FairPoint Communications 2007 Annual Report Download - page 46

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gains and gains realized on asset sales other than in the ordinary course of business and (ii) cash received on account of non-cash
gains and non-cash income excluded from Adjusted EBITDA. “Adjusted EBITDA” is defined in our existing credit facility as
Consolidated Net Income (which is defined in the existing credit facility and includes distributions from investments) (a) plus the
following to the extent deducted from Consolidated Net Income: provision for income taxes, consolidated 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, each as defined,
(b) minus gains on sales of assets and other extraordinary gains and all non-cash items increasing Consolidated Net Income.
• We may not pay dividends if a default or event of default under our existing credit facility has occurred and is continuing or
would exist after giving effect to such payment, if our leverage ratio is above 4.50 to 1.00 or if we do not have at least $20 million
of cash on hand (including unutilized commitments under our existing credit facility’s revolving facility).
Our existing credit facility also permits us to use available cash to repurchase shares of our capital stock, subject to the same
conditions. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and
Capital Resources” for a more detailed description of our existing credit facility and these restrictions.
Based on the dividend restrictions contained in the fifth amendment to our existing credit facility, we anticipate that we will not be
permitted to pay dividends on our common stock pursuant to our existing credit facility; provided that we may declare a dividend at any
time prior to April 30, 2008 so long as the payment of such dividend is expressly subject to the consummation of the merger and related
transactions and the repayment in full of all obligations owing under our existing credit agreement.
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Our new credit facility is expected to restrict our ability to declare and pay dividends on our common stock as follows:
• We may declare and pay dividends, but may not in general pay dividends in excess of the amount of our Cumulative
Distributable Cash. “Cumulative Distributable Cash” will be defined in our new credit facility as the amount of Available Cash
generated beginning on the first day of the first full fiscal quarter ending after the closing date of the merger and ending on the last
day of the last fiscal quarter for which a compliance certificate has been delivered, or the Reference Period (a) minus the aggregate
amount of Restricted Payments (as defined in our new credit facility) paid by us in cash during such Reference Period (other than
excluded dividend payments, certain restricted payments permitted to be made under the new credit facility and the payment of
dividends by any of our subsidiaries to us), (b) minus the aggregate amount of Investments (as defined in our new credit facility)
made by us during such Reference Period, (c) plus the aggregate amount of all cash and non-cash returns received from such
Investments (not to exceed the amount originally invested). “Available Cash” will be defined in our new credit facility as an
amount of cash equal to (a) the sum of (i) $40 million plus (ii) Adjusted Consolidated EBITDA, minus (b) the product of (i) 1.4
times (ii) Consolidated Interest Expense (as defined in our new credit facility), minus (c) the cash cost of any extraordinary losses
and any losses on asset sales (other than in the ordinary course of business), plus (d) the cash amount of any extraordinary gains
and gains realized on asset sales (other than in the ordinary course of business). “Adjusted Consolidated EBITDA” will be
defined in our new credit facility as Consolidated Net Income (as defined in our new credit facility) (a) plus the following add-
backs to the extent deducted from Consolidated Net Income: provision for income taxes; Consolidated Interest Expense;
depreciation; amortization; losses on asset sales and other extraordinary losses; non-cash portion of any retirement or pension
plan expense incurred; all one-time cash costs and expenses paid with respect to advisory services, financing sources and other
advisors retained prior to the closing date with respect to the transactions; cash expenses paid under the TSA; any other non-cash
charges accrued by us; the acquisition adjustment for the Reference Period; and the amount of any permitted junior capital issued
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