FairPoint Communications 2004 Annual Report Download - page 270

Subsidiaries may make Investments not otherwise permitted by clauses (a) through (m) of this Section 7.06 in an aggregate amount not to exceed
$15,000,000 (determined without regard to any write-downs or write-offs thereof), net of cash payments of principal in the case of loans and cash
equity returns (whether as a distribution, dividend or redemption) or a return in the form of an asset distribution (based on the fair market value of
the distributed asset as determined in good faith by senior management of the Borrower) in the case of equity investments.
7.07 Limitation on Creation of Subsidiaries. (a) Except as otherwise specifically provided in immediately succeeding clause (b), the
Borrower will not, and will not permit any Subsidiary to, establish, create or acquire any Subsidiary; provided that the Borrower and its Subsidiaries shall
be permitted to establish, create or acquire Wholly-Owned Subsidiaries (or 90%-Owned Subsidiaries in the case of Telcos or Carrier Services Companies), so
long as (i) 100% of the capital stock or other equity interests of such new Subsidiary (if a Parent Company) or at least 90% 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 Acquisition shall not have to be pledged if, after
giving effect to the acquisition or creation thereof, the Pro Forma EBITDA Test is satisfied) and the certificates representing such stock or other equity
interests, together with transfer powers duly executed in blank, are delivered to the Collateral Agent, (ii) such new Subsidiary executes a counterpart of the
Intercompany Subordination Agreement, the Subsidiary Guaranty (in the case of a new 1 st-Tier Subsidiary) and the Pledge Agreement (in the case of a new
Parent Company), in each case on the same basis (and to the same extent) as such Subsidiary would have executed such Credit Documents if it were a Credit
Party on the Initial Borrowing Date, and (iii) such new Subsidiary takes all action in connection therewith as would otherwise have been required to be taken
pursuant to Section 4 if such new Subsidiary had been a Credit Party on the Initial Borrowing Date.
(b) In addition to Subsidiaries of the Borrower created pursuant to preceding clause (a), the Borrower and its Subsidiaries may
establish, acquire or create, and make Investments in, Non-Wholly Owned Subsidiaries after the Initial Borrowing Date as a result of Permitted Acquisitions
(subject to the limitations contained in the definition thereof) and Investments expressly permitted to be made pursuant to Section 7.06, provided that (i) all of
the capital stock or other equity interests of each such Non-Wholly Owned Subsidiary shall be pledged by any Pledge Party which owns same as, and to the
extent, required by the Pledge Agreement, (ii) such new Subsidiary executes a counterpart of the Intercompany Subordination Agreement and (iii) in the case of
(x) a proposed Permitted Acquisition of an Acquired Person (other than a Telco or Carrier Services Company) or non-equity assets to be effected by a Qualified
Subsidiary (directly or through a Subsidiary of such Qualified Subsidiary) in circumstances where the capital stock or other equity interests of the Acquired
Person acquired pursuant to such Permitted Acquisition are not to be pledged under the Pledge Agreement or the assets so acquired pursuant to such Permitted
Acquisition are not held by a Person which is (or will concurrently become) a Pledged Subsidiary or (y) the creation or acquisition of a new Telco or Carrier
Services Company pursuant to a Permitted Acquisition in circumstances 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.
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