FairPoint Communications 2006 Annual Report Download - page 83

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credit facility as Consolidated Net Income (which is defined in the credit facility and includes distributions from investments) (a) plus the following to
the extent deducted from Consolidated Net Income: provision for income taxes, interest expense, depreciation, amortization, losses on sales of assets
and other extraordinary losses, certain one-time charges recorded as operating expenses related to the transactions contemplated by the Merger
Agreement and certain other non-cash items, and (b) minus, to the extent included in Consolidated Net Income, gains on sales of assets and other
extraordinary gains and all non-cash items.
· The Company may not pay dividends if a default or event of default under the credit facility has occurred and is continuing or would exist after
giving effect to such payment, if the Company’s leverage ratio is above 5.25 to 1.00 or if the Company does not have at least $10 million of cash on
hand (including unutilized commitments under the credit facility’s revolving facility).
The credit facility also permits the Company to use available cash to repurchase shares of its capital stock, subject to the same conditions.
The Company may obtain letters of credit under the revolving facility to support obligations of the Company and/or obligations of its subsidiaries
incurred in the ordinary course of business in an aggregate principal amount not to exceed $10.0 million and subject to limitations on the aggregate amount
outstanding under the revolving facility. As of December 31, 2006, a letter of credit had been issued for $1.4 million.
The credit facility is guaranteed, jointly and severally, subject to certain exceptions, by all first tier subsidiaries of the Company. The Company has
provided to Deutsche Bank Trust Company Americas, as collateral agent for the benefit of the lenders under the credit facility and certain hedging creditors
under permitted hedging agreements, collateral consisting of (subject to certain exceptions) 100% of the Company’s equity interests in the subsidiary
guarantors and certain other intermediate holding company subsidiaries. Newly acquired or formed direct or indirect subsidiaries of the Company which own
equity interests of any subsidiary that is an operating company will be required to provide the collateral described above.
The credit facility contains customary events of default, including but not limited to, failure to pay principal, interest or other amounts when due, breach
of covenants or representations, cross-defaults to certain other indebtedness in excess of specified amounts, judgment defaults in excess of specified amounts,
certain ERISA defaults, the failure of any guaranty or security document supporting the credit facility and certain events of bankruptcy and insolvency.
(b) Senior Notes Issued in 2003
FairPoint issued $225.0 million aggregate principal amount of senior notes in 2003 (the 2003 Notes). The 2003 Notes bear interest at the rate of 11 7/8%
per annum, payable semiannually in arrears.
The 2003 Notes mature on March 1, 2010. FairPoint may redeem the 2003 Notes at any time on or after March 1, 2007 at the redemption prices stated in
the indenture under which the 2003 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 2003 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.
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