FairPoint Communications 2006 Annual Report Download - page 33

customer service centers. Auxiliary battery or other non-utility power sources are at each central office to provide uninterrupted service in the event of an
electrical power failure. Transport and distribution network facilities include fiber optic backbone and copper wire distribution facilities, which connect
customers to remote switch locations or to the central office and to points of presence or interconnection with the long distance carriers. These facilities are
located on land pursuant to permits, easements or other agreements. Our rolling stock includes service vehicles, construction equipment and other required
maintenance equipment.
We believe each of our respective properties is suitable and adequate for the business conducted therein, is being appropriately used consistent with past
practice and has sufficient capacity for the present intended purposes.
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On June 6, 2005, a purported class action complaint was filed in the General Court of Justice, Superior Court Division, of the State of North Carolina
by Robert Lowinger on behalf of himself and all other similarly situated persons against the Company, the Company’s Chairman and Chief Executive
Officer, certain of the Company’s current and former directors and certain of the Company’s stockholders. The complaint alleges violations of Sections 11
and 12(a)(2) and liability under Section 15 of the Securities Act, and alleges that the Company’s registration statement on Form S-1 (which was declared
effective by the SEC on February 3, 2005) and the related prospectus dated February 3, 2005, each relating to the Company’s initial public offering of
common stock, contained certain material misstatements and omitted certain material information necessary to be included relating to the Company’s
broadband products and access line trends. The plaintiff, who has been a plaintiff in several prior securities cases, seeks rescission rights and unspecified
damages on behalf of a purported class of purchasers of the common stock “issued pursuant and/or traceable to the Company’s IPO during the period from
February 3, 2005 through March 21, 2005”. The Company removed the action to Federal court. The plaintiff filed a motion to remand the action to the North
Carolina State court, which was denied by the Federal Magistrate. The plaintiff has objected to and appealed the Magistrate’s decision to the District Court
Judge. The Company has contested the appeal and filed a Motion to Dismiss the action. The Magistrate, on February 9, 2006, issued a Memorandum and a
Recommendation to the District Court Judge that the Motion to Dismiss be granted and that the complaint be dismissed with prejudice. The plaintiff has filed a
Notice of Objection to the Magistrate’s Recommendation. Both the appeal of denial of the Motion to Remand and the Motion to Dismiss are pending before the
District Court Judge. We believe that this action is without merit and intend to continue to defend the litigation vigorously.
From time to time, we are involved in other litigation and regulatory proceedings arising out of our operations. Management believes that we are not
currently a party to any legal proceedings, the adverse outcome of which, individually or in the aggregate, would have a material adverse effect on our financial
position or results of operations.
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No matters were submitted to a vote of our security holders during the fourth quarter of fiscal 2006.
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