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(Exact Name of Registrant as Specified in Its Charter)

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(State or Other Jurisdiction of

Incorporation or Organization)

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(I.R.S. Employer Identification No.)

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(Address of Principal Executive Offices)

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(Zip code)

Registrant's Telephone Number, Including Area Code: 

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

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Name of Exchange on Which Registered

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Securities registered pursuant to Section 12(g) of the Act: 

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 o No 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not

contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated

by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 

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

1934). Yes o No 

As of June 30, 2004, the Registrant had no equity securities registered pursuant to the Securities Exchange Act of 1934 and,

accordingly, had no public float.

As of March 15, 2005, there were 34,925,432 shares of the Registrant's common stock, par value $0.01 per share, outstanding.

Page 1
...Street, Suite 250 Charlotte, North Carolina (Address of Principal Executive Offices) 13-3725229 (I.R.S. Employer Identification No.) 28202 (Zip code) Registrant's Telephone Number, Including Area Code: (704) 344-8150 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class...

Page 2
Documents incorporated by reference: None

Page 3
... 10. 11. 12. 13. 14. Directors and Executive Officers of the Registrant Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions Principal Accounting Fees and Services 119 124 132 135 136...

Page 4
... on the information currently available to us and speak only as of the date on which this Annual Report was filed with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events...

Page 5
... in the rural communities we serve, with limited competition. Demand for telephone services from our residential and local business customers has historically been very stable despite changing economic conditions. As a result, we have experienced a relatively stable access line count during the...

Page 6
... strategies for enhanced and ancillary services to meet the growing needs of our customers. Our long standing relationships with our customers have helped us to successfully cross-sell broadband and value-added services, such as digital subscriber line, long distance, Internet dial-up, voicemail and...

Page 7
...of class C common stock, on a one-for-one basis, into shares of our common stock. All share information in this Annual Report gives effect to the 5.2773714 for 1 reverse stock split and such reclassification and conversion. In connection with the offering, we entered into a new senior secured credit...

Page 8
... of our basic local telephone service to customers within our service areas; (ii) the provision of network access to interexchange carriers for origination and termination of interstate and intrastate long distance phone calls; (iii) Universal Service Fund high cost loop payments; and (iv) the...

Page 9
... a defined "exchange" area. The customer is charged a flat monthly fee for basic service and service charges for special calling features. 45% Enables long distance companies to utilize our local network to originate or terminate intrastate and interstate calls. The network access charges are paid...

Page 10
Network Access Charges Network access charges relate to long distance, or toll calls, that typically involve more than one company in the provision of telephone service. Since toll calls are generally billed to the customer originating the call, a mechanism is required to compensate each company ...

Page 11
... voice mail, teleconferencing, video conferencing, store-and-forward fax, follow-me numbers, Centrex services and direct inward dial. Billing and Collection. Many interexchange carriers provide long distance services to our rural local exchange carrier customers and may elect to use our billing and...

Page 12
...local phone service and (ii) the interexchange carriers which pay us for access to customers located within our local access and transport areas. In general, the vast majority of our local customers are residential, as opposed to business, which is typical for rural telephone companies. Information...

Page 13
... services. This system supports advanced services including Asynchronous Transfer Mode, Frame Relay and/or Internet Protocol Transport, facilitating delivery of advanced services as demand warrants. In our rural local exchange carrier markets, digital subscriber line-enabled integrated access...

Page 14
... companies, long distance carriers and cable television companies. Many of these companies provide direct access to the Internet and a variety of supporting services to businesses and individuals. In addition, many of these companies, such as America Online, Inc., Microsoft Network and Yahoo, offer...

Page 15
... with our union and non-union employees is good. Within our company, 34 employees are employed at our corporate office, 804 employees are employed at our rural local exchange carriers and 9 employees are employed by Carrier Services. Intellegtual Property We believe we have the trademarks...

Page 16
...Federal Communications Commission price structure. A significant amount of our revenues come from network access charges, which are paid to us by intrastate carriers and interstate long distance carriers for originating and terminating calls in the regions served by our rural local exchange carriers...

Page 17
... on long distance carriers for connection to local networks. States often mirror federal rules in establishing intrastate access charges. In 2001, the Federal Communications Commission adopted an order implementing the beginning phases of the Multi Association Group plan to reform the access charge...

Page 18
... telephone customers to change service providers but keep their existing telephone numbers. Initially, the Federal Communications Commission set November 24, 2003 as the local number portability deadline for carriers within the Top 100 Metropolitan Statistical Areas and May 24, 2004 for carriers...

Page 19
...changing carriers; (iii) ensure that competitors' customers can use the same number of digits when dialing and receive nondiscriminatory access to telephone numbers, operator service, directory assistance and directory listing; (iv) ensure access to telephone poles, ducts, conduits and rights of way...

Page 20
... payments related to the high cost loop represented 9% of our revenues for the year ended December 31, 2004. Under current Federal Communications Commission regulations, the total Universal Service Fund available to all rural local telephone companies, including our 26 rural local exchange carrier...

Page 21
...Group plan created a new universal service support mechanism, Interstate Common Line Support, to replace carrier common line access charges and the recovery of certain costs formerly recovered through traffic sensitive access charges. A recent Federal Communications Commission order merged long term...

Page 22
... local exchange carrier business. Our administrative and maintenance facilities are generally located in or near the rural communities served by our rural local exchange carriers and our central offices are often within the administrative building and/or outlying customer service centers. Auxiliary...

Page 23
... properties is suitable and adequate for the business conducted therein, is being appropriately used consistent with past practice and has sufficient ...OF MTTTERS TO T VOTE OF SECURITY HOLDERS No matters were submitted to a vote of our security holders during the fourth quarter of fiscal 2004. 20

Page 24
PTRT II ITEM 5. MTRKET FOR REGISTRTNT'S COMMON EQUITY, RELTTED STOCKHOLDER MTTTERS TND ISSUER PURCHTSES OF EQUITY SECURITIES General Our common stock began trading on the New York Stock Exchange under the symbol "FRP" on February 4, 2005. Prior to that time, there was no trading market for our ...

Page 25
... a view toward complying with the rules and regulations of the Securities and Exchange Commission with respect to prospective financial information, but, in the view of our management, was prepared on a reasonable basis, reflects the best currently available estimates and judgments, and presents, to...

Page 26
... would have been available for distributions to our stockholders subject to the assumptions described in such table. The information in the table below should be read in conjunction with our consolidated historical financial statements and notes thereto contained elsewhere in this Annual Report. 23

Page 27
... a public common stock issuer, including estimated audit fees, director and officer liability insurance premiums, expenses relating to stockholders' meetings, printing expenses, investor relations expenses, registrar and transfer agent fees, directors' fees, additional legal fees and listing fees...

Page 28
...to pay dividends. Our tax liability may also be affected by limitations on the use of our net operating loss carry forwards under Section 382 of the Internal Revenue Code by reason of the offering and earlier ownership changes. See "Item 7. Management's Discussion and Analysis of Financial Condition...

Page 29
... our six billing systems into an integrated billing platform and the centralization of our customer service records. Also includes non-recurring capital expenditures of $4.8 million for the year ended December 31, 2004 related to capital investments in digital subscriber line access multiplexers and...

Page 30
... our capital expenditures related to digital subscriber line technology in 2005 will significantly decrease. Capital expenditures for fiscal 2004 also includes the costs of converting our six billing systems into an integrated platform and the centralization of our customer service records. Capital...

Page 31
... investments in the roll-out of new services such as digital subscriber line internet access to our existing customer base and the selective expansion of our business into new and/or adjacent markets. Management currently has no specific plans to make a significant acquisition or to increase capital...

Page 32
... favorable to us than the terms of our credit facility. We generally have the ability to issue additional common stock, other equity securities or preferred stock for such consideration and on such terms and conditions as are established by our board of directors in its sole discretion and without...

Page 33
... first golumn) Equity compensation plan approved by our stockholders Equity compensation plans not approved by our stockholders (1) 1,215,701(1)(2)$ 14.88(1) 2,166,323(3) 0 $ 0 0 Includes 832,888 options to purchase our common stock issued under the FairPoint Communications, Inc. (formerly...

Page 34
... elsewhere in this Annual Report. Amounts in thousands, except access lines and ratios. Year Ended Degember 31, 2004 2003 2002 2001 2000 Statement of Operations: Revenues Operating expenses: Operating expenses Depreciation and amortization(1) Stock based compensation expense Total operating...

Page 35
...2004. We prospectively adopted the provisions of SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Liabilities and Equity," effective July 1, 2003. SFAS No. 150 requires us to classify as a long-term liability our series A preferred stock and to reclassify dividends...

Page 36
...rate swaps Loss on early retirement of debt Non-cash stock based compensation Write-off of cost associated with an abandoned offering of Income Deposit Securities Deferred patronage dividends...$ 100,034 (6) Total access line equivalents includes voice access lines and digital subscriber lines. 33

Page 37
...services, including local and long distance voice, data, Internet and broadband product offerings. We are one of the largest telephone companies in the United States focused on serving rural communities and we are the 17th largest local telephone company, in each case based on number of access lines...

Page 38
...customers. Interstate access charges to long distance carriers and other customers are based on access rates filed with the Federal Communications Commission. These revenues also include Universal Service Fund payments for local switching support, long term support and interstate common line support...

Page 39
... Communications provided communication services to approximately 13,280 access line equivalents in central Maine as of the date of such acquisition. On June 18, 2003, we executed an agreement and plan of merger with Berkshire Telephone Company, or Berkshire, to merge FairPoint Berkshire Corporation...

Page 40
... long distance services and support to our rural local exchange carriers and communications providers not affiliated with us. These services allow such companies to operate their own long distance communication services and sell such services to their respective customers. Our long distance business...

Page 41
... to the implementation of Basic Service Calling Areas in the state of Maine, which changes and expands basic service calling areas and has the effect of shifting revenues from intrastate access to local services. The remaining increase of $0.6 million in local revenues from existing operations is...

Page 42
.... The decrease was mainly attributable to the Basic Service Calling Areas plan implemented in Maine as discussed above in local calling services. Long distance services. Long distance services revenues increased $2.3 million from $15.4 million in 2003 to $17.7 million in 2004. This increase was...

Page 43
... on wireless equipment due to a decision to exit certain wireless markets. Stock based compensation. For the year ended December 31, 2004, stock based compensation of $49,000 was incurred as a result of modification of an employee stock option agreement with an executive officer and compensation...

Page 44
... from our wholesale long distance company. We derived our revenues from the following sources: Local calling services. Local calling service revenues increased $2.1 million from $54.0 million in 2002 to $56.1 million in 2003. Despite a 0.5% decline in net voice access lines, revenues from our...

Page 45
... wholesale long distance company decreased $0.7 million as a result of lower minutes of use from our wholesale customers. This decrease was offset by an increase of $1.3 million related to our existing operations and $0.3 million related to expenses of the companies we acquired in 2003 in the Maine...

Page 46
... support the growth of our business; (iv) dividend payments on our common stock; and (v) potential acquisitions. Our board of directors has adopted a dividend policy which reflects our judgment that our stockholders would be better served if we distributed a substantial portion of our cash available...

Page 47
... be able to enter into a new interest rate swap or to purchase an interest rate cap or other interest rate hedge on acceptable terms. Based on the dividend policy with respect to our common stock, we may not have any significant cash available to meet any unanticipated liquidity requirements, other...

Page 48
... billing platform and the centralization of our customer service records. These amounts also include $9.0 million and $4.8 million for the years ended December 31, 2004 and 2003, respectively, of non-recurring capital expenditures related to capital investments in digital subscriber line access...

Page 49
... Carrier Services' credit facility. In December 2004, we wrote off debt issuance and offering costs of $6.0 million associated with our abandoned offering of Income Deposit Securities. The offering of Income Deposit Securities was abandoned in favor of the offering. Debt issue and offering costs...

Page 50
... are also included. Payable to Kelso & Company upon the occurrence of certain events, which include the offering. See "Item 13. Certain Relationships and Related Transactions-Financial Advisory Agreements." (2) The following table discloses aggregate information about our contractual obligations...

Page 51
... to borrow under the revolver from time to time to provide for working capital and general corporate needs, including to finance permitted acquisitions. The delayed draw facility was not drawn at the closing of the offering but may be drawn for a period of one year following the closing of the...

Page 52
...may not in general pay dividends in excess of such amount. Set forth below is a summary of certain of the defined terms that are used in the provisions governing the payment of dividends and mandatory payments during suspension of dividends under our credit facility. "Available Casp" means, for any...

Page 53
... the extent that the declaration or payment of dividends or similar distributions by that subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that...

Page 54
..., in each case payable semi-annually in arrears. The LIBOR rate on the floating rate notes is determined semi-annually. The 91 /2 % notes and floating rate notes mature on May 1, 2008. The 91 /2 % notes and floating rate notes are general unsecured obligations of the Company, subordinated in right...

Page 55
...change of control, we must offer to repurchase the outstanding 11 7/8% notes for cash at a purchase price of 101% of the principal amount of such notes, together with all accrued and unpaid interest, if any, to the date of repurchase. The 117/8% notes are general unsecured obligations of the Company...

Page 56
... Allowance for doubtful accounts; Accounting for income taxes; and Valuation of long-lived assets, including goodwill. Revenue recognition. Certain of our interstate network access and data revenues are based on tariffed access charges filed directly with the Federal Communications Commission; the...

Page 57
... net operating loss carry forwards as of December 31, 2004. On February 8, 2005, we completed the offering which resulted in an "ownership change" within the meaning of the U.S. federal income tax laws addressing net operating loss carry forwards, alternative minimum tax credits and other similar...

Page 58
... and has enhanced its disclosures as required by this consensus. In December 2004, the FASB issued SFAS No. 123(R). This new standard requires companies to adopt the fair value methodology of valuing stock-based compensation and recognizing that valuation in the financial statements from the date of...

Page 59
... by our business in excess of operating needs, interest and principal payments on our indebtedness, dividends on our future senior classes of capital stock, if any, capital expenditures, taxes and future reserves, if any, as regular quarterly dividends to our stockholders. Our board of directors may...

Page 60
... the closing of the offering. After the interest rate swap agreements expire, our annual debt service obligations on such portion of the term loans will vary from year to year unless we enter into a new interest rate swap or purchase an interest rate cap or other interest rate hedge. If we choose...

Page 61
...to pay dividends on our common stock based on meeting a total leverage ratio, satisfying a restricted payment covenant and compliance with other conditions. See "-Description of Certain Indebtedness-Credit Facility." We may amend the terms of our gredit fagility, or we may enter into new agreements...

Page 62
..., contingent or otherwise, to make funds available to the Company, whether in the form of loans, dividends or other distributions. In addition, we have a number of minority investments and passive partnership interests from which we receive distributions. For example, in 2004 and 2003, we received...

Page 63
...the failure of securities analysts to cover our common stock or changes in financial estimates by analysts, competitive factors, regulatory developments, economic and other external factors, general market conditions and market conditions affecting the stock of communications companies in particular...

Page 64
... 11. Executive Compensation." Finally, our existing equity investors and certain members of management have certain registration rights with respect to our common stock. See "Item 13. Certain Relationships and Related Transactions." We may issue shares of our common stock, or other securities, from...

Page 65
... lose a customer for local service we also lose that customer for all related services); reduced usage of our network by our existing customers who may use alternative providers for long distance and data services; reductions in the prices for our services which may be necessary to meet competition...

Page 66
.... We originate and terminate calls for long distance carriers and other interexchange carriers over our network and for that service we receive payments for access charges. These payments represent a significant portion of our revenues. Should these carriers go bankrupt or experience substantial...

Page 67
... damage to access lines; power surges or outages; software defects; and disruptions beyond our control. Disruptions may cause interruptions in service or reduced capacity for customers, either of which could cause us to lose customers and incur expenses. Our new integrated billing platform may...

Page 68
...to obtain right-of-way agreements on favorable terms, or at all, in new service areas, and, if we are unable to do so, our ability to expand our networks, if we decide to do so, could be impaired. Our suggess depends on our ability to attragt and retain qualified management and other personnel. Our...

Page 69
... New York Stock Exchange and the Public Company Accounting Oversight Board, are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. We will be evaluating our internal controls systems to allow management to report...

Page 70
... cost loop support, we also receive Universal Service Fund support payments, which include local switching support, long term support, and interstate common line support that used to be included in our interstate access charge revenues (the Federal Communications Commission has recently merged long...

Page 71
... affect the rates that we are able to charge our customers. Our business also may be impacted by legislation and regulation imposing new or greater obligations related to assisting law enforcement, bolstering homeland security, minimizing environmental impacts, or addressing other issues that impact...

Page 72
... under the term loan facility of our credit facility would result in an increase of approximately $0.9 million in our annual cash interest expense, and a corresponding decrease in cash available to pay dividends on our common stock. If we choose to enter into a new interest rate swap or purchase...

Page 73
... TO FINTNCITL STTTEMENTS Page FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES: Report of Independent Registered Public Accounting Firm CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002: Consolidated Balance Sheets as of December 31, 2004 and 2003 Consolidated...

Page 74
... of operations, stockholders' equity (deficit), comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2004. These consolidated financial statements are the responsibility of FairPoint Communications, Inc.'s management. Our responsibility...

Page 75
... - 1,889 105 36,110 40,705 42,098 266,706 Property, plant, and equipment, net Other assets: Goodwill Investments Debt issue and offering costs, net of accumulated amortization Notes receivable - related party Covenants not to compete, net of accumulated amortization Other Total other assets 252...

Page 76
...571 100 85 915,311 15 598,612 11 Minority interest Common stock subject to put options, 16 shares at December 31, 2004 and 31 shares at December 31, 2003 Commitments and contingencies Stockholders' equity (deficit): Common stock: Class A voting, par value $0.01 per share. Authorized 44,757 shares...

Page 77
... income (expense): Net gain on sale of investments and other assets Interest and dividend income Interest expense Impairment on investments Equity in net earnings of investees Realized and unrealized losses on interest rate swaps Other nonoperating, net Total other expense 104 2,335 (104,315) (349...

Page 78
See accompanying notes to consolidated financial statements. 74

Page 79
... preferred stock Preferred stock accretion Preferred stock dividends Balance at December 31, 2003 Net income Compensation expense for stock-based awards Other comprehensive loss from available-forsale securities Other comprehensive income from cash flow hedges Balance at December 31, 2004 8,643...

Page 80
... Consolidated Statements of Comprehensive Ingome (Loss) Years ended Degember 31, 2004, 2003 and 2002 (Dollars in thousands) 2004 2003 2002 Net income (loss) Other comprehensive income (loss): Available-for-sale securities: Unrealized holding gains (losses) Less reclassification adjustment for gain...

Page 81
... dividends Minority interest in income of subsidiaries Loss on early retirement of debt Write-off of offering costs Net gain on sale of investments and other assets Impairment on investments Amortization of investment tax credits Stock-based compensation Change in fair value of interest rate...

Page 82
... from issuance of long-term debt Repayment of long-term debt Repurchase of shares of common stock subject to put options Repurchase of redeemable preferred stock Loan origination and offering costs Dividends paid to minority stockholders Net cash used in financing activities of continuing operations...

Page 83
... provide telephone local exchange services in various states. Operations also include resale of long distance services, internet services, cable services, equipment sales, and installation and repair services. MJD Capital Corp. leases equipment to other subsidiaries of FairPoint. Carrier Services...

Page 84
... arrangements with other communications carriers. Revenues are primarily derived from: access, pooling, local calling services, Universal Service Fund receipts, long distance services, Internet and data services, and other miscellaneous services. Local access charges are billed to local end users...

Page 85
... is provided from billing and collection and directory services. The Company earns revenue from billing and collecting charges for toll calls on behalf of interexchange carriers. The interexchange carrier pays a certain rate per each message billed by the Company. The Company recognizes revenue from...

Page 86
... stated at cost. For investments in partnerships, the equity method of accounting is used. Non-Qualified Deferred Compensation Plan assets are classified as trading. The Company uses fair value reporting for marketable investments in debt and equity securities classified as either available-for-sale...

Page 87
a five-year period. The Company began amortizing its billing system costs in 2004 based on the total operating subsidiaries that the Company had migrated to the new system. (i) Debt Issue and Offering Costs Debt issue costs are being amortized over the life of the related debt, ranging from 3 to ...

Page 88
...rate swap agreements to manage fluctuations in cash flows resulting from interest rate risk. These swaps change the variable-rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of the interest rate swaps, the Company receives variable interest rate payments and makes...

Page 89
... Option Plans At December 31, 2004, the Company had three stock-based employee compensation plans. The Company accounts for its stock option plans using the intrinsic-value-based method prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees , and related...

Page 90
... No. 123 using the straight-line method over the vesting period of the option. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company's net pro forma income (loss) would have been (dollars in thousands): 2004 2003...

Page 91
... as effect would be anti-dilutive: Stock options Restricted stock units 833 356 26 1,215 833 416 27 836 348 - 1,184 1,276 (s) New Accounting Pronouncements In March 2004, the EITF reached a consensus on the remaining portions of EITF 03-01, Tpe Meaning of Otper-TpanTemporary Impairment and Its...

Page 92
... of $1,000 payment of notes receivable-related party, â€¢ â€¢ Pay a long-term deferred transaction fee, and Pay related fees and expenses. (a) Issuance of Common Stock On January 28, 2005, the board of directors approved a 5.2773714 for 1 reverse stock split of the Company's common stock, which...

Page 93
..., the Company effected the following changes in its capital stock accounts (amounts in thousands): Class T and Class C Common Common Shares Shares Tmount Tmount Tdditional paid-in gapital Unearned gompensation Balance at December 31, 2004 Conversion of Class A and Class C to a single class of...

Page 94
... $130.0 million of the term loans under our new credit facility at 5.76% until December 31, 2007. The interest rate swaps qualify as cash flow hedges for accounting purposes. (c) Redemption of Series A Preferred Stock Subject to Mandatory Redemption The Company used proceeds of $129.2 million...

Page 95
... proceeds were used to repay the note receivable-related party. The Company used proceeds of $8.6 million to repurchase the remaining $136,000 common stock subject to put option and to pay a long-term deferred transaction fee of $8.4 million. (e) Dividends The Company has adopted a dividend policy...

Page 96
...the Company as though the acquisition was made as of January 1, 2002. These results include certain adjustments, including increased interest expense on debt related to the acquisition, certain preacquisition transaction costs, and related income tax effects. The pro forma financial information does...

Page 97
... that the carrying amount of its reporting unit did not exceed its estimated fair value and, therefore, the Company did not record an impairment loss upon adoption of SFAS No. 142. The Company updated its annual impairment testing of goodwill as of December 31, 2004, 2003, and 2002, and determined...

Page 98
... (a) Marketable Equity Securities The cost, unrealized holding gains and losses, and fair value of the Company's marketable equity investments classified as available-for-sale at December 31, 2004 and 2003 are summarized below (dollars in thousands): Gross Gross Cost unrealized holding...

Page 99
... equity method investments Investments in securities carried at cost: RTB stock CoBank stock and unpaid deferred CoBank patronage RTFC secured certificates and unpaid deferred RTFC patronage Cellular companies Other nonmarketable minority equity investments Nonqualified deferred compensation plan...

Page 100
... is presented below, rather than summary information for the Chouteau Cellular Telephone Company, which is the actual entity accounted for under the equity method on the books of the Company: September 30, 2002 Current assets Property, plant, and equipment, net Other Total assets $ 12,346...

Page 101
... Telephone Company and the Illinois Valley Cellular RSA 2-I, II, and III partnership investments. These charges are classified with the impairment on investments in the consolidated statements of operations. (c) Investments in Equity Securities Carried at Cost The aggregate cost of the Company...

Page 102
... subordinated notes, 12.50%, due 2010 Senior notes, 11.875%, due 2010 Carrier Services' senior secured notes, 8.00%, due 2007 Senior notes to RTFC: Fixed rate, 9.20%, due 2009 Variable rate, 6.15% at December 31, 2004, due 2009 Subordinated promissory notes, 7.00%, due 2005 First mortgage notes to...

Page 103
... facility limits the Company's ability to make investments in Carrier Services and its subsidiaries. Net cash proceeds from asset sales are required to be applied as mandatory prepayments of principal on outstanding loans unless such proceeds are used by us to finance acquisitions permitted under...

Page 104
... under which those notes were issued, together with accrued and unpaid interest, if any, to the redemption date. In the event of a change of control, FairPoint must offer to repurchase the outstanding 1998 Fixed-Rate Notes and the 1998 Floating-Rate Notes for cash at a purchase price of 101% of the...

Page 105
... in the indenture under which the 2000 Notes were issued, together with accrued and unpaid interest, if any, to the redemption date. In the event of a change of control, FairPoint must offer to repurchase the outstanding 2000 Notes for cash at a purchase price of 101% of the principal amount of such...

Page 106
.... Additionally, the Company recorded a nonoperating loss of $5.0 million for the write-off of debt issue costs related to this extinguishment of debt in 2003. (e) Carrier Services' Senior Secured Notes On May 10, 2002, Carrier Services entered into an amended and restated credit agreement with its...

Page 107
... series A preferred stock was issued to the lenders in connection with the Carrier Services debt restructuring. The series A preferred stock is nonvoting and is not convertible into common stock of the Company. The series A preferred stock provides for the payment of dividends at a rate equal to 17...

Page 108
...the Company to classify as a long-term liability its series A preferred stock and to classify dividends and accretion from the series A preferred stock as interest expense. Such stock is now described as "Preferred Shares Subject to Mandatory Redemption" in the Balance Sheets as of December 31, 2004...

Page 109
... in thousands): 2004 2003 2002 Computed "expected" Federal tax benefit from continuing operations State income tax benefit (expense), net of Federal income tax expense Amortization of investment tax credits Dividends on preferred stock Dividends received deduction Change in valuation allowance...

Page 110
... those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. In order to fully realize the deferred tax asset, the Company will need to generate future...

Page 111
... 31, 2004, the Company had alternative minimum tax credits of $1.5 million that may be carried forward indefinitely. The Company completed an initial public offering on February 8, 2005, which resulted in an "ownership change" within the meaning of the U.S. Federal income tax laws addressing net...

Page 112
... 18,013 options under the 1995 Plan. The Company recognized a compensation charge of $0.3 million related to the modification of these options during 2004. Certain principal shareholders of the Company granted stock appreciation rights to certain members of management. The stock appreciation rights...

Page 113
... initial public offering of the Company's common stock results in the principal shareholders holding less than 10% of their original ownership, or other changes in control, as defined, occur. The number of options that may become ultimately exercisable also depends upon the extent to which the price...

Page 114
... Stock Incentive Plan In May 2000, the Company adopted the FairPoint Communications, Inc. 2000 Employee Stock Incentive Plan (the 2000 Plan). The 2000 Plan provided for grants to members of management of up to 1,898,521 options to purchase class A common stock, at the discretion of the compensation...

Page 115
... of Class A common stock offered in conjunction with any transaction resulting in a change of control over the exercise price for such option. On August 3, 2001, the Company made an offer to its employees to cancel their existing options issued under the 2000 Plan in exchange for new options to...

Page 116
... as to the volatility of the stock price was made. No stock options were granted under the 2000 Plan during 2004. (13) Disgontinued Operations and Restrugture Charges (a) Competitive Communications Business Operations In October and November of 2001, Carrier Services sold certain assets of its...

Page 117
... ($5.0 million) plus principal amount of new term loans ($27.9 million) plus the estimated fair value of the Company's series A preferred stock issued ($78.4 million). During 2004 and 2003, the Company revised its assumptions on certain lease obligations related to the restructuring accrual and as...

Page 118
.... In 2004, a law firm in which a partner of such law firm was a director of the Company through February 8, 2005 was paid $3.5 million, of which $0.1 million was for general counsel services and $3.4 million was for services related to financing and equity offering costs. In 2003, this same law firm...

Page 119
... Company for general counsel services and unsuccessful acquisition bids are classified within operating expenses on the consolidated statements of operations. All payments made for services related to financings have been recorded as debt or equity issue costs. All payments made for services related...

Page 120
... The fair value of the Company's publicly registered long-term debt is stated at quoted market prices. The fair value of the Company's remaining long-term debt is estimated by discounting the future cash flows of each instrument at rates currently offered to the Company for similar debt instruments...

Page 121
...on the Company's estimates. The Company recognized $3.1 million, $3.0 million, and $3.1 million of revenue for settlements and adjustments related to prior years during 2004, 2003, and 2002, respectively. (19) Commitments and Contingengies (a) Operating Leases Future minimum lease payments under...

Page 122
... disclosed by the Company in this Annual Report has been accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Changes in Internal Controls There have been...

Page 123
...Operating Officer President Executive Vice President and Chief Financial Officer 47 53 54 Shirley J. Linn Lisa R. Hood Senior Vice President, General Counsel and Secretary Senior Vice President and Controller Vice President of Finance and Treasurer Director Director Director Director Director 39...

Page 124
... the New York State Telephone Association, in addition to his involvement in several community and regional organizations. Valeri A. Marks. In October 2004, Ms. Marks was appointed our President. From 2001 to 2003, Ms. Marks served as Chairman and Chief Executive Officer of Sockeye Networks (which...

Page 125
... as possible, each class will consist of one-third of our directors. This classification of our board of directors may have the effect of delaying or preventing changes in control of the company. In connection with the offering, we entered into a nominating agreement with THL Equity Fund, Kelso...

Page 126
... our internal control functions; review our compliance with legal and regulatory independence; review and discuss our earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies; review and discuss our risk assessment and risk management...

Page 127
...named executive officers' compensation; â€¢ make recommendations to our board of directors regarding the salaries, incentive compensation plans and equity-based plans for our employees; and produce a compensation committee report on executive compensation as required by the Securities and Exchange...

Page 128
... Code of Conduct and the Code for Financial Professionals are available on our web site, www.fairpoint.com, and are also filed as exhibits to this Annual Report. ITEM 11. EXECUTIVE COMPENSTTION The following table sets forth information concerning compensation paid to our Chief Executive Officer...

Page 129
... of group term life insurance coverage. Mr. Duda served as our President from April 2001 until September 2004. Mr. Duda's employment with us ended effective as of September 30, 2004. 1995 Stogs Option Plan The FairPoint Communications Inc. (formerly MJD Communications, Inc.) 1995 Stock Option Plan...

Page 130
...the involuntary termination or constructive termination, of the participant's employment, the awards will be deemed vested or exercisable and any restrictions on transfer shall lapse, as the case may be. â€¢ â€¢ 2005 Stogs Ingentive Plan The FairPoint Communications, Inc. 2005 Stock Incentive Plan...

Page 131
... stock incentive plan. The shares of restricted stock awarded on the closing date of the offering will generally become vested in four equal annual installments commencing on April 1, 2006 (three equal annual installments for our chief executive officer) and will not be entitled to receive dividends...

Page 132
... of the compensation committee, become fully exercisable or be canceled in exchange for a payment in cash equal to the product of (i) the excess of the change in control price over the option exercise price or stock appreciation right base price, as applicable, and (ii) the number of shares...

Page 133
... the meaning of Section 162(m). Under a special rule that applies to corporations that become public through an initial public offering, this limitation generally will not apply to compensation that is paid pursuant to the plans described above before the first meeting of our stockholders in 2009...

Page 134
.../STR Values The following table sets forth the information with respect to the named executive officers set forth in the Summary Compensation Table concerning the exercise of options during fiscal year 2004, the number of securities underlying options as of December 31, 2004 and the year-end value...

Page 135
... stock option and retirement plans, practices, policies and programs applicable generally to other senior management. The employment agreement also provides that upon (i) the expiration of Mr. Johnson's employment period, or (ii) the termination of Mr. Johnson's employment as Chief Executive Officer...

Page 136
... granted to him under the 2000 plan will terminate unless exercised within 60 days of his last day of employment and any unvested options thereunder will terminate on his last day of employment and (iv) in connection with any public offering of equity securities by us prior to May 21, 2008, Mr...

Page 137
5% Stogsholders: Kelso Investment Associates V, L.P. and Kelso Equity Partners V, L.P.(8) 320 Park Avenue, 24th Floor New York, New York 10022 Thomas H. Lee Equity Fund IV, L.P. and affiliates(11) 100 Federal Street, 35th Floor Boston, Massachusetts 02110 3,448,590 4,066,731 10.0% 11.8% * (1) ...

Page 138
... which is the sole member of THL Equity Advisors IV, LLC, which in turn is the general partner of each of Thomas H. Lee Equity Fund IV, L.P., Thomas H. Lee Foreign Fund IV, L.P. and Thomas H. Lee Foreign Fund IV-B, L.P.,is controlled by a managing group comprised of C. Hunter Boll, Anthony J. DiNovi...

Page 139
...Lee also controls Thomas H. Lee Investors Limited Partnership as the sole stockholder of its general partner, THL Investment Management Corp. See "Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities-Equity Compensation Plan Information...

Page 140
... and consulting related to financial accounting and reporting standards. Tax Fees consist of fees for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal and state tax compliance, return preparation and tax audits. Our...

Page 141
... or members to whom such authority is delegated shall report any pre-approval decisions to the audit committee at its next scheduled meeting. The audit committee is prohibited from delegating to management its responsibilities to pre-approve services to be performed by our independent auditor. 137

Page 142
...part of this Annual Report are listed in the index to the financial statements under "Item 8. Financial Statements and Supplementary Information", which index to the financial statements is incorporated herein by reference. In addition, certain financial statements of equity method investments owned...

Page 143
... authorized. FAIRPOINT COMMUNICATIONS, INC. Date: March 24, 2005 By: /s/ EUGENE B. JOHNSON Name: Eugene B. Johnson Title: Chairman of the Board of Directors and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by...

Page 144
... Communications, Inc.(1) Stock Purchase Agreement, dated as of May 9, 2003, by and among Golden West Telephone Properties, Inc., MJD Services Corp., Union Telephone Company of Hartford, Armour Independent Telephone Co., WMW Cable TV Co. and Kadoka Telephone Co.(2) 2.2 2.3 Agreement and Plan...

Page 145
... Stock Option Plan.(3) FairPoint Amended and Restated 1998 Stock Incentive Plan.(3) FairPoint Amended and Restated 2000 Employee Stock Incentive Plan.(8) FairPoint 2005 Stock Incentive Plan.* 10.22 10.23 14.1 FairPoint Annual Incentive Plan.(6) Form of Restricted Stock Agreement.* FairPoint Code...

Page 146
... will be treated as "accompanying" this Annual Report on Form 10-K and not "filed" as part of such report for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of Section 18 of the Securities Exchange Act of 1934 and this certification will...

Page 147
..., INC. ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004 PART I CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS PART II INDEX TO FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES Consolidated Balance...

Page 148
... its entirety as follows: 1. 2. Corporate Name. The name of the Corporation is FairPoint Communications, Inc. Registered Office and Agent. (a). The address of the Corporation's registered office in the State of Delaware is 1209 Orange Street, City of Wilmington, New Castle County, Delaware 19801...

Page 149
... ownership of shares of capital stock of the Corporation. (d). (e). "Corporation " means FairPoint Communications, Inc., a Delaware corporation. "Covered Person " means any holder of capital stock of the Corporation or any partner, member, director, stockholder, employee or agent of any such holder...

Page 150
... upon such surrender, shall receive in exchange therefor, without charge, a new certificate registered in the name of such holder representing the appropriate number of shares of Common Stock. (ii). (iii). (c). Preferred StocC. Shares of Preferred Stock may be issued at any time and from time to...

Page 151
... of Directors with respect to each class or series of Preferred Stock shall include, but not be limited to, determination of the following: (i). (ii). the number of authorized shares constituting that class or series and the distinctive designation of that class or series; the dividend rate on...

Page 152
... preemptive right to subscribe for any shares of any class or series of capital stock of the Corporation whether now or hereafter authorized. 6. Provisions Relating to StocC Ownership and Federal and State Communications Laws. (a). Requests for Information . So long as the Corporation or any of...

Page 153
... and for the conduct of the affairs of the Corporation and for the purpose of creating, defining, limiting and regulating the powers of the Corporation and its directors and stockholders. (a). The business and affairs of the Corporation shall be managed by or under the direction of the Board of...

Page 154
... of all the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required in order for the stockholders to adopt, amend, alter, change, add to or repeal the by-laws of the Corporation. (b). 7

Page 155
... at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders. Except as otherwise required by law and subject to the rights of the holders of any series of Preferred Stock, special meetings of stockholders of the Corporation may be...

Page 156
... of Section 279 of the DSCL, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said Court directs. If a majority in number representing three-fourths in value of the...

Page 157
..., INC. has caused this Eighth Amended and Restated Certificate of Incorporation to be executed by Shirley J. Linn, its Senior Vice President and Secretary, on this 7th day of February, 2005. FAIRPOINT COMMUNICATIONS, INC. By: /s/ Shirley J. Linn Name: Shirley J. Linn Title: Senior Vice...

Page 158
... 3.2 FAIRPOINT COMMUNICATIONS, INC. AMENDED AND RESTATED BY-LAWS As adopted on February 8, 2005 ARTICLE I STOCKHOLDERS SEFTION 1.1 Annual Meetings . The annual meeting of the stockholders of the Forporation for the purpose of electing directors and for the transaction of such other business as...

Page 159
...transmission notices and such inability becomes known to the Secretary, Assistant Secretary, the transfer agent or other person responsible for giving notice. A written waiver of any notice of any annual or special meeting signed by the person entitled thereto, or a waiver by electronic transmission...

Page 160
... of stockholders or any adjournment thereof; (b) entitled to receive payment of any dividend or other distribution or allotment of any rights; or (c) entitled to exercise any rights in respect of any change, conversion or exchange of capital stock or for the purpose of any other lawful action, the...

Page 161
... at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for...

Page 162
... determination of the number of shares of capital stock of the Forporation represented at the meeting and such inspectors' count of all votes and ballots. Such certification and report shall specify such other information as may be required by law. No person who is a candidate for an office at an...

Page 163
...at an annual meeting of stockholders may be made only (A) by or at the direction of the Board of Directors or the Fhief Executive Officer; (B) by any stockholder of the Forporation who is entitled to vote at the meeting, who complies with the applicable requirements of the Securities Exchange Act of...

Page 164
.... The presiding officer of any annual meeting of stockholders shall refuse to permit any business proposed by a stockholder to be brought before such annual meeting without compliance with the foregoing procedures or if the stockholder solicits proxies in support of such stockholder's proposal...

Page 165
... the Secretary at the principal executive offices of the Forporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the Forporation. (b) Special Meetings of Stockholders . (i) Only such business as shall have been brought...

Page 166
...news service or in a document publicly filed by the Forporation with the Securities and Exchange Fommission pursuant to Sections 13, 14, or 15(d) of the Exchange Act. (iii) For purposes of this Section 1.12, no adjournment nor notice of adjournment of any meeting shall be deemed to constitute a new...

Page 167
...must be effected at a duly called annual or special meeting of the stockholders of the Forporation, and the ability of the stockholders to consent in writing to the taking of any action is specifically denied. ARTICLE II BOARD OF DIRECTORS SEFTION 2.1 General Powers; Membership Policies . Except as...

Page 168
... capital stock of the Forporation entitled to vote generally in the election of directors, voting as a single class. SEFTION 2.5 Annual and Regular Meetings . The annual meeting of the Board of Directors for the purpose of electing officers and for the transaction of such other business as...

Page 169
... to record and communicate messages, telegraph, facsimile, electronic mail or other electronic means, or on five (5) calendar days' notice, if notice is mailed to each director, addressed or transmitted to him or her at such director's usual place of business or other designated location. Notice of...

Page 170
... Fommittee, except as otherwise may be provided in any resolution of the Board of Directors or as may be required by applicable law or by the rules of any stock exchange upon which the securities of the Forporation may be listed or traded, shall have and may exercise the authority of the Board of...

Page 171
... accounting, accounting controls or accounting matters. (c) Fompensation Fommittee . The Fompensation Fommittee, except as otherwise may be provided in any resolution of the Board of Directors or as may be required by applicable law or by the rules of any stock exchange upon which the securities...

Page 172
... or annual report on Form 10-K filed with the Securities and Exchange Fommission; (vi) oversee regulatory compliance with respect to compensation matters; (vii) review and approve any severance or similar termination payments proposed to be made to any current or former executive officer of...

Page 173
... no power as such. SEFTION 3.5 Action by Telephonic Fommunications . Members of any Fommittee designated by the Board of Directors may participate in a meeting of such Fommittee by means of conference telephone or similar communications equipment by means of which all persons participating in the...

Page 174
... be elected to hold office until the next succeeding annual meeting of the Board of Directors. In the event of the failure to elect officers at such meeting, officers may be elected at any regular or special meeting of the Board of Directors. Officers of the rank of Vice President and below may be...

Page 175
... Fhairman shall preside over all meetings of the stockholders and the Board of Directors. SEFTION 4.8 The Fhief Executive Officer . The Fhief Executive Officer shall have general control and supervision of the policies and operations of the Forporation and shall see that all orders and resolutions...

Page 176
... other duties and exercise such other powers as are normally incident to the office of general counsel and as may be prescribed by the Board of Directors or the Fhief Executive Officer from time to time. SEFTION 4.17 Additional Officers . The Board of Directors from time to time may delegate to any...

Page 177
... effect as if he or she were such officer, transfer agent or registrar at the date of issue. SEFTION 5.3 Lost, Stolen or Destroyed Fertificates . The Board of Directors may direct that a new certificate be issued in place of any certificate theretofore issued by the Forporation alleged to have been...

Page 178
...-Laws, the Board of Directors may prescribe such additional rules and regulations as it may deem appropriate relating to the issue, transfer and registration of shares of the Forporation. For so long as required by the rules of any exchange upon which the securities of the Forporation may be listed...

Page 179
... Such expenses (including attorneys' fees) incurred by former directors and officers shall be so paid upon such terms and conditions, if any, as the Forporation deems appropriate. The Board of Directors may authorize the Forporation's counsel to represent such director or officer in any action, suit...

Page 180
... of Incorporation, these By-Laws, agreement, vote of stockholders or directors or otherwise. SEFTION 6.5 Insurance. The Forporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Forporation or another corporation, partnership, joint...

Page 181
... Street, in the Fity of Wilmington, New Fastle Founty, Delaware 19801. The name and address of the Forporation's registered agent at such address is The Forporation Trust Fompany. SEFTION 7.2 Other Offices. The Forporation may maintain offices or places of business at such other locations within...

Page 182
... notes of the Forporation shall be signed by such officer or officers or such agent or agents of the Forporation, and in such manner, as the Board of Directors or the Fhief Executive Officer from time to time may determine. SEFTION 8.9 Sale, Transfer, etc. of Securities. To the extent authorized by...

Page 183
... by the Board of Directors or the Fhief Executive Officer may sell, transfer, endorse, and assign any shares of stock, bonds or other securities owned by or held in the name of the Forporation, and may make, execute and deliver in the name of the Forporation, under its corporate seal (if required...

Page 184
... stock of the Forporation entitled to vote generally in the election of directors, voting together as a single class, if, in the case of such special meeting only, notice of such amendment, alteration or repeal is contained in the notice or waiver of notice of such meeting. ARTICLE X CONSTRUCTION...

Page 185
...: WHEEEAS, the Company and the Old Trustee have heretofore executed and delivered the Indenture providing for the issuance of 12-1/2% Senior Subordinated Notes due 2010 (the "Securities") of the Company; WHEEEAS, the Company intends to offer its common stock to the public pursuant to a Eegistration...

Page 186
... to make this Supplemental Indenture a valid and binding agreement of the Company for the purposes expressed herein, in accordance with its terms, have been duly done and performed; NOW THEEEFOEE, in consideration of the premises and the covenants and agreements contained herein, and for other good...

Page 187
... of the Indenture and the Global Securities . Section 4 of the Global Securities is hereby amended to add the words...means any sale, lease, transfer, conveyance, issuance or other disposition (or series of related sales, leases, transfers, conveyances, issuances or dispositions) by the Company...

Page 188
... or series of related dispositions for an aggregate consideration not in excess of $1.0 million; (iv) contemporaneous exchanges by the Company or any Eestricted Subsidiary of Telecommunications Assets for other Telecommunications Assets in the ordinary course of business as long as the applicable...

Page 189
... entirety and replaced with the following: ""Change of Control" means the occurrence of any of the following events: (a) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more of the Equity Investors, becomes the "beneficial owner" (as defined...

Page 190
... for any reason to constitute a majority of the members of the Board of Directors then in office; or (d) the shareholders of the Company shall have approved any plan of liquidation or dissolution of the Company." (c) All terms defined in Sections 1.01 and 1.02 of the Indenture and contained in the...

Page 191
...force at the date this Supplemental Indenture is executed, the provision required by said Act shall control. 4.4 Governing Law . This Supplemental Indenture shall be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of...

Page 192
... to be duly executed as of the date first written above. FAIEPOINT COMMUNICATIONS, INC. By: /s/ Walter E. Leach, Jr. Name: Walter E. Leach, Jr. Title: Executive Vice President and Chief Financial Officer THE BANK OF NEW YOEK, as Trustee By: /s/ Derek Kettel Name: Derek Kettel Title: Agent

Page 193
... to such terms in the Indenture. WITNESSETH: WHEEEAS, the Company and the Trustee have heretofore executed and delivered the Indenture providing for the issuance of 11-7/8% Senior Notes due 2010 (the "Securities") of the Company; WHEEEAS, the Company intends to offer its common stock to the public...

Page 194
... to make this Supplemental Indenture a valid and binding agreement of the Company for the purposes expressed herein, in accordance with its terms, have been duly done and performed; NOW THEEEFOEE, in consideration of the premises and the covenants and agreements contained herein, and for other good...

Page 195
... of the Indenture and the Global Securities . Section 4 of the Global Securities is hereby amended to add the words...means any sale, lease, transfer, conveyance, issuance or other disposition (or series of related sales, leases, transfers, conveyances, issuances or dispositions) by the Company...

Page 196
... or series of related dispositions for an aggregate consideration not in excess of $1.0 million; (iv) contemporaneous exchanges by the Company or any Eestricted Subsidiary of Telecommunications Assets for other Telecommunications Assets in the ordinary course of business as long as the applicable...

Page 197
... entirety and replaced with the following: ""Change of Control" means the occurrence of any of the following events: (a) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more of the Equity Investors, becomes the "beneficial owner" (as defined...

Page 198
... for any reason to constitute a majority of the members of the Board of Directors then in office; or (d) the shareholders of the Company shall have approved any plan of liquidation or dissolution of the Company." (c) All terms defined in Sections 1.01 and 1.02 of the Indenture and contained in the...

Page 199
...force at the date this Supplemental Indenture is executed, the provision required by said Act shall control. 4.4 Governing Law . This Supplemental Indenture shall be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of...

Page 200
... to be duly executed as of the date first written above. FAIEPOINT COMMUNICATIONS, INC. By: /s/ Walter E. Leach, Jr. Name: Walter E. Leach, Jr. Title: Executive Vice President and Chief Financial Officer THE BANK OF NEW YOEK, as Trustee By: /s/ Derek Kettel Name: Derek Kettel Title: Agent

Page 201
... 10.1 CREDIT AGREEMENT among FAIRPOINT COMMUNICATIONS, INC., VARIOUS LENDING INSTITUTIONS, BANK OF AMERICA, N.A., as SYNDICATION AGENT, COBANK, ACB and GENERAL ELECTRIC CAPITAL CORPORATION, as CO-DOCUMENTATION AGENTS, and DEUTSCHE BANK TRUST COMPANY AMERICAS, as ADMINISTRATIVE AGENT Dated as...

Page 202
... Costs, Illegality, etc. 1.11 Compensation 1.12 Change of Lending Office 1.13 Replacement of Lenders 1.14 Incremental B Term Loan Commitments SECTION 1A. Letters of Credit. 1A.01 Letters of Credit 1A.02 Minimum Stated Amount 1A.03 Letter of Credit Requests; Notices of Issuance 1A.04 Agreement...

Page 203
...04 Payment of Taxes 6.05 Company Franchises 6.06 Compliance with Statutes, etc. 6.07 ERISA 6.08 Good Repair 6.09 End of Fiscal Years; Fiscal Quarters; Etc. 6.10 Permitted Acquisitions 6.11 CoBank Capital 6.12 Margin Stock 6.13 Post-Closing Refinancing 6.14 Special Covenant Regarding Cash Management...

Page 204
...Debt SECTION 8. Events of Default 8.01 Payments 8.02 Representations, etc. 8.03 Covenants 8.04 Default Under Other Agreements 8.05 Bankruptcy, etc. 8.06 ERISA 8.07 Pledge Agreement 8.08 Subsidiary Guaranty 8.09 Judgments SECTION 9. Definitions SECTION 10. The Agents 10.01 Appointment 10.02 Nature...

Page 205
... Letter of Credit Request Form of Notice of Conversion/Continuation Form of B Term Note Form of RF Note Form of Swingline Note Form of Section 3.04 Certificate Form of Opinion of Paul, Hastings, Janofsky & Walker LLP Form of Officer's Certificate Form of Subsidiary Guaranty Form of Pledge Agreement...

Page 206
EXHIBIT K EXHIBIT L - - Form of Intercompany Note Form of Incremental B Term Commitment Agreement v

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CREDIT AGREEMENT, dated as of February 8, 2005, among FAIRPOINT COMMUNICATIONS, INC., a Delaware corporation (the "Borrower"), the Lenders from time to time party hereto, BANK OF AMERICA, N.A., as Syndication Agent (in such capacity, the " Syndication Agent "), COBANK, ACB and GENERAL ELECTRIC ...

Page 208
..., the respective incurrence of RF Loans) at such time, equals the Available Revolving Commitment, if any, of such Lender at such time. (d) Subject to and upon the terms and conditions herein set forth, the Swingline Lender agrees to make at any time and from time to time after the Initial Borrowing...

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...Swingline Loans) and the Letter of Credit Outstandings (exclusive...agrees to make Base Rate Loans upon one Business Day's notice...required hereunder, (ii) whether any conditions specified in Section 4.02 or ...and (v) the amount of the Total Available Revolving Commitment and the Total Revolving Commitment...

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...Loans made pursuant to a Mandatory Borrowing), it shall give the Administrative Agent at its Notice Office, (x) prior to 12:00 Noon (New York time), at least three Business Days' prior written notice (or telephonic notice promptly confirmed in writing) of each proposed incurrence of Eurodollar Loans...

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...as the case may be, in good faith to be from an Authorized Officer. In each such case, the Borrower hereby waives the right to dispute the Administrative Agent's, the Swingline Lender's or such Letter of Credit Issuer's record of the terms of such telephonic notice, unless such record reflects gross...

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... as provided in Section 3.02 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (c) The RF Note issued to each RF Lender shall (i) be executed by the Borrower, (ii) be payable to the order of such RF Lender and be dated the Initial Borrowing Date (or, in the case...

Page 213
... in Section 3.02 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (d) The Swingline Note issued to the Swingline Lender shall (i) be executed by the Borrower, (ii) be payable to the order of the Swingline Lender and be dated the Initial Borrowing Date (or, in...

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... in number as provided in Section 1.02. Each such conversion shall be effected by the Borrower giving the Administrative Agent at its Notice Office, prior to 12:00 Noon (New York time), at least three Business Days' (or one Business Day's, in the case of a conversion into Base Rate Loans) prior...

Page 215
...Term Loans on a pro rata basis. 1.07 Pro Rata Borrowings . All Initial B Term Loans, Delayed-Draw B Term Loans, Incremental B Term Loans and RF Loans under this Agreement...payable (i) in respect of each Base Rate Loan, quarterly in arrears on the last Business...Agent, upon determining the interest rate...

Page 216
...) or prior to 12:00 Noon (New York time) on the third Business Day prior to the expiration of an Interest Period applicable to a Borrowing of Eurodollar Loans, it shall have the right to elect by giving the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of...

Page 217
... of any new law or governmental rule, regulation, guideline or order) (including, but not limited to, a change in the basis of taxation of payments to a Lender of the principal of or interest on the Loans or any other amounts payable hereunder (except for changes in the rate of tax on, or...

Page 218
... a copy to the Administrative Agent), the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or its parent corporation for such reduction. Each Lender, upon determining in good faith that any additional amounts will be payable pursuant to this Section...

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... increased costs in a material amount in excess of those being generally charged by the other Lenders, (y) if any Lender becomes a Defaulting Lender, or (z) in the case of a refusal by a Lender to consent to a proposed change, waiver, discharge or termination with respect to this Agreement which...

Page 220
... Replaced Lender concurrently with such replacement. Upon the execution of the respective Assignment Agreements, the payment of amounts referred to in clauses (i) and (ii) above, recordation of the assignment on the Lender Register by the Administrative Agent pursuant to Section 11.16 and, if so...

Page 221
...Term Commitments and, subject to the terms and conditions contained in this Agreement, make Incremental B Term Loans pursuant thereto, so long... an Incremental B Term Commitment and executed and delivered to the Administrative Agent an Incremental B Term Commitment Agreement as provided in clause...

Page 222
... B Term Commitment Agreement to the Administrative Agent, the payment of any fees required in connection therewith (including, without limitation, any agreed upon up-front or arrangement fees owing to the Administrative Agent) and the satisfaction of the other terms and conditions described...

Page 223
..., issue, for the account of the Borrower and in support of such obligations of the Borrower and/or its Subsidiaries that are incurred in the ordinary course of business or are acceptable to the Administrative Agent and, subject to and upon the terms and conditions herein set forth, such Letter of...

Page 224
... that a Letter of Credit be issued, the Borrower shall give the Administrative Agent and the respective Letter of Credit Issuer written notice (which may include by way of facsimile transmission) in the form of Exhibit A-2 hereto prior to 1:00 P.M. (New York time) at least three Business Days (or...

Page 225
... issued by a court of competent jurisdiction. If the Administrative Agent so notifies any Participant required to fund an Unpaid Drawing under a Letter of Credit prior to 1:00 P.M. (New York time) on any Business Day, such Participant shall make available to the Administrative Agent for the account...

Page 226
the account of such Letter of Credit Issuer such other Participant's Percentage of any such payment. 20

Page 227
... shall be required to make payments resulting from the Administrative Agent's gross negligence or willful misconduct as determined by a final judgment issued by a court of competent jurisdiction) and shall be made in accordance with the terms and conditions of this Agreement under all circumstances...

Page 228
... or any other amounts payable hereunder, changes in the rate of tax on, or determined by reference to, the net income or net profits of such Letter of Credit Issuer or Participant imposed by the jurisdiction in which its principal office or applicable lending office is located), then, upon demand to...

Page 229
... of Credit Issuer is customarily charging for issuances of, payments under or amendments of, letters of credit issued by it. (f) The Borrower shall pay to (x) each Agent on the Initial Borrowing Date, for its own account and/or for distribution to the Lenders, such fees as heretofore agreed by the...

Page 230
... of Commitments. (a) Upon at least three Business Day's prior written notice (or telephonic notice confirmed in writing) to the Administrative Agent at its Notice Office (which notice shall be deemed to be given on a certain day only if given before 2:00 P.M. (New York time) on such day and shall be...

Page 231
...Term Commitment Agreement shall terminate in its entirety on the related Incremental B Term Loan Borrowing Date therefor (after giving effect to the making of Incremental B Term... terminate in its entirety on the earlier of (x) the RF Maturity Date and (y) the date on which a Change of Control occurs...

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...the following terms and conditions: (i) the Borrower shall give the Administrative Agent at the Payment Office written notice (or telephonic notice promptly... 12:00 Noon (New York time) at least one Business Day prior to the date of such prepayment with respect to Base Rate Loans (other than Swingline...

Page 233
... are in place) exceeds the Adjusted Total Available Revolving Commitment then in effect, the Borrower shall pay to the Collateral Agent an amount in cash and/or Cash Equivalents equal to such excess and the Collateral Agent shall hold such payment as security for the obligations of the Borrower in...

Page 234
... be, shall have been used (except to the extent of any portion thereof applied to make a concurrent prepayment of B Term Loans pursuant to, and...case may be, actually issued to finance Permitted Acquisition(s) or Permitted Acquisitions (and pay related accrued interest and dividends thereon, if any), ...

Page 235
... furnished to the Administrative Agent a certificate from an Authorized Officer certifying as to compliance with the requirements of ...Agreement, (i) all outstanding RF Loans and Swingline Loans shall be repaid in full upon the termination of the Total Revolving Commitment, (ii) all outstanding B Term...

Page 236
... herein, all payments under this Agreement shall be made to the Administrative Agent for the ratable account of the Lenders entitled thereto, not later than 1:00 P.M. (New York time) on the date when due and shall be made in immediately available funds and in Dollars at the Payment Office, it being...

Page 237
... exemption from United States withholding tax with respect to payments to be made under this Agreement and under any Note, or (ii) if the Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service Form W-8ECI or W-8BEN (with...

Page 238
..., Fees or other amounts payable by it hereunder for the account of any Lender which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes to the extent that such Lender has not provided to the Borrower U.S. Internal Revenue...

Page 239
... to file an annual report on Internal Revenue Service Form 5500-series, a copy of the most recent such report (including, to the extent required, the related financial and actuarial statements and other supporting statements, certifications, schedules and information), and for each Plan that is...

Page 240
... the terms and relative rights of its capital stock or other any material agreement with respect to the management of the Borrower or any of its Subsidiaries; (v) any material employment agreements entered into by the Borrower or any of its Subsidiaries; and (vi) any tax sharing, tax allocation...

Page 241
... of the Collateral Agent, desirable to perfect the security interests purported to be created by the Pledge Agreement; (iii) certified copies of Requests for Information or Copies (Form UCC-11), or equivalent reports, each of a recent date, listing all effective financing statements that name...

Page 242
... fee in an amount not to exceed $20 for each $1,000 principal amount of such holder's Existing Tender Offer Notes. All terms and conditions of the Tender Offers and Consent Solicitations and the Existing Tender Offer Notes Indenture Amendments shall be reasonably satisfactory to the Agents, and...

Page 243
... hereunder as Letters of Credit as contemplated by Section 1A.01(d) and all guaranties issued in support of such Additional Refinanced Indebtedness shall have been terminated. (vii) On the Initial Borrowing Date and concurrently with the incurrence of Loans on such date, all security interests in...

Page 244
... to the Transaction and (y) be reasonably satisfactory in form and substance to the Agents. 4.02 Conditions Precedent to All Loans (other than RF Loans and Delayed-Draw B Term Loans Incurred to Finance an Optional Non-2008 Tender Offer Notes Redemption and RF Loans Incurred on the Redemption Date to...

Page 245
... survive the execution and delivery of this Agreement, the making of the Loans and the issuance of the Letters of Credit: 5.01 Company Status. Each of the Borrower and its Subsidiaries (i) is a duly organized and validly existing Company and is in good standing, in each case under the laws of the...

Page 246
...and to pay certain fees and expenses relating to the Transaction. (b) Refinancing. The proceeds of all Delayed-Draw B Term Loans shall be utilized solely to finance the Optional Non-2008 Tender Offer Notes (c) The proceeds of all Incremental B Term Loans shall be utilized for general corporate and...

Page 247
...Loans may be used for the general corporate and working capital purposes of the Borrower and its Subsidiaries; provided that no proceeds from Swingline Loans may be used to finance the Refinancing or to pay fees and expenses incurred in connection with the Transaction. (f) Neither the making of any...

Page 248
... their business. For purposes of this Section 5.10, " debt" means any liability on a claim, and " claim" means (i) the right to payment whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured...

Page 249
... 7.03(a)), in favor of the Collateral Agent for the benefit of the Secured Creditors, which Lien has been perfected under applicable law. No filings or recordings are required in order to perfect the Lien on the Collateral created under the Pledge Agreement, except for filings or recordings required...

Page 250
... right to subscribe for or to purchase, or any options or warrants for the purchase of, or any agreement providing for the issuance (contingent or otherwise) of or any calls, commitments or claims of any character relating to, its capital stock or other equity interests or any stock appreciation or...

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45

Page 252
...any securities convertible into or exchangeable for its capital stock or outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreement providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating...

Page 253
... of the twelve months of such fiscal year as customarily prepared by management for its internal use setting forth, with appropriate discussion, the principal assumptions upon which such budgets are based. (d) Officer's Certificates . At the time of the delivery of the financial statements provided...

Page 254
... in relation to such Person's business and activities. The Borrower will, and will cause its Subsidiaries to, permit, upon reasonable notice to the chief financial officer, controller or any other Authorized Officer of the Borrower, officers and designated representatives of the Administrative Agent...

Page 255
... to pay any such tax, assessment, charge, levy or claim which is being contested in good faith and by proper proceedings if it has maintained adequate reserves (in the good faith judgment of the management of the Borrower) with respect thereto in accordance with GAAP. 6.05 Company Franchises...

Page 256
... a complete copy of the annual report (on Internal Revenue Service Form 5500-series) of each Plan (including, to the extent required, the related financial and actuarial statements and opinions and other supporting statements, certifications, schedules and information) required to be filed with...

Page 257
... the Administrative Agent and the Lenders as soon as available but not later than 5 Business Days after the execution thereof, a copy of any executed purchase agreement or similar agreement with respect to such Permitted Acquisition; (iv) calculations are made by the Borrower of compliance with the...

Page 258
... where the capital stock or other equity interests of such Telco or Carrier Services Company is (or are) not to be pledged under the Pledge Agreement, the Pro Forma EBITDA Test is satisfied and (ix) the Borrower shall have delivered to the Administrative Agent an officer's certificate executed by an...

Page 259
...the same pursuant to the Tender Offers and Consent Solicitations the consent fee referred to in Section 4.01(l)(i)(III). (b) On the Redemption Date, the Borrower shall (x) redeem all of the then outstanding Existing 2008 Senior Subordinated Notes and (y) pay all related call premiums (not to exceed...

Page 260
... provided that any 2d-Tier Holdco may engage in those activities and incur related liabilities that are incidental to (x) the maintenance of its corporate existence in compliance with applicable law, (y) legal, tax and accounting matters in connection with any of the foregoing activities and 54

Page 261
... or be liquidated into, the Borrower or a Subsidiary Guarantor (so long as the Borrower or such Subsidiary Guarantor is the surviving corporation), or all or any part of its business, properties and assets may be conveyed, sold or transferred to the Borrower or any Subsidiary Guarantor, and (ii) any...

Page 262
... stock or other equity ...good faith judgment of the management of the Borrower) have been established in accordance with GAAP; (b) Liens in respect of property or assets of the Borrower or any of its Subsidiaries imposed by law which were incurred in the ordinary course of business, such as carriers...

Page 263
... by the Borrower or any Subsidiary Guarantor of any equipment or goods in the normal course of business, provided that such payables shall not constitute Indebtedness; (k) any interest or title of a lessor under any lease permitted by this Agreement; (l) Liens in existence on, and which are to...

Page 264
... Indebtedness of the Borrower under Interest Rate Agreements entered into to protect it against fluctuations in interest rates in respect of Indebtedness otherwise permitted under this Agreement, so long as the entering into of such Interest Rate Agreements are bona fide hedging activities and are...

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... Unsecured Notes and/or Permitted Junior Capital, as the case may be, actually incurred or issued by the Borrower to finance a Permitted Acquisition or Permitted Acquisitions (and pay related accrued interest and dividends thereon, if any) in the 364-day period prior to such issuance of Permitted...

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... to make a concurrent prepayment of B Term Loans ...concurrently used by the Borrower (I) to make ...issued by the Borrower to finance a Permitted Acquisition or Permitted Acquisitions (and pay related accrued interest and dividends...Agent a certificate from an Authorized Officer certifying as to compliance...

Page 267
... incurred or issued by the Borrower to finance a Permitted Acquisition or Permitted Acquisitions (and pay related accrued interest and dividends thereon, if... furnished to the Administrative Agent a certificate from an Authorized Officer certifying as to compliance with the requirements of preceding...

Page 268
... Subsidiary as contemplated above; (d) loans and advances to officers, directors and employees in the ordinary course of business (x) for relocation purposes and/or the purchase from the Borrower of the capital stock (or options or warrants relating thereto) of the Borrower and (y) otherwise in an...

Page 269
...be permitted to make Investments in (x) any Restricted Investment Entity on any date in an amount (in the case of a non-cash Investment, taking the fair market value of the asset so invested (as determined in good faith by senior management of the Borrower)) not to exceed the Available Basket Amount...

Page 270
...% of the capital stock or other equity interests of such new Subsidiary (if a Telco or a Carrier Services Company) is pledged pursuant to the Pledge Agreement ( provided that the stock or other equity interests of any new Telco or Carrier Services Company acquired or created pursuant to a Permitted...

Page 271
...shareholders, officers, employees, consultants and directors (or their estates) upon the death, permanent disability, retirement or termination of employment of any such Person or otherwise in accordance with any shareholder agreement, stock option plan or any employee stock ownership plan, provided...

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respect of all such shares, options, warrants and rights so redeemed or repurchased in any calendar year, does not exceed $2,000,000; (iii) the Borrower may declare and pay Dividends to the holders of Borrower Common Stock (including by way of the repurchase of outstanding shares of Borrower Common ...

Page 273
... Subordination Agreement (giving effect to the exceptions required by applicable regulatory law as contemplated thereby); (xiii) so long as no Default or Event of Default exists or would result therefrom, the Borrower may pay regularly accruing Dividends on its Disqualified Preferred Stock issued...

Page 274
... (which based on the number of outstanding shares of Borrower Common Stock as of the Initial Borrowing Date equates to approximately $777,000); (xvii) the Borrower may redeem or repurchase shares of Sunflower Telephone Company, Inc. held by third-party investors, so long as (x) no Default or Event...

Page 275
... 7.07 may issue capital stock or other equity interests in accordance with the requirements of Section 7.07 and (iv) to qualify directors to the extent required by applicable law. (c) The Borrower may issue Qualified Preferred Stock (x) in payment of regularly accruing dividends on theretofore...

Page 276
which made or deemed made; or 8.03 Covenants . Any Credit Party shall (a) default in the due performance or observance by it of any term, covenant or agreement contained in Section 6.05, 6.09, 6.10, 6.13, 70

Page 277
... contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such...

Page 278
..., 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or on account of a group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code, or the Borrower or any Subsidiary has incurred or is likely to incur liabilities...

Page 279
... waived by the Borrower; (iii) enforce, as Collateral Agent (or direct the Collateral Agent to enforce), any and all of the Liens and rights created pursuant the Pledge Agreement; (iv) terminate any Letter of Credit which may be terminated in accordance with its terms; (v) direct the Borrower to...

Page 280
... write-up of any assets as a result of purchase accounting and the write-off of deferred financing costs), (iv) losses on sales of assets (excluding sales in the ordinary course of business) and other extraordinary losses, (v) non-core income relating to Non-Core Assets, to the extent not included...

Page 281
... cards on file with the Administrative Agent; (ii) delivering financial information and officer's certificates pursuant to this Agreement, the chief executive officer, the president, any vice president, the chief financial officer, any treasurer or any controller of the Borrower; and (iii) any...

Page 282
...minus (iv) all payments made by the Borrower...way of repayment of principal in the case of loans and cash equity returns (whether as a distribution, dividend or redemption) in the case of equity...determined in good faith by senior management of the Borrower)). "Available Basket Sub-Limit" shall mean, on...

Page 283
... Tax Payments paid in cash during such Reference Period, (v) cash consideration paid during such Reference Period for acquisitions of equity interests and/or assets comprising a business or product line (whether pursuant to a Permitted Acquisition or otherwise), except to the extent financed...

Page 284
... B Term Loan. "B Term Note" shall have the meaning provided in Section 1.05(a). "Bankruptcy Code " shall have the meaning provided in Section 8.05. "BAS" shall mean Banc of America Securities LLC in its individual capacity and any successor thereto by merger, consolidation or otherwise. "Base Rate...

Page 285
...with GAAP. "Carrier Services " shall mean the resale of long distance services. "Carrier Services Company " shall mean any Subsidiary of the Borrower that is an operating company engaged in the Carrier Services business. "Cash Equivalents " shall mean (a) marketable direct obligations issued by, or...

Page 286
... the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Â§ 9601 et seq. "Change of Control " shall mean at any time and for any reason (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than...

Page 287
... "Co-Documentation Agent " shall have the meaning provided in the first paragraph of this Agreement. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to the Code are to the Code, as in...

Page 288
... (including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and without duplication net costs and/or net benefits under Interest Rate Agreements, but excluding, however, all non-cash interest expense...

Page 289
... Person in good faith. "Credit Documents " shall mean this Agreement, the Notes, the Intercompany Subordination Agreement, the Pledge Agreement, the Subsidiary Guaranty and each Incremental B Term Commitment Agreement. "Credit Event " shall mean the making of a Loan or the issuance of a Letter of...

Page 290
... such distributed asset (as determined in good faith by the Board of Directors of the Borrower)), in any such case as such aggregate amount has been then last certified by an Authorized Officer by delivery of an officers' certificate to the Administrative Agent, provided that the aggregate amount of...

Page 291
... Qualified Preferred Stock), all terms and conditions of which (including covenants, defaults, remedies, redemption provisions, maturity, voting provisions, dividend rate and cash-pay limitations), and the documentation therefor, are on market terms for a placement of preferred equity securities and...

Page 292
..., cost recovery, compensation or injunctive relief resulting from Hazardous Materials arising from alleged injury or threat of injury to health, safety or the environment. "Environmental Law " means any applicable federal, state, foreign or local statute, law, rule, regulation, ordinance, code and...

Page 293
... entered into among the Borrower and its Subsidiaries, so long as the amount of such payable relates to the taxes attributable to the operations of such Subsidiary. "Excluded Investments " shall mean any Investment made pursuant to clause (a), (b), (c), (e), (f), (g), (h), (i)(x), (j), (k) or (m) of...

Page 294
...Opco Notes " shall mean notes payable by Taconic Telephone Corp., Comerco, Inc., Maine Telephone Company and the Borrower previously identified to the Administrative Agent in an aggregate principal amount equal to approximately $21.0 million . "Existing Tender Offer Notes" shall mean and include the...

Page 295
...terms hereof and thereof. "Existing 2010 Senior Notes Documents " shall mean the Existing 2010 Senior Notes, the Existing 2010 Senior Notes Indenture and all other documents executed... Notes " shall mean the Borrower's 12-1/2% Senior Subordinated Notes due 2010, issued pursuant to the Existing...

Page 296
... the Administrative Agent. "Fees" shall mean all amounts payable pursuant to, or referred to in, Section 2.01. "1st-Tier Subsidiary" shall mean FairPoint Broadband, Inc., MJD Ventures, Inc., MJD Services Corp., STE, FairPoint Carrier Services and any other Subsidiary first acquired or created after...

Page 297
..., (vi) all obligations of such Person to pay a specified purchase price for goods or services whether or not delivered or accepted, i.e., take-or-pay and similar obligations, (vii) all net obligations of such Person under Interest Rate Agreements and (viii) all Contingent Obligations of such Person...

Page 298
... Borrower or any Subsidiary against fluctuations in interest rates. "Intermediary Holding Company " shall mean each 1 st-Tier Subsidiary and any other Subsidiary first acquired or created after the Initial Borrowing Date that is (i) not an operating company (but that owns directly or indirectly one...

Page 299
...11.04(b). "Lender Default " shall mean (i) the wrongful refusal (which has not been retracted) or failure of a Lender to make available its portion of any incurrence of Loans or a reimbursement of an Unpaid Drawing or (ii) a Lender having notified the Administrative Agent and/or the Borrower that it...

Page 300
... on such date to 94 make such Dividend) plus (ii) the amount of Unrestricted cash and Cash Equivalents of the Borrower and its Subsidiaries, is equal to or greater than $10,000,000. "Minimum Tender Offer Condition" shall mean, with respect to any issue of Existing Tender Offer Notes, that at least...

Page 301
... and its Subsidiaries not used in their core business of providing local exchange carrier voice telephony services ( e.g., assets used in the operation of the cable television business, cellular telephone business and radio stations) and (ii) the stock and/or other equity interests in any Subsidiary...

Page 302
...or indirectly, the capital stock or other equity interests of any Subsidiary that is a Telco or a Carrier Services Company. "Participant " shall have the meaning provided in Section 1A.05(a). "Patriot Act " shall mean the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001...

Page 303
"Payment Office" shall mean the office of the Administrative Agent at 60 Wall Street, New York, New York 10005 or such other office as the Administrative Agent may designate to the Borrower and the Lenders in writing from time to time. "PBGC" shall mean the Pension Benefit Guaranty Corporation ...

Page 304
... are substantially identical securities to the originally issued Permitted Senior Unsecured Notes and shall be issued pursuant to a registered exchange offer or private exchange offer for such Permitted Senior Unsecured Notes on market terms satisfactory to the Administrative Agent; provided that in...

Page 305
... of Credit " shall mean (i) each standby letter of credit issued by a financial institution acceptable to the Administrative Agent for the account of the Borrower or any of its Subsidiaries in support of obligations arising in the ordinary course of business of the Borrower or such Subsidiary and...

Page 306
... rate, amortization, redemption provisions, maturities, covenants, defaults, remedies and guaranties) are on market terms for a public offering of senior notes or for a private placement of senior notes under Rule 144A of the Securities Act and are otherwise reasonably satisfactory to the Agents...

Page 307
... mean a transfer of assets by the Borrower or any of its Subsidiaries in which at least 85% of the consideration received therefrom consists of assets (other than cash) that will be used in the Business; provided that (x) the fair market value (as determined in good faith by the board of directors...

Page 308
...or best rate actually charged to any customer. DBTCA may make commercial loans or other loans at rates of interest at, above or below the Prime Lending Rate. "Pro Forma Basis " shall mean, in connection with any calculation of compliance with any financial covenant or financial term, the calculation...

Page 309
...conveyance, sale or transfer referred to in Section 7.02(a), (y) the creation or acquisition of a new Telco or Carrier Services Company pursuant to a Permitted Acquisition the capital stock or other equity interests of which is or are not to be pledged under the Pledge Agreement or (z) an Investment...

Page 310
... management of the Borrower) and (iii) each Wholly-Owned Domestic Subsidiary of the Borrower that is a Telco or Carrier Services Company, the capital stock or other equity interests of which are not permitted to be pledged pursuant to the Pledge Agreement as a result of applicable regulatory law...

Page 311
... Notice " shall mean a written notice signed by an Authorized Officer stating that the Borrower, in good faith, intends and expects that the Borrower and its Subsidiaries will use all or a specified portion of the Net Cash Proceeds of an Asset Sale to finance a Permitted Acquisition within...

Page 312
... Lien in favor of any Person other than the Collateral Agent for the benefit of the Secured Creditors or (iii) are not otherwise generally available for use by the Borrower or any of its Subsidiaries. "Restricted Investment Entity " shall mean, as to any Person, (i) any other Person, other than an...

Page 313
... of) any voluntary or optional payment or prepayment on or redemption, repurchase or acquisition for value of (including, without limitation, by way of depositing with the trustee with respect thereto or any other Person money or securities before due for the purpose of paying when due), or any...

Page 314
... stock or other equity interests of one or more Subsidiaries ( i.e., is not an operating company). "Section 1A.01(c) Arrangements " shall have the meaning provided in Section 1A.01(c). "Section 3.04 Certificate " shall have the meaning provided in Section 3.04(b)(ii). "Secured Creditor " shall mean...

Page 315
..." of any Person shall mean and include (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such...

Page 316
...the payment of fees and expenses in connection with the foregoing. "Type" shall mean any type of Loan determined with respect to the interest option applicable thereto, i.e., a Base Rate Loan or Eurodollar Loan. "UCC" shall mean the Uniform Commercial Code as in effect from time to time in New York...

Page 317
... Agent, provided that the Borrower shall only be permitted to so designate a new Unrestricted Subsidiary after the Initial Borrowing Date and so long as (i) no Default or Event of Default exists or would result therefrom, (ii) such Subsidiary is not a Telco or a Carrier Services Company...

Page 318
... of its Subsidiaries. 10.02 Nature of Duties . (a) No Agent shall have any duties or responsibilities except those expressly set forth in this Agreement and in the other Credit Documents. Neither any Agent nor any of its officers, directors, agents, employees or affiliates shall be liable for any...

Page 319
... to all legal matters pertaining to this Agreement and any other Credit Document and its duties hereunder and thereunder, upon advice of counsel selected by such Agent (which may be counsel for the Credit Parties) and, with respect to other matters, upon advice of independent public accountants or...

Page 320
... Note with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter. No Agent or their respective affiliates nor any of their respective officers, directors, agents or employees shall be responsible to...

Page 321
... its individual capacity. Each Agent and its affiliates may accept deposits from, lend money to, and generally engage in any kind of banking, investment banking, trust or other business with, or provide debt financing, equity capital or other services (including financial advisory services) to, any...

Page 322
... granted pursuant to the Pledge Agreement. (b) The Lenders hereby authorize the Collateral Agent, at its option and in its discretion, to release any Lien granted to or held by the Collateral Agent upon any Collateral (i) upon termination of the Commitments and payment and satisfaction of all of...

Page 323
... care, disclosure or fidelity any of the rights, authorities and powers granted or available to the Collateral Agent in this Section 10.11 or in the Pledge Agreement, it being understood and agreed that in respect of the Collateral, or any act, omission or event related thereto, the Collateral Agent...

Page 324
... Law or any Environmental Claim in connection with the Borrower or any of its Subsidiaries or business or operations or any property owned or operated at any time by the Borrower or any of its Subsidiaries, including, in each case, without limitation, the reasonable fees and disbursements of counsel...

Page 325
... and which is not a United States Person (as such term is defined in Section 7701(a)(30) of the Code) for Federal income tax purposes, the respective assignee Lender shall provide to the Borrower and the Administrative Agent the appropriate Internal Revenue Service Forms (and, if applicable, a 120

Page 326
...(ii) qualify the Loans under the "Blue Sky" laws of any State or (iii) integrate such transfer or assignment with a separate securities offering of securities of the Borrower or any of its Subsidiaries. (d) Each Lender initially party to this Agreement hereby represents, and each Person that became...

Page 327
... banker's lien, by counterclaim or cross action, by the enforcement of any right under the Credit Documents, or otherwise) which is applicable to the payment of the principal of, or interest on, the Loans or Fees, of a sum which with respect to the related sum or sums received by other Lenders is in...

Page 328
... located within New York City, at its address for notices pursuant to Section 11.03, such service to become effective 30 days after such mailing. Nothing herein shall affect the right of the Administrative Agent, any Lender to serve process in any other manner permitted by law or to commence legal...

Page 329
... rate or extend the time of payment of interest ...change, waiver, discharge or termination shall, (t) except in cases where additional extensions of term loans and/or revolving loans are being afforded substantially the same treatment afforded to the Term Loans and RF Loans pursuant to this Agreement...

Page 330
... 3.04, 10.06 or 11.01 shall survive the execution and delivery of this Agreement and the making and repayment of the Loans. 11.14 Domicile of Loans . Each Lender may transfer and carry its Loans at, to or for the account of any branch office, subsidiary or affiliate of such Lender, provided that the...

Page 331
... that any Lender may disclose any such information (a) as has become generally available to the public, (b) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such Lender or...

Page 332
... Register only upon the acceptance of the Administrative Agent of a properly executed and delivered Incremental B Term Commitment Agreement. The Borrower agrees to indemnify the Administrative Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may...

Page 333
... its sole discretion, the Collateral Agent shall have received termination statements (Form UCC-3) or such other termination statements as shall be required by local law, fully executed (where required) for filing, for all financing statements that name any of the Credit Parties listed in Annex X as...

Page 334
... caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written. Address: 521 East Morehead Street, Suite 250 Charlotte, NC 28202 FAIRPOINT COMMUNICATIONS, INC. By: /s/ Timothy W. Henry Title: Vice President of Finance & Treasurer DEUTSCHE BANK TRUST...

Page 335
CIT LENDING SERVICES CORPORATION By /s/ Michael V. Monahan Title: Vice President WACHOVIA BANK, NATIONAL ASSOCIATION By /s/ Franklin M. Wessigner Title: Managing Director

Page 336
... Commitments B Term Commitments Delayed-Draw B Term Commitments Deutsche Bank Trust Company Americas Bank of America, N.A. Goldman Sachs Credit Partners L.P. Morgan Stanley Senior Funding, Inc. CoBank, ACB General Electric Capital Corporation CIT Lending Services Corporation Wachovia Bank...

Page 337
...303-740-4021 Corporate Financial Services GENERAL ELECTRIC CAPITAL CORPORATION CIT LENDING SERVICES CORPORATION 201 Merritt 7, P.O. Box 5201 Norwalk, CT 06856-5201 Attention: Mary Lou Parks Telephone: 203-229-5740 Facsimile: 203-229-5791 1211 Avenue of the Americas, 21 st Floor New York, NY 10036...

Page 338
... $.01 per share, authorized; 90,000 shares issued and outstanding. FairPoint Communications, Inc. - 90,000 shares Morehead Place, 521 E. Morehead Street, Suite 250, Charlotte, North Carolina 28202 Common Stock Purchase Warrants - 222.98 warrants issued and outstanding Steve McGeeney - Warrants to...

Page 339
... value $.01 per share, authorized; 100 shares issued and outstanding. FairPoint Communications, Inc. - 100 common shares Morehead Place, 521 E. Morehead Street, Suite 250, Charlotte, North Carolina 28202 F. All of the issued and outstanding stock of the following entities is held by MJD Ventures...

Page 340
...share issued and outstanding. Community Service Telephone Co. (d/b/a FairPoint New England - Community Service Telephone Co.) - 250,000 shares of Common Stock, par value $10.00 per share, authorized; 100 shares issued and outstanding. FairPoint Berkshire Corporation - 200 shares of Common Stock, no...

Page 341
.... FairPoint Communications, Inc. - 100 shares Morehead Place, 521 E. Morehead Street, Suite 250, Charlotte, North Carolina 28202 N. Marianna Tel, Inc. - 100 shares of Common Stock, par value $10 per share authorized; 100 shares issued and outstanding. Marianna and Scenery Hill Telephone Company...

Page 342
... held in treasury). MJD Services Corp. - 95.2857 common shares 521 E. Morehead Street, Suite 250 Charlotte, North Carolina 28202 Q. Orwell Communications, Inc. - 500 shares of Common Stock, no par value, authorized; 500 issued and outstanding. The Orwell Telephone Company - 500 shares 70 South...

Page 343
.... 12,000 shares of Preferred Stock authorized, 0 shares issued and outstanding. China Telephone Company - 20,000 shares of Common Stock, par value $10.00 per share, authorized; 20,000 shares issued and outstanding. Maine Telephone Company - 100,000 shares of Common Stock, par value $.01 per share...

Page 344
... outstanding. The Columbus Grove Telephone Company - 850 shares. Z. All of the issued and outstanding stock of the following entities is held by Chautauqua and Erie Telephone Corporation, 30 Main Street, Westfield, New York 14787: Chautauqua & Erie Communications, Inc. (f/k/a Chautauqua & Erie...

Page 345
... 250, Charlotte, North Carolina 28202 CC. All of the issued and outstanding stock of the following entities is held by FairPoint Carrier Services, Inc., Morehead Place, 521 E. Morehead Street, Suite 250, Charlotte, North Carolina 28202: FairPoint Communications Solutions Corp. - New York - 100...

Page 346
... Employers for Telephone Service Co. STE/NE Acquisition Corp. Pension Plan for Vermont Employees of Transferred GTE Operations Retirement Plan for Employees of the Ellensburg Telephone Company 5. 6. 7. 8. 9. 10. Chautauqua and Erie Telephone Corporation Management Pension Plan Chautauqua...

Page 347
... A. Liens on Capital Stock and Other Equity Interests of FairPoint Communications, Inc. and the Subsidiaries 1. Under Kansas law, the minority stockholders of Sunflower Telephone Company, Inc. have the right to participate in any issuance of stock by Sunflower Telephone Company, Inc. on a pro...

Page 348
... Corp. and Vermont Telephone Company, Inc. Unsecured Demand Notes to Chautauqua and Erie Telephone Corporation from various holders in the approximate aggregate principal amount of $387,000. Secured Note of Maine Telephone Company payable to Rural Telephone Finance Cooperative in an approximate...

Page 349
...Company, Inc. - 571 Class C shares Sidney Telephone Company - 131 Class C shares Northland Telephone Company of Maine, Inc. - 2,176 Class C shares Big Sandy Telecom, Inc. - 5 Class C shares Odin Telephone Exchange, Inc. - 33 Class C C-R Telephone Company - 18 Class C shares FairPoint Communications...

Page 350
FairPoint Communications, Inc. Addendum - Non-Material Investments Book Value December 31, 2004 Chouteau Cellular ICTC, Inc. Illinet 72,409 7,605 11,073 0 NYS Independent Ptnship New York Access Billing LLC Country Club Krupp Investments ANPI Tangible Data Options, LLC Benton Ridge Telephone ...

Page 351
ANNEX IX EXISTING LETTERS OF CREDIT Beneficiary Maturities Amount Travelers Indemnity Company June 30, 2005 $ 1,020,510

Page 352
...District Court, U.S. District Court GT COM GTC COMMUNICATIONS, INC. ODIN TELEPHONE EXCHANGE, INC. Florida-Gulf County Circuit Court Florida-Gulf County Circuit Court Illinois-Marion Circuit Court SUNFLOWER TELEPHONE COMPANY INC. YCOM NETWORKS, INC. Kansas-Hodgeman County, Hodgeman District Court...

Page 353
... collateral agent, the " Pledgee") for the benefit of the Secured Creditors (as defined below). Except as otherwise defined herein, terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as therein defined. WITNESSETH: WHEREAS, FairPoint Communications, Inc...

Page 354
...(as defined below) or the enforcement of this Agreement, after an Event of Default (such term, as used in this Agreement, shall mean any Event of Default under the Credit Agreement or any payment default by the Borrower under any Secured Interest Rate Agreement after the expiration of any applicable...

Page 355
...a TelCo, (IV) a Carrier Services Company or (V) an entity that the Borrower has designated as a "Pledged Entity" in a written notice to the Collateral Agent specifying such entity's legal name, type of organization, jurisdiction of organization, Location, organizational identification number (if any...

Page 356
... Foreign Entity) entitled to vote (with any limited liability company (other than an Excluded Entity) in which any Pledgor owns a membership interest being herein called a " Pledged LLC "). "Notes" shall mean all promissory notes at any time issued to, or held by, any Pledgor. "NSG Pledgor " shall...

Page 357
... combined voting power of all classes of capital stock of any Exempted Foreign Entity entitled to vote. "Transmitting Utility" has the meaning given such term in Section 9-102(a)(80) of the UCC. "UCC" shall mean the Uniform Commercial Code as in effect in the State of New York from time to time...

Page 358
...law to exercise and enforce every right, power, remedy, authority, option and privilege of such Pledgor relating to the Partnership Interest and/or Membership Interest, including any power to terminate, cancel or modify any partnership agreement or any limited liability company agreement, to execute...

Page 359
... (including a Federal Reserve Bank, Participants Trust Company or The Depository Trust Company), such Pledgor shall promptly notify the Pledgee thereof and shall promptly take (x) all actions required (i) to comply with the applicable rules of such Clearing Corporation or Securities Intermediary and...

Page 360
... to which the Pledgee may obtain "control" thereof within the meaning of Section 8-106 of the UCC (or under any provision of the UCC as same may be amended or supplemented from time to time, or under the laws of any relevant State other than the State of New York), such Pledgor shall take all...

Page 361
..., is listed on Annex A hereto; (b) the Stock held by such Pledgor consists of the number and type of shares of the stock of the corporations as described in Annex B hereto; (c) such Stock constitutes that percentage of the issued and outstanding capital stock of the issuing corporation as set forth...

Page 362
... or any other Secured Debt Agreement or by law) for the protection and enforcement of its rights in respect of the Collateral, including, without limitation, all the rights and remedies of a secured party upon default under the Uniform Commercial Code of the State of New York, and the Pledgee...

Page 363
...Accounts and to apply such cash and other Collateral to the payment of any and all Obligations; and (vi) at any time or from time to time to sell, assign and deliver, or grant options... in this Agreement or any other Secured Debt Agreement, or now or hereafter existing at law or in equity or by ...

Page 364
... of at least a majority of the outstanding Interest Rate Obligations, as the case may be, for the benefit of the Secured Creditors upon the terms of this Agreement. 9. APPLICATION OF PROCEEDS. (a) All moneys collected by the Pledgee or the Collateral Agent upon any sale or other disposition of the...

Page 365
(c) All payments required to be made to the (i) Lender Creditors hereunder shall be made to the Administrative Agent for the account of the respective Lender Creditors and (ii) Interest Rate Creditors hereunder shall be made to the paying agent under the applicable Secured Interest Rate Agreement or...

Page 366
... under the Uniform Commercial Code such financing statements, continuation statements and other documents in such offices as the Pledgee may reasonably deem necessary or appropriate and wherever required or permitted by law in order to perfect and preserve the Pledgee's security interest in the...

Page 367
... laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law); (viii) the pledge, assignment and delivery to the Pledgee of the Securities (other than those constituting Uncertificated Securities) pursuant to this Agreement...

Page 368
... in any public office, any enforceable financing statement or statements covering any or all of the Collateral, except financing statements filed or to be filed in favor of the Pledgee as secured party; (xiv) it shall give the Pledgee prompt notice of any written claim relating to the Collateral...

Page 369
... with any of the terms of any Secured Debt Agreement, or which would have the effect of impairing the position or interests of the Pledgee or any other Secured Creditor under any Secured Debt Agreement except as permitted by the Credit Agreement; and (xviii) "control" (as defined in Section...

Page 370
... that such Pledgor cause any registration, qualification or compliance under any Federal or state securities law or laws to be effected with respect to all or any part of the Pledged Stock, such Pledgor as soon as practicable and at its expense will use its best efforts to cause such registration to...

Page 371
... Corporation or Securities Intermediary), a termination of the agreement relating thereto executed and delivered by the issuer of such Uncertificated Security pursuant to Section 3.2(a)(ii) or by the respective partnership or limited liability company pursuant to Section 3.2(a)(iv)(2). As used...

Page 372
..., telexed, telecopied, faxed, cabled, or mailed (by first class mail, postage prepaid): (i) if to any Pledgor, at its address set forth opposite its signature below; if to the Pledgee, at: (ii) Deutsche Bank Trust Company Americas 60 Wall Street New York, New York 10005 Attention: Anca Trifan Tel...

Page 373
... OF CONFLICT OF LAWS. Any legal action or proceeding with respect to this Agreement or any other Credit Document may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Agreement, each NSG...

Page 374
...address set forth opposite its signature below, such service to become effective 30 days after such mailing. Nothing herein shall affect the right of any of the Secured Creditors to serve process in any other manner permitted by law or to commence legal...This Agreement may be executed in any number of...

Page 375
... Pledgor who makes (or whose Collateral has been used to make) any payment in respect ...Location, or its organizational identification number (if any), except that any such changes shall be permitted (so long as not in violation of the applicable requirements of the Secured Debt Agreements and so long...

Page 376
... to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby fully perfected and in full force and effect. 28. CHANGE OF CONTROL. The Pledgee acknowledges that, under existing law, a change of control of a Subsidiary whose equity interests are pledged...

Page 377
...Agreement to be executed and delivered by their duly authorized officers as of the date first above written. Address: 521 East Morehead Street, Suite 250 Charlotte, NC 28202 FAIRPOINT COMMUNICATIONS, INC., as a Pledgor By: /s/ Timothy W. Henry Title: Vice President of Finance & Treasurer Address...

Page 378
..., NC 28202 UTILITIES, INC., as a Pledgor By: /s/ Timothy W. Henry Title: Vice President of Finance & Treasurer Address: c/o Fairpoint Communications, Inc. 521 East Morehead Street, Suite 250 Charlotte, NC 28202 FAIRPOINT CARRIER SERVICES, INC., as a Pledgor By: /s/ Timothy W. Henry Title: Vice...

Page 379
Address: c/o FairPoint Communications, Inc. 521 East Morehead Street, Suite 250 Charlotte, NC 28202 ST. JOE COMMUNICATIONS, INC., as a Pledgor By: /s/ Timothy W. Henry Title: Vice President of Finance & Treasurer Accepted and Agreed to: DEUTSCHE BANK TRUST COMPANY AMERICAS, as Collateral Agent ...

Page 380
...Telephone Company of Maine, Inc. ST Computer Resources, Inc. 5. B. ST Long Distance, Inc. MJD Ventures, Inc. 1. 2. The Columbus Grove Telephone Company C-R Communications, Inc. a. 3. 4. C-R Telephone Company Taconic Telephone Corp. Ellensburg Telephone Company 5. 6. Sidney Telephone Company...

Page 381
.... Peoples Mutual Telephone Company Fremont Telcom Co. Comerco, Inc. a. YCOM Networks, Inc. 15. 16. C. Community Service Telephone Co. Marianna and Scenery Hill Telephone Company MJD Services Corp. 1. 2. 3. 4. Bluestem Telephone Company Big Sandy Telecom, Inc. Odin Telephone Exchange, Inc...

Page 382
ANNEX B LIST OF PLEDGED STOCK I. FAIRPOINT COMMUNICATIONS, INC. (F/K/A MJD COMMUNICATIONS, INC.)(1) Name of Issuing Corporation Type of Shares Number of Shares Percentage Owned 1. 2. 3. 4. FairPoint Broadband, Inc. MJD Services Corp. Common Common Common Common 100 100 100 100 100% 100% 100...

Page 383
...Fremont Telcom Co. Comerco, Inc. 15. 16. C. Community Service Telephone Co. Marianna and Scenery Hill Telephone Company 306 ST ENTERPRISES, LTD.(3) Name of Issuing Corporation Type of Shares Number of Shares Percentage Owned 1. Sunflower Telephone Company, Inc. Common 684 99.7% STE/NE...

Page 384
...500 100 100% 100% 5. D. ST Long Distance, Inc. C-R COMMUNICATIONS, INC. Name of Issuing Corporation Type of Shares Number of Shares Percentage Owned 1. E. C-R Telephone Company Common 100 100% UTILITIES, INC. Name of Issuing Corporation Type of Shares Number of Shares Percentage Owned...

Page 385
ANNEX C LIST OF NOTES None.

Page 386
ANNEX D PART I LIST OF PARTNERSHIP INTERESTS A. None. PART II LIST OF MEMBERSHIP INTERESTS A. None. 4

Page 387
... herein collectively called the " Issuer Pledged Interests"); and WHEREAS, the Pledgor desires the Issuer to enter into this Agreement in order to perfect the security interest of the Pledgee under the Pledge Agreement in the Issuer Pledged Interests, to vest in the Pledgee control of the Issuer...

Page 388
... by wire transfers to such account as the Pledgee shall instruct. 6. Except as expressly provided otherwise in Sections 4 and 5, all notices, instructions, orders and communications hereunder shall be sent or delivered by mail, telegraph, telex, telecopy, cable or overnight courier service and all...

Page 389
... banks in New York are authorized to remain closed. 7. This Agreement shall be binding upon the successors and assigns of the Pledgor and the Issuer and shall inure to the benefit of and be enforceable by the Pledgee and its successors and assigns. This Agreement may be executed in any number of...

Page 390
..., the Pledgee and the Issuer have caused this Agreement to be executed by their duly elected officers duly authorized as of the date first above written. [ as Pledgor ], By Name: Title: [ ], not in its individual capacity but solely as Collateral Agent and Pledgee By Name: Title: [ as the...

Page 391
..." Administrative Agent "), for the benefit of the Secured Creditors (as defined below). Except as otherwise defined herein, all capitalized terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as therein defined. WITNESSETH: WHEREAS, FairPoint Communications...

Page 392
... Subsidiaries of Secured Interest Rate Agreements and, accordingly, desires to execute this Guaranty in order to satisfy the condition described in the preceding paragraph and to induce the Lenders to make Loans to the Borrower and issue, and/or participate in, Letters of Credit for the account of...

Page 393
... or undertaking, (d) any dissolution, termination or increase, decrease or change in personnel by the Borrower, (e) the failure of any Guarantor to receive any benefit from or as a result of its execution, delivery and performance of this Guaranty, (f) any payment made to any Secured Creditor on the...

Page 394
...any new or additional liability to which it may apply, and waives promptness, diligence, presentment, demand of payment, demand for performance, protest, notice of dishonor or nonpayment of any such liabilities, suit or taking of other action by the Administrative Agent or any other Secured Creditor...

Page 395
... Obligations as so changed, extended, increased, accelerated, renewed or altered; (b) take and hold security for the payment of the Guaranteed Obligations and sell, exchange, release, surrender, impair, realize upon or otherwise deal with in any manner and in any order any property or other...

Page 396
... any of the Secured Interest Rate Agreements, the Credit Documents or any of such other instruments or agreements; (h) act or fail to act in any manner which may deprive such Guarantor of its right to subrogation against the Borrower to recover full indemnity for any payments made pursuant to...

Page 397
... shall be paid in full. 8. GUARANTY ENFORCEABLE BY ADMINISTRATIVE AGENT OR COLLATERAL AGENT . Notwithstanding anything to the contrary contained elsewhere in this Guaranty or any other Credit Document or Secured Interest Rate Agreement, the Secured Creditors agree (by their acceptance of the...

Page 398
... OF GUARANTORS. In order to induce the Lenders to make Loans to, and issue Letters of Credit for the account of, the Borrower pursuant to the Credit Agreement, and in order to induce the Interest Rate Creditors to execute, deliver and perform the Secured Interest Rate Agreements to which they are...

Page 399
... outstanding from time to time under the Secured Interest Rate Agreements. 13. SET OFF. In addition to any rights now or hereafter granted under applicable law (including, without limitation, Section 151 of the New York Debtor and Creditor Law) and not by way of limitation of any such rights, upon...

Page 400
...; or in any case at such other address as any of the Persons listed above may hereafter notify the others in writing. 15. REINSTATEMENT. If any claim is ever made upon any Secured Creditor for repayment or recovery of any amount or amounts received in payment or on account of any of the Guaranteed...

Page 401
... of this Guaranty as provided above. As used in this Guaranty, "Termination Date" shall mean the date upon which the Total Commitment and all Secured Interest Rate Agreements have been terminated, no Note or Letter of Credit under the Credit Agreement is outstanding (and all Loans have been...

Page 402
... Persons that own, directly or indirectly, all of the capital stock or other equity interests of any Guarantor shall be deemed to be a sale of such Guarantor for the purposes of this Section 18). 19. CONTRIBUTION . At any time a payment in respect of the Guaranteed Obligations is made under this...

Page 403
... that this Guaranty not constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy Code, the Uniform Fraudulent Conveyance Act of any similar Federal or state law. To effectuate the foregoing intention, each Guarantor and each Secured Creditor (by its acceptance of the benefits...

Page 404
... to be taken above to the reasonable satisfaction of the Administrative Agent. 24. HEADINGS DESCRIPTIVE . The headings of the several Sections of this Guaranty are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Guaranty. * * * 14

Page 405
... FAIRPOINT CARRIER SERVICES, INC., as a Guarantor c/o FAIRPOINT COMMUNICATIONS, INC. 521 East Morehead Street Suite 250 Charlotte, NC 28202 By: /s/ Timothy W. Henry Title: Vice President of Finance & Treasurer Accepted and Agreed to: DEUTSCHE BANK TRUST COMPANY AMERICAS, as Administrative Agent...

Page 406
... OF INDEBTEDNESS HELD BY GUARANTORS GUARANTY ENFORCEABLE BY ADMINISTRATIVE AGENT OR COLLATERAL AGENT REPRESENTATIONS, WARRANTIES AND COVENANTS OF GUARANTORS EXPENSES BENEFIT AND BINDING EFFECT AMENDMENTS; WAIVERS SET OFF NOTICE REINSTATEMENT CONSENT TO JURISDICTION; SERVICE OF PROCESS; AND WAIVER OF...

Page 407
..., among FAIRPOINT COMMUNICATIONS, INC., a Delaware corporation (the " Borrower"), various Lenders party to the Credit Agreement referred to below, and DEUTSCHE BANK TRUST COMPANY AMERICAS, as Administrative Agent (in such capacity, the "Administrative Agent "). All capitalized terms used herein and...

Page 408
... by way of facsimile transmission) the same to White & Case LLP, 1155 Avenue of the Americas, New York, NY 10036 Attention: May Yip (facsimile number: 212-354-8113 / e-mail address: myip0whitecase.com). 6. From and after the First Amendment Effective Date, all references in the Credit Agreement and...

Page 409
... officers to execute and deliver this Amendment as of the date first above written. FAIRPOINT COMMUNICATIONS, INC. By: /s/ Timothy W. Henry Name: Timothy W. Henry Title: Vice President of Finance and Treasurer DEUTSCHE BANK TRUST COMPANY AMERICAS, Individually and as Administrative Agent...

Page 410
GENERAL ELECTRIC CAPITAL CORPORATION, Individually and as CoDocumentation Agent By: illegible Name: Title:

Page 411
... COMMUNICATIONS, INC., THE LENDERS FROM TIME TO TIME PARTY TO THE CREDIT AGREEMENT AND DEUTSCHE BANK TRUST COMPANY AMERICAS, AS ADMINISTRATIVE AGENT NAME OF INSTITUTION: Pacifica CDO II, Ltd. NAME OF INSTITUTION: Avenue CLO Fund, Ltd. By: /s/ An Pham, Jr. Name: An Pham Jr. Title: Vice President...

Page 412
... Advisor By: /s/ David P. Wells Name: David P. Wells, CFA Title: Managing Director By: Babson Capital Management LLC as Collateral Manager By: /s/ David P. Wells Name: David P. Wells, CFA Title: Managing Director NAME OF INSTITUTION: NAME OF INSTITUTION: Bear Stearns Institutional Loan Master...

Page 413
... OF INSTITUTION: CIT Lending Services Corporation By: Its Collateral Manager, Callidus Capital Management, LLC By: /s/ Michael V. Monahan Name: Michael V. Monahan Title: Vice President By: /s/ Wayne Mueller Name: Wayne Mueller Title: Senior Managing Director NAME OF INSTITUTION: Senior Debt...

Page 414
... Income Fund NAME OF INSTITUTION: Eaton Vance Senior Floating-Rate Trust By: Eaton Vance Management as Investment Advisor By: /s/ Michael B. Botthof Name: Michael B. Botthof Title: Vice President By: Eaton Vance Management as Investment Advisor By: /s/ Michael B. Botthof Name: Michael B. Botthof...

Page 415
... Columbaro Title: Vice President By: /s/ Russell Riccardi Name: Russell Riccardi Title: CSO NAME OF INSTITUTION: State Street Bank and Trust Company as Trustee for General Motors Welfare Benefit Trust NAME OF INSTITUTION: Alzette European CLO S.A. By: INVESCO Senior Secured Management, Inc. As...

Page 416
... Funding IX LLC, for itself or as agent for Corporate Loan Funding IX LLC NAME OF INSTITUTION: Sequils-Liberty, Ltd. By: INVESCO Senior Secured Management, By: INVESCO Senior Secured Management, Inc. As Portfolio Manager Inc. As Collateral Manager By: /s/ Scott Baskind Name: Scott Baskind Title...

Page 417
...By: INVESCO Senior Secured Management, Inc. As Asset Manager By: /s/ Jim Dingler Name: Jim Dingler Title: Director By: /s/ Scott ...: Vice President The Norinchukin Bank, New York Branch, through State Street Bank and Trust Company N.A. as fiduciary custodian By: Eaton Vance Management, Attorney-...

Page 418
... for Castle Hill II - INGOTS, Ltd., as Term Lender Sun Life Assurance Company of Canada (US) By: Fairlead Capital Management Inc. as Sub-Advisor /s/ Lee M. Shaiman Name: Lee M. Shaiman Title: President and Chief Investment Officer By: By: /s/ Jeffrey Hawkins Name: Jeffrey Hawkins Title: Senior...

Page 419
... Town Funding LLC By: /s/ Meredith Koslick Name: Meredith Koslick Title: Assistant Vice President By: Stanfield Capital Partners LLC as its Investment Manager By: /s/ Christopher E. Jansen Name: Christopher E. Jansen Title: Managing Partner NAME OF INSTITUTION: XL Re Ltd. NAME OF INSTITUTION...

Page 420
...: Wachovia Bank National Association By: /s/ Alice L. Wagner Name: Alice L. Wagner Title: Vice President By: /s/ Franklin M. Wessinger Name: Franklin M. Wessinger Title: Managing Director NAME OF INSTITUTION: Waterville Funding LLC By: /s/ Meredith J. Koslick Name: Meredith J. Koslick Title...

Page 421
..., New York , 2005 FOR VALUE RECEIVED, FAIRPOINT COMMUNICATIONS, INC., a Delaware corporation (the "Borrower"), hereby promises to pay to the order of (the " Lender"), in lawful money of the United States of America in immediately available funds, at the Payment Office (as defined in the Agreement...

Page 422
..., New York , 2005 FOR VALUE RECEIVED, FAIRPOINT COMMUNICATIONS, INC., a Delaware corporation (the "Borrower"), hereby promises to pay to the order of (the " Lender"), in lawful money of the United States of America in immediately available funds, at the Payment Office (as defined in the Agreement...

Page 423
..., New York , 2005 FOR VALUE RECEIVED, FAIRPOINT COMMUNICATIONS, INC., a Delaware corporation (the "Borrower"), hereby promises to pay to the order of (the " Lender"), in lawful money of the United States of America in immediately available funds, at the Payment Office (as defined in the Agreement...

Page 424
... and By-Laws of the Company shall provide that the Board shall be divided into three classes, as nearly eFual in number as possible, as follows: (A) one class initially consisting of two directors (t Class I"), the initial term of which shall expire at the first annual meeting of the stockholders to...

Page 425
... for election to the Board as set forth below; provided that the Nominating Committee's obligations under this Agreement are subject to the reFuirements of their fiduciary duties as directors and the Delaware General Corporation Law. (a) For so long as the Stockholders (together with any of their...

Page 426
... or unenforceable in any respect under any applicable law or rule in any jurisdiction, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal...

Page 427
... by mail, five (5) business days shall have elapsed after the same shall have been deposited in the United States mails, postage prepaid and registered or certified: If to the Company, to: FairPoint Communications, Inc. 521 East Morehead Street Suite 250 Charlotte, North Carolina 28202 Attention...

Page 428
... 55th Street New York, New York 10022 Attention: Jeffrey J. Pellegrino, EsF. If to Kelso, to: Kelso & Company 320 Park Avenue, 24th Floor New York, New York 10022 Attention: James J. Connors, II, EsF. Facsimile: (212) 223-2329 If to THL, to: Thomas H. Lee Partners, L.P. 100 Federal Street 35th...

Page 429
... has been brought in an inconvenient forum. 14. of this Agreement. Descriptive Headings . The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part 15. Counterparts . This Agreement may be executed in separate counterparts each of which will be an...

Page 430
... parties hereto have executed this Agreement on the day and year first above written. COMPANY: FAIRPOINT COMMUNICATIONS, INC. By: /s/ Shirley J. Linn Name: Shirley J. Linn Title: Senior Vice President KELSO: KELSO INVESTMENT ASSOCIATES V, L.P. By: Kelso Partners V, L.P., its General Partner By...

Page 431
Schedule A THL Related Parties Thomas H. Lee Foreign Fund IV, L.P. Thomas H. Lee Foreign Fund IV-B, L.P. 1982 Thomas H. Lee Nominee ... Custodian for Nathan Lee Charles W. Robins James Westra Thomas H. Lee Charitable Investment L.P. THL-CCI Investors Limited Partnership Putnam Investment Holdings, LLC

Page 432
... other day on which banking institutions in New York, New York are permitted or required by any applicable law to close. "Commission " means the Securities and Exchange Commission. "Common Stock " has the meaning set forth in the Recitals. "Company" has the meaning set forth in the Preamble and also...

Page 433
...in a single public sale in accordance with the volume limitations contained in Rule 144(e)(1)(i) under the Securities Act, and if the Company shall offer to remove any and all legends restricting transfer from the certificates evidencing such Registrable Securities. For purposes of this Agreement, a

Page 434
... applicable to such Holder and furnishes to the Company in writing, within 10 Business Days after receipt of a request therefor, such information as the Company may, after conferring with counsel with regard to information relating to Holders that would be required by the Commission to be included...

Page 435
... pursuant to the Exchange Act. (c) Delay Period . The term " Delay Period " shall mean, with respect to any obligation to keep the Shelf Registration Statement or the Prospectus usable for resales pursuant to this Section 2, the shortest period of time determined in good faith by the Company to be...

Page 436
... Agreement, prior to the date on which the Shelf Registration Statement is initially declared effective by the Commission, the Company shall not grant to any Person the right to request the Company to register any equity securities of the Company, or any securities convertible or exchangeable into...

Page 437
... filings required under the Exchange Act, if the Holders, their counsel or the managing underwriters of an underwritten offering of Registrable Securities, if any, shall... supplement relating thereto, and comply with the provisions of the Securities Act, the Exchange Act and the rules and regulations...

Page 438
... be sub8ect to such service of process or (C) sub8ect itself to taxation in any such 8urisdiction if it is not then so sub8ect; (iv) promptly notify each Holder of Registrable Securities, its counsel and the managing underwriters of an underwritten offering of Registrable Securities, if any, and...

Page 439
... any such disposition of Registrable Securities, if any, without charge, as many copies of the Prospectus (including any preliminary prospectus) as such Holder or managing underwriters, if any, may reasonably request (it being understood that the Company consents to the use of the Prospectus by each...

Page 440
... at least $1.0 million of Registrable Securities: (i) enter into such agreements (including underwriting agreements) as are customary in underwritten offerings, (ii) obtain an opinion of counsel to the Company and updates thereof (which may be in the form of a reliance letter) in form and substance...

Page 441
...Securities Act the Registrable Securities of a seller who so fails to furnish such information. No Holder in its capacity as a stockholder and/or controlling person of the Company (but not in its capacity as director or officer of the Company) shall be required by any underwriting agreement to make...

Page 442
...all registration, stock exchange listing, accounting and filing fees, all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the reasonable fees and disbursements of counsel for the Company, and of...

Page 443
... indemnify and hold harmless the Company, each of its directors, each of its officers who shall have signed such Shelf Registration Statement, each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, any other selling...

Page 444
... stockholders and/or controlling persons (but not in their capacities as directors or officers of the Company) hereby acknowledge and agree that the only information furnished or to be furnished to the Company for use in any registration statement or prospectus relating to the Registrable Securities...

Page 445
... substantially similar or related actions, claims or proceedings in the same 8urisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one additional firm of attorneys (together with appropriate local counsel) at any time...

Page 446
... by it under the Exchange Act. If the Company is not required to file reports pursuant to the Exchange Act, upon the request of any Holder of Registrable Securities, the Company shall use commercially reasonable efforts to make publicly available the information specified in subparagraph (c)(2) of...

Page 447
... by hand, or if mailed or sent by overnight courier service, on the third Business Day after mailing (one Business Day in the case of express mail or overnight courier service) to the parties at the following addresses: (i) if to the Initial Holders, to the addresses set forth under their signatures...

Page 448
FairPoint Communications, Inc. 521 East Morehead Street, Suite 250 Charlotte, North Carolina 28202 Attention: Shirley J. Linn, Esq. with a copy to: Paul, Hastings, Janofsky & Walker LLP 75 East 55th Street New York, New York 10022 Attention: Jeffrey J. Pellegrino, Esq. or at such other address as ...

Page 449
... of Holders holding a ma8ority of Registrable Securities in the case of the Company; provided, that (i) such transferee acquires such Registrable Securities pursuant to an express assignment from the transferor, and (ii) such transferee executes a 8oinder agreement agreeing to be bound by all of...

Page 450
IN WITNESS WHEREOF, the Company has executed this Agreement as of the date first written above. FAIRPOINT COMMUNICATIONS, INC. By: /s/ Shirley J. Linn Name: Shirley J. Linn Title: Senior Vice President and General Counsel

Page 451
...Holder has executed this Agreement as of the date first written above. KELSO INVESTMENT ASSOCIATES V, L.P. By: Kelso Partners V, L.P., its General Partner /s/ George E. Matelich Name: George E. Matelich Address: Kelso & Company 320 Park Avenue, 24th Floor New York, NY 10022 KELSO EQUITY PARTNERS...

Page 452
...INVESTMENTS, LLC By: /s/ Robert T. Burns Name: Robert T. Burns Title: Managing Director Address: One Post Office Square Boston, MA 02109 THOMAS H. LEE FOREIGN FUND IV, L.P. /s/ Thomas H. Lee Name: Thomas H. Lee Address: 100 Federal Street, 35th Floor Boston, MA 02110 THOMAS H. LEE FOREIGN FUND IV...

Page 453
... President US Bank, N.A. (as successor to State Street Trust And Company), not personally but solely under a Trust Agreement dated as of August 18, 1997 and known as the Thomas H. Lee Nominee Trust THOMAS H. LEE EQUITY FUND IV, L.P. /s/ Thomas H. Lee Name: Thomas H. Lee Address: 100 Federal Street...

Page 454
.../s/ Scott A. Schoen Name: Scott A. Schoen Address: 100 Federal Street, 35th Floor Boston, MA 02110 /s/ C. Hunter Boll Name: C. Hunter Boll Address: 100 Federal Street, 35th Floor Boston, MA 02110 /s/ Scott M. Sperling Name: Scott M. Sperling Address: 100 Federal Street, 35th Floor Boston, MA 02110...

Page 455
... /s/ Seth W. Lawry Name: Seth W. Lawry Address: 100 Federal Street, 35th Floor Boston, MA 02110 /s/ Kent R. Weldon Name: Kent R. Weldon Address: 100 Federal Street, 35th Floor Boston, MA 02110 /s/ Terrence M. Mullen Name: Terrence M. Mullen Address: 100 Federal Street, 35th Floor Boston, MA 02110...

Page 456
...Charles A. Brizius Name: Charles A. Brizius Address: 100 Federal Street, 35th Floor Boston, MA 02110 /s/ Scott L. Jaeckel Name: Scott L. Jaeckel Address: 100 Federal Street, 35th Floor Boston, MA 02110 /s/ C. Hunter Boll Name: C. Hunter Boll Address: 100 Federal Street, 35th Floor Boston, MA 02110...

Page 457
... Charles W. Robins Name: Charles W. Robins, as Trustee, not individually Address: 100 Federal Street, 35th Floor Boston, MA 02110 /s/ Stephen Zachary Lee Name: Stephen Zachary Lee Address: c/o Thomas H. Lee Partners, L.P. 100 Federal Street, 35th Floor Boston, MA 02110 Attn: Todd Link /s/ Charles...

Page 458
..., Gotshal & Manges LLP 100 Federal Street Boston, MA 02110 /s/ Charles W. Robins Name: Charles W. Robins Address: c/o Weil, Gotshal & Manges LLP 100 Federal Street Boston, MA 02110 /s/ James Westra Name: James Westra Address: c/o Weil, Gotshal & Manges LLP 100 Federal Street Boston, MA 02110

Page 459
SCHEDULE A Number of Shares of Common Stock Holder Kelso Investment Associates V, L.P. Kelso Equity Partners V, L.P. Eugene B. Johnson Peter G. Nixon ... Investment Limited Partnership THL-CCI Investors Limited Partnership 1997 Thomas H. Lee Nominee Trust Thomas H. Lee Equity Fund IV, L.P. David V....

Page 460
...2005 STOCK INCENTIVE PLAN ARTICLE I PURPOSES This FairPoint Communications, Inc. 2005 Stock Incentive Plan is intended to foster and promote the long-term financial success of the Company and the Subsidiaries and increase total shareholder returns by ( i) motivating superior performance by means of...

Page 461
... States . The Committee, in order to conform with provisions of local laws and regulations in foreign countries in which the Company or its Subsidiaries operate, shall have sole discretion to ( i) modify the terms and conditions of Awards granted to Participants employed outside the United States...

Page 462
...pursuant to any exercise of an Option unless arrangements satisfactory to the Committee have been made to assure full payment of the exercise price therefor and any required withholding or other similar taxes or governmental charges. 4.5 Termination of Employment. Unless otherwise determined by the...

Page 463
... that, as a condition of any Restricted Stock award, the Participant shall have delivered a stock power, endorsed in blank, relating to the Shares covered by such award. Each grant of Restricted Stock or Restricted Units shall be evidenced by a written agreement setting forth the terms of such Award...

Page 464
... shall become vested and nonforfeitable, if at all, on the same terms and conditions as are applicable in respect of the Restricted Units with respect to which such Dividend Equivalents were payable. 5.4 Termination of Employment. Unless otherwise determined by the Committee at or after the date of...

Page 465
... grant of Incentive Stock or Incentive Units shall be evidenced by a written agreement setting forth the terms of such Award. 6.2 Performance Criteria . (a) Within 90 days after each Performance Period begins (or such other date as may be required or permitted under Section 162(m) of the Code, if...

Page 466
... on a freestanding basis, and not related to any Option. A grant of a Stock Appreciation Right shall be evidenced by a written agreement containing such provisions not inconsistent with the Plan as the Committee shall approve. 7.2 Terms and Conditions of Stock Appreciation Rights . Unless otherwise...

Page 467
into account the differences related to the character of the Stock Appreciation Right) to the terms and conditions that would have been applicable under Article IV above were the grant of the Stock Appreciation Rights a grant of an Option. 7.3 Payment of Stock Appreciation Right Amount . Upon ...

Page 468
...Unit that shall have become vested. The Committee may provide in the Award agreement applicable to any Deferred Shares or Supplemental Units that, in lieu of issuing Shares, the Committee may direct the Company to pay to the Participant the Fair Market Value of such Shares as of such payment date. 9

Page 469
... different terms and conditions may apply with respect to the further deferral opportunities made available to different Participants. ARTICLE IX CHANGE IN CONTROL 9.1 Accelerated Vesting and Payment. Subject to the provisions of Section 9.2 below, in the event of a Change in Control, each Option...

Page 470
..., solely for purposes of this Plan (including, without limitation, this Article IX), as continuing in the Company's employment until the occurrence of such Change in Control, and to have been terminated immediately thereafter. ARTICLE X STOCKHOLDER RIGHTS A Participant (or a Permitted Transferee...

Page 471
... to the first meeting of the stockholders of the Company in 2009 at which directors will be elected. ARTICLE XIII DEFINITIONS 13.1 Certain Definitions . Capitalized terms used herein without definition shall have the respective meanings set forth below: "Act" means the Securities Exchange Act of...

Page 472
... Code. "Change in Control Price " means the price per Share offered in conjunction with any transaction resulting in a Change in Control on a fully-diluted basis (as determined in good faith by the Committee as constituted before the Change in Control, if any part of the offered price is payable...

Page 473
...Awards awarded under the Plan. "Employee" means any officer, employee or consultant of the Company or any Subsidiary, or any director of the Company or any Subsidiary. "Fair Market Value" means, as of any date of determination, the closing price of a Share on the New York Stock Exchange (or on such...

Page 474
... Transferees" has the meaning given in Section 14.1. "Plan" means this FairPoint Communications, Inc. 2005 Stock Incentive Plan, as the same may be amended from time to time. "Public Offering" means a public offering pursuant to an effective registration statement under the Securities Act of 1933...

Page 475
... closing of such public offering, will be traded on the New York Stock Exchange, the American Stock Exchange or the National Association of Securities Dealers Automated Quotation System. "Qualifying Termination of Employment " means a termination of a Participant's employment with the Company or any...

Page 476
..., or otherwise to or by his or her estate. 14.3 No Guarantee of Employment or Participation . Nothing in the Plan shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate any Participant's employment at any time, nor to confer upon any Participant any right to...

Page 477
... the Company, with reasonable diligence, to complete such stock exchange listing or registration or qualification of such Shares or other required action under any federal or state law, rule, or regulation and may require any Participant to make such representations and furnish such information as...

Page 478
...or program. 14.13 No Constraint on Corporate Action . Nothing in this Plan shall be construed ( i) to limit, impair or otherwise affect the Company's right or power to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, or to merge or consolidate, or...

Page 479
... corporation (the " Company"), and the grantee whose name appears on Schedule A hereto (the " Grantee"), is being entered into pursuant to the FairPoint Communications, Inc. 2005 Stock Incentive Plan (the " Plan"). Capitalized terms used herein without definition have the meaning given in the Plan...

Page 480
..., as amended, and the rules and regulations of the Securities Exchange Commission thereunder, and in compliance with applicable state securities or "blue sky" laws and non-U.S. securities laws. 4. Grantee's Rights with Respect to Restricted Stock . (a) Rights as Stockholder . The Grantee shall have...

Page 481
... OF THE COMPANY." 5. Change in Control . In the event of a Change in Control, all of the Grantee's Shares of Restricted Stock shall be treated in accordance with the provisions of Article IX of the Plan. 6. Section 409A of the Code . In connection with the Grantee's termination of employment, the...

Page 482
... executing this Agreement, Grantee hereby consents to the delivery of information (including, without limitation, information required to be delivered to the Grantee pursuant to applicable securities laws) regarding the Company and the Subsidiaries, the Plan, and the Restricted Stock via Company web...

Page 483
IN WITNESS WHEREOF, the Company and Grantee have executed this Agreement as of the Grant Date. FAIRPOINT COMMUNICATIONS, INC. By: Name: Title: GRANTEE Name: 5

Page 484
Schedule A Grantee Grantee's Address Grant Date Total Number of Shares of Restricted Stock Which Have Been Granted 6

Page 485
... the undersigned, , hereby assigns and transfers to the Secretary of FairPoint Communications, Inc., a Delaware corporation (the "Company"), shares of common stock, par value $.01 per share, of the Company, standing in the undersigned's name on the books of the Company, represented by Certificate No...

Page 486
... guide all employees, directors and officers of the Company and its subsidiaries and controlled affiliates in meeting our goal to achieve the highest business and personal ethical standards as well as compliance with the laws and regulations that apply to our business. This Code covers a wide range...

Page 487
... the Company and the other company. The Audit Committee of the Company's Board of Directors must approve in advance any such investment (other than purchases of $50,000 or less of stock of a publicly traded company). (d) Related Parties As a general rule, you should avoid conducting business or...

Page 488
... reports and other information it files with or submits to the SEC and in other public communications, such as press releases, earnings conference calls and industry conferences, made by the Company. In meeting such standards for disclosure, the Company's executive officers and directors shall...

Page 489
... a commercial setting is to create good will and sound working relationships, not to gain unfair advantage with customers. No gift or entertainment should ever be offered, given, provided or accepted by any Company employee, officer, director, family member of any of the foregoing or agent unless it...

Page 490
... hard disks, email, floppy disks, microfiche, microfilm or all other media. The Company requires honest and accurate recording and reporting of information in order to make responsible business decisions. Many employees, officers and directors regularly use business expense accounts, which must...

Page 491
... securities law or stock exchange regulation. With regard to employees who are not executive officers, waivers must be approved by the General Counsel. 14. ReportiIg aIy Illegal or UIethical Behavior; No RetaliatioI It is your obligation and ethical responsibility to help enforce this Code...

Page 492
... writing, on an anonymous basis, please address your concerns to our General Counsel at the following address: FairPoint Communications, Inc., 521 East Morehead Street, Suite 250, Charlotte, NC 28202, Attention: Shirley J. Linn. (f) Reports of violations of this Code or other complaints made to the...

Page 493
... may be additional policies or laws specific to my position as an employee, officer or director of the Company. I further agree to comply with the Code. If I have questions concerning the meaning or application of the Code, any Company policies, or the legal and regulatory requirements applicable to...

Page 494
...included in FairPoint's periodic reports to the Securities and Exchange Commission and in other public communications made by FairPoint that are designated from time to time by the chief financial officer as senior financial professionals. As a senior financial professional employed by FairPoint or...

Page 495
... file with, or submit to, the Securities and Exchange Commission and in other public communications made by FairPoint or its subsidiaries. Comply with applicable laws, rules and regulations of any federal, state or local government or of any other public or private regulatory organization. Act in...

Page 496
... of operations, stockholders' equity (deficit), comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2004, which report appears in the December 31, 2004 Annual Report to Stockholders on Form 10-K of FairPoint Communications, Inc. /s/ KPMG...

Page 497
QuickLinks Consent of Independent Registered Public Accounting Firm

Page 498
... Partnership as of December 31, 2004 and 2003 and for each of the three years in the period ended December 31, 2004), appearing in this Annual Report on Form 10-K of FairPoint Communications Inc. for the year ended December 31, 2004. /s/ Deloitte & Touche LLP New York, New York March 24, 2005

Page 499
QuickLinks Consent of Independent Registered Public Accounting Firm

Page 500
...Public Accounting Firm We consent to the incorporation by reference in the Registration Statement (No. 333-122809) on Form S-8 of FairPoint Communications, Inc. of our reports...which reports are included in the December 31, 2004, Annual Report to Stockholders on Form 10-K of FairPoint Communications, ...

Page 501
QuickLinks Consent of Independent Registered Public Accounting Firm

Page 502
...and report financial information; and any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls over financial reporting. (ii) Date: March 24, 2005 /s/ EUGENE B. JOHNSON Eugene B. Johnson Chief Executive Officer

Page 503
QuickLinks CERTIFICATION

Page 504
...condition, results of operations and cash flows of the Company as of, and for, the periods presented in this annual report; 3. 4. The Company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in the Securities Exchange...

Page 505
QuickLinks CERTIFICATION

Page 506
... with the Annual Report on Form 10-K of FairPoint Communications, Inc. (the "Company") for the year ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Eugene B. Johnson, Chief Executive Officer of the Company, certify, pursuant...

Page 507
QuickLinks CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002

Page 508
... with the Annual Report on Form 10-K of FairPoint Communications, Inc. (the "Company") for the year ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Walter E. Leach, Jr., Chief Financial Officer of the Company, certify, pursuant...

Page 509
QuickLinks CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002

Page 510
Exhibit 99.1 Orange County - Poughkeepsie Limited Partnership Report of Independent Registered Public Accounting Firm Financial Statements Years Ended December 31, 2004, 2003 and 2002

Page 511
... COUNTY POUGHKEEPSIE LIMITED PARTNERSHIP TABLE OF CONTENTS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Balance Sheets December 31, 2004 and 2003 Statements of Operations For the years ended December 31, 2004, 2003 and 2002 Statements of Changes in Partners' Capital For the years...

Page 512
...'s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management...

Page 513
...,754 29,622 $ 50,376 Total current assets PROPERTY, PLANT AND EQUIPMENT - Net TOTAL ASSETS LIABILITIES AND PARTNERS' CAPITAL CURRENT LIABILITIES: Accounts payable and accrued liabilities Advance billings Due to general partner Total current liabilities $ 436 144 $ 348 310 3,102 - 658 3,682...

Page 514
... $ 114,591 OPERATING COSTS AND EXPENSES: Cost of service (excluding depreciation and amortization related to network assets included below) General and administrative Depreciation and amortization Net loss (gain) on sale of property, plant and equipment Total operating costs and expenses 16,854...

Page 515
... LIMITED PARTNERSHIP STATEMENTS OF CHANGES IN PARTNERS' CAPITAL YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 (Dollars in Thousands) General Partner Limited Partners Warwick Valley Taconic Telephone Telephone Company Corporation NYNEX Mobile Limited Partnership 2 Verizon Wireless of the East LP...

Page 516
... Net loss (gain) on sale of property, plant and equipment Changes in certain assets and liabilities: Accounts receivable Unbilled revenue Prepaid expenses and other current assets Accounts payable and accrued liabilities Advance billings Net cash provided by operating activities $ 139,670 - 5,521...

Page 517
..., New York service areas. The partners and their respective ownership percentages as of December 31, 2004 are as follows: Managing and general partner: Verizon Wireless of the East LP* 85.0% Limited partners: Taconic Telephone Corporation ("Taconic") Warwick Valley Telephone Company ("Warwick...

Page 518
... represents costs incurred to construct and expand capacity and network coverage on Mobile Telephone Switching Offices and cell sites within the Partnership's network. The cost of property, plant and equipment is depreciated over its estimated useful life using the straight-line method of accounting...

Page 519
... the Partnership's 2004, 2003 and 2002 revenue is affiliate revenue. The General Partner relies on local and long-distance telephone companies, some of whom are related parties, and other companies to provide certain communication services. Although management believes alternative telecommunications...

Page 520
... Net is net interest income related to the Due from General Partner balance of $980, $1,472 and $1,553 for the years ended December 31, 2004, 2003 and 2002, respectively. Recently Issued Accounting Pronouncements - In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets - An...

Page 521
... $ 29,622 Allocated capitalized network engineering costs of $245 and $415 were recorded during the years ended December 31, 2004 and 2003, respectively. Construction-in-progress included in certain of the classifications shown above, principally wireless plant equipment, amounted to $1,767 and...

Page 522
... and equipment used in its operations. Lease contracts include renewal options that include rent expense adjustments based on the Consumer Price Index as well as annual and endof-lease term adjustments. Rent expense is recorded on a straight-line basis. The noncancellable lease term used to...

Page 523
billing practices. Certain of these lawsuits and other claims may impact the ...legal actions and claims in the normal course of business. While Cellco's legal counsel cannot give assurance as to the outcome of each of these matters, in management's opinion, based on the advice of such legal counsel...

Page 524
QuickLinks -- Click here to rapidly navigate through this document Exhibit 99.2 RSA 2-I PARTNERSHIP Financial Statements

Page 525
...An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as, evaluating the overall financial statement presentation...

Page 526
... equivalents Accounts receivable Due from customers Less allowance of $116,500 and $110,000, respectively Affiliates $ 117,870 $ 102,338 Other Prepaids 1,079,795 233,674 58,018 97,384 1,586,741 1,176,246 115,664 65,137 3,446 1,462,831 PROPERTY AND EQUIPMENT Plant in service Less accumulated...

Page 527
ILLINOIS VALLEY CELLULAR RSA 2-1 PARTNERSHIP BALANCE SHEETS December 31, 2002 and 2001 2002 2001 LIABILITIES AND PARTNERS' CAPITAL CURRENT LIABILITIES Current portion of long-term debt Capital lease obligation Notes Payable Accounts Payable: Trade Affiliates $ - 21,287 1,000,000 $ 659,340 - - ...

Page 528
...,233 4,020,995 180,670 906,974 11,231,872 $ 6,095,261 3,184,181 149,909 693,533 10,122,884 OPERATING EXPENSES Cost of services Cost of equipment sales Selling, general and administrative Depreciation 4,572,661 1,017,085 3,986,972 956,539 10,533,257 4,358,681 937,143 3,723,723 748,968 9,768...

Page 529
ILLINOIS VALLEY CELLULAR RSA 2-I PARTNERSHIP STATEMENTS OF PARTNERS' CAPITAL December 31, 2002, 2001, and 2000 Total Balance at December 31, 1999 Net income Distribution Balance at December 31, 2000 Net income $ 2,859,792 1,669,620 (549,994) 3,979,418 1,413,315 (349,796) 5,042,937 341,281 ...

Page 530
...,583) 88,012 (801,571) (908,074) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings Repayment of long-term borrowings Payments of capital lease obligations Partnership distribution Net cash provided by/(used in) financing activities 1,000,000 (659,340) (5,877) - 334,783 15...

Page 531
... those estimates. Property and Equipment The Partnership's property and equipment is stated at cost, including labor and overheads associated with construction and capitalized interest. Depreciation is computed by applying the straight-line method. The estimated service lives for depreciable plant...

Page 532
... passed through to its customers most of the costs related to these revenues. However, the wireless industry and the Partnership have increasingly been using pricing plans that include flat rate pricing and larger home service areas. Under these types of plans, amounts charged to the Partnership by...

Page 533
..., of Rural Telephone Finance Cooperative (RTFC) subordinated capital certificates (SCC). Such SCC's were purchased from RTFC as a condition of obtaining long-term financing for the Partnership and are carried at cost. The SCC's are non-interest bearing and are returned as the related RTFC loan is...

Page 534
... paid to an affiliate of MC for contract labor, interest, and other services in 2002, 2001, and 2000, respectively. Certain cellular equipment sold to subscribers by the Partnership is provided to the Partnership by a related entity at cost. Cost of goods sold is recorded by the Partnership at the...

Page 535
... all of whom are local residents of this geographic area. Roamer cellular revenues are derived under arrangements with other wireless carriers (roaming partners) whose customers use the Partnership's network to place or complete calls. Roaming revenues from Verizon Wireless accounted for 21%, 31...

Page 536
...'s portion of the annual base rental, included in the future minimum rental payments above, is $68,400. A contingent rental provision allows for increases in base rent for real estate taxes and operating costs in excess of base operating costs. The agreement includes an option to extend the lease...

Page 537
... for Intangible Assets of Motor Carriers," and amends FASB Statement No. 13, "Accounting for Leases." In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," SFAS No. 146 requires companies to recognize costs associated with exit or disposal...

Page 538
RSA 2-I PARTNERSHIP Unaudited Financial Statements For the six months ended June 30, 2003

Page 539
... Current Liabilities: Note Payable Accounts Payable Trade Affiliates Accrued Liabilities Advanced Billings Accrued Taxes Capital Lease Obligation $ 1,000,000 Other 227,579 567,877 415,807 279,853 112,762 21,287 161,572 2,786,737 Total Current Liabilities Long Term Liabilities Capital Lease...

Page 540
...services Cost of equipment sales Selling, general and administrative Depreciation 3,053,145 554,923 2,120,550 582,000 6,310,618 Operating Income 298,555 Other Expenses Interest expense Net Income before cumulative effect of change in accounting principle Cumulative effect of change in accounting...

Page 541
QuickLinks Exhibit 99.2 RSA 2-I PARTNERSHIP Financial Statements INDEPENDENT AUDITORS' REPORT ILLINOIS VALLEY CELLULAR RSA 2-1 PARTNERSHIP BALANCE SHEETS December 31, 2002 and 2001 ILLINOIS VALLEY CELLULAR RSA 2-1 PARTNERSHIP BALANCE SHEETS December 31, 2002 and 2001 ILLINOIS VALLEY CELLULAR RSA 2-I...

Page 542
QuickLinks -- Click here to rapidly navigate through this document Exhibit 99.3 RSA 2-III PARTNERSHIP Financial Statements

Page 543
...An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as, evaluating the overall financial statement presentation...

Page 544
...Cash and cash equivalents Accounts receivable: Due from customers Less allowance of $85,000 and $80,000, respectively Affiliates $ 81,145 $ 48,377 Other Prepaids 565,754 69,741 20,554 104,236 697,422 72,718 23,620 3,855 845,992 841,430 PROPERTY AND EQUIPMENT Plant in service Less accumulated...

Page 545
ILLINOIS VALLEY CELLULAR RSA 2-III PARTNERSHIP BALANCE SHEETS December 31, 2002 and 2001 2002 2001 LIABILITIES AND PARTNERS' CAPITAL CURRENT LIABILITIES Current portion of long-term debt Capital lease obligation Notes payable Accounts payable: Trade Affiliates $ - $ 11,495 1,500,000 107,184 401,...

Page 546
... Retail service Roamer service Equipment sales Miscellaneous services $ 3,469,059 2,521,150 101,694 788,808 6,880,711 $ 3,227,973 $ 3,344,344 111,163 637,263 7,320,743 3,047,399 2,573,368 85,863 442,516 6,149,146 OPERATING EXPENSES Cost of sales Cost of equipment sales Selling, general, and...

Page 547
ILLINOIS VALLEY CELLULAR RSA 2-III PARTNERSHIP STATEMENTS OF PARTNERS' CAPITAL December 31, 2002, 2001, and 2000 Total Balance at December 31, 1999 Net Income Distribution Balance at December 31, 2000 Net Income $ 1,988,174 437,164 (99,994) 2,325,344 570,358 (399,761) 2,495,941 (211,590) ...

Page 548
... (437,927) (129,498) 128,861 (637) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings Repayment of long-term borrowings Payments of capital lease obligations Partnership distribution Net cash provided by/(used in) financial activities 1,100,000 (236,690) (3,173) - 860,137...

Page 549
... The Partnership's property and equipment is stated at cost, including labor and overheads associated with construction and capitalized interest. Depreciation is computed by applying the straight-line method. The estimated service lives for depreciable plant and equipment are: 15 years for buildings...

Page 550
... passed through to its customers most of the costs related to these revenues. However, the wireless industry and the Partnership have increasingly been using pricing plans that include flat rate pricing and larger home service areas. Under these types of plans, amounts charged to the Partnership by...

Page 551
..., of Rural Telephone Finance Cooperative (RTFC) subordinated capital certificates (SCC). Such SCCs were purchased from RTFC as a condition of obtaining long-term financing for the Partnership and are carried at cost. The SCCs are non-interest bearing and are returned as the related RTFC loan is...

Page 552
... services on behalf of the Partnership. In accordance with the Partnership Agreement, MC is reimbursed by the Partnership's share of these costs. MC allocates these costs to the various cellular systems to which they provide service based on each entity's customer access lines. Reimbursed

Page 553
... all of whom are local residents of this geographic area. Roamer cellular revenues are derived under arrangements with other wireless carriers (roaming partners) whose customers use the Partnership's network to place of complete calls. Roaming revenues from Verizon Wireless accounted for 34%, 43...

Page 554
...'s portion of the annual base rental, included in the future minimum rental payments above, is $36,936. A contingent rental provision allows for increases in base rent for real estate taxes and operating costs in excess of base operating costs. The agreement includes an option to extend the lease...

Page 555
... by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements...

Page 556
RSA 2-III PARTNERSHIP Unaudited Financial Statements For the six months ended June 30, 2003

Page 557
... Payable Accounts Payable Trade Affiliates Accrued Liabilities Advanced Billings Accrued Taxes $ 4,992,853 $ 11,495 1,500,000 Other 135,549 542,888 241,255 2,383 128,880 93,748 Total Current Liabilities Long Term Liabilities Capital Lease Obligation Asset Retirement Obligation Total Long Term...

Page 558
... services Cost of equipment sales Selling, general and administrative Depreciation 2,443,176 270,594 1,155,437 354,000 4,223,207 Operating Income (14,706) Other Expenses Interest expense Net Loss before cumulative effect of change in accounting principle Cumulative effect of change in accounting...

Page 559
... Exhibit 99.3 RSA 2-III PARTNERSHIP Financial Statements INDEPENDENT AUDITORS' REPORT ILLINOIS VALLEY CELLULAR RSA 2-III PARTNERSHIP BALANCE SHEETS December 31, 2002 and 2001 ILLINOIS VALLEY CELLULAR RSA 2-III PARTNERSHIP BALANCE SHEETS December 31, 2002 and 2001 ILLINOIS VALLEY CELLULAR RSA...

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