AGREEMENT AND PLAN OF MERGER OF GRANDE COMMUNICATIONS HOLDINGS, INC.,

This Plan of Merger (this “ Agreement ”) is by and between Grande Communications Holdings, Inc., a Delaware corporation, sometimes referred to in this Agreement as “ Grande Holdings ” and Rio Holdings, Inc., a Nevada corporation and wholly-owned subsidiary of Grande Holdings, (“ Rio Holdings ”).  The parties to this Agreement are collectively referred to in this Agreement as the “ Constituent Companies .”

1.01.            Adoption of Plan .   This Agreement of Grande Holdings and Rio Holdings has been adopted by their respective board of directors and is being entered into in accordance with the provisions of Delaware General Corporation Law (the “ DGCL ”) and Chapter 92A of the Nevada Revised Statutes (the “ NRS ”).  The board of directors of Grande Holdings will submit this Agreement to the stockholders of Grande Holdings for their approval in accordance with the DGCL and its Restated Certificate of Incorporation and Bylaws and Grande Holdings will approve this Agreement by written consent as the sole stockholder of Rio Holdings.

1.02.            The Merger .   At the Effective Time (as defined in Section 1.02 hereof), in accordance with this Agreement pursuant to Section 92A.180 of the NRS and Section 253 of the DGCL, Grande Holdings shall be merged with and into Rio Holdings (the “ Merger ”), the separate existence of the Grande Holdings shall cease, and Rio Holdings shall continue as the surviving corporation (the “ Surviving Corporation ”), governed by the laws of the State of Nevada.

1.03.            Effect of the Merger . At the Effective Time, the Surviving Corporation shall succeed, without other transfer, to all the rights, privileges, powers, franchises, equipment, and property of each of the Constituent Companies, and the Surviving Corporation shall be subject to all the debts, liabilities and obligations of each of the Constituent Companies, in the same manner as if the Surviving Corporation had itself incurred the debts and liabilities.  All rights of creditors and all liens on the property of any Constituent Company, if any, shall remain in force with respect to property affected by such liens immediately prior to the Merger.  The Surviving Corporation shall be responsible for payment of all fees and franchise taxes of the Constituent Companies payable to the State of Delaware and State of Nevada, if any.  The Surviving Corporation shall carry on business with the assets of the Constituent Companies as the Constituent Companies existed immediately prior to the Merger.

1.04.            Consummation of the Merger .  As soon as practicable after satisfaction of the conditions set forth in Article II hereof, Rio Holdings shall cause the merger to be consummated by filing articles of merger with the Nevada Secretary of State pursuant to the NRS, in such form as required by and executed in accordance with the relevant provisions of the NRS (the “ Articles of Merger ”) and a certificate of ownership and merger with the Delaware Secretary of State pursuant to the Delaware General Corporation Law.  The date of the filing of the Articles of Merger with the Nevada Secretary of State shall be the “ Effective Date ” and the time of the filing of the Articles of Merger with the Nevada Secretary of State shall be the “ Effective Time .”

2.01.            Conditions to Merger .   The obligations of the Constituent Companies to effect the Merger is subject to the satisfaction or waiver of the following conditions:

(a)               The Merger shall have been approved by the stockholders of Grande Holdings in accordance with the applicable provisions of the DGCL, its Restated Certificate of Incorporation and Bylaws.

(b)               The Merger shall have been approved by Grande Holdings as the sole stockholder of Rio Holdings in accordance with the applicable provisions of the NRS;

(c)               The transactions contemplated by the Recapitalization Agreement, dated as of August 27, 2009, by and among Grande Holdings, Grande Communications Networks, Inc., a Delaware corporation and wholly-owned subsidiary of Grande Holdings, ABRY Partners VI, L.P., a Delaware limited partnership, Grande Investment L.P., a Delaware limited partnership, Grande Parent LLC, a Delaware limited liability company, and ABRY Partners, LLC, a Delaware limited liability company, shall have been consummated.

2.02.            Termination . At any time before the Effective Time, this Agreement may be terminated and the Merger may be abandoned by the board of directors of either Grande Holdings or Rio Holdings or both, notwithstanding the approval of this Agreement or the Merger by the stockholders of Grande Holdings or Rio Holdings.

2.03.            Amendment .  The board of directors of the Constituent Companies may amend this Agreement by mutual written consent at any time prior to the Effective Time, in accordance with and to the extent permitted by Section 251 of the DGCL and Section 92A.120 of the NRS.

3.01.            Cancellation of Rio Holdings Stock.   Immediately prior to the Effective Date, each share of the stock of Rio Holdings that is owned by Grande Holdings shall automatically be cancelled and retired and shall cease to exist.

3.02.            Conversion of Stock .   As of the Effective Date, by virtue of the Merger and without any action on the part of the holders of any of the capital stock of Grande Holdings, the merger will have the following effects on the capital stock of Grande Holdings:

(a)               Each share of Series A Preferred Stock, par value $0.001 per share, of Grande Holdings issued and outstanding immediately prior to the Effective Time will be converted into one (1) share of Series A Preferred Stock of Rio Holdings;

(b)               Each share of Series B Preferred Stock, par value $0.001 per share, of Grande Holdings issued and outstanding immediately prior to the Effective Time will be converted into one (1) share of Series B Preferred Stock of Rio Holdings;

(c)               Each share of Series C Preferred Stock, par value $0.001 per shar