FairPoint Communications 2005 Annual Report Download - page 22

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· the creation of liens;
· the ability of our subsidiaries to guarantee our and their indebtedness;
· specified sales of assets;
· the creation of encumbrances or restrictions on the ability of our subsidiaries to distribute and advance funds or transfer assets to us or any other
subsidiary;
· specified transactions with affiliates;
· sale and leaseback transactions;
· our ability to enter lines of business outside the communications business; and
· certain consolidations and mergers and sales and/or transfers of assets by or involving us.
Our credit facility also contains covenants which require us to maintain specified financial ratios and satisfy financial condition tests, including,
without limitation, a maximum total leverage ratio and a minimum interest coverage ratio.
As a result of general economic conditions, conditions in the lending markets, the results of our business or for any other reason, we may elect or be
required to amend or refinance our credit facility, at or prior to maturity, or enter into additional agreements for indebtedness. Any such amendment,
refinancing or additional agreement may contain covenants which could limit in a significant manner our operations and our ability to pay dividends on our
common stock.


Our ability to comply with the covenants, ratios or tests contained in our credit facility or in the agreements governing our future indebtedness may be
affected by events beyond our control, including prevailing economic, financial and industry conditions. A breach of any of these covenants, ratios or tests
could result in a default under our credit facility. Certain events of default under our credit facility would prohibit us from making dividend payments on our
common stock. In addition, upon the occurrence of an event of default under our credit facility, the lenders could elect to declare all amounts outstanding under
our credit facility, together with accrued interest, to be immediately due and payable. If we were unable to repay those amounts, the lenders could proceed
against the security granted to them to secure that indebtedness. If the lenders accelerate the payment of the indebtedness under our credit facility, our assets
may not be sufficient to repay in full the indebtedness under our credit facility and our other indebtedness, if any.


Our initial public offering in February 2005 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 tax attributes. As a result of such ownership change, there are specific
limitations on our ability to use our net operating loss carry forwards and other tax attributes from periods prior to our initial public offering. Although it is not
expected that such limitations will materially affect our U.S. federal and state income tax liability in the near-term, it is possible in the future that such
limitations could limit our ability to utilize such tax attributes and, therefore, result in an increase in our U.S. federal and state income tax payments. In
addition, in the future we may be required to pay cash income taxes because all of our net operating loss carry forwards have been used or have expired.
Limitations on our usage of net operating loss carry forwards, and other factors requiring us to pay cash taxes in the future, would reduce
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