognized  in the  statement  of  financial  position  at that  date,
          regardless  of  when  the  assets  were  initially  recognized.   This
          Statement requires that goodwill and other intangibles with indefinite
          useful lives no longer be amortized to earnings, but instead be tested
          for  impairment,  at least  annually.  In  performing  this test,  the

                                       7
<PAGE>
          Company first compares the carrying  amount of its reporting  units to
          their respective fair values.  If the carrying amount of any reporting
          unit  exceeds its fair value,  the Company is required to perform step
          two of the impairment  test by comparing the implied fair value of the
          reporting unit's goodwill with its carrying  amount.  The amortization
          of goodwill and other  intangibles with indefinite useful lives ceased
          upon adoption of the Statement on January 1, 2002. We annually (during
          the fourth  quarter)  examine the  carrying  value of our goodwill and
          trade name to determine whether there are any impairment losses.

          SFAS No. 142 also  requires  that  intangible  assets  with  estimated
          useful  lives be  amortized  over  those  lives  and be  reviewed  for
          impairment in accordance with SFAS No. 144, "Accounting for Impairment
          or Disposal of Long-Lived  Assets" to determine whether any changes to
          these lives are required.  We periodically reassess the useful life of
          our intangible assets with estimated useful lives to determine whether
          any changes to those lives are required.

     (e)  Impairment of Long-Lived Assets and  Long-Lived  Assets to Be Disposed
          of:
          We adopted SFAS No. 144, "Accounting for the Impairment or Disposal of
          Long-Lived  Assets" as of January 1, 2002. In accordance with SFAS No.
          144, we review  long-lived  assets to be held and used and  long-lived
          assets to be disposed of, including  intangible  assets with estimated
          useful  lives,   for   impairment   whenever   events  or  changes  in
          circumstances indicate that the carrying amount of such assets may not
          be  recoverable.  Recoverability  of  assets  to be held  and  used is
          measured by comparing  the carrying  amount of the asset to the future
          undiscounted  net cash flows expected to be generated by the asset. If
          any assets are  considered to be impaired,  the impairment is measured
          by the amount by which the carrying  amount of the assets  exceeds the
          estimated fair value.

     (f)  Derivative Instruments and Hedging Activities:
          We account  for  derivative  instruments  and  hedging  activities  in
          accordance with SFAS No. 149,  "Accounting for Derivative  Instruments
          and  Hedging  Activities,"  as  amended.  SFAS No.  149,  as  amended,
          requires that all derivative instruments, such as interest rate swaps,
          be recognized in the financial  statements  and measured at fair value
          regardless of the purpose or intent of holding them.

          We have  interest rate swap  arrangements  related to a portion of our
          fixed rate debt. These hedge strategies satisfy the fair value hedging
          requirements  of SFAS No.  133.  As a  result,  the fair  value of the
          hedges is carried on the balance sheet in other assets and the related
          underlying  liabilities  are also  adjusted  to fair value by the same
          amount.

     (g)  Employee Stock Plans:
          We have various employee stock-based  compensation plans. Awards under
          these plans are granted to eligible officers, management employees and
          non-management employees.  Awards may be made in the form of incentive
          stock options, non-qualified stock options, stock appreciation rights,
          restricted stock or other stock based awards.  As permitted by current
          accounting rules, we apply Accounting  Principles Board Opinions (APB)
          No. 25 and related  interpretations  in  accounting  for the  employee
          stock plans  resulting in the use of the intrinsic  value to value the
          stock.

          SFAS No. 123,  "Accounting for Stock-Based  Compensation" and SFAS No.
          148,  "Accounting  for  Stock-Based   Compensation  -  Transition  and
          Disclosure,  an amendment of SFAS No. 123," established accounting and
          disclosure  requirements using a fair-value-based method of accounting
          for stock-based employee  compensation plans. As permitted by existing
          accounting standards, the Company has elected to continue to apply the
          intrinsic-valued-based  method of accounting  described above, and has
          adopted only the disclosure requirements of SFAS No. 123, as amended.

          We  provide  pro forma net  income and pro forma net income per common
          share  disclosures  for employee stock option grants on the fair value
          of the options at the date of grant.  For purposes of  presenting  pro
          forma information, the fair value of options granted is computed using
          the Black Scholes option-pricing model.

                                       8
<PAGE>
          Had we  determined  compensation  cost  based on the fair value at the
          grant date for the Management  Equity  Incentive  Plan (MEIP),  Equity
          Incentive  Plan  (EIP),   Employee  Stock  Purchase  Plan  (ESPP)  and
          Directors'  Deferred Fee Equity Plan,  our pro forma net income (loss)
          and  net  income   (loss)  per  common  share   available  for  common
          shareholders would have been as follows:
<TABLE>
<CAPTION>

                                                      Three Months Ended September 30,      Nine Months Ended September 30,
                                                      --------------------------------      -------------------------------
                                                             2004               2003             2004              2003
                                                      ---------------     -------------     -------------     --------------
             ($ in thousands)

             Net income (loss)
             available for common
<S>                                                        <C>               <C>               <C>              <C>
             shareholders                 As reported      $(11,290)         $ 11,412          $ 55,370         $ 172,900

             Add: Stock-based employee
             compensation expense
             included in reported net
             income, net of related tax
             effects                                         23,590               527            27,407             4,275

             Deduct: Total stock-based
             employee compensation
             expense determined under
             fair value based method
             for all awards, net of
             related tax effects                            (27,339)           (3,472)          (35,024)          (12,421)
                                                            --------          ---------         ---------       -----------

                                          Pro forma        $(15,039)         $  8,467          $ 47,753         $ 164,754
                                                            ========          ========          ========         =========

             Net income (loss) per
             common share available for
             common shareholders          As reported:
                                             Basic         $  (0.04)         $   0.04          $   0.19         $    0.61
                                             Diluted       $  (0.04)         $   0.04          $   0.18         $    0.59

                                          Pro forma:
                                             Basic         $  (0.05)         $   0.03          $   0.16         $    0.58
                                             Diluted       $  (0.05)         $   0.03          $   0.16         $    0.56
</TABLE>
          In  connection  with the  payment of the  special  dividend  of $2 per
          common share on September  2, 2004,  the exercise  price and number of
          all  outstanding  options was  adjusted  such that each option had the
          same  value to the  holder  after the  dividend  as it had  before the
          dividend.  In accordance with FASB  Interpretation  No. 44 ("FIN 44"),
          "Accounting for Certain Transactions Involving Stock Compensation" and
          EITF 00-23,  "Issues Related to the Accounting for Stock  Compensation
          under APB No. 25 and FIN 44", there is no accounting  consequence  for
          changes made to the exercise price, the number of shares,  or both, of
          a fixed  stock  option  or  award as a direct  result  of the  special
          dividend.

     (h)  Net Income Per Common Share Available for Common Shareholders:
          Basic net income  per  common  share is  computed  using the  weighted
          average  number of common shares  outstanding  during the period being
          reported on. Except when the effect would be antidilutive, diluted net
          income per common share  reflects  the dilutive  effect of the assumed
          exercise  of stock  options  using the  treasury  stock  method at the
          beginning  of the period  being  reported on as well as common  shares
          that would result from the conversion of convertible  preferred stock.
          In addition, the related interest on preferred stock dividends (net of
          tax) is  added  back  to  income  since  it  would  not be paid if the
          preferred stock was converted to common stock.

                                       9
<PAGE>
(2)  Recent Accounting Literature and Changes in Accounting Principles:
     -----------------------------------------------------------------

     Accounting for Asset Retirement Obligations
     -------------------------------------------
     In June 2001, the Financial  Accounting  Standards Board (FASB) issued SFAS
     No. 143, "Accounting for Asset Retirement Obligations." We adopted SFAS No.
     143 effective January 1, 2003. As a result of our adoption of SFAS No. 143,
     we recognized an after tax non-cash gain of approximately $65,769,000. This
     gain  resulted  from the  elimination  of the  cumulative  cost of  removal
     included in accumulated  depreciation as a cumulative effect of a change in
     accounting principle in our statement of operations in the first quarter of
     2003 as the  Company  has no legal  obligation  to  remove  certain  of its
     long-lived assets.

     Exit or Disposal Activities
     ---------------------------
     In June  2002,  the  FASB  issued  SFAS  No.  146,  "Accounting  for  Costs
     Associated  with Exit or Disposal  Activities,"  which  nullified  Emerging
     Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain
     Employee  Termination  Benefits and Other Costs to Exit an Activity."  SFAS
     No. 146 requires  that a liability  for a cost  associated  with an exit or
     disposal activity be recognized when the liability is incurred, rather than
     on the date of commitment to an exit plan.  This Statement is effective for
     exit or disposal  activities that are initiated after December 31, 2002. We
     adopted  SFAS No. 146 on January 1, 2003.  The adoption of SFAS No. 146 did
     not have any  material  impact on our  financial  position  or  results  of
     operations.

     Guarantees
     ----------
     In November  2002, the FASB issued FASB  Interpretation  No. 45 ("FIN 45"),
     "Guarantor's   Accounting  and  Disclosure   Requirements  for  Guarantees,
     Including  Guarantees  of  Indebtedness  of Others." FIN 45 requires that a
     guarantor be required to  recognize,  at the  inception  of a guarantee,  a
     liability for the fair value of the obligation assumed under the guarantee.
     FIN 45 also requires  additional  disclosures by a guarantor in its interim
     and annual financial  statements about the obligations  associated with the
     guarantee.  The provisions of FIN 45 are effective for guarantees issued or
     modified after December 31, 2002, whereas the disclosure  requirements were
     effective for financial  statements  for periods  ending after December 15,
     2002.  The  adoption of FIN 45 on January 1, 2003 did not have any material
     impact on our financial position or results of operations (see Note 16).

     Variable Interest Entities
     --------------------------
     In  December  2003,  the FASB issued  FASB  Interpretation  No. 46 (revised
     December 2003) ("FIN 46R"),  "Consolidation of Variable Interest Entities,"
     which addresses how a business  enterprise should evaluate whether it has a
     controlling financial interest in an entity through means other than voting
     rights and accordingly should consolidate the entity. FIN 46R replaces FASB
     Interpretation No. 46, "Consolidation of Variable Interest Entities," which
     was issued in January  2003.  We are  required to apply FIN 46R to variable
     interests in variable  interest entities or VIEs created after December 31,
     2003.  For any VIEs  that  must be  consolidated  under  FIN 46R that  were
     created before January 1, 2004, the assets,  liabilities and noncontrolling
     interests of the VIE initially would be measured at their carrying  amounts
     with any  difference  between the net amount added to the balance sheet and
     any  previously  recognized  interest  being  recognized as the  cumulative
     effect of an accounting  change. If determining the carrying amounts is not
     practicable,  fair value at the date FIN 46R first  applies  may be used to
     measure the assets,  liabilities and noncontrolling interest of the VIE. We
     reviewed all of our investments  and determined that the Trust  Convertible
     Preferred  Securities  (EPPICS),  issued by our  consolidated  wholly-owned
     subsidiary,  Citizens  Utilities Trust and the related  Citizens  Utilities
     Capital  L.P.,  were our only VIEs.  The  adoption of FIN 46R on January 1,
     2004 did not have any material impact on our financial  position or results
     of operations.

     Derivative Instruments and Hedging
     ----------------------------------
     In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
     Derivative  Instruments and Hedging," which clarifies financial  accounting
     and reporting for derivative  instruments including derivative  instruments
     embedded in other  contracts.  This  Statement is effective  for  contracts
     entered into or modified  after June 30,  2003.  We adopted SFAS No. 149 on
     July 1, 2003. The adoption of SFAS No. 149 did not have any material impact
     on our financial position or results of operations.

                                       10
<PAGE>
     Financial Instruments with Characteristics of Both Liabilities and Equity
     -------------------------------------------------------------------------
     In May  2003,  the  FASB  issued  SFAS No.  150,  "Accounting  for  Certain
     Financial Instruments with Characteristics of Both Liabilities and Equity."
     The Statement  establishes standards for the classification and measurement
     of certain financial  instruments with  characteristics of both liabilities
     and equity. Generally, the Statement is effective for financial instruments
     entered into or modified  after May 31, 2003 and is otherwise  effective at
     the beginning of the first interim period beginning after June 15, 2003. We
     adopted the  provisions of the  Statement on July 1, 2003.  The adoption of
     SFAS No. 150 did not have any material impact on our financial  position or
     results of operations.

     Pension and Other Postretirement Benefits
     -----------------------------------------
     In  December  2003,  the FASB issued  SFAS No. 132  (revised),  "Employers'
     Disclosures  about  Pensions  and  Other  Postretirement   Benefits."  This
     Statement retains and revises the disclosure  requirements contained in the
     original   Statement.   It  requires   additional   disclosures   including
     information  describing  the  types of plan  assets,  investment  strategy,
     measurement  date(s),  plan obligations,  cash flows, and components of net
     periodic  benefit cost  recognized in interim  periods.  This  Statement is
     effective for fiscal years ending after  December 15, 2003. We have adopted
     the expanded disclosure requirements of SFAS No. 132 (revised).

     The FASB has  issued an  Exposure  Draft  that  would  require  stock-based
     employee compensation to be recorded as a charge to earnings for interim or
     annual periods  beginning  after June 15, 2005. We will continue to monitor
     the progress on the issuance of this standard.

(3)  Accounts Receivable:
     -------------------
     The  components  of  accounts  receivable,  net at  September  30, 2004 and
     December 31, 2003 are as follows:
<TABLE>
<CAPTION>
($ in thousands)                           September 30, 2004     December 31, 2003
                                          ---------------------  --------------------

<S>                                                  <C>                   <C>
Customers                                            $ 227,248             $ 250,515
Other                                                   38,658                50,469
Less:  Allowance for doubtful accounts                 (35,558)              (47,332)
                                          ---------------------  --------------------
   Accounts receivable, net                          $ 230,348             $ 253,652
                                          =====================  ====================
</TABLE>
     The Company  maintains an allowance  for  estimated  bad debts based on its
     estimate of collectibility of its accounts  receivables.  Bad debt expense,
     which is recorded as a reduction of revenue,  was $7,196,000 and $4,355,000
     for the three months ended  September 30, 2004 and 2003,  respectively  and
     $13,754,000  and  $15,153,000  for the nine months ended September 30, 2004
     and 2003,  respectively.  Additional  reserves  are  provided  for known or
     impending  telecommunications  bankruptcies,  disputes or other significant
     collection issues.

(4)  Property, Plant and Equipment, Net:
     ----------------------------------
     Property,  plant and equipment,  net at September 30, 2004 and December 31,
     2003 is as follows:
<TABLE>
<CAPTION>
      ($ in thousands)                           September 30, 2004       December 31, 2003
                                                ---------------------    --------------------

<S>                                                      <C>                     <C>
      Property, plant and equipment                      $ 6,398,721             $ 6,221,307
      Less: Accumulated depreciation                      (3,022,741)             (2,695,667)
                                                ---------------------    --------------------
           Property, plant and equipment, net            $ 3,375,980             $ 3,525,640
                                                =====================    ====================
</TABLE>
     Depreciation  expense is principally  based on the composite  group method.
     Depreciation expense was $109,750,000 and $120,012,000 for the three months
     ended  September  30,  2004 and 2003,  respectively  and  $334,760,000  and
     $345,577,000  for the nine  months  ended  September  30,  2004  and  2003,
     respectively.  Effective  January 1, 2003,  as a result of the  adoption of
     SFAS No. 143,  "Accounting  for Asset  Retirement  Obligations,"  we ceased
     recognition of the cost of removal  provision in  depreciation  expense and
     eliminated  the  cumulative   cost  of  removal   included  in  accumulated
     depreciation.  In addition,  we increased the average depreciable lives for
     certain of our  equipment in our ILEC segment.  As part of the  preparation
     and adoption of SFAS No. 143, we analyzed  depreciation  rates for the ILEC
     segment and compared them to industry averages and historical expense data.
     Based on this  review,  the  Company  shortened  the  depreciable  lives of
     certain assets.

                                       11
<PAGE>
(5)  Dispositions:
     ------------
     In October 2004, we sold cable assets in California,  Arizona, Indiana, and
     Wisconsin,  and we have signed a definitive  agreement to sell cable assets
     in New Mexico.  The  $1,286,000  pre-tax loss on these sales was recognized
     during the third quarter of 2004.

     During  the third  quarter  of 2004,  we sold our  corporate  aircraft  for
     approximately $15,298,000 in cash.

     On April 1, 2003,  we completed  the sale of  approximately  11,000  access
     lines in North Dakota for  approximately  $25,700,000  in cash. The pre-tax
     gain on the sale was $2,274,000.

     On  April 4,  2003,  we  completed  the  sale of our  wireless  partnership
     interest in Wisconsin for  approximately  $7,500,000  in cash.  The pre-tax
     gain on the sale was $2,173,000.

(6)  Net Assets Held for Sale:
     ------------------------
     On August 24, 1999,  our Board of Directors  approved a plan of divestiture
     for our public utilities services businesses, which included our water, gas
     and electric businesses. All of these properties have been sold.

     Electric and Gas
     ----------------
     On August 8,  2003,  we  completed  the sale of The Gas  Company  in Hawaii
     division for $119,290,000 in cash and assumed liabilities. The pre-tax loss
     on the sale recognized in 2003 was $19,180,000.

     On August 11, 2003,  we completed  the sale of our Arizona gas and electric
     divisions for $224,100,000 in cash. The pre-tax loss on the sale recognized
     in 2003 was $18,491,000.

     On December 2, 2003,  we  completed  the sale of  substantially  all of our
     Vermont  electric  division's  transmission  assets for  $7,344,000 in cash
     (less  $1,837,000 in refunds to customers as ordered by the Vermont  Public
     Service Board).

     On  April  1,  2004,  we  completed  the  sale  of  our  Vermont   electric
     distribution  operations  for  approximately  $13,992,000  in cash,  net of
     selling expenses.

     Losses  on the  sales  of  our  Vermont  properties  were  included  in the
     impairment charges recorded during 2003.

     Summarized  balance sheet information for the electric  operations  (assets
     held for sale) is set forth below (no data for  September  30, 2004 because
     all of the properties had been sold as of that date).

     ($ in thousands)                                  December 31, 2003
                                                      --------------------

     Current assets                                              $  4,688
     Net property, plant and equipment                              7,225
     Other assets                                                  11,217
                                                      --------------------
     Total assets held for sale                                  $ 23,130
                                                      ====================

     Current liabilities                                         $  3,651
     Other liabilities                                              7,477
                                                      --------------------
     Total liabilities related to assets held for sale           $ 11,128
                                                      ====================

                                       12
<PAGE>
<TABLE>
<CAPTION>
(7)  Intangibles:
     -----------
     Intangibles at September 30, 2004 and December 31, 2003 are as follows:

      ($ in thousands)                                   September 30, 2004       December 31, 2003
                                                       ------------------------  ---------------------
<S>                                    <C>                           <C>                    <C>
      Customer base - amortizable over 96 months                     $ 994,590              $ 995,853
      Trade name - non-amortizable                                     122,058                122,058
                                                       ------------------------  ---------------------
         Other intangibles                                           1,116,648              1,117,911
      Accumulated amortization                                        (399,942)              (305,504)
                                                       ------------------------  ---------------------
          Total other intangibles, net                               $ 716,706              $ 812,407
                                                       ========================  =====================
</TABLE>
     Amortization  expense was  $31,630,000 and $31,866,000 for the three months
     ended  September  30,  2004 and  2003,  respectively  and  $94,890,000  and
     $95,208,000  for the  nine  months  ended  September  30,  2004  and  2003,
     respectively.  The decline in customer base at September 30, 2004 is due to
     the sale of cable  assets.  Amortization  expense for each of the next five
     years,  based  on  our  estimate  of  useful  lives,  is  estimated  to  be
     $126,520,000 per year.

(8)  Long-Term Debt:
     --------------
     The activity in our long-term  debt from December 31, 2003 to September 30,
     2004 is as follows:
<TABLE>
<CAPTION>
                                                     Nine Months Ended September 30, 2004
                                                   -----------------------------------------
                                                                                                            Interest Rate*
                                                                                                                  at
                                     December 31,                Interest                     September 30,   September 30,
($ in thousands)                        2003         Payments   Rate Swap   Reclassification     2004            2004
                                     ------------    --------   ---------   ----------------  -------------  --------------

  Rural Utilities Service Loan
<S>                                  <C>             <C>          <C>                         <C>               <C>
   Contracts                         $     30,010   $    (685)    $           $     -         $   29,325        6.120%

  Senior Unsecured Debt                 4,167,123     (80,955)      973          51,770        4,138,911        8.161%


  EPPICS** (reclassified as a
   result of   adopting FIN 46R)             -              -         -         100,377          100,377        5.000%

  Equity Units                            460,000    (408,230)        -         (51,770)             -            -


  ELI Notes                                 5,975      (5,975)        -             -                -            -
  ELI Capital Leases                       10,061      (5,640)        -             -              4,421       10.363%
  Industrial Development Revenue
    Bonds                                  70,440     (12,300)        -             -             58,140        5.559%
  Other                                        22         (13)                      -                  9       12.990%
                                     ------------    --------     --------    ----------      -----------
TOTAL LONG TERM DEBT                 $  4,743,631   $(513,798)    $  973      $ 100,377       $4,331,183
                                     ------------   =========     ========    ==========      -----------

  Less:  Current Portion                  (88,002)                                                (6,366)

  Less:  Equity Units                    (460,000)                                                   -
                                     ------------                                             -----------
                                     $  4,195,629                                             $4,324,817
                                     ============                                             ===========
</TABLE>
* Interest rate includes  amortization of debt issuance expenses,  debt premiums
or discounts.  The interest  rate for Rural  Utilities  Service Loan  Contracts,
Senior  Unsecured  Debt, and Industrial  Development  Revenue Bonds  represent a
weighted average of multiple issuances.

** In  accordance  with FIN 46R,  the Trust  holding  the EPPICS and the related
Citizens Utilities Capital L.P. are now deconsolidated (see Note 14).

     On  January  15,  2004 we  repaid at  maturity  the  remaining  outstanding
     $80,955,000 of our 7.45% Debentures.

     On  January  15,  2004,  we  redeemed  at 101%  the  remaining  outstanding
     $12,300,000 of our Hawaii Special Purpose  Revenue Bonds,  Series 1993A and
     Series 1993B.

     On May 17, 2004, we repaid at maturity the remaining outstanding $5,975,000
     of Electric  Lightwave,  LLC's 6.05% Notes. These Notes had been guaranteed
     by Citizens.


                                       13
<PAGE>
     On July 15, 2004, we  renegotiated  and prepaid with $4,954,000 of cash the
     entire remaining  $5,524,000 Electric Lightwave capital lease obligation to
     a third party.

     On July 30, 2004, we purchased  $300,000,000 of the 6.75% notes that were a
     component of our equity units at 105.075% of par, plus accrued interest, at
     a premium of  approximately  $15,225,000  recorded in investment  and other
     income (loss), net.

     During  August  and  September  2004,  we  repurchased  through a series of
     transactions  an additional  $108,230,000  of the 6.75% notes due 2006 at a
     weighted  average  price of 104.486% of par,  plus accrued  interest,  at a
     premium of approximately $4,855,000 recorded in investment and other income
     (loss), net.

     As of September 30, 2004,  EPPICS  representing a total principal amount of
     $111,379,000 were converted into 8,429,020 shares of Citizens common stock.

     Total future minimum cash payment  commitments over the next 20 years under
     ELI's long-term  capital leases amounted to $10,017,000 as of September 30,
     2004.

(9)  Net Income (Loss) Per Common Share:
     ----------------------------------
     The  reconciliation  of the income (loss) per common share  calculation for
     the three and nine months ended September 30, 2004 and 2003,  respectively,
     is as follows:
<TABLE>
<CAPTION>
                                                                For the three months ended         For the nine months ended
($ in thousands, except per-share amounts)                             September 30,                      September 30,
                                                           ------------------------------------   ----------------------------------
                                                                 2004               2003               2004                2003
                                                           -----------------  -----------------   ---------------  -----------------
Net income (loss) used for basic and diluted earnings (loss)
- ------------------------------------------------------------
   available to common shareholders:
   ---------------------------------

Income (loss) before cumulative effect of change in accounting
<S>                                                               <C>                 <C>               <C>               <C>
   principle                                                      $ (11,290)          $ 11,412          $ 55,370          $ 107,131
Cumulative effect of change in accounting principle                       -                  -                 -             65,769
                                                           -----------------  -----------------   ---------------  -----------------
Total basic net income (loss) available to common
   shareholders                                                   $ (11,290)          $ 11,412          $ 55,370          $ 172,900
                                                           =================  =================   ===============  =================

Effect of conversion of preferred securities                              -                  -                 -              4,658
                                                           -----------------  -----------------   ---------------  -----------------
Total diluted net income (loss) available to common
  shareholders                                                    $ (11,290)          $ 11,412          $ 55,370          $ 177,558
                                                           =================  =================   ===============  =================
Basic earnings (loss) available to common shareholders:
- -------------------------------------------------------
Weighted-average shares outstanding - basic                         309,732            282,838           294,455            282,217
                                                           =================  =================   ===============  =================

Income (loss) before cumulative effect of change in
   accounting principle                                           $   (0.04)          $   0.04          $   0.19          $    0.38
Cumulative effect of change in accounting principle                       -                  -                 -               0.23
                                                           -----------------  -----------------   ---------------  -----------------
Net income (loss) available to common shareholders                $   (0.04)          $   0.04          $   0.19          $    0.61
                                                           =================  =================   ===============  =================

Diluted earnings (loss) available to common shareholders:
- ---------------------------------------------------------
Weighted-average shares outstanding                                 309,732            282,838           294,455            282,217
Effect of dilutive shares                                             4,480              5,264             5,783              4,900
Effect of conversion of preferred securities                              -                  -                 -             15,134
                                                           -----------------  -----------------   ---------------  -----------------
Weighted-average shares outstanding - diluted                       314,212            288,102           300,238            302,251
                                                           =================  =================   ===============  =================

Income (loss) before cumulative effect of change in
   accounting principle                                           $   (0.04)          $   0.04          $   0.18          $    0.37
Cumulative effect of change in accounting principle                       -                  -                 -               0.22
                                                           -----------------  -----------------   ---------------  -----------------
Net income (loss) available to common shareholders                $   (0.04)          $   0.04          $   0.18          $    0.59
                                                           =================  =================   ===============  =================
</TABLE>
     For the  three  and nine  months  ended  September  30,  2004,  options  of
     1,913,135 and  2,494,634,  respectively,  at exercise  prices  ranging from
     $13.30 to $18.46 issuable under employee  compensation  plans were excluded
     from the  computation of diluted EPS for those periods because the exercise
     prices were  greater than the average  market  price of common  shares and,
     therefore, the effect would be antidilutive.


                                       14
<PAGE>
     For the  three  and nine  months  ended  September  30,  2003,  options  of
     10,420,894 and  10,770,894,  respectively,  at exercise prices ranging from
     $11.41 to $21.47 issuable under employee  compensation  plans were excluded
     from the  computation of diluted EPS for those periods because the exercise
     prices were  greater than the average  market  price of common  shares and,
     therefore, the effect would be antidilutive.

     In  connection  with the payment of the  special  dividend of $2 per common
     share  on  September  2,  2004,  the  exercise  price  and  number  of  all
     outstanding  options was adjusted  such that each option had the same value
     to the  holder  after  the  dividend  as it had  before  the  dividend.  In
     accordance  with FASB  Interpretation  No. 44 ("FIN 44"),  "Accounting  for
     Certain Transactions  involving Stock Compensation" and EITF 00-23, "Issues
     Related to the Accounting for Stock  Compensation  under APB No. 25 and FIN
     44",  there is no accounting  consequence  for changes made to the exercise
     price, the number of shares, or both, of a fixed stock option or award as a
     direct result of the special dividend,

     For the three and nine months ended September 30, 2004 and 2003, restricted
     stock awards of 1,543,000 and 1,453,000 shares, respectively,  are excluded
     from our basic  weighted  average  shares  outstanding  and included in our
     dilutive  shares  until  the  shares  are no  longer  contingent  upon  the
     satisfaction of all specified conditions.

     On August 17, 2004 we issued 32,073,633  shares of common stock,  including
     3,591,000  treasury shares, to our equity unit holders in settlement of the
     equity purchase contract component of the equity units. With respect to the
     $460,000,000  Senior Note  component of the equity  units,  we  repurchased
     $300,000,000  principal  amount of these Notes in July 2004.  The remaining
     $160,000,000 of the Senior Notes were repriced and a portion was remarketed
     on August 12, 2004 as the 6.75% Notes due August 17,  2006.  During  August
     and September, 2004, we repurchased an additional $108,230,000 of the 6.75%
     Notes which, in addition to the $300,000,000 purchased in July, resulted in
     a pre-tax charge of approximately  $20,080,000  during the third quarter of
     2004, but will result in an annual  reduction in interest  expense of about
     $27,555,000 per year.

     As a result of our July  dividend  announcement  with respect to our common
     shares,  our  5%  Company  Obligated  Mandatorily   Redeemable  Convertible
     Preferred  Securities due 2036 (EPPICS) began to convert to Citizens common
     shares.  As  of  September  30,  2004,  approximately  55%  of  the  EPPICS
     outstanding,  or about  $111,379,000  aggregate  principal amount of units,
     have  converted to 8,429,020  Citizens  common  shares,  including  725,000
     treasury shares.

     At September  30, 2004,  we had 1,797,428  shares of  potentially  dilutive
     EPPICS, which were convertible into common stock at a 4.36 to 1 ratio at an
     exercise  price of $11.46  per  share.  As a result of the  September  2004
     special  dividend,  the EPPICS  exercise price for  conversion  into common
     stock was reduced  from $13.30 to $11.46.  These  securities  have not been
     included in the diluted income per share calculation for the three and nine
     months ended  September 30, 2004 because their  inclusion would have had an
     antidilutive effect.

     At September  30, 2003,  we had 4,025,000  shares of  potentially  dilutive
     EPPICS which were  convertible into common stock at a 3.76 to 1 ratio at an
     exercise  price of $13.30 per share that have been  included in the diluted
     income per common share calculation for the nine months ended September 30,
     2003.  These  securities  have not been included in the diluted  income per
     share  calculation  for the three months ended  September  30, 2003 because
     their inclusion would have had an antidilutive effect.

(10) Segment Information:
     -------------------
     As of  April  1,  2004,  we  operate  in  two  segments,  ILEC  and  ELI (a
     competitive local exchange carrier (CLEC)).  The ILEC segment provides both
     regulated and unregulated communications services to residential,  business
     and wholesale  customers  and is typically  the  incumbent  provider in its
     service areas.

     As an ILEC,  we compete  with CLECs that may operate in our  markets.  As a
     CLEC, we provide telecommunications services, principally to businesses, in
     competition with the ILEC. As a CLEC, we frequently  obtain the "last mile"
     access to customers  through  arrangements  with the applicable ILEC. ILECs
     and CLECs are subject to  different  regulatory  frameworks  of the Federal
     Communications  Commission  (FCC) and state regulatory  agencies.  Our ILEC
     operations and ELI do not compete with each other.


                                       15
<PAGE>
     As permitted by SFAS No. 131, we have utilized the aggregation  criteria in
     combining our markets  because all of the Company's ILEC  properties  share
     similar  economic  characteristics:  they  provide  the same  products  and
     services to similar  customers  using  comparable  technologies  in all the
     states in which we operate.  The regulatory structure is generally similar.
     Differences  in  the  regulatory  regime  of  a  particular  state  do  not
     materially  impact the economic  characteristics  or operating results of a
     particular property.
<TABLE>
<CAPTION>
($ in thousands)                            For the three months ended September 30, 2004
                                      ------------------------------------------------------------
                                                                                        Total
                                          ILEC             ELI        Electric (1)     Segments
                                      --------------  -------------- --------------- -------------
<S>                                       <C>              <C>                  <C>     <C>
Revenue                                   $ 506,183        $ 39,210             $ -     $ 545,393
Depreciation and amortization               135,259           6,121               -       141,380
Management succession and
   strategic alternatives expenses           73,051           2,807               -        75,858
Operating income (loss)                      71,191             774             (11)       71,954
Capital expenditures                         65,960           1,907               -        67,867


($ in thousands)                                       For the three months ended September 30, 2003
                                      ---------------------------------------------------------------------------
                                                                                                       Total
                                          ILEC             ELI            Gas          Electric      Segments
                                      --------------  -------------- --------------- ------------- --------------
Revenue                                   $ 511,574        $ 40,416        $ 18,005      $ 25,042      $ 595,037
Depreciation and amortization               146,261           5,617               -             -        151,878
Loss on impairment                                -               -               -         4,000          4,000
Operating income (loss)                     133,807           3,773          (2,806)       (1,618)       133,156
Capital expenditures                         66,968           3,113           2,412         3,515         76,008

     (1)  Consists  principally  of  post-sale  activities  associated  with the
     completion  of our utility  divestiture  program.  These costs could not be
     accrued as a selling cost at the time of sale. The Company  believes it has
     an adequate provision for its remaining post-divestiture liabilities. We do
     not anticipate any material future costs associated with these activities.

($ in thousands)                             For the nine months ended September 30, 2004
                                      ------------------------------------------------------------
                                                                                        Total
                                          ILEC             ELI          Electric       Segments
                                      --------------  -------------- --------------- -------------
Revenue                                 $ 1,520,940       $ 117,277         $ 9,735   $ 1,647,952
Depreciation and amortization               411,749          17,901               -       429,650
Management succession and
   strategic alternatives expenses           87,279           3,353               -        90,632
Operating income (loss)                     337,146           5,121          (2,332)      339,935
Capital expenditures                        192,491           8,066             573       201,130

($ in thousands)                                    For the nine months ended September 30, 2003
                                      ---------------------------------------------------------------------------
                                                                                                       Total
                                          ILEC             ELI            Gas          Electric      Segments
                                      --------------  -------------- --------------- ------------- --------------
Revenue                                 $ 1,535,336       $ 125,228       $ 137,686      $ 92,603    $ 1,890,853
Depreciation and amortization               422,990          17,795               -             -        440,785
Reserve for telecommunications
   bankruptcies                               1,113           1,147               -             -          2,260
Restructuring and other expenses              9,482             468               -             -          9,950
Loss on impairment                                -               -               -         4,000          4,000
Operating income                            402,536           6,658          15,204         8,245        432,643
Capital expenditures                        161,260           6,514           9,877        13,487        191,138
</TABLE>

                                       16
<PAGE>
<TABLE>
<CAPTION>
     The  following  table  reconciles  sector  capital  expenditures  to  total
     consolidated capital expenditures.

($ in thousands)                       For the three months ended     For the nine months ended
                                              September 30,                  September 30,
                                      ------------------------------ -----------------------------
                                          2004            2003            2004           2003
                                      --------------  -------------- --------------- -------------
<S>                                        <C>             <C>            <C>           <C>
Total segment capital expenditures         $ 67,867        $ 76,008       $ 201,130     $ 191,138
General capital expenditures                      9              48             180           520
                                      --------------  -------------- --------------- -------------
Consolidated reported capital
   expenditures                            $ 67,876        $ 76,056       $ 201,310     $ 191,658
                                      ==============  ============== =============== =============
</TABLE>
(11) Derivative Instruments and Hedging Activities:
     ---------------------------------------------
     Interest rate swap  agreements are used to hedge a portion of our debt that
     is  subject  to  fixed  interest  rates.   Under  our  interest  rate  swap
     agreements, we agree to pay an amount equal to a specified variable rate of
     interest  times a notional  principal  amount,  and to receive in return an
     amount equal to a specified  fixed rate of interest times the same notional
     principal amount.  The notional amounts of the contracts are not exchanged.
     No other cash payments are made unless the agreement is terminated prior to
     maturity,  in which case the  amount  paid or  received  in  settlement  is
     established  by agreement at the time of  termination  and  represents  the
     market  value,  at the then  current  rate of  interest,  of the  remaining
     obligations to exchange payments under the terms of the contracts.

     The  interest  rate  swap  contracts  are  reflected  at fair  value in our
     consolidated balance sheet and the related portion of fixed-rate debt being
     hedged is  reflected at an amount equal to the sum of its book value and an
     amount  representing  the  change  in fair  value of the  debt  obligations
     attributable  to the interest rate risk being  hedged.  Changes in the fair
     value of interest rate swap  contracts,  and the offsetting  changes in the
     adjusted carrying value of the related portion of the fixed-rate debt being
     hedged,  are  recognized  in the  consolidated  statements of operations in
     interest expense. The notional amounts of fixed-rate indebtedness hedged as
     of  September  30,  2004  and  December  31,  2003  were  $550,000,000  and
     $400,000,000, respectively. Such contracts require us to pay variable rates
     of  interest  (estimated  average  pay rates of  approximately  6.31% as of
     September  30, 2004 and  approximately  5.46% as of December  31, 2003) and
     receive fixed rates of interest  (average  receive rates of 8.47% and 8.38%
     as of September  30, 2004 and December  31, 2003,  respectively).  The fair
     value of these derivatives is reflected in other assets as of September 30,
     2004, in the amount of $11,574,000 and the related underlying debt has been
     increased by a like amount.  The net amounts  received during the three and
     nine  months  ended  September  30,  2004 as a result  of  these  contracts
     amounted to $1,577,000 and $7,093,000,  respectively, and are included as a
     reduction of interest expense.

     We do not anticipate any nonperformance by counterparties to our derivative
     contracts as all counterparties have investment grade credit ratings.

(12) Management Succession and Strategic Alternatives Expenses:
     ---------------------------------------------------------
     On July 11, 2004,  our Board of Directors  announced  that it had completed
     its review of the Company's  financial and  strategic  alternatives  and on
     September  2, 2004 the  Company  paid a special  dividend  of $2 per common
     share and a quarterly dividend of $0.25 per common share to shareholders of
     record on August 18, 2004.  Concurrently,  Leonard Tow decided to step down
     from his position as chief executive officer,  effective  immediately,  and
     resigned his position as Chairman of the board on September  27, 2004.  The
     Board of Directors named Mary A. Wilderotter  president and chief executive
     officer (effective November 1, 2004) on September 21, 2004 and Rudy J. Graf
     was elected Chairman of the board on September 30, 2004.

     Through  the  first  nine  months  of  2004,   we  expensed   approximately
     $90,632,000 of costs related to management  succession and our  exploration
     of  financial  and  strategic  alternatives.  Included are  $36,618,000  of
     non-cash expenses for the acceleration of stock benefits,  cash expenses of
     $19,229,000  for advisory  fees,  $19,339,000  for  severance and retention
     arrangements and $15,446,000  primarily for tax  reimbursements.  We do not
     anticipate any significant future costs for these items.

                                       17
<PAGE>
(13) Investment and Other Income, Net:
     --------------------------------
     The components of investment and other income, net are as follows:
<TABLE>
<CAPTION>
                                                    Three Months Ended September 30,     Nine Months Ended September 30,
                                                  -----------------------------------   -----------------------------------
($ in thousands)                                        2004              2003                2004              2003
                                                  -----------------  ----------------   ----------------- -----------------
<S>                                                      <C>               <C>                  <C>               <C>
Investment income (loss)                                 $  (2,742)        $   1,809            $  2,869          $  7,113
Gain on capital lease termination/restructuring                  -                 -                   -            65,724
Gain on expiration/settlement of customer advances               -                 -              25,345             6,165
Premium on debt repurchases                                (20,368)           (7,250)            (20,368)          (10,704)
Gain (loss) on sale of assets                               10,735           (16,813)              9,365           (11,792)
Other, net                                                  (1,276)           (2,023)               (355)           (1,374)
                                                  -----------------  ----------------   ----------------- -----------------
     Total investment and other income, net              $ (13,651)        $ (24,277)           $ 16,856          $ 55,132
                                                  =================  ================   ================= =================
</TABLE>
     During 2003 and 2004,  we  recognized  income in  connection  with  certain
     retained  liabilities  associated with customer  advances for  construction
     from  our  disposed  water  properties,  as  a  result  of  some  of  these
     liabilities  terminating.  During 2003, we  recognized  gains in connection
     with the termination/restructuring of capital leases at ELI. Gain (loss) on
     sale of  assets  in  2004  represents  various  gains  (losses)  recognized
     including the gain on sales of non strategic  investments  during the third
     quarter.  In 2003,  the  amount  is  attributable  to the  sales of The Gas
     Company in Hawaii and our Arizona  gas and  electric  divisions  during the
     third  quarter,  and the  sale of  access  lines in  North  Dakota  and our
     wireless  partnership  interest in Wisconsin during the second quarter, and
     the sale of our Plano, Texas office building in March 2003.

(14) Company Obligated Mandatorily Redeemable Convertible Preferred Securities:
     -------------------------------------------------------------------------
     In 1996, our consolidated wholly-owned subsidiary, Citizens Utilities Trust
     (the Trust),  issued, in an underwritten public offering,  4,025,000 shares
     of  5%  Company  Obligated  Mandatorily  Redeemable  Convertible  Preferred
     Securities due 2036 (EPPICS), representing preferred undivided interests in
     the assets of the Trust, with a liquidation  preference of $50 per security
     (for a total  liquidation  amount of  $201,250,000).  The proceeds from the
     issuance  of the  Trust  Convertible  Preferred  Securities  and a  Company
     capital   contribution  were  used  to  purchase   $207,475,000   aggregate
     liquidation amount of 5% Partnership  Convertible  Preferred Securities due
     2036 from another wholly-owned subsidiary,  Citizens Utilities Capital L.P.
     (the  Partnership).  These securities have an adjusted  conversion price of
     $11.46 per Citizens  common share.  The  conversion  price was reduced from
     $13.30 to $11.46  during the third quarter of 2004 as a result of the $2.00
     per  share  special  dividend.  The  proceeds  from  the  issuance  of  the
     Partnership   Convertible   Preferred  Securities  and  a  Company  capital
     contribution were used to purchase from us $211,756,000 aggregate principal
     amount of 5% Convertible  Subordinated Debentures due 2036. The sole assets
     of the Trust are the Partnership Convertible Preferred Securities,  and our
     Convertible Subordinated Debentures are substantially all the assets of the
     Partnership.  Our obligations under the agreements related to the issuances
     of such  securities,  taken together,  constitute a full and  unconditional
     guarantee  by  us  of  the  Trust's  obligations   relating  to  the  Trust
     Convertible Preferred Securities and the Partnership's obligations relating
     to the Partnership Convertible Preferred Securities.

     In  accordance  with the  terms of the  issuances,  we paid the  annual  5%
     interest  in  quarterly   installments  on  the  Convertible   Subordinated
     Debentures  in the first,  second and third  quarters  of 2004 and the four
     quarters  of 2003.  Only cash was paid (net of  investment  returns) to the
     Partnership  in payment of the  interest  on the  Convertible  Subordinated
     Debentures.  The cash was then  distributed by the Partnership to the Trust
     and then by the Trust to the holders of the EPPICS.

     As of September 30, 2004,  EPPICS  representing a total principal amount of
     $111,379,000  had been converted into 8,429,020  shares of Citizens  common
     stock.

     We have adopted the  provisions  of FIN 46R (revised  December  2003) ("FIN
     46R"),  "Consolidation of Variable Interest Entities," effective January 1,
     2004. We have not restated prior periods.

                                       18
<PAGE>
     We have included the following description to provide readers a comparative
     analysis of the accounting impact of this standard.  Both the Trust and the
     Partnership have been  consolidated from the date of their creation through
     December  31,  2003.  As  a  result  of  the  new  consolidation  standards
     established   by  FIN  46R,  the  Company,   effective   January  1,  2004,
     deconsolidated  the  activities of the Trust and the  Partnership.  We have
     highlighted the comparative effect of this change in the following table:
<TABLE>
<CAPTION>
Balance Sheet
                                                                  As of
                                     -------------------------------------------------------------
($ in thousands)                      December 31, 2003    September 30, 2004           Change
                                     --------------------- --------------------     --------------
Assets:
<S>                                               <C>                  <C>               <C>       <C>
     Cash                                         $ 2,103              $     -           $ (2,103) (1)
     Investments                                        -               12,645             12,645  (2)

Liabilities:
     Long-term debt                                     -              100,377  (3)        (100,873(3)
     EPPICS                                       201,250                    -  (3)

Statement of Operations

                                                  As reported for the nine months ended
                                     -------------------------------------------------------------
 ($ in thousands)                      September 30, 2003   September 30, 2004           Change
                                     --------------------- --------------------     --------------
Investment income                                 $     -              $   474           $    474  (4)
Interest expense                                        -                7,044              7,044  (5)
Dividends on EPPICS (before tax)                    7,548                    -             (7,548) (6)
                                     --------------------- --------------------     --------------
     Net                                          $ 7,548              $ 6,570           $   (978)
                                     ===================== ====================     ==============
</TABLE>
     (1)  Represents  a cash  balance  on the books of the  Partnership  that is
          removed as a result of the deconsolidation.
     (2)  Represents Citizens'  investments in the Partnership and the Trust. At
          December 31, 2003, these  investments were eliminated in consolidation
          against the equity of the Partnership and the Trust.
     (3)  As a result of the  deconsolidation,  the  Trust  and the  Partnership
          balance  sheets were  removed,  leaving debt issued by Citizens to the
          Partnership  in the amount of  $211,756,000.  The nominal effect of an
          increase in debt of  $10,506,000 is debt that is  "intercompany."  FIN
          46R does not  impact the  economics  of the  EPPICS  structure.  As of
          September 2004, Citizens has $100,377,000  (approximately $111,378,600
          converted  during third quarter) of debt  outstanding to third parties
          and will continue to pay interest on that amount at 5%.
     (4)  Represents interest income to be paid by the Partnership and the Trust
          to Citizens for its  investments  noted in (2) above.  The Partnership
          and the Trust have no source of cash except as  provided by  Citizens.
          Interest is payable at the rate of 5% per annum.
     (5)  Represents  interest expense on the convertible  debentures  issued by
          Citizens to the Partnership. Interest is payable at the rate of 5% per
          annum.
     (6)  As a result of the  deconsolidation of the Trust,  previously reported
          dividends on the convertible preferred securities issued to the public
          by the Trust are removed and replaced by the interest  accruing on the
          debt  issued by  Citizens  to the  Partnership.  Citizens  remains the
          guarantor  of the EPPICS debt and  continues  to be the sole source of
          cash for the Trust to pay dividends.

                                       19
<PAGE>
(15) Retirement Plans:
     ----------------
     The following  tables provides the components of net periodic  benefit cost
     for the three and nine months ended September 30, 2004 and 2003:
<TABLE>
<CAPTION>
                                                                Pension Benefits
                                           --------------------------------------------------------
                                           For the three months ended     For the nine months ended
                                                 September 30,                  September 30,
                                           ----------------------------   -------------------------
($ in thousands)                               2004           2003           2004         2003
                                           -------------  -------------   ------------ ------------
Components of net periodic benefit cost
- ---------------------------------------
<S>                                             <C>            <C>            <C>         <C>
Service cost                                    $ 1,133        $ 1,763        $ 4,311     $  5,607
Interest cost on projected benefit obligation    11,859         13,364         34,851       42,502
Return on plan assets                           (14,286)       (14,697)       (42,902)     (46,739)
Amortization of prior service cost and
       unrecognized net obligation                  (61)           (47)          (183)        (149)
Amortization of unrecognized loss                 2,911          3,002          6,619        9,544
                                           -------------  -------------   ------------ ------------
Net periodic benefit cost                         1,556          3,385          2,696       10,765
Curtailment/settlement charge                         -          6,585              -        6,585
                                           -------------  -------------   ------------ ------------
Total periodic benefit cost                     $ 1,556        $ 9,970        $ 2,696     $ 17,350
                                           =============  =============   ============ ============


                                                           Other Postretirement Benefits
                                           --------------------------------------------------------
                                           For the three months ended     For the nine months ended
                                                 September 30,                  September 30,
                                           ----------------------------   -------------------------
($ in thousands)                               2004           2003           2004         2003
                                           -------------  -------------   ------------ ------------
Components of net periodic benefit cost
- ---------------------------------------
Service cost                                    $    48        $   292       $    846     $    876
Interest cost on projected benefit obligation     3,203          2,863          9,517        8,591
Return on plan assets                              (641)          (449)        (1,701)      (1,347)
Amortization of prior service cost and
       unrecognized net obligation                 (162)             5           (150)          15
Amortization of unrecognized loss                   809            838          3,927        2,515
                                           -------------  -------------   ------------ ------------
Net periodic benefit cost                       $ 3,257        $ 3,549       $ 12,439     $ 10,650
                                           =============  =============   ============ ============
</TABLE>
     We expect that our pension expense for 2004 will be $3,000,000 - $4,000,000
     (it was  $12,400,000  in 2003) and no  contribution  will be required to be
     made by us to the  pension  plan in 2004.  No  contribution  was  made,  or
     required, for 2003.

     In  December  2003,  the  Medicare   Prescription  Drug,   Improvement  and
     Modernization  Act of 2003 (the  Act)  became  law.  The Act  introduces  a
     prescription  drug benefit under  Medicare as well as a federal  subsidy to
     sponsors of retiree  health care benefit  plans that provide a benefit that
     is at least actuarially  equivalent to the Medicare benefit.  The amount of
     the  federal  subsidy  will  be  based  on  28  percent  of  an  individual
     beneficiary's annual eligible  prescription drug costs ranging between $250
     and  $5,000.  Currently,  the  Company  has not yet been  able to  conclude
     whether  the  benefits  provided  by its  postretirement  medical  plan are
     actuarially  equivalent  to Medicare Part D under the Act.  Therefore,  the
     Company cannot quantify the effects,  if any, that the Act will have on its
     future benefit costs or accumulated  postretirement  benefit obligation and
     accordingly,  the  effects  of the  Act  have  not  been  reflected  in the
     accompanying unaudited consolidated financial statements.

(16) Income Taxes:
     ------------
     The  effective  tax rate for the nine months ended  September  30, 2004 and
     2003 was 21.5% and 33.8%, respectively. Our effective tax rate has declined
     as a result of the  completion  of audits  with  federal  and state  taxing
     authorities  in the third  quarter  2004 and  changes in the  structure  of
     certain of our subsidiaries.

                                       20
<PAGE>
(17) Commitments and Contingencies:
     -----------------------------
     The City of Bangor,  Maine,  filed suit against us on November 22, 2002, in
     the U.S.  District  Court  for the  District  of Maine  (City of  Bangor v.
     Citizens Communications Company, Civ. Action No. 02-183-B-S).  We intend to
     defend  ourselves  vigorously  against  the  City's  lawsuit.  The City has
     alleged,  among  other  things,  that we are  responsible  for the costs of
     cleaning up environmental  contamination  alleged to have resulted from the
     operation of a manufactured gas plant by Bangor Gas Company, which we owned
     from 1948-1963.  The City alleged the existence of extensive  contamination
     of the Penobscot River and has asserted that money damages and other relief
     at issue in the lawsuit could exceed  $50,000,000.  The City also requested
     that  punitive  damages  be  assessed  against  us. We have filed an answer
     denying  liability to the City, and have asserted a number of counterclaims
     against  the  City.  In  addition,  we have  identified  a number  of other
     potentially  responsible parties that may be liable for the damages alleged
     by the  City  and  have  joined  them  as  parties  to the  lawsuit.  These
     additional  parties  include  Honeywell  Corporation,  the  Army  Corps  of
     Engineers,  Guilford Transportation  (formerly Maine Central Railroad), UGI
     Utilities, Inc., and Centerpoint Energy Resources Corporation. On March 11,
     2004,  the  Magistrate in charge of the case granted our motion for partial
     summary  judgment  with  respect  to the  City's  CERCLA  claims,  and that
     decision  was affirmed by the  District  Court on May 5, 2004.  In an order
     issued on July 6, 2004,  the  Magistrate  dismissed  the  City's  claim for
     punitive  damages.  The case  could be set for  trial as early as the first
     quarter of 2005. We have  demanded  that various of our insurance  carriers
     defend and indemnify us with respect to the City's lawsuit, and on December
     26, 2002, we filed a declaratory  judgment  action against those  insurance
     carriers in the Superior Court of Penobscot County,  Maine, for the purpose
     of establishing their obligations to us with respect to the City's lawsuit.
     We intend to  vigorously  pursue this lawsuit to obtain from our  insurance
     carriers indemnification for any damages that may be assessed against us in
     the City's  lawsuit as well as to recover  the costs of our defense of that
     lawsuit.

     On June 7, 2004,  representatives  of Robert A. Katz Technology  Licensing,
     LP, contacted us regarding possible infringement of several patents held by
     that firm. The patents cover a wide range of operations in which  telephony
     is supported by computers,  including obtaining  information from databases
     via  telephone,   interactive  telephone  transactions,  and  customer  and
     technical support  applications.  We are cooperating with the patent holder
     to  determine  if we are  currently  using  any of the  processes  that are
     protected by its patents.  If we determine that we are utilizing the patent
     holder's  intellectual  property,  we expect to commence  negotiations on a
     license agreement.

     On June 24, 2004, one of our subsidiaries,  Frontier Subsidiary Telco Inc.,
     received a "Notice of Indemnity Claim" from Citibank, N.A., that is related
     to a complaint  pending against Citibank and others in the U.S.  Bankruptcy
     Court  for the  Southern  District  of New  York  as a part  of the  Global
     Crossing Bankruptcy  proceeding.  Citibank bases its claim for indemnity on
     the provisions of a credit  agreement that was entered into in October 2000
     between  Citibank  and our  subsidiary.  We purchased  Frontier  Subsidiary
     Telco,  Inc.,  in June  2001 as part  of our  acquisition  of the  Frontier
     telephone  companies.  The complaint against  Citibank,  for which it seeks
     indemnification,  alleges that the seller  improperly used a portion of the
     proceeds  from the  Frontier  transaction  to pay off the  Citibank  credit
     agreement, thereby defrauding certain debt holders of Global Crossing North
     America Inc.  Although the credit  agreement was paid off at the closing of
     the Frontier  transaction,  Citibank claims the indemnification  obligation
     survives.  Damages  sought  against  Citibank and its  co-defendants  could
     exceed $1,000,000,000.  We have advised Citibank that we believe its demand
     for  indemnification is unfounded.  If Citibank elects to pursue its claims
     for indemnification in a legal proceeding, we will vigorously contest those
     claims.

     We are party to other legal proceedings arising in the normal course of our
     business. The outcome of individual matters is not predictable. However, we
     believe that the ultimate resolution of all such matters, after considering
     insurance  coverage,  will  not  have  a  material  adverse  effect  on our
     financial position, results of operations, or our cash flows.

     We  have   budgeted   capital   expenditures   in  2004  of   approximately
     $276,000,000, including $265,000,000 for ILEC (approximately $10,300,000 of
     which relates to our billing system  conversion)  and  $11,000,000 for ELI.
     Capitalized costs during 2004 associated with our billing system conversion
     amounted to $7,755,000.


                                       21
<PAGE>
     The  Company  sold all of its  utility  businesses  as of  April  1,  2004.
     However,  we have retained a potential payment  obligation  associated with
     our  previous  electric  utility  activities  in the state of Vermont.  The
     Vermont Joint Owners (VJO), a consortium of 14 Vermont utilities, including
     us, entered into a purchase power agreement with  Hydro-Quebec in 1987. The
     agreement contains  "step-up"  provisions that state that if any VJO member
     defaults on its purchase  obligation  under the contract to purchase  power
     from Hydro-Quebec the other VJO participants will assume responsibility for
     the defaulting party's share on a pro-rata basis. Our pro-rata share of the
     purchase power obligation was 10%. If any member of the VJO defaults on its
     obligations under the Hydro-Quebec agreement,  the remaining members of the
     VJO, including us, may be required to pay for a substantially  larger share
     of the VJO's total  power  purchase  obligation  for the  remainder  of the
     agreement  (which runs through 2015).  Paragraph 13 of FIN 45 requires that
     we disclose "the maximum potential amount of future payments (undiscounted)
     the guarantor could be required to make under the guarantee."  Paragraph 13
     also states that we must make such  disclosure  "... even if the likelihood
     of the  guarantor's  having to make any  payments  under the  guarantee  is
     remote..."  As noted  above,  our  obligation  only  arises  as a result of
     default  by another  VJO  member  such as upon  bankruptcy.  Therefore,  to
     satisfy the  "maximum  potential  amount"  disclosure  requirement  we must
     assume  that  all  members  of the VJO  simultaneously  default,  a  highly
     unlikely  scenario  given  that the two  members  of the VJO that  have the
     largest potential  payment  obligations are publicly traded with investment
     grade  credit  ratings,  and that all VJO  members  are  regulated  utility
     providers  with regulated  cost  recovery.  Regardless,  despite the remote
     chance that such an event could occur,  or that the State of Vermont  could
     or would  allow  such an event,  assuming  that all the  members of the VJO
     defaulted  by January 1, 2005 and  remained in default for the  duration of
     the contract (another 10 years), we estimate that our undiscounted purchase
     obligation for 2005 through 2015 would be approximately $1,600,000,000.  In
     such a  scenario  the  Company  would  then own the power and could seek to
     recover  its costs.  We would do this by seeking to recover  our costs from
     the  defaulting  members  and/or  reselling  the  power  to  other  utility
     providers or the  northeast  power grid.  There is an active market for the
     sale of power.  We believe that we would receive full recovery of our costs
     through  sales  to  others.  If  pricing  became  more  favorable  we could
     potentially  sell the  power  on the  open  market  at a  profit.  We could
     potentially  lose  money if we were  unable to sell the  power at cost.  We
     caution that all of the above-described scenarios are unlikely to occur and
     we cannot predict with any degree of certainty any potential outcome.

(18) Subsequent Event:
     ----------------
     On  October  29,  2004,  Citizens  Communications  Company  entered  into a
     $250,000,000 credit agreement with a maturity date of October 29, 2009. The
     $805,000,000 lines of credit, which would have matured on October 24, 2006,
     were  canceled  as of the same date.  During  the term of the  $250,000,000
     credit agreement,  Citizens may borrow,  repay and re-borrow funds. The new
     credit facility contains a maximum leverage ratio covenant,  which requires
     that we  maintain a ratio of no greater  than 4.50 to 1.  Although  the new
     credit  facility is  unsecured,  it will be equally and ratably  secured by
     certain  liens  and  equally  and  ratably  guaranteed  by  certain  of our
     subsidiaries if we issue debt that is secured or guaranteed. The new credit
     agreement is available for general  corporate  purposes but may not be used
     to fund dividend payments.

                                       22
<PAGE>
     Item 2. Management's Discussion and Analysis of Financial Condition and
             ---------------------------------------------------------------
             Results of Operations
             ---------------------

This quarterly report on Form 10-Q contains forward-looking  statements that are
subject to risks and  uncertainties,  which could cause actual results to differ
materially from those  expressed or implied in the  statements.  Forward-looking
statements  (including oral  representations) are only predictions or statements
of current plans, which we review continuously.  Forward-looking  statements may
differ  from  actual  future  results due to, but not limited to, and our future
results may be materially affected by, any of the following possibilities:

     *    Changes in the number of our access lines;

     *    The effects of  competition  from wireless,  other  wireline  carriers
          (through Unbundled Network Elements (UNE),  Unbundled Network Elements
          Platform  (UNEP),  voice over internet  protocol (VOIP) or otherwise),
          high speed cable modems and cable telephony;

     *    The effects of general and local economic and employment conditions on
          our revenues;

     *    Our  ability  to   effectively   manage  and  otherwise   monitor  our
          operations, costs, regulatory compliance and service quality;

     *    Our ability to successfully  introduce new product offerings including
          our ability to offer bundled  service  packages on terms that are both
          profitable to us and attractive to our  customers,  and our ability to
          sell enhanced and data services in order to offset  declines in highly
          profitable revenue from local services, access services and subsidies;

     *    Our ability to comply  with  Section  404 of the  Sarbanes-Oxley  Act,
          which requires  management to assess its internal  control systems and
          disclose  whether the internal  control  systems are effective and the
          identification  of any material  weaknesses in the Company's  internal
          control over financial reporting;

     *    The  effects  of  changes  in  regulation  in  the  telecommunications
          industry as a result of the  Telecommunications  Act of 1996 and other
          federal and state  legislation  and  regulation,  including  potential
          changes in access  charges and subsidy  payments,  regulatory  network
          upgrade and reliability requirements, and portability requirements;

     *    Our ability to successfully  renegotiate certain ILEC state regulatory
          plans as they expire or come up for renewal from time to time;

     *    Our ability to manage our operating  expenses,  capital  expenditures,
          pay dividends and reduce or refinance our debt;

     *    The effects of greater  than  anticipated  competition  requiring  new
          pricing,  marketing  strategies or new product  offerings and the risk
          that we will not respond on a timely or profitable basis;

     *    The effects of bankruptcies in the  telecommunications  industry which
          could result in more price competition and potential bad debts;

     *    The effects of technological  changes on our capital  expenditures and
          product and service  offerings,  including the lack of assurance  that
          our ongoing network  improvements will be sufficient to meet or exceed
          the capabilities and quality of competing networks;

     *    The  effects  of  increased   medical  expenses  and  related  funding
          requirements;

     *    The effect of changes in the telecommunications  market, including the
          likelihood of significantly increased price and service competition;

     *    Our  ability  to   successfully   convert   the  billing   system  for
          approximately 770,000 of our access lines on a timely basis and within
          our  expected  amount for 2004 of $18.0 - $20.0  million (a portion of
          which is expected to be capitalized and amortized)  and,  beginning in
          2005, to achieve our expected cost savings from conversion;


                                       23
<PAGE>
     *    The  effects  of state  regulatory  cash  management  policies  on our
          ability  to  transfer  cash among our  subsidiaries  and to the parent
          company;

     *    Our  ability to  successfully  renegotiate  expiring  union  contracts
          covering  approximately  140  employees  that are  scheduled to expire
          during the remainder of 2004;

     *    Our ability to pay a $1.00 per common share  dividend  annually may be
          affected  by  our  cash  flow  from  operations,   amount  of  capital
          expenditures,  debt  service  requirements  and  cash  taxes  and  our
          liquidity;

     *    The  effects  of  any  future   liabilities  or  compliance  costs  in
          connection with environmental and worker health and safety matters;

     *    The  effects of any  unfavorable  outcome  with  respect to any of our
          current or future  legal,  governmental,  or  regulatory  proceedings,
          audits or disputes; and

     *    The effects of more  general  factors,  including  changes in economic
          conditions;  changes  in the  capital  markets;  changes  in  industry
          conditions;  changes in our credit ratings;  and changes in accounting
          policies or practices adopted  voluntarily or as required by generally
          accepted accounting principles or regulators.

You should consider these important  factors in evaluating any statement in this
Form 10-Q or otherwise made by us or on our behalf. The following information is
unaudited  and should be read in  conjunction  with the  consolidated  financial
statements  and related  notes  included in this report and as  presented in our
2003 Annual Report on Form 10-K. We have no obligation to update or revise these
forward-looking statements.

Overview
- --------
We are a telecommunications  company providing wireline  communications services
to rural areas and small and medium-sized towns and cities as an incumbent local
exchange carrier, or ILEC. We offer our ILEC services under the "Frontier" name.
In addition, we provide competitive local exchange carrier, or CLEC, services to
business customers and to other communications  carriers in certain metropolitan
areas in the western United States through Electric Lightwave,  LLC, or ELI, our
wholly-owned  subsidiary.  We also provided  (through March 31, 2004),  electric
distribution services to primarily rural customers in Vermont.

Competition  in the  telecommunications  industry is  increasing.  We experience
competition  from  other  wireline  local  carriers  through  Unbundled  Network
Elements  (UNE),  VOIP and potentially in the future through  Unbundled  Network
Elements Platform (UNEP),  from other long distance carriers (including Regional
Bell Operating  Companies),  from cable companies and internet service providers
with respect to internet access and cable telephony, and from wireless carriers.
Most of the wireline  competition we face is in our Rochester,  New York market,
with competition also present in a few other areas. Time Warner Cable is selling
VOIP service in our Rochester market and other portions of our New York markets.
Competition  from cable  companies and other  internet  service  providers  with
respect to internet access is intense.  Competition from wireless  companies and
other long distance companies is increasing in all of our markets.

The   telecommunications   industry  is  undergoing   significant   changes  and
difficulties.  The market for internet  access,  long  distance,  long-haul  and
related services in the United States is extremely competitive, with substantial
overcapacity  in the market.  Demand and pricing for certain CLEC services (such
as long-haul  services) have decreased  substantially.  There is also increasing
price pressure on certain of our ILEC services such as special access,  business
services, long distance and internet access. These trends are likely to continue
and result in a challenging revenue environment. These factors could also result
in more  bankruptcies in the sector and therefore  affect our ability to collect
money owed to us by carriers.  Several long distance and Interexchange  Carriers
(IXCs)  have  filed  for  bankruptcy  protection,   which  will  allow  them  to
substantially  reduce  their cost  structure  and debt.  This could  enable such
companies to further reduce prices and increase competition.


                                       24
<PAGE>
Our ILEC business has been experiencing declining access lines, switched minutes
of use  and  revenues  because  of  economic  conditions,  unemployment  levels,
increasing competition (as described above), changing consumer behavior (such as
wireless  displacement  of  wireline  use,  email  use,  instant  messaging  and
increasing use of VOIP) and regulatory constraints. During the nine months ended
September 30, 2004, our access lines declined 2.4%, our switched  minutes of use
declined 1.6% and our ILEC revenues  declined  0.9%, in each case as compared to
the first  nine  months of 2003.  These  factors  are  likely to cause our local
network service,  switched network access, long distance and subsidy revenues to
continue  to decline  during  the  remainder  of 2004 and 2005.  During the nine
months ended  September 30, 2004, our switched  network access revenue  declined
6.9%, our long distance revenue declined 8.4%, our subsidy revenue declined 9.2%
and our local service  revenue  declined 2.2%, in each case as compared to 2003.
One of the ways we are  responding to  competition  is by bundling  services and
products and offering  them for a single  price,  which results in lower pricing
than purchasing the services separately.  During the nine months ended September
30,  2004,  approximately  58,300  customers  started  buying one of our bundled
packages  and we  increased  our revenue  from  enhanced  services  by 7.2%.  In
addition,  we added approximately  67,000 DSL subscribers during the nine months
ended  September 30, 2004 and  increased our data revenue by 28.7%.  Our average
ILEC  revenue per month per average  number of ILEC access lines during the nine
months ended  September  30, 2004 was $71.43  compared to $70.38 during the nine
months  ended  September  30,  2003.  Revenues  from data  services  such as DSL
continue to increase as a percentage  of our total  revenues  and revenues  from
high margin  services  such as local line and access  charges and  subsidies are
decreasing as a percentage of our revenues. These factors, along with increasing
operating  and  employee  costs may  cause our  profitability  to  decrease.  In
addition,  costs we will incur  during  the  remainder  of 2004 to  convert  the
billing system for some of our access lines, to enable our systems to be capable
of local number  portability  (LNP) and to retain certain  employees will affect
our profitability and capital expenditures during the remainder of 2004.

(a) Liquidity and Capital Resources
    -------------------------------
For the nine months ended September 30, 2004, we used cash flow from operations,
proceeds from the sale of equity and  non-strategic  investments,  cash and cash
equivalents to fund capital expenditures,  interest payments,  dividend payments
and debt repayments.  As of September 30, 2004, we had cash and cash equivalents
aggregating $199.0 million.

We have budgeted  approximately  $276.0  million for our 2004 capital  projects,
including  $265.0 million for the ILEC segment  (approximately  $10.3 million of
which relates to our billing  system  conversion)  and $11.0 million for the ELI
segment.  Capitalized  costs  during 2004  associated  with our  billing  system
conversion amount to $7.8 million through September 30.

For the nine months ended  September  30, 2004,  our capital  expenditures  were
$201.3 million,  including $192.5 million for the ILEC segment, $8.0 million for
the ELI segment,  $0.6 million for the public utilities segment and $0.2 million
for general capital  expenditures.  Our capital spending has been trending lower
over the last  several  years as we  continue to closely  scrutinize  all of our
capital  projects,   emphasize  return  on  investment  and  focus  our  capital
expenditures  on areas and services  that have the greatest  opportunities  with
respect  to revenue  growth and cost  reduction.  We will  continue  to focus on
managing our costs while  increasing our investment in certain new product areas
such as DSL, VOIP and other Broadband services.

We have an available shelf registration for $719.9 million.  As of September 30,
2004 we had  available  lines  of  credit  with  financial  institutions  in the
aggregate amount of $805.0 million. Associated facility fees varied depending on
our  credit  ratings  and were 0.40% per annum as of  September  30,  2004.  The
expiration date for these  facilities was October 24, 2006. No amounts were ever
borrowed under these  facilities.  On October 29, 2004, the $805.0 million lines
of credit were  cancelled and replaced with a new $250.0  million line of credit
with a maturity date of October 29, 2009.  Associated  facility fees for the new
credit  facility  vary  depending  on our  leverage  ratio and were 0.375% as of
October  29,  2004.  During the term of the new credit  facility  we may borrow,
repay and  re-borrow  funds.  The new credit  facility is available  for general
corporate purposes but may not be used to fund dividend  payments.  There are no
outstanding borrowings under the new facility.

In July  2004,  our  Board of  Directors  concluded  a review of  financial  and
strategic alternatives. After analysis of alternatives by the Board of Directors
and its  financial  and legal  advisors,  the Board  determined to pay a special
dividend of $2 per common share and  institute a regular  annual  dividend of $1
per common share which will be paid  quarterly.  The special  dividend and first
quarterly  dividend were paid on September 2, 2004 to  shareholders of record on
August 18,  2004,  utilizing  the  Company's  available  cash on hand.  The next
quarterly  dividend of $0.25 per common  share will be paid on December 31, 2004
to shareholders of record on December 10, 2004.

                                       25
<PAGE>
The dividends paid on September 2, 2004 totaled $747.9 million and significantly
reduced our cash  balances  and  liquidity.  In  addition,  our  ongoing  annual
dividends  of  approximately  $335.0  million  will  reduce  our  operating  and
financial  flexibility  and  our  ability  to  significantly   increase  capital
expenditures.  While we believe that the amount of our dividends  will allow for
adequate  amounts  of cash  flow  for  other  purposes,  any  reduction  in cash
generated by  operations  and any  increases in capital  expenditures,  interest
expense or cash taxes  would  reduce the amount of cash  generated  in excess of
dividends.  Losses of access lines, increases in competition,  lower subsidy and
access  revenues  and the other  factors  described  above may  reduce  our cash
generated by operations  and require us to increase  capital  expenditures.  The
downgrades in our credit  ratings in July,  2004 to below  investment  grade may
make it more  difficult and expensive to refinance our maturing debt. We have in
recent years paid relatively low amounts of cash taxes. We expect that over time
our cash taxes will increase.

As a result of our dividend  policy,  Standard and Poor's lowered its ratings on
Citizens debt from "BBB" to "BB-plus",  Moody's  Investors  Service  lowered its
ratings from "Baa3" to "Ba3" and Fitch Ratings lowered its ratings from "BBB" to
"BB".

We  believe  our  operating  cash  flows,  existing  cash  balances,  and credit
facilities  will be adequate to finance our working capital  requirements,  make
required  debt  payments  through 2005,  pay  dividends to our  shareholders  in
accordance  with our dividend  policy,  and support our short-term and long-term
operating strategies.  We have approximately $927.8 million of debt that matures
in  2006.  We  will  refinance  most of  this  debt.  Based  on  current  market
conditions,  any  refinancing  of such debt is likely to result in ongoing lower
interest  expense but in the period during which the refinancing  occurs we will
expense repayment  premiums and the write off of unamortized  deferred financing
costs as a result of retiring debt prior to its maturity.

Issuance of Common Stock
- ------------------------
On August  17,  2004 we issued  32,073,633  shares  of common  stock,  including
3,591,000  treasury  shares,  to our equity unit  holders in  settlement  of the
equity  purchase  contract  component of the equity  units.  With respect to the
$460.0  million  Senior Note  component of their equity  units,  we  repurchased
$300.0  million  principal  amount of these  Notes in July 2004.  The  remaining
$160.0 million of the Senior Notes were repriced and a portion was remarketed on
August  12,  2004 as the 6.75%  Notes due  August 17,  2006.  During  August and
September,  2004, we repurchased an additional $108.2 million of the 6.75% Notes
which,  in  addition  to the $300.0  million  purchased  in July,  resulted in a
pre-tax charge of approximately  $20.1 million during the third quarter of 2004,
but will  result in an annual  reduction  in  interest  expense  of about  $27.6
million per year.

As a result of our July dividend announcement with respect to our common shares,
our 5% Company Obligated Mandatorily Redeemable Convertible Preferred Securities
due 2036 (EPPICS) began to convert to Citizens  common  shares.  As of September
30, 2004,  approximately 55% of the EPPICS outstanding,  or about $111.4 million
aggregate principal amount of units, have converted to 8,429,020 Citizens common
shares, including 725,000 treasury shares.

Debt Reduction
- --------------
On January 15,  2004,  we repaid at maturity  the  remaining  outstanding  $81.0
million of our 7.45% Debentures.

On January 15, 2004, we redeemed at 101% the remaining outstanding $12.3 million
of our Hawaii Special Purpose Revenue Bonds, Series 1993A and Series 1993B.

On May 17, 2004, we repaid at maturity the remaining outstanding $6.0 million of
Electric  Lightwave,  LLC's  6.05%  Notes.  These Notes had been  guaranteed  by
Citizens.

On July 15,  2004,  we  renegotiated  and prepaid  with $5.0 million of cash the
entire remaining $5.5 million Electric  Lightwave  capital lease obligation to a
third party.

On July 30,  2004,  we purchased  $300.0  million of the 6.75% notes that were a
component of our equity units at 105.075% of par,  plus accrued  interest,  at a
premium of approximately $15.2 million.

During  August  and  September   2004,  we  repurchased   through  a  series  of
transactions  an  additional  $108.2  million  of the 6.75%  notes due 2006 at a
weighted average price of 104.486% of par, plus accrued  interest,  at a premium
of approximately $4.9 million.

We may from time to time repurchase our debt in the open market,  through tender
offers or privately negotiated transactions.

                                       26
<PAGE>
Interest Rate Management
- ------------------------
In order to manage our interest  expense,  we have entered  into  interest  swap
agreements.  Under the terms of these agreements, we make semi-annual,  floating
rate interest  payments based on six month LIBOR and receive a fixed rate on the
notional  amount.  The underlying  variable rate on these swaps is set either in
advance, in arrears or, based on each period's daily average six-month LIBOR.

The notional amounts of fixed-rate  indebtedness hedged as of September 30, 2004
and December 31, 2003 was $550.0 million and $400.0 million, respectively.  Such
contracts  require us to pay variable rates of interest  (estimated  average pay
rates of approximately 6.31% as of September 30, 2004 and approximately 5.46% as
of December 31, 2003) and receive fixed rates of interest (average receive rates
of  8.47%  and  8.38%  as  of   September   30,  2004  and  December  31,  2003,
respectively).  All swaps are  accounted  for under  SFAS No.  133 as fair value
hedges.  For the  three and nine  months  ended  September  30,  2004,  the cash
interest savings resulting from these interest rate swaps was approximately $1.6
million and $7.1  million,  respectively,  and is  reflected  as a reduction  of
interest expense in the accompanying statements of operations.

Sale of Non-Strategic Investments
- ---------------------------------
On August 13, 2004, we sold our entire 1,333,500 shares of D & E Communications,
Inc. (D & E) for approximately $13.3 million in cash.

On September  3, 2004,  we sold our entire  holdings of  2,605,908  common share
equivalents  in Hungarian  Telephone  and Cable Corp.  for  approximately  $13.2
million in cash.

During  the  third  quarter  of  2004,  we  sold  our  corporate   aircraft  for
approximately $15.3 million in cash.

Off-Balance Sheet Arrangements
- ------------------------------
We do not maintain any off-balance sheet arrangements, transactions, obligations
or other  relationships with  unconsolidated  entities that would be expected to
have a material current or future effect upon our financial statements.

Management Succession and Strategic Alternatives Expenses
- ---------------------------------------------------------
On July 11, 2004, our Board of Directors  announced that it completed its review
of the Company's  financial and strategic  alternatives.  Through the first nine
months of 2004,  we expensed  approximately  $90.6  million of costs  related to
management   succession   and  our   exploration   of  financial  and  strategic
alternatives.   Included  are  $36.6  million  of  non-cash   expenses  for  the
acceleration  of stock  benefits,  cash  expenses of $19.2  million for advisory
fees,  $19.3 million for severance and retention  arrangements and $15.5 million
primarily for tax  reimbursements.  We do not anticipate any significant  future
costs for these items.

EPPICS
- ------
In 1996, our consolidated wholly-owned subsidiary, Citizens Utilities Trust (the
Trust),  issued,  in an underwritten  public  offering,  4,025,000  shares of 5%
Company Obligated  Mandatorily  Redeemable  Convertible Preferred Securities due
2036 (Trust Convertible Preferred Securities or EPPICS),  representing preferred
undivided interests in the assets of the Trust, with a liquidation preference of
$50 per  security  (for a total  liquidation  amount  of  $201.3  million).  The
proceeds from the issuance of the Trust Convertible  Preferred  Securities and a
Company  capital  contribution  were used to purchase  $207.5 million  aggregate
liquidation amount of 5% Partnership  Convertible  Preferred Securities due 2036
from another wholly owned  consolidated  subsidiary,  Citizens Utilities Capital
L.P. (the  Partnership).  These securities have an adjusted  conversion price of
$11.46 per Citizens common share.  The conversion  price was reduced from $13.30
to $11.46  during  the third  quarter of 2004 as a result of the $2.00 per share
special dividend. The proceeds from the issuance of the Partnership  Convertible
Preferred  Securities and a Company capital  contribution  were used to purchase
from us $211.8 million aggregate principal amount of 5% Convertible Subordinated
Debentures  due  2036.  The  sole  assets  of  the  Trust  are  the  Partnership
Convertible Preferred Securities,  and our Convertible  Subordinated  Debentures
are substantially  all the assets of the Partnership.  Our obligations under the
agreements  related  to  the  issuances  of  such  securities,  taken  together,
constitute a full and unconditional  guarantee by us of the Trust's  obligations
relating to the Trust  Convertible  Preferred  Securities and the  Partnership's
obligations relating to the Partnership Convertible Preferred Securities.

In accordance with the terms of the issuances, we paid the annual 5% interest in
quarterly installments on the Convertible  Subordinated Debentures in the first,
second and third  quarters of 2004 and the four quarters of 2003.  Only cash was
paid (net of investment  returns) to the  Partnership in payment of the interest
on the Convertible Subordinated Debentures. The cash was then distributed by the
Partnership to the Trust and then by the Trust to the holders of the EPPICS.

As of September 30, 2004, EPPICS representing a total principal amount of $111.4
million had been converted into 8,429,020 shares of Citizens common stock.

                                       27
<PAGE>
We have adopted the provisions of FASB  Interpretation No. 46R (revised December
2003) ("FIN 46R"),  "Consolidation  of Variable  Interest  Entities,"  effective
January 1, 2004. We have not restated prior periods.

We have  included the  following  description  to provide  readers a comparative
analysis  of the  accounting  impact  of this  standard.  Both the Trust and the
Partnership  have  been  consolidated  from the date of their  creation  through
December 31, 2003. As a result of the new consolidation standards established by
FIN 46R, the Company,  effective January 1, 2004,  deconsolidated the activities
of the Trust and the Partnership.  We have highlighted the comparative effect of
this change in the following table:
<TABLE>
<CAPTION>
Balance Sheet
                                                                  As of
                                     -------------------------------------------------------------
($ in thousands)                      December 31, 2003    September 30, 2004           Change
                                     --------------------- --------------------     --------------
Assets:
<S>                                               <C>                  <C>               <C>       <C>
     Cash                                         $ 2,103              $     -           $ (2,103) (1)
     Investments                                        -               12,645             12,645  (2)

Liabilities:
     Long-term debt                                     -              100,377  (3)      (100,873) (3)
     EPPICS                                       201,250                    -  (3)

Statement of Operations

                                                  As reported for the nine months ended
                                     -------------------------------------------------------------
 ($ in thousands)                      September 30, 2003   September 30, 2004           Change
                                     --------------------- --------------------     --------------
Investment income                                 $     -              $   474           $    474  (4)
Interest expense                                        -                7,044              7,044  (5)
Dividends on EPPICS (before tax)                    7,548                    -             (7,548) (6)
                                     --------------------- --------------------     --------------
     Net                                          $ 7,548              $ 6,570           $   (978)
                                     ===================== ====================     ==============
</TABLE>
     (1)  Represents  a cash  balance  on the books of the  Partnership  that is
          removed as a result of the deconsolidation.
     (2)  Represents Citizens'  investments in the Partnership and the Trust. At
          December 31, 2003, these  investments were eliminated in consolidation
          against the equity of the Partnership and the Trust.
     (3)  As a result of the  deconsolidation,  the  Trust  and the  Partnership
          balance  sheets were  removed,  leaving debt issued by Citizens to the
          Partnership in the amount of $211.8 million.  The nominal effect of an
          increase in debt of $10.5 million is debt that is "intercompany."  FIN
          46R does not  impact the  economics  of the  EPPICS  structure.  As of
          September  2004,  Citizens has $100.4  million  (approximately  $111.4
          million  converted  during the third  quarter) of debt  outstanding to
          third parties and will continue to pay interest on that amount at 5%.
     (4)  Represents interest income to be paid by the Partnership and the Trust
          to Citizens for its  investments  noted in (2) above.  The Partnership
          and the Trust have no source of cash except as  provided by  Citizens.
          Interest is payable at the rate of 5% per annum.
     (5)  Represents  interest expense on the convertible  debentures  issued by
          Citizens to the partnership. Interest is payable at the rate of 5% per
          annum.
     (6)  As a result of the  deconsolidation of the Trust,  previously reported
          dividends on the convertible preferred securities issued to the public
          by the Trust are removed and replaced by the interest  accruing on the
          debt  issued by  Citizens  to the  Partnership.  Citizens  remains the
          guarantor  of the EPPICS debt and  continues  to be the sole source of
          cash for the Trust to pay dividends.

Covenants
- ---------
The terms and  conditions  contained  in our  indentures  and credit  facilities
agreements  include the timely and punctual  payment of  principal  and interest
when due, the maintenance of our corporate  existence,  keeping proper books and
records in accordance  with GAAP,  restrictions on the allowance of liens on our
assets, and restrictions on asset sales and transfers, mergers and other changes
in  corporate  control.  We  currently  have no  restrictions  on the payment of
dividends by us either by contract, rule or regulation.

Our  $200.0  million  term  loan  facility  with  the  Rural  Telephone  Finance
Cooperative (RTFC) contain a maximum leverage ratio covenant. Under the leverage
ratio  covenant,  we are required to maintain a ratio of (i) total  indebtedness
minus cash and cash equivalents in excess of $50.0 million to (ii)  consolidated
adjusted  EBITDA (as defined in the  agreements)  over the last four quarters no
greater than 4.25 to 1 through December 30, 2004, and 4.00 to 1 thereafter.

                                       28
<PAGE>
Our new $250 million credit facility contains a maximum leverage ratio covenant.
Under the leverage  ratio  covenant,  we are required to maintain a ratio of (i)
total indebtedness minus cash and cash equivalents in excess of $50.0 million to
(ii)  consolidated  adjusted  EBITDA (as defined in the agreement) over the last
four  quarters no greater than 4.50 to 1.  Although  the new credit  facility is
unsecured,  it will be equally and ratably  secured by certain liens and equally
and ratably  guaranteed by certain of our  subsidiaries if we issue debt that is
secured or guaranteed.

We are in compliance with all of our debt and credit facility covenants.

Divestitures
- ------------
On August 24, 1999, our Board of Directors  approved a plan of  divestiture  for
our public utilities services businesses, which included gas, electric and water
and  wastewater  businesses.  As of April  1,  2004,  we have  sold all of these
properties.  All of the  agreements  relating to the sales  provide that we will
indemnify the buyer against certain liabilities  (typically liabilities relating
to events that occurred prior to sale), including environmental liabilities, for
claims made by specified dates and that exceed  threshold  amounts  specified in
each agreement.

On January 15, 2002, we sold our water and  wastewater  services  operations for
$859.1 million in cash and $122.5 million in assumed debt and other liabilities.

On October 31, 2002, we completed the sale of  approximately  4,000 access lines
in North Dakota for approximately $9.7 million in cash.

On November 1, 2002,  we completed the sale of our Kauai  electric  division for
$215.0 million in cash.

On April 1, 2003, we completed the sale of approximately  11,000 access lines in
North Dakota for approximately $25.7 million in cash.

On April 4, 2003, we completed the sale of our wireless  partnership interest in
Wisconsin for approximately $7.5 million in cash.

On August 8, 2003, we completed  the sale of The Gas Company in Hawaii  division
for $119.3 million in cash and assumed liabilities.

On August 11,  2003,  we  completed  the sale of our  Arizona  gas and  electric
divisions for $224.1 million in cash.

On  December  2,  2003,  we  completed  the  sale of our  electric  transmission
facilities in Vermont for $7.3 million in cash.

On April 1, 2004, we completed the sale of our electric distribution  facilities
in Vermont for $14.0 million in cash, net of selling expenses.

In October  2004,  we sold cable assets in  California,  Arizona,  Indiana,  and
Wisconsin, and we have signed a definitive agreement to sell cable assets in New
Mexico.  The $1.3 million pre-tax loss on these sales was recognized  during the
third quarter of 2004.

Critical Accounting Policies and Estimates
- ------------------------------------------
We  review  all  significant  estimates  affecting  our  consolidated  financial
statements  on a  recurring  basis  and  record  the  effect  of  any  necessary
adjustment  prior to  their  publication.  Uncertainties  with  respect  to such
estimates  and   assumptions  are  inherent  in  the  preparation  of  financial
statements;  accordingly,  it is possible that actual  results could differ from
those  estimates  and changes to  estimates  could  occur in the near term.  The
preparation of our financial  statements  requires  management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of the contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period.  Estimates  and  judgments  are used when  accounting  for allowance for
doubtful  accounts,   impairment  of  long-lived   assets,   intangible  assets,
depreciation   and   amortization,   employee   benefit  plans,   income  taxes,
contingencies, and pension and postretirement benefits expenses among others.

                                       29
<PAGE>
Accounting  standards  require  that we record  an  additional  minimum  pension
liability  when the plan's  "accumulated  benefit  obligation"  exceeds the fair
market  value of plan assets at the pension  plan  measurement  (balance  sheet)
date.  In the fourth  quarter  of 2002,  due to weak  performance  in the equity
markets  during 2002 as well as a decrease in the  year-end  discount  rate,  we
recorded an additional minimum pension liability in the amount of $181.0 million
with a corresponding  charge to shareholders'  equity of $112.0 million,  net of
taxes of $69.0 million. In the fourth quarter of 2003, due to strong performance
in the  equity  markets  during  2003,  partially  offset by a  decrease  in the
year-end  discount rate, the Company recorded a reduction to its minimum pension
liability  in the  amount  of  $35.0  million  with a  corresponding  credit  to
shareholders'  equity of $22.0  million,  net of taxes of $13.0  million.  These
adjustments  did not impact  our  earnings  or cash  flows.  Based  upon  market
conditions  existing at the end of October 2004, an additional  charge to equity
of  approximately  $25.0  million - $30.0  million on a pre-tax  basis  would be
required at the end of 2004 should market conditions remain unchanged.

Management  has  discussed  the  development  and  selection  of these  critical
accounting  estimates with the audit committee of our board of directors and our
audit committee has reviewed our disclosures relating to them.

There have been no material  changes to our  critical  accounting  policies  and
estimates from the information  provided in Item 7. Management's  Discussion and
Analysis of Financial  Condition and Results of Operations  included in our 2003
Annual Report on Form 10-K.

New Accounting Pronouncements
- -----------------------------

Accounting for Asset Retirement Obligations
In June 2001, the Financial  Accounting  Standards  Board (FASB) issued SFAS No.
143,  "Accounting  for Asset  Retirement  Obligations."  We adopted SFAS No. 143
effective  January 1, 2003.  As a result of our  adoption  of SFAS No.  143,  we
recognized an after tax non-cash gain of approximately $65.8 million.  This gain
resulted from the  elimination  of the  cumulative  cost of removal  included in
accumulated  depreciation  as a  cumulative  effect  of a change  in  accounting
principle in our  statement of  operations  in the first  quarter of 2003 as the
Company has no legal obligation to remove certain of its long-lived assets.

Exit or Disposal Activities
In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit or Disposal  Activities,"  which nullified  Emerging Issues Task Force
(EITF) Issue No. 94-3,  "Liability  Recognition for Certain Employee Termination
Benefits  and Other Costs to Exit an  Activity."  SFAS No. 146  requires  that a
liability for a cost associated with an exit or disposal  activity be recognized
when the liability is incurred, rather than on the date of commitment to an exit
plan.  This  Statement is  effective  for exit or disposal  activities  that are
initiated  after  December 31, 2002. We adopted SFAS No. 146 on January 1, 2003.
The adoption of SFAS No. 146 did not have any material  impact on our  financial
position or results of operations.

Guarantees
In  November  2002,  the FASB  issued  FASB  Interpretation  No. 45 ("FIN  45"),
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Guarantees  of  Indebtedness  of Others."  FIN 45 requires  that a guarantor  be
required to recognize, at the inception of a guarantee, a liability for the fair
value of the  obligation  assumed  under  the  guarantee.  FIN 45 also  requires
additional  disclosures  by a  guarantor  in its  interim  and annual  financial
statements about the obligations  associated with the guarantee.  The provisions
of FIN 45 are effective for  guarantees  issued or modified  after  December 31,
2002,   whereas  the  disclosure   requirements  were  effective  for  financial
statements  for period ending after December 15, 2002. The adoption of FIN 45 on
January 1, 2003 did not have any material  impact on our  financial  position or
results of operations.
                                       30
<PAGE>
The Company has sold all of its utility businesses as of April 1, 2004. However,
we have retained a potential  payment  obligation  associated  with our previous
electric  utility  activities in the state of Vermont.  The Vermont Joint Owners
(VJO),  a  consortium  of 14 Vermont  utilities,  including  us,  entered into a
purchase power  agreement  with  Hydro-Quebec  in 1987.  The agreement  contains
"step-up"  provisions that state that if any VJO member defaults on its purchase
obligation under the contract to purchase power from  Hydro-Quebec the other VJO
participants will assume  responsibility  for the defaulting  party's share on a
pro-rata basis.  Our pro-rata share of the purchase power obligation was 10%. If
any  member  of the VJO  defaults  on its  obligations  under  the  Hydro-Quebec
agreement,  the remaining  members of the VJO,  including us, may be required to
pay  for a  substantially  larger  share  of  the  VJO's  total  power  purchase
obligation  for the  remainder  of the  agreement  (which  runs  through  2015).
Paragraph 13 of FIN 45 requires that we disclose,  "the maximum potential amount
of future payments  (undiscounted) the guarantor could be required to make under
the guarantee."  Paragraph 13 also states that we must make such disclosure "...
even if the likelihood of the guarantor's  having to make any payments under the
guarantee is remote..." As noted above,  our obligation  only arises as a result
of default by another VJO member such as upon bankruptcy.  Therefore, to satisfy
the "maximum  potential amount"  disclosure  requirement we must assume that all
members of the VJO simultaneously default, a highly unlikely scenario given that
the two members of the VJO that have the largest potential  payment  obligations
are  publicly  traded with  investment  grade credit  ratings,  and that all VJO
members  are  regulated   utility   providers   with  regulated  cost  recovery.
Regardless,  despite the remote  chance that such an event could occur,  or that
the State of Vermont  could or would allow such an event,  assuming that all the
members of the VJO  defaulted by January 1, 2005 and remained in default for the
duration of the contract  (another 10 years),  we estimate that our undiscounted
purchase  obligation for 2005 through 2015 would be approximately  $1.6 billion.
In such a  scenario  the  Company  would  then own the power  and could  seek to
recover  its costs.  We would do this by  seeking to recover  our costs from the
defaulting  members and/or reselling the power to other utility providers or the
northeast  power  grid.  There is an active  market  for the sale of  power.  We
believe  that we would  receive  full  recovery  of our costs  through  sales to
others.  If pricing became more favorable we could potentially sell the power on
the open market at a profit.  We could  potentially lose money if we were unable
to sell the power at cost.

We caution that all of the  above-described  scenarios are unlikely to occur and
we cannot predict with any degree of certainty any potential outcome.

Variable Interest Entities
In December 2003, the FASB issued FASB  Interpretation  No. 46 (revised December
2003)  ("FIN  46R"),   "Consolidation  of  Variable  Interest  Entities,"  which
addresses how a business enterprise should evaluate whether it has a controlling
financial  interest in an entity  through  means  other than  voting  rights and
accordingly should consolidate the entity. FIN 46R replaces FASB  Interpretation
No. 46,  "Consolidation  of  Variable  Interest  Entities,"  which was issued in
January 2003. We are required to apply FIN 46R to variable interests in variable
interest  entities or VIEs created  after  December 31, 2003.  For any VIEs that
must be consolidated under FIN 46R that were created before January 1, 2004, the
assets,  liabilities and noncontrolling  interests of the VIE initially would be
measured at their carrying  amounts with any  difference  between the net amount
added  to the  balance  sheet  and  any  previously  recognized  interest  being
recognized as the cumulative effect of an accounting  change. If determining the
carrying  amounts  is not  practicable,  fair  value at the  date FIN 46R  first
applies  may be used to  measure  the  assets,  liabilities  and  noncontrolling
interest of the VIE. We reviewed all of our  investments and determined that the
EPPICS, issued by our consolidated  wholly-owned subsidiary,  Citizens Utilities
Trust, was our only VIE. The adoption of FIN 46R on January 1, 2004 did not have
any material impact on our financial position or results of operations.

Derivative Instruments and Hedging
In April 2003,  the FASB issued SFAS No. 149,  "Amendment  of  Statement  133 on
Derivative  Instruments and Hedging," which clarifies  financial  accounting and
reporting for derivative  instruments including derivative  instruments embedded
in other  contracts.  This Statement is effective for contracts  entered into or
modified  after  June 30,  2003.  We adopted  SFAS No. 149 on July 1, 2003.  The
adoption  of SFAS No.  149 did not have any  material  impact  on our  financial
position or results of operations.

Financial Instruments with Characteristics of Both Liabilities and Equity
In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics of Both Liabilities and Equity." The Statement
establishes   standards  for  the  classification  and  measurement  of  certain
financial  instruments  with  characteristics  of both  liabilities  and equity.
Generally,  the Statement is effective for financial instruments entered into or
modified  after May 31, 2003 and is otherwise  effective at the beginning of the
first interim period beginning after June 15, 2003. We adopted the provisions of
the  Statement  on July 1, 2003.  The  adoption of SFAS No. 150 did not have any
material impact on our financial position or results of operations.

                                       31
<PAGE>
Pension and Other Postretirement Benefits
In  December  2003,  the  FASB  issued  SFAS  No.  132  (revised),   "Employers'
Disclosures  about Pensions and Other  Postretirement  Benefits." This Statement
retains  and revises  the  disclosure  requirements  contained  in the  original
Statement.  It requires additional  disclosures including information describing
the  types  of plan  assets,  investment  strategy,  measurement  date(s),  plan
obligations,  cash flows, and components of net periodic benefit cost recognized
in interim  periods.  This  Statement is effective for fiscal years ending after
December 15, 2003. We have adopted the expanded disclosure  requirements of SFAS
No. 132 (revised).

The FASB has issued an Exposure  Draft that would require  stock-based  employee
compensation  to be  recorded  as a charge to  earnings  for  interim  or annual
periods  beginning after June 15, 2005. We will continue to monitor the progress
on the issuance of this standard.

(b)       Results of Operations
          ---------------------
                                     REVENUE

ILEC  revenue is generated  primarily  through the  provision of local,  network
access, long distance and data services. Such services are provided under either
a  monthly  recurring  fee or  based  on  usage  at a  tariffed  rate and is not
dependent  upon  significant  judgments by  management,  with the exception of a
determination of a provision for uncollectible amounts.

CLEC revenue is generated  through  local,  long  distance,  data and  long-haul
services. These services are primarily provided under a monthly recurring fee or
based on usage at agreed  upon  rates  and are not  dependent  upon  significant
judgments by management with the exception of the  determination  of a provision
for  uncollectible  amounts and realizability of reciprocal  compensation.  CLEC
usage based revenue  includes amounts  determined under reciprocal  compensation
agreements.  While this  revenue is  governed  by  specific  contracts  with the
counterparty, management defers recognition of disputed portions of such revenue
until  realizability  is assured.  Revenue  earned from  long-haul  contracts is
recognized over the term of the related agreement.

Consolidated  revenue for the three and nine  months  ended  September  30, 2004
decreased $49.6 million,  or 8% and $242.9 million, or 13%, as compared with the
prior year periods.  The decrease for the three months ended  September 30, 2004
is due to a $5.4 million  decrease in ILEC revenue,  a $1.2 million  decrease in
ELI  revenue  and a $43.0  million  decrease in gas and  electric  revenue.  The
decrease for the nine months ended  September 30, 2004 is due to a $14.4 million
decrease in ILEC  revenue,  a $7.9 million  decrease in ELI revenue and a $220.6
million decrease in gas and electric revenue.

On April 1, 2003, we sold approximately 11,000 access lines in North Dakota. The
revenues  related to these access lines totaled $1.9 million for the nine months
ended September 30, 2003.
<TABLE>
<CAPTION>
                           TELECOMMUNICATIONS REVENUE

($ in thousands)                 For the three months ended September 30,       For the nine months ended September 30,
                                -------------------------------------------- -----------------------------------------------
                                    2004       2003       $ Change  % Change    2004        2003      $ Change    % Change
                                ----------- ----------- ----------- -------- ----------- ----------- ------------ ----------
<S>                              <C>         <C>          <C>            <C>  <C>         <C>          <C>               <C>
Access services                  $ 157,692   $ 167,321    $ (9,629)     -6%  $  474,399  $  503,517    $ (29,118)     -6%
Local services                     214,299     216,349      (2,050)     -1%     640,458     644,511       (4,053)     -1%
Long distance and data services     82,002      76,145       5,857       8%     240,177     230,315        9,862       4%
Directory services                  27,312      26,817         495       2%      82,987      80,596        2,391       3%
Other                               24,878      24,942         (64)      0%      82,919      76,397        6,522       9%
                                ----------- ----------- -----------          ----------- ----------- ------------
   ILEC revenue                    506,183     511,574      (5,391)     -1%   1,520,940   1,535,336      (14,396)     -1%
ELI                                 39,210      40,416      (1,206)     -3%     117,277     125,228       (7,951)     -6%
                                ----------- ----------- -----------          ----------- ----------- ------------
                                 $ 545,393   $ 551,990    $ (6,597)     -1%  $1,638,217  $1,660,564    $(22,347)      -1%
                                =========== =========== ===========          =========== =========== ============
</TABLE>
Change  in the  number of our  access  lines is the most  fundamental  driver of
changes in our telecommunications  revenue. Many rural local telephone companies
(including us) have been  experiencing a loss of access lines primarily  because
of  difficult  economic  conditions,   increased  competition  from  competitive
wireline  providers,  from  wireless  providers and from cable  companies  (with
respect to broadband and cable telephony),  and by some customers  disconnecting
second lines when they add high speed data service. We lost approximately 40,400
access  lines  during  the nine  months  ended  September  30,  2004  but  added
approximately  67,000 DSL  subscribers  during  this  period.  The loss of lines
during the first nine months of 2004 was primarily  residential  customers.  The
non-residential  line losses were principally in Rochester,  New York, while the
residential  losses were  throughout our markets.  We expect to continue to lose
access lines during the fourth  quarter of 2004. A continued  decrease in access
lines,  combined with increased  competition and the other factors  discussed in
this MD&A, may cause our revenues to decrease during the remainder of 2004.

                                       32
<PAGE>
Access Services
Access services  revenue for the three months ended September 30, 2004 decreased
$9.6  million or 6%, as compared  with the prior year  period.  Switched  access
revenue  decreased  $3.1  million,  as  compared  with the  prior  year  period,
primarily  due to $2.7  million  attributable  to a decline  in  minutes of use.
Subsidies  revenue  decreased  $7.0  million,  as  compared  with the prior year
period,  primarily due to a $2.4 million  decline in federal  universal  service
fund support because of increases in the national  average cost per loop, a $3.5
million  accrual  recorded  during the third  quarter of 2004 for mistakes  made
during 2002 and 2003 by the agency that calculates subsidy payments and true ups
related to 2002.

Access  services  revenue for the nine months ended September 30, 2004 decreased
$29.1  million or 6%, as compared  with the prior year period.  Switched  access
revenue  decreased  $16.1  million,  as  compared  with the prior  year  period,
primarily  due to the $7.4  million  effect of  federally  mandated  access rate
reductions  effective  as of July 1, 2003,  $2.7 million  associated  with state
intrastate  access rate  reductions,  $3.6 million  attributable to a decline in
minutes  of  use  and a $2.0  million  decrease  related  to  carrier  disputes.
Subsidies  revenue  decreased  $12.7  million,  as compared  with the prior year
period,  primarily due to a $5.2 million  decline in federal  universal  service
fund support because of increases in the national  average cost per loop, a $3.5
million  accrual  recorded  during the third  quarter of 2004 for mistakes  made
during 2002 and 2003 by the agency that calculates subsidy payments and true ups
related to 2002.

We expect our subsidy  revenue to be  approximately  $10.0 million lower in 2004
than in 2003 primarily  because of increases in the ceiling on national  average
loop  costs that is  compared  to our costs to  determine  the amount of subsidy
payments we receive.  Our switched  access revenues are impacted by the program,
known as the Coalition for Affordable Local and Long Distance Services, or CALLS
plan, which establishes a price floor for  interstate-switched  access services.
We have been able to offset some of the  reduction  in  interstate  access rates
through end-user  charges.  There are no material  increases in end-user charges
scheduled to take effect  during the  remainder of 2004 or 2005.  We believe the
net effect of reductions  in  interstate  access rates and increases in end-user
charges will reduce our revenues by approximately  $8.0 million in 2004 compared
to 2003 assuming constant  interstate switched access minutes of use (which have
been  declining).  Annual  reductions in interstate  switched  access rates will
continue  through 2005.  Our switched  access  revenues have also been adversely
affected  by  declining  switched  access  minutes  of use,  which we  expect to
continue.

We  currently  expect  that our  subsidy  revenue in 2005 will be at least $19.0
million  lower  than  2004  because  of the  improvement  in prior  years in the
profitability  of our operations and lower expenses and capital  expenditures in
prior years than  previously  anticipated,  and because of a recently  announced
increase in the national  average cost per loop (NACPL) from $286.18 to $298.45,
effective January 1, 2005. Increases in the number of competitive communications
companies (including wireless companies) receiving federal subsidies may lead to
further  increases in the NACPL,  thereby  resulting in further decreases in our
subsidy  revenue in the future.  Increases in the NACPL during 2004 are expected
to decrease our subsidy  revenue by $6.3 million in 2004  compared to 2003.  The
FCC and state  regulators  are  currently  considering a number of proposals for
changing the manner in which  eligibility for federal subsidies is determined as
well as the amounts of such  subsidies.  The FCC is also reviewing the mechanism
by which subsidies are funded.  We cannot predict when or how these matters will
be decided nor the effect on our subsidy revenues.

Our subsidy and switched  access  revenues are very profitable so any reductions
in those revenues will reduce our profitability.

Local Services
Local services  revenue for the three months ended  September 30, 2004 decreased
$2.1  million  or 1% as  compared  with the prior  year  period.  Local  revenue
decreased $4.7 million primarily due to $3.1 million related to continued losses
of access lines.  Enhanced services revenue increased $2.6 million,  as compared
with the  prior  year  period,  primarily  due to sales  of  additional  feature
packages.

Local  services  revenue for the nine months ended  September 30, 2004 decreased
$4.1  million  or 1% as  compared  with the prior  year  period.  Local  revenue
decreased  $11.8  million  primarily  due to $5.0  million  related to continued
losses of access lines, the termination of an operator services contract of $3.2
million and $2.0 million in decreased local measured service  revenue.  Enhanced
services revenue increased $7.8 million, as compared with the prior year period,
primarily due to sales of additional  feature packages.  Economic  conditions or
increasing  competition  could make it more  difficult  to sell our packages and
bundles and cause us to lower our prices for those products and services,  which
would adversely affect our revenues.

                                       33
<PAGE>
Long Distance and Data Services
Long distance and data services revenue for the three months ended September 30,
2004  increased  $5.9  million or 8%, as  compared  with the prior  year  period
primarily due to growth of $8.4 million  related to data services (data includes
DSL) partially offset by decreased long distance revenue of $2.6 million because
of a 22% decline in the average rate per minute.  Long distance  minutes of use,
however,  grew 15% as a result of new long distance products we started offering
earlier this year that drove both market penetration and minutes of use.

Long distance and data services  revenue for the nine months ended September 30,
2004  increased  $9.9  million or 4%, as  compared  with the prior  year  period
primarily due to growth of $22.6 million related to data services (data includes
DSL)  partially  offset by  decreased  long  distance  revenue of $12.7  million
primarily attributable to a 20% decline in the average rate per minute. Our long
distance  revenues  could  decrease  in the future  due to lower  long  distance
minutes of use because consumers are increasingly using their wireless phones or
calling  cards to make long  distance  calls and lower  average rates per minute
because of unlimited and packages of minutes for long distance  plans. We expect
these  factors will  continue to  adversely  affect our long  distance  revenues
during the remainder of 2004.

Directory Services
Directory  revenue for the nine months ended  September 30, 2004  increased $2.4
million or 3%, as  compared  with the prior year  period due to growth in yellow
pages advertising.

Other
Other  revenue for the nine months  ended  September  30,  2004  increased  $6.5
million or 9%, as compared  with the prior year period  primarily  due to a $4.4
million  carrier  dispute  settlement,  $3.0 million in  increased  conferencing
revenue and a decline in bad debt expense of $2.6 million, partially offset by a
decrease of $3.2 million in sales of customer premise equipment.

ELI revenue for the three and nine months  ended  September  30, 2004  decreased
$1.2 million, or 3%, and $8.0 million, or 6%,  respectively,  as compared to the
prior year  period  primarily  due to lower  demand  and  prices  for  long-haul
services.
<TABLE>
<CAPTION>
                            GAS AND ELECTRIC REVENUE

      ($ in thousands)             For the three months ended September 30,       For the nine months ended September 30,
                                --------------------------------------------  -----------------------------------------------
                                   2004       2003       $ Change   % Change    2004        2003      $ Change    % Change
                                ---------- ----------- -----------  --------  ----------- ----------- ------------ ----------
<S>                                   <C>    <C>        <C>           <C>      <C>        <C>         <C>              <C>
      Gas revenue                     $ -    $ 18,005   $ (18,005)   -100%     $     -    $ 137,686   $ (137,686)     -100%
      Electric revenue                $ -    $ 25,042   $ (25,042)   -100%     $ 9,735    $  92,603   $  (82,868)      -89%
</TABLE>
We did not have any gas or electric  operations  in the  quarter  ended June 30,
2004 due to the sales of our  Vermont  Electric  division,  The Gas  Company  in
Hawaii, and our Arizona gas and electric divisions.

Electric  revenue for the nine months ended  September 30, 2004 decreased  $82.9
million,  or 89%, as compared with the prior year period.  We completed the sale
of our remaining electric utility property on April 1, 2004. We have sold all of
our electric operations and as a result will have no operating results in future
periods for these businesses.
<TABLE>
<CAPTION>
                                COST OF SERVICES

      ($ in thousands)           For the three months ended September 30,       For the nine months ended September 30,
                                -------------------------------------------- -----------------------------------------------
                                   2004       2003       $ Change   % Change    2004        2003      $ Change    % Change
                                ----------- ----------- ----------- -------- ------------ ----------- ----------- ----------
<S>                               <C>         <C>         <C>           <C>   <C>         <C>          <C>              <C>
      Network access              $ 51,273    $ 57,133    $ (5,860)    -10%   $ 151,109   $ 171,816    $ (20,707)      -12%
      Gas purchased                      -      12,324     (12,324)   -100%           -      82,311      (82,311)     -100%
      Electric energy and
        fuel oil purchased               -      16,412     (16,412)   -100%       5,523      58,498      (52,975)      -91%
                                ----------- ----------- -----------          ----------- ----------- ------------
                                  $ 51,273    $ 85,869   $ (34,596)    -40%   $ 156,632   $ 312,625   $ (155,993)      -50%
                                =========== =========== ===========          =========== =========== ============
</TABLE>
                                       34
<PAGE>
Network access  expenses for the three months ended September 30, 2004 decreased
$5.9 million,  or 10%, as compared  with the prior year period  primarily due to
decreased  costs  in long  distance  access  expense  related  to  rate  changes
partially  offset by increased  long distance  usage and greater demand for data
products in the ILEC sector.  Network access  expenses for the nine months ended
September 30, 2004 decreased  $20.7 million,  or 12%, as compared with the prior
year period  primarily due to decreased  costs in long distance  access  expense
related to rate changes partially offset by increased circuit expense associated
with additional  data product sales in the ILEC sector.  ELI costs have declined
due to a drop in demand coupled with improved network cost  efficiencies.  If we
continue  to  increase  our sales of data  products  such as DSL or  expand  the
availability  of our unlimited  calling plans,  our network access expense could
increase.

We did not have any gas or electric  operations in the quarter  ended  September
30, 2004 due to the sales of our Vermont Electric  division,  The Gas Company in
Hawaii, and our Arizona gas and electric divisions.

Electric energy and fuel oil purchased for the nine months ended September, 2004
decreased  $53.0  million,  or 91%, as compared  with the prior year period.  We
completed the sale of our remaining  electric utility property on April 1, 2004.
We have  sold  all of our  electric  operations  and as a  result  will  have no
operating results in future periods for these businesses.
<TABLE>
<CAPTION>
                            OTHER OPERATING EXPENSES

($ in thousands)                 For the three months ended September 30,       For the nine months ended September 30,
                                -------------------------------------------- -----------------------------------------------
                                   2004       2003       $ Change   % Change    2004        2003      $ Change    % Change
                                ----------- ----------- ----------- -------- ----------- ----------- ------------ ----------
<S>                              <C>         <C>         <C>             <C>  <C>         <C>          <C>               <C>
Operating expenses               $ 156,571   $ 165,356   $  (8,785)     -5%   $ 473,445   $ 521,116    $ (47,671)       -9%
Taxes other than income taxes       20,000      26,095      (6,095)    -23%      72,015      84,982      (12,967)      -15%
Sales and marketing                 28,357      28,683        (326)     -1%      85,643      82,492        3,151         4%
                                ----------- ----------- -----------          ----------- ----------- ------------
                                 $ 204,928   $ 220,134   $ (15,206)     -7%   $ 631,103   $ 688,590    $ (57,487)       -8%
                                =========== =========== ===========          =========== =========== ============
</TABLE>
Operating  expenses for the three months ended September 30, 2004 decreased $8.8
million,  or 5%,  as  compared  with the  prior  year  period  primarily  due to
decreased  operating  expenses in the public services sector due to the sales of
our Vermont Electric  division,  The Gas Company in Hawaii,  and our Arizona gas
and electric divisions and increased  operating  efficiencies and a reduction of
personnel  in the ELI sector  partially  offset by higher  payroll and  employee
benefits expenses in the ILEC sector.

Operating  expenses for the nine months ended September 30, 2004 decreased $47.7
million,  or 9%,  as  compared  with the  prior  year  period  primarily  due to
decreased  operating  expenses in the public services sector due to the sales of
our Vermont Electric  division,  The Gas Company in Hawaii,  and our Arizona gas
and electric divisions and increased  operating  efficiencies and a reduction of
personnel in the ELI sector.  We routinely review our operations,  personnel and
facilities  to  achieve  greater  efficiencies.  These  reviews  may  result  in
reductions in personnel and an increase in severance costs.

Included in  operating  expenses  is stock  compensation  expense.  Compensation
arrangements entered into in connection with management succession and strategic
alternatives  will result in stock  compensation  expense of approximately  $5.2
million in 2005, $5.1 million in 2006 and $1.0 million in 2007.

Included in operating  expenses is pension  expense.  In future periods,  if the
value of our pension assets decline and/or projected benefit costs increase,  we
may have increased pension expenses. Based on current assumptions and plan asset
values, we estimate that our pension expense will decrease from $12.4 million in
2003  to  approximately  $3.0  million  - $4.0  million  in  2004  and  that  no
contribution  to our  pension  plans  will be  required  to be made by us to the
pension plan in 2004. In addition,  as medical  costs  increase the costs of our
postretirement  benefit costs also increase.  Our retiree medical costs for 2003
were $16.9 million and our current estimate for 2004 is $17.0 - $19.0 million.

Taxes other than income  taxes for the three  months  ended  September  30, 2004
decreased $6.1 million, or 23%, as compared with the prior year period primarily
due to decreased  property taxes in the public  services sector due to the sales
of our Vermont Electric division, The Gas Company in Hawaii, and our Arizona gas
and electric  divisions of $2.2 million and lower gross  receipts  taxes of $4.9
million in the ILEC sector  partially  offset by higher  payroll  and  franchise
taxes of $2.4 million.

Taxes  other than  income  taxes for the nine months  ended  September  30, 2004
decreased  $13.0  million,  or 15%,  as  compared  with the  prior  year  period
primarily due to decreased  property taxes in the public  services sector due to
the sales of our Vermont Electric  division,  The Gas Company in Hawaii, and our
Arizona gas and electric divisions of $11.6 million.

                                       35
<PAGE>
Sales and  marketing  expenses  for the nine  months  ended  September  30, 2004
increased $3.2 million,  or 4%, as compared with the prior year period primarily
due to increased costs in the ILEC sector.
<TABLE>
<CAPTION>
                      DEPRECIATION AND AMORTIZATION EXPENSE

      ($ in thousands)           For the three months ended September 30,       For the nine months ended September 30,
                                -------------------------------------------- -----------------------------------------------
                                   2004       2003       $ Change   % Change    2004        2003      $ Change    % Change
                                ----------- ----------- ----------- -------- ----------- ----------- ------------ ----------
<S>                              <C>         <C>         <C>             <C>  <C>         <C>          <C>               <C>
      Depreciation  expense      $ 109,750   $ 120,012   $ (10,262)     -9%   $ 334,760   $ 345,577    $ (10,817)       -3%
      Amortization expense          31,630      31,866        (236)     -1%      94,890      95,208         (318)        0%
                                ----------- ----------- -----------          ----------- ----------- ------------
                                 $ 141,380   $ 151,878   $ (10,498)     -7%   $ 429,650   $ 440,785    $ (11,135)       -3%
                                =========== =========== ===========          =========== =========== ============
</TABLE>
Depreciation  expense for the three and nine  months  ended  September  30, 2004
decreased  $10.3 million,  or 9%, and $10.8  million,  or 3%,  respectively,  as
compared to the prior year because the net asset base is declining.
<TABLE>
<CAPTION>

 RESERVE FOR TELECOMMUNICATIONS BANKRUPTCIES / RESTRUCTURING AND OTHER EXPENSES /
            MANAGEMENT SUCCESSION AND STRATEGIC ALTERNATIVES EXPENSES

($ in thousands)                 For the three months ended September 30,       For the nine months ended September 30,
                                -------------------------------------------- -----------------------------------------------
                                   2004       2003       $ Change   % Change    2004        2003      $ Change    % Change
                                ----------- ----------- ----------- -------- ----------- ----------- ------------ ----------
Reserve for telecommunications
<S>                                <C>            <C>    <C>                  <C>         <C>         <C>            <C>
  bankruptcies                     $      -       $ -    $      -        -    $     -     $ 2,260     $ (2,260)     -100%
Restructuring and other expenses   $      -       $ -    $      -        -    $     -     $ 9,950     $ (9,950)     -100%
Management succession and
  strategic alternatives expenses  $ 75,858       $ -    $ 75,858     100%    $ 90,632    $     -     $ 90,632       100%
</TABLE>
During the second quarter 2003, we reserved  approximately $2.3 million of trade
receivables  with  Touch  America  as a result  of Touch  America's  filing  for
bankruptcy.  These receivables were generated as a result of providing  ordinary
course telecommunication  services. If other  telecommunications  companies file
for bankruptcy we may have additional significant reserves in future periods.

Restructuring  and other expenses for 2003 primarily consist of expenses related
to reductions in personnel at our  telecommunications  operations  and the write
off of software no longer useful.

Management succession and strategic  alternatives expenses in 2004 include a mix
of cash retention payments,  equity awards and severance agreements (see Note 12
for a complete discussion).
<TABLE>
<CAPTION>

 INVESTMENT AND OTHER INCOME (LOSS), NET / INTEREST EXPENSE / INCOME TAX EXPENSE (BENEFIT)

      ($ in thousands)            For the three months ended September 30,       For the nine months ended September 30,
                                -------------------------------------------- -----------------------------------------------
                                   2004       2003       $ Change   % Change    2004        2003      $ Change    % Change
                                ----------- ----------- ----------- -------- ----------- ----------- ------------ ----------
      Investment and other
<S>                               <C>         <C>         <C>            <C>   <C>         <C>          <C>              <C>
        income (loss), net        $ (13,651)  $ (24,277)  $  10,626      44%   $  16,856   $  55,132    $ (38,276)      -69%
      Interest expense            $  90,864   $ 103,124   $ (12,260)    -12%   $ 286,298   $ 318,836    $ (32,538)      -10%
      Income tax expense
        (benefit)                 $ (21,271)  $  (7,210)  $ (14,061)    195%   $  15,123   $  57,150    $ (42,027)      -74%
</TABLE>
Investment and other income (loss), net for the three months ended September 30,
2004  increased  $10.6  million,  or 44%, as compared with the prior year period
primarily due to gains on sales of assets in 2004 of $10.7  million  compared to
losses on sales of  assets  of $16.8  million  in 2003,  partially  offset by an
increase in premiums paid on debt  repurchases  of $12.8 million due to the 2004
repurchase of our debt.

Investment and other income (loss),  net for the nine months ended September 30,
2004 decreased  $38.3  million,  or 69%, as compared with the prior year period.
The  decrease  is  primarily  due to gains on  sales of  assets  in 2004 of $9.4
million  compared  to losses on sales of assets  of $11.8  million  in 2003,  an
increase of $19.2  million in income  from the  expiration  of certain  retained
liabilities at less than face value, which are associated with customer advances
for  construction  from our disposed water  properties,  partially  offset by an
increase in premiums  paid on debt  repurchases  of $9.4 million due to the 2004
repurchase of our debt, and the recognition in 2003 of $65.7 million in non-cash
pre-tax  gains  related  to a capital  lease  termination  and a  capital  lease
restructuring at ELI.

                                       36
<PAGE>
Interest  expense for the three months ended  September 30, 2004 decreased $12.3
million,  or 12%, as compared  with the prior year period  primarily  due to the
retirement  of debt.  During the three months ended  September  30, 2004, we had
average long-term debt (excluding equity units and convertible  preferred stock)
outstanding  of $4.2 billion  compared to $4.4  billion  during the three months
ended  September 30, 2003.  Our composite  average  borrowing rate for the three
months  ended  September  30, 2004 as compared  with the prior year period was 8
basis points lower, decreasing from 8.08% to 8.0%.

Interest  expense for the nine months ended  September 30, 2004 decreased  $32.5
million,  or 10%, as compared  with the prior year period  primarily  due to the
retirement  of debt.  During the nine months ended  September  30, 2004,  we had
average long-term debt (excluding equity units and convertible  preferred stock)
outstanding  of $4.2  billion  compared to $4.6  billion  during the nine months
ended  September 30, 2003.  Our composite  average  borrowing  rate for the nine
months  ended  September  30, 2004 as compared  with the prior year period was 3
basis points lower, decreasing from 8.09% to 8.06%.

Income taxes  decreased  $14.1  million for the third  quarter of 2004 and $42.0
million,  or 74%, for the nine months ended  September 30, 2004 as compared with
the prior year periods primarily due to changes in taxable income. The effective
tax rate for the first nine months of 2004 was 21.5% as compared  with 33.8% for
the first nine months of 2003.  Our  effective tax rate has declined as a result
of the  completion  of audits with federal and state taxing  authorities  in the
third quarter 2004 and changes in the structure of certain of our subsidiaries.

Our income tax expense is  computed  utilizing  an  estimated  annual  effective
income tax rate in accordance  with Accounting  Principles  Board Opinions (APB)
No. 28, "Interim Financial  Reporting." The tax rate is computed using estimates
as to the  Company's  net income before income taxes for the entire year and the
impact of estimated permanent book tax differences relative to that forecast.
<TABLE>
<CAPTION>
                               LOSS ON IMPAIRMENT

      ($ in thousands)           For the three months ended September 30,       For the nine months ended September 30,
                                -------------------------------------------- -----------------------------------------------
                                   2004       2003       $ Change   % Change    2004        2003      $ Change    % Change
                                --------- ------------- ----------- -------- ----------- ----------- ------------ ----------
<S>                                <C>      <C>          <C>           <C>      <C>        <C>        <C>            <C>
       Loss on impairment          $  -     $ 4,000      $ (4,000)    -100%     $     -    $ 4,000    $ (4,000)     -100%

</TABLE>
During the third quarter of 2003, we recognized an additional  non-cash  pre-tax
impairment loss of $4.0 million related to our Vermont  property,  such that the
net assets were written down to our best  estimate of the net  realizable  value
upon sale. As of April 1, 2004, we sold all of these properties.

                                       37
<PAGE>
Item 3.  Quantitative and Qualitative Disclosures about Market Risk
         ----------------------------------------------------------

Disclosure of primary market risks and how they are managed
We are exposed to market risk in the normal  course of our  business  operations
due to ongoing  investing  and  funding  activities.  Market  risk refers to the
potential  change  in fair  value  of a  financial  instrument  as a  result  of
fluctuations in interest rates and equity and commodity  prices.  We do not hold
or issue  derivative  instruments,  derivative  commodity  instruments  or other
financial instruments for trading purposes. As a result, we do not undertake any
specific  actions to cover our  exposure to market risks and we are not party to
any  market  risk  management  agreements  other  than in the  normal  course of
business or to hedge  long-term  interest  rate risk.  Our  primary  market risk
exposures are interest rate risk and equity and commodity price risk as follows:

Interest Rate Exposure

Our exposure to market risk for changes in interest  rates relates  primarily to
interest on our long-term debt and capital lease obligations. The long term debt
and  capital  lease  obligations   include  various   instruments  with  various
maturities and weighted average interest rates.

Our  objectives  in managing our  interest  rate risk are to limit the impact of
interest  rate  changes  on  earnings  and cash  flows and to lower our  overall
borrowing costs. To achieve these objectives,  a majority of our borrowings have
fixed interest rates. Consequently,  we have limited material future earnings or
cash flow  exposures  from changes in interest  rates on our long-term  debt and
capital lease  obligations.  A hypothetical 10% adverse change in interest rates
would  increase  the amount that we pay on our  variable  obligations  and could
result in  fluctuations in the fair value of our fixed rate  obligations.  Based
upon our overall  interest  rate  exposure at  September  30,  2004, a near-term
change in interest rates would not materially affect our consolidated  financial
position, results of operations or cash flows.

In order to  manage  our  interest  rate risk  exposure,  we have  entered  into
interest  rate  swap  agreements.  Under the  terms of the  agreements,  we make
semi-annual,  floating  interest rate interest payments based on six month LIBOR
and receive a fixed rate on the notional amount.

Sensitivity analysis of interest rate exposure
At September 30, 2004,  the fair value of our  long-term  debt and capital lease
obligations was estimated to be approximately $4.4 billion, based on our overall
weighted  average rate of 8.04% and our overall  weighted  maturity of 12 years.
There has been no material change in the weighted average maturity applicable to
our obligations  since December 31, 2003. The overall  weighted average interest
rate  decreased  approximately  5 basis  points  during the first nine months of
2004. A  hypothetical  increase of 80 basis points (10% of our overall  weighted
average  borrowing rate) would result in an approximate  $209.1 million decrease
in the fair value of our fixed rate obligations.

Equity Price Exposure

Our exposure to market risks for changes in equity  prices is minimal and, as of
September 30, 2004, is limited to our investment in Adelphia.

As of September  30, 2004 and December 31, 2003,  we owned  3,059,000  shares of
Adelphia  common  stock.  The  stock  price of  Adelphia  was $0.38 and $0.55 at
September 30, 2004 and December 31, 2003, respectively.

On August 13, 2004, we sold our entire 1,333,500 shares of D & E Communications,
Inc. (D & E) for approximately $13.3 million in cash.

On September  3, 2004,  we sold our entire  holdings of  2,605,908  common share
equivalents  in Hungarian  Telephone  and Cable Corp.  (HTCC) for  approximately
$13.2 million in cash.

Sensitivity analysis of equity price exposure
At September 30, 2004,  the fair value of the equity  portion of our  investment
portfolio  was  estimated to be $1.2  million.  A  hypothetical  10% decrease in
quoted market  prices would result in an  approximate  $120,000  decrease in the
fair value of the equity portion of our investment portfolio.

Disclosure of limitations of sensitivity analysis
Certain  shortcomings  are  inherent in the method of analysis  presented in the
computation  of fair value of financial  instruments.  Actual  values may differ
from those presented should market  conditions vary from assumptions used in the
calculation of the fair value.  This analysis  incorporates only those exposures
that exist as of September  30, 2004.  It does not consider  those  exposures or
positions, which could arise after that date. As a result, our ultimate exposure
with respect to our market risks will depend on the exposures  that arise during
the period and the fluctuation of interest rates and quoted market prices.

                                       38
<PAGE>
Item 4.   Controls and Procedures
          -----------------------

(a) Evaluation of disclosure controls and procedures
We carried out an evaluation,  under the supervision and with the  participation
of our management,  regarding the  effectiveness  of the design and operation of
our  disclosure  controls  and  procedures.  Based  upon  this  evaluation,  our
principal executive officer and principal financial officer concluded, as of the
end of the  period  covered  by  this  report,  September  30,  2004,  that  our
disclosure controls and procedures are effective.

(b) Changes in internal control over financial reporting
We reviewed our internal control over financial reporting at September 30, 2004.
There have been no changes in our  internal  control  over  financial  reporting
identified  in an  evaluation  thereof  that  occurred  during the third  fiscal
quarter of 2004, that materially  affected or is reasonably likely to materially
affect our internal control over financial reporting.

                           PART II. OTHER INFORMATION

                CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES

Item 1.   Legal Proceedings
          -----------------

There  have  been  no  material  changes  to  our  legal  proceedings  from  the
information  provided in Item 1. Legal  Proceedings  included  in our  Quarterly
Report on Form 10-Q for the period ended June 30, 2004.

We are party to other  legal  proceedings  arising in the  normal  course of our
business.  The outcome of individual  matters is not  predictable.  However,  we
believe that the ultimate  resolution  of all such  matters,  after  considering
insurance  coverage,  will not have a material  adverse  effect on our financial
position, results of operations, or our cash flows.

Item 5.   Other Information
          -----------------

On October  29,  2004,  we  entered  into a new  $250.0  million  line of credit
pursuant to a Competitive  Advance Revolving Credit Facility Agreement among us,
the lenders party to the  agreement,  Bank of America,  N.A., as  administrative
agent and issuing bank,  JPMorgan  Chase Bank, as  Syndication  Agent and Morgan
Stanley Bank,  Deutsche Bank Trust Company Americas,  the Royal Bank of Scotland
PLC, and UBS Loan Finance LLC, as co-documentation  agents. The maturity date of
the new facility is October 29, 2009.

The  new  facility  permits  borrowings  at  interest  rates  equal  to (i)  the
eurodollar base rate, plus an applicable rate or a margin,  or (ii) an alternate
base rate.  Associated  facility fees for the new credit facility vary depending
on our leverage ratio and were 0.375% as of October 29, 2004. During the term of
the new credit facility we may borrow, repay and re-borrow funds. The new credit
facility is available for general corporate purposes but may not be used to fund
dividend payments. There are no outstanding borrowings under the new facility as
of the date of this report.

The new facility contains, among other things, conditions precedent to borrowing
(including absence of a material adverse change), covenants, representations and
warranties  and events of default  customary for  facilities of this type.  Such
covenants  include certain  restrictions on incurrence of secured  indebtedness,
mergers and sales of assets.  The new credit  facility  also  contains a maximum
leverage ratio covenant.  Under the leverage ratio covenant,  we are required to
maintain a ratio of (i) total  indebtedness  minus cash and cash  equivalents in
excess of $50.0 million to (ii) consolidated  adjusted EBITDA (as defined in the
agreement)  over the last four quarters no greater than 4.50 to 1.00 through the
term of the credit facility.  Although the new credit facility is unsecured,  it
will be equally  and  ratable  secured by certain  liens and equally and ratable
guaranteed  by certain of our  subsidiaries  if we issue debt that is secured or
guaranteed.

Under certain  conditions the lending  commitments under the new facility may be
terminated by the lenders and amounts  outstanding under the new facility may be
accelerated.  Bankruptcy and insolvency  events with respect to us or certain of
our subsidiaries will result in an automatic  termination of lending commitments
and acceleration of the indebtedness  under the new facility.  Subject to notice
and cure  periods  in  certain  cases,  other  events of  default  under the new
facility will result in termination of lending  commitments and  acceleration of
indebtedness  under the new  facility at the option of the  lenders.  Such other
events of default  include  failure to pay any  principal  when due,  failure to
comply with covenants,  breach of  representations or warranties in any material
respect, non-payment or acceleration of our and our subsidiaries' other material
debt or a change of control of our  company.  A complete  copy of the new credit
facility agreement has been filed as an exhibit to this Form 10-Q.

The new credit  facility  replaces  the  $805.0  million  lines of credit  under
Competitive  Advance and Revolving Credit Facility  Agreements dated October 24,
2001. As of the time of the cancellation,  there were no outstanding  borrowings
under the lines of credit.

                                       39
<PAGE>
Item 6.  Exhibits and Reports on Form 8-K
         --------------------------------

a)       Exhibits:

         3.200.5  By-laws of Citizens Communications Company, as amended through
                  July 10, 2004.

         10.16    Employment Agreement between Citizens  Communications  Company
                  and  Mary A. Wilderotter, effective November 1, 2004.

         10.17    Employment Agreement  between Citizens  Communications Company
                  and Jerry Elliott,  effective September 1, 2004.

         10.18    Employment  Agreement  between Citizens Communications Company
                  and Robert Larson, effective September 1, 2004.

         10.19    Competitive  Advance  and  Revolving Credit Facility Agreement
                  for $250,000,000 dated October 29, 2004.

         31.1     Certification of Principal Executive Officer pursuant to  Rule
                  13a-14(a) under the Securities Exchange Act of 1934.

         31.2     Certification of Principal Financial Officer  pursuant to Rule
                  13a-14(a) under the Securities Exchange Act of 1934.

         32.1     Certification of Chief Executive Officer pursuant to 18 U.S.C.
                  Section  1350,  as  adopted  pursuant  to  Section 906  of the
                  Sarbanes-Oxley Act of 2002.

         32.2     Certification of Chief Financial Officer pursuant to 18 U.S.C.
                  Section  1350,  as  adopted  pursuant  to  Section 906  of the
                  Sarbanes-Oxley Act of 2002.

         99.1     Disclaimed Employment and Retention Agreement between  Michael
                  G. Harris and Citizens  Communications Company, effective June
                  1, 2004.

b)        Reports on Form 8-K:

          We  filed  a Form  8-K on  July  8,  2004  under  Item  11  "Temporary
          Suspension  of Trading  Under  Registrant's  Employee  Benefit  Plan",
          announcing the blackout period associated with the Company's  election
          to change the record keeper for the Citizens 401(k) Savings Plan.

          We filed on Form 8-K on July 12, 2004 under Item 5 "Other  Events",  a
          press release announcing the completion of our review of financial and
          strategic alternatives.

          We furnished  on Form 8-K on August 3, 2004 under Item 12  "Disclosure
          of Results of  Operations  and Financial  Condition",  a press release
          announcing  our earnings for the quarter and six months ended June 30,
          2004.

          We filed on Form 8-K on August 5, 2004 under Item 5 "Other Events",  a
          press release announcing the expected reset interest rate on our 6.75%
          Senior Notes.

                                       40
<PAGE>
          We filed on Form 8-K on September 21, 2004 under Item 1.01 "Entry into
          Material Definitive Agreements",  Item 5.02 "Departure of Directors or
          Principal  Officers;  Election of Directors;  Appointment of Principal
          Officers" and Item 8.01 "Other  Events",  information  concerning  the
          entry by the Company into employment agreements and the appointment of
          Mary A.  Wilderotter as President and Chief  Executive  Officer of the
          Company,  including  a  press  release  announcing  Ms.  Wilderotter's
          appointment.

          We filed on Form 8-K on September 27, 2004 under Item 5.02  "Departure
          of Directors or Principal Officers; Election of Directors; Appointment
          of  Principal  Officers"  and Item 8.01  "Other  Events" and Item 9.01
          "Financial  Statements  and  Exhibits",   information  concerning  the
          resignation  of Leonard Tow as Director and Chairman of the  Company's
          Board of Directors, and the resignation of Claire Tow, Mr. Tow's wife,
          as a Director of the  Company,  including a press  release  announcing
          these events.

          We filed on Form 8-K on September 30, 2004 under Item 5.02  "Departure
          of Directors or Principal Officers; Election of Directors; Appointment
          of  Principal  Officers"  and Item 8.01  "Other  Events" and Item 9.01
          "Financial  Statements  and  Exhibits",   information  concerning  the
          appointment  of  Rudy J.  Graf  Chairman  of the  Company's  Board  of
          Directors,  and  the  election  of  Mary A.  Wilderotter,  who  became
          President  and Chief  Executive  Officer of the Company on November 1,
          2004, and Jerry Elliott,  Executive Vice President and Chief Financial
          Officer of the  Company to the Board of  Directors,  including a press
          release announcing these events.

                                       41

<PAGE>

                CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
                                    SIGNATURE



Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.






                         CITIZENS COMMUNICATIONS COMPANY
                         -------------------------------
                                  (Registrant)


                           By:   /s/ Robert J. Larson
                              --------------------------------
                                     Robert J. Larson
                                     Senior Vice President and
                                     Chief Accounting Officer






Date: November 4, 2004


                                       42









</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.200.5
<SEQUENCE>2
<FILENAME>bylaws.txt
<DESCRIPTION>BY-LAWS
<TEXT>
                                                        Exhibit 3.200.5



                                     BYLAWS*

                                       OF

                         CITIZENS COMMUNICATIONS COMPANY













* As amended March 9, 1937;  May 12, 1942;  June 15, 1946;  October 1, 1946; May
23, 1947;  January 7, 1948;  April 1, 1948;  March 31,  1949;  January 26, 1951;
April 11, 1952;  July 28, 1954;  February 24, 1960;  November 18, 1963;  May 10,
1966;  February 3, 1967;  April 10, 1968; April 17, 1970; June 11, 1970; June 7,
1974;  August 8,  1975;  November  7, 1980;  January  16,  1981;  March 3, 1981;
February 20, 1986; June 5, 1987; August 8, 1988; May 5, 1989; May 31, 1989; June
23, 1989; September 11, 1989 (clerical correction); May 1, 1990; April 14, 1992;
February 17, 1993,  February 8, 1994  (clerical  correction);  October 24, 1995;
August 8, 1996 (clerical  correction);  December 17,1996;  January 20, 1998; May
20, 1999; July 18, 2000;  March 6,2002;  May 16, 2002;  July 30, 2002;  April 1,
2003; and July 10, 2004.



<PAGE>
                                     BYLAWS
                                       OF
                         CITIZENS COMMUNICATIONS COMPANY

                                      TITLE

     1. The title of this corporation is CITIZENS COMMUNICATIONS COMPANY.

                               LOCATION OF OFFICES

     2.  The  principal  office  of the  corporation  in  Delaware  shall  be in
Wilmington  and the resident  agent in charge  thereof shall be THE  CORPORATION
TRUST COMPANY, The Corporation Trust Center, 1209 Orange Street.

     The  corporation  may also have an office or offices  at such other  places
within or without the State of Delaware as the Board of Directors  may from time
to time designate.

                                 CORPORATE SEAL

3. The corporate seal shall be circular in form and have  inscribed  thereon the
name of the  corporation,  the year of its  incorporation  (1935)  and the words
"Incorporated Delaware".

                            MEETINGS OF STOCKHOLDERS

4. All meetings of stockholders  shall be held at the offices of the corporation
or such other  place as shall be  designated  by the Board of  Directors  of the
corporation.

     Annual  Meetings  of  Stockholders  shall  be held on a date  and at a time
designated by the Board of Directors of the corporation.  At each annual meeting
the  stockholders  shall  elect a Board of  Directors,  such  election  to be by
majority of the stock present or represented  by proxy,  and entitled to vote at
the meeting.


<PAGE>

     Each stockholder  shall, at every meeting of the stockholders,  be entitled
to one vote in person or by written proxy signed by him, for each share of stock
held by him,  but no proxy shall be voted on after one year from its date.  Such
right to vote shall be subject to the right of the Board of  Directors  to close
the  transfer  books  or  to  fix a  record  date  for  voting  stockholders  as
hereinafter provided.

     Special  meetings of the  stockholders may be called by the Chief Executive
Officer  and shall be called on the  request in writing or by vote of a majority
of the Board of  Directors  or on request in writing of  stockholders  of record
owning fifty  percent  (50%) in amount of the capital  stock of the  corporation
outstanding  and entitled to vote.  Any such request by  stockholders  shall set
forth a brief  description  of the  business  desired to be  brought  before the
special  meeting  and the reasons for  conducting  such  business at the special
meeting.

     The record date for determining the stockholders of record entitled to vote
at a special  meeting  called on the written  request of  stockholders  shall be
fixed by  resolution of the Board of  Directors.  Written  notice of such record
date shall be sent  promptly to  stockholders  and the meeting  shall be held on
such date as shall be  determined  by the Board of Directors  which shall be not
less than sixty (60) nor more than one hundred  and twenty  (120) days after the
date on  which a proper  demand  for a  stockholders  meeting  has been  made by
stockholders.

     The Board of Directors may determine  rules and  procedures for the conduct
of the special meeting.

     No business may be transacted at a special meeting of  stockholders,  other
than  business  that is either (a)  specified  in the notice of meeting  (or any
supplement  thereto)  given by or at the direction of the Board of Directors (or
any duly authorized  committee  thereof),  (b) otherwise properly brought before
the special  meeting by or at the  direction of the Board of  Directors  (or any
duly authorized  committee thereof) or (c) otherwise properly brought before the
special  meeting by any  stockholder  of the  corporation  who complies with the
procedures set forth in this Bylaw.


<PAGE>

     Notice of each meeting of stockholders, whether annual or special, shall be
mailed by the secretary to each stockholder of record, at his or her post office
address as shown by the stock  books of the  Company,  at least ten days and not
more than sixty days prior to the date of the meeting. If the transfer books are
closed  or a record  date is fixed in  connection  with an  annual  meeting,  as
permitted  by  By-Law  17,  the  notice  of the  meeting  shall  be given to the
stockholders  of record as of the time said books are  closed or record  date is
fixed,  but if the transfer  books are not closed or a record date is not fixed,
said notice shall be given to the  stockholders of record at the time the notice
is mailed.

     The holders of a majority  of the stock  outstanding  and  entitled to vote
shall  constitute a quorum,  but the holders of a smaller amount may adjourn any
meeting from time to time without further notice until a quorum is secured.

     No business may be transacted at an annual meeting of  stockholders,  other
than  business  that is either (a)  specified  in the notice of meeting  (or any
supplement  thereto)  given by or at the direction of the Board of Directors (or
any duly authorized  committee  thereof),  (b) otherwise properly brought before
the annual meeting by or at the direction of the Board of Directors (or any duly
authorized  committee  thereof) or (c)  otherwise  properly  brought  before the
annual meeting by any stockholder of the corporation (i) who is a stockholder of
record on the date of the giving of the notice of the  annual  meeting  provided
for in this Bylaw and on the record date for the  determination  of stockholders
entitled to vote at such annual  meeting and (ii) who  complies  with the notice
procedures set forth in this Bylaw.

<PAGE>

     In  addition  to any other  applicable  requirements,  for  business  to be
properly  brought before an annual meeting by a  stockholder,  such  stockholder
must have given timely notice thereof in proper written form to the Secretary of
the corporation.

     To be timely,  a  stockholder's  notice to the Secretary of the corporation
must be delivered to or mailed and received at the principal  executive  offices
of  the   corporation  not  less  than  ninety  (90)  days  nor  more  than  one
hundred-twenty  (120)  days  prior to the  anniversary  date of the  immediately
preceding annual meeting of stockholders;  provided,  however, that in the event
that the annual meeting is called for a date that is not within twenty-five (25)
days before or after such anniversary  date,  notice by the stockholder in order
to be timely  must be so  received  not later than the close of  business on the
tenth  (10th) day  following  the day on which  notice of the date of the annual
meeting was mailed or public  disclosure  of the date of the annual  meeting was
made, whichever first occurs.

     To be in proper  written form, a  stockholder's  notice to the Secretary of
the corporation must set forth, as to each matter such  stockholder  proposes to
bring before the annual meeting, (i) a brief description of the business desired
to be brought  before the annual  meeting and the reasons  for  conducting  such
business  at the  annual  meeting,  (ii)  the name and  record  address  of such
stockholder,  (iii) the class and  series and number of shares of each class and
series of capital stock of the  corporation  which are owned  beneficially or of
record  by  such  stockholder,   (iv)  a  description  of  all  arrangements  or
understandings  between  such  stockholder  and  any  other  person  or  persons
(including their names) in connection with the proposal of such business by such
stockholder and any material interest of such stockholder in such business,  (v)
a  representation  that such  stockholder  is a holder of record of stock of the
corporation  entitled to vote at such meeting and that such stockholder  intends
to appear in person or by proxy at the annual  meeting  to bring  such  business
before the meeting,  and (vi) any other information relating to such stockholder
that would be required to be  disclosed in a proxy  statement  or other  filings
required to be made in  connection  with  solicitations  of proxies  pursuant to
Section 14 of the Securities  Exchange Act of 1934 (the  "Exchange  Act") (or in
any law or  statute  replacing  such  section),  and the rules  and  regulations
promulgated thereunder.
<PAGE>

     No business shall be conducted at any annual meeting of stockholders except
business  brought before the meeting in accordance with the procedures set forth
in this Bylaw; provided,  however, that, once business has been properly brought
before the meeting in  accordance  with such  procedures,  nothing in this Bylaw
shall be deemed to preclude  discussion by any stockholder of any such business.
If the chairman of a meeting  determines that business was not properly  brought
before the meeting in  accordance  with the foregoing  procedures,  the chairman
shall declare to the meeting that the business was not properly  brought  before
the meeting and such business shall not be transacted.

     In  addition,  notwithstanding  anything in this Bylaw to the  contrary,  a
stockholder intending to nominate one or more persons for election as a director
at an annual or special  meeting of  stockholders  must  comply with Bylaw 5 for
such nominations to be properly brought before such meeting.

                                    DIRECTORS

5. The property and business of the corporation  shall be managed and controlled
by its Board of  Directors,  which shall consist of not less than seven nor more
than fifteen members.  The number of Directors shall be fixed from time to time,
within the limits  prescribed,  by resolution  of the Board of Directors.  As of
July 10, 2004,  the Board of Directors  shall  consist of up to twelve  members,
unless a different  number shall  thereafter be fixed by resolution of the Board
of Directors.  Vacancies in the Board of Directors (except  vacancies  resulting
from the removal of directors by stockholders), including vacancies in the Board
of  Directors  resulting  from any increase in the number of  Directors,  may be
filled by a majority of the Directors then in office.
<PAGE>

     Directors  shall  otherwise  be elected by the  stockholders  at the annual
meeting and shall hold office  until the next  annual  election  and until their
successors  are elected and  qualified.  At all  elections  of Directors of this
corporation  each  stockholder  shall be  entitled  to one vote in  person or by
written  proxy signed by him, for each share of stock owned by him, and election
shall be by  majority  vote of the stock  present  or  represented  by proxy and
entitled to vote at the meeting. The stockholders of this corporation shall have
no  preemptive  right  to  subscribe  to any  issue of  shares  of stock of this
corporation now or hereafter made.

     A Director may be  designated  a "Director  Emeritus" of the Company by the
vote of the Board of Directors.  A Director  Emeritus shall be invited to attend
all meetings of the Board of  Directors  but shall not have the right to vote. A
Director Emeritus shall receive such compensation as the Board shall determine.

     A Director  Emeritus  shall be  designated  by the Board of Directors for a
one-year  term (and may be  reappointed)  at the Annual  Meeting of the Board of
Directors following the Company's Annual Meeting of Stockholders.

     The Board of Directors  shall have an Executive  Committee.  The  Executive
Committee of the Board shall consist of four (4) members, to be appointed by and
to serve at the pleasure of the Board. The Chief Executive  Officer shall be the
Chairman of the Executive  Committee.  During intervals  between meetings of the
Board,  the  Committee  shall  have the  power  and  authority  of the  Board of
Directors of the management of the business affairs and property of the Company.

     A majority of the  Directors  in office shall be  independent  directors as
hereinafter  defined.  At the time that the  nominees for the Board of Directors
are selected for  proposal for election at the Annual  Meeting of  Stockholders,
the Board of  Directors  will  review  the  circumstances  of each  nominee  and
determine  whether  he or  she  is an  independent  director.  If it  should  be
determined  that a majority of the nominees are not independent  directors,  the
Nominating  and Corporate  Governance  Committee  shall take steps to select and
recommend  the  nomination  of  a  sufficient  number  of  individuals  who  are
independent  directors  so that a majority of members of the Board of  Directors
shall be independent directors.
<PAGE>

     The Board of Directors  shall have a Nominating  and  Corporate  Governance
Committee.  The Nominating and Corporate  Governance  Committee shall consist of
not less than two directors and not more than four directors, to be appointed by
and to serve at the  pleasure of the Board.  Each member of the  Nominating  and
Corporate  Governance  Committee shall be an independent director as hereinafter
defined.  The  Nominating  and Corporate  Governance  Committee  shall  consider
recommendations  of individuals who may be expected to make contributions to the
Company or members  of the Board of  Directors.  The  Nominating  and  Corporate
Governance  Committee shall establish  procedures for the nominating process and
make  recommendations  to the  Board  of  Directors  annually  for the  slate of
nominees  for the Board of  Directors  to be proposed  at the Annual  Meeting of
Stockholders.  In addition,  the Nominating and Corporate  Governance  Committee
shall take a leadership role in shaping the corporate governance of the Company,
including making recommendations on matters relating to the make-up of the Board
and its various committees and corporate governance principles applicable to the
Company.

     The  Board  of  Directors   shall  have  a  Compensation   Committee.   The
Compensation Committee shall consist of not less than two directors and not more
than five  directors,  to be  appointed  by and to serve at the  pleasure of the
Board.  Each  member  of the  Compensation  Committee  shall  be an  independent
director as hereafter defined. The Compensation Committee shall consider matters
related to compensation of officers,  directors and employees of the Company and
to make  recommendations  with respect  thereto to the Board of  Directors.  The
Compensation  Committee  shall have the  authority to retain  independent  legal
counsel and compensation advisors.
<PAGE>

     The Board of Directors shall have an Audit  Committee.  The Audit Committee
shall consist of not less than three Directors,  to be appointed and to serve at
the  pleasure of the Board.  Except as  otherwise  provided by such rules,  each
member of the Audit  Committee shall be qualified to serve thereon in accordance
with the applicable  rules of the New York Stock  Exchange.  The Audit Committee
shall  have  such  powers,  duties  and  authority  as  shall be  determined  by
resolution of the Board of Directors  from time to time,  including as set forth
in the  charter  of the Audit  Committee  adopted by the Board of  Directors  in
accordance with the rules of the New York Stock Exchange.

     For  purposes of this  Article 5 and Article 9 of the Bylaws,  "independent
director" shall mean a director who is:

          (a) an individual who is not and has not been employed as an executive
     officer by the  Company  (or any  corporation,  the  majority of the voting
     stock of which is owned,  directly or indirectly  through one or more other
     subsidiaries,  by the Company)  within  three (3) fiscal years  immediately
     prior to his or her most recent  election or appointment as a member of the
     Board of Directors; or

          (b) an  individual  who is not a regular paid advisor or consultant to
     the Company and who is not an affiliate (within the meaning of Exchange Act
     Rule 12b-2 of the Securities and Exchange Commission) of any entity that is
     a regular paid advisor or consultant to the Company; or

          (c) an individual who is not an employee or owner of five percent (5%)
     or more of the voting stock of any business or professional entity that has
     made, during the Company' s last full fiscal year,  payments to the Company
     or its  subsidiaries  for  property,  goods or  services  in excess of five
     percent (5%) of the lesser of (i) the Company's consolidated gross revenues
     for its last full fiscal  year,  or (ii) such other  entity's  consolidated
     gross revenues for its last full fiscal year; or

          (d) an individual who is not an employee or owner of five percent (5%)
     or more of the voting stock of any business or professional entity to which
     the Company or its subsidiaries  have made,  during the Company's last full
     fiscal  year,  payments for  property,  goods or services in excess of five
     percent (5%) of the lesser of (i) the Company's consolidated gross revenues
     for its last full fiscal  year,  or (ii) such other  entity's  consolidated
     gross revenues for its last full fiscal year; or
<PAGE>

          (e) an individual  who is not a party to a personal  service  contract
     with the Company pursuant to which fees or other  compensation  received by
     the  individual  from the  Company  during his or her last full fiscal year
     (other than fees received as a member of the  Company's  Board of Directors
     or a committee thereof so as to require  description of such contract under
     Item 404(a) of Regulation  S-K  promulgated  by the Securities and Exchange
     Commission, as in effect on January 1, 1994; or

          (f) an  individual  who is not employed by a  tax-exempt  organization
     that  received,  during its last full fiscal year,  contributions  from the
     Company  in  excess  of  five  percent  (5%)  of  the  lesser  of  (i)  the
     consolidated  gross  revenues  of the  Company  during its last full fiscal
     year, or (ii) the  contributions  received by the  tax-exempt  organization
     during its last full fiscal year; or

          (g) an  individual  who has not carried out a  transaction  or did not
     have a relationship,  during the Company's last full fiscal year, such that
     the specifics of a transaction would be required to be described under Item
     404  of  Regulation   S-K   promulgated  by  the  Securities  and  Exchange
     Commission, as in effect on January 1, 1994; or

          (h) an individual  who is not employed by a public company at which an
     executive  officer  of the  Company  serves  as a  member  of the  board of
     directors;

                           or

          (i) an  individual  who  has not had  any  relationship  described  in
     paragraphs (a) - (h) with any corporation, the majority of the voting stock
     of which is owned directly or indirectly, through one or more subsidiaries,
     by the Company; or

          (j) an individual  who is not a member of the immediate  family of any
     person  described  in  paragraphs  (a)  -  (i).  For  these  purposes,   an
     individual's  immediate  family  shall  include such  individual's  spouse,
     parents,  children,  siblings,  mothers-  and  fathers-in-law,   sons-  and
     daughters-in-laws, and brothers and sisters-in-law.
<PAGE>

     The term  "independent  director"  shall have no legal  significance  under
applicable  corporate  or  securities  law or in any respect  other than for the
purposes  of this  Bylaw.  No  inference  shall be drawn that a director is "not
independent,"  "interested,"  or "a party to a contract or transaction" or has a
"financial  interest" in any contract or  transaction  within the meaning of any
applicable  corporate or securities  law, and no director shall be  disqualified
from taking  action or  refraining  from acting on any matter  coming before the
Board of  Directors  by reason of his or her status as an  independent  director
under  this  Bylaw.

     Only persons who are nominated in accordance with the following  procedures
shall be eligible for election as directors of the  corporation,  subject to the
rights of holders of any class or series of stock having a  preference  over the
common stock of the  corporation  as to dividends or upon  liquidation  to elect
directors under specified circumstances.  Nominations of persons for election to
the Board of Directors may be made at any annual meeting of stockholders,  or at
any  special  meeting  of  stockholders  called  for  the  purpose  of  electing
directors,  (a)  by or at  the  direction  of  the  Board  of  Directors  or the
Nominating and Corporate Governance Committee,  or (b) by any stockholder of the
corporation  (i) who is a stockholder of record on the date of the giving of the
notice  provided for in this Bylaw and on the record date for the  determination
of stockholders  entitled to vote at such meeting and (ii) who complies with the
notice procedures set forth in this Bylaw.

     In addition to any other  applicable  requirements,  for a nomination to be
made by a stockholder, such stockholder must have given timely notice thereof in
proper written form to the Secretary of the corporation.
<PAGE>

     To be timely, a stockholder's  notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the corporation (a)
in the case of an annual  meeting,  not less than ninety (90) days nor more than
one  hundred-twenty  (120) days prior to the anniversary date of the immediately
preceding annual meeting of stockholders;  provided,  however, that in the event
that the annual meeting is called for a date that is not within twenty-five (25)
days before or after such anniversary  date,  notice by the stockholder in order
to be timely  must be so  received  not later than the close of  business on the
tenth  (10th) day  following  the day on which  notice of the date of the annual
meeting was mailed or public  disclosure  of the date of the annual  meeting was
made,  whichever  first  occurs;  and (b) in the case of a  special  meeting  of
stockholders  called for the purpose of electing  directors,  not later than the
close of business on the tenth (10th) day  following  the day on which notice of
the date of the special  meeting was mailed or public  disclosure of the date of
the special meeting was made, whichever first occurs.

     To be in proper written form, a stockholder's  notice to the Secretary must
set forth (a) as to each person whom the  stockholder  proposes to nominate  for
election as a director (i) the name, age, business address and residence address
of the person, (ii) the principal occupation and employment of the person, (iii)
the class and  series  and  number of shares of each class and series of capital
stock of the corporation which are owned beneficially or of record by the person
and (iv) any other information  relating to the person that would be required to
be  disclosed  in a proxy  statement  or other  filings  required  to be made in
connection with  solicitations of proxies for election of directors  pursuant to
Section  14 of the  Exchange  Act  (or in any  law  or  statute  replacing  such
section), and the rules and regulations  promulgated  thereunder;  and (b) as to
the  stockholder  giving  the  notice  (i) the name and  record  address of such
stockholder,  (ii) the class and  series  and number of shares of each class and
series of capital stock of the  corporation  which are owned  beneficially or of
record  by  such  stockholder,  (iii)  a  description  of  all  arrangements  or
understandings  between such stockholder and each proposed nominee and any other
person or persons  (including  their names) pursuant to which the  nomination(s)
are to be made by such stockholder,  (iv) a representation that such stockholder
is a holder  of  record  of stock of the  corporation  entitled  to vote at such
meeting and that such stockholder intends to appear in person or by proxy at the
meeting to nominate the person or persons named in its notice, and (v) any other
information  relating to such stockholder that would be required to be disclosed
in a proxy  statement or other filings  required to be made in  connection  with
solicitations of proxies for election of directors pursuant to Section 14 of the
Exchange Act (or in any law or statute replacing such section) and the rules and
regulations promulgated thereunder. Such notice must be accompanied by a written
consent of each  proposed  nominee to being named as a nominee and to serve as a
director if elected.
<PAGE>

     No person shall be eligible  for election as a director of the  corporation
unless  nominated in accordance  with the procedures set forth in this Bylaw. If
the  Chairman  of the  meeting  determines  that a  nomination  was not  made in
accordance  with the  foregoing  procedures,  the Chairman  shall declare to the
meeting that the nomination was defective and such defective nomination shall be
disregarded.

                              POWERS OF DIRECTORS

6. The Board of Directors  shall have all such powers as may be exercised by the
Corporation,  subject to the  provisions of the  statutes,  the  Certificate  of
Incorporation, and the Bylaws.

                             MEETINGS OF DIRECTORS

7.  Meetings  of the Board of  Directors  shall be held at such place  within or
without the State of Delaware as may from time to time be fixed by resolution of
the Board of Directors, or as may be specified by the Chief Executive Officer in
the call of any meeting.  Regular  meetings of the Board of  Directors  shall be
held at such times as may from time to time be fixed by  resolution of the Board
of Directors  and special  meetings of the Board of Directors may be held at any
time upon the call of two (2)  Directors  or of the Chief  Executive  Officer by
oral, telegraphic, written, electronic mail or other electronic notice duly sent
or mailed to each  Director  not less than  twenty-four  (24) hours  before such
meeting. A meeting of the Board may be held without notice immediately after the
annual meeting of  stockholders at the same place at which such meeting is held.
Notice need not be given of regular meetings of the Board held at times fixed by
resolution of the Board.  Meetings may be held at any time without notice if all
the Directors are present or if those not present waive notice of the meeting in
writing. (Telephone Participation in Meetings)
<PAGE>

     Members  of  the  Board  of  Directors  (or  any  committees  thereof)  may
participate  in a meeting of the Board of Directors (or of such  committees)  by
means of conference  telephone or other  communications  equipment via which all
persons participating can hear each other. Such participation in the substantive
discussion and  determinations of a meeting shall constitute  presence in person
at such meeting.

     A majority of the Directors shall constitute a quorum, but a smaller number
may adjourn any meeting from time to time without  further notice until a quorum
is secured.

                            OFFICERS OF THE COMPANY

8. The officers of the Company shall be a Chairman of the Board of Directors,  a
Chief Executive  Officer,  a President,  one or more vice presidents  (with such
duties and titles as may be assigned to them), a secretary, a treasurer,  one or
more assistant vice  presidents  (with such duties and titles as may be assigned
to  them),  and such  other  officers  as may from time to time be chosen by the
Board of Directors.

     The officers of the Company  shall hold office until their  successors  are
elected and qualified.  If the office of any officer or officers  becomes vacant
for any  reason,  the  vacancy  shall be  filled  by the  affirmative  vote of a
majority of the whole Board of Directors.
<PAGE>

                             DUTIES OF THE CHAIRMAN

9. Unless  otherwise  determined by resolution of the Board,  the Chairman shall
preside at all meetings of the Board of  Directors  and of the  stockholders  at
which  he or she  shall  be  present.  In his or her  absence,  any  independent
director who has been designated as a lead director by the Board of Directors or
any other  Director  designated  by the Board of Directors  shall preside at all
meetings of the Board of Directors and of the  stockholders.  The Chairman shall
have such other powers and duties as the Board shall determine from time to time
by resolution.

                      DUTIES OF THE CHIEF EXECUTIVE OFFICER

     9A. The Chief Executive Officer shall be the chief executive officer of the
Company  and it shall be the duty of the Chief  Executive  Officer to carry into
effect  all  orders,  resolutions,  and  policy  determinations  of the Board of
Directors;  to execute all  contracts  and  agreements;  to keep the seal of the
Company;  and to sign and to affix  the seal of the  Company  to any  instrument
requiring  the same,  which  seal  shall be  attested  by the  signature  of the
Secretary or Treasurer or Assistant Secretary or Assistant  Treasurer.  He shall
have the general supervision and direction of the other officers of the Company.
<PAGE>

     He shall submit a report of the  operations  of the Company for the year to
the  Directors  at their  meeting  next  preceding  the  annual  meeting  of the
stockholders and to the stockholders at their annual meeting.

     He shall have the general duties and powers of  supervision  and management
usually vested in the chief executive officer of a corporation.

     The  Chief  Executive  may also  hold  another  office  with  the  Company.
Accordingly,  the duties and responsibilities of the position may be assigned by
the Board of Directors to any Company officer.

                             DUTIES OF THE PRESIDENT

9B. Unless otherwise  decided by the Board of Directors,  the President shall be
the chief  administrative  officer of the  Company.  It shall be his duty to see
that all orders and policy determination conveyed by the Chief Executive Officer
are carried into effect. He shall have the general  supervision and direction of
the  operations  and  administration  of the  affairs of the Company and general
supervision and direction of the other officers and employees of the Company and
shall see that their duties are properly performed.

                                 VICE PRESIDENT

     10. The vice president or vice presidents, in the order of their seniority,
shall be vested  with all the powers and  required  to perform all the duties of
the President in his absence or  disability  and shall perform such other duties
as may be prescribed by the Board of Directors.

                             CHIEF EXECUTIVE PRO TEM

     11. In the absence or  disability of both the Chief  Executive  Officer and
President, the Board may appoint a chief executive pro tem.
<PAGE>

                                    SECRETARY

     12. The  secretary  shall  attend all meetings of the  corporation  and the
Board of  Directors.  He shall act as clerk  thereof and shall record all of the
proceedings  of such  meetings  in a book kept for that  purpose.  He shall give
proper notice of meetings of  stockholders  and Directors and shall perform such
other  duties  as shall  be  assigned  to him by the  Chief  Executive  Officer,
President or the Board of Directors.

                                    TREASURER

     13. The  treasurer  shall have custody of the funds and  securities  of the
corporation  and  shall  keep  full  and  accurate   accounts  of  receipts  and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable  effects in the name and to the credit of the  corporation in
such  depositories  as may be  designated  by the Board of  Directors.  He shall
disburse the funds of the  corporation as may be ordered by the Board,  or Chief
Executive  Officer or President,  taking proper vouchers for such  disbursements
and shall  render to the  Chief  Executive  Officer,  President  and  Directors,
whenever  they may require it, an account of all his  transactions  as treasurer
and of the financial condition of the corporation.

     He  shall  keep an  account  of  stock  and  income  notes  registered  and
transferred  in such  manner  and  subject to such  regulations  as the Board of
Directors may prescribe.

     He  shall  give  the  corporation  a bond,  if  required  by the  Board  of
Directors,  in such sum and in form and with security  satisfactory to the Board
of Directors  for the faithful  performance  of the duties of his office and the
restoration to the corporation,  in case of his death,  resignation,  or removal
from  office,  of all  books,  papers,  vouchers,  money and other  property  of
whatever kind in his possession,  belonging to the corporation. He shall perform
such other duties as the Board of Directors  may from time to time  prescribe or
require.
<PAGE>

                       DUTIES OF OFFICERS MAY BE DELEGATED

     14. In case of the absence or disability of any officer of the  corporation
or for any other reason deemed  sufficient by a majority of the Board, the Board
of Directors  may  delegate his powers or duties to any other  officer or to any
Director for the time being.  The duties  relating to the execution of contracts
and  agreements  and the signing of  instruments  and  affixing  the seal of the
Company and other matters may be delegated to any officer, from time to time, as
the Board shall see fit.

                              CERTIFICATES OF STOCK

     15.  Certificates of stock shall be signed by the Chairman,  President or a
vice  president  and either the  treasurer,  assistant  treasurer,  secretary or
assistant secretary. If a certificate of stock be lost or destroyed, another may
be issued in its stead upon proof of such loss or destruction  and the giving of
a  satisfactory  bond of  indemnity,  in an amount  sufficient  to indemnify the
corporation against any claim.

                                TRANSFER OF STOCK

     16. All transfer of stock of the  corporation  shall be made upon its books
upon presentation of the certificate or certificates therefor, properly endorsed
by  the  holder  of  the  shares  in  person  or  by  his  lawfully  constituted
representative,  and upon surrender of such certificate or certificates of stock
for cancellation.

                            CLOSING OF TRANSFER BOOKS

     17. The Board of Directors shall have the power to close the stock transfer
books of the  corporation  for a period not exceeding  sixty (60) days preceding
the date for any meeting of  stockholders  or for payment of any dividend or for
the  allotment of rights or when any change or conversion or exchange of capital
stock  shall go into  effect.  In lieu of so  closing  the  books,  the Board of
Directors may fix in advance a date, not exceeding sixty (60) days preceding the
abovementioned dates, as a record date for the determination of the stockholders
entitled to notice of or to vote at any such meeting,  any adjournment  thereof,
or entitled to dividends or other rights hereinbefore mentioned.
<PAGE>

     In order that the  corporation may determine the  stockholders  entitled to
consent to corporate action in writing without a meeting, the Board of Directors
may fix a record  date,  which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors,  and
which  date  shall not be more than ten (10) days  after the date upon which the
resolution  fixing the record date is adopted by the Board of Directors (or such
later date as the stockholder may request). Any stockholder of record seeking to
have the  stockholders  authorize or take  corporate  action by written  consent
shall, by written notice to the Secretary of the corporation,  request the Board
of Directors to fix a record date. The Board of Directors shall promptly, but in
all  events  within  ten (10)  days  after the date on which  such a request  is
received,  adopt a resolution fixing the record date. If no record date has been
fixed by the Board of  Directors  within  ten (10) days  after the date on which
such request is received, the record date for determining  stockholders entitled
to  consent to  corporate  action in  writing  without a meeting,  when no prior
action by the Board of Directors  is required by  applicable  law,  shall be the
first date on which a signed written  consent  setting forth the action taken or
proposed to be taken is delivered to the  Secretary  of the  corporation  at its
principal  executive  offices.  Delivery  shall  be by hand or by  certified  or
registered mail, return receipt  requested.  If no record date has been fixed by
the Board of Directors and prior action by the Board of Directors is required by
applicable law, the record date for determining stockholders entitled to consent
to  corporate  action in  writing  without  a  meeting  shall be at the close of
business  on the date on which  the Board of  Directors  adopts  the  resolution
taking such prior action.
<PAGE>

                             STOCKHOLDERS OF RECORD

     18. The corporation  shall be entitled to treat the holder of record of any
share or shares of stock as the holder in fact thereof and accordingly shall not
be bound to recognize  any equitable or other claim to or interest in such share
on the part of any other  person  whether or not it shall have  express or other
notice thereof, save as expressly provided by the laws of Delaware.

                                   FISCAL YEAR

     19.  The fiscal  year of the  corporation  shall  begin on the first day in
January in each year.

                                   DIVIDENDS

     20.  Dividends,   to  the  extent  not  restricted  by  provisions  of  the
corporation's  Certificate of Incorporation  or by subsisting  agreements of the
corporation,  may be declared  by the Board of  Directors  and paid in cash,  in
property,  or in shares of the capital  stock of the  corporation  to the extent
permitted  by law,  out of net assets in excess of its capital or out of its net
profits, provided there shall be no impairment of the capital of the corporation
represented  by its  issued  and  outstanding  stock  of all  classes  having  a
preference upon the distribution of assets.

                                BOOKS AND RECORDS

     21. The books,  accounts, and records of the corporation may be kept within
or without  the State of  Delaware,  at such place or places as may from time to
time be designated by the Bylaws or by resolution of the Directors.
<PAGE>

                                     NOTICES

     22. Notice required to be given under the provisions of these Bylaws to any
Director, officer or stockholder shall not be construed to mean personal notice,
but may be given in writing by  depositing  the same in a post  office or letter
box, in a postpaid sealed or unsealed  wrapper,  addressed to such  stockholder,
officer or Director at such address as appears on the books of the  corporation,
and such  notice  shall be deemed to be given at the time when the same shall be
thus mailed; provided, however, that any notice to Directors may also be made by
oral, telegraphic,  electronic mail or other electronic  transmission,  and such
notice  shall be deemed  to be given at the time when the same  shall be sent or
given. In computing the number of days notice required for any meeting,  the day
on which the notice shall be deposited in the mail or sent by telegraph shall be
excluded;  provided, however, that in computing the number of hours required for
any oral,  telegraphic,  electronic mail or other electronic notice to Directors
of a special meeting of Directors,  the time of delivery of such notice shall be
the time of sending or giving such notice.

                                WAIVER OF NOTICE

     23. Any  stockholder,  officer,  or Director  may waive in  writing,  or by
telegraph, any notice required to be given under these Bylaws, whether before or
after the time stated therein.
<PAGE>

                    INDEMNIFICATION OF DIRECTORS AND OFFICERS

24.  Paragraph (a). Right of  Indemnification.  The  Corporation  shall,  to the
fullest  extent  permitted by  applicable  law as then in effect,  indemnify any
person  (the  "indemnitee")  who was or is  involved  in any manner  (including,
without limitation,  as a party or a witness) or was or is threatened to be made
so  involved  in any  threatened,  pending or  completed  investigation,  claim,
action,  suit  or  proceeding,   whether  civil,   criminal   administrative  or
investigative (including,  without limitation, any action or proceeding by or in
the  right  of  the  Corporation  to  procure  a  judgement  in  its  favor)  (a
"Proceeding")  by reason of the fact that he is or was a director  or officer of
the  Corporation,  or is or was serving at the request of the  Corporation  as a
director or officer of another corporation, or of a partnership,  joint venture,
trust or other enterprise (including,  without limitation,  service with respect
to any  employee  benefit  plan),  whether the basis of any such  Proceeding  is
alleged  action in an  official  capacity as director or officer or in any other
capacity while serving as a director or officer, against all expenses, liability
and loss (including,  without  limitation,  attorneys' fees,  judgments,  fines,
ERISA excise taxes or penalties,  and amounts paid or to be paid in  settlement)
actually and reasonably incurred by him in connection with such Proceeding. Such
indemnification shall continue as to a person who has ceased to be a director or
officer and shall inure to the benefit of his heirs,  executors,  administrators
and legal representatives. The right to indemnification conferred in this By-law
shall  include  the right to receive  payment of any  expenses  incurred  by the
indemnitee  in  connection   with  such  Proceeding  in  advance  of  the  final
disposition of the Proceeding, consistent with applicable law as then in effect.
All rights to indemnification  conferred in this By-law, including rights to the
advancement of expenses and the evidentiary,  procedural and other provisions of
this By-law,  shall be contract  rights.  The Corporation  may, by action of its
Board of Directors, provide indemnification for employees, agents, attorneys and
representatives  of the Corporation  with the same, or with more or less,  scope
and extent as herein  provided for officers and  directors.  No amendment to the
Restated  Certificate  of  Incorporation  or  amendment or repeal of the By-laws
purporting to have the effect of modifying or repealing any of the provisions of
this By-law in a manner  adverse to the  indemnitee  shall  abridge or adversely
affect any right to  indemnification  or other similar  rights and benefits with
respect to any acts or omissions  occurring  prior to such  amendment or repeal.
This By-law shall be applicable to all Proceedings, whether arising from acts or
omissions  occurring  before or after the  adoption of this  Bylaw.  The phrases
"this  By-law"  and  "By-law"  shall  refer to "By-laws 24 and 24A," and for all
purposes,  except the corporate  procedure required for amendment of the By-law,
this By-law shall be considered as one By-law.
<PAGE>

     Paragraph  (b).  By-Law  Not  Exclusive.   The  right  of  indemnification,
including the right to receive payment in advance of expenses, conferred in this
By-law shall not be  exclusive  of any other rights to which any person  seeking
indemnification  may  otherwise be entitled  under any provision of the Restated
Certificate of Incorporation,  By-law,  agreement,  applicable corporate law and
statute,  vote of  disinterested  directors or  stockholders  or otherwise.  The
indemnitee is free to proceed under any of the rights or procedures available to
him.

     Paragraph  (c).  Burden  of  Proof.  In  any  determination,  review  of  a
determination, action, arbitration, or other proceeding relating to the right to
indemnification  conferred in this By-law, the Corporation shall have the burden
of proof that the indemnitee has not met any standard of conduct or belief which
may  be  required  by  applicable  law  to  be  applied  in  connection  with  a
determination  that the  indemnitee  is not entitled to  indemnity  and also the
burden of proof on any of the issues  which may be material  to a  determination
that the  indemnitee  is not entitled to  indemnification.  Neither a failure to
make  such a  determination  of  entitlement  nor an  adverse  determination  of
entitlement to indemnity  shall be a defense of the  Corporation in an action or
proceeding  brought  by the  indemnitee  or by or on behalf  of the  Corporation
relating to  indemnification  or create any presumption  that the indemnitee has
not met any such  standard of conduct or belief or is otherwise  not entitled to
indemnity.  If successful  in whole or in part in such an action or  proceeding,
the indemnitee  shall be entitled to be further  indemnified by the  Corporation
for the expenses actually and reasonably incurred by him in connection with such
action or proceeding.
<PAGE>

     Paragraph (d). Advancement of Expenses. All reasonable expenses incurred by
or on behalf of indemnitee in connection  with any Proceeding  shall be advanced
from  time to time to the  indemnitee  by the  Corporation  promptly  after  the
receipt by the  Corporation of a statement from the indemnitee  requesting  such
advance, whether prior to or after final disposition of such Proceeding.

     Paragraph  (e).  Insurance,  Contracts  and Funding.  The  Corporation  may
purchase and maintain  insurance to protect itself and any person who is, or may
become  an   officer,   director,   employee,   agent,   attorney,   trustee  or
representative   (any  of  the   foregoing   being  herein   referred  to  as  a
"Representative")  of the Corporation or, at the request of the  Corporation,  a
Representative of another corporation or entity, against any expenses, liability
or  loss  asserted  against  him  or  incurred  by him in  connection  with  any
Proceeding in any such capacity,  or arising out of his status as such,  whether
or not the  Corporation  would  have the power to  indemnify  him  against  such
expense, liability or loss under the provisions of this By-law or otherwise. The
Corporation may enter into contracts with any Representative of the Corporation,
or any person  serving as such at the  request of the  Corporation  for  another
corporation or entity,  in  furtherance  of the provisions of this By-law.  Such
contracts  shall  be  deemed   specifically   approved  and  authorized  by  the
stockholders  of the  Corporation and not subject to invalidity by reason of any
interested directors.  The Corporation may create a trust fund, grant a security
interest or use other means (including,  without limitation, a letter of credit)
to  ensure  the  payment  of  such   amounts  as  may  be  necessary  to  effect
indemnification of any person entitled thereto.
<PAGE>

     Paragraph  (f)  Severability;  Statutory  Alternative.  If any provision or
provisions of this By-law shall be held to be invalid,  illegal or unenforceable
for any reason whatsoever (i) the validity,  legality and  enforceability of all
of the  remaining  provisions of this By-law shall not in any way be affected or
impaired  thereby;  and  (ii) to the  fullest  extent  possible,  the  remaining
provisions  of this By-law shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable. In the event
that the indemnitee  elects,  as an  alternative to the procedures  specified in
this By-law, to follow one of the procedures  authorized by applicable corporate
law or  statute  to  enforce  his  right to  indemnification  and  notifies  the
Corporation of his election,  the Corporation  agrees to follow the procedure so
elected by the  indemnitee.  If in accordance with the preceding  sentence,  the
procedure  therefor   contemplated  herein  or  the  procedure  elected  by  the
indemnitee in any specific  circumstances  (or such election by the  indemnitee)
shall  be  invalid  or  ineffective  in  bringing  about  a  valid  and  binding
determination of the entitlement of the indemnitee to indemnification,  the most
nearly comparable  procedure  authorized by applicable  corporate law or statute
shall be followed by the Corporation and the indemnitee.

     Paragraph (g).  Certain  Limitations.  The corporation  shall indemnify any
indemnitee  as provided in By-laws 24 and 24A in  connection  with a  Proceeding
initiated by such indemnitee only if such Proceeding was authorized by the Board
of Directors of the corporation;  provided,  however, that the corporation shall
further  indemnify an indemnitee in connection with a Proceeding to enforce such
indemnitee's rights under By-laws 24 and 24A.

     24A. Procedures;  Presumptions and Effect of Certain Proceedings; Remedies.
In  furtherance,  but not in  limitation,  of the  foregoing  provisions of this
By-law,  the following  procedures,  presumptions  and remedies shall apply with
respect to advancement of expenses and the right to  indemnification  under this
By-law:
<PAGE>

Section 1. Advancement of Expenses. The advancement or reimbursement of expenses
to an  indemnitee  shall  be  made  within  20 days  after  the  receipt  by the
Corporation  of a request  therefor  from the  indemnitee.  Such  request  shall
reasonably  evidence  the  expenses  incurred  or  about to be  incurred  by the
indemnitee and, if required by law at the time of such advance, shall include or
be  accompanied by an undertaking by or on behalf of the indemnitee to repay the
amounts  advanced if it should  ultimately be determined  that the indemnitee is
not entitled to be indemnified against such expenses.

     Section 2. Procedure for Determination of Entitlement to Indemnification.

     Section  2.l.  To  obtain  indemnification  (except  with  respect  to  the
advancement  of  expenses),  an indemnitee  shall submit to the Chief  Executive
Officer or  Secretary  of the  Corporation  a written  request,  including  such
documentation  and information as is reasonably  available to the indemnitee and
reasonably  necessary to determine  whether and to what extent the indemnitee is
entitled to indemnification (the "Supporting  Documentation").  The Secretary of
the Corporation shall promptly advise the Board of Directors in writing that the
indemnitee has requested indemnification.  The determination of the indemnitee's
entitlement  to  indemnification  shall be made  not  later  than 60 days  after
receipt by the Corporation of the written request and Supporting Documentation.

     Section 2.2.  The  indemnitee's  entitlement  to  indemnification  shall be
determined  in  one  of the  following  ways:  (a)  by a  majority  vote  of the
Disinterested  Directors  (as  hereinafter  defined)  (which term shall mean the
Disinterested  Director,  if there is only one); (b) by a written opinion of the
Independent  Counsel  (as  hereinafter   defined)  if  (i)  a  majority  of  the
Disinterested  Directors so directs; (ii) there is no Disinterested Director, or
(iii) a Change of Control (as  hereinafter  defined) shall have occurred and the
indemnitee so requests in which case the Disinterested Directors shall be deemed
to have so directed;  (c) by the  stockholders of the Corporation (but only if a
majority of the Disinterested Directors determines that the issue of entitlement
to   indemnification   should  be  submitted  to  the   stockholders  for  their
determination); or (d) as provided in Section 3 of this By-law.
<PAGE>

Section 2.3. In the event the determination of entitlement to indemnification is
to be made by  Independent  Counsel  pursuant to Section 2.2 of this  By-law,  a
majority of the  Disinterested  Directors shall select the Independent  Counsel,
but only an  Independent  Counsel to which the  indemnitee  does not  reasonably
object; provided,  however, that if a Change of Control shall have occurred, the
indemnitee  shall  select  such  Independent  Counsel,  but only an  Independent
Counsel to which the Board of Directors does not reasonably object.
<PAGE>

Section 3. Presumptions and Effect of Certain  Proceedings.  Except as otherwise
expressly  provided  in this  By-law,  the  indemnitee  shall be  presumed to be
entitled to  indemnification  upon  submission of a request for  indemnification
together with the Supporting Documentation,  and thereafter in any determination
or  review  of  any  determination,  and  in  any  arbitration,   proceeding  or
adjudication  the  Corporation  shall have the burden of proof to overcome  that
presumption in reaching a contrary determination. In any event, if the person or
persons  empowered under Section 2.2 of this By-law to determine  entitlement to
indemnification  shall  not  have  been  appointed  or  shall  not  have  made a
determination  within 60 days after  receipt by the  Corporation  of the request
therefor  together with the Supporting  Documentation,  the indemnitee  shall be
deemed to be entitled to  indemnification.  In either case, the indemnitee shall
be entitled to such indemnification, unless (a) the indemnitee misrepresented or
failed to disclose a material fact in making the request for  indemnification or
in the Supporting  Documentation  or (b) such  indemnification  is prohibited by
law,  in  either  case  as  finally   determined  by  adjudication  or,  at  the
indemnitee's sole option, arbitration (as provided in Section 4 of this By-law).
The termination of any Proceeding,  or of any claim, issue or matter therein, by
judgment,  order, settlement or conviction, or upon a plea of nolo contenders or
its  equivalent,  shall  not,  of  itself,  adversely  affect  the  right of the
indemnitee  to  indemnification  or create any  presumption  with respect to any
standard of conduct or belief or any other matter which might form a basis for a
determination  that the  indemnitee  is not  entitled to  indemnification.  With
regard to the right to  indemnification  for expenses,  (a) if and to the extent
that the  indemnitee  has been  successful  on the  merits or  otherwise  in any
Proceeding,  or (b) if a Proceeding was terminated  without a  determination  of
liability  on the part of the  indemnitee  with  respect to any claim,  issue or
matter therein or without any payments in settlement or compromise being made by
the indemnitee with respect to a claim,  issue or matter therein,  or (c) if and
to the  extent  that  the  indemnitee  was not a party  to the  Proceeding,  the
indemnitee shall be deemed to be entitled to indemnification,  which entitlement
shall not be  defeated  or  diminished  by any  determination  which may be made
pursuant to clauses  (a), (b) or (c) of Section  2.2.  The  indemnitee  shall be
presumptively  entitled to indemnification in all respects for any act, omission
or conduct  taken or occurring  which  (whether by condition  or  otherwise)  is
required,  authorized  or  approved by any order  issued or other  action by any
commission or governmental body pursuant to any federal statute or state statute
regulating the Corporation or any of its subsidiaries by reason of its status as
a  public  utility  or  public  utility  holding  company  or by  reason  of its
activities as such.  To the extent  permitted by law, the  presumption  shall be
conclusive  on all parties  with  respect to acts,  omissions  or conduct of the
indemnitee if he acted in good faith and in a manner he  reasonably  believed to
be in or not opposed to the best interests of the Corporation or its subsidiary.
No presumption  adverse to an indemnitee shall be drawn with respect to any act,
omission or conduct of the  indemnitee if he acted in good faith and in a manner
he  reasonably  believed  to be in or not opposed to the best  interests  of the
Corporation  or its  subsidiary  taken  or  occurring  in  the  absence  of,  or
inconsistent  with, any order issued or action by any commission or governmental
body.
<PAGE>

     Section 4. Remedies of Indemnitee.

Section 4.1. In the event that a determination  is made pursuant to Section 2 of
this By-law that the  indemnitee is not entitled to  indemnification  under this
By-law,  (a) the  indemnitee  shall be entitled to seek an  adjudication  of his
entitlement to such indemnification  either, at the indemnitee's sole option, in
(i) an  appropriate  court  of the  State  of  Delaware  or any  other  court of
competent jurisdiction or (ii) to the extent consistent with law, arbitration to
be  conducted  by three  arbitrators  (or,  if the  dispute  involves  less than
$100,000,  by a  single  arbitrator)  pursuant  to the  rules  of  the  American
Arbitration  Association;  (b) any such judicial Proceeding or arbitration shall
be de novo and the indemnitee  shall not be prejudiced by reason of such adverse
determination;  and (c) in any  such  judicial  Proceeding  or  arbitration  the
Corporation  shall have the burden of proof that the  indemnitee is not entitled
to indemnification under this By-law.

Section 4.2. If a determination shall have been made or deemed to have been
made, pursuant to Sections 2 or 3 of this By-law, that the indemnitee is
entitled to indemnification, the Corporation shall be obligated to pay the
amounts constituting such indemnification within five days after such
determination has been made or deemed to have been made and shall be
conclusively bound by such determination, unless (a) the indemnitee
misrepresented or failed to disclose a material fact in making the request for
indemnification or in the Supporting Documentation or (b) such indemnification
is prohibited by law, in either case as finally determined by adjudication or,
at the indemnitee's sole option, arbitration (as provided in Section 4.1 of this
By-law). In the event that (i) advancement of expenses is not timely made by the
Corporation pursuant to this By-law or (ii) payment of indemnification is not
made within five days after a determination of entitlement to indemnification
has been made or deemed to have been made pursuant to Section 2 or 3 of this
By-law, the indemnitee shall be entitled to seek judicial enforcement of the
Corporation's obligations to pay to the indemnitee such advancement of expense
of indemnification. Notwithstanding the foregoing, the Corporation may bring an
action, in an appropriate court in the State of Delaware or any other court of
competent jurisdiction, contesting the right of the indemnitee to receive
indemnification hereunder due to the occurrence of a circumstance described in
subclause (a) of this Section 4.2 or a prohibition of law (both of which are
herein referred to as a "Disqualifying Circumstance"). In either instance, if
the indemnitee shall elect, at his sole option, that such dispute shall be
determined by arbitration (as provided in Section 4.1 of this By-law), the
indemnitee and the Corporation shall submit the controversy to arbitration. In
any such enforcement action or other proceeding whether brought by the
indemnitee or the Corporation, indemnitee shall be entitled to indemnification
unless the Corporation can satisfy the burden or proof that indemnification is
prohibited by reason of a Disqualifying Circumstance.
<PAGE>

     Section  4.3. The  Corporation  shall be  precluded  from  asserting in any
judicial Proceeding or arbitration commenced pursuant to this Section 4 that the
procedures  and  presumptions  of  this  By-law  are  not  valid,   binding  and
enforceable  and shall stipulate in any such court or before any such arbitrator
or  arbitrators  that the  Corporation  is bound by all the  provisions  of this
By-law.

     Section  4.4. In the event that the  indemnitee,  pursuant to this  By-law,
seeks a judicial  adjudication  of or an award in  arbitration  to  enforce  his
rights under, or to recover damages for breach of, this By-law,  or is otherwise
involved  in any  adjudication  or  arbitration  with  respect  to his  right to
indemnification,   the  indemnitee   shall  be  entitled  to  recover  from  the
Corporation,  and shall be indemnified by the Corporation  against, any expenses
actually  and  reasonably  incurred  by him if the  indemnitee  prevails in such
judicial adjudication or arbitration. If it shall be determined in such judicial
adjudication or arbitration  that the indemnitee is entitled to receive part but
not all of the  indemnification  or advancement of expenses sought, the expenses
incurred by the  indemnitee in connection  with such  judicial  adjudication  or
arbitration shall be prorated accordingly.

     Section 5. Definitions.  For purposes of indemnification  under this By-law
or otherwise.  Section 5.1. "Change in Control" means a change in control of the
Corporation  of a nature  that would be  required  to be reported in response to
Schedule 14A of Regulation 14A promulgated under the Securities  Exchange Act of
1934  (the  "Act"),  whether  or not the  Corporation  is then  subject  to such
reporting  requirement;  provided  that,  without  limitation,  such a change in
control  shall be deemed to have  occurred if (a) any  "person" (as such term is
used in  Sections  13(d) and  14(d) of the Act) is or  becomes  the  "beneficial
owner" (as defined in Rule 13d-3  under the Act),  directly  or  indirectly,  of
securities of the  Corporation  representing  20 percent or more of the combined
voting power of the Corporation's then outstanding  securities without the prior
approval  of at least  two-thirds  of the members of the Board of  Directors  in
office immediately prior to such acquisition;  (b) the Corporation is a party to
a merger,  consolidation,  sale of assets  or other  reorganization,  or a proxy
contest, as a consequence of which,  members of the Board of Directors in office
immediately  prior to such  transaction or event constitute less than a majority
of  the  Board  of  Directors  thereafter;  or  (c)  during  any  period  of two
consecutive  years,  individuals who at the beginning of such period constituted
the Board of  Directors  (including  for this  purpose  any new  Director  whose
election or  nomination  for  election  by the  Corporation's  stockholders  was
approved by a vote of at least  two-thirds of the Directors then still in office
who were  Directors at the  beginning  of such  period)  cease for any reason to
constitute at least a majority of the Board of Directors.
<PAGE>

     Section 5.2.  "Disinterested  Director" means a Director of the Corporation
who is not or was not a  material  party to the  Proceeding  in respect of which
indemnification is sought by the indemnitee.

Section 5.3.  "Independent  Counsel"  means a law firm or a member of a law firm
that  neither  presently  is, nor in the past five years has been,  retained  to
represent (a) the  Corporation  or the indemnitee in any manner or (b) any other
party to the Proceeding  giving rise to a claim for  indemnification  under this
By-law.  Notwithstanding the foregoing, the term "Independent Counsel" shall not
include any person who, under the applicable  standards of professional  conduct
then prevailing under the law of the State of Delaware, would have a conflict of
interest in  representing  either the Corporation or the indemnitee in an action
to determine the indemnitee's rights under this By-law.

     Section  6.  Acts  of  Disinterested  Directors.   Disinterested  Directors
considering or acting on any  indemnification  matter under this By-law or under
governing corporate law or otherwise may consider or take action as the Board of
Directors  or may  consider  or take action as a committee  or  individually  or
otherwise.  In the event that Disinterested Directors consider or take action as
the Board of  Directors,  one-third  of the total  number of Directors in office
shall constitute a quorum.
<PAGE>

                              AMENDMENTS OF BYLAWS

     25.  These  By-laws  may be amended or altered by the vote of a majority of
the  whole  Board of  Directors  at any  meeting  provided  that  notice of such
proposed amendment shall have been given in the notice given to the Directors of
such meeting.  Such  authority in the Board of Directors is subject to the power
of the  stockholders  to change or repeal any By-laws by a majority  vote of the
stockholders  present and  represented  at any annual  meeting or at any special
meeting called for such purpose,  and the Board of Directors shall not repeal or
alter any By-laws, other than By-law 24A, adopted by the stockholders.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.16
<SEQUENCE>3
<FILENAME>wilderotteragreemt.txt
<DESCRIPTION>WILDEROTTER AGREEMENT
<TEXT>
                                                        Exhibit 10.16


                              EMPLOYMENT AGREEMENT
                               Mary A. Wilderotter


     This EMPLOYMENT AGREEMENT (the "Agreement") is dated as of November 1, 2004
(the  "Effective  Date") by and between  Citizens  Communications  Company  (the
"Company") and Mary A. Wilderotter ("Executive").

     WHEREAS,  Executive  is not  currently  employed  with  the  Company  as an
executive  officer and is leaving her current employer (the "Prior Employer") to
start work at the Company; and

     WHEREAS,  as of the Effective  Date,  the Company  desires to enter into an
agreement  with  Executive  embodying the terms of  Executive's  employment  and
pursuant to which Executive will serve as President and Chief Executive Officer,
and Executive desires to enter into such an agreement.

     NOW,  THEREFORE,  in  consideration  of the premises  and mutual  covenants
herein and for other  good and  valuable  consideration,  the  parties  agree as
follows:

     1. Term of  Employment.  Subject  to the  provisions  of  Section 8 of this
Agreement,  Executive  shall  be  employed  by  the  Company,  and  any  of  its
subsidiaries  that the Board of  Directors of the Company  (the  "Board")  shall
designate for a period  commencing on the Effective Date and ending on the fifth
anniversary  thereof  (the  "Initial  Term"),  on the terms and  subject  to the
conditions  set  forth  in this  Agreement.  Following  the  Initial  Term,  the
Agreement  shall  automatically  be renewed for additional  terms of one year on
each  anniversary  of the last day of the Initial Term (the Initial Term and any
annual  extensions  of the term of this  Agreement,  together,  the  "Employment
Term"),  subject  to  Section 8 of this  Agreement,  unless  the  Company or the
Executive  gives the other party written  notice of  non-renewal at least ninety
(90) days prior to such  anniversary.  A written notice of non-renewal  given by
the  Company  to the  Executive  shall be  considered  a Notice  of  Termination
(pursuant to Section 8(e) of this  Agreement) of a termination  without Cause by
the Company and shall constitute a termination  without Cause under Section 8(c)
of this  Agreement at the  expiration of such  Employment  Term for all purposes
hereunder.

     2. Position.

     a. During the Employment Term, Executive shall serve as President and Chief
Executive Officer of the Company and shall report directly to the Board. In such
position,  Executive shall have such duties and authority  commensurate with the
position of chief executive  officer of a company of similar size and nature. As
soon as practicable after the Effective Date, Executive shall become a member of
the Board.
<PAGE>

     b. During the  Employment  Term,  Executive  will devote  Executive's  full
business time and best efforts (excluding any periods of vacation or sick leave)
to the  performance of Executive's  duties  hereunder and will not engage in any
other  business,  profession or occupation for  compensation  or otherwise which
would conflict or interfere with the rendition of such services  either directly
or  indirectly,  without the prior written  consent of the Board;  provided that
nothing  herein shall preclude  Executive,  (i) subject to the prior approval of
the Board,  from  accepting  appointment to or continue to serve on any board of
directors  or  trustees  of  any   business   corporation   or  any   charitable
organization, (ii) making personal or family investments;  provided, however, in
each case  under  this  Section 2 (b)(i)  or (ii) that such  activities,  in the
aggregate,  do not conflict or interfere  with the  performance  of  Executive's
duties hereunder or conflict with Section 10 of this Agreement.

     3. Base Salary. During the Employment Term, the Company shall pay Executive
a base  salary at the annual  rate of  $700,000,  payable  by  payroll  check in
substantially equal periodic payments in accordance with the Company's practices
for other executive employees,  as such practices may be determined from time to
time.  Executive shall be entitled to such increases in Executive's base salary,
if any, as may be  determined  from time to time in the sole  discretion  of the
Board.  Executive's  annual  base  salary,  as in effect  from time to time,  is
hereinafter referred to as the "Base Salary."

     4. Annual Bonus. During the Employment Term, Executive shall be eligible to
earn an annual cash bonus award (an "Annual  Bonus"),  payable by payroll check,
with a  target  bonus  amount  equal  to 100% of the Base  Salary  (the  "Target
Bonus"),  with  adjustments  based on the  schedules  set forth in the  Citizens
Incentive  Plan, as amended from time to time, but the  adjustments  shall in no
event be less  favorable to Executive  than those set forth in such Plan for the
2004 calendar year; provided,  however,  that in no event shall the Annual Bonus
in respect of the 2004 calendar year be less than $700,000.

     5. Long-Term  Incentive.  As soon as practicable  after the Effective Date,
Executive shall upon commencement of her employment  hereunder,  receive a grant
of 150,000  restricted  shares of Common Stock (with the other grants hereunder,
the "Restricted Shares"). With respect to each fiscal year during the Employment
Term  after  2004,  the  Company  shall  grant no later  than each  March of the
following year (commencing with March, 2006) to Executive a number of Restricted
Shares  with an  aggregate  value on the  date of each  grant  equal to  between
$1,000,000 and $2,000,000,  as determined by the  Compensation  Committee of the
Board (the "Compensation Committee"). Subject to Section 8(b)(ii)(D) and Section
8(c)(iii)(D),  below,  each annual  grant of  Restricted  Shares  shall vest and
become  non-forfeitable  as to  twenty  (20)  percent  of the  shares  initially
granted,  on each anniversary of the date of grant and shall be fully vested and
100  percent  non-forfeitable  upon the fifth  anniversary  of the date of grant
provided,  however,  that  Executive  shall be  entitled to  participate  in any
program the Company  maintains to allow  employees to use vested  shares for the
payment of applicable taxes at the time of such vesting.

     6. Employee Benefits; Business Expenses.

     a.  Employee  Benefits.  During the  Employment  Term,  Executive  (and her
eligible  dependents) shall be entitled to participate in the Company's pension,
profit sharing, medical, dental, life insurance and other employee benefit plans
(other than severance  plans) (the "Company  Plans"),  as in effect from time to
time (collectively the "Employee  Benefits") on the same basis as those benefits
are generally  made  available to other senior  executives of the Company,  at a
level of participation commensurate with her position.

                                       2
<PAGE>

     b. Business Expenses and Perquisites.

     (i) Expenses.  During the Employment  Term,  reasonable  business  expenses
incurred by Executive in the performance of Executive's  duties  hereunder shall
be reimbursed by the Company in accordance with the Company's policies.

     (ii) Perquisites.  During the Employment Term,  Executive shall be entitled
to receive such  perquisites  as are  generally  made  available to other senior
executives of the Company at a level that is commensurate with her position.

     7. Relocation  Period.  During the period  commencing on the Effective Date
and  ending  no later  than  the  first  anniversary  thereof  (the  "Relocation
Period"),  Executive  is  expected  to arrange  relocation  from  California  to
Connecticut  on a permanent  basis for her, her spouse and her  dependents.  The
Company shall,  during the Relocation Period, pay or reimburse Executive for all
reasonable expenses incurred for temporary housing, local ground transportation,
travel to and from  California for her, her spouse and her  dependents,  closing
costs and moving  expenses in connection with the purchase and sale of permanent
housing and other costs and expenses during the Relocation Period related to her
maintaining a residence  separate from her family and relocating to Connecticut;
provided,  however,  that no later than November 1, 2005,  Executive  shall have
relocated to Connecticut and no further payments for expenses under this Section
7 that are incurred after the end of the Relocation Period shall be borne by the
Company.  The Company shall pay or reimburse  Executive under this Section 7 for
all costs and expenses  incurred  during the  Relocation  Period in an aggregate
amount up to $500,000.

     8.  Termination.  Executive's  employment  hereunder  may be  terminated by
either party at any time and for any reason;  provided  that  Executive  will be
required  to give the  Company at least 60 days  advance  written  notice of any
resignation of Executive's  employment (30 days if such resignation is for "Good
Reason" (as hereinafter  defined)).  Notwithstanding any other provision of this
Agreement, the provisions of this Section 8 shall exclusively govern Executive's
rights upon termination of employment with the Company.

     a. By the  Company  For  Cause or By  Executive  Resignation  Without  Good
        Reason.

     (i)  The  Employment  Term  and  Executive's  employment  hereunder  may be
terminated  by the  Company  for Cause (as  defined  below) and shall  terminate
automatically upon Executive's  resignation  without Good Reason;  provided that
Executive will be required to give the Company at least 60 days advance  written
notice of such  resignation.  For  purposes  of this  Agreement,  a  failure  by
Executive to have effected a relocation to Connecticut, reasonably acceptable to
the Board before November 1, 2005,  shall be deemed to be a resignation  without
Good Reason by Executive for all purposes hereunder, effective as of November 1,
2005;  provided,  however, if the Board does not accept that such relocation has
occurred  before  November 1, 2005,  Executive  shall be given written notice of
that fact by the Board as soon as reasonably practicable upon such determination
and the  resolution of such issue shall be dealt with using the same  procedures
as would be used in the last two sentences of Section 8(a)(ii).

                                       3
<PAGE>

     (ii) For purposes of this  Agreement,  "Cause" shall mean  Executive's  (A)
willful  and  continued  failure  (other  than as a result of physical or mental
illness or injury) to perform her material  duties  (provided such duties are as
described  in Section  2) to the  Company or its  subsidiaries  which  continues
beyond 10 days after a written demand for  substantial  performance is delivered
to Executive by the Company (the "Cure Period"), which demand shall identify and
describe such failure with sufficient specificity to allow Executive to respond;
(B) willful or intentional conduct that causes material and demonstrable injury,
monetarily or otherwise,  to the Company;  (C)  conviction of, or a plea of nolo
contendere  to, a crime  constituting  (x) a felony under the laws of the United
States or any state thereof or (y) a misdemeanor  involving moral turpitude;  or
(D)  material  breach of a  material  provision  of this  Agreement,  including,
without limitation,  engaging in any action in breach of Section 9 or Section 10
of this Agreement,  which continues  beyond the Cure Period (to the extent that,
in the Board's reasonable  judgment,  such breach can be cured). For purposes of
this Section 8(a)(ii), no act, or failure to act, on the part of Executive shall
be  considered  "willful" or  "intentional"  unless it is done, or omitted to be
done, by Executive in bad faith and without  reasonable  belief that Executive's
action or inaction was in the best interests of the Company. Any act, or failure
to act, based upon authority  given pursuant to a resolution duly adopted by the
Board or based upon the advice of counsel for the Company shall be  conclusively
presumed to be done,  or omitted to be done,  by  Executive in good faith and in
the best interests of the Company.  Any determination that Executive has engaged
in conduct for which the Board wishes to terminate Executive's  employment shall
be made  after a  meeting  of the  nonemployee  directors  of the Board at which
Executive  shall  be  invited  to  appear,  with  counsel,  to  respond  to  the
allegations  set forth in the written  notice to the  Executive  of such meeting
(which notice shall provide sufficient specificity to allow Executive to respond
to such  allegations).  The  Board  may  terminate  the  Executive  for  "Cause"
hereunder  following such meeting only upon the affirmative  vote of at least 60
percent of the nonemployee directors.

     (iii) If Executive's  employment is terminated by the Company for Cause, or
if  Executive  resigns  without  Good  Reason,  Executive  shall be  entitled to
receive:

          (A) the Base Salary through the date of termination;

          (B) any Annual Bonus  earned but unpaid as of the date of  termination
     for any previously completed fiscal year;

          (C)  reimbursement  for any unreimbursed  business  expenses  properly
     incurred by Executive in accordance  with Company  policy prior to the date
     of Executive's termination;

          (D) any accrued but unpaid vacation; and

          (E) such Employee Benefits, if any, to which Executive may be entitled
     under  the  applicable  Company  Plans  or  hereunder  (including,  without
     limitation,  if  applicable,  any  Restricted  Shares) upon  termination of
     employment  hereunder,  (the  payments and benefits  described  clauses (A)
     through  (E)  hereof  being  referred  to,  collectively,  as the  "Accrued
     Rights").

                                       4
<PAGE>

Following such termination of Executive's employment by the Company for Cause or
resignation  by  Executive,  except as set forth in this Section  8(a)(iii)  and
Section 8(g),  Executive shall have no further rights to any compensation or any
other benefits under this Agreement.

          b. Disability or Death.

          (i) Executive's  employment hereunder shall terminate upon Executive's
     death and may be terminated by the Company if Executive becomes  physically
     or mentally  incapacitated  and is therefore unable for a period of six (6)
     consecutive  months or for an  aggregate  of nine (9)  months in any twelve
     (12)  consecutive  month  period  to  perform   Executive's   duties  (such
     incapacity is hereinafter referred to as "Disability").  Any question as to
     the existence of the Disability of Executive as to which  Executive and the
     Company  cannot  agree  shall  be  determined  in  writing  by a  qualified
     independent  physician mutually acceptable to Executive and the Company. If
     Executive  and the  Company  cannot  agree  as to a  qualified  independent
     physician,  each shall  appoint such a physician  and those two  physicians
     shall  select a third who shall make such  determination  in  writing.  The
     determination  of  Disability  made in writing to the Company and Executive
     shall be final and conclusive for all purposes of the Agreement.

          (ii) Upon termination of Executive's  employment  hereunder for either
     Disability or death,  Executive or Executive's estate (as the case may be),
     shall be entitled to receive:

               (A) the Accrued Rights;

               (B)  continued  payment of  Executive's  Base  Salary  during the
          period  commencing on the termination date and ending on the date that
          is six months after the termination date;

               (C) a pro  rata  portion  of  the  Annual  Bonus,  if  any,  that
          Executive would have been entitled to receive pursuant to the Citizens
          Incentive Plan in the year of termination, based on actual performance
          through the date of termination; and

               (D) all  Restricted  Shares that have been granted as of the date
          of termination  shall be fully vested and  non-forfeitable  as of such
          date,  all other  restricted  shares and options  granted to Executive
          that  are  not  vested  as  of  such  date  shall  become  vested  and
          non-forfeitable  or, in the case of options,  fully  exercisable,  and
          Executive  shall  not be  entitled  to any  further  annual  grants of
          Restricted Shares under Section 5 of this Agreement.

     (iii)  Upon  termination  of  Executive's   employment   hereunder  due  to
Executive's  death or  Disability,  in addition  to the  benefits  described  in
Section 8(b)(ii) above, the Company shall provide Executive (in the event of her
Disability)  and  Executive's  spouse with medical,  dental,  life insurance and
other health  benefits  (pursuant  to the same  Company  Plans that are medical,
dental, life insurance and other health benefit plans and that are in effect for
active  employees of the  Company),  at the sole cost of the Company,  until the
second anniversary of the date of Executive's death or Disability.

                                       5
<PAGE>

Following  Executive's  termination  of employment  due to death or  Disability,
except as set forth in this Section 8(b) and Section 8(g),  Executive shall have
no  further  rights  to  any  compensation  or any  other  benefits  under  this
Agreement.

     c. By the  Company  Without  Cause  or by  Executive  Resignation  for Good
        Reason.

     (i) Executive's  employment  hereunder may be terminated (A) by the Company
without Cause (which shall not include Executive's termination of employment due
to her death or  Disability)  or (B) by  Executive  for Good  Reason (as defined
below).

     (ii) For  purposes  of this  Agreement,  "Good  Reason"  shall mean (A) the
failure of the  Company to pay or cause to be paid  Executive's  Base  Salary or
Annual  Bonus,  or grant  the  Restricted  Shares  when due  hereunder,  (B) any
substantial  and  continuing  diminution in Executive's  position,  authority or
responsibilities from those described in Section 2 hereof, (C) any relocation of
Executive's  principal  office  location  more  than  25  miles  outside  of the
Stamford,  Connecticut  metropolitan area, or (D) any other material breach of a
material provision of this Agreement;  provided that any of the events described
in clauses (A), (B), (C) or (D) of this Section  8(c)(ii) shall  constitute Good
Reason only if the Company fails to cure such event within 10 days after receipt
from  Executive  of written  notice of the event which  constitutes  Good Reason
(with  sufficient  specificity from Executive for the Company to respond to such
claim).

     (iii) If Executive's  employment is terminated by the Company without Cause
(other than by reason of death or  Disability)  or by Executive for Good Reason,
subject  to  Executive's  execution  of a release  of all then  existing  claims
against the Company and its subsidiaries,  affiliates,  shareholders,  officers,
directors, employees and agents, Executive shall be entitled to receive:

          (A) the Accrued Rights;

          (B) subject to Executive's continued compliance with the provisions of
     Section 9 and Section 10 of this Agreement,  an amount equal to the greater
     of (i) three times the sum of the Base Salary and Target Bonus,  payable in
     equal  installments over the thirty-six (36) month period commencing on the
     date of termination,  and (ii) continued payment, during the balance of the
     Initial  Term, of the Base Salary and Target Bonus (the  applicable  period
     referenced  in clause  (i) and (ii)  hereof  shall be  referred  to in this
     Agreement as the "Severance Period"); provided, however, that the aggregate
     amount described in this subsection (B) shall be reduced by any amounts due
     and owing by Executive to the Company for funds  borrowed  from or advanced
     by the Company (to the extent permitted under applicable law);

          (C) continuation of medical,  dental,  life insurance and other health
     benefits (pursuant to the same Company Plans that are medical, dental, life
     insurance and other health  benefit plans and that are in effect for active
     employees  of the  Company)  until the  earlier  to occur of the end of the
     Severance  Period  and the  date on which  Executive  becomes  eligible  to
     receive comparable benefits from any subsequent employer; and

                                       6
<PAGE>

          (D) all Restricted  Shares shall be vested and  non-forfeitable  as of
     the date of termination, all other restricted shares and options granted to
     Executive  that are not  vested as of such date  shall  become  vested  and
     nonforfeitable or, in the case of options,  fully exercisable and Executive
     shall not be entitled to any further  annual  grants of  Restricted  Shares
     under Section 5 of this Agreement.

Following  Executive's  termination  of employment by the Company  without Cause
(other than by reason of Executive's  death or Disability) or Executive for Good
Reason,  except  as set  forth  in this  Section  8(c)(iii)  and  Section  8(g),
Executive shall have no further rights to any compensation or any other benefits
under this Agreement.

          d. Change in Control.

     (i)  Executive  shall also be entitled to the benefits set forth in Section
8(c)(iii)  above if,  within one year  following  a Change in  Control  (defined
below),  Executive terminates her employment as a result of: (i) any decrease by
the Company of the Base Salary or Target Bonus; (ii) any decrease in Executive's
pension  benefit  opportunities  or any  material  diminution  in the  aggregate
employee  benefits;  or (iii) any  material  diminution  in  Executive's  title,
reporting  relationships,  duties or  responsibilities  (each,  a  "Constructive
Termination Event"); provided that either of the events described in clauses (i)
and (ii) of this Section 8(d) shall constitute a Constructive  Termination Event
only if the Company  fails to cure such event within 10 days after  receipt from
Executive  of  written  notice of the event  which  constitutes  a  Constructive
Termination Event.

     (ii) For purposes of this Agreement,  a "Change in Control" shall be deemed
to have occurred:

          (A) When any "person" as defined in Section  3(a)(9) of the Securities
     Exchange  Act of 1934,  as amended  (the  "Exchange  Act"),  and as used in
     Section 13(d) and 14(d) thereof,  including a "group" as defined in Section
     13(d) of the Exchange Act (but excluding the Company and any subsidiary and
     any employee  benefit plan  sponsored or  maintained  by the Company or any
     subsidiary  (including  any  trustee  of such  plan  acting  as  trustee)),
     directly or indirectly,  becomes the "beneficial owner" (as defined in Rule
     13d-3 under the Exchange  Act), of  securities of the Company  representing
     50% or more of the combined voting power of the Company's then  outstanding
     securities; or

          (B) Upon the consummation of any merger or other business  combination
     involving the Company, a sale of substantially all of the Company's assets,
     liquidation or dissolution of the Company or a combination of the foregoing
     transactions  (the  "Transactions")  other than a  Transaction  immediately
     following which the  shareholders of the Company  immediately  prior to the
     Transaction own, in the same proportion,  at least 51% of the voting power,
     directly or indirectly, of (i) the surviving corporation in any such merger
     or other  business  combination;  (ii) the purchaser of or successor to the
     Company's assets; (iii) both the surviving corporation and the purchaser in
     the event of any  combination of  Transactions;  or (iv) the parent company
     owning 100% of such surviving corporation,  purchaser or both the surviving
     corporation and the purchaser, as the case may be.

                                       7
<PAGE>

     (iii) Excess Parachute Payments.

          (A) If it is determined  (as hereafter  provided)  that any payment or
     distribution  by the  Company to or for the benefit of  Executive,  whether
     paid or payable or  distributed or  distributable  pursuant to the terms of
     this  Agreement  or  otherwise  pursuant  to  or by  reason  of  any  other
     agreement,   policy,  plan,  program  or  arrangement,   including  without
     limitation any stock option,  restricted  stock award,  stock  appreciation
     right or similar right,  or the lapse or termination of any  restriction on
     or the vesting or  exercisability  of any of the  foregoing  (a  "Severance
     Payment"),  would be subject to the excise tax  imposed by Section  4999 of
     the  Internal  Revenue  Code of  1986,  as  amended  (the  "Code")  (or any
     successor  provision thereto) by reason of being "contingent on a change in
     ownership or control" of the Company, within the meaning of Section 280G of
     the Code (or any successor provision thereto) or to any similar tax imposed
     by state or local law, or any  interest or  penalties  with respect to such
     excise  tax  (such  tax or  taxes,  together  with  any such  interest  and
     penalties,  are hereafter  collectively  referred to as the "Excise  Tax"),
     then  Executive  shall  receive the greater of (x) the  Severance  Payment,
     after  payment by  Executive  of the Excise  Tax  imposed on the  Severance
     Payment and (y) the amount of the Severance  Payment  (calculated  on a net
     after-tax basis) which could be paid to Executive under Section 280G of the
     Code  without  causing  any loss of  deduction  to the  Company  under such
     Section (the "Capped Payment");  provided,  however,  that if the amount in
     subsection (x) herein exceeds the amount  determined  under  subsection (y)
     herein by at least 125% of such amount in subsection (y), the Company shall
     make an additional payment (the "Gross-Up Payment") to Executive such that,
     after payment of all Excise Taxes and any other taxes payable in respect of
     such  Gross-Up  Payment,  Executive  shall  retain the same amount as if no
     Excise Tax had been imposed.

          (B) Subject to the  provisions  of Section  8(d)(iii)(A)  hereof,  all
     determinations  required  to be made under  this  Section  8(d),  including
     whether an Excise Tax is payable by Executive and the amount of such Excise
     Tax, shall be made by the nationally  recognized  firm of certified  public
     accountants (the "Accounting Firm") used by the Company prior to the Change
     in Control (or, if such Accounting  Firm declines to serve,  the Accounting
     Firm shall be a nationally  recognized firm of certified public accountants
     selected  by  Executive).  The  Accounting  Firm shall be  directed  by the
     Company or Executive to submit its preliminary  determination  and detailed
     supporting  calculations  to both  the  Company  and  Executive  within  15
     calendar days after the date of Executive's  termination of employment,  if
     applicable,  and any other  such time or times as may be  requested  by the
     Company or Executive. If the Accounting Firm determines that any Excise Tax
     is payable by  Executive,  the Company shall either (x) make payment of the
     Severance Payment,  less all amounts withheld in respect of the Excise Tax,
     as required by applicable law, (or, if applicable the Gross-Up  Payment) or
     (y)  reduce  the  Severance  Payment  by the  amount  which,  based  on the
     Accounting Firm's  determination and calculations,  would provide Executive
     with the Capped Payment,  and pay to Executive such reduced amount.  If the
     Accounting Firm  determines that no Excise Tax is payable by Executive,  it
     shall, at the same time as it makes such  determination,  furnish Executive
     with an opinion that she has substantial authority not to report any Excise
     Tax on her federal,  state,  local income or other tax return. All fees and
     expenses of the Accounting  Firm shall be paid by the Company in connection
     with the calculations required by this section.

                                       8
<PAGE>

          (C) The federal,  state and local income or other tax returns filed by
     Executive (or any filing made by a  consolidated  tax group which  includes
     the Company)  shall be prepared  and filed on a  consistent  basis with the
     determination of the Accounting Firm with respect to the Excise Tax payable
     by  Executive.  Executive  shall make  proper  payment of the amount of any
     Excise Tax, and at the request of the Company,  provide to the Company true
     and correct  copies (with any  amendments) of her federal income tax return
     as filed with the  Internal  Revenue  Service and  corresponding  state and
     local  tax  returns,  if  relevant,  as filed  with the  applicable  taxing
     authority,  and such other documents  reasonably  requested by the Company,
     evidencing such payment.

     e. Notice of  Termination.  Any purported  termination of employment by the
Company  or by  Executive  (other  than  due  to  Executive's  death)  shall  be
communicated  by written  Notice of  Termination  to the other  party  hereto in
accordance with Section 13(h) hereof. For purposes of this Agreement,  a "Notice
of  Termination"   shall  mean  a  notice  which  shall  indicate  the  specific
termination  provision  in this  Agreement  relied  upon and  shall set forth in
reasonable  detail  the facts and  circumstances  claimed to provide a basis for
termination of employment under the provision so indicated.

     f. Board/Committee Resignation; Execution of Release of all Claims.

     (i) Upon  termination of Executive's  employment for any reason,  Executive
agrees  to  resign,  as of the  date  of  such  termination  and  to the  extent
applicable,  from  the  Board  (and any  committees  thereof)  and the  board of
directors (and any committees  thereof) of any of the Company's  subsidiaries or
affiliates.

     (ii) Upon termination of Executive's  employment for any reason,  Executive
agrees to execute a release of all then existing claims against the Company, its
subsidiaries,  affiliates,  shareholders,  directors,  officers,  employees  and
agents in relation to claims relating to or arising out of her employment or the
business of the Company; provided,  however, that any such release shall not bar
or prevent  Executive  from  responding to any  litigation  or other  proceeding
initiated by a released party and asserting any claim or counterclaim she has in
such  litigation or other  proceeding as if no such release had been given as to
such  party.  Notwithstanding  anything  set  forth  in  this  Agreement  to the
contrary,  upon termination of Executive's employment for any reason,  Executive
shall  not  receive  any  payments  or  benefits  to which  she may be  entitled
hereunder (other than those which by law cannot be subject to the execution of a
release) (A) if Executive revokes such release or (B) until eight (8) days after
the date  Executive  signs such release (or until such other date as  applicable
law may provide that Executive cannot revoke such release).

                                       9
<PAGE>

     g. Indemnification.  While employed hereunder and thereafter,  with respect
to the  period  during  which she was  employed  hereunder,  Executive  shall be
indemnified  by the  Company to the fullest  extent  permitted  by its  charter,
by-laws or the terms of any insurance or other  indemnity  policy  applicable to
officers  or  directors  of the  Company  (including  any rights to  advances or
reimbursement  of  legal  fees  thereunder).  The  Company  shall  provide  that
Executive's right to  indemnification  hereunder by the Company or any insurance
or  indemnity  policy  shall at no time be less than the right of any officer or
director of the Company,  in the same or similar  circumstances.  The  Company's
obligation  under this Section 8(g) shall survive any termination of Executive's
employment hereunder or the expiration or termination of this Agreement.

     9. Non-Competition/Non-Solicitation/Non-Disparagement.

     a. Executive  acknowledges and recognizes the highly  competitive nature of
the businesses of the Employer and its affiliates and  accordingly  agrees that,
during  the  Employment  Term  and,  for a  period  of one  year  following  any
termination  of  Executive's   employment  with  the  Company  (the  "Restricted
Period"),  Executive will not, whether on Executive's own behalf or on behalf of
or  in  conjunction  with  any  person,   firm,   partnership,   joint  venture,
association,  corporation or other business  organization,  entity or enterprise
whatsoever  ("Person"),  directly  or  indirectly  engage in any  business  that
directly or indirectly competes in any material way with the primary business of
the Company:

     (i)  During  the  Restricted   Period,   Executive  will  not,  whether  on
Executive's  own  behalf  or on  behalf of or in  conjunction  with any  Person,
directly or indirectly:

          (A) solicit or encourage any employee of the Company or its affiliates
     to leave the employment of the Company or its affiliates; or

          (B) hire any such  employee  who was  employed  by the  Company or its
     affiliates as of the date of Executive's termination of employment with the
     Company  or who  left  the  employment  of the  Company  or its  affiliates
     coincident  with, or within one year prior to or after,  the termination of
     Executive's employment with the Company.

     b.  Executive  shall not at any time  issue any press  release  or make any
public  statement  about  the  Company  or  any  director,   officer,  employee,
successor,  parent, subsidiary or agent or representative of, or attorney to the
Company (any of the foregoing,  a "Company Affiliate")  regarding (i) any of the
foregoing's financial status, business,  services,  business methods, compliance
with  laws,  or  ethics  or  otherwise,  or (ii)  regarding  Company  personnel,
directors,   officers,   employees,   attorneys,   agents,  including,   without
limitation,  in respect of both  clauses  (i) and (ii),  any  statement  that is
intended or reasonably likely to disparage the Company or any Company Affiliate,
or  otherwise  degrade  any  Company  Affiliate's  reputation  in the  business,
industry or legal  community in which any such Company  Affiliate  operates and,
the  Company  shall not at any time  issue any press  release or make any public
statement about Executive or her spouse that is intended or reasonably likely to
disparage Executive's reputation in the business, industry or legal community or
otherwise  degrade  her  or his  reputation  or  standing  in  their  community;
provided,  that,  Executive  and the Company  shall be permitted to (a) make any
statement that is required by applicable securities or other laws to be included
in a filing  or  disclosure  document,  subject  to prior  notice  to the  other
thereof,  and (b) defend  herself or itself  against any  statement  made by the
other  party  (including  those made by any Company  Affiliate  or by any person
affiliated  with the  Executive  or her spouse)  that is intended or  reasonably
likely to disparage or otherwise degrade that party's reputation,  only if there
is a reasonable  belief that the  statements  made in such defense are not false
statements and (c) provide truthful testimony in any legal proceeding.

                                       10
<PAGE>

     c. It is expressly  understood  and agreed that although  Executive and the
Company consider the restrictions  contained in this Section 9 to be reasonable,
if a final judicial  determination is made by a court of competent  jurisdiction
that the time or territory or any other restriction  contained in this Agreement
is an  unenforceable  restriction  against  Executive,  the  provisions  of this
Agreement  shall not be rendered void but shall be deemed amended to apply as to
such maximum  time and  territory  and to such maximum  extent as such court may
judicially determine or indicate to be enforceable.  Alternatively, if any court
of competent jurisdiction finds that any restriction contained in this Agreement
is  unenforceable,  and such  restriction  cannot  be  amended  so as to make it
enforceable,  such  finding  shall not affect the  enforceability  of any of the
other restrictions contained herein.

     10. Confidentiality.

     a.  Executive  will not at any time  (whether  during or after  Executive's
employment  with the  Company)  (x) retain or use for the  benefit,  purposes or
account of Executive or any other  Person;  or (y)  disclose,  divulge,  reveal,
communicate, share, transfer or provide access to any Person outside the Company
(other  than  its  professional   advisers  who  are  bound  by  confidentiality
obligations),  any  non-public,   proprietary  or  confidential  information  --
including  without  limitation  rates,  trade  secrets,  know-how,  research and
development,  software, databases, inventions,  processes, formulae, technology,
designs  and  other  intellectual  property,  information  concerning  finances,
investments,  profits, pricing, costs, products,  services,  vendors, customers,
clients, partners, investors,  personnel,  compensation,  recruiting,  training,
advertising, sales, marketing, promotions,  government and regulatory activities
and approvals -- concerning the past, current or future business, activities and
operations of the Company, its subsidiaries or affiliates and/or any third party
that has  disclosed  or provided  any of same to the  Company on a  confidential
basis ("Confidential  Information")  without the prior written  authorization of
the Board.

     b. "Confidential Information" shall not include any information that is (a)
generally  known  to the  industry  or the  public  other  than as a  result  of
Executive's  breach of this  covenant  or any  breach  of other  confidentiality
obligations by third parties; (b) made legitimately  available to Executive by a
third party without breach of any confidentiality obligation; or (c) required by
law to be disclosed; provided that Executive shall give prompt written notice to
the  Company  of  such  requirement,  disclose  no more  information  than is so
required,  and cooperate with any attempts by the Company to obtain a protective
order or similar treatment.

                                       11
<PAGE>

     c. Upon  termination  of  Executive's  employment  with the Company for any
reason,  Executive shall immediately destroy,  delete, or return to the Company,
at the  Company's  option,  all  originals  and  copies  in any  form or  medium
(including  memoranda,  books, papers,  plans, computer files, letters and other
data) in  Executive's  possession  or control  (including  any of the  foregoing
stored or located in Executive's office, home, laptop or other computer, whether
or not Company  property)  that contain  Confidential  Information  or otherwise
relate to any material aspects of the business (that are not otherwise available
to the public) of the Company,  its  affiliates  and  subsidiaries,  except that
Executive  may retain only those  portions  of any  documents,  personal  notes,
notebooks and diaries that do not contain any Confidential Information.

     d. The  provisions  of this  Section 10 shall  survive the  termination  of
Executive's employment for any reason.

     11.  Specific  Performance.  Executive  acknowledges  and  agrees  that the
Employer's  remedies  at law for a breach  or  threatened  breach  of any of the
provisions of Section 9 or Section 10 of this Agreement  would be inadequate and
the  Company  would  suffer  irreparable  damages as a result of such  breach or
threatened  breach.  In recognition of this fact,  Executive agrees that, in the
event of such a breach or threatened breach, in addition to any remedies at law,
the  Company,  without  posting any bond,  shall be entitled to cease making any
payments or  providing  any benefit  otherwise  required by this  Agreement  and
obtain  equitable  relief  in  the  form  of  specific  performance,   temporary
restraining  order,  temporary or permanent  injunction  or any other  equitable
remedy which may then be available. In the event of an alleged breach of Section
9(b) by the Company,  Executive shall not be required to post a bond in order to
seek equitable relief or any other equitable remedy.

     12.  Arbitration.  Except as  provided  in Section  11,  any other  dispute
arising out of or asserting breach of this Agreement, or any statutory or common
law claim by Executive  relating to her  employment  under this Agreement or the
termination  thereof  (including  any tort or  discrimination  claim),  shall be
exclusively  resolved by binding  statutory  arbitration in accordance  with the
Employment  Dispute  Resolution Rules of the American  Arbitration  Association.
Such  arbitration  process  shall take place in New York,  New York.  A court of
competent jurisdiction may enter judgment upon the arbitrator's award. All costs
and expenses of arbitration  (including fees and disbursements of counsel) shall
be borne by the respective  party incurring such costs and expenses,  unless the
arbitrator  shall  award  costs and  expenses  to the  prevailing  party in such
arbitration.

     13. Miscellaneous.

     a.  Governing  Law.  This  Agreement  shall be governed by and construed in
accordance  with  the  laws of the  State  of  Connecticut,  without  regard  to
conflicts of laws principles thereof.

                                       12
<PAGE>

     b.  Entire   Agreement/Amendments.   This  Agreement  contains  the  entire
understanding  of the parties with respect to the employment of Executive by the
Company. There are no restrictions,  agreements, promises, warranties, covenants
or  undertakings  between the parties with respect to the subject  matter herein
other than those expressly set forth herein.  This Agreement may not be altered,
modified or amended except by written instrument signed by the parties hereto.

     c. No Waiver. The failure of a party to insist upon strict adherence to any
term of this  Agreement on any occasion shall not be considered a waiver of such
party's  rights or deprive  such party of the right  thereafter  to insist  upon
strict adherence to that term or any other term of this Agreement.

     d.  Severability.  In the event that any one or more of the  provisions  of
this  Agreement  shall be or become  invalid,  illegal or  unenforceable  in any
respect,  the validity,  legality and enforceability of the remaining provisions
of this Agreement shall not be affected thereby.

     e.  Assignment.  This Agreement,  and all of Executive's  rights and duties
hereunder,  shall not be  assignable  or delegable by  Executive.  Any purported
assignment or  delegation  by Executive in violation of the  foregoing  shall be
null and void ab  initio  and of no force  and  effect.  This  Agreement  may be
assigned  by the  Company  to a person  or  entity  which is an  affiliate  or a
successor in interest to  substantially  all of the business  operations  of the
Company.  Upon such  assignment,  the  rights  and  obligations  of the  Company
hereunder shall become the rights and obligations of such affiliate or successor
person or entity.

     f. Set Off;  Mitigation.  The  Company's  obligation  to pay  Executive the
amounts  provided and to make the arrangements  provided  hereunder shall not be
subject to set-off,  counterclaim  or recoupment of amounts owed by Executive to
the Company or its affiliates,  other than any amounts due and owing as provided
for under  Section  8(c)(iii)(B)  hereof.  Executive  shall not be  required  to
mitigate the amount of any payment  provided  for pursuant to this  Agreement by
seeking other employment or otherwise and the amount of any payment provided for
pursuant to this Agreement shall not be reduced by any compensation  earned as a
result of Executive's other employment or otherwise.

     g. Successors; Binding Agreement. This Agreement shall inure to the benefit
of and be binding upon the Company and its  subsidiaries  and  Executive and any
personal  or  legal  representatives,   executors,  administrators,  successors,
assigns, heirs, distributees,  devisees and legatees.  Further, the Company will
require  any  successor  (whether,  direct or  indirect,  by  purchase,  merger,
consolidation or otherwise) to all or  substantially  all of the business and/or
assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same  extent  that the  Company  would be required to
perform it if no such  succession  had taken place.  As used in this  Agreement,
"Company" shall mean the Company and any successor to its business and/or assets
which is  required  by this  Section  13(g) to assume and agree to perform  this
Agreement  or which  otherwise  assumes  and agrees to perform  this  Agreement;
provided,  however, in the event that any successor,  as described above, agrees
to assume this Agreement in accordance  with the preceding  sentence,  as of the
date such  successor so assumes this  Agreement,  the Company  shall cease to be
liable for any of the obligations contained in this Agreement.

                                       13
<PAGE>

     h.  Notice.  For the  purpose  of this  Agreement,  notices  and all  other
communications  provided for in the  Agreement  shall be in writing and shall be
deemed to have been duly given when  delivered by hand or  overnight  courier or
three days after it has been mailed by United  States  registered  mail,  return
receipt requested,  postage prepaid,  addressed to the respective  addresses set
forth below in this Agreement, or to such other address as either party may have
furnished to the other in writing in accordance herewith,  except that notice of
change of address shall be effective only upon receipt.

                  If to the Company:

                  Citizens Communications Company
                  Three High Ridge Park
                  Building 3
                  Stamford, Connecticut 06905
                  Attention:        Russ Mitten, Esq.

                  With a copy to:

                  Simpson Thacher & Bartlett LLP
                  425 Lexington Avenue
                  New York, New York 10017
                  Attention:        Alvin H. Brown, Esq.

                  If to Executive:

                  To the most recent address of Executive set forth in the
                  personnel records of the Company.

                  With a copy to:

                  Howard, Rice, Nemorovski, Canady, Falk & Rabin LLC
                  3 Embarcadero Center
                  Seventh Floor
                  San Francisco, California 94111
                  Attn:  Kenneth G. Hausman, Esq.

     i. Executive  Representation.  Executive  hereby  represents to the Company
that the execution  and delivery of this  Agreement by Executive and the Company
and the  performance  by Executive of  Executive's  duties  hereunder  shall not
constitute a breach of, or  otherwise  contravene,  the terms of any  employment
agreement  or  other  agreement  or  policy  to  which  Executive  is a party or
otherwise bound, whether with the Prior Employer or otherwise.

     j. Prior  Agreements.  This Agreement  supercedes all prior  agreements and
understandings  (including verbal agreements)  between Executive and the Company
and/or  its  affiliates  regarding  the  terms  and  conditions  of  Executive's
employment with the Company and/or its affiliates.

                                       14
<PAGE>

     k. Cooperation.  Executive shall provide Executive's reasonable cooperation
in connection  with any action or  proceeding  (or any appeal from any action or
proceeding)  which relates to events  occurring  during  Executive's  employment
hereunder. This provision shall survive any termination of this Agreement.

     l.  Withholding  Taxes.  The Company may withhold from any amounts  payable
under this Agreement  such Federal,  state and local taxes as may be required to
be withheld pursuant to any applicable law or regulation.

     m.  Counterparts.  This  Agreement may be signed in  counterparts,  each of
which shall be an original,  with the same effect as if the  signatures  thereto
and hereto were upon the same instrument.

                                       15
<PAGE>


     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.



CITIZENS COMMUNICATIONS COMPANY:            EXECUTIVE:

/s/  Citizens Communications Company        /s/  Mary A. Wilderotter
- ------------------------------------        ------------------------
     Citizens Communications Company             Mary A. Wilderotter


By:  /s/ Rudy Graf
     -------------------------------
         Rudy Graf

                                       16


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.17
<SEQUENCE>4
<FILENAME>elliottagreemt.txt
<DESCRIPTION>ELLIOTT AGREEMENT
<TEXT>
                                                        Exhibit 10.17


                              EMPLOYMENT AGREEMENT
                                  Jerry Elliott


     This  EMPLOYMENT  AGREEMENT (the  "Agreement")  is dated as of September 1,
2004 (the "Effective Date") by and between Citizens  Communications Company (the
"Company") and Jerry Elliott ("Executive").

     WHEREAS,  Executive is currently  employed with the Company as an Executive
Vice President and the Chief Financial Officer; and

     WHEREAS,  as of the Effective  Date,  the Company  desires to enter into an
agreement  with  Executive  embodying the terms of  Executive's  employment  and
pursuant to which  Executive  will serve as an Executive  Vice President and the
Chief Financial Officer, and Executive desires to enter into such an agreement.

     NOW,  THEREFORE,  in  consideration  of the premises  and mutual  covenants
herein and for other  good and  valuable  consideration,  the  parties  agree as
follows:

     1. Term of  Employment.  Subject  to the  provisions  of  Section 8 of this
Agreement,  Executive  shall  be  employed  by  the  Company,  and  any  of  its
subsidiaries  that the  Chief  Executive  Officer  (the  "CEO")  or the Board of
Directors of the Company (the "Board") shall  designate for a period  commencing
on the Effective Date and ending on the fifth anniversary  thereof (the "Initial
Term"),  on the terms and subject to the conditions set forth in this Agreement.
Following the Initial Term,  the Agreement  shall  automatically  be renewed for
additional  terms of one year on each anniversary of the last day of the Initial
Term (the Initial Term and any annual  extensions of the term of this Agreement,
together, the "Employment Term"), subject to Section 8 of this Agreement, unless
the Company or the Executive gives the other party written notice of non-renewal
at least  ninety  (90)  days  prior to such  anniversary.  A  written  notice of
non-renewal  given by the Company to the Executive  shall be considered a Notice
of  Termination  (pursuant to Section 8(e) of this  Agreement)  of a termination
without Cause by the Company and shall  constitute a  termination  without Cause
under Section 8(c) of this Agreement at the expiration of such  Employment  Term
for all purposes hereunder.

     2. Position.

     a. During the Employment  Term,  Executive shall serve as an Executive Vice
President  and the Chief  Financial  Officer  of the  Company  and shall  report
directly to the Chief  Executive  Officer of the Company and the Board.  In such
position,  Executive shall have such duties and authority  commensurate with the
position  of chief  financial  officer of a company of similar  size and nature.
Upon the  retirement  from the Board of the first member of the Board who is not
an  "independent  director"  (within  the meaning of the  Sarbanes  Oxley Act of
2002), Executive shall become a member of the Board.

     b. During the  Employment  Term,  Executive  will devote  Executive's  full
business time and best efforts (excluding any periods of vacation or sick leave)
to the  performance of Executive's  duties  hereunder and will not engage in any
other  business,  profession or occupation for  compensation  or otherwise which
would conflict or interfere with the rendition of such services  either directly
or  indirectly,  without the prior written  consent of the Board;  provided that
nothing  herein shall preclude  Executive,  subject to the prior approval of the
Board,  from  accepting  appointment  to or  continue  to serve on any  board of
directors  or  trustees  of  any   business   corporation   or  any   charitable
organization;  provided in each case in the aggregate,  that such  activities do
not conflict or interfere with the performance of Executive's  duties  hereunder
or conflict with Section 10 of this Agreement.
<PAGE>

     3. Base Salary. During the Employment Term, the Company shall pay Executive
a base salary at the annual rate of  $500,000,  payable in  substantially  equal
periodic payments in accordance with the Company's practices for other executive
employees,  as such  practices  may be determined  from time to time.  Executive
shall be entitled to such increases in Executive's  base salary,  if any, as may
be determined from time to time in the sole discretion of the CEO and the Board.
Executive's  annual base salary,  as in effect from time to time, is hereinafter
referred to as the "Base Salary."

     4. Annual Bonus. During the Employment Term, Executive shall be eligible to
earn an annual bonus award (an "Annual Bonus"), with a target bonus amount equal
to 100% of the Base Salary (the "Target Bonus"),  with adjustments  based on the
schedules  set forth in the  Citizens  Incentive  Plan,  as amended from time to
time, but the adjustments  shall in no event be less favorable to Executive than
those set forth in such Plan for the 2004 calendar year.

     5.  Long-Term  Incentive.  With  respect  to each  fiscal  year  during the
Employment  Term,  the  Company  shall  grant no later  than  each  March of the
following  year to Executive a number of restricted  shares of common stock (the
"Restricted  Shares") with an aggregate value on the date of each grant equal to
between $750,000 and $1,000,000,  as determined by the Compensation Committee of
the Board (the  "Compensation  Committee").  Subject to Section  8(b)(ii)(D) and
Section  8(c)(iii)(D),  below, each annual grant of Restricted Shares shall vest
and become  non-forfeitable  as to twenty (20)  percent of the shares  initially
granted,  on each anniversary of the date of grant and shall be fully vested and
100 percent non-forfeitable upon the fifth anniversary of the date of grant.

     6. Employee Benefits; Business Expenses.

          a.   Employee Benefits. During the Employment Term, Executive (and his
               eligible  dependents)  shall be  entitled to  participate  in the
               Company's  pension,   profit  sharing,   medical,   dental,  life
               insurance and other employee  benefit plans (other than severance
               plans)  (the  "Company  Plans"),  as in effect  from time to time
               (collectively the "Employee Benefits") on the same basis as those
               benefits are generally made available to other senior  executives
               of the Company.

          b.   Business Expenses and Perquisites.

     (i) Expenses.  During the Employment  Term,  reasonable  business  expenses
incurred by Executive in the performance of Executive's  duties  hereunder shall
be reimbursed by the Company in accordance with the Company's policies.

     (ii) Perquisites.  During the Employment Term,  Executive shall be entitled
to receive such  perquisites  as are  generally  made  available to other senior
executives of the Company at a level that is commensurate with his position.

                                       2
<PAGE>

     7. Special  Bonus.  In  recognition  of  Executive's  role in the Company's
successful  achievement  of  strategic  objectives,  the  Company  agrees to pay
Executive a special bonus in an amount equal to $250,000 (the "Special  Bonus"),
which bonus shall be payable in September, 2004.

     8.  Termination.  Executive's  employment  hereunder  may be  terminated by
either party at any time and for any reason;  provided  that  Executive  will be
required  to give the  Company at least 60 days  advance  written  notice of any
resignation of Executive's  employment.  Notwithstanding  any other provision of
this  Agreement,  the  provisions  of this  Section 8 shall  exclusively  govern
Executive's rights upon termination of employment with the Company.

     a. By the  Company  For  Cause or By  Executive  Resignation  Without  Good
Reason.

     (i)  The  Employment  Term  and  Executive's  employment  hereunder  may be
terminated  by the  Company  for Cause (as  defined  below) and shall  terminate
automatically upon Executive's  resignation  without Good Reason;  provided that
Executive will be required to give the Company at least 60 days advance  written
notice of such resignation.

     (ii) For purposes of this  Agreement,  "Cause" shall mean  Executive's  (A)
willful  and  continued  failure  (other  than as a result of physical or mental
illness or injury) to perform his material  duties  (provided such duties are as
described  in Section  2) to the  Company or its  subsidiaries  which  continues
beyond 10 days after a written demand for  substantial  performance is delivered
to Executive by the Company (the "Cure Period"), which demand shall identify and
describe such failure with sufficient specificity to allow Executive to respond;
(B) willful or intentional conduct that causes material and demonstrable injury,
monetarily or otherwise,  to the Company;  (C)  conviction of, or a plea of nolo
contendere  to, a crime  constituting  (x) a felony under the laws of the United
States or any state thereof or (y) a misdemeanor  involving moral turpitude;  or
(D)  material  breach of a  material  provision  of this  Agreement,  including,
without limitation,  engaging in any action in breach of Section 9 or Section 10
of this Agreement,  which continues  beyond the Cure Period (to the extent that,
in the Board's reasonable  judgment,  such breach can be cured). For purposes of
this Section 8(a)(ii), no act, or failure to act, on the part of Executive shall
be considered  "willful"  unless it is done, or omitted to be done, by Executive
in bad faith and without  reasonable belief that Executive's  action or inaction
was in the best interests of the Company. Any act, or failure to act, based upon
authority  given pursuant to a resolution  duly adopted by the Board or upon the
instructions  of the Chief  Executive  Officer of the  Company  or other  senior
officer of the Company or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by Executive in good
faith and in the best interests of the Company. Any determination that Executive
has  engaged  in conduct  for which the Board  wishes to  terminate  Executive's
employment  shall be made after a meeting of the  nonemployee  directors  of the
Board at which Executive shall be invited to appear, with counsel, to respond to
the allegations set forth in the written notice to the Executive of such meeting
(which notice shall provide sufficient specificity to allow Executive to respond
to such  allegations).  The  Board  may  terminate  the  Executive  for  "Cause"
hereunder  following such meeting only upon the affirmative  vote of at least 60
percent of the nonemployee directors.

                                       3
<PAGE>

     (iii) If Executive's  employment is terminated by the Company for Cause, or
if  Executive  resigns  without  Good  Reason,  Executive  shall be  entitled to
receive:

          (A) the Base Salary through the date of termination;

          (B) the Special Bonus, to the extent unpaid;

          (C) any Annual Bonus  earned but unpaid as of the date of  termination
     for any previously completed fiscal year;

          (D)  reimbursement  for any unreimbursed  business  expenses  properly
     incurred by Executive in accordance  with Company  policy prior to the date
     of Executive's termination;

          (E) any accrued but unpaid vacation; and

          (F) such Employee Benefits, if any, to which Executive may be entitled
     under  the  applicable   Company  Plans  upon   termination  of  employment
     hereunder,  (the  payments and benefits  described  clauses (A) through (F)
     hereof being referred to, collectively, as the "Accrued Rights").

Following such termination of Executive's employment by the Company for Cause or
resignation  by  Executive,  except  as set  forth  in this  Section  8(a)(iii),
Executive shall have no further rights to any compensation or any other benefits
under this Agreement.

          b. Disability or Death.

     (i) Executive's employment hereunder shall terminate upon Executive's death
and may be terminated by the Company if Executive becomes physically or mentally
incapacitated and is therefore unable for a period of six (6) consecutive months
or for an  aggregate  of nine (9) months in any twelve  (12)  consecutive  month
period to perform Executive's duties (such incapacity is hereinafter referred to
as  "Disability").  Any  question  as to  the  existence  of the  Disability  of
Executive as to which Executive and the Company cannot agree shall be determined
in writing by a qualified independent physician mutually acceptable to Executive
and the  Company.  If Executive  and the Company  cannot agree as to a qualified
independent  physician,  each  shall  appoint  such a  physician  and  those two
physicians  shall select a third who shall make such  determination  in writing.
The  determination  of  Disability  made in writing to the Company and Executive
shall be final and conclusive for all purposes of the Agreement.

     (ii) Upon  termination  of  Executive's  employment  hereunder  for  either
Disability or death, Executive or Executive's estate (as the case may be), shall
be entitled to receive:


                                       4
<PAGE>

          (A) the Accrued Rights;

          (B)  continued  payment of  Executive's  Base Salary during the period
     commencing  on the  termination  date and  ending  on the date  that is six
     months after the termination date;

          (C) a pro rata portion of the Annual  Bonus,  if any,  that  Executive
     would have been entitled to receive pursuant to the Citizens Incentive Plan
     in the year of termination, based on actual performance through the date of
     termination; and

          (D) all  Restricted  Shares  that have been  granted as of the date of
     termination shall be fully vested and  non-forfeitable as of such date, all
     other restricted  shares and options  previously  granted to Executive that
     are not vested as of such date shall become vested and  non-forfeitable or,
     in the case of  options,  fully  exercisable,  and  Executive  shall not be
     entitled to any further annual grants of Restricted  Shares under Section 5
     of this Agreement.

     (iii)  Upon  termination  of  Executive's   employment   hereunder  due  to
Executive's  death or  Disability,  in addition  to the  benefits  described  in
Section 8(b)(ii) above, the Company shall provide Executive (in the event of his
Disability)  and  Executive's  spouse with medical,  dental,  life insurance and
other health  benefits  (pursuant  to the same  Company  Plans that are medical,
dental, life insurance and other health benefit plans and that are in effect for
active  employees of the  Company),  at the sole cost of the Company,  until the
second anniversary of the date of Executive's death or Disability.

Following  Executive's  termination  of employment  due to death or  Disability,
except as set forth in this Section 8(b), Executive shall have no further rights
to any compensation or any other benefits under this Agreement.

     c. By the  Company  Without  Cause  or by  Executive  Resignation  for Good
Reason.

     (i) Executive's  employment  hereunder may be terminated (A) by the Company
without Cause (which shall not include Executive's termination of employment due
to his Disability) or (B) by Executive for Good Reason (as defined below).

     (ii) For  purposes  of this  Agreement,  "Good  Reason"  shall mean (A) the
failure of the  Company to pay or cause to be paid  Executive's  Base  Salary or
Annual  Bonus,  or grant  the  Restricted  Shares  when due  hereunder,  (B) any
substantial  and  continuing  diminution in Executive's  position,  authority or
responsibilities from those described in Section 2 hereof, (C) any relocation of
Executive's  principal  office  location  more  than  25  miles  outside  of the
Stamford,  Connecticut  metropolitan area, or (D) any other material breach of a
material provision of this Agreement;  provided that any of the events described
in clauses (A), (B), (C) or (D) of this Section  8(c)(ii) shall  constitute Good
Reason only if the Company fails to cure such event within 30 days after receipt
from  Executive  of written  notice of the event which  constitutes  Good Reason
(with  sufficient  specificity from Executive for the Company to respond to such
claim).

                                       5
<PAGE>

     (iii) If Executive's  employment is terminated by the Company without Cause
(other than by reason of death or  Disability)  or by Executive for Good Reason,
subject  to  Executive's  execution  of a release  of all then  existing  claims
against the Company and its subsidiaries,  affiliates,  shareholders,  officers,
directors, employees and agents, Executive shall be entitled to receive:

          (A) the Accrued Rights;

          (B) subject to Executive's continued compliance with the provisions of
     Section 9 and Section 10 of this Agreement,  an amount equal to the greater
     of (i) three times the sum of the Base Salary and Target Bonus,  payable in
     equal  installments over the thirty-six (36) month period commencing on the
     date of termination,  and (ii) continued payment, during the balance of the
     Initial  Term, of the Base Salary and Target Bonus (the  applicable  period
     referenced  in clause  (i) and (ii)  hereof  shall be  referred  to in this
     Agreement as the "Severance Period"); provided, however, that the aggregate
     amount  described  in this  subsection  (B) shall be reduced by any amounts
     owed by Executive to the Company (to the extent  permitted under applicable
     law);

          (C) continuation of medical,  dental,  life insurance and other health
     benefits (pursuant to the same Company Plans that are medical, dental, life
     insurance and other health  benefit plans and that are in effect for active
     employees  of the  Company)  until the  earlier  to occur of the end of the
     Severance  Period  and the  date on which  Executive  becomes  eligible  to
     receive comparable benefits from any subsequent employer; and

          (D) all Restricted  Shares shall be vested and  non-forfeitable  as of
     the date of termination, all other restricted shares and options previously
     granted  to  Executive  that are not  vested as of such date  shall  become
     vested and nonforfeitable or, in the case of options, fully exercisable and
     Executive  shall not be entitled to any further annual grants of Restricted
     Shares under Section 5 of this Agreement.

Following  Executive's  termination  of employment by the Company  without Cause
(other than by reason of Executive's  death or Disability) or Executive for Good
Reason,  except as set forth in this Section 8(c)(iii),  Executive shall have no
further rights to any compensation or any other benefits under this Agreement.

          d. Change in Control.

     (i)  Executive  shall also be entitled to the benefits set forth in Section
8(c)(iii)  above if,  within one year  following  a Change in  Control  (defined
below),  Executive terminates his employment as a result of: (i) any decrease by
the Company of the Base Salary or Target Bonus; (ii) any decrease in Executive's
pension  benefit  opportunities  or any  material  diminution  in the  aggregate
employee  benefits;  or (iii) any  material  diminution  in  Executive's  title,
reporting  relationships,  duties or  responsibilities  (each,  a  "Constructive
Termination Event"); provided that either of the events described in clauses (i)
and (ii) of this Section 8(d) shall constitute a Constructive  Termination Event
only if the Company  fails to cure such event within 30 days after  receipt from
Executive  of  written  notice of the event  which  constitutes  a  Constructive
Termination Event.

                                       6
<PAGE>

     (ii) For purposes of this Agreement,  a "Change in Control" shall be deemed
to have occurred:

          (A) When any "person" as defined in Section  3(a)(9) of the Securities
     Exchange  Act of 1934,  as amended  (the  "Exchange  Act"),  and as used in
     Section 13(d) and 14(d) thereof,  including a "group" as defined in Section
     13(d) of the Exchange Act (but excluding the Company and any subsidiary and
     any employee  benefit plan  sponsored or  maintained  by the Company or any
     subsidiary  (including  any  trustee  of such  plan  acting  as  trustee)),
     directly or indirectly,  becomes the "beneficial owner" (as defined in Rule
     13d-3 under the Exchange  Act), of  securities of the Company  representing
     50% or more of the combined voting power of the Company's then  outstanding
     securities; or

          (B) Upon the consummation of any merger or other business  combination
     involving the Company, a sale of substantially all of the Company's assets,
     liquidation or dissolution of the Company or a combination of the foregoing
     transactions  (the  "Transactions")  other than a  Transaction  immediately
     following which the  shareholders of the Company  immediately  prior to the
     Transaction own, in the same proportion,  at least 51% of the voting power,
     directly or indirectly, of (i) the surviving corporation in any such merger
     or other  business  combination;  (ii) the purchaser of or successor to the
     Company's assets; (iii) both the surviving corporation and the purchaser in
     the event of any  combination of  Transactions;  or (iv) the parent company
     owning 100% of such surviving corporation,  purchaser or both the surviving
     corporation and the purchaser, as the case may be.

     (iii) Excess Parachute Payments.

          (A) If it is determined  (as hereafter  provided)  that any payment or
     distribution  by the  Company to or for the benefit of  Executive,  whether
     paid or payable or  distributed or  distributable  pursuant to the terms of
     this  Agreement  or  otherwise  pursuant  to  or by  reason  of  any  other
     agreement,   policy,  plan,  program  or  arrangement,   including  without
     limitation any stock option,  restricted  stock award,  stock  appreciation
     right or similar right,  or the lapse or termination of any  restriction on
     or the vesting or  exercisability  of any of the  foregoing  (a  "Severance
     Payment"),  would be subject to the excise tax  imposed by Section  4999 of
     the  Internal  Revenue  Code of  1986,  as  amended  (the  "Code")  (or any
     successor  provision thereto) by reason of being "contingent on a change in
     ownership or control" of the Company, within the meaning of Section 280G of
     the Code (or any successor provision thereto) or to any similar tax imposed
     by state or local law, or any  interest or  penalties  with respect to such
     excise  tax  (such  tax or  taxes,  together  with  any such  interest  and
     penalties,  are hereafter  collectively  referred to as the "Excise  Tax"),
     then  Executive  shall  receive the greater of (x) the  Severance  Payment,
     after  payment by  Executive  of the Excise  Tax  imposed on the  Severance
     Payment and (y) the amount of the Severance  Payment  (calculated  on a net
     after-tax basis) which could be paid to Executive under Section 280G of the
     Code  without  causing  any loss of  deduction  to the  Company  under such
     Section (the "Capped Payment").

                                       7
<PAGE>

          (B) Subject to the  provisions  of Section  8(d)(iii)(A)  hereof,  all
     determinations  required  to be made under  this  Section  8(d),  including
     whether an Excise Tax is payable by Executive and the amount of such Excise
     Tax, shall be made by the nationally  recognized  firm of certified  public
     accountants (the "Accounting Firm") used by the Company prior to the Change
     in Control (or, if such Accounting  Firm declines to serve,  the Accounting
     Firm shall be a nationally  recognized firm of certified public accountants
     selected  by  Executive).  The  Accounting  Firm shall be  directed  by the
     Company or Executive to submit its preliminary  determination  and detailed
     supporting  calculations  to both  the  Company  and  Executive  within  15
     calendar days after the date of Executive's  termination of employment,  if
     applicable,  and any other  such time or times as may be  requested  by the
     Company or Executive. If the Accounting Firm determines that any Excise Tax
     is payable by  Executive,  the Company shall either (x) make payment of the
     Severance Payment,  less all amounts withheld in respect of the Excise Tax,
     as required by applicable  law, or (y) reduce the Severance  Payment by the
     amount  which,   based  on  the   Accounting   Firm's   determination   and
     calculations,  would provide Executive with the Capped Payment,  and pay to
     Executive such reduced  amount.  If the Accounting  Firm determines that no
     Excise Tax is payable by Executive,  it shall, at the same time as it makes
     such  determination,   furnish  Executive  with  an  opinion  that  he  has
     substantial  authority not to report any Excise Tax on his federal,  state,
     local income or other tax return.  All fees and expenses of the  Accounting
     Firm  shall be paid by the  Company  in  connection  with the  calculations
     required by this section.

          (C) The federal,  state and local income or other tax returns filed by
     Executive (or any filing made by a  consolidated  tax group which  includes
     the Company)  shall be prepared  and filed on a  consistent  basis with the
     determination of the Accounting Firm with respect to the Excise Tax payable
     by  Executive.  Executive  shall make  proper  payment of the amount of any
     Excise Tax, and at the request of the Company,  provide to the Company true
     and correct  copies (with any  amendments) of his federal income tax return
     as filed with the  Internal  Revenue  Service and  corresponding  state and
     local  tax  returns,  if  relevant,  as filed  with the  applicable  taxing
     authority,  and such other documents  reasonably  requested by the Company,
     evidencing such payment.

     e. Notice of  Termination.  Any purported  termination of employment by the
Company  or by  Executive  (other  than  due  to  Executive's  death)  shall  be
communicated  by written  Notice of  Termination  to the other  party  hereto in
accordance with Section 13(h) hereof. For purposes of this Agreement,  a "Notice
of  Termination"   shall  mean  a  notice  which  shall  indicate  the  specific
termination  provision  in this  Agreement  relied  upon and  shall set forth in
reasonable  detail  the facts and  circumstances  claimed to provide a basis for
termination of employment under the provision so indicated.

     f. Board/Committee Resignation; Execution of Release of all Claims.

     (i) Upon  termination of Executive's  employment for any reason,  Executive
agrees  to  resign,  as of the  date  of  such  termination  and  to the  extent
applicable,  from  the  Board  (and any  committees  thereof)  and the  board of
directors (and any committees  thereof) of any of the Company's  subsidiaries or
affiliates.

                                       8
<PAGE>

     (ii) Upon termination of Executive's  employment for any reason,  Executive
agrees to execute a release of all then existing claims against the Company, its
subsidiaries,  affiliates,  shareholders,  directors,  officers,  employees  and
agents.  Notwithstanding  anything set forth in this  Agreement to the contrary,
upon termination of Executive's  employment for any reason,  Executive shall not
receive any  payments or benefits to which he may be entitled  hereunder  (other
than those which by law cannot be subject to the  execution of a release) (A) if
Executive  revokes  such  release  or (B) until  eight  (8) days  after the date
Executive  signs such  release (or until such other date as  applicable  law may
provide that Executive cannot revoke such release).

     9. Non-Competition/Non-Solicitation/Non-Disparagement.

     a. Executive  acknowledges and recognizes the highly  competitive nature of
the businesses of the Employer and its affiliates and  accordingly  agrees that,
during  the  Employment  Term  and,  for a  period  of one  year  following  any
termination  of  Executive's   employment  with  the  Company  (the  "Restricted
Period"),  Executive will not, whether on Executive's own behalf or on behalf of
or  in  conjunction  with  any  person,   firm,   partnership,   joint  venture,
association,  corporation or other business  organization,  entity or enterprise
whatsoever  ("Person"),  directly  or  indirectly  engage in any  business  that
directly or indirectly competes in any material way with the primary business of
the  Company,  or  otherwise  engage in  competition  with the Company  which is
materially detrimental to the Company;

     (i)  During  the  Restricted   Period,   Executive  will  not,  whether  on
Executive's  own  behalf  or on  behalf of or in  conjunction  with any  Person,
directly or indirectly:

          (A) solicit or encourage any employee of the Company or its affiliates
     to leave the employment of the Company or its affiliates; or

          (B) hire any such  employee  who was  employed  by the  Company or its
     affiliates as of the date of Executive's termination of employment with the
     Company  or who  left  the  employment  of the  Company  or its  affiliates
     coincident  with, or within one year prior to or after,  the termination of
     Executive's employment with the Company.

     b.  Executive  shall not at any time  issue any press  release  or make any
public  statement  about  the  Company  or  any  director,   officer,  employee,
successor,  parent, subsidiary or agent or representative of, or attorney to the
Company (any of the foregoing,  a "Company Affiliate")  regarding (i) any of the
foregoing's financial status, business,  services,  business methods, compliance
with  laws,  or  ethics  or  otherwise,  or  (ii)  regarding  Company  partners,
personnel, directors, officers, employees, attorneys, agents, including, without
limitation,  in respect of both  clauses  (i) and (ii),  any  statement  that is
intended or reasonably likely to disparage the Company or any Company Affiliate,
or  otherwise  degrade  any  Company  Affiliate's  reputation  in the  business,
industry or legal  community in which any such Company  Affiliate  operates and,
the  Company  shall not at any time  issue any press  release or make any public
statement about Executive or his spouse that is intended or reasonably likely to
disparage Executive's reputation in the business, industry or legal community or
otherwise  degrade  his  or her  reputation  or  standing  in  their  community;
provided,  that,  Executive  and the Company  shall be permitted to (a) make any
statement that is required by applicable securities or other laws to be included
in a filing  or  disclosure  document,  subject  to prior  notice  to the  other
thereof,  and (b) defend  himself or itself  against any  statement  made by the
other party that is intended or  reasonably  likely to  disparage  or  otherwise
degrade that party's  reputation,  only if there is a reasonable belief that the
statements  made in  such  defense  are not  false  statements  and (c)  provide
truthful testimony in any legal proceeding.

                                       9
<PAGE>

     c. It is expressly  understood  and agreed that although  Executive and the
Company consider the restrictions  contained in this Section 9 to be reasonable,
if a final judicial  determination is made by a court of competent  jurisdiction
that the time or territory or any other restriction  contained in this Agreement
is an  unenforceable  restriction  against  Executive,  the  provisions  of this
Agreement  shall not be rendered void but shall be deemed amended to apply as to
such maximum  time and  territory  and to such maximum  extent as such court may
judicially determine or indicate to be enforceable.  Alternatively, if any court
of competent jurisdiction finds that any restriction contained in this Agreement
is  unenforceable,  and such  restriction  cannot  be  amended  so as to make it
enforceable,  such  finding  shall not affect the  enforceability  of any of the
other restrictions contained herein.

     10. Confidentiality.

     a.  Executive  will not at any time  (whether  during or after  Executive's
employment  with the  Company)  (x) retain or use for the  benefit,  purposes or
account of Executive or any other  Person;  or (y)  disclose,  divulge,  reveal,
communicate, share, transfer or provide access to any Person outside the Company
(other  than  its  professional   advisers  who  are  bound  by  confidentiality
obligations),  any  non-public,   proprietary  or  confidential  information  --
including  without  limitation  rates,  trade  secrets,  know-how,  research and
development,  software, databases, inventions,  processes, formulae, technology,
designs  and  other  intellectual  property,  information  concerning  finances,
investments,  profits, pricing, costs, products,  services,  vendors, customers,
clients, partners, investors,  personnel,  compensation,  recruiting,  training,
advertising, sales, marketing, promotions,  government and regulatory activities
and approvals -- concerning the past, current or future business, activities and
operations of the Company, its subsidiaries or affiliates and/or any third party
that has  disclosed  or provided  any of same to the  Company on a  confidential
basis ("Confidential  Information")  without the prior written  authorization of
the Board.

     b. "Confidential Information" shall not include any information that is (a)
generally  known  to the  industry  or the  public  other  than as a  result  of
Executive's  breach of this  covenant  or any  breach  of other  confidentiality
obligations by third parties; (b) made legitimately  available to Executive by a
third party without breach of any confidentiality obligation; or (c) required by
law to be disclosed; provided that Executive shall give prompt written notice to
the  Company  of  such  requirement,  disclose  no more  information  than is so
required,  and cooperate with any attempts by the Company to obtain a protective
order or similar treatment.

                                       10
<PAGE>

     c. Except as required by law, Executive will not disclose to anyone,  other
than Executive's immediate family and legal or financial advisors, the existence
or contents of this  Agreement;  provided  that  Executive  may  disclose to any
prospective future employer the provisions of Section 9 and 10 of this Agreement
provided that such potential employer agrees to maintain the  confidentiality of
such terms.

     d. Upon  termination  of  Executive's  employment  with the Company for any
reason,  Executive shall immediately destroy,  delete, or return to the Company,
at the  Company's  option,  all  originals  and  copies  in any  form or  medium
(including  memoranda,  books, papers,  plans, computer files, letters and other
data) in  Executive's  possession  or control  (including  any of the  foregoing
stored or located in Executive's office, home, laptop or other computer, whether
or not Company  property)  that contain  Confidential  Information  or otherwise
relate to the business of the Company,  its affiliates and subsidiaries,  except
that Executive may retain only those portions of any personal  notes,  notebooks
and diaries that do not contain any Confidential Information.

     e. The  provisions  of this  Section 10 shall  survive the  termination  of
Executive's employment for any reason.

     11.  Specific  Performance.  Executive  acknowledges  and  agrees  that the
Employer's  remedies  at law for a breach  or  threatened  breach  of any of the
provisions of Section 9 or Section 10 of this Agreement  would be inadequate and
the  Company  would  suffer  irreparable  damages as a result of such  breach or
threatened  breach.  In recognition of this fact,  Executive agrees that, in the
event of such a breach or threatened breach, in addition to any remedies at law,
the  Company,  without  posting any bond,  shall be entitled to cease making any
payments or  providing  any benefit  otherwise  required by this  Agreement  and
obtain  equitable  relief  in  the  form  of  specific  performance,   temporary
restraining  order,  temporary or permanent  injunction  or any other  equitable
remedy which may then be available.

     12.  Arbitration.  Except as  provided  in Section  11,  any other  dispute
arising out of or asserting breach of this Agreement, or any statutory or common
law claim by Executive  relating to his  employment  under this Agreement or the
termination  thereof  (including  any tort or  discrimination  claim),  shall be
exclusively  resolved by binding  statutory  arbitration in accordance  with the
Employment  Dispute  Resolution Rules of the American  Arbitration  Association.
Such  arbitration  process  shall take place in New York,  New York.  A court of
competent jurisdiction may enter judgment upon the arbitrator's award. All costs
and expenses of arbitration  (including fees and disbursements of counsel) shall
be borne by the respective party incurring such costs and expenses.

     13. Miscellaneous.

     a.  Governing  Law.  This  Agreement  shall be governed by and construed in
accordance  with  the  laws of the  State  of  Connecticut,  without  regard  to
conflicts of laws principles thereof.

     b.  Entire   Agreement/Amendments.   This  Agreement  contains  the  entire
understanding  of the parties with respect to the employment of Executive by the
Company. There are no restrictions,  agreements, promises, warranties, covenants
or  undertakings  between the parties with respect to the subject  matter herein
other than those expressly set forth herein.  This Agreement may not be altered,
modified or amended except by written instrument signed by the parties hereto.

                                       11
<PAGE>

     c. No Waiver. The failure of a party to insist upon strict adherence to any
term of this  Agreement on any occasion shall not be considered a waiver of such
party's  rights or deprive  such party of the right  thereafter  to insist  upon
strict adherence to that term or any other term of this Agreement.

     d.  Severability.  In the event that any one or more of the  provisions  of
this  Agreement  shall be or become  invalid,  illegal or  unenforceable  in any
respect,  the validity,  legality and enforceability of the remaining provisions
of this Agreement shall not be affected thereby.

     e.  Assignment.  This Agreement,  and all of Executive's  rights and duties
hereunder,  shall not be  assignable  or delegable by  Executive.  Any purported
assignment or  delegation  by Executive in violation of the  foregoing  shall be
null and void ab  initio  and of no force  and  effect.  This  Agreement  may be
assigned  by the  Company  to a person  or  entity  which is an  affiliate  or a
successor in interest to  substantially  all of the business  operations  of the
Company.  Upon such  assignment,  the  rights  and  obligations  of the  Company
hereunder shall become the rights and obligations of such affiliate or successor
person or entity.

     f. Set Off;  Mitigation.  The  Company's  obligation  to pay  Executive the
amounts  provided  and to make  the  arrangements  provided  hereunder  shall be
subject to set-off,  counterclaim  or recoupment of amounts owed by Executive to
the Company or its  affiliates.  Executive shall not be required to mitigate the
amount of any payment  provided for pursuant to this  Agreement by seeking other
employment or otherwise  and the amount of any payment  provided for pursuant to
this Agreement  shall not be reduced by any  compensation  earned as a result of
Executive's other employment or otherwise.

     g. Successors; Binding Agreement. This Agreement shall inure to the benefit
of and be binding upon the Company and its  subsidiaries  and  Executive and any
personal  or  legal  representatives,   executors,  administrators,  successors,
assigns, heirs, distributees,  devisees and legatees.  Further, the Company will
require  any  successor  (whether,  direct or  indirect,  by  purchase,  merger,
consolidation or otherwise) to all or  substantially  all of the business and/or
assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same  extent  that the  Company  would be required to
perform it if no such  succession  had taken place.  As used in this  Agreement,
"Company" shall mean the Company and any successor to its business and/or assets
which is  required  by this  Section  13(g) to assume and agree to perform  this
Agreement  or which  otherwise  assumes  and agrees to perform  this  Agreement;
provided,  however, in the event that any successor,  as described above, agrees
to assume this Agreement in accordance  with the preceding  sentence,  as of the
date such  successor so assumes this  Agreement,  the Company  shall cease to be
liable for any of the obligations contained in this Agreement.

                                       12
<PAGE>

     h.  Notice.  For the  purpose  of this  Agreement,  notices  and all  other
communications  provided for in the  Agreement  shall be in writing and shall be
deemed to have been duly given when  delivered by hand or  overnight  courier or
three days after it has been mailed by United  States  registered  mail,  return
receipt requested,  postage prepaid,  addressed to the respective  addresses set
forth below in this Agreement, or to such other address as either party may have
furnished to the other in writing in accordance herewith,  except that notice of
change of address shall be effective only upon receipt.

                  If to the Company:

                  Citizens Communications Company
                  Three High Ridge Park
                  Building 3
                  Stamford, Connecticut 06905
                  Attention:        Russ Mitten, Esq.

                  With a copy to:

                  Simpson Thacher & Bartlett LLP
                  425 Lexington Avenue
                  New York, New York 10017
                  Attention:        Alvin H. Brown, Esq.

                  If to Executive:

                  To the most recent address of Executive set forth in the
                  personnel records of the Company.

     i. Executive  Representation.  Executive  hereby  represents to the Company
that the execution  and delivery of this  Agreement by Executive and the Company
and the  performance  by Executive of  Executive's  duties  hereunder  shall not
constitute a breach of, or  otherwise  contravene,  the terms of any  employment
agreement  or  other  agreement  or  policy  to  which  Executive  is a party or
otherwise bound.

     j. Prior  Agreements.  This Agreement  supercedes all prior  agreements and
understandings  (including verbal agreements)  between Executive and the Company
and/or  its  affiliates  regarding  the  terms  and  conditions  of  Executive's
employment  with the Company and/or its  affiliates.  The provisions of Sections
8(b)(ii)(D)  and  8(c)(iii)(D)   shall  also  supersede  any  provision  of  any
restricted  stock  or  option  agreement  or plan  which  is less  favorable  to
Executive in the treatment of restricted shares or options previously granted to
him thereunder  upon his  termination of employment  upon death or Disability or
without Cause or for Good Reason.

     k. Cooperation.  Executive shall provide Executive's reasonable cooperation
in connection  with any action or  proceeding  (or any appeal from any action or
proceeding)  which relates to events  occurring  during  Executive's  employment
hereunder. This provision shall survive any termination of this Agreement.

                                       13
<PAGE>

     l.  Withholding  Taxes.  The Company may withhold from any amounts  payable
under this Agreement  such Federal,  state and local taxes as may be required to
be withheld pursuant to any applicable law or regulation.

     m.  Counterparts.  This  Agreement may be signed in  counterparts,  each of
which shall be an original,  with the same effect as if the  signatures  thereto
and hereto were upon the same instrument.


                                       14
<PAGE>


     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.



CITIZENS COMMUNICATIONS COMPANY:            EXECUTIVE:

/s/  Citizens Communications Company        /s/ Jerry Elliot
- ------------------------------------        ------------------
     Citizens Communications Company            Jerry Elliott


By:  /s/ Rudy Graf
     -------------------------------
         Rudy Graf

                                       15

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.18
<SEQUENCE>5
<FILENAME>larsonagreemt.txt
<DESCRIPTION>LARSON AGREEMENT
<TEXT>
                                                        Exhibit 10.18


                              EMPLOYMENT AGREEMENT
                                  Robert Larson


     This  EMPLOYMENT  AGREEMENT (the  "Agreement")  is dated as of September 1,
2004 (the "Effective Date") by and between Citizens  Communications Company (the
"Company") and Robert Larson ("Executive").

     WHEREAS,  Executive is currently employed with the Company as a Senior Vice
President and as the Company's Controller and Chief Accounting Officer; and

     WHEREAS,  as of the Effective  Date,  the Company  desires to enter into an
agreement with  Executive  embodying the terms of  Executive's  employment,  and
Executive desires to enter into such an agreement.

     NOW,  THEREFORE,  in  consideration  of the premises  and mutual  covenants
herein and for other  good and  valuable  consideration,  the  parties  agree as
follows:

     1. Term of  Employment.  Subject  to the  provisions  of  Section 8 of this
Agreement,  Executive  shall  be  employed  by  the  Company,  and  any  of  its
subsidiaries  that the  Chief  Executive  Officer  (the  "CEO")  or the Board of
Directors of the Company (the "Board") shall  designate for a period  commencing
on the Effective Date and ending on the fifth anniversary  thereof (the "Initial
Term"),  on the terms and subject to the conditions set forth in this Agreement.
Following the Initial Term,  the Agreement  shall  automatically  be renewed for
additional  terms of one year on each anniversary of the last day of the Initial
Term (the Initial Term and any annual  extensions of the term of this Agreement,
together, the "Employment Term"), subject to Section 8 of this Agreement, unless
the Company or the Executive gives the other party written notice of non-renewal
at least ninety (90) days prior to such anniversary.

     2. Position.

     a.  During the  Employment  Term,  Executive  shall  serve as a Senior Vice
President and as the Company's Controller and Chief Accounting Officer and shall
report directly to the Chief Financial Officer of the Company. In such position,
Executive shall have such duties and authority commensurate with the position of
controller and chief accounting  officer of a company of similar size and nature
and as the Company's Chief Financial Officer shall otherwise determine from time
to time.

     b. During the  Employment  Term,  Executive  will devote  Executive's  full
business time and best efforts (excluding any periods of vacation or sick leave)
to the  performance of Executive's  duties  hereunder and will not engage in any
other  business,  profession or occupation for  compensation  or otherwise which
would conflict or interfere with the rendition of such services  either directly
or  indirectly,  without the prior written  consent of the Board;  provided that
nothing  herein shall preclude  Executive,  subject to the prior approval of the
Board,  from  accepting  appointment  to or  continue  to serve on any  board of
directors  or  trustees  of  any   business   corporation   or  any   charitable
organization;  provided in each case in the aggregate,  that such  activities do
not conflict or interfere with the performance of Executive's  duties  hereunder
or conflict with Section 10 of this Agreement.
<PAGE>

     3. Base Salary. During the Employment Term, the Company shall pay Executive
a base salary at the annual rate of  $175,000,  payable in  substantially  equal
periodic payments in accordance with the Company's practices for other executive
employees,  as such  practices  may be determined  from time to time.  Executive
shall be entitled to such increases in Executive's  base salary,  if any, as may
be determined  from time to time in the sole  discretion of the Chief  Financial
Officer,  the CEO and the Board.  Executive's  annual base salary,  as in effect
from time to time, is hereinafter referred to as the "Base Salary."

     4. Annual Bonus. During the Employment Term, Executive shall be eligible to
earn an annual bonus award (an "Annual Bonus"), with a target bonus amount equal
to 50% of the Base Salary (the "Target Bonus"),  with  adjustments  based on the
schedules  set forth in the  Citizens  Incentive  Plan,  as amended from time to
time, but the adjustments  shall in no event be less favorable to Executive than
those set forth for the 2004 bonus year.

     5.  Long-Term  Incentive.  With  respect  to each  fiscal  year  during the
Employment  Term,  the  Company  shall  grant no later  than  each  March of the
following  year to Executive a number of restricted  shares of common stock (the
"Restricted  Shares")  with an  aggregate  value equal to between  $200,000  and
$300,000,  as  determined  by  the  Compensation  Committee  of the  Board  (the
"Compensation   Committee").   Subject  to  Section   8(b)(ii)(D)   and  Section
8(c)(iii)(D),  below,  each annual  grant of  Restricted  Shares  shall vest and
become  non-forfeitable  as to  twenty  (20)  percent  of the  shares  initially
granted,  on each anniversary of the date of grant and shall be fully vested and
100 percent non-forfeitable upon the fifth anniversary of the date of grant.

     6. Employee Benefits; Business Expenses.

     a.  Employee  Benefits.  During the  Employment  Term,  Executive  (and his
eligible  dependents) shall be entitled to participate in the Company's pension,
profit sharing,  medical,  dental and other employee benefit plans,  (other than
severance  plans)  (the  "Company  Plans")  as  in  effect  from  time  to  time
(collectively  the "Employee  Benefits") on the same basis as those benefits are
generally made available to other executives at his level of the Company.

     b. Business  Expenses.  During the  Employment  Term,  reasonable  business
expenses  incurred  by  Executive  in  the  performance  of  Executive's  duties
hereunder  shall be reimbursed  by the Company in accordance  with the Company's
policies.

     7. [Intentionally Left Blank.]

     8.  Termination.  Executive's  employment  hereunder  may be  terminated by
either party at any time and for any reason;  provided  that  Executive  will be
required  to give the  Company at least 60 days  advance  written  notice of any
resignation of Executive's  employment.  Notwithstanding  any other provision of
this  Agreement,  the  provisions  of this  Section 8 shall  exclusively  govern
Executive's rights upon termination of employment with the Company.

                                       2
<PAGE>

     a. By the  Company  For  Cause or By  Executive  Resignation  Without  Good
Reason.

     (i)  The  Employment  Term  and  Executive's  employment  hereunder  may be
terminated  by the  Company  for Cause (as  defined  below) and shall  terminate
automatically upon Executive's  resignation  without Good Reason;  provided that
Executive will be required to give the Company at least 60 days advance  written
notice of such resignation.

     (ii) For purposes of this  Agreement,  "Cause" shall mean  Executive's  (A)
willful  and  continued  failure  (other  than as a result of physical or mental
illness or injury) to perform his material duties (as described in Section 2) to
the Company or its  subsidiaries  which continues beyond 10 days after a written
demand for substantial performance is delivered to Executive by the Company (the
"Cure  Period"),  which  demand shall  identify  and describe  such failure with
sufficient specificity to allow Executive to respond; (B) willful or intentional
conduct that causes material and demonstrable  injury,  monetarily or otherwise,
to the Company;  (C)  conviction  of, or a plea of nolo  contendere  to, a crime
constituting  (x) a felony  under  the laws of the  United  States  or any state
thereof or (y) a misdemeanor  involving moral turpitude;  or (D) material breach
of this  Agreement,  including,  without  limitation,  engaging in any action in
breach of Section 9 or Section 10 of this Agreement,  which continues beyond the
Cure Period (to the extent that, in the Board's reasonable judgment, such breach
can be cured). For purposes of this Section 8(a)(ii), no act, or failure to act,
on the part of Executive  shall be  considered  "willful"  unless it is done, or
omitted to be done, by Executive in bad faith and without reasonable belief that
Executive's  action or inaction was in the best  interests  of the Company.  Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive  Officer of
the Company or other  senior  officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by Executive in good faith and in the best interests of the Company.

     (iii) If Executive's  employment is terminated by the Company for Cause, or
if  Executive  resigns  without  Good  Reason,  Executive  shall be  entitled to
receive:

          (A) the Base Salary through the date of termination;

          (B) any Annual Bonus  earned but unpaid as of the date of  termination
     for any previously completed fiscal year;

          (C)  reimbursement  for any unreimbursed  business  expenses  properly
     incurred by Executive in accordance  with Company  policy prior to the date
     of Executive's termination;

          (D) any accrued but unpaid vacation; and

          (E) such Employee Benefits, if any, to which Executive may be entitled
     under  the  applicable   Company  Plans  upon   termination  of  employment
     hereunder,  (the  payments and benefits  described  clauses (A) through (E)
     hereof being referred to, collectively, as the "Accrued Rights").

                                       3
<PAGE>


Following such termination of Executive's employment by the Company for Cause or
resignation  by  Executive,  except  as set  forth  in this  Section  8(a)(iii),
Executive shall have no further rights to any compensation or any other benefits
under this Agreement.

          b. Disability or Death.

     (i) Executive's employment hereunder shall terminate upon Executive's death
and may be terminated by the Company if Executive becomes physically or mentally
incapacitated and is therefore unable for a period of six (6) consecutive months
or for an  aggregate  of nine (9) months in any twelve  (12)  consecutive  month
period to perform Executive's duties (such incapacity is hereinafter referred to
as  "Disability").  Any  question  as to  the  existence  of the  Disability  of
Executive as to which Executive and the Company cannot agree shall be determined
in writing by a qualified independent physician mutually acceptable to Executive
and the  Company.  If Executive  and the Company  cannot agree as to a qualified
independent  physician,  each  shall  appoint  such a  physician  and  those two
physicians  shall select a third who shall make such  determination  in writing.
The  determination  of  Disability  made in writing to the Company and Executive
shall be final and conclusive for all purposes of the Agreement.

     (ii) Upon  termination  of  Executive's  employment  hereunder  for  either
Disability or death, Executive or Executive's estate (as the case may be), shall
be entitled to receive:

          (A) the Accrued Rights;

          (B)  continued  payment of  Executive's  Base Salary during the period
     commencing  on the  termination  date and  ending  on the date  that is six
     months after the termination date;

          (C) a pro rata portion of the Annual  Bonus,  if any,  that  Executive
     would have been entitled to receive pursuant to the Citizens Incentive Plan
     in the year of termination, based on actual performance through the date of
     termination; and

          (D) all  Restricted  Shares  that have been  granted as of the date of
     termination shall be fully vested and  non-forfeitable as of such date, and
     Executive  shall not be entitled to any further annual grants of Restricted
     Shares under Section 5 of this Agreement.

     (iii)  Upon  termination  of  Executive's   employment   hereunder  due  to
Executive's  death or  Disability,  in addition  to the  benefits  described  in
Section 8(b)(ii) above, the Company shall provide Executive (in the event of his
Disability)  and Executive's  spouse with health benefits  (pursuant to the same
Company  Plans that are health  benefit  plans and that are in effect for active
employees  of the  Company),  at the sole cost of the  Company,  until the first
anniversary of the date of Executive's death or Disability.

Following  Executive's  termination  of employment  due to death or  Disability,
except as set forth in this Section 8(b), Executive shall have no further rights
to any compensation or any other benefits under this Agreement.

                                       4
<PAGE>

     c. By the  Company  Without  Cause  or by  Executive  Resignation  for Good
Reason.

     (i) Executive's  employment  hereunder may be terminated (A) by the Company
without Cause (which shall not include Executive's termination of employment due
to his Disability) or (B) by Executive for Good Reason (as defined below).

     (ii) For  purposes  of this  Agreement,  "Good  Reason"  shall mean (A) the
failure of the  Company to pay or cause to be paid  Executive's  Base  Salary or
Annual Bonus, when due hereunder,  (B) any substantial and sustained  diminution
in Executive's  authority or responsibilities  from those described in Section 2
hereof, (C) any relocation of Executive's principal office location more than 25
miles outside of the Stamford,  Connecticut  metropolitan area, or (D) any other
material breach of a material provision of this Agreement;  provided that any of
the events  described in clauses (A) , (B), (C) or (D) of this Section  8(c)(ii)
shall constitute Good Reason only if the Company fails to cure such event within
30 days  after  receipt  from  Executive  of written  notice of the event  which
constitutes  Good Reason (with  sufficient  specificity  from  Executive for the
Company to respond to such claim).

     (iii) If Executive's  employment is terminated by the Company without Cause
(other than by reason of death or  Disability)  or by Executive for Good Reason,
subject  to  Executive's  execution  of a release  of all then  existing  claims
against the Company and its subsidiaries,  affiliates,  shareholders,  officers,
directors, employees and agents, Executive shall be entitled to receive:

          (A) the Accrued Rights;

          (B) subject to Executive's continued compliance with the provisions of
     Section 9 and Section 10 of this Agreement,  an amount equal to the greater
     of (i) three times the sum of the Base Salary and Target Bonus,  payable in
     equal  installments over the thirty-six (36) month period commencing on the
     date of termination,  and (ii) continued payment, during the balance of the
     Initial Term,  of the Base Salary and Target Bonus (each period  referenced
     in clause (i) and (ii) hereof shall be referred to in this Agreement as the
     "Severance Period"); provided, however, that the aggregate amount described
     in this subsection (B) shall be reduced by any amounts owed by Executive to
     the Company (to the extent permitted under applicable law);

          (C)  continuation  of health  benefits  (pursuant  to the same Company
     Plans  that are  health  benefit  plans and that are in effect  for  active
     employees  of the  Company)  until the  earlier  to occur of the end of the
     Severance  Period  and the  date on which  Executive  becomes  eligible  to
     receive comparable health benefits from any subsequent employer; and

          (D) all Restricted  Shares shall be vested and  non-forfeitable  as of
     the date of  termination,  and all  other  restricted  shares  and  options
     previously  granted to Executive that are not vested as of such date become
     vested and non-forfeitable or, in the case of options, fully exercisable.

                                       5
<PAGE>

Following Executive's termination of employment by the Company without Cause
(other than by reason of Executive's death or Disability) or Executive for Good
Reason, except as set forth in this Section 8(c)(iii), Executive shall have no
further rights to any compensation or any other benefits under this Agreement.

          d. Change in Control.

     (i)  Executive  shall also be entitled to the benefits set forth in Section
8(c)(iii)  above if,  within one year  following  a Change in  Control  (defined
below),  Executive terminates his employment as a result of: (i) any decrease by
the Company of the Base Salary or Target Bonus; (ii) any decrease in Executive's
pension  benefit  opportunities  or any  material  diminution  in the  aggregate
employee  benefits;  or (iii) any  material  diminution  in  Executive's  title,
reporting  relationships,  duties or  responsibilities  (each,  a  "Constructive
Termination Event"); provided that either of the events described in clauses (i)
and (ii) of this Section 8(d) shall constitute a Constructive  Termination Event
only if the Company  fails to cure such event within 30 days after  receipt from
Executive  of  written  notice of the event  which  constitutes  a  Constructive
Termination Event;  provided,  further, that a "Constructive  Termination Event"
shall  cease to exist  for an event on the 60th day  following  the later of its
occurrence or  Executive's  knowledge  thereof,  unless  Executive has given the
Company written notice thereof prior to such date.

     (ii) For purposes of this Agreement,  a "Change in Control" shall be deemed
to have occurred:

          (A) When any "person" as defined in Section  3(a)(9) of the Securities
     Exchange  Act of 1934,  as amended  (the  "Exchange  Act"),  and as used in
     Section 13(d) and 14(d) thereof,  including a "group" as defined in Section
     13(d) of the Exchange Act (but excluding the Company and any subsidiary and
     any employee  benefit plan  sponsored or  maintained  by the Company or any
     subsidiary  (including  any  trustee  of such  plan  acting  as  trustee)),
     directly or indirectly,  becomes the "beneficial owner" (as defined in Rule
     13d-3 under the Exchange  Act), of  securities of the Company  representing
     50% or more of the combined voting power of the Company's then  outstanding
     securities; or

          (B) Upon the consummation of any merger or other business  combination
     involving the Company, a sale of substantially all of the Company's assets,
     liquidation or dissolution of the Company or a combination of the foregoing
     transactions  (the  "Transactions")  other than a  Transaction  immediately
     following which the  shareholders of the Company  immediately  prior to the
     Transaction own, in the same proportion,  at least 51% of the voting power,
     directly or indirectly, of (i) the surviving corporation in any such merger
     or other  business  combination;  (ii) the purchaser of or successor to the
     Company's assets; (iii) both the surviving corporation and the purchaser in
     the event of any  combination of  Transactions;  or (iv) the parent company
     owning 100% of such surviving corporation,  purchaser or both the surviving
     corporation and the purchaser, as the case may be.

                                       6
<PAGE>

          (iii) Excess Parachute Payments.

          (A) If it is determined  (as hereafter  provided)  that any payment or
     distribution  by the  Company to or for the benefit of  Executive,  whether
     paid or payable or  distributed or  distributable  pursuant to the terms of
     this  Agreement  or  otherwise  pursuant  to  or by  reason  of  any  other
     agreement,   policy,  plan,  program  or  arrangement,   including  without
     limitation any stock option,  restricted  stock award,  stock  appreciation
     right or similar right,  or the lapse or termination of any  restriction on
     or the vesting or  exercisability  of any of the  foregoing  (a  "Severance
     Payment"),  would be subject to the excise tax  imposed by Section  4999 of
     the  Internal  Revenue  Code of  1986,  as  amended  (the  "Code")  (or any
     successor  provision thereto) by reason of being "contingent on a change in
     ownership or control" of the Company, within the meaning of Section 280G of
     the Code (or any successor provision thereto) or to any similar tax imposed
     by state or local law, or any  interest or  penalties  with respect to such
     excise  tax  (such  tax or  taxes,  together  with  any such  interest  and
     penalties,  are hereafter  collectively  referred to as the "Excise  Tax"),
     then  Executive  shall  receive the greater of (x) the  Severance  Payment,
     after  payment by  Executive  of the Excise  Tax  imposed on the  Severance
     Payment and (y) the amount of the Severance  Payment  (calculated  on a net
     after-tax basis) which could be paid to Executive under Section 280G of the
     Code  without  causing  any loss of  deduction  to the  Company  under such
     Section (the "Capped Payment").

          (B) Subject to the  provisions  of Section  8(d)(iii)(A)  hereof,  all
     determinations  required  to be made under  this  Section  8(d),  including
     whether an Excise Tax is payable by Executive and the amount of such Excise
     Tax, shall be made by the nationally  recognized  firm of certified  public
     accountants (the "Accounting Firm") used by the Company prior to the Change
     in Control (or, if such Accounting  Firm declines to serve,  the Accounting
     Firm shall be a nationally  recognized firm of certified public accountants
     selected  by  Executive).  The  Accounting  Firm shall be  directed  by the
     Company or Executive to submit its preliminary  determination  and detailed
     supporting  calculations  to both  the  Company  and  Executive  within  15
     calendar days after the date of Executive's  termination of employment,  if
     applicable,  and any other  such time or times as may be  requested  by the
     Company or Executive. If the Accounting Firm determines that any Excise Tax
     is payable by  Executive,  the Company shall either (x) make payment of the
     Severance Payment,  less all amounts withheld in respect of the Excise Tax,
     as required by applicable law, or (ii) reduce the Severance  Payment by the
     amount  which,   based  on  the   Accounting   Firm's   determination   and
     calculations,  would provide Executive with the Capped Payment,  and pay to
     Executive such reduced  amount.  If the Accounting  Firm determines that no
     Excise Tax is payable by Executive,  it shall, at the same time as it makes
     such  determination,   furnish  Executive  with  an  opinion  that  he  has
     substantial  authority not to report any Excise Tax on his federal,  state,
     local income or other tax return.  All fees and expenses of the  Accounting
     Firm  shall be paid by the  Company  in  connection  with the  calculations
     required by this section.

                                       7
<PAGE>

          (C) The federal,  state and local income or other tax returns filed by
     Executive (or any filing made by a  consolidated  tax group which  includes
     the Company)  shall be prepared  and filed on a  consistent  basis with the
     determination of the Accounting Firm with respect to the Excise Tax payable
     by  Executive.  Executive  shall make  proper  payment of the amount of any
     Excise Tax, and at the request of the Company,  provide to the Company true
     and correct  copies (with any  amendments) of his federal income tax return
     as filed with the  Internal  Revenue  Service and  corresponding  state and
     local  tax  returns,  if  relevant,  as filed  with the  applicable  taxing
     authority,  and such other documents  reasonably  requested by the Company,
     evidencing such payment.

     e. Notice of  Termination.  Any purported  termination of employment by the
Company  or by  Executive  (other  than  due  to  Executive's  death)  shall  be
communicated  by written  Notice of  Termination  to the other  party  hereto in
accordance with Section 13(h) hereof. For purposes of this Agreement,  a "Notice
of  Termination"   shall  mean  a  notice  which  shall  indicate  the  specific
termination  provision  in this  Agreement  relied  upon and  shall set forth in
reasonable  detail  the facts and  circumstances  claimed to provide a basis for
termination of employment under the provision so indicated.

     f. Board/Committee Resignation; Execution of Release of all Claims.

     (i) Upon  termination of Executive's  employment for any reason,  Executive
agrees  to  resign,  as of the  date  of  such  termination  and  to the  extent
applicable,  from  the  Board  (and any  committees  thereof)  and the  board of
directors (and any committees  thereof) of any of the Company's  subsidiaries or
affiliates.

     (ii) Upon termination of Executive's  employment for any reason,  Executive
agrees to execute a release of all then existing claims against the Company, its
subsidiaries,  affiliates,  shareholders,  directors,  officers,  employees  and
agents.  Notwithstanding  anything set forth in this  Agreement to the contrary,
upon termination of Executive's  employment for any reason,  Executive shall not
receive any  payments or benefits to which he may be entitled  hereunder  (other
than those which by law cannot be subject to the  execution of a release) (A) if
Executive  revokes  such  release  or (B) until  eight  (8) days  after the date
Executive  signs such  release (or until such other date as  applicable  law may
provide that Executive cannot revoke such release).

     9. Non-Competition/Non-Solicitation/Non-Disparagement.

     a. Executive  acknowledges and recognizes the highly  competitive nature of
the businesses of the Employer and its affiliates and  accordingly  agrees that,
during  the  Employment  Term  and,  for a  period  of one  year  following  any
termination  of  Executive's   employment  with  the  Company  (the  "Restricted
Period"),  Executive will not, whether on Executive's own behalf or on behalf of
or  in  conjunction  with  any  person,   firm,   partnership,   joint  venture,
association,  corporation or other business  organization,  entity or enterprise
whatsoever  ("Person"),  directly  or  indirectly  engage in any  business  that
directly or indirectly  competes with the business of the Company,  or otherwise
engage in  competition  with the Company which is materially  detrimental to the
Company;

                                       8
<PAGE>

     (i)  During  the  Restricted   Period,   Executive  will  not,  whether  on
Executive's  own  behalf  or on  behalf of or in  conjunction  with any  Person,
directly or indirectly:

          (A) solicit or encourage any employee of the Company or its affiliates
     to leave the employment of the Company or its affiliates; or

          (B) hire any such  employee  who was  employed  by the  Company or its
     affiliates as of the date of Executive's termination of employment with the
     Company  or who  left  the  employment  of the  Company  or its  affiliates
     coincident  with, or within one year prior to or after,  the termination of
     Executive's employment with the Company.

     b.  Executive  shall not at any time  issue any press  release  or make any
public  statement  about  the  Company  or  any  director,   officer,  employee,
successor,  parent, subsidiary or agent or representative of, or attorney to the
Company (any of the foregoing,  a "Company Affiliate")  regarding (i) any of the
foregoing's financial status, business,  services,  business methods, compliance
with  laws,  or  ethics  or  otherwise,  or  (ii)  regarding  Company  partners,
personnel, directors, officers, employees, attorneys, agents, including, without
limitation,  in respect of both  clauses  (i) and (ii),  any  statement  that is
intended or reasonably likely to disparage the Company or any Company Affiliate,
or  otherwise  degrade  any  Company  Affiliate's  reputation  in the  business,
industry  or legal  community  in which  any such  Company  Affiliate  operates;
provided,  that,  Executive shall be permitted to (a) make any statement that is
required by  applicable  securities  or other laws to be included in a filing or
disclosure  document,  subject to prior notice to the Company  thereof,  and (b)
defend  himself  against  any  statement  made  by the  Company  or any  Company
Affiliate  that is intended or reasonably  likely to disparage  Executive or his
spouse or otherwise degrade Executive's reputation in the business,  industry or
legal  community  in which  Executive  operates,  only if  Executive  reasonably
believes that the statements  made in such defense are not false  statements and
(c) provide truthful testimony in any legal proceeding.

     c. It is expressly  understood  and agreed that although  Executive and the
Company consider the restrictions  contained in this Section 9 to be reasonable,
if a final judicial  determination is made by a court of competent  jurisdiction
that the time or territory or any other restriction  contained in this Agreement
is an  unenforceable  restriction  against  Executive,  the  provisions  of this
Agreement  shall not be rendered void but shall be deemed amended to apply as to
such maximum  time and  territory  and to such maximum  extent as such court may
judicially determine or indicate to be enforceable.  Alternatively, if any court
of competent jurisdiction finds that any restriction contained in this Agreement
is  unenforceable,  and such  restriction  cannot  be  amended  so as to make it
enforceable,  such  finding  shall not affect the  enforceability  of any of the
other restrictions contained herein.

     10. Confidentiality.

     a.  Executive  will not at any time  (whether  during or after  Executive's
employment  with the  Company  (x) retain or use for the  benefit,  purposes  or
account of Executive or any other  Person;  or (y)  disclose,  divulge,  reveal,
communicate, share, transfer or provide access to any Person outside the Company
(other  than  its  professional   advisers  who  are  bound  by  confidentiality
obligations),  any  non-public,   proprietary  or  confidential  information  --
including  without  limitation  rates,  trade  secrets,  know-how,  research and
development,  software, databases, inventions,  processes, formulae, technology,
designs  and  other  intellectual  property,  information  concerning  finances,
investments,  profits, pricing, costs, products,  services,  vendors, customers,
clients, partners, investors,  personnel,  compensation,  recruiting,  training,
advertising, sales, marketing, promotions,  government and regulatory activities
and approvals -- concerning the past, current or future business, activities and
operations of the Company, its subsidiaries or affiliates and/or any third party
that has  disclosed  or provided  any of same to the  Company on a  confidential
basis ("Confidential  Information")  without the prior written  authorization of
the Board.

                                       9
<PAGE>

     b. "Confidential Information" shall not include any information that is (a)
generally  known  to the  industry  or the  public  other  than as a  result  of
Executive's  breach of this  covenant  or any  breach  of other  confidentiality
obligations by third parties; (b) made legitimately  available to Executive by a
third party without breach of any confidentiality obligation; or (c) required by
law to be disclosed; provided that Executive shall give prompt written notice to
the  Company  of  such  requirement,  disclose  no more  information  than is so
required,  and cooperate with any attempts by the Company to obtain a protective
order or similar treatment.

     c. Except as required by law, Executive will not disclose to anyone,  other
than Executive's immediate family and legal or financial advisors, the existence
or contents of this  Agreement;  provided  that  Executive  may  disclose to any
prospective future employer the provisions of Section 9 and 10 of this Agreement
provided that such potential employer agrees to maintain the  confidentiality of
such terms.

     d. Upon  termination  of  Executive's  employment  with the Company for any
reason,  Executive shall immediately destroy,  delete, or return to the Company,
at the  Company's  option,  all  originals  and  copies  in any  form or  medium
(including  memoranda,  books, papers,  plans, computer files, letters and other
data) in  Executive's  possession  or control  (including  any of the  foregoing
stored or located in Executive's office, home, laptop or other computer, whether
or not Company  property)  that contain  Confidential  Information  or otherwise
relate to the business of the Company,  its affiliates and subsidiaries,  except
that Executive may retain only those portions of any personal  notes,  notebooks
and diaries that do not contain any Confidential Information.

     e. The  provisions  of this  Section 10 shall  survive the  termination  of
Executive's employment for any reason.

     11.  Specific  Performance.  Executive  acknowledges  and  agrees  that the
Employer's  remedies  at law for a breach  or  threatened  breach  of any of the
provisions of Section 9 or Section 10 of this Agreement  would be inadequate and
the  Company  would  suffer  irreparable  damages as a result of such  breach or
threatened  breach.  In recognition of this fact,  Executive agrees that, in the
event of such a breach or threatened breach, in addition to any remedies at law,
the  Company,  without  posting any bond,  shall be entitled to cease making any
payments or  providing  any benefit  otherwise  required by this  Agreement  and
obtain  equitable  relief  in  the  form  of  specific  performance,   temporary
restraining  order,  temporary or permanent  injunction  or any other  equitable
remedy which may then be available.

                                       10
<PAGE>

     12.  Arbitration.  Except as  provided  in Section  11,  any other  dispute
arising out of or asserting breach of this Agreement, or any statutory or common
law claim by Executive  relating to his  employment  under this Agreement or the
termination  thereof  (including  any tort or  discrimination  claim),  shall be
exclusively  resolved by binding  statutory  arbitration in accordance  with the
Employment  Dispute  Resolution Rules of the American  Arbitration  Association.
Such  arbitration  process  shall take place in New York,  New York.  A court of
competent jurisdiction may enter judgment upon the arbitrator's award. All costs
and expenses of arbitration  (including fees and disbursements of counsel) shall
be borne by the respective party incurring such costs and expenses.

     13. Miscellaneous.

     a.  Governing  Law.  This  Agreement  shall be governed by and construed in
accordance  with  the  laws of the  State  of  Connecticut,  without  regard  to
conflicts of laws principles thereof.

     b.  Entire   Agreement/Amendments.   This  Agreement  contains  the  entire
understanding  of the parties with respect to the employment of Executive by the
Company. There are no restrictions,  agreements, promises, warranties, covenants
or  undertakings  between the parties with respect to the subject  matter herein
other than those expressly set forth herein.  This Agreement may not be altered,
modified or amended except by written instrument signed by the parties hereto.

     c. No Waiver. The failure of a party to insist upon strict adherence to any
term of this  Agreement on any occasion shall not be considered a waiver of such
party's  rights or deprive  such party of the right  thereafter  to insist  upon
strict adherence to that term or any other term of this Agreement.

     d.  Severability.  In the event that any one or more of the  provisions  of
this  Agreement  shall be or become  invalid,  illegal or  unenforceable  in any
respect,  the validity,  legality and enforceability of the remaining provisions
of this Agreement shall not be affected thereby.

     e.  Assignment.  This Agreement,  and all of Executive's  rights and duties
hereunder,  shall not be  assignable  or delegable by  Executive.  Any purported
assignment or  delegation  by Executive in violation of the  foregoing  shall be
null and void ab  initio  and of no force  and  effect.  This  Agreement  may be
assigned  by the  Company  to a person  or  entity  which is an  affiliate  or a
successor in interest to  substantially  all of the business  operations  of the
Company.  Upon such  assignment,  the  rights  and  obligations  of the  Company
hereunder shall become the rights and obligations of such affiliate or successor
person or entity.

     f. Set Off;  Mitigation.  The  Company's  obligation  to pay  Executive the
amounts  provided  and to make  the  arrangements  provided  hereunder  shall be
subject to set-off,  counterclaim  or recoupment of amounts owed by Executive to
the Company or its  affiliates.  Executive shall not be required to mitigate the
amount of any payment  provided for pursuant to this  Agreement by seeking other
employment or otherwise  and the amount of any payment  provided for pursuant to
this Agreement  shall not be reduced by any  compensation  earned as a result of
Executive's other employment or otherwise.

                                       11
<PAGE>

     g. Successors; Binding Agreement. This Agreement shall inure to the benefit
of and be binding upon the Company and its  subsidiaries  and  Executive and any
personal  or  legal  representatives,   executors,  administrators,  successors,
assigns, heirs, distributees,  devisees and legatees.  Further, the Company will
require  any  successor  (whether,  direct or  indirect,  by  purchase,  merger,
consolidation or otherwise) to all or  substantially  all of the business and/or
assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same  extent  that the  Company  would be required to
perform it if no such  succession  had taken place.  As used in this  Agreement,
"Company" shall mean the Company and any successor to its business and/or assets
which is  required  by this  Section  13(g) to assume and agree to perform  this
Agreement  or which  otherwise  assumes  and agrees to perform  this  Agreement;
provided,  however, in the event that any successor,  as described above, agrees
to assume this Agreement in accordance  with the preceding  sentence,  as of the
date such  successor so assumes this  Agreement,  the Company  shall cease to be
liable for any of the obligations contained in this Agreement.

     h.  Notice.  For the  purpose  of this  Agreement,  notices  and all  other
communications  provided for in the  Agreement  shall be in writing and shall be
deemed to have been duly given when  delivered by hand or  overnight  courier or
three days after it has been mailed by United  States  registered  mail,  return
receipt requested,  postage prepaid,  addressed to the respective  addresses set
forth below in this Agreement, or to such other address as either party may have
furnished to the other in writing in accordance herewith,  except that notice of
change of address shall be effective only upon receipt.

                  If to the Company:

                  Citizens Communications Company
                  Three High Ridge Park
                  Building 3
                  Stamford, Connecticut 06905
                  Attention:        Russ Mitten, Esq.

                  With a copy to:

                  Simpson Thacher & Bartlett LLP
                  425 Lexington Avenue
                  New York, New York 10017
                  Attention:        Alvin H. Brown, Esq.

                  If to Executive:

                  To the most recent address of Executive set forth in the
                  personnel records of the Company.

                                       12
<PAGE>

     i. Executive  Representation.  Executive  hereby  represents to the Company
that the execution  and delivery of this  Agreement by Executive and the Company
and the  performance  by Executive of  Executive's  duties  hereunder  shall not
constitute a breach of, or  otherwise  contravene,  the terms of any  employment
agreement  or  other  agreement  or  policy  to  which  Executive  is a party or
otherwise bound.

     j. Prior  Agreements.  This Agreement  supercedes all prior  agreements and
understandings  (including verbal agreements)  between Executive and the Company
and/or  its  affiliates  regarding  the  terms  and  conditions  of  Executive's
employment  with the Company  and/or its  affiliates.  The provisions of Section
8(c)(iii)(D)  shall also  supersede  any  provision of any  restricted  stock or
option  agreement or plan which is less  favorable to Executive in the treatment
of restricted  shares or options  previously  granted to him thereunder upon his
termination of employment without Cause or for Good Reason.

     k. Cooperation.  Executive shall provide Executive's reasonable cooperation
in connection  with any action or  proceeding  (or any appeal from any action or
proceeding)  which relates to events  occurring  during  Executive's  employment
hereunder. This provision shall survive any termination of this Agreement.

     l.  Withholding  Taxes.  The Company may withhold from any amounts  payable
under this Agreement  such Federal,  state and local taxes as may be required to
be withheld pursuant to any applicable law or regulation.

     m.  Counterparts.  This  Agreement may be signed in  counterparts,  each of
which shall be an original,  with the same effect as if the  signatures  thereto
and hereto were upon the same instrument.


                                       13
<PAGE>


     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.



CITIZENS COMMUNICATIONS COMPANY:            EXECUTIVE:

/s/  Citizens Communications Company        /s/  Robert Larson
- ------------------------------------        -------------------
     Citizens Communications Company             Robert Larson


By:  /s/  Rudy Graf
     -------------------------------
          Rudy Graf

                                       14


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.19
<SEQUENCE>6
<FILENAME>exhibit10-19credit.txt
<DESCRIPTION>CREDIT AGREEMENT
<TEXT>
                                                        Exhibit 10.19


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



                                  $250,000,000

           Competitive Advance and REVOLVING CREDIT FACILITY AGREEMENT

                          Dated as of October 29, 2004

                                      among

                         CITIZENS COMMUNICATIONS COMPANY
                                   as Borrower

                                       and

                            THE LENDERS NAMED HEREIN
                                   as Lenders

                              Bank of America, N.A.
                    as Administrative Agent and Issuing Bank

                                       and

                               JPMorgan Chase BAnk
                              as Syndication Agent
                                       and

                              Morgan Stanley Bank,
                         DEUTSCHE BANK SECURITIES, INC.,
                         THE ROYAL BANK OF SCOTLAND PLC
                                       and
                               UBS Securities LLC
                           as Co-Documentation Agents

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

                         Banc of America Securities LLC
                         as Lead Arranger and Bookrunner


- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>

<S>                                                                                      <C>
ARTICLE I DEFINITIONS.....................................................................1
SECTION 1.01. Defined Terms...............................................................1
SECTION 1.02. Terms Generally............................................................17
SECTION 1.03. Letter of Credit Amounts...................................................17
SECTION 1.04. Times of Day...............................................................18

ARTICLE II THE CREDITS...................................................................18
SECTION 2.01. Commitments................................................................18
SECTION 2.02. Loans......................................................................18
SECTION 2.03. Competitive Bid Procedure..................................................20
SECTION 2.04. Standby Borrowing Procedure................................................22
SECTION 2.05. Conversions................................................................22
SECTION 2.06. Fees.......................................................................23
SECTION 2.07. Repayment of Loans.........................................................23
SECTION 2.08. Interest on Loans..........................................................24
SECTION 2.09. Default Interest...........................................................25
SECTION 2.10. Alternate Rate of Interest.................................................25
SECTION 2.11. Changes in Commitments.....................................................25
SECTION 2.12. Prepayment.................................................................26
SECTION 2.13. Reserve Requirements; Change in Circumstances..............................27
SECTION 2.14. Change in Legality.........................................................29
SECTION 2.15. Indemnity..................................................................29
SECTION 2.16. Pro Rata Treatment.........................................................30
SECTION 2.17. Sharing of Setoffs.........................................................30
SECTION 2.18. Payments; Administrative Agent's Clawback..................................31
SECTION 2.19. Taxes......................................................................32
SECTION 2.20. Letters of Credit..........................................................35

ARTICLE III REPRESENTATIONS AND WARRANTIES...............................................44
SECTION 3.01. Organization; Powers; Governmental Approvals...............................44
SECTION 3.02. Financial Statements.......................................................44
SECTION 3.03. No Material Adverse Change.................................................45
SECTION 3.04. Title to Properties; Possession Under Leases...............................45
SECTION 3.05. Ownership of Subsidiaries..................................................45
SECTION 3.06. Litigation; Compliance with Laws...........................................45
SECTION 3.07. Agreements.................................................................46
SECTION 3.08. Federal Reserve Regulations................................................46
SECTION 3.09. Investment Company Act; Public Utility Holding Company Act.................47
SECTION 3.10. Use of Proceeds............................................................47
SECTION 3.11. Tax Returns................................................................47
SECTION 3.12. No Material Misstatements..................................................47
SECTION 3.13. Employee Benefit Plans.....................................................47
SECTION 3.14. Insurance..................................................................48


<PAGE>


ARTICLE IV CONDITIONS OF LENDING.........................................................48
SECTION 4.01. Each Borrowing and Issuance................................................48
SECTION 4.02. Effective Date.............................................................48

ARTICLE V AFFIRMATIVE COVENANTS..........................................................50
SECTION 5.01. Existence; Businesses and Properties.......................................50
SECTION 5.02. Financial Statements, Reports, etc.........................................51
SECTION 5.03. Litigation and Other Notices...............................................52
SECTION 5.04. Maintaining Records........................................................53
SECTION 5.05. Use of Proceeds............................................................53

ARTICLE VI NEGATIVE COVENANTS............................................................53
SECTION 6.01. Liens; Restrictions on Sales of Receivables................................53
SECTION 6.02. Ownership of the Principal Subsidiaries....................................54
SECTION 6.03. Asset Sales................................................................54
SECTION 6.04. Mergers....................................................................55
SECTION 6.05. Restrictions on Dividends..................................................55
SECTION 6.06. Transactions with Affiliates...............................................55
SECTION 6.07. Financial Ratio............................................................56
SECTION 6.08. Guarantees.................................................................56

ARTICLE VII EVENTS OF DEFAULT............................................................56
SECTION 7.01. Events of Default..........................................................56
SECTION 7.02. Application of Funds.......................................................58

ARTICLE VIII THE ADMINISTRATIVE AGENT....................................................59

ARTICLE IX MISCELLANEOUS.................................................................62
SECTION 9.01. Notices....................................................................62
SECTION 9.02. Survival of Agreement......................................................63
SECTION 9.03. Binding Effect.............................................................64
SECTION 9.04. Successors and Assigns.....................................................64
SECTION 9.05. Expenses; Indemnity........................................................67
SECTION 9.06. Right of Setoff............................................................69
SECTION 9.07. Applicable Law.............................................................69
SECTION 9.08. Waivers; Amendment.........................................................69
SECTION 9.09. Interest Rate Limitation...................................................70
SECTION 9.10. Entire Agreement...........................................................70
SECTION 9.11. Waiver of Jury Trial.......................................................71
SECTION 9.12. Severability...............................................................71
SECTION 9.13. Counterparts...............................................................71
SECTION 9.14. Headings...................................................................71
SECTION 9.15. Jurisdiction; Consent to Service of Process................................71
SECTION 9.16. USA PATRIOT Act Notice.....................................................72
SECTION 9.17. Payments Set Aside.........................................................72
SECTION 9.18. Treatment of Certain Information; Confidentiality..........................73
</TABLE>

<PAGE>

Exhibit A-1       Form of Competitive Bid Request
Exhibit A-2       Form of Notice of Competitive Bid Request
Exhibit A-3       Form of Competitive Bid
Exhibit A-4       Form of Competitive Bid Accept/Reject Letter
Exhibit A-5       Form of Standby Borrowing Request
Exhibit A-6       Form of Conversion Request
Exhibit B         Form of Assignment and Assumption
Exhibit C         Form of Opinion of Counsel to Borrower
Exhibit D-1       Form of Standby Note
Exhibit D-2       Form of Competitive Note

Schedule 2.01     Lenders' Commitment
Schedule 6.08     Guarantees
Schedule 9.01     Administrative Agent's Office; Certain Addresses for Notices


<PAGE>
               Competitive  Advance and  REVOLVING  CREDIT  FACILITY  AGREEMENT,
               dated as of  October  29,  2004,  among  CITIZENS  COMMUNICATIONS
               COMPANY,  a Delaware  corporation (the  "Borrower"),  the Lenders
               listed in Schedule 2.01 (together with any assignees  pursuant to
               Section 9.04, the "Lenders") and BanK of America, N.A. a national
               banking association,  as administrative agent for the Lenders (in
               such capacity, the "Administrative Agent").

     The Borrower has  requested the Lenders to extend credit to the Borrower in
order to enable it to borrow on a standby  revolving  credit basis and to obtain
the  issuance  of letters of credit on and after the date hereof and at any time
and from time to time  prior to the  Maturity  Date (as  hereinafter  defined) a
principal  amount not in excess of $250,000,000  (as such amount may be modified
pursuant to Section 2.11 hereof) at any time outstanding.  The Borrower has also
requested the Lenders to provide a procedure  pursuant to which the Borrower may
invite the Lenders to bid on an  uncommitted  basis on short-term  borrowings by
the  Borrower.  The  proceeds  of such  borrowings  are to be used  for  general
corporate  purposes,  including  working capital and support of commercial paper
issuances and  Securitization  Transactions (as hereinafter  defined)  permitted
hereunder.  The Lenders are willing to extend such credit to the Borrower on the
terms and subject to the conditions herein set forth.

     Accordingly,  the Borrower,  the Lenders and the Administrative Agent agree
as follows:

                                    ARTICLE I

                                   DEFINITIONS

     SECTION 1.01. Defined Terms.

     As used in this  Agreement,  the  following  terms shall have the  meanings
specified below:

     "ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.

     "ABR  Loan"  shall  mean  any  Standby  Loan  bearing  interest  at a  rate
determined  by  reference  to the  Alternate  Base Rate in  accordance  with the
provisions of Article II.

     "Administrative  Agent's Office" means the  Administrative  Agent's address
and,  as  appropriate,  account  as set forth on  Schedule  9.01,  or such other
address or account as the  Administrative  Agent may from time to time notify to
the Borrowers and the Lenders.

     "Administrative  Fees"  shall  have the  meaning  assigned  to such term in
Section 2.06(b).

     "Administrative  Questionnaire" shall mean an Administrative  Questionnaire
in a form supplied by the Administrative Agent.

     "Affiliate"  shall  mean,  when used with  respect to a  specified  Person,
another Person that directly,  or indirectly through one or more intermediaries,
Controls  or is  Controlled  by or is  under  common  Control  with  the  Person
specified.

<PAGE>

     "Alternate Base Rate" shall mean, for any day a fluctuating  rate per annum
equal to the higher of (a) the Federal Funds  Effective  Rate plus 1/2 of 1% and
(b) the Prime Rate in effect on such day.

     "Applicable  Rate" shall  mean,  with  respect to any ABR Loan,  Eurodollar
Standby Loan, Letter of Credit Fee or Commitment Fee, as the case may be, at all
times, a percentage  per annum  determined by reference to the Leverage Ratio as
set forth below:
<TABLE>
<CAPTION>

                                                                Applicable Rate
                                                                  for Eurodollar      Applicable Rate
                                              Applicable Rate   Standby Loans and           for
    Pricing Level         Leverage Ratio       for ABR Loans    Letters of Credit     Commitment Fee
- --------------------------------------------------------------------------------------------------------
<C>                    <C>                        <C>                <C>                 <C>
1                      < 3.0:1                     0.00%              1.00%               0.250%
                       -
- --------------------------------------------------------------------------------------------------------
2                      >3.0:1 <  3.5:1             0.25%              1.25%               0.375%
                              -
- --------------------------------------------------------------------------------------------------------
3                      >3.5:1 < 4.0:1              0.50%              1.50%               0.375%
                              -
- --------------------------------------------------------------------------------------------------------
4                      > 4.0:1                     0.75%              1.75%               0.500%
</TABLE>

     Any increase or decrease in the Applicable  Rate resulting from a change in
the  Leverage  Ratio  shall  become  effective  as of  the  first  Business  Day
immediately following the date a certificate of a Financial Officer is delivered
pursuant to Section 5.02(c);  provided,  however,  that if a such certificate is
not  delivered  when due in accordance  with such Section,  then Pricing Level 4
shall  apply  as of the  first  Business  Day  after  the  date  on  which  such
certificate  was required to have been  delivered.  Pricing  Level 3 shall apply
from the Effective  Date through the first Business Day after the earlier of the
date the  certificate  is delivered  under  Section  5.02(c) with respect to the
fiscal quarter ending  September 30, 2004, and the date the such  certificate is
required to be delivered under Section 5.02(c).

     "Asset   Exchange"   shall  mean  the   exchange   or  other   transfer  of
telecommunications  assets  between or among the Borrower and another  Person or
other   Persons  in   connection   with  which  the  Borrower   would   transfer
telecommunications  assets and/or other property in consideration of the receipt
of  telecommunications  assets and/or other property  having a fair market value
substantially  equivalent to those transferred by the Borrower (as determined in
good faith by the Borrower's  Board of  Directors);  provided that the principal
value of the assets being  transferred  to the Borrower  shall be represented by
telecommunications assets.

     "Assignment and Assumption" shall mean an assignment and assumption entered
into by a Lender and an assignee,  and accepted by the Administrative  Agent, in
substantially  the  form  of  Exhibit  B or  any  other  form  approved  by  the
Administrative Agent.

     "Available  Amount" of any Letter of Credit  shall mean,  at any time,  the
amount of such Letter of Credit as determined in accordance with Section 1.03.

     "Bank of America" shall mean Bank of America, N.A.


                                       2
<PAGE>

     "Board" shall mean the Board of Governors of the Federal  Reserve System of
the United States.

     "Borrowing"  shall  mean a group  of Loans  of a  single  Type  made by the
Lenders (or, in the case of a  Competitive  Borrowing,  by the Lender or Lenders
whose Competitive Bids have been accepted pursuant to Section 2.03) or Converted
on a single  date and as to which a single  Interest  Period is in  effect.  All
Loans of the same Type, having the same Interest Period and made or Converted on
the same day shall be deemed a single  Borrowing  hereunder until repaid or next
Converted.

     "Business  Day" shall mean any day (other  than a day which is a  Saturday,
Sunday or legal holiday in the State of New York or the State of Texas) on which
banks  are open for  business  in New York  City and  Dallas,  Texas;  provided,
however,  that,  when  used in  connection  with a  Eurodollar  Loan,  the  term
"Business  Day"  shall  also  exclude  any day on which  banks  are not open for
dealings in dollar deposits in the London interbank market.

     "Capital  Lease  Obligations"  of any Person shall mean the  obligations of
such  Person  to pay  rent  or  other  amounts  under  any  lease  of (or  other
arrangement  conveying  the  right  to use)  real  or  personal  property,  or a
combination  thereof,  which  obligations  are  required  to be  classified  and
accounted  for as capital  leases on a balance  sheet of such Person  under GAAP
and, for the purposes of this Agreement,  the amount of such  obligations at any
time  shall  be the  capitalized  amount  thereof  at such  time  determined  in
accordance with GAAP.

     "Cash Collateral" has the meaning specified in Section 2.20(g).

     "Cash Collateralize" has the meaning specified in Section 2.20(g).

     A "Change in Control" shall be deemed to have occurred if (a) any Person or
group  (within  the  meaning  of  Rule  13d-5  of the  Securities  and  Exchange
Commission  as in effect on the date hereof)  shall own directly or  indirectly,
beneficially  or of record,  shares  representing  50% or more of the  aggregate
ordinary voting power represented by the issued and outstanding capital stock of
the  Borrower;  or (b) a majority of the seats (other than vacant  seats) on the
board of  directors  of the  Borrower  shall at any time have been  occupied  by
Persons who were neither (i) nominated by the  management  of the Borrower,  nor
(ii)  appointed  by  directors  so  nominated;  or (c) any Person or group shall
otherwise directly or indirectly Control the Borrower.

     "Code"  shall mean the Internal  Revenue  Code of 1986,  as the same may be
amended from time to time.

     "Collateral"  means any and all "Collateral",  as defined in any applicable
Security Document.

     "Commitment"  means, as to each Lender,  its obligation to (a) make Standby
Loans to the Borrower pursuant to the Agreement, and (b) purchase participations
in L/C Obligations, in an aggregate principal amount at any one time outstanding
not to exceed the amount set forth  opposite such Lender's name on Schedule 2.01
or in the  Assignment  and  Assumption  pursuant to which such Lender  becomes a
party hereto, as applicable, as such amount may be adjusted from time to time in
accordance with this Agreement.  Unless earlier terminated pursuant to the terms
of this Agreement, the Commitments shall automatically and permanently terminate
on the Maturity Date.

                                       3
<PAGE>

     "Commitment  Fee" shall have the  meaning  assigned to such term in Section
2.06(a).

     "Competitive  Bid"  shall  mean an offer by a Lender to make a  Competitive
Loan pursuant to Section 2.03.

     "Competitive Bid  Accept/Reject  Letter" shall mean a notification  made by
the Borrower pursuant to Section 2.03(d) in the form of Exhibit A-4.

     "Competitive  Bid Rate" shall  mean,  as to any  Competitive  Bid made by a
Lender pursuant to Section  2.03(b),  (i) in the case of a Eurodollar  Loan, the
Margin,  and (ii) in the case of a Fixed Rate Loan,  the fixed rate of  interest
offered by the Lender making such Competitive Bid.

     "Competitive  Bid Request"  shall mean a request  made  pursuant to Section
2.03 in the form of Exhibit A-1.

     "Competitive  Borrowing" shall mean a Borrowing consisting of a Competitive
Loan  or  concurrent   Competitive  Loans  from  the  Lender  or  Lenders  whose
Competitive Bids for such Borrowing have been accepted by the Borrower under the
bidding procedure described in Section 2.03.

     "Competitive Loan" shall mean a Loan from a Lender to the Borrower pursuant
to the bidding procedure  described in Section 2.03. Each Competitive Loan shall
be a Eurodollar Competitive Loan or a Fixed Rate Loan.

     "Consolidated  EBITDA"  shall mean,  with  respect to the  Borrower and its
Subsidiaries  for any period:  Consolidated  Net Income for such period plus (a)
without  duplication and to the extent deducted in determining such Consolidated
Net Income, the sum of (i) consolidated  interest expense for such period,  (ii)
consolidated income tax expense for such period,  (iii) all amounts attributable
to depreciation and  amortization  for such period,  (iv) dividends on preferred
stock, (v) losses  attributable to minority  interests,  (vi) investment losses,
(vii) any  nonrecurring  charges for such period  relating to  severance  costs,
restructuring   costs  or   acquisition   assimilation   expenses,   (viii)  any
extraordinary  charges or non-cash  charges for such period  (provided  that any
cash payment made with respect to any such  non-cash  charge shall be subtracted
in computing Consolidated EBITDA during the period in which such cash payment is
made) and (ix) net losses in  connection  with the early  retirement of debt and
minus (b) without  duplication  and to the extent  included in determining  such
Consolidated Net Income, (i) income or gains attributable to minority interests,
(ii) investment income and (iii) any  extraordinary  gains or non-cash gains for
such period, all determined on a consolidated basis in accordance with GAAP. For
purposes of calculating  Consolidated  EBITDA for any period of four consecutive
fiscal   quarters   (each,  a  "Reference   Period")  in  connection   with  any
determination  of the Leverage  Ratio,  if after the first day of such Reference
Period  and on or  prior  to any  date on  which  the  Leverage  Ratio  is to be
determined  the  Borrower or a  consolidated  Subsidiary  shall have  effected a
Material  Transaction,  Consolidated  EBITDA for such Reference  Period shall be
calculated  after giving pro forma effect thereto (without giving effect to cost
savings not actually realized),  as determined reasonably and in good faith by a
Financial Officer, as if such Material  Transaction occurred on the first day of
such Reference Period;  provided,  that, such pro forma  calculations shall only
include such adjustments as are permitted under Regulation S-X of the Securities
and Exchange  Commission.  As used in this  definition,  "Material  Transaction"
means any acquisition or disposition  outside the ordinary course of business of
any  property  or  assets  that  (x)   constitute   assets   comprising  all  or
substantially  all of an operating  unit of a business or equity  interests of a
Person  representing  a  majority  of the  ordinary  voting  power  or  economic
interests in such Person that are  represented  by all its  outstanding  capital
stock  and (y)  involves  aggregate  consideration  in  excess  of  $50,000,000.
Notwithstanding  the foregoing,  Consolidated EBITDA for any period shall not in
any event be  calculated  to include the  operations,  income or expenses of any
Non-Recourse  Joint  Venture,  except  to  the  extent  of  dividends  or  other
distributions  actually  paid  to  the  Borrower  or  any  of  its  consolidated
Subsidiaries (other than Non-Recourse Joint Ventures) during such period.

                                       4
<PAGE>

     "Consolidated  Net Income"  shall mean,  for any period,  the net income or
loss  of  the  Borrower  and  its  consolidated  Subsidiaries  for  such  period
determined on a consolidated basis in accordance with GAAP;  provided that there
shall be excluded (a) the income of any Non-Recourse  Joint Venture or any other
Person  (other  than the  Borrower)  in which any other  Person  (other than the
Borrower or any consolidated  Subsidiary of the Borrower or any director holding
qualifying  shares in compliance with  applicable law) owns an equity  interest,
except to the extent of the amount of dividends or other distributions  actually
paid  to  the  Borrower  or any of its  consolidated  Subsidiaries  (other  than
Non-Recourse  Joint Ventures)  during such period,  and (b) (except as otherwise
specified in the definition of  Consolidated  EBITDA in connection with Material
Transactions),  the  income or loss of any Person  accrued  prior to the date it
becomes a Subsidiary of the Borrower or is merged into or consolidated  with the
Borrower or any Subsidiary of the Borrower or the date that such Person's assets
are acquired by the Borrower or any Subsidiary of the Borrower.

     "Consolidated Net Worth" shall mean, as at any date of  determination,  the
consolidated   stockholders'   equity  of  the  Borrower  and  its  consolidated
Subsidiaries,  including  redeemable  preferred  securities where the redemption
date  occurs  after  the  Maturity  Date,   mandatorily  redeemable  convertible
preferred  securities,  mandatorily  convertible  Indebtedness  (or Indebtedness
subject  to  mandatory   forward  purchase   contracts  for  equity  or  similar
securities) and minority equity  interests in other persons,  as determined on a
consolidated basis in conformity with GAAP consistently applied. For the purpose
of calculating  "Consolidated Net Worth", the consolidated  stockholders' equity
of any Non-Recourse  Joint Venture and its  subsidiaries  shall be excluded from
the  consolidated  stockholders'  equity of the  Borrower  and its  consolidated
Subsidiaries.

     "Consolidated  Tangible  Assets" of any Person  shall mean total  assets of
such Person and its  consolidated  Subsidiaries,  determined  on a  consolidated
basis,  less  goodwill,  patents,  trademarks  and other  assets  classified  as
intangible assets in accordance with GAAP.

     "Control" shall mean the possession,  directly or indirectly,  of the power
to direct or cause the  direction  of the  management  or  policies of a Person,
whether  through the ownership of voting  securities,  by contract or otherwise,
and "Controlling" and "Controlled" shall have meanings correlative thereto.

                                       5
<PAGE>

     "Conversion",  "Convert" or  "Converted"  shall mean the  conversion of any
Standby Loan of one Type into a Standby Loan of another  Type,  or the selection
of a new, or the renewal of the same, Interest Period for any such Standby Loan,
as the case may be, pursuant to Section 2.05.

     "Conversion  Request" shall mean a request made pursuant to Section 2.05 in
the form of Exhibit A-6.

     "Debtor Relief Laws" shall mean the  Bankruptcy  Code of the United States,
and all  other  liquidation,  conservatorship,  bankruptcy,  assignment  for the
benefit  of  creditors,  moratorium,  rearrangement,  receivership,  insolvency,
reorganization,  or similar  debtor  relief  Laws of the United  States or other
applicable jurisdictions from time to time in effect and affecting the rights of
creditors generally.

     "Default"  shall mean any event or condition  which upon  notice,  lapse of
time, or both would constitute an Event of Default.

     "Defaulting  Lender"  shall mean any Lender that (a) has failed to fund any
portion of the Standby Loans or participations in L/C Obligations required to be
funded by it hereunder within one Business Day of the date required to be funded
by it  hereunder,  (b) has  otherwise  failed to pay over to the  Administrative
Agent or any other Lender any other  amount  required to be paid by it hereunder
within one Business Day of the date when due, unless the subject of a good faith
dispute,  or (c) has been deemed insolvent or become the subject of a bankruptcy
or insolvency proceeding.

     "Dollars" or "$" shall mean lawful money of the United States of America.

     "Effective  Date" shall mean the date on which the conditions  specified in
Section 4.02 are satisfied (or waived in accordance with Section 9.08).

     "Eligible Assignee" shall mean (i) a Lender; (ii) an Affiliate of a Lender;
and (iii) any other  Person  (other than a natural  person)  approved by (a) the
Administrative  Agent and the Issuing  Bank,  and (b) unless an Event of Default
has  occurred and is  continuing,  the  Borrower  (each such  approval not to be
unreasonably withheld or delayed);  provided that notwithstanding the foregoing,
"Eligible  Assignee"  shall not  include the  Borrower or any of the  Borrower's
Affiliates or Subsidiaries.

     "Environmental Laws" shall mean all national,  federal, state,  provincial,
municipal  or local laws,  statutes,  ordinances,  orders,  judgments,  decrees,
injunctions,   writs,  policies  and  guidelines  (having  the  force  of  law),
directives,  approvals, notices, rules and regulations and other applicable laws
relating to environmental or occupational  health and safety matters,  including
those relating to the Release or threatened Release of Specified  Substances and
to the generation,  use, storage or transportation of Specified Substances, each
as in effect as of the date of determination.

     "ERISA" shall mean the Employee  Retirement Income Security Act of 1974, as
the same may be amended from time to time, and the  regulations  promulgated and
the rulings issued thereunder.

                                       6
<PAGE>

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

     "ERISA  Termination Event" shall mean (i) a "Reportable Event" described in
Section  4043 of ERISA  (other  than a  "Reportable  Event"  not  subject to the
provision  for 30-day  notice to the PBGC under such  regulations),  or (ii) the
withdrawal of the Borrower or any of its ERISA  Affiliates  from a Plan during a
plan  year in  which it was a  "substantial  employer"  as  defined  in  Section
4001(a)(2)  of ERISA,  or (iii) the filing of a notice of intent to  terminate a
Plan or the treatment of a Plan amendment as a termination under Section 4041 of
ERISA,  or (iv) the institution of proceeding to terminate a Plan by the PBGC or
(v) any other event or condition  which might  constitute  grounds under Section
4042 of ERISA  for the  termination  of,  or the  appointment  of a  trustee  to
administer, any Plan.

     "Eurodollar  Borrowing"  shall mean a  Borrowing  comprised  of  Eurodollar
Loans.

     "Eurodollar  Competitive  Borrowing"  shall mean a Borrowing  comprised  of
Eurodollar Competitive Loans.

     "Eurodollar  Competitive  Loan"  shall mean any  Competitive  Loan  bearing
interest at a rate  determined by reference to the LIBO Rate in accordance  with
the provisions of Article II.

     "Eurodollar Loan" shall mean any Eurodollar  Competitive Loan or Eurodollar
Standby Loan.

     "Eurodollar   Standby  Borrowing"  shall  mean  a  Borrowing  comprised  of
Eurodollar Standby Loans.

     "Eurodollar Standby Loan" shall mean any Standby Loan bearing interest at a
rate  determined by reference to the LIBO Rate in accordance with the provisions
of Article II.

     "Event of Default" shall have the meaning  assigned to such term in Article
VII.

     "Existing  Facilities" shall mean (i) the Competitive Advance and Revolving
Credit Facility Agreement,  dated as of October 24, 2001, as amended,  among the
Borrower,  the lenders party thereto and The Chase  Manhattan Bank, as agent for
the lenders and (ii) the $100,000,000 Revolving Credit Facility Agreement, dated
as of October 24, 2001, among the Borrower, the lenders party thereto and Morgan
Stanley Bank, as administrative agent.

     "Federal Funds  Effective Rate" shall mean, for any day, the rate per annum
equal  to  the  weighted  average  of  the  rates  on  overnight  Federal  funds
transactions  with  members of the Federal  Reserve  System  arranged by Federal
funds brokers on such day, as published by the Federal  Reserve Bank of New York
on the Business Day next succeeding  such day;  provided that (a) if such day is
not a Business Day, the Federal Funds  Effective Rate for such day shall be such
rate on such transactions on the next preceding  Business Day as so published on
the next  succeeding  Business  Day,  and (b) if no such rate is so published on
such next succeeding Business Day, the Federal Funds Effective Rate for such day
shall be the average rate (rounded upward, if necessary,  to a whole multiple of
1/100 of 1%)  charged  to Bank of America  on such day on such  transactions  as
determined by the Administrative Agent.

                                       7
<PAGE>

     "Fee Letter" means the letter  agreement,  dated October 4, 2004, among the
Borrower, the Administrative Agent and Banc of America Securities LLC.

     "Fees"  shall mean the  Commitment  Fee,  the Letter of Credit Fees and the
Administrative Fees.

     "Financial  Officer" of any  corporation  shall mean the  President,  Chief
Financial Officer, Chief Executive Officer, Vice President - Finance,  Executive
Vice President,  Chief Accounting Officer or Treasurer of such corporation.  Any
document  delivered  hereunder  that is signed by a Financial  Officer  shall be
conclusively  presumed to have been authorized by all necessary corporate action
on the part of the Borrower and such  Financial  Officer  shall be  conclusively
presumed to have acted on behalf of the Borrower.

     "Fixed  Rate  Borrowing"  shall mean a  Borrowing  comprised  of Fixed Rate
Loans.

     "Fixed Rate Loan" shall mean any  Competitive  Loan  bearing  interest at a
fixed  percentage rate per annum  (expressed in the form of a decimal to no more
than four  decimal  places)  specified  by the  Lender  making  such Loan in its
Competitive Bid.

     "Foreign  Lender"  means any Lender that is  organized  under the laws of a
jurisdiction other than that in which the Borrower is resident for tax purposes.
For purposes of this definition,  the United States,  each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.

     "GAAP" shall mean generally accepted  accounting  principles,  applied on a
consistent basis.

     "Governmental  Approval"  shall  mean any  authorization,  consent,  order,
approval,  license, franchise, lease, ruling, tariff, rate, permit, certificate,
exemption of, or filing or registration with, any Governmental Authority.

     "Governmental  Authority" shall mean any Federal,  state,  local or foreign
court or governmental agency, authority, instrumentality or regulatory body.

     "Guarantee"  means,  as  to  any  Person,  any  obligation,  contingent  or
otherwise,  of such  Person  guaranteeing  or  having  the  economic  effect  of
guaranteeing  any  Indebtedness  or other  obligation  payable or performable by
another  Person  (the  "primary  obligor")  in any manner,  whether  directly or
indirectly, and including any obligation of such Person, direct or indirect, (i)
to purchase or pay (or advance or supply  funds for the  purchase or payment of)
such  Indebtedness  or other  obligation,  (ii) to purchase  or lease  property,
securities  or services  for the  purpose of assuring  the obligee in respect of
such  Indebtedness  or other  obligation of the payment or  performance  of such
Indebtedness or other  obligation,  (iii) to maintain  working  capital,  equity
capital or any other  financial  statement  condition  or  liquidity or level of
income or cash flow of the primary  obligor so as to enable the primary  obligor
to pay such  Indebtedness  or other  obligation,  or (iv)  entered  into for the
purpose  of  assuring  in any  other  manner  the  obligee  in  respect  of such
Indebtedness  or other  obligation of the payment or  performance  thereof or to
protect such obligee against loss in respect thereof (in whole or in part).  The
amount of any  Guarantee  shall be deemed to be an amount equal to the stated or
determinable  amount of the related primary  obligation,  or portion thereof, in
respect of which such Guarantee is made or, if not stated or  determinable,  the
maximum reasonably anticipated liability in respect thereof as determined by the
guaranteeing  Person  in  good  faith.  The  term  "Guarantee"  as a verb  has a
corresponding meaning.

                                       8
<PAGE>

     "Guaranty  Agreement"  means,  collectively,  each  Guarantee  executed and
delivered pursuant to Section 6.08.

     "Honor  Date"  shall  have the  meaning  assigned  to such term in  Section
2.20(c)(i).

     "Hostile  Acquisition" shall mean any Target Acquisition (as defined below)
involving  a tender  offer or proxy  contest  that has not been  recommended  or
approved by the board of  directors  (or similar  governing  body) of the Person
that is the  subject  of such  Target  Acquisition  prior  to the  first  public
announcement or disclosure relating to such Target Acquisition.  As used in this
definition,  the term "Target  Acquisition"  shall mean any transaction,  or any
series  of  related  transactions,  by  which  the  Borrower  and/or  any of its
Subsidiaries  directly or indirectly (i) acquires any ongoing business or all or
substantially  all of the  assets of any  Person or  division  thereof,  whether
through  purchase  of  assets,  merger  or  otherwise,  (ii)  acquires  (in  one
transaction  or as the most  recent  transaction  in a series  of  transactions)
control of at least a majority in ordinary  voting power of the  securities of a
Person which have  ordinary  voting power for the election of directors or (iii)
otherwise  acquires  control of a more than 50%  ownership  interest in any such
Person.

     "Indebtedness"  of any Person  shall  mean,  without  duplication,  (a) all
obligations  of such Person for  borrowed  money or with  respect to deposits or
advances of any kind (other than customer  deposits made in the ordinary  course
of business), (b) all obligations of such Person evidenced by bonds, debentures,
notes or similar  instruments,  (c) all  obligations  of such  Person upon which
interest charges are customarily  paid, (d) all obligations of such Person under
conditional  sale or other title  retention  agreements  relating to property or
assets  purchased by such Person,  (e) all  obligations of such Person issued or
assumed  as the  deferred  purchase  price  of  property  or  services,  (f) all
Indebtedness of others secured by (or for which the holder of such  Indebtedness
has an existing  right,  contingent or otherwise,  to be secured by) any Lien on
property  owned or  acquired  by such  Person,  whether  or not the  obligations
secured  thereby have been assumed,  (g) all Capital Lease  Obligations  of such
Person,  (h) all obligations of such Person in respect of Swap Contracts (except
to  the  extent  such  obligations  are  used  as a bona  fide  hedge  of  other
Indebtedness  of such Person),  (i) all obligations of such Person as an account
party in respect of letters of credit and  bankers'  acceptances  (except to the
extent  any such  obligations  are  incurred  in  support  of other  obligations
constituting  Indebtedness  of  such  Person  and  other  than,  to  the  extent
reimbursed if drawn, letters of credit in support of ordinary course performance
obligations)  and (j) all  Guarantees  of such  Person in  respect of any of the
foregoing;  provided,  however,  that the term  Indebtedness  shall not  include
endorsements for collection or deposit, in either case in the ordinary course of
business.

                                       9
<PAGE>

     "Interest  Payment Date" shall mean, with respect to any Loan, the last day
of the Interest Period applicable  thereto and, in the case of a Eurodollar Loan
with an  Interest  Period of more than three  months'  duration  or a Fixed Rate
Loan,  each day that would have been an Interest  Payment Date for such Loan had
successive  Interest Periods of three months'  duration or 90 days duration,  as
the case may be, been applicable to such Loan and, in addition,  the date of any
Conversion of such Loan to a Loan of a different Type.

     "Interest Period" shall mean (a) as to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing or, with respect to any Conversion,  on
the last day of the immediately  preceding  Interest  Period  applicable to such
Borrowing,  as the case may be, and ending on the numerically  corresponding day
(or,  if there is no  numerically  corresponding  day,  on the last  day) in the
calendar month that is 1, 2, 3 or 6 months  thereafter (or such longer period as
may be agreed to by all of the  Lenders),  as the Borrower may elect,  (b) as to
any ABR  Borrowing,  the period  commencing  on the date of such  Borrowing  and
ending on the date 90 days  thereafter  or, if earlier,  on the Maturity Date or
the date of prepayment of such Borrowing and (c) as to any Fixed Rate Borrowing,
the  period  commencing  on the date of such  Borrowing  and  ending on the date
specified  in the  Competitive  Bids in which the  offer to make the Fixed  Rate
Loans  comprising such Borrowing were extended,  which shall not be earlier than
the day after the date of such Borrowing or later than 364 days (or,  subject to
the Borrower obtaining all necessary Governmental Approvals,  such longer period
as may be agreed  to by all of the  Lenders)  after the date of such  Borrowing;
provided,  however,  that if any Interest Period would end on a day other than a
Business  Day,  such  Interest  Period shall be extended to the next  succeeding
Business Day unless,  in the case of Eurodollar Loans only, such next succeeding
Business Day would fall in the next calendar  month, in which case such Interest
Period shall end on the next preceding  Business Day. Interest shall accrue from
and including the first day of an Interest  Period to but excluding the last day
of such Interest Period.

     "ISP"  means,  with  respect to any Letter of  Credit,  the  "International
Standby Practices 1998" published by the Institute of International  Banking Law
&  Practice  (or such later  version  thereof as may be in effect at the time of
issuance).

     "Issuing  Bank" shall mean the Bank of America in its capacity as issuer of
the Letters of Credit  hereunder,  or any successor  issuer of Letters of Credit
hereunder.

     "Issuer  Documents"  shall mean with  respect to any Letter of Credit,  the
Letter of Credit Application,  and any other document,  agreement and instrument
entered  into by the Issuing Bank and the  Borrower  (or any  Subsidiary)  or in
favor of the Issuing Bank and relating to any such Letter of Credit.

     "Joint  Venture"  shall  mean a general  or  limited  partnership,  limited
liability  company or other  entity  formed or  organized  under the laws of the
United  States  of  America  or any state  thereof  that  would  own or  operate
telecommunications assets and which, in turn, the Borrower would manage.

     "Joint Venture Transaction" shall mean the formation of a Joint Venture, by
the formation of a new entity and the contribution of telecommunications  assets
(or cash or similar  assets)  thereto by the  Borrower,  the  investment  by the
Borrower in a previously existing entity that owns telecommunications  assets or
other similar transaction.

                                       10
<PAGE>

     "Laws" means, collectively, all international,  foreign, Federal, state and
local statutes, treaties, rules, guidelines, regulations,  ordinances, codes and
administrative   or  judicial   precedents   or   authorities,   including   the
interpretation or administration  thereof by any governmental  authority charged
with  the  enforcement,   interpretation  or  administration  thereof,  and  all
applicable   administrative  orders,   directed  duties,   requests,   licenses,
authorizations and permits of, and agreements with, any governmental  authority,
in each case whether or not having the force of law.

     "L/C Advance" shall mean with respect to each Standby Lender, such Lender's
funding of its participation in any L/C Borrowing in accordance with its Ratable
Share.

     "L/C Borrowing" means an extension of credit resulting from a drawing under
any  Letter of Credit  which  has not been  reimbursed  on the date when made or
refinanced as a Standby Borrowing.

     "L/C Cash  Deposit  Account"  shall mean an interest  bearing  cash deposit
account to be established and maintained by the Administrative Agent, over which
the Administrative Agent shall have sole dominion and control, upon terms as may
be satisfactory to the Administrative Agent and the Issuing Bank.

     "L/C Credit Extension" shall mean with respect to any Letter of Credit, the
issuance thereof or extension of the expiry date thereof, or the increase in the
amount thereof.

     "L/C  Obligations"  means, as at any date of  determination,  the aggregate
Available Amounts under all outstanding Letters of Credit, plus the aggregate of
all Unreimbursed Amounts, including all L/C Borrowings. For all purposes of this
Agreement, if on any date of determination a Letter of Credit has expired by its
terms but any amount may still be drawn thereunder by reason of the operation of
Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be  "outstanding"
in the amount so remaining available to be drawn.

     "Lenders" shall mean the meaning  specified in the  introductory  paragraph
hereto.

     "Letter of Credit"  shall mean any  letter of credit  issued  hereunder.  A
Letter of Credit  may be a  commercial  letter of credit or a standby  letter of
credit.

     "Letter of Credit  Application" shall mean an application and agreement for
the issuance or amendment of a Letter of Credit in the form from time to time in
use by the Issuing Bank.

     "Letter of Credit  Expiration  Date"  shall mean the day that is seven days
prior to the Maturity Date then in effect for the Standby Loans (or, if such day
is not a Business Day, the next preceding Business Day).

     "Letter  of Credit  Fee" shall have the  meaning  assigned  to such term in
Section 2.20(i).

                                       11
<PAGE>

     "Letter of Credit Sublimit" shall mean an amount equal to $50,000,000.  The
Letter  of  Credit  Sublimit  is part  of,  and  not in  addition  to the  Total
Commitment.

     "Leverage Ratio" shall mean, with respect to any fiscal quarter,  as of the
date ending such fiscal quarter,  the ratio of (a) Total Indebtedness as of such
fiscal quarter end to (b) Consolidated  EBITDA,  for the four consecutive fiscal
quarters  immediately  prior to such fiscal quarter end  (including  such fiscal
quarter).

     "LIBO  Rate"  shall  mean,  for any  Interest  Period  with  respect to any
Eurodollar  Borrowing,   the  rate  per  annum  equal  to  the  British  Bankers
Association  LIBOR  Rate  ("BBA  LIBOR"),  as  published  by  Reuters  (or other
commercially available source providing quotations of BBA LIBOR as designated by
the Administrative  Agent from time to time) at approximately 11:00 A.M., London
time, two Business Days prior to the commencement of such Interest  Period,  for
Dollar  deposits (for delivery on the first day of such Interest  Period) with a
term equivalent to such Interest  Period.  If such rate is not available at such
time for any reason,  then the "LIBO Rate" for such Interest Period shall be the
rate per annum  determined by the  Administrative  Agent to be the rate at which
deposits in Dollars for  delivery  on the first day of such  Interest  Period in
same day funds in the approximate amount of the Eurodollar Borrowing being made,
continued  or converted  by Bank of America and with a term  equivalent  to such
Interest  Period  would be offered by Bank of America's  London  Branch to major
banks  in  the  London   interbank   eurodollar   market  at  their  request  at
approximately   11:00  A.M.  (London  time)  two  Business  Days  prior  to  the
commencement of such Interest Period.

     "Lien" shall mean,  with respect to any asset,  (a) any  mortgage,  deed of
trust,  lien,  pledge,  encumbrance,  charge, or security interest in or on such
asset,  (b) the  interest  of a vendor or a lessor  under any  conditional  sale
agreement,  capital lease, or title retention  agreement  relating to such asset
and (c) in the case of securities,  any purchase option,  call, or similar right
of a third party with respect to such securities.

     "Loan" shall mean a Competitive  Loan or a Standby Loan,  whether made as a
Eurodollar Loan, an ABR Loan, or a Fixed Rate Loan, as permitted hereby.

     "Loan Documents" means this Agreement, each Note, each Issuer Document, the
Fee Letter, the Guaranty Agreement and each Security Document.

     "Margin"  shall mean, as to any  Eurodollar  Competitive  Loan,  the margin
(expressed  as a  percentage  rate per annum in the form of a decimal to no more
than four  decimal  places) to be added to or  subtracted  from the LIBO Rate in
order to determine  the interest  rate  applicable to such Loan, as specified in
the Competitive Bid relating to such Loan.

     "Margin Regulations" shall mean Regulations T, U and X of the Board.

     "Material  Adverse  Effect" shall mean a materially  adverse  effect on the
business,  assets,  operations,  financial condition or results of operations of
the Borrower and the Subsidiaries taken as a whole.

     "Material  Transaction" shall have the meaning assigned to such term in the
definition of Consolidated EBITDA.

                                       12
<PAGE>

     "Maturity Date" shall mean October 29, 2009.

     "Non-Recourse Joint Venture" shall mean a Joint Venture the Indebtedness of
which is Non-Recourse Joint Venture Indebtedness.

     "Non-Recourse  Joint Venture  Indebtedness" shall mean secured or unsecured
Indebtedness  of a Joint  Venture  that is  non-recourse  to the Borrower or any
Principal  Subsidiary  or  any  of  their  respective  assets  or  property.  In
furtherance of the foregoing, an obligation of the Borrower that is non-recourse
to the  Borrower  except  to the  extent  of a pledge  of the  equity of a Joint
Venture (the  Indebtedness  of which is otherwise  non-recourse to the Borrower)
will be deemed Non-Recourse Joint Venture Indebtedness.

     "Note"  means a  promissory  note made by the Borrower in favor of a Lender
evidencing  Loans made by such Lender,  substantially in the form of Exhibit D-1
or D-2, as appropriate.

     "Obligations" means all advances to, and debts,  liabilities,  obligations,
covenants  and  duties of,  the  Borrower  arising  under any Loan  Document  or
otherwise  with  respect  to any Loan or Letter  of  Credit,  whether  direct or
indirect (including those acquired by assumption),  absolute or contingent,  due
or to become due, now existing or hereafter  arising and including  interest and
fees that  accrue  after the  commencement  by or against  the  Borrower  or any
Affiliate  thereof of any  proceeding  under any Debtor  Relief Laws naming such
Person as the debtor in such proceeding, regardless of whether such interest and
fees are allowed claims in such proceeding.

     "Outstanding  Amount"  means (i) with  respect  to Loans on any  date,  the
aggregate  outstanding  principal  amount  thereof  after  giving  effect to any
borrowings and  prepayments or repayments of such Loans  occurring on such date;
and (ii) with respect to any L/C Obligations on any date, the amount of such L/C
Obligations  on such  date  after  giving  effect  to any L/C  Credit  Extension
occurring on such date and any other changes in the aggregate  amount of the L/C
Obligations as of such date,  including as a result of any reimbursements by the
Borrower of Unreimbursed Amounts.

     "Participant" has the meaning specified in Section 9.04(d).

     "PBGC" shall mean the Pension Benefit Guaranty  Corporation referred to and
defined in ERISA.

     "Person" shall mean any natural person, corporation,  business trust, joint
venture,  association,  company,  limited  liability  company,  partnership,  or
government, or any agency or political subdivision thereof.

     "Plan" shall mean any pension plan (including a multiemployer plan) subject
to the  provisions  of Title IV of ERISA  or  Section  412 of the Code  which is
maintained for or to which  contributions are made for employees of the Borrower
or any ERISA Affiliate.

     "Prime  Rate"  shall  mean the rate of  interest  in effect for such day as
publicly announced from time to time by Bank of America as its "prime rate". The
"prime  rate"  is a rate  set by Bank of  America  based  upon  various  factors
including  Bank  of  America's  costs  and  desired  return,   general  economic
conditions and other factors,  and is used as a reference point for pricing some
loans,  which may be priced at, above,  or below such announced rate. Any change
in such rate  announced  by Bank of America  shall take effect at the opening of
business on the day specified in the public announcement of such change.

                                       13
<PAGE>

     "Principal  Subsidiaries" shall mean any Subsidiary of the Borrower,  whose
Consolidated  Tangible  Assets  comprise  in excess  of 25% of the  Consolidated
Tangible Assets of the Borrower and its consolidated Subsidiaries as of the date
hereof or at any time  hereafter.  The term "Principal  Subsidiaries"  shall not
include any Non-Recourse Joint Venture.

     "Ratable  Share" of any amount,  shall mean,  with respect to any Lender at
any time,  the product of such amount times a fraction the numerator of which is
the amount of such  Lender's  Commitment  at such time (or,  if the  Commitments
shall have been  terminated  pursuant  to Section  2.11,  2.12 or 7.01 or if the
Commitments  have  expired,  such Lender's  Commitment as in effect  immediately
prior to such termination,  giving effect to any subsequent assignments) and the
denominator  of which is the aggregate  amount of all  Commitments  at such time
(or, if the  Commitments  shall have been  terminated  pursuant to Section 2.11,
2.12 or 7.01 or if the Commitments  have expired,  the amount of all Commitments
as in effect immediately prior to such termination).

     "Register" shall have the meaning given such term in Section 9.04(c).

     "Regulation D" shall mean Regulation D of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

     "Regulation T" shall mean Regulation T of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

     "Regulation U" shall mean Regulation U of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

     "Regulation X" shall mean Regulation X of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

     "Release"  shall  mean any  spilling,  emitting,  discharging,  depositing,
escaping,  leaching,  dumping or other releasing,  including the movement of any
Specified  Substance  through  the air,  soil,  surface  water,  groundwater  or
property, and when used as a verb has a like meaning.

     "Required  Lenders"  shall mean, at any time,  Lenders  having  Commitments
representing more than 50% of the Total Commitment; provided, that, for purposes
of  declaring  the Loans to be due and payable  pursuant to Article VII, and for
all purposes  after the Loans become due and payable  pursuant to Article VII or
the  Commitments  expire or terminate,  the term  "Required  Lenders" shall mean
Lenders holding in the aggregate more than 50% of the Total  Outstandings  (with
the  aggregate   amount  of  each  Lender's   risk   participation   and  funded
participation in L/C Obligations being deemed "held" by such Lender for purposes
of this definition);  provided, further, that the Commitment of, and the portion
of the Total Outstandings held or deemed held by, any Defaulting Lender shall be
excluded for purposes of making a determination of Required Lenders.

                                       14
<PAGE>

     "Restricted  Payment" means any dividend or other distribution  (whether in
cash,  securities or other  property) with respect to any capital stock or other
equity  interest of the Borrower or any Subsidiary,  or any payment  (whether in
cash,  securities  or other  property),  including  any sinking  fund or similar
deposit,  on  account  of the  purchase,  redemption,  retirement,  acquisition,
cancellation or termination of any such capital stock or other equity  interest,
or on account of any return of capital to the Borrower's stockholders,  partners
or members (or the equivalent Person thereof).

     "Securitization  Transaction" means (a) any transfer of accounts receivable
or interests  therein (i) to a trust,  partnership,  corporation or other entity
(other than a Subsidiary),  which transfer or pledge is funded by such entity in
whole  or in part  by the  issuance  to one or  more  lenders  or  investors  of
indebtedness or other securities that are to receive  payments  principally from
the cash flow derived  from such  accounts  receivable  or interests in accounts
receivable, or (ii) directly to one or more investors or other purchasers (other
than  any  Subsidiary),  or (b) any  transaction  in  which  the  Borrower  or a
Subsidiary  incurs  Indebtedness  secured by Liens on accounts  receivable.  The
"amount" of any Securitization Transaction shall be deemed at any time to be (A)
in the case of a transaction  described in clause (a) of the preceding sentence,
the aggregate uncollected amount of the accounts receivable transferred pursuant
to such  Securitization  Transaction,  net of any such accounts  receivable that
have been  written off as  uncollectible,  and (B) in the case of a  transaction
described in clause (b) of the preceding  sentence,  the  aggregate  outstanding
principal  amount of the  Indebtedness  secured by Liens on accounts  receivable
Incurred pursuant to such Securitization Transaction.

     "Security Documents" means, collectively,  each security agreement or other
instrument or document executed and delivered pursuant to the proviso to Section
6.01 or the proviso to Section 6.02 to secure any of the Obligations.

     "Specified  Substance"  shall mean (i) any chemical,  material or substance
defined as or included in the definition of "hazardous  substances",  "hazardous
wastes",   "hazardous  materials",   "extremely  hazardous  waste",  "restricted
hazardous  waste" or "toxic  substances"  or words of similar  import  under any
applicable  Environmental  Laws;  (ii) any (A) oil,  natural  gas,  petroleum or
petroleum  derived  substance,  any drilling  fluids,  produced waters and other
wastes associated with the exploration,  development or production of crude oil,
natural gas or geothermal  fluid,  any flammable  substances or explosives,  any
radioactive materials,  any hazardous wastes or substances,  any toxic wastes or
substances or (B) other  materials or  pollutants  that, in the case of both (A)
and  (B),  (1) pose a  hazard  to the  property  of the  Borrower  or any of its
Subsidiaries  or any part thereof or to persons on or about such  property or to
any other  property  that may be affected by the  Release of such  materials  or
pollutants from such property or any part thereof or to persons on or about such
other  property  or (2) cause  such  property  or such other  property  to be in
violation of any  Environmental  Law; (iii)  asbestos,  urea  formaldehyde  foam
insulation,  toluene,  polychlorinated  biphenyls and any  electrical  equipment
which contains any oil or dielectric fluid containing levels of  polychlorinated
biphenyls in excess of fifty parts per million;  and (iv) any sound,  vibration,
heat,  radiation  or other form of energy and any other  chemical,  material  or
substance,  exposure  to  which  is  prohibited,  limited  or  regulated  by any
Governmental Authority.

                                       15
<PAGE>

     "Standby  Borrowing"  shall mean a  Borrowing  consisting  of  simultaneous
Standby Loans from each of the Lenders.

     "Standby  Borrowing  Request" shall mean a request made pursuant to Section
2.04 in the form of Exhibit A-5.

     "Standby  Lenders" shall mean at any time, any Lender that has a Commitment
at such time.

     "Standby  Loans" shall mean the revolving  loans made by the Lenders to the
Borrower  pursuant to Section  2.04.  Each  Standby  Loan shall be a  Eurodollar
Standby  Loan or an ABR Loan.  All  Standby  Loans by a Lender of the same Type,
having the same  Interest  Period and made or Converted on the same day shall be
deemed  to be a  single  Standby  Loan  by  such  Lender  until  repaid  or next
Converted.

     "Subsidiary"  shall mean, with respect to any Person (herein referred to as
the "parent"),  any  corporation,  partnership,  association,  or other business
entity (a) of which securities or other ownership  interests  representing  more
than 50% of the  equity or more than 50% of the  ordinary  voting  power or more
than 50% of the general partnership interests are, at the time any determination
is being made, owned, controlled, or held by the parent, or (b) which is, at the
time any  determination  is made,  otherwise  Controlled by the parent or one or
more subsidiaries of the parent or by the parent and one or more subsidiaries of
the parent.  Unless  otherwise  indicated,  all  references in this Agreement to
"Subsidiaries" shall be construed as references to Subsidiaries of the Borrower.

     "Swap Contract" means (a) any and all rate swap transactions,  basis swaps,
credit  derivative  transactions,  forward rate  transactions,  commodity swaps,
commodity options, forward commodity contracts,  equity or equity index swaps or
options,  bond or bond price or bond index  swaps or options or forward  bond or
forward bond price or forward bond index  transactions,  interest  rate options,
forward foreign exchange  transactions,  cap transactions,  floor  transactions,
collar  transactions,  currency  swap  transactions,  cross-currency  rate  swap
transactions,   currency   options,   spot  contracts,   or  any  other  similar
transactions or any  combination of any of the foregoing  (including any options
to enter  into any of the  foregoing),  whether or not any such  transaction  is
governed by or subject to any master agreement, and (b) any and all transactions
of any kind, and the related  confirmations,  which are subject to the terms and
conditions  of, or governed  by, any form of master  agreement  published by the
International Swaps and Derivatives Association, Inc., any International Foreign
Exchange  Master  Agreement,  or any other  master  agreement  (any such  master
agreement, together with any related schedules, a "Master Agreement"), including
any such obligations or liabilities under any Master Agreement.

     "Swap  Termination  Value"  means,  in  respect  of any  one or  more  Swap
Contracts,  after  taking into  account  the effect of any  legally  enforceable
netting agreement relating to such Swap Contracts,  (a) for any date on or after
the date such Swap  Contracts  have been  closed  out and  termination  value(s)
determined in accordance therewith,  such termination value(s),  and (b) for any
date prior to the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts  (which may include a Lender or any Affiliate of a
Lender).

                                       16
<PAGE>

     "Total  Commitment"  shall  mean at any time the  aggregate  amount  of the
Lenders' Commitments, as in effect at such time.

     "Total  Indebtedness" means, as of any date, the aggregate principal amount
of Indebtedness of the Borrower and its consolidated Subsidiaries outstanding as
of such date, in the amount and only to the extent that such Indebtedness  would
be reflected on a balance sheet prepared as of such date on a consolidated basis
in accordance  with GAAP,  minus the amount of the cash and cash  equivalents of
the Borrower and its  consolidated  Subsidiaries  in excess of $50,000,000  that
would  be  reflected  on such  balance  sheet;  provided,  however,  that  Total
Indebtedness shall not include (i) Non-Recourse  Joint Venture  Indebtedness and
(ii) the 5%  Company  Obligated  Mandatorily  Redeemable  Convertible  Preferred
Securities due 2036 (the "EPPICS").

     "Total  Outstandings"  means the aggregate  Outstanding Amount of all Loans
and all L/C Obligations.

     "Transferee" shall mean any transferee or assignee of all or any portion of
a  Lender's  interests,   rights  and  obligations   hereunder,   including  any
participation holder.

     "Type",  when used in respect of any Loan or Borrowing,  shall refer to the
Rate by reference to which interest on such Loan or on the Loans comprising such
Borrowing is  determined.  For purposes  hereof,  "Rate" shall  include the LIBO
Rate, the Alternate  Base Rate and the rate of interest  applicable to any Fixed
Rate Loan.

     "Unreimbursed  Amount"  shall  have the  meaning  assigned  to such term in
Section 2.20(c)(i).

     SECTION 1.02. Terms Generally.

     The  definitions  in Section 1.01 shall apply  equally to both the singular
and plural forms of the terms  defined.  Whenever  the context may require,  any
pronoun shall include the  corresponding  masculine,  feminine and neuter forms.
The words "include",  "includes" and "including"  shall be deemed to be followed
by the phrase "without limitation". All references herein to Articles, Sections,
Exhibits and Schedules  shall be deemed  references to Articles and Sections of,
and  Exhibits  and  Schedules  to,  this  Agreement,  unless the  context  shall
otherwise require.  Except as otherwise  expressly provided herein, all terms of
an accounting or financial nature shall be construed in accordance with GAAP, as
in  effect  from  time  to  time;  provided,  however,  that,  for  purposes  of
determining  compliance  with any  covenant  set forth in Article VI, such terms
shall be  construed  in  accordance  with  GAAP as in effect on the date of this
Agreement  applied on a basis  consistent with the application used in preparing
the Borrower's audited financial statements referred to in Section 3.02.

                                       17
<PAGE>

     SECTION 1.03. Letter of Credit Amounts

     Unless otherwise specified, all references herein to the amount of a Letter
of Credit at any time shall be deemed to be the stated  amount of such Letter of
Credit in effect at such  time;  provided,  however,  that with  respect  to any
Letter of Credit that, by its terms or the terms of any Issuer Document  related
thereto  provides  for one or more  automatic  increases  in the  stated  amount
thereof,  the amount of such Letter of Credit  shall be deemed to be the maximum
stated  amount  of such  Letter  of  Credit  after  giving  effect  to all  such
increases, whether or not such maximum stated amount is in effect at such time.

     SECTION 1.04. Times of Day

     Unless otherwise specified,  all references herein to times of day shall be
references to Central time (daylight or standard, as applicable).

                                   ARTICLE II

                                   THE CREDITS

     SECTION 2.01. Commitments.

     Subject to the terms and  conditions  and relying upon the  representations
and warranties herein set forth, each Lender agrees,  severally and not jointly,
to make Standby Loans to the Borrower,  at any time and from time to time on and
after the Effective Date and until the earlier to occur of the Maturity Date and
the  termination  of the  Commitment of such Lender,  in an aggregate  principal
amount at any time outstanding not to exceed such Lender's  Commitment,  subject
however, to the conditions that, (a) at no time shall (i) the Total Outstandings
exceed the Total  Commitment,  or (ii) the aggregate  Outstanding  Amount of the
Standby  Loans  of  such  Lender,  plus  such  Lender's  Ratable  Share  of  the
Outstanding Amount of all L/C Obligations exceed such Lender's  Commitment,  and
(b) at all times the outstanding aggregate principal amount of all Standby Loans
made by each  Lender  shall equal the  product of (i) the  percentage  which its
Commitment  represents  of the  Total  Commitment  times  (ii)  the  outstanding
aggregate principal amount of all Standby Loans made pursuant to Section 2.04.

     Each  Lender's  Commitment  is set forth  opposite its  respective  name in
Schedule  2.01.  Such  Commitments  may be modified or reduced from time to time
pursuant to Section 2.11 and Section 2.13(f).

     Within the foregoing  limits,  the Borrower may borrow,  pay, or prepay and
reborrow  hereunder,  on and after the Effective  Date and prior to the Maturity
Date, subject to the terms, conditions and limitations set forth herein.

     SECTION 2.02. Loans.

     (a) Each  Standby Loan shall be made as part of a Borrowing  consisting  of
Loans  made  by the  Lenders  ratably  in  accordance  with  their  Commitments;
provided, however, that the failure of any Lender to make any Standby Loan shall
not in itself  relieve any other Lender of its  obligation to lend hereunder (it
being understood,  however,  that no Lender shall be responsible for the failure
of any other Lender to make any Loan required to be made by such other  Lender).
Each  Competitive Loan shall be made in accordance with the procedures set forth
in Section 2.03. The Standby Loans or Competitive Loans comprising any Borrowing
shall be in an  aggregate  principal  amount  which is an  integral  multiple of
$1,000,000 and not less than  $10,000,000  (or, in the case of Standby Loans, an
aggregate  principal  amount  equal to the  remaining  balance of the  available
Commitments).

                                       18
<PAGE>

     (b) Each  Competitive  Borrowing shall be comprised  entirely of Eurodollar
Competitive  Loans or Fixed Rate  Loans,  and each  Standby  Borrowing  shall be
comprised entirely of Eurodollar Standby Loans or ABR Loans, as the Borrower may
request pursuant to Section 2.03 or 2.04, as applicable.  Each Lender may at its
option make any  Eurodollar  Loan by causing any  domestic or foreign  branch or
Affiliate of such Lender to make such Loan;  provided  that any exercise of such
option  shall not affect the  obligation  of the  Borrower to repay such Loan in
accordance  with the terms of this  Agreement.  Borrowings of more than one Type
may be outstanding at the same time; provided,  however, that the Borrower shall
not be entitled to request any  Borrowing  which,  if made,  would  result in an
aggregate of more than ten separate  Standby Loans or more than four Competitive
Borrowings  of any  Lender  being  outstanding  hereunder  at any one time.  For
purposes of the foregoing,  Loans having different Interest Periods,  regardless
of whether they commence on the same date, shall be considered separate Loans.

     (c) Each  Lender  shall  make each Loan to be made by it  hereunder  on the
proposed date thereof by wire  transfer of  immediately  available  funds to the
Administrative  Agent at the Administrative  Agent's Office, not later than 1:00
P.M.,  and the  Administrative  Agent  shall by 3:00 P.M.  credit the amounts so
received to the general deposit account of the Borrower with the  Administrative
Agent or, if a  Borrowing  shall not occur on such date  because  any  condition
precedent  herein  specified  shall not have been met,  return  the  amounts  so
received  to the  respective  Lenders.  Competitive  Loans  shall be made by the
Lender or Lenders  whose  Competitive  Bids  therefor are  accepted  pursuant to
Section 2.03 in the amounts so accepted  and Standby  Loans shall be made by the
Lenders pro rata in  accordance  with Section  2.16.  Unless the  Administrative
Agent  shall  have  received  notice  from a  Lender  prior  to the  date of any
Borrowing  (or, in the case of an ABR  Borrowing,  prior to the time of such ABR
Borrowing) that such Lender will not make available to the Administrative  Agent
such Lender's  portion of such Borrowing,  the  Administrative  Agent may assume
that such Lender has made such portion available to the Administrative  Agent on
the  date of such  Borrowing  in  accordance  with  this  paragraph  (c) and the
Administrative  Agent may, in reliance upon such  assumption,  make available to
the Borrower on such date a corresponding amount. If and to the extent that such
Lender shall not have made such portion  available to the  Administrative  Agent
and the  Administrative  Agent has made  available to the Borrower such portion,
such  Lender and the  Borrower  severally  agree to repay to the  Administrative
Agent  forthwith on demand such  corresponding  amount,  together  with interest
thereon for each day from the date such amount is made available to the Borrower
until the date such amount is repaid to the  Administrative  Agent at (i) in the
case of the  Borrower,  the interest  rate  applicable  at the time to the Loans
comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds
Effective  Rate.  If such Lender  shall repay to the  Administrative  Agent such
corresponding amount, such amount shall constitute such Lender's Loan as part of
such Borrowing for purposes of this Agreement.

                                       19
<PAGE>

     (d)  Notwithstanding  any other provision of this  Agreement,  the Interest
Period  requested by the Borrower  with respect to any  Borrowing  shall not end
after the Maturity Date.

     SECTION 2.03. Competitive Bid Procedure

     (a) Subject to the terms and conditions set forth herein, from time to time
during the period from and  including  the  Effective  Date to but excluding the
earlier to occur of the Maturity Date and the  termination of the Commitments of
all Lenders,  the Borrower may request  Competitive  Bids and may, but shall not
have any obligation to, accept  Competitive Bids and borrow  Competitive  Loans;
provided,  that after  giving  effect to any  Competitive  Borrowing,  the Total
Outstandings  shall  not  exceed  the  Total  Commitment.  In order  to  request
Competitive   Bids,   the  Borrower  shall  hand  deliver  or  telecopy  to  the
Administrative  Agent a duly  completed  Competitive  Bid Request in the form of
Exhibit A-1 hereto, to be received by the  Administrative  Agent (i) in the case
of a Eurodollar Competitive  Borrowing,  not later than 10:00 A.M. four Business
Days  before a proposed  Competitive  Borrowing  and (ii) in the case of a Fixed
Rate  Borrowing,  not later than 10:00 A.M.  one  Business Day before a proposed
Competitive Borrowing. No ABR Loan shall be requested in, or made pursuant to, a
Competitive  Bid  Request.  A  Competitive  Bid  Request  that does not  conform
substantially to the format of Exhibit A-1 may be rejected in the Administrative
Agent's sole discretion,  and the Administrative Agent shall promptly notify the
Borrower of such rejection by telecopier.  Such request shall in each case refer
to this Agreement and specify (x) whether the Borrowing then being  requested is
to be a  Eurodollar  Borrowing or a Fixed Rate  Borrowing,  (y) the date of such
Borrowing  (which shall be a Business  Day) and the aggregate  principal  amount
thereof which shall be in a minimum  principal  amount of $10,000,000  and in an
integral  multiple of  $1,000,000,  and (z) the Interest  Period(s) with respect
thereto (which may not end after the Maturity Date).  Promptly after its receipt
of  a  Competitive   Bid  Request  that  is  not  rejected  as  aforesaid,   the
Administrative  Agent  shall  invite  by  telecopier  (in the form set  forth in
Exhibit A-2 hereto)  the  Lenders to bid,  on the terms and  conditions  of this
Agreement, to make Competitive Loans pursuant to the Competitive Bid Request.

     (b) Each Lender may, in its sole  discretion,  make one or more Competitive
Bids to the Borrower  responsive to a Competitive Bid Request.  Each Competitive
Bid by a Lender must be received by the Administrative Agent via telecopier,  in
the form of Exhibit  A-3  hereto,  (i) in the case of a  Eurodollar  Competitive
Borrowing,  not later  than 9:30 A.M.  three  Business  Days  before a  proposed
Competitive Borrowing and (ii) in the case of a Fixed Rate Borrowing,  not later
than 9:30 A.M. on the day of a proposed  Competitive  Borrowing.  Multiple  bids
will be  accepted  by the  Administrative  Agent.  Competitive  Bids that do not
conform  substantially  to the  format of  Exhibit  A-3 may be  rejected  by the
Administrative  Agent after  conferring  with, and upon the  instruction of, the
Borrower,  and the  Administrative  Agent  shall  notify the Lender  making such
nonconforming bid of such rejection as soon as practicable. Each Competitive Bid
shall refer to this  Agreement  and specify (x) the range of  principal  amounts
(each of which shall be in a minimum  principal  amount of $5,000,000  and in an
integral multiple of $1,000,000 and, in the case of the larger such amount,  may
equal the entire principal amount of the Competitive  Borrowing requested by the
Borrower) of the Competitive Loan or Loans that the Lender is willing to make to
the  Borrower,  (y) the  Competitive  Bid Rate or Rates at which  the  Lender is
prepared to make the  Competitive  Loan or Loans and (z) the Interest Period and
the last day thereof.  If any Lender shall elect not to make a Competitive  Bid,
such Lender shall so notify the  Administrative  Agent via telecopier (A) in the
case of Eurodollar  Competitive  Loans,  not later than 9:30 A.M. three Business
Days before a proposed Competitive Borrowing,  and (B) in the case of Fixed Rate
Loans, not later than 9:30 A.M. on the day of a proposed Competitive  Borrowing;
provided,  however, that the failure by any Lender to give such notice shall not
cause such Lender to be obligated to make any  Competitive  Loan as part of such
Competitive  Borrowing. A Competitive Bid submitted by a Lender pursuant to this
paragraph (b) shall be irrevocable.  If the Administrative  Agent shall not have
received from any Lender  notification of its election to make a Competitive Bid
on or before the times set forth in the second sentence of this paragraph,  such
Lender shall be deemed to have elected not to make a Competitive Bid.

                                       20
<PAGE>

     (c) The  Administrative  Agent shall  promptly  notify (but in any event no
later  than  10:00  A.M.  on the  day any  Competitive  Bid is  received  by the
Administrative  Agent) the Borrower by  telecopier of all the  Competitive  Bids
made, the  Competitive  Bid Rate and the principal  amount (or range thereof) of
each  Competitive  Loan in respect of which a  Competitive  Bid was made and the
identity of the Lender that made each bid. The Administrative Agent shall send a
copy  of all  Competitive  Bids  to the  Borrower  for  its  records  as soon as
practicable  after  completion of the bidding  process set forth in this Section
2.03.

     (d) The Borrower may in its sole and absolute  discretion,  subject only to
the  provisions  of this  paragraph  (d),  accept or reject  all or any  portion
(within the range of principal amounts specified therein) of any Competitive Bid
referred to in paragraph (c) above. The Borrower shall notify the Administrative
Agent by telephone,  confirmed by  telecopier  in the form of a Competitive  Bid
Accept/Reject  Letter,  whether  and to what  extent it has decided to accept or
reject any of or all the bids  referred to in  paragraph  (c) above,  (x) in the
case of a  Eurodollar  Competitive  Borrowing,  not later than 11:00 A.M.  three
Business Days before a proposed  Competitive  Borrowing and (y) in the case of a
Fixed  Rate  Borrowing,  not later  than  11:00  A.M.  on the day of a  proposed
Competitive Borrowing;  provided,  however, that (i) the failure by the Borrower
to give such notice shall be deemed to be a rejection  of all the bids  referred
to in paragraph  (c) above,  (ii) the Borrower  shall not accept a bid made at a
particular Competitive Bid Rate if the Borrower has decided to reject a bid made
at a lower  Competitive Bid Rate,  (iii) the aggregate amount of the Competitive
Bids accepted by the Borrower shall not exceed the principal amount specified in
the  Competitive  Bid Request,  (iv) if the Borrower  shall accept a bid or bids
made at the same  Competitive  Bid Rate but the amount of such bid or bids shall
cause the total  amount of bids to be  accepted  by the  Borrower  to exceed the
amount specified in the Competitive Bid Request,  then the Borrower shall accept
a portion of such bid or bids in an amount no greater than the amount  specified
in the Competitive Bid Request less the amount of all other  Competitive Bids at
a lower  Competitive  Bid Rate  accepted  with respect to such  Competitive  Bid
Request, which acceptance,  in the case of multiple bids at such Competitive Bid
Rate,  shall be made pro rata in accordance  with the lowest amount of each such
bid at such  Competitive Bid Rate, and (v) except pursuant to clause (iv) above,
no bid shall be accepted for a Competitive  Loan unless such Competitive Loan is
in a  minimum  principal  amount  of  $5,000,000  and an  integral  multiple  of
$1,000,000;  provided further, however, that if a Competitive Loan must be in an
amount less than $5,000,000 because of the provisions of clause (iv) above, such
Competitive  Loan may be for a minimum of  $1,000,000  or any integral  multiple
thereof,  and in calculating  the pro rata allocation of acceptances of portions
of multiple  bids at a particular  Competitive  Bid Rate pursuant to clause (iv)
the amounts  shall be rounded to integral  multiples of  $1,000,000  in a manner
which shall be in the discretion of the Borrower. A notice given by the Borrower
pursuant to this paragraph (d) shall be irrevocable.

                                       21
<PAGE>

     (e) The  Administrative  Agent shall  promptly  notify each bidding  Lender
whether or not its  Competitive Bid has been accepted (and if so, in what amount
and at what  Competitive  Bid  Rate) by  telecopier  sent by the  Administrative
Agent, and each successful  bidder will thereupon  become bound,  subject to the
other applicable  conditions  hereof, to make the Competitive Loan in respect of
which its bid has been accepted.

     (f) If the Administrative  Agent shall elect to submit a Competitive Bid in
its capacity as a Lender,  it shall submit such bid directly to the Borrower not
later  than 9:15 A.M.  on the day on which the other  Lenders  are  required  to
submit their bids to the Administrative Agent pursuant to paragraph (b) above.

     (g) All notices  required by this Section 2.03 shall be given in accordance
with Section 9.01.

     SECTION 2.04. Standby Borrowing Procedure

     In order to request a Standby  Borrowing  (other  than a  Conversion),  the
Borrower shall hand deliver or telecopy to the Administrative  Agent a notice in
the form of Exhibit A-5 (a) in the case of a Eurodollar Standby  Borrowing,  not
later than 11:00 A.M. three Business Days before a proposed  Borrowing,  and (b)
in the case of an ABR  Borrowing,  not later  than  11:00  A.M.  on the day of a
proposed Borrowing.  No Fixed Rate Loan shall be requested or made pursuant to a
Standby Borrowing  Request.  Such notice shall be irrevocable  (unless otherwise
expressly  provided  herein)  and shall in each case  specify  (i)  whether  the
Borrowing then being requested is to be a Eurodollar Standby Borrowing or an ABR
Borrowing;  (ii) the date of such Standby  Borrowing  (which shall be a Business
Day) and the amount  thereof;  and (iii) if such Borrowing is to be a Eurodollar
Standby Borrowing,  the Interest Period with respect thereto.  If no election as
to the Type of Standby  Borrowing  is  specified  in any such  notice,  then the
requested  Standby  Borrowing  shall be an ABR Borrowing.  If no Interest Period
with  respect to any  Eurodollar  Standby  Borrowing  is  specified  in any such
notice, then the Borrower shall be deemed to have selected an Interest Period of
one month's duration. The Administrative Agent shall promptly advise (but in any
event no later  than 12:00 P.M.  on such date) the  Lenders of any notice  given
pursuant to this  Section  2.04 and of each  Lender's  portion of the  requested
Borrowing.

     SECTION 2.05. Conversions.

     The  Borrower  may from time to time  Convert any Standby  Loan (or portion
thereof) of any Type and with any Interest Period (if applicable) to one or more
Standby  Loans of the same or any other  Type and with any  Interest  Period (if
applicable)  by delivering  (by hand delivery or  telecopier) a request for such
Conversion in the form of Exhibit A-6 to the Administrative  Agent no later than
(i) 11:00  A.M.  on the  third  Business  Day prior to the date of any  proposed
Conversion into a Eurodollar Standby Loan and (ii) 11:00 A.M., on the day of any
proposed  Conversion into an ABR Loan. The Administrative  Agent shall give each
Lender prompt notice of each Conversion  Request.  Each Conversion Request shall
be irrevocable  (unless otherwise  expressly provided herein) and binding on the
Borrower and shall specify the requested (A) date of such  Conversion,  (B) Type
of, and Interest Period,  if any,  applicable to, the Standby Loans (or portions
thereof)  proposed  to be  Converted,  (C) Type of  Standby  Loans to which such
Standby Loans (or portions  thereof) are proposed to be  Converted,  (D) initial

                                       22
<PAGE>

Interest  Period,  if any, to be applicable to the Standby Loans  resulting from
such Conversion and (E) aggregate amount of Standby Loans (or portions  thereof)
proposed to be Converted. No Eurodollar Standby Loans may be Converted on a date
other than the last day of the Interest Period  applicable  thereto,  unless the
Borrower  reimburses  each  Lender  pursuant  to Section  2.15 for all losses or
expenses  incurred by such Lender in  connection  with such  Conversion.  If the
Borrower  shall  fail to  give a  timely  Conversion  Request  pursuant  to this
subsection in respect of any Standby  Loans,  such Standby  Loans shall,  on the
last day of the then existing  Interest Period therefor,  automatically  Convert
into, or remain as, as the case may be, ABR Loans, unless such Standby Loans are
repaid at the end of such Interest  Period.  If the Borrower  shall fail, in any
Conversion  Request  that has been timely  given,  to select the duration of any
Interest Period for Standby Loans to be Converted into Eurodollar Standby Loans,
such Standby Loans shall,  on the last day of the then existing  Interest Period
therefor,  automatically  Convert into Eurodollar Standby Loans with an Interest
Period of one month's duration. If, on the date of any proposed Conversion,  the
Borrower  shall have failed to fulfill any  condition set forth in Section 4.01,
all Standby Loans then outstanding  shall, on such date,  automatically  Convert
into, or remain as, as the case may be, ABR Loans.

     SECTION 2.06. Fees.

     (a) The Borrower agrees to pay to each Lender,  through the  Administrative
Agent, on each March 31, June 30,  September 30 and December 31, and on the date
on which the  Commitment  of such Lender  expires or is otherwise  terminated as
provided herein, a commitment fee (a "Commitment Fee") at a rate per annum equal
to the Applicable Rate from time to time in effect on the actual daily amount by
which  the  Commitment  of such  Lender  exceeds  the  sum of (i) the  aggregate
Outstanding Amount of the Loans of such Lender,  plus (ii) such Lender's Ratable
Share of the  Outstanding  Amount of all L/C  Obligations.  All Commitment  Fees
shall be computed on the basis of the actual number of days elapsed in a year of
365 or 366 days, as the case may be. The Commitment Fee due to each Lender shall
commence  to accrue on the date  hereof and shall cease to accrue on the date on
which the  Commitment  of such  Lender  expires or is  otherwise  terminated  as
provided herein.

     (b) The  Borrower  agrees  to pay  the  Administrative  Agent,  for its own
account,  the fees (the  "Administrative  Fees") at the times and in the amounts
agreed upon between them.

     (c) All Fees  shall be paid on the  dates  due,  in  immediately  available
funds,  to the  Administrative  Agent for  distribution,  if and as appropriate,
among the Lenders.  Once paid,  none of the Fees shall be  refundable  under any
circumstances.

                                       23
<PAGE>

     SECTION 2.07. Repayment of Loans.

     (a) The outstanding principal balance of each Loan shall be payable, in the
case of each  Competitive  Loan,  on the earlier to occur of the last day of the
Interest Period  applicable to such Loan and the Maturity Date, and, in the case
of each Standby  Loan,  on the Maturity  Date.  Each  Competitive  Loan and each
Standby  Loan  shall bear  interest  from the date  thereof  on the  outstanding
principal  balance thereof as set forth in Section 2.08. Each Lender shall,  and
is hereby authorized by the Borrower to record in such Lender's internal records
an appropriate  notation evidencing the date and amount of each Competitive Loan
or Standby Loan, as  applicable,  of such Lender,  each payment or prepayment of
principal of any Competitive Loan or Standby Loan, as applicable, and such other
relevant information as such Lender records in its internal records with respect
to loans of a type similar to such Loans; provided, however, that the failure of
any Lender to make such a notation or any error  therein shall not in any manner
affect the obligation of the Borrower to repay the Competitive  Loans or Standby
Loans, as applicable, made by such Lender in accordance with the terms hereof.

     (b) Any Lender may request that any Loans made by it be evidenced by one or
more promissory notes. Promptly upon receipt of such request, the Borrower shall
prepare, execute and deliver to such Lender one or more promissory notes payable
to the order of such Lender (or, if requested by such Lender, to such Lender and
its assignees)  substantially in the form of Exhibit D-1 or D-2, as appropriate.
Thereafter,  the Loans evidenced by such promissory  notes and interest  thereon
shall at all times  (including  after  assignment  pursuant to Section  9.04) be
represented by one or more promissory notes in such form payable to the order of
the payee named therein.

     SECTION 2.08. Interest on Loans.

     (a) Subject to the  provisions of Section 2.09, the Loans  comprising  each
Eurodollar  Borrowing  shall bear interest  (computed on the basis of the actual
number of days elapsed over a year of 360 days) at a rate per annum equal to (i)
in the case of each  Eurodollar  Standby  Loan,  the LIBO Rate for the  Interest
Period in effect for such Borrowing  plus the  Applicable  Rate, and (ii) in the
case of each Eurodollar  Competitive Loan, the LIBO Rate for the Interest Period
in effect for such  Borrowing  plus the Margin offered by the Lender making such
Loan and accepted by the  Borrower  pursuant to Section  2.03.  Interest on each
Eurodollar  Borrowing shall be payable on each applicable Interest Payment Date.
The LIBO Rate for each Interest Period shall be determined by the Administrative
Agent,  and such  determination  shall be conclusive  absent manifest error. The
Administrative  Agent shall  promptly (but in any event no later than 10:30 A.M.
two Business Days prior to the  commencement of such Interest Period) (A) advise
the Borrower and each Lender, as appropriate, of such determination and (B) upon
the request of the  Borrower,  provide the Borrower  with the  calculations  and
relevant factors supporting such determination.

     (b) Subject to the  provisions of Section 2.09, the Loans  comprising  each
ABR Borrowing shall bear interest (computed on the basis of the actual number of
days elapsed over a year of 365 or 366 days, as the case may be, when determined
with reference to the Prime Rate and over a year of 360 days in all other cases)
at a rate per annum equal to the Alternate Base Rate plus the  Applicable  Rate.
Interest  on each ABR  Borrowing  shall be payable on each  applicable  Interest
Payment Date. The Alternate Base Rate shall be determined by the  Administrative
Agent,  and such  determination  shall be conclusive  absent manifest error. The
Administrative  Agent shall  promptly (but in any event no later than 11:30 A.M.
on the day of each ABR  Borrowing)  (A) advise the  Borrower  and each Lender of
such  determination  and (B) upon  the  request  of the  Borrower,  provide  the
Borrower  with  the   calculations   and  relevant   factors   supporting   such
determination.

                                       24
<PAGE>

     (c) Subject to the  provisions of Section 2.09,  each Fixed Rate Loan shall
bear interest at a rate per annum (computed on the basis of the actual number of
days  elapsed  over a year of 360  days)  equal to the  fixed  rate of  interest
offered by the Lender making such Loan and accepted by the Borrower  pursuant to
Section 2.03.  Interest on each Fixed Rate Loan shall be payable on the Interest
Payment  Dates  applicable  to such Loan  except as  otherwise  provided in this
Agreement.

     SECTION 2.09. Default Interest.

     If the  Borrower  shall  default  in the  payment  of the  principal  of or
interest on any Loan or any other  amount  becoming  due  hereunder,  whether by
scheduled  maturity,  notice of  prepayment,  acceleration,  or  otherwise,  the
Borrower  shall on demand  from time to time from the  Administrative  Agent pay
interest,  to the extent  permitted by law, on such defaulted  amount up to (but
not including) the date of actual payment (after as well as before  judgment) at
a rate per annum  (computed  on the basis of the actual  number of days  elapsed
over a year of 360 days) equal to the Alternate Base Rate plus 2%.

     SECTION 2.10. Alternate Rate of Interest.

     In the event, and on each occasion, that on the day two Business Days prior
to the  commencement  of any  Interest  Period for a  Eurodollar  Borrowing  the
Administrative Agent shall have determined that dollar deposits in the principal
amounts of the  Eurodollar  Loans  comprising  such  Borrowing are not generally
available in the London interbank market, or that the rates at which such dollar
deposits are being offered will not  adequately  and fairly  reflect the cost to
any Lender of making or  maintaining  its  Eurodollar  Loan during such Interest
Period,  or that reasonable  means do not exist for  ascertaining the LIBO Rate,
the Administrative Agent shall, as soon as practicable thereafter,  give written
notice of such  determination  to the Borrower and the Lenders.  In the event of
any such  determination,  until the Administrative  Agent shall have advised the
Borrower  and the Lenders that the  circumstances  giving rise to such notice no
longer exist, (i) any such request by the Borrower for a Eurodollar  Competitive
Borrowing  pursuant to Section 2.03 shall be of no force and effect and shall be
denied by the Administrative  Agent, (ii) any such request by the Borrower for a
Eurodollar  Standby  Borrowing  pursuant to Section 2.04 shall be deemed to be a
request for an ABR  Borrowing  (unless the  Borrower  shall have  withdrawn  its
request for such Eurodollar  Standby  Borrowing not later than 10:00 A.M. on the
day of the  proposed  Borrowing)  and (iii) any  request by the  Borrower  for a
Conversion to Eurodollar  Standby Loans pursuant to Section 2.05 shall be deemed
to be a request for a Conversion  to ABR Loans  (unless the Borrower  shall have
withdrawn its request for such  Conversion  not later than 10:00 A.M. on the day
of the proposed  Conversion).  Each  determination by the  Administrative  Agent
hereunder shall be conclusive absent manifest error.

     SECTION 2.11. Changes in Commitments.

     (a) Upon at least three Business Days' prior irrevocable  written notice to
the  Administrative  Agent,  the Borrower  may at any time in whole  permanently
terminate,  or  from  time  to  time  in  part  permanently  reduce,  the  Total
Commitment;  provided,  however,  that (i) each  partial  reduction of the Total
Commitment  shall be in an  integral  multiple  of  $1,000,000  and in a minimum
principal amount of $10,000,000,  (ii) no such termination or reduction shall be
made which would, after giving effect to any concurrent  prepayment of the Loans
in accordance with Section 2.12,  reduce the Total  Commitment to an amount less
than Total  Outstandings,  and (iii) if, after giving effect to any reduction of
the Total  Commitment,  the Letter of Credit Sublimit  exceeds the amount of the
Total Commitment,  such Letter of Credit Sublimit shall be automatically reduced
by the amount of such excess.

                                       25
<PAGE>

     (b) Each reduction in the Total Commitment  hereunder shall be made ratably
among the Lenders in accordance with their respective Commitments.  The Borrower
shall pay to the  Administrative  Agent for the account of the  Lenders,  on the
date of each termination or reduction,  the Commitment Fees on the amount of the
Commitments  so  terminated  or  reduced   accrued  through  the  date  of  such
termination  or  reduction.   Subject  to  Section  2.06(a)(ii),  no  additional
Commitment  Fees on the amount of the  Commitments so terminated or reduced will
accrue.

     (c) Unless earlier terminated pursuant to the terms of this Agreement,  the
Commitment of each Lender shall  automatically and permanently  terminate on the
Maturity Date.

     (d) Any changes in the  Commitments  pursuant to this Section 2.11 shall be
appropriately recorded by the Administrative Agent in the Register in accordance
with Section 9.04(d).  In addition,  all notices with respect to any such change
shall be maintained by the Administrative Agent with the Register.

     SECTION 2.12. Prepayment.

     (a) The Borrower  shall have the right at any time and from time to time to
prepay any Standby Borrowing,  or Eurodollar Competitive Borrowing,  in whole or
in part, upon giving written notice (or telephone  notice promptly  confirmed by
written  notice)  to the  Administrative  Agent:  (i) before  11:00  A.M.  three
Business Days prior to  prepayment,  in the case of Eurodollar  Loans,  and (ii)
before 11:00 A.M. on the day of prepayment,  in the case of ABR Loans; provided,
however, that each partial prepayment shall be in an amount which is an integral
multiple of $1,000,000 and not less than $5,000,000. The Borrower shall not have
the right to prepay any Fixed Rate Competitive  Borrowing without the consent of
the applicable Lender.

     (b) Each notice of  prepayment  shall specify the  prepayment  date and the
principal amount of each Borrowing (or portion thereof) to be prepaid,  shall be
irrevocable  and shall commit the Borrower to prepay such  Borrowing (or portion
thereof)  by  the  amount  stated  therein  on  the  date  stated  therein.  All
prepayments  under this  Section  2.12  shall be  subject  to  Section  2.15 but
otherwise  without premium or penalty.  All prepayments  under this Section 2.12
shall be accompanied by accrued  interest on the principal  amount being prepaid
to the date of payment.

     (c) If for any reason the Total  Outstandings  at any time exceed the Total
Commitment then in effect,  the Borrower shall  immediately  prepay Loans and/or
Cash  Collateralize  the L/C  Obligations  in an aggregate  amount equal to such
excess;  provided,  however,  that the  Borrower  shall not be  required to Cash
Collateralize the L/C Obligations  pursuant to this Section 2.12(c) unless after
the  prepayment in full of the Standby Loans the Total  Outstandings  exceed the
Total Commitment then in effect.

                                       26
<PAGE>


     SECTION 2.13. Reserve Requirements; Change in Circumstances.

     (a) It is understood  that the cost to each Lender of making or maintaining
any of the Eurodollar  Loans may fluctuate as a result of the  applicability  of
reserve  requirements  imposed  by the  Board  at  the  ratios  provided  for in
Regulation  D on the date  hereof.  The  Borrower  agrees  to pay to each of the
Lenders from time to time such amounts as shall be necessary to compensate  such
Lender for the  portion of the cost of making or  maintaining  Eurodollar  Loans
(other  than  Eurodollar  Competitive  Loans)  resulting  from any such  reserve
requirements  provided for in  Regulation D as in effect on the date hereof,  it
being understood that the rates of interest  applicable to Eurodollar Loans have
been  determined on the assumption  that no such reserve  requirements  exist or
will exist and that such rates do not  reflect  costs  imposed on the Lenders in
connection with such reserve requirements.

     (b)  Notwithstanding  any other provision herein, if after the date of this
Agreement  any  change  in  applicable  law or  regulation  (including,  without
limitation,  Regulation D) or in the interpretation or administration thereof by
any Governmental  Authority  charged with the  interpretation  or administration
thereof  (whether  or not  having  the force of law)  shall  change the basis of
taxation  of  payments  to any Lender of the  principal  of or  interest  on any
Eurodollar  Loan or Fixed  Rate  Loan made by such  Lender,  or any  amounts  in
respect of Letters of Credit to the Issuing  Bank,  or any Fees or other amounts
payable hereunder (other than changes in respect of taxes imposed on the overall
net income of such Lender or the Issuing Bank and franchise  taxes imposed on it
by the  jurisdiction  in which such Lender or the Issuing Bank has its principal
office or by any political  subdivision or taxing authority  therein),  or shall
impose,  modify,  or deem applicable any reserve,  special  deposit,  or similar
requirement  against  assets of,  deposits  with or for the account of or credit
extended by such Lender or the Issuing  Bank,  or shall impose on such Lender or
the Issuing Bank or the London  interbank  market any other condition  affecting
this Agreement or any Eurodollar Loan or Fixed Rate Loan made by such Lender, or
any Letter of Credit or any participation  therein, and the result of any of the
foregoing  shall be to increase the cost to such Lender of making or maintaining
any  Eurodollar  Loan or Fixed Rate Loan or to increase  the cost of the Issuing
Bank of  participating  in,  issuing or  maintaining  any Letter of Credit or to
reduce  the  amount of any sum  received  or  receivable  by such  Lender or the
Issuing Bank  hereunder  (whether of  principal,  interest,  or otherwise) by an
amount  deemed by such Lender or the Issuing Bank to be material,  then,  to the
extent not otherwise being  reimbursed  under Section 2.19 hereof,  the Borrower
will pay to such  Lender or the  Issuing  Bank,  as the case may be, upon demand
such additional  amount or amounts as will compensate such Lender or the Issuing
Bank,  as the case may be,  for such  additional  costs  incurred  or  reduction
suffered.  Notwithstanding the foregoing, no Lender shall be entitled to request
compensation  under this  paragraph with respect to any  Competitive  Loan if it
shall have had actual knowledge of the change giving rise to such request at the
time of submission  of the  Competitive  Bid pursuant to which such  Competitive
Loan shall have been made.

                                       27
<PAGE>

     (c) If any  Lender or the  Issuing  Bank  shall  have  determined  that the
adoption  after  the date  hereof of any law,  rule,  regulation,  or  guideline
regarding capital adequacy, or any change in any existing law, rule, regulation,
or  guideline   regarding   capital  adequacy  or  in  the   interpretation   or
administration  of any of the foregoing by any governmental  authority,  central
bank, or comparable  agency charged with the  interpretation  or  administration
thereof,  or compliance by any Lender or the Issuing Bank (or any lending office
of such  Lender or the  Issuing  Bank) or any  Lender's  or the  Issuing  Bank's
holding  company  with any  request  or  directive  regarding  capital  adequacy
(whether or not having the force of law) of any such authority, central bank, or
comparable  agency,  has or would have the effect of reducing the rate of return
on such  Lender's  or the  Issuing  Bank's  capital  or on the  capital  of such
Lender's or the Issuing Bank's holding company, if any, as a consequence of this
Agreement or the Loans made by, or  participations in Letters of Credit held by,
such Lender  pursuant  hereto,  or the  Letters of Credit  issued by the Issuing
Bank, to a level below that which such Lender or such Lender's  holding  company
or the Issuing Bank or the Issuing Bank's holding  company,  as the case may be,
could have achieved but for such adoption,  change,  or compliance  (taking into
consideration  such Lender's or the Issuing Bank's  policies and the policies of
such  Lender's or the Issuing  Bank's  holding  company  with respect to capital
adequacy) by an amount deemed by such Lender or the Issuing Bank to be material,
then from time to time the  Borrower  shall  pay to such  Lender or the  Issuing
Bank, as the case may be, such  additional  amount or amounts as will compensate
such Lender or the Issuing Bank or such Lender's or the Issuing  Bank's  holding
company for any such reduction suffered.

     (d) A certificate of a Lender or the Issuing Bank setting forth such amount
or amounts as shall be necessary to  compensate  such Lender or the Issuing Bank
or its holding  company as specified in paragraph (a), (b), or (c) above, as the
case may be, and all of the  relevant  factors and the  calculations  supporting
such  amount  or  amounts,  shall be  delivered  to the  Borrower  and  shall be
conclusive  absent  manifest  error.  The Borrower  shall pay each Lender or the
Issuing  Bank,  as the  case  may  be,  the  amount  shown  as  due on any  such
certificate delivered by it within 10 days after the receipt of the same.

     (e)  Failure  or delay on the part of any  Lender  or the  Issuing  Bank to
demand  compensation  pursuant to this Section shall not  constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation;  provided
that the  Borrower  shall not be required to  compensate a Lender or the Issuing
Bank  pursuant to this Section for any increased  costs or  reductions  incurred
more than 45 days prior to the date that such Lender or the Issuing Bank, as the
case may be, notifies the Borrower of the occurrence of the event entitling such
Lender or the  Issuing  Bank to such  compensation  and of such  Lender's or the
Issuing Bank's intention to claim compensation therefor;  provided further that,
if the occurrence of the event entitling such Lender or the Issuing Bank to such
compensation is  retroactive,  then the 45-day period referred to above shall be
extended to include the period of retroactive effect thereof

     (f) If any Lender shall have delivered a notice or certificate  pursuant to
paragraph (d) above, the Borrower shall have the right, at its own expense, upon
notice to such Lender and the  Administrative  Agent,  to require such Lender to
(i) terminate its  Commitment or (ii) transfer and assign  without  recourse (in
accordance with and subject to the  restrictions  contained in Section 9.04) all
or a portion of its interest,  rights and  obligations  under this  Agreement to
another financial institution which shall assume such obligations; provided that
(A) no such  termination  or assignment  shall  conflict with any law,  rule, or
regulation  or order of any  Governmental  Authority and (B) the Borrower or the
assignee,  as the case may be, shall pay to the affected  Lender in  immediately
available  funds on the date of such  termination or assignment the principal of
and  interest  accrued to the date of payment on the Loans made by it  hereunder
and all other  amounts  accrued for its account or owed to it  hereunder  (other
than any amounts owed to such Lender  pursuant to Section  2.15(c) in connection
with such principal payment).

                                       28
<PAGE>

     SECTION 2.14. Change in Legality.

     (a) Notwithstanding any other provision herein, if any change in any law or
regulation  or in  the  interpretation  thereof  by any  governmental  authority
charged with the administration or interpretation thereof shall make it unlawful
for any Lender to make or maintain any Eurodollar  Loan or to give effect to its
obligations as contemplated hereby with respect to any Eurodollar Loan, then, by
written notice to the Borrower and to the Administrative Agent, such Lender may:

          (i) declare that Eurodollar  Loans will not thereafter be made by such
     Lender hereunder,  whereupon such Lender shall not submit a Competitive Bid
     in response to a request for Eurodollar  Competitive  Loans and any request
     by the Borrower for a Eurodollar Standby Borrowing shall, as to such Lender
     only,  be deemed a  request  for an ABR Loan (or for a  Conversion  thereto
     pursuant to Section  2.05) unless such  declaration  shall be  subsequently
     withdrawn; and

          (ii)  require  that all  outstanding  Eurodollar  Loans  made by it be
     Converted to ABR Loans, in which event all such  Eurodollar  Loans shall be
     automatically  Converted  to ABR  Loans  as of the  effective  date of such
     notice as provided in paragraph (b) below.

     In the event any Lender shall  exercise its rights under (i) or (ii) above,
all  payments  and  prepayments  of principal  which would  otherwise  have been
applied to repay the  Eurodollar  Loans that would have been made by such Lender
or the  Converted  Eurodollar  Loans of such Lender shall  instead be applied to
repay  the ABR Loans  made by such  Lender  in lieu of,  or  resulting  from the
Conversion of, such Eurodollar Loans.

     (b) For  purposes of this  Section  2.14,  a notice to the  Borrower by any
Lender shall be effective as to each Eurodollar Loan, if lawful, on the last day
of the Interest  Period  currently  applicable to such  Eurodollar  Loan; in all
other  cases  such  notice  shall be  effective  on the date of  receipt  by the
Borrower.

     SECTION 2.15. Indemnity.

     The Borrower shall  indemnify each Lender against any loss or expense which
such  Lender may  sustain or incur as a  consequence  of (a) any  failure by the
Borrower  to  fulfill  on the date of any  Borrowing  hereunder  the  applicable
conditions set forth in Article IV, (b) any failure by the Borrower to borrow or
to Convert any Loan  hereunder  after  irrevocable  notice of such  Borrowing or
Conversion  has been given  pursuant  to  Section  2.03,  2.04 or 2.05,  (c) any
payment,  prepayment or  Conversion  of a Eurodollar  Loan required by any other
provision of this  Agreement  or  otherwise  made or deemed made on a date other
than the last day of the Interest Period applicable thereto,  (d) any default in
payment or prepayment of the principal amount of any Loan or any part thereof or
interest accrued thereon,  as and when due and payable (at the due date thereof,

                                       29
<PAGE>

whether by scheduled maturity, acceleration, irrevocable notice of prepayment or
otherwise),  or (e) the occurrence of any Event of Default,  including,  in each
such  case,  any loss or  reasonable  expense  sustained  or  incurred  or to be
sustained or incurred in  liquidating  or employing  deposits from third parties
acquired to effect or  maintain  such Loan or any part  thereof as a  Eurodollar
Loan.  Such loss or  reasonable  expense  shall  include an amount  equal to the
excess,  if any, as reasonably  demonstrated by such Lender,  of (i) its cost of
obtaining the funds for the Loan being paid, prepaid, Converted, or not borrowed
(assumed  to be the LIBO Rate or, in the case of a Fixed  Rate  Loan,  the fixed
rate of  interest  applicable  thereto)  for the  period  from  the date of such
payment, prepayment, or failure to borrow to the last day of the Interest Period
for such Loan (or, in the case of a failure to borrow,  the Interest  Period for
such Loan which would have  commenced on the date of such failure) over (ii) the
amount of interest  (as  reasonably  demonstrated  by such Lender) that would be
realized  by such  Lender  in  redeploying  the funds so paid,  prepaid,  or not
borrowed for such period or Interest  Period,  as the case may be. A certificate
of any Lender setting forth the factors and  calculations  supporting any amount
or amounts  which such Lender is entitled  to receive  pursuant to this  Section
shall  be  delivered  to the  Borrower  no  later  than  30 days  following  the
incurrence   of  any  loss  or  expense   for  which  such   Lender  is  seeking
indemnification  under this Section 2.15 and shall be conclusive absent manifest
error.

     SECTION 2.16. Pro Rata Treatment.

     Except as required or otherwise  permitted under Sections 2.13(f) and 2.14,
each Standby  Borrowing,  each payment or prepayment of principal of any Standby
Borrowing,  each payment of interest on the Standby  Loans,  each payment of the
Letter of Credit Fees,  each reduction of the Commitments and each Conversion of
any Borrowing with a Standby  Borrowing of any Type, shall be allocated pro rata
among the Lenders in accordance with their  respective  Commitments (or, if such
Commitments  shall  have  expired or been  terminated,  in  accordance  with the
respective  principal amounts of their outstanding  Standby Loans). Each payment
of  Commitment  Fees shall be made to each Lender  (through  the  Administrative
Agent) as set  forth in  Section  2.06(a).  Each  payment  of  principal  of any
Competitive   Borrowing   shall  be   allocated   pro  rata  among  the  Lenders
participating  in such  Borrowing in accordance  with the  respective  principal
amounts of their outstanding  Competitive Loans comprising such Borrowing.  Each
payment of interest on any  Competitive  Borrowing  shall be allocated  pro rata
among  the  Lenders  participating  in such  Borrowing  in  accordance  with the
respective   amounts  of  accrued  and  unpaid  interest  on  their  outstanding
Competitive  Loans  comprising  such  Borrowing.  Each Lender  agrees  that,  in
computing  such  Lender's  portion of any  Borrowing to be made  hereunder,  the
Administrative  Agent may, in its discretion,  round each Lender's percentage of
such Borrowing to the next higher or lower whole dollar amount.

     SECTION 2.17. Sharing of Setoffs.

     Each  Lender  agrees that if it shall,  through the  exercise of a right of
banker's lien,  setoff, or counterclaim  against the Borrower,  or pursuant to a
secured  claim under  Section 506 of Title 11 of the United States Code or other
security or interest  arising from, or in lieu of, such secured claim,  received
by such Lender under any applicable bankruptcy, insolvency, or other similar law
or otherwise,  or by any other means,  obtain payment (voluntary or involuntary)
in respect of any  Standby  Loan or Standby  Loans or  participation  in the L/C
Obligations  as a result of which the unpaid  principal  portion of the  Standby
Loans or L/C Obligations of such Lender shall be  proportionately  less than the
unpaid  principal  portion of the Standby Loans or L/C  Obligations of any other
Lender,  it shall be deemed  simultaneously  to have  purchased  from such other
Lender at face value,  and shall  promptly pay to such other Lender the purchase
price for,  a  participation  in the  Standby  Loans of such  other  Lender or a

                                       30
<PAGE>

participation  in the  Letters  of  Credit  of such  other  Lender,  so that the
aggregate  unpaid  principal  amount of the Standby Loans or the L/C Obligations
and  participations  in the Standby  Loans or the Letters of Credit held by each
Lender shall be in the same proportion to the aggregate  unpaid principal amount
of all Standby Loans or L/C Obligations then outstanding as the principal amount
of its Standby Loans or L/C Obligations prior to such exercise of banker's lien,
setoff,  or  counterclaim  or other  event  was to the  principal  amount of all
Standby Loans or L/C Obligations  outstanding prior to such exercise of banker's
lien,  setoff, or counterclaim or other event;  provided,  however,  that if any
such purchase or purchases or adjustments shall be made pursuant to this Section
2.17 and the payment  giving rise thereto shall  thereafter  be recovered,  such
purchase or  purchases or  adjustments  shall be rescinded to the extent of such
recovery  and the  purchase  price or  prices  or  adjustment  restored  without
interest.  The Borrower  expressly  consents to the foregoing  arrangements  and
agrees  that,  to the maximum  extent  permitted  by law,  any Lender  holding a
participation  in a Standby  Loan or a Letter  of Credit  deemed to have been so
purchased  may  exercise  any  and all  rights  of  banker's  lien,  setoff,  or
counterclaim  with  respect to any and all moneys  owing by the Borrower to such
Lender by reason  thereof as fully as if such Lender had made a Standby  Loan or
Letter of Credit directly to the Borrower in the amount of such participation.

     SECTION 2.18. Payments; Administrative Agent's Clawback.

     (a) The  Borrower  shall  make  each  payment  (including  principal  of or
interest on any Borrowing or any Fees or other amounts) hereunder not later than
12:00 P.M.  on the date when due in Dollars to the  Administrative  Agent at the
Administrative  Agent's Office in immediately  available  funds. All payments by
the Borrower  shall be made without  deduction  for any  counterclaim,  defense,
recoupment or setoff.

     (b)  Whenever  any  payment  (including  principal  of or  interest  on any
Borrowing or any Fees or other amounts) hereunder shall become due, or otherwise
would occur,  on a day that is not a Business  Day,  such payment may be made on
the next succeeding  Business Day, and such extension of time shall in such case
be included in the computation of interest or Fees, if applicable.

     (c) (i) Unless the  Administrative  Agent shall have received notice from a
Lender prior to the proposed  date of any Standby  Borrowing  (or in the case of
any  Standby  Borrowings  consisting  of ABR  Loans,  prior  to 1:00  P.M on the
proposed date of such ABR Borrowing) that such Lender will not make available to
the  Administrative  Agent such Lender's  share of such Standby  Borrowing,  the
Administrative  Agent may assume that such Lender has made such share  available
on such date in  accordance  with  Section  2.02 and may, in reliance  upon such
assumption,  make  available to the  Borrower a  corresponding  amount.  In such
event,  if a Lender  has not in fact  made its share of the  applicable  Standby
Borrowing available to the Administrative  Agent, then the applicable Lender and
the Borrower  severally  agree to pay to the  Administrative  Agent forthwith on
demand such  corresponding  amount in immediately  available funds with interest
thereon,  for each day from and including the date such amount is made available
to the  Borrower  to but  excluding  the date of payment  to the  Administrative
Agent, at (A) in the case of a payment to be made by such Lender, the greater of
the Federal Funds  Effective  Rate and a rate  determined by the  Administrative
Agent in accordance with banking  industry rules on interbank  compensation  and
(B) in the case of a  payment  to be made by the  Borrower,  the  interest  rate
applicable to ABR Loans. If the Borrower and such Lender shall pay such interest
to  the  Administrative  Agent  for  the  same  or an  overlapping  period,  the
Administrative  Agent shall  promptly  remit to the  Borrower the amount of such
interest paid by the Borrower for such period.  If such Lender pays its share of
the applicable Standby Borrowing to the Administrative Agent, then the amount so
paid shall  constitute  such  Lender's  Standby  Loan  included in such  Standby
Borrowing.  Any payment by the Borrower shall be without  prejudice to any claim
the  Borrower  may have  against a Lender  that shall  have  failed to make such
payment to the Administrative Agent.


                                       31
<PAGE>

     (ii) Payments by Borrower; Presumptions by Administrative Agent. Unless the
Administrative  Agent shall have received  notice from the Borrower prior to the
date on which any payment is due to the Administrative  Agent for the account of
the Lenders or the Issuing Bank  hereunder  that the Borrower will not make such
payment,  the  Administrative  Agent may assume that the  Borrower has made such
payment on such date in  accordance  herewith  and may,  in  reliance  upon such
assumption,  distribute  to the Lenders or the Issuing Bank, as the case may be,
the  amount  due.  In such  event,  if the  Borrower  has not in fact  made such
payment,  then each of the  Lenders  or the  Issuing  Bank,  as the case may be,
severally  agrees to repay to the  Administrative  Agent forthwith on demand the
amount  so  distributed  to such  Lender or the  Issuing  Bank,  in  immediately
available funds with interest thereon,  for each day from and including the date
such amount is  distributed  to it to but  excluding  the date of payment to the
Administrative  Agent,  at the greater of the Federal Funds Effective Rate and a
rate determined by the Administrative  Agent in accordance with banking industry
rules on interbank compensation.

     A notice of the  Administrative  Agent to any Lender or the  Borrower  with
respect  to any amount  owing  under this  subsection  (b) shall be  conclusive,
absent manifest error.

     SECTION 2.19. Taxes.

     (a) Any and all  payments  by the  Borrower  hereunder  shall be  made,  in
accordance  with Section 2.18,  free and clear of and without  deduction for any
and all  present or future  taxes,  levies,  imposts,  deductions,  charges,  or
withholdings,  and all liabilities with respect thereto, excluding taxes imposed
on the  Administrative  Agent's,  the  Issuing  Bank's or any  Lender's  (or any
Transferee's)  net  income and  franchise  taxes  imposed on the  Administrative
Agent,  the Issuing Bank or any Lender (or  Transferee)  by the United States or
any  jurisdiction  under  the  laws of which it is  organized  or any  political
subdivision thereof (all such nonexcluded taxes,  levies,  imposts,  deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If the Borrower  shall be required by law to deduct any Taxes from or in respect
of any sum payable  hereunder  to the Lenders (or any  Transferee),  the Issuing
Bank or the Administrative  Agent, (i) the sum payable shall be increased by the
amount  necessary  so that  after  making  all  required  deductions  (including
deductions  applicable to additional  sums payable under this Section 2.19) such
Lender (or  Transferee),  the Issuing Bank or the  Administrative  Agent (as the
case may be) shall receive an amount equal to the sum it would have received had
no such  deductions  been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower  shall pay the full amount  deducted to the  relevant  taxing
authority or other  Governmental  Authority in accordance  with  applicable law.
Each Lender party  hereto on the date hereof  represents  and  warrants  that no
Taxes will be incurred on the date hereof in  connection  with the execution and
delivery of this Agreement.


                                       32
<PAGE>

     (b) In addition,  the Borrower agrees to pay any present or future stamp or
documentary  taxes or any other excise or property  taxes,  charges,  or similar
levies  which  arise from any  payment  made  hereunder  or from the  execution,
delivery,  or  registration  of, or otherwise  with  respect to, this  Agreement
(hereinafter referred to as "Other Taxes"). Each Lender party hereto on the date
hereof  represents and warrants that no Other Taxes will be incurred on the date
hereof in connection with the execution and delivery of this Agreement.

     (c) The Borrower will  indemnify each Lender (or  Transferee),  the Issuing
Bank and the  Administrative  Agent for the full amount of Taxes and Other Taxes
(including  any Taxes or Other  Taxes  imposed  by any  jurisdiction  on amounts
payable  under this  Section  2.19) paid by such  Lender  (or  Transferee),  the
Issuing Bank or the Administrative  Agent, as the case may be, and any liability
(including  penalties,  interest and expenses) arising therefrom or with respect
thereto,  whether or not such Taxes or Other  Taxes  were  correctly  or legally
asserted by the  relevant  taxing  authority  or other  Governmental  Authority.
Payment of such indemnification  shall be made within 30 days after the date any
Lender (or  Transferee),  the Issuing Bank or the  Administrative  Agent, as the
case may be, makes written demand  therefor.  If a Lender (or  Transferee),  the
Issuing Bank or the Administrative  Agent shall become aware that it is entitled
to receive a refund in respect of Taxes or Other Taxes, it shall promptly notify
the Borrower of the availability of such refund and shall,  within 30 days after
receipt of a request by the  Borrower,  apply for such refund at the  Borrower's
expense.  If any Lender (or Transferee),  the Issuing Bank or the Administrative
Agent  receives a refund in  respect of any Taxes or Other  Taxes for which such
Lender  (or  Transferee),  the  Issuing  Bank or the  Administrative  Agent  has
received  payment  from the Borrower  hereunder,  it shall  promptly  notify the
Borrower of such refund and shall,  within 15 days after receipt of such refund,
repay such refund to the  Borrower,  net of all  out-of-pocket  expenses of such
Lender (or  Transferee),  the Issuing Bank or the  Administrative  Agent, as the
case may be, and only with interest  received,  if any, from the relevant taxing
authority  or  Governmental  Authority;  provided  that the  Borrower,  upon the
request of such Lender (or Transferee),  the Issuing Bank or the  Administrative
Agent, agrees to return such refund (plus penalties, interest, or other charges)
to such Lender (or Transferee), the Issuing Bank or the Administrative Agent, as
the case may be, in the event such Lender (or  Transferee),  the Issuing Bank or
the Administrative Agent is required to repay such refund. This subsection shall
not be construed to require the Administrative  Agent, any Lender or the Issuing
Bank to make available its tax returns (or any other information relating to its
taxes that it deems confidential) to the Borrower or any other Person.

     (d)  Within 30 days after the date of any  payment of Taxes or Other  Taxes
withheld  by  the  Borrower  in  respect  of  any  payment  to  any  Lender  (or
Transferee),  the Issuing Bank or the  Administrative  Agent,  the Borrower will
furnish to the Administrative Agent, at its address referred to in Section 9.01,
the original or a certified copy of a receipt evidencing payment thereof.


                                       33
<PAGE>

     (e) Without  prejudice  to the  survival of any other  agreement  contained
herein,  the  agreements  and  obligations  contained in this Section 2.19 shall
survive the payment in full of the  principal  of and interest on all Loans made
hereunder.

     (f) Each Lender  represents  and  warrants  that either (i) it is organized
under  the  laws of a  jurisdiction  within  the  United  States  or (ii) it has
delivered to the Borrower and the Administrative  Agent duly completed copies of
such form or forms  prescribed by the Internal  Revenue Service  indicating that
such Lender is entitled to receive payments without  deduction or withholding of
any  United  States  federal  income  taxes,  as  permitted  by the  Code.  Each
Transferee  agrees  that,  on or prior to the date upon which it shall  become a
party hereto or obtain a participation  herein,  and upon the reasonable request
from time to time of the Borrower or the  Administrative  Agent, it will deliver
to the Borrower and the  Administrative  Agent either (A) a statement that it is
organized under the laws of a jurisdiction  within the United States or (B) duly
completed copies of such form or forms as may from time to time be prescribed by
the United States Internal Revenue  Service,  indicating that such Transferee is
entitled to receive  payments  without  deduction or  withholding  of any United
States  federal  income  taxes,  as permitted by the Code.  Each Lender that has
delivered,  and each Transferee that hereafter delivers, to the Borrower and the
Administrative  Agent  the  form  or  forms  referred  to in the  two  preceding
sentences further  undertakes to deliver to the Borrower and the  Administrative
Agent,  so far as it may legally do so, further copies of such form or forms, or
successor applicable form or forms, as the case may be, as and when any previous
form filed by it hereunder shall expire or shall become incomplete or inaccurate
in any respect.  Each Lender and  Transferee  represents  and warrants that each
such form supplied by it to the  Administrative  Agent and the Borrower pursuant
to this subsection (f), and not superseded by another form supplied by it, is or
will be, as the case may be, complete and accurate.

     (g) The Borrower shall not be required to pay any additional amounts to any
Lender (or  Transferee) in respect of United States  withholding tax pursuant to
paragraph (a) above if the obligation to pay such  additional  amounts would not
have arisen but for a failure by such Lender (or  Transferee) to comply with the
provisions of paragraph (f) above, unless such failure results from (i) a change
in applicable law, regulation,  or official  interpretation  thereof, or (ii) an
amendment,  modification, or revocation of any applicable tax treaty or a change
in official  position  regarding the application or interpretation  thereof,  in
each case after the date hereof  (and,  in the case of a  Transferee,  after the
date of assignment or transfer);  provided,  however, that the Borrower shall be
required  to pay  those  amounts  to any  Lender  (or  Transferee)  which it was
required to pay hereunder prior to the failure of such Lender (or Transferee) to
comply with the provisions of paragraph (f).

     (h) Any Lender (or  Transferee)  claiming any  additional  amounts  payable
pursuant to this  Section 2.19 shall use  reasonable  efforts  (consistent  with
legal and regulatory restrictions) to file any certificate or document requested
by the Borrower or to change the  jurisdiction of its applicable  lending office
if the making of such a filing or change  would avoid the need for or reduce the
amount of any such additional amounts which may thereafter accrue and would not,
in the sole  determination of such Lender, be otherwise  disadvantageous to such
Lender (or Transferee).


                                       34
<PAGE>

     (i) If any Lender shall request  compensation  under this Section 2.19, the
Borrower  shall have the right,  at its own expense,  upon notice to such Lender
and the  Administrative  Agent,  to require  such  Lender to (i)  terminate  its
Commitment or (ii) transfer and assign without  recourse (in accordance with and
subject to the  restrictions  contained in Section 9.04 but with the  assignment
fee in such  instance  to be  paid  by the  Borrower)  all or a  portion  of its
interest,  rights and  obligations  under this  Agreement  to another  financial
institution  which shall  assume  such  obligations;  provided  that (A) no such
termination  or assignment  shall  conflict with any law, rule, or regulation or
order of any Governmental Authority and (B) the Borrower or the assignee, as the
case may be, shall pay to the affected Lender in immediately  available funds on
the date of such termination or assignment the principal of and interest accrued
to the date of payment on the Loans made by it hereunder  and all other  amounts
accrued for its account or owed to it hereunder.

     SECTION 2.20. Letters of Credit

     (a) The Letter of Credit Commitment
         -------------------------------

          (i)  Subject to the terms and  conditions  set forth  herein,  (A) the
     Issuing Bank agrees,  in reliance upon the  agreements of the other Lenders
     set forth in this Section  2.20,  (i) from time to time on any Business Day
     during  the  period  from the  Effective  Date  until the  Letter of Credit
     Expiration Date, to issue Letters of Credit for the account of the Borrower
     or  certain  Subsidiaries,  and  to  amend  or  extend  Letters  of  Credit
     previously  issued by it, in accordance with Section  2.20(b),  and (ii) to
     honor  drawings  under the Letters of Credit;  and (B) the Standby  Lenders
     severally  agree to participate in Letters of Credit issued for the account
     of the Borrower or its Subsidiaries and any drawings  thereunder;  provided
     that after giving  effect to any L/C Credit  Extension  with respect to any
     Letter of  Credit,  (x) the Total  Outstandings  shall not exceed the Total
     Commitment,  (y) the aggregate  Outstanding  Amount of the Standby Loans of
     any Lender,  plus such Lender's Ratable Share of the Outstanding  Amount of
     all L/C Obligations, shall not exceed such Lender's Commitment, and (z) the
     Outstanding  Amount of the L/C  Obligations  shall not exceed the Letter of
     Credit Sublimit. Each request by the Borrower for the issuance or amendment
     of a  Letter  of  Credit  shall be  deemed  to be a  representation  by the
     Borrower  that the L/C Credit  Extension  so  requested  complies  with the
     conditions set forth in the proviso to the preceding  sentence.  Within the
     foregoing  limits,  and  subject to the terms and  conditions  hereof,  the
     Borrower's  ability to obtain  Letters of Credit shall be fully  revolving,
     and  accordingly  the Borrower  may,  during the foregoing  period,  obtain
     Letters of Credit to replace  Letters of Credit  that have  expired or that
     have been drawn upon and reimbursed.

          (ii) The Issuing Bank shall not issue any Letter of Credit if:

               (A)  subject to  Section  2.20(b)(iii),  the expiry  date of such
          requested  Letter of Credit would occur more than twelve  months after
          the date of issuance or last  extension,  unless the Required  Lenders
          have approved such expiry date; or


                                       35
<PAGE>

               (B) the  expiry  date of such  requested  Letter of Credit  would
          occur  after the  Letter of Credit  Expiration  Date,  unless  all the
          Lenders have approved such expiry date.

          (iii) The Issuing Bank shall not be under any  obligation to issue any
     Letter of Credit if:

               (A) any order,  judgment or decree of any Governmental  Authority
          or  arbitrator  shall by its terms  purport to enjoin or restrain  the
          Issuing Bank from issuing such Letter of Credit, or any Law applicable
          to the Issuing Bank or any request or directive (whether or not having
          the force of law) from any  Governmental  Authority with  jurisdiction
          over the Issuing Bank shall prohibit, or request that the Issuing Bank
          refrain  from,  the  issuance of letters of credit  generally  or such
          Letter of Credit in  particular  or shall impose upon the Issuing Bank
          with  respect  to such  Letter of Credit any  restriction,  reserve or
          capital  requirement  (for  which the  Issuing  Bank is not  otherwise
          compensated  hereunder) not in effect on the Effective  Date, or shall
          impose upon the Issuing Bank any  unreimbursed  loss,  cost or expense
          which was not  applicable on the Effective  Date and which the Issuing
          Bank in good faith deems material to it;

               (B) the issuance of such Letter of Credit would  violate any Laws
          or one or more policies of the Issuing Bank;

               (C) except as otherwise  agreed by the  Administrative  Agent and
          the Issuing Bank, such Letter of Credit is in an initial stated amount
          less than $100,000;

               (D) such  Letter  of Credit is to be  denominated  in a  currency
          other than Dollars;

               (E) such Letter of Credit  contains any  provisions for automatic
          reinstatement of the stated amount after any drawing thereunder; or

               (F) a default of any Lender's  obligations  to fund under Section
          2.20(c)  exists  or any  Lender is at such  time a  Defaulting  Lender
          hereunder,  unless the  Issuing  Bank has  entered  into  satisfactory
          arrangements with the Borrower or such Lender to eliminate the Issuing
          Bank's risk with respect to such Lender.

          (iv) The  Issuing  Bank  shall not  amend any  Letter of Credit if the
     Issuing  Bank would not be  permitted  at such time to issue such Letter of
     Credit in its amended form under the terms hereof.

          (v) The Issuing Bank shall be under no  obligation to amend any Letter
     of Credit if (A) the Issuing Bank would have no  obligation at such time to
     issue such Letter of Credit in its amended form under the terms hereof,  or
     (B) the  beneficiary  of such Letter of Credit does not accept the proposed
     amendment to such Letter of Credit.


                                       36
<PAGE>

          (vi) The Issuing  Bank shall act on behalf of the Lenders with respect
     to any  Letters  of  Credit  issued  by it  and  the  documents  associated
     therewith,  and  the  Issuing  Bank  shall  have  all of the  benefits  and
     immunities  (A) provided to the  Administrative  Agent in Article VIII with
     respect to any acts taken or  omissions  suffered  by the  Issuing  Bank in
     connection  with Letters of Credit issued by it or proposed to be issued by
     it and Issuer Documents pertaining to such Letters of Credit as fully as if
     the term  "Administrative  Agent"  as used in  Article  VIII  included  the
     Issuing  Bank  with  respect  to  such  acts  or  omissions,   and  (B)  as
     additionally provided herein with respect to the Issuing Bank

     (b)   Procedures   for  Issuance  and   Amendment  of  Letters  of  Credit;
Auto-Extension Letters of Credit.

          (i) Each Letter of Credit shall be issued or amended,  as the case may
     be, upon the request of the Borrower  delivered to the Issuing Bank (with a
     copy to the  Administrative  Agent)  in the  form  of a  Letter  of  Credit
     Application,  appropriately  completed and signed by a Financial Officer of
     the  Borrower.  Such Letter of Credit  Application  must be received by the
     Issuing  Bank and the  Administrative  Agent not later than  11:00 A.M.  at
     least two Business Days (or such later date and time as the  Administrative
     Agent and the Issuing Bank may agree in a particular instance in their sole
     discretion)  prior to the proposed  issuance date or date of amendment,  as
     the case may be.  In the case of a request  for an  initial  issuance  of a
     Letter of Credit,  such Letter of Credit  Application shall specify in form
     and detail  reasonably  satisfactory  to the Issuing Bank: (A) the proposed
     issuance date of the requested  Letter of Credit (which shall be a Business
     Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and
     address of the  beneficiary  thereof;  (E) the documents to be presented by
     such  beneficiary in case of any drawing  thereunder;  (F) the full text of
     any certificate to be presented by such  beneficiary in case of any drawing
     thereunder;  and (G) such other matters as the Issuing Bank may  reasonably
     require.  In the case of a  request  for an  amendment  of any  outstanding
     Letter of Credit,  such Letter of Credit  Application shall specify in form
     and detail  reasonably  satisfactory  to the Issuing Bank (A) the Letter of
     Credit to be amended;  (B) the proposed  date of amendment  thereof  (which
     shall be a Business Day); (C) the nature of the proposed amendment; and (D)
     such  other   matters  as  the  Issuing   Bank  may   reasonably   require.
     Additionally,  the  Borrower  shall  furnish  to the  Issuing  Bank and the
     Administrative  Agent such other  documents and  information  pertaining to
     such requested Letter of Credit issuance or amendment, including any Issuer
     Documents,  as the Issuing Bank or the Administrative  Agent may reasonably
     require.

          (ii) Promptly after receipt of any Letter of Credit  Application,  the
     Issuing Bank will confirm with the Administrative Agent (by telephone or in
     writing) that the  Administrative  Agent has received a copy of such Letter
     of Credit  Application from the Borrower and, if not, the Issuing Bank will
     provide the  Administrative  Agent with a copy thereof.  Unless the Issuing
     Bank has received written notice from any Lender, the Administrative  Agent
     or the Borrower,  at least one Business Day prior to the requested  date of
     issuance or amendment of the applicable Letter of Credit,  that one or more
     applicable  conditions contained in Article IV shall not then be satisfied,
     then,  subject to the terms and conditions  hereof, the Issuing Bank shall,
     on the  requested  date,  issue a Letter of Credit  for the  account of the
     Borrower  (or the  applicable  Subsidiary)  or enter  into  the  applicable
     amendment,  as the case may be, in each case in accordance with the Issuing
     Bank's  usual  and  customary  business  practices.  Immediately  upon  the
     issuance of each Letter of Credit,  each Standby Lender shall be deemed to,
     and hereby  irrevocably  and  unconditionally  agrees to, purchase from the
     Issuing  Bank a risk  participation  in such  Letter of Credit in an amount
     equal to the  product of such  Lender's  Ratable  Share times the amount of
     such Letter of Credit.


                                       37
<PAGE>

          (iii) If the Borrower so requests in any  applicable  Letter of Credit
     Application,  the Issuing Bank may, in its reasonable discretion,  agree to
     issue a Letter of Credit that has automatic extension  provisions (each, an
     "Auto-Extension  Letter of Credit");  provided that any such Auto-Extension
     Letter of Credit must permit the Issuing Bank to prevent any such extension
     at least  once in each  twelve-month  period  (commencing  with the date of
     issuance  of  such  Letter  of  Credit)  by  giving  prior  notice  to  the
     beneficiary  thereof not later than a day (the "NonExtension  Notice Date")
     in each such twelve-month  period to be agreed upon at the time such Letter
     of Credit is issued.  Unless  otherwise  directed by the Issuing Bank,  the
     Borrower  shall not be required  to make a specific  request to the Issuing
     Bank for any such extension.  Once an  Auto-Extension  Letter of Credit has
     been issued,  the Lenders shall be deemed to have  authorized  (but may not
     require) the Issuing Bank to permit the  extension of such Letter of Credit
     at any  time to an  expiry  date  not  later  than  the  Letter  of  Credit
     Expiration Date; provided,  however, that the Issuing Bank shall not permit
     any such extension if (A) the Issuing Bank has reasonably  determined  that
     it would not be  permitted,  or would  have no  obligation  at such time to
     issue such Letter of Credit in its  revised  form (as  extended)  under the
     terms  hereof (by  reason of the  provisions  of  clauses  (ii) or (iii) of
     Section 2.20(a) or otherwise),  or (B) it has received notice (which may be
     by telephone or in writing) on or before the day that is five Business Days
     before the NonExtension Notice Date (1) from the Administrative  Agent that
     the Required  Lenders have elected not to permit such extension or (2) from
     the  Administrative  Agent,  any Lender or the Borrower that one or more of
     the applicable  conditions specified in Section 4.01 is not then satisfied,
     and in each  such  case  directing  the  Issuing  Bank not to  permit  such
     extension.

          (iv)  Promptly  after  its  delivery  of any  Letter  of Credit or any
     amendment to a Letter of Credit to an advising bank with respect thereto or
     to the  beneficiary  thereof,  the  Issuing  Bank will also  deliver to the
     Borrower  and the  Administrative  Agent a true and  complete  copy of such
     Letter of Credit or amendment.

          (v) To the extent  requested to do so by any Lender,  the Issuing Bank
     shall provide such Lender with a quarterly report of L/C Outstandings.


                                       38
<PAGE>

     (c) Drawings and Reimbursements; Funding of Participations.

          (i) Upon receipt from the  beneficiary  of any Letter of Credit of any
     notice of a drawing  under such Letter of Credit,  the  Issuing  Bank shall
     notify the Borrower and the  Administrative  Agent thereof.  Not later than
     11:00 A.M. on the date of any payment by the Issuing Bank under a Letter of
     Credit (each such date, an "Honor Date"),  the Borrower shall reimburse the
     Issuing  Bank  through the  Administrative  Agent in an amount equal to the
     amount of such drawing.  If the Borrower  fails to so reimburse the Issuing
     Bank by such time,  the  Administrative  Agent shall  promptly  notify each
     Standby  Lender of the Honor Date, the amount of the  unreimbursed  drawing
     (the  "Unreimbursed  Amount"),  and the  amount  of such  Standby  Lender's
     Ratable Share thereof.  In such event, the Borrower shall be deemed to have
     requested a Standby  Borrowing  of ABR Loans to be  disbursed  on the Honor
     Date in an amount equal to the Unreimbursed  Amount,  without regard to the
     minimum and multiples specified in Section 2.02 for the principal amount of
     ABR  Loans,  but  subject to the  amount of the  unutilized  portion of the
     Commitments  and the  conditions  set forth in Section 4.01 (other than the
     delivery of a notice pursuant to Section 4.01(a)).  Any notice given by the
     Issuing  Bank  or  the  Administrative   Agent  pursuant  to  this  Section
     2.20(c)(i) may be given by telephone if  immediately  confirmed in writing;
     provided that the lack of such an immediate  confirmation  shall not affect
     the conclusiveness or binding effect of such notice.

          (ii) Each  Standby  Lender  shall upon any notice  pursuant to Section
     2.20(c)(i) make funds available to the Administrative Agent for the account
     of the Issuing Bank at the Administrative Agent's Office in an amount equal
     to its Ratable Share of the Unreimbursed Amount not later than 1:00 P.M. on
     the Business  Day  specified  in such notice by the  Administrative  Agent,
     whereupon, subject to the provisions of Section 2.20(c)(iii),  each Standby
     Lender  that so makes  funds  available  shall be deemed to have made a ABR
     Standby Loan to the Borrower in such amount. The Administrative Agent shall
     remit the funds so received to the Issuing Bank.

          (iii)  With  respect  to any  Unreimbursed  Amount  that is not  fully
     refinanced by a Standby  Borrowing of ABR Loans because the  conditions set
     forth in Section  4.01 cannot be  satisfied  or for any other  reason,  the
     Borrower  shall be deemed to have  incurred  from the  Issuing  Bank an L/C
     Borrowing  in  the  amount  of  the  Unreimbursed  Amount  that  is  not so
     refinanced,  which  L/C  Borrowing  shall  be due  and  payable  on  demand
     (together  with  interest) and shall bear interest at the rate specified in
     Section  2.09.  In  such  event,  each  Standby  Lender's  payment  to  the
     Administrative  Agent for the  account  of the  Issuing  Bank  pursuant  to
     Section 2.03(c)(ii) shall be deemed payment in respect of its participation
     in such L/C Borrowing and shall  constitute an L/C Advance from such Lender
     in satisfaction of its participation obligation under this Section 2.20.

          (iv) Until each  Standby  Lender funds its Standby Loan or L/C Advance
     pursuant to this  Section  2.20(c) to  reimburse  the Issuing  Bank for any
     amount  drawn  under any  Letter of  Credit,  interest  in  respect of such
     Lender's  Ratable  Share of such amount  shall be solely for the account of
     the Issuing Bank.

          (v) Each Standby  Lender's  obligation  to make  Standby  Loans or L/C
     Advances to reimburse  the Issuing Bank for amounts  drawn under Letters of
     Credit,  as  contemplated  by this Section  2.20(c),  shall be absolute and
     unconditional and shall not be affected by any circumstance,  including (A)
     any  setoff,  counterclaim,  recoupment,  defense or other right which such
     Lender may have against the Issuing Bank,  the Borrower or any other Person
     for any reason whatsoever;  (B) the occurrence or continuance of a Default,
     or (C) any other occurrence,  event or condition, whether or not similar to
     any of  the  foregoing;  provided,  however,  that  each  Standby  Lender's
     obligation  to make  Standby  Loans  pursuant  to this  Section  2.20(c) is
     subject to the conditions set forth in Section 4.01 (other than delivery by
     the Borrower of notice pursuant to Section  4.01(a)).  No such making of an
     L/C  Advance  shall  relieve  or  otherwise  impair the  obligation  of the
     Borrower to  reimburse  the Issuing Bank for the amount of any payment made
     by the Issuing Bank under any Letter of Credit,  together  with interest as
     provided herein.


                                       39
<PAGE>

          (vi)  If  any  Standby   Lender   fails  to  make   available  to  the
     Administrative  Agent  for the  account  of the  Issuing  Bank  any  amount
     required to be paid by such Lender pursuant to the foregoing  provisions of
     this  Section  2.20(c) by the time  specified in Section  2.20(c)(ii),  the
     Issuing Bank shall be entitled to recover from such Lender (acting  through
     the Administrative Agent), on demand, such amount with interest thereon for
     the period from the date such payment is required to the date on which such
     payment is  immediately  available  to the Issuing Bank at a rate per annum
     equal  to the  greater  of the  Federal  Funds  Effective  Rate  and a rate
     determined by the Issuing Bank in accordance with banking industry rules on
     interbank compensation.  A certificate of the Issuing Bank submitted to any
     Standby  Lender  (through  the  Administrative  Agent) with  respect to any
     amounts owing under this Section  2.20(c)(vi)  shall be  conclusive  absent
     manifest error.

     (d) Repayment of Participations.

          (i) At any time after the  Issuing  Bank has made a payment  under any
     Letter of Credit and has received from any Standby Lender such Lender's L/C
     Advance in respect of such payment in accordance with Section  2.20(c),  if
     the  Administrative  Agent receives for the account of the Issuing Bank any
     payment in respect of the related  Unreimbursed  Amount or interest thereon
     (whether  directly  from the Borrower or otherwise,  including  proceeds of
     Cash  Collateral  applied  thereto  by  the   Administrative   Agent),  the
     Administrative  Agent will  distribute  to such  Lender its  Ratable  Share
     thereof  (appropriately  adjusted,  in the case of  interest  payments,  to
     reflect  the period of time  during  which such  Lender's  L/C  Advance was
     outstanding)  in the same  funds as those  received  by the  Administrative
     Agent.

          (ii) If any  payment  received  by the  Administrative  Agent  for the
     account of the Issuing Bank  pursuant to Section  2.20(c)(i) is required to
     be  returned  under any of the  circumstances  described  in  Section  9.17
     (including  pursuant to any settlement  entered into by the Issuing Bank in
     its discretion),  each Lender shall pay to the Administrative Agent for the
     account of the  Issuing  Bank its  Ratable  Share  thereof on demand of the
     Administrative Agent, plus interest thereon from the date of such demand to
     the date such amount is returned by such Lender,  at a rate per annum equal
     to the  Federal  Funds  Effective  Rate  from time to time in  effect.  The
     obligations  of the Lenders  under this clause shall survive the payment in
     full of the Loans and other  obligations  hereunder and the  termination of
     this Agreement.


                                       40
<PAGE>

          (e) Obligations Absolute.  The obligation of the Borrower to reimburse
     the Issuing Bank for each drawing  under each Letter of Credit and to repay
     each L/C Borrowing shall be absolute,  unconditional  and irrevocable,  and
     shall be paid strictly in accordance with the terms of this Agreement under
     all circumstances, including the following:

               (i) any lack of  validity  or  enforceability  of such  Letter of
          Credit, this Agreement, or any other Issuer Documents;

               (ii) the existence of any claim, counterclaim, setoff, defense or
          other right that the Borrower or any  Subsidiary  may have at any time
          against any beneficiary or any transferee of such Letter of Credit (or
          any Person for whom any such beneficiary or any such transferee may be
          acting),  the Issuing Bank or any other Person,  whether in connection
          with this Agreement,  the transactions  contemplated hereby or by such
          Letter of Credit or any agreement or instrument  relating thereto,  or
          any unrelated transaction;

               (iii) any draft, demand,  certificate or other document presented
          under such Letter of Credit proving to be forged, fraudulent,  invalid
          or insufficient  in any respect or any statement  therein being untrue
          or inaccurate in any respect; or any loss or delay in the transmission
          or otherwise of any document required in order to make a drawing under
          such Letter of Credit;

               (iv) any payment by the Issuing  Bank under such Letter of Credit
          against  presentation of a draft or certificate that does not strictly
          comply with the terms of such Letter of Credit; or any payment made by
          the Issuing Bank under such Letter of Credit to any Person  purporting
          to be a trustee in bankruptcy, debtor-in-possession,  assignee for the
          benefit of creditors,  liquidator, receiver or other representative of
          or successor to any  beneficiary  or any  transferee of such Letter of
          Credit,  including any arising in connection with any proceeding under
          any Debtor Relief Law; or

               (v) any other  circumstance or happening  whatsoever,  whether or
          not similar to any of the foregoing,  including any other circumstance
          that might otherwise constitute a defense available to, or a discharge
          of, the Borrower or any Subsidiary.

          The Borrower  shall  within a  reasonable  time examine a copy of each
     Letter of Credit and each amendment thereto that is delivered to it and, in
     the event of any claim of noncompliance with the Borrower's instructions or
     other  irregularity,  the  Borrower  will notify the Issuing  Bank within a
     reasonable  time period (not to exceed two Business Days of receipt of such
     copy).  The Borrower shall be  conclusively  deemed to have waived any such
     claim against the Issuing Bank and its correspondents unless such notice is
     given as aforesaid.

          (f) Role of Issuing Bank.  Each Lender and the Borrower agree that, in
     paying any drawing  under a Letter of Credit,  the  Issuing  Bank shall not
     have any responsibility to obtain any document (other than any sight draft,
     certificates and documents  expressly  required by the Letter of Credit) or
     to ascertain or inquire as to the validity or accuracy of any such document
     or the authority of the Person  executing or delivering  any such document.
     Neither  the  Issuing  Bank,  nor  the  Administrative   Agent,  nor  their
     respective Affiliates,  directors, officers, employees, agents or advisors,
     nor any correspondent, participant or assignee of the Issuing Bank shall be
     liable to any  Lender for (i) any  action  taken or  omitted in  connection

                                       41
<PAGE>

     herewith at the request or with the approval of the Lenders or the Required
     Lenders, as applicable;  (ii) any action taken or omitted in the absence of
     gross  negligence  or  willful  misconduct;  or  (iii)  the due  execution,
     effectiveness,  validity or  enforceability  of any document or  instrument
     related to any Letter of Credit or Issuer  Document.  The  Borrower  hereby
     assumes all risks of the acts or omissions of any beneficiary or transferee
     with respect to its use of any Letter of Credit;  provided,  however,  that
     this assumption is not intended to, and shall not,  preclude the Borrower's
     pursuing such rights and remedies as it may have against the beneficiary or
     transferee at law or under any other  agreement.  Neither the Issuing Bank,
     nor the Administrative Agent, nor their respective  Affiliates,  directors,
     officers, employees, agents or advisors, nor any correspondent, participant
     or assignee of the Issuing Bank shall be liable or  responsible  for any of
     the  matters  described  in clauses  (i)  through  (v) of Section  2.20(e);
     provided,   however,   that  anything  in  such  clauses  to  the  contrary
     notwithstanding,  the Borrower may have a claim  against the Issuing  Bank,
     and the Issuing Bank may be liable to the Borrower, to the extent, but only
     to the extent,  of any direct,  as opposed to  consequential  or exemplary,
     damages  suffered by the Borrower which the Borrower  proves were caused by
     the Issuing  Bank's willful  misconduct or gross  negligence or the Issuing
     Bank's  willful  failure  to pay  under  any  Letter  of  Credit  after the
     presentation to it by the  beneficiary of a sight draft and  certificate(s)
     strictly  complying with the terms and conditions of a Letter of Credit. In
     furtherance  and not in limitation of the  foregoing,  the Issuing Bank may
     accept  documents  that  appear  on  their  face  to be in  order,  without
     responsibility  for  further  investigation,  regardless  of any  notice or
     information to the contrary,  and the Issuing Bank shall not be responsible
     for the validity or sufficiency of any instrument transferring or assigning
     or  purporting  to  transfer  or assign a Letter of Credit or the rights or
     benefits  thereunder or proceeds  thereof,  in whole or in part,  which may
     prove to be invalid or ineffective for any reason.

          (g) Upon the request of the  Administrative  Agent, (i) if the Issuing
     Bank has honored any full or partial  drawing  request  under any Letter of
     Credit and such drawing has resulted in an L/C Borrowing, or (ii) if, as of
     the Letter of Credit  Expiration  Date,  any L/C  Obligation for any reason
     remains  outstanding,  the Borrower shall, in each case,  immediately  Cash
     Collateralize the then Outstanding Amount of all L/C Obligations.  Sections
     2.12(c), and 7.01 set forth certain additional requirements to deliver Cash
     Collateral  hereunder.  For purposes of this Section 2.20,  Section 2.12(c)
     and Section 7.01, "Cash  Collateralize" means to pledge and deposit with or
     deliver to the  Administrative  Agent,  for the benefit of the Issuing Bank
     and the Lenders,  as collateral  for the L/C  Obligations,  cash or deposit
     account   balances   pursuant  to   documentation  in  form  and  substance
     satisfactory  to the  Administrative  Agent  and the  Issuing  Bank  (which
     documents are hereby consented to by the Lenders). Derivatives of such term
     have   corresponding   meanings.   The  Borrower   hereby   grants  to  the
     Administrative  Agent, for the benefit of the Issuing Bank and the Lenders,
     a security  interest in all such cash,  deposit  accounts  and all balances
     therein  and  all  proceeds  of  the  foregoing  (collectively,  the  "Cash
     Collateral").  The  Cash  Collateral  shall be  maintained  in the L/C Cash
     Deposit Account.

          (h) Applicability of ISP and UCP. Unless otherwise expressly agreed by
     the Issuing Bank and the Borrower when a Letter of Credit is issued (i) the
     rules of the ISP shall apply to each standby Letter of Credit, and (ii) the
     rules of the Uniform Customs and Practice for Documentary  Credits, as most
     recently published by the International  Chamber of Commerce at the time of
     issuance shall apply to each commercial Letter of Credit.


                                       42
<PAGE>

          (i)  Letter  of  Credit   Fees.   The   Borrower   shall  pay  to  the
     Administrative  Agent for the account of each Lender in accordance with its
     Ratable  Share a Letter of Credit fee (the "Letter of Credit Fee") for each
     Letter of  Credit  equal to the  Applicable  Rate  times the daily  maximum
     amount available to be drawn under such Letter of Credit;  provided,  that,
     for the purpose of  distributing  the Letter of Credit Fee, the  Commitment
     of, and portion of L/C  Obligations  held or deemed held by, any Defaulting
     Lender  shall be deemed held by the  Issuing  Bank and the Letter of Credit
     Fee  otherwise  payable  to such  Lender  shall be  payable  instead to the
     Issuing  Bank  until  such  Lender is no longer a  Defaulting  Lender.  For
     purposes of  computing  the daily  amount  available  to be drawn under any
     Letter of Credit,  the amount of such Letter of Credit shall be  determined
     in  accordance  with  Section  1.03.  Letter  of Credit  Fees  shall be (i)
     computed  on a  quarterly  basis in arrears and (ii) due and payable on the
     first  Business  Day  after  the end of each  March,  June,  September  and
     December,  commencing  with the first such date to occur after the issuance
     of such  Letter of  Credit,  on the  Letter of Credit  Expiration  Date and
     thereafter on demand.  If there is any change in the Applicable Rate during
     any  quarter,  the daily  amount  available  to be drawn under each standby
     Letter of Credit shall be computed and  multiplied by the  Applicable  Rate
     separately  for each period during such quarter that such  Applicable  Rate
     was in effect.  Notwithstanding  anything to the contrary contained herein,
     upon the  request  of the  Required  Lenders,  while any  Event of  Default
     exists,  all  Letter of Credit  Fees  shall  accrue at a rate  equal to the
     Applicable Rate plus 2% per annum.

          (j) Fronting Fee and  Documentary  and Processing  Charges  Payable to
     Issuing Bank.  The Borrower  shall pay directly to the Issuing Bank for its
     own account a fronting  fee (i) with respect to each  commercial  Letter of
     Credit,  at the rate equal to 0.25%,  computed on the amount of such Letter
     of Credit, and payable upon the issuance thereof,  (ii) with respect to any
     amendment of a commercial  Letter of Credit  increasing  the amount of such
     Letter of Credit,  at a rate separately agreed between the Borrower and the
     Issuing Bank, computed on the amount of such increase, and payable upon the
     effectiveness  of such  amendment,  and (iii) with  respect to each standby
     Letter of Credit,  at the rate per annum  equal to 0.25%,  computed  on the
     daily  amount  available  to be drawn  under such Letter of Credit and on a
     quarterly  basis in arrears,  and due and payable on the first Business Day
     after the end of each March, June, September and December,  commencing with
     the first such date to occur  after the  issuance of such Letter of Credit,
     on the Letter of Credit  Expiration  Date and  thereafter  on  demand.  For
     purposes of  computing  the daily  amount  available  to be drawn under any
     Letter of Credit,  the amount of such Letter of Credit shall be  determined
     in  accordance  with  Section  1.03.  In addition,  the Borrower  shall pay
     directly to the Issuing  Bank for its own account the  customary  issuance,
     presentation, amendment and other processing fees, and other standard costs
     and charges, of the Issuing Bank relating to letters of credit as from time
     to time in effect.  Such  customary fees and standard costs and charges are
     due and payable on demand and are nonrefundable.

          (k)  Conflict  with  Issuer  Documents.  In the event of any  conflict
     between the terms  hereof and the terms of any Issuer  Document,  the terms
     hereof shall control.

          (l) Letters of Credit Issued for Subsidiaries.  Notwithstanding that a
     Letter of Credit  issued or  outstanding  hereunder  is in  support  of any
     obligations of, or is for the account of, a Subsidiary,  the Borrower shall
     be  obligated  to  reimburse  the Issuing  Bank  hereunder  for any and all
     drawings under such Letter of Credit. The Borrower hereby acknowledges that
     the issuance of Letters of Credit for the account of Subsidiaries inures to
     the  benefit of the  Borrower,  and that the  Borrower's  business  derives
     substantial benefits from the businesses of such Subsidiaries.


                                       43
<PAGE>

                                  ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

     The Borrower  represents  and  warrants to the  Administrative  Agent,  the
Issuing Bank and each of the Lenders that:

     SECTION 3.01. Organization; Powers; Governmental Approvals.

     (a) The Borrower and each Principal  Subsidiary  (i) is a corporation  duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of the
jurisdiction of its organization,  (ii) has all requisite power and authority to
own its property and assets and to carry on its  business as now  conducted  and
(iii) is qualified to do business in every jurisdiction where such qualification
is required,  except  where the failure so to qualify  would not have a Material
Adverse Effect. The Borrower's  execution,  delivery and performance of the Loan
Documents  are within its  corporate  powers,  have been duly  authorized by all
necessary  action and do not violate or create a default  under (A) law, (B) its
constituent documents,  or (C) any contractual provision binding upon it, except
to the extent (in the case of violations or defaults described under clauses (A)
or (C)) where such  violation  or default  would not  reasonably  be expected to
result in a Material Adverse Effect. Each of the Loan Documents  constitutes the
legal,  valid and binding obligation of the Borrower  enforceable  against it in
accordance  with its terms  (except  as such  enforceability  may be  limited by
applicable  bankruptcy,  reorganization,  insolvency,  moratorium and other laws
affecting the rights of creditors  generally  and general  principles of equity,
including an implied covenant of good faith and fair dealing).

     (b) Except for (i) any Governmental  Approvals  required in connection with
any  Borrowings  (such  approvals  being  "Borrowing  Approvals")  and  (ii) any
Governmental  Approvals  the  failure to obtain  which could not  reasonably  be
expected  to result in a  Material  Adverse  Effect or affect  the  validity  or
enforceability  of this Agreement or any other Loan Document,  all  Governmental
Approvals required in connection with the execution and delivery by the Borrower
of this  Agreement  and the other  Loan  Documents  and the  performance  by the
Borrower of its  obligations  hereunder and thereunder  have been, and, prior to
the time of any Borrowing,  all Borrowing Approvals will be, duly obtained,  are
(or,  in the case of  Borrowing  Approvals,  will be) in full  force and  effect
without  having  been  amended or  modified  in any  manner  that may impair the
ability of the Borrower to perform its obligations under this Agreement, and are
not (or,  in the case of  Borrowing  Approvals,  will not be) the subject of any
pending appeal, stay or other challenge.

     SECTION 3.02. Financial Statements.

     The Borrower has furnished to the Lenders, for itself and its Subsidiaries,
its most recent  filings with the  Securities  and Exchange  Commission on Forms
10-K and 10-Q. Such Forms 10-K and 10-Q do not contain any untrue statement of a
material fact or omit to state a material  fact  necessary to make any statement
therein,  in light of the circumstances under which it was made, not misleading.
Each of the financial  statements in such Forms 10-K and 10-Q has been, and each
of the financial  statements  to be furnished  pursuant to Section 5.02 will be,
prepared in accordance with GAAP applied consistently with prior periods, except
as therein  noted,  and fairly  presents or will fairly  present in all material
respects  the   consolidated   financial   position  of  the  Borrower  and  its
Subsidiaries  as of the date  thereof and the results of the  operations  of the
Borrower and its Subsidiaries for the period then ended.


                                       44
<PAGE>

     SECTION 3.03. No Material Adverse Change.

     Since the date of the Borrower's most recent financial statements contained
in its Annual  Report on Form 10-K for the fiscal year ended  December 31, 2003,
furnished to the Lenders  pursuant to Section  3.02,  there has been no material
adverse change in, and there has occurred no event or condition  which is likely
to result in a material adverse change in, the financial  condition,  results of
operations,  business, assets or operations of the Borrower and the Subsidiaries
taken as a whole (it being  understood that the consummation or dissolution of a
Joint  Venture  Transaction,   the  incurrence  of  Non-Recourse  Joint  Venture
Indebtedness or the  consummation of an Asset Exchange shall not constitute such
a material adverse change).

     SECTION 3.04. Title to Properties; Possession Under Leases.

     (a) To the best of the Borrower's  knowledge,  each of the Borrower and the
Principal  Subsidiaries  has good and  marketable  title to, or valid  leasehold
interests in, or other rights to use or occupy, all its material  properties and
assets, except for minor defects in title that do not interfere with its ability
to conduct its business as currently conducted or to utilize such properties and
assets for their intended purposes.  All such material properties and assets are
free and clear of Liens, other than Liens expressly permitted by Section 6.01.

     (b) Each of the Borrower and the Principal  Subsidiaries  has complied with
all  obligations  under all material  leases to which it is a party and all such
leases  are in full force and  effect,  except  where such  failure to comply or
maintain such leases in full force and effect would not have a Material  Adverse
Effect.   Each  of  the  Borrower  and  the  Subsidiaries  enjoys  peaceful  and
undisturbed  possession under all such material leases except where such failure
would not have a Material Adverse Effect.

     SECTION 3.05. Ownership of Subsidiaries.

     The Borrower owns,  free and clear of any Lien (other than Liens  expressly
permitted by Section 6.01),  all of the issued and outstanding  shares of common
stock of each of the Principal Subsidiaries.

     SECTION 3.06. Litigation; Compliance with Laws.

     (a)  There  is  no  action,  suit,  or  proceeding,   or  any  governmental
investigation or any  arbitration,  in each case pending or, to the knowledge of
the Borrower,  threatened against the Borrower or any of the Subsidiaries or any
material  property  of  any  thereof  before  any  court  or  arbitrator  or any
governmental or  administrative  body,  agency, or official which (i) challenges
the validity of this Agreement or any other Loan  Document,  (ii) may reasonably
be expected to have a material  adverse effect on the ability of the Borrower to
perform any of its  obligations  under this Agreement or any other Loan Document
or on the rights of or benefits available to the Lenders under this Agreement or
any other Loan  Document or (iii) except as disclosed in the  Borrower's  Annual
Report  on  Form  10-K  for the  fiscal  year  ended  December  31,  2003 or the
Borrower's  Quarterly Reports on Form 10-Q for the periods ending March 31, 2004
and June 30, 2004, may reasonably be expected to have a Material Adverse Effect.


                                       45
<PAGE>

     (b) Neither the Borrower nor any of the Subsidiaries is in violation of any
law,  rule, or  regulation,  or in default with respect to any  judgment,  writ,
injunction  or decree of any  Governmental  Authority,  where such  violation or
default could reasonably be anticipated to result in a Material Adverse Effect.

     (c) Except as set forth in or contemplated  by the financial  statements or
other reports  referred to in Section 3.02 hereof and which have been  delivered
to the Lenders on or prior to the date hereof,  (i) the Borrower and each of its
Subsidiaries  have complied with all  Environmental  Laws,  except to the extent
that failure to so comply is not  reasonably  likely to have a Material  Adverse
Effect,  (ii)  neither the Borrower  nor any of its  Subsidiaries  has failed to
obtain,  maintain or comply with any permit, license or other approval under any
Environmental  Law, except where such failure is not reasonably likely to have a
Material Adverse Effect,  (iii) neither the Borrower nor any of its Subsidiaries
has  received  notice of any  failure to comply  with any  Environmental  Law or
become subject to any liability under any  Environmental  Law, except where such
failure or liability is not reasonably likely to have a Material Adverse Effect,
(iv) no facilities of the Borrower or any of its Subsidiaries are used to manage
any Specified  Substance in violation of any law, except to the extent that such
violations,  individually or in the aggregate, are not reasonably likely to have
a  Material  Adverse  Effect,  and (v)  the  Borrower  is  aware  of no  events,
conditions or circumstances  involving any Release of a Specified Substance that
is reasonably likely to have a Material Adverse Effect.

     SECTION 3.07. Agreements.

     (a)  Neither the  Borrower  nor any of the  Subsidiaries  is a party to any
agreement  or  instrument  or  subject  to any  corporate  restriction  that has
resulted,  or could  reasonably be anticipated to result,  in a Material Adverse
Effect.

     (b) Neither the Borrower nor any of the  Subsidiaries  is in default in any
manner under any  provision of any  indenture or other  agreement or  instrument
evidencing Indebtedness,  or any other material agreement or instrument to which
it is a party or by which it or any of its  properties  or assets  are or may be
bound,  where  such  default  could  reasonably  be  anticipated  to result in a
Material Adverse Effect.

     SECTION 3.08. Federal Reserve Regulations.

     No part of the  proceeds  of the Loans will be used,  whether  directly  or
indirectly,  and  whether  immediately,  incidentally,  or  ultimately,  for any
purpose  which  entails a  violation  of,  or which is  inconsistent  with,  the
provisions of the Margin Regulations.


                                       46
<PAGE>

     SECTION 3.09. Investment Company Act; Public Utility Holding Company Act.

     Neither the  Borrower  nor any of the  Subsidiaries  is (a) an  "investment
company" as defined in, or subject to regulation  under, the Investment  Company
Act of 1940 or (b) a "holding  company" as defined in, or subject to  regulation
under, the Public Utility Holding Company Act of 1935.

     SECTION 3.10. Use of Proceeds.

     The Borrower will use the proceeds of the Loans only for general  corporate
purposes,  including  working capital and support of commercial  paper issuances
and Securitization Transactions permitted hereunder as well as one or more Joint
Venture Transactions,  acquisitions or Asset Exchanges;  provided, however, that
no such  proceeds  shall  be used (i) to make any  Restricted  Payment,  or (ii)
directly or indirectly in connection with any Hostile Acquisition.

     SECTION 3.11. Tax Returns.

     Each of the Borrower and the  Subsidiaries  has filed or caused to be filed
all Federal,  state and local tax returns  required to have been filed by it and
has paid or  caused  to be paid all taxes  shown to be due and  payable  on such
returns or on any  assessments  received by it,  except (i) taxes that are being
contested in good faith by  appropriate  proceedings  and for which the Borrower
shall have set aside on its books adequate  reserves and (ii) where such failure
to file or pay would not reasonably be expected to result in a Material  Adverse
Effect.

     SECTION 3.12. No Material Misstatements.

     No statement, information, report, financial statement, exhibit or schedule
furnished  by or on behalf of the  Borrower to the  Administrative  Agent or any
Lender in connection  with the  syndication  or negotiation of this Agreement or
any other Loan  Document or  included  herein or therein or  delivered  pursuant
hereto or thereto contained, contains, or will contain any material misstatement
of fact or intentionally omitted, omits, or will omit to state any material fact
necessary  to make the  statements  therein,  in the light of the  circumstances
under which they were, are, or will be made, not misleading.

     SECTION 3.13. Employee Benefit Plans.

     (a) Each Plan is in compliance  with ERISA,  except for such  noncompliance
that has not resulted,  and could not reasonably be anticipated to result,  in a
Material Adverse Effect.

     (b) No Plan has an  accumulated  or waived  funding  deficiency  within the
meaning  of  Section  412 or  Section  418B of the  Code,  except  for any  such
deficiency  that has not resulted,  and could not  reasonably be  anticipated to
result, in a Material Adverse Effect.

     (c) No proceedings  have been instituted to terminate any Plan,  except for
such proceedings where the termination of a Plan has not resulted, and could not
reasonably be anticipated to result, in a Material Adverse Effect.


                                       47
<PAGE>

     (d) Neither the Borrower nor any Subsidiary or ERISA Affiliate has incurred
any liability to or on account of a Plan under ERISA (other than  obligations to
make  contributions in accordance with such Plan), and no condition exists which
presents a material risk to the Borrower or any  Subsidiary of incurring  such a
liability,  except for such  liabilities  that have not resulted,  and could not
reasonably be anticipated to result, in a Material Adverse Effect.

     SECTION 3.14. Insurance.

     Each of the Borrower and the  Principal  Subsidiaries  maintains  insurance
with financially sound and reputable insurers,  or self-insurance,  with respect
to its  properties and business  against loss or damage of the kind  customarily
insured  against by reputable  companies in the same or similar  business and of
such types and in such amounts  (with such  deductible  amounts) as is customary
for such companies under similar circumstances.

                                   ARTICLE IV

                              CONDITIONS OF LENDING

     SECTION 4.01. Each Borrowing and Issuance.

     The  obligation  of  each  Lender  to make a Loan  on the  occasion  of any
Borrowing,  including any Conversion pursuant to Section 2.05 and the obligation
of the  Issuing  Bank to make  any  L/C  Credit  Extension,  is  subject  to the
satisfaction of the following conditions:

     (a) The Administrative Agent shall have received a notice of such Borrowing
or L/C Credit  Extension  as required  by Section  2.03,  2.04,  2.05 or 2.20 as
applicable;

     (b) The  representations  and  warranties  set forth in Article  III hereof
(except, in the case of a Conversion,  the representations set forth in Sections
3.03 and 3.06(a))  shall be true and correct in all material  respects on and as
of the date of such Borrowing or such L/C Credit  Extension with the same effect
as though made on and as of such date, except to the extent such representations
and warranties  expressly  relate to an earlier date in which case they shall be
true and correct as of such earlier date;

     (c)  The  Borrower  shall  be in  compliance  with  all  of the  terms  and
provisions set forth herein on its part to be observed or performed,  and at the
time of, and  immediately  after such Borrowing or L/C Credit  Extension (as the
case may be),  no Event  of  Default  or  Default  shall  have  occurred  and be
continuing; and

each  Borrowing  and each L/C Credit  Extension  shall be deemed to constitute a
representation and warranty by the Borrower on the date of such Borrowing or L/C
Credit Extension (as the case may be) as to the matters  specified in paragraphs
(b) and (c) of this Section 4.01.

     SECTION 4.02. Effective Date.

     The  obligations  of the Lenders to make Loans or the Issuing  Bank to make
any L/C Credit Extension  hereunder shall not become effective until the date on
which each of the  following  conditions  is satisfied  (or waived in accordance
with Section 9.08):


                                       48
<PAGE>

     (a) The  Administrative  Agent  shall  have  received a  favorable  written
opinion of the general  counsel of the Borrower,  dated the  Effective  Date and
addressed to the Lenders,  to the effect set forth in Exhibit C hereto,  and the
Borrower  hereby   instructs  such  counsel  to  deliver  such  opinion  to  the
Administrative Agent;

     (b) All  legal  matters  incident  to  this  Agreement  and the  borrowings
hereunder shall be satisfactory to the Administrative Agent and the Lenders;

     (c)  The  Administrative  Agent  shall  have  received  (i) a  copy  of the
certificate or articles of incorporation,  including all amendments  thereto, of
the  Borrower,  certified  as of a recent date by the  Secretary of State of the
state of its  organization,  and a  certificate  as to the good  standing of the
Borrower as of a recent date,  from such Secretary of State;  (ii) a certificate
of the Secretary or Assistant Secretary of the Borrower dated the Effective Date
and  certifying  (A) that  attached  thereto is a true and complete  copy of the
by-laws  of the  Borrower  as in effect on the  Effective  Date and at all times
since a date prior to the date of the resolutions described in clause (B) below,
(B) that  attached  thereto  is a true and  complete  copy of  resolutions  duly
adopted by the Board of  Directors of the Borrower  authorizing  the  execution,
delivery and  performance of this Agreement and the  borrowings  hereunder,  and
that such resolutions have not been modified,  rescinded,  or amended and are in
full force and effect,  (C) that the certificate or articles of incorporation of
the Borrower have not been amended since the date of the last amendment  thereto
shown on the  certificate  of good  standing  furnished  pursuant  to clause (i)
above,  and (D) as to the  incumbency  and  specimen  signature  of each officer
executing this Agreement or any other document delivered in connection  herewith
on behalf of the  Borrower;  (iii) a  certificate  of another  officer as to the
incumbency  and  specimen  signature of the  Secretary  or  Assistant  Secretary
executing  the  certificate  pursuant  to clause (ii)  above;  (iv)  irrevocable
notices from the Borrower requesting termination of the "Total Commitment" under
each of the Existing  Facilities  effective  automatically on the Effective Date
and (v) such other  documents  as the  Administrative  Agent or the  Lenders may
reasonably request;

     (d) The Administrative  Agent shall have received a certificate,  dated the
Effective  Date and signed by a Financial  Officer of the  Borrower,  confirming
compliance with the conditions  precedent set forth in paragraphs (b) and (c) of
Section 4.01;

     (e) The Administrative Agent shall have received all Fees and other amounts
due and payable on or prior to the Effective Date; and

     (f) All "Commitments" (as defined in each of the Existing Facilities) under
the Existing  Facilities shall have been terminated in accordance with the terms
thereof  and  all  "Loans"  (as  defined  in each  of the  Existing  Facilities)
outstanding  thereunder  shall have been repaid or prepaid together with accrued
interest  thereon and all other amounts  payable to the "Lenders" (as defined in
each of the Existing Facilities) under the Existing Facilities.


                                       49
<PAGE>

                                   ARTICLE V

                              AFFIRMATIVE COVENANTS

     The  Borrower  covenants  and agrees  with the  Administrative  Agent,  the
Issuing Bank and each Lender  that,  so long as this  Agreement  shall remain in
effect or the principal of or interest on any Loan (or any portion thereof),  or
any other expenses or amounts payable hereunder,  shall be unpaid, or any Letter
of Credit shall remain outstanding, the Borrower will:

     SECTION 5.01. Existence; Businesses and Properties.

     (a) Preserve and  maintain,  cause each of the  Principal  Subsidiaries  to
preserve and maintain,  and cause each other Subsidiary to preserve and maintain
(where the  failure by any such other  Subsidiary  to so preserve  and  maintain
would likely result in a Material  Adverse  Effect),  its  corporate  existence,
rights and franchises,  except in connection with a Joint Venture Transaction or
an Asset  Exchange,  provided,  however,  that the  corporate  existence  of any
Principal   Subsidiary   may  be   terminated   if  such   termination   is  not
disadvantageous to the Administrative Agent or any Lender;

     (b) continue to own all of the  outstanding  shares of common stock of each
Principal  Subsidiary,  except in connection with a Joint Venture Transaction or
an Asset Exchange;

     (c) comply,  and cause each of the Subsidiaries to comply,  in all material
respects,  with all applicable laws, rules,  regulations and orders,  including,
without limitation, all Environmental Laws;

     (d) pay, and cause each of the Subsidiaries to pay, before any such amounts
become delinquent,  (i) all taxes,  assessments and governmental charges imposed
upon it or upon its property, and (ii) all claims (including without limitation,
claims for labor,  materials,  supplies,  or services)  which might,  if unpaid,
become a Lien upon its property,  unless,  in each case,  the validity or amount
thereof  is being  disputed  in good  faith,  and the  Borrower  has  maintained
adequate reserves with respect thereto, in each case where the failure to so pay
would be reasonably expected to cause a Material Adverse Effect;

     (e) keep,  and cause  each of the  Subsidiaries  to keep,  proper  books of
record and account,  containing  complete and accurate  entries of all financial
and business  transactions  of the Borrower and such  Subsidiary in all material
respects;

     (f) continue to carry on, and cause each  Principal  Subsidiary to continue
to carry on,  substantially  the same type of business  as the  Borrower or such
Principal  Subsidiary  conducted as of the date hereof and  business  reasonably
related  thereto,  except for changes in such  business that result from a Joint
Venture Transaction or an Asset Exchange; and

     (g) maintain or cause to be maintained insurance with financially sound and
reputable  insurers,  or  self-insurance,  with  respect to its  properties  and
business and the  properties  and business of the  Subsidiaries  against loss or
damage of the kinds  customarily  insured against by reputable  companies in the
same or  similar  businesses,  such  insurance  to be of such  types and in such
amounts (with such deductible  amounts) as is customary for such companies under
similar circumstances;


                                       50
<PAGE>

provided,  however, that the foregoing shall not limit the right of the Borrower
or any of its Subsidiaries to engage in any transaction not otherwise prohibited
by Section 6.02, 6.03 or 6.04.

     SECTION 5.02. Financial Statements, Reports, etc.

     In the case of the Borrower,  furnish to the Administrative  Agent and each
Lender:

     (a) as soon as available  and in any event within 110 days after the end of
each fiscal year,  consolidated  balance  sheets and the related  statements  of
income and cash flows of the Borrower and its Subsidiaries (the Borrower and its
Subsidiaries being collectively  referred to as the "Companies") as of the close
of such fiscal year (which requirement shall be deemed satisfied by the delivery
of the  Borrower's  Annual Report on Form 10-K (or any successor  form) for such
year),  all  audited  by KPMG LLP or other  independent  public  accountants  of
recognized  national  standing and accompanied by an opinion of such accountants
to the effect that such consolidated  financial statements fairly present in all
material  respects the  financial  condition  and results of  operations  of the
Companies on a consolidated basis in accordance with GAAP consistently applied;

     (b) within 65 days after the end of each of the first three fiscal quarters
of each fiscal year  (commencing  with the fiscal  quarter  ended  September 30,
2004),  consolidated  balance  sheets and related  statements of income and cash
flows of the  Companies  as of the  close of such  fiscal  quarter  and the then
elapsed portion of the fiscal year (which  requirement shall be deemed satisfied
by the  delivery  of the  Borrower's  Quarterly  Report  on  Form  10-Q  (or any
successor  form) for such  quarter),  each  certified by a Financial  Officer as
fairly  presenting  the  financial  condition  and results of  operations of the
Companies on a consolidated basis in accordance with GAAP consistently  applied,
subject to normal year-end audit adjustments;

     (c) concurrently with any delivery of financial  statements under paragraph
(a) or (b) of this Section, a certificate of a Financial Officer of the Borrower
(i)  certifying  as to whether a Default  has  occurred  and,  if a Default  has
occurred,  specifying the details thereof and any action taken or proposed to be
taken  with  respect  thereto  and  (ii)  setting  forth   reasonably   detailed
calculations (including with respect to any pro forma effect given to a Material
Transaction)  demonstrating  compliance  with Section 6.07 as of the last day of
the most recent fiscal quarter covered by such financial statements;

     (d) promptly  upon the mailing or filing  thereof,  copies of all financial
statements,  reports  and  proxy  statements  mailed  to the  Borrower's  public
shareholders,  and copies of all  registration  statements  (other than those on
Form S-8) and Form 8-K's (to the extent that such Form 8-K's disclose  actual or
potential  adverse  developments  with  respect  to the  Borrower  or any of its
Subsidiaries that constitute,  or could reasonably be anticipated to constitute,
a Material Adverse Effect) filed with the Securities and Exchange Commission (or
any successor thereto) or any national securities exchange;


                                       51
<PAGE>

     (e)  promptly  after  (i)  the  occurrence  thereof,  notice  of any  ERISA
Termination  Event or  "prohibited  transaction",  as such  term is  defined  in
Section  4975 of the  Code,  with  respect  to any Plan that  results,  or could
reasonably be anticipated to result, in a Material Adverse Effect,  which notice
shall specify the nature thereof and the Borrower's  proposed  response thereto,
and (ii) actual knowledge  thereof,  copies of any notice of PBGC's intention to
terminate or to have a trustee appointed to administer any Plan; and

     (f)  promptly,  from time to time,  such other  information,  regarding its
operations,  business  affairs and financial  condition,  or compliance with the
terms  of  this  Agreement,  as  the  Administrative  Agent  or any  Lender  may
reasonably request.

Documents required to be delivered  pursuant to Section 5.02(a),  (b) or (d) (to
the extent any such documents are included in materials otherwise filed with the
Securities and Exchange  Commission (or any successor thereto)) may be delivered
electronically  and if so delivered,  shall be deemed to have been  delivered on
the date (i) on which the  Borrower  posts such  documents,  or  provides a link
thereto on the  Borrower's  on the  Internet  at the website  address  listed in
Schedule  9.01;  or (ii) on which such  documents  are posted on the  Borrower's
behalf on an Internet or intranet website,  if any, to which each Lender and the
Administrative  Agent have access (whether a commercial,  third-party website or
whether sponsored by the Administrative Agent);  provided that: (i) the Borrower
shall deliver paper copies of such documents to the Administrative  Agent or any
Lender that  requests  the Borrower to deliver such paper copies until a written
request to cease delivering paper copies is given by the Administrative Agent or
such Lender and (ii) the Borrower shall notify the Administrative Agent and each
Lender (by  telecopier or electronic  mail) of the posting of any such documents
and provide to the Administrative  Agent by electronic mail electronic  versions
(i.e.,  soft  copies)  of such  documents.  Notwithstanding  anything  contained
herein, in every instance the Borrower shall be required to provide paper copies
of the compliance certificates required by Section 5.02(c) to the Administrative
Agent. Except for such compliance  certificates,  the Administrative Agent shall
have no  obligation  to  request  the  delivery  or to  maintain  copies  of the
documents  referred to above, and in any event shall have no  responsibility  to
monitor compliance by the Borrower with any such request for delivery,  and each
Lender shall be solely responsible for requesting  delivery to it or maintaining
its copies of such documents.

     SECTION 5.03. Litigation and Other Notices.

     Furnish to the  Administrative  Agent and each Lender prompt written notice
of the following:

     (a) any Event of  Default  or  Default,  specifying  the  nature and extent
thereof and the  corrective  action (if any)  proposed to be taken with  respect
thereto;

     (b) the filing or  commencement  of, or any written  notice of intention of
any Person to file or commence,  any action, suit or proceeding,  whether at law
or in equity or by or before any Governmental Authority, against the Borrower or
any of the Subsidiaries  which is reasonably  likely to be adversely  determined
and which, if adversely determined, could reasonably be anticipated to result in
a Material Adverse Effect; and


                                       52
<PAGE>

     (c) any development with respect to the Borrower or any Subsidiary that has
resulted in, or could reasonably be anticipated to result in, a Material Adverse
Effect.

     SECTION 5.04. Maintaining Records.

     Maintain all financial records in accordance with GAAP and, upon reasonable
notice, permit the Administrative Agent and each Lender to visit and inspect the
financial  records of the Borrower at reasonable times and as often as requested
and to make extracts from and copies of such financial  records,  and permit any
representatives  designated by the Administrative Agent or any Lender to discuss
the  affairs,  finances  and  condition  of the  Borrower  with the  appropriate
officers  thereof  and,  with  the  Borrower's   consent  (which  shall  not  be
unreasonably withheld), the independent accountants therefor; provided, however,
that if the  Borrower  shall  so  require,  a  single  representative  shall  be
appointed by Lenders holding at least 50% of the aggregate outstanding principal
balance of the Loans to exercise  the rights  granted to the Lenders  under this
Section  5.04.;  provided,  further,  that when an Event of  Default  exists the
Administrative Agent or any Lender may do any of the foregoing,  upon reasonable
notice,  at any time during normal  business  hours  (without  appointment  of a
single representative by the Lenders).

     SECTION 5.05. Use of Proceeds.

     Use  the  proceeds  of the  Loans  only  for  general  corporate  purposes,
including  working  capital  and  support  of  commercial  paper  issuances  and
Securitization  Transactions  permitted  hereunder  as well as one or more Joint
Venture Transactions,  acquisitions or Asset Exchanges;  provided, however, that
no such  proceeds  shall  be used (i) to make any  Restricted  Payment,  or (ii)
directly or indirectly in connection with any Hostile Acquisition.

                                   ARTICLE VI

                               NEGATIVE COVENANTS

     The Borrower  covenants  and agrees with each Lender,  the Issuing Bank and
the Administrative  Agent that, so long as this Agreement shall remain in effect
or the  principal  of or interest on any Loan (or any portion  thereof),  or any
other expenses or amounts  payable  hereunder,  shall be unpaid or any Letter of
Credit shall remain outstanding, it will not:

     SECTION 6.01. Liens; Restrictions on Sales of Receivables.

     Create,  incur,  assume, or suffer to exist, or permit any of the Principal
Subsidiaries to create,  incur,  assume,  or suffer to exist, any Lien on any of
its property now owned or hereafter  acquired to secure any  Indebtedness of the
Borrower  or any such  Principal  Subsidiary,  or sell or  assign  any  accounts
receivable  (other  than in the  ordinary  course of business  substantially  in
accordance with the Borrower's past practice), other than: (a) Liens incurred or
deposits  made in the  ordinary  course of business to secure  surety and appeal
bonds, leases, return-of-money bonds and other similar obligations (exclusive of
obligations of the payment of borrowed money); (b) pledges or deposits to secure
the utility  obligations  of the  Borrower  incurred in the  ordinary  course of

                                       53
<PAGE>

business;  (c) Liens upon or in  property  now owned or  hereafter  acquired  to
secure   Indebtedness   incurred   solely  for  the  purpose  of  financing  the
acquisition,  construction  or improvement  of any property,  provided that such
Indebtedness  shall not  exceed  the fair  market  value of the  property  being
acquired,  constructed  or  improved;  (d) Liens on the assets of any  Principal
Subsidiary  to secure the  repayment  of project  financing  for such  Principal
Subsidiary; (e) Liens on the assets of any Person merged or consolidated with or
into (in accordance with Section 6.04) the Borrower or any Principal  Subsidiary
that were in effect at the time of such merger or  consolidation;  (f) Liens for
taxes,  assessments and governmental charges or levies, which are not yet due or
are which are being  contested  in good faith by  appropriate  proceedings;  (g)
Liens securing  Indebtedness of the Borrower or any Principal  Subsidiary to the
Rural Electrification  Administration,  the Rural Utilities Service or the Rural
Telephone   Bank  (or  any  successor  to  any  such  agency);   (h)  carriers',
warehousemen's,  mechanics', materialmen's, repairmen's, suppliers or other like
Liens arising in the ordinary  course of business  relating to  obligations  not
overdue for a period of more than 60 days or which are bonded or being contested
in good faith by appropriate proceedings;  (i) pledges or deposits in connection
with workers'  compensation  laws or similar  legislation or to secure public or
statutory obligations;  (j) Liens incurred on deposits to secure the performance
of bids,  trade  contracts,  leases,  statutory  obligations,  surety and appeal
bonds,  performance bonds and other obligations of a like nature incurred in the
ordinary  course of business;  (k) easements,  rights of way,  restrictions  and
other encumbrances incurred which, in the aggregate, do not materially interfere
with  the  ordinary  conduct  of  business;  (l)  restrictions  by  Governmental
Authorities  on the  operations,  business  or  assets  of the  Borrower  or its
Subsidiaries  that  are  customary  in  the  Borrower's  and  its  Subsidiaries'
businesses;  (m) sales of accounts receivable pursuant to, and Liens existing or
deemed to exist in connection with, any  Securitization  Transactions,  provided
the aggregate amount of all such  Securitization  Transactions  shall not at any
time exceed $150,000,000;  and (n) other Liens securing Indebtedness outstanding
in an aggregate principal amount not to exceed $25,000,000;  provided,  however,
that the  Borrower or any  Principal  Subsidiary  may create,  incur,  assume or
suffer to exist other  Liens (in  addition  to Liens  excepted by the  foregoing
clauses (a) through (n)) on its assets so long as such Liens equally and ratably
secure  the  Obligations   pursuant  to  documentation  in  form  and  substance
reasonably satisfactory to the Administrative Agent.

     SECTION 6.02. Ownership of the Principal Subsidiaries.

     Sell,  assign,  pledge,  or otherwise  transfer or dispose of any shares of
common stock,  voting stock, or stock convertible into voting or common stock of
any Principal  Subsidiary,  except (a) to another Subsidiary,  (b) in connection
with a Joint Venture  Transaction or (c) in connection  with an Asset  Exchange;
provided,  however,  that the  Borrower  may pledge any shares of common  stock,
voting stock, or stock  convertible into voting or common stock of any Principal
Subsidiary so long as such pledge  equally and ratably  secures the  Obligations
pursuant to documentation in form and substance  reasonably  satisfactory to the
Administrative Agent.

     SECTION 6.03. Asset Sales.

     Except in connection with a Joint Venture Transaction or an Asset Exchange,
permit  any  Principal  Subsidiary  to sell,  assign,  or  otherwise  dispose of
telecommunications   assets   (whether  in  one   transaction  or  a  series  of
transactions),  if the net,  after-tax proceeds thereof are used by the Borrower
or any  Subsidiary  to prepay  (other than a mandatory  prepayment in accordance
with the terms of the applicable governing documents,  including pursuant to any
put provision)  Indebtedness  incurred after the date hereof which  Indebtedness
has a  maturity  later  than the  Maturity  Date  (other  than  bridge  or other
financings  incurred in  connection  with an asset  purchase or sale,  including
acquisition  indebtedness  or indebtedness of an acquired entity or indebtedness
incurred to refinance indebtedness outstanding as of the date hereof).


                                       54
<PAGE>

     SECTION 6.04. Mergers.

     Merge or consolidate with, or sell, assign,  lease, or otherwise dispose of
(whether in one transaction or a series of  transactions)  all or  substantially
all of  its  assets  (whether  now  owned  or  hereafter  acquired),  except  in
connection  with an Asset  Exchange,  to any  Person,  or permit  any  Principal
Subsidiary to do so, except that any  Subsidiary  may merge into or,  subject to
Section 6.03,  transfer  assets to the Borrower or any other  Subsidiary and the
Borrower may merge with any Person;  provided that,  immediately  thereafter and
after  giving  effect  thereto,  no event  shall  occur or be  continuing  which
constitutes an Event of Default or a Default and, in the case of any such merger
to  which  the  Borrower  is a  party,  either  the  Borrower  is the  surviving
corporation or the surviving entity (if not the Borrower) has a consolidated net
worth (as  determined in accordance  with GAAP)  immediately  subsequent to such
merger at least equal to the Consolidated Net Worth of the Borrower  immediately
prior to such merger and  expressly  assumes  the  obligations  of the  Borrower
hereunder;  provided, however, that, notwithstanding the foregoing, the Borrower
and any of the Principal  Subsidiaries may sell assets in the ordinary course of
its business and may sell or otherwise dispose of worn out or obsolete equipment
on a basis consistent with good business practices.

     SECTION 6.05. Restrictions on Dividends.

     (a) Enter  into or permit  any  Principal  Subsidiary  to enter  into,  any
contract or  agreement  (other  than with a  governmental  regulatory  authority
having jurisdiction over the Borrower or such Principal Subsidiary)  restricting
the ability of such Principal  Subsidiary to pay dividends or make distributions
to the  Borrower in any manner that would  impair the ability of the Borrower to
meet its present and future obligations hereunder. The Secretary of the Borrower
or another  officer of the Borrower  satisfactory  to the  Administrative  Agent
shall,  prior to entry into any  contract or agreement  that could  restrict the
ability of any Principal  Subsidiary to pay dividends or make  distributions  to
the Borrower, deliver to the Lenders a certificate certifying (a) to the absence
of any Event of  Default  or Default  after  giving  effect to the entry by such
Principal Subsidiary into such contract or agreement, and (b) that such contract
or agreement will not impair the ability of the Borrower to meet its present and
future obligations hereunder.

     (b) In the  case  of the  Borrower  only,  declare  or  make,  directly  or
indirectly,  any  Restricted  Payment,  or incur any  obligation  (contingent or
otherwise)  to do so, in each case if any Event of Default has  occurred  and is
continuing at the time of such action or will result  therefrom  (but  excluding
the payment of dividends  declared and  announced by the Board of Directors at a
time when no Event of Default existed).

     SECTION 6.06. Transactions with Affiliates.

     Except in connection with a Joint Venture Transaction or an Asset Exchange,
sell or transfer  any property or assets to, or purchase or acquire any property
or assets from, or otherwise engage in any other  transactions  with, any of its
Affiliates,  except  that as long as no Default  or Event of Default  shall have
occurred and be continuing,  the Borrower or any Subsidiary may engage in any of
the foregoing  transactions (i) in the ordinary course of business at prices and
on terms and conditions  not less  favorable to the Borrower or such  Subsidiary
than could be obtained on an  arm's-length  basis from unrelated  third parties,
(ii)  as  otherwise  may  be  required  by any  Federal  or  state  Governmental
Authority,   or  (iii)  so  long  as  such   transactions   are  not  materially
disadvantageous to the Borrower.


                                       55
<PAGE>

     SECTION 6.07. Financial Ratio

     Permit  the  Leverage  Ratio on any date prior to the  Maturity  Date to be
greater than 4.5:1.

     SECTION 6.08. Guarantees

     Permit any Subsidiary to enter into, directly or indirectly,  any Guarantee
of any Indebtedness of the Borrower or any Subsidiary unless the Obligations are
Guaranteed on a pari passu basis pursuant to documentation in form and substance
reasonably satisfactory to the Administrative Agent, except (i) any Guarantee in
effect at the time such Subsidiary becomes a Subsidiary of the Borrower, so long
as such  Guarantee was not entered into solely in  contemplation  of such Person
becoming a Subsidiary  of the  Borrower,  (ii) any Guarantee in effect as of the
Effective Date that is listed on Schedule 6.08, and (iii) additional  Guarantees
aggregating not more than $25,000,000 at any one time outstanding.

                                  ARTICLE VII

                                EVENTS OF DEFAULT

     SECTION 7.01. Events of Default

     In  case  of the  happening  of any of the  following  events  ("Events  of
Default"):

     (a) any  representation or warranty made or deemed made in or in connection
with this  Agreement or any Loan  Document or the  Borrowings  or any L/C Credit
Extension hereunder or thereunder, or any representation,  warranty,  statement,
or  information  contained  in  any  written  report,   certificate,   financial
statement,  or other instrument furnished in connection with or pursuant to this
Agreement or any Loan Document,  shall prove to have been false or misleading in
any material respect when so made, deemed made, or furnished;

     (b) default  shall be made in the payment of any  principal of any Loan (or
any portion thereof) or any L/C Obligation when and as the same shall become due
and payable,  whether at the due date thereof or at a date fixed for  prepayment
thereof or by acceleration thereof or otherwise;

     (c) default  shall be made in the  payment of any  interest on any Loan (or
any portion  thereof) or L/C  Obligation,  or any Fee or any other amount (other
than an amount  referred  to in (b) above) due  hereunder,  when and as the same
shall become due and payable,  and such default shall continue  unremedied for a
period of five Business Days;


                                       56
<PAGE>

     (d)  default  shall be made in the due  observance  or  performance  of any
covenant,  condition,  or agreement contained in Section 5.01(f) or Section 5.05
or in Article VI;

     (e)  default  shall be made in the due  observance  or  performance  of any
covenant,  condition,  or agreement  contained herein or any other Loan Document
(other than those  specified in (b),  (c), or (d) above) and such default  shall
continue  unremedied  for a period of 30 days after the  earlier to occur of (i)
the Borrower  obtaining  knowledge thereof and (ii) the date that written notice
thereof shall have been given to the Borrower by the Administrative Agent or any
Lender;

     (f) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed  in a court of  competent  jurisdiction  seeking  (i)  relief  in
respect of the Borrower or any Principal Subsidiary, or of a substantial part of
the property or assets of the Borrower or a Principal Subsidiary, under Title 11
of the United States Code, as now constituted or hereafter amended, or any other
Federal or state bankruptcy, insolvency,  receivership, or similar law, (ii) the
appointment of a receiver,  trustee,  custodian,  sequestrator,  conservator, or
similar  official  for  the  Borrower  or  any  Principal  Subsidiary  or  for a
substantial  part of the  property  or assets  of the  Borrower  or a  Principal
Subsidiary,  or (iii) the  winding-up  or  liquidation  of the  Borrower  or any
Principal Subsidiary; and such proceeding or petition shall continue undismissed
for 60 days or an order or decree  approving  or ordering  any of the  foregoing
shall be entered;

     (g) the Borrower or any Principal Subsidiary shall (i) voluntarily commence
any proceeding or file any petition  seeking relief under Title 11 of the United
States Code, as now  constituted or hereafter  amended,  or any other Federal or
state bankruptcy, insolvency,  receivership, or similar law, (ii) consent to the
institution  of, or fail to  contest  in a timely and  appropriate  manner,  any
proceeding or the filing of any petition described in (f) above, (iii) apply for
or consent to the appointment of a receiver, trustee,  custodian,  sequestrator,
conservator, or similar official for the Borrower or any Principal Subsidiary or
for a  substantial  part  of the  property  or  assets  of the  Borrower  or any
Principal Subsidiary,  (iv) file an answer admitting the material allegations of
a  petition  filed  against  it in any  such  proceeding,  (v)  make  a  general
assignment for the benefit of creditors,  (vi) become  unable,  admit in writing
its  inability,  or fail generally to pay its debts as they become due, or (vii)
take any action for the purpose of effecting any of the foregoing;

     (h) the Borrower or any Principal Subsidiary,  as the case may be, fails to
pay when  due,  or within  any  grace  period  applicable  thereto  by the terms
thereof,   any  Indebtedness  of  the  Borrower  or  any  Principal   Subsidiary
aggregating $50,000,000 or more;

     (i) the  Borrower  or any  Principal  Subsidiary  shall  fail to observe or
perform  any  covenant  or  agreement  contained  in  any  single  agreement  or
instrument  relating to any  Indebtedness  in excess of (x)  $75,000,000  in the
aggregate,  with respect to any Indebtedness  issued on a tax-exempt  basis, and
(y)  $50,000,000 in the aggregate,  with respect to all other  Indebtedness,  in
each case within any applicable grace period,  or any other event shall occur if
the effect of such  failure or other  event is to  accelerate,  or to permit the
holder of such  Indebtedness or any other Person to accelerate,  the maturity of
such  Indebtedness;  or any such  Indebtedness  shall be  required to be prepaid
(other than by a regularly  scheduled required  prepayment,  pursuant to any put
right (or  similar  right) of the  holder  thereof,  or by the  exercise  by the
Borrower  or  such  Principal  Subsidiary  of its  right  to  make  a  voluntary
prepayment)  in whole or in part prior to its stated  maturity;  or there occurs
under any Swap  Contract  an Early  Termination  Date (as  defined  in such Swap
Contract) resulting from (A) any event of default under such Swap Contract as to
which the  Borrower or any  Principal  Subsidiary  is the  Defaulting  Party (as
defined in such Swap  Contract)  or (B) any  Termination  Event (as so  defined)
under such Swap Contract as to which the Borrower or any Principal Subsidiary is
an Affected  Party (as so defined)  and, in either event,  the Swap  Termination
Value owed by the  Borrower or such  Subsidiary  as a result  thereof is greater
than $50,000,000;


                                       57
<PAGE>

     (j) a judgment or order for the  payment of money in excess of  $50,000,000
and having a Material  Adverse Effect shall be rendered  against the Borrower or
any of the  Subsidiaries  and such judgment or order shall continue  unsatisfied
(in the case of a money  judgment)  and in effect for a period of 30 days during
which execution shall not be effectively  stayed or deferred  (whether by action
of a court, by agreement, or otherwise);

     (k) a Plan shall fail to maintain the minimum funding standard  required by
Section  412(a) of the Code for any plan year or a waiver  of such  standard  is
sought  or  granted  under  Section  412(d),  or a Plan is or  shall  have  been
terminated  or the  subject  of  termination  proceedings  under  ERISA,  or the
Borrower or an ERISA  Affiliate  has  incurred a liability to or on account of a
Plan under  Section 4062,  4063,  4064,  4201 or 4204 of ERISA,  and there shall
result from any such event or events a Material Adverse Effect; or

     (l) there shall have occurred a Change in Control;

then,  and in every such event (other than an event with respect to the Borrower
described in paragraph (f) or (g) above),  and at any time thereafter during the
continuance  of such  event,  the  Administrative  Agent,  at the request of the
Required Lenders,  shall, by notice to the Borrower,  take either or both of the
following actions,  at the same or different times: (i) terminate  forthwith the
Commitments  and  any  obligation  of  the  Issuing  Bank  to  make  L/C  Credit
Extensions,  (ii) declare the Loans then  outstanding  to be  forthwith  due and
payable in whole or in part, whereupon the principal of the Loans so declared to
be due and  payable,  together  with  accrued  interest  thereon  and any unpaid
accrued Fees and all other liabilities of the Borrower accrued hereunder,  shall
become forthwith due and payable,  without presentment,  demand, protest, or any
other  notice  of any  kind,  all of which are  hereby  expressly  waived by the
Borrower,  anything  contained  herein to the  contrary  notwithstanding,  (iii)
require that the Borrower Cash  Collateralize  the L/C Obligations (in an amount
equal to the then Outstanding Amount thereof);  and in any event with respect to
the Borrower  described in paragraph (f) or (g) above,  the  Commitments and the
obligation of the Issuing Bank to make L/C Credit Extensions shall automatically
terminate and the principal of the Loans then outstanding, together with accrued
interest  thereon and any unpaid  accrued Fees and all other  liabilities of the
Borrower  accrued  hereunder,  and  the  obligation  of  the  Borrower  to  Cash
Collateralize  the L/C Obligations as aforesaid shall  automatically  become due
and payable, in each case without further act of the Administrative Agent or any
Lender and without  presentment,  demand,  protest,  or any other  notice of any
kind,  all of which  are  hereby  expressly  waived  by the  Borrower,  anything
contained herein to the contrary notwithstanding.

                                       58
<PAGE>

     SECTION 7.02. Application of Funds

     After the  exercise of remedies  provided for in Section 7.01 (or after the
Loans  have  automatically  become  immediately  due  and  payable  and  the L/C
Obligations have  automatically  been required to be Cash  Collateralized as set
forth in Section 7.01), any amounts received on account of the Obligations shall
be applied by the Administrative Agent in the following order:

     First,  to payment of that portion of the  Obligations  constituting  fees,
indemnities,   expenses  and  other  amounts   (including   fees,   charges  and
disbursements of counsel to the  Administrative  Agent and amounts payable under
Section 2.19) payable to the Administrative Agent in its capacity as such;

     Second,  to payment of that portion of the Obligations  constituting  fees,
indemnities and other amounts (other than principal and interest) payable to the
Lenders and the Issuing  Bank  (including  fees,  charges and  disbursements  of
counsel to the respective Lenders and the Issuing Bank and amounts payable under
Sections  2.15 and  2.19),  ratably  among  them in  proportion  to the  amounts
described in this clause Second payable to them;

     Third, to payment of that portion of the Obligations  constituting  accrued
and unpaid interest on the Loans, L/C Borrowings and other Obligations,  ratably
among the Lenders and the Issuing Bank in proportion to the  respective  amounts
described in this clause Third payable to them;

     Fourth, to payment of that portion of the Obligations  constituting  unpaid
principal  of the Loans and L/C  Borrowings,  ratably  among the Lenders and the
Issuing Bank in proportion to the  respective  amounts  described in this clause
Fourth held by them;

     Fifth, to the Administrative  Agent for the account of the Issuing Bank, to
Cash  Collateralize  that portion of L/C Obligations  comprised of the aggregate
undrawn amount of Letters of Credit; and

     Last, the balance,  if any, after all of the Obligations  have been paid in
full, to the Borrower or as otherwise required by applicable law.

Subject to Section  2.20(c),  amounts used to Cash  Collateralize  the aggregate
undrawn  amount of Letters of Credit  pursuant  to clause  Fifth  above shall be
applied to satisfy  drawings under such Letters of Credit as they occur.  If any
amount  remains on deposit as Cash  Collateral  after all Letters of Credit have
either been fully drawn or expired,  such  remaining  amount shall be applied to
the other Obligations, if any, in the order set forth above.


                                  ARTICLE VIII

                            THE ADMINISTRATIVE AGENT

     In order to expedite the transactions  contemplated by this Agreement, Bank
of America, is hereby appointed to act as Administrative  Agent on behalf of the
Lenders and the Issuing  Bank.  Each of the  Lenders,  each  Transferee  and the
Issuing Bank by its agreement to be bound  hereby,  irrevocably  authorizes  the
Administrative  Agent to take such actions on behalf of such Lender,  Transferee
or the Issuing Bank and to exercise such powers as are specifically delegated to
the Administrative Agent by the terms and provisions hereof,  together with such
actions and powers as are  reasonably  incidental  thereto.  The  Administrative
Agent is hereby  expressly  authorized  by the  Lenders  and the  Issuing  Bank,
without hereby limiting any implied  authority,  (a) to receive on behalf of the
Lenders all  payments of  principal  of and  interest on the Loans and all other
amounts due to the Lenders hereunder,  and promptly to distribute to each Lender
its proper  share of each payment so  received;  (b) to promptly  give notice on
behalf of each of the Lenders to the Borrower of any Event of Default  specified
in this  Agreement  of which  the  Administrative  Agent  has  actual  knowledge
acquired in connection with its agency hereunder;  and (c) to distribute to each
Lender copies of all notices, financial statements and other materials delivered
by the Borrower  pursuant to this  Agreement  as received by the  Administrative
Agent.


                                       59
<PAGE>

     Neither  the  Administrative  Agent  nor  any of its  directors,  officers,
employees,  or agents shall be liable as such for any action taken or omitted by
any of them,  except for its or his own gross negligence or willful  misconduct,
or be responsible for any statement,  warranty,  or representation herein or the
contents of any document  delivered in  connection  herewith,  or be required to
ascertain or to make any inquiry concerning the performance or observance by the
Borrower of any of the terms,  conditions,  covenants,  or agreements  contained
herein. The Administrative  Agent shall not be responsible to the Lenders or any
Transferee  or the Issuing Bank for the due  execution,  genuineness,  validity,
enforceability,  or effectiveness of this Agreement or any other  instruments or
agreements. The Administrative Agent may deem and treat each Lender party hereto
as a "Lender" hereunder and for all purposes hereof until it shall have received
notice,  given as provided  herein,  of the  assignment  of all of such Lender's
rights and obligations hereunder. The Administrative Agent shall in all cases be
fully protected in acting, or refraining from acting, in accordance with written
instructions  signed by the Required Lenders (or such other number of Lenders as
is  expressly  required  hereby with  respect to such action or  inaction)  and,
except as otherwise  specifically  provided  herein,  such  instructions and any
action or inaction pursuant thereto shall be binding on all the Lenders and each
Transferee.  The Administrative  Agent shall, in the absence of knowledge to the
contrary,  be entitled to rely on any  instrument or document  believed by it in
good  faith to be genuine  and  correct  and to have been  signed or sent by the
proper  Person  or  Persons.  Neither  the  Administrative  Agent nor any of its
directors,  officers,  employees, or agents shall have any responsibility to the
Borrower on account of the failure of or delay in  performance  or breach by any
Lender of any of its  obligations  hereunder  or to any Lender on account of the
failure of or delay in performance or breach by any other Lender or the Borrower
of any of their respective  obligations hereunder or in connection herewith. The
Administrative  Agent may  execute  any and all duties  hereunder  by or through
agents or  employees  and  shall be  entitled  to rely upon the  advice of legal
counsel  selected by it with respect to all matters arising  hereunder and shall
not be liable for any action taken or suffered in good faith by it in accordance
with the advice of such counsel.

     The Lenders hereby acknowledge that the Administrative Agent shall be under
no duty to take any discretionary action permitted to be taken by it pursuant to
the provisions of this  Agreement  unless it shall be requested in writing to do
so by the Required Lenders.


                                       60
<PAGE>

     Subject to the  appointment  and  acceptance of a successor  administrative
agent as  provided  below,  the  Administrative  Agent may resign at any time by
notifying the Lenders and the Borrower. Upon any such resignation,  the Borrower
shall  have the  right to  appoint  a  successor,  provided  that any  successor
selected  by the  Borrower  must be  approved  by the  Required  Lenders.  If no
successor  shall have been so appointed by the Borrower and shall have  accepted
such appointment within 20 Business Days after the retiring Administrative Agent
gives notice of its resignation,  then the Required Lenders shall have the right
to appoint a  successor.  If no  successor  shall have been so  appointed by the
Required  Lenders and shall have  accepted such  appointment  within 30 Business
Days after the retiring  Administrative  Agent gives notice of its  resignation,
then the retiring Administrative Agent may, on behalf of the Lenders,  appoint a
successor administrative agent which shall be a bank with an office in New York,
New York and having a combined capital and surplus of at least $1,000,000,000 or
an  Affiliate  of any such  bank.  Upon the  acceptance  of any  appointment  as
Administrative Agent hereunder by a successor bank, such successor shall succeed
to and become vested with all the rights,  powers,  privileges and duties of the
retiring  Administrative  Agent and the retiring  Administrative  Agent shall be
discharged from its duties and obligations  hereunder.  After the Administrative
Agent's resignation  hereunder,  the provisions of this Article and Section 9.05
shall  continue  in effect for its  benefit in respect of any  actions  taken or
omitted to be taken by it while it was acting as Administrative Agent.

     Any resignation by Bank of America as Administrative Agent pursuant to this
Section  shall  also  constitute  its  resignation  as  Issuing  Bank.  Upon the
acceptance of a successor's  appointment as Administrative Agent hereunder,  (a)
such  successor  shall  succeed to and  become  vested  with all of the  rights,
powers,  privileges  and duties of the retiring  Issuing Bank,  (b) the retiring
Issuing  Bank  shall  be  discharged  from  all of its  duties  and  obligations
hereunder or under the other Loan Documents,  and (c) the successor Issuing Bank
shall issue letters of credit in substitution for the Letters of Credit, if any,
outstanding  at  the  time  of  such   succession  or  make  other   arrangement
satisfactory to the retiring Issuing Bank to effectively  assume the obligations
of the retiring Issuing Bank with respect to such Letters of Credit.

     With respect to the Loans made by it hereunder, the Administrative Agent in
its  individual  capacity  and not as  Administrative  Agent shall have the same
rights and powers as any other  Lender  and may  exercise  the same as though it
were  not  the  Administrative  Agent,  and  the  Administrative  Agent  and its
Affiliates may accept deposits from,  lend money to and generally  engage in any
kind of business with the Borrower or any Subsidiary or other Affiliate  thereof
as if it were not the Administrative Agent.

     Each Lender agrees (i) to reimburse the Administrative Agent, on demand, in
the amount of its pro rata share (based on its  Commitment  hereunder or, if the
Commitments shall have terminated,  based on its outstanding Loans hereunder) of
any  expenses  incurred  for the  benefit of the  Lenders by the  Administrative
Agent,  including  reasonable  counsel  fees  and  compensation  of  agents  and
employees paid for services  rendered on behalf of the Lenders,  which shall not
have been  reimbursed by the  Borrower,  and (ii) to indemnify and hold harmless
the  Administrative  Agent and any of its  directors,  officers,  employees,  or
agents,  on demand,  in the amount of such pro rata share,  from and against any
and all liabilities,  taxes, obligations,  losses, damages, penalties,  actions,
judgments,  suits,  cost,  expenses,  or  disbursements  of any  kind or  nature
whatsoever  which may be imposed on, incurred by, or asserted  against it in its
capacity as the  Administrative  Agent or any of them in any way  relating to or
arising  out of this  Agreement  or any action  taken or omitted by it or any of
them  under  this  Agreement,  to the  extent  the  same  shall  not  have  been
indemnified  by the  Borrower;  provided  that no Lender  shall be liable to the
Administrative  Agent  or any of them  for  any  portion  of  such  liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
expenses,  or  disbursements  resulting  from the gross  negligence  or  willful
misconduct  of the  Administrative  Agent  or any  of its  directors,  officers,
employees, or agents.


                                       61
<PAGE>

     Each Lender  acknowledges  that it has,  independently and without reliance
upon the  Administrative  Agent or any other Lender and based on such  documents
and information as it has deemed  appropriate,  made its own credit analysis and
decision to enter into this  Agreement.  Each Lender also  acknowledges  that it
will,  independently and without reliance upon the  Administrative  Agent or any
other Lender and based on such  documents and  information as it shall from time
to time deem  appropriate,  continue to make its own  decisions in taking or not
taking action under or based upon this Agreement,  any related  agreement or any
document furnished hereunder or thereunder.

     None of the Lenders  identified  on the facing page or  signature  pages of
this Agreement as a "syndication agent" or  "co-documentation  agent" shall have
any  right,  power,  obligation,  liability,  responsibility  or duty under this
Agreement other than those  applicable to all Lenders as such.  Without limiting
the  foregoing,  none of the Lenders so identified as a  "syndication  agent" or
"documentation agent" shall have or be deemed to have any fiduciary relationship
with any Lender.  Each Lender  acknowledges that it has not relied, and will not
rely,  on any of the  Lenders  so  identified  in  deciding  to enter  into this
Agreement or in taking or not taking action hereunder.

                                   ARTICLE IX

                                  MISCELLANEOUS

     SECTION 9.01. Notices.

     (a)   Notices   Generally.   Except  in  the  case  of  notices  and  other
communications  expressly  permitted  to be given by  telephone  (and  except as
provided in subsection (b) below), all notices and other communications provided
for  herein  shall be in writing  and shall be  delivered  by hand or  overnight
courier service, mailed by certified or registered mail or sent by telecopier as
follows, and all notices and other communications  expressly permitted hereunder
to be given by telephone shall be made to the applicable  telephone  number,  as
follows:

          (i) if to the Borrower,  the Administrative Agent or the Issuing Bank,
     to the address,  telecopier  number,  electronic  mail address or telephone
     number specified for such Person on Schedule 9.01; and

          (ii)  if to any  other  Lender,  to the  address,  telecopier  number,
     electronic mail address or telephone number specified in its Administrative
     Questionnaire.

Notices sent by hand or  overnight  courier  service,  or mailed by certified or
registered mail, shall be deemed to have been given when received;  notices sent
by telecopier  shall be deemed to have been given when sent (except that, if not
given during normal  business hours for the  recipient,  shall be deemed to have
been  given  at the  opening  of  business  on the  next  business  day  for the
recipient).  Notices delivered through  electronic  communications to the extent
provided  in  subsection  (b) below,  shall be  effective  as  provided  in such
subsection (b).


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     (b)  Electronic  Communications.  Notices and other  communications  to the
Lenders  and the  Issuing  Bank  hereunder  may be  delivered  or  furnished  by
electronic  communication  (including e-mail and Internet or intranet  websites)
pursuant to procedures approved by the Administrative  Agent,  provided that the
foregoing  shall not apply to notices to any Lender or the Issuing Bank pursuant
to Article II if such Lender or the Issuing  Bank, as  applicable,  has notified
the  Administrative  Agent that it is incapable of receiving  notices under such
Article by electronic  communication.  The Administrative  Agent or the Borrower
may, in its discretion,  agree to accept notices and other  communications to it
hereunder by electronic  communications  pursuant to procedures  approved by it,
provided that approval of such  procedures may be limited to particular  notices
or communications.

     Unless the Administrative Agent otherwise prescribes, (i) notices and other
communications  sent to an  e-mail  address  shall be deemed  received  upon the
sender's receipt of an  acknowledgement  from the intended recipient (such as by
the "return receipt requested"  function,  as available,  return e-mail or other
written acknowledgement), provided that if such notice or other communication is
not sent  during the normal  business  hours of the  recipient,  such  notice or
communication  shall be deemed to have been sent at the  opening of  business on
the next  business day for the  recipient,  and (ii)  notices or  communications
posted to an Internet  or intranet  website  shall be deemed  received  upon the
deemed  receipt by the intended  recipient at its e-mail address as described in
the foregoing  clause (i) of notification  that such notice or  communication is
available and identifying the website address therefor.

     (c) Change of Address, Etc. Each of the Borrower,  the Administrative Agent
and the Issuing Bank may change its address,  telecopier or telephone number for
notices  and other  communications  hereunder  by  notice  to the other  parties
hereto. Each other Lender may change its address, telecopier or telephone number
for notices and other  communications  hereunder by notice to the Borrower,  the
Administrative Agent and the Issuing Bank.

     (d)  Reliance  by  Administrative  Agent,  Issuing  Bank and  Lenders.  The
Administrative Agent, the Issuing Bank and the Lenders shall be entitled to rely
and act upon any  notices  (including  telephonic  Standby  Borrowing  Requests)
purportedly  given by or on behalf of the Borrower even if (i) such notices were
not made in a manner specified  herein,  were incomplete or were not preceded or
followed  by any  other  form of  notice  specified  herein,  or (ii) the  terms
thereof, as understood by the recipient,  varied from any confirmation  thereof.
The Borrower shall indemnify the  Administrative  Agent,  the Issuing Bank, each
Lender,  their  Affiliates  and each of their  respective  partners,  directors,
officers,  employees,  agents and advisors from all losses,  costs, expenses and
liabilities   resulting  from  the  reliance  by  such  Person  on  each  notice
purportedly given by or on behalf of the Borrower. All telephonic notices to and
other telephonic communications with the Administrative Agent may be recorded by
the Administrative Agent, and each of the parties hereto hereby consents to such
recording.


     SECTION 9.02. Survival of Agreement.

     All  covenants,  agreements,  representations  and  warranties  made by the
Borrower  herein  and in the  certificates  or  other  instruments  prepared  or
delivered in connection  with or pursuant to this Agreement  shall be considered
to have been  relied  upon by the  Lenders  and shall  survive the making by the
Lenders of the Loans and the making of each L/C Credit Extension,  regardless of
any investigation  made by the Lenders or on their behalf, and shall continue in
full force and effect as long as the principal of or any accrued interest on any
Loan or any Fee or any other amount  payable under this  Agreement or any Letter
of Credit is outstanding and unpaid or so long as the Commitments  have not been
terminated.


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     SECTION 9.03. Binding Effect.

     This Agreement  shall become  effective when it shall have been executed by
the  Borrower and the  Administrative  Agent and when the  Administrative  Agent
shall  have  received  copies  hereof  which,  when  taken  together,  bear  the
signatures of each Lender, and thereafter shall be binding upon and inure to the
benefit of the  Borrower,  the  Administrative  Agent and each  Lender and their
respective  successors and assigns,  except that the Borrower shall not have the
right to assign its rights  hereunder or any interest  herein  without the prior
consent of all the Lenders.

     SECTION 9.04. Successors and Assigns.

     (a) Whenever in this  Agreement  any of the parties  hereto is referred to,
such  reference  shall be deemed to include the  successors  and assigns of such
party;  and all  covenants,  promises  and  agreements  by or on  behalf  of the
Borrower,  the  Administrative  Agent or the Lenders that are  contained in this
Agreement shall bind and inure to the benefit of their respective successors and
assigns permitted  hereby,  except that the Borrower may not assign or otherwise
transfer any of its rights or  obligations  hereunder  without the prior written
consent of the Administrative  Agent and each Lender and no Lender may assign or
otherwise  transfer any of its rights or obligations  hereunder except (i) to an
Eligible  Assignee in accordance  with the  provisions of subsection (b) of this
Section,  (ii) by way of  participation  in  accordance  with the  provisions of
subsection  (d) of this  Section,  or (iii) by way of pledge or  assignment of a
security  interest subject to the restrictions of subsection (f) of this Section
(and any other  attempted  assignment  or transfer by any party  hereto shall be
null and void).  Nothing  in this  Agreement,  expressed  or  implied,  shall be
construed  to confer  upon any Person  (other  than the  parties  hereto,  their
respective  successors and assigns permitted hereby,  Participants to the extent
provided  in  subsection  (d) of  this  Section  and,  to the  extent  expressly
contemplated hereby, the Administrative Agent, the Issuing Bank, the Lenders and
each of their  respective  Affiliates  and the  partners,  directors,  officers,
employees,  agents and advisors of such Person and of such Person's  Affiliates)
any  legal or  equitable  right,  remedy  or claim  under or by  reason  of this
Agreement.

     (b) Any Lender may at any time assign to one or more Eligible Assignees all
or a portion of its rights and obligations  under this Agreement  (including all
or a portion of its  Commitment  and the Loans  (including  for purposes of this
subsection  (b),  participations  in L/C  Obligations) at the time owing to it);
provided that

          (i) except in the case of an assignment of the entire remaining amount
     of the assigning Lender's  Commitment and the Loans at the time owing to it
     or in the case of an  assignment  to a Lender or an  Affiliate of a Lender,
     (x) the aggregate amount of the Commitment (which for this purpose includes
     Loans outstanding  thereunder) or, if the Commitment is not then in effect,
     the  principal  outstanding  balance of the Loans of the  assigning  Lender
     subject to each such  assignment,  determined as of the date the Assignment
     and  Assumption  with  respect  to  such  assignment  is  delivered  to the
     Administrative Agent or, if "Trade Date" is specified in the Assignment and
     Assumption,  as of the Trade Date, shall not be less than $10,000,000,  and
     (y) the aggregate amount of the Commitment (which for this purpose includes
     Loans outstanding thereunder) of the assigning Lender immediately after the
     effectiveness  of such  assignment  or,  if the  Commitment  is not then in
     effect,  the  principal  outstanding  balance of the Loans of the assigning
     Lender immediately after the effectiveness of such assignment, shall not be
     less than $10,000,000;

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          (ii)  each  partial  assignment  shall be made as an  assignment  of a
     proportionate  part of all the assigning  Lender's  rights and  obligations
     under this Agreement with respect to the Loans or the Commitment  assigned,
     except  that this  clause  (ii)  shall not  apply to rights in  respect  of
     Competitive Loans;

          (iii)  any  assignment  of  a  Commitment  must  be  approved  by  the
     Administrative  Agent and the  Issuing  Bank  unless the Person that is the
     proposed  assignee is itself a Lender (whether or not the proposed assignee
     would otherwise qualify as an Eligible Assignee); and

          (iv) the parties to each  assignment  shall execute and deliver to the
     Administrative  Agent  an  Assignment  and  Assumption,   together  with  a
     processing and recordation fee of $3,500, and the Eligible Assignee,  if it
     shall  not be a  Lender,  shall  deliver  to the  Administrative  Agent  an
     Administrative Questionnaire.

     Subject to acceptance  and recording  thereof by the  Administrative  Agent
pursuant to subsection  (c) of this Section,  from and after the effective  date
specified in each Assignment and Assumption,  the Eligible  Assignee  thereunder
shall be a party to this Agreement  and, to the extent of the interest  assigned
by such Assignment and  Assumption,  have the rights and obligations of a Lender
under this Agreement,  and the assigning Lender  thereunder shall, to the extent
of the interest assigned by such Assignment and Assumption, be released from its
obligations  under  this  Agreement  (and,  in the  case  of an  Assignment  and
Assumption  covering all of the assigning  Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto) but shall continue
to be entitled  to the  benefits of Sections  2.13,  2.15,  2.19,  and 9.05 with
respect to facts and circumstances occurring prior to the effective date of such
assignment.  Upon  request,  the  Borrower (at its  expense)  shall  execute and
deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of
rights or  obligations  under  this  Agreement  that does not  comply  with this
subsection  shall be treated for  purposes of this  Agreement  as a sale by such
Lender of a  participation  in such rights and  obligations  in accordance  with
subsection (d) of this Section.

     (c) The Administrative Agent, acting solely for this purpose as an agent of
the Borrower, shall maintain at the Administrative Agent's Office a copy of each
Assignment and Assumption  delivered to it and a register for the recordation of
the names and  addresses of the Lenders,  and the  Commitment  of, and principal
amount of the Loans owing to and its  participation  in Letters of Credit,  each
Lender  pursuant  to the terms  hereof from time to time (the  "Register").  The
Administrative  Agent  shall  also  record in the  Register  the then  scheduled
Maturity Date and shall update the Register from time to time upon any change in
a  Lender's  Commitment  and Loans and its  participation  in  Letters of Credit
pursuant to the terms of this  Agreement.  The entries in the Register  shall be
conclusive  in  the  absence  of  manifest   error,   and  the   Borrower,   the
Administrative  Agent  and the  Lenders  may treat  each  Person  whose  name is
recorded in the Register  pursuant to the terms hereof as a Lender hereunder for
all purposes of this  Agreement.  The Register shall be available for inspection
by the Borrower,  any Lender and the Issuing Bank,  at any  reasonable  time and
from time to time upon reasonable prior notice.

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     (d) Any Lender may at any time,  without  the consent of, or notice to, the
Borrower or the Administrative  Agent, sell  participations to any Person (other
than a natural  person or the Borrower or any of the  Borrower's  Affiliates  or
Subsidiaries)  (each,  a  "Participant")  in all or a portion  of such  Lender's
rights and/or  obligations  under this Agreement  (including all or a portion of
its Commitment  and/or the Loans (including such Lender's  participations in L/C
Obligations)  owing to it);  provided that (i) such Lender's  obligations  under
this  Agreement  shall remain  unchanged,  (ii) such Lender shall remain  solely
responsible to the other parties hereto for the performance of such  obligations
and (iii) the Borrower,  the  Administrative  Agent, the Lenders and the Issuing
Bank shall  continue to deal solely and directly  with such Lender in connection
with such Lender's rights and obligations under this Agreement.

     Any  agreement  or  instrument  pursuant  to  which a Lender  sells  such a
participation  shall  provide  that such Lender  shall  retain the sole right to
enforce this Agreement and to approve any amendment,  modification  or waiver of
any provision of this Agreement;  provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, waiver or other modification described in the first proviso to
Section 9.08(b) that affects such Participant. Subject to subsection (e) of this
Section,  the  Borrower  agrees that each  Participant  shall be entitled to the
benefits  of  Sections  2.13,  2.15 and 2.19 to the same  extent as if it were a
Lender and had acquired its interest by assignment pursuant to subsection (b) of
this Section.  To the extent  permitted by law, each  Participant  also shall be
entitled to the  benefits of Section  9.05 as though it were a Lender,  provided
such  Participant  agrees  to be  subject  to  Section  2.16 as though it were a
Lender.

     (e) A  Participant  shall not be entitled  to receive  any greater  payment
under  Sections 2.13,  2.15 and 2.19 than the applicable  Lender would have been
entitled to receive with respect to the participation  sold to such Participant,
unless  the  sale of the  participation  to such  Participant  is made  with the
Borrower's prior written  consent.  A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 2.19 unless
the Borrower is notified of the participation  sold to such Participant and such
Participant  agrees,  for the benefit of the  Borrower,  to comply with  Section
2.19(f) as though it were a Lender.

     (f) Any Lender may at any time pledge or assign a security  interest in all
or any portion of its rights under this Agreement  (including under its Note, if
any) to secure obligations of such Lender, including any pledge or assignment to
secure  obligations to a Federal  Reserve Bank;  provided that no such pledge or
assignment  shall release such Lender from any of its  obligations  hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.


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     (g) The words "execution,"  "signed," "signature," and words of like import
in  any  Assignment  and  Assumption  shall  be  deemed  to  include  electronic
signatures or the keeping of records in electronic  form, each of which shall be
of the same legal  effect,  validity or  enforceability  as a manually  executed
signature or the use of a paper-based  recordkeeping system, as the case may be,
to the extent and as provided for in any applicable  law,  including the Federal
Electronic  Signatures  in Global and National  Commerce Act, the New York State
Electronic  Signatures and Records Act, or any other similar state laws based on
the Uniform Electronic Transactions Act.

     (h)  Notwithstanding  anything to the contrary  contained herein, if at any
time  Bank of  America  assigns  all of its  Commitment  and Loans  pursuant  to
subsection  (b) above,  Bank of America  may,  subject  to the  appointment  and
acceptance  of a successor  Issuing  Bank as provided  below,  resign as Issuing
Bank. In the event of any such  resignation  as Issuing Bank, the Borrower shall
be entitled to appoint from among the  Lenders,  subject to  acceptance  of such
appointment by such Lender, a successor Issuing Bank hereunder.  If no successor
shall  have been so  appointed  by the  Borrower  and shall have  accepted  such
appointment within 20 Business Days after the retiring Issuing Bank gives notice
of its resignation,  then the Required Lenders shall have the right to appoint a
successor,  subject to the approval of the Borrower (which approval shall not be
unreasonably  withheld or delayed). If no successor shall have been so appointed
by the  Required  Lenders and shall have  accepted  such  appointment  within 30
Business Days after the retiring  Issuing Bank gives notice of its  resignation,
then the  retiring  Issuing  Bank  may,  on  behalf  of the  Lenders,  appoint a
successor Issuing Bank from the Lenders, subject to the approval of the Borrower
(which  approval  shall not be  unreasonably  withheld  or  delayed);  provided,
however,  that no failure by such  Lender to accept such  appointment  or obtain
such approval  shall affect the  resignation of Bank of America as Issuing Bank.
If Bank of America  resigns as Issuing  Bank, it shall retain all the rights and
obligations  of the Issuing Bank hereunder with respect to all Letters of Credit
outstanding as of the effective date of its  resignation as Issuing Bank and all
L/C Obligations with respect thereto (including the right to require the Lenders
to make Standby ABR Loans or fund risk  participations  in Unreimbursed  Amounts
pursuant to Section 2.20(c)). Notwithstanding any provision of this Agreement to
the  contrary,  Bank of America  shall not have any  obligation  to make any L/C
Credit Extension at any time after notice of its intended resignation  hereunder
is delivered to the Borrower hereunder.

     SECTION 9.05. Expenses; Indemnity.

     (a)  The  Borrower  agrees  to  pay  (i)  all  reasonable  legal  fees  and
disbursements  incurred  by the  Administrative  Agent  in  connection  with the
preparation of this Agreement  (including  reasonable fees and  disbursements of
counsel  subject  to  limits  agreed  to by the  Administrative  Agent  and  the
Borrower) and (ii) all  out-of-pocket  expenses  incurred by the  Administrative
Agent,  the  Issuing  Bank and any  Lender in  connection  with any  amendments,
modifications or waivers of the provisions  hereof or thereof or incurred by the
Administrative  Agent,  the Issuing  Bank or any Lender in  connection  with the
enforcement or protection of their rights in connection with this Agreement.


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     (b) The Borrower agrees to indemnify the Administrative  Agent, the Issuing
Bank, each Lender and each of their respective directors,  officers,  employees,
Affiliates and agents (each such Person being called an  "Indemnitee")  against,
and to hold each Indemnitee harmless from, any and all losses, claims,  damages,
liabilities  and  related  expenses,   including  reasonable  counsel  fees  and
expenses, incurred by or asserted against any Indemnitee arising out of, (i) any
Loan or Letter of Credit or the use or proposed  use of the  proceeds  therefrom
(including any refusal by the Issuing Bank to honor a demand for payment under a
Letter of Credit if the documents  presented in  connection  with such demand do
not strictly  comply with the terms of such Letter of Credit) or (ii) any claim,
litigation, investigation, or proceeding relating to this Agreement, any Loan or
Letter of Credit or the use or proposed use of the proceeds therefrom (including
any refusal by the Issuing Bank to honor a demand for payment  under a Letter of
Credit if the documents presented in connection with such demand do not strictly
comply with the terms of such Letter of Credit) or the transactions contemplated
hereby,  whether or not any  Indemnitee is a party  thereto;  provided that such
indemnity shall not, as to any Indemnitee,  be available to the extent that such
losses, claims,  damages,  liabilities,  or related expenses are determined by a
court of  competent  jurisdiction  by final and  nonappealable  judgment to have
resulted  from the gross  negligence or willful  misconduct of such  Indemnitee.
Each Lender shall notify the Borrower  promptly after it determines that it will
make a claim for indemnification  under this Section 9.05(b). The Borrower shall
be entitled to participate in the defense of the litigation,  investigation,  or
proceeding giving rise to such claim with counsel satisfactory to the applicable
Indemnitee in the exercise of its reasonable judgment;  provided,  however, that
any such participation in such defense shall be conducted by the Borrower and at
the  Borrower's  expense and in a manner  considered  by such  Indemnitee  to be
satisfactory  and effective to protect against such claim without causing damage
to the conduct of, or affecting such Indemnitee's  control of, such Indemnitee's
defense.  The  Borrower  shall  inform  such  Indemnitee  of  its  intention  to
participate  in the defense of such claim within 15 days after receipt of notice
thereof from such  Indemnitee.  In the case of an  investigation,  litigation or
proceeding to which the indemnity in this section applies,  such indemnity shall
be effective  whether or not such  investigation,  litigation  or  proceeding is
brought by the  Borrower,  the  Borrower's  equity  holders or  creditors  or an
Indemnitee,  whether or not an  Indemnitee  is  otherwise  a party  thereto  and
whether  or not  the  transactions  contemplated  hereby  are  consummated.  The
Borrower  further  agrees that no Indemnitee  shall have any liability  (whether
direct or  indirect,  in contract or tort or  otherwise)  to the Borrower or its
Subsidiaries  or  Affiliates  or their  respective  equity  holders or creditors
arising out of, related to or in connection with any aspect of the  transactions
contemplated  hereby,  except to the  extent of direct,  as opposed to  special,
indirect, consequential or punitive, damages determined in a final nonappealable
judgment  by a court  of  competent  jurisdiction  to have  resulted  from  such
Indemnitee's gross negligence or willful misconduct.

     (c) Each Lender  severally  agrees to  indemnify  the Issuing  Bank (to the
extent not promptly  reimbursed  by the  Borrower) in the amount of its pro rata
share  (based on its  Commitment  hereunder  or, if the  Commitments  shall have
terminated,  based on its outstanding  Loans hereunder) from and against any and
all liabilities,  obligations,  losses, damages, penalties,  actions, judgments,
suits,  costs,  expenses or disbursements of any kind or nature  whatsoever that
may be imposed on, incurred by, or asserted  against the Issuing Bank in any way
relating to or arising out of this  Agreement  or any action taken or omitted by
the Issuing Bank hereunder or in connection herewith; provided, however, that no
Lender shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties,  actions, judgments, suits, costs, expenses or disbursements
resulting from the gross negligence or willful misconduct of the Issuing Bank or
any of its directors,  officers, employees, or agents. Without limitation of the
foregoing, each Lender agrees to reimburse the Issuing Bank promptly upon demand
in the amount of its pro rata share (based on its  Commitment  hereunder  or, if
the Commitments shall have terminated, based on its outstanding Loans hereunder)
for any costs and expenses (including,  without limitation,  reasonable fees and
expenses of counsel)  payable by the Borrower  under this Section  9.05,  to the
extent that such  Issuing  Bank is not  promptly  reimbursed  for such costs and
expenses by the Borrower.


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     (d) The provisions of this Section 9.05 shall remain  operative and in full
force and effect regardless of the expiration of the term of this Agreement, the
consummation of the transactions  contemplated  hereby,  the repayment of any of
the Loans, the invalidity or  unenforceability  of any term or provision of this
Agreement, or any investigation made by or on behalf of the Administrative Agent
or any  Lender.  All  amounts  due under this  Section  9.05 shall be payable on
written demand therefor.

     SECTION 9.06. Right of Setoff.

     If an Event of Default shall have occurred and be  continuing,  the Issuing
Bank and each Lender is hereby  authorized at any time and from time to time, to
the fullest  extent  permitted by law, to set off and apply any and all deposits
(general or special, time or demand,  provisional or final) at any time held and
other  indebtedness at any time owing by such Person to or for the credit or the
account of the Borrower  against any of and all the  obligations of the Borrower
now or  hereafter  existing  under  this  Agreement  held by such  Lender or the
Issuing Bank, as the case may be,  irrespective of whether or not such Lender or
the Issuing  Bank shall have made any demand under this  Agreement  and although
such  obligations  may be  unmatured.  The rights of the  Issuing  Bank and each
Lender  under  this  Section  are in  addition  to  other  rights  and  remedies
(including other rights of setoff) which such Lender may have.

     SECTION 9.07. Applicable Law.

     THIS  AGREEMENT  SHALL BE CONSTRUED IN ACCORDANCE  WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK.

     SECTION 9.08. Waivers; Amendment.

     (a) No  failure  or delay of the  Administrative  Agent  or any  Lender  in
exercising any power or right hereunder  shall operate as a waiver thereof,  nor
shall  any  single  or  partial  exercise  of any such  right or  power,  or any
abandonment  or  discontinuance  of steps  to  enforce  such a right  or  power,
preclude  any other or further  exercise  thereof or the  exercise  of any other
right or power.  The rights and  remedies  of the  Administrative  Agent and the
Lenders hereunder are cumulative and are not exclusive of any rights or remedies
which they would otherwise have. No waiver of any provision of this Agreement or
consent  to any  departure  by the  Borrower  therefrom  shall  in any  event be
effective  unless the same shall be permitted by paragraph  (b) below,  and then
such waiver or consent shall be effective only in the specific  instance and for
the purpose  for which  given.  No notice or demand on the  Borrower in any case
shall  entitle the Borrower to any other or further  notice or demand in similar
or other circumstances.


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     (b) Neither this Agreement nor any provision hereof may be waived, amended,
or modified  except  pursuant to an agreement or agreements  in writing  entered
into by the Borrower and the Required Lenders;  provided,  however, that no such
agreement shall (i) decrease the principal  amount of, or extend the maturity of
or any scheduled  principal payment date or date for the payment of any interest
on,  any Loan,  or waive or excuse  any such  payment  or any part  thereof,  or
decrease the rate of interest on any Loan,  without the prior written consent of
each  affected  Lender,  (ii) change or extend the  Commitment  of any Lender or
decrease or extend any scheduled  payment date for the Commitment Fees or Letter
of Credit Fees of any Lender without the prior written  consent of such affected
Lender,  or (iii) amend or modify the provisions of Section 2.16, the provisions
of this  Section or the  definition  of  "Required  Lenders",  without the prior
written  consent of each Lender;  (iv) change  Section 2.16 or Section 7.02 in a
manner  that would  alter the pro rata  sharing  of  payments  required  thereby
without the written  consent of each Lender;  (vi) release all or  substantially
all of the Subsidiaries  party to any Guaranty  Agreement from their obligations
thereunder  (except as expressly  provided  therein),  or limit the liability of
such  Subsidiaries  thereunder,  without the written consent of each Lender,  or
(vii) release all or  substantially  all of the Collateral from the Liens of the
Security  Documents  (except  as  expressly  provided  therein  or  pursuant  to
transactions  permitted  under this  Agreement),  without the written consent of
each Lender;  provided  further that (A) no amendment,  waiver or consent shall,
unless in writing  and signed by the  Issuing  Bank in  addition  to the Lenders
required  above,  affect  the  rights or duties of the  Issuing  Bank under this
Agreement or any Issuer  Document  relating to any Letter of Credit issued or to
be issued by it; (B) no amendment,  waiver or consent  shall,  unless in writing
and signed by the  Administrative  Agent in  addition  to the  Lenders  required
above,  affect  the  rights or duties of the  Administrative  Agent  under  this
Agreement or any other Loan Document;  and (C) the Fee Letter may be amended, or
rights  or  privileges  thereunder  waived,  in a writing  executed  only by the
parties thereto.  Notwithstanding anything to the contrary herein, no Defaulting
Lender shall have any right to approve or disapprove  any  amendment,  waiver or
consent  hereunder,  except  that  the  Commitment  of  such  Lender  may not be
increased or extended  without the consent of such Lender.  Each Lender shall be
bound by any waiver,  amendment, or modification authorized by this Section, and
any consent by any Lender  pursuant to this Section shall bind any Transferee of
its rights and obligations hereunder.

     SECTION 9.09. Interest Rate Limitation.

     Notwithstanding  anything  herein  to  the  contrary,  if at any  time  the
applicable  interest rate,  together with all fees and charges which are treated
as interest under applicable law (collectively,  the "Charges"), as provided for
herein or in any other document  executed in connection  herewith,  or otherwise
contracted  for,  charged,  received,  taken,  or reserved by any Lender,  shall
exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for,
charged,  taken,  received,  or  reserved  by such  Lender  in  accordance  with
applicable law, the rate of interest  payable to such Lender,  together with all
Charges payable to such Lender, shall be limited to the Maximum Rate.

     SECTION 9.10. Entire Agreement.

     This Agreement constitutes the entire contract between the parties relative
to the subject  matter  hereof.  Any previous  agreement  among the parties with
respect to the subject matter hereof is superseded by this Agreement. Nothing in
this Agreement, expressed or implied, is intended to confer upon any party other
than the  parties  hereto and  thereto any  rights,  remedies,  obligations,  or
liabilities under or by reason of this Agreement.


                                       70
<PAGE>

     SECTION 9.11. Waiver of Jury Trial.

     EACH PARTY  HERETO  HEREBY  WAIVES,  TO THE  FULLEST  EXTENT  PERMITTED  BY
APPLICABLE  LAW,  ANY  RIGHT IT MAY HAVE TO A TRIAL  BY JURY IN  RESPECT  OF ANY
LITIGATION  DIRECTLY OR INDIRECTLY  ARISING OUT OF, UNDER, OR IN CONNECTION WITH
THIS  AGREEMENT OR ANY OTHER  AGREEMENT OR INSTRUMENT  EXECUTED AND DELIVERED IN
CONNECTION  HEREWITH.  EACH PARTY HERETO (a) CERTIFIES  THAT NO  REPRESENTATIVE,
AGENT, OR ATTORNEY OF ANY OTHER PARTY HAS  REPRESENTED,  EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, AND (b) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN  INDUCED  TO ENTER  INTO  THIS  AGREEMENT  AND,  IF  APPLICABLE,  ANY OTHER
AGREEMENT OR INSTRUMENT EXECUTED AND DELIVERED IN CONNECTION HEREWITH, BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.

     SECTION 9.12. Severability.

     In the event any one or more of the provisions  contained in this Agreement
should be held invalid,  illegal, or unenforceable in any respect, the validity,
legality and enforceability of the remaining  provisions  contained herein shall
not in any way be affected or impaired  thereby.  The parties shall  endeavor in
good-faith  negotiations  to replace  the  invalid,  illegal,  or  unenforceable
provisions with valid  provisions the economic effect of which comes as close as
possible to that of the invalid, illegal, or unenforceable provisions.

     SECTION 9.13. Counterparts.

     This Agreement may be executed in two or more  counterparts,  each of which
shall  constitute  an  original  but all of  which  when  taken  together  shall
constitute but one contract,  and shall become  effective as provided in Section
9.03.

     SECTION 9.14. Headings.

     Article and Section  headings and the Table of Contents used herein are for
convenience  of reference  only,  are not part of this  Agreement and are not to
affect the construction  of, or to be taken into  consideration in interpreting,
this Agreement.

     SECTION 9.15. Jurisdiction; Consent to Service of Process.

     (a) The Borrower  hereby  irrevocably  and  unconditionally  submits to the
nonexclusive  jurisdiction  of any New York State court or Federal  court of the
United States of America  sitting in New York City, and any appellate court from
any  thereof,  in any action or  proceeding  arising  out of or relating to this
Agreement  or any other  agreement  or  instrument  executed  and  delivered  in
connection herewith, or for recognition or enforcement of any judgment, and each
of the parties hereto hereby  irrevocably  and  unconditionally  agrees that all
claims in respect of any such action or proceeding  may be heard and  determined
in such New York  State or, to the  extent  permitted  by law,  in such  Federal
court.  Each of the  parties  hereto  agrees  that a final  judgment in any such
action  or  proceeding  shall  be  conclusive  and  may  be  enforced  in  other
jurisdictions  by suit on the judgment or in any other  manner  provided by law.
Nothing in this  Agreement  shall affect any right that any Lender may otherwise
have to bring any action or proceeding  relating to this  Agreement  against the
Borrower or its properties in the courts of any jurisdiction.


                                       71
<PAGE>

     (b) The Borrower hereby  irrevocably  and  unconditionally  waives,  to the
fullest extent it may legally and  effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit,  action, or proceeding
arising  out of or  relating  to  this  Agreement  or  any  other  agreement  or
instrument  executed and delivered in connection  herewith in any New York State
court or Federal court of the United States of America sitting in New York City.
Each of the parties  hereto hereby  irrevocably  waives,  to the fullest  extent
permitted by law, the defense of an  inconvenient  forum to the  maintenance  of
such action or proceeding in any such court.

     (c) Each party to this Agreement irrevocably consents to service of process
in the manner  provided for notices in Section 9.01.  Nothing in this  Agreement
will  affect the right of any party to this  Agreement  to serve  process in any
other manner permitted by law.

     SECTION 9.16. USA PATRIOT Act Notice.

     Each Lender and the  Administrative  Agent (for itself and not on behalf of
any Lender) hereby  notifies the Borrower that pursuant to the  requirements  of
the USA Patriot Act (Title III of Pub.  L. 107-56  (signed  into law October 26,
2001)) (the "Act"), it is required to obtain, verify and record information that
identifies the Borrower,  which information includes the name and address of the
Borrower and other information that will allow such Lender or the Administrative
Agent, as applicable, to identify the Borrower in accordance with the Act.

     SECTION 9.17. Payments Set Aside.

     To the extent that any  payment by or on behalf of the  Borrower is made to
the Administrative  Agent, the Issuing Bank or any Lender, or the Administrative
Agent,  the Issuing Bank or any Lender  exercises its right of setoff,  and such
payment or the  proceeds  of such  setoff or any part  thereof  is  subsequently
invalidated,  declared to be fraudulent or  preferential,  set aside or required
(including pursuant to any settlement entered into by the Administrative  Agent,
the Issuing  Bank or such Lender in its  discretion)  to be repaid to a trustee,
receiver or any other party, in connection with any proceeding  under any Debtor
Relief Law or otherwise, then (a) to the extent of such recovery, the obligation
or part  thereof  originally  intended  to be  satisfied  shall be  revived  and
continued  in full force and effect as if such payment had not been made or such
setoff had not  occurred,  and (b) each  Lender and the Issuing  Bank  severally
agrees to pay to the  Administrative  Agent  upon  demand its  applicable  share
(without  duplication)  of  any  amount  so  recovered  from  or  repaid  by the
Administrative  Agent, plus interest thereon from the date of such demand to the
date  such  payment  is made at a rate  per  annum  equal to the  Federal  Funds
Effective Rate from time to time in effect.  The  obligations of the Lenders and
the Issuing Bank under clause (b) of the  preceding  sentence  shall survive the
payment in full of the Obligations and the termination of this Agreement.


                                       72
<PAGE>

     SECTION 9.18. Treatment of Certain Information; Confidentiality.

     Each of the  Administrative  Agent, the Lenders and the Issuing Bank agrees
to maintain the  confidentiality  of the Information (as defined below),  except
that  Information  may be  disclosed  (a) to its  Affiliates  and to its and its
Affiliates'  respective  partners,   directors,   officers,  employees,  agents,
advisors and  representatives (it being understood that the Persons to whom such
disclosure  is  made  will  be  informed  of the  confidential  nature  of  such
Information and instructed to keep such  Information  confidential),  (b) to the
extent  requested by any regulatory  authority  purporting to have  jurisdiction
over  it  (including  any  self-regulatory   authority,  such  as  the  National
Association  of  Insurance  Commissioners),   (c)  to  the  extent  required  by
applicable laws or regulations or by any subpoena or similar legal process,  (d)
to any other party hereto,  (e) in connection  with the exercise of any remedies
hereunder or under any other Loan Document or any action or proceeding  relating
to this  Agreement  or any other  Loan  Document  or the  enforcement  of rights
hereunder  or  thereunder,  (f) subject to an  agreement  containing  provisions
substantially  the same as  those of this  Section,  to (i) any  assignee  of or
Participant  in, or any  prospective  assignee of or Participant  in, any of its
rights or  obligations  under this  Agreement or (ii) any actual or  prospective
counterparty (or its advisors) to any swap or derivative transaction relating to
the Borrower and its obligations, (g) with the consent of the Borrower or (h) to
the extent such  Information  (x)  becomes  publicly  available  other than as a
result  of  a  breach  of  this   Section  or  (y)  becomes   available  to  the
Administrative  Agent,  any Lender,  the Issuing Bank or any of their respective
Affiliates on a nonconfidential basis from a source other than the Borrower.

For purposes of this Section,  "Information" means all information received from
the Borrower or any Subsidiary relating to the Borrower or any Subsidiary or any
of  their  respective  businesses,  other  than  any  such  information  that is
available  to the  Administrative  Agent,  any Lender or the  Issuing  Bank on a
nonconfidential  basis prior to  disclosure  by the Borrower or any  Subsidiary,
provided  that,  in the case of  information  received  from the Borrower or any
Subsidiary after the date hereof,  such information is clearly identified at the
time  of  delivery  as  confidential.   Any  Person  required  to  maintain  the
confidentiality  of  Information as provided in this Section shall be considered
to have complied  with its  obligation to do so if such Person has exercised the
same degree of care to maintain the  confidentiality of such Information as such
Person would accord to its own confidential information.




                            [Signature pages follow]

                                       73
<PAGE>

     IN WITNESS WHEREOF, the Borrower,  the Administrative Agent and the Lenders
have caused this  Agreement to be duly executed by their  respective  authorized
officers as of the day and year first above written.

                        CITIZENS COMMUNICATIONS COMPANY


                        By:   /s/ Donald B. Armour
                           --------------------------------------------------
                           Name:  Donald B. Armour
                           Title: Senior Vice-President Finance and Treasurer


                        BANK OF AMERICA, N.A.,
                        as Administrative Agent


                        By:   /s/ Maurice Washington
                           --------------------------------------------------
                           Name:  Maurice Washington
                           Title: Assistant Vice-President


                                      S-1
<PAGE>


                                               SIGNATURE PAGE TO
                                 CITIZENS COMMUNICATIONS COMPANY
                               COMPETITIVE ADVANCE AND REVOLVING
                                       CREDIT FACILITY AGREEMENT


                              Lenders:
                              -------

                              BANK OF AMERICA, N.A.


                              By:   /s/ David A. Banmiller
                                 ----------------------------------------
                                 Name:  David A. Banmiller
                                 Title: Vice President




                                      S-2
<PAGE>
                                                SIGNATURE PAGE TO
                                  CITIZENS COMMUNICATIONS COMPANY
                                COMPETITIVE ADVANCE AND REVOLVING
                                        CREDIT FACILITY AGREEMENT




                                DEUTSCHE BANK TRUST COMPANY
                                AMERICAS


                                By:   /s/ Anca Trifan
                                   ---------------------------------------
                                   Name:  Anca Trifan
                                   Title: Director



<PAGE>


                                                SIGNATURE PAGE TO
                                  CITIZENS COMMUNICATIONS COMPANY
                                COMPETITIVE ADVANCE AND REVOLVING
                                        CREDIT FACILITY AGREEMENT




                                JPMORGAN CHASE BANK


                                By:   /s/ Joan M. Fitzgibbon
                                   ---------------------------------------
                                   Name:  Joan M. Fitzgibbon
                                   Title: Managing Director




<PAGE>


                                                 SIGNATURE PAGE TO
                                   CITIZENS COMMUNICATIONS COMPANY
                                 COMPETITIVE ADVANCE AND REVOLVING
                                         CREDIT FACILITY AGREEMENT




                                 MORGAN STANLEY BANK


                                 By:   /s/ Daniel Twenge
                                    -------------------------------------
                                    Name:  Daniel Twenge
                                    Title: Vice President



<PAGE>


                                                  SIGNATURE PAGE TO
                                    CITIZENS COMMUNICATIONS COMPANY
                                  COMPETITIVE ADVANCE AND REVOLVING
                                          CREDIT FACILITY AGREEMENT




                                  THE ROYAL BANK OF SCOTLAND PLC


                                   By:   /s/ Andrew Wynn
                                      -----------------------------------
                                      Name:  Andrew Wynn
                                      Title: Senior Vice President




<PAGE>


                                                   SIGNATURE PAGE TO
                                     CITIZENS COMMUNICATIONS COMPANY
                                   COMPETITIVE ADVANCE AND REVOLVING
                                           CREDIT FACILITY AGREEMENT




                                   UBS LOAN FINANCE LLC


                                   By:   /s/ Barbara Ezell-McMichael
                                      ----------------------------------
                                      Name:  Barbara Ezell-McMichael
                                      Title: Associate Director



                                   By:    /s/ Winslowe Ogbourne
                                       ---------------------------------
                                       Name:  Winslowe Ogbourne
                                       Title: Associate Director


<PAGE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>7
<FILENAME>exhib31-1.txt
<DESCRIPTION>GRAF CERTIFICATION
<TEXT>
                                                                Exhibit 31.1



                                 CERTIFICATIONS


I, Rudy Graf, certify that:

1. I have reviewed this quarterly report of Citizens Communications Company;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact  necessary to make the statements
made, in light of the  circumstances  under which such statements were made, not
misleading with respect to the period covered by this report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information included in this report, fairly present in all material respects the
financial  condition,  results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The  registrant's  other  certifying  officer(s)  and I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     (a)  Designed  such  disclosure  controls  and  procedures,  or caused such
disclosure  controls and  procedures to be designed  under our  supervision,  to
ensure that  material  information  relating to the  registrant,  including  its
consolidated subsidiaries,  is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

     (b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions  about the effectiveness
of the disclosure  controls and procedures,  as of the end of the period covered
by this report based on such evaluation; and

     (c)  Disclosed  in this  report  any  change in the  registrant's  internal
control over financial  reporting  that occurred  during the  registrant's  most
recent fiscal quarter (the registrant's  fourth fiscal quarter in the case of an
annual  report)  that  has  materially  affected,  or is  reasonably  likely  to
materially affect, the registrant's  internal control over financial  reporting;
and

5. The registrant's other certifying  officer(s) and I have disclosed,  based on
our most recent evaluation of internal control over financial reporting,  to the
registrant's  auditors  and the audit  committee  of the  registrant's  board of
directors (or persons performing the equivalent functions):

     (a) All significant  deficiencies and material  weaknesses in the design or
operation of internal  control over  financial  reporting  which are  reasonably
likely  to  adversely  affect  the  registrant's  ability  to  record,  process,
summarize and report financial information; and

     (b) Any fraud,  whether or not material,  that involves management or other
employees who have a significant role in the registrant's  internal control over
financial reporting.


Date: November  2, 2004
                               By: /s/ Rudy Graf
                               -------------------------------
                               Rudy Graf
                               Chief Executive Officer and
                               (principal executive officer)



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>8
<FILENAME>exhib31-2.txt
<DESCRIPTION>ELLIOTT CERTIFICATION
<TEXT>
                                                           Exhibit 31.2


                                 CERTIFICATIONS

I, Jerry Elliott, certify that:

1. I have reviewed this quarterly report of Citizens Communications Company;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact  necessary to make the statements
made, in light of the  circumstances  under which such statements were made, not
misleading with respect to the period covered by this report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information included in this report, fairly present in all material respects the
financial  condition,  results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The  registrant's  other  certifying  officer(s)  and I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     (a)  Designed  such  disclosure  controls  and  procedures,  or caused such
disclosure  controls and  procedures to be designed  under our  supervision,  to
ensure that  material  information  relating to the  registrant,  including  its
consolidated subsidiaries,  is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

     (b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions  about the effectiveness
of the disclosure  controls and procedures,  as of the end of the period covered
by this report based on such evaluation; and

     (c)  Disclosed  in this  report  any  change in the  registrant's  internal
control over financial  reporting  that occurred  during the  registrant's  most
recent fiscal quarter (the registrant's  fourth fiscal quarter in the case of an
annual  report)  that  has  materially  affected,  or is  reasonably  likely  to
materially affect, the registrant's  internal control over financial  reporting;
and

5. The registrant's other certifying  officer(s) and I have disclosed,  based on
our most recent evaluation of internal control over financial reporting,  to the
registrant's  auditors  and the audit  committee  of the  registrant's  board of
directors (or persons performing the equivalent functions):

     (a) All significant  deficiencies and material  weaknesses in the design or
operation of internal  control over  financial  reporting  which are  reasonably
likely  to  adversely  affect  the  registrant's  ability  to  record,  process,
summarize and report financial information; and

     (b) Any fraud,  whether or not material,  that involves management or other
employees who have a significant role in the registrant's  internal control over
financial reporting.





Date: November 4, 2004
                              By:  /s/ Jerry Elliott
                                  ---------------------------
                                  Jerry Elliott
                                  Chief Financial Officer
                                  (principal financial officer)


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>9
<FILENAME>exhib32-1.txt
<DESCRIPTION>GRAF 906 CERTIF.
<TEXT>
                                                 Exhibit 32.1




                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350.
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Quarterly Report of Citizens  Communications Company (the
"Company") on Form 10-Q for the quarter  ended  September 30, 2004 as filed with
the Securities  and Exchange  Commission on the date hereof (the  "Report"),  I,
Rudy Graf,  Chief  Executive  Officer of the  Company,  certify,  pursuant to 18
U.S.C.  Section 1350, as adopted  pursuant to Section 906 of the  Sarbanes-Oxley
Act of 2002, that:

(1)  The Report fully complies with the  requirements  of Section 13(a) or 15(d)
     of the Securities Exchange Act of 1934; and

(2)  The information  contained in the Report fairly  presents,  in all material
     respects, the financial condition and results of operations of the Company.



/s/ Rudy Graf
- ---------------------------
Rudy Graf
Chief Executive Officer
November 2, 2004



This certification is made solely for purpose of 18 U.S.C. Section 1350, subject
to the knowledge standard contained therein, and not for any other purpose.

A signed  original of this written  statement  required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the  electronic  version of this written  statement
required by Section 906, has been  provided to Citizens  Communications  Company
and will be retained by Citizens  Communications  Company and  furnished  to the
Securities and Exchange Commission or its staff upon request.







</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>10
<FILENAME>exhib32-2.txt
<DESCRIPTION>ELLIOTT 906 CERTIF.
<TEXT>
                                              Exhibit 32.2



                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350.
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Quarterly Report of Citizens  Communications Company (the
"Company") on Form 10-Q for the quarter  ended  September 30, 2004 as filed with
the Securities  and Exchange  Commission on the date hereof (the  "Report"),  I,
Jerry Elliott, Chief Financial Officer of the Company,  certify,  pursuant to 18
U.S.C.  Section 1350, as adopted  pursuant to Section 906 of the  Sarbanes-Oxley
Act of 2002, that:

(1)  The Report fully complies with the  requirements  of Section 13(a) or 15(d)
     of the Securities Exchange Act of 1934; and

(2)  The information  contained in the Report fairly  presents,  in all material
     respects, the financial condition and results of operations of the Company.




/s/ Jerry Elliott
- --------------------------
Jerry Elliott
Chief Financial Officer
November 4, 2004



This certification is made solely for purpose of 18 U.S.C. Section 1350, subject
to the knowledge standard contained therein, and not for any other purpose.

A signed  original of this written  statement  required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the  electronic  version of this written  statement
required by Section 906, has been  provided to Citizens  Communications  Company
and will be retained by Citizens  Communications  Company and  furnished  to the
Securities and Exchange Commission or its staff upon request.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.I
<SEQUENCE>11
<FILENAME>harrisagreemt.txt
<DESCRIPTION>HARRIS AGREEMENT
<TEXT>
                                                        Exhibit 99.1


                              NOTICE OF DISCLAIMER
                              --------------------

Attached  is a document  entitled  "Employment  and  Retention  Agreement"  that
Michael G. Harris, Citizens  Communications  Company's (the Company) Senior Vice
President,  Information  and  New  Technology,  claims  is a valid  and  binding
contract  between himself and the Company,  effective June 1, 2004. The Company,
however,  believes  that no binding  contract was ever formed and has so advised
Mr.  Harris.  Although  the  Compensation  Committee of the  Company's  Board of
Directors  considered whether to enter into employment and retention  agreements
with   certain   of  the   Company's   senior   executives   as   part   of  the
recently-completed initiative to review strategic and financial alternatives, no
such agreements were ever authorized or approved by the committee. Nevertheless,
it appears that Mr. Harris and the Company's former Chairman and Chief Executive
Officer,  Leonard Tow, each signed the attached document, which is the basis for
Mr.  Harris'  claim that a contract  exists.  The Company has advised Mr. Harris
that because neither the Compensation  Committee nor the full Board approved any
contract,  Mr. Tow had no authority  to sign the  attached  document and thereby
bind the Company to its terms. Because no valid contract was ever formed between
the Company and Mr.  Harris,  the  Company  believes it is not legally  bound to
perform any of the obligations stated in the attached document.


<PAGE>


                       EMPLOYMENT AND RETENTION AGREEMENT
                       ----------------------------------

     AGREEMENT  made as of this 1st day of June 2004 (the  "Effective  Date") by
and between CITIZENS  COMMUNICATIONS  COMPANY, a Delaware  Corporation and whose
address for the purposes of this  Agreement is 3 High Ridge Park,  Stamford,  CT
06905  ("Citizens")  and Michael G. Harris,  an individual,  whose address is 16
Gorge Lane, Pound Ridge, NY 10576 ("Executive").

                                    RECITALS
                                    --------

     A.  Executive  is  currently  employed by Citizens in the capacity of Chief
     Technology Officer.

     B.  Executive  and Citizens are mutually  desirous of, among other  things,
     providing for Executive's services for three years and making provision for
     special bonuses and severance  payments to Executive as well as payments in
     the instance of Change in Control,  as defined in Schedule B attached,  all
     as set forth herein.

     NOW THEREFORE; it is agreed as follows:

          1. EMPLOYMENT:
             ----------

               Citizens employs  Executive and Executive accepts such employment
          as  Chief   Technology   Officer  of  Citizens  and  its  subsidiaries
          responsible  for all of its  technological  matters,  reporting to and
          subject to the authority  and direction of the Chief  Executive of the
          ILEC  Division of Citizens and reporting and subject also to the Board
          of Directors (the "Board") of Citizens.


<PAGE>

          2. TERM: PLACE OF EMPLOYMENT:
             -------------------------

          (a) The term of this Agreement shall be three years commencing June 1,
          2004 and  terminating  May 31,  2007  (the  "Term")  subject  to prior
          termination  as  herein  provided.

          (b)  Executive  shall render his services in  Fairfield  County,  CT.,
          provided  Executive  agrees to take such trips  outside said area from
          time to time as shall be consistent  with or  reasonably  necessary in
          connection with his duties.

          3. (a) Subject to Sections 9 and 10, as compensation for his services,
          Citizens shall pay Executive (i) a base salary ("Base  Salary") at the
          rate of  $225,000.00  per year for each year of the Term for each year
          for which Executive renders his services, subject to such withholdings
          required by applicable law, which shall be increased  however for each
          of the second and third years of the Term (each an "Applicable  Year")
          by the percentage increase in the Consumer Price Index prepared by the
          United  States Labor  Department  for the United States as a whole for
          the last calendar month in each of the Applicable  Years over the last
          calendar month in the  immediately  preceding  year, plus (ii) a bonus
          for each full year of the term in an amount not less than $308,000.00,
          being the bonus paid to Executive under the Citizens Incentive Plan of
          Citizens for Executive's services in calendar year 2003 (the "Bonus").

                                      -2-
<PAGE>

          (b) As additional compensation, Citizens shall pay Executive, a bonus,
          denominated a Retention Bonus, in the sum of $56,250.00,  being 25% of
          Executive's annual Base Salary,  subject to such withholdings required
          by applicable law, within five business days,  immediately  succeeding
          the earliest to occur of the  following:  (i) December 31, 2004,  (ii)
          the date on which Citizens, which is presently exploring strategic and
          financial  alternatives has publicly  announced that it has determined
          to accept a particular  alternative,  (iii) the date of termination of
          Executive's  employment,  (w) by  reason  of  death,  (x) by reason of
          "Permanent  Incapacity"  as defined in  Schedule  B  attached,  (y) by
          Citizens  for other  than  "Good  Cause",  as  defined  in  Schedule B
          attached and (z) by Executive for "Good Reason" as defined in Schedule
          B attached, or (iv) a Change in Control.

          (c)  Nothing  herein  shall  preclude  or  prevent  the  Board  or the
          Compensation  Committee of the Board in its sole discretion,  and from
          time-to-time,  granting additional bonuses to the Executive, which may
          take the form of cash  bonuses,  shares of stock,  options  to acquire
          shares of stock or other incentive or stock related awards.

          (d) All reasonable expenses incurred by Executive in the discharge and
          fulfillment  of his duties will be reimbursed or paid by Citizens upon
          written substantiation by Executive.  Executive shall be insured under
          such  group  life,  medical,  dental,  major  medical  and  disability
          insurance  that Citizens  maintains  from time to time during the Term
          subject to the terms, provisions and conditions of such insurance.

                                      -3-
<PAGE>

          4. RESTRICTED STOCK GRANT:
             ----------------------

               Citizens  confirms  the prior grant and award to Executive of its
          Common Stock (the "Inducing  Shares") under its 2000 Equity Incentive
          Plan (the "Plan") as follows:

                        a) 50,000 shares on March 11, 2004
                        b) 15,000 shares on March 11, 2004

          Pursuant  to  the  Plan,   there  are  restrictions  on  the  sale  or
          transferability  of these shares which restrictions lapse cumulatively
          on one  third of the  shares  awarded,  each  year  over a three  year
          period, commencing with the respective date of grant.  Notwithstanding
          the foregoing, all restrictions on the sale or transferability as well
          as any and all other  restrictions on the Inducing Shares,  which have
          not  previously  lapsed,  shall  lapse and be of no further  force and
          effect on the earliest to occur of the following:  (a)  termination of
          Executive's  Employment (i) by reason of his death,  (ii) by reason of
          his Permanent Incapacity, (iii) by Citizens for other than Good Cause,
          and (iv) by the Executive for Good Reason, or (b) a Change in Control.
          The Inducing Shares  referenced in Item a) above were not certificated
          but issued in book-entry  form.  The Inducing  Shares in Item b) above
          shall be treated similarly.  A restricted stock agreement covering the
          Inducing  Shares  Referenced  in Item a)  above  has  heretofore  been
          executed by Citizens and Executive. Simultaneous with the execution of
          this  Agreement,  Citizens and  Executive  shall  execute a restricted
          stock  agreement  covering  the Inducing  Shares  reference in Item b)
          above in the form of Schedule A annexed.

                                      -4-
<PAGE>

          5. EXCLUSIVITY:
             -----------

          (a) During the Term,  Executive  agrees to devote his services and his
          best  energies  and  abilities,   exclusively,  to  the  business  and
          activities of Citizens and its Subsidiaries, and not engage or have an
          interest in or perform  services  for any other  business or entity of
          any kind or nature;  provided,  however,  that  nothing  herein  shall
          prevent  Executive from  investing in (but not rendering  services to)
          other  businesses  which are not  competitive  in any manner  with the
          business then being  conducted by Citizens or any of it  subsidiaries,
          or in investing in, but not rendering  services to , other  businesses
          which are  competitive  in any  manner  with the  business  then being
          conducted  by Citizens  provided in the latter  instance  that (i) the
          shares  of  such  business  are  listed  and  traded  over a  national
          securities exchange,  and (ii) Executive's stock interest or potential
          stock  interest  (based  on  grants,   options,   warrants,  or  other
          arrangements  then in  existence)  in any  such  business  which is so
          traded (together with any and all interest,  actual and potential,  of
          all  members of  Executive's  immediate  family) is not a  controlling
          interest.

          (b) While  employed by Citizens and for a period of one year after the
          termination  of the  Executive's  employment for any reason other than
          termination  by Citizens for other than Good Cause or by the Executive
          for Good Reason,  the Executive  shall not  personally  (and shall not
          personally  cause  others to) (i) take any action to solicit or divert
          any material  business or customers  away from  Citizens,  (ii) induce
          customers,  potential  customers,  suppliers,  agents or other persons
          under contract or otherwise associated or doing business with Citizens
          to terminate,  reduce or alter any such  association  or business,  or
          (iii)  induce any person  employed by Citizens to (x)  terminate  such
          employment  arrangement,  or  (y)  interfere  with  the  customers  or
          suppliers or otherwise with Citizens in any manner.

                                      -5-
<PAGE>

          6. UNIQUENESS:
             ----------

               Executive agrees that his services hereunder are special,  unique
          and  extraordinary  and that in the  event of any  material  breach or
          attempted  material  breach of this  Agreement by Executive,  Citizens
          will sustain substantial injury and damage, and Executive consents and
          agrees  that,  in the  event of  breach or  attempted  breach  hereof,
          Citizens shall be entitled to injunctive  relief against  Executive or
          any third party to prevent any such breach,  in addition to such other
          rights or remedies available to it.

          7. TRADE SECRETS:
             -------------

               Executive   acknowledges  that  his  employment   hereunder  will
          necessarily  involve his  understanding of and access to certain trade
          secrets,  technical data, know-how and other confidential  information
          pertaining  to the  businesses  and  activities  of  Citizens  and its
          subsidiaries,  which  are  special,  valuable  and  unique  assets  of
          Citizens  (such  assets  being   referred  to  as  "Trade   Secrets").
          Accordingly, Executive agrees that during the period of his employment
          and at all times thereafter,  he will not disclose to any unauthorized
          third  party  and such  Trade  Secrets  and will  not  (other  than in
          connection  with  carrying  out his duties)  for any reason  remove or
          retain without the express  written consent of Citizens any figures or
          calculations, letters, papers, records, or other information of a type
          likely to be regarded as confidential.  The provisions of this Section
          shall survive the  expiration or the  termination of this Agreement or
          the  Executive's  employment for any reason other than  termination by
          Citizens  for  other  than  Good  Cause or by the  Executive  for Good
          Reason.

                                      -6-
<PAGE>


          8. INVENTIONS; CREATIONS:
             ---------------------

               All right, title and interest of every kind and nature whatsoever
          in and to inventions, patents, trademarks, copyrights, films, scripts,
          ideas, creations, intellectual property and literary, intellectual and
          other  properties  furnished  to Citizens  or any of its  subsidiaries
          and/or used in  connection  with any of the  activities of Citizens or
          any of its  subsidiaries,  or with which  Executive  is  connected  or
          associated in connection with the  performance of his services,  shall
          as  between  the  parties  hereto  be,  become and remain the sole and
          exclusive property of Citizens or any of its subsidiaries, as the case
          may be, for any and all purposes and uses  whatsoever,  regardless  of
          whether  the  same  were  invented,   created,   written,   developed,
          furnished,  produced or  disclosed by Executive or by any other party,
          and  Executive  shall have no right,  title or interest of any kind or
          nature therein or thereto,  or in any results and proceeds there from.
          Executive agrees that both during and after the term hereof to execute
          any and all documents which Citizens may deem necessary or appropriate
          to effectuate  the provisions of this Section and,  further,  that the
          provisions  of  this  Section  shall  survive  the  expiration  or the
          termination,   for  any  reason,  of  this  Agreement  or  Executive's
          employment.

          9. TERMINATION:
             -----------

               Executive's  employment  shall terminate on the first to occur of
          the following:

               a) Death of Executive.

                                      -7-
<PAGE>

               b) On not less than 15 days  written  notice to  Executive in the
               instance of the Permanent Incapacity of Executive, in which event
               this  Agreement  shall  terminate  on the date set  forth in said
               notice.

               c) On not less than 30 days  written  notice to  Executive in the
               event of termination  of  Executive's  employment by Citizens for
               Good Cause,  in which event this Agreement shall terminate on the
               date set forth in said notice.  The notice shall specify the acts
               or  omissions   constituting   Good  Cause.  In  the  event  such
               termination is based on the  Executive's  willful refusal without
               proper  cause to  perform  his  duties as  delineated  herein and
               within 30 days following the giving of said notice of termination
               Executive   has  taken   reasonable   efforts  to  perform   such
               obligations,  the notice of termination  shall be of no force and
               effect.  Executive  shall have the right to contest or  challenge
               any termination for Good Cause utilizing the arbitration  process
               set forth in Section 17.

               d) On not less than 30 days  written  notice  from  Executive  to
               Citizens in the event of  termination  of this agreement for Good
               Reason in which event  Executive's  employment shall terminate on
               the date set forth in said notice.  The notice shall  specify the
               acts constituting  Good Reason.  Provided however that if, within
               30  days  of  the  giving  of  such  notice  Citizens  has  taken
               reasonable steps to eliminate the acts or omissions  constituting
               the alleged Good Reason the notice of termination  shall be of no
               force and  effect.  Citizens  shall  have the right to contest or
               challenge  any  termination  for  "Good  Reason"   utilizing  the
               arbitration  process  set forth in Section 17. A  termination  of
               Executive  employment  by  Citizens  without  Good Cause shall be
               deemed to be equivalent  to a  termination  by Executive for Good
               Reason.

               e) A Change In Control.


                                      -8-
<PAGE>

               10. CONSEQUENCES OF TERMINATION:
                   ---------------------------

                    (a)  Termination Under Section 9(a) or 9(b).
                         --------------------------------------

                         In  the  event  Executive's  employment  is  terminated
                    pursuant to either Section 9(a) or 9(b),  Executive shall be
                    entitled to receive and  Citizens  shall pay  Executive  the
                    following:

                         (i) Payment of Base  Salary to the date of  termination
                    if not previously  paid, plus the balance of payments of his
                    Base Salary  that would  otherwise  have  become  payable to
                    Executive  for  the  balance  of the  Term  pursuant  to the
                    provisions  of  this  Agreement  based  on the  rate of Base
                    Salary payable at the date of  termination,  but in no event
                    shall  this  balance  be less than an  amount  equal to Base
                    Salary for a two year period.

                         (ii) a cash bonus for the year of  termination  being a
                    fraction  of the bonus  paid for the  immediately  preceding
                    calendar year, (or the minimum amount  referenced in Section
                    3(a)(ii) in the event termination occurred in the first year
                    of the Term) the  numerator  of which is the  number of days
                    prior  to  termination  in the year of  termination  and the
                    denominator  of which is 365,  plus a cash  bonus  otherwise
                    payable  for  the  balance  of the  Term  (the  "Cash  Bonus
                    Balance")  in  the  minimum  amount  referenced  in  Section
                    3(a)(ii),  but in no event shall this Cash Bonus  Balance be
                    less than the minimum bonus  payable under Section  3(a)(ii)
                    for a two year period.


                                     -9-
<PAGE>

                         (iii) if not previously  paid, the Retention  Bonus, as
                    provided in Section 3(b).

                    All such  payments  shall be made  promptly  but in no event
               later than 10 business days immediately succeeding termination of
               employment and shall be subject to such withholdings  required by
               applicable law.

               In  addition,  (x) all  restrictions  on all  shares of  Citizens
          Common  Stock  previously  awarded  to and  then  owned  and  held  by
          Executive,  other than  Inducing  Shares  (which are  provided  for in
          Section 4) shall lapse on the date of termination,  (y) all options to
          acquire shares of Citizens Common Stock (whether  awarded  pursuant to
          one of Citizens' plans or otherwise) which have not then vested, shall
          be deemed  to vest on the date of  termination,  and,  (z) for the two
          years immediately  succeeding  termination,  Citizens at its sole cost
          shall provide Executive with a medical,  dental,  hospitalization  and
          health plan and  insurance  having the same benefits and coverage with
          respect  to  dependents  as are  contained  in the  plan  of  Citizens
          available  to  Executive,   including  life   insurance,   immediately
          preceding termination.



                                     -10-
<PAGE>

                    (b)  Termination For Good Cause.
                         --------------------------

                         In the event the  Executive's  employment is terminated
                    for  Good  Cause  under  Section  9(C),  Executive  shall be
                    entitled to the balance of his Base Salary to the end of the
                    calendar year in which termination occurs and Bonus for such
                    year, and to no other payment or benefit;  the payment shall
                    be paid  within  20  business  days  immediately  succeeding
                    termination. Effective with such termination (i) all options
                    to  purchase  shares of  Citizens  Common  Stock  heretofore
                    granted to Executive and which have not then vested shall be
                    and be deemed canceled,  forfeited,  null and void and of no
                    force and effect, and (ii) all shares of the Common Stock of
                    Citizens  previously  awarded to and then held by Executive,
                    including the Inducing  Shares on which  restrictions  shall
                    not have then lapsed,  shall be deemed  canceled,  forfeited
                    and null and void  and all  certificates  representing  said
                    shares shall  forthwith be returned by Executive to Citizens
                    for  cancellation  and any and all  entries on the books and
                    records of  Citizens  on which the  issuing  of said  shares
                    shall  have  been  recorded,  shall be deemed  canceled  and
                    deleted, null and void and of no force and effect.

                    (c)  Termination For Good Reason and Change In Control.
                         -------------------------------------------------
                         In the event the  Executive's  employment is terminated
                    pursuant to Section 9(d) or 9(e)  (including  termination by
                    Citizens  other than for Good Cause)  Citizens shall pay and
                    provide  Executive  with all of the  payments  and  benefits
                    (including  lapsing of restrictions of Citizens Common Stock
                    and vesting of all options)  provided in  subsection  (a) of
                    this Section 10. All such  payments  shall be made  promptly
                    after  but  in  no  event  later  than  10   business   days
                    immediately  succeeding  termination of employment and shall
                    be subject to such withholdings required by applicable law.


                                     -11-
<PAGE>

                    (d)  Mitigation.
                         ----------
                         In  the  event  of  the   termination   of  Executive's
                    employment  under Section 9, Executive shall not be required
                    to mitigate his damages  hereunder and payments and benefits
                    to be made in event of termination  under said section shall
                    not be limited or reduced by any amount Executive might earn
                    or be able to earn from other  employment  or ventures,  nor
                    shall  Executive be obligated  to seek other  employment  or
                    other opportunities.

               11.  PAYMENTS FOR STOCK AND OPTIONS:
                    ------------------------------

                    (a)  In  the  event  Executive's  employment  is  terminated
                    pursuant to Section  (9a)(b) or (d), then Citizens shall pay
                    Executive  or  his  legal   representatives  for  shares  or
                    restricted   stock  of  Citizens  then  owned  and  held  by
                    Executive,  including  the Inducing  Shares,  at a price per
                    share  obtained by taking the average  closing price of such
                    shares  over  the  New  York  Stock   Exchange  for  the  14
                    consecutive   trading   days   ending  on  the  trading  day
                    immediately  preceding  the  termination  date (the  "Market
                    Price") and shall pay  Executive  for each of the options to
                    acquire  shares  of  Citizens  then  held  by  Executive  as
                    follows:  (i) in the instance  where the  exercise  price of
                    options  is  greater  than the  Market  Price of the  shares
                    underlying  the  Options  at  the  date  of  termination  of
                    employment  the  value  of  the  options   pursuant  to  the
                    Black-Scholes methodology of evaluating options historically
                    utilized by Citizens in determining  such value;  or (ii) in
                    the  instance  where the  exercise  price of options is less
                    than the Market Price of the shares  underlying  the options
                    at the date of termination of employment, the greater of (y)
                    the  differential  between the Market Price and the Exercise
                    Price  of the  Options  and (z)  the  value  of the  options
                    utilizing  the  Black-Scholes  methodology  described in (i)
                    above.  Said payments  shall be made  simultaneous  with the
                    payments under Section 10(a).



                                      -12-
<PAGE>

                    (b) In the event of termination of Executive's employment by
                    reason of a Change in Control  Citizens  shall pay Executive
                    for shares of  restricted  stock of Citizens,  including the
                    Inducing  Shares,  and options to acquire shares of Citizens
                    previously awarded and then owned and held by Executive,  in
                    the  same  manner  as set  forth in  subsection  (a) of this
                    Section 11 except that the 14 consecutive day trading period
                    in  determining  Market  Price shall end on the day which is
                    five  business  days  prior to the  Change in  Control,  and
                    payment  shall  be made  simultaneous  with  the  Change  in
                    Control.

                    (c) Provided however, that notwithstanding the provisions of
                    sub-sections  (a)  and  (b),  on  written  notice  given  to
                    Citizens  no later  than  five days  immediately  succeeding
                    termination   of   employment,   Executive   or  his   legal
                    representatives  as the case may be, shall have the right to
                    forego  payment for said  restricted  shares  including  the
                    Inducing  Shares,  and options in which event Citizens shall
                    have no obligations of any kind to make payment to Executive
                    or his legal representatives for said shares and options.




                                      -13-
<PAGE>

               12.  CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY:
                    ------------------------------------------

                    (a)   Anything   in   this   Agreement   to   the   contrary
                    notwithstanding,  in the event it shall be  determined  that
                    any payment or  distribution  by Citizens or other  benefits
                    provided to Executive  hereunder  (including but not limited
                    to   acceleration   of  vesting  of   options,   lapsing  of
                    restrictions  on shares  of  restricted  stock and  medical,
                    dental, hospitalization and health plan and insurance) to or
                    for the benefit of the Executive (whether paid or payable or
                    distributed or  distributable  pursuant to the terms of this
                    Agreement or otherwise, but determined without regard to any
                    additional  payments  required  under  this  Section  12) (a
                    "Payment")  would be subject  to the  excise tax  imposed by
                    Section 4999 of the United States  Internal  Revenue code of
                    1986, as amended (the "Code"),  or any interest or penalties
                    are  incurred by the  Executive  with respect to such excise
                    tax (such excise tax,  together  with any such  interest and
                    penalties, being hereinafter collectively referred to as the
                    "Excise Tax"),  then Executive  shall be entitled to receive
                    an  additional  payment (a "Gross-Up  Payment") in an amount
                    such that after  payment by the  Executive  of all  federal,
                    state,  and local taxes (including any interest or penalties
                    imposed  with  respect  to such  taxes)  including,  without
                    limitation,   any  income  and  employment  taxes  (and  any
                    interest and  penalties  imposed  with respect  thereto) and
                    Excise Tax  imposed  upon the  Gross-Up  Payment,  Executive
                    retains  an  amount  of the  Gross-Up  Payment  equal to the
                    Excise Tax imposed upon the payment.




                                      -14-
<PAGE>

                    (b)  All  determinations  required  to be  made  under  this
                    Section 12, including whether and when a Gross-Up Payment is
                    required  and the amount of such  Gross-Up  Payment  and the
                    assumptions   to   be   utilized   in   arriving   at   such
                    determination,  shall  be made by  Deloitte  &  Touche  (the
                    "Accounting  Firm") which shall provide detailed  supporting
                    calculations  both  to  Citizens  and the  Executive  within
                    fifteen (15) business days of the receipt of notice from the
                    Executive  that  there has been a Payment,  or such  earlier
                    time  as  is  required  by   Citizens   (collectively,   the
                    "Determination").  All fees charged by the  Accounting  Firm
                    for its services  provided in connection with this Agreement
                    shall be paid by Citizens.  In the event that the Accounting
                    Firm is serving as accountant or auditor for the individual,
                    entity  or  group  effecting  the  Change  in  Control,  the
                    Executive  shall appoint  PriceWaterhouseCoopers  or Ernst &
                    Young,  or  their   respective   successors,   to  make  the
                    determinations  required  hereunder  (which  accounting firm
                    shall then be referred to as the Accounting Firm hereunder).
                    If the  Accounting  Firm  determines  that no Excise  Tax is
                    payable by the  Executive,  it shall  furnish the  Executive
                    with a written opinion that failure to report the Excise Tax
                    on the  Executive's  applicable  federal  income  tax return
                    would  not  result  in the  imposition  of a  negligence  or
                    similar  penalty.  The  Determination by the Accounting Firm
                    shall be  binding  upon  Citizens  and the  Executive.  As a
                    result of the uncertainty in the application of Section 4999
                    of the Code at the time of the Determination, it is possible
                    that Gross-Up  Payments which should have been made were not
                    made  ("Underpayment"),  consistent  with  the  calculations
                    required  to be  made  hereunder.  In  the  event  Executive
                    thereafter  is required  to make  payment of any Excise Tax,
                    the  Accounting  Firm  shall  determine  the  amount  of the
                    Underpayment  that has  occurred  and any such  Underpayment
                    shall be promptly  paid by Citizens to or for the benefit of
                    the Executive.



                                      -15-
<PAGE>

               13.  INDEMNITY; DIRECTORS' INSURANCE.
                    -------------------------------

                    (a)  Citizens  agrees to and  confirms  its  obligation,  to
                    indemnify  Executive as an officer,  director,  employee and
                    agent,  and its  related  obligation  to  advance  funds for
                    expenses  to  the   Executive   as  contained  in  Citizens'
                    certificate   of   incorporation,   by-laws  and  any  other
                    instruments  or  provided  for  by law  or  otherwise.  Such
                    obligation  shall  be in  scope  the  greatest  of  (i)  the
                    obligations  existing  as  of  the  date  hereof,  (ii)  the
                    obligations  as they may be amended or otherwise  revised in
                    the future,  or (iii) the maximum  protection  available for
                    officers  and/or  directors under  applicable law.  Citizens
                    agrees that it will use its best efforts to the end that the
                    By-laws and Certificate of  Incorporation  of Citizens shall
                    not be amended to reduce any indemnity  protection presently
                    available to officers and/or directors.




                                      -16-
<PAGE>

                    (b)  Citizens  presently  maintains  Directors  and Officers
                    Insurance  in  limits  of Fifty  Million  Dollars.  Citizens
                    agrees to maintain  Directors' and Officers' Insurance (at a
                    minimum in such limits) covering Citizens' obligation, among
                    other things, to indemnify the Executive for loss, liability
                    and  expenses  resulting  from  litigation  relating  to his
                    activities  as an  officer,  director,  employee or agent of
                    Citizens and/or any of its  subsidiaries,  on an "occurrence
                    made" basis,  and agrees further,  following  termination of
                    employment  under this  Agreement,  to  maintain  equivalent
                    coverage for the  Executive,  for the maximum  period of all
                    applicable  periods  of  limitation,  (or as a named  former
                    officer  and  director)  on a  "claims  made"  basis for his
                    activities  during  the  Term  while  he was an  officer  or
                    director of Citizens or any of its subsidiaries.

               14.  MERGER.
                    ------

                    (a) In the  instance of a merger,  consolidation  or sale of
                    assets which does not  constitute a Change in Control,  this
                    Agreement  shall  not be  terminated  by any such  merger or
                    consolidation  of Citizens whether Citizens is or is not the
                    surviving  or  resulting  corporation  or as a result of any
                    such sale or  transfer  of all or  substantially  all of the
                    assets  of  Citizens.  In  the  event  of any  such  merger,
                    consolidation or sale or transfer of assets,  the provisions
                    of  this  Agreement  provided  that  concurrently  with  any
                    merger, consolidation or sale or transfer of assets and as a
                    condition  thereof,  Citizens  will cause any  successor  or
                    transferee,  unconditionally, to assume, and such successor,
                    transferee shall assume by written  instrument  delivered to
                    the Executive  (or his  beneficiary  or estate),  all of the
                    obligations  of Citizens  hereunder.  Failure of Citizens to
                    obtain such  assumption  or such  successor or transferee to
                    execute such assumption  prior to the  effectiveness  of any
                    such merger,  consolidation or transfer of assets shall be a
                    breach of this  Agreement and shall entitle the Executive to
                    compensation  and other  benefits  from Citizens in the same
                    amount  and on the  same  terms  as the  Executive  would be
                    entitled  hereunder  if  the  Executive's   employment  were
                    terminated  by reason of a Change in  Control  (in the event
                    such merger or consolidation does not constitute a Change In
                    Control  under the  definition  set forth in Schedule  "B"),
                    with payment to Executive to be made  concurrently  with any
                    said  merger,  consolidation  or  transfer of assets and the
                    fourteen day period referenced in Section 11(b) shall end on
                    the fifth  business day  immediately  preceding said merger,
                    consolidation or transfer of assets.



                                      -17-
<PAGE>

                    (b) Without  limitation,  any dispute or  controversy  under
                    this  section  shall be settled by  arbitration  pursuant to
                    Section  17 and all legal  costs as well as other  costs and
                    expense of  Executive  in  connection  with such  dispute or
                    controversy  shall be paid by  Citizens  as those  costs and
                    expenses and incurred.



                                      -18-
<PAGE>

               15.  DISPUTE; ASSIGNMENT.
                    -------------------

                    (a) In the  event  of a  dispute  between  Citizens  and the
                    Executive  in the  instance of  termination  of  Executive's
                    employment  for Good  Cause or for Good  Reason  then  until
                    there is a determination pursuant to the arbitration process
                    set forth in Section  17, the amounts  that would  otherwise
                    have been paid to the Executive in the event there were Good
                    Reason for the Executive to have  terminated  his employment
                    or an  absence  of Good  Cause as a  predicate  to  Citizens
                    terminating  Executive's  employment,  shall  be  placed  by
                    Citizens in a separate  fund awaiting the  determination  in
                    the arbitration  process and confirmation of the arbitration
                    award.  In the  event  the  arbitrator  finds a lack of Good
                    Cause or a presence of Good Reason, the applicable  payments
                    by Citizens to Executive  shall be made within five business
                    days  immediately  succeeding  a final  confirmation  of the
                    award.   Citizens  shall  pay  Executive's  legal  fees  and
                    expenses in connection  with the aforesaid  arbitration,  as
                    same are incurred, regardless of the outcome thereof.

                    (b)  This   agreement   and  the   Executive's   rights  and
                         obligations   may  not  be  assigned  or  delegated  by
                         Executive;  provided  however that this Agreement shall
                         inure  to the  benefit  of and  be  enforceable  by the
                         Executive's    personal   or   legal    representative,
                         executors,    administrators,     successors,    heirs,
                         distributes,   devises  and  legatees.   In  the  event
                         Executive  shall  die  after  the  termination  of  his
                         employment  and while  amounts are still payable to him
                         by reason of his  termination of  employment,  all such
                         amounts, unless otherwise provided for herein, shall be
                         paid to such person or persons  appointed in writing by
                         the  Executive to receive such  amounts,  or if no such
                         person is so  appointed  to the  Executive's  estate or
                         legal representatives.



                                      -19-
<PAGE>

                    16.  RELEASE.
                         -------

                         In  exchange  for  the  consideration  provided  to the
                    Executive  pursuant to this Agreement,  the Executive,  with
                    the intention of binding  himself and his heirs,  executors,
                    administrators,  assigns and legal  representatives,  hereby
                    releases and forever discharges  Citizens and any subsidiary
                    of  Citizens,  and all of its or their  current,  former and
                    future   officers,   directors,   shareholders,   employees,
                    attorneys,  agents,  predecessors,  successors,  assigns and
                    legal  representatives,  and the pension and welfare benefit
                    plans in which Citizens  participates  and their  respective
                    administrators, fiduciaries, trustees, and insurers, whether
                    acting as agents for Citizens or in an individual  capacity,
                    from any and all  claims,  demands,  causes  of  action  and
                    liabilities whatsoever,  (other than a breach by Citizens of
                    this  Agreement),  whether  known or  unknown,  asserted  or
                    unasserted,  whether  based on tort,  contract  or any other
                    legal or  equitable  theory,  and whether for  compensatory,
                    punitive  or other  damages,  remedies  or relief,  that the
                    Executive  ever  had  or  now  has by  reason  of  any  act,
                    omission,  transaction or occurrence,  including those on or
                    before the date of this  Agreement,  and  including  further
                    without  limitation,  any and all such claims arising out of
                    or in connection with Executive's  employment with Citizens,
                    other than a material  breach of this Agreement by Citizens,
                    or the  termination of the Executive's  employment,  and any
                    and  all  such  claims  under  state,  federal,   municipal,
                    statutory  or common  law,  including,  without  limitation,
                    Title VII of the Civil  Rights  Act of 1964,  42 U.S.C.  ss.
                    1981,  the Civil Rights Act of 1866, the Civil Rights Act of
                    1991, the Age  Discrimination  in Employment  Act, the Older
                    Workers   Benefit   Protection   Act,  the   American   with
                    Disabilities  Act, the Employee  Retirement  Income Security
                    Act,  the Fair Labor  Standards  Act, the Family and Medical
                    Leave Act, the Delaware Fair  Employment  Practices Act, the
                    Connecticut   Human  Rights  and   Opportunities   Law,  the
                    Connecticut  Family and Medical  Leave Law, the  Connecticut
                    Age  Discrimination and Employee Insurance Benefits Law, the
                    Connecticut   Smokers'   Rights  Law,  and  the  Connecticut
                    Constitution, as such laws have been or may be amended.



                                      -20-
<PAGE>

               17.  ARBITRATION: EQUITABLE REMEDIES.
                    -------------------------------

                    (a)  Subject to the  provisions  of  subsection  (b) of this
                    section,  any dispute or  controversy  under this  agreement
                    shall be settled  exclusively  by  arbitration  in Stamford,
                    Connecticut  by a single  arbitrator in accordance  with the
                    rules  of  the  American  Arbitration  Association  then  in
                    effect.  Judgment may be entered  confirming the arbitration
                    award in any court having  jurisdiction.  Citizens shall pay
                    and bear all legal and other costs and expenses,  (including
                    those  of the  Executive)  arising  in  connection  with any
                    arbitration proceeding and subsequent  confirmation pursuant
                    to this  Section.  Executive's  costs and expenses  shall be
                    paid by Citizens as same are incurred.

                    (b)  Notwithstanding  any provision  herein to the contrary,
                    the Executive  acknowledges and agrees that Citizens' remedy
                    at law for any breach of the covenants contained in Sections
                    6, 7 and 8 would be  inadequate  and that for any  breach of
                    such covenants Citizens,  in addition to such other remedies
                    as may be available to it at law or in equity or as provided
                    for in this  Agreement,  shall be entitled to an injunction,
                    restraining  order, or other equitable  relief,  without the
                    necessity or posting a bond,  restraining the Executive from
                    committing  or  continuing  to commit any  violation of such
                    covenants.  Any breach or alleged  breach of such  covenants
                    shall not be subject to the arbitration process set forth in
                    this Section 17.



                                      -21-
<PAGE>

               18.  MISCELLANEOUS.
                    -------------

                    (a)  Right to Accelerate.
                         -------------------
                         Without  limitation  of  any  rights  of  Executive  to
                    otherwise  cause  acceleration of any benefits or monies due
                    or to become due to Executive, his legal representatives, in
                    the event Citizens shall fail to make, when due, any payment
                    referred to in this  Agreement  or shall  refuse to make any
                    such payment,  Executive,  at his option, may accelerate and
                    declare  due,   payable  and   performable   all   payments,
                    provisions or entitlement  under this  Agreement,  provided,
                    however,  that such  acceleration  shall be effected only by
                    written  notice  thereof  given  by  Executive  to  Citizens
                    specifying in detail the basis for  acceleration,  and shall
                    be  effective  as of the date which is twenty (20)  business
                    day after the receipt of such notice by  Citizens;  provided
                    further,  however,  that if within twenty (20) business days
                    following the date of receipt of such notice  Citizens shall
                    make  the  payment  in  question  or  shall  make  provision
                    therefore,   the   acceleration   shall  not  be  effective.
                    Notwithstanding  the  foregoing,  in the  event of a dispute
                    between  Executive and Citizen relating to Executive's right
                    to accelerate  payment or Citizens'  failure to make payment
                    the_provisions of this Section 18(a) shall be subject to the
                    provisions of Sections 15(a) and 17.



                                      -22-
<PAGE>

               (b)  Severability.
                    ------------

                         If for any reason any provision of this Agreement shall
                    be held invalid,  such invalidity shall not affect any other
                    provision of this Agreement not held invalid,  and all other
                    such provisions shall to the full extent consistent with law
                    continue  in full  force and effect so as to  carry-out  the
                    intent of this  Agreement.  If any such  provision  shall be
                    held invalid in part, such invalidity shall in no way affect
                    the rest of such provision not held invalid, and the rest of
                    such provision,  together with all other  provisions of this
                    Agreement, shall likewise to the full extent consistent with
                    the law continue in full force and effect so as to carry-out
                    the intent of this Agreement.  In the event of any aforesaid
                    invalidity, the parties shall both endeavor and negotiate in
                    good faith,  to agree upon  substitute  valid  provisions to
                    effectuate the intent of the  provisions  held to be invalid
                    in whole or in part.



                                      -23-
<PAGE>

               (c)  Headings.
                    --------

                         The  headings  of  Sections  are  included  solely  for
                    convenience  of reference  and shall not control the meaning
                    or   interpretation   of  any  of  the  provisions  of  this
                    Agreement.

               (d)  Governing Law.
                    -------------

                         Citizens  being a Delaware  corporation,  the validity,
                    interpretation,   performance   and   enforcement   of  this
                    Agreement  shall be  governed  by the  internal  laws of the
                    State of Delaware applicable to agreements made and fully to
                    be performed therein,  without any reference to any rules of
                    conflicts of laws.

               (e)  Counterparts.
                    ------------

                         This   Agreement   may  be  executed  in  two  or  more
                    counterparts,  and such  counterparts  when  taken  together
                    shall constitute one executed instrument.

               (f)  Notice.
                    ------

                         All notices and other communications hereunder shall be
                    in  writing  and  shall be deemed  given (i) when  delivered
                    personally,  (ii)  when  transmitted  by email or  facsimile
                    transmission  to the e-mail address or facsimile  number set
                    forth below (during  normal  business hours of the recipient
                    or the immediate succeeding business day), (iii) when mailed
                    on  the  second  business  day  immediately  succeeding  the
                    mailing by registered  or certified  mail,  (return  receipt
                    requested),  postage  prepaid,  or (iv)  when  delivered  by
                    overnight courier such as Federal Express or UPS, on the day
                    delivered,   addressed  to  the  parties  at  the  following
                    respective  addresses (or at such other address or facsimile
                    for a party as shall be specified  by like notice,  provided
                    that  notices of changes  of address or  facsimile  shall be
                    effective only upon receipt thereof);



                                      -24-
<PAGE>

                    (i) If to Citizens at

                           Three High Ridge Park
                           Stamford, CT  06905
                                        Attention: General Counsel
                                        ---------
                                        Facsimile #: (203) 614-4651

                                        With A Copy to:
                                        --------------
                                               David Kroenlein, Esquire
                                               WINSTON & STRAWN, LLP
                                               200 Park Avenue
                                               New York, NY  10166

                                                  Facsimile #: (212) 294-4700

                    (ii) If to Executive at:

                              16 Gorge Lane
                              Pound Ridge, NY 10576
                              Facsimile #:  (914) 764-0838


                                      -25-
<PAGE>

                    (g) No provision of this Agreement may be modified or waived
                    unless such  modification is agreed to in writing and signed
                    by  the  Executive  and  by a  duly  authorized  officer  of
                    Citizens,  or such waiver is signed by the waiving party. No
                    waiver by either  party  hereto at any time of any breach by
                    the other party hereto of, or compliance with, any condition
                    or  provisions  of this  Agreement  to be  performed by such
                    other   party  shall  be  deemed  a  waiver  of  similar  or
                    dissimilar  provisions  or  conditions at the same or at any
                    prior  or  subsequent  time.  Failure  by the  Executive  or
                    Citizens to insist upon strict compliance with any provision
                    of this  Agreement  or to assert any right the  Executive or
                    Citizens may have hereunder,  including without  limitation,
                    the right of the Executive to terminate  employment for Good
                    Reason, shall not be deemed to be a waiver of such provision
                    or right or any other  provision of or right provided for in
                    this Agreement.  The rights of, and benefits payable to, the
                    Executive,  his estate or his beneficiaries pursuant to this
                    Agreement  or in  addition  to any  rights  of, or  benefits
                    payable to, the Executive,  his estate or his  beneficiaries
                    under  any  other  employee  benefit  plan  or  compensation
                    program of Citizens.  No agreement or representations,  oral
                    or otherwise, express or implied, with regard to the subject
                    matter  hereof have been made by either  party which are not
                    expressly set forth in this Agreement.  The word "including"
                    shall be deemed  to be  immediately  succeeded  by the words
                    "but not limited to".

                                      -26-
<PAGE>



IN WITNESS WHEREOF,  Citizens has caused this Agreement to be executed by a duly
authorized  officer  of  Citizens  and the  Executive,  both has  executed  this
Agreement, as of the day first above written below.

CITIZENS COMMUNICATIONS COMPANY


By:  /s/ Leonard Tow
    ---------------------------------
       Its Chairman and CEO


     /s/ Michael G. Harris
- ---------------------------------------
         Michael G. Harris


                                      -27-
<PAGE>


                                   SCHEDULE A

                           RESTRICTED STOCK AGREEMENT

     This  Agreement is made June 1, 2004 as of March 11, 2004 ("Date of Award")
between Citizens  Communications Company, a Delaware corporation (the "Company")
and Michael G. Harris (the  "Grantee").  In  consideration of the agreements set
forth below, the Company and the Grantee agree as follows:

     1.   Grant:  A restricted  stock award  ("Award") of 15,000 shares  ("Award
          Shares") of the Company's  common stock  ("Common  Stock"),  is hereby
          granted by the Company to the Grantee  subject to the following  terms
          and conditions and to the provisions of the 2000 Equity Incentive Plan
          (the "Plan"), the terms of which are incorporated by reference herein.

     2.   Transfer  Restrictions:  None  of the  Award  Shares  shall  be  sold,
          assigned,   pledged   or   otherwise   transferred,   voluntarily   or
          involuntarily by the Grantee.

     3.   Release of Restrictions:

          (a)  The  restrictions  set forth in  Section 2 above  shall  lapse on
               one-third  (1/3) of the Award Shares on May 31,  2005,  one-third
               (1/3) of the Award Shares on May 31, 2006,  and on the  remaining
               one-third (1/3) on May 31, 2007.

          (b)  The restrictions set forth in Section 2 above with respect to the
               Award  Shares,  to the extent they have not lapsed in  accordance
               with  subsection  (a) of this Section 3, shall lapse on the first
               to occur of the following:

               (A)  Termination  of Grantee's  employment  pursuant to Grantee's
                    employment  agreement  with the  Company  dated June 1, 2004
                    (the "Employment Agreement")

                    (i)    by reason of Grantee's death,
                    (ii)   by reason of Grantee's Permanent Incapacity
                    (iii)  by the Company for other than Good Cause
                    (iv)   by Grantee for Good Reason

               (B)  By reason of Change in Control

     All of  said  terms  which  are  initial  capitalized  are  defined  in the
Employment Agreement.

     4.   Forfeiture:  The Award Shares,  with respect to which the restrictions
          have not been  previously  lapsed  pursuant  to  Section  3,  shall be
          forfeited to the Company upon the termination of Grantee's  employment
          with the  Company for Good Cause by the Company or for other than Good
          Reason by Grantee.



<PAGE>


     5.   Adjustment of Shares: Notwithstanding anything contained herein to the
          contrary,  in the event of any change in the outstanding  Common Stock
          resulting  from a  reorganization,  merger,  consolidation,  split-up,
          spin-off,  recapitalization,  share split,  reverse share split, share
          distribution,  combination  of  shares,  exchange  of  shares,  or the
          payment of a share  dividend (any such event being  referred to herein
          as a "Corporate Event"), the Award Shares shall be treated in the same
          manner in any such transaction as other Common Stock. Any Common Stock
          or other securities  received by the Grantee with respect to the Award
          Shares as a result of any  Corporate  Event  shall be  subject  to the
          restrictions  and  conditions  set  forth  herein.  Any cash  proceeds
          received with respect to the Award Shares as a result of any Corporate
          Event shall be accrued as a contingent  cash  obligation  and shall be
          payable to the Grantee only upon the lapse of the restrictions  herein
          in accordance with Section 3.

     6.   Rights of  Stockholder:  The  Grantee  shall be entitled to all of the
          rights of a stockholder with respect to the Award Shares including the
          right  to  vote  such  shares  and  to  receive  dividends  and  other
          distributions  payable  with  respect to such shares shall be the same
          restrictions as the underlying  shares.  Said restrictions shall lapse
          at the same time as restrictions lapse on the underlying shares.

     7.   Escrow of Share Certificates:  Certificates for the Award Shares shall
          be issued  in the  Grantee's  name and shall be held by the  Company's
          transfer  agent  until  all  restrictions  lapse  or such  shares  are
          forfeited  as  provided   herein.   A  certificate   or   certificates
          representing  the Award  Shares as to which  restrictions  have lapsed
          shall be delivered upon the Grantee's request upon such lapse.

     8.   Government Regulations:  Notwithstanding  anything contained herein to
          the  contrary,   the  Company's   obligations   to  issue  or  deliver
          certificates  evidencing  the Award  Shares  shall be  subject  to all
          applicable  laws,  rules and  regulations and to such approvals by any
          governmental  agencies  or  national  securities  exchanges  as may be
          required.

     9.   Withholding  Taxes:  The  Company  shall have the right to require the
          Grantee to remit to the  Company,  or to withhold  from other  amounts
          payable  to the  Grantee,  as  compensation  or  otherwise,  an amount
          sufficient  to satisfy all federal,  state and local  withholding  tax
          requirements.  The  Company  may  offer  Grantee  the  right  to  have
          withholding  requirements  satisfied by the Company's  withholding  of
          shares upon the timely  written  election of Grantee to utilize shares
          for withholding tax purposes.



                                      -2-
<PAGE>

     10.  Employment:  Nothing in the  Agreement  shall  confer upon Grantee any
          right to continue in the employ of the Company, nor shall it interfere
          in any way  with the  right  of the  Company  to  terminate  Grantee's
          employment at any time.

     11.  Plan: Grantee acknowledges receipt of a copy of the Plan, agrees to be
          bound  by  the  terms  and  provisions  of the  Plan,  and  agrees  to
          acknowledge, upon request of the Company, receipt of any prospectus or
          prospectus amendment provided to Grantee by the Company.

     12.  Security Laws: Grantee agrees to comply with all applicable securities
          laws upon sales or disposition of shares acquired hereunder.

     13.  Notices: Notices to the Company shall be addressed to it at:

                   3 High Ridge Park
                   Stamford, Connecticut 06905

                            and to Grantee at:

                                    16 Gorge Lane
                                    Pound Ridge, NY 10576

                    Company  or  Grantee  may  from  time to time  designate  in
                    writing  different  addresses for receipt of notice.  Notice
                    shall be deemed given when properly addressed and sent first
                    class or express mail.

     14.  Governing  Law:  The terms of this  Agreement  shall be  binding  upon
          Company,   Grantee  and  their  respective  successors  and  permitted
          assigns.  This  Agreement  shall be performed  under and determined in
          accordance with internal laws of the State of Connecticut.

     IN WITNESS WHEREOF,  the Company has caused this Award to be granted on the
date first above written.


/s/ L. Russell Mitten                          /s/ Michael G. Harris
- -----------------------------------          -----------------------------
    L. Russell Mitten                              Michael G. Harris
    Citizens Communications Company


                                      -3-
<PAGE>


                                   SCHEDULE B

A.   "Change in Control" means
     -------------------------

     (1) the  acquisition  by any  individual,  entity  or group  (a  "Person"),
including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities  Exchange Act of 1934, as amended (the "Exchange Act"), of beneficial
ownership within the meaning of Rule 13d-3  promulgated  under the Exchange Act,
of 33% or more of either  (i) the then  outstanding  shares  of common  stock of
Citizens (the  "Outstanding  Company Common Stock") or (ii) the combined  voting
power of the then outstanding  securities of Citizens entitled to vote generally
in the election of directors  (the  "Outstanding  Company  Voting  Securities");
provided, however, that the following acquisitions shall not constitute a Change
in Control: (A) any acquisition by Citizens,  (B) any acquisition by an employee
benefit  plan (or related  trust)  sponsored  or  maintained  by Citizens or any
corporation  controlled  by Citizens,  (C) any  acquisition  by any  corporation
pursuant to a reorganization,  merger or consolidation  involving Citizens,  if,
immediately  after such  reorganization,  merger or  consolidation,  each of the
conditions  described in clauses (i), (ii) and (iii) of  subsection  (3) of this
Section shall be satisfied, or (D) any acquisition by the Executive or any group
of persons  including the Executive;  and provided further that, for purposes of
clause (A), if any Person (other than Citizens or any employee  benefit plan (or
related trust) sponsored or maintained by Citizens or any corporation controlled
by Citizens) shall become the beneficial owner of 33% or more of the Outstanding
Company Common Stock or 33% or more of the Outstanding Company Voting Securities
by reason of an  acquisition  by  Citizens  and such  Person  shall,  after such
acquisition by Citizens, become the beneficial owner of any additional shares of
the  Outstanding  Company  Common  Stock or any  additional  Outstanding  Voting
Securities, such beneficial ownership shall constitute a Change in Control.

     (2)  Individuals  who,  as of the date  hereof,  constitute  the Board (the
"Incumbent  Board")  cease for any reason to  constitute  at least a majority of
such Board;  provided,  however,  that any  individual who becomes a director of
Citizens  subsequent  to the date  hereof  whose  election,  or  nomination  for
election  by  Citizens'  stockholders,  was  approved  by the  vote of at  least
three-quarters  (3/4) of the  directors  then  comprising  the  Incumbent  Board
(either by a specific vote or by approval of the proxy  statement of Citizens in
which such person is named as a nominee for director,  without objection to such
nomination)  shall be deemed to have been a member of the Incumbent  Board;  and
provided further,  that no individual who was initially elected as a director of
Citizens as a result of an actual or threatened  election contest, as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act, or
any other  actual or  threatened  solicitation  of proxies or  consents by or on
behalf of any Person  other than the Board shall be deemed to have been a member
of the Incumbent Board.


<PAGE>

     (3) Consummation of a  reorganization,  merger or consolidation  unless, in
any such case,  immediately after such reorganization,  merger or consolidation,
(i)  more  than  50% of the  then  outstanding  shares  of  common  stock of the
corporation resulting from such reorganization, merger or consolidation and more
than 50% of the combined voting power of the then outstanding securities of such
corporation  entitled to vote  generally  in the  election of  directors is then
beneficially owned,  directly or indirectly,  by all or substantially all of the
individuals  or entities who were the  beneficial  owners,  respectively  of the
Outstanding  Company Common Stock and the Outstanding  Company Voting Securities
immediately  prior  or  such  reorganization,  merger  or  consolidation  and in
substantially  the same  proportions  relative to each other as their ownership,
immediately  prior  to such  reorganization,  merger  or  consolidation,  of the
Outstanding  Company Common Stock and the Outstanding Company Voting Securities,
as the case may be, (ii) no Person (other than  Citizens,  any employee  benefit
plan (or related trust)  sponsored or maintained by Citizens or the  corporation
resulting from such reorganization, merger or consolidation ( or any corporation
controlled by Citizens),  or any Person which  beneficially  owned,  immediately
prior to such reorganization,  merger or consolidation,  directly or indirectly,
33% or more of the Outstanding  Company Common Stock or the Outstanding  Company
Voting Securities, as the case may be) beneficially owns, directly or indirectly
33% or more of the then  outstanding  shares of common stock of such corporation
or 33% or more of the combined voting power of the then  outstanding  securities
of such corporation  entitled to vote generally in the election of directors and
(iii) at least a  majority  of the  members  of the  board of  directors  of the
corporation  resulting from such  reorganization,  merger or consolidation  were
members  of the  Incumbent  Board at the time of the  execution  of the  initial
agreement or action of the Board  providing for such  reorganization,  merger or
consolidation; or

     (4)  approval  by  the  stockholders  of  Citizens  of a plan  of  complete
liquidation  or dissolution of Citizens,  or  consummation  of the sale or other
disposition of all or substantially  all of the assets of Citizens other than to
a  corporation  with  respect  to which,  immediately  after  such sale or other
disposition,  (A) more than 50% of the then  outstanding  shares of common stock
thereof and more than 50% of the combined  voting power of the then  outstanding
securities  thereof  entitled to vote  generally in the election of directors is
then beneficially owned, directly or indirectly,  by all or substantially all of
the individuals and entities who were the beneficial  owners,  respectively,  of
the  Outstanding  Company  Common  stock  and  the  Outstanding  Company  Voting
Securities   immediately  prior  to  such  sale  or  other  disposition  and  in
substantially  the same  proportions  relative to each other as their ownership,
immediately prior to such sale or other disposition,  of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities,  as the case may be,
(B) no Person (other than Citizens, any employee benefit plan (or related trust)
sponsored or  maintained  by Citizens or such  corporation  (or any  corporation
controlled by Citizens),  or any Person which  beneficially  owned,  immediately
prior to such sale or other disposition,  directly or indirectly, 33% or more of
the  Outstanding   Company  Common  Stock  or  the  Outstanding  Company  Voting
Securities,  as the case may be) beneficially owns, directly or indirectly,  33%
or more of the then outstanding shares of Common stock thereof or 33% or more of
the combined voting power of the then outstanding securities thereof entitled to
vote  generally in the election of directors  and (C) at least a majority of the
members of the board of directors thereof were members of the Incumbent Board at
the time of the  execution  of the  initial  agreement  or  action  of the Board
providing for such sale or other disposition.



                                      -2-
<PAGE>

     (5) a person  other than  Citizens,  an employee  benefit  plan (or related
trust)  sponsored or  maintained  by Citizens or any  corporation  controlled by
Citizens  or the  Executive  or any group of persons  including  the  Executive,
otherwise effectively controls the operation of Citizens,  whether by control of
the Board, by contract or otherwise.

     Notwithstanding  anything  contained in this Agreement to the contrary,  if
the  Executive's  employment is terminated  prior to a Change in Control and the
Executive  reasonably  demonstrates that such termination (i) was at the request
of a third  party who has  indicated  an  intention  or taken  steps  reasonably
calculated  to effect a Change in  Control  (a "Third  Party"),  and who in fact
effects a Change in  Control,  or (ii)  otherwise  arose in  connection  with or
anticipation of a Change in Control, then for all purposes of this Agreement the
date of a Change in Control shall mean the date immediately prior to the date of
such termination of the Executive's employment.

B.   "Good Cause" means:
     ------------------

     (i) Chronic  alcoholism  or chronic  drug  addiction  materially  affecting
Executive's performance, (ii) Executive's conviction of a felony involving moral
turpitude,  which  through  lapse of time or otherwise is not subject to appeal,
(iii) willful  malfeasance  by the Executive  consisting of his refusal  without
proper cause to perform his duties (iv) a breach by  Executive of the  Agreement
to which this Schedule B is attached or (v) Executive's  deliberate,  willful or
gross misconduct with respect to Citizens.

C.  "Permanent Incapacity" means:
    ----------------------------

     the executive's  absence from his duties with Citizens on a full-time basis
for at least 180  consecutive  days as a result of Executive  incapacity  due to
mental or physical illness.

D.  "Good Reason" means:
    -------------------

     Without the  Executive's  consent,  the  occurrence of any of the following
events:

     (1) (i) the  assignment  to the  Executive  on a permanent  basis of duties
materially inconsistent with the Executive's position, duties, responsibilities,
or status with  Citizens in  accordance  with this  Agreement,  (ii) a material,
adverse and  permanent  change in the  Executive's  reporting  responsibilities,
titles,  or offices with Citizens that is not in accordance with this Agreement,
or (iii) any removal or  involuntary  termination  of the  Executive by Citizens
otherwise  than as permitted by a breach by Executive of the  Agreement to which
this  Schedule  B  is  attached  (the  "Agreement")   provided,   however,  that
notwithstanding anything in this paragraph (1) to the contrary,  clauses (i) and
(ii) shall not be applicable to any occurrence  that is solely  attributable  to
the fact that Citizens is no longer a publicly traded entity;



                                      -3-
<PAGE>

     (2) a reduction by Citizens in the Executive's  rate of annual Base Salary,
as the same may be increased from time to time, or Citizens'  failure to pay the
Executive  within  120 days  following  the end of any  fiscal  year  the  bonus
referenced in Section 3(a) of the Agreement;

     (3) any  requirement  of Citizens that the Executive be  permanently  based
other than in Fairfield County, Connecticut.

     (4) the failure of Citizens to (i) continue in effect any employee  benefit
plan or compensation  plan in which the Executive is eligible to participates of
the Effective  date,  unless the Executive is permitted to  participate in other
plans providing the Executive  substantially  comparable benefits, or the taking
of  any  action  by  Citizens  that  would  adversely   affect  the  Executive's
participation  in or materially  reduce the Executive's  benefits under any such
plan,  (ii) provide the Executive and the  Executive's  dependents with medical,
dental,  and health  care  benefits  in  accordance  with the plans,  practices,
programs  and  policies of Citizens as set forth in the  Agreement to which this
Schedule  is  annexed,  (iii)  provide  the  Executive  with  paid  vacation  in
accordance  with the plans,  policies,  programs and practices of Citizens as in
effect for the Executive as of the Effective date.


                                      -4-














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</DOCUMENT>
</SEC-DOCUMENT>
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