FairPoint Communications 2006 Annual Report Download - page 84

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The 2003 Notes are general unsecured obligations of FairPoint, ranking pari passu in right of payment with all existing and future senior debt of
FairPoint, including all obligations under the Company’s amended and restated credit facility, and senior in right of payment to all existing and future
subordinated indebtedness of FairPoint.
The indenture governing the 2003 Notes contains certain customary covenants and events of default.
Of the 2003 Notes, $223.0 million were repaid in 2005 using proceeds from the Company’s initial public offering and borrowings under the 2005 Senior
Secured Notes.
(c) Other
In conjunction with the senior notes payable to the RTFC and the RTB and the first mortgage notes payable to the Rural Utilities Service, certain of the
Company’s subsidiaries are subject to restrictive covenants limiting the amounts of dividends that may be paid. A portion of the RTFC notes, the full amount
of the RTB notes and notes payable to the Rural Utilities Service were repaid in 2005 using proceeds from the Company’s initial public offering and
borrowings under the 2005 Senior Secured Notes.
The Company also has $0.3 million unsecured demand notes payable to various individuals and entities with interest payable at 5.25% at December 31,
2006 and 2005.
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The Series A preferred stock was issued to the lenders in connection with the Carrier Services debt restructuring.
The initial carrying amount of the Series A preferred stock was recorded at its fair value at the date of issuance ($78.4 million). The carrying amount
was increased by periodic accretions, using the interest method, so that the carrying amount equaled the mandatory redemption amount ($82.3 million) at the
mandatory redemption date (May 2011). On March 6, 2003, in connection with the Company’s issuance of the 2003 Notes, the Company used a portion of
these proceeds to repurchase $13.3 million aggregate liquidation preference of its Series A preferred stock at a 35% discount (together with accrued and unpaid
dividends thereon). For the years ended December 31, 2005 and 2004, the Series A preferred stock was increased by $0.2 million and $1.4 million,
respectively, to reflect the periodic accretions. The carrying amount of the Series A preferred stock was further increased by $2.2 million and $18.8 million in
connection with dividends paid in kind on the outstanding shares of the Series A preferred stock for the years ended December 31, 2005 and 2004,
respectively.
In February 2005, the Company repurchased all of the Company’s outstanding Series A preferred stock for $129.2 million. The Company recorded a
loss of $9.9 million on the redemption.
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The Company sponsors a voluntary 401(k) savings plan (the 401(k) Plan) that covers substantially all eligible employees. Each 401(k) Plan year, the
Company contributes to the 401(k) Plan an amount of matching contributions determined by the Company at its discretion. For the 401(k) Plan years ended
December 31, 2006, 2005, and 2004, the Company matched 100% of each employee’s contribution up to 3% of compensation and 50% of additional
contributions up to 6%. The 401(k) Plan also allows for a profit sharing contribution that is made based upon management discretion. Total Company
contributions
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